The New FTC Click-to-Cancel Rule
- Easier Cancellations: Companies must make canceling subscriptions as easy as signing up. This “click-to-cancel” rule aims to save people time and prevent unnecessary charges.
- Clear Information and Consent: Businesses must clearly explain all key terms before collecting payment details, and they must get a customer’s clear permission (known as “express informed consent”) before starting any charges. This protects consumers from hidden fees or surprise costs.
- Protection Against Misleading Practices: The rule prevents companies from using tricks or hiding important facts to keep people in unwanted subscriptions. It sets a consistent legal standard for how businesses can use “negative option offers,” ensuring people aren’t trapped in services they no longer want.
Background
The rule amends the Commission’s 1973 Negative Option Rule. In its press release, the Commission explained it is “modernizing” the Negative Option Rule “to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs in an increasingly digital economy where it’s easier than ever for businesses to sign up consumers for their products and services.”
The FTC says it “receives thousands of complaints about negative option and recurring subscription practices each year,” with the number of complaints “steadily increasing over the past five years.”
Frankly, we expected that number to be higher.
“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said FTC chair Lina Khan.
“The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”
How The New Rule Works
Negative option features are common and include:
- “Prenotification plans” – Programs like book-of-the-month clubs, where a seller offers and then sends a product, charging the customer if they don’t say “no.”
- “Continuity plans” – Services like bottled-water delivery, where customers agree upfront to receive regular shipments until they decide to cancel.
- “Automatic renewals” – Subscriptions, like those for magazines or streaming services, that automatically renew when they expire unless the customer actively cancels.
- “Free trials” – Offers where customers get a service or product for free (or at a discount) for a limited time, then are charged a higher price after the trial period unless they cancel.
The final “click to cancel” rule prohibits sellers from:
- misrepresenting any material fact made while marketing goods or services with a negative option feature;
- failing to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature;
- failing to obtain a consumer’s express informed consent to the negative option feature before charging the consumer; and
- failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.
Under the new rule, businesses will be banned from forcing customers to go though a chatbot or an agent to cancel subscriptions that were originally signed up to using an app or website For memberships that customers signed up to in person, businesses will have to offer the option to terminate them by calling by phone or online.
When Does "Click to Cancel" Take Effect?
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Let Us Help YouTerms & Definitions
What is “click-to-cancel”?
“Click-to-cancel” means that companies have to make it as easy to cancel a subscription as it was to sign up. For example, if signing up took just a few clicks online, cancelling should be just as simple, without having to make phone calls or jump through extra steps.
What are “negative option offers”?
A “negative option offer” is a subscription or program that keeps charging you until you take action to cancel it. If you don’t actively choose to stop, the company assumes you’re still interested and continues to charge you. Examples include a monthly membership that renews automatically unless you cancel it.
What are “continuity plans”?
“Continuity plans” are programs where you sign up once, and the company keeps delivering products or services on a regular schedule, like every month or every three months, until you decide to cancel. Many streaming services or monthly box subscriptions use continuity plans.
What is a “recurring subscription”?
A “recurring subscription” is a service or product that you pay for repeatedly, usually on a monthly or yearly basis. These subscriptions automatically renew unless you choose to cancel them. Examples include magazine subscriptions, streaming services, and meal delivery plans.
What is “express informed consent”?
“Express informed consent” means that a company must make sure you fully understand what you’re agreeing to before they start charging you. This includes explaining any fees or commitments and getting your clear permission before signing you up for a subscription or recurring charge.