CFPB signals crackdown on hidden fees for banks and credit cards

Rohit Chopra, director of the Consumer Financial Protection Bureau.

Alex Edelman/Bloomberg via Getty Images

The Consumer Financial Protection Bureau on Wednesday reported a broad crackdown on hidden and excessive fees charged by banks, mortgage lenders and other financial entities.

The federal agency, created following the 2008 financial crisis, is while searching consumer feedback about so-called unwanted charges associated with their bank, credit union, prepaid account or credit card, mortgage, loan, or payment transfer.

These experiences with a product or service include: Costs that people thought were covered by its base price; unforeseen costs; fees that seemed too high; and fees for which it was unclear why they were charged, according to the agency’s announcement Wednesday.

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There has been an “explosion” of junk fees, such as overdraft fees charged by banks, late fees charged by credit card companies and closing costs when buying a home, CFPB Director Rohit Chopra said in a press call Wednesday morning.

“In many cases, unwanted charges act as penalties” instead of compensation for legitimate service, according to Chopra, who was appointed by President Joe Biden. They also make it difficult for consumers to choose a product or service because they don’t know its true upfront cost, Chopra said.

The CFPB will use public feedback to target new rules, provide guidance to businesses and focus its monitoring and enforcement resources, the agency said. The comment period ends March 31.

“Today, with our request for public comment on junk fees, we are beginning the process of ending banks’ reliance on these operating revenue streams,” making costs more transparent and enabling potentially saving American consumers billions of dollars, Chopra said.

Richard Hunt, president and chief executive of the Consumer Bankers Association, a trade group representing retail lenders, said the CFPB initiative was an attempt to “create fear”, calling it “fuzzy math to its best and political theater at its worst”.

“The reality is that, despite their claims to the contrary, overdraft fees as a percentage of total industry revenue were less than 2% in 2019,” Hunt said in an emailed statement. “The Bureau has a responsibility to communicate with clarity and precision – not with overblown rhetoric to attack an industry.”


Credit card companies won $14 billion “punitive” late fees in 2019, while banks gained $15 billion in overdraft and insufficient funds fees, estimates the CFPB.

The initiative is also a response to Biden to call to spur more competition in the U.S. economy, according to Chopra, who called the high and inflated fees an anti-competitive practice that has grown with industry consolidation.

This is progress, but it is not enough.

Rohit Chopra

Director of CFPB

“Capitalism without competition is not capitalism, it is exploitation,” Biden said noted Monday during a meeting with the White House Competition Council.

Hunt pushed back against the idea that the banking industry was anti-competitive.

“The well-regulated and well-supervised banking sector is also among the most competitive in the world,” he said. “Consumers benefit from being able to choose one of more than 5,000 banks nationwide to meet their financial needs.”

Some banks like Bank of America and Capital One have recently decided to eliminate or reduce overdraft fees on their own.

“It’s progress, but it’s not enough,” Chopra said of some big banks adopting more consumer-friendly policies.

It is also somewhat unclear to what extent the CFPB will be able to regulate the fees charged by lenders. Input from the public will better help the agency focus its efforts, according to a senior CFPB official speaking on the merits.

“We have substantial powers, rule-making,” the official said. “We’re going to use our powers as best we can.”

The CFPB is also seeking public comment from small business owners, nonprofit organizations, legal aid attorneys, academics and researchers, state and local government officials, and financial institutions, including small banks and credit unions, he said.

The agency also has a separate service complaints database related to all financial products and services.