The FTC’s ‘Click-to-Cancel’ rule for subscriptions is long overdue

Using the Monarch personal finance program, I went through my finances recently and found that I pay $510 every month on various subscriptions. (That’s not counting things such as my Internet bill, $120 a month for AT&T 2Gbps fiber.) I’m talking about Netflix, Google One, The Wall Street Journal, and other services and publications I actually want. 

But there were also over $100 worth of subscriptions that, frankly, I’d forgotten about  and no longer wanted or needed. That’s real money.

So, how do I get rid of them? Today, I have to dig into every last lousy one of them and jump through numerous hoops to cancel — but that may not be the case for much longer. 

The US Federal Trade Commission (FTC) last month announced a “click-to-cancel” rule aimed at making it easier for you and me to end recurring subscriptions and memberships. The new regulation requires sellers to make canceling services as simple as when you initially signed up for them.

As FTC Commission Chair Lina M. Khan explained: “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.”

Amen, sister!

The new regulations aren’t going to affect just Disney+ subscribers and the like. Businesses that rely on Software-as-a-Service (SaaS) — as either users or providers — are going to be affected as well. 

The new rule, which goes into effect six months after being published in the Federal Register, will have significant implications, for example, for providers like Google One and Microsoft 365. 

Here’s how it’s likely to affect these services.

For example, practices like requiring phone calls or in-person visits to cancel will no longer be allowed. If you think that’s an exaggeration, by the way, you clearly haven’t had a Planet Fitness subscription, which required snail-mail or an in-person visit to close out your membership.

Additionally, SaaS providers must provide clear and conspicuous disclosures about subscription terms: For example, automatic renewal information must be clearly stated and cancellation deadlines by which customers must cancel to avoid charges must also be spelled out. 

Under these regulations, you can no longer automatically resubscribe customers. They must consent before automatic renewals take place. Clearly, businesses that use automatic renewals will have to change how they’ll handle subscription renewals.

If your business gets customers by offering free trials that convert to paid subscriptions, you’ll also need to clearly disclose the trial’s terms, including when the trial ends and what charges will occur. And, of course, canceling after a free trial must be as simple as signing up for the trial.

All of this means, of course, that your company will have to update its terms and conditions. You’re going to have to pay your lawyers (as well as your programmers) to address these new rules. 

On the plus side, while none of this will be cheap, the FTC argues that customers will be happier and more likely resubscribe. And new transparent practices could even lead to  stronger customer relationships.

Not everyone is happy about the new regulations. Business organizations such as the Internet & Television Association (NCTA), the Interactive Advertising Bureau, and the US Chamber of Commerce oppose them. They have three major arguments: that the FTC doesn’t have the legal authority to implement the rules; the change will cost companies money; and they’ll force industries to change current cancellation processes that protect consumers or offer better deals.

In other words, it’s exactly what you’d expect them to say. 

Given the click-to-cancel rule is part of the Biden administration’s efforts to combat “junk fees,” you might think it’s dead as a doornail. Usually, I’d agree. But while Kahn has been a lightning rod for both Democrats and Republicans, she has one ally you probably didn’t expect; Vice President-elect J.D. Vance, who said: “I look at Lina Khan as one of the few people in the Biden administration that I think is doing a pretty good job,”

In addition, overall, the rule appears to be quite popular among consumers and consumer advocates. Let’s get real. People are sick of perpetual subscriptions. Their budgets are tight. Even if the FTC regulation costs companies some coin, it’ll be worth it in the long run.