The Federal Trade Commission (FTC) has finalized a sweeping update to its “Negative Option Rule,” a regulation that governs how businesses offer subscriptions, memberships, and recurring billing. If your company operates in this space, it’s time to pay attention — noncompliance now carries serious legal and financial risk.
Most of the headlines are focused on the “click to cancel” rule, but just as important are the FTC’s requirements around how consumers enter a subscription.
Whether you run a streaming service, subscription box, software platform, or recurring delivery program, here’s what you need to know to stay compliant and protect your business.
⚠️ Subscriptions Must Now Meet Strict Disclosure Rules
Under the updated FTC guidelines, before a consumer agrees to a subscription or recurring charge, your business must clearly and conspicuously disclose:
- What the consumer is agreeing to
- The total cost (including taxes, fees, shipping, etc.)
- The frequency of the charges
- The cancellation terms
- That it’s a recurring or auto-renewing charge
This information must be provided before the consumer gives payment information — and not hidden in fine print, footnotes, or hyperlinks.
🖱️ Consent Must Be Informed and Express
It’s no longer enough to imply consent. Businesses must:
- Obtain affirmative, express consent to the subscription terms
- Keep proof of that consent
- Separate the subscription acceptance from other terms or unrelated agreements (like privacy policies or general terms of use)
In other words, pre-checked boxes won’t cut it. Consumers must actively agree to recurring charges, and the consent must be clearly tied to the disclosures.
❌ “Click to Cancel” Rule: Make Cancelling Just as Easy
Once signed up, canceling must be:
- As easy as signing up
- Available via the same method used to enroll (e.g., online sign-up = online cancellation)
- Free from unnecessary friction (e.g., no forcing phone calls, long surveys, or hard-to-find links)
Additionally, if you offer promotions or discounted trials that convert to paid subscriptions, the cancellation terms must be clearly disclosed before the trial ends, and reminders must be sent out where required.
⚖️ What Happens If You Don’t Comply?
The FTC can now enforce these rules aggressively. That means:
- Civil penalties up to $50,000 per violation
- Refunds to consumers
- Public investigations or lawsuits
- Loss of consumer trust and brand reputation
Some businesses have already been hit with multi-million dollar settlements for violating subscription and cancellation rules.
🛡️ How to Protect Your Business
It’s not enough to just “check a box” — your systems, language, and contracts all need to be compliant.
What you should do:
- Audit your sign-up and cancellation flows
- Update your terms of service and checkout screens
- Create clear documentation of consent
- Avoid manipulative upsell or retention tactics
- Work with an attorney to ensure your practices are lawful
💼 Why You Need a Business Attorney Now
Most businesses don’t realize they’re violating the FTC rules until a customer complains, or worse, until the FTC comes knocking.
At Landry Legal, we help businesses review their subscription flows, revise legal terms, and proactively guard against lawsuits and regulatory action. Subscription-based businesses are profitable, but only if they’re built on a compliant foundation.
Protect your business before it’s too late.
Email us at contact@landrypllc.com to schedule a compliance review.
