Signs at the headquarters of the Consumer Financial Protection Bureau (CFPB) in Washington, DC
Andrew Kelly | Reuters
WASHINGTON — Lawmakers debated ways to reform or defund the nation’s most important consumer protection agency Thursday, as the regulator targets “unwanted fees” charged to consumers.
A subcommittee of the House Financial Services Committee is examining approx 10 legislative proposals To shake up the nearly 13-year-old Consumer Financial Protection Bureau, with Republicans and pundits outside the Capitol accusing the agency of overreach, inadequate rulemaking and a lack of accountability. Members heard testimony from several witnesses who defended or condemned the agency’s practices.
“The agency is led by a single party director, Rohit Chopra, who has routinely acted unilaterally and arbitrarily, often outside any legal jurisdiction, without engaging in rule-making in accordance with Administrative Procedure Code, and sometimes even without trial,” the MP said. Andy Barr, R-Ky. and chairman of the Subcommittee on Financial Institutions and Monetary Policy, said in opening remarks. “This has led to the CFPB becoming the most unregulated and unaccountable agency in the entire federal government.”
Republican lawmakers at the hearing He criticized the Biden administration’s efforts to eliminate “junk fees,” which are largely regulated by the CFPB. These fees constitute additional fees that companies charge for consumer goods and services.
On Wednesday the agency released list unwanted fees involving deposit accounts; car and mortgage loan servicing; and payday and title lending.
Subcommittee member Rep. Blaine Lutkemere, R-Mis., said Chopra used the unwanted cartoon as an excuse to expand his power.
“The fact that we now call it a spam fee doesn’t mean it’s real,” said Lutkemere, after seeing Jessica L. Thompson, an attorney with conservative-leaning Pacific Legal, who agreed that the term didn’t exist as it was in the financial lexicon.
“Because there is no such word there. There is no authority. So, I think we as a group need to step back,” he said.
The vague definition of an unwanted charge leaves financial institutions “without a roadmap for how to go about it,” said William Hempler, president and CEO of the American Financial Services Association, a trade group for consumer credit firms.
Another witness accused the CFPB of making arbitrary decisions on what constituted an unwanted fee. Devin Watkins, an attorney with the conservative-leaning Competitive Enterprise Institute, argues that the CFPB’s definition of an unwanted fee is “any fee you don’t like.”
“When the definition under how they act is so broad in this way, it raises real concerns for non-mandates that it could undermine their authority to enact any of these,” Watkins said.
At least one witness defended the authority of the Office of Civilian Protection to combat excessive surcharges. Keith Ellison, a Minnesota Democratic attorney general and former member of the House Financial Services Committee, defended the agency’s oversight of predatory lending services and fraudulent actors. He said the CFPB can regulate hidden surcharges that consumers don’t know about.
“Some companies may not know what an unwanted fee is, but consumers do,” said Ellison, who served in Congress when the agency was created. “[Companies] not reveal [the fees]. They didn’t tell you about it. They didn’t know you had reason to expect it. It’s a fee that they charge because they have the market power to charge that fee.”
“It is entirely appropriate that the CFPB regulate this,” Ellison added. “I can tell you, prosecutors, Democrats and Republicans, they do it every single day. And it’s part of the way we create trust and faith and create consumers’ ability to prosper.”
The CFPB was created as part of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which was signed into law by former President Barack Obama in 2010. The act overhauled the financial regulatory system after the Great Recession of 2008.
In 2021, President Joe Biden selected Chopra to serve as director of the office. 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 goes beyond the annual appropriations process, and the lack of an executive board or independent inspection mechanism. Proposed legislation to be considered by the subcommittee includes oversight of existing directives, rules and regulations; changing the source of funding for the CFPB to ensure that it is approved by Congress; creation of the Office of the Inspector General of the Consumer Protection Oversight Board; and a requirement that the agency reward whistleblowers financially.
But some Democrats have argued that Republicans have wanted to fight CFPB oversight of banks and other financial institutions since the agency was formed.
“Many members of the Republican Party have fought against the CFPB since its inception, repeatedly seeking ways to delegitimize, defund or, more recently, defund the agency altogether,” said Rep. Barry Loudermilk, vice chair of the subcommittee.
Other Democratic lawmakers pressured their Republican counterparts on Thursday with a scathing statement issued during the hearing.
said Democratic Rep. Maxine Waters, ranking member of the House Financial Services Committee, and Democratic Sen. Sherrod Brown, chairman of the Senate Banking, Housing, and Urban Affairs Committee. Waters also cross-examined Ellison during the subcommittee hearing.
“This is not consumer reform, it is another page taken from the same Republican book designed to destroy the CFPB and its work to empower consumers. The CFPB has made great progress supporting consumers, combating discrimination and unwanted fees, large financial institutions responsible for repeatedly harming consumers, and more So much,” the lawmakers said.
“As chair of the Senate Banking and Housing Committee and a ranking member of the House Financial Services Committee, we will continue to work with our colleagues to stop any consumer billing and CFPB protection so that consumers can continue to have an agency dedicated solely to protecting their hard-earned money.”
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