On January 16, 2024, the Federal Trade Commission ("FTC") will hold a virtual informal hearing on proposed amendments to its current automatic renewal rules. Many businesses will be paying close attention to one proposal in particular: the addition of a "click to cancel" provision, requiring sellers to make it as easy for consumers to cancel their enrollment as it was to sign up. The "click to cancel" provision is one of a few proposed provisions aimed at updating automatic renewal rules to address what the FTC deems is a "seemingly never-ending struggle to cancel unwanted subscription payment plans." The public will be able to attend the hearing on the FTC's website. Currently, six nongovernmental organizations are scheduled to speak on issues related to the proposed automatic renewal rulemaking.
What are the Proposed Changes to the Automatic Renewal Rules?
The FTC constantly reviews its 1973 Negative Option Rule, which was promulgated, in part, to address consumer issues with automatic renewals, free to pay conversions, and continuity plans. The FTC states that it continues to receive thousands of customer complaints every year pertaining to the difficulty associated with cancelling subscriptions. The FTC's current proposal to add a "click to cancel" provision is (among other measures) an attempt to address these complaints once and for all.
Current FTC guidance includes a requirement that businesses not impede the effective operation of promised cancellation procedures, and to honor cancellation requests that comply with such procedures. The FTC's proposed provisions would require that:
- Businesses implement a simple cancellation mechanism, making it as easy to cancel a subscription as it was to sign up for it, and in the same number of steps. For example, if a registration required only that a consumer click a button on a website, the consumer must be able to cancel by clicking another button on the same website.
- Before businesses pitch consumers on new offers or subscription modifications when a consumer tries to cancel, the business must first ask the consumer whether he or she is interested in hearing about them. If a consumer answers "no," the business must immediately begin implementing the cancellation request.
If the FTC is persuaded by commentary or statements made at the hearing, it may decide to modify or terminate its rulemaking. Otherwise, the FTC will proceed by enacting a final rule that modifies the current regulations governing automatic renewal plans.
Experienced Marketing Attorneys Can Help Ensure Compliance with Automatic Renewal Rules
Businesses that offer automatic renewal plans are subject to a variety of federal and state laws. Each law has its own set of requirements that can trigger civil liability for businesses if not met. The FTC continues to make clear that it considers the regulation of automatic renewal plans to be a top priority. Hiring experienced counsel can ease the burden of keeping up with the long list of ever-changing regulations. The attorneys at Klein Moynihan Turco have significant experience in both defending businesses against allegations of automatic renewal law violations, and ensuring compliance so that future claims may be prevented.
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