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A federal appeals court has halted a highly anticipated Federal Trade Commission (FTC) rule that would have made it significantly easier for consumers to cancel unwanted subscriptions and memberships online, citing a procedural error by the agency.
The “click-to-cancel” rule, part of the Biden administration’s “Time is Money” consumer initiative, was scheduled to take effect Monday. But the U.S. Court of Appeals for the Eighth Circuit ruled this week that the FTC failed to meet key legal requirements during the rulemaking process.
“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 in its decision.
What the Rule Would Have Done
Originally finalized by the FTC in October, the rule aimed to protect consumers from predatory auto-renewal and subscription practices, requiring companies to:
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Clearly disclose when free trials or promotional offers would convert into paid plans
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Obtain explicit customer consent before charging for renewals
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Allow customers to cancel subscriptions as easily as they sign up — typically with a single online click
It also included protections against companies using dark patterns — manipulative interface designs that make it hard to cancel subscriptions.
Why the Rule Was Blocked
The appeals court’s decision centered on the FTC’s failure to provide a preliminary regulatory analysis, which is required for rules expected to impact the U.S. economy by $100 million or more annually.
The FTC initially estimated the rule’s economic impact would fall below that threshold, exempting it from certain procedural requirements under federal law. But an administrative law judge later found that the actual impact exceeded $100 million, triggering stricter review standards.
As a result, the court vacated the rule, essentially nullifying it before it could take effect.
Impact on Consumers and Businesses
Consumer advocates have criticized businesses for making cancellations needlessly difficult, especially for free trials that auto-renew into paid subscriptions. The FTC’s rule was widely seen as a response to growing public frustration.
“This is a setback for consumer rights,” said Linda Sherry, Director of National Priorities at Consumer Action. “Millions of Americans fall into subscription traps every year. The FTC rule would have given them a fair way out.”
Meanwhile, business groups and subscription-based companies had lobbied against the rule, arguing it imposed costly and overly broad mandates.
What’s Next for the FTC?
The FTC declined to comment on the court’s ruling. However, the agency is already gearing up for a high-profile trial against Amazon, accusing the company of enrolling users into Prime without consent and making cancellation difficult by design. That case is expected to go to trial in 2026.
Despite the court’s ruling, the Biden administration’s Time is Money initiative remains active, with other agencies exploring ways to streamline and simplify consumer experiences.
The FTC may now need to restart the rulemaking process for the click-to-cancel policy, this time with the required economic impact assessments in place — a move that could delay the rule’s implementation by months, if not years.
Bottom Line:
The FTC’s click-to-cancel rule was designed to protect consumers from subscription traps. But due to a procedural misstep in estimating its economic impact, the rule has been vacated — leaving consumers to navigate confusing cancellation processes without new protections, at least for now.
