Junk Fee Highlights

Last week the CFPB released a new issue of its Supervisory Highlights which is an update of its Spring Highlights on “junk fees.” The report discusses recent CFPB examination findings involving fees in the areas of deposits, auto servicing, and remittances. In its introduction, the CFPB notes a few general shifts in banking over the last year: “Multiple banks have announced they were eliminating overdraft fees or otherwise updating their policies to be more consumer friendly” and that many banks have also announced they are eliminating non-sufficient (NSF) fees on consumer deposit accounts. The bulk of the highlights discuss deposit practices. Key findings include:

  • Core processors engaged in an unfair act or practice by contributing to the assessment of unfair NSF fees on re-presented items. Specifically, when platforms do not allow banks to refrain from charging more than one NSF fee per item without discontinuing NSF fees altogether or manually waiving individual fees. To address these findings, the core processors enhanced their systems to facilitate their implementation of policies to eliminate NSF re-presentment fees.
  • Financial institutions were found to have engaged in unfair acts or practices by charging consumers re-presentment NSF fees without affording the consumer a meaningful opportunity to prevent another fee after the first failed representment attempt. Notably, unlike the OCC and the FDIC, the CFPB has not issued any separate formal guidance indicating that charging multiple representment fees could be an unfair or deceptive act or practice.
  • Financial institutions engaged in unfair acts or practices by charging Authorize-Positive Settle-Negative (APSN) overdraft fees. To remedy the violation, these institutions ceased charging APSN overdraft fees, and will conduct a lookback and issue remediation to injured consumers.
  • Financial institutions engaged in an unfair act or practice by assessing paper statement fees and returned mail fees for paper statements they did not attempt to print and deliver. These institutions had charged fees for the printing and delivery of paper statements, including additional fees when they mailed a statement that was returned undelivered.

Examiners also found that auto servicers engaged in unfair acts or practices by failing to ensure that consumers received refunds for add-on products following early loan termination or used miscalculated add-on product refund amounts after loans terminated early. These miscalculations were due either because servicers used the wrong amount for the price of the add-on product or because they deducted fees (such as cancellation fees) that were not authorized under the add-on product contract.

Lastly, examiners found that certain remittance transfer providers violated the remittance regulations by failing to appropriately disclose fees or failing to refund fees, in certain circumstances, because of an error. Remittance transfer providers are required to disclose any transfer fees imposed by the provider. In the case of an error for failure to make funds available to a designated recipient by the date of availability, the provider must refund to the sender any fees imposed, and to the extent not prohibited by law, taxes collected on the remittance transfer. Examiners found that certain providers failed to correct errors by refunding fees imposed on the remittance transfer, within the specified time frame, where the recipients did not receive the transfers by the promised date.

For more information on junk fees, be sure to register for our November webinar “Overdraft, NSF, and “Junk” Fees, Oh My: An Update” where we will provide an overview of the various junk fee related guidance released since the summer of 2022 and assess the current regulatory landscape.