Biden administration targets ‘junk fees’ as inflation continues

NEW YORK — With time operating out earlier than the election, President Joe Biden highlighted his administration’s push to crack down on so-called junk charges that banks and different firms cost their prospects. The announcement comes after months of excessive inflation has eaten away at Americans’ financial savings and made the economic system the highest difficulty for voters.

Biden was joined by Rohit Chopra, the director of the Consumer Financial Protection Bureau, the nation’s monetary watchdog company created after the Great Recession. The bureau is concentrating on overdraft charges charged by banks as nicely as dangerous verify charges, that are levied in opposition to a financial institution buyer when a verify is not legitimate.

Prior to the pandemic, banks collectively charged their prospects roughly $15 billion in overdraft and bounced verify charges, based on a bureau estimate. The bureau estimates that its new enforcement push on junk charges will save Americans roughly $3 billion in charges yearly.

“These steps will immediately start saving Americans collectively billions of dollars in fees,” Biden mentioned.

Roughly two weeks away from the midterm elections, Biden is utilizing public occasions to point out how his administration is attempting to scale back prices for households. That push comes as excessive inflation — averaging 8.2% over the previous 12 months — has been a drag on the president’s approval score and put Democrats at an obstacle with voters.

Back in 2021 as the economic system emerged from the pandemic, Biden tried to reduce the dangers of lasting inflation. But continued pandemic shutdowns and Russia’s invasion of Ukraine have pushed up costs globally, a problem that the U.S. is primarily attempting to deal with by having the Federal Reserve elevate rates of interest.

Banks have lengthy been criticized for the excessive charges they cost prospects when their accounts go briefly detrimental. Relenting after years of public stress, banks have reined of their overdraft payment practices. Most notably, Bank of America diminished its overdraft payment from $35 to $10. Other banks have instituted adjustments to their insurance policies so prospects can’t overdraft their accounts, or are given repeated warnings that they should deliver their accounts present earlier than a payment is charged.

The banking trade responded that it was taking steps to scale back charges on prospects earlier than the White House stepped in.

“These adjustments had been made with out regulatory or legislative intervention,” mentioned Lindsey Johnson, president and CEO of the Consumer Bankers Association, the commerce and foyer group for the nation’s greatest retail banks like Wells Fargo and Bank of America.

The CFPB can also be concentrating on bounced verify charges, which happen much less often these days as a result of Americans have largely moved away from writing paper checks and largely use peer-to-peer fee platforms like Zelle, Venmo, PayPal and CashApp. These charges are sometimes between $10 and $19, based on the bureau, and are charged to the client depositing the verify.

“Charging a fee to the depositor penalizes the person who could not anticipate the check would bounce, while doing nothing to deter the originator from writing bad checks,” the bureau mentioned in a press release.

Biden additionally highlighted a variety of different charges the administration plans to go after, which embrace resort charges, processing charges for live performance tickets, and varied charges charged by airways.

“We’re just getting started,” Biden mentioned.

The White House’s push can also be a public show of help for the CFPB days after the Fifth Circuit Court of Appeals dominated that the way in which the bureau is funded is unconstitutional. The conservative-leaning courtroom dominated that as a result of the CFPB receives its funding from the Federal Reserve and never by Congressional appropriations, the way in which the bureau writes its guidelines and rules is unconstitutional.

The courtroom case is the most recent in an extended checklist of conservative and Republican challenges to the bureau’s construction.