Regulators looking to garner bipartisan support for an initiative would be hard-pressed to find a more politically palatable target than “junk” or “hidden” fees. President Joe Biden recently announced his initiative against junk fees, calling on regulators to issue guidance to banks, airlines, and concert ticketing companies alike.
The Consumer Financial Protection Bureau recently issued guidance, stating that surprise overdraft fees and depositor fees (fees charged to consumers who deposit a check that bounces) are junk fee practices that are likely unfair and unlawful. At the National Association of Attorneys General, CFPB Director Rohit said we “cannot live in a country of junk fees.”
State attorneys general have targeted these fees for some time, framing them as unfair or deceptive typically because they are rarely disclosed clearly and conspicuously to consumers.
The Federal Trade Commission on Oct. 20 issued notice of proposed rulemaking and request for public comment on junk and hidden fees. It noted that the hospitality, live entertainment, travel, and automobile industries are where it believes junk or hidden fees and “drip pricing”—where companies reveal only part of the price and add charges later—are prevalent.
One reason for the FTC’s notice is that it presently cannot secure compensation for consumers or penalties related to unfair or deceptive fees. The US Supreme Court recently held in AMG Capital Management v. FTC that the Federal Trade Commission Act does not authorize the commission to seek equitable monetary relief, and generally precludes the federal regulator’s authority to pursue consumer restitution under Section 13(b).
But if the FTC adopts a rule on junk fees, it could seek similar relief under Section 19(b) of the FTC Act. The commission is specifically interested in the public’s opinion on the prevalence of junk and hidden fees, how often consumers are expected to pay such fees, whether a rule should require a business to disclose one price encompassing all charges when advertising products or services, and whether such rules should apply to all industries, according to its notice.
Several years ago, attorneys general from more than 40 states and the District of Columbia launched a working group to investigate whether hotel chains charged undisclosed or improperly disclosed fees, such as “resort” fees not included in advertised rates.
Last year, Pennsylvania Attorney General and now Governor-elect Josh Shapiro reached a settlement with Marriott on mandatory fees that it failed to disclose to customers. Marriott became the first major hotel to commit to a policy of disclosing these fees as part of the total price of a hotel stay.
The settlement follows similar lawsuits by District of Columbia Attorney General Karl Racine against Marriott and Nebraska Attorney General Doug Peterson against Hilton.
Other hospitality companies including hotels, home stay, or home-sharing businesses and third-party websites that offer these services are now on notice. Airbnb recently announced that it is scrapping its hidden fees and will instead display the total price including all fees before taxes upfront.
Companies in the industry should also ensure that they are only charging mandatory fees and that these fees are, at a minimum, disclosed to customers up front. A surprise fee on the checkout page could be construed as a junk …….