On October 16th, 2024, the Federal Trade Commission (“FTC”) announced the final amendments to the “Rule Concerning Use of Prenotification Negative Option Plans,” now retitled as the “Rule Concerning Recurring Subscriptions and Other Negative Option Programs” (hereinafter, “Negative Option Rule”) which creates a regulatory framework for the protection of consumers from unfair and deceptive negative option practices. The negative option, according to the FTC, is an arrangement under which the consumer’s silence or failure to take affirmative action to reject a good or service or to cancel the agreement is interpreted as acceptance or continuing acceptance of the offer, including, but not limited to: (1) An automatic renewal; (2) A continuity plan; (3) A free-to-pay conversion or fee-to-pay conversion; or (4) A pre-notification negative option plan (hereinafter, “Negative Option Feature”). The Negative Option Rule will take effect on January 14, 2025. Below, you will find a summary of the most significant developments:
Applicability
The provisions of the Negative Option Rule apply to all negative option programs in any media, including, but not limited to, interactive electronic media, telephone, print, and in-person transactions.
Key Requirements under the Negative Option Rule
In connection with promoting or offering any goods or service for sale with a Negative Option Feature, the seller shall:
- Disclose all material terms of the negative option offering in a “clear and conspicuous” manner prior to collecting the consumer’s billing information.
- Obtain the consumer’s expressed informed consent prior to proceeding with any charges. The consent must be separate from any other portion of the transaction.
- Maintain records of the consumer’s consent for at least three (3) years unless the seller can demonstrate by a preponderance of the evidence that it is not possible to complete the transaction without such consent.
- Provide a simple mechanism for cancellation (“Click to Cancel”) that allows the consumer to cancel the Negative Option Feature and stop any recurring charges. The cancellation mechanism must be easy to locate and provided through a method similar to the one the consumer used to consent to the feature.
The Negative Option Rule does not preempt consistent state legal regulations that provide greater protection.
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This Notice to Clients and Friends has been prepared for information purposes only and is not intended, and should not be relied upon, as legal advice. To further discuss or obtain additional information, please contact us at your convenience.
| Eugenio J. Torres Oyola | etorres@ferraiuoli.com | Rafael Rodríguez Muriel | rrodriguez@ferraiuoli.com |
| Maristella Collazo Soto | mcollazo@ferraiuoli.com | Karla-In Encarnación Pak | kencarnacion@ferraiuoli.com |
| Víctor Rodríguez Reyes | vrodriguez@ferraiuoli.com | Melissa Bayona Torres | mbayona@ferraiuoli.com |
| Jean G. Vidal Font | jvidal@ferraiuoli.com | Jorge Colberg Vilanova | jcolberg@ferraiuoli.com |
| Cristina Arena Solís | carenas@ferraiuoli.com | ||