FTC’s New “Click-to-Cancel” Subscriptions Rule: What Your Business Must Know

Subscriptions fuel revenue and customer loyalty, but the Federal Trade Commission (FTC) has introduced a game-changing regulation that redefines how businesses must manage them. The new “Click-to-Cancel” Rule, finalized on October 16, 2024 and with enforcement starting July 14, 2025, requires that consumers be able to exit subscriptions as effortlessly as they join, tackling complaints about complex cancellations and hidden fees. For businesses, compliance is critical to avoid penalties and maintain trust. Understanding the rule’s obligations, risks of non-compliance, and practical steps to comply is essential for all businesses with online subscriptions, memberships and recurring payment programs.

What Is the New “Click-to-Cancel” Rule?

The FTC’s updated Negative Option Rule, dubbed “Click-to-Cancel,” targets deceptive practices in subscription services, memberships, and recurring payment programs. Announced on the FTC’s news page, the new rule applies to nearly all negative option programs—meaning payments that auto-renew unless canceled—across platforms, from apps to in-person agreements. The rule’s core mandate is clear: cancellation must be as seamless as enrollment. With enforcement beginning July 14, 2025, businesses have a critical window to adapt and ensure compliance.

Your Obligations Under the Rule

The FTC outlines four key requirements for compliance:

1. Clear Disclosures: Before collecting billing information from consumers, businesses must disclose all material terms—recurring charges, cancellation deadlines, costs, and cancellation methods—in a clear, conspicuous manner. For online platforms, disclosures must be unavoidable and placed near the consent mechanism.
2. Explicit Consent: Businesses must obtain unambiguous consumer consent before charging for a negative option (auto-renew) feature. Pre-checked boxes or terms implying agreement through inaction are prohibited. Consent for recurring payments must be separate from the initial transaction.
3. Simplified Cancellation: If a consumer signs up online, cancellation must be equally accessible online, such as through a “Cancel Subscription” button requiring no more steps than enrollment. For in-person sign-ups, cancellation must be available via phone or online without requiring interaction with a representative unless one was involved in enrollment.
4. No Misrepresentations: Material misrepresentations, like advertising a product as “free” when it triggers recurring charges, violate the rule. Transparency is paramount.

Consequences of Non-Compliance

Failing to comply carries severe risks. Violations are treated as unfair or deceptive practices under Section 5 of the FTC Act, leading to civil penalties, consumer refunds, and regulatory scrutiny, as described here. The FTC has a history of enforcing negative option rules, pursuing companies for deceptive practices. Non-compliance also risks reputational damage, as consumers demand transparency. There is also a substantial likelihood that this rule will be a pay day for the class action plaintiffs' bar. With enforcement starting July 14, 2025, legal challenges to the rule persist, but the FTC’s authority is robust, and businesses must prepare now to avoid costly consequences.

The Easiest Path to Compliance

Compliance is achievable with proactive steps. Here’s how to align with the FTC’s requirements before July 14, 2025:

1. Audit Your Processes: Review your subscription and cancellation flows. Ensure disclosures are clear, consent is explicit, and cancellation is as easy as sign-up. Test your online cancellation process—does it take more clicks than enrollment? Simplify it.
2. Update Disclosures: Revise terms to include all material details about recurring charges and cancellation procedures, placing them prominently near the point of consent, as required.
3. Implement User-Friendly Systems: For online subscriptions, create a clear cancellation interface, like a single-click “Cancel” button. For in-person sign-ups, provide a dedicated phone line or online portal, avoiding delays or complex processes.
4. Train Your Staff: Educate your marketing and customer service teams on the rule’s requirements to ensure consistent compliance and transparency.
5. Monitor State Laws: Some states have stricter auto-renewal laws, and the FTC rule allows states to enforce higher standards. Stay informed about local regulations to avoid additional liabilities.

Act Now Before July 14, 2025

The “Click-to-Cancel” Rule is a chance to build consumer trust while meeting legal obligations. By auditing your practices, updating disclosures, and simplifying cancellations, you can comply with the FTC’s requirements and strengthen customer loyalty. With enforcement starting July 14, 2025, consult legal counsel now to ensure your subscription model aligns with the rule and state laws. Compliance isn’t just about avoiding penalties—it’s about positioning your business as a leader in transparency and customer care.