New Year, New Regulations: 2025 Brings Significant Developments to Federal and State Automatic Renewal Laws

At a Glance

• The FTC recently amended its negative option rule (NOR), and most of its provisions are scheduled to take effect on May 14. The amended rule applies to any “negative option feature,” which is broadly defined as “a provision of a contract under which the consumer’s silence or failure to take affirmative action to reject a good or service or to cancel the agreement is interpreted . . . as acceptance or continuing acceptance of the offer.” Unlike many state automatic renewal laws (ARLs), the federal NOR is not limited to agreements with consumers; business-to-business contracts are subject to the rule as well.
• New amendments to California’s ARL will take effect on July 1 and will apply to any contracts “entered into, amended, or extended” on or after that date, thus bringing many existing subscriptions within its scope. The amended ARL has new requirements for consent, cancellation and renewal reminders, among other changes.
• Minnesota and Utah recently enacted new ARLs, which took effect on January 1.
• Minnesota’s new ARL applies to contracts entered into, modified or renewed on or after January 1. It largely resembles the existing ARLs in California and New York, which have the most restrictive requirements and are often viewed as the “highest common denominator” for purposes of designing nationwide compliance programs.
• Utah’s new ARL is less detailed and narrower in scope, as it only applies to contracts with a renewal term longer than 45 days.
• Businesses should familiarize themselves with these new and amended laws and consider whether changes may be required for pre-sale disclosures, contract terms, acknowledgments, renewal reminders, cancellation procedures, and other related compliance touchpoints for continuing and automatically renewing agreements.

The Greek philosopher Heraclitus is credited with the maxim, “The only constant in life is change.” Suffice it to say: automatic renewal laws (ARLs) are no exception.

As subscriptions and memberships for goods and services have become more common, an increasing number of states have enacted — or amended — ARLs. These laws regulate many aspects of renewing or continuing contracts, and typically include strict requirements for making “clear and conspicuous” disclosures, obtaining affirmative consent, providing acknowledgments, sending renewal reminders and more. What began as a relatively rare area of regulation has blossomed into a landscape in which 35 states and Washington, D.C., have at least one ARL. Meanwhile, many of the remaining states have introduced legislation that, if passed, would create additional ARLs. Compliance with this patchwork of state laws has become increasingly complex, to put it mildly, especially for businesses with nationwide operations. Although some of these statutes can fairly be described as “cookie cutter,” many use unique language, define key terms in different ways, and create a host of other state-specific requirements and nuances that are enough to make even the most experienced in-house counsel’s head spin.

And there’s no sign of stopping. In 2025 alone, multiple sweeping changes are scheduled to occur. On May 14, 2025, much of the Federal Trade Commission’s (FTC) Rule Concerning Recurring Subscriptions and Other Negative Option Programs (negative option rule or NOR) will begin regulating many renewing and continuing contracts throughout the country. Additionally, amendments to California’s ARL will take effect on July 1, 2025. Lastly, brand-new ARLs just took effect in Minnesota and Utah on January 1, 2025. Each of these developments is discussed further below.

Amendments to the Federal NOR

On November 15, 2024, the FTC amended its NOR, which it first issued over 50 years ago in 1973. See 89 Fed. Reg. 90476 (Nov. 15, 2024) (amending 16 C.F.R. § 425). The amended rule expands on its predecessor in many ways. Initially, the NOR applies to any “negative option feature,” which is broadly defined as “a provision of a contract under which the consumer’s silence or failure to take affirmative action to reject a good or service or to cancel the agreement is interpreted . . . as acceptance or continuing acceptance of the offer,” and which includes continuing or automatically renewing contracts, “free-to-pay” conversions (i.e., free trials), and similar agreements. It applies regardless of whether a transaction is conducted electronically (e.g., online or via e-mail), by phone, on paper or in person. And unlike many state ARLs, the federal NOR is not limited to agreements with consumers; business-to-business contracts are subject to the rule as well. Other key provisions include the following:

