The US Government and DOJ Looks to Slash Trash Junk Fees; Real Estate Commissions Are Next

Junk fees can’t run, but they can hide. And if they aren’t careful, the US government could be the last thing they see. Earlier this year, the US government assailed entertainment giant Ticketmaster for predatory practices like hiding the true cost of concert tickets. Then, the Biden Administration tasked the Department of Justice (DOJ) to kill junk fees, requiring companies to disclose the full price of a product upfront:

• Travel and entertainment platforms often charge transaction fees — while hiding them until the checkout point.
• These price increases run as high as 20%, according to Biden, who expects the DOJ to pass a rule mandating transparent pricing and disclosure or risk a $50K violation.

They didn’t stop there: According to WSJ, the Fed is prepping a proposal that could lower merchant fees — which could take a bite out of card issuers like Visa (NYSE:V) and Mastercard’s (NYSE:MA) businesses. However, another major attack on fees could be coming to the real estate industry.

Real estate agents, you’re next

The current system saddles home sellers with a 5-6% fee, split between the buyer and seller’s real estate agents, which critics have called price fixing. In contrast, real estate commissions are as low as 2-2.5% in Australia and 1.42% in the UK.

This week, one of two major class action lawsuits against the National Association of Realtors (NAR) began — focusing on the billions in fees paid toward agent commissions. If changes are enforced from the lawsuits, buyers could be forced to pay agent fees.

• Per CoStar, industry experts say the NAR could face billions in fines, cut billions in brokerage commissions, bankrupt listing services and even the NAR.
• The lawsuits could decide the fate of millions of real estate agents, and even more troubling, the DOJ is also looking at reopening an investigation into the NAR, which was previously settled under the Trump administration.

Forward-looking:

Real estate platform Redfin (NASDAQ:RDFN) doesn’t expect the two lawsuits to go far, but action by the DOJ could lead to a “seismic change… half the real estate agents in this country would be unemployed” (BBG). And that would be an existential threat for the 1.5M US real estate agents and potentially troubling for the NAR, which collects $150 annually from each of them.