The Federal Trade Commission (FTC) has introduced a new “click-to-cancel” rule designed to simplify the process of canceling subscriptions and recurring payments. Under this rule, businesses must provide consumers with a cancellation process as straightforward as the one used for signing up. The rule, which aims to protect consumers from deceptive practices, will take effect 180 days after its publication in the Federal Register.
FTC Chair Lina M. Khan emphasized the need for this change, stating, “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.”
What the Rule Covers
The new rule applies to almost all “negative option” programs across various platforms, including online subscriptions and memberships. Negative option programs automatically charge consumers unless they actively cancel. With the increasing prevalence of these programs, the FTC has seen a growing number of complaints, making this rule a crucial update in consumer protection.
Key provisions of the rule include:
– Honest Marketing: Businesses must avoid misrepresenting any material facts about their negative option programs.
– Clear Disclosure: Sellers are required to provide consumers with all necessary information, such as costs and terms, before collecting payment details.
– Informed Consent: Consumers must give their explicit informed consent to the terms of the subscription before being charged.
– Simplified Cancellation: Sellers must offer an easy and immediate way for consumers to cancel their subscriptions and stop further charges.
Background and Public Input
The updated rule is part of the FTC’s ongoing modernization of its 1973 Negative Option Rule. With the rise of digital platforms, it has become easier for businesses to sign consumers up for recurring payment programs, making it harder for consumers to cancel. This has led to an increase in complaints over the past few years, with the FTC receiving an average of 70 complaints per day in 2024—up from 42 complaints per day in 2021.
In March 2023, the FTC proposed these rule changes, which resulted in over 16,000 public comments from consumers, government agencies, and industry groups. After reviewing the feedback, the FTC finalized the rule, making some adjustments, such as removing the requirement for annual reminders and allowing businesses to offer plan modifications during cancellation requests, but only if the consumer agrees to hear about them first.
Looking Ahead
The rule, approved in a 3-2 Commission vote, provides a clearer legal framework for businesses and aims to protect consumers from deceptive subscription practices. While some commissioners dissented, including Melissa Holyoak and Andrew N. Ferguson, the majority supported the rule as a necessary step in protecting consumers.
As the rule takes effect, consumers can expect to see more transparent subscription processes and easier cancellations, helping to reduce the frustration and financial burden caused by difficult-to-cancel services. For further updates, consumers can follow the FTC’s announcements and resources on their website.
Author: Jennifer Evancic
Jennifer.Evancic@ResourceManagement.com
Jennifer Evancic is a third-party auditor valued by creditors and large organizations for her knowledge in call monitoring within the collections industry. With meticulous attention to detail and a firm grasp of regulatory requirements, she ensures compliance with clients’ criteria and state and federal regulations.
Jennifer audits collections calls, ensuring they meet client-specific criteria and comply with regulations, providing valuable insights and maintaining industry standards.
Beyond her auditing responsibilities, Jennifer takes the lead in organizing and facilitating monthly call calibrations. These sessions serve as a collaborative forum where clients and their vendors come together to discuss call monitoring results and address any findings or areas for improvement. Jennifer’s guidance fosters open communication and ensures alignment between clients and vendors, driving continuous improvement in collections practices.
Jennifer stays up-to-date with compliance and industry best practices by participating regularly in peer meetings, regulatory updates and industry webinars. This keeps her informed about emerging issues and ensures she remains a knowledgeable leader in collections compliance.
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