The Eighth Circuit's recent decision to vacate the Federal Trade Commission's (FTC) new Negative Option Rule (commonly referred to as the "Click-to-Cancel" Rule) has created significant uncertainty for businesses in the payments and subscription industries. Many companies were preparing to comply with the now-vacated rule's broad requirements, only to see them now nullified just before they were set to take effect. And while the court's decision halts, for now, the FTC's efforts in implementing the new Rule, it is important for businesses to recognize that the fundamental compliance obligations for negative option programs remain firmly in place under existing federal and state laws.
What Happened?
The FTC's (now vacated) Negative Option Rule, which was intended to take effect on July 14, 2025, was purportedly intended to simplify the process for consumers to cancel recurring subscriptions and to require clear, affirmative consent for automatic renewals. With this rule, the FTC sought to modernize its original negative option rule (promulgated in 1973), that covered only one form of negative option plan, by extending its application to modern-day forms of negative-option programs.
Challengers to the rule argued, among other things, that the FTC failed to conduct the proper economic impact analysis as required under the Regulatory Flexibility Act. However, The Eighth Circuit agreed and vacated the new rule on procedural grounds, concluding that the FTC had failed to conduct the necessary preliminary regulatory. As a result, the vacated rule will not take effect, and the prior, more limited rule remains operative.
The Core Concepts Remain
Although the FTC's new rule is no longer in play, businesses should not interpret this as a signal to relax their compliance efforts on these issues. The core principles that underpinned the vacated rule, such as clear disclosures, affirmative consent, and easy cancellation are still enforced through a patchwork of existing laws. And, the FTC had already taken enforcement action against payment providers for such practices long before the new Click-to-Cancel Rule was even proposed.
For example, the Restore Online Shoppers' Confidence Act (ROSCA) applies to online negative option features, including automatic renewals and free-to-pay conversions. ROSCA requires businesses to provide clear and conspicuous disclosure of all material terms before obtaining billing information, to secure express informed consent from consumers before charging them, and to offer simple mechanisms for consumers to stop recurring charges. Violations of ROSCA are treated as violations of an FTC trade regulation rule, which allows the FTC to seek civil penalties and other remedies.
Further, Unfair or Deceptive Acts or Practices (UDAP) laws also play a significant role. At the federal level, Section 5 of the FTC Act prohibits unfair or deceptive acts or practices, including those involving negative option marketing. Every state has its own UDAP statute, many of which mirror or expand upon federal requirements. These laws generally require that material terms be disclosed before the consumer agrees to buy, that affirmative and informed consent be obtained, and that cancellation methods be simple, reasonable, and easily accessible.
State specific "Click-to-Cancel" and automatic renewal laws add another layer of complexity. For instance, California mandates that businesses provide a cancellation mechanism that is as easy as the sign-up process, with clear disclosures and prompt processing of cancellation requests. Several other states have enacted or are considering similar laws, often with requirements that match or even exceed those of the vacated FTC rule.
What Should Businesses Do Now?
In light of these overlapping requirements, businesses should continue their compliance efforts with respect to negative option and subscription offerings. The absence of the FTC's new rule does not eliminate the need for robust compliance programs. The original negative option rule, ROSCA, UDAP, and state laws still require clear, upfront disclosures of all material terms, affirmative and informed consent for automatic renewals, and easy, accessible cancellation methods (often including "click-to-cancel" for online sign-ups). Companies should actively review their enrollment and renewal processes, existing contracts, and contract templates to ensure they meet or exceed the requirements of the original negative option rule, ROSCA, the FTC Act, and the most stringent state laws.
Importantly, however, although the Eight Circuit's decision invalidates the rule, it did not undercut the FTC's policy objectives. The Eight Circuit's decision was procedural, not substantive, and the FTC may reappear with a revised rule or increased enforcement under existing statutes. In addition the rule invalidation may prompt a heightened regulatory response at the state level. In this environment, proactive monitoring of regulatory developments remains essential.
Final Thoughts
The Eighth Circuit's decision represents a procedural setback for the FTC, but not for consumer protection. The legal and regulatory expectations for negative option programs remain robust. Businesses should remain vigilant and proactive, recognizing that compliance is not merely a box to check, but a critical part of building consumer trust and avoiding costly enforcement actions.
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