Payments · Guide12 min readUpdated November 2, 2026

Free Trials and Negative Option Billing: The Rules in 2026

Free trial and negative option billing rules in 2026: where the FTC rule stands, ROSCA, California, Visa's 7-day notice, MCC 5968 and a compliant flow.

Nick Bonnassies, CMO at Tagada · checked against 11 sources

Article summary

TL;DR

Negative option billing means the customer keeps paying until they act to stop it: free trials that convert, auto-renewals, continuity plans. It's legal in the US, but regulated. Since the FTC's click-to-cancel rule was vacated in July 2025, ROSCA, state laws like California's and card network rules set the requirements.

Negative option billing is legal in the US. Silence can count as consent only if the terms were clear and the customer agreed to them.
The FTC's 2024 click-to-cancel rule was vacated on July 8, 2025. A new rulemaking opened in March 2026; as of November 2, 2026, no new rule has been proposed.
ROSCA applies to every online negative option: terms before the card details, express informed consent, a simple way to stop the charges.
Visa requires terms on the checkout screen, a click-to-accept consent, and a notice at least 7 days before a trial or intro price ends.
Negative option sellers can land on MCC 5968, a Visa high-risk code, and Stripe prohibits clubs that bill until cancelled.

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On this page

Negative option billing is a sale where silence counts as a yes: the customer keeps paying until they act to stop it. It's legal, and it's what most subscriptions and free trials run on. But in 2026 the rules come from four places at once (federal law, state law, card networks and your processor), and the FTC rule everyone talks about isn't one of them. For supplement and skincare brands: trial offers for supplement brands and trial offers for skincare brands.

What is negative option billing?

The FTC defines a negative option as any term that lets a seller treat a customer's silence, or failure to act, as acceptance of an offer.1 In practice, the charge happens unless the customer cancels or declines. The FTC sorts it into four kinds:

Type	How it works	Everyday example
Prenotification plan	The seller announces each shipment and sends it, and bills for it, unless the member declines	Book-of-the-month or wine-of-the-month club
Continuity plan	The customer agrees once and receives goods or services until they cancel	Monthly supplement delivery, bottled water
Automatic renewal	The subscription renews and is billed at the end of each term unless cancelled	Magazine, software or membership renewing yearly
Free-to-pay or nominal-fee-to-pay	A free or cheap trial turns into a paid plan unless cancelled	14-day free trial, then a monthly price

Source: FTC, March 2026 advance notice of proposed rulemaking.1

The FTC also flags upsells and bundled offers made with the billing details the customer just entered, because they often carry their own negative option.1 For a merchant, that covers almost every subscription model. The question isn't whether you use a negative option. It's whether your customer clearly agreed to it.

Is negative option billing legal?

Yes. No US law bans it. What the law bans is charging without clear terms, without consent, or while making cancellation hard. Under Section 5 of the FTC Act, the FTC expects five things from any negative option offer:1

Disclose the terms
That there is a negative option, the total cost, whether billing details go to a third party, and how to cancel.
Make them clear
Disclosures must be clear and conspicuous, not buried in small print or behind a link.
Disclose them first
The terms come before the customer agrees to buy, not in the confirmation email.
Get consent
The customer must agree to the negative option. Courts have held that billing without express informed consent is unfair.
Don't block cancellation
Promised cancellation procedures must work, and requests that follow them must be honored.

The FTC still enforces these rules case by case. In September 2025, Amazon agreed to pay a $1 billion civil penalty and $1.5 billion in refunds over Prime sign-ups and cancellations, under the FTC Act and ROSCA. The order requires a clear button to decline Prime, clear disclosure of cost, charge dates, frequency and auto-renewal, and a cancellation method as easy as the one used to sign up.10

Where the FTC click-to-cancel rule stands

This is the part most guides get wrong, because it changed three times in eighteen months. Here is the sequence, from the Federal Register.1 2 3

Fig. 1The FTC Negative Option Rule, 1973 to today

1973Original rule: prenotification plans only
Nov 15, 2024Click-to-cancel amendments published
Jul 8, 2025Eighth Circuit vacates the 2024 rule
Feb 12, 2026FTC restores the pre-2024 text
Mar 13, 2026New advance notice; comments closed Apr 13

no new rule yet

Source: FTC notices in the Federal Register, 91 FR 6507, 91 FR 12318 and 91 FR 65213.

