CFPB Requests Information on “Junk Fees”

CFPB Requests Information on “Junk Fees”

The CFPB recently requested comment from the public on what it deems to be “exploitative junk fees” and their impact.  It then followed up with a blog on “The hidden cost of junk fees” which further encourages people to share their experiences.  The CFPB describes these fees (such as those for document preparation, late payments, overdrafts, minimum balance requirements, stop payments, paper statements, card replacement, and out-of-network ATMs, etc.), as being “nominally voluntary” since they are not “meaningfully avoidable or negotiable in the moment”. 

The CFPB is concerned that such fees drive up the cost of having a deposit account/getting a loan and diminish competition.  It compares them to “resort fees” or “mystery fees” that people may see on their cable or phone bills.

The CFPB wants stories, data, and other information on experiences with “junk fees” and is specifically looking to hear from individuals as well as small business owners, and others, including government officials.  Nine questions were provided in the request for comment and the CFPB specifically requests experiences of fees that were unexpected, believed to be too high and/or charged for unknown reasons.

At this point, it’s hard to say exactly where this will go but it’s important to note that this request includes both deposit and loan junk fees.  While there is likely more to come, it’s always a good idea to look at your fees from time to time and reevaluate what you’re charging and why.  The request for comment and blog seem to indicate this will be an area of increasing focus.  Stay tuned!

In case you missed it, we discussed this in mWe discussed this in more detail during our February Monthly Connection.  Here is short clip:


Your BSA/AML Program & Crypto/Virtual Currency

With the rapid growth of cryptocurrencies and other virtual assets, regulators are working to update the requirements for financial institutions to help mitigate the associated risks. 

Your BSA/AML Program will need to evolve with these changes, and we can help keep you up to date!

Join us for our webinar, “BSA/AML: Crypto/Virtual Currency,” where we will cover all of the following:

  • Crypto Lingo Crash Course: Exchanges, Miners, Tumblers, etc.
  • Understanding and Assessing the Risks
  • Updating Your BSA/AML Program
  • Customer Due Diligence: What Questions Should You Be Asking?
  • Ongoing Customer Due Diligence and Updating the Customer Risk Profile
  • Enhanced Customer Due Diligence
  • Is This Crypto Business A Money Service Business?
  • Red Flags for Virtual Currency Abuse and Spotting Unusual Activity
Virtual Currency Exchange Investment concept. Financial Technology Background.




The CFPB updated its Electronic Fund Transfers (EFTs) FAQs on December 13, 2021.  It seems these updates have kind of flown under the radar as we haven’t seen much if any, discussion within our typical compliance circles.  The focus of these updates was specific to person-to-person (P2P) payments.

The FAQs clarify that:

  • P2P payments ARE subject to Regulation E.  This includes payments initiated online, through an electronic terminal, via telephone, debit card, ACH, using a prepaid account or any other electronic method. 
  • P2P providers, such as PayPal, Venmo, etc., ARE financial institutions under Regulation E (similar to banks, credit unions, savings associations, etc.).  When it comes to electronic funds transfer errors, the FAQs state, Any entity that is considered a financial institution under Regulation E has error resolution obligations in the event that a consumer notifies the financial institution of an error, with limited exceptions.  Generally speaking, the same requirements and restrictions of Regulation E apply to P2P providers the same as they do to banks, credit unions, and others. 
  • There are “narrow circumstances” where a financial institution could also be considered a service provider under §1005.14 of Regulation E.  In these cases, the provider of the EFT service has the primary responsibility to resolve the error and the account-holding institution has more limited responsibilities but only in the case of ACH transactions where there is an access device but no agreement in place between the account-holding institution and P2P provider.  This particular update made our heads spin a little bit and led us to contact the CFPB for further guidance.  We plan to address this in more detail in the upcoming February edition of Banking on BCCand our “Regulation E: EFT Errors & Disputes” webinar on March 22nd!

Some other things of note from the updates include:

  • The CFPB is seeing more and more institutions that deny disputes based on a consumer’s previous transactions with the same merchant.  Here’s your warning shot:  The CFPB does not like this and the FAQs indicate these institutions are being cited for not conducting a reasonable investigation.
  • When someone uses stolen credentials (login information, etc.) to initiate a transfer, the transaction(s) is unauthorized, assuming the consumer receives no benefit.  Some examples of access being obtained fraudulently were provided, such as someone physically stealing someone’s debit card or someone hacking into a third-party system or consumer’s phone to gain access. 

It’s easy to feel defeated when it comes to Regulation E because trying to do right by your customer usually means you lose.  It’s good to know; however, those P2P providers are, in fact, financial institutions and that, if they receive notice of an error, they too have error resolution responsibilities.


OFAC Settlement Demonstrates the Importance of Controls

You may have heard of a recent OFAC settlement with TD Bank, N.A. which resulted from violations of the North Korea Sanctions Regulations and the Foreign Narcotics Kingpin Sanctions. 

While you might be thinking it’s pretty low risk for someone on the OFAC list to walk into your institution and attempt to do business with you, there were some lessons learned on the importance of effective controls. 

A couple of breakdowns led to TD Bank’s issues:

  • The bank relied heavily on a third-party vendor’s Politically Exposed Persons (PEP) list that did not include government employees of sanctioned countries;
  • Employees failed to complete a citizenship field in customer profiles and/or incorrectly identified North Korea as “Korea” or “South Korea”; and,
  • OFAC alerts for “Esperanza Maradiaga Lopez” were dismissed for four years even though the date of birth the bank had on file matched “Esperanza Caridad Maradiaga Lopez”, a name on the OFAC List.  The alerts were dismissed due to there being no match on the full name and geographical location.

These breakdowns led to OFAC violations that spanned a four-year period.  There was no willful intent by the bank to violate OFAC sanctions and, in fact, remedial actions taken by the bank were mitigating factors that led to some grace in the penalty assessed.

This is a good reminder that controls are put in place for a reason.  It’s a good idea to test them regularly to ensure they’re functioning as intended.

Wondering what 2022 may have in store with respect to BSA/AML?  Be sure to check out our BSA/AML New Year Update webinar which is available now OnDemand!


Focus on Fair Lending is Intensifying

There have been numerous warning shots over the last year that Fair Lending is in the crosshairs, not only by the CFPB but also the Department of Justice (DOJ).  In October the DOJ announced an “Initiative to combat modern-day redlining”. 

This will be the DOJ’s most aggressive and coordinated effort against redlining and will be conducted across a broader area than ever before.

The reference to “modern-day redlining” seems to refer back to what CFPB Director Chopra has referred to as “digital” and “algorithmic” redlining.  While pouring data into automated systems may, on the surface, help prevent illegal discrimination, Director Chopra believes this “black box underwriting” may only make the situation worse. 

He has recently stated, When consumers and regulators do not know how decisions are made…, consumers are unable to participate in a fair and competitive market free from bias.

The DOJ is wasting no time as there has already been a settlement tied to this initiative as well as several open investigations.  More investigations are expected to be opened in the months ahead.

Keep in mind, redlining is just one area of focus when it comes to fair lending compliance.  Be sure JOIN US for our webinar, “All About Fair Lending”, to learn more.