Is it unethical to charge too much for your goods and services?

Before you answer, consider what is meant by “too much.” Thousands of journalists, politicians and media loudmouths are spewing volumes of hot air into the atmosphere claiming that oil companies are charging “too much” for gas, though they are charging the market-determined price. Is “too much” a standard based on what the purchaser is willing to pay? If so, can it still be “too much” even if the purchaser is happy to pay the amount asked? Or does “too much” depend on what the purchaser can afford? Is it unethical to charge the same amount for the same products or services to rich and poor alike?

In most cases, the way we know we have charged too much is when nobody wants to pay the price we’re asking. When one is being offered a job, is it ethically wrong to ask for a larger salary than anyone else employed in a similar job receives if your new boss says, “Oh, what the hell…sure! Welcome aboard!” Look at lawyers: the same legal work performed by a top law firm may cost two or three times what a solo practitioner might charge. Is that wrong? Or does it depend on whether the purchaser of the services understands that he is paying more than he has to? Is the high-priced lawyer ethically obligated to tell a potential client, “You know, the guy down the street will charge you much less for essentially the same work,” or perhaps, “I suggest you do a little research on what these services cost in this area before you agree to anything”?

If so, then why isn’t Tom Cruise obligated to tell a producer, “You know, I can give you the name of a young actor who is just as good as I am and will cost you a fraction of the ridiculous 9 million dollars I’m charging you to do your movie!”? In the convention and meeting speakers business, well-known and some not so well-known speakers charge $5,000, $10,000, $20,000 or even more for one canned speech. Should the more ethical ones refuse such fees, saying, “$10,000? For a speech from me? When all I’m doing is regurgitating columns your members can find for free on the internet? That’s silly…I’ll take $2,500, plus expenses, and not a penny more.”

These questions come to mind as the result of a report by the National Association of Home Buyers, which says that tens of thousands of unsuspecting home buyers are cheated by unethical mortgage brokers who charge excessive fees. It recounts the experiences of buyers like Karen and Josh, a self-employed couple who required a $500,000 mortgage. Their mortgage broker told them he had to charge a 4% “origination fee” because their self-employment status made the transaction especially complex. Karen and Josh wisely found another broker who told them that it wasn’t such a complicated deal after all and completed the transaction for only a 1% origination fee, saving them $15,000. But many buyers don’t compare fees, and they end up paying more than they have to.

Is “more than they have to” the same as “too much?”

Not according to According to RESPA, a Federal Law enacted to protect consumers in real estate transactions. It says that as long as mortgage brokers reveal the origination fees they charge, they can charge as much or as little as they want. “Just because it’s legal doesn’t mean it’s ethical,” says Consumer Advocate, Harj Gill, who is also a mortgage reduction specialist, , and the founder and president of the American Mortgage Educators. He wants legislation preventing exorbitant fees, and wants the mortgage industry to join him in exposing “unethical mortgage brokers”…the ones who charge “too much.”

The Scoreboard agrees that Karen and Josh’s first broker was unethical because he was deceptive: he told them that their situation was complex when it was not. It is also unethical to knowingly take advantage of a buyer’s inexperience or ignorance, like a cab driver who over-charges a first time visitor to a city for the ride from the airport. If a broker demands a higher fee from first-time home-buyers than he would from a more seasoned purchaser, that is exploitation, not legitimate business practice, and it is therefore unethical. The tougher question is whether a broker is unethical, as Gill seems to believe, if he charges all his clients the same high fees, doesn’t misrepresent the justification for them, and they have every opportunity to compare his fees to those charged by others.

Reluctantly but firmly, the Scoreboard has to say that it is ethical for one in business to charge whatever the market will bear. Not charging an exorbitant fee when a purchaser has no alternatives, as when hotels in Olympic cities jack up their prices during the Games; not springing hidden costs on the buyer after the sale has been completed; not misrepresenting the reason for a high charge or claiming that it is typical of other providers; these are all unethical. But some ethical principles come in the package that contains democracy and capitalism, and one of those is that it is not unethical for an American to value his or her products or services in an open and competitive market according to what the market will bear. Charging less to those who can’t afford it? Admirable, and certainly ethical. Making your products and services affordable to all? Wonderful; that’s ethical too. Selling at a price that only people so rich they don’t read the price tag can afford? It’s not going to get you declared a saint, but it isn’t unethical. Neither is charging more than the other sellers because, rightly or wrongly, you think your efforts are worth more than theirs.

“Too much” is only unethical when it involves elements of deception, unfairness, irresponsibility or exploitation. A buyer who is too careless, lazy, unprepared or ignorant to make sure he’s getting the best possible deal isn’t unethical, but in this land of personal responsibility, he’s got nobody to blame but himself.