FREE TRIAL AND SUBSCRIPTION RULES (VISA VS MASTERCARD)
Free trial and subscription rules for Visa and Mastercard are ever changing, which is why new rules have taken effect in 2020.
If you’ve been running free trial products and subscriptions within your business model or are thinking about it, it’s important that you take VISA and Mastercard rules very seriously. In fact, the rules may dramatically impact how you conduct your day-to-day business.
For example, if you’ve been running free trials and/or subscriptions prior to this year, it’s important for you to know that as of April 18, 2029 all merchants who accept VISA and who offer free trial rules (or offer upsells) and/or are engaged in negative option billing (or the practice of giving customers service not previously provided, then charging unless the customer declines the service). The new rule is quite similar to a similar rule implemented by Mastercard that was implemented in 2019.
But we’re getting ahead of ourselves. The purpose of this post is to dive into the rule differences between VISA and Mastercard.
The following will explain the differences.
VISA Free Trial & Subscription Rules
Express Consent
At the time of enrollment, merchants are required to ask the customer to expressly consent to entering into the free trial and ongoing subscription service for recurring payments.
Enhanced Notification
When a customer enrolls, a merchant must provide a copy (via email, SMS/text, or other delivery method) if the customer agrees to the terms and conditions of the free trial and subscription service.
The notification must include the following:
- Confirmation that the cardholder has agreed to the free trial and subscription, unless he or she cancels.
- The start date of the subscription.
- Details of the good/services.
- The amount of the ongoing transaction amount and billing frequency/date.
- Link or other simple way for a cardholder to easily cancel any subsequent transactions online.
- Merchants must sent a reminder notification including a link to online cancellation policy at least 7 days before initiating a recurring transaction if:
- A trial period introductory offer or promotional period is about to expire.
- The nature or terms of the recurring agreement has changed (i.e. the price or billing period, and more).
Explicit Transaction Receipts
Merchants must disclose the following on transaction receipts:
- Length of trial period, introductory offer details, or promotional period, and a disclosure that a cardholder is required to take steps to cancel any future transactions.
- Transaction amount and date for the initial transaction (even if no amount is due) and for future recurring transactions.
- A link or another way to enable the cardholder to easily cancel any future transactions.
Statement Descriptor
An additional descriptor is required for letting the card holder know that he/she will have a trial period-related transaction. This descriptor is required in the Merchant Name field of the Clearing Record for the first transaction at the end of a trial period. For example, the descriptor could read “trial,” free trial,” or “trial period” and will appear on the cardholder’s statements, mobile apps, online banking, and SMS/text alerts.
Expanded Dispute Rights
The existing dispute condition of “Misrepresentation” has been expanded, specifically where merchandise or digital goods have been purchased (1) through a trial period or (2) as a one-off purchase and the cardholder was not made aware of the fact that they would be charged again in the future.
If a consumer wrongly tries to dispute the charge, a merchant must provide proof that they have correctly charged them. Proof must come in the form of: (a) showing that the cardholder expressly agreed to future transactions at the time of their first interaction with the brand in question, and (b) The merchant was electronically notified before processing new transactions after a trial/promotional period has ended.
Mastercard Free Trial & Subscription Rules
In 2019, Mastercard decided that it was time to make sure that consumers were protected against shady free trial and subscription practices. This comes after millions of consumers reported being wrongly treated by numerous brands.
The new rules require the following:
- Merchants must gain cardholder approval at the conclusion of a free trial before they start billing.
- Merchants are required to send the cardholder an email or text that includes:
- The transaction amount
- Payment date
- Merchant name
- Explicit instructions on how to cancel a trial.
- For each payment thereafter, a merchant must send a receipt to the card holder for every transaction by email or text with clear instructions on how they can cancel the service.
- All charges that appear on a cardholder’s statement must include the merchant website URL or phone number of the store where the cardholder made the purchase.
Last Words
As you can see, VISA and Mastercard have similar rules, but there are some differences. It’s vital that you review them both and make sure that you are fully adhering to their policies.
Also, keep in mind that these rules can quickly evolve. We strongly recommend that you regularly review both of their policies on a regular basis. The more informed you can stay, the more likely you will succeed during these uncertain times.
