New Subscription Laws Help Put Money Back Into Consumers’ Pockets

Subscription services offer convenience to consumers and steady revenue for companies. However, difficult cancellation processes have led to consumer frustration and unintended expenses. In response, new regulations are being introduced to simplify cancellations, while companies are realizing that easier processes can enhance customer acquisition and retention.

This article explores these legislative changes and the financial benefits for consumers and companies alike.

Subscription Services and the Average Consumer
Subscription services have become a staple of modern consumer life, offering convenience in areas such as entertainment, software, meal kits, and fitness, among others.

Statistics vary on how much the average American spends on subscriptions. One 2022 report from C+R Research put the number at $219 a month, while a CNET survey released in April 2024 estimated $91 per month. On streaming subscriptions alone, the average amount is estimated at $77 each month, according to Bango.

Whatever the actual number, it’s safe to say that some Americans can pay anywhere from around $1,000 to more than $2,000 a year on various subscription services. This amount can represent a significant part of people’s discretionary spending.

However, many companies have historically made it difficult for consumers to cancel these subscriptions, resulting in unintentional renewals and hidden expenses.

Legislative Changes
In response to widespread consumer dissatisfaction with the cumbersome processes, lawmakers have taken significant steps to protect consumer rights and promote transparency.

These new laws and regulations are designed to ensure that canceling a subscription is as simple and straightforward as signing up for one, addressing long-standing grievances about hidden obstacles and time-consuming procedures. For example, in 2023, the Federal Trade Commission proposed a new rule aimed at simplifying the cancellation process for consumers enrolled in subscription-based services.

The “click-to-cancel” provision would require businesses to make it as easy for consumers to end their subscriptions as it is to sign up. This means that if consumers can enroll in a subscription with a simple online click, they should be able to cancel just as easily.

Additionally, the FTC is proposing restrictions on offering additional products or services during the cancellation process, prioritizing the consumer’s right to terminate their subscription without pressure or confusion.

As quoted in the release, FTC Chair Lina M. Khan says, “The proposal would save consumers time and money, and businesses that continued to use subscription tricks and traps would be subject to stiff penalties.” By implementing these changes, the FTC hopes to create a more transparent and consumer-friendly marketplace for subscriptions.

While the click-to-cancel rule is still in the proposal stage, some states have already enacted their own consumer protection laws regarding subscriptions. For instance, California’s 2022 Automatic Renewal Law requires companies to clearly outline subscription terms and obtain explicit customer approval for automatic renewals.

Click here to read the entire article | Courtesy of True Tamplin, Forbes