Think you’re getting a ‘free trial’? Fat chance!
As part of Scams Awareness Month Daniel VandenBurg and Nick MacAndrews from the Citizens Advice Consumer Intelligence Team look at one of the most common scams: subscription traps.
In our report Alarm bells briefing: slimming pill ‘free trial’ scams published in December 2014 Citizens Advice predicted that consumers in the UK would have lost £1 million to subscriptions traps for slimming pills during the financial year 2014-15. This year we have seen a continuation of the problem which is also branching out into other types of products and services.
How do these subscription traps work?
Our report found that people were tempted into free trials for slimming pills or similar health supplements, often by online pop-up adverts or across social media sites featuring celebrity endorsements. People thought they were simply giving their debit or credit card details to pay for the £5 postage and packing. But, if they’d read the extremely long small print, they would have discovered that they had signed up to a monthly subscription for these products unless they cancelled within a set period of time.
These terms sometimes came with a pre-ticked acceptance box or an implicit acceptance ‘in placing the order the consumer accepts the T&Cs’. By agreeing to these terms people had effectively formed a contract with the seller and had unknowingly agreed to a continuous payment authority (CPA).
What is a continuous payment authority?
In a recent survey* we found that only 21 per cent of adults in Britain knew the difference between a CPA and a direct debit. A CPA is implemented by giving the trader the long number on the front of your debit or credit card and the last three digits at the back rather than your bank account number and sort code. When you consent to a CPA you are giving the retailer permission to take future payments from your credit or debit card.
These payments can, in theory, be for any amount of money and taken on a day of the trader’s choosing. Whilst the flexibility of this payment method is useful for a variety of subscription services such as gym memberships or online streaming services, unscrupulous retailers can abuse them by taking large sums of money from people without their informed consent. This was frequently the case for our clients who contacted us in relation to slimming pill free trials.
How much of a problem is this?
It is difficult to put an exact number on how many people fall foul of subscription traps; however, between 1 April and 29 June this year 2,024 people rang the Citizens Advice Consumer Service helpline seeking advice in relation to products commonly associated with subscription scams, like slimming pills, face creams, and hair replacement therapies. 1,518 of these people paid using their debit or credit card making it highly likely they had trouble with a CPA. And this is just the tip of the iceberg, as we are now starting to hear about problems with other products like discount vouchers, collectible toys and fresh food delivery.
We also found from our recent survey that 48 per cent of adults in Britain had, at some point, signed up to a subscription service using a CPA. Of those, 38 per cent had tried to cancel their subscription and of these 8 per cent had their request denied by either the retailer or their bank. When this is scaled up and compared to the total adult population of Britain (around 49 million) it is possible that in the region of 1.9 million people** have had problems cancelling a CPA for a subscription service.
What can you do to about it?
Always read the terms and conditions of any agreement and be wary of any ‘free’ trials that ask for your debit or credit card details. If you do find yourself unwittingly signed up to a CPA the law says you can withdraw your consent and stop a future payment at any time up to the end of business on the day before the payment is due. You can do this by contacting your card issuer. Don’t be put off if they tell you to contact the retailer. It is your right to cancel with your card issuer, and in the case of subscription traps the companies involved are often based abroad and are hard to contact.
What are we doing about it?
As well as raising awareness of the problems with subscription traps and CPAs through Scams Awareness Month 2015, we are also conducting a research project with Citizens Advice Scotland to better understand the problems people face. We are running an online survey of people who have been affected by this issue as well as conducting face-to-face interviews over the summer. We intend to use the findings from this project to give enforcers and regulators the evidence they need to take action in this area.
If you would like to get involved, please complete our online survey.
*All figures, unless otherwise stated, are from YouGov Plc. Total sample size was 2,023 adults. Fieldwork was undertaken between 12th – 15th June 2015. The survey was carried out online. The figures have been weighted and are representative of all GB adults (aged 18+).
**Calculation by Citizens Advice, using mid 2013 ONS population estimates. 4% of 49,103,873 = 1,964,155