FTC Issues First Penalties Under Updated Negative Option Rule

The Federal Trade Commission announced its first enforcement actions under the strengthened Negative Option Rule (commonly called the "Click-to-Cancel" rule), fining three companies a combined **$4.2 million** for subscription practices that violated the updated requirements.

What Happened

Three companies — two SaaS providers and one subscription box service — were found to have:

• Failed to clearly disclose material terms of their subscription before obtaining billing information
• Required consumers to navigate multiple screens, answer retention questions, or contact customer service to cancel subscriptions that were enrolled online
• Continued charging consumers after cancellation requests were submitted

Key Requirements Under the Updated Rule

1. **Clear disclosure before billing info.** All material terms (price, frequency, renewal terms) must be presented clearly before the consumer provides payment information. 2. **Affirmative consent.** Consumers must separately affirm they understand the negative option feature (auto-renewal) — it cannot be bundled with other consents. 3. **Simple cancellation.** Cancellation must be available through the same medium used for enrollment (online signup = online cancellation). No mandatory phone calls, retention offers, or multi-page flows. 4. **Immediate effect.** Cancellation must stop future charges immediately (access can continue through the paid period).

What This Means for Your Business

The FTC is actively enforcing. If your business has any form of recurring billing — subscriptions, memberships, SaaS plans — review your enrollment flow, disclosure language, and cancellation process now. The penalties are per-violation, meaning each affected consumer counts separately.

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**Disclaimer:** This article is for informational purposes only and does not constitute legal advice. Consult a qualified attorney for advice specific to your business.