T.One of the thorns of modern life is the “junk fee”. And they’ve received a ton of payments, from early termination of cell phone contracts, to baggage checks on planes, to overdrafts to bank accounts. Worse, many of these fees are hard to find or hidden until it’s time to pay them, affecting the poor the most.
But Joe Biden, with a little-publicized initiative, is trying to tackle these hidden costs, and eliminating them, or at least drastically reducing them, is one of the key plans in his economic plan. to
These surcharges across all industries were top of the agenda at the recent meeting of the White House Competition Council meeting, the third since its creation in 2021.
“What we’re talking about today is what’s putting pressure on the household budget. Unnecessary hidden charges, known as ‘junk charges,’ hit families when they can’t afford them.” They shouldn’t pay for it anyway, but in my view when they can’t afford to pay it,” the President of the United States said.
The meeting was attended by Rohit Chopra, Director of the Consumer Financial Protection Bureau (CFPB), the US government agency responsible for consumer protection in the financial sector.
In an interview with The Guardian, Biden’s appointee said his organization has already taken steps to eliminate these so-called “junk fees.”
“Junk charges are creeping across the economy, and one of the main places Americans experience it is in their financial lives, dealing with bank accounts and other loans. More and more people are hearing about financial costs of sorts, and many people don’t even know they’re getting services. No, and in many cases they don’t even want the so-called services that are being offered,” he said.
The Biden administration does not have broad powers to force cell phone companies to cut termination fees or prevent Harry Styles fans from being charged “fees” by concert ticket sellers. But you can direct federal departments and agencies to: Focus their efforts on the specific sectors they operate in.
Agencies like the CFPB have authority over banks, credit unions, loan servicers, and debt collection agencies, and junk fees also prevail. Another federal agency, the Department of Transportation, led by Pete Buttigieg, is also cracking down on airline fees related to seat selection, baggage and rebooking.
“We have already issued some policies on many of them. One is payment fees, and debt collectors charge payment fees. [like] It’s an overdraft, but another fee is the so-called ‘NSF fee’ or insufficient funds fee, which is where you get charged when you don’t think you have enough money in your bank account,” he said.
According to a report published by the CFPB, credit card late fees are estimated at $12 billion. Chopra said the goal here is pricing transparency and healthy competition within the sector.
“What I would like to see in the market is competitively priced services. I want people to be able to compete upfront rather than charging fees on the back end. It creates a market of choice, and throughout the economy, we often see products and services advertised as “free” when in reality there is a cost behind it. ”
What many Americans are currently grappling with is high inflation, and recurring monthly payments such as utility bills and mortgages, at a time when the cost of food and car maintenance is rising. Don’t keep up with the cost of The Biden administration and Chopra say eliminating many of these fees will alleviate some of the problems caused by inflation, especially as the country prepares for the crucial midterm elections in November. thinking about.
“And this is very important because people are facing rising costs. Overall, people are paying much of their income for housing. And yes, we are dealing with inflation, but these are longstanding problems and [make] Many people feel sick and tired. ”
After the CFPB released a report on banks’ reliance on NSFs and overdraft fees, some banks took the initiative to eliminate NSFs and overdraft fees this year. Shortly thereafter, Capital One, Citibank and others eliminated these fees. Capital One lost an estimated $150 million in annual revenue as a result of this action. Wells Fargo and Bank of America have eliminated his NSF fee, but kept the overdraft fee.
Wells Fargo made $1 billion, and Bank of America made more than $800 million in overdraft and NSF earnings from January through September 2021, according to the CFPB. The CFPB also ordered Regions Bank to pay him $191 million in “undue overdraft fees.”
“I find it really encouraging that all banks are starting to compete, not just charging similarly high fees. was all supposed to bring costs down, and why isn’t that reflected in these areas?”
But it’s not easy.
“The devil really is in the details. The direction we’re in is encouraging,” said Chopra.
But if businesses get wind of a government crackdown on these hidden fees, won’t they just drive up the prices of their goods and services as a whole?
Rafi Mohammed is an economist and pricing strategy consultant. When airlines are forced to disclose prices upfront rather than offering goods and services à la carte, as is the case when airlines sell seats and baggage separately, Biden’s policy is firm-wide. He said it could raise the price of
Mohammed advocates removing the unavoidable hidden “trap” charges imposed at the end of the sale (e.g. convenience charges), but they should be distinguished from the individual prices of different products. I claimed. Not everyone carries luggage while traveling.
“Eliminating the so-called “junk” fees that President Biden referred to will lead to higher prices across the board. Consumers end up paying for additional features they don’t want, as well as absorbing costs for which they are not responsible. ”
Chopra said no.
“We’re not seeing it. And a competitive market often gives consumers more benefits, and that’s what we’d love to see.
“The question is, will companies incur new junk fees? Sure, some do. It doesn’t mean we don’t want to look for ways to be more competitive.”
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