Federal government streamlines subscription cancelation
New regulations from the Federal Trade Commission make it easier for consumers to cancel subscriptions and crack down on misleading subscription practices.
As part of a governmentwide consumer protection initiative known as "Time Is Money” which the Biden administration launched in August 2024, the FTC has released a final “click-to-cancel” rule that will require sellers to make it as easy for consumers to cancel their enrollment as it was to sign up.
"Too often, businesses make people jump through endless hoops just to cancel a subscription," said FTC chair Lina M. Khan. "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."
The updated rule will apply to almost all negative option programs (which automatically enroll customers in a subscription program unless they specifically request not to be enrolled) in any media. The rule also will prohibit sellers from misrepresenting any material facts while using negative option marketing; require sellers to provide important information before obtaining consumers’ billing information and charging them; and require sellers to get consumers’ informed consent to the negative option features before charging them.
The final rule will prohibit sellers from:
- Misrepresenting any material fact made while marketing goods or services with a negative option feature;
- Failing to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature;
- Failing to obtain a consumer’s express informed consent to the negative option feature before charging the consumer; and,
- Failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.
Following an evaluation of public comments, the FTC voted to adopt a final rule with some changes, including dropping a requirement that sellers provide annual reminders to consumers of the negative option feature of their subscription and dropping a prohibition on sellers telling consumers seeking to cancel their subscription about plan modifications or reasons to keep to their existing agreement without first asking if they want to hear about them.
The Commission vote approving publication of the final rule in the Federal Register was 3-2. FTC staff has developed a fact sheet summarizing the changes to the rule.
Most of the final rule’s provisions will go into effect 180 days after it is published in the Federal Register.
[READ MORE: Klarna launches monthly subscription plan in U.S.]
