Up to 76% of American consumers surveyed by C+R Research admit that it’s “Easy to forget about their recurring monthly subscription service charges,” while another 42% confess that “They’ve stopped using a subscription service(s) but forgot they were still paying for the service.”
The survey also reveals that consumers in this group spend an average of $219 per month on subscription services.
Suffice it to say that the rise of subscription-based products and services has become recurring sources of revenue for many retailers while becoming frustrating money pits for many consumers.
However, a proposed Federal Trade Commission (FTC) rule could make it easier for you to deal with your subscription spending. The rule is still in the process of being finalized as of this writing, but here’s what it could entail and how it could affect your wallet.
[Read: How to Save on Everyday Expenses.]
The Problem With Existing Subscription Practices
In some cases, subscription-based services can offer convenience and economic benefits for those who get value from the products they use and pay for.
However, when complicated or vague cancellation processes come into play, consumers can become trapped in subscriptions they no longer need or never wanted in the first place.
In fact, the Consumer Financial Protection Bureau (CFPB) recently put the retail industry on notice for its “Dark patterns and other tricks used by companies to confuse and deceive consumers enrolled in subscription services,” according to a press release from January 2023.
[What’s a Dark Pattern and Has It Already Cost You Money?]
The CFPB refers to “negative option marketing” as a term or condition under which a seller may interpret a consumer’s silence or failure to cancel an agreement as continued acceptance of the offer.
The CFPB said it “received complaints from consumers about being charged for products or services they did not intend to purchase or had sought to cancel, and has brought many enforcement actions involving unlawful negative option marketing practices.”
These increasingly deceptive practices have prompted the FTC to propose clearer, more consumer-friendly guidelines.
‘Click to Cancel’ FTC Rule
The FTC proposes a click to cancel provision in subscription rules to simplify the cancellation process.
While click to cancel is one aspect of the rule provisions, it could regulate other practices to reduce consumer frustration when managing monthly subscriptions.
Here are four key issues the rule will address:
1. Simplified Cancellations
The centerpiece of the proposed rule is to simplify the cancellation process. The goal here is to help consumers easily get out of services they no longer want to use or pay for.
For instance, if signing up for a subscription just required a few clicks online, the proposed rule would require the cancellation to take place the same way. This would prevent companies from using cancellation barriers to maintain profit margins.
2. Limiting Upsells During Cancellation
Have you ever been in the process of canceling a service, whether online, over the phone or in person, while trying to resist additional offers?
If you’re not prepared to make a firm decision, these tactics can put you in the same place as before — paying for an unused subscription — even though you were trying to cancel the service altogether.
Tim Peters is the chief marketing officer of Enghouse Systems, a tech firm that deploys and administers customer service software solutions. This means the company must stay closely aligned with legislation like the FTC’s click to cancel provisions.
“This change could reduce the pressure on consumers to continue or switch to different subscriptions, which can often lead to unwanted charges or more complex billing scenarios,” Peters says.
“By simplifying the cancellation process, consumers will be less likely to fall into the trap of continued or additional subscriptions, ultimately leading to more straightforward and predictable budgeting,” he adds.
[READ: Hate Budgeting? Here’s How to Reframe It]
3. Getting Permission to Present Additional Offers
Often, when consumers attempt to cancel a service, companies counter with other offers or incentives. While this can be beneficial, it can also be overwhelming and unwanted.
If implemented, the rule would require businesses to ask whether consumers wish to hear about more offers before canceling a subscription. Respecting a consumer’s refusal should not impact the cancellation process in any way.
4. Reinforcing Communication Through Reminders and Confirmations
The FTC’s proposal also includes enhanced communication measures. Sellers would provide an annual reminder for subscriptions not involving physical goods before automatic renewals occur.
The idea is to keep consumers aware of their active subscriptions so they aren’t surprised by unexpected renewal fees.
What These FTC Provisions Could Mean for Your Wallet
If the FTC rule is finalized and implemented, it seems that consumers will have more control and awareness regarding their subscription spending.
This could ultimately mean more money in customers’ pockets since less will be going toward unintentional spending on subscription services. This is definitely a win for frustrated consumers who’ve felt defeated in this area of their finances.
[What Is a Junk Fee and How Does It Affect You?]
Peters notes these FTC regulations could benefit all parties, by protecting “consumers from unnecessary expenses but also encourage more ethical business practices in the subscription economy.”
“Companies that previously relied on difficult cancellation processes to retain customers may now need to focus on providing genuine value to keep their customer base,” he says.
“This rule imposes a heavy burden on small businesses to invest in new technology, change marketing efforts, align their subscription and cancellation systems to comply with both applicable state laws and the rule,” says Catherine Delcin, managing attorney at a life sciences legal management consulting firm.
However, she adds, the costs associated with implementation will likely be passed on to the consumers.
“FTC may believe that they are helping consumers, but the flip side of this rule is that all of the potential savings to a consumer may be absolved by increased costs,” Delcin adds.
Still, the laws could help consumers save money by making informed decisions through proactive subscription management and better cancellation methods.
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This Is What New Subscription Laws Mean for Your Money originally appeared on usnews.com
