The CFPB Is Cleaning Up Junk Fees

The Consumer Financial Protection Bureau has taken a series of actions to cut excessive and hidden junk fees in the financial marketplace, which will save consumers billions of dollars.

Part of a Series
A sticker with the logos of the four major credit card companies is seen on the window of a shop in Chicago on October 19, 2022. (Getty/Jakub Porzycki)

Credit card companies, banks, and other financial services providers charge a wide range of fees.1 In some instances, these fees may be “junk fees”­­—excessive or undisclosed fees that mask the true price of a financial product and catch customers by surprise. Junk fees can add up quickly for households, making it more difficult to pay bills and save for the future.2 Yet while junk fees amplify financial disparities for vulnerable consumers, they have become attractive revenue raisers for firms, bringing in billions of dollars per year.3


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The Biden administration has made rooting out junk fees a core component of its broader agenda to improve competition and lower costs.4 As part of these efforts, the Consumer Financial Protection Bureau (CFPB) has pursued an aggressive agenda to limit junk fees and create a fairer financial marketplace.5 This issue brief discusses three recent policies that the CFPB has put forward to 1) rein in exorbitant credit card late fees; 2) impose greater consumer protections on checking account overdraft charges; and 3) eliminate nonsufficient funds (NSF) fees on instantaneous transactions.

CFPB action on junk fees by the numbers

$10 B

in estimated annual consumer savings from capping credit card late fees

$3.5 B

in estimated annual consumer savings from limiting overdraft fees

$443 M

in redress from financial institutions to wronged customers

$75 M

in fines to financial institutions and allocated to the CFPB’s victim relief fund

Who pays the most in fees?

Low-income Americans disproportionately bear the costs of fees charged by financial institutions. Late fees can represent a larger share of the average daily account balance, and thus a larger financial weight, for consumers in low-income neighborhoods than for those in higher-income areas.6 A 2017 CFPB report documented that 9 percent of account holders pay almost 80 percent of overdraft fees—and that they have a median end-of-day balance of less than $350.7 Looking at both overdraft and NSF charges, a 2023 CFPB report found that 81 percent of households who frequently encountered these charges had difficulty paying a bill at least once in the previous year, which is around three times higher than households who did not incur fees.8 Individuals may encounter these penalties when trying to prioritize essential expenses, such as rent and utilities, or emergencies.9

Black and Latino households face structural barriers in the financial market that slow their wealth growth and can make it more likely that they incur junk fees.

Fees unevenly burden those who already face obstacles to accessing credit and other financial services. Due to past and ongoing discrimination, Black and Latino households experience higher interest rates and fees than their white counterparts for the same types of loans.10 They are also more likely to resort to more costly forms of debt, such as credit cards, that leave them with less savings to cover additional expenses.11 In short, Black and Latino households face structural barriers in the financial market that slow their wealth growth and can make it more likely that they incur junk fees. In 2019, customers in majority-Black neighborhoods paid more in credit card late fees than those in majority-white neighborhoods.12 Black and Latino households, respectively, are 1.9 times and 1.4 times more likely to overdraft than white households.13

Financial institutions may employ strategies that exploit vulnerable consumers. The CFPB has noted companies’ reliance on fees to pad profits, finding, for example, that credit card late fees “account for 99 percent of penalty fees and over half of the credit card market’s total consumer fees.”14 And a literature review by the Federal Reserve Bank of Cleveland observes that revenue from overdraft fees “may make low-balance accounts more profitable and thus incentivize banks to open accounts for a wider range of customers.”15 Indeed, while most debit card overdrafts are less than $26, the largest firms charge penalties of $35, generating billions of dollars in revenue annually.16

Moreover, credit card companies or banks may disclose fees improperly, which has negative effects on consumers. A 2012 survey by The Pew Charitable Trusts found, “More than one-third of respondents surveyed were not aware their bank offered overdraft coverage until they incurred a penalty, and many also did not know about the tactics banks use that increase costs to consumers, such as reordering deposits and withdrawals.”17 Reordering, for instance, is an aggressive approach to maximize overdraft charges that reorganizes transactions from highest to lowest instead of chronologically. Since fees are typically charged for each overdrawn transaction, reordering can mean that account holders with lower balances face multiple overdraft fees in a short period of time.18

