[Federal Register Volume 87, Number 22 (Wednesday, February 2, 2022)]
[Notices]
[Pages 5801-5803]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-02071]


=======================================================================
-----------------------------------------------------------------------

BUREAU OF CONSUMER FINANCIAL PROTECTION

[Docket No.: CFPB-2022-0003]


Request for Information Regarding Fees Imposed by Providers of 
Consumer Financial Products or Services

AGENCY: Bureau of Consumer Financial Protection.

ACTION: Request for public comment.

-----------------------------------------------------------------------

SUMMARY: The Consumer Financial Protection Bureau (Bureau or CFPB) is 
seeking comments from the public related to fees that are not subject 
to competitive processes that ensure fair pricing. The submissions to 
this request for information will serve to assist the CFPB and 
policymakers in exercising its enforcement, supervision, regulatory, 
and other authorities to create fairer, more transparent, and 
competitive consumer financial markets.

DATES: Comments must be received on or before March 31, 2022.

ADDRESSES: You may submit comments, identified by Docket No. CFPB-2022-
0003, by any of the following methods:
    <bullet> Electronic: http://www.regulations.gov. Follow the 
instructions for submitting comments.
    <bullet> Email: <a href="/cdn-cgi/l/email-protection#0c4f4a5c4e534a6968697e6d605e696b657f78697e4f6361616962787f4c6f6a7c6e226b637a"><span class="__cf_email__" data-cfemail="fdbebbadbfa2bb9899988f9c91af989a948e89988fbe9290909893898ebd9e9b8d9fd39a928b">[email protected]</span></a>. Include 
Docket No. CFPB-2022-0003 in the subject line of the message.
    <bullet> Mail/Hand Delivery/Courier: Comment Intake--Fee 
Assessment, Consumer Financial Protection Bureau, 1700 G Street NW, 
Washington, DC 20552. Please note that due to circumstances associated 
with the COVID-19 pandemic, the CFPB discourages the submission of 
comments by hand delivery, mail, or courier.
    Instructions: The CFPB encourages the early submission of comments. 
All submissions should include document title and docket number. 
Because paper mail in the Washington, DC area and at the CFPB is 
subject to delay, commenters are encouraged to submit comments 
electronically. In general, all comments received will be posted 
without change to https://www.regulations.gov. In addition, once the 
CFPB's headquarters reopens, comments will be available for public 
inspection and copying at 1700 G Street NW, Washington, DC 20552, on 
official business days between the hours of 10 a.m. and 5 p.m. Eastern 
Time. At that time, you can make an appointment to inspect the 
documents by telephoning 202-435-7275.
    All comments, including attachments and other supporting materials, 
will become part of the public record and subject to public disclosure. 
Proprietary information or sensitive personal information, such as 
account numbers or Social Security numbers, or names of other 
individuals, should not be included. Comments will not be edited to 
remove any identifying or contact information.

FOR FURTHER INFORMATION CONTACT: Brian Shearer, Senior Advisor; Grace 
Bouwer, Advisor, Public Engagement, Director's Front Office, Office of 
the Director at 202-435-7700. If you require this document in an 
alternative electronic format, please contact 
<a href="/cdn-cgi/l/email-protection#185b5e485a47597b7b7d6b6b717a7174716c61587b7e687a367f776e"><span class="__cf_email__" data-cfemail="20636670627f6143434553534942494c49545960434650420e474f56">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

I. Background

    Consumers can only realize the benefits of competition if companies 
transparently advertise the true price of their products or services, 
and the full price is subject to the competitive process. Both 
empirical studies and theoretical models suggest that when companies 
use hidden back-end fees--which are mandatory or quasi-mandatory fees 
added at some point in the transaction after a consumer has chosen the 
product or service based on a front-end price--it can lure consumers 
into making purchasing decisions based on a perceived lower price.\1\ 
In addition, when a company charges for individual activities that are 
typical attributes of a product or service, it can give the company the 
power to substantially overcharge for those activities because 
consumers are not choosing a provider at the time they choose to engage 
in the activity. Well-known examples of such ``junk fees'' include 
resort fees added to hotel bills and service fees added to concert 
ticket prices. Government agencies and economists have raised concerns 
about the ways in which America's growing ``fee economy'' undermines 
competition.\2\
---------------------------------------------------------------------------

    \1\ https://www.ucl.ac.uk/~uctpbwa/papers/price-framing.pdf; 
https://pages.stern.nyu.edu/~xgabaix/papers/shrouded.pdf.
    \2\ https://obamawhitehouse.archives.gov/sites/whitehouse.gov/files/documents/hiddenfeesreport_12282016.pdf.

