FTC's new rule simplifies subscription cancellations

The Federal Trade Commission (FTC) has taken a significant step to protect consumers from subscription traps. On 10/16/24 the agency approved a new rule that requires businesses to make canceling subscriptions and memberships as simple as signing up for them.

Lina Khan‚ FTC Chair‚ explained the reasoning behind this decision: “Companies shouldnt be able to trick you into paying for subscriptions that you dont want.“ The rule‚ dubbed “click to cancel‚“ is a response to the increasing number of complaints the FTC has received about difficult cancellation processes.

Under the new regulation businesses must obtain explicit consent from consumers for subscriptions‚ auto-renewals‚ and free trials that convert to paid memberships. The cancellation method provided must be “at least as easy to use“ as the sign-up process. This means that if a consumer signed up online or through an app‚ they cant be forced to cancel via phone or in person.

The pandemic (which happened roughly 2-4 years ago) brought these issues to the forefront‚ as Khan noted: “The pandemic brought to the surface just how businesses are making people jump through endless hoops.“ She pointed out that requiring in-person cancellations while businesses were closed “really highlighted the absurdity of these practices.“

The FTC received thousands of comments from consumers who had trouble canceling services after proposing the rule last year. Advocates criticized practices at various companies‚ including:

• Planet Fitness
• HelloFresh
• Rihannaʼs Savage X Fenty lingerie shop

While existing laws like the Restore Online Shoppersʼ Confidence Act (passed about 14 years ago) address some aspects of this issue‚ the FTC identified gaps that the new rule aims to fill.

However‚ the rule faced opposition from trade groups representing car washes‚ retailers‚ news publishers‚ and TV providers‚ who argued that parts of the proposal were burdensome and unnecessary. In response‚ the FTC made some modifications‚ dropping proposals that would have required businesses to:

• Periodically remind consumers about recurring charges
• Allow consumers trying to cancel a service to opt out of seeing discounts and other retention efforts

The “click to cancel“ rule passed with a 3-2 vote‚ with the FTCs two Republican commissioners voting against it. Its worth noting that this is among the final pieces of President Joe Bidenʼs broader effort to tackle “junk fees“ before the upcoming election on 11/5/24.

Vice President Kamala Harris‚ the Democratic candidate for the White House‚ highlighted the “click to cancel“ proposal about a month ago as an example of the issues she will prioritize if elected. When asked about potential roles in a future Harris administration‚ Khan declined to comment‚ stating: “People just want an economy thats fair and honest; Thats what our focus is“