It's easy to decry "junk fees," and both the Federal Trade Commission ("FTC") and the Consumer Financial Protection Bureau ("CFPB") have done just that by launching multi-faceted regulatory initiatives to prohibit or regulate the use of such fees. President Biden himself has spoken multiple times about the need to regulate fees and proposed the Junk Fee Prevention Act to regulate fees in certain contexts. But what do regulators really mean when they refer to "junk fees" and are they as bad as they sound? This article provides an overview of the FTC's and CFPB's efforts to regulate junk fees and the substantive and procedural requirements that they need to meet to do so under their respective statutory authorities. We also consider the potential economic consequences of a far-reaching regulation that would significantly curtail the use of fees. While prohibiting fees altogether may seem popular in the abstract, the real-life consequences of doing so may be less beneficial for the typical consumer, particularly when the fee is conditioned on some consumer activity that is avoidable.

As a consumer, it's easy – and rational – to complain about "junk fees." The name itself presupposes that the fee does not serve a legitimate purpose and operates only to increase costs to consumers without any benefit.

Of course, defining what constitutes a "junk fee" and why they are problematic from a legal or economics standpoint is far more complicated. Even the most aggressive regulator would agree that some fees are legitimate and consistent with the law and consumer expectations. As such, the war against so-called junk fees, which is being waged by the Consumer Financial Protection Bureau ("CFPB"), the Federal Trade Commission ("FTC"), and President Biden himself,2 is as much about the meaning of the term as it is about any specific law or policy.

In this article, we discuss current proposals under consideration by the CFPB, FTC, and Congress – and the potential legal effects and limitations of those initiatives. We then consider the economics behind fees and analyze the potential unintended consequences of far-reaching bans and other prescriptive regulations.


While the term "junk fees" has been used in certain contexts for years, the current initiative began in earnest in January 2022 when the CFPB issued a Request for Information ("RFI") regarding fees imposed by providers of consumer financial products or services.3 The RFI characterized the initiative as an effort to reduce "exploitative junk fees charged by banks and financial companies" and requested information related to "excessive and exploitive fees, whether predictable and transparent to the customer or not" associated with consumers' bank, credit union, prepaid or credit card account, mortgage, loan, or payment transfers, including:

  • Fees for things people believed were covered by the baseline price of a product or service;
  • Unexpected fees for a product or service;
  • Fees that seemed too high for the purported service; and
  • Fees where it was unclear why they were charged.

The RFI did not purport to define or contextualize how a fee would be determined to be "excessive" or "too high for the purported service." The Bureau received over 50,000 comments on the RFI, including comments from members of Congress, industry groups such as the Chamber of Commerce and the Online Lenders Alliance, state attorneys general, and consumer groups such as Consumer Reports. Many comments pointed to the substantive limitations of the Bureau's authority to regulate fees. For example, while the Truth in Lending Act ("TILA") and Consumer Financial Protection Act of 2010 ("CFPA") confer the Bureau with authority to prescribe certain disclosures and promulgate rules that prohibit unfair, deceptive, and abusive acts and practices ("UDAAP authority") in connection with consumer financial products and services, they do not generally confer authority for the Bureau to set maximum rates and fees, nor do they authorize the Bureau to determine when fees are "excessive." To that effect, comments submitted on behalf of a group of seventeen attorneys general asserted that the RFI "fails to acknowledge that in many cases, state law appropriately regulates fees and expenses in consumer financial products or services, potentially rendering additional federal oversight duplicative."4

The CFPB, however, remains undeterred – taking two significant regulatory actions to limit fees since the RFI.5 First, in June 2022, the Bureau issued an advisory opinion stating its position that Section 808 of the Fair Debt Collection Practices Act ("FDCPA") prohibits debt collectors from imposing payment fees, such as convenience processing fees to make a payment online or over the phone, unless the fee is explicitly authorized by the agreement creating the debt or expressly "permitted by law."6 The opinion notably conflicts with certain court precedent finding that debt collectors can permissibly enter into a separate contract with consumers to authorize convenience processing fees.7 Moreover, while the opinion itself is limited to debt collectors subject to the FDCPA, the rationale used in the opinion could be used to justify CFPB enforcement under its UDAAP authority where convenience processing fees are not expressly contemplated under the initial debt.

Second, in February 2023, the Bureau issued a far-reaching proposed rule to amend Regulation Z, which implements TILA, to significantly limit the amount of late fees that could be charged in connection with credit accounts, including by: (1) presumptively capping late fees at $8, rather than the current $41 limit, unless a company can establish that a higher late fee is necessary to cover incurred costs; (2) eliminating automatic annual inflation adjustments to the presumptive late fee amount; and (3) capping late fees at 25 percent of the required minimum payment for the account.8 Comments are currently due on the proposed rule by May 3, 2023.

Notably, neither of the CFPB's two recent efforts to regulate fee practices address mandatory fees that are assessed unwittingly on consumers without choice. Consumers may affirmatively elect to pay convenience processing fees to pay off a debt. And late fees are already required to be disclosed under TILA and Regulation Z along with information on how consumers can avoid incurring such fees.9 In other words, the Bureau's recent efforts mark a clear policy shift to go beyond requiring companies to clearly and conspicuously disclose fees and obtain consent to such fees, and instead regulate the existence and extent of fees in the first place.

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1. Co-authored by Dr. Andrew Stivers an Associate Director in the Washington, D.C. office of NERA Consulting. Prior to joining NERA, Dr. Stivers was a senior official in the U.S. Federal Trade Commission's Bureau of Economics, where he oversaw economic analysis of all consumer protection and privacy matters.

2. In his State of the Union address on February 7, 2023, President Biden vowed to "tak[e] on 'junk' fees, those hidden surcharges too many businesses use to make you pay more." President Biden specifically cited a number of perceived problematic fees, including airline fees, overdraft fees, credit card late fees, resort fees, early termination fees, and ticket fees.

3. Notice and Request for Comment Regarding Fees Imposed by Providers of Consumer Financial Products or Services, 87 Fed. Reg. 5801 (Feb. 2, 2022).

4. Comment from Attorneys General from Utah, Texas, Alabama, Arizona, Arkansas, Idaho, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Montana, Ohio, Oklahoma, South Carolina, South Dakota, and West Virginia (April 11, 2022), available at:

5. In addition to these regulatory initiatives, the Bureau also brought an enforcement action against Regions Bank for allegedly charging consumers for surprise "authorized-positive overdraft fees" based on transaction posting order. The settlement requires the bank to pay a civil penalty of $50 million and to refund consumers at least $141 million based on alleged harm. In re Regions Bank, No. 2022-CFPB-0009 (Sept. 28, 2022).

6. CFPB Moves to Reduce Junk Fees Charged by Debt Collectors, (hereafter "CFPB RFI").

7. See e.g. Turner v. PHH Mortg. Corp., No. 8:20-CV-137-T-30SPF, 2020 WL 1517927 (M.D. Fla. Feb. 24, 2020).

8. Proposed Rule, Credit Card Penalty Fees (Regulation Z), 88 Fed. Reg. 18,906 (Mar. 29, 2023).

9. 12 C.F.R. § 1026.6(b)(2)(viii).

Originally published by CPI Antitrust Chronicle.

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