Transcripts For CSPAN Hearing 20240703

This hearing is one hour 40 minutes. Sen. Brown finding more and more ways to raise those costs, to boost their own profits. Weve talked about how every time americans go to a Grocery Store, they pay for corporate stock buybacks and executive bonuses. Last week we looked at how Companies Use the latest technologies to jack up prices for consumers. This week we look at junk fees. Often lastminute charges that drive up the cost of products, have no justification or connection to anything other than their quests for profits. Think about that hotel room you booked that has a bunch of mysterious charges at the end. Or that time you paid your credit card bill over the phone so you wouldnt be late but were charged a convenience fee. The only thing that fee is convenient for is the banks bottom line. Or lets say youre looking for an apartment, you find one with affordable rent but when you look at the lease, you realize between the maintenance fee and the trash fee and the mysterious convenience fee, the actual rent youll be charged each month is out of your budget now. These hidden addons, surcharges, fees, theyre all junk fees. Theyre extra costs that inflate the price you pay but add no real value. Theyre often hidden, theyre only disclosed when its time to pay. Consumers know what they can afford. Thats why we all shop based on price. But when the real price is hidden through undisclosedupping fees, how are consumers supposed to find the lowest price . The answer is, they often cant. We hear a lot about personal responsibility in Consumer Financial literacy in this committee, but no amount of Financial Education is going to protect someone from a tactic thats meant to purposely hide the real purpose of a product or service. They hide the price, thats the whole point. Junk fees make a mockery of free and fair markets. 32 here, 45 there, sprinkle in a 10 service fee, before you know it, a product you thought was the most affordable option actually is the most expensive. Without junk fees, consumers would keep more of their hardearned money, theyd better be able to find the lowest price which is how you really should promote competition to bring costs down. Thats why the cfpb has taken long overdue steps to make fees more transparent. They took a major step toward reducing costs for consumers when it issues its credit card late fee rule. Credit card late fees are the most costly and frequently applied junk fee. According to one report, one in five adult americans, an estimated 52 million people, paid a Credit Card Fee last year. Credit card late fee last year. By law, credit card late fees are supposed to be reasonable and proportional. Thats what the law says. To the costs that companies incur for late payments. Theres massive trilliondollar wall street companies. The idea that youre missing your payment due date by a day or two is imposing some huge cost on the Credit Card Company is patently ridiculous. Sure enough, cfpb found that Credit Card Companies are charging consumers more than five times their cost, by 2022 that meant Credit Card Companies charged consumers 14. 5 billion in late fees, thats up 3 billion over the Previous Year and who knows what next year will be. The new action by the cfpb will lower credit card late fees that the largest credit card issuers can charge down to just 8 if it stands. This will save americans more than 10 billion in fees each year. Of course the biggest banks oppose it. They trot out the same old complaints we always hear every time anyone tries to do anything that might just cut into wall street profits, just even a little bit. They whined in 2009 when we passed the credit act or excuse me, the we passed the card act to lower some fees and increase transparency. Surprise, surprise, the sky didnt fall. Consumers still have access to credit. And of course Credit Card Companies still make billions in profits. Of course its not just credit card late fees, junk fees are poured on top of all services and products. Some auto Loan Services charge 1,000 in repossession fees, almost three times the average repossession cost. Unsurprisingly, some owners never recovered their cars because 1,000 is an amount many working families cannot afford out of the blue. Rental housing, junk fees that are added to the advertised rent can make the actual rent paid unaffordable. We have seen cases where the advertised rent grows hundreds of dollars a month once all the fees are added. Utility deposits, trash fees, fear for the young man in my office pays a fee for the honor of paying his rent. Fee after fee after fee after fee. Imagine a family getting approved for a place they think they can afford, but then getting several hundred dollars of surprise, surprise addon fees when they go to sign their lease. Most renters cant afford these massive price increases but they may not have an option once they paid all the upfront costs and set their movein date. Be clear. The entire point of these fees is to hide the true cost. They could just list the rent for what it is but they dont. Because they want to make it impossible for families to actually, as they survey where they want to move, to actually find the lowest rent. Its not a free, fair market. Its a rigged system. We need to continue working to expose and crack down on those fees that are raising costs on americans to push already high corporate profits even higher. We need to defend the cfpbs work that is refunded 260 million to consumers for unlawful junk fees already, save that money, and will save consumers billions in the future. Corporations raising these prices have armies of lobbyists to fight for them. When i said people go into the Grocery Store to shop, theyre paying for stock buybacks and bonuses for executive, not too different in this world, in the banking world and the apartment world and the car repossession world. Our job is to stand up to those corporate lobbyists, to work for everyone else so the consumers can keep their hardearned money. Senator scott. Sen. Scott thank you, mr. Chairman. Thank you to the witnesses for being with us today. At last weeks hearing we heard from my colleagues on the other side of the aisle that the high prices americans are paying as they struggle to put food on the table and face mounting debt are the result of shrinkflatoin and shrinkflation and today is a similar story. This time the boogieman is socalled junk fees and these fees are to blame for the obvious economic pain americans are feeling. Not skyrocketing inflation. Not increasing global instability. And certainly not the slush fund known as the inflation reduction act. Clearly theres no shortage of finger pointing for the failure of bidenomics or as i like to call it, brokenomics, because thats whats happening to the average american family. My democratic colleagues and this administration have deployed a herd of scapegoats to deflect blame for the economic harm they have brought upon american households. Instead of taking responsibility for the real consequences of unchecked spending and increased regulation across the economy, the Biden Administration would rather throw a towel over the mirror than say, not me. Sure, it might be easy or even politically expedient to slap a label of junk or excessive on additional costs for legitimate products and services in an effort to vilify businesses in america so that they themselves do not have to face the reality that bidenomics, brokenomics, is causing devastation after devastation after devastation upon the shoulders of the american people. But it is long past time that democrats stop playing political games with price controls and try to micromanage the business operations. Especially when the real outcome of these feelgood gains is reducing access to credit and limiting Economic Opportunity for those who need it most. Thats why i introduced a c. R. A. Resolution to overturn the cfpbs credit card penalty fee rule. Lets be clear what this rule will mean for American Families. It will result in lower credit limits and higher Interest Rates for borrowers. It will result in new fees for services that are currently provided free of charge. Finally and perhaps worst of all, this rule will cut off access to credit and stymie Financial Inclusion for the families who need it most. Sadly, i wasnt surprised when the cfpb finalized the credit card penalty fee just days before the president s state of the union address. Thats the politics of this administration. Actions that sound good as talking points, just like the billions of dollars of student loan forgiveness, but they are truly divorced from economic reality. And its not just the financial sector. Its everything, everywhere, all at once. Thats what astounds me. This administrations rhetorical hypocrisy. The white house has claimed that a junk fee is a charge designed either to confuse or deceive consumers. Ironically enough, two of the targets, overdraft and credit card late fees, are two of the most highly regulated and transparent Business Practices in any industry. The credit card late fees and Overdraft Fees we are discussing here today are in fact not illegal and are heavily regulated. And while we are on the subject of regulation, if democrats actually wanted to address the junk fees that American Families are facing, a good place to start would be the enormous costs that consumers are paying due to the Biden Administrations regulatory onslaught. Its an albatross around every family trying to make ends meet. Since he took office, the total cost of President Bidens regulatory nightmare, the mountain of red tape, is 1. 37 trillion. Thats 1. 