Visa previously announced that starting April 18th, 2020, there will be updates to the rules and requirements surrounding free trials or introductory offers that roll into an ongoing subscription service. This change was going into place because Visa found that free trials and introductory offers that go straight into a subscription service cause problems for all parties involved. When the full subscription charge hits the cardholder's account, it causes "problems for cardholders and [Visa] clients, including multimillion-dollar operational cost increases due to high call center volumes, customer complaints, write-offs, and card closures / re-issuances."
Due to the turbulent times surrounding the COVID-19 crisis, Visa postponed the April Business Enhancement Release. While the content of the April Business Enhancement Release will be the same, the update will be postponed to July 17th, 2020.
As the free trial changes and mandates were part of the April Business Enhancement, here's what merchants need to know about the timelines and requirements.
Visa Subscription Merchant Policy Date Updates
Enhanced Statement Descriptor
The enhanced statement descriptor requires merchants to indicate a trial period-related transaction in the Merchant Name field for the first transaction after a trial period. By having this descriptor appear on statements, online banking, and text alerts can help cardholders place the transaction.
This requirement is postponed to April 17th, 2021. Acquirers do not need to submit waiver requests for delaying the implementation of the enhanced descriptor during this time.
Visa Subscription Requirements Effective April 2020
Visa understands that with large populations sheltering in place, many are utilizing subscription services for the first time. They feel that with the increase of subscription sign-ups and free trial offers, that some of the scheduled requirements should not be postponed. Here are the subscription requirements that went into effect on April 18th, 2020.
Expressed Cardholder Consent
At the time of enrollment, merchants are required to get the cardholder to expressly consent to an ongoing subscription. Merchants also need to provide a copy of their terms and conditions to the cardholder at the time of enrollment.
As part of enhanced notifications, merchants are required to send an electronic notification with a link to an online cancellation at least seven days before the first recurring transaction when:
- A trial period, introductions offer or proportional period has expired
- The agreement for a recurring transaction has changed, such as the price or billing period
Enhanced Transaction Receipts
When the cardholder is enrolled in the recurring transactions, merchants must disclose the following transaction receipts:
- Length of any trial period, introductory offer, or promotional period
- A clear explanation that the cardholder will be changed unless the cardholder takes steps to cancel
- Transaction amount and date for the initial transaction, even if no amount is due
- Transaction amount and date for the following recurring transactions
- A link or other simple mechanism that cardholders can easily cancel the subscription
Easy Online Cancellation
Merchants must have an easy way for cardholders to cancel the subscription or payment method online, regardless of how the cardholder initially interacted with the merchant. Visa gives the example that the ease of canceling a subscription should be similar to unsubscribing from an email list.
Monitoring and Compliance
Along with the updated and reconfirmed timelines, Visa concluded with, "As announced in the March 31st 2020 edition of the Visa Business NewsVisa is taking a tailored and pragmatic approach to rule compliance during the COVID-19 pandemic, focusing primarily on situations where payment system integrity is at risk. As such, Visa will delay proactive enforcement of compliance actions related to this policy."
Preventing Disputes and Improving Customer Experience
Recurring transactions are naturally susceptible to disputes. The frictionless checkout process makes things convenient for the customer, but it can also create a situation where disputes can happen. While these Visa compliances may take some extra work or changes, in the long run, it protects both the merchant and the cardholder. By creating better communication with the cardholder and giving the cardholder an easy way to cancel the subscription, not only increases customer experience, it prevents disputes.