FTC drops hammer on unwanted subscriptions with 'click to cancel' rule
It 'will end these tricks and traps, saving Americans time and money'
The US Federal Trade Commission on Wednesday announced a final "click-to-cancel" rule that aims to simplify the process of ending unwanted subscriptions to products and services.
The "Rule Concerning Recurring Subscriptions and Other Negative Option Programs" addresses business practices that make it more difficult for consumers to cancel subscriptions.
"Too often, businesses make people jump through endless hoops just to cancel a subscription," said FTC Chair Lina Khan in a statement. "The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want."
A "negative option program" refers to a business term or condition that allows a merchant to take a consumer's silence or inaction as a sign of consent. A one-year subscription that gets renewed after a year without notice or consent, for example, would qualify as a negative option.
According to a 2022 survey conducted by C+R Research, consumers on average underestimate the amount they spend monthly on subscription fees by more than 2.5 times, a finding that suggests people lose track of how much they're spending.
The FTC's rule [PDF] follows on the heels of California's adoption of its own click-to-cancel legislation, AB 2863. California legislation requires that companies offering automatic service renewals give consumers a way to cancel the subscription using the same medium used to sign up.
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The trade watchdog's directive makes it a deceptive or unfair trade practice under Section 5 of the FTC Act:
- to misrepresent any material fact made while marketing using a negative option feature (§ 425.3);
- to fail to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature (§ 425.4);
- to fail to obtain a consumer’s express informed consent to the negative option feature before charging the consumer (§ 425.5); and
- to fail to provide a simple mechanism to cancel the negative option feature and immediately halt charges (§ 425.6).
The rule will take effect 180 days after publication in the US Federal Register.
The Commission notes that complaints about negative option features have grown from an average of 42 per day in 2021 to nearly 70 per day in 2024.
The Interactive Advertising Bureau (IAB), an advertising industry trade group, opposed the FTC rule prior to its adoption. In a letter [PDF] to the FTC from December 2023, Lartease M. Tiffith, IAB's EVP of public policy, argued, "[T]his rule will have major harmful repercussions for the marketplace once finalized, as it seeks to fundamentally alter how autorenewal marketing operates."
Asked whether the IAB intends to challenge the regulation in court, a spokesperson for the group said, "IAB is still reviewing the final rule." ®