A New Year’s Resolution to Consider (Please!)
FTC Targeting Hidden and Bogus Fees
By David Howard
If you are an owner of single-family rental homes and you have not yet started thinking about New Year’s resolutions, allow me to make a suggestion: “Focus on fees.”
Actually, as I will explain, focusing on fees should be more than a New Year’s resolution. I only suggest it as such in the hopes that it will make it easier to remember.
For the better part of the past year, the Biden administration and its allies in Congress, have been intent on examining the economic impacts of a wide assortment of business fees on the American consumer. Not only was the issue of “harmful consumer fees” highlighted this year in the President’s State of the Union address, but it has also served as the subject of a number of congressional hearings and agency pronouncements.
The effort to eliminate so called “junk fees” — defined by the administration as “hidden, surprise fees that companies sneak onto customer bills, increasing costs and stifling competition” — is in full swing in Washington, DC, and rental property owners, both single-family and multifamily, need to make sure they are acting in ways that comply with the administration’s regulatory framework as it governs the treatment of these fees.
And although that framework is still emerging, there are things rental property owners can do now to prepare for what is sure to come.
What Rental Property Owners Should be Doing Right Now
First, we know what regulators are looking for in identifying “junk fees.” On Oct. 11, 2023, the Federal Trade Commission (FTC) issued a proposed rule banning “junk fee practices that consistently confuse and trick consumers.” Specifically, the FTC stated it was targeting both hidden fees and bogus fees, which it defined as:
» Hidden fees // mandatory fees that businesses hide or exclude when advertising prices, to include fees that do not appear as part of the initial price but emerge later to significantly increase the final price
» Bogus fees // fees that are misrepresented or not adequately and appropriately disclosed, to include those that serve to confuse consumers as to their amount and purpose
Second, we know how regulators will act to enforce provisions of the new regulations: companies found to be charging “junk fees” will be assessed monetary penalties and damages for incidents found to be harmful to consumers.
Third, we know the new regulations will apply to owners of rental housing. In a statement issued along with the FTC’s October 11 announcement, the Biden administration commented, “[T]he rule would apply to industries across the economy, including event tickets, hotels and lodging, apartment rentals, car rentals, and more.”
It is NRHC’s strong belief that owners of single-family rental homes should assume the rule’s inclusion of apartment rentals is a mere proxy for all rental housing.
How Can You Protect Yourself?
So, where do the regulations stand and how can you protect yourself in this new environment? As of the writing of this column in mid-November, there will be a 60-day comment period from the time the proposed rule is entered into the Federal Register, on Nov. 8. The proposed rule, subject to any alterations, will then be voted on by commissioners of the FTC.
As to whether and when the rule will pass and eventually become law, there is no absolute way of knowing. However, the administration clearly wants the rule to pass and is putting muscle behind it, if for no other reason — setting the merits of the rule aside — a win on “junk fees” is seen as a boost to the President’s reelection campaign in 2024.
For owners of rental housing, the endgame regarding fees comes down to disclosure and transparency. And lots of it.
Be clear and straightforward about your fee structure, make sure all fees are in the lease, and check with legal counsel to make sure you are protected.
NRHC continues to engage with members of the administration and agency officials on the issue of rental housing fees, and we will be routinely communicating new developments and regulatory decisions with the membership as they occur. As to NRHC statements on the issue, please refer to the Newsroom of the NRHC website at www.rentalhomecouncil.org.
