Biden targets credit card fees, app stores to aid consumers

The Consumer Financial Protection Bureau will formally propose a rule to cap late payment credit card fees at $8, from an average now of roughly $30, and estimates the move will save consumers a total of $9-billion a year. The fees are applied to payments made even a few hours late and appear to be a source of profit rather than cost recovery, White House officials told reporters.

“Folks, that’s a junk fee if there ever was one,” Biden said on Wednesday at a meeting of his “competition council”, a group of cabinet officials and top aides assembled to ease the grip of corporate consolidation in key industries. “These unfair fees add up. It’s a basic question of fairness.”

The credit card rule could go into effect in 2024 after a comment period and finalisation.

“At the end of the day, we want to see a marketplace where Americans are treated fairly, prices and risks are clear upfront and where companies compete hard to win their customers’ business,” CFPB director Rohit Chopra told reporters.

Shares of major credit card issuers including Discover Financial Services, Synchrony Financial and Capital One Financial fell in New York after Chopra’s announcement. Bread Financial Holdings, a large provider of store credit cards, plummeted 9.2% to $37.26 at 2.37pm in New York. 

Biden also called on Congress to pass a law regarding consumer fees, or so-called junk fees, in four categories: online ticket sales for concerts and sporting events, airline seat fees for families who want to sit together, surprise resort fees, and excessive termination fees for internet, telephone and television services.

“These fees can be incredibly frustrating,” National Economic Council director Brian Deese said. “They cost consumers billions of dollars a year, they make it harder for people to comparison shop but they also reduce competition.”

Airlines for America, a trade group representing large carriers, said the White House proposals on the aviation industry “are short-sighted and would inevitably drive up costs and reduce choices for the consumer”.

“A4A’s member airlines make every effort to accommodate customers traveling together, especially those travelling with children, without additional charges, and consumers are offered a range of choices at the time of ticket purchase, including various seating options,” the group said in a statement on Wednesday. “A4A passenger carriers do not charge a family seating fee, unlike some ultra low-cost carriers.” 

In a separate report released on Wednesday by a Department of Commerce branch, regulators concluded that Google and Apple have created overly burdensome rules for app developers, making it harder for them to reach consumers. Apple’s iOS and Google’s Android smartphone operating systems run on more than 99% of mobile phones in the US and globally. 

In a July 2021 executive order, the president asked the National Telecommunications and Information Administration to study the mobile app market. The agency said it had received more than 150 public comments as part of its study, including from tech platforms such as Apple and Meta Platforms.

Apple and Google’s “practices and policies hinder a competitive app ecosystem,” NTIA head Alan Davidson told reporters. “The current mobile app ecosystem, and especially the current app store model, is harmful to consumers and to app developers.”

Google disputed how the report described its Android operating system, which allows alternate app stores and direct downloads of apps.

“We disagree with how this report characterises Android, which enables more choice and competition than any other mobile operating system,” Google spokesperson Julie Tarallo McAlister said.

Apple also said it disagreed with the report’s conclusions and that its policies have created a “robust app economy that includes millions of apps and supports hundreds of thousands of US jobs”.

The report urged lawmakers to pass legislation that would make it easier for consumers to change the default apps on mobile phones and tablets and allow for direct downloading of apps or third-party app stores. Congress should also consider allowing developers to use payment methods other than the ones provided by Apple and Google, which often take a 15% to 30% cut on digital sales, according to another recommendation in the report.

The recommendations mirror legislation introduced in the last Congress. The Open App Markets Act would require Apple and Google – whose Google Play is the most popular app store on Android mobile phones – to make it easier for users to download other app stores and switch the apps set as the defaults on phones.

While a Senate panel advanced the bill, the full chamber failed to consider the legislation. The Justice Department opened a probe into Apple over its app store policies during the Trump administration, an investigation that has continued under Biden. BM/DM