Rule would require companies to offer a simple cancellation mechanism that will allow users to cancel subscriptions using the same method they used to sign up
Upper Cumberland – On March 23, The Federal Trade Commission (FTC) proposed a rule requiring companies to have a click to cancel option for subscriptions and recurring memberships, making it as easy to cancel a subscription as it is to sign up for one. The proposal is part of the FTC’s review of the Negative Option Rule, a 50-year-old legal framework that mandates sellers disclose sales terms before consumer subscriptions and inform them about cancellation processes.
“Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place,” said FTC Chair Lina M. Khan. “The proposed rule would require that companies make it as easy to cancel a subscription as it is to sign up for one. The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties.”
The new rule would require companies to offer a simple cancellation mechanism that will allow users to cancel subscriptions using the same method they used to sign up. For example, a consumer wouldn’t have to cancel a subscription in-person or over the phone if they signed up for it online.
FTC’s “click to cancel” proposal aims to save consumers both time and money. It also serves as a timely reminder that legal authorities can hold subscription-based companies legally responsible for making the cancellation process excessively difficult for consumers. Meanwhile, businesses that persist in using subscription tricks or tactics are liable to face severe penalties.
According to reports, between July 2021 to July 2022, approximately 60% of subscription-based companies witnessed an increase in online payment fraud, which is higher than the average in the e-commerce industry.
“With a difficult cancellation process, businesses risk customers resorting to chargebacks in the form of friendly fraud and complaints, even if they are compliant with payment processing guidelines,” said Monica Eaton, CEO of Charegbacks911. “Innovative technology has forever changed consumer behavior and the expectations they have in dealing with businesses. This is why companies must prioritize providing an intuitive and seamless cancellation process to avoid losing customers to their banks or credit card companies which often offer concierge-like services to meet their customers’ needs.”
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