May 2, 2022 — Comments

Americans for Financial Reform (AFR), the Center for Responsible Lending (CRL), Consumer Federation of America (CFA), and the National Consumer Law Center (NCLC) (on behalf of its low-income clients) submitted comments in response to the Consumer Financial Protection Bureau’s (CFPB or Bureau) Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services.

It has become increasingly common for businesses to deceptively increase the cost of goods and services through ancillary charges. This is usually done after the consumer has become legally or psychologically committed to a transaction. The fees may be hidden in the fine print of advertisements or complex contracts, hidden in plain sight through overly complex disclosures that lead to information overload, imposed at the last minute before consummation, imposed after the consumer has signed up for a service and begun using it, or triggered in ways or with a frequency that consumers do not expect.

In the comments below, we first address the CFPB’s authority to regulate junk fees and some common themes across different markets and then highlight some of the more egregious junk fees plaguing consumer products and services. In some areas, we provide specific recommendations. Click the buttons below to jump to a specfic section of the comments.

The CFPB has authority to regulate junk fees—fees that inflate or mask the price of a product or evade disclosure requirements, that inhibit transparent price comparisons and competition, that are imposed in a manner that deceives people about the cost of a product or how it works, that incent practices that injure consumers in ways that are not reasonably avoidable and provide no countervailing benefit to consumers, or that take unreasonable advantage of consumers.

Exploitative junk fees drain money and resources from households reeling from the financial impact of the COVID-19 pandemic and struggling to recover from the previous financial crises. Lower-wage workers, consumers of color, and other consumers struggling economically pay a disproportionate share of these fees. These consumers are located in communities where financial services companies, including mainstream lenders, charge more fees.

Overdraft and NSF fees have become profit centers for financial institutions that disguise the cost of a bank account, make it impossible to comparison shop, and harm the most vulnerable
consumers. They push some consumers out of the banking system, with a disproportionate impact on communities of color.

The CFPB reports credit card late fees are still costing consumers billions of dollars—$12 billion in 2020 to be exact. Subprime customers are the hardest hit, averaging $138 annually in late fees per account.

Earned wage advances (EWA) are an employer-based form of credit that allows workers to take advances ahead of payday based on the wages they have already earned ahead but are not yet scheduled to be paid.

Fintech payday lenders are disguising their finance charges in inflated and hidden expedite fees and so-called “tips” to evade consumer protection laws.

The cost of tracking the status of the insurance coverage required by auto and mortgage creditors is a well-concealed junk fee that the CFPB should investigate.

The Bureau has correctly observed that mortgage-related junk fees can create a barrier to homeownership and can strip wealth away from existing homeowners.

While car prices are often advertised, many related costs are not disclosed in advance. They may even be obscured by practices that prevent the consumer from discovering the true cost until it’s too late.

Pay-to-pay fees impact the most vulnerable consumers who are just trying to pay their bill. These fees, sometimes disingenuously called “convenience fees,” are extra charges that creditors impose on customers.

International remittances are key to helping hundreds of millions out of poverty. Ensuring the affordable, transparent, and safe flow of remittances is a global public policy objective.

The Fair Debt Collection Practices Act prohibits debt collectors from adding junk fees. Nevertheless, some debt collectors seek to add junk fees, including pay-to-pay fees, interest, collection costs, attorney fees, court costs, dishonored check fees, and late fees