Junk Fees - The Newest Catch Phrase - WST

Over the past few months, more headlines are circulating, and consumer protection groups are speaking out against the assessment of fees that confuse or deceive consumers or take advantage of a situation – aka “junk fees”. These fees may be charged by any type of entity (airlines, ticket brokers, cable/internet providers, etc.) but it is the banking industry that usually is in the limelight for criticism regarding fees charged to consumers. No surprise the concern regarding junk fees is being voiced by the Consumer Financial Protection Bureau (CFPB), but along with that, this time the White House is joining in on the conversation.

On October 26, 2022, the White House issued its initiative on junk fees, and simultaneously the CFPB issued Consumer Financial Protection Circular 2022-06 which addressed unanticipated overdraft fee assessment practices. This publication was followed by the CFPB’s issuance of Bulletin 2022-06 on November 7, 2022, regarding the blanket assessment of fees on returned deposited items. The CFPB publications indicate that surprise or the blanket assessment of fees for overdrafts or returned deposited items could be considered violations of the Consumer Financial Protection Act (CFPA).

Remember the benchmark to determine if an act or practice is considered unfair under the CFPA is that it causes or is likely to cause substantial injury to consumers that is not reasonably avoidable, and the injury is not outweighed by countervailing benefits to consumers or to competition. Before assessing any account or transaction fee, your institution should ask “would this be a fee the consumer would not reasonably anticipate?” If the answer is “yes”, then the fee may be construed as unfair and open your institution up to potential regulatory scrutiny – even if the fee has been previously disclosed.

Hey, no one ever said a life in banking was an easy job!

You can read more about the President’s and CFPB’s positions on junk fees by accessing the links below.

https://www.whitehouse.gov/briefing-room/blog/2022/10/26/the-presidents-initiative-on-junk-fees-and-related-pricing-practices/

https://files.consumerfinance.gov/f/documents/cfpb_unanticipated-overdraft-fee-assessment-practices_circular_2022-10.pdf

https://www.govinfo.gov/content/pkg/FR-2022-11-07/pdf/2022-23933.pdf

Authored by: Joann Lang, CAMS, CIA, CCBP