Card providers crack down on ‘free trial’ subscription traps

Mastercard follows Visa in forcing companies to warn you before free trials turn into costly recurring payments.

Many of us have signed up to free or heavily-discounted offers, forgotten to cancel and been locked into long and sometimes expensive contracts.

Now Mastercard has announced that new rules will require merchants to get your approval at the end of a free trial, before they start billing you.

“To help cardholders with that decision, merchants will be required to send the cardholder – either by email or text – the transaction amount, payment date, merchant name along with explicit instructions on how to cancel a trial," Mastercard has said.

Merchants will also have to send you a receipt for each payment thereafter and provide clearer information on your bank statement and information on how to cancel.

Mastercard isn’t the first card provider to crack down on recurring payments.

Visa told loveMONEY that, since 2015, merchants have had to provide notification to the cardholder seven working days before a free trial comes to an end, including information on how to cancel, although, anecdotally, it's not clear if all cardholders receive these warnings.

The difference is that Mastercard’s rules mean you have to ‘opt in’ to a subscription, whereas Visa required you to opt-out.

It's not yet clear how Mastercard will enforce their new rules, when they’ll come into force and what products will be covered.

The company has already stated that the rule change is only applicable "to physical products such as skincare, healthcare items etc”, so don't cover online subscriptions, although Visa's rules do apply to digital products.

loveMONEY has chased up Mastercard for more information and will update this story when we get it.

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The problem with free trials

As many as two million people in the UK struggle to cancel subscription services, according to Citizens Advice.

Whilst many larger companies like Amazon and Spotify offer free trials, less scrupulous operators have used the method to rip-off consumers.

Consumers would be offered a free trial, often of health or beauty product, usually online. Hidden in the terms and conditions would be a Continuous Payment Authority.

Not to be confused with direct debits, which have strict rules around them, CPAs essentially allow a trader to take as much money from your bank account whenever they want to.

A Citizens Advice report in 2017 found the average victim of such scams lost £141, with banks receiving hundreds of calls a day.

The Government promised to crack down on these scams in 2017, requiring advertisers to more clearly display the terms and conditions attached to free trials.

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What you can do

Even when Mastercard’s rules come into force, it’s worth staying alert to potential subscription traps.

Look out for offers that look too good to be true, have complicated contracts, or where the terms and conditions boxes are pre-ticked. Also check your bank statement regularly for unexpected payments.

If you do find an unexpected payment, go straight to your bank.

Under the Payment Services Regulations 2009, banks MUST stop reoccurring payments if you ask them, and they may be liable for subsequent payments if they don’t.

You may be able to get a refund under Section 75 rules if you paid with a credit card and it cost over £100.

If you paid on a debit card, or the cost was under £100, you may be able to get a refund with Chargeback, but you’ll need to inform your bank or card provider within 120 days.

In both cases, you’ll have to prove you didn’t receive what you paid for – simply forgetting to cancel a subscription won’t be enough.

And finally, if you've been paying for a subscription you haven't used for years, don't simply assume the money is lost. Read how loveMONEY's Felicity fought back and got 50% of her costs reimbursed.

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