Mastercard has amended its merchant acquisition rules to place new requirements on recurring billing merchants who sell subscriptions for digital ‘goods.’ Some of the new notice requirements are effective March 22, 2022, while new disclosure requirements don’t go into effective until September 22, 2022. Here is a summary of the new requirements.
Ironically, although new notice requirements (which arguably take more back-end changes) are required as of March 22, 2022, disclosure requirements are not effective until September 22, 2022.
Thankfully, the disclosure requirements do not deviate much from other state requirements. Basically, the basic terms of the subscription “at the point of payment” must be clearly disclosed and capture the cardholder’s affirmative acceptance of the offer terms.
Mastercard provided an example: “You will be billed USD 2.99 today for a 30-day trial. Once the trial ends, you will be billed USD 19.99 each month thereafter until you cancel.”
For e-commerce, the “point of payment” includes the screen where cardholders enter their card information and any screens that show a summary of the order (such as a shopping cart). Mastercard has explicitly articulated that providing this information behind a link (such as a terms and conditions page), or otherwise requiring the cardholder to expand a message box or scroll down the page to see the terms, will not suffice – but those prohibitions would not fall within the definitions of clear and conspicuous, so this is not new.
Notice Requirements, effective March 22, 2022:
Order Confirmation. Merchants must send an electronic order confirmation at the time of enrollment in a subscription/recurring billing plan that provides the terms of the subscription, including the terms of a trial period (if any), and clear instructions about how to cancel the subscription. Although this will be a challenge for merchants who do not collect a consumer’s email address, this is not really new and conforms with order confirmations that I assume most of you already send out.
Notice Prior to End of Free Trial. If you offer a free or “low-cost” trial period of a “digital good” subscription for which the consumer will automatically be charged unless the subscription is cancelled before the end of the trial, you must now send the cardholder a notice between 3-7 days before the end of the trial with the basic terms of the subscription, informing of the upcoming charge, and instructions on how to cancel.
“Low cost” is not defined, but it was articulated that 50% would certainly trigger this requirement. A small percentage off might not.
Transaction Receipt. The new most onerous requirement is that you must now also send an electronic receipt after every billing event that includes clear instructions for how to cancel the subscription. Apparently, you can ask whether consumers want to continue to receive such email notices (they very well might not if they are being billed monthly!).
Renewal Notice. For any subscription/recurring payment plan that bills a cardholder for terms greater than six months (e.g., annually), the merchant must send a notification between 3-7 days before the billing date that includes the terms of the subscription and instructions on how to cancel. This notice is no different than those required by various state laws, but to comply with the state laws and Mastercard regulations you would have to send two notices as most states require that the notice be sent no sooner than 60 and no later than 30 days prior to the renewal. Mastercard requires the notice be sent no earlier than 7 days.
Following a trend at the state and federal level you must provide an online or electronic cancellation method (e.g., similar to unsubscribing from email messages).
Sale of Physical Goods
Finally, there are already Mastercard regulations addressing recurring billing for physical goods which begin with a trial period. I am happy to go over those with anyone who is not familiar with those requirements. It might be worth reviewing the risks for compliance with these regulations as well.