Debate Over Junk Fees Heats Up

Lew Sichelman

The National Consumer Law Center has added fuel to the debate over so-called junk fees with a new report that shows the array of charges consumers can face when they try to find and keep rental housing.

The report found that renters are required to pay, among a dozen or so other charges, convenience fees, roommate fees and processing fees. In one case, tenants were charged a “January” fee, apparently for no other reason than it was the first month of the new year.

The study comes in the wake of an “open letter” from Marcia Fudge, secretary of the Department of Housing and Urban Development, who called on the housing industry to address these sometimes hidden fees, charges that weaken competition, raise costs and hit vulnerable people the hardest.

“Many renters today face fees that are hidden, duplicative and unnecessary,” Fudge wrote. “These fees limit options for renters and strain household budgets, particularly for renters with low and moderate incomes who already face high rental cost burdens.”

In particular, the HUD secretary cited non-refundable application fees, which she said can run into hundreds or even thousands of dollars for tenants applying to multiple places and place a heavy burden on people seeking rental housing. She also noted that, while landlords use the fees to pay for tenant screening reports, those reports often have inaccurate information and are of questionable validity in predicting renter behavior.

Secretary Fudge also mentioned “hidden fees” such as move-in charges, late charges, high-risk fees, security bonds and convenience fees for tenants who pay their rents online. But the National Consumer Law Center study listed 16 such charges it considers either onerous or dubious, including convenience fees, notice fees and administrative fees.

To compile its list, the Washington, D.C.-based non-profit surveyed legal services and non-profit attorneys about the types of fees they have seen. The survey period was in November and December last year.

Of the 95 responses from 26 states and the District, nearly nine out of 10 (89 percent) said landlords collect applications fees. Nearly as many (87 percent) said landlords also impose excessive late charges. Almost three out of four (73 percent) said they have seen utility-related fees.

About two-thirds (68 percent) have seen processing or administrative fees, three out of five (60 percent) noticed convenience fees. Almost that many (59 percent) reported insurance fees and over half (56 percent) saw notice fees.

A small number (7 percent) reported seeing fees to report on-time rent payments to credit bureaus. And the aforementioned January fee was reported by two Minnesota advocates “seemingly for no reason,” the survey said.

Rental Fee Fatique

Noting that nearly half of all renters—some 19 million households—spend more than a third of their incomes on housing, April Kuehnhoff, a senior attorney at the law center and a co-author of the report, said “there simply isn’t room in their budgets for junk fees.”

The report calls on the Federal Trade Commission and state legislatures to take action against burdensome fees.

“The FTC must investigate corporate and large landlords that impose unavoidable and exploitative junk fees and develop guidance to prevent this potentially deceptive and unconscionable practice,” said Steve Sharpe, another law center senior attorney and report co-author. “State governments must also limit or ban rental fees that exceed the landlord’s costs, cover services not rendered, stifle competition or violate the law.”

HUD Secretary Fudge had essentially the same message in her open letter, urging all housing providers as well as state and local governments to “take action to limit and better disclose fees charged to renters in advance of and during tenancy.” Fees, she said, should reflect “the actual and legitimate costs to housing providers.”

The Secretary’s message amplifies the Biden Administration’s “Blueprint for a Renter Bill of Rights,” which challenges stakeholders to commit to clear and fair leases without hidden or illegal fees.

Since the White House launched the challenge, Secretary Fudge wrote, “many” state and local governments and housing providers as well as several rental platforms and small property owners have announced policies aligned with the program. Among other things, they have agreed to limit application fees and allow applicants to re-use their applications multiple times at no extra cost.