The FTC Click to Cancel Rule and Your Subscription Box Business

Good morning, everybody. Today we're going to talk about the new FTC click-to-cancel rule that they're putting into place very, very soon. We've had lots of questions about it in the community, and I had the pleasure of watching the entire interview with the FTC chairman regarding the rule. And I'm going to break it down for you in really simple terms. And make it easy for you to decipher because the language in the ruling is a little bit confusing. And so I want to make sure that you guys understand what it means and what we need to do. And the first thing is, is that we don't need to panic because we are not operating in a deceptive manner. And that's what most of this is about. And so I just want you to relax a little bit. There is one thing I think I need to do with my own subscription, but I have plenty of time to do that. So I'm going to walk you through it today. There's really 4 parts to it. So I'm going to walk you through the 4 parts and we're going to get into it. I'm going to come over to the chat and say hi and then we're going to talk about it. All right. So good morning, everybody. Good morning, Brenda. Good to see you, everybody that's on YouTube. Good to see you guys over on YouTube. Good morning, Christina. Everybody that's on Facebook. Good morning. Good to see you over on Facebook. Good morning, Rebecca. Rebecca. Hey Jenna, I've got Carrie with me today on the team. Good morning, Chelsea. Good morning, Cameron. Good morning, Rebecca. Hey Jen. Okay, so here's what we're going to get into. So last week the Federal Trade Commission announced this brand new click-to-cancel rule, and basically it's for any recurring payment. So whether that is a membership, whether that is a subscription, there's a new rule going into effect and it's really based on an older law that was kind of passed in 1973 called the Negative Option Law. And as I was going through reading through this, they talk about the negative option law a lot. And so it just makes it very confusing when you read through it. So I want to just make it super simple for you guys. But basically in 1973, there was this negative option law that basically says we automatically assume that you want our service until you say no. So any recurring payment, any recurring subscription, the negative option law said, we're going to assume that you want our service until you tell us no. And that's basically what we do, right? So someone signs up for our subscription, we assume they want our service until they tell us they no longer want our service. And so that's how the law has been since 1973. But because there's been so many consumer complaints, so many consumer issues with subscriptions and memberships and recurring payments, because it's more and more prevalent in our world today, they've had to go back and look at that negative option law and revamp it. And that's where they came up with the click-to-cancel ruling. Okay, good morning everybody. Good to see you guys here live. So really there's 4 parts to this and I have some I have some of it kind of pulled up on my phone, so I'm going to pull it up real quick and I'm going to, I'm going to read you the rule and then I'm going to explain the rule in simple Sarah terms. Okay. Like the simplest terms because I want you to be able to understand it. Okay. So there's 4 parts to this and really it's really to prevent deceptive tactics when it comes to subscriptions. And that's where these 4 parts come in. And that's where I want you guys not to really panic about this because we're not deceptive. We're not deceptive with what we do. We don't try to trick people out of their money and or anything like that. So I just want you to relax knowing you're not going to have to change much. There's one thing I'm going to need to change, and I'll tell you that. I'll tell you that here. Okay, so part 1 says it prohibits sellers from misrepresenting any material fact made while marketing goods or services with a negative option feature. What does that mean? That's why I explained what the negative option law was. It's that, it's that law that says when I sign up for this, I'm assuming you want it until you tell me no. Okay, negative option. But it prevents sellers from misrepresenting any material fact made while marketing goods or services with a negative option feature. Basically, you have to be honest. Rule that says you have to be honest. You can't say sign up for $20 a month, and then on their second month you're charging them $40 and they have no idea. It prohibits sellers to be deceptive, um, with their recurring charges. That's all that first rule says. It says it in a very roundabout way, um, but it's just clearly stating what you're paying for. You know what that dollar amount is. You know, if I'm getting a a deal the first month, it is very clear that is only for that first month and that you're not scamming or being deceptive to that person. So that's part one. You just have to be honest with your offer, how much it costs. If you have a special deal on your first box, you have to be very clear that is going to be different from the set. The second box, it can't be like this clickbait. You sign up for $10 and the next month I'm charging you $50 and I