Consumers have been socked with myriad illegal junk fees in bank deposits, auto loans, mortgages, payday lending and student loans, according to a sweeping report Wednesday by the Consumer Financial Protection Bureau.
The violations included unfair fees for bank overdrafts or insufficient funds; excessive or improper late charges for auto and student loans as well as mortgage payments, and vehicles that were illegally repossessed despite payment agreements with customers.
“For years, junk fees have been creeping across the economy,” CFPB director Rohit Chopra said in a news release. “Our report highlights a host of illegal junk fee practices that the CFPB has uncovered across the financial services sector.”
In many cases, the companies agreed to remedy the problems, CFPB said. When firms refused, CFPB says it has opened investigations for potential enforcement actions. The agency said its findings reflect examinations it conducted from July 1, 2022, to Feb. 1, 2023.
In his State of the Union address last month, President Biden pushed for a crackdown on junk fees levied by credit card companies, airlines and resorts, among others.
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Among the violations:
► Banks charged multiple insufficient fund fees for the same transaction.
► Auto loan servicers charged late fees that exceeded the amounts allowed in borrowers’ contracts as well as late fees to consumers whose cars were repossessed. Some servicers also charged inflated vehicle repossession fees of $1,000 despite average repossession costs of $350.
► Mortgage servicers repeatedly paid inspectors to go to the wrong address, charging consumers $10 to $50 for each visit. Servicers also charged fake private mortgage insurance premium charges. And some charged late fees and penalties during the mortgage forbearance mandated by the CARES Act in the early days of the pandemic.
►Some payday loan borrowers whose vehicles were repossessed for non-payment had to pay fees to retrieve no just their vehicles but also personal property found in them. Some lenders also respossessed cars despite prior payment agreements.
►Some student loan servicers didn’t allow credit card payments, but customer service reps mistakenly accepted the payments. Servicers then canceled the payments, and instead of allowing borrowers to pay again, acted as if no payment was made, tacking on late fees and interest.
Last year, CFPB released guidance on surprise bank overdraft fees that led 20 of the nation’s largest banks to eliminate the charges, the agency said. Banks that CFPB examined refunded about $30 million to about 170,000 account holders who were hit with the fees.
Consumers can submit complaints about junk fees and about financial products and services, by visiting the CFPB’s website or by calling (855) 411-CFPB (2372).
