House Republicans target the CFPB as the agency takes aim at 'junk fees'

Key Points
  • Members of the House Financial Institutions and Monetary Policy Subcommittee attacked the Consumer Financial Protection Bureau and its oversight of "junk fees" during a meeting analyzing the bureau's regulatory policies.
  • Junk fees is not a legal term that can be reasonably regulated, House Republicans argued.
  • House Democrats said the GOP's scrutiny is an extension of a yearslong offensive against the agency.
The Consumer Financial Protection Bureau headquarters in Washington, D.C., on May 14, 2021.
Andrew Kelly | Reuters

WASHINGTON — Lawmakers discussed ways to reform, or altogether defund, the nation's foremost consumer protection agency on Thursday, as 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 change 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 lack 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 the most unchecked, unaccountable agency in the whole federal government." 

GOP lawmakers in the hearing criticized the Biden administration's push to eradicate "junk fees," largely regulated by the CFPB. Such fees constitute surcharges that companies levy for consumer goods and services.

On Wednesday, the agency released a list 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 fact that we now call them junk fees doesn't mean it's real," Luetkemeyer said after witness Jessica L. Thompson, an attorney at the conservative-leaning Pacific Legal Foundation, agreed that the term does not exist as in the financial lexicon.

"Because there is no such word out there. There is no authority. So, I think we as a group need to be pushing back," he said.

The murky definition for junk fees leaves financial institutions "with no road map as to how to follow that," said William Himpler, 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 they don't like," argued Devin Watkins, an attorney at 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 could undermine their authority to enact any of these," Watkins said.

At least 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 do not know about.

"Maybe certain firms don't 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 tell you about it. They didn't know you had a reason to anticipate it. It's a fee that they tack on because they have the market power to impose that fee."

"It is absolutely appropriate for the CFPB to regulate this," Ellison added. "I can tell you, attorneys general, both Democrat and Republican, do it every day. And it is part of the way that we create confidence, faith and create the ability for 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 2008 Great Recession.

In 2021, President Joe Biden chose Chopra to serve as 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 lack of an executive board or independent inspection mechanism. Proposed legislation the subcommittee is set to consider includes oversight of existing guidance, rules and regulations; changing the CFPB's funding source to ensure 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 wanted to fight the CFPB's oversight of banks and other financial institutions since the agency was formed.

"Many in the Republican Party have fought against the CFPB since its inception, repeatedly seeking 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 during the hearing.

"Make no mistake. This is about whose side you're on: workers and consumers or big corporations and Wall Street," said Democratic Rep. Maxine Waters, ranking 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 during the subcommittee hearing.

"This is not reform for the benefit of consumers, it is another page pulled from the same 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 much more," the lawmakers said.

"As chair of the Senate Banking and Housing Committee and Ranking Member of the House Financial Services Committee, we will continue to work with our colleagues to stop any anti-consumer bill and protect the CFPB so that consumers can continue to have an agency solely dedicated to protecting their hard-earned money," the lawmakers added.