In a speech last week, President Joe Biden said that his Administration is taking on so-called "junk fees." Accompanied by CFPB Director Rohit Chopra and FTC Chair Lina Khan, the President said that he wants to eliminate "unfair hidden fees" that are taking "real money out of the pockets of American families."
The Administration made clear that it's not suggesting that all additional fees are unfair; the President is just focused on the hidden ones. In a statement, the Administration explained, "There is nothing wrong with a firm charging reasonable add-on fees for additional products or services." What the Administration is concerned about is fees that that are designed to to "confuse or deceive consumers or to take advantage of lock-in or other forms of situational market power."
The Administration identified four categories of fees that it considers to be "junk fees":
- Mandatory fees that often hide the full price -- Where a seller publishes a low price and then adds mandatory fees later on, at the back-end of the buying process or when a consumer tries to terminate the service. One example the Administration cited was "service fees" charged by ticket sellers.
- Surprise fees that consumers learn about after purchase -- Where a seller charges surprise feels that consumers do not expect, even charges that may not be mandatory, such as "family seating fees" charged by some airlines.
- Exploitive or predatory fees -- Where a seller charges excessive fees -- such as termination fees and bank overdraft fees -- that target consumers who have limited alternative options, because they are locked into a product or service or are otherwise economically vulnerable.
- Fraudulent fees -- Where a seller makes false or fraudulent representations about pricing, such as when a bank offers a "no fee" bank account, but then actually charges significant fees.
The President made clear that he's looking to agencies across his Administration to take action on these so-called "junk fees." He said, "There are tens of billions of dollars in other junk fees across the economy, and I've directed my administration to reduce or eliminate them." As work already in progress, he cited the FTC's recent rulemaking on junk fees, the CFPB's recent guidance on junk fee practices, and the DOT's recent rulemaking on airline fees.
Marketers are well-advised to consider their current pricing practices now -- since clearly more rules and enforcement are coming.
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