[ALERT] Beware The Recurring Charge Scam
A college freshman bought some lingerie on an ecommerce site called “Adore Me.” Several months later, her debit card was declined at a brick-and-mortar store; she was overdrawn. When she reviewed her bank’s records, she discovered monthly charges of $39.95 from “Adore Me” which she did not recall authorizing. That was just the beginning of this outrageous scam. Here's what holiday shoppers need to know about this and other recurring credit card charge scams...
Holiday Shoppers, Beware of Recurring Charges
The young woman had received only the one order from the company, and nothing in exchange for those $39.95 charges. Despite Mom’s assistance, they were unable to stop the recurring charges. “Adore Me” insisted she had agreed to a “subscription” in which she accumulated “points” that she could spend on the site. The scammers pointed to a checkbox and fine print at the bottom of their checkout page that said, in effect, “By placing one order you agree to pay us $39.95 each month, indefinitely.” The box was checked by default.
Multiple attempts to cancel this bogus “subscription” (Who subscribes to underwear?) were either ignored or falsely promised to be honored. Finally, after months of torture, “Adore Me” refunded the monthly charges. Yes, she could have handled the situation differently; I would have reported my card stolen and gotten a new card number, simultaneously disputing the unauthorized monthly charges. But obviously, “Adore Me” is running a scam, and it is not alone.
This “recurring charges” scam is echoed in the software industry; ironically, it is common among online service providers and security software developers who purport to protect us from scammers. But lately, it has become more prevalent in e-commerce applications such as “Adore Me.”
Subscription ecommerce is a booming segment of the booming ecommerce market. “The largest such retailers generated more than $2.6 billion in sales in 2016, up from a mere $57.0 million in 2011,” according to a McKinsey research report published in February, 2018. The subscription model has been applied to a broad range of products “in a wide range of categories, including beer and wine, child and baby items, contact lenses, cosmetics, feminine products, meal kits, pet food, razors, underwear, women’s and men’s apparel, video games, and vitamins,” says the report.
Busy, convenience-driven consumers subscribe readily; about 15% of online shoppers subscribe to one or more products, says McKinsey. The business model is popular with consumer products makers ranging from start-ups like Blue Apron to venerable giants like P&G and Walmart. There is nothing inherently wrong with subscriptions when they are entered into voluntarily by fully informed consumers. But it’s apparent that “Adore Me” and other online stores are perverting the subscription model.
"Gotcha" As a Business Model
Many others have had a similar unpleasant experience with Fabletics, a clothing merchant. If you're not very careful, making a purchase will opt you in to a "VIP membership" which gives Fabletics permission to ding your credit card for $49.95 every month, unless you remember to log in before the 5th of the month to "skip the month." How many pairs of leggings do you need? Those funds do accrue in your Fabletics account, but it's not easy to spend your credits, and even harder to cancel the subscription.
Many companies that profit from these recurring automatic monthly charges have specially trained "customer retention specialists" that will bargain - and even argue - with upset customers to retain them as paying members. If you've ever tried to cancel a subscription-based service, you know how maddening it can be to speak with these agents. It's almost as if these companies derive pleasure from misleading and angering their customers.
The Federal Trade Commission has settled fraud cases against 12 subscription-based companies, assessing fines of over $400 million. "It's an area that's rife with problems right now," James Kohm, assistant director of enforcement at the FTC's Bureau of Consumer Protection, told CNBC in a recent interview.
Adore Me was one of those targeted by the FTC, and ordered to pay a $1.3 million fine for misleading customers. eHarmony, a popular online dating service was fined over $2 million for allegedly deceptive renewal practices. And Apple topped the list with a $16 million settlement, after FTC claims that they were charging unsuspecting customers for in-app purchases.
So do not shop too fast this holiday season, or ever. Take time to read the boilerplate and fine print on every page an ecommerce site from login to checkout. Uncheck any boxes you don’t want checked. If you notice that a site tried to pull a fast one, don’t submit your order; go somewhere else.
And finally, do keep a close eye on your credit card statement. If you see unexpected charges, contact the merchant right away. If they won't resolve the problem immediately, tell the rep that your next two phone calls will be to your bank, and your state Attorney General's office of consumer fraud.
Have you been scammed by an online merchant? Your thoughts on this topic are welcome. Post your comment or question below...
This article was posted by Bob Rankin on 23 Nov 2018
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Article information: AskBobRankin -- [ALERT] Beware The Recurring Charge Scam (Posted: 23 Nov 2018)
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