New Jersey Signals Aggressive Enforcement Against “Junk Fees”: What Businesses Need to Know

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New Jersey is signaling a more aggressive approach to the regulation of so-called “junk fees.” In a recent enforcement statement issued by the New Jersey Attorney General and the New Jersey Division of Consumer Affairs, state regulators outlined how they intend to use the New Jersey Consumer Fraud Act to address business practices involving fees that they consider deceptive, unconscionable, or abusive.

The enforcement statement was issued in conjunction with Governor Mikie Sherrill’s Executive Order No. 19, which directed state agencies to review and recommend measures to eliminate or reduce junk fees across a broad range of industries. Although the enforcement statement does not create new legal obligations, it provides important insight into how New Jersey regulators intend to interpret and enforce existing law. Businesses operating in New Jersey should pay close attention.

To explore the enforcement statement and its potential implications, Alan Kaplinsky (founder, former chair for 25 years and now Senior Counsel of the Consumer Financial Services Group) was joined on the Consumer Finance Monitor podcast by Beverly Brown Ruggia, Financial Justice Program Director at New Jersey Citizen Action (NJCA). NJCA is a statewide grassroots nonprofit organization focused on social, economic, and racial justice. Beverly has long been involved in consumer financial protection advocacy, including efforts to strengthen the Consumer Financial Protection Bureau, and participated in providing input into the development of New Jersey’s enforcement statement.

Alan and Beverly’s discussion examined the meaning of junk fees, the distinction between permissible fees and potentially unlawful charges, and how the New Jersey initiative could affect businesses in the consumer financial services industry.

Key Points Discussed:

• What constitutes a junk fee?
• Earned wage access and overdraft fees
• Credit card late fees and the limits of disclosure
• All-in pricing and mandatory versus optional charges
• Payday lending and buy now, pay later
• What does the New Jersey initiative mean for businesses?

Alan’s conversation with Beverly was particularly useful because it explored both the consumer advocates’ perspective and some of the difficult legal and practical questions raised by New Jersey’s initiative. Alan and Beverly did not agree on every aspect of what should qualify as a junk fee, and Alan pressed Beverly on several issues where he believes the distinction between an unlawful fee and a junk fee matters.

Those differences make the discussion especially worthwhile for financial institutions, nonbank financial services companies, and their counsel.

Consumer Finance Monitor is hosted by Alan Kaplinsky, Senior Counsel at Ballard Spahr, and the founder and former chair of the firm's Consumer Financial Services Group. We encourage listeners to subscribe to the podcast on their preferred platform for weekly insights into developments in the consumer finance industry.

View a transcript of the recording here.

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