The Federal Trade Commission this week issued its long-awaited rule prohibiting hidden junk fees. The rule focuses on two industries in which surprise fees added at checkout have caused widespread frustration and outrage: ticketing for live events and hotel and other short-term lodging. Though the final rule is narrower than many advocates (including the Center) had proposed in their comments, the rule may as a result avoid some of the hazards -- including a hostile Congress and courts -- that threaten recent broader agency regulations.
And the final rule does bear distinct signs of the comment filed by the Center, the CLASS Network, and seven law school student consumer protection organizations.
As background: Surprise "service fees" and "convenience fees" that can hike the final price for a ticket or hotel room have proliferated in recent years. Consumers looking for a product or service online are almost invariably snared by online platforms offering them items at one price, then charging a much higher amount at checkout. If you have ever clicked on a short-term rental that is advertised at $75 a night, only to find that it comes out to $150 a night once the full price (with all “fees”) is calculated, then you understand the problem. Hotels' “convenience fees” or “resort fees” or (we are not making this up) “January fees” have become ways for less scrupulous businesses to make their prices appear significantly lower than they actually are.
Well, perhaps no longer. The new Junk Fees Rule requires ticketing businesses and hotels to clearly and conspicuously disclose the true total price of their services, including all mandatory fees, whenever they display or advertise a price. These businesses can no longer hide or misrepresent any fee or charge in any ad for live-event tickets or short-term lodging. The rule also requires businesses to display the total price more prominently than other pricing information: truthful itemization and breakdowns may be displayed, but they may not overshadow what consumers really want to know: the total amount they have to pay.
As FTC Chair Lina Khan observed, consumers should not be offered one price only to "later be saddled with mysterious fees that they haven’t budgeted for and can’t avoid."
The Center filed a comment in support of the draft rule on behalf of itself, the nationwide CLASS Network of law students and professors, and seven student-led consumer protection law organizations at George Washington University; Stetson University; University of California, Berkeley; University of California, Irvine; University of Maryland, Baltimore; University of Michigan; and University of Montana. Most gratifyingly, eleven students from that panoply of schools – J.D., LLM and even an undergraduate – helped with research and drafting. The brief contained twenty single-spaced, robustly footnoted, tightly reasoned pages of analysis followed by a full Appendix containing examples of junk fees, with images, across a wide swath of industries, including rental housing fees, environmental fees, and restaurant charges.
Those tightly reasoned and robustly footnoted pages were cited 10 times, mostly substantively, in the FTC’s final rule.
Issuing the final rule, FTC Chair Khan explicitly encouraged "state and federal policymakers to build on this success with legislation that bans unfair and deceptive junk fees across the economy.” As of July 1, 2024, California has preemptively met that challenge. Californians may rest easy in the knowledge that, thanks to Senate Bill 478, the California Legal Remedies Act already prohibits a wide swath of businesses from advertising a price that does not include all required fees. That bill was co-sponsored by the California Attorney General’s office and the Center's sister organization, the California Low-Income Consumer Coalition (CLICC). The Center through our Economic Justice Policy Advocacy Coalition and CLICC look forward to support the adoption of similar legislation in other states.
As President Biden observed in his State of the Union address two years ago, “Junk fees may not matter to the very wealthy, but they matter to most folks.... I know how unfair it feels when a company overcharges you and gets away with it.” Hiding fees is an unfair and deceptive practice, one that can push low-income families to the financial edge, and one that can disadvantage honest businesses that don’t want to deceive their customers. And now the nation has moved a step toward eradicating that practice.
We hope that States and eventually the federal government will in the future expand the rule to include other industries like those we highlighted in our comment (as Chair Khan explicitly encouraged them to do in her message on the final rule's release), and we are brimming with pride that the FTC recognized the extraordinary contributions of the CLASS Network-affiliated students who worked so diligently and effectively to produce the comment.