Congress has long acknowledged the need to shield consumers from harmful practices by financial institutions: Over decades, federal policymakers have passed numerous laws to protect Americans from the hidden costs associated with financial products and ensure fees are set appropriately. The Truth in Lending Act (TILA) of 1969 is a core consumer protection statute that requires lenders to make clear disclosures to borrowers around the costs of credit, such as interest and fees.19 In 2009, the Credit Card Accountability Responsibility and Disclosure (CARD) Act amended TILA, extending transparency provisions to credit card agreements.20 And in 2010, in recognition of the role of predatory financial products in the 2007–2008 financial crisis, the Dodd-Frank Wall Street Reform and Consumer Protection Act created the CFPB and endowed it with the authority to prevent unfair, deceptive, or abusive acts or practices—known as “UDAAP.”21

The CFPB is the only federal agency with the sole mission of protecting consumers from rapacious and exploitative practices by financial institutions.

The financial services industry has long argued that fees have deterrent effects, incentivizing customers to more closely monitor their accounts to avoid these penalties, but has offered little evidence to demonstrate this.22 Conversely, research examining the effects of the 2009 CARD Act—the last major effort to reduce credit card fees—found no impact on the frequency of late payments.23 The same report also states that “regulation of ‘hidden fees’ can bring about a substantial reduction in borrowing costs without necessarily leading to an offsetting increase in interest charges or a reduction in access to credit.”24 These findings run contrary to the industry’s common claims that regulatory attempts to limit fee-setting will make credit more costly and less available to borrowers.25

The CFPB’s 3 policies to fight junk fees

The CFPB is the only federal agency with the sole mission of protecting consumers from rapacious and exploitative practices by financial institutions.26 Since first opening its doors more than a decade ago, the CFPB has been the primary enforcer of consumer finance statutes.

In January 2022, the CFPB launched an initiative to examine junk fees across the financial marketplace, which could save Americans $19.5 billion every year.27 Since then, the CFPB has published several reports carefully documenting junk fees’ costs to individuals and financial actors’ reliance on these charges for profit.28 Through enforcement, it has held financial institutions accountable for illegal fee practices, returning millions of dollars to wronged consumers.29

Over the past year, the CFPB has pursued three policies to curb junk fees, described in detail below.

1. Rein in excessive credit card late fees

Under the CARD Act, credit card issuers may only charge fees that are “reasonable and proportional to the omission or violation to which the fee or charge relates.”30 When implementing the CARD Act, however, regulators established a safe harbor, allowing firms to charge up to $25 for a first-time missed payment and $35 for subsequent late payments. Over time, these thresholds were adjusted annually for inflation, reaching as high as $30 and $41, respectively.31

These charges add up: The CFPB estimated that credit card late fees cost households around $12 billion every year.32 In 2022 alone, credit card companies charged $14.5 billion in late fees—a 28 percent increase over the prior year.33 A 2023 Consumer Report national survey estimated that 1 in 5 Americans—approximately 52 million—paid a credit card late fee within the past year.34 Compared with other fees, late payment penalties are the most costly and frequently applied.35

Extensive CFPB analysis finds that firms have steadily raised credit card late fee amounts, without evidence that servicing costs have increased at the same pace.36 In March 2024, the CFPB finalized its proposal to lower the safe harbor to just $8 for large issuers.37 In its 2023 proposal, the CFPB stated:

[This new cap] better represents a balance of issuer costs, deterrent effects, consumer conduct, as well as the benefits to issuers that result from relying on a safe harbor amount, like reduced administrative costs, and the possible beneficial effects of lower late fees on subprime cardholders’ repayment behavior.38

The finalized rule eliminates the annual inflation adjustment, meaning that consumers can count on an $8 cap on late fees. If a firm chooses to impose a higher fee, it must demonstrate that the higher fee is necessary to account for the collection costs. These policy changes have the potential to save Americans more than $10 billion annually.39

