In recent years these “junk fees” have been tacked onto everything from rent and cable bills to hotels, cellphones, storage units and even carpet cleaning. According to Consumer Reports, the average family of four spends nearly $3,300 in junk fees annually.
The corporations that foist these fees onto consumers claim that they are an immutable aspect of the market. But they are no such thing. The Federal Trade Commission recently finalized a rule eliminating junk fees in the live events ticketing and short-term lodging industries, and California and Minnesota have adopted broad bans on the use of mandatory, undisclosed fees. That still leaves residents of 48 states and the District of Columbia vulnerable to undisclosed charges across a host of industries, and that’s assuming courts don’t strike down the FTC rule.
California and Minnesota aren’t the only states that have been taking a hard look at junk fees. Lawmakers in 12 more states with wildly diverse politics, including Arizona, Colorado, New York and Ohio, introduced junk fee bans last year that didn’t make it across the finish line. With the Donald Trump administration primed to roll back many rules that govern the most abusive tactics employed by dominant corporations, it’s more important than ever that state governments take up the fight to ban junk fees once and for all.
Junk fees are more than an annoyance. They’re a systemic issue that creates barriers for low-income households, limits consumer choice, distorts the marketplace and erodes trust in businesses. They raise the price of products, according to one study, by more than 20 percent, taking advantage of our behavioral biases — and the real constraints on our time and attention — to goad us into paying more than we wanted to for a product or service.
Opponents of junk fee regulation argue that it stifles innovation and creates unnecessary red tape. However, if a business’s grand claim to innovation is how well it can trick consumers into paying a host of undisclosed fees, it’s not innovative at all. Real competition and innovation come from transparency, which drives businesses to create better products and services that consumers demand, not spend time and effort coming up with new ways to bamboozle buyers into paying nonsense fees.
In fact, a key argument in favor of banning junk fees is that business owners who want to do right by their customers and use transparent pricing are put at a disadvantage. Transparency in pricing also fosters trust — a key ingredient too long neglected in the name of quick profits.
And the public is on board. Polling conducted for our organization, the American Economic Liberties Project, shows a resounding 79 percent of Americans support legislation to eliminate deceptive fees. That broad approval transcends partisanship, attracting support from more than three-quarters of Democrats, independents and Republicans alike. State lawmakers looking for a political win that will definitely be noticed by constituents should champion anti-junk fee legislation, as have lawmakers in Hawaii, New York, Virginia and at least five other states who have introduced bills that could become law this year.
The banning of junk fees is more than a regulatory tweak; it is a statement of values. It affirms that fairness, honesty and respect for consumers are non-negotiable principles. In a time when many feel the deck is stacked against them and trust in government has eroded, this rule offers a tangible example of government working to level the playing field. The FTC and a handful of states are laying the foundation.
Kelsea Pym works on the state and local campaign team and Pat Garofalo is director of state and local policy at the American Economic Liberties Project, which advocates against concentrated economic power.
Governing’s opinion columns reflect the views of their authors and not necessarily those of Governing’s editors or management.
