(InvestigateTV) — James Kohm, associate director of the Enforcement Division of the Federal Trade Commission (FTC), said the agency has received more than 16,000 complaints from consumers about the difficulty of canceling subscriptions.
In response, the FTC has implemented a new rule requiring sellers to make the cancellation process as simple and straightforward as signing up.
“We want to make sure that this is an area that is free for commerce!” Kohm emphasized. “That people can compete. That consumers can take advantage without being taken advantaged of!”
The rule defines four practices as “unfair and deceptive”:
Misrepresentation: It prohibits sellers from misrepresenting any material facts when using “negative option marketing,” basically when a company automatically charges a consumer for a product or service unless they take action to decline or cancel it.
Disclosures: The rule requires sellers to clearly disclose information near the sign-up area so people can easily see and understand terms before agreeing.
“They have to tell people how they can cancel. That they’re going to pay a fee or a greater fee—how often that fee will be charged,” Kohm said.
Consent: The rule requires sellers to get the consumer’s clear and informed consent for the negative option feature before charging them. This must be done separately from the rest of the transaction, like using a standalone checkbox.
“So, you have to keep that for three years and you have to obtain it, and that can’t be a pre-checked box,” Kohm explained. “It has to be an affirmative act that consumers to show that they want to get into the negative option.”
Click to cancel: Sellers have to provide a simple mechanism for a cancellation.
“Sellers have a strong incentive to make sure that if they’re not making a long sign-up feature so that they can have you buy their product!” he said.
Kohm said before signing up for anything, remember to know what the subscription is, what the terms are and know exactly how to cancel when the product or service is no longer wanted.
The FTC’s rule went into effect in January. Businesses have until May 14 to come into full compliance.
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