Federal Trade Commission Announces Final “Click-to-Cancel” Rule Making It Easier for Consumers to End Recurring Subscriptions and Memberships

On October 16th, the Federal Trade Commission announced a final “click-to-cancel” rule that will require sellers to make it as easy for consumers to cancel their enrollment as it was to sign up. Most of the final rule’s provisions will go into effect 180 days after it is published in the Federal Register.

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said Commission Chair Lina M. Khan. “The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”

Here's a link to FTC's official published release:

Federal Trade Commission Announces Final “Click-to-Cancel” Rule Making It Easier for Consumers to End Recurring Subscriptions and Memberships

and the full 230-page text of the regulation: Proposed text of Federal Register publication

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As a summary :

Negative option offers come in various forms but, as the FTC describes, share a central feature. They all contain a term or condition that allows a seller to interpret a customer’s silence or failure to take affirmative action as acceptance of an offer.

Negative-option programs generally fall into four categories: prenotification plans, continuity plans, automatic renewals, and free trial conversion offers.

The final rule announced today is part of the FTC’s ongoing review of its longstanding Negative Option Rule, which the agency said it is modernizing “to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs in an increasingly digital economy where it’s easier than ever for businesses to sign up consumers for their products and services.”

The rule also addresses online cancellation, requiring sellers to provide a cancellation mechanism over the same website or web-based application the consumer used to consent. The Commission said that “thousands of public commenters repeated the mantra: “If you signed up online, you should be able to cancel online,” noting they often face hurdles in finding a cancellation mechanism and then must call and spend significant time on the telephone to cancel their subscriptions.”

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Personally, I've noticed an evolution over time for the better, and feel that the vast majority of online subscriptions today are transparent to very transparent and make it rather easy to cancel. Also, some may offer some hurdles, and many force a path of reviewing alternative options and retention algorithms - as long as done tastefully - these are probably a net positive for the consumer; however, unfortunately, they will also have to go with the new regulation.

The FTC says it is acting after receiving more than 16,000 comments and that the number of complaints has been steadily increasing.

I noticed that many billing/subscription platforms have already been self-regulated. For example, Apple's app store, which provides subscription billing services for the application in the store, implemented several years ago a set of rules that are even more stringent than the new regulation - including not just one-click cancellation but also advance subscription renewal notifications and emails with a one-click-cancel from the notice as well as a clear view in the app of all subscription with amount sand renewal dates that one can easily review and manage at any time.

This provided much comfort in subscribing to unknown apps, knowing that I could easily cancel without frustration. It has also increased my willingness to subscribe to random new apps just to test them (as well as games for the kids that they get all excited about and then forget about a few days later and stop using, leaving me with the subscription).

It is unfortunate that because of a few bad actors who make up likely significantly less than 1% of all SaaS, now all SaaS and other subscription model providers will have to make sure to comply with new extremely stringent regulations.

I do understand this, as a consumer, however.

The inability to easily cancel is rare, and it surprises me when I encounter it, and I find it frustrating and annoying to deal with.

Imagine what appears to be (and often is) a mainstream, legitimate business or productivity tool. I would subscribe to it without a thought or take the "free trial" and then shortly after realize that the tool is not a fit for me.

In most cases, it is rather easy to click through and cancel, be assured of the cancellation, and not have any further charges. The frustration comes when, surprisingly, there is no cancellation option to be found online, and after searching, some fine print in the Terms states that cancellations must be submitted via mail (or email, which is ignored) or another manual process.

This is rare, at least from my personal experience, however unexpected when it does occur, and for that I am now personally grateful for the new regulations, which are way overdue (probably by 20+ years!).

However, I am deeply concerned for all my portfolio companies and founder friends who run SaaS businesses and now have to rush to comply with not just the intent but the letter of these new regulations (which, again - 230 pages of text). As most are extremely transparent in their billing and offer easy cancellation, the changes are not a benefit to their customers but will be a hassle for the startups to carefully review and make changes to their sometimes deeply rooted processes and algorithms to ensure compliance with the new regulations or face potentially stiff penalties.