Biden crackdown on 'junk fees' will end up costing consumers more money: pro-market analysts

President Biden's executive action to outlaw "junk fees" will end up costing consumers more money, according to a Competitive Enterprise Institute analysis.

Biden explained that he directed the Competition Council that he created to crack down on "unfair fees" banks and corporations charge consumers. 

"We're cracking down on hidden 'junk' fees like surprise overdraft and deposit fees, credit card late fees, hidden hotel booking fees," Biden tweeted on Wednesday. "Even those termination charges that stop you from switching cable and internet plans to get a better deal. They add up. We're taking action."

The White House has argued that actions to "limit or disallow junk fees have the potential to create more efficient markets by requiring firms to compete on the merits by offering a lower (actual) price or a better product or service." 

Biden said eliminating these junk fees would be a way to bring down costs for families hurt by rising inflation.

Consumer prices have risen 8.2% since one year ago, according to the latest statistics from the Consumer Price Index. 

Ryan Young, CEI senior fellow, said that many of the charges the Biden administration is referring to as junk fees are examples of "unbundling," which is a "user pays" principle that can "save people a lot of money."

Biden and the Consumer Financial Protection Bureau are seeking to outlaw "airline baggage fees," which Young said could require consumers who do not check bags to pay a higher ticket price as a way to subsidize those that do.

"If an airline were to charge a single price to all passengers, then people who don't check luggage pay for that service anyway through a higher ticket price," Young wrote. "They also subsidize other passengers who do check bags. That isn't fair. People understandably grouse at getting out their credit card twice instead of once, but in many cases unbundling saves people money."

John Berlau, CEI senior fellow, said that "junk fees" are defined as fees politicians do not like.

"Fees that are separate from a product's or service's basic price can serve many beneficial functions for consumers and entrepreneurs, including to ensure that only consumers who use this service are billed for its cost," he wrote. "If those fees were to be banned, all consumers — including lower income-consumers— would likely be charged more to subsidize the cost of a particular service. How would that lead to fair and equitable results?"