The Green Sheet Online Edition
November 9, 2026 • 26:11:01
A narrow rule, a wider reach
What started out as a sweeping federal government plan—addressing pesky and often costly junk fees—ended up being limited to live-event ticketing and short-term lodging. But payment processing and related services remain within reach of the Federal Trade Commission. The agency can still pursue unfair or deceptive practices, including hidden and unauthorized charges.
"The FTC's junk fee rule applies only to two verticals—ticketing and lodging. But the FTC can still pursue deceptive or unfair fees in any industry, including payments," said Jonathan Razi, founder and CEO at Findustry AI.
States also have pursued broader pricing disclosure and transparency requirements, often through unfair and deceptive acts and practices (UDAP) laws. Together, these efforts put payment processors' fee disclosures, billing practices and merchant relationships under examination. The FTC junk fee rule—then and now
The FTC's Rule on Unfair or Deceptive Fees, commonly called its junk fee rule, began as a much broader proposal in late 2023. As proposed, it would have imposed fee disclosure requirements across much of the U.S. economy.
The proposal was potentially significant for payment processing because it raised questions about mandatory fee disclosures across business-facing and consumer-facing interactions.
While the FTC had the backing of the Biden administration and a broad coalition of consumer groups, business groups challenged the proposal, arguing that the agency had overstepped its rulemaking authority and citing implementation costs. In a comment letter to the agency, the U.S. Chamber of Commerce estimated costs across the economy would total at least $13 billion, with recurring compliance costs exceeding $800 million.
Financial services firms insisted existing federal disclosure requirements, such as the Truth in Lending Act, provided sufficient consumer protections.
The final rule, which took effect May 12, 2025, was considerably narrower than the proposal. It focuses on live-event tickets and short-term lodging, including purchases by individual and business customers. Businesses advertising prices in those markets must disclose the total price upfront, including mandatory fees, subject to specified exclusions, and display it more prominently than other pricing information.
Toast case shows reach of existing laws
The FTC's broader enforcement authority is evident in its action against Toast. On Oct. 29, 2026, the agency and officials representing eight states filed a lawsuit against the restaurant software and financial technology company and affiliated entities.
The complaint alleges that Toast saddles restaurants with hidden fees, unauthorized charges and unwanted add-ons; fails to deliver on customer service promises; and makes cancellation difficult through a multi-step process requiring assistance from multiple Toast employees. The FTC and states also allege Toast imposes fees for hardware and software without clearly disclosing them. The lawsuit alleges violations of the FTC Act, the Restore Online Shoppers' Confidence Act and related state laws.
"Small businesses are the backbone of communities across the country, and they deserve tools and services that are transparent, reliable and truthful," said Christopher Mufarrige, director of the FTC's Bureau of Consumer Protection.
One disputed fee involves restaurant patrons. Toast assessed a 99-cent charge on certain online orders "without adequate disclosure or consent of the patrons or the restaurants themselves," the FTC stated in a press release. The money went to Toast rather than the restaurants and was collected on top of fees restaurants already paid for its services, according to the complaint. That fee "could potentially be construed as a junk fee," Razi said. "[I]t was mandatory, unavoidable for patrons and added at checkout." He added, however, that "the basis of the claims against Toast is alleged hidden contract terms or unauthorized charges rather than 'junk fees.'"
Toast disputed the allegations and said it would vigorously defend itself. The company argued that the Restore Online Shoppers' Confidence Act does not apply to its negotiated business-to-business agreements with restaurants.
FTC focus on unauthorized fees
Toast isn't the only payments company to attract the FTC's attention over its own billing practices. The agency also pursued Corpay, the digital payments and spend management company formerly known as FleetCor, and its CEO over unauthorized charges.
The complaint, filed in 2019, alleged that the company and its CEO imposed a broad array of unauthorized and undisclosed fees totaling hundreds of millions of dollars. The company often waited several billing cycles before introducing many of the fees, making them less noticeable to customers, according to the complaint. It also alleged that invoices did not detail the fees, requiring customers to consult separate account management reports to understand the charges. In September 2026, Corpay and its CEO agreed to pay $100 million to settle the case. The FTC said the money will be used to provide redress to harmed businesses.