37 trillion, t as in tom, dollars. Paid by everyday families in the form of higher prices, because of these new regulations. This contributes to the increased cost for food, housing, vehicles and all the other basics a family must have just to survive. And this happens while inflation is raging. If my friends on the other side of the aisle were truly interested in helping the american family, the american people, this hearing would be about finding solutions to tame the inflation that is has increased the costs of good by almost 20 since President Biden took office. We should be discussing how real average hourly wages have decreased under this administration. Remember, 52 paychecks in a row where inflation was higher than wage increase. And we would be discussing how President Biden has promised to let the tcja, the tax cuts and jobs act, expire next year, which would result in a 2. 5 trillion tax increase on the american family. But thats not the conversation were having today. Unfortunately. In closing, it is my hope that we will hear today how misguided the administrations attempts are to push the Financial Services industry into only offering a onesizefitsall product when we should be really focusing on providing solutions to the financial hardships facing americans. Let me just close with one example. Everyone i know hates paying a late fee. But the late fee is oftentimes the one thing that encourages us to take our bills more seriously. Because ultimately a late fee represents a late payment. And if you are late on your payment, ultimately your credit score goes down, which means that the cost of borrowing goes up. Undeniably. If we really want to save americans more money, we should focus not on these fees that encourages better payment history so your credit score goes up and your Interest Rate goes down, we should focus on the cost of gas, up 40 . We should focus on the cost of energy up 30 . We should focus on the cost of food up 20 . Not on late fees. Sen. Brown thank you, senator scott. Three witnesses today. First witness, adam russ, director of Financial Services, the Consumer Federation of america. Welcome, mr. Rust. Hang on one sec. Our next witness is ms. Madry. President and c. E. O. Of Afena Credit Union headquartered in marion, indiana. Welcome. Final witness is santiago suero. Mr. Rust now, please. Mr. Rust thank you. Thank you for the opportunity to testify on this important issue today. My name is adam rust, i am the director of Financial Services at the Consumer Federation of america, c. F. A. Is an association of approximately 250 groups from across the united states, founded in 1968, our mission is to advance the consumer interests through research, advocacy and education. Today im going to talk about junk fees and explain their harm on consumers and the economy. And im going to talk about the Consumer Financial protection bureaus important work to address these issues. At the heart of it, junk fees are about power. Theyre about the imbalance between big banks and smaller consumers. Large banks with tens of billions of dollars in their board rooms or hundreds of billions or trillions, and private equity and corporate landlords with millions of Single Family homes, are talking about how junk fees are going to be what brings home an earnings beat for them, to hear on the talk radio shows that theyve booya on earnings. But for consumers in their dining rooms, junk fees are an entirely different matter. Junk fees are what is going to keep them from bringing home groceries this year. Today renters are focusing on housing increases. Anyone who has more month than paycheck knows how harmful these junk fees are to their households. Junk fees were over 14. 5 billion. I want to make a few top line points. First in the credit card late fees rule, and in the overdraft proposal, the cfpb has tailored regulations that focus on the largest Financial Institutions only. Only card issuers with more than one million active accounts will be affected by the rule. Effectively between 30 and 35 large issuers out of the more than 4,000 institutions that issue credit cards. And its similarly with the overdraft proposal that only applies to institutions with more than 10 billion in assets. To critics who contend that disclosures are enough, i say no. The honest truth is we need to understand that credit cards are marketed based on rewards, images of beach vacations and celebrity spokespersons and the penalty fees are buried in fine print. Its the same way with overdraft. No one shops for a bank account with the intention of failing to use the service in a way that meets their goals. Theyre caught by surprise. Too often consumers do use overdraft but its by accident. Cfpb Research Reveals that many consumers who have experienced an Overdraft Fee have an alternative source of credit. But i want to underscore that the cfpb has been deliberate about doing research to understand the credit card market. Congress instructed the cfpb to ensure that penalty fees are reasonable and proportional to costs. Closing these loopholes, the cfpb is living up to its mission to put consumers first. Additionally, we believe that reliance on penalty fees is ultimately something that undermines trust in the Banking System. 9 of account holders pay 80 of Overdraft Fees. It saddens me that our Payment System has been designed in such a way that the least welloff pay an outsized share of the overall cost. And we must remember that because they have been granted a charter, Financial Institutions have received a privilege and they have a responsibility with that. The Federal Reserves Payment System is something that comes with that much the privileges of a charter to meet the convenience and needs of communities where they do business is an essential truth to remember. But penalty fees undermine true Financial Inclusion. In the midst of an Affordable Housing crisis, renters today typically face a dizzying array of fees. Those fees render safe and decent housing one step further away because rent is already high and these late fees only add to the cost. The simple lease of 20 years ago has been replaced by a new structure where rent is only one of the costs. Fees are partitioned and consumers may not know all of the fees at the time that they consider filling out an application. An application could cost more than 100 for each applicant on the lease. There can be fees to sign the lease, fees to move in, fees to move out, fees to pay rent electronically, fees to remove a coresident from the lease. And often essential services are included, also have their own fees such as trash fees, fees to receive mail, and these are fees that should be included in the allin cost up front. I just want to say that the stakes are high. And these problems are actually interdependent. When junk fees track residents when junk fees trap residents in an unaffordable lease, they may be vulnerable to eviction and penalty fees, particularly ones that are a surprise and may come just before the rent is due, are perhaps particularly the most dangerous ones that could lead to evictions. So thank you and i look forward to your questions. Sen. Brown thank you, mr. Rust. Ms. Madry. Welcome. Ms. Madry good morning, chairman brown, Ranking Member scott, and the other members of the committee. My name is karen madry and i am the president and c. E. O. Of athena federal credit union located in marion, indiana. Athena is a federally chartered credit union with 99 million in asset, three branches and we serve just over 8,000 members. The mission is to help families who are financially vulnerable to achieve financial wealth and endure a legacy. We do not exist just to make profits. We are very focused on serving the needs of our community. First id like to address the term junk fees. Junk fees is a madeup word and it is not in statute. Weve heard a lot of comments about junk fees and various industries. I would argue that in the Financial Services market that those fees differ. Credit union fee programs are regulated by federal and State Government and the reduction of fee income would ultimately result in the reduction of services to our members. I can also share that in the credit union space, data shows that fee income is at a 32year low. The cfpbs actions really want to impact overdraft protection. They would make it seem that this is a predatory way that we serve our members, my members would argue that this is they are paying for a service that is valuable to them. Overdraft protection provides a lifeline for my members and it gives them peace of mind to know that when their paycheck cannot stretch and meet their needs, that we will cover a charge to help them to buy gas or put food on their table. To participate in an Overdraft Program is a choice. It is one that our members make, understanding what it is and how it works. We at our credit union make sure that we educate our members on overdraft protection and teach them how to use it responsibly. We disclose everything to our members up front and it is not a rush program and none of my members will tell you that they were forced to participate in such a program. Now, as a 100 million credit union, i recognize that i am exempt from the rules of the cfpb. However, there will be a trickledown effect because if larger institutions are forced to lower or cut their fees, my members will expect me to do the same and a reduction in fees would mean a reduction in the services that i am able to provide. The final rule on credit card late fees are also for larger institutions, however similar to overdraft courtesy pay programs, it will have a negative impact on my institution, regardless of the fact that im exempt. The 8 fee is not enough to cover the cost of collecting on a credit card once that credit card becomes delinquent. Again, those fees are fully disclosed to our members prior to them receiving their credit card and at the time of application. An 8 fee is not enough to encourage responsible behaviors from our members. If they have a choice to pay an 8 late fee versus a higher late fee charged by someone else, they will not pay our card and cover the bill that has the higher late fee penalty. I would also argue that Government Agencies and entities charge a late fee that