The FTC cracks down on “junk fees”: hotels and ticket sellers are now required to show true costs upfront
The Federal Trade Commission (FTC) has announced a new rule aimed at increasing transparency and eliminating “junk fees” in the hotel and live entertainment industries. This move comes as part of a broader Biden administration effort to curb hidden charges across various sectors, including airlines, banks, and online payment platforms.
The rule, which will take effect in 120 days, requires hotels, vacation rental platforms, and live event promoters to disclose all mandatory fees upfront when listing prices. This means consumers will no longer be surprised by hidden resort fees, cleaning fees, processing charges, and other surcharges that often inflate the advertised price.
“People deserve to know up front what they’re being asked to pay without worrying that they’ll later be saddled with mysterious fees that they haven’t budgeted for and can’t avoid,” said FTC Chair Lina Khan.
This initiative addresses a long-standing consumer complaint, with the FTC receiving over 12,000 public comments on the issue of deceptive pricing. The agency estimates that the new rule will save consumers 53 million hours per year spent searching for the true cost of lodging or events, translating to an estimated $1 billion in annual savings.
What Qualifies as a Junk Fee?
Junk fees are often hidden until the final stages of the checkout process, appearing as “processing charges” or other vague terms. These fees can be found in various transactions, from concert and airline tickets to hotel stays and even services for incarcerated people.
Ariel Nelson, staff attorney at the National Consumer Law Center (NCLC), highlights the importance of transparency in enabling consumers to make informed choices and avoid businesses that engage in deceptive pricing practices.
“The law will require disclosure up front of fees and prohibit misrepresenting the total cost, as well as the nature and purpose of the fee,” Nelson said. “If you think there are charges that don’t make sense or you’re paying for something not included in the original price, you should tell the FTC and the states’ attorneys general.”
The FTC’s rule will require businesses to clearly disclose the total price, including all mandatory fees, and to prominently display this information. It will also mandate that companies disclose whether fees are refundable.
Industry Response and Support
While some business groups have expressed concerns about increased regulatory costs, the American Hotel & Lodging Association (AHLA) has applauded the FTC’s move.
“For years, AHLA has been leading the charge to establish a single, federal standard for lodging fee display across the industry because consumers deserve to have transparency no matter where or how they book their stays,” said AHLA President & CEO Rosanna Maietta.
Maietta believes that a national standard for fee disclosure is in the best interest of both consumers and businesses. The AHLA has actively supported bipartisan federal fee-transparency bills and views the FTC’s rule as a significant win for consumers.
Ticketmaster, a company often criticized for its fee practices, has also expressed support for the new rule. “Ticketmaster has long advocated for all-in pricing as a nationwide industry standard, and we’re pleased to see the FTC mandate the necessary changes to make ticket-buying more transparent for fans,” the company said.
Wider Implications and Consumer Protection
The FTC’s crackdown on junk fees is part of a broader effort by the Biden administration to promote consumer protection and fair competition. The Consumer Financial Protection Bureau has also taken steps to prevent large banks from charging excessive fees for basic services.
Furthermore, the Department of Labor has proposed a rule requiring financial advisors to prioritize the best interests of retirement savers, aiming to reduce hidden fees in retirement advice.
Tips for Avoiding Junk Fees
While the new FTC rule will significantly improve transparency, consumers can take proactive steps to avoid junk fees in the meantime:
Question unclear charges: Inquire about any costs that are not clearly explained upfront.
Request written explanations: If you’re unsure about a fee, ask for a clear explanation in writing.
Comparison shop: Compare prices from different providers to identify potentially inflated charges.
Pay with credit cards: Credit cards offer better protection for disputing questionable fees.
Keep records: Maintain copies of receipts and communication related to your purchases.
The Cost of Junk Fees
Lael Brainard, director of the White House National Economic Council (NEC), emphasized the financial burden of hidden fees on consumers, stating that research indicates these fees can result in consumers paying up to 20% more than they would have if they had known the total cost upfront.
The FTC’s new rule is a significant step towards greater transparency and consumer protection in the lodging and live entertainment industries. By eliminating hidden fees and promoting fair competition, this initiative aims to empower consumers and save them both time and money.
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