The FTC aims to collect comments on mispresented or hidden fees for a proposed rule that would prohibit those practices, also on watch by the Consumer Financial Protection Bureau.
11/14/2023 1:55 P.M.
3.5 minute read
The Federal Trade Commission has opened comments for its proposed rule on “unfair or deceptive fees,” including questions on hidden or misleading fees and industry-specific practices.
Comments are due by Jan. 8, 2024.
The proposed rule “would prohibit unfair or deceptive practices relating to fees for goods or services, specifically, misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees,” according to the FTC’s Federal Register notice.
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, according to a news release from the FTC.
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.
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.
The FTC says in the Federal Register notice that unfair or deceptive practices relating to fees are prevalent “based on prior enforcement, the comments it received in response to an advance notice of proposed rulemaking, and other information discussed in this proposal.”
It received more than 12,000 comments in response to the advance notice of proposed rulemaking last year.
The FTC now seeks “written comment, data, and arguments concerning the utility and scope of the trade regulation rule proposed in this notice of proposed rulemaking to prevent the identified unfair or deceptive practices,” it states in the Federal Register notice.
Section X of the notice outlines specific questions for commenters.
To file comments, use “Unfair or Deceptive Fees, R207011” online at https://www.regulations.gov/document/FTC-2023-0064-0001. Comments, including your name and your state, will be placed on the public record of this proceeding.
If you prefer to file your comment on paper, mail your comment to the following address: Federal Trade Commission, Office of the Secretary, 600 Pennsylvania Avenue NW, Mail Stop H–144 (Annex J), Washington, D.C., 20580.
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 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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