This article originally appeared in the September 2022 issue of Security Business magazine. When sharing, don’t forget to mention Security Business magazine on LinkedIn and @SecBusinessMag on Twitter.
Over the last few years, the credit card industry has adopted new rules that make it tough for small companies to stay in compliance – including for recurring payments charged by most security alarm and life safety companies.
If your company accepts Visa and Master Card for recurring subscription invoices, please read on. You may be surprised by both the specifics of the rules and what it takes to make your company fully compliant.
Does your security company provide:
- An electronic receipt for the recurring transaction?
- Clear instructions on how subscribers can cancel the recurring charge to the card?
- An online or electronic method for them to remove their card from recurring charges?
- Clear subscription terms (price and frequency), including getting the customer’s acceptance?
- An electronic confirmation of a subscriber’s enrollment and authorization for storing their card for recurring transactions?
- Advance notice for subscribers with semi-annual or annual transactions and clear instructions on how to cancel the card transaction before the billing date?
If you answered NO to any of the above, you are out of compliance and your merchant account could be in jeopardy.
A desire to protect the consumer is likely behind these added rules related to recurring transactions. The result? It is nearly impossible for small security companies to keep up with this myriad of credit card rules; however, not following them can cause even bigger problems for your business.
While these new rules and rule changes make it very difficult for small companies to comply, working with a professional recurring payment services company can greatly help you get compliant quickly. Here’s an outline of the relatively new rules, along with detailed recommendations on how alarm companies can comply:
Rule: Electronic Receipt
After each billing for the subscription or autopay enrollment, merchants must send a receipt/confirmation of the billing by email or any other electronic method. In addition to the transaction details, this receipt must include clear instructions on how the consumer can cancel the subscription.
What alarm companies need to do: Require an email for credit card autopay customers. Follow up on accounts with no email on file by running email audit reports in your company’s software. If you do not have a good alarm account management software, you may need to do this manually. If they do not have an email, they can be set up for ACH debit autopay instead of credit autopay.
Rule: Subscription Terms
Prior to enrolling consumers in a subscription, merchants must, at the point of payment, disclose the subscription terms (MUST include price and frequency) and obtain the customer’s affirmative acceptance of the terms.
What alarm companies need to do: Include language in contracts and proposals detailing the price, frequency, and acceptance of terms. Doing this will protect your company from the most recent credit card updates as well as provide a good customer experience and transparency.
Rule: Online or Electronic Cancellation Method
Merchants must provide an online or electronic cancellation method to subscribers. This method should be “similar to unsubscribing from email messages or any other electronic method.”
What alarm companies need to do: Add an option for your customers to “remove autopayment” on their account. You may wish to follow up with customers who revoke authorization to understand why. Please keep in mind that customers are NOT canceling the service, they are only revoking their authorization for automatic charges to their card.
Rule: Advance Notice for 6+ Month Services
Merchants offering subscription plans with six months or more between billing dates must provide a notification containing the basic terms of the subscription and instructions on how to cancel the subscription prior to each billing date; applies to semi-annual and annual customers.
What alarm companies need to do: Follow up with any applicable customers who do NOT have an email on file. With any good alarm account management software, you should be able to pull this list. The notice informs them of their upcoming autopay payment and where they can go to update or remove the autopay on file.
Rule: Electronic Confirmation of Enrollment
Immediately following enrollment, merchants will need to send a confirmation of the consumer’s enrollment by email or any other electronic method. This confirmation must include the terms of the subscription (including the terms of a trial, if applicable) and clear instructions on how the consumer can cancel the subscription.
What alarm companies need to do: Set up a process, either within your software or manually, that emails a confirmation outlining the terms of the subscription. If you are working with a billing agent, they will likely handle this for you; however, you will want to confirm that they are compliant.
