Click to Cancel Subscription Rule Quashed in Federal Court 

As The Guardian reports, the ruling Tuesday (July 8) by U.S. court of appeals for the eighth circuit came days before the Federal Trade Commission (FTC) rule — designed to make cancelling subscriptions as easy as signing up for them — would have gone into effect.

According to the report, the court found that the commission failed to adhere to proper procedures under the FTC Act when making the rule.

“While we certainly do not endorse the use of unfair and deceptive practices in negative option marketing, the procedural deficiencies of the Commission’s rulemaking process are fatal here,” the court wrote.

The rule — officially known as the Negative Option Rule — was first proposed in 2023 and approved by the FTC last year. 

It requires businesses to make it as easy for consumers to cancel their subscriptions, memberships, and other recurring payment programs as it was to join. It was designed to apply to almost all negative option programs — those that automatically renew unless cancelled by the customer — in any media, the FTC has said.

“Too often, businesses make people jump through endless hoops just to cancel a subscription,” then-FTC Commission Chair Lina M. Khan said in announcing the rule. “The FTC’s rule will end these tricks and traps, saving Americans time and money.”

The FTC’s initial decision corresponds to widespread annoyance with complex processes involved in cancelling a subscription, PYMNTS has written. 

However, the path to implementing the rule itself has been rocky. A group of trade associations filed a lawsuit against the FTC over the rule last year, arguing the regulation was beyond the scope of the commission’s authority.

And in May, the FTC voted to hold off on implementing the rule, which would have gone into effect that month, to give companies more time to prepare. The new deadline was July 14. 

New York Attorney General Letitia James, who had been encouraging consumers to get ready for the rule to go into effect, issued a press release Tuesday saying that “New Yorkers should never have to jump through hoops just to cancel an unwanted subscription.”

A spokesperson for the New York attorney general’s office told the Guardian that the office is reviewing the ruling.

As PYMNTS has written, James and other state-level officials have been stepping up their efforts in the financial/consumer protection regulation space as rules are rolled back on the federal level.