Trade Groups Push Back on Biden's State of the Union Comments About 'Junk Fees,' OD Costs, CFPB Proposal

 WASHINGTON–Both credit union trade associations are pushing back on remarks made by President Joe Biden during his State of the Union speech last night related to junk fees.

While the junk fees reference included a range of such fees the Administration is proposing be eliminated, Biden did make reference to a recent CFPB proposal related to credit card fees, as well as overdraft fees.

Broadly, the president said, “My administration is also taking on junk fees, those hidden surcharges too many businesses use to make you pay more.”

President Biden delivers State of the Union address Tuesday night.

Specifically, Biden pointed to “exorbitant bank overdraft fees, saving consumers more than $1 billion a year.” The president then referenced the recent proposal by the Consumer Financial Protection Bureau to cut credit card late fees to $8 from $30, as CUToday.info reported here.

“Junk fees may not matter to the very wealthy, but they matter to most folks in homes like the one I grew up in. They add up to hundreds of dollars a month,” Biden said, calling for passage of the Junk Fee Prevention Act.

That Act, among other things, would ban what Biden called “surprise resort fees,” fees for changing cable, Internet and cellphone providers, service fees on tickets to concerts and sporting events, and prohibit airlines from charging up to $50 roundtrip for families just to sit together.

“Americans are tired of being played for suckers,” Biden said.

CUNA: ‘Overly Broad & Ignores Needs’

As they did when the CFPB unveiled its proposal on credit card late fees, both CUNA and NAFCU took issue with Biden’s remarks on junk fees.

“The president’s use of the term ‘junk fee’ is overly broad and ignores the needs of low-income and middle-income consumers who depend on these services to resolve short-term financial difficulties,” said CUNA President and CEO Jim Nussle. “It does not consider the costs involved in providing needed financial services that consumers depend on. Most importantly, consumers must opt-in to having the option of overdraft protection, and the cost to use it. The people who choose to use the service are the people who pay for the service.   

“Credit unions believe in empowering consumers to manage their finances – and this includes giving them the choice to access a variety of services if they need them. Consumers use overdraft protection as a safety net – protecting them from life’s challenges.   

“Credit unions are constantly adapting overdraft programs to better address the financial well-being of their members,” Nussle continued. “We work with our members to help address those financial challenges and avoid fees if they choose. Without the option of overdraft protection – people are more likely to turn to predatory lenders, hurting the same people the administration seeks to help.” 

NAFCU: ‘Not the Full Picture’

Similarly, NAFCU President and CEO Dan Berger said Biden repeated a “misleading claim.”

"President Biden and the CFPB are not giving Americans the full picture of what the credit card late fees proposal will actually mean for their pocketbooks,” said Berger. “Consumers rely on safe, reliable short-term credit to afford daily life. This rule will severely restrict the market for credit cards, making those products harder to qualify for and increasing the cost of all other financial products and services. For Americans with low credit scores or lower incomes, this rule would cripple their ability to achieve any sense of financial security.” -The Details

In a statement following the State of the Union address, NAFCU said additional details are needed to “set the record straight.”

According to NAFCU, those details include:

• The proposed rule would cut allowable late fees for credit cards by over 75%. “However, within the proposal, the bureau acknowledges that the majority of Americans don’t make late payments and wouldn’t see any cost savings, but would carry the brunt of increased costs arising from card issuers having to recoup those costs in other ways.”

• The proposal would drastically reduce the current safe harbor to $8. That reduction would create “financial chaos” with several unaddressed, unintended consequences, according to NAFCU, which said it has repeatedly flagged concerns over the rulemaking to the CFPB, including the Bureau’s “circumvention of the law” by not convening a panel under the Small Business Regulatory Enforcement Fairness Act (SBREFA) to consider the impact of the rule on small entities.