Today the Biden administration announced a new whole-of-government initiative against “junk fees” from airlines, banking, and other industries. But what he is calling junk fees aren’t really. CEI experts comment on why Biden is wrong and what the downside consequences will be.
Ryan Young, CEI Senior Fellow, uses Biden’s targeting of airline fees as an example of what’s wrong with the new CFPB guidance (policy):
“Many of the charges the administration calls junk fees are examples of something called “unbundling.” It’s a version of the “user pays” principle and can save people a lot of money.
“Unbundling is a form of price discrimination — or charging different prices to different customers. When it comes to airline baggage fees (or other extras), that allows people who are satisfied with a bare-bones experience to save money, while those who want more services can get it on their own dime. Unbundling is also evidence of a competitive market in which airlines compete on price.
“Ironically, unbundling and price discrimination help to advance another of the administration’s whole-of-government campaigns, on climate change. Incentivizing people to only check baggage or buy food and drinks when they need to also reduces airplane weight, which saves money and fuel and can further lower ticket prices while reducing emissions. Since this goal contradicts the new junk fee initiative, how will the administration decide which to prioritize?” > View the full analysis on cei.org
John Berlau, CEI Senior Fellow:
“’Junk fees’ is a subjective and paternalistic term used to describe fees that politicians like Biden and bureaucrats like Rohit Chopra and Lina Khan simply 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.
“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?”