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Rohit Chopra, Consumer Finance Protection Bureau

Trade groups warn CFPB against moving too fast on fee reform

Heavyweight financial lobbying groups fired a warning shot at a top consumer watchdog on Wednesday, vowing to fight yet-to-be-released proposals that could restrict banks’ fee practices.

Read the full letter here, signed by the American Bankers Association, America’s Credit Unions and Independent Community Bankers of America.

The trade groups warned Consumer Financial Protection Bureau Director Rohit Chopra that the agency may be running afoul of administrative law if it intends to issue a serious rulemaking without formally considering the impact on small businesses.

“These steps promote the issuance of rules that minimize the costs and burdens on small businesses and promote access to credit,” the groups wrote.

Let’s take a step back: The trade groups are hitting the CFPB over a pretty technical (but not insignificant) step of the rulemaking process — a Small Business Regulatory Enforcement Fairness Act review.

They’re also complaining about proposals that may or may not be issued this year. A recent rulemaking agenda update from the CFPB suggested the agency is considering some kind of fee-related proposal in 2024. But it’s still unusual for trade groups to sound off on potential regulations that haven’t actually been proposed yet.

And many banks — especially the largest national institutions — have reformed or abandoned such fee practices in the last few years. But smaller institutions still rely on fees for a significant portion of their profits. This letter is a good indicator that those types of firms intend to fight any reforms from the Biden administration in this space.

Slow burn: This fight has been simmering between the Biden administration and the financial sector since 2022 when the White House first took aim at what it calls “junk fees.” Much of that attention has focused on the surprise fees that appear at checkout for live entertainment or hotel stays.

But the high fees that banks charge customers for having “non-sufficient funds” or over-drawing their accounts have been criticized by Chopra and other financial regulators.

The financial sector letter argues that any proposed regulations on overdraft fees would hit smaller banks and credit unions especially hard, even if they’re not directly subject to some of the new regulations. They argue they’d face market pressure to conform either way.

On the Hill, Republicans haven’t been shy about their objections to the Biden administration’s actions at the CFPB. Senate Banking Committee Republicans have pushed back on the effort to go after overdraft and credit card late fees in particular.

This is just a teaser of the industry opposition to come. Expect more fireworks around any CFPB push to reshape bank fees later this year.

— Laura Weiss and Brendan Pedersen

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