Making Subscriptions Simple: FTC’s Click-to-Cancel Rule is a Win for Consumers

When the Federal Trade Commission (FTC) unveiled its final “Click-to-Cancel” rule on October 16, it was a win for consumers. The rule simplifies the way consumers can cancel their subscriptions, making it easier to end recurring subscriptions and memberships. This means that consumers should now be able to cancel a subscription as easily as signing up for one.

FTC Chair Lina M. Khan stated, “Too often, businesses make people jump through endless hoops just to cancel a subscription. 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.”

This rule is not just about cancelling subscriptions; it impacts every stage of the subscription relationship between businesses and consumers, creating civil penalties for subscription offers that mislead consumers as to material terms. That includes offers that fail to disclose material terms clearly and conspicuously. 

The rule is also specific as to where the disclosure of material terms must be placed and makes it clear that a business cannot collect a customer’s billing information until after disclosing all material terms of the relationship with them.

As lead of BBB National Programs’ National Advertising Division (NAD), the U.S. self-regulatory body for protecting consumers from misleading advertising, I was watching and waiting for this final rule to be issued. The rule is pertinent because through our review of cases regarding advertising for subscription offers and other “negative option” plans, we provide advertisers with the guidance that the material terms of an offer should be disclosed within the four corners of the advertising where the offer appears. 

And, as our case decisions reasoned, consumers can be misled if they do not know both the benefits and the terms of an offer before committing to being charged. 

Here are my other top takeaways from the FTC’s new Click-to-Cancel rule.

Simplifying the Cancellation Process

Consumers often find the process of canceling a subscription incredibly complex. The new FTC rule addresses that by mandating that cancellation processes and options should be able to be done easily and should not be required to interact with a live person if they didn’t need to do so to sign up. 

Even if a subscription was initiated in person, the cancellation must be possible through an interactive electronic medium or a telephone number.

Ensuring Honest Subscription Offers

Companies can now face civil penalties for misrepresenting or failing to disclose any material facts about their subscription offerings. The rule covers nearly all negative option programs and specifies that material terms should be disclosed. Material terms include the feature and term of the plan, the cost, deadlines to prevent or stop charges, and other “material facts,” which the rule defines as facts “likely to affect a person’s choice of, or conduct regarding, goods or services. The rule aims to protect consumers from deceptive practices that can lead to unwanted charges and commitments.

Clear and Conspicuous Disclosures

Transparency is a cornerstone of the new rule. The FTC requires that all material information must be disclosed before obtaining the consumer’s billing information, be clear and conspicuous, and be presented in a manner that is “unavoidable” and easy to notice.  

A Step Towards Consumer Empowerment

The FTC’s Click-to-Cancel rule will likely guide businesses on offering subscriptions in ways that foster consumer trust. Through businesses simplifying the cancellation process and ensuring transparency in subscription offers, consumers should avoid the traps that have long plagued the subscription market. I expect this rule to save consumers time and money while providing a fairer and uncomplicated cancellation experience. 

The rule goes into effect 180 days after its publication in the Federal Register, marking a new era of consumer protection and transparency. The rule underscores the FTC’s commitment to safeguarding consumer rights in an increasingly digital world and our NAD team will take this rule into consideration as we continue to monitor the advertising marketplace. 

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