Category: FTC

Over the past few years, subscription-based business models have gained significant traction. However, as these services continue to grow in popularity, regulatory bodies such as the Federal Trade Commission (FTC) are stepping up their efforts to protect consumers from deceptive practices.

One such initiative is the “Click to Cancel” rule, which mandates that subscription merchants provide an easy method for customers to cancel their subscriptions, in the most simple of terms. While compliance with this rule is essential, it can also present challenges for businesses looking to reduce churn and cancellation rates.

In this blog post, we’ll explore the intricacies of the FTC’s “Click to Cancel” rule and offer valuable insights on how subscription merchants can maintain a healthy customer base while staying compliant with industry regulations—and even increasing conversions.

Easier for Consumers to Cancel Any Recurring Payment

The FTC recently proposed a new “click to cancel” rule that would make it easier for consumers to cancel recurring subscriptions. This rule is designed to ensure companies provide customers with clear information about what they are agreeing to when signing up for a subscription and make it simpler for them to opt out if they choose.

The FTC’s proposal requires companies to make canceling a negative-option program as easy as signing up for the service in the first place. This means that customers should be able to easily find and access the cancellation process, without having to jump through hoops or search through pages of fine print. The FTC also wants companies to provide clear information about their subscription services, such as how long the membership lasts and what happens after it ends.

Quick Note: Negative option rules and negative option marketing are marketing tactics that continue an automatic renewal when the customer doesn’t take any action.

This new rule could be especially beneficial for those who have been stuck in difficult-to-cancel free trials or auto-renewals. With this new regulation, consumers will no longer have to worry about being charged unexpectedly or having difficulty canceling a service they no longer want.

Overall, the FTC’s proposed “click to cancel” rule is great news for consumers. It will help protect them from unwanted charges, fraud, scams, and deceptive practices as well as give them more control over their subscriptions.

Challenging for Subscription Merchants in a Tight Economy

Though it may be great for consumers, the FTC.gov’s new “Click to Cancel” rule is a major challenge for subscription merchants. The proposed rule would require companies to make it as easy for consumers to cancel their subscriptions as it is to sign up for one. This means that companies must provide clear information and make the cancellation process as simple and straightforward as possible.

This new rule has the potential to have a significant impact on subscription merchants, who are already facing an uphill battle in the current economic climate. With more people turning to online services, subscription merchants are having to adapt quickly in order to remain competitive. The FTC’s new rule could add another layer of complexity and cost, making it even harder for these retailers to survive.

At the same time, this new rule presents an opportunity for subscription merchants who are willing and able to comply with its requirements. By providing a clear and easy way for customers to cancel their subscriptions, these businesses can demonstrate their commitment to customer service and build trust with their customers.

Overall, the FTC’s Click To Cancel Rule is a challenge that subscription merchants must face head-on if they want to remain competitive in today’s market. It may take some time and effort, but those who can successfully implement this new requirement will be well-positioned for success in the future.

Cancellation isn’t the only thing hurting your opt-in rate. We can help.

How Subscription Merchants Can Keep Cancellation Rates Low and Reduce Subscriber Churn

If you’re worried about how this new rule will negatively affect your subscription business, don’t be. Here are some tips for maintaining a low cancellation rate, low chargeback rate, and low churn rate.

Clearly Explain the Terms, Fees, and Recurring Charges

To ensure that customers understand what they are signing up for and have an easy way to cancel their subscription if needed, merchants should provide a clear description of the subscription service on their website or app.

This should include information about any fees or recurring charges associated with the service and how long the customer will be subscribed for.

According to the notice of proposed rulemaking, merchants must provide an annual reminder in addition to a cancellation mechanism that matches the enrollment method (internet, phone, mail, and in-person). This doesn’t apply to physical goods. The cancellation method must contain an acceptable number of steps (re: minimal) as well as confirmation and notification of the successful cancellation.

