Business Blog
Negative reinforcement? FTC proposes amending Negative Option Rule to include click-to-cancel and other protections
Prenotification plans, continuity programs, automatic renewals, free-to-pay conversions. They’re all variations on the negative option theme. Under the right circumstances, those marketing methods can be convenient for consumers. But as decades of FTC law enforcement makes clear, when negative options are tainted with untruths, half-truths, and hidden strings, the impact on consumers can be, well, negative. That’s why the FTC is asking for public comment on proposed amendments to its Negative Option Rule designed to combat unfairness and deception.
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When the FTC takes a closer look at existing rules, it keeps an eye out for changes in the marketplace that suggest an update may be due. The Negative Option Rule is a good example of that. First, thanks to the burgeoning doorstep economy, consumers can buy just about anything – meals, clothes, household supplies, etc. – on a periodic schedule. However, the current Negative Option Rule applies only to prenotification plans, an older (and frankly, fading) business model. Under a prenotification plan, members of, say, a record club (remember record clubs?) get a notice in advance that the company intends to send them a certain album. If members don’t want that album, they have a limited time to return a postcard (remember postcards?). If they miss the deadline, they’re stuck with the album – and the bill. Given the narrow scope of the existing Negative Option Rule, the time seems right for a rethink.
A second reason why the FTC is asking for your feedback about proposed changes to the Rule is because problematic negative option practices continue to inflict consumer injury. Consumers tell us they’ve been being billed for stuff they never agreed to buy in the first place. Or they’ve made multiple cancellation attempts and yet products keeps coming at ‘em like clockwork. Others recount inconvenient hoops that companies make them jump through to cancel.
Because of the limited applicability of the Negative Option Rule, our approach to date has been to bring individual cases alleging violations of the FTC Act or – if applicable – the Telemarketing Sales Rule, the Restore Online Shoppers’ Confidence Act (ROSCA), and other laws. But the volume of complaints suggests that case-by-case enforcement may not protect consumers sufficiently.
So in 2019 the FTC published an Advance Notice of Proposed Rulemaking. Based on the comments we received, in 2021 the Commission issued an Enforcement Policy Statement Regarding Negative Option Marketing. The latest step is the just-announced proposal to amend the Rule. You’ll want to read the Federal Register Notice for details, but the FTC has a fact sheet with some highlights. And here is a summary of three of the proposals that are on the table:
- Requiring companies to spell out the details of the deal. “They signed me up, but never told me what was involved!” It’s a common theme when consumers file reports about misleading negative option offers. To address that information deficit, the proposed amendment would require sellers to give people important information before getting their billing information: 1) that consumers’ payments will be recurring, if applicable, 2) the deadline for stopping charges, 3) what consumers will have to pay, 4) the date the charge will be submitted for payment, and 5) information about how consumers can cancel.
- Ensuring companies get consumers’ express informed consent. “Why am I getting all this unwanted stuff and who said these people could bill my credit card?!” We hear that a lot from consumers, suggesting that additional provisions may be necessary to protect them from illegal practices. The proposed amendment is consistent with ROSCA’s “express informed consent” requirement, while providing more guidance for businesses on how to comply.
- Requiring companies to implement click-to-cancel. “How the $%#& do I cancel?!” Online marketers have that frictionless enrollment thing down pat. But when consumers want to cancel, some of those same companies set up obstacle courses designed for frustration and failure. Two practices challenged in recent FTC cases illustrate this. One company required people to call a phone number to cancel and then left them on hold for ages. Another company ignored cancellation requests unless consumers sent them to one hard-to-find email address authorized to accept cancellations. The proposed amendment would require companies to make it easy to cancel and one way to further that goal is to mandate that businesses must let people cancel using the same method they used to enroll – in other words, click-to-cancel.
The FTC envisions that proposed changes would apply to all forms of negative option marketing and in all media. The proposed amendments also address other issues of interest to businesses and consumers: the use of “saves” (additional offers made before cancellation to keep the customer signed up), reminders and confirmations, penalties for violations, and the impact on existing state laws, to name just a few.
Another proposed change would change the name from the Negative Option Rule to the Rule Concerning Recurring Subscriptions and Other Negative Option Plans. It may seem like a small revision, but it would signal that “negative option” applies much more broadly than to your dad’s record club.
At this stage, the proposal is just that – a possible approach about which we would like your feedback. Once the Notice is published in the Federal Register, you can save a step by filing a public comment online.
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I formally agree with this proposal due to several negative factors upon my business report with no knowledge of information from specific sources.
This stuff is no different then walking into my house and taking my debit card and swiping it for whatever amount they choose cause I can't even find the so called catalog subscription that I didn't ask for didn't know of it's existence nor even have a clue what site the charge took place on and then in my bank description it has no detailed info as to what it is even so I'm being stolen from 100 and it's every time I turn around I'm cancelling cards and having to dispute these big charges on my card I'm ready to stop online shopping period and be done with this lie that no one seems to even care no more I work hard for my money and it's being taken from me with no consent if I walk into a store grab a $86 item and walk out I go to prison so why does nothing happen to these online thieves
This stuff is no different then walking into my house and taking my debit card and swiping it for whatever amount they choose cause I can't even find the so called catalog subscription that I didn't ask for didn't know of it's existence nor even have a clue what site the charge took place on and then in my bank description it has no detailed info as to what it is even so I'm being stolen from 100 and it's every time I turn around I'm cancelling cards and having to dispute these big charges on my card I'm ready to stop online shopping period and be done with this lie that no one seems to even care no more I work hard for my money and it's being taken from me with no consent if I walk into a store grab a $86 item and walk out I go to prison so why does nothing happen to these online thieves
Cell phone companies, (Comcast, Verizon, T-Mobile) are all culprits.
one more thing if it is a free trial why do they have to request the information of the bank account or credit card? You can request customer information but if it's free you don't need the payment information, you should include that in the proposal.
