FTC unveils new ‘Click to Cancel’ rule for streamlined subscription cancellations

In a move aimed at protecting consumers from complex and cumbersome subscription cancellation processes, the Federal Trade Commission (FTC) has announced its new “click to cancel” rule. The rule, which was finalized and revealed on October 17, 2024, seeks to simplify the often frustrating process of ending subscriptions or memberships, making it as easy as signing up for them in the first place.

Under this new regulation, businesses will be required to offer a clear and straightforward way for customers to cancel subscriptions online, particularly for those that were originally initiated through digital platforms like websites or apps. Gone are the days of long-winded phone calls, forced chatbot interactions, or other drawn-out processes. For subscriptions initiated in person, companies must now offer cancellation options either online or via phone.

FTC Chair Lina M. Khan emphasized the significance of the new rule, stating, “Too often, consumers are forced to jump through endless hoops just to cancel a service. The FTC’s rule puts an end to these tricks, saving consumers time and money. No one should have to pay for a service they no longer want.”

The new rule applies broadly across all media to any negative option programs, where customers agree to automatic renewals or recurring charges. In addition to streamlining cancellations, the rule mandates that sellers provide clear terms before obtaining billing details and secure informed consent for all negative option features.

The FTC’s decision follows a sharp rise in consumer complaints regarding subscription practices, particularly around difficulties in canceling. In 2024, the agency received nearly 70 complaints daily related to these issues, a notable increase from 42 per day in 2021.

Despite its broad consumer support, the rule was not without opposition. The Commission voted 3-2 in favor of the final version, with two Republican commissioners dissenting. Notably, some earlier proposals, such as requirements for businesses to send annual reminders about recurring charges, were dropped from the final rule.

The regulation, which modernizes the FTC’s 1973 Negative Option Rule, is set to take effect 180 days after its official publication. This update comes amid growing scrutiny of subscription practices, with companies like Amazon and Adobe already facing legal challenges related to their subscription cancellation methods.

By introducing this rule, the FTC aims to curb deceptive practices and make subscription management more transparent and consumer-friendly, ensuring that customers can easily exit services they no longer wish to use.