AN 4934 Revised Standards For Merchants Using Subscription/Negative Option Billing

Mastercard recently announced they would be implementing new requirements to ensure a better cardholder experience that mitigates harmful practices associated with the utilization of the recurring billing model, a negative option billing model, or both.

Why The Changes?

The changes have been made to enhance the customer experience. In addition, the requirements will benefit all participants Mastercard by providing the following:

  • A better cardholder experience with all merchants
  •  Fewer complaints and chargebacks related to cardholders that do not intend to enroll in a subscription, cardholders that do not recognize a transaction related to a subscription they previously agreed to, and cardholders that have trouble canceling their subscription

These requirements will align with consumer protection regulations in Canada, the U.S., and the European Union.

Effective Dates

Below are the dates that you will need to be fully compliant by:

  • December 8, 2021 – All requirements become effective, except the requirement regarding the disclosure at the point of payment.
  • June 8, 2022 – The requirement regarding disclosure at the point of payment will become effective. 

The Changes

In efforts to help ensure a more positive cardholder experience, mitigate harmful practices associated with subscription billing models, and reduce the negatives impacts felt by all, Mastercard is implementing new acquirer requirements.

The main focus of this update is to make it, so merchants carry more transparency with their recurring billing/negative option billing. 

The revised Standard will apply to negative option billing merchants that offer a free/low-cost trial period such as a streaming service and then automatically enroll the cardholder into a subscription plan at the end of the trial.

No less than three days and no more than seven days before the end of the trial period, the merchant must send a reminder notification to the cardholder that their subscription plan will continue if they do not cancel.

This must include the basic terms of the subscription and instructions about how to cancel, and it can be delivered via email.

*It is important to note that this requirement will not apply to high-risk negative option billing merchants such as dietary supplements or healthcare product merchants.

In addition, merchants must adhere to the following:

  • Merchants must disclose the basic terms of the subscription at the point of payment to capture the cardholder’s acceptance of the terms. In the disclosure, the price must be included, along with the frequency of the billing.
  • Merchants must also disclose the terms of the trial, including any initial charges, the length of the trial period, and the price and frequency of the subscription. Example: “You will be billed $4.99 today for a 14-day trial. Once the trial ends, you will be billed $39.99 each month until you cancel. Simply providing a link to another page that contains this information, such as a terms and conditions page, does not satisfy this agreement; it must be on the checkout page, and merchants must send a confirmation email at the time of the enrollment as a reminder.

 Wrapping Up

Feel free to send us an email if you’re wondering if you are compliant with Mastercard’s revision. Also, be sure to sign up for our newsletter to stay up to date with the latest trends in the industry.