Service charge

Hotels and restaurants banned from charging service fees

The Central Consumer Protection Authority on Monday banned hotels and restaurants from levying service charges automatically or by default on food bills and allowed customers to file complaints for violations.

Amid growing complaints, the CCPA released guidelines to prevent unfair business practices and the violation of consumer rights with respect to the collection of service fees.

Per the guidelines, “No hotel or restaurant should add a service charge automatically or by default to the bill.” There should be no collection of service fees under any other name, he added.

Restaurants and hotels typically charge a 10% service charge on the food bill.

No hotel or restaurant can force a consumer to pay a service charge. They must clearly inform the consumer that service charges are voluntary, optional and at the discretion of the consumer.

“No restrictions on entry or provision of services based on the levying of service charges shall be imposed on consumers,” the directive states.

The guidelines state that a service component is inherent in the price of food and beverages offered by a restaurant or hotel.

“Product pricing covers both goods and services. There are no restrictions for hotels or restaurants on setting the prices at which they wish to offer food or drink to consumers.”

Also, the service charge cannot be collected by adding it to the food bill and charging the GST on the total amount.

“Thus, placing an order implies consent to pay the food prices displayed in the menu as well as applicable taxes. To charge anything other than said amount would amount to unfair commercial practices under the (Consumer Protection) Act “, say the guidelines.

The CCPA, in its guidelines, has stated that a tip or gratuity relates to hospitality received beyond the basic minimum service contracted between the consumer and hotel management, and constitutes a separate transaction between the consumer and hotel/restaurant staff at the discretion of the consumer.

It is only after finishing the meal that a consumer is able to assess the quality as well as the service and decide whether or not to tip and if so, how much.

A consumer’s decision to tip does not stem from simply entering the restaurant or placing an order.

If a consumer finds that a hotel or restaurant is charging a service charge in violation of the guidelines, he or she can ask the establishment concerned to remove it from the amount of the invoice.

Consumers can also lodge a complaint with the National Consumer Helpline, which operates as an alternative dispute resolution mechanism at the pre-litigation level, by calling 1915 or via the NCH mobile app.

They can also lodge complaints with the Consumer Commission.