CFPB Issues Request for Information Regarding Junk Fees

On January 26, 2022, the Consumer Financial Protection Bureau (CFPB) issued a Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services (RFI).  In the RFI, the CFPB seeks public feedback regarding fees that are not subject to competitive pricing in order to assist the CFPB in exercising its authority to create fairer, more transparent, and competitive consumer financial markets.

In the RFI, the CFPB states that it has grown “increasingly concerned that consumer finance has become part of [the] ‘fee economy,’” where “exploitative junk fees” charged by banks and other financial institutions far exceed the marginal cost of the service they purport to cover.  Companies may use hidden back-end fees, which are mandatory or quasi-mandatory fees added to a transaction after a consumer has chosen the product or service based on a “front-end” price, to lure consumers into making purchasing decisions based on a “lower” price.

The CFPB pointed specifically to a variety of fees, including late fees, overdraft fees, non-sufficient funds fees, convenience fees for processing payments, minimum balance fees, return item fees, stop payment fees, check image fees, fees for paper statements, fees to replace a card, fees for out-of-network ATMs, foreign transaction fees, ACH transfer fees, wire transfer fees, account closure fees, inactivity fees, fees to investigate fraudulent activity, and ancillary fees in the mortgage closing process.  The CFPB also pointed to resort fees and service fees as examples of fees that may conceal the true price of a product from consumers until late in a transaction.

Additionally, the CFPB cited statistics regarding the prevalence of fees in the RFI.  For example, the CFPB noted that, in the credit card industry, fees represent about 20% of the total cost of credit cards, and that card issuers charged $23.6 billion in fees in 2019 alone.  Nearly $14 billion of those fees were, according to the CFPB, late fees not subject to competitive pricing pressure.

The CFPB intends to use its authority under the Consumer Financial Protection Act to reduce these “junk” fees.  In order to do so, the CFPB seeks input from the public regarding their bank fees, credit union fees, prepaid or credit card account fees, mortgage fees, loan fees, or fees for payment transfers.  In a statement regarding the RFI, CFPB Director Rohit Chopra stated that “[m]any financial institutions obscure the true price of their services by luring customers with enticing offers and then charging excessive junk fees.  By promoting competition and ridding the market of illegal practices, we hope to save Americans billions.”