The Federal Trade Commission (FTC) proposed a new rule to make canceling subscription services and recurring payments as easy as signing up. The proposal is massive news because consumers around the country have felt the agony of signing up for something and then realizing it's not what they wanted or needed, but canceling it feels like they need a Ph.D. in rocket science to figure out how. This new rule would require businesses to make it as easy to cancel a subscription as it was to start and remove the hassle of endless phone calls, hidden cancel buttons, and excess frustration.
Subscriptions have been around since the 1860s with the emergence of the humble milkman. However, the modern era of subscriptions began in the early 2000s with the rise of the internet and e-commerce. Companies like Netflix and Amazon pioneered subscription-based services for DVDs and books. Soon, other companies began adopting the subscription model for everything from music and beauty products to meal kits and clothing. Fast forward to today, and the subscription economy has exploded with the growth of digital services and products. Consumers can now subscribe to digital streaming services like Hulu, Spotify, and Apple Music. Not to mention the emergence of monthly boxes of products tailored to their interests from companies like Book of the Month and Dollar Shave Club. Convenience, personalization, and cost savings have driven the rise of subscriptions to a multi-billion dollar industry but also have forced the need for market regulation.
The new proposal is one of several significant updates the FTC suggests to its rules on subscriptions and recurring payments. This rule would help prevent businesses from tricking consumers into paying for subscriptions they no longer want or didn't sign up for in the first place. The new requirement would make it mandatory for companies to make it at least as easy to cancel a subscription as it was to start. The proposal would help consumers save time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties. The notice of proposed rule-making is part of the FTC's ongoing review of its 1973 Negative Option Rule, which the agency uses to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs.
The FTC’s proposed “click to cancel” provision is good news for consumers who struggle to cancel unwanted subscription payment plans. However, businesses must provide transparent and accessible cancellation mechanisms to avoid stiff penalties. The proposed changes may require companies to redesign their subscription cancellation procedures to make them easier for consumers. Companies should ensure adequate disclosures and bill consumers with their consent to avoid issues with subscription payments. Overall, the proposal is a significant step forward for the industry. It provides a consistent legal framework for businesses and consumers, improving trust and confidence in subscription and recurring payment programs.
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