Mastercard is implementing new requirements to help ensure a more positive cardholder experience and to mitigate negative practices associated with the use of subscription/recurring payments and negative option billing.
The negative option billing model refers to merchants offering free or low-cost digital goods (e.g. streaming service, club membership) for a trial period, after which the cardholder is automatically enrolled into a subscription plan. High-risk negative option billing merchants are merchants that operate this model for physical goods such as dietary supplements and healthcare products.
What you need to do:
If you offer your customers subscription/recurring payments, negative option billing for digital or physical products you must familiarise yourself and ensure you comply with all requirements below.
All requirements will become effective from March 22, 2022, except the requirement regarding disclosure at the point of payment. The requirement regarding disclosure at the point of payment will become effective from September 22, 2022.
Negative option billing merchant
No less than 3 days and no more than 7 days before the end of the trial period, or whenever terms and conditions change, the merchant must send a reminder to the cardholder advising that the subscription plan will automatically commence if the cardholder does not cancel. This notification must include the terms of the subscription and instructions about how to cancel, and the notification may be sent via email or any electronic method.
High risk negative option billing merchants
All subsequent recurring payment transactions must be processed using the same Merchant ID and Merchant name as used for the initial payment transaction.
After the trial period has expired, you must provide the following information to the cardholder and receive the cardholder’s explicit consent in relation to this information before you submit an authorisation request for the initial recurring payment transaction:
- The transaction amount
- The payment date of the transaction
- Your business name as it will appear on the cardholder’s statement
- Instructions for terminating the recurring payment Transaction cycle (for example, cancelling the subscription service) at the Cardholder’s discretion
After the cardholder has provided consent, you may not change this date; however, a later payment date may be offered prior to consent, if the authorisation is declined due to insufficient funds.
Each time you receive an approved authorisation request, you must provide the cardholder with a transaction information document (TID) through an email or other electronic communication method (such as an SMS text message) including instructions for terminating the recurring payment transaction cycle.
If you provide a cardholder with a TID after a declined authorisation request, the TID must state the reason for the decline response.
You must provide the cardholder with written confirmation in either hard copy or electronic format when either or both of the following events occur:
- The cardholder’s trial period expires
- The recurring payment transaction cycle has been terminated by either the merchant or the cardholder
Note: a trial period means a pre-set length of time during which the cardholder may evaluate the characteristics of the product, such as its quality or usefulness, to determine whether the cardholder wants to either:
Purchase the product on a one-time basis or recurring basis, or
Return the product (if possible) to the negative option billing merchant.
All subscription paymnet merchants
You must clearly disclose the basic terms of the subscription at the point of payment and capture the cardholder’s acceptance of such terms. The disclosure must include the price that will be billed and the frequency of the billing (for example, "You will be billed GBP 9.95 per month until you cancel the subscription"). Merchants that use a negative option billing model 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 subsequent subscription (for example, "You will be billed GBP 2.99 today for a 30-day trial. Once the trial ends, you will be billed GBP 19.99 each month thereafter until you cancel.")
- For ecommerce merchants, the point of payment includes the screen where cardholders enter their card credentials and any screens that show a summary of the order (such as a shopping cart) before it is submitted for authorisation by the cardholder.
- Providing a link to another page that contains this information (such as a terms and conditions page), or requiring the cardholder to expand a message box or scroll down the page to see the terms, will not satisfy this requirement.
You must send a confirmation by email, or any other electronic method, at the time of enrolment in a subscription/recurring billing plan that provides the terms of the subscription, including the terms of a trial period when applicable, and clear instructions about how to cancel the subscription.
You must send a receipt by email, or any other electronic method, after every billing that includes clear instructions for how to cancel the subscription.
You must provide an online or electronic cancellation method (like unsubscribing from email or any other electronic method).
For any subscription/recurring payment plan that bills a cardholder less frequently than every six months (180 days), the merchant must send a notification no less than three days and no more than seven days before the billing date that includes the terms of the subscription and instructions about how a cardholder may cancel the subscription.