don't know anything about it. We're not, we're not scamming people. We're not, um, we're not doing anything like that. So you just have to be honest and clear about your offer. So that's part 1. That's part 1. Do you see how confusing they make it? Just make it clear for us. Okay, so the part 2 says it prohibits sellers from failing to clearly and conspicuously disclose material terms prior— this is important— prior to obtaining a customer's billing information in connection with a negative option feature. So what this means is, this means that I have to clearly disclose the rules of my subscription before I ask you for payment. Okay. And this would apply to like, say I'm signing up for a free trial. Oh, I'm getting a free trial. I have to disclose what happens after that free trial before I can ever ask you for your credit card number. Okay. So you have to be clear on what is it, when does it end, what's the charge, how frequently is that charge before I obtain your billing information. Okay. So that's all that is. We're not doing that. We're not, we're not asking people for their credit cards and not explaining what it is. So you have to clearly disclose the rules of your subscription prior to asking for their payment. Okay, easy. We do that all the time, right? Okay, number 3 says it prohibits sellers from failing to obtain a customer's expressed informed consent to the negative option feature before For charging the customer. Now this is one I need to go back and look at, okay, for my own subscription. Basically this says we have to confirm that they know this is a subscription and that they will be charged a recurring amount automatically. We have to confirm that. So it's not just as much as me saying, hey, this is subscription, sign up now, click the button. I have, they have to confirm that they know it's a subscription. So that might mean text box at checkout saying, I know I'm signing up for an automatic payment, or a little checkbox, check this box, saying, you know, this is recurring and you will be charged monthly for this, this charge. Okay, so I may need to go back and do that. I think I've done that with our Launch Your Box membership on our sales page, but I don't think we have that for my subscription box. So it's as simple as adding a little checkbox that says, I know I'm signing up for a recurring subscription. Okay, that's one thing that we have to make sure that we are confirming that they know, and there has to be an action for them to confirm that. Okay, um, so that was the one thing that I thought I need to get a little bit clear about it, cover myself with that particular ruling. And so I just want you to take a look at what you're doing in that aspect. It's not enough to just say it's a recurring subscription at checkout, but we have to have them physically confirm it in some way. Okay, got it. You with me? See, these little crazy, um, rulings are just spelled out so complicated, it just makes you question everything. And that's why I went and watched, um, the FTC chairman really explain all of these, and I was just feverishly taking notes. I'm like, this is what we need along with these rulings. We need the explanation. Okay, Part 4, and this is the major part. That's why this is called click to cancel. Okay, so this is the cancellation rule to this part. 4 parts with this FTC ruling. Um, the 4th part says prohibits sellers from failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges. Okay, so what this means is, and this is kind of the sticking point that people are like, I don't know what I'm supposed to do here. You have to make it as easy to cancel their subscription as it was to sign up. I'm going to give you two examples of subscriptions, memberships that I've had where this would directly apply to them. Okay. So first, first thing is I had a subscription to HelloFresh. It's the food delivery thing. I went on the website, I signed up on the website, completed my meals. Boom. When I wanted to cancel it, it was so hard to cancel my HelloFresh subscription that I will never, ever sign up for that again. But when I went to cancel it, I had to search through multiple web pages. Then I found in really tiny print that I needed to email I need to email to cancel. I sent the email to cancel. Then 2 days later, I got a reply from that email that said I had to call to cancel. I'm pissed. Number 1, that I can't find where to cancel very easy. Number 2, I sent the email and now 2 days later I have to stop what I'm doing again, get— pick up the phone and call to cancel my HelloFresh subscription. And that puts me on hold for over 30 minutes and I'm just so livid at this point. I will never have a HelloFresh subscription again. Okay, so this is what this is directly affecting. Another instance, I had a Planet Fitness membership, a gym membership. I went into the gym to sign up and I went into the gym to cancel it and they said, no, you can't cancel it here. You have to call this number. That will be illegal. When this click to cancel rule is in effect. Okay. So those are two examples of where I can see why they're putting this into, into effect, because it is very difficult. I've seen a lot of comments on that interview I was watching about how I guess it's really hard to cancel like HBO Max and things