The US Court of Appeals for the Eighth Circuit has vacated the Federal Trade Commission’s Negative Option Rule in its entirety — the regulation known almost universally as the “click to cancel” rule — on 8 July 2025, days before it was due to take full effect on 14 July.
For anyone who has ever tried to cancel a home warranty or a vehicle service contract by phone, this is the relevant news of the year.
What the Rule Would Have Required
Two things, both aimed squarely at auto-renewing products:
- Separate consent for the auto-renewal itself. A company could not bury the recurring charge inside the general terms you agreed to. It needed its own checkbox or equivalent affirmative act.
- Cancellation as easy as sign-up. If you could buy it online in two minutes, you had to be able to cancel it online in two minutes — no mandatory retention call, no phone tree, no “our cancellation department is closed.”
Home warranties and extended car warranties are close to the archetype of what the rule was written for. They are sold online or by phone, they renew automatically, and cancellation is routinely routed through a save-the-sale script.
Why It Was Struck Down
Not on the merits. On process.
The Eighth Circuit held that the FTC committed a “fatal” procedural error by failing to conduct a preliminary regulatory analysis of the rule’s costs, benefits and alternatives — a step required once a rule’s estimated annual economic impact exceeds $100 million. The court found the omission prejudicial and vacated the whole rule rather than remanding parts of it.
The court did not rule that the substance was wrong. It ruled that the FTC did not follow the steps required to get there.
What Still Applies
The vacatur removed a specific rule. It did not deregulate the practice.
- ROSCA — the Restore Online Shoppers’ Confidence Act — still requires clear disclosure, express informed consent and a simple cancellation mechanism for online negative-option sales, and the FTC continues to bring cases under it.
- Section 5 of the FTC Act still reaches unfair and deceptive practices generally.
- State auto-renewal laws — California, New York, Colorado and a growing list of others — impose their own requirements, several of which are stricter than what the federal rule would have been.
The FTC has since signalled it intends to redo the rulemaking properly rather than abandon the effort.
What This Means If You Hold a Warranty Contract
Assume cancellation will be made difficult, and set yourself up accordingly.
- Cancel in writing, always. Email or certified letter, keep the copy. A phone cancellation with no paper trail is the single most common way people end up still being billed.
- Check the refund mechanics before you buy. Most vehicle service contracts have a 30-day full-refund window and pro-rata refunds after that, minus a cancellation fee. Home warranties vary far more.
- Know who actually holds the contract. Many warranties are sold by a marketing company and administered by someone else. Cancelling with the seller does not always stop the billing.
- Use the card issuer as a backstop. If a company will not process a documented cancellation, a chargeback with your written notice attached usually resolves it faster than the retention line will.
The rule that would have made this unnecessary is gone. The paperwork habit is what replaces it.
Sources: Mayer Brown, “Click-to-Cancelled! Eighth Circuit Vacates FTC’s Revised Negative Option Rule”; Latham & Watkins, “Eighth Circuit Vacates FTC’s Click-to-Cancel Rule Days Before Compliance Deadline”
Before you sign anything that auto-renews, read our home warranty comparison.