The Federal Trade Commission (FTC) has finalized a new rule aimed at simplifying the process for consumers to cancel subscriptions, an issue that has sparked widespread frustration and numerous complaints. Dubbed the "click to cancel" rule, the regulation mandates that businesses, ranging from retailers and gyms to digital services, must offer cancellation methods that are as straightforward as their subscription processes. The decision comes as part of a broader effort by the Biden administration to eliminate so-called "junk fees" and protect consumers.
FTC Chair Lina Khan emphasized that the rule is designed to address the growing complaints from consumers who find it much easier to sign up for services than to cancel them. "Companies shouldn't be able to trick you into paying for subscriptions that you don't want," Khan said. The rule, set to take effect following negotiations with affected industries, represents the FTC's latest major move before the upcoming November elections.
Under the new rule, businesses must match the ease of signing up with an equivalent ease in canceling. For example, if a consumer registers for a service online, they must also be able to cancel it through the same platform in a similar number of steps. Companies that require in-person signups will need to offer phone or online options for termination. Khan explained that the rule aims to prevent companies from forcing consumers into "doom loops" of endless transfers between agents or unhelpful automated systems.
The pandemic brought to light many of these issues, with some businesses requiring in-person cancellations despite their locations being temporarily closed. Khan stated that such practices "highlighted the absurdity" of existing systems, making it clear that reforms were needed. The FTC received thousands of comments from consumers and advocacy groups during the rule's proposal phase, highlighting widespread difficulties in canceling memberships with companies such as Planet Fitness, HelloFresh, and Savage X Fenty.
The rule also fills gaps left by existing laws, like the Restore Online Shoppers' Confidence Act of 2010, which the FTC has previously used to sue companies, including Amazon, for their subscription practices. Notably, the FTC recently pursued legal action against Amazon over its Prime service, accusing the company of complicating the cancellation process. Amazon has denied any wrongdoing, and the case is scheduled for trial next summer.
Despite the FTC's efforts, the rule has faced opposition from several business groups. The U.S. Chamber of Commerce, the largest business lobbying organization in the country, criticized the rule as an attempt to "micromanage business practices." It argued that businesses already prioritize customer service and have better response times than federal agencies. However, Khan dismissed these criticisms, saying, "If a business is dependent on tricking or trapping people into subscriptions, that's not a good business model, and that's not one that we should stand for."
The rule, which passed by a 3-2 vote along party lines, also signals Vice President Kamala Harris's commitment to consumer protection. Harris, who has highlighted the rule as part of her campaign platform, underscored that such consumer-oriented measures would remain a priority if she is elected. The two Republican commissioners voted against the measure, reflecting a divide in the FTC over how far the agency should go in regulating businesses.
Khan declined to comment on her potential role in a Harris administration but reiterated her focus on making the economy fairer for consumers. "People just want an economy that's fair and honest. That's what our focus is," she said.
Consumer stories illustrate the need for the rule. Haley Nelson, a Minnesota resident, recounted her struggle with canceling a gym membership at Planet Fitness. After finding her local gym too crowded, Nelson attempted to cancel her membership, only to learn she had to do so in person. "It's not as daunting to try to figure out how the heck to cancel this membership that you joined, you know, three or four months ago," she said, welcoming the new rule as a necessary and positive change.
Planet Fitness, in response, said it offers cancellation options in person or through written mail notifications but noted that some members can cancel online depending on their membership type and location.
While many consumers are praising the new rule, businesses are gearing up to adjust their practices to comply with the FTC's mandate. The outcome of these adjustments and the enforcement of the rule will be closely watched, as it marks a significant step in rebalancing the relationship between consumers and businesses in the subscription economy.
