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Recurring Billing Requirements

TL;DR

Subscription compliance requires: (1) clear disclosure of price, frequency, and cancellation method before collecting billing info; (2) express consent capture with 3+ year retention; (3) confirmation at enrollment; (4) 7-day advance notice before trial-to-paid conversion; (5) online cancellation if signup was online; (6) annual reminders (California). FTC enforces under ROSCA even without Click-to-Cancel Rule. Violations trigger chargebacks, fines, and enforcement actions up to ~$53K per violation (as of 2025 civil penalty adjustments).

Card Network Requirements​

Visa Subscription Rules​

  • Obtain cardholder consent for recurring charges at enrollment
  • Consent must be separate, clear, and unambiguous
  • Cannot pre-check consent boxes
  • Consent must be specific to the subscription terms

Enhanced Notification at Enrollment​

Send terms and conditions even if no payment due at signup. Must include:

  • Confirmation of subscription agreement
  • Transaction amount and frequency
  • How and when subscription will be renewed
  • Clear cancellation instructions
  • Merchant contact information

Free Trial Conversion​

Send reminder at least 7 days before first paid charge. Reminder must include:

  • Amount to be charged
  • Date of charge
  • How to cancel

Cancellation Requirements​

  • Provide online cancellation if signup was online
  • Cannot require phone call or mail if not required at signup
  • Cancellation must be "simple": minimal clicks, no excessive friction
  • Confirmation of cancellation required

Transaction Identification​

  • Use proper MCC codes for subscription services
  • Include identifiable billing descriptor
  • Store credentials per Visa mandate requirements

Mastercard Subscription Rules​

Non-compliance with these rules can lead to chargebacks under reason code 4853 (Cardholder Dispute).

March 2022 Updates​

  • Confirmation email required at enrollment with all terms
  • Payment receipt after each successful billing
  • Cancellation instructions on every communication

September 2022 Updates​

  • Billing reminders required for plans with 180+ day intervals (7-30 days advance)
  • Negative option reminder before trial-to-paid conversion (7+ days)
  • Enhanced consent requirements

Cancellation​

  • Must provide mechanism matching signup channel
  • Online signup = online cancel required
  • Cannot add steps not present at enrollment

Federal Requirements​

ROSCA (Restore Online Shoppers' Confidence Act)​

ROSCA applies to all internet-based subscriptions and requires:

1. Clear and Conspicuous Disclosure​

  • All material terms disclosed before obtaining billing information
  • Not buried in terms of service or fine print
  • Includes: price, frequency, cancellation policy
  • Must be visible without scrolling past other content
  • Affirmative action required (cannot be passive acceptance)
  • Consent to specific recurring charge terms
  • Before any charge occurs
  • Consent mechanism separate from other agreements

3. Simple Cancellation Mechanism​

  • "Simple" not specifically defined but interpreted as reasonable
  • Cannot make cancellation significantly harder than signup
  • FTC enforcement provides guidance through cases

FTC Click-to-Cancel Rule (Status)​

  • Finalized October 2024
  • Vacated by 8th Circuit July 2025 on procedural grounds
  • FTC continues enforcement under ROSCA and FTC Act Section 5
  • Requirements from the rule reflect FTC's interpretation of existing law

Key Requirements (still enforced under ROSCA):

  • Cancellation as easy as signup
  • No forced interactions with representatives if not required at signup
  • Clear disclosure of material terms

Recent FTC Enforcement​

CompanyDateIssueOutcome
UberApril 2025Deceptive enrollment, difficult cancellationSettlement
Cleo AIMarch 2025Hidden subscription terms, cancellation barriersAction filed
Care.comAugust 2024Cancellation issues$8.5M settlement
AmazonOngoingDeceptive Prime enrollmentLitigation

Penalties: Up to ~$53,000 per violation under FTC Act (as of 2025 civil penalty adjustments)

State Laws​

California Automatic Renewal Law (ARL)​

California has the strictest state law for subscription billing.

July 2025 Amendments (AB 2863)​

  • Express Affirmative Consent: Must obtain for renewal terms specifically
  • Record Retention: Keep consent records 3 years or 1 year post-termination
  • Cancellation Medium: Must allow cancel in same medium as enrollment
  • Pre-enrollment Disclosure: Show cost, frequency, cancellation policy in proximity to enrollment
  • Annual Reminders: Required for subscriptions with terms of 12 months or longer
  • Price Change Notice: Advance notification required
  • One Save Rule: Limited retention offers during cancellation

Existing Requirements​

  • Clear and conspicuous disclosure of automatic renewal terms
  • Affirmative consent to the agreement
  • Acknowledgment with terms and cancellation info after signup
  • Goods/services provided without proper consent = unconditional gift (no payment owed)

Enforcement​

  • California AG and district attorneys
  • Private plaintiffs (class actions common)
  • Significant statutory damages available

New York​

  • Requires clear disclosure of autorenewal terms before signup
  • Easy cancellation mechanism required
  • Civil penalties for violations (NY General Business Law §527 et seq.)
  • AG and local government enforcement

Colorado​

  • Requires disclosure of renewal terms
  • Cancellation must be available
  • Growing enforcement activity

Other States with Auto-Renewal Laws​

Approximately 20+ states have some form of auto-renewal regulation, including:

  • District of Columbia
  • North Dakota
  • Vermont
  • Virginia
  • Illinois
  • Oregon
  • And others
State Law Complexity

State laws vary significantly and change frequently. Consult with legal counsel familiar with the specific states where you operate.

