Apple to compensate millions of parents whose kids splurged on apps

As a now-famous YouTube clip from 2010 shows, kids as young as 2 can operate an iPad, quickly learning how to open apps and play games. Unfortunately, some parents who used their iPad or iPhone as a babysitter ended up with a steep bill when their kids spent hundreds of dollars on virtual items in “free” games.

Five disgruntled parents blamed Apple for failing to provide appropriate controls around in-app purchases, and together filed a class-action lawsuit against the iPhone maker in 2011.

After fighting the case for two years, Apple agreed to settle last week, according to court filings first spotted by GigaOm.

Under the terms of the deal, Apple could pay out in excess of $100m in iTunes credits to the affected “class”, as it offers a refund of $5 or more to 23m affected customers.

The proposed settlement states that under Californian consumer protection laws, Apple “failed to adequately disclose” that free games distributed through its App Store, and marked as suitable for minors, contained the ability to make in-app purchases.

Apple declined to comment beyond the filings but it has since made changes to its software to prevent these accidental purchases. Version 4.3 of iOS, introduced in March 2011, added parental controls that require a password to be entered every time a purchase is made through the App Store.

If your children splurged on one of the “qualifying” games, claiming a rebate is relatively straightforward, as the legal filing states:

“To obtain the $5 credit, the Settlement Class Member need only fill out a valid electronic claim form and attest that they: (a) paid for a Qualified Game Currency Charge; (b) did not knowingly enter their iTunes passwords to authorize that purchase and did not give their passwords to the minor to make any such purchase; and (c) have not received a refund from Apple for that Qualified Game Currency Charge.”

A “significant majority” of the offending purchases were under $5, according to the filing, but those claiming $30 or more in unauthorised spending can choose to claim their money back in cash rather than iTunes credits.

The settlement states that the “precise size” of the number of people affected is unknown but that Apple will notify, via email or postcard, more than 23m iTunes account holders who bought in-app items from one of the relevant apps.

The settlement will go before a judge in San Jose for approval on March 1.