Canceling subscriptions just got easier after the Federal Trade Commission (FTC) updated its rules for companies that offer subscription services, from gyms and food delivery companies to streaming services.
The new “click-to-cancel” rule will require companies to make it as easy to end subscriptions as it is to sign up for them. The rule is set to go into effect 180 days after being published in the Federal Register.
“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said FTC Chair Lina Khan in a statement Wednesday. “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.”
Specifically, sellers are prohibited from misrepresenting any information when customers attempt to cancel their subscriptions. Sellers must also provide important information before obtaining billing information and charging the customer. There also must be informed consent before charges go through.
In this illustration photo taken on July 19, 2022, a Netflix show selection is displayed on a smartphone screen, with the account page in the background. A new Federal Trade Commission rule makes it easier to cancel subscriptions.
CHRIS DELMAS/AFP via Getty Images
The FTC has been trying to end many unfair and deceptive practices regarding subscriptions and memberships. It received more than 16,000 comments from consumers and agencies alike before introducing the latest rule change.
Complaints over deceptive subscription practices have increased over the past five years. The FTC said it receives nearly 70 consumer complaints a day. In 2021, the average was just 42 per day.
Currently, companies are permitted to use “negative option” marketing, which means they are able to use a customer’s lack of response as a “yes” to continue subscription to a service.
“For years, too many companies have used questionable tactics to trap customers in recurring payments even if they no longer want or need their services,” Teresa Murray, the consumer watchdog director at the Public Interest Research Group, told Newsweek.
“Subscriptions and memberships have often been like a visit to the Hotel California: ‘You can check out any time you like, but you can never leave.’ Now, you’ll be able to leave,” she said.
The FTC previously sued Amazon and Adobe over allegations they used “dark patterns” to keep customers in expensive recurring subscriptions, with cancellations exceedingly difficult.
“Those lawsuits are not yet resolved, but it’s clearly time to turn the page on unwanted subscriptions,” Murray said.
Alex Beene, a financial literacy instructor at the University of Tennessee at Martin, said while some of the FTC’s rules are seen as anti-business, they can go a long way toward protecting consumers.
“Many consumers have been met with confusion, disappointment and, most importantly, financial loss,” Beene told Newsweek. “Making the process of canceling an online service is pivotal in not just making sure businesses don’t take advantage of a complicated cancellation procedure but also building trust between online entities and consumers.”
