NEW YORK (AP) — “Junk fees” are just what they sound like: hidden or misleading charges that increase the total cost of concert tickets, hotel rooms, utility bills and other goods and services.
The Biden administration has proposed a new Federal Trade Commission rule that would require more transparency from companies when it comes to these fees, as well as regulation from the Consumer Finance Protection Bureau and the Department of Labor. You can also avoid the fees by staying vigilant, challenging late-breaking add-ons, and comparison shopping.
Here’s what to know:
WHAT QUALIFIES AS A JUNK FEE?
Often junk fees don’t appear until the final pages of a checkout process, such as when buying concert tickets, airline tickets, hotel stays, or other products with “processing charges.”
These fees may also appear late in the payment process when it comes to housing, such as when acquiring a rental, as well as when purchasing services for incarcerated people (such as phone calls, emails, or money transfers). Ariel Nelson, staff attorney at the National Consumer Law Center, says that increased transparency will allow consumers to avoid sellers who inflate prices. That doesn’t always apply to prisoners because they don’t always have a choice about where to buy from. The rule will also reduce wasted time consumers spend trying to find the real price of a good or service.
“The law will require disclosure up front of fees and prohibit misrepresenting the total cost, as well as the nature and purpose of the fee,” Nelson said. “If you think there are charges that don’t make sense or you’re paying for something not included in the original price, you should tell the FTC and the states’ attorneys general.”
The rule would also require that companies disclose whether fees are refundable. It would apply to industries across the economy, including hotels and lodging, energy and internet, car and apartment rentals, and music and entertainment tickets. With the new regulation, companies that fail to comply could face fines or penalties and be required to provide refunds.
WHAT IS THE WHITE HOUSE DOING?
The proposed junk fee crackdown is one of a series of Biden administration initiatives meant to help consumers, though Republican lawmakers and some business group say these efforts could lead to greater regulatory costs and leave the economy worse off.
“The proposed rule would prohibit corporations from running up the bills … requiring honest pricing and spurring firms to compete on honesty rather than deception,” FTC Chair Lina Kahn said on a call with reporters. “Violators will be subject to civil penalties and be required to pay back Americans that they tricked.”
The Consumer Financial Protection Bureau has said it will also block large banks from charging junk fees to provide basic customer services.
What’s more, a new proposed rule from the Department of Labor will require that financial advisers provide retirement advice in the best interest of the saver, closing a loophole in regulation generally governed by the Securities and Exchange Commission. (The SEC’s authority and rule does not typically cover commodities or insurance products like fixed index annuities, which are often recommended to retirement savers.) That should reduce junk fees for financial advice for people saving for retirement.
HOW CAN I AVOID PAYING JUNK FEES?
If the FTC rule is passed as proposed, the law will help consumers know what they’re paying for more quickly, creating better circumstances for fair competition, Nelson said.
