What do the agencies mean by junk fees?

In the FTC's usage, junk fees are extra charges associated with unnecessary or worthless services, which companies often fail to disclose up front. The CFPB's request for information uses a broader formulation, describing junk fees as exploitative, back-end, hidden, or excessive fees.

Is charging an extra fee illegal?

Only when the fee is arbitrary or opaque in a way that squeezes customers.

Which statute is a business really dealing with when the agencies say junk fees?

For most businesses the statute is Section 5 of the FTC Act, which prohibits unfair or deceptive acts or practices throughout most of the economy. For banks and other providers of consumer financial products, the CFPB works under the Consumer Financial Protection Act, which directs it to enforce Federal consumer law to keep consumer financial markets fair, transparent, and competitive.

Does disclosing the fee in the contract protect me?

A contract disclosure does not settle the question under the CFPB's unfairness test, because a fee that is disclosed in the contract can still be unfair depending on the circumstances. The CFPB's supervisory findings on re-presentment NSF fees show how that works: the injuries were not reasonably avoidable regardless of disclosures in account-opening documents, because consumers had no reasonable opportunity to prevent another fee after the first failed presentment attempt.

Does the FTC's fees rule cover my industry?

The FTC's final fees rule applies only to short-term lodging and live-event ticketing, but fees in other industries can still be unlawful. The final rule is far narrower than the proposed rule, which would have banned hidden fees and fee deception in all industries under the Commission's jurisdiction. Unfair or deceptive fees in sectors outside the rule can still violate state and federal laws.

Can a debt collector charge a convenience fee for paying online or by phone?

Only when the underlying agreement expressly authorizes the fee or the law affirmatively permits it.

Offer StructureAgency label

Junk fees

Also known as "Hidden mandatory fee"

Berkeley Robinson, Managing Attorney at Robinson Law Firm PLLC

Author

Berkeley Robinson, Esq.

Managing Attorney, Robinson Law Firm PLLC

Berkeley has served as the go-to counsel for many scaling businesses in a transactional and litigation management capacity. Before becoming an attorney, Berkeley grew sales teams, ran online marketing campaigns, and did everything else an entrepreneur does—and still does today as the founder of two online businesses.

Definition

No statute or regulation defines "Junk fees." At a CFPB advisory board meeting in 2023, a member said they would like further guidance from the CFPB to provide a definition of what is a junk fee. Source: CFPB Combined Advisory Board Meeting Summary (2023)

The FTC uses "Junk fees" to mean "extra charges associated with unnecessary or worthless services." Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022) The same statement adds that companies often fail to disclose these fees up front. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022)

Key legal rules

These are the duties agencies enforce when they describe the conduct as "Junk fees":

Section 5(a) of the FTC Act prohibits “unfair or deceptive acts or practices in or affecting commerce.” Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief
Misrepresentations or deceptive omissions of material fact constitute deceptive acts or practices prohibited by Section 5(a) of the FTC Act. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief
Acts or practices are unfair under Section 5 of the FTC Act if they cause or are likely to cause substantial injury to consumers that consumers cannot reasonably avoid themselves and that is not outweighed by countervailing benefits to consumers or competition. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief
The FTC's final fees rule prohibits junk fees in the short-term lodging and live-event ticketing industries. Source: Statement of Chair Lina M. Khan Regarding the Trade Regulation Rule on Unfair or Deceptive Fees, Commission File No. R207011 (Dec. 17, 2024)
In the consumer financial context, an act or practice is unfair when it causes or is likely to cause substantial injury to consumers, the injury is not reasonably avoidable by consumers, and the injury is not outweighed by countervailing benefits to consumers or to competition. Source: CFPB, Supervisory Highlights: Junk Fees Update Special Edition (Oct. 2023), § 2.1
An act or practice is abusive if it “takes unreasonable advantage of … the inability of the consumer to protect the interests of the consumer in selecting or using a consumer financial product or service.” Source: CFPB, Supervisory Highlights Junk Fees Special Edition, Issue 29 (Winter 2023), § 2.2
The Fair Debt Collection Practices Act and Regulation F prohibit debt collectors from charging consumers pay-to-pay fees (also known as convenience fees) for making payment a particular way, such as by telephone or online, unless those fees are expressly authorized by the underlying agreement or are affirmatively permitted by law. Source: CFPB, Advisory Opinion on Debt Collectors’ Collection of Pay-to-Pay Fees
Blanket policies of charging Returned Deposited Item fees to consumers for all returned transactions irrespective of the circumstances or patterns of behavior on the account are likely unfair under the Consumer Financial Protection Act. Source: CFPB Bulletin 2022-06: Unfair Returned Deposited Item Fee Assessment Practices (Oct. 26, 2022)
Regulation E's Remittance Rule requires remittance transfer providers to disclose any transfer fees imposed by the provider. Source: CFPB, Supervisory Highlights: Junk Fees Update Special Edition (Oct. 2023), § 2.3

