Negative Option Rule
The Federal Trade Commission ("FTC" or "Commission") issues final amendments to the Commission's trade regulation "Rule Concerning Use of Prenotification Negative Option Plans," retitled the "Rule Concerning Recurring Subscriptions and Other Negative Option Programs" ("Rule," "final Rule" or "Negative Option Rule"). The final Rule now applies to all negative option programs in any media. This document also contains the text of the final Rule, the Rule's Statement of Basis and Purpose ("SBP"), and a final regulatory analysis.
What this rule actually says
If you charge customers on a recurring basis—whether it's a monthly subscription for an AI medical scribe, a weekly billing cycle for a hiring assistant, or auto-renewing access to a support chatbot—the FTC now has detailed rules about how you do that. The rule covers the entire lifecycle: getting permission upfront, making cancellation easy, and sending reminders before charges happen. It applies to *all* recurring billing in any medium (web, app, phone, email), not just online.
Who it applies to
- If you charge subscription fees (monthly, weekly, quarterly, annual—any recurring interval), this applies to you.
- If you offer free trials that auto-convert to paid, this definitely applies to you.
- If you're in the US, this is federal law. Other jurisdictions may have similar rules; check your specific countries if you operate internationally.
- AI use case scope: Medical scribes with recurring billing, hiring assistant subscriptions, freemium chatbots that upgrade users—all in scope. One-time licensing fees are out of scope.
- User data: The rule focuses on billing behavior and consent, not data collection itself. Your privacy policy still lives elsewhere.
What founders need to do
- Get clear consent before charging (1–2 days): Your sign-up flow must explicitly state the price, billing frequency, and what the customer is agreeing to. "Subscribe for $99/month" in plain language, not buried in terms.
- Make cancellation as easy as the sign-up (2–3 days): If someone subscribed in two clicks on your website, they should cancel in two clicks. Phone-only cancellation? Not allowed. Requiring a support email? Risky.
- Send a reminder before renewal (2–3 days): Notify customers a "reasonable" time before each charge (typically 3–7 days). This alone stops a lot of complaints.
- Honor cancellation immediately (1 day): Stop billing as soon as someone cancels. No "we'll process it next billing cycle" delays.
- Audit your current flow (ongoing): Walk through your own signup and cancellation as a customer would. If you feel friction, the FTC probably will too.
Bottom line
If you have any recurring billing, act now—audit your consent and cancellation flows against these rules within the next 2–3 weeks, because enforcement started in 2024 and the FTC is actively investigating recurring-billing models.