Class Action Settles for $2 Million for Consumers

FTCLumosity customers could be in for a $2 million windfall due to a settlement of a case against the San Francisco based company. A federal consumer protection agency accused the company of lacking the proof to back up claims about improving mental sharpness through the use of their project.

The developer of “brain training” games has settled federal allegations of misleading customers by agreeing to pay $2 million. Lumosity games, accessed through online applications and programs for which customers generally paid a subscription fee, were advertising as providing a list of cognitive benefits. But the company’s advertisements suggested that playing them a few times a week could boost productivity at work and school, and possibly delay dementia, according to the Federal Trade Commission’s allegations.

The federal agency regulates advertising to consumers, and has recently taken on products including dietary supplements which claim to make people more mentally sharp. The FTC representative said that the advertising Lumosity used preyed on people’s fears of getting older and not being able to think as well, and that the company lacked the science to back up their claims. People’s fear of memory loss, dementia and Alzheimer’s disease led them to buy the product, but there was no proof any of these problems could be helped by the products in question.

Consumers of the company’s product purchased either a monthly subscription or access for a lifetime. As a part of the class action settlement, Lumos Labs must offer customers an easy way to cancel subscriptions. A judgment in the amount of $50 million was originally obtained by the agency, but the company reportedly was unable to pay that amount.

Trade publications indicate the company is one of many in the “brain training” business – worth an estimated $1 billion in sales per year. However, the Lumosity company was one of the most highly visible in the exploding field, no doubt an area of growth due at least in part to the aging population in America and other similarly developed countries around the world.

Federal law states that the only products that can claim to treat or prevent a serious disease must be reviewed and approved by the food and drug administration for their effectiveness. However, the agency has yet to approve a single “brain training” program.

Consumer class action involve claims such as these – where a customer acts on behalf of a group of people who feel they have been wronged or defrauded by a product or service. Sometimes, this is the only way that some issues can be addressed, due to the simple fact that the claims involved can be far too small to justify the high cost of bringing an individual lawsuit. The consumers, if handled individually, could not hope to sensibly pursue the matter. In some cases, the customers involved spent an amount too small to be worth filing a small claims case. Class action cases are an efficient way to address such issues.

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