[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
            HOW WILL THE CFPB FUNCTION UNDER RICHARD CORDRAY

=======================================================================


                                HEARING

                               before the

                SUBCOMMITTEE ON TARP, FINANCIAL SERVICES

              AND BAILOUTS OF PUBLIC AND PRIVATE PROGRAMS


                                 of the

                         COMMITTEE ON OVERSIGHT

                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                            JANUARY 24, 2012

                               __________

                           Serial No. 112-107

                               __________

Printed for the use of the Committee on Oversight and Government Reform


         Available via the World Wide Web: http://www.fdsys.gov
                      http://www.house.gov/reform




                  U.S. GOVERNMENT PRINTING OFFICE
73-165                    WASHINGTON : 2012
-----------------------------------------------------------------------
For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC 
area (202) 512-1800 Fax: (202) 512-2104  Mail: Stop IDCC, Washington, DC 
20402-0001


              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
DAN BURTON, Indiana                  ELIJAH E. CUMMINGS, Maryland, 
JOHN L. MICA, Florida                    Ranking Minority Member
TODD RUSSELL PLATTS, Pennsylvania    EDOLPHUS TOWNS, New York
MICHAEL R. TURNER, Ohio              CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 DENNIS J. KUCINICH, Ohio
CONNIE MACK, Florida                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
ANN MARIE BUERKLE, New York          GERALD E. CONNOLLY, Virginia
PAUL A. GOSAR, Arizona               MIKE QUIGLEY, Illinois
RAUL R. LABRADOR, Idaho              DANNY K. DAVIS, Illinois
PATRICK MEEHAN, Pennsylvania         BRUCE L. BRALEY, Iowa
SCOTT DesJARLAIS, Tennessee          PETER WELCH, Vermont
JOE WALSH, Illinois                  JOHN A. YARMUTH, Kentucky
TREY GOWDY, South Carolina           CHRISTOPHER S. MURPHY, Connecticut
DENNIS A. ROSS, Florida              JACKIE SPEIER, California
FRANK C. GUINTA, New Hampshire
BLAKE FARENTHOLD, Texas
MIKE KELLY, Pennsylvania

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                     Robert Borden, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

  Subcommittee on TARP, Financial Services and Bailouts of Public and 
                            Private Programs

              PATRICK T. McHENRY, North Carolina, Chairman
FRANK C. GUINTA, New Hampshire,      MIKE QUIGLEY, Illinois, Ranking 
    Vice Chairman                        Minority Member
ANN MARIE BUERKLE, New York          CAROLYN B. MALONEY, New York
JUSTIN AMASH, Michigan               PETER WELCH, Vermont
PATRICK MEEHAN, Pennsylvania         JOHN A. YARMUTH, Kentucky
JOE WALSH, Illinois                  JACKIE SPEIER, California
TREY GOWDY, South Carol                                                                                                                                                                                                                                                                                                                                                           ina           JIM COOPER, Tennessee
DENNIS A. ROSS, Florida
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on January 24, 2012.................................     1
Statement of:
    Cordray, Richard, director, Consumer Financial Protection 
      Bureau.....................................................     9
Letters, statements, etc., submitted for the record by:
    Cordray, Richard, director, Consumer Financial Protection 
      Bureau, prepared statement of..............................    12
    Maloney, Hon. Carolyn B., a Representative in Congress from 
      the State of New York:
        CFPB Officials testimony before Congress.................    40
        Letter dated December 7, 2011............................    42
        Letter dated January 24, 2012............................    34
    Quigley, Hon. Mike, a Representative in Congress from the 
      State of Illinois:
        July 2011 AFR issue brief................................    76
        Letter dated January 23, 2011............................    50
        Prepared statement of....................................     6


            HOW WILL THE CFPB FUNCTION UNDER RICHARD CORDRAY

                              ----------                              


                      WEDNESDAY, JANUARY 24, 2012

                  House of Representatives,
      Subcommittee on TARP, Financial Services and 
           Bailouts of Public and Private Programs,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The subcommittee met, pursuant to notice, at 1:30 p.m., in 
room 2154, Rayburn House Office Building, Hon. Patrick T. 
McHenry (chairman of the subcommittee) presiding.
    Present: Representatives McHenry, Guinta, Buerkle, Meehan, 
Walsh, Gowdy, Ross, Quigley, Maloney, Welch, and Speier.
    Also present: Representatives Issa, Cummings, Norton, and 
Connolly.
    Staff present: Kurt Bardella, senior policy advisor; Robert 
Borden, general counsel; Molly Boyl, parliamentarian; David 
Brewer, counsel; Sharon Casey, senior assistant clerk; Katelyn 
E. Christ, research analyst; Adam P. Fromm, director of Member 
services and committee operations; Linda Good, chief clerk; 
Peter Haller, senior counsel; Ryan M. Hambleton, professional 
staff member; Christopher Hixon, deputy chief counsel, 
oversight; Mark D. Marin, senior professional staff member; 
Jaron Bourke, minority director of administration; Kevin 
Corbin, Devon Hill, and Adam Koshkin, minority staff 
assistants; Ashley Etienne, minority director of 
communications; Jennifer Hoffman, minority press secretary; 
Jason Powell and Steven Rangel, minority senior counsels; and 
Davida Walsh, minority counsel.
    Mr. McHenry. The committee will come to order.
    The Subcommittee on TARP, Financial Services and Bailouts 
of Public and Private Programs is meeting here today and the 
hearing is entitled, How Will the CFPB Function Under Richard 
Cordray?
    The policy of this committee is that we begin with the 
mission statement of the Oversight and Government Reform 
Committee.
    We exist to secure two fundamental principles: first, 
Americans have a right to know that the money Washington takes 
from them is well spent and, second, Americans deserve an 
efficient, effective government that works for them. Our duty 
on the Oversight and Government Reform Committee is to protect 
these rights. Our solemn responsibility is to hold government 
accountable to taxpayers because taxpayers have a right to know 
what they get from their government. We will work tirelessly in 
partnership with citizen watchdogs to deliver the facts to the 
American people and bring genuine reform to the Federal 
bureaucracy.
    So, with that, I thank Mr. Cordray for being here today and 
making time in his certainly busy schedule.
    I will recognize myself now for 5 minutes for an opening 
statement.
    This hearing is to focus on the functions and operations of 
the Consumer Financial Protection Bureau under Mr. Cordray.
    The American public has always demanded consumer protection 
regulations that discourage and discipline financial fraud and 
ensure consumers are entitled to clear, succinct, and honest 
disclosures about financial products.
    But that is simply not enough for a robust marketplace.
    Since the onset of the financial crisis, Members of 
Congress have heard from businesses of all sizes that markets 
are in need of certainty. In this regard, the CFPB has failed 
the first test.
    The needed certainty that we and the financial marketplace 
need, that consumers need, that regulated entities need in 
order to extend credit is real.
    Since Dodd-Frank was enacted 18 months ago, the role, 
agenda and authority of the CFPB has increased uncertainty in 
U.S. markets, not lessened it. This restricts access to credit.
    In May of last year, this subcommittee hosted then-special 
advisor for the CFPB, Elizabeth Warren, in an effort to perform 
its oversight responsibilities and allow the American public to 
clearly understand the Bureau's operations, accountability to 
U.S. taxpayers, and beliefs about its authority and limits.
    At the time, Ms. Warren's answers to congressional 
questions were fuzzy at best, leaving members and market 
participants unsure of the Bureau's areas of focus and the 
duplicative role when establishing rules with existing Federal 
regulators.
    An encouraging sign is the news today that there is an 
agreement between the CFPB and the FTC in division of those 
responsibilities. That is a good sign.
    As a result, countless experts continued to raise serious 
questions about the Bureau's structure and broad discretionary 
powers on our economy and credit markets.
    While conflicting opinions about Federal regulators are not 
new, the fact of the matter is that the operations and 
authority of the CFPB still remain a mystery to Congress and 
the American public.
    For the last year and a half, interim figureheads for the 
Bureau have skillfully dodged congressional inquiries about the 
regulator's operations and powers. In this subcommittee, for 
example, Ms. Warren could not answer a simple question about 
the definition of abusive from Congressman Gowdy. This question 
came about. I hope that Mr. Cordray will be willing to engage 
in that discussion today and give some clarity.
    With such immense powers over financial products left to 
the interpretation of a single, unelected, unaccountable 
bureaucrat, with over a half a billion dollar budget, 
furthermore, being done with a recess appointment, Republicans 
in this body and in the Senate have called for meaningful 
changes to the structure of the CFPB.
    Unfortunately, the President decided against compromise. If 
having a regulator with unprecedented and ill-defined power was 
not enough, the administration decided to double down by 
bringing into question the validity of its director. That is 
unfortunate.
    The fact that White House lawyers must continue to justify 
the President's decision to waive roughly 200 years of 
precedent jeopardizes the sanctity of the Bureau's operations 
and is unfair, in my opinion, to Mr. Cordray, the Bureau, its 
powerful responsibilities and duties, and, most importantly, 
the American public.
    The irony for this to occur to the CFPB, self-proclaimed as 
``the most constrained and most accountable agency in 
government,'' is chilling.
    Nonetheless, now that Mr. Cordray, despite an appointment 
that is constitutionally questionable, has stated his intention 
to assume full powers as head of the CFPB, this subcommittee 
believes it is time that he deliver definitive responses about 
how he will implement and enforce the unparalleled powers of 
his new office.
    As daily headlines proclaim Mr. Cordray's latest 
authorities and targets, it is vital that this subcommittee 
stand committed to its mission of producing an efficient and 
effective government that works for the people and their 
livelihood.
    Simple questions about the CFPB's annual budget of roughly 
half a billion dollars of taxpayer funds, dictated by a single 
individual, to its vast authority over the U.S. economy remain 
unanswered and warrant persistent congressional oversight.
    I certainly appreciate the willingness of Mr. Cordray to 
submit to this oversight. There are many questions that do 
remain. I am interested in hearing from Mr. Cordray about his 
thoughts on what he believes the CFPB's new regulatory 
authority is and how it will be promoting private sector job 
creation and a robust credit market, and assuring that Congress 
will have accurate and full oversight over this process.
    Will you disclose your regulatory agenda for the year?
    Will you focus on products with even-handed enforcement, 
regardless of who is offering said product?
    Will you get input from small businesses on your 
regulations that you are issuing?
    Will you empanel small businesses and hear feedback from 
them in your major regulatory pieces?
    And will you actively solicit the regulated community as 
well?
    These are questions that I will have and I look forward to 
the gentleman answering, and I thank Mr. Cordray for making 
time in his busy schedule early in his service in this regard.
    With that, I will recognize Mr. Quigley, the ranking 
member.
    Mr. Quigley. Thank you, Mr. Chairman, and thank you for 
holding today's hearing.
    I would like to begin by reading a mission statement, that 
of the CFPB: ``To make markets for consumer financial products 
and services work for Americans, whether they are applying for 
a mortgage, choosing among credit cards, or using any number of 
other consumer financial products.''
    Let's remember why we are here. There can be no amnesia 
about the fact that these markets were not working for 
Americans before the financial crisis. Weak and patchwork 
regulation allowed dangerous consumer financial products and 
toxic financial instruments to infiltrate the market.
    Unscrupulous lenders were able to take advantage of 
consumers by selling them faulty, fraudulent, and deceptive 
financial products. This reckless lending poisoned the 
financial system and directly contributed to the mortgage 
meltdown.
    We explicitly created the CFPB to protect Americans from 
these fraudulent and abusive products.
    On July 21, 2011, the CFPB took over consumer protection 
authorities from the Federal Reserve, the FDIC, the FTC, the 
NCUA, the OCC, OTS, and HUD. But, by law, CFPB supervisory 
authority over nondepository providers of mortgage loans, 
mortgage brokerage services, foreclosure release services, and 
abusive lending practices could not take effect until a 
director was in place. That is why, on December 8th, I was so 
disappointed to see a culture-proof minority of 45 Senators 
block Mr. Cordray's nomination to be director.
    Mr. Cordray, a former Ohio attorney general, is eminently 
qualified for this position. Senator Scott Brown has called him 
the right person to lead the agency and help protect consumers 
from fraud and scams. Mr. Cordray, who I am pleased to welcome 
here today as the first director of CFPB, was appointed to his 
position by the President on January 4, 2012. He takes charge 
of the CFPB at a critical time for consumer financial 
protection. I am eager to work with him and his staff to ensure 
that Americans in the 5th District of Illinois, as well as 
around the country, are protected from financial fraud and 
abuse.
    I am also glad to have this opportunity to discuss with Mr. 
Cordray his plans for the CFPB under his directorship. I 
applaud the early work that has been done looking into 
predatory practices targeting veterans and I look forward to 
hearing more. I also applaud the fact that the CFPB has made 
transparency and accountability one of its top priorities.
    This is the third hearing in this committee to invite 
witnesses from and conduct oversight of the CFPB. Overall, this 
is the twelfth time that witnesses from this agency have 
testified before Congress. An independent audit firm found that 
the agency has adopted and maintained a strong interest in 
being transparent and accountable in public. In fact, both the 
ICP and the ABA have praised the Bureau for its transparent and 
accessible rulemaking process.
    This is keeping with Congress's intent in creating the 
CFPB, whose ability to protect consumers is counteracted by 
extraordinary and unprecedented checks and balances. For 
example, the Financial Stability Oversight Council can reject 
any CFPB regulation that would put the safety and soundness of 
the U.S. banking system or stability of the financial system at 
risk. Finally, the CFPB stands alone among banking regulators 
in that its budget has a statutory cap.
    But the simple fact is that we need the CFPB. Whether you 
are an investor planning for retirement or a veteran coming 
home after serving our country, the agency will protect you 
against financial abuse. I hope my colleagues will join me in 
welcoming Mr. Cordray, and I look forward to hearing his 
testimony.
    We need to understand, Mr. Cordray, that to a certain 
extent you are outmanned. You are certainly outnumbered 
financially. So my concern isn't so much that you have this 
cap, my concern is do you have the ability to meet this 
challenge given the resources you have.
    I hope my colleagues will join me in welcoming Mr. Cordray. 
I look forward to hearing his testimony.
    Mr. Chairman, I would also like to ask unanimous consent 
that other members of the committee be allowed to participate 
in the hearing.
    [The prepared statement of Hon. Mike Quigley follows:]
    [GRAPHIC] [TIFF OMITTED] 73165.001
    
    [GRAPHIC] [TIFF OMITTED] 73165.002
    
    [GRAPHIC] [TIFF OMITTED] 73165.003
    
    Mr. McHenry. Reserving the right to object. The intention 
is, with this being such an important hearing, that I want to 
let our Members have as many questions as they have time to ask 
and that Mr. Cordray has time to answer, so it would be my 
intention to object to other Members that are not on the 
subcommittee, aside from the ranking member and obviously the 
full committee chairman. And I would hope that Members would 
respect that.
    Mr. Issa. Mr. Chairman.
    Mr. McHenry. Yes.
    Mr. Issa. Also reserving a point. The ranking member and I 
are actually members of the subcommittee.
    Mr. McHenry. Ex-officio members, yes.
    Mr. Issa. Actually, as Mr. Cummings would let us all know, 
voting members at a previous hearing. But, Mr. Chairman, our 
committee rules, as I understand them, are that you must be 
present at the time that, by name, you are asked for. That has 
been the policy. So I would not object, but I think that it 
would be appropriate to ask for unanimous consent if, and only 
if, an individual arrived and could then be subject to that 
request, and, of course, they would still go after all other 
Members.
    Mr. McHenry. Thank you so much, Mr. Chairman. I would put 
that down as a matter of the committee rules, and thank you for 
outlining that.
    Mr. Quigley. I think I still need to yield back, but thank 
you, Mr. Chairman.
    Mr. McHenry. I thank the ranking member.
    With that, we will now recognize Mr. Cordray. I know you 
are familiar with the process with the lights, but you have 5 
minutes to summarize your opening statement. Green obviously 
means go; yellow means, well, you are a former attorney 
general, you know that means hurry up; and then, obviously, red 
means stop. So thank you so much and we look forward to your 
testimony.

