Suppose you are one of the millions of consumers who accepted a “free trial” only to find it hard to cancel after the charges started or find it took repeated tries to stop an “automatic renewal.” Or you thought you were buying a one-time service only to have it morph into a continual charge. In that case, you will probably be happy to hear the Federal Trade Commission (FTC) has finally changed the rules, making it easier for consumers to cancel services, stop automatic renewals, and ensure that everyone knows what is being sold. The rule is called “Click to Cancel.”
If you have had such a problem, you are not alone. In 2021, three years ago, the FTC began investigating “negative option marketing,” which means consumers can be forced to pay for goods and services unless they never knowingly ordered. Under the term “negative option marketing,” the burden is on the consumer to cancel the purchase, not on the business to make the sale. As the FTC began its investigations, thousands of consumers inundated the Commission with examples of how they had been taken advantage of and why it was “critically important” to ensure consumers knew what clicking on something would lead to.
The State of Washington’s Attorney General reported, “59% of Washingtonians (3.5 million residents) may have been unintentionally enrolled in a subscription plan or service when they thought they were making a one-time purchase.”
The FTC created four very basic rules:
1. Important information must be truthful, clear, and easy to find.
2. People must know what they’re agreeing to before signing up.
3. Sellers must show that people knew what they agreed to before they signed up.
4. There always has to be a way to cancel that’s as quick and easy as it was to sign up.
The rule would have been stronger had it not been for the opposition of the business lobbyists and the “libertarian” think tanks that oppose any regulation. It would have:
1. Required sellers to provide annual reminders to consumers of the negative option feature of automatic renewals.
2. Prohibited sellers from forcing consumers to receive any changes to orders or products without first obtaining consumers’ unambiguously affirmative consent.
In one of the more ironic positions a lobbyist or trade organization has taken, the anti-regulation trade groups argued that the new rule was not specific enough, and many of their clients wouldn’t know how to follow the law.
The law will take effect in 180 days unless stopped by the courts. The FTC’s ruling illustrates at least part of what the Presidential election will mean to consumers.
The FTC comprises five commissioners; no party can have more than three appointments. The nominees are appointed by the President and confirmed by the Senate—the Click to Cancel rule passed by a 3 to 2 vote. The three commissioners aligned with the Democratic Party voted in favor of the rule, and the two Republican Commissioners voted against it.
Commissioner Melissa Holyoak, one of the Republicans, explained her opposition to consumer protections in her dissenting opinion, Giving three reasons. The first is that Commissions like the ones appointed to the FTC do not have the rightful power to regulate businesses. Ms. Holyoak writes that the FTC exceeds its legal mandate by protecting consumers from deceptive practices.
Second, Ms. Holyoak opposes the protections because the process was too fast. She believes it should have taken more than three years to take action. In addition, she objects to creating the protections as they were part of a political promise President Biden and supported by Vice President Harris made four years ago as candidates. Ms. Holyoak writes: “Less than a month from election day, the [FTC} is hurrying to finish a rule that follows through on a campaign pledge.” The objection is that elected officials fulfill campaign promises by creating the “Click to Cancel” rule.
The third objection isn’t clear. Ms. Holyoak appears to be saying that the deceptive practice did not harm enough consumers to warrant a rule that says you can’t force consumers to pay for services they didn’t know they ordered.
That is a part of what is on the ballot in the coming presidential election: the appointment of Federal Trade Commissioners. And what the FTC will do.
In general, consumers can protect themselves from some of these charges by refusing automatic renewals when they buy goods or services. While the law doesn’t require the business to tell you when the subscription will renew, almost every company will let you know when it will end and give you an opportunity to renew it.
There are cases when an automatic renewal freezes a price, but it’s worth considering whether there would be a discount if you decided to renew the service on your own. If you “shopped around,” you may find a better value than the automatic renewal. Many services improve, and there are, at least in some cases, competitors seeking your business.
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