Biden’s war on ‘junk fees’ misses the real problem

From claiming that inflation is “temporary” to blaming it on Vladimir Putin, President Biden seems all too willing to ignore inflation. Severe impact of inflation About the daily lives of Americans.

As he continues to grapple with the effects of the highest inflation in decades, Mr. Biden is trying to fight a war over “junk fees” rather than directly addressing the core issues. The daily cost of living for Americans everywhere.

In this year’s State of the Union address, Biden boasted that he would save Americans $20 billion a year by cutting “junk fees.” This equates to approximately $153 per year per American household.

The boost to household budgets is welcome, but consider that the $153 that Biden says he will deliver means American households will have to pay $12,061 more in annual inflation-adjusted costs than they did when he took office in January 2021. That’s a cold comfort.

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These staggering numbers aside, Mr. Biden’s mission might be more acceptable if it were a legitimate attempt to help Americans deal with rising costs. Rather, Biden’s latest proposals are the latest in a broader campaign of misguided policies.

As Biden’s approval ratings continue to disappoint, he and his allies are trying to shift the blame for inflation onto private companies.

Mr. Biden has two ideologues on his side who have launched a campaign against private corporations and weaponized small institutions in the process. In particular, Rohit Chopra of the Consumer Financial Protection Board (CFPB), Lina Khan at the Federal Trade Commission (FTC).

For Biden, Chopra, and Khan, the villain in the latest oppressive cost-of-living saga is “big business.” Financial institutions that dare to charge consumers fees if they violate the terms of their free checking account. Delivery companies that have the audacity to charge consumers for the popular services they provide. Live event ticket sellers. Most of them already provide transparency in response to consumer demand. There are many others.

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In short, the CFPB has declared war on checking account overdraft fees. No one likes paying overdraft fees, but this is hardly a public policy crisis. A recent survey by the New York Fed found that nearly 80% of respondents had never overdrafted their bank accounts. Of those who had overdrafted, 84% were aware of their bank’s fees, suggesting the problem is not hidden from consumers.

Additionally, overdraft fees, which currently average about $35, are already subject to numerous federal and state laws that require banks to disclose overdraft fees to account holders.

Overdraft fees are not a “junk fee collection machine,” as CFPB Director Rohit Chopra recently argued. These help financial institutions recover the costs associated with providing free banking services, but perhaps more importantly, they help steer consumers away from bad financial practices that can damage their credit. Masu.

This is similar to how the threat of a speeding ticket encourages drivers to stick to the speed limit, which results in safer roads, cleaner driving records, and lower insurance premiums.

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The CFPB’s own survey of low- to moderate-income consumers also found that “some participants expressed value in overdraft programs that offered greater flexibility.” That flexibility is even more important now that the cost of living has increased significantly.

Meanwhile, Mr. Khan’s FTC has imposed onerous new transparency requirements and pursued “hidden” fees on everything from ticket purchases to Airbnb rentals to delivery apps and more. The agency claims this will save consumers tens of billions of dollars in “unexpected” expenses, suggesting that hapless consumers lack the knowledge to anticipate recurring fees. ing.

But the commission’s crackdown on fees clearly ignores one of the biggest cost drivers of these purchases: taxes and other government fees that are exempt from Mr. Khan’s proposed regulations.

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While the FTC targets the fees faced by Airbnb users, it turns a blind eye to exorbitant lodging taxes that in certain jurisdictions can easily exceed 20% of rental costs. Similarly, FTC regulations do not require full entertainment tax disclosure for concerts or sporting events. However, these taxes often exceed his 10% and extend to include streaming services in cash-hungry jurisdictions like Chicago.

The FTC also appears unsympathetic to the regulatory challenges facing innovative U.S. food delivery services like DoorDash and Uber Eats. That’s because they’re being forced to collect extra fees to comply with aggressive government mandates, like Seattle’s new minimum wage law mandating delivery drivers. You’ll earn $26.40 per hour before tips and mileage reimbursement.

These taxes and regulations would significantly increase food, transportation, and rental costs for many U.S. consumers, potentially exacerbating the cost-of-living crisis, but they are clearly exempt from the FTC’s harsh approach.

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It’s no surprise that the FTC turns a blind eye to these issues. The push by Biden and his top aides against junk fees is starting to look like a political stunt aimed at shifting the blame for persistently high inflation onto the private sector.

Whether it’s the FTC, the CFPB, or other federal agencies, their purpose is to hold private companies accountable even as reckless government policies like high taxes and oppressive regulations increasingly strain household budgets. It is to blame.

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