Nonprofit News: FTC's 1-click subscription cancellation rule

What nonprofits need to know about the FTC's new one-click subscription cancellation rules

June 19, 2023
3 minutes
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As buyers, we love a subscription, and as nonprofiteers, we love-love-LOVE a recurring gift. (And organizations using Funraise love recurring revenue 52% more each year!) But as much as we adore the predictable drumbeat of automatic renewal, subscription models come with their own set of problems for consumers and donors alike. As a result, the US Federal Trade Commission (FTC) is looking to improve consumer protections with some new rules—rules that could impact recurring donations. Let’s take a look-see.

The problem with subscriptions

It’s 2:00 AM, you’ve had three slices of pie, and you find yourself thinking, “What I really need is a vast quantity of different types of gazpacho every month.” With one click, you’ve signed up, and when you receive the first box three weeks later, you’re thrilled. Who knew there was peach-jalapeno gazpacho?! But by month six, you’re gazpacho-ed out. You go to cancel your subscription, but there’s no cancel button on the gazpacho website, and the service center is only open for 45 minutes every second Thursday.

While that example might be a bit hyperbolic, most of us have been in a similar situation. One unfortunate side effect of the subscription economy is that signing up for monthly payments is easy; canceling them … not so much. As monthly donations become increasingly popular, donors, too, have to deal with this headache. And that’s if they even remember that they signed up in the first place.

However, the FTC is looking to change that through amendments to its negative options rule. These changes would require organizations to make canceling subscriptions as easy as signing up, among several other proposed updates. Read on for all the details.

What does “negative options” mean?

“The FTC uses the phrase ‘negative option marketing’ broadly to refer to a category of commercial transactions in which sellers interpret a customer’s failure to take an affirmative action, either to reject an offer or cancel an agreement, as assent to be charged for goods or services.” Thanks, FTC!

What’s included in the FTC’s proposed changes?

The FTC has put together a handy fact sheet here. There are three major changes proposed:

  • Companies need to make cancellation as easy as sign-up. So, if you sign up with one click online, you need to be able to cancel with one click online.
  • While businesses can suggest other offers or changes to subscription services when a customer tries to cancel, they first need to ask whether the customer actually wants to know about them. If the customer clicks “no,” the business needs to cancel their order ASAP—no ifs, ands, or buts.
  • Every year, the business needs to send a reminder to any customers enrolled in subscription services, unless they’re receiving tangible goods.

What would those changes mean for nonprofits?

Translating the above changes into nonprofit-ese, you can expect that:

  • Donors will need to be able to cancel recurring gifts online if they signed up online.
  • You’ll need to ask donors if they want to hear about alternatives to cancellation before explaining all the other ways they can support your organization or why they should actually increase that monthly gift.
  • You’ll need to send annual reminders to all recurring donors, explicitly stating how much they’re giving each month.

And just in case you’re thinking this isn’t a big deal, please note that any organization that doesn’t comply with the new rules will get fined $50,000 per violation.

But Funraise customers are already positioned for success

As you might know, Funraise offers a Donor Portal App, which gives donors the ability to manage their subscriptions. So, if you’re a Funraiser, you’re already positioned to give your donors access to all their donation information whenever and wherever they need it. Plus, they have access to recurring donation management tools that allow them to easily increase, decrease, and cancel their recurring gifts. Let’s hear it for being as transparent as possible!

For anyone who’s forgotten that they signed up for Baby Wombats Monthly after a particularly tough Monday, the FTC’s amendments are a good thing. As a nonprofit, you’ll need to make a few changes to your recurring giving pages and update your communications calendar. Then, it’s back to the business of changing the world.

One-click subscription cancellation: Key takeaways

  • Subscription models offer plenty of benefits for businesses and consumers alike. For nonprofits, recurring giving is particularly important because it provides a predictable source of income.
  • However, many subscriptions (and recurring giving programs) default to auto-renewal, which leads to unexpected charges for users who aren’t actively managing their accounts.
  • The Federal Trade Commission has proposed a series of amendments to protect consumers by making subscription cancellation as easy as sign-up.
  • Nonprofits should be aware of these changes or risk hefty fines.
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