The Federal Trade Commission proposed Thursday a new rule that would make it easier to cancel recurring subscriptions.
Companies would use the click-to-cancel provision to make it easier for consumers to cancel services in the same way that they signed up. For example, a subscriber to a website would be able cancel online, rather than by calling or visiting.
It would be mandatory for sellers to ask customers who have cancelled their subscriptions about other offers, before pitching them. Consumers should also receive annual reminders of their subscriptions prior to automatically renewing them.
The notice of proposed rulemaking 3-1 was approved by the commission. Commissioner Christine Wilson voted against it, claiming it was too broad in its current form.
According to the federal agency, it receives thousands from consumers each year complaining about being charged for recurring services without their consent or dealing with difficult cancellation policies .
Lina Khan, FTC Chair, pointed out reports that gyms require their members to cancel their subscriptions in person, via certified or notarized mail or by calling a customer service representative. She also mentioned that cellphone plans require that you call a customer support representative to try and convince you to stay.
Khan stated that these companies bet on customers being too busy, impatient, or confused to jump through all the hoops.
According to the announcement by the federal agency, current laws and regulations “does not provide consumers or industry with a consistent law framework.”
Notice of Proposed Rulemaking is part the agency’s review the Negative Option Rule. This rule, which was passed in 1973, requires sellers disclose the terms and conditions of sale before consumers sign up, as well as information about how consumers can cancel.
However, the rule allows businesses and consumers to continue charging for services indefinitely unless the consumer takes action to cancel. It also doesn’t regulate any other marketing tactics that can make it difficult to cancel. This is something the FTC is working to change.
Once the proposal is published in Federal Register, the official government journal, the public can submit comments for 60 days.
A spokesperson for FTC stated Thursday that officials don’t know when the proposal will go public and be available for public comment. The final rule may not be in effect immediately.
