FTC Introduces New "Click-to-Cancel" Rule to Simplify Subscription Cancellations
The Federal Trade Commission (FTC) has finalised a new rule that will make it easier for consumers to cancel unwanted subscriptions and memberships.
Known as the "click-to-cancel" rule, it aims to ensure that cancelling services is as simple as signing up for them. The rule, which takes effect 180 days after publication in the Federal Register, will prevent companies from misleading consumers and require them to get consent before charging for programs tied to auto-renewals or free trials.
FTC Chair Lina Khan emphasised that the rule is designed to stop businesses from trapping people in services they no longer want.
"Too often, businesses make people jump through endless hoops just to cancel a subscription," Khan said. "This rule will end these tricks and traps, saving Americans time and money."
The rule comes in response to a growing number of complaints about complicated cancellation processes. Khan noted that the FTC now receives about 70 complaints daily from consumers struggling to cancel subscriptions, pointing out that companies often make signing up easy but create "doom loops" of transfers and unhelpful phone systems when customers try to leave.
In addition to simplifying cancellations, the rule also requires companies to be upfront about all key terms before obtaining a consumer's billing information. This includes disclosing whether a service automatically renews and what charges may apply after any free trial period ends.
The FTC rule also prohibits companies from misrepresenting facts when marketing their products. For example, they can no longer downplay the difficulty of cancelling a subscription or mislead consumers about how long their trial period will last.
Rule comes as part of the “Time Is Money” initiative
The rule is part of the Biden administration's "Time Is Money" initiative, which aims to address common consumer frustrations. While the US Chamber of Commerce criticised the rule, calling it "heavy-handed," Khan dismissed the opposition.
"If a business is dependent on tricking or trapping people into subscriptions, that's not a good business model," she said.
Though there were concerns about how this rule might impact businesses, the FTC's goal is to ensure fairness and transparency in subscription services. Khan stated that all people want is honesty and fairness, adding that this new rule will help achieve that.
The FTC has taken action against major companies in the past for their cancellation practices. Amazon, for example, is currently facing a lawsuit over accusations that it made cancelling its Prime membership difficult. That case is expected to go to trial next summer.
While some businesses may push back, consumers like Nelson are hopeful that these changes will make their lives easier.
"It definitely would be very helpful for people like us," she said, emphasising the need for fairness when dealing with large companies.
