Apple to Refund at Least $32.5 Million Over Kids' App Purchases

Apple (NASDAQ: AAPL  ) is about to dip into its coffers to settle a Federal Trade Commission complaint. The tech giant will pay a minimum of $32.5 million in full customer refunds to retire the complaint, which accused the company of billing customers for in-app purchases made by children without their parents' consent.

Apple will also modify its billing practices to ensure that "express, informed consent" is given by its customers for such purchases, according to information released today by the FTC.

In-app purchases are extra features, functions, or virtual currency within an app that are offered after a user initially downloads the title. Numerous apps intended for children feature them.

In its press release announcing the news, the FTC quoted its chairwoman, Edith Ramirez, as saying that the agreement "is a victory for consumers harmed by Apple's unfair billing, and a signal to the business community: whether you're doing business in the mobile arena or the mall down the street, fundamental consumer protections apply."

According to the FTC, Apple has received tens of thousands of complaints about unauthorized in-app buying by children. One particularly egregious example alleged that a child spent $2,600 on such buys in the Tap Pet Hotel app.

Under the terms of the settlement, Apple is required to provide full refunds promptly, upon request from the affected account holders. Apple is required to notify all consumers charged for in-app charges of the availability of refunds and how to get them for unauthorized purchases by children. If Apple issues less than $32.5 million in refunds in the year after the settlement becomes final, it will have to pay the balance to the FTC.

A message left for an Apple spokesperson was not immediately returned.


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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 15, 2014, at 1:31 PM, Jsgltd wrote:

    This happened with my grandchild 6 months ago. Apple issued an immediate refund after I called.

  • Report this Comment On January 15, 2014, at 1:38 PM, caddis16 wrote:

    I don't get it. What did you do, give your password to the kid.

  • Report this Comment On January 15, 2014, at 2:09 PM, TXObjectivist75 wrote:

    Um, go into settings, and turn in app purchases off! I do it every time I let my 4 year old play on my iPhone or iPad. It's literally like 4 taps. Apple is now paying people for being stupid.

  • Report this Comment On January 15, 2014, at 3:01 PM, toph36 wrote:

    This happened to me when I had an iPhone. Apple did refund some of the charges at the time when I complained. The problem is that in-App purchases are turned on by default and authentication is not required for the store every time you make a purchase, unless you enable that setting. My daughter used to delete apps on me, as well as post on my LinkdedIn and send texts! I don't have to worry about any of this anymore since I switched to a Windows Phone. Love the Kid's Corner feature. My daughter no longer has access to anything unless I give her explicit access to it.

  • Report this Comment On January 15, 2014, at 3:32 PM, jdmeck wrote:

    Why is it Apple's fault that parents are stupid and use their phone and pads as babysitters.

  • Report this Comment On January 15, 2014, at 5:34 PM, Mathman6577 wrote:

    They won't have to dig too deep. My estimate is the refunds are about 6 hours worth of earnings.

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Eric Volkman

Eric has been writing about stocks and finance since the mid-1990s, when he lived in Prague, Czech Republic. Over the course of a varied career, he has also been a radio newscaster, an investment banker, and a bass player in a selection of rock and roll bands. A native New Yorker, he currently lives in Los Angeles.

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