Using Zipcar may damage your credit

http://fstutzman.com/2009/03/29/using-zipcar-may-damage-your-credit/

by kmfrk • 16 years ago

140 94 16 years ago

tokenadult• 16 years ago

An epic fail that a company that is still so new in many markets (I was considering Zipcar for having a second car for the winter in my town when the biking weather becomes bad) would be so customer-unfriendly. I'll never be a customer for the first time if this is how the company treats early adopters.

_delirium5• 16 years ago

This does seem somewhat unusual. Forcing auto-renewal upon customers (and providing no way to turn it off short of actually cancelling the account) is, alas, common, but most companies won't go so far as to turn the auto-renewal over to collections. They'll send you an email or two complaining, then cancel the account. I think all the times it's happened to me it's actually been stated like that in the emails pretty explicitly; something like, your credit card is no longer valid, please log in and provide new details within X days or your account will be canceled.

Does this kind of thing meaningfully damage your credit, though? I wouldn't think that someone sizing you up for something like a car loan would consider a $50 dispute over an annual fee to be a very good predictor of your creditworthiness.

mgkimsal3• 16 years ago

Problem is, it's usually not 'someone' sizing you up - it's an algorithm like a FICO score that gets spit back to anyone looking you up for credit considerations. When dealing face to face with someone reviewing a report for a score, they might take that in to consideration, but it's not always (or usually?) the case.

_delirium5• 16 years ago

Hmm, yeah, I can buy that. If I were designing an algorithm, I think I would attempt to differentiate different types of disputes, so something like a dispute with Newsweek over a subscription renewal doesn't get much weight, while skipping credit-card or mortgage payments does. But maybe they've run the numbers and found that these small disputes actually are predictive of bigger defaults? Although, alternately, I could believe that the FICO folks don't care that much about predictive accuracy, since they're basically a monopoly with a good moat.

brc• 16 years ago

I remember writing an app that took a FICO score into account. It was pretty much a range - if your number fell below the range, rejected (or price increase). While the person using the system could see the qualitative reports, the whole thing was very much driven by your number.

plusbryan• 16 years ago

Bills sent to collections for as little as $15 can severely affect your credit score (personal experience). Since most car dealerships these days use the score as indicative of credit worthiness, even a small dispute can lead to annoying situations.

barrkel7• 16 years ago

Well, if you're so hard up you can't afford 50 bucks, why should anyone lend to you?

(For the sarcasm-deaf downvoters out there, I'm pointing out the perspective of the algorithm reviewing the credit score, not stating my personal opinion.)

gxti• 16 years ago

I had this happen for a domain renewal at "1&1 Internet Inc.". The card expired and it failed to autorenew, except that A) I wasn't expecting an auto-renewal and B) no notification was ever sent from the company that the domain was expiring or that there was a billing issue. 6 months later the domain actually stopped working (with 6 months left on the registration, of course) and I got a collections notice for $40. I tried to reconcile with the registrar but they told me to pay up to the collector before they'd do anything, so I walked. No domain for 6 months until it expired. I check my credit yearly and have yet to see any mention of it. Of course the normal thing for domain registrars is to let it expire if no payment is received by the expiration date, but this company seems to be geared for web hosting and buddied up with an apparently shady collections agency.

jauer• 16 years ago

It is actually very common for hosts to automatically renew and charge if you don't explicitly cancel the domain.

Customers get upset if their domain expires, someone snaps it up, and their widely publicized email addresses stop working. Getting a late payment notice is preferable.

Of course, if 1&1 never notified you there is no excuse for them sending you to a collection agency.

Still, every web hosting company that I've seen sells their packages as a recurring service.

If you want the service to not auto-renew then you need to explicitly cancel the service.

owyn• 16 years ago

FWIW, I don't use zipcar, but this blog post is 18 months old... The plural of anecdote is not research.

itistoday• 16 years ago

If you live in the Bay Area, a nonprofit alternative is City CarShare:

http://www.citycarshare.org/

dotBen4• 16 years ago

I'm totally into non-profit schemes but from the math I did it seemed that CityCarShare came out more expensive than ZipCar if you want to take the car out of the city because they charge you $0.35c/mile in addition to the hourly rental.

