Group of professionals discuss finance

Breaking news and expert analysis on legal and compliance issues

[Back To Home][Back To Archives]

From Banking and Finance Law Daily, September 7, 2017

Amazon passes ‘rascality test’; parent liable for Kindle in-app purchases

By Richard A. Roth, J.D.

A parent is liable for $2,500 in in-app purchases apparently made by her son while playing games on a Kindle Fire she bought for his use, a U.S. district judge has decided. Neither nor Synchrony Bank, which issued the relevant credit card, violated New Hampshire consumer protection laws, the judge said. The bank had not violated the Truth in Lending Act either (Grube v., Sept. 6, 2017, McCafferty, L.).

The parent bought two Kindle Fire devices for the use of her children, a nine-year-old son and a five-year-old daughter. As part of the purchase, she linked her credit card to her Amazon account for payments and she agreed to Amazon’s "Conditions of Use." These conditions included a number of terms that are intended to protect parents against unauthorized in-app purchases by their children. The parent did not let her children know what the account passwords were but, according to the judge, it was not clear whether she had turned on available parental controls.

Over the next several months, the parent made a few small purchases for her children; however, she was surprised to see charges for 72 in-app purchases totaling more than $2,500 on a subsequent credit card statement. None of the 72 purchases would have been possible without the password if the parental controls had been enabled, the judge noted, and 52 of them would have required the password even if the controls were not turned on.

Parent’s suit. After more than a year of unsuccessfully disputing the charges, the parent sued both Amazon and Synchrony, claiming violations of New Hampshire law and TILA. She asserted that Amazon had violated the state’s Consumer Protection Act and the company’s duty of good faith and fair dealing in permitting the purchases, while Synchrony had violated TILA and the state’s Unfair, Deceptive, or Unreasonable Collection Practices Act by attempting to collect credit card charges she did not owe.

Amazon not a rascal. The New Hampshire CPA specifies a number of actions that are unfair, but also allows other, unspecified commercial actions to be deemed illegal. According to the judge, whether an unspecified action violates the law is determined by the "rascality test"—does it "attain a level of rascality that would raise an eyebrow of someone inured to the rough and tumble world of commerce" (citing Axenics, Inc. v. Turner constr. Co., 164 N.H. 659 (2013)). Amazon’s in-app purchasing practices did not approach rascality, the judge said.

In the wake of a prior suit and a Federal Trade Commission enforcement action, Amazon had substantially improved its unauthorized purchase protections, the judge pointed out. All of these improvements were in effect before the parent bought the two Kindles, and they would have required her to give her password for the first purchase and choose whether to require the use of the password for future purchases. She also could have disabled the device’s use for any in-app purchases if she chose.

Good faith and fair dealing. Amazon and the parent argued over whether the good faith and fair dealing law of New Hampshire or Washington applied, but the judge said it did not matter—the parent’s claim failed both.

Washington law requires that parties to a contract perform their contractual obligations in good faith, the judge said. Amazon had created "ample safeguards" to prevent children from making in-app purchases without a parent’s consent, and that was enough.

New Hampshire law is a bit broader, she noted, in that the duty of good faith and fair dealing is not tied specifically to the terms of the contract. Instead, it requires parties to act toward each other fairly and in good faith. However, the parent’s claim was that Amazon had abused its discretion under the contract, and there was no evidence of any relevant exercise of discretion.

TILA. The parent told Synchrony that she should not be liable for the credit card charges because they must have been due to fraud, according to the judge. Synchrony investigated the claim three times and each time rejected the fraud claim.

There was no fraud, the judge said, because the charges were not unauthorized; rather, the purchases had been made by someone who the bank reasonably believed had authority to use the account.

The charges all were for in-app purchases that were made from and downloaded onto Kindles owned by the parent, the judge pointed out. The parent had given Amazon her credit card information for purchases from the devices, and she had linked the devices to her Amazon account. She had never claimed that the Kindles had been lost or stolen, the judge noted. The bank’s conclusion that the purchases were authorized was the only reasonable conclusion.

Debt collection law. Once the judge determined that there had been no TILA violation, she quickly dispensed with parent’s claim under the state debt collection law. That claim was based on the assertion that Synchrony Bank misrepresented the amount of her debt by attempting to collect unauthorized charges. Since the charges were not unauthorized, there was no debt collection violation, the judge said.

The case is No. 16-cv-126-LM.

Attorneys: Kristina Cerniauskaite (Harman Law Offices) for Carrie Grube. Harry H. Schneider Jr. (Perkins Coie LLP) and Robert A. Stein (The Stein Law Firm PLLC) for, Inc. and Synchrony Bank.

Companies:; Synchrony Bank

MainStory: TopStory ConsumerCredit CreditDebitGiftCards NewHampshireNews StateBankingLaws TruthInLending WashingtonNews UDAAP

Back to Top

Banking and Finance Law Daily

Introducing Wolters Kluwer Banking and Finance Law Daily — a daily reporting service created by attorneys, for attorneys — providing same-day coverage of breaking news, court decisions, legislation, and regulatory activity.

A complete daily report of the news that affects your world

  • View full summaries of federal and state court decisions.
  • Access full text of legislative and regulatory developments.
  • Customize your daily email by topic and/or jurisdiction.
  • Search archives for stories of interest.

Not just news — the right news

  • Get expert analysis written by subject matter specialists—created by attorneys for attorneys.
  • Track law firms and organizations in the headlines with our new “Who’s in the News” feature.
  • Promote your firm with our new reprint policy.

24/7 access for a 24/7 world

  • Forward information with special copyright permissions, encouraging collaboration between counsel and colleagues.
  • Save time with mobile apps for your BlackBerry, iPhone, iPad, Android, or Kindle.
  • Access all links from any mobile device without being prompted for user name and password.