CFPB Publishes on Junk Fees

The CFPB published Supervisory Highlights Junk Fees Special Edition, which reports on unlawful junk fees uncovered in deposit accounts and in multiple loan servicing markets, including in mortgage, student, and payday lending. Areas included in the Supervisory Highlights include deposit accounts, auto loan servicing, mortgage loan servicing, payday and title lending, and student loan servicing. 

Junk Fees - The White House released a guide for state legislatures and attorneys general on how they can take action against what it has labeled “junk fees”—a broad category of business fees that includes fees banks charge for services such as overdraft protection. The guide includes several examples of alleged junk fees across multiple industries, including hotel resort fees, rental car fees, event ticketing fees, and cable and internet fees. Included in the examples was “the banking industry’s excessive and unfair reliance on banking junk fees,” with the administration pointing to several examples of banks ending fees for overdraft protection amid regulatory pressure.

Zelle Users Suffer from Scams

A group of five Senators have sent a letter to the Federal Reserve, OCC, FDIC, and NCUA asking them to take several steps to protect consumers from scams when using Zelle to transfer money. The letter includes that “because depository institutions currently take the position that they are under no obligation under the EFTA to make their customers whole when fraudsters use the network to steal their hard-earned money. Instead, depository institutions appear to have forced their customers to foot the bill in the vast majority of these circumstances, often relying on ambiguity over whether a payment is classified as “authorized,” “unauthorized,” or an “error” to avoid reimbursing customers who have been victims of fraud.

US Government Accountability Office Weighs in on Fintechs

Fintechs – The U.S. Government Accountability Office released a report on fintechs, FINANCIAL TECHNOLOGY, Products Have Benefits and Risks to Underserved Consumers, and Regulatory Clarity is Needed. The report found that fintech products may offer benefits to underserved consumers, such as those without bank accounts or credit scores, but can also pose risks. For example, digital deposit accounts advertise low or no fees and no minimum balance requirements. However, consumers may be unaware that their funds are not being held by the fintech company itself and may be confused about how to recover their funds if the company goes out of business.

Redlining – An Ohio bank’s redlining practices have led to a $9 million agreement to settle allegations from the Department of Justice from not providing mortgage lending services to majority-Black and Hispanic communities. Under the consent order, the bank agreed to invest at least $7.75 million in a loan subsidy fund to provide subsidies for home mortgage loans, home improvement loans, home refinance loans, and home equity loans for applicants in majority-Black and Hispanic communities in the Columbus area. The bank also pledged to allocate at least $750,000 towards advertising, outreach, consumer financial education, and credit counseling in the Columbus area. Further, the bank agreed to invest a minimum of $500,000 developing partnerships with community-based or governmental organizations to provide services related to credit, financial education, homeownership, and foreclosure prevention to residents of majority-Black and Hispanic census tracts in the Columbus Area. Additionally, the bank will open a new full-service branch and a mortgage loan production office in majority-Black and Hispanic neighborhoods in the Columbus area, and assign at least four mortgage lenders, including a Spanish-speaking lender, to serve such neighborhoods.