How to Avoid ‘Gray Charges’ in Autopay Schemes

While some find it helpful to automate payments, including setting aside funds for savings and retirement, companies are using deceptive autopay methods to hit consumers with unexpected fees.

Companies set up autopay schemes that are known by several different terms in the industry under the umbrella of “gray charges.”

A 2012 study by Aite Group found that gray charges accounted for $14 billion that year, or $215 for each person with a credit or debit card. Although it’s easy to say that a consumer should have kept track of their subscriptions and other reoccurring charges, consumers are often tricked by confusing or hidden terms while shopping online.

“Gray charges” include:

  • “free” trial scams,
  • “phantom charges,” and
  • “zombie charges.”

Companies that use gray charges bank on the inattention and apathy of busy consumers with multiple financial statements to identify and cancel autopay. Further, since many gray charges are legal, it is difficult for consumers to go through the rigmarole of getting reimbursed for autopay charges that have gone unnoticed for several months.

Consumers can protect themselves, however, by knowing how companies try to trick them into giving their credit or debit card number as a part of an autopay scam.

Autopay Scams

Nearly half of all gray charges stem from supposedly free trials that require the consumer to enter their account information to take advantage of the offer. Companies then bet on a number of customers forgetting to cancel the subscription after the trial ends and then hit them with an autopay charge. Combined with confusing or non-existent instructions for canceling the autopay, consumers can often be hit with many months of fees before noticing the fees.

“Phantom charges” refer to charges companies add onto legitimate purchases; for example, an additional service plan added to the online purchase of an item. These account for 18 percent of gray charges.

When consumers are hit with autopay fees even after they cancelled with the company, they are fittingly called “zombie charges.” These account for 6 percent of gray charges. Membership fees are a common example of zombie charges, with gyms and other businesses ignoring cancelations or proving convoluted cancellation policies.

Protection From Autopay

States are increasingly regulating autopay, but consumers can take steps to protect themselves from autopay:

  • Set calendar reminders for “free” trials. Or, better yet, don’t sign up for trials that require debit or credit card information.
  • Take note of the fine print and look for any reoccurring charges.
  • To avoid phantom or zombie charges for goods or services, do some research on the company before signing up. If they have poor online reviews, don’t use them.
  • It is important to look over financial statements regularly. Also be sure to review them for unfamiliar fees each month.
  • Several smart phone apps have been developed to automatically monitor accounts for autopay.

If you find yourself the victim of an autopay scam, contact the attorneys at Bradley/Grombacher to see what your legal options are. Fill out the form on this page now for a FREE case evaluation.