The Obama White House warned Thursday that hidden fees are a widespread and growing problem for the U.S. economy, according to a report commissioned to help boost competition on behalf of consumers.
The report, published by Obama’s National Economic Council, warned that hotels, sports and entertainment events, airlines, and other industries are increasingly relying on hidden fees that are at worst “fraudulent or deceptive.”
Such fees are harmful, the report concludes, because they can trick people into paying an amount for a good or service that they wouldn’t be willing to pay if the fees were included in the advertised price. For instance, the consumer is harmed if he ponies $80 for a concert ticket that he was willing to pay $90 for — only to be hit later with a $15 servicing fee, pushing the cost above what he was originally willing to pay.
Obama’s advisers suggest, to protect consumers, the federal government and state governments might consider caps on fees or mandating that advertised prices are “all-in” prices, including fees. In some areas, federal agencies are already doing so.
A number of specific industries receive special criticism in the report.
Hotels charged over $2 billion in fees in 2015, according to the consumer group Travelers United, including for “resort fees” that are not optional. Those fees have drawn scrutiny from the Federal Trade Commission.
Event ticketing fees amounted to $1.6 billion in 2015, as suggested by Ticketmaster data, including “service fees,” “processing fees” and “delivery fees” that are not necessarily tied to any service.
Fees attached to sales of new cars can range up to nearly $1,000 in states where they are not regulated, according to the report.
The biggest category may be airline fees, which accounted for over $22 billion in 2015. Change and baggage fees “operate in a gray zone between being truly mandatory fees and truly optional,” the report said. Currently, the Department of Transportation is weighing whether to regulate how fees are presented.
Also of perennial concern are fees colleges charge to students separately from tuition and fees that banks charge customers. New data indicates that banks increasingly rely on customer-unfriendly fees, rather than net interest, to generate revenues and profits.
The report released Thursday is part of a larger effort by the outgoing Obama administration to highlight ways to increase pro-consumer competition.
