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Credit
Card Hijacking is the term used when a person’s
credit card
information is used for undesired charges for
goods or services where the credit card owner has
trouble reasserting control. This can occur in two
major forms.
The
first form of credit card hijacking is basically
identity theft,
which is the deliberate assumption of another
person's
identity.
Identity theft is usually the result of serious
breaches of
privacy
and often involves the thief compromising a great
deal of
financial
and personal information allowing the thief to
open up new credit card accounts in the name of
the victim.
The
second form of credit card hijacking, which most
people have fallen victim to, is the continued
charging of a person’s credit card for a
subscription
to goods or
services
no longer desired by the credit card owner. This
type of credit card hijacking was pioneered by
major
ISPs
and
online dating
services, is perfectly
legal,
and is still common today in a wide range of
subscription based goods and services. Credit card
hijacking of this type came about as online
subscription based
marketers
realized that traditional subscription systems,
such as the annual subscriptions that paper
magazines
use, were an impediment to enrolling customers. A
typical dial-up ISP, at US$24.95 per month, is
US$299.40 annually. By breaking the subscription
period into small units like months or quarters,
and allowing direct monthly charging of the
subscriber’s credit card, the psychological and
economic barriers potential subscribers see are
greatly reduced.
The
issue which makes one subscription system a
hijacking of the credit card is not the mode of
entry into the subscription nor the billing
interval, but the marketing organization creating
barriers for the user to easily cancel the
subscription. Organizations which use credit card
hijacking as part of their marketing strategy make
online registration for the subscription easy,
enforce default automatic renewal policies, and
create barriers to halting the subscription. (This
is in contrast to traditional subscription based
system such as paper magazines where the
subscriber has to periodically proactively
reauthorize the subscription, hence the default is
to not renew.) The most common subscription exit
barrier is to not provide any online subscription
cancellation mechanism at all, but to instead
require the user to cancel by telephone or by
"on-line chats". Such organizations often add the
additional barrier of making any subscription
cancellation information difficult for the user to
even find, thus creating an additional delay in
the subscription cancellation. This is very common
amongst ISP’s, who know the psychological barrier
to making the call, which the subscriber
anticipates will be unpleasant, is very high. It
also allows the marketing organization to talk the
subscriber into changing their minds and not
cancelling the subscription. Another common
subscription cancellation barrier is to have a
relatively long subscription period, a no refund
policy, and to require the user upon cancellation
to forfeit all money covering the present
subscription period. This is very common amongst
online dating services.
This
second form of credit card hijacking was created
by marketers who recognized that subscription
based services generally have relatively low
periodic billings which will generally go
unnoticed on any given credit card statement. So
what happens is that long after the user loses
interest in the subscription, they forget to
cancel the subscription and because the periodic
billing is so low, they don’t tend to notice it on
their credit card statement.
Negative option billing
is the practice of sending goods automatically and
billing the recipient unless the recipient is
proactive in declining the goods before they are
sent. Negative option billing reverses the usual
direction of sales transactions. It assumes that
unless you say 'no', you've agreed to have bought
the goods. This is the common practice used in
book clubs, record clubs, and magazine
subscriptions with automatic renewal. Some
practitioners of negative option billing prefer to
call it "advance consent marketing.
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