In today’s digital landscape, signing up for a service usually only takes a couple of clicks of a button. But opting out of a plan can prove to be much harder.
The Federal Trade Commission on Wednesday moved to change that.
The FTC unveiled its final “click-to-cancel” rule, which requires businesses provide a way for consumers to cancel their subscriptions that is just as easy as it is to sign up. That includes everything from gym memberships to digital streaming and e-commerce to cable TV service.
“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said Commission Chair Lina Khan in statement by the FTC. “Nobody should be stuck paying for a service they no longer want.”
The average American has roughly 4.5 subscriptions and pays an average of $924 per year, with streaming services as the leading category, according to research from online payment technology company Bango.
The new rule, which goes into effect 180 days after it is published in the Federal Register, is meant to address common issues with subscription plans. That includes sellers that misrepresent facts about the product or service, those who make it difficult to cancel, and people who are billed even when they didn’t agree to pay, such as when a free trial ends.
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What exactly does this new rule do?
“The rule makes it clear that it has to be as easy to cancel a subscription as it is to sign up,” said Laura Brett, vice president of the National Advertising Division of BBB National Programs. “That means it’s got to be easy to find where to cancel and how to cancel, and that you never have to interact with a live person in order to cancel the subscription.”
The FTC also noted that customers who signed up for a service online should be able to “click to cancel,” and those who enrolled in person should have the option to cancel online or over the phone.
But Brett said the rule impacts every stage of the subscription relationship between businesses and consumers.
For example, it requires businesses to disclose all necessary material information about the product (including features of the plan, deadlines, and specific costs) clearly and without misrepresentation.
Essentially, customers have to know what exactly it is they’re agreeing to before companies can start charging them.
“This rule now makes it clear that you can’t collect the customer’s billing information until after you’ve disclosed all the terms of relationship with them,” Brett said.
Cancellation made quick
After its announcement of the proposed rule change in March last year, the FTC received more than 16,000 comments from the public concerning difficulties in canceling subscriptions.
“(Consumers) had to jump through hoops online to find out where to cancel. Other times they might’ve been able to sign up online, but in order to cancel they had to call and talk to a representative. Other kinds of memberships required them to actually show up in person to cancel their subscription,” Brett said.
This is not the first time the FTC has cracked down on subscription practices.
In 2022, the FTC reached a settlement with internet phone service provider Vonage over its cancellation policies. And online children’s education company ABCmouse agreed in 2020 to pay $10 million to settle FTC allegations that it failed to disclose membership terms that led to consumers being charged without their consent.
