FTC Issues Advance Notice of Proposed Rulemaking on Junk Fees – Consumer Finance Monitor | CarTailz

On October 20, 2022, the Federal Trade Commission (“FTC”) announced that it was issuing an Advance Notice of Proposed Rulemaking (“ANPR” or “Notice”) to address “junk fees,” a term used in the Notice to refer to “unfair or misleading charges levied for goods and services that have little or no added value to the consumer”.

In announcing the notice, the FTC said it was soliciting public comment on “the harms resulting from junk fees and related junk fee practices, and whether a new rule would better protect consumers.” As summarized in the FTC press release, the types of fees the FTC is seeking comment on include the following:

  • Unnecessary charges for worthless, free, or counterfeit products or services: Consumers may be faced with fees for products or services that companies do not pay to provide, that are available free of charge, or that should be included as part of the purchase price. Businesses could also offer consumers counterfeit products or services that either have no value or never materialize.
  • Unavoidable charges for bound consumers: Consumers may be forced to pay junk fees because they have no way to avoid or choose not to. You could be dealing with a monopoly or exclusive rights company that may charge because there is no competing option. Or consumers could be hit with fees after they’ve already put money into a product or service and can’t just walk away.
  • Surprise fees that secretly inflate the purchase price: Consumers can experience junk fee shock when companies unexpectedly charge mysterious fees they didn’t know about, didn’t agree to, or included in the purchase. Businesses can hide these fees in fine print, stuff them in at the end of a checkout process, or use digital dark patterns or other deceptions to collect them. Some companies may claim that they don’t charge and then add fees after purchase or signup.

The ANPR was announced just over a month after the comment deadline for the FTC’s proposed Commerce Regulation for Motor Vehicle Dealers, which among other things, seeks to address unnecessary additional fees in the car buying process. The ANPR seeks to take a broader approach to charging, and provides examples of charges that it considers “junk” charges based on its extensive work in this area, including: “mobile cramming” charges (unauthorized cell phone charges), connection and Prepaid phone card maintenance fees, account fees (including maintenance or inactivity fees on suspended or inaccessible accounts), fees that reduce the amount a borrower receives on a loan, miscellaneous fuel card fees, car dealership fees, undisclosed funeral services fees, hotel Resort fees, hidden academic publication fees, poorly disclosed supplemental insurance products, membership programs, and discounts on groceries, travel, long distance, and merchandise.

The FTC has sought consumer relief under Section 5 of the FTC statute in lawsuits and settlements involving “junk” fees, including a lawsuit recently settled with an auto dealer (Passport Auto Group) that contained allegations of “junk” fees . While the FTC recognizes that certain illegal charging practices may be covered by existing rules and laws, the release states that in many cases, given the Supreme Court’s decision, its ability to seek consumer protection is limited or unavailable AMG Capital Management vs. FTC that adequate financial relief under Section 13(b) of the FTC Act is not available and the fact that it is difficult to obtain such relief under Section 19(b) without a violation. (A podcast with an in-depth discussion of AMG capital management and his aftermath with Bikram Bandy, FTC Chief Litigation Counsel, Bureau of Consumer Protection, and Alan Kaplinsky of Ballard Spahr, are available here.) Accordingly, the FTC believes a new rule specifically for “junk” fees would deter risk civil penalties and enable it to more easily obtain redress and compensation for consumers.

Publication of the ANPR was approved by a vote of 3 to 1, with Commissioner Christine S. Wilson voting no. In her dissenting statement, Commissioner Wilson highlighted key issues that she believed stakeholders’ contributions should address, including the scope of the ANPR, the likelihood of overlap with existing regulations and what she believed to be its flawed assumptions and vague definitions – including the Definition of the term “junk fee.”

The CFPB is also seeking to address charges that it believes are unfair and misleading, and in January 2022 issued a request for comment asking for “fees that are subject to non-competitive practices that ensure fair pricing.” Last week, the CFPB issued guidance on two charges it believes are likely to be unfair, “surprise” overdraft fees (overdraft fees charged when consumers had enough funds in their account to pay a withdrawal fee at the time the bank approved them). cover) and depositor fees levied on consumers who cash a check that does not bounce.

The deadline for submitting comments to the ANPR is 60 days from their publication in the federal register.

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