fbpx

Do You Charge Clients Small Fees for Services? Time to Evaluate Them.

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.

“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.”

Companies charge junk fees in many 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 of 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 has 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 them. Some companies might claim they do not charge 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.

Follow Me
Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.
Steve Rhode
Follow Me