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





                 THE SEMI-ANNUAL REPORT OF THE CONSUMER
                      FINANCIAL PROTECTION BUREAU

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                           SEPTEMBER 20, 2012

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 112-159








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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
KEVIN McCARTHY, California           BRAD MILLER, North Carolina
STEVAN PEARCE, New Mexico            DAVID SCOTT, Georgia
BILL POSEY, Florida                  AL GREEN, Texas
MICHAEL G. FITZPATRICK,              EMANUEL CLEAVER, Missouri
    Pennsylvania                     GWEN MOORE, Wisconsin
LYNN A. WESTMORELAND, Georgia        KEITH ELLISON, Minnesota
BLAINE LUETKEMEYER, Missouri         ED PERLMUTTER, Colorado
BILL HUIZENGA, Michigan              JOE DONNELLY, Indiana
SEAN P. DUFFY, Wisconsin             ANDRE CARSON, Indiana
NAN A. S. HAYWORTH, New York         JAMES A. HIMES, Connecticut
JAMES B. RENACCI, Ohio               GARY C. PETERS, Michigan
ROBERT HURT, Virginia                JOHN C. CARNEY, Jr., Delaware
ROBERT J. DOLD, Illinois
DAVID SCHWEIKERT, Arizona
MICHAEL G. GRIMM, New York
FRANCISCO ``QUICO'' CANSECO, Texas
STEVE STIVERS, Ohio
STEPHEN LEE FINCHER, Tennessee
FRANK C. GUINTA, New Hampshire

           James H. Clinger, Staff Director and Chief Counsel
































































                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 20, 2012...........................................     1
Appendix:
    September 20, 2012...........................................    53

                               WITNESSES
                      Thursday, September 20, 2012

Cordray, Hon. Richard, Director, the Consumer Financial 
  Protection Bureau (CFPB).......................................     9

                                APPENDIX

Prepared statements:
    Cordray, Hon. Richard........................................    54

              Additional Material Submitted for the Record

Frank, Hon. Barney:
    List of times CFPB officials have testified before Congress..    56
Luetkemeyer, Hon. Blaine:
    Letter to the CFPB from various organizations, dated 
      September 10, 2012.........................................    57
Cordray, Hon. Richard:
    ``Semi-Annual Report of the Consumer Financial Protection 
      Bureau, January 1-June 30, 2012,'' dated July 2012.........    59
    Written responses to questions for the record submitted by 
      Chairman Bachus............................................   142
    Written responses to questions for the record submitted by 
      Representative Luetkemeyer.................................   148
    Written responses to questions for the record submitted by 
      Representative Neugebauer..................................   154

 
                       THE SEMI-ANNUAL REPORT OF
                         THE CONSUMER FINANCIAL
                           PROTECTION BUREAU

                              ----------                              


                      Thursday, September 20, 2012

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10 a.m., in room 
2128, Rayburn House Office Building, Hon. Spencer Bachus 
[chairman of the committee] presiding.
    Members present: Representatives Bachus, Hensarling, 
Manzullo, Biggert, Capito, Garrett, Neugebauer, McHenry, 
Pearce, Posey, Luetkemeyer, Huizenga, Hayworth, Hurt, Dold, 
Schweikert, Grimm, Canseco, Stivers, Guinta; Frank, Maloney, 
Velazquez, Sherman, Meeks, Capuano, McCarthy of New York, Baca, 
Miller of North Carolina, Scott, Green, Cleaver, Perlmutter, 
Himes, and Carney.
    Chairman Bachus. The hearing will come to order. As 
previously agreed with the ranking member, there will be 10 
minutes on each side for the purpose of making opening 
statements, and without objection, all Members' written 
statements will be made a part of the record.
    The Chair will now recognize himself for the purpose of 
delivering an opening statement.
    Today, we welcome back to the committee Richard Cordray, 
the Director of the Consumer Financial Protection Bureau 
(CFPB), to present the Bureau's second semi-annual report, as 
required by Congress in the Dodd-Frank Act. These statutorily 
required hearings are one of the very limited forms of 
oversight that Congress can exert over the CFPB.
    Many of us have been frustrated by the lack of 
accountability in the CFPB's leadership structure and the lack 
of transparency in the CFPB's funding structure. The absence of 
adequate checks and balances is especially troubling given that 
neither Congress nor the Executive Branch can fully review the 
Bureau's spending. The CFPB's requests to draw millions of 
dollars from the Federal Reserve often take the form of nothing 
more than e-mails that lack any details as to how the money 
will be spent.
    Mr. Cordray, all of us on both sides of the aisle support 
consumer protection. Under your direction, the Bureau has 
attempted to tackle a number of issues it perceives to be 
problematic for consumers. Some may prove to be helpful; others 
may warrant reconsideration.
    For instance, in the semi-annual report the CFPB discusses 
at length the consumer complaint data it has received. While I 
applaud the Bureau's efforts to give Americans a forum for 
reporting potential abuses, many question its decision to 
release raw, unverified complaint data to the public.
    Rather than help consumers, publicly disclosing unverified 
information could instead mislead consumers. It is my hope that 
the CFPB will take the steps necessary to ensure the data it 
releases to the public is accurate.
    The CFPB's efforts to rewrite the rules governing the 
mortgage market are also of particular interest to many 
Americans. These regulations are already very complex, and in 
carrying out its responsibilities the CFPB must avoid adding to 
that complexity.
    For example, the CFPB's long-awaited proposed rule for 
consolidated mortgage disclosure forms is more than 1,000 pages 
long. The new disclosure forms required by the proposal add up 
to eight pages. It appears the dream of a one-page mortgage 
disclosure form is officially dead.
    As the CFPB goes forward in the mortgage rulemaking 
process, I encourage you and it to consider how the complexity 
of this and other mortgage-related rules might burden consumers 
and small businesses.
    Mr. Cordray, welcome back. I look forward--and I think we 
all look forward--to the civil discussion we will have today. 
And thank you for being here.
    At this time, I recognize the ranking member for the 
purpose of making an opening statement.
    Mr. Frank. I am, frankly--I was about to say I am pleased 
to be here, but it is too late in my career to pretend. Here we 
go again. We will listen for a couple of hours to my Republican 
colleagues complain that they have no chance to have oversight 
during an oversight hearing.
    In fact, I ask unanimous consent to submit for the record a 
list of the 26 prior occasions on which either Mr. Cordray or 
other officials of the CFPB have testified before Congress. It 
has been very closely monitored.
    Chairman Bachus. Without objection, it is so ordered.
    Mr. Frank. Thank you.
    The objection to its structure and financing would be more 
persuasive to me as a genuine objection on those merits rather 
than a complaint about independent consumer protection if I had 
ever heard them before about the other Federal financial 
regulatory agencies, which are exactly similarly situated. The 
Comptroller of the Currency gets funding from fees, does not 
get appropriations, is independent of the Treasury, is 
appointed to a fixed term. As a matter of fact, we have a 
pattern of Comptrollers of the Currency lasting from one 
Administration to another across partisan lines in some cases.
    None of my Republican colleagues, in my hearing or in my 
reading, have ever objected, and it is, in fact, even more 
insulated than the CFPB. The Federal Reserve itself, yes, gets 
money from the Federal Reserve, which is self-funding and 
doesn't get money from appropriations. And when we had a vote 
to subject CFPB to appropriations I offered an amendment to 
subject the Federal Reserve to appropriations and the Members 
voted it down.
    When people give a reason and then don't apply it 
logically--and I am not talking about taking it to an extreme; 
I am talking about simply applying it very logically to 
identically situated agencies--it means that is not the real 
reason. What we have is an objection to the fact that we have, 
for the first time, an independent consumer agency. It is not 
subject to brow-beating; it is not subject to having its funds 
cut.
    By the way, if it was subjected to the regular 
appropriations process, we know what would happen with this 
congressional alignment, because we have seen it with the 
Commodities Futures Trading Commission. One of the gravest 
problems we had in the first part of this century was largely 
unregulated derivatives trading. It led directly to the crisis 
at AIG and it caused problems elsewhere, led to unlimited 
speculation that hurt the prices for farmers. That is why our 
friends on the Agriculture Committee were strongly in favor of 
derivatives regulation.
    We conferred significant regulatory authority over 
derivatives on the Commodities Futures Trading Commission and 
the response of my Republican colleagues has been to deprive it 
of the funds it needs--to keep it so inadequately funded that 
derivatives cannot be adequately regulated. And that is clearly 
what they would want to do here. There is no example of these 
kinds of objections ever being made to the other Federal 
agencies to which it applies.
    So what we have here is, as I said, an objection to the 
CFPB being independent.
    The chairman said once he thought the regulators were there 
to serve the banks. He later said that wasn't exactly what he 
meant. But what my Republican colleagues want to do is to put 
the other bank regulators, who have a historic record of not 
being very serious about consumer protection, and putting 
concern for the financial well-being of the banks well ahead of 
consumer protection. And obviously, there has to be a balance. 
They want to put them back in charge.
    I am also struck that there have been no substantive 
objections to the--Mr. Chairman, how much time did I consume? 
How much time have I consumed?
    Chairman Bachus. Four minutes.
    Mr. Frank. Four minutes. But I will take another minute. I 
will yield myself 1 minute.
    The lack of substantive objection is very important. There 
was an argument that there were too many pages. There were 
often a lot of pages because the entities being regulated come 
to the regulator and say, ``Well, wait a minute. Provide for 
this exception. Provide for that exception.''
    I think the merger--one of the good things we did was to 
take two statutes dealing with real estate settlements, RESPA 
and TILA, that were given to different agencies and put them 
together. So I think Mr. Cordray can be proud of the fact that 
he has presided over an agency about which there are very few 
substantive objections.
    And finally, I do note there was some complaint about the 
salaries. Once again, I haven't read the complaint about the 
salaries of the Office of the Comptroller of the Currency, or 
the FDIC.
    There is on the part of the Republicans an understanding 
that the agency is popular, a failure to find specific things 
it did wrong, so they seized other issues on which to argue 
when they, in fact, ignore the possibility that those would be 
equally relevant criticisms of the other financial agencies.
    I yield the balance.
    Chairman Bachus. I thank the gentleman.
    Let me take a point of personal privilege. I have been 
quoted by the press as saying that the regulators were there to 
serve the banks. What I said, in fact, was that I viewed the 
regulators as public servants. And the question was asked, did 
that include the banks, and I said yes.
    I went on to say--not later, but at the same time; quoted 
in the article that quote has been drawn from--that they were 
supposed to enforce the rules. And I am actually going to 
introduce into the record--
    Mr. Frank. If the gentleman would yield, yes, I had read 
that quote somewhat differently than you said it, but if the 
gentleman will produce a quote to me, I will be glad to read 
it--
    Chairman Bachus. And I am actually going to, hopefully 
before--and I would like to clear that up because I do believe 
that Members genuinely believe that was the quote in its 
entirety, which was what I--the statement was that they were 
public servants, and they should look on themselves as public 
servants not only to the people but to the banks. But I also 
went on and there were two other sentences there that they--and 
I know it has been widely quoted, and it is hard once something 
gets out on the Internet to clarify, but I am going to actually 
read the statement.
    Mr. Frank. I appreciate that, Mr. Chairman. If you would 
yield, I had not previously heard that explanation. I will be 
glad to read it, and if that is--if you didn't use those words, 
I will be glad to acknowledge that.
    Chairman Bachus. The two things on the Internet--and I am 
sure all our Members have suffered from this--which claimed 
that I said there were 19 socialists in Congress, that was 
absolutely not said. Someone at a meeting asked, ``Are there 
any socialists in Congress?'' And I said, ``I am sure there are 
some who profess the European view of socialism.'' They asked, 
``How many?'' And I said, ``I don't know.'' They said, ``100?'' 
And I said, ``No, not that many.'' I actually said I didn't 
know; I had no idea. The only one I knew of was Bernie Sanders.
    But, in today's attempts really to make us all look like 
fools, sometimes that sort of thing is said, and it is very 
disappointing because there have been things that I--where I 
have misspoken, but those two things have been a source of--
they just seem to have a life of their own. In fact, I 
specifically said I had no idea. And I have that in a 
recording, because that was a speech that was recorded. And 
they later retracted that, but the retraction never got out.
    Mr. Hensarling?
    Mr. Hensarling. Thank you, Mr. Chairman.
    Good morning, Mr. Cordray. As you know and we have 
discussed before, Section 1066 of Dodd-Frank requires you to be 
``confirmed by the Senate.'' You haven't been. Even if we 
choose to ignore the statute, which apparently the 
Administration chooses to do, you can't be bootstrapped as a 
recess appointee because your appointment came at a time when 
the Senate was in pro forma session.
    So you came before us 6 months ago as an unlawful appointee 
and probably an unconstitutional one as well. Six months later, 
nothing has changed.
    The Dodd-Frank Act, Mr. Cordray, has made you a very 
powerful appointee, but it has not made you a legitimate 
appointee, and it has not made you an accountable appointee. 
And it is certainly not personal to you, but as long as this 
big gray legal cloud hangs over you and your agency, your 
credibility and the efficacy of both you and your agency are 
compromised.
    Mr. Chairman, we know that the creation of the CFPB was a 
major title under Dodd-Frank, and in the passage of the Act, 
the President predicted that Dodd-Frank ``would lift our 
economy'' and ``give certainty to everybody.''
    Two years later, we are mired in the worst economy in the 
post-war era. Millions suffer from unemployment and 
underemployment and Dodd-Frank's rules are proving to be some 
of the most confusing, complex, voluminous, and harmful our 
capital markets have ever seen, including those of the CFPB. 
Regulations tend to fall in two categories: those that create 
uncertainty; and those that create certain economic harm.
    We know that small businesses are the job-engines of 
America. They are capitalized quite frequently and principally 
by our community financial institutions. The head of one of the 
community banks in my native Texas remarked, ``My major risks 
are not credit risks, risk of theft, or risk of some robber 
coming in with a gun in my office. My number one risk is 
Federal regulatory risk.''
    I yield back.
    Chairman Bachus. Mrs. Maloney for 3 minutes. Thank you.
    Mrs. Maloney. First, I would like to welcome Director 
Cordray to the 27th hearing that he has attended, and often my 
Republican colleagues continue to use the CFPB as a political 
issue, citing it as an example of unprecedented power with no 
oversight. And I believe this list of hearings--27 of them--
speaks to the oversight that they have gone through.
    In fact, you are here today to discuss the semi-annual 
report requested and put in Dodd-Frank--it actually happened to 
have been my amendment. If I had known there would be so much 
oversight, I never would have required it. I thought we 
wouldn't be seeing much of you, but when you do come, we do 
hear what you are doing to help people, and I would say you 
have tremendous credibility, particularly with the college 
students that you are helping, the veterans, the seniors, 
``Know Before You Owe'' issues that help people understand 
their finances.
    But the CFPB is already, I would say, one of the most 
accountable Federal agencies, and the numerous attempts to 
defang the CFPB with major pieces of legislation put forward by 
this committee are merely election-year efforts by those who 
never wanted to create the agency in the first place. Those who 
put forward those amendments and bills didn't vote for the 
creation of the CFPB.
    And there were many of us who offered and worked on Dodd-
Frank who thought the consumers needed to have an office that 
was on their side. Too often, consumers were not thought about. 
It was a secondary thought, a third thought, or even not 
thought about at all. And I think it is very appropriate to 
have an agency looking out for a proper balance for industry, 
for consumers, and for the overall economy.
    Some of my colleagues on the other side of the aisle 
continue to say that there is not enough accountability, but I 
would say that the CFPB has extensive accountability and these 
were standards that were put in place under the Wall Street 
reform bill, and they are absolutely unprecedented in our 
government. I would say there is more accountability and 
oversight of the CFPB than any of the Federal regulators.
    And I would like to place in the record this analysis of 
the accountability and mention that--my time is running out--
the President can remove the Director for cause. The Director 
must appear before Congress annually and report on their 
budget. The GAO is required to do an audit every year.
    It is the only banking regulator with a funding cap. They 
are capped in what they can spend. And the CFPB final rules are 
subject to judicial review. And it is also subject to the 
Regulatory Flexibility Act and the Congressional Review Act. 
The Inspector General monitors the CFPB, and all of their rules 
could be overruled by the other regulators.
    So there is extensive oversight of this important agency, 
which in my opinion has tremendous credibility, particularly to 
the consumers and Americans and hard-working people that they 
are trying to help understand their finances, bring 
transparency into their contracts with credit cards and other 
financial institutions. And I believe it is good for industry, 
good for our overall economy, and good for consumers.
    I look forward to your 27th report from the CFPB to this 
Congress. Thank you for your service.
    And I yield back.
    And may I place this in the record? A detailed explanation 
of the various oversight--
    Chairman Bachus. Without objection, it is so ordered.
    Mrs. Capito for 2 minutes.
    Mrs. Capito. Thank you. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for coming today. I don't 
want to repeat a lot of the things that I have said in opening 
statements in the past. I think you know that I believe, and 
many of us believe on this committee, particularly on our side, 
that a commission or a five-person panel would probably serve 
this agency better because you would eliminate dramatic swings 
in ideology, and those kinds of things can happen to the 
political winds.
    I know you are aware of the fact that we believe the CFPB 
should have more accountability to Congress for the fiscal and 
the allocations that occur. A lot of people ask us, how can you 
control or weigh in on this agency, and one of the ways we 
weigh in on agencies all across this government is to work with 
their finances, and I think that this is one of the arms-length 
things the law provided that I think is a detriment to the CFPB 
and really to consumer safety.
    But I am going to take a little bit different tack because 
what we heard in the August recess, and I know what you are 
hearing is, what is wrong with this economy? Why can't we get 
it going? And it is the uncertainty that we have across-the-
board, whether it is uncertainty on taxes, health care, 
regulatory uncertainty. And financial regulatory uncertainty is 
part of this.
    You have some extremely important issues before your Bureau 
right now, such as the Qualified Mortgage (QM), where if you 
don't do it right, this economy is going to stay in a bleaker 
uncertain state. If you don't get the ability to pay rule that 
we have been asking you to make a judgment on for those stay-
at-home spouses to be able to get credit in their own names.
    And lastly, since I just have 12 seconds left, I have heard 
over the last several days that many of the financial 
institutions have a lot of uncertainty because you have the 
CFPB over here and the regulator over here who are still 
holding on to their consumer protection. Nobody is making the 
decision. It is creating more uncertainty for financial 
institutions, and it is resulting in a lack of lending, a lack 
of job creation, and further stagnating this economy.
    Thank you.
    Chairman Bachus. Mr. Scott for 2 minutes.
    Mr. Scott. Thank you, Mr. Chairman.
    I think this is a great time for you, Mr. Cordray, because 
you hear a lot of complaints about the CFPB, to take an 
opportunity to explain exactly what you are doing to help 
protect the consumer. For example, sharing what are the 
violations that pose the greatest threat to consumers would be 
good for us to know.
    You are currently carrying out hundreds of investigations. 
It would be good for us to know what types are they, what is 
most prevalent? What poses the greatest threat?
    There are also areas of conflicts of jurisdiction, 
particularly in areas like with the FTC and your agency, 
particularly involving credit scores. That came up in our 
credit score hearing a few weeks ago. Where do you begin? Where 
do they begin? Where do you end? Where do they end?
    One very important issue to our consumers is home 
appraisals. We hear all of the time because of the economy 
where homeowners are caught in a bind where their mortgages 
have been allocated at a certain level, their homes have lost 
the value, you get your appraisals coming in. That would be 
good to know.
    Another is to describe just how the consumer complaints 
process works. What happens here? If a consumer disputes the 
response they get from a financial company, what are the 
options available to that consumer?
    And in your experience, are there additional changes that 
the Bureau could make, particularly to home appraisals to help 
protect the consumer more?
    So I am looking forward to your comments on these things 
but I think it presents you with an excellent opportunity to 
give a great response to some of the criticism that we have 
gotten to show exactly the good that you are doing and how it 
is being done to the benefit of protecting our consumers.
    Thank you, Mr. Chairman.
    Chairman Bachus. Thank you.
    Mrs. Biggert for 1 minute.
    Mrs. Biggert. Director Cordray, as we all know, Congress 
has been examining complex settlement procedures and confusing 
mortgage disclosures for several decades. Mortgage disclosure 
has been of interest to me since my days as a real estate 
attorney.
    Today, alongside consumers and mortgage industry 
stakeholders, we are reviewing the 1,000 pages of the CFPB's 
proposed RESPA/TILA rule and mortgage disclosures. At first 
glance, I can say that I think that the proposal needs more 
work.
    Newly proposed mortgage disclosures must be streamlined and 
simplified, thoroughly tested and vetted, allow stakeholders 
ample time to provide input, and include a thorough regulatory 
impact analysis with a particular focus on small businesses. As 
the CFPB continues to work on mortgage disclosures, I encourage 
you to keep in mind that new disclosures can radically change 
the marketplace and be costly to businesses--particularly small 
businesses--and these changes and costs will be absorbed by 
consumers. We must get it right.
    I yield back.
    Chairman Bachus. Mr. Neugebauer for 1 minute.
    Mr. Neugebauer. Thank you, Mr. Chairman.
    I was trying to put this in perspective as we look at Dodd-
Frank basically creating a new government agency, giving the 
Director a half a billion dollar slush fund to say, I am going 
to go create an agency. And I was trying to put that in 
perspective in my background in business, and it would be like 
a CEO calling an employee to his office and saying, ``I hear we 
have a problem down in this certain area. I will tell you what, 
here is a half a billion dollars. You can draw that. Send me an 
e-mail if you need a little more, and don't worry about sending 
us any reports or--I won't ask you any questions, but you just 
go and see if you can take that money and fix that problem.''
    I think government is the only place where that would 
happen. And I think one of the things that, whether you agree 
or not that we created the CFPB, what you should agree is that 
at a time when we are having to borrow 40 cents for every 
dollar we spend of the American taxpayers' money, transparency 
and accountability is very important.
    Mr. Cordray has promised that he would have an open and 
transparent agency, yet our continued requests for additional 
information on operational and financial plans basically have 
gone unanswered. And so I am hopeful today that we can get a 
clearer picture of where this agency is going.
    With that, I yield back.
    Chairman Bachus. Let me indicate to the Members that Mr. 
Cordray has to leave at 1:30.
    And with that being said, without objection, Mr. Cordray, 
your written statement will be made a part of the record, and 
you are now recognized for a 5-minute summary of your 
testimony, but you can obviously go longer than 5 minutes.