  STATEMENT OF RICHARD CORDRAY, DIRECTOR, CONSUMER FINANCIAL 
                       PROTECTION BUREAU

    Mr. Cordray. Thank you, Mr. Chairman----
    Mr. Issa. Mr. Chairman, I'd make a point of order that the 
witness has not been sworn.
    Mr. McHenry. I thank the full committee chairman. Again, 
not reading off my script, I am so sorry.
    If the gentleman will stand and if you will raise your 
right hand.
    [Witness sworn.]
    Mr. McHenry. Thank you. You may be seated.
    Let the record reflect that the witness answered in the 
affirmative.
    And now I will take the time to introduce Mr. Cordray here 
to represent the CFPB and testify on behalf of the CFPB after 
his January 4th appointment. Thanks so much, Mr. Cordray. Five 
minutes.
    Mr. Cordray. Thank you again, Mr. Chairman, for inviting me 
here today. Thank you, Chairman Issa, Ranking Member Cummings, 
Ranking Member Quigley and members of this subcommittee for 
taking time to hear about the Consumer Financial Protection 
Bureau.
    Before I became director, I promised Members of Congress in 
both chambers and on both sides of the aisle that I would be 
accountable to you for how the Consumer Bureau carries out the 
laws you have enacted. I said that I would always welcome your 
thoughts about our work, and I stand by that commitment today. 
I am pleased to be here with you to tell you about our work and 
to answer your questions.
    The people who work at the Consumer Bureau are always happy 
to discuss our work with the Congress. This is the twelfth time 
that we have testified before either the House or the Senate, 
and my colleagues and I look forward to working closely with 
you, with the businesses who serve their customers in the 
consumer financial markets, and with the hundreds of millions 
of American consumers themselves.
    I am honored to serve as the first director of the new 
Consumer Bureau. I am energized and inspired by the many 
talented people who work with me there and I am driven by the 
challenges and responsibilities of our mission to protect 
American consumers.
    Our mission is of critical importance to making life better 
for Americans. Consumer finance is a big part of all our lives. 
Mortgages allow people to buy a home and spread the payments 
over many years. Student loans give young people with talent 
and ambition the ability to get an education. Credit cards give 
us immediate and convenient access to money when we need it.
    These products enable people to achieve their dreams. But 
as we have all seen in recent years, they can also create 
dangers and pitfalls if they are misused or not properly 
understood.
    During my years in State and local government, I became 
deeply engaged in consumer finance issues. I saw good people 
struggling with debt they could not afford. Sometimes those 
people made bad decisions they came to regret. Sometimes an 
unexpected event, like a loved one getting sick or a family 
member losing a job, overwhelmed even their most careful 
planning. Still, other times I saw unscrupulous businesses who 
obscured loan terms or engaged in outright fraud, causing 
substantial harm to unsuspecting consumers, ruining their lives 
and devastating our communities.
    I am certain that each one of you hears these same stories 
every day from your families, your neighbors, and constituents 
in your districts. People do not want or expect any special 
favors; they just ask for a fair shake. They want a consumer 
financial system that actually works for consumers and a chance 
to get back on track toward the American dream.
    One of our primary objectives at the Consumer Bureau is to 
make sure the costs and risks of these financial products are 
made clear. People can make their own decisions, and nobody can 
or should try to do that for them. But it is the American way 
for responsible businesses to be straightforward and up-front 
with their customers, giving them all the information they need 
to make informed decisions. That is good for honest businesses 
and it is good for the overall economy.
    A particular quote caught my eye recently which embodies 
this view. It goes: Free men engaged in free enterprise build 
better nations, with more and better goods and services, higher 
wages and higher standards of living for more people. But free 
enterprise is not a hunting license.
    That was Governor Ronald Reagan in 1970. I agree with what 
he said and it is a view widely shared by the people who work 
with me at the Consumer Bureau.
    So another key objective is making sure that both banks and 
non-bank competitors receive the evenhanded oversight necessary 
to promote a fair and open marketplace. Our supervisors will be 
going onsite to examine their books, ask tough questions, and 
work with them to fix problems we uncover. Under the laws 
enacted by Congress, and with a director now in place, we have 
the ability to make sure this is true across all financial 
products and services.
    The Consumer Bureau will also make clear that violating the 
law has consequences. Through our field examiners, our direct 
contact with consumers and businesses, and our highly skilled 
researchers, we have multiple channels to know the facts about 
what is happening in the marketplace. We plan to use all the 
tools available to us to ensure that everyone respects and 
follows the rules of the road. Where we can cooperate with 
financial institutions to do that, we will. However, we will 
not hesitate to use enforcement actions to right a wrong.
    As we move forward with our work, we need to hear directly 
from the consumers we protect and the businesses who serve 
them. We do that on our Web site, consumerfinance.gov, where 
people are able to tell us their personal stories. We also make 
it a point to get out of Washington and to hear from people 
across the country. Thus far, we have held 10 field meetings in 
Philadelphia, Minneapolis, Cleveland, and we had our first 
field hearing in Birmingham. We are hearing from thousands of 
Americans about what works and what does not. We are listening 
closely and we will hope that many of you will join us at these 
events when we come to visit your communities.
    Thank you. I look forward to your questions.
    [The prepared statement of Mr. Cordray follows:]
    [GRAPHIC] [TIFF OMITTED] 73165.004
    
