The Daily - Biden’s Open War On Hidden Fees

Episode Date: May 22, 2024

The Biden administration is trying to crack down on sneaky fees charged by hotels, rental cars, internet providers and more.Jim Tankersley, a White House correspondent, explains why the effort is doubling as a war against something else that Biden is finding much harder to defeat.Guest: Jim Tankersley, who covers economic policy at the White House for The New York Times.Background reading: This month, a judge temporarily blocked a new rule limiting credit-card late fees.Hotels and airlines struggling to recoup their losses from the pandemic have been including more hidden charges. Don’t fall for them.For more information on today’s episode, visit nytimes.com/thedaily. Transcripts of each episode will be made available by the next workday.

From The New York Times, I'm Michael Barbaro. This is The Daily. Today, President Biden has declared war on hidden fees that cost American consumers tens of billions of dollars a year. But as my colleague Jim Tankersley explains, it's doubling as a war against something else that Biden is finding much harder to defeat. It's Wednesday, May 22nd. Jim, over the past few weeks, the Biden administration has decided to take on airline fees about as dreaded an enemy as you can imagine. And I want you to just describe

what the president has done. Well, Michael, I don't know if you do a lot of flying, but when you do fly on an airline, it turns out there are a lot of additional charges beyond just the price of the ticket. Now, this depends on which airline you fly, but a lot of airlines now, they ask you to select a seat, and they might charge you for your selection or for any selection. Right. Do they ever, they charge you to have the person you travel with sit next to you, and the baby you're traveling with sit next to that person? Right, exactly. If you want to check a bag on some airlines, that's a fee. If you want to carry on on some other airlines or with certain tickets, that's a fee.

And so what we have are several airlines that have adopted sort of a business model where you charge low ticket prices up front, but then you add fees throughout the process. And by the end, your ticket could double. Right. And just to name a couple names, why not Spirit, Frontier? That's how they operate.

Sure. And then even the bigger guys, like American and United, have started charging some more of these fees too. So fees are sort of on the rise across the airline industry. Okay, enter Joe Biden. Right. So the Biden administration, led by the Transportation Department, swoops in, finalizes some rules that say, first off, you can't hide these fees until the end of the transaction. You got to disclose them right away up front, what the whole thing

is going to cost. And second off, there's some fees you can't charge at all, particularly you can't charge parents to sit next to their kids. So the way the administration envisions it, when you go to your favorite travel site, now you would see like an itemized list of all the fees. Like here's what it could actually cost and what it could actually add up to. And you'll see it right away when you're comparing what it costs between certain airlines. So you have a better sense of what would the final price be at the end compared to the final price I'm seeing now. Okay. It's difficult, Jim, for me to imagine anyone not welcoming this kind of a rule. I mean, it's the equivalent of free ice cream on Friday in the office. Everybody is going to like this rule, right? I mean, and that would seem to be the point. Yeah, that's a big

reason why Biden and his administration are doing this. They are leaning into helping consumers with something that really annoys them. And that's part of a bigger push. Biden has made a real concerted effort across the last few years to target what his administration calls junk fees, which are just particular fees and hidden costs that dog you in all sorts of parts of your life as a consumer, and that just annoy people. This is just a pattern of Biden saying, I'm going to tell corporate America, you can't hide these fees, or in some cases, you can't charge the fees that you've been charging. But for Biden in the last few months, this push on junk fees has taken on a much

larger importance than just pleasing the crowds. What do you mean? It has become one of his go-to ways of trying to show Americans that he's working to solve what everybody says is their biggest economic problem right now, which is high prices. In other words, inflation. But of course, fees for an airline ticket and scene aren't exactly inflation. No, this is not tackling the big drivers of inflation. The prices that people are upset about, which have risen very fast under Joe Biden compared to previous presidents,

