The recurring nightmare of recurring charges

infinite money
By | March 8th, 2016

Carolyn Borer wants her money back from Adobe. She wants us to get it for her.

Borer’s daughter needed a Photoshop subscription for an art project, but the site made her purchase an annual subscription.

The least expensive, most restrictive offering costs $9.99 per month. When you consider she can’t cancel until the end of the year, that’s one expensive homework assignment.

“I tried to cancel the plan months ago but was told there would be a hefty penalty, so I let the plan run its one-year course,” she tells our advocacy team. “I assumed Adobe would stop billing and or try to sell a new plan. Instead, I have been billed again. I tried to cancel online via chat and was told there is a penalty to terminate early.”

How hefty a penalty? Scratch the surface on the Adobe website and you’ll see that customers are charged 50 percent of their remaining contract time to remove the subscription service.

Subscription services are not new by any stretch of the imagination, but they have adapted to our 21st century “need it now” mentality. I buy coffee at regular intervals from, and when my kids were really young, I bought diapers from the subscription program Amazon Mom. Both Keurig and Amazon allow its customers to modify shipment schedules and cancel at any time, at no cost.

All of that is cool. I want it, and they’ll deliver. We understand this is not a forever situation. Everybody wins.

But Adobe’s 12-month subscription service is the only option the company provides. It offers students its full suite of products, for a promotional price of $19.99 per month, down from the retail price of $49.99 per month. The terms, however, explain that at the end of twelve months, unless you cancel, you will be charged each month at the full retail price.

The student rates apply to subscribers ages 13 and over, with a verified .edu email address. Can companies really count on 13 year olds to have the sophistication to cancel in a timely manner, or is the company rather counting on the student not canceling?

This payment arrangement is one brilliant example of what’s become the seedy underbelly of subscription models. This business model requires customers to agree that they will be charged at regular intervals, unless they actively cancel before the current subscription term.

These charges typically appear on a credit card bill as “recurring” charges. And those words always send a shiver up my spine.

How many of us have subscribed to services we don’t even remember we have? And why are companies allowed to make it so hard to stop buying a service we don’t want anymore?

When I subscribed to SiriusXM radio, I researched a promotional rate, and would have to schedule a date in my Outlook calendar every 6 months, to call back and pretend I wanted to cancel in order to avoid being charged the full price, which is a pricey $20 per month. Instead I paid $6.50 per month, but I got tired of the renegotiation routine, and eventually canceled once and for all.

In fairness to SiriusXM, the company allows you to opt-out of its auto-renew service, which means the charge is run to the customer’s card as a one-time transaction. This is probably the most costly arrangement for SiriusXM, because when the customer doesn’t actively call to renew his subscription, the company has to invest money in winning the customer back, through marketing materials, better deals, and contact from live customer service agents. It’s something they’d love to avoid.

Some customers prefer recurring charges, as they allow the customer to make monthly payments seamlessly, without thought or effort. But the real winners in this arrangement are undoubtedly businesses and credit card companies, especially when consumers are not carefully monitoring their accounts. Discover card freely admits that the recurring charge arrangement generates more sales annually for businesses, and makes customers less likely to cancel their accounts.

These arrangements can provide benefits to customers, when the auto-renew price is not an increase over the current term, and when the company doesn’t charge hefty “cancellation fees” when a customer wants out. If we were to level the playing field, companies requiring a recurring charge arrangement would have to surrender their right to cancellation fees.

For Borer and Adobe, this is the predicament we face. All because her daughter had a homework assignment.

You might say that Borer could easily cancel her credit card, but it’s not always that straightforward. Banks and credit cards imprint the transaction with data called “recurring billing indicators,” which allow recurring charges to “jump” from an expired card or a canceled card to its successor. I once closed out an entire bank account and transferred my funds to a brand new account, just to get out from under such an arrangement. It’s unsettling, to say the least.

All of this means consumers need to be vigilant in checking monthly account statements, and yes, scheduling those phone calls to cancel accounts before they auto-renew.

Should recurring payments with no opt-out be illegal?

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  • AJPeabody

    A process that can be beneficial or exploitative requires not banning but smart regulation. For instance, in the case of the photoshop girl, there should be an option to set a cancel date at the time of signing up. OK, the one year minimum is a burden, but it should be automatically terminated at the end of the year, not turn into a money grab.
    So there should always be a hard termination date, that can be extended by the purchaser, for every recurring charge.

