Consumers love the option of recurring payments—being for the convenience it offers when it comes to handling their bills, as well as for the protection it provides against incurring late fees when bills are inadvertently forgotten or lost. Merchants also favor the concept because it ensures that they receive payments on time, every time—and that is just the tip of the iceberg. However, financial challenges, such as those brought on by the COVID-19 pandemic, sometimes create a need for consumers to suspend recurring payments and reinstate them later when they are ready to do so. Here’s what merchants need to know about the process.
1. Suspension and reinstatement of recurring payments are always the consumers’ responsibility, but merchants can, and should, help things along.
In a recurring payment scenario, consumers provide their debit, credit, or other payment information (e.g., PayPal account information) to merchants. Consumers are then automatically charged for services or goods on a prearranged schedule, with no further permission needed in order for charges to be processed according to that schedule.
Merchants should not initiate a temporary stop to recurring payments, nor reinstate them. Consumers must take both steps themselves. Nonetheless, it’s in the merchants’ best interests to simplify the process.
Some consumers prefer to make such changes by telephone, but using a recurring payment solution that allows adjustments to happen electronically is a wise idea. The reason? Many individuals prefer not to wait in telephone queues and spend time speaking with a customer service representative to cancel recurring payments or arrange for their resumption.
In addition to enabling merchants to automate invoicing and payment details for recordkeeping purposes and allowing consumers to opt-out of recurring payments when needed, a good recurring payment solution lets customers easily check their account details. Among these details: whether and when a recurring payment schedule was suspended and reinstated. The fewer hassles consumers encounter along the way, the lesser the likelihood of errors—and headaches for merchants—down the road.
2. The Electronic Fund Transfer Act protects consumers from unauthorized electronic funds transfers.
This includes the collection of funds for recurring payment or a series of payments that have already been canceled by the consumer. Whether unintentional or not, such collection will result in a chargeback for the merchant. Making it easy for consumers to suspend recurring payments, and to start them up again when they can, cuts down on recurring payments collection mistakes and chargebacks.
3. The Restore Online Shoppers’ Confidence Act (ROSCA) has implications for recurring payments.
ROSCA applies to companies that ship merchandise to consumers on a schedule (e.g., monthly) and automatically bill consumers for these items unless they are notified not to do so before a set deadline (e.g., a certain day of the month). Among other requirements, ROSCA mandates that consumers be given simple mechanisms to stop recurring charges, like a phone number to call or a website link.
Merchants that fail to adhere to this—or any other—provision of ROSCA are subject to action from the Federal Trade Commission (FTC). This action includes penalties.
During the COVID-19 pandemic and beyond, financially challenged consumers will appreciate the flexibility to temporarily place a hold on recurring payments and to resume them when their “money situation” improves. Merchants that understand the in’s and out’s of the process and prepare accordingly, will be well-positioned to offer that flexibility, cultivating customer loyalty in the bargain.
Be sure to check out the E-Complish RecurPay system for robust recurring capabilities!