Implementation Checklist​

Pre-Enrollment​

  • Display price clearly (including post-trial price)
  • Show billing frequency (monthly, annual, etc.)
  • Explain trial period and conversion date
  • Provide cancellation instructions
  • Link to full terms of service
  • All disclosures "clear and conspicuous"
  • Disclosures in proximity to enrollment (not buried)

At Enrollment​

  • Capture express consent (checkbox, not pre-checked)
  • Separate consent for subscription vs. one-time purchase
  • Record timestamp and method of consent
  • Store consent record for 3+ years

Post-Enrollment Confirmation​

  • Send immediate confirmation email/text
  • Include all subscription terms
  • Repeat cancellation instructions
  • Provide customer service contact
  • Include transaction amount and frequency

Before Trial Conversion​

  • Send reminder 7+ days before first charge
  • Include specific charge amount
  • Include charge date
  • Include cancellation method
  • Make it easy to cancel from the reminder

Ongoing Communications​

  • Receipt after each successful charge
  • Cancellation instructions on every receipt
  • Price change notifications in advance
  • Annual reminders (California, 12+ month terms)

Cancellation Process​

  • Online cancel if online signup
  • Minimal clicks to complete
  • No forced upsells before confirmation
  • Immediate confirmation of cancellation
  • Clear effective date of cancellation
  • No penalties for cancellation (unless disclosed)

Chargeback Prevention for Subscriptions​

Common Subscription Chargeback Reasons​

ReasonRoot Cause
"I forgot about this subscription"Poor communication, no reminders
"Trial converted without my knowledge"Insufficient trial conversion notice
"I couldn't figure out how to cancel"Difficult cancellation process
"I don't recognize this charge"Unclear billing descriptor

Prevention Strategies​

Clear Billing Descriptors:

  • Include company name and subscription indication
  • Example: "ACME*MONTHLY SUB" not "PYMNT SVC 12345"

Pre-Charge Reminders:

  • 7+ days before trial conversion
  • Before annual renewals
  • When price changes

Easy Online Cancellation:

  • Self-service portal
  • Minimal clicks
  • Immediate confirmation

Proactive Customer Outreach:

  • Failed payment notifications
  • Usage reminders for unused subscriptions
  • Win-back offers before cancellation

Prevention Tools:

  • Ethoca and Verifi alerts
  • Order Insight / Consumer Clarity enrollment
  • Clear transaction enrichment data

Visa Reason Code 13.2​

Canceled Recurring Transaction specifically applies when merchant continues billing after cancellation request.

To defend against 13.2:

  • Document cancellation request date
  • Show charges were for period before cancellation
  • Provide cancellation confirmation sent to customer
  • Show clear terms about billing through end of period

Record Retention Requirements​

Record TypeMinimum RetentionRequirement Source
Consent capture3 yearsCalifornia ARL
Transaction records2+ yearsPCI DSS, network rules
Cancellation confirmations2+ yearsBest practice for disputes
Customer communications1 year post-terminationCalifornia ARL
Terms of service versionsDuration of use + 2 yearsBest practice

High-Risk Considerations​

Subscription models are often considered higher risk by processors due to:

  • Higher chargeback rates
  • Trial abuse
  • Customer complaints
  • Regulatory scrutiny
  • Negative option concerns

What to Expect​

  • Enhanced monitoring requirements
  • Possible reserves (rolling or upfront)
  • Stricter chargeback thresholds
  • Regular compliance audits
  • Higher processing rates

Mitigation Strategies​

  • Transparent pricing and terms
  • Easy cancellation process
  • Proactive customer communication
  • Strong consent documentation
  • Low chargeback ratios
  • Positive customer reviews

Step 1: Pre-Enrollment Disclosure​

Subscription Terms

You are enrolling in [Product Name] for $X.XX per month.

  • Your subscription will automatically renew each month
  • You will be charged $X.XX on the [date] of each month
  • You can cancel anytime at [website.com/cancel] or by calling [phone]
  • See our full [Terms of Service] for complete details

[ ] I agree to the subscription terms above. I understand I will be charged $X.XX per month until I cancel.

[Subscribe Now]

(Checkbox must not be pre-checked)

Step 3: Confirmation​

Subscription Confirmed

Thank you for subscribing to [Product Name]!

Subscription Details:

  • Amount: $X.XX per month
  • Next charge: [Date]
  • Renewal: Automatic monthly

To Cancel:

  • Online: [website.com/cancel]
  • Phone: [number]
  • Email: [email]

A confirmation email has been sent to [email address].

Last Verified: December 2024

Subscription compliance rules are evolving. The FTC Click-to-Cancel Rule was vacated in July 2025 but enforcement continues under ROSCA. State laws (especially California) change frequently. Verify current requirements before making compliance decisions.

Next Steps​

Setting up subscription billing?

  1. Follow implementation checklist - Pre, at, and post enrollment
  2. Review network rules - Visa and Mastercard requirements
  3. Design consent flow - Pre-enrollment to confirmation

Ensuring compliance?

  1. Meet ROSCA requirements - Federal rules
  2. Check California ARL - Strictest state law
  3. Set up record retention - 3+ year consent

Preventing subscription chargebacks?

  1. Identify root causes - Forgot, couldn't cancel
  2. Implement prevention strategies - Reminders, easy cancel
  3. Defend against 13.2 - Cancelled recurring disputes

See Also​