On March 8, the CFPB released a special edition of its Supervisory Highlights reporting on unlawful junk fees that were uncovered in a variety of servicing markets, including bank account deposits, auto loan servicing, mortgage loan servicing, payday lending, and student loan servicing during examinations between July 1, 2022, and February 1, 2023. Specific discoveries during such time period include:
- Deposit Accounts: Evidence of depository institutions charging overdraft fees that could not be reasonably avoided, as well as occurrences of unfairly assessed non-sufficient fees issued multiple times for single occurrences.
- Auto Loan Servicing: Practices such as charging unfair and abusive payment fees, including fake late fees, inflated repossession fees, and kickback payments, as well as processing fees that were above and beyond servicers' actual costs for processing.
- Mortgage Loan Servicing: Certain mortgage services overcharged for late fees and for property inspections that were unnecessary. The Bureau also found that some servicers added insurance premiums and failed to waive fees or other charges.
- Payday and Title Lending: Certain lenders for payday, title, installment, and line of credit loans would split missed payments in order to cause multiple overdraft fees. Certain servicers were also found to charge repossession-related fees and property retrieval fees that were not authorized in the original loan contracts.
- Student Loan Servicing: Servicers at times charged late fees and interest, even when payments were made on time.
At the same time the report was issued, the Biden administration gathered state legislative leaders to hold discussions about junk fees and recognized the role states play in advancing the effort to eliminate such fees alongside the federal agencies' agendas. Additionally, HUD Secretary Marcia L. Fudge published an open letter to the housing industry and state and local governments, encouraging them to "limit and better disclose fees charged to renters in advance of and during tenancy." Fudge noted that "actions should aim to promote fairness and transparency for renters while ensuring that fees charged to renters reflect the actual and legitimate costs to housing providers."
Putting it into practice: A crackdown on junk fees has remained at the forefront of the CFPB's efforts. However, the Biden Administration appears to be applying a whole-of-government approach to regulating junk fees. Companies charging such fees may wish to review fee policies to ensure that they promote fairness and transparency for consumers, including the elimination of duplicative, excessive, and undisclosed fees at all stages of the lending process.
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