KYC and the FTC
The FTC's scrutiny of processors also extends beyond the fees they charge to the merchants they serve. The agency recently went after payment processor Nuvei for processing payments for companies it knew or should have known were engaged in deceptive conduct. Specifically, the FTC alleged Nuvei processed more than $30 million for an offshore tech support operation and maintained accounts for other high-risk merchants despite fraud and chargeback concerns.
Humboldt Merchant Services agreed to pay $12 million to settle allegations that it processed payments for merchants that defrauded consumers. According to the FTC's complaint, Humboldt processed payments for more than 1,000 merchants that were shell entities serving companies engaged in unauthorized billing scams. The settlement also permanently bans Humboldt from processing payments for merchants with a heightened risk of potential fraud.
"Humboldt was processing payments for companies despite red flags indicating they were scamming consumers," said Katherine White, deputy director of the FTC's Bureau of Consumer Protection. "This case underscores the FTC's commitment to holding companies accountable for knowingly supporting fraudulent businesses."
These cases involve alleged facilitation of merchant fraud, rather than disputes over processors' own fees. They illustrate another aspect of the FTC's reach into payments—and the importance of knowing customers and their business models.
States take the lead
Alongside federal enforcement, states have been developing their own fee disclosure requirements. According to the National Conference of State Legislatures, at least 30 states, Washington, D.C. and Puerto Rico are considering legislation regarding disclosure and transparency requirements and other limitations on fees charged for consumer goods and services.
Several states already have adopted measures. California's Honest Pricing Law took effect July 1, 2024, banning "drip pricing," or advertising a low base price and adding mandatory fees later at checkout. The law generally requires advertised prices to include mandatory charges, with exceptions for certain government charges and shipping costs. Restaurants and certain other food vendors have separate provisions allowing mandatory fees to be listed separately if clearly and conspicuously disclosed as required.
Minnesota's law took effect in 2025 and generally requires mandatory fees to be included in advertised prices, excluding taxes and shipping costs. Massachusetts also issued regulations in 2025 requiring total prices to be displayed whenever a price representation is made. The terminology itself can be slippery. "There is no real definition of 'junk fee.' The term is associated with added fees that are not linked to any tangible service," the law firm BakerHostetler noted in a blog post. As Razi explained, "the states are not all going to do it identically. And what that means is you will have a patchwork. And for sure, the compliance complexity goes up for any merchant or payment processor that operates nationally." These consumer protection laws," he added, "are designed to protect the consumers of a state," regardless of where the business is located.
Changing the narrative?
The California, Massachusetts and Minnesota measures focus on consumer pricing. New York broadened its General Business Law protections through the FAIR Business Practices Act, extending the attorney general's authority to address unfair and abusive practices and protect small businesses as well as consumers.
A group of dentists in North Carolina is pursuing a challenge specifically involving payment processing fees. A case filed in U.S. District Court for the Middle District of North Carolina against Elavon and Paychex disputes monthly recurring fees totaling nearly $100, alleging inadequate disclosures or authorizations. The charges include PCI DSS compliance, non-PCI, SafeT SMB and "other fees."
The proposed class-action complaint challenges the introduction of fees through fine-print notices in monthly statement sections titled "news for you," rather than through contractual authorization. The dental practices allege breach of contract and violations of North Carolina's UDAP law. Businesses suing processors over fee disputes isn't new. The dentists' complaint places those disputes within the broader debate over fee transparency, at a time when card payment fees are under intense scrutiny. James Huber, managing partner at Global Legal Law Firm, scoffed at the North Carolina lawsuit. "Calling them junk fees I think is creative," he said. "The problem is these fees are all listed." Huber added that he doesn't think the case will come down on the side of the dentists. In September, Elavon and Paychex filed a motion to compel arbitration and a motion to dismiss the lawsuit. At this writing, both motions were under consideration.
The dispute illustrates the distinction running through these cases: a fee need not fall under the FTC's specific junk fee rule to face a legal challenge. For payment processors, the questions extend to how charges are disclosed, whether they are authorized and what the merchant agreement permits.
Patti Murphy is senior editor at The Green Sheet, president of ProScribes Ink (www.proscribes.net) and self-described payments maven of the fourth estate. Her Today in Payments reports are a regular feature of the Merchant Sales Podcast.
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