On February 2, 2022, the Consumer Financial Protection Bureau (CFPB) published in the Federal Register a Request for Information (RFI) on “junk fees.”  The CFPB stated that it is seeking comments from the public on “fees that are not subject to competitive processes that ensure fair pricing,” and that the comments will assist the CFPB with its various functions, including enforcement, supervision, and rulemaking.

Specifically, the CFPB stated that it is concerned that the consumer finance markets have become part of the “fee economy,” and that “exploitative junk fees charged by banks and non-bank financial institutions have become widespread.”  The CFPB stated that it is, “concerned about 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 provided a list of examples of such fees in the RFI.  Significantly, for the mortgage and title insurance industries, the list included “ancillary fees in the mortgage closing process.”   Specifically about mortgages, the CFPB stated that, “priced into most mortgages are thousands of dollars in application fees and closing costs, which few people are well-positioned to shop on.”  The CFPB described mortgage closing costs as including “inflated and padded fees.”  The CFPB stated that such fees are a barrier to homeownership, strip wealth from homeowners, and deter advantageous refinancing.  The CFPB also noted that, “many closing costs, like title insurance, may not always be subject to standard or appropriate competitive forces.” 

The CFPB also called out mortgage servicing-related fees, such as fees for making payments over the phone or online.  In addition, the CFPB called out delinquency-related fees, such as, “monthly property inspection fees, new title fees, legal fees, appraisals and valuations, broker price opinions, force-placed insurance, foreclosure fees, and miscellaneous ‘corporate advances.’”

The CFPB stated that it is interested in other loan origination and loan servicing fees, including for student loans, auto loans, installment loans, payday loans, and other types of loans. The CFPB gave as examples, “fees to reschedule payment dates or make online or phone payments…application fees and some even charge to receive loan proceeds in an expedited manner.”

The CFPB provided the following other examples of the fees it considers “junk fees,” which were mostly banking-related fees:

 ·       Penalty fees such as late fees, overdraft fees, non-sufficient funds (NSF) fees; convenience fees for processing payments;

·       Minimum balance fees;

·       Return item fees;

·       Stop payment fees;

·       Check image fees;

·       Fees for paper statements;

·       Fees to replace a card;

·       Fees for out-of-network ATMs;

·       Foreign transaction fees;

·       ACH transfer fees;

·       Wire transfer fees;

·       Account closure fees;

·       Inactivity fees; and

·       Fees to investigate fraudulent activity.

The CFPB asked commenters to submit stories, data, and information about fees.  The CFPB also asked the following specific questions:

 1. If you are a consumer, please tell us about your experiences with fees associated with your bank, credit union, prepaid or credit card account, credit card, mortgage, loan, or payment transfers, including:

a. Fees for things you believed were covered by the baseline price of a product or service.

b. Unexpected fees for a product or service.

c. Fees that seemed too high for the purported service.

d. Fees where it was unclear why they were charged.

2. What types of fees for financial products or services obscure the true cost of the product or service by not being built into the upfront price?

3. What fees exceed the cost to the entity that the fee purports to cover? For example, is the amount charged for NSF fees necessary to cover the cost of processing a returned check and associated losses to the depository institution?

4. What companies or markets are obtaining significant revenue from back-end fees, or consumer costs that are not incorporated into the sticker price?

5. What obstacles, if any, are there to building fees into up-front prices consumers shop for? How might this vary based on the type of fee?

6. What data and evidence exist with respect to how consumers consider back-end fees, both inside and outside of financial services?

7. What data and evidence exist that suggest that consumers do, or do not, understand fee structures disclosed in fine-print or boilerplate contracts?

8. What data and evidence exist that suggest that consumers do or do not make decisions based on fees, even if well disclosed and understood?

9. What oversight and/or policy tools should the CFPB use to address the escalation of excessive fees or fees that shift revenue away from the front-end price?

You can access the press release and RFI here: https://www.consumerfinance.gov/about-us/newsroom/consumer-financial-protection-bureau-launches-initiative-to-save-americans-billions-in-junk-fees/.

Please contact rich@garrishorn.com if you would like to discuss any of these issues, or if you would like assistance with drafting a comment letter.