California is poised to clamp down on hidden charges known as “junk fees,” reflecting a growing national momentum against these deceptive pricing practices. This decision aligns with recent federal initiatives targeting such hidden costs.
Governor Gavin Newsom has signed a law, set to take effect from July 1, 2024, that will ban businesses from concealing the actual cost of their services with these additional fees. This state action mirrors recent pushes at the federal level, with the Biden Administration urging for action against junk fees and Congress considering similar legislation.
These dubious charges can manifest in multiple ways—from additional service fees on food deliveries and unexpected bank overdraft charges to extra costs on sporting event tickets. A report from the Consumer Financial Protection Bureau (CFPB) suggests that Americans are shelling out an estimated $29 billion yearly due to such fees. The main issue with these charges, as per the CFPB, is that they often vastly surpass the cost of the corresponding service.
Under the newly signed California legislation, “drip pricing” will be prohibited. This method involves companies advertising a base price, only to reveal later that the cost is higher due to various added fees. While businesses will retain the right to determine prices, the law mandates clarity and transparency in how these prices are presented to consumers.
State Senator Bill Dodd, a key proponent of the law, expressed optimism about its potential to promote transparency and fairness. He observed that such fees are becoming ubiquitous, making it essential to ensure consumers aren’t misled. Introduced by Senators Dodd and Nancy Skinner earlier this year, the legislation received broad support, clearing the State Senate in May and the Assembly in September.
Consumer advocates have praised the move. The ubiquity of these fees, often obscured or undisclosed, makes it challenging for consumers to compare prices and make informed choices. From the U.S. Public Interest Research Group’s California division, Jenn Engstrom highlighted the importance of transparent pricing, asserting that “comparison shopping becomes nearly impossible.”
On the national front, President Joe Biden has consistently highlighted the issue of junk fees, even addressing it in his 2022 and 2023 State of the Union speeches. He has promised support to federal legislators aiming to eradicate such costs.
Reflecting this national concern, U.S. Senators Richard Blumenthal and Sheldon Whitehouse have championed the “Junk Fee Prevention Act” this year. This bill zeroes in on often exorbitant fees imposed by airlines and tourist hotspots. The Federal Trade Commission is contemplating whether a dedicated rule against junk fees is warranted.
As California takes a definitive step against deceptive pricing, it symbolizes a broader national shift towards greater transparency and fairness in consumer transactions.