Canceling your subscription is about to get a lot easier thanks to this new rule

Ever been trapped into paying for a subscription or membership you no longer want or need but can't cancel? Breaking up with your gym or streaming service is about to get a little easier.

The Federal Trade Commission on Wednesday adopted a “click to cancel” rule that requires businesses to make it as easy to cancel a service as it was to sign up.

Signed up online? Click to cancel. Signed up in person? Cancel online or over the phone.

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” commission Chair Lina Khan said in a statement. “Nobody should be stuck paying for a service they no longer want.”

Under the new rule that will take effect in the coming months, businesses must get consent for subscriptions, auto-renewals and free trials that convert to paid memberships. Canceling the services has to be “at least as easy” as signing up, with no tricks or traps, the FTC said. 

The FTC rule is part of President Joe Biden’s efforts to crack down on “junk fees.” 

Vice President Kamala Harris, the Democratic nominee for the White House, talked up the proposed “click to cancel” rule in September.

The rule passed 3-2, with the FTC's two Republican commissioners voting against it.

While some subscriptions can be canceled with a couple clicks or a phone call, when companies make it difficult to cancel a subscription, customers can end up with monthly charges long after they no longer want or need a product or service.

Unwanted subscriptions have become such a headache for consumers, a cottage industry of apps to help subscribers find and cancel subscriptions has emerged.

“We know signing up for subscriptions is so easy, it is miraculous. That is why we know that the difficulty of cancellation is not an accident. It is a choice. And it's a choice that's causing real harm to consumers,” Samuel Levine, director of the FTC’s Bureau of Consumer Protection told USA TODAY last year.

Complaints about the difficulty of dropping subscriptions have soared in recent years. The FTC estimates it receives nearly 70 a day on average.

After proposing the rule last year, the FTC received thousands of comments from consumers who had trouble canceling services, from cable subscriptions to subscriptions for dietary supplements.

The comments made it clear “that consumers were really struggling with how to cancel and get out of these long-term commitments where they continued to be billed,” said Laura Brett, vice president of BBB National Programs’ National Advertising Division, the advertising industry’s self-regulatory body. 

Trade groups representing news publishers, retailers and other businesses have argued that a multistep cancellation process protects consumers or lets them take advantage of a better deal. They say the new FTC rule places too many burdens on businesses and is unnecessary.

Consumer advocates disagree. 

Erin Witte, director of consumer protection for the consumer advocacy group Consumer Federation of America, called the rule a win-win for consumers and businesses. 

“It benefits businesses by ensuring that they are engaging with and providing services to consumers that actually want to continue to receive that service rather than people who just relented after not being able to cancel or people who forgot about a subscription,” she said. “It really just puts everybody on the same page.”  

The high cost of subscription binges:How businesses get rich off you forgetting to cancel

Teresa Murray, consumer watchdog director at Public Interest Research Group, pointed to the questionable tactics deployed by businesses, such as the “seemingly endless phone trees that consumers sometimes encounter, as well as websites where you’re supposed to be allowed to cancel, but every link takes you to a new link that takes you to yet another link and none of them are helpful.”

Still, more can be done to protect consumers, according to Murray.

PIRG wants the FTC to require businesses to send reminders before automatically renewing subscriptions or memberships and to prohibit strong-arm tactics that discourage customers from canceling services.

Recurring charges from unwanted free trials, auto-renewals and monthly subscriptions can be dead weights on budgets already squeezed by inflation and higher prices.

Cancellation rates jump when consumers are prompted to make a renewal decision, research from economists at Stanford University and Texas A&M suggests.

People are four times more likely to cancel a subscription when prompted to make an “active choice” such as when a credit card expires, Stanford economics professor Neale Mahoney told USA TODAY last year.

“It’s not uncommon that people forget they signed up for something, and reminders from the business can be a very helpful way to ensure that they’re still providing a service to consumers who want to receive it, not just people who have forgotten about it,” Witte said. “We hope that the FTC will revisit this in a future rulemaking or updates to the rule.”