Podcast - The FTC Takes Initiative to Stop Junk Fees

Welcome to another podcast of Clearly Conspicuous. As we've noticed in previous sessions, our goal in these podcasts is to make you succeed in this current regulatory environment that's very progressive, make you aware of what's going on with the federal and state consumer protection agencies and give you practical tips for success. It's a privilege to be with you today.

FTC Proposes Rule to Prohibit Junk Fees, Receives Thousands of Comments in Response

Today we discuss the Federal Trade Commission initiative to stop junk fees. On October 11, the FTC announced a new proposed rule to prohibit junk fees, which are hidden and bogus fees that can harm consumers and undercut honest businesses. The FTC has estimated that these fees can cost consumers tens of billions of dollars per year in unexpected costs.

The agency launched a proceeding last year requesting public input on whether a rule would help to eliminate these unfair and deceptive charges. After receiving more than 12,000 comments on how fees affect their personal spending or business, the FTC is seeking a new round of comments on a proposed junk rule. "All too often, Americans are plagued with unexpected and unnecessary fees that they just can't escape. These junk fees cost Americans tens of billions of dollars per year. Money the corporations are extracting from working families just because they can," said FTC Chair Lina Khan. "By hiding the total price," she continues, "these junk fees make it harder for consumers to shop for the best products or services and punish businesses who are honest up front. The FTC's proposed rule to ban junk fees will save people money and time, and make our markets more fair and competitive."

As the public comments made clear, consumers are just fed up with hidden fees for everything from booking hotels and resort fees to buying concert tickets online, renting an apartment and paying utility bills. Many consumers say that sellers often do not advertise the total amount they will have to pay and disclose fees only after they are well into completing the transaction. They also said that sellers often misrepresent or do not adequately disclose the nature or purpose of certain fees, leaving consumers wondering what they are paying for or if they are getting anything at all for the fee charged.

What the Proposed Rule Would Ban and How It Would Be Enforced

The proposed rule would ban businesses from running up the bills with hidden and bogus fees, ensure consumers know exactly how much they are paying and what they are getting, and help spur companies to compete on offering the lowest available price. Businesses would have to include all mandatory fees when telling consumers the price, making it easier for consumers to compare for the lowest price. The proposed rule would also have enforcement teeth, allowing the FTC to secure refunds for harmed consumers and seek monetary penalties against companies that do not comply with its provisions.

To accomplish all of this, the proposed rule would ban the following junk fee practices that consistently confuse or trick consumers:

1. Hidden fees. Consumers told the FTC that dishonest businesses routinely engage in bait and switch practices that hide mandatory fees and deceive consumers about the price. This is because fees imposed later, but before the purchases, may significantly increase the total that consumers pay. Accordingly, the proposed rule would prohibit businesses from advertising prices that hide or leave out mandatory fees.
2. Bogus fees. Many consumers also said they often do not know what these are for, because dishonest businesses routinely misrepresent or fail to adequately disclose the nature or purpose of the fees. The rule would prohibit sellers from misrepresenting fees and require them to disclose upfront the amount and purpose of the fees, and whether they are refundable.

The Commission vote to approve publication of the notice of the proposed rulemaking was 3 to 0. Once the notice has been published in the Federal Register, comments can be submitted electronically for 60 days.

Concluding Thoughts

So here's the key takeaway. The FTC is involved in a very active listening mission to determine what's on consumers' minds and what constitutes injury and damage in the current environment. Junk fees is a top priority, and indeed, other governmental agencies have identified junk and bogus fees as a top consumer protection concern. So please stay tuned to further programs as we identify and address the key issues and developments, and provide strategies for success. I wish you continued success and a meaningful day. Thank you.