Many hotels and restaurants add a service charge by default without informing the customers even though it’s optional. Even when customers object while paying the service charge, many hotels claim that they agreed to pay as soon as they placed an order. Due to numerous complaints from various consumers, on July 4, 2022, the Central Consumer Protection Agency (CCPA) issued guidelines prohibiting hotels and restaurants from charging such rates (service charges) by default.
The CCPA’s reasoning for this is that the cost of services should be included in the price of food and drink, just like any other cost. Therefore, the price must include both the goods and services component, and calculating beyond that is considered unfair trade practice under the Consumer Protection Act 2019 (CPA).
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Service Fee Guidelines Issued By The CCPA To Protect Consumer Rights
- Hotels and restaurants should not add service charges by default.
- No, hotel or restaurant can force consumers to pay a service charge.
- No restrictions on access to services can be imposed on consumers on the basis of service charges.
- No service charge should be collected illegally like by adding it to the cost of the meal or GST.
Consumers who find their hotel/restaurant charging service charges and/or violating their policies have the following remedies available:
- Firstly they can ask the hotel itself to deduct the service charges from the bill.
- A consumer can call on 1915 or file a complaint on the National Consumer Helpline app.
- If both methods didn’t work, consumers can complain about the unfair trade practices with consumer consumption.
- Complaints can be submitted electronically through the e-daakhil portal (www.edaakhil.nic.in). Complaints can also be emailed to CCPA at com-ccpa@nic.in.
- If the CCPA determines that a breach has occurred after the other party has been given an opportunity to be heard under Section 20 of the Act, the CCPA may issue an order as follows:
- Refund unreasonable charges to customers.
- End unfair practices that harm the interests of consumers.
By order dated 20th July 2022, the Delhi High Court has suspended the service charge policy until 25th November. The court determined that the question of pricing and whether charges for service fees fell within section 2(47) of the CCPA should be considered. The stay was granted conditionally, and the court ruled that restaurants should not charge service charges on takeout food and that the proposed service charge should be prominently displayed in addition to the price and tax owed.
Regretting the suspension, the CCPA appealed to the High Court for a hearing on August 31, 2022.
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