.svg)
The White House has stood behind the Consumer Financial Protection Bureau’s (CFPB) efforts to end unexpected overdraft and depositor fees as mid-term elections are approaching and the cost of living becomes a core issue for voters.
On Wednesday (October 26), the CFPB issued guidance on two junk fee practices that are “likely unfair and unlawful” under existing law.
The circular on unexpected overdraft fees argues that it is unfair to charge overdraft fees when a consumer would not reasonably anticipate it.
Similarly a bulletin on returned deposited fees states that blanket policies of charging fees for all returned transactions irrespective of the circumstances or patterns of behaviour on the account are also likely to be against the law.
“Each year, these ‘junk fees’ that companies charge cost Americans tens of billions of dollars, weighing down family budgets and making it harder for people to pay their bills,” President Joe Biden said at a White House press briefing backing up the regulatory action.
“My administration is taking action to eliminate these fees,” he emphasised.
As the CFPB points out, there are many reasons why deposited cheques can bounce. The most common reason is that the cheque originator does not have enough money available in their account.
The agency says charging a fee to the depositor penalises the person who has no idea or control over whether the cheque will clear, while doing nothing to deter the originator from writing bad cheques.
The depositor cannot know that the cheque “was bad, but you get charged 15 bucks. It’s wrong. It’s ridiculous. It’s unfair,” Biden said stressing that his administration “is making clear today it’s illegal”.
Another likely unfair scenario, related to overdrafts, happens when a bank displays that a customer has sufficient available funds to complete a purchase at the time of the transaction but then the account gets overdrawn by the time the settlement takes place.
The customer is in the belief that they have sufficient money but “it turns out your balance wasn’t up to date because your bank was slow in processing other charges”, the President explained.
“By the time the bank gets around to settling the transaction, you’ve overdrawn your account. You’re charged an overdraft fee that runs around $35 each time. It’s not your fault. The bank screwed up. You didn’t; the bank did … . It’s just simply wrong,” Biden stressed.
The President noted this announcement, as well as a related Federal Trade Commission (FTC) action, are part of his administration’s wider efforts to crack down on junk fees.
Biden set up the White House Competition Council last year, of which both CFPB director Rohit Chopra and FTC chair Lina Khan are members.
One of the key things Biden asked the council to take on was the unfair hidden fees “that are taking real money out of the pockets of American families”, the President stressed.
The remarks come as the date of mid-term elections is approaching and economy and inflation rank as the top concerns of voters, issues which typically resonate better with Republicans’ messaging.
Democrats have recently shifted their focus from abortion rights to pointing at their record of passing legislation that lowers costs, the New York Times noted.
Biden has now stressed that the crackdown on junk fees will lower the cost of everyday living for American families and “put more money in the pockets of middle-income and working-class Americans”.
“These steps will immediately start saving Americans, collectively, billions of dollars in unfair fees,” the President added.
