The president’s address promised a ban on “junk fees” from credit cards and other financial products, stemming from the Consumer Financial Protection Bureau’s work in this area. ACA International is continuing advocacy to clarify the industry’s use of fees.
02/08/2023 3:20 P.M.
3 minute read
President Joe Biden covered a growing issue of focus for his administration and regulators—reining in so-called “junk fees” for financial products and services—in his State of the Union address Tuesday.
CBS News reports Biden covered the Junk Fees Prevention Act in his speech following the October 2022 release of plans to regulate fees by the administration and the Consumer Financial Protection Bureau.
The CFPB has increased its focus on reining in fees since last year, ACA International previously reported, and the Federal Trade Commission closed comments on an Advance Notice of Proposed Rulemaking on whether to explore regulation of “junk fees” Feb. 8.
The Junk Fees Prevention Act was proposed by the Biden administration Feb. 1 with a focus on concert, entertainment and airline fees, among others, according to the CBS News report.
The White House quickly followed the bureau’s announcement with a blog post outlining why these fees are a concern and citing Biden’s “initiative on junk fees and related pricing practices.”
The bureau’s guidance centers on two “junk fee processes that are likely unfair and unlawful under existing law,” according to a news release.
First, the bureau outlines its guidance on “surprise overdraft fees,” in which consumers have enough money in their bank account to cover a charge at the time their bank authorized it, but still incur an overdraft fee.
Second, the bureau explains the risks of “surprise depositor fees” sometimes charged to a consumer when a check they deposit bounces.
The bureau sought comments on credit card fees through an advance notice of proposed rulemaking last summer and ACA International responded with an overview of the use of fees in the debt collection industry.
In its request for information for the credit card fees proposed rule, 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, ACA previously reported.
Now, the CFPB proposes to “lower the immunity provision for late fees to $8 for a missed payment as well as end the automatic annual inflation adjustment. The proposed rule would also ban late fee amounts above 25% of the consumer’s required payment.”
The CFPB is collecting comments on the proposal, which must be received on or before April 3, 2023, or within 30 days after publication of the Notice of Proposed Rulemaking in the Federal Register, whichever is later.
ACA expected Biden to address fee regulations in his speech and the CFPB’s proposed rule on credit card fees after the request for information (RFI) was released in 2022. ACA is reviewing it for possible comment.
Congress also 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.
If you have feedback to share as ACA reviews this request for comment, contact our advocacy team at [email protected].
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