  • What’s VERY duplicitous about the Adobe model is that you can’t just cancel and leave the rest of the term in place, then it cancels. They cancel THAT day and charge you for service you never receive. I don’t mind fulfilling my obligations. I do mind being hoodwinked. They hookwink you.

  • Regina Litman

    But you didn’t tell us if you ultimately got her money back for her! I hope you did. And, no, I did not pick the survey choice with the phrase “free market” in it. Once per day is enough for me.

  • HulkSmash

    Kid needs to learn how to use pirate bay. Free Photoshop.

  • Harvey-6-3.5

    As AJPeabody notes, there needs to be a cancel date. I have Norton antivirus, AAA, and AAAS, and rather than “autopay” for a slightly reduced rates in each case, I’d rather pay the extra few dollars to have control over whether I want to continue the service or not.

  • random_observation_source

    I’m stuck at the part where she was forced to pay for an annual subscription; I was able to find Adobe’s monthly subscription for Photoshop with no annual obligation pretty quickly. It’s $30, which is certainly much cheaper than $120 if you only need it briefly.

  • Pat

    This mom did not do her homework. If she did, she would have found options that would have allowed her daughter’s homework to be done without the high cost. Along with selecting the subscription that best fit the needs of her daughter, many PC’s and Macs have photo software on them which she might have been able to use at no cost. And NO, illegally pirated software that another suggested is NEVER, EVER an option. There is this thing as a parent called being a role model of doing what is right.

  • Pocahontas

    Get an Amex card. They’re pretty great about helping you get out from under unwanted charges (NOT that you can get out of a contract you signed with terms clearly stated, but they can block charges from specific vendors if you call and request it.)

  • AAGK

    She could have gotten the free trial or used the computer at school. I don’t get the issue. Cnet evaluated the cost and it is significantly cheaper than buying the software. If it is a school assignment she can do it in the computer lab. How is this any different than the violins, ballet shoes and all the other stuff parents buy to encourage hobbies that a kid loses interest in a few months later.

  • Éamon deValera

    So what has been done? Has the customer asked adobe for a retroactive cancellation assuming it wasn’t used in the pendency.

  • Éamon deValera

    Free prison term.

  • Éamon deValera

    Adobe says you can use it until the paid for term expires if you cancel recurrent billing during a term.

  • Not true. They default to a “cancel it now” with a 1/2 balance kicker as an insult.

    You’d think it would just stop the recurring billing…but, alas, no!

  • scoosdad

    My credit card provider has a program where you can go online to the bank and request a limited time or even one time use credit card number, which you can set with a maximum spending limit and an expiration date. You enter the parameters you want and it spits back a valid Visa card number which you can then supply to online vendors or for use with these types of recurring charges, and the charge shows up on your standard credit card statement. The online vendors can’t tell that’s it’s a temporary use number.

    If you specify a dollar amount equal to only the first year’s subscription, and an expiration date of say, two months from the date of issue, this is ideal for preventing unwanted renewals. It forces the subscription provider to come back to me to get a new number when they try to process a renewal automatically a year later. To them it just looks like the credit card has expired. I’ve never had a refusal to renew on the temporary number transferred to my standard credit card by the bank. My understanding is this kind of program isn’t unique to my bank.

  • NBradley

    I may be wrong but I believe there is a law in BC Canada about “negative option billing”. It means that you cannot be charged for extras to an original contract by omission. In other words they cannot charge you unless you specifically say you want to. I realize that this may not apply here but at least it’s a step in the right direction.

  • jae1

    Actually, no. Free download of Photoshop legally, from Adobe, as a trial. Do the homework, delete the trial.

  • Éamon deValera

    I had looked at Acrobat. Indeed Photoshop is different. IfranView is free.

  • Jason J Olson

    While frustrating I would chalk this up to a lesson learned. Unfortunately I see many parents duped into what I child says they need for school. Parents are busy, they don’t have time, and say, okay, that’s $120, I can do that, seems expensive, but I don’t have the time. A friend of mine is an educator and they use smartphones extensively in class… they also have a few loaner phones that basically just use wireless (no cell service) and they work okay. The student duped her parents into buying her an iPhone, contract and all, and they were upset at the teacher. The parents were a client, and we stumbled onto the topic on day. They were shocked to learned that it wasn’t required, but rather the kid really wanted it, and to fit in, and the parents just went with it.

  • AAGK

    I agree with this. When I was in school my dad would have told me to use the school computer then. I am surprised Adobe didn’t just refund her the 13th month if she canceled once she saw the automatic renewal. Not out of obligation but most companies do that upon polite request these days.