New Consumer Laws Require Easier Subscription Cancellations and Refunds

The average American now pays roughly $1,080 per year on recurring subscriptions — and an estimated $200 or more of that goes to services they no longer use or have forgotten entirely [1]. Across the country, that adds up to approximately $27 billion in annual charges on unused subscriptions [1]. After a federal appeals court struck down the FTC's attempt at a national click-to-cancel standard, states are racing to fill the gap with their own laws. The result is a patchwork of new requirements that subscription businesses must now navigate, while consumer advocates argue the reforms remain inadequate.

The Scale of the Problem

The subscription economy has ballooned into a vast commercial infrastructure touching nearly every consumer category — streaming, fitness, meal kits, software, news, and more. With that growth has come a parallel increase in consumer frustration.

Forty-two percent of consumers report having forgotten about a subscription and continuing to be charged for it [1]. The problem is worsening: surveys found that 54.6% of respondents had at least one unused paid subscription in 2023, a figure that jumped to 85.7% in 2024 [2].

Source: Self Financial / C+R Research

Data as of Dec 1, 2024CSV

The FTC logged approximately 70 consumer complaints per day in 2024 related to predatory subscription practices, up 67% from roughly 42 per day in 2021 [3]. A 2024 FTC study found that 81% of subscription websites and apps used "dark patterns" — design techniques that make cancellation difficult — including burying cancellation options, requiring phone calls, or imposing multi-step processes [4]. In 70% of cases studied, subscription providers did not even provide information on how to cancel [4].

Source: FTC

Data as of Jan 1, 2025CSV

The Federal Rule That Wasn't

The FTC finalized its "click-to-cancel" rule in October 2024, requiring that canceling a subscription be as simple as signing up for one [5]. The rule mandated clear disclosures of costs and billing terms, affirmative consumer consent, and a prohibition on misrepresentation in subscription marketing [6].

It never took effect. On July 8, 2025, the U.S. Court of Appeals for the Eighth Circuit vacated the entire rule on procedural grounds [7]. The court found that the FTC had originally estimated the rule's annual economic impact at under $100 million, exempting it from a required preliminary regulatory analysis. But during rulemaking hearings, an administrative law judge determined that compliance costs would exceed that threshold [7]. Rather than pausing to conduct the required analysis, the FTC pressed ahead with finalization.

"The Commission could (and should) have issued the preliminary analysis at that time," the court wrote, finding the procedural failure "prejudicial" and warranting complete vacatur [7]. The ruling did not address the substantive merits of the rule — only the process by which it was adopted.

The FTC has signaled it will attempt to revive the rule through a new rulemaking process [8]. In the meantime, the agency continues to enforce existing law, particularly the Restore Online Shoppers' Confidence Act (ROSCA), which already requires clear disclosure and simple cancellation mechanisms for online subscriptions [9].

States Step Into the Vacuum

With the federal rule struck down, the regulatory center of gravity has shifted to the states. At least a dozen states have enacted or strengthened subscription cancellation laws since 2024, creating what industry lawyers describe as an "increasingly complex" compliance landscape [10].

California updated its Automatic Renewal Law effective July 1, 2025, requiring that consumers who sign up online must be able to cancel online without unnecessary steps or delays. Businesses must obtain express affirmative consent to renewal terms and maintain records of that consent for at least three years [11]. A coalition of county and city enforcers called the California Automatic Renewal Task Force (CART) has aggressively pursued violations, including a $7.5 million settlement with HelloFresh in August 2025 over allegations the company misled consumers and obstructed cancellations [12].

Colorado enacted amendments effective August 6, 2025, requiring a "simple, cost-effective, timely, easy-to-use, and readily accessible" cancellation mechanism — specifically, either a one-step online cancellation link or in-person cancellation at the consumer's regular service location [13].

New York amended its automatic renewal law effective November 5, 2025, requiring advance notice of price increases, the option to cancel through the same medium used to subscribe, and a 14-day penalty-free cancellation window after any price increase with a pro-rated refund [14].

Illinois requires that online subscriptions allow online cancellation with no added friction [13]. Virginia similarly mandates online cancellation for subscriptions initiated online [15].

