New proposals would crack down on junk fees across industries and ban fees for essential bank services
Today, President Biden will be joined by Federal Trade Commission (FTC) Chair Lina Khan and Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra as they announce new efforts to crack down on junk fees and bring down costs for American consumers. Junk fees are hidden, surprise fees that companies sneak onto customer bills, increasing costs and stifling competition in industries across the economy. Last year, as part of his agenda to increase competition following his Executive Order on Promoting Competition, President Biden called on federal agencies, Congress, and private companies to crack down on junk fees and provide consumers with the full price up front.
Junk fees cost American families tens of billions of dollars each year and inhibit competition, hurting consumers, workers, small businesses, and entrepreneurs. Research shows that fees charged at the back-end of the buying process make it harder to comparison shop for the best deal and lead to consumers paying upward of twenty percent more. Junk fees also make it hard for honest businesses to compete, stifle innovation, and hurt small businesses.
Today, the Biden-Harris Administration is announcing bold, new actions to crack down on junk fees and promote competition:
- The FTC is proposing a rule that, if finalized as proposed, would ban businesses from charging hidden and misleading fees and require them to show the full price up front. The rule would also require companies disclose up front whether fees are refundable. This would mean no more surprise resort fees at check out or unexpected service fees to buy a live event ticket. The rule would apply to industries across the economy, including event tickets, hotels and lodging, apartment rentals, car rentals, and more. Under the proposed rule, companies that fail to comply could face monetary penalties and have to provide refunds to consumers.
- The CFPB is taking action to require large banks and credit unions to provide basic information to consumers without charging fees-meaning no more fees for basic services like checking bank account balances, obtaining a payoff amount for a loan, or getting account information needed for applications.
- Later this month, the CFPB will propose a rule that, if finalized, would require financial companies to allow customers to safely, securely, and reliably send their banking transaction data to other companies and banks. The proposal would make it easier for people to break up with their bank, switch to banks with better offerings, and to manage accounts from multiple providers. This reform will ensure financial companies compete based on service quality and up-front pricing, deterring junk fees.
In addition, CFPB is releasing new findings showing their crack down on junk fees is already saving consumers billions of dollars:
- CFPB finds that bounced check fees are down more than 86 percent since 2021-saving consumers nearly $2 billion-and that nearly two-thirds of large banks have eliminated these fees entirely. Previous CFPB studies have shown that bounced check fees, which can cost $30-40 per transaction, hit low income and minority Americans the hardest. This new finding adds to the $5.5 billion annual reduction in banking junk fees achieved by the Biden-Harris Administration, for a total of an average of $170 in annual savings for the 33 million households that pay these fees.
- CFPB is also announcing that it secured an additional $140 million in consumer refunds from companies that charged illegal junk fees, such as surprise overdraft fees and multiple bounced check fees for the same transaction. Last October, the CFPB issued guidance to financial institutions about these illegal junk fees.
Also today, the White House is reinforcing the Administration's all-of-government approach to competition:
- The Office of Information and Regulatory Affairs (OIRA) is publishing new guidance to help agencies better develop and analyze regulations with competition in mind. Developed in collaboration with the National Economic Council, the Council of Economic Advisers, and other members of the White House Competition Council, this guidance will help agencies design regulations that promote competition while achieving other important policy goals.
Today's announcements build on important actions the Biden-Harris Administration has already taken to address junk fees:
- The Department of Transportation (DOT) has secured significant commitments by major airlines to improve service. Previously, none of the 10 largest U.S. airlines guaranteed meals or hotels when they caused a cancellation or significant delay and no airline guaranteed that parents can sit with their children for free. Now, thanks to DOT's efforts, 9 of the 10 largest airlines guarantee hotels, 10 airlines to guarantee meals, and 4 airlines guarantee fee-free family seating. Consumers can see what services airlines offer at FlightRights.gov.
- DOT has issued several proposals that, if finalized, would: (1) require airlines to promptly refund airline tickets when they cancel or significantly change a flight; (2) require refunds for services not delivered (like broken Wi-Fi or delayed bags), and (3) require fees to be disclosed up-front for checking a bag or changing or canceling a flight. DOT is also working on rule proposals that would ban family seating junk fees and would require airlines to compensate flyers when a flight is cancelled or delayed due to the airline's fault.
- The Department of Housing and Urban Development (HUD) called on industry, housing providers, and state and local governments to adopt policies that promote greater fairness and transparency of fees faced by renters.
- The Federal Communications Commission (FCC) has finalized a rule that will soon require broadband providers to display "Broadband Nutrition Labels" for consumers-clear labels that provide basic information about the costs and fees of internet service offerings, so people can compare options more easily.
- The FTC proposed a "click to cancel" rule in March of 2023, that, if finalized as proposed, would require sellers to make it as easy for consumers to cancel their enrollment as it was to sign up. This rule would rescue consumers from seemingly never-ending struggles to cancel unwanted subscription payment plans for everything from cosmetics to gym memberships.
- The FCC has proposed a rule that, if finalized as proposed, would require cable providers to display "all-in" prices clearly and prominently, so consumers know what they are getting and at what price.
- CFPB proposed a rule that, if finalized as proposed, would lower credit card late fees from approximately $30 to $8, saving consumers up to $9 billion annually.
- The FTC proposed a rule that, if finalized as proposed, would ban junk fees and bait-and-switch advertising by auto dealers, including prohibiting deceptive advertising, requiring full upfront pricing, requiring consent for charges, and prohibiting the sale of add-ons that have no benefit.
- Following the President's calls to action, private sector companies in the live event ticketing, lodging, and rental housing sectors have changed how they display prices so that the all-in price is more readily available to consumers.
