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Biden cracks down on ‘junk fees’ in new economic focus ahead of midterms

By Betsy Klein, Maegan Vazquez, Matt Egan and Arlette Saenz, CNN

President Joe Biden on Wednesday announced a crackdown on so-called junk fees, including new steps that effectively ban banks from issuing surprise overdraft fees and depositor fees on bounced checks.

His speech announcing the new actions also highlighted his administration’s efforts to provide more “breathing room” relief to American consumers as the economy and inflation remain top concerns to voters 13 days before the midterm elections.

“Today, my administration is announcing new actions to lower the costs of everyday living for American families, to put more money in the pockets of the middle-income and working-class Americans, to hold big corporations accountable,” Biden said at the White House, pointing to the “unfair hidden fees” like overdraft fees, hidden hotel booking fees and termination charges when consumers switch cable and internet plans.

Biden said that the new moves on junk fees will “immediately start saving Americans collectively billions of dollars in unfair fees,” and that he has directed his administration to “reduce or eliminate” other junk fees.

Specifically, the Consumer Financial Protection Bureau is issuing new guidance publicly relaying that depositor fee and surprise overdraft fee practices “are likely unfair and unlawful under existing law.”

“There is an all-of-government effort to attack junk fees. They are creeping across the entire economy. We see it everywhere,” Rohit Chopra, the director of the CFPB, told CNN.

Analysts say the new CFPB guidance signals the agency plans to lean heavily on enforcement, instead of the lengthy rule-making process, when it comes to banking fees.

“This is a shot across the bow to any bank that continues to charge an overdraft fee,” said Ed Mills, Washington policy analyst at Raymond James. “This is regulation through enforcement.”

Chopra also noted that the CFPB is already “starting” to take enforcement action on junk fees, including through a $50 million penalty last month against Regions Bank for what the agency described as illegal surprise overdraft fees. However, he would not say directly whether more enforcement is coming.

Biden said on Wednesday that “there’s a lot” his administration is doing to lower costs and that “it adds up.” He also repeatedly underscored that understands “the frustration of the American people” amid rising prices.

The economy and inflation are issues at the front of voters’ minds in battleground states, CNN polls released this week show. And along with acknowledging Americans’ frustrations about the state of the economy, Biden has frequently deployed a midterm campaign message aimed at differentiating what he says are the savings in Democrats’ policy plans from Republicans’ costly proposals.

At the podium, Biden was keenly aware of the concerns, seeking to provide examples of how his, and his party’s, efforts are affecting the economy and lowering costs — highlighting downward trends in gas prices, reductions in the cost of hearing aids and new jobs at a New York Micron facility he’s visiting this week.

The White House defines junk fees as those “designed either to confuse or deceive consumers or to take advantage of lock-in or other forms of situational market power,” National Economic Council officials Brian Deese, Neale Mahoney, and Tim Wu wrote, falling into four categories: mandatory fees that often hide the full price, surprise fees that consumers learn after purchase, exploitative or predatory fees, and fraudulent fees. Tackling hidden fees was a key component of the President’s meeting with the White House Competition Council last month.

The economic officials also highlighted other past actions — including new rules and guidance on bank and credit card fees, taking aim at bad junk fee practices across industries through a new rulemaking process, restricting junk fees charged by auto dealers, requiring airlines to disclose fees up front, requiring internet companies to display a “Broadband Nutrition Label” and reducing the cost of shipping goods.

The President detailed some of those unfair charges with specific examples, including an overdraft fee when “the bank screwed up,” a fee for a bounced check for someone trying to sell a bicycle online, resort fees added to bills at checkout, and processing fees for concerts.

“These junk fees — they’re unfair and they’re hitting marginalized Americans the hardest, especially low-income folks and people of color. They benefit big corporations, not consumers, not working families. And that changes now,” Biden said, vowing to announce more “concrete actions” going forward.

A slew of major banks have already ditched overdraft fees over the past 18 months, including Ally Bank, Capital One and Citigroup. But the banking industry is slamming the CFPB for the way it is going about the crackdown.

“The CFPB has clear authority to define prohibited fee practices through notice-and-comment rulemaking, but instead continues to rely on invective-filled guidance, which is legally non-binding but which the CFPB has a history of improperly enforcing through the non-public examination process and threats of enforcement action,” Greg Baer, president and CEO of the Bank Policy Institute, a trade group, said in a statement.

Republican Sen. Pat Toomey, ranking member of the Senate Banking Committee, similarly slammed the CFPB in a statement as an “out-of-control and unaccountable agency” that has decided to “sidestep” the congressionally mandated rule-making process to change the rules.

Chopra defended his strategy, saying the guidance reflects existing law.

“There are no new obligations being created. It’s about helping law-abiding institutions that want to compete fairly,” he told CNN.

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