If your gym offers month-to-month memberships with automatic renewals, there’s an important update you should know about. The Federal Trade Commission (FTC) has finalized the Negative Option Rule, which includes a key provision called “Click-to-Cancel.” That means it has been filed with the Federal Registrar’s office and the timeline to make it law has started ticking. Unless someone sues the FTC, the Negative Option Rule is set to become law in May of 2025.
Here’s what you need to know and how we’ll help you stay compliant as these changes unfold.
What Is the Negative Option Rule?
The Negative Option Rule aims to protect consumers against a couple of different types of service agreements. For gym owners, the biggest issue here are services with automatic renewals, i.e. month-to-month memberships. If the FTC Rule goes into law, Gym owners will be required to provide clear disclosures, obtain explicit written consent, and simplify cancellation processes. The FTC designed this rule to prevent unfair practices and ensure transparency in automatic renewal services.
Key Provisions That May Affect Gyms
- Simplified Cancellation Processes
Since the beginning, we’ve known that the rule mandates that businesses must offer cancellation methods as simple as the sign-up process. Here’s what we’ve learned:
- If a member can sign up through the gym’s website, they must also be able to cancel through the gym’s website. A website form will likely be sufficient, but requiring an email to cancel isn’t the same as signing up “online.”
- Requiring in-person or phone call “exit interviews” prior to processing the cancellation may not comply.
- Clear and Conspicuous Disclosures
The FTC is really emphasizing that Gyms will need to clearly inform members in writing about:
- The cost and frequency of automatic renewals.
- The cancellation process, including any notice periods or additional fees.
- Any other material terms of the membership agreement.
- Consent to Automatic Payments
Almost every gym uses automatic payments. Before charging members for automatic renewals, you must:
- Obtain explicit, written informed consent for recurring payments.
- Ensure this consent is separate from other membership terms and not buried in fine print. Some sources we are reading are indicating the need for additional initials. This may cause Client Management Software companies to update their contract/template uploads.
What Does This Mean for Gym Owners?
If this rule becomes enforceable, we are seeing signs that gyms will need to revise their current membership agreements and cancellation processes to meet these requirements. Key adjustments could include:
- Updating membership agreements to include clear disclosures and separate consent (initial lines) for automatic renewals.
- Offering cancellation options that match the simplicity of your sign-up process, such as an online cancellation feature. Written cancellation requirements via email or text may not be compliant any longer.
How We’re Supporting Gym Owners
We understand that regulatory changes can feel overwhelming, but we’re here to help. Our team is closely monitoring the development of the Negative Option Rule and will provide updates as it moves forward. Once the rule is finalized and enforceable, we’ll help you:
- Review and update your membership agreements to ensure compliance.
- Streamline your cancellation processes to meet FTC standards.
- Protect your gym from potential fines, penalties, or consumer disputes.
Stay Proactive and Prepared
While this rule is not yet enforceable, now is the time to review your current practices and identify areas that might need improvement. This may require significant changes to your standard operating procedures. As your legal partner, we’re here to guide you through these changes and ensure your gym stays compliant.
If you have any questions about how this rule could impact your business, or if you’d like to schedule a review of your membership agreements, please don’t hesitate to reach out.
Contact us today to ensure your gym is prepared for what’s ahead!
By staying informed and proactive, you’ll be able to navigate these changes smoothly and continue providing excellent service to your members.
