United States: CFPB issues request for information regarding unwanted charges

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On January 26, 2022, the Consumer Financial Protection Bureau (CFPB) issued a request for information regarding fees charged by providers of consumer financial products or services (RFIs). In the RFI, the CFPB seeks public comment regarding fees that are not competitively priced in order to help the CFPB exercise its authority to create fairer, more transparent, and more competitive consumer financial markets.

In the RFI, the CFPB says it has become “increasingly concerned that consumer credit is now part of [the] “cost savings”, where the “unwanted operating costs” charged by banks and other financial institutions far exceed the marginal cost of the service they claim to cover. Businesses can use hidden return fees, which are mandatory or quasi-mandatory fees added to a transaction after a consumer has chosen the product or service based on an “original” price, to incentivize consumers to make purchase decisions on the basis of a “lower” price.

The CFPB specifically highlighted a variety of fees, including late fees, overdraft fees, insufficient funds fees, payment processing convenience fees, minimum balance fees, return charge, chargeback fee, check image fee, paper statement fee, card replacement fee, out-of-network ATM fee, foreign transaction fee, ACH transfer fees, wire transfer fees, account closure fees, inactivity fees, fraudulent activity investigation fees, and incidental fees in the mortgage closing process. The CFPB also cited resort fees and service fees as examples of fees that can conceal the true price of a product from consumers until the end of a transaction.

Additionally, the CFPB cited statistics regarding the prevalence of fees in the RFI. For example, the CFPB noted that in the credit card industry, fees represent about 20% of the total cost of credit cards and that card issuers charged $23.6 billion in fees alone. in 2019. Nearly $14 billion of these fees were, according to the CFPB, late fees not subject to competitive price pressure.

The CFPB intends to use its power under the Consumer Financial Protection Act to reduce these “undesirable” charges. To do this, the CFPB solicits public feedback regarding its bank fees, credit union fees, prepaid account or credit card fees, mortgage fees, loan fees, or payment transfer fees. In a statement regarding RFI, CFPB director Rohit Chopra said that “[m]all financial institutions hide the true price of their services by enticing customers with enticing offers and then charging excessive fees. By promoting competition and ridding the market of illegal practices, we hope to save Americans billions.”

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