Senior Vice President, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce
February 15, 2022
Across the U.S., thousands of banks, credit unions, and fintech companies all compete for consumers’ business and trust. American consumers benefit from a highly competitive market when it comes to selecting the banking services that suit their needs and are empowered to make informed decisions about how much they should pay for a checking account feature like overdraft protection or the benefits a specific credit card might offer.
Against this backdrop, it is all the more bewildering that earlier this year, the Consumer Financial Protection Bureau (CFPB) seemed to suggest some surprise that financial service providers charge for the products they provide to consumers. In a recent Request for Information (RFI), and a series of accompanying blog posts, the CFPB implies consumers are the unwitting victims of fees, charged to them by service providers.
The RFI published in the Federal Register is officially titled, “Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services,” but the agency’s press release and related blog posts suggest this is more than a neutral information gathering exercise. Rather, they use menacing phrases like “exploitive income streams” to suggest that all companies are taking advantage of consumers or are somehow in violation of the law. This is not the case.
With respect to consumer protection, existing laws and regulations ensure consumers are provided with timely and accurate disclosures, including a schedule of fees. The Truth in Lending Act, for example, requires disclosures about the terms and cost of credit products, while the Truth in Savings Act requires certain uniform information about fees and interest when banks open a deposit account for a customer.
The Financial Services Market is Highly Competitive
There’s little evidence to suggest that consumers lack the benefits of robust competition in the financial services market. According to the CFPB’s January 2021 Taskforce on Federal Consumer Financial Law Report, the consumer credit market “has seen new entrants, innovative products, aggregate growth, reinvention of incumbents, and decline or departure of companies that could not keep pace with the others. These are the hallmarks of competitive markets.”
Another puzzling statement from the CFPB is their description of some fees as “quasi-mandatory.” It seems to suggest that the Bureau isn’t comfortable with any fees being charged. This type of thinking demonstrates a total misunderstanding of the financial services market and business more broadly by overlooking overhead costs including, but not limited to, development of the services, marketing (which can be extremely expensive in a competitive market), and the infrastructure, including customer service, that makes products function.
If the CFPB wants to help consumers, it should specifically identify its concerns. Casting broad dispersions that accuse law-abiding companies of wrongdoing distracts from illegal activity that should be addressed. The business community is committed to protecting consumers – we cannot help identify bad actors if the CFPB sidesteps stating what the unlawful activity is.
The CFPB is supposed to empower consumers to make informed choices, not to choose for them. This supposed RFI is merely an attempt to force banks and financial institutions to limit consumer choice and will only stifle innovation and competition in the financial services sector. The ultimate question, which the CFPB ignores, is what services will disappear if providers cannot cover the costs and will the consumer be better off?