Free Trials That Turn Into Paid Subscriptions

A free trial that bills automatically at the end is a negative option, and federal law regulates it as one. The seller has to disclose the terms before taking billing information, obtain express informed consent to the recurring charge, and provide a simple way to stop it.

The word free does most of the damage here. A customer who reads free understands that nothing will be charged, and hands over a card number believing it is a formality. The statute is built on the opposite assumption, treating the card number as the moment the transaction becomes real, and placing the disclosure duty immediately before it.

What a trial actually is

A negative option feature is any arrangement in which the customer's silence is taken as agreement to be charged. A trial with a card on file is the clearest example: doing nothing produces a payment. Book clubs and continuity shipments are older versions of the same idea, and the federal rule still in the Code of Federal Regulations addresses that older form, requiring promotional material to disclose the material terms of the plan and requiring announcements to be sent far enough in advance that a subscriber can decline before merchandise ships.

The internet version is governed by statute rather than by that rule. It makes it unlawful to charge or attempt to charge any consumer for goods or services sold in a transaction effected on the internet through a negative option feature unless three conditions are met. Those conditions are the whole subject of this area, and each of them fails in a recognizable way.

Disclosure before the card

The first condition is that the seller clearly and conspicuously disclose all material terms of the transaction before obtaining the consumer's billing information. Material terms for a trial include the length of the trial, the date or event on which the charge begins, the amount of that charge, how often it repeats, and how to cancel before it happens.

Timing is the element sellers most often get wrong, and it is not a technicality. A disclosure that appears on the confirmation screen after the card has been entered is too late by the terms of the statute. So, generally, is a disclosure available only behind a link the customer is not required to open. The test is whether an ordinary customer completing the sign-up would encounter the terms before handing over the payment details.

Prominence is judged the same way. Terms in small gray type below the button, terms interrupted by unrelated marketing copy, and terms stated only in a video are all weak. Where a state renewal statute also applies, it usually adds a requirement that the terms appear in visual proximity to the request for consent, which is a stricter version of the same idea.

Consent to the charge itself

The second condition is express informed consent before charging the consumer's credit card, debit card, bank account or other financial account. This is a separate act from agreeing to the trial. Consent is informed because the disclosure preceded it, and express because the customer did something directed at the charge rather than merely proceeding.

The related provision on post-transaction third party sellers shows how strictly this is meant to be read. A third party that appears after checkout and offers something else may not charge unless it disclosed all material terms including that it is not affiliated with the original merchant, collected the full account number and the customer's name, address and contact information itself, and obtained an additional affirmative action such as clicking a confirmation button. The initial merchant is separately prohibited from disclosing billing information to such a seller for use in an internet sales transaction.

That prohibition is what makes an unexplained recurring charge from an unfamiliar company worth challenging rather than tolerating. If the customer never gave that company an account number, the company is not permitted to have obtained it from the merchant, and the charge is unauthorized on the face of the statute.

Stopping a conversion in time

The third condition is a simple mechanism to stop recurring charges, and it exists precisely so that a trial can be exited without a negotiation. What that means in practice is covered in canceling by the same route you joined. For a trial specifically, the sequence that works is to cancel through the seller's own route first, keep the confirmation, and only then deal with the payment instrument.

Where the trial is billed by preauthorized bank debit rather than by card, the customer has a statutory route of their own. A consumer may stop payment of a preauthorized electronic fund transfer by notifying the financial institution orally or in writing at least three business days before the scheduled transfer, with the institution able to require written confirmation within fourteen days. That is a useful backstop when a seller's cancellation route is not working.

Records are what decide these disputes. A screenshot of the sign-up page as it appeared, the confirmation email if one arrived, and the cancellation confirmation together answer nearly every question a bank will ask. The absence of an acknowledgment is itself evidence, since state law requires one, as explained in automatic renewal and the notice you are owed. Where the charge has already landed more than once, the routes available are set out in disputing a charge that keeps coming.