The Biden administration is taking on a stealthy adversary that has long lurked in the shadows of everyday transactions: junk fees. Although they may seem like minor inconveniences, these fees, often hidden and deceptive, have been quietly siphoning billions of dollars from the pockets of hardworking Americans.
Junk Fees: A Multibillion-Dollar Industry
Junk fees have become a substantial source of revenue, reaching tens of billions of dollars. Examples include credit card late-payment fees, bank overdraft fees, hotel resort fees, airline baggage fees, and cable hidden fees. While competitive markets might offset these fees with lower upfront prices, non-competitive markets force American consumers to pay more.
Junk fees might seem like an annoying nuisance, but their economic ramifications are significant. Markets thrive when firms compete fairly and transparently, displaying prices that empower consumers to make informed choices. Mandatory hidden fees obscure these prices, making comparison shopping difficult and unfairly portraying transparently priced businesses as more expensive.
Biden Administration Actions Targeting Junk Fees
The Biden administration has taken several actions to decrease junk fees in various sectors of the economy, such as banking, rental housing, and air travel:
- In October 2022, the Consumer Financial Protection Bureau issued a rule that effectively eliminated overdraft fees for most consumers by requiring banks to obtain affirmative consent from customers before charging them for overdraft services.
- In July 2023, the president announced a new initiative to crack down on rental housing junk fees, such as repeated application fees, convenience fees, and other hidden charges. The initiative included new commitments from such major rental housing platforms as Zillow, Apartments.com, and AffordableHousing.com to provide consumers with total, upfront cost information on rental properties.
- In September 2022, the president signed an executive order directing the Department of Transportation (DOT) to consider issuing rules that require airlines to clearly disclose all fees and charges in a simple and comparable format. The DOT then proposed rules that would require airlines and online travel agencies to disclose fees for baggage, seat selection, and other services upfront and to refund fees for services that are not delivered as promised. The DOT has not yet issued the final rules; it is still accepting public comments on them.
As the fight against junk fees continues, Americans can look forward to a brighter, fairer, and less annoying economic landscape.