Three out of the eight major retail chains included in a sample reviewed by the federal consumer financial protection agency were found to charge “cash back” fees at the register, a practice that the agency says is costing consumers at those establishments $90 million in fees annually.
The Consumer Financial Protection Bureau (CFPB), in a release, said retailers had long provided cash back on debit card purchases for free, but it said dollar store chains and othttps://www.regreport.info/wp-admin/edit.phphers are now charging people to access their cash at the register against a backdrop of financial institution mergers and closures that have created “competitive conditions” for such practices.
Today, the bureau said, the ability to obtain cash back at the register is sometimes the only option. “Many retailers are filling a void in providing access to cash, as some communities lack access to a local bank,” the bureau said in discussing an “issue spotlight” that was released Monday. “While some retailers have typically offered cash back for free, the CFPB’s recent market scan suggests that this is changing, particular at dollar store chains.”
The CFPB said it sampled eight large retail companies – Dollar General, Dollar Tree/Family Dollar, Kroger, Albertsons, Walgreens, CVS, Walmart and Target – and assessed their practices for charging cash-back fees.
An executive summary of the report notes that:
- Cash-back fees are costing consumers millions of dollars. The CFPB found that three companies in the sample charge cash-back fees and estimates that they collect over $90 million in fees annually for people to access their cash. The CFPB also estimates that the marginal cost to merchants for processing each transaction may be a few pennies, compared to the much higher fees charged by these retailers to consumers. While there may be other costs related to cash handling, these are generally reduced by the provision of cash back, as it reduces merchants’ cash on hand.
- Three major firms charge cash-back fees even though other competitors offer it for free. Three retail companies – Dollar General, Dollar Tree, and Kroger, which also operate brands such as Family Dollar, Harris Teeter, Ralph’s, and others – charge fees for this service while other national retail companies sampled by the CFPB do not charge a fee. At the two largest dollar store corporations, cash-back fees for small withdrawal amounts are the highest in the sample ($1 or more for amounts under $50). Kroger, the country’s largest grocery chain, recently expanded cash-back fees to its Harris Teeter brand (75 cents for $100 or less), higher than those in place among its other brands (50 cents for $100 or less), in addition to higher fees for larger amounts.
- Cash-back fees are levied on low pre-set cash withdrawal amounts. Many merchants pre-determine the withdrawal amount options in a single transaction, commonly between $5 and $50. The fees charged on small, constrained amounts often constitute a high percentage of the cash withdrawal and limit consumers’ ability to spread the cost of that fee over larger amounts. It may also induce repeat withdrawals, with consumers incurring a new fee each time.
- Consumers with lower incomes or fewer banking choices may be more likely to encounter cash-back fees. Dollar stores are frequently located in small rural towns, communities of color, and low-income communities. These areas are also more likely to be places where there are fewer branch locations, and communities where people are more reliant on cash for daily transactions than others.
The CFPB looked to various sources for its report. It said its analysis of data from the Atlanta Federal Reserve Bank’s Diary and Survey of Consumer Payment Choice found that from 2017 to 2022, cash withdrawals at retail locations made up 17% of all transactions by which people got cash from their checking account, savings account, or prepaid card. It said cash withdrawals at retail are second only to ATMs (61%) and more frequently used than bank tellers (14%). (It noted that its report does not include cash-back transactions made using a credit card cash advance feature or other form of credit.)
“The CFPB is concerned that reduced access to cash undermines the resilience of the financial system and deprives consumers of a free, reliable, and private means of engaging in day-to-day transactions,” the bureau said, noting that it would continue to monitor practices and “work with agencies across the federal government to ensure people have fair and meaningful access to the money that underpins our economy.”