like that. So they are really tightening down. This will not directly affect most of it, but I want you to understand. So to sign up for my subscription, You are going to have the monogram box. You go to my website and you have to fill out a form that has your sizes, your monograms, yada yada yada. You're filling out a form to sign up. To cancel my monogram box, you go to the— go to my website to the cancellation page and you fill out a form to cancel. Um, so I'm covered because the same way that you sign up for my subscription is the same way you cancel my subscription. On the other side of my business is Launch Your Box, which is my monthly membership. You sign up very easily on my website. You also cancel very easily on my website. It's a click. So basically, click to cancel means if I have one click to sign up for your subscription, I need to have one click to cancel it. If I have to fill out a form to sign up for your membership or subscription, I need to be able to cancel it with a form. If I have to physically go into your place to sign up for my subscription, I should be able to cancel it by showing up and canceling the subscription. So that is the ruling. And it's really simple once you take all the technical jargon out of it. Number one, you have to be honest with pricing. You cannot bait and switch people. You cannot put stuff in tiny print. You cannot be deceptive with your pricing. Whatever you say the pricing is, that has to be— there can't be a bunch of hidden fees that they find out on the next charge. Okay. Number 2, you have to clearly disclose the rules of your, of your offer. If you have a free offer, a free trial, or a discounted trial, when does that end? How much will I be charged? How frequently will I be charged? Before— here's the caveat— before you obtain their credit card information. So you have to have that information clear as day before you can ask for their billing information. Number 3, you need them to confirm that they are signing up for a subscription or a membership, and that has to be an action. So you need them to confirm that they know this is an automatic recharge at checkout. And then number 4, the click to cancel. You have to make it just as easy to cancel their subscription as it was to sign up. It doesn't mean you can't have a cancellation policy. It doesn't mean you can't have this waiting period of when, when you can cancel. There's nothing about your cancellation policy. They just have to be able to cancel the same way that they sign up. That's it. That's it. And so I don't want you to read this and be like, oh my gosh, what do I need to do? It's not happening overnight either, okay? So basically, with this new rule, it has to go to print. So it hasn't even been registered yet. Once it goes into the registry, it, it goes into effect 180 days later. So we still have 6 months minimum for this goes to infect— goes to— goes in effect, sorry. Um, so you have time. I'm gonna go audit my site, make sure that I'm getting them to confirm that they are having an automatic charge. And that's really all that I need to do because I know the rest of this, I'm covered. But that's the ruling. It's not scary. It's not stressful. It's not going to change a lot about the way we sell and the way that we cancel. It's just, you just have to be very clear because in reality, there is a lot of businesses and a lot of big businesses that are being deceptive when it comes to canceling. They're making it difficult to cancel, um, and we are not those people, so this really doesn't affect us. But they are really regulating this industry in this way. And so, um, I just want you to be knowledgeable about what's changing. We'll probably cover it again when it actually goes into effect, but I want you to have a heads up right now so that you can audit own business, audit your own website, audit your own systems and procedures so that you're good to go when this does go into effect and nobody has to panic. The last thing you want is dealing with chargebacks, okay? Because you don't have this ruling in effect that costs us money, that costs us time, and it's not worth it for us in the long run. These are very simple rules to go by, and technically we are all following them already with the exception of a little bit of tweaking. So I just want you to know what it means so that you're knowledgeable about your business going forward. Siobhan says, what about refunds? There is no information on here that this does not affect refunds. There's no guidance on refunds. So this doesn't outline refunds at all. It's basically those 4 parts. Um, and if you've got those covered, you're going to be in great shape. So I hope that helps clear that up for everybody. If you've got more questions, you can rewatch this. We can also talk about it inside Launch Your Box, but it's very clear once you start to get clarity on those 4 rules. They just make them as difficult to understand as possible. So I hope I cleared that up for you today. Have a great day. We're halfway through October. I hope that you are working your 4th quarter sales plan and I'll see you guys inside Launch Your Box this week. We're doing social media reviews. So I can't wait to see you in the group on Wednesday. Have a great Monday. I'll talk to you guys soon.