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:
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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