This is something that has been a source of frustration for myself since graduating high school. I'd love to run a race every weekend or so, but it'd be very expensive to do so. ~$35-40 is typical of even just a 5K around here and never any prize money.
I understand the concept of supply and demand, so if a race director wants to charge $100+ for a 5K race and no prize money then by all means do it. If the race director still manages to make a sizeable profit from doing this then more power to him. The problem I have with the OP's story is the race director's intention to mislead and deceive the customer. This is what ticketmaster got in trouble for. If you want to charge a $20 processing fee then go for it. But, include this in the advertised race fee. This is no different from your cell phone plan that was advertised at $70/month but you somehow end up paying ~85/month after various taxes and other made up fees fabricated to squeeze every dime out of the customer as you can. I don't support this BS and I'm not sure why everyone is seemingly content to do so.