The Federal Trade Commission (FTC) recently announced a new rule designed to make it easier for consumers to cancel subscriptions and recurring memberships. This "Click-to-Cancel" rule applies to businesses that offer negative option programs, which are essentially services where consumers agree to be charged on a recurring basis unless they actively cancel.
Key provisions of the Click-to-Cancel Rule
The Click-to-Cancel rule outlines several key requirements for businesses:
- Cancellation must be as easy as signup: The rule requires businesses to make cancelling a subscription as simple as signing up for it. This means offering a clear and easy-to-find cancellation method through the same channel the consumer used to sign up (e.g., online account, mobile app, phone number).
- Digital cancellation options are required: For digital signups (website or mobile app), consumers must be able to cancel entirely online without having to contact a customer service representative.
- Clear and transparent communication: Businesses are prohibited from misrepresenting any material facts about their subscription services. This includes the terms of service, cancellation process, and any fees associated with cancellation.
- Informed consent for negative option features: Before consumers are charged, businesses must obtain their informed consent to the negative option features.
What this means for your business
If your business offers subscription services with automatic renewals, the Click-to-Cancel rule requires you to review and potentially update your cancellation process. Here are some key steps to ensure compliance:
- Review your cancellation process: Ensure your cancellation method is clear, easy to find, and accessible through the same channel(s) used for signup.
- Offer multiple cancellation options: Consider providing a variety of cancellation methods, such as online account, mobile app, phone number, and email.
- Update your terms and conditions: Clearly outline your subscription terms, cancellation policy, and any applicable fees in your terms and conditions.
- Obtain informed consent: Before charging consumers for a subscription, obtain their explicit consent to the automatic renewal feature.
The deadline to comply
The FTC's Click-to-Cancel rule will go into effect 180 days after it is published in the Federal Register. Businesses are advised to begin reviewing and updating their cancellation processes as soon as possible to ensure compliance with the new regulations.
Stay informed and consult with legal counsel
The FTC's Click-to-Cancel rule is a significant development for businesses that offer subscription services. Staying informed about the latest regulations and consulting with legal counsel can help you ensure your business is compliant and avoid potential penalties.
Disclaimer: This blog post is for informational purposes only and should not be construed as legal advice. Businesses should consult with their own legal counsel to ensure compliance with the FTC's Click-to-Cancel rule.
