FTC proposes click-to-cancel subscription provision

In an ongoing effort to protect consumers from getting stuck in endless billing cycles after cancelling subscriptions, the Federal Trade Commission proposed amending the Negative Option Rule, which was originally introduced in 1973. New provisions unveiled March 23, 2023, would make opting out as easy as opting into services, according to FTC Chair Lina M. Khan.

"Some businesses too often trick consumers into paying for subscriptions they no longer want or didn't sign up for in the first place," Khan said in a statement. "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."

Scott Talbott, senior vice president of government relations at the Electronic Transactions Association, concurred, stating, "ETA supports the proposal to give individual consumers the ability to cancel subscriptions and memberships."

Deceptive practices

Noting that the Negative Option Rule was created to combat deceptive business practices relating to recurring billing, FTC representatives stated subscription billers frequently bill consumers without their consent and make cancellation difficult by requiring consumers to make requests in person or by keeping them on hold for extended periods. Enhancements to the proposed rule would do more to address several issues by enabling the following:

• Easy cancellations: Requiring businesses to make it at least as easy to cancel a subscription as it was to start it. Consumers who sign up online must be able to cancel online, using the same number of steps.

• Opt-in mechanism for heroic account-saving offers: Allowing sellers to pitch additional offers but only if consumers agree to hear them. A seller must take "no" for an answer.

• Annual reminders: Requiring sellers to remind consumers enrolled in negative option programs involving anything other than physical goods before automatically renewing their subscriptions.

Request for comment period

When the notice has been published in the Federal Register, the FTC will invite public commentary, both electronically and in writing, FTC representatives stated. While consumers appreciate the opportunity to try products and services, the FTC noted, opting out of free trials can be onerous when merchants have not provided all the necessary information, bill consumers when they have not agreed to pay, and make it nearly impossible to cancel subscription. Law enforcement has not been able to fully solve for these issues, they added.

Amending the Negative Option Rule would prohibit misrepresentations and provide more transparent disclosures, so that people can know what they are agreeing to and can cancel at any time, the FTC stated. These clear, enforceable, performance-based requirements would apply to all subscription features in all media, while making sure that consumers fully understand and agree to what they are buying while having the option of cancelling without "jumping through lots of hoops," the commission added.

A fact sheet on the proposed ruling and its potential impact on merchants and consumers is available at: www.ftc.gov/system/files/ftc_gov/pdf/NegOptions-1page.pdf .

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