The prevalence of unexpected and added fees, encountered by consumers when purchasing airline tickets, renting a car, or even ordering takeout, is the focus of new initiatives announced by the Biden administration. Their aim is to combat these so-called “junk fees” and provide buyers with more transparency regarding their payments.
President Biden expressed his concerns at the White House, saying, “Folks are… tired of being taken advantage of, and being played for suckers.” He emphasized that while these “junk fees” may not be significant to the wealthy, they certainly matter to working-class families.
One significant move unveiled is a proposal by the Federal Trade Commission (FTC) that would prevent companies in various sectors from imposing concealed and deceptive fees. This rule would mandate sellers to disclose all essential costs upfront. The FTC could potentially impose financial penalties on companies that violate this rule. Proponents argue that this regulation will enable consumers to make more informed price comparisons and create a level playing field for businesses that are transparent about their costs.
Additionally, the Consumer Financial Protection Bureau (CFPB) has instructed banks and credit unions to offer basic information to customers, such as their account balances, without any fees. The White House further disclosed that the CFPB will introduce a separate rule later this month, compelling financial institutions to enable customers to conveniently share their data with other banks if they wish to switch.
However, the Biden administration’s actions have sparked criticism from some quarters. Neil Bradley, the executive vice president of the U.S. Chamber of Commerce, argued that the crackdown on “junk fees” would negatively impact consumers. He expressed puzzlement at the notion that the administration believes it can assist consumers by regulating the pricing of the numerous transactions occurring daily.
On the contrary, consumer advocates have lauded the administration’s efforts. They estimate that “junk fees” cost consumers more than $64 billion annually. Erin Witte, the director of consumer protection at the Consumer Federation of America, affirmed that Americans, regardless of their political affiliations, are weary of being subjected to deceitful and worthless fees. She also pointed out that these fees disproportionately affect low-income consumers and communities of color.
Chip Rogers, the president and CEO of the American Hotel & Lodging Association, announced that the organization will review the FTC rule. However, he emphasized their support for establishing a uniform standard for displaying mandatory fees within the lodging industry. This standard would apply across short-term rental platforms, where such fees are prevalent, online travel agencies, metasearch sites, and hotels.
President Biden had previously urged lawmakers to pass the Junk Fees Prevention Act in his State of the Union speech earlier this year. The proposed legislation seeks to limit the excessive fees imposed by companies.
