February 1

By Susan Milligan

The Biden administration is moving to limit credit card late fees to $8 – a drastic reduction from fees that now run as high as $41 – as part of a crackdown on “junk fees” that aggravate consumers who travel by air, buy concert tickets online or stay at hotels that spring a hefty “resort fee” on guests.

Capping credit card late fees, which financial institutions sometimes impose even when a cardholder is merely hours late with a payment, would save consumers as much as $9 billion a year, Brian Deese, director of the National Economic Council, told reporters in a conference call. The rule, which White House officials said could be in effect in 2024 after the process is completed, is to be announced Tuesday at a meeting of President Joe Biden’s Competition Council.

“Junk fees have unfortunately become the norm,” said Rohit Chopra, director of the Consumer Financial Protection Bureau, and “this has morphed into a multi-billion dollar bonanza” for banks and financial institutions.

The council will also release a report by the National Telecommunications and Information Administration exposing “barriers to competition” in mobile apps, with Google and Apple having overwhelming control over how consumers access, use and pay for apps – sometimes requiring users to pay through the company’s own systems, which can be pricey, NTIA administrator Alan Davidson said.

Biden created the Competition Council in 2021 to identify ways agencies across the government could protect consumers against what the White House describes as unfairly high and often surprise fees people are forced to pay for basic services.

That includes exorbitant “handling fees and other add-ons” for concert tickets, fees for broadband and cable that jack up the core price dramatically, and overdraft and late fees charged by banks, administration officials said.

For example, a review of 31 different sporting events across five ticket sellers’ websites, service charges averaged more than 20% of tickets’ face value, the White House said. Total added fees, such as processing fees, delivery fees and facility fees – added up to more than half the price of the original ticket. That means a family of four attending a show could end up paying far more than $100 in fees above and beyond the cost of the tickets, the White House said in its fact sheet.

While some junk fees could be limited most easily with congressional action, the credit card late fees can be addressed through rule-making, administration officials explained, because Congress passed a law in 2009 meant to control high costs for using credit cards.

When the original rules were written, credit card companies found ways to “fine print themselves out of trouble” and keep their high late fees, Chopra said. Companies used to impose a relatively small fee for late payments, but jacked it up earlier this century “once they discovered the fees could be a source of easy profits,” he said.

The proposed $8 cap is about five times the actual cost of recovering a late payment, Chopra said.

The report on mobile apps, issued by the NTIA, has no rule-making authority and will mainly expose the business practices of the sellers, Davidson said. Since the app stores are controlled by two tech behemoths – Google and Apple – the companies can require the use of a particular device, or require that customers use the tech companies’ payment systems, he said.

“The current mobile app ecosystem is harmful to consumers” and to app developers, both of whom have few choices, he said.

The Department of Transportation has already proposed a new rule to require airlines and online booking agents to reveal the full price of a ticket up front – including baggage fees. The Federal Communications Commission, meanwhile, has released new rules that will go into effect next year requiring broadband providers to use a sort of nutrition label-type format to inform customers about prices, speeds, data allowances and any additional fees.

Biden can do some things through executive action and rule-making, but it would be easier and faster for Congress to act – especially on the entertainment ticket prices and a proposed ban on airlines charging parents more to sit with their young children.

“The rule-making process can take a long time,” Chopra said. But “there is bipartisan interest in addressing these fees.”