Citing billions of dollars that households spend annually on “exploitative junk fees,” the Consumer Financial Protection Bureau launched an initiative Wednesday to reduce the fees charged by banks, credit unions and other financial companies.
Industry trade groups called the move “misguided.”
As part of the initiative, the CFPB in a statement yesterday asked the public to provide information about the fees, saying that the input would “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 in the statement. “By promoting competition and ridding the market of illegal practices, we hope to save Americans billions.”
The CFPB said U.S. companies have increasingly charged fees that are inflated and on the back-end, creating a new “fee economy” that conceals the true price of products from the competitive process. The CFPB said the practice distorts the free market system.
Citing research into bank revenue from overdraft and non-sufficient funds fees, as well as late fees charged by credit card companies, the CFPB said it had found areas where back-end fees might undermine a competitive market while also obscuring a product’s true cost.
The CFPB wants to use its authority to reduce these kinds of fees and requested public comments about experiences with fees from banks, credit unions, prepaid or credit card accounts, mortgages, loans or payment transfers,
The comments will be used to craft rules, issue industry guidance, and focus supervision and enforcement resources to achieve this goal, the CFPB said, adding that the comments could also uncover potential illegal practices or fees.
The fees the CFPB wants to hear about include:
In addition to consumers, the CFPB also requested information 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.
For eight industry trade groups, this request for comment is misguided.
“The CFPB’s new Request for Information on fees is a misguided effort that paints a distorted and misleading picture of our country’s highly competitive financial services marketplace,” said the statement from The American Bankers Association, Bank Policy Institute, Consumer Bankers Association, Credit Union National Association (CUNA), Financial Services Forum, Independent Community Bankers of America, National Association of Federally-Insured Credit Unions (NAFCU) and National Bankers Association.
The industry groups said that multiple federal laws, as well as the CFPB’s own rules, require banks, credit unions and other financial services providers “to disclose terms and fees in a clear and conspicuous manner,” adding that trade group members “do so each and every day.”
“Consumers in this country know they have a wide range of choices when it comes to financial services products, and those businesses compete every day, including on fees,” the groups said. We look forward to responding to this Request for Information with facts and perspective sadly lacking from today’s announcement.”
