On October 16, the United States Federal Trade Commission (FTC) officially released the final version of the “Click to Cancel” rule, which requires businesses to simplify the cancellation process to make it as easy as the subscription process. This rule is part of the FTC's amendment to its 1973 Negative Option Rule, which targets unfair or deceptive practices related to subscriptions, memberships, and other recurring payment plans.
The “Click to Cancel” rule introduces new compliance requirements for businesses operating in the U.S. This article will outline the main content of the rule and analyze key compliance points.
The “Click to Cancel” rule applies to all forms of negative option features, whether they are conducted through the internet, telephone, print materials, or face-to-face transactions. A “negative option feature” refers to arrangements where, if the consumer remains silent or takes no action to reject goods or services or cancel an agreement, they are deemed to accept or continue receiving the goods or services. Common examples include auto-renewals, continuous service plans, free trials, and prenotification plans. Notably, the rule also applies to B2B (business-to-business) transactions, meaning businesses that participate in negative option programs have the same protections as individual consumers.
The main content of the “Click to Cancel” rule (hereinafter referred to as "the rule") is as follows:
Prohibition of Misrepresentation: The rule prohibits sellers from making false statements about significant facts when marketing through negative option features. "Significant facts" refer to information that may influence consumers’ decisions or actions regarding a product or service, such as the existence and terms of a negative option feature, costs, the purpose or effectiveness of the product or service, and health or safety-related facts.
Mandatory Information Disclosure: The rule requires sellers with negative option features to clearly and conspicuously disclose all significant terms, whether or not they directly relate to the negative option feature. The rule provides a non-exhaustive list of “significant terms,” including: (1) that the consumer will pay for the goods or services, or that the cost will increase after a trial period, and that they will be charged periodically unless they take timely action to prevent or halt these charges; (2) that the consumer must take action before a deadline to avoid incurring charges; (3) the amount the consumer will be charged (or a range of fees), and, if applicable, the frequency of charges if the consumer does not act to prevent or halt them; and (4) information necessary for the consumer to find a simple cancellation mechanism. This information must be disclosed before obtaining the consumer’s billing information and must appear close to where the consumer consents to the negative option feature.
Obtaining Informed, Explicit Consent: The rule requires sellers with negative option features to obtain the consumer's explicit consent separately from other parts of the transaction, and without including information that interferes with, undermines, or impairs the consumer's ability to consent. Additionally, records of the consumer’s consent must be kept for at least three years, unless the seller can prove that the procedures used ensure the transaction cannot proceed without the consumer's consent.
Simple Cancellation Mechanism (“Click to Cancel”): The rule requires sellers to provide consumers with an easy mechanism to cancel negative option features or avoid charges, with a mechanism at least as convenient as the one used for consent. (a) For electronic cancellations, the cancellation method should be easy to find, and if consent was given without interacting with a real or virtual representative, the cancellation process should not require interaction with one. (b) For telephone cancellations, the seller must ensure prompt execution, with calls answered during regular business hours and at no higher cost than the consent call. (c) For in-person cancellations, sellers must, where feasible, offer an in-person cancellation method similar to the one used for consent, along with alternative electronic or phone-based options.
The rule’s prohibition of misrepresentation will take effect 60 days after publication in the Federal Register, while the requirements for mandatory information disclosure, obtaining informed explicit consent, and the simple cancellation mechanism will take effect 180 days after publication. As of now, the “Click to Cancel” rule has not yet been officially published in the Federal Register.
Compliance Recommendations
Businesses with negative option features should prioritize the new compliance requirements set by the “Click to Cancel” rule to avoid penalties. First, the rule’s core goal is to simplify the cancellation process, making it no more difficult than the subscription process. Therefore, businesses should minimize barriers to cancellation, allowing users to easily cancel or avoid charges. Notably, even if a subscription is initiated offline, businesses are required to provide electronic or phone-based cancellation options. Second, businesses must review marketing materials to ensure all significant facts are clearly and conspicuously disclosed without any inaccurate information. Lastly, since user consent is the legal basis for the subscription feature, businesses need to ensure they obtain separate, informed consent specifically for the negative option feature.
