Federal Trade Commission Passes Rule to Help Tackle Junk Fee Epidemic

AARP has been advocating for the transparent and upfront disclosure of fees. In a January 2024 letter to Khan, AARP called for fees that are "reasonable and proportional to the services rendered."

“People reliant on fixed and modest incomes, like most older adults, are particularly vulnerable to hidden fees, which can add up while providing no consumer benefit,” the AARP letter says.

The rule goes into effect 120 days after its publication in the Federal Register, well after the new president is sworn in. President Donald Trump has already announced that he intends to replace FTC Chair Khan with Andrew Ferguson, the lone dissenting vote in the agency's junk fees ruling.

Not all fees are illegitimate. Charges may cover staffing and the cost of doing business, and companies have a right to make a profit.

But some businesses are more transparent about disclosing fees to consumers ahead of time, rather than burying them in the fine print of advertisements or contracts.

What you’re paying for — or not — can get squishy.

Junk fee problems targeted

The Biden administration asked federal agencies to find ways to reduce or eliminate hidden fees, charges and add-ons for everything from banking services and cable and internet bills to airline and concert tickets.

“It’s beyond frustrating to end up spending more than you budgeted because of random, arbitrary fees,” Khan said in an earlier statement. “No one has ever felt that a ‘convenience fee’ was convenient. Companies should compete to provide the best quality at the best price, not to see who can squeeze the most added expenses out of consumers.”

Along the way, the FTC solicited comments from the public “on the harms caused by junk fees and the unfair or deceptive tactics companies use to impose them.” Some of those fees it considers fraudulent include auto dealerships’ “nitrogen-filled” tires that have no more nitrogen than normal air.

The agency also wants to improve the public’s access to funeral prices posted online. In January, the FTC sent warning letters to 39 nationwide funeral homes after investigators discovered “several violations” of the Funeral Rule following an undercover phone sweep.

An FTC document explains the rule: "The Funeral Rule requires [funeral providers] to give consumers accurate, itemized pricing information, and various other disclosures about funeral goods and services." On 38 calls, investigators said the funeral homes either refused to answer pricing questions or provided inconsistent answers.

Transparency sought on bank, airline, TV fees

The Consumer Financial Protection Bureau, an independent agency within the Federal Reserve System, issued guidelines in October 2022 on surprise overdraft and depositor fees it says violate the Consumer Financial Protection Act.

“Financial institutions should compete for consumers’ business based on the quality of their products and services and attractive interest rates. Their profit models should not rely on excessive and unpredictable junk fees,” Deborah Royster, CFPB assistant director in the Office for Older Americans, told AARP at the time.

In May, the CFPB announced it is seeking public comments about junk fees added to mortgage closing costs. Charges for credit reporting, employment verification and title insurance are draining down payments and pushing up monthly mortgage costs, the bureau says.

The median amount borrowers paid in 2022 was nearly $6,000, and between 2021 and 2023, loan costs increased by more than 36 percent, according to the agency. Lenders often slide the higher fees they see down to the homebuyer.

The U.S. Department of Transportation issued its own rule to make extra fees more transparent. It wants airlines to issue refunds for checked-bag fees when luggage is significantly delayed or when services such as Wi-Fi don’t work in flight. Its public comment period has closed.

In January 2023, AARP sent a letter to the Transportation Department asking the agency to finalize and strengthen the proposed rules to protect consumers.

“While added fees may be appropriate in certain circumstances, the high fees for changing or canceling travel plans and fees for families to reserve seats together do not promote affordable access to travel by air,” the letter read in part. “While disclosure is an essential first step, we would encourage the department, and the airlines themselves, to reduce or eliminate such fees wherever possible.”

The Federal Communications Commission is targeting the fees that cable TV and direct broadcast satellite providers add on.

Late last year, Chairwoman Jessica Rosenworcel asked commissioners to prohibit those companies from slapping consumers with billing and early termination fees.

“No one wants to pay junk fees for something they don’t want or can’t use,” she said in a statement. “When companies charge customers early termination fees, it limits their freedom to choose the service they want.”

