Posted by Chuck on January 19, 2019
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Published on January 19th, 2019 | by Chuck

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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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sevillada
sevillada

I guess they are tired of all those shady services that sign you up for a subscription…and people having to file disputes for them

Andrew
Andrew

This is nice. Usually why I rather use PayPal for subscription based things, in particular swagbucks sign ups. You can immediately kill the recurring payment and not worry about recurring or sending an email in two weeks

GL
GL

I use visa/mc/amex gift cards for those… then drain them afterwards

Jason Smith
Jason Smith

I did that with a company once…and they kept the charges recurring and then sent it to a collection agency.

MSer
MSer

Good for MC. Hope this sets a trend and all the scammer trial offers will disappear

gman
gman

That is a silly statement. If people do not want a trial offer, then do not sign up for the trial. Just sign up for the service and skip the trial offer.

John Beezy
John Beezy

I mean, sometimes you just want the trial and nothing more.

Krista check my posts
Krista check my posts

Not silly at all. You must have never dealt with those scammers that advertise products on TV or you would understand. They all have fine print that is contrary to their TV advertising and they hope that no one reads it or disputes with their credit cards. For example some will have a free “trial.” But make it start when they ship the product and by the time you receive the product you don’t have a chance to use it before they start charging you.

I know better than to order any of that junk from TV but some family members seem to never learn.

Atul
Atul

Not Silly. I once subscribed to world history books 12 of them 1 for each month language said cancel anytime and stop subscription. They sent all 12 books on month 1 and started subscription. I called and said I wanted to to try first couple and if not interested then cancel rest of them. Response was to save shipping we sent all now but we will charge monthly. Can I cancel then? No now that you got all the books you can’t cancel it and it is like you want to cancel buying song after downloading them…Had to go thru lot of trouble and threats to get part of money back had to ship the books back too. So shipping cost was add on. Left bitter taste for all subscription model.

Mike
Mike

Great news for consumers. Not so good news for businesses who use trials as bait hoping customers don’t cancel in time.

Paul
Paul

This is great for consumers. Way to go Mastercard.

Reed
Reed

A welcomed consumer-focused change. I use virtual card numbers from Citi with limits when I set up free trials to avoid this very thing.

Jason Smith
Jason Smith

I did that with a dial up internet service years back…they just kept on the charges and then sent it to a collection agency after a few months.

Jason
Jason

They may have been losing too much on chargebacks, to look at it cynically.
I usually use a virtual account number from Citi for these sorts of recurring charges.

Frank

Wow, that seems like a fantastic change. Hopefully visa will follow so merchants are at risk of losing their main processing sources if they try to scam you. Will also mean MC disputes will be much easier — just show that you never got the notification and the merchant should be SOL

AnameOfaguy
AnameOfaguy

But how do you prove a negative?

TheTaxman_Cometh
TheTaxman_Cometh

I would think the service would need to prove they did send it when you dispute the charge.

gman
gman

I know people think they can “show” they did not get a notification – but there is NO POSSIBLE WAY to show that.

Ryan
Ryan

Right. It will be easy for the vendor to produce a sent email or something. No way to prove a negative.

Enhante
Enhante

Nice for a company to step up and do something good for consumers. If only the U.S. could pass regulations for more…

Scott
Scott

This is why I use a Visa or MasterCard prepaid card – to avoid the company from billing me for something I don’t want and avoiding the hassle of disputing a charge.

MoreSun
MoreSun

With that you just have to be careful to actually read the fine print so the company doesn’t send you to collections for failing on your promise to pay if you fail to cancel.

Trevor
Trevor

Yup. Such as using a fake name. Who cares if a fake name goes to collections?

John
John

Will do the same thing, Citi virtual numbers are great for trials. This needs a requirement for easy cancel online or automated phone number. This doesn’t solve the problem of being unable to cancel easily. I cancel if I can do so online but if I have to call and fight I don’t cancel. I just kill the virtual card.

NinjaX
NinjaX

this is fake consumer protection theatre. its like companies offering free one year credit monitoring after a data breach. this doesnt mean jack shit in practice. its just nice to put words on paper.

we need to be very clear on passive approval vs active approval. simple notifications and no action lead to default charge approvals. nothing changes guys.

Jon
Jon

Then don’t sign up for trials…no one is forcing anybody.

Dan
Dan

There are some ‘vendors’ who do recurring for monthly rates. Some ignore repeated requests to end a ‘subscription’ just like they ignore communications from card issuers. It might be a hassle for that business model but abusers like the one I dealt with are why this change may be a good one.

Anna G
Anna G

That’s where I use Privacy Cards. Hate when they dont give an option or some by default turn it off so unless you turn it on, you wont be notified before the charge! Also remember when you use Privacy card, you can use any Name and address. Just remember they have a limit for creating a card for the same merchant. So you cant create too many. But you can use it again by pausing the card instead of closing it. This way, you can’t be charged when it’s paused but can use it next time you like to resubscribe. Also merchants are allowing this only when you forget to cancel it and then looking at the cancelled transaction on your privacy dashboard, you need to go cancel it wherever you signed up and maintain integrity. Hope this helps! I feel there’s no other awesome app with a bunch of exiting features along with 1-2% cashback for debit transactions. And many more.

Alben
Alben

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.

Ryan
Ryan

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.

Jack - NJ
Jack - NJ

Effective when?

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