are things like groceries and housing and restaurant meals and... Cars. Yeah, cars, trucks, the things you buy in a lot. Basic necessities of day-to-day life. Ticket fees and airline fees are a very, very small part of that. But, but, this is an area he can affect. And so much else on inflation is not really under Biden's direct control, at least not in the short term. And so tackling junk fees for the president has become a way

to show Americans, hey, I'm trying on an issue that he really can't do much about right now, but that is really dragging on his presidency. Got it. You're saying that Joe Biden's crusade against fees is kind of a inflationary proxy battle. If he can tackle fees and make people feel like he's in their corner when it comes to these hidden costs in their life that are so annoying and painful, then he's going to create a halo effect in which inflation, this broader problem that he has less ability to conquer, will feel perhaps less painful. That's exactly right. I mean, there is a larger strategy by the Biden administration to address what they call corporate greed when it comes to prices. But junk fees are the president's

most concrete and kind of go-to way of connecting with voters on the issue. It's like Biden and his brain trust built this nice little policy canoe early in his administration. You know, something that's like fun and gets you around a small waterway. But now they're taking it to sea because people need to see that he's out there on the water trying to get things done in the much bigger problem of inflation. Right. Why don't you walk us through what this crusade has looked like from the start? If the airline fees are feeling like an endpoint and perhaps the marquee project of this effort, where does it start and what kind of ground has it covered? of this effort, where does it start and what kind of ground has it covered? So Biden's push on junk fees starts in the summer of 2021. And he issues this huge executive order

sprawling about competition, all the ways he wants to bring competition back to the U.S. economy. And embedded in there is the first route of a real action on junk fees, like airline fees. And driving that is this really deeply held theory among a lot of the president's economic advisors that corporate America has gotten too much power when it comes to how it interacts with consumers. So this starts as an effort to improve the economy in ways that Biden's advisors really think will be very helpful at the individual level and beyond. Now, at the same time, two things happen. One, inflation starts to really blow up that summer. And two, polling starts to show that people really like the idea of going after corporate America

on hidden fees. And so by 2022, in the midterm elections, when the president is being hammered by Republicans on inflation, he turns around and starts talking on the campaign trail about going after corporate America for junk fees. This is the first signs of him sort of saying, okay, prices are high, I'm fighting back, I'm fighting big corporate America. So politics is clearly and firmly at play here. Yes, exactly. Okay, and what kind of action does this start to translate into?

Well, it's Washington, so these things take time, but branches of the federal government start to translate into? Well, it's Washington, so these things take time. But branches of the federal government start to propose and then eventually finalize rules going after a whole host of hidden fees across various industries. So, for example, the Consumer Financial Protection Bureau takes aim at overdraft fees for people who have bank deposits. You know, if you bounce a check or try to make a payment and it's beyond what you have in your bank account, the bank can charge you a fee. Typically right now for large banks, it's about $35 every time someone overdraws their account. So the Bureau proposes a rule that basically caps the amount that banks can charge for an overdraft fee. And the administration sees this as a way to help

low-income people with bank accounts not get trapped in that cycle of overdrafts. Got it. Okay. So that's bank fees. What else? Well, then there's also credit card late fees. Right now, that first fee for the first time you miss a payment can be more than $30. And the Consumer Financial Protection Bureau said that's too much. And it issued a rule that capped those first time fees at $8. And then, of course, there are concert ticket fees, which people might hate just as much as they hate airline fees, right? We've all been there. You go to see a show and book tickets or see a baseball game, and you go to check out in your cart, and there are several fees just tacked on the end that you

don't even know what they are. And the administration knows this makes people mad. Biden says he's going to go after it. And he ends up procuring a summit with Ticketmaster and Live Nation at the White House, where they announced that they're going to disclose those fees up front right away at the start. So in this case, the government didn't need to issue any kind of new rule. It just needed to invoke the power of public shaming. Well, there's just real pressure coming from Biden and from his administration on this. And so there's a voluntary action by some big players here in the industry to go along with it. Got it. So when you put all this together from going after overdraft fees, credit card late fees,

