FTC proposes new rule to make it easier to cancel free trials and subscriptions
The Federal Trade Commission has proposed a new “click to cancel” rule that would make it easier for consumers to cancel free trials, auto-renewals and subscriptions. The proposed rule change covers both digital and physical subscriptions, and would apply to gym memberships, streaming services, cable TV, newspapers and more. The FTC says it receives thousands of consumer complaints every year about companies making it difficult to cancel subscriptions.
The “click to cancel” provision would require companies to make the process of ending a subscription as easy as it is to sign up for one. For instance, if you sign up for a subscription online, you must be able to cancel it on the same website in the same number of steps, as opposed to be being required cancel by phone.
Although the proposed rule change would continue to allow companies to offer special deals when a customer is looking to cancel their subscription, they would be required to first ask consumers whether they want to hear them. If a customer were to say “no,” then the company would be required to immediately implement the cancellation process.
The changes would also require companies to give an annual reminder to consumers enrolled in negative option programs, or programs where not cancelling a subscription is considered an agreement to renew it, before they are automatically renewed.
“Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place,” said FTC Chair Lina M. Khan in the press release. “The proposed rule would require that companies make it as easy to cancel a subscription as it is to sign up for one. The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties.”
The provision has not yet been finalized, and the public will have an opportunity to comment on the proposal.
The proposed changes come as the FTC has already penalized companies that it believes have engaged in deceptive subscription practices. Last year, telecommunications company Vonage was required to pay $100 million to settle FTC allegations of trapping consumers in subscriptions. As part of the settlement, Vonage was required to provide a simple way for consumers to cancel their subscriptions. In addition, the FTC has been investigating Amazon since 2021 over allegations that the sign-up process for its Prime subscription is deceptive and makes it harder for users to cancel.
A study conducted by research firm C+R Research last year found that consumers underestimated their monthly spend on subscriptions by $133. The firm conducted a survey and found that 74% of respondents said it was easy to forget about their recurring monthly subscription service charges, and 42% said they’ve stopped using a subscription service, but forgot they were still paying for it.