Are “Junk Fees” A Winning Election Issue?
If July was Republicans’ “ESG Month,” August (and potentially everything after, at least until next November) might just be Democrats’ “Junk Fee Month.”
As The Associated Press reported earlier this week, the White House, Democrats in Congress, and the Progressive Change Institute are staging several events across the country this month to “target unexpected fees tacked on to things like plane and concert tickets, hotel rooms, hospital and cellphone bills, and housing transactions.” Democrats already have held events in Detroit, Philadelphia, central New Jersey, and Albuquerque with more planned for Pittsburgh, New York, Las Vegas, Wisconsin, Ohio, and North Carolina. “Still others are in the works,” The Associated Press noted.
What fees do Democrats and progressives consider “junk,” what are policymakers already doing to address them, and could this issue turn into a winning one for Democrats as we head into an election year?
Let’s take a look.
How Do Democrats Define Junk Fees?
The Consumer Financial Protection Bureau (CFPB) has said so-called junk fees cost U.S. consumers about $29 billion a year. To find that sum, the CFPB looked at only two types of fees, however: credit card late fees and bank overdraft and non-sufficient funds fees. Other than that, as lawyers at McGlinchey Stafford pointed out, the CFPB has been “careful not to explicitly define what” constitutes a junk fee. (Though, to be sure, the CFPB has said “service” fees assessed by the hotel and concert sectors also fall under the category of “junk fee,” even though the agency has no jurisdiction over those markets.)
The Federal Trade Commission (FTC) has been a tad clearer, providing what it deems to be an actual definition for junk fees. Junk fees are “unfair or deceptive fees that are charged for goods or services that have little or no added value to the consumer, including goods or services that consumers would reasonably assume to be included within the overall advertised price,” the FTC has said. The FTC also has defined junk fees as:
- Unnecessary, unavoidable, or surprise charges;
- Arbitrary or random fees; and
- Fees imposed on captive consumers by deploying digital dark patterns and other tricks to hide or mask them.
The agency noted junk fees can show up “at any stage of the purchase or payment process.”
While the FTC has offered a broader definition than the CFPB, terms like “arbitrary,” “unnecessary,” and “little or no added value,” are, largely, in the eye of the beholder. Businesses, of course, would argue all of these fees are assessed in connection with the provision of a good, service, or tool.
Federal policymakers have said so-called junk fees affect hundreds of millions of Americans each year, and they may be right about that statistic. According to a 2019 Consumer Reports survey, about 85 percent of Americans report having been assessed hidden fees. The avenues where Americans are most likely to encounter these fees are telecommunications, entertainment and sporting events, utility bills, personal banking services, and credit cards.
While the vast majority of consumers find these fees “annoying” (more on those opinions later), a White House paper published this year gave a harsher assessment. It opined, “The prevalence of junk fees degrades consumers’ ability to comparison shop by confusing consumers about the true price, enticing (or tricking) consumers into paying more than they should, and reducing companies’ incentives to compete with high quality or lower costs.”
Which is why White House officials are so keen to address this issue.
What Are Federal Policymakers Doing About Junk Fees?
In his 2023 State of the Union address, President Joe Biden pledged to use the executive branch’s power to end junk fees. “Junk fees may not matter to the very wealthy, but they matter to most folks in homes like the one I grew up in,” the president said. “I know how unfair it feels when a company overcharges you and gets away with it.”
Shortly after that speech, the White House offered draft legislation, the Junk Fee Prevention Act, which would:
- Get rid of “excessive” online concert, sporting event, and other entertainment ticket fees;
- Ban airline fees for family members to sit with children;
- Outlaw “exorbitant” early termination fees for TV, phone, and internet services; and
- Block surprise resort and destination fees.
Rep. Ruben Gallego (D-Ariz.) introduced the Junk Fee Prevention Act in the House in May 2023. It currently has just eight cosponsors, all Democrats. A related bill in the Senate, sponsored by Sen. Richard Blumenthal (D-Conn.), has just only two cosponsors.
The real action is happening in the executive branch, and it started well before the State of the Union. In January 2022, the CFPB issued a Request for Information seeking input from the public and stakeholders on:
- Fees people thought were already included as part of a product or service’s baseline price;
- Unexpected fees;
- Fees that appeared too high; and
- Unclear fees.
