According to President Joe Biden, Junk fees are the way through which Americans are looted by the companies, airlines, banks, and entertainment industries in the name of hidden charges.
President Joe Biden in this week’s State of Union speech said that ‘junk fees’ are causing harms to families budgets and causing them financial harms. He also told that Americans are being played and looted by airlines, banks, and other service providers. The government wants to promote healthy competition in the economy, hence they have decided to crack down on these charges.
The Junk fees are those charges which are often hidden and unexpected and won’t be included in the initial or listed price but are added at the time of payment.
The White House claims that these junk fees falls into four categories. Mandatory fees such as the service fees added to a concert ticket. Surprise fees such as family seating fees are charged by the airlines. Predatory fees such as excessive overdraft fees, this type of fees are always targeted at the economically vulnerable section. Fraudulent fees are like the name suggests, such as ‘no fee’ in bank accounts but make hidden charges in practice.
Junk fees are hidden and unexpected charges that are often not included in the initial or listed price of a transaction but are added on at the time of the payment.
According to a 2019 survey by Consumer Reports, at least 85% of Americans have paid such fees. The government says that such type of fees disproportionately affects low-income households and harms small and medium-sized businesses.
Government’s Plan to Tackle This
The President is urging a new act called Junk Free Prevention Act, which would aim to reduce or eliminate certain junk fees. There are four types of junk fees that would either be reduced or eliminated through this act.
One of the fees which would be tackled is the additional costs to the online ticket sales for concerts, sporting events, and other entertainment. Then there are airline booking seats for family seating, early termination fees for smartphones, cable and wireless TV services, and destination fees charged at the end of online reservations.
Previous Regulation to Protect Customers from Junk Fees
There are several regulations in place in the United States to help protect consumers from junk fees:
- Truth in Lending Act (TILA): This federal law requires lenders to disclose the terms and costs of a loan, including all fees and charges, to the borrower in a clear and conspicuous manner. This helps ensure that borrowers have a clear understanding of the costs associated with their loans.
- Real Estate Settlement Procedures Act (RESPA): This federal law requires lenders to provide a Good Faith Estimate of all closing costs associated with a mortgage loan. The Good Faith Estimate must include all fees, charges, and expenses that the borrower is likely to incur in connection with the loan.
- Consumer Financial Protection Bureau (CFPB): The CFPB is a federal agency that oversees the mortgage industry and works to protect consumers from predatory lending practices, including junk fees. The CFPB has the authority to take enforcement action against lenders that violate consumer protection laws, including the TILA and RESPA.
- State regulations: In addition to federal regulations, some states have their own laws and regulations aimed at protecting consumers from junk fees. For example, some states have caps on the number of fees that can be charged, while others require lenders to provide a detailed itemization of all fees and charges.
Consumers can also take steps to protect themselves from junk fees by shopping around for a loan and comparing the fees and charges associated with different lenders. It’s also important to carefully review all loan and mortgage paperwork and to ask questions about any fees or charges that are not fully explained.