Implications of Click-To-Cancel Policies

Just an FYI - the FTC’s "Click-to-Cancel" comes into effect July 15, 2025 and DOES apply to B2B (business-to-business) transactions - not just B2C (business-to-consumer). This marks a significant expansion compared to many state-level automatic renewal laws, which often only apply to consumer contracts. According to the final rule and related guidance: “The Rule does not exempt business-to-business transactions. Therefore, the requirements apply equally to B2B arrangements involving negative option features, such as recurring billing, unless another specific exemption applies.” This means that B2B businesses should stay on top. Subscription-based services sold to other businesses (SaaS platforms, marketing subscriptions, data tools, etc.) are subject to the same obligations ad B2C businesses: - Clear pre-billing disclosures; - Standalone, informed consent; - Easy cancellation mechanism (no harder than sign-up); - No misrepresentations; Enforcement can include civil penalties and compliance demands, even in commercial contexts. Make sure your signup and cancellation processes are in compliance.

The FTC just dropped its shiny new “Click-to-Cancel” rule, supposedly making it easier for consumers to cancel subscriptions. Cute, right? Because ROSCA (Restore Online Shoppers’ Confidence Act) already covered most of this. Here’s what ROSCA already required: • Clearly disclose the terms before charging. • Get express consent before billing. • Make it simple to cancel. Now the FTC wants to make sure that canceling is as easy as signing up. The difference? Before, the requirement was to provide a “simple mechanism”—but this new rule adds a specific emphasis on making the cancellation process identical to the sign-up process. No more making people jump through hoops to end a subscription. But here’s the kicker: with Chevron deference being kicked to the curb, it’s cute that the FTC still thinks it gets to interpret and enforce these rules without question. Without Chevron, their power to expand these interpretations is, let’s just say, a bit questionable. And honestly, that’s probably a good thing. Now, I’m not saying throw compliance out the window. But DTC brands need to weigh the risks themselves—compliance vs. non-compliance. With the FTC’s authority facing some uncertainty, you’ll have to decide how far to go with these new requirements and what makes sense for your business. Watch the space, assess your own risks, and don’t just follow blindly.

The U.S. government is about to disrupt the cancellation flow for subscription merchants We’ve known this was coming for some time now, but it appears the Federal Trade Commission is putting the final touches on the “Click to Cancel” rule. A core component of the rule requires that the mechanism to cancel must be as simple as it was to sign up. If you signed up online with the click of a button, you must also be able to easily click a button to immediately cancel a subscription. 𝗖𝗮𝗻 𝗜 𝗼𝗳𝗳𝗲𝗿 𝗱𝗶𝘀𝗰𝗼𝘂𝗻𝘁𝘀 𝗶𝗳 𝗺𝘆 𝗰𝘂𝘀𝘁𝗼𝗺𝗲𝗿 𝗰𝗵𝗼𝗼𝘀𝗲𝘀 𝘁𝗼 𝗰𝗮𝗻𝗰𝗲𝗹? You can, but the proposed rule states that before doing so, you must receive consent from the customer. If they decline, you cannot present any offers and must cancel the subscription immediately. This could harm retention, as merchants will be unable to save customers that want to cancel. Although, one could argue that customers that are willing to be convinced will give you the opportunity. This should push you invest in a better customer experience and better communication prior to this stage in the customer journey. 𝗪𝗵𝗮𝘁 𝗶𝗻𝗳𝗼𝗿𝗺𝗮𝘁𝗶𝗼𝗻 𝗱𝗼 𝗜 𝗻𝗲𝗲𝗱 𝘁𝗼 𝗱𝗶𝘀𝗰𝗹𝗼𝘀𝗲 𝗯𝗲𝗳𝗼𝗿𝗲 𝗜 𝗰𝗮𝗻 𝗯𝗶𝗹𝗹 𝘁𝗵𝗲 𝗰𝗼𝗻𝘀𝘂𝗺𝗲𝗿? Merchants must present the following information in a clear and conspicuous manner prior to collecting billing information: 1. The consumer’s payments will be recurring 2. The deadline by which consumers must act to stop charges 3. The costs that will be charged 4. The date the payment will be processed 5. The mechanism by which the consumer can cancel the payment This can harm conversion, as sometimes these details are obfuscated. On the other hand, this could help reduce refunds and chargebacks from customers that were less educated about free trial logistics. 𝗜𝗳 𝗜 𝗵𝗮𝘃𝗲 𝗮 𝗳𝗿𝗲𝗲 𝘁𝗿𝗶𝗮𝗹 𝘁𝗵𝗮𝘁 𝗰𝗼𝗻𝘃𝗲𝗿𝘁𝘀 𝘁𝗼 𝗽𝗮𝗶𝗱, 𝗱𝗼 𝗜 𝗻𝗲𝗲𝗱 𝘁𝗵𝗲 𝗰𝗼𝗻𝘀𝘂𝗺𝗲𝗿’𝘀 𝗰𝗼𝗻𝘀𝗲𝗻𝘁 𝘁𝗼 𝗯𝗶𝗹𝗹 𝘁𝗵𝗲𝗺? Yes, you must obtain affirmative consent before charging the consumer. 𝗗𝗼 𝗜 𝗻𝗲𝗲𝗱 𝘁𝗼 𝗿𝗲𝗺𝗶𝗻𝗱 𝗺𝘆 𝗰𝘂𝘀𝘁𝗼𝗺𝗲𝗿𝘀 𝗮𝗯𝗼𝘂𝘁 𝘁𝗵𝗲𝗶𝗿 𝘀𝘂𝗯𝘀𝗰𝗿𝗶𝗽𝘁𝗶𝗼𝗻? Yes, there is proposed language that states merchants will need to provide an annual reminder to consumers enrolled in negative option plans for non-physical goods. This will likely increase voluntary churn after these messages have been delivered.  

Been having a lot of conversations lately with SaaS & subscription leaders about May 15th. Why? The stakes are $51,744 in civil penalties - per VIOLATION - for failure to comply with a new FTC rule. For those of you that don’t know, I’m talking about the FTC’s new click-to-cancel rule - and the deadline is quickly approaching. While it technically went into effect in January, companies were given time to comply. But that grace period ends May 15th, 2025… There are several components to understand about this rule (we talk about them extensively in our blog at ProsperStack), but here are two critical aspects everybody should be aware of: 1️⃣ We need to provide an easy method of cancellation. This means the cancellation process should require the same number of steps (or level of ease) as signing up. We need to avoid "dark patterns" that trick customers into not canceling. 2️⃣ Clear disclosure of "negative option" rules. This is where we automatically charge customers *unless* they take action to cancel. This includes automatic renewals and free trials (among other things) Lots of companies fear the switch (call center/difficult to cancel→ online cancel flow) will hurt them retention-wise. But customer-friendly Cancel Flows actually have the opposite effect: - Up to 30% of customers may return in the future - Those that don’t return may still speak positively about you - Less likely that customers leave bad reviews on G2 & Trustpilot Last month, we signed a client that had those fears and made this exact switch... It’s still early, but their retention rate (on active churn) is already +8% better than call center performance so far. My hypothesis? If a customer is determined to cancel, they’ll find a way to do so - period. The best thing we can do is give them a reason to stay, get out of their way, and remain compliant.