(ZipCar don't charge per mile just per hour).

I also have appreciated being able to use my ZipCar membership in other cities in America and Europe, esp in emergences/unexpectedly.

gcheong4• 16 years ago

Their liability coverage is better - up to $1mil per incident vs. $300,000 with zipcar. I know at least one person who chose CityCarShare for this reason.

gcheong4• 16 years ago

I wouldn't say that being a nonprofit makes them any better from a customer service point of view. When I closed an account with them, they continued to charge my card and didn't refund my deposit until almost 2 months later.

PStamatiou• 16 years ago

Heh, I've been a zipcar user since the flexcar days and this happened to me but I just ignored it all. I ended up renewing some months later but Im hope they didnt report me me. Though I did a credit check a while ago while apt hunting and nothing odd showed up.

a4agarwal5• 16 years ago

This doesn't seem so terrible to me. You entered a contract with Zipcar where you pay them an annual fee for their services. Failing to pay the fee doesn't automatically break that contract.

Think of this way: what if you could simply stop paying rent when you want to move out of an apartment? Or you just stopped paying your cell phone bill when you want to cancel it? What if you forgot to pay your health care premium and you lost your health insurance??

Clearly these aren't acceptable ways to break out of a contract.

The author's trick to "lose" your card to prevent auto billing is inviting issues like this. It seems so much smarter to just check your credit card statement each month. That would be much less work than having to update your credit card number everywhere you do want to renew a service.

Your credit card failed processing and Zipcar kept your service up and prompted you to update the card. That seems like a great way to go. If they had simply cancelled your account, I could imagine this blog post going the other way. "I forgot to update my card and zipcar cancelled my account, leaving me stranded when I really needed a car!!"

With critical accounts like your car, apartment, cell phone... it seems best to be explicit when you want to cancel your account.

barrkel7• 16 years ago

I think damage to your credit score is worse than being stranded without a car. The policy seems bad from a PR perspective to me, quite apart from any notion of right and wrong. Besides, you seldom get far in business victimizing your customers.

dannyr• 16 years ago

I don't see the correlation to apartment renting.

For me, it's more of like magazine subscription. If you don't renew, they can just stop sending you magazines.

With apartment renting, you continue to use the service/product. If you stop paying your rent, they need to kick you out of your apartment.

If you don't renew, what is the cost for Zipcar since you can't avail of the service anyway?

barrkel7• 16 years ago

I expect the cost to Zipcar is that they rely on oversubscription and underuse, a bit like porn sites.

eli4• 16 years ago

If you stop paying rent, they don't just kick you out, they try to get the missed payments back too.

xpaulbettsx• 16 years ago

Agreed - if he didn't want to use Zipcar anymore, why didn't he just call up and cancel? That's easier than getting new credit cards.

jpcx01• 16 years ago

Not really. I also cancel my cards once a year. It makes sure you only keep the services you absolutely need.

ppereira• 16 years ago

Insurance companies often use missed payments to cancel contracts, although there are usually specific legal provisions for notification, coverage, and fees associated with late renewals.

On an unrelated note, I once had an auto-renewing contract for $2/year renew at $40. It was interesting because the $2 subscription was on a now expired credit card from one bank and the $40 subscription appeared on a different card with a different number from a different bank. The transaction was considered illegal by MasterCard.

Alex3917• 16 years ago

"Failing to pay the fee doesn't automatically break that contract."

IANAL, but aren't contracts only valid if there is consideration for both parties? If they're still letting him use their cars then the contract is probably legally binding, but if they've already cut him off then he can probably argue that the contract is invalid and he doesn't have to pay off the debt.

a4agarwal5• 16 years ago

by that logic, i could get away with not paying my credit card bill by simply not paying it.

tzs• 16 years ago

> Your credit card failed processing and Zipcar kept your service up and prompted you to update the card. That seems like a great way to go.

