The Subscription Cancellation Gap: Clear State Rules, Vague Federal Standards, and Growing Legal Risk

Anyone who’s tried to cancel a gym membership, a digital subscription, or an auto-renewing trial knows the feeling: buried links, print-and-mail forms, long hold times. Some apps simply won’t let go.

While these tactics may reduce churn, they’re increasingly creating legal risk.

The Federal Trade Commission (FTC) has made subscription cancellations a regulatory priority, citing widespread consumer harm and deceptive business practices. The problem is that while federal law imposes a compliance obligation, it offers little in the way of clear instruction.

Under the Restore Online Shoppers’ Confidence Act (ROSCA), businesses must provide a “simple mechanism” to cancel recurring charges—but the statute doesn’t define what “simple” means. That ambiguity has opened the door to aggressive enforcement and costly litigation.

By contrast, states like California have adopted far more specific and prescriptive rules. For companies operating across jurisdictions, this divergence creates a growing compliance gap—and a patchwork of standards that’s proving difficult to navigate.

Enforcement in Action: Real-World Examples Shape the Legal Landscape

Recent FTC enforcement actions help illustrate how these vague federal requirements are being interpreted, and why the stakes are so high.

• Amazon: In a historic $2.5 billion settlement, the FTC alleged that Amazon enrolled consumers in Prime subscriptions without proper consent and created an intentionally difficult cancellation process. Internal emails reportedly showed employees referring to the company’s practices as "shady" and an "unspoken cancer."
• Chegg: The education technology company paid $7.5 million to resolve FTC claims that it buried cancellation links, made consumers click through multiple screens, and even continued billing after cancellation attempts. Despite years of internal feedback identifying the problem, the company made few changes until regulators stepped in.
• LA Fitness: The FTC has filed suit against the nationwide gym chain, alleging that members were forced to cancel by printing a form from a website they rarely used and physically delivering it to a specific manager, available only during limited weekday hours. Consumers who followed the rules still found themselves billed.

Each of these cases reflects a core FTC concern: cancellation mechanisms that are technically available, but functionally unusable. And without a defined federal standard, the agency is using litigation and settlements to fill in the blanks.

The California Standard: Clear, Specific, and Enforceable

California law is far less ambiguous. Under its Automatic Renewal Law (ARL), if a consumer signs up for a service online, they must be able to cancel it online, and the cancellation process must be as easy as the sign-up.

The ARL also requires:

• Clear and conspicuous disclosure of auto-renewal terms before purchase;
• Affirmative consent before charging;
• A post-transaction acknowledgment with terms and cancellation instructions.
  
  

These statutory requirements apply to any business offering subscriptions to California consumers, regardless of where the company is based.

Why This Matters: A Patchwork of Standards and a Litigation Risk

For businesses operating nationwide, the divergence between federal and state law creates compliance challenges. For example, a cancellation flow that satisfies ROSCA might still violate California’s ARL.

In addition, businesses that rely on inertia or friction to retain subscribers risk triggering not just regulatory action, but also consumer class actions, particularly in California, New York, Florida, and other states with active plaintiff’s bars.

Internal awareness also matters. In the Amazon case, internal emails showed executives acknowledged that subscription flows were confusing by design. That kind of documentation can be devastating (and undoubtedly contributed to the record $2.5 billion settlement).

Practical Steps for Reducing Risk

For companies offering subscription-based services, it’s important to review and potentially revise your cancellation processes. Consider the kinds of issues that arose in the enforcement actions against Amazon, Chegg, and LA Fitness—many of which stemmed from design choices, internal knowledge, and inconsistent user experiences, such as:

• Match cancellation to sign-up. If consumers can subscribe in two clicks, they should be able to cancel in two clicks.
• Check for dark patterns. Manipulative language (e.g., "No thanks, I hate saving money") can be deemed deceptive.
• Audit user experience. Test your cancellation process from the consumer’s perspective. How many steps does it take? Is the path obvious?
• Training staff. Make sure frontline employees understand the rules.
  
  

Conclusion

The law around subscription cancellation is evolving quickly, and litigation and enforcement actions are ramping up. While federal regulators use enforcement actions to define expectations on a case-by-case basis, some states have already established detailed statutory frameworks. That disconnect continues to shape the legal landscape—and will likely remain a focus of both regulatory and private enforcement in the months and years ahead.