Upcoming Rule Changes for Subscription Trial Merchants, April 2020

Effective April 18, 2020, Visa is introducing enhancements to existing rules for subscription merchants of free trials and introductory offers, also known as negative option billing.
Visa’s stated objective is to streamline processes for subscriptions that feature a free trial or introductory offer, to improve transparency on billing terms and support easier cancellation for customers. Trial and introductory offers frequently roll into lengthy subscriptions or recurring charges and can lead to billing conflicts for customers and merchants, often leading to disputes. The forthcoming rule changes are designed to provide issuers with greater clarity in identifying transactions, which can bring more specificity to managing and preventing disputes.
For information on Mastercard’s recent policy updates on negative option billing, read our article here.


The changes apply to all merchants, whether selling physical goods or digital goods and services, which offer free trials or introductory offers that roll into subscription/recurring agreements. Below is a summary of Visa’s new policies and simple steps to take that we recommend being implemented them in your procedures:
Express Consent and Enhanced Notification
As the current rule stands, merchants are required to get consent from customers to enter a subscription agreement with recurring payments at the time of enrollment. Now, merchants are required to send an electronic copy of the agreement to the customer, via email or text message, even if no payment is due at that time.
The message must include:

  • Confirmation that the customer is entering a subscription agreement, unless the customer decides to cancel
  • Start date of the subscription
  • Details of the goods/services
  • The recurring transaction amount, billing frequency, and payment date
  • A link or other simple method the customer can use to easily cancel the subscription

Prior to the beginning of the recurring payments cycle, merchants are required to send a reminder notice with a link to a simple cancellation method at least seven (7) days before initiating the transaction, detailing:

  • When the trial, introductory offer, or promotional period is coming to an end
  • Information relating to whether the substance of the subscription agreement has changed – such as payment amount or billing period

Although Visa has not expressly provided rules for merchants with a trial period of less than seven (7) days, Verifi recommends merchants send a reminder notice as soon as possible before initiating the recurring transaction.
Transaction Receipt or Written Confirmation
After consent has been confirmed by the customer, the merchant must immediately send a transaction receipt or a written confirmation in electronic form (email or text message), even if the card hasn’t been charged yet.
The receipt must include:

  • Length of the trial period, introductory offer, or promotional period
  • Clear disclosure that the customer will be charged unless subsequent transactions are cancelled
  • Transaction amount and date of initial transaction (even if no amount is due)
  • Amount and date of subsequent transactions
  • A link and simple instructions on how to cancel any subsequent transactions online via text message

Simple Cancellation
Merchants must provide clear, easy-to-understand instructions for customers on how they can cancel their subscription or payment online. Verifi suggests for best practices that the customer should be able to cancel the subscription similar to the ease of “unsubscribing” from an email list.
Billing Statement Descriptors
The first transaction processed after the trial period has ended must include a unique billing descriptor in the Merchant Name field indicating the transaction is an initial purchase. The description – such as Trial, Trial Period, or Free Trial – will be included in the transaction descriptor on the customer’s billing statement, online banking, mobile app, text alerts, etc.
It is up to the merchant to work with their acquirer to accommodate deployment of this descriptor for customer billing.
Additional steps may be required for subsequent transactions, including use of descriptors, which Visa may provide in the future. Verifi will provide updates as they become available.
Disputes and Dispute Responses
If a transaction is disputed because the customer claims they were not aware of or did not agree to a subscription after the trial period, the merchant may receive a chargeback for the expanded reason code 13.5 – Misrepresentation. This reason code applies specifically when a customer claims they never gave permission to enter a subscription/recurring payment agreement with the merchant.
The dispute may result in further chargebacks for subsequent transactions in the subscription. Merchants can successfully represent chargebacks if they provide sufficient compelling evidence, proving they are in compliance with Visa’s new rules.
Compelling evidence should include both of the following:

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

The existing reason code of 13.2 – Cancelled Recurring Transaction, will continue to apply when the customer has expressly withdrawn their permission to be charged for recurring payments, or if the merchant was advised that the customer’s card account was closed.

How Visa Will Monitor and Enforce Compliance

After Visa’s new policies go into effect on April 18, 2020, Visa plans to monitor and conduct mystery shopping activities to ensure the initiative’s success. We encourage you to make any appropriate updates to your systems and procedures, along with determining you are in alignment with your acquirer’s procedures, to ensure compliance before Visa’s implementation timeline.
In addition, Visa will be implementing new rules to regulate how all merchants upsell additional products or services. Visa has indicated these rules will be updated with further customer disclosure and consent requirements, possibly by October 2019.
Verifi will continue to share updates on Visa’s rule changes for subscription merchants, as new information and further clarifications are made available.

Be Prepared

Overall, proactive communication with your customers, featuring relevant transaction and subscription confirmation and consent points detailed in this article, will help you maximize profits and reduce disputes. Verifi’s payments protection solutions can further extend value by mitigating disputes and improving customer experience.
Verifi’s global collaboration network, Order Insight®, enables merchants to provide enhanced billing descriptors directly to customers, which can be delivered via issuer-hosted banking portal or mobile app. With customer access to this order information in near real-time, not only can you ensure compliance with Visa’s new requirements, but this increased transparency can help reduce disputes and chargebacks. In addition, the dispute case information directed through Verifi’s CDRN® solution enables merchants to resolve disputes and eliminate a chargeback, and it can also be used to cancel recurring transactions to prevent future chargebacks.
If you have any questions or need further guidance to prepare for compliance with Visa’s new rules, please reach out to your relationship manager.