CFPB’s Supervisory Highlights Junk Fee Special Edition

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Article Highlights:

On March 8, 2023 the Consumer Financial Protection Bureau (CFPB) released its first Junk Fees Special Edition of its quarterly Supervisory Highlights. Since Rohit Chopra has taken the helm of the CFPB, there has been a heightened focus on certain kinds of fees charged to consumers, dubbed “junk fees”. The agency has not been shy about its effort to eliminate and/or reduce these fees, and the industry has seen numerous banks and financial institutions either eliminate or reduce certain fees, especially overdraft fees.

The report outlines key areas where “unlawful” junk fees are being charged to consumers, and includes:

  • Deposit Accounts
    • Surprise overdraft fees
    • Multiple non-sufficient funds (NSF) fees
  • Auto Loan Servicing
    • Out-of-bounds and fake late fees
    • Inflated estimated repossession fees
    • Pay-to-play payment fees and kickback payments
  • Mortgage Loan Servicing
    • Excessive late fee amounts
    • Fees for unnecessary property inspections
    • Fake Private Mortgage Insurance (PMI) premium charges
    • Failure to waive fees for homeowners entering some loss mitigation options

“For years, junk fees have been creeping across the economy,” said CFPB Director Rohit Chopra. “Our report describes a host of illegal junk fee practices that the CFPB has uncovered across the financial services sector.” The report gives specific examples of how these “junk” fees were assessed to consumers, and it also give institutions some guidance for looking at their own practices to ensure they are not engaged in these practices. While the CFPB administers several laws and regulations that may touch on fees including, but not limited to, the Credit Card, Accountability, Responsibility and Disclosure Act of 2009 (CARD Act),2 the Fair Debt Collection Practices Act (FDCPA), Regulation Z, and the prohibition against unfair, deceptive, or abusive acts or practices (UDAAP) under the Consumer Financial Protection Act of 2010 (CFPA), UDAAP is the most far reaching of these, as it can apply to the practices related to any fee determined a “junk” fee.

Financial institutions should review this report against the practices of their institutions, and also against the updated UDAAP Examination Procedures released by the CFPB in 2022, which outlines what examiners may look for as it relates to UDAAPs in “junk” fees.