Subscriptions, Recurring billing, and Memberships get a gut punch from the FTC.
The FTC – Federal Trade Commission has proposed a requirement for having a “click to cancel” button available on websites.
Making it as easy to cancel as it was to sign up in the first place.
Visa and MasterCard issued a rule – mandate on this back in 2020 – and went into effect in June 2022.
Here is how it affects businesses:
If you do NOT have a cancellation button on your site – cardholders can charge back up to 3 payments usually – the cardholder’s bank – card issuer will automatically do this. Now merchants can fight that if they can prove the customer did use the services and has proof and only lose 1 chargeback.
If you have a cancel button – then it's limited to one chargeback.
What can and what should merchants do?
Have a cancel button.
Enroll in RDR – rapid dispute resolution – cuts down on chargebacks.
Cancel customers who are not logging in at least once each month or send them an email.
Businesses will complain about this as they are losing revenue – but if the FTC rule kicks in – they could get hit with a ton of fines for not complying.
In 2020, a new Visa mandate went into effect that changed the rules of subscriptions. Merchants must allow customers to cancel online, notify them before each payment is processed, and link to the cancellation page in these notifications.
Full coverage of this mandate can be found here, but here are the key points:
Merchants must provide a digital receipt when a customer enrolls that includes the agreement terms, timeline, and amounts for future payments.
Customers must be able to cancel their subscriptions online, even if they didn't enroll online.
The billing descriptor for recurring charges must clearly indicate the merchant and what the charge is for.
The customer must be notified by email or text message at least 7 days before a free trial period ends, and this notification must include a link to the cancellation page.
Mastercard created changes to its rules with largely similar requirements. The last of these changes, which implements the rule about informing new customers about the timeline and amount of future payments, will go into effect on June 9th, 2022.
Visa Trial and Subscription Mandate Explained:
Visa Subscription Mandate provides rules for enhanced transaction disclosure, consumer cancellation options, dispute rights, and participation monitoring.
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