No way to break free

IT’S NO SHOCK these days when a “free” Internet service starts charging. What can catch the unwary by surprise is how quickly they can wind up paying more than they bargained for.

In July 2001, Web-hosting firm Homestead Technologies began charging for what it formerly offered as a free service. To encourage existing customers to stay with the service, Homestead offered a “Charter Member Special Discount” at yearly rate of $19.99 for the company’s new Homestead Personal subscription service. That seemed like a reasonable deal — so, many customers signed up.

The surprise came a year later, when several readers who had initially signed up for Homestead service discovered their subscriptions had been automatically renewed for another year. Worse, their credit cards had been charged for a new “Charter Member Sterling” service at $69.99 for the next year. When they contacted Homestead to say they didn’t want the new service, they were told they could cancel if they wished but Homestead would be keeping their money.

“The funny part — if there is any humor to this situation — is that they claim that I have ‘already renewed for an additional year,’ ” wrote a systems manager and Homestead Personal customer. “I never agreed to renew anything at any price. Homestead took it upon themselves to renew me at a rate $50 more than what I was originally paying — that’s 250 percent more!”

Homestead customers who complained about the automatic renewal were sent a long and somewhat menacing email from Homestead support that cited various parts of the company’s membership agreement as proof that it had the right to do it this way. “When you signed up for a Homestead subscription account one year ago, the contract for that account was for automatic renewal and billing, unless canceled before the billing renewal date by the member,” the message from Homestead read. “The Homestead Member Agreement is a legally binding document which is agreed to before Homestead accepts any funds. Banks and/or credit agencies inquiring about Homestead charges on behalf of a member will, as per Homestead procedures, be given all materials relating to the member’s billing history, including a copy of the Member Agreement.”

Homestead held out one slim olive branch by offering to let disgruntled customers downgrade to a cheaper “Silver” service and credit the difference on future purchases, but that still meant the customers would be out their 70 bucks. Homestead support also claimed that all members had received e-mail notification of the changes in time to have canceled their account before being renewed. By way of proving this, the company attached two messages it said had been sent out announcing the changes. But the tech support email also pointed to the notification procedures described in Homestead’s agreement, which in typical sneakwrap fashion says the company can notify customers of changes to the service just by posting the notice on its Web site.

“All of the attachments Homestead has added in their communications [of e-mails supposedly sent earlier] were never received by me,” wrote the systems manager, who said he kept careful records of all his e-mail from Homestead. “They are claiming that I was ‘aware’ of the new subscription rates just by the fact that they existed somewhere.”

“I’m relatively certain they didn’t send me those messages beforehand, as I’d think I’d remember them,” said another Homestead customer. “But even if had gotten them, take a look and you’ll see they aren’t real notices. They come across like they’re pitching a new premium service. … You have to read very carefully to see they are planning to replace the old service with this one unless you cancel. Plus they don’t tell you how to cancel, so you have to go to their Web site.”

The Homestead customers also pointed out the cancellation procedure as described in Homestead’s membership agreement was such that they would have had to cancel their account by phone before the year of service they paid for ended. And the membership agreement also says customers can be charged a cancellation fee. So even if the customers had gotten real notice of the pending changes, they were going to lose something one way or another.

Homestead officials acknowledge the migration to the new service was not done as well as it should have been. Although they still say that the e-mail messages announcing the changes were sent in June, the evidence I’ve seen indicates that some customers did not receive them. In any case, officials admit they’ve heard from a lot of customers who didn’t get the message, whether they got the e-mails or not.

“It’s been a learning experience,” said Michael Geller, Homestead vice president of marketing. “We have changed our policy now, and as long as the customer raises the issue in a reasonable amount of time, we are letting them cancel and we are refunding their money.” Geller also said the company is changing its termination process so that customers don’t lose the rest of the period of service they paid for when they cancel. “We’ve had some customers tell us about that, and it’s something we’re fixing. If you cancel, the service won’t terminate until your expiration date,” Geller said.

Geller added that the company has already stopped charging cancellation fees, although the membership agreement may not reflect that. “It used to be that we imposed the cancellation fee, but we realized that’s not the way to do business,” he said. “That’s what we’re trying to do on all these issues. I understand the concerns and how, from a customer point of view, you could be totally confused. The process isn’t 100 percent perfect, but we’re learning and we’re fixing it.”

A lot of people seem to be learning lessons these days. Let’s hope the lesson Homestead has learned is that the one thing you have to give customers for free is the chance to say no.