ABA CEO to Congress: Misguided Campaign Against Fees Will Harm Rather Than Help Consumers

Ahead of today’s Senate Committee on Banking, Housing, and Urban Affairs hearing examining fees in the financial services and rental housing sectors, ABA President and CEO Rob Nichols sharply criticized the administration for engaging in a political campaign to denigrate legitimate, transparent and well-disclosed fees for banking services.

“Today’s Senate hearing clearly seeks to perpetuate the myth that there are junk fees in financial services,” said Nichols. “There may be junk fees in the economy, but they are not in banking. National surveys have consistently shown that consumers value the wide range of banking services available to them today and acknowledge that banks are transparent about the cost of those services, most of which must be disclosed under existing federal law. The irony is that this misguided political campaign will ultimately harm, rather than help, the very consumers supporters claim to want to protect.”

Nichols’ concerns echo a statement for the record ABA submitted to the committee ahead of today’s hearing. In the statement, the American Bankers Association emphasized that the U.S. market for financial services is fiercely competitive, particularly when compared with financial services markets in other advanced economies and other consumer-facing industries in the United States.

“Banks, credit unions, credit card companies, mortgage lenders, fintechs, and other providers of consumer financial products and services compete aggressively on all aspects of their offerings—including fees,” ABA wrote in its statement. “This ultra-competitive environment benefits consumers, who are free to choose from a wide variety of high-quality, convenient, innovative, and competitively priced products and services.”

The association noted that, “consumers that obtain these products and services from banks are overwhelmingly satisfied with their bank.” According to a March 2024 survey conducted by Morning Consult on behalf of ABA, nine in ten Americans with a bank account (87%) say they are “very satisfied” or “satisfied” with their primary bank, and 96% rate their bank’s customer service as “excellent,” “very good” or “good.”

In the statement, ABA highlighted that “for over 50 years, Congress under both Democrats and Republicans has determined that the best way to promote competition and consumer choice – while also ensuring robust consumer protection – is through disclosure-based laws and regulations.” The association cited the Truth in Lending Act, Truth in Savings Act and the Electronic Funds Transfer Act as examples, noting that “each law reflects Congress’ conclusion that ‘clear and conspicuous’ disclosures promote informed use of products, which enhances competition and access to financial services.”

In contrast, recent actions taken by the Consumer Financial Protection Bureau are at odds with the precedent set by Congress.

“The CFPB…has initiated a series of blogs, circulars, advisory opinions, and rulemakings designed to upend this disclosure-based approach to consumer protection,” ABA wrote. “As part of its participation in the Administration’s campaign against so-called ‘junk fees,’ the CFPB has indicated that certain bank fees and pricing frameworks are ‘unfair’ or ‘abusive.’ When a regulator classifies a fee or pricing framework as inherently ‘unfair ‘or ‘abusive,’ financial institutions cannot respond with enhanced disclosures. Instead, the threat of UDAAP enforcement may force financial institutions to cease charging the (legal and fully disclosed) fee the CFPB disfavors or to abandon the pricing framework that the CFPB deems too ‘complex.’ The end result may be one Congress considered—but rejected—in the Dodd-Frank Act: authorizing the CFPB to define ‘plain vanilla’ financial products and services.”

The statement details the myriad ways that the administration’s campaign against so-called “junk fees” risks harming the constituents it aims to protect, including rulemakings on credit card late fees and overdraft fees that seek to impose price caps on the fees at levels far below banks’ actual costs. The statement notes: “Rather than enhancing consumer protection and promoting competition, both examples of market interference will result in less innovation, fewer choices and higher prices for consumers—to the detriment of financial inclusion.”

ABA notes that the administration’s campaign “has led regulatory agencies to jettison disclosure-based frameworks in favor of using UDAAP authority and price caps to target disfavored products, which impairs innovation, reduces consumer choice, decreases competition, increases prices, and restricts consumers’ access to financial services.”

ABA concludes its statement by urging Congress to “conduct rigorous oversight of the CFPB’s and FDIC’s unprecedented campaign against fees; pass H. J. Res. 122 and S. J. Res. 70, to overturn the CFPB’s rule on credit card late fees; and examine how the CFPB’s overdraft proposal will lead banks to limit consumers’ access to overdraft and to low-cost deposit accounts. A return to disclosure- and market-based solutions will expand access to credit and liquidity, expand financial inclusion, and create a more prosperous economy for all.”

Read ABA’s full statement for the record.