October 6, 2022

Mastercard Implements New Guidelines for Automatic Transactions Potentially Impacting Non-Profit Donations

Mastercard Recurring Giving Potentially Impacts Non-Profit Fundraising

Mastercard is implementing new guidelines for automatic transaction that will affect non-profit’s individual donation fundraising. It was originally effective September 22, but was recently extended 6 months until March 21 2023. Per the new guidelines, nonprofits will likely have to comply with the following requirements:

  • Upon enrollment, send a confirmation email with terms and conditions and instructions on how to cancel the subscription
  • Email receipts after each successful billing attempt with terms and conditions and instructions on how to cancel the subscription
  • There must be an online cancellation method available
  • If the period of a recurring subscription is billed longer than every six months, a notification seven days prior to the charge must be sent with instructions as to how to cancel the subscription

Because of these notification requirements, nonprofits must set up electronic forms of communication with donors. As some nonprofits do not provide donors with log in information for their websites, this may require some organizations to create new infrastructure. Older or less electronically literate donors may also have problems with electronic portals which would create logistical issues.

If an email is not on file or donors have issues with electronic communication for another reason, this could pose a risk to compliance and threaten the reliability of donor lists. Donors that have given in the past through the mail or over the phone may also have a less streamlined process that could reduce gifts. Mastercard did clarify after their initial guidelines that if a donor does not have an email on file nonprofits would not be required to send paper notifications to be in compliance with the new rules.
The purpose of these new rules are to reduce the number of disputes and chargebacks associated with subscriptions. According to an article on Justt, 60% of chargebacks were from recurring transactions. However, Amanda Cole writer at Nonprofitpro.com states that, “The nonprofit sector doesn’t view recurring gifts and subscriptions as synonymous and doesn’t account for a large amount of chargebacks”. Nonprofits can attempt to reduce conflict with donors and Mastercard by giving as much control and transparency over recurring transactions as possible.

Currently, MasterCard has stated that they found their requirements to be best practices and that it would apply across all of their users.

Mastercard spokespeople were contacted as recently as August 19, 2022 and have not clarified their position on the extent to which nonprofits will need to implement the new requirements.  Mastercard has also not discussed what penalties would be levied on parties that did not meet the new standards. Issues like overcommunication with donors and donor retention have been addressed by nonprofit leaders with the advice to also communicate the impact and importance of donations by showing recent initiatives. Actions like this can help improve the communication with clients required by Mastercard while still complying with their new standards.

This article was written and contributed by Noah Luzader, a member of  the Holsinger P.C. Audit team under the supervision of William G. Godfrey III, CPA. This information is not meant as tax/audit advice but merely an informative piece.  For inquiries or more information, please visit our website www.holsinger.cpa or email us at info@thinkholsinger.com

 

References
Cole, A. L. (2022, September 7). Mastercard Extends Deadline: How to Comply With New Recurring Giving Regulations. Retrieved September 22, 2022, from https://www.nonprofitpro.com/article/mastercard-extends-deadline-how-to-comply-to-new-recurring-giving-regulations/
Justt. (2022, August 21). Mastercard Subscription Rules Update: What Merchants Must Know. Retrieved September 22, 2022, from https://justt.ai/mastercard-subscription-rules-update/
Waasdorp, E. (2022, August 18). New Mastercard Regulations Could Harm Recurring Gifts Unless You Take Action Now. Retrieved September 22, 2022, from https://www.nonprofitpro.com/post/new-mastercard-regulations-harm-recurring-gifts/

Article written by William Godfrey

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