Have you ever seen a business offer a free trial or introductory offer followed by a monthly subscription if you don’t cancel before the trial is over? This is what Visa refers to as negative option billing. In other words, negative option is a billing practice in which merchants offer a free trial, require a credit card to claim the trial, and then bill the customer for a monthly subscription if they didn’t proactively cancel before the trial ended. Visa has had rules regarding these types of sales since 2011, but they are now enhancing the rules based on trends.

With these enhancements, Visa is trying to address pain points around cardholder complaints and confusion. These often revolve around tracking and monitoring difficulties as well as lack of clarity on dispute rights.

The enhancements will apply equally to merchants if a free or introductory offer is followed by an ongoing subscription or recurring agreement, regardless on whether they are selling either physical or digital goods and services.

Here are some of the high-level requirements of the enhanced program for negative option billing:

  • Express Consent – At the time of enrollment, merchants must require the cardholder to expressly consent to entering an ongoing subscription for recurring payments.
  • Enhanced Notification – At the time of enrollment, merchants must send electronic copies (email, text, etc.) of the terms and conditions of the subscription, even if no amount is due at the time. Merchants must also send an electronic reminder with a link to cancel at least seven days before initiating a recurring transaction.
  • Easier Cancellation – Merchants must provide an easy way to cancel the subscription method online, regardless of how the cardholder initially interacted with the merchant.
  • Statement Descriptor – An additional descriptor indicating a trial period-related transaction will be required.
  • Expanded Dispute Rights – Various additional dispute rights will be given to the card issuer if the cardholder was not clearly advised of further billing. Specific documentation requirements will be implemented to protect merchants that have acted appropriately.

These new rules for negative option billing will go into effect on Aril 18, 2020, and Visa will be conducting proactive monitoring and mystery shopping for enforcement activities. If you have any questions about how this may affect you or your business, please contact us.