WASHINGTON (Legal Newsline) - Republicans in Congress are growing frustrated with the actions of a "rogue" federal agency that is passing new rules for financial institutions without the approval of lawmakers.
The Consumer Financial Protection Bureau has been a source of controversy since it was created in 2011 in a way that both prevented its director from being removed and kept Congress from controlling its funding. Under President Joe Biden and his director Rohit Chopra, the CFPB is increasingly facing criticism for implementing new standards called strict and vague by critics.
The House Financial Services Committee took up the issue on March 7 in a hearing on "politicized financial regulation." Part of the hearing focused on the CFPB's new "junk fees" rule that targets fees charged by banks and financial companies, as well as its ban on late fees higher than $8.
"The Biden Administration is using would-be ‘independent’ regulators as political agents to circumvent Congress and drive leftist transformations in financial regulation to the detriment of consumers and communities," said Rep. Andy Barr, a Kentucky Republican and the chair of the Financial Services Committee.
“In deciding to finalize the credit card late fee rule nearby President Biden’s State of the Union address, the CFPB is showing how politics, not consumer protection, drives the train under Director Chopra.
“Commenters on the proposal should be appalled that their thoughtful critiques were conveniently tossed aside in favor of political considerations in an election year."
Previous Legal Newsline coverage detailed the difficulties lenders are facing from the CFPB's new crackdown on loans that pose "risk" to borrowers, with the president of a trade group explaining that the CFPB hasn't actually defined "risk" in a way that will help companies be in compliance.
The CFPB is funded by the Federal Reserve, supposedly for the purpose of avoiding political battles in Congress over how much money it should receive. The U.S. Supreme Court is currently mulling whether that framework is constitutional.
Nicholas Anthony, a policy analyst at the Cato Institute, testified at the hearing that the late fee rule showed a misunderstanding of the marketplace, considering late fees fell 68% in recent years.
"In fact, even the CFPB has recognized this trend," he said, citing a CFPB report that found late rees revenue dropped $1.5 billion from the fourth quarter of 2019 to the fourth quarter of 2023.
The Federal Reserve found competition among banks has forced them to charge lower late fees in order to attract and keep customers.
"So long as fraud is not occurring, and people can freely opt into and out of these services, the government should stay out of the equation," Anthony said, " especially since price controls hurt the very people they are intended to help and create needless government intrusion into business."
Karen Harbin, the president of Commonwealth Credit Union in Kentucky, added credit unions are facing a "tidal wave of new burdens and regulations."
Though some members of the committee defended the CFPB's rulemaking as a way to protect consumers, Roger Williams of Texas told witnesses he was glad to stand with them in their fight against the CFPB's actions.
He called the junk fees rule a "misguided crusade" and then took aim at the late fees rule.
"In this proposal is an attempt to regulate overdrafters' credit, which would require additional disclosure and underwriting that would ultimately lead to many customers being priced out and eliminating a lot of loans that you might make to small business owners for payrolls and other things," he said.
"The overdraft services offer a variety of benefits to increase financial flexibility and emergency access to funds. Many consumers will lose this critical safety net and be forced to turn to less-regulated alternatives.
"It's funny on the other side they're gonna always help everybody but the people they hurt are the people they think they're helping."