The mountain of meritless and hidden “junk fees” that consumers pay should be banned, Biden administration officials said Wednesday, in an escalation of an ongoing effort to fight hidden charges that cost consumers billions each year.
The Consumer Financial Protection Bureau and the Federal Trade Commission announced a set of proposed rules that would require businesses to show the full price up-front on a wide range of transactions — from concert ticket purchases to car rentals, hotel bookings to apartment rentals — and save people time and money as they shop for the best prices, regulators said.
The Federal Trade Commission’s proposed rule “would prohibit corporations from running up the bills with hidden and bogus fees, requiring honest pricing and spurring firms to compete on honesty rather than deception,” said Chairwoman Lina Khan. The FTC proposal would assess money penalties on violators, she told reporters.
At the same time, the Consumer Financial Protection Bureau said it’s making it clear that big banks and credit unions cannot charge customers for simple requests, such as fees to review account balances, check-imaging fees or charges to access loan statements.
“When people request basic information about their accounts, big banks cannot charge them massive fees or trap them in endless customer-service loops,” CFPB Director Rohit Chopra said.
The agency has already been scrutinizing fees, and banks have largely curbed non-sufficient-funds fees, Chopra said. The result is an estimated consumer savings of $2 billion a year. Businesses have already paid back consumers $140 million in junk fees after CPFB scrutiny on unnecessary fees. That included charges from one unidentified company for paper statements — except no statement was ever printed or mailed, Chopra said.
“Today I’m proud to announce that my administration has taken our most comprehensive action ever to eliminate junk fees,” President Joe Biden said Wednesday in the White House’s Rose Garden.
“It’s just about simple fairness. Folks are tired of being taken advantage of and being played for suckers,” he said.
For over a year, the Biden administration has been hammering away at the harms of junk fees that can knock bank customers, travelers, concert-goers and others with unneeded costs. But efforts have culminated so far in companies making pledges to show “up-front all-in pricing,” transparency that may only do so much to protect consumers, some advocates say.
The one-two punch from regulators Wednesday attempts to be a tough new chapter. “These announcements are some of the most comprehensive actions on junk fees the administration has taken to date,” said Lael Brainard, director of the White House’s National Economic Council.
Consumer advocacy groups cheered the news Wednesday. “It’s a long needed change that is going to have a real impact on Americans’ pocketbooks,” said Susan Harley at Public Citizen.
Requiring clear, easy-to-understand prices will help people make informed purchases and it also improves competition for businesses that already want to offer clear up-front pricing, said Harley, managing director for Public Citizen’s Congress Watch division.
A group that represents financial institutions was critical. “The CFPB’s latest advisory opinion is another instance of the bureau overstepping its authority and masking a major power grab as simple ‘guidance,’” said Greg Mesack, senior vice president of government affairs at the National Association of Federally-Insured Credit Unions.
The U.S. Chamber of Commerce urged the administration to drop the proposal. “The reality is this attempt at price controls will only stifle the innovation that leads to more choices and lower prices for consumers,” said Neil Bradley, the business group’s executive vice president and chief policy officer.
“We need a government that is focused on holding accountable those who defraud consumers, not one focused on micromanaging the economy,” Bradley said.
The Biden administration’s focus on unnecessary fees and added costs comes while inflation has burned Americans’ budgets. Inflation rates have receded from their four-decade highs, but higher prices and the ability to pay back debts are still on the mind of many people. September’s consumer inflation data is scheduled for release Thursday.
There’s no estimate on exactly how much money the FTC proposal could save consumers, but it could be in the billions, senior administration officials said.
Hidden and deceptive fees are already illegal under federal law, but the proposed FTC rule is an effort to broaden the fight instead of bringing individual cases.
The rule takes aim at fees that are hidden and misrepresent their purpose. Businesses also have to be clear about whether fees are refundable, regulators said.
Of course, there’s no guarantee the FTC proposal will make the books. It has to go through a public comment and review period, and possibly even withstand lawsuits. The agency has proposed a ban on noncompete clauses in the job market and business groups say they are ready to sue if it takes effect.
The new CFPB guidance is rooted in a 2010 law that grew out of the financial crisis and Great Recession. Banks and credit unions with at least $10 billion in assets already have to follow laws to provide customers with account information, the CFPB noted.
When financial firms charge fees for that kind of information, they’re blocking customers from the data they are entitled to have, the agency said.
The agency said it could press for money penalties if violations happen after Feb. 1, 2024.
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