Federal Trade Commission Proposes Ban on Junk Fees and Hidden Charges to Lower Prices

The Federal Trade Commission (FTC) has proposed a rule to ban hidden and bogus junk fees, which are often found in the total cost of concert tickets, hotel rooms, and utility bills. This move comes as President Biden has made the removal of these fees a priority of his administration. The goal is to protect consumers from these additional costs that can inflate prices and waste their time.

According to FTC Chair Lina Kahn, the proposed rule would require corporations to be transparent with their pricing, eliminating the use of deceptive fees. Violators will face civil penalties and will be required to reimburse consumers who were deceived by these fees.

The FTC’s proposal is accompanied by the Consumer Financial Protection Bureau’s announcement that it will block large banks from charging junk fees for basic customer services. These combined efforts aim to protect consumers and promote fair competition.

Research conducted by the White House National Economic Council indicates that hidden fees can cause consumers to pay up to 20% more than the upfront cost disclosed. This proposal seeks to address this issue and help consumers make informed decisions and comparison shop.

The FTC estimates that consumers waste 50 million hours each year searching for the total price of tickets and lodging. Implementing this rule would save consumers time and result in potential savings of around $1 billion annually.

However, some business groups are skeptical about the potential savings for consumers. The U.S. Chamber of Commerce, for example, expressed concern that this approach could limit consumer choices and make the economy less competitive.

President Biden plans to discuss both the proposed FTC rule and the Consumer Financial Protection Bureau’s actions on junk fees in the White House Rose Garden.