Bankers defend fees and fairness



The American Bankers Association and 51 state bankers associations, including the New York Bankers Association and Connecticut Bankers Association, have joined forces to take a position on an investigation into bank fees launched by the federal Consumer Financial Protection Bureau (CFPB).


In a lengthy written position, the bankers charge that the bureau’s recent request for information about fees charged to customers of financial institutions makes it clear that the bureau has already drawn conclusions about the use of fees. The bankers allege that the bureau has already concluded that the financial services market is not competitive, and that fees are hidden and hurt consumers.


The bankers quote  CFPB Director Rohit Chopra as stating in the bureau’s request for information that the economy has become “more consolidated and dominated,” and that “banking is no different.”

The bankers take a position that “the U.S. market for financial services is fiercely competitive. It is competitive when compared with financial services markets in other advanced economies, and it is competitive when compared to other consumer-facing industries in the United States.”


The bankers point out that consumers routinely have multiple accounts at different financial institutions, and they have the power to move their assets and financial business whenever they want.


The bankers note that in the U.S. banking is a $23.7 trillion industry, which employs more than two million people, has $19.7 trillion in deposits and extends $11.2 trillion in loans.

The associations say that disclosure frameworks mandated by Congress require detailed, upfront cost and fee disclosures for virtually all consumer financial products and services.

They dispute CFPB’s claim that banks earn a substantial amount of their revenue from fees and offer four examples of annual fee revenue, all from 2019: $15.4 billion in overdraft and insufficient funds charges; $1 billion in account maintenance fees; $14 billion for credit card late fees; and $23.6 billion in credit card fees.

The bankers say the bureau is wrong and that in 2019, banks earned only a small amount of their income from fees. They said that in 2019 there had been $705 billion in interest income, and another $264 billion in noninterest income from a variety of sources. The bankers say the roughly $40 billion in fees highlighted by the bureau constitute only about 4% of the nearly $1 trillion in industry revenue.


It’s pointed out that there are approximately 10,000 banks and credit unions offering financial services and products to consumers. The bankers argue that fees are disclosed clearly and conspicuously in marketing materials, at the point-of-sale, in applications, before consummation or account opening and in periodic statements.

The bankers say that their ability to charge fees preserves consumer choice and promotes access to services. They say fees allow recovery of costs associated with specific services offered to consumers, and allow providers and consumers to better manage the risk presented by particular consumer behavior.

It’s the position of the banker associations that the U.S. offers a fiercely competitive banking environment with relatively low levels of concentration.

“Compared to other consumer-facing industry sectors in the U.S., such as department stores, airlines or telecommunication carriers, the banking industry is far less concentrated and far more competitive when looking at the share of total sales captured by the top four firms in each industry on a national basis,” the bankers told the CFPB.

They cited a recent study conducted by Cornerstone Advisors showing that younger people, ages 21 to 56, have been shifting away from traditional banking and have their primary transaction account with alternative service providers, such as Chime, PayPal, or Cash App.

The bankers cite another consumer survey suggesting that approximately 50% of people who deal with financial institutions in the U.S. have an active bank account at more than one institution, with 22% of consumers having accounts at three or more different banks.

The bankers take the position that competition in deposit accounts ultimately benefits consumers, and consumers recognize and appreciate these benefits. They say that consumer surveys repeatedly show that the vast majority of consumers are happy with their banking choices and recognize they have many options when selecting financial products or services.

Regarding overdraft protection fees, the bankers reported on a February 2022 Morning Consult survey that revealed approximately nine out of 10 U.S. consumers find their bank’s overdraft protection valuable, and three in four consumers who paid an overdraft fee in the past year were happy that their bank covered their overdraft payment, rather than returning a check or declining payment.

The bankers point to competition in the credit card field and note that a survey found that the median number of different credit cards per cardholder was three.

“Cardholders’ behavior of maintaining multiple cards and switching to new cards in pursuit of more attractive offerings does not support the view that consumers are somehow subject to a ‘captive relationship’ or are being taken advantage of by card providers,” the bankers said.

The bankers underscored that the CFPB’s own rules require that credit card issuers send their credit card customers highlighted information about fees on each monthly statement.

They said that any assertion that consumers lack information about late fees and other fees associated with credit cards is misplaced. The bankers contended that a recently published report by the CFPB itself concluded that the effectiveness of disclosure of terms, fees and other expenses of credit card plans does not raise any concern.

That same CFPB report gave credit to credit card issuers for providing relief to consumers suffering hardship as a result of Covid-19, including waivers of annual fees, transactional fees and penalty fees, resulting in an almost $3 billion reduction in fee income.

The bankers highlighted that for 30 years, the Truth in Savings Act and regulations associated with it have required that, before a bank account is opened, consumers receive in writing the account’s costs and terms including any maintenance, overdraft and insufficient funds fees in a clear and conspicuous manner to allow them to compare products and shop for a bank account.

The bankers said they support the CFPB’s mission “of ensuring that all consumers have access to markets for consumer financial products and services and that markets for consumer financial products and services are fair, transparent and competitive.”

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