(The author is a Reuters contributor. The opinions expressed are his own.)
By Mitch Lipka
(Reuters) - A multibillion-dollar business has grown up around “gray charges” - extra credit card charges for products and services consumers never wanted or meant to sign up for. Some experts say these charges are deceptive and misleading, if not illegal.
An example of a gray charge is a trial offer that expires and is automatically converted to a full membership or subscription. Consumers incur these charges often because they fail to read the fine print in service agreements.
Gray charges totaled $14.3 billion in 2012, according to a study released Thursday by the credit card usage monitoring company BillGuard in conjunction with the research firm Aite Group. Credit card issuers, the report says, spent an estimated $562 million in customer service time to deal with disputes and process charge-backs.
Here are the answers to key questions about how gray charges work and what you can do to avoid them.
Q. How many people get these sorts of charges on their bills?
A. To get to more than $14 billion, total, a lot. Aite Group calculated that 35 percent of credit card users will get at least one of these charges in a year.
Q. How can merchants charge me for these products and services?
A. In reality, you agreed to the charges by clicking a box when signing up for a purchase or free trial online. What makes it a gray charge is the general lack of awareness. Most consumers do not wade through volumes of terms and conditions, even though they click a box saying they did.
Also, there is the seemingly intentional silence that comes following the change of your account status from a free trial to one that incurs charges.
“The propensity for more and more folks to shop online allows merchants to put out these sort of sales agreements,” says Mary Anne Keegan, BillGuard’s chief marketing officer. “The merchants that are trying to do good with their consumers have really good communications.”
Those companies will send you an email that your trial is expiring and that you’re being converted to a paying member or subscriber, she says. That way you have a chance to cancel before the charges start.
Q. Why are people overlooking these charges instead of disputing them?
A. Many charges are in the $10-$20 range, explains Ron Shevlin of Aite Group. Even though some are much higher - the average is $61 - the smaller changes often get skipped over by someone glancing at a crowded credit card bill.
“When you think about calling your bank to get $10 back … it becomes a challenge most people don’t want to undertake,” Keegan says. She points out, however, that some $10 charges can recur every month, and that can add up.
Q. I didn’t sign up for any free trials. Does that mean I won’t get any of these charges?
A. While the free-to-paid scenario is the largest category of gray charges, there are plenty of others. Among them: auto-renewing subscriptions you believed to be expiring, a confusing offering from a third party at the time of another purchase and subscriptions or service charges that continue even after you have canceled them.
Q. Can I just dispute the charges?
A. Sometimes you can prevail, but not always.
“Not every gray charge is reversible,” Keegan says. Why? Because in many cases the consumer agreed to the terms, even if they don’t recall or didn’t realize what they were agreeing to. In some cases, such as when you have canceled a subscription and keep getting charged, you have an easier case to make.
Q. What should I do if I discover gray charges on my credit card statement?
A. You should lodge a dispute with your credit card issuer for those charges that you did not initiate. You also should contact the merchant that placed the charges to try to get them to reverse the charges.
Q. What can I do to make sure I don’t get these charges?
A. You can read the terms and conditions before you agree to them and make a note to yourself to cancel any trial of a service prior to your account converting to a paid one. A lot of the work is spotting charges when they do occur.
“Consumers are at a serious disadvantage because they are willingly providing their credit cards to merchants who already have systems in place to keep charging their cards with little repercussion,” says Robert Siciliano, a fraud expert.
Q. Aren’t these charges fraudulent?
A. For the most part, no. Some, however, do appear to cross the line. While BillGuard came up with the term “gray charges,” state and federal officials have been battling these sort of marketing tactics for years.
After a U.S. Senate investigation that started in 2009 revealed misleading practices by three marketing companies working with 450 partner websites, Congress passed the Restore Online Shoppers’ Confidence Act (signed into law in 2011). However, that law specifically addresses manipulative marketing tactics that follow a previous transaction - for example, a “special offer just for you” with an additional charge attached, which a consumer might click on after purchasing a concert ticket.
Also, state attorneys general regularly bring cases against companies that generate a lot of complaints for duping consumers who signed up for trial offers and ended up with unexpected charges. Still, most of these charges fall into, well, a gray area.
Editing by Lauren Young and Douglas Royalty