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