As US elections ramp up, federal and state efforts to fight “junk fees” – those often undisclosed costs such as processing or convenience charges – have taken center stage. Recent moves at the state level, particularly in California and Minnesota, are now setting the benchmark for corporate advertising practices.
President Joe Biden has addressed federal measures to curb junk fees in his last two State of the Union addresses, emphasizing the cost these fees incur on consumers, a figure he estimates at $90 billion annually. However, the most robust regulatory actions are emerging at the state level.
In California, Senate Bill 478, effective since July, modifies the California Consumers Legal Remedies Act. The amendment prohibits businesses from advertising a price for goods or services that fails to include all mandatory fees or charges. Similarly, Minnesota’s new legislation, effective January 1, 2025, mandates that advertised prices must encompass all unavoidable fees.
While considerable federal action remains scant, a few notable regulatory steps include the Consumer Financial Protection Bureau’s finalization of a rule reducing credit card late fees, and the Federal Trade Commission’s proposed rule aiming to ban junk fees.
These state laws apply explicitly within their jurisdictions. However, the likelihood that they set a defacto national standard is high, due to nationwide advertising practices. Beyond simply including mandatory and unavoidable fees in advertisements, businesses must navigate exempting taxes and shipping fees, which each state defines slightly differently. For example, California’s law distinguishes that shipping exemptions apply only to costs “reasonably and actually incurred” to ship goods, excluding additional handling or installation expenses.
The advertising landscape is likely to grow more complicated if additional states pass varied junk fee laws. Further complexity arises from the proposed FTC rule, which, while creating a baseline for federal regulation, does not preempt stricter state laws.
If the regulatory framework becomes too burdensome, companies might opt out of price advertisements altogether, potentially leading to greater consumer confusion. Thus, regulators must strike a balance to avoid a disjointed legal environment that could impede straightforward price disclosures.
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