CFPB Launches Initiative Targeting ‘Junk Fees’

February 1, 2022

The Consumer Financial Protection Bureau (CFPB) launched an initiative to collect information on alleged junk fees that will help shape the agency’s rulemaking, guidance and enforcement priorities.

“Many financial institutions obscure the true price of their services by luring customers with enticing offers and then charging excessive junk fees,” said CFPB Director Rohit Chopra. “By promoting competition and ridding the market of illegal practices, we hope to save Americans billions.”

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.

The CFPB’s research has found several areas where back-end fees might obscure the true cost of a product and undermine a competitive market:

  • In 2019, the major credit card companies charged over $14 billion each year in punitive late fees.
  • In 2019, bank revenue from overdraft and non-sufficient funds fees surpassed $15 billion.

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.

The CFPB is interested in hearing about people’s experiences with fees associated with their bank, credit union, prepaid or credit card account, mortgage, loan or payment transfers, including:

  • Fees for things people believed were covered by the baseline price of a product or service
  • Unexpected fees for a product or service
  • Fees that seemed too high for the purported service
  • Fees where it was unclear why they were charged

Last year, ALTA sent an introductory letter to Chopra that provided an overview of the title industry and explained how ALTA members responded to the COVID-19 pandemic to help close transactions. The letter also reinforced ALTA’s position that the CFPB’s rule for the disclosure of title insurance fees on the Closing Disclosure does not provide consumers with clear information about their title insurance costs. ALTA also encouraged Chopra to build on the warning the CFPB issued in 2019 to help educate consumers about wire transfer fraud.

ALTA also mentioned that effective and balanced oversight is important to the industry.

“We support robust efforts by the CFPB to give the industry an opportunity to comment on policy statements, guidance, and bulletins, and seek advisory opinions to provide more specific guidance so businesses can meet Bureau expectations in their daily business practices,” wrote Diane Tomb, ALTA’s chief executive officer. “Additionally, ALTA believes a Small Business Advisory Board, similar to other advisory boards created for community banks and credit unions, would help foster a relationship with regulated entities with whom the Bureau may not engage directly as often, including many of our members.”

Want to help advocate for the title and settlement industry? Join ALTA's Title Action Network.

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