Who Are the People That Create Hidden Fees?
I was in for a big surprise last week when I picked up a sandwich for lunch. What was supposed to cost $8.95 turned out to be $12.35. Blame it on hidden fees.
- The “condiment placement fee” for the spicy mustard: 35 cents
- The “texture enhancement fee” for de-pitting and applying avocado: 65 cents
- The “temperature adjustment fee” for toasting the bread: 90 cents
- And finally, the “nutrition assembly fee” for…making the sandwich: $1.50
This is pure fiction, of course. How could a mom and pop deli add costs for the act of sandwich making? That would be like a writer charging extra for the typing.
Absurd nonsense, yes, but no more than the real hidden fees consumers pay. Each year, Americans put around $8 billion of unnecessary money into corporate bank accounts.
One of the biggest culprits is the hotel industry and the infamous “resort fee.” This means the hotel will tack on an extra charge if the property includes things like a business center, a swimming pool, a gym, or even a bar.
Typically you’re not told about the resort fee until check-in, but you have to pay it even if you don’t use any of those amenities.
No sweat for the hotels. Resorts fees bring in about $2.04 billion every year, which is 16.6% of the industry’s overall revenue.
As much as I’m bothered by hidden fees, I’m more troubled that corporate leaders thought it was okay to create them - to deceive people in the name of profits.
There’s nothing wrong with trying to sell more of your offerings. But a hidden fee is not a charge for an optional product or service. Rather, you’re paying extra for very thing you’ve already purchased.
How messed up is that?
For example, AT&T and Verizon have a "line access fee". This isn’t an option – it’s a fee that customers must pay to use phones and data plans they just bought.
CEOs and executives also manipulate the timing of when to spring the news on unsuspecting consumers. They bury the hidden fee into tiny print that no one but a prisoner in solitary confinement has the patience to read.
They also use one of the oldest tricks in the book, telling customers about the hidden fee only once they already have some of their money.
Customers usually resign themselves to a shoulder shrug and meekly agree to the added cost. Emotionally, it’s hard to back out of a transaction after you’ve convinced yourself to buy.
I can understand that psychology. But I don’t understand how some leaders can partition their values. Those responsible for creating hidden fees probably revere honesty in their personal lives, but somehow justify unethical behavior in their professional lives.
I want to know who these people are. I want them to go on the Rachel Maddow show or Last Week Tonight with John Oliver. They should be forced to look in the camera and tell the masses with a straight face why it’s legitimate to dupe people out of their hard earned money.
Each week could feature a guest from a different industry.
First is a VP from the credit card industry, who could explain why the American people should do jumping jacks over Annual Membership Fees (This is the cost of simply being able to use the card.)
Next is a CEO from the cable television industry, who could reveal why it’s fair to have an Equipment Cost Recovery Fee (This covers the cost of maintaining, repairing and improving their network).
The following week is an executive from higher education, who could point out to cash-strapped parents the rationale of the Student Success Fee (This covers the cost of student services the school may add in the future).
Then we’ll have a leader from the automobile sales industry, who could tell us about the Floor Plan Fee (This covers the cost of keeping the vehicle in the dealer’s inventory).
And while we’re at it, let’s invite a decision maker from the property management industry, who can enlighten us about the Rental Service Fee (An extra fee you pay to be able to pay your rent. My friends, you can’t make this stuff up).
What can we do to eliminate these unethical practices? In 2016, the National Economic Council (NEC), a non-partisan U.S government office, issued a report with a host of recommendations to tackle the issue.
One recommendation is to have a legal requirement of "all-in" pricing. This would force companies to advertise the exact total amount they charge for specific products or services. Other suggestions include action by consumer groups, fee caps, and more transparent disclosure of fees.
Those against regulation might claim these ideas, if implemented, would hinder growth and innovation. The free market system, driven by the forces of supply and demand, will self-correct all wrongdoing.
I’m sorry, but it’s naïve to think that corporations will police themselves, especially when profits are involved. We needed legislation to protect employee health and safety. We needed legislation to make seat belts mandatory in cars. Now we need legislation to clamp down on hidden fees.
I’m all for businesses being able to make a profit. I’ve spent over two decades helping companies to do that. But just because there’s a way to earn money doesn’t mean you should try it.
Besides, everyone benefits when the listed cost is the actual cost. As the NEC report says, “Transparent and accurate pricing is the foundation of an effective and efficient American economy, allowing consumers to make smart choices and to reward the providers of better goods and services.”
How novel. Just make the price the price.