Subscriptions are a great way to build long-lasting relationships with your customers. However, that relationship can quickly sour if customers don’t have an easy way to change or cancel their subscriptions.
Times are hard for everyone right now, so customers looking to cancel their subscriptions aren’t always unhappy with their service. So, as long as they can cancel or alter their subscription with no fuss, there’s a strong chance they’ll return once their situation improves.
However, it’s not just customer satisfaction you need to worry about. Legal regulations worldwide are starting to catch up to this relatively new way of doing business. Depending on where your business operates, making it difficult (or nearly impossible) to cancel a subscription could land you on the wrong side of the law.
Here’s what you need to know about subscription commerce regulations from around the world and how you can stay compliant with them.
Subscription regulations around the world
It’s incredibly exciting when your business starts to reach new countries, but it also makes running your business a little more complicated. Let’s look at some countries that are starting to implement regulations about subscription commerce.
Subscription commerce regulations in the UK focus on clarity and transparency. As part of improvements to consumer protection regulations, the UK set their sights on “subscription traps”. This refers to the shadier practices that some subscription-based platforms use to retain customers, even when they’re not using the product.
- Provide clearer information to consumers before they enter a subscription contract
- Issue a reminder to consumers that a free trial or low-cost introductory offer is coming to an end and a reminder before a contract auto-renews onto a new term
- Ensure consumers can exit a contract in a straightforward, cost-effective, and timely way
The UK has also increased the powers of their Competition and Markets Authority (CMA). The agency will now be able to directly enforce consumer laws, including these new subscription-based regulations. This means it’s much more difficult for businesses to slip through the cracks.
Amazon put up a strong fight, but the eCommerce giant was forced to bring its Prime cancellation process in line with EU regulations after a dialogue with the European Commission.
Adding to EU regulations, Germany recently passed a new law designed to make cancelling contracts easier. As part of the Fair Consumer Contracts Act, businesses that offer online subscriptions, including offline services that customers sign up for online, must make it simple for customers to cancel.
The new regulation requires companies to include a “cancellation button” on the same website that offers the subscription. This button must be permanently available and easily accessible. Customers won’t need to log in to the website, and they don’t even need to have purchased the subscription online.
Doing business in the USA is complicated, even for traditional businesses. Business regulations are often set at a state level, meaning you have to navigate state and federal regulations to operate in the USA.
For example, California recently updated their auto-renewal laws. As of July 2022, businesses operating a subscription service in California must notify customers who have auto-renewal turned on. These new regulations apply for subscriptions with a term of one year or longer or free trial periods of more than 31 days.
These new regulations are designed to inform customers that a payment is about to be taken before their subscription renews, protecting customers who have forgotten about their subscription.
The new amendments also improve cancellation processes for customers. The law already required businesses to offer online cancellation for any subscription triggered online. The update now means businesses need to offer cancellation at will, without taking further steps that obstruct or delay the customer’s ability to cancel immediately. The hope is this will eliminate needlessly complex and anti-consumer cancellation processes.
Beyond state-level laws, the Federal Trade Commission (FTC) is cracking down on “illegal dark patterns” that trick customers into subscriptions. These practices were rampant in the early stages of subscription commerce, and thankfully most businesses no longer use these practices. However, those that do provide real issues for consumers.
- “Disclose clearly and conspicuously all material terms of the product or service” - This includes costs, deadlines the customer must abide by to stop further charges, amount and frequency of charges, how to cancel, and a clear description of the product or service to ensure the customer knows what they’re purchasing.
- “Obtain the consumer’s express informed consent before charging them for a product or services” - This means that businesses must ensure that consumers are happy with all features of their subscription before proceeding. This involves complete transparency about all features so the customer can make an informed decision before taking the subscription.
- Provide easy and simple cancellation - Consumers should be able to cancel a subscription easily. This means businesses should deploy a clear, simple way to cancel a subscription.
Credit card companies are also taking action after bearing the brunt of dark patterns. When businesses fail to offer simple cancellations, consumers often turn to their credit card companies for protection.
- Gain express consent from cardholders to start a contract
- Provide customers with a copy of the terms and conditions of subscription services
- Provide detailed receipts with information about free trial periods
- Provide accurate descriptions on customer credit card statements
- Give customers easy ways to cancel
- Have clear instructions on how customers can dispute instances of misrepresentation
Other credit card companies will have their own versions of these regulations, so businesses need to be savvy with each partner they use for their payments to avoid falling foul.
Limio helps keep you compliant
With so many regulations to keep an eye on, it can be challenging to launch a subscription service. Partnering with Limio can help make the process much easier. We have the expertise you need to launch purchasing, renewals and smart cancelling experiences that complies with all regulations. This means you can focus on what really matters.