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Breaking up is hard to do for subscribers

It's easy to see why subscription-based companies love the automatic renewal. But many consumers hate it.

By Credit.com Aug 19, 2013 5:45PM

This post comes from Bob Sullivan at partner site Credit.com.


MSN Money PartnerWhen was the last time you tried to give a company $100 and it refused to take it?

Image: Credit card © Mike Kemp, Getty Images, Getty ImagesThat happened to me this week as I bargained with Sirius XM Radio over continuing my membership to the satellite radio service.  I said I would renew for a year, but only if the firm put in writing that it would not automatically renew my account. I'd had a bad time twice with the firm's renewal policies, as have many others, and I told them I wouldn't play renewal roulette again.

Sirius turned down my money rather than agree to my terms. That's how critical automatic renewals are to Sirius XM’s business model.

It's easy to see why subscription-based companies love automatic renewals. All that predictable revenue is lovely. And if a few -- or a lot -- of consumers end up paying accidentally for services they don't want but don't bother canceling, well, that's just leveraging consumer behavior. Heck, that's not a bad business plan. America Online's dial-up still has 2.6 million paying subscribers, many who may have simply forgotten they are paying for it.

Sirius isn't AOL. I still love the online service's live sports offerings, though increasingly, I get what I need through streaming directly from sports leagues. Despite all the terrestrial and Internet competition, the satellite service passed 25 million subscribers last quarter, and optimistic investors keep hoping the stock will finally find its way above $5 for the first time since 2005.

When a company relies so heavily on automatic renewals, it's worth questioning how loyal its customers are, however.

Sirius media relations spokesman Sal Resendez, when told about my situations and asked about similar tales, did not respond to requests for comment on this story at press time.

A long-term commitment
Like many XM users, I "inherited" the service when I bought a car two years ago. It was built right into the car's radio. I tried it for a year at a good price, and liked it well enough, but never really considered renewing. The credit card I had used to make my initial purchase had expired, so I assumed the service would simply stop working after my term was up. My inaction was costly.

Last summer, I began receiving threatening collection notices, as Sirius XM had automatically renewed me and billed me for an entire year at double the price. I objected, and the firm made me an offer -- another year at half the price. I agreed, but said repeatedly that I did not authorize the firm to charge my credit card again in a year, or to renew my account. I bet you know what came next.

This month, Sirius charged my credit card $174. To its credit, the firm quickly offered me a refund when I called to object, but then said it would send me an invoice. At this point, I said I was annoyed enough that I wanted to cancel. A second operator offered me a deal at half the price again. I agreed, as long as I received notice in writing that I would not be auto-renewed. The operator said that wasn't possible, and I canceled.

This was a reasonable negotiation between two informed actors that didn't leave me with a bad taste in my mouth. Sirius has obviously calculated that automatic renewal -- really, lowering the risk that I might quit -- is part of the price I must pay to have its service. I decided I didn't want to pay that price.


Customer dissatisfaction
Not all automatic renewal stories have such a rational end, however, and the technique has run afoul of state and federal regulators many times with many companies. Reacting to a slew of consumer complaints about websites with questionable practices, Florida and California both passed laws in 2010 creating new legal burdens on firms engaging in auto-renewals.

At about the same time, Sirius disclosed in an SEC filing that it was the subject of a "multistate working group" led by then Ohio Attorney General Richard Cordray that was probing the firm’s billing practices.

No action was taken against the firm.

Back then, the Better Business Bureau said it had 3,000 complaints about the company and Sirius faced a barrage of negative publicity. Today, the company has an A+ rating with the BBB, but the organization also notes on its website that there have been 1,500 resolved complaints against the firm in the past 12 months, most dealing with billing issues. That's a tiny fraction of the firm's 25 million users, but it's not an insignificant number.

No doubt, some consumers appreciate the set-it-and-forget-it nature of automatic renewals, which as the firm says, "allows us to ensure your service is never interrupted.” The practice is perfectly legal as long there is "clear and conspicuous" disclosure, and consumers have a legitimate chance to cancel, as I did.

Still, auto-renewal opens the door for abuse, and a quick scan of the Internet reveals many consumers hate it. If I were an investor, I would wonder why the firm seems to value automatic renewal more than money.

Red tape wrestling tips
Consumers can certainly do what I did -- simply refuse to do business with firms that force automatic renewal. That's often not realistic, however, so here's a few suggestions.

Separate credit card
The biggest problem with auto-renewal is the likelihood that you will end up paying for something you don't want because you forget about it. That's even more true when renewal charges are rare, such as annual bills. One good way to avoid that -- use a separate, rarely-used credit card for these kinds of business deals. That way, the renewal charges are less likely to get lost in a sea of other charges.

Don't just shrug
Any time a company surprises a consumer with a charge, that's wrong. Call and fight it. Complain to your attorney general. Complaining is like voting, I often say. If no one does it, the bad practices go on forever. Even if you lose the battle, you will win the war by complaining. Also, know your rights if someone alleges you owe a debt that you dispute.

