New California law will ban hidden fees. What does it mean for consumers?

Starting next year, California businesses will be prohibited from using hidden fees to attract customers with seemingly low prices.

The rules surrounding “junk” fees — from cell phone to food delivery costs — will be stiffened beginning July 2024. California Gov. Gavin Newsom recently signed Senate Bill 478 or the “Consumer Legal Remedies Act: advertisements,” first introduced in February by senators Bill Dodd, D-Napa and Nancy Skinner, D-Berkeley.

“California sent a clear message today: The days of bait-and-switch pricing practices are over,” Skinner wrote in a recent statement from the Office of the Attorney General.

Hidden fees are extra charges you cannot see until after you’ve reached the final stage of purchasing a good or service, hence the name. The tactic is typically used to help a business pose as the most affordable option compared to its competitors.

According to a blog written by personal finance reporter Penelope Wang for Consumer Reports, companies can get away with hidden fees so long as they’re disclosed somewhere in the shopping process. The Federal Trade Commission defines the technique as drip pricing.

“Now we can put the consumer first and create a level playing field for those businesses that advertise the real price, up front,” Dodd wrote in a recent statement. “I appreciate everyone who worked to end these dishonest charges that boost corporate profits at the expense of those who can least afford it.”

SB 478 passed the Assembly on Sept. 11 with a 60-14 margin. The Senate passed the bill one day later with a 30-8 vote.

What is the current law on hidden fees in California?

There’s no current law regulating hidden fees in California.

There are similar California laws surrounding “unfair methods of competition” including advertising without the intent to sell. A consumer can take action to get what they paid for, including at least $1,000 in damages.

What new hidden fees law mean for Californians

Starting July 2024, you won’t be blindsided by how much something costs due to hidden fees.

SB 478 makes it mandatory for businesses to include all essential charges upfront, excluding taxes and government fees. Certain exceptions — such as disclosure of registration or licensing fees — are made for property managers, car rental companies and motor vehicle dealerships.

This story was originally published October 9, 2023 at 3:08 PM with the headline "New California law will ban hidden fees. What does it mean for consumers?."