Subscription merchants that take payment by Visa cards will have new acceptance, disclosure, and cancellation requirements imposed on their transactions beginning April 18, 2020. As Visa recently announced, the card brand is updating its rules for merchants that offer free trials or introductory offers as part of an ongoing subscription program.

The Visa rules follow on the heels of similar Mastercard rules that became effective earlier this year. However, while MasterCard’s rules focus on merchants selling subscriptions for physical goods, Visa’s rules apply to merchants selling either physical or digital products if the merchant offers a free trial or introductory offer that rolls into an ongoing subscription arrangement.

The new requirements are more specific than what the Restore Online Shoppers’ Confidence Act (ROSCA) prescribes, and while they don’t have the force of law, noncompliance could put a merchant’s credit card processing capabilities at risk. Here are some of the components of the new Visa rules:

  • Enhanced notification procedures that require merchants to send (electronically) to the cardholder, at the time of enrollment, the terms and conditions of the subscription services—even if the cardholder is not being billed at that time. The notification must include:
    • Confirmation that the cardholder has agreed to a subscription, unless the cardholder cancels.
    • The start date of the subscription.
    • Details of the goods / services.
    • Ongoing transaction amount and billing frequency / date.
    • Link or other simple mechanism to enable the cardholder to easily cancel any subsequent transactions online.
  • If the trial / introductory offer / promotional period has expired or the nature of the reoccurring payments have changed, merchants must send an electronic reminder notification with a link to online cancellation at least seven days before they initiate a recurring transaction.
  • Merchants will also be required to disclose on a transaction receipt the length of the trial / introductory offer / promotional period and provide a notice that the cardholder will be charged unless the cardholder takes steps to cancel any subsequent transactions as well as the amount and date for the initial transaction and any recurring transactions.
  • Merchants will be required to provide an easy way to cancel the subscription or payment method online, regardless of how the cardholder initially interacted with the merchant. The ease of cancellation should be similar to “unsubscribing” from an email distribution list.

Although it is unclear how and to what extent the card brands will enforce their rules, Visa has announced that, to ensure compliance with the new requirements and policies, Visa will undertake proactive monitoring and mystery shopping. And though card brand rules do not have the force of law, violating them may result in losing card processing capabilities.

In addition to the changes in card brand rules, the Federal Trade Commission recently called for public comment on ways to improve current requirements for subscription and recurring billing programs, indicating that the FTC might tighten the reins on these programs. And an increasing number of states have passed laws that specifically regulate subscription and automatic renewal programs, including California, D.C., North Dakota, Vermont, and Virginia. As a result, companies offering these programs should take steps to come into compliance with these requirements, and be on the lookout for new developments.

To learn more about the new requirements and other updates affecting negative option programs, join Venable attorneys Ari Rothman and Shahin Rothermel for a webinar discussing these topics on October 29. Click here to register.

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Photo of Ari N. Rothman Ari N. Rothman

Ari Rothman’s nationwide practice focuses on all legal facets of Internet and mobile marketing, telemarketing, and payment processing. Ari represents advertisers, affiliate networks, lead generators, advertising agencies, payment processors, ISOs, and others in contract negotiations, compliance matters, federal and state government investigations before…

Ari Rothman’s nationwide practice focuses on all legal facets of Internet and mobile marketing, telemarketing, and payment processing. Ari represents advertisers, affiliate networks, lead generators, advertising agencies, payment processors, ISOs, and others in contract negotiations, compliance matters, federal and state government investigations before the Federal Trade Commission (FTC) and state attorneys general, and private litigation. As a result of this experience, he offers a unique perspective when counseling clients and helping them find creative solutions to complex problems.

Photo of Ellen T. Berge Ellen T. Berge

Ellen Berge provides counsel on regulatory compliance, government investigations, contract negotiations, and general business matters. Ellen focuses on advertising, marketing practices, payment processing, and merchant services. Her clients include major brand advertisers and direct-response retailers, and lead generators, telemarketers, media agencies, software providers…

Ellen Berge provides counsel on regulatory compliance, government investigations, contract negotiations, and general business matters. Ellen focuses on advertising, marketing practices, payment processing, and merchant services. Her clients include major brand advertisers and direct-response retailers, and lead generators, telemarketers, media agencies, software providers, and others who serve them. On the merchant services side, she leads a practice that works with banks, processors, sales agents, payment facilitators, independent software vendors, and fintech and financial services businesses. Ellen also serves as the firm’s managing partner of Professional Development and Recruiting.

Photo of Shahin O. Rothermel Shahin O. Rothermel

Shahin Rothermel is an experienced counselor and defender who helps advertisers, retailers, merchants, and marketers advance their business goals while reducing legal and regulatory risks. Shahin provides clients with up-to-date, practical insights into the constantly evolving advertising, marketing, and e-commerce regulations, which allows…

Shahin Rothermel is an experienced counselor and defender who helps advertisers, retailers, merchants, and marketers advance their business goals while reducing legal and regulatory risks. Shahin provides clients with up-to-date, practical insights into the constantly evolving advertising, marketing, and e-commerce regulations, which allows her clients to make informed decisions. She has achieved successful resolutions, dismissals, and full walkaways in court, saving clients millions of dollars. She takes a pragmatic approach as a counselor, considering the implications of her advice for her clients’ marketing campaigns and their bottom lines.