On January 26, the Consumer Financial Protection Bureau issued a “Request for Information Regarding Fees Charged by Providers of Consumer Financial Products or Services.” In a contemporary statement, CFPB Director Rohit Chopra described the request for information as the start of “a new effort to help American families save billions of dollars in unwanted fees in their financial lives.” The request for information seeks public comment on the impact of these “junk fees” on individuals (especially seniors, students, the military, people of color, and low-income consumers) and solicits feedback from social service organizations, consumer advocacy organizations, assisting attorneys, academics and researchers, small businesses, financial institutions, and state and local government officials.
As part of the request for information, the CFPB identified as points of attention:
- If you are a consumer, please let us know your experiences with fees associated with your bank, credit union, prepaid card account, credit card, mortgage, loan, or payment transfer, including: (a) charges for things you thought were covered by the base price of a product or service; (b) unexpected charges for a product or service; (c) charges that appeared too high for the purported service; and (d) charges for which it was not clear why they were charged.
- What types of fees for financial products or services hide the true cost of the product or service by not being included in the original price?
- What charges exceed the cost to the entity that the charge is intended to cover? For example, is the amount charged for the NSF check fee necessary to cover the cost of processing a returned check and the associated losses to the depository institution?
- Which companies or marketplaces derive significant revenue from return fees or consumer costs that are not factored into the list price?
- What are the barriers, if any, to incorporating fees into the initial prices for which consumers buy? How can this vary depending on the type of fee?
- What data and evidence exists on how consumers view return costs, both inside and outside of financial services?
- What data and evidence exists that suggests consumers do or do not understand fee structures disclosed in fine print or boilerplate contracts?
- What data and evidence exists that suggests consumers do or do not make fee-based decisions, even if they are well disclosed and understood?
- What monitoring and/or policy tools should the CFPB use to deal with escalating excessive fees or fees that divert revenue from the original price?
The RFI initially set a deadline for comments to be provided no later than 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 fees for late penalties, overdrafts, returns, use of an out-of-network ATM, money transfers, inactivity, etc.” The blog post further identified the following “common unwanted charges”:
- fees for lack of money (overdraft fees and NSF fees);
- late fee;
- fees to pay your bill (convenience fee);
- prepaid card fees; and
- closing costs and home buying costs.
In additional information provided as part of the RFI, the CFPB characterized the imposition of “hidden return fees”, which are “mandatory or quasi-mandatory”, as an anti-competitive tactic intended to “encourage consumers to make purchasing decisions based on a perceived lower price.” In support of its position, the CFPB noted that:
- overdraft and NSF fees topped $15.4 billion in 2019, compared to just $1 billion in account maintenance fees;
- fees represent about 20% of the total cost of credit cards (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) regarding telephone payment fees; and
- in the context of residential mortgage transactions, “monthly property inspection fees, new title fees, legal fees, appraisals and appraisals, broker price notices, forced insurance, foreclosure and various unspecified “corporate advances” can all cost a homeowner dearly out of a home.
Although the request for information relates to credit cards, residential mortgages and fees charged by financial institutions in relation to deposit accounts, it is clear that the CFPB’s field of interest is much broader than that. The CFPB explicitly states that it is “interested in other loan origination and servicing fees, including for student loans, auto loans, installment loans, payday loans and other types of loans “. Therefore, while sales finance companies and installment lenders are not the immediate target of the CFPB’s investigation into fees charged in connection with financial services, we believe that these creditors should anticipate scrutiny by the CFPB of these practices and the future development of rules governing origination and creditor service fees. of all types. The information request also indicates, as expected, that Director Chopra plans to use the CFPB’s extensive oversight and review functions to aggressively regulate creditors and their financial products.