05/15/2024
California Cracks Down on Hidden Fees
Exciting news for consumers: California Governor Gavin Newsom has signed SB 478 into law, aiming to put an end to deceptive pricing practices in the travel industry and beyond.
Contrary to some reports labeling it a "ban" on resort fees, the new law mandates full disclosure of all fees at every stage of a transaction. This means that businesses—from hotels to concert venues—must now include all mandatory fees in their advertised prices right from the start, with the only exception being taxes and government-imposed fees.
Starting July 1, 2024, this law will ensure that hotels can no longer manipulate search results by advertising artificially low prices that exclude hidden fees. It also addresses similar practices in other industries, such as the controversial "healthcare fees" added by some restaurants.
SB 478 enforces transparency by making it illegal to advertise or display prices that do not include all non-optional fees. These hidden charges, often known as resort fees, urban fees, or destination fees, will now be subject to California's existing Unfair Competition Law and False Advertising Law.
State Senator Nancy Skinner, a key proponent of the bill, expressed her satisfaction with its passage: "California sent a clear message today: The days of bait-and-switch pricing practices are over. With Gov. Newsom’s signing of SB 478, Californians will know up front how much they’re being asked to pay, and no longer be surprised by hidden junk fees when buying a concert or sports ticket or booking hotel rooms for their family vacation."
The impact of this legislation is expected to be significant. Earlier this year, industry giants like Hyatt and Marriott began including extra fees in their initial search results. California's new law will standardize this practice across the board, benefiting consumers and promoting fair competition.
According to the Consumer Financial Protection Bureau, American consumers pay an estimated $29 billion annually in junk fees. While California’s law doesn’t eliminate these fees, it does ensure they are disclosed upfront, providing much-needed transparency.
There’s a broader conversation to be had about the existence of these fees. Although many countries, particularly in Europe, have outright bans on resort fees, such comprehensive measures face stiff resistance in the U.S. The hospitality industry's lobbying efforts are a significant barrier, as seen when Airbnb unsuccessfully argued that the law should only apply to Californians.
While this legislation only affects products sold within California, it sets a precedent that could influence national policy. President Biden and several U.S. senators are pushing for the Junk Fee Prevention Act, although its progress has been slow in a gridlocked Congress.
California’s bold step is a hopeful indicator that other states might follow suit. Ideally, all mandatory fees should be included in the base price and taxed uniformly. Although some may find this approach too similar to European models, it offers a straightforward solution to the issue of hidden fees.
Transparency in pricing is a win for consumers, and California’s leadership in this area is a promising development for fairer market practices across the United States.