By Abigail Palotas, Staff Writer
On October 16, 2024, the Federal Trade Commission (FTC) issued a final rule imposing new requirements on companies with subscriptions, autorenewals, and other similar services that obligate consumers to make recurring purchases unless they take affirmative steps to cancel.[1] These business practices are referred to as “negative options.”[2] The new rule, “Click to Cancel,” addresses common problems, such as sellers who do not tell the truth or leave out necessary information, people who get billed when they did not agree to pay, and sellers who make it hard – or impossible – to cancel.[3] Most of the rule’s provisions will go into effect 180 days after it is published in the Federal Register.[4]
The headline portion of the rule sets a baseline requirement that the company provide a simple mechanism for the consumer to cancel.[5] Under the rule, it must be at least as easy to cancel as it was to sign up.[6] Cancellation must also be available through the same medium that the consumer used to sign up.[7] Online cancellation must be easy and cannot require interacting with a live or virtual representative.[8] For cancellations by phone, the company must promptly honor the cancellation request.[9] Lastly, if consumers purchased a negative option service in person, the company must offer either an online or telephonic method of cancelling.[10]
The rule also requires sellers to obtain express consent to the negative option separate from any other part of the transaction.[11] Companies can comply with this provision using a click box, separate button, or signature that relates solely to the negative option feature itself.[12]
Further, the Click to Cancel rule requires companies to prominently disclose certain information regarding the negative option near the affirmative consent mechanism described above.[13] Examples of the kind of information that must be disclosed include that the consumer will be charged unless they timely act to cancel; the deadline by which the consumer must act to prevent the recurring charge; the amount of the charge, the frequency of the charges unless the customer cancels; and how to find the simple cancellation mechanism.[14]
Additionally, the rule prohibits a company offering a product or service sold via a negative option from making misrepresentations. It also sets recordkeeping requirements.[15] Sellers must keep a record of affirmative consent for at least three years.[16]
It is important to note that the rule does not supersede other state laws unless the state law is inconsistent, and state laws that provide greater protection are not inconsistent with the rule.[17]
The Click to Cancel rule obviously has numerous benefits for consumers, and it also streamlines processes for businesses that offer products or services via negative options by setting a baseline standard.[18] However, businesses have criticized the rule as governmental meddling.[19] Neil Bradley of the U.S. Chamber of Commerce believes the rule will not only deter businesses from providing sensible consumer-friendly subscriptions, but will leave Americans with “fewer options, higher prices and more headaches.”[20]
Despite these criticisms, the rule addresses a problem so widespread that it is considered a non-partisan issue, even amidst the surge of political division across the United States as the 2024 presidential election nears. The FTC estimates that it receives about 70 complaints per day about illegal and deceptive subscription traps.[21]These business practices have also been the subject of class action lawsuits.[22] Overall, the Click to Cancel rule will save American consumers both time and money by better informing them of the terms attached to their purchases and by protecting them from paying for things they do not want anymore – whether it be because they forgot about the subscription or they were unable to get out of that subscription because the company designed that way.[23]
[1] https://www.kirkland.com/publications/kirkland-alert/2024/10/ftc-finalizes-click-to-cancel-rule-governing-subscriptions-and-autorenewals.
[2] Ibid.
[3] https://www.ftc.gov/system/files/ftc_gov/pdf/NegOptions-1page-Oct2024-v2.pdf.
[4] https://www.ftc.gov/news-events/news/press-releases/2024/10/federal-trade-commission-announces-final-click-cancel-rule-making-it-easier-consumers-end-recurring.
[5] https://www.kirkland.com/publications/kirkland-alert/2024/10/ftc-finalizes-click-to-cancel-rule-governing-subscriptions-and-autorenewals.
[6] Ibid; https://www.ftc.gov/system/files/ftc_gov/pdf/NegOptions-1page-Oct2024-v2.pdf.
[7] https://www.kirkland.com/publications/kirkland-alert/2024/10/ftc-finalizes-click-to-cancel-rule-governing-subscriptions-and-autorenewals.
[8] Ibid.
[9] Ibid.
[10] https://www.ftc.gov/system/files/ftc_gov/pdf/NegOptions-1page-Oct2024-v2.pdf.
[11] https://www.kirkland.com/publications/kirkland-alert/2024/10/ftc-finalizes-click-to-cancel-rule-governing-subscriptions-and-autorenewals.
[12] Ibid.
[13] Ibid.
[14] Ibid.
[15] Ibid.
[16] Ibid.
[17] Ibid.
[18] https://www.pbs.org/newshour/show/ftcs-click-to-cancel-rule-would-make-it-easier-to-end-subscriptions.
[19] Ibid.
[20] Ibid.
[21] Ibid.
[22] Ibid.
[23] Ibid.
