Recurring subscription payments
Around 10% of consumers in the EU have been lured into an unwanted subscription in the past. This is due to manipulative on-line techniques which make consumers believe that they are just agreeing to a free trial or very cheap offer, where in fact -without realising it- they are entering a subscription for which they will be periodically charged. Often, information concerning the recurrent payments is altogether omitted or buried in the small prints. The CPC Network, coordinated by the European Commission and under the lead of the Danish Consumer Ombudsman, asked Mastercard, VISA and American Express to introduce a series of changes in their rules, in order to ensure that traders provide clear information to consumers on recurrent payments before they enter into a subscription.
CPC Authorities noticed a frequent fraudulent online trap consisting of presenting products for a free trial or at a very low cost, but hiding in the small prints that taking up such an offer would lead to a subscription with recurring payments. Such schemes manipulate consumers who are asked to input their card credentials but with the information displayed referring only to the price of the first product tried or purchased and not to the amounts that will be charged regularly thereafter.
Mastercard, VISA and American Express practices were reviewed by authorities as market leaders. The examination concerned how they implement specific rules regarding authorising card transactions through their payment network. CPC Authorities found that their rules did not ensure that card transactions were correctly authorised when they included regular subsequent payments. Consequently, they raised issues of compliance with the Payment Services Directive and the Unfair Commercial Practices Directive.
Overview of the modified rules of card schemes:
In the course of this action, American Express introduced stricter rules for traders, including the obligation to send a reminder notification of the first subscription fee. Mastercard and VISA, on the other hand, went a step further by instructing in detail in which window the traders should display the information on the subscription payments, so as to avoid circumvention of the rules. More specifically they agreed - as recommended by the CPC Authorities - on the obligation of traders to always provide information on the recurring subscription fees also in the window where the consumers enter their credit card information for their first purchase or trial that leads to a subscription.
- Mastercard: Merchants must now disclose the subscription terms simultaneously with a request for card credentials. The disclosure must include:
1) The price that will be billed;
2) The frequency of the billing;
3) If relevant, terms of the trial, including any initial charges, the length of the trial period, and the price and frequency of the subsequent subscription.
- VISA: Starting in the course of 2023, merchants will need to ensure that the length of any trial period, introductory offer, or promotional period, as well as the transaction(s) amount(s) is clearly displayed on both the webpage where the card credentials is requested and entered, and on the checkout screen. The transaction(s) amount(s) to be clearly displayed include specifically the amount due at the time of purchase (even if zero), and the amount and fixed date or interval due for each recurring transaction.
- American Express: Merchants must now clearly disclose all material terms of the offer including, if applicable, the fact that Recurring Billing Charges will continue until the option is cancelled by the Card member. If this includes an introductory offer, they should send the Card member a reminder notification in writing before submitting the first Recurring Billing Charge, that allows the Card member a reasonable amount of time to cancel.
As next steps, the CPC Network will actively monitor the implementation of these commitments, and national authorities will proceed with further action should additional problems be identified.
Misinformation and disinformation related to COVID-19 reached very high level during the first stages of the pandemic. Consumers should beware of online scams related to products that allegedly can cure or prevent the COVID-19 infection. Rogue traders take advantage of consumers’ fears to advertise and sell fake or substandard products, to propose very high prices for basic goods such as protective masks or hand sanitisers and sell unauthorised food supplements that may be dangerous for people’s health.
To fight such practices, authorities adopted a CPC common position on how to deal with COVID-19 related scams and required the cooperation of major world level platforms (see here Scams related to COVID19).
Consumer protection authorities are carefully looking into the issue of frauds and scams experienced by consumers. Today, consumers are targeted by increasingly sophisticated misleading or fraudulent practices and scams, via different channels, both offline and online. Consumers can be targeted while shopping online, on social media, via telephone, text messages, e-mails or face to face through doorstep sales. This potentially has far reaching and damaging consequences for individuals and broader society alike.