California Restaurants Banned from Charging Surcharges and Hidden Fees
California restaurants will no longer be allowed to impose surcharges or service fees on customers, thanks to a new law that will soon take effect. Beginning July 1, Senate Bill 478, also known as the “Consumer Legal Remedies Act: advertisements,” will put an end to the practice of adding unjustifiable fees to purchases made throughout the state, as per the legislation reviewed by our experts.
Restaurants frequently misrepresent these surcharges, which are often mistaken as tips or taxes, as necessary to cover supplementary expenses like employee health care or credit card processing fees, as confirmed on Tuesday by the California attorney general’s office in a news article that the San Francisco Chronicle posted. Nevertheless, the law, sponsored by Senator Nancy Skinner, will put an end to the confusion caused by these hidden junk fees and ensure transparency in the pricing of products and services from restaurants to concert tickets. Consumers will be informed of the precise amount to be paid beforehand, eliminating any surprises.
Understanding “Junk” Fees
The new law takes a strong stance against “junk” fees or drip pricing, a deceptive business strategy in which the displayed price to consumers fails to reflect the final amount paid for a product or service. Companies have been employing this method to lure customers by presenting seemingly inexpensive options when compared to their competitors. Although existing laws address unfair competition and false advertising, until now, California lacked specific regulations surrounding hidden fees.
The legislation clarifies that its intent isn’t to prohibit any particular pricing method but rather to govern how prices are advertised, displayed, or offered to consumers. The emphasis is on transparency and empowering buyers to make informed decisions.
Changes Impacting Shopping and Dining
Effective July 1, the law mandates businesses to disclose all charges upfront to customers, ensuring complete transparency in transactions. This disclosure requirement applies to all industries, except for taxes and government fees. Restaurants, in particular, will need to revamp their pricing practices. Instead of adding surcharges at the conclusion of the dining experience to account for additional costs or to move away from tip-based compensation, they will be obligated to incorporate these extra fees into their menu prices from the beginning, giving customers an accurate understanding of the total cost upfront.
Exceptions to the Rule
It’s important to note that car rental companies and motor vehicle dealerships enjoy certain exemptions from the law. Car rental entities will be considered compliant as long as they provide a disclaimer that outlines the possibility of imposing additional mandatory charges. Vehicle dealerships will not be in violation of the law if they do not disclose specifics about registration or licensing fees in the payments.
By curbing the use of misleading fees, this new legislation aims to protect consumers from questionable billing practices and bring transparency and fairness to the marketplace. As the law takes effect, Californians can look forward to a clearer understanding of the charges they are asked to pay and an end to unpleasant surprises when settling their bills.