2. Impose greater consumer protections on checking account overdraft charges

Overdraft fees used to be rare, but over time, they have become common practice for financial institutions, generating $12.6 billion in revenue in 2019 alone.40 About 23 million households are charged overdraft fees annually.41

An overdraft occurs when an individual makes a transaction that exceeds the amount in their checking account. In most cases, the bank covers the transaction and charges the customer a fee. In many ways, this fee is like a short-term loan. However, unlike with other lending products, overdraft loans have historically been exempted from various consumer protection regulations. Forty years ago, when regulators promulgated TILA rules, many payments were made by check and sent through the mail. The exemption was intended to allow time for checks to reach banks: If an individual lacked the funds in their account to make a transaction by the time a check arrived, the bank would manually honor the check as a courtesy.42 At the same time, however, the exemption means that TILA protections, including disclosure requirements, do not apply to overdraft loans.

Earlier this year, the CFPB introduced a proposal that would modernize regulations related to overdraft charges—and that could save consumers up to $3.5 billion annually43—as although automation has made firms’ processes more efficient and economical, overdraft fees have grown in cost and volume. Under the proposal, which applies to large banks and credit unions, firms could choose between two approaches. The first seeks to better align overdraft fees with their proportionate cost to firms:44 Firms would be allowed to extend overdraft services as a courtesy at a break-even cost or a benchmark fee set by the CFPB, which could be as low as $3. The second approach would allow firms to maintain profitable overdraft loans by subjecting these loans to TILA protections, helping ensure that consumers are well informed about the costs associated with overdraft loans.

3. Eliminate NSF fees on instantaneous transactions

A bank may impose an NSF fee after declining a transaction due to a customer’s lack of funds. Unlike overdraft loans, NSF fees are an administrative charge the bank imposes for blocking a transaction; the bank does not provide customers with any product or service.

The CFPB’s latest proposal would consider NSF fees on transactions that are declined instantly—such as those involving debit cards, ATMs, and some person-to-person platforms—unlawful under UDAAP because the practice takes “unreasonable advantage of a consumer’s lack of understanding of the material risks, costs, or conditions of the product or service.”45 The CFPB views this proposal as a preventive measure because person-to-person transactions are increasing—acknowledging that NSF fees from financial institutions have declined in recent years and that NSF fees imposed on instantly declined transactions are currently rare.46


Every year, millions of households are hit with excessive or surprise junk fees that disproportionately affect lower income earners and people of color. Since its inception, the CFPB has been working to ensure that consumer financial products are “fair, transparent, and competitive”47—and in recent years, it has continued to hold financial actors accountable for junk fees, as well as taken action to combat excessive credit card late fees, place greater protections around overdraft services, and eliminate certain NSF fees. These actions have created important safeguards for consumers and will help to level the playing field in consumer financial markets, putting billions of dollars back into the pockets of everyday Americans.

The authors would like to thank Alex Thornton, Anona Neal, Christian Weller, Edwith Theogene, Emily Gee, Marc Jarsulic, Meghan Miller, and Christian Rodriguez for their contributions.


