A House subcommittee discussion covered regulation of “junk fees” and how regulatory enforcement processes impact consumers and businesses. ACA urged the subcommittee to continue to focus on CFPB actions related to the discussion.
03/07/2024 2:00 P.M.
3.5 minute read
Ahead of Thursday’s State of the Union address from President Joe Biden, where regulation of “junk fees” was expected to be a focus, a House Financial Services subcommittee held a hearing on how politicized financial regulations, including fees, impact consumer credit.
“The Biden [a]dministration is using would-be ‘independent’ regulators as political agents to circumvent Congress and drive leftist transformations in financial regulation to the detriment of consumers and communities,” said U.S. Rep. Andy Barr, R-Ky., chair of the House Subcommittee on Financial Institutions and Monetary Policy, in his opening remarks from the hearing. “The coordinated effort between the Biden [a]dministration and the CFPB to eliminate so-called ‘junk fees’ is a clear illustration of this effort.”
The hearing explored recent actions from federal regulatory agencies on fees the subcommittee said will “restrict access to financial services for consumers,” such as the CFPB’s final rule on credit card late fees, as well as regulatory enforcement actions.
Barr’s legislation, the Rectifying UDAAP Act, was presented at the hearing as a measure to clarify standards for unfair, deceptive or abusive acts or practices, and enforcement actions from the CFPB.
ACA International urged Congress to address concerns with CFPB actions in a letter (PDF) to the subcommittee and House Financial Services Committee leadership, including a proposal to make sweeping changes to the Fair Credit Reporting act and surrounding medical debt, arbitration and enforcement in the public eye through news releases.
ACA also outlined where the CFPB does not have legal authority—a theme during the hearing—for regulations such as rewriting the FCRA and eliminating only certain types of debt from credit reports.
Fees and Enforcement Actions
Barr asked hearing witness Lindsey Johnson, president and CEO of the Consumer Bankers Association, about the impact of the CFPB’s use of its UDAAP authority for enforcement actions.
Johnson said, for example, the authority is used to apply an enforcement action retroactively, which is similar to changing the speed limit and fining people before the new signs are posted, adding that Barr’s legislation would help solve that problem.
Turning back to fees, U.S. Rep. Blaine Luetkemeyer said the term “junk fees” doesn’t have any basis in the financial services industry and is not legally enforceable, and the CFPB’s rule with a cap on credit card late fees is an example of it acting outside of its authority.
“This is how far the CFPB has gone to extend their own authority to things they have no authority to do,” Luetkemeyer said. “While we’re talking about politicization of financial regulation, this is the paramount example of that.”
Chair of the House Financial Services Committee U.S. Rep. Patrick McHenry, R-N.C., previously said in response to the credit card late fee rule that it “would limit consumer options, benefits, and punish borrowers in good standing.”
Meanwhile, the White House released a fact sheet Thursday on how the Biden administration is addressing fees, including a new Strike Force on Unfair and Illegal Pricing by the Department of Justice and the Federal Trade Commission and actions in student debt relief.
ACA Advocacy
ACA has supported targeted efforts to eliminate illegal activity when bad actors are engaging in abusive behavior, as noted in the letter to the subcommittee.
“However, engaging in time- and resource-draining regulatory activity without the backing of data-driven research and ample time for stakeholder comments is not a good use of anyone’s resources, and ultimately, those costs are passed on to consumers,” said ACA CEO Scott Purcell. “Congress created the CFPB to protect consumers, not to target certain disfavored industries or businesses, without due process.”
ACA invites members to be a part of discussing these issues on Capitol Hill at the Washington Insights Fly-In April 29-May 1 to collectively grow the impact of our voice in Washington.
Register by April 15 to meet with your elected officials during Hill visits as well as hear from legislators and regulators who will speak to ACA as a group.
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