[Link to comment page updated 4 Feb 22.] If you’ve been whacked by unexpected or unfair penalty or other junk fees by a bank, mortgage company or credit card company, the CFPB wants to hear from you. You can send the CFPB a comment on its new “initiative to save households billions of dollars a year by reducing exploitative junk fees.” Find out more here.
Know that the bank and credit card company execs are already lawyering up and unleashing hordes of PR flacks and lobbyists. After all, their tricks and traps and anti-competitive practices are under intense scrutiny over consumer harms. It’s important that consumers tell the CFPB their own stories. The CFPB is the only federal bank agency with just one job: protecting consumers.
The CFPB blog last week highlighted “three ways that the CFPB will focus on ensuring a more fair, transparent, and competitive credit card market:”
Blog Goal: Uncover unfair, anticompetitive practices. Back in the ten-year run-up to the landmark Credit CARD Act of 2009, I testified, along with other consumer advocates, numerous times on a problem the CFPB finds still hasn’t gone away: some credit card companies withhold full information from credit bureaus so consumer credit scores will be lower so consumers can’t shop for better rates. They become captive customers. I was not alone. From a Federal Reserve study cited in 2003 hearings:
“A key measure used in credit evaluation–utilization–could not be correctly calculated for about one-third of the open revolving accounts in the sample because the creditor did not report the credit limit.”
Blog Goal: Make it simpler to compare, switch, or refinance your credit card. The CFPB has a mandate to give consumers more control over their own data. It says “We are considering options that will help Americans with credit cards escape high rates and lousy service. Consumers who have more control over their own data may be able to create more options for themselves to find better deals.”
Blog Goal: Scrutinize junk fees. The CFPB says: “While many of the worst practices that plagued the credit card industry were banned in the CARD Act of 2009, the industry is still heavily dependent on fees…including $14 billion in late fee penalties alone in in 2019.”
While that January 19th blog was a warning shot to the credit card industry, this week’s announcement applies to the entire financial industry marketplace: Save Americans Billions in Junk Fees. It calls many fees many names, none of which will make those well-heeled bank execs happy. The CFPB referred to fees charged by banks and other financial firms including credit card and mortgage companies as “exploitative junk fees,” “unexpected,” “unclear” or “for things people believed were covered by the baseline price of a product or service.” And although several big banks have recently “voluntarily” reduced certain overdraft and non-sufficient funds penalty fees, the CFPB wants a lot more to be done. So do we.
As CFPB director Rohit Chopra explained:
“Many financial institutions obscure the true price of their services by luring customers with enticing offers and then charging excessive junk fees. By promoting competition and ridding the market of illegal practices, we hope to save Americans billions.”
The CFPB release went to highlight the problems posed by a “new fee economy.”
“Companies across the U.S. economy are increasingly charging inflated and back-end fees to households and families. This new “fee economy” distorts our free market system by concealing the true price of products from the competitive process. For example, hotels and concert venues advertise rates, only to add “resort fees” and “service fees” after the fact. And fees purportedly charged to cover individual expenses, like paperwork processing, can often greatly exceed the actual cost of that service.”
I am sure that those well-heeled bank execs won’t like their own pesky fee grabs compared to sketchy hospitality industry and concert ticket DRIP fees, which are under scrutiny by the FTC. But what’s the difference between a “drip, drip, drip” and a back-end, undisclosed fee strategy? Nothing that I can see.
President Biden’s recent Executive Order on Competition urged the CFPB: “to ensure that actors engaged in unlawful activities do not distort the proper functioning of the competitive process or obtain an unfair advantage over competitors who follow the law.” This initiative on junk fees will do that and more.
The CFPB wants to make our financial markets work, for everyone, including small businesses and at-risk consumers, not just powerful corporate interests. Tell the CFPB what you know about how junk fees harm you and your family.
Senior Director, Federal Consumer Program, PIRG
Ed oversees U.S. PIRG’s federal consumer program, helping to lead national efforts to improve consumer credit reporting laws, identity theft protections, product safety regulations and more. Ed is co-founder and continuing leader of the coalition, Americans For Financial Reform, which fought for the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, including as its centerpiece the Consumer Financial Protection Bureau. He was awarded the Consumer Federation of America's Esther Peterson Consumer Service Award in 2006, Privacy International's Brandeis Award in 2003, and numerous annual "Top Lobbyist" awards from The Hill and other outlets. Ed lives in Virginia, and on weekends he enjoys biking with friends on the many local bicycle trails.