Thai Liang Lim/E+ via Getty Images
The US Consumer Financial Protection Bureau announced a rather interesting development on Tuesday: Consumers will be charged fees if they access their own funds when making a purchase at large retail stores and use debit or prepaid cards to receive “cash back”.
Such Cash-back fees arise in connection with bank mergers, branch closures and widespread out-of-network ATM fees, all of which have reduced the availability of free cash access points for consumers, the CFPB explained in a report. Retail chains traditionally offer free cash back on debit card purchases.
“Many people in small towns no longer have access to a local bank where they can withdraw money from their account for free,” said CFPB Director Rohit Chopra. “This has created a competitive playing field for retailers to charge fees for cash back.”
The consumer protection organization found that three companies in a sample of eight major retailers (Dollar General (NYSE: DG), Dollar Tree (NASDAQ:DLTR), Kroeger (NYSE:KR), Albertsons (NYSE: ACI), Walgreens (NASDAQ: WBA), CVS (NYSE: CVS), Walmart (NYSE: WMT) and Target (TGT) charge cashback fees and estimate that they generate more than $90 million annually.
Dollar General (DG), Dollar Tree (DLTR) and Kroger (KR) were the three major retail chains that charged cash-back fees. And the marginal cost to merchants in processing each transaction could be just pennies compared to the much higher fees these retailers charge consumers, the regulator estimated.
Card issuer: American Express (NYSE: AXP), Synchrony Financial (NYSE: SYF), Capital One Financial (NYSE: COF), Discover Finance (NYSE: DFS), Bread Financial Holdings (NYSE: BFH).
Credit card networks: Mastercard (NYSE:MA), Visa (NYSE:V).