   STATEMENT OF THE HONORABLE RICHARD CORDRAY, DIRECTOR, THE 
          CONSUMER FINANCIAL PROTECTION BUREAU (CFPB)

    Mr. Cordray. Thank you, Mr. Chairman. Let me clarify, I 
will stay as long as you like.
    Chairman Bachus, Ranking Member Frank, and members of the 
committee, thank you for inviting me to testify today about the 
Semi-Annual Report of the Consumer Financial Protection Bureau.
    A little over one year ago, the Consumer Bureau became the 
Nation's first Federal agency focused solely on protecting 
consumers in the financial marketplace. The Semi-Annual Report 
we are discussing today covers our activities from January 1st 
through June 30th of this year.
    As the report shows, we have been using all of the tools at 
our disposal to help protect consumers across this country. We 
pledge to continue our work to promote a fair, transparent, and 
competitive consumer financial marketplace.
    Through our regulatory tools, we have proposed rules that 
will help fix the broken mortgage market with common-sense 
solutions. We are writing rules that simplify mortgage 
disclosure forms, as referenced, and rules that make sure 
consumers do not receive mortgages they do not understand or 
cannot afford. Our rules will also bring greater transparency 
and accountability to mortgage servicing. And our careful 
process is that before we propose a rule, a team of attorneys, 
economists, and market experts evaluates its potential impacts, 
burdens, and benefits for consumers, providers, and the market.
    Our push for accountability extends beyond mortgage 
servicing. We are holding both banks and nonbanks accountable 
for following the law. Prior to my appointment, nonbanks had 
never been federally-supervised. The financial reform law 
specifically authorized us to supervise nonbanks in the markets 
of residential mortgages, payday loans, and private student 
lending. We also have the authority to supervise the ``larger 
participants'' among nonbanks in other consumer finance markets 
as defined by rule. So far, we have added credit reporting 
companies to this group.
    It is important for us to exercise sensible oversight of 
the consumer finance markets but it is also important that we 
empower consumers themselves to make responsible financial 
decisions. Our ``Know Before You Owe'' campaign involves us 
working to make mortgages, credit cards, and student loans 
easier to understand. We also developed ``AskCFPB,'' an 
interactive online database with answers to consumers' 
frequently asked questions. We also launched the first-ever 
database of individual complaints about financial products, 
starting with credit cards. Consumers can use the Web site to 
review and analyze information and draw their own conclusions 
about the customer service provided with these financial 
products.
    We also think it is important to engage directly with 
consumers so we know more about the struggles and frustrations 
they encounter in their daily lives. The Bureau has held 
numerous field hearing across the country--you will recall, Mr. 
Chairman, our first one was in Birmingham, Alabama, under my 
Director's tenure--so we can talk face to face with consumers 
on a variety of topics. Our Web site has a feature called 
``Tell Your Story,'' which encourages consumers to share with 
us their personal stories to help inform our approach in 
addressing issues in the financial marketplace. And perhaps 
most significantly, we help to resolve consumer disputes with 
lenders by taking complaints on our Web site at 
consumerfinance.gov, as well as by mail, fax, phone, and by 
referral from other agencies. As of September 3rd, we have 
received 72,297 consumer complaints about credit cards, 
mortgages, and other financial products and services and the 
pace of complaints has been increasing over the past year.
    All of these processes--rulemaking, supervision, 
enforcement, and consumer engagement--provide us with valuable 
information about consumer financial markets. We engage in 
extensive outreach to large and small institutions, including 
banks and nonbanks, to gather the best current information as 
we make policy decisions. We pride ourselves on being a 21st-
Century agency whose work is evidence-based. So we also conduct 
our own in-depth studies on consumer financial products such as 
reverse mortgages and private student loans. We have issued 
public requests for information that seek input from consumers, 
industry, and other stakeholders on issues such as overdraft 
fees, prepaid cards, and the financial exploitation of seniors.
    The new Consumer Bureau has worked on all of these projects 
while being fully engaged in start-up activities to build a 
strong foundation for the future. The Bureau has worked to 
create an infrastructure that promotes transparency, 
accountability, fairness, and service to the public. Our first 
year has been busy and full and this report reflects 
considerable hard work done by people whom I greatly admire and 
respect. They are of the highest caliber and they are deeply 
dedicated to public service. We look forward to continuing to 
fulfill Congress' vision of an agency that helps all Americans 
by improving the ways and means of their financial lives.
    Thank you. I will be glad to address all of your questions.
    [The prepared statement of Mr. Cordray can be found on page 
54 of the appendix.]
    Chairman Bachus. Thank you, Mr. Cordray. And I appreciate 
you making, I think one of the--the first hearing was in 
Birmingham. That was your first public hearing, and Senator 
Shelby and I both appreciate you coming to Birmingham for that 
hearing. And I think it went quite well.
    As you know, the Federal Reserve issued a final rule 
earlier this year clarifying certain provisions of the Card Act 
in which they determined that a credit card issuer could no 
longer rely on the consumer's household income to determine a 
consumer's ability to pay. The CFPB has now inherited this rule 
from the Fed.
    I am deeply concerned about the impact this change will 
have on non-working spouses and military families. Some people 
call this the stay-at-home moms--or probably stay-at-home 
spouses might be more politically correct. But given the 
current economic environment, many consumers already face 
challenges getting access to credit, and this change would make 
the situation worse, especially for women and military 
families.
    In a June hearing with the Financial Institutions 
Subcommittee, Gail Hillebrand of the CFPB testified that the 
Bureau intended to make a determination about how to proceed 
with the rule during the course of the summer. She went on to 
clarify that summer goes until mid- to late September, so we 
are within that definition.
    With that said, has the CFPB finished reviewing the 
submitted comments and made a determination about how to 
proceed? And if so, could you share with the committee any 
analysis that you have conducted on the impact this change may 
have on consumers?
    Mr. Cordray. Thank you, Mr. Chairman, for that question. I 
know it has been of concern to many Members. I have actually 
discussed the matter personally over the telephone with 
Representative Capito and Representative Maloney, and we have 
had communication with others.
    We have, over the course of the summer, made an effort to 
assess two things. The first is sort of the scope of the 
problem, and understanding whether it is something we should 
move forward and act on. The second is, if we do so, what means 
are available to us? What avenues can we pursue?
    Is it something that we could simply clarify without having 
to engage in rulemaking? Is it something that requires us to 
engage in rulemaking? Is it something where whatever we do by 
rulemaking really has to be fixed by the Congress in a statute, 
which, of course, is often most difficult?
    Over the course of the summer we did have a chance to 
gather information and some data from industry to assess the 
gravity of the problem. I think we have determined that it is a 
significant problem. There are tens and perhaps hundreds of 
thousands of individuals who perhaps have been denied access to 
credit as a result of the way the law was interpreted.
    We have also attempted to gauge whether we could simply 
offer some sort of clarification informally and that would do 
the trick, and I think we have determined that will not 
suffice, that we will need to engage in rulemaking. I think we 
have also determined that in order to address this problem, we 
can engage in rulemaking, and it is not necessary to come back 
and have Congress change the law. Of course, it is always 
within Congress' purview if they want to change the law to do 
so.
    So we have made a determination to proceed. We are going to 
address this issue.
    Our proposal will be on the street in the very near future. 
Certainly, I would think, before you reconvene you will have an 
opportunity to look at that, then you may want to determine 
whether you want to proceed by legislation, whether you want to 
work with us on a rulemaking process, and we do intend to face 
this issue and resolve it.
    Chairman Bachus. Thank you. I appreciate--that is a 
responsive answer, and we don't always get those.
    Mr. Cordray. I do what I can.
    Chairman Bachus. And I don't mean from you personally, I 
mean just in the course of these hearings.
    As you know, lending standards on residential mortgages are 
as tight as they have ever been, and even prospective borrowers 
with strong credit histories are in some cases finding it 
difficult to obtain loans. Are you concerned about the rigid 
criteria for defining what constitutes a Qualified Mortgage and 
how it could disproportionately affect populations that tend to 
take out smaller mortgages, such as low-income, first-time, 
rural, or minority borrowers? And how is that concern informing 
the CFPB's deliberations on the critical question of how much 
protection from legal liability should be afforded to lenders 
that make Qualified Mortgages?
    Mr. Cordray. Mr. Chairman, we do have a concern, and I 
think Congress told us one of our statutory objectives is to be 
mindful of issues of access to credit, and I have come to 
understand that we can draw up the nicest-looking consumer 
protections you have ever seen, but if people are not willing 
to lend to consumers, those protections are worth very little, 
and if they interfere with lending to consumers, then they 
could actually be harmful to consumers.
    I would say two things about the mortgage market. The first 
is, the biggest thing that has constrained credit in the 
mortgage market in our lifetimes was the financial crisis 
credit freeze and meltdown and ensuing recession that has 
caused so many problems for smaller institutions, community 
banks, and small businesses and individuals getting access to 
credit.
    That remains the case today. Credit in the mortgage market 
is extremely tight. We are at very low levels of activity and 
it is part of what is essentially having to dig out of a 
financial crisis that would have been far better if we could 
have averted it in the first place.
    Secondly, with respect to the Qualified Mortgage Rule that 
you asked about, we have received a tremendous amount of input 
from industry, consumers, stakeholders of all kinds, 
participants in the real estate industry. I think over the 
course of that--of course, we inherited this proposal, as you 
mentioned, from the Fed; we did not originally propose it, but 
our job is to finalize--we have come to understand that it is 
very important for us to draw this rule in a way that 
encourages and facilitates access to credit in the mortgage 
market and we plan to do so.
    It would be unwise of our agency to write a rule that 
further constricts access to credit. The Qualified Mortgage 
Rule, which is due and will be finalized before January 21st of 
next year, is intended to create protections for consumers, and 
I think that in the end, people will be satisfied with what we 
do.
    Chairman Bachus. Okay. Thank you very much.
    Mrs. Maloney?
    Mrs. Maloney. Thank you, Mr. Chairman.
    And welcome again, Director Cordray.
    I read a story recently in Bloomberg--I believe it was last 
week--where you were quoted as saying that the Bureau had 
received far fewer complaints on credit cards than expected, 
and I was pleased to hear that, as I was the author of the 
Credit Card Bill of Rights in the House, and that you 
attributed that low number of complaints to the changes that we 
made in the passage of the Card Act. I would like to add that 
I, likewise, have not been getting complaints. It used to be I 
couldn't walk down the street without someone stopping me with 
a credit card horror story.
    But I would like to know, to the extent you are receiving 
complaints about credit cards, what are they? What types of 
complaints are you receiving, if you are receiving any, and 
what is the Bureau doing to address it?
    Mr. Cordray. Thank you for the question. And again, thank 
you for what I thought were really important strides for 
consumers made in the Card Act that Congress enacted in the 
last session.
    I did say and I do believe that for myself personally, 
coming to this, I have been surprised that we have received 
fewer complaints about credit cards than I certainly would have 
expected. My experience in that regard was at the time that the 
Federal Reserve was first considering broadening consumer 
protections in this area. I was the treasurer in the State of 
Ohio. I organized a Speak Out Ohio campaign to collect comments 
and reactions from the public on this.
    We submitted something like 30,000 comments to the Fed on 
it, and people were very upset about their credit card accounts 
and how those were being handled, and manipulation, as they 
perceived it, of late fees, and changes that they did not 
understand, or were not sufficiently explained--just a whole 
variety of things.
    In the wake of the Card Act, a number of those problems 
have been addressed. We held a conference on the implementation 
of the Card Act last year and I think we were encouraged 
already by what we saw, and as it has filtered through more and 
more it has been very positive.
    The complaints we have received on credit cards range 
across the spectrum. I am sure they are very similar to the 
types of things your office hears from constituents; a lot of 
issues, clearly, around billing--billing disputes--sometimes 
they are factual disputes, sometimes they are claims of error; 
sometimes there is unclarity around terms, although again, I 
think less so than was true before. And I think we have put up 
a graph on our Web site of different categories of complaints 
that we have received so that the public can scrutinize it and 
understand what we are seeing.
    The other thing I want to note is that we have found, 
through our complaint database, that the response from the 
financial companies--the credit card issuers--to the complaints 
has been at a pretty high rate. They seem to be paying 
increased attention to customer service. I have been to a 
couple of the customer service centers of credit card issuers 
where they have kind of overhauled the way in which they 
respond to their own complaints and to the ones that we work 
with them on, and there seems to be better attention.
    The J.D. Power survey recently indicated this as well. It 
showed that the overall level of public satisfaction with 
credit card companies has been increasing over each of the last 
several years. Again, I would attribute some of that to the 
Card Act, some of that to renewed focus by the companies 
themselves, and I think it is a good development.
    Mrs. Maloney. I must say that one outcome of the Card Act 
with which I am not pleased is the interpretation of the 
Federal Reserve on the ability-to-pay standards in implementing 
the Card Act, and I join Chairwoman Capito and others on both 
sides of the aisle, and I know, since I wrote the bill, it was 
certainly not my intent for ability-to-pay to prevent stay-at-
home spouses from obtaining credit in their own right.
    Chairwoman Capito held a hearing in May on the issue, and 
at that hearing, we received substantial testimony that this 
was a huge effort for stay-at-home moms. I know you say you are 
working on it, but we certainly don't want to legislate it. If 
we wanted to legislate it, we would have done it by now.
    We feel that we created the CFPB to handle these types of 
problems. We have made it a top priority of the subcommittee, 
the committee, and it is a priority on both sides of the aisle. 
And I also would say it is a women's issue.
    So when are you going to have a draft? We have been waiting 
for almost 2 years now or a year. Can you give us a little more 
definite statement on when we will have something we can react 
to?
    Mr. Cordray. Yes. Thank you, Congresswoman. I thought it 
was fairly definite before, but I will repeat it.
    This issue came up where you and I, and Representative 
Capito and I had discussions about it, I believe in May, so 
that is a few months ago. We first had to determine whether we 
could proceed by rule or whether the statute itself had to be 
changed. This is clearly an unintended consequence--
    Mrs. Maloney. Exactly.
    Mr. Cordray. --of the legislation and the regulatory 
process.
    It is not an uncomplicated issue. There are a number of 
issues here that have to be sorted through. But we have 
determined that we will proceed with rulemaking and we will 
have a proposal, as I said, on the street, I am fairly 
certain--quite certain, before you all return.
    Mrs. Maloney. That is good. That is a definite date. I 
didn't hear a definite date.
    My time has expired. And that is very good news that we 
will have something we can--
    Mr. Cordray. You will.
    Mrs. Maloney. --start working on to help stay-at-home moms. 
Thank you.
    My time has expired.
    Mrs. Capito [presiding]. Thank you.
    Mr. Hensarling?
    Mr. Hensarling. Thank you, Madam Chairwoman.
    Mr. Cordray, when you were here before the committee 6 
months ago, we had a discussion about the term ``abusive,'' 
since your agency has the ability to outlaw abusive acts. It is 
a new legal term of art.
    At the time, I believe you said, ``We will have more to say 
about this over time.'' Section 1031(b) permits the Bureau to 
prescribe rules defining ``abusive.'' I think you were quoted 
in the American Banker, though, a few months ago stating that 
it was not your intention to write rules dealing with the term 
``abusive.''
    Is that correct, and is that still your intention?
    Mr. Cordray. That is currently our outlook on that issue, 
Representative.
    Mr. Hensarling. Okay. It is a new legal term of art. There 
wasn't much clarity 6 months ago.
    You also testified 6 months ago before this committee that 
there could be a practice that could be fair yet still be 
abusive. You didn't give examples at the time. Can you give, 6 
months later, now that your agency has had a chance to study 
this--can you give me examples of a practice or a product that 
would be both fair and abusive, or at least give me the 