is much higher than 8. So the biggest concern for us is safety and soundness. As senator brown pointed out, if our members become late as reported on their Credit Bureau as such, it demises their ability to get credit in the future and it will also cause Financial Institutions to tighten up on their credit standards. So in conclusion, id like to say that i hope you understand that these regulations pose a substantial risk to small Credit Unions like mine, as well as to my members and the communities that we serve. I am asking congress and regulators to take action and do something to stop this before its too late. Thank you for inviting me here to be a witness today and testify and speak on this issue. And i welcome any questions. Sen. Brown thank you, ms. Madry, from my neighboring state of indiana. Sir, welcome. Good morning, thank you, chairman brown. Thank you to the Committee Staff for inviting me to be here today. I am santiago, senior policy analyst. Were the largest hispanic civil rights and Advocacy Organization in the country. We partner with 300 affiliates from ohio to south carolina, to texas and florida. Our affiliates are Community Organizations that serve latinos. Working class people, people of color and latinos are experiencing mixed results in our economy. The good news is that unemployment is at near historic lows and real wages are rising even as inflation keeps declining. On the other hand, poverty remains higher than prepandemic levels and skyrocketing housing costs are burdening families. Wealth inequality also remains a concern as researchers calculate that fully closing the racial wealth gap for latinos could take up to 228 years at the current pace. Developments in the Financial System mirror this mixed economic picture. Fees and costs are falling, including for Overdraft Fees and small dollar loans. And the number of people who remain unbanked is reaching near historic lows. However, many challenges remain. Credit card debt is at the highest level ever and working class consumers are paying more in late fees than wealthier consumers. Industry progress toward reducing Overdraft Fees also appears to have stalled. And the most recent studies suggest that the number of people without a bank account is rising. Back sliding on these means that more households will fall into Economic Hardship or deeper distress. Efforts to reduce these fees can have a major impact on the Financial Wellbeing of working class consumers. The cfpbs credit card late fees rule, for example, is projected to save consumers more than 10 billion. There are three major reasons why supporting this rule and others like it are important to make the Financial System more equitable. First, fees are all too common among working class consumers and people of color. Those in the poorest neighborhoods pay twice as much in total late fees than those in the wealthier areas. A new forthcoming survey finds that one in four latinos have made a credit card late fee in the past year. Second, fees harm Financial Health and access to credit. Making it harder to get an account out of delinquency and increasing the chances of losing an account. A large percentage of consumers identify late fees as a barrier to obtaining credit. Third, late fees do not effectively deter late payment and undermine the lenders relationship with borrowers. Evidence shows that most people who miss a bill payment simply cannot pay because they dont have the funds. Many who are charged a late fee may be facing a decision between paying their rent or paying their credit card bill. The decision there is clear. High late fees are thus counterproductive because they pile onto existing debt. Congress and Financial Institutions should build upon progress from the past few years by following three principles. First, policymakers should respect efforts by financial regulators to improve affordability in the marketplace, while supporting innovations to better meet the needs of working class people. Bank on certified accounts are an example of a Market Solution that improves inclusion while maintaining safeguards to prevent abusive practices. Others are also developing affordable small dollar loans and credit card products that save consumers money and improve their finances. Second, Financial Institutions should reimagine the relationship between themselves and consumers to promote longterm Customer Loyalty and Financial Health. Consumers notice when a Financial Institution is willing to be flexible with them and they will in turn remain loyal to the Financial Institution as they grow economically and need other financial products. Third, democratic structures can make our Banking System more equitable. Credit unions, especially cdfis and m. D. I. s are example of communityowned banks that democratize banking policy decisions. Policymakers should cultivate these to reach more people. Finally, policies that require banks to meet with communities will allow their needs to be voiced where it counts. Ultimately, investing in working class people by providing affordable and highquality products will allow banks and communities to grow together. If we create a Banking System built on trust and loyalty, one that invests in the longterm potential of everyone, we will be a major step closer to creating a more fair, inclusive and thriving economy. Thank you and i look forward to your questions. Sen. Brown thanks. Ill start with mr. Rust. Working families have real budgets they have to stick to, junk fees do not allow them to know the true cost of a product, making consumers pay more than what theyre budgeted for. Last week cfpb released a report saying that consumers pay more for products with complex pricing structures. What are some a couple questions. What are some of the most troubling junk fees youve seen in Financial Services and in rental housing and how do these hidden fees effect peoples ability to find the lowest price and stifle healthy competition between businesses . Mr. Rust thank you for your question. I think the point of complexity cannot be overstated. This is an issue where it becomes difficult to comparison shop because you dont know all of the costs ahead of time. I do find it stunning to see leases where there are scores of fees added on top of the original rent. That makes it that people could actually apply for an apartment, think its affordable, receive an invitation to move in and then discover that in fact it was too expensive. Credit card late fees, thats 14. 5 billion a year. Overdraft fees, similar. Just the myriad of fees that people pay at any point in time when theyre having a struggle. I think you see this with captive arrangements. I listed about 10 kinds of fees that are also involved. But there are more. So ill stop there. Sen. Brown thank you. I appreciate your comments about complexity. I appreciate ms. Madrys, the way she runs her credit union and the Credit Unions overwhelm overwhelmingly in ohio, i see the same way, they explain their members, theyll explain to their members better, they keep a simple structure. They really arent the problem. So i just wanted to say that in response to your testimony. I want to get some facts straight about cfpbs credit card late fee rule. Please answer the following four questions with a yes or no. According to the law, credit card late fees are not meant to generate profits, yet on average they generate profits that are five times greater than relevant costs, is that correct . Mr. Suiero yes. Sen. Brown thank you. Do credit card late fees disproportionately impact consumers with lower Credit Scores and people in less welloff neighborhoods . Mr. Suiero yes. Sen. Brown you made that clear in your testimony. Thanks for repeating it. Her only are only the largest credit card issuers covered by the cfpb rule . Mr. Suiero with you have to have one million open accounts. Sen. Brown thats the reason for ms. Madrys credit union, most Credit Unions in ohio would be exempted. So the rule just doesnt apply to small card issuers, correct . Mr. Suiero correct. Sen. Brown thank you. Credit card issuers shouldnt be extracting profits from consumers through late fees, first of all, because its unfair to consumers, second of all, because these rules are required to be reasonable and proportional to cost, by reducing late fees its pretty clear cfpbs ensuring consumers save over 10 billion every year. Back to you, mr. Rust. On rental junk fees which is every bit as problematic as is Financial Services junk fees. In rental housing, theyre raising already far too high housing costs, companies charge renters all kinds of fees. Application fees, processing fees, convenience fees, notice fees, and im sure you can cite several others. Some renters report even being charged a january fee, a fee for just being in the month of january. Unbelievably perhaps. Mr. Rust, can you explain the types of fees that renters face, the challenges these fees create for renters shopping for a place they can afford or manage their expenses once they sign their lease . Mr. Rust thank you. To be honest, i cant explain the fees. They seem unexplainable, right . But the truth is that i think it reflects a power imbalance. And i would say if we have more housing supply, landlords perhaps would not be attempting to extract these kinds of fees from consumers. But when there is a vulnerability, they are. I think the point about Comparison Shopping, it is hard to determine how much youre going to pay. That doesnt make any sense at all for our economy. Sen. Brown that speaks to what ms. Madry said. You can comparison shop with her because they make it clear, theyre simple, theyre exempt from this rule. Ill point that out as she acknowledged. But its made it makes it that much more complex in the larger institutions that really are the ones that extract that levy the biggest fees and the most frequent fees or the most onerous to modern income people and to everybody. You want to add anything on to