By WASHINGTON — The White House on Wednesday announced new initiatives to rein in tens of billions worth of surcharges tied to goods and services, or “junk” fees, in partnership with two of the nation’s leading consumer-protection agencies.
“Research shows that without realizing it, folks can end up paying as much as 20% more because of hidden junk fees than they would have paid if they could see the full price upfront and compare it with other options,” President Joe Biden said Wednesday speaking from the White House Rose Garden.
“It’s wrong. It’s wrong,” Biden said. “It’s just taking advantage of people. And it makes it harder for honest businesses who are trying to do the right thing to compete.”
Biden, along with Federal Trade Commission Chair Lina Khan and Consumer Financial Protection Bureau Director Rohit Chopra, revealed new policy proposals from the two agencies aimed at banning junk fees in certain sectors.
The FTC’s rule proposal would prohibit businesses from burying fees within a transaction and force them to present the amount and purpose of surcharges, upfront — potentially saving consumers over $10 billion over the next decade, according to a release. Under the rule, the commission would be able to secure refunds for consumers if the mandate is violated.
The rule “would not just return money to people’s pockets but also restore a degree of justice to American families and restore fairness in our markets,” Khan told reporters on Tuesday.
The CFPB is targeting big banks by highlighting consumers’ rights to access complete, accurate and free account information upon request according to a 2010 federal law.
“When people request basic information about their accounts, big banks cannot charge them massive fees or trap them in endless customer service loops,” Chopra told reporters on Tuesday. “Charging a competitive price for a legitimate service makes sense but charging junk fees for basic customer responsiveness doesn’t.
The CFPB has slapped Wells Fargo, Bank of America and Regions Bank with fines, citing extraneous overdraft fees or overcharges in recent years. Further, to address big banks’ monopoly, the bureau will issue a proposal later this month to require financial companies to allow the easy transfer of customers’ banking transaction data to competitors.
The American Bankers Association has said it is closely reviewing the CFPB’s advisory “to discern whether it aligns with appropriate administrative procedures and the relevant statutes.”
The proposals are part of the administration’s overarching effort to increase competition across industries, beginning with Biden’s 2022 executive order on promoting competition in the economy. The federal Office of Information and Regulatory Affairs, in partnership with the NEC and the Council of Economic Advisers, also published new guidance on Wednesday to help federal agencies establish the new standard.
Both the FTC and the CFPB have taken preliminary actions toward cracking down on junk fees over the past few months. Earlier this year, the CFPB released a rule proposal on excessive credit card fees, while the FTC began targeting unfair practices in ticketing and other fees in late 2022.
Lawmakers have come out in support of the agencies’ new initiatives. Sen. Maria Cantwell, D-Wash., chair of the Senate Committee on Commerce, Science and Transportation, applauded 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.”
Sen. Sherrod Brown, D-Ohio, chair of the Senate Banking Committee, called junk fees “just another way for big banks and big companies to hide their true prices and charge Americans more.”
“By cracking down on junk fees, the CFPB is keeping money in Americans’ bank accounts,” Brown added. “When we take on these fees across industries, Americans will be able to see all the ways corporations raise prices on them, and keep more of their own money.”
Sen. Amy Klobuchar, D-Minn., who cosponsored the Hotel Fees Transparency Act introduced in July, said “We must put an end to these surprise costs so that consumers have the transparency they need and deserve.”
“This announcement from the administration is an important step towards ensuring that the price you see is the price you pay,” she added.
The nation’s largest business advocacy organization, meanwhile, has denounced the White House’s effort.
Neil Bradley, executive vice president and chief policy officer of the U.S. Chamber of Commerce, called the administration’s attempt to regulate how businesses price thousands of daily transactions “baffling.”
“The reality is this attempt at price controls will only stifle the innovation that leads to more choices and lower prices for consumers,” Bradley said. “The Chamber urges the administration to reverse course. We need a government that is focused on holding accountable those who defraud consumers, not one focused on micromanaging the economy.”
The FTC will consider a final rule after a 60-day comment period, according to a senior administration official.