    [GRAPHIC] [TIFF OMITTED] 73165.005
    
    [GRAPHIC] [TIFF OMITTED] 73165.006
    
    [GRAPHIC] [TIFF OMITTED] 73165.007
    
    [GRAPHIC] [TIFF OMITTED] 73165.008
    
    [GRAPHIC] [TIFF OMITTED] 73165.009
    
    [GRAPHIC] [TIFF OMITTED] 73165.010
    
    Mr. McHenry. Thank you, Mr. Cordray and thank you for your 
testimony.
    I will now recognize myself for 5 minutes.
    After your January 4th recess appointment, the CFPB took 
its nonbank supervisory authority and you are moving forward 
with that. On your Web site you have a statement of regulatory 
policy. You are familiar with the SEC and their process that 
they put forward, and they put forward an agenda that roughly 
outlines their year's plan. Would you submit to that same type 
of disclosure on the regulatory framework that you are going to 
attempt to put in place in the coming year?
    Mr. Cordray. Thank you, Mr. Chairman. It is our intention 
to be as transparent as we can be, but recognizing that we are 
a new agency and building an agenda from the ground up. Now, 
first and foremost, our agenda is set by Congress. We are to 
implement the laws that you have enacted, and our regulatory 
agenda in the early going is largely going to be dictated by 
that.
    Mr. McHenry. Okay.
    Mr. Cordray. There are certain rules that you have required 
us to do and we will focus----
    Mr. McHenry. Yes. And, number one, you have actually taken 
the existing rules from the myriad of other regulators which 
you have assumed.
    Mr. Cordray. Yes.
    Mr. McHenry. At what date did you become employed by the 
CFPB?
    Mr. Cordray. Me?
    Mr. McHenry. Yes.
    Mr. Cordray. January of last year. I believe the date was 
January 18th of 2011.
    Mr. McHenry. Okay. So you have had roughly a year as the 
director of enforcement, and in that role you have seen the 
buildup in the CFPB. How many folks are employed at the CFPB at 
this date?
    Mr. Cordray. At the end of 2011 we had 757 employees. The 
counting depends a bit on whether you count detailees from 
other agencies, people who have been made offers and accepted, 
but that is the ballpark.
    Mr. McHenry. So 700, 800 folks.
    Mr. Cordray. Correct.
    Mr. McHenry. And what was the budget last year, roughly?
    Mr. Cordray. Well, the budget that we had sought originally 
in the fiscal year 2011-2012 proceedings was $142 million.
    Mr. McHenry. And you drew down from the Fed how much?
    Mr. Cordray. Last year we drew down from the Fed about $161 
million. We had to make some adjustments in light of we had 
some issues with the Fed about negotiating what kind of 
contribution we had to make to their pension system as we 
joined them and when that----
    Mr. McHenry. So $300 million budget. So the question I have 
is will you lay out a regulatory agenda for the coming year 
with these roughly 800 employees you have and a budget that is 
hundreds of millions of dollars? Will you lay that out for the 
public so that those that are engaged in that type of business 
activity will know that it is coming forward, Members of 
Congress will know that this is part of your agenda?
    Mr. Cordray. I think, Mr. Chairman, we have been quite 
transparent about our regulatory agenda. As I say, it is 
stuffed full of the requirements that Congress has imposed on 
us, and it is our first obligation to carry that out.
    Mr. McHenry. I certainly appreciate that.
    My time is short, but the SEC outlines the regulatory 
actions that they intend to take in the coming year. Other 
regulatory bodies do this. You are vested with enormous powers, 
one person vested with enormous powers over all consumer 
finance in this country. Will you at least submit to the idea 
of maybe laying out the agenda for the next month?
    Mr. Cordray. Well, I will tell you what, Mr. Chairman. I 
think our agenda has been pretty clear to everybody who has 
interacted with us, from the Chamber to consumer groups. I am 
happy to have my staff work with you and if that seems to be a 
best practice, that that is something that we can do. We are 
not intending to hide the ball. I think our priorities are 
quite clear, we have stated them very clearly. If you want to 
have it on a particular piece of paper or on a Web site, that 
is something we can----
    Mr. McHenry. I think it would be a best practice if you 
look at what the SEC is doing in laying out their regulatory 
agenda. I think that would give clarity to the public, allay a 
lot of concerns that I have from small and large businesses 
alike, and from Members of Congress as well.
    Mr. Cordray. Let us take a look at that and work with you 
and your staff, and we will see what we can do to----
    Mr. McHenry. Thank you.
    Mr. Cordray. Yes.
    Mr. McHenry. What current rulemaking are you working on 
right now?
    Mr. Cordray. The biggest one we are working on, and we have 
been working on it for some time, is actually something near to 
your heart, I know, because you tried to legislate on it as 
much as 5, 6 years ago, when it would have made more of a 
difference before the crisis, which is consolidating the 
mortgage disclosure forms around real estate closings, the TILA 
and RESPA so-called forms that over the years have been adopted 
separately under different statutes by HUD and by the Federal 
Reserve.
    They were duplicative in many respects. There was a long-
time congressional desire to simplify and clarify that and 
reduce the burdens. That is something we have been at work on 
since about May of last year. We will be coming out with a 
proposed rule on that by this summer. We are going to have 
small business briefing panels on that starting in the spring 
and it has been an ongoing effort for us to follow through on 
what I know you sought to do 5, 6 years ago.
    Mr. McHenry. Thank you. A further question would be would 
you intend to have a small business panel for all major 
regulatory actions you take?
    Mr. Cordray. We are required by law to empanel a small 
business panel. Unique among the banking agencies. It is one of 
the oversight mechanisms you all put in place for us. It is 
totally appropriate. Unless we can certify that a particular 
rule would not have a significant impact on small providers. So 
the assumption and the baseline is that we will do those 
panels. We are going to do it, and I saw some communication 
earlier today from one of the associations suggesting that we 
maybe were not. We have already committed to that; we committed 
in congressional testimony last year. That will be coming very 
soon.
    Mr. McHenry. And that will be coming this year?
    Mr. Cordray. On the TILA RESPA rule in particular, yes.
    Mr. McHenry. Okay. Thank you.
    Mr. Quigley for 5 minutes.
    Mr. Quigley. Thank you, Mr. Chairman.
    Mr. Cordray, the questions that were set for Ms. Warren are 
set for you as well. I know she had discussions with community 
bankers associations, particularly of my State, the State of 
Illinois, and the discussion was very intense about leveling 
the playing field for community bankers. Could you comment on 
your sense of how that plays out in your administration?
    Mr. Cordray. Yes, Congressman. It is a very high priority 
for us. It was the first active step that we took as a Bureau 
after I was appointed director, and that was the time at which 
we could now begin to actually implement a nonbank supervision 
program. It is something that, had it been in place, would have 
helped community banks and credit unions across this country 
immensely in the runup to the financial crisis.
    We have what, in my view, was a broken regulation of the 
mortgage market, where some people were regulated, others were 
not. I was a State treasurer and local treasurer at the time. I 
heard from bankers in my area who told me they were asked to 
make loans by customers that they knew would not work and they 
had to watch those customers after they said, no, go down the 
street and get them from unlicensed brokers and others, and it 
eventually wrecked the system.
    So leveling the playing field is very important not only to 
the community banks and credit unions themselves, but it is 
very important to making this system work. So it is very 
important to us and we know it is a big responsibility for us.
    Mr. Quigley. Thank you. You mentioned the number of 
employees you have and the resources you have, and I alluded to 
it in my opening statement. Just try to ballpark an analysis of 
that which you are attempting to regulate, the comparative 
budgeting for marketing alone within these institutions, the 
number of staff they have, the resources they have. The cavalry 
is not coming over the hill anytime soon, but do you have the 
resources currently to match those extraordinary levels of 
institutional capability?
    Mr. Cordray. I would say two things, Congressman. That is a 
concern. We are, right now, a new agency, so we are building 
up. You know, we started obviously at zero. We are at 757 at 
the end of last year. We need to build further. We need to 
recognize the scope of what we are trying to deal with. The 
consumer credit markets, you add up all aspects of that, 
mortgages and the other things, is approximately a $20 trillion 
set of markets, so it is a big job. I have heard a lot of talk 
about how powerful we are, but it is an important set of 
markets, and we hope that we are up to the task, and we are 
working to be up to the task, but it is an immense challenge.
    Mr. Quigley. I am not out to demonize anyone in any 
industry, but we have had enough lessons in our lifetime here 
to recognize, human nature being what it is, someone needs to 
regulate particularly this industry. If you could focus, in the 
closing parts of my time, your interest in the issues you see 
particularly for those veterans coming home, protections they 
might need.
    Mr. Cordray. As I know you know, we have been fortunate to 
have a tremendous spokesperson for service member issues at the 
Bureau, Mrs. Holly Patraeus, who has been teaching us all about 
the special circumstances that service members and veterans 
face: some of the challenges that a simple debt collection 
issue can pose, posing risk to their security clearance; being 
moved around under orders and, in this market, not necessarily 
being able to sell their home and, therefore, being saddled 
with immense financial stress for themselves and their 
families; the real scuffle that a lot of colleges, universities 
are waging to get at the GI money that is available to 
returning service members to go to school; and there is a lot 
of concerns that she has raised both for us and I believe for 
Members of Congress.
    And I know that these are issues that are bipartisan and 
there is concern across the spectrum that we be able to address 
them effectively. We feel the same and she goes out week in, 
week out, visits military bases, works with the JAG Corps to 
bring home insights and perspectives that we can then use to be 
more effective in our work, and we are proud and, frankly, 
grateful to have her as a colleague and to follow her lead in 
these areas.
    Mr. Quigley. I am particularly sensitive and concerned too 
because we have veterans coming home with health issues that 
aren't new, but perhaps will be extraordinary in number and 
intensity. We haven't had incidents where people on four, five, 
six deployments before, so I would like to think our 
institutions would be sensitive to that. But to the extent we 
can help, I think that is just as important.
    My time is over and I yield back.
    Mr. McHenry. With that, I yield 5 minutes to the vice 
chairman, Mr. Guinta, of New Hampshire.
    Mr. Guinta. Thank you, Mr. Chairman.
    Thank you, Mr. Cordray, for testifying today. I have a 
couple of questions just to talk a little bit about 
accountability, transparency.
    Mr. Cordray. Yes.
    Mr. Guinta. I assume those two things are rather important 
to you and rather important to the agency, correct?
    Mr. Cordray. I think they are critical to the credibility 
of the agency and I think you have every right to demand that 
from us, and I hope that you will find that we provide it.
    Mr. Guinta. Do you recall, during Elizabeth Warren's 
testimony back in March of last year, her statement that the 
CFPB is the most constrained and the most accountable agency in 
government?
    Mr. Cordray. I don't recall the exact words, but I 
recognize the tenor of the discussion.
    Mr. Guinta. If I could just have the record reflect that 
that was part of her testimony. Would you agree with that 
statement? Assuming she said it, would you agree with that 
statement, now that you sit in----
    Mr. Cordray. Well, I think Professor Warren had had more 
experience with the Washington agencies than I have had. I have 
been here for a year; she, as you know, had worked as 
congressional oversight and so forth, so she may have broader 
perspective than I. I do know that there are very special 
oversight provisions in our law that apply to us that do not 
apply to any other banking agency.
    So, for example, as was mentioned earlier, our budget is 
subject to a cap. No other banking agency has that. We are not 
able to raise our budget by raising anyone's fees, unlike the 
other banking agencies. If we were to ever have to go above 
that cap, we would come to Congress and be subject to the 
appropriations process. Not true of any other banking agencies. 
Our rules can be overridden by the Financial Stability 
Oversight Committee. Not true of any other banking agency. I 
believe we are subject to more audits and financial and budget 
oversight than other banking agencies.
    So there certainly is a way in which that statement seems 
quite true. Whether it is true across all agencies, I am not 
sure I have the perspective to make a global comment.
    Mr. Guinta. Is it fair to say that your agency should be or 
would be an unbiased agency?
    Mr. Cordray. You know, I would hope that that is so, but I 
imagine that is always going to be in the eye of the beholder. 
I think one of the things we can do in our work to try to make 
sure that we heed to that touchstone, which I agree with you is 
a desirable thing, is to make sure we are hearing broadly and 
in a very open way from all perspective on issues, so 
particularly that we hear from both the providers and the 
consumers that are on both sides of each transaction. I think 
we are making a lot of efforts to do that, but it is also 
probably useful for us to come up here regularly and hear from 
you on it as well.
    Mr. Guinta. Well, given that, and I appreciate hearing you 
say that, and I would tend to agree, we want to see all sides 
of an issue before there is action, my fundamental concern 
moving forward is, as other Members have talked about and will 
continue to talk about, is the process by which you were 
appointed. Does it concern you that the process by which you 
were appointed has an impact on those very individuals or 
businesses or banks that you are going to be regulating?
    Mr. Cordray. I understand that there is controversy that 
people have raised about the appointment. My intention here is 
I am in a job; it is an important job; it is a big job that 
commands all my time and attention. All I can do is try to 
carry out the responsibilities that the law of the land now has 
put on my back and to try to do it in a way that is consistent 
with the values you articulated, which I think are good ones 
for us, transparency and accountability. So I will do that and 
that will be my focus.
    Mr. Guinta. And you mentioned earlier in your testimony 
that you take direction from Congress. Do you also take 
direction from the White House?
    Mr. Cordray. We do not. We are an independent Federal 
agency. As you know, there are a number of those. 
Constitutional scholars scratch their heads at times to figure 
out how they fit directly within the three branches of 
government, but it is my understanding that Congress has 
established independent agencies to keep them closer to the 
Congress, to keep them accountable for enforcing the law, and I 
expect that that is why we will be here frequently for 
oversight and for you to know exactly what we are doing.
    Mr. Guinta. So there have been no directives that you have 
received since your appointment from the White House?
    Mr. Cordray. There have not.
    Mr. Guinta. If there were, in the future, directives, would 
you willingly, proactively share that with this committee?
    Mr. Cordray. It would be within our discretion to determine 
our course, and the way we would exercise that discretion is by 
looking at the statutes that you have passed, which are the 
only thing that give us any authority to do anything at all, 
and make sure that we are adhering closely to carrying those 
out.
    Mr. Guinta. The only reason I bring it up is because in 
terms of accountability and transparency, something I think is 
extremely important, I think it is better to err on the side of 
caution and be over-transparent than under-transparent, which I 
think is the point that the chairman was also making about 
posting things on your Web site, what your regulatory agenda 
is. Those things are extremely important, I think, for the 
country and for those that you oversee.
    Mr. Cordray. Yes.
    Mr. Guinta. So you have credibility and the agency has 
credibility. And I think, as is stands today, there is probably 
some question about that, given the process by which you were 
appointed. So I thank you for your time. Unfortunately, my time 
has expired.
    Mr. McHenry. The gentleman's time has expired.
    We will now recognize the full committee ranking member, 
Mr. Cummings, for 5 minutes.
    Mr. Quigley. Mr. Chairman, before you do that, if I might 
ask, again, for unanimous consent----
    Mr. McHenry. The ranking member is recognized.
    Mr. Quigley. Thank you, Mr. Chairman. I would like to renew 
my motion to ask unanimous consent that other members of the 
committee be allowed to participate, particularly Mr. Connolly, 
who is at the far end.
    Mr. McHenry. Yes. And the Chair did not state correctly at 
the beginning. In order to have other committee members of the 
full committee hear today, that can happen in due course, and 
it is based on seniority on your side of the aisle at the time 
that folks show up, and that is your party's prerogative of 
that. For other Members of Congress who wish to sit in, they 
have to ask unanimous consent at the time that they are here 
and want to ask questions. So Mr. Connolly will be recognized 
in due course.
    Mr. Cummings is recognized for 5 minutes.
    Mr. Cummings. Mr. Cordray, on behalf of my constituents, 
many of whom have lost almost everything they have, many of 
whom have lost their homes, their jobs, their savings, I am 
very pleased that you have been appointed. One of the most 
critical new responsibilities that transferred to the CFPB is 
the authority to oversee nonbanks. Director Cordray, is it true 
that prior to the passage of Dodd-Frank Wall Street Reform and 
Consumer Protection Act, these nonbanks operated in the shadows 
and outside the scrutiny of Federal regulators, is that 
correct?
    Mr. Cordray. It is the case that there was little or no 
regulation of any of them or oversight at the Federal level, 
and whether there was any State-by-State varied greatly; in 
some of them there was little or no at any level.
    Mr. Cummings. In fact, one of Dodd-Frank's top priorities 
was to bring these businesses and products into the regulatory 
sunlight. According to the CFPB, some nearly 20 million 
consumers used payday loans, approximately 200 million 
Americans rely on credit reporting agencies, 14 percent of 
consumers have one or more debts in collection, and nonbank 
lenders originated almost 2 million new mortgages in 2010. Do 
those figures sound correct?
    Mr. Cordray. They do. And as you are pointing out, they are 
substantial.
    Mr. Cummings. So that is an extraordinary number of 
Americans who are regularly exposed to these products that 
have, until now, received just about zero Federal scrutiny.
    Mr. Cordray, a lot of the debate surrounding your 
appointment focus on the bureaucratic and procedural issues, 
but, for consumers, what does a director of the CFPB mean for 
consumer protection from unscrupulous or payday lenders, for 
example?
    Mr. Cordray. Well, it means, Congressman, that we can now, 
as we could not before, begin to have an active supervision 
program over four nonbank areas in particular that are 
specified in the law: mortgage markets, which includes mortgage 
originators, as you said, 2 million of those in 2010; mortgage 
servicers, who have been a troubled area in many respects; 
payday lenders are specified in the statute; and private 
student lenders. It also allows us to expand that program to 
larger participants in other fields, as we will be doing 
shortly, and I think that that is very important.
    The other thing is this isn't only important to consumers, 
although it is vital for them. It is also important to 
responsible businesses who compete in these markets. And it is 
unfair for one business to be subject to regulation and 
oversight and their direct competitor to be subject to none. 
That is an automatic cost differential and it means that those 
who would violate the law to get advantage can get away with 
it. That is not something we should ever want to tolerate and 
it is not something that makes for a functioning marketplace.
    Mr. Cummings. Now, when Ms. Warren was setting up the 
agency, and you may be familiar with this, she talked about how 
she regularly met with bankers, trying to work things out. You 
know, it seems like folks think that a person in your position 
is the bogeyman, that you are going to go around and you are 
going to harm, I guess, the banks. I don't know what they 
think. And they forget that your main objective is to just make 
sure that there is a fair playing field, a fair playing field 
for the banks, but also for our constituents, the ones who live 
in our neighborhoods and the ones who want and deserve to have 
this kind of agency moving forward and doing what you are 
doing.
    Now, she was moving around, meeting with the banks, and 
trying to work out things. For example, she often talked about 
the forms, simplifying mortgage forms, things of that nature, 
and how she was able to work things out with banks and lending 
institutions. Can you tell us about what your plans are?
    Mr. Cordray. Sure.
    Mr. Cummings. Do you plan to continue that kind of effort? 
Because I see this as a win-win. Go ahead.
    Mr. Cordray. I agree with that and I think that bankers and 
community bankers and our credit union heads who know me best, 
the ones from Ohio that I worked with over the years when I was 
a treasurer both at the State and local level, know that I 
reached out to them, I created advisory councils so they could 
help us work better, and they did.
    We are going to have, I have already pledged to the 
community bankers, we are going to have a special community 
bank advisory council in this Bureau and we are going to have a 
credit union advisory council, as well, because we need to hear 
from them because I do think that their interests are often 
aligned with those of consumers. Their business model is a 
customer-facing, customer service delivery model. That is the 
model we want to encourage in the marketplace, so we need to 
hear from them to how we balance our work.
    Mr. Cummings. Now, I see my time is up, but, again, 
welcome. We look forward to working with you.
    Mr. Cordray. Thank you.
    Mr. McHenry. We will now recognize Mr. Meehan of 
Pennsylvania for 5 minutes.
    Mr. Meehan. Thank you, Mr. Chairman.
    And thank you, Mr. Cordray, for not only being here today, 
but your commitment to this process as a former prosecutor. I 
certainly share with you a deep concern for those who are, in 
appropriate times, taken advantage of by some of these 
instruments. And I am pleased to see you spending some time 
talking about the relationship with community bankers.
    You have developed the idea of how the playing field can be 
unlevel with respect to those who are unregulated and you have 
spent some time talking about how important it is that 
community banks, in your own words, can provide tailored 
products and services. They, in effect, know their communities 
the best, and one of the fears I have is the tremendous 
authority you have to be looking at any kind of an instrument, 
so this fine relationship on oversight.
    Now, the first question I have is you are going to be 
regulating, to some extent, the banks that are over $10 billion 
in assets, according to this. But at the same time we still 
have four agencies, the Federal Reserve, the OCC, FDIC, 
National Credit Union are going to be still maintaining their 
oversight over the community banks. How are you going to work 
together to assure we don't have a trickle down, the things 
that you have, that you are making regulations with respect to 
either the $10 billion and up don't trickle down and create a 
whole new set of problems for community banks? And how are you 
going to work in concert with all of these other regulatory 
agencies that still have authority over them?
    Mr. Cordray. So, Congressman, I think that is an extremely 
insightful question because it is something that we are 
wrestling with and trying to figure out as we go, and I would 
suggest that it is a topic that you all should continue to 
focus on as we go forward over this year and the next and bring 
each of the banking agencies in together to talk to us about 
how are we coordinating, how are we collaborating together, 
what are we doing to minimize any duplication. For example, the 
law requires us to coordinate our supervision exam schedules 
with the other regulators, who are still being in some of these 
same institutions. That is something we are trying to do on a 
timing basis. We should be coordinating on the kind of guidance 
or regulations that we----
    Mr. Meehan. As a former attorney general, one of the 
difficulties is the most dangerous place to be is between a 
television camera and one other regulator that thinks they have 
the big case. So how are you going to deal with an agency that 
doesn't want to work with you but says, no, this is our 
authority, we are going to do this, we are looking at this 
issue?
    Mr. Cordray. If people really don't want to work with you, 
that creates a problem and it is not an easy one to get around. 
But let me give you an example. The chairman mentioned we have 
just completed a very strong and detailed memorandum of 
understanding with the Federal Trade Commission, because we do 
have overlapping jurisdiction.
    And we had two goals in mind here that really came out of 
discussions we had with the U.S. Chamber. The first is that we 
should not ever double-team companies, we shouldn't have 
duplicative actions. By the way, that is not only bad for them, 
it would be bad for us; it would be a waste of resources. We 
have limited resources, so----
    Mr. Meehan. May I do this? Because I am sensing you the 
commitment to work together.
    Mr. Cordray. Yes.
    Mr. Meehan. Because I have one more question I want to ask.
    Mr. Cordray. Okay.
    Mr. Meehan. I would like to ask if you would do two things: 
if you would make a commitment to see the extent to which you 
can reach memoranda of understanding with some of these other 
agencies, as well as asking, to the extent you can, I don't 
want to nail you down with commitments, but that you will do 
impact analysis on when the regulations are made for the 
institutions above $10 billion, you will do an impact analysis 
on how it will affect community banks when those regulations or 
other determinations are made.
    Mr. Cordray. I made that commitment in my testimony in my 
nomination at the Senate Banking Committee and we are starting 
down that road already. I had a big call with a number of the 
community bankers through the ICBA last week, might have been 
the week before last, they are kind of running together a 
little bit right now, in which we pledged to do that. And with 
our remittance rule, which we just put out, we have added and 
proposed a further tweak, which is to figure out is there a 
threshold below which that rule should not apply. And that is 
the approach we are going to try to take generally.
    Mr. Meehan. Thank you for that commitment. I have one quick 
area I would love to spend more time on.
    Mr. Cordray. Sure.
    Mr. Meehan. You have tremendous authority when you are 
dealing with institutions once you determine to do an 
investigation, and it includes the ability to effectively ask 
them for all kinds of information, including what you can 
determine, confidential and privileged information. One of the 
real fears I have is the standard you are going to use before 
you request confidential and privileged information, and then 
the second is, in light of the McKesson situation and other 
things which I imagine you are familiar with from our days as 
prosecutors, how you are going to protect that against third 
parties that may be trying to access that.
    Mr. Cordray. That is an issue that the big financial firms, 
and not so big, have raised with us. It is a concern for them. 
There is a bit of an omission in the statute where there is a 
mention of other banking agencies that have a special provision 
for them. We were not included in that. That is an oversight 
that Congress may want to look at and may want to fix.
    Mr. Meehan. I am sorry, what is that oversight?
    Mr. Cordray. There is a special provision that was added 
somewhere in the course of the last 10 years that specifies 
that when privileged information is provided to a banking 
agency, that that does not waive any privilege against third 
parties. It is very much what you just described in your 
question. However, instead of simply saying banking agencies, 
where I think we could fit comfortably, it is specified by 
name, certain ones. We were not in existence then. When we came 
into existence, it was not noted to fix that provision in the 
statute. I had said that we would be supportive of that.
    In the meantime, we are working with financial institutions 
to try to allay their concerns and help them see that we 
recognize the problem, and we want to do all we can both to do 
our work effectively, which is important, and to be mindful of 
that concern for them, which is a real concern.
    Mr. McHenry. The gentleman's time has expired.
    Mr. Welch of Vermont is recognized for 5 minutes.
    Mr. Welch. Thank you, Mr. Chairman. Mr. Chairman, I want to 
thank you for calling the hearing. There is a lot of 
controversy about the financial services industry and what 
happened after the meltdown, and to some extent I sense that 
the concern that is expressed by the calling of this hearing is 
one of excessive regulation. That is a legitimate concern. We 
need regulation. I happen to think that the failure to have 
regulation caused a lot of harm.
    But if we have too much regulation, that can get in the way 
of, like what Mr. Meehan was saying, the facility of consumer 
banks, pardon me, of small banks that can be collateral damage 
from some of the regulatory provisions in Dodd-Frank that were 
intended for the large banks. When in Ohio and in Vermont, our 
small banks were doing the job and not causing the problem.
    But, Mr. Chairman, I just want to remind Members, because I 
think this should put your mind at ease. Mr. Cordray comes from 
Ohio. He has Republicans and Democrats who were getting 
hammered. He saved over $2 billion for consumers in Ohio, and 
the folks who were on the saving end of that didn't look at 
that as a Republican or Democratic deal, they just had a voice 
in the regulatory process, an attorney general and a treasurer 
who was going to do the job for them. And I also noted in Mr. 
Cordray's history that he got an award from the Better Business 
Bureau. There are a lot of small businesses who had access to 
the process felt they had a place that they could go to to get 
fair consideration for the concerns that they have.
    Also what I have heard in the testimony that Mr. Cordray 
has provided is that one of his concerns will be whether the 
regulations are working. It is not as though every regulation 
is a good regulation. Too much regulation gets in the way.
    And I want to give you a chance, Mr. Cordray, just to 
address that particular concern, which I think is a concern 
that many of my Republican colleagues, understandably and 
legitimately, have.
    Mr. Cordray. Thank you, Congressman. Appreciate the kind 
words.
    In terms of regulations actually working, we are in a good 
place on this issue, and maybe a unique place, because we are a 
brand new agency that just came into existence. We don't have 
any vested interest in what's been done before, and yet we have 
now inherited just a forest of regulations from other agencies. 
And one of the first things that we have determined that we 
need to do and want to do is we published a notice in the 
Federal Register to say that we are interested in considering 
how we can streamline our inherited regulations. Where can we 
reduce the burden without sacrificing anything in terms of 
consumer welfare?
    And the reason this is important is you have a lot of rules 
that are developed from time to time, and they kind of add up 
over time. But with each new rule it is well intentioned, there 
is a purpose you are trying to serve.
    Mr. Welch. Right.
    Mr. Cordray. But there isn't, often, a consideration of 
when you put this against the entire mass of rules, is it too 
much?
    Mr. Welch. Okay. So would it be fair to say, in your view, 
simple and clear beats complex and confusing?
    Mr. Cordray. Every day of the week, yes.
    Mr. Welch. All right.
    Mr. Chairman, you heard it here.
    Also, we need to have the opportunity for small businesses, 
for kids with student loans, for folks who are trying to hang 
on to their house to have some place they can go to to get an 
answer. There are some Vermont situations. A woman called, her 
son's student loan is with the Department of Education and 
Sallie Mae. She is trying to get an answer and hasn't gotten 
one for 30 days. They make $44,000 a year and she is the sole 
provider for three sons, and she has no place to go.
    Another situation. This is, again, a Vermont situation. A 
dad called our office about his son who was in a bad car 
accident, unable to return to school full-time. After the 
accident he received a bill from the bank demanding payments on 
the loans immediately after graduating and then claiming that 
the grace period that you get is the recovery period that he 
had while he was in the hospital.
    Another one, Bridget, 29 years old, significant student 
loans with Sallie Mae in the American education loan, $176,000. 
She has been making her payments, $7,000 in interest in a year, 
but she can't get by. Sallie Mae has not been willing to 
discuss negotiating any kind of payment.
    Under the Consumer Protection Finance Agency, would these 
Vermonters be able to call your office and at least get a yes 
or no answer on what they could do and some help through the 
process?
    Mr. Cordray. Let me say generally we have all heard the 
horror stories about mortgage servicing, and I know you hear 
from the same people we do. There is a growing problem in the 
student loan servicing realm as well. It is of concern to us. 
We are aware of it. We are taking consumer complaints on our 
Web site thus far about credit card products and mortgage 
products. We are going to expand to other products soon and 
student loans will be one of those.
    In the meantime, we are working on trying to simplify and 
clarify, as you said earlier, simple and clear is better, the 
student loan shopping worksheet that we have worked on with the 
Department of Education to try to make things easier for 
students and their families to understand what choices they are 
making. So it is an area that is of great importance. We know 
how tuition has grown and the burdens on people have 
multiplied, and then they are stuck with these other problems 
that occur.
    Mr. Welch. Thank you. I yield back.
    Mr. McHenry. I thank my colleague.
    And to state for the record, the hearing is entitled, How 
Will the CFPB Function Under Richard Cordray? The intent of 
this chairman who called this hearing was to understand the 
consequences of the appointment of Mr. Cordray as head of the 
CFPB in this unprecedented action the President took and the 
legal consequences as a result and uncertainty that that would 
create. So that is the intention.
    With that, I recognize the full committee chairman, Mr. 
Issa, for 5 minutes.
    Mr. Issa. Thank you, Mr. Chairman.
    Greetings. Welcome. You know, it is my hope that there 
won't be any long-term controversy on your appointment, and I 
certainly would like to see certainty sooner, rather than 
later, in your position.
    Let me go through a couple of things, and Mr. Welch kind of 
asked one of those questions that leads a point. We think we 
know what your agency can do. Would you make it clear that, for 
example, your agency cannot order some entity to take existing 
contract law and simply discount it? That it is beyond the 
scope of your new agency to say, yeah, we want Sallie Mae to 
cut principal and renegotiate? As a matter of law, that is not 
within your purview, is it?
    Mr. Cordray. We have the limited authority that has been 
given us by Congress. Our authority is to follow that law, it 
is not to disrupt or interfere with other sources of law. 
Another example is that in the statute Congress made it plain 
that we had no authority to set the interest rate on any 
product, to price that product. There are States who are doing 
that on payday loans and other things, but that is not within 
our authority to do.
    Mr. Issa. Well, thank you. I will mention that this 
Congress, or a previous Congress, has wrestled with that same 
difficult task.
    Mr. Cordray. Yes.
    Mr. Issa. And I don't envy you having to at least have 
people fully understand that if you take a 1-day loan out and 
it is $12 of fee or interest on $100, it is a lot of money, but 
it is probably, if you really look at the cost of processing, 
less than the cost of processing. So we often have exactly that 
problem, is how do we keep gouging, how do we define gouging 
and prevent it. Hopefully, your agency will do a good job of 
making sure at least the consumer is informed, even if it is 
not within your power to change that.
    Mr. Cordray. Right.
    Mr. Issa. Let me go through a couple of questions. And I 
know this is difficult, that you are sort of being asked about 
how you got appointed more often than you are asked about what 
you are going to do with your appointment, but as a fellow 
Ohioan, I will try to make this as painless as it can be here 
today, although I represent, now, California.
    You know there is a controversy and that there is a legal 
challenge. I presume that you have looked at at least some of 
the President's council's opinion, other justices', so on. You 
are familiar with it as one studied in the law.
    Mr. Cordray. I did read the Justice Department opinion.
    Mr. Issa. And I would presume that your opinion is that it 
is a good opinion, even if it is the opposite of the Bush 
opinion in a similar situation, and that you are going to 
remain on the job as a result.
    Mr. Cordray. I believe the appointment is valid and, given 
that, I now have legal responsibilities under the law of the 
land to carry out my role as director for the Bureau, yes.
    Mr. Issa. But I am concerned for our country and I am going 
to ask you a difficult question. Have you begun seeking 
counsel, weighing how you could mitigate, if the administration 
was wrong and we find that there is, through suits and 
challenges, a question of actions you take? In other words, do 
you have a plan B? Have you looked for ways to ensure that even 
if your appointment ceased to be valid, that the work that you 
are overseeing would somehow have the ability to continue on 
because of some level of redundancy of authority?
    Mr. Cordray. Mr. Chairman, it is a good question and it is 
a bit of a dilemma, which is I have been appointed to be the 
director. There are certain legal responsibilities I now have 
and the Bureau has: we have to go forward with rulemakings; we 
are under specific deadlines; we have to carry out the intent 
of that law, which is well intended to better protect American 
consumers. Either we do or we don't, it feels to me. And it 
seems to me that the right answer is that we do and we need to 
go ahead, and that is what we are doing and that is what we 
will continue to do.
    Mr. Issa. Although my question was a little bit more 
narrow. Have you looked into forms of redundancy or some way to 
ensure that you still do what you want to do, what you believe 
your mandate is to do, but that you can look at action after 
action and ask the question during this period of uncertainty, 
as the NRLB and other--you are not the only person in this 
kettle of stew, but have you looked at ways to ensure that this 
committee, in our oversight, looks and says how many of these 
things would have to be redone, how much waste would there be 
in government, and so on, and to mitigate that.
    Look, I am not asking, and I want to make it very clear, I 
am not asking you to act as though you weren't appointed. I 
want you to act as though you were appointed. I think that is 
your responsibility. The question is more as we as a committee 
look at the ramifications of any time there is uncertainty to 
an appointment for a period of time, what can we see done to 
reduce the chances that that uncertainty, if it were to 
ultimately culminate in a question of law in this case.
    And we could have the same argument, by the way, of the law 
that the President signed, well, he says the Senate was in 
recess. You can't pass a bill in recess. The flip side of that 
is if you appointment is legal, then the law the President 
signed which was passed while in recess may be in doubt.
    So I will let the Senate and the President worry about the 
law, but have you looked at that or would you agree here today 
to at least put some time and energy into asking how many 
things would sustain your departure should, for any reason, 
that occur?
    Mr. Cordray. I will give it some thought, Congressman, and 
I understand the tenor of the question as you explained it 
further. I do think the one thing that we could not do, and I 
think it would be dereliction of duty, would be for me to say 
we are not going to go forward and do the things the law of the 
land now tells us to do because I am going to somehow act as 
though I was not appointed. I just think that is not tenable. 
And as to the rest of it, I will give it some thought. If you 
all have insights, I would be happy to have you share those 
with me.
    Mr. Issa. And I would be glad to share it with you off the 
record or off this hearing. Candidly, my challenge is I look 
and say I want whatever your thousand people, by the time the 
end of the year comes, I want them to make sure that they do 
not waste their time in something that has to be redone.
    I might note that all of us on the dais are aware that 
sometimes we have to recuse ourselves, but, you know, one of 
those things is if we know that a vote is going to come out 
exactly the same whether we recuse ourselves or not, sometimes 
it is a lot easier to say, you know, caution says recuse 
yourself so they can't question the vote, while ultimately the 
same outcome occurs. And that is a lot of what I am asking for, 
that at least you be concerned enough to ask the questions of 
can we have belt and suspenders for a period of time while 
these challenges go on.
    Mr. Cordray. I understand the concern.
    Mr. Issa. I thank you very much and thank the chairman.
    Mr. McHenry. Mrs. Maloney from New York for 5 minutes.
    Mrs. Maloney. Welcome, Director Cordray. I believe your 
appointment reflected the overwhelming consensus in the 
American public that reforms were needed to prevent another 
crisis and that the creation of the Consumer Financial 
Protection Board, and the Credit Card Act and other consumer 
protections, were deeply needed. In fact, I have a letter here 
that was signed by 49 Members of Congress in support of your 
confirmation and I am glad to hear there is some support on the 
other side of the aisle for your appointment, and I would like 
to put that in the record.
    I would like to--is there consensus, overwhelming consensus 
to place this in the record?
    Mr. Issa. I would ask unanimous consent that her statement 
be placed in the record.
    Mrs. Maloney. Thank you, Mr. Chairman.
    Mr. McHenry. Without objection.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] 73165.011
    
