Ed Tech Provider Chegg to Pay $7.5 Million to Settle FTC Allegations Concerning Unlawful Cancellation Practices

Chegg Inc. will be required to pay $7.5 million to settle Federal Trade Commission allegations that the education technology provider made it extremely difficult for consumers to cancel recurring subscriptions while also failing to honor consumers' cancellation requests.

For years, Chegg failed to provide consumers, namely students and parents, with a simple mechanism to cancel auto-renewing subscriptions for online learning tools such as homework help and writing assistance tools, according to the FTC's complaint. Under a proposed order settling the FTC's charges, Chegg will be required to provide a simple cancellation mechanism for consumers in addition to the $7.5 million payment.

"It harms the American people when companies fail to provide simple mechanisms to cancel recurring charges as Congress required in the Restore Online Shoppers' Confidence Act," said Christopher Mufarrige, Director of the FTC's Bureau of Consumer Protection. "As part of our effort to reinvigorate the agency's fraud program, the FTC will continue enforcing ROSCA against online sellers where they violate this important statute."

In its complaint, the FTC alleges that Chegg used unlawful cancellation practices that made it difficult, and in some cases nearly impossible, for consumers to cancel their recurring subscriptions. For example, the complaint alleges that:

• Chegg continued to charge some consumers even after they cancelled their subscriptions. Since October 2020, Chegg has charged nearly 200,000 consumers after they had requested cancellation.
• Chegg's online cancellation processes for its various subscription services were buried on Chegg's websites and required multiple clicks to locate.
• Even when consumers were able to successfully locate the cancellation process, consumers would still need to navigate a confusing and cumbersome process.
• Despite overwhelming consumer feedback and internal recognition that consumers faced difficulties with Chegg's cancellation process, the company did not improve the visibility of the cancellation link.

The FTC alleges that Chegg's deceptive billing and cancellation practices violate the FTC Act and the Restore Online Shoppers' Confidence Act (ROSCA), which requires online retailers selling through negative option features to clearly and conspicuously disclose the material terms of the transaction, obtain consumers' express, informed consent before charging them, and provide simple ways to stop recurring charges.

The FTC's latest action against Chegg follows a 2022 FTC settlement with the company. The 2022 order required Chegg to bolster its security against data breaches and delete unnecessary data in response to allegations that the company's lax data security practices exposed sensitive information about millions of its customers and employees.

Under the FTC's proposed order, Chegg will pay $7.5 million, which will be used to provide refunds to consumers impacted by Chegg's deceptive cancellation practices. The proposed order also requires that Chegg maintain simple cancellation mechanisms for negative option features.

The Commission vote authorizing the staff to file the complaint and proposed order was X-X. The complaint and proposed order were filed in the U.S. District Court for the Northern District of California.

NOTE: The Commission authorizes the filing of a complaint when it has "reason to believe" that the named defendant is violating or is about to violate the law and it appears to the Commission that a proceeding is in the public interest. Stipulated final orders have the force of law when approved and signed by the District Court judge.