The biggest problem the agency has with those pesky little “service charges,” “resort fees,” “order processing fees,” etc., is that when companies charge excessive fees on top of the upfront price, it’s difficult or impossible to comparison shop based on actual cost.
Fortunately, the CFPB has some regulatory power and is embarking on a new mission “to ensure banking and lending markets are fair, transparent, and competitive for everyone.”
What the CFPB is going to tackle
Many consumers have gotten used to fees being a part of their everyday life. They take many different forms, including fees for late penalties, overdrafts, returns, using an out-of-network ATM, money transfers, and more. However, the CFPB says these fees are often baffling and unclear to many people.
The agency has pegged five areas that it wants to investigate further -- and officials say they will be making changes to favor consumers where possible.
Account maintenance fees. Fees for not having enough money in the bank -- also called “account maintenance fees” -- are the CFPB’s primary target.
“The cost of signing up for a bank account is generally advertised as account maintenance fees, which can vary substantially from bank to bank,” the agency said. “However, the vast majority of fee revenue banks make from deposit accounts comes from back-end penalty fees for overdrafts or from not having enough funds to cover a transaction.”
CFPB researchers estimate that the overall market revenue from overdraft and NSF fees was $15.47 billion in 2019.
Late fees. Companies – particularly credit card companies – owe a lot to late fees. Out of the $23.6 billion in fees charged by card issuers in 2019, $14 billion came from late fees alone.
Fees to pay your bill. Another added revenue source for companies comes in the form of fees to accept payments on your bill, such as the ability to transfer payments, conduct a foreign transaction, or even pay bills online. These are sometimes called “convenience fees."
Prepaid card fees. Many unbanked consumers use prepaid cards to buy things and pay for services. The CFPB is fine with prepaid cards as a transaction source, but it isn't fine with consumers having to pay additional or unadvertised fees just for using them.
Closing costs and home buying fees. Historically, homeownership has been a great way to build personal wealth. However, the CFPB says fees associated with closing on a home, such as document preparation or title insurance, have got to be addressed.
“[They] can act as a significant barrier to families trying to buy a home or refinance and can significantly cut into household equity,” the agency said.
To help it in its crusade, the CFPB is asking consumers to share their stories about junk and service fees. The agency is accepting comments here.