Chegg (NYSE:CHGG) shares moved lower after it was revealed that the educational technology platform has agreed to pay $7.5 million to settle Federal Trade Commission (FTC) claims that it made it difficult for consumers to cancel recurring subscriptions.
The FTC alleged that Chegg buried cancellation options on its website and imposed a confusing, cumbersome process, with internal communications indicating the company was aware of the difficulty.
The complaint claims Chegg continued charging consumers even after cancellation requests and failed to improve the visibility and accessibility of cancellation links despite repeated feedback.
The settlement requires Chegg to provide refunds to affected customers and maintain simple, clear cancellation mechanisms for all subscription services.
“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,” FTC Bureau of Consumer Protection director Christopher Mufarrige said in a statement.
“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.”
Chegg stock was down 7.5% at about $1.40 in the early afternoon on Monday.
Shares of Chegg are down more than 11% year to date as developments in rival AI technologies, such as Google’s AI Overviews, have challenged its business model, resulting in declines in subscribers and revenue.