Court Blocks Click-to-Cancel, Halting Federal Consumer Protection Against Unfair Subscription Practices

Signing up for a streaming service takes just a few clicks. But often, consumers find themselves lost in a maze when trying to cancel - which is an experience the Federal Trade Commission (FTC) intended to address with its “Click-to-Cancel” rule passed in October 2024, before being blocked by a federal court just before it was meant to go into effect this summer.

The rule was designed to make ending subscriptions as easy as starting them, addressing the growing frustration of consumers trapped in recurring payments they no longer want.

Subscription services have exploded in popularity, from entertainment to meal kits. But with convenience comes a dark side. Companies make it easy to sign up - but often bury the cancellation function under layers of menus or complicated processes. The FTC’s rule aimed to end these “tricks and traps,” promising a level playing field for consumers in the digital marketplace.

What is the Click to Cancel Rule?

The FTC’s “ Click-to-Cancel” regulation would have forced businesses to:

• Make cancellation as simple as enrollment—if you signed up online, you could cancel online.

• Clearly disclose all terms, including when free trials or promotional periods would end.

• Obtain explicit consent before charging for subscriptions, renewals, or after free trials.

• Prohibit misrepresenting any material facts about subscriptions or cancellations

The rule applied broadly to nearly all “negative option” programs—those where inaction means you’re automatically charged. The goal was to protect consumers from unwanted charges and ensure transparency in subscription agreements.

The Court's Decision to Block the Rule

Just days before the rule was set to take effect in July 2025, a federal appeals court threw a wrench in the FTC’s plans. The Eighth Circuit Court of Appeals blocked the rule, citing a fatal procedural flaw: the FTC failed to conduct a required preliminary regulatory analysis. According to the court, if a rule is projected to have an annual economic impact exceeding $100 million, agencies must conduct a detailed analysis before implementation.

The FTC argued its initial estimates fell below the $100 million threshold, but the court disagreed, pointing to follow-up estimates that suggested the rule’s impact would be much greater. Without this analysis, the court said, the rule could not stand.

Economic Impact Analysis Controversy

This wasn’t just a technicality—it was a battleground between consumer advocates and business interests. Supporters of the rule accused “big business” of using procedural arguments to protect profits at the expense of consumers. Critics of the FTC, on the other hand, warned that the rule would impose excessive compliance costs and stifle innovation in the subscription economy.

The court made it clear: “While we certainly do not endorse the use of unfair and deceptive practices… the procedural deficiencies of the Commission’s rulemaking process are fatal here.”

Consumer Protection and Subscription Practices

For consumers, the court’s decision was a gut punch. The promise of easy cancellations evaporated overnight, leaving many stuck with the old status quo—complicated, time-consuming, and sometimes impossible cancellation processes. Consumer complaints about unwanted subscriptions had been mounting, with the FTC receiving thousands of reports each year.

The blocked rule also highlighted a broader problem: the “negative option” marketing model, where silence equals consent, often leads to consumers paying for services they no longer use. Without the rule, companies can continue to use confusing interfaces or require phone calls to cancel, making it harder for people to take control of their finances.

Business Compliance Challenges

For businesses, the court’s decision brought both relief and uncertainty. Many companies had already started preparing for the rule, updating their systems and training staff. The sudden halt meant those investments were in limbo. Some industry groups welcomed the decision, arguing that the FTC’s rule would have created unnecessary burdens and compliance headaches, especially for small businesses.

Even without the rule, companies that make cancellation easy may win customer loyalty - while those that don’t risk backlash and negative publicity.

Introduction of the Unsubscribe Act

In response, lawmakers quickly introduced new legislation—the Unsubscribe Act—to tackle deceptive subscription practices. This bipartisan bill would require companies to:

• Clearly explain contract terms and obtain informed consent.

• Offer simple, straightforward cancellation methods, mirroring the sign-up process.

• Notify consumers when free trials end and before charging full price.

• Ban automatic transfers to long-term contracts without explicit approval.

• Periodically remind customers of their rights and cancellation options.

The Unsubscribe Act aims to fill the gap left by the blocked FTC rule, signaling that Congress may step in where regulators have stumbled.

Potential FTC Appeals and Rule Revisions

Will the FTC give up? Not likely. The agency may appeal the court’s decision or revise its rulemaking process to address the procedural flaws. In the meantime, the FTC continues to warn businesses against unfair and deceptive practices, reminding them that existing consumer protection laws still apply.

As new laws and rules emerge, both consumers and businesses should stay alert for updates—and be ready to adapt.The court’s decision to block the FTC’s Click-to-Cancel rule at the last minute was a dramatic twist in the ongoing struggle between consumer protection and business interests. While the rule’s promise of easy cancellations is on hold, the demand for transparency and fairness in subscription services isn’t going away. Whether through new legislation or revised regulations, the push for consumer-friendly subscription practices will continue. For now, consumers must remain vigilant, and businesses should consider making cancellation as easy as signing up—not just because the law might require it soon, but because it’s the right thing to do.

State Laws Fill the Gap Left by the FTC’s Click-to-Cancel Rule

Although the FTC’s Click-to-Cancel rule was recently invalidated by the courts on procedural grounds, this does not mean that subscription cancellation practices are unregulated. In fact, many states have enacted their own automatic renewal laws that require businesses to make cancellation as easy as enrollment.

California’s Automatic Renewal Law (ARL), effective July 1, 2025, is a leading example. It mandates that consumers who sign up online must be able to cancel online without unnecessary steps or delays. The ARL also requires clear disclosures about renewal terms and prompt processing of cancellation requests.

Other states, including Colorado, Delaware, Minnesota, Oregon, and Virginia, have similar laws that impose strict requirements on cancellation mechanisms. These laws collectively create a complex regulatory environment that businesses must navigate carefully.

For companies operating nationwide, the best approach is to implement cancellation processes that meet or exceed the most stringent state laws, such as California’s ARL. Doing so not only ensures legal compliance but also builds consumer trust and loyalty.

As the regulatory landscape continues to evolve, businesses should stay informed of new state laws and potential federal legislation aimed at protecting consumers from confusing or burdensome subscription cancellation practices.