Can we give the Federal Trade Commission a hallelujah for its new “click-to-cancel” rule? This is how good government should work: eliminating business practices that frustrate consumers to the point they want to swear.
The FTC recently approved a new rule that makes it easier to cancel recurring subscriptions or memberships, which are referred to as “negative option” programs. These include offers where consumers agree to automatic billing after trying something out at a discount or free, or in some cases when they are enrolled without their knowledge or consent. Billing stops only after they take some action to cancel. That’s where the “negative” part comes in.
I get so annoyed with this sales practice. Here’s why.
You sign up for a subscription — a magazine, hair product or fruit-of-the-month service.
You later decide it’s not worth the money, or you aren’t using the product or service as much as you thought. Think a gym membership. Meanwhile, the magazines pile up on the floor unread, the hair products come too frequently and most of the fruit rots before you can eat it.
You want to cancel but can’t find contact information. Or you have to call the company and you’re routed to an automated telephone system that seems to have been specifically designed to wear down your resolve. Frustrated, you hang up and continue to curse when the next box of fruit arrives in the mail and the charges appear on your credit card.
A good example is the beautyproduct subscription nightmare that many readers have told me about. They just wanted to sample a new face cream. An online ad said all they had to do was pay for shipping, and the company promised they could cancel after a 14-day free trial.
But the $5.99 shipping fee was bait to get them to provide their credit or debit card information.
They didn’t realize that they were signing up for a subscription costing $90 a month.
Negative-option offers aren’t illegal, but they can push the boundaries of the law, which requires companies to clearly and conspicuously disclose the terms.
The problem is that many people also forget to cancel — or worse, they can’t stop the automatic billing even when they try.
Shady companies count on this response — or, they implement cancellation conditions so strict it is difficult to get out of the deal. Return, refund and cancellation policies are often buried in pages of fine print that people can only reach through an inconspicuous hyperlink.
“Nobody should be stuck paying for a service they no longer want,” said FTC Chair Lina M. Khan when the rule was approved.
It will be a few months before the rule takes effect, but here are the basics:
• Consumers should be able to cancel recurring subscriptions quickly and easily.
• Companies have to offer the option to cancel in the same way they got you to subscribe.
So they can’t require you to speak with a live representative to cancel if you signed up online.
• It doesn’t matter how you signed up. The rule covers online, phone or in-person sign-ups. If you signed up in person, you should be able to cancel online or over the phone.
• If you signed up for a program in person, you should be offered the opportunity to cancel in person. However, companies can’t require an in-person cancellation. You should be offered a way to cancel online or on the phone.
• Companies must be clear about how they will charge you and when a free trial or promotional offer will end. They also must get your express informed consent before charging you.
• Got a business? You’re covered, too. If you enroll your business in a negative-option program, you receive the same protections as consumers.
• You shouldn’t be charged extra for phone cancellation.
• Companies must answer the phone or take a message promptly during regular business hours.
Deceptive negative-option practices have long been a problem, trapping consumers in subscriptions and memberships they no longer want or never intended to sign up for long-term.
So far this year, the FTC has received nearly 70 consumer complaints a day about negative-option deals, up from 42 per day in 2021, the agency said.
According to the FTC, bad actors can make it difficult or nearly impossible to cancel recurring subscriptions by forcing consumers to jump through hoops in the hope that they will eventually stop trying. And then the unwanted subscription, with the billing, continues.
In 2020, ABCmouse, a digital education platform for children, agreed to a $10 million settlement with the FTC.
The agency said the company refused to accept cancellation requests made over the phone, via email or through a form on its website. Instead, customers were directed to an inconspicuous online portal where they had to navigate anywhere from six to nine screens. The company, unconnected to the ABC network or Disney, denied wrongdoing.
“Since the FTC announced the final click-to-cancel rule last week, many consumers have told us how happy they are that we’re cracking down on subscription traps,” said Samuel Levine, director of the agency’s Bureau of Consumer Protection. “We’re pleased by the positive reception to the final rule and ready to enforce it when it goes into effect.”
The click-to-cancel rule can save consumers a lot of money from unwanted or forgotten subscriptions. However, some companies may still try to get around the new rule.
My advice: Set calendar reminders well in advance of subscription or membership renewals. Better yet, don’t sign up for automatic payment renewals. The companies will remind you.
I’ve often been able to negotiate a lower price — in one case 50% off — after I purposefully let a certain subscription or membership lapse. Sometimes the reduced rate is just for 12 months. No problem, I turn off the automatic renewal option, then set a reminder to follow the same savings tactic the following year.
Avoid free trial offers that require you to provide your credit or debit card number.
Also, if a company wants you to try its product, it should pay for shipping.
“Free” is a code word for “Watch out!” Because there’s always a price to pay.
Samuel Levine, FTC