In 2011, I was lucky enough to go travelling around the world, which I can only describe as one of the best things I have ever done. However, when I got back and started taking stock of my finances, I noticed a £15 charge to a company that I didn’t recognise.
I found this charge on numerous monthly bank statements, so I did some Googling to investigate. Google told me which company was the likely culprit, so I called them to find out what was going on. The operator informed me that I was subscribed to their monthly magazine for £15 every month, which didn’t seem like something I would do.
It turned out that I had entered an introductory trial of their magazine, which entailed paying £3 for three issues. What I didn’t know, was that after the 3rd issue I would automatically be charged £15 every month until I decided to opt out. It turns out I had been charged this amount for over a year, so had spent £200 on a service I didn’t even know about. I felt I had been duped.

The subscription ‘trap’

To put this into perspective, £200 would have paid for 30 additional nights of accommodation in Vietnam, or 3 months of restaurant meals in local dining spots in Thailand. Instead, it had dripped out of my fingers £15 at a time, because of my own carelessness. I felt negligent, ashamed and embarrassed and I didn’t tell a soul.
This is a common ploy used by companies, and it costs the UK £4bn per year. It starts with people entering cheap trials that then begin charging automatically at the end of the trial period. These payments continue unchecked because they are small, infrequent and often intentionally mislabelled. The problem is compounded by the fact that, when they realise, people often find it hard to escape due to deliberately opaque and long-winded cancellation procedures.

Research by Money & Mental Health shows that people with mental health problems are more likely to fall into these so-called ‘subscription traps’. 71% of people with mental health conditions say they have signed up to subscription services, compared to 58% of people without. Once signed up they are more likely to forget to cancel, and three times more likely to be put off by phone-only cancellation procedures. 21% of those who said they’d put cancellation off even though they no longer wanted the service said it was because they thought the company would pressure them to stay, 20% thought it would take a lot of effort and 9% said they didn’t know how.

We spoke to Aiden Hatfield, who is the Founder of In Music We Trust. The popular clothing brand which donates 50% of its profits to the mental health charity, Mind. He explained that he would have put off cancelling unwanted payments during periods of mental stress because “It would have been the sort of thing I’d have hidden from, with the hope it would go away. It would have caused me stress without me even knowing that that’s what was bugging me. They don’t understand the stress it can cause some people.”

A complicated process

Following my experience of getting caught out by an unwanted subscription, I set up a company called SmartBill. We protect other people from this problem by keeping an eye on recurring payments, and then cancelling on your behalf when you want to. Given our experience of cancelling subscriptions, we can attest that current cancellation procedures need to be changed. Citizens Advice found that two million people struggle to cancel subscriptions in the UK each year and this doesn’t surprise us.

The first challenge is in actually finding the cancellation procedure, which can be hidden in long company T&C’s or in a dark corner of the website. In addition, the stated procedures don’t necessarily work in practice. Some companies state that you can cancel online but you need to phone to complete the cancellation. Phone cancellation results in endless menu navigation and long wait times to get through to someone who can help. It’s also not uncommon to make multiple calls because you don’t know what information you need to provide on the first call. When online cancellation is available, the processing times can be so long that you need to call if you want to enact your cancellation before the next payment date. This process can be even harder to navigate in a period of poor mental health.
We also find that those consumers who fear being pressured into staying with companies are not entirely wrong. We often find ourselves being presented with incentives to avoid the cancellation. Whilst some people use this avenue to intentionally secure cheaper deals, we understand why this would deter others from calling up at all.

Providing an escape route

We think that companies should offer a multitude of cancellation options to enable users to the route they find most manageable, including both online and phone cancellation. For online cancellation, we think a cancellation email address should be mandatory as opposed to having to log into your account, which requires remembering the email, username or password for that account which is easily forgotten. We also think that it should be easier to cancel on someone’s behalf, where the account holder is not able to make the cancellation themselves but has provided the necessary information to a third party. Given the challenges outlined by Money and Mental Health and our own experience, we think this would remove the barriers to cancellation for a lot of people.

UK government committed to tackling the ‘subscription trap’ in the Spring 2017 budget, and we look forward to seeing what measures they propose to solve the problem.

Thanks for reading!

Nikhil, SmartBill

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