Biden administration tackles ‘junk fees’ in bid to clarify costs for consumers

WASHINGTON (CN) — The Biden administration on Wednesday unveiled another batch of proposed regulations pushing for greater transparency in fees charged to consumers.

The proposal from the Federal Trade Commission would target hidden fees typically charged at the end of transactions. A separate regulation from the Consumer Financial Protection Bureau focuses on charges from banks and credit unions.

President Joe Biden has made it a key factor of his economic policies to rein in so-called “junk fees,” or hidden charges not disclosed to consumers upfront. Previous announcements highlighted efforts to reduce costs in the travel industry and health care along with beefed up regulations on corporate mergers. The announcement came the same day as the FTC announced it had seized the assets of a skin cream marketer for charging junk fees.

Biden, in remarks from the White House’s Rose Garden on Wednesday, said the unexpected charges trick customers into thinking prices are lower and could make the final costs 20% higher than advertised.

“It’s taking advantage of people,” he said. “Folks are tired of being taken advantage of and taken for suckers.”

The FTC’s regulation would specifically prohibit businesses from advertising prices that leave out mandatory fees, instead giving customers what Biden called “all-in upfront pricing.” It also would require disclosure of the amount and purpose of fees and if they are refundable.

A familiar example many consumers have experienced are the notorious Ticketmaster fees, which are charged at the end of a transaction and can run up prices for consumers far beyond advertised costs. The company, along with Live Nation, voluntarily agreed in June to start providing all-in upfront pricing.

“When these rules are finalized they won’t be voluntary, they’ll be mandatory,” Biden said.

The fees also are prevalent in purchasing hotels, resorts, concert and live event tickets, renting an apartment and paying utility bills, officials said.

“Those sneaky fees might not matter a lot for wealthy Americans, but they matter a lot for hard-working Americans sitting around the kitchen table,” Lael Brainard, director of the National Economic Council, told reporters on Tuesday.

Regulators would have the power to impose fines and force companies to issue refunds to customers.

“These junk fees function as an invisible tax that quietly inflates prices across the economy,” FTC Chair Lina Khan said Tuesday.

Speaking with reporters Tuesday to preview the announcement, a senior administration official noted the regulation won’t limit how much companies can charge in fees. Instead, the official said, it focuses on providing transparency.

“We want companies competing on price, not their ability to hide prices from consumers,” the official said.

At the Consumer Financial Protection Bureau, its proposal focuses specifically on large banks and credit unions. It would prohibit those institutions from charging fees to provide consumers with basic information, such as checking account balances, accessing account information or getting a payoff amount for a loan.

The federal watchdog agency is also finalizing a proposal to make it easier for consumers to switch financial institutions.

“Americans are fed up with the junk fees that are creeping across the economy,” the bureau’s director, Rohit Chopra, said in a press release. “If finalized, the CFPB will enforce the rule against violators in the financial industry and ensure that these firms play fairly.”

Officials estimated the proposals would save consumers a cumulative $10 billion over the next decade.

Biden also called on Congress to pass legislation outlawing junk fees.

Senator Maria Cantwell, a Washington Democrat who chairs the Senate Committee on Commerce, Science and Transportation, applauded Wednesday’s announcement and supports Congressional legislation.

“Whether it’s buying a ticket to the game or renting a car for a weekend, consumers should know the total price up front when they’re shopping for goods and services,” Cantwell said in a press release. “I applaud the FTC for proposing a rule to require companies to disclose any fees from the start — making sure the price they say is the price you pay.”

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