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Mastercard issues new regulations defining donations as subscriptions

Written on Sep 1, 2022

Under a new rule, Mastercard has classified monthly recurring donations as “subscription services” and will force fundraisers to alert sustaining donors every month of their cancellation option. 

The rule goes into effect St. 22. 

According to Mastercard’s current FAQs on the issue: 

Q: “If a customer is donating to a charity on a recurring basis, is this considered a subscription?” 

A: “Yes, this would be considered a subscription service.” 

To gain an exemption or clarification that the new rule doesn’t apply to nonprofits — despite the explicit language in the FAQs — The Nonprofit Alliance (TNPA) is collecting member signatures on a letter and has an attorney set to meet with Mastercard executives. 

Mastercard’s new regulations are an attempt to cut down on credit card fraud and reduce chargebacks – disputes with consumers over monthly subscription fees or efforts to cancel services. The regulations lump nonprofit in with merchants, suppliers of streaming services and magazine, health club and other subscriptions.  

The new regulations require: 

  • A confirmation email at the time of enrollment that includes the terms of the subscription and instructions on how to cancel the subscription.  

  • An emailed receipt after every successful billing that includes instructions on how to cancel the subscription, in this case donation 

  • Provision of an online cancellation method 

  • For recurring payment plans that bill less frequently than every six months, a notification with the terms of the subscription and instructions on how to cancel the subscription (donation) must be made at least seven days prior to the billing date. 

TNPA is asking members to sign a letter it authored that seeks an exemption from the new regulations for nonprofits. TNPA’s letter to Mastercard has received about 110 signatures to date, states, in part: “We rely on donations from generous individuals to make our work possible. Recurring donations are a crucial part of that support. Required compliance with Mastercard’s new recurring transaction regulations would create an undeserved operational and financial impact on our work.” 

It continues: “We understand Mastercard’s intention with the new regulations is to mitigate negative practices associated with the utilization of a subscription billing model and/or a negative billing option. Our research across a broad swath of nonprofit organizations shows that nonprofit donations do not result in substantial chargebacks. These regulations, if applicable, could put an undue burden on nonprofits and would not move the needle on Mastercard’s goal of reducing chargebacks.”