Facebook ignored kids’ spending problems, internal documents reveal

Facebook eventually settled a lawsuit about the issue of children and in-app payments

A trove of internal documents have revealed how Facebook was concerned children were spending large amounts on in-app payments without parents’ permission - but seemingly chose not to act.

Discussions showed the firm decided not to implement certain safeguards as it might affect overall revenues from people paying for games.

The documents formed part of a lawsuit that was settled in 2016, after which Facebook agreed to change its practices.

Between February 2008 and June 2014, Facebook said it made just over $34m from accounts belonging to minors in the United States.

The information had been kept under seal, until the Center for Investigative Reporting recently made a request for them to be made public. Last week a judge ordered Facebook to provide the extra material. It did so on Thursday.

The files show discussions between Facebook employees about how in-app payments were occurring within the platform, and whether children might be unwittingly spending real money during games.

Tara Stewart, a risk analyst for Facebook, remarked that in-game currency often “doesn’t necessarily look like real money to a minor”.

The investigation was prompted by Finnish game developer Rovio.

It told Facebook it had noticed an “alarmingly high refund rate", caused by what is known as “friendly fraud”. The term typically refers to instances when parents discovered a child has been using their credit card to buy features or add-ons in a game.

‘Running rampant'

Facebook considered it “really important to make Angry Birds a success story” - referencing Rovio’s smash hit game - and so investigated what was causing so many refund requests.

"In nearly all cases the parents knew their child was playing Angry Birds, but didn’t think the child would be allowed to buy anything without their password or authorisation first,” read one memo, written by Facebook employee Danny Stein.

Mr Stein went on to say that the company could build an automated method that might reduce the problem, but that it “would most likely block good total payment volume”.

While Facebook did not develop the games in question, payments were made through its system which, at the time, did not have additional measures in place that required parents to re-verify card use if a child was spending more money. Facebook took a 30% cut of payments, with the rest going to the game’s developer.

Facebook considered changing its system so that users under 17 (and over 90) who tried to make transactions worth over $75 would have to enter the first six digits of the payment card on file, in order to prove they were in possession of it, or could at least remember it.

While not foolproof, Ms Stewart - who appears to have put forward the measure - said she believed it would “curb the spending of the least savvy minors”. A colleague added: “It should keep kids from running rampant with their parents CCs.”

Facebook did not implement the idea.

‘Whale’ denied refund

In another discussion, employees talked about how one so-called “whale” - an industry-wide term for customers who spend a lot of money on in-app payments - should not be given a refund. The account had spent $6,545.

"That user looks underage as well,” one Facebook employee noted, perhaps a “13ish year old".

A colleague replied: “I wouldn’t refund."

As part of the 2016 settlement, Facebook paid out $5,000 each to the families of two children who racked up large bills apparently without their parents’ knowledge.

"He thought he was playing with virtual reality money,” said Glynnis Bohannon, the mother of one of the children.

The boy, who was 12 at the time, was playing a title called Ninja Saga and eventually spent $610.40 before Ms Bohannon was warned about the activity by her credit card company.

"He thought he was playing so good and it just was telling him that if he re-clicked it, it would regenerate,” she said.

"He thought it was within the game. He had no understanding that every time he clicked it, it was going to go on my credit card.”

In a statement, Facebook said it "works with parents and experts to offer tools for families navigating Facebook and the web”.

It added: "As part of that work, we routinely examine our own practices, and in 2016 agreed to update our terms and provide dedicated resources for refund requests related to purchases made by minors on Facebook.”

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