Subscription billing compliance

I researched U.S. subscription-billing compliance (federal and state) for U.S. businesses and prepared a concise summary of the legal landscape, practical compliance requirements, and recommended next steps for subscription- and recurring-revenue businesses.

Key findings: • Federal: FTC Negative Option Rule (Final Rule) — requires (1) no misrepresentations of material fact, (2) clear and conspicuous disclosure of material terms prior to collecting billing information, (3) express informed consent to negative-option/auto-renewal terms (separate from other consents), and (4) simple cancellation mechanisms at least as easy to use as the enrollment method.

Portions of the Rule (misrepresentation and simple cancellation) took effect Jan 14, 2025; disclosures and express informed consent provisions took effect July 14, 2025. The FTC rule can provide civil penalties and consumer redress; preempts inconsistent state laws except where state law provides greater protection. • California: Amended California Automatic Renewal Law (CARL) — effective July 1, 2025 — imposes stronger requirements than the FTC Rule in several respects: express affirmative consent to auto-renewal, recordkeeping of consent for at least three years (or one year after contract termination, if longer), simplified cancellation in the same medium used to enroll or interact, restrictions on “save offers” during cancellation (must simultaneously show a direct “click to cancel” link/button), and specified timing for notices for price changes, free-trial conversions, and one-year-or-longer renewals (e.g., 15–45 days before renewal for 1+ year terms; 7–30 days for fee changes; 3–21 days before conversion for promotional/free periods >31 days). • State ARLs: More than half the states and DC have automatic-renewal / negative-option statutes or regulations.

Requirements and definitions vary by state; many track the same core themes (clear & conspicuous disclosure, affirmative consent, easy cancellation, renewal reminders), but timelines and exact obligations differ.

Businesses must evaluate laws in all states where they market or bill customers. • Practical controls & operational requirements (synthesized from guidance and checklists): 1) Consent capture: obtain express, separate, affirmative consent to auto-renewal/negative-option terms prior to collecting billing info; store auditable records of consent for 3+ years.

I researched U.S. subscription-billing compliance (federal and state) for U.S. businesses and prepared a concise summary of the legal landscape, practical compliance requirements, and recommended next steps for subscription- and recurring-revenue businesses.

Key findings: • Federal: FTC Negative Option Rule (Final Rule) — requires (1) no misrepresentations of material fact, (2) clear and conspicuous disclosure of material terms prior to collecting billing information, (3) express informed consent to negative-option/auto-renewal terms (separate from other consents), and (4) simple cancellation mechanisms at least as easy to use as the enrollment method.

Portions of the Rule (misrepresentation and simple cancellation) took effect Jan 14, 2025; disclosures and express informed consent provisions took effect July 14, 2025. The FTC rule can provide civil penalties and consumer redress; preempts inconsistent state laws except where state law provides greater protection. • California: Amended California Automatic Renewal Law (CARL) — effective July 1, 2025 — imposes stronger requirements than the FTC Rule in several respects: express affirmative consent to auto-renewal, recordkeeping of consent for at least three years (or one year after contract termination, if longer), simplified cancellation in the same medium used to enroll or interact, restrictions on “save offers” during cancellation (must simultaneously show a direct “click to cancel” link/button), and specified timing for notices for price changes, free-trial conversions, and one-year-or-longer renewals (e.g., 15–45 days before renewal for 1+ year terms; 7–30 days for fee changes; 3–21 days before conversion for promotional/free periods >31 days). • State ARLs: More than half the states and DC have automatic-renewal / negative-option statutes or regulations.

Requirements and definitions vary by state; many track the same core themes (clear & conspicuous disclosure, affirmative consent, easy cancellation, renewal reminders), but timelines and exact obligations differ.

Businesses must evaluate laws in all states where they market or bill customers. • Practical controls & operational requirements (synthesized from guidance and checklists): 1) Consent capture: obtain express, separate, affirmative consent to auto-renewal/negative-option terms prior to collecting billing info; store auditable records of consent for 3+ years.

Clear & conspicuous disclosures

show renewal frequency, renewal term, amount, trial conversion rules, cancellation methods, contact info — before enrollment.

Cancellation

provide a cancellation mechanism as easy as enrollment and in same medium; if offering phone cancellation, promptly answer and honor voicemail cancellation or call back within one business day.

Notices

implement notice workflows for price changes (7–30 days), free-trial conversion notices (3–21 days for long trials), and advance renewal notices for long-term renewals (15–45 days) where required.

Data retention and evidence

retain consent records, screenshots, transactional logs, notice deliveries, and cancellation confirmations.

Payment processing and security

adopt PCI-compliant processing for card-on-file, follow ACH/NACHA rules for debits and recurring authorizations, and ensure clear authorization for recurring charges.

Tax & state registration

consult state revenue departments about sales tax treatment of subscription goods/services and nexus obligations; tax treatment varies by state and service type.

Terms & customer service

update Terms of Service and checkout flows, train customer support to accept simple cancellation requests, and avoid dark-pattern retention flows that could violate laws.

Monitoring & enforcement readiness

prepare for AG/FTC enforcement and potential class actions — include remediation workflows and consumer redress processes. • Practical checklist for immediate action:

Inventory subscription offers and jurisdictions served.

Revise checkout flows to include separate, express affirmative consent to auto-renewal and all material terms before collecting billing info.

Build/save auditable consent records (3-year retention).

Implement same-medium, simple cancellation and ensure “click to cancel” is visible for online cancellations.

Automate required notices (price changes, renewal reminders, trial conversion) with retention proofs.

Confirm PCI compliance and ACH authorization language; consult payment processor for card network rules on recurring payments.

Consult state-specific ARL requirements (or counsel) for states with stricter rules (California is an immediate priority).

Update TOS, privacy policy (data/consent intersection), and customer support scripts.

Confirm tax treatment and registration for subscription revenue in states where you have customers. • Next recommended research / deliverables I can prepare

a) State-by-state ARL/negative-option summary table with statute citations and required timing/disclosure language per state; b) Sample legal/compliance templates (checkout checkbox language, cancellation page copy, renewal-notice templates, recordkeeping schema); c) Implementation checklist for product/engineering and CS teams; d) Payment processing checklist (PCI, NACHA, card network specifics) and sales-tax guidance per state. If you want, I can now produce (pick one or more):

A full blog post tailored to US business owners/LLC founders that covers the above and includes practical examples and templates;

A state-by-state summary table of automatic-renewal/negative-option laws and links to statutes/AG guidance; or

Compliance templates and an implementation checklist for engineering and customer support. Indicate which deliverable(s) you want next.