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

                      THE IMPACT OF DODD-FRANK ON CONSUMER
                          CHOICE AND ACCESS TO CREDIT

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

                                    HEARING

                                   BEFORE THE

                     SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

                              AND CONSUMER CREDIT

                                     OF THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                          ONE HUNDRED TWELFTH CONGRESS

                                 SECOND SESSION

                                   __________

                                 JULY 19, 2012

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 112-147

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                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                       SPENCER BACHUS, Alabama, Chairman

    JEB HENSARLING, Texas, Vice          BARNEY FRANK, Massachusetts,
        Chairman                             Ranking Member
    PETER T. KING, New York              MAXINE WATERS, California
    EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
    FRANK D. LUCAS, Oklahoma             LUIS V. GUTIERREZ, Illinois
    RON PAUL, Texas                      NYDIA M. VELAZQUEZ, New York
    DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
    WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
    JUDY BIGGERT, Illinois               BRAD SHERMAN, California
    GARY G. MILLER, California           GREGORY W. MEEKS, New York
    SHELLEY MOORE CAPITO, West Virginia  MICHAEL E. CAPUANO, Massachusetts
    SCOTT GARRETT, New Jersey            RUBEN HINOJOSA, Texas
    RANDY NEUGEBAUER, Texas              WM. LACY CLAY, Missouri
    PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
    JOHN CAMPBELL, California            JOE BACA, California
    MICHELE BACHMANN, Minnesota          STEPHEN F. LYNCH, Massachusetts
    THADDEUS G. McCOTTER, Michigan       BRAD MILLER, North Carolina
    KEVIN McCARTHY, California           DAVID SCOTT, Georgia
    STEVAN PEARCE, New Mexico            AL GREEN, Texas
    BILL POSEY, Florida                  EMANUEL CLEAVER, Missouri
    MICHAEL G. FITZPATRICK,              GWEN MOORE, Wisconsin
        Pennsylvania                     KEITH ELLISON, Minnesota
    LYNN A. WESTMORELAND, Georgia        ED PERLMUTTER, Colorado
    BLAINE LUETKEMEYER, Missouri         JOE DONNELLY, Indiana
    BILL HUIZENGA, Michigan              ANDRE CARSON, Indiana
    SEAN P. DUFFY, Wisconsin             JAMES A. HIMES, Connecticut
    NAN A. S. HAYWORTH, New York         GARY C. PETERS, Michigan
    JAMES B. RENACCI, Ohio               JOHN C. CARNEY, Jr., Delaware
    ROBERT HURT, Virginia
    ROBERT J. DOLD, Illinois
    DAVID SCHWEIKERT, Arizona
    MICHAEL G. GRIMM, New York
    FRANCISCO ``QUICO'' CANSECO, Texas
    STEVE STIVERS, Ohio
    STEPHEN LEE FINCHER, Tennessee

               James H. Clinger, Staff Director and Chief Counsel
           Subcommittee on Financial Institutions and Consumer Credit

                 SHELLEY MOORE CAPITO, West Virginia, Chairman

    JAMES B. RENACCI, Ohio, Vice         CAROLYN B. MALONEY, New York,
        Chairman                             Ranking Member
    EDWARD R. ROYCE, California          LUIS V. GUTIERREZ, Illinois
    DONALD A. MANZULLO, Illinois         MELVIN L. WATT, North Carolina
    WALTER B. JONES, North Carolina      GARY L. ACKERMAN, New York
    JEB HENSARLING, Texas                RUBEN HINOJOSA, Texas
    PATRICK T. McHENRY, North Carolina   CAROLYN McCARTHY, New York
    THADDEUS G. McCOTTER, Michigan       JOE BACA, California
    KEVIN McCARTHY, California           BRAD MILLER, North Carolina
    STEVAN PEARCE, New Mexico            DAVID SCOTT, Georgia
    LYNN A. WESTMORELAND, Georgia        NYDIA M. VELAZQUEZ, New York
    BLAINE LUETKEMEYER, Missouri         GREGORY W. MEEKS, New York
    BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
    SEAN P. DUFFY, Wisconsin             JOHN C. CARNEY, Jr., Delaware
    FRANCISCO ``QUICO'' CANSECO, Texas
    MICHAEL G. GRIMM, New York
    STEPHEN LEE FINCHER, Tennessee

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        July 19, 2012................................................     1
    Appendix:
        July 19, 2012................................................    29

                                   WITNESSES
                            Thursday, July 19, 2012

    Date, Raj, Deputy Director, Consumer Financial Protection Bureau
      (CFPB).........................................................     6

                                    APPENDIX

    Prepared statements:
        Date, Raj....................................................    30

                  Additional Material Submitted for the Record

    Capito, Hon. Shelley Moore:
        Written statement of the Financial Services Roundtable.......    33
    Duffy, Hon. Sean P.:
        Letter to Treasury Secretary Timothy F. Geithner from Fred R.
          Becker, Jr., President/CEO, the National Association of
          Federal Credit Unions (NAFCU), dated June 27, 2012.........    51
    Luetkemeyer, Hon. Blaine:
        Written responses to questions submitted to Raj Date.........    54

