A recurring or installment payment plan exists when a series of charges, either of a fixed or variable amount, are paid over a period of time. With installment plans, the number of payments is fixed, while recurring plans exist indefinitely, until canceled by the consumer. Discover requires merchants that process installment and recurring payments to comply with the following requirements:
- Authorization. Discover requires merchants to obtain a separate, current authorization for each installment charged to a cardholder under a recurring or installment payment plan, before submitting the transaction for settlement. An authorization approval for one installment payment is not a guarantee that any future installment will be authorized.
- Cardholder’s approval. Merchants are required to obtain the cardholder’s written approval to charge their cards over the term of the recurring or installment payment plan. If approval is given over the internet, merchants need to retain some kind of electronic evidence. In any case, the approval must include all of the following information:
- Cardholder’s name, address and account number.
- Amount of each installment.
- Timing or frequency of payments.
- Length of time over which the cardholder permits you to bill installments to his or her card.
- The merchant’s merchant number as assigned by Discover.
- Card expiration date.
- Dollar amount of the transaction, including tax and tip (dollars and cents).
Merchants are required to retain evidence of the cardholder’s approval of the installment or recurring plan for at least the duration of the installment plan. If the plan is renewed, the merchant needs to obtain a new evidence of the cardholders approval.
- Submission of transaction data. Recurring and installment transactions should be submitted the way one-time transaction data is submitted. If the account is closed for whatever reason, the merchant needs to request an alternative form of payment from its customer.
- Fixed and variable payment plans. Whether a recurring or installment plan features installments of the same amount, or the amount of each installment in a recurring or installment plan varies, merchants are required to submit transaction information to Discover for each recurring or installment payment they accept. If a merchant wants to make any changes to a fixed or variable payment plan, it needs to contact Discover before making these changes.
For the most part, Discover recurring and installment payment plans need to comply with the same requirements as they would have to if the card was a Visa or a MasterCard. We have written in detail on managing the various aspects of such plans in previous posts and encourage you to review them.
Image credit: Discoverstudentcenter.com.