New FTC Rules Impact Subscription Services

Abstract

Subscription services are all over the place these days, and we’re willing to bet that you have a couple of lingering subscriptions that you’ve either forgotten about or don’t care enough about to cancel immediately. The Federal Trade Commission, however, seems to care enough to take action with a ruling that makes canceling subscriptions easier. Businesses won’t be able to add more hurdles to their subscription cancellations, which is good for end users.

How “Click to Cancel” Works

The FTC has revised its Negative Option Rule to become the Rule Concerning Recurring Subscriptions and Other Negative Option Programs.

The official Final Rule submission states: “Negative option programs come in a variety of forms, but all share a central feature: each contain a term or condition that allows a seller to interpret a customer’s silence, or failure to take an affirmative action, as acceptance of an offer.”

The ruling also takes time to define the categories for negative option programs: prenotification, continuity, automatic renewals, and free trials. Previously, the rule only covered prenotification plans. These examples are legitimate negative option marketing concepts, but the Commission makes one good point: these practices can cause harm to consumers, whether individuals or businesses.

Subscriptions Can End Without Confusion on the User’s Part

These rule adjustments mean that businesses need to make canceling subscriptions easier. For example, if you signed up online or in person, you should be able to cancel online or in person.

Additionally, if a discussion with a live agent or a chatbot wasn’t involved with the sign-up process, that same discussion will not be necessary during the opt-out process. Cancellations over the phone cannot include fees, and showing up in person must be optional. It should be available, but it’s not mandatory.

Any charges must also have records of informed consent documented from the consumer and retained for at least three years. Businesses need to disclose the various terms and conditions, as well as the cancellation process, every time the negative option shows up.

Your Business Needs to Pay Attention

Penalties are something that your business should avoid at all costs.

After the rule goes into effect in April of 2025, the FTC could charge your business $51,744 per customer, per violation. To that, we say… “yikes.”

All businesses need to be aware of these new developments, so we wanted to draw your attention to them. As for how we play a part in this, NetMGM can help you remain in compliance with your applicable technology-based rules.

Learn more by calling us at 888-748-2525.