In last week’s Spring Budget, the UK government finally acknowledged a problem plaguing 60% of the UK population. That is the issue of companies employing ‘subscription traps’ to lure customers into unwittingly parting with their money on a regular basis.
So, what is a subscription trap? One of the most common types is when companies offer free or cheap trial periods, counting on the fact that consumers will forget to cancel before higher prices kick in.
Our research suggests that this is a huge problem with 18% of 18-35 year olds wasting £1164 each year on subscriptions they don’t need . However, the problem is widespread across all age ranges resulting in £4bn being wasted each year on unused subscription services in the UK alone .
Difficult to spot
Subscription payments are tricky to spot because they are usually for comparatively small amounts hidden within all of your other transactions. This is very different to utility bills for instance, which are clearly highlighted as Direct Debits on all of our bank statements. Banks are not currently able to segregate out our subscriptions for us.
The most painful subscriptions in our experience are those that do not occur regularly every month but rather its those quarterly or annual charges that are most surprising. They are also for far larger amounts and once the charge hits our accounts, its too late! Am sure many of us have been hit with an annual payment for an online service (magazine subscription, priority delivery memebership etc.) that you use once and then forget about!
Difficult to cancel
So once you have identified the subscription, the problem is solved right? Unfortunately not.
Companies don’t always make it easy to cancel. They know we would rather not to spend our Saturday afternoons on the phone, trying to cancel smallish payments that occur once a quarter and are likely not to act. To make things worse they often make their T&C’s are intentionally long and complicated, so the cancellation terms aren’t easy to find even if you look.
The Government has finally identified that ‘Subscription Traps’ are a problem and are unfair to consumers. They are proposing measures, to attempt to counteract the issue, in a Green Paper to be announced in this week’s spring budget.
Some of the measures that will be outlined in the government’s green paper are expected to include:
– Making company T&C’s clearer;
– Requiring the ticking of an additional box to acknowledge that a consumer has understood that they are entering into a subscription arrangement;
– Preventing companies from taking Credit Card information when offering free trials.
We at Smart Bill are extremely glad that the Government finally acknowledges the problem and is taking steps in the right direction. We look forward to seeing more detail on Wednesday, although we do wonder if the proposed measures will go far enough to protect consumers.
For instance, “increased clarity” of T&C’s will be of limited use if its not focused on increasing the prominence, clarity and ease of subscription cancellation procedures. Also, giving consumers another box to tick before signing up to a subscriptions, is hardly going to prevent the issue.
Even if a solid set of measures is adopted, we know its going to be a long while before these measures actually protect consumers, and estimate that it could be another 2 years or more before these are incorporated into law.
Our research shows that in that time, 18-35’s will have wasted an additional £2,300 on unused services, and the nation as a whole will wasted an additional £8bn! This seems unacceptable to us so we created SmartBill, which is a free service to help consumers right now.
– Shows you all of your recurring payments, across all of your bank accounts in one convenient place (unlike your online bank, we include subscriptions as well as Direct Debits and Standing orders)
– It gives you the option to cancel any payments in a single click. We do the legwork, so you can spend your Saturday afternoons doing what you actually want.
– It sends you a reminder before any big recurring payments, like insurance premiums, are taken from your account, so you have the option to avoid entering into an expensive automatic renewal.
– It monitors all of your outgoing payments and alerts you to any price hikes that you were not expecting.
– It operates on a secure platform, which employs Bank Level Security, and complete data privacy for your piece of mind.
Sign up to become a free beta user at http://www.smart-bill.co.uk which will definitely not turn into a paid subscription in 3 months! ☺
Other steps you could take include:
– Being wary of free trials, especially when they ask for your credit card details
– When signing up for a service, find out the cancellation procedure.
– Keep a watchful eye on your bank statements and start keeping a record of all the different recurring types of recurring payments leaving your account monthly, quarterly, bi-annually and annually.
– Use the above stay aware of what payments will be leaving your account and when and serve notice to companies in advance of this.
Alternatively you can always pop over to SmartBill and let us take care of the problem for you. We would love to have you on board ☺