The Federal Trade Commission (FTC) recently finalized their “Click-to-Cancel” rule, which will put an official structure requiring sellers to make it “as easy for consumers to cancel their enrollment as it was to sign up”. This finalization was announced in mid-October 2024 after initially being floated in March 2023; this is important to note since there is not yet an official timeline that merchants are marching towards, nor an idea on what the ramifications (aside from reputational hits) may be for merchants who do not adhere to the guidelines in place. While many merchants with recurring subscriptions or memberships already have ease of cancellation in mind, what should a merchant consider in light of this new rule?
Time to Take a Look “Under the Hood”
Josh Mathers, CEO of Rebar, shared, “Just as merchants continually enhance their offers, products, and user experiences to improve conversion and engagement, they should thoughtfully adapt how they communicate renewals and handle cancellations. Recognizing that not all subscription models are the same and that the FTC’s pending ‘click to cancel’ guidelines may not fit every merchant, it’s still essential to build trust with customers throughout the entire journey—including the cancellation process.””
To ensure compliance with the “Click-to-Cancel” rule, subscription businesses should consider the following best practices:
- Regular Review of Cancellation Process: Conduct periodic reviews of your cancellation process to identify any potential obstacles or areas for improvement.
- Clear and Concise Cancellation Instructions: Provide clear and concise instructions on how to cancel a subscription, avoiding jargon or complex language.
- Transparent Billing Practices: Be upfront about all fees and charges associated with the subscription, including any trial periods or automatic renewals.
- Secure and Easy-to-Use Cancellation Portal: Create a user-friendly online portal where customers can easily manage and cancel their subscriptions.
- Prompt Processing of Cancellation Requests: Process cancellation requests promptly and efficiently to avoid any unnecessary charges.
- Confirmation of Cancellation: Send a confirmation email or message to the customer once the cancellation is complete.
While the Click-to-Cancel rule is designed to protect consumers, it also presents some challenges for merchants who are making more grandiose changes to their cancellation methodologies that should be considered as a part of forecasting your business model and operations overall. Mathers opined, “A merchant who may not have offered the easiest path to cancel should expect to see increased cancellation rates, increased chargebacks, additional backend support and refunds, and more customer support resources required across the board.”
Rebar works with merchants to help architect these processes across their entire ecosystem and is always eager to challenge merchants on the corner cases they might not be considering. Mathers added, “Sometimes merchants get so busy in the day-to-day that they cannot find the time to take a step back and think from a more holistic view, or to read up on all the things myriad other organizations and providers are doing in their recurring payment workflows. Rebar can help by providing our wide-angle view of the landscape. Merchants should look at cancellation in line with strategies to improve customer satisfaction and retention, such as personalized offers, rewards programs, and excellent customer service and payments workflows.”
By understanding and implementing the “Click-to-Cancel” rule requirements in full now, subscription businesses can protect their reputation, maintain customer trust, and avoid potential legal penalties. Those that are proactive can achieve this in line with a proud boast to their customers that they are forthright and will always ensure the customer can cancel when needed.
Josh Mathers is passionate about leading Rebar merchants and clients in their considerations related to payment acceptance, cancellation, and related workflows. For an audit of your cancellation processes with guidance on creating a trust-driven customer experience, or to discuss in more detail, contact Josh Mathers at [email protected]