The Federal Trade Commission (FTC) announced a final Click-To-Cancel Rule 16 CFR Part 425 (the “Rule”), requiring sellers in any media to fairly represent the facts of their offers and make it as easy for customers − individuals as well as businesses − to cancel a service as it was to sign up. If a customer can enroll in one easy click, they must be able to disenroll just as easily. Violations of the Click-to-Cancel Rule are “unfair business practices” under FTC enforcement.

Under the Click-to-Cancel Rule, the FTC is taking steps to modernize its 1973 “Negative Option Rule.” A Negative Option is a marketing strategy where a customer must affirmatively decline or opt-out of an offer or else their silence will be automatically considered acceptance. Negative option marketing was frequently used in subscription services with free trials where the consumer was automatically enrolled and charged if they didn't cancel before a trial period ended. In the digital age, this negative option practice has been severely exacerbated by the ease of one-click enrollment and pop-up offers online. While fast and convenient, they can also be deceptive and extremely hard to cancel.

The new FTC rule recognizes that customers like the convenience of fast and easy sign up. So, it does NOT eliminate negative marketing programs entirely. Instead, it does strictly limit how and when they can be used. Going forward, sellers must obtain a customer's affirmative “opt-in” permission to enter into a negative option arrangement. Key enrollment facts must be accurate and clarified for customers at the checkout page. Customers must be able to cancel recurring charges just as easily as they enrolled.

The FTC advises that businesses with negative option features should reevaluate the “time, expense and ease” on consumers of their cancellation methods. If a customer signed up online, they should be able to cancel online and not be required to interact live or virtually with a representative. Customers who sign up in person should be able to cancel online or over the phone. 

The FTC states this new final Rule: “(1) prohibits misrepresentations of any material fact made while marketing using negative option features; (2) requires sellers to provide important information prior to obtaining consumers' billing information and charging consumers; (3) requires sellers to obtain consumers' unambiguously affirmative consent to the negative option feature prior to charging them; and (4) requires sellers to provide consumers with simple cancellation mechanisms to immediately halt all recurring charges.”

If your business offers a negative option, the Rule lists the following specific steps your enrollment and sale process must follow. Sellers must obtain express customer informed consent to negative option features. The consent must be separate from all other portions of the transaction, including payment. Consent can be either clicking a box or providing a signature. Consent must be presented plainly and clearly, in a non-distracting screen. It must be free from other images or information that undermines or detracts from the customer's ability to see, read, and form consent. 

In most cases, negative option sellers must keep proof of compliant consent for three (3) years from the date of consent. 

All material terms of a negative option sale must be presented to the buyer before the customer enters their billing information. This would include the total price, frequency of charges, date when a free trial ends, and a very simple how-to cancel the subscription or withdraw consent. “Material” is broadly defined as any information about the transaction that “is likely to affect a person's choice of, or conduct, regarding goods or services." This will be a big change for many online sellers whose negative option check-out process requires a buyer to enter all their billing information first, then “review” their order later.

Cancellation must be at least as simple for a customer as was giving consent.

Again, “customer” means both individuals and B2B transactions. But the FTC allows that a B2B customer is still free to individually negotiate a negative option feature and their cancellation process with a seller.

The Rule goes into effect 180 days after it is published in the Federal Register and does not preempt state law.