Credit Union Trades Question CFPB’s Authority Over Fees

Credit union industry advocate groups issue comments following bureau’s request for information in early 2021.

The Consumer Financial Protection Bureau (CFPB) is purposely trying to inflame the public by claiming legitimate fees charged by credit unions and banks are “junk fees,” the two national credit union trade groups told the agency.

The Credit Union National Association (CUNA) called the junk fee assertion “provocative and plainly untrue,” while to the National Association of Federally-Insured Credit Unions (NAFCU), the claim is a “gross mischaracterization” of the fee structures used by credit unions.

Consumer advocates disagree.

“Fees obfuscate the price of products and services in the marketplace and make comparison shopping more difficult,” Check Bell, program director and Syed Ejaz, policy analyst at Consumer Reports wrote. “Fees are also often levied against consumers in order to penalize them for making late payments or having insufficient funds in their bank accounts. For these reasons, fees have served as a longtime nuisance for consumers.”

Why Did the CFPB Put Out a Request for Information?

The CFPB issued a request earlier this year for information about the fees credit unions and banks charge members and customers. The agency said at the time some financial institutions were not being totally forthcoming about myriad fees they charge—ranging from overdraft fees to additional charges when a person pays a bill online.

The deadline for submitting comments was Monday. By Tuesday morning, the agency had received more than 2,500 responses, according to the online portal operated by the federal government. That number is likely to climb as comments are processed and posted online.

Why Credit Union Advocate Groups are Pushing Back

Credit union trade groups were blunt in their criticism. “We strongly object to this deceptive language,” Alexander Monterrubio, CUNA’s senior director of advocacy and counsel for consumer protection, wrote in one letter.

He added, “We can only surmise the [request for information] and press release was purposefully intended to be inflammatory merely to garner attention rather than begin a legitimate discussion of fees and the efficacy of disclosures.”

He also noted the agency contends it is trying to assist in keeping financial markets competitive.

“The Bureau is not vested with the authority to police ‘competitiveness’ in the financial services market, as the [request for information] implies, nor can it establish usury limits or cap fees,” he said. “We caution the Bureau against regulatory overreach.”

Lastly, he claimed the bureau should not be lumping together all fees financial institutions charge.

“Many credit unions have specifically designed their fee schedules with members in mind and as a result there is substantial diversity across the industry,” he wrote, adding that credit unions often develop customized solutions to help members.

Ann C. Kossachev, NAFCU’s vice president of regulatory affairs, told the CFPB it is “pushing the bounds of statutory authority” to regulate fees.

She said the imposition of fees is regulated by state and federal governments and conspicuously disclosed before transactions are completed.

“Fees are not simply imposed to generate revenue and take advantage of consumers’ mistakes or misunderstandings about the products they are using, but are rather business decisions made to account for the risk associated with certain products and services,” she wrote.

She noted further credit unions do not obscure the cost of their services, but instead provide members with a simple schedule of fees.

The Response from Consumer Advocates

The commenters from Consumer Reports painted a different picture.

“The reality is that add-on fees can be difficult to spot, requiring consumers to click through multiple web pages or scour fine print to get the information—a gradual reveal strategy that economists call drip pricing,” they wrote.

Financial fees are a costly inconvenience that hits low- and moderate-income consumers particularly hard.

“Overdraft services are effectively short-term lending programs with extremely high interest rates, as banks provide short-term liquidity for overdrawn transactions in exchange for a fee,” the pair added.

Some consumers themselves also related bad experiences through their own comment letters.

One particular credit union member said she forgot about some bills that would automatically debit her account, resulting in overdrafts.

“Each time those deductions exceeded my balance, my ‘overdraw protection’ kicked in—and I got charged $35, overdrawing my account further,” the credit union member wrote. “Within a week, I owed my credit union more than $400 for deductions that each totaled less than $10, even though my personal spending had ground to a halt.”

Still, credit union advocates can take heart in one brief comment filed with the CFPB.

That individual wrote: “Full disclosure: I quit doing business with banks 35+ years ago. I’m no dummy…I love credit unions!”