Financial institutions refunding $140M in ‘junk fees,’ consumer watchdog says

Financial institutions are refunding $140 million to consumers for so-called junk fees, the Consumer Financial Protection Bureau (CFPB) said Wednesday.

The consumer watchdog said $98 million is being refunded for surprise overdraft fees, while another $22 million is being refunded for multiple insufficient fund fees levied on a single transaction.

The CFPB also accused companies of taking in “millions in fake revenue” by charging monthly fees for paper bank statements that they never attempted to deliver, which will be refunded to customers.

Other junk fees levied on bank account deposits, auto loan servicing and international money transfers will also be refunded, according to the agency.

“The CFPB continues to uncover junk fee scams that violate the law and undermine consumer trust,” CFPB Director Rohit Chopra said in a press release. “We will continue to combat the illegal fees cropping up in consumer finance markets.”

The recent efforts by the consumer watchdog to curb the extra charges in the financial sector come amid a larger Biden administration push to crack down on “hidden and bogus” fees throughout the economy. 

The Federal Trade Commission (FTC) announced Wednesday that it is proposing a rule that would require companies to include all mandatory fees up front, effectively banning “junk fees.”

“The proposed rule would prohibit corporations from running up the bills with hidden and bogus fees, requiring honest pricing and spurring firms to compete on honesty rather than deception,” FTC Chairwoman Lina Khan said on a call with reporters.

The CFPB also issued a new policy Wednesday requiring large banks and credit unions to provide customers with information about their accounts without “imposing unreasonable obstacles,” such as excessive fees. 

“Today’s guidance outlines a pretty basic concept: When people request basic information about their accounts, big banks cannot charge them junk fees or trap them in endless customer service loops,” Chopra said on the press call alongside Khan.

“When people are just trying to get simple information to fix problems with their bank account or manage their finances, they shouldn’t be hit with one fee after another,” he added.

Later this month, the CFPB is also set to propose a rule that would require financial institutions to let customers send their banking transaction data to other banks and companies in an effort to make it easier to switch banks and avoid junk fees, the agency said.