ABA, State Bankers Associations to CFPB: U.S. Markets for Financial Services Are Highly Competitive, Innovative and Offer Extensive Consumer Choice

In a detailed comment letter filed today, the American Bankers Association and all 51 state bankers associations directly challenge the basic premise behind the Consumer Financial Protection Bureau’s Request for Information on fees charged by financial service providers in the U.S. The letter reads in part:

“The CFPB has long pledged to be a ‘data-driven’ agency that seeks to ‘[e]nsure that CFPB policy development and other functions are informed by the latest market developments and trends.’ With respect to fees charged by banks, the data show clearly that U.S. markets for consumer financial services are highly competitive, innovative and offer consumers a wide variety of choice. In addition, there is robust evidence that fees are disclosed to consumers before they are obligated to pay them, through disclosures designed by the Bureau and the Federal Reserve to help consumers shop for the products and services that fit their particular needs, which further stimulates competition. Available evidence, including the Bureau's own testing and reports, show that consumers understand these disclosures, and appreciate the products and services provided even if they have to pay fees for them.”

The letter shows that the U.S. market for financial services is “fiercely competitive,” highlights major inaccuracies in the CFPB analysis including overstating the modest role fees play in bank revenue, and shows how the RFI fails to recognize or acknowledge that the CFPB’s existing rules require clear and conspicuous disclosure of all fees. It also questions whether the CFPB has prejudged the outcome: 

“Although the Bureau has styled its action as a Request for Information, the RFI makes clear that the Bureau has already drawn a series of deeply flawed conclusions regarding the market for consumer financial services and the use of fees in the market. An RFI that asks for ‘stories’ about fees that ‘you believed were covered by the baseline price’ or ‘unexpected’ or ‘seemed too high for the purported service,’ and closes by asking how the Bureau should ‘address the escalation of excessive fees’ is not a search for the facts, but instead is a solution in search of a problem.”

The letter goes on to say:

“The Bureau should not substitute its own judgment for the sound decisions of consumers who choose to use valuable services offered by financial institutions.”

Through their comments to CFPB, ABA and the state bankers associations offer facts that show:

• With approximately 10,000 banks and credit unions as well as a growing number of fintechs, markets for consumer financial products and services are highly competitive and offer consumers a wide variety of high-quality, innovative and competitively priced products and services;
• The consumer protection laws implemented and administered by the Bureau reflect Congress’ determination that robust disclosures of the terms and conditions of consumer financial products, including fees, are the best means to protect consumers and encourage competition among financial institutions;
• As a result, fees are disclosed clearly and conspicuously in marketing materials, at point-of-sale, in applications, before consummation or account opening, and in periodic statements;
• The Bureau and its predecessor, the Federal Reserve Board, have been thoughtful and deliberate in developing disclosures, including conducting extensive consumer usability and comprehension testing to ensure that consumers understand the fee disclosures and can use the disclosures for shopping and price comparison purposes; 
• Consumers appreciate services offered, even if they have to pay fees, in particular, for overdraft services; 
• The ability to charge fees preserves consumer choice and promotes access to services – both by allowing providers to recover costs associated with specific services offered to consumers, and by allowing providers to better manage the risk presented by particular consumer behavior; and
• The Bureau’s authority to impose substantive price restrictions is limited, and the evidence does not support additional substantive regulation of fees.

“Surveys show that consumers recognize the value they get from the wide array of banking services available to them today,” said Rob Nichols, ABA president and CEO, in a separate statement. “Anyone unsatisfied with the terms of a financial product, which must be clearly disclosed under existing CFPB rules, has thousands of other options in today’s highly competitive marketplace. Our comment letter sets the record straight and makes clear that the Bureau’s misguided campaign against fictional ‘junk fees’ is unfortunately an attempt at ‘junk’ regulating without any supporting facts.”

The letter makes clear that the associations remain open to a constructive discussion of fees and disclosures with the CFPB. 

Click here to read ABA and the state bankers associations’ full comment letter to the CFPB.