Canceling recurring subscriptions and memberships should get simpler with final FTC rule
If it takes a few steps to sign online to join a gym, well, it should take a few steps to cancel online.
Sounds reasonable? No? Well, soon commonsense simplicity will be a requirement once a new "click to cancel" rule goes into place in six months or so. If you signed up in person, you'd be able to cancel by phone or online.
Exactly how easy it should be to cancel will be determined on a case-by-case basis, according to the Federal Trade Commission. FTC Commission Chair Lina Khan says some consumers have had to jump through "endless hoops" to cancel a subscription. She maintains it should be “as easy to cancel as it was to subscribe.”
The Federal Trade Commission initially proposed the rule back in March 2023. We're talking about gym memberships, newspapers, recurring charges for cosmetics or clothes where you're regularly sent personalized boxes of stuff, meal kit services and more.
After announcing the proposed rule a year ago, the FTC heard more than 16,000 comments from consumers and federal and state government agencies, consumer groups and trade associations.
How 'tricks and traps' hurt consumers
The FTC already was seeing a steady flow of complaints from consumers about how some businesses had put up too many roadblocks to canceling recurring charges. The FTC said it has received nearly 70 such consumer complaints per day on average this year, up from 42 each day in 2021.
“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," FTC Commission Chair Khan said in a statement.
As part of the new rule, consumers would be told clearly upfront about such ongoing charges before giving their payment information. A company also would have to obtain a consumer’s consent to what's known as a "negative option feature" before charging the consumer.
What is a 'negative option' strategy?
"Negative option" marketing, according to the FTC, contains a term or condition that allows a seller to interpret a customer's silence, or failure to take action, as acceptance of an offer. That's how you can end up suddenly hit with automatic renewals or signing up for a free trial and then being charged an ongoing fee for a product or service.
The new rule doesn't go as far as some wanted. For example, the business can still try to talk you into staying on as a customer when you're trying to cancel a service.
The rule drops a proposal that would have stopped a company from telling consumers who wanted to cancel about discounts, deals or plan modifications. And customer service support could still give customers reasons to keep their existing agreement without first asking whether the consumer wanted to hear about them.
The rule will not require annual notices to consumers about these subscriptions or charges. So, you'd still have to pay attention to what you're being charged and what you're getting. If shoppers don't pay attention, they could be saddled with recurring payments for products and services they don't want now or never intended to buy.
Federal Trade Commission: With 'click to cancel' rule, FTC wants to solve subscription headache
Yes, some said FTC is playing politics
The Commission vote was 3 to 2 for approving publication of the final rule in the Federal Register, which is expected to happen within two weeks. Commissioners Melissa Holyoak and Andrew Ferguson, both Republicans who were sworn in earlier in 2024, voted no. Holyoak noted in her dissent: "For those tracking the rule and national politics closely, this rush to the finish line (and less than a month from a presidential election) is no surprise."
She indicated that the rollout of the final rule is politically motivated and part of President Joe Biden's administration's efforts to crack down on "so-called junk fees," which is now being highlighted on the campaign trail. Some industry groups also criticized the added regulations.
Everything in October, of course, can have a political hue. But consumers have been dealing with much of this nonsense for years so I'd maintain they could welcome some relief ahead, no matter how they plan to vote. Green tops red or blue.
"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," Teresa Murray, consumer watchdog for the U.S. PIRG Education Fund, said in a statement.
Over the years, she said, many consumers complained about trying to cancel ongoing payments for a product or service only to encounter a "never-ending phone tree or online maze that required click after click after click."
They'd often find themselves stuck without a way out.
"The new rules," she said, "give consumers more freedom to switch providers, read a different news service, buy a different pet food or none at all."
Murray told the Detroit Free Press that the overall rule is straightforward, requiring companies to get “clear informed consent” before charging someone or even getting their billing information.
“No tricks. No ambiguities,” Murray said.
She noted that some companies have tricked consumers for years into signing up for subscriptions, and then essentially would not allow them to cancel.
“Sometimes, people don’t even know how they got roped into a subscription,” Murray said.
Most of the final rule’s provisions will go into effect 180 days after the rule, announced Oct. 16, is published in the Federal Register.
The FTC has taken other actions as well. In June, for example, the FTC charged that software company Adobe — maker of Photoshop and Acrobat — trapped consumers in its “annual, paid monthly” subscription plan without adequately disclosing that canceling the plan in the first year could cost hundreds of dollars.
FTC Chair Lina Khan: New rule is an overdue response
How to avoid costly charges
Consumers can protect themselves as well, by taking steps to make sure they're not faced with ongoing charges that they don't want. PIRG and others suggest:
- Ask yourself whether a limited, free trial subscription is worth it, especially if you just want to watch one movie or use that service one time. You likely will need to provide credit card information or other payment account information to sign up for something that’s free. If you don’t cancel, you're stuck paying.
- Never sign up for such services with a debit card, which links to your bank account. It can make it difficult to get your money back, PIRG notes, and can even lead to costly overdraft fees. If the company continues to charge you, you have more protections with a credit card than a debit card under the Fair Credit Billing Act.
- Watch your bank statements to see whether you are being charged regularly for services or products. Cancel ones you don't want. If the charges continue after you've tried to cancel a subscription, the FTC says, file a dispute or charge-back with your credit card issuer or debit card.
- Watch out for prechecked boxes. Many companies may, by default, check boxes that give them permission to charge you after the free trial expires, according to PIRG. Or the checked box could even end up signing you up for other products or services. "Uncheck the boxes you don’t agree with," PIRG states.
- Understand that sometimes, unscrupulous companies don't follow the rules. That's why you want to keep emails, receipts and records of agreements and any attempts to cancel. You can complain to the FTC or the state attorney general.
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X (Twitter) @tompor.