                      THE IMPACT OF DODD-FRANK ON CONSUMER
                          CHOICE AND ACCESS TO CREDIT

                                  ----------

                            Thursday, July 19, 2012

                 U.S. House of Representatives,
                 Subcommittee on Financial Institutions
                                   and Consumer Credit,
                               Committee on Financial Services,
                                                       Washington, D.C.
        The subcommittee met, pursuant to notice, at 2:02 p.m., in
    room 2128, Rayburn House Office Building, Hon. Shelley Moore
    Capito [chairwoman of the subcommittee] presiding.
        Members present: Representatives Capito, Renacci, Manzullo,
    McHenry, Pearce, Luetkemeyer, Huizenga, Duffy, Canseco;
    Maloney, Hinojosa, Miller of North Carolina, and Scott.
        Also present: Representative Green.
        Chairwoman Capito. I now call the subcommittee to order,
    and I would like to inform Members, and Mr. Date, that we do
    expect a series of votes this afternoon between 4:30 and 5:00.
    It will be a long series of votes, and it is my intention to
    complete this hearing by the time votes are called. I am sure
    you are okay with that.
        Anyway, this afternoon's hearing is the second installment
    of the Financial Institutions and Consumer Credit
    Subcommittee's contribution to oversight hearings leading up to
    the second anniversary of the Dodd-Frank Act. Today, we are
    joined by Mr. Raj Date--this is not his first visit here, and I
    appreciate him coming back again--who is the Deputy Director of
    the Consumer Financial Protection Bureau (CFPB), and he will
    provide members of this subcommittee with an update on the
    operations of the CFPB since the designated transfer date of
    last July.
        Many of my colleagues on the other side of the aisle like
    to highlight the number of times the CFPB has testified as
    proof positive of sufficient congressional oversight. According
    to the CFPB's Web site, this will be the 24th time a
    representative from the agency has testified before either the
    House or the Senate. So, just for the sake of comparison, how
    does that compare to the other financial regulators? The
    Treasury and the Federal Reserve each have appeared 45 times,
    the SEC has appeared 47 times, the FDIC has appeared 26 times,
    and the OCC has appeared 22 times. Testifying at hearings is a
    central function of a Federal regulatory agency, but it does
    not necessarily equate to Congress having sufficient oversight.
        Republicans have offered common-sense proposals that
    provide for greater congressional oversight of an agency that
    will be spending hundreds of millions of dollars each year
    without compromising the core mission of protecting--a shared
    mission, I might add--consumers, and I urge the Senate and the
    Administration to accept our good faith offering and work with
    Republicans to place these vital reforms in place.
        I am especially interested to hear Mr. Date's thoughts on
    two rules that are now before the CFPB's purview. The first is
    the credit card ability-to-pay rule--on which we had a
    hearing--that CFPB inherited from the Federal Reserve, and the
    second is the Qualified Mortgage rule that is pending.
        Last fall, the Federal Reserve finalized rules providing
    guidelines for credit card issuers to determine a borrower's
    ability to pay. When drafting this rule, in my view, and I
    think it is borne out in the actions, the Federal Reserve
    clearly misinterpreted the statute and required all borrowers
    to provide proof of an individual income, even though the
    statute clearly intended that requirement to apply only to
    underage students seeking credit. The practical effects are
    that we are hearing more and more anecdotal stories from across
    the Nation about stay-at-home spouses, male and female, being
    denied credit because they do not have an individual income.
    This is a clear example, I think, of Washington regulations
    that have gone wrong. I have asked the CFPB to fix this
    inequity, and they have assured us and the committee that they
    are working on it, and they will have a resolution by this
    summer. We are working on a legislative solution to restore
    parity in case that doesn't come about.
        Last week, we heard from many witnesses about the
    importance of clarity in the CFPB as the CFPB promulgates the
    Qualified Mortgage rule. Again, the actions of this agency
    could determine the availability of credit for borrowers across
    this Nation, and I would urge the CFPB, as I did in a letter
    with Mr. Sherman that I am sure you received, to have a broad
    definition for the Qualified Mortgage and provide a strong
    legal safe harbor for the loans that fit these criteria. We
    need to ensure this rule does not overly restrict credit for
    consumers and increase the cost of credit for borrowers.
        Again, I would like to thank Mr. Date for appearing before
    the committee. Our members are very interested in the actions
    of the CFPB. Going forward, we must ensure that agencies strike
    the appropriate balance between protecting consumers and
    ensuring that there is sufficient access to credit.
        With this, I would like to recognize the ranking member,
    the gentlelady from New York, Mrs. Maloney, for the purpose of
    making an opening statement.
        Mrs. Maloney. I thank the gentlelady for calling this
    hearing and I thank her for pointing out that this is the 24th
    time the Bureau has testified before Congress, oftentimes
    before this committee, but it is always with good news. It is
    always with good news of how we are protecting consumers and
    how we are moving forward.
        Just yesterday--I would like unanimous consent to place in
    the record a report really from the American Banker that shows
    that the CFPB hit a financial institution with their first-ever
    penalty. And I was waiting to see in what area it was going to
    take form, and it took form in the area of credit card reforms,
    so I was pleased to see that the Bureau is being serious about
    cracking down on unfair, deceptive, and anticompetitive
    practices.
        Just yesterday, they announced their first enforcement
    action, finding deceptive marketing of credit protection
    products to consumers with lower credit scores. These practices
    were uncovered during the supervision process, a critical
    authority we gave to the CFPB, and it will put $140 million
    back into the pockets of 2 million cardholders. This case in
    point is why the Bureau is necessary, and I applaud the work
    that was done in the months leading up to this announcement.
        We need to put this in perspective. Not only is this the
    24th hearing, but there have been 50 bills and numerous
    amendments that have been introduced to either gut, slow down,
    block or defund the financial reforms, including the repeal of
    this bill. There have been numerous legal challenges to
    dismantle the CFPB as well as other important aspects of
    financial reform. And the very agencies which have been tasked
    with implementing financial reform are facing drastic budget
    cuts. The SEC is looking at a 12 percent cut. The CFTC would
    get a 41 percent cut. And if my colleagues get their way,
    together that would amount to $323 million cut, but it pales in
    comparison to what Americans lost in the financial crisis. It
    is merely two-tenths of a basis point of the $19 trillion in
    household wealth that Americans lost. We lost 8.7 million jobs,
    and 6.3 million more Americans are now in poverty because of
    the financial crisis. If we had prevented those abuses, then we
    would not have had these drastic losses.
        The CFPB is a pillar of the financial reforms that we
    enacted 2 years ago, and consumer protection in financial
    products is its first and only mission. That was not the case
    before financial reform, where consumer protection authority
    was housed in multiple agencies whose chief mission was safety
    and soundness, not consumer protection, and that is important,
    but too often consumer protection was a secondary thought, a
    third thought or not even thought about at all. Now the system
    has changed; it is safer, stronger, more transparent, and there
    are new tools to monitor and mitigate threats that consumers
    face and to protect them.
        These reforms are helping to build a sound foundation to
    support economic growth, and we do see signs of that growth. We
    have added 3.8 million jobs, and business lending has increased
    15 percent, according to the Bureau of Labor Statistics, after
    these reforms went into place. CFPB has leveled the playing
    field for consumers and financial institutions.
        And I for one do not really understand why there is such
    great opposition to it. The ``know-before-you-owe'' is really
    very important so consumers can see and assess how much they
    owe. They have simplified credit card contracts, introduced new
    student loan assessment tools, highlighting rates and
    eliminating confusing rhetoric so people know what they are
    getting into, and I really don't understand why some of my
    colleagues are opposed to it for giving consumers disclosures
    that will clearly state their obligations under their
    mortgages: their interest rates; their payments; their fees;
    and other important information.
        For all the talk of limits to consumer choice and
    restrictions in credit, none of that has materialized. And for
    all the talk about unacceptable agencies and unaccountable and
    not transparent, the CFPB has been unprecedented in its
    transparency. Just go to their Web site. They have been
    forthcoming with Members, with the industry, and with
    consumers, and I look forward to hearing their report today. I
    hope there have been more advancements to simplify information,
    to level the playing field, and to strengthen our overall
    economy and consumers' understanding of their exposure and
    enabling them to better manage their own financial life and
    their own risk. I thank the gentlelady for calling this
    hearing, and I look forward to the gentleman's testimony. Thank
    you.
        Chairwoman Capito. Mr. Duffy, for 2 minutes.
        Mr. Duffy. Thank you, Chairwoman Capito, for holding this
    very important hearing. Here we are a year after the CFPB took
    over responsibility for promulgating Federal consumer
    protection rules, and many questions still remain on the
    potential future actions that the Bureau may take.
        As you know, I have been following the CFPB developments
    ever since being elected to Congress, and my focus has been
    particularly targeted at how the CFPB actions impact small
    financial institutions, many of them in smaller, more rural
    parts of America. Almost daily, I continue to hear from
    community banks and credit unions in my district and throughout
    Wisconsin about the increasing regulatory regime that these
    institutions are now facing. Many of them tell us it is not
    making their lives easier. The small institutions are telling
    us that it is making their lives far more difficult.
        We have had numerous hearings discussing this important
    issue. We had one recently in Wausau, Wisconsin, and we have
    also had many hearings in this room talking about the impact on
    small community institutions. This hearing will hopefully
    highlight some of those concerns. Today, we will be discussing
    the impact of Dodd-Frank on consumer choice and access to
    credit.
        As we have this conversation on consumer choice, I want to
    make sure that we do not restrict financial institutions from
    providing consumers with the power to choose the products that
    they want and the products that make the most sense for them.
        I would also like to ask for unanimous consent to offer a
    letter into the record from the National Association of Federal
    Credit Unions that addresses the regulatory burden and the
    issues that are arising with regard to consumer choice.
        Chairwoman Capito. Without objection, it is so ordered.
        Mr. Duffy. Thank you. And I want to thank Mr. Date for
    coming today, and I look forward to his testimony.
        Chairwoman Capito. Mr. Hinojosa for 2 minutes.
        Mr. Hinojosa. Thank you, Chairwoman Capito, and Ranking
    Member Maloney.
        I also want to thank you, Mr. Date, for once again coming
    before this subcommittee to speak out about the progress of the
    Consumer Financial Protection Bureau. We are once again
    evaluating the CFPB and marking the 2-year anniversary of the
    Dodd-Frank Wall Street Reform and Consumer Protection Act.
        Two years later, I still hear my friends and colleagues on
    the other side of the aisle complaining about the so-called
    strangling red tape which the law has supposedly imposed. On
    Monday, The National Journal published a story entitled,
    ``Gripes and Few Laws From GOP on Dodd-Frank.'' By next month,
    the CFPB will have testified before Congress 26 times during
    their 18-month existence.
        I would like to point out that, according to a poll
    commissioned by the AARP and other organizations taken earlier
    this month, most Americans disagree with the negative
    characterization of the CFPB that my Republican colleagues have
    embraced. In fact, two-thirds of voters and 69 percent of
    independents agreed that the CFPB is a necessary institution, I
    repeat, that it is necessary to have it.
        No wonder they feel this way. While the big banks are
    complaining about the red tape, we are being inundated with new
    scandals and evidence of malfeasance by the major financial
    institutions. Starting with the JPMorgan exotic derivatives
    loss that may reach up to $9 billion, there have been several
    instances which reflect poorly on the financial services
    industry and beg for more oversight and protection for our
    consumers.
        Just yesterday, the CFPB announced its first enforcement
    action against Capital One Bank, which will have to refund $140
    million to 2 million consumers and pay a $25 million penalty.
    It has also recently come to light that HSBC Bank has been
    looking the other way while terrorist organizations and drug
    cartels launder money with their institution. Last week, the
    chairman of Peregrine Financial Group admitted to 20 years of
    embezzlement, and of course, we are all appalled at the London
    Interbank Offered Rate, or LIBOR, fixing scandal which may have
    involved up to 16 banks in a conspiracy to report false rates.
    It boggles my mind that instead of seeking to regain public
    trust, if only for self preservation, these institutions
    continue to evade the law and point at the CFPB and the Dodd-
    Frank Act and cry foul.
        In closing, I want to say that rather than continually
    trying to hamper the work of the CFPB, we should be encouraging
    the Bureau and the other regulators to hamper these Wall Street
    banks from evading laws and putting our economy at risk. We do
    need the Consumer Financial Protection Bureau, and the recent
    scandals only underscore this point. With that, I yield back.
        Chairwoman Capito. The gentleman yields back.
        Mr. Canseco?
        Mr. Canseco. Thank you, Madam Chairwoman.
        The number I am keeping in mind today is 1,100, and that is
    how many pages the CFPB's recently proposed rule regarding
    mortgage disclosures contains, even though the disclosures
    themselves will be less than 10 pages in length. Many of us
    have expressed skepticism over the argument that the creation
    of another unaccountable bureaucracy would somehow reduce red
    tape and compliance costs and make financial decisions easier
    to understand for consumers.
        The CFPB's biblical length rule seems to have validated our
    worst fears about this agency. With its proposed rule, the CFPB
    has shown us the path they have chosen to take, and I am afraid
    that for financial institutions, families, and consumers, the
    outlook isn't good. I yield back my time.
        Chairwoman Capito. The gentleman yields back.
        Mr. Scott for 3 minutes.
        Mr. Scott. Thank you very much, Madam Chairwoman.
        In addition to forming the CFPB, the Dodd-Frank Act also
    imposed a risk retention requirement for lenders that I think
    we really need to take a good look at as we discuss this today,
    a risk retention requirement for lenders who securitize
    mortgages that they originate.
        Under Dodd-Frank, there is a requirement that lenders must
    retain 5 percent of the credit risk of any asset in order to
    encourage sound lending practices. The law currently exempts
    Qualified Residential Mortgages, or what are referred to as
    QRMs, from this risk retention. And on that note, as many of
    you may know, I am the cosponsor of the Consumer Mortgage
    Choice Act, which would simply amend the calculation within
    Dodd-Frank determining whether a mortgage loan is compliant
    with the QRM requirement. This is necessary. Our legislation
    would exclude so-called points and fees as long as they are
    reasonable.
        So I am going to be interested to know what Mr. Date's view
    on the legislation might be and how it might affect consumers'
    access to credit in order to obtain mortgages, because it seems
    to me that any expansion of charges to be included in the
    finance charge could very well cause vast numbers of mortgages
    to fail to meet the standards required of a Qualified Mortgage,
    and obviously, if the CFPB counts all originations and title
    charges as part of the points and fees, then a huge part of the
    mortgage loan market in my State of Georgia and elsewhere will
    not meet the requirement to be a Qualified Mortgage, and
    lenders will not be able to make the loan, and moreover, there
    could be an especially negative impact on the consumer's
    ability to choose affiliated mortgage and title companies if
    affiliated fees are included.
        And so, it could be that by expanding the range of charges
    that must be included in the finance charge, it could make it
    nearly impossible for the average consumer to obtain a
    Qualified Mortgage. I would like for us to look at this and get
    your opinion on that as we move forward and look forward to the
    hearing. Thank you, Madam Chairwoman.
        Chairwoman Capito. Thank you.
        That concludes our opening statements.
        I would like to welcome, again, Mr. Raj Date to our
    committee. He is the Deputy Director of the CFPB. Welcome.

