New Year, New Rules for Mastercard Subscription Billing

Mastercard announced new policy changes for merchants that employ subscription billing and negative option billing models. These changes address the issue of consumers not understanding that they have been enrolled in an automatic renewal subscription or negative option billing plan, which can often lead to chargebacks. The changes involve new required disclosures, requirements to provide confirmation notices, and new mandates for cancellation measures.

The new rules require that merchants must disclose the subscription terms at the point of payment, prior to enrolling consumers in a subscription billing plan. The merchants must also obtain the affirmative acceptance of these terms from the consumer. Included in the terms, the merchant must disclose the price of the subscription and the frequency of billing. If it is a negative option plan with a free trial period, the merchant must also disclose the length of the trial period. Merchants are required to disclose these terms at the point of payment and may not require consumers to scroll elsewhere on the page, click a link, or expand a message box in order to read the terms.

Merchants are required to send consumers an enrollment confirmation by email or some other electronic method. Mastercard requires this confirmation to occur immediately following enrollment. The enrollment confirmation must also include the terms of the subscription as well as clear instructions on how to cancel it. After each billing, the merchant must send a receipt electronically that includes the transaction details and information about how to cancel.

If the merchant’s billing periods occur every six months or longer, the merchant must send electronic billing notifications between three and seven days before the consumer’s card is charged. This notification must include the terms of the plan and information about how to cancel. Negative option billing plans are required to send these notifications before the consumer is fully enrolled in the plan with exceptions for high-risk negative option billing plans. Merchants that offer a free trial period of physical goods such as healthcare products or dietary supplements are not required to send trial period notifications.

Mastercard requires subscription and negative option merchants to provide consumers an easy, electronic cancellation method that should be “similar to unsubscribing from email messages or any other electronic method.”

These changes reflect a growing movement to prevent consumer confusion regarding subscriptions, negative option billing, and automatic renewals. Visa instituted similar changes in 2019. Multiple states have automatic renewal laws (ARLs) and California even has an Automatic Renewal Task Force. Mastercard’s new subscription rules will take effect March 22, 2022, except for the point of payment changes, which will take effect on September 22, 2022.