what mr. Rust said . Mr. Suiero yeah. Pointing out that theres sometimes, similar to the rental Housing Market and housing in general, in banking a lot of people are finding themselves without a lot of options so the same dynamic applies here where if you need an account or you need a loan or you need a credit card, but you only have one or two options to choose from, youre going to have trouble youre going to pay what theyre going to offer because you need that account. So it makes it more difficult to comparison shop and it makes it easier for the Financial Institution to raise costs. Sen. Scott thank you, mr. Chairman. So much has been said, but i only have five minutes. So unfortunate. Let me just ask you a question, ms. Madry. Reading your story about who you are and the success that youve had, being the c. E. O. Of a credit union. You have overcome real obstacles. I wish we had more time for you to tell your story because honestly, the question that i want to ask deserves the context of not just your position today but the journey that youve taken to get to your position today. I think about my life story and the challenges ive had to overcome from a single parent household, mired in poverty, and what that really means for the context in which im asking the questions. I think about some of my staffers, kathryn, whose last day in the committee is today. I think about her growing up on a farm, a farm that focuses on vegetables, cucumbers and corn and the impact that has on her psyche and the ability to work hard. I think about the three stories that we have combined together and i ask myself, if the cfpbs going to save the average person about 200 a year, or the cost of the biden economy on a family of four, 15,000 a year, when you are in your credit union in indiana and your members come in and theyre complaining about the cost of gas, cost of food, the cost of energy, do you hear them talking more about the challenges of 15,000, the weight of bidenomics, or do you hear them talking a little bit more about the late fee . Ms. Madry thats a great question. Every day we have members come into our credit union and express just how hard it is to make ends meet. One of the things about our credit union is we do not take a fast food approach to lending. My lenders will spend anywhere from an hour to two hours with a member because we want to listen and understand the struggles that theyre facing. We will do what we can to help them, to overcome those challenges and we do it with empathy. My lenders have training on how to envision themselves walking in our members shoes. We help them to look at their financial situation and create budgets. And when its deemed necessary, we provide them with a loan, if that is in their best interest. We do a lot of debt consolidation loans to try to help put them in a better financial position. So because were regulated, because we are limited, capped at an 18 Interest Rate, quite often my members can borrow money from me at a much more affordable rate. When we consolidate all of their debt and give them one payment to make, it makes it easier for them to manage their finances. It makes them less prone to late fees. The other thing that we do is when a member comes in and says, im having a hardship, we do a lot of extensions on loans where we will forgive payments for up to 90 days. If they are having problems paying their current loans, we will do modifications. We will look at what they can reasonably afford to pay, and rewrite that loan at that loan payment, so that our members can be successful. As you said, i have lived that life, i wish when i was struggling that there was a bank or a Financial Institution that was willing to help me better manage my money so that i could ensure that my children always had food on their tables. That was not always the case. And so i am committed to making sure the people in the communities that i serve have a wonderful opportunity and know that we are there to walk alongside them and help them through whatever financial challenge they face. Sen. Scott thank you. We need more people like you in the Financial Services industry, without any question. You have introduced financial laws 101, fast food approach. You dont take the fast food approach. I love that concept. Because i am only the Ranking Member, not the chairman, hes going to cut me off because im running out of time but i want to talk about something i call the law of the tradeoffs. There are no changes to fee structures that doesnt require a tradeoff. So if your fee goes away, either your Interest Rates go up, the cost of the product goes up, or the product itself goes away. Yay, nay . Ms. Madry i agree with that. We have looked at what we would do if the overdraft protection law was passed into regulation. It would mean that we would have to cut our services. It could mean that we would have to lay off staff. I currently employ 36 people in my community. And we would have to move away from this twohour approach and say, how can we accomplish things in a shorter period of time . Sen. Scott thank you very much. I know im out of time, mr. Chairman. Im just close with this. I know the chairmans trying to do his best to be as lenient with me as possible. Sen. Brown its a difficult challenge. Sen. Scott it is indeed. [laughter] i appreciate his transparency there. Let me just suggest this. Even though the fees that were talking about do not apply to your credit union, you said without any question that the trickledown effect will have impact on your credit union. Thank you very much. Thank you, mr. Chairman, for your leniency this morning. Sen. Brown thank you, mr. Scott. Dont try it again next week. Mr. Tester of montana is recognized. Sen. Tester thats what happens when you run for president. It gets longer on the questions than the answers, right . Sen. Scott i said that too. Sen. Brown i did not run for president , mr. Scott. Sen. Tester anything i can do to start some fights. Thats good. Look, housing is a big issue across this country. And montana has had a housing shortage for years. Thats my home state. Its getting worse. Wherever you go across the state, one of the first challenges folks mention to me is lack of workforce, housing in our state. Its really hurting our economy, quite frankly. Were seeing a lot of wealthy individuals and groups come into the last best place, which is what they call montana, and buying up these houses. Its happening with Single Family homes, buildings, weve seen examples of it happening with manufactured Home Communities. Where montanans are really stuck, they own a mobile home that really isnt mobile at all, and these out of state investors take advantage by jacking up the rent and jacking up fees on hardworking montanans and seniors that live in sometimes the only affordable stuff left in the state. On top of jacking up rent, they often these out of state investors often add new fees, basic fees, that have always been included, but now all of a sudden theyre not. Fees, sewer and water are two, the chairman talked about others. That have been long included as part of the rent, ok . So what were see something a lot of out of staters are making money on what used to be Affordable Housing and making it not so affordable anymore. So, mr. Rust, just give me some insight on how any additional fees, how increase in fees, how new fees impact folks across the board but specifically in these manufactured home parks where they really dont have a lot of flexibility and they dont have a lot of money. Mr. Rust thank you for that question. That is such an important thing to remember. From 2015 to 2018, a group of private Equity Investors bought over 150,000 lots, again, this is a power imbalance. When a person lives in a manufactured Housing Community, its very difficult to move. It might cost 5,000 to 10,000 to move. If you can afford that, then its also difficult to find a place that will take a used manufactured home because there are fewer and fewer communities that are zoning for these communities. Its true, as you said, that the cost is going up. Not just the rent, but also fees are being added on to it. At the end of the day, this is workforce housing. It is working in Rural Communities where there are fewer construction crews available. Its housing for seniors. This is a fundamental aspect of something thats happening in the midwest and the upper midwest. And junk fees, its just not fair. Sen. Tester so the real question is, i think we can all agree, its not fair. This is workforce housing, this is senior housing, these are folks that are working hard for their money. Some of them are on fixed incomes and so the question is, what does congress do about it . Mr. Rust im glad you raised that. There is a bill before congress that would permit investment in manufactured Housing Communities, particularly when residentowned communities seek to buy homes or nonprofit groups. The challenge they face is its very difficult to gather the capital on a short period of time. And typically the reason a manufactured Housing Community is being sold is because theres an infrastructure challenge. So it becomes very expensive to find the capital and buy a home quickly. The price act, which is a bipartisansupported act, will provide Grant Funding to address these issues and i believe will become a very important source of reinvestment in communities. Sen. Tester let me go back to something you just said. I want to clarify that a little bit. Did you say that theyre being sold because of infrastructure needs or i just want to clarify this for me. I see them being sold because in our particular case, we got out of staters that are coming into our state and they want to change our state and they see an opportunity to make a quick buck on the back of working people and seniors and thats exactly what they do. Mr. Rust right. The cash flow is available on manufactured Housing Communities, especially if youre talking about owning