With rising consumer complaints, the Central Consumer Protection Authority (CCPA) has barred hotels and restaurants from levying service charges automatically or by default on food bills.
- Service charge is used by restaurants/hotels to pay the staff and workers and is not charged for the experience or food served to consumer.
- Consumer Organisations observed that levying service charge is patently arbitrary and constitutes an unfair as well as restrictive trade practice under the Consumer Protection Act.
- Recently, Department of Consumer Affairs (DoCA) under the Ministry of Consumer Affairs had called a meeting with the National Restaurant Association of India (NRAI).
- It was regarding service charge levied by them on customers.
- It said that the restaurants are collecting service charges from consumers by default, even though collection of any such charge is voluntary.
What is a ‘service charge’?
- A service charge is a fee charged to customers for something specific. E.g., a bank charging a fee for using an ATM that’s not part of its network or a vendor charging a fee for making a payment with a credit card.
- It also may be called a customer service fee or maintenance fee.
- Restaurants and hotels generally levy a service charge anywhere between 5 to 15 per cent on the food bill.
About the Central Consumer Protection Authority –
- The CCPA is a statutory body constituted under Section 10 of the Consumer Protection Act, 2019.
- Mandate — To protect the rights of the consumer by cracking down on unfair trade practices, and false and misleading advertisements that are detrimental to the interests of the public and consumers.
- Concerned Ministry — Ministry of Consumer Affairs, Food and Public Distribution
- Powers & Functions of CCPA —
- To recall goods or withdrawal of services that are “dangerous, hazardous or unsafe”;
- Pass an order for refund the prices of goods or services so recalled to purchasers of such goods or services;
- Discontinuation of practices which are unfair and prejudicial to consumer’s interest;
- Impose penalties on manufacturers/endorsers/publishers of misleading advertisements.
About the Consumer Protection Act, 2019 –
- The Consumer Protection Act, 2019 replaced the Consumer Protection Act, 1986, and seeks to widen its scope in addressing consumer concerns.
- The new Act recognises offences such as providing false information regarding the quality or quantity of a good or service, and misleading advertisements.
- It also specifies action to be taken if goods and services are found “dangerous, hazardous or unsafe”.
- The Act came into force in July 2020 and it will empower consumers and help them in protecting their rights through its various notified rules and provisions.