Two weeks ago, the Biden Administration made a media splash with an umbrella initiative pitched as a way to aid consumers from unnecessary corporate hassles. Part of this larger effort was a push to “help” consumers cancel subscriptions and services. While cynics could be forgiven for thinking that this macro proposal was just a campaign theme rolling into the November elections, the consumer cancellation portion raises plenty of substantive concerns worth attention. Ironically, sweeping new rules, as proposed, could backfire in many instances, resulting in consumers being harmed. Federal officials would be wise to cut back on the rhetoric, acknowledge that cancellation “remedies” can be flawed, and focus attention on enforcement actions against any egregious actors.
Except for fraudsters, no one should support “headaches and hassles that waste Americans’ time and money.” Legitimate companies have no interest. Instead, they want to obtain, retain, and service customers well in order to stay in business, and potentially grow in size and scope -- not intentionally cause consumers pain or grief. This is especially true when consumers seek to cancel subscriptions or services. It takes substantial time, effort, and money to attract consumers, and recently churned customers can be the most likely to be won back. The vast majority of companies do not try to permanently burn existing relationships via shoddy cancellation procedures.
As the Administration admits, the cancellation portion of last week’s announcement basically repackaged a Federal Trade Commission (FTC) effort from early 2023. It indicated that the Federal Communications Commission (FCC), which oversees our nation’s communications sectors, will initiate a new FCC proceeding to consider similar requirements.
In effect, the Administration is doubling down on a troubled FTC proceeding that is particularly ill-fitting for the communications sector. The FTC’s proposed solutions of one-stop-shops and click-to-cancel mechanisms rightly have drawn some of the most ire. Because customer cancellation procedures are not monolithic and many services, especially in the telecom field, are vital to consumers, the cancellation processes cannot and should not be dumbed-down to a click-of-a-button mentality that could prevent companies from providing important information and better offers before cancelling service. This is particularly true when little to no evidence exists that there is a problem in need of fixing. Case in point: cable TV service, which consumers have cancelled at record rates in recent years. Consider also that Affordable Connectivity Program participants were able to shed Internet service quickly when the subsidies ended without any new FTC/FCC rules. No problem there.
From a larger perspective, policymakers should realize that turning off critical services shouldn’t be done on a whim. But that is exactly what this Administration wants to mandate. The new rules would require that consumers be able to cancel a service or subscription the same way they originally signed up with the same number of steps. That means online signups for telephone services and the Internet – deemed a necessity by many – must have the same ease to cancel. There are multiple problems with this. Consider what happens after the Federal government tells consumers that they can save money and time just by clicking magic buttons. Assuming click-to-cancel works flawlessly, services and subscriptions that consumers rely on for maintaining quality of life and communicating with loved ones will be cancelled instantaneously. Think of senior citizens and the budget conscious trying to save a few bucks no longer having the benefits of modern communications technology, with companies restricted from offering better plans to meet their needs and budgets before they lose service.
Likewise, not all services and subscriptions are created equal. Cancelling telephone service should be treated differently from stopping a People magazine subscription. No one can die from missing the latest celebrity gossip. This important distinction is missing from the Administration’s mindset, much less its proposal.
Moreover, over-zealous cancellation mandates will run into reality as mistakes are made. Any corrections will take time to reestablish services and subscriptions. Consumers will suffer in the meantime. There should be a legitimate governmental interest in making sure companies are extra positive that consumers recognize and affirm any cancellation. If that means a few more steps, that’s something society should accept, not denigrate. In this instance, additional steps don’t mean burden, they mean safeguards.
Lastly, ignored in the FTC’s consideration seems to be an understanding of who pays for new governmental mandates. Companies do not just absorb cost increase for compliance and procedural changes. The practical impact is that consumers will get the bill in the form of higher rates, reduced services, or a mixture of both.
The real solution to any perceived cancellation problem is not new FTC rules that apply across the board. That’s overkill and ill-fitting for a very diverse set of services and subscriptions. Alternatively, the Administration should focus attention on a select industry sector or a few companies where evidence of substantial consumer harm is available and abundant. Traditional enforcement actions at either the FTC or FCC are available to address any need.
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