Chopra resists requests to define ‘junk fees’ with specificity

Under pressure from Republican lawmakers to define what he meant by “junk fees”—a term coined by the bureau as part of a media campaign—CFPB Director Rohit Chopra would not offer any formal definition. Asked by Rep. Andy Barr (R-Ky.) if he could offer “any legal or statutory authority that defines ‘junk fees,’” Chopra replied: “No. Junk fees are something that everyone experiences at so many parts of their financial life.”

Elsewhere during the hearing, he said it refers to “a fee for a service that you didn’t ask for and didn’t necessarily want . . . or a fee that doesn’t feel like it’s subjected to the competitive process.” Chopra offered as examples “pay to pay” fees, where consumers are required to pay a fee in order to complete a payment transaction, or “payoff statement fees,” where consumers are charged a fee in order to receive the payoff amount on an amortizing loan.

In a strongly worded op-ed published in American Banker yesterday, ABA President and CEO Rob Nichols slammed the CFPB’s campaign against these so-called “junk fees,” calling it “little more than a PR effort designed to confuse the public about the well-disclosed fees they currently pay and to undercut an industry simply following the regulator’s own rules. The fees the CFPB continues to highlight, including late fees and overdraft fees, are already required to be ‘clearly and conspicuously’ disclosed under existing rules, and banks are watched carefully for compliance.”

During the four-hour hearing today, Chopra also discussed the implementation of Section 1033 of the Dodd-Frank Act, which addresses consumers’ rights to access and control information about their accounts, noting that it is a top priority for the CFPB.

While he did not give a specific timeline, he noted that the “hope is to get the next step” in the rulemaking process “done within a year.” That next step should be the identification of small banks, credit unions and fintechs that will provide feedback on an outline of proposals the CFPB is considering.

Calling the 1033 effort “one of the most important rules that the CFPB can do,” Chopra noted that it “has the ability to open up consumer opportunities,” and would “take some important steps toward open banking,” but acknowledged that there are “tough issues” related to data privacy and security that will need to be addressed.

“We really all want to think together about: how do we get to a world that is more ‘open banking’—that people can switch more seamlessly, that people can compare more products across a broader range of participants. I see a lot of upside there,” Chopra said. However, “I do worry about big tech firms really modeling what we’re seeing in China with Alipay and WeChat Pay,” he added. “The fact that you have these dominant providers that have so much data about people’s movements, about people’s geolocation . . .  it raises a lot of questions about: will there be a fair system and a transparent system?”

ABA has long supported consumers’ ability to share their financial data but continues to emphasize the importance ensuring that it is done in a secure way that gives consumers bank-level security, transparency, and control.