https://www.techtarget.com/searchcustomerexperience/news/366627597/Click-to-Cancel-left-to-the-states-for-now
A federal appeals court struck down the Federal Trade Commission's "Click to Cancel" law, which required that canceling a subscription to things like gym memberships, phone apps and cable plans be as simple as signing up for it.
Despite the win for the trade associations and businesses that challenged the rule, people involved in CX design and technologies should note that the idea of Click to Cancel lives on: At least 15 states -- including California, New York, South Carolina, Idaho and the District of Columbia -- have their own versions of Click to Cancel statutes.
This patchwork of laws varies from state to state. Some require renewal reminders. Some require toll-free phone numbers and in-person options to cancel, in addition to online mechanisms to quit a subscription.
The court's decision to set aside Click to Cancel at a federal level could make compliance tougher for companies that do business nationwide, as they have to track each individual law, said Brian Goodrich, a regulatory and consumer protection attorney at Holland & Knight in Dallas.
"There is a viewpoint that this ruling leaves businesses in a far more difficult position, because this rule really would have clarified and set uniform rules of the road for operating throughout the country," Goodrich said. "Now you have 15 divergent standards."
In the Eighth Circuit's questioning of trade association plaintiffs and in the final ruling, the judges indicated distaste for business tactics that make it difficult for consumers to cancel subscriptions. However, they set aside the rule on a technicality that the Biden administration didn't perform enough analysis of how the rule would affect businesses as required by law.
There is a chance that the FTC could revive the rule by starting over with the regulatory rulemaking process, but that route faces an uphill political battle. The rule had bipartisan support in Congress during the Biden administration. However, the FTC's current chair, Andrew Ferguson, voted in the minority last year against the original Click to Cancel regulation. He now leads the majority of commissioners.
The FTC could also pursue setting legal precedent in its lawsuit against Uber, which calls out the ride-sharing company for making it difficult to cancel Uber One subscriptions as an unfair or deceptive practice, Goodrich said. Many states have similar laws, and attorneys general in New York and California have already indicated companies that offer subscriptions might face scrutiny for their practices.
Consumers can also sue companies for hard-to-cancel subscriptions through class action lawsuits. So, Goodrich said, the fight for Click to Cancel might continue.
Regardless of the federal law's future, consumers have had enough of hard-to-cancel subscriptions that sometimes require sitting on telephone hold with a company or worse -- lock-ins for extra months before they are allowed to cut off an unwanted subscription.
In fact, according to a new survey of more than 1,200 U.S. and U.K. credit card holders by dispute management company Chargebacks911, 85% of consumers want their banks to cancel subscriptions through credit card disputes. Of the respondents who signed up for subscriptions in the last year, 80% started with a free trial. Phone apps, streaming services and online memberships were the top merchant categories for signup.
But when canceling becomes too complicated, consumers take the easy way out: Disputing the credit card charge.
Chargebacks -- where the bank provides provisional credit to the consumer until the merchant provides proof that the consumer signed up for a subscription -- cost merchants in penalties for each occurrence. Furthermore, after a certain number of chargebacks, it costs a merchant more per transaction to accept credit cards.
So when a merchant makes it too difficult to cancel a subscription, it drives up chargeback costs.
"The chargeback scenario is basically like when you get a traffic ticket -- but it's probably the only judicial system that exists in the entire U.S. where you are guilty before proven innocent," said Chargebacks911 founder and CEO Monica Eaton.
Such a system puts businesses in a situation where they have to choose to either make it easier to cancel a subscription and increase the potential for fraud risk -- when an unauthorized user cancels someone else's subscription -- or make it hard, where they're vulnerable to chargebacks or running afoul of the law.
Some companies are signing people up for subscriptions so fast, they pay the chargebacks and don't worry about them, Eaton said. In other cases, banks might decide it's not worth managing the dispute, skip the chargeback processes, and write off the disputed charge. Either way, hard-to-cancel subscriptions incur costs to both merchants and banks.
Making a consistent national standard that considers both consumer and business needs could be the answer, Eaton said. It could start with getting merchants to agree on how to convey subscription terms and conditions. Currently, some are simple and short, and others are deliberately long and abstruse, she said.
"We need retailers to recognize consumer protection and consumer rights -- that's a top priority -- and make sure that they have a good experience," Eaton said. "But equally, we also need retailers to have the opportunity and take the responsibility to defend themselves."
Don Fluckinger is a senior news writer for Informa TechTarget. He covers customer experience, digital experience management and end-user computing. Got a tip? Email him.
11 Jul 2025