Negotiate
When you call to complain, say you plan to cancel and get to what's called the "customer retention department." Agents there have special powers to make deals that front-line agents do not. Often, you can get a company to waive late fees or other unfair charges by agreeing to renew at a bargain rate, which can be a happy ending for everyone.

Credit, not debit
Never use a debit card for subscriptions that might auto-renew. Consumer rights to dispute credit charges are stronger than debit rights -- for starters, with a credit charge, you simply dispute and don’t pay. With a debit charge, you have to fight to get back money that’s been taken from your account.

More from Credit.com:
183Comments
Dec 3, 2013 6:29PM
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automatic renewls should be outlawed
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Automatic renewal requirement equals NO SALE for me.
Dec 3, 2013 6:24PM
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I was considering a subscription to XM Radio until reading this.  I just purchased a vehicle that has it in it.....is nice, but not worth the hassle!  thanks for the article.
Dec 3, 2013 6:39PM
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Use a prepaid card and then when try to auto renew it won’t work.

 

When this happened to me I emailed them and told them they had 30 minutes to take the charge off my account or I would contact the state attorney general. Since the charge was still there I filed a fraud complaint with the attorney general. I also immediately contacted the credit card company and told them it was a fraudulent charge and demanded that they remove it immediately, which they did.

 

Folks need to complain to their credit card companies, if they get enough complaints they will not approve any transactions to the offending vendor because it costs them too much to investigate and deal with the complaints.

 

You may see your contacting the attorney general or other agency as one complaint, but if the complaints start adding up for the same thing they do notice.

Dec 3, 2013 6:53PM
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I have cancelled several magazines due to automatic renewal - I would have renewed - but I want it to be MY choice!
Dec 3, 2013 6:41PM
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Auto Renewals - NEVER give up control like that!!!!
Dec 3, 2013 6:40PM
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It is important to be vigilant about these automatic renewals; they don't automatically renew at your original price!  Recently I received a thank you letter for a magazine subscription that does not expire until next April.  The renewal rate was considerably higher than the original subscription, so I went on-line, clicked on the magazine cancellation service, and went through the process. It wasn't difficult as much as annoying!  I do not trust the automatic renewal system at all, and will avoid companies that use the tactic.
Dec 3, 2013 6:16PM
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No wonder they insisted on a credit card when it was time to renew the trial service I'd gotten with a new car.  When I told them I'd pay by check after they sent me a bill they ignored me and kept asking for a credit card number.  So I hung up.  It took three months of telling them "not interested" when they kept calling me before they gave up... although I still get offers from them in the mail every few months.
Dec 3, 2013 7:08PM
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I didn't accept automatic billing from Sirius. Instead, I demanded a bill, Don't remember if it was monthly or quarterly, The billing got so screwed up, I lost patience and rather impolitely told them what they could do with their service. Since then, I haven't missed Sirius at all in my car. NPR and a good CD collection have kept me quite happy. Lesson learned: don't do business with companies that require automatic billing. Monthly or quarterly billing requires them to keep you happy to keep your business. 
Dec 3, 2013 6:49PM
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Pay by check not credit card = Nothing automatic next year!
Dec 3, 2013 6:48PM
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I change my credit card # every year.  Not the account just the number.
Dec 3, 2013 7:09PM
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I had a subscription to Rolling Stone Magazine for probably over twenty years and always renewed on my own volition.  To my surprise, I received a charge on my credit card for automatic renewal.  It annoyed me so much that I just cancelled.  Have I received any sort of reply to my complaint?  No, and that's why they don't get my business anymore.
Dec 3, 2013 7:18PM
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Just had the same issue with Sirius - not only charged our account but upped the service from "basic" to their best - which was roughly $100 more than we'd been paying.  Several long winded phone calls later, finally got them to reimburse our account!  Now, after several phone calls and mailings, they gave us 5 months at $25.00 - and we paid by check - no more credit card dealings with them!!


Dec 3, 2013 6:44PM
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Why not simply pay with a mailed check instead of giving a debit OR credit card number?
Dec 3, 2013 7:01PM
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Once these folks who use auto-renew have your payment,you may as well kiss it goodbye.

You'll need an exponential amount in lawyer fees to get it back.

The first time I ever saw auto-renew some years ago when complaints about it were sporadic,I looked until I found the appropriate info and killed it.

If I see auto-renew  on something I'm considering,I first make sure how to kill it BEFORE I sign up.

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Same here Auto renew Keep it out my Pocket.
Dec 3, 2013 6:22PM
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Gunthy Renker, probably the most guilty of all when it comes to automatic renewals. Cindy Crawford, Wen hair care, their program really sucks.
Dec 3, 2013 6:56PM
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cancelled a debit card and dish network still took money from bank account, had to close bank account and open a new one TD bank said it was preauthorized
Dec 3, 2013 6:55PM
Dec 3, 2013 8:00PM
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WOW I'm proud of everyone that will not allow Automatic Renewal!! They should be OUTLAWED, maybe we could get congress to pass a bill that would outlaw them!!  Oh wait we can't even get them to pass a budget.
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