You might be getting ripped off right now, and you don’t even know it.
Businesses in several different financial industries, from banks to auto lenders, are charging consumers “junk fees” — completely unnecessary or inflated or even illegal fees. And they’re counting on you not noticing or not caring or not being willing to do anything about it.
That’s the upshot of a sweeping new report by the Consumer Financial Protection Bureau. It found unfair fees for bank account overdrafts, fake charges for private mortgage insurance, and improper late fees for auto and student loan payments, among other things.
“For years, junk fees have been creeping across the economy,” said the bureau’s director, Rohit Chopra. President Joe Biden pushed for a crackdown on junk fees in his State of the Union address in February.
How can you fight back? Let’s look at five categories of junk fees.
5 Outrageous Junk Fees and How to Fight Them
Here’s an obnoxious junk fee. You know how your bank will charge you an overdraft fee if you have insufficient funds to cover a payment to someone? The CFPB found that some banks are charging multiple insufficient fund fees for the same transaction — even as soon as the next day.
Some banks are also charging unfair “surprise” overdraft fees by authorizing a debit that was made with a positive balance, but later charging an overdraft fee because of subsequent transactions that got processed before the debit settled.
What can you do about all this? For one thing, you can vote with your feet and move to a different bank. Remember, banks are competing for your business. If you think your bank is charging you unfair fees, or too many fees, you can shop around for a better option.
Some of the bigger national banks don’t really necessarily need your deposits, while smaller banks and online banks are often hungrier for your business. Online banks often pay more interest on your deposits because they have less overhead to pay for.
Yes, it’s a bit of a pain to move your bank account, especially if you have any automatic payments set up. But it’s worth the trouble if your current bank is ripping you off.
We hate paying for private mortgage insurance, also known as PMI. Just imagine paying for fake PMI — that’s an outrage!
Private mortgage insurance is required on a conventional mortgage if you can’t make a 20% down payment at signing. (A conventional mortgage comes from a bank, not a government agency.) If you can avoid paying for PMI, you should.
Here’s the kicker: The Consumer Financial Protection Bureau found that some mortgage lenders are charging homeowners for fake PMI premiums.
Not only that, but some of the shadiest mortgage lenders will repeatedly pay property inspectors to go to the wrong address, charging you $10 to $50 per visit.
Finally, some lenders will charge you late fees that are higher than what’s allowed in your state.
What can you do about all this? Read your monthly mortgage statement really carefully. Your mortgage lender is required to send you a detailed financial statement every month. If they’re charging you unnecessary fees, they’re counting on you not paying attention to these documents.
3. Student Loans
This is a nasty one.
Some student loan companies don’t allow credit card payments. But sometimes their customer service representatives accept credit card payments by mistake.
Some companies cancel those payments and act like they never happened. They don’t give you a chance to pay again before they hit you with late fees.
What can you do? You can complain to your lender and see if you get any satisfaction. And, like with all these junk fees, you can file a complaint with the federal government via the CFPB’s website or by calling 855-411-CFPB (2372).
Sorry there’s not a better answer.
4. Auto Loans
Some lenders will charge you late fees that are higher than what’s allowed in your contract. If you get charged a fee for a late car payment, it’s worth looking through your auto loan documents to see what your lender is allowed to charge you.
If you can’t find your contract, call or email your lenders and ask for a copy to be sent to you.
Also, when cars get repossessed, some lenders will charge repo fees of up to $1,000 even though the average cost is really $350, according to the CFPB.
5. Payday Loans
A payday loan is a short-term, high-interest personal loan that comes due when you get your next paycheck. They may look appealing in a cash crunch, particularly for people with low credit scores. But the fees and interest are exorbitant, getting borrowers trapped in a debt cycle where they take out loan after loan.
It’s common for borrowers to put up their cars for collateral to get this kind of personal loan. The CFPB found that some payday lenders would repossess cars for non-payment despite having entered into payment agreements with borrowers to allow them to avoid repossession.
The Consumer Financial Protection Bureau says it’s working to fix all of these problems by putting the squeeze on unruly lenders. OK, that’s not how these federal bureaucrats put it in their news release, but that’s what they’re doing.
“Typically, as with many of the instances identified within today’s report, companies take actions to fix the identified problems,” they said. “For more serious violations or when companies fail to take corrective actions, the CFPB opens investigations for potential enforcement actions.”
Like we said earlier, with all these junk fees, you can file a complaint with the federal government via the CFPB’s website or by calling 855-411-CFPB (2372).
Mike Brassfield ([email protected]) is a senior writer at Codetic.