The Federal Trade Commission unveils a new directive to simplify the cancellation process for recurring subscriptions, ensuring consumers can easily disengage without unwanted charges.
The US Federal Trade Commission (FTC) has introduced a new directive aimed at simplifying the cancellation process for recurring subscriptions and memberships, often referred to as “negative option” programmes. These arrangements often involve consumers being automatically billed after accepting a discounted or free trial offer, and in some cases, individuals may be enrolled without their explicit consent. The onus has traditionally been on consumers to cancel to avoid further charges, which can often prove cumbersome.
FTC Chair Lina M. Khan highlighted the importance of ensuring that no consumer remains involuntarily tied to a service they do not wish to continue using. In alignment with this sentiment, the newly approved “click-to-cancel” rule mandates businesses to facilitate a straightforward cancellation process akin to how the consumer initially signed up for the subscription. This means if a consumer joined a service online, they should also be able to cancel online without being forced to interact with a live representative.
The rule extends across various sign-up methods, including online, telephone, and in-person processes. Notably, it stipulates that consumers must be presented with clear information regarding charges and the conclusion of any promotional offers or free trials. Furthermore, businesses will need to obtain explicit informed consent from consumers before initiating any charges.
Business entities also fall under the umbrella of protection provided by the rule, ensuring an equitable approach for both individual consumers and businesses. The FTC has faced a growing number of complaints related to negative-option practices, reflecting a surge from 42 daily complaints in 2021 to nearly 70 in recent months.
Historically, some businesses have employed tactics to make cancellations deliberately arduous, as observed in the 2020 case involving ABCmouse, a children’s digital education platform. The company, which is not associated with the ABC network or Disney, settled with the FTC for $10 million after it was found to reject cancellation requests via normal channels such as phone, email, or online forms. Instead, customers were directed through a complex and unintuitive online process to disengage from the service.
Samuel Levine, Director of the FTC’s Bureau of Consumer Protection, noted the positive response the new rule has garnered from the public. The FTC is set to enforce the rule, keen on reducing the instances of so-called subscription traps that have financially burdened consumers.
Despite the new regulation, there remains concern about some companies potentially seeking loopholes. Consumers are advised to remain vigilant by setting calendar alerts ahead of subscription renewals and avoiding entering payment details for free trials where possible.
The rule’s full implementation is anticipated in the coming months, promising improved transparency and ease for consumers looking to control their subscriptions without unnecessary impediments.
Source: Noah Wire Services
- https://www.steptoe.com/en/news-publications/ftc-finalizes-click-to-cancel-rule-with-major-new-requirements-for-recurring-subscriptions-and-memberships-what-businesses-need-to-know.html – Corroborates the introduction of the ‘click-to-cancel’ rule, its application to various sign-up methods, and the requirements for clear information and explicit informed consent.
- https://www.reuters.com/world/us/ftc-takes-subscription-traps-with-click-cancel-rule-2024-10-16/ – Supports the mandate for a straightforward cancellation process and the prohibition on requiring consumers to interact with a chatbot or representative to cancel subscriptions.
- https://www.bbc.com/news/articles/c07nlvmyl05o – Confirms FTC Chair Lina Khan’s statement on ending deceptive practices and the rule’s application to various businesses, including retailers and fitness centers.
- https://www.ftc.gov/news-events/news/press-releases/2024/10/federal-trade-commission-announces-final-click-cancel-rule-making-it-easier-consumers-end-recurring – Details the key provisions of the rule, including the requirement for easy cancellation, clear disclosures, and informed consent, as well as the FTC’s enforcement efforts.
- https://www.kirkland.com/publications/kirkland-alert/2024/10/ftc-finalizes-click-to-cancel-rule-governing-subscriptions-and-autorenewals – Provides information on the rule’s requirements for simple cancellation mechanisms, misrepresentation bans, and recordkeeping of consent.
- https://www.steptoe.com/en/news-publications/ftc-finalizes-click-to-cancel-rule-with-major-new-requirements-for-recurring-subscriptions-and-memberships-what-businesses-need-to-know.html – Explains the rule’s applicability to business-to-business transactions and the safe harbor for obtaining consent through specific methods.
- https://www.reuters.com/world/us/ftc-takes-subscription-traps-with-click-cancel-rule-2024-10-16/ – Mentions the growing number of complaints related to negative-option practices and the FTC’s efforts to address these issues.
- https://www.ftc.gov/news-events/news/press-releases/2024/10/federal-trade-commission-announces-final-click-cancel-rule-making-it-easier-consumers-end-recurring – Discusses the historical context of complaints and the example of the ABCmouse case, highlighting the need for the new rule.
- https://www.kirkland.com/publications/kirkland-alert/2024/10/ftc-finalizes-click-to-cancel-rule-governing-subscriptions-and-autorenewals – Addresses the concern about companies potentially seeking loopholes and the importance of consumer vigilance.
- https://www.bbc.com/news/articles/c07nlvmyl05o – Confirms the rule’s full implementation timeline and its promise of improved transparency and ease for consumers.
- https://www.steptoe.com/en/news-publications/ftc-finalizes-click-to-cancel-rule-with-major-new-requirements-for-recurring-subscriptions-and-memberships-what-businesses-need-to-know.html – Details the effective dates of the rule, including the provisions related to disclosures, consent, and cancellation.
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