Mastercard will soon implement new rules that require merchants to get cardholders’ permission before charging them when free trials end.
You’ve likely run into this situation. You sign up for a free trial of a product or service, such as a monthly snack-delivery program, but then decide you’re going to cancel it.
However, you forget to halt the free trial and wind up being billed for whatever you’re supposed to receive next.
Payment network Mastercard is putting a stop to this free-trial frustration for its customers.
On Jan. 16 Mastercard said it would start requiring merchants to get approval from holders of Mastercard-branded cards to get permission at the end of the free trial before any charges are processed. The new rules – a first for a payment network – will take effect later this year.
“No one wants to be unsatisfied with a product after paying for it. For some consumers, a free trial is a great way to test out a new product and get comfortable with it before making a purchasing decision. And with so many merchants offering free trials it is becoming the new norm,” Paul Petta, chief franchise officer at Mastercard, wrote in a Jan. 16 blog post. “However, sometimes a free trial can unwittingly turn into a recurring subscription that is difficult to cancel. These situations can be frustrating and costly for both consumers and their banks.”
See related: Mastercard aims to cut PVC from payment cards
How the new free-trial policy works
At the conclusion of a free trial, a merchant will be required to send the cardholder, either by email or text, these details:
- Transaction amount.
- Payment date.
- Merchant name.
- Clear instructions on how to cancel a free trial.
If a cardholder continues to pay for the product or service, the merchant must send a receipt, by email or text, to the cardholder for each subsequent transaction. Once again, the merchant must provide clear instructions on how to stop getting the product or service.
Furthermore, all charges that appear on a cardholder’s statement now must include the URL of the merchant’s website or the phone number of the location where the cardholder made the purchase, Mastercard said.
Free trials “can be a legitimate and useful way to increase sales and improve consumer satisfaction,” Petta wrote. “The new rules will help increase transparency and ensure an outstanding experience for cardholders.”
Of course, holders of Mastercard-branded cards aren’t the only ones dealing with free-trial hassles.
Half of consumers fall blindly into auto-renewals
In 2017, CreditCards.com commissioned a national telephone survey of 1,002 U.S. adults that found 48 percent had signed up for free trials that automatically renewed without their knowledge. Only 9 percent of those people kept the subscriptions after the trial period ended.
As we explained in 2017, federal laws bar companies from tricking people into paying for things they don’t want. However, many online merchants use “negative option” offers, which require consumers to cancel services or product shipments to avoid recurring charges.
“The main reason consumers get caught in these negative option offers is the material details, conditions and terms are not clearly and conspicuously shown,” Bonnie Patten, executive director of the consumer watchdog group Truth in Advertising, told us in 2017.
See related: Signatures still required on payment slips? It depends
How to avoid a free trial trap
So, what can you, the consumer, do if you have a credit or debit card – but not a Mastercard – and want to dodge the trap of a free-trial offer?
Your first line of defense is to cancel an offer before an automatic payment kicks in.
If that option isn’t available anymore and you’ve already been charged, you can contact the merchant and ask for a refund. If that doesn’t yield any results, you can dispute the payment with your credit card issuer.
In addition, if you believe you’ve been wrongly charged for a free-trial offer, you can file complaints with the Federal Trade Commission and your local Better Business Bureau (BBB).
A study released in December 2018 by BBB tallied financial losses stemming from free-trial offers of more than $1.3 billion over the past 10 years. Consumers who had notified BBB over the past three years about free-trial scams reported an average loss of $186, according to the study.
“Anytime a consumer sees the word \u2018free,’ they should immediately look for the hook the company is laying out in front to catch them,” Patten said in 2017. “\u2018Free’ rarely actually means free. Almost inevitably, if consumers are being offered a free trial, it’s so the company can get their credit card information and enroll them in one of these negative option offers.”