Consumer Groups Urge Action on "Junk Fees"

Advocates detail common junk fees, call on Consumer Bureau to institute protections

In response to a call for comment on junk fees in the consumer finance industry, a number of consumer advocacy groups sent a letter to the Consumer Financial Protection Bureau (CFPB) detailing junk fees across a range of industries and services. The groups also called for specific actions to protect consumers from these fees.

The groups submitting the letter included Americans for Financial Reform (AFR), National Consumer Law Center (NCLC), Center for Responsible Lending (CRL), Consumer Federation of America (CFA), and the National Community Reinvestment Coalition (NCRC).

The letter notes:

It has become increasingly common for businesses to deceptively increase the cost of goods and services through hidden or obscured fees, often presented after the consumer has committed to a transaction. The cost of junk fees almost always exceeds the cost of the service or activity that triggers them. Using well-honed techniques and marketing research, companies obscure the fee, trick the consumer into accepting it, or force them into a position where they cannot say “no.” Junk fees can also lead to perverse incentives where banks and other companies push practices that are at odds with their customers’ financial health, setting them up to fail.

In a statement, advocates representing the consumer groups highlighted the harms caused by these fees:

“Banks, credit card companies, and other vendors impose fees on consumers in a manner that is calculated to evade the influence of competition and price comparison shopping,” said Rachel Gittleman, financial services outreach manager at the Consumer Federation of America. “The provider knows that the consumer will overlook and accept the charge because it is well hidden, or because the consumer has no alternative.”

“Junk fees like overdraft fees can push consumers into becoming unbanked and losing access to mainstream financial products,” said Lauren Saunders, associate director at the National Consumer Law Center. 

The group called on the CFPB to use its authority to reduce or eliminate these junk fees.

“Fees that don’t help consumers, and are often hidden or unreasonable, are junk fees that should be tossed out by the CFPB,” said Nadine Chabrier, senior policy counsel at the Center for Responsible Lending. “Junk fees strip wealth from financially vulnerable families and disproportionately harm communities of color.”

The groups called on the CFPB to rein in fees that:

Inflate or mask the price of a product or evade disclosure requirements;
Inhibit transparent price comparisons and competition;
Are imposed in a manner that deceives people about the cost of a product or how it works;
Incent practices that injure consumers in ways that are not reasonably avoidable; or
Take unreasonable advantage of consumers. 

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