The Federal Trade Commission (FTC) recently released a notice of proposed rulemaking concerning “unfair or deceptive fees.” AFSA commented on the proposed rule this week, agreeing with the FTC that consumers should be protected from hidden or misleading fees and explaining that in the financial services market they already are.

With this rulemaking, the FTC is attempting to eliminate:

1. Hidden fees by requiring all mandatory fees be added up and clearly and conspicuously disclosed as the “total price,” and;
2. Misleading fees by requiring businesses to clearly and conspicuously disclose any amount a consumer must pay that is excluded from the “total price.”

AFSA wrote that because there are already several laws and regulations requiring clear disclosures by financial services providers, the FTC should exempt creditors from the rulemaking.

As drafted, the FTC’s proposed rule would not help consumers shopping for credit products and services, but merely add confusion. The FTC does not provide any guidance as to what fees are a part of the “total price,” or how the “total price” should be disclosed in conjunction with other required disclosures. This will lead to confusion for consumers. Such fees as late fees are mandatory but not necessarily imposed. If one creditor decides to include late fees and another does not, consumers could not use the “total price” to comparison shop.

Even if both creditors decide to include late fees, they may decide to include them in different ways. One creditor might include a single late fee and the other might include twelve. This lack of consistency makes the “total price” meaningless. AFSA included several other examples in the comments to the FTC where uncertainty about the calculation of fees in the total price would lead to uncertainty and unintended consequences.

The FTC proposed rule is part of a broader push from the administration against “junk fees.” No one, including AFSA members, condone true “junk fees.” However, using “junk fee” rhetoric and attempting to proscribe fees that are legitimate and authorized by state law, even if they are disliked by regulators, is not appropriate.

AFSA has voiced concerns against this rhetoric manytimes in the past few years, and will continue to do so. We have made it clear that when states and federal legislative bodies have authorized these fees and made clear the disclosure requirements, regulatory agencies do not have authority to outlaw them. Therefore, to the extent the proposed rule conflicts with applicable law allowing, the rule must be changed.