Biden vowed to outlaw "junk" fees in his State of the Union address. Here's his plan.

What political strategists heard in President Biden's State of the Union address

In his State of the Union address on Tuesday evening, President Joe Biden vowed to ban an economic annoyance that affects almost every American: so-called  "junk fees."

These fees now touch everything from financial products like credit cards to concert and airline tickets, with companies seemingly finding endless new ways to tack on bogus charges each year. About 85% of people have encountered such hidden fees, according to a Consumer Reports survey from 2019.

They're a big money-generator for airlines, financial services firms and more, with consumers shelling out at least $29 billion each year in excessive charges, according to the Consumer Financial Protection Bureau. These fees often aren't clearly advertised to consumers when they purchase a product or service, and they can drive up costs far beyond what people had expected to pay. 

"Junk fees may not matter to the very wealthy, but they matter to most folks in homes like the one I grew up in. They add up to hundreds of dollars a month," Biden said in his speech. "I know how unfair it feels when a company overcharges you and gets away with it."

He added, "Not anymore."

The Junk Fee Prevention Act

On Tuesday, Biden urged Congress to pass a new "Junk Fee Prevention Act," which his administration proposed on February 1 and which would focus on curtailing extra fees in four areas:

  • Get rid of "excessive" online concert, sporting event, and other entertainment ticket fees.
  • Ban airline fees for family members to sit with young children.
  • Outlaw "exorbitant" early termination fees for TV, phone, and internet service.
  • Block surprise resort and destination fees.

"We'll make cable internet and cellphone companies stop charging you up to $200 or more when you decide to switch to another provider," Biden said. "And we'll prohibit airlines from charging up to $50 roundtrip for families just to sit together."

The administration said it plans to work with Congress in the coming weeks and months to move the legislation forward.

Inconvenient "convenience" fees

At the same time, the Federal Trade Commission is looking at whether it needs to create a rule against junk fees, an area it began to examine last fall. 

"It's beyond frustrating to end up spending more than you budgeted because of random, arbitrary fees," said FTC Chair Lina M. Khan in an October statement announcing the effort. "No one has ever felt that a 'convenience fee' was convenient."

Currently, the FTC is asking for comments from members of the public about their views on junk fees and whether regulation is necessary. So far, almost 12,000 comments have been posted at Regulations.gov, with the comment period ending today, February 8. 

Consumer Financial Protection Bureau

The CFPB, created in the wake of the 2008 financial crisis to protect consumers from financial abuse, is also cracking down on junk fees, with a focus on fifinancial services firms. 

For instance, the agency last fall ordered Regions Bank to refund at least $141 million to customers who were socked with what the CFPB describes as its "illegal surprise overdraft fees."

The agency, which asked for consumer feedback on financial services fees last year, said it may use the info to create new rules and regulations. 

"In many cases, junk fees often act as penalties, like with non-sufficient funds and credit card late fees, rather than compensation for a legitimate service," said CFPB director Rohit Chopra in January 2022. 

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