With less than two weeks before the midterm elections, President Joe Biden yesterday announced a new administration initiative to get rid of so-called “junk fees” — the additional charges added on to all sorts of transactions that make things cost more than you expected. All told, once various federal agencies write rules to limit what companies can get away with, the plan is expected to save consumers billions of dollars. The idea is to get rid of surprise fees that are added onto bills, like the “resort fee” that gets tacked on to hotel bills, or the ridiculous fees that make buying concert or sporpsball tickets far more expensive than the tickets’ face value.
Biden was joined for the White House event yesterday by Federal Trade Commission Chair Lina Khan and Consumer Financial Protection Bureau (CFPB) Director Rohit Chopra, whose agencies will be key to the regulatory effort. Biden listed several nasty junk fees he’d like to see done away with, like “surprise banking overdraft fees, excessive credit card late fees, hidden hotel booking fees, or those huge termination charges to stop you from switching cable and Internet plans to a better deal.” For a short definition, he called them “Surprise charges that companies sneak into bills because they can.”
“In fact,” Biden added, “There’s an entire industry that’s popping up in America to help companies use complicated algorithms to hide fees that hurt consumers and help them. These things add up.”
Good on him! This is one of those things we like about the Biden administration: Not everything has to be a big nation-changing effort. You certainly have some of those, like the Climate Law, which will definitely motivate a massive shift toward clean energy. But we also appreciate that the administration is willing to tackle things like crappy add-on fees, or fixing the “family glitch” in Obamacare that made insuring workers’ family members excessively costly. As Biden says, they add up.
A couple of new banking regulations were announced yesterday to kick off the initiative. The CFPB announced new guidance aimed at eliminating two forms of banking fees that it said are “likely unfair and unlawful,” and which can hit bank customers as a complete surprise. Chopra said that Americans are “willing to pay for legitimate services at a competitive price, but are frustrated when they are hit with junk fees for unexpected or unwanted services that have no value to them.” So the guidance targets surprise overdraft fees, which can cost as much as $36 per transaction.
Also too, CFPB will ban fees charged to a customer’s account when they deposit checks that end up bouncing due to the check-writer’s insufficient funds. Those fees run between $10 and $19 per instance, punishing bank customers for bad checks that weren’t their fault.
Biden got all folksy in illustrating the problems, because he secretly wants to be Jimmy Stewart and we are completely fine with that:
Imagine this: Your child outgrows his bicycle, and you decide to sell it online, and someone pays you a check. Pays you 30 bucks for the bicycle or something. Days later, that check that you got paid with, that you deposited into your bank, it bounces. You didn’t know it was bad, but you get charged 15 bucks. You get charged 15 bucks. It’s wrong. It’s ridiculous. It’s unfair. And my administration is making clear today it’s illegal as well.
Well Mr. Potter, America isn’t going to let you charge decent people extra when they’ve already been ripped off! They may have been cheated in selling Timmy’s bike but there’s no need for you to add to it! We hate you, Mr. Potter!
Biden did not digress from his comments to explain to younger Americans what a “check” is, although that may be necessary.
Biden didn’t get the kids involved as he explained the surprise overdraft fees, but he made clear that he isn’t any too fond of those, either. (And good for him, because this has happened to me, too!)
My administration is also making clear: Surprise overdraft fees are illegal. Listen to how those fees work. […] You pay a bill, and you double check your bank account to make sure, before you write the check, that you have enough in your account to cover it. You’ve gotten the money, so you go ahead and you pay.
Then it turns out your balance wasn’t up to date because your bank was slow in processing other charges. And by the time the bank gets around to setting — settling the transaction, you’ve overdrawn your account. You’re charged an overdraft fee that runs around $35 each time.
It’s not your fault. The bank screwed up. You didn’t; the bank did. You had a positive balance when you paid the bill. It’s just simply wrong. And today, my administration is making clear it’s also illegal.
Okay, so maybe that’s what happened with the person who bought Timmy’s bike. We feel kind of bad for slagging them now.
Biden said that just getting rid of those two types of fees would save Americans about a billion dollars every year, which is great news for the secondhand bicycle trade and for consumers all around.
Rules to eliminate other junk fees across a range of businesses will have to go through the federal rule-making process, which Team Biden actually pays attention to, so it may be a few months before other dumb fees are done away with.
Biden noted that CFPB plans to take on unfair credit card late fees as well, which along with other banking fees being targeted will add up to consumers saving some $24 billion a year. We hope that includes changing the fun little scam where credit card companies move up the date payments are due from time to time, and if people don’t notice the change, they get hit with late fees. (I remember Elizabeth Warren explaining that one on the “Daily Show,” back in the late Jurassic.)
Biden also said the Transportation Department would target “unfair airline fees,” noting that some progress has already been made on one such fee:
Last summer, if your flight was canceled or delayed, only one top airline guaranteed that you could rebook for free, even because they’re the ones who cancelled you, not you; you didn’t fail to show up. They can- — they — they cancelled.
When Secretary Buttigieg called them out on this, about 10 airlines — now 10 airlines rebook for free. They don’t charge the fee. That’s progress.
Not surprisingly, Republicans and business groups are already complaining about the effort. Republicans already hate the CFPB and support an ongoing lawsuit that seeks to have its funding mechanism declared unconstitutional. Sen. Pat Toomey, the top Republican on the Senate Banking Committee, griped in a statement that it’s “no surprise that an out-of-control and unaccountable agency […] has chosen to sidestep the congressionally mandated rulemaking process to change the rules of the road” without congressional approval.
So keep that in mind as you talk to friends about voting: Republicans want you to pay surprise fees, because banks deserve to fleece you at every opportunity.
[AP / CNBC / White House / CNBC]
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