A Deeper Dive into Consumer Protection: Increased Focus on Provider Fees
On January 26, 2022, the Consumer Financial Protection Bureau (CFPB) announced an initiative to save consumers billions of dollars a year by reducing exploitative fees (as defined by the CFPB) charged by banks and financial companies. To assist the CFPB in gathering relevant information for this initiative, a comment period was opened and is scheduled to close on March 31, 2022. The CFPB is soliciting feedback from the public regarding their experiences with fees associated with their bank, credit union, prepaid or credit card account, mortgage, loan, or payment transfers including the following: fees for things people believed were covered by the base price of a product or service, unexpected fees for a product or service, fees that seemed too high for the service offered, and/or fees where it was unclear why they were charged. This request seeks information from the public on how these fees—exploitative, back-end, hidden, or excessive fees—have impacted people's lives.
In addition, the CFPB noted it is interested in hearing 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.
One may ask, “Why is the CFPB interested in this information now?”
According to the CFPB:
The Consumer Financial Protection Act (CFPA) directs the CFPB to enforce Federal consumer law for the purpose of ensuring consumer financial markets are fair, transparent, and competitive. The CFPB has grown increasingly concerned that consumer finance has become part of this ‘fee economy.’ Exploitative … fees charged by banks and non-bank financial institutions have become widespread, with the potential effect of shielding substantial portions of the true price of consumer financial products and services from competition. The CFPB is concerned about fees that far exceed the marginal cost of the service they purport to cover, implying that companies are not just shifting costs to consumers, but rather, taking advantage of a captive relationship with the consumer to drive excess profits. Excessive and exploitative fees, whether predictable and transparent to the customer or not, can add up and pose significant costs to people, especially those with low wealth and income.
As the economy begins to rebound from the financial hardships the pandemic imposed, consumer fees may become an increased area of focus during upcoming regulatory exams. As we continue through the first quarter of 2022, banks and financial companies should prepare by performing an overall analysis of their current fees charged to the consumer. Performing this analysis proactively can help banks and financial companies get ahead of potential examiner scrutiny.
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