    [GRAPHIC] [TIFF OMITTED] 73165.012
    
    [GRAPHIC] [TIFF OMITTED] 73165.013
    
    [GRAPHIC] [TIFF OMITTED] 73165.014
    
    [GRAPHIC] [TIFF OMITTED] 73165.015
    
    Mrs. Maloney. And some of my colleagues have expressed 
concern that there is not enough oversight. I know one of my 
amendments to the bill was to require that you come before, the 
director come before Congress twice, but I would like to put in 
the record that in the last 12 months, 11 months there have 
been 12 hearings with the CFPB before Congress, and also I 
would like to place in the record statements by all of the 
leading consumer protection groups in support of the CFPB going 
forward in your appointment.
    Mr. McHenry. Without objection.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] 73165.016
    
    Mrs. Maloney. So I feel that we suffered tremendous loss. 
We are still suffering. People are losing their homes and we 
lost trillions of wealth in this country because of, truly, 
mismanagement, and I would like to try to understand why people 
are opposed to your appointment, because isn't it true that one 
of the new authorities that the CFPB has is the ability to 
issue regulations to prohibit unfair, deceptive, and abusive 
practices as they relate to financial products? Is that true? 
Is that one of your goals?
    Mr. Cordray. That is one of the authorities that the law 
gives us, yes.
    Mrs. Maloney. And before that there were a number of 
agencies that had roles to play, but too often consumer 
protection was an afterthought, a secondary thought, a third 
thought, or as we saw in the subprime crisis, not thought about 
at all. So I think that creating an agency that focuses on 
consumers and preventing unfair, deceptive, and abusive 
practices should be a goal that all Americans support.
    In fact, I would like to place in the record a letter from 
the U.S. Conference of Mayors that was sent to Senate Majority 
Leader Reid and Minority Leader McConnell, and I think it 
pointed out very clearly that without a director the new CFPB 
is hamstrung in its ability to hold nonbank firms accountable 
and to rein in some of the financial practices that contributed 
to the economic downturn that hurt so many individuals, so many 
communities, and our overall economy. It went on to say the 
agency is not able to use its authority to prohibit unfair, 
deceptive, or abusive acts or practices, or to issue new rules 
requiring better disclosures of the terms of financial 
products. And they go on to urge a swift appointment of a 
director so that we can get out there and protect consumers.
    And I would like to ask you----
    Mr. McHenry. Without objection, that will be entered into 
the record.
    Mrs. Maloney. Thank you so much.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] 73165.017
    