  1. Council of Economic Advisers, “The Price Isn’t Right: How Junk Fees Cost Consumers and Undermine Competition” (Washington: The White House, 2024), available at
  2. Not all fees are considered junk fees. In some instances, fees may be appropriate, allowing a financial institution to recoup the costs associated with providing a product or service, at a modest price to the customer.
  3. Consumer Financial Protection Bureau, “Consumer Financial Protection Bureau Launches Initiative to Save Americans Billions in Junk Fees,” Press release, January 26, 2022, available at
  4. The White House, “Fact Sheet: Executive Order on Promoting Competition in the American Economy,” Press release, July 09, 2021, available at; The White House, “Biden-⁠Harris Administration Announces Broad New Actions to Protect Consumers From Billions in Junk Fees,” Press release, October 11, 2023, available at,the%20full%20price%20up%20front.
  5. Consumer Financial Protection Bureau, “CFPB Bans Excessive Credit Card Late Fees, Lowers Typical Fee from $32 to $8,” Press release, March 5, 2024, available at; Consumer Financial Protection Bureau, “CFPB Proposes Rule to Close Bank Overdraft Loophole that Costs Americans Billions Each Year in Junk Fees,” Press release, January 17, 2024, available at; Authors’ calculation based on recent CFPB enforcement actions. See Consumer Financial Protection Bureau, “CFPB Orders Wells Fargo to Pay $3.7 Billion for Widespread Mismanagement of Auto Loans, Mortgages, and Deposit Accounts,” Press release, December 20, 2022, available at; Consumer Financial Protection Bureau, “CFPB Orders Regions Bank to Pay $191 Million for Illegal Surprise Overdraft Fees,” Press release, September 28, 2022, available at; Consumer Financial Protection Bureau, “Consumer Financial Protection Bureau Announces Settlement with TD Bank for Illegal Overdraft Practices,” Press release, August 20, 2020, available at
  6. Consumer Financial Protection bureau, “Credit card late fees” (Washington: 2023), available at
  7. Authors’ calculations based on Consumer Financial Protection Bureau, “Data Point: Frequent Overdrafters” (Washington: 2017), available at
  8. Consumer Financial Protection Bureau, “Overdraft and Nonsufficient Fund Fees: Insights from the Making Ends Meet Survey and Consumer Credit Panel” (Washington: 2023), available at
  9. Lisa L. Gill, “How to Avoid Credit Card Late Fees,” Consumer Reports, October 19, 2023, available at
  10. Forthcoming paper from Edwith Theogene and Christian E. Weller, “High-Cost, High-Risk Consumer Credit Strips Wealth Among Black and Latino Households” (2024).
  11. Ibid.; Angela Hanks, Danyelle Solomon, and Christian E. Weller, “Systematic Inequality: How America’s Structural Racism Helped Create the Black-White Wealth Gap Andrea Freeman” (Washington: Center for American Progress, 2018), available at; Andrea Freeman, “Racism in the Credit Card Industry,” North Carolina Law Review 95 (4) (2017): 1071–1160, available at
  12. Consumer Financial Protection Bureau, “Credit card late fees.”
  13. Financial Health Network, “Amid Resurgence of Interest in Overdraft, New Data Reveal How Inequitable It Can Be,” September 3, 2021, available at
  14. Consumer Financial Protection Bureau, “Credit card late fees.”
  15. Paola Boel and Peter Zimmerman, “Unbanked in America: A Review of the Literature,” Federal Reserve Bank of Cleveland, May 26, 2022, available at
  16. Consumer Protection Financial Bureau, “Fact Sheet: The CFPB’s Proposed Rule To Curb Excessive Fees On Overdraft Loans By Very Large Banks And Close A Decades-Old Loophole,” available at (last accessed March 2024); “Consumer Financial Protection Bureau Launches Initiative to Save Americans Billions in Junk Fees.”
  17. The Pew Charitable Trusts, “Overdraft America: Confusion and Concerns about Bank Practices” (Washington: 2012), available at
  18. For example, an account holder with a balance of $100 who deposits $100 and makes a $150 purchase later that same day would not be charged an overdraft fee if transactions are processed chronologically, but the same consumer would incur an overdraft fee if transactions are processed from highest to lowest. See Marco Di Maggio, Angela T. Ma, and Emily Williams, “In The Red: Overdrafts, Payday Lending And The Underbanked” (Cambridge, MA: National Bureau of Economic Research, 2020), available at
  19. Legal Information Institute, “Truth in Lending Act (TILA),” Cornell Law School, available at (last accessed 2024).
  20. Credit CARD Act of 2009, Public Law 111-24, 111th Cong., 1st sess. (May 22, 2009), available at
