- "Junk fees" are a type of fee that confuses consumers because the aren't disclosed up front.
- Biden released a plan to tackle those fees, which can arise in industries like banking, internet, and auto.
After you buy a plane ticket, you probably end up spending a lot more than the price you saw originally.
Additional fees for baggage, seats, and cancellation — often not displayed until after you've made the purchase decision — are just one example of a type of fee President Joe Biden wants to resolve.
Last week, the White House released its plans to tackle "junk fees," which are "fees designed either to confuse or deceive consumers" by hiding the full price of a product, revealing fees after a purchase, or targeting consumers who have limited alternative options for a product, according to the fact sheet.
Not only do those fees make it difficult for a consumer to know upfront what they are paying — it also can hurt small businesses that are targeted by the same surprise fees that bring billions of dollars of revenue to major industries like transportation and banking.
"Look, folks, these are junk fees," Biden said during remarks last week. "They're unfair, and they hit marginalized Americans the hardest, especially low-income folks and people of color. They benefit big corporations, not consumers, not working families. And that changes now."
"Today's actions are going to save consumers more than $1 billion each year," he added. "And that's a lot of money back in people's pockets."
According to the Consumer Financial Protection Bureau (CFPB), consumers in low-income and majority-Black neighborhoods paid disproportionately more in late credit card fees, prompting the White House to work with the bureau to crack down on the issue, particularly in banking. Here are the steps the Biden administration plans to take on the issue:
- Get rid of unfair banking fees. In actions that are expected to save consumers more than $1 billion annually, as Biden referenced, the CFPB issued guidance that surprise overdraft fees are illegal, which are fees for overdrawing a checking account even though the ATM showed there were sufficient funds. The CFPB also declared depositor fees illegal, which are fees charged to a customer when someone else's check bounces.
- Get rid of junk fees in entertainment, hospitality industries. The Federal Trade Commission (FTC) recently launched a rulemaking process that would look into practices across industries that charge consumers with mandatory fees, or ones they did not consent to, like hotel resort fees and event ticket processing fees. This process will give the FTC tools to take action against companies involved in those practices.
- Restrict junk fees in auto industry. The FTC also proposed a rule in June that would ban car dealers from making deceptive advertising claims to lure in borrowers, prohibit fraudulent add-on products that don't actually add any value to the car, prevent dealers from charging additional fees without the consumers clear, written consent, and require upfront disclosure of the total costs of the car to consumers.
- Require airlines to disclose all costs upfront. The Department of Transportation proposed a rule in September that would require airlines to disclose any fees a consumer might encounter along with the purchase of a plane ticket, like seat fees, baggage fees, and change or cancellation fees.
- Require upfront internet fees. The Federal Communications Commission proposed rules that would require internet companies to disclose monthly prices, fees, and internet speeds upfront so customers can clearly see which company is the cheapest.
This crackdown on junk fees comes just weeks before the midterm elections, where inflation and the economy are at the top of many voters' minds — and Biden referenced that during his remarks, saying that he's "working hard to tame inflation with policies to bring down the cost of gasoline, home energy bills, and prescription drugs."