In reply to one more thing if it is a… by Jose Guerrero
Excellent point. True and logical. Your question deserves an answer. I'm sure we won't like their answer.
Click-to-cancel without having to login (I don't remember passwords a year later) nor do I want to set up an account to cancel or to unsubscribe.
In reply to Click-to-cancel without… by Jana E.
I agree. I don't like having to set up an account I will only use the one time.
Time to stop it completely because no matter how you try to limit it, they will find a way around
to continue its use in a different form. Make all purchase's a single purchase with an option to sign up for a continuation. Along with not allowing them to sell your information to other companies related or not. this would apply especially to email . as it is now you cancel one email newsletter and the same email shows up under a different name. Cancelling does no good. they just keep popping up.
Free trials should just end at the end of the free trial. Companies give free trials and then set up automatic enrollment knowing people sometimes forget to call to cancel or cancel online because they didn't like their online product or found something better. They won't notice until a few payments in. People should be sent notices saying their free trial is over and if they wish to continue then they must make an account to be billed monthly where they can cancel at any time. The cancel button should be instructions should be on their home web page where they sign in.
One additional challenge is that some people lose access to the email address they used to sign up for a service. This makes it additionally difficult to cancel. Please consider adding something to make it easier to cancel if the customer no longer has access to the subscription email.
This is long overdue. Companies have been getting away with it because they have been able to get away with it. The time has come to stop this nonsense.
Dear ftc.gov owner, Keep up the good work, admin!
This is an important modernization of the rules so that companies can't continue to exploit consumers. It is very frustrating to sign up for a service's trial, decide it isn't for you, and then have no way to cancel it. It's also frustrating to sign up for a service, lose access to that service due to a hack, and then continue to be charged despite reaching out to customer service. When that happened to me, I couldn't get the payments to stop even by canceling my credit card. It took 2 months for customer service to read my request and restore my account to me. We deeply need consumer protections in this country. Enact this rule change.
I'm happy to hear about this initiative, but/and would like you to add the time share industry to this rule. Too many fall into this scam. The deception is above and beyond what 'click to cancel' covers, and the financial consequences are devastating for many. Surely you must be aware of the problem, and if not, watch John Oliver's recent 'Last Week Tonight' episode on the topic.
Please and thank you-
Jill Boldu
I completely agree with the proposed changes and proposed name change. I was just the victim of one of these hard-to-cancel schemes. They tried to claim it was PayPal's fault. It was not. It was the company's fault for not listing the autorenew on the PayPal site when I placed the order. In fact, shortly before I was charged I again checked PayPal and there was no visible autorenew. On top of that, I had already called the company several weeks prior, told them what my subscriptions were and told them to cancel them all. They said they did. Then a few weeks later I got a notice of a charge. This is deceptive and must stop.
This is a battle that will hopefully get some attention with the state of Oregon consumer protection agency. Hello Fresh is a German company with a similar business model operating in the United States. It is a subscription model that sends out food to one's doorstep with the option to pause or cancel. They have representatives that can be called to ensure the action happens. The disconnect would be if you called to cancel or pause and the service started up again. A recording of the call can or will not be available. In one case a family member was navigating the city of Houston in and around MD Anderson Cancer Research Center for the holidays. A loved one researched the service and decided to give it a two week trial. The loved one would be receiving treatment and staying at a rented place during chemotherapy. Two boxes worth of food was charged and sent in three days time, presumably because of the holidays and a call was promptly made letting the business know that a pause was needed to see how the service worked. At issue was whether it was paused or cancelled during the conversation. In an hour conversation letting the representative know those sending the food could not afford the service, but the information would be given to the loved one and if the food was worth the cost in the scenario; they could call or enter payment information if they wanted to continue. No action was taken by the loved one to do so. They received Christmas Chemotherapy and left the Houston area to go back home two weeks later. No further action was taken. 2 months later 3-4 boxes of food was said by Hello Fresh to have shown up on a doorstep in Houston and the people who called to let them know they could no longer afford the service was billed. No call, to text, no e-mail notification that the service was renewed or un-paused. They would not make the situation right. They said the food was sent and that was that. After 3-4 hours of conversation, many hang-ups and promises of a manager calling back they refunded one box worth and the other hundreds of dollars of food remains unaccounted for. This may be a version of that business model and any help you give to consumers would surely be welcome.
The Match Group, owners of the dating apps Match.com, Bumble, Eharmony, Tinder, Hinge, etc. is ABSOLUTELY NOTORIOUS for doing this--consumers are never sent notice of an impending charge. The Match Group considers telling you that they plan to bill you in 365 days to be the "notice" they give you, and then they never give you notice again. Tens of millions of dollars have been siphoned out of the pockets of Americans just from these few apps due to negative options renewals where only a single notice is provided--365 days before you are charged.
Hi ftc.gov owner, Your posts are always well-formatted and easy to read.
I am planning to post a petition to require all businesses with auto-renew payment plans to offer an opt in option. Click to cancel requires customers to notice the renewal notice amongst all the spam once a year. It doesn't go far enough to protect consumers from spending on unwanted subscriptions that they ended up not using and forgot about. But I would love it if this could be included in this rule.
I am strongly in favor of this proposal - make it easier for consumers to manage their money and accounts, not harder. If people truly want the service/product, they can easily renew with the click of a button - for others, it would be very helpful to be prompted. The deck is already stacked against consumers -
100% click to cancel” needs to be mandated. These companies knowingly make canceling subscriptions a difficult and time consuming process. Meanwhile signing up is magically simple. Fraud is difficult to define sometimes … but you know it when you see it!