criteria that the agency is currently using to draw the 
differentiation?
    Mr. Cordray. Congressman, we are, as I think you would hope 
that we would do as a Federal law enforcement agency, applying 
the language that Congress itself enacted--that is, following 
the law. The definition of ``abusive'' that is contained within 
the financial reform law itself is specific as to prongs. It is 
different language than the Act uses in defining ``unfair,'' 
which is also a defined term in the Act. And therefore, there 
could be different application.
    I have also said that it is a bit of a puzzle to determine 
what kind of actions would not be unfair, not be deceptive, but 
would be abusive. And that is--
    Mr. Hensarling. So is it at least fair to say that 6 months 
later, we still don't have an answer to the question, is there 
a specific example of a product or service that would be both 
fair and abusive?
    Mr. Cordray. I wouldn't put it that way, that we don't have 
an answer to the question. We have had an answer from the 
beginning. The answer is, Congress defined what ``abusive'' 
means. It is the law of the land. We have to follow it.
    Mr. Hensarling. If we have an answer, could you give me 
examples, Mr. Cordray? Can you then give me examples?
    Mr. Cordray. I don't think that industry is eager to have 
us start spraying ``abusive'' citations around. We are trying 
to be careful about this and--
    Mr. Hensarling. Wouldn't they want to know what is lawful 
and what is unlawful? If an act is abusive, it would be 
unlawful. I would think they would want to follow the law, so I 
don't quite understand your answer.
    Mr. Cordray. That is fine. As we go along, if we determine 
that there are abusive acts and practices, we will rely upon 
Congress' definition of the term. There is no reason for us to 
go make up some different definition. For us to establish--
    Mr. Hensarling. But you have the power to prescribe the 
rules that define it.
    Mr. Cordray. We could. I don't get a sense that industry is 
dying for that either, Congressman. State attorneys general can 
enforce rules that we adopt under the Act, cannot enforce the 
statutory terms themselves against the banks. So if we were to 
define rules on--
    Mr. Hensarling. I guess, Mr. Cordray, what is--
    Mr. Cordray. --enforcement channels--
    Mr. Hensarling. --of concern here is whether or not the 
agency refuses to write a rule or is incapable. Is it a totally 
subjective term that will be determined by the agency on a 
case-by-case basis, in which case an incredible detriment to 
our consumer credit markets? I haven't heard any clarity around 
it today, but in the limited time I have, I will move on.
    In the context of discussion of mortgage rules, I think you 
said it wouldn't help homebuyers to promulgate rules that 
restricted access to mortgage credit. But then I look at what 
has happened with respect to remittances. Your own agency has 
estimated the first rule would require 7.7 million employee 
hours to implement and comply with the rule--the new rule. You 
also noted, ``The cost of compliance will ultimately be shared 
among the consumers and businesses involved in remittance 
transfers.''
    All I can tell you, Mr. Cordray, is I am hearing from a 
number of banks in my home State of Texas that due to the rules 
promulgated by your agency, they are just getting out of the 
business. They are getting out of the remittance business.
    I have lots of constituents, as do many other Members who 
represent States along our southern border. So, I am just 
curious, are you--I hope your agency is hearing the same thing. 
I don't think these are outliers. How is this serving the 
consumer that they have fewer choices and their access is 
getting restricted by the rules?
    Mr. Cordray. Thank you, Congressman, for raising that 
issue. As you will recall, we didn't just come up with this 
rule in a vacuum. Congress passed a statute. It is the law of 
the land now, unless Congress were to act otherwise, that there 
are brand new consumer protections being afforded to remittance 
transfers, and therefore, when people send money 
internationally, they now will have the same kinds of consumer 
protections in many respects that they have when they send 
money domestically.
    That is a public policy choice that Congress made. I happen 
to agree with it.
    Our job was to carry that out by implementing rules, which 
we have done. There are some providers for whom the notion that 
in doing these transactions, they have to offer consumer 
protections and disclosures, et cetera, may be too onerous, 
that they won't do the transfers if they have to tell the 
consumer how much money is going to be received on the other 
end.
    There are provisions in the law meant to soften that. So, 
for example, if you are a smaller depository institution or 
credit union and you are not in a position to know what the 
exchange rate is that is going to be applied on the other end, 
you are permitted under the law to use a reasonable estimate. 
You don't have to get it exactly right.
    If you don't know, because of the nature of the transaction 
you are engaged in, what fees are going to be imposed on the 
other end, you are permitted to give a reasonable estimate. You 
don't have to get that right.
    We do hear that there are some providers for whom this is 
going to be difficult and they may not be able to comply, and 
they may choose not to offer this product. We did propose and 
send out for comment and then finalize an exemption for any 
institution that does not do these transactions in the normal 
course of business. That exemption is now in place and will 
exempt many providers from having to comply with this rule if 
they simply want to do this as a convenience for existing 
customers, not very frequently.
    For anybody who is in the business of doing remittance 
transfers and that is their business model, there are new 
requirements, again, imposed by Congress by law. I happen to 
agree with them. I think they are necessary. I think the people 
who engage in these transactions are entitled to the same 
protections that we all get on our bank account transactions, 
and that is what we are doing.
    There is also--
    Mrs. Capito. I am going to step in here a minute, because 
we are about 2 minutes over his time. Hopefully, we can get 
into some more on this topic, but if I don't keep things 
moving, we are not going to get to our other questioners, so--
    Mr. Cordray. I know I can get a little--
    Mrs. Capito. No, you are--it is not you, really.
    Ms. Velazquez for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman.
    Mr. Cordray, the Dodd-Frank Act created a Bureau-specific 
requirement to assess the possibility that new consumer 
protection regulations will increase the cost of capital for 
small businesses. What factors about access to capital did the 
CFPB analyze when drafting the new TILA/RESPA mortgage 
disclosure regulations?
    Mr. Cordray. Congresswoman, on that particular effort we 
have been at it for more than 2 years now with being as 
transparent as we can be around these forms, because the issue 
is, what do consumers understand and what exactly do financial 
providers need to tell them and how will it be framed so that 
it is understandable?
    We have been doing a great deal of qualitative testing 
around different forms, around different language to see how 
actual consumers react to that. We have conducted, as we are 
required to do by law on certain of our rulemakings, a Small 
Business Regulatory Enforcement Fairness Act (SBREFA) panel, 
which is a panel of small providers who came and gave us face-
to-face their input into how different proposals might affect 
small providers like themselves, and we had broad 
representation from a lot of the real estate industry, not just 
lenders.
    That was very useful to us, and a number of aspects of 
their input went into the proposal that we now have out for 
notice and comment--which is now available, and we are getting 
much more comment now broadly, not only from small providers, 
but also more from them. We have tried to be very accessible to 
groups and stakeholders on all sides, to meet with us and tell 
us their concerns.
    This is a change. It is something Congress has wanted for 
more than 20 years to take these two distinct forms under two 
distinct statutes that overlapped each other in very confusing 
and redundant ways and put them together. It is not an easy 
thing to do.
    I think Mark Twain once said that if he had more time, he 
would write a shorter letter. It is the same for us as we are 
trying to boil things down but still make it understandable. It 
is actually quite a bit of work and we want to make sure that 
we test it with consumers to get it right.
    We will be doing quantitative testing as well in the winter 
and spring, as we have been urged to do by many of our 
colleagues who know this field very well. And we hope to get it 
right. We are doing everything we can--
    Ms. Velazquez. Great. Thank you.
    Mr. Cordray, under the Dodd-Frank Act the CFPB becomes only 
the third Federal agency required to convene advocacy review 
panels to examine how small entities will be affected by the 
agency's new regulations. Can you talk to us about what type of 
feedback the small business community has provided to you as 
the CFPB begins implementing these type of regulations?
    Mr. Cordray. Yes. Thank you.
    As you said, the Consumer Bureau is one of only three 
government agencies out of all the government agencies that 
write regulations that is required to follow the small business 
review process. The others are OSHA and the EPA.
    There was some concern among our staff at the outset of how 
onerous would this process be, how much would it encumber the 
rulemaking process? I think we have had a good experience with 
it so far. I would say that for myself, I am a fan of the 
SBREFA process.
    On all of the rulemakings where we have gone through the 
SBREFA process thus far, we have found that we have received 
input that has changed the content and our thinking about our 
proposals. It has, I think, succeeded in the aspiration, which 
is that hearing face to face from small providers in a setting 
where we are focused specifically on them and not being drowned 
out by some of the voices of the larger providers, we come to 
see things a little differently and we take that into account 
in our proposals. And I could show you for each of the rules 
different specific substantive changes that that has led to. 
And so it has been a good process.
    Ms. Velazquez. Okay. I guess by now you have heard a lot of 
people and critics saying that they express concern that the 
CFPB will stifle lending to small businesses. We know that even 
before the Act was passed, small businesses were having trouble 
accessing capital.
    Based on empirical data, can you talk to us if there has 
been any negative impact on small businesses accessing access 
to credit?
    Mr. Cordray. In terms of perspective on that, probably the 
Small Business Administration has a better perspective than we 
do, but it is something we are mindful of and trying to avoid, 
to the extent we can, in our regulatory process. I would echo 
what you said. The biggest single drying up of capital for 
small business in our lifetime was the financial crisis, the 
credit freeze, and it has been difficult for small businesses 
ever since. The things that we can do to prevent that from 
happening again are very meaningful to small businesses, and I 
hope that is also understood.
    Ms. Velazquez. Thank you.
    Mrs. Capito. Thank you.
    Mr. Cordray, I am going to recognize myself for 5 minutes 
for questioning.
    Quick question: How many employees do you have right now at 
the CFPB?
    Mr. Cordray. My understanding is that as of September 30th, 
it will be 983 employees.
    Mrs. Capito. And then, how many will you have at full--
    Mr. Cordray. I don't know that we know that yet, 
Congresswoman, but somewhere probably in the 1,600 to 1,700 
range. So I would say we are more than halfway there but still 
have a ways to go.
    Mrs. Capito. That is quite a large agency.
    You remember the FSOC, correct?
    Mr. Cordray. I am a member of the FSOC.
    Mrs. Capito. Yes. How many meetings have you been to and 
how many have there been?
    Mr. Cordray. I don't have an exact count for you. I have 
been attending meetings since I became Director of the Bureau 
on January 4th. I could go back and get you an exact number. My 
guess is there have been approximately half a dozen meetings.
    Mrs. Capito. So once--
    Mr. Cordray. We are meeting regularly.
    Mrs. Capito. Less than once a month, if it is 6.
    Mr. Cordray. Certainly more than once every 2 months. It 
may be less than once a month, but it is probably--
    Mrs. Capito. What is the substance of those meetings at 
your level?
    Mr. Cordray. The substance of the meetings is implementing 
the provisions of the Dodd-Frank Act that the Financial 
Stability Oversight Council (FSOC) was given authority to 
oversee, which has to do with Systematically Important 
Financial Institutions (SIFIs) and other matters that are of 
grave import to the stability of the financial system.
    Mrs. Capito. Are you satisfied that is moving fast enough?
    Mr. Cordray. I don't really have a context for making that 
judgment. We are moving forward. There are activities that are 
occurring and I think that they have become known publicly. 
There is other activity occurring that is in process and 
therefore isn't necessarily public yet.
    I think everybody is looking to move these processes along, 
and I, as a member of the Council, am looking to do so as well.
    Mrs. Capito. Okay. Thank you.
    I mentioned in my--I want to get into two things, but I 
want to get into this uncertainty issue that I talked about in 
my opening statement. And we have heard this as recently as 
yesterday from institutions who fall, say, within the purview 
maybe of the CFPB and the FDIC, or the CFPB and the Federal 
Reserve. There is a distinct impression that--and I haven't 
just heard it once, so it is not just a one-shot deal, and I 
believe this was brought to your attention--I believe you are 
aware of this, the feeling that the CFPB is there to make 
decisions on consumer protection yet the prudential regulator 
is still holding on or is still exerting that influence in that 
area and that there is some--when two people think they have 
authority in one area, instead of both people making decisions, 
sometimes nobody makes a decision or takes the lead.
    Where is the lead supposed to be? What are you going to do 
about this? Because this was one of the fears we had in 
creating the--when the Bureau was being created. We didn't 
create the Bureau; we all know that.
    But when it was created, we said, ``You are just going to 
pile on and pile on and it is going to create more 
uncertainty.'' And this really concerns me, particularly at 
this juncture of our economy. So I would like for you to be as 
candid as you possibly can be in this area.
    Mr. Cordray. Okay. It is a fair concern because the 
statutory authority does overlap to some degree. If you have a 
consumer protection issue you, arguably, almost inevitably have 
a consumer compliance issue that could involve matters such as 
litigation risk, reputational risk, and the like, for the 
institution, which can, depending on the magnitude, go to 
safety and soundness.
    So this is and is going to be a collaboration, and I have 
come to see that more and better as the Director of this 
agency. It is very important for us to have strong 
relationships with the FDIC, the OCC, the Fed, and frankly, 
with the National Credit Union Administration, as well.
    I have been really pleased at the progress we have all made 
at building those relationships and working together. It may be 
noted that the credit card add-on product enforcement action 
that was completed recently was a collaboration between our 
Bureau and the OCC. We worked together on that.
    It is important that we be on the same page so that the 
institutions don't have to, as you say, deal with the 
possibility of different regulators taking different positions 
from one another. That is very confusing and unfortunate if 
that were to happen.
    It is our job to see that we get together. We have a number 
of matters that we are working on cooperatively with the OCC, 
and a number of matters we are working on cooperatively with 
the FDIC and with the Fed.
    We all collaborated earlier this summer on supervisory 
guidance involving military servicemembers and their families' 
permanent change of station orders. That was a good 
collaboration.
    But, as you say, when you are starting to do these things 
for the first or second or third time, there are issues you 
work through that are new and different, and then over time it 
becomes easier. But I would say that the fact that the new 
Comptroller of the Currency has a strong background at the 
State and Federal level in both consumer protection issues and 
safety and soundness regulation has been a tremendous step 
forward for our relationship, and I would say that the fact 
that I serve on the FDIC Board and have had a chance, 
therefore, to get to know their leadership has helped 
tremendously with that cooperation.
    Mrs. Capito. Thank you. And my final statement, because I 
have run out of my time, would be, I think the institutions can 
follow a roadmap if they can see the roadmap, and they can 
follow the directions if they have the directions. They can 
follow the rules if they have the rules.
    But if nobody is going to make a decision or if there is 
going to be a political struggle between regulators, they are 
put into a twilight zone of decision-making, and what do they 
do? They don't make a decision.
    Mr. Cleaver?
    Mr. Cleaver. Thank you, Madam Chairwoman.
    Mr. Cordray, you have been on the job now for half a year, 
maybe slightly over, and I know there probably was this 
assumption that you were going to be a Wall Street attacker, 
which obviously didn't materialize. But I am wondering how 
many--if you have a number thus far--people across the country 
have contacted the agency so far? Do you have an estimate or 
maybe even an accurate number?
    Mr. Cordray. I am sorry, Congressman. How many people have 
contacted the agency so far?
    Mr. Cleaver. Yes. How many people have come to the agency 
filing complaints?
    Mr. Cordray. Okay. I see.
    The complaints have been steadily increasing. That is a 
function of probably several things. Number one, given that we 
didn't know at the outset what the volume would be, we did 
stage in complaints in different categories at a time starting 
with credit cards, then adding mortgages before proceeding to 
other products.
    By the way, that was only possible, notably, because other 
agencies cooperated with us to make that possible. The number 
of complaints as of September 3rd total 72,297. That is 
increasing. We are at an annualized rate this month of what 
would be 10,000 a month, or 120,000 a year.
