(C) Minnesota Reformer
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This commentary is free (and no hidden fees!) • Minnesota Reformer [1]
['Matt Keliher', 'More From Author', 'March']
Date: 2024-03-13
Junk fees are everywhere, and they impact Minnesota households every day, in every corner of the state. You’ve almost certainly experienced junk fees yourself: They’re those mandatory fees tacked on to the end of a transaction that drive up the cost of the product or service from its advertised price.
Junk fees have become ubiquitous across the economy, levied on everything from Timberwolves tickets to car rentals to moving vans. Renters encounter junk fees on their monthly bills from landlords. Your phone, cable, and internet service providers often include hidden fees, as do automotive sales and food delivery services. Even storage unit companies use junk fees.
These hidden fees cost the average American family of four more than $3,000 per year, and can increase the costs of individual items by as much as 20%.
Junk fees are an annoyance and a headache that waste two things we all value: Time and money.
Thankfully, legislators in Minnesota and across the nation are taking a stand against these deceptive pricing practices. In 12 states, from New York to Hawaii, legislation has been introduced to require that all mandatory fees be included in the advertised and displayed price of all products, and that all fees or surcharges that can’t be avoided must be clearly and conspicuously disclosed to the customer.
You can see all the information on state legislation to ban junk fees here. In Minnesota, it’s HF3438/SF3537, sponsored by Rep. Emma Greenman, DFL-Minneapolis, and Sen. Lindsey Port, DFL-Burnsville.
It’s no surprise that banning junk fees is extremely popular. In recent polling, 85% of Minnesotans support legislation that would make it illegal for businesses to charge junk fees, with two-thirds strongly supporting. And this popularity extends across the political spectrum, with Democrats, independents, and Republicans all polling near 80% in support of banning junk fees.
It’s simple: People don’t like to be misled and deceived about the true price of the things they need.
These practices are not only unfair to consumers, but also to honest businesses that price their services without hidden fees to bolster their margins.
Say you are shopping for a hotel stay for a weekend up north. You see two hotel options that work for your family: Junk Fee Hotel is priced at $100 per night and Honest Hotel is priced at $130. The Honest Hotel uses all-in pricing, meaning $130 is the final price you will pay when you check out.
But Junk Fee Hotel hides its true price, and by the time you check out, you’re paying $140 including fees. You end up paying more for the deceptively lower-priced hotel room because Junk Fee Hotel is allowed to deceive consumers about the true costs of its services. Both the consumer and Honest Hotel lose, because junk fees short-circuit true competition.
Opponents of this legislation will come up with a host of reasons why it shouldn’t become law. Don’t let that distract you from the simple goal of the bill: That sellers include all mandatory fees buyers are required to pay in order to receive the desired product or service, up front.
If a business is already engaged in honest pricing practices, it’s already in compliance. The bill does not tell anyone what total price they can or can’t charge, and it wouldn’t prevent the offering of optional add-ons consumers affirmatively choose.
Junk fees exploit the behavioral biases of consumers. Sellers only need to generate enough real or perceived scarcity of their product or service in order to find a captive consumer with no alternatives, advertise that consumer a low price, get that consumer to the final stage of the transaction and then heap on mandatory fees that drive up the profit margin and bilk the buyer at their most vulnerable position.
Does the buyer abandon the transaction altogether, and forego the thing that they have already decided they want, only to waste more time and money looking for a similar offer and finding out that a competitor in the same industry follows similar pricing tactics?
This is not how we need to conduct business. We can, and should, demand better from those selling us products and services that we need, and we should reward local businesses that price honestly and transparently. Minnesota can do just that by passing a ban on junk fees.
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