Intense scrutiny is being directed toward hidden fees and additional charges known as ‘junk fees’, encouraging businesses to implement best practices now to ensure future compliance. There is a push from both the federal government and state law makers to reign in or eliminate what they see as unfair fees on goods and services.
‘Junk fees’ – including processing fees, convenience charges, and recoupment – routinely go unseen by consumers due to their lack of transparency. They appear when businesses advertise an initial low price, then reveal additional fees throughout the purchasing process. This approach gives a false impression of affordability or prevents the consumer from properly comparing pricing, as the total price is often not shown until the end of the transaction.
Following President Joe Biden’s 2023 State of the Union address, a regulatory focus on hidden and junk fees was realized. The Federal Trade Commission later announced its Trade Regulation Rule on Unfair and Deceptive Fees.
This rule seeks to prohibit misrepresentation of total costs by excluding mandatory fees from advertised prices and by misrepresenting the nature and purpose of the fees. A group of 19 state attorneys general filed a comment letter stating the rule would provide much-needed safeguards for consumers.
At the state level, California’s Senate Bill 478 aims to stop companies from hiding mandatory fees or charges. It will be enacted on July 1 and imposes strict requirements for how pricing must be advertised.
Businesses must anticipate and adapt to these changing legislative and regulatory trends, assessing their current advertising to preemptively avoid becoming a target. By clearly and conspicuously disclosing all mandatory fees upfront, along with offering a full itemized price breakdown explaining all fees charged before collecting billing information, businesses can stay ahead of the regulatory curve.