The proposal seeks to eliminate these fees and provide enforcement authority to the FTC and Consumer Financial Protection Bureau. The bureau has also released new supervisory guidance on “junk fees.”
10/11/2023 1:45 P.M.
3 minute read
About a year after it started to consider regulating “junk fees,” the Federal Trade Commission issued a proposed rule on fees charged for goods and services that have little to no value for consumers.
The FTC received more than 12,000 comments on whether a rulemaking would help eliminate these fees and how they impact consumers’ personal spending or businesses, according to a news release from the FTC.
“Junk fees” were defined by the FTC as:
- Unnecessary charges for “worthless, free, or fake products or services.”
- Unavoidable charges “imposed on captive consumers.”
- Surprise charges that secretly push up the purchase price.
“The proposed rule would ban businesses from running up the bills with hidden and bogus fees, ensure consumers know exactly how much they are paying and what they are getting, and help spur companies to compete on offering the lowest price. Businesses would have to include all mandatory fees when telling consumers a price, making it easier for consumers to comparison shop for the lowest price,” according to the FTC.
The proposed rule also includes enforcement authority for the FTC to secure refunds for consumers and pursue monetary penalties against companies that do not comply with the regulation.
In addition, the proposed rule would require all businesses to quote total prices at the start of the purchasing process and remove false or misleading information about fees from the marketplace, according to the FTC.
Once published in the Federal Register, the public will have 60 days to comment on the proposed rule.
If enacted, the proposed rule would:
- Stop businesses from offering prices that hide mandatory fees.
- Prohibit misrepresenting fees.
- Require businesses to share in advance the amount and purpose of fees and whether they are refundable.
CFPB Actions
Other agencies, including the Consumer Financial Protection Bureau, have advanced their efforts to regulate “junk fees.”
The CFPB issued an advisory opinion on fees charged by banks for customer service as well as a special edition of its Supervisory Highlights report focused on its efforts to stop “junk fees.”
If the FTC’s proposed rule is finalized, the CFPB would have enforcement authority as well.
Meanwhile the bureau’s advisory opinion references “a provision enacted by Congress which generally prohibits large banks and credit unions from imposing unreasonable obstacles on customers, such as charging excessive fees, for basic information about their own accounts.”
The Supervisory Highlights report focuses on fees related to bank account deposits, auto loan servicing and remittances found during supervisory examinations between February and August 2023, according to a news release from the CFPB.
ACA’s Take
The CFPB’s advisory opinion focuses mainly on other sectors of financial services, but it and the FTC’s proposed rule serve as a reminder of the regulators’ broad approach to grouping all fees associated with consumer products into the term “junk fees.”
In April 2022, ACA International submitted comments (PDF) to the CFPB on its Request for Information regarding fees related to consumer financial products and services, clarifying the use of fees in the debt collection industry.
Congress also recently noted in a letter (PDF) that “the CFPB broadly groups all fees associated with consumer products and services as ‘junk fees’ and does not provide any legal definition of the term or any statutory authority to define such a term.”
ACA strongly agrees with this concern, and moreover, is disappointed that it has been a trend in recent months for the CFPB to use pejorative terms when describing not only the debt collection industry, but also most participants in the financial services industry.
An article from ACA CEO Scott Purcell published in American Banker (a subscription may be required) challenged regulators’ approach to “junk fees” at the federal level.
The trend of targeting certain fees by the Biden administration, the CFPB and FTC will likely continue, and ACA will be monitoring this activity in terms of how it could impact the accounts receivable management industry.
Related Content from ACA International:
CFPB Supervisory Highlights Report Covers ‘Junk Fees’
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