The Rise of Junk Fee Class Actions: What Companies Should Know

The threat of "junk fee" class action suits – those targeting pricing practices deemed deceptive – is real and growing. These claims have become a high-volume practice area, with class-wide exposure that can reach $10 million or more. Thus, companies should understand the drivers of this litigation to strengthen compliance.

When it comes to required disclosures, the location matters as much as existence. During litigation, courts focus on whether fees were prominently and timely disclosed, not just whether they appeared somewhere. Fees disclosed only at checkout are high-risk. Fees disclosed at the initial stages of the transaction reduce risk. This is especially important for online transactions. 

In addition, properly drafted arbitration clauses remain the strongest structural defense for companies. Those with enforceable class waivers can convert class actions into individual arbitrations, and pre-suit remediation is dramatically more cost-effective than post-suit defense.

As these cases surge, regulatory action and private litigation are converging. Enforcement actions by the Federal Trade Commission (FTC) and state attorneys general (AG) establish precedents that plaintiffs' firms use as road maps when bringing class actions.

What Is Junk Fee Litigation?

Junk fee litigation encompasses class actions and enforcement actions challenging fees that regulators characterize as hidden, unnecessary or deceptive, and not clearly included in the advertised price. Typical claims allege a "bait-and-switch" – when consumers see a headline price but ultimately pay more due to add-on fees.

Junk fee litigation commonly centers on the following:

• hotel resort and destination fees
• apartment amenity, utility and administrative fees
• electronic ticket delivery and service fees
• rental car surcharges and similar add‑ons

What Is Driving the Wave?

The FTC has made junk fee elimination a priority, including through proposed rulemaking against "drip pricing," or the practice of listing a price that is less than what a consumer will have to pay for a good or service. AGs in California, New York, Illinois, Colorado and Florida have brought parallel actions. This regulatory activity validates plaintiffs' theories and creates public records that firms rely on during private litigation.

Consumer class action firms have developed turnkey templates targeting specific fee types. A single resort fee complaint can be repurposed to use against dozens of competitors, applying equally to multifamily fees, rental car surcharges and mortgage fees.

State Unfair and Deceptive Acts and Practices (UDAP) statutes – including the District of Columbia Consumer Protection Procedures Act, California Consumer Legal Remedies Act and analogous laws nationwide – provide plaintiffs with potentially powerful tools: Statutory damages that convert small per-consumer overcharges into large exposures, one-way fee-shifting and broad standards that do not require proof of intent. Some recent hospitality settlements have ranged from $5 million to more than $50 million.

How Plaintiffs Are Framing the Claims

• UDAP Claims Based on State Consumer Protection Laws: UDAP claims are the workhorse of junk fee litigation. Plaintiffs allege that fees are buried in fine print, revealed late in the booking process or described in misleading terms. Courts increasingly focus on the process flow of when a fee is disclosed, examining whether a reasonable consumer would have noticed and understood the fee at the point in the transaction where it appeared.
• Contract Claims: When it comes to contract claims, plaintiffs argue that contracts did not authorize the challenged fee or that assessing it violates the implied covenant of good faith. These theories frequently arise in multifamily housing, where leases are scrutinized for clear fee authorization.
• Drip Pricing: Advertising an attractive base price and revealing mandatory surcharges only as consumers progress through the transaction has emerged as a distinct theory. Even fully disclosed fees can be challenged if the manner and timing diminish awareness of the true total price.

Industries Currently in Crosshairs

Junk fee litigation affects a wide range of industries, including:

• Hospitality. Hotel brands face challenges surrounding resort and destination surcharges. Guests often select rooms based on advertised rates and later encounter non-optional fees at checkout. Both franchisors and management entities may be named in claims, raising indemnity issues.
• Multifamily Housing. National housing providers are defending class actions attacking application fees, move-in/move-out charges, late fees, utility charges and ancillary fees. Claims assert that leases do not clearly authorize the fees or disclosure violates tenant-specific rules.
• Financial Services. Lenders face suits alleging that origination fees and closing costs were not adequately disclosed. Data breach class actions also bundle fee-related theories.
• Electronic Ticket Sellers. Entities that sell tickets to sporting and entertainment events are facing increasing pressure to disclose the entire price of tickets – including base price and all associated fees – at the start of a transaction in order to prevent allegations of drip pricing practices.

