Everything You Need to Know About the FTC’s New Click-to-Cancel Rule

Digital subscriptions can be a convenient way for customers to purchase ongoing services at a predictable fixed price. Users can sign up quickly and easily, while providers benefit from reliable revenue streams and consumer loyalty.

However, companies offering subscription models often complicate the cancellation process, making it harder for users to opt out. The US Federal Trade Commission (FTC) has recognised this imbalance and introduced a new “click-to-cancel” rule to make this process easier.

This new legislation places strict requirements on service providers and represents a significant shift in the US’s consumer protection laws. With the law scheduled to take effect on 14 July 2025, businesses must understand its impact and how to comply.

This article explores the rationale behind the new rule, its key provisions, and its effect on businesses and customers.

Restore Online Shoppers’ Confidence Act (ROSCA)

The FTC currently regulates subscription models under the Restore Online Shoppers’ Confidence Act (ROSCA). Enacted in 2010, this legislation requires companies to obtain consumers’ express informed consent before charging them for recurring services. The Act targets businesses that automatically enrol users into subscription services without providing sufficient information or seeking their agreement.

However, ROSCA doesn’t explicitly address cancellations, meaning many companies make customers jump through various hoops to end their subscriptions. Examples include paid auto-renewals following a free trial, requiring users to call customer service, and providing hidden cancellation links.

Why the New Law?

The FTC’s decision to introduce this new rule stems from a rise in customer complaints about cancellations and a recent shift towards subscription models. While these services offer many benefits, the inability to cancel as easily as users sign up has resulted in millions of people making unwanted payments. In 2024, the Commission received an average of 70 complaints about subscription cancelling per day.

Notably, the FTC accused Amazon in 2023 of deceiving customers into signing up for paid services and making it too difficult for them to cancel. The lawsuit is ongoing, with a trial listed for June 2025.

As digital services become more popular, the Commission recognises the increased risk of companies using deceptive practices to extract money from customers. The new rule, therefore, aims to give bill-payers more control and restore the power balance between businesses and consumers.

Although the law was due to come into force on 14th May 2025, the FTC has delayed its implementation until 14th July 2025 to give companies additional time to comply.

What Does the Click-to-Cancel Rule Say?

The new rule has several key provisions companies must comply with, including:

1. Easy Online Cancellation

Businesses must introduce straightforward cancellation processes, ideally allowing customers to cancel with one click. The cancellation should be as simple as the sign-up, so companies must avoid hiding relevant links within account settings.

For example, a streaming service like Netflix or Disney+ must have a visible cancellation button on the user dashboard and not require customers to contact a helpline to opt out.

2. Clear Terms of Service

Before users sign up, companies must provide details of their services, costs, duration, free trials, and cancellation policies. They mustn’t bury important information in small print, ensuring it’s accessible to the average user.

For example, a skincare subscription should state that the customer will be charged $19.99 per month until cancellation, providing a link to the company’s terms of service and cancellation button.

3. Explicit Consent

This provision aims to tackle “negative option marketing”, where a user’s inactivity results in charges. A common example is a free trial, which automatically renews unless the customer cancels in advance.

Consumers must explicitly agree to payments rather than businesses hiding auto-renewal terms behind links. For example, users must tick a box confirming their agreement to a free trial rolling into a paid subscription when registering.

4. Notify Customers About Material Changes

If a company updates their services, pricing, or billing frequency, it must inform customers in advance and allow them to cancel easily. Providers should use the same communication channels they would usually use, such as email or text messages.

For example, if a meal subscription service increases its monthly price from $9.99 to $10.99, it must notify consumers and give them time to cancel.

5. Regular Reminders

Customers who agree to automatic renewals should still receive periodic reminders about their subscription with cancellation details. These reminders are useful for yearly subscriptions, as users might forget about their renewals.

For example, a cloud service provider should email customers a month before renewing their yearly subscription, informing them when they will be charged and how to end the contract. 

6. Immediate Processing

When a user cancels, the company must process their request immediately and stop taking payment. Businesses can still charge until the end of the billing cycle if their terms allow it – but mustn’t create further obstacles to prevent cancellations.

For example, a YouTube Premium user ends their subscription mid-month. They will retain access until the next billing period, but after this date, they can’t be charged.

What Are the Consequences of Non-Compliance?

Businesses in the US offering subscription services could receive substantial penalties for failing to comply with the click-to-cancel rule. The FTC could issue fines of over $50,000 per violation, highlighting the seriousness of these new regulations.

Additionally, non-compliance could cause lasting reputational damage, and customers could lose trust in companies that ignore vital consumer protection laws. The FTC can also issue enforcement orders requiring businesses to alter their practices, which could become more costly than taking proactive compliance measures.

How Will Businesses Be Impacted?

Reviewing business practices

US companies that rely on subscription models should conduct detailed audits of their customer workflows and update their terms of service to comply with the new rules. These updates will mean increased spending and a reallocation of resources. Smaller businesses will likely suffer more and may be unable to update their systems by the deadline.

Cross-border laws

Businesses that operate across states and in other jurisdictions will need to manage overlapping regulations, such as the EU Digital Services Act. Companies that fail to comply with the relevant laws will face greater legal and financial risks.

Increased cancellations

Companies may need to temporarily stop their subscription services while conducting system overhauls to comply with the new rule, which could result in losing customers. While some might suffer from an initial increase in cancellations, the click-to-cancel rule offers various long-term benefits, including improved consumer trust and loyalty. Companies can offer discounts to retain users and help minimise the impact of a spike in cancellations.

Competition

Those who take proactive steps to adapt their practices and seek consumer feedback will likely gain a competitive advantage and quickly attract a loyal customer base, while those who fail to comply may lose out.

How Will Customers Be Impacted?

User control

The click-to-cancel rule will give consumers greater autonomy over their chosen subscription services, allowing them to stop payments quickly and easily. They won’t have to waste time searching for cancellation links or spending hours speaking to customer service to end their contracts.

Transparent charges

Users will no longer face unwanted or unexpected charges and will have all the information they need to make more informed decisions about their purchases. This allows customers to manage their finances and avoids the frustration of dealing with multi-step cancellations.

Consumer trust

Overall, the rule aims to enhance consumer trust in digital services. Quick and hassle-free cancellations should encourage people to explore different services without the fear of being locked in. This represents a much-needed shift towards a more ethical and consumer-focused digital market where users feel confident investing in subscription-based products.

Conclusion

The FTC’s new click-to-cancel rule marks a significant turning point in the US’s regulation of digital subscriptions. It addresses a persistent frustration for consumers and redresses the power imbalance between users and service providers. By mandating clear terms, explicit consent, and simple cancellation processes, the new law will set fair and transparent standards in subscription-based business models.

For companies, the law presents challenges and opportunities. In the short term, businesses will need to invest in updating systems, redesigning cancellation flows, and aligning terms of service with the new requirements. While this may place a strain on smaller businesses or those operating across multiple jurisdictions, companies that adapt proactively can gain a competitive advantage and build stronger relationships with their customers.

Consumers will have more control over their purchasing decisions, allowing them to make informed choices, manage their money more effectively, and cancel subscriptions without unnecessary stress. The new rule should also improve trust in digital services by reducing the use of deceptive practices.

As the compliance deadline approaches, businesses should actively review their workflows and update their processes to avoid breaches and potentially severe penalties. The click-to-cancel rule ensures customers stay subscribed because they want to, not because they feel trapped.