CFPB turns attention to what it calls ‘junk fees’


The Consumer Financial Protection Bureau (CFPB) launched an initiative on Wednesday in connection with what the federal regulator called “exploitative junk fees” charged by banks and financial companies.

The CFPB said through a news release that it’s making this request so the public can share input that will help shape the agency’s rulemaking and guidance agenda, as well as its enforcement priorities in the coming months and years.

“Many financial institutions obscure the true price of their services by luring customers with enticing offers and then charging excessive junk fees,” CFPB director Rohit Chopra said. “By promoting competition and ridding the market of illegal practices, we hope to save Americans billions.”

As part of its request for comment, the CFPB said it is interested in origination and servicing fees for auto financing as well as for student loans, installment loans, payday loans and other types of loans.

“For example, some servicers charge fees to reschedule payment dates or make online or phone payments,” the CFPB said in the request. “Loan originators often charge application fees and some even charge to receive loan proceeds in an expedited manner.”

Consumer Bankers Association president and chief executive officer Richard Hunt pushed back at some of the initial assertions made by the CFPB, using some colorful analogies and descriptions.

“This is fuzzy math at its best and political theater at its worst, and another attempt by the bureau to fearmonger without any credible data to back it up,” Hunt began in a statement. “The reality is, despite their claims to the contrary, overdraft fees as a percent of total revenue across the industry made up less than 2% in 2019. To best serve America’s families and small businesses, the bureau has a responsibility to communicate with clarity and precision – not with overblown rhetoric to attack one industry.

“America’s leading banks engage in rigorous underwriting practices and are required by law to have clear and conspicuous disclosure of material terms and conditions, aimed at empowering consumers to make informed financial decisions,” Hunt continued. “Fintechs, which represent a sizable and growing segment of the financial marketplace today, often do not abide by these same standards — serving as further impetus for the Bureau to expand its oversight to these firms and mitigate the growing risk they pose to hardworking families. 

“The well-regulated, well-supervised banking industry is also among the most competitive in the world,” Hunt went on to say. “Consumers benefit from the ability choose one of the nation’s nearly 5,000 banks to meet their financial needs. The bureau should be focused on seeking feedback from and working in tandem with banks — the very people on the frontlines interacting with customers everyday — to recognize the value these products and services have in the lives of the people we are all working to serve.”

Nonetheless, the bureau insisted that financial institutions and other companies across the U.S. economy are increasingly charging inflated and back-end fees to households and families. The regulator contended that this new “fee economy” distorts a free market system by concealing the true price of products from the competitive process.

“For example, hotels and concert venues advertise rates, only to add ‘resort fees’ and ‘service fees’ after the fact. And fees purportedly charged to cover individual expenses, like paperwork processing, can often greatly exceed the actual cost of that service,” the CFPB said in its news release.

The CFPB went on to note that it is interested in hearing about people’s experiences with fees associated with their bank, credit union, prepaid or credit card account, mortgage, loan, or payment transfers, including:

— Fees for things people believed were covered by the baseline price of a product or service

— Unexpected fees for a product or service

— Fees that seemed too high for the purported service

— Fees where it was unclear why they were charged

The CFPB added that it is also interested in hearing from small business owners, non-profit organizations, legal aid attorneys, academics and researchers, state and local government officials, and financial institutions, including small banks and credit unions.

“The CFPB will strive to strengthen competition in consumer finance by using its authorities to reduce these kinds of junk fees,” the bureau said. “To craft rules, issue industry guidance, and focus supervision and enforcement resources to achieve this goal, the CFPB is seeking input from the public.

“Public comments provide valuable insights that allow the CFPB to target the most pressing needs and concerns, including uncovering potential illegal practices or fees,” the regulator went on to say.

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