Four U.S. senators introduced the Unsubscribe Act, a bill that would prohibit companies from overcomplicating their subscription cancellation processes. If passed, businesses must give U.S. consumers an easy way to monitor their subscription payments before a trial period ends.
The legislation is sponsored by Democratic senators Brian Schatz (Hawaii) and Raphael Warnock (Georgia), and Republican senators John Thune (South Dakota) and John Kennedy (Louisiana). This bipartisan effort seeks to address negative option billing — where customers unknowingly purchase a subscription after a free trial expires.
Read on to understand how the Unsubscribe Act seeks to solve deceptive cancellation policies and what impact it could have on your subscription business.
Controversial Subscription Cancellations
Creating a seamless customer experience is incredibly important in today’s modern e-commerce marketplace. Unfortunately, many companies have used unscrupulous tactics to trick customers into purchasing subscriptions without knowing they were agreeing to ongoing charges.
A well-known example is that of Noom. The company was sued for $100 million after charging users for weight loss subscriptions without their consent. The May 2020 case came after thousands of Noom customers complained they could not cancel the subscriptions they were automatically placed into.
These cases have occurred across the direct-to-consumer subscription space. “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, in a press release.
Last September, kids educational subscription ABC Mouse renewed tens of thousands of users’ memberships without sanction. The company had to pay a $10 million settlement for misrepresenting cancellations and illegally auto-billing customers.
Building Honest Business Practices with The Unsubscribe Act
The Unsubscribe Act would crack down on cases where consumers are at risk of paying against their will. It will specifically tackle instances where companies leverage a free trial period to unethically drive subscription revenue.
“Free trials should benefit consumers, not trick them into endless payments for a product they don’t want,” said Senator Kennedy in the press release. “When people sign up for a free trial, they shouldn’t have to jump through hoops just to cancel their subscription before being charged,” added Senator Schatz.
According to Schatz’s U.S. Senate website, the bill seeks to avoid unethical business practices by:
- Requiring sellers to provide customers with a clear understanding of all the terms of the contract and obtain the customer’s express and informed consent.
- Requiring 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.
- Requiring 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.
- Disallowing automatic transfers to a contract longer than one month.
- Requiring sellers to periodically notify the customer of the terms of the contract and the cancelation mechanism.
Through this bill, businesses will have to meet more stringent requirements in ensuring customers have the necessary tools to cancel subscriptions at any time.
“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,” added Linda Sherry, Director of National Priorities at Consumer Action, in the press release.
Giving Consumers What They Deserve
In 2020, there was an 84% increase in all active subscribers, according to ReCharge’s report, The State of Subscription Commerce 2021. Consumers are subscribing to more services than ever before, with the average household spending $47/mo on streaming services alone. This poses challenges for customers in staying on top of each payment. Luckily, resources have become available to help consumers track their spending.
Services like TrueBill make it easy for consumers to manage their subscriptions and gauge billing cycles, which can help subscribers monitor their expenditures. The Unsubscribe Act hopes will heighten consumers’ control over their subscriptions by holding subscription businesses accountable for their cancellation policies.
“There’s really no place in this world for unethical businesses and while you’d expect most subscription companies to make it easy for their customers to cancel, pause, or take a break from their subscription for a moment, that isn’t always the case. Legislation like this will help shake out the bad ones,” says SUBTA’s CEO and Co-Founder, Paul Chambers.
It’s incredibly important that customers have a seamless experience with a subscription brand. Companies must establish a transparent system where customers know what to expect before putting in their payment information.
At the Subscription Trade Association (SUBTA), it is our mission to help companies provide an honest and sincere experience to subscribers. Chambers explains how sticking to an ethical business model can increase customer loyalty.
“Time and time again, our research, conversations with other brands, and personal experience has shown that the easier you make it for the consumer to pause or cancel their subscription, the more likely they are to return and resubscribe or purchase from you again,” says Chambers.
Having an adverse cancellation process ultimately comes at the cost of losing the consumer for good.
“While the friction of a more difficult cancellation process could have some short-term gain, the long-term damage done by it far outweighs the value in the moment,” Chambers adds. “Brands should do everything they can to create long-lasting, positive relationships with their customers.”
Key Takeaways:
- Four U.S. senators recently introduced the Unsubscribe Act, which would prohibit companies from overcomplicating subscription cancellations.
- The bill would require companies to remain transparent throughout transactions and provide customers more ways to cancel subscriptions before their free trial is up.
- There was an 84% increase in active subscribers in 2020, making subscription management strategies all the more important.