Provide Easy Access to Account Information and Subscription Management

To make sure customers have an easy way to access their account information and manage their subscription preferences, merchants should provide clear instructions on how to do so. This includes providing detailed information about the cancellation process, such as what steps are needed in order to cancel a subscription and what options are available for canceling a subscription. Additionally, merchants should make sure that customers can easily find the cancellation option within their account settings or on the merchant’s website.

Allow Customers to Pause a Subscription

In order to reduce subscriber churn, keep chargeback rates low, and keep cancellation rates low, businesses should allow customers to pause or temporarily suspend their subscriptions if needed. This will give customers more control over their recurring-payment programs and help them avoid unnecessary charges.

Companies can also offer flexible payment options such as monthly payments or one-time payments instead of annual plans, so customers can choose a plan that best suits their needs.

Implement Multiple Ways for Customers to Contact You and Vice Versa

The FTC’s rule requires businesses to prominently display simple cancellation options on their website, and provide customers with an easy way to cancel their subscription. In light of this, businesses should consider providing multiple ways for customers to contact customer service (or vice versa). For example, a chatbot/live agent popup in the corner of the screen during the cancellation process.

This extends to including a phone number and email address for contacting support. Providing these options allows customers who may be having difficulty with their subscriptions the ability to get help quickly and easily.

In addition, businesses should make sure that all customer service representatives are well-trained on how to handle cancellation requests and any other inquiries related to subscriptions. Cancellation and customer retention mechanics should be fast; nobody has time to waste these days.

Incentivize Subscriber Loyalty

Subscription merchants need to find creative ways to reduce subscriber churn and maintain low cancellation rates while still adhering to the regulations. One such approach is to offer incentives such as discounts or freebies to subscribers who remain active for a certain period of time.

This strategy not only helps in fostering customer loyalty but also keeps chargeback rates low.

1. Tiered Incentives: Introduce a tiered incentive system that rewards subscribers based on their longevity with your service. For example, after three months of continuous subscription, customers may receive a 10% discount on future payments or a complimentary service upgrade. This encourages subscribers to remain active and engaged with your offerings.
2. Exclusive Access: Offer exclusive content, features, or services to long-term subscribers, making them feel valued and appreciated. This could include early access to new products, priority customer support, or even invitations to special events.
3. Milestone Rewards: Recognize and celebrate subscriber milestones, such as a one-year anniversary or reaching a specific usage level. Send personalized messages, offer discounts on their next billing cycle, or provide a free gift as a token of appreciation for their continued support.
4. Referral Programs: Encourage subscribers to refer friends or family members to your service by offering them a reward for each successful referral. This could be in the form of a discount on their next billing cycle, a free month of service, or a unique promotional item.

Provide an Additional Offer from your Business or an Affiliate

Lastly, when a customer is adamant about cancelling, offer them something else instead. This is much easier if the customer is vocal about why they’re cancelling, but can be done even when details are vague.

There are three easy ways to do this:

1. Offer a discount: First, offer the customer a discount for the next 6 months. It’s better to keep the customer on and make a little less than allow them to leave completely, resulting in a complete loss.
2. Cross-sell a different product: Sometimes, customers want to cancel because the product isn’t right for them. But that doesn’t mean none of your products align with their needs.
3. Promote an affiliate offer: It’s better to make a little on a lost customer than nothing at all. Promote an affiliate product that the customer might be more attracted to.

Secure Your Subscription Business with the Right Payment Processor

The Federal Trade Commission’s proposed “Click to Cancel” rule is a major step forward in consumer protection from recurring subscription traps. By requiring sellers to make it as easy for consumers to cancel their subscriptions, the FTC is helping to ensure that merchants are held accountable for their practices and that consumers have the power to make informed decisions about their purchases.

For subscription merchants, this new rule could mean an increase in cancelation rates. To help reduce those rates, merchants should consider opening a high-risk merchant account with DirectPayNet. With DirectPayNet, subscription merchants can take advantage of secure credit card payment processing and fraud prevention tools that will help protect them from potential losses due to subscription cancellations.