    [GRAPHIC] [TIFF OMITTED] 73165.018
    
    Mrs. Maloney. Why do you think opponents fear the Bureau's 
ability to prohibit unfair, deceptive, and abusive practices? 
Why are people trying to stop the agency from going forward to 
protect people? Do you have any idea why this is happening?
    Mr. Cordray. Well, Congresswoman, I take people at their 
word and I assume that the concern is with potential 
overregulation and uncertainty affecting the markets. I think 
my experience is that people on both sides of the aisle are 
trying to do what they think is right, and I take that at face 
value.
    Mrs. Maloney. But there is more oversight over this Bureau 
than any other in terms of the capping of the budget, in terms 
of appealing to the financial stability on any rules. So why 
would anyone want to strain or delay the CFPB's ability to 
prohibit these kinds of practices, to prohibit and restrain 
unfair, deceptive, and abusive practices? You testified earlier 
that you had more oversight of your actions, they can even 
repeal actions by the CFPB. So I am having difficulty 
understanding why people want to delay, stall, defang. Do you 
have any idea why some people feel that way?
    Mr. Cordray. I don't have a very informed perspective on 
that issue. I just know that I believe that the right thing for 
us to do is to go ahead and do our work, and that is what we 
are going to do.
    Mrs. Maloney. But some of these have caused substantial 
injury to the American public, abusive practices, toxic 
products. Is that true?
    Mr. Cordray. Look, I think----
    Mrs. Maloney. The subprime crisis, the ability to give 
mortgages to people who can't even pay their rent, much less a 
mortgage. There was no oversight, no guidelines. There were 
abuses, you have to admit.
    Mr. Cordray. Look, in my lifetime, the single thing that 
hurt more Americans than anything I have ever seen was the 
financial crisis, the meltdown, the recession. Millions of 
people lost jobs. Millions of people lost homes. I do think 
that one of the significant causes of that were the problems in 
the markets that were allowed to develop and metastasize. And I 
think that we can help head that off in the future and, if so, 
that would be a very good thing.
    Mrs. Maloney. I agree. Congratulations on your appointment.
    Mr. McHenry. I hate to interrupt, but the gentlelady's time 
has expired. I do appreciate the exchange of ideas and thoughts 
and we will continue on.
    Mr. Gowdy from South Carolina is recognized for 5 minutes.
    Mr. Gowdy. I thank the gentleman from North Carolina.
    Mr. Cordray, my first question has something of a lengthy 
predicate, so I would ask you to bear with me, and then the 
rest of them, hopefully, will be a little quicker predicate.
    Recently, the CFPB released a document on examination 
procedures for short-term, small dollar loans. In testimony 
last year before this committee, Professor Elizabeth Warren 
stated the principle role of consumer protection regulation in 
credit markets is to make it easy for consumers to see what 
they are getting and to make it easy for consumers to compare 
one product with another so markets can function effectively.
    On page 2 of the examination procedures, in a footnote, it 
is stated that overdraft lines of credit and services do not 
fall into the definition of short-term, small dollar loan. Both 
the FDIC and Federal Reserve had indicated consumers use 
overdraft protection in substantially the same way they would 
other short-term loan products.
    Why have you decided to exclude these products from 
guidance?
    Mr. Cordray. Thank you, Congressman, for the question. I 
don't think it would be fair to say that we are excluding these 
products from guidance, but when you try to define the market 
for small consumer loans there is actually a variety of 
potential products there; there is payday loans, there are car 
title loans, there are pawn brokers, there are other sort of 
rent-to-own type products. There also, as you note, overdraft 
protection is an alternative that can give you access to short-
term money for considerable fees, typically, and there are 
issues around that the other regulators have already recognized 
and that we see as well.
    It is typically the case that when you are talking about 
overdraft protection, you are talking about a deposit 
institution, a bank and a bank account. A payday loan is a 
nonbank product, typically; not necessarily. There are some new 
products some of the banks are starting to offer that they call 
some version of deposit advance products. But this is a 
somewhat different product and it is not, itself, a deposit 
type product. So I think we were trying to focus our exam 
guidance there on a particular type of product in the nonbank 
sector.
    But I think you are absolutely right to note that there are 
comparabilities between that and overdraft protection in the 
effect on consumers, and there is also comparability between 
those and the deposit advance products that a handful of banks 
and perhaps others to come are starting to offer, and credit 
unions have a short-term product as well, stretch pay and other 
things it is typically called.
    Mr. Gowdy. Well, to your credit, I have not heard you 
demagog this morning or this afternoon, but there is a lot of 
conversation about Wall Street versus Main Street. There is a 
Wall Street in my hometown; it is about two blocks long. I 
don't think there are any businesses on it; it is near the 
courthouse. Main Street is much bigger, much wider, many more 
businesses, and there are some businessmen in the State of 
South Carolina, and I suspect in other States, who have asked 
legitimately why their business is being treated differently 
from others.
    So I heard your explanation. I would just ask you to be 
sensitive to the fact that many people use overdraft protection 
as a form of a loan, and if the numbers are right, 20 million 
people choose to go another route. And there was a lot of fear 
that your putative predecessor wanted to ban payday lending. So 
I would ask you do you want to ban it?
    Mr. Cordray. Congressman, I don't look at these issues in 
terms of banning products. What that provision of the code 
talks about is addressing unfair, deceptive, and abusive acts 
or practices. One of the things we did, you may have seen last 
week, we went to Birmingham, Alabama and held a field hearing 
on payday lending. It was important for us to do that because, 
in particular, we need to know more about all the perspectives 
on this product.
    There are some issues that we have seen in terms of 
potential unauthorized withdrawals from bank accounts that 
would be illegal; there are some debt collection tactics being 
used that would be illegal. In terms of the structure and core 
essence of the product itself, we felt we need to know more 
about it and we were pleased that in that hearing we ended up 
hearing pretty extensively from both sides of the issue. It 
gave us a lot to come back and digest.
    But I think that we need to analyze this, we need to think 
carefully about it, we need to hear from people and then we can 
make judgments. But to try to make judgments just off the top 
of our head is not the right approach.
    Mr. Gowdy. You made reference to conduct that is currently 
illegal. The last time Professor Warren was here, I counted and 
my colleagues made use of the word illegal or unlawful 19 
different times, which, as a former prosecutor, strikes me that 
if it is currently illegal and unlawful, why aren't people 
being prosecuted for it? Have you had any conversations with 
the Department of Justice about the status of any of their 
lawsuits that may have arisen from the 2008 collapse?
    Mr. Cordray. We have discussions with the Department of 
Justice about their work and our work. We actually signed a 
memorandum of understanding with them also, before the end of 
last week, which we were required to do by law so that we could 
coordinate. I will tell you that we have also reached out to 
the U.S. attorneys, who have a great interest and who told us, 
frankly, that had they known more about mortgage fraud in the 
early part of the last decade, there were cases they could have 
dealt with that they did not see the significance of, and they 
regretted, some of them, that they did not.
    While we were in Birmingham, we coordinated closely with 
the U.S. attorney for that district of Alabama, who was 
interested in how payday lending issues affect her 
constituents, and we are going to try to take insight and 
guidance from others on this as we think about the right 
approach, but we are at the beginning of that.
    Mr. Gowdy. Mr. Chairman, can I ask a question that would 
have a one word answer?
    Mr. Guinta. Mr. Chairman, I would ask for unanimous consent 
to give the Member 1 additional minute.
    Mr. McHenry. Without objection.
    Mr. Gowdy. I thank the chairman and the vice chairman.
    You mentioned the U.S. Attorney's Office and Department of 
Justice. Have the statute of limitations expired on any of the 
cases that they wish they had known more about?
    Mr. Cordray. I am sure that they have because some of the 
mortgage fraud cases, in fact, when I was a local treasurer and 
we saw irregularities in our local real estate market which 
turned out to be flipping schemes and scams, that was 2004, 
2005. You know better than I, we depend on exactly what the 
nature of the criminal activity was that would be charged, what 
the limitations period would be. Some of those I think probably 
very likely have expired; others probably have not.
    Mr. Gowdy. Thank you, Mr. Chairman.
    Mr. McHenry. I thank the committee's indulgence.
    Ms. Speier from California is recognized for 5 minutes.
    Ms. Speier. Thank you, Mr. Chairman.
    Mr. Cordray, welcome. We have awaited your appointment for 
a long time and, as one Member, delighted that you are now on 
the job doing the people's business. I would also like to point 
out to my colleagues that recess appointments are not unusual. 
In fact, President Clinton made 139, President George W. Bush 
made 171, and President Obama has made a little over 30. And I 
think that your appointment is very key to us being able to 
move forward and protect consumers in America.
    Let me ask you a couple questions. We got off on payday 
lending just a moment ago and, as you are certainly aware, 
there are more payday lenders in this country than there are 
McDonald's franchises. My question to you would be is it 
abusive for a lender to charge a 400 percent interest rate?
    Mr. Cordray. That is an interesting and difficult question. 
There are States, including my home State of Ohio, that have 
made a determination in the legislature to cap the interest 
rate on payday loans in Ohio. The cap was set at 28 percent.
    As I mentioned earlier, we do not have the authority as a 
Bureau, the statute is very clear, to cap any interest rates on 
any financial products. There is clearly a demand for small 
consumer loans that shows up in the demand for this product, 
even though it is a pretty tough product to sustain over time, 
so it is something that we, as I said, we just conducted a 
field hearing on the issue because we are very interested in 
it, we need to know more.
    We were happy to hear from all sides, both industry and 
customers of industry, and also those who are opposed to its 
affects in their community, and it is something that we are 
going to continue to size up. But I think----
    Ms. Speier. All right, thank you. Let's move on. Why don't 
you tell us how many complaints you have received from 
consumers in this country since the Bureau has been 
established.
    Mr. Cordray. We have received thousands, and the volume of 
complaints we receive is growing, I assume as our visibility 
grows, and also because we are phasing in periodically the 
handling of different kinds of complaints as we built from 
scratch. We started with credit card complaints. In December we 
added mortgage complaints, which I am sure you all know because 
you all get constituents who are you telling you their stories 
and asking for help. Immensely more complicated, but we have 
been getting a higher volume of those now. We are going to add 
other products as we go over the course of this year and take 
complaints on those as well, but we are hearing a lot from 
people.
    Ms. Speier. And what are you hearing about the complaints 
relative to credit cards?
    Mr. Cordray. We hear all kinds of things. You can imagine. 
We hear all the things that you hear. We hear complaints about 
charges and fees that people don't understand why they are 
there. We get complaints about changes in interest rates that 
they don't understand why that happened. We get complaints 
about----
    Ms. Speier. All right. Excuse me for interrupting, but 
there are a couple of questions I want to get to.
    Mr. Cordray. Sure.
    Ms. Speier. Let me ask you this. Financial privacy is a 
huge concern to most consumers, and when you fill out your 
application for a credit card or for a mortgage you are doing 
it for that specific purpose, not to have it then sold to third 
parties to be used in whatever ways they deem appropriate. Some 
States have passed laws to protect financial privacy and give 
consumers the ability to opt in or opt out. Do you have any 
interest in pursuing that within your Bureau?
    Mr. Cordray. We inherited, I mentioned earlier about 
overdraft protection. There is opt in, opt out rule that was 
adopted with respect to that product. I think that there are 
other areas where that can be an appropriate approach, and we 
also have inherited some authority over Gramm-Leach-Blilely and 
some of the financial privacy issues for consumers that are of 
great concern.
    When I was attorney general, perhaps when I was treasurer 
of Ohio, we had a credit freeze bill in our legislature that I 
testified in support of which had to do with your ability to 
protect your financial information against identity theft, 
which is the fastest growing crime in the United States and a 
very easy crime for people to perpetrate anonymously through 
the Internet. So it is an area of real concern and it is 
something that I know Congress has been concerned about and has 
legislated on it. We will be looking at those issues with 
respect to the consumers we hear from. And there is something 
of a difficult balance there, but some of these issues don't 
seem quite as hard.
    Ms. Speier. All right, in the 9-seconds I have left, on 
student loans, a huge problem. You said in a New York Times 
article earlier this month it could be a redo of the subprime 
market. Do you believe that private loans should be 
extinguished at death or not, private student loans?
    Mr. Cordray. I don't have a position on that issue; it is 
not something I have thought carefully about, so I wouldn't 
want to opine off the top of my head. The total student loan 
burden is still much smaller than the mortgage debt in this 
country, but it is growing fast and, in fact, it is probably 
growing faster than any other kind of consumer debt. So the 
whole area is one of concern, but I don't have a position for 
you today on whether that should be extinguished at death; that 
seems like a matter for Congress.
    Mr. McHenry. The gentlelady's time has expired.
    With that, I will recognize----
    Mr. Quigley. I am sorry.
    Mr. McHenry. The ranking member seeks recognition?
    Mr. Quigley. I am sorry.
    Mr. McHenry. For what purpose does the gentleman seek 
recognition?
    Mr. Quigley. I apologize, Mr. Chairman. The ranking member 
of the full committee, Mr. Cummings, was going to ask unanimous 
consent to have a letter he wrote dated January 23, 2011, to 
Chairman Issa on this matter entered into the record.
    Mr. McHenry. Reserving the right to object. Is this a 
letter presented--what is the nature of the letter?
    Mr. Quigley. I was just handed the letter. I was doing the 
chairman a parliamentary favor.
    Mr. McHenry. I certainly understand. I certainly appreciate 
the ranking member and, without objection, this will be entered 
into the record.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] 73165.019
    
