US ‘click to cancel’ rule to ban subscription traps
The US Federal Trade Commission (FTC) has introduced a ‘click to cancel’ rule designed to simplify the process of ending subscriptions.
The rule will require companies to make both signing up for and canceling subscriptions equally easy.
Businesses, such as retailers and gyms, will also need to obtain customer consent before renewing subscriptions or turning free trials into paid memberships.
The new regulation is expected to take effect in approximately six months.
“Too often, businesses make it unnecessarily difficult to cancel a subscription,” said FTC Chair Lina Khan.
“This rule will put an end to these tricks and traps, saving Americans time and money. No one should be stuck paying for a service they no longer want.”
The rule prohibits businesses from requiring customers to interact with a chatbot or agent to cancel subscriptions if they initially signed up through an app or website.
For memberships initiated in person, companies must provide the option to cancel either by phone or online.
Last year, the FTC took legal action against technology giant Amazon on a related issue.
The lawsuit accused the firm of tricking customers into signing up for Prime subscriptions that renewed automatically and made it difficult for people to cancel.
It also said Amazon’s website designs pushed customers into agreeing to enroll in Prime and have the subscription automatically renewed as they were making purchases.
Amazon has rejected the claims.
The FTC has also taken legal action against software giant Adobe for similar reasons.
It sued the company for allegedly violating consumer protection laws with “hidden” termination fees and a convoluted cancellation process.
The FTC said Adobe had failed to clearly disclose its terms to customers, including the year-long length of a subscription and charges that would be triggered for canceling early.
Adobe has disputed the allegations.
A law introduced in the UK in May also aims for so-called subscription traps.
The Digital Markets, Competition, and Consumers Act 2024 requires businesses to provide clear information to consumers before they enter a subscription agreement.
It forces sellers to remind customers that a free or low-cost trial is coming to an end.
It also requires companies to ensure customers can easily end a contract.
