    [Senate Hearing 118-554]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 118-554

                    CONSUMER PROTECTION: EXAMINING FEES IN
                    FINANCIAL SERVICES AND RENTAL HOUSING

    =======================================================================

                                    HEARING

                                   before the

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

            EXAMINING FEES IN FINANCIAL SERVICES AND RENTAL HOUSING

                                   __________

                                  MAY 9, 2024
                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

                   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                    Available at: https: //www.govinfo.gov /

                                     ------

                       U.S. GOVERNMENT PUBLISHING OFFICE

    58-502 PDF                 WASHINGTON : 2025

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                           SHERROD BROWN, Ohio, Chair

    JACK REED, Rhode Island              TIM SCOTT, South Carolina
    ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
    JON TESTER, Montana                  MIKE ROUNDS, South Dakota
    MARK R. WARNER, Virginia             THOM TILLIS, North Carolina
    ELIZABETH WARREN, Massachusetts      JOHN KENNEDY, Louisiana
    CHRIS VAN HOLLEN, Maryland           BILL HAGERTY, Tennessee
    CATHERINE CORTEZ MASTO, Nevada       CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                J.D. VANCE, Ohio
    RAPHAEL G. WARNOCK, Georgia          KATIE BOYD BRITT, Alabama
    JOHN FETTERMAN, Pennsylvania         KEVIN CRAMER, North Dakota
    LAPHONZA R. BUTLER, California       STEVE DAINES, Montana

                         Laura Swanson, Staff Director
                   Lila Nieves-Lee, Republican Staff Director

                           Elisha Tuku, Chief Counsel

                  Catherine Fuchs, Republican Policy Director

                          Cameron Ricker, Chief Clerk
                          Shelvin Simmons, IT Director
                           Pat Lally, Assistant Clerk

                                      (ii)

                                C O N T E N T S

                                  ----------

                             THURSDAY, MAY 9, 2024

                                                                       Page

    Opening statement of Chair Brown.................................     1
            Prepared statement.......................................    32

    Opening statements, comments, or prepared statements of:
        Senator Scott................................................     3
            Prepared statement.......................................    33

                                   WITNESSES

    Adam Rust, Director of Financial Services, Consumer Federation of
      America........................................................     5
        Prepared statement...........................................    35
        Responses to written questions of:
            Senator Fetterman........................................    84
    Karen Madry, President and Chief Executive Officer, Afena Federal
      Credit Union...................................................     7
        Prepared statement...........................................    58
    Santiago Sueiro, Senior Policy Analyst, UnidosUS.................     8
        Prepared statement...........................................    68
        Responses to written questions of:
            Chair Brown..............................................    94

                  Additional Material Supplied for the Record

    Statement submitted by ABA.......................................    95
    Statement submitted by BPI.......................................   110
    Letter submitted by CBA..........................................   113
    Letter submitted by DCUC.........................................   118
    Letter submitted by NAA/NMHC.....................................   120

                                     (iii)

                       CONSUMER PROTECTION: EXAMINING FEES
                    IN FINANCIAL SERVICES AND RENTAL HOUSING

                                  ----------

                             THURSDAY, MAY 9, 2024

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10 a.m., via Webex and in room 538,
    Dirksen Senate Office Building, Hon. Sherrod Brown, Chair of
    the Committee, presiding.

                OPENING STATEMENT OF CHAIR SHERROD BROWN

        Chair Brown. The Senate Committee on Banking, Housing, and
    Urban Affairs comes to order.
        Senator Scott, welcome. The three witnesses, welcome.
        Costs are far too high for Americans. Corporations are
    finding more and more ways to raise those costs to boost their
    own profits. We have 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. These are surprise--
    although not that much of a surprise anymore--often last-minute
    charges that drive up the cost of products, have no
    justification or connection to anything other than their quest
    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 wouldn't be late, but were charged a convenience fee.
    The only thing that fee is convenient for is the bank's bottom
    line. Or let's say you're looking for an apartment and you
    finally find one with affordable rent. But when you get a look
    at the lease, you realize that, between the maintenance fee and
    the trash fee and the mysterious convenience fee, the actual
    rent you'll be charged each month is out of your budget now.
        These hidden add-ons, surcharges, fees, they're all junk
    fees. They're extra costs that inflate the price you pay, but
    add no real value. They're often hidden. They're only disclosed
    when it's time to pay.
        Consumers know what they can afford. That's why we all shop
    based on price. But when the real price is hidden through
    undisclosed junk fees, how are consumers supposed to find the
    lowest price? The answer is they often can't.
        We hear a lot about personal responsibility and consumer
    financial literacy in this Committee, but no amount of
    financial education is going to protect someone from a tactic
    that's meant to purposely hide the real purpose of a product or
    service. They hide the price. That's the whole point.
        Junk fees make a mockery of free and fair markets. Thirty-
    two dollars here, $45 dollars 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 hard-
    earned money. They would be able to better find the lowest
    price, which is how you really should promote competition to
    bring costs down.
        That's why the CFPB has taken long-overdue steps to reduce
    costs and fees and make them more transparent.
        CFPB took a major step toward reducing costs for consumers
    when it issued 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 late fee last
    year.
        By law, credit card late fees are supposed to be reasonable
    and proportional--that's what the law says, ``reasonable and
    proportional''--to the cost that companies incur for late
    payment. So, be clear, there are massive trillion-dollar Wall
    Street companies. The idea that your missing your payment due
    date by a day or two is imposing some huge cost on the credit
    card company is just 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. That's 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--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--we passed the CARD Act
    to lower some fees and increase transparency.
        Surprise, surprise, the sky didn't fall. Consumer still
    have access to credit. And, of course, credit card companies
    still make billions in profits.
        Of course, it's not just credit card late fees. Junk fees
    pile on top of all sorts of services and products. CFPB found
    that some auto loan services charge $1,000 in repossession
    fees, almost three times the average repossession cost.
    Unsurprisingly, some owners never recover 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've seen
    cases where the advertised rent grows hundreds of dollars a
    month once all the fees were added on top of the rent--
    application fees, utility deposits, trash fees, fees for the--a
    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--added-on fees and surprise add-on fees when
    they go to sign their lease. Most renters can't afford these
    massive price increases, but they may not have an option once
    they have paid all the upfront costs and set their move-in
    date.
        Be clear, the entire point of these fees is to hide the
    true cost. They could just list their rent for what it is, but
    they don't, 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.
        It's not a free, fair market. It's 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 CFPB's work that has
    refunded $260 million to consumers for unlawful junk fees--
    already saved that money and will save consumers billions in
    the future. Corporations raising these prices have armies of
    lobbyists to fight for them. At the beginning, I said people,
    when they go into the grocery store to shop, they're paying for
    stock buybacks and bonuses for executives--not too different in
    this world, in the banking world, in the apartment world, and
    in the car repossession world.
        Our job is to stand up to those corporate lobbyists who
    work for everyone else, so that consumers can actually keep
    their hard-earned money. Senator Scott.

                 OPENING STATEMENT OF SENATOR TIM SCOTT

        Senator Scott. Thank you, Mr. Chairman. Thank you to the
    witnesses for being with us today. At last week's 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
    greedflation and shrinkflation. And today is a similar story.
    This time, the bogeyman is so-called 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, there's no shortage of
    fingerpointing for the failure of Bidenomics or, as I like to
    call it, ``Brokenomics,'' because that's what's 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 and
    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
    villainize business 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 long past time that Democrats stop playing political
    games with price controls and trying to micromanage the
    business operations, especially when the real outcome of these
    feel-good gains is reducing access to credit and limiting
    economic opportunity for those who need it most.
        That's why I introduced a CRA resolution to overturn the
    CFPB's credit card penalty fee rule. Let's be clear about 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 cutoff
    access to credit and stymie financial inclusion for the
    families who need it most.
        Sadly, I wasn't surprised when the CFPB finalized the
    credit card penalty fee just days before the President's State
    of the Union Address. That's 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 it's not just the financial sector; it's everything
    everywhere all at once. That's what astounds me--this
    Administration's 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 recent targets within the Committee's
    jurisdiction--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 administration's
    regulatory onslaught. It's an albatross around every family
    trying to make ends meet.
        Since he took office, the total cost of President Biden's
    regulatory nightmare--the mountain of red tape--is $1.37
    trillion. That's 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 has increased the cost of goods by almost 20
    percent 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 increases.
        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 that's not the conversation we're having
    today, unfortunately.
        In closing, it is my hope that we will hear today how
    misguided the Administration's attempts are to push the
    financial services industry into only offering one-size-fits-
    all products, when we should be really focusing on providing
    solutions to the financial hardships facing Americans.
        And 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 encourage better payment history--
    so your credit score goes up and your interest rates go down--
    we should focus on the cost of gas, up 40 percent; we should
    focus on the cost of energy, up 30 percent; we should focus on
    the cost of food, up 20 percent--not on late fees.
        Chair Brown. Thank you, Senator Scott.
        Three witnesses today.
        The first witness, Adam Rust, Director of Financial
    Services, the Consumer Federation of America. Welcome, Mr.
    Rust.
        Mr. Rust. Thank you.
        Chair Brown. Hang on 1 second. Sorry. Sorry.
        Our next witness is Ms. Karen Madry, President and CEO of
    Afena Federal Credit Union, headquartered in Marion, Indiana.
        Welcome, Ms. Madry.
        Our final witness is Mr. Santiago Sueiro. He is Senior
    Policy Analyst on the Economic Policy Team at UnidosUS.
        Mr. Rust, now, please.

            STATEMENT OF ADAM RUST, DIRECTOR OF FINANCIAL
              SERVICES, CONSUMER FEDERATION OF AMERICA

        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. CFA 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, I'm going to talk about junk fees and explain their
    harm on consumers and the economy. And I'm going to talk about
    the Consumer Financial Protection Bureau's important work to
    address these issues.
        You know, at the heart of it, junk fees are about power.
    They're about the imbalance between big banks and smaller
    consumers. Large banks with tens of billions of dollars in
    their boardrooms, or hundreds of billions or trillions in
    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 ``booyah'' 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.
        So, this is a zero-sum game in the end and the costs are
    high. Junk fees, including credit card late fees, amounted to
    $14.5 billion last year, in overdraft and NSF, $7.7 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 1 million active accounts will be
    affected by the rule--effectively, between 30 and 35 large
    issuers out of more than 4,000 institutions that issue credit
    cards. And it's similarly with the overdraft proposal; it 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, and 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.
        And it's 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. They're caught by surprise.
    Too often, consumers do use overdraft, but it's by accident.
    CFPB research reveals that many consumers who have experienced
    an overdraft fee have an alternative source of credit.
        And 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 cost. By closing these
    loopholes, the CFPB is living up to its mission to put consumer
    first. Additionally, we believe that reliance on penalty fees
    is, ultimately, something that undermines trust in the banking
    system.
        Nine percent of account holders pay 80 percent of overdraft
    fees. It saddens me that our payment system has been designed
    in such a way that the least well-off 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. And we should also
    remember that the Federal Reserve's payment system is something
    that comes with that. The privileges of the 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.
        You know, 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. And 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 that
    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 all-in cost upfront. I just want to say that the stakes are
    high and these problems are actually interdependent. 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.
        Chair Brown. Thank you, Mr. Rust. Ms. Madry, welcome.

            STATEMENT OF KAREN MADRY, PRESIDENT AND CHIEF
            EXECUTIVE OFFICER, AFENA FEDERAL CREDIT UNION

        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 CEO of
    Afena Federal Credit Union, located in Marion, Indiana.
        Afena is a federally chartered credit union with $99
    million in assets, three branches, and we serve just over 8,000
    members.
        Afena's 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, I'd like to address
    the term ``junk fees.'' ``Junk fees'' is a made-up word and it
    is not in statute. We heard a lot of comments about junk fees
    in 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 32-
    year low. The CFPB's 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 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 upfront, 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 trickle-down
    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 also is for larger
    institutions. However, similar to overdraft courtesy pay
    programs, it will have a negative impact on my institution,
    regardless of the fact that I'm 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 charge 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, it is
    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, I'd 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 it's 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.
        Chair Brown. Thank you, Ms. Madry, from my neighboring
    State of Indiana.
        Mr. Sueiro, welcome.

