President Biden and his team may have found a winning issue protecting consumers (and voters) from junk fees and hidden costs — but only if they play their policy (and political) cards right.
Regulation that solves old problems without creating new ones will strengthen the economy and bolster Democrats’ brand as practical leaders who put consumers first. But overreach that puts talking points ahead of tangible gains — or regulates for regulation’s sake — is sure to backfire. So far, the Administration’s junk fee push has been a little bit of both.
The Federal Trade Commission’s (FTC’s) CARS rule banning phantom charges in auto sales and DOT’s new requirement that airlines automatically refund canceled fights have been clear winners, delivering concrete, immediate benefits without harmful side effects or unintended consequences.
On the other hand, the FTC’s centerpiece proposal requiring businesses to disclose “total prices” before consumer purchases is turning into more of a mixed bag.
On the surface, this one should be a policy and political gimmee. No one supports surprise last-minute charges or Rube Goldberg pricing schemes that make it impossible to figure out what something costs until you’ve clicked through multiple screens to buy it. The basic idea is so logical and popular that the worst offenders — industries like ticketing services, hotels, and short-term rental services — have been scrambling to get ahead of the regulators and banish or more clearly disclose dubious “convenience” and “destination” fees.
But the FTC’s proposed rule doesn’t only apply to these obvious targets; it covers the entire economy. And in its rush to pump out the broadest possible rule ahead of fall elections, the agency is ignoring costly unintended consequences that could undermine both the policy and the political benefits of the rule.
The biggest problem is the FTC’s failure to consider the confusion and other harms caused by applying the new rules to consumer businesses that are already subject to existing transparency requirements. This oversight isn’t surprising, given the agency is clearly focused on a handful of high-profile consumer industries that do not already have such obligations. But by sweeping everyone else in too, it poses real problems for businesses that are already fully regulated and for consumers who would end up swamped with confusing or conflicting disclosures.
Banking services, for example, must comply with the extensive requirements of the Truth in Lending Act, including disclosure of “life of the loan” borrowing and financing costs a well as company policies around default, late payments, and service charges and fees. Adding new disclosure obligations alongside these existing requirements would be confusing, duplicative and costly, driving up borrowing costs and potentially freezing lenders in place with no way to satisfy conflicting regimes.
Communications companies are also already covered by industry-specific — and absolutely mandatory — rules dictating how they describe and disclose prices and related policies, including the 2019 Television Viewer Protection Act as well as the Federal Communications Commission’s (FCC’s) recently enacted “All In Pricing” and “Broadband Nutrition Label” regulations. And these existing requirements differ substantially from the proposed FTC rules on critical issues like whether or not to include government fees and taxes in “total costs” (required by the FTC but not the FCC) or how to explain regional pricing variations to consumers (the FCC says companies can reference these differences in ads while the FTC does not).
The result would be defensive, “double messaging” to consumers offering two different and conflicting sets of disclosure, as businesses subject to overlapping regulatory regimes attempt to manage the tension. Consumers would almost certainly be more confused and prices would likely rise in these industries due to the high costs of complying with such complex and risky overlapping obligations.
One tool to avoid these missteps is the Bipartisan Regulatory Early Notice and Engagement Act, which requires agencies to give an early heads-up when they are considering new regulations — giving the people and businesses affected a chance to flag potential conflicts and unintended consequences.
Another is even simpler — regulate where needed — but no farther. By limiting the application of their new rule to industries that aren’t already covered by more specific, tailored regulations, policymakers can stop confusion and conflicts before they even get started.
That’s how to protect consumers, boost the economy, and win the war on junk fees without making the Democratic brand collateral damage.
