In a nutshell: There are numerous subscription services available today, from streaming sites like Netflix and Disney Plus to non-digital services like gym memberships. Signing up online is usually very simple, yet canceling is often a lot more complex, sometimes intentionally. But the FTC is trying to change things.
The Federal Trade Commission on Thursday proposed a 'Click to Cancel' provision that would require companies to make the process of canceling recurring subscriptions as simple as signing up for them.
Many companies turn their cancelation mechanisms into arduous tasks that require many steps. Some even demand customers call phone numbers, where they're kept on hold for so long that they decide it isn't worth it. Others require in-person cancelations that involve reps trying to convince customers to stay. These deceptive techniques often keep people paying for subscriptions even when they've stopped using the services.
"The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties," said FTC Chair Lina M. Khan.
The proposal is part of the FTC's ongoing review of its 1973 Negative Option Rule, which the agency uses to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs. It received 17,427 complaints under this rule last year and 16,020 complaints in 2021.
Anyone who has tried to cancel a subscription may be familiar with being bombarded with offers of different subscriptions, a temporarily reduced price, and other perks - all attempting to get customers to stay signed up. The FTC proposes allowing people to decide whether they want to hear these deals before sellers pitch them, i.e., the companies must take "no" for an answer.
Finally, the FTC also proposes that companies send customers an annual reminder of any automatic subscription renewals for anything other than physical goods.
Companies that violate these rules would face a fine of $50,000 per day. "When you're talking about companies that have hundreds or thousands or millions of consumers," Khan says, "that could add up quite quickly."
The FTC voted 3-1 to publish a notice of proposed rulemaking in the Federal Register, the first step in the process. Members of the public can now submit comments on the proposal.
According to a survey commissioned by market research firm C+R Research, consumers underestimate how much they spend on all subscription services by an average of $133 per month.