Undisclosed Fees & Consumers' Legal Rights

Consumers rely on a wide range of services in their daily lives that are provided by banks, utility companies, telecommunications companies, insurance providers, and others. All of these providers charge fees for their services, often based on a service contract or agreement with the consumer. Sometimes, consumers may find that a bill is higher than they expected. These may be one-time charges based on some unforeseen situation, but it also might be that the service provider did not disclose certain fees to the consumer in advance. Undisclosed fees are a growing concern for consumer rights advocates, costing consumers millions of dollars every year. State and federal consumer laws offer protections and remedies against these types of deceptive or abusive practices.

Types of Undisclosed Fees
  • Credit card fees included in a monthly statement
  • Bank fees deducted from a consumer’s account
  • Fees for use of a bank’s automated teller machine (ATM)
  • “Inactivity” fees charged by a bank or credit card company
  • Hidden fees or surcharges by cellular telephone, cable, or internet service providers
  • Additional insurance fees or premiums
  • Hidden fees or charges by airlines, rental car companies, or hotels
  • Undisclosed fees by brokers or other financial professionals
  • Fees charged for subscription-based services
  • Internet memberships and services

Litigating Undisclosed Fees

Most incidents involving undisclosed or fraudulent fees do not, by themselves, involve a large sum of money. A typical amount might be in the $10 to $20 range, and few individual cases involve fees of more than $100. Individual consumers may not find it worth the time and expense of pursuing a legal claim. Cases involving undisclosed fees in small amounts, however, also tend to involve large numbers of consumers, which might make class action litigation an appealing option.

State Consumer Laws

State consumer protection statutes enable consumers to recover damages for many types of undisclosed or concealed fees. California’s Unfair Competition Law, for example, provides remedies for a wide range of deceptive business practices, and its False Advertising Law protects consumers against fraudulent or misleading statements by service providers.

Federal Banking Laws

Several federal laws require disclosure of fees associated with banking services. The Truth in Lending Act requires banks and other lenders to disclose fees and interest costs to the borrower at or before closing, with additional requirements specific to mortgage loans. The Truth in Savings Act requires banks to make similar disclosures with regard to savings accounts. The Electronic Funds Transfer Act protects consumers from hidden ATM fees and other undisclosed fees.

Other Federal Laws

Many federal statutes require the disclosure of specific types of fees to consumers. The Employee Retirement Income Security Act (ERISA), for example, prohibits health insurance providers from charging fees that are not directly related to the health plan without disclosing them to clients. The U.S. Department of Labor is empowered to enforce these provisions on behalf of consumers. The Federal Trade Commission (FTC) has held “payday lenders” accountable for undisclosed fees under the Federal Trade Commission Act.

The FTC and Undisclosed Fees

The FTC has previously been successful in recovering money for consumers harmed by undisclosed fees. In 2022, the FTC recovered more than $17.6 million for consumers charged hidden fees by online lender LendingClub Corporation. The FTC sued LendingClub in 2018 for its false promises that loan applicants would pay “no hidden fees” when they in fact were charged hundreds or thousands up front. The company also told consumers that they were approved for loans when they were not and withdrew money from their bank accounts without authorization.

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