Important Update: New FTC "Click to Cancel" Rule Affects Your Business
by Sandy Waggett
3 min reading time
IF YOUR BUSINESS IS A SUBSCRIPTION MODEL OR HAS RECURRING PAYMENTS, THIS IS MUST READ!
We are always trying to keep clients and small business owners informed and aware of regulatory changes - and this is a big one! I want to bring to your attention a significant update from the Federal Trade Commission (FTC) that may impact your business operations, especially if you offer services with SUBSCRIPTIONS OR RECURRING BILLING.
Introducing the FTC’s New "Click to Cancel" Rule
The FTC has implemented the "Click to Cancel" rule to make subscription cancellations as straightforward as sign-ups.
Here's what you need to know:
1. Simplify Cancellation Processes
If your customers can sign up for a service online, they must be able to cancel it online just as easily. Complicated, multi-step cancellation procedures are no longer acceptable.
Bottom line: Make online cancellations as simple as online sign-ups. If they can sign up online, they MUST be able to cancel online with a simple single click.
2. Obtain Permission Before Offering Retention Deals
You may offer "save the sale" promotions, but only if the customer agrees to hear them. If they decline, you must proceed with the cancellation immediately.
Tip: Always ASK before presenting any retention offers.
3. Send Annual Reminders for Service Subscriptions
For service-based subscriptions (not products), you're required to send an annual reminder with key details like cost and renewal date. This ensures transparency and gives customers the opportunity to cancel if they wish.
Bottom line: You MUST send an annual reminder with cost and renewal date BEFORE processing a renew. If this isn’t in your processes right now, add this mechanism in. We do have an affordable new CRM tool that can automate this process for you. Reply to this email if you are interested in learning more.
4. Keep Detailed Records
You must retain records of customer consents and any "save the sale" offers for at least three years. This is crucial for demonstrating compliance with the new regulations.
Bottom line: In my opinion this is excessive and ridiculous. However, failure to do so leaves you open to significant fines.
Important Deadline
Businesses have 180 days to comply with these new rules. It's essential to review and adjust your processes accordingly to avoid any penalties.
Potential Consequences for Non-Compliance
Failing to adhere to the new FTC rule can result in significant penalties:
Hefty Fines: Up to $50,120 per violation, which can add up quickly.
Legal Actions: Possible injunctions requiring changes to your business practices.
Customer Refunds: Mandatory reimbursements to affected customers.
Reputation Damage: Loss of customer trust and potential long-term revenue loss.
Take Action Now
I strongly encourage you to review your current subscription and cancellation processes (just like we are) to ensure they meet the new FTC requirements. Staying compliant not only avoids penalties but also helps maintain trust with your customers.
If you have any questions or need assistance in adjusting your systems, please don't hesitate to reach out. You can call the office at 573-552-8403 or book a strategy call with me using the link below.