          STATEMENT OF SANTIAGO SUEIRO, SENIOR POLICY ANALYST,
                              UNIDOSUS

        Mr. Sueiro. Good morning. Thank you, Chairman Brown. Thank
    you to the Committee staff for inviting me to be here today.
        I am Santiago Sueiro, Senior Policy Analyst at UnidosUS.
    We're 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, too many families continue to face
    economic difficulties. Poverty, for instance, remains higher
    than prepandemic levels and skyrocketing housing costs are
    burdening families.
        Wealth and equality 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. Backsliding 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 well-being of working-class consumers. The CFPB's
    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 is important to
    making 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 do
    those in the wealthy areas. A new forthcoming survey by
    UnidosUS 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. In fact, a large
    percentage of consumers identify late fees as a barrier to
    obtaining credit.
        And third, late fees do not effectively deter late payment
    and undermine the lender's relationship with borrowers.
    Evidence shows that most people who miss a bill payment simply
    cannot pay because they don't 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 buildupon
    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. BankOn 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 long-
    term 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 MDIs, are
    examples of community-owned 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 high-quality 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 long-term
    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.
        Chair Brown. Thank you, Mr. Sueiro.
        I'll 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 they're budgeted
    for.
        Last week, CFPB released a report finding that consumers
    pay more for products with, shall we say, complex pricing
    structures.
        Mr. Rust, a couple of questions. What are some of the most
    troubling junk fees you've seen in financial services and in
    rental housing, and how do these hidden fees affect people's
    ability to find the lowest price and stifle health 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 don't 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 it's
    affordable, receive an invitation to move in, and then,
    discover that, in fact, it was too expensive.
        Credit card late fees, that's $14.5 billion a year;
    overdraft fees, similar. And then, just the myriad of fees that
    people pay at any point in time when they're 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, I'll stop there.
        Chair Brown. Thank you. And I appreciate your comments
    about complexity. I appreciate Ms. Madry, the way she runs her
    credit union. And credit unions, overwhelmingly, in Ohio, I see
    the same way. They explain to their members better. They keep a
    simple structure. They really aren't the problem. So, I just
    wanted to say that in response to her testimony.
        Mr. Sueiro, I want to get some facts straight about CFPB's
    credit card late fee rule. Please answer the following, I
    guess, 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. Sueiro. Yes.
        Chair Brown. OK. Thank you.
        Do credit card late fees disproportionately impact
    consumers with lower credit scores and people in less well-off
    neighborhoods?
        Mr. Sueiro. Yes.
        Chair Brown. And you made that clear in your testimony.
    Thanks for repeating it.
        Are only the largest credit card issuers covered by the
    CFPB rule?
        Mr. Sueiro. Yes, with 1 million--you have to have 1 million
    open accounts.
        Chair Brown. And that's the reason for Ms. Madry's credit
    union, as most credit unions in Ohio would be exempted.
        So, the rule just doesn't apply to small card issuers,
    correct?
        Mr. Sueiro. Correct, yes.
        Chair Brown. OK. Thank you.
        Credit card issuers shouldn't be extracting profits from
    consumers through late fees, first of all, because it's unfair
    to consumers; second of all, because these rules are required
    to be reasonable and proportional to cost. By reducing late
    fees, it's pretty clear CFPB is ensuring consumers saved 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, they're raising already far too high housing
    costs. Companies charge renters all kinds of fees--application
    fees, processing fees, convenience fees, notice fees. And I'm
    sure you could 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't afford or manage their expenses once they
    sign their lease?
        Mr. Rust. So, thank you.
        And to be honest, I can't explain the fees. They seem
    unexplainable, right? But the truth is that I think it reflects
    a power imbalance. And I would say that, if we had more housing
    supply, perhaps landlords wouldn't be attempting to extract
    these kinds of fees from consumers. But in the moment when
    there is this vulnerability, they are.
        I think the point about comparison shopping, just it is so
    hard to determine how much you're really going to pay. That
    doesn't make any sense at all for our economy.
        Chair Brown. OK. Again, that speaks to what Ms. Madry said,
    that you can comparison shop with her because they make it
    clear; they're simple. I mean, they're exempt from this rule;
    I'll point that out, as she acknowledged.
        But 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, and are the most
    onerous to moderate-income people and to everybody.
        Mr. Sueiro, do you want to add anything onto what Mr. Rust
    said?
        Mr. Sueiro. Yes. You know, pointing out that, sometimes
    similar to the rental housing market, and housing in general,
    when banking, a lot of people are finding themselves without a
    lot of options. And 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,
    you're going to have trouble. You know, you're going to pay
    what they're 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.
        Chair Brown. Senator Scott.
        Senator Scott. Thank you, Mr. Chairman.
        So much has been said. I love the debate, but I only have 5
    minutes. It's so unfortunate.
        But let me just ask you a question, Ms. Madry. Reading your
    story about who you are and the success that you've had, being
    the CEO 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 you've
    taken to get to your position today.
        I lead by my life story and the challenges I've had to
    overcome from a single parent household mired in poverty, and
    what that really means for the context of which I'm asking the
    questions. I think about some of my staffers. Catherine Fuchs,
    who's 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 that has on her psyche
    and the ability to work hard.
        And I think about the three stories that we have combined
    together, and I ask myself, if the CFPB is going to save the
    average person about $200 a year, or the concept 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
    they're complaining about the cost of gas, the cost of food,
    the cost of energy, do you hear them talking more about the
    challenges--the $15,000, the weight of Bidenomics--or do you
    hear them talking a little bit more about the late fee?
        Ms. Madry. That's 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 that we do not take a fast-
    food approach to lending. My lenders will spend anywhere from
    an hour to 2 hours with a member because we want to listen and
    understand the struggles that they are 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 it's 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 we're regulated, because we are limited and
    capped at an 18 percent 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, ``I'm 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 table.
    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.
        Senator Scott. Thank you.
        We need more people like you in the financial services
    industry, without any question. You have introduced Financial
    Laws 101. The fast-food approach--you don't take the fast-food
    approach. I love that concept.
        Because I'm only the Ranking Member and not the Chairman,
    he's going to cut me off in a few minutes because I'm going to
    run out of time.
        But I want to talk for just a second about something I call
    ``the law of the tradeoffs.'' There are no changes to fee
    structures that don't require a tradeoff. So, if your fees go
    away, either your interest rates go up, the cost of the product
    goes up, or the product itself goes away. Yea/nay?
        Ms. Madry. I agree with that. And 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 2-hour approach and say, how can we
    accomplish things in a shorter period of time?
        Senator Scott. Thank you very much. I know I'm out of time.
    Mr. Chairman, I'll just close with this: I know the Chairman is
    trying to do his best to be as lenient with me as possible.
        Chair Brown. It's a difficult challenge.
        [Laughter.]
        Senator Scott. It is, indeed. And I appreciate his
    transparency there.
        Let me just suggest this: that even though the fees that
    we're talking about do not apply to your credit union, you
    said, without any question, that the trickle-down effect will
    have impact on your credit union.
        Thank you very much.
        Thank you, Mr. Chairman, for your leniency this morning.
        Chair Brown. Thank you, Senator Scott. Don't try it again
    next week.
        [Laughter.]
        Senator Scott. I tried not to do it last week.
        Chair Brown. Mr. Tester of Montana is recognized.
        Senator Tester. That's what happens when you run for
    President; it gets a little longer on the questions and
    answers, right?
        Senator Scott. I told Brown that, too. He's gotten very
    longwinded since he ran for President, yes, sir, I agree with
    you.
        [Laughter.]
        Chair Brown. I did not run for President, Mr. Scott.
        [Laughter.]
        Senator Tester. All right. Anything I can do to start some
    fights, that's good.
        Hey, look, housing is a big issue across this country, and
    Montana has had a housing shortage for years. That's my home
    State. It's getting worse. Everywhere we go across the State,
    one of the first challenges folks mention to me is lack of
    workforce housing in our State. It's really hurting our
    economy, quite frankly.
        And we're 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. And it's happening with
    single-family homes, buildings. We've seen examples of it
    happening with manufactured home communities, where Montanans
    are really stuck; they own a mobile home that really isn't
    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 living in sometimes the only affordable
    stuff left in the State.
        On top of jacking up rent, these out-of-State investors
    often add new fees, basic fees, that have always been included,
    but now, all of a sudden, they're not. Sewer and water are two.
    The Chairman talked about others. And they have been long
    included as part of the rent. OK? And so, what we're seeing is
    a lot of out-of-staters are making money off of 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 don't have a lot of
    flexibility and they don't 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, it's very difficult to move.
    It might cost $5,000 to $10,000 to move. If you can afford
    that, then it's 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. It's true,
    as you said, that the cost is going up--not just the rent, but
    also fees are being added onto it.
        I think, at the end of the day, this is workforce housing,
    right? It is working in rural communities, where there are
    fewer construction crews available. It's housing for seniors.
    This is a fundamental aspect of something that's happening in
    the Midwest and the Upper Midwest. And with junk fee, it's just
    not fair.
        Senator Tester. So, the real question is--I think we can
    all agree it's 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. Well, so I'm glad you raised that. There is a
    bill before Congress that would permit investment in
    manufactured housing communities, in particular, when resident-
    owned communities seek to buy homes or nonprofit groups. The
    challenge they face is that it's very difficult to gather the
    capital in a short period of time.
        And typically, the reason a manufactured housing community
    is being sold is because there's an infrastructure challenge.
    So, it becomes very expensive to find the capital and buy a
    home quickly.
        The PRICE Act, which is a bipartisan-supported Act, will
    provide grant funding to address these issues, and I believe it
    will become a very important source of reinvestment in
    communities.
        Senator Tester. So, let me go back to something you just
    said because I want to clarify that a little bit. Did you say
    that they're 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've got out-of-staters who
    are coming into the State that want to change our State, and
    they see an opportunity to make a quick buck on the back of
    working people and seniors. And that's exactly what they do.
        Mr. Rust. Well, right. The cash-flows available on
    manufactured housing communities, especially if you're talking
    about owning the land but not the units, are very certain. They
    are 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.
        Senator Tester. I appreciate all three of your testimonies
    and I appreciate what you're doing. I had a question for the
    credit union lady, but I'm out of time. Unlike the Ranking
    Member, I do not want to go over.
        I yield.
        Chair Brown. Thank you, Senator Tester.
        Senator Vance of Ohio is recognized.
        Senator Vance. Thank you, Mr. Chairman. Thanks to you and
    the Ranking Member.
        I think it's important just 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. I'm 39 years old. It's pretty much the worst
    interest rate environment since I was a toddler, and I,
    obviously, don't remember anything on interest rates when I was
    3 years old.
        So, I think we have to sort of be careful here about this
    particular proposal or, at the very least, appreciate some of
    its implications.
        And, Ms. Madry, I wanted to sort of direct this first
    question to you. You, obviously, run a small bank, and I
    appreciate you being here--or I should say a small credit
    union, right?
        Ms. Madry. Right.
        Senator Vance. Maybe you could just 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 sort of people, especially low-income
    people.
        Ms. Madry. So, in the context of my credit union, first
    off, we are capped at 18 percent interest rates.
        Senator Vance. Yes.
        Ms. Madry. And we really try very hard to keep our interest
    rates very low. I'm in a market where it is overbanked and
    underserved. And 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.
        Senator Vance. Sure.
        Ms. Madry. So, liquidity is tight. So, I am paying higher
    rates on my members' deposits because, 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 low-income population and it is important
    to me to make sure that financial services are affordable to my
    members. The fee income really helps to offset the operating
    cost that goes along with collecting on overdraft, when a
    member overdraws their account. We have to send out letters. My
    staff is there calling members. It helps when members are
    coming in because their 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 find a solution.
        I can tell you that the way we operate in our credit union
    is, if a member's 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 you're serving a population that is vulnerable, quite
    often, they don't want loan products. They feel more
    comfortable with this service because it prevents them
    propelling into perpetual debt.
        Senator Vance. Sure. Sure. So, I appreciate that, Ms.
    Madry. I really pick up on that, that basic point.
        Mr. Rust, I know you're an advocate of this proposal. And I
    want to just understand this basic question. I mean, do you
    think that consumers, especially lower-income consumers, will
    have less access to credit if this proposal becomes law, the
    junk fee proposal?
        Mr. Rust. And you mean, specifically, the credit card late
    fee rule?
        Senator Vance. Yes.
        Mr. Rust. So, thank you for the question.
        I personally think that credit cards are among the most
    profitable sources of business for institutions. And the Y-14
    data from the Federal Reserve talks about returns on assets
    that are three to four times greater than other forms of
    commercial banking. There's examples of institutions with
    profit margins of over 40 percent on their credit card
    business. So, in my view, this is a question of: will credit
    cards be exorbitantly profitable or just incredibly profitable?
        Senator Vance. So, I understand that and I don't
    necessarily disagree with the underlying argument, Mr. Rust. I
    guess my point is, look, when you take a product--even if I
    assume sort of your framing is correct and say it's very
    profitable to sort of moderately profitable, if you make
    something more expensive, if you take it from very profitable
    to just, you know, somewhat profitable, don't you fundamentally
    make it less likely that people are going to offer those
    services? And 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 are actually having. This
    proposal will, inevitably, lead to less credit options for
    lower-income people. And I wish its advocates would just lean
    into that and say, ``Yeah, that's exactly what it's going to
    do. In fact, we think that's 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 point 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 had just tried to have dealt with that problem
    directly, as opposed to this sort of backdoor way 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 we're really doing. What we're proposing to
    do is to make consumer debt much less available to low-income
    people. Let's just be honest about that, and then, have the
    debate about whether that's good or bad, or could be
    accomplished through other means. That's sort of my point here.
    With that, Mr. Chairman, I'll stop. Thank you.
        Chair Brown. Thank you, Senator Vance.
        Senator Menendez of New Jersey is recognized.
        Senator Menendez. Thank you, Mr. Chairman. Ample research
    shows that junk fees are disproportionately targeted at and
    paid by minority consumers. To give one example, according to a
    survey from Bankrate, Hispanic checking account holders pay an
    average of more than triple that of white account holders.
        Mr. Sueiro, can you talk about the particular vulnerability
    of minority consumers to junk fees?
        Mr. Sueiro. Yes. So, the first point is, low-income people
    and working-class people across the board pay more in overdraft
    fees and credit card late fees. Latinos and Black consumers pay
    even higher rates of overdraft fees and junk fees.
        We just did a survey where we found that 40 percent of all
    Latinos had paid a junk fee. This is much higher than other
    groups. Twenty-five percent of Latinos had paid a credit card
    late fee, which is also much higher than other groups.
        So, it's widespread. It's disproportionately affecting
    people who don't have a lot of income.
        Senator Menendez. Yes. And then, one of the other elements
    of it is I'm 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 LEP consumers?
        Mr. Sueiro. There's a number of different things. Number
    one is, you know, for LEP consumers, in particular, we need to
    make sure that our marketing and the materials that we offer
    consumers are transparent, are accurate, and are in Spanish and
    other languages spoken in the U.S. as well.
        We've found in the auto-lending space that there's 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. The FTC has
    done a lot of work trying to address that issue. So, that's
    one.
        The second part is, on a broader scale, obviously, these
    rules we think will help. That's why we support them. In the
    market, we can also promote things like BankOn accounts. We can
    also promote things like affordable small-dollar loans that
    have low interest rates. Credit cards, lots of credit card
    products that are out there that are really solid have low
    interest rates, have no or low late fees. We need to be
    promoting those products as well.
        Senator Menendez. Thank you.
        Mr. Rust, in May of 2022, the CFA and several other
    consumer groups sent a letter to the CFPB on junk fees and
    financial services. In that letter, you stated, and I quote,
    ``Junk fees contributed to high rates of unbanked or
    underbanked households of color.'' Close quote.
        Can you and Mr. Sueiro elaborate on how junk fees drive
    low-income families away from the traditional financing system
    and how this negatively impacts their financial well-being?
        Mr. Rust. So, thank you for that question.
        The FDIC does research every 2 years on the unbanked and
    the underbanked, and they ask, ``Why don't you have a bank