The requirements differ in their specifics. California focuses on consent documentation and enforcement infrastructure. Colorado emphasizes a one-step process. New York adds price-increase protections that other states lack. This variation creates compliance challenges for businesses operating nationally, but also ensures that if one state's approach proves ineffective, others remain intact [10].

No state law has been successfully challenged in court as of early 2026, though industry groups have signaled potential litigation. The Eighth Circuit decision rested on procedural grounds specific to the FTC's rulemaking authority, and state consumer protection statutes operate under different legal frameworks [15].

The Business of Not Canceling

The subscription industry's resistance to cancellation reform is not abstract. A significant share of subscription revenue comes from consumers who are paying but not actively using the service — a phenomenon the industry calls "passive retention."

The gym industry illustrates this most clearly. An estimated 67% of gym members do not regularly use their memberships [16]. At Planet Fitness, roughly 20% to 25% of members consistently attend, meaning three-quarters or more of the company's 19+ million members are paying for a service they rarely or never use [16]. Planet Fitness generated $1.288 billion in revenue for the twelve months ending September 2025 [17]. The company's business model, with its $10/month base membership, is designed around the expectation that most members will not show up — and that the low price makes cancellation feel less urgent [16].

Gyms are far from alone. Streaming services, SaaS companies, and news publishers all benefit from subscribers who forget to cancel or find the process too burdensome to complete. Investor-focused metrics like gross revenue retention (GRR) and net revenue retention (NRR) are central to how Wall Street values subscription businesses [18]. Companies with GRR above 90% — meaning they retain 90% of their existing subscription revenue before upsells — command valuation multiples 12-15% higher than those with lower retention [18]. Easier cancellation directly threatens that metric.

Official investor disclosures are cautious. Most subscription companies do not separately report revenue from passive subscribers. But annual reports from companies like Planet Fitness, Netflix, and major SaaS providers routinely list "increased churn" or "changes to auto-renewal regulations" as risk factors [17][18].

The Industry's Case Against Easy Cancellation

Industry opposition to click-to-cancel mandates has centered on three arguments.

First, trade groups and companies argued in the Eighth Circuit challenge that the FTC's rule was overbroad, applying uniform requirements across industries that "may have little or nothing in common" [7]. A meal kit company, a gym, and an enterprise software provider face different customer relationships, the argument goes, and a single cancellation standard cannot account for those differences.

Second, FTC Commissioner Melissa Holyoak, who dissented from the original rule in a 3-2 vote, argued that the rule's "liability and risk of enforcement" could "incentivize companies to avoid negative option models" entirely — potentially reducing consumer choice [19]. Commissioner Andrew Ferguson, now FTC Chair, also voted against the rule [19].

Third, some industry advocates have raised the concern that frictionless cancellation could lead to impulsive cancellations that consumers later regret — particularly for services with long-term benefits like educational platforms or health-related subscriptions. However, peer-reviewed research specifically measuring regret rates after easy cancellation is scarce. The FTC's rulemaking record does not contain studies demonstrating that cancellation friction provides a net consumer benefit, and the dissenting commissioners focused their objections on procedural and authority grounds rather than citing behavioral evidence [19][7].

Consumer advocates counter that the "impulsive cancellation" argument conflates two different things: a consumer's right to leave a service and a company's interest in preventing them from doing so. "If a service is valuable, consumers will re-subscribe," said CFPB Director Rohit Chopra in a statement supporting the FTC's original rule [20]. The more pressing harm, advocates argue, is the billions of dollars extracted annually from consumers who have already decided they want to stop paying but cannot easily do so.

Enforcement: Ambition Versus Resources

Even where strong laws exist, enforcement capacity is limited. The FTC's workforce has been reduced to approximately 1,100 employees — its lowest level in a decade — following a 10% staff reduction [21]. The agency's civil penalty authority allows fines of up to $53,088 per violation per day [22], a figure that can accumulate rapidly but requires active investigation and litigation to impose.

The FTC's recent enforcement record shows it remains active despite staffing cuts. ROSCA violations are the agency's "most active enforcement category" [9]. High-profile settlements include $7.5 million from Chegg over cancellation practices [9] and significant actions against Match.com and Cleo AI [9]. The FTC obtained a major settlement from Amazon in September 2025, though the full details and scope of that settlement extend beyond subscription issues alone [9].

