Facebook’s Friendly Fraud

Being a parent is one of the most difficult jobs ever. Raising a child is time-consuming and expensive, but for many it is well-worth it. The costs of raising children are usually associated with feeding and clothing them. Though recently, parenting became more expensive due to Facebook’s shenanigans that drained some parent’s bank accounts by way of their kids. In an effort to increase the social media site’s revenue, the tech giant encouraged practices that bypassed parental protections. Game developers designed online platforms, accessed through Facebook, that allowed eager children to spend money without a parent’s permission. We call this friendly fraud. However, in some neighborhoods they call it “plain old theft.”

How Did They Do It?

According to an investigative report from Reveal, Facebook has been defrauding children and their parents for 6 years through unscrupulous practices. While playing games on the social media platform, children were unintentionally charging their parent’s credit cards that were linked to the Facebook accounts.

In one case, a 15-year old spent $6,500 in a two-week period, which is about five times the average monthly rent! As a result, credit card companies issued chargebacks, causing the chargeback rates for Facebook to hit 9%. According to the Federal Trade Commission (FTC), an indication of deceptive business starts with 2%, which means that Facebook was 9 times over the “red flag” threshold. Despite warnings from employees and concerned game developers, the company prioritized revenue maximization over ethics, and apparently the law.

Facebook’s Response to Fraud

Facebook is not the only company participating in practices allowing children to unknowingly spending their parents’ life-savings. Other companies, such as Google and Apple, have addressed this problem by requiring users to enter a passcode or credit card number to complete a transaction. And in most cases, parent’s do not share this type of sensitive information with their children, which eliminates the potential of careless transactions. The telephone companies dealt with this smartphone issue a few years ago. So clearly this is not a new issue and should have been managed accordingly.  

According to an internal Facebook team member, the company tried to emulate Google and Apple’s basic check-ins. In a test trial, kids were required to input the first 6 digits of a credit card number before they were able to play certain games. And voila, it worked. Facebook saw a decrease in chargebacks and refunds from children. You would think that the company enacted this strategy immediately, but you would be wrong. Facebook recognized that implementing these check-ins would decrease their revenues, which was the exact opposite of their goal. In fact, it took the company until 2016 to update its terms and instate the credit card authentication for games found on their site. To make matters worse, Facebook denied several users their refunds. Instead, the tech giant offered virtual goods as a means to pay off upset parents. Of course, this cost Facebook nothing. The revenue was kept intact.  

The Takeaway

Facebook has done nothing to prevent friendly fraud, even when the company was caught red-handed. Since then, Facebook has been under fire for several data privacy infractions. In their , most recent data protection incident, the company had a breach that disclosed its users’ personal information.  There were other incidents where they simply sold the data without their permission.

Stay Woke

We strongly recommend that parents pay particular attention to their children’s online activities – it could protect your life-savings. Facebook is one of the nation’s largest conglomerates and are not your friend. The integration of Facebook in our lives is a symptom of our loss of self. It is up to each person to monitor the privy they give away and understand the implications of letting the world into your life.  It is especially your responsibility to assure you are not letting your money fade into the platform’s ether and onto Mr. Zuckerberg’s balance sheet. Stay woke!

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