Biden Pledged to Take On “Junk Fees.” He Should Start With Jails and Prisons.

In what was probably the first reference to “junk fees” during a State of the Union address, President Joe Biden said Tuesday that his administration is cracking down on “those hidden surcharges too many companies use to make you pay more” and urged Congress to pass legislation expanding on the effort.

“The idea that cable, internet and cell phone companies can charge you $200 or more if you decide to switch to another provider? Give me a break,” Biden said to applause.

Junk fees — various late fees, overdraft fees and service fees — are quietly added to the total cost of products ranging from checking accounts to airplane tickets, and Biden is likely telling voters that he is looking out for their pocketbooks. However, advocates say the most harmful junk fees are not found on receipts from ATMs or the resort hotels Biden mentioned in his speech; they are found inside jails and prisons, where private companies pay lucrative kickbacks to extract profits from disproportionally low-income customers with no choice in the matter.

“You can't truly address the worst impacts of junk fees without addressing how they harm incarcerated people and their families,” wrote Mike Wessler, communications director for the Prison Policy Initiative, after Biden's address.

For those us living outside of prison walls, junk fees often leave us complaining about paying more than expected or looking for another company to do business with, but incarcerated people and their families do not have the option to spend what little money they have somewhere else.

The Federal Trade Commission is currently taking public comment on proposals to rein in junk fees, and the National Consumer Law Center and 27 other organizations recently filed an 18-page letter explaining why regulators should prioritize consumers in jails and prisons. Private prison companies pay lucrative kickbacks to wardens to secure monopoly contracts for providing financial and telecommunications services in jails and prisons, where additional profits can be squeezed out of a “captive market.” According to the letter:

More specifically, private companies compete with one another for a contract to provide services in a given correctional facility by offering to make kickback payments. The higher the kickback payment, the more attractive the company's offer is to the correctional facility. In exchange, the company requires the correctional facility to make it the exclusive provider of the contracted service. This secures for the company what is, in many cases, a literally “captive market.” Companies pass on the costs of these kickback payments directly to consumers — here, incarcerated people and their loved ones.

Without competition from competing providers, prison contractors have little incentive to provide a quality service to prisoners and their families. Christopher Blackwell, a Truthout contributor and incarcerated writer in Washington state, described the frustration he felt during the early days of the pandemic, when the prison phone company provided shoddy service despite squeezing customers during COVID-19 lockdowns.

“Phones frequently become choppy or sound as if you're underwater. This results in mounting frustration between prisoners and their loved ones,” Blackwell wrote in June 2020. “It's annoying and exhausting to pay by the minute to say ‘What? Can you hear me?' over and over, until tensions are so high you suddenly find yourself in an argument.”

Prisoners and their families organized for years to bring down the cost of prison phone calls, and incarcerated people still pay extra for email and other digital services people in the free world take for granted. Prisoners even face junk fees after they are released with “release cards,” or the pre-paid debit cards containing the money saved in their prison commissary account. (In jails, these cards may also replace any cash a defendant had with them when arrested.)

While release cards sound convenient, formerly incarcerated folks attempting to get back on their feet are often charged for simply making purchases or using the wrong ATM or bank for a withdrawal, for example. Has it been six months since the last purchase on the account? That may come with a fee as well.

“Often the only way to avoid these fees is by closing your account almost immediately upon your release, a time when you're likely to be looking for stable housing and employment — things that are often necessary conditions for someone's release to be approved,” Wessler wrote.

However, junk fees imposed on prisoners and their families do not appear on the Biden administration's radar. The president did not mention prisoners in his speech and called out airlines, hotels and credit card companies instead.

Last month, the Consumer Financial Protect Bureau (CFPB) launched an initiative aimed at saving consumers “billions” in overdraft fees and late fees levied by banks and credit card companies. The agency's request for public comment does not mention release cards or money transfers to prisoners, but prisoners and their advocates are expected to file extensive comments with the bureau.

A White House fact sheet lists different types of junk fees under consideration by regulators. “Mandatory” fees often hide the full price of a product, while consumers learn about “surprise fees” after a purchase, although there is probably some overlap. There are also “fraudulent fees” based on outright fraud or misrepresentations on the part of the seller, such as a “no-fee” bank that in practice carries significant fees.

Finally, “exploitive fees” are excessive fees targeting consumers “who have limited alternative options — because they are locked into a product or service, or are otherwise economically vulnerable.” Exploitive fees far exceed the cost of the service they purport to cover, according to the CFBP. The junk fees imposed on incarcerated people are the epitome of this category, even if the administration does not spell it out. If regulators wish to spare consumers the most harmful junk fees, they will start with the those imposed on incarcerated people and their families.