US unveils ‘click to cancel’ rule to combat subscription traps
A substantial new regulation has been announced by the U.S. Federal Trade Commission (FTC) with the objective of streamlining the process of cancelling subscriptions for consumers. Addressing longstanding complaints regarding the complexities and impediments encountered by customers when attempting to terminate their services, the recently implemented “click to cancel” rule will guarantee that terminating subscriptions is as simple as signing up for them.
The significance of the rule was underscored by FTC Chair Lina Khan, who mentioned that too frequently, businesses require individuals to navigate an interminable series of obstacles in order to terminate a subscription. The FTC’s rule will eliminate these deceptive practices and snares, thereby sparing people both time and money. It is unacceptable for any individual to be obligated to pay for a service that they no longer desire. The regulation is scheduled to be implemented within the next six months.
The new law requires retailers and fitness companies to get consumer approval before renewing subscriptions or converting free trials into paid memberships. This strategy protects consumers from unexpected payments and keeps them informed about their subscriptions.
It is crucial to note that the rule forbids businesses from requiring customers to traverse through chatbots or customer service agents when attempting to cancel subscriptions that were initially established through an app or website. Businesses must provide cancellation options for subscriptions that are initiated in person, either through a phone call or an online procedure, in order to improve accessibility for all consumers.
The FTC’s decision follows legal actions against major companies that have been accused of employing deceptive practices regarding subscription cancellations. The agency filed a lawsuit against the technology behemoth Amazon last year, alleging that the company deceived customers into enrolling in automatic Prime subscriptions and made it challenging to opt out. The lawsuit alleged that Amazon’s website design effectively coerced customers into agreeing to enrol in Prime, often without their explicit assent.
Amazon has categorically denied these allegations, asserting that its subscription procedures are transparent and open. The FTC’s examination of subscription practices is not limited to this; it has also targeted Adobe, a software behemoth, for comparable concerns. The Federal Trade Commission (FTC) accused Adobe of violating consumer protection laws by implementing an excessively complex cancellation process and “hidden” termination fees.
The demand for more transparent subscription practices is not exclusive to the United States. The Digital Markets, Competition and Consumers Act, which was introduced in May 2024 by the United Kingdom, also aims to eradicate subscription traps. Before consumers enter into subscription agreements, the UK law requires that businesses provide them with plain information. This information should include a reminder of the expiration dates of free or low-cost trials and the ability to easily terminate contracts.
Consumers can anticipate a more straightforward approach to managing their subscriptions as the FTC prepares to implement its ‘click to terminate’ rule. This regulatory change is a substantial stride towards the improvement of consumer protection in a subscription-based economy, thereby fostering transparency and fairness in business practices. Americans will be able to make informed decisions without any superfluous obstacles and have a greater degree of control over their subscriptions with the implementation of these measures.