    That is continuing to increase. We have no idea where it 
will level off. So it is a considerable piece of work for us.
    There are other people who have come to our ``Tell Your 
Story'' portal and told their stories. There have been 
thousands of those. I don't have an exact number of those.
    There are many other people who communicate with us in 
various ways, ranging from meetings, to mail, to all the same 
sort of things they probably come to you by those different 
avenues, as well.
    Mr. Cleaver. I don't have as much personal pain involved in 
this as I did a couple of years ago before my youngest son 
graduated from school, but--
    Mr. Cordray. From college?
    Mr. Cleaver. Yes, from college. And I would never have 
given him a credit card if I owned a credit card company. It 
doesn't have anything to do with love; it is logic.
    But I am wondering what you have found so far, or whether 
you have found anything with regard to student debt, credit 
card use?
    Mr. Cordray. Yes. One of the things that the Card Act 
addressed which has been positive, among the many things it 
addressed, was the credit card marketing to minors, often to 
new college students on their own for the first time, about 
which there were various concerns. I remember in State 
government there being concerns about those abuses in different 
hearings in front of our legislature and then the Card Act was 
passed and it addresses that to a considerable degree.
    So that has been, I think, certainly helpful. In terms of 
student loan debt, we hear quite a bit. It is a big issue for 
people right now.
    We calculated and we had better sources of data than maybe 
had been available before earlier this year that the total 
amount of student loan debt in the United States had passed the 
$1 trillion mark--the biggest single source of debt--besides 
mortgages--bigger than credit cards, bigger than auto loans. 
There are many people over the years who accumulated debt and 
didn't understand maybe the differences between private student 
loans and Federal loans, the different protections that are 
available in terms of if you have trouble making payments, the 
different avenues that you have.
    We have done a lot of work--it is part of our ``Know Before 
You Owe'' project--around clarifying and making much more 
accessible to people the choices they have on student loans 
when they are thinking about going on for further schooling. 
And we will be bringing out the results of all that as a 
college cost indicator that people can really get a sense of, 
when they get that offer--it is a little like buying a house. 
Sometimes, people fall in love with the house and they forget 
to think much about the mortgage. Similarly, you can fall in 
love with the school and forget to think much about the bill.
    This will be much easier for them to compare what kind of 
offers they are getting from different places, what the cost 
will be, and we believe it will help people make more informed, 
better choices.
    We also are working a lot of complaints from people who, it 
is too late to inform them because they already went through--
people not like your son necessarily, but people of the age and 
older who do have problems now repaying their loans about what 
their rights are, what their responsibilities are, what their 
options are. We are working very closely with the Department of 
Education on that. It has been a great partnership for us with 
Secretary Duncan and his staff.
    Mr. Cleaver. Thank you. My time has expired. I would be 
interested if your staff could provide any information on that. 
I was one of the authors, the pushers for that inclusion in 
Dodd-Frank, and not just because of my son but because of the 
sons and daughters of other people I knew who were also--
    Mr. Cordray. I would be glad to come talk with you, sure.
    Mr. Cleaver. Thank you.
    Thank you, Madam Chairwoman.
    Mrs. Capito. Thank you.
    Mr. Neugebauer?
    Mr. Neugebauer. Thank you, Madam Chairwoman.
    Mr. Cordray, you testified before our subcommittee on 
February 15th, and during your testimony you stated that the 
CFPB is committed to being accountable and using your resources 
wisely and carefully. You also repeatedly stated in 
correspondence that you are committed to promoting a culture of 
transparency and accountability.
    But quite honestly, to date the responses that we have been 
receiving from the CFPB haven't really proved that out. And, 
one of the things that Dodd-Frank requires is that you provide 
a financial operating plan and forecast to OMB. I understand 
that you did not do that, that you gave them a budget 
justification form, which is different than a financial 
operating plan.
    Additionally, we have asked you to furnish us performance 
measures and an overall strategic plan for the agency. As of 
this date, we have not received that.
    We also asked you to give us a--you mentioned the word 
``detailed process'' in determining the Bureau's employment 
needs, and as the gentlewoman asked you today what was the size 
of the organization you felt like it would be at some point in 
time, you have still not furnished us with any kind of 
information on what the process is to determine what the 
employment needs of the agency are.
    I could go on. There are a number of things that we have 
asked you that should be an integral part of any agency or any 
business that is operating, especially one with a half a 
billion dollar budget.
    So here is the question: Is it just you don't want to 
furnish that information, or it is just not a part of the 
process, you don't have these documents? I am trying to get a 
handle on if it is just a lack of transparency or you just 
don't have these documents. Can you elaborate on that?
    Mr. Cordray. Sure. And thank you for the chance to address 
the issue, Congressman Neugebauer. I did read your piece in the 
Wall Street Journal.
    A number of things. Again, it is important to recognize 
that we did not exist as an agency until last year, so at the 
outset, we obviously weren't going to have the same kind of 
full documentation as other agencies do that have existed in 
some cases for decades, in some cases for over a century. But 
we are on our way there and we are getting there.
    In terms of responsiveness to your requests, it is my 
understanding that we have at least 5 times responded to 
requests with more information that you have asked for, and 
especially as it has been clarified to us what information you 
want.
    As to specific issues you raise, our budgeting documents 
are growing larger and more fulsome each time in the process, 
and this is the first time through for me as Director; I only 
became Director, as you recall, in January. And I believe that 
we are well on our way to doing the kinds of things you want us 
to be doing around the budget process.
    As for performance plans, I know that we have been working 
and I have seen drafts and worked on drafts of our performance 
plan under the GPRA that will be coming out shortly. I think 
you are going to find that as we go, you will receive more 
information. Initially, you got very little information because 
we had 30 people at the Bureau at the time and we hadn't built 
up the expertise yet. The next time, it was more. This next 
time, it will be more yet.
    But we are happy to work with you and are committed to 
working with you to try to make sure that you are satisfied 
that you are getting the kind of information you want. I 
understand as of today, you perhaps are not satisfied, but I 
think that you will be over time, and we are getting there.
    We did get a clean audit, I want to note for the record, 
from GAO our first time through. They are back to see us again 
and we have our Inspector General from the Federal Reserve, who 
is working over matters with us. And Congress has required us 
to obtain yet another outside audit, which also was clean.
    So we are trying to be careful about these processes. I 
take them seriously and I take them personally. But in terms of 
getting you the information that you need to be satisfied, we 
are working hard at it and we will have more as we go and we 
will be happy to continue to be in touch with your office about 
making sure that--
    Mr. Neugebauer. I look forward to that.
    I have one last question. I want to follow up on my friend, 
Mr. Hensarling, on this term ``abusive.''
    Here is the question: If your agency determines that a bank 
or a nonbank financial entity is engaging in what you deem as 
an abusive product or an abusive practice, what is the recourse 
for that bank or for that financial institution if they don't 
like your decision?
    Mr. Cordray. Sure. This could come up, I guess, in two 
different contexts. One would be an examination of the 
institution. If we were to find something that we deemed to 
comply with Congress' definition, which again, is the law of 
the land, on what abusive means, we would have a working back-
and-forth with the institution. There might be disagreement 
about that. We would discuss it, try to clarify it.
    It is not our intention to try to ding institutions on 
things where it is not very clear what the law is or what the 
law says, in gray areas. That is not really worth our time or 
theirs. But, as I say, often things that you might consider to 
be abusive are also unfair or deceptive, which is much clearer 
under the law, and that may be where the discussion would 
center.
    It also could come up in the context of an enforcement 
action or an investigation, and if that is so the company would 
have every opportunity, or the individual, to raise their 
concerns. We have a--what we call a NORA process, that if we 
are considering taking an action they have an opportunity to 
come to us and explain why we should not or why we don't 
necessarily understand the facts or law correctly. And then, we 
take account of that before deciding whether to proceed.
    And then, of course, if we were overreaching or if we were 
getting it wrong, courts might well tell us that and cut us 
back. We have not had any of those occasions thus far. We would 
hope that we would not, but we will see as we go. We are trying 
to be reasonable and yet firm in our understanding that we are 
there to enforce the law.
    Mrs. Capito. Thank you. Thank you, Mr. Neugebauer.
    Mrs. McCarthy?
    Mrs. McCarthy of New York. Thank you.
    And thank you for your testimony. It has been very 
interesting, especially being that it is such a young agency 
and the amount of work that you have done in a short period of 
time.
    One of the things that we were interested in is that your 
agency so far has issued two notices for comments of proposed 
rules aiming at protecting mortgage borrowers. With regard to 
the servicing proposed rules you have included a provision that 
requires servicers to make good-faith efforts and contact the 
delinquent borrowers and inform them of their options to avoid 
foreclosure.
    And I was just wondering, how do you define ``good-faith 
effort,'' because I have to tell you that we--and I am sure 
many Members of Congress are going through this, where so many 
of our constituents are calling us because they get the 
foreclosure notice and they don't know what to do. And they 
then call us back to basically say, ``We have been trying to 
work with the bank. We don't understand what they are trying to 
tell us, or because there are different programs out there. Can 
you help us?''
    And we are very lucky. We have a good relationship with a 
number of our community bankers. One of the things that we 
found--probably the best solution is for the customer to really 
sit down with the loan person so there can be a face-to-face. 
And I was wondering if you ever considered--if the agency has 
ever considered a face-to-face as a means of contacting, once 
you make the contact with the borrower, to come in, let's talk 
about this. Because over the phone sometimes it is very 
difficult, or even, to be very honest with you, with some of 
the papers that I have seen my constituents bring in and read--
I am sorry. I sit on this committee. We have been working on 
this issue for a long time. You need to be a lawyer, and so you 
can understand where the confusion is coming from, so--
    And most of these people want to keep their homes. They 
want to do whatever they can, but obviously they are caught in 
the economical problems that this country has been facing. And 
I still believe very strongly that until we settle the housing 
issue across this Nation, that is one of the things that is 
dragging our economy down. And I was just wondering what your 
response would be to that?
    Mr. Cordray. My response, Congresswoman, to that would be, 
I agree with you. I think housing has been one of the single 
biggest obstacles to a faster economic recovery. I think that 
is well-documented now. I think that is undeniable and everyone 
is working toward more improvement, and no one more than the 
private sector, frankly.
    In terms of the questions you raised about mortgage 
servicing, I believe that the community bank and credit union 
model on this is exactly as you describe. It is very often a 
face-to-face process. Typically, a lot of those institutions do 
keep their loans in their own portfolios, so no one else is 
involved. There isn't some subcontracted mortgage servicer who 
may not have an actual relationship with that customer and it 
is much easier to work through the problems in that setting.
    That is the traditional model and it is a good model and it 
works well. The lender and the borrower both have a stake. They 
talk it through. They find a way to go forward.
    What has happened in this industry is that there are a lot 
of high-volume providers, and in many cases servicing rights 
may have been bought and sold and go on to someone who never 
has had a relationship with that individual customer and it may 
be several years before they start having a problem making 
payments. That kind of communication has not occurred very well 
or very effectively.
    Frankly, there has been--just to be blunt about it--poor 
customer service by a lot of the mortgage servicers. There is 
just no other way to describe it.
    Our rules will help to improve this situation. They provide 
for continuity of contact, early intervention, and new record-
keeping and document management procedures, all of which should 
improve this. None of this is a surprise or a mystery to people 
in the industry; it is just a question of whether they are 
willing to put in the time and effort to do it.
    And whether we should mandate face-to-face meetings in all 
instances, that feels a little like we would be micromanaging 
processes maybe too much. I would be happy to have our staff 
discuss with your staff thoughts along those lines, but we have 
tried to draw a balance in these rules. They are out for public 
notice and comment right now and we will be finalizing them by 
January.
    Mrs. McCarthy of New York. My time is up. Thank you.
    Mr. Neugebauer [presiding]. I thank the gentlewoman.
    And now the gentleman from North Carolina, Mr. McHenry, is 
recognized for 5 minutes.
    Mr. McHenry. Thank you, Mr. Chairman.
    Mr. Cordray, thank you for returning to the Hill to 
testify. Structural issues remain regarding the CFPB, but I 
certainly appreciate your willingness to submit to 
congressional oversight.
    And I want to follow up on my colleague from Texas, Mr. 
Neugebauer's, line of questioning, as well as Mr. Hensarling's 
line of questioning about the term ``abusive.'' Now, the 
concern--and you answered this in Mr. Neugebauer's question, 
but you outlined it that this term will largely be determined 
by enforcement action.
    That is the concern I hear from industry is that you are 
going to wait until you take an enforcement action in order to 
understand what the definition of ``abusive'' is. It would be 
proper for you to outline what those terms are before you take 
an enforcement action.
    That sort of concern by the industry adds to their level of 
uncertainty about your agency and about the Bureau as it 
currently stands. So I ask you to consider that.
    The question I have in hand is about simplified mortgage 
disclosures. My colleague, Mr. Green of Texas, and I wrote 
legislation trying to put in place a one-page mortgage 
disclosure form.
    I appreciate the fact you took this up first on your watch. 
Again, the concern I have, though, is the construct of it, as 
Chairman Bachus outlined--look, when you say you have a three-
page loan estimate at the beginning and a five-page long 
disclosure form at the end it becomes overly cumbersome and 
simply adds to the stack that folks have at closing or at 
refinancing.
    We had Mr. Date--Raj Date--testify and he even conceded, 
like I have conceded, that I didn't read the full stack. And so 
people are left with a lot of major questions even when they 
make this huge closing with all these enormous mandates.
    Can you get to a one-page mortgage disclosure and can you 
simplify the regs that you have put out?
    Mr. Cordray. Thank you, Congressman McHenry, and--for the 
discussions we have had around these issues. And I recalled 
that you had worked on legislation on this actually several 
years before it became in vogue.
    We are working, as I said, to simplify the two forms. 
Congress has asked us to do this. They had asked agencies to do 
this before. It was not easy. There were different statutes and 
they overlapped and we are well on our way to simplifying those 
forms.
    It is a hard piece of work and you maybe can appreciate it 
the most if you have tried to create the short form that speaks 
to the things that need to be spoken to without making it 
overly long.
    Our proposals to date are shorter than what existed before. 
It is not accurate to try to make something so simple when it 
isn't so simple, but it is an ongoing project for us.
    In terms of the fact that there is still a huge stack of 
materials, we dug into that and looked carefully at what there 
is. Much of it is required by State law. Unless we are going to 
sort of preempt State law that says you have to have a deed and 
you have to have different titles--
    Mr. McHenry. We have had that since--some of these issues 
are as old as the Magna Carta.
    Mr. Cordray. Right. So--
    Mr. McHenry. But the important thing is that people have 
the essential information.
    Mr. Cordray. That is correct.
    Mr. McHenry. What their payment is, what their interest 
rate is--
    Mr. Cordray. That is right. And that is what we are trying 
to do with our form. And frankly, we have had this all out for 
lots of public input, and are happy to get input from your 
office, and if you want to have us look again at what you had 
thought about--
    Mr. McHenry. So what specific elements of TILA and RESPA 
need to be reformed so that we can reduce that stack and make 
sure consumers have the proper information?
    Mr. Cordray. Yes. Although, my point is, as for the stack, 
a lot of it is State law.
    Mr. McHenry. I heard you.
    Mr. Cordray. It is not correctable by this Congress unless 
