FTC Click To Cancel Rule Update – March 31 2025

Last Updated on November 7, 2024 by Corepay

The Federal Trade Commission (FTC) has announced a major update to protect consumers from confusing or restrictive subscription practices, making it simpler to cancel unwanted services.

Known as the Click-to-Cancel Rule, this regulation is a key revision of the existing Negative Option Rule, which now covers recurring subscriptions, automatic renewals, and free trial offers across both consumer and business-to-business transactions. Here’s everything businesses need to know to stay compliant and avoid penalties.

***Enforcement is set to begin March 31, 2025

FTC’s New Click-to-Cancel Rule Sets Clear Standards for Subscription Services

The Federal Trade Commission (FTC) recently introduced the Click-to-Cancel Rule, a major update to the Negative Option Rule aimed at protecting consumers from complicated and restrictive subscription practices. This rule requires businesses to simplify cancellations, making it as easy to cancel a subscription as it is to sign up for one.

Common Frustrations with Subscription Cancellations

Magazine subscriptions that require a mailed letter to cancel. Streaming services that insist on lengthy calls to customer service, where agents push hard to keep customers on board.

Federal regulators report receiving nearly 70 complaints daily about charges for subscriptions that are either hard to cancel or that consumers didn’t realize they had agreed to in the first place. Now, this new U.S. rule will require companies—from streaming platforms to monthly product boxes—to make canceling subscriptions as straightforward as enrolling and to ensure a transparent subscription process from the start.

Why the New Rule?

Consumers have long been frustrated by tricky subscription practices that make it difficult to cancel services, often requiring interactions with chatbots, live agents, or a maze of steps. FTC Chair Lina Khan explains, “Nobody should be stuck paying for a service they no longer want.” The Click-to-Cancel Rule aims to eliminate these “tricks and traps” by requiring companies to simplify their cancellation processes and maintain transparency throughout.

Key Requirements of the Click-to-Cancel Rule

Simplified Cancellation Process

If customers signed up online or through an app, businesses must allow a similarly straightforward online cancellation process—without requiring phone calls, live representatives, or chatbots. For in-person signups, companies must offer an online or phone cancellation option. An in-person cancellation option can be provided, but it cannot be required as the only method.

Clear Disclosure of Subscription Terms

Businesses are required to disclose all essential terms of a subscription before a customer agrees to sign up. This includes:

• Billing frequency and total costs
• Expiration dates for free trials or promotions
• Clear cancellation deadlines and instructions

Ban on Misleading Tactics

The rule prohibits deceptive tactics in subscription marketing. Companies are not allowed to mislead customers about any significant aspects of their offer, including billing, product benefits, or service purposes. This aligns with the FTC’s truth-in-advertising standards, requiring full transparency in all aspects of a subscription offer to ensure customers are making informed decisions.

Proof of Customer Consent

The rule requires businesses to secure verifiable proof of customer consent before initiating charges. Consent can be recorded through a checkbox, signature, or other similar confirmation, and this proof must be kept on file for at least three years. Phone-based offers must comply with the Telemarketing Sales Rule, ensuring extra protections are in place for transparency in telemarketing subscription offers.

Applies to All Negative Option Programs

The rule broadly applies to any type of “negative option marketing,” including:

• Automatic renewals
• Continuity plans
• Free trial offers that convert to paid subscriptions

Importantly, the rule also applies to B2B transactions, so businesses offering subscriptions to other companies must follow the same compliance standards as consumer-facing programs.

State Compliance and Penalties

The FTC’s rule does not override state laws with more stringent consumer protections. Businesses are responsible for complying with both federal regulations and any applicable state laws. Non-compliance could result in significant civil penalties, as most of the rule will take effect within 180 days, with certain provisions active within 60 days. Businesses should use this time to review and adjust their subscription policies and processes.

Background and Recent Enforcement Cases

The FTC’s updated rule is the result of a multi-year effort that began in 2019, incorporating input from thousands of consumers, industry representatives, and advocacy groups. The revised rule builds on earlier protections under the Negative Option Rule, consolidating guidelines to prevent misleading enrollment, billing practices, and burdensome cancellation processes.

Recent high-profile cases underscore the importance of the new rule. Amazon, for example, faced allegations of using “dark patterns”—web design tactics that steer consumers into auto-renewing Prime subscriptions and complicate cancellations. Adobe also faced legal action for imposing hidden termination fees, making it difficult for customers to cancel. The Click-to-Cancel Rule directly addresses these kinds of tactics, mandating easier opt-out processes and clear, upfront terms for subscriptions.

Global Shift Toward Consumer Protection in Subscriptions

This trend isn’t limited to the U.S. The UK recently introduced similar regulations under the Digital Markets, Competition and Consumers Act 2024. Like the FTC’s rule, the UK law mandates transparent terms for free trials, easy contract termination options, and clear reminders before paid subscriptions start. These international efforts reflect a broader shift toward consumer-first policies in subscription-based models, offering customers more control over recurring charges.

The Takeaway for Businesses

The FTC’s Click-to-Cancel Rule represents a significant shift in how subscriptions are managed, with a clear emphasis on consumer rights. For businesses, compliance isn’t just about avoiding penalties; it’s also an opportunity to build customer trust through transparency and ease of use.

Our team at Corepay put together a nice checklist to prepare for the new rule:

• Ensure Cancellation Processes Are Simple: Match the cancellation method to the original signup channel.
• Disclose Key Terms: Make sure all subscription terms are clear and available at the point of signup.
• Document Consent: Secure proof of customer consent before charging and keep records for three years.
• Stay Informed on State Laws: Comply with both federal rules and any stricter state-level requirements.

The FTC’s deadline for full compliance is fast approaching, with some provisions taking effect within 60 days and the remainder within 180 days. By acting now to align with the Click-to-Cancel Rule, businesses can protect themselves from penalties and, importantly, create a more transparent billing environment.