FTC Proposes New Rule To Protect Consumers From Junk Fees

The Federal Trade Commission has announced a new rule to prohibit junk fees.

The proposed rule would protect consumers from paying billions in hidden and falsely advertised fees.

If finalized as proposed, the rule would ban businesses from running up the bills with hidden and bogus fees, ensure consumers know exactly how much they are paying and what they are getting, and help spur companies to compete on offering the lowest price. Businesses would have to include all mandatory fees when telling consumers a price, making it easier for consumers to comparison shop for the lowest price.

The rule has a provision to secure refunds for harmed consumers and seek monetary penalties against companies that do not comply with its provisions.

Junk fees are hidden, surprise fees that companies sneak onto customer bills, increasing costs and stifling competition in industries across the economy.

Research shows that fees charged at the back-end of the buying process make it harder to comparison shop for the best deal and lead to consumers paying an additional 20 percent. Junk fees also make it hard for honest businesses to compete, stifle innovation, and hurt small businesses.

The FTC has estimated that these fees can cost consumers tens of billions of dollars per year in unexpected costs.

The agency launched a proceeding last year requesting public input on whether a rule would help to eliminate these unfair and deceptive charges. After receiving more than 12,000 comments on how fees affect their personal spending or business, the FTC is seeking a new round of comments on a proposed junk fee rule.

As the public comments made clear, consumers are fed up with hidden fees for everything from booking hotels and resort fees to buying concert tickets online, renting an apartment, and paying utility bills. Many consumers said that sellers often do not advertise the total amount they will have to pay, and disclose fees only after they are well into completing the transaction. They also said that sellers often misrepresent or do not adequately disclose the nature or purpose of certain fees, leaving consumers wondering what they are paying for or if they are getting anything at all for the fee charged.

The White House said that in addition to the proposed rule, the CFPB is taking action to require large banks and credit unions to provide basic information to consumers without charging fees. It means no more fees for basic services like checking bank account balances, obtaining a payoff amount for a loan, or getting account information needed for applications.

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