On Feb. 1, 2023, the Biden administration released a fact sheet describing actions taken by the White House that continue a focus on so called “junk fees.” The announcement, which was done along with several independent agencies including the Consumer Financial Protection Bureau and Federal Trade Commission, also calls on Congress to target fees through legislative efforts.
Consumer Financial Protection Bureau
The Consumer Financial Protection Bureau (CFPB) has announced a new rule under the Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 that allowed credit card companies to charge fees. The CFPB’s proposed rule seeks to “amend Regulation Z, which implements the Truth in Lending Act, to better ensure that the late fees charged on credit card accounts are ‘reasonable and proportional’ to the late payment as required under TILA.”
The proposal would:
- adjust the safe harbor dollar amount for late fees to $8 and eliminate a higher safe harbor dollar amount for late fees for subsequent violations of the same type;
- provide that the current provision that provides for annual inflation adjustments for the safe harbor dollar amounts would not apply to the late fee safe harbor amount; and
- and provide that late fees must not exceed 25% of the required payment.
The Card Act currently allows card issuers to charge customers $30 for a late payment, and $41 for another late payment incurred within six months.
The CFPB’s proposed rule would cap late payment charges at $8 and would not allow card issuers to charge higher late fees if a customer missed another payment in the six-month time frame. Additionally, the rule would not allow card issuers to adjust their late fees for inflation, which they are currently allowed to do. Finally, the CFPB’s rule provides that late fee amounts could not exceed 25% of the cardholder’s required minimum payment.
The proposal requests comment on if these changes should be expanded to other credit card fees, whether there should be a required 15-day grace period before charging late fees and if companies should be made to provide autopay to use the immunity dollar provision.
Industry groups have pushed back on these sweeping changes and have highlighted that the CFPB did not engage in the Small Business Regulatory Enforcement Fairness Act (SBREFA) process before issuing this rule, despite its clear impact on smaller financial institutions.
The current deadline to submit comments on the proposed rule is April 3, 2023.
Department of Commerce’s National Telecommunications and Information Administration (NTIA)
The NTIA released a report addressing the effect of the current app store ecosystem on competition and provides recommendations to make the field more equitable for developers and consumers alike. Some of their changes include:
- Allowing alternate app stores to phone operator stores on mobile devices.
- Banning phone operators from preferencing their own apps for mobile functions.
- Prohibiting in-app purchases from being required to go through phone operators stores.
Highlighting Previous Action
The Biden administration also used this opportunity to highlight regulations instituted by the CFPB, Department of Transportation (DOT) and the Federal Communications Commission (FCC) related to fees.
This includes:
- Banning surprise overdraft fees and ending bounced check fees.
- Requiring airlines and booking companies to display the full price of plane tickets, including baggage and other fees up front.
- Establishing a dashboard of airline cancellation policies. Many airlines introduced covered meals and hotels for delayed or canceled flights after the dashboard’s creation.
- Imposing standards on internet providers to display clear pricing information about their offerings.
Brownstein has analyzed many of these past actions here, here and here.
Junk Fee Prevention Act
The White House closed the fact sheet with a call for action from the “Democrats and Republicans in Congress” to pass the president’s Junk Fee Prevention Act. The legislation proposed in concert with the CFPB has not yet been introduced in either chamber. During this announcement the administration focused on four aspects of the bill.
- A crackdown on hidden fees on tickets for sporting, music and other entertainment venues. This section is of particular interest given the recent hearings on the Hill where members of both parties criticized ticket distributors for anti-competitive practices.
- The White House criticized service fees that average more than 20% the ticket’s face value with total fees reaching up to half the initial cost of the ticket.
- A reported 80 of the top 100 arenas having exclusive deals with individual ticket sellers, reducing consumer options to avoid fees and eliminating competition.
- The president is urging Congress to work alongside the antitrust forces already investigating these companies by passing legislation that prohibits excessive fees, requires the fees to be disclosed in the ticket price and mandates disclosure of any ticket holdbacks that diminish available supply.
- Banning certain seating fees charged by airlines as they relate to families with children.
- The president is calling on airlines to stop the practice of charging for seat selection for families traveling together.
- This action builds on a DOT notice from July 2022 that states, “children who are age 13 or younger are seated next to an accompanying adult with no extra charge.”
- While DOT will propose a fee-free family seating rule, the bill would give the agency additional authority and protect it from lawsuits.
- Eliminating early termination fees for TV, phone and internet service. The purpose being to increase competition and make it harder for companies to charge individuals for switching services or canceling for moves or economic hardship.
- Stopping surprise resort and destination fees. The Biden administration, citing fees of $50 per or more a night, has called for the end of fees that are not included in hotel pricing. They also posited this act of Congress would improve Americans’ ability to comparison shop as the full price would be more readily available.
Next Steps
The actions proposed in this fact sheet deserve attention from the targeted industries. The credit card late fee proposal makes sweeping changes for financial institutions and credit card providers without first considering whether there is a substantial effect on small entities. Impacted industries should consider all their options and file comments in response to these massive changes that some have argued harm consumers that pay their credit card bills. This continued focus on fees from CFPB put industry on notice that all fees being charged by financial services providers could be impacted.
Travel, technology companies and the housing industry have similarly been put under scrutiny for charging any fees. Just last week, the White House stated in a release related to renters that it welcomes commitments to “reduce or eliminating rental ‘junk fees,’” which are the hidden fees, charges and add-ons that take cash out of people’s pockets; expand pathways to eviction mitigation and prevention; and enhance and increase communication about tenant rights.”
With several agencies working with the White House and with the Junk Fee Prevention Act under consideration on Capitol Hill, it is critical that impacted groups have a seat at the table for these discussions. Brownstein’s team is well equipped to assist in both formal and informal engagement with all branches of government on this topic.
THIS DOCUMENT IS INTENDED TO PROVIDE YOU WITH GENERAL INFORMATION REGARDING THE WHITE HOUSE FACT SHEET ON THE BIDEN ADMINISTRATION'S 'JUNK FEE' POLICIES. THE CONTENTS OF THIS DOCUMENT ARE NOT INTENDED TO PROVIDE SPECIFIC LEGAL ADVICE. IF YOU HAVE ANY QUESTIONS ABOUT THE CONTENTS OF THIS DOCUMENT OR IF YOU NEED LEGAL ADVICE AS TO AN ISSUE, PLEASE CONTACT THE ATTORNEYS LISTED OR YOUR REGULAR BROWNSTEIN HYATT FARBER SCHRECK, LLP ATTORNEY. THIS COMMUNICATION MAY BE CONSIDERED ADVERTISING IN SOME JURISDICTIONS.