Written by: Haim Ravia, and Dotan Hammer
The U.S. Federal Trade Commission (FTC) announced the adoption of a “click-to-cancel” rule that will require subscription sellers and service providers to make it “as easy for consumers to cancel their enrollment as it was to sign up”. The rule is set to take effect in April 2025.
The rule targets what are called “Negative option programs”, where a seller can interpret a consumer’s silence or failure to act as an acceptance of a retail offer. These programs include practices which fall into 4 categories:
- Prenotification Plans – where sellers send consumer notices offering goods; when consumers fail to refuse the transaction the goods are delivered to the consumer which is then charged for them.
- Continuity Plans – where the initial agreement given by the consumer is used continuously to periodically charge the consumer for various goods and services.
- Automatic Renewals – where renewals for paid subscriptions are made and charged automatically.
- Free Trail Conversion Offers – where an initial “free trial” is automatically extended in a charged model, unless a consumer actively cancels the subscription.
While previous rules only regulated prenotification plans, the new rule will extend to all categories of negative option programs and will prohibit sellers from misrepresenting material facts and relevant terms, while marketing goods before obtaining a customer’s billing information. Additionally, the rule requires sellers to obtain a consumer’s expressed informed consent to the negative option included in the term of the transaction prior to charging and providing a simple mechanism to cancel the negative option feature and immediately cease payments.
The rule was adopted after an evaluation process initiated by the FTC in March 2023, amid a significant increase in complaints submitted to the FTC regarding negative option features and recurring subscription practices.
Click here to read the FTC’s announcement of the new rule.
Click here to read the full text of the final rule.
