FTC Announces Final “Click-to-Cancel” Rule: Essential Compliance Updates for Subscription-Based Businesses

Dear Valued Clients,

On October 16, 2024, the Federal Trade Commission (FTC) announced the finalization of the “Click-to-Cancel” Rule, an amendment to the Negative Option Rule designed to make it easier for consumers to cancel recurring subscriptions and memberships. Most provisions of the final rule will go into effect 180 days after its publication in the Federal Register.

As your trusted legal advisors, Silverstein Legal is committed to keeping you informed about regulatory changes that may impact your operations. This new rule has significant implications for businesses offering subscription services, including those in the adult entertainment industry.

Key Provisions of the Final “Click-to-Cancel” Rule

1. Simplified Cancellation Process:

• Easy Cancellation Mechanism: Businesses must provide a cancellation method that is as easy to use as the method consumers used to sign up. If customers enrolled online, they must be able to cancel online without unnecessary steps or obstacles.
• No Unnecessary Barriers: Sellers cannot require consumers to interact with a customer service representative or go through lengthy procedures to cancel their subscriptions if they did not do so to sign up.

2. Clear and Conspicuous Disclosures

• Material Terms Disclosure: Before obtaining a consumer’s billing information, you must clearly and conspicuously disclose all material terms of the subscription offer. This includes:
  • That consumers will be charged, including any increases after a trial period.
  • The amount and frequency of charges.
  • Deadlines by which consumers must act to avoid charges.
  • Instructions on how to cancel.
• Presentation Requirements: Disclosures must be:
  • Easily noticeable and understandable.
  • Presented immediately adjacent to the consent mechanism.
  • Free of any distracting or contradictory information.

3. Express Informed Consent

• Separate Affirmative Consent: You must obtain the consumer’s unambiguously affirmative consent to the negative option feature separately from other parts of the transaction.
• No Pre-Checked Boxes: Consent cannot be obtained through pre-selected options; consumers must actively agree.
• Record-Keeping: Maintain verification of the consumer’s consent for at least three years, unless your systems ensure that transactions cannot be completed without consent.

4. Prohibition of Misrepresentations

• Truthful Communication: It is prohibited to misrepresent any material fact related to the negative option feature, including costs, terms, or the efficacy of goods or services.

Implementation Timeline

Most provisions of the final rule will go into effect 180 days after its publication in the Federal Register. It is crucial to begin reviewing and updating your practices now to ensure compliance by the effective date.

Implications for Your Business

The final rule broadens the FTC’s oversight and enforcement capabilities, making compliance more critical than ever. Non-compliance can result in substantial penalties, including fines and injunctions.

For businesses in the adult entertainment industry offering subscription-based access, these changes are particularly pertinent. The FTC will scrutinize the ease with which customers can cancel their subscriptions and the clarity of the terms presented to them.

Recommended Action Steps

1. Review and Update Cancellation Procedures: Ensure your automatic renewal terms are presented clearly, and make adjustments to your website or app interface to collect affirmative consumer consent.
   • Assess Current Processes: Examine your existing cancellation mechanisms to ensure they meet the “Click-to-Cancel” standards.
   • Implement Necessary Changes: Modify your systems to provide a simple, online cancellation method that is easy to find and use.
2. Enhance Disclosure Practices:
   • Update Communication Materials: Revise your website, terms of service, and any promotional materials to include all required disclosures in a clear and conspicuous manner.
   • Ensure Clarity: Present material terms adjacent to the consent mechanism, using language that is easily understandable.
3. Obtain Express Informed Consent:
   • Separate Consent Mechanism: Implement a distinct process where consumers actively agree to the negative option feature before any charges are made.
   • Avoid Ambiguity: Do not include unrelated information that could confuse or distract consumers during the consent process.
   • Maintain Records: Keep documentation of all consents for at least three years.
4. Train Staff and Update Policies:
   • Staff Training: Ensure that your customer service and sales teams are aware of the new requirements and are trained to comply.
   • Policy Updates: Revise internal policies and procedures to reflect the amended rule.

Conclusion

The FTC’s final “Click-to-Cancel” Rule represents a significant regulatory shift that demands immediate attention. We strongly advise all subscription-based businesses to review and adjust their practices to ensure full compliance by the effective date.

Contact Silverstein Legal for Assistance

Silverstein Legal is here to support you in navigating these changes and ensuring your business remains compliant with all regulatory requirements.*

Best Regards,

The Silverstein Legal Team

*This communication is for informational purposes only and does not constitute legal advice. For legal advice specific to your situation, please consult with us directly.

About Silverstein Legal

Founded in 2006 by internet lawyer Corey Silverstein, Silverstein Legal is a boutique law firm that caters to the needs of anyone working in the online industry. Silverstein Legal’s clients include hosting companies, affiliate programs, content producers, processors, designers, developers, and website operators.