The 2024 rule is gone. The Eighth Circuit vacated it on July 8, 2025, shortly before most of it would have applied, because the FTC skipped the preliminary regulatory analysis that section 22 of the FTC Act requires (Custom Communications, Inc. v. FTC).1
The 1973 rule is back, and it's narrow. On February 12, 2026, the FTC restored the rule as it stood before 2024.2 It covers only prenotification plans. The FTC's own staff estimate that about 25 sellers are subject to it.3
A new rule is only at the question stage. On March 13, 2026, the FTC published an advance notice asking whether and how to modernize the rule, with comments due April 13, 2026.1 An advance notice is the step before a proposed rule.
Status on November 2, 2026. The Federal Register shows no proposed or final rule since. The FTC's latest notice on the rule, dated October 14, 2026, treats the restored 1973 version as the one in effect.3

Vacated doesn't mean unregulated

The click-to-cancel rule disappearing changed nothing about ROSCA, Section 5 or state laws. The FTC itself says the current rule doesn't reach continuity plans, auto-renewals and free trials, and that ROSCA covers them when they are sold online.1

ROSCA: the federal law for online subscriptions

The Restore Online Shoppers' Confidence Act, passed in December 2010, is the only federal law designed mainly for negative option marketing, and it applies to sales made on the internet.1

ROSCA prohibits charging or attempting to charge consumers for goods or services sold on the internet through any negative option feature unless the marketer: (1) clearly and conspicuously discloses all material terms of the transaction before obtaining the consumer's billing information; (2) obtains a consumer's express informed consent before charging the consumer's account; and (3) provides simple mechanisms for the consumer to stop recurring charges.

FTC, summary of ROSCA (15 U.S.C. 8403), 91 FR 12318, March 13, 2026

Three details matter for a checkout:

"Before obtaining billing information." The recurring price, frequency and trial end must be visible before the card fields, not after the order.4
Upsells by another seller need more. A third party selling during or right after your checkout must disclose its terms and collect the customer's full card number and an extra affirmative action. You can't pass the billing details to it.1
Penalties. A ROSCA violation is treated as a violation of an FTC rule, which opens civil penalties, injunctions and consumer redress.1

Other federal texts fill the gaps: the Telemarketing Sales Rule for offers made by phone, the Electronic Fund Transfer Act, which requires written authorization for recurring debits on debit cards and bank accounts, and the unordered merchandise statute.1

State automatic renewal laws: California sets the bar

States add their own rules on top. The FTC cites California, Colorado, Vermont and Virginia as examples.1 California's is the most detailed, and it was tightened for contracts entered into, amended or extended on or after July 1, 2025.5

What California requires	Timing
Auto-renewal terms shown clearly, near the consent request; the post-trial price if there's a free trial	Before the subscription starts
Express affirmative consent to the renewal terms	Before the first charge
An acknowledgment with the terms, cancellation policy and how to cancel, in a form the customer can keep	After sign-up
Proof of consent kept	3 years, or 1 year after the contract ends, whichever is longer
Notice before a free trial or promotional price ends, for trials longer than 31 days	3 to 21 days before it ends
Notice before renewal, for initial terms of 1 year or more	15 to 45 days before renewal
Notice of a price change, with how to cancel	7 to 30 days before it applies
Online cancellation for online sign-ups, with a visible "click to cancel" button if you show a save offer	Always
A reminder of the product, the amount and frequency, and how to cancel	At least once a year

Source: Cal. Bus. & Prof. Code § 17602.5

Practical rule

If you sell to customers in California, build your whole flow to this standard, wherever you're based. It's stricter than ROSCA on every point that touches your checkout, and one flow is easier to run than two.

What Visa and Mastercard require

Card networks don't wait for regulators. Their rules apply to every merchant accepting their cards, wherever it's based, and your acquirer enforces them.

Visa

Visa has two layers. Every merchant that stores a card for recurring charges follows its stored-credential and recurring rules. A merchant that bills on a negative option follows a dedicated rule on top.6

