Americans who withdraw cash from major retail chains are paying fees on these transactions even though processing these payments costs just a “few pennies,” according to a recent report by the Consumer Financial Protection Bureau (CFPB).
When people purchase items from a store using a debit or prepaid card, they can withdraw a small amount of their funds through the retailer. The outlets typically set a fixed withdrawal limit for such transactions. People living in small towns with no immediate access to local banks benefit from such services by accessing the cash at a nearby retailer.
The agency assessed eight retail firms for their cash-back practices—Dollar General, Dollar Tree/Family Dollar, Kroger, Albertsons, Walgreens, CVS, Walmart, and Target.
Dollar General, Dollar Tree/Family Dollar, and Kroger were found to charge cash-back fees and were estimated to collect more than $90 million in such fees every year.
“At Dollar General and Dollar Tree/Family Dollar, cash-back fees for small withdrawal amounts are the highest in the sample ($1 fee or more for cash-back amounts under $50),” the release stated.
Kroger, one of the largest grocery chains in the United States, charged 75 cents for a maximum of $100 cash back at its Harris Teeter stores. At the company’s other stores like Fred Meyer and Ralph’s, cash backs of up to $100 came with a charge of 50 cents.
The CFPB estimated that the cost of processing such transactions “may be a few pennies.” With withdrawal limits set at $5 to $50 per transaction, consumers may conduct multiple transactions to receive bigger amounts as cash back, with retailers benefiting by levying a fee on each of these.
“Consumers with lower incomes or fewer banking choices encounter cash-back fees disproportionately,” CFPB stated.
Dollar stores tend to be frequently located in small rural towns and low-income regions. “These areas are also more likely to have fewer bank branch locations and more residents reliant on cash for daily transactions than others,” said the agency.
Responding to the CFPB report, Dollar General told The Epoch Times that it offers cash back options at more than 20,000 stores across the nation.
Cash back acts as “a service to customers who may not have convenient access to their primary financial institution. These services may also help customers save money on fees compared to alternative, non-retail options such as check cashing locations or ATM fees,” according to the company.
Customer Exploitation, Criticizing Banking Sector
The Institute for Local Self-Reliance welcomed the CFPB report, with co-executive director Stacy Mitchell pointing out that it exposes “yet another way” in which dollar stores are exploiting customers.Mitchell pointed to the “enormous profits” made by dollar stores, with Dollar General making more than $11 billion in profits last year.
“But they nonetheless find new ways to squeeze even more money from their shoppers—in this case, by charging them a few dollars to get cash back on their transactions, which average only a modest $25 or so,” she said.
The agency said it would monitor the “underlying failure of banks and credit unions” to ensure sufficient supply of cash in the country.
According to the group, publicly available data from banking regulators show that a median community in the United States has 10 branch locations within two miles, and rural areas have four. In addition, there are also several ATMs that provide cash access.
The association “will continue to push back on false narratives that seek to criticize the banking industry for the actions of other industries outside its control.”
Over the past year, CFPB has taken multiple actions against practices found to negatively affect customers.
