Unfair and Deceptive Fees_PRA Supporting Statement_November 8 2023_Final

Supporting Statement for Proposed Rule on Unfair or Deceptive Fees
16 C.F.R. Part 464
The Federal Trade Commission (“FTC” or “Commission”) proposes to promulgate a
trade regulation rule titled Rule on Unfair or Deceptive Fees under the authority of Section 18 of
the Federal Trade Commission Act, (“FTC Act”), 15 U.S.C. 57a(b)(2), which grants the FTC the
authority to promulgate, modify, or repeal trade regulation rules that define with specificity acts
or practices that are unfair or deceptive in or affecting commerce within the meaning of Section
5(a)(1) of the FTC Act, 15 U.S.C. 45(a)(1).
The Notice of Proposed Rulemaking (“NPRM”) proposes one requirement that
constitutes a collection of information for purposes of the PRA. Specifically, the NPRM
proposes to require businesses that exclude an amount from the Total Price that they display,
advertise, or offer to consumers to disclose the refundability of such fees (hereinafter, referred to
as “refundability disclosure requirement”). If the Commission finalizes the proposed
requirement, such disclosures will be required only when an amount is excluded from the Total
Price, which will only be permitted for Government Charges, Shipping Charges, and optional
charges. The disclosures will have to be made clearly and conspicuously, meaning that they have
to be provided in a manner that is difficult to miss (i.e., easily noticeable) and easily
understandable. The NPRM proposes other requirements (hereinafter, referred to as “the
proposed rule’s other requirements” or “the proposed rule’s other provisions”), but those
requirements do not constitute collections of information for purposes of the PRA. 1
(1) & (2) Necessity for and Use of the Information Collection
Clear and conspicuous disclosures of the refundability of fees not included in Total Price
displays will ensure that consumers have the information that they need to understand the
material terms of the sales transactions that they enter into. This information is necessary for a
consumer to decide whether to consent to the charge. As explained in Part III.B of the NPRM,
comments received in response to the previously issued Advance Notice of Proposed
Rulemaking 2 indicated that consumers made purchases that included charges for goods or
services that the consumers believed were refundable. These consumers discovered only after
making the purchases that the charges were either not refundable at all or that a portion of the
fees was not refundable. Whether a charge is refundable is an important component of the nature
or purpose of the charge and is material to consumers – that is, it is likely to affect their choice of
product or their conduct regarding the product. 3 Disclosures of the refundability of charges
excluded from the Total Price are necessary for consumers to decide whether to accept the
optional charges.

See Part VIII of the NPRM for a discussion of these additional requirements and the Commission’s rationale as to
why the proposed rule’s other requirements do not constitute collections of information. See also Part V of the
NPRM for an overview of the proposed rule’s prohibitions and requirements.
2
See 87 FR 67413 (Nov. 8, 2022).
3
See NPRM notes 191, 193.
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The FTC does not intend to use fee refundability disclosures for any purpose other than
monitoring compliance.
(3)

Consideration of the Use of Improved Information Technology to Reduce
Burden

Businesses subject to the proposed rule are free to offer, display, or advertise their goods
or services using whatever technology they wish to use. Nothing in the proposed rule prescribes
that the refundability disclosure be made on paper or in any format that would preclude the use
of improved technology.
(4)

