In the United States, thousands of banks, credit unions and fintech companies are vying for business and consumer trust. U.S. consumers benefit from a highly competitive marketplace when it comes to selecting the banking services that meet their needs and are empowered to make informed decisions about how much they should pay for a checking account feature like overdraft protection or benefits that a specific credit card might offer.
Against this backdrop, it is all the more disconcerting 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 accompanying series of blog posts, the CFPB suggests that consumers of financial products 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 Charged by Providers of Consumer Financial Products or Services,” but the agency’s press release and related blog posts suggest that it is more than a neutral information-gathering exercise. Instead, they use threatening phrases like “operating revenue streams” to suggest that all companies profit from consumers or somehow break the law. This is not the case.
With regard to consumer protection, existing laws and regulations ensure that consumers receive accurate and timely information, including a schedule of fees. The Truth in Lending Act, for example, requires disclosure of 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 is little evidence to suggest that consumers are not enjoying the benefits of vigorous competition in the financial services market. According to the CFPB of January 2021 Federal Consumer Financial Law Report Task Force, the consumer credit market “has seen new entrants, innovative products, overall growth, the reinvention of incumbents, and the decline or exit of companies that could not keep pace with others. These are the characteristics of competitive markets.
Another confusing statement from the CFPB is their description of certain fees as “quasi-mandatory”. This seems to suggest that the Bureau is not comfortable with any fees charged. This type of thinking demonstrates a complete misunderstanding of the financial services market and business more broadly by neglecting overhead costs, including but not limited to service development, marketing (which can be extremely costly in a competitive) and the infrastructure, including customer service, that makes the products work.
If the CFPB wants to help consumers, it must precisely identify their concerns. Throwing out wide scatters that accuse law-abiding companies of wrongdoing diverts attention from illegal activity that should be addressed. The business community is committed to protecting consumers – we cannot help identify bad actors if the CFPB avoids saying what the illegal activity is.
The CFPB is meant to empower consumers to make informed choices, not choose for them. This so-called RFI is an attempt to force banks and financial institutions to limit consumer choice and will only stifle innovation and competition in the financial services industry. The ultimate question, which the CFPB ignores, is which services will disappear if providers cannot cover the costs and will the consumer be better off?
About the authors
Vice President, Center for Competitive Capital Markets
Bill Hulse is vice president of the Center for Capital Markets Competitiveness at the United States Chamber of Commerce.