CFPB Special Edition Report: Uncovering Unlawful Junk Fees in Deposit Accounts and Loan Servicing Markets

Shipkevich PLLC

March 8, 2023, the Consumer Financial Protection Bureau (CFPB) released its special edition Supervisory Highlights report, which focuses on Junk Fees found in deposit accounts and multiple loan servicing markets, such as mortgage, student, and payday lending. Junk fees refer to fees charged to consumers without providing any clear benefit to them. According to the CFPB, illegal fees negatively affect family finances, drive up their banking and borrowing costs, and are not easily avoided. The CFPB typically publishes Supervisory Highlights reports to promote transparency and stop potentially unlawful practices.

In this recent report, regarding student lending, CFPB examiners found that servicers charged origination fees to borrowers whose loans were cancelled, thus resulting in the borrower paying back more than the amount disbursed, in violation of the Truth in Lending Act. Additionally, servicers charged fees for administrative forbearance processing that were not authorized by the borrower, and in some cases, failed to timely process borrower requests for the Public Service Loan Forgiveness program, resulting in improper payment amounts and additional interest.

Additionally, the report states that payday lenders charged a fee of $30 to $40 for stopping payment on a check loan in some instances. This fee was charged irrespective of whether the stop payment request was made on the due date or before the due date. Depository institutions charged unlawful junk fees on consumer deposit accounts. According to the report, financial institutions charged surprise overdraft fees by authorizing a debit made with a positive balance, then charging an overdraft fee because of intervening transactions that were processed before the debit settled, which was impossible for account holders to avoid, irrespective of account disclosures. Institutions charged customers multiple non-sufficient funds (NSF) fees for a single item that was presented for payment multiple times, potentially as soon as the next day.

The agency's prior supervision work, according to the CFPB, led to guidance on the longstanding problem of surprise overdraft fees, and as of March 8, 2023, 20 of the largest banks in the United States (which apparently hold 62% of the volume of consumer deposit accounts subject to the CFPB's supervisory authority), do not charge surprise overdraft fees. Furthermore, banks that the CFPB has examined so far will refund roughly $30 million to about 170,000 account holders who were assessed surprise overdraft fees.

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Shipkevich PLLC

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