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Develop Apps? Use Password Protection to Avoid Fines

Develop Apps? Use Password Protection to Avoid Fines

Apple had to pay $32.5 million in refunds to customers. Here's how mobile developers can prevent fines and lawsuits over in-app purchases.

Friday, July 18, 2014/Categories: computer-programmers

CNET reports that the FTC has ruled Amazon must refund customers whose children made in-app purchases.

The question of how to regulate in-app purchases generated a lot of discussion – and a few million-dollar fines. Many apps (and mobile platforms) require users to enter their passwords each time they make a purchase from inside an app. However, some do not.

Users can run into trouble because some games and apps use virtual currency that can be purchased using real dollars. If an eight-year-old kid is playing a game, he might not realize that the digital currency costs real money. In fact, these kinds of in-app purchases have led to millions of dollars in mistaken charges.

Earlier this year, the Federal Trade Commission ordered Apple to repay at least $32.5 million to its customers. That's a hefty chunk of change.

With greater scrutiny being placed on apps, mobile developers need to review their app liability and make sure they have a clear in-app purchasing policy. Let's take a closer look at what you can learn from Apple and Amazon's mistakes.

Developers Beware: 5 Takeaway from the FTC's Ruling about Mobile App Purchases

  1. Require passwords for purchases. The FTC has shown that it will go after mobile companies. The first and most immediate step you need to take is to require passwords each time a user wants to make an in-app purchase.
  2. Make sure app policies are transparent. It's not enough to have the option to password-protect purchases. The Federal Trade Commission pointed out that Amazon didn't do enough to protect customers. Some apps only required passwords for the first in-app purchase; other apps weren't clear about opt-out procedures. When it comes to in-app purchases, err on the side of caution and clarity.
  3. Have a refund policy. Make sure you have a crystal-clear way for customers to file complaints. Handle these complaints quickly and establish a protocol so all your employees do the same.
  4. Secure your income. Apple and Amazon have had to refund millions of dollars to their users. Though it's costly for these big businesses, they can afford it. For a small-business owner like you that might not be the case. If you're forced to refund app purchases, your business might not have the cash required to do it, especially if the FTC rules that you need to refund a year’s worth of mistaken purchases. Imagine going to court and having the judge rule that you need to refund five percent of the revenue your business made over the last two years. If your business is penalized for its in-app purchases, the settlement costs could easily be a sizeable chunk of the business's revenue.

Mobile Developer Liability: Protect Your Apps, Protect Your Bottom Line

As a mobile developer, you can be sued if a client is unsatisfied with your work. Usually, when you think about your professional liabilities, you think about data security and making a good mobile app. But don't forget that it's also your responsibility to keep track of mobile developer regulations.

A client can sue you if you write an app that doesn't use password protections on purchases. If the client's customers complain, or the client is forced to refund purchases, they could file a professional liability lawsuit against you.

Mobile Developer Insurance can cover the cost of a software lawsuit, paying for settlements, damages, and your legal expenses. It's always better to avoid lawsuits, but it's smart to invest in coverage that can protect you from data risks, client disputes, and other mobile liability.

For free quotes on Professional Liability Insurance, contact a technology insurance agent at (800-668-7020) or submit an online insurance application.

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