But now, some states may soon have new tools to combat potential unfair and deceptive practices throughout a variety of industries. With the legislative season coming to a close, we have your rundown of the spread of “hidden fees” regulation including California and beyond. So, if a vacation from hidden resort fees is all you ever wanted – and a trip to see Carhenge or the Alamo (attractions in states where attorneys general have been active in enforcement) has already been checked off your bucket list – here are your ideal places to get away:

California: The Golden State’s newly minted Consumers Legal Remedies Act (SB 478) amendment will take effect on July 1, 2024, specifically making it unlawful for companies across virtually all industries to advertise or display a price without including all mandatory fees and charges, save taxes and fees imposed by the government (though the bill states that “drip pricing” is already prohibited). Click here and here for more details. California is such a lovely place, and if you are traveling on a dark desert highway looking for somewhere to rest your head, you should be aware the California Resort Fee Bill (AB 537) contains similar measures even more specific to the short-term lodging industry (effective July 1, 2024).

When all of this raises your appetite, you can dig into the legal back-and-forth between lawmakers and California’s food and beverage industry. In response to questions about how SB 478 would apply to bars and restaurants, lawmakers recently introduced an urgency measure (SB 1542) that would make clear that restaurants may still display mandatory gratuities, services charges, and other fees separately so long as they are clearly displayed on the menu and don’t come as a post-dessert surprise. Interestingly, the legislature specifically noted that this is intended as a clarification, not a change in existing law. As of today, this hasn’t passed yet, but we will be sure to provide updates.

Massachusetts: If the Cape is more your style, you may want to pay attention to Massachusetts AG Andrea Campbell’s proposal of a new slate of regulations that would require businesses to “clearly disclose” the total price of goods and services. Like in California, this would apply across industries. If enacted, non-compliance would constitute an unfair and deceptive trade practice. Read our full coverage here.

Minnesota: If you have the land of 10,000 lakes in mind, the state recently passed HF3438 requiring that an advertised or displayed price include all mandatory fees and surcharges (not including taxes), including additional clarity on “mandatory fees” compared to California’s statute. The bill provides exemptions or specifications for several industries, including specifically requiring that hotels (among other food or beverage establishments) must clearly and conspicuously disclose the percentage of any automatic or mandatory gratuities that consumers will be charged. The law will take effect January 1, 2025.

The Near Hits: As state lawmakers leave for their own summer vacations, some notable legislation got left on the drawing board. For instance, in the Land of Lincoln, the state’s proposed Junk Fee Ban Act gained momentum when it easily passed the Illinois House in a 71-35 vote but then never made it to the Senate floor. We saw similar attempts in Connecticut and New York. While these bills didn’t cross the finish line this year, we expect many states will take on this issue in the next legislative season.

Against this backdrop of state activity, the FTC is in the midst of rulemaking process that would ban hidden fees and further regulate the types of fees companies can charge. Revisit our coverage on that here and here. Also in Washington, the House of Representatives just passed the No Hidden Fees Act. If made law, the Act would require hotels and other short-term rentals to clearly display mandatory fees.

Clearly, multiple levels of government are “checking out” hidden fees. Even President Biden denounced “surprise” fees in his 2023 State of the Union Address.

Of Importance…

• Updates to regulation are occurring but general state consumer laws still apply. While some states may be setting specific standards in this area, remember state consumer laws, which outlaw deceptive acts and practices (and in many states, unfair acts and practices), still apply. Therefore, just because a state doesn’t specifically spell-out fees requirements in its statutes or regulations, it does not mean fees disclosures comply with states’ interpretations of the law. (For example, the AG’s office in Washington DC issued guidance on the types of restaurant fees that may violate existing law.)
• Some fees face greater scrutiny than others. AGs have sought out so-called “bogus” fees they feel offer consumers little value. Companies should be mindful of what the fees actually deliver for consumers and convey the value accurately and clearly.
• Messaging and disclosures are critical. The crux of the states’ take on drip pricing is a failure to disclose certain fees in a timely manner (if at all), and AGs have taken issue with tactics that do not clearly describe when a fee is mandatory or not.

We expect to see more on “junk fees” in the weeks and months ahead. Subscribe to our monthly newsletter AG Chronicles and Ad Law Access blog to stay up-to-date.

BINT allegedly operated a deceptively marketed faith-based wealth building organization designed as a “blessing loom” during the COVID-19 pandemic that falsely promised investment returns as high as 800 percent. Victims of the scheme were allegedly promised a return of over $11,200 each, for their (refundable) investment of between $1,400 to $1,425, if they recruited other people to join. However, these investments did not pay off and customers were not provided refunds as promised.

