FTC Announces Crackdown on Hidden Fees

Regulator proposes rule to eliminate junk fees across the economy

The Federal Trade Commission (FTC) has announced it is proposing a rule that will eliminate junk fees across a number of financial transactions - from hotel stays to ticket purchases - in an effort to improve transparency in the marketplace.

“All too often, Americans are plagued with unexpected and unnecessary fees they can’t escape. 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,” said FTC Chair Lina M. Khan. “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. The FTC’s proposed rule to ban junk fees will save people money and time, and make our markets more fair and competitive.”

The new rule takes two steps that the FTC says will result in a reduction or elimination of most junk fees:

• The proposed rule would prohibit businesses from advertising prices that hide or leave out mandatory fees
• The rule would prohibit sellers from misrepresenting fees and require them to disclose upfront the amount and purpose of the fees and whether they are refundable

The goal of the rule is to create transparent, upfront pricing and to discourage hidden fees or fees that serve no clear purpose.

The announcement by the FTC comes as the Consumer Financial Protection Bureau (CFPB) is taking steps to reduce or eliminate certain junk fees charged by banks.

The CFPB says it wants banks to focus on customer service.

“While small relationship banks pride themselves on customer service, many large banks erect obstacle courses and impose junk fees to answer basic questions,” said CFPB Director Rohit Chopra. “While the biggest banks have abandoned the relationship banking model, federal law still requires them to answer certain customer inquiries completely, accurately, and in a timely manner.”

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