Purchasing Services Online – A Pocket Guide

How many times have you been browsing a service online that requires a subscription to continue viewing? I can name quite a few:

  • Netflix
  • Microsoft Office/365
  • Spotify
  • Amazon Prime
  • Google’s YouTube Premium.

Online Services

Most online services, like the above, will offer a trial period for free and then expect you to sign-up to a subscription service to continue to use it. This lure is very seductive especially when the service becomes part of your life as is the case with the above. If you are happy to continue the subscription (which may be monthly or annually for a discount) then that’s OK. But what if you decide it isn’t something you want to pay for, or you find a better service that is more comprehensive or cheaper? Normally you go onto the service and cancel the subscription and that’s the end of it.

However, what we are seeing is a number of services provided through social media and through mobile app stores who make it especially hard to cancel the subscription and continue to charge you after the trial period. Also, we are seeing people forgetting they provided a payment method to qualify for the free period and then the company assuming you want to continue and start charging you.

There have been cases where these services have charged for a years subscription at full price and drained someone’s bank account, or imposed charges on their credit card. In these cases the bank/credit card company cannot act as you provided your consent when you signed up. If presented with the payment request from the service, they have to honour it.

In App Purchases

I am betting if you have a smartphone and have browsed the Apple App Store or Google Play Store, you will have seen listings like the one on the left for Netflix stating the app contains ‘In-app Purchases’.

What does this actually mean?

It means that the app is free to download. It might be free for a trial period or for non-premium services. Then after the trial period, or for premium content, you will be charged. You may be asked to subscribe to a subscription and this will be charged to the payment method attached to the app store.

On a monthly basis (maybe annually or for individual purchases) your payment method will be charged, and because you have provided authorisation through the app store the payment will be honoured by the bank/credit card company that issued the payment method.

This is particularly an issue for games since these often provide extra levels and powers for an in-app charge.

A company like Netflix is a reputable company and will provide a good service (I personally don’t subscribe to their service and have not been paid to promote them). Netflix do provide some content for free, but the latest film releases will be charged.

Social media platforms, like Facebook, also provide services through third parties and again you will sign-up using the payment method attached to the social media account.

There are ways to turn off In-App purchases in Apples App Store and Googles Play Store. The best way to limit the opportunity to make a mistake with In-App purchases is not to provide a payment method at all.

Online Dating Apps/Services

Dating apps also lure you in by allowing you to browse potential contacts and then requesting a subscription to initiate contact or answer messages you may receive. If anyone has tried these services, you may well find a number of people contact you almost immediately when you sign up for the free service. However, these are a lure to get you to sign-up for the subscription. They may be real people, but also can be fake accounts put up by the service to make you want to sign-up for the paid service. This is not necessarily illegal, but in my opinion unethical because they are preying on the reason you might be looking there in the first place.

Some dating services and social media sites have also been used by human traffickers as recently notified by the FBI.

What happens when you try to cancel subscriptions?

The first you may know of an active subscription is when you see charges being made against your credit card or bank account. This is when you need to contact the company making the charges to cancel the subscription.

What then happens is often one of two outcomes:

  • The subscription is cancelled and all charges stop
  • The subscription is cancelled, but charges continue because:
    • You have signed up for a year and these are mandatory
    • The company is not genuine and are fleecing your account.

If the company is operating under UK distance selling regulations (there may be similar regulations in your country), then you have the right to cancel within a cooling off period – normally a month (the minimum by law is 7 days) from the date you first received the service or goods. This is the case even with annual commitments. However, you must cancel within the cooling off period. A good example of this is when you sign-up for a new mobile phone contract where during the cooling off period you can cancel the monthly subscription and return the phone/SIM card. However, there are some cases where this doesn’t apply and this article from Which explains this.

This assumes that the service provider is running with UK rules. A lot of these companies operate from an offshore location where these regulations don’t exist. However, if they are selling into the UK market, the UK regulations apply (same will often apply for your country). In these cases, due to the small amounts of money involved, it is not easy to prosecute these companies. If they attract too much attention they will just terminate operations and set up elsewhere.

What happens when you try to return goods?

