Businesses offering ‘free’ trials will be required to get customer consent before starting to charge them for regular subscriptions, under new regulations to be implemented by Mastercard in April.
Many companies attract new customers by offering free trials of a product for a few weeks, then transitioning customers to a regular subscription plan.
Merchants gain permission to charge for the subscription when the customer signs up, but many customers are surprised at the costs or don’t know how to unsubscribe.
The new regulations, which Mastercard chief franchise officer Paul Petta outlined in a recent blog, will require merchants to get approval from customers before they transition from a free trial to a paid subscription.
Merchants will be required to email or text the cardholder clear details of the charges that will go on their card, as well as providing instructions about how to cancel the service.
They will also have to send a payment confirmation each time another payment is made, and must make sure their Web site or phone number appears on the customer’s credit card statement.
“Free trial offers 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.”
Social media a growing source of problems
Seemingly legitimate free-trial offers have become a source of regular complaints as consumers become embroiled in ‘free’ offers that flood them with physical products.
The new policies don’t (yet) apply to purchases of digital products – which have created their own issues for many customers – with a Mastercard spokesperson telling Information Age that trials involving physical products had caused the most customer complaints.
Long-standing warnings have been regularly issued for years and reports of celebrity-endorsement scams, for example, increased 400 percent during 2018, with the Australian Consumer and Competition Commission (ACCC) reporting losses totalling over $142,000 through September 2018.
A recent report from US business group the Better Business Bureau warned of subscription traps, deceptive free trials, misleading ads, and fake celebrity endorsements that had “infested the internet and social media”.
The US Federal Trade Commission (FTC) recently published explicit guidelines to help consumers understand the risks of the offers they are interested in.
“If you see charges you didn’t agree to, contact the company directly to sort out the situation,” the FTC advised, suggesting that charges be disputed with credit card companies if the merchant doesn’t resolve the issue.
“Ask the company to reverse the charge,” the agency recommended, “because you didn’t actively order the additional merchandise.”
Would you like to see these protections extended to digital products? We’d love to hear your thoughts below.