Junk fees are everywhere. The fees, which cost American families tens of billions of dollars each year, can strain any family budget.
The Consumer Financial Protection Bureau, which looks for junk fees when it examines financial institutions, found the following during its reviews between February and August 2023:
- Fake paper statements: Some institutions charge customers monthly fees for sending paper bank statements. CFPB examiners found instances where banks charged fees for statements they never actually printed or mailed.
- Worthless add-on products for paid-off auto loans: When people purchase cars, they sometimes have purchase loan add-on products, such as guaranteed asset protection insurance. In cases when borrowers paid off their loan early or had their vehicle repossessed, CFPB examiners found that loan servicers continued to charge fees for the add-on products, which no longer offered any value.
- Sloppy international money transfers: CFPB examiners found money senders charged hidden fees by taking money out of the funds consumers sent without properly disclosing them. In other cases, CFPB examiners found they failed to refund fees when the money consumers sent failed to arrive on time.
The companies examined are refunding $140 million to consumers, $120 million of which is for surprise overdraft fees and double-dipping on non-sufficient funds fees.
In a separate report, the CFPB found that most financial institutions have eliminated non-sufficient funds fees, saving consumers an estimated $2 billion every year.
The Biden administration is addressing the problem of hidden fees.
The Federal Trade Commission is proposing a rule that, if finalized, would ban businesses from charging hidden and misleading fees and require them to show the full price up front. The rule would also require companies disclose up front whether fees are refundable. This would mean no more surprise resort fees at check out or unexpected service fees to buy a live event ticket. The rule would apply to industries across the economy, including event tickets, hotels and lodging, apartment rentals, car rentals, and more. Under the proposed rule, companies that fail to comply could face monetary penalties and have to provide refunds to consumers
The CFPB is taking action to require large banks and credit unions to provide basic information to consumers without charging fees – meaning no more fees for basic services such as checking bank account balances, obtaining a payoff amount for a loan, or getting account information needed for applications.
Later this month, the CFPB will propose a rule that, if finalized, would require financial companies to allow customers to send their banking transaction data to other companies and banks. The proposal would make it easier for people to break up with their bank, to switch to banks with better offerings, and to manage accounts from multiple providers. This reform will ensure financial companies compete based on service quality and up-front pricing, deterring junk fees.
To avoid junk fees, shop around, negotiate, and be proactive, such as pay your credit card bills on time.