The Federal Trade Commission (“FTC“) recently announced final amendments to its trade rule, titled the “Rule Concerning Recurring Subscriptions and Other Negative Option Programs“, commonly referred to as the “Click-to-Cancel” rule.

The FTC introduced the new rule as part of an ongoing effort to modernize consumer protection practices around recurring payment programs in a transparent and fair manner.

The rule will apply broadly, including across all online services serving the US market, and impose obligations on any company offering “Negative Option Programs” for goods or services.

The rule will take effect 180 days after its publication in the Federal Register, which is expected shortly, therefore will become enforceable in April 2025. Non-compliance may lead to enforcement under several federal laws, including the FTC Act, and may result in civil penalties and other liabilities.

What are Negative Option Programs?

While these programs vary in form, all Negative Option Programs share a core feature: they treat a customer’s silence or lack of action as acceptance of an offer, assuming by default that the customer agrees to continue the service or product. Under these programs, customers are charged unless they actively cancel the service or subscription.

Negative Option Programs generally fall into the following categories:

1. Free trials: Start with a free or low-cost trial period, converting to a full paid subscription if not canceled within the trial timeframe;
2. Automatic renewals: Subscriptions automatically renew at the end of each term (monthly, yearly, etc.) without prompting the customer;
3. Continuity plans: Billing occurs continuously at regular intervals (often monthly or quarterly), with no set end date; and
4. Prenotification Plans: Additional offers are made after an initial purchase, which may result in enrollment in extra agreements.

What is Now Required?

The new rule’s key provisions require companies to implement specific, customer-focused features and practices directly within their apps and websites. Below are some of the key requirements, together with practical insights:

• Obtain explicit, informed consent:
  • Before confirming a subscription, implement a specific confirmation step requiring customers to actively check a box or click to confirm that they understand the terms of the service, including cancellation procedures and billing schedules; and
  • Record user interactions related to consent and cancellation, including a timestamp.

• Easy-to-find, accessible cancellation mechanism:
  • Include a prominently displayed, clearly labeled “cancel subscription” or “end membership” button in the customer account settings. Avoid hiding this option in submenus or behind multiple steps. The cancellation process must be as simple as signing up, and key terms should not be buried in lengthy agreements or small print; and
  • Ensure that customers can cancel with minimal effort, ideally in just one or two clicks. For example, clicking “cancel” should confirm the action without unnecessary redirects or prompts.

• Transparent disclosures:
  • Display clear, accurate descriptions of all material terms, such as pricing, billing frequency, renewal terms, and any potential fees, before collecting payment information;
  • For trial offers, clarify if and when customers will be charged after the trial period. This should include information about trial expiration dates and any associated charges if the subscription continues; and
  • Facilitate customer access to view or update their billing information, ensuring clear visibility of the exact charges they will incur for each billing cycle.

• Provide reminders and notifications:
  • Send notifications before the end of a trial period or renewal date, reminding customers of upcoming charges. Notifications should ideally include a direct link to the cancellation page for convenience; and
  • After a user cancels, send a clear confirmation email or notification stating that the cancellation was successful and include the effective end date of service.

Companies offering Negative Option Programs should review and align their practices with these new FTC standards to avoid regulatory enforcement actions.

Notably, earlier this year, the UK Government passed the Digital Markets, Competition and Consumers Act, which introduced new rules relating to subscription contracts, which share strong similarities (albeit not identical) to the new FTC’s rule, including providing an easy mechanism to cancel subscriptions, transparent disclosures, and periodic reminders.

For questions or guidance on implementing the new regulatory requirements, feel free to reach out.