President Biden announces new measures to eliminate so-called “junk fees” for consumers: top points about this coordinated regulatory approach
Just two weeks before the midterm elections, President Joe Biden has announced new measures to eliminate what he terms “junk fees” for consumers, based on his view that companies and financial institutions are using such fees to disguise the true cost of services.
The President’s remarks follow a meeting last month of the White House Competition Council, where he called on all agencies to reduce or eliminate hidden fees, charges, and add-ons for everything from banking services to cable and Internet bills to airline and cruise tickets.
The White House and the consumer protection regulators have defined junk fees as “unfair or deceptive fees that are charged for goods or services that have little or no added value to the consumer, including goods or services that consumers would reasonably assume to be included within the overall advertised price; the term also encompasses ‘hidden fees,’ which are fees for goods or services that are deceptive or unfair, including because they are disclosed only at a later stage in the consumer’s purchasing process or not at all, whether or not the fees are described as corresponding to goods or services that have independent value to the consumer.”
The White House’s non-exhaustive examples of what they are classifying as “junk fees” include “back-end” mandatory fees that they say hide the full purchase price (such as service fees added to a concert ticket); surprise fees revealed after a purchase (such as surprise hospital bills or airline family seating fees); exploitative or predatory fees (such as overdraft fees) that cannot reasonably be avoided; and fraudulent fees (such as advertising a “no fee” bank account that actually carries fees).
During his remarks, President Biden highlighted certain recent agency actions in support of his initiative.
- Overdraft fees: On October 26, the Consumer Financial Protection Bureau (CFPB) issued new guidance regarding two forms of “junk fees”: (i) depositor fees charged when a customer deposits someone else’s bounced check, and (2) overdraft fees when at the time of purchase the consumer’s account showed available funds for the purchase but processing of other transactions then caused the account to be overdrawn. This guidance comes less than a month after the CFPB issued a $191 million Consent Order against a bank for charging overdraft fees on debit card transactions under similar circumstances.
- Airline fees: Last month, the DOT issued proposed regulations directing airlines and online travel agencies which provide flights within or from the United States to clearly disclose fees for certain add-on items, such as seat selection and checking a bag, and fees for any changes or cancellations.
- Mandatory service fees: Last week, the FTC voted to launch a rulemaking that would address such practices as failing prominently to disclose consumers mandatory service fees that they believe have “little or no added value” – for instance, hotel resort fees, car rental fees, or event ticket processing fees.
Given the focus of the President’s remarks on disclosing total prices up front and the mention of specific fees that are common in certain industries, as well as the coordinated regulatory approach on this issue, companies and financial institutions are encouraged promptly to evaluate their practices and disclosures.
To learn more about the implications of this coordinated regulatory approach, please contact any of the authors or your usual DLA Piper relationship attorney.