In a move aimed at protecting consumers from misleading subscription practices, the U.S. Federal Trade Commission (FTC) has adopted a final rule requiring businesses to make subscription and membership cancellations as simple as the sign-up process. This “click to cancel” rule targets various industries, including gyms, retailers, and digital services, ensuring that consumers can opt out of subscriptions without unnecessary hurdles.

What the ‘Click to Cancel’ Rule Entails

The new FTC rule mandates that businesses obtain explicit consent from customers before enrolling them in subscriptions, auto-renewals, or free trials that convert into paid memberships. Importantly, the cancellation method must be “at least as easy to use” as the process to sign up for these services. This new regulation prohibits companies from forcing consumers to go through convoluted procedures, such as dealing with chatbots or agents, when they want to cancel subscriptions.

FTC Chair Lina Khan emphasized that the rule responds to a growing number of consumer complaints regarding the difficulty of canceling unwanted subscriptions. She noted that many companies had made signing up for services “extraordinarily easy” while simultaneously making cancellations “absurdly difficult.” The rule seeks to eliminate these manipulative practices, ensuring that consumers are not locked into subscriptions they no longer want or need.

“Companies shouldn’t be able to trick you into paying for subscriptions that you don’t want,” Khan remarked, stressing the importance of consumer protection in this area.

The Pandemic’s Role in Highlighting Unfair Practices

The COVID-19 pandemic exposed the extent of these questionable practices, particularly in industries such as gyms, where consumers were often required to cancel memberships in person, even when the businesses themselves were closed due to lockdowns. Khan cited the pandemic as a turning point in recognizing the “absurdity” of requiring in-person cancellations while companies restricted physical access.

The FTC’s decision comes after extensive feedback from thousands of consumers who shared their struggles with canceling subscriptions. Several high-profile companies, including gym chain Planet Fitness, meal kit provider HelloFresh, and Rihanna’s Savage X Fenty lingerie brand, were frequently mentioned in complaints for making it overly difficult to cancel services.

Pushback from Business Groups

While consumer advocates have largely supported the “click to cancel” rule, some business groups have raised concerns. Trade associations representing car washes, retailers, TV providers, and news publishers have argued that parts of the proposal are burdensome and unnecessary. Despite this opposition, the FTC moved forward with the rule, though it did make some concessions by dropping proposals that would have required businesses to periodically remind customers about recurring charges and to allow consumers to opt out of receiving retention offers when attempting to cancel.

The rule was passed in a 3-2 vote by the FTC, with the two Republican commissioners voting against it.

Part of a Broader Effort to Combat ‘Junk Fees’

The “click to cancel” rule is part of President Joe Biden’s larger initiative to address what his administration has termed “junk fees” — hidden or unexpected charges that consumers often encounter. Vice President Kamala Harris, who is running for the White House, has also championed the proposal, highlighting it as a key issue she would prioritize if elected.

With growing consumer frustration over subscription traps and misleading billing practices, the FTC’s new rule is seen as a major step in ensuring a fairer and more transparent marketplace.

(Adapted from WionNews.com)

Categories: Economy & Finance, Regulations & Legal, Strategy