Biden Administration Calls on States to Join ‘Junk Fee’ Campaign

White House hosts session alongside CFPB to press states on fees, including those charged by credit unions and banks.

CFPB Director Rohit Chopra on Wednesday called on state officials to use their power to help root out so-called “junk fees” that he said plague consumers.

“States have always been at the forefront of consumer protection,” he said, in a White House session designed to press states on the issue. “The federal government does not have a monopoly on consumer protection.”

The Biden Administration is engaged in a public campaign to push businesses to cut or eliminate fees ranging from surcharges tacked onto the cost of a ticket to a concert or sporting event to overdraft fees charged by credit unions and banks.

Context

The CFPB already has issued a proposed rule that would cut most credit card late fees to $8 and may issue a rule governing overdraft charges.

Credit union and banking trade groups bristle at the term “junk fees,” contending that overdraft programs help consumers make purchases even though they may be a bit short of funds. They also argue that consumers, including credit union members, must opt into an overdraft program.

Supervisory Overview

In addition to speaking at the Biden Administration session, Chopra released the latest CFPB supervisory overview.

“Our report describes a host of illegal junk fee practices that the CFPB has uncovered across the financial services sector,” he said.

The report covers the period between July 1, 2022, and February 1, 2023, and details instances of junk fees found by agency examiners.

For instance, examiners found that financial institutions charged unfair overdraft fees by authorizing a debit made with a positive balance, but later charged an overdraft fee because of intervening transactions that were processed before the debit settled. They also discovered financial institutions that charged consumers multiple insufficient funds fees for a single item.

In addition, the agency said, “CFPB examiners have identified old and new ways that mortgage servicers attempt to run-up unlawful fees that are charged to homeowners.” That, according to the bureau, includes charging the highest late fee amount permitted by a state even though a homeowner’s contract caps the fees below state maximums.

The CFPB report also cites many fees charged on student loans, as well as payday and car title loans as being excessive “junk fees.”

White House Guidance

Accompanying the supervisory overview, the White House issued a guide for state officials who want to crack down on fees at the state level.

“The prevalence of junk fees degrades consumers’ ability to comparison shop by confusing consumers about the true price, enticing (or tricking) consumers into paying more than they should, and reducing companies’ incentives to compete with high quality or lower costs,” the guide states.

It notes further that every state attorney general has the authority to enforce the federal prohibition on Unfair, Deceptive or Abusive Acts or practices. In addition, many state legislatures have enacted their own statutes on UDAAP violations.

“Because many junk fees are likely to be unfair, deceptive, or unconscionable under these state laws, states already have ample authority to attack such practices through enforcement, which (as noted above) many states have already done,” the guidance reads.