Policy: How Cities And States Are Fighting Subscription Traps

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0:26What do gyms, TV shows, pet food, and smart doorbells all have in common? Nowadays, you might use a monthly subscription or other recurring membership to access these goods or services. The average American spends$219 every month on subscriptions. That's more than$2 ,600 a year. Subscriptions mean predictable profits for companies, that is, unless you cancel. Enter subscription traps. That's when companies make it easy for customers to sign up but difficult to cancel. Some also use deceptive tactics that automatically enroll customers into a subscription after a free trial ends without making the terms clear.

1:06In recent years, cities and states have moved to crack down on subscription traps. They're also taking steps to regulate junk fees that companies can add to goods and services, causing prices to soar far beyond what's advertised. One city leading the way is New York, where city leaders announced a ban on abusive subscription practices on Friday. New York City is banning subscription traps for good. Delivery on Mayor Mdani's executive order number 10, DCWP is implementing the first municipal click to cancel rule in the United States. Guaranteing, guaranteeing that New Yorkers can cancel services as easy as they can sign up for them.

1:47If a business can enroll you with one click, they can let you cancel with one click. It's that simple. That was Samuel Levine. He's the commissioner of the NYC Department of Consumer and Worker Protection. I'm Jen White. You're listening to the 1A Podcast. Today, how regulators around the country are working to protect consumers against hidden fees and deceptive subscription models. We'll look into that and more after this short break. Stay with us.

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3:00Follow Up First wherever you get your podcasts and start your day knowing what matters and why. This is Tanya Mosley, co-host of Fresh Air. When I interviewed the screenwriters of The Invite, Rashida Jones and Will McCormick, they called it a sex comedy that's not about sex. It's about wanting to be seen and heard and valued. Get a peek into how the script came to be on Fresh Air on the NPR app or wherever you get your podcasts. Welcome back to the 1A podcast. We're talking about subscription traps and what consumers can do to avoid hidden fees and deceptive models. We spoke to Michael Tiger. He's the general counsel at the NYC Department of Consumer and Worker Protection.

3:43So, Michael, on Friday, New York City announced this new rule banning companies from using subscription schemes to trap customers into recurring charges. It's slated to go into effect later this year on October 1st. How prevalent is this problem in your city? I think it's something that we've seen develop and accelerate over recent years. I mean, we received hundreds of complaints just to DCWP's consumer services line over the last couple years. But this is nothing new. No, this is something that we've seen that industry is rewarding as far as a measure of profitability subscription. We've all seen it.

4:21Things that have traditionally not been subscription services. You go to buy a vehicle now, a car, and there are certain things that are vehicles like security and warranties are now based on a subscription service. We all know how many different streaming apps we have that are based on streaming. Suddenly, we used to be an aggregated cable package. Now we all have managing all these digital subscriptions. And these are the things that are building up and making it very difficult for New Yorkers to have an affordable lifestyle in this city. And that's why we want to give New Yorkers a fighting chance and fight back and give them the protections they need.

5:00because there's nothing wrong inherently with subscriptions or subscription models, but they can't be predatory. This new rule is estimated to save adults in New York City over$160 million a year. That's according to an analysis from the Roosevelt Institute. That's a progressive think tank. What industries or sectors do you think will be most impacted? Well, I think this has a broad impact. I'm not sure if I can specify one that will be rocket right to the top of the list, but this is a broadly applicable rule. Traditionally, over the last decade, we've heard a lot of complaints about gym memberships.

5:35In February, we sent out a letter reminding gyms in New York City of their obligations under current New York state law. And so this rule is really a whole of government approach to make sure that all sorts of industries know that they are going to a subscription model. There are protections in terms of disclosures. And of course, the click to cancel part, being able to cancel that subscription as easy as you signed up for it. Companies that violate the rule will be required to pay hefty fines. How will the city investigate whether companies are actually adhering to the new rule once it's implemented?

6:12Well, we have different ways of actually doing that. You know, the mayor passed Executive Order 10, which was really what our inspiration for pursuing this click to cancel rule. He did that back at the beginning of his administration after he was inaugurated. And that really focused our vision on like, how are we going to be able to take in complaints here on subscription models? So as I mentioned before, we have a consumer services unit that serves as like an intake and mediation arm for our agency. And through that, we can see trends and that can really focus on who are the repeat actors, who are harming consumers through these subscription practices and allows our lawyers to bring bigger enforcement actions and bring those administrative, go to an administrative tribunal and seek those penalties that serve as a deterrent.

