The Federal Trade Commission (FTC) announced last month a final rule taking effect April, 2025 to make it as easy for consumers to cancel automatically renewing subscriptions, memberships, etc. as it was to sign up for them. It also requires that sellers give complete and accurate information about the product, service, and/or program ahead of consumers signing up, so that consumers can make informed decisions at the outset. This new rule is commonly called the “Click-to-Cancel Rule,” but its legal name is the amended Negative Option Rule.
Whether it’s a subscription or membership, all negative option programs include a term allowing the seller to interpret the customer’s silence or inaction as a “yes.” Some include a free or discounted trial period. Some are simply a straight monthly amount until canceled. It may be a gym membership, water delivery service, annually renewing software subscriptions, book-of-the-month club, vitamin/supplement monthly shipments, free-shipping-and-deals clubs, or any number of other examples. (Notice that this is different from installment sales, like a car loan or lease, where you agree up front to make a set number of monthly payments. Installment sales are not affected by the new rule. It is also different from a simple subscription that doesn’t automatically renew, like purchasing a one-year subscription to a newspaper or magazine.)
The FTC noted that consumer complaints about recurring subscriptions and memberships have skyrocketed. In 2024 they have received almost 70 complaints per day on average, whereas in 2021 they averaged 42 complaints per day. When the FTC asked for comments on a draft rule in 2023, they received over 16,000 comments from consumers, government agencies, and trade associations. Many of those comments expressed frustration with trying to cancel these programs. Consumers lamented the amount of time they have spent getting nowhere, sometimes having the memberships go on for many more months before finally successfully canceling them.
The new rule will:
• Require that sellers up front provide complete and accurate information about the goods and services they are selling and the negative option features of their program.
• Require that before sellers collect billing information, they must clearly and conspicuously disclose all material terms.
• Require that before a seller charges the customer, the seller must get the customer’s express consent to it being an arrangement that will continue until canceled.
• Require that sellers provide a cancellation method that is as easy as the sign-up process, and that halts charges immediately. For online signups, it must be click-to-cancel. For signups in person, it must be online or over the phone.
Once a subscription or membership has started, sellers are not required to remind you periodically about the auto-renewal feature. You will have to keep track of that yourself, but at least when you cancel, you can do so easily and halt charges immediately.
Penalties for violators are stiff: civil penalties of $51,744 per violation (payable to the government), and payment of refunds and damages to consumers. Consumers can file complaints online at www.ftc.gov.
Remember that the rule doesn’t take effect until April, 2025. This gives sellers an opportunity to change their current websites, apps, phone staff, and marketing materials to comply with the new rule.
Kim K. Steffan is an attorney with Steffan & Associates, P.C. in Hillsborough. She can be reached at (919)732-7300 or kim.steffan@steffanlaw.com.