Visa requirement	Applies to	Source in the Visa rules
Trial length, amounts and dates of the first and later charges, the last 4 card digits and the cancellation policy, clearly visible on the checkout screen	Negative option merchants	Section 5.8.17.2, p. 479-480
Recurring terms shown at the moment of consent and separately from your general terms	All stored-credential agreements	Table 5-20, p. 459
Consent through a "click-to-accept" button on the checkout screen	Negative option merchants online	Section 5.8.17.2, p. 479
Receipt or written confirmation immediately after sign-up, sent electronically for online sign-ups	Negative option merchants	Section 5.8.17.2, p. 479-480
Notice at least 7 days before the next charge when a trial, intro offer or promotion ends, or when terms change	All recurring merchants	Table 5-21, p. 461-462
Online cancellation when the order was taken online, and a cancel link in the trial-ending notice	All recurring merchants	Table 5-21, p. 461-462
A link to a cancellation page on your site in every receipt or notice sent by email	Negative option merchants	Table 5-31, p. 480
Full refund if you didn't stick to the agreed terms	All stored-credential agreements	Table 5-20, p. 460

Visa's rules in effect from April 18, 2026.6 In Europe, Visa adds a confirmation of the recurring agreement within 2 business days and a notice when more than 6 months have passed since the last charge or when the agreement changes.6

Mastercard

Mastercard's rulebook isn't publicly downloadable, so we can only report what acquirers relayed. Ahead of the rules taking effect on April 12, 2019, J.P. Morgan told its merchants that Mastercard requires free trial merchants selling physical products to be registered and to use MCC 5968, that the trial starts when the customer receives the product, and that after the trial the merchant must get the customer's consent before charging, with the amount, date, statement name and cancellation instructions.11 It also lists a receipt with cancellation instructions after every charge, a direct online cancellation link, and a written confirmation once a trial is cancelled.11 These standards may have changed since 2019: ask your acquirer for the current version.

What negative option billing does to your MCC and your processor

The billing model can change how the networks classify your business, and whether a processor takes you at all.

Subscription products sold by direct marketing: ads, email, phoneVisa's code is 5968, a Tier 3 high-risk code for card-absent salesYour acquirer must be approved for Tier 3 and register you before your first transaction
A regular store with a subscribe-and-save optionVisa says you keep the code of your main businessCheck your MCC. If you're on 5968 by mistake, ask for a review
A club or program that bills until cancelled, on StripeStripe lists it as prohibited, with discounted trials whose pricing is hidden or unclearRead the processor's list before launching; a closure stops every payment at once
A free trial of a physical product, on MastercardReported to require registration and MCC 5968Ask your acquirer which program applies to you

Visa defines 5968 as subscription products delivered to the customer, such as books, magazines, cosmetics, food, clothing or "nutraceuticals", sold through direct marketing.7 Its Integrity Risk Program lists subscription "negative option" merchants in Tier 3, for card-absent sales.8 The tiers and what registration involves are in our high-risk MCC codes list, and the way each provider assigns your code is in how to find your MCC code.

On Stripe, the prohibition sits under unfair, deceptive or abusive practices: marketing and membership clubs that bill until cancelled, and discounted trials with hidden or unclear pricing.9 Plain subscriptions with clear terms aren't the target. Hidden continuity is.

Negative option billing and chargebacks

Most negative option disputes come from customers who don't remember agreeing, or who tried to cancel. Visa gives issuers two dispute reasons that fit exactly:6

Fig. 2The two Visa dispute reasons trials run into

13.2 Cancelled recurring transaction
The cardholder withdrew permission to charge the card, and you charged anyway.
13.5 Misrepresentation
Goods bought through a trial, promotional period or introductory offer, when the cardholder "was not clearly advised of further Transactions".

both are won or lost on your consent record

Source: Visa Core Rules and Visa Product and Service Rules, April 18, 2026.

Your defense in both cases is the record of what the customer saw and accepted, and when. Without it, these disputes are hard to win, and each one adds to your dispute ratio. A recognizable billing descriptor and a reminder before the first paid charge prevent many of them before they start. More fixes are in our guide to chargeback prevention. Repeat sign-ups that never pay are a separate problem: see free trial abuse.

How to run a compliant negative option flow

Take the strictest rule at each step: Visa for the checkout and the 7-day notice, California for the timing windows and record keeping, ROSCA for the order of things.

Show the terms before the card fields. Trial length, price after the trial, billing frequency, first charge date, how to cancel. On the checkout screen, not behind a link.
Collect a separate consent. An unchecked box or a click-to-accept button tied to the recurring terms, apart from your general terms and conditions.
Log the consent. Store the exact text shown, the version of the page, the time and the order. California asks for at least 3 years.
Send the confirmation right away. Terms, amount, next charge date, last 4 card digits and a link to cancel online.
Send the reminder before the trial ends. For a 30-day trial, at least 7 days before the charge (Visa). For trials over 31 days, 7 to 21 days before the end covers both Visa and California.
Let them cancel the way they signed up. Online for online sign-ups. A save offer can appear, but the cancel button stays visible.
Confirm the cancellation in writing, and stop the next charge.
Send a receipt after every charge with a cancellation link, and a yearly reminder for long-running plans.

