“Click to Cancel” Rule to Require Simple Method to Cancel Enrollment on Subscription Services

cancel article

November 1, 2024

On October 16, 2024, the Federal Trade Commission (FTC) announced its final “click-to-cancel” rule.  According to the FTC, the purpose of the rule is to require sellers to make it as easy for consumers to cancel their enrollment as it was to sign up.  

Members that offer enrollment in music lessons or other types of subscription services should prepare a simplified method for customers to cancel their services.

The Final Rule, officially known as the “Rule Concerning Recurring Subscriptions and Other Negative Option Programs,“ will broadly apply to businesses with subscription services, including automatic renewals. It imposes significant marketing, consent, disclosure and recordkeeping requirements on businesses, and gives the FTC more authority to enforce these new requirements.  

The Final Rule applies to any person (i.e., a business) who sells, offers, charges or otherwise markets a good or service with a "negative option.” This negative option feature includes a subscription, membership, free trial that converts to a paid subscription or other recurring-payment program that indefinitely renews unless a consumer affirmatively cancels or returns the goods or services. The Rule covers negative option marketing in all forms, whether online, the phone, printed materials or in-person.  

Requirements Summary

Some provisions of the Rule, including a prohibition on misrepresentations, will go into effect 60 days after the Final Rule’s publication in the Federal Register (expected any day now). There are several other provisions that will go into effect 180 days after publication, including: disclosure of important information, consent and simple cancellation. Here’s a summary of these requirements:

  • Affirmative Consent: Sellers of “negative options” must first obtain consumers’ express informed consent before charging the consumer. The rule also requires sellers to keep records of consumers' consent for three years unless an exception is met.
  • Clear and Conspicuous Disclosures: Businesses must present subscription terms in a clear and conspicuous manner before any billing occurs.
  • Click-to-Cancel Requirement: This new requirement mandates that companies provide a simple, user-friendly method for consumers to cancel their subscriptions or recurring charges. This "simple mechanism" must be at least as easy to use as the mechanism the consumer used to consent to the negative option feature.

The Rule also increases the FTC’s enforcement authority to levy fines for violations, as well as seek other remedial action.  

There are already court challenges seeking to block the new Rule. On October 23, 2024, the Electronic Security Association, Interactive Advertising Bureau, and NCTA – The Internet & Television Association filed a lawsuit, claiming that the FTC exceeded its regulatory authority and that the Rule violates federal administrative law.  

NAMM will continue to monitor the implementation of the Rule, including the status of pending court cases, and keep NAMM members informed of significant developments.