6:57And New York City is also looking to regulate junk fees. These are the extra dollars that some companies add on to purchases, like concert tickets, even rent. But they can add up to significant sums over time. A former FTC cheerleader, Lena Kahn, says the Mondani administration has already dispatched investigators across the city to make sure businesses aren't charging these illegal fees. How would that rule work? Paired with the announcement of the adoption of the click-to-cancel rule, as you just noted, we also propose a junk fee rule that would apply to all industries in the city. We've already dipped our toe into those waters when we adopted a hotel junk fee rule earlier this year.

7:38But this would apply to all sorts of industries. That's just a proposed rule. So we have to go through the rulemaking process, and we're really excited to see what feedback we get from not just the regulated community, but consumers, advocacy organizations, and really point to where are the most grown elements of our economy right now to these junk fees. So again, because we can really direct our attention to where we're seeing the most harm. What are you hearing from businesses on the receiving end of this new rule and any proposed rule that may go into effect? Well, we just announced it on Friday.

8:14So this is a great thing. You know, I'm a lawyer, so there's a legal process. We now go through a notice and comment period. We'll have a actual hearing on the rule in 30 days or so. And we actually expect to get very robust comments as part of that rule. And we take the comments we get from all stakeholders very seriously. And I think that is what's going to inform us. This is the beginning of the process. Yes. We're talking to Michael Tiger. He's the general counsel at the NYC Department of Consumer and Worker Protection. When people talk about living in New York City, the cost of housing is one of the first things they bring up.

8:51If passed, this proposed fee rule could have huge implications for New York's housing market, where about 70 % of residents rent, and the average price of a one-bedroom apartment is more than$4 ,100 a month. And that's before you factor in other monthly or annual fees that rental agencies can tackle, like an amenity fee or a lifestyle fee. So if this rule goes into effect, what do you think it would mean for the housing market in your city? Well, you know, it's obviously a very wide-reaching question that you asked there. It's very important to the mayor and our commissioner that we focused on that.

9:26In fact, one of the other executive orders that Mayor Mamdani issued at the beginning of his administration was directing us to look at rental ripoffs. And that's why he held hearings in all five New York City boroughs to hear the stories of New York City residents on an everyday basis. This rule is part of that fight. And we expect that if this rule were to go into effect somewhere down the road later this year, that this will have an impact on what is shown to consumers as they're trying to rent an apartment, provide more clarity, so they are more informed. More informed consumers are better consumers, and consumers that can actually fight for the affordability of their housing.

10:03It's interesting what you're proposing through both this new potential fee rule and the subscription rule is increased transparency for consumers. But you might also see a higher number of complaints. You may have more people who say, look, they're not adhering to this rule and I need help. Is your office ready for a potential uptick in complaints? Do you feel well-staffed enough to be able to address consumer concerns? We are. Like, we're very fortunate with this mayor and this commissioner to really dedicate resources to this agency more than, in my experience, I've been at the agency in various roles for nine years now.

10:49And this is the most dedicated resources that we've gotten. So we're actually staffing up right now in terms of lawyers, in terms of staff members in our consumer services unit. So it may very well be that we get more complaints. But those complaints are really what, again, helps us drive our enforcement. I always say there's top-bottom and there's bottom-up enforcement. Of course, we all see ads on the subway, and that can help guide enforcement. But those complaints that we get from everyday New Yorkers are really what drives our enforcement. And so we are prepared to hear from New Yorkers and take the actions we need to make sure that the city is affordable.

11:25For other city leaders who are considering how to make their cities more affordable and considering these consumer protection questions, any advice for them? Well, be aggressive and be thoughtful. I mean, this is an opportunity for states, for municipalities to really step in for where there have been losses at the federal level, to be candid. Our commissioner came from the Federal Trade Commission, and he really came with that spirit of tackling the most difficult issues. But we don't have tools necessarily that other cities don't have. Many cities have deceptive business practices laws. Many cities have rulemaking power or enforcement power.

12:07They should look at what their tools are, and they should use them aggressively at this time when there really is falling on localities and states to really make sure consumers' rights are preserved. And we'll talk more about how the consumer protection landscape at the federal level has shifted. That's Michael Tiger. Michael, thank you so much for speaking with us. Oh, thank you. Thank you for inviting me. Coming up, how a federal rule banning subscription traps got struck down and what it means for consumer protection in the U.S. We'll be right back.

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13:31This is Tanya Mosley, co-host of Fresh Air. From mail-in ballots to racial gerrymandering, a lot is at stake for America's free and fair elections. I spoke with journalist Ari Berman about what he calls a final blow to the Voting Rights Act. My fear is that we are returning to a politics of Jim Crow in the South. Listen to Fresh Air on the NPR app or wherever you get your podcasts. Let's get back into the conversation. We're discussing subscription traps, junk fees, and the efforts to regulate them around the country. Joining us now in studio to discuss is Heather Timmons. She's a reporter covering U.S.

