The Federal Trade Commission has passed a final “click-to-cancel” rule that will require subscription companies to make it as easy for consumers to cancel their enrollment as it was to sign up.
“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said FTC Chair Lina Khan in a statement. “The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”
The final rule follows a March 2023 proposal and the receipt of more than 16,000 comments from consumers, government agencies, consumer groups and trade associations. Most of the new requirements under the rule will go into effect in approximately six months.
The rule specifically targets a practice known as negative-option marketing, where a consumers’ failure to take any action (whether it be a rejection of an offer or a cancellation) is accepted as their assent to being charged. The FTC said it receives thousands of complaints about negative-option and recurring subscription practices each year, and the volume of these complaints has been steadily increasing over the past five years, with an average of nearly 70 consumer complaints received per day this year, up from 42 per day in 2021.
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The new Click-to-Cancel rule is part of the FTC’s ongoing review of its 1973 Negative Option Rule, which the agency is modernizing to combat unfair or deceptive practices related to subscriptions, memberships and other recurring-payment programs that have increased in prominence in the digital economy.
Making it Easier to Say ‘No’ to Subscriptions
The final rule passed this week prohibits sellers from:
- Misrepresenting any “material fact” made while marketing goods or services with a negative option feature;
- Failing to clearly and conspicuously disclose terms prior to obtaining a consumer’s billing information in connection with a negative option feature;
- Failing to get consumers’ informed consent to the negative option features before charging them; and
- Failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.
Several provisions of the proposed rule were dropped after the public comment period, including a requirement that sellers provide annual reminders to consumers of the negative option feature of their subscription, and a prohibition on sellers telling consumers seeking to cancel their subscription about plan modifications or reasons to keep to their existing agreement without first asking if they want to hear about them.
‘What it Looks Like When the Government is on Your Side’
The FTC has been particularly active under Chair Khan’s tenure, with subscription cancellations only the agency’s latest target. In the past year, the FTC also has issued rules banning fake online reviews and non-compete clauses, and the agency is currently pursuing another rule to ban so-called “junk fees.”
“Chair Khan’s big priority is to show the American people what it looks like when the government is on their side,”said Douglas Farrar, Director of the FTC’s Office of Public Affairs in an interview with Retail TouchPoints. “So taking on big corporations that are using illegal business tactics to harm consumers is something she’s not going to shy away from. Taking on illegal employment contracts like non-compete clauses that trap 30 million workers in jobs they don’t want, or even in certain instances jobs where they’re facing a toxic work environment or abuse, is something she’s not going to shy away from.”