      STATEMENT OF RAJ DATE, DEPUTY DIRECTOR, CONSUMER FINANCIAL
                        PROTECTION BUREAU (CFPB)

        Mr. Date. Thank you, Chairwoman Capito, Ranking Member
    Maloney, and members of the subcommittee for inviting me back
    to discuss the work of the Consumer Financial Protection
    Bureau.
        The last time I was before this subcommittee was back in
    November and the CFPB had been in existence for just over 100
    days. Today as we look forward to the 1-year anniversary of the
    CFPB on July 21st, so the day after tomorrow, I am glad once
    again to have the opportunity to discuss the important work
    that we are doing.
        As you know, before the Dodd-Frank Wall Street Reform and
    Consumer Protection Act, no agency was solely responsible for
    protecting consumers of financial services. Now, after the
    Dodd-Frank Act, one agency is solely responsible for consumer
    protection, and that is the CFPB. Congress equipped the CFPB
    with a range of tools to reform the consumer finance
    marketplace: tools like research and supervision and
    enforcement and rulemaking and consumer education. I am pleased
    to report that we have been using these tools to deliver
    tangible value to American consumers.
        In addition to supervising the country's biggest banks, we
    have also begun our supervision of nonbank businesses in two
    markets, residential mortgage and payday lending. On Monday of
    this week, we announced the addition of credit reporting
    companies to our nonbank supervision program, and over time we
    will continue to build out our nonbank supervision activities.
    Many of these nonbank products and services have never before
    been supervised at the Federal level, so these are important
    changes for consumers.
        And yesterday, we resolved our first enforcement action.
    During our supervision of a major credit card issuer, our team
    identified deceptive marketing practices used by the bank's
    third-party vendors to pressure or mislead customers into
    paying for add-on products when they activated their credit
    cards. Yesterday's consent order, which we issued in
    conjunction with the OCC, requires the credit card issuer to
    refund $140 million to 2 million consumers and to pay an
    additional $25 million fine.
        Other work that we have been up to: Evaluating overdraft
    protection; helping students to better understand their
    financial options; and working with the prudential regulators
    to help struggling military homeowners who have received
    permanent change of station orders.
        In most of what we do, we have had the benefit of an
    ongoing and productive dialogue with the consumer finance
    industry. We are, for example, working with one of the largest
    credit unions in the country to figure out if shorter, more
    transparent credit card agreements can make a meaningful
    difference to consumers' understanding.
        The place that we are spending most of our time, as you
    might imagine, is the mortgage market. Given what American
    consumers have gone through since 2007, mortgage reform is
    appropriately at the top of the Bureau's policy agenda. From
    shopping for a mortgage to closing on a mortgage to paying for
    a mortgage, we are working toward restoring trust across the
    mortgage business system. Over the next 6 months, we will be
    proposing and then finalizing rules to address problems
    consumers often face in buying or refinancing a home.
        Let me start with shopping for a mortgage. Markets don't
    work if both parties to the transaction don't understand what
    it is they are getting into. With our new loan estimate form,
    we are saying ``no more'' to costs and risks being buried in
    the fine print. Not only are we integrating the Federal
    mortgage disclosure forms, as Congress directed us to do, but
    we are simplifying those forms, too. The idea is for borrowers
    to have a better chance to actually understand the price and
    the risk of their obligations in a way that is better for
    everyone involved.
        When it comes to closing on a mortgage, the Bureau is
    proposing rules that would require lenders to provide the most
    critical information 3 days before closing instead of at the
    closing table. This means consumers will have the time to
    review the loan terms and the costs and ask questions about
    anything that they don't understand or that just doesn't seem
    right.
        We are also trying to put an end to mortgages that, as a
    practical matter, destine consumers to fail. In the years
    leading up to the financial crisis, lenders too often paid
    little attention to whether consumers actually had the ability
    to repay their loans. The results were disastrous, not only for
    consumers but for the housing market, for investors, and for
    the broader economy. By the end of the year, we plan to
    finalize a rule requiring lenders to make a good faith
    determination that borrowers actually have an ability to repay
    their loans.
        And finally, when it comes to paying for a mortgage, we are
    considering common-sense rules of the road. So, for example, we
    are considering whether a servicer should be required to give
    borrowers better information about how much they owe every
    month. We are still at the early stages of these servicing
    rulemakings, but I am optimistic that we can find a common-
    sense path forward. In the end, we want to craft sensible rules
    that work for the market throughout the credit cycle, but we
    also want to be mindful of just how fragile and risk-averse the
    market seems to be today.
        Throughout all of our efforts across consumer finance, we
    want to minimize compliance burden to the extent possible, and
    we want to encourage a competitive market where consumers and
    honest businesses can both thrive. Again, thank you for
    inviting me back, and I look forward to your questions.
        [The prepared statement of Mr. Date can be found on page 30
    of the appendix.]
        Chairwoman Capito. Thank you.
        I would like to say in reference to the comment that you
    made about whether you are going to recommend that everybody
    send out a statement monthly on what they owe on their
    mortgages, I get that. I get that from my own lender every
    month. I think it is probably a good business practice, and I
    think you will find a lot of people are already doing that,
    which I am sure you already know.
        But anyway, I brought up two rules when I was mentioning my
    opening statement. Let me go to the one that Gail Hillebrand
    came to our committee and spoke about, and that is the stay-at-
    home spouse issue with the ability to repay to be able to get
    credit in their own name. Can you tell me what the status of
    that is? And I am hoping that you are moving as quickly as she
    said that you would be towards a resolution of this.
        Mr. Date. Yes, strangely, Chairwoman Capito, I am not sure
    I actually have that much to add beyond your explanation of the
    issues associated with the ability-to-pay rule in the CARD Act
    and how the Federal Reserve Board's regulation may have the
    unintended consequence that you discussed on nonworking
    spouses.
        Associate Director Hillebrand had discussed our approach to
    it, and that remains our approach, which is to try to move from
    the admittedly merely anecdotal evidence today to a more
    systematic understanding of the magnitude of the problem, its
    trajectory, and to think about potential solutions that we
    might be able to move forward with. She had talked about the
    end of the summer being the point in time where we would have a
    good sense of what the right path is, and that remains our
    plan.
        Chairwoman Capito. My understanding--
        Mrs. Maloney. May I--
        Chairwoman Capito. Let me go ahead and finish because I
    only have 3 minutes. My understanding on her, on our testimony
    is that this is a real problem. I am a former stay-at-home
    spouse myself. I understand the issues and how important this
    issue is to folks who are staying at home with their children
    to raise their families, both, as I said, males and females, so
    my understanding is that the resolution to this issue was going
    to be reached by the end of the summer, not just an analysis of
    whether there actually is a problem. So I would encourage you
    to keep moving forward quickly on this. It is extremely
    important to these families that we have a resolution to this
    sooner than later, and that was the crux of what she said when
    she was here, the way I understood it.
        Let's go to the bright line. Mr. Cordray has said that a
    bright line is exceedingly important in the criteria for a
    Qualified Mortgage. I have an article here from the Wall Street
    Journal yesterday which said the Fed's new mortgage disclosures
    are a bust. I guess they could say the CFPB new mortgage
    disclosures are a bust, in his opinion. I don't agree with some
    of what he is saying here, the nitpicking of the forms; I
    looked at them. It looks fine to me. I think he is complaining
    about having the APR on the third page. I don't think that
    bothers me as much as it seemingly bothers him, but he does say
    that the unintended consequences, and we did discuss this in
    our hearing last week, would be a tightening of credit and an
    inability--if you can't get a Qualified Mortgage, you are out
    of the game. Everybody on our panel said nobody is going to
    write a mortgage that is not a Qualified Mortgage, and so it
    needs to be broad and it needs to have bright lines in terms of
    the legal protections.
        So do you agree that the safest way to ensure that standard
    is not overly litigated is to get the legal safe harbor on
    this, or what is your position on that?
        Mr. Date. As always, Chairwoman Capito, thank you for
    raising the set of reforms around mortgages because it is at
    the top of our policy agenda for a reason, it is the single
    most important and largest market in the country, and it is the
    one that we have the most impact on. The ability to repay
    curiously also called ability to repay provision with respect
    to mortgages, which most people call the Qualified Mortgage
    Rulemaking, is a pending rulemaking so I am a little bit
    constrained in how I can talk about it, but I will point out
    that it is difficult to find a lot of dissenting voices to the
    core notion that you are saying, which is that bright lines
    matter. To the extent that the Qualified Mortgage is meant to
    be at the time of origination to provide some manner of
    presumption, either irrebuttable or rebuttable in some way,
    that the ability to repay provision has been met, then, that is
    not especially helpful if no one knows whether or not the loan,
    when made, is in fact a Qualified Mortgage. So I think most of
    the commenters throughout the two comment periods on the QM
    rule have made very similar arguments.
        There are related issues with respect to the degree and
    magnitude of litigation risk that we recently reopened the
    comment period to get more perspectives on. I know that your
    letter, and thank you for it, takes a point of view on that
    question. I would characterize the point of view in that letter
    as being quite solidly within the spectrum of the wide
    diversity of perspectives on litigation risk as evidenced by
    the comment letters that we have received, but we are trying to
    move forward on the timetable that we have laid out.
        Chairwoman Capito. I would also bring up and caution you
    that in this article that was written in the Wall Street
    Journal, an opinion article that raises some questions, and we
    have heard this in our office of Habitat for Humanity and other
    nonprofits that try to get maybe nonqualified borrowers to be
    able to be in a home, sweat equity, those kinds of things. I
    would hope that would be taken into consideration and have some