14:07consumer rights and corporate power for The Guardian. Heather, welcome to the program. Good morning. Also with us in studio is Pat Garofalo. He's the Director of State and Local Policy at the American Economic Liberties Project. He's also the author of The Billionaire Boondoggle, How Are Politicians Like Corporations and Big Wigs, Still Our Money, and Jobs. Pat, welcome. Hey, thanks for having me. We're also hearing from so many of you. Hi, my name is Olivia. I'm from Falls Church, Virginia. I have a subscription to DoorDash that I have not been able to figure out how to cancel. I've gone through support.

14:42I've gone through the website. I've gone through the app. And I have not figured out how to cancel that$9 subscription fee that I pay every single month. And it's been going on for about a year and a half, two years. This is Lisa from Alpharena. The subscription that I had to deal with was ClassPass. I didn't realize I even signed up for it. I thought I was just searching it and didn't realize after a few months that I was actually paying for a subscription I never used. And when I contacted ClassPass, they were very difficult to deal with, but they did eventually cancel my subscription. Lisa, Olivia, thanks for those messages.

15:30As we've been discussing last week, New York City enacted a rule to impose fines on companies that make canceling subscriptions more difficult for customers. Pat, how does New York City's move fit into the larger landscape of cities and states enacting what's known as click-to-cancel policies? First, we think it's really exciting to see a municipal-level rule in New York City. This is, as far as we know, the first in the nation. But it does follow on efforts in a bunch of states, including New York State, which has arguably the strongest click-to-cancel rule in the country that was passed and signed into law a few years ago.

16:02In enacting these sort of rules, there's been a lot of action at the state level, both Virginia and Louisiana. This year became the latest states to enact click-to-cancel rules. And if that sounds like a kind of purplish state and a reddish state and something that appeals all across the ideological spectrum, well, that's exactly what it is. Well, I was wondering about the political divide, if any, that you're seeing here. Why are you seeing this as a bipartisan issue from the politician's perspective? I think it's a couple of things. First, in an era of high costs, this is something that you can enact quickly and have an impact quickly.

16:35It's also something that everyone has experienced. You don't have to be a Democrat or a Republican or an Independent or a Socialist or a Monarchist or whatever to have been trapped in a subscription. and a lot of legislators have experienced this, both on click-to-cancel and junk fees. One of the things that I found really striking is that the politicians themselves or their families, you know, their kids, their spouses have gotten trapped in subscriptions, have paid outrageous fees. And so when you're in committee hearings or talking to folks off the floor of the statehouse, they have their own story.

17:06So it hits home with them in a way that I think a lot of other issues don't. So I think that's why we've seen so much momentum at the city and state level. But also there have been some federal efforts that haven't been as successful and haven't gotten as far through the process. I think that's galvanized a movement of both advocates and legislators at other levels to say, well, the feds are letting us down, so let's do it ourselves. We'll talk a little bit more about those federal attempts in a bit. But in a statement to 1A, trade association NetChoice, which represents major internet and technology companies like Meta, Amazon, and Netflix, wrote that NYC's click-to-cancel rule would, quote, harm both consumers and businesses by restricting the ability of businesses to offer discounted retention offers to save consumers money, while also causing legal uncertainty when it comes to the interpretation of this rule compared with existing New York state law regulating subscription cancellation policy.

18:00So Heather, they're making an argument here about consumer choice and access and affordability, but also that you have this city-level rule, and then there's also a state-level rule and those might be in conflict for some businesses. What's your response? We're going to hear this a lot probably from businesses as we see different municipalities and different states start to roll out different rules given the federal vacuum about them. You know, their argument, the strongest argument from the industry or one of the strongest has always been if you institute this one click to cancel, they can't do what they call saves where you go, listen, I'm paying$83 for my gym membership or whatever it is.

18:38and you say, I want to cancel it, and someone calls you up and says, what if it's 50? You know, and they like that. And that's good for you as a consumer, too, if you can do that kind of thing. And so how exactly that gets worked out is something I think industry is going to have to grapple with. But, Pat, also this question of the vacuum at the federal level. If we rewind back to October 2024, the FTC, the Federal Trade Commission, enacted a federal click-to-cancel rule. It required companies that offer subscription services to make it as easy to cancel as it is to sign up. Then in July 2025, the federal appeals court struck that rule down, saying the FTC didn't conduct a preliminary regulatory analysis.

