The Federal Trade Commission today proposed a “click-to-cancel” rule that would require sellers to make it as easy for consumers to cancel their registration as it was to sign up. This is just one of several important updates the Commission is proposing to its rules on subscriptions and recurring payments. The new click-to-cancel deployment, along with other proposals, would go a long way in saving consumers from the seemingly endless hassle of canceling unwanted subscription payment plans for everything from cosmetics to newspapers to gym memberships.
“Some companies too often lure consumers into paying for subscriptions they no longer want or didn’t purchase in the first place,” said Lina M. Khan, chair of the FTC. “The proposed rule would require companies to make canceling a subscription as easy as signing up. The proposal would save consumers time and money, and companies that continue to use subscription tricks and traps would face hefty penalties.”
The announcement of the proposed rulemaking, announced today, is part of the FTC’s ongoing review of the Negative Option Rule of 1973, through which the agency addresses unfair or deceptive practices associated with subscriptions, memberships and other recurring payment programs.
These programs are widely available in the market and can offer significant benefits to both consumers and businesses. However, they can become problematic when marketers fail to make adequate disclosures, bill consumers without their consent, or make cancellation either difficult or impossible — for example, by requiring customers to cancel in person or by allowing them to do so in the Hold on hold and wait to speak to customer service. Each year, the FTC receives thousands of consumer complaints about such practices.
The current patchwork of laws and regulations available to the FTC does not provide a consistent legal framework for consumers and industry. Accordingly, the proposal would include several specific changes, including the implementation of:
- A simple cancellation mechanism: If consumers are unable to leave a program at any time, the negative options feature is simply a way to continue charging them for products they no longer want. To address this issue, the proposed rule would require companies that canceling a subscription is at least as easy as starting. For example, if you can register online, you must be able to cancel on the same website and in the same number of steps.
- New requirements before submitting additional offers: The proposed rule would allow sellers to offer additional offers or changes if a consumer tries to cancel their subscription. But before making such speeches, sellers must first ask consumers if they want to hear them. In other words, a seller must accept no as an answer and, if no, immediately initiate the cancellation process.
- New requirements for reminders and confirmations: The proposed rule would require sellers to provide annual reminders to consumers participating in negative option programs for non-physical goods before they are automatically renewed.
The commission voted 3-1 to publish the notice of the proposed rule, with Commissioner Christine S. Wilson voting no. Chairwoman Khan issued a separate statement, joining Commissioners Rebecca Kelly Slaughter and Alvaro Bedoya. Commissioner Wilson issued a dissenting statement. Once the notice has been published in the Federal Register, consumers can submit comments electronically. The public may also submit comments in writing by following the instructions in the Additional Information section of the Federal Register Notice.
The FTC has prepared a fact sheet summarizing proposed changes to the negative option rule. The key contributor on this matter is Hampton Newsome in the FTC’s Enforcement Division.
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