The FTC’s Negative Option Rule: Complying with the 2025 Amendments

On May 14, 2025, the Federal Trade Commission (FTC) will implement crucial amendments to its Negative Option Rule. These amendments aim to strengthen consumer protections in subscription-based goods and services, adding compliance requirements for businesses that use negative option billing. A negative option is when a company automatically enrolls customers in a service or subscription unless the customer explicitly opts out. If your business utilizes subscription models, automatic renewals, or free trials, these changes will affect how you handle customer consent, disclosures, and cancellations. Regulated entities have until May 14, 2025, to comply with published sections 425.4, 425.5, and 425.6 of the Negative Option Rule.

The FTC’s Negative Option Rule amendments will strengthen the customer’s experience by making it easier than ever to cancel recurring payments to businesses. On January 14th, 2025, the FTC amended the Rule to prohibit misrepresenting any material fact regarding either the negative option offer or any other aspect of the offering. By May 14, there are three additional key enhancements taking effect:

Disclosure Requirements

The FTC is introducing more stringent requirements around disclosures, stating, “many sellers fail to provide adequate disclosures, thereby luring consumers into purchasing goods or services they do not want.” (88 FR 24726-27). The new rules will require businesses to disclose all material terms of the transaction, not strictly limited to the terms of the negative option offer. Prior to collecting a consumer’s billing information, businesses must disclose, “(1) that consumers’ payments will be recurring, if applicable; (2) the deadline by which consumers must act to stop charges; (3) the amount or ranges of costs consumers may incur; (4) the date the charge will be submitted for payment; and (5) information about the mechanism consumers may use to cancel the recurring payments.” (88 FR 24726). The disclosure must be “unavoidable,” and no part of the offering can contradict the disclosure. It must be located immediately adjacent to the means of obtaining consent, which must occur before obtaining the consumer’s billing information. Note that a disclosure is not considered clear and conspicuous if a consumer must take an action to see it, such as clicking a hyperlink or hovering over a “disclosures” icon.

Express Informed Consent

Introducing separate express informed consent to the negative option feature is designed to prevent consumers from unintentionally consenting to a negative option feature when they thought they were agreeing to a one-time purchase. The FTC’s amendments will require sellers to exclude information that “interferes with, detracts from, contradicts, or otherwise undermines the ability of consumers to provide their express informed consent to the negative option feature.” (88 FR 25534). After obtaining express informed consent for the negative option offer, businesses will then be required to obtain the consumer’s unambiguous affirmative consent to the rest of the transaction. Records of the consumer’s consent must be kept for at least three years, or one year after the contract is terminated, whichever is longer.

“Click to Cancel”

There must be a “simple mechanism” for consumers to cancel the negative option. This mechanism “must be at least as easy to use as the method the consumer used to initiate the negative option feature.” (88 FR 25534). The consumer must be able to cancel the negative option via the same medium they used to sign up. If the consumer signed up in person, they must be able to cancel in-person and through the phone or electronic medium. For telephone cancellation, businesses must provide a telephone number that is answered during business hours. Businesses cannot use a live or virtual representative to cancel unless signup was also through these means. Regardless of the medium of cancellation, businesses must be sure to immediately cancel the negative option feature and maintain these records.

As the May 2025 deadline approaches, it’s crucial to review your marketing practices to ensure compliance with the FTC’s new amendments. Since the landmark decision by the Eleventh Circuit Court of Appeals to strike down the implementation of the FCC’s One-to-One Consent Rule in January 2025, businesses may be curious if future federal amendments will be held or be overturned. There is a possibility that Congress utilizes the Congressional Review Act to overturn the rule, though CompliancePoint feels the amendments to the Negative Option Rule are likely here to stay. These amendments are designed to strengthen consumer protections, contrary to the One-to-One Consent Rule amendments that threatened to limit the consumer’s ability to easily get the services they want.

Staying up to date on developments in federal regulations can be a complex and time-consuming task. CompliancePoint has a team of marketing compliance professionals that can take compliance monitoring off your plate. Reach out to us at connect@compliancepoint.com to learn more about our services.