    account?'' And the first reason is, ``I'm afraid of having a
    bank account because of surprise fees.'' And the third reason,
    specifically, calls out overdraft fees. So, these set of fees
    are explicitly creating financial exclusion.
        Senator Menendez. Mr. Sueiro.
        Mr. Sueiro. I would add we see similar findings with credit
    card. There's surveys out there asking consumers, ``Why don't
    you have a credit card, if you don't have a credit card?'' They
    cite costs, interest rates, and late fees, specifically, as one
    of the reasons why they don't get those.
        I would add, you know, people that do have these high-cost
    products are often more likely to, for credit cards being
    delinquent, for overdraft fees, to lose their products; get
    overburdened in debt in both situations, and can get pushed out
    of the financial system if they're not able to pay those fees.
        Senator Menendez. Yes. According to a 2019 FDIC survey, 16
    percent of unbanked households cited distrust of banks as the
    main reason for not having an account. It's something we have
    to try to modify because we need people to enter a portal of
    financial institutions. So that, this way, they're not going to
    the check-cashing place and the payday lender and the pawn
    broker.
        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 low-income families. And it seems that many
    landlords are taking advantage of that fact by charging
    exorbitant application fees--as high as $350 in some instances,
    according to the National Consumer Law Center.
        Mr. Rust, are these application fees truly reflective of
    actual costs incurred by the landlord in processing
    applications?
        Mr. Rust. So, no, they're not. Thank you for that question.
        TransUnion, for example, has a service that they market to
    landlords where the cost is between $25 and $42, based on what
    basket of services the landlord wants. And then, yes, they turn
    that around and charge $100 per person, even more. That's
    what's happening and that makes it very difficult to comparison
    shop, because just the search costs are so high. It makes
    people say, ``I have to apply for this first one and just take
    it, because I can't afford another $300 application fee.''
        Senator Menendez. Thank you.
        Thank you, Mr. Chairman.
        Chair Brown. Thanks, Senator.
        Senator Britt of Alabama is recognized.
        Senator Britt. Thank you, Mr. Chairman.
        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 consequences of 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, it's 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 imaginable.
        Last week in this Committee room, we talked about
    shrinkflation. This week, it's junk fees that are to blame.
    ``Junk fees,'' by the way, is an arbitrary term found nowhere
    in any legal statute--used by this Administration to vilify
    seemingly every industry that offers services to its customers.
    However, so many times, these are just political talking points
    used to distract from the root of the problem and to evade
    accountability.
        There is also an attempt to justify significant regulatory
    actions from regulators across the board, and without any
    adequate cost-benefit analysis to follow, or any assessment of
    how these numerous rulemakings actually impact the end user,
    actually impact the customer, or actually impact the member.
    These very individuals that these regulators and the
    Administration claim to be, quote, ``helping,'' I believe are
    the very ones that are going to suffer the most.
        Mrs. Madry, just to clarify, you, obviously, are the CEO of
    a smaller financial institution, Afena Federal Credit Union.
    And I want to know how this is going to affect your members;
    what this means to the very people that we are trying to help.
        So, first, does current regulation already require credit
    unions and banks to disclose fees to their members and to their
    customers?
        Ms. Madry. So, the current regulation is, it requires us to
    disclose fees, yes.
        Senator Britt. OK.
        Ms. Madry. We have a fee schedule that we go over with our
    members at the time that they apply for it.
        Senator Britt. OK. Thank you. And in addition to these
    disclosures that are already required by law, do your
    institutions typically engage in other forms of communication
    with your members or your customers? Do you, for instance,
    share things like low-balance alerts, things like that?
        Ms. Madry. Yes, we have texting services that our members
    can opt into that will alert them when their balance is low;
    plus, all sorts of tools where they can monitor their account
    online.
        Senator Britt. OK. Well, thank you.
        In addition to these types of alerts and communications,
    have financial institutions, particularly these smaller credit
    unions, proactively made other changes to their late fees and
    overdraft fee programs without any additional regulation or
    legislative changes? Like what have you done to make
    improvements in this area?
        Ms. Madry. So, 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. If you find
    that you cannot make ends meet, we encourage our members to
    come in and ask that all of the funds that are available be
    moved into their checking account or savings account, so that
    they pay just the one fee in the course of a month and they
    will have those funds available to them when they need them.
        Senator Britt. Excellent. I am glad to hear that. I
    certainly believe you understand the needs of your members and
    the day-to-day challenges that they face in the State of
    Indiana more than anyone in a regulating building here in
    Washington, D.C. So, I appreciate what you are doing to help
    the very people that these regulations intend or say they
    intend to help.
        A couple of other questions. Do you, as the CEO, determine
    your salary or your bonus based on overdraft or late fee
    charges at your credit union?
        Ms. Madry. No.
        Senator Britt. Uh-hum, that's what I thought.
        Ms. Madry. And in fact----
        Senator Britt. Go ahead.
        Ms. Madry. ----I will just share that, from time to time, I
    have told my board that I will forgo a raise or a bonus when I
    feel that our credit union needs to show a profit in order to
    be able to meet regulatory requirements.
        Senator Britt. And obviously, serve your members' needs.
    So, thank you so much.
        And 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 CFPB's so-called ``junk fee rules'' are finalized
    as proposed? I mean, specifically, what would happen to things
    like free checking account or affordable small business loans?
    And that's kind of what I want to know.
        Ms. Madry. Yes. We would probably have to rethink our
    interest rate structure; increase our interest rates, when
    possible; eliminate things like free checking accounts, and--
        Senator Britt. Eliminate free checking accounts?
        Ms. Madry. Eliminate free----
        Senator Britt. The very thing the very people that this
    rule is so-called intended to help, I believe it will hurt, and
    I think that what you have said proves that right there. So,
    thank you so much.
        And I wish we could take a look at these regulations and
    actually see how they affect the end user.
        Thank you.
        Ms. Madry. Thank you.
        Chair Brown. Thanks, Senator Britt.
        Senator Smith of Minnesota is recognized.
        Senator Smith. Thank you, Chair Brown.
        Thanks to all of you for being with us today. I really
    appreciate it. It's a very important topic.
        I'm going to focus my questions, first, with you, Mr. Rust.
    I want to talk a bit about these automated tenant-screening
    processes that are popping up all over the place. So, landlords
    are increasingly turning to automatic screening tools and
    reports to determine whether or not to rent to a perspective
    tenant. And so, who pays for these screenings? It's usually, of
    course, it he applicants.
        And in Minnesota, a two-adult family is paying, on average,
    four application fees, incurring about $320 in total costs,
    every time they're trying to find a place to live. And I've
    heard reports that that number could go up to $800.
        So, obviously, these screening fees are making it really
    expensive for families, especially low-income families, to find
    an affordable place to live. And they might not even result in
    a fair or accurate assessment of the capacity of that tenant to
    be able to be a good tenant.
        One woman in Minnesota, for example, was denied an
    apartment because a tenant-screening report flagged an
    incorrect criminal record. And this isn't an anomaly.
        An investigation of the tenant-screening industry by the
    CFPB found that screening services can use incorrect
    information and often provide limited explanation back to folks
    about why they've been denied--leaving renters in the dark and
    in the hole financially. So, they paid for an inaccurate
    screening.
        So, could you talk a bit about this? Tell us your
    perspective on how this is working, the obstacles that they
    create for tenants, and what we should be doing to protect
    people against these tools?
        Mr. Rust. Thank you for that question.
        You've raised something really important, which is how the
    evolution of tenant-screening reports are changing. They're
    becoming more complex. And one of the issues that happens from
    that is that it's very difficult, if there's information on
    your report that's not true--well, first off, it's very hard
    even to know if that's the case. It's harder perhaps to even
    know how to fix it.
        So, this is happening frequently. Again, when the
    information is wrong, and then, you're denied, well, that's
    $100; that's $200, and you've got to try again. And if the
    information is wrong on Tuesday, it's probably wrong on
    Thursday.
        Senator Smith. Right. Right. And, I mean, I'm kind of
    stuttering because I think that this is just so unfair--that
    you actually are being forced to pay for something that is
    inaccurately and unfairly denying you a place to live. And, I
    mean, wouldn't that go--I mean consumers should have a right to
    know whether they're being denied to rent based on inaccurate
    information. That's part of what's in fair lending laws, right?
        Mr. Rust. Right. The FTC has been working on this, as well
    as the CFPB, with filing complaints against institutions that
    don't have record systems in place to make sure that
    information is correct.
        Senator Smith. Yes. Mr. Sueiro--am I saying your name
    correctly?
        Mr. Sueiro. Yes.
        Senator Smith. Thank you. I want to just follow up a bit on
    the question that Senator Britt and others have been asking
    about. You know, I think the consumers understand that the
    prices of products and services in this world have a markup,
    and that's capitalism. They get that.
        But I think if you told them that they were looking at a
    markup that was, like, 400 percent, that maybe they would think
    twice about what's going on and what is really fair and
    reasonable. I mean, to me, that is really the issue that is at
    the core of the CFPB's credit card late fee rule.
        And so, my question to you is--this is adding up to, you
    know, billions of dollars that it is costing people for these
    late fees. And there seems to be sort of this argument that
    credit card issuers are suggesting that these high fees are,
    basically, an incentive to get people to pay their bills on
    time. But that is assuming that people could pay their bills on
    time and aren't because they just don't feel like it, as
    opposed to what seems to be more likely, which is that they
    can't.
        And so, I would like to hear your comments on this. And to
    me, this sort of gets at the issue of why it is so expensive to
    be poor in this country.
        Mr. Sueiro. Yes. So, there are a number of different pieces
    here. Number one is we know from lots of surveys, and we know
    from just talking to people, that one of the biggest reasons
    why people don't pay is simply they don't have the funds.
    Right?
        And we also see this reflected in the data. It's lower-
    income people that are living paycheck to paycheck that are
    disproportionately paying these fees. So, folks are in a
    situation where they are faced with a decision between putting
    food on the table or paying this late fee. That's 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--so just to give
    you like a real-world example--of the people that commented was
    a parent. They had a very serious medical issue. They were
    paying for lots of expensive medicine. And they were working
    two and three jobs.
        Senator Smith. Uh-hum.
        Mr. Sueiro. You know, a third job every now and again just
    to make ends meet. They missed a payment because they had
    worked so late that they worked after midnight of the day that
    the payment was due, and they missed the payment window. They
    got charged with a $35 late fee.
        Senator Smith. Uh-hum.
        Mr. Sueiro. So, this is the type of thing. That is also an
    example of where this is a working-class person. They had the
    funds, but they couldn't do it. But there's so many other
    things going on in people's lives that they couldn't pay it.
        There were other examples, like people put their payment in
    the mail.
        Senator Smith. Yes.
        Mr. Sueiro. The money didn't get to the credit card company
    in time because the mail slowed down.
        Senator Smith. It's not their fault, and they're not going
    to pay quicker in any of those circumstances because they're,
    you know--Mr. Chair, I know I'm out of time.
        Thank you for the opportunity to ask these questions and
    thanks to our panelists.
        Chair Brown. Thanks, Senator Smith.
        Senator Cortez Masto from Nevada is recognized.
        Senator Cortez Masto. Thank you. Thank you, Mr. Chair. And
    thank you to the witnesses for being here today.
        I know one of my colleagues already talked about
    manufactured housing. I'm going to touch on this because we
    don't talk about manufactured housing enough and the potential
    for it.
        I know, Mr. Rust--thank you very much--wrote an incredible
    book here and very thoughtful about families who live in
    manufactured housing. To my colleagues, this was in 2007. If
    you haven't had a chance to read it, please do.
        A few months ago, HUD announced a request for applications
    for a new program--I think you've talked about this--to fund
    new roads, water, sewer, tornado shelters, and other
    infrastructure improvements. It's called the PRICE program in
    honor of Congressman David Price, who, by the way, wrote the
    foreword here in the book.
        And I led the bill for the Preservation and Reinvestment
    Initiative for Community Enhancement, the permanent program.
    And why is this? Because I see the benefits in my State.
        But, Mr. Rust, can you explain why the 8.5 million
    Americans who live in manufactured home communities deserve
    special consideration and investment?
        Mr. Rust. So, thank you for that question.
        I've visited manufactured housing communities in Nevada,
    and this is, clearly, an issue there. The cost of
    rehabilitating a community, the cost of infrastructure
    investment, this is something that the PRICE Act will address.
    And I think it's strongly needed.
        So, why are people living in manufactured housing? What are
    the reasons for that demand that exists? It's because it's
    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. So,
    rural areas.
        Senator Cortez Masto. Thank you. Uh-hum.
        Mr. Rust. Manufactured housing communities can be a very
    nice place to live. They are communities, right? But if they're
    being disinvested in--and 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, it's
    probably a manufactured housing community.
        Senator Cortez Masto. That's right. And that's the
    unfortunate piece about this. Because there also is some stigma
    associated with manufactured housing, which there shouldn't be.
    This is an opportunity for so many people to have a roof over
    their head and have it be affordable.
        Also, I know one of my colleagues talked about private
    equity coming in and purchasing up a lot of these. I have
    concerns about that. We see that just in housing in general in
    southern Nevada, and it is an issue that we need to address,
    these high costs.
        Mr. Rust, let me ask you this: in Nevada, 86 percent of
    extremely low-income renters are severely housing cost
    burdened, meaning renters that are spending more than 50
    percent of their income on rent. And rents are only going up.
    Since 2020, rents have increased between 20 and 30 percent in
    some parts of my State. As families are forced to spend more
    and more on rent, they are left with fewer resources; we know
    that.
        How do additional fees imposed on renters, like application
    fees, processing fees, and so-called convenience fees,
    exacerbate these high costs of renting?
        Mr. Rust. So, that's a great question.
        I think it gets down to, if you're going to comparison
    shop, if you're going to look on a platform and you see 10
    different potential places to live, and some of those listings
    are all-in priced and some are partitioned, where there might
    be fees that you don't even know about, well, that makes it
    very difficult to comparison shop. It puts well-intentioned
    landlords who are being fair at a disadvantage with landlords
    that are playing these games.
        So, yes, and I think what we're 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, or even if I have to leave, I may
    not be able to take my home with me. So, I may actually lose
    that home.
        Senator Cortez Masto. That's right. That's right. And
    nobody should have to make that decision, but, unfortunately,
    there are too many just even individuals that are having--I
    don't care whether you're a veteran, you're a senior, you're
    working, a hardworking family, still, there's many in our
    communities now that are having to make this decision. And
    that's why we have to address it.
        But, more importantly, we have to address these fees and
    these junk fees that are add-ons. But we've got to address the
    housing issue and the affordability of housing. And that's why
    I'm so pleased there's bipartisan support in this Committee to
    really address these issues. And I hope--I hope--we are able to
    pass this--for the benefit of so many, not just in Nevada, but
    across the country.
        There's more questions that I have. I'm not going to be
    able to get to everyone. I thank you for being here and your
    commitment to addressing these issues.
        Thank you, Mr. Chair.
        Chair Brown. Thanks, Senator Cortez Masto.
        Senator Warren of Massachusetts is recognized.
        Senator Warren. Thank you, Mr. Chairman.
        So, in 2009, Congress passed the CARD Act to crack down on
    banks 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 APRs have nearly doubled
    over the last decade from 13 percent in 2013 to 23 percent in
    2023. That is the highest on record.
        Now, 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 percent 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're charging consumers--the big guys versus the small
    guys that are still left?
        Mr. Rust. Thank you for that question.
        And actually, I was really hoping to have the opportunity
    to say that CFA and the CFPB have pointed out that interest
    rates at smaller institutions, small credit unions, are lower,
    right? And this has to do, I believe, with the fact that the
    credit card market is somewhat broken.
        Because the way that people are comparison shopping, when
    they say, ``I would like to get a credit card,'' it doesn't
    take them to the small bank; it takes them through a comparison
    shopping site, a lead generator, that's earning large amounts
    of fees to direct them just to the cards that have the highest
    rates.
        And we're seeing margin-on-margin issues where the amount
    of the margin is growing over time. It's never been higher. And
    credit card issuers that are larger are charging interest rates
    that are 8 to 10 percentage points higher now.
        Senator Warren. Wow. So, the big guys with the highest-paid
    CEOs are actually charging consumers a whole lot more than the
    little guys in the credit card market. And it's the big guys
    who are hitting particularly hard on customers' pockets.
        Mr. Sueiro, you're an expert on predatory lending
    practices. Who's paying the bulk of the interest and fees that
    are driving credit card companies' profits?
        Mr. Sueiro. Yes. So, there's a number of different ways to
    look at it. CFPB has found that consumers with deep subprime
    credit scores are paying a disproportionately high amount of
    fees.
        We know that that population are generally lower-income,
    working-class people of color. We know from our surveys, we
    know from other consumer surveys, you know, this has been
    reflected over time repeatedly, that low-income people
    disproportionately pay these. Latinos, Black consumers also are
    disproportionately paying these.
