Chegg to pay $7.5 million over subscription cancellation practices

Education technology company Chegg Inc. (NYSE: CHGG) will pay $7.5 million to settle Federal Trade Commission allegations that it made it difficult for consumers to cancel recurring subscriptions.

The FTC complaint alleges that Chegg failed to provide simple cancellation mechanisms for auto-renewing subscriptions to online learning tools including homework help and writing assistance services. The agency said the company continued charging nearly 200,000 consumers after they requested cancellation since October 2020.

According to the FTC, Chegg's online cancellation processes were difficult to locate on the company's websites and required multiple clicks to find. When consumers located the cancellation process, they faced what the agency described as a confusing and cumbersome procedure.

"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.

The FTC alleges Chegg's practices violated the FTC Act and the Restore Online Shoppers' Confidence Act, which requires online retailers to clearly disclose transaction terms, obtain consumer consent before charging, and provide simple ways to stop recurring charges.

Under the proposed settlement filed in U.S. District Court for the Northern District of California, the $7.5 million payment will fund refunds to affected consumers. The order also requires Chegg to maintain simple cancellation mechanisms for subscription services.

This marks the second FTC settlement with Chegg in recent years. In 2022, the company settled allegations related to data security practices that exposed sensitive customer and employee information.

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