the land but not the units. Are very certain, theyre very guaranteed. There are consultancies out there saying, yes, these individuals will have a hard time moving, this is an opportunity for you to make a lot of money. Sen. Tester appreciate all three of your testimonies and i appreciate what you guys are doing. I had a question for the Credit Union Lady but im out of time. Unlike the Ranking Member, i do not want to go over. I yield. Sen. Brown thank you, senator tester. Senator vance from ohio is recognized. Sen. Vance thank you, mr. Chairman, thanks to you and the Ranking Member. I think its important to sort of note that this entire conversation about late fees, Overdraft Fees and so forth takes place in the context of extraordinarily high Interest Rates. Im 39 years old. Pretty much the worst Interest Rate environment since i was a toddler. I dont remember anything about Interest Rates when i was 3 years old. I think we have to be careful here about this particular proposal or at the very least appreciate some of its implications and, ms. Madry, i wanted to direct this first question to you. You run a small bank and i appreciate you being here. Or i should say a small credit union, right . Ms. Madry right. Sen. Vance maybe you can sort of explain how, especially in the context of higher Interest Rates, what this particular proposal would mean for your ability to offer debt and Credit Services to people, especially low income people. Ms. Madry so in the context of my credit union, first off, were capped at 18 Interest Rates. We really try very hard to keep our Interest Rates very low. Im in a market where it is overbanked and underserved so i have extreme market pressures to have low rates in order to attract borrowers. And we also as a credit union, we believe in giving profits back to our members. So liquidity is tight. So i am paying higher rates on my members deposits because we as a credit union, i am reliant upon the deposits that my members make to provide the liquidity that i need to lend out. So while the Interest Rates have climbed, my members have not felt much of that pinch. Again, i serve a lowincome population and it is important to me to make surehat Financial Services are affordable to my members. The fee income really helps to offset the operating costs that goes along with collecting on overdraft when a member overdraws their account. We have to send out letters. My staff is there calling meers. It helps when members are coming in because the account is overdrawn because of a circumstance or a life event. As i said, my staff will take the time to talk to the member, understand the situation, and help them to find a solution. I can tell you that the way we operate in our credit union is if members account is overdrawn, we will do everything that we can to help them to get back in good standing. We waive fees whenever possible. If a member comes in and asks, we have other alternatives that we make available to members. However, when youre serving a population that is vulnerable, quite often they dont want loan products. They feel more comfortable with this service because it prevents them propelling into perpetual debt. Sen. Vance i appreciate that. I want to pick up on that basic point. Mr. Rust, i know youre an advocate of this proposal and i nt to just understand this bac question. Do you thi that consumers, especially ler income consumers, will ha less access to credit if this propal becomes law . The junk fee proposal. Mr. Rust you an specifically the credit card te fee rule . Sen. Vance yes. Mr. Rust thank you for the question. I personally think that cred cards are among the most profitable sources of business for institutions. In the data from the Federal Reserve talks about returns on assets that are three to four times greater than other forms of commercial banking. Theres examples of institutions with Profit Margins of over 40 onheir credit card business. So in my view, this isnt a question of will credit cards be orbitantly profitable or just inedibly profitable . Sen. Vance so i understand that. I dont necessarily disagree with the underlying argument, mr. Rust. I guess my point is, when you take a product thats even if i assume your framing is correct and say its a very profitable to moderately profitable, if you take something from very profitable to somewhat profitable, dont you fundamentally make it less likely that people are going to offer those services . My point here is not to put you in a tough spot. I guess my argument is, i think it would be better if we were just honest about the debate we were actually having. This proposal will inevitably lead to less credit options for lower income people. And i wish its advocates would lean into that and say, yeah, thats exactly what its going to do. We think thats a good thing as opposed to sort of hiding from the fact that it will mean Less Consumer credit for low income people. And i guess a related pot is, if the goal here is to provide options and to reduce the debt spiral that we all know people in low income situations sometimes experience, i maybe wish we would try to deal with that problem directly as opposed to the sort of back doorway of making credit more expensive and consequently less available to people. So i just wish this whole debate was a little bit more honest about what were really doing. What were proposing to do is to make Consumer Debt much less available to low income people. Lets just be honest about that and then have the debate about whether that is good or bad or could be accomplished through other means. Thats sort of my point here. With that, mr. Chairman, ill stop. Thank you. Sen. Brown senator menendez of new jersey is recognized. Sen. Menendez thank you, mr. Chairman. Ample Research Shows that junk fees are disproportionely targeted at and paid by minority consumers. To give one example. According to a survey from bank ra, hispanic Checking Account holders pay an average of more than triple that of white account holders. Can you talk about the particular vulnerality of minority consumers to nk fees . Mr. Suiero yeah. So the first point, is low income people and working class people across the board pamore in Overdraft Fees and credit card le fees. Latinos anblack consumers pay even higher rates of Overdraft Fees and junk fees. We just did a survey where we found that 40 of all latinos had paid a junk fee. This is mu higher than other groups. 25 of latin had paid a credit card late fee which is also much higher than other groups. So its widespread, its disproportionately affecting people who dt have a lot of income. Sen. Menendez one of the other elements of it is im concerned that disparities are even larger for the 26 million americans who have limited english proficiency. These consumers are disproportionately targeted by scams, they often face difficulty accessing Consumer Protection resources and education materials. What can we do to promote Price Transparency and reduce the disproportionate fees paid by minority and other consumers . Mr. Suiero number one is, for l. E. P. Consumers in particular we need to make sure that our marketing and our distribute materials that we offer consumers are transparent, are accurate and are in spanish and other languages spoken in the u. S. As well. We found in the auto lending space that theres been a lot of issues with auto lenders promoting a product in spanish at a certain price, and then when the consumer comes in to get that loan, it turns out the price was different. The Interest Rate was higher, there were other fees associated, a lot of work trying to address that issue. So thats one. The second part is on a broader scale, obviously these rules we think will help. In the market we can also promote things like bank on account, we can also promote things like affordable small dollar loans that have low Interest Rates. Credit cards that lots of credit card products that are out there that are really solid have low interest tes have no or low late fees. We need to be promoting those products as well. Sen. Menendez thank you. Consumer groups sent a letter to the cfpb on junk fees in Financial Services. In that letter you stated, and i quote, junk fees contribute to high rates of unbanked or underbanked households of color, closed quote. Can you elaborate on how junk fees drive low income families away from the traditional financing system and how this negatively impacts their Financial Wellbeing . Mr. Rust thank you for the question. The fdic does a number of studies. We ask why dont you have a bank account. Thfirst is im afraid of havi one because of surprised fees. And the second is erdraft fees. Ese set of fees are explicitly creating financial excluon. Mr. Sueiro we s similar findings with credit cards. There are surveys out ther asking consumers why dont you have a credit card . If you dont, they ci costs, Interest Rates, and late fees as one of the rsons they dont get those. I would add people w do have these highcost products are often more likely to for credi cards being delinquent. Overdraft fees to lose their products. Get overburdened in debt. And pushed out of the finaial system if they are not able to pay those fees. Senator menendez according to a 2019 fdic survey, 36 cited distrust of banks as a reason for not having an account. We have to try to modify because we need people to enter a port Financial Institution so this way they are not going to the Check Cashing place and payday lender and pawnbroker. One final question. One area where renters are feeling acutely the pain of junk fees is the search for housing in new jersey where housing is acute. It can be difficult, particularly for lowincome families and it seems many landlords are taking advantage of that fact by charging exorbitant application fees. As high as 350 in some instances. According to the national conser law center. Mr. Rust, are these application fees reflective of actual costs incurred by the landlord . Mr. Rust no, they are not. Thank you for that question. Transunion has a service they market to landlords where between the cost is betwn 25 and 42 based on what basket of services the landlord wants. Yes, turn that around and charge 100 per person even more. Thats whats happening. That makes it very difficult to comparison shop. Just the search costs are so high. It makes people think i have to apply for this first one and take it because i cant afford another 300 application fee. Senator menendez ank you. Chair brown senator from alabama. Americans are facing real problems and real financial challenges under the Biden Administration. Yet i am discouraged by the continual lack of responsibility taken by this white house for the consequencesf its own actions. What we see from this administration is another attempt to change its messaging. To blame shift rather than reversing course or admitting fault. According to some of my colleagues, on the other side of the aisle, its not inflation or excessive government spending, or overregulation that is fueling the obstacles that hardworking families are facing just to make ends meet every day. Instead, they are pointing the blame to everyone iminable. Last week in this Committee Room we talked about shrinkflation. This week its junk fees. Junk fees is an arbitrary term found nowhere in any legal statute. Used by this administration to vilifyeemingly every industry that offers servic to its customers. There is also an attempt to justy significant regulatory actions from regulators across the bod. Without any adequate costbenefit analysis to follow or any assessment of how these numerous rulemakings actually impact the end user, the customer, or actually impact the member. These very individuals these regulars and administration claim to be quote helping i believe are the ones that will suffer the most. Just to clarify and you are the ceo of amaller institution, Afena Credit Union, i want to know how thiis going to affect your membe. What this means to the very people that we are tryg to help . We have texting servi that is our members can opt into that will alert them when their balance is low. Plus all sorts of tools where they can monitor their aount online. In addition to these alerts and communications, have financial initutions, particularly these smaller Credit Unions, proactively made other changes to their late fees and Overdraft Fee programs without any additional regulation or legislative anges . What have you done to make improvements in this area . One of the things that we do is our members who have overdraft protection, we educate them that you do not have to access that by swiping your debit card. You find that you cannot make endseet, we encourage our members to come in and ask tt all of t funds that are available be moved into their Checking Account osavings account so that th pay just the one fee in the course of a month and they will have tho Funds Available to them when they need them. Excellent. I am glad to hear that. I certainly believe you understand the needs of your members and the datetoday challengeshat they face in the state of indiana more than anyone in a regulating building here in washington, d. C. I appreciate what you are doing to help the very people that these regulations say they intend to help. A couple of other questions, do you as the c. E. O. Determine your salary or your bonus based on overdraftr late fee charges at your credit union . No. Go ahead. From time to time i have told my board that i will forgo a raise or bonus when i feel that our cred union needs to show a profit in order to be able to meet regulatory requirements. And obviously serve your members needs. Thank you so much. Can you share with us what you anticipate will happen to the products that you offer to your members at your credit union if the cfpbs socalled junk fee rules are finalized as proposed . What would happen to things like free Checking Account or affordable Small Business loans . Thats kind of what i want to know. Yes. We would probably have to rethink our Interest Rate structure, increase our Interest Rates when possible. Eliminate things like free Checking Accounts. Elinate free checng accounts the very thing the very people this rule is socalled intended to help i believe will hurt. I think what you have said proves that right there. Thank u so much. I wish we could take a look at these regulations and actually see w how they affect the end user. Senator smith of minnesota is recognized. Thank you, sherrod brown. Thanks to all of you for being th us today. Its a very important topic. Im going to focus my questions first with you, mr. Rust. I want to talk about tse automad tenant screening processes popping up all over the place. Landlos are increasingly rning to automatic screening tools and reports to dermine ether or not to rent to a prospective nant. Who pays for the screenings . s usually the applicants. And in minnesota, a two adult family is paying on average four application fees, incurring about 320 in total costs, every time theare trying to find a place to live. I heard reports that number could go up to 800. Obviously these screening fees are making it really expensive for milies, especially lowincome filies, to findn affordable place to live. And they might not even result a fair or accurate assessment of the capacity of that tena to be able to be aood tenant. One woman ininnesota, for example, wasenied an apartment because a tenant screening report flagged an incorrect criminal record. This ian anomaly. An investigation of the tenant screening industry by the cfpb found Screening Services can use Incorrect Information and often provide limid explanation back to folks about why they have been died. Leaving renters in the dark and in the hole financially. So ty paid for an inaccurate screeng. Could you talk about this, tell us your perspective on how this is working, the obstacles they create for tants, and what we should do to protect people against these tools . Thank youor that question. Yohave raised something really important which is how the evolutio of tenant screening reports are changing. They are becing more complex. One of the issuethat happens from that is that is very difficult if there is information on your rert best not true. First off, its very hard to even know ifhats the case. Its harder perhaps to ev know how to fix it. This is happening frequently. Again, when the information is wrong, and then you are denied, thats 100. Thats 200. Uve got to try again. Ifhe information is wrong on tuesda its probably wrong on thursday. Im kind of stuttering because i think that this is just so unfair you are being forced to pay for something that is inaccurately and unfairly denying you a place to live. Consumers should have a right to know whether they are being denied rent based on inaccurat information. Thats part of whats in fair lending laws, right . Thetc has been working on this as well as the cfpb in filing complaints against institutions that dont have record systems in place to make sure that information is correct. Mr. Sueiro. Am i saying your name correctly . I want to follow up with a question. I think consumers understand the prices of products and servis in this rld have a markup. Thats capitalism. They get that, but i think if yotold them that they were lookg at a markup that was 00 , tt maybe they would think ice about whats going on and what is really ir and reasonable. To mthat is really the issue that is at the core of the cfpbs credit card late fee rule. My question to you is this is adding up to billions of dollars that is costing people for these late fees. There seems to be this argument that credit card issuers are suggesting that these high fees are basically an ientive to get people to pay their bills on time. But that is assuming that people could pay their bills on time and arent because they dont feel like it. As opposed to what seems to be more likely which is they cant. Id like to hear your comments on this. To me this sort of gets at the issue of why it is so expensive to be poor in this country. The are a number of different pieces here. Nuer one is we know fromots of surveys and talking to people that one of the biggest reons people donpay is simply they dont have theunds. And we also see this reflected in the data. It is lower income People Living paycheck to paycheck that are disproportionately paying these fees. Folks are in a situation where they are faced with the decision between putting food on the table or paying this late fee. Thas one. Two is the cfpb collected a lot of comments, 57,000 comments. They received a ton of comments from consumers who had been paying late fees. One of the comments justo giveou a real world exampl one of the people that comment was a parent. They had a very serious medical issue. They were paying for expensive medicine. And they were working two and three jobs. A third job every now and again to make ends meet. Theyissed a payment because they h worked so late that they worked after midnight of the day that theayment was due and they missed the paent window. They got charged with a 3late fee. This is the ty of thing. That is an example of where this is a working class person. They had the funds but couldnt dot. But there are so many her things going on in peoples lives that they couldnt pay it. There were other examples like people put their payment in the mail. The money dnt get to the Credit Card Company in time because the mails slow. They are not going to pay quicker in think any of those circumstances. Mr. Chair, i know im out of time. Thank you for the opportunity to ask these questions and thanks to our panelists. Senator cortez masto from nevada is recognized. Thank you to the witnesses for being here. I know my colleagues talked about manufactured housing. I will touch about this because we dont talk about manufactured housing ough and the potential for it. I know mr. Rust, thank you very much, wrote an incredible book here. Very thoughtful about families who live in manufactured housing to my colleagues, this was 2007 if you havent had a chance to read it, please do. A few months ago had announce d a request for applications for a new program. I think we talked about this. Fund new roads, water sewer, tornado shelters, and other infrastructure improvements. It is caed the Price Program in honor of congressman david pryce, who wrote the forward eword here in the book. I led the bill for the preservation and Reinvestment Initiative for community enhancement, the permanent program. Why is this . Because i see the benefits in my state. Mr. Rust, can you explain why thmillion americans who live 8. 