CFPB Advisor Says Many States’ Laws Already Prohibit ‘Junk Fees’

Many states can use existing laws to fight “junk fees,” according to a federal regulator.

Addressing a Pennsylvania house committee, Brian Shearer, senior advisor to the director of the Consumer Financial Protection Bureau (CFPB), said many states can attack junk fees under their existing statutes that prohibit unfair or deceptive acts or practices, according to a transcript posted on the CFPB website.

Junk fees are charges that are hidden in fine print or not disclosed at all to the consumer and serve to conceal the true price of a product or service. They are prevalent in banking and consumer finance, Shearer said.

“Because many junk fees are likely to be unfair or deceptive under these laws, states can attack junk fees under existing statutes,” Shearer said.

To make it even more clear to companies that junk fees are included among unfair or deceptive acts or practices, and to make it easier for both state officials and consumers to enforce those laws, states can also add junk fees to the lists of prohibited practices included in those statutes, Shearer said.

“These lists of illegal practices convey bright line prohibitions that may already fall within the general standard,” Shearer said. “But they can have more deterrent effect, provide more useful guidance to industry, and are often easier to enforce by private plaintiffs and government enforcers.”

Shearer said during his testimony that the rooting out of junk fees has been a major focus of the CFPB’s recent work. He added that states can play an important role because they often move more quickly and target their laws more precisely than the federal government.

“Because junk fees have crept into all aspects of the economy, it will take an all-out effort from all levels of government to protect consumers,” Shearer told the Pennsylvania house committee. “We’d be interested in hearing from you about ways that we can strengthen our partnership, and in particular about opportunities for the federal government to help or at least avoid hindering state efforts.”

The CFPB launched an initiative against junk fees in January 2022, saying it aims to save consumers billions of dollars each year and promote competition in the free market.