FTC and CFPB Attack "Junk Fees"

The Federal Trade Commission ("FTC") proposed a new rule to combat "junk fees." The CFPB issued an advisory opinion clarifying financial institution obligations to respond to consumers' account requests and provide information on fees and charges.

FTC Proposed Rulemaking

Based on over 12,000 comments responding to the FTC's Advanced Notice of Proposed Rulemaking published in 2022, the FTC proposed a new rule entitled "Trade Regulation Rule on Unfair or Deceptive Fees". The proposed rule would ban hidden and misleading fees on goods or services, make businesses show the total costs for the consumer, crack down on misrepresentations of the nature and purpose of the fees, and require disclosure of refundable fees.

The proposed rule would apply to a wide number of industries, and address unfair and deceptive practices regarding event tickets, hotels, on-line deliveries for restaurants and groceries, telecommunications, apartment and car rentals, among others. The FTC stated that "while unfair or deceptive practices relating to fees are already unlawful under Section 5 of the FTC Act, ... the proposed rule (if finalized) will allow the Commission to seek civil penalties against violators and more readily obtain monetary redress for the consumers who are harmed."

Comments are due 60 days after the proposed rule is published in the Federal Register.

CFPB Guidance on Large Bank "Junk Fees"

The CFPB issued an advisory opinion reaffirming that banks and credit unions must provide basic account information to customers. The legal interpretation clarifies Section 1034(c) of the Consumer Financial Protection Act ("CFPA"), which requires large banks and credit unions to comply in a timely manner with consumer requests for information concerning their accounts for consumer financial products and services. The CFPB's interpretation reaffirms a customer's right to information and underscores the obligation of large banks to comply with this requirement. As part of the advisory opinion, the CFPB provided a summary section to assist large banks and credit unions in complying with Section 1034(c). The CFPB stated:

"Regardless of how a large bank or credit union labels or categorizes a fee on its fee schedule or other documents, section 1034(c) does not permit unreasonable impediments to a request for information about a consumer’s account. That would likely include charging fees (1) to respond to consumer inquiries regarding their deposit account balance; (2) to respond to consumer inquiries seeking the amount necessary to pay a loan balance; (3) to respond to a request for a specific type of supporting document, such as a check image or an original account agreement; and (4) for time spent on consumer inquiries seeking information and supporting documents regarding an account."

In the opinion, the CFPB stated that the agency "does not intend to seek monetary relief for potential violations of section 1034(c) that occur prior to February 1, 2024."

Separately, the CFPB highlighted in a special supervisory report, that "financial institutions are refunding over $120 million to consumers for unanticipated overdraft fees and unfair [non-sufficient fund] fees." In the report, the CFPB identified illegal fees in products including bank account deposits and auto loan servicing.

White House Statement

In a statement, the White House called on "federal agencies, Congress, and private companies to crack down on junk fees and provide consumers with the full price up front." President Biden said that the administration continues to support the efforts of the FTC, the CFPB and all agencies with respect to "junk fees" in an "all-of-government" approach to help "design regulations that promote competition while achieving other important policy goals."