        Senator Warren. OK. So, people are paying more and you know
    who is paying more--people who are struggling the most.
        Now, 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's not happy about that--big credit card issuers and
    their Republican friends in Congress.
        Last month, Republicans introduced a bill to overturn the
    CFPB's 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.''
        So, Mr. Rust, I have to ask: do you know anyone who is
    actually a consumer who loves junk fees?
        Mr. Rust. So, I have never heard someone say, ``Oh, I paid
    an overdraft fee and I'm really glad that worked out.''
        Senator Warren. Yes, ``That really worked out well for
    me.'' I have never seen the bumper sticker ``I heart junk
    fees.'' Right?
        How about you, Mr. Sueiro? Anybody you know who is excited
    about being gouged by a multibillion dollar bank?
        Mr. Sueiro. No, obviously not. And I want to add two
    things.
        One is the CFPB received 57,000 comments from this. A vast
    majority or a large number were from consumers that were saying
    quite the opposite, that they were fed up with these fees; that
    they didn't want to pay them. They were very unpopular.
        The opposite is also true. If you ask consumers, ``How
    would you feel about a product that doesn't have such high late
    fees, or low fees?'' they look at those products very
    favorably, and they actually have more goodwill toward
    financial institutions if they were to be offered those
    products.
        Senator Warren. Well, I'm really glad that the CFPB is
    taking up the fight on behalf of consumers and willing to stand
    up to these big banks. Thank you.
        Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator.
        Senator Fetterman is recognized from Pennsylvania.
        Senator Fetterman. Thank you, Mr. Chairman.
        And I would like to thank my colleague from Connecticut for
    allowing to do this.
        Yes, hi.
        Banks seem to really, really--they love fees like that,
    right? I didn't. I think it's helpful, if something happens to
    you, to really understand what a lot of other American
    consumers have faced with that kind of a thing.
        I would say about 18, well, probably a couple of years ago,
    I was at a coffee place and I bought one, and then, everything
    went through. I didn't think anything of it. And then, I had a
    notice that I overdraft my account. So, that was a $40 cup of
    coffee. And then, I wasn't at Blue Bottle.
        But, at any rate, so it seems kind of crazy that you would
    allow your account to be charged for, you know, $35 over a cup
    of coffee. And, of course, I didn't really appreciate it.
        So, in who's interest was that, would you think? Anyone,
    what are your thoughts about it?
        Mr. Rust. So, it's in the interest of institutions that
    want to pad their profits with huge, exorbitant fees. I think
    we shouldn't forget that, during the time when you were
    experiencing your not Blue Bottle coffee overdraft, that many
    institutions were using high-to-low check reordering to
    actually trigger additional overdrafts.
        Senator Fetterman. Yes. Well, and that's what I thought,
    and then, I called up my bank and I'm like, ``Well, hey, that's
    kind of crazy.'' And they're like, ``Well, actually, sir, we
    allowed this transaction to occur, and you were able to get on
    with your day.'' And they actually justified that by saying,
    ``Well, that's a service that we provided, that you were
    allowed to get your coffee and get on with your day.''
        And then, now it becomes very clear that these kinds of
    fees are a profit center. Is that accurate, too?
        Mr. Rust. Oh, absolutely. The data from call reports
    reveals that the amount of fees coming in off of transaction
    accounts in some cases can be 20, 30, 40 percent equivalent to
    the net income of that financial institution. Those are almost
    overdraft stores.
        Senator Fetterman. Yes, and it's pure profit, too. I mean,
    it's no service, anything other than it's just being nickeled
    and dimed. I personally don't enjoy that, being nickeled and
    dimed. Any of you in the panel, do you enjoy being nickeled and
    dimed anywhere you got?
        Mr. Sueiro. No, sir.
        Senator Fetterman. No? Anyone?
        But now, what once was something that was a penalty now has
    become part of their mission, like to do that.
        And then, this happened just last week in my apartment. The
    D.C. rental market is kind of rough and I pay $2,000 a month
    for 500 squares, and then, I left my key on the counter. And
    then, I approached the front desk and I'm like, ``Could you
    please let me in, so I can get my key?'' And they were like,
    ``Well, absolutely.'' And then, they pulled out a form that
    said, well, that's $50. I'm like, ``Oh, no, no. I don't need
    another--I don't need a new key. Could you just let me in?''
    And they're like, ``Well, that doesn't matter. That's $50.''
    And I'm like, ``Fifty dollars to let me in?'' And then, I
    really couldn't believe that someone would charge $50 just to
    open up to just get your key.
        And would agree that that's kind of junk fees for housing
    rentals?
        Mr. Rust. Well, yes, absolutely, that's 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.
        Senator Fetterman. Well, yes, of course, it's not personal
    against the worker. But the fact that they institutionalized
    this idea that we're going to be $50 for letting just get your
    key there, and that seems that's just pure profit, and that
    becomes that, too.
        And metaphorically--and I know I'm running out of time--but
    I think that's the same kind of thing in Government where you
    cannot count or create, like, parking tickets and speeding
    tickets as, like, revenue. That should be for a public service
    or to protect a situation.
        And in my opinion, it's just gone crazy. And now, when
    billions and billions of dollars now, those kinds of nickeling
    and diming now is part of their business strategy.
        But thank you for joining me, and my time is off.
        Chair Brown. Thank you, Senator Fetterman.
        Senator Van Hollen of Maryland is recognized.
        Senator Van Hollen. Thank you, Mr. Chairman.
        Thank all of you for your testimony today. I've been trying
    to listen-in via C-SPAN, and I know a lot has been covered, of
    course, on the issue of overdraft fees and the finding that 80
    percent of overdraft fees are borne by 9 percent of customers,
    which shows the impact of these fees on those who can least
    afford to pay them. So, 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's also been a lot of misinformation about the CFPB
    rule from opponents of it. Mr. Rust, if you could just briefly
    describe what the rule does and what it doesn't do?
        Mr. Rust. So, thank you.
        So, one of the things I like about the rule is how it
    creates multiple structures to fit different types of use cases
    and fit institutions into the different priorities they might
    have for their business.
        So, there is the overdraft described as a ``courtesy
    overdraft'' where the institution is allowed to charge a fee up
    to a benchmark amount, and still receive an exemption from
    being regulated as credit. And it's a proposal. So, we don't
    know exactly what the rate will be.
        There's also an option to create an intentional line of
    credit, an overdraft line of credit, that comes with consumer
    protections. And so, this is really moving in the direction
    that will be about financial inclusion, not ``gotcha,'' but
    working together.
        And then, there's a third aspect which you might call a
    hybrid debit credit card that allows a consumer to overspend,
    but instead resulting in a negative balance on the debit card
    side, it is paid from a separate but linked credit card
    account, which was set up beforehand and comes with CARD Act
    protections.
        Such as rules against fee harvesting; 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 that they don't incur another overdraft fee.
        Senator Van Hollen. I appreciate that because, as I said
    and as you know, there's been a lot of misinformation. I think
    it's a very well-tailored and well-designed proposal.
        Mr. Rust. Yes.
        Senator Van Hollen. 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.
    We're the Banking and House and Urban Affairs Committee, and I
    appreciate that. And we've looked at ways to reduce the costs
    of housing, including rental housing, in terms of increasing
    the supply; making sure that we have voucher programs.
        But one of the other areas where we've seen big increases
    in the cost of housing is not only rents, but in many of these
    sort of predatory junk fees that's the topic of today's
    discussion.
        So, Mr. Rust and Mr. Sueiro, if you could just provide some
    examples of the most egregious junk fees you've seen in the
    housing market? I know some of them surfaced as part of the
    RealPage lawsuit. Maybe we should start with Mr. Sueiro, or Mr.
    Rust, either one, whoever wants to go first.
        Mr. Rust. Right. So, there are additional costs being
    applied to home ownership that also raise the cost of housing.
    One of the things that we're worried about is any situation
    where you have to pay to pay, and particularly, if you have to
    pay to pay electronically, where the real cost of an ACH might
    be 4\1/2\ cents, but you have to pay $7 or $10.
        The CFPB has been working on addressing junk fees in the
    title insurance market. Title insurance is an interesting
    market where there are counter-competitive pressures. Loss
    ratios on title insurance could be between 3 and 5 percent.
    That's the amount of the premium that is ultimately paid back
    to the consumer in the form of a claim. Most of the fees in
    title insurance are going to pay the institutions that provided
    the lead generation for that title insurance policy.
        Senator Van Hollen. Thank you.
        Mr. Sueiro.
        Mr. Sueiro. Yes. No, I'll just add, you know, in the rental
    market, things like application fees, late fees on your rent
    payments, utility fees, administrative fees, right, I guess
    for, you know, the process of applying and things like this,
    those are the most common ones that we see. And again, you
    know, a similar pattern to the banking junk fees, which is low-
    income people across the board are paying those, and Latinos
    and people of color are also paying those disproportionately.
        Senator Van Hollen. Thank you. Well, thank you for your
    work on this. And to the CFA, thank you, and the team there,
    for what you're doing.
        Mr. Chairman, thank you.
        Chair Brown. Thanks, Senator Van Hollen.
        Senator Butler of California is recognized.
        Senator Butler. Thank you, Mr. Chairman, for having this
    hearing.
        And thank you all for your testimony and for your work.
        I would like to just associate myself with the questioning
    from Senator Van Hollen relative to the rental market
    application fees, and, Mr. Sueiro, those that you just
    mentioned, as they have just 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 $100 application fee or
    the $50 trash take-out fee. And so, I appreciate your comment,
    specifically, to that market and to those young people, because
    I think that there are some things that we can and should be
    doing.
        Let me turn to, actually, Mr. Sueiro, where you left off,
    the notion of disproportionate impact and racial wealth gaps
    relative to junk fees. The Federal Reserve Survey of Consumer
    Finances shows that, while the wealth of Black and Hispanic
    households grew at a faster rate than the wealth of white
    households, disparities continue to persist, in part, due to
    the proliferation of junk fees. Consumers of color are often
    pushed out of mainstream financial products into fringe
    financial services and predatory financial products, including
    high-cost loans and credit cards. You know this as well as I
    do, and thank you for helping my team facilitate that financial
    literacy webinar last week.
        Mr. Sueiro or Mr. Rust, either of you can take the
    question. But what are the ways that junk fees perpetuate
    existing racial wealth gaps and hinder generational wealth-
    building?
        Mr. Sueiro. Yes. So, I want to start on the access side
    first. So, we've cited already today that high costs are one of
    the big barriers to obtaining these products. So, we know from
    the FDIC survey--we've done surveys--if you just go out and ask
    people, ``Why don't you have a bank account?'' they'll cite
    cost as one of the biggest barriers. ``I don't want to pay--you
    know, it's too expensive to pay for an overdraft fee or a
    monthly maintenance fee,'' that type of thing. The same thing
    for credit card products. They'll tell you the same thing.
    ``It's too expensive. Interest rates are too high. Credit card
    late fees are too high.''
        So, one the one hand, we're creating a situation in which
    low-income people and people of color disproportionately are
    left out because they're concentrated in those working-class,
    low-income jobs. So, that's on the one hand. And if you look at
    the access to those products, they always have the least amount
    of access to those products.
        In the bigger picture in terms of wealth, you know, the
    people who do have these products are also paying the highest
    fees and the highest costs. And so, you think about what's
    going on in that situation. This is a continual process where
    working-class people, people of color are paying a lot more, a
    bigger percentage of their money, back into financial
    institutions. And oftentimes, it's the biggest financial
    institutions. We're talking multibillion-, you know, trillion-
    dollar institutions that are getting back that money.
        So, it's a wealth extraction and it's also financial
    exclusion process.
        Senator Butler. Thank you for that.
        Mr. Rust, I'd 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 much more accessible to people whose
    first language is not English. And so, I would love to have you
    combine these two issues for me, if you can. How and why are we
    here, and then, what are things like language access and ways
    that companies continue to take advantage of these communities?
        Mr. Rust. So, sure. Thank you. I'll start with the first
    half and touching on a bit of what Santi said, but adding that
    Gen Z and Millennials face a housing market that's dramatically
    different than what generations before did. Currently,
    something like 30 percent of Gen Z, after high school or
    college, are living with their parents. And this is really
    about a lack of supply of housing, right? But this means that
    they're not getting on the escalator to home ownership, to
    wealth-building, to all the aspects of what we associate with
    the American dream.
        So, related to your question, these new generations,
    younger generations, are more diverse, right? The bargain
    they're seeing isn't the same bargain.
        And so, to the point about making sure that financial
    institutions use inclusive language, well, this is very
    important. We've worked a lot over time in things like adverse
    action notices, right? When you are turned down for credit,
    well, why were you turned down for credit? Well, if it's in
    English, that's doesn't really help if you're someone who comes
    from a family that speaks a different language, right? This is
    vitally important to being fair.
        Senator Butler. Thank you.
        And thank you, Mr. Chair.
        Chair Brown. Thank you, Senator Butler.
        Thank you all for being here, for good questions. I
    appreciate so many people, especially on this side of the
    aisle, with such good questions. Appreciated the involvement of
    everyone on this Committee.
        Senators who wish to submit questions for the hearing
    record, they're due 1 week from today, May 16th.
        To the witnesses, please submit your responses to the
    questions within 45 days from the day you receive them.
        Thank you all again. With that, the hearing is adjourned.
        [Whereupon, at 11:41 a.m., the hearing was adjourned.]
        [Prepared statements, responses to written questions, and
    additional material supplied for the record follow:]
                   PREPARED STATEMENT OF CHAIR SHERROD BROWN
        The Senate Committee on Banking, Housing, and Urban Affairs comes
    to order.
        Senator Scott, welcome. The three witnesses, welcome.
        Costs are far too high for Americans. Corporations are finding more
    and more ways to raise those costs to boost their own profits. We have
    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. These are surprise--although not
    that much of a surprise anymore--often last-minute charges that drive
    up the cost of products, have no justification or connection to
    anything other than their quest 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
    wouldn't be late, but were charged a convenience fee. The only thing
    that fee is convenient for is the bank's bottom line. Or let's say
    you're looking for an apartment and you finally find one with
    affordable rent. But when you get a look at the lease, you realize
    that, between the maintenance fee and the trash fee and the mysterious
    convenience fee, the actual rent you'll be charged each month is out of
    your budget now.
        These hidden add-ons, surcharges, fees, they're all junk fees.
    They're extra costs that inflate the price you pay, but add no real
    value. They're often hidden. They're only disclosed when it's time to
    pay.
        Consumers know what they can afford. That's why we all shop based
    on price. But when the real price is hidden through undisclosed junk
    fees, how are consumers supposed to find the lowest price? The answer
    is they often can't.
        We hear a lot about personal responsibility and consumer financial
    literacy in this Committee, but no amount of financial education is
    going to protect someone from a tactic that's meant to purposely hide
    the real purpose of a product or service. They hide the price. That's
    the whole point.
        Junk fees make a mockery of free and fair markets. Thirty-two
    dollars here, $45 dollars 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 hard-earned
    money. They would be able to better find the lowest price, which is how
    you really should promote competition to bring costs down.
        That's why the CFPB has taken long-overdue steps to reduce costs
    and fees and make them more transparent.
        CFPB took a major step toward reducing costs for consumers when it
    issued 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 late fee last year.
        By law, credit card late fees are supposed to be reasonable and
    proportional--that's what the law says, ``reasonable and
    proportional''--to the cost that companies incur for late payment. So,
    be clear, there are massive trillion-dollar Wall Street companies. The
    idea that your missing your payment due date by a day or two is
    imposing some huge cost on the credit card company is just 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. That's 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--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--we passed the CARD Act to lower some fees and
    increase transparency.
        Surprise, surprise, the sky didn't fall. Consumer still have access
    to credit. And, of course, credit card companies still make billions in
    profits.
        Of course, it's not just credit card late fees. Junk fees pile on
    top of all sorts of services and products. CFPB found that some auto
    loan services charge $1,000 in repossession fees, almost three times
    the average repossession cost. Unsurprisingly, some owners never
    recover 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've seen cases where the
    advertised rent grows hundreds of dollars a month once all the fees
    were added on top of the rent--application fees, utility deposits,
    trash fees, fees for the--a 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--added-on fees and surprise add-on fees when they go to sign
    their lease. Most renters can't afford these massive price increases,
    but they may not have an option once they have paid all the upfront
    costs and set their move-in date.
        Be clear, the entire point of these fees is to hide the true cost.
    They could just list their rent for what it is, but they don't, 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.
        It's not a free, fair market. It's 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 CFPB's work that has refunded $260
    million to consumers for unlawful junk fees--already saved that money
    and will save consumers billions in the future. Corporations raising
    these prices have armies of lobbyists to fight for them. At the
    beginning, I said people, when they go into the grocery store to shop,
    they're paying for stock buybacks and bonuses for executives--not too
    different in this world, in the banking world, in the apartment world,
    and in the car repossession world.
        Our job is to stand up to those corporate lobbyists who work for
    everyone else, so that consumers can actually keep their hard-earned
    money. Senator Scott.
                                     ______