How about threatening to send it to a collections agency? Was that a great way to go too?

I work at a company that offers a subscription service. If someone failed to re-bill and we threatened to send them to collections, most of our customers would react to such a threat in one of two ways.

1. Immediately cancel their account.

2. Quickly cancel their account, but after one of our re-billing attempts had gone through, in which case they would also demand a refund (if we are lucky) or would complain to their credit card company and we'd end up with a chargeback. Enough of the later and the banks get annoyed.

We've found in fact that a lot of people who have stopped using our service forget that they are on automatic billing. We successfully charge them, and then they cancel. We give them a full refund if they cancel reasonably soon after the renewal.

srgseg2• 16 years ago

Furthermore, contrary to popular belief, if you sign a contract and put down a deposit for something, that doesn't give you the right to walk away from the full purchase in exchange for forfeiting your deposit.

This was discovered the hard way by people putting down deposits for to-be-built houses, who thought they could simply walk away from the full purchase if the value of the house fell between the time they put down the deposit and the time the completion was due.

billswift• 16 years ago

That depends entirely on how the contract was written, some you can walk away from and some you can't.

mrkurt4• 16 years ago

I'm a reasonably experienced consumer and until now I always would have answered "yes" if someone asked "is cancelling your credit card an acceptable way of terminating a monthly service?" I'm also a reasonably experienced seller of recurring services... and my answer would have been the same.

If I'm pre-paying a service each month and I cancel my card, getting threats about collections is the exact opposite of what I expect. What I usually expect is for the service provider to either cancel my service or put it in some kind of suspended mode and then follow up with me to see if I really meant to cancel. Good billing providers would actually do this automatically: http://chargify.com/features/dunning-management/

As an aside, half the purpose of Zipcar is that it isn't a critical account. It's an easy-to-use convenience that saves you from the complexities of owning a car or making arrangements with a traditional rental service.

eli4• 16 years ago

It's a possible way of terminating SOME services (I wouldn't try it on your cable or cell phone bill). But I think it depends what you mean by "acceptable." It's not very nice. If the best practice for a merchant is to suspend an account when someone doesn't pay, then best practice for a consumer is to cancel a service when you no longer intend to pay for it.

a4agarwal5• 16 years ago

you can make your own assumptions about acceptable ways of canceling a monthly service. you can also read the terms of service and abide by what you said ok to.

personally, it seems like a lot of people are trying to whine their way out of contracts.

jboydyhacker2• 16 years ago

Wow this attitude is really offensive. If I want to auto renew a contract it should be something I willfully decide to do--not something that is auto-default. Then to presume that this guy gets his credit score hurt and potentially will have trouble getting loans and a mortgage all because some company is so insecure about the value of the service it provides that it has to trick consumers into renewing?

If your service is good, people will renew automatically. Given the proliferation of online services, it is absolutely impractical for people to keep track of many dozens of expiration dates.

There should be a federal law preventing this behavior. It's dishonest and a very bad practice. Zipcar should be held liable for any damage to this lad's credit. GRRR

randallsquared2• 16 years ago

If I want to auto renew a contract it should be something I willfully decide to do

But in the contract, you already agreed to let them charge you every month. I don't know the wording, but it probably doesn't say "as long as this card is active". This wasn't a case, if I read correctly, of automatically renewing when he hadn't agreed to that, but of him promising to pay until he cancelled his account, and then admittedly attempting to defraud zipcar by neither paying nor canceling.

There should be a federal law preventing this behavior. It's dishonest and a very bad practice.

To be clear, do you mean the practice of agreeing to charges you have no intention of paying? ;)

I agree, though, that we desperately need contract reform. Maybe contracts which are not individually executed by at least one person on each side should be advisory only, or something. What with the uncertainty surrounding TOS, EULAs, licenses, and 20 pages of fine print, they nearly are anyway, in practice.

randallsquared2• 16 years ago

> With critical accounts like your car, apartment, cell phone...

