Dive Brief:

• The Federal Trade Commission would be in a position to impose civil penalties and obtain monetary remedies from companies that charge unnecessary or deceptive fees in a rule the agency proposed this week, after wading through 12,000 public comments in the past 12 months that in large measure blast the fees as profit grabs.
• “Americans are plagued with unexpected and unnecessary fees they can’t escape,” FTC Chair Lina Khan said in announcing the proposal. “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.”
• The agency announced it was launching this effort last year when it asked people whether they feel they’ve been hit with fees they weren’t told about or that seem disconnected to the service provided. “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,” the agency’s announcement says.

Dive Insight:

The rule would require companies to state a total price that’s inclusive of all fees and add-ons, minus government fees and shipping costs. Any kind of service, convenience, administrative or other type of fee must be stated upfront, clearly and conspicuously, in any offer, display or ad. The total price must be displayed more prominently than any other price. 

The rule also takes aim at misleading fees by requiring companies to disclose clearly and conspicuously what the fees are for and whether they’re refundable. 

“It is an unfair and deceptive practice and a violation … for any business to misrepresent the nature and purpose of any amount a consumer may pay, including the refundability of such fees and the identity of any good or service for which fees are charged,” the rule says. 

Hotels, short-term lodging, event ticketing, rental housing, financial services, auto sales and internet service providers are among the industries called out for their practices. 

In a typical scenario recounted in the preamble to the rule, a company tacked on a $299 processing fee to the cost of a year’s worth of contact lenses, doubling what the consumer owed to $580. 

“This clearly shows how these deceptive junk fees more than double the advertised price of a year’s supply of contact lenses,” said a consumer whose comment was shared in the preamble.  

The rule doesn’t add any provisions to create penalties or allow for monetary redress, but by promulgating the prohibitions under Section 5 of the FTC Act, which prohibits deceptive practices, the agency gains the authority to assess penalties and pursue monetary relief.

“The proposed rule (if finalized) will allow the Commission to seek civil penalties against violators and more readily obtain monetary redress for the consumers who are harmed,” the agency says. 

Among the interests opposing the rule are the U.S. Chamber of Commerce and the Association of National Advertisers, who argue the FTC hasn’t presented evidence that unfair or deceptive practices related to fees are prevalent.   

The agency is taking public comments for two months. Comments are to be labeled “Unfair or Deceptive Fees NPRM, R207011” and submitted to Regulations.gov.