Efforts to Identify Duplication

As noted in the NPRM, the Commission has reviewed the proposed rule as a whole,
including the proposed rule’s other requirements, for any potential duplications of or conflicts
with other federal statutes, rules, or policies currently in effect. The FTC has not identified any
other federal statutes, rules, or policies currently in effect that may directly duplicate or conflict
with the proposed refundability disclosure requirement.
There is some overlap between the proposed rule and some of the FTC’s existing
regulations. Specifically, the Telemarketing Sales Rule and the Business Opportunity Rule both
contain provisions requiring the disclosure of all material terms related to refund policies. 4
Similarly, the Franchise Rule requires the disclosure of certain fees and the disclosure of whether
any of the fees are refundable and under what conditions they are refundable, 5 and the Negative
Option Rule prohibits misrepresentations pertaining to refunds. 6 However, the proposed
refundability disclosure requirement does not conflict with these rules, but would work in
tandem with them to protect consumers. Unlike the FTC’s existing regulations, the proposed
refundability disclosure requirement is not limited to specific marketing or sales techniques (e.g.,
telemarketing, negative option marketing) or to specific market sectors (e.g., business
opportunities, franchises). As such, if finalized, the proposed rule would protect U.S. consumers
by filling this regulatory gap.
(5)

Impact on Small Businesses

The refundability disclosure requirement would impact only a subset of small businesses:
those that currently charge a fee that is properly excluded from their Total Price display without
disclosing the refundability of that fee. Thus, it would require only small businesses that
currently do not disclose the refundability of fees excluded from their Total Price displays to
adjust their business practices. Most small businesses will already be aware of whether they are
currently excluding any fees from their Total Price displays, and if so, whether they provide a
disclosure as to the refundability of such fees in a manner that is difficult to miss (i.e., easily
noticeable) and easily understandable. Additionally, instead of disclosing the refundability of
such fees, small businesses will also have the option to simply include such amounts in the Total
4
5
6

See 16 CFR 310.3(a); 16 CFR Part 437.3(a)(4).
16 CFR Part 436.5(e).
See generally 88 FR 24716 (June 23, 2023).

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Price that they display, advertise, or offer to consumers. As such, any covered small businesses
would incur only de minimis costs in assessing whether they are in fact noncompliant with the
proposed refundability disclosure requirement. 7
(6)

Consequences of Conducting Collection Less Frequently

Less frequent disclosure of the refundability of fees would undermine the purpose of the
proposed rule. Every consumer benefits from receiving transparent information about the fees
they pay, including whether the fees are refundable. Requiring a less frequent disclosure of this
information would mean that some consumers would not have the same ability as others to make
informed purchasing decisions. Businesses would be required to affirmatively disclose the
refundability of fees only if those fees are excluded from the Total Price. Fees are only permitted
to be excluded from the Total Price if they are Shipping Charges, Government Charges, or
optional fees—i.e., they are not fees that a consumer must pay for a good or service and any
mandatory Ancillary Good or Service. Thus, the proposed refundability disclosure requirement
was drafted in a manner that limits the circumstances in which businesses would be required to
make these disclosures.
(7)

Circumstances Requiring Collection Inconsistent with Guidelines

None. The collection of information in the Rule is consistent with all applicable
guidelines contained in 5 CFR 1320.5(d)(2).
(8)

Public Comments/Consultation Outside the Agency

Because this request pertains to a new proposed rule, the FTC did not previously seek
public comment related to the disclosure requirement for which the FTC is seeking clearance.
The FTC sought public comment generally about unfair or deceptive practices related to fees in
an Advance Notice of Proposed Rulemaking, 8 pursuant to which the FTC received over 12,000
comments, some of which addressed the issue of refundability, as discussed above. Through the
NPRM, the Commission is providing an opportunity for public comment while seeking OMB
approval.
(9)

Payment or Gift to Respondents
Not applicable.

(10)

Assurances of Confidentiality

No assurance of confidentiality is necessary as the businesses that would be subject to the
proposed rule do not have to register or file any documents with the Commission, and disclosing
to consumers in advertising whether fees are refundable does not involve confidentiality
concerns.