    flexibility for these really valuable programs to move forward.
        I guess my other question, my final question--I don't have
    time for a final question. Maybe I will come back afterwards.
        Mrs. Maloney?
        Mrs. Maloney. I thank the gentlelady, and I would like to
    add my voice with the concern on the stay-at-home moms. It was
    certainly not my intention when I authored the bill to in any
    way roll back rights of women, and just on my own calls that I
    hear in my district from stay-at-home moms, this has been quite
    a challenge, so I look forward to your report, and I hope that
    you can make accommodations that are in line with the spirit of
    the law, and this is something we agree on. This is something
    that we both support wholeheartedly.
        We are having a day on the Floor next week on regulatory
    burdens, and many people or some people on the other side of
    the aisle have criticized the CFPB, claiming that it has too
    much of a regulatory burden on smaller institutions and
    businesses, yet I do know that in the financial reform, we made
    a point of requiring that the Bureau convene panels during the
    rulemaking process to assess the effects of proposals on small
    businesses. Can you report on how this process is working? And,
    very importantly, in your data-driven research, has it been any
    type of a burden in any way? Also, some have claimed that it
    has ensured the end of free checking. Would you agree with that
    statement or could you give your analysis of that particular
    complaint, shall we say?
        I do want to say I am very proud to have been one of the
    authors of Dodd-Frank. I worked on the conference committee,
    and I feel this is a centerpiece, an incredibly important
    reform, I support it completely, but it is also very important
    to answer any types of criticisms that come our way, so I look
    forward to your response. Thank you.
        Mr. Date. Thank you, Ranking Member Maloney, and I will
    take those questions in the order in which you posed them.
    First, with respect to burden on small institutions, I think
    sometimes lost, and perhaps it is my own fault for not being as
    clear about this as maybe I can be, the CFPB does not supervise
    or enforce the law with respect to small banks. There are
    15,000 banks, thrifts, and credit unions within the country.
    Our supervision authority extends to call it the biggest 105
    out of 15,000.
        Second, are any putative sort of burdens associated with
    abiding by regulations that are promulgated by the CFPB?
    Although conceptually I understand that notion, the fact of the
    matter is that we have finalized two substantive rulemakings
    since being in business for a year, one of which by its terms
    kept in place the status quo, that is the Alternative Mortgage
    Parity Transactions Act rulemaking, and the other is not yet
    effective, and indeed we have publicly said we are considering
    means by which to provide exemptions for smaller providers. So
    the burden argument with respect to smaller institutions I
    think we have been quite attentive to and indeed the Congress
    has been.
        Mrs. Maloney. What was the second rule you came forward
    with?
        Mr. Date. The Remittance Rulemaking.
        Mrs. Maloney. The Remittance Rulemaking.
        Mr. Date. And when that was finalized, it was not yet
    effective, and, second, we are now considering means by which
    to provide exemptions or different requirements with respect to
    smaller remittance providers.
        You had mentioned the small business review panels that we
    convene. I am essentially a quite conservative person. I tend
    to be slightly fearful and anxious about things that are new,
    and we are the first financial regulator to conduct small
    business review panels. There are only two other Federal
    agencies that do them, OSHA and the EPA, and so I will confess
    to a certain amount of anxiety a year ago about how this would
    work out.
        I have been very pleased personally with how it is that we
    have been able to convene panels of small entity
    representatives, the diligence that the representatives have
    taken to the task at hand, the feedback that we have gotten,
    and as I think you probably have already seen in a couple of
    our proposals and will continue to see, for example, in our
    servicing proposal when it comes out, we have been able to
    listen to quite right-minded concerns and adapt to them where
    we can. It has been a real benefit to us, and I am proud of the
    team that is responsible for that at the Bureau.
        Finally, just briefly on the notion of free checking, the
    Federal Reserve Board had a not insubstantial change to
    overdraft fee opt-in a couple of years ago. We have said that
    we will evaluate how it is that the marketplace has changed
    since then. We don't actually know how it is that the
    marketplace has changed until we do the work, and as a result,
    the notion that somehow the CFPB has either promoted or
    prevented free checking I think is just factually inaccurate.
        Second, I would just point out, not just from this
    particular job I am in but from years prior, there is no free
    anything. Products that provide value, institutions tend to
    charge for one way or another.
        Mrs. Maloney. My time has expired. Thank you.
        Chairwoman Capito. Mr. Renacci for 5 minutes.
        Mr. Renacci. Thank you, Madam Chairwoman.
        Thank you, Mr. Date, for being here.
        Mr. Date, on June 28th the CFPB amended its regulations to
    provide that submission of confidential information to the CFPB
    will not waive any applicable privilege and to assert that the
    Bureau's transfer of such information to another Federal or
    State agency does not waive privilege. How do you address the
    concerns raised by the American Bar Association that because
    the proposed rule is based in part on an assertion of the
    Bureau's authority to compel production of privileged
    materials, the proposed rule may not protect the privileged
    status of the information?
        Mr. Date. I understand that concerns have been voiced, and
    it is a concern that caused us to propose and then finalize
    exactly the rulemaking that you are referring to, Congressman.
        Supervision of banks and nonbanks is core to what we do. I
    would argue that of the many policy tools we have, it is the
    single most central, it is the single most flexible, it is the
    one that makes everything else better. Supervision depends on
    confidential information being shared with regulators, full
    stop. You cannot create a supervisory relationship that is
    going to be meaningfully additive to the system unless
    institutions can count on that, which is why we proceeded with
    and finalized the rule that you discussed.
        Mr. Renacci. Again, I appreciate the intentions of the
    rule, but I share some of the concerns of the American Bar
    Association. I believe the statutory change is preferable. In
    fact, in recent congressional testimony, Director Cordray had
    also stated that legislation would be helpful in removing all
    doubt. It is for that reason I supported Representative
    Huizenga's efforts in H.R. 4014, but I also have concerns for
    institutions not covered under the Huizenga bill. Many nonbank
    financial institutions are now subject to the CFPB. Many of
    these nonbank institutions are also regulated by the consumer
    finance regulators, not State bank supervisors, as currently
    defined under the FDI Act.
        Regardless of how an institution is regulated at the same
    level, I believe they should be extended the same protections
    when they and their regulators share information with the CFPB.
        So I would ask you, can you envision a scenario where the
    CFPB will collect information from a nonbank financial company?
        Mr. Date. Certainly, Congressman. Given the nature of
    nondepositories, the number of them, and the diversity of their
    business models, the nondepository supervisory process may not
    look identical to, say, a supervisory process with respect to a
    $150 billion bank. It will rely on the exchange of information,
    absolutely.
        Mr. Renacci. Sure. Can you envision a scenario where the
    CFPB might share or collect information with a State consumer
    finance regulator as opposed to a State bank regulator?
        Mr. Date. We have promulgated our point of view on when it
    is and under what conditions of confidentiality we would share
    information of any kind, and I believe that takes account of
    that possibility, where there is a shared purpose and
    confidentiality is assured. So, again, I understand and
    appreciate the analogous situation that nondepositories are in
    versus depositories.
        Mr. Renacci. So there is a possibility that there would
    be--
        Mr. Date. I would say core to the question is to the extent
    that confidential information can be important to enabling an
    effective supervisory regime, we will insist the confidential
    information be shared, and we will obviously be quite careful
    with it. Again, our point of view is that does not somehow
    waive attorney-client privilege for the supervised
    institutions, but to the extent that there is doubt out there,
    and I am not quibbling with whether or not there is, in fact,
    some doubt, then statutory remedy is something, as Director
    Cordray has pointed out, that we would welcome.
        Mr. Renacci. So you could see why a nonbank institution
    would want the same protections extended to the consumer
    finance regulator that are extended to a State bank regulator
    under the FDI Act?
        Mr. Date. Yes, by and large the entire premise of the
    supervisory authority of the CFPB is grounded in parallel
    treatment of institutions. The idea is if you are going to be
    in the consumer finance business, it shouldn't matter if you
    are a bank or a thrift or a broker or an investment bank, you
    all should follow the same set of rules.
        Mr. Renacci. So this really comes down to those
    protections.
        This is one of the reasons I joined my colleague from
    Colorado, Mr. Perlmutter, on H.R. 6125. It is legislation to
    ensure that all information shared between State agencies and
    the CFPB is afforded the same protections. This is the only way
    that I believe we can remove all doubt and protect the free
    flow of all information.
        Madam Chairwoman, without objection, I would like to submit
    for the record a letter in support of H.R. 6125.
        Chairwoman Capito. Without objection, it is so ordered.
        Mr. Renacci. And I yield back the remainder of my time.
        Chairwoman Capito. The gentleman yields back.
        Mr. Hinojosa for 5 minutes.
        Mr. Hinojosa. Thank you, Chairwoman Capito.
        Mr. Date, the CFPB was created as the first Federal
    regulator wholly responsible for protecting the American
    consumer. This is apparent in the recent enforcement action
    against Capital One, the first by the CFPB. The hearing held
    earlier today was entitled by the Republicans, ``Who is in Your
    Wallet? Dodd-Frank's Impact on Families, Communities, and Small
    Businesses.'' That was the title. It seems to me the hearing's
    title mirrored, ironically, the catch phrase of Capital One's
    omnipresent commercials.
        I have a question or two to ask. In addition to credit card
    companies, credit bureaus also heavily affect the financial
    lives of Americans, and the Bureau just announced its intention
    to supervise credit bureaus through its larger participant
    authority. Can you elaborate on what this rule will mean for
    credit bureaus and also what it will mean for consumers?
        Mr. Date. Certainly. As actually we were just talking
    about, one of the key features of the CFPB's supervisory
    authority is that it has the opportunity to extend not just to
    big banks but to nondepositories as well, because
    nondepositories, after all, are quite important features of the