    [GRAPHIC] [TIFF OMITTED] 73165.020
    
    [GRAPHIC] [TIFF OMITTED] 73165.021
    
    [GRAPHIC] [TIFF OMITTED] 73165.022
    
    [GRAPHIC] [TIFF OMITTED] 73165.023
    
    [GRAPHIC] [TIFF OMITTED] 73165.024
    
    [GRAPHIC] [TIFF OMITTED] 73165.025
    
    Mr. McHenry. With that, we will recognize Mr. Ross of 
Florida for 5 minutes.
    Mr. Ross. Thank you, Mr. Chairman.
    Mr. Cordray, I think you are going to have your hands full 
with regard to legitimizing not only your appointment, but also 
the agency with which you are going to lead. I have had a 
chance to review not only your opening statement, but also 
listen to it, and you make several references about the 
Consumer Bureau will benefit honest business, will support 
honest businesses, honest businesses want to compete in a 
market where buyers understand the terms. I think in your 
conclusion you say to make the financial markets work better 
for consumers and honest businesses that serve them.
    What constitutes an honest business?
    Mr. Cordray. To me, an honest business is a business that 
abides by the law and competes in a fair way in the 
marketplace. Let me give you a couple examples of what I saw as 
dishonest among businesses over the years. When I was a local 
treasurer, I was responsible for collecting delinquent property 
taxes, and we saw certain businesses that would put a low 
priority on paying their property taxes because it gave them a 
cost advantage if nobody went after them and never enforced the 
law against them, and I made it a point to do that to level the 
playing field on behalf of all the law-abiding taxpaying 
businesses.
    I could give you other examples.
    Mr. Ross. Would it be just safe to say simply that it is 
what you have been charged with, to prevent an unfair, 
deceptive, or abusive act or practice? I mean, does that 
constitute an honest business? My point is, Mr. Cordray, is 
that there are little, if any, standards by which your 
regulatory control should be exercised.
    And I guess my concern is that you have been given broad 
powers and now we are saying we are only going to--I think 
business is business and I think saying an honest business 
means that all other businesses out there aren't honest, and I 
guess what I am asking you is in your rulemaking is there a 
standard, is there something that says this is the level with 
which we are going to hold businesses accountable?
    But, more importantly, at what point do you hold them? 
Because, again, you are a whole new agency and you are looking 
at a business community that is out there and says at what 
point do they get involved from a regulatory view. Do they get 
involved and say do not make this loan? Do they get involved 
after the loan is made and say you shouldn't have made this 
loan and we are going to fine you and correct performances 
here? That is my point.
    Mr. Cordray. I think I understand your question better than 
I did when I answered it before. So we don't have authority as 
a Bureau to attack or make judgments about a dishonest 
business. Dishonesty in itself doesn't violate the law, but I 
do think this is a term that most people can understand. And I 
will tell you, I saw and I took on dishonest businesses when I 
was a State attorney general. I saw businesses that were 
fraudulent, businesses who were scams. They were making money, 
they were businesses, but they were violating the law.
    Mr. Ross. And I understand that you utilized private law 
firms to prosecute some of these suits against businesses that 
were in violation in furtherance of your enforcement duties. Is 
that something that you are going to seek to do also in your 
capacity, to utilize private law firms to do that, plaintiff 
law firms?
    Mr. Cordray. No, it is not.
    Mr. Ross. Okay. With regard to I guess after your first 4 
months you received over 5,000 credit card complaints that you 
investigated and I think only 400 of those came back by the 
consumers saying they weren't resolved to their satisfaction, 
or approximately 8 percent of those. Did you collect data as to 
whether those 5,000 were as a result of illegal activity or 
just customer dissatisfaction?
    Mr. Cordray. It has been an interesting area for us, 
Congressman, as you can understand. We weren't sure what we 
would find when we started out, and what we are finding is that 
there is a considerable willingness on the part of the 
financial institutions and consumers, once we can get them to 
work together to see if they can figure out and resolve those 
issues. We are going to continue to analyze this as we go. We 
just have a little bit of data so far; we will have more as we 
go. A lot of it is disagreements and misunderstandings and just 
different points of view. Some of it is----
    Mr. Ross. But this data that you are collecting--and let me 
ask you this.
    Mr. Cordray. Yes.
    Mr. Ross. Is this something that you want to expand further 
into the mortgage lending industry?
    Mr. Cordray. We are now taking complaints on mortgage 
issues, yes.
    Mr. Ross. And the data that you collect, do you intend to 
share it? Is it something that you want to just keep for 
internal purposes, or what do you want to do with that data?
    Mr. Cordray. Sure. The first thing we do with the 
complaints is we make efforts to get the complaints resolved. 
We refer them to the financial institutions. They have actually 
been very cooperative with us. I think they understand that 
this is good business for them. I think often they prefer that 
the customers go to them directly rather than coming to us, but 
it is the same difference in the end. We also then are 
collecting the data about what the consumers are telling us and 
what----
    Mr. Ross. Will you maintain this confidentiality? That is 
the important thing.
    Mr. Cordray. Well, that is a hard question that we are 
working through right now. We have a notice out to hear from 
people about how we should handle that data. We are subject, as 
you probably know, to the Freedom of Information Act, so some 
of it has to be public as long as we scrub it out of personal 
identifiable information. Some of these issues are quite 
complex. I will frankly say that our lawyers are looking at 
them carefully. We want to be transparent, but we want to also 
not be unfair. So that is the balance we are trying to strike.
    Mr. Ross. Thank you. I see my time has expired and I yield 
back.
    Mr. McHenry. I thank the gentleman.
    Mr. Connolly of Virginia is recognized for 5 minutes.
    Mr. Connolly. Thank you, Mr. Chairman.
    Mr. Cordray, welcome to the committee and let me thank you 
for your willingness to serve your country in a difficult role, 
and I very much appreciate your being here. Let me also say, 
however, and this may surprise my colleagues on the Republican 
side of the aisle, I frankly share the misgivings about recess 
appointments.
    From my reading of the Constitution of the United States, 
recess appointments were intended to give the President the 
power to run the government when there were long stretches of 
Congress not being in session. And, frankly, in my view, recess 
appointments have been abused by both Republican and Democratic 
presidents.
    And if my Republican friends on this committee and in this 
body actually want to correct that, not by using you as the 
example, but by moving forward to correct that on a bipartisan 
basis, they would find this Democrat more than willing to 
cooperate, because I think it is another example of, frankly, 
executive encroachment on the prerogatives of the legislature. 
That is a different issue.
    Having said all of that, would that our hands being 
entirely clean here in the Congress, but you can't have it both 
ways. The chairman indicated that your appointment was 
unprecedented. I don't know if that is true, but I do know 
this, that to have 44 Members of the other body actually write 
a letter saying, no matter what, no matter the virtues, we are 
going to block any appointment to this body to protect 
consumers of America, duly constituted in the law, because my 
equal reading of the Constitution says the way a law becomes a 
law is it passes both bodies, goes to the President and is 
signed into law.
    Now, you win or lose. I have lost some. I have had 
amendments that weren't accepted or were defeated. I have had 
amendments that were passed. But once it becomes a law, we 
implement it. That is our duty as legislators, it seems to me, 
and that is the duty of the President.
    It is unprecedented to have all but two Members of the 
other party in the other body actually say, no, we don't care 
if we lost, we are going to thwart it anyhow. That is not how 
the Constitution intended legislation to work. It is not at all 
an example of check and balance in government, and it is, in my 
view, a perversion and an abuse of the powers that the other 
body allows itself. And you, unfortunately, are the unwilling 
victim of that power struggle, which I think is extra-
constitutional and strange coming from so many who flash the 
Constitution in the public's face saying first I believe in the 
Constitution. But that is just me.
    Mr. Cordray, could you explain to us what you think created 
your Bureau? What was it that Congress had in mind, from your 
point of view, that somehow we came up with this idea?
    Mr. Cordray. Well, I think that Congress had several things 
in mind. I think they had in front of them the very unhappy and 
destructive experience of the financial crisis, the credit 
crunch, the meltdown. I was the State treasurer in Ohio in 2007 
and 2008, so I had to work to safeguard public funds in the 
wake of markets that really weren't functioning properly, and 
people were trying to understand the causes of that and one of 
the causes, I am firmly convinced, and I think Congress 
embodied this in creating the Bureau, was that you had the 
consumer finance issues that had largely been ignored at the 
Federal level that, when allowed to fester and to grow, such as 
the mortgage irregularities, could actually, to everyone's 
surprise, gross or large that they threatened the safety and 
soundness of the financial system.
    Mr. Connolly. I am sorry, Mr. Cordray, but just building on 
your experience as attorney general and now from this perch, 
would it be fair to say that in all of these examples you are 
giving, foreclosures, the meltdown on Wall Street, banks 
teetering on the edge, that this was in fact the worst such 
situation in all of those categories affecting consumers, as 
well as the public at large, since the Great Depression?
    Mr. Cordray. No question.
    Mr. Connolly. So the need was imperative.
    Mr. Cordray. It seems to me that there is a strong case for 
the Bureau. That is what Congress enacted into law. No one had 
real authority over these issues at the Federal level, it was 
parceled out among many hands and it was a low priority for all 
those involved----
    Mr. Connolly. I am going to run out of time, unfortunately, 
but just real quickly, Holly Patraeus's Office of Service 
Member Affairs, isn't it a fact a practice among some banks to 
foreclose on active duty members while they are serving 
overseas?
    Mr. Cordray. It has been documented that there were 
violations of the Service Members Civil Relief Act, meaning 
foreclosures went forward when they should not have done so for 
people on active duty. I personally doubt that any of that was 
intended by the institutions involved, but they needed to pay 
closer attention to making sure they complied with the law and 
I think many of them have gotten that message.
    Mr. Connolly. I thank the Chair.
    Mr. McHenry. With that, we will now recognize Ms. Buerkle 
from New York for 5 minutes.
    Ms. Buerkle. Thank you, Mr. Chairman. And I want to commend 
my colleague, Mr. Connolly, with regards to his comments about 
appointments.
    I have a couple of questions, Mr. Cordray. Thank you for 
being here and for answering our questions. My first question 
is in the same line of question that I spoke of and asked 
Elizabeth Warren about. You have heard from so many of my 
colleagues from the other side of the aisle with regards to 
this horrendous meltdown on the foreclosures and all of the 
issues. Fannie and Freddie are not included or covered by Dodd-
Frank, are they?
    Mr. Cordray. I believe that they are not. There is nothing 
in our Bureau that touches on that.
    Ms. Buerkle. Okay. So a big part of the problems that this 
economy faced and that poor American people faced in the 
foreclosures wasn't even addressed in Dodd-Frank, which 
concerns me greatly. I have been a vocal critic of Dodd-Frank 
because of the overreaching, because of the uncertainty that it 
causes for so many businesses and financial institutions that I 
have met with and certainly in the district, the community 
banks and the credit unions. So that is of concern, and the 
fact that Fannie and Freddie weren't addressed, that is not 
going to get any better, their poor business practices.
    I just have a question with regards when Professor Warren 
was here, she said that the CFPB is completely walled off from 
the Durbin Amendment, and I would like to hear your view of the 
CFPB's authority with respect to Interchange.
    Mr. Cordray. My understanding of our statute is that the 
Interchange Amendment and the cap that was put on that was 
specifically not something that where any jurisdiction was 
granted to the Consumer Bureau to address it, so that, I 
believe, would be the reason why she would have made that 
statement. We do not enforce any of that, nor do we have the 
authority to amend or modify by adopting rules any of that.
    Ms. Buerkle. So you would agree that it is walled off from 
the Durbin Amendment?
    Mr. Cordray. I believe that is so, yes.
    Ms. Buerkle. Okay. My last line of questioning, and I also 
took this up with Ms. Warren when she sat here before us, and 
that is with regards to your budget and the fact that you are 
not subject to annual congressional appropriations and the 
whole pay scale for the employees that will be employed by the 
Consumer Protection Board. You mentioned to our chairman that 
about 757 folks have been hired to date?
    Mr. Cordray. As of end of last year, yes, several weeks 
ago.
    Ms. Buerkle. And how many are you anticipating that you 
will hire until you get the entire board in place?
    Mr. Cordray. It is hard to say for certain. Part of it 
depends on how efficient we will find that we are doing our 
work as we go, but I think our long-term estimates have ranged 
upward of 1,000 by the end of this year, and probably we will 
need more than that would be my sense.
    Ms. Buerkle. Any idea beyond the 1,000 how many?
    Mr. Cordray. You know, if I had to guess sitting here 
today, I would estimate probably somewhere finally between 
1,200 and 1,500, which is smaller than the other banking 
agencies, but we think that we can utilize technology and our 
partnerships to try to have an impact even with smaller 
numbers.
    Ms. Buerkle. Now, on your Web site, and before I get into 
this, and I have to keep watching my time, you are not going to 
follow the Federal guidelines for salaries for Federal 
employees with regards to the board, the members?
    Mr. Cordray. Here, as in every other area, it is our 
intention to closely follow the law that we are operating 
under, and what Congress says in the law for us is that we are 
to be hiring, paying, promoting, retaining on the Federal 
Banking Agency pay scale, and we are to be comparable in 
particular to the Federal Reserve. We did check, in preparation 
for this hearing, and saw that thus far I think we are 1 
percent under the average pay bans for the Federal Reserve, so 
I think we are following the law carefully there in trying to 
do what Congress told us to do.
    Ms. Buerkle. On your Web site there is a listing for open 
staff position at CFPB as a training administrator. What is a 
training administrator?
    Mr. Cordray. Well, I am not familiar with the exact posting 
that you may be asking about, but it certainly would sound like 
to me that it is someone who is overseeing the kind of training 
programs that we need to bring onboard either examiners or 
perhaps attorneys, train them in the laws that we are 
overseeing, train them, if it examiners, in examination 
procedures that are rather voluminous that we are adapting from 
other banking agencies, and any and all aspects of what is 
needed to make sure that they work effectively and efficiently.
    Ms. Buerkle. My time is up, but I guess I would ask you 
would it surprise you to know that that training administrator, 
the starting salary is anywhere between $53,500 and $102,900?
    Mr. Cordray. I would say that I know that on our scale, 
which, again, mimics the Federal Reserve, we have wide pay 
bands. It is very often our intention to fill those kind of 
positions at the lower end of the pay band. I have seen that we 
have been caricatured at times because people will pick out the 
high end of that pay band and assume that that is what people 
are going to be paid. It is not a valid assumption.
    Ms. Buerkle. Thank you.
    I yield back my time. I just would ask, Mr. Cordray, if 
possible, if he could provide the committee with the job titles 
and some description of what you intend the staff members to do 
that you will be hiring 1,200 to 1,500, and possibly the pay 
scales that would go with each one of those job titles.
    Mr. Cordray. Happy to do that.
    Ms. Buerkle. Thank you very much.
    And I yield back my time.
    Mr. McHenry. Thank you.
    With that, we will recognize Ms. Holmes Norton of the 
District of Columbia.
    Ms. Norton. Thank you, Mr. Chairman.
    Mr. Cordray, I want to congratulate you on your appointment 
and thank you for your patience and for waiting out the 
process. The President confronted an attempt to nullify the 
possibility of recess appointments, which are perfectly 
constitutional. Our President has shown great forbearance on 
recess appointments until it became clear that his appointments 
of perfectly qualified candidates were being filibustered and 
held up. And, you know, unless he was going to be a pansy, you 
have to step forward when you find that kind of stonewalling of 
a process as intended by the framers.
    My good friends on the other side opposed Dodd-Frank. They 
lost and became sore losers, you became a hostage, and the 
President, it seems to me, did the only thing that he could do 
if he meant to enforce the law that was in fact passed.
    Let me ask you. I am curious. We have seen something that 
should tell, I think, everybody what kind of new consumer 
movement we have in this country, and I don't know whether it 
would have come under your jurisdiction. I don't believe you 
were there at the time, but that was the big Bank of America 
revolution, where people rose up against these monthly debit 
card fees, where you had to pay to get your own money out, a $5 
fee a month, and forced Bank of America to withdraw it. That 
didn't take any regulation, but it does tell us where consumers 
are today, and I want to ask you would that have come under 
your jurisdiction?
    Mr. Cordray. We do not have the ability, as I said, under 
our law to set the price of any fee or the interest rate on any 
product. However, what I would say about that set of 
circumstances was it is interesting to see in every marketplace 
transaction, consumer transaction, there is both a provider and 
then there is a lender and a borrower or a provider and a 
consumer, and both sides of the table have a certain power in 
the transaction, and it is important that both sides recognize 
the provider needs to serve their customers if they are going 
to succeed in the long run and the customers need to make sure 
that they provide the provider with the kind of information 
about what they are looking for, what they are seeking, and 
they can always vote with their feet by going to another 
provider.
    Ms. Norton. Well, I wish that that were the case all the 
time. What we had here was a set of young people who, like the 
Arab spring, have found a new way to organize and I think will 
be giving you a lot of help in consumer protection. I think it 
is a real warning to the Congress. There are people out there 
who have a way to organize they have never had before.
    I do not agree that people have the same ability as the 
market has to simply walk away, and that would be a very 
dangerous thing to do. We wouldn't need you at all if that were 
the case. To get some kind of balance so the consumer is not 
left out altogether. So I don't think that that is necessarily 
a harbinger of what you will see in the future, but it does 
tell you there are a lot of people out here willing to help to 
make sure the consumer is protected.
    There is one group of people and that is the people who I 
think have been most left out by this crisis, and that is the 
people who have been abused by mortgage service abusers. We see 
the attorney general's suit that is going on. The abuses that 
we learn of, with no clear remedy, are hard to take, for 
example, illegal foreclosures against military service members. 
Do you have any plans to address misconduct of this kind 
against mortgage service abusers?
    Mr. Cordray. Under the new law we have considerable 
authority and different tools to try to address problems in the 
mortgage market, including mortgage servicing. We have both 
rulemaking authority, we have the ability to go in and examine 
these institutions and actually see what is happening, which 
largely did not occur until about a year ago, and we have the 
ability to enforce the law, which is very important to making 
sure people are held accountable. We will continue. That is a 
flashpoint, it is a very difficult area, but it is an important 
one for consumers and we will continue to as we now move 
forward, figure out how to use our tools to address those 
issues.
    Ms. Norton. Thank you very much.
    And thank you, Mr. Chairman. I just want to say that I hope 
Mr. Cordray will give some priority to the service members who 
have, as you go down the list of people when you can't help 
everybody at the same time, people in the service who have been 
victims of the abuses by mortgage servicers.
    Mr. McHenry. I appreciate my colleague, her comments.
    With that, we will begin a second round with additional 
questions. We will begin with the vice chairman of the 
committee, Mr. Guinta of New Hampshire.
    Mr. Guinta. Thank you, Mr. Chairman.
    Mr. Cordray, I want to talk about two items. I have 
listened to the testimony that you have given and the questions 
that have been asked by Members of both sides of the aisle, and 
my original line of questioning was about transparency, 
accountability, what we I think both agree is the unbias 
approach, and it struck me as a little interesting. I went to 
the Web site, the CFPB Web site.
    Is there a bias toward payday loans? Because it appears 
that your first field hearing was on this subject matter and 
you also issued guidance on this on January 19th. So while you 
didn't take a position on whether you oppose payday loans, as 
your predecessor did, to me it appears that there is some sort 
of direction to go after this area, so I want to get some 
clarification there.
    Mr. Cordray. Sure. Let me try to explain our approach here. 
The day after I became director, we launched our nonbank 
supervision program. The statute very clearly addresses this 
issue and it very explicitly picks out certain markets that 
Congress has essentially told us to prioritize. The mortgage 
market is mentioned by name, the payday lending market is 
mentioned by name, and the private student lending market is 
mentioned by name.
    What we did was we launched our program, we brought out our 
general examination manual, which very closely adheres to how 
we are approaching banks as well, and then we begun bringing 
out the modules of the manual that speak more specifically to 
products in these priority markets as identified by the 
Congress. So we brought out our manual on mortgage origination 
products, we brought out our manual on mortgage servicing 
products, and we brought out a manual now on the payday 
lending, the short-term high-cost loan products.
    Mr. Guinta. You did that all since January 4th?
    Mr. Cordray. Yes. Although our mortgage servicing manual 
had come out and a lot of it aimed at banks, so it was able to 
come out before, had come out before the turn of the year. But 
for the nonbank lenders, the mortgage originators and payday 
lenders, those have just come out, yes, over the course of the 
last several weeks. The only one of those priority areas, 
again, as specified in our statute, which is sort of our Bible 
for going forward, is the private student lending, and I expect 
that we will address that in due course as well.
    Mr. Guinta. Okay. So you have not issued an opinion, then, 
regarding any of these particular subject areas.
    Mr. Cordray. I am not sure what you mean by an opinion. I 
think the answer is no, but I am not totally sure I am clear 
what your----
    Mr. Guinta. Well, going back to the transparency notion, I 
guess I am trying to figure out at what point the agency would 
issue public opinions on these subject matters. And the only 
reason I am asking is it is a new agency. I have been here a 
year, so I am not quite certain exactly how it is going to 
work. Under your vision, I am trying to get a better idea of 
how this would work.
    Mr. Cordray. All right. You and me both, we have been here 
about a year. In terms of an opinion, I think what would happen 
over time is we are going to be examining, which means people 
will go into the institutions and they have the ability, they 
have the authority under the law to examine the books, to ask 
questions, to understand what the products are and how they are 
being used, how they are being marketed, whether there are any 
kinds of acts or practices that are of concern. You know, it is 
an ability to really get under the skin of the surface and see 
what is happening. We will be utilizing that authority and it 
is important for us to do that.
    In terms of possible enforcement actions, you know, we will 
just have to see whether there are violations of the law that 
can't be remedied by other means and, if so, we will have to 
proceed on those. A possibility that gets closer to your 
question about opinions is whether at some point we might 
engage in a rulemaking on some aspects of payday lending.
    If we get to a point where we have confidence that we have 
identified issues and problems, we have heard from all sides 
and a rulemaking seems like it could be in order, then what we 
would do is we would develop and publish a notice of a proposed 
rule, we would have a notice and comment process, the normal 
process on rulemaking that could finally result in a rule. Do 
we have any plans to do that at the moment? I don't believe so. 
But that is something that could occur over time.
    In terms of an opinion per se, I don't think we have a 
mechanism for that, necessarily.
    Mr. Guinta. Okay, so the enforcement would be the process 
by which you would be setting policy, then?
    Mr. Cordray. No, enforcement would be the process by which 
we would address if there are clear violations of law that 
aren't being remedied in any other way.
    Mr. Guinta. Okay, so is a rule going to come before 
enforcement?
    Mr. Cordray. It would depend on the area. I don't think 
that we can say for sure. Look, if somebody is violating the 
law in some clear and conspicuous way, you don't want to wait 
on a rule. And if the law already is that that is what the law 
says, either you all have passed it or it is part of maybe the 
rules we inherit from others, we can't wait on other processes 
to enforce the law.
    Mr. Guinta. And in any other--without objection, may I have 
another 30 seconds?
    Mr. McHenry. Without objection.
    Mr. Guinta. I guess I answered my own question. Thank you, 
Mr. Chairman.
    The other concern I guess I have is you are obviously not 
subject to a congressional appropriation. I think that is 
unique. Through the budget process, my understanding is that 
the agency has provided seven pages of information relative to 
its budget to House Appropriations. I think that is a small 
number for a three to $600 million budget, whatever you are 
spending, whatever you are authorized. Would you commit to 
expanding that level of transparency maybe by tenfold, at 
least?
    Mr. Cordray. I think we are providing more information than 
that, and we are putting information up on our Web site every 
quarter about our budgetary and financial issues. I think it is 
something that, as we go, we will get a better understanding of 
what it is you need and want to know about our operations and 
the financial side of them.
    I will say we are a new agency, we are just underway, but 
we did have a GAO audit, which you all provided by law we would 
be subject to, and it was a clean audit opinion about how we 
are handling our finances and the kind of information we 
provided them, and they had top to bottom access to everything 
we are doing. But if you all are dissatisfied and would like 
more information, I am happy to have our staff work with your 
staff to see what we are trying to provide what you need.
    Mr. Guinta. And I only ask it for transparency purposes. 
This is a brand new agency. I think members and the public 
should have access to that information if they so choose to 
read it. The final question is I understand that you are going 
to staff up, you have 757 employees, you are going to have 
1,200 to 1,500. I understand you are a new agency. I understand 
