Retailers charge cash-back fees to consumers on smaller supply of free cash access points: CFPB
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The U.S. Consumer Financial Protection Bureau shared on Tuesday a rather interesting development: Consumers are incurring charges to access their own funds when using debit or prepaid cards to receive “cash back” at large retail stores during a purchase.
Such cash-back fees are emerging in the context of 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 have traditionally offered free cash back on debit card purchases.
“Many people living 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 the competitive conditions for retailers to charge fees for cash back.”
The consumer watchdog found that three companies in a sample of eight large retailers (Dollar General (NYSE:DG), Dollar Tree (NASDAQ:DLTR), Kroger (NYSE:KR), Albertsons (NYSE:ACI), Walgreens (NASDAQ:WBA), CVS (NYSE:CVS), Walmart (NYSE:WMT) and Target (TGT)) charge cash-back fees and estimates that they collect more than $90M annually.
Dollar General (DG), Dollar Tree (DLTR) and Kroger (KR) were the three major retail chains charging cash-back fees. And the marginal cost to merchants for processing each transaction may be only a few pennies, compared with the much higher fees these retailers charge consumers, the regulator estimated.
Card issuers: American Express (NYSE:AXP), Synchrony Financial (NYSE:SYF), Capital One Financial (NYSE:COF), Discover Financial (NYSE:DFS), Bread Financial Holdings (NYSE:BFH).