Consider This from NPR - While The Fate Of The CFPB Is In Limbo, The Agency Is Cracking Down On Junk Fees

Episode Date: March 2, 2023

The Supreme Court is weighing whether or not the Consumer Financial Protection Bureau is constitutional based on how it receives its funding.Last fall a panel of three Trump appointees on the Fifth Circuit Court of Appeals outlined that if funding for a federal agency like the CFPB is not appropriated annually by Congress, then everything that agency does is deemed unconstitutional.While the agency's fate is in limbo, its latest initiative is aimed at cracking down on junk fees that can cost Americans a lot of money.We speak with CFPB's director, Rohit Chopra, on how unnecessary fees impact everyday people. In participating regions, you'll also hear a local news segment to help you make sense of what's going on in your community.Email us at [e-mail] more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

The Consumer Financial Protection Bureau was established by Congress in 2010. The Bureau is charged with protecting consumers from predatory practices by financial institutions. This was one of the responses to the 2008 financial crisis. Now the Supreme Court has agreed to take up a case that could decide the CFPB's fate, along with the status of several other federal agencies like the Federal Reserve. But there is a bigger context here. There are lots of conservatives

who have long opposed the modern administrative state, and they've previously challenged laws that say heads of agencies can only be fired for cause. In recent years, the Supreme Court has agreed, and it's struck down a bunch of these provisions saying that these independent agencies are essentially creatures of the executive branch. That is NPR legal affairs correspondent Nina Totenberg. So the president has to be able to fire at will, not just for cause. But while those decisions did change the who in terms of who runs these agencies, it didn't take away the agency's powers. Now comes a lower court decision that essentially invalidates the whole mission of the Consumer Financial Protection Bureau, the CFPB. Okay. So just to explain some more, last fall, a panel of three Trump appointees on the Fifth Circuit Court of Appeals ruled that the CFPB's funding is unconstitutional because

it gets its money from the Federal Reserve, which is in turn funded by bank fees. In other words, according to that appeals court ruling, if funding for a federal agency like the CFPB is not appropriated annually by Congress, then everything that agency does is unconstitutional. The thing is, this could impact several federal agencies that are also not funded by annual appropriations. Also, the Postal Service has different funding. The U.S. Mint, the federal deposit insurance corporation which protects bank depositors. Even programs like Social Security and Medicare are paid for by mandatory spending, not annual appropriations.

As the brief puts it, this marks the first time in our nation's history that any court has held that Congress violated the Appropriations Clause by enacting a law authorizing spending. So consider this. The Supreme Court won't issue its ruling in this case until 2024. And while its very existence hangs in the balance, the Consumer Financial Protection Bureau is still there doing the job Congress asked it to do back in 2010. Coming up, we're going to hear about one of the CFPB's latest efforts to protect consumers, one that could potentially save you some money. From NPR, I'm Elsa Chang. It's Thursday, March 2nd. This message comes from WISE, the app for doing things in other currencies. From NPR, I'm Elsa Chang. It's Thursday, March 2nd. It's Consider This from NPR. During his State of the Union address last month, President Biden talked about an issue that many Americans can probably relate to,

companies that charge consumers so-called junk fees. These are some of the practices the president mentioned that he would like to do away with. Cable, internet, and cell phone companies can charge you $200 or more if you decide to switch to another provider. Prohibit airlines from charging $50 round trip for family just to be able to sit together. And prize resort fees that hotels charge on your bill. Those fees can cost you up to $90 a night at hotels that aren't even resorts. We can stop service fees on tickets to concerts and sporting events. Pass the Junk Free Prevention Act so companies stop ripping us off.

You get the idea. Junk fees are basically those little, well, sometimes not so little, charges that pop up unexpectedly during a transaction you want to make, like booking travel online or getting tickets to a concert, even buying a house. They can also show up after you miss a payment on your credit card or overdraft your bank account, making it even harder for many who are just trying to manage debt. President Biden has called on Congress to pass legislation specifically addressing junk fees.

But the administration is also acting on its own. And that is where the Consumer Financial Protection Bureau comes in. Rohit Chopra is the CFPB's director, and I spoke to him recently. Rohit Chopra, welcome. Thank you so much, Elsa. So, you know, President Biden, we just heard him talk about the American consumer being ripped off by these extra charges. Is that how the CFPB would also characterize it, that people are being truly ripped off here? I think Americans are willing to pay for a decent, legitimate service that's priced competitively. But I think what we often find is surprises, hidden fees, or being charged for things that are not services at all.

