Tuesday, December 12, 2023

I’ve been thinking about conspicuous fees and the Federal Trade Commission (FTC).

What is a conspicuous fee? Well, one way to look at it is that a conspicuous fee is the opposite of a hidden junk fee. Are fees for your services conspicuous and delightful or are they hidden and junk? How would you know? Whose definition are we using? Queue a new proposed rule being offered by the FTC.

We’re in a comment period running until Jan. 8, 2024, for the FTC’s proposed rulemaking entitled “Rule on Unfair or Deceptive Fees.” If you’re involved in advertising, marketing, presenting or charging fees for your services, I hope you’ll digest the rule and comment upon its practicalities or limitations.

If you think you’re exempt from these changes because you’re regulated by the Consumer Financial Protection Bureau (CFPB), you might want to double check that. The FTC says that despite their not having a charter to cover the financial services sector, the CFPB does have the authority to enforce provisions of the FTC’s rules. It seems Dodd-Frank created a bit of a shared responsibility in that regard.

There are plenty of things in this proposal to be thinking about ahead of time. So, let’s take a look at its basic outlines.

If you were anywhere online over the summer, you saw the frustrated comments about ticket broker surcharges and handling fees. Next came posts about resort fees that hotel guests were required to pay on top of the room’s advertised booking rate. If you’re a consumer of these services, you too might get irritated at having to pay them. These are the easiest types of fees to use as illustrators, because of the frequency with which we encounter them.

What this rule attempts to do is require any provider of services to advertise, market or otherwise present – conspicuously – the entire amount of any fees that a consumer is required to pay. That total and conspicuous price would have to be prominently displayed to the consumer up front, including any forms of advertising or price quoting. The idea is to ensure there are no surprises or “gotcha” fees for charges that are mandatory.

Exemptions are carved-out for government fees and overnight fees – since often quoting those fees requires specific information from a consumer or transaction before they can be calculated. There are no exemptions or carve-outs for other third-party fees, whether passed through or bundled together with other items.

If a fee is optional, the consumer can select it in addition to the conspicuously presented all-inclusive mandatory services fee. The consumer must be presented with details of these optional fees before they pay them.

A corollary example used to illustrate the concept of calculating and prominently displaying net mandatory fees can be drawn from the APR disclosure for loans or an APY disclosure for savings.

So, if you’re wondering how this rule might harmonize or conflict with TILA or TRID or generally how the CFPB approaches the disclosure of fees … you’re in good company.

I encourage you to read up on the Proposed Rule, think about how your fees for services would be impacted, then comment to the FTC. They want to hear from you, they say.

Oh, and auto dealers have been exempted, they get their own rule. Also, I wonder how this will impact the next time I end up in an emergency room or need surgery. Well, that’s for another day. Good luck.

Until next time,

Mary Schuster
Chief Knowledge Officer
October Research, LLC