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Amazon under ‘fire’ on kids’ purchases

By Claes Bell, CFA · Bankrate.com
Friday, July 11, 2014
Posted: 4 pm ET

Amazon is facing an FTC lawsuit over allegations it billed parents and other adults for millions of dollars of unauthorized in-app purchases made by kids.

Most of those charges were allegedly racked up while playing games that make money by selling kids "coins," "stars" and other digital detritus to help them progress in the game.mobile-blog-amazon-fire

"Amazon's in-app system allowed children to incur unlimited charges on their parents’ accounts without permission," said FTC chairwoman Edith Ramirez in a statement. "Even Amazon's own employees recognized the serious problem its process created. We are seeking refunds for affected parents and a court order to ensure that Amazon gets parents' consent for in-app purchases."

One app, "Ice Age Village," allowed players to make purchases of up to $99.99 on screens "visually similar to the one that has no real-money charge," according to the complaint.

And of course, Amazon gets a 30 percent cut of all in-app charges, whether they're authorized or not.

This isn't the first time in-app purchases have gotten a hardware manufacturer in hot water. Apple has also faced regulatory scrutiny over its in-app purchases, including the now-infamous "Smurf's Village" iPad app. In 2011, that app allowed a 2nd-grader to run up $1,400 in charges, one $99 "wagon of smurfberries" at a time.

Apple ended up settling an FTC lawsuit over the practice earlier this year, agreeing to refund $32.5 million in kids' purchases. Apple also agreed to change the in-app purchase process to make it harder for kids to buy things without their parents knowing.

It seems likely Amazon will suffer the same fate, eventually refunding some of the charges to consumers and putting in place safeguards to help better inform parents of the costs, including an alert about. And Google will probably be next; a Freedom of Information Act by Politico turned up a letter from Apple general counsel Bruce Sewell tattling on Google for its in-app purchase issues.

To avoid your grade-schooler blowing thousands of dollars on pixelated smurfberries or what have you, the FTC has these tips for owners of all tablets and smartphones:

  1. Read about the app before you download it: That includes the store description and user reviews, keeping an eye out for any mention of in-app purchases. You also can look at outside reviews from sources you respect.
  2. Consider turning off in-app purchases: Go to Settings-->General-->Restrictions-->In-App Purchases and change it to off. Note that the first time that you go into Restrictions, you will have to press "Enable Restrictions" and set a passcode for Restriction settings.
  3. Consider turning off the 15-minute window: If you're using an Apple device, know that entering your password opens a 15-minute window where your kids are free to spend. (On Amazon, it's also 15 minutes; for Google Android, it's 30 minutes.) To turn off the window and require a password for every charge, go to Settings --> General --> Restrictions --> Require Password and change it from "15 minutes" to "Immediately."
  4. Play the app with your kids first: What better way to know if an app will allow in-app purchases than to see it for yourself? Talk to your kids about the fact that buying gear and other things in games could cost real money.

What do you think? Are in-app purchases inevitably going to be a problem for kids' apps? Should companies do more to prevent unauthorized purchases by kids?

Follow me on Twitter: @ClaesBell.

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2 Comments
DC Power Guy
July 15, 2014 at 2:54 am

What a joke, any loser parent that hands their young kid a wide open Ipod or Kindle, that's linked to a credit card, deserves to pay.If your going to let your kid have one, link it to a pre-paid debit card, or disable in App purchases. Get a clue people!

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