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The CFPB marketed its latest set of supervisory highlights as the “Junk Fees Special Edition.” The splashy headline is consistent with the agency’s recent focus on fees that it asserts are hidden from the competitive process. In speeches, press releases, and blog posts (and now a single proposed rule), the CFPB has stressed its growing concern with “junk” fees. The CFPB even created a section of its web site solely devoted to press releases on “junk” fees.
Gleaning compliance guidance from Supervisory Highlights is not always straightforward, as they do not provide full details. However, in this Special Edition, the CFPB notes that it has characterized the following types of fees and practices as junk:
Deposit Accounts
Auto/Title Financing
Mortgage Loan Servicing
Payday / Small Dollar Loans
Student Loan Servicing
Loan servicing has never been a simple task. The Herculean efforts of mortgage servicers to manage the COVID crisis may soon be matched by new challenges created by the emergence from the pandemic (President Biden has promised to end the national emergency in May, which may lead to a slew of new loan servicing compliance and procedural obligations). The lessons from this Supervisory Highlights Special Edition, for servicers of all types of consumer financial accounts, include ensuring that their servicing systems do not allow for fees that exceed the provisions of their consumer agreements and to avoid unlawfully charging fees to borrowers who take advantage of federal loan relief initiatives. Servicers may also want to examine the types and amounts of servicing and default fees to understand the circumstances in which they are incurred, , as the CFPB has alleged that a variety of other common fee practices are unfair.
For its part, the CFPB encourages servicers to self-assess their compliance with federal consumer financial law, self-report “likely” violations to the CFPB, remediate the harm resulting from these likely violations, and cooperate “above and beyond what is required by law.”
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