you are simply going to preempt all of State property law. A 
lot of it is imposed, we have found, by the lenders themselves 
out of a sort of defensive medicine-type approach to--
    Mr. McHenry. Right. My time is short, and that is why I am 
trying to ask about TILA and RESPA--
    Mr. Cordray. Yes.
    Mr. McHenry. --that are both Federal laws. I conceded with 
you that much is State law and much is as old as the Magna 
Carta. I am talking about the things that we can control.
    Mr. Cordray. Yes. What we are doing is trying to simplify 
that as much as possible, and that proposal is out for comment 
now. We will be finalizing it next year. And again, we are 
happy to hear from everybody on that project.
    Mr. McHenry. I will just follow up with you in written form 
because--
    Mr. Cordray. That would be fine.
    Mr. McHenry. --that is not much of an answer. I am trying 
to ask for specifics of what can be reformed.
    I yield back.
    Mr. Cordray. Okay. That is fine.
    Mr. Neugebauer. I thank the gentleman.
    And now the gentleman from New York, Mr. Meeks, is 
recognized for 5 minutes.
    Mr. Meeks. Thank you, Mr. Chairman.
    It is good to see you, Director Cordray, and we thank you 
for the work that you are doing. I have just a few questions on 
issues that have come before my office from a number of 
constituents, and I would just like to get some of your 
viewpoint.
    One of the first is, of course, dealing with many of our 
servicemembers. We have had a number who have come by the 
office and are in very difficult financial challenges and seem 
to be prime victims for predatory lenders. One had told me 
about individuals being outside of the military base itself and 
giving him what he thought was an offer that was too good to be 
true, and generally, when it is too good to be true, that is 
because it is.
    I know that Holly Petraeus is part of the new Office of 
Servicemember Affairs. So I was wondering what you can tell us 
in regards to how this office has been helping and what they 
can do and how maybe I can direct some of my constituents to 
the services, or those individuals in the military.
    Mr. Cordray. Sure. Thank you, Congressman, for asking about 
that part of our office. It has been really a great success, 
our Office of Servicemember Affairs, and a lot of it is due to 
the fact that Assistant Director Petraeus is in charge of it.
    She has tremendous credibility throughout the military, 
across the country from both the rank and file and leadership. 
She goes out and brings back issues that she learns about from 
servicemembers and their families, and increasingly from 
veterans as well, and she gets a response from the Department 
of Defense, and the Department of Veterans Affairs, as wanting 
to solve those problems.
    The Permanent Change of Station Order guidance that we 
gave--and a number of you served in the military and can think 
back to when you were actively on duty and understand the 
challenges it can create economically for servicemembers and 
their families. People get a Permanent Change of Station Order 
and they have to move. They don't have any choice. That is part 
of their Army duty, or Navy, or whichever branch of the 
service.
    But they may not be able to sell their home. They may have 
to decide between leaving their family there because they are 
not able to sell it, it is underwater, or taking a huge loss 
which they can't afford, some hard choices that maybe civilians 
don't typically face.
    And the guidance that we have provided now makes that a 
qualifying hardship for the HAMP program and some of the other 
government programs that help people get mortgages modified. 
That is an advance. Any number of those types of stories that I 
can tell.
    People can get in touch with our Office of Servicemember 
Affairs either through our Web site--consumerfinance.gov--or by 
calling our line and working through that. And we welcome that 
input. We have been very actively working on behalf of 
servicemembers and trying to address their special concerns.
    Mr. Meeks. Thank you very much. And we will be in touch on 
that.
    In the time I have left, let me ask another question, 
because when we went through the financial crisis, and what 
caused it, a lot of the larger companies and the big companies 
were the major ones and we have our smaller institutions that 
still are very actively involved in the local communities, et 
cetera. And I know that when we put in--when Congress granted 
the CFPB the power to exempt various or certain financial 
institutions.
    So my question is, down the line do you foresee the CFPB 
creating, maybe, a rule that would exempt some of the smaller 
financial institutions--some of the community banks, or credit 
unions, or things of that nature? What is your vision there? 
What is your viewpoint there?
    Mr. Cordray. Congressman, that is something that I have 
promised we will think about with every single rule. In the 
first rule, we finalized on the remittance transfers, discussed 
earlier, we ended up putting in a threshold below which you do 
not have to comply with the rule and that will exempt a large 
number of community banks and credit unions. We have that in 
our proposal on mortgage servicing and we are considering it in 
some of the other rules, as well.
    I firmly believe--as I have said before and I will say it 
again--that community banks and credit unions and the 
traditional customer service model that they bring to their 
work did not cause the financial crisis. We would have been far 
better off if their market share hadn't been robbed before the 
crisis by some of their irresponsible competitors, and we will 
be better off eventually to the extent that they are restoring 
their place in the market. We want to encourage and promote 
that and we will look to do that as we write rules.
    Mr. Meeks. Thank you, Mr. Director.
    I yield back.
    Mr. Neugebauer. I thank the gentleman.
    Now, the distinguished gentlewoman from Illinois, the 
chairwoman of the Insurance and Housing Subcommittee, Mrs. 
Biggert, is recognized for 5 minutes.
    Mrs. Biggert. Thank you, Mr. Chairman.
    Director Cordray, I think that I want to continue a little 
bit on what was said before about RESPA and TILA. It seems that 
Dodd-Frank failed to provide the CFPB with the authority to 
merge the RESPA and TILA statutes, and I know that we worked to 
try and get them together as they were working on that so that 
it didn't--they didn't come up with a disparity in those 
statutes, but that happened. And there seems to be the conflict 
between the statutes and their application or policy goals.
    Can you or your staff suggest legislative language that 
would resolve the differences and the conflicts between the two 
statutes, and should they be merged?
    Mr. Cordray. Yes. And Congresswoman, maybe this helped me 
understand what I didn't--what was not clear in Congressman 
McHenry's question before.
    What Congress did in the financial reform law was they said 
that the disclosures that apply to mortgage transactions at 
application and again at closing needed to be merged and 
consolidated and if possible streamlined because it was just 
too confusing for people to get two different things with 
somewhat different purposes but overlapping. And that is the 
project we are working on and we are resolving.
    Congress did not, though, push together the Truth in 
Lending Act and the Real Estate Settlement Procedures Act. They 
are very different statutes and have different objectives: the 
Truth in Lending Act has to do with the accuracy of disclosures 
and forthcoming nature of disclosures around different types of 
consumer financial lending and credit; and the Real Estate 
Settlement Procedures Act has to do with what were viewed as 
problematic issues and practices around real estate closings, 
and therefore, they are actually quite distinct.
    They do overlap in this area of mortgage disclosures and 
that is where Congress has asked us and really directed us to 
try to clean that up, and that is what we are trying to do. But 
beyond that, I don't at this point have suggestions on ways in 
which you should change RESPA or change TILA, although I would 
be happy to work with you and your staffs on those. I don't 
regard the statutes themselves as a problem--
    Mrs. Biggert. Or that have to be--then you don't think that 
they have to be merged to--
    Mr. Cordray. The two statutes, no. I don't think that would 
be productive, although I am always open-minded on legislative 
matters. That is your purview, and if there is something you 
want to look at, we are happy to look at it as well.
    Mrs. Biggert. I would like to, and we can do that in the 
future. And thank you.
    Another question is that the RESPA/TILA rule I think 
creates uncertainty regarding who prepares and delivers the 
final disclosure to the consumer. The proposed rule, by 
permitting the lender to deliver the final disclosure, I think 
removes the independent third-party closing agent from the 
settlement process. And even in Illinois, there is a State law 
that requires that at any closing, there be a real estate 
attorney also.
    What was the intent of removing this independent check at 
the closing table?
    Mr. Cordray. Congresswoman, one of the issues kind of left 
unresolved, to the extent that the financial reform law 
directed us to merge the TILA and RESPA disclosures for 
mortgages, was who would provide certain pieces of that at the 
closing table, whether it be the settlement agent or the 
lender. And the lender had more responsibility for some of the 
things under the Truth in Lending Act, and the settlement agent 
under RESPA.
    We have not at this point decided that issue. We are not 
trying to--we are kind of wary about trying to impose a model 
on the market. We certainly feel the right answer is--clearly 
the right answer is that the two would work together because 
they tend to bring different sources of information to 
ultimately what needs to be done to get you your mortgage, and 
so that is all out for notice and comment now. We are hearing 
from people--hearing some of the same questions you are raising 
today. We are hearing what they think, thinking through that, 
and we will do that before we finalize.
    And any thoughts that you or your staff have about it that 
you want us to know, we are happy to hear them.
    Mrs. Biggert. Okay. When you are talking about this, is 
this from the testing that you are doing on the mortgage 
disclosure form for consumers and how they react to changes?
    Mr. Cordray. Yes. Although that testing is more around the 
effectiveness of the disclosures, whether consumers understand 
them or whether they are confused by them. The issue you are 
raising is more of a practical problem of who, on the industry 
side, the provider side, is responsible for which pieces of the 
closing. That has always been an issue that the settlement 
agents and lenders have tended to work out between the two of 
them and it is something they should continue to work out 
between the two of them. But we are hearing from people who 
have different points of view on this and we are going to try 
to--
    Mrs. Biggert. And that is why I would like to meet and 
discuss that further, because I am really concerned that the 
mortgage participants, especially small businesses, may be shut 
out of the mortgage origination process altogether. So I thank 
you for your answers.
    And I yield back the balance of my time.
    Mr. Neugebauer. I thank the gentlewoman.
    And now the gentleman from Georgia, Mr. Scott, is 
recognized for 5 minutes.
    Mr. Scott. Thank you very much, Mr. Chairman.
    Mr. Cordray, I would like to continue the line of 
questioning on the mortgage servicing end. Two significant 
events have happened lately to help struggling homeowners. I 
happen to think that there are just too many homeowners who are 
losing their homes unnecessarily. There is help out there, but 
they are not getting it. And I wanted to know what connection 
you had with these and how you are working with them.
    One has been the settlement of the multi-State with the 
banks, the large banks. There was a settlement--Bank of 
America, Wells Fargo, JPMorgan Chase, Citi, and Allied--these 
five banks, and individuals who held their mortgages with that 
would be entitled to very significant help.
    Have you all looked into this? What relationship would you 
have with it? How are you making sure those consumers are 
getting help?
    There has been some debate as to whether or not this money 
can be used to write down principal, for example, which is very 
much needed. What is the assessment of that situation right 
now?
    Mr. Cordray. Our involvement, Congressman, in this issue 
is, in particular, we now have authority over mortgage 
servicers. We have authority to write rules on mortgage 
servicing that apply across the industry to banks and nonbanks. 
We are in the process of doing that; those will be final by 
January.
    We have the ability to examine mortgage servicers, send in 
our examination teams. We have been doing that with different 
servicers. We are in the process of doing that across the 
industry. That has been insightful for us and it will lead to 
corrective action in a number of instances where they have not 
been up to snuff, likely.
    We have enforcement authority, which in appropriate cases 
will be utilized as needed to make sure people are following 
the law. In terms of the--
    Mr. Scott. Have there been any problem areas there? Any 
complaints? Is it moving smoothly? Are all five major banks 
cooperating?
    Mr. Cordray. I think our processes are moving relatively 
smoothly. Again, we are a new agency, so I am sure things will 
be smoother several years from now than they are at the outset, 
but relatively smoothly.
    In the mortgage servicing industry, things have not moved 
smoothly over the past 5 or 6 years. Consumers--I am sure your 
office hears from them as much as we do--have been very 
dissatisfied with the level of customer service, accessibility, 
even the ability to get somebody on the phone, when you get 
them the paperwork, whether there is continuity and they 
actually keep and don't lose the paperwork, all the 
frustrations people have had.
    So it is a troubled area, but it is not necessarily the 
case that every mortgage servicer is having deep problems with 
their process. Some of them have cleaner portfolios; some of 
them have been more attentive to--
    Mr. Scott. Let me ask you--my time is slipping away: One 
other program we put together here at this very committee was 
to get help where it really was needed for those people who are 
barely holding on to their homes, but have lost their jobs. And 
so, we put forward what we call the Hardest Hit Program.
    Mr. Cordray. Yes.
    Mr. Scott. And there have been a lot of problems with that, 
largely because some States have the 45 percent approval rate, 
and some have a 10 percent approval rate. And I am wondering, 
this is a program--and many people do not even know it exists--
where an individual lost his job and this money is there to 
help them to pay up to 18 months of their mortgage, and they 
have not gotten that information.
    What are you doing to help some of these States move along 
to more aggressively market the program, target the severely 
unemployed and make sure that works? That is something that 
could directly keep people in their homes, particularly in the 
view of the fact that that money will run out in 4 years?
    Mr. Cordray. Yes. I recall, when I was Attorney General of 
Ohio and these funds were first made available, finding myself 
frustrated as time was passing and they were not being drawn 
down. I actually think in the State of Ohio, that is going 
better, but it is a challenge.
    We don't actually administer the Hardest Hit funds so I am 
not an expert on that. But I do know it has been an issue and a 
problem around the country. Some States have drawn virtually 
none of their funds; others somewhat more. There has been 
resistance from various quarters. I don't understand it well 
enough to opine helpfully to you on it.
    Mr. Scott. That might be somewhere where we need some extra 
help. You are absolutely right. Many of the States have been--
    But let me get to one other point on the regulatory front 
and the regulatory burden. We hear some complaints from your 
agency about the regulatory--the overworked paperwork, the 
outdated, unnecessary, unduly burdensome regulations. What are 
you doing to address this issue?
    Mr. Cordray. We have heard that too, and I have invited 
that kind of comment. We launched a streamlining initiative 
earlier this year to ask people broadly, including industry and 
other stakeholders who typically have this complaint, to 
identify for us some of the types of provisions that they think 
could be eliminated or modified or the burden of them reduced 
without hurting consumers or that they think are not really 
delivering their value.
    And we got a number of suggestions, some of which we are 
definitely following up on, but one of which was the credit 
card ``ability to repay'' effect on spouses who do not work 
outside the home, which is one, as I said earlier, we are going 
to be taking up imminently. There are others we will pursue.
    So I think that was fruitful for us. We did find that a lot 
of the burden people complain about has nothing to do with the 
Consumer Bureau and the financial industry. It is the money 
laundering requirements and the Bank Secrecy Act, neither of 
which we administer.
    But there are things that did come within our purview that 
we will proceed on and I think that has been helpful and we 
will be able to show the people who complain about that, that 
we are willing to take up and work on some of the issues they 
raise, which I want to do.
    Mr. Scott. Thank you very much.
    Mr. Neugebauer. The gentleman from Missouri, Mr. 
Luetkemeyer, is recognized for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Mr. Cordray, on--I sent you a letter along with, I think, 
30-some of my colleagues with regards to the wire remittance 
rule that you promulgated, and we received back this week your 
letter and we thank you for that. One of the questions that I 
have that, in the letter here it says that you understand that 
achieving full compliance by the effective date may present 
challenges for some institutions subject to the rule and have 
met with some providers to hear the concerns they may have.
    Are you considering any changes as a result of those 
meetings that you had with those providers? And if so, what 
changes to the rule are you anticipating?
    Mr. Cordray. There have sort of been three stages of this. 
The first is, as I said earlier, Congress passed the law. It is 
the law of the land. There are now new protections and new 
procedures for remittance transfers. If the Consumer Bureau 
didn't exist, that would still be the law of the land.
    The Consumer Bureau was the agency designated to implement 
that law by adopting rules. Those were out for public notice 
