Click-to-cancel rule

Source: This post on “Click-to-cancel” rule has been created based on the article “What is the new ‘click-to-cancel’ rule in US?” published in Indian Express on 18th October 2024.

Why in news?

The United States’ Federal Trade Commission is going to introduce a rule that will simplify the process for consumers to cancel their subscriptions and memberships.

About ‘click-to-cancel’ rule

1. The new “click-to-cancel” rule by the United States’ Federal Trade Commission (FTC) simplifies the process for consumers to cancel subscriptions and memberships, targeting companies that make cancellations overly complex.

2. Objective: The rule addresses rising complaints regarding recurring payments, aiming to modernize the 1973 Negative Option Rule to tackle deceptive practices in the growing digital subscription economy.

3. There is currently no equivalent rule in India.

Key highlights include:

1. Ease of Cancellation: Companies must provide a cancellation option through the same medium (online, phone, etc.) that was used to sign up. Cancellation cannot be more difficult than subscribing.

2. Prohibition on Representative Requirement: Companies cannot force customers to speak to a live or virtual representative to cancel if they didn’t have to do that while signing up.

3. Cost and Timing: Companies cannot charge extra for phone cancellations and must respond promptly to cancellation requests, especially if customers leave a message.

4. In-person Cancellations: If a service was subscribed to in person, companies must offer cancellation options online or over the phone and cannot mandate in-person cancellations.

5. Applicable Programs: The rule applies to most subscription models, including those with automatic renewals, free trials, or continuity plans, often referred to as “negative option” programs, where consumers are charged unless they explicitly opt out.

6. Consumer Protection: The rule prevents businesses from misrepresenting material facts, requires clear disclosure of terms, and mandates obtaining explicit consent before charging consumers.

UPSC Syllabus: Governance