---------------------------------------------------------------------------

[[Page 5802]]

    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.\3\ The CFPB 
has grown increasingly concerned that consumer finance has become part 
of this ``fee economy.'' Exploitative junk 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.
---------------------------------------------------------------------------

    \3\ 12 U.S.C. 5511(a).
---------------------------------------------------------------------------

    Many Americans have experienced inflated or surprise fees that, 
however nominally voluntary, are not meaningfully avoidable or 
negotiable in the moment. These fees in consumer finance can take many 
forms: Penalty fees such as late fees, overdraft fees, non-sufficient 
funds (NSF) fees, convenience fees for processing payments, minimum 
balance fees, return item fees, stop payment fees, check image fees, 
fees for paper statements, fees to replace a card, fees for out-of-
network ATMs, foreign transaction fees, ACH transfer fees, wire 
transfer fees, account closure fees, inactivity fees, fees to 
investigate fraudulent activity, ancillary fees in the mortgage closing 
process, and more. These fees have become the norm among financial 
services that Americans rely on every day, and a substantial amount of 
the revenue earned by financial services companies comes from these 
fees. The following are a few examples from select products and 
markets:
    Deposit Accounts. The price of a deposit account is made up of, 
among other fees, account maintenance fees, minimum balance fees, 
savings transfer fees, NSF fees, overdraft fees, and ATM fees. 
Overdraft and NSF fees are back-end fees that make up the majority of 
total revenue banks derive from deposit accounts. Overdraft and NSF 
fees exceeded $15.4 billion in 2019.\4\ By comparison, banks make only 
about $1 billion annually in account maintenance fees. Since the back-
end fees are the bulk of the price, there is effectively no price 
competition amongst the major banks for deposit accounts. Only recently 
have companies started to substantially vary their overdraft practices. 
This is of course a positive development, but these changes will not 
reverse the trend of pricing deposit accounts primarily through back-
end fees.
---------------------------------------------------------------------------

    \4\ https://www.consumerfinance.gov/about-us/newsroom/cfpb-research-shows-banks-deep-dependence-on-overdraft-fees/.
---------------------------------------------------------------------------

    Credit Cards. Fees represent about 20% of the total cost of credit 
cards. Card issuers charged $23.6 billion in fees in 2019 alone and 
nearly $14 billion of those fees were late fees not subject to 
competitive pricing pressure.\5\ Nearly every bank charges the same for 
late fees--the maximum allowed by law of $30 for the first late payment 
and $41 for subsequent late payments--and the average late fee has 
increased to $31, nearing the average of $33 before the Credit Card 
Accountability Responsibility and Disclosure (CARD) Act of 2009.\6\
---------------------------------------------------------------------------

    \5\ https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2021.pdf, at 46.
    \6\ https://files.consumerfinance.gov/f/documents/cfpb_consumer-credit-card-market-report_2021.pdf, at 54-57.
---------------------------------------------------------------------------

    Remittances and Payments. Financial institutions charge 
``convenience'' fees on payment transfers, return item fees, stop 
payment fees, check image fees, online or telephone bill pay fees, ACH 
transfer fees, and wire transfer fees. International transfers are 
subject to a significant number of fees as well. In 2017, after 
observing many abuses, the CFPB issued a Compliance Bulletin on unfair, 
deceptive, and abusive acts or practices relating to fees for making 
payments over the telephone, and potential violations of the Fair Debt 
Collection Practices Act (FDCPA).\7\ These kinds of convenience fees 
are still common.
---------------------------------------------------------------------------

    \7\ CFPB Compliance Bulletin 2017-01, Phone Pay Fees (July 31, 
2017), available at https://files.consumerfinance.gov/f/documents/201707_cfpb_compliance-bulletin-phone-pay-fee.pdf.
---------------------------------------------------------------------------