• No Misrepresentations. The NOR prohibits any misrepresentation of a “material” fact made in connection with promoting or selling any good or service with a “negative option feature.” 16 C.F.R. § 425.3. (Although other amendments to the NOR will take effect on May 14, 2025, this one took effect four months earlier, on January 14, 2025.)
• Content of Disclosures. Before obtaining a buyer’s “billing information,” a seller must disclose the “material” terms, including without limitation that charges will recur until canceled; the amount and frequency of the charges; and the instructions for cancellation (including the deadline to act to prevent further charges). Id. § 425.4(a).
• Format of Disclosures. The required disclosures must be “clear and conspicuous” (as defined) and must appear “immediately adjacent” to the “means of recording” consent to the negative option feature. Id. § 425.4(b).
• Separate Consent to the Negative Option Feature. A seller must obtain “express informed consent” (which is also described as “unambiguously affirmative consent”) to “the Negative Option Feature offer separately from any other portion of the transaction.” Id. § 425.5(a)(1) (emphasis added). In other words, a seller must obtain one consent to the contract and a separate consent to its renewing/continuing nature. A seller that does so through a checkbox, signature, or substantially similar methods will be “deemed in compliance.” Id. § 425.5(c).
• Additional Consent Requirements. A seller cannot “include any information that interferes with, detracts from, contradicts, or otherwise undermines” a consumer’s ability to provide “express informed consent.” Id. § 425.5(a)(2). FTC comments on an early draft of the NOR explained that this provision was intended to prohibit so-called “dark patterns” — e.g., deceptive or manipulative web design techniques that could trick consumers into providing consent when they otherwise would not have. Additionally, a seller must maintain proof of consent for at least three years. Id. § 425.5(a)(3). However, a seller does not need to maintain these records if it “can demonstrate by a preponderance of the evidence that it uses processes ensuring no consumer can technologically complete the transaction without consent.” Id.
• Simple and Easy Cancellation Through the Same Medium Used to Consent. Labeled by the FTC as the “Click-to-Cancel” rule, a seller must provide a “simple” mechanism to cancel the negative option feature. Id. § 425.6(a). This cancellation mechanism must be “at least as easy to use” as the mechanism used to consent to the negative option feature in the first instance. Id. § 425.6(b). Cancellation options must also be provided “through the same medium” used to consent — e.g., an “easy to find” online cancellation option must be provided if consent was obtained online. Id. § 425.6(c). If consent was obtained in person, cancellation should be offered in person “where practical,” but also online or by telephone. Id.

The NOR states that it does not preempt state ARLs unless they are “inconsistent” with it, 16 C.F.R. § 425.7(a), and that an ARL is not “inconsistent” merely because it provides “greater protection” for consumers. Id. § 425.7(b). In other words, the NOR is a floor, not a ceiling. Further, although the NOR does not include categories of exempt entities (as is often the case in state ARLs), it does allow anyone to petition the FTC for a full or partial exemption. Id. § 425.8. Lastly, the NOR does not include a private right of action in addition to FTC enforcement — although it remains possible that individuals in states with broad consumer protection statutes may still be able to sue for alleged NOR violations.

Perhaps inevitably, this sweeping new federal regime has seen its fair share of criticism. Not only does the NOR apply more broadly than most state ARLs (by regulating consumer and business-to-business contracts), but it also includes unique features that could expand the FTC’s enforcement authority (such as the provision prohibiting any misrepresentation of a material fact). And by applying across the country, it also effectively creates an ARL in the approximately 15 states that, to date, have not enacted one of their own. To date, various industry groups including the U.S. Chamber of Commerce have filed petitions for review in four federal circuit courts of appeals. These petitions challenge the NOR as arbitrary and capricious, an abuse of discretion and in excess of the FTC’s statutory authority (among various other arguments), leaving uncertainty as to whether it will take effect in its current form or if modifications are in store. The petitions have been consolidated in the Eighth Circuit for further proceedings. See Consolidation Order, In re: Federal Trade Commission, NOR, MCP No. 192 (8th Cir. Nov. 21, 2024), ECF No. 3. Because the FTC recently rejected a request for a stay pending appeal, the amendments are expected to take effect in the absence of a court order to the contrary or a change in course from the FTC. See Decision and Order Denying Petition for Stay of Final Rule Pending Judicial Review, In the Matter of: Rule Concerning Recurring Subscriptions and Other Negative Option Programs, No. P064202 (Dec. 13, 2024).

