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Age of Learning, Inc. also doing business as ABCmouse agreed to pay $10 million to settle the allegations of the Federal Trade Commission (FTC) that it violated consumer protection laws.

ABCmouse is an online children’s education company based in Southern California. It operates a learning website where parents can access educational content for children ages 2 to 8 years old by paying a membership fee— typically from $9.95 per month to $59.99 for 12 months.

FTC allegations against ABCmouse

In the complaint, the Commission alleged that ABCmouse violated the FTC Act and the Restore Online Shoppers’ Confidence Act (ROSCA) by engaging in unlawful billing and marketing practices from 2015 to at least 2018.

The company allegedly failed to disclose material information regarding its $59.95 special offer membership fee for 12 months and other term memberships that automatically renew.

In addition, ABCmouse allegedly misled consumers about its enrollment and cancellation practices. The company did not disclose to consumers who tried the 30-day free trial or the 12-month membership that they were enrolled in a negative option plan. It means the company charged consumers automatically at the end of the period and every year after until they affirmatively cancel the plan.

According to the FTC, the ABCmouse lied about its advertised “easy cancellation.” In fact, the company did not clearly disclose how consumers can easily cancel their membership.

Tens of thousands of consumers complained that they did not know that their membership renews automatically and they did not authorize the company to charge their accounts on an ongoing basis.

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

FTC prohibits ABCmouse from misrepresenting its negative options

In addition to the $10 million monetary judgment, the settlement order prohibits ABCmouse from making any misrepresentations related to its negative options.

Furthermore, it requires the company to clearly and conspicuously disclose that its product or service includes a negative option feature that is being offered on a free trial, no obligation, reduced, upgraded, or discounted basis, or for a specific term,

Moreover, the settlement order requires ABCmouse to disclose to consumers the important information about its negative options including its cancellation process (must be simple), deadlines, and the total amount to be charged if they fail to cancel.

Finally, it requires the company to explain the key terms associated with its negative options before obtaining consumers billing information for any transaction, and to get consumers’ consent before enrolling them in any automatic billing programs.

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