                    PREPARED STATEMENT OF SENATOR TIM SCOTT
        Thank you, Mr. Chairman. Thank you to the witnesses for being with
    us today. At last week's 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 greedflation and shrinkflation. And today is a similar story.
    This time, the bogeyman is so-called 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, there's no shortage of fingerpointing for the failure of
    Bidenomics or, as I like to call it, ``Brokenomics,'' because that's
    what's 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 and 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 villainize business 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 long past time that Democrats stop playing political games
    with price controls and trying to micromanage the business operations,
    especially when the real outcome of these feel-good gains is reducing
    access to credit and limiting economic opportunity for those who need
    it most.
        That's why I introduced a CRA resolution to overturn the CFPB's
    credit card penalty fee rule. Let's be clear about 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 cutoff access to
    credit and stymie financial inclusion for the families who need it
    most.
        Sadly, I wasn't surprised when the CFPB finalized the credit card
    penalty fee just days before the President's State of the Union
    Address. That's 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 it's not just the financial sector; it's everything everywhere
    all at once. That's what astounds me--this Administration's 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 recent targets within the Committee's jurisdiction--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 administration's regulatory
    onslaught. It's an albatross around every family trying to make ends
    meet.
        Since he took office, the total cost of President Biden's
    regulatory nightmare--the mountain of red tape--is $1.37 trillion.
    That's 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 has increased the
    cost of goods by almost 20 percent 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 increases.
        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
    that's not the conversation we're having today, unfortunately.
        In closing, it is my hope that we will hear today how misguided the
    Administration's attempts are to push the financial services industry
    into only offering one-size-fits-all products, when we should be really
    focusing on providing solutions to the financial hardships facing
    Americans.
        And 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 encourage better payment history--so your credit
    score goes up and your interest rates go down--we should focus on the
    cost of gas, up 40 percent; we should focus on the cost of energy, up
    30 percent; we should focus on the cost of food, up 20 percent--not on
    late fees.
                                     ______

