MasterCard Compliance Regulations
for
Subscription Models
https://www.slideshare.net/ChrisArmstrong99/presentations

Why me?
• Registered agent of Cardservice International in 2001
• My first subscription business was start in 2004
• $25 CPA & there was no such thing as step 2!
• Over $40 million in revenue generated for managed
clients in 2018
• Deployed campaigns in over 22 countries using 13
currencies
• Largest single day for customers acquired as an offer
owner…17,000 Acai trials
• Offers we’ve created - Diet, skin, muscle, business
education, website builder, fitness, merchant account
agent offer, talent agency site…

Why MasterCard has taken action:
• Card brand protection
• Enforcement to eliminate load balancing (circumvention of risk monitoring)
• Enforcement to eliminated transaction laundering
• Regulatory agency action exposing who is supporting these models
• Abnormal CB rates and fraud rates
– Reasons include:
• Lack of billing disclosures
• Traffic quality and presell tactics
• Billing practices
• Vendor failures
• Financial constraints driving poor business decisions
• Comparison of purchase experiences vs Amazon

In that time we’ve seen major regulation
in the direct response industry :
• 2003 – DNC Act
• 2003 – CAN SPAM act
• 2007 - FTC negative option conference
• Conference notes: http://tiny.cc/jcdz2y
• 2009 - Industry wide closures of Nutra MIDs
• 2013/14 - Mass closures of USMS,VPS and Powerpay
MIDS after EVO acquires Powerpay
• 2018 – Mass MATCH listings with Priority Payments
and Paysafe

2007 - FTC negative option conference
highlights
• 1) Marketers should disclose the material terms of the offer in an understandable manner. The material terms of
negative option offers include: the existence of the offer; the offer’s total cost; the transfer of a consumer’s billing
information to a third party (if applicable); and how to cancel the offer. Marketers should avoid making disclosures that
are vague, unnecessarily long, or contain contradictory language.
• 2) Marketers should make the appearance of disclosures clear and conspicuous. To make online negative option
disclosures clear and conspicuous marketers should place them in locations on webpages where they are likely to be
seen, label the disclosures (and any links to them) to indicate the importance and relevance of the information, and use
text that is easy to read on the screen.
• 3) Marketers should disclose the offer’s material terms before consumers pay or incur a financial obligation. Marketers
should disclose an offer’s material terms before consumers agree to purchase the item. Consumers often agree to an
offer by clicking a “submit” button; therefore, disclosures should appear before consumers click that button.
• 4) Marketers should obtain consumers’ affirmative consent to the offer. Marketers should require that consumers take
an affirmative step to demonstrate consent to an online negative option offer. Marketers should not rely on a prechecked
box as evidence of consent.
• 5) Marketers should not impede the effective operation of promised cancellation procedures. Marketers should employ
cancellation procedures that allow consumers to effectively cancel negative option plans. Marketers should not engage in
practices that make cancellation burdensome for consumers, such as requiring consumers to wait on hold for
unreasonably long periods of time.
Some light reading:
• https://www.ftc.gov/news-events/press-releases/2018/07/ftc-halts-online-marketers-responsible-deceptive-free-trial
• https://www.ftc.gov/news-events/press-releases/2016/09/ftc-action-nutraclick-must-change-billing-practices
• https://www.ftc.gov/news-events/press-releases/2019/02/ftc-returns-more-6-million-consumers-who-bought-
deceptively
• https://www.ftc.gov/news-events/press-releases/2017/08/ftc-charges-online-marketing-scheme-deceiving-shoppers

We had a 12 year heads up but we didn’t listen…
Why?
Because we as an industry suck at saying no!

MasterCard
• Summary:
– https://midigator.com/blog/new-mastercard-rules-for-negative-option-billing-merchants/
MRP Registration Required MRP Registration Not Required
Physical Product Trial Service Product Trial
Digital Product Trial
Product/Service/Digital Continuity
• Interpretation of trial and continuity does vary by acquirer. For specifics on each acquirer, speak with Brian Randolph

• Important MRP Notes
– Trial starts when product is received.
– Initial purchase requirements:
• Purchased details must go out to before billing including
– The amount the card will be charged
– The date the card will be charged
– The date the merchant will attempt to charge the card a second time
if the account had insufficient funds when the first attempt was
made (if applicable)
– The merchant’s name as it will appear on the cardholder’s statement
– Subscription cancellation instructions
• The merchant must obtain the cardholder’s explicit consent for the
transaction amount before initiating the authorization request.
– Cancellation requirements
• Cancellation at the point of sale
• Ongoing cancellation policy
• Cancellation confirmations

• Additional notes:
– Visa is expected to follow suit. Source – Mark Stanfield: Midigator
– MasterCard says that it could modify the 5968 if digital and services
quack like a duck – Chad Anselmo: Healthy MIDs
– PAN analysis for load balancing will be done at the acquirer level but
could also be done at the MC level
– Explicit consent requirements are varying by acquirer
– How legacy billings on 5968 will vary by acquirer post April 12th

Explicit consent options:
• Email
– 20% open rate?
– 10% click rate?
– 30% take action?
– Likely consent = poop
• SMS
– 98% delivery w/ short code
– 70% delivery w/ long code

So what are my options
after April 12th?

Traffic Load Balancing
& Brand Management

Traffic Load Balance

Alternative to trials for step 2 & 3:
• Continuity (no trial) take rates for 500 orders
recently:
– Step 2
• $29.95/month
• Take Rate: 65%
• Refund rate: 16.7%
• Revenue/Cust: $49
– Step 3
• $29.95/month
• Take Rate: 47%
• Refund rate: 18.7%
• Revenue/Cust: $45

Hybrid Pages

Alternative presell:
• https://www.familyhealthformothers.com/ho
w-i-learned-that-just-a-few-drops-can-
alleviate-pain-for-my-entire-family/

Alternative offers:
• Lander:
– https://offer.purityhealthoils.com/os-pain-relief/
• Checkout:
– https://offer.purityhealthoils.com/os-pain-relief

Lander:

Lander:

What is the conversion on this page?

Leverage the partial and buyer data
into branded ecom - www.realoil.com

Buy your own media!

Example Ad

Resources to get you started:
• Training courses:
– http://certifications.digitalmarketer.com/
• Podcast:
– Perpetual Traffic
• Conference:
– Traffic & Conversions

Reduce cost and reduce consumer’s
cost burden!
• One strategy we use is remarketing the $#!*
out the data to reduce your CPA

Remarketing strategy example:

Final thoughts:
• Learn compliance and regulations
• Partner with groups that have sustainable strategies
• Go talk with your media partners now about trial
compliance and strategize now on post-April 12
marketing strategies
• Invest time and money in strategies that provide value
and provide proper disclosure
• Share white hat strategies with groups that have a long
term vision for ecommerce marketing

https://www.slideshare.net/ChrisArmstrong99/presentations