SB2140

SECTION 1. The legislature finds that providers of transient accommodations are adding junk fees to their advertised rates and prices. Junk fees are hidden and bogus fees that are designed to either confuse or deceive consumers or to take advantage of lock-in or other forms of situational market power. Some examples of junk fees include mandatory fees that are not disclosed until after a transaction commences, surprise fees that consumers learn about after purchase, excessive fees that target consumers who have limited alternative options, and fraudulent fees of which their nature and purpose are misrepresented by the seller. Common undisclosed mandatory fees include hotel resort fees and airline baggage and change fees. These hidden mandatory fees prevent consumers from making informed purchases and knowing how much they are to pay for lodging or airfare. A 2022 report from the White House estimates that Americans have paid over $8,000,000,000 in hotel and airline junk fees annually.

The practice of charging an undisclosed mandatory fee in addition to the advertised price after the purchase process begins is called "drip pricing". Drip pricing misleads consumers of the actual amount they are to pay for a product or service. Studies have found that drip pricing inhibits price competition, while resulting in consumers paying more for a product or service than they initially would have had the actual and total price been advertised. Drip pricing can also create an uneven playing field for businesses by making small and medium companies that price in a fair and transparent manner seem more expensive than their rivals. Drip pricing additionally incentivizes companies to engage in "exploitative innovation", where new junk fees are developed rather than the quality of the product or service.

The legislature notes that there is national support to reduce and eliminate the practice of drip pricing. For example, the federal Junk Fee Prevention Act, S. 916. 118th Cong. (2023) was introduced earlier this year to curb and eliminate excessive, hidden, and unnecessary fees that are unexpectedly imposed on consumers. California recently passed the Consumers Legal Remedies Act, 2023, which would make it unlawful to advertise, display, or offer a price for a product or service that does not include all mandatory fees or charges, with exceptions. In October 2023, the Federal Trade Commission proposed a new trade regulation rule entitled the "Rule on Unfair or Deceptive Fees" that would prohibit businesses from advertising prices that hide or omit disclosing mandatory fees, prohibit sellers from misrepresenting fees, and require sellers to disclose upfront the amount and purpose of the fees and whether the fees are refundable. The legislature believes that prohibiting people who pay transient accommodations taxes from charging fees that were not disclosed at the time of purchase and instead requiring them to fully disclose the rate that a consumer is expected to pay upfront will protect consumers from deceptive trade practices.

Accordingly, the purpose of this Act is to:

(1) Prohibit any person from charging any fees on a transient accommodation or resort time share vacation interest, plan, or unit that were not disclosed before the time of purchase;

(2) Require a person to clearly and conspicuously display in each advertisement for a transient accommodation or resort time share vacation interest, plan, or unit a rate or price that includes all fees to be charged at the time of purchase; and

(3) Require any taxes and fees that are displayed as a percentage of the cost on a booking transaction also be displayed as a dollar amount at the time of purchase.

SECTION 2. Chapter 481B, Hawaii Revised Statutes, is amended by adding a new section to part I to be appropriately designated and to read as follows:

"§481B- Transient accommodations; booking transactions; total price; disclosures; junk fees. (a) No person shall charge any fee for a transient accommodation or resort time share vacation interest, plan, or unit that was not disclosed before the time of purchase.

(b) A person shall clearly and conspicuously display in each advertisement for a transient accommodation or resort time share vacation interest, plan, or unit, including online advertisements, a rate or price that includes all fees to be charged at the time of purchase.

(c) Any taxes and fees on a booking transaction that are displayed as a percentage of the cost at the time of purchase shall also be displayed as a dollar amount.

(d) For the purposes of this section:

"Booking transaction" means any transaction in which there is a charge to a consumer by a taxpayer for any transient accommodation or resort time share vacation interest, plan, or unit.

"Government entity" has the same meaning as defined in section 137-1.

"Resort time share vacation interest", "resort time share vacation plan", "resort time share vacation unit", and "transient accommodations" have the same meanings as defined in section 237D-1."

SECTION 3. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 4. New statutory material is underscored.

SECTION 5. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________

Report Title:

Consumer Protection; Transient Accommodations; Booking Transactions; Drip Pricing; Disclosures; Junk Fees

Description:

Prohibits any person from charging any fees on a transient accommodation or resort time share vacation interest, plan, or unit that were not disclosed before the time of purchase. Requires a person to clearly and conspicuously display in each advertisement for a transient accommodation or resort time share vacation interest, plan, or unit a rate or price that includes all fees to be charged at the time of purchase. Requires any taxes and fees that are displayed as a percentage of the cost on a booking transaction also be displayed as a dollar amount at the time of purchase.

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.

THE SENATE	S.B. NO.	2140
THIRTY-SECOND LEGISLATURE, 2024
STATE OF HAWAII