End This Fee for All - hidden charges burden lower- and middle-income population

Last week, AT&T agreed to pay $80 million to customers who had been overbilled for charges they had not authorized. This was an all-too-rare case of a perpetrator brought to book: In recent decades, Americans have increasingly been hit with fees they know nothing about, which have contributed to a crisis of consumer debt. We must hope we are entering a new era of regulatory activism that will shine a light on hidden fees.

Besides mystery cellphone charges, consumers regularly complain about surprise bank charges for using tellers, for overdraft protection or for not maintaining minimum balances. Not to mention fees for "maintenance" of individual retirement accounts or 401(k)'s, airport taxes, charges on credit-card cash advances or balance transfers, costs for the activation or early termination of cable and Internet services, and fees on 529 college savings accounts and mortgage origination. A 2010 Consumer Reports survey found that unexpected or hidden fees were consumers' biggest bugbear.

In the AT&T case, the company typically charged customers $9.99 per month for unrequested, third-party subscriptions for ringtones and text messages providing horoscopes, flirting tips, celebrity gossip and "fun facts." AT&T pocketed at least 35 percent of these fees; the company earned $108 million in 2012 and $161 million in 2013 from the scheme.

The structure of billing made it "very difficult for customers to know that third-party charges were being placed on their bills," according to the Federal Trade Commission. Even when customers complained, refunds were often denied.

This isn't the first time the industry has run afoul of regulators. In June, the F.T.C. issued a similar lawsuit against T-Mobile for "cramming," as the practice of adding hidden fees is known; there have been seven such fee-cramming investigations since 2013.

"Hidden" does not necessarily mean a charge is missing from the consumer agreement; rather, costs and terms are often buried in fine print or impenetrable legal language that even contract lawyers have difficulty discovering. The onus is on the customer to be informed of whatever costs are associated with the goods or services. But with these charges buried in tightly guarded pricing structures, customers are often trapped into paying exorbitant fees for years and years.

Perniciously, these "trick-and-trap" fees are not just lurking in your cellphone plan; they have invaded areas of consumer credit like mortgages, student and auto loans - financial services that have traditionally provided a path of upward mobility for low-income and working-class families. A glaring example is higher education, where colleges and universities bury students under a mountain of fees, including registration fees just to attend class, quite apart from the fees they already face on student loans.

Airlines, in particular, have become notorious for levying hidden charges. "A customer can buy a ticket for $200 and find themselves with a hidden $100 baggage fee, and they might have turned down a $250 ticket with no baggage fee," Transportation Secretary Anthony Foxx said recently, "but the customer was never able to make that choice."

Fees are often baked into the price of a good or service, making it nearly impossible for consumers to know its itemized cost. Auto insurers, for example, typically charge customers a hidden cost based on where they live, but rarely disclose the premium differential.

Abolishing excessive fees and predatory charges could help save lower-income Americans more than $6.5 billion a year, according to a 2006 report from the Brookings Institution. Imagine the boost to the spending power of the squeezed middle class if just a percentage of those fees went back in people's pockets.

As consumers, we certainly bear some responsibility. Many of us fail to read contracts and we've grown accustomed to mindlessly agreeing to terms with just a couple of clicks. Even when we take time for due diligence, contracts have grown thick with indecipherable legalese. But many industries, like auto insurance, protect their pricing systems as a trade secret.

The regulatory agencies should proactively set out rules for best practices on disclosing fees, rather than prosecuting a few egregious cases. That also means enforcement of those practices, in the form of financial audits conducted by the Consumer Financial Protection Bureau, the F.T.C., the Federal Reserve or other agencies. These regulators should apply tougher scrutiny to industries like financial services and higher education to examine whether fees are reasonable and proportional to actual administrative and processing costs. They should be capped or pegged to operational costs, rather than serving as streams of revenue.

AT&T customers can rejoice over the coming payback, but the problem of hidden fees doesn't stop there. Corporations, now defined as legal persons, must act with greater integrity. Companies may argue that they have to hide fees to make prices appear low. But without reforms, it is impossible to judge whether extra charges are about businesses staying competitive or just price gouging and profit taking. A market is neither fair nor free unless consumers can make informed choices.