Amendments to California’s ARL

Although the future remains unclear for the federal NOR, new amendments to California’s ARL are set to take effect later this year, on July 1, 2025, now that Gov. Gavin Newsom recently approved Assembly Bill No. 2863 (AB 2863). The amended ARL will extend its requirements to free trials (defined as “free-to-pay conversions”) and will generally apply to any contracts “entered into, amended, or extended on or after July 1, 2025,” thus bringing many existing subscriptions within its scope. AB 2863 (emphasis added). The amendments share some similarities with the federal NOR — but also contain some important differences. The notable new provisions include:

• No Misrepresentations. The amended law will prohibit any misrepresentation of a “material fact related to the transaction, including, but not limited to, the inclusion of an automatic renewal or continuous service, or any material fact related to the underlying good or service.”
• Express Affirmative Consent. Under the existing law, a business must obtain “affirmative consent to the agreement containing the automatic renewal offer terms.” The amended law will maintain this provision, while adding language requiring the consumer’s “express affirmative consent” to the “automatic renewal or continuous service offer terms.” It is unclear whether and to what extent this new provision will actually change existing “affirmative consent” requirements, given that the term “express affirmative consent” is neither defined nor obviously different from “affirmative consent.” Moreover, the new provision does not require that this “express affirmative consent” be separate from the consent to the contract or transaction generally, which also raises questions about what (if anything) it means.
• Additional Consent Requirements. The amended ARL will prohibit including any information in the contract “that interferes with, detracts from, contradicts, or otherwise undermines” a consumer’s ability to provide “affirmative consent.” This provision, which mirrors the language in the federal NOR, also appears to be aimed at addressing so-called “dark patterns.” Additionally, proof of consent will need to be maintained for at least three years, or for one year after the contract is terminated, whichever is longer.
• Cancellation by Phone. If a business offers cancellation by a toll-free number, it will need to “answer calls promptly during normal business hours” and will not be allowed to “obstruct or delay the consumer’s ability to cancel the automatic renewal or continuous service.” That said, the amended law will permit a business in this context to make “save” offers — i.e., to “present the consumer with a discounted offer, retention benefit, or information regarding the effect of cancellation, provided that the business first clearly and conspicuously informs the consumer that they may complete the cancellation process at any time by stating that they want to ‘cancel’ or words to that effect.” If the consumer does ask to cancel at that point, however, a business will have to promptly process the cancellation. Finally, for consumers who leave a voicemail requesting cancellation, a business will be required, within one business day, to “either process the requested cancellation or call the consumer back regarding the cancellation request.”
• Cancellation Online. Although the general requirements for online cancellation will remain unchanged, the amended law will permit a business to make “save” offers — i.e., to display “a discounted offer, retention benefit, or information regarding the effects of cancellation” to a consumer who conveys a request to cancel online, “provided that the business simultaneously displays a prominently located and continuously and proximately displayed direct link or button entitled ‘click to cancel,’ or words to that effect.” If a consumer clicks this link or button, the business will have to promptly process the cancellation.
• Cancellation Through the Same Medium Used to Consent. Although the current law requires an online cancellation option for consumers who enter into a continuing or automatically renewing contract online, the amended law will expand on this principle. Specifically, it will require a cancellation option to be available “in the same medium that the consumer used in the transaction that resulted in the activation of the automatic renewal or continuous service, or the same medium in which the consumer is accustomed to interacting with the business, including, but not limited to, in person, by telephone, by mail, or by email.”
• Notice of Fee Change. Although the existing law requires a business to provide a clear and conspicuous notice of any “material change” to the terms of a renewing agreement, with information regarding how to cancel and “in a manner that is capable of being retained,” the only timing requirement for this notice is that it be sent “prior to implementation” of the material change. The amended law will add a required timing window for this notice if the material change is a change to the recurring fee — in that context, the notice will need to be sent between seven and 30 days before the fee change takes effect.
• Renewal Reminders. The current law requires a renewal reminder only if a consumer has accepted a free trial lasting more than 31 days or has an automatically renewing contract with an initial term of one year or more. These reminders will still be required under the amended law, although with additional requirements that they be sent “before confirming the consumer’s billing information” and that they include the amount and frequency the consumer will be charged. Additionally, a business will need to provide an annual renewal reminder for any renewing or continuing consumer contract still in effect, which must be provided “in the same medium that resulted in the activation of the automatic renewal or continuous service, or the same medium in which the customer is accustomed to interacting with the business.” The annual reminder will need to disclose the applicable product or service, the amount and frequency of charges, and the options for cancelling.

