In light of the Biden Administration’s policy initiative targeting “junk fees,” the Senate Banking Subcommittee on Financial Institutions and Consumer Protection held a hearing today entitled, Taking Account of Fees and Tactics Impacting Americans’ Wallets. Witnesses were Michelle Henry, Attorney General of Pennsylvania, Lindsey Siegel, Director of Housing Advocacy at the Atlanta Legal Aid Society, and Brian Johnson, Managing Director of Patomak Global Partners and Former Deputy Director of the Consumer Financial Protection Bureau (CFPB).

The hearing focused on how these so-called “junk fees” affect rental housing and bank deposit fees. However, Attorney General Henry’s testimony referred to installment loans as “predatory,” and a Senator referred to installment lenders “bad actors.” AFSA strongly objects to this characterization and other assertions in the testimony.  In response, we remind policymakers of the following:

• For more than a century installment lending has proven to be an affordable and responsible form of consumer credit for working Americans. Installment loans are a good way for consumers to manage credit and build a positive payment history. Installment lenders are licensed in each state in which they do business. The interest and fees they charge are expressly permitted by state law and clearly disclosed.
• Optional products play a crucial role in delivering financial security for borrowers and proved particularly effective and valuable during the pandemic. Because they are transparent, accessible, and affordable, they are popular with consumers and generate very few complaints.
• The lawsuit that the Attorney General referenced in her testimony is another example of government overreach, with a government agency seeking to “regulate through enforcement,” rather than permit the appropriate legislative body to set policy. This lawsuit in particular is also about a small number of states trying to enforce federal law on a nationwide basis, authority that only rests with the CFPB (subject to its own constitutional challenges).
• Many consumers taking out an installment loan do so because they do not qualify for a loan at a bank or credit union.
• Of all the complaints the CFPB got from consumers last year, less than half a percentage point were about installment loans.

AFSA reached out to key Senate Banking Committee members before the hearing and will continue to educate Senators on what installment loans are and how they benefit consumers.