Biden Convenes Meeting of Competition Council, Urges Congress to Pass Junk Fee Prevention Act

By Jeff Louderback
Jeff Louderback
Jeff Louderback
Jeff Louderback covers news and features on the White House and executive agencies for The Epoch Times. He also reports on Senate and House elections. A professional journalist since 1990, Jeff has a versatile background that includes covering news and politics, business, professional and college sports, and lifestyle topics for regional and national media outlets.
February 1, 2023Updated: February 1, 2023

Flanked by members of the White House Competition Council he created after taking office, President Joe Biden on Wednesday urged Congress to pass the Junk Fee Prevention Act at the council’s fourth meeting.

Part of that legislation would cap credit card late fees at around $8 and eliminate or limit other charges, Biden said.

Estimating that the move could reduce late fees paid by consumers by $9 billion per year, the Consumer Financial Protection Bureau (CFPB) introduced the proposal on Feb. 1.

Credit card companies presently charge as much as $41 for a missed payment and $30 for an initial late payment, according to CFPB director Rohit Chopra, who is part of the Competition Council.

Epoch Times Photo
Consumer Financial Protection Bureau Director Rohit Chopra testifies before the Senate Banking, Housing and Urban Affairs Committee April 26, 2022, in Washington. (Win McNamee/Getty Images)

To ensure reasonable late fees for credit cards, the CFPB would update the Credit CARD Act of 2009, according to the proposal.

“Specifically, the proposed rule would lower the immunity provision for late fees to $8 for a missed payment as well as end the automatic annual inflation adjustment,” the CFPB said in a press release. “The proposed rule would also ban late fee amounts above 25 percent of the consumer’s required payment.”

Exploiting a Loophole

Chopra pointed to “a regulatory loophole” that has been exploited by credit card companies.

“Over a decade ago, Congress banned excessive credit card late fees, but companies have exploited a regulatory loophole that has allowed them to escape scrutiny for charging an otherwise illegal junk fee,” Chopra said. “Today’s proposed rule seeks to save families billions of dollars and ensure the credit card market is fair and competitive.”

Late fees are often higher than the amount credit card companies spend to manage late payments, the CFPB reported.

Late fees generally don’t deter people from late payments, and those charges accumulate along with additional consequences like a reduced credit score and a lost grace period, the CFPB noted.

The Competition Council was created when Biden signed an executive order on Promoting Competition in the American Economy in 2021.

The council’s purpose is “to coordinate progress on the order’s 72 initiatives to restore competition in the economy, to collaborate on addressing pressing competition problems across the economy, and to find new ways of delivering concrete benefits to America’s consumers, workers, farmers, and small businesses,” according to a White House statement.

Ten cabinet members and the heads of seven independent agencies are part of the group.

Chopra, Attorney General Merrick Garland, Secretary of Health and Human Services Xavier Becerra, Secretary of Transportation Pete Buttigieg, Chair of the Securities and Exchange Commission Gary Gensler, and Director of the National Economic Council Brian Deese are among the members.

Focus on Reduction

At the September 2022 Competition Council meeting, Biden urged agencies to focus on reducing junk fees.

On Wednesday, in addition to the push to reduce credit card late fees, Biden boasted about three other points addressed since that meeting.

The CFPB has targeted overdraft and bounced check fees that will reduce charges by more than $1 billion annually, he said.

Biden added that the Department of Transportation proposed a rule to require airlines and online booking services to show the full price of a plane ticket up front, which has led nine airlines to “change policies to guarantee coverage of hotels and 10 airlines to guarantee coverage of meals, none of which was guaranteed before.”

The Federal Communications Commission (FCC) released new rules that will take effect next year requiring broadband providers to use “nutrition labels similar to those on food products to “convey key information to consumers about internet service options in an accessible format,” the White House explained.

At Wednesday’s Competition Council meeting, Biden said passage of the Junk Fee Prevention Act would also crack down on excessive online fees for concerts, sporting events, and other entertainment tickets.

“Often, if Americans want to attend a particular concert or sporting event, they only have one online option for making the initial ticket purchase. That means that even if consumers knew they might have to pay a large fee on top of the ticket cost, they would have no way to avoid it if they wanted to attend a particular show,” according to a White House statement.

“One company has exclusive partnerships with a reported 80 of the top 100 arenas in the United States, allowing it to charge fees to attend events at those leading venues without fear of competition.”

Banning airline fees for family members to sit with young children; eliminating exorbitant early termination fees for TV, phone, and internet service; and banning surprise resort and destination fees are other intended targets in the proposed legislation, Biden said.

“These fees can be incredibly frustrating for typical Americans who have to travel or who are seeking to just engage in practical ways in our economy, like accessing internet services—they cost consumers billions of dollars a year, they make it harder for people to comparison shop,” Deese explained. “But they also reduce competition and make it more difficult for innovators and new businesses to break into markets and offer better services at lower prices.”

A Question of Fairness

When he was vice president under President Barack Obama, Biden noted, Congress passed a bipartisan law that said banks cannot charge late fees that are significantly more than the late payments cost them in the first place.

“Nobody’s saying that you should pay you shouldn’t pay your fees on time. And no one says the bank should lend you money for free. That’s what banks charge interest for,” Biden said.

“Congress should pass the Junk Free Protection Act so we can crack down on these fees and give hardworking Americans just a little bit more breathing room,” Biden continued. “Look, the bottom line is some of these unfair fees add up. It’s a basic question of fairness. And with the help of the folks in this room, we’re going to keep building an economy that’s a fair economy, that’s competitive, and an economy that works for everyone.”

Not everyone agrees with Biden’s assessment of the Junk Fee Prevention Act’s provision related to capping credit card late fees.

“Restricting the ability to charge late fees on credit cards will simply translate into higher charges for consumers who make their payments on time,” said John Berlau, who is Senior Fellow and Director of Finance Policy at the Competitive Enterprise Institute. “The CFPB is proposing price controls that will raise the overall cost of credit for everyone.

“By disincentivizing credit providers who take risks that they may not be paid back, these proposed price controls would also greatly reduce the availability of credit,  particularly for lower-income consumers,” Berlau added.

“This measure could also lead to a more concentrated credit card market, as smaller banks and credit unions may pull out of the market due to the higher costs of issuing credit cards.”