Banks will come under scrutiny as part of the Consumer Financial Protection Bureau’s initiative to get rid of so-called junk fees, Director Rohit Chopra warned Thursday.
The collection of gratuitous fees has spread to all parts of the economy — from hotel fees to concert ticket surcharges to underfunding fees levied by banks, Chopra said. The increase in line-item fees on invoices obscures the true price of products and services and makes it difficult for consumers to shop based on price, he said.
“People are fed up with this fee sniveling that’s all over the economy,” Chopra said during an online discussion with the Washington Post open to the public. “Banking is a bastion of many of these fees and consumers want to know what’s going on with them. In many cases, these are fees that do not even provide a service or even take action from the bank or financial institution.”
Bank fee scrutiny is expected to increase on the regulatory front. It’s still unclear if the CFPB plans to propose a rule to curb such fees.
“What we really need to understand is, are financial institutions competing for an upfront price and consumers can shop for it, or are all of these junk fees essentially thrown into the later process?” asked Chopra. “We are still evaluating all our options in this regard. We expect to increase our supervisory scrutiny of institutions that depend on these fees. I think all options are on the table.”
Chopra also offered a limited compliment to the dozen large and mid-sized banks have fallen or been contained Overdraft fees – or promised in the last few weeks.
“I think a lot of institutions are realizing that they need to get away from these fees in the long run,” he said. “We’re already seeing some of that. Honest actors out there are already ahead of the game and I expect others will follow. This is a small step in the right direction.”
Banks raked in about $15.5 billion in overdraft and underfunding fees in 2019, though the percentage of fees collected has been declining for years, according to the CFPB.
Richard Hunt, the President and CEO of the Consumer Bankers Association, accused Chopra of making unsubstantiated claims about fees in his recent attack on the banking industry. The association claims the crackdown on the fees was unjustified.
“The office should focus on getting feedback from them and working with them [bankers] — the very frontline people who interact with customers every day — to recognize the value these products and services bring to the lives of the people we all work for,” Hunt said in a press release.
When asked about cryptocurrency, Chopra generally spoke about the need for consumers to have a real person to talk to at a business when something goes wrong.
“Right now it’s mostly used in speculative trading,” Chopra said. “I think there’s one big question that a lot of people ask me when we talk or think about crypto, and one of the questions they ask is who do they go to when things go wrong?”
During the crypto discussion, Chopra reiterated his concerns that big tech companies are trying to gain too much control over the financial system.
“More and more companies are following us, collecting our data and monetizing it. And I really wonder what these giant tech companies are doing? he asked. “That’s worrying when it comes to how big tech is consuming more and more power in this country.”
The CFPB started in December a request buy now/pay later installment loans that have grown into a $100 billion market. Chopra said the bureau is trying to understand how the business model works and what its acquisition means, particularly for younger consumers.
“We asked questions about how this collected data is being used and how the credit report works with all of that,” he said.
in one blog entry On Thursday, the CFPB released a list of the top 20 banks based on overdrafts and insufficient fund fee income for the nine months ended Sept. 30.
Wells Fargo last year at the top of the list by revenue of $1 billion, followed by JPMorgan Chase at $924 million and Bank of America at $823 million. TD Bank ranked fourth with $347 million in fee income.
CFPB senior engagement and policy fellow Rebecca Borne and CFPB payments and deposits program manager Amy Zirkle wrote on the blog that the CFPB is working to reduce banks’ reliance on overdraft fees and underfunding as part of its program to reduce greater initiative Reduce junk fees to save consumers billions of dollars.
Still, the vast majority bank charges are covered, where not required, by existing legislation including the Truth in Lending Act 1968 and the Credit Card Accountability Responsibility and Disclosure Act 2009.
The CFPB also looks closely at the auto loan and credit card markets to assess whether interest rates are competitive.
“I’m very concerned that consumers don’t always face a competitive market when it comes to interest rates on their credit cards,” he said. “So that’s something we’re looking at broadly.”