Businesses with California customers should familiarize themselves with AB 2863 and monitor court decisions interpreting the new amendments, especially with respect to the meaning of the undefined term “express affirmative consent.”

New ARLs in Minnesota and Utah

Finally, two other states (Minnesota and Utah) recently enacted new ARLs, which took effect on January 1, 2025. See Minn. Stat. §§ 325G.56–325G.63; Utah Code §§ 13-70-101, 13-70-201 and 13-70-301.

The new Minnesota law applies to contracts entered into, modified or renewed on or after January 1, 2025. It largely resembles the existing ARLs in California and New York, which have the most restrictive requirements (e.g., clear and conspicuous disclosures, visual proximity, acknowledgments, etc.) and are often viewed as the “highest common denominator” for purposes of designing nationwide compliance programs. Some of its requirements are unique, however, including its rule that prohibits a seller that has received a cancellation request from undertaking “any unfair or abusive tactic to delay, unreasonably delay, or avoid the cancellation or termination of the agreement.” Minn. Stat. §§ 325G.58. Similarly, and in contrast to the forthcoming California amendments, a seller that has received a cancellation request cannot make “save” offers (i.e., offer benefits, contract modifications, gifts or similar offers) without first obtaining “permission” from the consumer to do so. What’s more, permission to make a “save” offer is only effective if it is obtained after the cancellation request. Id. However, a seller may still: (1) ask about the reasons for cancellation (provided the consumer is not required to answer); (2) inform the consumer of any consequences of cancelling; and (3) describe options to maintain an ongoing relationship, including for “downgrading, pausing, or suspending the subscription.” Id.

The new Utah law is much less detailed than most ARLs and lacks many of the “typical” provisions. It is also narrower in scope, as it only applies to contracts with a renewal term longer than 45 days (thus seemingly excluding month-to-month contracts). The main new requirement relates to renewal reminders, which must be sent between 30 to 60 days before the renewal date and must “clearly and conspicuously” disclose the renewal date, total renewal cost, and options for cancellation. Utah Code § 13-70-201.

Conclusion

Although it is still early in 2025, all signs point to an active year in this space — especially given the legal challenges to the FTC’s NOR. If past is prologue, this will likely continue for the foreseeable future, as several states currently have pending legislation that would create or amend ARLs. There is no time like the present to take a fresh look at pre-sale disclosures, contract terms, renewal reminders, cancellation procedures, and other related components of continuing and automatically renewing agreements. Not only have legislatures become more active in recent years, but there has also been a steady stream of lawsuits and enforcement actions by the plaintiff’s class action bar and government regulators. These cases can be costly to defend, with seven and sometimes eight-figure settlements generating headlines. The most prudent risk-mitigation measure, given the near-constant change in this area, is to proactively stay abreast of new developments and regularly refine business practices as needed to ensure up-to-date compliance.

For More Information

Faegre Drinker’s consumer contracts team actively monitors developments relating to ARLs and advises clients on compliance strategies. Questions can be directed to the authors or to your usual Faegre Drinker contacts.