ARTICLE
26 June 2025

Autorenewal Requirements Are Finally Coming Into Focus – What You Need To Know

NM
Nelson Mullins Riley & Scarborough LLP

Contributor

Flexibility, practical business sense, and tireless advocacy are among Nelson Mullins’ service hallmarks. Our growth over the past 120 years continues to be client-focused.

Our culture and multidisciplinary platform provide our community of clients trusted advice to meet a broad range of business needs and our team members an opportunity to be part of a Firm that values relationships, collaboration, thinking ahead, leadership within our profession, and helping those in need through pro bono and community service.

As July prepares to descend upon us, the swirl regarding the impending legal requirements for properly offering and administering autorenewing subscriptions has become downright maddening...
United States California Consumer Protection

As July prepares to descend upon us, the swirl regarding the impending legal requirements for properly offering and administering autorenewing subscriptions has become downright maddening – which rules will apply? How can I comply with all of these different standards I'm seeing? Which boogeyman might come after me? Yes, the details matter, and this article isn't intended to be completely granular – you should work with knowledgeable counsel for that. However, a few fundamental concepts are clear, from both a legal perspective and from the standpoint of what it takes to be a good corporate citizen that cares for its customers.

The Laws Aren't Just for Online Contracts or B2C Contracts

While some of the applicable laws are limited solely to autorenewing subscription contracts entered into online, and/or to the sale of products for personal or household use only (not B2B), the Click-to-Cancel Rule is not so limited, and some of the respective states' laws are not limited either. As we navigate this complex framework of requirements, don't make assumptions that the types of contracts you offer are outside the scope. The Click-to-Cancel Rule, for instance, applies to any autorenewing subscription contract for any goods or services offered through any medium to any customer (including business customers).

Don't Count on the New Administration to Sit on its Hands

To say the FTC has been consistent with its position on the Click-to-Cancel Rule would be what we in the business call a "material misrepresentation". Despite prior statements and dissents from current FTC Chair Andrew Ferguson and Commissioner Melissa Holyoake when the Rule was published (prior to the 2024 election) voicing concern that the Rule was overly broad and procedurally flawed, both of them have now indicated vigorous support for the Rule.

Whether defending the Rule itself in the lawsuits challenging it that have now been consolidated in the Eighth Circuit (Custom Communications, Inc. v. Federal Trade Commission, No. 24-3137 (8th Cir.)), or filing lawsuits alleging violations of the Restore Online Shoppers' Confidence Act (ROSCA) based on the same fundamental principles that are espoused by the Click-to-Cancel Rule, the newly-constituted Commission under President Trump has made clear that deceptive practices in the way autorenewing subscriptions are advertised or how customers are enrolled (and sometimes trapped) in them will not be tolerated, despite the general atmosphere of deregulation we are otherwise seeing or were expecting.

Lesson: If you plan to cross your fingers and hope that the Click-to-Cancel Rule will go away, do so at your own peril.

Material Misrepresentations Are Not Okay

Perhaps the biggest elephant in the room pertains to the inclusion in the Click-to-Cancel Rule of a prohibition on misrepresenting any "material" fact in connection with an autorenewing subscription, including facts that have nothing to do with the subscription process but relate solely to the underlying product or service offered. This aspect of the Click-to-Cancel Rule was a primary driver behind the consolidated lawsuits that were filed in December to try to have the Rule vacated or set aside as "arbitrary, capricious, and an abuse of discretion" by the FTC.

While the FTC has announced that it will not begin enforcement of certain portions of the Click-to-Cancel Rule until July 14, Section 425.3 of the Rule – which covers material misrepresentations – is and has been in effect since January (although we have seen no enforcement activity related to that section yet). In oral arguments heard by the Eighth Circuit on June 10 in the now-consolidated lawsuits referenced above, the parties fought over substantive and procedural issues and, while the judges didn't necessarily tip their hand on which way they will rule (or when they will rule), comments from the bench certainly indicated that the Court believes that the way consumers are being misled by and/or trapped into recurring subscriptions is a problem.

