FTC Delays Click-to-Cancel Rule Enforcement

FTC Delays Enforcement of “Click-to-Cancel” Rule

The Federal Trade Commission (FTC) announced on Friday a postponement in the enforcement of the Negative Option Rule. This rule, commonly referred to as the “click-to-cancel” rule, mandates that businesses provide a cancellation process that is as straightforward as the initial subscription signup.

Addressing Complex Cancellation Processes

Initially proposed in 2023, the rule specifically targets companies offering subscriptions – encompassing both physical products and digital services like streaming platforms and gym memberships. Many customers have encountered unnecessarily complicated or lengthy cancellation procedures after experiencing easy sign-up flows.

Key Provisions of the Negative Option Rule

The Negative Option Rule stipulates that businesses cannot require customers to utilize a different method for cancellation than the one used for subscription. For instance, if a subscription was initiated through a few simple clicks on a website, cancellation should also be possible directly on that same website.

Furthermore, companies are obligated to clearly communicate cancellation details to customers before collecting any payment information.

Enforcement Timeline Adjustments

While the rule officially became effective on January 19, the FTC had previously delayed enforcement of certain aspects until May 14. Now, enforcement is being further postponed by an additional 60 days, extending the deadline to July 14.

The FTC explained this decision by stating that a recent evaluation revealed the initial deferral period was insufficient to adequately address the complexities involved in achieving full compliance.

Commission Vote and Recent Changes

The commission reached a unanimous 3-0 vote to delay enforcement. Traditionally, the FTC comprises five commissioners, split between the president’s party and the opposing party.

However, recent events have altered the commission’s composition. President Trump dismissed the two Democratic commissioners in March, prompting a legal challenge based on a Supreme Court precedent regarding the grounds for removing FTC commissioners.

Future Enforcement and Potential Amendments

Despite the delay, the FTC affirmed its intention to begin enforcing the rule on July 14, at which point “regulated entities must be in compliance.”

The FTC also indicated a willingness to consider amendments to the rule if enforcement reveals any unforeseen issues or challenges. They remain open to addressing any problems that may arise during the implementation phase.