Cancelling Subscriptions Could be Easier, or Maybe Signing Up Will Get Harder

By: Jordan Briggs

Drawn in by the appeal of steady revenue, nearly three-quarters of direct-to-consumer companies now include a subscription model.[1] Everything has a subscription these days: video games, groceries, dating apps—you can even subscribe to a service to cancel your other subscriptions.[2] These subscriptions were not deterred from joining their most prominent predecessor (the gym membership) as an age-old punchline about how hard they are to cancel. However, cancelling subscriptions started to look less like a joke and more like a “trick” or even a “trap,”[3] so the FTC stepped in with the “click-to-cancel” rule to provide clarity to both companies and consumers on what the subscription cancellation process should look like.

The click-to-cancel rule is the headliner for a few new updates to the FTC’s Negative Option Rule. Negative option offers are agreements that allow a seller to interpret a customer’s failure to act or silence as an acceptance of the terms.[4] The FTC’s previous Negative Option Rule,[5] dating back to 1973, failed to cover modern types of negative option offers—like free trials that convert to paid subscriptions.[6] Each new requirement attaches to a different part of the lifecycle of a subscription.

The new rules require sellers that offer a negative option feature—i.e. most subscriptions—to:

• Avoid misrepresenting material facts while marketing the attached good or service;
• Clearly and conspicuously disclose all material terms before collecting a customer’s billing information;
• Obtain a consumer’s express informed consent to the feature before charging the customer; and
• Provide a simple mechanism to cancel the feature and immediately halt charges (the “click-to-cancel” part of the rule).

The two biggest changes for companies to implement is likely to be informed consent and “click-to-cancel.” While both might have been included in best practices guidelines from lawyers before the new rule, they are not common features. Informed consent must be unambiguously affirmative, and, in most cases, sellers must retain these records of consent for three years. Even free trials that become paid subscriptions without any additional action, if they have followed the requirements of the new rule (such as obtaining informed consent) may continue until a customer cancels.

If a customer decides to cancel, sellers may tell customers about plan modifications or reasons to keep the plan during cancellation but must also make a “simple mechanism” for cancellation available. The option must be easy to find and as easy as the method the customer used to consent to the negative option feature.[7] If the subscription allows a customer to sign up online without talking to a chatbot, then cancellation cannot require use of a chatbot either. The rule does go beyond the “as easy as” requirement for in-person agreements. When a customer signs up in person, the seller must allow that customer to cancel either online or by phone, without a cost-barrier.

While the second two requirements focus on the negative option feature, the FTC extends the first two requirements more broadly. In the first requirement, “material facts” include the facts about the good or service itself, such as its efficacy, in addition to the subscription terms, such as cost or deadlines to cancel. Likewise, the material terms that must be disclosed under the second requirement include, but are not limited to, the terms of the subscription and the terms of its negative option feature. The FTC felt that limiting these requirements to only facts about the negative option feature would be inconsistent with the FTC’s other guidance, enforcement, and regulations.[8]

The FTC’s approach to these material fact requirements is consistent with its approach to other new technologies as well. While the FTC is updating its rules to more clearly address the present market and technological conveniences, it is also using its existing rules to enforce principles of fair marketing even in emerging spaces testing the boundaries of what is technologically possible—or just crowding out formerly helpful Google results—like Artificial Intelligence.[9]

The new Negative Option rule became effective January 14, 2025, but businesses have until May 14, 2025 to comply with §§ 425.4 through 425.6 (clear and conspicuous disclosure, informed consent, and click-to-cancel).[10] As the FTC pointed out, the first requirement is so consistent with its other guidance, enforcement, and regulations that companies should be prepared to comply with § 425.3.

[1] Jay Fitzgerald ft. Elie Ofek, “With Subscription Fatigue Setting In, Companies Need to Think Hard About Fees,” Marketing and Consumers, HARVARD BUSINESS SCHOOL (October 17, 2023), available at https://www.library.hbs.edu/working-knowledge/with-subscription-fatigue-setting-in-companies-need-to-think-hard-about-fees.

[2] Sophia Acevedo, “Best Budgeting Apps for January 2025: Top Picks, Features, and Benefits,” BUSINESS INSIDER (Updated Dec. 30, 2024, 5:46 PM), available at https://www.businessinsider.com/personal-finance/banking/best-budgeting-apps.

[3] Commission Chair Lina M. Khan quoted in “Federal Trade Commission Announces Final “Click-to-Cancel” Rule Making It Easier for Consumers to End Recurring Subscriptions and Memberships” FTC (Oct. 16, 2024), available at: https://www.ftc.gov/news-events/news/press-releases/2024/10/federal-trade-commission-announces-final-click-cancel-rule-making-it-easier-consumers-end-recurring, (hereinafter “Press Release”).

[4] Federal Register, Vol. 88, No. 78, Proposed Rules at 247176-17 (Apr. 24, 2023).

[5] 16 C.F.R. 425.1.

[6] Id. at 24717 n.3.

[7] Federal Register, Vol. 89, No. 221, Rules and Regulations at 90506 (Nov. 15, 2024); see also Press Release.

[8] Id. at 90494.

[9] “FTC Order Requires Online Marketer to Pay $1 Million for Deceptive Claims that its AI Product Could Make Websites Compliant with Accessibility Guidelines,” FTC, Press Release (Jan. 3, 2025), available at https://www.ftc.gov/news-events/news/press-releases/2025/01/ftc-order-requires-online-marketer-pay-1-million-deceptive-claims-its-ai-product-could-make-websites.

[10] Press Release.