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Understanding California’s Landmark Junk Fee Law Revisions to the Consumer Legal Remedies Act (CLRA) | By Mark Adams & Jim Butler

Transparent pricing bans hidden fees and drip pricing
2 July 2024

First, the nomenclature of the forbidden practices, then the names for the law, a summary of the latest events, and details of the final California Junk Fee Law. In this article, we will focus on the changes to the California Civil Code (CC), and particularly CC Section 1770) of the Consumer Legal Remedies Act (CC 1750, et eq.).

The bottom line: As of July 1, 2024, California’s new Junk Fee Law is a comprehensive transparency pricing law that eliminates hidden mandatory fees. It applies to all businesses in all industries, except for a few specific exceptions. Restaurants are exempted if they meet certain conditions. Restaurants may find compliance trickier than apparent at first glance, and even a modest consumer backlash for this special exemption may be harmful.

CA Governor signs SB 1524’s new Junk Fee Law with “Restaurant Exemption” (if certain tests are met). SB 478, SB 1524, and AB 537 all go effective July 1, 2024. Unfair business practices redefined in CC 1770.

California bans fees and practices known by many names — junk fees, hidden fees, mandatory fees, drip pricing, surcharges, resort fees, unfair and deceptive practices, bait and switch, and consumer fraud.

Names for the new 2024 California Junk Fee Law

There are so many names for the California law that is making big changes, primarily to Civil Code Section 1770. It may be helpful to list the most common names, which include:

Don’t forget AB 537 and its $10,000 civil penalties.

In addition to the amendments to California CC 1770, another Junk Fee law effective July 1, 2024, was introduced by Assemblyman Berman. He had a bad experience with a hotel “resort fee” he encountered in his private life. It led him to introduce the new law which adds a new Section 17586.6 to the California Business and Professions Code (B&P Code).

It is nicknamed the California Resort Fee Bill. It requires upfront price disclosure on first contact with consumers of all mandatory fees for all hotels, motels, and other short-term lodging rentals for less than 30 days. It carries a civil penalty of not more than $10,000 per violation. It extends to any advertisement, display, or offer of either from or into California.

It is also referred to as B&P Code Section 17586.6, and the Transparency in Short-Term Lodging Prices Act.

Newsom signs SB 1524 amending California Junk Fee Law

Governor Gavin Newsom signed SB 1524 on Saturday, June 29. 2024. This last-minute act exempts Restaurants (as broadly defined in the bill) from California’s otherwise comprehensive ban on hidden fees and drip pricing. It became effective immediately because the legislature made it an “urgency statute.” That requires a measure that is “necessary for the immediate preservation of the public peace, health, or safety.”

The final provisions of the California Junk Fee Law primarily amend Civil Code Section 1770(a) of the Consumer Legal Remedies Act (CRLA)

The final amended law enacts the new California Junk Fee Law as of July 1, 2024, and it also creates the so-called Restaurant Exemption from the California Civil Code 1770(a)’s new prohibition on drip pricing. As mentioned, the Restaurant Exemption covers more than just restaurants. The critical provisions of the final law are below, with the new provisions highlighted in yellow. The Restaurant Exemption is in paragraph (D). (Click here for the complete text of law, as revised):

California Consumer Legal Remedies Act (CC 1750, et eq.)

Each mention in this article of “Restaurants” or the “Restaurant Exemption” refers to all businesses exempted under paragraph (D) above.

What is “clear” and “conspicuous”? The test for CC 1770(b) is in CC 1781(u)

Existing law in California CC 1791(u) sets out the definition of the clear and conspicuous disclosure required to claim the Restaurant Exemption. It reads as follows:

There are several questions as to the “clear and conspicuous” requirement, and also as to the impact of the July 1, 2025 effective date for compliance with CC 1791’s requirements to claim the Restaurant Exemption, but that is a topic for another day.

Background on the Restaurant Exemption

The California Junk Fee Law, including the amendments to the Consumer Legal Remedies Act (CLRA) or CC 1770, were adopted by the California legislature and signed by the Governor in October 2023. The law provided for a delay in effectiveness until July 1, 2024, to give businesses time to learn about the law and get ready for implementation.

This legislative about-face represented by the Restaurant Exemption has been described as a “whiplash reversal” in response to the politically powerful special interests of the California Restaurant Association and the UNITE HERE labor union.

In any event, the change in California’s Junk Fee Law was very sudden. Here is the timeline:

Understanding CC 1770’s demand for transparent pricing in (almost) all businesses ban with a few exceptions, including the new Restaurant Exemption

Before the extraordinary, last-minute effort that created the Restaurant Exemption, the California Junk Fee Law (as enacted from SB 478) was widely hailed as the first comprehensive ban on drip pricing.

The broad prohibitions of CC 1770 (a) were comprehensive. They applied to virtually all businesses in all industries. The exceptions under the prior law were all for industries that were already heavily regulated by other government regulations such as the FCC Act, various banking laws, and the like.

The Restaurant Exemption is the first exception from 17770 (a) that is not justifiable because consumer protection is provided by other specialized regulatory agencies. In that sense, the Restaurant Exemption represents a break in a comprehensive reform.

The Restaurant Exemption: A gift or a Trojan Horse?

While many Restaurants and Bars are relieved by the exemption, there is considerable consumer sentiment against carveout to the new consumer protection law that requires pricing transparency and eliminates hidden mandatory fees and charges.

If mandatory hidden fees are banned for hotels, short-term rentals, ticket sellers, internet providers, and software companies, why should they be OK for Restaurants and Bars? What happened to the politicians’ promise that the law means that “the price you see, is the price you pay”?

Restaurants need to increase their revenues for profitably. If even 5% of consumers reduce their Restaurant purchases because of consumer backlash, where is the benefit to Restaurants? And there are likely many legal challenges Restaurants face when they seek to claim the Restaurant Exemption.

As lawyers representing owners, developers, lenders and operators of hotels and restaurants, we advise on compliance, options, and defense of claims. It is time for all players in the hospitality industry to seriously consider their mandatory fee policies.

For more information, please contact Mark Adams or Jim Butler.

Related News

California’s new Junk Fee Law now has world-wide effect. Here’s what you need to know to avoid costly litigation.
2 July 2024

Junk Fee Law: Exception to SB 478 for California Restaurants Moves Forward | By Mark Adams
27 June 2024

Junk Fees: California Senate unanimously passes SB 1524. Restaurant exception to SB 478’s Honest Pricing Law goes to Governor.
27 June 2024


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