Junk Fees: how to know the value of anything?

Junk Fees: how to know the value of anything?

Bagmisikha Puhan

Alaqshendra Singh

It has become more than a habit, a practice, for all of us to conclude a transaction, without wanting to review the finer print. When we are purchasing a product or service, from over the internet, we somehow miss out on additional monies which is being charged, in addition to the fees which is warranted for the said product or service. A harmless cost that all have had to bear is “convenience fees”, and we have all paid it for some product or service, throughout our digital journey. The hard reality to this is that these fees are not disclosed, upfront and only revealed after a consumer has decided to buy something, obscure true prices and dilute the forces of market competition.

Recently, the United States White House came up with guides, and the Consumer Financial Protection Bureau, the Federal Trade Commission, came up with discussion papers, proposed rules to address this menace. The concern has moved to a point where it is not about private players moving their burden of costs to the consumers, but has also moved to a point where they are seeking to reap benefits from their captive audience, their loyal customers by having them to pay that additional amount, without giving them a way out.

Since this is a common occurrence now, across industries, ranging from loans, auto-financing, telecommunications, live entertainment, to name a few, the inflated final bill is not just coming across a hidden charge, but it is also with the lack of informed consent of the end users, which stems from a lack of the consumer’s awareness. This goes beyond the commitments made to the end users by the service provider, and oversteps into how the information, behavioral patterns of any individual is used to induce them into buying things, with such excess [and, oft unwarranted] costs.

Certain apparent issues which would mislead consumers would be in the form of (i) confusing prices – which would mean, that a user would never be able to determine what is the exact value for a product or a service; (ii) exploiting consumers – where a captive audience is already set, it becomes easier for the service provider to entice them to pay upwards of what was their expectations, and studies have shown that consumers faced with these hidden or “dripped” fees can pay upward of twenty percent more than they would have had the actual price been disclosed upfront. This all ties in to the fact that companies which actually employ fair and transparent practices, by making upfront disclosures about their charges, will seem to be more expensive than these opportunistic providers; this harks us back to the first point where the consumer is not sure about the true values.

Some common examples being, banks sending across account maintenance charges, companies eliciting “late-fee” charges, “convenience fees”, foreclosure and closing costs too. To curb issues mostly originating in a consumer heavy business of commercial airlines, the US Department of Transportation, has advisories related to Airline Family Seating Dashboard – it was curated as such to state that “a parent who purchases airline tickets for a family should receive a guarantee from the airline that it will seat the parent and child together without fees or a last-minute scramble at the gate or having to ask other passengers to give up their seat to allow the parent and child to sit together”. Since then, several airlines have stepped up to bring forth this assurance to the end users, at no additional cost; and since then, a legislative proposal has also be brought fore to mandate this.

While a lot of discussion and deliberations have been made to this end in the US, this does not mean that this is not a common occurrence elsewhere; and also sees a lot of prevalence in fast-developing economies like India. Especially here, with a large consumer base, and a digital divide distinguishing the competency of users seeking services, it will become imperative for legislators to act in a two-fold manner: (i) legislate for the entire masses, keeping in mind that it has to be sector agnostic; and, (ii) to ensure that the private parties that they are contracting with also, toe the line. We all know there is nothing called a free-lunch, but as a consumer – I should only pay for what my consumption is worthy of!