Google pays $19 million to settle claims that it deceived kids into buying Android apps

Yesterday, Google agreed with the Federal Trade Commission to pay $19 million to consumers whose children allegedly were misled into making purchases in the Android "app store." As this article by Cecilia Kang explains:

Google made it too easy for children to use Android phones to buy items ranging from 99 cents to $200 in kids-oriented games without a parent's permission. The settlement is the latest in the FTC's three-year investigation into so-called "in-app purchases" on devices running software by Apple, Amazon and Google. The enforcement agency has said the purchases are deceptive and particularly harmful for children. Apple agreed to a $32.5 million settlement last January. Amazon in July said it would fight similar charges brought by the FTC.

Read the FTC's press release, and take a look at what the agency calls its 4 tips that app sellers should take away from the Google settlement:

1)  Get consumers’ express consent before billing them.  It’s hardly a novel concept, but it bears repeating:  It’s illegal to place charges on consumers’ accounts without their permission.  That was the law before the advent of mobile apps and we’ll go out on a limb and say the same principle will apply to The Next New Thing.  Regardless of what you sell or how you sell it, get people’s informed OK before billing them.

2)  Read – and heed – your mail.  According to the complaint, Google started to get flak from consumers almost as soon as it introduced in-app purchases in kids’ apps.  The FTC’s complaint cites just a few of the thousands of communications from parents that should have made it crystal-clear to Google that it had a problem on its hands.  What’s the message for marketers?  One insightful – and free – gauge of what’s going on in the marketplace is what your customers are telling you.

3)  Listen to your staff.  It wasn’t just parents who expressed concerns.  In a 2012 email, one Google product manager warned higher-ups that:

“friendly fraud” (unauthorized purchases by individuals you know) is the lead cause of chargebacks.  For example, parents realize their kids have made a series of purchases and call the credit card company claiming those were unauthorized.  Risk estimates that close to 80% of current chargebacks are driven by this specific issue.

Another in-house communication referred to a “high number of canceled orders for in-app billing” and explained that “these usually tend to be family fraud (kids takes phone and buys lots of food for virtual fish).”  Remember:  Those weren’t quotes from someone with an axe to grind.  It’s what Google’s own people were saying about problems with the payment process.

4)  Nix the trick fix.  Once you know there’s a problem, commit your company to correct it pronto.  It’s unlikely that half-hearted measures will do the trick.  As the complaint in this case alleges, the changes Google implemented didn’t solve the problem.

Pounding Student Loan Borrowers: The Heavy Costs of the Government's Partnership with Debt Collection Agencies

That's the name of this new report by the National Consumer Law Center. Here's the Center's overview:

The U.S. Department of Education refers every eligible defaulted student loan debt to private debt collection agencies. Collectors are hired not only to collect money, but also to communicate with borrowers about options to resolve their debt, creating a conflict of interest. Promoting paths to success for these borrowers is ultimately less costly for taxpayers, yet the Department hammers borrowers with draconian collection tools.The government must balance the need to collect loans with the need to assist borrowers. Yet, the current system favors high pressure collection tactics and private company profits. The system fuels widespread violations of consumer protection laws and prevents borrowers from assessing their rights.

Read the executive summary after the jump. You can also read the entire report, the report's various charts and tables, and the Center's press release. And read this story on the report by journalist Jonnelle Marte.

(BREAKING) B.P. found "grossly negligent" in Gulf oil spill

The New Orleans Times-Picayune has the details about today's 153-page ruling from the U.S. District Court for the Eastern District of Louisiana.

CFPB warns credit-card companies over deceptive interest-rate promotions

Yesterday, the Consumer Financial Protection Bureau warned credit-card companies through this Bulletin not to attract new customers with deceptive interest-rate deals that are too good to be true. Here's how CFPB head Richard Cordray put it:

Credit card offers that lure in consumers and then hit them with surprise charges are against the law. Before they sign up, consumers need to understand the true cost of these promotions. Today, we are putting credit card companies on notice that we expect them to clearly disclose how these promotional offers apply to consumers so that they can make informed choices about their credit card use.

The agency explained:

The Bureau believes some companies’ marketing materials do not clearly disclose that consumers must pay off the promotional balance by their due date to avoid racking up unexpected interest charges on routine purchases for which they were not charged interest previously. For some consumers, these surprise charges can make the cost of transferring a balance more expensive than revolving the same balance on their existing card. These marketing tactics specifically impact consumers who enjoy an interest-free “grace period” on their credit card purchases. Consumers who pay off their total credit card balance each month receive a grace period during which they do not have to pay interest on purchases. When consumers carry their promotional credit card balance past their payment due date, they lose their grace period and are charged interest on all new purchases. The only way for these consumers to avoid interest charges on new purchases made with the credit card is to pay off their whole statement balance, including the promotional balance and the new purchases, by their monthly billing due date.

