Nearly $65 billion.
That's how much money is lost to this deceptive
American practice.
Junk fees.
We're tired of being played for suckers.
It really seems like companies have become
addicted to junk fees and it's making companies
billions of dollars richer across industries,
spanning banking and telecom to entertainment
and hospitality.
I stayed at a hotel.
I asked, Are there any extra fees?
They said no. The bill on the last night we were
charged a $40 a night amenity fee.
But even crazier.
A $1 mandatory charity donation.
I looked up the charity.
It's a charity that goes back to the hotel.
These fees are more than just annoying.
The White House says they weaken market
competition, raise costs and ultimately drain the
wallets of Americans.
The very entity that's creating these fees are
the ones telling you what we have to charge
them.
Their investors and shareholders really like
it. It's another way to pull in more revenue
without really competing unless we do something
about it is just a race to the bottom.
Some changes are happening, but the
question remains whether any of the new policies
and regulatory oversight will actually be enough
to squash junk fees once and for all.
Junk fees are basically an additional cost that
has little to no added value.
It's a junk fee.
You know, junk fees are fees that sometimes
provide no service whatsoever and are not
subject to the normal forces of competition.
There are so many different kinds of these
hidden fees.
So let's categorize some of the biggest offenders
into three different buckets.
Bucket number one, banking fees like
overdraft charges, late fees or fees to pay a
bill or even account maintenance fees that you
might get hit with after easily signing up for a
new bank account. A charge for using that
service every year.
We could even count student loans in this
bucket.
Just before the pandemic, we found that banks
charged about $15.5 billion in
overdraft fees in just one year.
And many of those fees were ones that actually
could not have been avoided. It isn't just
unfair. In many cases, it's illegal.
And banks are cashing in.
Fees worth nearly $24 billion were charged by
card issuers in 2019, and most of that $14
billion came from late fees alone.
We estimate that the credit card industry
levies about $120 billion in
fees and interest each year, and that number
might be even going up given the rise in
interest rates.
Bucket number two fun fees or the fees that you
might incur when you're hopefully doing something
fun like buying a concert ticket, booking a
flight or a hotel, for example, Resort fees
might be added for your use of amenities during
your stay, even if you're not using the gym
or the pool. And even if it's not a resort.
Junk hotel fees and these ancillary fees at hotels
bring in about $3 billion a year for the
hotel industry.
Waikiki has them.
And Detroit, which is crazy.
Lauren Wolfe founded Kill Resort Fees in 2016 after
a vacation in Florida.
Even though my receipt said paid in full, I
couldn't get the key to the room unless I paid an
extra $20 in the name of a resort fee.
And so I started the website.
Hotel and resort fees can be anywhere from $20 to
$70 per night.
Many sites don't display these extra costs in the
advertised price, so people can't comparison
shop. The same thing happens when you buy a
plane ticket.
A lot of times people don't realize they're
booking the lowest economy fare that doesn't
allow them to bring a suitcase.
The same goes for entertainment fees.
It's when you try to buy a ticket to go see Taylor
Swift.
No price gouging.
Off the record, my wife calls me a Gen X swifty.
Are you sure you want that off the record?
I do not mind.
I'm a very comfortable place in my life.
I love Taylor Swift.
For your band to make six bucks out of a $42 ticket
price.
Yeah, that doesn't feel great.
Does it strike me...
Government Accountability Office found that on
average, ticketing companies charged fees
worth about 27% of the tickets face value.
And then bucket number three, home fees from
buying a house to having a car and getting
Internet at home.
This includes closing costs and other fees that
come up when you're trying to buy a home,
like extra fees for document preparation or
title insurance.
Then there's your cable and Internet junk fees.
A multi dollars in revenue for the cable
companies to keep breaking out these fees.
And they're mandatory,
Including Cnbc's own parent company, Comcast.
And cable Internet and cell phone companies can
charge you $200 or more if you decide to switch
to another provider.
Give me a break.
It can also be a violation of marketing.
If you look at the fine print there, like to
maintain our high speed fiber network and you're
like, okay, so you have to charge me an extra
seven bucks for the Internet infrastructure
fee. But what about the $75 I've already paid
you? What's that paying?
Today's actions are going to save consumers more
than $1 billion each year, and that's a lot of
money.
President Biden has been asking agencies to tackle
this problem. And regulators have the
ability to address junk fees today using existing
authorities.
It's really an all of government effort.
The FTC has a law prohibiting unfair or
deceptive practices.
And so we already have the ability to bring
lawsuits against junk fees.
We can make it even clearer for companies and
we can also strengthen our ability to impose
civil penalties on companies that are
imposing junk fees and also get back money for
consumers.
The CFPB is targeting overdraft and bounced
check fees and issued further guidance for
banning surprise overdraft charges.
The White House estimates these moves
alone will reduce fees by more than $1 billion
each year.
