On January 26, the Consumer Financial Protection Bureau issued a “Request for Information on Fees Imposed by Providers of Consumer Financial Products or Services.” In a contemporaneous statement, CFPB Director Rohit Chopra described the information request as the beginning of a “new effort to help American families save billions of dollars in junk fees in their financial lives.” Information request seeks public comment on how these “junk fees” impact people (specifically seniors, students, service members, people of color, and low-income consumers) and requests comments from social service organizations, consumer rights and advocacy organizations, legal aid attorneys, academics and researchers, small businesses, financial institutions, and state and local government officials.
As part of the request for information, the CFPB identified the following as its points of emphasis:
- If you are a consumer, please tell us about your experiences with fees associated with your bank, credit union, prepaid card account, credit card, mortgage, loan, or payment transfers, including: (a) fees for things you thought were covered by the base price of a product or service; (b) unexpected charges for a product or service; (c) fees that seemed too high for the alleged service; and (d) fees when it was not clear why they were being charged.
- What types of charges for financial products or services obscure the true cost of the product or service by not being built into the initial price?
- Which fees exceed the cost to the entity that the fee is intended to cover? For example, is the amount charged for NSF fees necessary to cover the cost of processing a returned check and associated losses to the depository institution?
- Which companies or markets derive significant revenue from final fees or consumer costs that are not incorporated into the sticker price?
- What obstacles, if any, exist to converting fees into the initial prices that consumers buy? How might this vary by rate type?
- What data and evidence exists regarding how consumers view final fees, both inside and outside of financial services?
- What data and evidence exists to suggest that consumers do or do not understand fee structures disclosed in standard or fine print contracts?
- What data and evidence exists to suggest that consumers do or do not make decisions based on fees, even if it is well disclosed and understood?
- What oversight tools and/or policies should the CFPB use to address excessive fee increases or fees that divert revenue from the initial price?
The request for information originally set a deadline for comments to be provided on or before March 31.
However, on March 25, the CFPB extended the deadline to April 11 and announced that it had already received 25,000 comments.
In a February 2 blog post, the CFPB described “junk fees” as fees that “take many different forms, including late fees, overdrafts, chargebacks, use of an out-of-network ATM, money transfers , inactivity, and more.” The blog post identified the following “common junk fees” in more detail:
- fees for not having enough money (overdraft fees and NSF fees);
- late payment fees;
- fees to pay your bill (convenience charges);
- prepaid card fees; Y
- closing costs and home purchase fees.
In supplemental information provided as part of the information request, the CFPB characterized the charging of “hidden late fees,” which are “mandatory or quasi-mandatory,” as an anti-competitive tactic designed to “lure consumers into making purchasing decisions.” buy”. based on a lower perceived price.” In support of its position, the CFPB noted that:
- overdraft and insufficient funds fees exceeded $15.4 billion in 2019, compared to just $1 billion in account maintenance fees;
- fees represent about 20% of total credit card costs (including $14 billion in late fees);
- convenience fees remain common, despite a 2017 CFPB bulletin on unfair, deceptive and abusive acts or practices (and violations of the Fair Debt Collection Practices Act) related to telephone payment fees; Y
- In the context of residential mortgage transactions, “monthly property inspection fees, new title fees, legal fees, appraisals and appraisals, broker price opinions, forced insurance, of foreclosure and miscellaneous and unspecified ‘corporate advances’ can put a price on a homeowner. outside of a home.
While the information request focuses on credit cards, residential mortgages, and the fees charged by financial institutions in connection with deposit accounts, it is clear that the CFPB’s scope of interest is much broader than that. The CFPB explicitly states that it is “interested in other loan origination and servicing fees, including student loans, auto loans, installment loans, payday loans, and other types of loans.” Therefore, while retail finance companies and installment lenders are not the immediate focus of the CFPB’s investigation into fees charged in connection with financial services, we believe such creditors should anticipate examination of such practices by part of the CFPB and future regulations governing creditor origination and servicing fees. of all kinds The information request also indicates, as expected, that Director Chopra plans to use the CFPB’s extensive oversight and examination functions to aggressively regulate creditors and their financial products.