CFPB Opens Inquiry Against ‘Junk Fees’

The Consumer Financial Protection Bureau (CFPB) launched an initiative to reduce “junk fees,” a move the agency said will save consumers billions of dollars each year.

“Many financial institutions obscure the true price of their services by luring customers with enticing offers and then charging excessive junk fees,” CFPB Director Rohit Chopra said in a news release Wednesday (Jan. 26). “By promoting competition and ridding the market of illegal practices, we hope to save Americans billions.”

According to the CFPB, companies are increasingly saddling households and families “inflated and back-end” fees, creating a “fee economy” that distorts the free mark system by masking the true cost of products.

“For example, hotels and concert venues advertise rates, only to add ‘resort fees’ and ‘service fees’ after the fact.” the CFPB said. “And fees purportedly charged to cover individual expenses, like paperwork processing, can often greatly exceed the actual cost of that service.”

The agency says its research uncovered numerous areas where back-end fees might conceal the true cost of a product. In 2019, the major credit card companies charged more than $14 billion in punitive late fees. The same year, bank revenue from overdraft and non-sufficient funds fees topped $15 billion.

The CFPB says it is interested in hearing from people about their experience with fees connected to bank, credit union or credit card accounts, as well as mortgage, loans and payment transfers.

They are looking for instances where fees were included for things people thought were covered in the baseline price of a product or service, fees that seemed too high for the service in question or situations where it was unclear why fees were even charged.

The agency says it also wants to hear from small business owners, non-profit organizations, legal aid attorneys, academics and researchers, officials form state and local government, and financial institutions, including small banks and credit unions.

Read more: CFPB to Probe College Loan Programs

Last week, the CFPB said it planned to look into post-secondary schools which extend private loans to students. The agency said it is concerned about the borrower experience with institutional loans, as students have faced high interest rates and harsh collection practices.