Biden Promises To Crack Down on Junk Fees — How Much Do They Cost You?
President Joe Biden, in conjunction with the Consumer Financial Protection Bureau (CFPB). announced a crackdown on so-called junk fees — which are hidden in everything from hotel fees to airline fees, concert fees, cable fees and bank fees — and end up costing American consumers a lot of money.
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The White House defined junk fees as those “designed either to confuse or deceive consumers or to take advantage of lock-in or other forms of situational market power,” according to a fact sheet.
“One of the key things I’ve asked the [competition] council to take on was the unfair hidden fees known as ‘junk fees’ that are taking real money — real money out of your pockets — real money out of the pockets of American families,” President Biden said on Oct. 26, according to a transcript of his remarks. “Things like, as been mentioned, surprise banking overdraft fees, excessive credit card late fees, hidden hotel booking fees, or those huge termination charges to stop you from switching cable and internet plans to a better deal. Surprise charges that companies sneak into bills because they can.”
The administration said that these fees make up “tens of billions of dollars in revenue” in many industries. For example, in 2020, credit card late payment fees, made up an estimated $12 billion in revenue; bank overdraft and non-sufficient funds totaled $15.5 billion in 2019; hotel resort fees made up $2.93 billion in 2018; airline baggage and change fees made up $5.97 billion in 2021; and cable hidden fees made up $28 billion in 2019.
In turn, on Oct. 26, the CFPB issued guidance about two junk fee practices regarding surprise overdraft fees and depositor fees.
“Americans are willing to pay for legitimate services at a competitive price but are frustrated when they are hit with junk fees for unexpected or unwanted services that have no value to them,” CFPB Director Rohit Chopra said in a press release. “We are providing guidance on existing law that will help law-abiding businesses seeking to fairly compete and the families they serve.”
The CFPB said that surprise overdraft fees can cost as much as $36 and when financial institutions charge them, “they may be breaking the law.”
As for surprise depositor fees, which happen when a consumer deposits a check that bounces, banks sometimes charge a fee to the depositor, usually in the range of $10 to $19, the CFPB said in the release. “Charging a fee to the depositor penalizes the person who could not anticipate the check would bounce, while doing nothing to deter the originator from writing bad checks,” according to the release.
President Biden said that the administration was “just getting started” in tackling these junk fees.
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“There are tens of billions of dollars in other junk fees across the economy, and I’ve directed my administration to reduce or eliminate them,” he said according to the transcript of his remarks.
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