Regulators Are Finally Addressing Junk Fee Inflation

Hidden fees are an increasingly popular business strategy. By unbundling the cost of their goods and services, companies are able to increase their margins without raising the sticker price. There’s only one problem with these fees: consumers hate them.

Fee Fatigue

These surprise fees pop up across industries, from credit card companies to food delivery services to ticket sales. Even restaurants have embraced the model. In 2023, 16% of eateries added some type of surcharge to the final bill.

The White House estimates Americans collectively pay more than $90 billion in “junk fees” each year, or about $650 per household. But that’s not the only reason consumers are sick of them. In addition to the financial implications, junk fees can dampen trust. Many customers are less upset with the final costs than with the fact that they were not provided upfront.

Surcharge Crackdown

The good news is that this surge in fees has prompted legislative action. The White House has made cracking down on junk fees a top priority, proposing rules barring fees for certain basic services and requiring fee disclosures. Congress also introduced the Junk Fee Prevention Act in April 2023 to limit unnecessary and deceptive fees and ensure greater price transparency. Similar measures have been introduced by the Federal Trade Commission, and instituted in several states, including California and New York.

Amid the ongoing crackdown, some businesses have proactively adapted their strategies. Companies like FedEx (FDX) and Airbnb (ABNB) provide options for users to view all fees. Others have simply opted to raise sticker prices.

Ultimately, inflation has impacted companies and consumers alike, and businesses do have their own elevated costs they need to cover. But they might need a new strategy that customers don’t hold in such disfavor, if the customer is, as they say, always right.

Looking for more stories like this? Check out On the Money — SoFi’s one-stop-shop for news, trends, and tips!

Check it out

Please understand that this information provided is general in nature and shouldn’t be construed as a recommendation or solicitation of any products offered by SoFi’s affiliates and subsidiaries. In addition, this information is by no means meant to provide investment or financial advice, nor is it intended to serve as the basis for any investment decision or recommendation to buy or sell any asset. Keep in mind that investing involves risk, and past performance of an asset never guarantees future results or returns. It’s important for investors to consider their specific financial needs, goals, and risk profile before making an investment decision.

The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. These links are provided for informational purposes and should not be viewed as an endorsement. No brands or products mentioned are affiliated with SoFi, nor do they endorse or sponsor this content.

Communication of SoFi Wealth LLC an SEC Registered Investment Advisor.

SoFi isn’t recommending and is not affiliated with the brands or companies displayed. Brands displayed neither endorse or sponsor this article. Third party trademarks and service marks referenced are property of their respective owners.
SOSS24051302