CFPB Issues Advisory Opinion on Junk Fees and Customer Requests for Information: What Financial Institutions Should Know

On October 11, the Consumer Financial Protection Bureau (CFPB) issued new guidance on so-called “junk fees” that large financial institutions charge to fulfill customers’ requests for information about their accounts. This advisory opinion suggests a new area of scrutiny of financial institutions around consumer requests and customer service more generally.   

This is the first guidance issued by the CFPB on Section 1034(c) of the Consumer Financial Protection Act (CFPA)—but just the latest development in a broader federal campaign against junk fees that has also involved the White House, Federal Trade Commission and other agencies. Coming in the form of an “advisory opinion,” this guidance goes further than addressing fees to express an expansive view of the obligations of Section 1034(c) and the reach of CFPB advisory opinions more generally. By applying broad interpretations to the terms of a law that had, to date, received little attention, the Bureau is imposing significant requirements on financial institutions to track and respond to customer requests for information.

The advisory opinion also criticizes large financial institutions, claiming that some “have moved away from a traditional relationship banking model” and that “individualized service is now generally reserved for high net-worth individuals, and is difficult for other households to find.” 

Section 1034(c) – What It Is, Who It Covers

Section 1034(c) of the CFPA (12 U.S.C. § 5534(c)) requires covered institutions to, “in a timely manner, comply with a consumer request for information in the control or possession of [the institution] concerning the consumer financial product or service that the consumer obtained from [the financial institution], including supporting written documentation, concerning the account of the consumer.” The requirement exempts requests for:

• Confidential commercial information, including an algorithm used to derive credit scores or other risk scores/predictors.
• Information collected for the purpose of preventing fraud or money laundering, or making reports related to unlawful conduct.
• Information required to be kept confidential by any other law.
• Nonpublic or confidential information, including confidential supervisory information.

Section 1034(c) applies to insured depository institutions and credit unions that offer consumer financial products or services and have total assets of more than $10 billion, along with their affiliates. The CFPB has not issued any implementing regulations for Section 1034(c), and there has not been any public enforcement activity involving the provision.  

Why the Advisory Opinion Is Notable

Given the lack of guidance or activity around Section 1034(c) since it took effect in 2011, the CFPB’s decision to issue an advisory opinion about it is surprising. The Bureau’s Advisory Opinions Policy (set forth in 85 F.R. 77987 (Dec. 3, 2020)) indicates that such opinions are meant to be issued in response to requests from “interested parties” and “will be interpretive rules issued to resolve regulatory uncertainty.” 

As with the 10 other advisory opinions the CFPB has issued previously, there’s no indication whether anyone actually requested guidance on the scope or application of Section 1034(c).     

Unlike other advisory opinions, the Section 1034(c) advisory opinion concerns a statutory requirement that stands alone without an existing implementing regulation that was developed through the notice and comment rulemaking process.  

Under the Administrative Procedures Act, interpretive rules (a category which includes the CFPB’s advisory opinions) are exempt from the notice and comment process. Accordingly, they do not carry the force of law and instead are meant to advise the public of how the agency interprets a law that it administers. The lack of other interpretive authority—whether an implementing regulation, case law arising from consumer claims that their Section 1034(c) rights were violated, or even well-recognized industry practices for compliance with the rule—may result in regulated entities (and even courts) more heavily weighting the views set forth in the opinion than they might otherwise. 

What the Advisory Opinion Says About Section 1034(c)

Section 1034(c), without the exceptions, is just 64 words. The Bureau’s advisory opinion spans 17 double-spaced pages and expands on the definitions and ordinary understanding of many of the terms used in the statute. 

The advisory opinion gives the following interpretations of Section 1034(c):

• The requirements of Section 1034(c) apply even if a customer does not explicitly invoke the law.
• Information that must be provided in response to a request includes information that appears on periodic statements or in online portals, applicable interest rates, individual transaction details, automatic bill payments and other recurring transactions, account terms and conditions, and fee schedules.
• The term “supporting written documentation” in the law requires financial institutions to provide upon request “written documents that will substantiate information provided in response to consumer questions, or that will assist consumers with understanding or verifying information regarding their accounts.” This includes images of checks and original signed agreements with consumers.
• Financial institutions must provide information and documentation in their “control or possession,” which means anything known by the institution’s employees or contained in its records, and information held by an affiliate or service provider if the institution has the right or ability to receive it.
• Responses must be accurate and provide all responsive information.
• Institutions may not impose conditions or requirements on consumer information requests that “unreasonably impede” consumers’ ability to request or receive information.
  • The Bureau states that “as a general matter, requiring a consumer to pay a fee or charge to request account information, through whichever channels the bank uses to provide information to consumers, is likely to unreasonably impede consumers’ ability to exercise” their right to request information.
  • The Bureau also suggests an institution could violate the law “by imposing other conditions or obstacles,” such as “excessively long wait times to make a request to a customer service representative, requiring consumers to submit the same request multiple times, requiring consumers to interact with a chatbot that does not understand or adequately respond to consumers’ requests, or directing consumers to obtain information that the institution possesses from a third party instead.”
• There is no fixed time limit for an institution to respond to a consumer’s request, and the CFPB will consider the specific circumstances to determine compliance.
• The CFPB states that, “as a matter of prosecutorial discretion,” it will not seek monetary relief for violations of Section 1034(c) that occur before February 1, 2024.

