Feature
The Gist
- Simpler cancellations. The FTC’s Click to Cancel rule requires businesses to offer easy, user-friendly cancellation options matching the sign-up simplicity.
- Impact on businesses. Subscription services must update systems, train staff and redesign processes to comply while balancing compliance with customer retention.
- Consumer protection focus. The rule aims to address subscription traps and foster trust through transparent billing and informed consent requirements.
The Federal Trade Commission (FTC) issued last month a new “Click to Cancel” rule to simplify the process for consumers to cancel subscriptions and recurring payment plans. The rule, takes effect 180 days after publication in the Federal Register, mandates that businesses make subscription cancellations as easy as the sign-up process, addressing consumer frustrations over deceptive practices.
The FTC's Click to Cancel rule poses operational challenges for subscription-based businesses by requiring real-time digital cancellations, forcing companies to update infrastructure, redesign portals and train staff (more on this later). While easing some regulatory burdens, the rule shifts the focus to delivering transparency and trust, balancing compliance with customer retention efforts.
With the rise of subscription services in the digital economy, this ruling aims to protect consumers by providing clearer consent guidelines and streamlining cancellation processes. This article will examine the FTC’s Click to Cancel rule and explore how it could reshape customer experience, from enhancing transparency to creating frictionless exit points across digital services.
Rebecca Jones, president of Mosaicx, a conversational AI platform provider, told CMSWire that the FTC’s new Click to Cancel rule is likely to disrupt the subscription economy and reshape customer journeys.
"The change may encourage innovation in subscription offerings, like flexible plans and customer-centric engagement strategies, transforming retention from a default outcome to a proactive effort," she said. "Ultimately, the rule could lead to a healthier, trust-based subscription economy."
Introduction to the Click to Cancel Rule
The FTC's Click to Cancel rule is designed to address long-standing consumer frustrations with subscription services that make it difficult to cancel memberships or recurring charges. This rule requires that businesses offering subscription-based services provide consumers with a straightforward, user-friendly option to cancel—one as simple as signing up.
According to the FTC, the rule aims to eliminate complex cancellation processes that lead to unwanted charges and promote transparency and fairness in subscription models.
The Rise of Subscription Challenges
In recent years, subscription-based services have surged across industries, from streaming platforms to meal delivery services, often bringing challenges for consumers who find themselves in "negative option" billing scenarios where charges continue unless explicitly canceled.
Reports of hidden terms, complex cancellation protocols and unexpected renewals have increased, reflecting a growing need for regulatory oversight. The FTC, responding to consumer complaints and industry trends, has moved forward with this rule to ensure that subscribers can easily end their commitments without barriers or deceptive practices.
Consumer Frustrations Prompt Regulatory Action
Michael Podolsky, CEO of review platform PissedConsumer.com, was at the root of the CRFA (Consumer Review Fairness Act) that the FTC lobbied through Congress as a result of the ROCA LABS vs PissedConsumer lawsuit. He told CMSWire that as seen from complaints on his review platform, consumers often find it difficult or almost impossible to cancel subscriptions with service providers.
"Cancellation processes have become a headache for many who want more control over their money,” said Podolsky. “The FTC's 'Click to Cancel' provision might be a game-changer for average consumers and the industry, ensuring fairness and transparency in billing.”
Podolsky suggested that for subscription-based businesses, this may mean a short-term increase in churn but at the same time long-term trust with customers.
Sonny Stafford, chief commercial officer at Bonafide Health, a women’s health supplement retailer, told CMSWire that the Click to Cancel rule represents a pivotal shift for businesses relying on recurring revenue models.
"When people know they’re in control, it fosters confidence and makes them more likely to return. In the subscription economy, customer loyalty is as valuable as recurring revenue, and companies that embrace this approach will ultimately benefit from stronger retention over time," said Stafford.
Related Article: Marketers Must Act Now on FTC's New Fake Review Rules
Key Provisions of the Rule
The Click to Cancel rule introduces several essential provisions aimed at enhancing transparency and consumer control in subscription-based services.
Simplifying the Path to Cancellation
First, the rule mandates a simplified cancellation process for subscriptions. This provision ensures that businesses provide an accessible, user-friendly option to cancel subscriptions through the same medium used for sign-up. For example, if a customer subscribed online, they must be able to cancel online without navigating through a maze of complex steps or engaging in time-consuming interactions.
