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More than a year after proposing a click-to-cancel rule for subscriptions and recurring transactions, the Federal Trade Commission released a final version of the measure, officially called the Negative Option Rule.
Announced Wednesday, the rule’s five primary elements call for important subscription information to be truthful, clear, and easy to find. It also spells out that consumers must know what they are signing up for and that sellers must be able to show that consumers knew what they agreed to before enrolling in a subscription plan. Cancellation methods have to be as quick and easy as the enrollment process, according to the rule. Violators are subject to redress and civil penalties, the FTC says.
The new rule takes full effect 180 days after publication in the Federal Register, the legal medium for communicating new regulations. The FTC says that publication date is not known yet.
The measure could have an effect on churn, or the rate at which customers stop using a service. Merchants and their recurring payments providers constantly try to counter churn, a critical indicator for subscription services. The rate, according to Recurly’s data in its “2024 State of Subscriptions” report, hasn’t varied much over the past few years. It stood at 4.1% in 2023 and 2022, 4% in 2021, and 4.3% in 2020, Digital Transactions reported in March.
The FTC says the number of complaints on recurring subscription practices has been increasing over the past five years. In 2024, it received nearly 70 complaints per day on average, up from 42 in 2021.
Passage of the rule was not unanimous, as two commissioners voted against it. One sought a provision in the new rule that would require that consumers receive annual reminders of subscriptions that do not involve delivery of physical goods. The original version of the rule contained that provision. The final version also dropped a prohibition on sellers telling consumers who wish to cancel a subscription about plan modifications or reasons to remain without first asking if the consumer wants to hear about them.
The other dissent contended the Commissioners exceeded their rulemaking limits and suggested this was an effort to help the Kamala Harris presidential campaign.
“Too often, businesses make people jump through endless hoops just to cancel a subscription,” Commission Chair Lina M. Khan says in a statement. “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.”
