Large banks and credit unions must provide certain information to customers free of charge, such as account balances, transaction history, and fees, according to an advisory opinion issued by the Consumer Financial Protection Bureau (CFPB). Under the law, consumers have the right to request and receive certain information about their accounts, including statements, transaction records, and account terms. Banks must comply with these requests in a timely manner and without charge. While the advisory opinion applies only to large banks and credit unions, there are useful takeaways for all financial institutions regarding the CFPB's view on the manner of responding to consumer requests for information, and fee practices.
The CFPB's advisory opinion release was made and timed to fit within the Biden administration's overall efforts to combat what it considers "junk fees," coupled with its release of Supervisory Highlights on alleged excessive fees charged for consumer financial products and services. In addition, the FTC's release of a proposed rule to enhance its enforcement authority over alleged unfair and deceptive disclosure of the total cost of products and services within its jurisdiction shows that this is a cross-agency effort.
Now that the Biden administration, the CFPB, and the FTC have had their turn to characterize these fees, it is important to note that fees, when properly charged and disclosed, help ensure the availability of financial and related services to both consumers and other companies. Not all the fees that the Biden administration, CFPB, and FTC decry as "junk fees" deserve that moniker.
The CFPB's guidance is a clear signal to large banks that they cannot charge customers excessive fees for basic services. The CFPB notes at the end of the advisory opinion that as a matter of prosecutorial discretion, the CFPB does not intend to seek monetary relief for potential violations that occurred prior to February 1, 2024.
The following are examples of fees that are prohibited according to the CFPB's guidance for customer service-related functions:
- Fees to check account balances over the phone or online
- Fees to receive paper statements
- Fees to speak to a customer service representative
- Fees to transfer money between accounts
- Fees to stop payments
- Fees to close accounts
This article focuses on the release of the CFPB's advisory opinion and Supervisory Highlights, and our discussion of the FTC's proposed rule on deceptive fees is available here. The FTC's proposed rule would prohibit unfair or deceptive practices relating to fees for goods or services—specifically, misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees.
CFPB Advisory Opinion—Consumer Information Requests to Large Banks and Credit Unions
The CFPB's advisory opinion focuses on a single provision of the Consumer Financial Protection Act (CFPA), Section 1034(c), and the duties the CFPB states it imposes on certain covered persons. Section 1034(c) of the CFPA requires large banks and credit unions to comply in a timely manner with consumer requests for information concerning their accounts for consumer financial products and services, subject to limited exceptions.
The CFPB notes in its advisory opinion that it has not previously issued supervisory findings or pursued an enforcement action under Section 1034(c), and the advisory opinion is the CFPB's first guidance regarding Section 1034(c).
The advisory opinion provides guidance regarding a covered person's obligations under Section 1034(c), and, as it relates to fees, it outlines fees that in the CFPB's opinion would unreasonably impede a consumer's request for information and would be impermissible under Section 1034(c). Section 1034(c) requires that, subject to enumerated exceptions, "a covered person subject to supervision and primary enforcement by the Bureau pursuant to Section 1025 shall, in a timely manner, comply with a consumer request for information in the control or possession of such covered person concerning the consumer financial product or service that the consumer obtained from such covered person, including supporting written documentation, concerning the account of the consumer."
Section 1034(c) applies to covered persons subject to supervision and primary enforcement by the CFPB pursuant to Section 1025, which generally means that the provision is applicable to insured depository institutions and insured credit unions with total assets of more than $10 billion, as well as their affiliates. The CFPA defines an affiliate as any person that controls, is controlled by, or is under common control with another person. The CFPB's position is that the language "shall, in a timely manner, comply with a consumer request for information" means that covered persons are required to respond with information in their possession or control, in a timely manner, to a consumer request for information concerning their account. Per the advisory opinion, a consumer does not need to specifically invoke Section 1034(c) for the information request to be valid under Section 1034(c).
According to the CFPB, whether a response is "timely" may depend on the complexity of the request or the difficulty in responding to the consumer's request. Timeliness may also be assessed against other federal laws that provide set timelines for responding to consumer requests. The CFPB provides the example of a covered person that also must comply with Regulation X and the timing requirements thereunder. The CFPB states that if a covered person subject to Section 1034(c) complies with the timing requirements of other statutes with a timing component it is subject to, the covered person likely complies with Section 1034(c), and that, conversely, if a covered person does not comply with other applicable timing requirements, it is likely not in compliance with Section 1034(c).