ticket fees, and of course, the airline fees. This starts to add up to something pretty meaningful sounding. Yeah, it starts to add up to what you could call like a platform, right? This is a series of things that Biden can now package together and say, look, I am fighting for you, the consumer, against big evil corporations that want to hide fees and rip you off. And as Biden starts pointing toward his reelection bid and entering this year, looking ahead to November, a big economic speed bump happens for him. Inflation had been coming down, but at the start of this year, it kind of goes sideways. It's not coming down in the way that it had been

or that the White House wants it to be. And so Biden needs a new narrative. He needs a new way to sort of commiserate with Americans about the damage of high prices while also showing he's doing something to help. Right. And as you've said, he has his crackdown on fees. He's got this canoe. It's just sitting there in the water. And so they decide to trick it out and take it back out again.

Good evening. If I were smart, I'd go home now. You could see the importance of junk fees to Biden's overall message about fighting corporations and trying to bring down inflation in this year's State of the Union address. Look, I'm also getting rid of junk fees, those hidden fees. When he gives the issue six paragraphs of space, several applause lines. My administration announced we're cutting credit card late fees from $32 to $8.

Talks about going after credit card companies, talks about going after late fees. I'm not stopping there. And promises that he's going to do more. My administration proposed rules to make cable, travel, utilities, and online ticket sellers tell you the total price up front. He's going to go after utilities, and he's going to go after cable fees. And, you know, the battle to fight big corporate America on the issue of fees that annoy voters is just begun. It matters. It matters.

Right. Joe Biden, fee slayer. Exactly. But then something happens that is, on its face, a little bit of a policy setback for Biden, but politically looks like a gift, which is these big corporations he's targeting in the junk fee fight, they decide to fight back. We'll be right back.

So Jim, how are these industries trying to fight back against Biden's crusade against fees, and how is it benefiting Biden? Well, the fighting back part is easy. They are suing Biden and his administration in federal court. They are trying to get judges to stop the implementation of these regulations. So take, for example, the credit card companies, the banks. They are suing, saying, hey, this is politics, this is not what the law allows, and the federal government just does not have the authority to intervene and set these low limits on how much we can charge in a private transaction for people with a credit card. So it's a very traditional business argument against government regulation.

And just recently, a judge in Texas agreed with them and paused the regulation while the lawsuit proceeds. And the airlines are making a similar argument. They're suing Biden as well. They're trying to stop this fee disclosure rule. And they're saying, again, this is way beyond the authority of the Transportation Department. It cannot intervene in our private marketplace like this. It doesn't have the authority. They're also saying that this regulation will confuse consumers by giving them too much information.

If you see all of these fees listed in the beginning, it could be confusing. You might not really know what's going on. That's their argument. Okay, just to be clear, they're arguing that more information on fees and more transparent information on fees might confuse airline consumers more than when those fees were hidden. Yeah, they're saying, look, we tell you what those fees are before you buy the ticket. You know, you get asked to pay for the seat as part of the ticket selection process. And so they're saying it'd be confusing to people to give them all that information right up front as opposed to throughout the process.

Intriguing. up front as opposed to throughout the process. Intriguing. And by the way, you can see in these complaints some of the reasons why Biden's aides think this is a good political fight for them to have. Right. You know, when you have big companies saying, we think it will confuse our consumers to give them more information up front, that's the sort of thing that the president's team to give them more information up front, that's the sort of thing that the president's team says, aha, we have a good villain here. We have people who seem like they are trying to hide something from consumers,

and we can be on the side of defending them. Right, the villains in this story are acting a little bit villainous, which makes the argument for Biden. That is the way the Biden people see it, right. The Biden people see this as, with these lawsuits and with their arguments that the big corporations are showing themselves to consumers to be exactly the sort of people consumers want the president to stand up to. And so that is sort of the political situation where the president sees advantage right now.

