The Consumer Financial Protection Bureau (CFPB) is continuing its fight against what it refers to as “illegal junk fees” in its latest Consumer Financial Protection Circular and a compliance bulletin. The circular and bulletin contain guidance on two junk fee practices that the CFPB characterizes as likely being “unfair and unlawful under existing law.”
The first, surprise overdraft fees, includes overdraft fees charged when consumers had enough money in their account to cover a debit charge at the time the bank authorizes it. These fees are also referred to as “authorize positive, settle negative” which result when a customer’s transaction is authorized because the account shows a sufficient balance, but after all debts are settled, the transaction causes the account balance to be negative.
The CFPB asserts that consumers are likely to reasonably assume that if a transaction is authorized, that there are in fact sufficient funds available and not expecting to be charged an insufficient funds fee after all debits are settled. Consumers cannot reasonably be expected to take into account the varying delays between authorization and settlement, the CFPB contends. This delay is not of the consumer’s own making but is a byproduct of the payment system.
The second is the practice of indiscriminately charging depositor fees to every person who deposits a check that bounces. The penalty is an unexpected shock to depositors who thought they were increasing their funds. The bulletin explains that indiscriminately charging these depositor fees does nothing to prevent a check originator from writing a bad check and only penalized the person that was unaware that the check would not be cleared.
“Americans are willing to pay for legitimate services at a competitive price but are frustrated when they are hit with junk fees for unexpected or unwanted services that have no value to them,” said CFPB Director Rohit Chopra. “We are providing guidance on existing law that will help law-abiding businesses seeking to fairly compete and the families they serve.”