5 in manufactured Home Communities deserve special consideration and investment thank you for that question. I visited manufactur Housing Communities in nevada. This is clearly an issue tre. The cost of rehabilitating a community, cost of infrastructure investment. This is something that the price yce act will address. Its strongly needed. Why are People Living in manufactured housing, what are the reasons for thatemand to exist . It is because its affordable. It meets the needs of people who are seniors. It meets the needs of workers who may be working in a community where there is not a large set of construction workers. Rural eas. Manufactured Housing Communities can be a very nice pce to live. They are communities. But if they are being disinvested in, i would say if you go around to your local neighborhood and look for the neighborhood that is the least that is receiving the least amount of capital its probable y a manufactured Housing Community. Thats right. That is the unfortunate piece about this because there is stigma associated with manufactured housing, which there shouldnt be. This is an opportunity for so many people to have a roof over their head and have it be affordable. One of my colleagues talked about private equity coming in and rchasing a lot of these. I have concerns about that. We see that just in housing in general in southern nevada. It is an issue that we need to address these high cos. Let me ask you this, in nevada, 86 of extremely lowincome renters are severely housing cost burdened. Meang renters spending more than 50 of their income on rent. And rents are only going up. Since 2020, rents have increased betwee20 and 30 . In some parts my state. As families are forced to spend more and more on rt, they are left with fewer resources, we know that. How do additional fees imposed on renters like application fees, processing fees, and socalled convenience fees exacerbate these high costs of rent . Thats a great question. I think it gets down to if youre going to comparison shop, if youre going to look on a platform and see 10 different potential places to live, some of those listings are all in price, and some are partitioned where there might be fees you dont know about. Well that makes it very difficult to comparison shop. It puts wellintentioned landlords who are being fair at a disadvantage with landlords playing these games. Yes, i think what we are seeing are cases where consumers are paying rent on time in their community, in their manufactured Housing Community, private equity comes in, they buy the park, they add 400 in fees, and suddenly it becomes groceries or paying the rent. Even if i have to leave i may not be able to take my home with me. So i may actually lose that home. Nobody should have to make that decision. But unfortunately there are too many even individuals that are havi dont care whether you are a veteran, senio hardworking family, there are many in our communities now that are having to make this decision. Ats why we have to address it. Moremportantly, we have to address these fe, junk fees or addons. We have to address the housing issue and affordability housing. Thats why im so pleased there is bipartisan supporin this committee to really address the issues. And i hope we are able to pass this for the benefit of so many, not just in nevada but across the country. There is more questions i have. Im not going to be able tget to every one. I thank you for being here and your commitment to addressing the issues. Thank u. Senator warren of massachusetts is recognized. In 2009 Congress Passed the card act to crack down on nks and other credit card issuers that were abusing consumers with excessive late fees and bait and switch terms. Like those low initial rates that once somebody signed on the dotted line really jumped up and jumped up high. The card act slashed average late fees by a third, to 23 in 2010. But by 2022, 12 years later, by exploiting loopholes in the law, that number was back up to 32. Enough to make the biggest Credit Card Companies an extra 14. 5 billion in profits that year. Meanwhile, average credit card a. P. R. s have nearly doubled over the last decade from 13 in 2013 to 23 in 2023. That is the highest on record. As Credit Card Companies have grown their profits through interest and fees, they have also become more concentrated. With the biggest issuers gobbling up the smaller ones. In 2022 the 10 biggest Credit Card Companies in the country accounted for 83 of all credit card loans. Mr. Rust, you have studied the credit card market for years now. Can you Say Something about how the smaller credit card issuers stack up versus the biggest issuers in terms of how much they are charging consumers . The big guys versus the small guys that are still left. Thank you for that question. I was really hoping to have the opportunitto say that c. F. A. And the cfpb pointed out that terest rates at smaller institutions, smalCredit Unions, are lower, right. And this has tdo, i believe, with the fact that t credit card market is broke because the way that people e Comparison Shopping when they say i would like to get a credit card, it doesnt take them to the small bank. It takes them through a Comparison Shopping site. A lead generator thats earning large amounts of fees to direct them just the cards that have the ghest rates. We are seeing margin on margin issues whe the amount of the margin is growg over time. Its never beenigher. Credit card issuers that are larger are charging Interest Rates that are 8 to 10 higher. The big guys with the highest paid c. E. O. s are actually charging consumers a whole lot more than the little guys in the credit card market. And its the big guys hitting particully hard on customers pockets. Mr. Sueiro, you are an expert on predatory lending practices. Who is paying the bulk of the interest and fees that are driving Credit Card Companies profits . There is a number of diffent ways to look at it. Cfpb has found that consumers with deep subprime Credit Scores are paying a disproportionately high amounof fees. We know that that population are generally lower income working class people of color. We know from our surveys, other consumer surveys, this has been reflected over time repeatedly that lowincome people disproportionately pay these. Latinos, black consumers also. So people a paying more. You know who is paying more. People who are struggling the most. The cfpb is taking action to rein in price gouging in the credit card market, including by capping most late fees at 8. Obviously very good news for American Families. Of course, we know who is not happy about that. Big credit card issuers and their republican friends in congress. Last month republicans introduced bill overturn the cfpbs credit card late fee rule so that the credit card industry can continue squeezing every last dime out of these consumers. One House Republican even said, quote, the vast majority of americans support these fees. Rust, i have to ask. Do you know anyone who is actually consumer who loves junk fees . I he never heard someone say, oh, i paid an Overdraft Fee and im gl that worked out. Yeah, that worked out well for me. I have never seen the bumper sticker, i heart junk fees. How about you, mr. Sueiro, anybody you know excited about being gouged by a multimillion multibillion dollarank . The cfpb received 57,000 comments. A large number were from consumers that were saying quite the opposite. But they were fed up with these fees. They didnt want to pay them. Thopposi is also true. If you askedonsumers how would you feel about a product that does not have such high late fees, they look athose products favorly and have more goodwill towards Financial Institutionsf they were offered those products. Im gl the cfpb is taking up the fig on the behalff consumers and standing up to big banks. Thank you, mr. Chairman. Senator fetterman is recognized from pennsylvania. I would like to thank my colleague from connecticut for allowing me to do this. Yes, hi. Banks se to really ty ve fees like that, right . I didnt. I think its helpful if something happens to you to understand what a lot of other american conmers face. That kind of thing. Probably a couple years ago, i was at a coffee place. And i bought o. And en everything went through. I didnt think anythingf it. Then i had a notice that i overdraft my account. So that was a 40 cup of coffee. Then i was not at blue bottle, but at any rate, it seems crazy that you would allow your account to be charged 35 over a cup of coffee. I didnt really appreciate it. In whose interest was that would you think . Anyone, what do you think . Its in the interest of institutions that want to pad their profits with huge orbitant fees. I think we shouldnt forget that duri the time when you were experiencing your not Blue Bottle Coffee overdraft, that many institutions were using gh to low check reordering to actually trigger additional overdrts. Thats what i thought. I calledp my bk. Im le, welhey, thats kind of crazy. And they are like, actuay, sir, we allowed this transaction to occur. And you were able to get on with your day. They justify that saying, well, ths a service we provided. At youere allowed to get your coffee and get on with your day. And now