Consumers, states question surprise ‘COVID fee’
Nearly a year into the pandemic’s gutting of the economy, businesses across the country are increasingly charging coronavirus-related fees, ranging from a $5 disinfection charge in a hair salon to $1,200 for extra food and cleaning in a senior living center, which are often undisclosed until the customer gets a bill.
According to a survey by the Washington Post of attorney general offices and financial departments in 52 states and territories, U.S. consumers in 28 states have filed 510 complaints of coronavirus-related surcharges at dentist offices, senior living facilities, hair salons and restaurants.
Hidden fees are a legitimate concern for consumers, especially for economically vulnerable Americans or senior citizens without income, but not every state protects consumers. While medical insurance law in some states requires health care providers to offer refunds to patients who have been unfairly charged for personal protective equipment, other states allow for businesses to tack on extra fees, as long as they’re disclosed upfront.
It’s unclear exactly how widespread coronavirus surcharges are, as anecdotal social media posts of customer receipts and reports filed with attorneys general and state consumer protection departments are the only way to track them. But health care providers and residential facilities are some of the worst-affected sectors.
For instance, Michigan Attorney General Dana Nessel sent a cease-and-desist letter to 11 senior living facilities in August after 45 residents reported being charged $900 each in “supplemental COVID-19 fees.”
According to Nessel’s office, a senior official for one of the companies said the fee covered charges for meal service, PPE and cleaning services, but that residents who pushed back were told they didn’t have to pay it.
Extra fees, especially when they’re a surprise, aren’t typically praised by the patron.
But small businesses and franchises have had to get creative out of desperation when gift card drives, individual tipping and fundraising by local chambers of commerce aren’t enough to pay the bills.
Sean Kennedy, the National Restaurant Association’s vice president for public affairs, said this is especially true for the restaurant industry.
“The biggest challenge is, for most restaurants, it’s not going to be enough,” Kennedy said. “Gift cards and tipping are vital because it really is allowing us to survive week to week, but from a long-term perspective, we really need to see a restaurant-specific solution from the federal government.”
Seniors speak up
John G. Cleminshaw, 83, lives at Independence Village in Aurora, Ohio. He said the senior living facility sent a letter to its 80 residents in March 2020 announcing a $1,200 mandatory fee for extra cleaning and food because of the pandemic.
“I didn’t feel it was right,” Cleminshaw said. “There was nothing in our contract that called for it. For most businesses, this would be a cost of doing business. It certainly wasn’t their fault that they had these costs, but neither was it the residents’ fault.”
He begrudgingly paid the fee, but he brought up the issue during a residents meeting and reported it to the Ohio Attorney General’s Office. Eventually, the company announced it would refund the fee. Independence Village did not return a request for comment.
Most reports of coronavirus surcharges have come from patients at dentist offices. Chad Gehani, president of the American Dental Association, said the cost of PPE for dentists has jumped, so some offices have charged a fee to cover it.
Some insurance providers subsidize PPE costs, and other contracts don’t allow for customers to be held liable for additional fees tacked on later. But the rules vary from state to state and provider to provider, depending on whether the fee is disclosed upfront and what a client’s insurance policy covers.
Starting in August, a handful of state officials — in New York, Connecticut, Arizona, Michigan and Massachusetts — issued guidance warning residents of hidden fees and businesses and insurers of the consequences of violating consumer protection and insurance laws.
The New York State Department of Financial Services instructed health insurers to coordinate refunds to patients after receiving complaints about providers improperly adding on fees to cover protective equipment, especially in dental care.
The department threatened to punish insurers that don’t inform health care providers that they cannot charge PPE fees or make sure that patients who were charged are refunded.
Clipped by fees
Businesses that require physical contact and close interaction, such as hair salons, have also been reported for charging coronavirus fees.
Sports Clips’ president and chief executive, Edward Logan, said the company discourages its franchisees from passing on sanitation costs to clients — but in some cases, it’s necessary.
“Sport Clips locations do not charge for disposable masks as a policy, and very few locations have added a service charge,” Logan said in an email. “Many locations have been forced to increase prices slightly to pay for increased labor and materials costs, but our franchisees also prioritize the needs of the client when they have to make difficult business decisions.”
Restaurant woes
For the restaurant industry, coronavirus fees are a way to offset the increased expenses of operating under occupancy restrictions.
“We are not an industry that is designed for an on/ off switch,” Kennedy said. “For a restaurant to be able to be financially viable, they need to be operating at full capacity, seven days a week.”
Restaurants rely on paying for last week’s expenses with next week’s revenue, the National Restaurant Association’s spokesman said. And many communities, like New Orleans, have more restaurant seats than local residents to fill them, relying on visitors coming on cruise ships, vacations, honeymoons and business conferences. But travel restrictions eliminated much of that business.
“A lot of fixed expenses didn’t change,” Kennedy said. “Rent didn’t change. Utilities, insurance. Those were all things that still had to be paid even as no customers were coming in the door.”
When Stephanie Baiocchi’s dad called to ask her to lunch, she told him she was craving Thai or Chinese food. They settled on Big Bowl Buzz, a small chain by her Chicago office that serves both, and when she searched the menu online before lunchtime, an advisory banner with “COVID-19” caught her eye on her screen.
The chain had posted a message on its website about an automatic surcharge for all food orders.
“To help offset restrictions on our business resulting from the COVID-19 crisis, a 4% surcharge has been added to all guest checks. If you would like this removed, please let us know,” the banner read. Big Bowl Buzz declined to comment.
Baiocchi felt duped. She’d ordered from Uber Eats, which offers options to customers to donate directly to the restaurant or delivery workers. She’s seen other restaurants temporarily increase menu prices and collect funds for furloughed staff. But an automatic fee — even if it could be removed upon request — without knowing who benefited from it felt, as she said, “super slimy.”
“You’re just banking on people not realizing and it just felt so scummy and I just did not like it at all. Right now is not the time to be taking advantage of people,” she said. “For all I know, the CEO is just keeping it all.”