For the sake of space, this page lists only the primary rules related to this term that most businesses should follow. More may apply to your situation, and your unique facts affect how they apply.

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Why these rules exist

Extra or redundant fees can mislead consumers, or prevent them from knowing the true cost of a purchase until they have already invested substantial time and energy. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022) Because the full price is not visible at the start, consumers cannot make accurate price comparisons, and they end up spending more than they expected or wanted to. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022) The same mechanism reaches competitors, since a seller who advertises the full price can lose sales to one who advertises less and adds a fee at the end. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022)

Underneath the label, the FTC is applying Section 5 of the FTC Act, which prohibits “unfair or deceptive acts or practices in or affecting commerce.” Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief The label also supports rulemaking, because specific prohibitions issued as rules under section 18 allow the Commission to seek redress and civil penalties and give regulated businesses clearer guidance than Section 5 alone. Source: Concurring Statement of Commissioner Rebecca Kelly Slaughter, Commission File No. R207011 (Dec. 17, 2024), n.1

For consumer financial products, the statute underneath is the Consumer Financial Protection Act, which directs the CFPB to enforce Federal consumer law for the purpose of ensuring consumer financial markets are fair, transparent, and competitive. Source: CFPB, Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services (Jan. 2022) The CFPB's particular concern is fees that far exceed the marginal cost of the service they purport to cover, which suggests a company is taking advantage of a captive relationship with the consumer to drive excess profits. Source: CFPB, Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services (Jan. 2022)

Enforcement examples

FTC v. Passport Automotive Group, Inc. (used-car dealer)

FTC v. Passport Automotive Group, Inc., Case Summary, FTC Matter/File Number 2023199

According to the complaint, Passport Auto advertised a price for cars that were certified, reconditioned, and inspected, but buyers who went to purchase a car were then hit with charges for certification, reconditioning, and inspection. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022) In October 2022 the FTC charged the dealer with adding hundreds, or even thousands, of dollars in illegal junk fees to car prices. Source: FTC v. Passport Automotive Group, Inc., Case Summary, FTC Matter/File Number 2023199

Outcome. The FTC sent payments totaling more than $3.3 million to customers of Passport Auto, a Washington D.C.-area auto dealer. Source: FTC v. Passport Automotive Group, Inc., Case Summary, FTC Matter/File Number 2023199

FTC v. Vonage Holdings Corp. (internet phone service)

Federal Trade Commission v. Vonage Holdings Corp., Case Summary

In November 2022 the FTC announced that it had stopped Vonage from taking consumers’ money without their consent and from creating obstacles for those who tried to cancel their service. Source: Federal Trade Commission v. Vonage Holdings Corp., Case Summary

Outcome. Under a proposed court order that Vonage agreed to, the company was required to pay $100 million to refund consumers, make its cancellation process simple and transparent, and stop charging consumers without their consent. Source: Federal Trade Commission v. Vonage Holdings Corp., Case Summary The refunds followed in October 2023, when the FTC sent nearly $100 million to consumers who lost money as a result of Vonage imposing junk fees and creating obstacles to cancellation. Source: Federal Trade Commission v. Vonage Holdings Corp., Case Summary

CFPB supervisory findings, auto loan servicers (estimated repossession and pay-to-pay fees)