                        PREPARED STATEMENT OF ADAM RUST
         Director of Financial Services, Consumer Federation of America
                                  May 9, 2024

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                     ______

                       PREPARED STATEMENT OF KAREN MADRY
       President and Chief Executive Officer, Afena Federal Credit Union
                                  May 9, 2024
    Introduction and Mission
        Good morning and thank you for the opportunity to share my story.
    My name is Karen Madry, and I serve as the President and CEO of Afena
    Federal Credit Union (Afena), located in Marion, Indiana. We are a
    federally chartered, low-income designated credit union with $99
    million in assets and 3 branches serving over 8,000 members in central
    Indiana. In 2019 Afena was certified as a Community Development
    Financial Institution (CDFI). As Grant County's only CDFI, Afena is
    mission-focused on increasing financial inclusion among the under-
    served and financially challenged individuals in our community. With
    the support of our many community partnerships, we continue to develop
    products, services, and programs that are specially designed to empower
    low-income and financially underserved people and families and help
    them enter the financial mainstream.
        More than 70 percent of families in Grant County, Indiana, one of
    the main areas within Afena's field of membership, live below the
    poverty line and face difficult financial decisions every day. I do not
    have to imagine the struggles that so many members of my community
    face--I have experienced them myself. Years ago, having survived an
    abusive relationship, filing for bankruptcy, and on the verge of
    homelessness, I once found myself living at the poverty level.
    Overcoming this adversity through years of hard work and dedication to
    my community has led me to where I am today--building empathy and trust
    with the members we serve to ensure they too can avoid future financial
    pitfalls within their life's journey.
        A core part of our mission at Afena is to empower our members
    through financial education and help them understand how to make wise
    money management decisions that will have a dramatic impact on their
    future and their ability to build generational wealth. We want to put
    our members on a path to financial health and well-being so that they
    can leave a legacy they are proud of for the people who come after
    them. Furthermore, in times of economic distress or personal hardship
    for our members, we offer assistance through several methods including
    low-interest loans, fee waivers, and flexible payment options. We are
    also proud to partner with several community banks in the region to
    ensure customers who may not fit the risk profiles of banks can be
    referred to Afena for their financial needs, which will further
    decrease unbanked populations in our region.
        In addition to the variety of free and low-cost routine banking
    services we provide, Afena is proud to offer unique lending options
    that help families maintain their financial stability and improve their
    quality of life through affordable home improvement loans. Over 70
    percent of the loans Afena approves are to families considered to be
    low- and moderate-income (LMI), with an average credit score of 560-
    570. Over the last 3 years, the credit union's loan portfolio achieved
    double-digit growth.
        Born through a collaborative effort with the Community Foundation
    of Grant County, Afena's Bridge the Gap Loan program is designed as a
    safe, affordable alternative short term loan program. Through this
    program, Afena provides small-dollar, low-interest loans with flexible
    terms specifically for low-income families. These loans are designed to
    help borrowers build good credit, grow their emergency savings, and
    improve their financial literacy. Each participant receives free
    personalized coaching from Afena's certified financial counselors to
    set them on a path toward financial wellness.
        While credit unions nationwide have continued to grow over the past
    few years, now serving over 140 million consumers, the vast majority
    are small institutions with limited resources, like Afena. The unique
    and impactful financial assistance services we provide for our members
    are under threat with mounting regulatory requirements and expectations
    from Federal regulators. These high levels of regulatory burden are
    hampering many credit unions from fulfilling their mission of serving
    LMI Americans. We support tailored and rightsized regulation that
    accounts for the varying size and complexity of financial institutions,
    especially community-based, not-for-profit institutions like Afena.
    Credit unions always put their members first and prudent use of member
    resources is critical. Diverting those resources toward meeting
    excessive regulatory requirements has ripple effects, one of the more
    prominent being a trend toward industry consolidation. This result,
    ironically, threatens consumer access to credit, disproportionately
    impacts LMI communities, and strains the entire industry. This
    unintended consequence of excessive regulatory burden is felt across
    all small community-based financial institutions, and the people they
    serve, who are often unable to be banked at other financial
    institutions.
        I look forward to sharing how Afena's unique approach to serving
    the financial needs of my community may be hindered by recent changes
    made to the financial services regulatory landscape.
    The Credit Union Mission
        Credit unions are the original consumer financial protectors
    because of our not-for-profit, member-owned cooperative structure that
    aligns the interest of the credit union with its members. Credit unions
    like mine serve a unique purpose in the financial services marketplace,
    helping diverse and underserved populations gain access to safe,
    reliable, and affordable retail banking services. This distinction,
    combined with a track record of providing consumer-friendly financial
    services, is a key reason that rules and regulations should be tailored
    so they are not overly burdensome on credit unions.
        Credit unions play an essential role in helping individuals, small
    businesses, and communities prosper by assisting with daily financial
    management and fostering stronger financial futures. Credit unions
    continue to offer members affordable interest rates, which keep monthly
    payments lower. The median interest rate for a 30-year mortgage for
    near-prime borrowers at a credit union in December 2023 was 9.04
    percent.
        The median credit union interest rate for a $40,000 auto loan with
    a 6-year term in December 2023 ranged from 7.33 percent for super prime
    borrowers to 11.38 percent for deep subprime borrowers. Using recent
    pricing differences, we found that credit unions save consumers with
    lower credit scores up to $10,000 over the life of a typical car loan
    and as much as $73,000 over the life of a typical home loan. \1\
    ---------------------------------------------------------------------------
         \1\ Equifax Analytic Dataset and America's Credit Unions.
    ---------------------------------------------------------------------------
        Member-ownership and not-for-profit status results in a wide range
    of pro-consumer credit union behaviors and substantial pro-social
    outcomes. Credit union members across the country recognize the real
    measurable ``transformative power'' associated with cooperative
    finance.
    ``Junk Fees''
        In 2022, the CFPB launched an initiative to target standard fees
    charged by credit providers that included sensible payment guardrails
    such as overdraft and credit card late fees. This initiative has been
    mislabeled, with the CFPB calling lawful payment incentives ``junk
    fees.'' These fees bear no resemblance to the type of hotel and resort
    fees referenced by others as ``junk fees'' and, in contrast, are all
    subject to comprehensive Federal or State laws and regulations that
    include clear and conspicuous consumer disclosures. Sensible payment
    guardrails are not unfair, deceptive, or abusive, and there are
    mechanisms in place to ensure consumers are well informed of the costs
    of these essential financial products.
        Afena takes financial literacy and counseling seriously and
    addresses these fee costs head on with our members to ensure they build
    sustainable and fiscally responsible spending habits. For example,
    members have opportunities to have multiple overdraft fees waived if
    they meet with a staff member to get financial counseling.
        The CFPB's guidance on these so-called ``junk fees'' falsely
    suggests that these fees are for the sole benefit of the financial
    institution. In practice, these fees are used to help the consumer make
    responsible financial decisions, cover short-term financial
    shortcomings, and encourage on-time payments or avoid violating the
    terms of financial agreements. These fees also enable companies to
    offset the costs of late payments and their associated risks so that
    they can continue to offer the financial products that people want and
    need, particularly to financially vulnerable communities and
    individuals trying to build credit. These products help many LMI
    communities and the nearly 26 million Americans who are credit
    invisible to begin their financial health journeys.
        The characterization of these well-disclosed, regulated fees as
    ``junk fees'' and the conflation of member-driven financial
    institutions with financial bad actors has a very real, very harmful
    impact on the ability of credit unions to serve their members. If
    credit union members are consistently told by Federal regulators, and
    even the President, that their financial institution is out to get
    them, it will erode the trust and relationship-focused service that is
    so crucial to the credit union difference.
        Furthermore, the reduction in fee revenue is especially onerous for
    small credit unions. Although there are often asset-based exemptions
    for rules, such as the overdraft proposed rule, market pressures create
    downstream impacts for all financial institutions. Small credit unions
    will struggle to find non-essential costs to cut in response to
    decreased revenue when these downward pressures emerge. We have
    evidence of this from the implementation of Regulation II, where credit
    unions like mine were exempt from debit interchange caps, but we still
    saw an over 30 percent decrease in debit interchange revenue since the
    rule took effect. If burdensome regulation continues to make it more
    difficult for small financial institutions to operate, we will see
    fewer banking options, less competition, and higher prices. These
    results hurt consumers and are the opposite outcome of what the CFPB
    seeks to achieve.
        Service fees for financial products enable credit unions to make
    financial services overall more affordable and more accessible for
    Americans, particularly those who are low income. It is important to
    recognize that fee income at credit unions is at a 32-year low, as
    evidenced by recent data published by the NCUA and America's Credit
    Unions (see Figure below). That means basic banking services are more
    affordable than they have been for a decade. A consumer can join a
    credit union and open checking and savings accounts, including an ATM
    card, for free. This is possible in part because of the move towards
    service fees, such as overdraft or late fees. Credit union members pay
    for the services they use, such as an overdraft program, which allows
    the credit union to keep basic services such as checking accounts low
    cost or free for their members. The cost of eliminating or reducing
    overdraft based on Government mandates instead of market forces is that
    credit unions like mine will have to raise prices for all members to
    replace that revenue, making basic banking services less affordable.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Finally, these regulations do not exist in a vacuum. My colleagues
    within the credit union movement feel as though their revenue on all
    fronts is being questioned in a manner that fails to recognize the
    ever-increasing costs of operating a modern, safe, and secure financial
    institution. As new restrictions on fee income move through the
    regulatory process there will undoubtedly be a shift in cost-structures
    that will increase the cost of credit and lower the value proposition
    that credit unions offer their communities. Credit unions want the
    Bureau to know that they embody the pro-consumer, relationship banking
    ethos that the Bureau celebrates, but they feel that the Bureau is not
    recognizing how difficult the operating environment is becoming.
    Overdraft Rule
        One of the most recent attacks on well-disclosed, regulated fees is
    the CFPB's proposed rule to amend Regulations E and Z, specifically as
    it relates to updating regulatory exceptions for overdraft credit
    provided by financial institutions with more than $10 billion in
    assets. As a credit union with less than $10 billion in assets, we are
    deeply committed to our mission of promoting financial inclusion and
    providing affordable, accessible financial services to our members,
    many of whom are from underserved communities. We are concerned that
    the proposed rule, as currently drafted, may inadvertently undermine
    the ability of smaller financial institutions like ours to offer
    services that are critical to our members' financial well-being.
        Like many other credit unions, Afena offers services tailored to
    assist our members in managing their finances effectively. We provide
    various options to cover instances where members unintentionally or
    intentionally overdraft their accounts, including checks, automatic
    payments, and debit card transactions. To meet the needs of our
    members, all of Afena's Member Service Representatives are authorized
    by management to refund up to $100 in overdraft fees upon a member's
    first request, no questions asked. If a member requests a second refund
    in a 12-month period, we require them to complete a form and have a
    counseling session with a Loan Officer or a Member Service
    Representative. Our team uses their discretion to determine the
    appropriate amount of fees to refund based on the situation or hardship
    experienced by the member. Member Service Representatives on our team
    work diligently to counsel our members to understand the circumstances
    that led to the overdraft and how to help them prevent habitual use of
    this service in the future.
        We prioritize compliant and user-friendly options for our checking
    account holders. Additionally, they can opt in to a service where our
    credit union covers the transaction temporarily, allowing the account
    to go negative until a deposit is made, albeit with a fee associated.
    This service, known as Courtesy Pay, is highly valued by our members.
    If a member's account is overdrawn and the member is not able to bring
    it current within the 45 days required by regulation, we may offer the
    member an opportunity to obtain an overdraft payback loan. These loans
    are generally offered to members whose accounts are overdrawn due to an
    unexpected life event and have a relatively low interest rate.
        Our Courtesy Pay program ensures that members' checks and automatic
    payments are processed without disruption, preventing them from
    incurring additional expenses such as returned check fees. We also
    cover debit card transactions, ensuring that members can access
    necessities when needed, thus averting potential embarrassments at
    checkout counters or even critical situations like being unable to
    purchase groceries due to a shortfall in funds. Contrary to the
    suggestion that these services exploit consumers, consumers greatly
    appreciate the option to ensure their transactions are completed.
    Without overdraft services as a financial lifeline, often bridging the
    gap between paychecks and covering essential expenses like utilities
    and groceries, important transactions would be declined. Declining such
    transactions could spark impacts, like increased fees, disrupted
    services, and financial insecurity. These potential impacts dwarf the
    relatively minor cost of an overdraft fee.
        To ensure transparency and understanding, we maintain regular
    communication with members who use the Courtesy Pay service, providing
    detailed information about limits, fees, and how the service operates.
    Our members are well-informed and appreciate the clear terms under
    which overdraft services are offered, including the fees associated
    with these services. We often receive expressions of gratitude from
    members who appreciate the assistance these programs offer.
        The utilization rate of our Courtesy Pay program stands at
    approximately 20 percent of our checking accounts monthly, with over 58
    percent of account holders having access to all or part of the service
    as a precautionary measure. We observe a mix of regular and first-time
    users, and refund about 10 percent of fees, mainly to first-time users,
    as part of our commitment to supporting them through financial
    challenges.
        The proposed rule's requirement to treat overdraft services as
    extensions of credit subject to Regulations E and Z, unless fees are
    nominal and only cover applicable costs and losses, although not
    directly applicable to smaller institutions, may force credit unions
    like ours to significantly alter or eliminate these services. As
    regulatory mandates reduce or remove the prevalence of overdraft
    services for the largest financial institutions, market pressures will
    necessitate that smaller credit unions alter their overdraft programs
    in response. Without the ability to benefit from the same economies of
    scale that might allow larger institutions to weather a reduction in
    fee revenue, these changes could make it unsustainable for smaller
    institutions to offer overdraft protection, disproportionately
    affecting those who rely on it the most.
        All 4,700 credit unions across the country are unique and serve
    their fields of membership in the best way they see fit for the benefit
    of their communities. We believe that financial institutions should
    retain the flexibility to set fees for services like overdraft
    protection. This flexibility allows us to tailor our services to the
    needs of our diverse membership, balancing the need to cover costs and
    manage risk with the commitment to keeping our products and services
    affordable. A blanket approach in which above breakeven overdraft is
    deemed open-ended credit does not account for the downstream impacts to
    smaller institutions and the unique circumstances of our credit union
    and varied needs of our members.
        Moreover, the ability to set and adjust fees enables us to innovate
    and introduce new services that can help members manage their finances
    more effectively, such as convenient money management tools or low-
    cost, short-term credit options that can serve as alternatives to
    traditional overdraft protection. If the proposed rule drives down the
    average overdraft fee, these innovations would be at risk.
        Instead of imposing restrictive fee structures, we advocate for a
    greater emphasis on financial literacy and education efforts. Many
    consumers benefit from overdraft services because they rely on these
    financial lifelines to pay for purchases during moments of sudden need
    or between paychecks. Although a small subset of these consumers may
    become overly reliant on overdraft services, the solution should not be
    to regulate it out of existence, but rather to help equip consumers
    with the resources to take control of their financial futures. Several
    institutions report that some members knowingly want to use this
    service regularly and have indicated that they are willing to change
    institutions if it is not available. Afena's members have told us that
    that they do not always trust themselves to pay off credit products and
    would rather pay a one-time fee like overdraft. We believe the focus
    should be on investing in comprehensive financial education programs
    that can empower consumers to make informed decisions about their
    money, reduce reliance on overdraft services, understand other options
    available, and improve their overall financial health.
        Afena is deeply committed to financial education, offering
    workshops, online resources, and one-on-one counseling to help our
    members build budgeting skills, understand credit, and plan for their
    financial futures, including retirement or their children's education.
    We believe that expanding these efforts, with support from regulators
    and policymakers, can have a profound impact on financial inclusion and
    consumer well-being.
        America's Credit Unions believes that the proposed rule on
    overdraft credit may have unintended consequences that could hinder
    credit unions' ability to serve their members effectively. We urge the
    CFPB to consider the unique role of smaller financial institutions in
    promoting financial inclusion and to rescind the rule and support a
    paradigm that balances consumer protection with the need for
    flexibility and innovation in financial services. Instead of imposing a
    rule on overdraft fees with industry-wide implications, we encourage
    the CFPB to support efforts to enhance financial literacy and empower
    consumers to make informed financial decisions. By working together, we
    can ensure that all consumers have access to affordable, responsible
    financial services that meet their needs and support their long-term
    financial health.
    Credit Card Late Fees
        We object to the CFPB's final rule to amend Regulation Z to slash
    credit card late fees from the current limits to $8 for large issuers
    with over one million open accounts. The rule aims to ensure these late
    fees are ``reasonable and proportional'' to assist LMI borrowers in
    better managing their debt. However, the rule will instead result in
    reduced competition in the credit card market, further consolidation
    among community-based financial institutions, and reduced access to
    credit for vulnerable and underserved communities. The current
    regulatory structure and safe harbor limits for credit card late fees
    have resulted in clear disclosures to consumers, providing ample
    opportunity for comparison shopping, and a deterrence effect that
    encourages consumers to make timely payments on their accounts. An $8
    late fee does nothing to encourage responsible consumer behavior. It
    may even encourage greater delinquencies on unsecured credit card
    portfolios, leading to potential safety and soundness concerns. We
    would note that various governmental entities, including the Federal
    Government, set late fees well above that $8 level for a wide range of
    payments.
        This drastically reduced safe harbor limit is not only arbitrary
    but is also unlikely to reduce consumer indebtedness. In fact, this
    rule would have a disproportionate impact on LMI borrowers and those
    with thin credit files by limiting the availability of safe and
    affordable products and services. Although the majority of credit
    unions are not immediately impacted, similar to the CFPB's overdraft
    proposed rule, there will be a downstream effect on smaller
    institutions over time due to market pressures and changing consumer
    expectations. As a result, credit unions and other institutions will be
    forced to make difficult decisions about their offerings. Some smaller
    credit unions may be forced to reevaluate or eliminate their credit
    card programs altogether because the economics no longer work. Credit
    unions are also unique in that they are subject to an interest rate
    ceiling established under the Federal Credit Union Act (FCU Act). This
    statutory limitation further constrains credit unions' revenue options
    with respect to credit cards, whereas other institutions will likely
    increase their interest rates to compensate for reduced late fee
    revenue. We have already seen this trend toward increasing interest
    rates among larger issuers despite the pending legal challenge against
    the final rule. If credit unions like ours are forced to tighten their
    credit criteria or exit the credit card market because of this rule,
    the impact on underserved communities will be immeasurable.
        We encourage you to exercise your oversight over this final rule as
    the CFPB's data and analysis were cursory at best and the Bureau did
    not seek the input of small financial institutions as required under
    the law.
    NSF Rule/UDAAP
        The uncertainty surrounding the abusiveness prong of unfair,
    deceptive, or abusive acts and practices (UDAAP) has been a source of
    concern for credit unions for many years. The recent proposed rule
    prohibiting nonsufficient funds (NSF) fees on instantaneously declined
    transactions puts the logic of the Bureau's 2023 Policy Statement on
    Abusive Acts or Practices into action, and we are troubled by the
    Bureau's interpretation regarding the test for abusive conduct.
    Specifically, that conduct is abusive if it takes unreasonable
    advantage of a lack of understanding on the part of the consumer of the
    material risks, costs, or conditions of the product or service. But in
    the Bureau's interpretation, there is no requirement that the
    consumer's lack of understanding be reasonable, and the Bureau
    unreasonably concludes that the fact that a consumer decides to take a
    risk must necessarily mean that the consumer did not understand the
    risk.
        If a consumer chose to initiate a transaction even though they were
    uncertain if they had sufficient funds, it does not necessarily mean
    that they lacked understanding of the risk. It could just as easily
    mean the consumer understood the risks and chose to initiate the
    transaction anyway, hoping that their account had sufficient funds.
    Through this interpretation, the Bureau has removed all responsibility
    from the consumer and shifted the burden entirely to financial
    institutions. Furthermore, it has created a situation in which any
    product or service could be deemed too complex for a consumer to
    understand, and if a financial institution charges a fee in relation to
    that product or service, it could be subject to an allegation that it
    violated the abusiveness prong of UDAAP.
        This interpretation will chill innovation and place credit unions
    in a position where they will be extremely hesitant to offer new
    products or services to their members, for fear that they might be
    considered abusive. Smaller credit unions that cannot afford to take
    the risk of UDAAP enforcements will be incentivized to only offer the
    most basic services, further reducing their ability to compete.
        We urge the Bureau to issue a rulemaking to further define the
    abusiveness standard and work to ensure an equitable framework that
    recognizes the role of financial responsibility for consumers as much
    as it does the responsibility of their financial institution. While any
    guidance or additional clarity is crucial to providing credit unions
    with the rules of the road when it comes to UDAAP, a single policy
    statement with overly broad prohibitions is insufficient. A rulemaking
    to further define abusiveness through the notice and comment rulemaking
    process would give financial institutions confidence in the knowledge
    that an act or practice is or is not abusive and would allow the
    entities that are governed by UDAAP to better understand their
    obligations under those prohibitions.
    CFPB Governance Modernization
        America's Credit Unions believes that, given the broad authority
    and awesome responsibility vested in the CFPB, a five-person commission
    has distinct consumer benefits over a single director. Regardless of
    how qualified one person may be, including the current leadership of
    the Bureau, a commission would allow multiple perspectives and robust
    discussion of consumer protection issues throughout the decision-making
    process. Additionally, a commission helps ensure some continuity of
    expertise and rulemaking. The current single director structure can
    lead to uncertainty during the transition from one Presidential
    administration to another. The U.S. Supreme Court highlighted this fact
    when it released a decision in Seila Law v. the Consumer Financial
    Protection Bureau that found the single director, removal only for
    ``just cause'' structure of the CFPB to be unconstitutional. \2\ It is
    with this in mind that we urge Congressional action on legislation to
    transform the structure of the CFPB from a single director to a
    bipartisan commission. We support legislative efforts that would
    improve the Bureau by making this change. sUnfortunately, under the
    current structure, the CFPB has missed many opportunities to leverage
    credit unions' mission and history to the benefit of consumers and
    finalized regulations that ultimately hampered credit unions and their
    members. Consumers lose when one-size-fits-all rules force credit
    unions to pull back safe and affordable options from the market,
    pushing consumers into the arms of entities engaged in the very
    activity the CFPB's rules were designed to curtail. Under Director
    Rohit Chopra's leadership, the Bureau has yet again missed numerous
    opportunities to recalibrate its approach to regulation in a manner
    that fulfills its consumer protection mission without impeding
    consumers' access to credit or safe and affordable financial products
    and services.
    ---------------------------------------------------------------------------
         \2\ Seila Law LLC v. Consumer Financial Protection Bureau, 591
    U.S. ______ (2020).
    ---------------------------------------------------------------------------
    Principles That Should Guide CFPB Rulemaking
        We would like to take this opportunity to highlight for Congress
    several key principles we believe should guide any CFPB action. These
    principles were developed in consultation with members of America's
    Credit Unions.