    consumer finance landscape in the United States, and I would
    argue certainly perhaps none more importantly than the credit
    Bureaus and the information flows built off of it.
        The fact of the matter is that the latticework of consumer
    information that is captured within credit reporting companies
    has great benefits for the democratization of credit across the
    United States. It is a quite remarkable thing.
        On the other hand, it is certainly possible that
    inaccuracies or inequities with respect to that data can have
    the consequences of trapping consumers into situations that end
    up not being especially fair to them or to the system more
    broadly. Those are issues, among others, that we hope to be
    able to put light on through our continued activity in the
    space, including our continued supervision of credit reporting
    companies.
        As you point out, this week we finalized our rule with
    respect to the larger participants within the credit reporting
    agency industry. There are something like 30 firms that would
    be subject to that rulemaking and therefore subject to our
    supervisory authority. Together, those 30 firms constitute
    better than 90 percent of the revenues in that business, and we
    will proceed with alacrity as soon as that rule becomes
    effective.
        Mr. Hinojosa. I look forward to seeing the impact that you
    will have.
        Can you explain the Bureau's auditing practices? Who
    conducts the audits, how often are they required to happen, and
    what has been found to date through auditing processes?
        Mr. Date. Audits or supervisory exams are the core activity
    within the supervisory process, and that is true for the CFPB.
    It is true for the prudential regulators and has been true for
    quite some time. The key thing to remember with respect to
    exams broadly is that the purpose of the CFPB's exam process is
    to ensure compliance with the law. It is not meant to sneak up
    on people. We try to be quite clear and transparent about what
    the expectations both of the law and of our exam teams are so
    that institutions are in a best position to ensure their own
    compliance, to ensure that they have a compliance management
    system that they can count on, and to ensure that our
    relationship can be a productive one to make sure the consumer
    financial laws are abided by and that consumers are protected
    in the way that the Congress has intended.
        Mr. Hinojosa. Another criticism that we have heard is that
    the Bureau is going to create additional regulatory burdens for
    our smaller institutions and for businesses, yet Dodd-Frank
    requires that the Bureau convene panels during the rulemaking
    process to assess the effects of proposals on small businesses,
    which are of great concern to me. Can you report on how the
    process has worked so far?
        Mr. Date. Yes. It has been a quite productive early venture
    into the convening of small business review panels, the
    synthesis of the feedback that we hear with respect to
    potential rulemakings, and to date folding that feedback into
    the proposed rules that we actually promulgate. If the purpose
    was to make sure that we are hearing a diversity of
    perspectives with respect to impact on small enterprises and
    make sure that we are attentive to them even before we propose
    a rule, I would call it an unmitigated success.
        Mr. Hinojosa. My time has run out, and I yield back.
        Mr. Renacci [presiding]. The gentleman yields back.
        I recognize Mr. Duffy for 5 minutes.
        Mr. Duffy. Thank you, Mr. Chairman. Just a quick question
    and to clarify, you had indicated that the rules that you make
    in the CFPB have an impact on the 105 largest banks. And you
    are going to enforce those rules, but is it fair to say also
    that the rules that you promulgate will be enforced on smaller
    institutions as well? Is that correct?
        Mr. Date. Yes. Our rulemaking authority, as distinct from
    our supervisory authority, is meant to cover the entire
    landscape of firms, which is why we have been so attentive, as
    we were talking about a moment ago, to make sure that we are
    using, for example, the small business review panel process to
    ensure that the rules as crafted can ease compliance burden
    where necessary, especially with respect to smaller firms.
        Smaller firms, be they depositories or nondepositories, are
    by their nature less able to easily shoulder significant
    compliance burden. Compliance costs tend to be more fixed than
    variable, which means that to the extent that a firm is
    smaller, equivalent compliance burden will be more biting, more
    constraining, and so we are attentive to that basic fact and
    trying to make sure that we are attentive to it as applied to
    various regulatory requirements.
        Mr. Duffy. That is one of my concerns. Being from a more
    rural part of the country, I keep getting that feedback from
    our small banks and credit unions about the compliance costs
    with all these new rules that are coming out. Within the CFPB,
    those who are dealing with disclosure issues with QM and QRM as
    well as other disclosure forms, are you guys all communicating
    so when QM and QRM and the disclosure forms all come out, we
    are not going to have different waves of compliance issues for
    small banking institutions? Are all institutions, are you guys
    all talking together so it is going to be very fluid and we are
    not going to have one rule come out with QM that will then
    maybe be modified when the disclosure forms come out, you guys
    are all talking and this is going to be a very smooth process?
        Mr. Date. Yes. Dodd-Frank contemplates a number of reforms
    to the mortgage market, quite appropriately in my opinion,
    given how many facets of the mortgage market proved to be quite
    not up to the task of pricing and calibrating risk.
        We are proceeding in three sorts of ways to make sure that
    your concern is addressed. Number one is structural. In some
    ways, the statute itself lays out means by which to make sure
    that somehow definitions don't get uncoordinated. So, for
    example, the Qualified Residential Mortgage definition, which
    is an important element of the risk retention framework under
    Dodd-Frank, that definition cannot be broader than the
    Qualified Mortgage definition. So there is a structural means
    by which these fit together.
        A second is process. So there is a great advantage--it is
    not easy on the team, but there is a great advantage to
    actually developing all of these areas simultaneously so that
    we are thinking about those interactions instead of in series
    really thinking about them as an integrated whole.
        Mr. Duffy. So with the process and the practice internally,
    you are all communicating, you are trying to make it as simple
    and easy as possible for all these small institutions?
        Mr. Date. Yes, absolutely, because the compliance burden
    can fundamentally be dead weight in the economy. We want to
    make things as easy as possible and still achieve the consumer
    protection aims appropriately baked in the statute.
        Mr. Duffy. Right. Switching just a little bit, you have
    heard the argument, we have heard it today, and we have read
    articles as well that the new rules may reduce the power of
    consumers to choose different products that may work for them.
    I think the Chair brought this up earlier about this example of
    Habitat for Humanity, an example where they may have issues
    with making loans to not as wealthy individuals in our
    community because of the risk for making that loan and the
    ability to repay. We saw with the CARD Act that we want to make
    sure people have the ability to pay, we all agree that is a
    sound banking principle, but the side impact of that is, if you
    are a spouse who stays at home, you may not be able to get a
    credit card. Have you guys contemplated all of these offshoot
    issues? I know you are trying to do the right thing, I know we
    are trying to make the process work better, we are trying to
    protect consumers, but in the end, there are some unintended
    consequences. I certainly don't imagine you guys intend to have
    Habitat for Humanity not be able to engage in a loan and build
    a home for a low-income family in communities across America. I
    don't imagine that is your intent, but that is the reality of
    some of these rules that are coming out. How do you guys plan
    on addressing that?
        Mr. Date. Our rulemaking process does not lack for
    deliberation and it certainly doesn't lack for transparency and
    getting feedback from the public, and so, for example, in the
    case of Habitat for Humanity or, frankly, lots of other
    institutions that are concerned with providing credit to
    especially underserved segments of the population, we
    absolutely have heard the feedback, and we are sufficiently
    early in the process to make sure that we think about how it is
    that these things fit together. We take the feedback for what
    it is intended to do, which is to help inform a better, more
    nuanced rule that works not just for now but for the long term
    and for the entire marketplace.
        Mr. Duffy. And one of the concerns--oh, I yield back, my
    time is up.
        Chairwoman Capito. The gentleman yields back.
        Mr. Miller for 5 minutes.
        Mr. Miller of North Carolina. Thank you, Madam Chairwoman.
        In the last few years on this committee, since the credit
    crisis, there are Members who remember that they warned us
    repeatedly that we were on the road to ruin in subprime
    mortgage lending, and that is not really my recollection. I
    introduced with Mel Watt legislation in 2004 to provide
    consumer protections in subprime mortgage lending, and I recall
    it was a fairly lonely fight. And the argument against it was,
    you mean well, this is well-intended, but you are going to
    constrict credit, you are going to make credit unavailable to
    people who now for the first time can get credit, can buy homes
    they couldn't otherwise have bought or will not be able to
    refinance.
        And I always acknowledged the importance of making credit
    available, credit being available. Ned Gramlich, a well-
    regarded member of the Federal Reserve Board, argued in the
    1990s for subprime lending as democratization of credit, but by
    the last decade, he was arguing that the terms had become
    obviously abusive, so there is--something that may begin as a
    wholesome practice may cease to be. But I think, I thought that
    just about everybody agreed that a lot of the loans made, a lot
    of the mortgages in particular made in the last decade were not
    really such a good idea, and now we are hearing, but we are
    hearing the same arguments for consumer protection that it is
    going to constrict credit. Do you think that all the loans that
    were made in the last, all the mortgages made in the last
    decade should have been made or that--and if some consumer
    protections against abusive terms for those loans had prevented
    them from being made, it wouldn't have been such a bad thing?
        Mr. Date. Thank you, Congressman, for the question.
        There is no question that the credit business is a cyclical
    one. It is difficult to banish, somehow, the credit cycle from
    the economy. That said, not just in retrospect, but at the
    time, there were mortgage loans being made at the height of the
    bubble--in 2005, 2006, and the first half of 2007--that were
    simply implausible from a credit perspective. Clearly, loans
    were being made without, for example, a lender's inquiry into a
    borrower's ability to repay the loan. Basic reforms, frankly
    common-sense provisions within Dodd-Frank would have prevented
    those loans from being made at the time. To my mind, there is
    no question about that.
        Mr. Miller of North Carolina. We also hear the idea that
