By The US Federal Trade Commission (FTC) has taken a decisive step to protect consumers by implementing a new ‘click to cancel’ rule designed to simplify the process of ending subscriptions. Set to take effect in approximately six months, this regulation will require companies to make subscription cancellations as straightforward as the initial sign-up process.
FTC Chair Lina Khan underscored the importance of this rule, stating, “Too often, businesses make people jump through endless hoops just to cancel a subscription. The FTC’s rule will end these tricks and traps, saving Americans time and money.” This new regulation addresses a persistent consumer frustration with complicated cancellation procedures that often trap customers in unwanted subscriptions.
Under the ‘click to cancel’ rule, companies will be prohibited from forcing customers to use chatbots or speak with agents to cancel subscriptions that were originally initiated online or through an app. For memberships signed up for in person, businesses must offer cancellation options by phone or online. Additionally, the rule mandates that companies obtain explicit consent from customers before renewing subscriptions or converting free trials into paid memberships.
This regulatory action follows several high-profile legal challenges by the FTC against major tech companies. Last year, the agency filed a lawsuit against Amazon, accusing the e-commerce giant of misleading customers into signing up for Prime subscriptions that automatically renewed and were difficult to cancel. Amazon has denied these allegations. Similarly, the FTC has taken legal action against Adobe for allegedly violating consumer protection laws with “hidden” termination fees and a complex cancellation process. Adobe has disputed these claims.
The new FTC rule aligns with similar efforts in other countries to combat subscription traps. In the UK, the Digital Markets, Competition and Consumers Act 2024, introduced in May, requires businesses to provide clear information to consumers before entering subscription agreements, remind customers when free or low-cost trials are ending, and ensure easy contract termination.
This regulatory move by the FTC is expected to have far-reaching implications for businesses across various sectors, including retail, technology, and fitness industries. Companies will need to review and potentially overhaul their subscription models and cancellation processes to comply with the new requirements.
As the implementation date approaches, consumer advocacy groups are likely to welcome this change as a significant step towards protecting consumers from deceptive practices. Meanwhile, businesses will need to adapt their systems and practices to ensure compliance with the new rule.
The ‘click to cancel’ rule represents a major shift in how subscription services operate in the United States, potentially setting a new standard for consumer-friendly practices in the digital age. Its effects will be closely watched by both consumers and industries as it rolls out in the coming months, with the potential to reshape the landscape of subscription-based services and enhance consumer rights in the digital marketplace.