Well, if you're using zipcar, it's precisely because your car is not in the same category with these others. If it were in that category, you'd just buy a car.

sbov• 16 years ago

I use zipcar because I usually don't need a car, not because when I need to use a car its use isn't critical.

cletus• 16 years ago

I couldn't disagree more. I recently had a similar issue. If a company cares about its customers it should:

1. Email them 3-7 days prior to an auto-renewal to tell you it will be renewed if you do nothing;

2. Simply cancel the account if an auto-renewal fails emailing the customer to tell them why. Ideally it will go inactive for a period (eg 7 days) in case it's unintentional;

3. Give a no fuss refund within 7 days of an auto-renewal if the service hasn't been used in that time; and

4. Allow easy deletion of an account (not simply inactive ie it's about data retention).

Stories like this are good to publicly shame companies for putting short term interests (the money made from auto-renewal grifting) ahead of customer satisfaction, which is ultimately to their detriment.

Still... not sure why this is on HN.

lsc2• 16 years ago

at the very least, it seems like it should be an option. I mean, sure, you are right that some people are probably depending on their zipcar, and would prefer to keep getting charged (and have it go to collections) than to have the account canceled... however, how long will zipcar keep the account active, really? I mean, collections on that sort of thing have got to have way less than a 50% success rate, so if they leave your account active for another month (I'm assuming zipcar is pre-paid) they aren't getting paid much for that last month. It might be better from their perspective to take an approach more like mine.

However, I think for most of us, the zipcar account isn't such a huge deal (I can always hit avis, enterprise, or get a cab if it's an emergency and I don't have friends.) I know, personally, that I'd really prefer to have my zipcar account (if I had one) terminate upon non-payment, rather than hit collections.

This is an issue I've thought a lot about; right now, my policy is to warn and then shut you off, in fact, one of the reasons I use paypal is that I can only ask you for money. I can't pull. This makes billing mistakes on my part much less of a big deal. For most of my customers, I think this is probably the right thing. But yeah, it probably would be good to allow them a choice.

But yeah, for many of us, especially for pre-paid services, the assumption is that if I stop paying you, you will just cut me off. considering how many subscriptions I have (and the difficulty of canceling some of them) I think that's quite reasonable. Hell, I periodically change my credit card number to make sure all the 'package deals' I get when I sign up for stuff I actually want from someone shady, like, say, a bank, get canceled.

a4agarwal5• 16 years ago

For the record, original author is not allowing my comment on his blog (identical to comment above).

And he has approved a comment that was entered after mine.

kscaldef4• 16 years ago

I “lose” my credit cards yearly to avoid sneaky auto-renewals just like this.

Doesn't this also damage your credit? Length that accounts are open factors into your credit score, and people who cycle through cards typically see it go down.

_delirium5• 16 years ago

If you just your card stolen, they send you a new card with a new number on the same account, which I don't believe shows up on the credit report at all (it still counts as the same account).

kscaldef4• 16 years ago

I don't believe that's how most banks handle lost cards, and I don't see how that would avoid the auto-renewals as the original author was trying to do. I assumed the the author was talking about closing the account and re-opening with a new number.

EDIT: I'm sorry, I mis-read your comment originally and thought you said the same number, not a new number. That said, I've been through this a couple times, and each number shows up individually on my credit reports.

graywh• 16 years ago

I've never received a new CC# for a lost card. The 3-digit security code on the back did change, though.

gcheong4• 16 years ago

I think the person just calls to get a new card on the same account but with a different card number. In fact, I recently got new cards with a different number from my credit card company because they apparently had information that my original card may have been used illegally. This caused a bit of pain as charges to various accounts started failing.

kscaldef4• 16 years ago

This is sort of off-topic, but does anyone know how Zipcar affect your insurance record, since you don't have an individual insurance policy? If you use Zipcar exclusively for a couple years, then stop and go back to a private vehicle and private insurance, do insurance companies consider you "continuously insured" or are you going to get hit for having a break in your insurance record?

