FTC Negative Option Rule for Business Compliance
Learn about the FTC's new negative option rule and its implications for businesses marketing goods or services with automatic renewal features. Discover the substantive requirements for disclosure, consent, and cancellation to ensure compliance by the implementation date.
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Presentation Transcript
FTC Negative Option Rule Click to Cancel April 2025 ERCOT RMS
Summary of FTC Rule The FTC s new negative option rule applies to businesses marketing or selling a good or service with a negative option feature Negative option feature is defined as a provision of a contract under which the consumer's silence or failure to take affirmative action to reject a good or service or to cancel the agreement is interpreted by the negative option seller as acceptance or continuing acceptance of the offer Includes things like automatic renewal contracts and continuity plans Effective Date January 14, 2025 Compliance / Implementation Date May 14, 2025
3 Substantive Requirements Disclosure (16 CFR 425.4) Disclosure (16 CFR 425.4) Prior to collecting the consumer s billing information, must disclose all material terms Requires a clear & conspicuous disclosure of auto-renewal How the consumer can cancel using the simple cancellation mechanism (see cancellation section below) Consent (16 CFR 425.5) Consent (16 CFR 425.5) The consumer must give their separate option feature separate express informed consent to the negative Cancellation (16 CFR 425.6) Cancellation (16 CFR 425.6) The consumer must be able to cancel and immediately stop any recurring charges
3 Substantive Requirements, cont. Cancellation (16 CFR 425.6) Cancellation (16 CFR 425.6) The cancellation mechanism must be as least as easy to use as the mechanism used to consent to the negative option feature If the consumer can give consent with one click, then the consumer should be able to cancel with one click The cancellation mechanism must be available at least through the same medium the consumer used to enroll (e.g., consumer enrolled via web must be able to cancel via web, consumer enrolled via phone must be able to cancel via phone) If the cancellation mechanism is by an interactive electronic medium such as web, text, chat, instant messaging, or email, the mechanism must be easy to find and it cannot require the consumer to interact with a live or virtual representative (like a chatbot) unless the consumer had to interact with a live or virtual representative to give their consent
