The Federal Trade Commission (FTC) has proposed a new rule to ban junk fees in all aspects of finance. The rule, announced on Oct. 11th, aims to protect consumers and honest businesses from unexpected and unnecessary fees that can cost them tens of billions of dollars per year.
Junk fees can be found in various types of purchases, such as hotel bookings, concert tickets, and utility bill payments. These fees are often hidden or not disclosed upfront, making it difficult for consumers to shop for the best product or service and punishing businesses that are transparent about their pricing.
FTC Chair Lina M. Khan stated, "All too often, Americans are plagued with unexpected and unnecessary fees they can't escape. These junk fees now cost Americans tens of billions of dollars per year - money that corporations are extracting from working families just because they can. By hiding the total price, these junk fees make it harder for consumers to shop for the best product or service and punish businesses who are honest up front. The FTC's proposed rule to ban junk fees will save people time and money, and make our markets more fair and competitive."
The proposed rule will prevent businesses from including hidden fees on the backend of transactions, ensuring that consumers know the exact amount they will have to spend on a product. This will encourage companies to offer the lowest price among competitors, making the market more competitive. It will also enable consumers to easily shop for the lowest price when making purchases.
The two most common types of junk fees used by companies are hidden fees and bogus fees. Hidden fees occur when the company significantly increases the price of the good or service at the time of checkout, without including these fees in the initial price. Bogus fees, on the other hand, occur when the company does not disclose what the fees are for. The new rule would prohibit companies from not disclosing any fees on the front end of any purchase.
The FTC's proposed rule has come after receiving more than 12,000 comments on how junk fees affect personal spending and businesses. The aim is to eradicate these fees and create a fair and transparent market for consumers and businesses alike.