Supervisory Highlights Junk Fees Special Edition, Issue 29, Winter 2023

Examiners found that, where consumers could recover a repossessed vehicle by paying off the loan balance or past due amounts, servicers charged a $1,000 estimated repossession fee as part of the amount owed, even though the average repossession cost is generally around $350. Source: CFPB, Supervisory Highlights Junk Fees Special Edition, Issue 29 (Winter 2023), § 2.2 The servicers also offered only two free payment options, pre-authorized recurring ACH and mailed checks, so approximately 90 percent of consumers' payments incurred a pay-to-pay fee. Source: CFPB, Supervisory Highlights Junk Fees Special Edition, Issue 29 (Winter 2023), § 2.2

Outcome. Examiners found the estimated repossession fees unfair, and the servicers ceased the practice and provided refunds to affected consumers. Source: CFPB, Supervisory Highlights Junk Fees Special Edition, Issue 29 (Winter 2023), § 2.2 The payment fees were found unfair and abusive, and Supervision directed the servicers to cease the practice. Source: CFPB, Supervisory Highlights Junk Fees Special Edition, Issue 29 (Winter 2023), § 2.2

FTC v. USA Student Debt Relief (student loan debt relief)

USA Student Debt Relief, FTC v., Case Summary (M.D. Fla.)

In July 2024 the FTC announced that it had stopped the operators of a scheme that, in the FTC's account, tricked financially strapped consumers seeking student loan relief into paying hundreds of dollars in junk fees. Source: FTC v. USA Student Debt Relief, Case Summary (M.D. Fla.) The operators pretended to be affiliated with the Department of Education and its loan servicers and made false promises of low, permanently fixed monthly payments and loan forgiveness. Source: FTC v. USA Student Debt Relief, Case Summary (M.D. Fla.)

Outcome. At the FTC's request, a federal court temporarily halted the scheme and froze its assets. Source: FTC v. USA Student Debt Relief, Case Summary (M.D. Fla.) In May 2025 the FTC announced that the operators had agreed to be permanently banned from the debt relief industry and to turn over their assets to resolve allegations that they misled consumers. Source: FTC v. USA Student Debt Relief, Case Summary (M.D. Fla.)

FTC v. Invitation Homes Inc. (single-family home rentals)

Complaint for Permanent Injunction, Monetary Judgment, and Other Relief; Invitation Homes: Stipulated Order for Permanent Injunction (Entered by the Court)

The complaint alleges that Invitation Homes advertised monthly rents that left out a mandatory fee bundle, which can add $60 per month and $720 over a one-year lease and is mandatory for the substantial majority of its homes. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief Applicants allegedly paid nonrefundable fees to apply and reserve a property before learning that the actual monthly rent was higher than advertised. Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief According to the complaint, when a Vice President asked why consumers could not see the fees before they applied, the company's Senior Vice President of Operations confirmed that it was the company's practice not to display or itemize the fees on the application portal, commenting, “we can’t show all additional fees, so we don’t want to show any.” Source: FTC v. Invitation Homes Inc., Complaint for Permanent Injunction, Monetary Judgment, and Other Relief

Outcome. The stipulated order for permanent injunction, entered by the court, recites that the complaint charges deceptive and unfair practices in the company's home rental services, including charging mandatory undisclosed junk fees, and that the defendant neither admits nor denies the allegations. Source: Invitation Homes: Stipulated Order for Permanent Injunction (Entered by the Court), Findings Separately, Invitation Homes agreed to a proposed settlement order that would require it to turn over $48 million to be used to refund harmed consumers and to clearly disclose its leasing prices. Source: Federal Trade Commission v. Invitation Homes Inc., Case Timeline

FTC v. Doxo (online bill-payment platform)

Complaint for Permanent Injunction, Monetary Judgment, and Other Relief

The complaint alleges that throughout Doxo's payment flow the platform indicated that consumers were paying the “Amount” on their bill, yet it charged more through a surprise “delivery fee” mentioned without explanation, in light gray text, only at the last stage of an approximately seven-step process. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Doxo, ¶¶ 33-35 Billers typically do not charge fees for bill payments made to them directly, so consumers allegedly paid millions of dollars in fees they would not otherwise have been charged. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Doxo, ¶¶ 33-35

