FTC to issue advance notice of rulemaking on “junk money” | So Good News

On October 20, 2022, the Federal Trade Commission (“FTC”) announced that it is issuing an Advance Notice of Proposed Rulemaking (“ANPR” or “Notice”) to address “junk money,” a term used in the Notice to refer to “ unfair or fraudulent fees charged for products and services that have little or no added value to the consumer.”

In announcing the Notice, the FTC said it wanted public comment on “the negative effects of fines and unfair payment practices and whether the new rule will better protect consumers.” As summarized in the FTC’s press release, the types of charges the FTC intends to address include:

• Unwanted money for junk, free, or bogus or bogus services: Consumers may be offered substantial discounts on products or services that companies do not offer, are available for free, or must be included as part of the purchase price. Companies can also sell consumers on fake products or services that have no value or cannot be implemented.
• Indefinable case against captive buyers: Consumers may be forced to pay unprofitable fees because they have no way to avoid or eliminate them. They may be dealing with a company that has a monopoly or a monopoly that can result in fines because there is no way to compete. Or consumers can be hit with fines after they’ve already frozen their money on a product or service, and they can’t get out of it.
• Surprising fees that raise the price of private shopping: Consumers can be exposed to negative feedback when companies unexpectedly engage in mysterious activities that they did not know about, approve of, or sell. Companies can hide these charges in good mail, put them at the end of the purchase period, or use dark digital versions or other tricks to get them. Some companies may say they don’t charge a fee and add a fee after you buy or sign up.

The ANPR was announced just over a month after the comment period closed for the FTC’s Motor Vehicle Dealers Trade Regulation Rule, which also aims to address unnecessary surcharges, among other things, on vehicle purchases. The ANPR wants to tackle charges more broadly, and gives examples of what it considers to be “unfair” charges based on its extensive work in the area, including: “mobile cramming” charges, connection and maintenance charges. prepaid phone cards, account fees (including processing or inactive fees for blocked or inaccessible accounts), fees that reduce the amount a borrower receives from a loan, miscellaneous fees charged on gas cards, car dealer fees, unspecified funeral fees, hotel fees ” fees, hidden costs for educational publications, poorly disclosed insurance products, membership programs, and discounts on meals, travel, long-distance calls, and merchandise.

The FTC has requested that consumers deal with and recover “food” charges under Section 5 of the FTC Act, including a recent settlement with an auto dealer (Passport Auto Group) that included “frivolous” charges. While acknowledging that some illegal charging practices may be subject to existing laws and regulations, the FTC explains in the Notice that its ability to seek reimbursement from consumers is limited or unavailable in many cases due to Supreme Court jurisdiction. AMG Capital Management v. FTC that equitable relief is not available under Section 13(b) of the FTC Act and that it is difficult to obtain such relief under Section 19(b) without violating the statute. (Podcast with in-depth discussion of AMG Capital Management and the results by Bikram Bandy, FTC Chief Litigation Counsel, Bureau of Consumer Protection, and Ballard Spahr’s Alan Kaplinsky, are available here. the risk of government financial penalties and allowing it to collect interest and damages for consumers.

The publication of the ANPR was approved by a vote of 3-1, with Commissioner Christine S. Wilson voting no. In his dissent, Commissioner Wilson highlighted key issues he believes stakeholders need to address, including the scope of ANPR, its ability to interact with existing laws, and, in his view, its misconceptions and simplistic interpretations – including how to interpret the term. he says “a small price.”

The CFPB also wants to crack down on fees it believes are unfair and fraudulent, and issued a Request for Information in January 2022 seeking comments regarding “fees that do not comply with competitive procedures that ensure fair pricing.” Last week, the CFPB issued a complaint about two charges it believed were potentially unfair, “extraordinary” overdraft fees (overdraft fees charged when consumers had enough money in their account to pay the interest at the time the bank agreed) and fees for depositor. for buyers who deposit checks that bounce.

The deadline for submitting comments to the ANPR will be 60 days after publication Federal Register.