A sophisticated nationwide subscription scam involving several well-known publications was the target of multiple lawsuits this week, where the attorneys general in New York, Oregon, Minnesota, Missouri, and Texas have all filed suit against the alleged participating subscription services.
The scam involved fraudulent renewal notices sent to magazine and newspaper subscribers that urged quick action to lock in lower subscription rates. The notices were printed on what appeared to be official company stationary, complete with publisher logos. Overcharges include $600 for a yearly subscription to The Wall Street Journal, which regularly sells for $413, and $59.95 for a yearly subscription to Consumer Reports, which sells for only $29.95. In some cases, consumers were charged up to double the actual subscription rate.
The scam began to come to light when customers filed complaints about paying for subscriptions or renewals but having never received anything in return. Authorities say that the subscription services used a multitude of different fraudulent names to avoid detection and that most of the return addresses showed the subscription services to be operating out of Nevada and Oregon.
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Oregon Attorney General Ellen Rosenblum said, “This sophisticated main scam ripped off thousands of Oregonians and others across the country. Consumers thought they were dealing with legitimate companies, and that they were paying the lowest available price. Instead, they sent payments to a dishonest third-party, who pocketed the money.”
In total, subscriptions to 44 different publications were sold, including The New York Times, The Wall Street Journal, The Washington Post, Sports Illustrated, Consumer Reports, Woman’s World, National Geographic, and Forbes.
The lawsuits ask that judges in each individual state bar the companies involved from selling subscriptions and identify and provide reimbursement to those who overpaid.
Subscription businesses would be remiss if they didn’t take note of this story. For one, it illustrates the importance of keeping customer data under lock and key so that it won’t be stolen and misused by a malicious entity. While the large publishing companies affected here can better absorb the losses associated with scams than smaller subscription businesses, the cost of this subscription scam is still very high – both monetarily for these publishers and to their brand and reputation. The cost to reach out and reengage customers thought to be securely within each publisher’s recurring revenue base will be high. We expect the impact on their churn rate to be significant.
This story also illustrates the importance of clearly communicating with subscribers the monthly price and length of subscription contracts, as well as informing them to never respond to suspicious notices without first contacting you.
We recommend all subscription services review renewal operations and communications with an eye toward this scam, to shore up potential weak spots in their processes or subscriber/member education on the matter. We also remind subscription businesses that the old fashioned “seed list” still is a very practical tool today. Make sure you have a few “seed’ accounts that go to your office or home addresses and email accounts to monitor for any potential abuse of your list(s).