And it's not just a small amount of money. It adds up to tens of billions of dollars per year. Yeah. Can you describe one or two particularly egregious examples of these junk fees? Sometimes someone will write you a check and they don't have enough money in their account. Somehow you get charged with a fee for that. You don't necessarily know if they have enough money in their account. And yes, there's some real costs that need to be recouped. All of that we have to think about. But some of these fees just feel totally unfair and they don't make sense. Absolutely. And the thing is, penalties like late fees or overdraft charges frequently turn up precisely when someone doesn't have the money to make a payment or cover their bills.

Like, how much are you seeing these kinds of fees disproportionately hitting low-income people? Well, there's no question. Our analysis when it comes to overdraft fees, late fees, it really hits those who can least afford it. But I will tell you this. They are also hitting people who really thought they did nothing wrong at all. One of the things the CFPB has been taking on is these surprise overdraft fees where someone can check their app or their bank account balance.

It says they have money in their account, but the way the transactions get ordered and processed can sometimes trigger multiple overdraft fees in a day. Sometimes people just feel like behind the scenes, they are penalizing me when I did nothing wrong at all. Yeah. I mean, I'm still reeling from the example you gave of getting hit with a late fee or an overdraft fee if I try to cash a check written by someone else, but they don't have enough money in their account for the check. And here's another one. People were getting their statements, you know, sometimes just a few days before it was due. have mailed in a payment. They can't necessarily control when it lands. And they feel like, okay, to hit me with a huge fee on top of it, it just sort of feels like it's being baked into the business model. And I think people really are frustrated by that. Well, can I ask you, what have you been hearing from the banks and the companies that are charging these fees? Like,

how are they even justifying them? What kind of pushback are you getting? Well, here's what's so interesting about credit card late fees. This is a multi-billion dollar revenue source. And a little over a decade ago, Congress banned unreasonable late fees. If you're going to charge a penalty fee, it has to be reasonable. And the financial institutions point to a loophole that was created by the Federal Reserve Board years ago that essentially allows them to get immunity from this congressional ban,

even if those fees they charge are out of proportion and unreasonable. We're looking to rein that in and align those fees to what the bank's costs really are. And we did an analysis of what those costs were, and they were far lower than what is being charged. I'll also just say another piece of this is, yeah, you want to incentivize on-time payment, but boy, do consumers already get hit when they don't pay on time. They may face higher interest rates. They might have to pay interest on their entire balance as if there is no grace period. Trust me, they even get consequences on their credit report for it. But charging huge late fees, even if someone is just a day late, that feels like it's just becoming the norm in so many parts of our economy,

and people are pretty fed up with it. What about credit card interest? People are increasingly relying on credit cards these days. Interest can be very, very expensive, and it can make it hard to get out of debt for a lot of people. Are there any separate efforts to address that piece of this? Well, here's what we've seen in the last several months. As the Fed has increased its interest rate targets, so have financial institutions. And financial institutions have raised them on average more than even the Fed has when it comes to credit cards.

I think there's a big question here about competition. How easy is it to switch your card, refinance it, lock in a lower rate, take advantage of your improved credit history? That's hard for a lot of consumers right now. So we're looking at lots of ways that we can inject more competition in the process so that people can find lower rates in this rising rate environment. Do you have any advice for people right now who are dealing with a lot of these junk fees or feel that they're being treated unfairly? Like, what can they do right now? Who can they talk to about that?

Well, one of the things we're urging all Americans to do is when they think they've been victimized by an illegal junk fee is to come forward, file a complaint at consumerfinance.gov. Those complaints not only help individuals get restitution, but they form the basis for identifying systemic abuses and may even lead to major enforcement actions like the CFPB's recent multi-billion dollar action against Wells Fargo, who we caught engaging in illegal fee practices. So I really hope people are willing to raise their hand for the benefit of themselves, their families, and frankly, consumers across the country. That was Rohit Chopra, the Consumer Financial Protection Bureau's director. It's Consider This from NPR. I'm Elsa Chang.