Biden, CFPB Take Next Step in Junk Fee Crackdown

In a joint appearance yesterday, President Joe Biden and Rohit Chopra, the Director of the Consumer Financial Protection Bureau announced new guidance that deems a pair of fees charged by financial institutions to “likely” be unfair and unlawful under existing law. The announcement is part of a crackdown on what the federal government is labeling as “junk” fees charged to consumers the involves a number of federal agencies.

This guidance addressed two specific types of fees:

  • What are known as surprise overdraft fees, which occur when an institution displays that a consumer has enough funds in his or her account to cover a transaction, only later to charge the individual an overdraft fee because intervening transactions used up the available funds. Some institutions have been accused of stacking transactions in certain ways to guarantee that overdraft fees are incurred.
  • What are known as surprise depositor fees, which are charged to individuals who deposit checks into their accounts that subsequently bounce because the issuer of the check does not have sufficient funds.

“These are junk fees,” President Biden said. “They benefit big corporations. Not consumers. Not working families. And that changes now.”

Overdraft and non-sufficient funds fees generated more than $15 billion in revenue for banks in 2019, according to CFPB data.

More information about the CFPB’s analysis of overdraft fees is available by clicking here. Guidance about surprise depositor fees is available by clicking here.

“Today’s actions also call into question the CFPB’s process,” said Rob Nichols, the president and chief executive of the American Bankers Association, in a statement. “Rather than propose changes and give the industry and other stakeholders a chance to offer constructive input as is the norm, the Bureau once again has chosen to regulate via press release. Highly regulated banks and the customers they serve deserve better.”

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