A recent mandate issued by MasterCard will impact the way our mutual clients manage their recurring donations. This is what we currently understand about these changes:
The Requirements:
MasterCard has introduced "new requirements to mitigate negative practices associated with the utilization of a subscription/recurring billing model, a negative option billing model, or both."
The complete requirements are available here, with a supplemental update (and extended deadline) here.
What does this mean for nonprofit organizations?
MasterCard considers Recurring Donations to be treated the same way as Subscription services, requiring nonprofits to comply with these regulations.
Why these changes?
These changes have been introduced to help ensure a "more positive cardholder experience" and to provide fewer complaints and chargebacks related to:
- Cardholders that do not intend to enroll in a recurring donation (subscription).
- Cardholders that do not recognize a transaction related to a recurring donation (subscription) they previously agreed to.
- Cardholders that have trouble canceling their recurring donation (subscription).
Effective Dates:
The deadline for these requirements is September 22, 2022.
The Highlights:
The focus of this update is to increase transparency from merchants for recurring donations. A nonprofit organization that accepts recurring donations will now be required to:
- Provide an email message or other electronic communication that includes the subscription terms and clear instructions on how to cancel the recurring donation (subscription).
- Clearly and prominently display the recurring donation (subscription) terms on any payment and order summary web pages.
- Capture a Cardholder's affirmative acceptance of the recurring donations (subscription).
- Immediately send the Cardholder a communication via email or other electronic communication method that includes terms and instructions on how to cancel the recurring donation (subscription).
- Provide the Cardholder with a transaction receipt through email or other electronic communication after each approved authorization.
- Provide an online or electronic cancellation method or clear instructions on how to cancel that are easily accessible (Such as "Manage Recurring Donations" or "Cancel Recurring Donations").
- Send an electronic reminder at least seven days but no more than 30 days before the next billing date, where the billing frequency is less than six months, and it must also include the terms and clear instructions on how to cancel.
The last bullet has caused some confusion. To clarify:
- A recurring donation made on January 1 and July 1 of each year would need to send an electronic reminder.
- A donation that recurs on January 1, April 1, July 1, and October 1 of each year would not.
A "billing frequency of six months or less" also excludes monthly recurring donations from this requirement.
There have been inquiries about whether (recurring) donations are included in these requirements. MasterCard confirms they are included in their answer to Question 8 of the FAQs here.
Summary
iATS is working closely with MasterCard to better understand these changes and share concerns around the impact this might have on nonprofit organizations based on the nature of these transactions.
However, based on these new standards, our nonprofit clients need to be aware of and prepared to implement processes and procedures to adhere to these requirements.
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