I'm curious, though, if these industries, credit card industry, airline industry, have a strong legal case here. I know that you're not a lawyer, but are they in any way right that the administration has overstepped the law or tested the bounds of the law by going after these fees? Well, I would defer to my court reporter colleagues on the exact merits

of the lawsuit. But I will say that, yes, the Biden administration is pushing what we previously had seen as the boundaries of where the federal government would intervene on these measures. I mean, there's a reason why Biden is able to do a quote junk fee crackdown. And it's because there hasn't been a big crackdown before. So that's always going to be an area where you're going to get a lot of litigation. And it's certainly an area when I talk to business groups where they are really frustrated. They feel like the president has gone well beyond the law and established norms. And they see this as really overreaching regulation that costs companies a lot of money, both to defend in court and to comply with. So I don't think it's any surprise whatsoever that we

have a legal fight here, given the sort of freshness of this fight picked by this president. Got it. Okay, so pretty clearly, Biden is not out on a political limb, but he may be out on a legal one. The strategy may not work. And I want to turn to what the risks of this strategy may be for Biden. It would seem that the biggest risk is that it doesn't work. And therefore, Biden has made a lot of promises in very prominent places like State of the Union speeches that he can't keep. Courts end up blocking these plans. And since this is, as you said from the beginning of our conversation, a kind of proxy battle for inflation, Biden doesn't end up making much progress in changing how voters feel about their economic situation. And that would be a real problem for him. I actually don't think it's a huge risk to Biden if courts block these moves, politically speaking. Obviously, it will be frustrating for his policy team.

But the bigger risk for Biden here, to go back to our canoe analogy, is that he's going to load up the canoe, voters are going to like the canoe, and then it's going to get out in the sea and they're going to realize, wait, this is not the craft that you take to cross the ocean. The risk here flows from the fact that cracking down on junk fees is not an actual strategy to bring down the inflation rate. It will help on the margins, maybe, of some things that Americans pay, some costs that Americans pay, but it's not going to bring your rent down. It's not going to make groceries cheaper in the store. It's not going to soothe several years of frustration over high prices. And to be fair, the Federal Reserve is the one who really is in charge of bringing inflation down, not Joe Biden. But the risk is that he's taking some ownership of the issue and saying, this is my strategy. And voters go, wait, that's it? That's the whole strategy? We're crossing the ocean in

this canoe? Right, right. The risk you're seeing is that this strategy is exposed for what it kind of is, which is a side squabble rather than the real battle against inflation. Yes. And the president is really struggling to convince Americans that he feels their pain on inflation. The polls show Americans are very upset about high prices and they blame Biden for it. Americans are very upset about high prices and they blame Biden for it. So this may be the best thing he's got to try to go out and sell the idea that, hey, I'm doing something that you like standing up to companies that you don't like in order to fight the high prices that you are really upset about, even though you and I both know that that's not enough on its own to solve your rent, solve your groceries,

solve everything else. Right. As Donald Rumsfeld might say, you go with the canoe that you've got. Exactly. Well, Jim, thank you very much. We appreciate it. Thank you very much. We'll be right back.

Here's what else you need to know today. In the hush money trial of Donald Trump, the defense rested its case on Tuesday without calling the former president to the stand. The possibility of Trump testifying was always an open question, but in the end, his lawyers decided that it was not worth the risk. Closing arguments in the case, the first criminal trial of a president, will begin on Tuesday. After that, the jury will begin their deliberations. Today's episode was produced by Shannon Lin, Eric Krupke, Carlos Prieto, and Ricky Nowetzki.

It was edited by Lexi Diao, contains original music by Marion Lozano and Alisha Ba'itub, and was engineered by Chris Wood. Our theme music is by Jim Brunberg and Ben Lansford of Wonderling. Hans Verk of Wonderland. That's it for The Daily. I'm Michael Barbaro. See you tomorrow.