New Mastercard Rules for Negative Option Billing Merchants

  • Max Jones
  • October 19, 2018
  • 5 minutes

Mastercard is in the process of updating regulations for merchants who sell products using a negative option or “free trial” billing structure.

These policy changes will have a significant impact on the way merchants are able to bill their customers and the payments industry as a whole. Find out what has changed, and take the necessary steps to ensure compliance.


Over the last two weeks, Midigator® met with Mastercard® representatives several times, including the recent Mastercard Compliance Conference and the MAC Regional Conference. Our team’s goal was to better understand these policies and ensure merchants have the information they need to comply.


We have updated this article to include the new insight. 


Midigator will continue to monitor the situation and share information as it becomes available. We encourage you to bookmark this page and check back often.

Who Will Be Impacted By These Mastercard Rules?

The new Mastercard rules govern a certain type of merchants as well as the processors that manage their merchant accounts.

Impacted merchants are those who use a negative option billing model to sell physical goods.


While these rules are applicable to all negative option merchants selling physical merchandise, the nutraceutical (or nutra) industry is the primary focus. This is because Mastercard receives a significant amount of complaints about this industry from cardholders, issuers, and regulators.

When Will Rule Go Into Effect?

Mastercard initially published the revised standards for negative option billing merchants on October 18, 2018. The new standard will take effect on April 12, 2019. Merchants, processors, and acquirers must be compliant by that date.

What are the New Mastercard Rules?

There are several new and noteworthy updates to Mastercard’s standards. We’ve broken them down into three categories.

Jump to a specific category or read all the regulations below.

Regulations Pertaining to New Merchant Account Creation and On-Boarding

There are several regulations that merchants and acquirers must adhere to when creating and registering merchant accounts.

Rule 1: MCC Classification

Merchants who use negative option billing will be assigned a card acceptor business code or MCC of 5968: Direct Marketing—Continuity/Subscription Merchants.

Rule 2: High-Risk Designation

Merchants who use negative option billing to sell physical goods—not services or digital content—will be classified as a high-risk merchant.

Rule 3: Inclusion in the Mastercard Registration Program (MRP)

Acquirers must register all merchants who use negative option billing through the MRP to ensure compliance with new standards.

Rule 4: Disclosure of Contact Information

Merchants must share the following information in the appropriate ways:

  • eCommerce Merchants: List the website URL where the customer shopped in data element 43, subfield 1 in the dual message system. Also, share a customer service phone number on the maintenance page that will be displayed when the website is offline for software updates, scheduled maintenance, technical difficulties, etc.
  • MO/TO Merchants: List the merchant’s contact phone number—one that is valid and accessible worldwide—in private data subelement 0170, subfield 1 in the dual message system.

Rule 5: Disclosure of Third-Party Service Providers

As part of the on-boarding process, merchants must list all of their third-party service providers that have access to cardholder data (such as customer relationship managers or CRMs).

The merchant’s acquirer must register these service providers with Mastercard.

Regulations Pertaining to Payment Processing

Merchants and acquirers must comply with regulations during the trial period and beyond.

Rule 6: Trial Start Date

Rule 7: Initial Payment Processing

a.  After the trial period ends, but before the card is charged, the merchant must reach out to the cardholder and share relevant information, including:

  • The amount the card will be charged
  • The date the card will be charged
  • The date the merchant will attempt to charge the card a second time if the account had insufficient funds when the first attempt was made (if applicable)
  • The merchant’s name as it will appear on the cardholder’s statement
  • Subscription cancellation instructions

b.  The merchant must obtain the cardholder’s explicit consent for the transaction amount before initiating the authorization request.

Rule 8: Subsequent Payment Processing

The initial transaction and all subsequent transactions must be processed with the same information.

The merchant ID (or MID) entered in DE 42 and the merchant name in DE 43, subfield 1 must match.

Rule 9: Unsuccessful Authorization Attempts

If an authorization attempt is unsuccessful, the merchant must send the cardholder a receipt and explain why authorization was declined.

Rule 10: Verification of Multiple Purchases

Acquirers must carefully monitor authorization messages. They need to be on the lookout for situations where a single cardholder account number is used to process transactions on multiple different merchant accounts.

If this repeat activity is noticed over a 60-day period, the acquirer must reach out to the merchants to verify the sales were bonafide transactions.

Documentation the merchant might provide to verify the transactions could include a copy of the cardholder’s receipt.

Acquirers must retain this information for at least a year and share it with Mastercard if requested.

Regulations Pertaining to Subscription Cancellation

Cancellation policies will have a significant impact on the future sales structure.

Rule 11: Disclosure of Cancellation Policy

All eCommerce merchants must list their cancellation policy on the website where the cardholder shopped. The policy must be easily accessible with a direct link.

Rule 12: Continued Reference to the Cancellation Policy

Each time the merchant submits an authorization request for a subsequent recurring transaction, a receipt must be sent to the cardholder via email or text message. The receipt needs to include instructions on how to cancel the subscription or negative option billing plan.

Rule 13: Cancellation Confirmation

The merchant must send a written confirmation to the cardholder when the negative option billing plan has been cancelled.

Monitor the New Mastercard Rule Updates Carefully

Mastercard’s new regulations will bring massive changes for negative option merchants and their acquirers—especially those in the nutra industry. To avoid fees and penalties, updates should be started now to ensure on-time compliance.


Mastercard created these new policies because the card network receives a significant amount of complaints about deceptive merchant practices. These regulations are meant to encourage merchants to communicate openly and honestly with their customers in order to reduce complaints and provide a better customer experience.

Midigator will continue to monitor the situation and share new information as it becomes available. We encourage you to bookmark this page and check back often.

Also, follow Midigator on social media to be notified of changes. You can find us on LinkedIn and Facebook. Or, sign up for our newsletter here and receive tips to make the transition easier and less risky.

Midigator aims to simplify complexities for the entire payment ecosystem. If you have questions about these new Mastercard rules or want help making necessary changes, don’t hesitate to contact our team of payment experts.

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