What is opt-out compliance and why does it matter?

Opt-out compliance is a legal framework that gives consumers the right to refuse or decline to have their personal information collected, used, or shared by businesses. It requires businesses to offer clear options for consumers to opt out and withdraw consent at any time. 

As of November 2024, 19 US states have passed data privacy laws, including California, Colorado, Texas, Utah, and Vermont. All of these laws also feature an opt-out consent model. In 2025, this number is expected to grow. 

Failing to comply with these opt-out or opt-in requirements can lead to hefty fines. It’s crucial to get this aspect of data privacy right. In this comprehensive guide, we’ll explore all of the concepts, considerations, and best practices you need to know to stay on the right side of compliance.

Let’s start by clearing up a point of confusion. What’s the difference between opt-in vs opt-out? 

What is the difference between opt-in and opt-out consent?

Opt-out consent means consumers can choose not to allow businesses to store their data. In this sense, businesses can use personal information until the consumer tells them they cannot. A standard opt-out example is a banner that informs visitors that cookies are in use, alongside a reject button for consumers to withdraw consent. 

In contrast, opt-in consent withdraws consent by default. Consumers need to willingly and clearly state they’re fine with a business processing their information before the business can act. 

A classic example of opt-in consent is a sign-up form for a business to send marketing emails, a request to send personalized ads based on browsing habits, or an app that asks for permission to track location. 

The primary difference between the two consent models is who makes the initial choice. With opt-out consent, the business can choose to process data until a consumer states otherwise. With opt-out, the business needs to make its case and wait for explicit consent before it does anything else.

Which types of data are covered?

In general, opt-out compliance requirements apply to all types of personal information that businesses collect. This includes:

• Personally identifiable information (PII): Names, phone numbers, addresses, and any other information that can be used to identify an individual. 
• Digital personal information: IP addresses, third-party cookies, geolocation data, and more. 
• Sensitive personal information: Health records, financial details, religious beliefs, ethnicity, and sensitive information. 
• Data collected on children: Data collected about minors (under the age of 13) has special considerations, like getting parental consent and offering parents the right to opt out of data collection. 

These are some of the key types, but this list is non-exhaustive. The best course of action for the sake of compliance is to assume that all personal information falls under legislation of some sort. 

What are the legal requirements for opt-out compliance?

Let’s explore some of the core regulations that have clauses for opt-out consent. We’ll also touch on some regulations, such as the General Data Protection Regulation (GDPR), that are primarily opt-in but feature specific consumer rights surrounding withdrawing consent once it’s been obtained. 

GDPR

General Data Protection Regulation (GDPR) is a data privacy and security legislation that controls how consumer information is processed and used by businesses. It applies to all businesses that are located in the EU or handle the data of EU residents. regardless of whether that business is EU-based. 

GDPR is an opt-in consent model, meaning consumers need to provide clear consent before businesses can collect, use, or share their data. That said, businesses can collect personal data without obtaining consent under five other lawful bases for processing:

• Contractual: The business (data controller) needs to meet contractual obligations entered into by the consumer (data subject). For instance, when completing an inventory order. 
• Legal obligations: The data controller needs to fulfill a legal obligation, such as data sharing tax information with tax authorities.
• Vital interests: The data controller needs to process data to protect the vital interests of the data subject, such as protecting someone’s life. 
• Public interest: The data controller needs to carry out a public task, such as protecting public health. 
• Legitimate interests: The data controller has a legitimate reason to process information, and the benefits of this reason outweigh the negative impact on the data subject’s rights. 

If none of these lawful bases apply, The GDPR requires opt-in consent. This consent must be given freely and by clear, affirmative action. 

If you’ve started processing data based on one of the lawful bases, keep in mind that consumers still have several rights that businesses must respect. 

• The right to object: Individuals can object to the processing of their data at any time.
• The right to withdraw consent: Individuals can withdraw consent at any time, even if they previously provided consent. 
• Right to restrict processing: Individuals can request that businesses temporarily restrict processing. 
• Right to erasure: Individuals can request the deletion of all personal data a business holds about them if that data is no longer needed for its original purpose. 

GDPR is one of the most stringent global privacy laws in the world. Fines can soar up to €20 million or 4% of a business’s annual turnover, whichever is higher. 

Even if you don’t handle the data of EU citizens, this is the best set of guidelines to follow if you want to take compliance seriously. If you can adhere to the GDPR, you can comply with anything. 

CCPA

The California Consumer Privacy Act (CCPA) is the most comprehensive state-specific privacy law in the US. It applies to all businesses that are collecting personal data related to California residents. 

Under the legislation, Californians can request that businesses stop selling or sharing their personal information with third parties. In certain circumstances, they can also restrict the use or processing of their personal information. 

Compliance with the CCPA opt-out model for consent requires a multi-pronged approach. Organizations need to:

• Provide a clear, accessible link that lets consumers opt out of third parties using or processing data.
• Provide a clear, accessible link that lets consumers opt out of the disclosure or use of their sensitive data.
• Clearly inform consumers if their personal data may be sold or shared and let these consumers know their right to opt out. 
• Respect and act upon any opt-out requests a consumer exercises using known preference signals. 

After they receive a valid opt-out request, the business is required by law to wait for 12 months or more before they can approach the consumer to reconsider. As with the GDPR, any consent to opt back in must be given freely and clearly. 

Nonconsent with the CCPA can result in a $2,500 fine per breach when accidental. For intentional violation, penalties rise to $7,500 per breach. 

Opt-out compliance laws by state

The United States doesn’t have a single federal law governing data protection and privacy. Instead, it’s built up of various state-level legislations. Currently, 19 states have data protection regulations. 

