WASHINGTON, DC – Today, after President Joe Biden announced new plans taking aim at hidden ‘junk fees’ across multiple industries, U.S. Senator Jack Reed says he favors the move and supports federal efforts to crack down on excessive hidden fees while promoting greater transparency, fairness, and competition in the market for all kinds of consumer goods and services.
The Biden Administration outlined a Junk Fee Prevention Act that would target several types of excessive fees, including:
• excessive credit card late fees that cost American families about $12 billion each year;
• excessive online concert, sporting event and entertainment ticket fees;
• airline fees for families sitting together on flights;
• exorbitant early termination fees for TV, phone and internet services; and
• surprise resort and destination fees.
According to the White House, the average credit card late fee currently stands at $31. Under a new proposal announced today, the average penalty would be trimmed to $8.
The Consumer Financial Protection Bureau (CFPB) proposed a rule to curb excessive credit card late fees. Major credit card issuers continue to profit off late fees that are protected by an expansive immunity provision. Credit card companies have also relied on this provision to hike fees with inflation, even if they face no additional collection costs. The proposed rule would help ensure that over-the-top late fee amounts are illegal. Based on the CFPB’s estimates, the proposal could reduce late fees by as much as $9 billion per year.
“Hardworking families are getting unfairly squeezed by excessive, deceptive junk fees. It’s time to stop companies from exploiting consumers and return fairness and competition to the marketplace. This initiative will help lower costs for working families, prevent surprise fees, put money back in the pockets of consumers, and level the playing field for companies that play by the rules,” said Reed.
According to the CFPB, the income credit card issuers generate from late payment fees is five times greater than the costs companies incur for late payment violations.
Today’s announcement opens the CFPB’s public comment period on the proposed rule. After the comment period ends, no earlier than April 3, the agency can decide if it wants to finalize the proposed rule.