    Prepaid Accounts. Prepaid cards represent a way for many unbanked 
consumers and individuals with limited resources to have access to 
basic financial services--yet many accounts carry fee structures that 
make it challenging for consumers to pick the right product based on 
their needs. Consumers frequently select a product based on a monthly 
rate only to find out that the ``add-on'' fees for regular activities 
such as transaction fees, cash reload fees, balance-inquiry fees, 
inactivity fees, monthly service fees, and card cancellation fees, 
among others, overshadow the quoted monthly charge.
    Mortgages. Mortgages facilitate homeownership for millions of 
people, and, through homeownership, allow millions of families to build 
and maintain intergenerational wealth. But priced into most mortgages 
are thousands of dollars in application fees and closing costs, which 
few people are well-positioned to shop on. These fees can act as a 
barrier to homeownership, strip wealth from homeowners accessing their 
equity through refinancing or home sales, and deter some homeowners 
from refinancing when doing so would lower total housing costs and be 
financially advantageous. Advocates and reporters have noted that many 
closing costs, like title insurance,\8\ may not always be subject to 
standard or appropriate competitive forces. Even aside from inflated 
and padded fees rolled into the mortgage at closing, homeowners can 
find themselves forced to pay fees for making payments over the phone 
or online or even for the servicer's bill pay service. Borrowers who 
face financial hardship and struggle to make mortgage payments can find 
themselves unable to catch up due to the snowballing of a plethora of 
fees related to the mortgage delinquency. Monthly property inspection 
fees, new title fees, legal fees, appraisals and valuations, broker 
price opinions, force-placed insurance, foreclosure fees, and 
miscellaneous, unspecified ``corporate advances'' can all price a 
homeowner out of a home.
---------------------------------------------------------------------------

    \8\ https://www.nclc.org/images/pdf/foreclosure_mortgage/archive/title_insurance_testimony042606.pdf; https://www.texasobserver.org/entitled-to-profit-in-texas-title-insurance-is-a-total-scam/.
---------------------------------------------------------------------------

    Other Loans. The CFPB is interested in other loan origination and 
loan servicing fees, including for student loans, auto loans, 
installment loans, payday loans, and other types of loans. For example, 
some servicers charge fees to reschedule payment dates or make online 
or phone payments. Loan originators often charge application fees and 
some even charge to receive loan proceeds in an expedited manner.

II. Request for Comment

    This request for information seeks information from the public on 
how junk fees--exploitative, back-end, hidden, or excessive fees--have 
impacted peoples' lives. The CFPB is particularly interested in hearing 
from individuals (including older consumers, students, servicemembers, 
consumers of color, and lower-income consumers), social services 
organizations, consumer rights and advocacy organizations, legal

[[Page 5803]]

aid attorneys, academics and researchers, small businesses, financial 
institutions, and state and local government officials.
    The CFPB welcomes stakeholders to submit stories, data, and 
information about fees. To assist commenters in developing responses, 
the CFPB has crafted the below questions that commenters may answer. 
However, the CFPB is interested in receiving any comments relating to 
fees in consumer finance.
    1. If you are a consumer, please tell us about your experiences 
with fees associated with your bank, credit union, prepaid or credit 
card account, credit card, mortgage, loan, or payment transfers, 
including:
    a. Fees for things you believed were covered by the baseline price 
of a product or service.
    b. Unexpected fees for a product or service.
    c. Fees that seemed too high for the purported service.
    d. Fees where it was unclear why they were charged.
    2. What types of fees for financial products or services obscure 
the true cost of the product or service by not being built into the 
upfront price?
    3. What fees exceed the cost to the entity that the fee purports to 
cover? For example, is the amount charged for NSF fees necessary to 
cover the cost of processing a returned check and associated losses to 
the depository institution?
    4. What companies or markets are obtaining significant revenue from 
back-end fees, or consumer costs that are not incorporated into the 
sticker price?
    5. What obstacles, if any, are there to building fees into up-front 
prices consumers shop for? How might this vary based on the type of 
fee?
    6. What data and evidence exist with respect to how consumers 
consider back-end fees, both inside and outside of financial services?
    7. What data and evidence exist that suggest that consumers do, or 
do not, understand fee structures disclosed in fine-print or 
boilerplate contracts?
    8. What data and evidence exist that suggest that consumers do or 
do not make decisions based on fees, even if well disclosed and 
understood?
    9. What oversight and/or policy tools should the CFPB use to 
address the escalation of excessive fees or fees that shift revenue 
away from the front-end price?

Rohit Chopra,
Director, Bureau of Consumer Financial Protection.
[FR Doc. 2022-02071 Filed 2-1-22; 8:45 am]
BILLING CODE 4810-AM-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>