The Simple Benefits of 'Click to Cancel'

Voters like policies that prevent corporations from ripping them off.

Photo credit: Stock Catalog

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The Federal Trade Commission last week released the final version of a rule known as “click to cancel.” At its most basic, the rule is meant to end the practice of a corporation making it very easy to sign up for a subscription service, and then very difficult to cancel when the consumer no longer wants to be subscribed.

Under the rule, if you can enroll in a service with a click, you should be able to cancel with a click — hence the name.

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said FTC Chair Lina 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.” Or, as Rep. Pramila Jayapal put it, “No more mailing in a letter to cancel, no more sitting on hold for hours, no more hassle.”

But it’s not just the FTC working on this subject area. California Gov. Gavin Newsom recently signed into law a very similar version of click to cancel for his state, and Minnesota also has a rule, signed into law by Gov. and Democratic Vice Presidential nominee Tim Walz, requiring easy cancellation that goes into effect next year.

Several other states, such as Tennessee, Utah, and Virginia, enacted new laws this year bringing more transparency to automatic subscriptions and requiring clearer and timelier notice be given to consumers before automatic renewals occur.

This is good stuff, for reasons both policy-based and political, and I hope more states pick up on what the FTC is doing. In my experience in the trenches at the state level over the last bunch of years, these kinds of policies — that affect annoying things corporations do to people that cost them time, money, or both — are extremely politically impactful, in addition to correct on the policy merits.

Backing up, these rules most directly cover something known as “negative option billing”: This is when you sign up for a trial period or temporary account for some service, and then it becomes a permanent subscription unless you take an affirmative action to cancel, which is often much more onerous than the process for signing up. I imagine everyone reading this is familiar with the practice, even if you’ve never heard the phrase “negative option billing” before.

Though the FTC’s history regulating negative option billing dates back to 1973, laws governing this area of the economy have become particularly important with the advent of app stores and the many, many phone applications that work on a negative option model, as well as more general adoption of subscription models across the economy, in everything from gyms to software.

In fact, one analysis shows the value of the “subscription economy” will be $1 trillion globally by 2028. 59 percent of people in one survey report being charged for something they didn’t want after a “free trial.”

As one person wrote during the FTC’s public comment period for the click to cancel rule, “I am currently trying to cancel a gym membership and have been overwhelmed by how difficult it has been. I was shocked to discover that the practice of intentionally making it cumbersome and difficult to cancel memberships is not only pervasive but legal.” Another noted that “My Fitness Pal, an app, notified me that they’d charged me for another year's $50 subscription to their app. There was no warning that the deadline was approaching and the deadline occurred on the day they charged me.”

Several commenters said they simply had to cancel their credit or debit cards, or have their bank block payments to a particular company, in order to escape unwanted subscription payments.

Overall, the FTC received more than 16,000 comments on click to cancel, and several commenters say they lose hundreds of dollars per year on unwanted subscriptions.

In addition to taking advantage of consumers, subscription traps are also anti-competitive, giving an advantage to corporations that — rather than innovating on price or service — do the best job of suckering their customers into agreeing to recurring charges and leading them into a inescapable maze of awfulness when they try to cancel. Policy should reward innovation that helps people, not create a race to the bottom in which the most nefarious corporation is rewarded by making the most money.

Though the FTC rule is very solid, the reasons for states adopting their own laws mandating click to cancel are two-fold: One, federal regulations often wind up tied up in court for years, and can be unmade by a new administration coming in and either repealing them or simply choosing not to enforce them. Second, a state-specific law gives the state — through the state attorney general, some other executive agency, or private actors — enforcement powers, rather than having to wait around for a federal agency to enforce the rule for them.

So that’s the policy side. But you will probably not be shocked to learn that “click to cancel” rules are also very popular, making them a good way for folks who want to challenge corporate power to do things their constituents will notice and appreciate. An August Data for Progress poll found that the FTC proposal is “supported by 83% of voters, including 85% of Democrats, 86% of Independents, and 80% of Republicans.

As one Twitter commenter put it, it’s good to see government say, “hey here's a thing you encounter a lot in real life that sucks — we made it illegal!" Indeed, there’s political power in proving that government can remove the everyday inconveniences people face as they try to simply live their lives.

So again, I hope more state legislators move on click to cancel next year. (And if one of you is reading this, reach out!) It’s an opportunity to win over constituents with a policy that is good for competition and consumer rights.

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SIMPLY STATED: Here are links to a few stories that caught my eye this week.

• Meet the corporations that are monopolizing Halloween.

• There’s an election underway to chair the “deceptively named” Texas Railroad Commission, which doesn’t have anything to do with railroads at all.

• Fraudulent business filings are messing up Colorado’s economic data.

• A ballot initiative could make Oregon “the first state to increase the minimum tax on large businesses and send the cash to all residents.”

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— Pat Garofalo