Facebook's 'Friendly Fraud' Scandal: What Parents Need to Know

Consumer Reports has no financial relationship with advertisers on this site.

Consumer Reports has no financial relationship with advertisers on this site.

Facebook knowingly allowed children who played games on its platform to rack up big credit card charges, even after staffers warned about the problem and proposed solutions for the practice some employees referred to as "friendly fraud," according to a report from the Center for Investigative Reporting's Reveal.  

The organization filed to have court documents unsealed and it says those documents, which span 2010 to 2014, also show that Facebook often refused to refund the money—in some cases, thousands of dollars—that was earned without parental permission in games such as Angry Birds, Ninja Saga, and PetVille.

"This story is shocking, but the details are sadly not surprising to anyone who has been following the industry over the past several years,” says Anna Laitin, director of financial policy for the advocacy arm of Consumer Reports. "If this report is accurate, Facebook knew that kids and their parents were being ripped off, but consciously decided to continue the practices anyway and keep as much money as it could. This is just another indication of how Facebook has prioritized growth and revenue over the welfare of its users."

The revelations are the latest in a series of scandals to beset the social networking company, which span from Russia's bid to use the platform to influence the 2016 presidential election to allegations that Facebook gave some tech companies special access to user data.

The Federal Trade Commission is investigating whether the company has faithfully followed its stated privacy practices since signing a consent decree with the commission in 2011.

And, in a letter released on Thursday, nine advocacy groups led by the Electronic Privacy Information Center urged FTC Chairman Joseph Simons to impose a $2 billion fine on the tech giant and force it to divest its holdings in WhatsApp and Instagram for violations involving "unfair and deceptive trade practices."

The litany of revelations has led some to swear off Facebook (read our article about how you can quit Facebook). Others have opted to stay on Facebook, but update their privacy settings. (Learn how to how to use Facebook privacy settings.)

Facebook did not respond to a series of questions sent by Consumer Reports about the latest scandal, but it told Reveal that “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.”

The Larger Problem

For parents, the tactics reportedly used in Facebook's "friendly fraud" strategy may sound familiar.

In March 2014, Apple signed a consent decree with the Federal Trade Commission, agreeing to pay a minimum of $32.5 million to consumers billed for unauthorized in-app purchases made by children. Three years later, Amazon agreed to pay $70 million in a similar agreement with the commission.

Though the digital purchasing process has improved over time, young gamers still are routinely exposed to all sorts of in-game offers. Games such as Fortnite use limited-time offers to drive demand for virtual items, such as costumes (known as skins), equipment, and funny dance moves, for use in play. The items can cost as much as $20 and require so-called “V-Bucks”—sold only in $10, $25, $60, and $100 increments—for purchase.

Other games such as Overwatch and Counter-Strike: Global Offensive offer “loot boxes,” virtual treasure chests that function much like a slot machine. They must be purchased or earned through gameplay before the random prize inside is revealed.

What You Can Do

If you want to contest a charge on Facebook, the company has an online form that you can access via the link on this Help Center page.

An easy way to limit your child's spending is to use a pre-paid gift card for your child’s in-game purchases. Facebook Gift Cards are available at retailers such as Amazon, Best Buy, and Walmart. But you can also use the pre-paid cards supplied by credit card companies at grocery stores and pharmacies.

And, finally, smartphones include parental controls that can help you oversee your children’s in-app purchases.

Android users with a family account on the Google Play store can require a password or other form of authentication for all in-app purchases. The step-by-step instructions for doing that are available here.

Apple users can utilize the parental controls in the company’s Screen Time feature. The step-by-step instructions for that are here

More from Consumer Reports:
Top pick tires for 2016
Best used cars for $25,000 and less
7 best mattresses for couples

Consumer Reports is an independent, nonprofit organization that works side by side with consumers to create a fairer, safer, and healthier world. CR does not endorse products or services, and does not accept advertising. Copyright © 2019, Consumer Reports, Inc.

Our goal is to create a safe and engaging place for users to connect over interests and passions. In order to improve our community experience, we are temporarily suspending article commenting