In a move to address the widespread frustration over hidden charges and fees, the Biden administration has proposed a rule that would ban businesses from implementing so-called junk fees. This comes shortly after California Governor Gavin Newsom signed a law that would prohibit junk fees from July 1, 2024. The Federal Trade Commission (FTC) also received 12,000 comments from consumers and businesses regarding the impact of these fees, prompting their proposed rule.

Junk fees are not only a financial burden for Americans, costing them billions annually, but they also hinder competition among businesses, leading to a detrimental effect on the economy. The proposed rule aims to combat this issue by requiring businesses that rely on junk fees to provide refunds to consumers. Companies that fail to comply with the rule could face monetary penalties.

Rohit Chopra, director of the Consumer Financial Protection Bureau (CFPB), expressed support for the ban on junk fees, stating that Americans are tired of these hidden charges. The CFPB is also addressing another concerning practice employed by some major banks, where customers are charged for basic account information, such as their balance. To address this, the CFPB is implementing a new policy to ensure that banks are transparent and do not impose excessive fees when customers request basic account information.

The proposed ban on junk fees is projected to free up approximately 50 million hours of consumers' time, as they would no longer have to spend their valuable time searching for the total price of purchases like hotel stays or event tickets. FTC Chair Lina Khan emphasized that these fees make it difficult for consumers to make informed choices and choose the best products or services.

The proposed rule will now be published in the Federal Register, allowing consumers to submit comments online for a period of 60 days. The Biden administration's efforts to tackle junk fees align with their broader goal of alleviating financial strains on voters as the next election approaches. By addressing this issue, President Biden and his allies aim to demonstrate their commitment to helping Americans navigate rising costs and improve their economic well-being.

This is not the first time the Biden administration has taken action against junk fees. They had previously proposed a rule requiring airlines to disclose fees upfront. The FTC's proposed rule expands on this by targeting various industries, including car rentals, hotels, and event ticketing providers. The agency estimates that these hidden fees cost consumers billions of dollars each year, particularly through practices like hotel resort fees.

Under the proposed rule, businesses would be required to include all mandatory fees in the original price provided to customers, making comparison shopping easier. The FTC would have the authority to impose monetary penalties on companies that violate the rule and secure refunds for affected customers.

Additionally, the CFPB issued an advisory opinion stating that banks and credit unions cannot charge excessive fees for simple account inquiries or loan balance information. This announcement follows the CFPB's earlier proposal to limit credit card late fees, which has faced opposition from banks. The Supreme Court is also considering a legal challenge to the CFPB's funding structure, brought forth by the payday loan industry, which the administration argues poses a threat to the agency's viability.

As the proposed rule banning junk fees gains momentum, it highlights the Biden administration's commitment to addressing consumer concerns and ensuring greater transparency in pricing across various industries.