Get Ready for Click to Cancel
This week the Federal Trade Commission, which promotes competition and protects customers from unfair or predatory business practices, announced a final “click-to-cancel” rule. It requires sellers to make it as easy for customers to cancel subscription services as it did to sign up in the first place. The rule will go into effect in April 2025.
“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said Commission Chair Lina M. Khan. “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.”
Numerous business groups and the FTC's Republican commissioners oppose the rule, arguing that the agency overstepped its legal authority to pass new burdensome requirements — days before the election. The U.S. Chamber of Commerce on Wednesday said the regulators made a "power grab ... to micromanage business decisions."
The FTC receives about 70 consumer complaints a day from consumers trying to cancel online subscriptions, up from 42 complaints on an average day in 2021. The new rules are an update of the 1973 Negative Option Rule.
Negative options plans were popularized by book clubs, record clubs and other mail order merchandisers. Under a negative option plan, the customer's failure to say “no” means in effect you have said “yes”. Now negative options are widely used by health clubs, online business products and other service providers. The burden is on the buyer to opt out of a subscription, rather than to opt in for a renewal. Subscribers are charged for automatic renewals and some businesses make it very difficult to cancel.
The final rule will provide a consistent legal framework by prohibiting sellers from:
misrepresenting any material fact made while marketing goods or services with a negative option feature;
failing to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature;
failing to obtain a consumer’s express informed consent to the negative option feature before charging the consumer; and
failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.
The smart business owner should review their current cancellation procedures and to make changes as needed.
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