A Consumer Financial Protection Bureau public inquiry into so-called “junk fees” associated with mortgage closing costs mischaracterizes the fully disclosed and required fees charged by mortgage providers, the American Bankers Association and nine associations said today in a joint letter to the bureau. ABA also submitted a separate letter where it provided several bank-specific responses to questions raised in the CFPB request.
The CFPB launched the inquiry in May to “understand why closing costs are increasing, who is benefiting, and how costs for borrowers and lenders could be lowered.” In their letter, the associations said they support the bureau’s interest in understanding the affordability challenges facing the housing market. However, they objected to the “junk fee” terminology the bureau has used to describe the data collection in its communications to the public.
“It is damaging for consumers and industry stakeholders alike to have the principal consumer financial protection regulator mischaracterize legitimate and fully disclosed fees associated with products and services that are of crucial financial utility and serve critical risk management purposes,” the associations said.
In responding to the CFPB’s request for input, the associations said that any policy action that results from the inquiry must respect the letter and spirit of the legislative intent and framework set forth by Congress. In addition, adding regulations would impose costs and complications and must be considered relative to any benefits derived, they said. Further action by CFPB affecting mortgage disclosures should be fully informed by previous regulatory reviews and assessments.
In its letter, ABA provided bank-specific answers sought by the CFPB through the inquiry, such as who profits from the various fees and who benefits from the services provided. The association also said the bureau should focus more efforts on positive education-focused actions that are fully within its authority.
“In establishing the bureau, Congress mandated the creation of the Office of Financial Education within the CFPB to educate American consumers and help them make better-informed financial decisions,” ABA said. “This command should encourage the CFPB to take steps to further solidify consumer understanding of the home buying and financing process. The CFPB should also identify opportunities for broader policy coordination and collaboration on financial education among the range of stakeholders in the nonprofit, government and private sectors.”