that you are not subject to the President's hiring freeze. But 
considering the conditions of our economy, would you 
voluntarily adhere to his hiring freeze?
    Mr. Cordray. If we were to adhere to the President's hiring 
freeze, we would still be at zero people and we wouldn't be 
able to do----
    Mr. Guinta. I am saying from this day forward.
    Mr. Cordray. My sense is, you know----
    Mr. Guinta. I wouldn't object to you being at zero, but----
    Mr. Cordray. Right. I understand. Let me refocus.
    Mr. Guinta. But we can split the difference, 757, 1,500----
    Mr. Cordray. We are building up. That is what the law tells 
us we are supposed to do. The law tells us we have very 
specific jobs to do here. We are trying to do those jobs. Once 
we reach a steady state down the road, you know, I don't know 
what the considerations might be at that point, but that is 
probably where that would become germane.
    Mr. Guinta. Thank you very much. I appreciate it.
    Mr. McHenry. I appreciate it. And I would say let the 
record reflect that we have no objection to you actually having 
an income and a means of income, but the gentleman, I think, 
was making a larger point about the President's hiring freeze 
and the sort of Swiss cheese nature of that. There are so many 
holes in it that government continues to expand. But certainly 
understand your explanation and appreciate it.
    With that, Mr. Gowdy of South Carolina is recognized for 5 
minutes.
    Mr. Gowdy. I thank the chairman, the gentleman from North 
Carolina.
    Mr. Cordray, if I heard you correctly, you set up advisory 
panels which you found helpful with community bankers and 
credit unions.
    Mr. Cordray. I did. I did that when I was the treasurer in 
Ohio and then I did it again, even though it was not quite as 
germane, but I still thought it was very useful and it turned 
out to be, when I was the attorney general.
    Mr. Gowdy. Would you be willing to do that with payday 
lenders, particularly those who are in full compliance with 
their respective State laws, before any rules or regulations 
are promulgated that may impact them?
    Mr. Cordray. I do think that we are going to have, in fact, 
I will tell you that I intend for us to have additional 
advisory panels. Those are the only two we have thought through 
at the moment. We also have, you may be aware, in our statute 
we have a requirement that we set up what is called a consumer 
advisory board, and it is intended to be and there are 
provisions in the statute we were actually going over earlier 
today that provide for a mix of points of view; industry, bank, 
nonbank, consumer groups, community groups.
    And that is one thing, but we are required to do that. The 
other things here that I am talking about we are not required 
to do it, but I think they will help us do our job better. I 
have no aversion to hearing from the nonbank firms that we are 
going to be regulating; I think it is important for us to hear 
from them. There are unofficial and more official ways for us 
to do that. We will consider that.
    Mr. Gowdy. Having no aversion is different from saying that 
you will do it, so at the risk of repeating the same question 
again, will you commit to having advisory panel, not given one 
of your legal slots to a member of the industry, but an 
advisory panel so you can hear from people? Because I am sure, 
particularly as a former prosecutor, you can understand the 
frustration of people who are currently complying with State 
law fully and there is fear and apprehension about what comes 
tomorrow, which leads to the second question. I would like 
whether or not you will commit to at least have a nonbinding 
advisory panel where you can get the perspective of people who 
are currently complying with their respective State laws.
    Mr. Cordray. And, again, that may be--the first time you 
asked the question it sounded like it was limited to payday 
lending. It may be that it expands to other nonbank firms. I 
will consider doing that and I will come back to you and let 
you know what we are doing on that over the next month or two.
    Mr. Gowdy. What about the States that already have embarked 
on regulatory schemes? Without getting into a long discussion 
about preemption, what will be the fate of those regulatory 
schemes with the new CFPB?
    Mr. Cordray. And I appreciate that you sent us a letter on 
this subject, and I believe we are responding today to the 
letter. For example, when we were in Birmingham for the field 
hearing, one of the people in attendance who spent some time 
talking to us was John Harrison, who is the Alabama State 
Superintendent of Banks, and as is true in that State, and I 
know from Ohio and probably a number of States, the 
superintendent of banks doesn't only deal with banks, they deal 
with a lot of nonbank financial firms, including, in Alabama, 
payday lenders.
    So there are some States that have significant and robust 
oversight; there are some States that have none; there are some 
States, I am sure you know, that have effectively banned payday 
lending or imposed some sort of interest rate cap that makes it 
untenable. So there is kind of a patchwork quilt, as there 
often is, with State law.
    It is our intention to work and coordinate closely with the 
State regulators so that we understand their perspective and 
point of view and it informs our work. We have no intention at 
this point to preempt State law in these areas, but, again, the 
reason we had a field hearing is we are kind of at the 
beginning of the road in trying to understand and appreciate 
what the right approach to that product and a number of other 
products are, and we will gather more information as we go.
    Mr. Gowdy. I understand you have a really good memory, but 
even I will not expect you to remember every word of Dodd-
Frank. There is a phrase in Dodd-Frank that speaks to taking 
unreasonable advantage of consumers, which strikes me that if 
every word has meaning, that it is possible to take reasonable 
advantage of consumers, or else they wouldn't have used the 
word unreasonable. I asked Professor Warren. You may find this 
to be an inappropriate question. For whatever reason, I never 
could get her to answer it. I think it is a fair question. What 
do you believe the duties of the consumer are with respect to 
educating themselves?
    Mr. Cordray. I think that consumers have not only a duty to 
do that, because I think you really can't be a properly 
functioning citizen in our economic democracy if you don't try 
to educate yourself and be in a position to make responsible 
decisions for yourself that you can live with over time.
    I also think that this Bureau, one of the tasks that we 
have been given is to work on financial literacy issues. Now, 
that is near to my heart. When I was a local treasurer in Ohio, 
we worked with the Ohio legislature that sat on both sides of 
the aisle to try to get it passed that it would be a 
requirement for high school students to have personal finance 
education before they could graduate. We managed to do that. It 
is one of very few States that has that requirement.
    I think we would all be better off if young people had some 
sort of consistent guidance in this area, because they often 
don't get it at home. Often, at home, people are embarrassed to 
talk about finances and they know they don't really understand 
them or they are having trouble with their finances. So I think 
that that would be helpful, and we will try to work with the 
States to consider that.
    But people have to be responsible for their decisions. But 
the thing that the Bureau can do that is important is to make 
sure that the decisions that they are faced with are as clear 
and transparent as possible, that they know the prices and 
risks, this is something we say often, and, therefore, they can 
make a deal that they know they can live with down the road. 
And if they make a bad deal, you know, they will have to live 
with it. Nobody is going to wave a magic wand and undo personal 
responsibility, and all of us feel that and see that.
    I have 13-year-old twins. Before long they will go out into 
the world and they will be expected to fend for themselves and 
make their own decisions. I hope they will make good decisions. 
I will try to give them what assistance I can to do that, but 
we need to try to remember that we need to shore up young 
people so that when they go out and do that they won't make 
wrecks of their lives and hurt our society as well.
    Mr. Gowdy. Thank you.
    Mr. Chairman, may the record reflect Mr. Cordray answered 
the question?
    Mr. McHenry. Well, I know the gentleman from South Carolina 
appreciates that based on how exasperated the committee was at 
Ms. Warren's answer to that same very question.
    Thank you, Mr. Cordray. Now I will recognize myself.
    My colleague delved into this, taking unreasonable 
advantage in the legislative text. There is also, we know, and 
I asked this question before when Ms. Warren was before our 
committee representing the CFPB in July of last year, we have 
case law that is already outlined unfair and deceptive, and it 
appears to me that in the agreement you have with the FTC that 
you have accepted, in essence, that whole lineage of 
litigation, legal memoranda, and things of that sort that 
really codify what that means and gives some awareness to 
industry that their actions are permissible. Is that correct?
    Mr. Cordray. I think that is right. I think, frankly, for 
us to try to go off and define unfair and deceptive in some new 
and bizarre way, when the courts have been dealing with it for 
several decades, not only at the Federal level, but at the 
State level, would not be productive.
    Mr. McHenry. Okay. The additional thing that the law that 
you are operating under includes is abusive. Is it your 
intention to define abusive as a matter of regulatory action?
    Mr. Cordray. So the term abusive in the statute is, for the 
reasons you say, a little bit of a puzzle because it is a new 
term. It is not entirely new; there was a brief flirtation with 
it in some of the FTC law I think in the 1990's, and they had 
some difficulty defining it. But the term abusive in this 
statute is actually defined by Congress, there are specific 
prongs in the statute as Congressman mentioned a moment ago. A 
prong is to take unreasonable advantage of people in certain 
different circumstances, one of which is that they aren't in 
that market, they don't have an opportunity to choose their 
provider, so they can't shop, they can't leave, and there are 
markets that are marked by that.
    For us, since abusive is a new term, since it is apparently 
different from unfair and deceptive, the first question is, 
well, what is something that would be abusive but wouldn't also 
be unfair and deceptive. And if it is one or the other, I think 
it is straightforward to deal with in that term. In terms of 
abusive specifically is, we have been looking at it, trying to 
understand it, and we have determined that that is going to 
have to be a fact and circumstances issue; it is not something 
we are likely to be able to define in the abstract. Probably 
not useful to try to define a term like that in the abstract; 
we are going to have to see what kind of situations may arise 
where that would seem to fit the bill under the prongs----
    Mr. McHenry. Can you give us an example?
    Mr. Cordray. Well, let's say you have a market where you 
don't get a chance to choose your provider, which is arguably 
the case with mortgage servicing these days. You----
    Mr. McHenry. That actually could be the case for flipping 
on the lights in your house, as well.
    Mr. Cordray. That is true, although----
    Mr. McHenry. Obviously, you don't have that jurisdiction, 
but go on. So there is only one provider in your region.
    Mr. Cordray. Or, in this case, you just don't have control 
over the provider is; you get a loan and then it is sold and 
resold. You aren't asked any permission on that or have any 
veto over that, and by the time you have a problem, you don't 
know who has your loan and you find out, oh, this is the person 
servicing; you never met him, you never had anything to do with 
them.
    If the party were to take unreasonable advantage of the 
fact that you are sort of at their mercy in that way, I guess 
that could--and unreasonable advantage, as the Congressman 
pointed out, in and of itself is something of a vague term that 
needs definition. I suppose that could be a realm where you 
could have abusive practices.
    But it is something that I want to stress we are trying to 
think through. It is obviously going to depend on judging facts 
and circumstances. As we have more guidance to provide, we will 
try to be transparent in providing the guidance. We don't have 
all the answers on that one at this point.
    Mr. McHenry. So is it your intention to define abusive 
based on enforcement action, rather than definition?
    Mr. Cordray. Well, there is the definition in the statute. 
As I said, it is fairly specific in terms of prongs. It is not 
so easy to determine exactly how you apply that to facts and 
circumstances. I could imagine a situation where we would think 
that practices are outrageous enough as to be abusive and it 
might be the basis for an enforcement action. I don't have one 
to give you as we speak here back and forth. I can also imagine 
there might be a point at which we would want to do rulemaking 
on that, but I would think that we would want to see facts and 
circumstances, and let our view of that and the view of others 
who are giving us lots of guidance, frankly, you can 
understand, on both sides of the question, mature and ripen a 
bit before we would have more confidence on that issue.
    Mr. McHenry. Well, as you use the terms imagine and I'll be 
thinking about this and we are considering this, there are 
trillions of dollars of financial assets that are waiting on 
your thinking or imagining or going through this process, and 
that adds to uncertainty in these contracts. Your point of 
reference on reselling mortgages is a very interesting one 
because this has been the legal case and there are contract law 
for decades on the reselling of that mortgage, and it is part 
of the disclosure process. So to say that that is abusive is a 
puzzler.
    Mr. Cordray. That wasn't what I thought I was saying. It 
wasn't what I intended to say. The mere selling and reselling 
of mortgages is perfectly legal; there is nothing abusive or 
illegal about that. But when you are in a situation, as this 
statute defines, where you do not have control or the ability 
to choose your provider, if then unreasonable advantage was 
taken of you in that situation, that seems to be what the 
statute is beginning to contemplate. But I am just trying to 
give you some context here. So, for example, if outrageous 
practices were engaged in at that point, I think that there 
might be an issue of that sort.
    But I don't think there is a lot of uncertainty here for 
businesses----
    Mr. McHenry. Really, in terms of abusive or the CFPB 
generally?
    Mr. Cordray. I think what is very clear in the statute, 
even though a lot of the detail and definition is, as you say, 
less clear is for something to be an abusive practice, it would 
have to be a pretty outrageous practice. And if you, in your 
business, stay away from pretty outrageous practices, you 
should be pretty safe. That would be my sense of it at this 
point in time. And as we mature our views, I would be happy to 
talk back and forth with you more about it.
    Mr. McHenry. Is it your intention with the agreement that 
you and the FTC or the CFPB and the FTC made, is that going to 
be a model for how the CFPB is going to work with other 
regulatory bodies in outlining that line so that consumers will 
know who they can take action with and so the regulated 
entities can actually know who then you would have the 
conversations with?
    Mr. Cordray. I do hope that the kind of cooperation that 
we----
    Mr. McHenry. Is it your intention? Not hope. Is it your 
intention that that be the case?
    Mr. Cordray. Again, it takes two to tango, but it is my 
intention that we already have been and we will continue to 
reach out to our fellow banking agencies and other law 
enforcement agencies the same way we have already been working 
very well with the FTC in trying to arrive at the same kind of 
productive relationship. That would be my intention, and I hope 
that they will respond accordingly.
    Mr. McHenry. Okay. Additionally, you know, I am asking 
about the definition of abusive----
    Mr. Cordray. Yes.
    Mr. McHenry [continuing]. To give certainty to actors in 
the financial marketplace.
    Mr. Cordray. I see.
    Mr. McHenry. But to outline that I think would give some 
level of certainty to the marketplace. But beyond that there is 
also some action that I have become aware of regarding credit 
card disclosures, and some of what you have already outlined or 
you are going through the process right now, your folks are 
going through this process at the CFPB in essence mandates some 
defined terms that the CFPB would like included in that credit 
card disclosure. Am I characterizing that appropriately?
    Mr. Cordray. Yes. I think, if I am understanding your 
question, you are referring to our Know Before You Owe project, 
which the centerpiece of that is the TILA RESPA form that, as I 
say, we are happily starting to follow through on what you 
noticed 5, 6 years ago, that there is a need for that. Other 
areas where we are working on Know Before You Owe have to do 
with student loans, private student loans, where we have worked 
up a sample shopping sheet with the Department of Education, 
which is out there for people to consider and use, and we have 
a repayment calculator on our Web site that people can use, 
because that is a very confusing, difficult thing for them.
    In the credit card area, what we have developed is a sample 
agreement--this is not binding on anyone, it has not been 
imposed on anyone by rule--that would attempt to pull out and 
identify and highlight the specific important terms in a credit 
card agreement, so that instead of the consumer being 
confronted with this forest of dense fine print and they are 
never going to read it all, and they can't even tell what is 
important and what is not important, that there would be an 
effort made to make it clear and more transparent to them.
    That is in line with what a lot of the credit card issuers 
have begun doing on their own in the wake of the Card Act. I 
mean, I have seen, in cards that I have applied for in the last 
couple years, shorter, clearer, simpler forms. We are working 
with financial institutions cooperatively to see if they will 
adopt something like this form, or if it will help encourage 
them in this direction. There seems to be a lot of interest in 
that and we are going to see how the marketplace evolves on 
that.
    But it is not intended as some sort of binding, heavy-
handed regulation; just this can be done, here is an example of 
how it can be done, will you consider working with us and 
seeing if you can either adopt that or something similar. And I 
think that we are getting a lot of buy-in and a lot of interest 
from them because I think they recognize what we all see, which 
is when they apply for their own credit cards, they probably 
have trouble getting through the fine print themselves, and 
they want to provide better customer service.
    Mr. McHenry. Two of the objectives--I serve on the 
Financial Services Committee. I know my time has long passed 
and I will finish with this. Two of the great concerns with 
creation of the CFPB. I serve on the Financial Services 
Committee going through the markup, we have the concern that 
came about out of the Senate of having a single individual 
given this enormous power and a half a billion budget who has a 
set term, and in order to unseat that person it would take very 
extraordinary action. And your actions are only overruled by 
the Financial Stability Board if it causes a larger concern. 
They can't just simply overrule you; they have to have a 
concern about the financial marketplace of our country, the 
largest market in the world. So that power is one of the 
concerns.
    The second concern was that, in essence, by having the 
CFPB, we would have plain vanilla consumer options. So the 
financial marketplace would have fewer options; you would have 
government terms; you would have only this one very narrow safe 
harbor for financial firms to operate in.
    So that is why I asked this question about defining these 
terms. And if you are mandating these terms of their 
disclosures, certainly to start the process is to lay out the 
framework by which you are going to judge them, not simply act 
as many attorneys general have that enforcement action, but you 
are given this authority to outline the regulations, and I 
think those regulations, those bright lines, and the clear 
framework so that we can actually have a variety of consumer 
options and that we don't end up with plain vanilla options, 
fewer choices, higher cost, which is not, I don't think, what 
anybody wants in this country.
    Mr. Cordray. So may I, in response to that?
    Mr. McHenry. Oh, absolutely.
    Mr. Cordray. So the good news is that I think that is how 
we are approaching the issue, and we recognize. One of the 
things the statute tells us, and we take it very seriously, it 
is not easy to figure out how you actually do it, but is that 
we are supposed to see what we can do to encourage innovation 
in financial products. And certainly the opposite of that would 
be to stifle innovation and say everything has to be done in a 
single way.
    So, again, as we put out this proposed sample credit card 
agreement, there is nothing mandatory about that, it is 
attempted to lead thinking in a somewhat different direction 
than has been the case in the past, although, as I said, the 
market is moving in this direction already, it seems, and it is 
not intended to constrain everybody into one straightjacket of 
having to do things a particular way.
    One of the great features of financial products in this 
country has been lots of innovation over the years, lots of 
technological development, lots of different approaches, and 
then consumers are in a position to pick the ones they think 
are most suiting their needs, and those tend to do well. You 
know, credit cards themselves were once an unusual product, and 
they have become pretty much universal or widespread. Debit 
cards are a new product; prepaid cards are a fairly new 
product.
    There is lots of innovation in this industry and we have no 
desire to squelch that offer because we wouldn't know--no 
regulator knows enough to tell the market what is the right or 
wrong answer in general. What we should be focusing on is 
accountability for evenhanded rules of the road and then where 
we can encourage innovation, that is a good thing, the statute 
tells us to do that, but any common sense approach would 
recognize that as well.
    Mr. McHenry. Thank you.
    With that, Mr. Walsh from Illinois is recognized.
    Mr. Walsh. Thank you, Mr. Chairman.
    Mr. Cordray, I appreciate you sticking around. I will be 
brief, and I apologize if I am redundant; I missed a chunk of 
the hearing. But again thank you for spending so much time with 
the committee.
    Mr. Cordray. If you are redundant, I should have answered 
it before and I should have an answer.
    Mr. Walsh. Small business in this country is dying. They 
are not growing, they are not hiring. No matter what the 
President says tonight, that is not going to change. What I 
hear over and over back home is they are scared to death with 
all the uncertainty coming out of Washington and to a man and a 
woman they feel overregulated like you wouldn't believe, big 
and small.
    As importantly, what we hear from small businesses every 
day is they can't access credit. I chair a subcommittee, Access 
to Growth on the Small Business Committee. We held a hearing a 
few months ago and brought in the heads of three or four 
community banks and asked them pretty directly why aren't you 
lending, and to a man they all said they can't, their hands are 
tied. They alluded to Dodd-Frank, they alluded to all these 
regulations.
    It seems like whatever we tend to do up here, the big 
banks, big business is able to adjust to; small businesses and 
community banks get hit hard. Dodd-Frank obviously requires you 
to consider the impact on small business with any rule and reg 
that you will implement. These review panels are to be convened 
before any proposed rules that might impact small business.
    And correct me where I am wrong. It seems like CFPB has 
determined here initially that a number of these rules won't 
disproportionately impact small business, and so they have 
opted not to convene the panels? I think I understand a panel 
has not been convened since July. Am I right on that?
    Mr. Cordray. I don't think so in the following respect. 
Thus far we have not had a rulemaking of our own to begin and 
to propose a rule. What we have had is rules that were begun by 
others, notably the Federal Reserve in several cases, that then 
came to us to finish. We just issued a remittance rule, that 
was one that we finished that the Federal Reserve began.
    As you say, and this is how we read the statute too, we are 
supposed to convene the SABRIEFA panels before we propose a 
rule and, therefore, we have not been in that position yet. But 
we have one upcoming, it is the big rule that I talked about 
with the chairman, combining the mortgage forms to simplify 
them. We have committed and we are going to do SABRIEFA panels. 
The SABRIEFA panels probably will get underway very shortly, I 
would say within the next month or two, and that will be a 
model for how we do this, and we will learn from that as we go. 
But it is our intention to convene SABRIEFA panels on our new 
rules as we proceed, wherever the law tells us to do that; and 
not just because the law tells us to do it, but because we 
recognize that will help us do our work better and be mindful 
of the concerns you are laying out.
    My own background in Ohio was when I was the treasurer, I 
inherited a small business loan interest buy-down on small 
business loan program, and it was almost out of business when I 
took over because they made it so bureaucratic and difficult 
small businesses just didn't want to bother with it.
    And by the time I left office 2 years later, we had put out 
more than $300 million by making the form simple, letting them 
do it within 30 minutes, and promising and getting them a 
response within 72 hours. So I am mindful of the needs of small 
businesses. It is critical to this country, they create more 
than two out of three new jobs. That is what we have been 
missing as we came out of this recession.
    But I also want to say one other thing, which is the credit 
crunch that they are suffering under was caused by the 
financial meltdown. It has been the most difficult credit 
conditions that any of these small businesses have ever lived 
under. And some of the things the Consumer Bureau is designed 
to do are to prevent a recurrence of that worst economic 
catastrophe of our lifetime. So if we can be successful, if we 
can do our job reasonably well, then we will help ward off the 
kind of conditions that are hurting small businesses and small 
banks more than anything right now.
    Mr. Walsh. You would worry, as well, about the pendulum 
swinging too far as far as too much regulation, tampering that 
access to credit as well.
    Mr. Cordray. Yes, I would.
    Mr. Walsh. Tell me if I am wrong, Mr. Cordray. It is my 
understanding that many of the actions the Bureau is poised to 
take may well lead to a further reduction in credit 
opportunities for small businesses. Can you comment on that?
    Mr. Cordray. I don't think that that is our intention, 
Congressman. And if you are hearing from small businesses, 
community banks, and others in your district, we hope you will 
pass those comments on to us. It may well be that we are 
hearing from them as well, but that is not our intention. Our 
intention is to be mindful of the difference between larger 
institutions and smaller institutions. Smaller institutions 
typically don't have a big compliance compartment to shrug off 
the burdens that are imposed on them.
    On our remittance rule that we just issued, we have issued 
a further proposed rule to consider setting a threshold that 
the rule wouldn't apply to those below the threshold on a 
number of transactions because they don't really need to take 
on these burdens for not doing it in the normal course of 
business; and that is what I pledged to the community bankers 
and credit unions, is that we will consider our regulatory work 
in that way.
    Mr. Walsh. Thank you. I will close with this. I would just 
implore you to commit to looking out for small businesses and 
community banks. I am not exaggerating when I say that they are 
suffocating right now under regulations, and there is great, 
great, great trepidation that this Bureau and everything else 
we are doing up here of late is only going to add to that. So 
please look out for them as you embark.
    Mr. Cordray. I appreciate that, sir.
    Mr. Walsh. And, again, thank you for your time.
    Mr. McHenry. I certainly appreciate that.
    Mr. Quigley.
    Mr. Quigley. Thank you, Mr. Chairman. I would just ask that 
the document, Ten Reasons Why We Need the CFPB Now, issued by 
Americans for Financial Reform, be entered into the record. Ask 
unanimous consent.
    Mr. McHenry. Without objection.
    [The information referred to follows:]
    [GRAPHIC] [TIFF OMITTED] 73165.026
    
