Mastercard has new rules for recurring transactions that entities must be aware of. Implementation of these rules has been delayed several times; currently, the rules are expected to take effect on March 21, 2023, for nonprofits. The rules essentially apply to any recurring transactions that are automatically charged to customers’ or donors’ Mastercard. Refer to Mastercard’s Transaction Processing Rules.
These are Mastercard’s terms and conditions. Therefore, if an entity accepts payment from Mastercard, it must follow these terms and conditions. For transactions from other credit card companies, such as Visa or Discover, the Mastercard terms and conditions do not apply. However, state laws may have similar requirements that an entity may be subject to. It also may be easier to structure the electronic systems to be the same regardless of the payment vendor.
These rules appear to be designed to assist the consumer and reduce chargebacks. Most consumers have some type of “subscription” that automatically “renews” or charges a credit card on a periodic, often monthly, basis. These rules are designed to make it easier for the consumer to cancel that subscription or renewal. Although the letter of the rules discusses ongoing and/or periodic delivery of physical products or digital goods, Mastercard’s FAQs indicate that recurring donations are also considered in this rule.
The rules start at the initiation of the transaction and so would apply to newly initiated transactions. When the entity obtains the Mastercard credentials for payment, they must disclose the price that will be billed and the billing frequency to their customer. The entity must clearly and prominently (i.e., no burying in the fine print) display the subscription terms on payment and order summary web pages. During the initiation, the entity must capture the cardholder’s affirmative acceptance of the subscription terms. It specifically states that a link to another website or expanding a message to scroll down does not satisfy this requirement. This may require a change in how website orders are confirmed. In addition, immediately after completing the subscription order, the entity must send their customer, through electronic communications, the subscription terms and clear instructions for how to cancel the subscription. Think of this as an email or a text message that the customer can keep.
In addition to initiation rules, there are rules for the subsequent transactions. These rules take effect on the date the changes in transaction processing rules take effect; that means if someone initiated a transaction in the year 2019 and is still doing that transaction, these rules will apply to the transactions processed starting on March 21, 2023. Each time a transaction (payment) occurs, the entity must provide the customer with a transaction receipt through electronic means, and it must include instructions for canceling the subscription. It also goes on to say the entity must provide an “online or electronic cancellation method (similar to unsubscribing from email messages or any other electronic method) or clear instructions for how to cancel that are easily accessible online (such as a “Manage Subscription” or a “Cancel Subscription” link on the merchant’s home page).” Some entities have inquired whether this requires the ability to unsubscribe online without having to call, or if the instructions can include calling a phone number to cancel; Mastercard has not clarified this.
There are also notification requirements for infrequent billings. For subscriptions where the billing is less frequent than every six months (180 days), the entity must send an electronic reminder about the billing at least 7 days, and no more than 30 days, before the next billing date. The reminder must include the subscription terms and how to cancel the subscription. It also cannot be part of marketing communications. Think of this as a reminder that amounts will be charged so the customer can stop the charges before they occur.
If your entity has recurring subscriptions/donations, ensure that you familiarize yourself with these rules in detail and the specific dates they take effect, which may be different for nonprofits. These rules apply to Mastercard transactions; other laws could also be applicable, and other credit card companies might have or add similar rules. Clearly, changes may need to be made to your electronic notices of payment. Most importantly, it needs to be easy for customers to see how to unsubscribe; this may involve changes to the website itself. Some payment portals have already made changes to comply with these rules, while others may require work on the entity’s part to do so.