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Mastercard Extends Effective Date of New Rules for Free Trials and Recurring Charges

The effective date for new Mastercard rules for free trials and recurring charges is now September 22, 2022.

Two clients informed me earlier this week that they had heard from their processor that Mastercard was extending the effective date of its new rules for free trials and recurring charges until September 22, 2022 (from March 22). But rather than bothering you with unsupported gossip, such as Coach K returning to Duke following his retirement announcement, or Ye quitting his day job to become Kim’s full time stylist, I needed more. And we got it!

In this April 12 announcement, Mastercard confirmed the delay of the new rules pursuant AN 4934 until September 22.  The announcement also “clarified” the new rules, as follows:

Free or Low Cost Trial: For a free or low cost trial of a digital good (such as a streaming service, club membership, website access or software license) lasting longer than 7 days, the merchant must send the cardholder a notice between 3-7 days before the end of the trial detailing the basic terms of the subscription and instructions on how to cancel.  The notice can (note: not “must”) be sent by email or any other electronic method.

For All Subscription Merchants:

  • Offer Terms and Acceptance.  Disclose the offer terms clearly and conspicuously at the point of payment and capture the cardholder’s affirmative acceptance of such terms. For e-commerce merchants, the point of payment is the screen where cardholders enter their card credentials and any screens that show a summary of the order before it is submitted for authorization by the cardholder. A link to another page or requiring cardholders to expand or scroll down a page to see the terms will not suffice.
  • Confirmation Notice. Merchants must send an order confirmation notice by email or other electronic method at the time of enrollment with the terms of the subscription (including any trial period) and instructions on how to cancel.
  • Transaction Receipt. Merchants must send a receipt by email or other electronic method after every billing that includes cancellation instructions. Cardholders may choose to opt out of receiving these notices.
  • Cancellation Methods. Merchants must provide an online or electronic cancellation method (similar to unsubscribing from email messages or any other electronic method) OR clear instructions on how to cancel that are easily accessible online, such as a “Manage Subscription” or “Cancel Subscription” link on the merchant page.  NOTE:  This is a notable change from Mastercard’s previous announcement, as it appears to allow merchants to provide instructions on how to cancel (not a direct link to do so) and the use of a link without the word “Cancel” in it.  That said, we must still be mindful of an amendment to the California auto renewal law that goes into effect July 1, 2022 that requires, for offers made online, an online link that allows consumers the ability to immediately cancel “without engaging any further steps that obstruct or delay the consumer’s ability to terminate.”  
  • Renewal Notices. For any subscription/recurring payment plan that bills cardholders less frequently than every six months, the merchant must send the cardholder a notice between 7-30 days before the billing date that includes the subscription terms and instructions on how to cancel.  Note:  While the plain language of the Mastercard announcement says, “less frequently than every six months,” which, from a grammatical reading, means more than six months, such as annually, the notice also includes a parenthetical that confuses its meaning, “(such as, but not limited to, cardholder is billed every six months every year, every two years.).”  I have no idea what the parenthetical means or how it is intended to clarify the six-month threshold; it really just makes it more confusing.

We’ll provide additional clarification as it becomes available.

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