    these consumer protections will prevent people from making
    consumer choices. Looking at the kind of consumer choices that
    those mortgages represented, particularly at the height of the
    bubble, because by that time, subprime mortgages, whatever
    wholesome innovation they may have been in the 1990s, the
    predatory mortgages had completely shoved those out of the
    market. It was entirely a predatory market. The terms that made
    those loans subprime were almost entirely predatory. Do you
    think we should be too worried about consumers not having a
    choice that no one in their right mind would make?
        Mr. Date. Let me give an example just from our supervisory
    and enforcement action announced yesterday. It would be my
    characterization that, for example, add-on credit card products
    may make sense for some borrowers, but it doesn't make sense to
    make that inquiry until you are confident that the sales
    practices associated with those products, in fact, abide by the
    law. No one can be expected to make the right choice for
    himself, herself or their families unless they actually are
    confronted with a financial services landscape that operates in
    a fair and nondeceptive way. I think that is the central
    challenge for the Bureau, and it is the central thrust of the
    consumer reforms as I understand them within Dodd-Frank.
        Mr. Miller of North Carolina. Okay. I yield back.
        Chairwoman Capito. The gentleman yields back.
        Mr. Canseco?
        Mr. Canseco. Thank you, Madam Chairwoman.
        Mr. Date, the CFPB on its Web site has a consumer complaint
    database, and there is a disclaimer attached to it that says,
    ``We do not verify the accuracy of these complaints, but we do
    take steps to confirm a commercial relationship between the
    consumer and the identified company.''
        So given that the CFPB does not verify these complaints but
    boasts that it collects thousands of them, am I correct in
    assuming that the complaint database from a legal, ethical, and
    rational point of view will not influence enforcement of
    regulatory actions by the CFPB?
        Mr. Date. I think I lost the last part of it. You are
    asking me whether or not consumer complaints will not influence
    enforcement?
        Mr. Canseco. No, no, no. You have a complete consumer
    complaint database, but it says that it does not verify the
    veracity of those complaints. Now, am I to assume that you
    don't use them at all for any of your enforcement actions?
        Mr. Date. Oh, I see what you mean. The consumer complaint
    database that is published, we certainly make sure that we,
    what is called de-dupe the complaints as they come in, which
    means you remove duplicates, you don't want to double and
    triple count things, and we make sure that a customer who is
    making a complaint is in fact a customer of the institution
    they are complaining about.
        What that disclaimer means is that we put those counts and
    classifications on complaints and without publishing a point of
    view as to whether or not the consumer is somehow right in the
    complaint. However, for a subset of the complaints that we
    receive, both on the randomized and in a focused way both, we
    do conduct investigations on a subset of those, and the
    outcomes of those investigations may or may not influence--
        Mr. Canseco. Yet they are unverified.
        Mr. Date. The ones that would influence an enforcement
    agenda would be the ones that come up--
        Mr. Canseco. But your database says that they are
    unverified and that you will not verify the accuracy of the
    complaints. Very specifically, do you use unverified complaints
    to use, to start enforcement action or do you just have them
    there just as a collection?
        Mr. Date. There is an internal step that we obviously do
    with respect to a subset of complaints that we receive to
    investigate, and to the extent that those investigations result
    in a finding of a potential of a violation of law, then of
    course then we would take appropriate steps thereafter.
        Mr. Canseco. So, therefore, it is not true that they are
    verified? They are verified, you go and verify them; is that
    correct?
        Mr. Date. Internally, we will investigate a subset of the
    complaints.
        Mr. Canseco. So it is a misstatement for you to say that
    you will not verify the accuracy of these complaints, yes or
    no? Do you verify the accuracy of the complaints?
        Mr. Date. Of all the complaints that are catalogued on the
    Web site?
        Mr. Canseco. Right.
        Mr. Date. No, that is correct, we do not--
        Mr. Canseco. Okay. Thank you. So therefore what is to keep
    your organization from putting together a campaign against a
    single financial institution by having hundreds of individuals
    send complaints to the CFPB about an institution, and more
    importantly, who is going to verify the accuracy of these
    complaints were such an event to occur?
        Mr. Date. We are careful to make sure that--that is why we
    ensure that there is a commercial relationship between a
    complainant and an institution. You would not want to somehow
    open the system to someone submitting thousands of complaints
    with respect to a firm that he or she happens not to like. So
    there are antifraud mechanisms built in, and we are attentive
    to that.
        The notion, though, that raw numbers of complaints are
    somehow irrelevant to a consideration of, that would be
    relevant for consumers, I certainly don't see things that way.
    The prior--
        Mr. Canseco. My time is sort of running out, but let me ask
    you this: Are there any penalties for individuals or groups of
    individuals who submit bogus complaints to the CFPB?
        Mr. Date. We have not, as far as I know, assessed any
    penalties with respect to so-called bogus complaints that we
    have discovered to exist.
        Mr. Canseco. Okay. All right.
        Mr. Date. I cannot promise--
        Mr. Canseco. Now, so moving on here, one of the things that
    troubles me about the CFPB is your agency's ability to ban
    products or at least make them so unattractive that nobody will
    use them. In a White Paper released in May, economists at the
    Chicago Fed debunked the theory that low-income or naive
    consumers were the primary target of lenders accused of pushing
    complex mortgages. The Chicago Fed study showed that those who
    took out interest-only or negative amortization loans by and
    large had much higher income and higher FICO scores than any
    borrowers, yet the CFPB excluded these types of mortgages from
    the proposed Qualified Mortgage rule.
        So my question is, if a sophisticated borrower with a high
    income and high credit score wants to use a complex mortgage to
    buy a home or invest in a second property, why should the CFPB
    or any other Federal agency stop them?
        Mr. Date. Congressman, I think just to be clear about what
    it is the ``ability to repay'' provision does, it is possible
    to provide a negatively amortizing loan or an interest-only
    loan and be in compliance with the ability-to-repay rule, as it
    is--obviously, we have to finalize a rule, but as contemplated
    by the statute. It is certainly possible.
        I think what you are referring to is that the ``Qualified
    Mortgage'' definition within the statute, I think fairly
    unambiguously, does not provide for deferred amortization
    products.
        Mr. Canseco. Okay. Has the CFPB conducted any type of
    empirical study to determine the typical consumer--I see my
    time is up.
        Chairwoman Capito. Your time is up.
        Mr. Canseco. Thank you very much, Mr. Date.
        Chairwoman Capito. Mr. Scott for 5 minutes.
        Mr. Scott. Yes, thank you.
        Mr. Date, in my district of Georgia, a significant
    percentage of homes are valued at less than $100,000, and with
    the Qualified Mortgages 3 percent cap on points and fees, many
    of my constituents, especially low-income and first-time home
    buyers, will not have the access to credit if title charges,
    escrows for taxes and insurance, and loan officer's
    compensation have to be included in the calculation.
        As a result of this, I cosponsored H.R. 4323, the Consumer
    Mortgage Choice Act, to assure that these fees would be
    excluded, regardless of whether they are using a lender with
    affiliated businesses or not. So it seems to me that any
    expansion of charges to be included in the finance charges will
    cause vast numbers of mortgages to fail to meet the standards
    required of a Qualified Mortgage, and obviously, if the CFPB
    counts all originations and title charges as parts of the
    points and fees, a huge part of the mortgage loan market in
    Georgia and elsewhere will not meet the requirements to be a
    Qualified Mortgage, and lenders will not make the loans.
    Moreover, there could be an especially negative impact on
    consumers' ability to choose affiliated mortgage and title
    companies if affiliated fees are included.
        So, with this information, and as I have articulated it,
    are you not concerned that expanding the range of charges that
    must be included in the finance charge will make it nearly
    impossible for average consumers to obtain a Qualified
    Mortgage?
        Mr. Date. Thank you, Congressman, for raising the question.
    It is one that we have been trying to be mindful of, and it is
    a good example of the benefit of working on a number of these
    reforms and at the same time, to make sure that an approach is
    appropriately integrated and doesn't create problems in one set
    of the reforms even as we are trying to solve problems in a
    different set.
        So, with your example, we are trying to make sure that the
    finance, sort of an all-in finance charge if it is used that it
    doesn't inadvertently somehow create dramatically different
    sweeping in or sweeping out of loans under, for example, the
    HOEPA standards or under the Qualified Mortgage standard. We
    have a solicited comment with respect to precisely those
    questions, which is how is it that one should account for the
    conceivably unintended consequences of vastly increasing the
    universe of HOEPA loans even as we move forward with respect to
    the TILA and RESPA project.
        Mr. Scott. Okay. So you don't see any difficulty here at
    all with this situation?
        Mr. Date. I think you are right to point out the issue,
    which is if we were somehow blind to it and just blithely
    proceeded with a new definition of finance charge without being
    attentive to potential impact on HOEPA and Qualified Mortgage,
    I would agree that would be a bad outcome, but due to your
    flagging the issue and others, the team is very much going to
    focus on it.
        Mr. Scott. So you see our legislation as a useful way of
    making sure that the expansion, any expansion of charges to be
    included in the finance charge will not cause vast numbers of
    mortgages to fail to meet the standard required of the
    Qualified Mortgage?
        Mr. Date. I see, and that is one of the means that we are
    trying to contemplate in the rulemaking project itself.
        Mr. Scott. Okay, thank you, sir.
        I yield back, Madam Chairwoman.
        Chairwoman Capito. The gentleman yields back. The Chair is
    going to recognize Mr. Huizenga for the purpose of making an
    introduction of a guest, and then I will go to Mr. Pearce. Go
    ahead.
        Mr. Huizenga. Thank you, Madam Chairwoman. It is a real
    honor to have a couple of members from the European Parliament
    join us here today. We have with us Miss Sharon Bowles, who is
    the Chair of the Economic and Monetary Affairs Committee, who
    is sitting right over here, and Mr. Peter Skinner. Both are
    from the U.K. He also serves on the Economic and Monetary
    Affairs Committee. I had a chance to meet Sharon for the first
    time a short while ago, but she is the first Briton to chair