(I've tried to ask this question of Zipcar representatives in the past, and no one has been able to give me an answer. Their FAQ on insurance doesn't help either: http://www.zipcar.com/how/faqs/one-faq?faq_number=28)

dotBen4• 16 years ago

I asked a similar question about building up a no-claims bonus for using ZipCar.

The short answer is no, it's technically ZipCar that is insured and so from a personal capacity you have no car insurance if you only use ZipCars and don't run your own car (and personal insurance).

I'm not clear why that is a problem - you just loose your no claims bonus but surely that's reasonable?

kscaldef4• 16 years ago

I'm not clear why that is a problem - you just loose your no claims bonus but surely that's reasonable?

Typically your rates are higher if you haven't been continuously insured over the past N years, where N is something in the range of 5-10.

gamble2• 16 years ago

> you just loose your no claims bonus but surely that's reasonable?

Unfortunately not. In my experience, the slightest break in insurance coverage is an excuse to push you into the highest-risk pool. It's completely ridiculous. Perhaps the policy made sense before every piece of information relevant to insurance was tracked by computers, but now it seems like something that only exists to punish people who want to go car-free for awhile.

gcheong4• 16 years ago

That's a good question. I think instead of asking Zipcar it might be better to ask an insurance company.

dotBen4• 16 years ago

A few thoughts (I'm a ZipCar member btw):

I don't pay an annual fee because I used a company code I found on a discount site that gave me no annual fee (use Google to find one).

They wrote and said that he was several weeks overdue paying for his annual subscription but I wonder if he'd tried to book a car whether they'd have let him without a valid credit card on file? Point is, if they wouldn't have let him rent a car then I think it's crap to say he was overdue because the membership was still in effect. I think his MO on the "loosing his card" is crappy, but this seems equally crappy.

Finally as an FYI, Felix Salmon wrote (admittedly a while back, but then this OP link is old too) that ZipCar insurance is very weak in places, see http://www.felixsalmon.com/000855.html. I'm not aware they've done much to improve the situation

jfager• 16 years ago

My ZipCar experience: I rented a car for a full weekend last October, and returned it several hours before it was due back. I forgot to "tap out", though, and ZipCar sent me a late return notification and charged my credit card. No big deal, just a simple mix-up, so I called customer service.

Unbelievably, they couldn't do anything about it from the national help line, and when I was redirected to the NY office, I got more runaround. It got to the point where I called my credit card company to do a stop payment, as it was clear that I wasn't going to get help from ZipCar.

Then I tweeted about it. Someone at ZipCar saw the tweet, and the whole problem got fixed pretty much immediately - I got an email saying my case had been reviewed, that the computer showed I did in fact return the car on time, and that if I could cancel the stop-payment, I'd get my money back (which I did).

It was awesome to get the problem fixed with just a simple tweet, but I wasted hours on the phone and would have wasted hours more dealing with the stop-payment fallout, when they already had the information that I hadn't actually returned the car late. I'm still a member, but I think I've used them only once or twice since. The whole experience left me pretty soured on them.

The takeaway is: if you're only giving good customer service to the people who complain publicly, you're doing it wrong.

lsc2• 16 years ago

>The takeaway is: if you're only giving good customer service to the people who complain publicly, you're doing it wrong.

Speaking as a provider who has been in that situation before (e.g. losing a ticket, then responding to a public complaint) I agree completely. First off, 98% of your customers are not going to complain publicly. They are simply going to leave. And as I keep saying, the people who don't complain are the cash cows... the silent majority, from whom you get most of your money.

Now, I'm not saying you should ignore public complaints... that would be bad business. Respond publicly and solve the problem, or at least give a refund. But you must treat the complainers like canaries. for every valid complaint (and yeah, you will get invalid complaints... respond to those too, and offer a refund, but it's okay to say "I'm sorry my service does not meet your needs." - you can't be all things to all people.) you need to review your processes, and figure out why the complaint wasn't resolved through normal channels.

kungfu1• 16 years ago

This is his own fault. Zipcar could have done a better job handling it, but please note how he says letters became increasingly more menacing. Why did he not attempt to do anything about this until they were trying to send him to collections?

