TikTok, the popular video-sharing app formerly known as Musical.ly, has agreed to a record $5.7m (£4.2m) fine with the US Federal Trade Commission after being accused of illegally collecting personal information from children under 13.

The app, which is owned by the Chinese giant Bytedance, a private startup with a $75bn valuation, admitted to improper data collection in a statement following the settlement and said that it would begin keeping younger users in “age-appropriate TikTok environments”, where those under 13 would be pushed into a more passive role, able to watch videos, but not post or comment on the platform.

“While we’ve always seen TikTok as a place for everyone, we understand the concerns that arise around younger users,” the company said in a statement. “In working with the FTC [the commission] and in conjunction with today’s agreement, we’ve now implemented changes to accommodate younger US users in a limited, separate app experience that introduces additional safety and privacy protections designed specifically for this audience.”

The FTC, which placed the number of TikTok users worldwide at more than 200 million – with a third of those in the US – said the company had previously been aware that “a significant percentage of users were younger than 13”, the age at which American laws mandate strict data protections, “and received thousands of complaints from parents that their children under 13 had created Musical.ly accounts.”

Joe Simons, the FTC’s chairman, said: “The operators of Musical.ly – now known as TikTok – knew many children were using the app but they still failed to seek parental consent before collecting names, email addresses and other personal information from users under the age of 13. This record penalty should be a reminder to all online services and websites that target children that we take enforcement of Coppa [the Children’s Online Privacy Protection Act] very seriously, and we will not tolerate companies that flagrantly ignore the law.”

TikTok says its target audience is people aged between 16 and 25, but the company acknowledges it has many users younger than that range. “We’ve been committed to creating measures to further protect our user community – including tools for parents to protect their teens and for users to enable additional privacy settings,” the company said.