FTC’s “Click to Cancel” Rules are Here
Subscription model pricing has become very popular nowadays. So popular that the government is concerned that the subscription model is being taken advantage of, and that consumers who subscribe to these services or models may have a hard time unsubscribing.
Because of that, as of January 2025, a new rule that will take effect by May 2025 was passed by the federal Trade Commission, related to subscription models and consumer opt out procedures.
Who Does the Rule Target?
The rule targets subscription models where subscriptions automatically and periodically renew, without the consumer doing anything, which basically is the definition of a subscription model. The rule applies to any subscription model, not just digital—for example, a monthly product that shows up to your door and you are billed for it, and even free trials that, if the consumer does nothing, eventually become monthly payments.
The Disclosure Rules
The first rule is obvious: don’t mislead anybody. The rule specifically prohibits any advertising or misrepresentation about the service being offered, and specifically, the terms and conditions of the monthly subscription itself—for example, misleading people about how or when a subscription can be canceled.
The rule requires certain disclosures, many of which your company, if you do subscriptions, hopefully have already. The Rule requires that consumers be informed of before they are charged or before they subscribe:
- That the consumer will be charged monthly what will be charged, and whether the charges will increase
- Cancellation deadlines, to avoid the next recurring charge
- Information related to how the consumer can cancel charges
- Any other material terms, for those terms are those that would or could affect the consumer’s choices to initiate or continue the monthly billing subscription, as well as terms related to the service or product itself
Conspicuousness
All of this information must be obvious and conspicuous, and must appear above whatever mechanism is used to sign up (for example, the checkbox to agree to charges). Conspicuous generally means that no other information interferes with, overpowers, or detracts from the necessary information in 1-4 above.
Consent to monthly billing must be separate from the agreement to get or receive whatever product or service is being sold. In other words, you cannot have a consumer agree to both the product/service, as well as the subscription billing, in or by using, the same consent.
Cancellations
Cancellation of the subscription must be as easy as possible, and as simple as the signup was.
So, if signing up took just a checkbox, or a signature, so too must cancellation. Signup and cancellation must be allowed via the same mechanism, whether online, or by phone or whatever other method so long as it is the same. If cancellation is done online, you cannot require the consumer to speak with or interact with an agent as a condition of cancellation.
The rule is new, as is this presidential administration, so there is no way of knowing how strenuously the rule will be enforced, but it’s best to comply now, to avoid problems later on—and to avoid conflict with existing state laws which are modeled after this new Rule.
Stay out of trouble if you have a subscription model service, online or otherwise. Let the West Palm Beach commercial litigation lawyers at Pike & Lustig help your business.
Source:
\ftc.gov/news-events/news/press-releases/2024/10/federal-trade-commission-announces-final-click-cancel-rule-making-it-easier-consumers-end-recurring
