WASHINGTON — Despite strong derision from Republicans on several occasions, President Joe Biden emphasized his administration’s work on “junk rates” and highlighted what he said is a recovering economy in his State of the Union address. Tuesday night, widely considered the opening salvo of his 2024 re-election bid.
Biden touted the work his administration has done to address what he called “junk” fees and urged Congress to pass the “Junk Fee Prevention Act.” The Consumer Financial Protection Bureau last week proposed a rule That would cut credit card fees to $8 from $30, threatening $9 billion a year in fees for banks and credit card companies.
“Junk fees may not matter to the very rich, but they matter to most people in homes like the one I grew up in,” he said. “They add up to hundreds of dollars a month. They make it harder for you to pay the bills or pay for that family trip. I know how unfair it feels when a company overcharges you and gets away with it.”
He also said his administration has “reduced exorbitant bank overdraft fees,” which he said amount to more than $1 billion a year.
Bloomberg News
Biden’s support of the CFPB and its director Rohit Chopra has been a constant theme throughout his administration, even as the agency’s funds are under scrutiny from federal courts and Republicans in Congress. The nod to the agency during the State of the Union address doubles down on the Biden administration’s focus on these fees as its political approach in the realm of financial policy.
Banking business groups are pushing back against the CFPB’s plan, however, arguing that lowering late fees will require an increase in prices for everyone else.
“The CFPB’s assertion that the rulemaking will reduce late fees from $12 billion a year to $3 billion fails to take into account the costs imposed on the approximately 70% of credit cardholders who pay on time each month,” the American Bankers Association said before Biden’s speech. “They’re going to see their costs go up. Also, lowering the late fee will only encourage more people to pay late, which will hurt their credit score and only hurt their ability to access credit.”
The Independent Community Bankers Association called Biden’s comments “misleading.”
“ICBA and the nation’s community banks continue to reject President Biden’s mischaracterization of overdraft protection services and late payment credit card fees as ‘junk charges,'” said the president and CEO ICBA executive, Rebeca Romero Rainey, in a statement. “Such language misrepresents the overdraft protection services banks offer their customers and how community banks meet their customers’ credit card needs.”
The Consumer Bankers Association said that comparing the banking industry’s consumer fees to other fees, such as resort fees or cable Internet, is inaccurate.
“Continuing to merge the fees charged by banks to extend credit to consumers, with those in other sectors of the economy, does not recognize the fact that banks operate in the most competitive and best regulated industry in the world and are required by law to provide clear disclosures intended to empower consumers to make informed financial decisions,” Consumer Bankers Association President and CEO Lindsey Johnson said in a statement.
In addition to junk fees, Biden took a strong antitrust tone in his speech, pushing for tougher crackdowns on federal spending targeted at small businesses and individuals and distributed by financial firms. Antitrust policy could show up in policy development around bank mergers, and that COVID-19-era federal spending refers, at least in part, to fraud surrounding the Paycheck Protection Program.
“Before I took office, many inspectors general who protect taxpayer dollars were sidelined. Fraud was rampant,” Biden said. “Last year I told you the watchdogs were back. Since then, we’ve recovered billions of taxpayer dollars.”
He also repeated pleas for higher taxes on billionaires, profitable businesses and corporate stock buybacks.
