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Locked In: Consumer issues with subscription traps

8 March 2016

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 Locked in: consumer issues with subscription traps [ 1.1 mb] we wanted to understand the problems consumers face with subscription traps, including how they could get out of them and whether banks and card issuers could be doing more to help their customers in this situation.

We found that

  • Over 16.8 million adult consumers in GB have signed up to a subscription service using a CPA between June 2014 and June 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. They are usually advertised online.

  • Terms and conditions are frequently not clearly and prominently displayed and key information is often hidden.

  • Eighty four per cent of consumers who answered our online survey did not realise they had agreed to a subscription.

  • 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.      

To help alleviate the detriment caused by subscription traps we recommend:

  • EU and UK law should require any terms and conditions to have the most important information clearly summarised on the first page.

  • Companies offering trial periods for subscription products or services should remind consumers that they will enter into a binding contract at the end of the trial period.

  • The FCA should produce specific guidance for banks and card issuers on how to deal with disputed recurring payments.

  • Payment service providers should consider notifying consumers when they first become aware that a CPA has been set up.