Intellectual Property Blog

Another Consumer Transparency Requirement for Businesses: The FTC finalizes the “Click to Cancel” Rule

The Federal Trade Commission routinely develops, amends, and enforces various rules related to consumer protection including transparency and choice requirements, many of which involve consent, privacy, and data security.

Last month, the FTC released a final rule called "click to cancel," creating another “transparency” requirement for businesses offering subscriptions. Specifically, the rule provides that online subscriptions should require the same number of clicks to end as they do to sign up, and in-person signups should have an option to cancel online or over the phone.

The “click to cancel” rule will provide a consistent legal framework by prohibiting sellers from:

• Misrepresenting any material fact made while marketing goods or services with a negative option feature;
• Failing to clearly and conspicuously disclose material terms prior to obtaining a consumer’s billing information in connection with a negative option feature;
• Failing to obtain a consumer’s express informed consent to the negative option feature before charging the consumer; and
• Failing to provide a simple mechanism to cancel the negative option feature and immediately halt charges.

Following an evaluation of public comments, the FTC has voted to adopt a final rule with certain changes, most notably dropping a requirement that sellers provide annual reminders to consumers of the negative option feature of their subscription and dropping a prohibition on sellers telling consumers seeking to cancel their subscription about plan modifications or reasons to keep to their existing agreement without first asking if they want to hear about them.

Similar to the FTC’s other transparency requirements, which underpin the FTC’s privacy disclosure rules regarding website privacy policies, under the FTC’s final rule:

• Important information must be truthful, clear, and easy to find.
• People have to know what they are agreeing to before they sign up.
• Sellers have to be able to show that people knew what they agreed to before they signed up.
• There always has to be a way to cancel that’s as quick and easy as it was to sign up.

Most of the new requirements will go into effect in about six months.

A warning: Businesses that violate these requirements can be liable for redress and civil penalties. McBrayer’s Data Privacy Security and Technology attorneys can bring your business up to speed on the latest consent, privacy, and data security requirements.

Ameena Khan Per is an Associate of McBrayer PLLC, practicing in the firm's Louisville office. Her law practice primarily focuses on data privacy and security, intellectual property, and trademarks. Mrs. Khan Per can be reached at aper@mcbrayerfirm.com or (502) 327-5400.

Services may be performed by others. This article does not constitute legal advice.