Junk fees have made, and continue to make, state attorney general headlines with recent actions by Maryland and Rhode Island relating to consumer transportation. The rubber met the road when Maryland Attorney General Anthony Brown brought charges against a car dealership and its owners, and Rhode Island Attorney General Peter Neronha filed a lawsuit against a parking management company.
In the Maryland matter, the state alleged multiple violations of the Consumer Protection Act (CPA) for deceptive and unfair trade practices regarding fees and pricing, including the use of "junk fees," against car dealership DARCARS Honda and related parties. In addition to the general CPA allegations Maryland asserts in the complaint, the state also describes its interpretation of how the Maryland Transportation Article, and its corresponding regulations, regulate vehicle dealers in Maryland, "including through consumer protections that prohibit dealers from misleading consumers about vehicle pricing and that prohibit dealers from charging surprise junk fees (i.e., fees from which a consumer gets no added value and that simply add to the cost of a transaction that are, in essence, price increases under a guise)." Specifically, the Transportation Article prohibits dealers from, among other things, stating the purchase price in an ad "unless the price is the full delivered purchase price of the vehicle, excluding only taxes, title fees, and any freight or dealer processing charge" and requires the full price be printed "in the largest font used in the advertisement to provide any information related to the price of the vehicle."
In the complaint, the Maryland AG claims Respondents charged consumers an optional fee of 2% of a vehicle's sale price termed a "Sales Commission," when in reality, it was an "Overhead Fee" to offset Respondents' existing obligations. Per the complaint, neither consumers nor Respondents' employees received added benefit when consumers paid the fee. The complaint further states consumers were not adequately informed about the 'optional' fee and that the fee "cannot be considered truly 'optional' when the onus is entirely on the consumer to notice the charge, figure it out, deduce that it can be removed while still completing the purchase of the car, and then demand that the fee be removed."
The Rhode Island action also makes similar fee and pricing claims, including claiming Defendant UPP Global, LLC used "junk fees" in its operation of multiple parking facilities in violation of the Rhode Island Deceptive Trade Practices Act (DTPA). For example, the state alleges Defendants charged consumers a fee identified as a tax and then kept the proceeds instead of paying it to the government. At times, Defendants also charged a 10% service fee the state termed as "junk," saying this fee was not in fact for additional services and instead was used for some other undisclosed purposes. In addition, the state alleged Defendants charged fees to consumers who stayed past their prepaid parking time under the guise of a "citation."
Whatever industry you are in, be aware state AGs are carefully reviewing fee charges. Here are a few things to consider:
- What is the fee for and what value does the consumer get from paying the fee? Is this accurately described to the consumer?
- Is the fee mandatory or optional?
- What is disclosed to consumers regarding the fee, and when and by what method is that disclosure made?
- Are there industry- or state-specific laws or regulations defining and/or outlawing "hidden fees"?
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