FTC introduces proposal to make US subscriptions easier to cancel
It is one of the ires of the digital age: signing up for a new subscription can be done in a few clicks, but cancelling it later is often difficult and can sometimes feel almost impossible.
Now the US Federal Trade Commission (FTC) is trying to change that for customers in a new proposal that would require companies with customers on recurring payment programs to offer easy online cancellation.
Some companies require customers to call obscure phone numbers and wait on hold in order to cancel a subscription, something that the FTC believes is a deceptive practice.
“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 the FTC chair, Lina Khan, in a statement. “The proposed rule would require that companies make it as easy to cancel a subscription as it is to sign up for one.”
The FTC said it has received a growing number of complaints under its negative option rule, which regulates how companies charge customers when there is no affirmative action from them, like when they forget to cancel a subscription. In 2022, the FTC received 17,427 complaints under this rule and 16,020 complaints in 2021.
The proposal would affect multiple types of subscription services, from cosmetics and newspapers to gym memberships – any type of service that allows customers to sign up online. Last year, a survey from the market research firm C+R Research showed that consumers underestimate how much they pay for subscriptions each month, and they are on average paying $133 more than they expect.
Along with a click-to-cancel requirement, the FTC is also considering requiring businesses to ask customers whether they want to hear about additional offers before the cancel, instead of the customer being forced to bypass them in order to cancel.
Another proposal would also order companies to provide an annual reminder of automatic renewals to customers of a subscription service for anything other than physical goods.
Companies who fail to comply would be subject to civil penalties of $50,000 per violation. Customers could also seek redress from the FTC if they faced harmful tactics.
On a call with reporters, Khan said the new rules would allow better standardization across subscription businesses.
“Once you allow companies to basically engage in deceptive tactics, it creates an incentive across the market,” she said. “We think this will also be good for honest businesses that don’t actually want to engage in these tactics in the first place.”
Some states have already implemented laws that require easy cancellation for customers. California requires that businesses must allow customers to cancel online. Colorado similarly requires easy cancellation, like one-step cancellation.