The Federal Trade Commission (FTC) has intensified its efforts to address deceptive marketing practices related to subscription services, implementing a new rule on Wednesday. This rule mandates that businesses must allow consumers to cancel subscriptions—such as gym memberships or streaming services—just as easily as they can sign up for them.
The regulation broadens the FTC’s existing restrictions on “negative option” offers, which automatically initiate, renew, or expand services unless the consumer actively opts out. Common examples include free trials that transition into paid subscriptions and contracts that renew indefinitely without the consumer’s consent.
This rule has been in development since 2019 and aligns with a recent California law signed by Governor Gavin Newsom that requires a “click to cancel” process.
Under the new FTC rule, subscription services must facilitate cancellation through simple means, like a clear online link or a straightforward phone call.
Additionally, businesses are now required to obtain explicit consent before enrolling a consumer in a subscription, refrain from withholding crucial information or misleading consumers about their services, and provide clear and conspicuous terms before collecting payment information.
As subscriptions increasingly replace one-time payments, consumer complaints about difficulties in canceling unwanted subscriptions have risen significantly. The FTC noted it received nearly 70 complaints daily this year regarding recurring subscriptions, up from 42 per day in 2021.
Lindsay Owens from the Groundwork Collaborative, which advocates for the new rule, highlighted common frustrations consumers face when attempting to cancel subscriptions, such as long hold times on calls or complicated cancellation processes that often require physical visits to businesses. She emphasized that the FTC’s rule aims to make cancellation as easy as enrollment, removing deceptive barriers.
Teresa Murray, a consumer watchdog at the Public Interest Research Group, compared the cancellation experience to a “Hotel California” scenario, where leaving seems impossible. She welcomed the rule, stating it would empower consumers to change providers more freely.
The rule did face opposition along party lines; the three Democratic commissioners supported it while two Republicans opposed it. Dissenting Commissioner Melissa Holyoak argued that the rule exceeds the agency’s authority and may drive businesses away from offering negative option features that some find beneficial. She also suggested the chair, Lina Khan, was hasty in finalizing the rule to benefit the Democratic presidential candidate, Vice President Kamala Harris.
Unless blocked by a court, the new regulation will take effect in about six months.
A related California law, Assembly Bill 2863, will follow a few months later and apply to subscription contracts signed or renewed after July 1, 2025. Robert Herrell from the Consumer Federation of California expressed support for the FTC rule but noted that AB 2863 includes additional protections, such as reminders for automatic renewals and streamlined cancellation processes free from promotional distractions.
This state law will remain effective even if the FTC’s rule is challenged or invalidated at the federal level.