The agency's press release provides more detail.

The federal government agrees to a non-disparagement clause

I was surprised to learn, as the National Law Journal reported today:

The recent settlement of the long-running legal dispute over modernization of the U.S. Supreme Court building included a pledge by the government not to give the contractor any negative ratings.

Read more here (subscription required).

I imagine it's unusual to see an entity with the size and strength of the federal government agree to this kind of clause.

Unlike non-disparagement clauses that we here at Public Citizen have challenged in the past (see here and here, for instance), this type of provision in a settlement agreement with both parties represented by counsel is not likely to be held unconscionable.

Assessing facts in the Supreme Court

I thought our readers might be interested in this story by legal reporter Adam Liptak about how some facts are determined in the Supreme Court. Like any court, the Supreme Court wants to understand the facts relevant to the legal issues. It also wants to know how its decision, one way or the other, might affect the real world. But often the facts the Court wishes it knew are not in the record of the case. So, the Supreme Court sometimes looks elsewhere, including to amicus briefs, to ascertain the facts. Liptak raises concerns about that approach.

A snapshot from debtors' court in Georgia

Check out this story from a recent episode of This American Life, with a tale of what happens in court when a debtor being sued insists on seeing evidence of the debt.

Consumerist reports: online retailer that threatened consumer uses bogus endorsements

We told you yesterday about the online merchant Accessory Outlet, which demanded $250 from a consumer and told her she was "playing games with the wrong people" after the consumer said she would contact her credit card company about a transaction with Accessory Outlet.

Now, Consumerist has compiled some additional, telling information -- turns out, apparent endorsements from Angie's List, the Better Business Bureau and others on the company's website are false. Read the whole story here.

 

(Update Aug. 29: now it appears that both the company's original site, http://www.accessoryoutletmall.com, and the site to which it moved earlier this week, http://www.onlineaccessoryoutlet.com, are down; identical messages at each note that they are "undergoing maintainance." Will be interesting to see if the terms change when the sites are restored.)

New SEC rules on asset-backed securities and credit rating agencies

Taking aim at some of the key causes of the financial crisis, the SEC

approved rules on Wednesday that would require issuers of asset-backed securities — complex investments based on mortgages, auto loans or other types of debt — to disclose more information about the underlying loans. The rules are meant to help investors better judge the quality of such securities.

At the same time, the S.E.C. tightened controls on credit rating agencies, whose overly optimistic ratings helped inflate the housing bubble in the years before the crisis.

This from the New York Times, which has the whole story here.

Paper on Privacy Harms and the Notice and Choice Framework

Joel R. Reidenberg, N. Cameron Russell, Alexander J. Callen, Sophia Qasir, and Thomas B. Norton, all of Fordham, have written Privacy Harms and the Effectiveness of the Notice and Choice Framework. Here is the abstract:

In the last fifteen years, the Federal Trade Commission and the White House have promoted notice and choice as the preferred mechanism for protecting consumers’ privacy online.  But law and policy scholars doubt the efficacy of this mechanism.  Research shows that consumers rarely read website privacy policies, that such policies are often too complex for users to understand, and that website policy statements do not match consumers’ privacy expectations.  Efforts to ameliorate theses issues through technological tools, such as privacy filters and do-not-track codes, have been unsuccessful.  Further, these tools do not address whether notice and choice theory aligns with the actual privacy harms that consumers experience. 

This alignment remains unexplored.  This article, thus, proposes to examine the relationship between the notice and choice theory and users’ actual privacy concerns.  The article takes a novel approach that examines privacy litigation and FTC enforcement actions.  This focus on the wrongs litigated in the real world reveals the most important harms that consumers experience and provides a better understanding of the efficacy of the notice and choice framework.

The data set compiled to support the research for the article consists of all federal class action complaints alleging online privacy violations filed during the last ten years and the Federal Trade Commission complaints and settlements addressing online privacy.  The article next addresses the roles that jurisdiction and competence play in framing claims and identifies a typology of the wrongful acts experienced by consumers.  The research shows that four types of claims appear in both private litigation and public enforcement with respect to personal information:  (1) unauthorized disclosure, (2) surreptitious collection, (3) failure to secure, and (4) undue retention.

The article then applies this typology to map “zones of effectiveness” for the notice and choice regime.  The article identifies which wrongs a proper notice and choice regime can and cannot address.   The research demonstrates that while some wrongful practices might be avoided by the inclusion of specific statements in a notice, others will be incurable through notice.  The latter set of wrongs is, thus, outside the “zone of effectiveness” of a notice and choice regime.  Lastly, the article concludes with a discussion of whether and how the harms that consumers experience match the outcomes of litigation and FTC settlement orders.

This research is supported by the National Science Foundation grant 1330214 “TWC SBE: Option: Frontier: Collaborative: Towards Effective Web Privacy Notice and Choice: A Multi-Disciplinary Prospective.”