Finance

Dollar General, Dollar Tree and Kroger charge cash-back fees: CFPB

Published

2 months ago

August 27, 2024

Business Finance News

A Dollar General store in Germantown, New York, on Nov. 30, 2023.

Angus Mordant/Bloomberg via Getty Images

Three of the nation’s largest retailers — Dollar General, Dollar Tree and Kroger — charge fees to customers who ask for “cash back” at check-out, amounting to more than $90 million a year, according to the Consumer Financial Protection Bureau.

Many retailers offer a cash-back option to consumers who pay for purchases with a debit or pre-paid card.

But levying a fee for the service may be “exploiting” certain customers, especially those who live in so-called banking deserts without easy access to a bank branch or free cash withdrawals, according to a CFPB analysis issued Tuesday.

That dynamic tends to disproportionately impact rural communities, lower earners and people of color, CFPB said.

Not all retailers charge cash-back fees, which can range from $0.50 to upwards of $3 per transaction, according to the agency, which has cracked down on financial institutions in recent years for charging so-called “junk fees.”

Five of the eight companies that the CFPB sampled offer cash back for free.

They include Albertsons, a grocer; the drugstore chains CVS and Walgreens; and discount retailers Target and Walmart. (Kroger proposed a $25 billion merger with Albertsons in 2022, but that deal is pending in court.)

“Fees to get cash back are just one more nickel and dime that all starts to add up,” said Adam Rust, director of financial services at the Consumer Federation of America, an advocacy group.

“It just makes it harder and harder to get by,” he said. “It’s thousands of little cuts at a time.”

Luis Alvarez | Digitalvision | Getty Images

A spokesperson for Dollar General said cash back can help save customers money relative to “alternative, non-retail options” like check cashing or ATM fees.

“While not a financial institution, Dollar General provides cashback options at our more than 20,000 stores across the country as a service to customers who may not have convenient access to their primary financial institution,” the spokesperson said.

Spokespeople for Kroger and Dollar Tree (which operates Family Dollar and Dollar Tree stores) didn’t respond to requests for comment from CNBC.

Kroger, Dollar General and Dollar Tree were respectively the No. 4, 17 and 19 largest U.S. retailers by sales in 2023, according to the National Retail Federation, a trade group.

Cash back is popular

The practice of charging for cash back is relatively new, Rust explained.

For example, in 2019, Kroger Co. rolled out a $0.50 fee on cash back of $100 or less and $3.50 for amounts between $100 and $300, according to CFPB.

This applied across brands like Kroger, Fred Meyers, Ralph’s, QFC and Pick ‘N Save, among others.

However, Kroger Co. began charging for cash back at its Harris Teeter brand in January 2024: $0.75 for amounts of $100 or less and $3 for larger amounts up to $200, CFPB said.

CFPB takes steps to regulate 'buy now, pay later' lenders

Cash withdrawals from retail locations is the second most popular way to access cash, representing 17% of transactions over 2017-22, according to a CFPB analysis of the Diary and Survey of Consumer Payment Choice.

ATMs were the most popular, at 61%.

But there are some key differences between retail and ATM withdrawals, according to CFPB and consumer advocates.

For instance, relatively low caps on cash-back amounts make it challenging to limit the impact of fees by spreading them over larger withdrawals, they said.

The average retail cash withdrawal was $34 from 2017-22, while it was $126 at ATMs, CFPB said.

Banking deserts are growing

However, retailers may be the only reasonable way to get cash for consumers who live in banking deserts, experts say.

More than 12 million people — about 3.8% of the U.S. population — lived in a banking desert in 2023, according to the Federal Reserve Bank of Philadelphia.

That figure is up from 11.5 million, or 3.5% of the population, in 2019, it found.

Generally speaking, a banking desert constitutes any geographic area without a local bank branch. Such people don’t live within 10 miles of a physical bank branch. The rise of digital banking, accelerated by the Covid-19 pandemic, has led many banks to close their brick-and-mortar store fronts, according to Lali Shaffer, a payments risk expert at the Federal Reserve Bank of Atlanta.

These deserts “may hurt vulnerable populations” who are already less likely to have access to online and mobile banking, she wrote recently.

Retailers blame banks

Retail advocates say banks are to blame for cash-back fees.

Merchants must pay fees to banks whenever customers swipe a debit card or credit card for purchases. Those fees might be 2% to 4% of a transaction, for example.

Since cash-back totals are included in the total transaction price, merchants also pay fees to banks on any cash that consumers request.