Nine months later, in October 2022, the CFPB issued a compliance bulletin focused on “surprise depositor fees” and “surprise overdraft fees.” This bulletin was meant to illustrate to regulated entities how the CFPB would exercise its enforcement and supervisory authority regarding:
- Unfair and unanticipated overdraft fees for transactions where the consumer had a positive balance at the time of the transaction;
- Assessing multiple insufficient funds (NSF) fees for the same transaction;
- Auto and mortgage loan servicers charging late fees in excess of the amounts permitted under the applicable consumer’s contract; and
- Auto servicers charging unauthorized late fees after repossession and acceleration.
In October 2022, the FTC also announced it would explore a new rule to crack down on junk fees. The FTC asked the public and stakeholders to comment on:
- Unnecessary charges for worthless, free, or fake products or services;
- Unavoidable charges imposed on captive consumers; and
- Surprise charges that increase the purchase price.
Then, in February 2023, the CFPB issued a proposed rule to curb credit card late fees, which it considers junk fees. The agency has indicated intends to issue final regulations on both overdraft and credit card late fees this November.
The FTC and CFPB are not the only agencies working to address so-called junk fees. The U.S. Department of Transportation published a draft rule in October 2022 that, if finalized, would require airlines to show the full price of a plane ticket and baggage charges up front. And, this year the Federal Communications Commission finalized a rule that requires cable and internet providers to list fees and services on “an easy-to-read consumer friendly label.”
In addition to exploring and developing regulations, the CFPB is going after individual companies it deems guilty of charging excessive fees. In September 2022, for example, it required Regions Bank to repay $191 million in “illegal surprise overdraft fees.”
How Does the American Public Feel About So-Called Junk Fees?
In perhaps the least surprising poll outcome in the history of polling, the Consumer Reports survey from 2019 found so-called junk fees are almost universally reviled. In fact, a full 96 percent of respondents said they are “annoying.” (Anna Laitin, Consumer Reports’ director of financial policy deadpanned, “I’d like to find one of the four percent of people who doesn’t mind these fees.”)
Being annoyed is one thing — but are those annoyances profound enough that Americans want policymakers to intervene?
The answer is a resounding yes.
Make that a resounding bipartisan yes.
According to a poll by Global Strategy Group fielded in February 2023, 64 percent of Independent voters and 62 percent of Republican voters want Congress to approve the President Biden-endorsed Junk Fees Prevention Act. Nearly three-quarters of Independent voters, 74 percent, and 68 percent of Republicans support federal policymakers’ plans to reduce credit card late fees.
Morning Consult found similar results when it asked voters if Congress should address certain so-called junk fees. Eighty percent of Democrats, 71 percent of Independents, and 73 percent of Republicans want federal lawmakers to reduce service fees for event tickets. The numbers were similar when it asked if Congress should try to eliminate the fees consumers pay for cancelling internet or phone service early.
Perhaps not surprisingly, Morning Consult found elderly voters (those more likely to be on fixed incomes) were especially supportive of efforts to address so-called junk fees.
Among generations, baby boomers were most likely to say they support reducing fees for concerts and sporting events. Seventy-nine percent want Congress to act on this matter. Baby boomers also were the most likely to say Congress should work to eliminate fees charged by cell phone, cable TV, and internet providers. Seventy-seven percent of baby boomers want Congress to approve legislation getting rid of these fees.
Other results were surprising.
While households with lower or moderate incomes pay a higher proportion of their revenue in fees, among income brackets, those who reported a household income of $100,000 or more were the most likely to tell Morning Consult they wanted Congress to act to reduce service fees. Eighty-two percent in that income bracket said they support that initiative while 80 percent said they wanted Congress to eliminate early termination fees.
This June, the Pew Charitable Trusts released a survey that found 71 percent of U.S. adults said the typical overdraft fee banks charge is “unfair.” NSF fees were even less popular, with 87 percent of Americans saying those fees are unfair. Again, Pew found Americans want the government to intervene. In fact, 84 percent of respondents told Pew regulators should encourage banks to reduce fees. More than half, 54 percent, said regulators should eliminate these fees altogether.
No wonder Democrats and progressives are barnstorming the country – and plan to continue to do so on this issue for at least the next 15 months.