Canceling subscriptions is notoriously difficult. A proposed FTC rule wants to change that.

March 23, 2023:

Everything is a subscription these days. And sometimes, those subscriptions are really hard to cancel — intentionally so. Sneaky companies know that the harder it is to stop paying for their services, the more money they’ll get from people who either didn’t know they were signing up for a paid service in the first place or don’t have the time to cancel it.

The Federal Trade Commission announced today that it’s proposing a “click to cancel” rule, which would force businesses to make it just as easy to sign off as it was to sign up.

If the rule gets approved, that means no more in-person visits, handwritten letters, or waiting on hold for hours to cancel. No more manipulative designs that trick consumers into paying for services. No more being forced to endure various sales pitches and pleas before you can finally cancel your subscription or membership. These are some of the most popular complaints the FTC gets, the agency said, and what it hopes the click to cancel rule will fix.

“I’m sure this is an experience that all of you can relate to, where you tried to cancel a subscription and the company has made you jump through an endless number of hoops,” FTC chair Lina Khan said in a call with reporters. “Companies should not be able to manipulate consumers into paying for subscriptions that they don’t want.”

You can probably relate to that: Gym memberships are notoriously difficult to end. Free trials, as you surely know, aren’t so free. And monthly subscriptions you didn’t even know you subscribed to sure get expensive when you don’t realize you’ve been paying for them.

The click to cancel rule, which is just a notice of proposed rulemaking for now, will amend and update the existing negative option rule, which, Khan said, typically applied to businesses that sent consumers products and then charged them if they didn’t send those products back quickly. But these days, the business model has shifted from physical products you get in the mail to ongoing subscriptions for access to products or services. The agency believes its rules should be updated accordingly.

“We’ve seen a dramatic growth in subscription-based business models over the last few years, which just underscores the urgency here,” Khan said.

In addition to requiring businesses to make it as easy to cancel as it is to sign up, the rule would also mean new requirements that businesses better inform consumers that they’re signing up for a paid service. They would also have to get users’ express consent to pay for that service and remind them before those services are automatically renewed. They must also spell out how long a free trial will last so a customer knows how and when to cancel it before the free part ends. Businesses would be allowed to offer consumers various special offers or discounts to try to get them to maintain their subscriptions, but only if the customer agrees to see or hear them.

Finally, the rule would give the FTC the authority to get civil penalties from offenders and redress for consumers.

Businesses that engage in these practices surely won’t like this new rule, but they shouldn’t be surprised to see it. The FTC signaled that it would be looking at negative option marketing back in October 2021, and it’s been investigating how to deal with dark patterns, or web designs meant to trick or manipulate consumers into choosing what the website wants them to, since before Khan even got there. President Biden has made protecting consumers from deceptive business practices like junk fees one of his administration’s initiatives.

Again, because this is a notice of proposed rulemaking, it’s not yet final, and it will take several months before it’s approved — assuming it’s approved at all.

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