CFPB junk fee proposals weighed by Senate Banking Committee

WASHINGTON — Members of the Senate Banking Committee jostled Wednesday over whether the leading U.S. consumer protection agency has the ability to curb so-called junk fees that affect hundreds of thousands of consumers every yr.

Republican lawmakers have accused the Consumer Financial Protection Bureau of operating outside of its jurisdiction by enforcing the Biden administration’s proposals to crack down on the costs. Democrats have defended the agency’s ability to focus on the much-maligned fees and shield consumers from what they call burdensome costs.

The committee’s first hearing comes because the Biden administration takes a spread of steps to root out junk fees, which the CFPB says includes bank card late fees, overdraft fees and surcharges on ticket purchases. Amongst other actions, the agency recently fined Bank of America $150 million for charging its customers multiple overdraft fees.

The GOP criticism comes amid a sustained Republican effort to claw back the CFPB’s powers.

The agency “is undertaking a reputation and shame campaign to coerce banks who were following the established prudential standards for the crime of listening to their previous federal regulators,” said Sen. Thom Tillis, R-N.C., rating member of the subcommittee on Financial Institutions and Consumer Protection.

The CFPB has drawn Republican ire for a wide range of proposals to curb the costs, including a plan to cap bank card late fees at as little as $8.

In his testimony, Brian Johnson, managing director of economic regulatory consultancy Patomak Global Partners, said the CFPB “has been essentially the most enthusiastic amongst regulators” in targeting junk fees. Johnson, who served because the CFPB’s deputy director under former President Donald Trump, accused the agency of “indiscriminately attacking a growing list of common financial services fees, regardless of that they’re lawful and fully disclosed.”

Democrats argued the ability to focus on junk fees matches throughout the CFPB’s core duties.

Sen. Elizabeth Warren, a critical figure in creating the CFPB, said the agency has effectively deterred banks from collecting billions in predatory fees from consumers.

“Name your favorite big bank: Bank of America, Wells Fargo, JP Morgan Chase … and chances are high that the CFPB has caught them red-handed engaging in any one in all these tricks, no less than once, and sometimes all at the identical time,” Warren, D-Mass., said. “The banks claim that these fees help consumers by allowing banks to supply overdraft protection to those that want it.”

“And let’s not forget, these are the identical banks which might be bankrolling the attacks on the CFPB,” Warren added.

JP Morgan Chase and Wells Fargo declined to comment. A Bank of America spokesperson didn’t immediately reply to requests for comment from CNBC.

Pennsylvania Attorney General Michelle Henry testified that overdraft fees don’t profit customers as banks claim.

“The reality is that they hit families of color harder and infrequently end in account closures, leaving them unbanked,” Henry said, adding that 90% of those that pay overdraft and nonsufficient fund fees “generally pay three or more a yr while earning lower than $50,000.”

Henry also contended big banks cannot be trusted to act in one of the best interest of consumers on their very own.

Sen. Raphael Warnock, a Georgia Democrat and chair of the subcommittee, said that junk fees serve to maintain “hardworking Americans” out of the economic system and on the margins of the economy.

“We must hold these businesses accountable once they use their profits off the backs of hardworking Americans and make sure that they should not these customers as easy targets to be taken advantage of with onerous and opaque fees,” Warnock said.