Following Court Ruling Blocking Click-To-Cancel Rule, Schatz, Kennedy Introduce Legislation To Stop Deceptive Subscription Business Practices

WASHINGTON – Following a ruling from a federal court that blocked the Federal Trade Commission’s “click-to-cancel” rule that was set to go into effect on Monday, U.S. Senators Brian Schatz (D-Hawai‘i) and John Kennedy (R-La.) introduced the Unsubscribe Act. The bipartisan bill would require companies to be more transparent about their subscription-based business models and make it easier for consumers to cancel their subscriptions once their free or reduced-price trial period has ended.

“Our bill will require companies to be more transparent about their business model and make it easier for consumers to avoid costly, automatic monthly charges they never intended to make,” said Senator Schatz. “The subscription-based business model is exploding, and it’s largely because of the deceptive practices that some companies use to lure and trap in customers. When people sign up for a free trial, they shouldn’t have to jump through hoops just to cancel their subscription before being charged.”

“The average American is all too familiar with the headache of running around in circles to cancel a subscription before their free trial expires. Our common-sense Unsubscribe Act would make sure companies are upfront about automatic charges and make it easier to cancel subscriptions without the convoluted song-and-dance routine,” said Senator Kennedy.

From video streaming and news to food delivery and fashion, subscription-based services have become a key part of today’s economy. A major driver of their growth is the use of free or low-cost trial offers to attract new customers. These trials give users a chance to explore the service at little to no cost before committing to a paid subscription. Unfortunately, in order to retain customers, some subscription providers rely on deceptive marketing, confusing contracts, and restrictions that make it difficult for customers to cancel their subscriptions.

The Unsubscribe Act would:

• Require sellers to provide customers with a clear understanding of all the terms of the contract and obtain the customer’s express and informed consent;
• Require sellers to provide a simple means of canceling the subscription, which the customer can complete in the same way in which the original contract was entered into;
• Require sellers to provide a clear notice to consumers when their free or reduced-cost trial is complete and before charging for the full-cost subscription;
• Disallow automatic transfer to a contract beyond the preliminary period; and
• Require sellers to periodically notify the customer of the terms of the contract and the cancelation mechanism.

Companion legislation is set to be introduced in the House of Representatives by U.S. Representative Mark Takano (D-Calif.).

“Too many consumers are lured in by free trials, only to get trapped in confusing billing cycles and cancellation mazes. The Unsubscribe Act is about fairness—it puts the burden back on companies to be honest, clear, and accountable. If a business has to trick people into staying, it does not deserve their money,” said Representative Takano.

The Schatz-Kennedy legislation is supported by Consumer Action, Truth in Advertising, the National Consumer League (NCL), Public Citizen, and Consumer Federation of America.

“Reining in subscription traps is a massively popular and nonpartisan issue,” said John Breyault, Vice President of Public Policy, Telecommunications, and Fraud at NCL. “Passing the Unsubscribe Act is critical to protecting consumers from these predatory practices.”

“Consumers deserve safeguards to prevent them from being trapped into paying for a service they no longer want with no straightforward way to cancel a subscription. With this week’s win by conservative big business interests in the courts against the FTC, Senator Schatz’s Unsubscribe Act is even more critical. We applaud this sensible measure to protect the public and hope it swiftly becomes law,” said Lisa Gilbert, Co-President of Public Citizen.

The full text of the bill is available here.

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