President weighs in on debate between consumer advocates and financial trade groups over certain overcharge fees.
President Biden this week jumped on the so-called “junk fee” bandwagon and called on federal regulators to eliminate them.
And he singled out overdraft fees as particularly odious.
“[W]hat we’re talking about today is something that’s weighing down family budgets: unnecessary hidden fees—unnecessary hidden fees, known in the parlance as ‘junk fees,’ are hitting families at a time when they can’t afford it,” he said, as he opened a meeting of the White House Competition Council Monday. “They shouldn’t be paying it anyway, in my view—but [especially not] at a time when they can’t afford it.”
The President gave several examples, including citing overdraft charges on checking accounts and credit card late fees.
Background: Consumer Advocates vs. Financial Trades
CFPB Director Rohit Chopra has railed against “junk fees,” saying that financial institutions are reaping the benefits of the fees, which consumer groups contend hurt low- and moderate-income Americans the most.
Credit union and banking trade groups have strenuously objected to the term “junk fees.” They have argued that consumers opt into overdraft programs and that the programs essentially provide short-term loans for cash-strapped individuals who may need to make a purchase using their debit cards.
The CFPB has been investigating how to deal with the fees. Meanwhile, many credit unions and banks are adjusting their charges or eliminating them altogether.
“And thanks to our efforts so far, three quarters of the country’s 20 largest banks are... getting rid of fees for bounced checks,” Biden stated. “The average fee for a bounced check was 50 bucks. They’re getting rid of them. And that matters.”
What Happens Next?
Biden also challenged the council to eliminate or reduce fees.
“This council is going to come back to me—‘God willing and the crick not rising,’ as the old saying goes—with a plan for eliminating and reducing fees,” he said.
Chopra is a member of the council.
On Wednesday, the bureau ordered Regions Bank to pay $50 million to the CFPB’s victims-relief fund and to refund at least $141 million to customers “harmed by its illegal surprise overdraft fees.”
“The bank charged overdraft fees even after telling consumers they had sufficient funds at the time of the transactions,” CFPB officials said, in announcing the fines.
And they added, “The CFPB has observed that in many circumstances, financial institutions have created serious obstacles to consumers taking steps to anticipate and avoid overdraft fees.”