By taking these steps, merchants can ensure that they are providing a safe and secure shopping experience for their customers while also reducing their risk of losses due to subscription cancellations.

OPEN A SUBSCRIPTION MERCHANT ACCOUNT TODAY

Subscription signups are changing, where a seemingly small detail—like a checkbox—can make all the difference. These simple little squares are how the FTC wants (in part) to make simple cancellations mandatory for all subscription merchants.

In this blog post, we’ll explore the ins and outs of using checkboxes in subscription signups, including the FTC’s stance on this matter, the benefits of incorporating them into your process, and best practices for doing so.

Whether you’re a seasoned subscription merchant or just starting your journey, this guide will equip you with the knowledge to create a seamless and customer-friendly experience.

FTC Subscription Regulations Breakdown

A recently proposed rule from the Federal Trade Commission (FTC), as an amendment pending review of the existing Negative Option Rule, would make it easier for consumers to cancel recurring subscriptions. This new rule is an important step in ensuring that subscription merchants adhere to the FTC’s guidelines and maintain consumer trust.

As a subscription merchant, there are several guidelines you must follow in order to remain compliant with the FTC. For example, you must:

–       notify customers prior to charging their credit card,

–       provide clear cancellation mechanisms policies,

–       and ensure that customers have the ability to opt out of auto-renewals.

These rules are designed to protect consumers from deceptive practices and ensure they have control over their own finances.

It is essential for merchants to comply with these regulations in order to maintain a trustworthy image and establish consumer trust. Failure to do so can result in legal action, fines, and negative PR—all of which can be damaging for any business.

We’re focusing today on whether checkboxes are required by the FTC to be compliant regarding subscription opt-in. Checkboxes allow customers to easily opt out of auto-renewals or cancel subscriptions without having to contact customer service or search through lengthy terms and conditions documents. This makes it easier for customers to manage their own finances while also helping merchants remain compliant with the FTC’s rules.

Checkbox Guidelines: Navigating the Subscription Compliance Landscape

You might be surprised to learn that the FTC doesn’t actually require checkboxes for subscription signups. That’s right—there’s no legal mandate stating that merchants must include these handy little boxes.

But, as we’ll discuss later, there are still plenty of reasons to consider using them.

The FTC’s True Focus: Easy Cancellation and Consumer Consent

While checkboxes aren’t a must, the FTC is deeply committed to ensuring that subscription merchants prioritize easy cancellation and informed consent. The goal here is consumer protection from deceptive practices.

By making the cancellation process a breeze and ensuring that customers understand the terms of their subscription memberships, merchants not only comply with the FTC’s guidelines but also create a positive customer experience.

The term “negative option” might sound like a legal thriller, but it’s actually an important concept for subscription merchants to understand. According to the FTC, a negative option refers to a customer’s failure to take affirmative action—either to reject an offer or to cancel a subscription.

This means that if customers don’t explicitly opt-out, they may be unwittingly enrolled in a subscription or additional service. The FTC frowns upon such practices, so it’s vital to give your customers the chance to make informed decisions and to avoid any semblance of negative option billing.

Regulatory Updates: ROSCO and Notice of Proposed Rulemaking

The Restore Online Shoppers’ Confidence Act (ROSCO) is a 2010 federal act that requires merchants to conspicuously state the terms of the subscription and obtain clear, informed consent from the subscriber.

ROSCO is just a small part of FTC compliance. The bigger news is how they propose to handle negative option features. Here’s what you need to know:

–       All negative options are covered: from prenotification plans and free trials to automatic renewal plans and continuity plans.

–       All negative option media is covered: internet, telemarketing, print, in-person.

–       Disclosure and informed consent: merchants must conspicuously disclose that the payment is recurring as well as obtain informed affirmative consent to the negative option SEPARATE from any other part of the offer.

–       Cancellation changes: sellers CANNOT pitch additional offers to prevent cancellation until they receive informed consent from the customer to receive additional marketing offers; the cancellation method must be available in the same medium as the signup; and annual reminders of cancellation must be sent to the customer. (Cancellation reminders do no apply to physical goods)

Checkbox Checkup: So, what does this have to do with checkboxes?

