The UK Government has confirmed details of proposed new legislation on subscription contracts it intends to bring into force in spring 2027.  There will be new "cooling-off" periods at the end of free trials and when contracts auto-renew, as well as new obligations to make it easier for consumers to cancel, with potentially costly consequences for businesses that fail to comply.

One year on from the end of its consultation, the UK Government has announced its decision on the proposed new rules for subscription contracts under UK consumer protection law. 

The new laws will address two types of subscription that can lead to "subscription traps":

• auto-renewal: subscription contracts with automatic renewal terms; and
• free trials: subscription contracts that begin with a free-of-charge "trial period", with the possibility that, without active cancellation, the consumer is bound to the subscription.

These two types of subscription contract will not be prohibited under the new rules. However, businesses offering such contracts to consumers will be obliged under the new rules to give the consumer certain specified rights:

Cooling-off periods

• Existing consumer protection laws already provide consumers with a 14-day cooling off period after buying goods and services (with some exceptions), in which they can cancel a contract and get a full or partial refund. The new rules will introduce "renewal" cooling off periods of 14 days after a "free trial" or when a subscription contract of a year or more auto-renews.
• If a trader is in breach of the requirement to inform a consumer about their cooling-off rights, the cooling-off period extends to 14 days after the trader corrects its breach, up to a maximum of 12 months. 
• If a consumer cancels the contract within the extended cooling off period, the consumer will be entitled to a refund of all amounts paid within that period, unless the business can establish that the consumer took an unreasonable amount of time to cancel. This is potentially the most onerous consequence of the new rules for businesses.

Information to consumers

• Cooling-off notices must be given in writing on a durable medium, the purpose of the notice must be immediately apparent to the consumer, and the notice must include information about the costs for the consumer of returning (returnable) goods after exercising a renewal cooling-off right.
• Reminder notices (before auto-renewal) must be given to consumers in writing on a durable medium and the purpose of the notice must be immediately apparent to the consumer.
• The purpose of an end-of-contract notice must be immediately apparent to the consumer, and the prescribed information must be given in a way that is more prominent than any other information given at the same time.
• But this information does not need to be given upfront such that it is the first thing the consumer sees.
• The proposals would also extend the cooling off rules to subscription contracts for various goods and services that are not covered by the current rules, including: (i) bespoke or perishable goods; (ii) goods sealed for health/hygiene reasons or sealed audio/video recordings and software, which have been unsealed by the consumer; (iii) goods that have become inseparably mixed with other items after delivery; (iv) newspapers and magazines and periodicals; (v) passenger transport services; and (iv) low value “off premises” (e.g. online) contracts.

Refunds on cancellation

• Where businesses have complied with their obligations to inform consumers about the renewal cooling off periods, consumers' refund rights will be as follows. With the exception of digital content, these rules are broadly in line with those that already apply to the initial cooling off period after a consumer has entered a contract.
• Refunds for cancelled goods contracts:  where goods sold to consumers are returnable (for example, a book), consumers will receive a refund if they return the goods after cancelling the contract, including standard delivery costs (there are modifications for perishable goods).
• Refunds for cancelled service contracts: full refund where the cancellation is made before the service has begun; proportionate refund (as a percentage of the full price) where the cancellation occurs after the service has begun or while it is ongoing (for example, during a renewal cooling-off period)
• Refunds for cancelled digital content contracts (e.g. streaming services):  where a consumer signs up for a contract, once the consumer has given express consent for supply to start and waived the initial cooling-off right, the consumer lose the statutory right to cancel when the supply starts (but will still benefit from the renewal cooling-off right - 14 days after a free trial or after a subscription contract of a year or more auto-renews - and would receive a proportionate refund if they cancelled then).
• Refund payments need to be made without undue delay and within 14 days after cancellation (or 14 days after receiving returnable goods sold) to the same method of payment, unless agreed otherwise.

Easy exit

• Businesses will have to give consumers a straightforward method for exiting the subscription on the renewal date, at any time after it begins and up to a few days before the before the renewal date, with no steps that are not reasonably necessary.
• Traders will be allowed to make offers or seek feedback from consumers during the exit mechanism, provided these do not frustrate or unreasonably prolong the exit process, or consumers can opt out of them.
• Non-compliance with the easy exit requirements will have similar consequences to those for information and reminder requirements.

Contract terms designed to circumvent the rules

• Prohibition of using contractual terms which have the purpose or effect of making it disproportionately difficult for consumers to cancel auto-renewal.
• Prohibition of contractual terms that make consumers liable for payment before a rolling contract actually renews onto a new contract period.

Penalties

• Breaches of the new rules on subscription contracts will be subject to the direct enforcement powers of the Competition and Markets Authority, including fines of up to 10% of group worldwide turnover.

Implementation

• The new rules are to be enacted by a statutory instrument, with a view to coming into force from spring 2027.
• They will not apply to certain regulated services such as energy, water, telecoms and financial services, where the sector regulators already deal with subscription terms.
• Guidance is to be published on how the new rules will work, including on how the concept of "easy exit" should be applied.