Junk fees are costing consumers in the U.S. billions of dollars annually, and the Federal Trade Commission is looking to establish necessary guidelines that prohibit hidden fees.
In a press release issued earlier this week, FTC Chair Lina M. Khan stated:
“All too often, Americans are plagued with unexpected and unnecessary fees they can’t escape. These junk fees now cost Americans tens of billions of dollars per year—money that corporations are extracting from working families just because they can. 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.”
More Transparency Around Junk Fees
Last year, the FTC asked the public how they felt about hidden fees and received over 12,000 remarks. From booking hotels to paying their bills, many consumers state they aren’t able to see what they’re exactly paying for—particularly when it comes to fees—until after the transaction is completed.
After reviewing the comments and better understanding how junk fees are impacting consumers, the FTC is proposing a new rule that will “save consumers more than 50 million hours per year of wasted time spent searching for the total price in live-ticketing and short-term lodging alone.”
If passed, businesses will need to be clear around the final price that’s presented to the consumer. This includes disclosing all mandatory fees, giving consumers to the option to look elsewhere if they want to price compare.
A United Stance
On the heels of the announcement from the FTC, the Consumer Financial Protection Bureau (CFPB) also put out guidelines, as well as a new report, which outlined the actions the organization has taken to get rid of junk fees over the past few months. According to the CFPB, the financial institutions cited in its research refunded $140 million to consumers, and $120 million of that comprised of overdraft fees and non-sufficient funds fees.
In conjunction with the FTC and the CFPB, the Biden administration is also taking action against junk fees, further honing on the fact that businesses need to be transparent about the fees upfront. In a press conference earlier this week, President Biden said:
“Research shows that without realizing it, folks can end up paying as much as 20% more because of hidden junk fees than they would have paid if they could see the full price upfront and compare it with other options.”
