WASHINGTON — The Federal Trade Commission has adopted a “click-to-cancel” rule that will require businesses to make it as easy for consumers to cancel an enrollment or subscription as it was to sign up.

 

What You Need To Know

    • U.S. Sen. Brian Schatz, D-Hawaii, said the new rule makes progress on an issue that still requires legislative action to adequately address
    • The rule is a result of the commission’s ongoing review of its 1973 Negative Option Rule, which the agency is modernizing to combat unfair or deceptive practices related to subscriptions, memberships and other recurring-payment programs in the evolving digital economy
    • The update, approved on a 3-2 vote, specifically targets so-called negative-option marketing, in which customers accept free trials or other temporary promotions and are then automatically enrolled in and charged for a subscription- or member-based program if they do not proactively reject an offer or cancel an agreement
  • In 2021, Schatz joined Sens. John Thune, R-S.D., Raphael Warnock, D-Ga., and John Kennedy, R-La., in introducing the Unsubscribe Act, which called for greater transparency on the part of business who use subscription-based business models and easier cancellation options for consumers

 

U.S. Sen. Brian Schatz, D-Hawaii, said the new rule makes progress on an issue that still requires legislative action.

“Free trials should be free, but instead some companies have used that model to lure and trap customers into subscriptions with costly monthly charges they never meant to make,” Schatz said in a statement released shortly after the FTC announcement on Wednesday. “That’s why I introduced a bill to stop those kinds of deceptive business practices. While this FTC action is a good step in the right direction, we also need to pass the Unsubscribe Act to provide consumers with more transparency and protections.”

The rule is a result of the commission’s ongoing review of its 1973 Negative Option Rule, which the agency is modernizing to combat unfair or deceptive practices related to subscriptions, memberships and other recurring-payment programs in the evolving digital economy. The review included consideration of more than 16,000 comments from consumers, state and federal agencies, consumer groups and trade associations.

The update, approved on a 3-2 vote, specifically targets so-called negative-option marketing, in which customers accept free trials or other temporary promotions and are then automatically enrolled in and charged for a subscription or member-based program if they do not proactively reject an offer or cancel an agreement.

For example, a consumer might click “accept” for a free, three-month trial for regular home delivery of a personal hygiene product like skin cream or razors. However, after the trial period is over, instead of the shipments ceasing, the consumer would be automatically enrolled in an ongoing delivery program for which the person is periodically charged. In many cases, procedures for cancelling the enrollment are confusing, inconvenient or significantly more burdensome that the initial sign-up.

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said FTC chair Lina Khan. “The FTC’s rule will end these tricks and traps, saving Americans time and money. Nobody should be stuck paying for a service they no longer want.”

The FTC said the updated rule will apply to almost all negative-option programs in any media. It will prohibit sellers from misrepresenting any material facts while using negative-option marketing; provide certain information before obtaining consumers’ billing information and charging them; and get consumers’ informed consent to the negative-option features before charging. It also requires businesses failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.

The commission said it fields thousands of complaints about negative-option and recurring-subscription practices each year. In 2024, the commission received nearly 70 consumer complaints per day on average, up from 42 per day in 2021.

Schatz continues to push for more rigorous safeguards against such practices.

In 2021, he joined Sens. John Thune, R-S.D., Raphael Warnock, D-Ga., and John Kennedy, R-La., in introducing the Unsubscribe Act, which called for greater transparency on the part of business who use subscription-based business models and easier cancellation options for consumers.

In addition to similar provisions contained in the new FTC rule, the Unsubscribe Act would require sellers to provide a clear notice to consumers when their free or reduced-cost trial is complete and before charging for the full-cost subscription; disallow automatic transfer to a contract longer than one month; and require sellers to periodically notify the customer of the terms of the contract and the cancelation mechanism.

Companion legislation was introduced in the House of Representatives by U.S. Reps. Ed Case, D-Hawaii; Mark Takano, D-Calif.; Jim McGovern, D-Mass.; Sheila Jackson Lee, D-Texas; Jamie Raskin, D-Md.; Debbie Dingell, D-Mich.; and Michael San Nicolas, D-Guam.