The CFPB has released a new issue of Supervisory Highlights that carries the title “Junk Fees Update Special Edition.” The report discusses the CFPB’s examinations involving fees in the areas of deposits, auto servicing, and remittances that were generally completed between February 2023 and August 2023. The report updates the CFPB’s “Junk Fees Special Edition” of Supervisory Highlights issued in March 2023.
In its introduction to the new issue, the CFPB states that it “has observed that supervised institutions have started to compete more when it comes to fees,” that “multiple banks have announced they were eliminating overdraft fees or otherwise updating their policies to be more consumer friendly,” and that “many have announced that they are eliminating non-sufficient (NSF) fees on consumer deposit accounts.” (Concurrently with the release of the new issue, the CFPB issued a data spotlight providing data that indicates the “vast majority of NSF fees have been eliminated” by large banks.)
Key findings by CFPB examiners include:
- Core processors, in the offering and providing of core service platforms, engaged in an unfair act or practice by contributing to the assessment of unfair NSF fees on re-presented items. Specifically, the core processor platforms did not allow financial institutions to refrain from charging more than one NSF fee per item without discontinuing NSF fees altogether or manually waiving individual fees. To address these findings, the core processors enhanced the systems they provide to financial institutions to facilitate their implementation of policies to eliminate NSF re-presentment fees. The CFPB indicates that it intends to review the practices of financial institutions seeking payment from the consumer’s financial institution, i.e. “Originating Depository Financial Institutions,” to ensure that represented transactions are coded properly to allow systems to identify the relevant transactions efficiently as well as refrain from charging NSF fees on those transactions.
- Financial institutions were found to have engaged in unfair acts or practices by charging consumers re-presentment NSF fees without affording the consumer a meaningful opportunity to prevent another fee after the first failed representment attempt. (The CFPB notes that this finding is consistent with its enforcement action against Bank of America.) While institutions proactively developed plans to remediate consumers for assessed re-presentment NSF fees, some institutions used incomplete reports that captured consumer accounts that were charged NSF fees on checks only, or on both checks and ACH transactions, but omitted accounts that were assessed NSF fees solely on ACH transactions. After examiners identified this issue, institutions reviewed their remediation methodologies to ensure coverage of both ACH and check re-presentments. It is noteworthy that unlike the OCC and the FDIC, the CFPB has not issued any guidance indicating that charging multiple representment fees could be an unfair or deceptive act or practice.
- Financial institutions engaged in unfair acts or practices by charging Authorize-Positive Settle-Negative (APSN) overdraft fees. To remedy the violation, these institutions ceased charging APSN overdraft fees, and will conduct a lookback and issue remediation to injured consumers. In its March 2023 “Junk Fees Special Edition” of Supervisory Highlights, the CFPB also indicated that its examiners had cited institutions for unfair acts or practices based on APSN overdraft fees charged to consumers. Such fees were also the subject of a 2022 circular issued by the CFPB.
- Financial institutions engaged in an unfair act or practice by assessing paper statement fees and returned mail fees for paper statements they did not attempt to print and deliver. These institutions had charged fees for the printing and delivery of paper statements, including additional fees when they mailed a statement that was returned undelivered. In some instances, the institutions had not printed or attempted to deliver paper statements but nevertheless continued to assess paper statement fees and returned mail fees each month. The institutions have stopped charging fees for paper statements they did not attempt to deliver and will refund the fees that were charged.
The report also includes a discussion of returned deposit fees. In October 2022, the CFPB issued a compliance bulletin stating that it is likely an unfair act or practice for an institution to have a blanket policy of charging returned deposit item fees anytime that a check is returned unpaid, irrespective of the circumstances or patterns of behavior on the account. CFPB examiners evaluated the returned deposit item fee practices at a number of institutions in recent examinations and most of the examined institutions advised the CFPB that they have eliminated returned deposit item fees entirely or are in the process of doing so. The CFPB notes that it has not sought to obtain monetary relief for return deposit item fees assessed prior to November 1, 2023 but will continue to monitor the relevant practices and may direct remediation from institutions that continue charging unfair returned deposit item fees.
Auto Servicing. Examiners found auto servicers engaged in unfair acts or practices when servicers failed to ensure they received refunds for add-on products following early loan termination or used miscalculated add-on product refund amounts after loans terminated early. The servicers who used miscalculated amounts had a policy to obtain add-on product refunds but relied on service providers to calculate the refund amounts. The service providers miscalculated the refunds due, either because they used the wrong amount for the price of the add-on product or because they deducted fees (such as cancellation fees) that were not authorized under the add-on product contract.
Remittances. Examiners found that certain remittance transfer providers violated the remittance regulations by failing to appropriately disclose fees or failing to refund fees, in certain circumstances, because of an error. Remittance transfer providers are required to disclose any transfer fees imposed by the provider including any fees imposed by an agent of the provider at the time of the transfer and providers were found to have failed to disclose such fees imposed by their agents at the time of the transfer. In the case of an error for failure to make funds available to a designated recipient by the date of availability, the provider must refund to the sender any fees imposed, and to the extent not prohibited by law, taxes collected on the remittance transfer. Examiners found that certain providers failed to correct errors by refunding to the sender fees imposed on the remittance transfer, within the specified time frame, where the recipients did not receive the transfers by the promised date.