Do you offer subscriptions or memberships as part of your business? If so, you may be aware of new laws regarding how subscription services operate in the UK.
In this post we will explain these new rules, and explore how they might affect your business.
DMCC Automatic Subscription Rules – The Basics
The Digital Markets, Competition and Consumers Act 2024 (DMCC) set certain rules and regulations for digital markets. This included some major changes to auto-renewing subscription contracts, which are due to come into force in 2026.
The new rules are designed to combat “subscription traps”, whereby customers unwittingly sign up for long-term subscriptions that renew automatically.
Who Do The New Rules Apply To?
The new rules apply to any business that offers any kind of subscription service, whether you offer them online or in-store.
This might include:
- Gyms and leisure centres
- Companies offering “subscription boxes” containing snacks, drinks, or other products
- Shops that offer membership schemes
- Apps, websites, and streaming platforms
What Are The New DMCC Automatic Subscription Rules?
DMCC sets new rules for various aspects of automatic subscription contracts:
- Pre-contract information.
- Reminder notices
- Ending contracts
- Cooling-off notices
Pre-Contract Information
- Businesses must provide key pre-contract information in full at the point when customers enter into the contract. This information can not be hidden in terms and conditions, or behind a hyperlink.
- Key pre-contract information should specify both the frequency and amounts of ongoing payments, along with the customer’s minimum total liability, a summary of their cancellation rights, and details of how reminder notices will be timed.
- In addition to providing this key pre-contract information, businesses must also make full pre-contract information available before the customer enters into a contract. This should include company details, including information on how to contact them for enquiries, along with the customer’s cooling off rights.
- Failure to provide any of the above information means that the customer will not be considered legally bound by any contract they sign.
Reminder Notices
- Businesses must send reminder notices before a customer’s subscription renews, and before a payment is due.
- The frequency and timing of these reminder notices vary depending on the length of the subscription. For instance, businesses must send reminders every six months for yearly subscriptions.
- The legislation outlines that these reminder notices must contain specific information regarding payment amounts, cancellation rights, and so on.
Ending Contracts
- Businesses must make it as easy as possible for customers to end their contracts.
- There must not be any unreasonable steps for cancellation. For example, if the customer takes out a subscription online, then they must also be able to cancel that subscription online.
- Businesses must make their cancellation instructions as accessible as possible. They must also provide customers with written confirmation of a cancellation.
- Businesses must send this confirmation within 24 hours if the customer cancels their contract online, or within three working days if they cancel by other means.
Cooling-Off Notices
- All subscription contracts must include a non-waivable and non-conditional cooling-off period that applies more broadly than standard cancellation rights.
- Customers must be allowed to cancel a contract within 14 days of entering it, and within 14 days of any renewal payments.
- Cooling-off periods must apply regardless of how the customer signed up, whether it was online or in person.
- Businesses must issue new cooling-off notices on the first day of renewal cooling-off periods. They are not just for new customers.
- Businesses must explicitly notify customers of their cooling-off rights. They must provide this information separately from all other contractual information. They cannot hide the cooling-off rights in the terms & conditions, for example.
What Are The Penalties For Not Complying With DMCC Rules?
The DMCC Act also introduced new fining powers for the Competition and Markets Authority (CMA). As a result of this, you can be fined up to 10% of your annual turnover if you fail to comply with consumer law.
Non-compliance could also lead to reputational damages. If you do not adopt these more user-friendly contract rules, then it may send a message to your existing and potential customers: That you are actively looking to deceive them, or trap them. This, of course, could cause many to think twice about signing up.
Complying With The New DMCC Automatic Subscription Rules
You should review your current subscription contract processes as soon as you can. You may have to make changes to some aspects of the customer journey so as to ensure that customers receive all the information you need to provide, when you need to provide it.
It may also be necessary to review your current terms and conditions, to ensure that you are not burying any necessary information regarding renewal clauses, cancellation policies, and cooling-off periods.
Get Specialist Help and SME Insurance from James Hallam
James Hallam is an independent Lloyd’s broker with a dedicated team of experienced insurance professionals who care about protecting your business. We can help you understand the new regulatory framework for subscriptions, and we can help your business access the specialist insurance you need should a customer ever make a claim against you.
Find out how we can help you today.