The Federal Trade Commission (FTC) voted 3-2 on October 16 to implement a new regulation known as “click-to-cancel.” This new rule aims to streamline the cancellation process for consumers, who often encounter numerous obstacles when they attempt to unsubscribe from services or gym memberships. The rule requires companies to make cancellation as simple as subscribing.
FTC Chair Lina Khan stated, “Companies often create hurdles for consumers when they try to cancel subscriptions; our new regulations will put an end to these tricks and traps.”
The FTC’s guidelines primarily address situations where consumers are automatically renewed unless they actively cancel their subscriptions. Under the new regulations, companies must offer an easily accessible cancellation method for consumers wishing to opt-out, although there are no specific requirements for what that method must be.
Additionally, companies cannot require consumers to communicate with a human or virtual representative, like a chatbot, unless the consumer agreed to this at the time of subscription. If consumers are directed to cancel via phone, the seller must be available to process these requests during normal business hours.
When the FTC proposed this rule in March 2023, it faced opposition from trade groups representing publishers, advertisers, and video game companies. The News/Media Alliance at the time argued that many states already had regulations in place for cancellation processes, making federal rules unnecessary.
The final version of the regulation reflects some changes from the original proposal, notably removing the requirement for sellers to send annual automatic renewal reminders. Instead, the FTC now mandates that companies provide consumers with important information regarding subscriptions and recurring payments upfront.
The FTC has the authority to initiate enforcement actions and seek civil penalties against companies that violate these new regulations.
Two Republican commissioners, Melissa Holyoak and Andrew Ferguson, voted against the new rules. In her dissent, Holyoak argued that the commission lacks the authority to impose such mandates and suggested that the Democratic majority rushed the announcement ahead of the November elections.
