What is the “Click to Cancel” Provision

The proposed "click to cancel" provision by the Federal Trade Commission aims to ensure that sellers make the process of canceling a subscription as simple as the sign-up process. This provision is one of the many significant updates that the Commission is proposing to its regulations related to subscriptions and recurring payments. By implementing the click to cancel provision and other suggested changes, the Commission hopes to rescue consumers from the arduous task of canceling unwanted subscription payments. This can be particularly helpful for those dealing with recurring payments for products such as cosmetics, newspapers, or gym memberships.

“Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place,” said FTC Chair Lina M. Khan. “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.”

The Federal Trade Commission has announced a notice of proposed rulemaking as part of its continuous review of the 1973 Negative Option Rule. This rule is used by the agency to address any unfair or deceptive practices associated with subscriptions, memberships, and other programs that involve recurring payments.

What is the 1973 Negative Option Rule

The 1973 Negative Option Rule was created by the Federal Trade Commission (FTC) to protect consumers from deceptive or unfair practices related to negative option marketing. Negative option marketing is a practice where a seller interprets a customer's silence or failure to cancel a trial offer or subscription as acceptance of the offer and proceeds to charge the customer's credit card or bank account. The FTC created the rule to ensure that companies obtain the explicit consent of consumers before enrolling them in recurring-payment programs and to make it easier for consumers to cancel or opt-out of such programs.

There were several instances of abuse and fraud in the marketing industry that led to the creation of the 1973 Negative Option Rule. Some examples include:

• Unsuspecting consumers being signed up for magazine subscriptions without their knowledge or consent.
• Consumers receiving merchandise they did not order and being charged for it unless they explicitly refused it.
• Telemarketers taking advantage of elderly or vulnerable individuals by tricking them into purchasing unwanted products or services.
• Companies automatically renewing subscriptions without notifying the consumer or providing an easy way to cancel.
• Some companies offering "free trials" but requiring the consumer to provide payment information and then automatically enrolling them in a subscription service after the trial period ends.

Subscription-based programs can make it difficult for customers to unsubscribe in a variety of ways. Here are some examples:

• Hiding the unsubscribe option: Some subscription-based programs may hide or obscure the unsubscribe option, making it difficult for customers to find and use it. For example, the option to unsubscribe may be buried in a long email or placed in small font at the bottom of a webpage.
• Requiring an in-person visit or phone call to cancel: Some subscription-based programs may require customers to cancel their subscription in person or over the phone, making it difficult for customers who are busy or unable to visit the company's location during business hours.
• Making the cancellation process lengthy or confusing: Some subscription-based programs may require customers to jump through multiple hoops or complete a lengthy cancellation process, which can discourage customers from canceling their subscription.
• Continuing to charge customers after cancellation: Some subscription-based programs may continue to charge customers after they have canceled their subscription, either due to a technical glitch or intentional misbehavior by the company.
• Making it difficult to contact customer support: Some subscription-based programs may make it difficult for customers to contact customer support or may have long wait times for support, making it difficult for customers to resolve issues with their subscription or cancel it.

These practices are often referred to as "dark patterns" and can be used by companies to keep customers subscribed even when they no longer want the service, leading to frustration and dissatisfaction among customers.

While subscription and recurring-payment programs offer significant advantages to both consumers and businesses, they can turn into problematic situations if marketers do not provide adequate disclosures, bill customers without consent, or make cancellation processes difficult or impossible. For instance, some companies may require customers to cancel in-person or keep them waiting for an extended time period to speak with customer service. These programs are widespread, and every year the FTC receives thousands of complaints from consumers about such practices.

What changes will the "Click to Cancel" Provision make

The FTC currently lacks a consistent legal framework for regulating subscription and recurring-payment programs, which leads to confusion and inconsistency for both consumers and industry. To address this issue, the proposed rule would implement various changes, including:

• Requiring businesses to make it as easy for consumers to cancel a subscription as it was to sign up for it. This would ensure that consumers are not trapped in unwanted programs.
• Allowing sellers to pitch additional offers or modifications when a consumer tries to cancel their enrollment, but only after asking consumers whether they want to hear them. Sellers must accept "no" as an answer and immediately begin the cancellation process.
• Requiring sellers to provide an annual reminder to consumers enrolled in negative option programs (excluding physical goods) before they are automatically renewed.

What businesses will be affected by the Click to Cancel Provision

A Click to Cancel Provision is likely to affect a wide range of businesses that offer subscription or recurring-payment programs, including:

• Streaming services (e.g., Netflix, Hulu, Amazon Prime)
• Online retail services (e.g., Amazon Subscribe and Save, Target Subscriptions)
• Subscription-based meal delivery services (e.g., Blue Apron, HelloFresh)
• Fitness clubs and gyms
• Subscription-based beauty products (e.g., Birchbox, Ipsy)
• Magazine and newspaper subscriptions
• Subscription-based software services (e.g., Microsoft Office 365, Adobe Creative Cloud)
• Music and podcast streaming services (e.g., Spotify, Apple Music)
• Subscription-based gaming services (e.g., Xbox Live, PlayStation Plus)
• Subscription-based energy services (e.g., ESCOs)

This list is not exhaustive, and any business that offers subscription or recurring-payment programs may be impacted by the Click to Cancel Provision if it is enacted.