Schatz, Thune, Warnock, Kennedy Introduce New Legislation To Stop Deceptive Subscription Business Practices
Bipartisan Bill Would Make it Easier For Consumers Lured In By Free Trials To Cancel Costly Subscriptions
WASHINGTON – U.S. Senators Brian Schatz (D-Hawai‘i), John Thune (R-S.D.), Raphael Warnock (D-Ga.), and John Kennedy (R-La.) today introduced the Unsubscribe Act. The bipartisan bill would require companies to be more transparent about their subscription-based business model and make it easier for consumers to cancel their subscriptions once their free or reduced price trial period has ended.
“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,” said Senator Schatz. “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.”
“Consumers want to know what they’re signing up for, so the more transparency, the better when it comes to online subscriptions,” said Senator Thune. “In addition to empowering online consumers by providing them with more information, this bill helps ensure they don’t face the unwanted and unexpected fees that can sometimes be incurred.”
“We must protect consumers’ dignity and their pockets from deceptive marketing practices that harm their ability to thrive in our economy. I am proud to sponsor this important legislation that will provide more protections and transparency to consumers to help ensure they’re spending their well-earned dollars according to their goals and not wasting their money on deceitful practices,” said Senator Warnock.
“Free trials should benefit consumers, not trick them into endless payments for a product they don’t want. This bill would give customers who enter subscription trials a clear, easy way to cancel those subscriptions,” said Senator Kennedy.
From news to fashion, music to food, subscriptions are everywhere in today’s economy. An important part of their success has been subscription-based businesses’ utilization of reduced-cost or free entry deals for new customers. Theoretically, this allows customers to sample a product or service at a reduced price before committing themselves to the full cost of the subscription. A common practice is to use “negative option billing,” which means that once the free trial is over, the subscription company automatically switches a customer to a full-cost 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. For example, some subscriptions do not notify customers when the free trial has expired or that the customer will start to be charged for the full cost of their subscription. Or they will not allow a customer to cancel their subscription online or by email—even if that is how the customer signed up in the first place. Instead, they require a customer to call in to a busy customer service line or send a cancellation by physical mail. This unduly burdensome process often results in customers paying for products and services they do not want and for which they may not even realize they are being charged.
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 longer than one month; and
- Require sellers to periodically notify the customer of the terms of the contract and the cancelation mechanism.
Companion legislation is being introduced in the House of Representatives by U.S. Representatives Mark Takano (D-Calif.), Jim McGovern (D-Mass.), Sheila Jackson Lee (D-Texas), Jamie Raskin (D-Md.), Debbie Dingell (D-Mich.), Ed Case (D-Hawai‘i), and Michael San Nicolas (D-Guam).
The Schatz-Thune legislation is supported by Consumer Action, Truth in Advertising, and the National Consumer League.
“From movies, to clothing, to food, to cosmetics, consumers are being marketed subscription services that are often easy to sign up for but hard to cancel,” said Sally Greenberg, Executive Director of the National Consumers League. “That is why we need common-sense consumer protection legislation like the Unsubscribe Act. The bill will help consumers get the information they need to make an informed buying decision and allow them to easily cancel their subscriptions without getting the runaround.”
“With the lure of free trial offers, consumers can unknowingly be duped into a subscription deal that they never agreed to purchase,” said Linda Sherry, Director of National Priorities at Consumer Action. “The Unsubscribe Act of 2021 will protect consumers by mandating that sellers clearly explain contract terms, provide plain notice of free trial expirations and make it simple for consumers to cancel a contract that they do not want.”
The full text of the bill is available here.