FTC Settles With Children’s Online Learning Company Over Auto-Renewal Misrepresentations

The Federal Trade Commission (FTC) announced on Wednesday that it reached a settlement with a children’s online learning company, Age of Learning Inc., the operator of ABCmouse. The company will pay $10 million and change its negative marketing and billing practices. Previously, the FTC charged the company for making misrepresentations about cancellations and for failing to disclose important information to consumers, which the FTC proffered led thousands of individuals to be charged for renewed memberships without adequate consent.

Age of Learning operates ABCmouse Early Learning Academy, an online tool for children between two and eight. The content, covering math, reading, and other topics, is accessed on its website or app. According to the FTC, the company “unfairly billed ABCmouse users without their authorization and made it difficult for consumers to cancel their memberships, preventing consumers from avoiding additional charges.” Specifically, the FTC averred that Age of Learning did not adequately disclose key terms of membership when it was advertising ABCmouse from 2015 until at least 2018.

“ABCmouse didn’t clearly tell parents that their subscriptions would renew automatically, and then the company made it very difficult for them to cancel,” Andrew Smith, Director of the FTC’s Bureau of Consumer Protection, said. “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.”

While ABCmouse advertised a 12-month “Special Offer” membership for $59.95, it did not inform consumers that the plans automatically renewed indefinitely, causing consumers to be subjected to additional charges. A similar tactic was purportedly used for other plans. For example, consumers enrolled in the 30-day free trial membership could extend their membership beyond the trial for $39.95 for 12 months or $29.95 for 6 months, but the company did not disclose to users that when the trial period ended they would be charged automatically and indefinitely.

Furthermore, some consumers who went through a full cancellation process discovered recurring charges from ABCmouse. The FTC claimed that “company records show that, between 2015 and 2018, hundreds of thousands of consumers who visited the ABCmouse cancellation path nevertheless remained subscribed.”

The settlement institutes a $10 million payment and prohibits Age of Learning form making misrepresentation for negative options, such as stating that a good or service is available on a “free,” “trial,” “sample,” “no obligations,” or similar plan when, in actuality, a consumer must act to prevent future charges. The company must also clearly define and explain terms when it uses a negative option plan, including informing consumers what must be done to cancel, how much consumers will be charged if they do nothing to cancel, and deadlines.

The defendant must explain the negative option key terms, if offered, before a customer’s billing information is obtained, in addition to obtaining informed consent before placing consumers on an automatic billing and renewal plan. Furthermore, cancellations must be simple and easy.  

In its complaint filed in the Central District of California, the FTC charged Age of Learning with violating the FTC Act for misrepresentation of easy cancellation, deceptive failure to disclose automatic renewal terms, and unfairly charging consumers without authorization. The defendant is also accused of violating the Restore Online Shoppers’ Confidence Act and for causing consumer injury.

FTC attorneys for the litigation were General Counsel Alden F. Abbott, along with Matthew H. Wernz and Joannie T. Wei.