[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.]











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