On January 26, 2022, the Consumer Financial Protection Bureau announced a request for information seeking comments on fees charged to consumers in connection with certain products or services. The CFPB has expressed concern that when financial institutions charge “return fees” – including late fees, payment processing convenience fees and chargeback fees – they are incentivizing consumers to make product decisions based on the perception of a lower price. In seeking public comment on these fees, the CFPB has indicated that it will use the feedback it gathers to inform its priorities for rulemaking, guidance and enforcement.
The CFPB cites its power to regulate return fees in the Consumer Financial Protection Act mandate that the CFPB ensures that consumer financial markets are fair, transparent and competitive.1 Echoing his earlier comments about market competition, CFPB Director Rohit Chopra said the fees lacked transparency as they allowed financial institutions to “hide the true price of their services by enticing customers with tempting offers and then charging excessive fees”.
In the request for information, the CFPB expressed concern about “charges that far exceed the marginal cost of the service they are intended to cover.” The CFPB also noted that its research has identified specific products and markets where return fees can impose significant costs on consumers:
- Deposit accounts: The cost of a deposit account includes a number of associated fees, such as overdraft and insufficient funds (NSF) fees. The CFPB alleges that overdraft and NSF fees make up the majority of revenue banks derive from deposit accounts, although many established and challenger banks have moved away from overdraft fees.
- Credit card: The CFPB says that in 2019, card issuers charged more than $14 billion in punitive late fees. Specifically, the CFPB alleges that nearly all issuers charge the maximum fee allowed by law of $30 for the first late payment and $41 for subsequent late payments.
- Discounts and payments: The CFPB says financial institutions charge fees to stop payments, and on automated clearing house (ACH) or payment transfers, among other services. International transfers are also subject to fees, including fees for making payments over the phone.
- Prepaid accounts: Although consumers can select a product based on a monthly fee, the CFPB notes that prepaid accounts often include fees for regular activities such as cash top-ups or balance inquiries.
- Mortgages: In addition to fees such as closing costs that are built into the initial cost of a mortgage, some borrowers may be charged a fee to make a payment in a certain way, such as over the phone or online.
- Other loans: The CFPB notes that it is also interested in loan origination and servicing fees for student loans, car loans, installment loans, payday loans and other types of loans.
The CFPB has asked consumers, including those it has traditionally considered vulnerable and for whom there are dedicated desks within the CFPB – such as older consumers, students, service members and consumers of color – to submit stories, data and information on how these fees have impacted their lives. The CFPB made the same request to other stakeholders, such as small business owners, legal aid attorneys, academics and researchers, state and local government officials, and financial institutions, including small banks and credit unions. The CFPB has highlighted its particular interest in learning about consumer experiences with:
- According to them, fees were included in the base price of a product or service.
- Unexpected or background charges for a product or service.
- Charges that seemed excessive for a product or service.
- Charges where it was unclear why they were charged.
The CFPB has suggested several topics on which stakeholders can choose to comment, such as types of fees that hide the true cost of the product or service by not being rolled into the original price, barriers to in up-front pricing, the existence of data and evidence that suggests consumers are or are not making fee-based decisions, and the monitoring and/or policy tools the CFPB should use to address these fees.
Comments must be received no later than March 31, 2022.
- 12 USC § 5511(a).