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rohit chopra
Wall Street Banks Accused of Trying to Sabotage Key Consumer Protection Rule
"The CFPB must stop this ploy by the biggest banks to keep us trapped under their thumbs."
Nov 15, 2024
Consumer advocates applauded last month as the Consumer Financial Protection Bureau finalized a rule aimed at making it easier for people to switch financial institutions if they're unhappy with a bank's service, without the bank retaining their personal data—but on Thursday, more than a dozen groups warned the CFPB that major Wall Street firms are trying to stop Americans from benefiting from the rule.
Several advocacy groups, led by the Demand Progress Education Fund, wrote to CFPB director Rohit Chopra warning that major banks—including JP Morgan Chase, Bank of America, Citi, TD Bank, and Wells Fargo—sit on the board of the Financial Data Exchange (FDX), which has applied to the bureau for standard-setting body (SSB) status, which would give it authority over what is commonly known as the "open banking rule."
Standard-setting authority for the banks would present a major conflict of interest, said the groups.
The banks are also on the board of the Bank Policy Institute, which promptly filed what the consumer advocates called a "frivolous lawsuit" to block the open banking rule when it was introduced last month, claiming it will keep banks from protecting customer data.
At a panel discussion this week, Bank of America CEO Brian Moynihan also said the open banking rule, by requiring financial firms to unlock a consumer's financial data and transfer it to another provider for free, would cause "chaos" and amplify concerns over fraud.
"The American people are fed up with Wall Street controlling every aspect of their lives and the open banking rule is an opportunity to give all of us some financial freedom."
The groups wrote on Thursday that big banks want to continue to "maintain their dominance by making it unduly difficult for consumers to switch institutions."
"The presence of these organizations on both the FDX and BPI boards undermines the credibility of FDX and presents various concerns relating to conflict of interest, interlocking directorate, and antitrust law," they wrote.
Upon introducing the finalized rule last month, Chopra said the action would "give people more power to get better rates and service on bank accounts, credit cards, and more" and help those who are "stuck in financial products with lousy rates and service."
The coalition of consumer advocacy groups—including Public Citizen, the American Economic Liberties Project, and Americans for Financial Reform—urged Chopra to reject FDX's application for standard-setting authority so long as the banks remain on its board.
“It would be a flagrant conflict of interest for the same banks who are suing to block the open banking rule because it threatens their market dominance to also be in charge of implementing it," said Demand Progress Education Fund corporate power director Emily Peterson-Cassin. "The American people are fed up with Wall Street controlling every aspect of their lives and the open banking rule is an opportunity to give all of us some financial freedom. The CFPB must stop this ploy by the biggest banks to keep us trapped under their thumbs."
The groups called the open banking rule "a historic step forward for the cause of giving consumers true freedom intheir financial lives."
"For this reason, it is imperative that SSB status not be granted to an organization whose board members are, either directly or through a trade association they are participating in, suing the CFPB to stop the rules from taking effect, particularly when such members may be ethically conflicted from such dual participation," said the groups. "By rejecting SSB status for FDX or any other organization with similar conflicts of interest pertaining to Section 1033, the CFPB will help prevent big banks from sabotaging open banking rules."
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Report Exposes How Chains Like Dollar General Prey on the Poor With Cash-Back Fees
Dollar General, Dollar Tree, and Kroger rake in a combined $90 million a year from cash-back fees, according to a new report by the Consumer Financial Protection Bureau.
Aug 27, 2024
The Consumer Financial Protection Bureau published a report Tuesday highlighting how large retailers such as Dollar General and Kroger exploit low-income communities' lack of access to local banking to hit consumers with predatory cash-back fees.
The CFPB found that while many retailers still offer free cash back at the register, Dollar General, Dollar Tree, and Kroger collectively rake in $90 million a year from fees imposed on people using the retail locations to access their own money.
"At Dollar General and Dollar Tree/Family Dollar, cash-back fees for small withdrawal amounts are the highest in the sample ($1 fee or more for cash-back amounts under $50)," the bureau found. "Kroger, the country's largest grocery chain, recently announced new charges at their Harris Teeter stores (75 cents for $100 cash back or less), and charges 50 cents for up to $100 cash back at their other brand stores such as Ralph's, Fred Meyer, and others."
The CFPB emphasized that such fees are disproportionately levied against people with lower incomes, who are more likely to live in areas with fewer banking options—forcing residents to rely on dollar stores for easy access to cash. The report notes that banking industry consolidation and branch closures have left a "void" of cash access spots that retailers like Dollar General have rushed to fill.
"While retail chains had long provided cash back on debit card purchases for free, the CFPB has found that dollar store chains and other retailers are now charging fees for access to cash," Rohit Chopra, the CFPB's director, said in a statement Tuesday. "Many people living in small towns no longer have access to a local bank where they can withdraw money from their account for free. This has created the competitive conditions for retailers to charge fees for cash back."
"Dollar General alone chalked up gross profits of $11.82 billion in 2023. But they nonetheless find new ways to squeeze even more money from their shoppers."
