Cancellation isn’t goodbye—the subscriber lifecycle is cyclical. According to Recurly’s 2025 State of Subscriptions report, 20% of new sign-ups came from returning subscribers, and businesses have unlocked over $200 million from reactivated paused subscriptions.

This shift in mindset presents a unique opportunity for businesses: making the cancellation experience as seamless and positive as the sign-up process. However, it also introduces a new challenge—remaining compliant, particularly with the FTC’s new click-to-cancel rule. To help navigate these changes, we’ve partnered with Linda Goldstein of BakerHostetler, a legal expert in subscription compliance, to share everything you need to know about the rule.

Background and overview

The Federal Trade Commission (FTC) released its long awaited click-to-cancel rule, which requires sellers to make cancellations as easy as sign-ups. It was published in the Federal Register last November and became effective on January 14, 2025, with provisions relating to notice, consent, and cancellation to take effect on May 14, 2025. 

It is important to point out that the new Rule is extremely broad in scope. It applies to any form of negative option where a consumer continues to receive goods or services and is billed for them on a recurring basis, unless the consumer cancels. Thus, it applies to automatic renewals, continuous service, continuity programs, free trials that automatically convert to a paid subscription, and any similar types of agreements. 

Unlike ROSCA, which is limited to online transactions, the Rule applies to negative option transactions in all sales channels, including online, phone, in-person, and any other type of interactive electronic medium such as mobile apps, text messaging, and instant messaging.

Additionally, the FTC has also made clear that the Rule is not limited to consumer transactions, but applies to business-to-business transactions as well.

Key provisions: Four key pillars

While the Rule has been nicknamed the click-to-cancel rule, its provisions extend well beyond the cancellation requirements. The provisions can be viewed as four key pillars: 

1. Prohibited misrepresentations

The Rule broadly prohibits misrepresentations of any material fact, not just those pertaining to the negative option feature. This is significant, since it allows the FTC to bypass the Supreme Court’s decision in AMG Capital that restricted the FTC’s ability to obtain monetary relief for false and misleading advertising claims by going directly to federal court.

Even if the advertising complies with all the requirements relating directly to the negative option feature, the advertising can be deemed to violate the Rule if it misrepresents any material fact that would affect a person’s choice or conduct regarding a product or service. 

This heightens the risk of offering any products or services on a subscription or other negative option basis. If there is any alleged misrepresentation about the features offered, the FTC can obtain substantial civil penalties—which are a whopping $54,000 per violation.

2. Mandatory disclosures

The Rule requires disclosure of all material terms, even those that don’t relate to the negative option feature. It specifies four acknowledgments that must be disclosed before the consumer provides their billing information:

  • The fact that consumers will be charged, or that the charges will increase after any trial period, and that consumers will pay on a recurring basis unless the customer takes some affirmative action, like canceling.

  • The deadline by which the consumer must cancel to avoid future charges, by date or frequency. Phrases like “billed annually or monthly,” as applicable, should be enough to meet this requirement. 

  • The amount of costs and frequency of the charges. Businesses must state if the amount is fixed or variable. There is no need to include taxes or shipping costs in the amount, but should indicate that they are extra.

  • The information necessary to find the simple cancellation mechanism.

It's not surprising that the Rule demands clear and conspicuous disclosures. These should be difficult to miss, stand out from the surrounding text, and be made through the same medium as the ad.

For example, in audiovisual ads, the disclosures must be both in the audio and video. For online offers, disclosures cannot be placed behind a hyperlink, hover, modal, or similar system—unless the consumer cannot proceed to order without engaging with that mechanism.

Additionally, the Rule requires that these disclosures be made before the consumer shares their billing information and placed immediately adjacent to where the consent is provided.

3. Express affirmative consent 

The seller must obtain the consumer’s unambiguous affirmative consent to the negative option feature before they are charged. This consent must be separate from the rest of the transaction, meaning that the consent must be solely for the negative option feature. This means that you cannot combine consent to Privacy Terms or Terms of Use with consent to the negative option feature. 

While the Rule does not require a check-box or electronic signature, it does provide a safe harbor for these mechanisms. If a seller decides to use another method of consent, the seller will have to prove that the method used is just as effective.

The Rule technically requires that the consent is obtained before the consumer is charged. However, the consent mechanism must be immediately adjacent to the disclosures, and the disclosures must be made before the consumer provides their billing information. This may require that the consent is also obtained before the billing information, or that the disclosures are made twice.

The Rule also has a new record-keeping provision which requires that a record of the consent be maintained for three years unless the seller can show that the consumer could not have made the purchase without providing consent. 

4. Simple cancellation requirements

Unlike ROSCA, the Rule’s cancellation requirements go beyond a simple text. The method of cancellation must be as easy as the method used to provide consent.

  • For online transactions: The cancellation method must be easy to find and cannot require the consumer to interact with a real or virtual sales representative—if such interaction was not required to provide consent.

  • For telephone transactions: The seller must provide a telephone number that is answered during normal business hours and is no more expensive than the phone number used to sign up.

  • For in-person transactions: The seller must provide, where practical, an in-person method of cancellation similar to the method used to sign up, plus an electronic or phone method to cancel.

One of the most controversial provisions of the Rule, as initially proposed, was the prohibition on making save-a-sale offers to consumers looking to cancel without their prior consent. While the FTC has eliminated said provision, marketers should not, however, present an unlimited amount of offers. 

Even absent a specific prohibition in the Rule, the FTC is likely to view the presentation of multiple offers as a dark pattern—designed to interfere with or thwart the consumer’s efforts to cancel. Hence, a violation of the Rule’s requirement that the method of cancellation be as simple as the sign-up method. 

Status of the click-to-cancel rule

To date, four lawsuits have been filed by various trade associations challenging the FTC’s authority to promulgate the Rule and certain of its provisions. These lawsuits have now been consolidated into action in federal court in Houston.

 It is also possible that the Rule could be rescinded by the incoming Congress under the Congressional Review Act, which allows Congress to invalidate Rules passed at the end of the prior Congressional session with a joint resolution.

Finally, in an effort to save at least some portions of the Rule, the Commission could voluntarily remove certain provisions. The broad prohibition on any misrepresentations is particularly vulnerable to challenge.

What you can do—and how Recurly can help

For now, marketers should be prepared to comply with the Rule, and in particular, take a close look at the claims they are making, since the prohibition on misrepresentations took effect on January 14, 2025. For the most part, these provisions reflect the positions the FTC has taken for the past several years in its enforcement actions involving negative option offers. 

A great partner is key. Recurly’s integration provides the tools necessary to align with the FTC’s requirements while enhancing customer experience and safeguarding compliance. With our platform you can easily: 

  • Capture consent, such as checkboxes or digital signatures, with our custom fields.

  • Enable immediate-termination, next-bill-date, or end-of-term cancellation options.

With the new regulations, the playing field is leveled—every subscription business must follow the same rules. Brands that succeed long-term are those that offer clear communication, flexible account management, and a seamless experience—all of which Recurly is built to deliver.

About Linda Goldstein: 

Linda Goldstein, Partner at Bakerhostetler, is one of the leading advertising lawyers in the U.S. She regularly provides advertising counsel and regulatory advice to companies in telecommunications, wireless, retailing, publishing, entertainment, digital media, gaming, food and beverage, and financial services. She represents clients in investigative and enforcement proceedings brought by the Federal Trade Commission, state attorneys general, district attorneys and other federal and state agencies with jurisdiction over advertising and marketing practices.