Plenty of industries can make big profits from penalty fees.

Perhaps one of the most common examples is the fee charged by Canadian banks for non-sufficient funds (NSF). In 2025, it’s estimated that more than 16 million transactions would incur NSF charges, costing Canadians more than $750 million.

Technologies, such as mobile apps that alert users when nearing their overdrawn limit, can help consumers track their spending and avoid these penalties.  

Yet new research from University of Toronto associate professor Peter Landry suggests these “helpful” apps might in some cases be harmful to consumers.

In a paper “Forgetful Consumers and Consumption Tracking,” Landry — alongside University of Illinois’ Ying Bao and HKUST Business School’s Mengze Shi — found that these tracking apps might give forgetful consumers a false sense of security, ultimately making them more vulnerable to penalty fees.

“When consumers know they’re forgetful, but underestimate how forgetful they are, they know they can benefit from these tools, but they underestimate how much they need it,” says Landry. “They might not bother pulling out their phone and logging into the app, and that’s when they can get an unpleasant surprise of a penalty fee for going over their limit.”

Landry and his colleagues found that tracking apps can certainly benefit customers by helping them exercise more caution and avoid these types of fees. But for customers who know they’re forgetful and underestimate their forgetfulness, tracking apps might not be as beneficial.  

Building on Bao's work as a PhD student at the Rotman School of Management, the researchers created a model based on a common scenario, a phone plan with data limits and penalty fees. The model assumed consumers knew they were forgetful, but perhaps not how forgetful they are. They had access to an app to track their usage, but it still required logging on.

The key finding? Just having access to a tracking tool can create a false sense of control. In these cases, consumers who are forgetful assume they’ll use it to stay on track, but then may neglect to check it, leaving them vulnerable to going over their limit and paying the price.

“[According to the model] the technologies don’t make customers more or less forgetful but can make them more susceptible to having to face the repercussions of their forgetfulness,” Landry says.

Landry emphasizes that the paper is primarily a theoretical analysis and does not look at individual companies that might take advantage of consumer forgetfulness. However, the paper does demonstrate the possibility that a firm could increase its penalty fee in response to the availability of consumption tracking technologies to benefit from forgetful consumers.  

While the issue of penalty fees isn’t exactly pressing among politicians, he says technology and AI — which are rapidly evolving — will offer new innovations down the road that will help these forgetful consumers avoid penalty fees.

Until then, he says it’s important for customers to be more mindful of their forgetfulness.

“Second guess yourself a little bit and try not to be too overconfident in your ability to remember things,” he advises customers. “If you can do that, then these kinds of tools certainly can’t hurt and could very well end up helping you.”

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