However, the Commission acknowledges that small businesses will incur additional costs as a result of the
proposed rule’s other provisions. See infra note 10 for a discussion of these costs.
8
87 FR 67413 (Nov. 8, 2022).
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(11)

Sensitive or Private Information

Disclosing to consumers in advertising whether fees are refundable does not require the
disclosure of any information of a private or sensitive nature.
(12)

Estimated Annual Hours Burden and Associated Labor Costs

Although the NPRM proposes several requirements, only one of the proposed
requirements constitutes a collection of information for purposes of the PRA. 9 Specifically, the
FTC’s proposal to require businesses to disclose the refundability of fees not included in the
Total Price constitutes the proposal’s only collection of information (hereinafter, also referred to
as “refundability disclosure requirement”). Therefore, this burden analysis focuses on the burden
resulting from the proposed refundability disclosure requirement, although the Commission
understands that businesses will likely incur additional costs as a result of the proposed rule’s
other requirements. 10
Estimated One-Time Hours Burden: 245,454 Hours.
FTC staff estimates that 818,178 entities are currently not in compliance with one or
more of the proposed requirements (including those that do not constitute a collection of
information). 11 However, FTC staff assumes that only 20 percent of these 818,178 entities, or
163,636 entities, will incur costs as a result of the refundability disclosure requirement. FTC staff
believes that the remaining entities (approximately 654,542) already make disclosures consistent
with the proposed refundability disclosure requirement in the normal course of their activities. 12
Thus, although the majority of firms within the FTC’s jurisdiction will be subject to the

See Part VIII of the NPRM for the Commission’s rationale as to why the other proposed requirements do not
constitute collections of information.
10
As noted in the NPRM for purposes of transparency and comprehensiveness, FTC staff estimates that, in
connection with the proposed rule’s other provisions, all firms in the U.S. economy will spend, on average,
approximately one hour conducting a compliance review. See NPRM, Part VIII. Additionally, entities that are
currently not in compliance with one or more of the proposed rule’s other provisions will incur costs as a result of
having to bring their business processes into compliance. See id.
11
See the United States Census Bureau’s Statistics of U.S. Businesses. U.S. Census Bureau, 2020 SUSB Annual
Datasets by Establishment Industry (Mar. 2023). The number of entities (818,178) is derived as follows: FTC staff
subtracted the number of firms in the live-event ticketing, short-term lodging, and restaurant industries (518,119)
from the total number of firms in the U.S. (6,140,612) and assumes that 10% of those remaining firms will incur
costs because they are currently not in compliance with one or more provisions of the proposed rule, including those
provisions of the rule that do not constitute collections of information for purposes of the PRA. This results in
562,249 firms that incur compliance costs (beyond an initial review of whether they are compliant) that are not in
the live-event ticketing, short-term lodging, and restaurant industries. Next, FTC staff added the number of firms in
the live-event ticketing, short-term lodging, and restaurant industries that FTC staff currently expects to be
noncompliant with the proposed rule (255,929), which results in 818,178 entities.
12
However, as these entities are currently not in compliance with one or more of the proposed rule’s other
provisions, they will likely incur costs related to bringing their business processes into compliance with those
proposed requirements. See also supra note10.
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refundability disclosure requirement, only the time, effort, and financial resources expended by
these 163,636 entities 13 constitute a burden for purposes of the PRA. 14
FTC staff believes that businesses will incur only minimal costs in assessing whether
they currently comply with the refundability disclosure requirement because that determination
is simple. Businesses will merely have to assess whether they are currently excluding any fees
from the Total Price, and if so, whether they provide a disclosure as to the refundability of such
fees in a manner that is difficult to miss (i.e., easily noticeable) and easily understandable.
Therefore, FTC staff believes that any costs related to this rudimentary compliance review is de
minimis.
However, FTC staff believes that businesses will incur costs as a result of providing the
required disclosure. FTC staff estimates the burden resulting from the refundability disclosure
requirement will be, on average, 90 minutes (or 1.5 hours) for each entity estimated to not be
currently compliant with the refundability disclosure requirement (163,636). Of this 90-minute
total, FTC staff estimates that 30 minutes will be time spent by attorneys reviewing the
disclosure, and 60 minutes will be time spent to update the website or physical price display to
include the appropriate disclosure. 15 Accordingly, the total estimated one-time hours burden is
245,454 hours (163,636 firms x 1.5 hours).
Estimated One-Time Labor Cost: $13,305,243.
Applying the hourly wage for attorney time of $78.40 16 to the estimate of 30 minutes of
attorney time and applying the hourly wage for web developer time of $42.11 17 to the estimate of
60 minutes of web developer time, this yields a one-time labor cost of $81.31 per entity
($39.20+$42.11). Accordingly, the estimated total one-time labor cost for disclosures is
$13,305,243 ($81.31 per entity * 163,636 entities).
(13)

