Feds Hope to Rein In Junk Fees
Processing fees, environmental clean-up fees, restocking fees and fee creation fees — there’s no end to the “junk fees” that American businesses impose on customers, and the Federal Trade Commission thinks consumers have had just about enough.
“It’s beyond frustrating to end up spending more than you budgeted because of random, arbitrary fees,” said FTC Chair Lina M. Khan. “No one has ever felt that a ‘convenience fee’ was convenient. Companies should compete to provide the best quality at the best price, not to see who can squeeze the most added expenses out of consumers. That’s especially true at a time when families are struggling with the effects of inflation.”
The FTC is considering a rule that would crack down on the junk fees which, as Khan notes, are unnecessary, unavoidable, or surprise charges that inflate costs while adding little to no value. The FTC is not alone in its concern. Separately, the Consumer Financial Protection Bureau has been targeting surprise bank fees.
Consumers can get hit with junk fees at any stage of the purchase or payment process. Companies often harvest junk fees by imposing them on captive consumers or by deploying digital dark patterns and other tricks to hide or mask them.
Companies charge junk fees in a wide range of contexts, including cramming in hidden fees to which consumers did not consent, misrepresenting optional services or upgrades as mandatory, and charging for products or services with little or no value.
For example, consumers purchasing tickets or booking a hotel room may find a surprise junk fee tacked on at checkout. These junk fees – which add up to tens of billions of dollars each year – can drive up prices, make comparison shopping difficult, and leave consumers feeling powerless and cheated.
As part of the process for cracking down on junk fees, the FTC is seeking public comment on the harm stemming from junk fees and whether a new rule would better protect consumers. The types of junk fees the FTC is seeking comment on include:
- Unnecessary charges for worthless, free, or fake products or services: Consumers may be slammed with charges for products or services that cost companies nothing to provide, are available for free, or should be included as part of the purchase price. Companies might also upsell consumers on fake products or services that either have no value or never materialize.
- Unavoidable charges imposed on captive consumers: Consumers may be forced to pay junk fees because they have no way to avoid or opt out of them. They might be dealing with a company with a monopoly or exclusive rights that can extract fees because there is no competing option. Or consumers might get hit with fees after they have already sunk costs into a product or service, and they can’t easily walk away.
- Surprise charges that secretly push up the purchase price: Consumers can experience junk fee shock when companies unexpectedly tack on mystery charges they did not know about, consent to, or factor into the purchase. Companies might hide these fees in the fine print, cram them on at the end of a purchase process, or use digital dark patterns or other deception to collect on them. Some companies might claim that they do not charge any fees and then add on fees after the purchase or sign up.
Not the first time
The FTC has a history of taking action on junk fee practices – they have been the subject of Commission investigations, enforcement actions, workshops, research, and consumer and business education outreach.
But while the agency has been active in addressing junk fees, it generally lacks the authority to seek penalties against first-time violators or the ability to obtain redress readily for consumers in instances in which fees violate the FTC’s prohibition on unfair or deceptive practices. A new junk fee rule could remedy the problem.
Once the rulemaking notice has been published in the Federal Register, consumers can submit comments electronically. Consumers also may submit comments in writing by following the instructions in the “Supplementary Information” section of the Federal Register notice.