The United States’ Federal Trade Commission (FTC) will soon implement a “click-to-cancel” rule, which will make it significantly easier for consumers to cancel their subscriptions and memberships, and make companies liable to face civil penalties for complicating the cancellation process.
Highlights of the new rules
- Easy cancellation: Consumers must be given the option to cancel their subscription in the same way they subscribed. If you subscribed online, the cancellation must be done online.
- No need to talk to representatives: Companies cannot force consumers to talk to virtual representatives or over the phone to cancel their subscription if they did not need to do so when they signed up.
- No additional fees: Companies cannot charge additional fees for cancellations and must answer the phone during normal business hours.
- Option required: If you subscribed in person, companies must provide an option to cancel over the phone or online.
Who will the click-to-cancel rules apply to
These rules will apply to almost all types of subscription plans, such as:
- Services with advance notice
- Automatic renewal plans
- Services after a free trial
Purpose of the rules: These rules have been brought as part of a review of old rules from 1973, to prevent unfair or deceptive practices of companies in the digital era. The FTC has received many complaints about such subscription plans, which these new rules will address.
Consumer dissatisfaction is growing rapidly in the United States due to “negative option” marketing programs. The FTC is receiving thousands of complaints every year, in which consumers are reporting that they have trouble canceling subscription services.In 2024, the number of these complaints increased to about 70 per day, while this number was 42 in 2021.
A study conducted by CR Research in 2022 found that 42% of consumers forget that they are paying for services they are not using. Also, many customers underestimate the actual monthly cost of their subscription by an average of $133, meaning they are unaware of the true cost. This shows that people are unknowingly paying for services they do not need.
Federal Trade Commission
- The Federal Trade Commission (FTC) is an independent agency of the US federal government, established in 1914 under the “Federal Trade Commission Act”. Its main objective is to protect consumers and promote healthy competition in business activities.
FTC works in the following areas
- Preventing unfair or deceptive trade practices: The FTC ensures that consumers do not face fraud, deceptive advertising, or unfair business practices. It monitors business and marketing practices.
- Enforcing antitrust laws: The FTC takes action against anti-competitive practices, such as illegal monopolies and agreements that restrict competition. Its goal is to maintain healthy competition.
- Regulating advertising and marketing practices: The FTC ensures that advertisements for products and services are true and accurate so that consumers are not influenced by false information.
- Regulating consumer lending practices: The FTC ensures that lending terms and interest rates are transparent and in the interest of consumers so that people can make better financial decisions.