The CFPB's Crusade Against Junk Fees

Junk fees – those unexpected surcharges that appear everywhere – are the bane of all our lives. But don’t worry, if you’re an American, the CFPB is here to save the day.

The CFPB Strikes Back

These days, junk fees lurk everywhere, from immediate denials, to fees for payments Payments One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl One of the bases of mediums of exchange in the modern world, a payment constitutes the transfer of a legal currency or equivalent from one party in exchange for goods or services to another entity. The payments industry has become a fixture of modern commerce, though the players involved and means of exchange have dramatically shifted over time.In particular, a party making a payment is referred to as a payer, with the payee reflecting the individual or entity receiving the payment. Most commonl Read this Term, or foreign exchange Exchange An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv An exchange is known as a marketplace that supports the trading of derivatives, commodities, securities, and other financial instruments.Generally, an exchange is accessible through a digital platform or sometimes at a tangible address where investors organize to perform trading. Among the chief responsibilities of an exchange would be to uphold honest and fair-trading practices. These are instrumental in making sure that the distribution of supported security rates on that exchange are effectiv Read this Term, but have no fear, the Consumer Financial Protection Bureau (CFPB) is riding to the rescue. The cause? Real-time declined transactions, a fertile ground for the insertion of sneaky junk fees. A newly-proposed rule is the CFPB's latest weapon to thwart financial institutions from profiting off declined swipes, taps, or clicks.

Declined Transactions, Real-time Justice

The CFPB's proposed rule zeroes in on the archaic practice of charging non-sufficient funds (NSF) fees for transactions denied at the point of sale. Think declined debit card purchases or ATM withdrawals. “Over the years, large banks and their consultants have concocted new junk fees for fake services that cost almost nothing to deliver,” said CFPB Director Rohit Chopra. “Banks should be competing to provide better products at lower costs, not innovating to impose extra fees for no value. The CFPB will continue to rid the market of junk fees today and prevent new junk fees from emerging in the future.”

The CFPB proposed today to block banks and other financial institutions from one potential source of new junk fee revenue – fees on transactions declined right at the swipe, tap, or click. https://t.co/aQiCHEV9bD

— consumerfinance.gov (@CFPB) January 24, 2024

Real-time Fair Play

As technology evolves, financial institutions have often gained the ability to reject transactions instantaneously. The CFPB, playing tech watchdog, aims to prevent these real-time declines from becoming a cash cow for banks. Past tech advancements, like the overdraft loophole, led to fee increases. The CFPB, learning from history, is moving to close loopholes and protect consumers from emerging fees.

Beyond the Proposed Rule: CFPB's Junk Fee Cleanup

The proposed rule is just one cog in the CFPB's arsenal against junk fees. In 2022, they initiated a crusade against the fees, resulting in substantial reductions and forced Bank of America to cough up $100 million for NSF fee malfeasance.

Read the proposed rule here.