ALTA Submits Letter in Response to CFPB’s Request for Information on ‘Junk Fees’
April 7, 2022
ALTA recently submitted a comment letter in response to the Consumer Financial Protection Bureau’s (CFPB) request for information (RFI) on fees imposed by providers of consumer financial product or services.
The letter highlights the value the title insurance industry provides and the robust nature of the current regulatory framework. While ALTA shares the CFPB’s desire to root out companies and practices that mislead consumers about their charges, the bureau would benefit from conducting a full Administrative Procedures Act rulemaking before taking action on any area of concern, including so-called “junk fees.” In the letter, ALTA said businesses can best serve customers when there are clear regulatory rules and that the RFI does not provide the needed rules.
“Consumers benefit when regulators discourage bad acts through enforcement while also encouraging good behavior through clear rules and guidance,” ALTA wrote. “We encourage the bureau to take its ability to promote good practices seriously through rulemaking. If the CFPB sees a clear need to address so-called “junk fees,” it should use the rulemaking process to first clearly define a ‘junk fee’ and then develop clear regulatory requirements addressing them. The value of dependable guidance makes it easier for businesses to comply with regulations by giving them examples of acceptable practices that can serve as a solid basis for making decisions.”
ALTA pointed out that the CFPB’s description of a “junk fee is flawed and provided no support in law. Even more troubling, the subjective nature of the bureau’s description is so broad and expansive it potentially captures most legitimate fees paid by consumers, ALTA wrote.
ALTA also pointed out that the association worked closely with the bureau during the development and implementation of the TILTA-RESPA Integrated Disclosures (TRID). The regulation sets strict rules for the way the industry’s fees are disclosed to consumers, the timing of those disclosures, and when changed circumstances allow for alterations to the disclosures.
“Given this reality, it would seem impossible for our fees to be of the nature the CFPB intended to address when issuing this broad RFI,” ALTA’s letter states. “That is why we are so troubled that the bureau referenced outdated, questionable and inflammatory opinion pieces on industry competition in the RFI’s footnotes.”
ALTA also reminded the CFPB that the industry is comprehensively regulated by a state’s department of insurance, the CFPB through RESPA and where applicable, the state bar/supreme court rules.
“Real estate transactions are extremely local—varying from state to state and even city to city,” ALTA wrote. “The state department of insurance oversees the industry’s practices and rates, and examines them to ensure they are not excessive, inadequate and unfairly discriminatory.”
According to the CFPB, companies are increasingly charging inflated and back-end fees to households and families. This conceals the true price of products from the competitive process, the bureau said in a release. For example, hotels and concert venues advertise rates, only to add “resort fees” and “service fees” after the fact.
Within the eight-page request for information, the CFPB specifically mentions title insurance and closing costs in the section focused on mortgages:
Mortgages facilitate homeownership for millions of people, and, through homeownership, allow millions of families to build and maintain intergenerational wealth. But priced into most mortgages are thousands of dollars in application fees and closing costs, which few people are well-positioned to shop on. These fees can act as a barrier to homeownership, strip wealth from homeowners accessing their equity through refinancing or home sales, and deter some homeowners from refinancing when doing so would lower total housing costs and be financially advantageous. Advocates and reporters have noted that many closing costs, like title insurance, may not always be subject to standard or appropriate competitive forces.
Even aside from inflated and padded fees rolled into the mortgage at closing, homeowners can find themselves forced to pay fees for making payments over the phone or online or even for the servicer’s bill pay service. Borrowers who face financial hardship and struggle to make mortgage payments can find themselves unable to catch up due to the snowballing of a plethora of fees related to the mortgage delinquency. Monthly property inspection fees, new title fees, legal fees, appraisals and valuations, broker price opinions, force-placed insurance, foreclosure fees, and miscellaneous, unspecified “corporate advances” can all price a homeowner out of a home.
Contact ALTA at 202-296-3671 or [email protected].