Vanessa Ribeiro only wanted a gym membership for a month. The Washington-based therapist went in-person to a Gold’s Gym in the city and thought she avoided a monthly sign-up fee and the yearly membership the sales person pitched.
She authorized the one-time credit card payment, and assumed that was that.
One month later, Ribeiro’s credit card statement showed two more charges. She called Gold’s. An agent told her they were not allowed to cancel her membership on the phone and directed her to email management or go to the gym in person to cancel. They also refused to refund her.
In the fine print was a line stating that after requesting to cancel, it would take 30 days before the cancellation would be final.
“I asked the questions, and they should have disclosed it because otherwise I would have thought about it or not sign[ed] at all,” Ribeiro said.
Ribeiro managed to initiate canceling the membership after a trip to the gym, but the experience left a sour taste in her mouth.
“It made me so mad because I had to take time and go to the gym, put up with the whole thing, and they have no sense of consumer or customer relationships or anything,” she said. “I actually like the gym, really, [but] this experience is no good at all. Like, I don't want to see that gym anymore — ever.”
Gyms are far from the only industry that makes it difficult to cancel a membership, though they are an oft-cited culprit. Cable and internet providers, retailers and gaming companies have all been the subject of complaints.
The Federal Trade Commission fields thousands of complaints similar to Ribeiro’s every year, and last week, it finalized a rule designed to make it as easy to cancel recurring payments as it was to sign up for them.
The “click-to-cancel” rule prohibits businesses from misrepresenting material facts while marketing subscriptions with recurring payments, instructs companies to relay such facts before charging customers, and requires businesses provide consumers with a simple method to immediately halt all recurring charges.
The regulation aims to protect consumers from getting trapped paying for services and products they no longer want — and improves customer experience along the way.
For its part, Gold’s said the company and its franchisees are committed to following all local, state and federal rules and regulations.
“While cancellation policies may vary by location, all terms and conditions are outlined within membership agreements, which all members sign when they join a gym,” a spokesperson told CX Dive via email. “We will review our cancellation policies to ensure they are in compliance when the new FTC ruling takes effect in April 2025.”
Good for consumers, good for customer experience?
Customer experience analysts agree that the rule will benefit customers and the CX practice.
“I do believe the rule will be a customer experience enhancer, given all the frustration that companies’ high-friction cancellation processes can cause for consumers,” Jon Picoult, founder and principal of Watermark Consulting, a customer experience advisory firm, said via email.
In some ways the rule enforces CX best practices. For instance, it increases transparency by requiring companies to provide more clarity on the terms and conditions of their subscriptions.
“This is a really good thing for consumers to have more clarity, more transparency around what they're agreeing to when they're getting into subscription situations, and how easy it can be to get out of those subscriptions if they choose not to continue,” said Judy Weader, principal analyst at Forrester. “It's just going to make things easier for consumers.”
Erin Witte, director of consumer protection at the Consumer Federation of America, agrees. “The ‘click-to-cancel’ portion of the rule is a significant win for consumers,” she said via email.
“I do believe the rule will be a customer experience enhancer, given all the frustration that companies’ high-friction cancellation processes can cause for consumers.”
Jon Picoult
Founder and principal of Watermark Consulting
Consumer complaints about the difficulty canceling subscriptions are growing in number. The FTC said it receives nearly 70 complaints a day on average — up from 42 a day in 2021.
“What’s unfortunate is that government regulators even had to insert themselves to stop this insanity, and it underscores the sad fact that many businesses operate in a way that benefits the company rather than the customer — a strategy that never ends well,” Picoult said.
Most provisions of the final rule will be effective 180 days after its publication in the Federal Registrar.
Cancellation woes
From a customer experience standpoint, Weader was hard pressed to think of many reasons why a company would want to make it difficult to cancel a subscription.
“There are very few instances that I can imagine where it's a good thing to effectively trap a consumer in a subscription and say it's for your own good,” Weader said. “We should not be that paternalistic about it. Consumers are looking for choice. … They should have some measure of control over who they're paying and what they're paying them for.”
And while customers are also looking for deals and may be eager to sign up for free trials, companies that look to squeeze customers are losing out on developing customer relationships built on trust.
“It's unacceptable to treat your customers as though they are just cows to be milked for every single amount of money you could possibly get out of them,” Weader said. “There shouldn't be hidden things. There shouldn't be gotchas.”
Building customer relationships that induce loyalty and encourage more purchases requires businesses to keep in touch with customers, making the practice of “set it and forget it” ill-advised.
“It's unacceptable to treat your customers as though they are just cows to be milked for every single amount of money you could possibly get out of them."
Judy Weader
Principal analyst at Forrester
“From the businesses’ standpoint, it may seem like a great thing because it's less expensive to have a relationship where you never have to reach out and talk to your customer, but then you also never have that opportunity to explain to them why you're there, what other things you can do for them, how you can offer them the next thing up,” Weader said.
Notably, the FTC chose not to regulate “saves” in which a business presents a series of offers to a customer looking to cancel their subscription.
Used judiciously, “saves” can be a win-win for customers and businesses. A company can offer services or products that better meet a customer’s needs or better understand why a customer is leaving.
But “saves” can also be a slippery slope in which CX designers and business leaders embed so many layers of friction that the process becomes a “save gauntlet” for customers to overcome, Picoult said.
“For this reason, CX leaders would be wise to review their cancellation processes not through the lens of any FTC rule, but rather, through the lens of customer experience,” Picoult said.
How will the rule affect operations?
Witte portrayed the rule as a win-win for consumers and businesses. “The updates that were finalized today help businesses who provide subscription services ensure that they are serving consumers who actually want their products and services,” she said.
Not everyone is happy with the rule.
The U.S. Chamber of Commerce expressed its displeasure, adding that it would harm consumers. It directed CX Dive to its prepared statement.
“Not only will this rule deter businesses from providing sensible, consumer-friendly subscriptions, but it will leave Americans with fewer options, higher prices, and more headaches,” Neil Bradley, EVP and chief policy officer at the Chamber, said in the prepared statement.
Bradley accused the FTC of trying to “micromanage business decisions” and said it is examining the rule and “considering all options.”
To Picoult, the fact that regulators felt compelled to step in indicates a need to reconsider how organizations view customer experience.
“A good rule of thumb for CX professionals: When regulators or legislators feel compelled to step in and dictate how you treat customers, that’s a pretty good sign that the CX you’ve designed is exploiting rather than enriching people,” he said.
The regulations provide businesses some consistency in standards, too.
The FTC’s rule follows a recently enacted California law that requires businesses to offer an “immediate” method of cancellation. The federal rule eliminates a need for patchwork of processes in different states and sets a national standard, experts said.
“We need something that's at the national level, so that you don't end up having confusion among businesses trying to understand, ‘How should we operate when we're dealing with consumers in one state versus another state?’” Weader said. “This will solve that on a national level.”
That’s not to say the rule, which is some 230 pages long, is short on details. Picoult urges CX leaders to familiarize themselves with the rule and review their organization’s cancellation experience.
Online, consumers overwhelmingly welcomed the FTC’s rule.
Ribeiro is still on guard. Wary of being charged again, she contacted her bank to make sure no more charges from Gold’s would be authorized and submitted a complaint to the District of Columbia’s Office of Consumer Protection.
Asked how she felt about the FTC’s rule, Ribeiro messaged this reporter 5 stars. “It was about time,” Ribeiro said.
