Chargebacks911 Says that FTC’s “Click to Cancel” Rule May Reduce First-Party Fraud

Chargebacks911 and Fi911, the global firm focused on chargeback management technology, has reaffirmed its support of continued discussion “around strategies to reduce the likelihood of friendly fraud, such as the Federal Trade Commission’s (FTC) proposed ‘click-to-cancel’ provision to its 1973 Negative Option Rule.”

The provision would require businesses “to make it as easy for their customers to cancel a recurring subscription as it was to initiate that subscription.”

For example, if a customer “signed up for a service online, then they must be able to cancel using the same website, in the same number of steps.” Merchants must also obtain a consumer’s affirmative consent before pitching any offers “when a user cancels a service and send an annual reminder of subscription renewals.”

The change is aimed at stopping “the thousands of complaints the regulator receives each year from consumers who thought that they had cancelled subscriptions that continued to take money from their accounts.”

Currently, although merchants are “required to disclose the terms of sale before consumers subscribe, including the means to unsubscribe, this information is often only included in the ‘small print’.”

Companies should also be “providing notice at predetermined intervals when payments are going to be taken and giving notice of any changes to terms and conditions, but customers may still find the process of unsubscribing unclear, difficult or time-consuming.”

According to Chargebacks911’s professionals, the rules would also “help to protect businesses from first-party fraud: it has been shown that an inability to cancel subscriptions easily can often result in customers initiating chargebacks instead of trying to grapple with purposefully difficult forms.”

Chargebacks911 founder and CEO Monica Eaton said:

“To remain competitive and address growing demands, users require a more comprehensive, self-service experience. Today’s consumer wants intuitive flexibility, payment scheduling options, and frictionless convenience. Otherwise, retailers face steep competition with their customers’ banks and credit card companies, many of which supply a “concierge-like” service to efficiently address their customers’ needs and wants.”

She added:

“This isn’t just a matter of serving shifting consumer preferences. Unfortunately, any perceived breakdown of communication between customer and retailer is an open door for first-party fraud. Left unaddressed, this door may be wedged open permanently.”

First-party fraud is cited by Visa “as representing up to 75% of digital commerce chargebacks.”

It is a growing industry concern, “with subscription retailers shouldering a significant share of this burden.”

According to the LexisNexis True Cost of Fraud Report, “every $1 in chargebacks costs the merchant approximately $3.75 and evokes a negative reputational statistic that even if successfully contested, is never removed from their record.”

Monica continued:

“At Chargebacks911, we advise that companies should include recurring billing information, as well as terms and conditions, within the checkout process. They should also make sure the information is easily accessible for customers. Finally, we suggest that companies increase the frequency of reminders and billing confirmations ahead of renewal dates.”

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