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The Biden administration unveiled a new rule Monday aimed at doing away with headache-inducing processes that waste customers’ time and money, as part of an extension of its crackdown on junk fees.
In a new governmentwide initiative known as “Time is Money,” the White House is targeting the unnecessarily complicated steps that companies force customers through to receive refunds, return items, or cancel subscriptions.
“These seemingly small inconveniences don’t really happen by accident — they have huge financial consequences,” said Neera Tanden, Domestic Policy Advisor to President Joe Biden.
Tanden described paperwork, hold times, requiring customers to go to physical locations, and “general aggravation,” as tools companies use to take advantage of people’s busy lives to hold onto their money. For that reason, this initiative is in the same vein as the White House’s approach to hidden and misleading costs known as junk fees, according to senior administration officials.
“It is a way that companies are kind of manipulating practices in order for you to spend more money or hold onto your money longer,” the officials said. “But it is definitely the case that these are just corporate practices that create a lot of headaches for people, and in creating those headaches, it is part of a reform of consumer practices to stamp them out.”
Under a series of rules initiated by several government agencies, businesses will be required to take a number of steps, including making it easier to cancel subscriptions and memberships; addressing the limitations of customer-service chatbots; tackling automated call “doom loops”; and allowing people to submit health claims online.
Officials said that the crackdown is “not about shaming corporations writ large,” but rather is aimed at changing corporate practices across industries that ultimately hurt consumers. The rules will also even the playing field between companies that already make it easy for their customers to cancel or change subscriptions, and those who do not, the officials said.
“That’s what a free market is really about, empowering individuals to make the decisions they want to make without these practices that get in their way,” they said.
In March 2023, the Federal Trade Commission proposed a rule that, if passed, would require companies to make it as easy to cancel a subscription as it was to sign up for it. As part of Monday’s newly announced efforts, the Federal Communications Commission is launching an inquiry into whether a similar rule should be applied to cable, internet, and phone companies.
Americans will also be able to submit their suggestions for what corporate practices the Biden administration should take on next in an online portal that went live Monday.
The battle against junk fees
Last October, the White House launched its war on junk fees when it proposed a rule to to prohibit the added costs and require companies to show full prices upfront.
The U.S. Council of Economic Advisers estimates that American consumers spend $90 billion annually on junk fees, or over $650 per household annually. The White House claims that its initiatives combating these fees will help reduce that cost by more than $20 billion per year.
These rules have especially targeted airlines, which receive considerable windfall from added charges, including for seat selection and checked bags — both of which the Biden administration has proposed initiatives to do away with.
In one of the biggest changes, the Department of Transportation is requiring airlines to give automatic cash refunds to passengers if a flight is delayed or cancelled, as opposed to travel credits and airline vouchers.
Over the last three years, the Transportation Department has helped return more than $3 billion in refunds and reimbursements owed to airline passengers, according to the agency. That includes more than $600 million in returns to passengers affected by the Southwest Airlines LUV-0.85% holiday meltdown in 2022, when a widespread system failure led to the cancellation of 16,900 flights and left two million passengers stranded.
Other industries targeted by the junk fee-crackdown include credit cards, banks, and financial advice.
— Will Gavin contributed reporting.