Biden Unveils Sweeping Measures Aimed at Slashing ‘Junk Fees’

President Joe Biden (L) and First Lady Jill Biden arrive at the White House South Lawn on May 30, 2023. Madalina Vasiliu/The Epoch Times

Companies could soon be forced to reveal hidden fees to customers, according to a new rule unveiled by President Joe Biden.

The Federal Trade Commission (FTC) proposed a rule mandating that businesses in all industries under its jurisdiction show the total price upfront to customers.

This would apply to concert and sports tickets, hotel and lodging firms, and apartment and car rental agencies.

If the rule as outlined is implemented, the FTC would possess the power to fine companies refusing to disclose the entire upfront price and secure refunds for customers who have been charged hidden fees.

Unexpected costs can add up to tens of billions of dollars per year for consumers, allowing corporations to extract money from families “just because they can,” according to FTC Chair Lina Khan.

“By hiding the total price, these junk fees make it harder for consumers to shop for the best product or service and punish businesses who are honest upfront. The FTC’s proposed rule to ban junk fees will save people money and time, and make our markets more fair and competitive,” Ms. Khan said in the rule.

President Biden described the proposal as the “most comprehensive action ever” to eradicate so-called junk fees.

“If these rules are finalized, they won’t just be voluntary, they'll be made mandatory. It will do more than embarrass companies; it will make it mandatory,” he said during prepared remarks in the Rose Garden on Oct. 11.

“Folks are tired of being taken advantage of and played for suckers.”

These charges, President Biden said, take money out of the pockets of American families and add hundreds of dollars to household budgets.

Helping ‘Working Folks’

“These junk fees may not matter to the wealthy, but they sure matter to working folks in homes like the one I grew up in,” President Biden said.

The Consumer Financial Protection Bureau (CFPB) will employ measures to restrict large financial institutions and credit unions from charging customers for basic services, such as checking account balances or requests for account information for applications.

A proposed CFPB rule would force banks to permit account holders to securely send transaction data to other institutions, making it easier for customers to switch banks.

President Biden labeled the fees as “outrageous.”

Looking forward, he said his team is cracking down on the “tens of billions of dollars in other junk fees across the economy.”

This announcement comes days after California Gov. Gavin Newsom, a Democrat, signed legislation outlawing so-called junk fees in the nation’s most populous state to “create a level playing field for those businesses that advertise the real price, up front.”

The White House released new findings from the CFPB indicating that customers are already enjoying billions of dollars in fee savings.

Since 2021, bounced check fees are down by 86 percent, saving consumers approximately $2 billion. The administration noted that this is in addition to the reported $5.5 billion annual reduction in banking junk fees.

CFPB also announced $140 million it obtained in consumer refunds “from companies that charged illegal junk fees, such as surprise overdraft fees and multiple bounced check fees for the same transaction.”

“Junk fees are unavoidable, surprise, excessive, or unnecessary charges imposed for fake or even worthless services,” CFPB Director Rohit Chopra said in a statement.

However, the Cato Institute has pushed back against the assertion that restricting junk fees is saving consumers money.

Although the federal government would prohibit fee revenues in the marketplace, companies would raise the headline prices of services, the libertarian-leaning think tank wrote in a May paper.

‘No Pot of Gold’

“This different pricing structure may redistribute money between different types of customers, but the total amount spent by U.S. households would be largely unchanged,” Cato economists wrote.

“Even in sectors where firms have market power, policing one component of pricing would not massively alter the industry’s dynamics, leaving the total price faced by consumers essentially unchanged.

“There’s no pot of gold here for regulation to transfer from businesses to U.S. households.”

Amit Bhattacharjee, an associate professor of marketing at the Leeds School of Business at the University of Colorado Boulder, said the war on junk fees is unlikely to achieve its aims because such a public policy pursuit doesn’t eliminate the companies’ costs.

“If you prevent them from charging fees to cover those costs, it’s not like you somehow eliminate the costs themselves. Companies still have to incur them,” Mr. Bhattacharjee said.

“But if they can’t selectively charge fees to certain consumers or in certain situations and have to lump them into one, uniform, all-inclusive price, that price will inevitably be higher for everyone else. It’s hard to legislate away economic realities.”

The American Bankers Association stated that it’s “closely reviewing” the CFPB’s guidance “to discern whether it aligns with appropriate administrative procedures and the relevant statutes.”