‘Make A Mockery Of Free & Fair Markets’: Sherrod Brown Rails Against Undisclosed Junk Fees

7 months ago

During a Senate Banking Committee hearing on Thursday, Sen. Sherrod Brown (D-OH) gave opening remarks about junk fees.

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Transcript

00:00The Senate Committee on Banking, Housing, and Government Affairs comes to order.

00:11Senator Scott, welcome, the three witnesses, welcome.

00:15Costs are far too high for Americans.

00:18Corporations are finding more and more ways to raise those costs to boost their own profits.

00:23We've talked about how every time Americans go to a grocery store, they pay for corporate

00:28stock buybacks and executive bonuses.

00:31Last week, we looked at how companies use the latest technologies to jack up prices

00:35for consumers.

00:37This week, we look at junk fees.

00:39These are surprise, although not that much of a surprise anymore.

00:43Often last-minute charges that drive up the cost of products have no justification or

00:47connection to anything other than their quest for profits.

00:52Think about that hotel room you booked that has a bunch of mysterious charges at the end.

00:58Before that time, you paid your credit card bill over the phone so you wouldn't be late,

01:01but were charged a convenience fee.

01:04The only thing that fee is convenient for is the bank's bottom line.

01:08Or let's say you're looking for an apartment.

01:10You finally find one with affordable rent, but when you get a look at the lease, you

01:14realize that between the maintenance fee and the trash fee and the mysterious convenience

01:19fee, the actual rent you'll be charged each month is out of your budget now.

01:24These hidden add-ons, surcharges, fees, they're all junk fees.

01:28They're extra costs that inflate the price you pay but add no real value.

01:33They're often hidden.

01:34They're only disclosed when it's time to pay.

01:37Consumers know what they can afford.

01:39That's why we all shop based on price, but when the real price is hidden through undisclosed

01:44junk fees, how are consumers supposed to find the lowest price?

01:48The answer is they often can't.

01:50We hear a lot about personal responsibility and consumer financial literacy in this committee,

01:56but no amount of financial education is going to protect someone from a tactic that's meant

02:01to purposely hide the real purpose of a product or service.

02:06They hide the price.

02:08That's the whole point.

02:09Junk fees make a mockery of free and fair markets.

02:12$32 here, $45 there.

02:15If you pull in a $10 service fee before you know it, a product you thought was the most

02:21affordable option actually is the most expensive.

02:24Without junk fees, consumers would keep more of their hard-earned money.

02:27They'd be able to better find the lowest price, which is how you really should promote competition

02:33to bring costs down.

02:35That's why the CFPB has taken long overdue steps to reduce costs and fees and make them

02:40more transparent.

02:42CFPB took a major step toward reducing costs for consumers when it issued its credit card

02:47late fee rule.

02:49Credit card late fees are the most costly and frequently applied junk fee.

02:54According to one report, one in five adult Americans, an estimated 52 million people,

03:00paid a credit card late fee last year.

03:04By law, credit card late fees are supposed to be reasonable and proportional.

03:09That's what the law says, reasonable and proportional to the costs that companies incur

03:12for late payments.

03:13So be clear, there are massive trillion-dollar Wall Street companies.

03:17The idea that you are missing your payment due date by a day or two is imposing some

03:22huge cost on the credit card company is just patently ridiculous.

03:28Sure enough, CFPB found that credit card companies are charging consumers more than five times

03:34their cost.

03:35By 2022, that meant credit card companies charge consumers $14.5 billion in late fees.

03:42That's up $3 billion over the previous year and who knows what next year will be.

03:47The new action by the CFPB will lower credit card late fees that the largest credit card

03:52issuers can charge down to just $8 if it stands.

03:58This will save Americans more than $10 billion in fees each year.

04:02Of course, of course, the biggest banks oppose it.

04:05They trot out the same old complaints we always hear every time anyone tries to do

04:09anything that might just cut into Wall Street profits just even a little bit.

04:15They whined in 2009 when we passed the Credit Act, excuse me, we passed the Card Act to

04:21lower some fees and increase transparency.

04:23Surprise, surprise, the sky didn't fall.

04:26Consumers still have access to credit and, of course, credit card companies still make

04:29billions in profits.

04:30Of course, it's not just credit card late fees.

04:33Junk fees are piled on top of all sorts of services and products.

04:37CFPB found that some auto loan services charge $1,000 in repossession fees, almost three

04:44times the average repossession cost.

04:47Unsurprisingly, some owners never recovered their cars because $1,000 is an amount many

04:53working families cannot afford out of the blue.

04:57Commercial housing, junk fees that are added to the advertised rent can make the actual

05:01rent paid unaffordable.

05:03We've seen cases where the advertised rent grows hundreds of dollars a month once all

05:09the fees are on top of the rent.

05:10Application fees, utility deposits, trash fees, fees for the young man in my office

05:16pays a fee for the honor of paying his rent, fee after fee after fee after fee.

05:22Imagine a family getting approved for a place they think they can afford, but then getting

05:26several hundred dollars of surprise add-on fees when they go to sign their lease.

05:34Most renters can't afford these massive price increases, but they may not have an option

05:38once they've paid all the upfront costs and set their move-in date.

05:41Be clear.

05:43The entire point of these fees is to hide the true cost.

05:46They could just list the rent for what it is, but they don't because they want to make

05:52it impossible for families to actually, as they survey where they want to move, to actually

05:57find the lowest rent.

05:59It's not a free, fair market.

06:01It's a rigged system.

06:03We need to continue working to expose and crack down on those fees that are raising

06:07costs in Americans to push already high corporate profits even higher.

06:11We need to defend the CFPB's work that has refunded $260 million to consumers for unlawful

06:17junk fees already, save that money, and will save consumers billions in the future.

06:23Corporations raising these prices have armies of lobbyists to fight for them.

06:26At the beginning, I said people, when they go into the grocery store to shop, they're

06:31paying for stock buybacks and bonuses for executives.

06:36Not too different in this world, in the banking world, in the apartment world, in the car

06:41repossession world.

06:42Our job is to stand up to those corporate lobbyists, to work for everyone else so that

06:47consumers can actually keep their hard-earned money.

‘Make A Mockery Of Free & Fair Markets’: Sherrod Brown Rails Against Undisclosed Junk Fees

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