In recent times, a common headache for consumers worldwide has been the auto-renewal systems implemented by various companies – you sign up for a free trial or an annual subscription, forget to cancel, and suddenly you’re billed heavily for a service you didn’t wish to continue. This unfortunate circumstance is not uncommon. The Better Business Bureau provides that the average consumer loss associated with these instances hits around $186. On top of that, a survey by Creditcards.com found that 35% of consumers have unwittingly enrolled in some type of auto-renewing subscription which they could not escape (FTC Proposed Rule).
This has prompted the Federal Trade Commission (FTC) to propose amendments to its Negative Option Rule to protect consumers better from recurring charges for unwanted products or services. This industry practice interprets silence or customer non-action as acceptance of an offer.
Under the current rules, only prenotification plans, such as product-of-the-month clubs, come under the rule’s purview, necessitating sellers to disclose the negative option offer’s terms clearly. With the proposed changes, online subscription services and all types of negative option marketing, including automatic renewals and free trial marketing, would be under regulation.
The amendments would oblige businesses to:
- Acquire clear consent to negative option marketing.
- Provide an annual reminder to consumers enrolled in negative option plans.
- Facilitate easy subscription cancellation for participants.
- Comply with the FTC rule, or risk potential civil penalties and consumer redress.
Non-compliance could entail civil penalties and consumer redress. It’s important to note that various states have created laws that apply to subscription services and auto-renewals. For a comprehensive overview, Contract Nerds has put together an enlightening piece.
These initiatives are crucial, especially for law firm owners, as sadly, companies providing services to lawyers have been identified as some of the worst offenders. Despite these necessary strides, however, some barriers to cancellation still exist. Certain companies may make data transfer difficult, and some may register a law firm’s domain name and withhold it to prevent the firm’s departure – a practice only avoidable by closely inspecting the terms of the plan before agreeing.
Nevertheless, the proposed FTC rule acts as a powerful tool in aiding you to sever unwanted auto-renewed subscriptions. While not yet finalized, the FTC is still able to take enforcement action against deceptive auto-renewal practices on a case-by-case basis, making it high time to scrutinize your subscriptions and decide which ones to cut. If you face any difficulty in this process, here’s a resource that may assist.