Around the end of January, I hit “unsubscribe” on a $30-a-month software program by Adobe and was quickly informed that I would have to pay a cancellation fee of more than $100 to end the service.
An online conversation with a customer service agent to get rid of the unexpected fee was going nowhere until I typed these two words into the chat: “Statutory chargeback.” Suddenly, I was told I’d be able to cancel at no cost.
Statutory chargebacks are a provision in most provinces’ consumer protection acts that requires card issuers to reverse or cancel a credit card charge for services or goods that customers did not receive. But while this tool has been on the books for around two decades, very few people know about it.
And even those who are aware of them might not fully understand how to use them – including me. As I asked legal experts about my experience, I discovered both the limitations and the largely unexplored potential of this obscure legal tool.
In November I’d signed up for Adobe Acrobat Pro, software I needed to edit PDF files that cost $25.99 a month before tax. I had let a seven-day free trial expire because I thought I might still need the program for a few more weeks. Then, in December, I missed my own reminder to cancel the subscription, which popped up in my calendar during the holiday frenzy.
When I got dinged again in January, I finally resolved to end the unwanted charges right away. I was prepared for the fact that I might have to pay for another month of service and expected the company would end my access to the program at the end of the billing cycle.
But when I went through the motions of ending the subscription online, a warning appeared on my screen: Cancelling would incur a fee that, in my case, worked out to over $100.
It turned out my Adobe subscription was an annual plan, paid monthly. Beyond the weeklong free trial, I had the ability to obtain a full refund by cancelling within 14 days. After that, if I unsubscribed I would incur a fee, my contract warned with a hyperlink where I could “learn more.” That charge, as the fine print specified, would be equal to 50 per cent of the amount left on the yearlong contract and I would still lose access to the service at the end of that month’s billing period. It was all there in the terms of service, which, I’ll admit, I hadn’t read to the bottom.
When I contacted Adobe via online chat saying that I wanted out of its subscription plan, a customer service agent known to me only as “Tanya” offered to give me three months worth of free access instead.
I politely declined: Could Adobe just cancel the service and waive the fee please?
But Tanya stood firm: “Since you have an annual plan based on a monthly basis, a cancellation fee applies if you cancel now.”
I pleaded and argued that the contract didn’t sufficiently highlight the potential cost of the charge. But Tanya remained unwavering.
It was then that I remembered statutory chargebacks. I reckoned I may have grounds to ask my credit card issuer for just such a special type of chargeback if Adobe applied its cancellation fee. After all, I’d be charged for half of what was left of my annual contract but would lose access to the software at the end of the billing cycle. It sounded like I’d be paying for months worth of a service that I would no longer be allowed to use.
So I told Tanya that if Adobe went through with the fee, I’d ask for a statutory chargeback on my Mastercard.
Within a few minutes, Tanya typed back that “Adobe values you as a customer.” The subscription was promptly cancelled and the fee waived.
I was quite proud of myself for arguing my way out of that fee – until I found out I probably just got lucky. In reality, I likely wasn’t entitled to a statutory chargeback, I learned after several conversations with consumer law experts, although I did have another remedy available to me.
The reason that a statutory chargeback likely didn’t apply in my case is that I received part of what I had paid for, said Daniel Tsai, who teaches law and business at the University of Toronto and Toronto Metropolitan University (formerly Ryerson). Adobe probably waived the fee simply to avoid dealing with a difficult customer, he added.
Adobe did not respond to two requests to offer comment for this article.
The key issue in my case wasn’t that I didn’t get what I ordered but rather whether the contract did a good enough job of making consumers aware of the cancellation fee. If you run into this, a simple chargeback request to your credit card company may do the trick, Prof. Tsai said.
With that route your issuer will referee your dispute according to the terms and conditions of the credit card contract, which has some potential drawbacks. For example, some credit card companies demand that consumers act within a certain time frame, said Jeff Orenstein, founder of Consumer Law Group, which has offices in Montreal and Ottawa.
And if your credit card company doesn’t take your side, that’s often the end of the road – unless you’re willing to go to small claims court.
But if a retailer or service provider simply didn’t deliver the product or service they promised, you should know that asking for statutory chargeback is also an option, said Prof. Tsai.
This goes beyond the straightforward scenario in which a company ghosts you after taking your money. Consumers can resort to statutory chargebacks when retailers try to force them to accept vouchers when they can’t provide a product or service or can’t deliver it in the time frame specified by the contract, said Prof. Tsai, speaking about the Ontario Consumer Protection Act. (This applies to charges of more than $50.)
In Quebec, statutory chargebacks may come in handy if service providers try to impose schedule changes instead of providing refunds when they’re unable to honour the original terms of their contracts, said Joey Zukran, a lawyer at Montreal-based LPC Avocat.
As a legal instrument, statutory chargebacks are “absolutely useful,” said Marina Pavlovic, a law professor at the University of Ottawa, “because sometimes you have a renegade service provider and you really don’t have any other way of actually getting your money back.”
All provinces except New Brunswick and Prince Edward Island allow for statutory chargebacks, although consumer protection legislation in the territories does not include this tool. The rules vary slightly from province to province. In Quebec, for example, the tool is limited to “distance contracts,” which are orders or bookings you’ve placed online or over the phone. Ontario doesn’t have that restriction.
Statutory chargebacks enjoyed a brief moment of notoriety among the general public in the spring of 2020 as a tool for Canadians to try to get their money back for flights cancelled because of the onset of the COVID-19 pandemic. Several carriers had initially offered vouchers or travel credits rather than cash back for the cancellations, although Air Canada, WestJet and others later began to provide refunds. It is unknown, though, what the success rate has been among passengers who used statutory chargeback to recoup the cost of their tickets.
One thing to consider: If you decide to try for a statutory chargeback, mind the paperwork. In Ontario, for example, you’ll have to send the retailer or service supplier notice that you are cancelling your contract with it and request a refund after waiting 30 days of not receiving the product or service you paid for (if it’s a product, that’s 30 days from the supplier’s promised delivery date). You’ll need proof of this so either send a written note or record your call.
If you don’t get your money back, you’ll then have to ask your credit card for a chargeback under the Consumer Protection Act.
The process is time-consuming enough that it may deter some consumers, especially if the charge they’re trying to reverse is small, Prof. Pavlovic said. Often, though, merely saying that you’re going to resort to a statutory chargeback may be enough to prompt a company to refund the money, she added.
Bottom line: It pays to know that a simple credit card chargeback may not be your only recourse. As my experience shows, navigating these rules is hard. But in specific circumstances, a statutory chargeback can be a powerful bargaining chip – and you might not even have to do any of the paperwork. You just have to know about the option.