Apple to settle over app purchases made by children

Parents will get $5 iTunes giftcards, lawsuit may wind up costing Apple $100 million

Financial trends and news by Steven Loeb
February 26, 2013
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For all the talk of why having kids spend too much time on electronic devices is such a bad thing (it makes them anti-social! it hurts their eyes! it makes them fat!), there is one that I never considered: they might accidentally start buying things on their parents' phone, and rack up huge bills.

That was the basis of a 2011 lawsuit, which was brought against Apple by parents who had seen big credit card bills from their children being able to buy apps without needing to enter a username and password.

After nearly two years, Apple has finally decided to settle the lawsuit, agreeing to give a $5 iTunes credit to parents who say that their children bought in-game items without permission.

"Settlement Class Members seeking this $5 Credit Relief must file a valid electronic Claim Form, setting forth the Settlement Class Member’s name, address, and Apple ID. Settlement Class Members must attest that they: (a) paid for Qualified Game Currency Charges that a minor charged to their iTunes account without their knowledge or permission; (b) did not knowingly enter their iTunes password to authorize any such purchases and did not give theirpassword to the minor to make such purchases; and (c) have not already received a refund from Apple for those Qualified Game Currency Charges," it says in the settlement. 

While a $5 iTunes card does not seem like much, the lawsuit may pertain to over 23 million affected customers, meaning Apple may wind up paying out at least $100 million.

Apple has also included other provisions for customers with larger bills. If the amount  is more than $5, Apple says that will offer a credit for that amount. If the person does not have an iTunes account, they will get a cash refund.

"As an alternative to the $5 Credit Relief, Settlement Class Members shall be entitled to receive an iTunes Store credit (or, for any Settlement Class Member who no longer maintains an iTunes account, a cash refund), in an amount equal to the aggregate total of all Qualified Game Currency Charges within a single forty-five (45) day period for which they have not previously received a refund (“Aggregate Relief”)."

If the amount totals over $30, the user will be able to claim a cash refund, as long as they are still maintaining an iTunes account. 

"At their election, Settlement Class Members who currently maintain an iTunes account and who are claiming Aggregate Relief totaling $30 or more may choose to receive a cash refund in lieu of an iTunes Store credit."

The initial problem stemmed from a 15 minute window that Apple allowed, in which purchases could be made in an app without entering an Apple ID password.

What this meant was that a parent could download an app using their password, then another person, including their child, could then go onto that app and make purchases without needing to enter the password, as long as it was within that time period. Though the 15 minute window was eliminated in March 2011, the bills had already stacked up by then.

There was even a Daily Show segment about one parent whose children spent $375 on a game called Tap Fish.

The proposed settlement will be heard by the court on March 1, and will require court approval to go forward.

You can read the entire proposed settlement below:

Apple's Bait App Settlement

Apple could not be reached for comment.

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