For many Americans, signing up for subscription services has become as easy as clicking a few buttons. But when it’s time to cancel, what often follows is frustration, confusion, and endless hoops to jump through. The Federal Trade Commission (FTC) is now stepping up to make this process significantly smoother with the introduction of its new "click-to-cancel" rule.
On Wednesday, the FTC unveiled the final version of this rule, which mandates businesses to provide consumers with the same ease of canceling their subscriptions as they do when signing up. Whether it’s gym memberships, streaming services, e-commerce subscriptions, or cable TV packages, this ruling aims to simplify how consumers can exit their commitments. "Too often, businesses make people jump through endless hoops just to cancel a subscription," said FTC Chair Lina Khan, emphasizing the need for consumers to have the freedom to stop paying for services they no longer want.
According to research from online payment technology firm Bango, Americans hold an average of 4.5 subscriptions, equaling about $924 annually, with streaming services leading the pack. With the new rule set to take effect 180 days after its publication, the FTC is directly addressing prevalent concerns over subscription plans, including misleading advertising, overly complicated cancellation procedures, and unauthorized billing practices when free trials convert to paying memberships.
What Does the New Rule Entail?
The crux of the "click-to-cancel" rule lies in its emphasis on making cancellation processes just as effortless as enrollment. Laura Brett, Vice President of the National Advertising Division at BBB National Programs, states, "The rule makes it clear it has to be as easy to cancel as it is to sign up. That means it has to be straightforward to find where and how to cancel, and consumers should never have to interact with a live person to do so."
The FTC specifies this rule applies to any customers who enroll online, allowing for them to click to cancel their subscription. Customers who signed up through physical locations should likewise have the option to cancel their subscriptions either online or via phone.
The rule impacts all stages of the subscription process, meaning businesses must disclose all necessary material information about their products before charging customers. That includes key details like features, costs, and deadlines, creating transparency and preventing consumers from being blindsided. Brett noted, "This rule makes it clear you can’t collect the customer’s billing information until you’ve disclosed all the terms of the relationship with them."
Making Cancellation Quick and Easy
The movement to change cancellation practices sprouted after the FTC proposed the rule back in March 2023. Subsequently, the commission received over 16,000 comments highlighting consumer frustrations with the cancellation process. Brett mentions, "Consumers expressed having to jump through hoops online to find out where to cancel. Some had to make phone calls to representatives, and others were required to appear in person to cancel their membership."
The new cancellation rule is not the FTC’s first foray at addressing consumer rights concerning subscriptions. Back for 2022, the FTC reached settlements with service providers like Vonage due to problematic cancellation processes. ABCmouse similarly agreed to pay $10 million to settle allegations over failure to disclose membership terms leading to unauthorized charges.
This new rule from the FTC signals stronger consumer protection against tricky subscription practices, where many companies have used convoluted systems to make canceling seem nearly impossible. By creating simple, user-friendly pathways for cancellation, the FTC hopes to restore trust and fairness to consumer agreements.
Overall, with this new regulatory approach, consumers can look forward to having greater control over their subscription services, allowing them to opt out easily and without unnecessary complications. It’s about time consumers are able to manage their subscriptions as easily as they start them!
