New Delhi

The US Federal Trade Commission (FTC) has announced a groundbreaking 'click to cancel' rule designed to simplify the cancellation process for subscriptions. This new regulation mandates that companies make the process of ending subscriptions as straightforward as signing up, addressing widespread consumer frustrations over complex cancellation methods as detailed in a report by BBC.

Advertisment

The rule is set to take effect in approximately six months and aims to eliminate the so-called "subscription traps" that have plagued consumers for years. FTC chair Lina Khan stated, “Too often, businesses make people jump through endless hoops just to cancel a subscription. 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.

Under the new guidelines, businesses will be prohibited from requiring customers to navigate through chatbots or speak with agents in order to cancel subscriptions initiated via apps or websites. For memberships signed up in person, companies must provide options for cancellation either by phone or online.

This initiative follows recent legal actions taken by the FTC against major corporations like Amazon and Adobe for similar deceptive practices. Amazon faced allegations of misleading customers into signing up for Prime subscriptions that automatically renewed, complicating the cancellation process. The FTC claimed that Amazon's website design encouraged users to agree to automatic renewals during purchases. Amazon has denied these claims.

Advertisment

Similarly, Adobe was sued for allegedly violating consumer protection laws by imposing "hidden" termination fees and maintaining a complicated cancellation process. The FTC asserted that Adobe failed to disclose essential terms clearly, including the length of its subscriptions and potential charges for early cancellations. Adobe has contested these allegations as well.

The move mirrors recent legislative changes in the UK aimed at curbing subscription traps. The Digital Markets, Competition and Consumers Act 2024 requires businesses to provide clear information before consumers enter subscription agreements. It also mandates reminders for customers about the end of free or low-cost trials and ensures that they can easily terminate contracts.

As consumer awareness grows regarding subscription services, this new rule from the FTC represents a significant step towards greater transparency and fairness in the marketplace. With these changes on the horizon, consumers can look forward to a more straightforward approach when managing their subscriptions, reducing frustration and financial strain associated with unwanted services.