The administrative authority has simplified the process for terminating your fitness club subscription.
The Federal Trade Commission (FTC) declared its intentions to revamp the situation on Wednesday.
The FTC introduced its ultimate "click-to-cancel" regulation, mandating businesses to provide a user-friendly means for consumers to cancel their subscriptions, equal to the simplicity of signing up. This encompasses a broad range of services such as gym memberships, digital streaming platforms, e-commerce sites, and cable TV providers.
FTC Chair Lina Khan stated in an official declaration by the FTC, "Far too often, businesses make individuals endure an endless series of challenges just to terminate a subscription. No one should be compelled to continue paying for a service they no longer desire."
The average American maintains around 4.5 subscriptions and spends an average of $924 annually, with streaming services emerging as the primary category, according to research conducted by online payment technology firm Bango.
This new rule, to be executed 180 days following its publication in the Federal Register, aims to tackle common hurdles associated with subscription plans. This includes deceitful representation of the product or service, complicated cancellation processes, and charges incurred when consumers haven't agreed to pay, such as when a free trial concludes.
Exactly what does this new rule entail?
Laura Brett, vice president of the National Advertising Division of BBB National Programs, explained, "The rule emphasizes that cancelling a subscription should be as simple as subscribing to it. This implies clear instructions on how and where to cancel, and that no live interaction with a customer service representative is required for cancellation."
The FTC also highlighted that online customers should have the choice to "click to cancel," while those who enrolled in person should be offered the option of canceling online or through a customer service representative.
Brett added that the rule applies to every stage of the subscription relationship between businesses and consumers. For instance, it necessitates businesses to disclose all necessary information about the product (such as plan features, deadlines, and specific costs) without misrepresentation in a clear manner.
Effectively, consumers must be fully aware of the terms and conditions before companies can commence billing them.
"This rule now clarifies that you cannot collect a customer's billing information before disclosing all the conditions of the relationship with them," Brett explained.
Swift cancellation
Following the FTC's March 2021 proposal of rule change, the public submitted over 16,000 comments detailing the challenges in canceling subscriptions.
Brett pointed out, "Consumers had to navigate complex online procedures to locate the cancellation option. Sometimes they could sign up online but needed to speak with a representative to cancel the subscription. Certain memberships required customers to physically visit a location to cancel their subscription."
This isn't the first time the FTC has intervened in subscription practices. In 2022, the FTC reached a settlement with internet phone service provider Vonage over its cancellation policies. In 2020, online children's education company ABCmouse agreed to settle FTC allegations for failing to disclose membership terms resulting in unauthorized charges.
-Reporting by CNN's Brian Fung and Nathaniel Meyersohn
The new FTC regulation requires businesses to simplify their cancellation processes, making it as easy for consumers to cancel subscriptions as it is to sign up. This applies to various services such as gym memberships, streaming platforms, e-commerce sites, and cable TV providers.
Brett, from the National Advertisement Division, explains that the rule necessitates clear instructions and the absence of live customer service interaction for cancellation. This is part of the FTC's effort to tackle common subscription hurdles, including complicated cancellation processes.