    that committee, and the first female, I believe, to do that as
    well and has been Chair since 2009. And then Mr. Skinner
    actually has been in Parliament since 1994 and has been on this
    committee for 16 years. So the committee has the responsibility
    of economic and monetary policies for the EU, taxation and
    competition policies, free movement of capital and regulation
    of financial services such as banks, insurance, pension funds,
    asset fund management accounting, international monetary and
    financial systems, so they are here meeting with a number of
    our regulators and also continuing to build those
    relationships.
        Peter and I had a chance to meet in Copenhagen a few weeks
    ago as part of the transatlantic legislative dialogue, and we
    are looking forward to continuing to build those relationships
    as we know we are in a one world market space for financial
    services. I am very pleased that you are able to join us here
    today. So thank you, Madam Chairwoman.
        [applause]
        Chairwoman Capito. Thank you for that, and welcome to our
    guests. We could have orchestrated a little more fireworks for
    you, but we are doing business as usual here.
        Mr. Pearce for 5 minutes.
        Mr. Pearce. Thank you, Madam Chairwoman.
        And thanks to Mr. Date for being here and for your service.
    I guess as I am looking at your account, and you are reporting
    that the CFPB is solely accountable for protecting consumers of
    financial products and services, I wonder--and you go into some
    of the failures of homeowners who couldn't understand or
    couldn't afford homes, lost those, and then the ability to
    repay is a repeating theme. So I wonder if the CFPB has taken a
    close look at what led to those homeowners not being able to
    repay, what caused that process that began to push loans out at
    people? Have you all done that?
        Mr. Date. Sure. We obviously also work with the backdrop of
    a great deal of work that has come before at other agencies and
    public and private researchers. Thank you for raising this
    because I do think it is important, Congressman, to look back
    to how is it that we got here in the first place. We are--
        Mr. Pearce. I am just asking, not for you to recount it.
    Have you studied it?
        Mr. Date. Oh, certainly, and indeed it is relevant.
        Mr. Pearce. So do you all have any authority over Fannie
    Mae?
        Mr. Date. Our--
        Mr. Pearce. Just yes or no.
        Mr. Date. Our authority extends to consumer financial.
        Mr. Pearce. So no?
        Mr. Date. So the GSEs don't have consumer relationships in
    general, but if they did--
        Mr. Pearce. But the GSEs actually, according to--I don't
    know if you have read the book by Gretchen Morgenson and Joshua
    Rosner, ``Reckless Endangerment,'' but on page 5 of that they
    explain that Fannie Mae led the way in relaxing loan
    underwriting standards, a shift that was quickly followed by
    private lenders, and then later in the paragraph, it became the
    playbook for financial executives, and in that whole process
    under James Johnson, he began to--he spent about $100 million
    in 10 years lobbying Congress to make certain small changes in
    the rules that would allow him to push those.
        So you had members of this committee back in 2005 were
    asked, are you afraid that the easy lending programs, for
    example, that James Johnson was pushing through Fannie and that
    this institution was encouraging, are you concerned that these
    easy lending programs are going to wind up luring people into
    homes they could not ultimately afford?
        And so it is not kind of like this came on us in the middle
    of the night. It was well-orchestrated by a guy who began to
    change the financial compensation standards in Fannie Mae and
    Freddie Mac to one of loan values, and he pushed $100 million
    towards himself in his 9 years as head of Fannie and Freddie,
    and so I wonder as you are concerned about the health of our
    consumer, if you have worried about who is protecting us from
    policy and who is protecting us from these people who will buy
    influence here to redirect?
        If you don't do that and if you all haven't asked those
    hard questions behind the scenes, then I fear that there is no
    one actually out here who is really concerned about the
    consumer because this thing didn't begin with the banks. It
    began with one guy that began to buy influence here on Capitol
    Hill and with the Administration. It began in 1994 with
    President Clinton buying into the idea that somehow--I think it
    was 1994--that he says more Americans should own their own
    home. That is a theme that continued through both of his terms
    and through President Bush's term, but it was during those
    periods that they began to restructure the policies in order to
    push loans at people who couldn't afford them, and when I hear
    that you are just sort of blandly going along and not kicking
    back at the system that encouraged it, it gives me great pause,
    it gives me a sadness that this is all just a little bit of a
    game, that we used the crisis to come down, and we are going to
    lean on banks all the way up and down Main Street without ever
    really getting at the problem.
        The problem originated in these halls, and I think you all
    know that, but I don't think you have the courage to get out
    and push and say loudly, but we are only looking at a piece of
    the problem, you are not letting us get where the real problem
    is. The real problem was there; it was there in the halls of
    Congress. It was there on the Financial Services Committee. And
    it was there with James Johnson and when he was buying
    influence here, and you are not saying that. I haven't heard it
    once. And it just makes me sad because you are the guys, you
    are the sheriff in town, and you are looking the other way.
        I yield back.
        Chairwoman Capito. The gentleman yields back.
        Mr. Green for 5 minutes.
        Mr. Green. Thank you, Madam Chairwoman. I thank the witness
    for appearing, and I thank you for allowing me to be a part of
    this subcommittee.
        I am very much concerned about our military families. As
    you know, members of the military are sometimes required to
    relocate, and upon relocating, they have mortgages that have to
    be dealt with. Sometimes, they have to have short sales. They
    have to have refis, and these things are sometimes difficult to
    negotiate with servicers because of what servicers perceive as
    a limited amount of authority.
        These persons who serve us in our military, they do so
    without question. They go where they are told to go. Families
    go with them. I would like to compliment the President and the
    First Lady for the Joint Forces Initiative that helps them with
    education, jobs, and job training. Can you explain what the
    CFPB is doing in concert with the FDIC and some other agencies
    to make sure that they can get the assistance they need when
    they have to transfer or they have to relocate to some other
    area because they are forced to do so as a result of serving
    our country?
        Mr. Date. Thank you, Congressman, and thank you for your
    concern with respect to issues surrounding servicemembers and
    their interaction with the finance system in the United States.
    This is a specific instance of a broader theme with the Bureau
    and its work to date where we have tried to shine a light on
    issues that are especially important to our servicemembers.
        As you point out, servicemembers not infrequently are asked
    to change stations with Permanent Change of Station Orders.
    When military homeowners receive those orders, they don't have
    the flexibility to say, no thank you, I would rather stay right
    here. And that becomes a real problem to the extent the
    homeowner, like so many homeowners across the country, is in
    fact underwater. So there is not very much flexibility to be
    able to refi away or sell the house. We worked with the
    prudential regulators to make sure servicers were put on notice
    that in fact there are legal obligations with respect to the
    treatment of our military borrowers under a number of different
    statutes and that we are quite attentive to it over time. It is
    an area where Congress has already done a lot, and combined
    with shining a bright light on the issues, my hope is that we
    can effect real change.
        Mrs. Holly Petraeus, who runs our Office of Servicemember
    Affairs, has been doing exactly that, not just on mortgages,
    but across a number of important markets where frankly the men
    and women who put on a uniform to serve the country, we at some
    level should be attentive to the fact that they have financial
    circumstances that are different than most of the civilian
    population, and we should ensure that our regulated
    institutions follow the law with respect to them.
        Mr. Green. Thank you. I trust we will promulgate rules that
    will help them to make this transition and maintain their
    creditworthiness and in general not get caught with a home that
    they can't do anything with because of the current market
    conditions. I hope that you will do your best.
        Now, I have a minute and 16 or 17 seconds left. Have you
    been asked any question that you would like to respond to and
    you need perhaps a moment to answer or some statements that may
    have been made that you didn't get a chance to respond to? If
    so, you now have a minute to do so.
        Mr. Date. Thank you, Congressman.
        Hopefully, I have been responsive to questions as they have
    been raised. Given the frequency, though, with which concerns,
    I think some quite legitimate concerns, about the impact of
    financial reform on small community banks has been raised, I
    think it is useful to just point out the fact that over the
    last decades, community banks have been pushed further and
    further toward the periphery of consumer finance in the United
    States. There is some reason for that, at least in part because
    we had a regulatory system that did not create an even playing
    field. If, in general, you have a regulatory system that makes
    it as a practical matter easier to be a nondepository or easier
    to be very big compared to very small, then you shouldn't be
    surprised when community banks end up with the short end of the
    stick. If we did our jobs right, we should be able to help
    them, not make it worse.
        Mr. Green. Thank you, I yield back.
        Thank you, Madam Chairwoman.
        Chairwoman Capito. Thank you.
        Mr. Luetkemeyer for 5 minutes, please.
        Mr. Luetkemeyer. Thank you, Madam Chairwoman.
        Mr. Date, it is always interesting to have you before the
    committee. It is an interesting discussion this afternoon.
        Can you tell me what spurs the rulemaking of CFPB, the
    different areas that they get into?
        Mr. Date. Thank you, Congressman.
        Let me answer that in terms of the long-term policy agenda,
    and then the near-term, not quite in that order. The near-term
    policy agenda as it applies to rulemaking really is set out by
    the statute. We have a not inconsiderable rulemaking agenda
    within the mortgage business that is mandatory and carries with
    it a timetable that is--
        Mr. Luetkemeyer. Let me call timeout right there. What is
    the reason, or do you know or have any idea, what the reason is
    for the rulemaking request that has been made of you?
        Mr. Date. Yes, when the statute is relatively clear in most
    cases, the--
        Mr. Luetkemeyer. Why is the statute the way it is? Why
    would the statute want you to make a rule in certain instances?
        Mr. Date. I know that the deliberations and debate with
    respect to the statute were lengthy and spirited, and of course
    Congress in its discretion has chosen rulemaking mandates, and
    we have embraced them, and we are moving forward with speed.
