Patrick Semansky/AP Photo
President Joe Biden announces his administration’s plans to eliminate junk fees for consumers, October 26, 2022, in the South Court Auditorium on the White House campus in Washington.
The Biden administration’s junk fee initiative has thus far led a charmed policy life. Rolled out last year but given a high-profile slot in the State of the Union address, the push to crack down on exorbitant, hidden, and deceptive fees for things like hotels, air travel, event ticketing, and telecommunications services has received laudatory notices in the press, overwhelming support among the general public, and shockingly little pushback from political opponents. White House officials are absolutely giddy about it.
Lobbyists who are paid to maximize industry profits have attempted to get in front of the rebellion. The Consumer Financial Protection Bureau’s efforts on overdraft and credit card late fees yielded a hilariously tone-deaf statement from the CEO of the Consumer Bankers Association. And Airlines for America, the industry trade group, had some mild criticism for Biden’s efforts on air ticketing. But big business has clearly been thrown off-balance by an administration that isn’t letting them nickel-and-dime customers without a fight.
The backpedaling reached a high point with United Airlines’ announcement last week that it would allow families traveling with small children to sit together for free. Consumer advocates have rightly warned that a voluntary promise is not a substitute for government regulation. However, if United puts the family seating policy into its general service agreement, it would be enforceable by the Department of Transportation. And in a copycat industry, it would likely be mirrored by United’s competitors.
Yet in the corporate frenzy to restore their God-given right to gouge, you could see a narrative emerge. Three of the four items that Biden highlighted in his proposed Junk Fee Prevention Act—the aforementioned family seating fees, concert ticketing fees, and “resort fees” for hotels—involve discretionary travel and entertainment. You could see a pro-business conservative make a populist attempt to call out limousine liberals for whining about their jet-setting and fun-seeking.
Now, that wouldn’t be an airtight case. First of all, it neglects what else the administration has targeted. Early termination fees for cable, internet, and cellphone services have a near-universal affected population. (While cable usage is down, 77 percent of Americans have home broadband as of 2021, and 97 percent own a cellphone.) And the overdraft and credit card fees banks impose, which the CFPB is going after, specifically aim at low-income customers.
Plus, even fees on discretionary activities are big business—companies reaped nearly $6 billion from airline baggage and change fees in 2021, and nearly $3 billion from resort fees. Americans across the income scale should not have to be subject to monopolistic power imposing deceptive, hidden fees that they cannot escape and that represent pure profiteering. “We’re tired of being played for suckers,” Biden said in his State of the Union speech, a message applicable to everyone.
But it’s true that junk fees are routinely targeted down the income ladder, and that some of the fees the administration has chosen not to highlight thus far—particularly with respect to rental housing and incarceration—are attached to vital necessities and vulnerable populations. Legal aid groups and advocates are pushing for the White House to adopt these more pernicious junk fees as part of a broader agenda.
Fees to Get an Apartment. Fees to Stay There. Fees to Pay Fees.
Last October, the Federal Trade Commission invited public comment in an Advance Notice of Proposed Rulemaking (ANPR) on junk fees, asking for guidance on “unnecessary, unavoidable, or surprise charges that inflate costs while adding little to no value.” One of the more comprehensive responses was delivered this month by the National Consumer Law Center (NCLC) and the National Housing Law Project. It details a panoply of junk fees in the rental housing space, at virtually every stage of the process. According to the comment’s authors, the fees perfectly fit the FTC’s definition of unnecessary, unavoidable, and surprising.
It starts with rental application fees. Most landlords run credit or background checks on potential tenants, and they pass the costs down. NCLC surveyed 95 legal services and nonprofit attorneys in 26 states, and nearly all of them saw application fees. But the variance is high: The comment letter cited fees ranging from $25 to a whopping $350. The cost is typically per applicant and can be assessed even if the rental unit is unavailable.
According to Apartments.com, only eight states have any limitations on rental application fees. New York and Wisconsin are the most stringent with a $20 cap; Minnesota prevents charges from exceeding the actual cost of application processing; and in Massachusetts, only a licensed broker can charge the fee, not a landlord. Cities have tried their own caps, but earlier this month a $10 cap in Eugene, Oregon, was thrown out by a court for being inconsistent with state law.
