The U.S. Federal Trade Commission (FTC) has introduced a new rule aimed at simplifying how consumers cancel subscriptions, ensuring that businesses make the process as easy as signing up. The “click-to-cancel” rule, announced on Wednesday, marks the FTC’s latest effort to combat deceptive business practices and ensure transparency in subscription billing. The rule will affect a wide range of businesses, including gyms, online services, and retailers, and is expected to significantly change how subscription cancellations are handled across the U.S.

Under the new rule, businesses must allow customers to cancel their subscriptions using the same method they used to sign up. For example, if a consumer registers for a service online, they must be able to cancel online without being forced to navigate through customer service agents or confusing chatbots. The FTC’s rule specifically prohibits companies from requiring additional steps, such as phone calls, to cancel subscriptions initiated online or via an app.

FTC Chair Lina Khan emphasized the need for this new regulation in light of rising consumer complaints. “Companies shouldn’t be able to trick you into paying for subscriptions you don’t want,” Khan said. “The FTC’s rule will end these tricks and traps, saving Americans time and money.”

Growing Consumer Complaints Lead to New Regulation

The click-to-cancel rule follows years of growing frustration from consumers, particularly regarding the difficulty of unsubscribing from services that often require navigating complex processes or interacting with persistent customer service agents. The FTC reported receiving nearly 70 complaints per day related to subscription cancellations in 2024, a significant increase from 42 complaints per day in 2021.

The rule is part of a broader effort to modernize the FTC’s 1973 Negative Option Rule, which was originally designed to address deceptive practices in recurring billing agreements. Negative-option programs, which automatically charge consumers unless they opt out, have become more widespread in today’s digital economy, prompting the need for clearer and more straightforward cancellation processes.

The FTC received more than 16,000 public comments on the proposed rule changes, reflecting significant public interest. Following the comment period, the agency adjusted the final rule, notably removing a requirement for annual reminders about subscriptions and modifying the conditions under which businesses could offer plan modifications during the cancellation process.

What the Rule Entails

The click-to-cancel rule requires businesses to:

• Obtain clear, informed consent from consumers before charging them for recurring services.
• Provide easy cancellation mechanisms that are “at least as easy” as the method used to sign up, such as a clear and simple “click-to-cancel” button for online signups.
• Disclose key terms related to the subscription before obtaining billing information, including the recurring nature of the charges and cancellation terms.
• Prohibit misleading practices, ensuring businesses cannot deceive consumers about the terms or conditions of their subscription.

Additionally, the rule prohibits businesses from obstructing or delaying cancellations. While businesses can offer discounts or incentives for consumers to remain subscribed, they must prominently display the cancellation option throughout the process, ensuring it is easy to access without unnecessary hurdles.

Mixed Reactions from Commissioners

The FTC’s decision to adopt the rule was passed in a 3-2 vote, with Chair Lina Khan and two other commissioners supporting the regulation. Commissioners Melissa Holyoak and Andrew N. Ferguson, however, dissented. Holyoak raised concerns about the potential burden on businesses, particularly smaller companies, and expressed worries that the rule might stifle innovation. Ferguson’s dissenting statement is expected to be released soon.

In her separate statement, Commissioner Rebecca Kelly Slaughter hailed the rule as a necessary step to protect consumers in an increasingly subscription-based economy, stating that it “provides much-needed safeguards in a marketplace where businesses have been far too comfortable exploiting consumer confusion.”

The FTC’s click-to-cancel rule will take effect 180 days after it is published in the Federal Register, giving businesses time to adjust their practices. Once in effect, the rule will provide a consistent legal framework across industries, helping consumers avoid being trapped in unwanted subscriptions and memberships.

As businesses adapt to these changes, consumers can expect a smoother and more transparent experience when managing their subscriptions. For the FTC, the rule represents a broader commitment to promoting fair competition and protecting consumers from deceptive practices in a digital economy that increasingly relies on recurring payments and subscriptions.