It isn’t rare for people to subscribe to things and only stay subscribed because the cancellation process is so challenging and inconvenient. However, the Federal Trade Commission is looking to stop this, adopting a rule that eliminates the capability for businesses to put hurdles in front of cancellation processes.
The FTC is Enforcing “Click to Cancel” Subscriptions
The FTC has revised its Negative Option Rule to become the Rule Concerning Recurring Subscriptions and Other Negative Option Programs.
As the official Final Rule submission puts it, “Negative option programs come in a variety of forms, but all share a central feature: each contain a term or condition that allows a seller to interpret a customer’s silence, or failure to take an affirmative action, as acceptance of an offer.”
It then defines the four categories of negative option programs—prenotification, continuity, automatic renewals, and free trials—and discusses how the rule previously only covered prenotification plans.
While there are examples of legitimate negative option marketing, the Commission points out how problematic practices have created issues and outright harm to many consumers… individuals and businesses alike.
Hence, the importance of the new rules the FTC is implementing.
Ending Subscriptions Can’t Be Buried in a Labyrinth of Confusion
With the adaptation to these rules, businesses must ensure there are simple paths to canceling subscriptions. If one signed up online, they need to be able to cancel a subscription online. If one signs up in person, they need to be able to cancel a subscription online or by phone.
Furthermore, if a discussion with a live agent or chatbot wasn’t part of the sign-up process, such a discussion cannot be required to opt out. Cancellations taken over the phone can’t include fees, and showing up in person must be optional: available but not required.
All charges must also be preceded by records of informed consent from the consumer, which need to be maintained for at least three years.
Businesses must also fully disclose all terms and conditions, including cancellation processes, every time the negative option is presented.
Why Businesses Need to Pay Attention
First and foremost, the penalties are significant. After the rule goes into effect in April 2025, the FTC could potentially charge non-compliant businesses $51,744, per customer, per violation. This could significantly impact businesses, especially those of a smaller size.
We wanted to ensure that the businesses of Kentucky were aware of this new development and to remind them that CoreTech is here to assist with any IT needs that present themselves as they ensure their compliance. Give us a call at (270) 282-4926 with any questions you may have.
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