Subscription contracts under the DMCCA: What the new government guidance means for businesses

The new rules governing subscription contracts represent the latest step in the government’s broader programme of strengthening consumer protection through the new consumer enforcement regime introduced by the DMCCA. Drawing on the government’s recently published draft guidance, this article will cover:

• What types of contracts the new rules will apply to
• The obligations that the new rules will place on traders and the rights that will be given to consumers
• The practical steps that businesses can take to prepare
• How we can support you

What types of contracts do the rules apply to?

The new rules will apply to all business-to-consumer subscription contracts entered into on or after 1 January 2027, regardless of whether they are entered into online, over the phone, or in person.

However, contracts in relation to certain sectors and services are excluded from the regime, including contracts for:

• cultural and heritage charitable memberships
• utilities
• insurance and financial services
• medical prescriptions
• telecoms services
• accommodation
• services carried out by micro-grocery businesses
• travel packages, timeshares, and other holiday products
• childcare
• gambling

What are the obligations placed on traders?

Under the new rules, traders must:

• Give or make available full pre-contract information clearly, altogether, and before a consumer enters a subscription contract. Key pre-contract information (such as how often payments will be taken and the amount that will be charged) must also be provided separately from any other information, to ensure that it comes to the consumer’s attention.
• Provide clear and prominent reminder notices at key points during the subscription contract to inform consumers that a renewal payment is due. This must be done in a durable medium (e.g. via email, paper, or SMS, rather than a disappearing push notification), and generally, these will be required:
• For rolling weekly or monthly subscription contracts – once every 6 months
• For subscription contracts renewable every 12 months or more – before the contract renews for the next period , as well as an additional earlier reminder
• For subscription contracts with a free or discounted trial period – before such a concessionary period ends
• Ensure it’s easy and straightforward for consumers to bring a subscription contract to an end at any time during the duration of the contract, including immediately after the contract is entered into. Exiting should be as easy as signing up, and if consumers can enter into a subscription contract online, they must be able to end the contract online .
• Provide a clear end-of-contract notice in writing on a durable medium after a consumer has exercised their right to end a subscription contract. Such notice must state the date on which the contract ended, or will end, and must be given within 24 hours of the consumer’s notification if the consumer ends the contract online, or within 3 working days if the consumer ends the contract by other means.

What additional rights will consumers have?

The new rules give consumers a number of new cancellation rights. In particular, consumers will generally be entitled to cancel without giving a reason and without penalty during:

1. The initial 14-day cooling-off period after entering into the contract
2. The further 14-day renewal cooling-off period after the end of a concessionary period, or after the contract auto-renews onto a 12-month (or longer) period

Consumers may also have cancellation rights where a trader fails to comply with certain obligations under the regime and, depending on the circumstances, may be entitled to a full or partial refund upon exercising those rights.

What can businesses do to prepare?

If you’re a business that offers subscription services to consumers, you should begin preparing now to ensure that you’re ready to comply with the new rules. In particular, you should review the customer journey from sign-up through to cancellation, to identify any areas where changes may be required. Such a review should cover:

• The pre-contract information you provide to consumers, when it is provided, and how it is presented – including your terms and conditions and any marketing materials presented to consumers before and throughout the subscription sign-up journey
• Your auto-renewal and free trial mechanisms, especially in relation to how consumers are informed that charges will begin and when renewals will occur
• The reminder notices sent to customers, and how often these are sent
• The cancellation mechanisms in place, and how accessible they are to customers
• The technology and systems you have in place to facilitate the management of reminder notices, cancellation requests, and record-keeping, to ensure operational readiness for the new regime

Consumer law compliance – How we can support you

The new rules governing subscription contracts are part of a wider shift towards stronger consumer protection enforcement in the UK, and the next step in the government’s crackdown on business practices that could be harmful to consumers. Our specialist Competition lawyers can help you to stay ahead by providing user-friendly compliance checklists to aid in your reviews, tailored training sessions for marketing and compliance teams, and strategic advice on compliance risk, CMA engagement, and enforcement risk mitigation. In addition to this, if/when complaints or a CMA investigation occur, we can support you with an effective strategic response.

If you’re unsure whether your practices are compliant under the new rules, now is the time to act. If you would like to get in touch, please contact Sarah Ward or Alicia Moyo.