The “vast majority” of retailers don’t charge for cash back, and therefore take a financial loss to offer this service to customers for free, said Doug Kantor, general counsel at the National Association of Convenience Stores and a member of the Merchants Payments Coalition Executive Committee.

“Banks have abandoned many of these communities and they’re gouging retailers just for taking people’s cards or giving people cash,” he said.

But consumer advocates say this calculus overlooks the benefit that retailers get by offering cash back,

“You’d think they’d see this as a free way to get customers: coming into [the] store because the bank branch isn’t there,” Rust said. “Instead they’re going ahead and charging another junk fee.”

Finance

Biden administration forgives $4.5 million in student debt for 60,000 borrowers

Published

8 hours ago

October 18, 2024

Business Finance News

Borrowers who serve in the public service sector and government are eligible for this forgiveness. (iStock )

Another 60,000 student loan borrowers will receive student loan relief in the coming weeks. The Biden Administration announced $4.5 billion in relief for public service workers such as nurses, teachers and social workers.

The relief comes as a fix to the original Public Service Loan Forgiveness (PSLF) program. The program was initially signed into law by George W. Bush in 2007 to give non-profit and government employees loan forgiveness after 10 years in the workforce.

“Before President Biden and Vice President Harris entered the White House, the Public Service Loan Forgiveness program was so riddled by dysfunction that just 7,000 Americans ever qualified,” U.S. Secretary of Education Miguel Cardona said in the Education Department’s press release.

The new relief intends to pay down the loans of borrowers who were originally denied acceptance or who have still not received relief after making the 120 required monthly payments.

“Today’s announcement comes on top of the significant progress we’ve made for students and borrowers over the past three years,” President Joe Biden said in a statement.

“That includes approving debt cancelation for nearly 5 million Americans across all our various debt relief actions; providing the largest increases to the maximum Pell Grant award in over a decade; fixing Income-Driven Repayment so borrowers get the relief they earned; and holding colleges accountable for taking advantage of students and families,” Biden said.

If you have private student loans, federal relief doesn’t apply to you, unfortunately. If you’re looking to lower monthly payments and ease the burden of student loan debt, consider refinancing. See what your interest rate could be via the online marketplace Credible.

IS COLLEGE DEBT WORTH IT?

Resources available for students affected by the recent hurricanes

Hurricanes Helene and Milton have wreaked havoc on many communities in the south, causing serious physical damage and severely disrupting educational services. In response, the U.S. Department of Education released resources to help students and institutions of higher education recover.

“I have directed our team at the Department of Education to leverage every possible resource available to meet the needs of impacted students, families and school communities,” Cardona said.

The new resources include support for recovery needs like mental health care for students and educators, technical assistance and flexible financial aid policies at affected universities. Many students are also automatically being enrolled in natural disaster forbearance, so they don’t have to worry about their loans while recovering from the hurricanes.

Most of these resources will be concentrated on Georgia, which has seen a substantial amount of damage. The Readiness and Emergency Management for Schools Technical Assistance Center is a specific program Georgians have access to. It helps education agencies manage their safety, security and emergency management programs.

The Early Childhood Technical Assistance Center is another option that offers resources and links from organizations that help families and children, including those with disabilities, cope with disasters.

If you don’t have federal student loans that qualify for assistance, refinancing could cut your monthly payment. You can use Credible to compare student loan refinancing rates from multiple private lenders all at once without affecting your credit score.

STUDENT LOAN DEBT HAS INCREASED BY 430% SINCE 2003 – HERE’S HOW TO LOWER YOUR DEBT

$70 million in federal funding going to schools for additional mental health services

Along with aid to student loan borrowers and students affected by natural disasters, the Biden administration is also directing federal funding towards mental health services in K-12 schools. The administration announced a $70 million investment that will expand students’ access to mental health support.

“We know that students are more likely to access mental health support if it’s offered in schools, and our educators and school communities are on the front lines when a student is struggling,” Cardona said in the announcement.

“The need for mental health support in our schools remains high,” Cardona said. “Today’s announcement of an additional $70 million will allow more institutions and schools to train and hire mental health professionals – especially in underserved communities – ensuring that every student has access to the care they need to thrive.”

The new funding, combined with the Bipartisan Safer Communities Act (BSCA) investments, will go to 333 grantees across 48 states. It will help communities train and hire 4,000 more mental health professionals across the country.

To see what you’d pay on a private student loan, you can visit Credible today to view a rates table that allows you to compare fixed and variable rates from multiple lenders.

LESS THAN A THIRD OF AMERICANS APPROVE OF HOW BIDEN HAS HANDLED STUDENT LOAN DEBT

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