Monday, February 11, 2008

"Junk Fees"

If you're like me, when a bill arrives in the mail, you pay it. If the amount is what I expected, I'll usually write the check or schedule the online payment without much additional thought. However, I do occasionally read a bill thoroughly, which leads to some interesting observations.

My combined local telephone/Internet/long distance telephone bill is full of bizarre fees, taxes, and strange charges: the VA Public Rights of Way Use Fee; the Federal Universal Service Fund Surcharge Long Distance; the VA Cost Recovery Surcharge; the VA Federal Universal Service Fund Surcharge; the VA Communications Sales Tax; the PEG Grant Fee; the Federal Subscriber Line Charge; and the Non-Primary Line Subscriber Line Charge. I have no clue what most of those are for, or if they are legitimate. The service provider is willing to explain them to you as long as you are willing to wait long enough to talk to the nice person in India who is paid (although not very well) to listen to your question and provide some stock answer.

The documents you sign at closing when you buy or sell a house are worse. You sit at a table for an hour, surrounded by brokers and lawyers, and sign page after page of densely-printed documents that are passed in front of you in a rapid-fire sequence. Most of these are designed to protect the interests of the bank who's lending you the money to buy the house; relatively few are intended to provide any protection for your interests. And the parade of documents is thick with small print and various fees, charges, surcharges, and other odd things you're not encouraged to ask about.

An interesting article in the Washington Post last Saturday discussed a lawsuit that's taking on some of the most egregious of the so-called "junk fees" - the various undefined charges for "admin fees," "document preparation," "regulatory compliance," etc, that add hundreds of dollars to the closing costs that are already very high. The focus of the lawsuit is a ruling by the Department of Housing and Urban Development that any fee imposed in connection with a real estate transaction must be for services actually rendered...and it seems that many of the fees being imposed are for services covered in brokerage fees that are already being assessed. The real estate industry, of course, is fighting this suit, which would deprive it of a small, but significant source of income.

The problem is also seen in other areas, too. Consider the last time you bought or repaired a car: how many "dealer preparation charges," "destination charges," "environmental fees," and other undefined assessments did you pay? How many of those are legitimate, and how many are actually already covered in the cost of the car or the repair? The dealer can explain these to you at great length, if unconvincingly, if you ask; it really doesn't matter to him, because if you've gotten to this stage, you're probably going to buy or repair the car, anyhow.

Junk fees. As the economy continues to tank and businesses of all sorts look for ways to keep up their revenue intake, I expect we'll see more and more of them. Not all will be as egregious as the charge assessed by a law office a few years ago for "HVAC" (heating, ventilation, and air conditioning - essentially, charging the customers separately for heat and a/c), but they're out there...and we need to be aware of them. You may not be able to escape, but you can question them, and if enough of us do that, perhaps the glaring light of public opinion may result in some of them going away.

As fantasies go, that's a pretty safe one.

Have a good day. More thoughts tomorrow.



The Mistress of the Dark said...

Phone bills and the internet bills are all full of bizarre taxes. My cell phone has some interesting fees attached too. It's not as if the service is cheap either :(

noisms said...

One of my pet hates is 'service charge' at restaurants. You glance at the bill, pay up, leave a tip...then take a look at the receipt a few weeks later when you're doing your accounts and realise that the restaurant had also already factored a 10% 'service charge' into the cost of the meal. So basically you've been tricked into tipping twice (or, more likely, you've tipped once and the restaurant owner has pocketed a 10% surcharge on your already over-priced meal).

That happens a lot in Britain; not sure if that particular junk fee has made its way to the US yet. (Another advantage to living in Japan: tips are unheard of.)

It isn't just companies; governments do it too. In order to process a marriage visa for the UK it costs around £600 ($1200) in 'administrative fees' - which I refuse to believe is the amount it actually costs to check a few forms are legit and put a stamp in a passport. (About five man-minutes of time.) So it's just an extra source of revenue for the government that you have no choice but to pay. Embassy fees must levy a relatively big and important country like the UK hundreds of millions of pounds a year - all pouring into the government's pockets.

Sue said...

I've also never figured out the usage fees on my phone bill. However, I don't know what kind of fees you are referring to on the car repair.

Typically, when a technician works on your car, he is not paid by the hour. He is paid by the job, and only for the alotted time that job 'calls for'. Like oil changes are supposed to take 18 minutes, so that is all the technician is paid for, regardless of how long it actually takes (if you have a bad filter, he could take longer, and this 'cuts into' time he could be gettng paid for a different job). Part of your bill pays the labor for that.

The only other fee I can think of is are markup fees for the parts (they make profit off any part they order for you) and cost of disposing of the damaged parts.