Hey video gamers, are you being played?


Loot boxes make loot for the company, not the player

Virtual reality may be taking a real life bite out of your pocketbook if you’re not careful.

The Consumer Financial Protection Bureau (CFPB) has issued a report examining the growth of financial transactions in online video games and virtual worlds and claims that more and more consumers are complaining that they're being harmed by scams or theft on gaming platforms and not receiving the protections they would expect under federal law. 

If you’re not a gamer, you might not understand how big this market is, but the report, Banking in Video Games and Virtual Worlds, says that American consumers spent nearly $57 billion in gaming worlds like Roblox, Second Life or Fortnite, last year.

Those billions went toward understandable purchases like hardware and software, but it was the in-game transactions such as converting dollars to virtual currencies or other gaming assets that concerned the agency the most. 

“Americans of all ages are converting billions of dollars into currencies used on virtual reality and gaming platforms,” said CFPB Director Rohit Chopra. “As more banking and payments activity takes place in video games and virtual worlds, the CFPB is looking at ways to protect consumers from fraud and scams.”

What are the risks you’re running into?

Online gaming may seem harmless to a 15-year-old kid, but a kid doesn’t have much skin in the game when it comes to protecting their identities or their parent’s credit card account that they use to fuel their gaming love. 

For example, those "free" amazing item offers, or people pretending to be from the game company? They're all trying to trick you out of your cash or login info.

All those cool upgrades? More problems. It's just too tempting to click "buy." Things add up fast when there’s a game that uses in-game currency but shows up as real cash until mom or dad open up their bank statement.

Same with those "free" games because they’re not always free. Just like a slot machine in Vegas, your odds at “free” aren’t in your favor.

But the biggest problem is that gaming companies are gathering gamers’ personal and behavioral data. Publishers have a voracious appetite when it comes to collecting data on players just like they do on regular consumers.

All of the behavioral details – financial data, purchasing history and spending thresholds – a gaming platform can collect and track pose standard financial risks.

However, the agency warns, there’s a new problem. In virtual- and mixed-reality gaming, headsets may gather biometric data, such as iris scans, eye movements, pupil responses, and gait analysis, that may pose a threat to medical privacy.

Just try and do anything about it, though

In complaints to both the Federal Trade Commission (FTC) and CFPB, gamers reported they were essentially left twisting in the wind when they suffered hacking attempts, account theft, scams, unauthorized transactions and losing access to game currencies and virtual items. 

“Those consumers said they received limited recourse from gaming companies. Gaming companies often take a "buyer beware" approach, putting the burden on individual players to avoid these scams and phishing attempts. They may lock or ban players’ accounts suspected of scamming and phishing but do little to provide remedy to the victim,” the agencies said. 

Several complaints involving Roblox raised the agencies’ ire, mostly because they felt the company went too far in pushing back when consumers complained about unauthorized Roblox game purchases. 

Roblox asks users to “contact Roblox Support before disputing any charges directly with your payment processor.” That’s a fair request and could make everyone’s life simpler, but some players who contacted their financial institutions first wound up with Roblox either terminating or locking their account, leaving the consumer with nothing.

“When a player loses access to their account because they are accused of violating a game’s terms of service or a game is terminated altogether, the game publishers state that they have no obligation to compensate the players for their lost assets or return the money players have invested,” the CFPB said. 

'Loot boxes' raise questions, too

Loot boxes – virtual items that contain random assortments of in-game items, which can range from simple cosmetic skins to game-changing equipment or abilities – are also raising concerns with regulatory agencies.

South Korea’s online game developer Nexon Korea Corp. was recently fined $8.9 million for allegedly misleading its customers over in-game items of its hit online titles MapleStory and Bubble Fighter. In the UK, the UK's Advertising Standards Authority also filed charges against companies like EA, Jagex, and Miniclip because those companies failed to disclose the presence of loot boxes in their ads.

Loot boxes are a total crapshoot because the contents of a loot box are typically unknown until after a gamer makes a purchase. At that point, a more concerning element of chance similar to gambling creeps in, especially for children and vulnerable individuals who can’t self-throttle their spending in situations like this.

Here's how one gaming industry watcher describes what's going on with these loot boxes...

The trick behind these loot boxes is the use of “microtransactions,” claims one social media manager. And those microtransactions are low-hanging fruit in the world of gaming. Loot box life is so good that Electronic Arts’ live-services operations reportedly made the company $5.6 billion in its most recent quarter.

“Although microtransactions might seem like a good idea, many in the video game community see microtransactions as exploitative and sinister,” Nat Poeschel, a social media manager at the University of Wisconsin - Platteville, theorizes.

And the FTC agrees. A little more than a year ago, the agency announced a $245 million settlement with Epic Games’ “Fortnite,” claiming that players were lured into making unnecessary purchases within the game.

“Some microtransactions that are offered are gameplay advantages, which make video games unfair to those who do not spend money on games. To games that thrive on competitive balance, this creates a lot of issues,” Poeschel said.

“To prevent overspending on microtransactions, set spending limits, be selective about purchases and stay informed about the true value of in-game items to make responsible decisions.”

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