Thank you to National Council of Nonprofits for sharing this important update:
Last Friday, we met with executives from Mastercard to follow up on our earlier communications with the company about the new Transaction Processing Rules (TPR) requirements. At that meeting, Mastercard’s executives informed us they would be announcing a new, nonprofit-specific policy this week, and they confirmed that the notices went to connected financial institutions this morning.
Mastercard told us Friday that it developed the new rules to reduce chargebacks and other kinds of “friction” between cardholders and merchants; however, it turns out that the vast majority of nonprofits don’t have a chargeback problem. Therefore, in response to concerns shared with Mastercard by many nonprofit groups and different nonprofits around the globe, the new requirements will become optional, recommended practices for nonprofits except in specific circumstances. Instead of imposing new requirements on nonprofits as of the previously announced implementation date of March 22, 2023, the new standards are now optional recommendations for nonprofits, effective immediately.
Below, we’ve posted our best understanding of the new recommended practices. These practices will become mandatory requirements only for nonprofits that have “excessive” consumer complaints or chargebacks for four consecutive months.
If a nonprofit is flagged for having excessive complaints or chargebacks, Mastercard will work with the organization to adjust the practices that are causing the problems, which most often result from a lack of clarity or sometimes outright deceptive tactics.
The best way to prevent friction and disputes with cardholders is to be up-front and transparent with donors (or others who might set up a recurring transaction with your nonprofit, such as subscribers or members) about what they are signing up for and how to cancel recurring transactions. In this article, we’ll use the term “recurring donations” to cover all recurring payments to nonprofits, including not just donations but also subscriptions, membership dues, and any other transactions.
We’re posting our best understanding of the new rules here today, and we’ll update this piece to keep our readers informed as things evolve. We encourage readers to speak with their Constituent Relationship Management (CRM) system or donation app representative / merchant account provider to confirm the requirements.
Summary of the new recommended procedures for recurring donations
Nonprofits should be clear about the terms of the recurring donation at the outset, send initial and electronic receipts every time a charge is made with instructions on how to cancel the recurring donation online, post clear online instructions on how to cancel such donations, and provide advance notice of a scheduled recurring donation if the frequency is less often than every six months.
While these procedures may sound daunting on the technical side, many nonprofits may already have suitable systems in place to be transparent and communicative with donors. Nonprofits should consider implementing these procedures even if the processing is done through a Constituent Relationship Management platform (CRM) or app.
Summary of the five main requirements
There are five main requirements that will affect recurring donations to nonprofits, as we understand them currently. Note: in this summary, we’ll use the terms “Nonprofit” and “Donor,” instead of Mastercard’s “Merchant” and “Cardholder,” to make these rules easier to understand and apply.
Again, these will no longer be requirements for nonprofits, but are still recommended as best practices by Mastercard, and as wise donor stewardship by the National Council of Nonprofits.
- The nonprofit should clearly and prominently display the terms of the recurring donation (amount and frequency) on any screen where the donor enters their credit card information, including an order confirmation/checkout screen. Donors should be allowed to “affirmatively accept” the subscription terms (as opposed to being forced to opt out, for example).
- Immediately after the donor signs up for recurring donations, the nonprofit should promptly send an electronic confirmation message to the donor (email or text) that restates the terms and provides clear instructions on how to cancel the recurring donation.
- Each time a recurring donation is charged, the nonprofit should send an electronic receipt to the donor (email or text) that includes clear instructions on how to cancel the recurring donation. Donors should be able to opt out of receiving these notices.
- The nonprofit should provide an online cancellation method or clear instructions on how to cancel that are easily accessible online, such as a “Manage Recurring Donation” or “Cancel Recurring Donation” link on the home page. This link may go to an email address for the person responsible for cancelling recurring transactions.
- For donations that automatically recur less often than every six months (for example, an annual donation), the nonprofit should send an electronic reminder to the donor at least seven days, but no more than 30 days, in advance of the next billing date, including the donation terms and clear instructions on how to cancel the donation. The communication should clearly state in the subject line that it relates to upcoming charges to the donor, and the message should be distinct from any marketing communications.
For more specific information about the requirements listed above, you can find Mastercard’s actual language in the TPR at pages 185-186, Sections 5.4.1 (1)-(5).