Ever feel like the most toxic breakups are the ones between canceling customers and the subscription services that don’t want to lose them?
The Federal Trade Commission seems to have sensed that pain. The agency proposed a new rule Thursday that it said would mandate that companies make it equally easy to both cancel and sign up for a service.
“The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties,” FTC Chair Lina Khan said in a statement.
The so-called “click to cancel” provision would be an update to the “negative option rule” adopted in 1973, which tackled the issue of companies notifying customers of a product, sending that product, and then charging the consumer unless they’d “affirmatively declined” it, according to a separate statement Thursday from Khan and FTC commissioners Rebecca Slaughter and Alvaro Bedoya, who voted to approve the notice for the newly proposed rule.
While the agency has other means of addressing deceptive negative options in telemarketing and online shopping, customers’ difficulties in canceling a product or service remain as companies adopt “ever more sophisticated dark patterns to thwart consumer efforts” to break away, Khan, Slaughter, and Bedoya said.
It’s something the FTC gets “thousands of consumer complaints” about each year, the agency said in its announcement Thursday. Customers who sign up for a service in minutes may find that they have to spend much more time on hold to cancel it, or may even have to visit an office in person.
Otherwise, negative option plans — which presume that a customer will continue an agreement unless they affirmatively state otherwise — can be “harmless, and can even benefit consumers, when properly disclosed,” Khan, Slaughter, and Bedoya said.
Some gyms require in-person cancelation
“As the commission has found in case after case, companies can make it easy to sign up — sometimes inadvertently — for an ongoing good or service and make it difficult to leave,” Khan, Slaughter, and Bedoya said. “Many gyms reportedly require
members to cancel in person or via certified or notarized mail.”
“You might sign up for a cell phone plan online, but to cancel, you have to call an 800 number, wait on hold for a customer service representative, and then speak to that representative, who will keep you on the line to try to convince you to stay,” they added. “These companies are betting that customers will be too impatient, busy, or confused to jump through every hoop.”
The FTC’s proposed rule would make it so that consumers who sign up for a service online can cancel it online with the same number of steps, or “make it at least as easy to cancel a subscription as it was to start it,” the agency said Thursday.
Businesses would also have to ask customers whether they want to hear pitches for new offers or plan modifications — or selling points to talk consumers into staying — before launching into that conversation and potentially delaying the cancellation process.
“In other words, a seller must take ‘no’ for an answer and upon hearing ‘no’ must immediately implement the cancellation process,” the FTC said.
Under the rule, sellers would also be required to send annual reminders to consumers “enrolled in negative option programs involving anything other than physical goods” prior to an automatic renewal.
Not everyone is in favor of the rule
However, not everyone is in favor of the potential change. FTC Commissioner Christine Wilson issued a dissenting statement Thursday, saying the new rule appeared broad and would “extend far beyond the negative option abuses cited” in the agency’s advance notice of proposed rule-making, and “far beyond practices for which the rule-making record supports a prevalence of unfair or deceptive practices.”
Though Wilson acknowledged abuses in negative option marketing, the proposal would extend past addressing just that.
“It also covers any misrepresentation made about the underlying good or service sold with a negative option feature,” Wilson said, despite the notice not offering “evidence that negative option marketing writ large is permeated by deception.”
“Consider a dietary supplement marketed with a continuity plan that is advertised to relieve joint pain,” Wilson said. “The Commission alleges the joint-pain claims are deceptive and unsubstantiated. The rule could apply. A grocery delivery service offered via subscription asserts that the consumer’s shopping lists will not be shared, but in fact the service does share the information for advertising purposes– a privacy misrepresentation. The rule could apply. Cosmetics purchased through a monthly subscription service are marketed as Made in USA but in fact are made elsewhere. The rule could apply.”
Though it’s possible the FTC would exercise more discretion and not allege that companies had violated the proposed rule for all kinds of issues, “this commission, in many areas, has demonstrated a zeal and willingness to push beyond the boundaries of our authority,” Wilson said.
