A new study, The 2023 Cash Poor Report, looks at the typical profiles of these borrowers, common expenses they face, and just how these junk fees are truly impacting them. The findings make the case for replacing the misleading Annual Percentage Rate (APR) with a Total Cost Rate (TCR), so that consumers can understand how much they will be expected to pay.

Who borrows money? 

The 2023 Cash Poor report surveyed American households, revealing intriguing insights into who falls prey to junk fees. Surprisingly, it’s not just the working poor. Middle-class people, often with college degrees and six-figure incomes, also find themselves strapped for cash when faced with unexpected expenses.

The data indicates that unplanned expenses can range from hospital visits and unexpected utility bills to car repairs and natural disasters. Such expenses cost the average paycheck-to-paycheck American family nearly $2,000 annually. Of those surveyed, auto repair bills were the biggest offender, accounting for 29% of unplanned expenses in the past year. 

The survey results showed that credit cards constitute 40% of the payment options chosen by these Americans. Another 38% of those surveyed borrowed money from family and friends. Others turned to selling possessions (21%) or pawning items (16%). Alarmingly, 5% resorted to illegal activities to cover unexpected costs.

Understanding the $25 billion burden of junk fees

Junk fees, a variety of hidden charges, add an insurmountable burden on consumers when they borrow this money. Financial companies often exploit those in dire need, leading to these fees. 

The gravity of this issue cannot be overstated as these seemingly small fees cumulatively siphon off a staggering $25 billion annually from consumers’ pockets. Among the numerous financial platforms, subprime credit cards particularly stand out as notorious perpetrators. It’s of paramount importance to fully understand these fees and the total cost of borrowing to prevent spiraling further into debt.

Designed for those with lower income and poor credit ratings, the research showed that subprime credit cards account for $11.5 billion in additional fees each year. These fees encompass the Annual Percentage Rate (APR), plus subscription fees, late fees, fast payment processing fees, application fees, monthly maintenance fees, new card fees, and ATM fees.

Following subprime credit cards, payday loans ranked in the study as the second most costly option-roughly $6 billion in additional fees annually. Fintech solutions like earned wage access and peer-to-peer lending amounted to $1.3 billion in annual fees.

Where do we go from here?

The high cost of living exerts immense pressure on middle-class Americans living paycheck to paycheck. While options exist for managing unexpected expenses, many are predatory or lack transparency regarding the total costs incurred. The predatory nature of the system is clear when a $50 parking ticket can balloon to $200 within a year due to compounding late fees.

Increased awareness among consumers can lead to more informed decision-making, but ultimately, the onus is on Congress and regulators.

By replacing the misleading APR with the Total Cost Rate (TCR), we can provide a clear picture of borrowing costs, empowering consumers to make informed decisions while dealing with unplanned expenses. After all, consumers have a right to understand the true cost of borrowing and the options available to them.

Rodney Williams is the co-founder and president of SoLo Funds.

The opinions expressed in Fortune.com commentary pieces are solely the views of their authors and do not necessarily reflect the opinions and beliefs of Fortune.