Mastercard Rule Changes: Brands Now More Aligned on Subscription-Based Merchant Rules

By Dan Spalinger, VP of Global Advisory Services, Infinicept

It has been said that history doesn’t repeat itself, but it does rhyme. So it is with card brand rules.

What one major brand views as a needed control or mandate is often repeated – perhaps with a nuanced spin – by another. In early 2020, Visa introduced rules for subscription-based merchants and those that offer free trials before automatically enrolling consumers in recurring payments. It followed that Mastercard would likely issue a similar view at some point.

And now it has. On March 22, Mastercard issued new requirements that align with consumer protection regulations in many jurisdictions. These requirements are intended to reduce consumer complaints and chargeback incidents. They are meant to address Instances where a consumer did not intend to subscribe to something, doesn’t recognize a transaction, or has trouble cancelling a subscription.

All subscription merchants must now capture the consumer’s explicit acceptance of the subscription. They must confirm the subscription by email or other electronic method at the time of acceptance and include terms and conditions (T&Cs) and cancellation instructions. They also must issue an electronic receipt after every billing event (again including cancellation instructions). And finally, they must maintain an online or electronic cancellation method.

If a subscription merchant bills the consumer less often than every six months, it must issue a reminder three to seven days before billing. And it must include the T&Cs and cancellation instructions at that time.

Effective Sept. 22, merchants will also have to clearly disclose the subscription’s basic terms at the point of payment acceptance.

Those are the new requirements for simple subscription-based merchants. Those that offer a free or low-cost trial period for a digital good before auto-enrolling a consumer into ongoing payments (known as “negative option billing”) have further requirements.

These merchants now must send an electronic reminder to the consumer three to seven days before the end of the trial. They must include the T&Cs and cancellation instructions. During that period, the consumer must be allowed to cancel the subscription at no cost.

These new Mastercard rules mirror consumer protection rules established in California in 2021 in response to complaints regarding “unethical” billing practices. And they mean that the two major card brands are now more aligned in how these types of merchants must disclose their programs to consumers.

As always, if you are a payment facilitator we recommend that you reach out to your acquiring sponsor for more information. You can request to see the exact wording on these rules. But know that you will need to act if you have subscription or negative option billing merchants in your portfolio – or are considering onboarding any. You will need to add verifying these disclosures and requirements to your enhanced due diligence or periodic review processes.

Please feel free to reach out to Infinicept to discuss how these rules impact your processes.