Biden Wants Federal Action To Ban ‘Junk Fees.’ That Might Not Be A Good Idea.

President Joe Biden His show aired a lot of time during his tenure. State of the Union On Tuesday, address the inconvenience “junk fees” The charges are likely to cause damage to the average consumer and should be eliminated by federal action.

Junk fees are hidden charges that aren’t included in the transaction price but are paid by the consumer when they pay for the product or services. They are prevalent in areas such as banking, personal finance and hospitality. Biden asked lawmakers to pass a Junk Fee Prevention Act. Crack down On concert and sporting ticket fees. Phone and internet early termination fees. Resort and destination fees.

“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 spoke in the Address. “They make it harder for you to pay the bills or afford that family trip. I know how unfair it feels when a company overcharges you and gets away with it. Not anymore.”

Many agencies have looked at the issue and considered rules that could reduce junk fees. Federal Trade Commission officials Requested At the end of last calendar year, public comment was invited on proposed regulations to ban smoking. “unnecessary charges for worthless, free, or fake products or services.” According to a study by a, Americans spent $15 billion per annum on bank overdrafts fees in 2019, according to a Study The Consumer Financial Protection Bureau.

Despite the inconveniences that junk fees can cause to consumers, it is possible for nationwide regulations to ban them to prove inefficient and impractical.

“The federal government should not be concerned with punishing companies for fees that someone doesn’t like,” Norbert Michel, vice president and director of the Cato Institute’s Center for Monetary and Financial Alternatives, told The Daily Wire. “People can refuse to pay the fee, complain, and go somewhere else. If large numbers of customers take any of those actions, chances are the company will adjust its policy.”

The United Kingdom’s Financial Conduct Authority, for instance, implemented New rules Overdraft fees for the period November 2019 to April 2020. Despite the fact that banks had overdraft revenues drop by one-quarter to one-third, the agency acknowledged that “many of the banks’ new rates were similar” Many financial institutions created a range pricing structures for their customers after the new restrictions had been enacted.

Michel said that businesses and consumers are more likely than others to solve their problems without regulator interference. “It makes little sense for the federal government to try to control fees, just as it makes it little sense for the federal government to try to control prices,” He stated.

Prior calls to action by senior White House officials against junk fees have been rejected. “lower income households and people of color” Charges can have a greater impact on the lives of those who are most affected. One Analysis Brian Deese, Director of the National Economic Council, cited as follows: Study The Consumer Financial Protection Bureau noted that many consumers live in low-income or majority-black areas. “paid disproportionately more in credit card late fees.” Another Study According to the official, Hispanic car owners paid more in add-on expenses than their counterparts.

Michel pointed out that disparity does NOT necessarily indicate discrimination. “The fact that certain consumers pay more in late fees does not, by itself, mean that anything nefarious has occurred,” He continued.