PhoneSwipe Is a Scam

PhoneSwipe provides an example of how consumers lack protection from online e-commerce scams, thus demonstrating the need for auditable, delivered transaction receipts.

My wife had been using Square for her business’ credit card processing for about a year. About eight months ago she decided to look for an alternative. Her main issue with Square was that they would not share her customers’ email addresses with her and that they only supported Square Register on iPads and not on her Android phone (Update Dec 2013: Square Register is now available on phones).

A promising looking alternative was PhoneSwipe. PhoneSwipe’s pricing looked good and they supported a register feature on phones. She signed up on PhoneSwipe’s web site, entering just as much as was required in order to try the product. Unfortunately PhoneSwipe’s Android app was dismally implemented. It was cumbersome, ugly and frequently crashed and/or locked up. So she stuck with Square and ended up buying an iPad, just so she could use Square Register.

Fast forward and we find that for six months PhoneSwipe had been charging her business a monthly fee of $12. This is despite the service being advertised as having no monthly fee (the monthly fee, monthly minimum and cancellation fee are all advertized as None on their site). Apparently there was also a feature where you could sign up for a reduced swipe rate if you paid a monthly fee. She did not sign up for this feature, though that is what PhoneSwipe claims in order to justify the fee. PhoneSwipe never contacted her via email or any other means to confirm or provide a receipt showing that she had signed up for this additional service.

She thought it would be straight forward to clear up this erroneous charge. This was not the case, as PhoneSwipe refused to refund the six months of monthly fees. This was the case even though they acknowledged that she has never used the service, and further acknowledged that they had never sent her a notice indicating she had signed up for the additional monthly service.

The next line of protection was to contest the fees with her card issuer. Unfortunately consumers lack solid protection here as well. For credit cards you now have only two months within which to dispute a charge. With so-called electronic delivery of statements now commonplace amongst credit card issuers, I doubt many people even see their statements every month (moral: keep paper statements coming). However she had used a debit card and, for this, the dispute period is just two days.

This situation highlights the lack of consumer protection in online e-commerce, and it is not an isolated case. I’ve had a similar experience with Expedia where I was charged for services never advertised and for which I never received confirmation via postal or electronic receipt. In both cases the only record of the transaction was buried somewhere on the provider’s web site, if you knew to look for the charge you were not aware of.

Here is another example, an account of dealing with the company JustFab.

“Back in January 2012, one of [my girl friend’s] friends emailed her a link to JustFab, then she bought a pair of shoes from and never visit the website again. Then 8 months later, in September 2013 she finished her Master study in the US and returned to her home country. She was appalled to find out that her credit card has been charged a $39.95 fee for the last eight months. Yes, $39.95 for 8 months, without getting anything from JustFab.

“I then did a bit research on the internet. It turned out my girlfriend wasn’t the only victim. Apparently JustFab works like this: once you buy something from their website, you become their “VIP member” without your knowledge. Then you will have to log into their website between the 1st-5th of each month and click “Skip This Month”. If no action is taken (either skip this month, or cancel your account), they just charge you a $39.95 fee every month.

“According to article published on BusinessInsider, JustFab “generate about $100 million this year” in sales, I wonder how much of this $100 million are from people like my girlfriend who simply didn’t read their entire 2,500 words Terms of Service and were unaware that they were charged $39.95 a month for nothing.”

The call to action is for government regulators to establish consumer protections that require a clear and transparent auditable, delivered receipt process in the case of all online fees charged. A secondary action should be to establish a minimum card issuer dispute period that more realistically aligns with the ability of consumers to detect such charges amidst the increasing noise of multiple dozens of monthly statements received and reduced paper delivery.

In the meantime, try not to miss reviewing any of your credit card statements, and either avoid using debit cards or check your debit card transactions daily. And please do also avoid using companies such as PhoneSwipe that are unwilling to fix an obvious wrong.