Virtual Listening Session: Consumer Financial Products’ Impact on the Dignity of Work

I really appreciate your willingness to do this. We do hearings like this, sort of listening sessions, when as smart as Senator Smith is and is engaged, either she nor I nor other, and Senator Cortez Mastos checked in, we'll be asking questions. We just wanted to do listening sessions. It's something we all could do better, I'm sure, as elected officials, is listening more than talking. So thanks to the three of you for joining us. Two days ago, as we know, yesterday, two days ago, we celebrated Labor Day. We come together to honor the people who make this country work. It's a day to remember the workers who came before us and build our middle class. I was given this lapel pin I've worn for the last 25 years, well before I came to the Senate, at a Workers Memorial Day rally. As we celebrate Memorial Day, we also, in April, celebrate Workers' Moral Day. This is a depiction of a canary in a birdcage. The mine workers took the canary down in the mines if the mine worker had no union in those days to protect him or her, and no government that cared very much about doing it. So we know, and that's really, out of that comes this listening session with Senator Smith and Senator Cortez Mastos and the three of you. We fought, for generations, workers have fought for all of us to have a fair shot at the American dream. That's what the dignity of work is all about. Hard work should pay off for everyone. When work has dignity, you should be able to support your family and your future. Yet we know millions of workers with full-time jobs can't make ends meet. Even with the job and wage gains under this administration and this new Senate, corporations and their allies talk about workers as liabilities to our economy instead of talking about workers as the foundation for our success as a nation. When workers are forced to find ways to make up for the gap between what they're paid and what they should earn, what are they left with? And they're left with debt. Debt products that are well-designed, transparent, and regulated can help workers pay off an unexpected car repair, help with a grocery bill, or cover a medical expense. But in reality, these products often are not well-designed. They're not well-designed for the debtor, or they're rarely transparent. They're not well-regulated. It leads to more debt, more financial instability for workers who far too often are not paid a living wage. We've discussed in the Banking, Housing, and Urban Affairs Committee the impact that predatory payday lenders have on working families. Today we're here to listen to the stories of the impact on three workers across the country on some of these newer consumer financial products. Companies love to tell us these newer financial products are innovative, they're easy to use, they'll give people more options, they'll make their lives better. But so often, innovation ends up meaning a new way for companies to make money, to extract money from people, from trapping people in debt. Newer installment loans like Buy Now, Pay Later could help consumers pay for products and installments serving an important need by helping people have flexibility in paying off bills. Yet many of these products come with hidden fees. They lack transparency. They aren't underwritten properly. Ads and promos target and encourage consumers to use these plans for multiple purchases at multiple online stores, racking up debt they often can't afford to repay. There's a way to make this work for consumers with proper disclosure, with real regulation. There are debt products. And then, though, there are debt products that are so predatory and offensive, they should have no place in our financial schemes, in system schemes like training repayment agreement provisions, appropriately known as TRAPS. These provisions in employment contracts allow employers to recoup the cost of training employers who leave the job. It's a ridiculous, offensive concept, and a couple of you will talk about that today. It's employers' jobs, obviously, to train their workers on the job. Training isn't some special perk that workers have. It's a smart investment for employers, for companies. TRAPS require workers to pay back their employers for training if they leave the job within a certain period of time, saddling workers with unexpected debt. Employers use TRAPS to prevent workers from pursuing higher pay or better opportunity. Most don't have the protection one of you does, but most don't have the protection of the union. The employers then decide how much the training would cost in the market, and they go after their workers. Most of the time, the supposed training tied to TRAPS barely even qualifies for that definition. It's not an extensive course or an apprenticeship program. It's just ordinary workplace orientation or even sometimes busy work. TRAPS allow employers to leverage debt to bind workers to their companies, turning debt into a tool for coercion. No one should be trapped into staying at a job when she deserves or he deserves a better opportunity. It's why I've invited the three of you to this listening session to hear directly from American workers and consumers living with this kind of debt. Witnesses come from across the country, one of you from Texas, one of you from California, one of you from Colorado. Each has different experiences with debt from newer financial products. All three of you speak to a common experience, how this debt undermines dignity and prevents the work from paying off. So I'm going to introduce each of the panelists. I'll do each one and then speak, and I'll do the second. Our first panelist is Brianna Gordley. She's currently a policy analyst at Texas Appleseed, a public interest justice center. Ms. Gordley, you can go first. Thank you. Great. Can everybody hear me? Yep, perfectly. Wonderful. Good morning. Thank you so much for that introduction, and thank you, committee members, for this opportunity to provide a virtual testimony on my experience with Buy Now, Pay Later products. My name is Brianna Gordley. I work at Texas Appleseed as a policy analyst, and our nonprofit works to change the unjust laws and policies