Regulators Are Finally Addressing Junk Fee Inflation

By: Krystal Etienne · May 13, 2024 · Reading Time: 3 minutes

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.

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