{"id":6787,"date":"2023-10-29T17:27:15","date_gmt":"2023-10-29T17:27:15","guid":{"rendered":"https:\/\/infundpros.com\/fintech\/the-5-junk-fees-joe-biden-should-ban-and-those-he-shouldnt\/"},"modified":"2023-10-29T17:27:16","modified_gmt":"2023-10-29T17:27:16","slug":"the-5-junk-fees-joe-biden-should-ban-and-those-he-shouldnt","status":"publish","type":"post","link":"https:\/\/infundpros.com\/?p=6787","title":{"rendered":"The 5 \u2018Junk Fees\u2019 Joe Biden Should Ban\u2014And Those He Shouldn\u2019t"},"content":{"rendered":"
\n

OBSERVATIONS FROM THE FINTECH SNARK TANK<\/h2>\n

The Federal Trade Commission announced a new proposed rule to prohibit junk fees, which it defined as \u201chidden and bogus fees that can harm consumers and undercut honest businesses.\u201d The FTC has estimated that these fees can cost consumers tens of billions of dollars per year in unexpected costs.<\/p>\n

Where should the government start in its efforts to ban junk fees? Here are 5 of the the worst offenders:<\/p>\n

5) Convenience fees. <\/strong>Investopedia defines this as a fee \u201ccharged by a seller when a consumer pays with an electronic payment card rather than by a standard form of payment\u2014including cash, check, or an ACH transfer\u2014accepted by the business.\u201d This is nonsense\u2014the use of debit and credit cards are<\/em><\/strong> the \u201cstandard\u201d forms of payment today. With cash handling costs and the growing prevalence of check fraud, sellers should rejoice when a customer pays with a card. In fact, consumers should get a \u201cconvenience\u201d discount when paying with an electronic payment card.<\/p>\n

4) Restaurant living wage fees. <\/strong>Sometimes called a \u201cliving wage\u201d charge or \u201ckitchen fee,\u201d the rationale for the fee is to pay back-of-house staff like cooks and dishwashers. Other times it’s a fee the restaurant says it uses to cover employees’ health care, or a mandatory minimum gratuity that gets split by all restaurant employees. Admirable intentions, but how can restaurant patrons know for sure the fee they\u2019re paying actually goes to pay for health care or is split among employees?<\/p>\n

3) Inactivity fees. <\/strong>Let me see if I understand this: You\u2019re going to charge me a fee for services rendered and<\/em><\/strong> a fee if I don\u2019t have any services rendered?<\/p>\n

<\/fbs-ad><\/p>\n

2) Hotel resort fees. <\/strong>Resorts should charge for the use of their facilities. The problem here is twofold: a) Hotels that hardly qualify as \u201cresorts\u201d charge the fee, and b) The fee is charged whether use the facilities or not. How can they get away with charging for something that isn\u2019t provided? Section 5(a) of the Federal Trade Commission Act (FTC Act) (15 USC 45) prohibits \u2018\u2018unfair or deceptive acts or practices in or affecting commerce.\u2019\u2019 Isn\u2019t it unfair to charge for something that wasn\u2019t consumed or provided?<\/p>\n

And the #1 most offensive and onerous junk fee…<\/p>\n

1) Ticket service charges. <\/strong>These charges should be the first to be attacked. At the new Sphere in Las Vegas, the service charge for a $600 ticket for a U2 concert came to $150\u201425% of the ticket value. The Federal Reserve is proposing to reduce interchange fees because it claims banks\u2019 costs for card processing have declined. How much could it possibly cost StubHub to process the online sale of a ticket?<\/p>\n

The Impact of Junk Fees<\/h2>\n

The Administration should be commended for announcing a crackdown on junk fees. But it\u2019s playing both sides of the court. Because junk fees aren\u2019t included in price calculations, the government\u2019s claim that inflation is slowing may be incorrect.<\/p>\n

The government\u2019s own estimates of the volume of junk fees is suspect, altogether. The Consumer Financial Protection Board (CFPB) estimates that Americans pay \u201cat least\u201d $29 billion annually.<\/p>\n

At $29 billion, that comes out to $112 per American adult per year, or $9.35 per month. That\u2019s not<\/em> a huge problem.<\/p>\n

But the CFPB\u2019s numbers (and FTC\u2019s estimate) have to <\/em>be understated.<\/p>\n

If just 2% of restaurant and hotel revenue ($898 billion and $240 billion in 2022, respectively) came from junk fees that would total $22.8 billion, and that doesn\u2019t include junk fees associated with utilities, cable, and telco bills, or the \u201cconvenience\u201d fees, or surcharges, that retailers and merchants tack on to credit card payments.<\/p>\n

Wait, What About Banking Fees?<\/h2>\n

The Administration\u2014in particular, the CFPB\u2014loves to lump bank overdraft fees in its discussion of junk fees. But, by its own definition, are these fees really \u201chidden and bogus\u201d?<\/p>\n

They\u2019re not hidden. It\u2019s hard to imagine that anyone with a checking account doesn\u2019t know that if you try to spend more than you have, you\u2019re going to get hit with an overdraft charge.<\/p>\n

Are there issues with the timing of payments that causes these charge? Absolutely. But: 1) Many banks reverse these charges for good customers (especially if it happens infrequently), and 2) Fees for overdraft charges have declining significantly in the past four years\u2014according to Bankrate, the average overdraft fee was 25% higher in 2019 ($33.36) than it is today ($26.61).<\/p>\n

Are they bogus? Not if you use the dictionary definition for the term, \u201cnot genuine or true; fake.\u201d Overdraft fees are real charges for trying to spend more money than what\u2019s in the account, and they\u2019re a fee for a service provided\u2014covering a payment the purchaser doesn\u2019t have the money to pay for.<\/p>\n

What the Government Should Do<\/h2>\n

The problem of \u201cjunk fees\u201d are real, and the FTC and CFPB should take actions to ban them. There are, however, some things the Administration should do to truly make consumers\u2019 lives better:<\/p>\n

1) More precisely define\u2014and ban\u2014junk fees. <\/strong>\u201cHidden or bogus\u201d is a great marketing term for these fees since it resonates with consumers\u2019 emotions. But it\u2019s not a great term from a legal perspective. The government should define junk fees more precisely\u2014for example, \u201cfees or charges for services that are not provided or not provided in connection with the product or service purchased.\u201d<\/p>\n

2) Audit fees. <\/strong>As mentioned above, do restaurant living wage fees really go to helping pay for restaurant workers\u2019 health care costs or do hotels\u2019 \u201cconservation fees\u201d really go to conservation efforts? The government should make businesses prove that the fees they collect are used for their intended purpose.<\/p>\n

3) Ban credit card surcharges.<\/strong> Retailers and merchants\u2019 efforts to allegedly recoup interchange fees is what\u2019s really bogus here. Companies set prices for products and services based on two things: 1) cost to provide the product or service, and 2) supply and demand. If a Maserati Gran Turismo was priced solely on what it cost to make and deliver it, it wouldn\u2019t cost $174,000. The stated price of any product already<\/em><\/strong> encompasses the cost of interchange. Charging for it separately is basically charging for it twice.<\/p>\n

4) Better coordinate agency efforts. <\/strong>Although the CFPB was originally created to monitor and punish large banks, the agency\u2019s more recent efforts to expand its scope and look at any<\/em> company or industry impacting consumers\u2019 financial lives is a positive direction. This direction, however, begins to overlap with the FTC\u2019s jurisdiction, and potentially with any agency that oversees any industry. Please note that I am not<\/em><\/strong> advocating for the creation of another government agency.<\/p>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

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