    [GRAPHIC] [TIFF OMITTED] 73165.027
    
    [GRAPHIC] [TIFF OMITTED] 73165.028
    
    [GRAPHIC] [TIFF OMITTED] 73165.029
    
    [GRAPHIC] [TIFF OMITTED] 73165.030
    
    [GRAPHIC] [TIFF OMITTED] 73165.031
    
    [GRAPHIC] [TIFF OMITTED] 73165.032
    
    [GRAPHIC] [TIFF OMITTED] 73165.033
    
    [GRAPHIC] [TIFF OMITTED] 73165.034
    
    [GRAPHIC] [TIFF OMITTED] 73165.035
    
    [GRAPHIC] [TIFF OMITTED] 73165.036
    
    [GRAPHIC] [TIFF OMITTED] 73165.037
    
    [GRAPHIC] [TIFF OMITTED] 73165.038
    
    [GRAPHIC] [TIFF OMITTED] 73165.039
    
    [GRAPHIC] [TIFF OMITTED] 73165.040
    
    [GRAPHIC] [TIFF OMITTED] 73165.041
    
    [GRAPHIC] [TIFF OMITTED] 73165.042
    
    [GRAPHIC] [TIFF OMITTED] 73165.043
    
    [GRAPHIC] [TIFF OMITTED] 73165.044
    
    [GRAPHIC] [TIFF OMITTED] 73165.045
    
    [GRAPHIC] [TIFF OMITTED] 73165.046
    
    [GRAPHIC] [TIFF OMITTED] 73165.047
    
    [GRAPHIC] [TIFF OMITTED] 73165.048
    
    Mr. McHenry. I just have just a couple more questions.
    Mr. Cordray. Sure.
    Mr. McHenry. There is an interview that you did with the 
Associated Press, and I am sure you are prepared to answer 
this. Your quote was, ``frankly, there is a lot of fraud that 
is committed in the marketplace that is not, on its face, 
necessarily technically illegal.'' Can you clarify that 
statement?
    Mr. Cordray. Yes. And I appreciate the opportunity to 
clarify that statement. I thought it was garbled as I read the 
article; didn't like it. I am sure you have had the experience 
of saying things, and then you read it and----
    Mr. McHenry. Oh, never, never, never.
    Mr. Cordray. In any event, my point there was there are 
some statutes we have inherited where there are very specific 
and in some ways kind of technical in terms of what is 
compliant, for example, some of the regs under the Truth and 
Lending Act, and then there is also the law that we inherit 
under our statute of what is an unfair, deceptive, or abusive 
practice.
    I don't mean to say in any respect that something can be 
not against the law, but somehow be acted on by us. It would 
have to violate the law in one or another of these respects. 
And either I got twisted around in saying it or it got twisted 
around in the quoting of it, and it might be either, I am not 
sure which. But my point is not that we can just deal with 
things that we don't like, even though they don't violate the 
law; that is not my view of what we do.
    Mr. McHenry. Okay. But this is the concern, though. It is a 
violation of the law as you interpret it. That would be how you 
would take action. The concern here is your interpretation of 
existing law. So much of what we have in our common law history 
is built on precedence. So if you are accepting the precedence 
of the agencies that you are taking powers from, that you are 
assuming powers from, and you are accepting their legal basis 
for those precedents, then I think there is a greater deal of 
certainty.
    But the marketplace not knowing that that is fully the case 
adds uncertainty.
    Mr. Cordray. Yes. I see that. And that is not our 
intention, but I do see why the concern is there.
    Mr. McHenry. So walk me through that. I do want to give you 
the opportunity to sort of walk through what that looks like 
and how that functions, and not as a gotcha, just as a clarity.
    Mr. Cordray. So law that we inherit from other agencies 
and, frankly, law that we have because Congress has imposed it 
is law that we need to follow and follow closely. If there is a 
body of law interpreting rules, for example, Reg Z or something 
we have inherited from the Federal Reserve, that body of law is 
relevant for us too and constrains us, and we shouldn't be 
going off in some wild, new, unexpected direction.
    The thing is what I would say is new about the Bureau is 
that we do have authority now in some areas where there really 
wasn't any application of law before. So, for example, in the 
nonbank sphere, Federal law did not apply to the various 
parties that we have talked about here today, so they weren't 
subject to any, necessarily, unfair, deceptive, abusive, the 
kind of terms we talked about.
    Look, it is not our point to try to revolutionize any kind 
of existing law; our job is to follow it and apply it. And it 
is also not our intention to start going off and acting like we 
are some sort of mini Congress, just doing anything we think is 
good and right, and writing it into the books. I think we need 
to follow our procedures carefully, follow the law carefully, 
and if we do that we will build credibility in our work.
    Mr. McHenry. Okay. So, to that line of thought, it brings 
me back to my first question.
    Mr. Cordray. Okay.
    Mr. McHenry. At the beginning of each year, the SEC 
outlines their intention for regulatory actions for the coming 
year. It is not saying they will get to every action there, but 
it is their intention to get to those actions. That is a 
broader agenda than the two paragraphs that are found on the 
CFPB Web site that outline the principles, which looks like an 
agenda of sorts, but it is very broad. That adds to 
uncertainty. And uncertainty in the financial marketplace means 
things cost more or are less available. Actually, those two 
things go hand in hand.
    So it would be a proper thing for you to outline your 
regulatory actions that you foresee for the coming year and 
make that a matter of due course for this Bureau that is new. 
You are the first head, you are taking powers that never 
existed in one person in Washington, DC. There is a great deal 
of trepidation based on that enormous power. It is not about 
you. You certainly exhibited the reason why you were elected in 
Ohio as attorney general in answering your questions, in 
answering questions and being forthright about it. Many of us 
just may see things differently about the powers that you are 
vested with and some of the actions you may take.
    But if you could be very forthright at the beginning of 
each year, I think it would add tremendously to this and 
explain clearly what your intention is for enforcement actions, 
even on a quarterly basis would be helpful.
    Mr. Cordray. Let me come back to you on that and say I 
think we can satisfy you on that. I think it is a reasonable 
request. I think that as I sit here and as we thought about 
different pieces of the Bureau in preparing for this testimony, 
I think it is pretty clear what we intend to do in the 
rulemaking sphere this year. I would just say one thing I would 
want to say is since we are a new agency and a lot of this is 
new to us, I would want to have one sort of asterisk and 
residual to say there may be something that will come up over 
the course of this year that we did not foresee that we think 
we need to do. But I think we can probably give you and the 
public more detailed guidance on that. And I happen to think, 
as we have had this exchange, that would be a good thing.
    Mr. McHenry. Well, thank you. And the concern, again, is 
that asterisk. It does actually lead to uncertainty. And you 
have heard me say that quite a bit today.
    Mr. Quigley, would you like any closing comments?
    Mr. Quigley. Thanks for being here and good luck.
    Mr. McHenry. Mr. Cordray, thank you for your forthright 
answers. There have been a lot of concerns expressed here 
today. You have given a great deal of explanation. We 
appreciate that and we certainly appreciate the exchange of 
ideas. Again, the question of the cost to the marketplace, the 
question of access to credit is really key to all these 
questions and concerns. You are not going to simply allay the 
fears that many of us have about the enormous budget given to 
one individual and the enormous powers one individual has to, 
in essence, change contract law and a number of other items, 
but you can allay a number of fears and take away a great deal 
of uncertainty with your early actions. Thank you for being 
here today and for submitting yourself to congressional 
oversight.
    Mr. Cordray. Absolutely.
    Mr. McHenry. With that, the committee stands adjourned.
    Mr. Cordray. Thank you.
    [Whereupon, at 4:05 p.m., the subcommittee was adjourned.]
    [Additional information submitted for the hearing record 
follows:]
[GRAPHIC] [TIFF OMITTED] 73165.049

[GRAPHIC] [TIFF OMITTED] 73165.050

                                 
