Question about Subscription Rate Increases & TOS Legalities...

[Jack Duncan]

Quick question for you "legal buffs"...

I'm going to use a hypothetical scenario of an actual real world situation...


You sign up for a membership program. The cost is $97 per month.

You are required to check a box which says, "Yes, I have read the Terms and Conditions for this offer."...

In the Terms and Conditions, there is a statement which says, "You are required to pay the current monthly membership fee, which we can change at any time during your membership."

The first month, you get charged for $97.

The second month, you notice a charge for $997...the NEW price of the monthly membership...

Keep in mind that the company did not notify you about the new membership price...it just appeared on your credit card statement...and upon checking the site after the charge, you notice that indeed, they now have a $997 per month price tag on their signup form...

Is this legal in all 50 states?

Are they required to notify you of the price increase?

Does anyone know of specific laws that govern subscription based business'?

Thanks!

[Ken Leatherman]

Jack,

I'm not sure about the legal aspect of that kind of bump in the monthly payment, but I would be double dog oops that's triple.

I'm sure you are going to get a lot of theory here, but if it was me the very first thing I would do is call a lawyer. Then call PayPal, CreditCard Company(say Charge back) and my bank. I would also be burning up the phone lines to the membership that did this. I don't care if they changed the NEW price to $997.00 on the membership sign up form on the 2nd month.


But now I' presuming that somewhere in the sales copy there was no mention of the possibility of a price increase of $900.00, without prior notice or was there? But if there was, I'm thinking you would be out of luck and it may be legal. (I'm not a lawyer, just my opinion). Surely though, somewhere your hypothetical person knew this increase was going to happen or they were just plain blinded by greed and the Silver Bullet.

One thing I know, legal or not legal, that membership would have lost all my trust and my continued membership fee.

Ken Leatherman
The Old Geezer

[Johnny Slater]

The subscription must have been handled by a direct merchant account. With PayPal the merchant can not change the price of your subscription once you have started, as least as far as I know from looking the the Dev forum for PayPal.

[Jack Duncan]

Yeah, it is a merchant account...and not PayPal handling the subscription payments...

To me, this would seem like the scam choice of the week if it is indeed legal...

Just get people to sign up for a membership program at $1 per month...make them agree to a TOS agreement...then jack the membership price to $5,000 the next month and tell them it was their fault for agreeing to the TOS...

I still think there must be a law that covers "disclosure of fee increases"...

I just can't put my finger on it...

[sbucciarel]

There are rules governing other companys regarding fee increase disclosure (found some for real estate, credit cards, etc). In some cases, a new TOS needs to be signed before new fees can be charged. I'm not a lawyer, but this company screams of being a scam and what they did is probably not legal, no matter what they put in their TOS.

I would contact their merchant account directly. If they lose that, they're out of business.

[Jack Duncan]

That merchant account idea is a good one.

I was also aware that many cable companies (depending on the state of course) are required by law to notify their customers in writing within 30 days of making a rate increase...so that the customer has enough time to cancel their account.

Thanks for the tip...