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What will the 2024 State of the Union address say — and will banking policy and “junk fees” once again play a starring role?
On March 7, President Biden will follow tradition and deliver his State of the Union address to a joint session of Congress. In last year’s speech, Biden discussed his administration’s commitment to tackling “junk fees” — hidden financial-services fees and surcharges including penalties for late payments, nonsufficient funds and account maintenance — urging Congress to pass the Junk Fee Prevention Act.
“Junk fees may not matter to the very wealthy, but they matter to most folks in homes like the one I grew up in,” he said. “They add up to hundreds of dollars a month. They make it harder for you to pay the bills or afford that family trip. I know how unfair it feels when a company overcharges you and gets away with it.”
In the year since, his administration has demonstrated support of the Consumer Financial Protection Bureau (CFPB) as it continues efforts to regulate away junk fees, even as bankers protest these efforts. As recently as this week, the CFPB finalized its proposal to cut credit card late fees to $8 from $32, which would save save consumers $10 billion a year in credit card late fees.
Read more: Biden unveils new action on ‘junk fees’ to counter rising costs
In early 2022, CFPB director Rohit Chopra began a review of extraneous charges from banks, credit unions, mortgage lenders and fintechs with a goal to increase competition for consumers. The agency initially found that in many instances, the amount of fees charged to customers exceeded the financial institutions’ cost of providing the services, meaning that companies are imposing fees to increase profits. Chopra criticized banks for earning billions in revenue each year through these “junk fees.”
“Large banks haul in huge sums in fees from retail customers,” Chopra said at the start of this process on a call with reporters. “When markets become dependent on these back-end fees, it makes it harder for families to realize the benefits of competition. Today with our request for public comment on junk fees, we are beginning the process of breaking banks’ reliance on these exploitative income streams and making prices and features clear upfront.”
Bankers have opposed these efforts and expressed concern over the past two years. Debra Stamper, general counsel of the Kentucky Bankers Association, said there is no data to support the CFPB’s position that “junk fees” are a significant source of complaints from consumers. She and others oppose the CFPB’s broadly lumping all fees on consumer financial products as junk fees given that roughly 5% of the agency’s complaints in 2021 concerned checking and savings accounts.
“What consumer is going to write that they love being charged a fee?” Stamper wrote in a 2022 letter opposing the CFPB’s broad request for information. “With all due respect to Director Chopra, banks are different. Banks are highly regulated.”
The American Bankers Association (ABA) echoed Stamper’s sentiment, noting that the CFPB’s request about fees incorrectly implies that most fees are hidden, that markets are not competitive and that consumers cannot switch institutions to avoid paying the charges.
“As the Bureau well knows, congressionally-mandated disclosure frameworks require detailed, upfront cost and fee disclosures for virtually all consumer financial products and services,” wrote Kitty Ryan, the ABA’s vice president and senior counsel and a former deputy assistant director at the CFPB, in a letter signed by 51 state bankers associations, including Puerto Rico’s.
The CFPB, however, has continued its work on “junk fees,” even releasing proposals that would alleviate these fees in January of this year. President Biden, similarly, has continued to address the issue, slamming junk fees as a cause of Americans’ dwindling retirement savings at an Oct. 31 event at the White House.
This year’s State of the Union address comes as the president is ramping up his reelection campaign while many Americans are struggling with the effects of inflation, higher interest rates and other economic uncertainties. It is expected that Biden will address a number of financial topics including the Affordable Care Act, student debt relief and increased taxes for billionaires.
Catch up on the latest developments of the Biden administration’s war on “junk fees” below.