Getting out of subscriptions often frustrates consumers. Responding to that frustration, the Federal Trade Commission (FTC) revised its existing Negative Option Rule (New Rule). The New Rule ends subscription frustration by requiring a more transparent cancellation process.
The FTC Negative Option Rule was adopted in 1973. Its scope has been limited to one set of negative options known as prenotification plans, where sellers provide notices offering goods to participating consumers, and consumers are then sent the goods unless they decline. That rule has co-existed with a patchwork of related federal and state laws. That framework left gaps in coverage as the types and channels of these offerings expanded and modernized.
NEW RULE REQUIREMENTS
Click-to-cancel requirements must provide an easy and accessible way for consumers to cancel the negative option feature that is at least as easy as and at least through the same medium as the initial consent process, which is easy to find and use at the time of cancellation and offers immediate cessation of charges.
Consumers cannot be required to talk to a live person if the consumer did not have to do so in their online sign-up for the negative option feature.
For cancellations permitted by telephone, the call cannot be more expensive than the call used to enroll. The number must be answered, messages recorded during regular business hours, and the cancellation effected promptly.
In-person sign-ups must offer either an online or telephone cancellation option.
NOT COVERED
There are several absences in the New Rule in both concepts and language from what was initially proposed, including:
It did not require companies to send annual reminders to consumers about their negative option engagements for nonphysical goods.
It does not prevent offering alternative incentives to keep a subscription when a consumer tries to cancel.
The FTC did not include language on disclosures via hyperlinks or icon hovering not meeting clear and conspicuous standards.
It did not require separate consent for negative option and other transactions.
It did not exempt payment processors and intermediaries from the "negative option seller" definition.
WHAT IT MEANS
With the New Rule, businesses offering negative option features, like automatic renewal programs, free (or nominal)-to-pay conversions, continuity plans, or prenotification plans, may want to:
Map sign-up and cancellation processes across various channels (phone, chat, in-person, clickthrough).
Identify technical capabilities for stand-alone negative option checkboxes and allocate website space for disclosures.
Review sign-up and cancellation processes for accessibility and clarity issues, especially regarding cancellation execution.
Review each channel’s disclosure content, timing, and placement for any changes.
Review auto-renewal reminders for consistent language and sign-up disclosures.
Verify internal record retention practices.
Assess intermediary involvement in transactions and review contract commitments.
Provide internal training for sales, marketing, and customer service teams.
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