and comment. We had many discussions with many parties about 
them before finalizing them. We finalized those in February.
    At the same time, we proposed a supplement to consider 
whether to exempt institutions below a certain threshold from 
having to comply with the rule because it was more burdensome 
than makes sense for them. We did adopt that threshold in 
August and there are many--I believe it is thousands of 
institutions exempt from the rule. But it still covers most of 
the consumer market--
    Mr. Luetkemeyer. Through your discussions, though, have you 
found that in serving the entities that are going to be 
affected by this, have you found a large group of them that are 
just going to quit providing the service?
    Mr. Cordray. We hear different things about that and we are 
trying to understand it more. The third stage that I didn't get 
to--Congress passed the law. That is settled. We did issue a 
rule that is now settled. There is some opportunity for us to 
perhaps clarify and provide guidance around some of the points 
that are being raised, but unless we are going to reopen notice 
and comment rulemaking and redo the process, we are a little 
more constrained now.
    We are having discussions with various providers who were 
expressing concerns to us about what we can do to try to 
address those concerns. We will do as much as we can.
    We also recognize we need to provide clearer and simpler 
guidance to a lot of the smaller institutions and we are going 
to be coming out with a small business compliance guide to the 
rule, which will be much more accessible and in plain English 
than what is written in the Federal Register. That is coming 
out soon. And we are going to continue to work with 
institutions to try to give them guidance and ease the 
implementation process as much as possible.
    Mr. Luetkemeyer. If you see that there is a constriction of 
services due to the number of folks who are going to be doing 
this, would you look at raising this number from 100 to 500 or 
1,000?
    Mr. Cordray. We just went through a process on that. We can 
do and redo and redo processes forever and then people complain 
about regulatory uncertainty. We went through a process; we 
heard--
    Mr. Luetkemeyer. Director Cordray, let me interrupt for 
just a second. The rule is there or the law is there to solve a 
problem?
    Mr. Cordray. Correct.
    Mr. Luetkemeyer. And if the problem--if there is no problem 
at the lower end of institutions that have very few 
transactions then that is not--then that problem--then we need 
to eliminate that because we are creating a problem instead of 
solving a problem.
    Mr. Cordray. Correct. And that is what we did. That is what 
the supplement was--transactions that are exempt from this 
rule. You do not have to worry about it; you can throw it in 
the trash.
    Mr. Luetkemeyer. If we find, though, that as a result of 
constricting services, people getting out of it, and there 
still is--and the folks who were--who are getting out of it are 
not our problem folks, would you not think that we need to 
reconsider that at least?
    Mr. Cordray. What the law requires is that for the first 
time now, consumers are entitled to certain protections in this 
area: if errors are made that there would be an error 
resolution process, they are entitled to know what money is 
going to be received on the other end and not just toss their 
money into a black hole and not know what is--
    Mr. Luetkemeyer. Okay. I understand where you are going. I 
understand that.
    You mentioned the word ``error.'' Right now, the way the 
rule is written the error can be assigned to the individual 
providing--the provider who correctly delivers the funds but 
the sender gives them a wrong account number. Is that not 
correct?
    Mr. Cordray. I think that is one of the issues we are 
working through with different institutions that are raising 
the issue with us. I think it is somewhat overstated.
    Mr. Luetkemeyer. How can you overstate that?
    Mr. Cordray. Because I think that--
    Mr. Luetkemeyer. Either you count it as an error or you 
don't.
    Mr. Cordray. Shall I explain?
    Mr. Luetkemeyer. Sure.
    Mr. Cordray. Okay. So counting as an error then has to do 
with whose responsibility it is to sort out whether it is an 
error or not. That is the first issue. And, Congress provided, 
and it probably makes better sense that the institutions sort 
out how the error occurred than that the individual be given 
the burden of doing that.
    Once that is done, the fact that an error was made by the 
consumer is something that can be worked on back and forth 
between the institution and the consumer. There is some concern 
I have heard expressed that there might be fraud here, the 
consumer makes an error deliberately and the institution is 
somehow on the hook for sorting through that error. Nothing in 
our rule prevents the institution from suing consumers who 
attempt to defraud them and to get relief.
    But look, these are more complicated issues, perhaps, in 
some ways, than can be discussed productively in 30- and 60-
second bites. We would be happy to come and talk with your 
staff more about them. We are having the same kinds of 
discussions with some of the providers themselves and we are 
looking to see if there is any kind of clarification and 
guidance we can give around this to keep your--
    Mr. Luetkemeyer. I see my time is up, but I think it is--it 
opens a huge liability situation for the providers of the 
service. And whenever you deem something an error, which is not 
anything that they have control over, I think we have a huge 
problem that needs to be at least looked at and worked with 
industry in some degree.
    Mr. Cordray. With respect, the notion that consumers who 
come in for a $400 transfer and then there is an error are 
going to sue you and find an attorney to bring a case based on 
that I think is vastly overstated, but we are worried--we do 
not want to foment litigation and we are having discussions to 
see what we can do to resolve and address some of these 
concerns, and we will continue to do that and we are happy to 
have them with you and your staff as we go.
    Mr. Luetkemeyer. Thank you.
    Thank you, Mr. Chairman.
    Mr. Neugebauer. I thank the gentleman.
    And now the gentleman from California, Mr. Sherman, is 
recognized for 5 minutes.
    Mr. Sherman. I thank the Chair.
    The Federal Government does an awful lot to try to support 
the home market, especially in these difficult economic times. 
We do so at considerable cost and considerable controversy.
    We have a home mortgage deduction and property tax 
deduction. We have taken over Fannie Mae and Freddie Mac. There 
is considerable controversy there, and some risk to the Federal 
Government.
    And now the Federal Reserve has its QE3 program, which is 
designed to support home prices and allow people who might 
otherwise not be able to buy a home to qualify for a home with 
a lower payment or lower interest rate. So everybody in the 
Federal Government is sacrificing their other goals in order to 
try to make sure that we can turn around the home prices and 
provide for homeownership.
    Your agency is now crafting rules defining Qualified 
Mortgages, which will govern how housing finance works in the 
future, and initial reports indicate that the rules you are 
considering are very conservative and could restrict the number 
of creditworthy borrowers that are able to obtain mortgage 
financing.
    How do you reconcile your agency taking an action which 
would depress home prices, reduce the number of people who 
could qualify for a loan and become homeowners while everybody 
else in the Federal Government is paying the price, enduring 
the controversy, shouldering the cost to accomplish the exact 
opposite goal?
    Mr. Cordray. The short answer, sir, is that is not what we 
are doing. The--
    Mr. Sherman. That is a good answer.
    Mr. Cordray. --longer answer is that this is not a 
proposal--the only proposal publicly on the table is one that 
did not originate with us, it originated with the Fed and it is 
a difficult area and the proposal raised a number of questions 
that it did not yet seek to resolve but sought to get broad 
input and comment from people, which I think was sensible at 
that time.
    We have now received those comments. We have received 
further comments. We have received incessant comments on this 
because it is very important to people.
    And the question you raise is one that has been raised to 
us numerous times and I think it is fair to say we are getting 
the message that if we draw the QM circle too narrowly we could 
ourselves be responsible for causing further troubles in the 
mortgage market. We do not intend to do that.
    We recently reopened this proposal for more notice and 
comment because we got some new data that gives us a better 
handle on what is actually happening in the mortgage market in 
this period where it is, in this somewhat unnatural phase, and 
it is difficult to predict where it is going.
    I think that people will be satisfied in the end that we 
have taken account of that concern and we need to do so. 
Hearing you say it again today reminds me once again how 
important this is for people.
    Mr. Sherman. I thank you for your attention to that.
    One part of these rules goes back and forth between 
rebuttable presumption and safe harbor, and of course, the 
economy works best when the rules are clear and when the 
regulators are in touch with the markets enough to know when 
some new abuse occurs and then they can quickly change the 
rules. If you can't draw clear rules, and you can't modify 
those rules as necessary, then we are stuck with the litigation 
system. Vague rules and rules you can't rely on, and then you 
have litigation liability and loss to consumers and the 
economy.
    Is your agency leaning toward the rebuttable presumption 
and do you think you can write a rule that provides a safe 
harbor so that businesses can be certain that if they comply, 
they will avoid the liability, and won't need to pay for the 
liability insurance?
    Mr. Cordray. I found myself saying in my head, ``Amen,'' to 
your comments about this. As a former attorney general, now as 
the head of a Federal agency that has, among other 
responsibilities, law enforcement functions, gray areas of the 
law are not appreciated. They are difficult. They are difficult 
for people trying to comply. They are difficult for us.
    I think we understand here that if we write rules that are 
murky, that is going to essentially be an abdication of our 
responsibility because they will end up getting resolved in 
courts through litigation so it will take years and it will be 
very expensive, and the uncertainty will linger all during that 
process. So we understand and I think we are making real 
efforts here to draw very bright lines about what qualifies you 
or doesn't qualify you.
    The safe harbor versus rebuttable presumption comparison is 
a little bit of a mirage because even the safe harbor isn't 
safe. You can always be sued for whether you meet the criteria 
or not to get into the safe harbor, so there was a bit of a 
marketing concept there.
    But I think the more important point is, are we drawing 
bright lines that will discourage and minimize the prospect of 
litigation. That--
    Mr. Sherman. Let me just tell you that all the sea captains 
I have talked to really want a safe harbor.
    Mr. Cordray. Yes. Look, if somebody said to me, safe harbor 
or anything else, I would go for a safe harbor. But I don't 
think the safe harbor is truly safe and I think that 
oversimplifies the issue. The issue here is minimizing 
litigation cost and the risk of it which would lead people out 
of this market. We are definitely going to try to do that.
    Mr. Sherman. Thank you. I yield back.
    Mr. Schweikert [presiding]. And the groaning wasn't at the 
joke. Yes, it actually was at the joke.
    Mr. Grimm?
    Mr. Grimm. Thank you.
    Let me just pick up from there. And I very much appreciate 
your time today, Mr. Cordray. One of the frustrations I think 
some of the Members are having is that we hear there are 27 
oversight meetings. It is great to have that much oversight, 
but a lot of the questions just don't get answered. We are 
talking about the questions and talking about everything but 
the answers.
    I was told--and please correct the record if I am wrong--
that you yourself had mentioned that the CFPB would absolutely 
not be adopting a safe harbor for QM. Is that accurate?
    Mr. Cordray. First of all, that rule is pending and not 
finalized, so--
    Mr. Grimm. Hold on, sir. That is my point, though. It is a 
yes-or-no question. Did you or did you not say that the CFPB 
would absolutely not be adopting safe harbor? Yes or no?
    Mr. Cordray. So it is a little like bringing a Justice to 
the Supreme Court in here last spring and saying, ``Are you or 
are you not going to find the Affordable Health Care Act 
unconstitutional?'' It is in process. It is not yet resolved. 
So for me to tell you what we are going to do or not--
    Mr. Grimm. Sir, that is actually not true. I asked if you 
said that. My question was, did you say that in the past? That 
is something that happened or didn't happen. See how simple 
that question is? It is yes or no. It is not what is it going 
to do in the future; it is did you say that in the past or not?
    Mr. Cordray. Okay. I have not taken a position because the 
Bureau has not taken a position on that.
    Mr. Grimm. Thank you.
    Mr. Cordray. What I have said is I have discussed the issue 
in ways as I just discussed it with Congressman Sherman, which 
is explaining that some of the difference between safe harbor 
and rebuttable presumption is, in my view, quite overstated, 
and that we are going to try to minimize litigation risk and 
draw bright and clear lines. That is what we are going to try 
to do, but we have not done it yet, so for me to tell you what 
we are going to do when it is not finalized would be, as I 
understand it, improper.
    Mr. Grimm. Okay. And that is why when there is a lot of 
talk about the lack of oversight and the uncertainty out there, 
there have been 27 meetings, yes, but all of them ended with, 
``We are working on it; we will let you know when we are 
done.''
    Mr. Cordray. Sometimes, that is the accurate answer.
    Mr. Grimm. And that is extremely frustrating.
    Mr. Cordray. Sometimes, that is the accurate answer. If we 
are working on it and it is not yet done, I could give you an 
answer, but it would not be accurate. That is the answer 
sometimes. Where I can answer the questions more definitively, 
I certainly try to do so.
    Mr. Grimm. In your opinion, do you think that litigation 
risk associated with ability to repay standards will be--would 
be increased? If the CFPB goes that way, do you think that 
would increase litigation risk?
    Mr. Cordray. Goes which way?
    Mr. Grimm. With an ability to repay standard as opposed to 
a safe harbor.
    Mr. Cordray. The rule is an ability to repay rule. The 
proposal that the Fed put out posits a choice between a so-
called safe harbor and a so-called rebuttable presumption.
    Mr. Grimm. I am sorry, rebuttable presumption.
    Mr. Cordray. I think that a rule that creates uncertainty 
and murky criteria will foster litigation and that would, in 
fact, restrict access to credit. I would agree with that, yes.
    Mr. Grimm. Okay.
    Today, do you think there are a substantial number of 
borrowers who are qualifying for mortgage credit who should not 
be getting loans?
    Mr. Cordray. Today?
    Mr. Grimm. Today.
    Mr. Cordray. I don't think so. I think in 2005, 2006, and 
2007, there were a lot of mortgages made for people who 
honestly should never have qualified--they didn't check their 
income; they falsified income. There are legions of stories 
around this.
    But today, it is much more constrained--because we had a 
financial crunch. We had a credit freeze. We have had a fall 
and a deep recession. Right now, credit is tight, and it is 
because of what happened to the economy in 2007 and 2008.
    Mr. Grimm. So let me ask, alternatively, do you think that 
there are qualified borrowers who are not receiving credit 
under today's underwriting standards?
    Mr. Cordray. My sense is that there are in--the weasel word 
in that question is ``qualified,'' but my sense is that credit 
is very tight, yes. Maybe too tight.
    Mr. Grimm. I will end with this: How do you anticipate 
whichever way the CFPB goes with the Qualified Mortgage rule, 
do you think it will expand or contract that availability?
    Mr. Cordray. I think we are trying to write a rule that 
confers the protections that are intended under the ability to 
repay provisions and we are trying not to have the unfortunate 
side effect of drying up credit in the mortgage market. This is 
not an easy issue. It is a hard issue and it is hard to gauge 
the future of the mortgage market right now.
    We ask everybody who comes in to meet with us, what is the 
future? What is going on? What kind of financing is coming back 
into this market? Nobody has very clear answers.
    But we are going to try to avoid doing that ourselves. And 
by the way, let me say that if we write a rule and then we find 
that it has unduly restricted access to credit, we will go back 
and look at redoing it, although again, regulatory uncertainty 
is what people are complaining about now. We will have these 
rules in place by January. Then things will be certain. We will 
remove that cloud.
    People then may complain about, now it is certain but I 
don't like it. That is what we are trying to listen to them on 
now so that we can do our best to take account of their 
concerns.
    Mr. Grimm. Thank you.
    My time has expired.
    Mr. Schweikert. Thank you, Mr. Grimm.
    Mrs. Maloney had a question to a point you made.
    Mrs. Maloney. Mr. Grimm and I are from the same State and 
City and we are experiencing the same situation even though the 
economy is improving in New York and in the country overall. 
Credit is incredibly tight. Even if you have an A-plus, A-plus-
plus-plus rating for your finances, you can't get a loan. Why 
is that and what do we need to do about it?
    Is it the backload in Fannie and Freddie? Some of the big 
banks say that they are pushing back properties--if they find 
anything wrong, Fannie and Freddie push it back on the bank's 
books and they take a huge loss on it, and they feel they are 
getting so much of this that they can't put any other capital 
out. That is one explanation I have gotten.
    But we have now had 30 months of job growth and financial 
indicators going up in many places--
    Mr. Huizenga. Mr. Chairman, point of order. I am curious. 
We are all in line for questions and I am just curious where 
this time is coming from.
    Mr. Schweikert. Sorry. This was supposed to be just a quick 
reference question.
    Mrs. Maloney. Okay. Why do you think that credit is so 
tight?
    Mr. Cordray. I think there are a lot of reasons. I think 
people are digging into this and trying to analyze and 
understand it.