Responses to requests under Section 1034(c) must completely respond to the consumer's information request and be accurate. To contextualize what is a complete response, the advisory opinion provides an example that if a bank receives a request for 7 years' worth of transactional information related to a consumer's account and provides only 1 year's worth, the response would not comply with Section 1034(c). To contextualize a complete response, the advisory opinion provides the example of a consumer requesting to know the monthly maintenance fee for a deposit account and the covered person provides an inaccurate number; in that case, the CFPB would find that the covered person did not accurately respond to a Section 1034(c) request.
The advisory opinion provides that the obligation to respond does not include information that does not concern the individual consumer's account, such as internal operating procedures or policies, the covered person's financial performance, marketing strategy, or training programs for employees. Furthermore, the obligation does not apply to the four enumerated exceptions in Section 1034(c), including confidential information or information collected to prevent fraud or money laundering.
As noted, the advisory opinion specifically discusses whether a covered person may impose fees in connection with their obligation to respond to a consumer's information request. The CFPB's opinion, articulated in the advisory opinion, is that "requiring a consumer to pay a fee or charge to request account information, through whichever channels the bank uses to provide information to consumers, is likely to unreasonably impede consumers' ability to exercise the right granted by Section 1034(c), and thus to violate the provision." According to the CFPB, some consumers may not be able to afford a fee to request information under Section 1034(c), however nominal, and even if the fee can be afforded, the CFPB believes it would have a chilling effect on information requests.
The CFPB provides examples of certain fees that would, under the CFPB's advisory opinion, unreasonably impede a consumer's ability to request information: (1) a fee to respond to consumer inquiries regarding their deposit account balances; (2) a fee to respond to consumer inquiries seeking the amount necessary to pay a loan balance; (3) a fee to respond to a request for a specific type of supporting document, such as a check image or an original account agreement; and (4) a fee for the time spent on consumer inquiries seeking information and supporting documents regarding an account. Conversely, the advisory opinion does seem to allow for covered persons and affiliates to charge fees in certain instances, and the example of a consumer requesting the same exact information repetitively concerning their account would be a situation where a covered person could charge a fee under Section 1034(c) without, in the CFPB's opinion, violating the statute.
In addition to fees, the CFPB also believes that there are other conditions that may unreasonably impede consumers' ability to make an information request, and therefore potentially violate Section 1034(c), such as requiring consumers to endure excessively long wait times to make a request to a consumer service representative, requiring consumers to submit the same request multiple times, requiring consumers to interact with a chatbot that does not understand or adequately respond to consumer's requests, or directing consumers to obtain information that the institution possesses from a third party instead.
Supervisory Highlights Junk Fees Update Special Edition
In addition to releasing its advisory opinion, the CFPB also issued a special edition of its Supervisory Highlights focused on "junk fees." The following observations from Supervision signal areas of focus for the CFPB in supervision and enforcement:
- Core processors, those that provide critical deposit, payment, and data processing service to financial institutions and supervised institutions, continue to potentially commit unfair, deceptive, or abusive acts or practices when charging consumers representment NSF fees without affording the consumer a meaningful opportunity to prevent another fee after the first failed representment attempt
- Certain institutions engaged in unfair acts or practices by assessing paper statement and returned mail fees when the financial institution did not print and deliver the statements the fees were assessed for
- Certain providers of remittance transfers failed to properly disclose fees charged by their agents, which reduced the total disclosed wire amount
- Certain payment processors may have violated applicable consumer financial protection laws by failing to disclose a no-fee option to add funds to a student's lunch account and collecting fees instead
Although the foregoing examples show instances where the CFPB found that fees may have been charged impermissibly, federal consumer financial laws do allow for fees to be charged if they are properly disclosed. For example, Regulation E allows for the imposition of certain fees for electronic funds transfers or for the right to make transfers, provided the fees are properly disclosed. Similarly, Regulation X allows for mortgage brokers to charge a fee for the cost of a credit report when providing a good faith estimate to a borrower, if it is properly disclosed.
Looking Ahead
The CFPB and other government agencies have been pursuing several initiatives targeting fees. While many fees are specifically allowed under consumer financial services law, it is important for financial services companies to monitor the types of fees the CFPB will be scrutinizing and ensure compliance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