        Mr. Luetkemeyer. Okay. In the course of your rulemaking, do
    you do a cost-benefit analysis of each rule?
        Mr. Date. We do. It comes in a couple of different flavors.
    One is an analysis of the cost and the benefits and the burdens
    associated with the rule. There is also an element that relates
    with particularity to the impact on relatively small
    institutions within the financial services landscape.
        Mr. Luetkemeyer. With regard to your RESPA and TILA rules,
    have you done a cost-benefit analysis on those yet?
        Mr. Date. Yes. And as part of the proposal, part of the
    reason why the document is 1,100 pages long is that the new
    rules associated with TILA and RESPA integration are like 60
    pages of the 1,100 pages. The other, whatever that is, 1,040
    pages relate to lots of other required elements of our
    rulemaking, including the cost-benefit analysis, so that is
    laid out in that which we publish.
        Mr. Luetkemeyer. Okay. Part of the initiative of going to
    RESPA, though, was to create a simpler disclosure form and
    something more consumer-friendly. And yet, we wound up with a
    3-page-long estimate at the beginning and a 5-page-long
    estimate at the end. Do you think that is really an
    improvement?
        Mr. Date. I do. Both to my mind are improvements. We have
    been careful to reach out to a number of different--
        Mr. Luetkemeyer. Have you ever done a survey to see how
    many consumers actually read those documents?
        Mr. Date. We conducted what is called ``qualitative
    usability testing'' before the proposal was even issued.
        Mr. Luetkemeyer. Qualitative using?
        Mr. Date. Usability testing. It goes by a few different
    terms. It is something that is used at other agencies as well
    as not infrequently in the private sector to develop the broad
    contours of a piece of collateral or disclosure form so that--
        Mr. Luetkemeyer. I get it. Did you ever do it?
        Mr. Date. Yes, absolutely.
        Mr. Luetkemeyer. What was your finding on the RESPA forms?
    Have you done it on RESPA yet?
        Mr. Date. You are referring to the general kind of
    difficulties that consumers have with the current form--
        Mr. Luetkemeyer. No, I am asking, did you do the survey on
    the RESPA form to see if anybody reads them?
        Mr. Date. We did conduct--
        Mr. Luetkemeyer. What was the result?
        Mr. Date. In general, that which we have proposed is
    something that is easier, it would appear, based on the testing
    to date.
        Mr. Luetkemeyer. More pages, and it is going to be easier
    to read; is that right?
        Mr. Date. It is--so the mandate by the Congress was to
    combine the TILA and RESPA closings documents, or the final
    truth in lending disclosure.
        Mr. Luetkemeyer. Do you know offhand what the percentage is
    of the people who actually read the RESPA documents?
        Mr. Date. You would be hard-pressed, I think, Congressman,
    to find borrowers who sit at a closing table and thumb
    through--
        Mr. Luetkemeyer. Do you have a figure please?
        Mr. Date. I don't know the--
        Mr. Luetkemeyer. Two percent?
        Mr. Date. I wouldn't hazard a guess, but we will be doing
    quantitative testing after the proposal comment period ends.
        Mr. Luetkemeyer. But we don't know how many--we do propose
    a rule, and we don't know what percentage of people actually
    read this stuff. So, therefore, is there a use for it?
        Mr. Date. Oh, sure, this is for most people the single
    largest financial transaction that they will enter.
        Mr. Luetkemeyer. If they don't read it, Mr. Date, what good
    is it?
        Mr. Date. Congressman, at some level, I suppose it would be
    useful to know how the dollars in the transaction actually
    flow.
        Mr. Luetkemeyer. I have one more quick question for you. In
    following Mr. Canseco's discussion here about verifying
    complaints, it was very concerning to me that you indicated
    that you did not verify all the complaints, did not go through
    and try and figure out if they were a legitimate complaint and
    didn't follow up, if there was something needed to be followed
    up on, why?
        Mr. Date. Oh, no. This was, I feel like I was not
    adequately clear. To the extent that there are complaints that
    the consumer disputes the resolution of, then we have an
    investigations team within our consumer response unit that will
    follow up with those complaints--
        Mr. Luetkemeyer. But you indicated to him you just verified
    whether it was a legitimate complaint that they actually did
    business with them; you didn't tell them that you actually
    followed up on each individual complaint to see if there was
    something there.
        Mr. Date. What I just referred to is our approach with
    respect to complaints that we receive. With respect to that
    which we publish on the Web site, we--and we are quite
    transparent about it--that which we publish on the Web site is
    the nonpersonally identifiable information associated with
    complaints that we receive with the various data fields as we
    receive them. It is something that will continue to populate
    over time. That is--for example, we have--
        Mr. Luetkemeyer. My basic question was, you get the
    complaints, you verify that it is a legitimate complaint the
    person does business, do you follow up with an individual
    complaint? If one individual--you talk about--you keep telling
    me about this subset, about a whole group of people who are
    being abused or there is a problem, but if there is one
    individual case, you are not following up on it from the
    discussion and answers you are giving me; is that correct?
        Mr. Date. With a random sample of complaints that are
    resolved--
        Mr. Luetkemeyer. If you are giving a random sample, Mr.
    Date, you are not taking care of every single one of them.
        Mr. Date. Complaints that are resolved to the satisfaction
    of a consumer, we will not follow up with an investigation of
    every single one of those complaints, no.
        Mr. Luetkemeyer. My time is up.
        Thank you, Madam Chairwoman.
        Chairwoman Capito. Mr. Manzullo?
        Mr. Manzullo. Thank you.
        According to FICO and other sources, small amounts of
    medical debt that had been reported to credit bureaus can
    dramatically lower a consumer's credit score and keep a
    creditworthy customer from assessing credit and bolstering our
    economy. Is the review of medical debt that it is reporting by
    credit bureaus on your radar screen?
        Mr. Date. It is, and more broadly, trying to understand the
    interplay between data, data accuracy, its resilience as it
    feeds into scores and the usability of scores thereafter is
    within sort of both the medium-term research agenda and the
    near-term supervisory agenda.
        Mr. Manzullo. We know it impacts the credit score. The
    reason I ask that question is that I practiced law for several
    years, and I was probably involved in 300, 400, 500
    bankruptcies, and one of the things that we saw toward the end
    of my law career and what we see today are people filing
    bankruptcy because of high medical bills.
        Obviously, these are not large screen TVs. These are bills
    that were incurred because a person had no insurance or
    otherwise. And that being the case, it really has no impact--
    not the word impact--it really has nothing to do with a
    person's ability to pay the bills that would come day to day.
        And we are seeing even small amounts of money, even if they
    are money for bills, even if the bills are paid off, that
    already impacted a person's credit score. That is where I want
    to go on. Do you think that you would be open to look into the
    fact, so that perhaps there may be a regulation that says if a
    medical debt is under such and such an amount and it has been
    resolved, that it no longer should be part of a person's
    permanent credit record?
        Mr. Date. I understand the issue you are raising, and I do
    think that we should take steps to inquire into it. It is
    something that has been raised also in other contexts, field
    hearings that we have conducted. It is also analogous to other
    issues. For example, delinquency rates for homeowners--
    otherwise identical homeowners, one of whom happens to be
    underwater because he lives in a part of the country where
    there is a lot of depreciation, delinquencies are higher where
    people are more underwater. Does that necessarily mean that you
    are more or less likely to pay your auto--an analogous kind
    of--
        Mr. Manzullo. If I could send you a letter on that, laying
    out that issue--
        Mr. Date. We would welcome your thoughts.
        Mr. Manzullo. The second thought I had is on RESPA. When I
    practiced law, I closed probably 2,000 real estate closings,
    everything from small shopping centers and farms and
    residences, industrial properties, etc. And most of those were
    homes, and I am showing my age, but it was before RESPA took
    effect--I think it was in 1973 or 1975. What we are seeing now
    is going from a relatively small folder of documents to
    documents that can reach 6, 7, 8, 10 inches high. In my
    experience, in fact in closing one of my own loans, is the fact
    that it is impossible for a person to read through all that
    information. And in the effort and good faith attempts by
    regulators to disclose to the public, I think there has been so
    much work at that end, that we really have to ask ourselves the
    question, exactly what does the consumer need to know?
        Alex Pollock, who was the head of the Federal Home Loan
    Bank of Chicago--I think you know Alex--came up with, I
    believe, a 1\1/2\-page closing statement. Are you familiar with
    that?
        Mr. Date. I am.
        Mr. Manzullo. Tell me your thoughts on this. The closing
    statement plus the amount of paper that appear at a closing.
        Mr. Date. Many of the documents at a closing are State law-
    driven and not Federal.
        But I absolutely agree that there has been, over a period
    of decades, I assume right-minded in the moment, but also
    reflexive reaction, there is a problem, add another disclosure,
    add another disclosure. And at some point, and I think that
    point is relatively early on, there are diminishing returns to
    another sheet of paper.
        I mentioned to one of your colleagues in a different
    subcommittee here a couple weeks ago, my wife, who happens to
    be here today, we bought a house a year ago. She does financial
    fraud at the Department of Justice, and consider what I do for
    a living. We didn't read the documents at the closing table. At
    some level, to the extent that things are predicated on an
    unrealistic assumption of human behavior, that is bad. That is
    why we are trying to get the most critical information in
    people's hands 3 days beforehand, so that they actually have a
    chance to look at the most critical things ahead of time. I
    certainly don't think that just sort of throwing up our hands
    is the right answer, but we want to makes things better and not
    worse.
        Mr. Manzullo. Thank you.
        Mr. Date. Thank you.
        Chairwoman Capito. Thank you.
        I believe that concludes our questioning. I would like to
    ask for unanimous consent to insert into the record a statement
    from the Financial Services Roundtable.
        Hearing no objections, it is so ordered.
        The Chair notes that some Members may have additional
    questions for this witness, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 30 days for Members to submit written questions to this
    witnesses and to place his responses in the record.
        Hearing no further discussion, this hearing stands
    adjourned.
        [Whereupon, at 3:35 p.m., the hearing was adjourned.]

                                A P P E N D I X

                                 July 19, 2012

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