Burned by free trials? Mastercard has your back
It’s a familiar story: you sign up for a month-long free trial, decide a service isn’t for you, forget to cancel it, and just like that you have a direct debit going out of your account every month. Depending on which company we’re talking about and how they bill, that could result (for example) in getting stung for hundreds of pounds for an annual membership. Fear not – these stories are about to become much rarer, as cashless transaction giant Mastercard is about to start protecting consumers from deals like this.
Last Wednesday, Mastercard announced a new policy that will force merchants to explicitly gain cardholder approval before they start billing at the end of a free trial. For now, this just applies to physical subscriptions (such as clothes or book clubs).
In a direct sense, merchants will have to email or text the customer in question with the transaction amount and date, giving them a last chance to cancel it. Then, they’ll have to do the same thing before each payment is taken on the contract.
Mastercard reiterated its position that “free trial offers can be a legitimate and useful way to increase sales and improve consumer satisfaction,” but added that consumers were often taken aback when payments began, and said their new policy would “increase transparency and ensure an outstanding experience for cardholders.”
Ted Rossman, an industry analyst at CreditCards.com, praised Mastercard for the policy, saying “it’s definitely a big problem”. According to a 2017 poll of more than 1,000 US adults, 35% had been enrolled in an automatic payments scheme without realising it. Of that 35%, 89% had opted to turn it off, and 42% had found it “difficult” to do so.
Rossman noted that about half (51%) of these cancellations managed to receive a refund. Speaking to CNBC, he said: “I suspect the business reason is they're sick of issuing all those refunds. They don't want the business cost and time to reverse all these transactions that people are upset about.”
Dominion holds Mastercard in its Global Trends Ecommerce Fund.
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