Consent from the customer is deemed acceptable and compliant according to the FTC guidelines if they:

–       affirmatively check a checkbox (not uncheck a pre-checked checkbox),

–       sign on the dotted line,

–       or some other, similar method of recording consent.

Some states do require a checkbox, like Vermont. So it’s best practice to use one unchecked checkbox for consent to comply with federal and state laws.

Is your subscription service compliant?

The Power of Checkboxes: Reaping the Rewards for Subscription Signups

Now that we’ve explored the FTC’s stance on checkboxes, let’s dive into the many compelling reasons you might want to include them in your subscription signups.

Building Trust: Transparency as the Cornerstone of Customer Relationships

In the world of subscription services, trust is everything. And including checkboxes in your signups is a fantastic way to promote transparency with your customers. By giving them the choice to opt-in, you’re demonstrating respect for their preferences and reinforcing the notion that they’re in control. This kind of clarity is key to fostering long-lasting relationships with your subscribers.

Informed Consent: Empowering Customers with Choice

As we mentioned earlier, the FTC is all about informed consent. By using checkboxes in your subscription signups, you can ensure that customers are explicitly agreeing to your terms and conditions. This not only helps you stay compliant with FTC guidelines but also creates a sense of empowerment for your customers. After all, who doesn’t like having control over their decisions?

Happy Customers, Healthy Business: The Impact of Fewer Complaints and Improved Retention

One of the secret weapons of checkboxes is their ability to reduce customer complaints and improve retention rates. When customers have a clear understanding of what they’re signing up for and can easily opt-in or out, they’re less likely to feel deceived or unsatisfied. This can lead to fewer complaints, better customer retention, and ultimately, a healthier bottom line for your subscription business. In other words, checkboxes are a win-win for everyone involved!

Mastering the Art of Checkboxes: The Do’s and Don’ts for Subscription Merchants

So, you’ve decided to include checkboxes in your subscription signups. Now, let’s make sure you’re using them in a way that complies with FTC guidelines and enhances the customer experience. Follow these best practices, and you’ll be well on your way to checkbox success.

Compliance is Key: Avoiding the Checkbox Pitfalls

Believe it or not, there’s a right way and a wrong way to use checkboxes. Non-compliant usage might include pre-checked boxes that automate customers’ enrollment in subscriptions or additional services. To stay on the right side of the FTC, ensure that your checkboxes are always unchecked by default, giving customers the freedom to actively opt-in.

To create a seamless and user-friendly experience for your customers, keep these best practices in mind:

1.     Be clear and concise: Use straightforward language to describe the purpose of the checkbox and what customers are agreeing to.

2.     Make it visible: Place the checkbox in a prominent location during the signup process, ensuring it’s easy for customers to find and understand.

3.     Keep it simple: Avoid overwhelming customers with too many checkboxes. Stick to the essentials and prioritize the most important opt-in choices.

 Conclusion: Embracing Checkboxes and Empowering Your Subscription Business

As we’ve explored throughout this post, checkboxes may not be required by the FTC, but they offer numerous benefits for subscription merchants who choose to embrace them. From promoting transparency and trust with your customers to facilitating informed consent and improving customer retention, these little boxes can have a big impact on your business.

But, as important as checkboxes are, there’s more to consider when it comes to running a successful subscription business. That’s where a high-risk merchant account comes in. With a high-risk merchant account, you’ll be able to manage the unique challenges of subscription billing, navigate potential risks, and optimize your payment processing experience.

So, why wait? If you’re a subscription merchant looking to level up your business, it’s time to sign up for a high-risk merchant account. Combine the power of checkboxes with the robust capabilities of a high-risk merchant account, and you’ll be well on your way to creating an exceptional experience for your customers and growing your subscription empire.

STAY COMPLIANT WITH A SUBSCRIPTION MERCHANT ACCOUNT