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The Biden administration has broadened its crackdown on so-called junk fees used by companies to inflate prices at checkout, which the White House has argued cost US shoppers billions of dollars each year.
The measures by the Federal Trade Commission and the Consumer Financial Protection Bureau announced on Wednesday have the potential to significantly alter how US companies display prices to shoppers.
The FTC has proposed a rule that would prohibit companies from using bait-and-switch practices that show consumers one price and then inflate it with fees.
The proposal would also ban “bogus fees” that businesses fail to disclose and accurately represent to consumers.
“In the aggregate, these junk fees function as an invisible tax that quietly inflates prices across the economy,” said Lina Khan, FTC chair, adding that the proposal would require “honest pricing and [spur] firms to compete on honesty rather than deception”.
Companies in violation of the rules would face civil monetary penalties and be required to reimburse affected customers. The proposal will enter a 60-day comment period before final implementation.
From booking a hotel and buying concert tickets to punitive late fees on credit card bills, US consumers for years have griped about hidden fees. President Joe Biden had raised the issue in his State of the Union speech in February.
The issue received added public attention when music fans trying to buy tickets for Taylor Swift’s Eras tour complained of hidden fees. Ticketing platforms such as Live Nation and Ticketmaster subsequently offered upfront pricing options.
Lael Brainard, director of the National Economic Council, said: “These announcements are some of the most comprehensive actions on junk fees the administration has taken to date and have the potential to really change how consumers experience the purchasing process from live event tickets to hotel stays to apartment rentals and to save consumers money.”
It is already illegal for businesses to hide fees from consumers and the FTC has brought enforcement actions against wrongdoers. But “when case-by- case enforcement . . . is not doing enough to root out illegal practices, we are prepared to use other tools, including rulemaking”, said a senior administration official.
Egregious examples of unfair or hidden fees that the Biden administration has flagged in the past include an estimated $12bn charged by credit card companies in 2020 for punitive late fees and $6bn in airline baggage and change fees.
The CFPB on Wednesday issued detailed guidance on how it will use federal laws to prevent banks from charging high fees when customers seek basic information about their accounts. According to Rohit Chopra, CFPB director, “to date, this law has not been enforced. We are changing that”.
The CFPB said it was also refunding $140mn to US customers. This included refunds from some financial institutions charging customers monthly fees for paper bank statements without ever printing or sending the statements.
