CR survey finds hidden fees are common across industries and consumers say they are increasingly costly
WASHINGTON, D.C. — Consumer Reports is applauding the initiatives announced today by the Biden Administration to protect consumers from the growing cost of junk fees. The Administration’s efforts aim to crack down on hidden fees that inflate the cost of goods and services and make it difficult for consumers to comparison shop.
Among the measures announced today is a proposed rule by the Federal Trade Commission that would prohibit companies from charging hidden fees and require them to disclose the total cost upfront to customers. The proposal would cover companies across the economy that would be subject to penalties and required to provide refunds if they failed to comply.
“Americans are sick and tired of getting hit with junk fees that hike up prices and take a big bite out of their wallets,” said Chuck Bell, advocacy program director for Consumer Reports. “Companies shouldn’t be allowed to hide the true cost of their products and surprise consumers with excessive junk fees that can’t be avoided. These initiatives will create greater transparency and accountability around pricing that will foster more competition in the marketplace and help consumers find better deals.”
Consumer Financial Protection Bureau Tackles Costly Financial Fees
At the same time, the Consumer Financial Protection Bureau issued an advisory opinion today making it clear that large banks and credit unions cannot charge customers a fee for obtaining basic information like checking account balances, getting a payoff amount for a loan, or obtaining account information needed for applications.
Over the past year, the CFPB has stepped up its efforts to rein in junk fees charged by financial institutions and announced today that nearly two-thirds of large banks have eliminated bounced check fees, which have declined by 86 percent since 2021, saving consumers almost $2 billion. Overall, the CFPB estimates that its efforts to reduce overdraft/NSF fees will result in an annual savings of $5.5 billion for consumers or more than $170 for households that are charged such fees.
The CFPB also announced that it had secured $140 million in additional refunds for consumers from financial institutions that charged illegal junk fees, including surprise overdraft fees and multiple fees for bounced checks for the same transaction. The Bureau is expected to finalize a proposed rule by the end of the year that caps credit card late fees and would save consumers an estimated $9 billion annually.
“Unfair financial fees can really add up and cause serious hardship for Americans living on tight budgets and doing their best to provide for their families,” said Bell. “It is encouraging to see the CFPB working to ensure that financial fees are clearly disclosed in plain language, imposed fairly, and reasonably proportionate to the cost of providing the service.”
Federal Communications Commission Takes On Telecommunications Fees
Earlier this year, the Federal Communications Commission proposed a new rule that would require cable TV companies to display “all-in” prices clearly and prominently for customers. A 2019 CR report found that consumers pay significantly more than the advertised price for video programming. CR determined that extra charges of all types amounted to an additional 33 percent markup over the base price of cable service.
“Many of these additional charges are not included in the advertised price and are buried in the fine print of the cable service plan,” said Jonathan Schwantes, senior policy counsel at Consumer Reports. “The FCC’s proposal promotes transparency and holds the cable industry accountable by requiring full disclosure of the total cost upfront so consumers know exactly how much they will be charged.”
Consumer Reports Survey Finds Hidden Fees Common
In April 2023, Consumer Reports conducted a nationally representative survey of 2,121 U.S. adults to learn more about their experiences with hidden fees across a range of products and services. CR asked Americans who had used particular services in the past two years whether they had encountered unexpected fees and found that 49 percent had experienced hidden fees for telecommunications services; 45 percent for live entertainment or sporting events; 37 percent for gas and electric utilities; 37 percent for hotel stays; 35 percent for air travel; 27 percent for credit cards; 26 percent for auto loans and purchase; and 23 percent for personal banking services.
Fifty-one percent of Americans who had encountered hidden fees for telecommunications services said that the fees caused them to exceed their budget for cable, internet, or phone service, and two out of three Americans (68 percent) say they are paying more in hidden fees now than they did five years ago.
CR supports the Junk Fees Prevention Act introduced by Senators Richard Blumenthal and Sheldon Whitehouse that would require hotels and event ticket sellers to disclose all fees upfront; ban early termination fees charged by cable TV, internet and mobile phone companies and require mandatory fees to be disclosed in advertised prices; and require airlines to provide children 13 years or younger a seat next to a family member at no extra charge. Similarly, CR has called on Congress to pass the TICKET Act, introduced by Senators Maria Cantwell and Ted Cruz, which requires event ticket sellers to disclose the full price for events in their advertised prices.
Michael McCauley, michael.mccauley@consumer.org