FTC negative option rule lawyer + ftc click-to-cancel rule compliance and defense attorney

FTC Negative Option Rule Lawyer

The FTC’s new Rule Concerning Recurring Subscriptions and Other Negative Option Programs  - also known as the FTC Click-to-Cancel Rule – introduces a number of compliance requirements upon business-to-business and business-to-consumer eCommerce companies that offer negative option features.  Negative options can include, without limitation, automatic renewals, pre-notification plans, continuity plans and free trial conversion offers.

Covered entities should consult with an FTC Negative Option Rule lawyer to review marketing materials, disclosures, consent methods and cancellation practices in order to ensure compliance with the FTC Click-to-Cancel Rule and to minimize exposure to FTC civil investigative demands and enforcement actions.

FTC Negative Option Rule Attorney Defending Automatic Renewal Investigations and Actions

Richard Newman is an FTC Negative Option Rule attorney that defends FTC investigations concerning negative option and automatic renewal law violations.  The FTC can initiate an investigation by any number of means, including, but not limited to, voluntary access letters and civil investigative demands.

The FTC aggressively investigates and enforces FTC Negative Option Rule claims.  It is imperative that eCommerce sellers proactively and properly address compliance requirements and investigations from the start by consulting with an experienced FTC Negative Option Rule lawyer.

What is a Negative Option Program Under the Final FTC Negative Option Rule?

Under the Final FTC Negative Option Rule, negative option programs include any program with a provision that interprets a “consumer’s silence or failure to take affirmative action to reject . . . or to cancel” as an acceptance of the offer, including, but not limited to,  automatic renewals, continuity plans, free trials (i.e., free-to-pay or nominal fee-to-pay conversions) and pre-notification plans.

The scope of the FTC’s prior Negative Option Rule applied only to pre-notification plans.

What Does the Amended FTC Negative Option Rule Require of eCommerce Sellers?

Pursuant to the Final FTC Negative Option Rule, eCommerce sellers are required to make certain disclosures to consumers and obtain the consumer’s express informed consent to the negative option feature in a specific manner.

The amended Federal Trade Commission “Click-to-Cancel” Rule requires sellers to make it as easy for consumers to cancel their enrollment as it was to sign-up.  Consumers cannot be required to jump through endless hoops just to cancel a subscription.

The Negative Option Rule is designed to help the FTC get money back to consumers when sellers do not tell the truth or leave out necessary information.  It is intended to assist consumer that get billed when they did not agree to pay, and to assist consumers when sellers make it difficult to cancel.

Pursuant to the FTC’s amended Negative Option Rule, important information must be truthful, clear and easy to find.  Consumers have to know what they are agreeing to before they sign-up.  Sellers have to be able to show that consumers knew what they agreed to before they enrolled.

There always has to be a way to cancel that is as quick and easy as it was to sign-up.  If the sign-up was online – click to cancel.  If the sign-up was in person – cancel online or over the phone.

Violators can be liable for redress and monetary civil penalties.  There can potentially be several violations in a single transaction.

What Does the FTC Click-to-Cancel Rule Prohibit?

The FTC Negative Option Rule prohibit sellers from misrepresenting any material facts while using negative option marketing.  The prohibition on misrepresentations (and certain other procedural provisions) became effective in January 2025.

It prohibits sellers from failing to clearly and conspicuously disclose material information before obtaining consumers’ billing information and charging them.  It also prohibits sellers from failing to obtain consumers’ express informed consent to the negative option features before charging them.  Sellers are also prohibited from failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.

Any Misrepresentation Made by a Negative Option Seller - Whether or Not Related to the Negative Option Feature - is a Violation of the Final FTC Negative Option Rule

The Final FTC Negative Option (Click-to-Cancel) Rule strictly prohibits misrepresentations of any material fact in conjunction with marketing a product or service that contains a negative option feature, whether related to the negative option feature or not.  For example, it is a violation of the FTC Negative Option Rule to make a material misrepresentation relating to the subject product or service, or other aspects of the transaction.  The FTC has also noted that a misrepresentation in a privacy policy could be covered under this provision if the seller misrepresents its privacy policy in a way that is likely to affect consumer choice or conduct.