    The most obvious reason is because we went through a credit 
crunch and a credit freeze and a financial crisis and a 
recession. That hurt a lot of institutions and therefore it is 
taking time for them to be able to lend more aggressively. 
There are a lot of problems that occurred in the financial 
crisis, including put-backs of mortgages that were poorly drawn 
up to begin with, so that has created risk and concern for 
people active in this market.
    There are any number of different explanations, many of 
which have some validity. I don't know how to quite rate the 
importance of them vis-a-vis one or the other.
    Mr. Schweikert. Okay. And forgive me, because it was meant 
to be just a question off of a point of personal privilege.
    Mr. Green?
    Mr. Green. Mr. Chairman, I am amenable to yielding to the 
gentlelady such time as she may consume.
    Mrs. Maloney. Thank you. Thank you, Mr. Green.
    I would just like to say that I think this credit crunch is 
really the biggest problem that we have in having a robust 
recovery. And I just would appreciate your getting back to us 
as soon as you can with what you think we could do to try to 
address that.
    One of the reasons housing is not beginning to move forward 
is people literally can't get mortgages. They can't. They come 
to my office and they are making $400,000 a year, they have an 
A-plus credit rating, but they can't get a mortgage anywhere. 
There is something wrong with a system like that.
    I yield back to Mr. Green and I just wanted to jump in on 
it because I think it is one of the biggest problems we have. 
We have the head of the CFPB. I would like to pick his brain 
and see how he sees it, and I think that is something that all 
of us are concerned about and I am sure all of my colleagues 
are hearing it from their constituents.
    I yield back to Mr. Green. And thank you so much, and 
congratulations on your important bill that passed the Floor 
last night.
    Mr. Green. Thank you, Mrs Maloney.
    And I thank the Chair for this opportunity.
    Mr. Cordray, thank you very much for appearing today and 
for your many, many other appearances. I am sure you have lost 
track of the actual number--
    Mr. Cordray. I enjoy coming here.
    Mr. Green. --but we do see you quite regularly and we 
appreciate your testimony.
    I would like to visit with you for just a moment on the 
``Know Before You Owe'' program, but from a different 
perspective. I would like to talk for just a moment about the 
notion that we are polyglot--a good many persons in our society 
are bilingual and speak multiple languages. In my district, we 
have the ballot printed in four languages: English; Spanish; 
Vietnamese; and Chinese.
    How does this tie into ``Know Before You Owe?'' In this 
sense: We are talking about understanding and making sure that 
people understand the documents that they negotiate. If we are 
doing this--and I know that you are making a concerted effort 
to get the job done--to what extent are we translating 
documents and providing documents in other languages such that 
other persons can know before they owe by virtue of reading a 
language that they understand? That is the first question, and 
then I will have a quick follow up, if you can answer that one 
rather briefly.
    Mr. Cordray. Okay, sure. The issue of accessing consumers 
in other languages is one where I am not satisfied with our 
progress yet to date. We need to do more and we will.
    Our complaint call line is accessible to people in well 
over 100 languages, so we are good on that front. In terms of 
our Web site, we don't have enough translation there yet, in my 
view, but we are working on it.
    In terms of how we write rules and do things like ``Know 
Before You Owe'' and testing and the like, that is something 
that we are taking into account. In the remittance rule that we 
finalized there is a requirement in the rule that if you 
advertise to offer money transfers and you advertise in a 
foreign language, so therefore you are trying to get customers 
by using that language, the disclosures need to be provided in 
that language. It wouldn't be fair to people to bring them in 
speaking Spanish to them and then give them disclosures in 
English that you are not sure they can understand.
    And there will be other rules as we go where this will be a 
legitimate concern--always will be a legitimate concern and we 
will work with that.
    Mr. Green. I thank the Chair.
    I just want to comment on that last statement, if I may, 
quickly. That is an important aspect of this inquiry because we 
do have persons who will bring--attract business in a certain 
language, but when they do business, they do it in a different 
language, meaning English when they do the business but when 
they are attracting the business they may use Spanish or some 
other language on various radio stations. So I appreciate your 
looking into it.
    Thank you.
    Mr. Schweikert. Thank you, Mr. Green.
    Mr. Huizenga?
    Mr. Huizenga. Thank you, Mr. Chairman. I appreciate that.
    And I agree with my colleague from New York about the 
credit issue. I will make a note, though, it is not an interest 
rate problem as to why people are not able to get loans right 
now, and as we are having this discussion about Quantitative 
Easing 3 happening I think that is important.
    I, too, am glad you are here, but I am concerned about the 
real lack of oversight, which means, in my mind, budget 
direction from this body. We can ask whatever questions we 
want, but precious little can actually be done unless we have 
that actual, direct budget direction or input. And my 
definition, which I think is the constitutional definition as 
well, that is what real true oversight is.
    And I know, Mr. Cordray, you are in a particularly tough 
spot to a degree and you have said a number of times--I have 
lost count of how many ``Congress has directed'' or ``this bill 
has said,'' and all those other things. Not all of us were here 
when that was passed. I am living with the echo effects as one 
of those freshmen, 12 on this side of the aisle, and I believe 
there are one or two over on the other side of the aisle.
    So I want to not talk or dwell about, necessarily, the 
specifics about your rule, but I want to know this: Why do you 
believe that so many entities that will be falling under the 
purview of the CFPB are nervous or, frankly, even afraid about 
what your agency and its rules are going to do to them?
    Mr. Cordray. Thank you, Congressman. I think that the 
reason that is so, as I understand--I have asked this question 
because I want to understand it because if we can alleviate 
some of that anxiety and concern we want to do so.
    A lot of it I think clearly stems from the fact that we are 
just new. People haven't dealt with us before. They aren't sure 
what to make of us; they are not sure what we are going to do.
    Obviously as a new agency, it takes some time to figure out 
what we are going to do, what our priorities are, how we are 
going to approach things. And we are trying to think that 
through carefully.
    It gets easier for us to sort of signal what we intend to 
do as we go, and as we do our work people begin to see how we 
do our work. But--
    Mr. Huizenga. Could it be--
    Mr. Cordray. --at the outset, they don't know what to 
expect, and I am sure that is the anxiety.
    Mr. Huizenga. I think that is part of it, but could you--
could it be also because that they believe what is being 
imposed or discussed about, it certainly is not efficient or 
workable in their opinions?
    Mr. Cordray. Certainly. That could be the case. And I am 
sure in some instances that is part of the reaction.
    Mr. Huizenga. Do you believe that the big banks that you 
are dealing with now are acting in good faith?
    Mr. Cordray. I actually have found over the years that most 
citizens, most businessmen in particular, want to follow the 
law, they want to get it right. They are sometimes unsure what 
the right answer is. They would like to have clarity and 
guidance.
    However, there are some who are interested in taking 
advantage of every gray area they can. When I was Ohio Attorney 
General, I had to enforce the law against a number of those 
people--fraudsters and scammers.
    But in the banking industry, and I would say my guess is, 
as in the legal profession that I am more familiar with 
historically, people will tend to follow the rules if the rules 
are made clear to them.
    Mr. Huizenga. How about credit unions or community banks. 
You believe they are acting in good faith?
    Mr. Cordray. Community banks and credit unions, I have 
worked with them for years now, going back to my time in State 
and local government in Ohio. They have a sound business model. 
They are under a lot of economic challenges because of the 
changing nature of the marketplace. This has been true for 30 
years with consolidations going on for a lot of reasons.
    Mr. Huizenga. But do you have confidence that they are 
actually doing that? Or insurance companies? Or financial 
advisors that you are dealing with?
    Mr. Cordray. My view is that the vast majority of people do 
deal in good faith. They sometimes can get into trouble for a 
variety of reasons but the ones who get into trouble typically 
are the ones who are looking for trouble or not caring about 
the consequences because they downplay the notion they will get 
caught and the law will be enforced against them.
    Mr. Huizenga. But do you believe it takes a massive 
government agency like this one to guarantee that somehow?
    Mr. Cordray. I don't think that is our role. Our role is to 
focus on consumer protection and make sure that there are clear 
rules of the road to address some of the obvious problems that 
we saw, particularly in the mortgage market and other places in 
the run up to the financial crisis.
    Mr. Huizenga. But you don't believe that market forces can 
dictate that; it has to be an agency like yours coming in and 
doing that? If these people are acting in good faith--and you 
believe that they are acting in good faith, which I seem to 
have heard that is what you have said from financial advisors, 
community bankers, credit unions, insurance agents, all the way 
up to big banks--why do we need to be going through some of 
these things and why do we need to be causing that same 
anxiety?
    Mr. Cordray. I would say two things. First of all, we just 
saw how well that worked. In 2007, 2008, the economy of the 
United States melted down dramatically. Trillions of dollars in 
household wealth were lost because the markets didn't work 
properly. So--
    Mr. Huizenga. So you don't believe that is the answer.
    Mr. Cordray. Second, I served as Ohio Attorney General. Why 
do we need an attorney general? I had 1,500 people in my 
office. Because somebody has to enforce the law and--
    Mr. Huizenga. Trust me, I am a Calvinist. Man is depraved, 
sinful, fallen, and evil by its nature. But--
    Mr. Cordray. So we have--
    Mr. Huizenga. And, Mr. Chairman, I would respectfully ask--
the other side had 5 additional minutes, and so I would like to 
kind of follow through on this.
    But, I understand that it is not the nature of an agency to 
leave things alone, whether they are good or whether they are 
bad, frankly. That is part of my concern and I think that is 
the anxiety that as I talk to those people who are involved in 
this that is the anxiety that is being created, because they 
feel like--whether they are acting in good faith or not, they 
feel like there is an anvil hanging over their head and that 
there is one person who decides whether that anvil falls on 
their head or not.
    And, I just reject the notion, I guess, that this is the 
only way to deal with these problems is to have this massive 
agency.
    So with that, Mr. Chairman, I appreciate your indulgence 
and I yield back.
    Mr. Schweikert. Thank you. Though, when you were explaining 
you are a Calvinist, I hope you weren't pointing at me.
    Mr. Carney?
    Mr. Carney. Thank you, Mr. Chairman, finally.
    Mr. Cordray, it is good to see you again. When you get to 
me, you know it is almost over.
    You say in your opening statement that your push for 
accountability extends beyond mortgage servicing. We are 
holding both banks and nonbanks accountable for the following; 
law--and you add at the end of that paragraph, so far we have 
added credit reporting companies to this group.
    We had a hearing last week on credit bureaus, and in 
particular, two pieces of legislation. I don't know if you are 
aware of those or not. Fact, one would address medical bills 
and the other was to add utility payments to the consideration 
of credit scores.
    The medical bills, tell me, what are you doing, if 
anything, this--the credit bureau question first, and then I 
want to ask specifically about these two bills on medical bills 
in particular.
    Mr. Cordray. Okay. So on the credit bureau in general, what 
we are doing with credit reporting companies?
    Mr. Carney. Yes.
    Mr. Cordray. Is that the question? Okay.
    Mr. Carney. I assume you are referring to consumer credit 
bureaus.
    Mr. Cordray. We are. Transunion, Experian, Equifax, and 
then a number of others that are more specialty providers.
    First of all, we are very appreciative that Congress is 
taking an interest in this area. It is an issue that affects 
Americans dramatically and across-the-board; most of them are 
unaware of it because it isn't something where they sign up for 
anything, it is that credit files are being kept on them, 
information is in those files, and that information often is 
used to dictate whether they can get a loan--
    Mr. Carney. And that information is often incorrect, and 
what we learned in the hearing last week that one-in-three of 
the information, the debts sent to collectors for medical debts 
is just wrong. And is there anything that you can do to address 
that question? Are you aware of the bill that is before this 
committee and this--
    Mr. Cordray. Yes. There is a lot that we are going to be 
able to do to address that question. First of all, we will now 
have the authority to examine these institutions, which means 
send in teams who are used to examining financial companies and 
understanding exactly how they operate. We will get a real--
    Mr. Carney. To the credit bureaus themselves?
    Mr. Cordray. Yes. We will get a real, neutral view of what 
the error rate is and what is being done about those errors. 
There have been wildly different estimates, and we will be able 
to really get a picture of what is actually going on, and what 
the problems are, and what may need to be done to clean those 
up. So--
    Mr. Carney. The medical bills in particular are a problem 
because of--I don't know if you know much about the medical 
billing system, but it is incomprehensible. I will just speak 
from my own personal experience, to figure out what gets 
credit, how much you are due, or whatever, and it is not 
necessarily whether you get sick or have one of these 
occurrences. It could happen to any of us. And it is not so 
much a function of--it is really a function of your insurance 
coverage, your employment status, and all of that than it is a 
function of your ability to pay, and then to have a credit 
bureau using inaccurate information to affect your credit 
rating, it is just, I think, completely unacceptable. It is an 
area, I think, that you ought to really look hard at. We have 
this piece of legislation.
    Mr. Cordray. Fair enough. And a lot of those medical debts 
are small amounts and yet they can have a huge impact on your 
credit score or block bigger transactions like mortgages. It is 
an issue. We are interested in what you are going to be finding 
as you are looking at it. We are also looking at it closely and 
we are looking to take action as needed.
    Mr. Carney. Yes. I think the error rate problem is the 
biggest problem there because you are getting bad information 
into a system that has a dramatic impact on a person's ability 
to get credit.
    Tell me briefly--you and I have had this conversation 
before about nonbank lending, payday lending, that kind of 
stuff. You have mentioned it briefly in your remarks. Are you 
moving the ball at all on that question, particularly the 
payday lending and the--
    Mr. Cordray. Yes.
    Mr. Carney. It is a tough issue, too, in terms of people 
who don't have access to the banking system who are using these 
services. I know you have testified before you have learned 
that in your hearing that you had in Alabama.
    Mr. Cordray. Yes. We had our first, under my direction, 
field hearing on this issue. We put out a request for 
information to gather broad input on the problem. We now have 
begun actual examinations of payday lenders, and similarly, of 
the similar products at times offered by banks, so we are 
getting a much deeper understanding of this and we will 
consider what steps need to be taken.
    We do not have--and I want to emphasize this--under our 
statutory authority the ability to impose an interest rate cap, 
which has been the approach taken at the State level at times 
to address this issue by raising or lowering it, but--
    Mr. Carney. Is it within your purview or your expectation 
that you will be doing some kind of report on what you find? 
That would be helpful to us, as legislators, and maybe even to 
State legislators, as well.
    Mr. Cordray. We haven't determined that. We might be 
proceeding in any number of ways. As I said, we are already 
engaged in supervision of the payday lending industry. We, of 
course, have the enforcement authority. We have rule-writing 
authority. If we--
    Mr. Carney. I see my time has expired. I want to thank you 
again for coming today. You have been here many times, and I 
thank you for your good work.
    Mr. Cordray. I appreciate it. Thank you.
    Mr. Schweikert. Thank you, Mr. Carney.
    Mr. Stivers?
    Mr. Stivers. Thanks, Mr. Chairman.
    I would like to welcome Director Cordray to the committee. 
He is one of my constituents. I have known him a long time.
    I appreciate your commitment to consumer protection and I 
thank you for what you are trying to do at the Consumer 
Financial Protection Bureau.
    I do have a few questions about the structure and budget of 
the committee, and then some issue questions if we could. The 
first is regarding the structure of the CFPB. I am personally 
bothered that there is no reference in the creation of the CFPB 
about safety and soundness of the financial institutions, 
because if your only charge is to protect consumers but you 
have no responsibility to the safety and soundness of the 
institutions, the easy thing to do is make people give products 
away at a loss. And that hurts the safety and soundness of our 
financial system.
    And I guess I am just curious what your thoughts are, 
briefly, on that issue, and if you have had a chance to 
reconcile that.
    Mr. Cordray. It is a new approach to have an agency that 
focuses specifically on consumer protection and decouple that 
from the chartering and safety and soundness. I would say 
