How In-App Purchases are Victimizing Consumers

If your child is racking up charges from in-app purchases online, you’re not alone. They are likely victims of “bait apps” that prey on children who either don’t realize that they are making purchases or don’t understand the full financial consequences of their actions. Giant tech companies are not motivated to create safeguards because these purchases generate significant revenue. In fact, some companies actually create an environment where this type of fraud is encouraged. Five years ago, the Federal Trade Commission required Apple and Google to refund parents millions of dollars for in-app purchases made by their children. Two years ago, Amazon followed suit. In addition to refunds, Apple and Google promised to change their billing practices after the FTC discovered that, despite the class action suits, unauthorized purchases continued at the companies.

A recent report by the Center for Investigative Reporting revealed information even more shocking: Facebook knowingly and deliberately “orchestrated a multiyear effort that duped children and their parents out of money, in some cases hundreds or even thousands of dollars and then refused to give the money back.”

A class action suit filed against Facebook claims that it targeted children in an effort to expand revenue for online games like Angry Birds, PetVille and Ninja Saga. According to documents in the suit, “Facebook encouraged some developers to let children spend money without their parents’ permission.”

One document called Facebook’s efforts to maximize profit at consumers’ expense “friendly fraud.” Facebook’s tactics to generate revenue were so successful, one teenager even racked up an outrageous $6,500 in charges over a two week period. Although this was an extreme example, it illustrates the tremendous financial risks parents face. Despite knowing that children typically generated these charges unknowingly, they denied a refund. In fact, Facebook called these users “whales,” a label used in casinos to describe big spenders.

So what can parents do to protect themselves? According to the New York Times, here are a few steps, you can take to prevent, or at least minimize, unauthorized purchases online:

Apple:

Set up a family sharing account. Turn on the “Ask to Buy” feature in the child’s account in the family sharing settings. Parents will receive an alert any time their child wants to make a purchase.

Facebook:

Because there are so many ways to make purchases on Facebook, an efficient way to protect yourself is to remove payment from Facebook altogether.

Amazon:

Amazon’s parental controls feature allows users to add security for in-app purchases.

Google:

Google Family Link promises to create healthy digital habits. But parents beware: children can opt to leave Family Link once they turn 13.

Despite some of the safeguards available to parents, the most important thing to do is talk to your children about the risks of playing games online.

Billshark fights unfair billing practices in many other industries. If you think you’re overspending on your wireless, cable and internet bills, send it to the Sharks so we can take care of it for you.