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Scots urged to beware online 'subscription traps'

8 Mar 2016

Many online companies are using ‘dodgy tactics’ to lure people into subscriptions they don’t want. That’s the finding of a new report by the Citizens Advice service.

Our report, Locked In, focuses on one of the main tools that online traders use to hook people: the Continuous Payment Authority (CPA). Like a Direct Debit, it allows companies to take money from your bank or credit card account. But unlike a DD, a CPA has few protections, and allows the company to alter the amount it takes from you. For a full explanation of how a CPA works see our related blog post.

Moreover, some companies hide key information about their deal before you sign up. Our research showed that 84% of Scottish respondents to our survey didn't realise they had agreed to a subscription. Young people are most vulnerable: 18-24 yr olds are least likely to know what a CPA is, yet almost half have set one up in the past year. 

Another problem we have found is that 81,000 Scots have been prevented from cancelling a CPA subscription, either by the company or by their bank – despite the fact that it is their right to do so at any time.  

As today’s report is published jointly with our Citizens Advice colleagues in England and Wales, the research data it contains is GB-wide. But we can now publish the Scotland-only breakdown here.

  • 75% (over 4 million) of Scots do not know difference between Direct Debit and CPA (this is slightly better than the all-GB figure of 80%)
  • 86% of Scotland’s 18-24 year olds (435,000) do not know the difference, despite almost half (47% or 238,000) setting one up in the past year
  • 2.14 million Scots have set up a CPA in the last year
  • 1 million Scots have cancelled a CPA in the last year (1,016,044)
  • 81,000 Scots have tried to cancel a CPA with the company but been turned down (It’s their legal right to cancel at any time)
  • 30,000 Scots have tried to cancel a CPA at their bank but been turned away (A bank must cancel if asked)

Publishing the report today Citizens Advice Scotland’s Consumer spokesman Fraser Sutherland says,

“In this report we have identified a major problem facing consumers across the country. Many online companies are luring people into signing up for long-term subscriptions, often without even realising it. We’ve all seen the pop-up adverts for a ‘free trial,’  e.g. of a healthcare product, like slimming pills. Unfortunately in many cases these end up being anything but free.

“One of the problems is that the company will use complicated language to describe what you are signing up to. In many cases they even with-hold key details altogether. A further problem is that they often use a CPA rather than a Direct Debit as the payment mechanism. But there is a big difference between the two. With a DD you are covered by a guarantee from your bank: if they make a mistake they have to refund you, and you can review all your Direct Debits easily. But with a CPA you don't have these protections. There is no guarantee, and nor is there any easy way to see what is active on your account. And the worst part of a CPA is that the company can charge how much they take from you and as often as they like.

“Our research finds that 1 million Scots last year had reason to cancel a recurring payment, but many found barriers in doing  this – despite the fact it is their right. We want it to be easier for consumers to cancel recurring payments and we have called on the Financial Conduct Authority to make sure that both traders and banks play fair. We are also calling on social media firms and websites that advertise these companies to take these adverts down when they get complaints, and the subscription companies themselves must make it clearer that people are signing up to a subscription in the first place.

“The bottom line here is that consumers who shop online must be protected from traps which deliberately take advantage of them. The internet is a fantastic tool for consumers, but it brings with it many traps and scams. We need to iron these out, so that people can enjoy the online experience without having to worry about whether they are being exploited.

“Our advice to anyone who uses the internet is to always read the small-print carefully so you know what you are signing up to. And also, check your bank account and credit card statements regularly. If you see payments going out that you weren’t aware of, you have the right to cancel these at any time: contact both the trader and your bank. You can get more advice from your local CAB, or our consumer helpline 03454 040506, or our advice website www.adviceguide.org

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