US Consumer Watchdog Eyes Expansion of ‘Junk Fee’ Crackdown Ahead of 2024 Election

The U.S. Consumer Financial Protection Bureau (CFPB) is poised to expand its crackdown on hidden or excessive financial fees, often referred to as “junk fees,” as the 2024 presidential race heats up. If Vice President Kamala Harris succeeds in her bid for the White House, the CFPB could potentially target billions more in fees associated with mortgages, credit reporting and other financial services.

Expunging these “junk fees” has been a cornerstone of President Joe Biden’s economic agenda, a key effort aimed at reducing the cost of living amid inflation concerns. According to Reuters, Democratic presidential candidate Harris has vowed to continue the initiative, ensuring consumer protection remains a priority in a second term of Democratic leadership.

The current CFPB director, Rohit Chopra, has focused on regulating approximately $20 billion in annual fees, including bank overdrafts, credit card penalties and bounced-check charges. However, there is a significant portion of undisclosed or excessive fees still in the crosshairs. According to Reuters, the CFPB could target additional fees in areas such as mortgage closing costs and business-to-business charges, which are often passed down to consumers.

The financial watchdog is particularly concerned with closing costs, which can significantly inflate the cost of homeownership. Per CFPB data, median loan costs rose more than 20% in 2022, with homebuyers and those refinancing their mortgages paying nearly $24 billion in total. A significant portion of these costs stems from title insurance, which can account for 0.5% to 1% of the home’s purchase price. Another rising concern is the cost of borrower credit reports, which some mortgage lenders report have surged by up to 400% since 2022.

“If Democrats win, you’re going to see continued pressure on all types of fees,” said Isaac Boltansky, director of policy research at BTIG, per Reuters.

Despite the push for fee transparency, financial institutions are pushing back. Banks argue that these fees are clearly disclosed and vital for providing credit to consumers. Bill Hulse, senior vice president at the U.S. Chamber of Commerce, which is leading legal efforts to reverse a CFPB rule capping credit card late fees, claimed, “U.S. consumers don’t want new regulations that make it more expensive to use their credit cards.”

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The CFPB remains undeterred. According to a CFPB official who spoke to Reuters, the agency is expected to finalize regulations on overdraft and bounced-check fees by the end of the year. The next significant focus will be mortgage-related fees, particularly as they pertain to closing costs and credit reporting charges. This regulatory trajectory is likely to persist if Harris wins the presidency, as she has seen the efficacy of the Biden administration’s efforts firsthand.

Financial industry groups have been quick to mobilize in response to the CFPB’s actions. The Consumer Bankers Association has launched a campaign to counter what it sees as a negative narrative surrounding so-called “junk fees.” Lindsey Johnson, CEO of the association, emphasized the need for banks to have a voice in the conversation, stating, “What we don’t want to see repeated is this administration’s campaign against banks.”

On the political front, there are signs that a Republican victory in 2024 could change the regulatory landscape. Analysts believe that a win by Republican candidate Donald Trump could lead to a rollback of some of the CFPB’s fee regulations. However, recent statements by Trump, pledging to cap credit card interest rates, suggest that even under his administration, some financial reforms could continue.

Source: Reuters