New FTC rule aims to simplify subscription cancellations
New FTC rule aims to simplify subscription cancellations
In the early days of the pandemic, Florencia Marotta-Wurgler was missing her gym time.
“I have three kids at home. I need to channel my energy in some way. And so I signed up for some different exercise classes,” she said.
Marotta-Wurgler’s virtual sampler of cardio workout trial subscriptions started out free, then automatically renewed and kept billing her credit card long after she’d forgotten.
“I canceled the peskiest one just two weeks ago. We’ve had this long relationship that I didn’t even know about,” she said.
Marotta-Wurgler is an expert on fine print. She studies internet contracts at the New York University School of Law and she still falls victim to this kind of stuff. So, she said, the rest of us don’t stand a chance. Especially when companies make it frictionless to sign up for subscriptions but cumbersome to cancel.
“You have to go through many different pages, try to get a human on the loop. There are many different stages where you’re being asked whether you’re sure,” Marotta-Wurgler said.
Economists have a name for those of us who keep our finances on auto-pilot: inattentive consumers. And as the subscription economy booms and spreads to new sectors, inattention can make companies a lot of money.
Ben Klopack, a professor at Texas A&M University, co-authored research finding that firms can count on as much as a 200% revenue boost from this kind of consumer spaciness. And it helps if customers have to jump through hoops once they realize they’re shelling out for a product they don’t need.
“Maybe it took you six months to even remember that you had subscribed to something, so if companies can put off that cancellation decision, you might forget for another six months and continue paying for that product,” Klopack said.
But the Biden administration is cracking down on these tactics that prevent consumers from making choices that cost firms money. The Federal Trade Commission’s proposed “click to cancel” rule would require companies to make ending a recurring subscription no harder than signing up. So, if you can enroll online in three steps, you should be able to opt out online in three steps. And in some cases, companies would have to remind subscribers before automatically renewing their subscriptions.
Teresa Murray, director of the Consumer Watchdog office at the U.S. Public Interest Research Group, expects the proposed rule to be finalized in the coming weeks. But she said many firms have already gotten in the habit of offering clear disclosures and easy cancellation.
“Companies are trying to get out in front of it because they probably know that the rules are going to change. Or, it just is good PR for them,” Murray said.
As companies make those changes, which are popular with consumers, Murray said competitors are pressured to fall in line. Still, she said the best way to limit unwanted charges is to steer clear of free trials and subscription-based services to begin with.
Easier said than done, with so many temptations out there.
“It’s embarrassing. I wanted to make a meme. And so I signed up for a meme making platform [subscription] and it’s now three months later and I’ve made one meme,” said Yahya Mokhtarzada.
Mokhtarzada founded Truebill, now called Rocket Money, an app that promises to help with forgotten subscriptions. Users hand over their credit card information and the service tracks down recurring charges.
“People have that initial ‘aha’ moment, when they first get the app and they see their dashboard for the first time and they’re just shocked at how much they’re paying for,” Mokhtarzada said.
That dashboard report is free. Rather than calling cancellation hotlines yourself, you can get Rocket Money to brave them for you. For a minimum of $6 a month. Automatically renewing, of course, though Mokhtarzada said the company sends monthly updates that should remind users that they’re still subscribed. You can try it out first with a seven-day free trial. Maybe just set yourself a reminder to cancel it.
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