Sweeping New Rules Would Ban Hidden ‘Junk Fees’ Across the Economy. Here’s What It Means.

The Biden Administration announced a slew of rules on Wednesday intended to combat the rampant and unchecked use of hidden and junk fees across the economy. The fees impact everything from cable bills to concert and movie tickets to rental cars to hotels and apartments and bank accounts. Even some restaurants have started presenting hidden fees with the bill. Companies wait until the last second before purchase to disclose the fees, reducing the likelihood people will walk away from the purchase and making it nearly impossible to accurately compare products and prices before committing.

“The Biden administration has made junk fees a consumer protection priority, which is phenomenal,” said Erin Witte, director of consumer protection for the non-profit organization Consumer Federation of America. “What we’ve seen is it’s really a bipartisan issue. It affects every single person in every consumer-facing industry.”

The new rules, which are proposed under the Federal Trade Commission and the Consumer Financial Protection Bureau, reach across the entire economy. The FTC rule would make it an illegal deceptive practice to misrepresent the “total costs of goods and services” by omitting fees people must pay from advertised prices and “misrepresenting the nature and purpose of fees.” For example, if a ticket to an event can only be bought online and that purchase comes with a mandatory “convenience fee” or “service fee,” that fee would have to be included in the upfront ticket price. The same would go for resort fees, destination fees, and any other bullshit fee that magically makes the thing you’re buying more expensive once you hit the checkout cart. The CFPB proposed rule targets the financial sector specifically, banning fees for “providing basic information” to customers like checking account balances. 

According to the Biden administration press release, the CFPB will be proposing another rule later this month that would “require financial companies to allow customers to safely, securely, and reliably send their banking transaction data to other companies and banks.” The goal of that rule would be to more easily allow people to “break up with their bank” or manage accounts from multiple providers using the same program.

The Biden administration has previously introduced rules to require broadband companies to disclose all fees in advertised prices, require companies to make it as easy to cancel subscriptions as it is to sign up, and would ban junk fees and “bait-and-switch” advertising from auto dealers, which would also include a ban on “sale of add-ons that have no benefit,” perhaps once and for all putting an end to the sacred “Trucoat” upcharge.

However, these rules do not, by and large, ban junk fees themselves from getting absorbed into the cost of the product or service. As a whole, the Biden administration’s approach to combatting junk fees has largely been one of mandating transparency in the hopes that more accurate pricing would enhance competition and ultimately result in the fees being eliminated, rather than banning them outright, according to Ariel Nelson, a staff attorney at the National Consumer Law Center. 

“The idea is if you disclose everything, then maybe another company will attract consumers better if I get rid of this fee and they come to me,” Nelson said.

There are some areas of the economy where this approach likely will not work. For example, Nelson has done research around junk fees affecting incarcerated people and their families for things such as sending emails or making phone calls. She doesn’t think these rules will help them much, because “they’re literally captive consumers and they can’t choose which product they use in most contexts.” Similarly, event tickets often have exclusive sale partners, so people do not have a choice which vendor they buy the tickets from. 

But Nelson does think it will help in a lot of other contexts, such as the rental housing market, which she also researches. There, the mandatory disclosure of hidden fees like trash and maintenance fees, even for things landlords are legally mandated to provide like functional heating systems, would make it much easier for renters to accurately compare how much it will actually cost to live somewhere.

It is also not yet clear how the rules will be enforced or when they will go into effect. It is likely there won’t be a private enforcement component, meaning the FTC itself would have to bring enforcement actions against companies that break the rules, after which they can be fined and forced to pay restitution if found guilty. 

Most of these rules are now working their way through the federal rulemaking process. The FTC and CFPB will receive comments from the public on the rules introduced today, then present a finalized rule. This process can take months or even years. Once it becomes a finalized rule, companies or interest groups can sue to delay or block them by challenging their constitutionality.

Still, this regulatory action on a legitimately infuriating aspect of the American economy is both widely popular and desperately needed. “I would characterize this as a really encouraging and solid first step,” Nelson said, but she would like to see the government take more forceful action against egregious fees that, for example, amount to more than the cost of the product or service. “I think there’s a lot more work to be done on actually prohibiting certain fees.”