The news: The Consumer Financial Protection Bureau’s (CFPB’s) “junk fee” enforcement spree could push financial institutions (FIs) to refund customers to the tune of $140 million. 

• Newly issued guidance will tack another type of fee onto the list of no-nos, preventing large FIs from charging high fees for basic customer service.

What’s new? The CFPB’s latest guidance is based on a 2010 federal law that prohibits certain FIs from charging excessive fees when customers seek basic information about their own accounts.

• Large banks and credit unions with over $10 billion in assets will be required to respond to consumer information requests about their accounts in a “timely manner.”
• What qualifies as “timely” depends on the complexity of the request, accessibility of the information, and regulatory requirements over specific pieces of information.
• The CFPB won't seek penalties for potential violations before February 1, 2024.

How we got here: Over the last few years, the CFPB has forced FIs to reevaluate the fees which they charge to customers.

• Following recent investigations, unnamed FIs must return $120 million in surprise overdraft fees to their customers.
• Bank of America was ordered to pay $100 million to consumers and $150 million in fines for repeatedly charging junk fees, among other practices deemed unlawful.
• Wells Fargo was slapped with a $2 billion consumer redress bill for charging surprise overdraft fees.
• Since 2021, denial and nonsufficient fund (NSF) revenue has dropped by 86%, reflecting how public scrutiny set off this trend. 
• Credit unions are starting to take heat for continuing these practices.

What’s a ‘junk fee?’ While the word “junk” appears in the press release, the actual guidance doesn’t use it. However, the CFPB has clarified what it considers to be problematic.

• Charging fees for responding to customer inquiries—including balance inquiries, loan payoff amounts, or requests for specific supporting documents like check images or original account agreements—could be seen as unreasonable and a potential violation.
• Generally, this rule wouldn’t be violated if a FI imposes fees in certain limited circumstances, such as when customers repeatedly request information they’ve previously received, as long as these fees aren’t considered excessive.
• The context, impact on consumers, and whether fees create unreasonable obstacles are essential factors in evaluating a FI’s compliance.

The new guidance got mixed reviews: Although the CFPB’s fate recently came under question, it dove right back into stirring the pot with these announcements.

• National Association of Federal Credit Unions (NAFCU) criticized the CFPB for "masking a power grab as simple ‘guidance’” and said it ought to have first sought input from the public and affected stakeholders.
• National Economic Council Director Lael Brainard, a former Federal Reserve vice chair, said of the CFPB’s recent efforts: “Those sneaky fees might not matter a lot to the wealthiest Americans, but they sure do matter for hard-working Americans sitting around the kitchen table trying to stay on top of their bills.”
• Legal experts have expressed concerns about the guidance’s lack of clarity and how it differs from other laws regarding a FI’s ability to charge fees, whether it will encourage frivolous consumer requests, and how it will affect technological innovation at FIs. 

The bottom line: While the CFPB’s guidance will save consumers money, its impacts on FIs will vary, depending on their size. FIs with less than $10 billion in assets won’t come under the watchful eye of CFPB and can continue to rely on these fees for revenue. 

• This may save these smaller FIs money in the short run, but consumers may flock to larger banks that advertise their lack of fees. 
• We recommend that all FIs, regardless of size, discontinue charging fees to customers for access to basic account information—or risk adverse competitive positioning and negative attention.