Mark Lennihan/AP Photo
On Wednesday, the Biden-Harris administration introduced new guidance and restrictions for “junk fees,” the excess fees charged by companies that are often hidden or undisclosed. My colleague Robert Kuttner has covered the overall details, including the Federal Trade Commission’s proposal to ban all hidden junk fees that aren’t revealed to consumers until after they commit to purchasing the product or service. But part of the announcement included a new CFPB guidance that would require banks to provide consumers with basic account information without being charged.
This guidance has been years in the making. In 2010, when Congress passed the Consumer Financial Protection Act as part of the Dodd-Frank reform, banks with more than $10 billion in assets were required to provide account information when asked, but no further guidance or enforcement has been issued in the decade since the law was passed. Last year, the Consumer Financial Protection Bureau asked for public comment on the quality of customer service at big banks, noting a trend in which large banks are moving “toward algorithmic banking and away from relationship banking.” The announcement asked for public comment regarding what information is useful to a consumer and how easy it is to access that information, among other things.
Customers complained about struggling to obtain information, dealing with customer service agents that bounced them around, and being charged fees to ultimately access what they needed. Some of this information is available on the bank’s website or mobile app or through a chatbot, but customers have to know how to navigate that process and find what they need. As the CFPB pointed out in June, chatbots often do not have answers for individual accounts and often create a dead end.
Of course, customers can eventually find the information, but they often must pay a price to access the basics about their own money. “When large financial institutions charge fees to respond to those requests, they impede customers from obtaining the essential information they are entitled to under federal law,” the CFPB wrote in the official announcement, which was also released Wednesday. The agency is planning to release a separate rule that would force banks to make switching institutions easier, by requiring the sharing of information at the request of the consumer.
The CFPB’s advisory opinion states that, generally, “requiring a consumer to pay a fee or charge to request account information, through whichever channels the bank uses to provide information to consumers, is likely to unreasonably impede consumers’ ability to exercise [their] right.” Examples of fees that likely unreasonably burden consumers include those on checks of customer deposit balances, which are critical to avoid overdrawing on an account. In addition, copies of past monthly statements or check images, which could be necessary in determining account balances and periodic payments, must be given for free, as well as information regarding the payoff amount or interest rate of a loan and other requests. The agency makes it clear that the technical name of the fee is of little concern; if it unreasonably impedes the consumer, it’s probably illegal.
The CFPB lays out what information must be supplied, such as account balances, transaction history, and forward steps for loan payoff. The CFPB also issued guidance with regard to the timeliness of a response to a request, and the “accuracy and completeness” of a request. The agency notes many instances of requiring something from a consumer that do not violate the law, such as identity verification and data security measures.
The CFPB has already had success with one kind of junk fee which is imposed on customers for making account withdrawals that are more than their balance (known as “non-sufficient funds,” or NSF). In an accompanying report, the agency estimated that almost two-thirds of all larger banks with over $10 billion in assets had eliminated NSF fees, accounting for about 97 percent of all NSF fee revenue. This has saved primarily low-income customers almost $2 billion per year.
Junk fees are a thorn in the side of consumers. The Biden administration has not only taken steps to eliminate junk fees in a variety of areas, including consumer finance, but states have moved forward as well. California Gov. Gavin Newsom this week signed a ban on junk fees that are hidden from the consumer.
Many of these junk fees target travel and entertainment, like airfares, hotel rooms, and concert tickets. But as others have noted, junk fees in consumer finance often impede low-income and marginalized groups. Overall, customers lose an estimated $65 billion to these fees on a yearly basis. By requiring banks to waive unnecessary fees, and companies to fully disclose all fees up front, the Biden administration is taking a step to put money back into people’s pockets—money that should have never left.