Consumers speak out

AARP informally canvassed social media users to ask which junk fees bothered them the most.

The comments weren’t surprising.

“Activation fee, convenience fee or administrative fee of any sort,” responded Jon Freeman, an independent automobile consultant in Dallas. “So I’m buying a service from you. But in order to do that, I also have to pay a one-time fee of a completely arbitrary amount just so someone can type a few buttons on their computer, which they do anyway?”

Northern Virginia-based tech consultant Stephen Baker takes issue with phone providers: “The idea that you have to pay [them] a fee to upgrade or trade in your phone is reprehensible.”

A gaggle of other fees came up: charges to reserve an Uber ride, service fees at Airbnb, fees tacked on to cable bills and rental car agreements, and those added to the tab at restaurants. Ticketmaster, which has more than 80 percent of the market for major live concerts and professional sporting events, was frequently mentioned.

Chaos of Taylor Swift tour tickets starts new era

If you wanted Taylor Swift concert tickets for your kids or grandkids when they went on sale in November 2022, you had to get them via Ticketmaster through a process that could drive fans of any age nuts.

First, you had to register as a “Verified Fan” of the artist to be eligible for a presale.

Ticketmaster explained the procedure is designed to help manage high-demand shows, identify real humans and weed out bots. Some Capital One credit card holders were also eligible for the presale.

Hopeful fans then had to wait for an email with a code saying they were selected to participate in a Swift presale. Demand was staggering: More than 3.5 million registered for the presale.

That left about 2 million other Verified Fans on a waiting list. Ticketmaster’s site crashed, and even those lucky enough to get tickets had to wait in the queue for hours.

Ticketmaster apologized, and that December sent emails to a limited subset of consumers who would get another shot at tickets. Through all this, Ticketmaster hasn’t waived any of its fees.

In the aftermath of the Swift presale problems, Sens. Amy Klobuchar (D-Minn.) and Mike Lee (R-Utah) called a hearing that January to examine the “lack of competition” in the ticketing industry.

Lawmakers from both parties grilled Joe Berchtold, the president and chief financial officer of Live Nation Entertainment, on the Swift chaos. Live Nation Entertainment is Ticketmaster’s parent company.

“You have brought together Republicans and Democrats in an absolutely unified cause,” Sen. Richard Blumenthal (D-Conn.) said.

Berchtold blamed the Swift fiasco on scalper bot attacks that were three times the amount of traffic that Ticketmaster had previously seen. At a subsequent White House roundtable, Live Nation, along with Airbnb, SeatGeek and other companies, pledged to disclose full pricing up front to consumers.

Live Nation defends its charges

The Justice Department, which went ahead with its lawsuit, remains unmoved.

In a written response to the government’s action, Dan Wall, Live Nation's executive vice president, denied that Live Nation and Ticketmaster wield monopoly power and said the suit “won’t reduce ticket prices or service fees.”

“It ignores everything that is actually responsible for higher ticket prices, from rising production costs, to artist popularity, to 24/7 online ticket scalping that reveals the public’s willingness to pay far more than primary ticket prices. It blames [us] for high service charges — and just the fact that there are fees — but ignores that Ticketmaster retains only a modest portion of those fees.”

Ticketmaster’s typical charges include:

• Service fees, also known as convenience charges, added to the face-value price or for a resale ticket to the listing price of each ticket. The fee varies by event based on Ticketmaster’s agreements with its clients.
• Order-processing fees that offset the costs of ticket handling, shipping and support. The fee is generally not charged at the box office. In some cases, order-processing costs are lower than the order-processing fee, so Ticketmaster may earn a profit on the fee. 
• Delivery fees that Ticketmaster may profit on as well. Clients determine delivery fees that vary by event, but the company may have lower costs.

This story, originally published Dec. 27, 2022, has been updated to reflect a bipartisan Senate hearing on Ticketmaster’s business practices and the subsequent Department of Justice lawsuit, AARP’s outreach to the Department of Transportation, the FTC’s rule on junk fees and the CFPB’s public inquiry into mortgage closing fees.