In a world that operates 24/7, we want to simplify our lives as much as possible. One way to do that is to use automated payments for credit cards, gym memberships, streaming services, rent and mortgage, subscriptions and more.
However, the more automated payments we create, the harder it can be to track what you’re paying for. I recently did an audit of all my subscriptions and was horrified to discover how many services – Max, Paramount+, Starz, Headspace, Vanity Fair and the Disney+ bundle (with ESPN+ and Hulu), to name a few – I was paying for but not using enough to justify the cost. When I ran the numbers, I realized I was spending a whopping $701.81 a year on subscriptions I wasn’t using. And I’m not alone.
Customers waste an average of $32.84 a month on average for unused paid subscriptions, according to a study by Austin, Texas-based Self Financial, a fintech company that helps people build credit and save money with a range of financial products. “That could amount to $394.08 a year if paid subscriptions remain unused,” said the study.
One in three said the main reason for them not canceling their unused paid subscriptions was a lack of time to dedicate to the process. Another 35.3 percent felt a company made it difficult to cancel the subscription.
Negative options and auto renewals
If you are a happy consumer, an automatic subscription renewal can be a convenience. However, that’s not always the case. It often makes life easier for a business, rather than you, when it extends your subscription automatically.
Considering the scope for abuse in such matters, the Restore Online Shoppers’ Confidence Act (ROSCA), which became law in 2010, addresses what’s called a “negative option.” A negative option is a situation in which you are billed for something unless you specifically ask not to be billed. This is often the case with subscriptions (as well as free trial offers).
The law requires businesses that use a negative option feature to clearly state your subscription will automatically renew, and you will continue to be billed after it expires, unless you take specific action.
Businesses also cannot make it difficult for you to cancel your subscription, and they should provide a simple process to cancel. At the time you signed up, the business should have conspicuously disclosed these terms and gotten your informed consent to a subscription renewal.
How the law protects you
“Under the law, businesses must take steps to ensure that charges to customers’ credit cards, debit cards, phone bills, and other accounts are authorized,” according to the FTC. “Those principles apply to mobile payments, too. It’s also illegal to bill people for negative options, automatic shipments or continuity programs without their express consent.”
The Electronic Funds Transfer Act requires that consumers give their permission before a credit card is charged. There are also rules that govern how a merchant can store a cardholder’s information.
According to the law firm Bradley/Grombacher, “Consumers have complained about unexpected and hard to cancel recurring charges that appear on their financial statements. Additionally, several major companies have been hit with legal action over allegedly deceptive auto-renew charges. Recently, state legislatures have enacted laws protecting consumers and requiring companies using auto-renew to meet strict standards.”
What to do if your card gets charged without your consent
Since prevention is better than a cure, it’s good practice to look into the terms of a subscription before signing up for it. If a box has been checked indicating you are consenting to auto renewal, you should uncheck it to indicate that you are not on board with auto renewal.
And find out how you can cancel your subscription if you don’t want to continue it after it expires.
If you are billed for auto renewal without your consent, even after taking such precautions, you should file a dispute with your credit card company as soon as possible. If it investigates the matter and rules for you, you would be given back your money by crediting your account, in what’s called a chargeback.
You could also file a complaint against the company with the FTC. In some states, companies are required to disclose automatic renewal terms when you sign up for their services, said Russel Morgan, founder and partner of New York City-based Morgan Legal Group. “When you are signing up, the company should explain the renewal process and how much you will be charged. It should also outline how you can cancel,” he said. “This transparency is meant to protect consumers.”
The problem is that for years, many companies have been making it difficult for consumers to cancel, said Morgan. “While signing up is streamlined and straightforward, canceling can often involve multiple steps, such as phone calls to representatives or other steps that require a lot of time,” he said.
Because of this, the FTC on Oct. 16, 2024, issued a ‘Click to Cancel’ rule that requires companies to make the cancelation process just as simple as the sign-up one,” said Morgan. “The goal was to make cancelations easy and to avoid unwanted charges.”
The rule is part of the FTC’s ongoing review of its 1973 Negative Option Rule, which the agency is modernizing to combat unfair or deceptive practices related to subscriptions, memberships, and other recurring-payment programs in an increasingly digital economy where it’s easier than ever for businesses to sign up consumers for their products and services.
The bottom line
You don’t have to pay for something you didn’t order. If you feel your subscription was renewed without your consent, you can dispute the charge, request a refund or file a complaint with the FTC. Your state attorney general can also help.
Meanwhile, there are steps you can take as a consumer to keep automatic subscriptions in check, including:
- Set calendar reminders for ending free trials;
- Use your credit card’s virtual assistant to set an alert on a free trial;
- Reach out to the company to get their terms for ending automatic payments;
- Read the fine print on your contract;
- Contact your card issuer to help with a dispute;
- Save all correspondence between you and the vendor; and
- Once the issue is resolved, continue to check your bill to ensure you’re not being charged.
Former Bankrate writer Poonkulali Thangavelu contributed to an earlier version of this article.
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