Commissioner's Blog: Automatic renewals
With Acting Commissioner for Consumer Protection David Hillyard
The product, membership or subscription may say “free trial” but in many cases it turns into an automatic charge or renewal and consumers need to be aware of this marketing trap.
We receive many complaints and enquiries from consumers who report receiving unexpected charges resulting from the automatic charging or renewals of products or services they have purchased, usually online.
It may be ordering some wine, cosmetics, healthcare or diet products once and then receiving the same order every month thereafter. Or joining a free trial for a dating website assuming that the membership will end when the trial period expires, but in reality they have signed up to an ongoing contract and an automatic charge is made on the consumer’s credit or debit card when the free period is over.
Usually the consumer has to meet a deadline in which to cancel the order or subscription before the charge is made and the cancellation can often be a difficult process.
In some cases, the consumer has been misled which may be a breach of consumer law. More often though the charge or automatic renewal is contained in the terms and conditions of the purchase contract which few people read but many readily accept.
Consumers can ask for the renewal clause to be removed or, if it’s a non-negotiable standard contract, then there may be some protections under the unfair contact term provisions of the Australian Consumer Law. The renewal term in a contract will be deemed unfair if it causes a significant imbalance in the rights and obligations of either parties, would cause detriment to a party and is not reasonably necessary to protect the legitimate interests of the supplier who would be given an advantage.
The same issue can also affect business operators as, what they thought were once-off purchases of print cartridges or other stationery, for example, turns into a weekly or monthly recurring order. Later this year the ACL’s unfair contract terms provisions will extend to protect small businesses in WA.
The best way to avoid approving any charges unknowingly is to carefully read all the terms and conditions to make sure you know what you are signing up to and how much it will cost, especially if a ‘free trial’ is being offered. Check your options for cancelling the contract and note any cancellation deadlines or the expiry date for any free trial periods.
Consumers who are having problems resolving a dispute over a renewal charge, can seek advice from Consumer Protection on 1300 30 40 54 or email@example.com.
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