Biden administration proposes rule to ban junk fees: “Americans are fed up”

If there’s one thing that unifies Americans, it’s their hatred of so-called junk fees, or charges that are often hidden until payment is due and that can inflate the ultimate price of everything from food delivery to hotels and bank accounts. Now, the Biden administration says it’s taking aim at the practice by proposing a rule that would ban businesses from the practice. 

The move comes days after California Governor Gavin Newsom signed a new law that bans junk fees effective starting July 1, 2024, and as the Biden administration had earlier called for a crackdown on the practice. 

The Federal Trade Commission’s proposed rule banning junk fees comes after it received 12,000 comments from consumers and businesses on how such fees impact them, FTC Chair Lina Khan said on a conference call with reporters to discuss the rule.

Junk fees not only cost Americans billions annually in unnecessary charges, but also hurt the economy by suppressing competition among businesses, officials said on the call. The proposed rule would require businesses that rely on junk fees to provide refunds to consumers, and those companies could face monetary penalties.

“Junk fees have been creeping across the economy, and Americans are tired and fed up,” Rohit Chopra, director of the Consumer Financial Protection Bureau, said on the call. 

The CFPB is also taking aim at a practice employed by some big banks in which customers are charged to gain basic information about their accounts, such as their balance, Chopra said.

“We are issuing a new policy to ensure the largest banks in the country play it straight with consumers,” he said. “Today’s guidance outlines a pretty basic concept: When people request basic information about their account, banks can’t change them big fees.”

The FTC said that banning junk fees will also free up about 50 million hours of consumers’ time, as they won’t have to search for the total price for purchases like hotels or tickets. 

“These junk fees make it harder for people to choose the best product or service,” Khan said on the call. 

The FTC will next publish the proposed rule in the Federal Register, and consumers can submit comments online for 60 days after that.