Have you ever found yourself stuck paying for a subscription you didn’t want after a company “gotcha” with an automatic renewal? I bet you have.
It happened to me recently. Here’s how I fought it and what you can do to protect yourself from this predatory business practice.
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Surprise! You just renewed your annual subscription
I was in a good mood on a Sunday afternoon because my football team had just won their game. But my mood quickly changed when I received an email that said my credit card had been charged $249 for an annual subscription renewal.
To my surprise, one of my digital subscriptions had been automatically renewed, without any warning, for another year. It was a subscription that I hadn’t intended to renew. Also, the price had gone up by $50. I especially didn’t want to pay the higher price.
While I was looking at the email, my wife got a text alert about that charge. She reminded me that we had agreed not to renew that subscription.
These days most of us have subscriptions to cable companies, mobile phone plans, streaming services for movies and music and gaming, premium cable channels, digital news and information services, newspapers, gyms, cosmetics, meal kits, and wine clubs, to give a few examples.
When you have many subscriptions and memberships, it’s easy to lose track of when each one comes up for renewal. The companies are counting on that. They use auto-renewals to keep subscription revenue flowing.
Auto-renewals catch millions of consumers off-guard
Survey responses suggest that millions of Americans have gotten charged for subscriptions they did not want to renew. The attorney general of Washington state estimates that as many as 3.5 million consumers in that state alone “may have been unintentionally enrolled in a subscription plan or service when they thought they made a one-time purchase”
A national market research firm surveyed consumers across the country to ask about their relationship with subscription services and found that 42% of those surveyed:
…admit that they’ve stopped using a subscription service(s) but forgot they were still paying for the service (with Gen Z being most likely to forget and Boomers least likely). It appears that it’s pretty easy to forget about payments considering that the majority (72%) said they set all their monthly subscription payments to auto-pay.CRResearch
Beware of “negative options.”
Many subscription services use what is referred to as a “negative option” to hook you. Here is the way the Federal Trade Commission (FTC) explains it:
A negative option is when you’re automatically billed for something when you didn’t specifically say not to bill you. It’s a common practice that businesses use, and it often happens with free trial offers and subscriptions.
For example, you agree to try a box of products free for a month. After that month, you’re charged automatically for monthly shipments until you cancel. Or you get a magazine subscription that renews automatically when it expires. Those are negative options. Your silence is taken as consent to be charged.Federal Trade Commission
Negative options have been around for a long time. Remember those monthly record and book clubs? They automatically sent you the next monthly selection and billed you for it unless you mailed them a postcard by a deadline saying you didn’t want it.
And most of the time, you didn’t want it, but forgot to return the postcard!
How new automatic renewal laws can help consumers
There is a federal statute, the Restore Online Shoppers Confidence Act (ROSCA) which has a section related to negative options. But the problem has gotten so bad that many states have started enacting their own Automatic Renewal Laws (ARL) that go beyond the federal consumer protection rules.
A state legislator in Colorado sponsored and succeeded in passing such a law after she found how hard it was to cancel one of her subscriptions.
According to a report by the Pew Foundation, “Many other states—including California, Delaware, Georgia, Hawaii, Illinois, Louisiana, New Mexico, New York, North Carolina, Oregon, Vermont, and Virginia—have enacted similar laws to curb automatic renewal, and roughly ten other states are considering similar legislation this year.”
Those laws are starting to have an effect. Using the state’s new ARL, the district attorneys for five California counties filed a lawsuit against a wine club over how it handled monthly subscriptions for wine shipments. This past October, they announced a settlement:
Nakedwines, Inc. settled a consumer protection lawsuit alleging that Naked Wines violated provisions of California’s Automatic Renewal Laws. As part of the settlement, Naked Wines entered into an injunction prohibiting future violations of renewal laws and, without admitting liability, agreed to pay $650,000 in civil penalties and costs.California state attorney general
In November, the FTC announced an action against Vonage, an internet phone provider:
The Federal Trade Commission has stopped internet phone service provider Vonage from imposing junk fees and creating obstacles to those who try to cancel their service. … Under the proposed court order, Vonage will be required to pay $100 million in refunds to consumers harmed by the company’s actions, make its cancellation process simple and transparent, and stop charging consumers without their consent.
My online search found complaints and information on several pending class action lawsuits against other companies alleging similar automatic renewal practices.
Fact: Companies count on consumers not knowing the rules.
While those enforcement actions are growing and getting attention, companies count on their customers being unaware of these newer consumer protections.
Since its customer service office is only open on weekdays, I had to wait until Monday morning to call. The person I reached told me that I had renewed for one year. Any cancellation would only be effective 12 months from now, when that new term would end. He said that I had to notify them before the renewal date and stated that since I had not done so, the $249 would not be refunded.
Fortunately for me, I had previously read about the new California ARL. Among its provisions, if a subscription is for a term of one year or longer, a business is required to notify subscribers of the renewal and cancellation methods, and that notification must be sent no fewer than 15 days and no more than 45 days prior to an automatic renewal.
Also, before calling, I had searched my email files, including the trash folder, for all emails from that company. It had not sent the required renewal notice.
I politely informed their representative that I live in California and this automatic renewal is a violation of a state law. I pointed out that his company was required to send me a notification in advance of the renewal and that it had not done so.
His response was that the subscription was non-refundable and there was nothing he could do about it. So I asked to speak to a supervisor. He tried to avoid transferring me. However, after several repetitions of this, he said he needed to put me on hold. Then, about a minute later, he came back on the line and told me the refund was approved, being processed and a confirming email had just been sent. I checked my email and the refund confirmation was there.
Victory felt good.
How to protect yourself from unwanted automatic renewals
An important first step is to familiarize yourself with the rules in your state. Do an online search for “automatic subscription renewals in (your state).” If you find yourself in a similar situation, you can politely point the provider to the state law it is violating.
Even if you live in one of the states that have not enacted a stronger ARL, you can still suggest the provider is violating the federal Restore Online Shoppers Confidence Act (ROSCA). If that doesn’t get you anywhere, the FTC has a website where you can report fraud.
Prevention is best: set up self reminders
But the best thing to do is not to let yourself get into the situation in the first place. When you first sign up, be sure you understand all of the terms. You’ll want to know when and how the subscription plan renews and how much it will cost you. Keep detailed notes, including screen captures of the offer and terms and all related emails. That especially applies to those “free trials” and tempting, low-cost introductory rates.
Then keep track of the renewal dates by using your calendar or a reminder app. While I forgot to do so in this case, I usually put a “to do” item on my calendar to consider canceling when I first sign up. I’ll set the reminder for a date about two weeks before the subscription term or the introductory rate is up.
If you have subscriptions on autopay, consider removing them. That way you’ll have to make a conscious decision to renew each period.
Set up alerts on your credit cards so that you’ll know immediately if a subscription automatically renews.
The FTC has an information page headlined “Getting In and Out of Free Trials, Auto-Renewals, and Negative Option Subscriptions.” It has additional tips, including links on how to report fraud.
Another resource is the Consumer Rescue guide on how to get excellent customer service and fix your own problem.
If a company hits you with an unexpected and unwanted subscription renewal, act quickly. If you wait too long, you might not be able to undo it. So use this article as your trigger to review your subscriptions and their renewal dates today. (Abe Wischnia for Consumer Rescue)