GRAND RAPIDS, Mich. (WOOD) — It has probably happened to you: You’re shopping online and see one price at first, but by the time you get to checkout, the price is much higher because of hidden fees.
They’re known as “junk fees” — extra costs you didn’t know you had to pay at first. You can find them when booking a hotel, buying concert tickets or getting a flight. It can even happen when paying your utility bill, buying internet or securing a health care plan.
“It’s more of a question of where you’re not seeing fees,” said Chris Hinsch, an associate professor of marketing at Grand Valley State University.
Consumers pay up to 20% more than the upfront price as a result of junk fees, White House Principal Deputy Press Secretary Olivia Dalton told News 8.
“People work really hard to earn a paycheck,” Dalton said. “They are being gouged for things companies just feel like charging, service fees and resort fees. They just make up their mind to charge them more because they can.”
The White House hopes junk fees become a thing of the past. The Federal Trade Commission proposed a ban on the hidden costs Wednesday morning. The FTC’s announcement came as the Consumer Federal Protection Bureau advised banks and credit unions to avoid charging excessive fees to consumers for basic services like checking an account balance.
In a speech Wednesday morning, President Joe Biden said junk fees are “just wrong” and take advantage of people.
“It makes it harder for honest businesses who are trying to do the right thing to compete with dishonest companies who trick customers into thinking the prices are lower when they are in fact are not,” the president said.
“Charges are taking real money out of the pockets of American families,” Biden continued. “These junk fees can add up to hundreds of dollars, weighing down family budgets, making it harder to pay family bills.”
The rule would require businesses to share full prices upfront, allowing consumers to find their best deal faster. Companies would have to share what the extra fees are for and whether they’re refundable. The FTC could fine businesses that don’t comply and even get refunds for people affected.
Hinsch said the change would likely have a positive impact in increasing the “transparency of pricing.” He added that if the change works as intended, consumers could save time and money.
“It shouldn’t really be necessary. Ideally, the free market would take care of this,” Hinsch said. “There would be other competitors who would offer the same type products without the fees and consumers would choose them. But apparently that’s not happening. We see these fees all over the place.”
The professor said you can even find junk fees in academics.
“You might choose to go a specific university and then you find your degree program has a certain set of fees,” he said. “Certain classes have other fees that are associated with them that have to do with technology. These are added on top. You thought you were getting one price. When you get the final bill, you’re getting something completely different.”
Hinsch questioned how the rule would be enforced, citing how “rampant” and “widespread” junk fees are. The professor said it would take a lot of FTC manpower to track sites.
“It’s going to be difficult to do this,” he said. “Enforcement is an issue and it’s not going to be perfect.”
When asked how the proposal would be enforced, Dalton said the FTC and CFPB have the ability and resources to investigate cases.
“They can hold companies accountable if they don’t abide by these regulations once they become final,” Dalton said.
The FTC can move forward with enforcing the rule without congressional approval, though it hasn’t been finalized yet. The president also urged Congress to take up additional legislation to codify these changes into law.