FTC To Allow Online Cancellation For Online Subscriptions

Consumers who dread the hassle of trying to cancel a subscription or membership they signed up for online will soon see some relief under a Federal Trade Commission rule finalized Wednesday.

Once the so-called click-to-cancel rule goes into effect, businesses will be required to offer ways of canceling services that are as fast and easy as the way a customer signed up, the FTC said.

FTC Chair Lina Khan said businesses often make consumers “jump through endless hoops” to cancel subscriptions, including those with recurring charges.

“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,” Khan said.

The commission voted 3-2 in favor of adopting the rule, formally known as the “negative option” rule, where a customer’s failure to act or silence is interpreted as agreement. It would take effect six months after it is published in the government’s daily compendium of public notices, the Federal Register.

The rule would also compel sellers to provide information that is truthful, clear and easy to find; require that consumers know and businesses be able to show they know what they are signing up for; and allow violators to be fined.

Subscription-based products have been growing for years. In April, Zuora Inc., a company that helps monetize subscriptions, said companies in its Subscription Economy Index had grown more than three times faster than companies in the Standard & Poor’s 500 stock index over the past 12 years.

The FTC’s move drew plaudits from liberal economic and consumer groups.

“Consumers shouldn’t have to navigate a Rube Goldberg machine to get out of a subscription they purchased with a keystroke. This new rule will put a stop to this predatory pricing model, saving consumers time and money,” said Lindsay Owens, executive director of Groundwork Collaborative.

The rule’s finalization also came as speculation about Khan’s future as chief of the FTC swirls amid the presidential election.

“When Big Tech and Big Business billionaires attack Lina Khan and the FTC, they are attacking commonsense consumer protections like the ‘click to cancel’ rule,” said Emily Peterson-Cassin, director of corporate power at Demand Progress Education Fund.

But it was the political ramifications that one FTC commissioner who opposed the change said carried the day.

“Had political leadership at the Commission taken more time to engage with other Commissioners to refine and improve the Rule, my vote and statement would look very different. Instead, less than a month from November 5, the Chair has put political expediency over getting things right,” said Melissa Holyoak in a dissenting statement about the rule.

“Why the rush? There is a simple explanation. Less than a month from election day, the Chair is hurrying to finish a rule that follows through on a campaign pledge made by the Chair’s favored presidential candidate.”

Holyoak said she voted against the rule because it went beyond the initial proposal outlined in 2023; it lacked specifics on what would be prohibited; and the commission had failed to show that abuses were widespread.

The FTC did make two changes before finalizing the rule: dropping a requirement that companies give customers annual reminders of their cancellation options and letting companies tell customers about changes or reasons to keep their subscriptions without requiring customers to first ask for them.