House hearing focuses on CFPB over junk charges

Signage at the Consumer Financial Protection Bureau (CFPB) headquarters in Washington, DC

Andrew Kelly | Reuters

WASHINGTON — Lawmakers on Thursday discussed ways to reform the country’s main consumer protection agency or stop funding altogether as the regulator focuses on illegal “junk fees” imposed on consumers.

A subcommittee of the House Financial Services Committee is considering nearly 10 legislative proposals to change the nearly 13-year-old Consumer Financial Protection Bureau as Republicans and critics outside the Capitol accuse the agency of overreaching, inadequate regulation and a lack of accountability. Members heard testimonies from several witnesses who defended or condemned the agency’s practices.

“The agency is headed by a single, partisan director, Rohit Chopra, who has routinely acted unilaterally and arbitrarily, often outside any legal mandate, without engaging in rule-making in accordance with the Administrative Procedures Act, and sometimes even without trial,” Rep. Andy Barr, a Kentucky Republican and chairman of the Subcommittee on Financial Institutions and Monetary Policy, said in the opening remarks. “This has resulted in the CFPB becoming the most uncontrolled, irresponsible agency in all of the federal government.”

GOP lawmakers in the hearing criticized the Biden administration’s push to eliminate “junk fees,” largely regulated by the CFPB. Such fees are surcharges that companies charge for consumer goods and services.

On Wednesday, the bureau released a list of illegal deposit account junk fees; maintenance of car and mortgage loans; and loan of payday and title.

Subcommittee Member Rep. Blaine Luetkemeyer, R-Mo., said Chopra has used junk fees as an excuse to expand his authority.

“So the fact that we’re now calling them unwanted charges doesn’t mean it’s real,” Luetkemeyer said after witness Jessica L. Thompson, an attorney with the conservative-minded Pacific Legal Foundation, agreed that the term doesn’t exist as in the financial lexicon.

“Because there’s no such thing. There’s no authority. So I think we need to push back as a group,” he said.

The obscure definition of junk fees leaves financial institutions with “no roadmap on how to follow them,” said William Himmpler, president and CEO of the American Financial Services Association, a trade group for consumer credit companies.

Another witness accused the CFPB of making arbitrary decisions about what qualifies as a mess fee. The CFPB’s working definition of unwanted fees is “any fee they don’t like,” argued Devin Watkins, an attorney with the conservative-leaning Competitive Enterprise Institute.

“If the definition of how they act is that broad, it raises real non-delegation concerns that could undermine their authority to issue one of these,” Watkins said.

At least one witness defended the CFPB’s authority to curb excessive surcharges. Keith Ellison, Minnesota’s Democratic Attorney General and a former member of the House Financial Services Committee, has defended the agency’s oversight of predatory lending and fraudulent actors. He has said that the CFPB can regulate hidden fees unknown to consumers.

“Some businesses may not know what junk fees are, but consumers do,” said Ellison, who was in Congress when the agency was created. “[Companies] not reveal [the fees]. They didn’t tell you about it. They didn’t know you had a reason to anticipate it. It’s a fee they charge because they have the market power to impose that fee.”

“It is absolutely appropriate that the CFPB regulate this,” Ellison added. “I can tell you, Attorneys General, Democrat and Republican alike, do it every day. And it’s part of how we build trust and credibility and create the opportunity for consumers to take a chance at wealth. “

The CFPB was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by former President Barack Obama in 2010. The act overhauled the financial regulatory system following the Great Recession of 2008.

In 2021, President Joe Biden selected Chopra to serve as director of the agency. Chopra had previously been appointed to the Federal Trade Commission by former President Donald Trump.

Republican lawmakers have criticized the agency’s funding mechanism, which circumvents the annual appropriation process, and the lack of a board of directors or an independent oversight mechanism. Proposed legislation the subcommittee will consider includes oversight of existing guidelines, rules and regulations; change the source of funding for the CFPB to require Congress to approve it; establishment of an Office of Inspector General for the CFPB; and a requirement for the agency to financially reward whistleblowers.

But some Democrats have argued that Republicans have wanted to fight the CFPB’s oversight of banks and other financial institutions since the agency’s inception.

“Many in the Republican Party have fought against the CFPB since its inception, repeatedly seeking ways to delegitimize, defund or most recently abolish the agency entirely,” said Rep. Barry Loudermilk, D-Ga., Subcommittee Vice Chairman.

Other Democratic lawmakers countered their GOP counterparts on Thursday with a caustic statement released during the hearing.

“Make no mistake. It’s about whose side you’re on: workers and consumers or big business and Wall Street,” said Democratic Rep. Maxine Waters, senior member of the House Financial Services Committee, and Democratic Sen. Sherrod Brown, chairman of the Senate Banking, Housing and Urban Affairs Committee. Waters also questioned Ellison at the subcommittee hearing.

“This is not consumer reform, it is another page out of the same Republican playbook, designed to destroy the CFPB and its work to empower consumers. The CFPB has made great strides in supporting consumers, fighting of discrimination and junk costs, detaining large financial institutions responsible for repeatedly harming consumers, and much more,” the lawmakers said.

“As chairman of the Senate Banking and Housing Committee and a leading member of the House Financial Services Committee, we will continue to work with our colleagues to stop any anti-consumer bill and protect the CFPB so that consumers can continue to have an agency that dedicated solely to protecting their hard-earned money,” the lawmakers added.


Leave a Reply

Your email address will not be published. Required fields are marked *