        Use the Bureau's authority in a manner consistent with the
            original purpose of the CFPB and the spirit of the Dodd-Frank
            Wall Street Reform and Consumer Protection Act (the Dodd-Frank
            Act)

        The Bureau should dedicate most of its time and resources to
    unregulated and under-regulated entities. If the Bureau spent fewer
    resources on regulating and supervising credit unions and other lenders
    subject to Federal prudential regulation, then it would have more
    available to focus on unregulated institutions and the businesses
    actively engaged in objectionable practices that exploit consumers. We
    believe this balance can be accomplished without sacrificing important
    consumer protections.
        Credit unions remain some of the most regulated entities in the
    country. Despite our pro-consumer history, credit unions have
    repeatedly been lumped in with others through the promulgation of
    overly broad rulemakings, increasing compliance costs without a
    material benefit for consumers. In fact, the increasing cost and
    complexity of regulatory compliance remains a contributing factor in
    the significant consolidation taking place among community-based
    financial institutions. Ultimately, consumers lose when fewer choices
    are in the marketplace, resulting in a higher cost of financial
    services and reduced access to local community-based providers.

        Appropriately tailor regulations to reduce disruption for
            community-based financial institutions

        In the wake of the financial crisis, Congress contemplated the need
    for exemptions to certain rules and crafted the Dodd-Frank Act to
    authorize the Bureau to tailor its rules to avoid adverse outcomes for
    consumers and regulated entities. Congress deliberately provided this
    express authority in Section 1022 of the Dodd-Frank Act:

            The Bureau, by rule, may conditionally or unconditionally
            exempt any class of covered persons, service providers or
            consumer financial products or services from any provision of
            this title, or from any rule issued under this title (Emphasis
            added).

