The Federal Trade Commission (FTC) has plans to crack down on automatically renewing subscription programs. The Negative Option Rule, known as the click-to-cancel rule, requires companies to clearly disclose all terms before obtaining a consumer’s billing information, offer a simple way to cancel recurring charges and obtain consumer consent before charging. This rule specifically applies to businesses that wield a negative option feature, like free-to-pay trials, recurring subscriptions and automatic renewals. The Negative Option Rule was scheduled to go into effect on May 14. The FTC has now deferred enforcement of the Rule through July 2025.
The FTC said the new rule is based on thousands of consumer complaints related to negative option marketing and the real-world economic consequences of these practices for consumers who experience financial harm as a result.
The rule has undergone legal challenges, but in January, a motion to stay the Rule was denied. While additional litigation may attempt to intervene, the FTC can still point to Section 5 of the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA) in the case of deceptive and unfair subscription practices.
