FTC Issues Click-to-Cancel Rule to Allow Customers to Opt Out of Subscriptions Easier

Source: YouTube

The Federal Trade Commission (FTC) recently introduced the “click-to-cancel” rule to simplify subscription cancellations for U.S. consumers. This rule, set to take effect six months after publication, is a significant step toward protecting consumers from frustrating cancellation processes. From gyms to digital streaming services, the new regulation applies to any business using negative option marketing—where subscriptions automatically renew until canceled. The rule forces businesses to provide straightforward cancellation methods and match the simplicity of their sign-up processes.

Click-to-Cancel Rule Makes It Cancellations Easier for Consumers

Many businesses make it exceptionally easy to sign up for a subscription—usually just a couple of clicks are all it takes. However, canceling that same subscription often requires dealing with chatbots, waiting on hold with customer service, or, in some cases, visiting a store in person. With the click-to-cancel rule, the FTC mandates that businesses allow online cancellations for online sign-ups and provide a choice between online and phone cancellations for in-person sign-ups.

FTC Chair Lina Khan explains the goal behind the rule: “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 new measure comes after the FTC received thousands of consumer complaints over unfair subscription practices and deceptive cancellation methods.

New Click-to-Cancel Rule Has Immediate Positive Impact on Consumers

Under the new rule, consumers no longer need to engage with a live agent or endure a complex process to cancel. This rule enhances transparency by requiring businesses to disclose essential information upfront, including any trial periods, subscription costs, and terms. Additionally, companies cannot obtain billing information until these terms have been fully disclosed and the customer has given explicit consent. 

Research from online payment company Bango shows that the average American has about 4.5 subscriptions, costing an average of $924 per year. The new rule addresses the common issues faced with such plans, such as hidden fees and complex cancellation steps, by allowing consumers to cancel online.

Business Backlash and Concerns

Despite the positive response from consumers, businesses across various sectors have raised concerns. Retailers, gyms, and streaming services argue that the rule could affect their subscription models, which often rely on long-term customer retention through auto-renewals. Companies like Amazon and Adobe have already faced legal action from the FTC regarding their subscription practices. For instance, the FTC sued Amazon over its Prime subscription cancellation process, claiming it was deliberately confusing. Amazon has denied these allegations, stating that they aim to provide customers with control over their subscriptions.

Similarly, Adobe was sued by the FTC over its termination fees and complex cancellation process for its subscriptions. Adobe argued that they provide value-added services that justify the need for early termination fees, but the FTC found these practices misleading for consumers.

The Impact on Subscription-Based Businesses

The click-to-cancel rule isn’t just about making it easier for consumers; it represents a shift in how subscription-based businesses must operate. By enforcing clear disclosures and straightforward cancellation processes, the FTC is cracking down on negative option marketing practices. This move follows the U.K.’s Digital Markets, Competition and Consumers Act 2024, which also targets subscription traps and auto-renewals.

Businesses may need to adjust their cancellation policies, potentially leading to a temporary increase in subscription cancellations as consumers exercise their rights under the new rule. Still, while companies may initially feel a financial impact, the rule could foster greater trust and satisfaction among consumers, who are increasingly wary of hidden fees and difficult cancellation processes.

Do You Agree with the New Click-to-Cancel Rule? 

The FTC’s click-to-cancel rule is set to go into effect approximately six months from its publication. This timeframe allows businesses to adjust their processes and comply with the new requirements. Moving forward, companies must ensure that consumers can quickly and easily cancel subscriptions without navigating complex customer service systems. As this rule is implemented, it remains to be seen how businesses will adapt to the regulatory changes and whether consumers will see a long-term shift in how subscriptions are managed.

Do you agree with the FTC's new click-to-cancel rule? Will it really make it easier for consumers to cancel their subscriptions?