this--we do not have authority to make companies offer products 
at a loss. If they are going to be losing money on products 
they will stop offering them and we have no authority to 
require them to do that.
    But second, the notion that we would pay no attention to 
safety and soundness or not cooperate closely with our fellow 
regulators who do have that concern would be quite misguided, 
because if institutions are not going to be safe and sound, 
they are not going to be good for consumers, and then we have a 
much bigger problem on our hands.
    Mr. Stivers. And I believe you would do that. I guess my 
question is, do you believe we need to make it clear in the law 
that the CFPB should look at safety and soundness as one piece 
of the things you look at?
    Mr. Cordray. At this point I would say, I think the law 
does that implicitly by making our regulations subject to being 
overruled by the Financial Stability Oversight Council, which 
includes the safety and soundless regulators.
    Mr. Stivers. With only a supermajority vote, though, not a 
simple majority. It takes either two-thirds or three-quarters; 
I can't remember the exact number for there to be a 
supermajority.
    Mr. Cordray. That is right. Look, if it weren't a close 
call, I have no doubt that that could be the outcome.
    I don't think there is a change in law needed. Of course, 
that is for Congress to determine. I think that if we show that 
we are not willing to cooperate with the other regulators and 
to work closely with them then maybe that should be 
reconsidered down the road. That is not the case now. We have--
    Mr. Stivers. And I don't have a concern with you at the 
helm, but the other concern I have about the agency is you are 
also one of the few agencies in Washington that does financial 
regulation that is not a board: the SEC is a board; the Federal 
Reserve is a board; the CFTC is a board; and the Federal 
Deposit Insurance Corporation is a board. You are one person 
and you run the agency the way you see fit, and I have total 
confidence in you knowing you, but who knows who will be in 
charge after you? That is why I think it is really important to 
look at the agency, so I appreciate that.
    The other quick question I have on structure is about your 
budget, and your budget comes--you could have up to 12 percent 
of the Federal Reserve's budget, up to $598 million without an 
additional request, and an extra $200 million, the way I 
understand it, as a discretionary increase from Congress. I 
think you requested $440-some million for this year, in round 
numbers. I looked at your numbers earlier--
    Mr. Cordray. That is the estimate. We are going through the 
budget now, actually. We will have new numbers--
    Mr. Stivers. I guess my question is, do you believe the 
CFPB should have less accountability than the FBI and the 
military, whose budgets are appropriated?
    Mr. Cordray. My understanding, and again, I wasn't here 
when the Dodd-Frank Act was enacted, was that it was determined 
that we should have the same accountability as the other 
banking agencies and we should operate pretty much on 
equivalent terms with them. That is true of the manner in which 
we are funded and it is true to some extent of the structure. 
The OCC has a single Comptroller; the FHFA used to be 
appropriated and now is not and has an individual at its head.
    So I think it makes sense for us to be on a par with the 
other banking agencies since they are the peers that we need to 
work closely with in our work. That would be my sense of it. Of 
course, that is a policy choice for--
    Mr. Stivers. And that is a choice we have to make, and I 
have some concerns there.
    I do quickly want to talk, as I know Blaine Luetkemeyer 
did, about remittances. As you know, we have a big Somali 
community in Columbus, Ohio, second biggest to Minneapolis, and 
these remittances are truly lifelines for those folks and other 
folks who are immigrants and trying to help family back home. 
And I am curious, when I read your rules and I read the 
comments from those around it, it sounds like the closed 
networks like Western Union and MoneyGram will be able to 
comply with your February deadline but a lot of the wire 
services and ACH transfers might have real trouble with that.
    Have you been told that, and does that give you cause for 
concern? Because what it tells me is there is going to be less 
competition, more expensive cost to these remittances, and less 
access. So is this something you are aware of and are you 
willing to do something to give folks time to make sure that 
they can comply with your regulations?
    Mr. Cordray. We are aware of it. I was actually on the 
phone with the clearing house just the other day and we have 
offered to make ourselves available to try to work through the 
issues that they may be finding. This has been long 
telegraphed. The law was passed more than 2 years ago, and we 
allowed a 12-month implementation period on this, but it is a 
concern.
    I also think this is an area--and you can appreciate this; 
you have a background in the financial services industry 
yourself--where the technology and innovation are changing very 
fast: PayPal is now in this space; prepaid cards are now being 
used at times to send money overseas; phone transfers may now 
be starting to increase. So we don't have a good sense of how 
this marketplace is changing.
    At the same time, I have no desire to have our rule or the 
law drive out depository institutions from this space, and they 
are treated a little more generously under the law. They can 
make reasonable estimates of exchange rates and fees in a lot 
of instances. But we are going to try to work through the other 
issues with them.
    Mr. Stivers. I appreciate that.
    Can I ask one last follow up? I know you are--I appreciate 
your indulgence and--by the time when you get to me--Mr. Carney 
said when you get to him, you are almost done, but when you get 
to me, you really are done. Lunch is almost over by the time I 
get to ask questions, so--one other question I have is, when 
financial institutions deal with many regulators, especially 
the FDIC and the Comptroller, they get some confidentiality--
they have privilege on the information that they provide but 
they do not receive that same benefit to the information they 
provide to the CFPB. Would you be amenable to Congress amending 
the Federal Deposit Insurance Act to add the Bureau as an 
agency for which privilege is preserved?
    Mr. Cordray. We are. We have really done our best to try to 
address this issue. We think the law is already clear. We 
issued a bulletin to that effect, and when it wasn't clear that 
was satisfactory to the banking institutions raising the 
concern, we went through the rulemaking process to adopt a rule 
which has the force of law and would deserve deference from the 
courts.
    We have also said there is legislation pending that we are 
supportive of making that even clearer than maybe people think 
it is now, and we think it is. So that is our position.
    Mr. Stivers. Great.
    Can I do one more or do you need me to--
    Mr. Schweikert. Is it a really good one?
    Mr. Stivers. I don't know. You can tell me that later.
    Mr. Schweikert. All right. Go ahead.
    Mr. Stivers. Thank you, Mr. Chairman. I appreciate again 
your indulgence.
    I also wanted to ask you quickly about the ability to repay 
and the Qualified Mortgage. I understand that you have worked 
on your rulemaking and your rulemaking on mortgage 
underwriting, ability to pay, and Qualified Mortgage 
requirements, and high-cost loan requirements.
    While larger lenders can really absorb some of these 
regulatory changes, it does affect some of the smaller 
institutions like community banks. I have a lot of community 
banks in my district and I am curious if you have sort of a 
game plan about how you will deal with these regulatory changes 
and make them manageable for small institutions like community 
banks, because they serve a lot of customers especially in the 
rural parts of my district in Union and Madison Counties and in 
a lot of the southern Ohio counties that I am familiar with as 
well?
    Mr. Cordray. So what do you think, Mr. Chairman? Is it a 
really good one? Should I answer it?
    [laughter].
    Mr. Schweikert. If the answer is really short, it is a 
great one.
    Mr. Cordray. All right.
    We are mindful of that, Congressman, and one of the things 
we have begun to realize that we will need to put out when all 
these mortgage rules are finalized is what I am calling a slim 
mortgage booklet that will boil down the changes in the rules 
in plain English so that it can be followed--something like the 
guide we are doing on remittance rules for smaller providers. I 
think that is important for us to do. It is important for us to 
make it easy for people to understand what is going to be 
required of them and we will work to do that.
    There will also be an implementation period on those rules 
to give us a chance to work some of this through with people. 
So we will be happy to hear more from you as we go on about how 
we are doing.
    Mr. Stivers. I appreciate your time.
    And I appreciate the Chair and the acting ranking member's 
indulgence.
    Mrs. Maloney. They were good questions.
    Mr. Stivers. You think that one did okay?
    Mr. Schweikert. Yes. We agree that you were worth the extra 
time, Mr. Stivers.
    Mr. Cordray, this is the moment when you know you are near 
the end. Can I throw just a couple of questions at you?
    Mr. Cordray. Yes, sir.
    Mr. Schweikert. One of my great concerns is the differences 
different States operate under. I come from a deed of trust 
State. The Member next to me comes from a mortgage State and 
uses a judicial foreclosure system.
    In the rule-writing, the one-size-fits-all is sort of the 
colloquialism, but I actually have a great concern. As you do 
that are you finding mechanics looking at those differences in 
different State laws? I come from a 91-day State foreclosure 
system. Where I come from, there are no lawyers at the closing, 
because many, many years ago, back in I think the 1950s they 
did a constitutional amendment in Arizona to try to do the 
things to make buying a piece of property as inexpensive at the 
closing mechanics as possible.
    Mr. Cordray. Yes.
    Mr. Schweikert. And so my great fear is any rules that come 
from the Federal Government that change a first-time 
homebuyer's cost of doing that transaction.
    Mr. Cordray. It is a great question. My background again is 
in State government, and as a State attorney general I am very 
mindful and sensitive to differences in State law, which 
usually reflect different circumstances. Obviously, things are 
very different in Arizona than they would be in New York, and 
particularly the New York City area.
    So for the most part, our approach is we are going to be 
leery about preempting State law. Most of what we do will ride 
on top of State law and coexist with State law, and that 
actually was most of the premise of the Dodd-Frank Act, as I 
understand it. I was Attorney General at the time, and we were 
very concerned about those issues.
    It is the nature of things that we are going to be adopting 
rules that apply throughout the country so the difficulty of 
how that fits with local conditions is something that we are 
going to try to understand through the notice and comment 
process and hearing from people--
    Mr. Schweikert. And you have a number of those you have to 
deal with, both the types of instruments we use--deed of trust, 
mortgage state--the different closing procedures we use--
    Mr. Cordray. Yes.
    Mr. Schweikert. --the reporting, the regulations of, even 
down to the way title insurance is issued. You do have some 
dramatic regional differences.
    Mr. Cordray. Yes. That is right. And we have an Office of 
Intergovernmental Affairs that is going to help us try to be 
sensitive to those things. Of course, people can comment in on 
our rules as we go and we will take account of those things.
    If we are getting this balance wrong somehow, and unduly 
crimp State law and State processes people, I hope, will bring 
that to our attention and we can rethink it. But we are trying 
to be mindful of that.
    Mr. Schweikert. One scenario example: Let's say Mrs. 
Maloney lived in Arizona and had a handful of properties that 
she owned that she wanted to sell, and she chose to carry the 
loans on them. So she was going to act as the bank on it--not a 
purchase money mortgage, but do the carry-back. And she does 
half a dozen of these in 1 year. Do you think that is someone 
who is going to fall into your purview?
    Mr. Cordray. No. I am not entirely clear on whether we have 
anything to do with that sort of person-to-person lending for 
business or investing purposes. I don't think that necessarily 
falls under the broader provision in consumer financial 
products and services but I would have to go back and look at 
that. I would certainly say, it wouldn't be any kind of 
priority for us as we are trying to allocate limited agency 
resources. The things that are broader patterns and of 
potential consumer harm are obviously the kinds of things we 
should prioritize but I would have to go back and look at 
that--
    Mr. Schweikert. If you could and could let me know, because 
I have seen in Arizona where certain subdivisions have been 
subdivided where the old farmer or rancher who owned the land 
dices it up and sells it and carries back the loans for 10 
years, those sorts of things. Would they start to be pulled 
into another regulatory scheme?
    One last thing I would like to go over with you: In a 
previous life I was the treasurer of Maricopa County. We 
spent--actually, one of our side projects was trying to reach 
out to we will say the ``unbankable'' population--the 
population who would show up at our countertop twice a year 
with bundles of cash to pay their property tax--and try to find 
ways to get them so they could pay through ACH or pay--they had 
a checking account.
    And I do have this great fear, as we reach out to try to 
protect everyone, do we end up changing the cost structure that 
more of our population gets moved into the unbankable 
population because they are not going to fit in the box. And 
just, in many ways this be more of a statement, but I hope you 
are at least keeping that in mind of these--I don't want to 
call them more marginal populations, but with their--they often 
don't have a relationship with banking financial institutions, 
either through distrust or some other reasons--being very 
careful that we don't build additional barriers for them to 
come join us.
    Mr. Cordray. I would say that, kind of ironically, you and 
I may be the only two people in this room who can speak the 
same language of having served as county treasurers. I used to 
be responsible for collecting the real estate taxes, current 
and delinquent--
    Mr. Schweikert. Did you have the same experience?
    Mr. Cordray. I had a lot of the same experiences. It was 
good for me.
    But what I would say is, we are very concerned about the 
unbanked and the underbanked, and I would say the underbanked 
in particular. I was at the FDIC; Chairman Gruenberg invited me 
over as they unveiled their latest report--they are doing now a 
2-year study every other year with the Census Bureau on the 
unbanked, the underbanked, trying to understand that 
population, document how much and who that is.
    And the underbanked, in particular, are very interesting. 
They have a bank account. They are not unbanked. But they use a 
lot of alternative financial products and services. For 
whatever reasons, the banking system isn't really meeting their 
needs the way it maybe meets a lot of people's needs. We need 
to understand that better.
    Mr. Schweikert. And we have--we did some studying in our 
Maricopa County Treasurer's Office and we found it was more 
complicated. We had some folks who had the income, they had the 
resources; they came from either an ethnic background where 
they just didn't trust institutions--
    Mr. Cordray. Yes.
    Mr. Schweikert. --and the fact of the matter is they should 
have every right to not trust institutions and have another 
alternative channel if that is their particular background. So 
this is sort of a tricky line--
    Mr. Cordray. It is.
    Mr. Schweikert. --because my fear is as we raise the cost 
structure so institutions end up having to limit sort of 
certain services, we start to drop parts of the population that 
is underbanked.
    Mr. Cordray. Yes. It is a tricky line. And actually, one of 
the things that we will now do, which has not been true before 
of the banking agencies is, we have the ability to protect 
consumers even if they are getting their services from nonbank 
firms, so whether it is a payday lender, a check-casher, 
whoever it may be. We are going to try to be thoughtful about 
how we use that authority, but we care deeply about these 
people and just because they are not in the banking system, or 
they choose not to be, or maybe they are out of it because of 
prior problems with the banking system, we care very much about 
how they are getting their ways and means of their lives 
managed and thinking about whether they are getting the same 
kind of protections they should be entitled to. And it is an 
interesting and difficult but very important set of problems.
    Mr. Schweikert. Director, it is one of those things my 
office has an interest in--
    Mr. Cordray. Okay.
    Mr. Schweikert. --so as you head there, on occasion think 
of us and send us things.
    And I think that is the end of this hearing.
    Mrs. Maloney. I would just like to add--
    Mr. Schweikert. Mrs. Maloney?
    Mrs. Maloney. --my appreciation. You have been incredibly 
generous with your time today, Director Cordray, and I am so 
proud of you and the work that your Bureau is doing. I think 
you are doing a sensational job.
    But I also have a goal, and that is the Federal Reserve 
interpretation of the ability to pay standard, so I am looking 
forward to that report sooner rather than later. Let's get 
something done.
    Mr. Cordray. I hear you loud and clear.
    Mrs. Maloney. It was certainly not the intent of the 
legislation, and I want to show the world that you can solve 
this problem.
    So anyway, thank you for all the problems you have solved 
and that you are working on to solve to help consumers.
    Thank you. I yield back.
    Mr. Schweikert. And the ones we worry about that we hope we 
are not creating. So, there are always both sides of the coin.
    Mrs. Maloney. Preventing.
    Mr. Schweikert. The Chair notes that some Members may have 
additional questions for the Director, 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 Director Cordray and to place his responses in the record.
    And with that, thank you for your time, thank you for your 
generosity, and this hearing is adjourned.
    [Whereupon, at 12:44 p.m., the hearing was adjourned.]

                            A P P E N D I X



                           September 20, 2012





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