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Is it time to junk junk fees?

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A 2022 study by Consumer Reports found that Americans spend nearly $65 billion on junk fees each year. This figure includes fees for overdrafts, late payments, account maintenance, and convenience services.

The impact of junk fees is not just financial. They can also be a source of frustration and anxiety for consumers. A 2022 Consumer Reports survey found that 73% of Americans feel that junk fees are unfair, and 64% feel that they are hidden from consumers.

Recently President Biden announced a crack down on junk fees particularly in the retirement advising industry. The administration points out that a financial adviser who provides retirement advice adds hidden costs of up to 20% of their client’s lifetime savings without providing any benefit to the client.

Junk fees are hidden costs that jack up the price of many goods and services. They can include the surcharges you pay on credit cards, bills, loans, buy a new car, rent, air travel, hotel rooms and event tickets.

These fees are larding the cost of being a consumer that are unnecessary and only serve the profit margin of corporations. The fact that many of these fees are hidden until they pop the consumer makes it difficult to do comparison shopping.

In addition, fees at the back end of a transaction or those hidden in fine print distort the total price for consumers. You see this tactic with “service fees” for event ticketing or “resort fees” on hotel bills.

Junk fees are found across most financial services. For example, a CFPB report on March 8 detailed unlawful junk fees in several loan servicing markets, including auto loans, mortgages, student loans and payday loans.

In a July 19 report from The Department of Housing and Urban Development documented that renters are being hit with a growing number of junk fees. There are application fees, convenience fees for online payments, fees for trash collection, fees for mail sorting and "January fees" charged for no clear reason at the beginning of a new calendar year.

The fees disproportionately burden Black and Hispanic renters, as well as low-income households with housing vouchers, who tend to submit more applications than white renters, HUD said. Once a renter signs a lease, they may end up paying a monthly fee that is higher than the rent price due to hidden or junk fees, according to the report.

The Junk Fee Prevention Act aims to eliminate hidden and unnecessary fees and require the full price of services to be provided up front rather than at the point of sale. In addition, the bill would allow the Federal Trade Commission, or FTC, and the FCC to issue and enforce new rules.

Guest:

Liz Zelnick is the Director of the Economic Security & Corporate Power Program at Accountable.US.

"The Source" is a live call-in program airing Mondays through Thursdays from 12-1 p.m. Leave a message before the program at (210) 615-8982. During the live show, call 833-877-8255 or email thesource@tpr.org.

This interview will be recorded Thursday, November 16, 2023.

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David Martin Davies can be reached at dmdavies@tpr.org and on Twitter at @DavidMartinDavi