that prevent Texans from realizing their full potential. I'm also a recently licensed social worker, so I definitely have a lot of vested interest when it comes to consumer protection and regulation. However, I am not here to speak on behalf of my organization, but on behalf of myself and my personal experiences with some of these predatory products. So in 2016, I was just an 18-year-old full-time college student, and I also worked full-time to help make ends meet, and I typically didn't have additional money for recreational spending. However, the few times that I did go and pick up extra shifts at the local Chili's, I had a few extra dollars in my pocket, and so I was able to go to the store, go to the mall with my friends, and buy clothes, and a very trendy store at the time, called Forever 21, had this advertisement for Afterpay. It was one of the first – I think it was actually the first time I ever heard of a Buy Now, Pay Later platform. It seemed very manageable. It seemed very ideal. Oh, I can finally purchase larger amounts of clothing. Things I'll need for school. Things I'll need for fun. So I quickly applied, was approved for about $100 initially, and became an active user of Afterpay. Initially, it was very easy to manage my payments and track my payments. Very feasible to repay the debts that I owed, and so it was very attractive for me to continue to use this platform. However, this quickly shifted from manageable to dramatically difficult to repay once I started looking into other Buy Now, Pay Later platforms, and I think it's important to note that I heard about these other platforms from Afterpay. It was kind of a chain. I would see a Klarna advertisement on the Afterpay website. I would see a Quadpay advertisement on the Klarna website, and so forth, and so at the time, I was not mindful of these advertisement methods. I definitely am now, but I quickly started using Klarna, and then Quadpay. With Klarna, that is where my use of these products shifted, because Klarna approved me after I made my first payment, it was maybe $50, nothing too large. It quickly approved me for $1,000, and as alarming as that may sound now, at the time, at just 18, I thought, well, why would they offer me this large approval amount if they didn't trust in my ability to repay it? So if Klarna is saying they believe that I can repay this amount, then I do too, and that is why I racked up a lot of debt using Klarna, and shortly after, using Quadpay, and that's definitely where I started to spiral downhill. I was juggling four very difficult and very large Klarna payments, ranging from about $150 to $350 each, on top of that, I had taken out debt with Quadpay, they approved me instantly for $500, and I thought, the credit's there, why not go ahead and use it? They believe I can repay this, and so I do too. And so over the about year and a half course that I used Buy Now, Pay Later products, I spent about $1,500, $116 in general were charged by my bank for non-sufficient funds, fees, and overdraft fees, and about $350 to $375 were actually sent to collections, which were my final three Buy Now, Pay Later purchases. And so in that last year, I was managing or trying to manage about $1,100 in debt. Mind you, I was still working full-time, but all of that money was allocated towards bills, and I was still in school full-time, so I was really struck with how on earth am I going to pay this debt back? I started to go into damage mode, I was selling all of my personal items, and I even considered taking out a payday loan, however, I did not get approved for a payday loan at 18, even though I was working full-time, and I see the irony in that now. And so ultimately, and thankfully, I recognize the privilege in being able to say I was able to confide in my family, confide in my parents, and explain the mess that was Buy Now, Pay Later in hopes that they would help me address it, and thankfully they did. I was then able to quote-unquote refinance with my family, they paid off the debt, and then we started a payment agreement with the promise that I would never use these products ever again. And I'm really mindful now, with Buy Now, Pay Later platforms reporting to some of the credit reporting agencies, just how different and how much more catastrophic my experience at just 18 years old would have been if this would have been the case now for my financial health and future. So today, as a policy analyst advocating for consumer protection and regulation, it's very easy for me to recognize the potential predatory nature of some of these products, but at just 18 years old, I didn't care to better understand Buy Now, Pay Later products, I just finally saw an opportunity to enter into a space that was so unattainable to me at the time. And Buy Now, Pay Later products know this about their consumers, and not only do they take advantage of knowing this, but they capitalize on this heavy desire to feel included in these different environments by approving outrageously high payment amounts across different platforms for low-income consumers with little to no foundation and inconsistency in approval amounts across these platforms. And so when I think about moving forward, like you mentioned, Senator, I'm so aware of how many people are living paycheck to paycheck, I was one of them, and are unable to meet even their most basic needs, let alone have additional funds for whatever they see fit to use. So I truly understand why these products are so attractive, because they attracted me. And at first, using just one Buy Now, Pay Later platform, one purchase at a time, it is manageable, it's trackable, and it's feasible. So this model can work for people. I definitely recognize that. However, as the number of purchases across multiple Buy Now, Pay Later platforms increased, my inability and feasibility to repay decreased, and I was quickly spiraling downhill. And so as I look back on my experience, I see now that, well, a few things. I see what would have made a difference would have been to have a better or more clear understanding of what I owed and when. Ultimately, it would have been best to have the money to pay it, but that's a different story. And I also want to recognize that I