Material Terms Must be Clearly and Conspicuously Disclosed

The Final FTC Negative Option Rule requires that material terms be “clearly and conspicuously” disclosed prior to obtaining consumers’ billing information and prior to obtaining consumers’ consent to the negative option feature.

In addition, prior to obtaining a consumer’s billing information there are specific material disclosures that are required to be clearly and conspicuously disclosed directly adjacent to the method of memorializing consumer consent to the negative option feature:

• That charges will recur continuously until the consumer cancels (for trials, that the charges will increase following the applicable trial period)
• Each deadline by which the consumer must act to prevent or stop future charges
• The amount of charges and how frequently the charges will occur
• Information regarding how consumers can cancel

What Does “Clear and Conspicuous” Mean?

According to the FTC Negative Option Rule, “clear and conspicuous” means easily noticeable, unavoidable, difficult to miss and easily understandable by reasonable ordinary consumers.”

Consult with a seasoned FTC Negative Option rule compliance attorney to discuss how to make compliant disclosures across various media types.

How to Disclose Material Terms of a Negative Option Feature

Visual disclosures must stand out from any accompanying text or visual.  Audible disclosures must be delivered in a volume/cadence sufficient for ordinary, reasonable consumer to easily hear and understand.  If a communication is solely visual or solely audible, the disclosure must be made by that same means.  If both visual and audible - like a T.V. advertisement - the disclosure must be presented by both means simultaneously.  When presented electronically, the disclosure must be “unavoidable.”

Nothing in the offering can contradict or otherwise be inconsistent with the disclosure.  Disclosures should be immediately adjacent to the means of recording consent to the negative option offering, prior to obtaining the consumer’s billing information.

Express Informed Consent to the Negative Option Feature Must be Obtained Prior to Charging the Consumer

Under the amended FTC Negative Option Rule, sellers must obtain express informed consent to a negative option feature prior to a consumer being charged.  Express informed consent is unambiguous affirmative consent to the negative option feature.  The negative option feature needs its own consent/opt in.

Additionally, consent has to be unambiguous, affirmative, independently obtained and not mixed with information that is unrelated to acceptance of or undermines the ability of consumers to provide their express informed consent to the negative option feature.

With limited exception, consent can be obtained via a check box (not pre-checked), a signature or similar method where the consumer must affirmatively select or sign to accept the negative option feature.  Also with limited exception, records verifying consent must be maintained for at least three years.

A Simple Mechanism to Cancel a Negative Option Feature Must be Provided

The amended FTC Negative Option Rule requires that a simple mechanism to cancel the negative option feature and avoid being charged an increased amount be provided.  It must be in the same medium used to obtain consent and at least as easy as the negative option sign-up mechanism.  The cancellation mechanism must stop further charges immediately.

Additionally, online cancellation or cancellation via mobile application requires that the cancellation mechanism be easy to find, and consumers must not be required to interact with a live or virtual representative - such as a chatbot – to cancel if the consumer did not interact with such a representative as part of the enrollment process.  Therefore, consumers must be able to “click to cancel.”

Cancellation requests made over the telephone must be processed during normal business hours.  Online or phone cancellation must also be available where in-person cancellation is provided.

Who Does the FTC Negative Option Rule Impact?

The amended FTC Negative Option Rule applies to virtually all negative option programs in any media.  It applies to all negative option programs, regardless of whether the offer appears online, is presented telephonically or is offered in person.  It impacts both business-to-business and business-to-consumer subscription autorenewals and other negative option programs.

Are “Save” Attempts at Time of Cancellation Permissible?

When a consumer attempts to cancel a negative option feature a seller is permitted to attempt to preserve the existing offer provide that there are no unreasonable and unnecessary roadblocks to cancellation.  However, the FTC has left open the possibility that it may supplement the rule on this issue, going forward.

Note that the FTC Negative Option Rule will not preempt state laws that afford greater protection to consumers, such as California’s automatic renewal law “save” rule.

Is the Final FTC Negative Option Rule Different Than the 1973 Negative Option Rule?

