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Credit Unions Slam Biden’s Characterization of “Junk Fees”

Last updated 02/10/2023 by

During his State of the Union address, President Biden faced criticism from credit union trade groups over his characterization of certain fees as “junk fees.” The CFPB has proposed a rule to reduce credit card late fees to $8, but no final rule reducing overdraft fees has been adopted yet. The credit union groups argue that the term “junk fees” is too broad and does not take into account the financial services that consumers depend on.
During his State of the Union address on Tuesday, President Biden faced pushback from credit union trade group officials over his characterization of fees as “junk.”
“My administration is taking on these hidden surcharges that businesses impose to make you pay more,” Biden said. “We’ve reduced excessive bank overdraft fees, saving consumers over $1 billion annually and cutting credit card late fees by 75%, from $30 to $8.”
These junk fees may not affect the wealthy, but they matter to the majority of people, including those from homes like the one I grew up in. They can add up to hundreds of dollars a month. I understand the frustration when a company overcharges you and gets away with it. But not anymore,” said President Biden.
The Consumer Financial Protection Bureau (CFPB) has proposed a rule to reduce credit card late fees to $8. There has also been discussion of the CFPB reducing overdraft fees, but no final rule has been adopted yet.
Despite this, credit union trade groups swiftly criticized Biden’s use of the term “junk fees.”
“The president’s use of ‘junk fee’ is too broad and fails to consider the needs of low and middle-income consumers who use these services for short-term financial assistance,” said CUNA President/CEO Jim Nussle. “It does not take into account the costs of providing financial services that consumers need.”
He added that consumers must choose to have overdraft protection and if not, they may resort to predatory lenders, “The same group the administration aims to help.”
NAFCU President/CEO B. Dan Berger argued that Biden and the CFPB are not presenting a complete picture when it comes to credit card late fees.
“Biden and the CFPB are not providing the full impact of the credit card late fees proposal on consumers’ finances,” he said. “Consumers rely on safe and reliable short-term credit to manage their daily expenses.”

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