New FTC rules could aid donors in opting out

Nonprofit managers are scrambling to get clarity on how to proceed regarding the Federal Trade Commission’s (FTC) new “click to cancel” provisions requiring businesses to make it easier for consumers to cancel enrollment in recurring billing, such as memberships. 

In the case of nonprofits, it could mean anything from making it easier to cancel recurring gifts, to getting out of gym memberships or membership of any type to any pausing ongoing donor relationships. Most of the final rule’s provisions will go into effect 180 days after it is published in the Federal Register. 

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” Commission Chair Lina M. Khan said via a statement. Here’s where it might be confusing. A spokesperson added, “nonprofits are not covered, as they are not under the FTC’s statutory jurisdiction. We’re not a regulatory agency, although we do develop and implement regulations. So, we don’t ‘clear off’ or approve any particular companies or industries.” 

While nonprofits are referred to in the FTC rules as not being directly impacted, businesses with which nonprofits contract are subject to the regulations. According to the FTC statement, “The rule is co-extensive with the FTC’s jurisdiction. Thus, it does not cover nonprofits, and assuming the YMCA is a nonprofit it is not covered. Any for-profit firm a nonprofit hires would be covered to the extent the rule applies to the activities it engages in.” 

The new rules will prohibit: 

Misrepresenting any material facts while using negative option marketing 

Require sellers to provide important information before obtaining consumers’ billing information and charging them 

Require sellers to get consumers’ informed consent to the negative option features before charging them 

The final rule is part of the FTC’s ongoing review of its 1973 Negative Option Rule, which agency officials said is being modernized to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs in an increasingly digital economy. 

Commission approval and publication follows the March 2023 announcement of a notice of proposed rulemaking which resulted in more than 16,000 comments from consumers and federal and state government agencies, consumer groups, and trade associations. 

FTC officials said the commission receives thousands of complaints about negative option and recurring subscription practices each year. The number of complaints has been steadily increasing during the past five years and in 2024 the FTC received nearly 70 consumer complaints per day on average, up from 42 per day in 2021. 

Following an evaluation of public comments, the Commission voted to adopt a final rule with certain changes, most notably dropping a requirement that sellers provide annual reminders to consumers of the negative option feature of their subscription, and dropping a prohibition on sellers telling consumers seeking to cancel their subscription about plan modifications or reasons to keep to their existing agreement without first asking if they want to hear about them. 

FTC staff has developed a fact sheet summarizing the changes to the rule. 

Nonprofit managers indicated they did not know the ramifications of the new rules. The challenge, they said, was formulating language that would not entice a donor to no longer allow monthly debiting of a credit card for donation. 

A poll conducted by C+R Research found that the average consumer underestimates their monthly spending on subscription services at only $86, while actually spending $219 a month, more than 2.5 times their initial estimate. At the same time, 42% of consumers admit they’ve stopped using a subscription service but forgot they were still paying for it.