By Donald Shaw and David Moore, Sludge

Weeks after the Consumer Financial Protection Bureau announced that it was planning to cap credit card late fees at $8 and President Joe Biden gave it his full-throated support in the State of the Union, House Republicans are gearing up to reintroduce a bill that would undercut the agency. Led by Kentucky Republican Rep. Andy Barr, the Republicans want to cut off the agency’s sources of funding.

In January 2022, the CFPB launched an initiative to reduce what the Biden administration has labeled as “junk fees.” In addition to its recent proposal to cap credit card late fees, the CFPB is pursuing actions to address things like surprise overdraft fees that banks sometimes charge customers even when their accounts show they have enough money to cover a purchase, as well as “convenience fees” that some debt collectors charge people to make a payment.

Over the past decade, the amount banks and credit card companies are allowed to charge for late fees has risen with inflation up to $30 for the first late payment and $41 for subsequent payments—which the CFPB found brings in revenue approximately five times higher than the cost of collection.

Measures to limit excessive fees are widely popular—a December 2022 poll released by a coalition of consumer advocacy groups found that 79% of voters support the CFPB taking on the size of credit card late fees, including 76% of Republicans. But politicians like Barr and other bank industry-funded Republicans may be thinking more of their donors than their voters. 

Barr, who chairs the House Financial Services Subcommittee on Financial Institutions and Monetary Policy, has received more campaign money from the securities and investment industry over the course of his career than from any other industry, according to OpenSecrets. PACs and employees in the securities and investment industry have combined to provide his campaigns with more than $2 million since 2009. The commercial banking industry has been his fourth-largest career industry donor, giving him more than $1.1 million. 

Barr is just one of the bank industry-funded representatives who have recently been critical of the CFPB and its actions.

Follow The Money

The day after the CFPB announced its credit card late fee proposal, Rep. Patrick McHenry (R-N.C.), the chairman of the Financial Services Committee and the top recipient of bank money in the House of Representatives, vowed to stop it. 

“Under my leadership, the House Financial Services Committee will not allow Director Chopra to punish consumers solely to placate progressive activists,” McHenry said in a statement. McHenry also accused the agency of pursuing the fee cap for political purposes, saying that he found it troubling that the CFPB had coordinated its announcement with the Biden administration. The week before his State of the Union address, President Biden spoke on the CFPB’s proposed $8 cap on credit card late fees during a White House meeting with his Competition Council and called on Congress to pass legislation to rein in junk fees. 

McHenry has received more than $1.6 million in campaign contributions from the commercial banking industry over the course of his career. Combining companies’ PAC contributions with donations made by their employees, McHenry’s top career donors include Signature Bank, which has provided him with $275,000, and Wells Fargo, which gave him $133,000. 

Several of Barr and McHenry’s big bank donors are represented by lobbying groups that have been fighting the CFPB on the issue of credit card fees and that came out strongly against the proposal to cap them at $8, calling it “extreme” and accusing the agency of having “a political agenda.” 

In response to the CFPB rulemaking, the American Bankers Association (ABA), the top-spending bank lobbying group in D.C., issued a press release where the group’s President Rob Nichols slammed the proposal and said it would continue to “challenge the Bureau’s efforts to unfairly demonize an industry critical to the U.S. economy.” Also, Nichols said that the CFPB proposal “flagrantly violates federal law,” pointing to a recent letter from the ABA and other trade groups arguing that the agency must first convene a Small Business Review Panel before advancing to a proposed rulemaking phase. Financial industry observers expect legal challenges ahead for any CFPB rule issued limiting late fees.

The ABA represents many of McHenry and Barr’s largest career donors, including Bank of America and JPMorgan Chase. The ABA itself is McHenry’s second-largest career PAC donor, having contributed $105,000 to his campaigns over the years. It has also given $55,000 to Barr from its PAC.

The CFPB Under Attack

Meanwhile, the CFPB is being threatened by conservative legal challenges arguing that the agency’s funding structure is unconstitutional, a case that could have far-reaching implications for independent government regulation and fighting financial fraud. After three judges appointed by former President Donald Trump issued a decision last year that supported challenges to the agency, the U.S. Supreme Court may soon announce whether it will take up the case.

On the Financial Services Committee, McHenry has been joined in pushing back against the CFPB by banking industry ally Rep. Blaine Luetkemeyer (R-Mo.), who has rejected the Biden administration’s use of the term “junk fees.” About two weeks before the midterm elections, Luetkemeyer lambasted CFPB Director Rohit Chopra, saying of the agency’s “junk fee” guidance, “This is just the latest example of the Administration inventing a problem with the goal of expanding its control over the U.S. economy and shifting blame for the historic inflation and recession created by its disastrous economic policies.” Among all U.S. House members, Luetkemeyer is second only to McHenry in career contributions from the commercial banking industry, with $1.5 million received. 

As the new committee chair, McHenry has brought on numerous banking industry insiders to pursue his caucus’ “agenda to conduct robust oversight of the Biden administration,” among other aims. Larry Seyfried, the committee’s newly-appointed director of member services and coalitions, was previously an ABA lobbyist, capping his nearly two decades of employment with the ABA as its senior vice president for congressional relations.

A Revolving Door

At the ABA, which led an industry group comment last year to the CFPB on the credit card late fees proposal, several lobbyists have revolved from positions in the federal government, including Naomi Camper, chief policy officer, who previously worked as subcommittee staff director for the Senate Banking Committee. Overall, the ABA spent more than $9.9 million last year lobbying Congress and federal agencies including the CFPB.

The Consumer Bankers Association (CBA), the trade group representing retail banks, joined the ABA’s opposition in a statement panning the CFPB’s rulemaking as “political,” saying the proposal “disregards data and reality.” CBA’s members include Wells Fargo, Bank of America, JPMorgan Chase, and many other large banks that have donated to McHenry, Barr, and Luetkemeyer.

CBA lobbyist and head of regulatory affairs Dan Smith formerly worked at the CFPB from 2013 to 2019 as assistant director in the agency’s Office of Financial Institutions and Business Liaison. After CFPB, Smith went on to work for the American Bankers Association as the executive director of its Card Policy Council, which focuses on credit card issues. Smith is one of the lobbyists that CBA has listed in the section of its lobbying disclosures where it disclosed lobbying on the credit card late fee issue. The forms indicate Smith may have lobbied his former colleagues at the CFPB on the issue. Overall, the CBA spent a record amount last year on federal lobbying, totaling more than $3.8 million and regularly mentioning the issues of the CFPB and credit card late fees.