The United States Federal Trade Commission (FTC) issued a Final Rule in November 2024 which will regulate the disclosure and cancellation of subscriptions for goods and services. The Rule, “the Rule Concerning Recurring Subscriptions and Other Negative Option Programs” is more commonly known as the “Click to Cancel” Rule.
Studies showing that millions of Americans and billions of U.S. Dollars were caught up in unwanted subscriptions drove the FTC to draft the Click to Cancel Rule to curb unfair or deceptive practices leading to continued subscription fees for unknowing consumers.
The main elements (and enforcement) of Click to Cancel will go into effect May 14, 2025, so here’s what you need to know to bring your company into compliance.
What companies does Click to Cancel apply to?
The FTC typically promulgates rules concerning Business-to-Consumer entities, but this rule notably applies to both Business-to-Consumer and Business-to-Business entities. That means B2B companies, including software as a service (SaaS) companies, must comply with Click to Cancel, as well.
Companies must comply with Click to Cancel if they offer any “negative option feature” — which the Rule clarifies is a provision of a contract that treats a customer’s silence or failure to affirmatively cancel a service as an acceptance of continued service. This includes, but is not limited to, automatic renewals and subscriptions that give you a free or discounted trial and then automatically increase to the standard price at a given time.
What disclosures are required?
Businesses must now disclose all material terms of the subscription immediately prior to obtaining the consumer’s explicit consent.
Material terms include, e.g.:
(i) that the consumer will be charged on a recurring basis unless the consumer timely stops the charges,
(ii) the dates or frequency of the charges,
(iii) the amounts of the charges, and
(iv) information on how to cancel.
Each of these terms must be clear and conspicuous, meaning written disclosures should be bolded or otherwise styled to stand out. The terms must also be easy for an ordinary consumer to comprehend and not contradicted by any other terms in the agreement.
Further, Click to Cancel creates liability for misrepresentations, as well. Expressly or implicitly misrepresenting any material fact, including cost, purpose or efficacy of the underlying good or service, health or safety, or any negative option feature, is a violation of this Rule.
Businesses will have to ensure that they receive unambiguous affirmative consent to the subscription by requiring a separate consent for the subscription provision detailing the terms. This can come in the form of a check box, signature box, or initial line immediately following the terms.
What does “Click to Cancel” mean?
“Click to Cancel” refers to the ability to simply click a button to cancel a subscription, which is the idea at the heart of this rule. While The Rule does not mandate companies use an immediate cancel button, it does demand that cancelation must be simple and as easy as it was to consent to the subscription.
However, the Rule does not require immediate cancellation or prohibit notice periods for cancelation, which means businesses may continue to require, for example, “30 days’ notice of cancellation before the service is cancelled.”
For online services, this may very well mean a cancel button. The Rule explicitly prohibits that consumers need go through a live representative or chatbot if they were able to sign up through electronic means.
Where a consumer consented to the subscription over the phone, they must be able to cancel over the phone. Where a consumer registered in person, they must be able to cancel either through electronic means or telephone.
Penalties
Click to Cancel comes with severe penalties for non-compliance. Violators could be charged up to $53,088 per violationas an unfair or deceptive act.
What to do going forward
While Click to Cancel does not state that it will be effective retroactively, all subscription services must abide by the Rule for new consumers. This means it may be time to take a look at and update your Terms of Service, Service Agreements, and online subscription procedures.
How we can help
Please contact our Corporate Team of Elena G. Rogers, Esq. or Jeffrey A. Bekiares, Esq. if you would like us to review and provide guidance on what changes would need to be made to your business’ agreements and procedures to bring your company into compliance with Click to Cancel.
You can also learn more about our services on our General Counsel Practice Area page.
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