Yes.  In October 2024, the Federal Trade Commission issued a final amended “Click-to-Cancel” Rule.  It did so in an effort to update the 1973 Negative Option Rule in order to police “unfair or deceptive practices related to subscriptions, memberships and other recurring-payment programs in an increasingly digital economy” where it is easier than ever for businesses to sign-up consumers for products and services.  The amended FTC Negative Option Rule expands the original Negative Option Rule’s marketing, disclosure, consent and cancellation requirements.  It also contains a much broader definition of what constitutes a negative options program.

Comply With and Defend FTC Click-to-Cancel Rule Requirements with the Assistance of an FTC Negative Option Rule Attorney

Mr. Newman regularly guides and defends sellers and marketers with respect to the FTC Negative Option Rule and state automatic renewal legal regulations, including disclosures, obtaining lawful consent and cancellation practices in order to ensure that processes are effective and compliant.

When necessary, the firm possesses a strong track record successfully defending those that are being investigated and face formal regulatory actions concerning FTC Negative Option Rule legal regulatory violations.

Consult an Experienced FTC Negative Option Rule Attorney to Discuss Other Federal Legal Regulations

In addition to the FTC Negative Option Rule, there are other federal legal regulations that govern aspects of negative option programs.  For example, the FTC’s Restore Online Shoppers’ Confidence Act.

ROSCA requires, in part, that marketers that utilize negative option contracts to clearly and conspicuously disclose the material terms of the transaction before obtaining billing information, to obtain express informed consent before charging the consumer, and to provide a simple mechanism for the consumer to stop recurring charges from being placed on the consumer’s credit card, debit card, bank account or other financial account.

What is the Difference Between the FTC Negative Option Rule and ROSCA?

Generally speaking, the FTC Negative Option Rule is broader in scope than the FTC’s Restore Online Shopper’s Confidence Act.  ROSCA focuses upon online transactions with negative options, whereas the Negative Option Rule applies to all forms of negative option marketing, including online, print, and in-person transactions. Additionally, the amended FTC Negative Option Rule introduces new requirements like “click-to-cancel.”

FTC Negative Option Rule Lawyer for Compliance with State Automatic Renewal Laws

In addition to the applicable legal regulations, numerous state automatic renewal laws exist with similar requirements.  However, various state ARLs possess differences and some of them are much more onerous than federal legal regulations.

For example, California’s ARL (Cal. Bus. & Prof. Code §§ 17600 et seq. ) contains strict requirements that in some respects exceed federal compliance requirements.  The California ARL has been amended repeatedly since 2010.

California’s Automatic Renewal Law Compliance Attorney

Effective July 1, 2025, California requires the following:

• Obtaining consumers’ “express affirmative consent” to autorenewal terms
• Maintaining records of verification of consent
• Notice with certain disclosures prior to “confirming billing information”
• Notice of fee changes
• Annual reminders for annual subscriptions
• New telephone cancellation procedures
• Cancellation through the same medium as enrollment

Free-to-pay conversions are now included in definitions of “automatic renewal” and “continuous service.”

Section 17602(a)(4) as amended, provides that it is unlawful to “fail to obtain the consumer’s express affirmative consent to the automatic renewal or continuous service offer terms.”  What constitutes express affirmative consent is not defined in the statute.  According to the California Automatic Renewal Taskforce (CART), “the consent shall be obtained by an express act … through a checkbox, signature, express consent button, or other substantially similar mechanism that … the consumer must affirmatively select to give consent to the automatic renewal offer terms…”

From the standpoint of the Federal Trade Commission, “affirmative express consent” means any freely given, specific, informed, and unambiguous indication of an individual’s wishes demonstrating agreement by the individual, such as be a clear affirmative action, following a clear and conspicuous disclosure to the individual, apart from any privacy policy, terms of service, terms and conditions, or terms of use of all information material to the provision of such consent.  The following actions do not constitute affirmative express consent: acceptance of general or broad terms of use of similar communications; hovering over, muting, pausing, or closing a given piece of content; or agreement obtained through a user interface designed or manipulated with the substantial effect of subverting or impairing user autonomy, decision-making, or choice.”

