Biden’s war on ‘junk fees’ misses the real problem

From claiming inflation was "transitory" to blaming it on Vladimir Putin, President Biden has seemed all too willing to ignore the enormous impact of inflation on everyday Americans. 

As they continue to deal with the effects of the highest inflation seen in decades, Biden is trying to fight a war on "junk fees,'' instead of directly combating the core problem. Unfortunately, his efforts will do little more than continue to raise everyday costs for Americans everywhere. 

At this year’s State of the Union address, Biden boasted that he would save Americans $20 billion annually by cutting "junk fees." That equates to about $153 per year per American household. 

While any boost to household budgets is welcome, the $153 that Biden says he will deliver is cold comfort when American households have to pay $12,061 more in yearly inflation-adjusted costs than they did when he took office in January 2021.

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Those staggering numbers aside, Biden’s mission might be better received if it were a legitimate attempt to help Americans deal with rising costs. Instead, Biden’s recent proposal is the latest in a broader campaign of misdirected policies. 

Biden and his allies are trying to shift the blame for inflation to private companies as his approval numbers continue to disappoint.

At Biden’s side are a pair of ideologues who have launched crusades against private businesses and weaponized their small agencies in the process – notably Rohit Chopra at the Consumer Financial Protection Board (CFPB) and Lina Khan at the Federal Trade Commission (FTC).

To Biden, Chopra and Khan, the villain in our recent saga of oppressive cost-of-living increases is "big business." Financial institutions that dare to charge consumers fees when they violate the terms of their free checking accounts. Delivery companies that have the audacity to charge consumers for the popular services they provide. Live event ticket sellers, most of whom have largely already provided transparency due to consumer demand. And so many others. 

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To wit, the CFPB has declared war on checking account overdraft fees. No one likes paying overdraft fees, but this is hardly a public policy crisis. According to a recent survey by the New York Fed, nearly 80% of respondents have not overdrafted their bank accounts. Of those who had overdrafted, 84% were aware of their bank’s fee, suggesting this issue is not hidden from consumers. 

Furthermore, overdraft fees, which currently average about $35, are already subject to a host of federal and state laws that require banks to disclose overdraft fees to account holders. 

Overdraft fees aren’t a "junk fee harvesting machine," as CFPB Director Rohit Chopra claimed recently. They help financial institutions recoup costs associated with providing free banking services and, perhaps more importantly, they help nudge consumers away from bad financial practices that could damage their credit. 

This is similar to the way that the threat of a speeding ticket encourages drivers to abide by the speed limit, which in turn, makes roads safer and keeps their driving record clean and their insurance rates low. 

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Even the CFPB’s own survey of low- to moderate-income consumers noted that "some participants expressed that they found value in overdraft programs to provide them with greater flexibility." That flexibility is even more important at a time when the cost of living has risen so dramatically. 

Meanwhile, Khan’s FTC is going after "hidden" fees with onerous new transparency requirements for everything from ticket purchases to Airbnb rentals to delivery apps and more. The agency claims this will save consumers tens of billions in "unexpected" costs, implying that hapless consumers lack the savviness to anticipate routine fees.

Yet, the commission’s crackdown on fees conspicuously ignores one of the largest cost drivers for these purchases – taxes and other governmental fees, which are exempted from Khan’s proposed regulations.

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The FTC is targeting fees that Airbnb users face, yet turning a blind eye to exorbitant lodging taxes that can easily exceed 20% of the rental cost in certain jurisdictions. Similarly, the FTC regulations do not require full disclosure of amusement taxes on concerts and sporting events – though these can often exceed 10% and have been stretched to include streaming services in cash-hungry jurisdictions, like Chicago.

And the FTC doesn’t seem sympathetic to the regulatory challenges for innovative U.S. food delivery services like DoorDash and UberEats face, as they have been forced to tack on added fees to respond to aggressive government mandates like Seattle’s new minimum wage law that requires delivery drivers to receive $26.40 an hour before tips and mileage reimbursement. 

These taxes and regulations, which could significantly increase food, transportation and rental costs for many U.S. consumers and exacerbate the cost of living crisis, are conspicuously exempt from the FTC’s get-tough approach. 

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The FTC’s blind eye toward these issues should come as no surprise. Biden and his lieutenants’ push against junk fees increasingly looks like a political stunt intended to shift the blame to the private sector for stubbornly high inflation. 

Whether it is the FTC, CFPB or another federal agency, the goal is to pin the blame on private businesses even as reckless government policies like high taxes and stifling regulations take an increasingly sizable bite out of family budgets.

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