The FTC is making it easier to cancel subscriptions. Here’s what to know.

The Federal Trade Commission is cracking down on the patchwork of hidden subscriptions that undergirds modern life. The agency’s new finalized proposal requires businesses to make canceling subscriptions as easy as signing up. The “click to cancel” rule will govern a range of things from streaming services to gym memberships.

The facts

• Companies have made it difficult to cancel subscriptions in various ways: requiring in-person cancellation, burying the button behind several webpages and leaving consumers on hold for long stretches of time.

• The rule forces businesses to make the cancellation process take as many steps as signing up does and requires sellers to provide all relevant information so consumers have all the facts before subscribing.

• Companies that violate the rule open themselves up to civil penalties.

• The vote fell across party lines, 3-2, with opposition from the FTC’s two Republican commissioners appointed by President Joe Biden.

Background

Shady subscription practices predated the COVID-19 pandemic, but the issue became more serious as people looking to socially distance signed up for online services, said Teresa Murray, who runs the consumer watchdog office for advocacy group U.S. Public Interest Research Group. The FTC received an average of 21 complaints per day about this issue in 2021, the agency has written. The number was 70 per day by 2024.

The Biden administration began working on this policy in 2021, Murray said, and publicly introduced proposed language in March 2023. The agency asked for comments on the proposal and received 16,000 responses from consumers along with federal and state government agencies, consumer groups, and trade associations. The FTC announced the final proposal Wednesday.

This proposal amends the 1973 Negative Option Rule — a “negative option” is when a company notifies a consumer about their subscription expiring, and, if the consumer doesn’t answer, the company can take silence as permission to keep the subscription active.

The advent of mainstream internet since 1973 has made this a bigger issue, but the law from five decades ago hadn’t been updated to reflect modern challenges, Murray said.

That means there has been no policy laying out the rules regarding when, how and how much a company tells a consumer, she said, citing as an example companies that offer a free month before increasing the price to $9.99 a month afterward.

“If they chose to tell you that, they could bury it on page 161 of their terms and conditions,” Murray said, adding, “These companies that have been playing games with people and make it impossible to cancel, that’s not OK.”

How will this work?

Any company the FTC determines has violated the rule opens itself up to civil penalties in federal court, the agency has said.

The new rule gives the FTC broad discretion to protect customers, said Laura Brett, vice president of national advertising for BBB National Programs. Brett said the rule also requires specifics that protect the consumer.

For instance, companies must make the details “unavoidable,” meaning they can’t be in a pop-up or require the consumer to click through to another page. The FTC also requires the details of the offer to be given in the same format as the enticing part of the offer — so if the company is using a voice-over on a YouTube video to sell you a subscription, the terms can’t be only shown on the screen. Brett said that’s to make sure “distracted consumers get the information the way they’re viewing whatever commercial they’re viewing.

What led to this?

Along with inflation, subscription services with opaque and complex cancellation paths add to the overall sense that businesses are invasive and bilking consumers, said Lindsay Owens, the executive director of the left-leaning economic policy think tank Groundwork Collaborative.

“It’s just one of the many ways that pricing feels unfair and is unmoored from the stability it once had,” she said.

She said companies offering “easy, breezy technology on the way in” are “trapping you in a corn maze or Rube Goldberg machine when it’s time to quit.”

For instance, why would a gym require in-person cancellation?

“There is no reason to do that other than using a subscription model to drive up profits by banking on the fact that, in making it difficult to cancel subscriptions and memberships, you’ll be able to bring in additional profit,” Owens said.

Rule deepens political rift

The idea of “click to cancel” was praised Wednesday by the White House and was a presidential campaign promise from Vice President Kamala Harris. It has been criticized by Republicans as stifling businesses.

“The FTC’s expansive subscription rule is the latest power grab by the Commission in its pursuit to micromanage business decisions,” Neil Bradley, the U.S. Chamber of Commerce’s executive vice president and chief policy officer, said Wednesday. “Not only will this rule deter businesses from providing sensible, consumer-friendly subscriptions, but it will leave Americans with fewer options, higher prices, and more headaches.”

Melissa Holyoak, one of the FTC’s two Republican commissioners, wrote in her dissent that the new rule is another dangerous example of the FTC overstepping its mandate.

Holyoak also accused her three fellow commissioners of playing politics by making the decision so close to the end of the presidential race: “Why the rush? There is a simple explanation. Less than a month from election day, the Chair is hurrying to finish a rule that follows through on a campaign pledge made by the Chair’s favored presidential candidate.”

FTC Chair Lina M. Khan said in the announcement of the rule that companies have made consumers jump through endless hoops to cancel.

“The FTC’s rule will end these tricks and traps, saving Americans time and money,” she said. “Nobody should be stuck paying for a service they no longer want.”

Kevin Arquit, an antitrust lawyer at Quinn Emanuel and former general counsel at the FTC during the 1990s, said this tension is the latest example of partisan infighting on the board.

“It is quite unusual for a dissent to openly accuse the majority of politics,” he said.

Bradley said the Chamber is “actively examining the rule and considering all options to ensure consumers can continue to access the convenience and affordability of the subscription services they desire.”

When will this go into effect?

The rule goes into effect 180 days after it is published in the Federal Register.

Murray, of U.S. PIRG, said that it is likely to be published later this month, meaning the rule would become active in April.