The Federal Trade Commission (FTC) announced a “click-to-cancel” rule to make it easier for consumers to cancel recurring subscriptions and memberships.
Here are the key points of the new rule:
- Easy Cancellation Process: Businesses must provide a simple and straightforward method for consumers to cancel subscriptions. If you can sign up online, you should be able to cancel online without unnecessary steps or obstacles.
- Clear Disclosures: Companies are required to present all terms of the subscription clearly, including pricing, renewal intervals and how to cancel. This ensures consumers are fully informed before they commit.
- Consent for Additional Offers: When a consumer initiates the cancellation process, businesses cannot hinder the process by requiring them to listen to sales pitches or navigate through additional offers unless the consumer agrees to it.
- Renewal Reminders: For subscriptions that renew automatically, especially those on an annual basis, companies must send clear reminders to consumers, giving them ample time to decide whether they wish to continue the service.
According to the FTC, while negative option marketing programs — prenotification plans, continuity plans, automatic renewals and free trial conversion offers — can be convenient for sellers and consumers, the FTC receives thousands of complaints about negative option and recurring subscription practices each year. The number of complaints has been steadily increasing over the past five years and in 2024 the FTC received nearly 70 consumer complaints per day on average, up from 42 per day in 2021.
After reviewing public feedback, the FTC approved a final rule with key revisions. The requirement for sellers to provide annual reminders about subscription details has been removed. Additionally, businesses are now allowed to inform consumers about subscription plan modifications or benefits during the cancellation process, without needing prior consent to share this information.
What does Click-to-Cancel mean for the health and fitness industry?
Most of the final rule’s provisions will go into effect 180 days after it is published in the Federal Register, with some in effect within 60 days. The full details are in the Federal Register Notice, but here are the main takeaways for businesses.
The rule applies to almost all negative option marketing.
The rule covers negative option marketing, such as auto-renewals, free trials and continuity programs across online, phone and in-person offers. It applies to both business-to-consumer and business-to-business transactions. This means the protections extend not only to individual consumers but also to businesses that enroll in negative option programs.
Material misrepresentations are prohibited.
If you’re advertising a negative option, don’t mislead people about any important aspect of your offer, including the terms of your negative option program, the purpose or efficacy of the product or service you’re selling, or anything else likely to matter to your customers.
Disclose all material terms of the deal before asking people to sign up.
A material term is any important detail about your offer that could affect a customer’s decision to sign up. This includes the cost and frequency of charges, when free trials or promotions end, deadlines for canceling, and how to cancel. All these details should be clear and easy to find before a customer enrolls. Additionally, key information about charges and cancellation must be shown right at the point when the customer agrees to the subscription every time.
Obtain proof of consent before charging people.
Don’t try to distract people from what they’re signing up for with other information. Get proof of consent and maintain it for at least three years. Note that the rule gives you some flexibility on what that proof looks like. In many cases, a checkbox, signature or similar method is just fine. For negative option offers made over the phone, make sure you’re also complying with the FTC’s Telemarketing Sales Rule.
Include a simple way for people to cancel.
Make it as easy for people to withdraw from your program as it was to sign up. That means people must be able to find your cancellation method quickly and easily. It should be provided using the same method people used to sign up — online, phone, etc. — and the process should be simple and not overly complicated.
Three things to keep in mind:
- If a customer didn’t need to speak to a live or virtual representative to sign up, you can’t require it for cancellations.
- If offering phone cancellations, you can’t charge extra, and you must answer calls or take messages during normal business hours, responding promptly if a message is left.
- For in-person sign-ups, you can offer in-person cancellations, but it can’t be mandatory. You must provide an online or phone cancellation option as well.
Other rules and laws may apply.
The rule doesn’t override state laws that offer stronger consumer protections. It’s important to check the specific state regulations where you sell your product or service. If state laws go beyond the FTC’s click-to-cancel rule, you must follow those additional requirements.
Violators may be liable for civil penalties. Take time to make sure you’re fully complying and avoid the possibility of civil penalties down the line.
