ACA Issues Clarifying Comments to CFPB on ARM Industry’s Use of Fees

The comments focus on grouping all fees associated with consumer financial products as “junk fees” and the lack of evidence of improper use of fees in the ARM industry.

04/04/2022 2:00 P.M.

3.5 minute read

ACA International submitted comments to the Consumer Financial Protection Bureau on its Request for Information (RFI) regarding fees related to consumer financial products and services April 1 clarifying the use of fees in the debt collection industry.

The CFPB sought comments from the public and businesses related to fees that are not subject to competitive processes that ensure fair pricing and has received more than 38,000 so far. The comment deadline is April 11.

According to the CFPB, the public comments will serve to assist the bureau policymakers in exercising its enforcement, supervision, regulation and other authorities to create fairer, more transparent and competitive consumer financial markets, according to the RFI.

In its RFI, the CFPB notes that in 2017, “after observing many abuses,” it issued a Compliance Bulletin on unfair, deceptive, and abusive acts or practices related to fees for making payments over the phone, and potential violations of the Fair Debt Collection Practices Act. The RFI states, “These kinds of convenience fees are still common.”

“However, the CFPB does not provide any evidence or date of abuse by ARM industry participants occurring in this area,” ACA states in its comments. “ACA takes issue with including this vague and unsupported accusation in an RFI and is unaware of any pattern of abusive behavior in this area among our members.”

Following are additional key points in ACA’s comments:

  • Congress recently noted in a letter that “the CFPB broadly groups all fees associated with consumer products and services as ‘junk fees’ and does not provide any legal definition of the term or any statutory authority to define such a term.” ACA strongly agrees with this concern. Moreover, we are disappointed that it has been a trend in recent months for the CFPB to use pejorative terms when describing not only the debt collection industry, but also most participants in the financial services industry.
  • Simple economic analysis would hold that some costs must be passed on to consumers for those working in the financial marketplace to be able to continue to operate and keep the economy churning, without an increased cost of credit. As noted in the bureau’s recent Taskforce on Federal Consumer Financial Law Report, the costs associated with not making timely payments for consumers is also an important part of encouraging accountability in the marketplace.

“Providing clear disclosures and being transparent is important. However, starting from the premise that any and all fees are “junk” is problematic,” said ACA’s former Vice President and Senior Counsel of Federal Advocacy Leah Dempsey, in the letter. Dempsey will start a position as shareholder at Brownstein, Hyatt, Farber Schreck, April 11, and will work with ACA in a similar capacity.

“ACA instead encourages the CFPB to focus on education and financial literacy efforts to help consumers better understand steps they can take to avoid those charges,” Dempsey said. “The CFPB is unclear in its RFI about its intended actions in this space, beyond making broad and unsupported accusations against the debt collection industry and using combative words to describe the entire financial services marketplace. If there is substantive information that points to trends to this area in the future, we look forward to a more robust discussion.”

The opportunity to submit comments to the bureau is open through April 11. The bureau is interested in comments on fees associated with consumers’ bank, credit union, prepaid or credit card account, mortgage, loan or payment transfers.

The CFPB is also 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.

For more updates on ACA’s advocacy work, such as regulatory and congressional updates, you can register now for the Washington Insights Fly-In, May 18-19 in Washington, D.C.

If you have executive leadership updates or other member news to share with ACA, contact our communications department at [email protected]. View our publications page for more information and our news submission guidelines here.

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