President Biden joins the junk fee fight.

Yesterday, President Biden spoke again against junk fees. After President Biden first joined the fight against junk fees, I wrote a long academic article for Competition Policy International explaining the fight.  Download it at left.

In the case of the FTC and CFPB, I explain that both both agencies’ authority over junk fees is strongly rooted in authority granted by Congress in their organic statutes. Of course, that hasn’t stopped scurrilous carping by powerful special interests. Here’s an excerpt from it:

“It’s important to understand that many new laws and regulations grow out of a pattern and practice of earlier unfair or deceptive actions. Short TL;DR version: Credit cards had long been the most profitable form of consumer lending, according to the Federal Reserve’s Annual Reports to Congress. But consolidation of monoline credit card companies into larger banks brought new pressures on credit card chiefs to make even more money, every year. They first ratcheted down the thumbscrews on late pays, adding penalty interest rates to late fee charges. They then tricked more consumers into paying late by changing due dates or making bills due on a Sunday but late on Monday. They then invented universal default to dun consumers who’d never been late with their payments. Finally, the banks invoked the “we can change the rules at any time, for any reason, including no reason” clauses. The CARD Act passed overwhelmingly.”

You can watch a video explainer of the two-decade-long runup of unfair or deceptive practices that led to passage of the Credit Card Accountability, Responsibility and Disclosure Act (“CARD Act”) of 2009 here (skip to 36m 10sec).

The article then explains how the banks “gamed” limits on overdraft fees with “overdraft protection”:

“The banks aggressively marketed the new product. They called it “standard” overdraft protection. Of course, they said it was intended to protect consumers from embarrassment.

Hypothetical: “We’ll cover your overdrafts so you can avoid the embarrassment of your debit card being declined by a barista, (unspoken: but, of course, you’ll pay an overdraft protection fee of about the same amount as an overdraft fee itself, each time. To make you feel better), we’ll label it as a convenience fee (after all, it’s convenient to the bank).”

Finally, late fees on credit cards are required by law to be reasonable, but the pre-CFPB Fed rules have essentially made a mockery of the law:

“For example, in its proposed (new) rules on credit card late fees, CFPB first makes it clear that the 2009 Credit CARD Act made late fees that weren’t reasonable and proportional illegal. Unfortunately, however, the CARD Act was first enforced by the Federal Reserve Board, which declared that any late fees that followed its regulation fell within an immunity safe harbor ringed by an automatic inflation escalator clause.”

I also looked at the activities of our oldest consumer agency – the 1914 Federal Trade Commission (“FTC”); the CFPB,  of course, is our newest – the Consumer Financial Protection Bureau (“CFPB”), was established in 2010 following the massive 2008 economic collapse brought on by risky bank lending practices.

Probably the most exciting thing about the FTC’s fight against junk fees is that it plans to “make it as easy to cancel enrollment as it was to sign up.” Isn’t that only fair?

The article then explains unfair junk fees from airlines and includes a catch-all list of some of the rest:

“For example, consumers are deluged by debt collector pay-to-pay fees; surprise medical billing fees triggered by out-of-network treatment; the dozens of fees imposed on tenants by some landlords; purported “inflation adjustment” fees at some restaurants; fees charged by correctional facilities;;campus fees to access student loans and grants; tax preparer fees; and many others. Finally, it would be remiss of me not to call out the telephone and cable guys; anti-competitive oligopolies that pioneered the use of deceptive fees and services!”

Finally it says: “Congress, federal agencies and the president have joined the fight against unfair, deceptive and even illegal fee practices. It’s a bad look for companies to hit their customers in the wallet with surprise fees. It’s time to cut the death of a thousand cuts.”