The head of the CFPB reinforces the rhetoric of “junk fees”

Banks will be put under the microscope as part of the Consumer Financial Protection Bureau’s initiative to eliminate so-called junk fees, chief executive Rohit Chopra warned Thursday.

The collection of free royalties has spread to every sector of the economy — from hotel fees to concert ticket surcharges to insufficient funds charges imposed by banks, Chopra said. The proliferation of itemized charges on invoices obscures the true price of products and services, making it harder for consumers to shop by price, he said.

“People are sick of this fee drift that’s spreading throughout the economy,” Chopra said in an online chat with The Washington Post that was open to the public. “The bank is a bastion of many of these fees, and consumers want to know what’s going on with that. In many cases, these are charges for which no service is provided or for which the bank or financial institution does not even do any work. »

“We expect us to refine our prudential control over [financial] institutions that are dependent on these fees,” says CFPB Director Rohit Chopra. “I think all options are on the table.

The examination of bank charges should intensify in terms of surveillance. It remains unclear if the CFPB plans to propose a rule to limit these fees.

“What we really need to understand is: are financial institutions competing on an upfront price and can consumers buy it, or are all of these unwanted fees basically being rolled in later in the process? ” Chopra asked. “We are still looking at all of our options on this. We expect us to refine our prudential oversight of institutions that are dependent on these fees. I think all options are on the table.

Chopra also offered a limited compliment to the dozen large and medium-sized banks that fell or braked overdraft fees – or has pledged in recent weeks to do so.

“I think a lot of institutions are realizing that in the long run, they have to stop relying on these fees,” he said. “We are already seeing some of it. Honest actors are already staying ahead of the game, and I expect more to follow. It’s a small step in the right direction. »

Banks collected about $15.5 billion in overdraft and insufficient funds fees in 2019, although the percentage of fee revenue has been declining for years, according to the CFPB.

Richard Hunt, president and CEO of the Consumer Bankers Association, accused Chopra of making unsubstantiated claims about fees in his latest attack on the banking industry. The association says the fee crackdown is unjustified.

“The office should focus on seeking feedback and working in tandem with [bankers] — the very people on the front lines who interact with customers every day — to recognize the value these products and services have in the lives of the people we all work to serve,” Hunt said in a press release.

When asked about cryptocurrency, Chopra spoke generally about consumers needing a real person to talk to in a business if something goes wrong.

“Most of its use right now is really in speculative trading,” Chopra said. “I think there’s a big question that a lot of people ask me when we talk or think about crypto, and one of the things they wonder is who do they go to when something doesn’t do not go?”

During the crypto discussion, Chopra reiterated his concerns that big tech companies are looking to gain too much control over the financial system.

“More and more companies follow us, collect our data and monetize it. And I really wonder what these giant tech companies are doing,” he said. “It’s a concern when it comes to how Big Tech is gobbling up more and more power in this country.”

In December, the CFPB launched investigation buy now/pay later installment loans, which have become a $100 billion market. Chopra said the office is trying to understand how the business model works and what its adoption means for young consumers in particular.

“There are questions that we have asked about how this collected data is used and how the credit report works with all of this,” he said.

In one blog post On Thursday, the CFPB released a list of the top 20 banks based on overdrafts and insufficient funds fee income for the nine months ended Sept. 30.

Last year, Wells Fargo at the top of the list earning $1 billion in commission income, followed by JPMorgan Chase with $924 million and Bank of America earning $823 million. TD Bank came in a distant fourth with $347 million in fee income.

Rebecca Borne, CFPB’s Engagement and Policy Manager, and Amy Zirkle, CFPB’s Payments and Deposits Program Manager, wrote in the blog that the CFPB is working to reduce banks’ reliance on overdraft fees. and insufficient funds under its larger initiative to reduce unwanted fees to save consumers billions of dollars.

Yet, the vast majority of Bank charges are covered, if not prescribed, by existing laws including the Truth in Lending Act 1968 and the Credit Card Liability and Disclosure Accountability and Disclosure Act 2009.

The CFPB is also looking 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 card,” Chopra said. “So that’s something we’re looking at at all levels.”

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