The rule also establishes informed consent requirements for negative option features, which are common in subscription services that automatically renew or bill at regular intervals. Before charging customers, businesses must present clear information about the terms of the subscription, including fees, renewal timelines and any other critical details. This ensures that customers fully understand what they are agreeing to and reduces unexpected or unwanted charges.
Ensuring Informed Consent
Finally, the rule prohibits companies from misrepresenting material facts during the subscription process. Businesses must present accurate, straightforward information about all costs and terms associated with the service. Misleading or deceptive practices, such as hiding cancellation requirements in fine print or misrepresenting the cost of a subscription, are explicitly barred, promoting a higher standard of transparency and ethical business practices.
Podolsky explained that businesses should ensure that the path to cancellation is as simple as the sign-up, with clear consent, terms and exits.
“They need to ensure a customer gives informed consent to the subscription, including consent to the negative option,” said Podolsky. “This may require adding extra checkboxes or buttons in the subscription forms, sending emails to notify users and asking for their confirmation to be subscribed.”
Banning Misleading Practices
Overall, these provisions aim to protect consumers from hidden fees, unauthorized charges and unwelcome surprises, setting a standard for fairness and clarity in subscription-based business models. Businesses should consider the FTC rules as a starting point as they work toward transparency with their policies and procedures.
“Beyond simply aligning with 'Click to Cancel,' businesses should focus on establishing clarity from the start–-providing clear, upfront information on subscription terms and easy access to account management tools,” said Stafford. “By proactively adopting transparency and ease-of-use standards throughout the customer journey, businesses can mitigate compliance risks while building a stronger promise to their customers.”
Related Article: FTC Won't Tolerate Generative AI Deception in Marketing, Customer Service
Impacts on Businesses and Consumers
The Click to Cancel rule stands to significantly affect both businesses and consumers by addressing longstanding consumer complaints about subscription services and posing new operational considerations for businesses.
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How Consumers Benefit
For consumers, the rule is a response to frequent complaints about opaque and burdensome cancellation processes, especially with digital and subscription services. By simplifying the process, it aims to empower consumers to regain control over their subscriptions, reducing instances of “subscription traps” where users are billed even when they want to cancel.
Anthony Miyazaki, a professor of marketing at Florida International University, told CMSWire that the rule’s effects on consumers will be substantial.
"Millions of consumers will avoid the burden of navigating complex processes to cancel their subscription services,” said Miyazaki. “Consumers will save time, money, and effort while avoiding frustration and stress."
The requirements around informed consent and honest representation of material facts should also help consumers avoid unwanted charges and make more informed decisions from the outset, addressing one of the main pain points in consumer advocacy around subscriptions.
Operational Challenges for Businesses
Tom Zauli, senior vice president and general manager at SOFTRAX, a billing and revenue management service in the subscription economy, told CMSWire that quite often, subscription businesses offer a discounted rate for customers opting into an annual contract vs. a month-to-month agreement.
"For example, a music streaming service may charge $14.99 per month but discount that to $120 for a year-long contract,” said Zauli.
“The subscription business’ finance team uses these subscription amounts to determine their monthly recurring revenue (MRR) from subscriptions, which in turn, determines the company’s annual recurring revenue (ARR), or the total amount of predictable and recurring revenue that the music provider expects to receive from its customers over the year," he added. "MRR and ARR are important financial markers for subscription services, and these numbers must be kept accurate and as much in real time as possible."
This is where Click to Cancel complicates matters, Zauli added.
"Currently," he said, "many companies require a phone call or written request to cancel subscriptions, allowing the company to give a notification that goes through at least one department and the cancellation process to begin. With 'Click to Cancel,' the business has to capture the real-time customer action through a web or mobile interface."
Zauli said that for businesses implementing these changes, there may be operational and logistical challenges.
“Many companies will need to adjust existing infrastructure, particularly if they rely on retention strategies that involve making it harder for customers to cancel,” said Zauli. “Businesses may also need to train customer service staff and redesign online portals, especially as they streamline digital interactions.”
