Still trying to quit that gym membership? The FTC is proposing a rule that could help
LEILA FADEL, HOST:
Back in 1997, there was an episode of "Friends" about just how hard it can be to cancel something like a gym membership.
(SOUNDBITE OF TV SHOW, "FRIENDS")
MATTHEW PERRY: (As Chandler Bing) They make you go all the way down there. And they use all these phrases and peppiness to try to confuse you.
FADEL: Now companies do the same online. I tried to cancel a magazine - an online subscription - and there were so many versions of are you sure you want to cancel that I kept forgetting to complete the process, and I kept paying for the subscription. Enter the Federal Trade Commission. The agency is proposing a new rule today to make it easier for Americans to cancel recurring charges on things like gym memberships and online subscriptions. They're calling the provision Click to Cancel. Lina Khan is chair of the FTC, and she joins me now. Good morning.
LINA KHAN: Good morning.
FADEL: So, Lina, what exactly does this rule do?
KHAN: So this rule really fights back about what you were just describing. All too often, we've seen that when consumers are looking to cancel a subscription, companies impose all sorts of obstacles that are really designed to trap you into the subscription. And so that's what the FTC's proposed rule would fight back against. It would really say that companies are not able to manipulate consumers into paying for subscriptions that they don't want. And the idea is simple. So for any product or service, the rule would say that it should be as easy to cancel as it is to sign up. So if you were able to subscribe online, you need to be able to cancel online using the same number of steps. If you open an account over the phone, you need to be able to close it over the phone without suffering through, you know, endless hold music or sales pitch. And so really, the rule is saying companies need to make it as easy to cancel as it is to sign up.
FADEL: I mean, 'cause sometimes I even subscribe to things by accident, having no idea that I'm paying for something new. But how do you enforce that? What are the penalties if a company doesn't adhere to this new rule?
KHAN: So there would be civil penalties that kick in - so $50,000 per violation per day. And, you know, when you're talking about companies that have hundreds or thousands or millions of consumers, that can add up quite quickly. The rule would also enable us to actually get back money for consumers that were harmed by these tactics. So we'd be able to get redress and make sure that anybody who's been tricked or trapped would be able to get that money back.
You just noted something really important, which is sometimes consumers are trapped in these subscriptions, but sometimes they're actually tricked or manipulated into signing up in the first place. And that's something that the FTC's work has also found and something that this rule would also be addressing. So our rule would require that businesses need to disclose key terms - like when the trial period ends, when the deadline to cancel is - before collecting any billing information. And companies are prohibited from engaging in these dark patterns where they're really using manipulative design techniques to try to trick people into signing up in the first place.
FADEL: How big of a problem is this that it led to this rule now?
KHAN: This is a big problem. The FTC receives tens of thousands of complaints about being tricked or trapped into subscriptions. And it's something that we've seen through our enforcement work as well. So the FTC has, for years now, been bringing lawsuits against these practices, but unfortunately, the practice has persisted, and that's what's leading us to now move forward with this rule.
FADEL: Are there any exceptions to this rule? I mean, I'm thinking of, like, your cable bill, your phone bill that you commit to for years in a contract.
KHAN: So it's a great question. So, you know, our rule would require that sellers provide an annual reminder to consumers, and it would also allow companies to still give you the option of getting a better deal. It would just require that they affirmatively give you the ability to reject that. So if a customer service representative says, I understand you're looking to cancel, would you like the opportunity to get a better deal, and the consumer would get to say, yes, actually, I'd like to see that, or no, I just want to cancel.
FADEL: Lina Khan is chair of the FTC. Thank you.
(SOUNDBITE OF TRIOSENCE'S "JASMINE")
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