        These words are unambiguous, and Congress clearly granted the
    Bureau broad authority to tailor regulations in a manner consistent
    with the best interest of consumers. We appreciate that the Bureau has
    used its Section 1022 authority in some rulemakings to create
    exemptions based on asset size, loan volume, the merits of a specific
    product, or other factors. However, we believe the Bureau should use
    its exemption authority more consistently and to greater effect.
        Credit unions and Credit Union Service Organizations (CUSOs) should
    be considered for and receive appropriate exemptions from some of the
    Bureau's regulatory requirements. It is critically important for the
    Bureau to understand that credit unions are not asking to be exempt
    from all its rules; instead, we ask the Bureau to carefully consider
    the downstream impact of its rules and how those rules--without
    appropriate tailoring--could negatively affect the ability of consumers
    to access financial products and services from reputable, community-
    based financial institutions.

        Be consistent and transparent during the development and
            implementation of rulemakings and supervision and enforcement
            policies

        The current CFPB structure vests substantial authority with the
    Director. It is critical for the CFPB Director to avoid disrupting the
    efficient functioning of markets due to unnecessary secrecy, surprise
    regulation, ``gotcha'' enforcement, or the pursuit of political goals.
    Often, it is consumers themselves that are negatively affected by
    opaque, abrupt, or extreme changes in policy from one Administration to
    the next.
        We believe the CFPB should emphasize regular and open communication
    with financial services providers and be transparent during the
    policymaking process. An open communication posture would generate
    goodwill with industry and further both consumer protections and proper
    due process. To that end, we are ready and willing to assist in
    communicating and amplifying any critical information from the Bureau
    to credit unions and their members. We are also at the Bureau's
    disposal to solicit feedback from our members, as stakeholder input is
    critical to an efficient and effective regulatory environment.
        Relatedly, we encourage the Bureau to regularly conduct reviews of
    its regulations in the interest of streamlining and eliminating
    outdated or superfluous requirements, increasing the efficiency of
    rules, or to provide exemptions where appropriate. However, it is
    critical that the Bureau keep in mind that any change in regulation--
    even a change intended to reduce complexity--always comes with a cost.
    For most Bureau rulemakings, the Dodd-Frank Act and the Regulatory
    Flexibility Act provide specified review processes intended to assist
    in identifying necessary or appropriate regulatory changes after the
    rule has been ``in the field'' for a reasonable time. Therefore, the
    Bureau should reserve the adoption of substantial changes to rules or
    policies for cases where there are compelling data-based reasons for
    doing so or an imminent need that addresses a specified consumer
    impact.

        Consult with NCUA during the policymaking process and avoid
            implementing duplicative or contradictory policies

        Throughout their history, credit unions have been supervised by
    several different Federal agencies. The lesson that comes through
    clearly, based on these different supervisory arrangements, is that
    credit unions are best positioned to succeed when policy decisions
    affecting them are made by a regulatory agency that has significant
    familiarity with the characteristics that differentiate them from other
    financial services providers. The National Credit Union Administration
    (NCUA or agency), due to its half-century of experience regulating
    credit unions, has a special understanding of the credit union model as
    well as the environmental and operational challenges credit unions face
    daily. For that reason, the CFPB should work more closely with the
    agency throughout the policymaking process and avoid implementing
    policies that conflict with or are duplicative of those issued by the
    agency, especially regarding examinations.

        Provide certainty to regulated entities by adopting clear
            ``rules of the road'' and prioritizing internal consistency

        Since the passage of the Dodd-Frank Act, there has been a massive
    increase in new consumer financial services regulations. This
    environment is particularly burdensome for credit unions which, unlike
    big banks, do not have scores of legal experts in-house to assist with
    compliance matters. Given the heightened nature of the regulatory
    landscape, it is important that the Bureau provide certainty to
    regulated entities through the adoption of clear ``rules of the road,''
    internal consistency from the Director's office down to the field
    examiners, and robust guidance and implementation support.
        In that spirit, we encourage the Bureau to provide helpful
    compliance resources, especially interactive webinars on final rules
    and Small Entity Compliance Guides, that help stakeholders understand
    regulatory expectations. We also encourage the Bureau to be proactive
    and continue providing compliance resources after final action as
    questions in need of clarification are identified. For example, the
    Bureau's recent implementation of an Advisory Opinion program is a
    positive development and should be maintained.
        Regarding clarity, we oppose the Bureau adopting a ``regulation by
    enforcement'' approach to policymaking. We believe if the Bureau wants
    to make actionable policy, then it should propose clear regulations
    pursuant to the Administrative Procedure Act (APA) process instead of
    using its enforcement authority against financial institutions
    expecting the subsequent consent order to serve as a means for others
    to determine what practices are in violation of the law. We also
    caution against an unproductive and inflammatory ``regulation by press
    release'' approach to governance characterized by clearly politicized
    press releases intended to serve as a bully pulpit. The Bureau's recent
    reliance on blog posts, guidance, and even amicus brief filings to
    issue proclamations regarding the application of consumer financial
    protection laws is inappropriate and denies stakeholders the
    opportunity to participate in the statutorily mandated notice and
    comment process.

        Conduct thorough research prior to the adoption of a new
            rule or policy and base policy decisions on relevant data

        The Bureau prides itself on being a modern, data-driven regulator.
    Former Director Cordray often referred to the data underlying consumer
    complaints as the Bureau's ``compass,'' playing a key role in
    identifying and prioritizing the Bureau's actions, including in the
    realm of rulemakings. However, data for data's sake is insufficient,
    and it is critical that the Bureau's policy and regulatory decisions be
    wholly supported by relevant, timely, representative data.
    Unfortunately, it has been common for a CFPB rulemaking to lack (or at
    least appear to the public to lack) sufficient evidence, data,
    research, or other information to substantiate assertions within the
    rulemaking. The Bureau has also refused, in certain instances, to
    publicly share the data upon which it relies to justify a rulemaking--
    in direct contravention of its obligations under the APA. We challenge
    the CFPB to set a new standard for evidence-based rulemaking decisions
    and processes.
        It is critical that the Bureau base its decisions on data specific
    to the entities it intends to regulate through an action. For example,
    relying on bank data to justify a rulemaking that also covers credit
    unions without evaluating credit union-specific data is misguided.
    Almost equally critical is that the Bureau be wholly transparent in its
    reliance on data, ensuring the public has access to the same
    information--absent confidential and personally identifiable
    information--the Bureau relies on as a foundation for its rulemakings.

        Ensure continued access to credit from reputable providers

        Credit unions often provide the safest and most affordable loan
    options for consumers in need of credit. When developing rulemakings
    overseeing lending, the Bureau should carefully evaluate and consider
    the impact a policy decision may have on the availability of credit for
    consumers, especially when the action is likely to impact the cost of
    credit. At Afena, we understand the nuances of how our members use our
    affordable credit cards and we educate them on the potential fees and
    costs associated with this service. Over the last several years, we
    have consistently operated our credit card program near the break-even
    point or at a net loss to the credit union because we understand the
    importance of these options for families seeking affordable credit to
    cover an unintended cost that may arise. For example, we have called
    for the Bureau's rule governing short-term, small dollar lending to be
    meaningfully tailored to address predatory lending while not inhibiting
    credit unions from offering responsible credit products to members in
    need. It is important that the CFPB strikes an appropriate balance
    between its consumer protection mission and the availability of
    products and services. This balance is critical whether the product is
    a mortgage, credit card, or emergency loan. Many consumers rely on
    access to credit to manage their everyday finances, and the Bureau
    should ensure reputable providers, especially community-based
    providers, are able to meet those needs.

        Encourage and support innovation in the consumer financial
            services marketplace

        Innovation through technology and other creative solutions has the
    potential to enhance the delivery and quality of financial products and
    services to consumers. In recent years, credit unions have been at the
    vanguard of innovation as a byproduct of their cooperative nature,
    member-driven focus, and relatively small size. Consumers benefit when
    financial institutions are provided with more opportunities, under the
    careful oversight of regulators, to pursue fresh answers to traditional
    questions. However, the Bureau should not approach innovation in a
    manner that places traditional depository institutions at a
    disadvantage compared to another business model. Ultimately, credit
    unions must be given equal access to innovation policies and programs.
    Conclusion
        My lived experiences have underscored the importance of access to
    quality education and socioeconomic opportunities. They have fueled my
    commitment to advocating for marginalized communities, addressing
    systemic inequities, and doing whatever I can to level the playing
    field. Through mentorship, community outreach, and advocacy efforts, I
    strive to empower individuals to overcome barriers that prevent them
    from achieving financial well-being.
        Credit unions across the country, including Afena, derive their
    value in their genuine commitment to serving their communities. Every
    decision we make is guided by our dedication to our members and the
    belief that they can achieve a brighter financial future if offered the
    proper tools, guidance, and most importantly respect. While my career
    leading financial institutions continues to reach heights beyond my
    wildest dreams, nothing brings me greater joy than hearing a member of
    my credit union express gratitude: ``Thank you for empowering me to
    become a better financial manager. You were there for me when everyone
    else said no.'' While we may not be able to assist everyone, making a
    positive impact in the lives of those we serve is what truly matters.
        It is crucial that stories like mine and the members of Afena are
    told in the halls of Congress and directly with the regulatory agencies
    that ensure safety, soundness, and fairness within the diverse
    financial services ecosystem. Unfortunately, overregulation and attacks
    on products that provide necessary income to financial institutions,
    such as mischaracterizing avoidable and clearly disclosed fees as
    ``junk fees, are making it harder for small institutions like mine to
    survive. It is not one single action that ultimately overburdens small
    institutions, but rather it is the tidal wave of regulations and
    restrictions that are ultimately crushing us. Finally, in addition to
    using your oversight authority to help small institutions, I would also
    encourage you to act on two small measures pending before the Committee
    that will help turn the tide and provide relief--S. 2674, the CDFI Fund
    Transparency Act, which would ensure an annual hearing on CDFI issues
    for institutions like mine, and S. 610, the Credit Union Board
    Modernization Act, which would reduce the number of required board
    meetings for well-run credit unions like mine. Both measures enjoy
    bipartisan and bicameral support.
        Thank you for the opportunity to discuss these issues with the
    Committee today and I would welcome any questions you may have.
                                     ______

                     PREPARED STATEMENT OF SANTIAGO SUEIRO
                        Senior Policy Analyst, UnidosUS
                                  May 9, 2024

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                   RESPONSES TO WRITTEN QUESTIONS OF
                    SENATOR FETTERMAN FROM ADAM RUST

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

             RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN
                          FROM SANTIAGO SUEIRO

    Q.1. Research suggests that the credit card late fee limits
    imposed by the CARD Act of 2009 did not reduce access to credit
    and in fact benefited consumers, such as through reduced costs.
    Please elaborate on the impact of the CARD Act on consumers and
    the credit card market.

    A.1. The Credit Card Accountability Responsibility and
    Disclosure (CARD) Act of 2009 implemented several consumer
    protections related to credit cards such as limits to interest
    rate increases, limits on double-cycle billing, transparent
    disclosures, and limits on fees such as late fees which were
    capped at $27 for a first late payment and $38 for subsequent
    late payments. Many industry actors and policymakers claim that
    late fee limits would restrict access to credit. However, the
    passage of the CARD Act proved that late fee limits don't
    restrict access to credit. Instead, the data shows that in the
    first few years following the first CARD Act rule, the law
    saved consumers more than $16 billion in fees, lowered the
    overall cost of credit, and credit availability remained
    widespread. \1\
    ---------------------------------------------------------------------------
         \1\ Consumer Financial Protection Bureau, ``The Consumer Credit
    Card Market'', Consumer Financial Protection Bureau, December 2015,
    https://files.consumerfinance.gov/f/201512-cfpb-report-the-consumer-
    credit-card-market.pdf.
    ---------------------------------------------------------------------------
        For example, a 2015 study by the Consumer Financial
    protection Bureau (CFPB) found that, ``the data showed that
    credit availability expanded in the years following the CARD
    Act as compared to its recessionary trough.'' \2\ Another study
    from 2013 by the Federal Reserve Bank of Boston shared, ``we do
    not find evidence that banks closed accounts at a higher rate''
    in the years after the enactment of the CARD Act. \3\ Finally,
    a 2014 study by researchers at the National Bureau of Economic
    Research find that, ``the CARD Act had a precise zero effect on
    credit limits and [average daily balances, and] a zero effect
    on the number of new accounts.'' \4\
    ---------------------------------------------------------------------------
         \2\ Ibid.
         \3\ Federal Reserve Bank of Boston, ``The Credit CARD Act of 2009:
    What Did Banks Do?'' Federal Reserve Bank of Boston, October 2013,
    https://www.bostonfed.org/publications/public-policy-discussion-paper/
    2013/the-credit-card-act-of-2009-what-did-banks-do.aspx.
         \4\ Sumit Agarwal, Souphala Chomsisengphet, Neale Mahoney, and
    Johannes Stroebel, ``Regulating Consumer Financial Products: Evidence
    From Credit Cards'', National Bureau of Economic Research, September
    2013, https://www.nber.org/system/files/working-papers/w19484/
    w19484.pdf.
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