FTC Announces Final “Click-to-Cancel” Rule

The Federal Trade Commission (FTC) recently announced its final “Click-to-Cancel” rule that will significantly impact companies that use negative option (also known as automatic renewal) features. The final rule retains most, but not all, of the requirements set forth in the FTC’s proposed “Click-to-Cancel” rule released in March 2023 (discussed here). The effective date of the final rule is May 14, 2025, except for the provisions related to misrepresentations and other procedural requirements, which are not expected to be a burden for companies already complying with negative option laws and which will take effect on January 14, 2025. Assuming the rule survives legal challenge (it is already under challenge by several trade associations), companies should start taking steps now to ensure compliance. Companies that utilize these negative option features (even in business-to-business transactions) should review their current subscription practices, particularly their disclosures and consent and cancellation mechanisms.

The rule will apply to any person selling, offering, charging for, or otherwise marketing goods or services with a “negative option feature” (e.g., automatic renewals, continuity plans, free-to-pay conversions) through any medium (e.g., internet, phone, print materials, or in-person transactions). Negative option features come in a variety of forms (e.g., club memberships, subscriptions, and scheduled refill programs), but all share the central feature that they allow a seller to interpret a customer’s silence or failure to take an affirmative action as acceptance of an offer, resulting in continuation and automatic renewals until a customer takes affirmative action to cancel. The rule will apply to both business-to-business and business-to-consumer transactions.

Below is a summary of the key requirements under the final rule.

1. Prohibition on Misrepresentations. Companies cannot misrepresent any material fact in connection with the promotion of a negative option feature. This prohibition is intended to be read broadly to include statements about the negative option feature as well as any statement about the underlying good or service. In this context, “material” means “likely to affect a person’s choice of, or conduct regarding, goods or services.” This is significant because, with such misrepresentations constituting a violation of Section 5 of the FTC Act, they may amount in penalties up to $51,744 per violation.
2. Expanded Disclosures. Companies must clearly and conspicuously disclose all material terms prior to obtaining a consumer’s billing information, regardless of whether those terms directly relate to the negative option feature. The final rule provides a non-exhaustive list of information that must be disclosed: (a) that the consumer will be charged for the good or service, or that charges will increase after a trial ends, and, if applicable, that the charges will be on a recurring basis; (b) each deadline (by date or frequency) by which the consumer must act to prevent or stop the charges; (c) the amount (or range of costs) that the consumer will be charged, and, if applicable, the frequency of such charges; and (d) the information necessary for the consumer to find a simple cancellation mechanism. These material terms must be easily noticeable and understandable and appear immediately adjacent to the means of recording the consumer’s consent to the negative option feature and prior to obtaining such consent.
3. Express Informed Consent. Companies must obtain a consumer’s express informed consent to the negative option feature prior to charging the consumer. To obtain such consent, companies must obtain the consumer’s unambiguously affirmative consent to the negative option plan separately from any other portion of the transaction, and not include any information that interferes with, detracts from, contradicts, or otherwise undermines the ability of consumers to provide their express informed consent. Consent can be obtained through the use of a check box, signature, or other substantially similar method. The request must be presented in a clear, non-deceptive format.
4. Simple Cancellation. Companies must provide a simple cancellation mechanism that immediately halts all recurring charges. The cancellation mechanism must be at least as easy as the mechanism used to obtain consent and through the same medium. For cancellations via electronic mediums (e.g., app, website, text, email), the cancellation mechanism must be easy to find and cannot require the consumer to interact with a live or virtual representative (e.g., a chatbot) if the consumer did not do so when providing consent. For cancellations via telephone, the company must offer a telephone number that is monitored and available during normal business hours. For in-person cancellations, companies must offer an in-person cancellation method similar to the method used for obtaining the consumer’s consent and either an electronic option or telephone option. Once a company receives proof of consent, it generally must maintain it for at least three years unless the company can demonstrate that its sales process could not be completed without the required consent, in which case the company does not have to maintain the record of consent.

Note that the proposed rule would have required companies to provide annual reminders to consumers of the negative option feature and to obtain consent before trying to “save” a cancellation attempt, such as by presenting additional offers, modifications to the existing agreement, reasons to retain the existing offer, or similar information. The FTC did not adopt these requirements at this time but nevertheless cautioned that “the removal of the saves proposal is not a license to erect unreasonable and unnecessary barriers to cancellation,” which could render a cancellation method “neither simply nor easy.”

As the FTC’s final rule sets a national standard for negative option features, states have begun enacting similar laws. California recently amended its automatic renewal law to incorporate many of the FTC’s requirements from the final rule, including the prohibition on misrepresentation, the requirement to obtain a consumer’s express consent to the negative option feature itself, and expanded disclosures prior to confirming billing information. California’s law also goes a step further by requiring companies in the state to send reminder notices to consumers enrolled in annual subscriptions, and to provide clear and conspicuous notices of price changes at least seven days and not more than thirty days before the change takes effect. California’s amended law goes into effect on July 1, 2025. Other states may follow California’s lead by passing or amending their own automatic renewal laws.

A copy of the final rule is available here. If you need assistance with complying with federal and state automatic renewal laws or restructuring your subscription service, please contact one of the authors of this alert.