Estimated Capital/Other Non-Labor Costs Burden

This number may be overinclusive as it includes entities that would be exempted from the definition of the term
“Business,” as described in proposed Section 464.1(b), if another proposed rule that is currently in development, the
Motor Vehicle Dealers Trade Regulation Rule, is finalized, published, and in effect at 16 CFR Part 463. However,
FTC staff is including such entities in its calculations because the Motor Vehicle Dealers Trade Regulation Rule is
not yet finalized, published, and in effect.
14
See 5 CFR 1320.3(b)(2) (“The time, effort, and financial resources necessary to comply with a collection of
information that would be incurred by persons in the normal course of their activities (e.g., in compiling and
maintaining business records) will be excluded from the “burden” if the agency demonstrates that the reporting,
recordkeeping, or disclosure activities needed to comply are usual and customary.”).
15
Web developer time is a proxy for any costs associated with changing the firm’s disclosures to comply with the
proposed rule, such as the time spent adjusting websites or adjusting any physical price displays to include the
disclosure.
16
See U.S. Bureau Lab. Stat., Occupational Employment and Wage Statistics, Occupational Employment and
Wages, May 2022: 23-1011 Lawyers (May 2022), https://www.bls.gov/oes/current/oes231011 htm (providing the
hourly wages for lawyers).
17
See U.S. Bureau Lab. Stat., Occupational Employment and Wage Statistics, Occupational Employment and
Wages, May 2022: 15-1254 Web Developers (May 2022), https://www.bls.gov/oes/current/oes151254 htm
(providing the hourly wages for web developers).
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Any capital and start-up costs associated with the proposed rule’s disclosure requirements
will be at most de minimis. Businesses already convey pricing information to consumers in their
normal course of business, and any capital costs involved in making the necessary disclosures
would be costs borne by sellers in the normal course of business.
(14)

Estimated Cost to the Federal Government

FTC staff estimates that the Federal Government will not incur any costs from the
proposed refundability disclosure requirement except for monitoring for compliance and taking
enforcement action. FTC staff estimates that the cost to the FTC’s Bureau of Consumer
Protection of enforcing the refundability disclosure requirement will be approximately
$70,619.60 per year. FTC staff estimates that approximately 1/10 of the time spent enforcing the
proposed rule as a whole would involve the refundability disclosure requirement. The estimate of
the cost of the proposed rule includes the cost of 3.5 full-time employees (“FTEs”) (salary and
benefits for two full-time attorneys, one half-time attorney, one half-time investigator, and one
half-time economist) annually to monitor, investigate, and enforce violations of the rule.
Approximately 1/10 of these FTEs would be applied to the refundability disclosure requirement.
FTC staff does not expect the agency to incur additional costs.
(15)

Adjustments/Changes in Burden

This request is for a new proposed rule. There are therefore no adjustments or changes in
burden to report.
(16)

Plans for Tabulation and Publication

The proposed rule does not require businesses to provide information to the FTC. There
are therefore no plans to publish any information obtained pursuant to this information
collection.
(17)

Failure to Display Expiration Date for OMB Approval

Not applicable.
(18)

Exceptions to Certification

The FTC certifies that this collection of information is consistent with the requirements
of 5 CFR 1320.9, and the related provisions of 5 CFR 1320.8(b)(3), and is not seeking an
exemption to these certification requirements.

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