On January 26, the Consumer Financial Protection Bureau (CFPB or Bureau) announced its request for the public to share its input on “exploitative junk fees charged by banks and financial companies” to form its rulemaking and guidance agenda, along with its enforcement priorities. The CFPB’s press release included a link to its “Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services” (Request for Information).
The press release stated the “‘fee economy’ distorts our free market system by concealing the true price of products from the competitive process,” while the CFPB shared its concerned with inflated fees that greatly exceed the actual cost of the services and back-end fees charged after the fact.
The CFPB noted that in 2019, major credit card companies charged over $14 billion in late fees and bank revenue from overdraft and nonsufficient funds (NSF) fees exceeded $15 million. The press release stated that these fees may distort the true cost of a product and undermine competition.
The CFPB specified that it intends to strengthen competition by reducing junk fees and craft rules, industry guidance, and focus on its enforcement authorities. Specifically, the CFPB requested to hear about the public’s experiences with fees associated with their bank, credit union, prepaid or credit card account, mortgage, loan, or payment transfers regarding:
- Fees for things believed to be covered by the baseline price of a product or service;
- Unexpected fees for a product or service;
- Fees that seem too high for the service; and
- Fees where it was unclear why they were charged.
Our Take. The CFPB’s Request for Information linked to its press release indicates that the CFPB may attempt to use its unfair, deceptive, or abusive acts and practices (UDAAP) authority as a vehicle to initiate enforcement actions against banks and processors that process payments for entities that do not fully disclose all of the costs that a consumer may incur before purchasing a good or service from the entity. Overdraft fees and alleged merchant processor complicity with businesses purportedly running afoul of consumer financial protection laws were important issues for the CFPB while Rohit Chopra served as the CFPB assistant director under Richard Cordray, and it looks like Director Chopra wants to pick up where the Bureau left off several years ago. Indeed, some of the earlier CFPB enforcement actions concerning UDAAP focused on a merchant or financial institution’s alleged failure to disclose certain consumer costs. The CFPB’s focus on “junk fees” should be viewed as the Bureau exercising similar authority along that same continuum. Banks and processors should continue to be vigilant about reviewing merchant advertising to ensure that the costs of the goods and services are disclosed.