Sources: ROSCA (15 U.S.C. 8403), Cal. Bus. & Prof. Code § 17602, Visa Core Rules April 2026. Check state laws where your customers live with your counsel.

One test before you launch

Take the customer's confirmation email and your checkout screenshot. If someone who has never seen your offer can't tell, from those two alone, what they'll pay, when, and how to stop, the flow isn't ready.

If your offer depends on customers missing the renewal, no wording will make it safe. If it depends on customers who like the product staying, these rules cost you little, and they keep your dispute rate and your processor relationship where they should be. For the payment side of running subscriptions, see subscription payment processing.

By industry

Industry	What changes	Guide
Supplements	Stripe prohibits trials with unclear or hidden pricing; claims and "free + shipping" offers draw the most scrutiny	Trial offers for supplement brands
Skincare	"Risk-free" cream trials are behind the FTC's best-known cases, and processors remember them	Trial offers for skincare brands
Online pharmacy	A free trial of a prescription medication is rare and draws scrutiny; a reduced first month works if refills never outrun the prescription	Trial offers for online pharmacies
Telehealth	Free visits and discounted first months are the offers the FTC has pursued; no recurring charge before the clinician decides	Trial offers for telehealth companies
Fitness	An equipment home trial is a return policy; a sports nutrition trial that turns into a subscription is a negative option	Trial offers for fitness brands
Info products	Free and $1 trials on memberships are negative options; for a one-time course, a guarantee is often safer	Trial offers for info product businesses

How Tagada helps

Payments that follow the card network rules

Tagada follows Visa and Mastercard rules and the laws that apply to payments. TagadaPay runs native 3DS2, device intelligence and a rules engine, and payments route across TagadaPay and processors such as Stripe, NMI and Airwallex with one logic. Each payment goes to the processor most likely to approve it, with a retry on decline; TagadaPay reports a +18% approval uplift. Your PCI-tokenized cards and subscription data stay in a vault you own, so you can switch processors without re-onboarding customers. Pricing starts from 2.9% + $0.29, with no setup fees and no monthly minimums; high-risk verticals and edge cases are priced case by case.

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Updated on November 2, 2026

Nick Bonnassies

CMO at Tagada

CMO at Tagada. Before Tagada, Nick built direct-to-consumer brands that generated over $115M in sales, raised over $25M in crowdfunding and sold two of them. He also works as a fractional CMO on marketing operations and AI systems.

Frequently asked questions

What is an example of negative option billing?

A free trial that turns into a paid monthly plan unless the customer cancels before it ends. Other examples: a magazine or software plan that renews automatically, a monthly supplement or coffee delivery that continues until cancelled, and product-of-the-month clubs that ship unless the member declines the selection.

Is negative option billing illegal?

No. It's legal in the US when the seller discloses the terms clearly before taking payment details, gets the customer's express informed consent, and makes stopping the charges simple, as ROSCA requires for online sales. It becomes illegal when terms are hidden, consent isn't obtained or cancellation is obstructed.

What is the status of the FTC click-to-cancel rule in 2026?

It isn't in force. The Eighth Circuit vacated it on July 8, 2025. The FTC restored the old 1973 rule text on February 12, 2026, and opened a new rulemaking on March 13, 2026, with comments due April 13. As of November 2, 2026, it hasn't published a proposed rule.

Does the FTC Negative Option Rule apply to free trials?

Not the rule in force today. The restored rule covers only prenotification plans, like book-of-the-month clubs. Free trials, auto-renewals and continuity plans sold online fall under ROSCA and Section 5 of the FTC Act instead, plus state auto-renewal laws such as California's.

What is the 7-day rule for free trials?

It's a Visa rule. At least 7 days before charging a customer whose free trial, introductory offer or promotional period is ending, the merchant must notify them with the amount, the date of the next charges and a simple way to cancel online. It applies to all merchants accepting Visa.

What MCC is used for negative option billing?

Visa uses 5968 for subscriptions sold through direct marketing, and lists it as high-risk in Tier 3 of its Integrity Risk Program for card-absent sales. A store that simply offers a subscribe option, without direct marketing, keeps the code of its main business.