In his State of the Union address, President Joe Biden said his administration is cracking down on “junk fees” — including those from banks as well as hotels, airlines and other service providers.
The president said these unnecessary or hidden fees are weighing down families’ budgets and causing financial harm.
What are junk fees?
Junk fees are additional, often hidden charges that can come from a range of lenders. They are not typically included in the initial price of a transaction but are tacked on at the time of payment.
To stop this practice, Biden called on Congress to pass the Junk Fee Prevention Act, which will reduce unexpected charges, such as airline booking fees; service fees for concert tickets; early termination fees for TV, phone and internet services; “resort fees” at hotels; and “excessive” credit card late fees.
“Americans are tired of being — we’re tired of being played for suckers,” Biden said Tuesday.
The initiative has been months in the making.
Last fall, the Consumer Financial Protection Bureau said it was scrutinizing certain fees that catch customers by surprise — and are “likely unfair and unlawful,” according to the agency.
The consumer watchdog proposed a new rule earlier this month prohibiting banks from charging surprise overdraft fees on debit transactions and reducing typical late fees from roughly $30 to $8, saving consumers as much as $9 billion a year, according to the White House.
“Despite recent progress in addressing overdraft fees, the job is far from complete,” Nadine Chabrier, the Center for Responsible Lending’s senior policy counsel, said in a statement.
More than a quarter of checking account holders, or 27%, are regularly hit with fees, which can add up to an average of $24 per month, or $288 per year, according to a recent survey from Bankrate.com.
The average overdraft fee costs $29.80, Bankrate’s research found, while the average nonsufficient funds fee is $26.58.
Some banking interest groups countered that offerings such as overdraft protection provide a much-needed safety net.
“It does not consider the costs involved in providing needed financial services that consumers depend on.”
Without the option of overdraft protection, “people are more likely to turn to predatory lenders, hurting the same people the administration seeks to help,” Nussle said.
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