US finalizes “click to cancel” rule for subscriptions and paid memberships

The Federal Trade Commission has unveiled its final “click to cancel” rule requiring companies selling products and services on a subscription basis to make it “as easy to cancel as it was to sign up”.

The rules apply to almost all negative option programs for consumers in the US. Negative option marketing is a business practice where a customer's silence or inaction is interpreted as their agreement to be charged for a product or service.

The FTC also says the rule will “prohibit sellers from misrepresenting any material facts while using negative option marketing”. Sellers are now required to provide information before obtaining consumers’ billing information and charging them, and also to obtain “informed consent to the negative option features before charging [customers]”.

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” said Commission Chair Lina M. 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 “hoops” cited by Khan include protracted cancellation journeys that include multiple screens and clicks and forcing customers to navigate interactions with chatbot or agents to cancel a subscription that was originally signed up to using an app or website.

Under the EU AI Act, consumers in the European Union have the option to decline chatbot interaction altogether in all circumstances, in favor of talking to a human representative.
Under the new rule, businesses will be banned from forcing customers to go through a chatbot or an agent to cancel subscriptions that were originally signed up to using an app or website.

The final rule bans sellers from:

• Misrepresenting any material fact made while marketing goods or services with a negative option feature;
  
  
• Failing to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature;
  
  
• Failing to obtain a consumer’s express informed consent to the negative option feature before charging the consumer; and
  
  
• Failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.

Click to cancel requires sellers to provide annual reminders to consumers of the negative option feature of their subscription, unless they are subscribed to a physical product, and sellers can still attempt to upsell the customer to an alternative or “better” deal during their cancellation journey, but the seller must first have consent to do this.

The rules come into force 180 days after the final announcement on October 16, giving subscription-based organizations until April 14, 2025, to update their cancellation journeys.

The FTC’s fact sheet can be viewed here.

Why click to cancel happened – and who is opposed

The rise in streaming and subscription services in recent years has come with a sharp rise in complaints to the FTC.

Its announcement on the final rules noted that it receives thousands of complaints a year related to negative option marketing and recurring subscription, and the volume of complaints has risen dramatically since the start of the 2020s. The FTC noted more than 70 daily complaints in 2024, almost double the 42 per day it received in 2021.

First proposed in March 2023, the click to cancel bill is part of the Time is Money initiative, announced by the Federal Communications Commission (FCC) in August, and updates the FTC’s 1973 Negative Option Rule.

It also follows specific actions against Amazon Prime and Adobe for “unfair practices” around how they sell and renew their subscriptions. Both rejected the claims.

Other companies and organizations have stated their opposition to the bill. In mid-October 2024, the Internet & Television Association (NCTA) and groups representing the home security and online advertising industries said in papers filed with the 5th U.S. Circuit Court of Appeals in New Orleans that the rule oversteps the FTC's authority and is not supported by evidence.

The NCTA represents companies including Charter Communications, Comcast Corp and Cox Communications, as well as media companies such as Disney Entertainment and Warner Bros. Discovery.

Why are the FTC and FCC involved?

As explained by CX Network, a coalition of US federal agencies is spearheading efforts to improve customer service across multiple private sector industries.

The Federal Communications Commission (FCC) and the Federal Trade Commission (FTC) are two different bodies, and both have been involved in the Time is Money and click to cancel developments, as a number of older regulations are updated to ensure they are fit for purpose in the digital and subscription economies.

Click to cancel has already seen the FCC double down on internet and telecoms subscriptions, hence the NCTA’s complaints. In October 2023 the FTC proposed a broader rule to ban “hidden and bogus fees” that often obscure the true cost of such things as concert tickets, hotel rooms and utility bills. Similarly, in April 2024, the Department of Transportation finalized rules requiring airlines to automatically issue cash refunds for delayed flights and to improve transparency regarding baggage and reservation cancellation fees.

One of the first official Time is Money initiatives was announced on August 12, when the FCC launched an inquiry into whether communications companies should be required to make cancelling a subscription or service as easy as signing up for one.

The final rule applies to all brands and organizations – not just those in the communications industry – and this includes gym memberships, retail subscriptions including “subscribe to save” options, and any negative option feature or recurring-payment program that indefinitely renews unless a consumer intervenes to cancel.

Click to cancel around the world

While the new FTC rules apply to subscriptions offered to US consumers, other countries are introducing similar rules.

In the UK, the Digital Markets, Competition and Consumers Act 2024 requires businesses to provide clear information to consumers before entering into a subscription agreement.

It forces sellers to remind customers that a free or low-cost trial is coming to an end and requires companies to ensure customers can easily end a contract.

In Australia, a 2024 report published by the Consumer Policy Research Centre (CPRC) found 75 percent of Australians have had a negative experience when trying to cancel a subscription, and 32 percent felt pressured into keeping a subscription they wanted to cancel.

The Australian government has since said it will “take action” against a range of unfair trading practices, including subscription services that are difficult to cancel, but its rules are not expected to be finalized until the 2025.