Stacy Mitchell, co-executive director of the Institute for Local Self-Reliance (ILSR), applauded the CFPB's new research as an "important report" that "exposes yet another way in which dollar stores' exploitative business practices take advantage of consumers."
"The three big dollar store chains make enormous profits," said Mitchell. "Dollar General alone chalked up gross profits of $11.82 billion in 2023. But they nonetheless find new ways to squeeze even more money from their shoppers—in this case, by charging them a few dollars to get cash back on their transactions, which average only a modest $25 or so. All three major dollar store chains have been fined for overcharge errors, and all use their market muscle to force suppliers to create 'cheater' sizes for them. CFPB's report will help alert shoppers to these abusive retailing practices."
ILSR has long worked to shine light on the abuses of dollar stores, releasing a report last year detailing how the retailers have invaded low-income communities and preyed on vulnerable consumers as well as workers.
"One might assume that the dollar chains are simply filling a need, providing basic retail options in cash-strapped communities. But the evidence shows something else," reads ILSR's report. "These stores aren't merely a byproduct of economic distress, they are a cause of it."
"In small towns and urban neighborhoods alike," the report adds, "dollar stores drive grocery stores and other retailers out of business, leave more people without access to fresh food, extract wealth from local economies, sow crime and violence, and further erode the prospects of the communities they target."
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CFPB Aims to Protect Workers From Paycheck Advance Fees
"The CFPB's actions will help workers know what they are getting with these products and prevent race-to-the-bottom business practices," said the director of the bureau.
Jul 18, 2024
With inflation rising in recent years, driven by corporate greed according to numerous analyses, the number of people in the U.S. who have relied on paycheck advance products has skyrocketed—but a rule introduced Thursday by the Consumer Financial Protection Bureau is aimed at ensuring that lenders who provide these products are transparent with financially struggling workers about the fees they can incur.
The CFPB proposed a rule clarifying that paycheck advances, sometimes marketed as "earned wage" products, are consumer loans and are therefore subject to the Truth in Lending Act.
The federal law requires lenders to disclose all fees, interest, and total costs consumers will incur before they use the product.
According to a study released by the CFPB as it announced the new proposed rule, the number of paycheck advance transactions processed by employer-partnered firms ballooned by 90% from 2021-22. More than 7 million workers used paycheck advances to access $22 million over that time period in order to pay for their housing, utilities, and other essentials.
The study notes that "the mismatch between when a family receives income and when a family must make payments for expenses" is a major driver of demand for consumer credit and other products like paycheck advances.
"To reduce their costs, employers have a strong incentive to delay the payment of compensation to workers, which drives demand for short-term credit," reads the analysis.
As such, said Rohit Chopra, director of the CFPB, paycheck advances "are often marketed to and designed for employers, rather than employees."
"The CFPB's interpretive rule will level the playing field and promote competition among short-term small-dollar lenders."
"The CFPB's actions will help workers know what they are getting with these products and prevent race-to-the-bottom business practices," he said.
Th bureau's report focuses on employer-sponsored paycheck advances, which have been increasingly used over and over by the same workers. Employees took out an average of 27 paycheck advance loans per year, according to the CFPB, with the average transaction totaling $106.
"The share of workers in our sample using the product at least once a month increased from 41% in 2021 to nearly 50% in 2022," wrote the CFPB.
The bureau noted that while employers sometimes make paycheck advances fee-free for their employees, workers usually pay fees themselves, including expedited service fees and "tips" that the online services request when completing the transaction.
In the sample the CFPB reviewed, employers paid for less than 5% of the fees incurred by workers
"Across our sample of surveyed companies, in 2021 and 2022, roughly 90% of workers paid at least one earned wage product-related fee," said the bureau. "Among the companies in our sample that collect fees, the average cost per transaction ranged from $0.61 to $4.70. When workers paid a fee, the average size was approximately $3.18. Workers paid an average of $68.88 per year in fees."
Some services provide subscriptions for workers who used paycheck advances regularly; those who utilize them can pay as much as $14.99 per month in subscription fees, according to the CFPB.
"In recent years, workers have seen big increases in wages, but junk fees and high rates on financial products not only chip away at these gains—they take advantage of workers," acting Labor Secretary Julie Su said in a statement.
Adam Rust, director of financial services for the Consumer Federation of America, said the proposed rule shows that "an advance on wages is still a loan that has to be repaid, and no amount of hair-splitting can change it."
"Workers have always relied on wages to repay advances from lenders," said Rust. "Policymakers should be skeptical whenever lenders insist on regulatory exemptions from rules that apply to their competitors. The CFPB's interpretive rule will level the playing field and promote competition among short-term small-dollar lenders."
The CFPB is among several federal agencies that right-wing operatives, many of whom worked in the Trump administration, have pledged to abolish under the policy agenda Project 2025.
Under the Biden administration, in addition to taking aim at paycheck advances, the CFPB has proposed a rule to cap credit card late fees at $8, a move that would save Americans $10 billion per year; prevented discrimination by small business lenders; and fined Wells Fargo $3.7 billion for illegal activity.
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