The Advisory Opinion Places Additional Burdens on Institutions by Treating Information Requests Like Complaints

The opinion effectively equates requests for information with customer complaints, noting that Section 1034(c) was enacted alongside Sections 1034(a) and (b), which relate to how institutions must respond to customer complaints submitted to the CFPB. The opinion points out that, like customer complaints, requests for information “can lead to the identification and resolution of errors.”

Treating customer requests for information similarly to customer complaints will place additional burdens on institutions to track such requests. Because Section 1034(c) does not specify the manner in which requests must be submitted (and the Bureau’s opinion suggests that institutions cannot limit the methods), this could create a significant challenge for institutions to track requests through a myriad of channels, particularly when they now need to establish that they fully and timely responded to each request. For example, does an institution need to document and track a request made over the phone that a customer service representative was able to resolve immediately during that phone call?

Financial institutions covered by Section 1034(c) will need to assess their ability to track customer requests and determine if their current approach to logging and tracking customer inquiries is sufficient to meet the CFPB’s expectations for timely and fully responding to requests for information.

The Advisory Opinion Suggests the CFPB Interprets Possession and Control Broadly

Section 1034(c) states that an institution must provide the consumer with responsive information in the institution’s “possession or control.” In the advisory opinion, the CFPB explores the scope of this concept by referencing the obligations placed on government agencies in responding to Freedom of Information Act requests and on parties to litigation under Federal Rule of Civil Procedure 34. In particular, the reference to the “possession, custody, or control” standard of Rule 34 is a novel approach and introduces some ambiguity because courts have developed differing tests: Some apply the “practical ability” test, meaning a party must produce documents that it has the practical ability to obtain, even if they don’t have the legal right to obtain them. Other courts apply the “legal right” test, under which parties need only produce documents that they have the legal right to produce on demand. The Advisory Opinion references both standards, suggesting that the Bureau is taking a broad interpretation of the terms “possession and control” used in the statute.

Time will tell how the CFPB will approach the application of this discovery concept to customer requests for information. For now, institutions should review or develop policies and procedures around this issue in consultation with their subpoena and legal order response teams to ensure the institution meets the “possession, custody, or control” standard when responding to customer inquiries.

5 More Questions the Advisory Opinion Raises

1. What Is a Request? The opinion pointedly avoids defining what constitutes a request, noting that customers do not need to invoke Section 1034(c) for its requirements to apply. Thus, under the current interpretation, any request for information by a customer (outside of the exceptions) sent through any channel triggers these requirements. A first step for institutions to demonstrate their compliance with Section 1034(c) will be to implement policies and procedures that guide employees to recognize consumer requests and handle them appropriately.
2. Who Can Make a Request? Financial institutions frequently allow customers to designate a “trusted contact” or other authorized third party with whom the institution can share account information. The opinion references comments received from groups representing disabled consumers whose attorneys encountered difficulty obtaining account documentation. Financial institutions should be cognizant of their policies regarding authorized third parties and how they interact with the requirements of Section 1034(c), as the Bureau could find certain restrictions on, or requirements for, authorized third-party access to information to be “unreasonable impediments.”
3. What Constitutes an “Unreasonable Impediment” When It Comes to Customer Service Issues? The Bureau notes long hold times or customers having to submit multiple requests as “unreasonable impediments” to consumers but provides little further guidance on these issues. Financial institutions should consider their customer service standards and ensure that customers are not subjected to long wait times to speak with a representative.
4. Do Chatbots Pose an Unreasonable Impediment? The opinion also references chatbots, a favorite recent topic of the CFPB. Specifically, it states that it would likely be an impediment for customers to have to interact with a chatbot that “does not understand or adequately respond to customers’ requests.” This is one of many recent references to chatbots and AI that the Bureau has made, suggesting that institutions should expect scrutiny in this area. Institutions should assess any automated customer service systems to ensure they can adequately handle or route information requests.
5. What About Payoff Quotes? The opinion gives “balances necessary to pay off a loan” as an example of information that a consumer might request pursuant to Section 1034(c). This raises the question of how the Bureau would view fees charged for providing payoff quotes. For example, in the mortgage context, a payoff quote is a prediction of what amount will pay off the loan as of a future date. There is more involved in providing one than simply providing an existing account balance. It’s a new record that the institution creates in response to a consumer’s request; not existing information or documentation pertaining to their account.