A Trump/Vance Administration is Likely to Continue the Fight Against Junk Fees. They Should Do So Without the CFPB and FTC.

The Federal Trade Commission (FTC) and Consumer Financial Protection Bureau (CFPB) under President Joe Biden championed the fight against what the administration refers to as “junk fees.” The administration has not provided a definition or exhaustive list of what exactly junk fees are, but it is generally used as a catch-all term for service, transaction, purchase, and penalty fees across financial and service industries.

While it is not entirely clear where Donald J. Trump and J.D. Vance will come down on the junk fees issue, reasonable assumptions can be made. The incoming administration has a clear mandate resulting from the decisive electoral and popular vote victory to enact their populist policy agenda. Coupled with Vance’s admiration for FTC Chair Lina Khan and the popularity of banning junk fees, the fight is probably here to stay.

However, Republicans in Congress clearly believe the behavior of the FTC and CFPB is administrative overreach. Their dissatisfaction with the CFPB has been ongoing under the leadership of agency director Rohit Chopra who has enacted broad rules like the “credit card late fee” with very limited congressional oversight. The FTC under Lina Khan has been slightly less aggressive in implementation. Though they have proposed banning junk fees, currently the rule has not been enacted.

With a popular economic populist policy of banning junk fees, the Trump-Vance administration could consider continuing down the path of Biden by using federal agencies to force businesses to cut fees. However, this will leave Republicans in Congress and private businesses dissatisfied, who have a strong case to make that banning junk fees will do more harm than good. Instead of using the heavy hand of government, it is more likely the administration may choose to tackle the issue through public-private partnership with key businesses and stakeholders. This approach has had some success with Ticketmaster and Live Nation agreeing to show fees upfront without any rule forcing them to do so.

Mandates and regulations, while sometimes necessary, often fail to consider the unintended consequences and the wide variety of needs among varying businesses. A one-size-fits-all approach is irrational when considering, for example, a boutique hotel charging a resort fee for use of the pool and beach and the towels and sunscreen they provide, compared to a large multibillion-dollar hotel chain providing the same resort benefits across hundreds or thousands of hotels. And while revenue or asset-based thresholds are typically put in place ensuring smaller businesses are not subjected to overburdensome regulation, they and their customers are harmed when mismatched pricing encourages acquisition and consolidation.

The Trump-Vance administration can still follow the path of price transparency and reduced hidden fees. But businesses, consumers, and politicians will all be best served by doing so without broad executive mandates from bureaucratic agencies.