The Federal Trade Commission (FTC) has proposed a new provision requiring subscription service providers to implement an easy cancellation mechanism for their customers. The proposed “click to cancel” provision is one of several updates the FTC is proposing to its rules regarding subscriptions and recurring payments. The new rule, if implemented, would make it easier for consumers to cancel unwanted subscription payment plans for various services, such as cosmetics, newspapers, and gym memberships.
In a statement, FTC Chair Lina M. Khan said, “Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place.” The proposed rule would require companies to make it as easy to cancel a subscription as it is to sign up for one. The new rule would save consumers time and money, and companies that continue to use subscription tricks and traps would be subject to stiff penalties.
The proposed rule is part of the FTC’s ongoing review of its 1973 Negative Option Rule. This rule helps the agency combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs. While such programs can provide substantial benefits to both consumers and businesses, they can become problematic when marketers fail to make adequate disclosures, bill consumers without their consent, or make cancellation either difficult or impossible.
The FTC receives thousands of consumer complaints each year related to subscription services. The current patchwork of laws and regulations available to the FTC does not provide consumers and the industry with a consistent legal framework. The proposed rule would make several specific changes, including implementing a simple cancellation mechanism. The proposed rule would require businesses to make it at least as easy to cancel a subscription as it was to start it. For example, if a customer can sign up online, they must be able to cancel on the same website in the same number of steps.
The proposed rule would also require sellers to ask customers whether they want to hear additional offers or modifications before making such pitches. Sellers must take “no” for an answer, and upon hearing “no,” they must immediately implement the cancellation process. Additionally, the proposed rule would require sellers to provide an annual reminder to consumers enrolled in negative option programs involving anything other than physical goods before they are automatically renewed.
The Commission vote approving publication of the notice of proposed rulemaking was 3-1, with Commissioner Christine S. Wilson voting no. Once the notice has been published in the Federal Register, consumers can submit comments electronically, and the public can submit comments in writing. The FTC has developed a fact sheet summarizing the proposed changes to the Negative Option Rule, and the primary staffer on this matter is Hampton Newsome in the FTC’s Enforcement Division.
In conclusion, the proposed “click to cancel” provision is a significant update to the FTC’s rules, which could benefit consumers and businesses alike. The proposed rule would ensure that consumers have a simple mechanism to cancel their subscription services and prevent them from being tricked into paying for subscriptions they no longer want or didn’t sign up for in the first place. The proposed rule would also provide a consistent legal framework for the industry, making it easier for businesses to comply with the regulations and avoid potential penalties.