The US Federal Trade Commission (FTC) is reconsidering how it regulates subscriptions that renew automatically, and software companies sit squarely in its field of view. This article lays out what has happened so far, what remains undecided, and what a fair sign-up and cancellation flow looks like in practice.
What is a negative option, and why does SaaS fall under it?
A negative option is an offer in which a customer’s silence or inaction is treated as agreement. In subscription software, the classic example is a free trial that converts to a paid plan unless the customer cancels, or an annual plan that renews unless the customer opts out. The business model works because recurring revenue is predictable, which is why it is central to how SaaS pricing models work.
The same design that makes revenue predictable can also trap people who did not intend to keep paying. Regulators therefore watch three moments closely: how terms are disclosed at sign-up, whether the customer clearly agreed to be charged, and how hard it is to leave.
How did the FTC’s “click-to-cancel” rule come about, and what happened to it?
The FTC’s timeline, as published on its Negative Option Rule page, runs as follows:
| Date | Event |
|---|---|
| October 16, 2024 | FTC announces its final “click-to-cancel” rule |
| November 15, 2024 | Rule notice published in the Federal Register (16 CFR Part 425) |
| December 13, 2024 | Commission denies industry request to pause the rule while courts review it |
| February 12, 2026 | Federal Register notice revises the Negative Option Rule to conform to federal court decisions |
| March 11, 2026 | FTC announces a request for public comment on negative option practices |
| March 13, 2026 | Advance notice of proposed rulemaking published |
| April 13, 2026 | Comment period closes |
In its own materials the FTC now refers to the “vacated 2024 Rule,” meaning a court set the 2024 rule aside. The practical result is that the sweeping 2024 requirements are not the operating framework, and the older 1973 Negative Option Rule, which the FTC says covers only prenotification plans, is far narrower than modern subscription practice.
What is the FTC asking now?
In March 2026 the agency issued an advance notice of proposed rulemaking, an early step in which a regulator asks the public for evidence before drafting any specific rule. According to the FTC’s press release, it asked for comment on:
- how widely negative option programs are used and how they operate;
- whether common practices obscure program terms, enroll people without express informed consent, or discourage cancellation;
- whether to keep the current rule, adopt provisions of the vacated 2024 rule or other provisions, or rely on non-regulatory tools such as consumer and business education;
- the costs and benefits of each path, backed by studies and data.
The agency said it receives thousands of complaints each year and that it has seen more than 100,000 complaints in the past five years about negative options and related practices. Christopher Mufarrige, Director of the FTC’s Bureau of Consumer Protection, said that “negative option subscriptions continue to be plagued by difficult cancellation processes.”
As of October 22, 2026, comments have closed, and the sources reviewed here do not show a proposed rule text. What happens next is undecided, which is exactly why teams should not wait for a rule to treat cancellation as a design problem.
Does the lack of a current rule mean anything goes?
No. The FTC says it has used several tools against unfair and deceptive negative option practices: the Restore Online Shoppers’ Confidence Act (ROSCA), Section 5 of the FTC Act, the Negative Option Rule and the Telemarketing Sales Rule. In other words, the vacated rule was one tool among several, and the others remain. The agency’s stated view, again from Mufarrige, is that “neither consumers nor competition are protected when consumers are enrolled in programs” they do not want or cannot cancel.
Rules also differ by market. Companies selling across borders face other regimes, and in Europe the switching rights covered in the EU Data Act’s SaaS switching rules push in a similar direction. This article describes the US federal picture only.
What does a fair subscription flow look like?
Regulation aside, the debate keeps returning to the same few design principles. A flow that would be easy to defend to a regulator, a customer or a journalist usually has these features:
- Terms before billing details. Price, billing frequency, renewal date and the trial’s end are shown before the customer enters a card, in plain words and not only in a linked policy.
- A clear act of agreement. The customer takes a deliberate step, such as ticking an unchecked box or pressing a button labeled with the price, to accept recurring charges.
- Reminders before renewal. An email ahead of a trial ending or an annual renewal prevents surprise charges and is cheap to send.
- Cancellation as easy as sign-up. If a customer joined online in two minutes, they should be able to leave online in about the same time, without a mandatory phone call or a maze of screens.
- Honest confirmation. After canceling, the customer sees the end date of paid access and receives a written confirmation.
- Access to their data. Export tools let people take their work with them, a point covered in how to evaluate a SaaS tool before you commit from the buyer’s side.
None of this is a legal checklist. Requirements vary by jurisdiction, and a company with a specific question should consult a qualified lawyer.
What are “dark patterns” in cancellation, and why do they backfire?
A dark pattern is an interface choice that steers people toward an outcome that benefits the business and not the user. In cancellation flows, typical examples include burying the cancel button, making the “keep my plan” option bright and the “cancel” option faint, asking the customer to repeat their decision across many screens, or requiring a chat with an agent.
Retention offers are not themselves a problem. A single, skippable offer of a discount or a pause can serve customers who would genuinely prefer it. The line is crossed when the offer becomes an obstacle, so the customer cannot complete the cancellation they came to make.
Teams also tend to overlook the cost of friction. Forced retention can inflate churn metrics in the short term while pushing the real departure into complaints, payment disputes and public criticism.
Worked example: what does friction really earn?
The following is illustrative arithmetic, not data from any company. Suppose a product charges $40 per month, and 200 customers try to cancel in a given month.
- A hard-to-find cancel button causes 20 of them to give up and stay for one more month: 20 × $40 = $800 of extra revenue.
- Suppose 8 of those 20 file card disputes instead. If each dispute costs the business the $40 charge plus a $15 fee, the loss is 8 × ($40 + $15) = $440.
- The net gain is $800 − $440 = $360, before counting support time, lost goodwill and legal exposure.
The numbers are invented, but the structure is the point: friction produces a small, one-off gain, while the costs recur and are harder to see. A clean exit, by contrast, leaves a former customer who may return and who may recommend the product.
Where should teams start?
A short internal audit is usually enough to find the biggest gaps:
- Sign up for your own product with a test card and time how long cancellation takes.
- Read the confirmation emails as a customer would.
- Check that the trial end date and renewal price are visible before payment.
- Review support tickets and payment disputes for cancellation complaints.
- Record the findings and fix the worst friction first.
Conclusion: treat cancellation as part of the product
The FTC’s 2024 click-to-cancel rule has been vacated, and its 2026 notice shows the agency is still deciding how to proceed. Whatever rule emerges, the direction of travel is consistent: clear terms, informed consent and a simple way out. Companies that build those into the product now are protected against the next rule and, more importantly, earn the kind of trust that keeps customers by choice.
This article provides general information, not legal, financial or investment advice. Consult a qualified professional about your specific situation.
Sources: Federal Trade Commission
