On October 26, 2022, the CFPB issued guidance about two junk fee practices that are likely unfair and unlawful under existing law. The guidance, issued separately through a circular and a compliance bulletin, are intended to help banks avoid charging illegal junk fees on deposit accounts.
The first junk fee practice, surprise overdraft fees, includes overdraft fees charged when consumers had enough money in their account to cover a debit charge at the time the bank authorizes it. The CFPB explains that when financial institutions charge surprise overdraft fees, sometimes as much as $36, they may be breaking the law. The circular provides some examples of potentially unlawful surprise overdraft fees, including charging penalties on purchases made with a positive balance.
Secondly, the practice of indiscriminately charging depositor fees to every person who deposits a check that bounces. When a consumer deposits a check that bounces, banks sometimes charge a fee to the depositor, usually in the range of $10 to $19. The truth is the person trying to deposit a check has no idea or control over whether the check will clear, and sometimes, that person is the victim of check fraud. The CFPB’s bulletin explains that indiscriminately charging these depositor fees, regardless of circumstances, likely violates the Consumer Financial Protection Act. Financial institutions are advised to employ more tailored fee policies that charge depositor fees only in situations where a depositor could have avoided the fee.
It can be recalled that in January 2022, the CFPB launched an initiative to save households billions of dollars a year by reducing exploitative junk fees charged by banks and financial companies.
Read the CFPB’s press release here.
The CFPB’s circular on surprise overdraft fees can be found here.
The CFPB’s compliance bulletin on surprise depositor fees can be found here.
This topic, along with a discussion on the FDIC’s recent guidance for overdraft fees on representment items, will be included in our upcoming Fall 2022 Quarterly Compliance Update. You can learn more about this program at https://www.compliancecohort.com/fall-2022-quarterly-compliance-update.