As per my input in the chat, I think the answer really depends on your goals and whether you feel it's worth the cost. If your concern is competence and a "legitimate" belt, then you may want to look at another school. If you're just looking for your child to have a fun time with his friends, the cost is reasonable, and they're not actually being unsafe, you might just write it off as "entertainment". I know that's how I pursued sports as a child (and still do them today), not worrying too much about getting better at them, but just enjoying the experience.
I actually speak on this from a bit of experience. When I was in elementary to middle school, my mother got me into classes at a local Tang Soo Do academy and she picked up the "black belt" package where we paid for three years of tuition at a discount with a statement that after three years, I would be a black belt in the style. Yes, this is a belt factory tactic. That said, they had enough integrity that, when I failed my black belt test (I wasn't that good of a student), they did not promote me, although I think they came to regret that because my mother pointed out that their contract read as that the initial payment was valid until the later of the two conditions, three years or my black belt, so I got an extra year of classes out of it before I failed the exam again and we came to a mutual agreement that I was not black belt material and therefore the contract would never really terminate except by agreeing to let it lapse.
Ultimately, also as I stated in chat, if you do decide to remove your child from the "diploma mill" school, make it explicitly evident that this is not their fault, that it's not a punishment, and that you're doing this because the school itself doesn't do what they are being paid to do.