The Federal Trade Commission (FTC) has announced details of a brand-new “Click To Cancel” rule, which will require companies in the United States to make it as easy to cancel subscriptions and memberships such as Disney+.

There have been a set of common-sense revisions to the Negative Option Rule, which is now known as the Rule Concerning Recurring Subscriptions and Other Negative Option Programs. The revisions are designed to protect people from misleading enrollment tactics, billing practices, and cancellation policies. They also provide businesses with clear rules of the road, all consolidated in one place, to help them build customer trust and avoid enforcement action.

While streaming services often make it easy to sign up, they can make it more tricky to unsubscribe, offering additional offers to remain or moving the buttons around between screens to try to confuse customers into staying.

This has been part of a multi-year process that began in 2019 and reflects input from thousands of public comments from consumers, industry, law enforcement partners, and others.

These new rules won’t come into effect immediately; it will take 180 days before it comes into place in order to give the streaming services time to implement these changes.

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said Commission Chair Lina M. Khan. “The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”

Here are some of the key details about this new rule:

• The rule applies to almost all negative option marketing. The rule applies to negative option marketing, including prenotification and continuity plans, automatic renewals, and free trial offers, whether the offer appears online, on the phone, or in person. And, importantly, the rule covers business-to-business transactions, as well as business-to-consumer transactions. That means a few things for business owners. It means the rule applies to almost any negative option program you offer. And it also means if you enroll your business in a negative option program, your business gets the same protections as an individual consumer.
• Material misrepresentations are prohibited. The rule picks up on well-established truth-in-advertising principles. If you’re advertising a negative option, don’t mislead people about any important aspect of your offer, including the terms of your negative option program, the purpose or efficacy of the product or service you’re selling, or anything else likely to matter to your customers.
• Disclose all material terms of the deal before asking people to sign up. A material term is any part of your offer that would matter to the customer or influence their decision whether to sign up. For example, material terms might include how much and how frequently you’re going to charge people, when free trials or promotional offers will end, deadlines to withdraw from your program, and how to cancel. All this information should be clear, conspicuous, and available to your customers before they enroll. And certain key information related to charges and cancellation must appear right when and where the customer agrees to the negative option, every time.
• Obtain proof of consent before charging people. Being able to demonstrate your customers fully understood what they were signing up for before you started charging them protects your business and your customers. Don’t try to distract people with other information. Get proof of consent and maintain it for at least three years. Note that the rule gives you some flexibility on what that proof looks like. In many cases, a checkbox, signature, or similar method is just fine. For negative option offers made over the phone, make sure you’re also complying with the Telemarketing Sales Rule.
• Include a simple way for people to cancel (a/k/a “Click to Cancel”). Make it as easy for people to withdraw from your program as it was to sign up. That means people have to be able to find your cancellation method quickly and easily. It should be offered through the same medium (online, phone, etc.) people used to sign up, and it shouldn’t be overly burdensome. Keep these three guardrails in mind:
  • You can’t require people to talk to a live or virtual representative to cancel if they didn’t have to do that to sign up.
  • If you’re offering phone cancellation, you can’t charge extra for that service, and you have to answer the phone or take a message during normal business hours. If you take a message, you have to respond to people promptly.
  • If people originally signed up for your program in person, you can offer them the opportunity to cancel in person if they want to, but you can’t require it. Instead, you need to offer a way for people to cancel online or on the phone.

Roger’s Take: The executives at the streaming services will undoubtedly be unhappy with this new rule, but for consumers, this is an important step to make things a little clearer and simpler. Too many people sign up for services and aren’t able to unsubscribe (especially Gym Memberships!).

Amazon has been called one of the hardest companies to cancel, and I’ve found that the website often tricks you into signing back up for Prime when you try to buy something. I’ve had to contact them on at least two separate occasions to get a Prime subscription cancelled after apparently signing up.  

No doubt Disney will need to adjust how it’s cancellation pages currently work to make it more simpler.  I also think the idea of being asked if you want to continue a subscription after a free trial is a major step forward, rather than assuming that they want to carry on.  Ultimately, this is a win for consumers.

What do you think of this move?  Let me know on social media!

Roger Palmer

Roger has been a Disney fan since he was a kid and this interest has grown over the years. He has visited Disney Parks around the globe and has a vast collection of Disney movies and collectibles. He is the owner of What's On Disney Plus & DisKingdom. Email: Roger@WhatsOnDisneyPlus.com Twitter: Twitter.com/RogPalmerUK Facebook: Facebook.com/rogpalmeruk

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