Mastercard will Require Merchants to Get Approval for Charges after Free Trial – Won’t Apply to Digital Subscriptions

[Update 1/19/19: Mastercard added an update to their press release that the change will only affect physical products, not digital subscriptions. Yawn…most subscriptions are digital. My guess is they intended for this to be on digital subscriptions too, but got blowback from large digital subscription providers, and were forced to change it to apply only to physical items.]

Mastercard announced today that they’ll now require merchants to get approval of the first charge after a trial before they can charge you.

 The rule change will require merchants to gain cardholder approval at the conclusion of the trial before they start billing. To help cardholders with that decision, merchants will be required to send the cardholder – either by email or text – the transaction amount, payment date, merchant name along with explicit instructions on how to cancel a trial.

For each payment thereafter, the merchant will have to send a receipt to the cardholder for each transaction by email or text message with clear instructions on how to cancel the service if the consumer so desires.  In addition, all charges that appear on the cardholder’s statement must now include the merchant website URL or the phone number of the store where the cardholder made the purchase.

My initial read was that they’ll require merchant to get an opt-in approval for the first charge. But a closer look at the language leads me to believe that it’ll be enough for the merchant to send you an email with instructions on how to cancel. Meaning, they don’t need opt-in level approval, rather they are required to tell you about the impending charge and give you the opt-out option. For subsequent charges, they don’t need to send you notification beforehand at all, but they have to notify you afterwards.

That’s my read, at least. A lot of companies, especially the large ones like Amazon and Netflix, already have this kind of system where they notify you before the large charge, though I don’t think many subscription services send a monthly receipt of charge.

I’m also hopeful that this will knock out the likes of WSJ who require calling in to cancel, but that’s not all all clear since it may be considered enough to instruct you on calling in, without giving an online cancel option.

Overall, a nice little change. It’ll probably get me to use Mastercard on subscriptions, especially those that I’m planning on cancelling.

Hat tip to reader Feb

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JAC
JAC (@guest_752730)
April 26, 2019 14:31

Most subscriptions are NOT digital – no one gives a crap about 12$/month Netflix – most subscriptions are physical & 25-60/month. This is awesome news!!!

Darwin
Darwin (@guest_709025)
January 20, 2019 07:31

Re physical vs digital items: then why do they waste time on creating some rule that affects nobody, protects nobody, and most definitely nobody is asking for? Next thing you know, they will say that the rule won’t apply to electronic orders of physical items.

bob
bob (@guest_709018)
January 20, 2019 06:31

I think consumers need to grow up and take responsibility for their actions. If you sign up for a free/cheap trial, you have the responsibility to cancel the trial before being charged full price.

I’ve done dozens upon dozens of trials and have never had a problem cancelling a subscription. Obviously companies will use a hard sell when you want to cancel. If you can’t take the pressure, then don’t sign up.

Andy
Andy (@guest_709115)
January 20, 2019 16:29

Nowhere in the terms they say when I cancel, they will give a hard time yet they do. For online offers, the ability to cancel online should be mandatory.

William Charles
Admin
January 20, 2019 18:29

I can understand your point if the trials were easy to cancel, but in most cases they aren’t and in a lot of cases it isn’t clear you are signing up for an ongoing subscription if you don’t cancel. That’s the whole point of what this change was originally supposed to do.

MaxPower
MaxPower (@guest_708952)
January 20, 2019 00:08

Knew it was too good to be true…

P
P (@guest_708936)
January 19, 2019 23:23

Can someone name non-digital subscriptions besides magazines?

Nothing come to mind 🤔🤔

JV
JV (@guest_708945)
January 19, 2019 23:50
  P

Nothing that has a free trial per se. I thought of those old columbia house cd subscriptions but you paid $1 for them so wasnt free

diggs
diggs (@guest_708967)
January 20, 2019 00:52
  P

Off the top of my head, I think there’s reoccurring subscription services for coins (Franklin Mint, maybe even the US Mint), Stamps, Wine, Beer, silly commemorative plates, etc. The tend to lure in people with a loss leader intro offer that auto-converts a costly “____ of the month” subscription (unless you cancel). As already mentioned by several others, virtual cards are a great way to prevent them from charging anything beyond the intro offer (as you can set the CL of a Virtual Card), but as others have mentioned, the merchant could (try to) go after you for subsequent (failed) charges if they’re dumb enough to ship you subscription products w/o first obtaining a CC auth.

Citi offers VAN (Virtual Account Numbers), BofA offers ShopSafe for their virtual CC’s. @Anna G mentioned Privacy Card. Not familiar w/ that program… will have to investigate it.

P
P (@guest_708969)
January 20, 2019 00:54

Oh! So it’s prety much useless what MC is offering.

Andy
Andy (@guest_709116)
January 20, 2019 16:31

Most subscription based services now block one time cc numbers, even they block rebate visas.

William Charles
Admin
January 19, 2019 22:56

Lol nice work Mastercard, let’s make a pointless change. Why doesn’t it apply to digital subscriptions? Makes no sense.

Gadget
Gadget (@guest_708925)
January 19, 2019 23:03

Guaranteed Amazon, Apple, Google, and Netflix and the 1000+ other digital content providers all sent MC “constructive feedback”.

William Charles
Admin
January 19, 2019 23:12

Not sure why MC doesn’t grow a spine, no way they start to refuse MC. I hope easy cancellation becomes a thing

Gadget
Gadget (@guest_708917)
January 19, 2019 22:48

Go figure companies that have a business model of a subscription service want to keep the billing going. Just like insurance, they need many people to subscribe that pay every month in order to afford costs of having a lesser amount of people that binge on the service.

But, I don’t really see this as a needed service from MC. Deal with reputable companies and take responsibility for your subscriptions & monitor your CC charges.

Jack - NJ
Jack - NJ (@guest_707745)
January 17, 2019 13:23

Effective when?

Ryan
Ryan (@guest_707730)
January 17, 2019 12:54

If the second part of their announcement – the vendor has to simply send cancellation instructions – is the entirety of this policy, then their statement that “The rule change will require merchants to gain cardholder approval at the conclusion of the trial before they start billing.” is completely false. reminding someone of a cancelation deadline does NOT equal “gain[ing] cardholder APPROVAL”!

So then this is mostly just window-dressing. I can’t think of a time when I didn’t know or couldn’t find out HOW to cancel after the trial. That just leaves two aspects: (1) remembering to do it and (2) the hassle of in some cases needing to call and go through their sales pitch before finally getting it cancelled.

This would help with (1) for vendors not already sending reminders. Although some already do this and regardless, I always set a calendar reminder for myself. This won’t help at all with (2).

I guess it’s better than a kick in the head, but I just don’t see this as being a big win if the above interpretation is correct.

Alben
Alben (@guest_707583)
January 17, 2019 03:36

I use a Citibank Visa card and generate a virtual card number and set the expiration date and maximum amount. Works great to avoid recurring subscriptions/renewals.