Expert view: Gary Rycroft on annual subscriptions and refunds

Without doubt, the single biggest source of anger and complaint over the last few months has been the behaviour of businesses when it comes to refunds for goods and services.

While much of the attention has been on the travel and holiday industry, people across the UK have been in touch about gym memberships, caravan parks, insurance contracts and pretty much any annual policy you can think of.

The argument goes like this: If I have an annual contract and I can’t use some/all of it due to lockdown restrictions, am I entitled to a refund? The answer isn’t black and white but the good news is the existing laws we have are – more or less – on your side. So I’ve teamed up with top TV expert, Gary Rycroft, to tackle all things legal. 

What are your rights when cancelling an annual subscription?

In recent years, the laws governing how we shop have improved immeasurably for us all. Resolver has a full guide covering the main rules and how they work .

If you have taken out a new subscription online then by law you have the right to cancel the order 14 days after placing it. This comes from the Consumer Contract Regulations. But as with any law, there are always caveats, so some things aren’t covered. The big ones, sadly are accommodation, transport and leisure services purchased for a specific timeframe. This is generally taken to mean holidays and travel, which is why those cruise companies can try to hit you with a massive bill for cancelling even the next day after booking. This doesn’t mean you don’t have rights – see below for more. MoneySavingExpert has the full list of the exemptions.

We get most of our shopping rights – online or on the high street, from the Consumer Contract Regulations and the much more wide-ranging Consumer Rights Act. They’re full of wonderful and useful nuggets too, such as since June 2014 all new subscriptions have to be ‘actively’ signed up to. This means they can’t opt you into a contract – you have to choose to sign up and the contract needs to be fair and clear.

What do I need to do to find and cancel subscriptions? 

With existing subscriptions it’s always a good idea to do an audit of your bank and credit card statements in order to weed out any recurring payments which you no longer wish to continue with. There is no definitive legal right to a refund on past payments, but you may can always ask and try to negotiate one. Remember if you were misled in to taking out contract or you didn’t authorise it, you can indeed ask for a full or partial refund. The firm must be able to prove you agreed to the contract.

Before you cancel a subscription check the T’s&C’s on any notice period required. As a general rule, it’s trickier to get out of a contact that runs for a defined period. But this must have been made clear to you when you signed up. If the contract is a ‘rolling’ one, that just continues till you cancel it, contact the provider and ask them to cancel with immediate effect. If it’s not playing ball, you can also ask your bank or credit card company to stop future payments as well. If your bank does not act upon this, you can complain the Financial Ombudsman Service (FOS).

Any payment from your account that isn’t authorised should be automatically cancelled and refunded, though the other party may try to hold you to a contract if there is one.

 What if goods or services aren’t provided due to lockdown?

If you have subscribed for payment for goods and services which you have not been able to make the most of because of lockdown the law could well be on your side if you want to be refunded.

The legal principle of ‘Frustration of Contract’ is the basis of your legal right to seek a full refund. In short, this applies where goods or services cannot be delivered for reasons not anticipated when the contract was agreed. This applies to both a single event – such as hiring a venue for a wedding – or ongoing contracts like a gym membership.

So for example, if you have paid £300 for gym membership for a year (£25 a month) and the gym is closed for two months, you could be able to claim a £50 refund under ‘Frustration of Contact. This also means you could pause or stop a regular subscription even if you are still within an initial agreed tie-in period, though you would have to start up again once the goods and services were available to use.

What if the business makes deductions for ‘costs’? 

In circumstances where you are relying on a ‘Frustration of Contract’ argument for a refund, a business may be entitled to ask for a small contribution to its costs, but only if the initial contract says this is permitted, so again check the T’s&C’s you were given when you signed up.

How to I ask for a refund?

Politely but firmly is always a good approach. It’s always good to acknowledge the value you have had from a service over time while noting that circumstances have now changed.

Have a think about what you are going to say and stick to it. Remember to point out what services haven’t been available in full or in part and explain what you’ve lost as a result. Make the distinction between things being flat out unavailable to being partially available. Using the gym analogy again, if you are a gym member but you only use the pool and it’s not open, you can argue the main part of your contract isn’t being fulfilled (though you might get a partial refund).

If you’re planning on returning, make a point of saying you hope to return one day – it helps smooth the path. There’s a big difference between ‘bye for now’ and bye forever’.

The business says it doesn’t have to refund me

The pandemic has brought unbelievable challenges for us all, but it’s also presented unprecedented problems when it comes to interpreting existing law. There’s a huge amount of misunderstanding about laws and regulations – Martyn and I are constantly fielding questions about firms changing T’s&C’s, ignoring rules or quoting non-existent or wrongly interpreted legislation.

Bear in mind many businesses are battling to keep going, so some are going to try to stall refunds where possible – especially if they’re going to go under if they refund everyone. You’ll make more progress if you have a think about what you might be willing to compromise on – but get the firm to put its response in writing if it says no.

Remember, this isn’t about you not wanting the goods or services anymore. It’s about not being able to have or use them.

What do the regulators say?

The Competition and Markets Authority (CMA) has been inundated with questions and complaints about these issues since lockdown was first imposed in March. It is firmly of the view that businesses should treat their customers fairly and that very much means recognising the legal rights explained above.

The CMA has published guidance on their website covering when they expect businesses to refund you. This guidance does not have the same clout a legal judgment in a court of law, but in my view it would be a brave business which went against the spirit and intention of it. The CMA has started issuing fines and threats of legal action to the firms they’ve heard the most complaints about – so watch the news.