The War On So-Called ​“Junk Fees”: Who’s Fighting and What’s At Stake

It’s easy to decry ​“junk fees,” and both the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) have done just that by launching multi-faceted regulatory initiatives to prohibit or regulate the use of such fees. President Biden himself has spoken multiple times about the need to regulate fees and proposed the Junk Fee Prevention Act to regulate fees in certain contexts. But what do regulators really mean when they refer to ​“junk fees” and are they as bad as they sound? This article provides an overview of the FTC’s and CFPB’s efforts to regulate junk fees and the substantive and procedural requirements that they need to meet to do so under their respective statutory authorities. The authors also consider the potential economic consequences of a far-reaching regulation that would significantly curtail the use of fees.  While prohibiting fees altogether may seem popular in the abstract, the real-life consequences of doing so may be less beneficial for the typical consumer, particularly when the fee is conditioned on some consumer activity that is avoidable.

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Disclaimer: This article was first published by Competition Policy International.