Subscription Merchants: Updates to Free Trials and Negative Option Billing
Starting in April 2020, Visa will update its rules and requirements for free trials. The changes apply equally to merchants selling either physical or digital goods and services if they offer free trials or introductory offers that roll into an ongoing subscription/recurring agreement.
This change is following Mastercard’s revised standards for high-risk negative option billing merchants that were announced in January last year.
There are already existing rules in place, including express, informed consent from customers after required disclosures and a simple cancellation mechanism.
Mastercard: Update effective since April 2019
Mastercard has already updated its requirements regarding high-risk negative option billing merchants. One of them is that the acquirer registers negative option billing merchants that provide a physical product (as opposed to digital goods).
The merchant must request the cardholder’s authorisation and obtain explicit consent for the payment amount before initiating the authorisation request after the trial period for a product has ended, but before the cardholder makes any additional payments.
The authorisation request must contain the following information:
- The payment transaction amount
- The payment date
- The merchant name as it will appear on the cardholder’s statement
- Instructions for cancelling the subscription at the cardholder’s discretion
Additionally, each time that the merchant attempts an authorisation transaction, the merchant must send a receipt to the cardholder electronically that includes instructions on how to cancel the subscription service or recurring billing cycle.
Visa: Acceptance, disclosure and cancellation policies update
Effective 18 April 2020, Visa will implement Rules update to address free trials more efficiently. The changes are designed to promote an enhanced cardholder experience; enable issuers to identify these transactions clearly, and bring more transparency to the requirements of the dispute.
Visa Rules Update Summary
The summary of these changes includes:
- express consent to entering an ongoing subscription service for recurring payments
- enhanced electronic confirmation that contains a simple mechanism to enable the cardholder to cancel any subsequent transactions online easily
- explicit transaction receipts stating the length of any trial period, introductory offer or promotional period, including clear disclosure that the cardholder will be charged unless the cardholder takes steps to cancel any subsequent transactions
- easier cancellation similar to “unsubscribing” from an email distribution list
- additional statement descriptor (e.g., “trial,” “trial period,” “free trial”) that appears on cardholder statements
- expanded dispute rights and updated Visa complaint forms for issuers and cardholders
- extended policy for negative option and up-selling merchants
It should also be noted that specific documentation requirements will be implemented to protect merchants that have acted appropriately.
TrustPay works closely with the card schemes to help merchants better understand their requirements and stay compliant with the new rules updates. Therefore, if you have any additional questions regarding these changes, do not hesitate to contact your account manager.