New Visa Rules for Up-Sells & Subscriptions with Free Trials or Introductory Offers

  • Max Jones
  • July 11, 2019
  • 5 minutes

Visa® has launched an initiative to improve transparency and streamline processes for subscriptions that include a free trial or introductory offer. New rules also regulate how merchants up-sell additional products or services. 

The initiative draws attention to existing regulations that need better compliance as well as introduces new and improved policies. 

Find out what is expected and how to comply with these new Visa rules. 

Note: It is expected that Visa will release a merchant-specific publication regarding these changes at the end of July 2019. The new policies and rule updates referenced in this article may be amended by Visa at any time. We suggest you bookmark this page and check back often.

Who will be impacted?

Policies will impact all merchants who turn a free trial or introductory offer into a recurring billing model. Policy updates also regulate up-sells and negative option billing. The new rules apply to the sale of physical goods, digital goods, and services.

When will the updates take effect?

New Visa rules will go into effect on April 18, 2020.

Why do rules need to change?

Visa has identified several issues that typically result from free trials, introductory offers, up-sells, and negative option billing. The network anticipates that updated regulations will minimize issues and create benefits for everyone involved, including: 

  • Improved transparency about what is being offered will lead to greater customer satisfaction. 
  • Streamlined and simplified cancellation processes will reduce the number of customer service issues. 
  • Designated reason codes will improve the accuracy of disputes and the resulting data analysis. 
  • Enhanced dispute response opportunities will help compliant merchants recover lost revenue.

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A Complete Overview of Visa Rules: Existing, Updated, and New Policies

Visa’s rules for free trials, introductory offers, up-sells, and negative option billing first went into effect in 2011. Since then, the card network has identified ways to enhance or complement existing policies. 

As of April 18, 2020, merchants are expected to fully comply with all of the following rules.

Simple Cancellation Policies

Merchants must create clear, easy-to-understand policies and make it simple for customers to cancel their subscriptions. 

The cancellation process must include a digital, self-service option. For example, a customer should be able to fill out an online cancellation form or send a text message to the merchant. new

Visa’s goal is to make it as easy to cancel subscriptions as it is to unsubscribe from emails. 

Disclosure and Expressed Consent

Before finalizing the initial transaction (or trial period), the customer must acknowledge the subsequent subscription and consent to recurring payments via a “click to accept” button. If an up-sell is involved, the customer must consent to this additional purchase.

As part of the consent process, merchants must disclose the following information:

  • Merchant’s name
  • Description of the goods or services being offered
  • Length of the trial period or introductory offer
  • Clear disclosure that the customer will be charged unless subsequent transactions are cancelled
  • Date the trial begins or the initial transaction date (if applicable)
  • Initial transaction amount (if applicable)
  • Date and amount of subsequent transactions
  • Cancellation policy
  • Last four digits of the card being used for the subscription new
  • Instructions on how to cancel the subscriptions new

If recurring transactions are processed from stored account information, the following must also be disclosed and agreed to: 

  • How the merchant will notify the customer of any changes to the subscription
  • How the customer’s stored account information will be used
  • The subscription’s expiration date (if applicable)
  • Transaction currency
  • Merchant’s location

This disclosure needs to be separate from the general terms and conditions notification. 

If the transaction includes an up-sell item, the name of the up-selling merchant must also be clearly listed in a way that differentiates it from the original merchant.

Transaction Receipt or Written Confirmationnew

Immediately after consent has been granted, the merchant must send a transaction receipt (if applicable) or some other form of written confirmation—even if the card hasn’t been charged yet. This needs to be sent in electronic format, either via email or text message.

The receipt needs to contain the following information:

  • Confirmation that the customer has agreed to the up-sell, free trial, or introductory offer and the subsequent subscription
  • Merchant’s name
  • Description of the goods or services being offered
  • Length of the trial period or introductory offer
  • Clear disclosure that the customer will be charged unless subsequent transactions are cancelled
  • Date the trial begins or the initial transaction date (if applicable)
  • Initial transaction amount (if applicable)
  • Date and amount of subsequent transactions
  • Last four digits of the card being used for the subscription 
  • Cancellation policy
  • Instructions on how to cancel the subscriptions
  • Name of the up-selling merchant clearly listed in a way that differentiates it from the original merchant (if applicable)
Subsequent Notificationsnew

In addition to the transaction receipt, there are two other types of customer notifications that merchants must send.

  1. Before the trial period or introductory offer has ended, the merchant must remind the customer of the upcoming transaction.
  2. The merchant must also notify the customer if the subscription terms have changed. Examples of situations that would warrant a notification include, but are not limited to, a price change or an alteration to the billing period.

Notifications must be sent via email or text and should be delivered at least seven days before a transaction is processed. All communications should also include instructions on how to cancel the subscription.

Billing Descriptor

The recurring payment indicator must be added to the first transaction processed, even if the amount is discounted as part of the trial or introductory offer.  updated

Also, the first transaction processed after the trial period has ended needs a unique billing descriptor. The merchant name must be updated to include a phrase such as “trial”, “trial period”, or “free trial” to help distinguish the transaction on the customer’s statement, online banking, mobile app, text alert, etc. new

Disputesnew

If a transaction is disputed because the customer wasn’t aware of or didn’t agree to a subscription after the trial period, the issuer must use reason code 13.5 – Misrepresentation

Issuers should only use reason code 13.2 – Cancelled Recurring Transaction if the merchant was instructed to cancel a subscription but didn’t.

Dispute Responsesnew

Merchants can respond if they’ve complied with Visa’s new rules and a 13.5 dispute is invalid. 

Compelling evidence must include both of the following:

  • Proof that the cardholder agreed to future transactions
  • Proof the merchant reminded the customer of the first post-trial transaction at least seven days in advance

Compliance: How Visa Plans to Monitor and Enforce Rules

Visa’s latest announcement has several new regulations. However, the initiative seems to focus primarily on increasing awareness of existing policies and demanding greater compliance. 

Visa states that “ongoing monitoring and enforcement are key” to the initiative’s success. At this point, it is unknown how noncompliance will be addressed, but the network promises to “undertake proactive monitoring and mystery shopping.”

Merchants are encouraged to start making updates early to ensure on-time compliance with Visa’s implementation timeline.

It’s important to note that “compliance” is subjective. Rather than do the bare minimum in an attempt to fulfill requirements, merchants should instead aim to align with Visa’s primary objectives.

The goal is for merchants to communicate openly, honestly, and transparently to provide a better customer experience. If merchants make that their top priority, they should have no problems adhering to Visa’s new rules.

Stay Updated as New Visa Policies Take Effect

Midigator® will 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.

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

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