Senate Commerce Subcommittee on Consumer Protection Holding Hearing Today on “Protecting Consumers From Junk Fees” at 10am ET
WASHINGTON, D.C. – Consumer Reports is calling on Congress today to rein in junk fees that inflate and distort the cost of goods and services and make it difficult for consumers to compare prices. CR outlined its concerns and the policy reforms that are needed in a letter to the Senate Commerce Committee’s Subcommittee on Consumer Protection, which is holding a hearing on the topic today at 10 am ET.
“Consumers are understandably fed up with the increasing number of costly junk fees they encounter whenever they make a purchase,” said Jonathan Schwantes, senior policy counsel for Consumer Reports. “These fees are more than just a nuisance, they can add up to thousands of extra dollars every year for the typical American family. Congress should protect consumers from these unfair and deceptive charges by passing legislation to prohibit hidden junk fees.”
CR’s letter to the Subcommittee details how add-on fees are siphoning off billions of dollars from consumers’ wallets every year. These add-on fees can be difficult to spot, requiring consumers to click through multiple web pages or scour fine print to find out the true cost – a gradual reveal strategy economists call drip pricing. Consumers’ attempts to compare prices are frequently frustrated by such drip pricing techniques as companies add fees on the back end of the transaction prior to checkout.
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 in the last two years. 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 encountered 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 purchases; and 23 percent for personal banking services.
Fifty-one percent of respondents who had encountered hidden fees for telecommunications services said that hidden fees caused them to exceed their budget for their 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.
Consumer Reports is calling on lawmakers to adopt a number of reforms to protect consumers:
- Mandatory fees that add little or no value to a product offering – or that should be reasonably included in the base price for a product or service – should be banned because of their highly negative impact on consumer choice and competition.
- Congress should consider granting the Federal Trade Commission broad authority to require upfront price transparency and prevent hidden junk fees in all areas of the economy to help level the playing field for ethical and honest sellers, and prevent deceptive pricing.
- Optional fees for discretionary or add-on services should be clearly disclosed in plain language in a standardized format that consumers can access and review before deciding whether to purchase a product or service
- Optional fees should bear a reasonable and proportionate relationship to the underlying costs of providing the service and not as a backdoor way of raising prices and undermining competition.
Michael McCauley, michael.mccauley@consumer.org, 415-902-9537