it becomes very clear that these kin of fees are a profit center, is that accurate . Absolutely. The ta from call reports revealshat the amount of fees coming in off ansaction accounts, some casesan be , 30 , 40 equivalt to t net income of that fancial institution. Those are almost overdraft stores. It is pure profit, too. It is no service, anything other than just being nickeled and dimed. I personally dont enjoy that , being nickeled and dimed. Anof you on thpanel,o you enjobeing nickeled and dim anywhere you go . No, s. Anyone . But now what once was something that was a penalty now has become part of their mission. This happened just last week in my apartment. The d. C. Rental market is kd ofough. I pay 200 a month for a 500 squares. Then i left my k on the counter. And then i approh the ont desk. Im like could you please let me , iso i could get my key . Absolutely. And then they pulled out a form that said well, that 50. Im like no, no. , oh i dont need a new key. Could you just let me in. They are like well, that doe matter. Thats 0. Im like, 50 . To let me in . I couldnt beeve that someone would charge 50 justo open up to get your y. Would you age thats kind of a junk fee for housing rentals . Yes, absolutely. Thats a junk fee. I feel bad for the person at the desk who had to follow the corporate policy that requires them to charge that fee. Its not peonal against the worker. But the fact that they institutionalized this idea we are going to be 50 for letting you to just get your key there. That seems just pure profit. That becomes that, too. Metaphorically, im running t of time, but i think thats the same kind of government where you cannot count or create parking tickets and speeding tickets as revenue. That should be about for public servicor to protect a situation. In my opinion, its just gone crazy. And now when billions and billions of dollars now those kind of nickeling and diming now is part of the business strategy. But thank you for joining me. My time is off. Senator van hollen of maryland is recogniz. Thank you, mrchairman. Thank all of you for your teimony today. I have been trying to listen in via cspan. I know a lot h been covered on the issue of Overdraft Fees. And the finding that 80 of Overdraft Fees are borne by 9 of customers, which shows e impact of these fees on those who can least afford to pay them. That is why the cfpb developed a rule to address this issue. Senator booker and i organized a letter in april in support of the cfpb rule. There has also been a lot of sinformation about the cfpb rule from opponents of it. Mr. Rust, if you uld ju brfly descri what the le does and what doesnt. One of e things i lik about the ru is how it creates ltipletructus to f different tys of u cases anfit initutio in diffent prritieshey might ha for their busess. So there is thOverdraft Fee whh theyescribas the coursy overaft fee wherere for benchmk rate initutions allow to charge. Its a proposal. We dont know exactlyhat th ra will. The is ao an option to create an inntional line of credit, overdraft linef credit, that comes with consum protections. This is really moving in the diction that will be more abt Financial Inclusion, not gotcha. But workintogether. There is a third aspecthich you might call a hybrid debit cred card that allows a consumer to overspend. But instead of having it be a negative balancet creates a parate account that ha credit. These are protected by important protectis likeo fee harvesters. An ability to repay standard. Giving consumers time to repay. So, a periodic statement. Giving them the ability to choose how they repay their account so they dont incur another Overdraft Fee. I appreciate that because as i said, and you know there has been a lot of misinformation. I think its a very well tailored and well degned proposal. I do want to turn briefly to the issue of junk fees as part of the rental Housing Market. And the chairman of this committee has put a renewed focus on housing where the for the banking and housing and urban affairs committees. I apprecia that. We looked at ways to reduce the cost of housing, including rental housing in terms of increasing the supply, making sure that we have voucher programs. But one of the other eas where we have seen big increases in the cost of housing is not only rents, but in many othese sort of predatory junk fees. This is the topic of todays discussion. Mr. Rust and mr. Sueiro, if you could provide some examples of the most egregious junk fees you have seen ithe Housing Market. Some of them surfaced as part of the al page lawsuit. Maybe we should start with mr. Sueiro or rust, either one. Whoever wants to gfirst. There are additional costs being applied to homeownership that raise the cost of housing. At one of the things that we are worried about is any situation we have to pay to pay, particularly electronically where the real cost might be 4. 5 cents but you have to pay seven or 10. It addresses junk fees in the Title Insurance market. Title insunce is an interesting market where they are cross competitive pressures, lost ratios on Title Insurance could be between 3 and 5 . Thats the amount of the premium pay that leads back to the consumer. Most of the fees in Title Insurance are going to pay e institutions provided a lead generaon for that Title Insurance policy. Thank you. Will just add in the rental market, things like application fees, late fees on your rent payments, administrative fees i guess for the process of applying and things like this. Those of the most common ones that we see. Similar patterns to the banking junk fees, which is low income people across the board are paying those in latinos and people of color are paying those disproportionately quick thank you for your work on this end to the cfa on the team there for what you are doing. Mr. Chairman. Senator butler of california is recognized. Thank you mr. Hairman for having this hearing, and thank you all for your testimony and for your work. I would like to associate myself with the questioning from senator van hollen relative to the rental Market Application fees and what you just mentioned as they have an incredibly impactful impact on young people in the country who are trying to find a way to do all the things that we expect them to do, save their money and be prepared for a rainy day, and the hundred dollar application fee or the 50 trash pickup fee. So i appreciate your comment specifically to that market and to those young people because i think there are things that we can and should be doing. Let me turn to where you left off. The notion of disproportionate impact and racial wealth gaps relative to junk fees. Perpetuate existing racial wealth gaps and hinder generational wealth building . I want to start on the access side, first. We cited already today that high costs are one of the big barriers to obtaining these products, so we know from the fdics survey, we have done surveys, if you just ask people why dont you have a bank account, they will site costs. Its too expensive to pay for an Overdraft Fee or monthly maintenance fee, that type of thing. Same thing for credit card products. They will tell you the same thing, Interest Rates are too high, cdit card late fees are too high. On the one hand we create a situation which lowincome people and people of color disproportionately are left out because they are concentrated in those workingclass low income jobs. So that is on the one hand. If you look at access to those products, they always have the least amount of access tohose products. In the bigger picture, in terms of wealth, the people who do have these products are also paying the highest fees in the highest cost. You think about whats going on in that situation, this is a continual process where workingclass people, people of color are paying a bigger percentage of their money back into Financial Institutions, and often times its the biggest Financial Institutions, talking multitrillion dollar institutions that are getting back that money. So its a wealth extraction and its also a financial exclusion process. Thank you for that, i would love to get your thoughts to that question and, i have done some work to introduce a set of bills relative to expanding language inclusivity. And making sure that we are making the information mh more accessible to people whose language first language is not english. I would love to have you combine these two issues, if you can. How and why are we here, and what are things like Language Access in ways that Companies Continue to take advantage of these commuties . I will start with the first lf, touching on a bit of what was said, gen z in the manila and the millennials face a Housing Market thats different there were generations before the. 40 of gen z after high school, coege or living with their parents. This ireally about a lack of supply of housing, right . This means they are not getting on the escalator to homeownership, to wealth building. All the aspects of what we associate with the american dream. So related to your question, please new generations, younger generations are more diverse. The bargain they are sing isnt the same bargain. The point about making sure finaial institutions use inclusive language, is is very important. Weve worked a lot over time in things like adverse action notices. You are turned down for credit, why were you turned it down . If its in english, it doesnt help. If you are someone who comes from a family that speaks a different language, this is important to being fair. Quick thank you. Senator butler. Thank you all for being here for good questions. I appreciate so many people especially on the side of the aisle with such good questions. I apprecie the involvement of everyone in this comttee. Senators who wish to submit questions, they are due may 9. To the witnesses, please submit your responses to the questions within 45 days from the day you received tm. Thank you all again. With that, the hearing is adjourned