On October 20, 2022, the Federal Commerce Fee (“FTC”) introduced that it’s issuing an Advance Discover of Proposed Rulemaking (“ANPR” or “Discover”) to handle “junk charges,” a time period used within the Discover to discuss with “unfair or misleading charges which can be charged for items and companies which have little or no added worth to the buyer.”
In saying the Discover, the FTC stated it’s in search of public touch upon “the harms stemming from junk charges and related junk payment practices and on whether or not a brand new rule would higher shield customers.” As summarized within the FTC’s press launch, the sorts of charges the FTC is in search of touch upon embody:
- Pointless fees for nugatory, free, or faux services or products: Customers could also be slammed with fees for services or products that price firms nothing to supply, can be found free of charge, or must be included as a part of the acquisition worth. Corporations may also upsell customers on faux services or products that both don’t have any worth or by no means materialize.
- Unavoidable fees imposed on captive customers: Customers could also be compelled to pay junk charges as a result of they don’t have any option to keep away from or decide out of them. They is perhaps coping with an organization with a monopoly or unique rights that may extract charges as a result of there is no such thing as a competing choice. Or customers may get hit with charges after they’ve already sunk prices right into a services or products, and so they can’t simply stroll away.
- Shock fees that secretly push up the acquisition worth: Customers can expertise junk payment shock when firms unexpectedly tack on thriller fees they didn’t find out about, consent to, or issue into the acquisition. Corporations may disguise these charges within the superb print, cram them on on the finish of a purchase order course of, or use digital darkish patterns or different deception to gather on them. Some firms may declare that they don’t cost any charges after which add on charges after the acquisition or join.
The ANPR was introduced simply over a month after the remark interval closed for the FTC’s proposed Motor Car Sellers Commerce Regulation Rule, which additionally seeks to handle pointless add-on charges, amongst different issues, within the automobile shopping for course of. The ANPR seeks to handle charges extra broadly, and gives examples of fees it views as “junk” charges primarily based on its substantial work on this space, together with: “cell cramming” fees (unauthorized charges on cell phones), connection and upkeep charges on pay as you go telephone playing cards, account charges (together with upkeep or inactivity charges on blocked or inaccessible accounts), charges that diminish the quantity a borrower receives from a mortgage, miscellaneous charges levied on gasoline playing cards, auto supplier charges, undisclosed charges for funeral companies, resort “resort” charges, hidden charges for tutorial publishing, poorly disclosed ancillary insurance coverage merchandise, membership applications, and reductions for meals, journey, long-distance calls, and merchandise.
The FTC has sought shopper redress in actions and settlements involving “junk” charges below Part 5 of the FTC Act, together with an motion settled not too long ago with an auto supplier (Passport Auto Group) which included allegations of “junk” charges. Whereas conceding that sure illegal payment practices could also be lined by current guidelines and statutes, the FTC explains within the Discover that its means to hunt shopper redress is restricted or unavailable in lots of cases in mild of the Supreme Court docket’s holding in AMG Capital Administration v. FTC that equitable financial aid is unavailable below Part 13(b) of the FTC Act and the truth that it’s difficult to acquire such aid below Part 19(b) with out a rule violation. (A podcast that includes an in-depth dialogue of AMG Capital Administration and its aftermath with Bikram Bandy, FTC Chief Litigation Counsel, Bureau of Client Safety, and Ballard Spahr’s Alan Kaplinsky, is accessible right here.) Accordingly, the FTC believes a brand new rule particular to “junk” charges would act as a deterrent in mild of the danger of civil cash penalties and permit it to extra readily acquire redress and damages for customers.
Publication of the ANPR was authorized by a 3-1 vote, with Commissioner Christine S. Wilson voting no. In her dissenting assertion, Commissioner Wilson highlighted substantive points she believes stakeholder enter ought to handle, together with the ANPR’s breadth, the probability of overlap with current rules, and, in her view, its flawed assumptions and imprecise definitions – together with how you can outline the time period “junk payment.”
The CFPB can also be in search of to handle charges it believes are unfair and misleading, and issued a Request for Data in January 2022 in search of feedback associated to “charges that aren’t topic to aggressive processes that guarantee truthful pricing.” Final week, the CFPB issued steerage on two charges it believes are probably unfair, “shock” overdraft charges (overdraft charges charged when customers had sufficient cash of their account to cowl a debit cost on the time the financial institution authorizes it) and depositor charges charged to customers who deposit a examine that bounces.
The deadline to submit feedback to the ANPR will likely be 60 days after its publication within the Federal Register.
