Americans pay billions of dollars every year in costly, hidden charges known as “junk fees.” For everyday consumers, these can be bank overdraft fees, expensive credit card interest charges, hidden fees in mortgages, loans, or payment transfers. In 2019 alone, banks' overdraft fees were a $15 billion industry, and credit card companies earned $14 billion in late fees, according to the Consumer Financial Protection Bureau (CFPB). 

As the voice of leading fintech companies in Washington, we are constantly working to ensure the regulatory landscape allows for innovation, competition, and consumer choice. The regulatory agency tasked with protecting consumers, the CFPB, can now take meaningful action to tackle one of the most harmful fees: the hidden costs embedded in international remittance payments. 

The CFPB recently launched an inquiry into pervasive junk fees. At the same time, competition from technology-driven financial services companies, or fintechs, gives consumers greater choice in the market and offers more transparent, fairer, and lower-cost options. Many fintech leaders founded their companies to tackle debilitating fees and provide alternatives to the status quo in traditional banking. 

The CFPB can take action immediately to require price disclosure standards, eliminating hidden fees and ensuring consumers have complete information to shop for the right remittance payment provider. The simple fix would require banks and international payments providers to include the exchange rate markup in presenting any fees charged on a product. Currently, many providers present their services as “no fee” even when they bake profits into inflated exchange rates. 

We’re seeing real-time results of greater consumer choice in the markets driven by competition from financial technology. Take investment, for example. Instead of paying a costly, hidden fee for a brokerage account, fintech enables consumers to access high-quality investment advice on a digital platform, building wealth in ways traditionally reserved for the wealthy. 

In the United States alone, people sent over $148 billion abroad as recently as 2017. These cross-border payments come out of the pocketbooks of recent immigrants working hard to send some money back home, small businesses transacting with vendors or customers abroad, foreign exchange students, vacationers, service members, and more. Yet, these consumers pay a significant markup – $8.7 billion in hidden fees – due to a lack of price transparency in exchange markup rates. 

Other governments worldwide are helping consumers better understand the costs of international payments. In 2018, new rules went into effect within the European Union to eliminate hidden exchange rate markups. The United Kingdom commissioned research into the behavioral economics of transparent pricing. The Australian government issued a report on the lack of transparent pricing in international payments. And the United Nations and World Bank recently convened a Global Remittance Task Force recommending governments adopt “total cost” pricing (upfront fees plus exchange rate margin) to help bring down the costs of remittances.

It’s time for the U.S. to catch up and prioritize the well-being of American consumers. We urge Director Rohit Chopra to update the CFPB’s outdated remittance rule and take on the high cost of international payments. Taking action on remittance fees and ensuring price transparency is a no-brainer: Let’s make sure Americans can keep more of their hard-earned money by tackling hidden fees in international payments.