On Wednesday, the US Federal Trade Commission (FTC) announced a new rule that will make it easier for consumers to cancel subscriptions and memberships. Known as the "click to cancel" regulation, this rule requires businesses to simplify their cancellation processes, ensuring that it is just as easy to cancel as it is to sign up for a service.
This significant rulemaking comes as the agency prepares for the upcoming election on November 5.
FTC's Click to Cancel Rule
Chair of the FTC, Lina Khan, explained that this new regulation addresses a long-standing problem. Many consumers have voiced their frustrations about how simple it is to sign up for subscriptions while facing numerous obstacles when trying to cancel.
Under the new rule, companies must obtain explicit consent from consumers for subscriptions, auto-renewals, and free trials that become paid memberships. Importantly, businesses cannot require customers to navigate complicated chatbots or speak to a representative to cancel their service.
Instead, companies must offer straightforward cancellation options online or via phone for those who signed up in person. Khan emphasized that the COVID-19 pandemic revealed just how difficult it was for people to cancel services, especially when businesses were closed, said Reuters.
The FTC received a flood of comments from consumers struggling to cancel services after proposing this rule last year. Many of these complaints involved popular businesses such as Planet Fitness, HelloFresh, and Rihanna's Savage X Fenty lingerie store.
The FTC recognized that existing laws, like the Restore Online Shoppers' Confidence Act of 2010, were not enough to protect consumers effectively.
While some industry groups, including those representing car washes and retailers, criticized the proposal as being overly burdensome, the FTC decided against requiring businesses to periodically inform customers about recurring charges.
Additionally, companies cannot force customers to opt out of receiving discounts or other incentives aimed at keeping them from canceling.
This new rule was approved with a narrow 3-2 vote, with two Republican commissioners opposing it. As Election Day approaches, the "click to cancel" regulation represents one of the final pieces of President Joe Biden's broader initiative to tackle "junk fees" that burden consumers.
Last month, Kamala Harris, the Democratic presidential candidate, highlighted the importance of this issue, promising to focus on it if she wins the election.
FTC Regulation Aims to Simplify Cancellations, Protect Consumers
Currently, the FTC reports receiving about 70 complaints each day from individuals struggling to cancel subscriptions they either did not know they had or found challenging to terminate.
The FTC's regulation aims to eliminate these deceptive practices, ultimately benefiting Americans by conserving both time and financial resources." This regulation seeks to prevent consumers from continuing to pay for services that no longer meet their needs.
According to CBS News, the majority of the new rules will take effect 180 days after they are published in the Federal Register, providing businesses time to adjust their cancellation processes.
Despite some opposition from the US Chamber of Commerce, which claims this initiative could lead to higher costs for consumers, the Biden-Harris administration remains firm in its support for the rule, emphasizing its goal to reduce costs for all.
