FTC’s Controversial Click to Cancel Rules: Key Takeaways

Last month, the FTC released its final amendments to the “Rule Concerning Recurring Subscriptions and Other Negative Option Programs”, known as the “Negative Option Rule” or “’Click-To-Cancel’ Rule.” And while the amendments have yet to be finalized, it is likely they will come into effect in the first half of 2025. With that in mind, we’re sharing the key provisions and action items in this article.  

What Is Negative Option Marketing? 

Negative option marketing is a business practice where a customer’s silence or failure to take an action to reject goods or services or cancel an agreement is interpreted as an acceptance of the offer. Negative option marketing is commonly used in a variety of contexts, including subscriptions, memberships, and other recurring-payment programs.  

Some Background: Consumers Aren’t Happy With The State of Subscriptions 

Although negative option marketing is governed by a variety of state and federal laws designed to protect consumers from unfair and deceptive practices, in practice consumers are still struggling.  

Here are some snippets from a Forbes article about the state of subscription satisfaction:  

• “Research from Toolkits and National Research Group found that 67% of consumers would be more likely to subscribe to digital publications if canceling subscriptions was easier.” 

• According to a survey by Zendesk, “Of those reporting a bad customer experience, almost all of them (97%) changed their future buying decisions.” 

In other words, consumers aren’t happy with the status quo. And regulators are paying attention. Even before announcing the recent updates to the regulations, the FTC has been taking action against companies with poor subscription practices. For example, it initiated complaints against Adobe in June of this year and Doxo in April — both for tricky subscription practices. In Doxo’s case, the FTC alleged Doxo was checking boxes for automatic subscriptions by default, and in Adobe’s, the agency alleged that customers who selected an annual subscription were not adequately alerted that “cancelling the plan in the first year could cost hundreds of dollars.” 

Key Provisions of the FTC’s Updated Click-to-Cancel Rule 

The final click-to-cancel rule applies to all negative option programs. If you employ these tactics, here’s what you need to know:  

You Must Provide Certain Important Information 

You must provide certain information before obtaining billing information from customers or charging their payment method. This includes:  

• That payments will be recurring, if applicable;  

• The deadline by which consumers must act to stop charges;  

• The amount or ranges of costs consumers may incur;  

• The date the charge will be submitted for payment; and  

• Information about how to cancel the recurring payments. 

You Must Have Consent To Automatically Subscribe Someone 

Businesses must obtain unambiguous and affirmative consent before charging a consumer via a negative option feature. This means that pre-checked auto renewal boxes are a thing of the past. Your users and customers must now opt-in for these plans. 

Cancelling Must Be At Least As Easy As Signing Up 

The core of the rule is to ensure that canceling a subscription is as easy as signing up for it. If your customer signed up online, they should be able to cancel online as well.  If you signed up in person, companies are required to offer online or phone cancellation options. 

Action Items for Business Leaders 

Making your subscription practices more customer-friendly can improve compliance, but it will also help to build consumer trust and satisfaction. Here are some simple steps you can take in advance of the FTC’s rulemaking coming into effect:  

• Review and update your business’s subscription and membership enrollment and cancellation processes. View them through the lens of ‘how easy is this?’. If the answer is “it isn’t”, then it’s time to update your user experience.  

• Provide clear and conspicuous disclosures. Clearly disclose all material terms of the subscription or membership upfront, including the length of the subscription, renewal terms, cancellation fees, and how fees are calculated.    

• Obtain unambiguous consent. This means getting the consumer’s express consent to the negative option feature before charging them. This can be done through a checkbox or other method that requires the consumer to take a clear affirmative action to agree to the negative option feature. In other words, do not automatically check the auto-renew box – the consumer must do it themselves.  

• Offer a simple cancellation mechanism. This means providing a clear and easy-to-use mechanism for consumers to cancel their subscription or membership. The mechanism should be at least as simple as the sign-up process – and for those of you offering in-person sign ups, make sure your customers can cancel online.  

• Train customer service representatives. It’s worthwhile to explain to your team why you’re making the changes, what the new processes are, and how these updated cancellation methods can help your business.

Finally, while the Click-to-Cancel is not yet final (and is facing some legal challenges which could delay or even derail it going into effect), it’s worth bearing in mind that the FTC isn’t the only regulator on the beat here. California’s CPPA recently released its second enforcement advisory targeting dark patterns, including those that make it more challenging to cancel a subscription than to sign up. You can learn more about that here.   

If you’re concerned about dark patterns or privacy compliance, reach out. Our team is available to help.  

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