The New “Click to cancel” Law goes into effect soon.
Don’t be surprised or penalized by the FTC. Get answers to key questions about subscription changes and compliance below.
The Federal Trade Commission mandate requires subscriptions to be as easy to cancel as they are to sign up for. Basically, this means one-click cancellation online. The new law is expected to become enforceable mid-April 2025.
It’s another tech hoop to jump through for sellers, but all part of the natural evolution of e-commerce. Subscription businesses will need to configure their Q2C and ERP systems to enable easy self-service cancellation. They also must be able to demonstrate compliance, showing that customers knew what they agreed to before signing up for subscriptions.
While a bit of a challenge for companies, the FTC law aims to protect people from complex and cumbersome cancellation procedures that feel like a trap. Something most of us can relate to. The new mandate ensures that subscription cancellation information is truthful, clear, and easy to find. It will also help people get money back if they were misled or if cancellation was made too difficult.
Following, are a few of the top questions and answers that you need to know now.
Where does this new law come from?
The new law has its origins back in the dot-com bubble when we sold one-time products. Without recurring revenue, those software companies collapsed. We learned a lot from that, technology evolved, and the subscription model was born. Perpetual licensing is great for companies financially, from higher sales and recurring revenue to forecastable earnings. But, while it’s become very easy to sign up for subscriptions, it’s been way too hard to end them. Some sellers have left out necessary cancelation information. Others have inserted a human into the process to dissuade cancelation. The FTC intervened on behalf of consumers. So, this is where we are today.
What are the consequences of non-compliance?
The short answer is financial pain. Violators can be liable for legal redress and civil penalties. Specifically, non-compliance can lead to monetary fines from the FTC of up to $51,744 per violation. A flurry of violations soon after the law goes into effect could quickly become a big problem for your business.
What businesses are affected by the FTC mandate?
Any company with an online self-service sign-up process for subscriptions, recurring services, and payment programs is subject to the new law. Examples include all self-service subscriptions, software renewals, maintenance and service contracts, SaaS annual licenses. This is common today with popular payment systems like Stripe, Zuora, Salesforce, and others. Your business is also at risk of non-compliance if you have a form fill to cancel or if you require a phone call to discontinue the membership.
The technology correction seems straightforward enough, but it quickly gets tricky when you start considering things like how to enable an easy automated way to turn off or deprovision customers. And how do you make customers whole through refunds or the proration of credits?
How does my B2B company achieve compliance?
Subscription management tools. These enable selling the new product, cancelling or changing the product, adding more of the product, exchanging the product, and everything else related to managing the full lifecycle of subscriptions.
For example, Salesforce Revenue Cloud makes subscription cancellation relatively simple. In addition to its auto provisioning capabilities with self-service sign up subscriptions, Salesforce has an API for cancellation with a click. It automates the deprovisioning process and runs all the needed processes for you, from determining whether to turn subscriptions off immediately or later to choosing refunds and prorated credits. Cancelation is also made clearly visible in the UI.
What’s the scope of this technology project for sellers, and when should I begin?
It all depends of course on your current software (Q2C, CPQ, ERP, etc.) and if you already have subscription management tools in place or at least compatible with your system. The complexity of your subscription business is also a key factor. With these variables in mind, enabling one-click cancellation can take anywhere from a few weeks and under $40k to a few months and from roughly $150k to a million dollars for a large enterprise. So, considering the projected mid-April 2025 start date of the click-to-cancel law – now’s the time to begin taking steps towards compliance.
Why should I consider PW for this project?
Subscription management and cancellation compliance is squarely in our wheelhouse. We call the overarching environment Total Commerce. It’s about supporting multiple product-selling models, including recurring ones, through any channel.
We’ve specialized in Q2C/CPQ implementation for twenty years, especially for B2B companies in manufacturing, tech, and life sciences. We’re also top-tier implementation partners of Salesforce and Oracle. We know their software inside out and can implement any feature and functionality, including subscription lifecycle management that’s compliant with the click-to-cancel law. And we can do it efficiently, because we’ve already created cancellation agents and flows, as well as accelerators with Revenue Cloud’s APIs. Additionally, we can integrate Revenue Cloud subscription management tools into any e-commerce environment.
So, what should my B2B company do next/first?
Two things. One, don’t wait. It’s go-time. Start the budget conversation now with an eye toward Q1. But how do you budget for click-to-cancel in 2025? That’s the second point, which is to contact Pierce Washington. We’ll assess your unique situation and estimate the time and cost for your FTC subscription compliance project.