1) Oct 26 blog -- The President's Initiative on Junk Fees and Related Pricing Practices
Last month, at a meeting of the White House Competition Council, President Biden called on all agencies to reduce or eliminate hidden fees, charges, and add-ons for everything from banking services to cable and internet bills to airline and concert tickets. . . .
These so called “junk fees” are not just an irritant – they can weaken market competition, raise costs for consumers and businesses, and hit the most vulnerable Americans the hardest.
Today, the Consumer Financial Protection Bureau (CFPB) took new actions to effectively eliminate billions in banking fees . . . .
On the occasion of today’s announcement, this blog provides context on what junk fees are, why they are a concern, and what the Biden-Harris Administration is doing to address them. . . .
In response to President Biden’s call to action, all Competition Council federal agencies are looking for ways to reduce or lower junk fees. . . . To date, the Administration has already taken a number of actions that will save consumers and businesses billions of dollars:
Eliminating unfair banking fees. Today, the CFPB issued guidance explaining that two junk fee practices are unfair and unlawful – effectively banning both. First, the CFPB is making clear that surprise overdraft fees are unlawful. These are fees charged for overdrawing a checking account even though at the time the account owner made a purchase, the bank’s website or ATM terminal showed the customer that they had sufficient available funds for the purchase. Second, the CFPB is making clear that surprise depositor fees are unlawful. These are fees charged to customers who deposit someone else’s bounced check, penalizing the victim. Together, these actions will save consumers more than $1 billion annually. https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-guidance-to-help-banks-avoid-charging-illegal-junk-fees-on-deposit-accounts/
Additional CFPB actions on bank and credit card fees. The CFPB is developing rules and guidance on other fees charged by banks and credit card companies. These fees cost consumers more than $24 billion a year combined, with the biggest impacts on low-income Americans. . . .
Taking aim at bad junk fee practices that span industries. Last week, the Federal Trade Commission (FTC) voted to launch a rulemaking process that would broadly reduce junk fee practices across the economy, including for event ticketing, hotels, funeral homes, and any other industry that uses mandatory fees. https://www.ftc.gov/news-events/news/press-releases/2022/10/federal-trade-commission-explores-rule-cracking-down-junk-fees
The rulemaking would address practices such as charging consumers fees they never consented to or charging mandatory fees with little or no added value, like hotel resort fees or event ticket processing fees. This action is an important step towards a future rule that would give the FTC additional information and enforcement tools to take action and seek penalties against companies adopting unfair and deceptive junk fees. This action builds upon the FTC’s work bringing multiple enforcement actions challenging junk fees across a variety of industries and returning money to injured consumers. . . .
Restricting Junk Fees Charged by Auto Dealers. This June, the Federal Trade Commission (FTC) issued a proposed rule that would restrict junk fee practices by car dealers that are costly and frustrating for consumers. https://www.ftc.gov/news-events/news/press-releases/2022/06/ftc-proposes-rule-ban-junk-fees-bait-switch-tactics-plaguing-car-buyers
The rule, if finalized, would (1) ban bait-and-switch claims by prohibiting dealers from making deceptive advertising claims to lure in prospective car buyers; (2) prohibit fraudulent add-on products (such as “nitrogen filled” tires that contain no more nitrogen than normal air); (3) prevent dealers from charging consumers surprise fees for an add-on without their clear, written consent; and (4) mandate upfront disclosure of costs and conditions by requiring dealers to make disclosures to consumers like proving a “true offering price” for a vehicle.
Requiring Airlines and Airline Search Sites to Disclose Fees Up Front. In September, the Department of Transportation (DOT) proposed a rule that would protect travelers by ensuring they know the full price of airline tickets before they buy. https://www.transportation.gov/airconsumer/AirlineAncillaryFeeNPRM
The rule, if finalized as proposed, will require airlines and online search sites to disclose up front – while you are comparison shopping – any fees to sit next to your child, for baggage, and for changes or cancellations. The proposal seeks to provide customers the information they need to choose the actual best deal, preventing surprise fees that add up quickly and prevent competition on the basis of price. This builds on previous actions the DOT has recently taken, including issuing proposed rules that would require airlines to refund fees for checked bags that are significantly delayed and for services not actually provided (like broken WiFi), and to require refunds for delayed and cancelled flights.
Requiring Broadband Nutrition Labels. The Federal Communications Commission (FCC) has issued proposed rules that would, if finalized as proposed, require internet companies to display a standardized “Broadband Nutrition Label” that discloses their monthly prices, fees, and internet speeds – so customers can see which company is cheapest and companies will have to compete for business. The FCC anticipates completing this rulemaking by the end of this year. https://www.fcc.gov/broadbandlabels
Reducing the Cost of Shipping Goods. Congress responded to President Biden’s call to crack down on excessive fees in ocean shipping by passing the bipartisan Ocean Shipping Reform Act. The Federal Maritime Commission, which is responsible for implementing the law, recently released a proposed rule that proposes to bring more clarity, structure, and punctuality to ocean shipping fee billing practices. https://www.regulations.gov/document/FMC-2022-0066-0090
2) Remarks by President Biden on Protecting American Consumers from Junk Fees https://www.whitehouse.gov/briefing-room/speeches-remarks/2022/10/26/remarks-by-president-biden-on-protecting-american-consumers-from-junk-fees/
3) Oct 20 -- Federal Trade Commission Explores Rule Cracking Down on Junk Fees [press release]
Agency seeks comment on harms from unnecessary, unavoidable, or surprise charges that inflate costs while adding little to no value
The Federal Trade Commission announced today that it is exploring a rule to crack down on junk fees proliferating throughout the economy. Junk fees are unnecessary, unavoidable, or surprise charges that inflate costs while adding little to no value. 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. The agency is seeking public comment on the harms caused by junk fees and the unfair or deceptive tactics companies use to impose 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.
The FTC is concerned that junk fees are common in many sectors of the U.S. economy. The advance notice of proposed rulemaking announced today seeks public comment on the harms stemming from junk fees and associated junk fee practices and on 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.
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. 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. The FTC can seek such remedies when a company violates a rule promulgated by the agency, which is why the agency is exploring a junk fee rule.
The Commission vote approving publication of the advance notice of proposed rulemaking was 3-1, with Commissioner Christine S. Wilson voting no. Chair Khan and Commissioner Wilson issued separate statements. Once the 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.
Unfair or Deceptive Fees Trade Regulation Rule: Advance Notice of Proposed Rulemaking (16 CFR Part 464): https://www.ftc.gov/legal-library/browse/federal-register-notices/unfair-or-deceptive-fees-trade-regulation-rule-advance-notice-proposed-rulemaking-16-cfr-part-464
Press release: https://www.ftc.gov/news-events/news/press-releases/2022/10/federal-trade-commission-explores-rule-cracking-down-junk-fees
4) Nov 8 -- FTC Proposes Unfair or Deceptive Fees Trade Regulation Rule
The Federal Trade Commission (“Commission”) proposes to commence a rulemaking proceeding to address certain deceptive or unfair acts or practices relating to fees. The Commission is soliciting written comment, data, and argument concerning the need for such a rulemaking to prevent persons, entities, and organizations from imposing such fees on consumers. Comments must be received on or before January 9, 2023.
Comment period extended to February 8, 2023. https://www.ftc.gov/news-events/news/press-releases/2022/12/federal-trade-commission-extends-public-comment-period-potential-rule-regarding-harms-caused-junk