CFPB Publishes Supervisory Highlights Report on Junk Fees

Earlier this month, the Consumer Financial Protection Bureau (CFPB) released “Junk Fees Special Edition,” a Special Edition of its Supervisory Highlights report that discusses how the CFPB examines fees attached to deposits, mortgage servicing, auto servicing, small-dollar and payday lending, and student loan servicing completed between July 1, 2022 and February 1, 2023.

The CFPB and the Biden administration have cracked down on junk fees, stating that they destroy family finances and forcefully raise families’ borrowing costs. “For years, junk fees have been creeping across the economy,” said Rohit Chopra, CFPB Director. “Our report describes a host of illegal junk fee practices that the CFPB has uncovered across the financial services sector.”

Ballard Spahr noted that the release of the report coincided with a virtual White House event in which White House officials urged state lawmakers to take their own actions against junk fees. Chopra spoke at the event and offered the CFPB as a resource for state junk fees initiatives, saying that state lawmakers have asked the CFPB for advice on making changes to state consumer protection laws.

CFPB examiners found that on consumer deposit accounts, some financial institutions charged what they allege are surprise overdraft fees and multiple non-sufficient funds (NSF) fees. The CFPB found that institutions are making restitution to consumers and after assessing NSF fees, many institutions have decided to forego them altogether.

The Bureau says its examiners found that institutions in the auto loan industry charged inflated estimated repossession fees, out-of-bounds and fake late fees, and pay-to-pay payment fees for the servicers’ benefit. Mortgage loan services charged consumers excessive late fees, fees for unnecessary property inspections, and also failed to waive fees for homeowners entering loss mitigation options.

The CFPB also accused payday lenders of profiting off of unlawful fees, such as vehicle repossession and property retrieval fees. The Bureau found that services in the student loan market charged late fees and interest when payments were made on time. They would not allow borrowers to pay with credit cards, but would sometimes wrongfully accept credit card payments.