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:


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The Federal Trade Commission’s “Negative Option Rule” is up for review, and the FTC is steering toward stricter regulations for automatic renewal plans and subscription programs. The FTC completed its last regulatory review of the Negative Option Rule in 2014 and decided then to retain the rule in its current form. But, will this time be different?

The Rule Under Review

The rule under review is the “Rule Concerning the Use of Prenotification Negative Option Plans,” also referred to as the “Negative Option Rule.” However, the scope of the Negative Option Rule only covers prenotification plans, like book-of-the-month clubs, where the seller sends notice of a book to be shipped and charges for the book only if the consumer takes no action to decline the offer, such as sending back a postcard or rejecting the selection through an online account.


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Opting OutWhat do golf and sex have in common? According to the old joke: They’re two things you don’t have to be good at to enjoy. Similarly, some men – ok, most men – tend to exaggerate their prowess at both. You can add one more common trait: The FTC scrutinizes online continuity offers for the accessories associated with both, as the FTC last week settled a case involving lingerie and we blogged previously about the FTC’s golf ball ROSCA case, which settled recently. One final note on the connectivity between golf and lingerie: Supermodel and actress Kelly Rohrbach appeared in lingerie on the AdoreMe site and played college golf.

On November 20th, the FTC filed suit in New York against an online seller of lingerie for violating the FTC Act and Section 5 of the Restore Online Shoppers’ Confidence Act (ROSCA). According to the complaint, AdoreMe generates most of its revenue from its “VIP members.” For $39.95 a month, VIP members receive discounted prices, but are not charged if they buy apparel within the first five days of each month or affirmatively click a button to skip that month. If a consumer forgets to click the button or buy something within the first five days, the amount becomes store credit that supposedly can be used at any time. However, according to the FTC, many consumers were surprised to learn that the store credit could not be used at any time. The FTC alleged that AdoreMe failed to disclose that if a consumer cancelled their VIP membership, their store credit would be forfeited. The FTC sought $1.3 million for the forfeited store credit.


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financial lawMany time-strapped consumers count on household subscription services to simplify life. One quick purchase agreement with automatically renewing payments, and consumers can receive uninterrupted access to the latest streaming shows, months of lifestyle subscription boxes, or online cloud storage to back up all the family vacation photos. But sometimes consumers aren’t clear on how to unsubscribe or exactly what price they’ll pay after a discounted or free trial period. Thus, many states are enacting or updating their Automatic Renewal Laws (“ARLs”) to ensure consumer protection.

On the heels of increased class action filings under California’s current ARL (see e.g., Kruger v. Hulu; Wahl v. Yahoo! Inc.), the state continues to tighten the reins on automatic renewals and continuous service providers with newly enacted Senate Bill 313. California’s expiring ARL was enacted in 2010. It requires auto-renewing consumer contracts to clearly and conspicuously disclose terms, obtain affirmative consumer consent before imposing a charge, and provide an acknowledgment that contains the terms, the cancellation policy, and a simple cancellation method. California’s 2010 ARL was already broader and more specific than the federal Restore Online Shoppers’ Confidence Act, commonly known as ROSCA and enforced by the FTC. (Read more about ROSCA here.)


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healthcare and fitness appsLast week, in an ironic twist of fate, the Federal Trade Commission (FTC) charged the operators of the Pact Mobile App, which paid consumers for keeping their fitness promises and charged consumers who missed their goals, for failing to honor its promises to consumers.

According to the FTC’s complaint, when consumers signed up for the Pact App (formerly GymPact), consumers provided the app with their payment card information and set a workout or fitness goal. When signing up, users specified an amount of money the app could deduct if the user missed a workout or fitness goal for the week. The charges ranged from $5 to $50 per missed activity. If, on the other hand, the user achieved the goal, Pact would pay them. To track consumers’ compliance with their goals, Pact required users to check in at gyms using their phones’ GPS. Pact also allowed consumers to set other goals, using the app’s VeggiePact and FoodLoggingPacts options.


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Risk-free trialIt’s no secret that automatic renewal (or continuity or negative option programs) are on many regulators hit lists. Regulators argue that consumers are often unaware that they have signed up for services or products for which they will be billed on a monthly basis unless and until they cancel, particularly when it involves a free trial period. In some cases cancellation may not always be easy and the billing descriptor that appears on the consumer’s credit card statement may differ significantly from the branded product or service name. Finally, otherwise busy consumers may simply forget about the upcoming renewal, particularly if the subscription term is lengthy.

Regulators have responded by bringing numerous law enforcement actions, many of which seek to heighten disclosure requirements. At the federal level many of these enforcement actions are based in part upon ROSCA, the Restore Online Shoppers Confidence Act. (See our previous posts on ROSCA here.) The Unsubscribe Act, introduced in the House of Representatives earlier this year, seeks to tighten legal requirements for such programs even further.


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