The Federal Trade Commission is proposing a rule that would ban junk fees, preventing vendors—including tech companies and apps—from placing bogus or hidden charges on consumer bills.
The FTC introduced the new rule after asking the public for feedback on a potential regulation to stop the junk fees. The Commission ended up receiving over 12,000 comments, a majority of which called for government action or recounted negative experiences with paying such fees.
“In particular, they raised concerns that sellers do not advertise the total amount consumers will have to pay, and disclose fees only after consumers are well into purchasing transactions, harming both consumers and businesses,” the FTC said.
“They also stated that sellers misrepresent or do not adequately disclose the nature or purpose of fees, leaving consumers wondering what they are paying for or believing that fees are arbitrary, and that they are getting nothing for the fees charged,” the Commission added.
The public commentators noted the junk fees can be found across the market, including for hotel rooms, renting an apartment, online ticket sales, and at internet service providers (ISPs) and on mobile apps. For ISPs, this can include omitting “installation and activation fees, equipment fees, penalties for exceeding data caps, and early termination fees, in advertised prices,” the FTC said.
Some commentators also claimed food delivery apps are another offender by charging prices “not reflected in advertised food prices, and that the nature or purpose of these fees is not always clear or is misrepresented,” the Commission added.
In response, the FTC is proposing new regulations to crack down on the junk fees on the grounds they constitute a deceptive and unfair trade practice. “By hiding the total price, these junk fees make it harder for consumers to shop for the best product or service and punish businesses who are honest upfront,” said FTC Chair Lina Khan in a statement.
To stop the junk fees, the proposed rule would not just ban them, but it would also allow the FTC to secure refunds for affected consumers and impose financial penalties on companies found in violation. That said, vendors could still charge any extra fees, so long as they're upfront about it.
The proposed action occurs months after the Biden administration also pushed for a crackdown on junk fees. In his State of the Union address in February, Biden called on Congress to pass the Junk Fee Prevention Act. But since then, the legislation has failed to gain any traction.
The FTC is now seeking comment on the proposed new rule before a potential vote. In the meantime, the FCC has enacted its own rule to require ISPs to be upfront with the total cost to an internet plan through new broadband labels. Major ISPs have until April to start displaying the broadband labels at physical stores and on their websites.