Even in locales with caps or restrictions, “those rules are violated often,” said Ariel Nelson of the NCLC, who wrote the comment letter. Unfortunately, renters invariably don’t know what’s legal. “Or maybe you’re desperate for housing or you’re in a place where you can’t contest it,” Nelson said.
That’s also true of the fees that get layered on once you secure an apartment. NCLC uncovered fees related to virtually every amenity in a rental unit: utilities, internet, cable, insurance, pest control, mail sorting, use of common areas. There are fees for allowing pets to stay on the premises, fees for renting month-to-month instead of annually, fees for roommates or guests, fees for costs related to court cases involving the building, fees for maintenance, fees for inspections. “There are fees that are charged each January because it’s January,” Nelson said.
Some of these fees are for services, like pest control and maintenance, that are required of landlords. Some are unknown to the renter because they are buried in template rental agreements that make it difficult to discern the final price. And some are charged whether the tenant wants the service or not. Nelson described the growing prevalence of “trash valet” fees that allow a renter to put their trash outside the door for someone to pick up. In some cases, the trash chute is just at the end of the hallway, but the trash valet fee cannot be avoided. In other cases, nobody ever comes to toss the trash, but the fee is imposed anyway.
And then there are fees related to the payment of rent. There are often exorbitant fees for partial payments or paying late. Some tenants pay using an online portal and are charged “convenience” fees for that privilege. “But you’re also charged if you pay any other kind of way,” Nelson said, including by check or wire transaction from a bank account. These “pay to pay” fees are precisely what the CFPB has said are illegal when imposed by debt collectors.
One housing advocate from South Carolina explained that they’ve seen rental units advertised for $1,100 a month—but after accounting for fees, the real price was $1,800.
The Biden administration did take action last week to lower mortgage insurance rates for lower-income buyers. But renters are even further down the income scale, and excessive fees threaten the affordability of shelter, a basic necessity. They can tangle tenants in rental debt, which affects their ability to get an apartment down the road. (They also likely don’t show up in inflation statistics, underplaying the real cost of living.)
“These fees are adding to the cost of rent and exacerbating the affordability crisis we’re already in,” Nelson said. “It’s something that people are experiencing every day that hasn’t gotten a lot of attention.”
Captive Markets Behind Bars
I devoted an entire chapter of my book Monopolized to the practice of junk fees in the criminal justice context. These fees are the very definition of unavoidable: An incarcerated person has no consumer choice, and cannot sidestep fees that define whether they can eat, purchase toiletries, send and receive communications to loved ones, and use the little money they get when leaving prison or jail.
Fees have risen in recent years as correctional facilities shift the costs of running facilities to the people who are incarcerated. “A lot of prisons and jails who sign projects with companies do so based on kickbacks they get,” said Mike Wessler of the Prison Policy Initiative, which has focused heavily on this issue. “The more that the individual spends, the larger the kickback they get. They don’t have the consumer at heart.”
Congress actually did act last year on one element of this, passing the Martha Wright Prison Phone Justice Act, which enables the Federal Communications Commission to set rate caps on phone and video services, and bans other related practices. But a comment letter to the FTC, sent by 29 groups and led by the Prison Policy Initiative and NCLC, highlighted three other areas where there is little to no regulation: technology services, money transfers, and release cards.
Incarcerated people and their families are really the only ones in America who pay to send and receive email. An email “stamp” costs around 50 cents per message, according to the comment letter, with some as high as $1.25. This is a truly absurd overcharge—outside of prison, free email services have been available since 1996. Tablet computers, which have gained in popularity in prisons and jails, are often “free” but come with a host of ancillary fees if you want to do anything with them, like listen to music or read books. There’s been a disturbing trend in corrections of denying physical printed books and outside mail (like birthday cards) but offering e-books or copied communications for a fee. One facility in Florida banned Bibles but charged for them online.
