Gym, cable and other subscriptions may FINALLY be easy to cancel thanks to proposed FTC rule
The Federal Trade Commission (FTC) has proposed a new rule that would crack down on hard-to-cancel subscriptions by ordering firms, such as newspapers and gyms, to make it easier for consumers to end contracts.
On Thursday, the FTC announced its proposal to make canceling subscriptions easier by ‘requiring sellers to make it as easy for consumers to cancel their enrollment as it was to sign up.’
The goal is to stop the ‘never-ending struggles to cancel unwanted subscription payment plans for everything from cosmetics to newspapers to gym memberships,’ the press release said.
‘Some businesses too often trick consumers into paying for subscriptions they no longer want or didn’t sign up for in the first place,’ FTC Chair Lina Khan said.
‘The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties.’
The goal of the proposal is to stop the ‘never-ending struggles to cancel unwanted subscription payment plans for everything from cosmetics to newspapers to gym memberships,’ the FTC press release said.
Khan wrote on Twitter that ‘the proposal would also prohibit firms from tricking consumers into signing up for subscriptions in the first place, requiring businesses to clearly disclose key terms before collecting billing information, and to get separate consent before charging them.’
President Joe Biden applauded the proposal on Thursday, writing on Twitter, “Too often, companies make it difficult to unsubscribe from a service, wasting Americans’ time and money on things they may not want or need.”
I support @FTC’s proposal requiring companies to fix this. It shouldn’t be harder to cancel a service than it was to subscribe for it.
Khan revealed the rule change came after the FTC ordered Vonage, an internet-based phone service, to pay a $100million settlement ‘for charging junk fees and trapping consumers into their services’ in November 2022.
The FTC received hundreds of complaints from customers of the New Jersey-based company because it required consumers to call a different number from the main customer service line to cancel subscriptions. The phone number was also not easily found on the website, causing consumers to jump through hoops to unsubscribe.
The FTC ruled Vonage’s practices were deceptive and unfair and the agency used the $100 million to refund customers.
Vonage might not be the only company that could face heavy fines if the rule is adopted, as Khan said it ‘would enable [the FTC] to return money to injured consumers and would activate civil penalties, where firms could face hefty fines for violations.
‘This proposal is part of our effort to deploy our tools to promote efficient enforcement,’ she wrote on Twitter.
The proposal would also pose risk to legacy papers, such as The New York Times, which do not allow their subscribers to cancel online, as Business Insider and the New Yorker do.
A study done by the American Press Institute last year found that only 41 percent of US news publishers allow consumers to cancel their subscriptions online.
Sixty percent of news publishers used customer service representatives that are ‘trained in tactics for “saving” renewals when customers ask to cancel.’
The rule change came after the FTC ordered Vonage, an internet-based phone service, to pay a $100million settlement ‘for charging junk fees and trapping consumers into their services’ in November 2022.
The proposal would also pose risk to legacy papers, such as The New York Times, which does not allow their subscribers to cancel online, like Business Insider and the New Yorker do
The rule will also affect mega-online-retailer Amazon, which has already changed its practices after pressure from the European Union.
The EU announced in July 2022 that they would make Amazon simplify the cancellation process by making it two clicks. Amazon had previously had a lengthy cancellation process and was filled with ‘multiple pages’ and ‘unclear button labels.’
Gyms and cable subscriptions will also be affected.
During the pandemic, New York Sports Club received 1,800 FTC complaints for not suspending or crediting membership fees while the city was under a stay-at-home protection order.
New York City then signed a consumer protection order into law to force gyms to make it easier to cancel their subscriptions.
‘The proposal states that if consumers can sign up for subscriptions online, they should be able to cancel online, with the same number of steps. If consumers can open an account over the phone, they should be able to cancel it over the phone, without endless delays,’ Khan said on Twitter.
‘Unwanted subscriptions, along with other sources of junk fees, cost Americans billions of dollars and punish honest businesses. Our proposed rule would save consumers time and money and impose penalties on firms that continue to deceive customers.