Some save attempts are permissible provided that certain conditions are met.  Save attempts cannot be “an obstruction or delay.”  Consumers must remain able to cancel.  Sellers must  simultaneously display “prominently located and continuously and proximately displayed direct link or button entitled “click to cancel,” or words to that effect …”  If clicked, cancellation must be promptly processed.

Information that undermines a consumer’s ability to consent, as well as misrepresentations of material fact are prohibited.

Section 17602(a)(5) as amended, provides that it is unlawful to “include any information in the contract that interferes with, detracts from, contradicts, or otherwise undermines the ability of consumers to provide their affirmative consent to the automatic renewal or continuous service.”

Section 17602(a)(6) as amended, provides that it is unlawful to “fail to maintain verification of the consumer’s affirmative consent for at least three years, or one year after the contract is terminated, whichever period is longer.”

Similar to the FTC Negative Option Rule, Section 17602(a)(7) of California’s ARL as amended, provides that it is unlawful to: “misrepresent, expressly or by implication, any material fact related to the transaction, including, but not limited to, the inclusion of an automatic renewal or continuous service, or any material fact related to the underlying good or service.”  There is a broad prohibition covering three categories of express and implied misrepresentations that compliments existing law (e.g., California’s False Advertising Law and Consumers Legal Remedies Act).

Section 17602(f) provides that cancellation must be available in the same medium as enrollment or “same medium in which the Section consumer is accustomed to interacting with the business …”

New telephone cancellation requirements reflect online requirements.  If a consumer enrolled by telephone, the consumer must be able to cancel by telephone.  Businesses must clearly and conspicuously display the number online.  Business that provide cancellation by toll-free number must answer calls promptly and not obstruct or delay ability to cancel.  For voicemails requesting cancellation, businesses have one business day to process the cancellation or return the call.  ▪ Save attempts are permitted if the business clearly and conspicuously discloses that the consumer can complete cancellation any time by saying “cancel” or words to that effect.  Once stated, cancellation must be prompt

There are several new notice requirements.  Notice with specific disclosures are required prior to confirming the consumer’s billing information.  Notice of fee changes is required 7-30 days prior to the change taking place.  Clear and conspicuous notice of the change is required.  Information about how to cancel that is capable of being retained is also required.  As are annual reminders for annual agreements with specific medium and content requirements.

Contact an experienced negative option attorney to discuss other state automatic renewal law requirements.

Does Compliance with the FTC Negative Option Rule Ensure Compliance with Applicable State Requirements?

No.  For example, covered business that fully comply with the FTC Negative Option Rule may still need to address potentially applicable state legal regulatory requirements, including, but not limited to, post-sale notification obligations.

Importantly, the FTC Negative Option Rule applies to B2B and B2C transactions, whereas many state automatic renewal laws apply only to B2C transactions.

Covered entities should consult with a seasoned FTC Negative Option Rule attorney to design and implement compliant marketing protocols.

Does the FTC Negative Option Rule Preempt State Automatic Renewal Laws?

The Final FTC Negative Option Rule does not preempt state laws that have more protection for consumers.  In the event that a state law imposes additional requirements, sellers are required to comply with applicable state legal regulations, as well.  Therefore, businesses must ensure enrollment, consent and cancellation practices are compliant with the Final FTC Negative Option Rule and applicable state laws.

FTC Negative Option Rule Compliance, Investigation and Defense Attorney for eCommerce Sellers and Marketers

Paying close attention to the FTC Negative Option rule and state automatic renewal laws is critical in order to reduce risks to your brand and avoid monetary damages, including severe civil penalties that can result from an FTC Negative Option Rule or state ARL-related investigation or enforcement action.

Sellers that utilize negative option features should consult with experienced FTC Negative Option Rule compliance and defense lawyers in order to assess such practices and make updates, as appropriate.  Compliance with the FTC Negative Option Rule, otherwise known as the FTC Click-to-Cancel Rule is crucial from a regulatory scrutiny standpoint, as well as reputational one.   Contact a seasoned FTC Negative Option Rule compliance lawyer to discuss how to comply with legal regulatory requirements.

As a leading FTC Negative Option Rule attorney, Richard Newman of Hinch Newman LLP provides the full range FTC Negative Option Rule compliance, and claim investigation and defense services.  Please contact Mr. Newman with any questions or concerns.