The subcommittee will examine possible legislative solutions to protect consumers from undisclosed fees and explore how the fees impact a fair and transparent marketplace.
06/06/2023 11:50 A.M.
3 minute read
As regulators such as the Consumer Financial Protection Bureau and Federal Trade Commission continue efforts to regulate “junk fees” and companies’ tactics to impose them, Congress is exploring the issue and possible legislative solutions.
This week, the Senate Subcommittee on Consumer Protection, Product Safety and Data Security will meet for a hearing, “Protecting Consumers from Junk Fees,” which will include testimony from consumer advocates, business and legal experts.
“The hearing will explore how undisclosed fees harm consumers and prevent a fair and transparent market and will examine potential legislative solutions,” according to the subcommittee’s website.
ACA International has been closely monitoring this issue and providing responses to regulatory proposals on fees from the CFPB and FTC.
For example, ACA submitted comments (PDF) to the CFPB regarding fees related to consumer financial products and services and clarifying the use of fees in the debt collection industry, ACA previously reported.
ACA is also working on materials on behalf of the industry for consideration at the Senate subcommittee’s hearing and filed a letter (PDF) with the subcommittee as well.
The hearing, at 10 a.m. EST Thursday, July 8, will feature witnesses:
- Sally Greenberg, CEO, National Consumers League.
- Vicki G. Morwitz, Bruce Greenwald Professor of Business, Marketing Division, Columbia Business School.
- Todd J. Zywicki, George Mason University Foundation Professor of Law, Antonin Scalia School of Law, George Mason University.
Following are additional key points in ACA’s comments to the CFPB on fees:
- The House Financial Services Committee recently noted in a letter that “the CFPB broadly groups all fees associated with consumer products and services as ‘junk fees’ and does not provide any legal definition of the term or any statutory authority to define such a term.” ACA strongly agrees with this concern. Moreover, we are disappointed that it has been a trend in recent months for the CFPB to use pejorative terms when describing not only the debt collection industry, but also most participants in the financial services industry.
- Simple economic analysis would hold that some costs must be passed on to consumers for those working in the financial marketplace to be able to continue to operate and keep the economy churning, without an increased cost of credit. As noted in the bureau’s recent Taskforce on Federal Consumer Financial Law Report, the costs associated with not making timely payments for consumers is also an important part of encouraging accountability in the marketplace.
The FTC is exploring a rule regarding the harms of “junk fees that are charged for goods or services that have little or no added value to the consumer. The ANPR seeks comment on the prevalence of junk fees and the consumer harms arising from junk fee practices, among other questions,” ACA previously reported.
The Junk Fees Prevention Act was proposed by the Biden administration Feb. 1 with a focus on concert, entertainment and airline fees, among others.
The White House quickly followed the bureau’s announcement with a blog post outlining why these fees are a concern and citing Biden’s “initiative on junk fees and related pricing practices.”
The bureau’s guidance centers on two “junk fee processes that are likely unfair and unlawful under existing law,” according to a news release.
ACA will provide updates on the subcommittee’s hearing and continue to advocate on this issue.
For more information on fee regulations, members can check out this recording of the ACA Huddle to hear a comprehensive overview of the recent changes proposed by the CFPB to the fees under Regulation Z as well as review this ACA SearchPoint document, Payment Transaction Fees (PDF).