Online shopping in the UK is on the rise and with this comes a different set of consumer problems. One such problem is subscription traps. These are situations where a consumer is tricked into agreeing to a subscription through the advertising of a “free trial” or reduced price offer. If the consumer doesn’t cancel the trial within a set amount of time they automatically get transferred onto a costly subscription payment plan.
Unscrupulous companies who use subscription traps can also abuse the payment method used, continuous payment authorities (CPAs), to take as much money as they want from consumers’ accounts whenever they like without prior notice. In this research we set out to understand the problems consumers face with subscription traps, including how they could get out of them. Specifically we wanted to find out if banks and card issuers were doing enough to help their customers and whether they were adhering to EU legislation and Financial Conduct Authority (FCA) guidance. To do so we undertook a Great Britain (GB) representative omnibus survey of 2,023 adults, an online survey with 496 responses and 31 face to face 1 interviews with affected consumers throughout Great Britain.
Key Findings
● Over 16.8 million adult consumers in GB have signed up to a subscription service using a CPA between August 2014 and July 2015.
● Over 2 million adult consumers in GB have had a request to cancel a CPA for a subscription declined by either the company or their bank/card provider.
● Consumers’ awareness of what a CPA is and how they can cancel one is low. Only 21 per cent of GB adults know the difference between a CPA and a direct debit.
● Subscription traps are used for a wide variety of goods and services but most of the problems are encountered with health and beauty related products.
● Women aged 50 to 64 are most at risk from subscription traps offering health and beauty related products, specifically slimming pills/products or face/skin creams.
● Consumer financial detriment is on average between £50 and £100 but non-financial detriment such as time, energy and how consumers were left feeling can be significant.
● Subscription traps are usually advertised online via social media and pop-up advertising and many of the adverts are misleading.
● Terms and conditions are frequently not clearly and prominently displayed and key information is often hidden. This means that many subscription trap agreements may be in breach of the Consumer Contract (Information, Cancellation and Additional Charges) Regulations 2013 and the Consumer Protection from Unfair Trading Practices Regulations 2008.
● Eighty four per cent of consumers who answered our online survey did not realise they had agreed to a subscription.
● In many cases, the full cost of the recurring payments is not provided to the consumer at the point of authorisation. This means they may be eligible for a full refund from their bank or credit card company under the Payment Services Regulations 2009.
● In our online survey of 496 consumers, 36 per cent of people who approached their bank to cancel their CPA had the request refused, their bank took the wrong action, or they had further payments taken despite having their request acknowledged.