Scam Watch: Free trial scams
It is rare to get something for nothing - and when it comes to 'free' trials, the only thing you're likely to be left with is a hole in your wallet.
At Moneywise, we are regularly contacted by concerned readers who have been ripped off by unscrupulous businesses offering everything from miracle diet pills and face cream to muscle growth supplements, only to have their payment card raided soon after.
In fact, Citizens Advice has reported an enormous 124% increase in the number of complaints about so-called free trials in the past 12 months.
So what can you do to protect yourself? And what can you do if you are a victim? Here's the Moneywise guide to free trials.
How it works
Normally, an advert, in the form of a web pop-up, will suggest customers only need to pay for postage and packaging (P&P) for the goods for a trial period.
But unwittingly when they enter their payment details for P&P, customers sign up for a monthly repayment plan via a continuous payment authority (CPA) that allows the business to withdraw cash from their account every month without the customer realising.
A CPA is used by millions of people to make regular payments – such as a gym membership or mobile phone bills – via their debit or credit card each month.
But with these free trials, often the terms and conditions of what the customer is signing up for are buried in the small print – if there are any at all – so many customers don't know they are agreeing to a CPA, leaving them shocked when they check their card statements.
Add in the difficulty consumers face in contacting the companies when they realise they have been duped – especially if the company is based overseas – and it's easy to understand why these scams have become so problematic.
Gillian Guy, chief executive of Citizens Advice, warns: "No company should be advertising slimming pill trials as free while burying the high price and nature of the contract in lengthy terms and conditions.
"It is often difficult for people to get money back even if they feel misled because the extra payments were not clear. The small print should be easy to understand, so consumers know exactly what they are signing up to."
What to do if you get stung
When customers realise they have been ripped off, it's understandable that they start to panic. Many victims can't afford to lose sizeable sums unexpectedly and the situation is compounded by the problems customers have in tracking down these companies to complain.
David Hinde contacted Moneywise asking for help after he had been scammed by a free trial.
Earlier this year, he signed up for a trial with a company called Testocore that sells men's health supplements.
Two weeks later, he found that the firm had tried to withdraw £94 from his account after he'd used his debit card to pay the £2.99 P&P. His bank, Santander, placed a block on the payment automatically and contacted him to explain. He was advised to call Testocore to cancel the agreement. After struggling to find a contact number, he eventually managed to speak to someone who agreed to cancel the payment.
However, another payment went out the following month and this time the payment was processed, leaving him £94 out of pocket.
"There was deliberately no fine print. It was virtually impossible to get hold of them. I eventually did but they still took the money."
While Santander is now helping him get his money back, David says it is not fair that these companies are allowed to trick people.
Unfortunately, David's experience is far from unique. But progress is gradually being made.
Last year, the Financial Conduct Authority (FCA) confirmed that when a customer asks their bank to stop a recurring payment, then the agreement should be cancelled and if another payment should go through by mistake then the money should be refunded immediately.
This is important to remember, as many customers get told mistakenly by bank staff in branches that they are unable to cancel a CPA and that they must contact the seller instead – something which is very difficult to do and not the case anyway.
The Financial Ombudsman Service (FOS), which has seen a "notable" rise in the number of CPA complaints in recent years, told Moneywise while it would expect a consumer to have made a "reasonable" effort to contact the company, and recommends that they do so, it is "disappointed" to see that consumers are still being given the incorrect information at cashier desks.
The FOS says the majority of cases it deals with are solved quickly when it points out to the bank that it is obliged to cancel the CPA.
"If you spot a payment on your account that you don't recognise, let your bank or credit provider know as soon as possible. It pays to know your rights so remember if you aren't able to sort things out, the Ombudsman may be able to help," a spokesperson says.
The banks are starting to wise up to the issue.
For example, Royal Bank of Scotland has recently launched a pilot project to notify customers when a fee leaves their account to a business the bank has identified as taking part in free scams.
During one week in September, the bank contacted 40 customers who had funds withdrawn via a CPA, with 24 of those unaware that money was being taken.
However, like the FOS, it does recommend that its customers consult with the retailer or business they have entered into an agreement with and try to follow its cancellation policy.
It is a similar story across Lloyds Banking Group. A spokesperson told Moneywise that any customer who fears they have signed up for a problematic free trial should contact it immediately.
"We take the protection of customers' finances very seriously," the spokesperson says. "We can help cancel future recurring payments from customers' accounts and we may be able to claim back any payments taken after the date when it was cancelled."
The Consumer Contract Regulations that came into force in June this year also offer an extra level of protection. Consumers must now actively tick a box to say they agree to further payments – if they aren't made aware of further charges, they will not be liable for them.
The regulations also state consumers have the right to cancel an online order from the moment they place it until 14 days after the goods arrive. This may well cover the 'trial' part of the offer, so consumers still need to be aware of what exactly they're signing up for and make sure they cancel before the trial period ends.
Free trials encapsulate the importance of 'buyer beware' perhaps more than any consumer issue.
If you are in any doubt about the legitimacy of a company that is offering something for nothing, don't sign up and/or give it your payment details in the first place – it's as simple as that.
As a spokesperson for Santander says: "We urge customers to consider such offers carefully and to research thoroughly any terms and conditions before signing up to an offer – if it looks too good to be true, it probably is.
"Once a customer has contacted us stating they have withdrawn consent for these subsequent payments to be debited, the bank will take steps to block any subsequent payments."
And if you are unfortunate enough to have been a victim, then don't bury your head in the sand. Speak to your bank or credit card provider, who will be able to help you put a stop to future payments and get your money back.
Tips for dealing with free trial scams
1. Make sure you fully read the terms and conditions of what you are signing up to. If you can't see them or there aren't any, don't give the company your bank details.
2. If you think you have been scammed, try to contact the business and explain you weren't told about the monthly repayments. This might prove fruitless but your bank will expect you to have tried.
3. Speak to your bank. If you tell it to put a stop on a continuous payment authority, it must do so. Don't be deterred by incorrect information given out by a cashier.
4. If your bank doesn't resolve the issue, then speak to the Financial Ombudsman Service. It will remind the bank of its responsibilities regarding CPAs and help put a stop to further payments.
If you’ve have a complaint about a financial service product you have bought but the company you bought it from refuses to resolve your problem after eight weeks, the Ombudsman can help. The Ombudsman will investigate and resolve the matter. The Ombudsman is independent and its service is free to consumers. The Ombudsman may find in the company’s favour but consumers don’t have accept its decision and are always free to go to court instead. But if they do accept an Ombudsman’s decision, it is binding both on them and on the business.
Issued by a bank as part of a current account and, in a nutshell, serves as electronic cash. Unlike a credit or charge card, where you get an interest-free period before you have to settle the bill, the funds spent on a debit card are withdrawn immediately from your current account. Unless you’ve arranged an overdraft, if you don’t have the cash in the account, you can’t spend it.
Used by the holder to buy goods and services, credit cards also have a monthly or annual spending limit, which may be raised or lowered depending on the creditworthiness of the cardholder. But unlike charge cards, borrowers aren’t forced to pay the balance off in full every month and, as long as they make a stated minimum payment, can carry a balance from one month to the next, generating compound interest. As the issuing company is effectively giving you a short-term loan, most credit cards have variable and relatively high interest rates. Allowing the interest to compound for too long may result in dire financial straits.