Junk fees drive up costs of purchases or services, often without the purchaser’s knowledge nor consent. These fees range from nominal charges to exorbitant sums and occur in industries ranging from banking and real estate to airlines and telecommunications. In response, President Biden’s administration has proposed legislation targeting junk fees across multiple industries.
The proposed Junk Fee Protection Act would be enforced by the U.S. Consumer Financial Protection Bureau (“CFPB”) and cap the following excessive fees, without limitation:
- Online concert, sporting event, and entertainment ticket fees, especially considering the reactions of Taylor Swift’s fans (often referred to as Swifties) to alleged exorbitant ticket prices and junk fees;
- Airline fees for families sitting together on flights;
- Early termination fees for TV, phone, and Internet products and services; and
- Hidden resort and destination fees.
At a Presidential Competition Council meeting in February 2023, President Biden called on Congress to pass the Junk Fee Protection Act, stating that it would create “an economy that’s fair, an economy that’s competitive, and an economy that works for everyone.”
Although the CFPB recently proposed a rule to limit credit card fees to $8, Bharat Ramamurti, Deputy Director of the National Economic Council, believes that legislative action is necessary. Junk fees are anti-competitive and cost consumers tens of billions of dollars each year, according to the CFPB.
Meanwhile, purchasers can fight back against junk fees by taking collective action—often through a class action–with the assistance of experienced attorneys. Such actions are often taken on contingency: purchasers need not pay legal fees nor litigation costs out of pocket.
What Are Junk Fees?
Junk fees are charges added to costs of products or services without a legitimate basis. These fees are often hidden in fine print or presented in ways that make them difficult to spot. Junk fees can take many forms, including, without limitation, administrative, processing, and convenience fees.
For example, a bank may charge an administrative fee for closing an account, even though no additional work is required. Similarly, a telecommunications company may charge a convenience fee for paying a bill online, even though this is a standard industry practice. These fees may be imposed without sufficient disclosure nor warning to purchasers.
Companies can counter that such fees are not “junk” and are sufficiently disclosed to purchasers before they execute transactions; purchasers are well equipped to avoid the transactions if they are not satisfied with the extra fees. But this argument is complicated in a digital age where a transaction is often executed through a click of the mouse—or even a touch of a smartphone—with a hyperlink that discloses in fine print the extra fees (hyperlinks that purchasers rarely review). And companies can counter that such fees are negotiable with purchasers; purchasers can negotiate with companies to avoid such extra fees. But purchasers often have no room to negotiate away extra fees and terms because companies often impose such fees and terms on a “take it or leave it” basis.
Are Junk Fees Legal?
Junk fees are not necessarily illegal, but they must be disclosed to purchasers in clear and conspicuous manners. The U.S. Federal Trade Commission (“FTC”) has issued guidelines that require companies to disclose all fees associated with a purchase or service upfront. Failure to do so can result in legal action by the FTC. In addition, some states have passed laws that regulate or prohibit certain types of junk fees. These state laws often take the form of consumer fraud protection or unfair and deceptive business practices. And claims can be brought under common law contract actions.
Which U.S. Federal Laws Protect Purchasers from Junk Fees?
Several federal laws protect consumers from unfair and deceptive business practices, such as junk fees, including the following, without limitation:
- The Truth in Lending Act (TILA) requires lenders to disclose the cost of credit, including all fees associated with a loan;
- The Electronic Funds Transfer Act (EFTA) regulates electronic transactions, including fees associated with ATM withdrawals and debit card usage; and
- The Fair Credit Billing Act (FCBA) requires credit card companies to disclose all fees associated with a credit card and to provide consumers with a process for disputing such charges.
How Can an Attorney Help?
A consumer protection or class action attorney can help purchasers fight back against junk fees through class actions, mass actions, or even individual actions, along with alternative dispute resolution. Such cases are often litigated on contingency, meaning that purchasers need not pay attorneys’ fees nor litigation costs out of pocket.
Companies facing such lawsuits or government investigations also need the sophisticated advice of attorneys experienced in such matters. Attorneys who have experience on both sides of the “v” in having represented both plaintiffs and defendants are often best equipped to provide effective and efficient representation.
The Main Takeaways
Whether the Junk Fee Protection Act becomes law remains to be seen. Until then, purchasers can protect themselves by staying informed, reading contracts carefully, and consulting with an attorney. Companies must also keep their fingers on the pulse of this evolving arena and retain counsel to help make sure that they are abiding by government regulations and legislation. If you are a victim of junk fees or are otherwise involved in a dispute, talk to an experienced class action or consumer protection attorney.