understand and wholeheartedly believe in personal accountability for the very conscious choices that I made at 18. But accountability and responsibility should be, they must be a two-way street between consumers and businesses. And I just truly urge the committee to consider how these new and involving fight of fintech products such as Buy Now, Pay Later, can, whether intentionally or not, truly harm the most vulnerable of consumers and really trap them in debt, immense debt, before they've really had a chance to live their lives. So just thank you so much for being given this opportunity to tell my story, and I really appreciate it. Thank you, Ms. Gartley. Thank you, Ms. Gartley, for your comments, for your insight, and for your willingness to tell your story in public like this. Thank you so much. Brianna, I'm sorry, Brianna Scali is from Belmont, California. She hopes one day to run her own animal shelter. Ms. Scali, thank you for joining us. Thank you, guys. Thank you so much for the opportunity to share my story with you guys today. My name is Brianna Scali, I'm 25, and I live in Northern California. Like Senator said, I want to start my own animal shelter. And so today I'm here to talk to you about my former employer, PetSmart. PetSmart kept me in a trapped, miserable job, holding a debt over my head, because I wanted to do the grooming academy so that I can get more experience for my rescue, to help the animals that I, to rescue. With that, I got the job at PetSmart, and after a few months working as a bather, I was able to start the training academy. When I did that, they had me sign an agreement, the trap agreement. And this agreement was $5,000 for the academy itself, and then $500 for the grooming equipment. In addition, they told me I can either, they did tell me I can either buy my own equipment, or again, I could spend, I can get the $500, and they will provide it for me. So I decided to accept the agreement, not knowing that the agreement that I had signed before I started my grooming training was going, was the trap agreement. I was not explained that that was my agreement in any way. I was just told, sign this if you want to start the grooming academy, you're all good. So after starting the grooming academy, they, I thought, I thought I was going to get important and valuable training, but it wasn't anything like that. I didn't get any kind of license or accreditation or anything, and my actual training was only a few weeks total, about two to three weeks. During the first week, I just worked my way on my own. I did book work. And then after the week of book work, I started the grooming with my, with my manager. The person who gave me training, she was extremely busy because she was as well, salon manager as well as the person who did the grooming training. And during this time, we didn't have the help that we needed to be able to provide us and myself the actual training and the actual attention that we needed to be able to learn the tools that we needed to move forward. We kind of were just thrown in there, just do these dogs. This is kind of how you do it. And that's that. After the academy, I still was not a full time groomer and said I received only a fraction of grooming pay during the 200 additional supervised rooms that I was supposed to get. But none of these rooms were actually supervised at all. Just like the academy, I was learning the job on my own. Over time at PetSmart, it became worse and worse. I was basically making minimum wage. And I was also, and this was from the start of getting the job. I never got any increase or anything after going from a bather to a groomer in any way, shape or form. And I was basically required to work through my breaks and my lunches, but I was required to clock out. But I was, I had to come back to do my grooms, I had to come back to do my animals because we didn't have the help that we needed to be able to take our breaks and take our lunches because if we did and then we didn't finish on time, we got in trouble. And it was stressful. I was like Brianna was saying, I was living, not even paycheck to paycheck, if I'm being honest, I was kind of getting a paycheck and then I was scraping up money between the weeks I was getting paid just so I had gas money to get to work and so that I can maybe get myself some lunch that day if I was taking a lunch. And I knew I could make more money working somewhere else, but I was terrified of getting the $500 in debt because I had been working since 2018 to pay down my debt so that I can get approved for things that I haven't been able to be approved for. And so I felt stuck and therefore I went to my manager and asked her what I could do in order to make up this $5,500 so that I could leave and I don't have to feel that I'm struggling so heavily. And so what I was told, I was told that if I could upsell and make the money through the grooms that I did, then I should be okay. There shouldn't be a problem and I shouldn't be targeted with this debt because I had already worked so hard and made the money up for PetSmart. So that's exactly what I did. I was taking extra dogs. I was calling people to see if they wanted to come in. I was upselling the product to see if they wanted to spend another $25 just so I could add that on. And I made up to $6,000 plus for PetSmart. And so when I did that, I thought I was going to be okay. I thought my nightmare was over and I thought I wouldn't have this debt because I did exactly what they told me to do. Well, a few months later, they targeted my credit. They put $5,500 on my collections and I never received any paper notice. I didn't even know I actually had the collection until I think a month or two later because I like to do checks on my credit report. And during this time, I was doing it every few months. Now I do it very, very often. I was just checking my normal credit check and I saw that my points had gone down tremendously. And I was so confused because I know that I haven't applied for anything or any credit card. I haven't done anything to make sure that I don't get any extra debt because I know I can't pay it yet. And when I went into my credit report and I saw that, I called them. I called my collection. And