Payment processors urged to prepare for ‘junk fee’ B2B scrutiny

Federal and state regulators have extended their focus on so-called ‘junk fees’ to business-to-business transactions, prompting payment processors to review pricing, merchant contracts and disclosure practices.

Since 2022, agencies including the Federal Trade Commission and several state attorneys general have targeted hidden and excessive fees in consumer markets, producing enforcement actions and prompting changes to pricing and refund policies in airlines, hotels, banks and fintech firms.

Industry participants and compliance lawyers say that regulatory pressure, growing litigation and legislative interest mean fees long accepted in B2B relationships — such as convenience charges, nonrefundable setup or cancellation fees, statement fees and pass-through surcharges — face increased scrutiny and may be recharacterized as unfair or deceptive.

Payment processors that handle business transactions are advised to take a full inventory of fee lines that appear on merchant invoices, customer receipts and merchant services contracts. That inventory should identify who sets each fee, whether the fee appears in customer-facing contracts, how it is described on statements and receipt descriptors, how the fee is calculated, whether it is mandatory, and whether it is refundable or bundled with other services.

Processors should review onboarding and underwriting documents to confirm merchant agreements disclose any surcharges, markups or ancillary charges that will be passed to buyers. Contracts that permit adding fees without advance notice or that use vague language such as “processing costs” increase legal exposure. Compliance counsel recommend clear, plain-language disclosures that appear before a transaction is completed and on invoices.

On the systems side, processors may need to update billing and statement descriptors so fees are itemized and traceable. Receipts and electronic statements should show the merchant, the nature of each fee, the amount and any refundability. Processors should maintain audit logs that show when and how a fee was applied and be able to process refunds where contract terms or law require them. Dispute workflows and customer-service procedures should address complaints about ancillary charges promptly and transparently.

State consumer protection laws and recent enforcement actions vary by jurisdiction. Some investigations have focused on fees promoted as optional but effectively mandatory, or fees charged after sale without clear notice. Small businesses can be treated as consumers under certain statutes. Public filings and court dockets show an increase in class-action suits and state-level enforcement actions alleging unfair fee practices.

Operational changes under consideration at payment firms include updating merchant agreements, adding explicit fee disclosures to point-of-sale flows, modifying underwriting to flag high-risk fee models, retraining account managers, and changing pricing to simplify or absorb contested charges. Processors that act as intermediaries for third-party services should require transparency in contracts with those providers so downstream buyers are not surprised by add-on costs.

Regulators have sought public comment and issued guidance on fee practices in recent years. Firms cannot assume business customers have the same protections as individual consumers and should monitor federal and state developments that could expand enforcement or reinterpret existing consumer-protection standards for B2B transactions.