WASHINGTON — Lawmakers discussed ways to reform, or altogether defund, the nation’s foremost consumer protection agency on Thursday, because the regulator takes aim at illegal “junk fees” levied on consumers.
A subcommittee of the House Financial Services Committee is considering nearly 10 legislative proposals to alter the nearly 13-year-old Consumer Financial Protection Bureau, as Republicans and critics outside the Capitol accuse the agency of overreach, insufficient rulemaking and a scarcity of accountability. Members heard testimony from several witnesses who defended or condemned the agency’s practices.
“The agency is led by a single, partisan director, Rohit Chopra, who has routinely acted unilaterally and arbitrarily, often outside any statutory mandate, without engaging rulemaking in compliance with the Administrative Procedures Act, and even sometimes without adjudication,” Rep. Andy Barr, a Kentucky Republican and chair of the Subcommittee on Financial Institutions and Monetary Policy, said in opening remarks. “This has led to the CFPB becoming essentially the most unchecked, unaccountable agency in the entire federal government.”
GOP lawmakers within the hearing criticized the Biden administration’s push to eradicate “junk fees,” largely regulated by the CFPB. Such fees constitute surcharges that firms levy for consumer goods and services.
On Wednesday, the agency released a listing of illegal junk fees encompassing deposit accounts; auto and mortgage loan servicing; and payday and title lending.
Subcommittee member Rep. Blaine Luetkemeyer, R-Mo., said Chopra has used junk fees as an excuse to expand his authority.
“So, the undeniable fact that we now call them junk fees doesn’t suggest it’s real,” Luetkemeyer said after witness Jessica L. Thompson, an attorney on the conservative-leaning Pacific Legal Foundation, agreed that the term doesn’t exist as within the financial lexicon.
“Because there is no such thing as a such word on the market. There isn’t any authority. So, I feel we as a gaggle should be pushing back,” he said.
The murky definition for junk fees leaves financial institutions “with no road map as to the way to follow that,” said William Himpler, president and CEO of the American Financial Services Association, a trade group for consumer credit firms.
One other witness accused the CFPB of creating arbitrary decisions about what qualifies as a junk fee. The CFPB’s working definition of junk fees is “any fee they do not like,” argued Devin Watkins, an attorney on the conservative-leaning Competitive Enterprise Institute.
“When the definition under how they’re acting is so broad like that, it raises real non-delegation concerns that would undermine their authority to enact any of those,” Watkins said.
No less than one witness defended the CFPB’s authority to combat 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 services and fraudulent actors. He has said the CFPB can regulate hidden surcharges consumers don’t find out about.
“Possibly certain firms do not know what junk fees are but consumers know,” said Ellison, who served in Congress when the agency was created. “[Companies] don’t disclose [the fees]. They didn’t let you know about it. They didn’t know you had a reason to anticipate it. It is a fee that they tack on because they’ve the market power to impose that fee.”
“It is totally appropriate for the CFPB to manage this,” Ellison added. “I can let you know, attorneys general, each Democrat and Republican, do it every single day. And it is an element of the best way that we create confidence, faith and create the flexibility for consumers to have a shot at prosperity.”
The CFPB was created as a part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law by former President Barack Obama in 2010. The law overhauled the financial regulatory system after the 2008 Great Recession.
In 2021, President Joe Biden selected Chopra to serve because the bureau’s director. Chopra was previously appointed to serve on the Federal Trade Commission by former President Donald Trump.
Republican lawmakers have criticized the agency’s funding mechanism, which bypasses the annual appropriations process, and the dearth of an executive board or independent inspection mechanism. Proposed laws the subcommittee is ready to contemplate includes oversight of existing guidance, rules and regulations; changing the CFPB’s funding source to make sure Congress has to approve it; establishment of an Office of Inspector General for the CFPB; and a requirement for the agency to monetarily reward whistleblowers.
But some Democrats have argued Republicans have desired to fight the CFPB’s oversight of banks and other financial institutions for the reason that agency was formed.
“Many within the Republican Party have fought against the CFPB since its inception, repeatedly looking for ways to delegitimize, defund, or most recently, to abolish the agency entirely,” said Rep. Barry Loudermilk, D-Ga., the subcommittee vice chair.
Other Democratic lawmakers pushed back against their GOP counterparts on Thursday with a biting statement released throughout the hearing.
“Make no mistake. That is about whose side you are on: employees and consumers or big corporations and Wall Street,” said Democratic Rep. Maxine Waters, rating member of House Financial Services Committee and Democratic Sen. Sherrod Brown, chair of the Senate Committee on Banking, Housing, and Urban Affairs. Waters also questioned Ellison throughout the subcommittee hearing.
“This is just not reform for the good thing about consumers, it’s one other page pulled from the identical Republican playbook designed to destroy the CFPB and its work to empower consumers. The CFPB has made major progress in supporting consumers, combatting discrimination and junk fees, holding large financial institutions accountable for repeatedly harming consumers, and so far more,” the lawmakers said.
“As chair of the Senate Banking and Housing Committee and Rating Member of the House Financial Services Committee, we are going to proceed to work with our colleagues to stop any anti-consumer bill and protect the CFPB so that customers can proceed to have an agency solely dedicated to protecting their hard-earned money,” the lawmakers added.