To better understand which states have an opt-out requirement in place, let’s break it down with a table.

US states with data protection laws

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It may seem like the optimal idea is to take a similar patchwork approach to consent, tailoring your strategy to your location. But this can open the door to breaches, especially if you operate across multiple boundaries. 

Instead, the most effective way to keep your business on the right side of compliance is to take a blanket approach and implement one all-encompassing set of guidelines to comply with all laws and legislations. 

Opt-out vs opt-in mechanisms

Opt-out mechanisms are the processes or methods organizations need to offer to consumers so they can exercise their right to opt-out. Here are some of the core mechanisms and how they work:

• Opt-out request form: As a business, you need to provide individuals with an accessible, easy-to-grasp opt-out form so they can submit their opt-out requests.
• Opt-out notices: You should also provide consumers with an easy-to-read notice, such as a website pop-up with an opt-out option explaining the consumer's rights. 
• Global privacy control: The GPC is a universal opt-out model (UOOM) that lets consumers alter their browser settings to opt-out from all websites.
• Privacy settings: Businesses must also comply with a user’s predefined privacy settings. 

Again, the best option is to implement each of these mechanisms by default, to ensure you’re on the right side of legislation, even when crossing borders.

Technical implementation

Here are some technical ideas for implementing opt-out mechanisms for your business:

• Cookie consent banners: Deploy cookie banners that allow users to accept, reject, or customize their cookie preferences.
• Preference centers: Create a preference manager where consumers can manage their consent choices freely. Make sure to clearly inform the consumer where they can access and change their preferences. 
• UOOMs: Implement Universal Opt-Out Mechanisms (UOOMs), such as Global Privacy Control (GPC) to understand and respect user preferences across devices automatically. 
• CMPs: Use a Consent Management Platform (CMP) to store consent preferences, to ensure your opt-outs are enforced across all touchpoints.
• DMPs: Configure your data management platform to recognize opt-out requests. 
• Data suppression lists: Implement data suppression lists for exclusive users who’ve opted out. 

Implementing an opt-out compliance model is a multi-step process. Each of these components works together to create a robust model for data privacy and compliance.

What are the best practices for opt-out compliance?

There isn’t a one-size-fits-all approach to meeting opt-out legislation. That said, there are several best practices you should follow to maintain compliance across every regulation. 

1. Create a user-friendly experience

Provide intuitive and accessible opt-out options to simplify the user experience. These should be easy to see and interact with.

Avoid dark patterns and maintain transparency. Dark patterns are deceptive design practices designed to manipulate a user, such as design that obscures an opt-out button in some way. Your design should allow users to easily understand and navigate your opt-out processes.

2. Emphasize clear and concise communication

Use plain language to explain data collection practices and opt-out options. Consider the principle of ‘ELI5’, which can help you simplify complex topics. 

Opt-out instructions should be straightforward and visible – the whole idea is to give users confidence in their ability to control their data.

3. Implement reliable opt-out mechanisms

Offer multiple accessible opt-out options. These can include cookie banners, preference centers, and/or global privacy controls.

• Cookie banners: Pop-up notifications on websites that inform users about data collection via cookies, allowing them to accept, reject, or customize settings.
• Preference centers: A user-friendly dashboard where users can manage and update their privacy preferences.
• Global privacy controls: Settings or browser features (like the Global Privacy Control or GPC) that automatically signal a user’s data preferences across all websites they visit.

Always look to process opt-out requests quickly. This builds trust with users and ensures compliance across jurisdictions. 

4. Protect data security and privacy

Follow data minimization principles. This means you only undertake the collecting and processing activities you truly need for your essential business functions. 

Safeguard all user data by following industry-standard protections to protect against breaches. This can include things like using firewalls, performing regular security audits, and using data encryption, among other measures. 

As with dealing with opt-out requests quickly, following these standards – and communicating that you do – helps to build a sense of trust and authenticity around your organization. 

Summing up

Opt-out compliance is critical for any business handling customer data to remain compliant with data privacy regulations. It’s crucial for businesses to ensure that individuals can control the collection and use of their personal information. 

Following the guidelines of key regulations like the GDPR and the CCPA is a good start. Using common sense to implement clear opt-out mechanisms can also help protect customer data and prevent costly penalties.

The RecordPoint solution 

For more than 15 years, RecordPoint has empowered organizations to govern data responsibly and stay compliant across jurisdictions. Our AI governance platform can help you stay compliant at every stage of your data lifecycle, from data discovery to data disposal. 

Explore our blog for more expert insights, or connect with our team to see how RecordPoint can help you protect user privacy and strengthen your data compliance strategy.

FAQs

What are some common mistakes businesses make regarding opt-out compliance?

Businesses often fail to provide clarity regarding opt-out compliance. They offer vague or inaccessible opt-out options. They compound this with slow processing times or by using dark patterns to discourage users from opting out. Prioritize transparency to avoid falling short. 

How can I ensure my opt-out mechanism is GDPR compliant?

In short, you need to ensure your opt-out mechanism appears alongside an opt-in option. Provide clear opt-out options in plain language. When presenting the opt-out option, clearly explain what data is being collected and how it will be used. And finally, process opt-out requests promptly and accurately.

What are the best practices for obtaining valid consent for cookie usage?

Use a clear and visible cookie consent banner that allows users to accept, reject, or adjust cookie preferences. You can also provide further details on each cookie’s purpose to help users make informed choices.

How can I measure the effectiveness of my opt-out implementation?

You should track various metrics related to opt-out implementation. You can track the number of opt-out requests, the time to process these requests, and user engagement with consent management tools. Checking in on these metrics regularly can give you a picture of how your opt-out mechanisms are performing.