The FTC Is Coming After Junk Fees, With Penalties of $50,120 per Violation

The days of charging hidden fees–ranging from convenience fees to Covid surcharges–could be numbered. 

The Federal Trade Commission proposed a new rule on Wednesday that would ax junk fees, or the hidden costs businesses fail to disclose up front. These costs appear once a customer decides to pull the trigger to buy something. So that Rihanna concert ticket a consumer originally thought was $200 might actually cost $277.99 once they hit their checkout screen. 

Consumers encounter junk fees often: They tend to pop up when purchasing concert tickets, booking hotel rooms, ordering food, and so on. 

But the FTC says: Enough. President Joe Biden feels similarly. He urged Congress earlier this year to crack down on excess fees, though no federal legislation has yet been approved. In California, Governor Gavin Newsom signed a bill into law on October 7 that bans junk fees in the state. The rule is slated to go into effect in July 2024. 

So the FTC is heeding the president’s call to action. The rule the agency is floating would not only require companies to disclose all fees up front, but also to explain why a fee is necessary.

If a company tacks on a junk fee, the proposed rule would allow the FTC to pursue recourse for consumers. Such recourse might include requiring companies to refund customers and paying fines–which could reach upwards of $50,120 per violation, according to the FTC. 

That would put an end to businesses reeling in consumers, only to hit them with sticker shock. If businesses are required to be more transparent with respect to hidden fees, the agency claims that it could save consumers tens of billions of dollars. It’s something that companies are paying attention to–the proposed rule fetched more than 12,000 comments. 

TickPick, a secondary online ticket marketplace based in New York City, is one of the companies that submitted a comment letter–and welcomes the FTC’s measure. 

Transparent pricing is in TickPick’s DNA, says Michele Rusnak, the company’s chief financial and administrative officer, since one of its founding principles is to have transparent pricing.

But in Rusnak’s view, it can be a competitive advantage, since it improves the customer experience for those looking to buy tickets.

“I think all boats rise in this environment,” Rusnak says. “Businesses that are really serving the customers are going to be the ones to really take advantage of the fact that transparency exists.”