Clarity from Mastercard on Recurring Billing Charges

Last week Lisa B. Dubrow, Esq. reported on anticipated new rules to be issued by Mastercard based on an announcement Mastercard made on January

Last week I reported on anticipated new rules to be issued by Mastercard based on an announcement Mastercard made on January 16^th, modified on the following day. There were still outstanding questions.

I have been informed that the new rules will go into effect on April 12, 2019 will apply only to free trial offers involving the delivery of physical goods. Keep in mind that the physical goods will not be limited to nutraceuticals or skincare and will apply to all physical goods, including magazines and continuity programs of any kind.

So, for free to pay conversions (even those including a shipping & handling fee) which also involve the sale of physical goods, merchants will now have to obtain the consumer’s express opt-in consent to continue receiving and be charged for future deliveries after the free trial. This is in addition to an initial agreement a consumer accepts to be charged after the free time that presumably they made at the time of enrollment. This requirement exceeds all state and federal laws applicable to these types of offers.

Since this new Mastercard ruling is apparently in response to high charge back rates and complaints, other sellers of programs using free trial offers should be careful to monitor complaints and ensure that their programs are not eliciting excessive complaints to avoid similar rulings by Mastercard or other card providers.

Payment processors are responsible for monitoring merchant activity so if you are a merchant offering a free to pay continuity offer your payment processor will be required to register you as a covered merchant and verify that your free to pay offer complies with the new rules.

The new rules require a notice be sent after acceptance of the offer and receipt of an opt in from the consumer to continue to receive the goods and be charged after the free trial. In addition, after this opt in, all subsequent charges must be followed by a receipt sent to the consumer with instructions on how the consumer can cancel and avoid being charged. All card statements must identify the merchant’s website URL or provide a toll-free phone number that may be used to cancel the subscription.

If any of you fall into this category feel free to reach out to ensure compliance with these new regulations.

Filed in Best Practice and How To, Payment Processing, Regulation and Compliance, Subscriber Acquisition, Subscriber Only, Subscriber Retention

Lisa B. Dubrow, Esq.

Lisa B. Dubrow is a lawyer specializing in advertising and consumer protection with an emphasis on subscriptions and recurring billing business models. She counsels clients on legal issues surrounding the advertising and marketing of goods and services. Her practice also encompasses the negotiation and drafting of contracts pertaining to product development, marketing, and sales, including those with vendors, agencies, fulfillment, distribution, talent, production and media. Ms. Dubrow is a Phi Beta Kappa graduate of SUNY Binghamton. She received her law degree from New York University School of Law. For more information, please visit: www.lisadubrow.com