Come on. you arent a victim. If i start to get calls about something, im going to return them, and figure out what is going on here.

If he would have simply called them he could have avoided this. Zipcar saw that he "owed" 50 bucks, they saw him not returning their calls, and finally they sent his ass to collections. Pretty straight forward to me. Its his fault for making sure that they wernt trying to bill him any longer, and to have done something PRIOR to them sending him to collections. Sit back a moment and ask yourself how Zipcar makes money.. hint: its not on the mileage

I use zipcar, and ive never had any issues.

barrkel7• 16 years ago

I don't know what it is about stories like this that make commenters here start thinking in terms of fault.

It's not about fault. It's about the customer always being right, even when they're wrong.

yannk• 16 years ago

There is good and ugly with zipcar. I have my share to say about the ugly. They increased their fare when gas price went up, but didn't lower it when the prices dropped significantly. http://blog.cyberion.net/2008/12/zipcar-please-lower-your-pr...

Besides, a Marketing Executive noticed this post above and dropped me a line saying he would get back to me the next day at the latest (I thought, yeah, cool a 2.0 company or whatever. My expectations were lower, I just wanted to vent out publicly about zipcar not listening). I never heard of him again.

In short? I'm not surprised one bit about their poor customer practice.

jarin2• 16 years ago

The grim reality thing about questionably ethical business practices like this is the increased profits usually outweigh the drawbacks, as long as they can keep the outrage down to background noise. Seems like nobody checks BBB listings before buying anymore.

eli4• 16 years ago

I agree this is dumb of ZipCar from a PR standpoint, but that is a ridiculously hyperbolic title.

Using ZipCar won't damage your credit. Canceling ZipCar won't damage your credit. Failing to cancel ZipCar while also failing to pay for ZipCar could indeed damage your credit.

nickpinkston• 16 years ago

I couldn't even get past the "you have too many speeding tickets phase" - nor could my girlfriend...

jrockway• 16 years ago

I've read my credit card agreements. It says that if you authorized a recurring charge before you cancel your account, and that charge shows up again, you are responsible for it. (If it's erroneous, you can dispute it, of course.)

The way to cancel services is to call up the provider and tell them you want to cancel. If they charge you after that, dispute it. If they won't close your account, sue them or write a letter to your state's attorneys general office.

Now ideally, there would be a way to cancel everything online... but that is apparently not good for business, and it's something that the government is going to have to mandate.

(Honestly, it surprises me how people manage their finances. Losing your credit card to avoid paying for things that auto-renew!? This reminds me of some hate mail I read that was directed at my employer; apparently this person kept a $0 balance in her checking account, bought a $5 sandwich everyday with her debit card, ate it, and then went to the bank and deposited exactly $5 in cash. Since overdraft fees were calculated overnight instead of intraday, she never paid overdraft fees. Then the algorithm changed, and she got charged the overdraft fees. This apparently was because the bank was evil, and not because it's stupid to go into debt to buy a sandwich when you are carrying the cash with you anyway. But I digress...)

mmt• 16 years ago

I do something similar, but, arguably, lower-effort than outright cancelling my cards yearly. I use disposable card numbers.

I only wish every single one of my cards offered this service, but, most notably, Amex doesn't[1].

Currently, only Citi[2] and Bofa[3] (from their MBNA acquisition) offer it on reward cards I'm willing to use[4]. If anyone knows of other issuers who offer this on such a card or who offer it on an otherwise full-featured[5] business card, with all cardholders having access to this feature, I'd be very interested in knowing.

[1] They had it under the mark "Private Payments" but discontinued it. I don't think they ever offered it on the Costco co-branded cards, so I never tried it.

[2] "Virtual Account Numbers"

[3] "ShopSafe"

[4] At least 1% kickback payable as cash. Miles and "points" don't do it for me.

[5] Employee cards with spending limits settable online is the critical one.

Using Zipcar may damage your credit

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