Last week, the White House declared war on so-called consumer “junk fees” – think aggressive bank overdraft fees or hidden hotel booking fees.
According to the Biden administration, junk fees cost Americans $24 billion annually, often with lower-income consumers paying the freight.
The opening salvo from Washington, D.C. may be a muted one, however, with the White House only issuing guidance or deliberating on federal action against junk fees. Currently, the Consumer Financial Protection Bureau doesn’t impose any significant legal requirements on junk fees.
Even so, consumer financial advocates seem to fully back the White House in targeting junk fees.
“I have zero problems with the government getting involved this way,” said Lending Tree chief credit analyst Matt Schulz. “We’ve seen many times over the years that government regulation is needed to ensure the type of transparency that consumers deserve with these fees and costs.”
The Worst Junk Fees
Will additional regulations make junk fees disappear forever?
“No,” Schulz said. “But if the government can play a role in reining in some of the more egregious examples or even just ensure that they have to be properly and clearly disclosed when they are charged, that’s a good thing.”
In the meantime, U.S. consumers are still on their own in fighting onerous junk fees. Job number one is identifying the worst junk fees and addressing them on a one-by-one basis.
These toxic consumer fees top the list.
Bank overdraft fees. Bank overdraft fees have historically been the most frustrating – and one of the most expensive junk fees, with charges of up to $36 per overdraft infraction commonplace.
Yet until clear requirements from the White House and the CFPB are delivered to banks, Debt.com chairman Howard Dvorkin offers some proactive advice for banking customers.
“Just because an announcement to eliminate junk fees was made doesn’t mean all banks may comply in all cases,” says Dvorkin. “Banking consumers should conduct a quick internet search for their account fees. If they’ve already been hit with junk fees, they should call their bank and try to get them waived.”
Resort fees. These fees, charged in most tourist destination cities, are mandatory, pushing the cost of a trip up much more than what consumers may have estimated.
“You may be required to pay a “resort fee” to enjoy amenities like pools or gyms,” said Oak View Law Group principal attorney Lyle Solomon. “But these amenities are usually expected to be covered with the room fees.”
Imagine comparing prices of various rooms and booking the one offering $50 per night, Solomon noted. “But it includes a $35 resort fee. It means, including taxes, so you may have to pay about $95 per night,” he said.
Mortgage fees. Home mortgage lenders often present additional charges that are not disclosed upfront.
“These are added at the time of closing, making comparison shopping difficult for consumers,” Solomon said. “You may find these junk fees as application fees, processing fees, administrative fees, courier fees, and underwriting fees.”
Individually these may cost a few hundred dollars for each fee but can add up to a sufficiently large amount while closing, Solomon added.
Event fees. Concert or game ticket processing fees are among the most maddening because the costs can be so high. The online ticket broker StubHub, for example, adds 15%-to-20% in service fees to its ticket costs.
“It’s already crazy expensive to travel or to take your family to a show or a ballgame, but these fees can make it far worse,” Schulz noted.
Credit card late payment fees. Despite government intervention by the CFPB, credit card companies still charge high late fees.
“Today, the legally protected fees for late payments have crept up to $30 for the first late payment, and $41 for subsequent incidents,” said CFPB Director Rohit Chopra in a June 22, 2022 statement. “It has almost become a uniform industry standard among large players to charge the max fee authorized by the special immunity provisions.”
Fighting Back On Fees
What can consumers do to eliminate junk fees? Get just as aggressive in fighting fees as companies are in charging them.
“In some cases, you can shop around to avoid them,” Schulz said. “For example, you can stay in a hotel that doesn’t charge a resort fee.”
Also, consumers can call the company and get them to waive the fee.
“That happens all the time with credit card late fees,” Schulz said. “However, you’re far less likely to be successful with getting a hotel to waive a resort fee or a ticket seller to waive a processing fee.”
“It can’t hurt to ask,” he added. “Just adjust your expectations before you do.”
While you can’t completely avoid or eliminate these junk fees, you can always be alert and look for ways to minimize them.
“For instance, in case of overdraft fees, we all have access to banking apps available in our pockets,” Solomon said. “Why not use them?”
For example, you can use your banking app to check the amount available in your account and make transactions accordingly.
“Link your checking and savings accounts so that if you mess up, you can pay the shortage instead of your bank,” Solomon said. “Plus, you can make use of free person-to-person payment methods like Zelle.”