Because of the UK regulations, you are often allowed to return goods purchased online for a refund provided they are unused, in the original condition and in the original undamaged packaging. It is reasonable to expect a full refund, but in some cases the company will deduct the return postage from the refund. For example if you purchased the wrong size of garment or the item was fully functional but you changed your mind. They may also charge a restocking fee to put the item back into their inventory or to cover their loss if they then resell at a discount. If the item was defective then a full refund, replacement item or some form of credit note is often given. The problem with refunds through credit with the company is that you have to buy something else through the company (Amazon do this by issuing a virtual gift card).

However, I have come across services where items have been purchased though a social media influencers recommendation and the refund policy is not guaranteed. In this case they won’t offer any refund and will ignore any requests to return or or reply stating that a return isn’t possible.

How to protect yourself

Firstly read the Which article on Distance Selling Regulations in the UK. If you are not in the UK then seek out the equivalent in your country.

When you make a purchase online:

  • Investigate the sellers return policy
  • Investigate where the item is sourced from – if not in your country, then making a later claim may not be easy
  • Investigate any charges for the return of goods
  • Check on the returns period – this should be prominently placed on the item description or in a returns policy
  • For services, check the cancellation rights
  • Investigate whether or not the item can be returned (e.g. some items of personal clothing and sanitary products may not be returnable)

As an example, eBay prominently states the return policy on all purchases as in the following example:

All companies like this will have a returns policy and you need to check this before you commit to a purchase.

Cancelling a Subscription

You should always be able to cancel a subscription, irrespective of whether it is an online service or for an in-person service like a car valet.

You need to check the Terms and Conditions to see the cancellation rights and the notice period for any cancellation. If you have signed up for a years subscription (e.g. in the case of Amazon Prime, Microsoft 365, Google G-Suite) then you will continue to enjoy the service until that subscription ends. Some companies may allow you to terminate the subscription early for a fee (e.g. energy providers often will charge £10 per energy type for early termination of a tariff lasting a year or more). If you subscribe monthly and cancel mid month, you will likely enjoy the service for the remainder of that month.

Once the service has been cancelled you will lose access to all services provided by that subscription. This may not have any impact, but if you also have online storage associated with the subscription (e.g. as with Microsoft 365) you may lose access to your files after a period of time if you don’t move them elsewhere.

With online movie and music streaming catalogues and (e.g. Spotify, Netflix, Amazon Prime Video), you will lose access to all your purchased videos and music as well. You may still be able to use a free service, but this will always be supported by advertisements.

It should be noted that you are not buying movies and music through these streaming services in the same way as you would buy a DVD/Blue Ray disc. You are buying a licence to the media and with it, though the continued subscription for the licence, you will be able to view the content when you want. Once you terminate the subscription/licence the access rights also go away. Even when you buy physical media, you are also just buying a licence to view the material and there will be restrictions – read the back cover of any purchased DVD/BR/CD disc in the small print.

What can I do if the subscription continues even when cancelled

You may have signed up for a year. This is often the case for TV and energy services where you sign up at a discount/fixed rate for a year and then revert to the full/variable rate thereafter. Unless the service provider allows you to cancel mid-year, you will have to pay the remainder of the service subscription either as a lump sum or as a monthly payment. Again, you need to look very carefully at the companies Terms and Conditions and comply with them and if necessary force the company to abide by them too.

What if the company refuses to respond and still charges?

You have several avenues open to you. You can report them to the regulatory body. However, in the UK the government has terminated a lot of the government sponsored agencies and advises you to look at other private companies. You can:

If a financial services company is acting fraudulently then you should contact the Police and report them to their regulatory body (in the UK this is the Financial Conduct Authority).

You can also contact your bank or credit card company to cancel any direct debits on your account relating to the rogue service. This will normally terminate any recurring charges made through direct debits. The same applies to standing orders. However, be careful when you do this. You may be committed to the full term of the service and the company may come back to you to claim the remaining fees. In the worse case scenario this can result in legal action. Before you resort to this you need to exhaust all other avenues to terminate the service.

Online Payment Methods

My number one precaution is to take out a separate credit card that you use for online shopping. Do not use this for any in-person transactions. Any transactions that do appear will be online ones or resulting from online fraud and if necessary the card can be cancelled without leaving you without an active credit card.