We anticipate that the amount of annual
overdraft fees has declined by billions of
dollars per year.
We have done major enforcement actions when
it comes to junk fees against Wells Fargo,
Regions Bank and others.
The agency also wants to change credit card late
fees to $8.
It could save Americans as much as $9 Billion a
year in late fees.
Now, we don't think credit card companies
should build their business model based on
these fees.
And the Department of Transportation wants to
require companies to show the full price of a
plane ticket at booking baggage fees and all.
I know how unfair it feels when a company
overcharges you and gets away with it.
Not anymore.
We've written a bill to stop it all.
President Biden still wants Congress to pass
the Junk Fee Prevention Act in hopes of tackling
four more hidden charges.
One to ban airline fees for families to sit with
small children.
Baggage fees are bad enough.
Airlines can't treat your child like a piece
of baggage.
Too excessive concert event and entertainment
fees. Three Crack down on early termination fees
for canceling telecom services and for getting
rid of the surprise vacation charges like
resort and destination fees.
You know, we've met with the FTC and we've seen
these fees get a bit more transparent, though
I hesitate to say that transparency here is
going to solve anything.
Part of the problem is drawing the line between
what is truly junk and what charges are
warranted. One dissenting FTC
commissioner Christine Wilson, called junk fees
flawed assumptions and vague definitions.
The Peterson Institute for International
Economics argues that the projected savings is
speculative arithmetic that at best spotlights
$27 billion in junk fees.
And those figures may not accurately represent
how those junk fees, if they're eliminated, how
they can be rolled into that upfront cost.
They also estimate that the real savings of junk
fees could work out to be $100 average annually
for each 131 million American households,
which would be much less than President Biden's
estimate of hundreds of dollars per month per
American.
They add up to hundreds of dollars a month.
Dissenting FTC Commissioner Wilson poses
the question of whether government mandated all
in pricing will actually result in less price
competition or whether it could make consumers
pay for goods and services they may not
want or need.
What would your response be to someone who thinks
that the junk fee is something that is
beneficial?
I think the first thing is you should give
consumers a choice.
Oftentimes, these types of junk fees are tacked
on in a way where it's all or nothing.
And so there's no way for the consumer to
actually buy the product or service without being
subject to the junk fee in the first place.
I think if these fees are being included, you
really have to make the case to the consumer or
to the member of the public about what they're
really buying through paying this fee in the
first place. Some House Republicans point to how
late fees are used to offset costs for credit
and financial products, arguing that the CFPB's
proposal to crack down on credit card late fees
would result in negative consequences because
credit providers like banks would be forced to
increase interest rates for all borrowers in
order to offset that loss income that could
lead banks to restrict credit to lower income
customers who are more likely to overdraw their
accounts in the first place. However, PIIE
believes that the Junk Fee Prevention Act is
likely not to pass through the House of
Representatives Republican majority.
We're now considering whether to introduce a
rule that would apply across the economy and
put companies on notice that these types of junk
fees can be illegal.
We also more generally are inviting comment
right now on whether the FTC should do a rule that
addresses junk fees more broadly.
So this would not just be focused on a
particular sector, but really zooming out and
looking across the board. Some practices are
shifting.
A lot of banks are already starting to
eliminate these fees.
15 of the 20 largest banks agreed to stop
charging bounced check fees, and the Department
of Transportation dashboard resulted in
more guarantees of hotels and meals for
passengers that experienced delays or
cancellations at the fault of the airlines,
none of which was guaranteed before.
I think President Biden has recognized that this
is an issue that impacts everyday Americans, that
this isn't just a travel issue of people going to
the fanciest hotels, that this impacts hotels
that are charging $40 a night.
It impacts hotel workers.
It impacts how taxes are collected, just these
sorts of junk fees, just hotel junk fees are
really impacting our economy at a time when we
need more travel and tourism.
Telecom is also prepping for new regulations.
The Federal Communications Commission
will have new rules for grocery store like
nutrition labels starting in 2024.
Broadband providers must relay details about
prices, speeds, data allowances and any and
all added fees, but it's likely that more
solutions will be needed.
There's currently a 50 attorneys general
investigation into hotel resort fees.
The Nebraska attorney general has sued Hilton.
The D.C. attorney general has sued
Marriott, Pennsylvania just came to an agreement
with Marriott also about hotel resort fees.
The fight against these fees is likely far from
over as more congressional hearings
are down the road.
There's broad agreement that this fee creep
across the economy has to stop.
So if the FTC did end up finalizing a rule that
either prohibited junk fees or added new
obligations on companies when they're adding fees,
it would really mean that if companies violate
the rule, the FTC will be able to charge them
civil penalties for fees that can really pile up
on these companies. It would also mean that the
FTC would be able to actually get money back
for consumers. So the junk fees that consumers
were paying would be able to get that money
back in their pockets.