Federal watchdog cracks down on Bank of America but 'junk fees' aren't going anywhere, expert says

Junk fees are additional, often hidden, charges that tin travel from a scope of lenders. They are not typically included successful the archetypal terms of a transaction but are tacked connected astatine the clip of payment.

"Consumers are encountering these 'surprise' charges much often than they mightiness expect, successful everything from performance summons surcharges to hose spot enactment fees, recognition paper precocious fees, slope overdraft fees, edifice hotel fees and more," according to Ted Rossman, elder manufacture expert astatine Bankrate.

Yet adjacent if these fees were capped oregon adjacent banned entirely, it's improbable that consumers would prevention wealth arsenic a result, helium said.

"Overdraft fees are a bully illustration of a 'game of whack-a-mole' erstwhile it comes to fees," Rossman said.

When galore fiscal institutions lowered their overdraft and non-sufficient funds fees oregon eliminated them altogether, the mean overdraft interest fell portion ATM surcharges jumped to a grounds high, Bankrate found.

In astir cases, adjacent with much transparency, the all-in outgo to consumers would apt stay the same, according to Rossman.

President Joe Biden has said his medication would ace down connected junk fees — including those from banks, arsenic good arsenic hotels, airlines and different work providers.

"Junk fees whitethorn not substance to the precise wealthy, but they substance to astir different folks successful homes similar the 1 I grew up in, similar galore of you did," Biden said successful his State of the Union address earlier this year. "They adhd up to hundreds of dollars a month."

Biden besides called connected Congress to walk the Junk Fee Prevention Act, which volition trim unexpected charges, specified arsenic hose booking fees; service fees for performance tickets; aboriginal termination fees for TV, telephone and net services; "resort fees" astatine hotels; and "excessive" recognition paper precocious fees.

Last year, the CFPB said it was scrutinizing definite fees that drawback customers by astonishment — and are "likely unfair and unlawful," according to the agency.

The user watchdog projected a new rule prohibiting banks from charging astonishment overdraft fees connected debit transactions and reducing emblematic precocious fees from astir $30 to $8, redeeming consumers arsenic overmuch arsenic $9 cardinal a year, according to the White House.

"Despite caller advancement successful addressing overdraft fees, the occupation is acold from complete," Nadine Chabrier, the Center for Responsible Lending's elder argumentation counsel, said successful a statement.

"The Consumer Financial Protection Bureau took a large measurement by banning astonishment overdraft fees," she said. "We are encouraged that the user bureau announced it volition instrumentality further steps, and we impulse the bureau to spot beardown limits connected the size and frequence of these fees."

More than a quarter of checking relationship holders, oregon 27%, are regularly deed with fees, which tin adhd up to an mean of $24 per month, oregon $288 per year, according to a another survey from Bankrate. 

The mean overdraft interest costs $29.80, Bankrate's research found, portion the mean nonsufficient funds interest is $26.58.

Some banking involvement groups countered that offerings specified arsenic overdraft extortion supply a much-needed information net.

"The president's usage of the word 'junk fee' is overly wide and ignores the needs of low-income and middle-income consumers who beryllium connected these services to resoluteness short-term fiscal difficulties," Jim Nussle, president and CEO of the Credit Union National Association, said successful a statement.

"It does not see the costs progressive successful providing needed fiscal services that consumers beryllium on."

Without the enactment of overdraft protection, "people are much apt to crook to predatory lenders, hurting the aforesaid radical the medication seeks to help," Nussle said.

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