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When was the last time you tried to give a company $100 and it refused to take it?

That happened to me this week as I bargained with Sirius XM Radio over continuing my membership to the satellite radio service.  I said I would renew for a year, but only if the firm put in writing that it would not automatically renew my account. I’d had a bad time twice with the firm’s renewal policies, as have many others, and I told them I wouldn’t play renewal roulette again.

Sirius turned down my money rather than agree to my terms. That’s how critical automatic renewals are to Sirius XM’s business model.

It’s easy to see why subscription-based companies love automatic renewals. All that predictable revenue is lovely. And if a few — or a lot — of consumers end up paying accidentally for services they don’t want but don’t bother canceling, well, that’s just leveraging consumer behavior. Heck, that’s not a bad business plan. America Online’s dial-up still has 2.6 million paying subscribers, many who may have simply forgotten they are paying for it.

Sirius isn’t AOL. I still love the online service’s live sports offerings, though increasingly, I get what I need through streaming directly from sports leagues. Despite all the terrestrial and Internet competition, the satellite service passed 25 million subscribers last quarter, and optimistic investors keep hoping the stock will finally find its way above $5 for the first time since 2005.

When a company relies so heavily on automatic renewals, it’s worth questioning how loyal its customers are, however.

Sirius media relations spokesman Sal Resendez, when told about my situations and asked about similar tales, did not respond to requests for comment about this story at press time.

A Long-Term Commitment

Like many XM users, I “inherited” the service when I bought a car two years ago. It was built right into the car’s radio. I tried it for a year at a good price, and liked it well enough, but never really considered renewing. The credit card I had used to make my initial purchase had expired, so I assumed the service would simply stop working after my term was up. My inaction was costly.

Last summer, I began receiving threatening collection notices, as Sirius XM had automatically renewed me and billed me for an entire year at double the price. I objected, and the firm made me an offer — another year at half the price. I agreed, but said repeatedly that I did not authorize the firm to charge my credit card again in a year, or to renew my account. I bet you know what came next.

This month, Sirius charged my credit card $174. To its credit, the firm quickly offered me a refund when I called to object, but then said it would send me an invoice. At this point, I said I was annoyed enough that I wanted to cancel. A second operator offered me a deal at half the price again. I agreed, as long as I received notice in writing that I would not be auto-renewed. The operator said that wasn’t possible, and I canceled.

This was a reasonable negotiation between two informed actors that didn’t leave me with a bad taste in my mouth. Sirius has obviously calculated that automatic renewal — really, lowering the risk that I might quit — is part of the price I must pay to have its service. I decided I didn’t want to pay that price.

Customer Dissatisfaction

Not all automatic renewal stories have such a rational end, however, and the technique has run afoul of state and federal regulators many times with many companies. Reacting to a slew of consumer complaints about websites with questionable practices, Florida and California both passed laws in 2010 creating new legal burdens on firms engaging in auto-renewals.

At about the same time, Sirius disclosed in an SEC filing that it was the subject of a “multistate working group” led by then Ohio Attorney General Richard Cordray that was probing the firm’s billing practices.

No action was taken against the firm.

Back then, the Better Business Bureau said it had 3,000 complaints about the company and Sirius faced a barrage of negative publicity. Today, the company has an A+ rating with the BBB, but the organization also notes on its website that there have been 1,500 resolved complaints against the firm in the past 12 months, most dealing with billing issues. That’s a tiny fraction of the firm’s 25 million users, but it’s not an insignificant number.

No doubt, some consumers appreciate the set-it-and-forget-it nature of automatic renewals, which as the firm says, “allows us to ensure your service is never interrupted.” The practice is perfectly legal as long there is “clear and conspicuous” disclosure, and consumers have a legitimate chance to cancel, as I did.

Still, auto-renewal opens the door for abuse, and a quick scan of the Internet reveals many consumers hate it. If I were an investor, I would wonder why the firm seems to value automatic renewal more than money.

Red Tape Wrestling Tips

Consumers can certainly do what I did — simply refuse to do business with firms that force automatic renewal. That’s often not realistic, however, so here’s a few suggestions.

Separate credit card. The biggest problem with auto-renewal is the likelihood that you will end up paying for something you don’t want because you forget about it. That’s even more true when renewal charges are rare, such as annual bills. One good way to avoid that — use a separate, rarely-used credit card for these kinds of business deals. That way, the renewal charges are less likely to get lost in a sea of other charges.

Don’t just shrug. Any time a company surprises a consumer with a charge, that’s wrong. Call and fight it. Complain to your attorney general. Complaining is like voting, I often say. If no one does it, the bad practices go on forever. Even if you lose the battle, you will win the war by complaining. Also, know your rights if someone alleges you owe a debt that you dispute.

Negotiate. When you call to complain, say you plan to cancel and get to what’s called the “customer retention department.” Agents there have special powers to make deals that front-line agents do not. Often, you can get a company to waive late fees or other unfair charges by agreeing to renew at a bargain rate, which can be a happy ending for everyone.

Credit, not debit. Never use a debit card for subscriptions that might auto-renew. Consumer rights to dispute credit charges are stronger than debit rights – for starters, with a credit charge, you simply dispute and don’t pay. With a debit charge, you have to fight to get back money that’s been taken from your account.

* For companies considering auto-renewal plans, here’s a helpful article offering advice on staying on the right side of the law.

Image: iStockphoto

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