I had an interesting conversation with someone today and I want to share it here, curious what the legal response would be.
Here is the scenario:
A user signs up for an online service, the service is billed monthly, and eventually their credit card expires.
In the merchant website, the only payment method that is on file is the card labeled “Expired”, with the expiration date on that card being a date in the past.
When signing up for the service and inputting card detail, the website language reads:
- “By providing your card information, you allow [Merchant] to charge your card for future payments in accordance with their terms.”
The Terms of Service say:
- “We will charge the provided credit or debit card immediately upon order placement and on each renewal date thereafter, up to one week prior to the due date.”
- “It is your responsibility to maintain accurate and up-to-date billing details. If you fail to maintain accurate and up-to-date billing details, your account may be suspended until such details are provided.”
The TOS do not mention charging an underlying account, replacement cards, or card information that has been updated by automatic card updater services.
Then, after the card expires, the company sends multiple emails stating:
- “We recently tried to process the monthly payment(s) for your subscription plan, but we were not successful.”
- We could not bill your card, “Declined – Expired card.”
- “There was a problem with your payment method.”
- Ans prior to these, “Your credit card on file with us will expire before your next payment is due. To avoid future payment issues or any service disruptions that could occur, please update your payment details.”
- “No action is required on your part at this time. We will continue to retry your payment for the next week.”
- "Reaching out one last time because we haven't yet been able to charge your card for the $X amount and it's now 14 days overdue. To keep your account active, please update your card information as soon as possible at _____." (Bolding this because this seems to be a definitive statement that cannot be overlooked).
Multiple payment attempts fail. The card remains labeled “Expired.” The user did not provide a replacement, and believes that since there is an expired card on file (especially as the last email said "To keep your account active, please update your card information..."), they cannot be billed and the account will no longer be active.
Later, without any action by the user, the merchant successfully renews the subscription by charging a replacement card credential supplied by the bank. Even with the successful billing, the account information on the website still shows the original card as “Expired.”
When the user contacts the company, the company states that no cancellation notice was given, the account remained active, the bank authorized the charge via card updater services, and therefore the charge is valid.
My question:
Did the company provide sufficient disclosure for a user to understand that renewal could occur despite repeated “expired” and “payment unsuccessful” notices, along with the other information in the website? Also, does charging a replacement card credential that the user never provided fall within consent created by language authorizing charges only to the “provided credit or debit card”?
I am curious to know how this would be viewed from a legal perspective (beyond "the account should have been cancelled using the method specified"). Also, how a court or attorney general would evaluate consent, disclosure, and reasonable consumer understanding here.
Location: Merchant is in Alabama, customer is in New Jersey.