ABCmouse Pays $10 Million to Settle FTC Enforcement Action
On September 2, 2020, Age of Learning, Inc. (operating as ABCmouse), a children’s online educational company, settled with the Federal Trade Commission (FTC) for $10 million for its alleged misrepresentations and failure to disclose important information to consumers.
The FTC’s complaint alleged that ABCmouse unfairly billed users without their authorization and also made it very difficult to cancel memberships. Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, said, “ABCmouse didn’t clearly tell parents that their subscriptions would renew automatically, and then the company made it very difficult for them to cancel. People are relying more than ever on remote learning and other online services, and companies need to be up-front about automatic renewals and get permission before charging customers.” This is certainly a warning for other online educational companies operating during the pandemic – transparency is key.
ABCmouse records between 2015 and 2018 indicate that hundreds of thousands of consumers who attempted cancellation nevertheless remained subscribed and billed.
In addition to the $10 million penalty, the settlement order requires ABCmouse to:
- Stop making any misrepresentations related to negative options (i.e., that a good or service is “free,” “trial,” “sample” or “no obligation” when a consumer must act in order to avoid later charges);
- Disclose important information to consumers when it offers negative option plans (i.e., how to cancel the plan, the total amount they will be charged if they don’t cancel the plan, and the deadlines by which they must cancel the plan);
- Explain clearly key terms associated with negative option plan offers BEFORE they get a consumer’s billing information;
- Obtain consumers’ informed consent BEFORE enrolling the consumer in any automatic billing programs; and,
- Provide cancellation mechanisms for its subscriptions.
To read the full settlement order, click here.