The White House and regulators are acting across the board in their focus on “junk fees,” including proposed rulemakings and guidance.
10/18/2023 1:25 P.M.
2.5 minute read
A series of actions on “junk fees” came together last week at the federal level and with a new state law in California.
The Federal Trade Commission issued a proposed rule on fees charged for goods and services that have little to no value for consumers, ACA International previously reported.
The FTC received more than 12,000 comments on whether a rulemaking would help eliminate these fees and how they impact consumers’ personal spending or businesses, according to a news release from the FTC.
Concurrent with the proposal, the White House released a fact sheet with an overview of the FTC’s work on the fees as well as that of the Consumer Financial Protection Bureau.
According to a client alert from Brownstein Hyatt Farber Schreck, the federal actions related to “junk fees” could have broad impacts for many industries.
These actions aren’t only occurring at the federal level. The alert from Brownstein notes that in California the governor signed a law, S.B. 478, to ban “junk fees” and require businesses to disclose any fees to consumers in advance.
CFPB Actions
The CFPB issued an advisory opinion on fees charged by banks for customer service as well as a special edition of its Supervisory Highlights report focused on its efforts to stop “junk fees.”
If the FTC’s proposed rule is finalized, the CFPB would have enforcement authority as well.
Meanwhile, the bureau’s advisory opinion references “a provision enacted by Congress which generally prohibits large banks and credit unions from imposing unreasonable obstacles on customers, such as charging excessive fees, for basic information about their own accounts.”
The Supervisory Highlights report focuses on fees related to bank account deposits, auto loan servicing and remittances found during supervisory examinations between February and August 2023, according to a news release from the CFPB.
ACA’s Take
The CFPB’s advisory opinion focuses mainly on other sectors of financial services, but it and the FTC’s proposed rule serve as a reminder of the regulators’ broad approach to grouping all fees associated with consumer products into the term “junk fees.”
In April 2022, ACA International submitted comments (PDF) to the CFPB on its Request for Information regarding fees related to consumer financial products and services, clarifying the use of fees in the debt collection industry.
Congress also recently noted in a letter (PDF) 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, and moreover, is 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.
An article from ACA CEO Scott Purcell published in American Banker challenged regulators’ approach to “junk fees” at the federal level.
Fee targeting by the Biden administration, CFPB and FTC will likely continue, and ACA will be monitoring this activity in terms of how it could impact the accounts receivable management industry.
Related Content from ACA International:
CFPB Supervisory Highlights Report Covers ‘Junk Fees’
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