In a move to protect American consumers from undisclosed “junk fees,” the Biden administration, in collaboration with the Federal Trade Commission (FTC), has proposed new regulations titled “Rule on Unfair or Deceptive Fees.” These regulations aim to crack down on deceptive practices by companies that misrepresent the total costs of goods and services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees.
The proposal comes as Americans continue to face hidden charges that often go unnoticed until they are ready to make a purchase. These fees can quickly add up and impact personal spending and finances. While deceptive fees are commonly associated with concert tickets or food delivery services like DoorDash or Uber Eats, consumers may also be accumulating hidden charges in utility bills, rent, hotel bookings, and more.
Companies often use misleading language to mask these fraudulent charges, making it difficult for consumers to identify and avoid them. To address this issue, the FTC advises consumers to reach out to companies in writing if they are confused about a processing charge and question its legitimacy. Additionally, shopping around and comparing prices, keeping receipts and communications with companies, and reporting hidden charges to the FTC or state attorney general’s office are recommended approaches to avoid unfair fees.
FTC Chair Lina Khan emphasized the impact of these “junk fees” on American families, stating, “These junk fees now cost Americans tens of billions of dollars per year – money that corporations are extracting from working families just because they can.” She further added that the proposed rule would save people money and time while making markets more fair and competitive.
However, lawmakers and politicians remain divided on the issue, with some expressing concerns that suppressing these fees could have negative effects on the economy, while others support the proposed regulation. Examples of common introductory fees in rental properties, such as application, move-in, move-out, parking, and pet fees, have been cited as deceptive practices by landlords. These fees are often undisclosed in the fine print or terms and conditions of a lease, leaving renters unaware of the additional charges until the first of the month.
Under the FTC rule, businesses across various industries, including utility, cable, internet companies, entertainment ticket sites, and travel industries, would be required to disclose whether fees are refundable. Non-compliance could result in fines or penalties, and businesses may be required to provide refunds.
The proposed rule also targets two specific misleading processing charges: hidden fees and bogus fees. Hidden fees are prices that hide or exclude mandatory fees, while bogus fees are misrepresented fees that do not adequately explain the amount and purpose of the charges. Through these regulations, the FTC aims to ensure transparency in pricing and protect consumers from misleading practices.
In addition to the FTC’s efforts, other regulatory bodies, such as the Consumer Financial Protection Bureau and the Department of Labor, are taking steps to address unfair fees. The Consumer Financial Protection Bureau plans to stop banks from charging for basic financial services, while the Department of Labor is pushing for financial advisers to act in the best interest of retirees.
As the Biden administration and the FTC work towards implementing stricter regulations, the proposed crackdown on undisclosed “junk fees” aims to empower consumers and create a more equitable marketplace.
