On March 23, the Federal Trade Commission released a Notice of Proposed Rulemaking that, if passed, would amend the Negative Option Rule to increase disclosure requirements and make it easier for consumers to cancel renewing subscriptions and memberships.
Currently, the Negative Option Rule covers “prenotification plans” only, where sellers provide periodic notices offering goods to participating consumers and then send and charge the consumer for those goods if the consumer takes no action to cancel or decline the offer. The proposed Rule would expand coverage to include all negative options and continuity plans.
The proposed provision would apply to all subscription features in all media to ensure consumers know important details upfront. Sellers will also be required to provide consumers the following information before signing up for services such as free trials and recurring subscriptions:
- Recurring payments (if applicable)
- Deadline for stopping charges
- What consumers will have to pay
- Date the charge will be submitted for payment
- Information about how to cancel
Consumers report multiple unsuccessful cancellation attempts or inconvenient methods to cancel which make canceling more of a hassle than paying the monthly fees. The FTC’s proposed provision would update the Negative Option Rule to apply to the current marketplace where consumers can enroll for subscriptions with just one-click. The provision aims to make cancellation as easy as enrollment and allow consumers to make informed decisions with regard to subscriptions.
The FTC is seeking comment on the proposed provision for 60 days after the proposed provision is published in the Federal Register.
*Jennifer Tran contributed to this article
Michele is the Managing Partner at M&S and former Chief of the Ohio Attorney General’s Consumer Protection Section. Bringing more than two decades of experience in the consumer protection arena, she advises highly regulated businesses on a wide range of telemarketing, privacy, and other consumer protection matters.