Ed Tech Provider Chegg Fined $7.5 Million by FTC Over Cancellation Practices

The fine will be used to reimburse customers who were impacted by the company’s cancellation policies, the FTC said.

Textbook rental company Chegg.com demonstrates its site to students of the University of Texas at Caffe Medici in Austin, Texas, on Aug. 26, 2009. Sarah Kerver/Getty Images for Chegg.com

An educational technology provider has agreed to pay a $7.5 million fine levied on Sept. 15 by the Federal Trade Commission (FTC) over allegations that it intentionally made it difficult for users to cancel their monthly subscriptions and ignored users’ cancellation requests.

The FTC said Chegg Inc. intentionally buried the cancellation process for subscription services behind multiple layers on its website for years. The Santa Clara, California-based company provides a range of academic help to high school and college students, such as online assistance with homework questions and tools to aid with writing assignments. It also rents out physical and digital copies of textbooks.

In the FTC complaint filed with the U.S. District Court for the Northern District of California, customers who wished to end their subscriptions online had to navigate a labyrinthine process requiring multiple clicks through many different web pages. The journey brought up multiple pop-up ads that urged customers to reconsider and offered discounts if they stayed. Any deviation from the cancellation path voided the cancellation process, the FTC said, making it extremely onerous for consumers to actually complete their cancellation requests.

Christopher Mufarrige, director of the FTC’s Bureau of Consumer Protection, said Chegg’s practices violated the statutes of the Obama-era Restore Online Shoppers’ Confidence Act of 2010 (ROSCA).

“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,” Mufarrige said.

Chegg also continued to charge customers after they had actually completed cancellation requisitions, the FTC said. Since October 2020, more than 200,000 customers have been charged monthly subscription fees after they had properly submitted and completed cancellation requests. Cancellations placed through calls, texts, and direct messaging with the company’s customer service department were also ignored, the FTC said. Customers who contacted customer support seeking reimbursement for erroneous charges were either refused refunds or only given partial refunds, according to the FTC.

A spokesperson for Chegg said in a statement to The Epoch Times that, while the company disagrees with the FTC’s claims, it settled to protect the best interests of students.

“At Chegg, we prioritize students and their experience with us, making sure they find value in our service. We have always had a straightforward cancellation process. By putting this behind us, we can avoid prolonged litigation and remain focused on what matters most: student success.”

According to the FTC complaint, these issues were well-known and widely discussed among Chegg’s executive management team dating back to 2021. Company leaders were aware of a host of complaints filed with the Better Business Bureau, as well as negative feedback on social media sites. Instead of rectifying, Chegg added more steps to the confusing cancellation flow by introducing coupon, pause, and perks pages to the process, the complaint states.

The $7.5 million fine will be used to reimburse customers who were impacted by the company’s cancellation policies, the FTC said. In addition to the fine, the FTC ordered Chegg to provide customers with a simple mechanism for account cancellation.

It’s the second action taken by the FTC against Chegg. In 2022, the company was ordered to bolster its data security practices after incurring four security breaches dating back to 2017. Three of the attacks involved phishing attacks targeting Chegg employees, and one compromised sensitive information of more than 40 million customers, the FTC said.