Regardless, no matter how the consolidated lawsuits ultimately shake out (which could involve SCOTUS), remember that California has also amended its autorenewal statute, effective July 1, to prohibit the same sorts of material misrepresentations that are covered by Section 425.3 of the Click-to-Cancel Rule. This means that any business offering autorenewing subscriptions to customers in California is still going to be subject to this prohibition. And if you've been paying attention, the California Auto Renewal Task Force (CART), a group of district attorneys from San Diego, Los Angeles, Santa Clara, and Santa Cruz Counties, together with the Santa Monica City Attorney's Office, actively identifies and challenges businesses that it believes are not complying with the California statute. Couple that with the class action bar's practice of relying on the California Consumers Legal Remedies Act to sue for violations, as well as other state UDAP statutes and Section 5 of the FTC Act generally, and no merchant should feel comfortable when deceptively describing how its subscription program works or the attributes, features, and benefits of the products or services it offers through the program.

Clear and Conspicuous Disclosures

While the patchwork of federal and state laws may use different verbiage regarding how the terms of an autorenewing subscription should be presented to the customer, the fundamental takeaway is that how merchants go about describing the subscription program should be seen and understood by consumers acting reasonably under the circumstances. Don't bury the terms, don't call them something they're not, don't spring them on the consumer after they've already given you their billing information or consented to enrollment, and don't hide them behind links. Ask yourself if a reasonable consumer might not have understood what they were signing up for (e.g., recurring charges); if it's not clear, you should reconsider when, where, and how you explain it.

Affirmative Consent

Arguably the trickiest and potentially most confusing element of the autorenewal laws relates to the manner in which the customer consummates the transaction. Despite varying language amongst the applicable laws, the requirement is clear – by proceeding, does the customer intend to sign up for an autorenewing subscription? There may be a few ways to go about checking this box (pun intended), but whichever approach you choose, it is critical that you can say with a straight face that any reasonable consumer – prior to clicking the consent button or otherwise accepting and proceeding with the transaction – clearly is knowingly agreeing to (i) an automatically renewing subscription, (ii) for the identified products/services, (iii) for which they'll be charged an identified amount at identified intervals, and (iv) how to cancel. This information should be broken out from other information, be legible and understandable, and be above and in proximity to the consent mechanism. That's not just the law, it's good business.

Confirmation

Do yourself and your customer a favor: when they sign up for an automatically renewing subscription, send them a confirmation outlining what they signed up for and how the subscription works (costs, frequency, how to cancel, etc.). If you don't want to do that, ask yourself why – is it because you don't want the customer to realize what they've signed up for, or because you don't want to prompt them with an opportunity to back out? Hint: those are not valid reasons.

Simple Cancellation Methods

When all is said and done, you should make it generally as easy to cancel as it was to sign up, and you should offer cancellation through the same methods that you allowed for sign-up. The more obstacles you put in the way of cancellation (including making it difficult to even find out how to go about cancelling), the more likely you are to be in violation of the applicable laws.

There has been much discussion about "save" tactics – something that was ultimately left out of the final Click-to-Cancel Rule – but state laws generally prohibit you from abusing the process. While offering a discount or some other benefit one time as part of the process in an effort to keep the customer might be okay, if they refuse then you need to honor that and stop pushing.

Reminders and Notices

Neither ROSCA nor the Click-to-Cancel Rule imposes any specific requirements on when and how merchants must send renewal reminders or notices of changes to a subscription, but the states have stepped into the breach and have outlined a myriad of requirements that are not easy to harmonize with one another. However, if your goal is to be compliant across the country, the best approach is to (i) send a renewal reminder to every subscriber 30 days in advance of the renewal date that will take their subscription over one year and on each annual anniversary, (ii) for free or promotional trials that last a month or more, send a notice reminding the customer that the trial period is ending 15 days prior to the date on which the subscription converts to a different structure, and (iii) for any other material changes to the subscription – including price increases – send a notice of the changes 15 days in advance of their effective date and allow the customer to cancel if they don't agree to them.

What Now?

With several of these new requirements springing into effect in July, it is prime time for some self-reflection. If you offer autorenewing subscriptions, take a good look at how they are advertised, how customers sign up, how you communicate with customers about changes, and how cancellation works. Assess the types and volume of complaints you get – if there's a particular element of your user flow that a lot of customers complain about, maybe there's a way to improve that piece.

While these laws might have never evolved the way they have but for a lot of unscrupulous businesses out there who purposely attempt to trick and take advantage of consumers, the laws are not limited solely to the bad guys. Regardless of the purity of your intentions, if you are not following the standards and requirements set forth in these laws, you could find yourself on the wrong end of a challenge. Rather than waiting until you are defending yourself in an investigation or litigation to think about whether you should have done things differently, do yourself a favor and ask yourself those questions now (and fix things while you can).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More