Last week, AT&T agreed to pay $80 million
to customers who had been overbilled for charges they had not authorized. This was an all-too-rare case of a perpetrator brought to book: In recent decades, Americans have increasingly been hit with fees they know nothing about, which have contributed to a crisis of consumer debt.
We must hope we are entering a new era of regulatory activism that will shine a light on hidden fees.
Besides mystery cellphone charges, consumers regularly complain about surprise bank charges for using tellers, for overdraft protection or for not maintaining minimum balances. Not to mention fees for "maintenance" of individual retirement accounts or 401(k)'s, airport taxes, charges on credit-card cash advances or balance transfers, costs for the activation or early termination of cable and Internet services, and fees on 529 college savings accounts and mortgage origination. A 2010 Consumer Reports survey found
that unexpected or hidden fees were consumers' biggest bugbear.
In the AT&T case, the company typically charged customers $9.99 per month for unrequested, third-party subscriptions for ringtones and text messages providing horoscopes, flirting tips, celebrity gossip and "fun facts." AT&T pocketed at least 35 percent of these fees; the company earned $108 million in 2012 and $161 million in 2013 from the scheme.
The structure of billing made it "very difficult for customers to know that third-party charges were being placed on their bills," according to the Federal Trade Commission. Even when customers complained, refunds were often denied.
This isn't the first time the industry has run afoul of regulators. In June, the F.T.C. issued a similar lawsuit against T-Mobile for "cramming," as the practice of adding hidden fees is known; there have been seven such fee-cramming investigations since 2013.
"Hidden" does not necessarily mean a charge is missing from the consumer agreement; rather, costs and terms are often buried in fine print or impenetrable legal language that even contract lawyers have difficulty discovering. The onus is on the customer to be informed of whatever costs are associated with the goods or services. But with these charges buried in tightly guarded pricing structures, customers are often trapped into paying exorbitant fees for years and years.
Perniciously, these "trick-and-trap" fees are not just lurking in your cellphone plan; they have invaded areas of consumer credit like mortgages, student and auto loans - financial services that have traditionally provided a path of upward mobility for low-income and working-class families. A glaring example is higher education, where colleges and universities bury students under a mountain of fees, including registration fees just to attend class, quite apart from the fees they already face on student loans.