The Consumer Financial Protection Bureau (CFPB) is ramping up its efforts to combat junk fees charged by mortgage servicers, as well as other illegal practices. CFPB examinations have found servicers charging illegal junk fees. Examples include prohibited property inspection fees. It has evidence of mortgage providers sending deceptive notices to homeowners. There is also evidence of violation of loss mitigation rules that help struggling borrowers stay in their homes. In response to the CFPB’s findings, Financial Institutions refunded junk fees to borrowers and stopped their illegal practices.
CFPB secures $140m fees refunds
In October last year, the CFPB announced that its examination work from February to August of 2023 resulted in $140m refunded to consumers for unlawful junk fees in the areas of bank account deposits, auto loan servicing, and international money transfers. Since that time, the CFPB’s supervision junk fee work has resulted in more than $120m in additional junk fee refunds in the area of bank account deposits.
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“Homeowners cannot just simply switch providers if their mortgage servicer charges them illegal junk fees,” said CFPB Director Rohit Chopra. “Since mortgage borrowers are captive to a company they never chose to do business with, we are working hard to detect and deter violations of law.”
Mortgage servicers are the companies responsible for, among other things, processing mortgage payments and managing mortgage accounts. They play a critical role in assisting homeowners with repayment. This includes helping mortgage borrowers access repayment options when they face financial difficulties. A mortgage servicer is chosen by the lender or Investor that owns the mortgage, and not by the homeowner. Residential mortgage servicers currently handle more than $13trn in mortgage balances.
CFPB targets illegal junk fees across consumer finance
Over the last few years, the CFPB has prioritised combatting illegal junk fees in a wide range of consumer financial markets. Most recently, the CFPB announced a final rule that, when it goes into effect, would reduce credit card late fees by more than $10bn every year. The CFPB has also proposed a rule that would save consumers more than $3.5bn in overdraft fees every year. And it has addressed junk fees charged on international money transfers. Overdraft and non-sufficient funds fees have declined by more than $6.1bn since the CFPB began scrutinising junk fees.
The CFPB has also announced that it is working to address other anticompetitive mortgage fees. These include those charged in connection with closing costs.
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