I actually had to physically call them and ask them for the collection notice. And it took me calling them two times in order to actually receive that notice. I was really sad to see that I had that $5,500 because I have been working so hard and I didn't realize that PetSmart really was going to track me the way they did. And so after that, I kind of, I just came to you guys and I've been doing what I can so that I can, you know, tell the world what happened. And so other people who have gone through this or experienced the same thing can possibly speak up as well. Because I don't think it's fair that people are doing all this work and you're going to these places so that you can expand your knowledge and so that you can grow and they don't want you to actually grow. And so that was my story. And I really appreciate you guys for sitting down and listening to me today. Thank you, Ms. Kelly, for your good insight and a remarkable story. And good luck to you. Cassie Pennings is our third speaker. She's a certified nursing assistant from Littleton, Colorado. She's a member of Communication Workers American Local 7799. Ms. Pennings, thanks for joining us too. Good morning, Chairman Brown and members of the committee. Thank you for the opportunity to testify today. My name is Cassie Pennings and I'm a registered nurse and a proud member of CWA Local 7799. I remember the courage it took to believe in myself enough to apply to nursing school. For me, nursing isn't just a career path. It's an identity. It's who I've always been. It's coming home. As I entered the field of nursing amidst the COVID-19 pandemic, veteran nurses apologized to me on behalf of the state of the profession and assured me it wasn't always like this. One of the worst shifts I've experienced occurred when I had been a nurse for just 11 weeks. As a part of the new grad program, we are promised to be paired with a nurse mentor who will stay elbow to elbow with us for at least the first 12 weeks. But on this shift, my mentor was preoccupied with multiple emergencies, leaving me to take care of my five patients alone, each of whom required high levels of care. I remember feeling like I couldn't be physically in enough places at once. And then I received an ICU admission. I was running to one patient's room, checking one task off the list, and running back to attend to another one of my six patients. By the time I was able to prioritize spending more than a few minutes with my new admit, who was elderly, confused, and incontinent, I realized he had been laying in his own urine with a fresh-spiled residual by valuing profits over patients. This was just under three months into my nursing career. In describing the shift to my manager, I expressed, it was not safe for the patients. It was not safe for my license. Never again. Nonetheless, patient ratios continue to increase. As the injury the pandemic has left on the field of nursing persists, the responsibility is continually placed upon the worker. While walking an average of six miles every shift, I still struggled with crippling feelings of guilt when the limitations of staffing made it impossible for me to deliver the basic care these human beings deserve. I learned this was moral distress, a precursor to burnout, yet we continue to ask why the nursing shortage persists. Despite being one of the most profitable healthcare systems in the nation, my former employer responded to cries for help from the front lines with breakfast burritos and free water bottles. It is imperative that Congress pass Chairman Brown's bill to mandate safe staffing ratios. Historically resilient, I found myself in survival mode. It took everything I had to keep my space clean, exercise, and feed myself. Rather than advocating for my fellow healthcare workers and patients in forums like this, I had to turn down opportunities because the healthcare system had successfully oppressed me, a labor activist. The hospital's greed and neglect forced me to leave this summer, but that same greed made it almost impossible to leave. Leaving my job felt like exiting an abusive relationship. The only way to get a job as a new nurse in a hospital is to enter a new nurse residency program and sign a financial contract with no sign-on bonus. As a result of my choice to remove myself from this situation, I am now indebted $7,500 to the hospital because of a training repayment agreement plan, ironically, TRAPP for short. That's two months of my salary. That's more than six months' rent. Suffice it to say, we certainly did not receive $7,500 worth of benefits through the program. Hospitals have demonstrated that they would rather trap their employees with the threat of debt than incentivize them to stay. Upon resignation, I received an email informing me that there would be money withheld for my remaining paychecks to help cover the debt, making it even more impossible for some nurses to be able to afford to leave. Any uncollected debt would be turned into collections. This email was vague, not detailing any sort of schedule or amount for these withholdings. My heart dropped as I received the following paycheck and recognized half of it was missing. As you consider policy moving forward, I ask you to remember my patience. Think of your loved ones and prioritize empowering and protecting the people at the bedside with them by banning abusive practices like TRAPP. Thank you. Thank you, Ms. Penning. The stories from all of you really make clear why there's a worker shortage because of the way employers are compensating or treating people at work and are so often trapping employees in debt. Thank you, all three of you, again, for joining us today. Your stories are important for my colleagues and me to understand as we consider how debt undermines the dignity of work. So thank you for helping speaking out, helping us establish this record. Senator Cortez Mastan, Senator Smith and I will benefit, but so will other members of the committee as we relay your comments to them. So thank you and stay in touch with the Banking, Housing, Urban Affairs staff and with me. And we want to find ways to work together. So thanks so much to all of you. Catherine, thanks for joining us. Thank you guys so much.