Signage at the Consumer Financial Protection Bureau (CFPB) headquarters in Washington, DC
Andrew Kelly | Portal
WASHINGTON — Lawmakers on Thursday debated ways to reform or disappoint the nation’s top consumer protection agency altogether as the regulator targets illegal “garbage fees” imposed on consumers.
A subcommittee of the House Financial Services Committee is considering nearly 10 bills to amend the nearly 13-year-old Consumer Financial Protection Bureau, as Republicans and critics outside the Capitol accuse the agency of overreacting, inadequate rulemaking and a lack of accountability. Members heard testimony 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 of a statutory mandate, without making a settlement in accordance with the Administrative Procedures Act and sometimes even without a judgement,” Rep said. Andy Barr, a Republican from Kentucky and chair of the Subcommittee on Financial Institutions and Monetary Policy, said in his opening remarks. “This has resulted in the CFPB becoming the least controlled, unaccountable agency in the entire federal government.”
GOP lawmakers in hearing criticized the Biden administration’s push to end “garbage fees,” which are largely regulated by the CFPB. Such fees represent surcharges that companies charge for consumer goods and services.
On Wednesday, the agency released a list of illegal junk charges that included deposit accounts; Auto and mortgage loan administration services; and Payday and Title Lending.
Subcommittee member Rep. Blaine Luetkemeyer, R-Mo., said Chopra used junk fees as an excuse to expand his authority.
“The fact that we’re calling them junk fees now doesn’t mean it’s real,” Luetkemeyer said after witness Jessica L. Thompson, an attorney with the conservative-leaning Pacific Legal Foundation, agreed the term didn’t exist as in the financial dictionary.
“Because there is no such word out there. There is no authority. So I think we have to push back as a group,” he said.
The vague definition of junk fees leaves financial institutions “with no roadmap on how to follow it,” said William Hipler, 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 junk fee. The CFPB’s working definition of junk fees is “any fee you don’t like,” argued Devin Watkins, an attorney at the conservative-leaning Competitive Enterprise Institute.
“If the definition of how they behave is so broad, it raises real concerns that are not being delegated that could undermine their authority to enact any of these,” Watkins said.
At least one witness defended the CFPB’s authority to combat overcharges. Keith Ellison, Minnesota Attorney General and 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 that consumers are unaware of.
“Maybe certain companies don’t know what junk fees are, but consumers do,” said Ellison, who served in Congress when the agency was founded. “[Companies] Do not tell [the fees]. They didn’t tell you. Little did you know you had a reason to foresee it. It’s a fee they charge because they have the market power to charge that fee.”
“It is entirely appropriate for the CFPB to regulate this,” Ellison added. “I can tell you, attorney generals, both Democrats and Republicans, do this every day. And it’s part of the way we’re building trust and trust and empowering consumers to have a shot at prosperity.”
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 law overhauled the financial regulatory system after the Great Recession of 2008.
In 2021, President Joe Biden elected Chopra as director of the bureau. Chopra was previously appointed a member of the Federal Trade Commission by former President Donald Trump.
Republican lawmakers have criticized the agency’s funding mechanism, which bypasses the annual appropriation process, and the lack of a board of directors or independent inspection mechanism. Legislative proposals for the subcommittee to consider include oversight of existing guidelines, rules and regulations; Changing the CFPB’s funding source to ensure Congress must approve it; establishment of an office of inspector general for the CFPB; and a requirement for the agency to financially reward whistleblowers.
However, 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, continually seeking ways to delegitimize, defund, or most recently abolish the agency altogether,” said Rep. Barry Loudermilk, D-Ga., the subcommittee’s vice chair .
Other Democratic lawmakers lashed out at their GOP counterparts Thursday with a scathing statement released during the hearing.
“Don’t make a mistake. This is 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 Senator Sherrod Brown, chair of the Senate Financial Services Committee for banking, housing and urban development. Waters also questioned Ellison during the subcommittee hearing.
“This is not consumer-good reform, it is another page from the same Republican playbook aimed at destroying the CFPB and its consumer empowerment work. The CFPB has made great strides in helping consumers, fighting discrimination and junk fees from large financial institutions responsible for repeat consumer harm, and more,” lawmakers said.
“As chairman of the Senate Banking and Housing Committee and a senior member of the House Financial Services Committee, we will continue to work with our colleagues to stop all anti-consumer legislation and protect the CFPB so consumers can continue to have an exclusively dedicated agency to tough it out.” protect money earned,” lawmakers added.