Dive Brief:
- The Consumer Financial Protection Bureau (CFPB) announced an initiative Wednesday to save U.S. households billions in hidden “exploitative junk fees” charged by banks and financial companies.
- The bureau issued a request for information to solicit input from consumers on a wide variety of inflated or obfuscated fees, including overdraft fees, card-replacement fees, out-of-network ATM fees, wire transfer fees, inactivity fees, and fees to investigate fraudulent activity.
- The American Bankers Association (ABA), Consumer Bankers Association (CBA) and others published a joint statement decrying the announcement.
Dive Insight:
The CFPB is seeking comments through March 31 from consumers, small-business owners, nonprofit organizations, legal aid attorneys, academics and researchers, government officials and financial institutions regarding fees that may be seen as inflated or unexpected.
Banking trade groups, however, called the request "a misguided effort that paints a distorted and misleading picture of our country's highly competitive financial services marketplace," adding that current rules sufficiently shield consumers from illegal fees.
“This is fuzzy math at its best and political theater at its worst," Richard Hunt, the CBA's president and CEO, wrote in a separate statement. "To best serve America’s families and small businesses, the bureau has a responsibility to communicate with clarity and precision — not with overblown rhetoric to attack one industry.”
Overdraft fees made up less than 2% of total revenue in the banking industry in 2019, Hunt noted, arguing that customers have their choice of more than 5,000 banks, making the field highly competitive.
Under Director Rohit Chopra, the CFPB has adopted an aggressive stance against overdraft and other fees charged by banks.
A number of banks — not necessarily in response — have launched products over the past year to help customers avoid overdraft and related fees.
Capital One last month became the largest bank in the country to eliminate overdraft fees. Bank of America this month pledged to reduce the amount it charges when consumers overdraw their accounts.
“Many financial institutions obscure the true price of their services by luring customers with enticing offers and then charging excessive junk fees,” Chopra said Wednesday in a press release. “By promoting competition and ridding the market of illegal practices, we hope to save Americans billions.”
The bureau, in its request, raises concerns about an emerging "fee economy," in which businesses charge “fees that far exceed the marginal cost of the service they purport to cover, implying that companies are not just shifting costs to consumers, but rather, taking advantage of a captive relationship with the consumer to drive excess profits.”
The CFPB cited data it collected indicating major credit card companies charged $14 billion in punitive late fees in 2019. Banks collected $15 billion in revenue that year from overdraft and non-sufficient funds (NSF) fees, the bureau said.
