Some news from Mastercard: in a Jan. 16 blog post, the credit card giant announced new rules governing free product trials with recurring subscriptions for physical goods, such as skincare or healthcare items.
When the rules take effect in April, merchants offering these types of products will be required to notify a consumer – via email or text message – when a free trial period ends and a regular subscription is about to start billing. The notification must include the amount to be billed, the payment date, merchant name and explicit instructions on how to cancel. And, before automatic billing begins, the merchant must obtain the cardholder’s approval.
- Merchants must send receipts for each recurring transaction, via email or text, which also explicitly tell the consumer how to cancel.
- Charges appearing on a consumer’s credit card statement must be accompanied by the merchant’s website URL or a phone number.
From Mastercard’s blog:
Free trial offers can be a legitimate and useful way to increase sales and improve consumer satisfaction. The new rules will help increase transparency and ensure an outstanding experience for cardholders.
While it’s only Mastercard announcing these rules for now, it’s likely that Visa and the other card brands will follow suit at some point. In the long run we think it’s a win-win: great for transparency and consumer protection, but also a useful way to reduce chargebacks since each email or text notification could represent evidence on the merchant’s behalf when responding to a dispute.