(Bloomberg) -- The Federal Trade Commission finalized a rule Wednesday requiring companies make recurring subscriptions as easy to cancel as they are to sign up for.
The rule, which will go into effect later this year, obliges companies that allow online sign-ups to also offer online cancellation options in just a few steps, rather than forcing customers to quit in person or over the phone. Companies would also have to send reminders before automatic renewals are billed.
“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said 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.”
The commission voted 3-2 to finalize the rule with both of the agency’s Republicans voting against. In a written dissent, Republican Melissa Holyoak said the new rule “goes well beyond what existing laws” require and alleged that Democrats “rushed” the process to release a final rule before the election to aid Vice President Kamala Harris’ campaign.
The White House praised the FTC’s rule, saying it would help lower costs for consumers.
“Companies should not be allowed to trick customers into buying subscriptions, and today’s action ensures Americans don’t have to jump through hoops to cancel them,” National Economic Advisor Lael Brainard said.
The US Chamber of Commerce, the nation’s biggest business lobby, however, said it was “actively examining” the rule and would consider all options, an indication that a potential legal challenge may be on the way. The group previously sued the FTC over its rulemaking to bar non-competes.
“Not only will this rule deter businesses from providing sensible, consumer-friendly subscriptions, but it will leave Americans with fewer options, higher prices, and more headaches,” Neil Bradley, the group’s chief policy officer said.
The average American spent $273 a month on subscription services in 2021, according to consulting firm West Monroe, up from $237 in 2018. Another 2021 survey by Chase found 56% of consumers said they have trouble tracking recurring subscriptions and it takes about three months for them to cancel unneeded ones.
In recent years, Apple Inc., AT&T Inc. and Sirius XM Holdings Inc. have been criticized for making it too hard for customers to cancel their services. The FTC has also sued Amazon.com Inc. and Adobe Inc. for making it difficult or expensive to cancel recurring subscriptions. Both companies are contesting the allegations.
(Updates to add White House, Chamber of Commerce comments beginning in fifth paragraph.)
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