Senate Banking Committee Considers Testimony on "Junk Fees"

The Senate Banking Committee considered opposing testimony concerning policies on junk fees and the resulting impact on consumers.

At a hearing titled, "Taking Account of Fees and Tactic Impacting Americans’ Wallets," the Committee heard the following testimony:

• Patomak Global Partners Managing Director Brian Johnson reviewed administration initiatives on "junk fees" underscoring the "lack of a precise and fixed definition" of the term. He said this lack of clarity has "sown confusion among market participants, which needlessly complicates the task of regulatory compliance." He expressed concern about the CFPB’s adherence to the rule of law and urged Congress to "scrutinize executive agency regulatory proposals."
• Pennsylvania Attorney General Michelle A. Henry criticized junk fees, stating that they not only harm "consumers, but also honest businesses." She said they "also harm[] the local community bank or credit union that might have otherwise earned the consumer’s business." She cited actions she has taken to ensure "that prices are truly transparent, [and by doing so] we protect businesses from being undercut by 'cheaper' or 'faster' competitors that rip off consumers with hidden fees." She "commend[ed] the CFPB for taking supervisory action against mortgage servicers that have charged junk fees, and [] encourage[d] it to consider banning or significantly restricting convenience fees in markets where consumers do not have the ability to take their business elsewhere to avoid the fees." She also cited empirical research that shows predatory loans are typically taken out to meet recurring expenses. She stated that consumers often regret taking out loans from a high-cost lender and typically were persuaded to agree to a loan based on the lender’s claims of being able to provide the "best deal available."