COLUMBUS, Ohio (WCMH) — When President Joe Biden took to the podium in front of Congress last Tuesday to deliver his State of the Union, one policy priority he outlined for lawmakers was passing a bill to eliminate “junk” fees.
The Biden administration and the Consumer Financial Protection Bureau (CFPB) loosely define junk fees as additional charges for items and services that consumers don’t see on the front end, which can sometimes confuse or deceive them, according to an October memo from the White House.
Consumers being charged for overdrafting a bank account, paying a utility bill late, or using an online platform to pay all fall under the junk fees umbrella, according to the CFPB.
Biden’s pitch for passage of the newly-introduced Junk Fee Prevention Act stems from growing momentum among several federal agencies, including the CFPB, to rein in what is being charged across a number of sectors.
According to the October memo from the Biden administration and a February 2022 CFPB article, the most common junk fees include:
- Fees for not having enough money, like overdraft fees from banks or termination fees
- Late fees, including those on credit or utility bills
- Payment or convenience fees
- Fees that obscure the full total, like “service fees” or hidden fees on items such as hotel bookings and concert tickets
Morgan Harper, a Columbus-area attorney, policy advocate, and former Democratic U.S. Senate candidate, worked for the bureau for more than three years, from 2013 through 2017.
Harper said she believes less competition among big companies has led to “a crisis of concentration” where, rather than offering lower prices to pull in consumers, the biggest companies are mirroring each other in additional fees.
“This is a unifying issue,” she said. “Even if you are earning a bit more money, once you start talking about a 30% increase in a ticket price, for example — that adds up, and that’s starting to really eat into the amount of disposable income you have overall, even if you’re in a slightly more comfortable financial position.”
But junk fees can affect lower-income people disproportionately, she said. CFPB and nonprofit Financial Health Network studies show lower-income households doling out more in credit card late fees and incurring a higher rate of overdraft fees.
Although Harper said she sees how consumers who are “footing the bill” can easily coalesce around the issue, opposition still exists, and heavy lobbying could still stall any progress on it.
A number of Republican attorneys general, including Ohio’s Dave Yost, signed on to a letter in spring 2022 opposing the CFPB’s efforts at gathering more information to tackle junk fees. The attorneys general wrote they thought state laws already “appropriately regulate” them, among other issues they took with the request for information.
Even if Congress does not move on legislating junk fees in 2023, Harper said she believes mounting pressure has led some big companies to publicly rethink certain policies. Ticketmaster said on Feb. 1 it would support “all-in” pricing, which eliminates any hidden fees at checkout.
“Oftentimes, the market will adjust even before that rulemaking is complete,” Harper said, adding that she still believes that is not enough.