The Federal Trade Commission (FTC) today proposed a “click to cancel” rule for unwanted subscriptions. This proposed rule will require sellers to make it easy for consumers to cancel their subscriptions - in as many steps as it took to sign up.
Consumers are often tricked. They fall into a rabbit hole where they can't figure out how to get out. They often find it difficult to reverse recurring payments for goods and services they don't want.
The new rule will make three major changes to how companies with recurring payments operate:
- A simple cancellation mechanism: The proposed rule would require businesses to make it at least as easy to cancel a subscription as it was to start it. For example, if you can sign up online, you must be able to cancel on the same website, in the same number of steps.
- New requirements before making additional offers: Before making pitches to stay in the subscription, sellers must first ask consumers whether they want to hear them. In other words, a seller must take “no” for an answer and upon hearing “no” must immediately implement the cancellation process.
- New requirements regarding reminders and confirmations: The proposed rule would require sellers to provide an annual reminder to consumers enrolled in negative option programs involving anything other than physical goods before they are automatically renewed.
Mimicking California
In Oct. 2021, Governor Newson of California signed a set of Consumer Financial Protection bills that included many of these kinds of rules for companies operating or selling services in California. AB 390 streamlined the cancellation of automatic renewal and increases notice for continuous service subscriptions.
This follows up on his establishment of a Department of Financial Protection in late 2020. The legislation also requires businesses to notify consumers before the expiration of a free trial or promotional price included as part of a subscription offer.
California has a broad reach in the financial sector, as most companies doing business in the U.S. on a large scale also operate in California. As a result, their Department of Financial Protection and financial protection bills both mimic Federal laws, and Federal laws and rules tend to lead or mimic California legislation in this regard.
Bottom line - you should be able to find it easier to cancel your online subscriptions in the future.
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Mark R. Hake, CFA, writes articles on national and local news, stocks, and market events at InvestorPlace.com, Barchart.com, Medium.com, and Newsbreak.com as well as TalkMarkets.
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