  21. Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, Public Law 111-203, 111th Cong., 2nd sess. (July 21, 2010), available at
  22. Howard Grosfield and others, “Re: Responses from Credit Card Issuers to Sen. Elizabeth Warren’s (D-MA) call for CFPB to rein in unreasonable credit card late fees,“ June 30, 2023, available at; Paige Pidano Paridon, “Re: Request for Information Regarding Fees Imposed by Providers of Consumer Financial Products or Services [Docket No.: CFPB-2022-0003],” Bank Policy Institute, March 31, 2022, available at “; Sen. Elizabeth Warren, “ Letter to CFPB regarding credit card late fees,” June 29, 2023, available at
  23. Sumit Agarwal and others, “Regulating Consumer Financial Products: Evidence from Credit Cards,” Social Science Research Network (2013), available at
  24. Ibid.
  25. American Bankers Association, Consumer Bankers Association, and National Association of Federally-Insured Credit Unions, “RE: Request for Information Regarding Consumer Credit Card Market Docket No. CFPB-2023-0009,” April 24, 2023, available at
  26. Raj Date, “Testimony of Raj Date: The First 100 Days before the Subcommittee on Financial Institutions and Consumer Credit,” Consumer Financial Protection Bureau, November 2, 2011, available at
  27. Consumer Financial Protection Bureau, “Consumer Financial Protection Bureau Launches Initiative to Save Americans Billions in Junk Fees”; Council of Economic Advisers, “The Price Isn’t Right: How Junk Fees Cost Consumers and Undermine Competition.”
  28. Consumer Financial Protection Bureau, “Reports,” available at (last accessed April 2024).
  29. Consumer Financial Protection Bureau, “CFPB Orders Regions Bank to Pay $191 Million for Illegal Surprise Overdraft Fees.”
  30. Credit CARD Act of 2009; Michelle Black, “What Is The CARD Act Of 2009?”, Forbes, December 1, 2023, available at
  31. Consumer Financial Protection Bureau, “CFPB Bans Excessive Credit Card Late Fees, Lowers Typical Fee from $32 to $8,” March 5, 2024, available at
  32. Consumer Financial Protection Bureau, “CFPB Proposes Rule to Rein in Excessive Credit Card Late Fees,” February 1, 2023, available at
  33. Consumer Financial Protection Bureau, “CFPB Report Finds Credit Card Companies Charged Consumers Record-High $130 Billion in Interest and Fees in 2022,” October 25, 2023, available at
  34. Consumer Reports, “American Experiences Survey: A Nationally Representative Multi-Mode Survey” (New York: 2023), available at; Gill, “How to Avoid Credit Card Late Fees.”
  35. Consumer Financial Protection Bureau, “The Consumer Credit Card Market” (Washington: 2023), available at
  36. Consumer Financial Protection Bureau, “CFPB Bans Excessive Credit Card Late Fees, Lowers Typical Fee from $32 to $8.”
  37. Ibid.
  38. Consumer Financial Protection Bureau, “Credit Card Penalty Fees (Regulation Z),” Federal Register 88 (60) (2023): 18906–18951, available at – citation-46-p18909.
  39. Consumer Financial Protection Bureau, “CFPB Bans Excessive Credit Card Late Fees, Lowers Typical Fee from $32 to $8.”
  40. Consumer Financial Protection Bureau, “CFPB Proposes Rule to Close Bank Overdraft Loophole that Costs Americans Billions Each Year in Junk Fees.”
  41. Ibid.
  42. Ibid.
  43. Ibid.
  44. Ibid.
  45. Consumer Financial Protection Bureau, “Fees for Instantaneously Declined Transactions,” Federal Register 89 (21) (2024): 6031–6051, available at
  46. Ibid.; Consumer Financial Protection Bureau, “Vast Majority of NS Fees have been eliminated, saving consumers nearly $2 billion annually,” October 11, 2023, available at
  47. Consumer Financial Protection Bureau, “About us,” available at (last accessed March 2024).

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.


Lilith Fellowes-Granda

Associate Director, Financial Regulation

David Correa

Research Assistant


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The Consumer Financial Protection Bureau (CFPB) protects consumers, holds financial institutions accountable for predatory practices, and has returned $17.5 billion since 2011 to wronged consumers across all 50 states. However, recent legal challenges have threatened the agency’s autonomy, potentially spreading uncertainty and harm far beyond the agency. This series explores the ways the CFPB helps and advocates for consumers, as well as the potential implications of CFPB v. Community Financial Services Association of America, in which the U.S. Supreme Court’s ruling could undermine the agency’s independent funding structure and, by extension, its capacity to protect everyday consumers.


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