Subscription traps no more: FTC introduces one click-to-cancel rule

The Federal Trade Commission (FTC) has promised to free consumers from a frustrating obstacle course when canceling unwanted subscriptions. The FTC revised a Negative Option Rule, introducing a ‘Click to cancel’ requirement, which will go into effect in six months.

The new rule requires companies to provide an easy way to cancel.

“Make it as easy for people to withdraw from your program as it was to sign up,” the FTC explained.

“That means people have to be able to find your cancellation method quickly and easily. It should be offered through the same medium (online, phone, etc.) people used to sign up, and it shouldn’t be overly burdensome.”

Subscribers can’t be required to ‘talk to a live or virtual representative to cancel if they didn’t have to do that when signing up. If phone cancellations are offered, companies won’t be able to charge extra for that service and wil have to respond promptly during normal business hours.

Companies can't require in-person cancellation for users who signed up, but they must provide options to cancel online or by phone.

And that’s not the only change. The revised rule restricts companies from using a ‘negative option,’ which is a practice when companies interpret a customer’s silence or inaction as consent, often leading to charges.

Companies will need to disclose all material terms of the deal, obtain explicit permission before charging for a subscription or membership and will not be able to use tricks to mislead customers about any aspect of their offers.

“The rule gives you some flexibility on what that proof looks like. In many cases, a checkbox, signature, or similar method is just fine,” the FTC explains in a blog post. “Don’t try to distract people with other information. Get proof of consent and maintain it for at least three years.”

The rule applies broadly and covers most subscription services, including business-to-business subscriptions, giving companies similar protections as individual customers.

“Violators may be liable for civil penalties. Some provisions of the rule will start to go into effect within 60 days, with most parts in full effect within 180 days. Take this time to make sure you’re fully complying and avoid the possibility of civil penalties down the line,” the FTC warns.

These revisions may destroy some business models that rely on holding consumers hostage. The FTC has found that many gym, fitness center, and health studio memberships are sold via negative options and require cancellation via ‘certified mail or in person,’ sometimes even when consumers can enroll online.

Some Reddit users are excited about the change, which addresses long-standing frustrations about complex and convoluted cancelation procedures.

“Thank God! This was highly needed. Few things are as annoying as having to jump through hoops to cancel a subscription you're not using anymore,” one user posted.

According to FTC’s fact sheet, the rule will help to get money back if the people are misled by companies not telling the truth or leaving out the necessary information, charging when users didn’t agree to pay, or making it hard or impossible to cancel.

“There always has to be a way to cancel that’s as quick and easy as it was to sign up. Sign up online? Click to cancel. Signed up in person? Cancel online or over the phone. Violators can be liable for redress and civil penalties.”

Some users shared stories of them being unable to cancel gym subscriptions for six months or even longer.

The FTC said it receives tens of thousands of complaints about negative options each year. A study about subscription traps demonstrated that complaints about free trials doubled between 2015 and 2017, reaching nearly 37,000.

Another study reveals that on average consumers pay “two-and-a-half times what they originally estimated on monthly subscriptions, likely due to the lack of adequate notice from sellers.” More than two thirds (71%) of individuals lost more than $50 a month in unwanted subscriptions.