FTC makes ed. tech company pay $7.5M for unlawful cancellation practices

On September 15, the FTC announced it had filed a complaint in the U.S. District Court for the Northern District of California along with a proposed order for permanent injunction and monetary judgment against an educational technology company, which markets educational products to students. Specifically, the FTC alleged violations of the Restore Online Shoppers’ Confidence Act (ROSCA), seeking relief including a permanent injunction and monetary damages under the FTC Act and ROSCA.

According to the complaint, the defendant failed to provide subscribers with a simple mechanism to cancel recurring charges, often continuing to bill consumers after they attempted to cancel their subscriptions. Specifically, the FTC alleged the option to cancel such recurring payments was “buried” in account settings and multiple steps were required to complete cancellation; neither online self-cancellation nor contacting customer service providing a clear method for consumers to stop recurring charges.

The FTC asserted that these practices generated numerous consumer complaints to agencies such as the Better Business Bureau, state law enforcement, and online review platforms, and despite provided evidence the defendant acknowledged these issues, the defendant continued its unlawful acts. The complaint contended this conduct violated Section 4 of ROSCA and Section 5(a) of the FTC Act, as the defendant failed to provide simple mechanisms for consumers to stop recurring charges sold through negative option features.

Under the terms of the proposed order, the defendant neither admitted nor denied the allegations except as necessary to establish jurisdiction. If the proposed order is ultimately approved by the court, the order would permanently enjoin the defendant from misrepresenting material facts related to cancellation and from failing to provide simple cancellation mechanisms for negative option features. Additionally, the order would require the defendant to pay $7.5 million in monetary relief, with the funds designated for consumer redress.