At the state level, California's CART coalition represents an innovative enforcement model, pooling resources from multiple county and city attorneys to pursue auto-renewal cases [12]. But most states lack equivalent infrastructure. The universe of subscription businesses in the United States numbers in the hundreds of thousands, and even well-resourced enforcement agencies can pursue only a fraction of potential violations.

The gap between legal requirements and enforcement capacity means that compliance will be driven partly by the law's deterrent effect — particularly the risk of class action litigation. California's auto-renewal law has already generated a "growing wave" of class action lawsuits targeting subscription businesses [23], creating private enforcement pressure that supplements government action.

How the U.S. Compares to Europe

The European Union has addressed subscription transparency through its Consumer Rights Directive and the Unfair Commercial Practices Directive. EU consumers have a 14-day right of withdrawal — a cooling-off period during which they can cancel online subscription contracts without providing any justification [24]. The EU's framework explicitly classifies dark patterns, including convoluted cancellation processes, as prohibited unfair practices [24].

The EU's Digital Fairness Act, currently under development, is expected to impose further requirements on digital subscriptions, including standardized cancellation interfaces [25]. The European approach differs from the U.S. model in a fundamental way: it establishes minimum standards at the supranational level, creating uniformity across 27 member states rather than the patchwork that characterizes the American landscape.

In jurisdictions where strict cancellation rules have been in force longest, the subscription industry has not contracted in any measurable way. EU-based streaming services, SaaS companies, and e-commerce subscription businesses continue to grow [24]. There is no published evidence that companies have relocated or restructured to avoid compliance with EU subscription rules. The industry's adaptation has primarily involved redesigning cancellation flows and investing in retention through service quality rather than procedural friction.

Who Gets Trapped

Subscription-trap harm is not evenly distributed. Older adults and people with lower digital literacy face compounded vulnerabilities. Research shows that only one in four European older adults possess basic digital skills [26], and the "grey digital divide" is exacerbated by income disparities [26]. In the U.S., older adults in ethnic minority communities with limited resources are particularly likely to be "intimidated by expanded choices or skeptical about unfamiliar approaches to technology" [26].

The specific mechanisms that cause the most harm — phone-only cancellation requirements, mandatory retention calls, auto-renewal terms buried in fine print — disproportionately burden consumers who are less comfortable with digital interfaces or less likely to persist through an adversarial cancellation process.

The new state laws address some but not all of these mechanisms. Requirements that online subscriptions allow online cancellation eliminate phone-only cancellation traps. Mandated clear disclosure reduces the fine-print problem. But mandatory retention calls — the "save" pitches that companies deploy when a consumer attempts to cancel — are not uniformly banned. The FTC's original rule would have prohibited sellers from making retention offers unless the consumer affirmatively opted in to hearing them, but that provision died with the rule's vacatur [5].

Younger consumers face different problems. Gen Z reports wasting an average of $276 per year on unused subscriptions [1] — more than any other age group — reflecting a pattern of rapid sign-ups (often through free trial conversions) followed by forgotten recurring charges.

What Comes Next

The regulatory trajectory is clear even if the timeline is not. The FTC is expected to pursue a new rulemaking that addresses the Eighth Circuit's procedural objections, this time including the required preliminary regulatory analysis [8]. That process will take years. In the interim, state-level legislation will continue to expand. At least several additional states are considering auto-renewal bills for their 2026 legislative sessions [15].

The subscription industry faces a strategic choice: resist state-by-state regulation and risk an even stricter eventual federal rule, or adopt voluntary standards that preempt the harshest requirements. Some companies have already moved toward easier cancellation — not out of legal obligation, but because consumer backlash and media attention have made aggressive retention tactics a brand liability.

The $27 billion question is whether making cancellation easier will meaningfully reduce consumer harm or simply accelerate churn in an industry built on inertia. The EU experience suggests that strong cancellation rights coexist with a healthy subscription economy. But the U.S. is running a different experiment: testing whether 50 different state approaches, patchy federal enforcement, and an energized class action bar can accomplish what a single federal rule could not.