Federal regulators have just finalized a new rule that will soon make it easier for consumers to cancel ongoing subscriptions without jumping through hoops.
The Federal Trade Commission (FTC) unveiled its "click-to-cancel" rule Wednesday for things like gym memberships, newspapers, food delivery and other services that charge weekly or monthly fees.
The new rule goes into effect in 180 days and will require sellers to make it just as easy for consumers to cancel a subscription as it was for them to sign up in the first place.
"Too often, businesses make people jump through endless hoops just to cancel a subscription," said FTC 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."
The rule changes are part of the FTC’s review of the negative option rule. The federal government defines a negative option as one that “allows a seller to interpret a customer's silence, or failure to take an affirmative action, as acceptance of an offer.”
Under the new FTC rule changes, sellers will now be prohibited from:
- misrepresenting any material fact made while marketing goods or services with a negative option feature;
- failing to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature;
- failing to obtain a consumer’s express informed consent to the negative option feature before charging the consumer; and
- failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.
- RELATED: SiriusXM sued for 'trapping' subscribers in its cancellation process
The publication of the proposed rules was approved by a 3-2 margin by the FTC, with Commissioners Melissa Holyoak and Andrew N. Ferguson voting no. Holyoak issued a dissenting statement after the vote was finalized.
"Whenever we engage in rulemaking, the Commission should recall that Article I of the Constitution vests legislative powers in Congress, not with agencies," Holyoak said. "Because of that, it is elected officials that delineate the boundaries, and set the requirements, that we as Commissioners must adhere to. I believe the Commission exceeds those boundaries and requirements in amendments to the Negative Option Rule "