Acquiring the money will cost you, too. For incarcerated people who make as little as 12 cents an hour working behind bars, they survive on money transfers from the outside. The money goes to buying food (what’s provided free is often unpalatable or inedible), toiletries … really anything. And these money transfers are typically charged at around 20 percent, an unavoidable fee that’s again well above cost. While most states allow only one money-transfer provider, even where there’s actual choice it’s hard to figure out which service is the cheapest.
“It’s not a healthy market dynamic,” said Caroline Cohn, who drafted the comment letter for NCLC. “They have captive consumers, they can increase the costs without fear of competition. And they serve a population that a lot of people don’t pay attention to.”
When someone completes their sentence, they typically receive money left in their account, along with any release funds provided by the state, on a release card. Guess what? These debit card–style products have a litany of fees attached to them. Released prisoners can get the money in cash or a check, but must go through an extended process of opting out. “It’s a catch-22 if you have no money,” Wessler said. “Do I use the card and pay fees, or wait for the refund? If you have to eat, you have to eat.”
Some release cards charge a fee just to be swiped for any purchase. There are also weekly maintenance fees if the user does not use the card, which is clearly unrelated to the cost of the service. There are account closure fees and fees to pull cash out of an ATM. There are often fees to speak to bank tellers about the card, or fees if an “out-of-network” bank is used. “All of this is happening to someone trying to re-establish their life after incarceration,” Wessler noted.
Most prison telecom services are run by one of two companies, ViaPath and Securus. And Securus’s corporate parent Aventiv also has a related business line, JPay, that handles a significant number of prison money transfer and release card services. (The CFPB did fine JPay for its release card practices in 2021.) The small handful of companies in this space prey on an incredibly vulnerable population. Incarcerated people are disproportionately Black and brown, and make a median wage of around $19,000 per year prior to entering prisons and jails, according to the Prison Policy Initiative.
It may seem unpalatable in a political context to argue against the economic predation of incarcerated people. But when someone is sentenced to prison or jail, the sentence doesn’t come with an addendum that companies also get to rip them off. “It puts them in a situation where they have no choice but to take on further punishments that are beyond the sentences handed down on them,” said Wessler.
Numerous studies have shown the importance of family contact for the incarcerated, and companies exploit this desperation for human interaction. Advocates say any administration wanting to deal with racial equity or criminal justice reform must start with fees. “These people have limited resources to begin with and no way to earn in prison,” said Cohn. “This is the most important place that the administration can focus on, given their other goals.”
Fees Here, There, and Everywhere
Rental housing and prisons are far from the only areas rich in junk fees. Beyond early-termination fees, there are a ton of hidden charges on cellphone and cable bills, some of which sound like they are imposed by the government but are not, and some of which are for unrequested services from third-party providers. Fixed fees for the right to use electricity have crept up in recent years, and those “pay to pay” fees for using credit cards also predominate for utility bills. Most rental car companies charge for child safety seats. It is legal for an employee making over minimum wage to have the cost of providing a uniform for the job deducted from their pay.
California has banned that last junk fee, requiring that companies reimburse employees for uniform costs. This is the kind of approach that advocates would like to see the administration apply to a host of fees they haven’t focused on. That could happen at agencies with jurisdiction, like the FCC’s implementation of prison phone rates, or at the Department of Housing and Urban Development with rental housing. Alternatively, the FTC junk fee process, which is just beginning, could pick up certain fees seen as unfair and deceptive.
The administration, in its fact sheet on the junk fee initiative, committed to working with Congress on fees that go beyond the ones they have targeted. The White House team working on this matter looked at several other fees before narrowing to the four in the Junk Fee Prevention Act. They are also open to working with state legislators, since many of these types of policies are governed at the state level.
Advocacy groups have cited fees on housing and prisons in particular because they are often attached to goods and services that are necessary for survival, and because they hit populations that are poorer, more diverse, and more deeply impacted by price-gouging. A broad junk fee agenda, they say, could build a coalition and make the overall project more impervious to partisan sniping or industry pushback. After all, junk fees are like ants: There’s never just one.