Key Litigation Battlegrounds

• Class Certification: Class certification is often decisive, and cases that survive certification settle at multiples of pre-certification values. Successful defenses focus on variation in disclosures across channels, differences in consumer understanding and damages models requiring individualized inquiry.
• Arbitration and Class Waivers: Well-drafted arbitration clauses with class waivers remain highly effective in many areas; however, courts scrutinize notice and assent, unconscionability and the clarity of the class waiver. Robust provisions can convert a putative class into individual arbitrations, though doing so creates mass arbitration risk.
• Damages: Plaintiffs pursue restitution or "price-premium" models. Price-premium theories are vulnerable to expert challenges where the market does not offer fee-free alternatives or plaintiffs' models do not show that disclosure would have changed consumer behavior.

Proactive Defense Strategies

The most successful litigation outcomes reflect the work that companies do before complaints are filed. Early risk-management measures include: 

• Auditing Fee Disclosures. Companies should review each consumer-facing transaction. When is each fee first disclosed? Is it as prominent as the base price? Does the label accurately describe what the fee covers? Do the disclosures meet the requirements of any applicable statutory requirements?
• Tightening Contract Language. Entities can ensure specific authorizations for each fee category, clear non-generic descriptions and integration clauses that align contracts with marketing flows.
• Refreshing Arbitration Programs. Companies are advised to conduct an "arbitration health check." Are terms clearly disclosed and accepted? Are opt-out procedures reasonable? Can provisions withstand unconscionability challenges? Are the provisions permitted for the contract type?
• Managing Early Litigation. When a complaint is filed, companies should use the first 60 days to implement litigation holds, conduct privileged reviews of actual practices, assess arbitration enforceability and size potential exposure.
• Coordinating with Regulators. If there is parallel FTC or state AG activity, businesses can harmonize litigation positions with regulatory strategy and centralize oversight.

What a Strong Defense Looks Like

Effective defense teams understand how fees are actually set and displayed, integrate operations witnesses into legal strategy, and target standing and contract-interpretation defenses early. Companies with robust pre-litigation compliance programs resolve these matters at a much lower cost than those without documented fee governance frameworks.

What's Next: Trends to Watch

The junk fee environment will intensify before it stabilizes. Companies should prepare for:

• FTC Rulemaking. The proposed "all-in" pricing rule is already shaping state legislation and plaintiffs' theories. Companies should not wait for final rulemaking to begin compliance planning.
• Industry Expansion. Plaintiffs' firms are adapting templates for healthcare, financial services and subscription businesses. Companies in adjacent sectors should conduct preemptive audits.
• State Legislation. California, New York, Illinois and Colorado have enacted junk fee legislation, with 10 to 15 additional states expected to follow, creating a patchwork requiring jurisdiction-by-jurisdiction compliance mapping.
• Digital Interfaces. Courts are developing frameworks for evaluating digital disclosure practices, and "dark pattern" allegations are increasingly bundled with junk fee claims.
• Mass Arbitration. As class waivers become more common, plaintiffs' firms are filing thousands of individual arbitration demands simultaneously to create cost pressure. Companies should stress-test their arbitration programs.

How Holland & Knight Can Help

Holland & Knight's Litigation and Dispute Resolution Practice has extensive experience defending hospitality brands, housing providers and consumer services companies in junk fee class actions and related regulatory proceedings. We help clients design defensible pricing frameworks, strengthen arbitration programs, develop certification-focused strategies and navigate parallel class actions and regulatory investigations.

For more information or questions about the alert, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.