The Federal Trade Commission (FTC) announced a decisive new “click-to-cancel” rule on October 16, 2024, aimed at making it easier for consumers to cancel subscriptions and memberships. The rule mandates that the process to cancel must be as straightforward as the process to enroll, addressing longstanding consumer frustrations with overly complicated cancellation procedures.
FTC Chair Lina M. Khan highlighted the common practice where businesses compel consumers to endure cumbersome processes to end their subscriptions, often resulting in unnecessary expenses for services no longer desired. The new rule intends to eliminate such practices, ensuring a straightforward path for consumers wishing to discontinue services.
This final rule applies to virtually all negative option programs across any media, enhancing transparency and fairness in digital marketing and sales. It also includes strict requirements for sellers, such as prohibiting the misrepresentation of essential facts in negative option marketing, mandating clear disclosure of material terms before obtaining billing information, and securing informed consent from consumers before initiating charges.
Developed as part of an ongoing review and modernization of the FTC’s 1973 Negative Option Rule, this update responds to the shift towards digital economies where signing up consumers for recurring charges has become increasingly easier for businesses. The rule, set to take effect 180 days after publication in the Federal Register, follows a robust public consultation that began with a proposed rulemaking announced in March 2023, which attracted over 16,000 comments from various stakeholders.
Despite the benefits of negative option programs, the FTC noted a significant increase in consumer complaints regarding such practices, with daily complaints rising sharply over the past five years. In response, the final rule stipulates several prohibitions aimed at protecting consumers, including clear guidelines on the cancellation process and the immediate cessation of charges once a cancellation request is made.
Interestingly, the final rule was approved by a 3-2 vote, reflecting some dissent within the Commission. The adopted rule omits previously considered requirements such as annual reminders to consumers about their subscriptions and constraints on how sellers can interact with consumers attempting to cancel.
The FTC has prepared a fact sheet, led by primary staffer Katherine Johnson from the FTC’s Bureau of Consumer Protection, summarizing these changes. This new rule is a significant step by the FTC to safeguard consumer interests in an increasingly subscription-driven market, reinforcing the agency’s role in promoting fair business practices and competition.
