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. FTC Spokesman Mitchell Katz told The NonProfit Times that “nonprofits are not covered, as they are not under the FTC’s statutory jurisdiction.” He continued: “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. 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; and,
* 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 contacted by The NonProfit Times did not know the ramifications of the new rules. None would speak on the record but only for background when contacted. 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.
World Vision back in April launched Subscribe to World Change, a campaign aimed at disrupting people’s expectations about subscription services while extending an invitation to join Believers for World Change. The Subscribe to World Change campaign prompts potential donors to reflect on their current subscriptions that go unused (like streaming services, meal deliveries, etc.) and invites them to put the money spent here to better use. By subscribing to World Vision instead, consumers can help tackle the causes of poverty and injustice and make a lasting impact.
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.
“Worldwide, humanitarian needs continue to increase,” said Edgar Sandoval Sr., president and CEO of World Vision said via statement. “But World Vision knows that when we partner with donors and the communities we serve, we’re able to not only bring life-saving aid to some of the world’s most challenging places but also equip children with the tools they need to fulfill their God-given potential. Our hope is that donors will join with us to bring hope and create lasting change while gaining a new and a more rewarding perspective on how they spend their hard-earned money.”
Leaders at constituent relationship management (CRM) platforms nonprofits contacted by The NonProfit Times declined to comment on the new rules except to say that they advise transparency when dealing with donors and are evaluating the challenges. A leader at donation and donor relationship platform Fundraise Up was not as coy. The platform requires users to be upfront regarding recurring gifts and contact from a nonprofit.
“On our platform, the donors giving to the nonprofits we partner with all have access to a self-management dashboard. This is not optional because we know this is for the good of all parties, said Salvatore Salpietro, chief community officer at Fundraise Up. “We measure this from time-to-time, and of those that click the ‘Cancel My Recurring’ donation button, we see that over 80% do absolutely nothing. Of the remaining 20%, about half of them will choose a different option that is presented to them, such as reducing the amount or skipping an installment or two, and the other half needs to cancel,” said Salpietro.
“The drum that I beat is that our donors are consumers. They expect control of their money and expenses. If a donor is receiving ‘Click to Cancel’ convenience and control in every other sphere of their life, but their monthly donation is lacking this, then we have our answer to ‘why is donor trust in nonprofits slipping and struggling’,” he said.
Nonprofit organizations are indeed often exempt from federal regulations like this one … But, to be honest, the industry is often doing itself a disservice by seeking exemptions. These regulations become consumer expectations,” said Salpietro. “Consumers are donors. By looking for exemptions, we’re widening the gap and shooting ourselves in the foot as an industry. We talk about ‘trust in nonprofits declining’ and then in the next breath we ask for ways to avoid meeting regulatory demands that are meant to increase trust.”