Automatic renewals can blindside Colorado consumers | Opinion
October 9, 2020
Consumers are rightly concerned that some businesses use a range of tactics to take their hard-earned dollars through a shell game where they are stuck with charges for a service they did not know they signed up for. Hidden fees, automatic renewals, and extra charges in the fine print hurt consumers and undermine trust. By contrast, responsible companies who ask — “are you still using our service and is it performing as you expected?”— build trust and treat consumers fairly.
Those companies playing a short-term game seek to take advantage of consumers who believe they are making only a one-time purchase or receiving a free trial offer. Here’s how this works in practice: After burying an automatic-renewal plan in difficult-to-follow fine print, or never mentioning it at all when making a sale, a company will proceed to charge customers for additional products or services that the customers did not believe they were buying. Only later, after consumers are out of their hard-earned money, might they realize that they were taken for a ride they did not want.
When a company hides from a customer critical terms of a sale — such as whether it is an automatically renewing service — we at the attorney general’s office want to know about it. Such sales violate the Colorado Consumer Protection Act.
To understand what we are talking about, consider the case of Fit Turf, a lawn-care services company that used telemarketers to enroll thousands of Colorado consumers in automatically renewing service plans. Fit Turf often failed to inform its consumers in advance about its auto-renewal policy. While many customers may have wished to continue to use Fit Turf’s service, they were not given the clear choice on whether to continue or not. Our settlement with Fit Turf requires that all future sales of auto-renewing services include a clear and conspicuous disclosure that the services will renew unless canceled. Fit Turf also agreed to contact all consumers who enrolled in its services in the previous three years to obtain express permission to continue those customers in auto-renewing services.
Another scheme that consumers need to be on the lookout for is where sellers lure them with offers of “free” goods or services during a “trial period,” disclosing, only in fine print hidden in a website’s “terms and conditions,” that the consumer will be charged for additional expensive products. Unless the consumer notices and expressly rejects these hidden charges almost immediately, the seller automatically bills the consumer’s credit card for the unwanted products. As evidenced by the Fit Turf case, we believe that consumers have the right to a clear and conspicuous disclosure of a future charges.
When used properly, a free-trial period provides a valuable consumer benefit, introducing a new product or service. But when abused by irresponsible merchants, these offers become unfair schemes to deceive consumers. In short, irresponsible companies use such schemes to benefit themselves at the expense of consumers. Since 2009, for example, the Federal Trade Commission has acted in such cases and recovered more than $1.4 billion. And that’s just the amount collected from those who were caught.
For consumers, the prevalence of such schemes calls for constant vigilance when signing up for a new service. Be sure to ask the critical questions about how long it lasts and whether the pricing will vary over time. The best protection for consumers is to avoid a pitch that sounds too good to be true and will become a cause for remorse later. If you believe you were lured into a deceptive scheme, please contact us at stopfraudcolorado.gov.
For businesses, please take note of the right way to market services in a responsible manner. When consumers are misled and later distrust all offers, all responsible businesses are hurt. Similarly, if irresponsible businesses are allowed to take advantage and benefit from such tactics, the lack of enforcement puts responsible businesses at an unfair disadvantage.
Together, we can support a pro-responsible business environment here in Colorado that treats consumers fairly and builds trust that people are not getting taken advantage of through undisclosed terms or auto-renewals that surprise consumers down the road — after they have been taken advantage of and are rightly upset.