Visa tightens merchant cancellation terms on free trials as chargebacks rise during coronavirus lockdowns

Visa is requiring merchants to be clearer about cancellation options for free trials and subscriptions, as chargebacks related to coronavirus soar.

In a recent blog post, Visa said merchants selling new digital or physical goods subscriptions like streaming services, meal kits and beauty or clothing boxes must immediately provide customers with the terms of agreement by email or text.

Visa merchants also must warn consumers at least a week before they’re automatically charged for the service when the free trial ends, and must provide clear instructions on how to cancel the free trial.

Visa planned the new policy last year and it went into effect April 18, but the timing was propitious, as millions of home-bound consumers have increased their online shopping, including taking out free trials.

Bloomberg News

“This new policy will help consumers during these unprecedented times when a majority of people are sheltering in place and buying—and trying—more goods online,” said Mary Kay Bowman, Visa’s head of global buyer and seller solutions, in the blog post.

Visa’s move echoes a policy Mastercard put in place a year ago, but Visa’s policy goes further.

Mastercard’s similar policy, which went into effect in April 2019, required merchants to provide clear terms and cancellation steps for free trials of physical goods, excluding digital goods like streaming services.

Subscription-based services are a fast-rising category in e-commerce sales, but chargebacks on all types of purchases are soaring during the pandemic.

Mastercard said in response to coronarivus it’s extending merchants 90 days of free service from transaction-verification firm Ethoca to share near-real-time alerts with businesses about disputed transactions.