*Editor’s Note: This is breaking quickly and will be updated continuously.
Mastercard has backed off its September 22 deadline to classify sustainer donations made via credit card as subscriptions, which would require giving those donors a notice every month of their option to cancel.
Mastercard is now “extending the effective date of these requirements for nonprofits until March 21, 2023,” according to Shannon McCracken, CEO of The Nonprofit Alliance. “This extension is an acknowledgement that the new requirements as written caused considerable confusion among nonprofits and their processing platform partners, delaying steps toward compliance,” McCracken told The NonProfit Times.
“To be very clear, nonprofits are required to comply with the new subscription payment requirements, but now have an additional six months to prepare,” she said.
The delay also gives McCracken and other nonprofit leaders time to convince Mastercard executives to hear the impact on nonprofits of the new regulations. McCracken stressed that the donor-nonprofit relationship is distinct from that of a consumer and merchant or vendor.
Additionally, monthly notification (receipting) is only required for donors who have provided an email address. Nonprofits will not need to generate receipts by alternate means (such as postal mail) for recurring donors whose email addresses are not available. This will amount to considerable cost savings for many organizations, McCracken said.
“This is a significant step in the right direction. TNPA will continue our work building our coalition of U.S. and international umbrella groups to clarify with Mastercard the details of compliance, and assess the impact of the new processes on nonprofit organizations,” she said.
A request for a statement from Mastercard was not immediately returned.
Mastercard has classified monthly recurring donations as “subscription services” which would and will force fundraisers to alert sustaining donors every month of their cancellation option.
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.”
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. McCracken said the donor-nonprofit relationship is distinct from that of a consumer and merchant or vendor.
McCracken called the regulation “overkill,” saying it will place a burden on already-overworked nonprofit staffs and should not apply to the sector since donors are voluntarily contributing, not receiving a literal subscription or goods and services in exchange for the charge to the card.