Outcome. Count II of the complaint alleges that Defendants represented that consumers will pay the amount on their bill. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Doxo, Count II, ¶¶ 79-81 The complaint further alleges that this representation is a deceptive act or practice in violation of Section 5(a) of the FTC Act. Source: Complaint for Permanent Injunction, Monetary Judgment, and Other Relief, FTC v. Doxo, Count II, ¶¶ 79-81

FTC and State of Illinois v. Leader Automotive Group (multi-location car dealerships)

Leader Automotive Group: Complaint for Permanent Injunction; Leader Automotive Group, et al., FTC and State of Illinois v., Case Summary

The complaint describes dealerships that advertised cars online at enticingly low prices and then added hundreds to thousands of dollars more once consumers were onsite, including charges for additional, undisclosed junk fees. Source: Complaint for Permanent Injunction, FTC and State of Illinois v. Leader Automotive Group, ¶ 4 In one example, the complaint says the dealers added a $2,999 “inspection” fee to the price of a $15,000 used car sold to one of their own employees. Source: Complaint for Permanent Injunction, FTC and State of Illinois v. Leader Automotive Group, ¶ 67

Outcome. The dealerships and their parent company will be required to pay $20 million to settle the allegations, a proposed monetary judgment that is the largest the FTC has secured against an auto dealer. Source: Leader Automotive Group, et al., FTC and State of Illinois v., Case Summary (N.D. Ill.) The proposed settlement would also require the companies to disclose a car’s offering price clearly and to get consent from buyers for any charges. Source: Leader Automotive Group, et al., FTC and State of Illinois v., Case Summary (N.D. Ill.)

Exposure

Where a specific rule applies, firms deploying bait-and-switch pricing tactics when selling concert tickets or hotel rooms will be subject to civil penalties, and the Commission will be able to return money to harmed customers. Source: Statement of Chair Lina M. Khan Regarding the Trade Regulation Rule on Unfair or Deceptive Fees, Commission File No. R207011 (Dec. 17, 2024) Where there is no specific rule or sector-specific law, the Commission's chair said in October 2022, the Commission lacks authority to seek penalties against violators or readily get financial compensation for victims. Source: Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022) Enforcement of the general prohibition has still been costly for businesses, because the Commission described its action against unfair and deceptive fees in the three years before December 2024 as securing hundreds of millions of dollars in relief for Americans who were saddled with junk fees. Source: Statement of Chair Lina M. Khan Regarding the Trade Regulation Rule on Unfair or Deceptive Fees, Commission File No. R207011 (Dec. 17, 2024)

Individual matters show the scale. Invitation Homes agreed to a proposed settlement order that would require it to turn over $48 million for consumer refunds, to disclose its leasing prices clearly, and to stop other unlawful behavior. Source: Federal Trade Commission v. Invitation Homes Inc., Case Timeline In FTC v. Benefytt Technologies, the proposed court orders would require $100 million in refunds and prohibit the company from lying about its products or charging illegal junk fees. Source: FTC v. Benefytt Technologies, Inc., et al., Case Summary (M.D. Fla.) The $20 million proposed monetary judgment against the Leader Automotive Group dealerships is the largest the FTC has secured against an auto dealer. Source: Leader Automotive Group, et al., FTC and State of Illinois v., Case Summary (N.D. Ill.)

On the CFPB side, supervision in the reported matters has produced refunds rather than penalties: financial institutions are refunding over $120 million to consumers for unanticipated overdraft fees and unfair NSF fees. Source: CFPB, Supervisory Highlights: Junk Fees Update Special Edition (Oct. 2023), § 1 Auto servicers that charged late fees above their contracts' caps ceased the practice and refunded the overcharges. Source: CFPB, Supervisory Highlights Junk Fees Special Edition, Issue 29 (Winter 2023), § 2.2

FAQs

1.cfpb_combined-advisory-board-meeting_summary_2023-05. CFPB Combined Advisory Board Meeting Summary (2023)
2.Statement of Chair Lina M. Khan Regarding the Unfair or Deceptive "Junk" Fees ANPR. Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022)
3.Statement of Chair Lina M. Khan Regarding the Unfair or Deceptive "Junk" Fees ANPR. Statement of Chair Lina M. Khan Regarding the Advanced Notice of Proposed Rulemaking on Unfair or Deceptive “Junk” Fees, Commission File No. R207011 (Oct. 20, 2022)