Dear Your Business Credit,
Is it legal for a credit card company to give out your new credit card number for a recurring charge? -- Mike
Dear Mike,
Yes. All four of the major credit card companies -- American Express, Visa, MasterCard and Discover -- offer "updater" services to provide merchants with consumers' new credit card numbers and expiration dates, as I discussed in an earlier column ("Card updater services keep customers' auto-payments flowing"). Card updater services are designed to save merchants the hassle of contacting customers with lapsed cards to get their new numbers.
I have not come across any information suggesting that account updater services are illegal. While contracts vary, consumers authorize access to their credit card accounts, not to a specific number or expiration date tied to that account. That means authorized recurring charges can go on regardless of whether a card has expired or been replaced.
For many businesses, automatic renewable contracts provide a steady source of revenue -- and many customers welcome the convenience of no-hassle monthly payments. However, things can get tricky when a customer's credit card is replaced, whether by routine expiration or due to a data breach. Merchants know if they contact customers by phone to find out their new credit card information, it might be hard to reach some who want to continue their contracts. Other customers might use the opportunity to reconsider whether they need to keep making a purchase and discontinue it.
To avoid such scenarios, business owners often prefer indirect methods of updating customers' credit card information, such as using account updater services. Some even guess at the clients' new credit card expiration dates to avoid calling them, though this isn't an ideal practice, as I discussed in a previous column ("Merchant guesses card expiration date to renew subscription").
Given that many merchants use these services, consumers should be certain to formally cancel recurring charges they want to end. The lapsing of a credit card will not put an end to a contract you have signed. Should you want to cancel, ask the business for the cancellation procedure and follow it. You may need to put your request in writing. If you do, keep a copy of the letter as well as proof that you sent it, which the post office can provide.
Unfortunately, some merchants make it very difficult for customers to get out of contracts they have auto-renewed, so you may have to be persistent. If you are having trouble canceling an auto-pay charge, take a look at the article "Revoking automatic debits from your account."