House Committee on Small Business: “Junk Fee” Rulemakings, May 9, 2024

Summary

A letter dated May 9, 2024 from the House Committee on Small Business to Lina M. Khan, Chair of the U.S. Federal Trade Commission, signed by Chairman Roger Williams and Members of Congress Pete Stauber, Beth Van Duyne, Jake Ellzey and Aaron Bean. The committee states its concern that FTC rulemakings on fees, including the Trade Regulation Rule on Unfair or Deceptive Fees (88 Fed. Reg. 77420) and the Combating Auto Retail Scams Trade Regulation Rule, place an undue burden on small businesses. It requests answers to eight questions by May 23, 2024, covering recordkeeping for compliance, annual compliance hours, dynamic pricing, car dealership service contracts and compliance costs for small versus large entities. The final question asks how the FTC reconciles its disclosure approach with the Consumer Financial Protection Bureau's Nonsufficient Funds Fee Rule.

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Full text

                                                 May 9, 2024

The Honorable Lina M. Khan
Chair
U.S. Federal Trade Commission
600 Pennsylvania Ave. NW
Washington, DC 20580

Dear Chair Kahn:

        The House Committee on Small Business writes to discuss the Biden Administration’s so
called “Junk Fee” rulemakings and their impact on small businesses. The Federal Trade
Commission (FTC) has proposed multiple rules related to fees consumers may experience while
shopping. These rulemakings will bury small businesses under an ever mountain of
regulations—which would substantially strain their operations without providing the intended
benefit to consumers. The Committee is concerned that these rules, especially when considered
together, pose an undue burden on small businesses at a time when Main Street is already
struggling due to over regulation, persistent inflation, and supply chain issues.

        Last fall, the FTC issued a rule banning what the Biden Administrations has decided to
call “junk fees.”1 In the rule, the FTC characterizes a fee as “hidden” if it is not disclosed well in
advance of the completion of the purchase.2 The sweeping nature of the ban fails to consider the
diverse nature of small businesses or any innovation which could occur using unique fee
structures, such as dynamic pricing or certain discount offerings.3 This rule impacts a wide range
of industries including travel, hospitality, restaurant services, accommodations, and live events
and would have a substantial impact on the pricing decisions of small businesses,
disproportionately impacting the ability of small businesses to survive. Unfortunately, it seems
the FTC failed to properly consider the costs to small businesses in this rule.

        The FTC also issued a rule which would prohibit certain fees in the car-buying process
and require additional disclosures from car dealerships.4 The Committee has previously written
to the FTC regarding this rule and its impact on small car dealerships. Currently, this rule is
suspended pending the results of litigation, but the Committee has concerns with the FTC’s

1
  Trade Regulation Rule on Unfair or Deceptive Fees, 88 Fed. Reg. 77420 (Nov. 9, 2023) (to be codified at 16 C.F.R
§ 464).
2
  Id.
3
  Sean Heather, The FTC’s 'Junk Fees' Rule Has Its Own Hidden Costs, U.S. CHAMBER OF COMMERCE (Feb. 26,
2024).
4
  Combating Auto Retail Scams Trade Regulation Rule, 16 C.F.R. § 463 (Feb. 22, 2024).
The Honorable Lina M. Khan
May 9, 2024
Page 2 of 3

claim that this rule will not increase costs for small businesses.5 It seems unlikely a business will
be able to demonstrate they have complied with this rule or show that they have not violated this
rule without increasing their operations costs. The Committee does appreciate the efforts the
FTC has undertaken to lessen this rule’s impact on small dealerships but believes improvements
could still be made.

       It is important for agencies to correctly evaluate small businesses interests—which make
up 99.9 percent of all businesses in the United States—when passing any new rule. America’s
small businesses deserve to have their voices heard and considered. We therefore request the
following information as soon as possible but no later than May 23, 2024:

    1. The rule seems to lack the detail necessary for small businesses to comply. What specific
       records should small businesses retain in order to demonstrate compliance with these
       rules?

    2. The estimated number of hours these rules will require annually to comply with. Please
       include all factors considered in this determination and the weight given to each factor.

    3. How should small businesses that use dynamic pricing models advertise their products in
       a way that comports with the FTC’s Trade Regulation on Unfair or Deceptive Fees rule?

    4. What impact will this rule have on car dealership sales of items such service contracts?

    5. Explain the FTC’s expected cost for a small entity to comply with the junk fee rule and
       how that differs from the compliance cost of larger entities.

    6. Please explain how the FTC believes small dealerships will be able to demonstrate
       compliance with this rule in a manner which does not increase their compliance costs?

    7. How are the compliance costs of these rules different for large and small entities?

    8. The FTC’s junk fee rule specifically states that fees must be disclosed clearly in advance
       of any transaction, the Consumer Financial Protection Bureau’s Nonsufficient Funds Fee
       Rule indicates that disclosures may not be sufficient to warn a customer of a fee. How do
       your agencies reconcile your respective viewpoints on the sufficiency of disclosing fees?

        To schedule the delivery of responsive documents or ask any related follow-up questions,
please contact the Committee on Small Business Majority Staff at (202) 225-5821. The
Committee on Small Business has broad authority to investigate “problems of all types of small
business” under House Rule X. Thank you in advance for your cooperation with this inquiry.



5
 See generally Combating Auto Retail Scams Trade Regulation Rule, 89 Fed. Reg. 13267 (Feb. 22, 2023) (Order
Postponing the Effective Date of Final Rule Pending Judicial Review).
The Honorable Lina M. Khan
May 9, 2024
Page 3 of 3

                                  In God We Trust,



_________________________                    _________________________
Roger Williams                               Pete Stauber
Chairman                                     Member of Congress
Committee on Small Business                  Committee on Small Business




_________________________                    _________________________
Beth Van Duyne                               Jake Ellzey
Member of Congress                           Member of Congress
Committee on Small Business                  Committee on Small Business




_________________________
Aaron Bean
Member of Congress
Committee on Small Business


cc:   The Honorable Nydia M. Velazquez, Ranking Member
      Committee on Small Business


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