FTC Proposes Rule on Cancellation of Subscription Services, Relies on Professor Hoofnagle’s Insight

March 27, 2023

How many times have you signed up for a service like a gym membership or cellphone plan and then struggled when you wanted to get out of it? Especially during the COVID-19 pandemic, as subscription programs have surged in popularity, companies have made it easy to enroll for services that bill you on a recurring basis with just a click of a button. Yet canceling these services can be almost impossible, with byzantine instructions buried deep in website terms and conditions, or requirements that customers spend hours waiting on hold to speak to a service representative.  

Now, the Federal Trade Commision is seeking to curb these burdensome cancellation practices as part of its review of its so-called “negative option” rule. which the FTC uses to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs. The Commission is proposing a new regulation requiring sellers to make cancelling subscription services as easy as enrolling. Sellers must provide a simple “click to cancel” feature to immediately halt all billing charges. The rule would also require sellers to seek affirmative consent from customers before billing them, inform them about cancellation procedures prior to obtaining their billing information, and provide annual reminders before the subscription is automatically renewed. 

In advance of issuing the proposed rule, the Commission received comments from consumer advocates, industry trade groups, and state attorneys general. The Commission’s proposed rule relies heavily on a public comment by Berkeley Law Professor and Center Faculty Advisor Chris Hoofnagle, who advocated for an easy “one-time ‘no’ rule” that would require marketers to accept a consumer’s first “cancel” request – much as the Commission ultimately proposed. Professor Hoofnagle also recommended that the Commission prohibit specific “transaction costs” imposed on some consumers, such as repeated cancellation requests or signing in with additional security in order to cancel, and that cancellation should be as easy and unburdensome as subscription itself. 

The Commission is now seeking public comment on the proposed “click to cancel” rule. Comments will be due 60 days after the proposed rule is published on the Federal Register.