the Consumer Financial Protection Bureau (“CFPB”) continued to strengthen its regulatory oversight of the consumer financial services market. On January 26, 2022, the CFPB published an initiative seeking public input on so-called “unwanted fees” in consumer financial services. According to the CFPB, “junk fees” occur when: (i) fees are charged for things that consumers thought were covered by the base price of a product or service; (ii) the charges are unexpected; (iii) the cost of the fees is grossly disproportionate to the cost of the service; or (iv) it is unclear why a fee was charged. The CFPB argues that ‘junk fees’ are harmful to the financial services market because they ‘obscure the true price’ of a service by, for example, offering attractive introductory prices, but then make up the difference by charging various fees. back. on consumers.
The bulletin specifically identified credit card late fees and current account overdraft fees as potential “junk fees” that obscure true service pricing and undermine a competitive financial services marketplace. The purpose of the bulletin is to seek public input on consumer fees in financial services to “develop rules, issue guidance for the industry, and focus supervisory and enforcement resources” in an attempt increase competition in consumer credit and reduce the incidence of so-called ‘junk fees’. ”
The bulletin refers to the CFPB Request for information regarding fees charged by providers of consumer financial products or services (“RFI”), which asks consumers to identify charges associated with “a bank, credit union, prepaid or credit card account, credit card, mortgage, loan, or payment transfers “. Beyond the deposit account and credit card fees identified in the CFPB bulletin, the RFI is also soliciting consumer testimonials regarding fees associated with (i) remittances and payments (bank transfer/ACH, etc. .); (ii) prepaid card fees; (iii) mortgage charges; and (iv) fees associated with other types of loans, such as student loans, car loans, or payday loans. Given the wording of the RFI and the bulletin, it is possible that the Bureau will attack consumer credit charges, even when these charges are well disclosed, if it perceives a strong disconnect between the amount of the charge and the cost of the service resulting in the fee.
The CFPB’s continued focus on fees for financial services is likely to spur an active plaintiffs bar that has created a cottage industry of class action lawsuits against financial institutions alleging insufficient disclosures regarding consumer banking fees. The risks associated with these types of consumer class actions are not negligible. A court recently approved an award of $25 million class action plaintiff’s attorney’s fees, to be paid from a $75 million settlement fund, in a class action lawsuit for bank charges. Financial institutions should also prepare for increased regulatory scrutiny and the possibility of enforcement action following any findings the CFPB draws from the RFI.