During the last week of December, at the urging of Senator Jay Rockefeller of West Virgina, Mastercard went on a mission to eliminate negative option continuity as a viable marketing model. 1000s of companies were shut down, acquirers were fined to the tune of millions of dollars, and many people lost their jobs. Many companies were willing to change their models to become compliant but were not given an opportunity. Their accounts were terminated and they were added to the Terminated Merchant File with no recourse effectively making it impossible for them to get new merchant accounts with their new compliant offers.
At InChek, this crackdown hit close to home. Many of our clients were affected and we saw good people with families lose jobs on which they were reliant for income. In a time when the economy is struggling and the unemployment rate is very high, one must wonder what the motivations were behind those in charge of this crackdown. While I certainly do agree that the internet marketing needed to be cleaned up, I believe a compliance period in which merchants were given an opportunity to change their offers would have been far more ethical and effective than instant terminations with huge fines.
At any rate, we are committed to seeing our clients grow and prosper in the new landscape. To that end, we have developed a 48 point compliance checklist that combines all known MC, Visa, and FTC regulations related to internet marketing. Our clients’ sites are carefully inspected prior to approval.
The irony is that only certain industries were targeted. I pay a monthly recurring membership fee for my fax service that could be classified as negative renewal option because I will continue to be billed until I cancel. I warn my clients who operate within industries that have not been targeted to bring their offers into compliance.
Here are a few starting points:
- Affirmative Agreement: Put a checkbox on your site that requires your customers to affirmatively agree to the terms of your offer.
- CLEAR Terms: While your terms should be clearly spelled out in a separate link “Terms and Conditions,” you must clearly display the renewal terms in at least a 12 point font next to the checkbox. This statement should begin with “I agree..”
- Free Trials: Your trial period cannot imply that your customer is receiving something for free if it is not truly free. Free means there are no strings attached and specifically that you will not bill their card for any amount of money.
- Data Sharing: Don’t do it, ever.
- Options: Give your customer options. For example offer a one off sale, a prepaid sale, and a fixed period continuity offer. Once you know how long your tail usually lasts, why not cut the billing there since many of those transactions will result in chargebacks anyway?
- Be Available: Make sure your descriptors are clear and include a customer service number that is answered by an in house or outsourced professional call center group.
This crackdown is global so going offshore without coming into compliance with mastercard standards is not the solution that many think it is. Run a clean offer, sell a high quality product, don’t be deceptive, and market properly and you will have a model fit for long term success.
We offer our compliance review to any business who wants to make sure they are in compliance with all FTC, Visa, and Mastercard regulations.