gavel, court, FTC ruling

The Federal Trade Commission published its much-talked-about “Click-to-Cancel” rule in the Federal Register earlier this week, and it will become fully enforced on May 14, 2025. The new rule is designed to reduce the long-standing consumer frustration of having to endure cumbersome and convoluted subscription cancelation processes by some companies.

Some business groups say the rule is overreaching and burdensome to comply with, while others say the new rule may be challenging for some. It is also an opportunity to shift their focus toward customer loyalty, improved customer service and more flexible subscription plans. “There is an opportunity here for companies not just to comply but find ways to better connect with their customers and subscribers,” said Rebecca Jones, president at conversational AI provider Mosaicx.

Under the new regulations, businesses must provide a “simple mechanism” for consumers to cancel their subscriptions. This means that if a customer signs up online, they must be able to cancel online without additional hurdles like hidden cancellation buttons or protracted phone calls with a call center. The new FTC rule seeks to end that by mandating that canceling a subscription must be as straightforward as signing up and providing up-to-front transparency regarding terms.

Some industry groups are fighting the FTC’s move. The Electronic Security Association, Interactive Advertising Bureau and NCTA filed a petition in the U.S. Court of Appeals for the Fifth Circuit. The Chamber of Commerce for the United States and the Georgia Chamber of Commerce filed a challenge in the U.S. Court of Appeals for the Eleventh Circuit. Following a petition to the Judicial Panel on Multidistrict Litigation, all the challenges have been combined and transferred to the U.S. Court of Appeals for the Eighth Circuit.

The now consolidated lawsuits all broadly contended that the FTC lacks the authority to issue such a broad rule affecting contracts across all industries; that the FTC violated regulatory procedures when issuing the rule, and that the rule is “arbitrary and capricious” and violates First Amendment rights.

However, many experts suggest the new rule has a silver lining: It’s an opportunity to rethink customer experience.

New Rule Presents Opportunity

The idea is that, with retention through friction no longer an option, companies will be compelled to focus on continuously delivering value to their customers. This shift could lead to more innovative features, better customer support and improved product quality across subscription-based services.

Also, while it may be true that the new rule could lead to an initial increase in cancellations, it also presents an opportunity for companies to innovate in their retention strategies.

Additionally, the rule’s requirement for companies to collect cancellation reasons provides a valuable source of customer feedback. Savvy businesses will use this data to refine their products and services, addressing common pain points that lead to cancellations.

For instance, Mosaicx’s Jones says companies may end up providing more flexible subscription options, such as more tiered offerings that will give customers a chance to switch to more reasonable options. “There will be an increased focus on actual customer loyalty,” Jones said.

To comply, companies must provide streamlined cancellation processes that are just as easy as sign-up. During sign-up, companies must provide clear disclosures about subscription terms, such as pricing, renewal timelines and cancellation policies.

Businesses that don’t comply with Click-to-Cancel risk substantial penalties, with fines up to $51,744 for each violation. Under the rule, the FTC can seek additional consumer refund damage awards. Every day a violation continues could mean more fines.

However, compliance isn’t straightforward for all businesses, depending on the agility of their data structure. Companies must redesign their cancellation flows to comply with the new regulations. This could lead to the widespread adoption of straightforward, one-click cancellation options prominently displayed within user accounts.

Other companies may have to re-architect how they store and manage their customer data. Jones said that much of this work would have been previously extremely difficult. “Model artificial intelligence and machine learning capabilities make compliance easier to reach,” Jones said.

Jones added that companies with more extensive IT infrastructures or older systems may still find it challenging.

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