On May 12, 2025, the Federal Trade Commission’s Rule on Unfair or Deceptive Fees took effect, thereby thrusting the United States’ primary regulator of unfair or deceptive practices once more into the spotlight. But the spotlight given to the FTC rule, which only applies to the short-term lodging and live-event ticketing industries, has obscured the simultaneous expansion of broader reaching state legislation. These state laws, which are either currently in effect or pending in nearly half of all states, pose a far greater liability for the majority of businesses. If you’ve been comforted by the limited scope of the FTC rule and ignored the rise of these state laws, it’s not too late — this article will quickly catch you up to speed on your potential liability and the next steps your business should take.
What Are These New State Laws?
Some of the obfuscation around the growing number of state fee legislation has to do with their different naming conventions. The FTC rule refers to “unfair or deceptive” fees, but the types of activities that states seek to regulate are also known as junk fees, hidden fees, bait-and-switch pricing, or drip pricing, among others. This article will use the phrase “fee legislation” to encompass the wide variety of conventions in use. Regardless of what they’re ultimately named, these laws and regulations target fees added to the mandatory total price a consumer pays that were not disclosed prior to that consumer’s commitment to pay. In fact, in some cases, the price advertised must include all of the fees the consumer will pay.
Under both federal and state law, a business will incur liability from fee legislation when it asks the consumer to pay a fee that was not disclosed prior to expecting final payment from the consumer. But state fee legislation varies, and some states have independent requirements of how and when a fee must be disclosed. A state usually requires a “clear and conspicuous” disclosure ahead of final payment, but how that may be defined depends on the state. For those states that have only implemented regulations to bolster their unfair or deceptive acts and practices (UDAP) statutes, knowing how to properly comply is typically even less clear.
Liability Imposed by Fee Legislation
Just how severe is the liability incurred by these new state laws? Using its powerful statutory authority, the FTC can seek upwards of $53,000 per violation of its own fee rule. In a similar fashion, many states have passed regulations to expand their preexisting UDAP statutes in lieu of formal fee legislation. This means businesses can expect to incur similar “per violation” penalties from states themselves. The FTC has cautioned its rule only establishes a baseline, and nothing forecloses the ability of a state to bring its own action.
Even though a state may not have passed formal fee legislation or amended its UDAP statute to incorporate hidden fees, a business could still incur liability from a state. Take Texas for example. Recently, the state brought an action against Booking.com alleging the site’s failure to disclose mandatory fees violated Texas’ UDAP statute — even though Texas had not passed formal regulations enumerating hidden fees as part of its UDAP statute like other states. Nonetheless, the Texas attorney general was able to settle the case against Booking.com for a total of $9.5 million.
What if a state’s attorney general chooses not to pursue legal action on behalf of the state? There is still potential liability since many states have built-in private rights of action within their UDAP statutes. Depending on the state, the private right of action may exist under the statute’s “catch-all” unfair or deceptive provision or remain limited to only the statute’s enumerated unfair or deceptive business practices. Since fee legislation is an evolving area of law and many state UDAP statutes look to the FTC’s guidance on what is unfair or deceptive, it is likely that state UDAP liability could evolve to include hidden fees, even in the absence of specific state fee legislation. As such, the private rights of action within state UDAP statutes will always remain a consistent and threatening source of liability, regardless of whether formal fee legislation or expansive regulations have been passed in the state.
Finally, the most concerning challenge posed by this rise in fee legislation is the inclusion of private rights of action separate from a state’s UDAP statute. At least eight states currently have private rights of action in their fee legislation, with multiple states allowing for the recovery of punitive damages as well. Failure to properly comply with these new state laws can therefore lead to a sea of lawsuits with millions of dollars at stake. And given that this fee legislation is typically triggered based on the status of the consumer’s state residency, rather than the residency of the business, one small mistake can mean defending multiple suits across different states — including class action lawsuits.
What Steps Should You Take Now?
If your business has been watching from the sidelines under an expectation that the FTC rule doesn’t apply, it’s not too late to start ensuring compliance with the broader wave of state fee legislation. For now, consider the following:
- Evaluate your ecommerce flows. It is vital to understand when mandatory fees are being presented to the consumer to ensure your business is in compliance.
- Map where you conduct your business. If you’re selling to consumers in a state that has fee legislation, you are vulnerable. Knowing where your business conducts its sales ensures you know where a lawsuit may originate.
- Keep a watchful eye on your primary state’s attorney general. Because some states have added regulations to support their existing UDAP statutes, monitoring the state attorney general’s office or related UDAP enforcer is key to managing expectations of liability.
- Don’t wait for your industry to change. Liability for hidden fees is now a case of “when” not “if.” Private rights of action make this new legislation unpredictable. Be on the forefront of your industry by taking steps to ensure compliance today, without waiting for someone else to take the lead.
These are only the first steps your business should take. Given the threat of costly litigation from private rights of action and “per violation” liability, the national interest surrounding fee enforcement, and the FTC rule overshadowing the wider net of state legislation, staying proactive on your business’s compliance is crucial. With new fee legislation springing up, the narrative on compliance is rapidly changing.