Record everywhere you have lodged your credit card online. This could be in a note taking app (e.g. OneNote, EverNote, Apple Notes), or in a text file you can keep on your online (or offline) storage. This will help you when you need to change credit card expiry dates, etc. It will also help you to track down a rogue transaction especially if your credit card has been skimmed/cloned or disclosed in a data breach. If you do this don’t put the full details in the note, just put in the Issuer of the card and the last four digits. Do not put the commencement and expiry dates and CVV/Security Code number into the note. If the note is then disclosed in some form, the recipient won’t have all the information required to use the credit card details.

If you don’t need to provide a payment method, then don’t. Only add the payment method when you need it and then once completed remove it.

I would advise against lodging credit/debit card numbers with any website you have no history with. I personally use an online payment option like PayPal which insulates your actual payment method behind their service. Of course, PayPal would still have your credit/debit card details, but they will never disclose them to an online shop.

There are other online payment services you can use. However, please make sure they are regulated and have a good reputation. Also, ask your friends and family for recommendations.

We also blogged about Electronic Payments in August 2019, and all of the advice in this blog still stands.

Another method is not to store the credit card details with the service. This is inconvenient since you will have to re-enter the details every time you use the service. However it is more secure. LastPass (as well as a number of other such services) allow you to lodge credit/debit cards with your LastPass account. However, I would advise here not to enter your security code so that the details are almost useless to any would be attacker.

If your Online Payment Method is being abused, then remove it from the service and do not replace it. However, take a note of the advice above before you do this.

Fleeceware

This is defined in our glossary as:

“… a form of fraud where you install an app that abuses the ability to offer trial periods to users before their accounts are charged. When a user signs up for an app trial period, they have to manually cancel the trial to avoid being charged. Most users just uninstall apps they don’t like and the majority of app developers take this as a sign that they wish to cancel the trial period without being charged. However some continue to charge the premium subscription charges.”

In January 2020 it was reported that the Google Play Sore had a large number of apps that were guilty of this practice (see ZDNet’s article and Info Securities article). To be fair to Google, they are acting on this and removing these apps as soon as they are detected as well as introducing additional policies to prevent this from happening in the future.

However, it is not only Google. It was found in April 220 that the same is happening on the Apple iOS App Store.

In order to reduce this threat, here are a few precautions:

  • Read the Terms and conditions of any trial period
  • If you decide to not subscribe after the trial period, cancel the subscription in the Google Play Store or Apple App Store before the end of the trial – in fact any store you use including the Microsoft Windows 10 Store
  • Cancel the subscription before you remove the App
  • Remove the App so that you don’t access it by mistake and reactivate the subscription
  • If in the future you re-install the app, you may be prompted to reactivate the subscription before you can use the app since you will have used up your free trial period.

Data Breaches

Every day we are seeing new data breaches being reported in the press. Some are minor, but some are massive. If Credit/Debit Card or banking details are disclosed then you need to act by cancelling the payment method with your bank immediately. For online use, this is where a separate credit card is useful that is only used for online purchases. If the online card is cancelled you will still have a regular card for in-person transactions.

Conclusion

With everything that has happened in 2020 with more people working from home during the Coronavirus lockdowns, people are using online services much more frequently than in previous years. Some have quoted that 3 years of digitalization efforts has taken place in 3 months during this period.

With this increased use of online services comes an increased opportunity for cyber attack and fraud. As a result consumers and businesses alike need to be extra vigilant.

To summarise:

  • Read the T&C’s, Privacy Policy and Refund/Returns policy before you subscribe
  • Keep a Credit Card purely for online purposes
  • Use an online service for payments (e.g. PayPal) where you have no experience of the company
  • Observe any trial periods and cancel the subscription before the end of the trial period to avoid falling found of repeat charges
  • Limit who you lodge credit cards with online
  • If the company suffers a data breach where credit card numbers are disclosed, cancel the credit card and have it re-issued by the bank.

If you want to cancel a subscription, contact the company providing the service first before you start cancelling payment methods. Only cancel payment methods as a last resort.

Please also note that even if you cancel a credit card, the payments may still continue to be processed against your account and the new card number since you authorised them with the service provider online.

It should also be noted that in the UK, if you use a credit card online, you are protected from Credit Fraud by the UK laws and the credit card company. Therefore it is probably better to use a credit card for large online purchases and definitely for holidays. However, this is where the online only credit card comes in.

Disclaimer: While I may use some of the online services mentioned in this blog, I am not being paid or sponsored to endorse any of them. If you choose to use them then you do so at your own risk.


Headline photo by  Negative Space from Pexels

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