FTC Implements Click-to-Cancel Rule for Subscriptions

October 18, 2024

The Federal Trade Commission (FTC) in the United States is introducing a new rule called the “click-to-cancel” rule, aimed at making it easier for people to cancel subscriptions and memberships. This rule was approved on October 16, 2024, with a 3-2 vote. It’s meant to solve common problems people face when trying to stop services they no longer want.

Key Features of the Rule

The rule ensures that canceling a subscription should be as simple as signing up for it. Key aspects include:

Cancellation method: If you signed up for a service online, you should be able to cancel it online as well. If you signed up over the phone, cancellation should be available by phone.

No need to speak to a representative: If you didn’t have to speak to someone when signing up, you shouldn’t have to speak to someone to cancel.

No extra fees: Companies cannot charge extra fees for canceling over the phone, and they must respond to calls or messages promptly.

Multiple cancellation options: If you signed up for something in person, companies must also give you the option to cancel online or by phone.

Applicability of the Rule

The rule covers many types of programs where customers are automatically charged unless they cancel, such as automatic renewals or free trials. The FTC refers to these as “negative option” programs, where companies assume you agree to continue unless you actively say no.

Legal Framework

The new rule prevents companies from:

Misleading customers in marketing materials.
Not sharing important details before charging customers.
Charging people without their clear consent.
Making it difficult to cancel and stop future charges.

Why the Rule Was Created

The FTC updated this rule from a 1973 Negative Option Rule to keep up with changes in the digital world. Many people have complained about how difficult it is to cancel subscriptions, with the number of complaints rising from 42 per day in 2021 to nearly 70 per day in 2024. People also often don’t realize how much they’re paying for services they aren’t using, underestimating costs by an average of $133 per month.

Comparison to Indian Regulations

India does not have a similar rule to protect consumers when canceling subscriptions, leaving many without the same level of protection as in the United States.

About the FTC

The FTC was founded in 1914 to stop unfair business practices and promote competition. It enforces antitrust laws and protects consumers. The FTC investigates companies and can issue orders for businesses to stop harmful practices. It also works to prevent false advertising and educates consumers. The FTC has five members, chosen by the President, and its current focus areas include digital privacy and data security. Although the FTC can issue fines for breaking rules, it does not have the power to file criminal charges.

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