CFPB Continues Push Against ‘Unavoidable’ Fees, Issues Compliance Bulletin

As part of its crackdown on what it calls “junk” fees, the Consumer Financial Protection Bureau yesterday issued a compliance bulletin to companies that distribute government payments to consumers via debit cards, making sure they are not running afoul of the Electronic Funds Transfer Act (EFTA) by not forcing consumers to receive benefits at a specific institution and ensuring consumers have choices.

A copy of the bulletin can be accessed by clicking here.

Under the EFTA, entities are barred from requiring consumers to establish an account for receipt of electronic fund transfers with a particular financial institution as a condition of employment or receipt of government benefits. The objective is to ensure that consumers receiving government benefits have a choice in how they receive those funds.

The CFPB is concerned that some entities may be “illegally siphoning money” from consumers by charging fees to allow consumers to access their funds on debit cards that the entities forced the consumers to use — removing the choices that are required under the EFTA and Regulation E. The CFPB pointed to an enforcement action it took against JPay, which was fined $6 million for charging fees when issuing debit cards to individuals who were being released from prison or jail.

“When companies act as gatekeepers for government benefits, they often abuse that power to extract unavoidable fees,” said CFPB Director Rohit Chopra, in a statement. “Barriers to choice kill competition and can harm families who need every dollar to make ends meet.”

Last month, the CFPB announced a Request for Information seeking to learn more about what it calls “exploitative junk fees” charged by banks and financial services companies. This could include convenience fees that are sometimes charged by companies, including those in the accounts receivable management industry, for allowing consumers to make payments via debit cards.

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