Ladies and Gentlemen:
The Bank Policy Institute[1] is providing these comments in response to the Consumer Financial Protection Bureau’s request for information on fees charged by banks and other financial companies. Banks provide products and services that help consumers meet their financial needs, and BPI members take very seriously the important role they play in the financial lives of consumers, families, businesses, communities, and the nation’s economy. Banks are continuously innovating to better meet their customers’ needs in this highly competitive marketplace.
BPI supports any Bureau efforts to protect consumers from exploitative practices across consumer finance markets as well as to promote transparency, consumer choice and competition in financial products. We are concerned, however, that the RFI, without substantiation or supporting evidence, presents a misleading portrait of banking and the consumer financial services market, reflecting a prejudgment that all fees are “junk fees.” The RFI, for example, omits any reference to the detailed disclosure requirements that must be followed by consumer financial services providers to provide consumers transparency and foster competition. In addition, the RFI states that the Bureau is interested in hearing about consumers’ experiences with fees only when such experiences have been negative. As set forth below, in this letter, BPI highlights some of the unsupported assertions in the RFI and provides responses thereto.
The prejudgment that all fees are “junk fees” in the RFI appears to be based on four misconceptions. First, as noted, the RFI seems to assume that fees are not transparent to consumers and may therefore come as a “surprise.” However, the RFI does not acknowledge the expansive, congressionally mandated disclosure framework[2] that requires detailed, upfront cost and fee disclosures for virtually all consumer financial products and services. These disclosures enable consumers to select the bank products and services that best meet their needs, thereby enhancing consumer choice and competition. This framework has been administered and further refined by the Bureau through multiple regulations, which, in many cases, include model disclosures designed and extensively consumer-tested by the CFPB.[3] The RFI makes no mention of this disclosure scheme and solicits no comment from consumers on how well it is working or how it might be improved to help them compare banking services and pricing.
Second, the RFI presumes that the consumer financial services industry is non-competitive, and therefore seeks information on why banks do not compete on fees – not whether they compete on fees.[4] In reality, due in part to the entry of online banks, fintechs, and other providers of consumer financial products and services, this industry has seen a significant increase in competition and innovation in recent years, and a corresponding increase in consumer choice. Further, banks must actively market the products and services they offer to compete for new customers and expand and retain existing customer relationships. For example, with respect to deposit accounts, fees that prove unpopular in connection with those accounts – such as monthly fees or charges for teller access – are often reduced or eliminated through competition. In recent years, this same dynamic has driven and continues to drive many institutions to eliminate or substantially curtail overdraft fees. As a result, consumers report a high level of satisfaction with their banks, including with respect to product offerings and fees.[5]
To read the full comment letter, please click here.
[1] The Bank Policy Institute is a nonpartisan public policy, research, and advocacy group, representing the nation’s leading banks and their customers. Our members include universal banks, regional banks and the major foreign banks doing business in the United States. Collectively, they employ almost 2 million Americans, make nearly half of the nation’s small business loans, and are an engine for financial innovation and economic growth.
[2] For example, Regulations DD and E (deposit account and electronic fund transfer fees), TILA/RESPA (mortgage origination and settlement service fees), and Dodd-Frank UDAAP principles all require clear disclosures of fees to consumers to ensure fees are not “hidden” or “back-end”. Many banks have also adopted the Pew Charitable Trust model fee disclosures for checking accounts following their creation in 2014, which provides consistency for consumer comparison shopping.
[3] Prior to the establishment of the Bureau by the Dodd-Frank Act in 2010, other federal regulatory agencies administered these disclosure requirements. Thus, this disclosure regime has been developed and refined over many years.
[4] Other recent RFIs have sought information in a more unbiased, neutral manner than this RFI. For example, the Bureau recently issued a Notice and Request for Comment Regarding the CFPB’s Inquiry Into Buy-Now-Pay-Later Providers posing the following questions: (i) What is the consumer experience with BNPL products?; (ii) What are the benefits and risks to consumers from BNPL products?; (iii) What is the merchant experience with BNPL products?; (iv) What perspectives do regulators and Attorneys General have with respect to BNPL products?; and (v) Are there ways in which the BNPL market can be improved? 87 Fed. Reg. 3511, 3512 (Jan. 24, 2022). For specific questions related to BNPL fees, see CFPB, In re Market Monitoring, Buy Now, Pay Later, Order to File Information at 9-10 (Dec. 16, 2021), https://files.consumerfinance.gov/f/documents/cfpb_bnpl_sample- order_2021-12.pdf.
[5] See, e.g., ABA Unveils New Consumer Polling Data on Major Bank Policy Issues at 2022 Washington Summit, American Bankers Association (March 8, 2022), available at https://www.aba.com/about-us/press-room/press- releases/aba-unveils-new-consumer-polling-data-on-major-bank-policy-issues-at-2022-washington-summit; Consumer opinions on fees, overdraft and cannabis banking, American Bankers Association (March 8, 2022), available at: https://www.aba.com/news-research/research-analysis/consumer-opinions-on-fees-overdraft-and- cannabis-banking; U.S. Retail Banks Nail Transition to Digital during Pandemic, J.D. Power Finds, J.D. Power (April 27, 2021), available at: https://www.jdpower.com/business/press-releases/2021-us-retail-banking-satisfaction- study.
