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Can a merchant renew my introductory subscription without permission?

When a merchant takes a customer’s lack of opt-out as permission to bill, it is using a negative option feature

Summary

A Montana resident says she was offered an introductory subscription that was renewed without her permission. What are her rights?

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Can a merchant renew an introductory subscription without your permission?

That’s the issue that has upset reader Nancy. She writes, “A year ago I signed up for an introductory offer with ‘Curiosity Stream,’ a ‘documentary video site.’ We discovered that the site is mostly self-made videos, no professional work, so decided against it and didn’t plan to renew.

“However, the company renewed without our prior authorization. In reply to my question, they stated that we set up the subscription without checking the box to say that we didn’t want to continue after a year.”

While the money involved is not large, it’s the principle of the matter that she is concerned about. Understandably, Nancy doesn’t like it that “anyone has open use of my credit card.” She believes that it is the merchant’s obligation to find out if she wants to continue with the subscription after the introductory period, rather than leaving it to her to opt-out.

Negative-option offers abound

What Nancy is dealing with is a so-called negative option feature. According to the Federal Trade Commission, this is a sort of marketing strategy whereby “sellers interpret a customer’s failure to take an affirmative action, either to reject an offer or cancel an agreement, as assent to be charged for goods or services.”

It seems the merchants expect that many consumers will not go to the trouble of following up and taking action against them, particularly when the sum of money involved is relatively small, such as for a subscription to a magazine or streaming service.

Former President Donald Trump made the news for using such a tactic. It seems the company that processed online donations for Trump’s re-election campaign in 2020 made weekly recurring donations (for every week until the election) the default option for those supporters who actually thought they were signing up for a single payment.

Instead, the marketer used a prechecked box that got the donors’ assent to these recurring payments unless they actively opted out. It seems a lot of individuals of modest means found themselves caught in this trap and credit card issuers, as well as banks, received a lot of complaints.

See related: How can I cancel an auto-renewal billing if I can’t contact the seller?

Online sellers cannot act with impunity

It’s to deal with such murky schemes that abound on the internet that the Federal Trade Commission came out with its Restore Online Shoppers’ Confidence Act law in 2010. Under this law, it is illegal for online sellers to engage in the use of negative option features unless they:

  • Provide written material that clearly reveals all “material terms” of the sale before getting a consumer’s billing information.
  • Get a consumer’s “express informed consent” before charging them for the transaction.
  • Give consumers a simple way of stopping recurring charges to their credit card (or other means of payment).

At a separate workshop dealing with negative options, the FTC stated that in order to avoid invoking the government agency’s laws on “unfair methods of competition,” merchants who use negative options should also:

  • Make their disclosures “clear and conspicuous” and understandable.
  • Get an affirmative consent from the consumer to their offer and not rely on such techniques as a pre-checked box to indicate consumer consent.
  • Set up cancellation methods they promise to operate smoothly, so they are not burdensome to the consumer.

See related: Best credit cards for online shopping

Payment networks have also weighed in

Visa and Mastercard, two major payment networks, have also weighed in on such matters. In April 2020, Visa came out with standards for merchants who use a free trial subscription or introductory offers as part of a recurring subscription. These include:

  • At the time of enrollment, merchants should get the active consent of the consumer.
  • They should make notifications of the terms and conditions of the subscription service at the time the consumers sign up, even if they didn’t pay at that time.
  • Receipts of the transaction should also include disclosures about, among other things, the duration of the introductory period and disclose that the customer will be charged unless they take steps to cancel.
  • At the end of the trial period, the first card statement should indicate that it relates to the trial period.
  • Merchants should make it easier for customers to cancel these subscriptions online.

Consumers now also enjoy more rights to dispute such transactions with Visa.

See related: Best credit cards with extended warranty benefits

State laws differ

Nancy lives in Montana and wonders if each state has different laws on this matter. Indeed, different states have their own laws, or not, on negative option matters. While Montana law doesn’t specifically apply to negative options, the state addresses matters of truth in advertising.

Montana residents can take up their cases with the Montana Department of Justice’s Office of Consumer Protection. Nancy, you could also take up the matter with the FTC or make a complaint with the Consumer Financial Protection Bureau.

Good luck with your laudable attempt to stand on principle, which could ease the path for others who have had more of a financial impact in negative option-related matters.

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The editorial content on this page is based solely on the objective assessment of our writers and is not driven by advertising dollars. It has not been provided or commissioned by the credit card issuers. However, we may receive compensation when you click on links to products from our partners.

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