President Joe Biden and the Consumer Financial Protection Bureau announced new efforts Wednesday to clamp down on “junk fees,” or unnecessary or excessive charges by banks and financial institutions, footed by American consumers.

The CFPB issued an advisory opinion regarding a 2010 law prohibiting banks and credit unions with $10 billion or more in assets from imposing junk fees on customers seeking account information, such as the balance in a deposit account or the interest rate on a loan.

As banks lean deeper into automation, the advisory “clarifies that people are entitled to get the basic information they need without having to pay junk fees,” as required by law.

“When people request basic information about their accounts, big banks cannot charge them massive fees or trap them in endless customer service loops,” CFPB Director Rohit Chopra told reporters on a press call Tuesday. “Charging a competitive price for a legitimate service makes sense, but charging junk fees for basic customer responsiveness doesn’t.”

Starting in February 2024, firms that violate the law will be subject to monetary penalties. Chopra did not specify how the penalties would be sized.

The CFPB has previously caught Wells Fargo, Regions and Bank of America in large junk fee schemes, Chopra noted.

Bank of America, for its part, had to pay $100 million to harmed customers and $90 million in fines to the CFPB for the scheme earlier the year, along with $60 million in fines to the Office of the Comptroller of the Currency.

The Biden administration spearheaded its battle against junk fees last year.

Alongside efforts of the CFPB, the Federal Trade Commission proposed a rule Wednesday that, if finalized, would ban businesses like ticket vendors and car rental companies from charging surprise service fees. The rule would require vendors to advertise the full cost of something upfront.

National Economic Council Director Lael Brainard, a former Federal Reserve vice chair, told reporters on a press call Tuesday that these announcements are “some of the most comprehensive actions on junk fees the administration has taken to date and have the potential to really change how consumers experience the purchasing process from live-event tickets to hotel stays to apartment rentals.”

“Those sneaky fees might not matter a lot to the wealthiest Americans, but they sure do matter for hardworking Americans sitting around the kitchen table trying to stay on top of their bills and have a little left over,” Brainard said.

Later this month, the CFPB plans to propose a rule that, if finalized, would require financial institutions to allow customers to send transaction data to other institutions, making it easier for people to “break up with their bank, switch to banks with better offerings, and to manage accounts from multiple providers,” Chopra has said.

The CFPB said this reform, known as open banking, will ward off institutions’ use of junk fees by ensuring that banks compete based on service quality and upfront pricing.

CFPB exams expose offenders

The CFPB also released a report Wednesday detailing millions of dollars in junk fees it uncovered in bank account deposits, auto loan servicing and remittances through examinations conducted between February and August.

Some banks, the CFPB found, charge customers fees for bank statements that were neither printed nor mailed. The watchdog also uncovered situations in which auto lenders charged fees for loan add-on products even after a vehicle was repossessed or a loan was paid off early; and in which remittance providers charged fees without proper disclosure or failed to refund fees when money consumers sent didn’t arrive on time.

In all, offending companies will refund $140 million, the CFPB reported, 86% of which is for unexpected overdraft fees and double-dipped non-sufficient funds fees.

“The CFPB continues to uncover junk fee scams that violate the law and undermine consumer trust,” Chopra said. “We will continue to combat the illegal fees cropping up in consumer finance markets.”


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