Click-to-Cancel Stopped Less Than a Week Before Effective Date

In October 2024, the Federal Trade Commission (FTC) adopted changes regarding the Negative Option Rule, better known as the “click-to-cancel” rule. The Click-to-Cancel rule was intended to require business to make it easier for consumers to cancel undesired subscriptions and memberships, addressing services that either consumers use and then forget to unsubscribe from or those where the cancellation process is extremely complex and drawn out.

Among other provisions, the rule requires that companies clearly disclose all key terms before billings and obtain clear consent from the user regarding recurring charges. These changes were supposed to go into full effect starting July 14, 2025, but on July 8 the U.S. Court of Appeals for the Eighth Circuit struck down the FTC’s “click-to-cancel” rule, with the main reason being that the FTC failed to conduct a required preliminary regulatory analysis for rules that have an economic impact of over $100 million annually.  

While well intended, the overly broad nature of the rule could have unintended consequences, which SIA and other industry organizations pointed out in a 2023 letter to the FTC. Consumers of security and fire/life safety products and services, such as alarm monitoring services, typically sign multiyear contracts which then renew on a month-to-month basis. These types of arrangements are popular with both customers and security companies because the multiyear initial term allows security companies to discount the initial cost of equipment and/or installation, thus reducing the initial upfront cost of a new system and installation for the customer. After the initial multiyear term, customers’ contracts renew monthly, but they can cancel their contracts at any point, which grants them maximum flexibility.

Applied to these types of contracts, the FTC rule not only is unnecessary, but could also negatively impact consumers. Companies would be incentivized to alter their customer agreements to renew for additional multiyear terms. Risks to life and property would be created with the potential inadvertent cancellation of alarm contracts. And for security companies, sending monthly mailed reminders in this context would impose unnecessary costs and regulatory burdens that disproportionally fall on the small businesses that make up the vast majority of our industry.

As the rule was originally promulgated under the Biden administration, it is not clear whether the current FTC will take any action to reinstate the rule. Security companies should continue to be aware of existing state laws governing subscription products and regulatory enforcement given the heightened scrutiny of these products.