Continued Scrutiny: Curbing Auto-Renewal Programs and Online Cancellation

Both federal and state legislators and regulators continue to focus on auto-renewal/continuous service programs, particularly emphasizing the necessity of online cancellation for orders initiated via the Internet. In March 2023, the FTC aimed to modernize its “negative option rule,” aligning it with state laws and increasingly common continuity programs. The proposed FTC Rule Concerning Recurring Subscriptions and Other Negative Option Plans would mandate  disclosure of continuity program terms and cancellation processes before acquiring a consumer's billing information. Moreover, it would mandate explicit informed consent for the negative option feature and would require “click to cancel” for online orders. Inspired by California's existing law, the proposed rule aims to limit unsolicited “save” offers. Recently, the FTC announced plans for a virtual informal hearing on January 16, 2024, to discuss these proposed amendments.

States are also actively introducing laws and regulations pertaining to automatic renewals. Most notably, Massachusetts proposed enhanced regulations requiring not only online cancellation but also elevated compliance responsibilities concerning renewals.  Earlier this year, states such as Virginia and Kentucky enacted their own measures similarly restricting automatic renewal plans and cancellation.

Private plaintiffs have also joined in the fray, bringing proposed class actions against marketers who fail to offer online cancellation options when accepting online enrollment.

For marketers who offer continuous service programs, it is critical to re-evaluate their enrollment and cancellation paths to address these evolving standards.

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