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New VISA Rules for Free Introductory Promotional Terms or Free Trials

On October 19, 2019 VISA published an updated version of its Product and Service Rules that will impact the acceptance, disclosure and notice obligations

On October 19, 2019, VISA published an updated version of its Product and Service Rules that will impact the acceptance, disclosure and notice obligations of merchants conducting free trial offers and introductory offers that convert to paid programs for both digital and physical goods and services. These changes go into effect on April 18, 2020. I will not go into all of the new requirements but will summarize the most salient for now.

Applicability: The new rules apply only to free trial and introductory offers, and not negative option offers in general. At the Subscription Show last week a VISA representative confirmed that introductory offers were not specifically defined in the new rules and did not offer any definitive answers but did say that such offers could involve a low introductory rate or time period. I have reached out for more answers on what encompasses an introductory offer which will trigger these new requirements.

Despite this ambiguity, VISA encourages all merchants offering negative option plans to consider and follow the rules as a “best practice.”

Enrollment Disclosures:   Current VISA rules require merchants offering a negative option transaction to obtain a consumer’s express informed consent to the offer by disclosing all purchase terms and conditions before initiating the initial transaction, including:

  • The name of the merchant,
  • A description of the goods and services,
  • The transaction amount and date(s) for recurring charges,
  • The length of any trial period after which the consumer will be charged for the
  • goods or services if not canceled, and
  • The merchant’s cancellation policy.

The revised rules require merchants to provide enhanced enrollment disclosures which also includes:

  • That the consumer will be charged unless they take steps to cancel subsequent transactions,
  • The transaction amount and transaction date for the initial transaction (even if no amount is due),
  • The last four digits of the account number to be charged*, and
  • Instructions for an easy way to cancel the agreement or subsequent charges.

*It is hard to understand how one can provide this at the point of enrollment (as opposed to post-sale) as the consumer has not yet provided their card and I am trying to get clarification of this requirement.

Express Informed Consent:  Under the revised rules, if the initial transaction is an Electronic Commerce Transaction (i.e., online or via mobile app) all of the above information must be clearly visible on the checkout screen, and the consumer’s express informed consent must be obtained via a“click-to-accept” button on the checkout screen.

I do not know whether the updated requirement for consumers to “click to accept” recurring charges must be a checkbox separate from a “submit” or “I accept” button for online offers. A VISA representative agreed to seek clarification. However, “click to accept” might require a checkbox acceptance in addition to the consent to the offer similar to that which is now required for VT for all recurring billing sales and for Washington DC for certain free-to-pay conversions.

Notices: The current rules require a merchant to provide consumers with a receipt of the transaction containing a description of the purchase. The revised rules will require merchants to send consumers a receipt or confirmation containing the revised enrollment disclosures noted above.

Future Notices: The revised rules will require merchants to send a written notice to consumers containing the revised enrollment disclosures at least 7 days prior to initiating a subsequent paymenttransaction only if the terms of the agreement have changed (in which case the notice must include the changed terms), or a trial period, introductory offer or promotional period is going to end.

A press release suggests in an FAQ that this future notice may not be required where a trial or introductory period is less than 7 days: “If the merchant’s trial/promotional period is less than seven days, the initial confirmation provided to the cardholder should include the details required in the reminder (i.e., date of expiration of the trial/promotional period, link or other simple mechanism to cancel the subscription).” However, at the Subscription Show 2019 conference, the VISA representative indicated that the notice and future notice could be combined and did not limit the combination to a trial period of less than 7 days. Again, I have asked for clarification. 

Method of Dissemination: If a consumer’s consent to future transactions occurs on a website or via a mobile app, the receipt/confirmation and future notices must be sent by email or text, which may be problematic for transactions conducted by phone or through mail order where an email address or mobile number may not be collected. To date, VISA has not articulated what it expects under these circumstances. 

Cancelation: Merchants must provide a simple way for consumers to cancel to avoid future charges. If the notices required are sent via email, the notice must contain a link to a page on the merchant’s website where the agreement, order or any subsequent transaction can be easily canceled. This mirrors the requirement for Wash DC.

Takeaway: These are new requirements for free trials and introductory offers and although free to pay, or even nominal fee to pay is easier to define, we do not know yet the circumstances where an introductory offer will trigger all these new requirements. I am in touch with VISA and I will keep you posted as more details are obtained.

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