If it takes a few steps to sign up online to join a gym, then it should also take a few steps to cancel online.
Sound reasonable? No? Well, soon, common sense simplicity will be a requirement once a new ‘click to cancel’ rule comes into effect in about six months. If you have registered in person, you can cancel by telephone or online.
Exactly how easy it should be to cancel will be determined on a case-by-case basis, according to the Federal Trade Commission. FTC Committee Chair Lina Khan says some consumers have had to jump through “endless hoops” to cancel a subscription. She claims it should be “as easy to unsubscribe as it is to subscribe.”
The Federal Trade Commission initially proposed the rule in March 2023. We’re talking about gym memberships, newspapers, recurring costs for cosmetics or clothing where you regularly receive personalized boxes of items, meal packages and more.
After announcing the proposed rule a year ago, the FTC heard more than 16,000 comments from consumers and federal and state government agencies, consumer groups and trade associations.
How ‘tricks and traps’ harm consumers
The FTC was already seeing a steady stream of complaints from consumers about how some companies had put up too many roadblocks to recurring charge cancellations. The FTC said it has received an average of nearly 70 such consumer complaints per day this year, up from 42 per day in 2021.
“The FTC’s rule will put an end to these tricks and traps, saving Americans time and money. No one should have to keep paying for a service they no longer want,” FTC Commission Chairman Khan said in a statement.
As part of the new rule, consumers would be given clear advance notice of such ongoing charges before providing their payment information. A company would also have to obtain a consumer’s consent for what is known as a “negative option feature” before charging the consumer.
What is a ‘negative option’ strategy?
“Negative option” marketing, according to the FTC, includes a term or condition that allows a seller to interpret a customer’s silence, or failure to take action, as acceptance of an offer. For example, you may suddenly experience automatic renewals or sign up for a free trial and then be charged an ongoing fee for a product or service.
The new rule does not go as far as some wanted. For example, the company may still try to get you to stay as a customer if you try to cancel a service.
The rule eliminates a proposal that would have prevented a company from informing consumers who wanted to cancel about discounts, deals or plan changes. And customer service support could still give customers reasons to keep their existing agreement, without first asking if the consumer wanted to hear about it.
The rule does not require annual notice to consumers about these subscriptions or charges. So you still need to pay attention to what you’re being charged and what you’re getting. If shoppers aren’t careful, they can be saddled with recurring payments for products and services they don’t want now or never plan to buy.
Yes, some said the FTC is playing politics
The Commission’s vote was 3-2 in favor of approving publication of the final rule in the Federal Register, which is expected to occur within two weeks. Commissioners Melissa Holyoak and Andrew Ferguson, both Republicans previously sworn in in 2024, voted no. Holyoak noted in her dissent: “For those who follow the administration and national politics closely, this rush to the finish (and less than a month after the presidential election) comes as no surprise.”
She indicated that the introduction of the final rule is politically motivated and part of President Joe Biden’s administration’s efforts to crack down on “so-called junk fees,” which are now being highlighted during the campaign. Some industry groups also criticized the added regulations.
Of course, everything in October can have a political tint. But consumers have been dealing with a lot of this nonsense for years, so I think they might welcome some relief in the future, regardless of how they plan to vote. Green tops red or blue.
“Subscriptions and memberships are often like visiting the Hotel California: ‘You can check out whenever you want, but you can never leave.’ Now you can leave,” Teresa Murray, consumer watchdog at the U.S. PIRG Education Fund, said in a statement.
Over the years, she said, many consumers complained about attempts to cancel pending payments for a product or service, only to find themselves in an “infinite phone tree or online maze that required click after click after click.”
They were often stuck with no way out.
“The new rules,” she said, “give consumers more freedom to switch providers, read a different news service, buy different pet food or none at all.”
Murray told the Detroit Free Press that the general rule is simple and requires companies to get “clear informed consent” before charging anyone or even getting their billing information.
“No tricks. There are no ambiguities,” Murray said.
She noted that some companies have tricked consumers into signing up for subscriptions for years, then essentially not allowing them to cancel.
“Sometimes people don’t even know how they got a subscription,” says Murray.
Most provisions of the final rule will become effective 180 days after the rule, announced on October 16, is published in the Federal Register.
The FTC has also taken other measures. In June, for example, the FTC accused software company Adobe — maker of Photoshop and Acrobat — of locking consumers into its “annual, monthly” subscription plan, without sufficiently disclosing that canceling the plan could cost hundreds of dollars in the first year.
More: Hidden junk fees from companies can drive up costs. Biden, the FTC plan would put an end to it.
How to avoid expensive costs
Consumers can also protect themselves by taking steps to ensure they are not hit with ongoing charges they do not want. PIRG and others suggest:
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Ask yourself if a limited, free trial subscription is worth it, especially if you only want to watch one movie or use that service once. You’ll probably have to provide credit card information or other checking account information to sign up for something that’s free. If you do not cancel, you will continue to pay.
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Never sign up for such services with a debit card linked to your bank account. It can make it difficult to get your money back, PIRG notes, and can even lead to expensive overdraft fees. If the company continues to charge you, you have more protection under the Fair Credit Billing Act with a credit card than with a debit card.
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Check your bank statements to see if you are regularly charged for services or products. Cancel the ones you don’t want. If charges continue after you try to cancel a subscription, the FTC says, file a dispute or chargeback with your credit or debit card company.
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Beware of pre-checked boxes. According to PIRG, many companies can check default boxes that give them permission to charge after the free trial period expires. Or the checked box may even cause you to sign up for other products or services. “Uncheck the boxes you don’t agree with,” says PIRG.
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Understand that unscrupulous companies sometimes don’t follow the rules. That’s why you’ll want to keep emails, receipts and records of agreements and any attempted cancellations. You can file a complaint with the FTC or the Attorney General.
Contact personal finance columnist Susan Tompor: stompor@freepress.com. Follow her on X (Twitter) @boring.
This article originally appeared on Detroit Free Press: FTC rule should end ‘endless hoops’ to cancel recurring charges