UK Businesses Say New Subscription Rules Too Rigorous
BY PYMNTS | JULY 9, 2023
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British businesses are protesting new regulations to make it easier for customers to cancel subscriptions.
As the Financial Times (FT) reported Friday (July 7), the broadcaster Sky and groups representing newspapers and small businesses say the government’s proposal to help consumers avoid unwanted bills for their subscriptions are too draconian.
According to the report, ministers want businesses to remind consumers more often before subscriptions renew automatically, and give them easier ways to get out of recurring bills. The FT says official estimates say the law could help consumers save £290 million ($372 million) per year over the next decade.
The proposal is part of the Digital Markets, Competition and Consumers Bill now going through the British parliament.
The report cites a letter from Tina McKenzie, policy chair of the Federation of Small Businesses, to business secretary Kemi Badenoch, arguing the new law would target “a much greater range of businesses and services than intended” and that the federation’s members would be “disproportionately affected.”
McKenzie said a requirement to allow customers to cancel a subscription by giving notice “by any means” could force businesses to process cancellations submitted beyond their usual communication channels, including through social media.
Great Britain’s efforts are happening at a time when regulators in the U.S. are likewise warning businesses against overusing auto-renewals.
For example, the Consumer Financial Protection Bureau (CFPB) in January warned subscription merchants against resorting to “dark patterns and other tricks used by companies to confuse and deceive consumers enrolled in subscription services.”
Against this backdrop, PYMNTS wrote earlier this year, more subscription merchants are shifting to measuring customer lifetime value (LTV), which, according to one study, is something only a small percentage of companies do.
“The State Of Subscription Business: Best Practices And Business Performance Drivers,” a PYMNTS and FlexPay collaboration, analyzed this concept in depth.
It found that failure to measure LTV is one reason that many subscription merchants have become over-reliant on auto-renewals — often without notifying customers ahead of time — which has caused regulators to react harshly.
And PYMNTS’ reporting has shown that merchants who give consumers an easier time when they want to cancel subscriptions can actually retain customers.
Alex Brown, CEO of subscription cleaning supplies provider Truly Free, told PYMNTS’ Karen Webster in a round table in May that his firm makes sure to let subscribers cancel themselves directly from the membership portal.
The outcome, he said, was “less cancellation requests, more saves and less customer service time. That’s given us the latitude to take a little bit of the pressure off of them, and I think it’s caused more of them to come back in the future too.”
