President Biden Will Call for a Junk Fee Prevention Act to Eliminate Unfair and Costly Junk Fees
As part of the fourth meeting of the President’s Competition Council, the Biden-Harris Administration is announcing two actions that further advance the President’s agenda of promoting competition in the American economy. First, the Consumer Financial Protection Bureau (CFPB) is proposing a rule that would slash excessive credit card late fees, pursuant to its authority under the bipartisan Credit CARD Act of 2009. The rule is projected to reduce typical late fees from roughly $30 to $8, saving consumers as much as $9 billion a year in late fees. Second, the Department of Commerce’s National Telecommunications and Information Administration (NTIA) is releasing a report assessing the barriers to competition in the current mobile app store ecosystem and providing recommendations to level the playing field for app developers and give consumers more control over their devices.
The President will also highlight the Administration’s steady progress in eliminating or limiting junk fees: those hidden or unexpected fees that Americans pay each day that can total hundreds of dollars a month. Junk fees are not only costly to consumers, but they can stifle competition by encouraging companies to use increasingly sophisticated tools to disguise the true price consumers face. By reducing these fees and increasing transparency, we can provide relief to consumers and make our economy more competitive, particularly for new and growing businesses.
Since the President urged agencies to focus on reducing junk fees at the September 2022 meeting of the Competition Council, agencies have delivered in the following ways:
The CFPB targeted overdraft and bounced check fees, releasing two reports in 2021 and ramping up its oversight, driving 15 of the 20 largest banks to agree to put an end to bounced check fees. The CFPB followed up by releasing guidance banning surprise overdraft fees – fees charged for overdrawing a checking account even though at the time of purchase there appeared to be sufficient funds – and surprise depositor fees charged when you deposit someone else’s bounced check. These changes will reduce fees by more than $1 billion annually.
The Department of Transportation (DOT) proposed a rule to require airlines and online booking services to show the full price of a plane ticket up front, including baggage and other fees. DOT also published a dashboard of airline policies when flights are delayed or cancelled due to issues under the airlines’ control, leading 9 airlines to change policies to guarantee coverage of hotels and 10 airlines to guarantee coverage of meals, none of which was guaranteed before.
The Federal Communications Commission (FCC) released new rules that will go into effect next year to require broadband providers to use “nutrition labels”—similar to those used for food products—to convey key information to consumers about internet service options in an accessible format. The information featured will include prices, speeds, data allowances, and any additional fees charged.
Even as the Administration is taking these significant steps to use existing authority to eliminate junk fees, the President is calling on Congress to pass a Junk Fee Prevention Act that cracks down on four types of junk fees that cost American consumers billions of dollars a year.
Specifically, the President is urging Democrats and Republicans in Congress to come together to:
Crack down on excessive online concert, sporting event, and other entertainment ticket fees. Many online ticket sellers impose massive service fees at check-out that are not disclosed when consumers are choosing their tickets. In a review of 31 different sporting events across five ticket sellers’ websites, service charges averaged more than 20% of the ticket’s face value, and total fees—like processing fees, delivery fees, and facility fees—reached up to more than half the cost of the ticket itself. A family of four attending a show could end up paying far more than $100 in fees above and beyond the cost of the tickets.
Significant concentration in the industry—and a lack of consumer options—makes matters worse. Often, if Americans want to attend a particular concert or sporting event, they only have one online option for making the initial ticket purchase. That means that even if consumers knew they might have to pay a large fee on top of the ticket cost, they would have no way to avoid it if they wanted to attend a particular show. One company has exclusive partnerships with a reported 80 of the top 100 arenas in the United States, allowing it to charge fees to attend events at those leading venues without fear of competition.
While antitrust enforcement agencies have the authority to investigate and address anti-competitive conduct in the industry, the President urges Congress to act now to reduce these fees through legislation. Specifically, the President is calling on Congress to prohibit excessive fees, require the fees to be disclosed in the ticket price, and mandate disclosure of any ticket holdbacks that diminish available supply.
Ban airline fees for family members to sit with young children. Many airlines today charge a fee to select a seat in advance, including for those traveling with children. Parents can find themselves unexpectedly not seated with their young child on a flight or paying large fees to sit next to their children. The President believes no parent should have to pay extra to sit next to their child.
In July 2022, the DOT issued a notice stating that it is the Department’s policy that U.S. airlines ensure that children who are age 13 or younger are seated next to an accompanying adult with no extra charge, but still no airline guarantees fee-free family seating. DOT will publish a family seating fee dashboard and launch a rulemaking to ban the practice. The President is calling upon Congress to fast-track the ban on family seating fees so that the DOT can crack down on these practices more quickly than through a rulemaking.
Eliminate exorbitant early termination fees for TV, phone, and internet service. Too often, cable TV, internet, and mobile phone providers have “early termination” fees that consumers must pay if they want to switch to another provider. These fees can exceed $200. Early termination fees are costly for consumers and undermine economic dynamism by making it harder for innovative companies to win a toe-hold in the market by encouraging customers to switch. And these providers often charge people when they’re most vulnerable—people who are forced to move because of a job loss or other financial downturn, for example, may be slammed with hundreds of dollars in early termination fees.
The President urges Congress to eliminate these excessive early termination fees so that companies can no longer lock in customers and must truly compete with each other on the basis of price and quality.
Ban surprise resort and destination fees. When families set their budget for a vacation, they expect that the hotel price they see is the price they will pay. But many travelers encounter surprise “resort fees” or “destination fees” when they check out or at the end of a lengthy online reservation process. These fees harm consumers by preventing them from the seeing the true price when they pick out a hotel and by limiting their ability to comparison shop. Over the past decade, a growing number of hotels have imposed these fees on consumers, which can be $50 or more per night. More than one-third of hotel guests report having paid such fees. And the total costs for Americans are enormous: according to one report, hotels collected billions in these fees and surcharges in 2018.
The President urges Congress to ban these surprise fees by requiring that hotels include them in the price of the room, so consumers aren’t surprised. Travelers should know which hotels charge these fees and which ones do not, so that they can plan and budget accordingly.
The President is calling for passage of a Junk Fee Prevention Act to provide millions of Americans with fast relief from these frustrating and costly fees. This will not only save Americans billions a year, but make our markets more competitive—creating a more even playing field so that businesses that price in a fair and transparent manner no longer lose sales to companies that disguise their actual prices with hidden fees. In the coming weeks and months, the Biden-Harris Administration looks forward to working with Congress to crack down not only on these fees, but also other junk fees that take cash out of Americans’ pockets and hide the true cost of products.
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