The US Consumer Financial Protection Bureau (CFPB) is ramping up scrutiny of banks and financial services firms to curb ‘exploitative junk fees’.
CFPB director Rohit Chopra said: “Many financial institutions obscure the true price of their services by luring customers with enticing offers and then charging excessive junk fees.
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“By promoting competition and ridding the market of illegal practices, we hope to save Americans billions.”
As per the CFPB’s research, in 2019, banks’ revenue from overdraft and non-sufficient funds (NSF) fees was over $15bn.
Also in 2019, customers paid over $14bn as punitive late fees to major credit card companies, the regulator said.
Chopra said: “In many cases, junk fees often act as penalties, like with non-sufficient funds and credit card late fees, rather than compensation for a legitimate service.”
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By GlobalDataIn some cases, banks charge for the extra services they provide but many customers feel that “these fees are far higher than the service is really worth.”
The CFPB is seeking inputs from the consumers to shape its rulemaking and guidance agenda.
It seeks to further competition in the consumer finance market using its authority to curb such junk fees and end banks’ reliance on these income streams.
Several lenders such as Bank of America and Wells Fargo recently announced that they will reduce or eliminate overdraft fees.
Responding to banks’ move Chopra stated that “this is progress but not enough.”
