During his remarks in a meeting with private sector companies on June 15, 2023, President Biden described junk fees as “these hidden charges that companies sneak into your bill to make you pay more and without you really knowing it initially.” President Biden was joined by representatives from Live Nation, SeatGeek, xBk, Airbnb, the Pablo Center at the Confluence, TickPick, DICE, and the Newport Festivals Foundation — companies that currently provide or have committed to providing all-in pricing in response to the President’s call to action on “junk fees” in his State of the Union.
After taking credit for “reducing overdrafts by $5.5 billion a year and bounced checks cost by another $2 billion a year,” the President turned his focus on the ticketing and lodging industries and stated the solution is “all-in pricing.” All-in pricing is “where companies fully disclose their fees upfront when you start shopping so you’re not surprised at the end when you check out.” Quite notably, other fees that President Biden has attacked as “junk fees,” like overdrafts and credit card late fees, are clearly out of scope of his “junk fee” definition. Overdraft and credit card late fees are not hidden charges. They are disclosed upfront in all-in pricing prior to account opening using model disclosures set forth in Regulation E and Regulation Z respectively. Additionally, overdraft and credit card late fees are reasonably avoidable by consumers.
During his State of the Union, President Biden announced his administration “is also taking on ‘junk’ fees, those hidden surcharges too many businesses use to make you pay more” and took credit for “reduc[ing] exorbitant bank overdraft fees.” In October 26, 2022, President Biden appeared at the White House with Rohit Chopra, CFPB Director, and Lina Khan, FTC Chair, to announce that his Administration is taking action to eliminate all “junk fees,” such as fees for deposited checks that are returned unpaid, surprise banking overdraft fees, hidden hotel booking fees and termination charges to stop people from changing cable plans.
In addition to the efforts by the CFPB and FTC to attack “junk fees,” the Department of Transportation (DOT) proposed a rule in September 2022 that would require airlines to disclose all of their fees, from baggage fees to wireless internet to seat changing fees, up front when you’re first comparing prices. The Federal Communications Commission (FCC) finalized a rule in November 2022 to require cable and internet providers to list fees and services up front with an easy-to-read consumer friendly label.
On March 21, 2023, the White House convened a bipartisan panel of leading scholars and business leaders to discuss the economic case in support of the Biden Administration’s efforts to crack down on “junk fees” inviting scholars, practitioners and representation from sixteen agencies, including DOT, CFPB, FTC, FCC, and HUD, to discuss “How Junk Fees Distort Competition.” In prepared remarks delivered by Director of the National Economic Council Lael Brainard, claimed that junk fee regulation is smart economics because “[j]unk fees weaken competition, penalize honest businesses that want to be transparent up front about the all-in price, and lead to a race to the bottom.” After discussing drip pricing (where additional costs are “dripped in” as the consumer goes through the shopping process) in concert tickets and food delivery, hotel report fees, and mandatory apartment fees, the conversation shifted to bank wire fees. The written materials stated that banks typically charge $10-$35 for incoming and outgoing wires when the actual cost to the bank from the Federal Reserve through FedWire cannot exceed $0.92. This Fed cost does not include processing and other fees that a bank may pay to an intermediary bank for the wire. The written materials further stated that “[a] consumer is typically captive at the moment they need to send or receive a wire transfer and have no choice but to pay the fee, as it would be costly and time-intensive to move their banking relationship to another bank with lower fees.”