By tf-lawyer.com On October 16, the Federal Trade Commission (FTC) voted 3-2 to implement a new regulation known as the “click-to-cancel” rule. This decision comes in response to widespread complaints from consumers about the frustrating hurdles they encounter when trying to cancel subscriptions, such as gym memberships. The new rule aims to streamline the cancellation process, making it just as simple for consumers to opt-out as it is to sign up.
FTC Chair Lina Khan expressed, “Companies often design convoluted processes that make it difficult for people to cancel subscriptions; our new regulations will put an end to these tactics and traps.”
The FTC’s regulations primarily address automatic renewals, stating that businesses must provide an easily accessible cancellation method unless consumers actively choose to renew their subscriptions. However, the specifics of this cancellation method are not mandated by the law.
Additionally, companies cannot require customers to engage with a human or virtual representative, such as a chatbot, unless the consumer agreed to that condition at the time of subscription. If a company insists on phone cancellations, it must be able to handle such requests during normal business hours.
Initially proposed in March 2023, this rule faced opposition from trade groups representing publishers, advertisers, and gamers. The News/Media Alliance argued that many states already regulate cancellation procedures, rendering new federal regulations unnecessary.
The final version of the rule that the FTC passed has omitted some original provisions, including an annual notification requirement for automatic renewals. Now, businesses are only required to inform consumers about the terms of their recurring payment memberships upfront.
The FTC holds the authority to initiate enforcement actions and seek civil penalties against companies that violate this regulation.
During the vote, two Republican commissioners, Melissa Holyoak and Andrew Ferguson, expressed their opposition to the new rule. Holyoak asserted in her dissent that the commission lacks the power to impose such mandates and criticized the Democratic majority for rushing to announce the new regulation ahead of the November elections.
