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Click to cancel: FTC proposes rule to help consumers ditch subscriptions

“These companies are betting that customers will be too impatient, busy, or confused to jump through every hoop,” FTC Chair Lina Khan said.
Federal Trade Commission chair Lina Khan.
Federal Trade Commission Chair Lina Khan.Graeme Jennings / Bloomberg via Getty Images file

A new rule proposed by the Federal Trade Commission on Thursday would make it easier for consumers to cancel recurring subscriptions.

The so-called click to cancel provision would require companies to simplify the cancellation process by allowing consumers to terminate services the same way they signed up for them — so if a consumer signed up for a subscription on a website, for example, they would need to be able to cancel it online rather than having to do it by phone or in person.

The proposal would also require sellers to ask consumers who are canceling their subscriptions if they want to hear about other offers before pitching them, and provide consumers with annual reminders of their subscriptions before automatically renewing them.

The commission voted to approve the notice of proposed rulemaking 3-1, with Commissioner Christine Wilson voting against it, alleging it was too broad as written.

The federal agency said it receives thousands of complaints from consumers every year about being billed for recurring services without their consent or dealing with difficult cancellation policies.

In a statement, FTC Chair Lina Khan pointed to reports of gyms that require members to cancel their subscriptions in person or via certified or notarized mail, and cellphone plans that require calling a customer service representative "who will keep you on the line to try to convince you to stay," she said.

"These companies are betting that customers will be too impatient, busy, or confused to jump through every hoop," Khan said.

Current laws and regulations "do not provide consumers and industry with a consistent legal framework," according to the federal agency's announcement.

The notice of proposed rulemaking is part of the agency's review of the Negative Option Rule, passed in 1973, which requires sellers to disclose the terms of sale before consumers subscribe and provide information about how consumers can go about canceling.

But the rule allows businesses to continually charge consumers for services indefinitely unless they take action to cancel, and it doesn't regulate other marketing tactics that make it difficult to cancel, which the FTC is trying to change.

The public will be able to submit comments on the latest proposal over a 60-day period once it is published in the Federal Register, the official journal of the government.

A spokesperson for the FTC said Thursday that officials do not yet know when the proposal will be published and available for public comment. It is not immediately clear when the finalized rule could take effect.