Visa Changes Subscription Cancellation Policy for Free Trials

Last Updated on March 8, 2021 by Corepay

We recently received a bulletin from Visa reminding their retail merchants about certain changes to “. . . acceptance, disclosure, and dispute policies for transactions at merchants that offer free trials or introductory promotions as part of an ongoing subscription service.”

In other words, if you offer a free trial for a subscription service, like a streaming service, trunk club, or lawn care service, these changes will affect how you do business. They’re designed to better protect the consumer, because they’re making it easier to cancel the subscription and give consumer clearer dispute rights. The new rules go into effect on April 18, 2020.

(You can download Visa’s flyer here at the Visa Online website.)

Here are a few things we can tell you about the new policy changes and what they mean for you.

First, the changes apply to subscription services of any kind — physical goods, digital goods, or services, like a car wash or lawn care service. Basically, if you offer a free trial or introductory promotion that rolls into an ongoing subscription, then it applies to you, regardless of what you sell.

But if you don’t offer a free trial or introductory rate, then you’re safe. The new policies don’t apply to you. (However, Visa does strongly recommend you follow these new policies. And if anything, we can certainly see how they’ll become required for the rest of you one day.)

One important change that you have to follow is that you use a term like “trial,” “trial period,” or “free trial” in the merchant descriptor field of your merchant services account. This pass-through data will appear on consumers’ credit card statements, online bank statements, and mobile apps as a way to identify the nature of the transaction. Visa is not restricting the word choice or telling you what the term needs to be; the merchants just need to be able to identify when a transaction is part of a free trial or introductory promotion.

Merchants are also required to notify the cardholder at least seven days ahead of the expiration of their trial, along with a link or method to cancel the subscription, whether that’s done online or via text message. Plus, the notification has to be electronic in nature, but could be via another method if the consumer agrees to that in advance (such as if they don’t want to be notified electronically).

(We especially like this requirement, because it will protect merchants by reducing the number of chargebacks from consumers who forgot to cancel their subscription before their first full payment is made. And the notification will aid merchants who dispute the chargeback — if you can tell the issuing bank, “Look, we gave them seven days notification to cancel. It’s not our fault if they failed to act,” you’re less likely to be hit with the chargeback, which can affect your chargeback-to-transaction ratio.)

Another change which consumers will no doubt love, is that they must be able to cancel their subscription online, without needing an additional contact method via another channel, such as a phone call. However, merchants can continue to use those other channels for customer service issues like cancellations; it’s just that consumers have to be able to cancel their subscription online if that’s the method they choose.

If you have questions about Visa’s new subscription cancellation policies, or just want help avoiding excessive chargebacks, Corepay can help you. For more information, please visit our website or call us at (800) 408-0095.

Photo credit: Mike Mozart (Flickr, Creative Commons 2.0)