The U.S. Senate Committee on Banking, Housing, and Urban Affairs held a hearing, “Consumer Protection: Examining Fees in Financial Services and Rental Housing,” on May 9. Witnesses included Adam Rust, director of financial services at Consumer Federation of America; Karen Madry, president and CEO of Afena Federal Credit Union in Marion, Indiana; and Santiago Sueiro, senior policy analyst at UnidosUS, a Steering Committee member of NLIHC’s Opportunity Starts at Home (OSAH) campaign. Witnesses and members of the committee discussed fees in the rental market, including junk fees like application, trash, and convenience fees, as well as fees levied by credit card companies, like overdraft fees. Senators and witnesses connected the topic to legislation such as the “Preservation and Reinvestment Initiative for Community Enhancement (PRICE) Act” (S.3264/H.R.6321), which NLIHC has endorsed.
Senator Sherrod Brown (D-OH), chair of the Banking Committee, opened the hearing by connecting rental housing fees to the affordable housing crisis and defining “junk fees.” Senator Brown stated that “[i]n 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 honor of paying your rent, and on and on.” Ranking member Tim Scott (R-SC) framed “junk fees” differently, stating that “[a]t 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, it’s a similar story. This time, the ‘boogeyman’ is so-called ‘junk fees’ – and these fees are to blame for the obvious economic pain Americans are feeling.” The Senator called junk fees “legitimate products and services” that politicians have relabeled “in an effort to villainize business in America.” Whereas Chair Brown applauded the Consumer Financial Protection Bureau’s work on eliminating junk fees, Ranking Member Scott defended the financial services industry, ending this testimony by asserting that “the late fee is oftentimes the one thing that encourages us to take our bills more seriously.”
Witnesses spoke of their support or opposition to such fees from research and banking perspectives. Karen Madry spoke primarily to the need for credit card fees to keep Afena Federal Credit Union financially sound. Adam Rust shared research from the Consumer Federation of American and argued that junk fees “undermine competition by obscuring the real price of goods and services.” Santiago Sueiro of UnidosUS highlighted the racial disparities associated with financial and rental fees, which impact Latinos disproportionately.
Senators on the Committee questioned witnesses about the impact of fees in the rental housing market and linked them to tenants’ lack of access to affordable housing. Senator Jon Tester (D-MT) asked about the impact of rental fees in manufactured housing, to which Rust noted that “from 2015 to 2018, eight private equity-owned real estate companies purchased 153,062 lots in manufactured housing communities” and that these new owners often increase the fees in manufactured housing communities. Senator Bob Menendez (D-NJ) observed that landlords take advantage of low-income families’ search for housing by charging “exorbitant” application fees and asked if application fees are reflective of the accurate cost to landlords. Rust responded that they are not and pointed out that research shows that companies like Transunion market services to landlords that cost between $25 to $42 but that landlords often charge $100 per person for the services. Senator Tina Smith (D-MN) highlighted concerns about automated tenant screening and the possibility of incorrect information showing up on tenant screening records. Senator Catherine Cortez Masto (D-NV) referenced NLIHC’s Gap data, which show that 86% of extremely low-income renters in Nevada are severely cost burdened, and discussed the need for passage of her “PRICE Act,” which addresses the need to preserve manufactured housing as a key source of affordable housing, particularly for seniors and people in rural areas. (For more on the PRICE Act, see Memo, 11/13/2023). Senator Chris Van Hollen (D-MD) voiced his concern about rental junk fees and asked witnesses about some of the most egregious examples of junk fees in the rental housing market. Rust mentioned the “pay to pay” fees, which charge far more than the actual cost of processing a rent payment, and Sueiro pointed to application fees, utility fees, late fees, and administrative fees, noting the pattern according to which Latinos and people of color pay these fees disproportionately.
Watch a recording of the hearing and read witnesses’ testimony here.