2022 MasterCard rule changes applicable to subscription payments

October 11, 2022 | Susan M. Manwaring, Domenic Presta, P. Jason Kroft

MasterCard has recently proposed changes to its credit card processing rules which, if implemented, will impact a broad range of “merchants” including non-profits and charitable organizations. Given that these changes appear to be a reaction to legislative changes in other jurisdictions, we anticipate that similar changes could be introduced by other credit card companies in the near future.

The new MasterCard requirements apply to “merchants” that use a recurring billing or subscription-style model including, it seems, a monthly charitable donation program. The new rules focus on consumer disclosures to be made at the point of payment. Requirements include provision of consumer notifications, bill receipts, sufficiency of consumer confirmations, and provision for an electronic cancellation option.

The good news is that while these new rules were announced to be effective September 22, 2022 for all “merchants”, MasterCard has extended the deadline for charities and non profits until March 21, 2023. Imagine Canada along with a collective of other similar organizations are in the process of consulting with MasterCard and other credit card providers about a possible exemption for these types of programs. Thus, there is time to come into compliance and some hope that non-profits and charities will be exempt from the changes altogether.

That said, it is important to be aware that these changes may be coming. In the balance of this article, we will explore the key new requirements to the MasterCard rules and the potential application of these requirements to non-profits and charities.

Potential application of the new MasterCard requirements to non-profits and charities

If implemented, these rules will require charities and non-profits to make additional disclosures to donors about their respective monthly donation programs. The standards appear to provide further safeguards which will ensure that the donor has expressly accepted the applicable terms. Things like the frequency of donations and the date the donations will be charged against the card will need to be made available and clear to the donors. In some instances, an email will need to be sent before the charge is made against the donor’s credit card. In other cases, each donation will have to be acknowledged by email and the email will need to contain a note about how to cancel participation in the donation program.

The focus of these ‘standards’ appears to be to improve online systems and requires non-profits and charities to disclose the applicable terms of the subscription and clear instructions, ideally in plain language, on how the donor may cancel their subscription or monthly donations. Charities will be required to send by email or other electronic method a detailed receipt or acknowledgement of registration in the monthly donation program, which must include clear instructions on the steps to be taken by donors if they wish to cancel their monthly donations.

Finally the charity will need to provide an option for consumers to cancel a subscription electronically, which should be, according to the rules, “similar to unsubscribing from email messages or any other electronic method.” In other words, a click box or request to reply must be contained in the monthly confirmations sent to donors. Evidence shows this could have a negative impact on monthly donation programs. Donors appear more likely to cancel if the option is offered to them.

While it is reasonable to argue that such standards are intended for e-commerce merchants (i.e. those selling physical goods through an online or digital platform) and not to non-profits or charities who receive recurring donations through online subscriptions, MasterCard has confirmed that a monthly recurring donation is a subscription service to which the new requirements, including the disclosure and notification requirements, are intended to apply.

We are hopeful that those working with MasterCard and other credit card processors will be successful in coming up with an exemption to or modification of these rules for donation programs. This is a stay tuned update and we will provide further information as it is gathered. In the meantime, if your organization receives input from your payment processor about these changes, we would be pleased to answer any questions.

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