Arkansas’ Attorney General Tim Griffin and the Federal Trade Commission jointly filed a Stipulated Order for Permanent Injunctive Relief with a $450,000 settlement (the monetary portion is contained in a separate “Monetary Judgment” between Arkansas and defendants). This settlement enjoins defendants from:

• Participating in or operating a Ponzi, chain referral, or “blessing loom” scheme (seemingly more akin to their alleged conduct).
• Making misrepresentations regarding income, costs or other material aspects of business ventures or investment opportunities (defined terms).
• Creating contracts terms that prohibit parties from leaving reviews, addressing allegations of violations of the Consumer Review Fairness Act (enforceable by states and the FTC).
• Violating the Arkansas DTPA including its specific prohibition against operating a “pyramid promotional scheme.”

While these terms generally track the allegations from the lawsuit, the FTC and states took it a step further by prohibiting BINT and its owners from operating or even participating in any “multi-level marketing program,” which the agreement defined broadly as a program that recruits others and receives payment based at least partly on activities of a “downline.” The expansion of this injunction beyond otherwise illegal “pyramid schemes” is a good reminder of the broad powers of the state and FTC and the significant negotiating leverage they can wield.

At the same time, the Office of the Attorney General in Texas announced that it secured $2,500,000 in restitution and $7,500,000 in penalties from BINT. Parties have agreed upon, however, a number of payment options that would satisfy the judgment and vary depending on the time of payment and the collective aggregate gross annual income and assets; it’s unclear how much BINT will ultimately pay, but the priority in the settlement is payment towards restitution.

These cases serve as a reminder that pure chain referral/pyramid schemes – where consumers are promised returns based on the recruitment of others and not the sale of goods or services — are generally illegal under state and federal law. But additionally, these orders highlight the continued collaboration among states and the FTC, which can take different forms. Notably here one state (Arkansas) chose to file a joint lawsuit and settlement with the FTC in federal court, while another (Texas) chose a separate, but coordinated, lawsuit and settlement in state court. The consumer protection enforcement community collaborates often on these efforts (even more so in the post-AMG world), which can result in multiple lawsuits filed in different courts throughout the country. This makes it vitally important to ensure your practices comply with the law and stay in front of any potential enforcement.

Background and Priorities of the Office

Given Colorado’s larger size and what AG Weiser called a “range of inputs” including from the legislature and the public, the Consumer Protection Section is comprised of many specialized teams including an opioids unit, a utilities consumer advocate unit, a consumer credit codes unit (where the office plays a supervisory role in non-bank lending), and a civil rights and corporate fraud unit. The section also encompasses traditional consumer protection issues such as consumer fraud and antitrust. For example, in response to public outcry and legislative concerns, the office is actively reviewing student loans, fees, and student loan servicing as potential areas of deception and consumer harm.

Like most states, the office also uses consumer complaints filed with the office to inform its priorities. While Colorado’s complaints were historically not public, the office started a pilot program about a year and a half ago to forward complaints to some businesses for resolution. An expansion of this program should increase business’ awareness of potential issues as they arise.

Collaboration with States

Colorado has a robust history of participating in multistate consumer investigations. AG Weiser touted the multistate’s ability to create a comparative advantage and leverage the distinct strengths and resources of each state. “We’re better together,” he said. Moreover, states may provide a more efficient and streamlined settlement for businesses that are involved in nationwide investigations.

Price Gouging & Auto-Renewals

AG Weiser noted that in addition to its general UDAP law, the Colorado Consumer Protection Act, the office enforces specific consumer protection laws related to topics such as price gouging and auto-renewal charges. Under Colorado’s price gouging statute, it an “unfair and unconscionable act” when “a person charges a price so excessive as to amount to price gouging.” AG Weiser emphasized that the statute relies on a reasonableness standard which is based on comparison with the market. AG Weiser hypothesized that if there is a fire in Boulder County, if people are looking for a place to the stay that night, it’s understandable that the average will go up a little for the hotels. However, if one hotel charges $2,000 extra because they know they can take advantage of a family’s dire situation, AG Weiser identified that actor as an “opportunistic seller” who is violating Colorado’s price gouging laws. He said it is important to note that, like with many states, there has to be a declared state of emergency to trigger price gouging laws.

Auto-renewals have also been a hot topic in Colorado (as with many state and federal enforcers) as a specific Colorado law took effect in 2022. Mr. Blake emphasized the state’s commitment to enforce the recent statute and noted some of the more unique aspects, such as requirements for monthly subscriptions to provide annual reminder notices to consumers.

