Tech Trends: FTC Cracks Down on Junk Fees

When making a purchase, most customers skip to the total to determine if what they are buying is worth it. The number on the screen or at the bottom of the receipt is crucial for shoppers to determine the value of the goods or services they are about to buy. It has been troubling for consumers lately that the often-reliable total on the purchase screen is not in fact what they are going to pay. Any number of fees or surcharges are added at the seller’s discretion and the number goes up, which is an especially troubling trend where the current rate of inflation is concerned. Sellers often offer flimsy explanations for these fees and consumers have little recourse other than seeking a refund. That is about to change as the FTC has now weighed in on these “junk fees” and retailers will have to make some changes. This won’t necessarily save money, yet they will be able to know the true total they are paying before swiping their credit card.

The FTC has just laid out a proposed rule that would ban the type of fees that are not initially visible to consumers or are hidden during the purchasing process. The commission estimates that these hidden fees have cost the public at least $80 billion every year. These extra fees have been a way for companies to raise prices behind the scenes without scaring off customers with high ticket prices upfront. The new rule would force companies to notify shoppers when extra fees are being charged and businesses would have to include any fees in an advertised price. The initial scope of the changes is targeted at hotels on stadium venues, yet those targets could be expanded in the future. These new FTC rules have been backed by President Biden and is in line with one of his administrations goals. It is important to note that these new rules would not prevent companies from charging extra fees for service or convenience, it would only require them to notify customers upfront.

Stadiums and hotels aren’t the only culprits of junk fees according to the FTC; restaurants have also come under fire for how they are charging customers. It could be argued that these fees may have been a driving force behind the restaurant sector’s recovery. These new rules also come at a time when restaurant employment levels have finally reached pre-pandemic levels. Businesses credit these fees with being able to pay employees higher wages and provide additional benefits. While it does not hinder their ability to provide service, the surcharges and fees allowed them to operate without the sticker shock of drastically raising menu prices. Unlike hotels or ticket vendors where you must complete the purchase before receiving your goods, restaurant customers often have already consumed their meal by the time they discover the additional charges. These kinds of fees are not as prevalent in retailer and supermarket transactions and FTC scrutiny could keep them from dipping into this practice.

With inflation causing so much consumer backlash, it should come as no surprise that the FTC has stepped in to wrangle the situation. The holidays are quickly approaching, and these proposed changes could have a significant impact on the lucrative shopping season. It is unlikely that these junk fees will cease to exist and companies that already employ them will continue to do so, although, we have seen instances where enough pushback caused a course reversal. FTC oversite will likely drive companies to implement new pricing strategies as they hope to keep the extra $80 billion earned through secondary charges.