The Federal Trade Commission’s “Negative Option” rule updates are poised to end the frustrations of cumbersome subscription cancellations, but how effective will they be in practice?
At a Glance
- The FTC introduces a “click-to-cancel” rule for easier subscription cancellations.
- The rule will take effect 180 days after publication.
- Aim to stop deceptive practices and simplify cancellations to match the ease of sign-ups.
- The rule narrowly passed with a 3-2 vote among commissioners.
FTC Introduces “Click-to-Cancel” Rule
The Federal Trade Commission (FTC) has announced a significant update with the introduction of the “click-to-cancel” rule, which aims to simplify the cancellation process of recurring subscriptions and memberships. Consumers often face complex cancellation processes that are not as straightforward as the original sign-up. This rule mandates that the cancellation procedure be as uncomplicated as the enrollment process, serving to protect consumers from deceptive practices.
This rule comes after analysis showed an increase in complaints, now at an average of 70 per day in 2024, compared to 42 daily three years ago. The majority of the provisions under this rule will become effective 180 days from their publication in the Federal Register.
In 2021 the FTC received 42 complaints per day from consumers trying to cancel subscriptions.
In 2024, it's nearly 70 every day.
But today, the FTC issued a final rule that makes it as easy to cancel a subscription as it is to sign up. https://t.co/BAv0VWZR6R
— Douglas Farrar (@DouglasLFarrar) October 16, 2024
Protections for Consumers and Responsibilities for Sellers
The “Negative Option” update mandates that sellers provide clear information and obtain informed consent from consumers before billing for these ongoing services. Additionally, it places a ban on misrepresenting material facts and requires sellers to offer a straightforward cancellation mechanism. Commissioner Chair Lina M. Khan highlighted the need for these changes, stating, “Too often, businesses make people jump through endless hoops just to cancel a subscription.”
These measures come as part of a larger effort to modernize the 1973 Negative Option Rule, tackling practices deemed deceptive in the current digital economy. The FTC has developed a fact sheet explaining these rule changes, spearheaded by Katherine Johnson.
Rule Implementation and Corporate Adjustments
This statutory update was not unanimously welcomed, facing dissent from Commissioners Melissa Holyoak and Andrew N. Ferguson, concerned about the rule’s swift adoption. Businesses, including giants like Adobe and Amazon, will need to adjust quickly, ensuring that consumers understand the terms and have an easy cancellation option. The FTC can impose civil penalties on companies that fail to comply, reinforcing its commitment to promoting competition and safeguarding consumers’ rights.
Though facing challenges, the rule aims to significantly reduce subscription-related frustrations. Clear and efficient processes will enable consumers to make informed decisions without falling into traps often associated with recurring billing.
