In a bid to curb so-called “junk fees” on various consumer purchases such as concert tickets or hotel rooms, the Federal Trade Commission (FTC) has proposed a comprehensive ban on such hidden and deceptive charges. This move is a part of the Biden administration’s battle against ostensible fees. Under this new rule, firms will be required to integrate and clearly highlight all mandatory charges in the displayed price of a good or service. This is to prevent consumers from being slapped with sudden unexpected costs post-purchase reported Bloomberg Law.
Furthermore, this rule aims to enable the FTC to provide quicker relief for consumers who have been misled by hidden fees or charges, following the Supreme Court’s decision to restrict some of the agency’s authority in last year’s AMG Capital Management LLC v. FTC case. The suggested rule seeks to facilitate a streamlined means for the FTC to recoup such funds as per the Supreme Court’s directive.
Besides the FTC, the Consumer Financial Protection Bureau is also clamping down on bank fees. These regulatory agencies are currently empowered to rapidly grant consumer refunds under laws and regulations addressing several areas such as telemarketing sales, sharing consumer data with third-party vendors, and deceptive subscription enrolment tactics.
The FTC’s consumer protection authority extends its jurisdiction over most industries excluding financial services, common carriers and a few other sectors regulated by other agencies. Instituting a rule on junk fees for all FTC regulated industries effectively equips the Commission with better enforcement, thus enabling better consumer haven and prevention of harmful conduct.
However, there has been pushback to the FTC’s proposition from industry groups, signaling a possible legal tussle once the rule is finalized. Critics argue the administration’s decision to govern business transactions could ultimately hamper innovation, potentially leading to lesser choices and higher prices for consumers.
Meanwhile, the FTC insists that the proposed rule primarily emphasizes clarity in terms of disclosures without necessarily imposing a cap or fixing any fees. The rule aims to ensure all firms are aware of their compliance obligations and enables the FTC to carry out swift enforcement action.
The new rule aligns with earlier efforts by the FTC and Democrats to persuade Congress to amend the FTC Act to facilitate rapid consumer redress. Similarly, last week, California Governor Gavin Newsom approved legislation requiring firms to provide all-inclusive pricing which is expected to counteract hidden fees. Given the magnitude of California’s economy, this law could potentially set a new national standard.
A parallel crackdown on junk fees is being carried out by the federal consumer finance watchdog which published its interpretative guidance on addressing rampant customer queries pertaining to their banking accounts. According to the Consumer Financial Protection Bureau, their focus is to enable bank customers (in banks with over $10 billion in assets) to access their account details upon request, without the imposition of additional fees or unnecessary hold-ups reported Bloomberg Law.
This crackdown and the subsequent interpretative advice is seeing stiff resistance from banks and credit unions, thus fortifying the possibility of litigation. The road to reforms is certainly not without its challenges. Yet, uniform price disclosures could likely facilitate easier comparison shopping for consumers while promoting fair competition.