I understand why consumers and regulators get so infuriated by the incessant fees financial institutions seem to never tire of dreaming up and charging their customers. My favorite along this line happened years ago when I was on the sell-side: it was the “inactivity fee” a large brokerage firm decided to charge its retail customers who hadn’t generated enough in the way of brokerage transactions during the prior month. That’s right: customers were told they had to fork over money for not generating adequate commission revenue. The resulting riot among the firm’s brokers and clients was something to behold.
So I get the outrage over nickel-and-dime fees. What I don’t get, though, is why it’s only the banks that seem to get publicly shamed for charging them. I’m just back from a week in Arizona. I travel enough that the company I rented a car from when I was there, Hertz, gives me a bit of a break on my rate daily rate. For the week, I was charged $418.50 for the rental. And yet my total bill when I returned the car came to $609.54—nearly 50% higher than the price I was quoted when I rented it in the first place.
What accounted for the difference? You guessed it: mostly fees. There was a “Concession Fee Recovery” fee, for instance, and an “O&M Recovery Fee.” Also, an “Airport Facilities Fee.” These fees, I later learned, compensate Hertz for payments it makes to the Phoenix airport for the privilege of doing business there. Kind of like rent. Which is to say, they reflect Hertz’s ongoing cost of doing business. Why these costs aren’t incorporated into Hertz’s daily rental rate, I don’t understand. Their tack-on as fees instead seems unfair in a very basic way.
In its brief life, the Consumer Finance Protection Bureau hasn’t been shy about penalizing financial services providers for charging consumer fees it deems to be excessive, unnecessary, or not adequately disclosed. This past July, for example, the CFPB ordered Citigroup to pay $700 million in relief to credit card customers the CFPB said had been charged fees improperly, plus a $35 million civil penalty. In April it fined Regions Financial $7.5 million for wrongly charging overdraft fees. Businesses from mortgage servicers to student loan companies have been targeted.
I have no view on whether those improper-fee fines were merited or not. What I don’t get, though, is why it’s only financial services companies that seem to have to pay them. Rental car companies can boost a customer’s bill by 50% without prior disclosure—the sort of move that one assumes would drive Richard Cordray to apoplexy if a bank did it—and yet policymakers, if their lack of response is anything to go by, seem to believe that’s a perfectly acceptable way of doing business.
I’m not calling for the creation Car Renters Protection Bureau to police the activities of the Hertzes and Avises of the world. But I continue to be amazed at the browbeating regulators continue to inflict on banks and financial services providers for what often seem like minor misdeeds—especially compared to the stunts that companies operating in other industries seem to routinely get away with.
What do you think? Let me know!