Zauli suggested that while the rule does allow businesses to offer promotions to retain customers during cancellation, they must ask if the consumer is open to hearing these offers first, ensuring that customers aren’t inadvertently subjected to unwanted retention pitches.
Lightens the Regulatory Load for Businesses
On the other hand, the FTC's decision to drop the annual reminder requirement lessens the regulatory burden for businesses. While such a requirement might have benefitted consumers by keeping subscription terms transparent over time, its removal offers businesses a reprieve from additional administrative obligations, enabling them to focus on meeting the core cancellation and informed consent standards.
“For smaller businesses, this shift means making investments in both technology and processes to support transparent, informed consent and easy cancellation,” said Stafford. “Balancing these changes while delivering a strong customer experience isn’t easy when resources are tight. But it’s essential for companies of all sizes to keep clarity front and center—from how terms are presented to how accessible options are.”
Stafford emphasized that this approach builds trust as a customer experience standard, not just a compliance check.
The Impact on Customer Experience
The Click to Cancel rule isn’t just a regulatory adjustment; it’s poised to reshape how consumers experience subscription services across industries. By mandating simpler cancellation processes, transparent terms and clearer consent, the rule addresses many of the pain points customers encounter with subscription models. This move signals a shift toward customer empowerment, and it will likely compel businesses to reevaluate how they engage and retain subscribers.
Here are four key ways this new rule is expected to impact customer experience, from transparency in billing to opportunities for more personalized retention strategies:
Simplified Cancellation Processes Build Trust
By requiring a cancellation process that matches the simplicity of sign-up, the rule removes the friction that previously frustrated customers when trying to cancel subscriptions. This shift can deepen trust, as customers feel empowered and assured that they aren’t trapped in a service.
Stafford said that for his company, compliance with the FTC rule means doubling down on the basics: honesty, clarity, and ease of use. "This approach not only meets compliance but strengthens trust across every stage of the customer journey, regardless of where future regulations may lead."
Enhanced Communication Improves Engagement
The FTC rule also aims to enhance transparency and communications around fees, renewal policies and cancellation terms, helping customers avoid the “subscription traps” that occur when companies fail to disclose key information.
Danielle Harvey, global VP, head of travel and hospitality strategy at Quantum Metric, a digital experience analytics platform provider, told CMSWire that brands will need to work harder to define, deliver on, and communicate the benefit of the product or service they’re offering, and work hard to constantly engage and remind their customers of that benefit. This will increase customer engagement and improve satisfaction.
Personalization Opportunities in Retention
While the rule discourages difficult cancellation processes, it allows businesses to offer retention offers—provided the customer consents to hearing them. This opens opportunities for companies to retain customers through targeted, relevant offers that reflect prior usage, rather than blanket retention tactics.
Harvey said that instead of putting in offers during the cancellation process, brands should take the time to personalize outreach before they go to cancel. "Has a customer interacted with your site in a while, changed their products or looked for new items? If not, find ways to re-engage them, as this will make them less likely to cancel," Harvey said. "It's all about continuing to provide value."
Strengthened Long-Term Loyalty Through Clearer Consent
The FTC rule’s emphasis on informed consent means customers will better understand their commitment to recurring services, building a foundation for trust-based relationships. For smaller businesses, this might require investing in compliance tools or partnerships to streamline processes, yet it sets the stage for customer loyalty built on genuine value rather than restrictive policies.
Jones said that the new rule might increase churn rates for subscription-based businesses and push them to shift their focus from retention through restrictive policies to genuine customer loyalty.
"Shifting to easier cancellations requires that companies prioritize transparent, value-driven experiences that encourage customers to engage with the business willingly," Jones said.
Looking Ahead: The Future of Subscription Regulation
The Click to Cancel rule marks a foundational shift toward greater consumer protection in subscription-based models. As recurring services continue to become more widespread, this rule could pave the way for additional regulations on fair billing, cancellation ease, and renewal transparency, addressing common pain points and building trust.
If automated customer interactions complicate cancellations, regulators may mandate accessible human support to safeguard consumer autonomy, underscoring the need for clarity and informed consent in digital subscriptions.
“This overwhelming response in support of consumer protection," Jones said, "especially in the digital economy, is only expected to increase."
