FTC ratifies ‘click-to-cancel’ rule, making it easier for consumers to end subscriptions

The Federal Trade Commission has made it easier for consumers to cancel subscriptions. In a decision that went down along party lines, the agency voted to ratify a “click-to-cancel” rule that will require providers to make it as easy to cancel a subscription as it is to sign up for one. First proposed last year, the rulemaking prohibits companies from misrepresenting their recurring services and memberships, as well as failing to clearly disclose any material terms related to those offerings.

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said Chair Lina Khan. “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.”

After considering more than 16,000 comments on the matter, the FTC decided not to write the final rulemaking as originally proposed. Most notably, the agency scrapped a proposal that would have required companies to provide consumers with annual reminders for subscription renewals. It also won’t mandate a rule that would have forced sellers to obtain the consent of those seeking to cancel a subscription before telling them about potential modifications to their plan or reasons why they should continue paying for a service.

A separate statement issued by Commissioner Rebecca Slaughter (PDF link) provides insight into the decision. Essentially, the agency felt the FTC Act doesn’t give it the authority to require a renewal notice. I’ll note here that the dissenting opinion (PDF link), written by Republican Commissioner Melissa Holyoak, contends that the entire rulemaking is overly broad, and accuses the Democratic majority of attempting to push through the change before next month’s election.

“Americans understand the importance and value of such a requirement; many have discovered that they or their parents had been paying for years or even decades for a service wholly unused, such as a dial-up internet service from the 1990s,” Slaughter writes in her statement. “… Of course, we are always mindful that our authority under the FTC Act to issue rules under section 18 has limits; sometimes, as here, those limits prevent us from codifying in a rule practices that we might, as a matter of policy, prefer to require explicitly.”

Slaughter points out that state and federal lawmakers do have the authority to mandate renewal notices, and notes some states, such as Virginia, have even recently gone down that path. “The comment record compiled in this rulemaking proceeding strongly supports the wisdom of federal and state legislators’ carefully considering adopting such a law,” Slaughter writes.

Provided there’s no legal challenge to the FTC’s decision, today’s rulemaking will go into effect 180 days after it is published in the Federal Register. When the agency moved to ban noncompete clauses earlier this year, a federal judge in Texas issued a nationwide injunction. That decision is still stuck in legal limbo.