Colorado Privacy Act

AG Weiser stressed “if you’re a business today, and you’re not thinking about data, you need to wake up.” Colorado was the third state to pass a comprehensive privacy law. With the law now in effect, the office is paying particular attention to how businesses are reacting and adapting. AG Weiser provided some historical context to the law and noted that the CPA was intended to be “principle based” and not “prescriptive” with the knowledge that “technology changes and we need to have an adaptable regime.” Importantly, the office wants to focus its attention on businesses committing “flagrant fouls and not ticky tack fouls. If you’re trying and make a mistake, that’s okay, but if you’re deliberately thumbing your nose at the law? Not okay.”

Mr. Blake discussed Colorado’s thoughtful approach to regulatory process and rulemaking describing it as an extensive, collaborate, and transparent process to develop the rules that went into effect July 1. Blake said Colorado’s commitment is to continue in the spirit of collaborative rulemaking for consumers, members of industry, and sister states. AG Weiser added that the rulemaking process was critical to the CPA. The office started with informal stakeholder process, then issued model rules, received comments, and by the end of the process evaluated the comments and made adjustments prior to issuing final rules.

The office has conducted significant outreach to the business community to maintain the transparent approach to implementing the CPA. Mr. Blake discussed how the office sent a series of letters to businesses informing them of their duties under the CPA after the bulk of the rulemaking process was finished, the purpose of which he explained was to inform them that the law was in effect and what they can anticipate.

As we’ve previously reported, the CPA provides Colorado residents with the right to opt out of use of personal data for sale and targeted profiling, and next year they will have the right to use a universal opt out mechanism. The CPA also imposes a data minimization requirement and mandates covered businesses conduct data protection impact assessments before conducting data processing activities that present a heightened risk to consumers.

Mr. Blake stated that the office welcomes questions. Though the AG office does not answer individual questions, the office considers the questions for FAQs or future rulemaking. The office intends on releasing an FAQ in the coming months, with additional guidance on the universal opt out requirement going into effect July 1, 2024.

Artificial Intelligence

As AG Weiser’s office has discussed before, AI is a hot topic for state and federal agencies. AG Weiser stressed that not having the rules of the road for AI poses some potentially significant risks for our whole society. He stated that one of most important functions of consumer protection law is to build trust with consumers. If bad actors are not held accountable for harming consumers, then the overall trust environment is undermined for everyone. As such, AG Weiser worked with other states to issue a letter to the National Telecommunications and Information Administration (NTIA) and also gave a speech in front of the Federal Circuit Bar Association addressing his concerns for AI and its potential harms. Colorado has some tools available to curb potential harms from AI such as requirements for risk assessments and transparency under the CPA.

Mr. Blake added that AI could pose a risk of accelerating discriminatory practices. However, even without specifically tailored AI statutes, UDAP (unfair deceptive acts and practices) laws provide flexibility to law enforcement to deal with AI and other new technologies that create consumer harm.

Teen Mental Health

AG Weiser, like many of his AG colleagues, has made teen mental health a priority. He described concerns that social media increases engagement with dark content that negatively impacts teen mental health. AG Weiser said that the office evaluated its tools available such as the Children’s Online Privacy Protection Act (COPPA), but noted it falls short in only protecting children under 13 years of age, leaving teenagers unprotected. Mr. Blake added that the challenge is to assess whether these companies broke the law when it came to this teen mental health crisis. As Colorado’s investigation proceeds, the office will consider potential avenues for justice and rectification.

Join Kelley Drye’s State Attorneys General Ad Law Team for the next program in the 2023 State Attorneys General Webinar Series featuring Illinois Attorney General Kwame Raoul and his Consumer Protection Chief Susan Ellis on August 29 at 2:00 ET. Register here.

Special guest speakers Colorado Attorney General Phil Weiser and Nathan Blake, Deputy Attorney General for Consumer Protection, will join Kelley Drye State Attorneys General practice Co-Chair Paul Singer, Special Counsel Abby Stempson, and Senior Associate Beth Chun for a discussion on a variety of important consumer protection topics, including teen mental health and the increased use of artificial intelligence. AG Weiser has been a national leader on these important topics and will discuss how AGs are using their existing and new consumer protection authority to examine emerging issues.

In addition, the Colorado Privacy Act went into effect on July 1. AG Weiser marked the occasion with a series of letters sent to businesses announcing the office’s intent to enforce the new law. Join us to learn more about the Act, and the office’s enforcement plans.

REGISTER HERE