19:18And that process is required for rules that could impact the economy by more than$100 million. So before we dig a little more into that federal rule, I mean, is there some truth to this idea that if companies are trying to navigate a regulatory environment that changes from state to state that really isn't tenable for them? I don't really buy that argument because there are tons of areas in which these very large, well-resourced corporations have to deal with differing laws. Every state has different tax laws. Every state has different environmental regs. Every county has different property tax rules.

19:58And so this is something they're very used to. And when it's in their interest to have rules be different, something like pushing down a minimum wage or eliminating labor law in a certain place, they have no problem with that and dealing with differing regimes that help them. It's only when something that's aimed at consumers making life a little easier or cheaper for customers of these products that we start to worry about. Patchwork is the word that always gets thrown around. So I don't take that super seriously as an argument, particularly for these giant, massive corporations. It's one thing if you're talking about a small, you know, five-person mom-and-pop shop.

20:33But I'm fully confident Amazon can deal with different kick-to-cancel laws in Buffalo versus New York City. Well, I mean, Heather, we mentioned small mom-and-pop shops. Some of them do rely on a subscription model. In your reporting, what are you finding about the pressure these types of rules put on those businesses? I don't have a great answer for the small mom-and-pop shops yet. I've mostly sort of looked at what the Chamber of Commerce is going to say next and things. I would just say to your point, you know, the subscription economy, this idea that we're going to subscribe to everything is relatively new.

21:06In all of our lifetime in this room, you know, 20 years ago, there was no such thing. So, of course, it can be regulated. And, of course, companies can figure out a different way to act. It's something that investors love it. You know, it's regular predictable earnings. But Americans are now paying over$200 a month in subscriptions, according to a rocket money estimate. something like 74 % of Americans are paying more than they think they are. You sort of underestimate how much you're paying because, again, for all this stuff that you didn't know you had a$9 DoorDash fee, you can't figure out how to get rid of it.

21:38It's only$9 a month. How long are you going to be on the phone trying to get rid of it? You know what I mean? And that kind of logic is something that companies are relying on, and it's a multibillion-dollar business for them every year, subscriptions you can't cancel. Well, in 2024, the U.S. Chamber of Commerce issued a statement criticizing the click-to-cancel rule, calling it a, quote, power grab by the commission in its pursuit to micromanage business decisions. They continued on to say, quote, not only will this rule deter businesses from providing sensible, consumer-friendly subscriptions, but it will leave Americans with fewer options, higher prices, and more headaches.

22:13Heather, why was the U.S. Chamber of Commerce so opposed to this rule? I mean, they're, you know, they're the biggest business lobby in America, and they have always been opposed to very specific sort of conditions dictating how they do business. Their general pushback is that. And I would just go back to what both the New York City Consumer Protection Division and the FTC are tasked with doing. And the language for both of them is FTC is unfair or deceptive practices. The New York City's is unfair or unconscionable practices. And I think, you know, we can all probably agree more easily in what's deceptive.

22:50And when you talk about what's unfair or unconscionable, it depends on what your point of view is. Is there a bit of consumer responsibility here, Pat, in that, you know, yeah, we all click those boxes without really reading the fine print. But how much of this is on us as consumers to just be more thoughtful and careful about reading the fine print before we say yes? I think especially in an online environment, and that's the other big change that we're talking about, right? A lot of subscription rules date back to the 70s when we were not dealing with an online environment. It's very easy to make online purchasing deceptive and tricky and hard to understand through the design of the physical page, through the actions you have to take to navigate through the screens.

23:37And the corporations know that and have spent a lot of time and effort making those processes as hard to understand and as tricky to follow as possible. So there certainly is some level of consumer responsibility, but there's also a lot of corporate responsibility to not make things hard to navigate and tricky. And also I think this is not just a consumer-facing question. This is also a business fairness question. A corporation, a business that doesn't want to engage in these practices, and I found this a lot on my work on junk fees. The companies that don't want to use them feel compelled to use them because it does give you a sort of perverse competitive advantage.

24:18You appear artificially cheaper if you use backloaded junk fees versus just putting an upfront price. So there are actually business pressures to engage in these deceptive practices. And so in a lot of ways, these rules are just leveling the playing field for the businesses that want to do the right thing. We'll talk a bit more about junk fees, but I want to go back to when the FTC was still crafting a federal version of the click-to-cancel rule. Other business groups as well raised objections about how the regulations would hurt their business models. Sarah Davies is with the International Franchise Association, and here's some of what she said when she testified at an informal hearing on proposed amendments to the rule in 2024.