The New York and Pennsylvania state attorneys general recently led a bipartisan coalition of 26 state AGs in a letter, supporting the Federal Trade Commission (FTC)’s proposed rule amending the Negative Option Rule.
Currently, some companies utilize negative option marketing to sign up consumers for subscriptions, automatic renewals, continuity plans and programs, and other charges that occur repeatedly. These plans and programs do not necessitate obtaining separate consent for every recurring charge. At present, FTC’s Negative Option Rule only covers prenotification plans — the rule does not address continuity plans, automatic renewals, and free trial conversions. For prenotification plans, sellers must clearly and conspicuously disclose seven key terms before allowing customers to subscribe, including cancellation rights, minimum purchase obligations, credit and return policies, and frequency of announcements and forms. The FTC’s proposed rule suggests similar requirements applicable to all types of negative option marketing, “including prenotification and continuity plans, automatic renewals, and free trial offers.”
The proposed rule would also:
- Cover all offers made in all media, “including, but not limited to the internet, telephone, in-print, and in-person transactions”;
- Prohibit misrepresentation of “any material fact regarding the entire agreement, not just facts related to the negative-option feature”;
- Require sellers to obtain the consumer’s express informed consent before charging the consumer, and provide a simple cancellation mechanism.
In their letter, the state AGs expressed support and urged the FTC to, among other things, further require businesses offering free trials to obtain an additional round of consent before charging a customer after completing the free trial period and to provide negative-option reminders in additional forms.
Why It Matters
The FTC’s proposed rule would continue preserving state AGs’ authority to regulate negative-option marketing and enact greater protections. At least 17 states and the District of Columbia have enacted laws concerning negative options. But the proposed rule “provides more guidance and specificity on how negative option sellers can comply with the existing legal framework,” setting clear and enforceable requirements for all negative-option practices throughout the nation.
Troutman Pepper State Attorneys General Team
|Ashley Taylor – Co-leader and Firm Vice Chair
Ashley is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. He focuses primarily on federal and state government regulatory and enforcement matters involving state attorneys general, the Consumer Financial Protection Bureau (CFPB), and the Federal Trade Commission (FTC). Drawing upon his experience as a deputy attorney general, Ashley has developed an extensive consumer practice with regard to the consumer financial services industry.
|Clay Friedman – Co-leader
Clay is a partner in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group and co-leader of the State Attorneys General practice. Informed by nearly a decade in a state attorneys general office, and more than 25 years in private practice, Clay spends much of his time representing clients in singular or multistate regulatory actions. Clay has repeatedly led teams before all 50 state attorneys general and also handles matters with the Federal Trade Commission, the Consumer Financial Protection Bureau, and other local, state and federal agencies.
Judy is a partner in the firm’s Regulatory Investigations, Strategy and Enforcement (RISE) practice, based in the Richmond office. She brings experience serving as chair and commissioner of the Virginia State Corporate Commission (VSCC) from 2006 through 2022, which includes regulating the utilities, insurance, banking, and securities industries. She also served as Virginia’s attorney general from 2005-2006.
Stephen represents clients interacting with, and being investigated by, state attorneys general and other enforcement bodies, including the CFPB and FTC, as well as clients involved with litigation, particularly in heavily regulated industries.
A former deputy attorney general of New York, Avi applies his experience in bet-the-company matters, representing clients in criminal and civil investigations and enforcement actions before state and federal regulators, prosecutors and enforcement agencies.
Michael handles high-profile state attorneys general, FTC, and CFPB investigations by advising clients through these complex government inquiries. He assists clients through the entire life cycle of investigations, from regulatory enforcement through formal litigation.
As a former government official at the state and federal level, Ketan leverages extensive experience in the public and private sectors to skillfully represent client interests.
Tim is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, with a primary focus on financial services litigation.
Chris represents clients in regulatory, civil and criminal investigations and litigation. In his practice, Chris regularly employs his prior regulatory experience to benefit clients who are interacting with and being investigated by state attorneys general.
Natalia is an associate in the firm’s business litigation practice. She recently received her J.D from the University of California, Davis School of Law.
Namrata is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group, based in the Washington, D.C. office. Her work includes advising clients in regulatory investigations and compliance matters, in addition to representing clients in civil litigation matters.
Susan is an associate in the firm’s Consumer Financial Services Practice Group, and focuses her practice on consumer financial services matters. She has defended several of the nation’s largest and most influential financial institutions in individual and class action litigation involving the Telephone Consumer Protection Act (TCPA), Fair Credit Reporting Act (FCRA), Fair Debt Collection Practices Act (FDCPA), and other consumer privacy statutes. Susan also represents banks, fintechs, and financial services companies in connection with regulatory examinations and investigations brought by the CFPB, state attorneys general, and the California Department of Financial Protection and Innovation.
John represents clients in a wide variety of general and complex litigation matters, shareholder disputes, products liability, and privacy claims.
Whitney is an attorney in the firm’s Regulatory Investigations, Strategy + Enforcement (RISE) Practice Group. She represents clients facing state and federal regulatory investigations and enforcement actions, as well as related civil litigation.
Trey is an associate in the firm’s Regulatory Investigations, Strategy + Enforcement practice. His experience includes serving as a summer associate at the firm in 2021.
An experienced litigator, Daniel advises and represents regional, national and international companies, financial institutions and insurers in all facets of business, complex commercial and insurance coverage litigation. He is committed to working with his clients to find creative solutions to meet their needs.
Stephanie is Troutman Pepper’s senior government relations manager in the state attorneys general department.