In a landmark move to combat persistent consumer harm, the Federal Trade Commission has unveiled comprehensive new regulations governing negative option programs and recurring subscriptions. This sweeping rule arrives after decades of consumer complaints and a steady stream of state and federal enforcement actions that highlighted the inadequacy of existing piecemeal regulations.
While negative option programs can benefit both sellers and consumers, the FTC found that widespread marketplace abuse demanded a unified response. Too often, consumers have found themselves trapped in recurring payments for products and services they never intended to purchase, victims of misleading marketing, hidden terms or Byzantine cancellation processes.
The new regulation, which applies across all media platforms from digital to in-person sales, establishes four cornerstone requirements. First, sellers are prohibited from misrepresenting any material facts during marketing. Second, they must clearly disclose all material terms before collecting billing information. Third, they must obtain express informed consent before charging customers. Finally, and perhaps most crucially, they must provide a simple mechanism to cancel subscriptions and halt charges immediately.
Notably, the final rule steps back from two initially proposed requirements: mandatory annual subscription reminders and restrictions on “save” attempts during cancellation (where sellers try to retain customers with new offers). The FTC plans to seek additional public comment on these provisions through a supplemental notice of proposed rulemaking.
The heart of the regulation remains its “Click to Cancel” provision, requiring cancellation to be as effortless as signing up. Sellers must provide a straightforward cancellation mechanism through the same medium used for enrollment, ending the practice of forcing consumers through customer service gauntlets or buried cancellation links.
The transparency requirements are equally robust. Before collecting billing information, companies must clearly disclose all material terms, including future charges, post-trial price increases and specific timing of charges. These disclosures must be clear, conspicuous and positioned right where customers provide consent.
For consent itself, the bar has been raised significantly. Businesses must obtain express informed consent that’s unambiguously affirmative and separate from other aspects of the transaction. This consent must be documented and maintained for three years, though businesses can avoid this record-keeping requirement if they can prove their systems technically prevent completion without proper consent.
The rule also takes a practical approach to cancellation methods. Phone cancellations must be available during normal business hours at no additional cost, and in-person subscriptions must offer alternative cancellation methods, ensuring consumers aren’t forced to return to a physical location.
Importantly, this federal regulation serves as a floor rather than a ceiling for consumer protection. States retain the freedom to impose stricter requirements, with the FTC explicitly preserving the validity of state laws offering greater consumer safeguards.
This comprehensive overhaul of subscription practices marks a significant shift in the regulatory landscape, forcing businesses to prioritize transparency and user-friendly cancellation processes. For consumers long frustrated by subscription traps and cancellation mazes, these new protections promise a more balanced and fair marketplace.