Mastercard Rolls Out New Standards for Recurring Billing

You may have heard that Mastercard was implementing new required standards for merchants that use subscription or recurring billing, which includes recurring gifts made to nonprofit entities, churches, and church-run schools.

However, after receiving feedback from merchants, Mastercard has now made the new standards best practices—not a requirement—for nonprofit and charity merchants, as long as those entities do not have excessive chargebacks.

Understanding these new standards is crucial for any church or church-run school with a recurring giving program (also known as a sustainer donor program), including which merchants must comply with the standards, what is required, and the potential penalties for noncompliance.

For those who may wonder, these new standards do not stem from a government regulation. They are a contractual matter with Mastercard and only apply to donations that automatically recur. For example, a one-time gift made by using the “donate” button on a church or school’s website would not be considered a subscription payment.

Furthermore, there has been no indication that other payment processors plan to follow Mastercard’s lead and implement similar required standards.

On June 14, 2022, Mastercard introduced Transaction Processing Rules that include new standards, outlined in Section 5.4.1, for subscription billing.

While the Transaction Processing Rules state that these standards apply to “subscription billing in which the Cardholder has agreed for the Merchant to provide ongoing and/or periodic delivery of physical products or Digital Goods,” Mastercard later clarified that this includes recurring donations made to nonprofit and charitable organizations.

While the new standards went into effect on September 22, 2022, Mastercard extended the effective date to March 21, 2023, for nonprofit organizations.

In October, Mastercard then announced that, effective October 11, 2022, only nonprofits and charity merchants with excessive chargebacks will be required to comply with the new standards.

Under the modified requirements, all the standards described below that took effect on September 22, 2022, are recommended as a best practice for nonprofit and charity merchants with a recurring payment program.

However, the standards become a requirement if a nonprofit or charity merchant that uses a recurring payment plan is placed into Mastercard’s Acquirer Chargeback Monitoring Program (ACMP) as an Excessive Chargeback Merchant, High Excessive Chargeback Merchant, or Excessive Fraud Merchant for at least four months. (Mastercard offers a “Data Integrity Monitoring Program” module as well as an updated, downloadable rules document.)

Organizations in the ACMP for at least four months or more that do not implement the required standards may be subject to a costly Category A noncompliance assessment each month, in addition to the assessments applicable under the ACMP.

A Category A noncompliance assessment can be up to $25,000 for the first violation and increase with each subsequent violation, up to $100,000 per violation for the fourth and subsequent violations within 12 months. More information about Category A noncompliance assessments is available in Section 2.1.4 of the Mastercard Rules.

The new, recommended standards entail:

In its statement about the revised standards, Mastercard said that it changed the requirements after engaging with merchants and recognizing that “some of these requirements present unique challenges to merchants that have found other effective ways to manage their subscription and recurring payment model.”