[House Hearing, 113 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 THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                           SEPTEMBER 12, 2013

       Printed for the use of the Committee on Financial Services

                           Serial No. 113-43



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                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                    JEB HENSARLING, Texas, Chairman

GARY G. MILLER, California, Vice     MAXINE WATERS, California, Ranking 
    Chairman                             Member
SPENCER BACHUS, Alabama, Chairman    CAROLYN B. MALONEY, New York
    Emeritus                         NYDIA M. VELAZQUEZ, New York
PETER T. KING, New York              MELVIN L. WATT, North Carolina
EDWARD R. ROYCE, California          BRAD SHERMAN, California
FRANK D. LUCAS, Oklahoma             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            STEPHEN F. LYNCH, Massachusetts
MICHELE BACHMANN, Minnesota          DAVID SCOTT, Georgia
KEVIN McCARTHY, California           AL GREEN, Texas
STEVAN PEARCE, New Mexico            EMANUEL CLEAVER, Missouri
BILL POSEY, Florida                  GWEN MOORE, Wisconsin
MICHAEL G. FITZPATRICK,              KEITH ELLISON, Minnesota
    Pennsylvania                     ED PERLMUTTER, Colorado
LYNN A. WESTMORELAND, Georgia        JAMES A. HIMES, Connecticut
BLAINE LUETKEMEYER, Missouri         GARY C. PETERS, Michigan
BILL HUIZENGA, Michigan              JOHN C. CARNEY, Jr., Delaware
SEAN P. DUFFY, Wisconsin             TERRI A. SEWELL, Alabama
ROBERT HURT, Virginia                BILL FOSTER, Illinois
MICHAEL G. GRIMM, New York           DANIEL T. KILDEE, Michigan
STEVE STIVERS, Ohio                  PATRICK MURPHY, Florida
STEPHEN LEE FINCHER, Tennessee       JOHN K. DELANEY, Maryland
MARLIN A. STUTZMAN, Indiana          KYRSTEN SINEMA, Arizona
MICK MULVANEY, South Carolina        JOYCE BEATTY, Ohio
RANDY HULTGREN, Illinois             DENNY HECK, Washington
DENNIS A. ROSS, Florida
ROBERT PITTENGER, North Carolina
ANN WAGNER, Missouri
ANDY BARR, Kentucky
TOM COTTON, Arkansas
KEITH J. ROTHFUS, Pennsylvania

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel

























                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    September 12, 2013...........................................     1
Appendix:
    September 12, 2013...........................................    73

                               WITNESSES
                      Thursday, September 12, 2013

Cordray, Hon. Richard, Director, the Consumer Financial 
  Protection Bureau (CFPB).......................................     7

                                APPENDIX

Prepared statements:
    Cordray, Hon. Richard........................................    74

              Additional Material Submitted for the Record

Hensarling, Hon. Jeb:
    Written statement of the Independent Community Bankers of 
      America (ICBA).............................................    76
Beatty, Hon. Joyce:
    Script from ``40 Million Mistakes,'' which aired on CBS on 
      February 10, 2013, and was rebroadcast on August 25, 2013..   132
Cordray, Hon. Richard:
    Written responses to questions submitted by Representative 
      Foster.....................................................   138
    Written responses to questions submitted by Representative 
      Murphy.....................................................   140
    Written responses to questions submitted by Representative 
      Sinema.....................................................   144
    Written responses to questions submitted by Representative 
      Ross.......................................................   148
    Written responses to questions submitted by Representative 
      Stivers....................................................   151
    Written responses to questions submitted by Representative 
      Pittenger..................................................   152
    Written responses to questions submitted by Representative 
      Luetkemeyer................................................   153
    Written responses to questions submitted by Representative 
      Fincher....................................................   158
    Written responses to questions submitted by Representative 
      Garrett....................................................   160
    Written responses to questions submitted by Representative 
      Royce......................................................   165
    Written responses to questions submitted by Representative 
      Pearce.....................................................   166
    Written responses to questions submitted by Representative 
      Bachus.....................................................   169
    Written responses to questions submitted by Representative 
      Mulvaney...................................................   172

 
                       THE SEMI-ANNUAL REPORT OF
                         THE CONSUMER FINANCIAL
                           PROTECTION BUREAU

                              ----------                              


                      Thursday, September 12, 2013

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 9 a.m., in room 
2128, Rayburn House Office Building, Hon. Jeb Hensarling 
[chairman of the committee] presiding.
    Members present: Representatives Hensarling, Miller, 
Bachus, Royce, Capito, Garrett, Neugebauer, McHenry, Campbell, 
Pearce, Posey, Fitzpatrick, Luetkemeyer, Huizenga, Duffy, Hurt, 
Grimm, Stivers, Fincher, Stutzman, Mulvaney, Hultgren, Ross, 
Pittenger, Barr, Cotton, Rothfus; Waters, Maloney, Velazquez, 
Watt, Sherman, Meeks, Hinojosa, Clay, Lynch, Green, Ellison, 
Perlmutter, Himes, Peters, Carney, Sewell, Foster, Kildee, 
Murphy, Delaney, Sinema, Beatty, and Heck.
    Chairman Hensarling. The committee will come to order.
    Without objection, the Chair is authorized to declare a 
recess of the committee at any time.
    For Members who are arriving and seeing our hearing room 
for the first time since our last hearing, yes, it did receive 
a coat of paint. For those of you who were wondering when 
Chairman Frank's portrait would make its appearance, it is here 
now, and as I said to him at the unveiling ceremony of his 
portrait, as a conservative Republican, I have long since 
looked forward to the day when Barney could be seen but not 
heard.
    [laughter]
    That day has arrived. If I could say, it did seem to elicit 
a chuckle from our former chairman. I don't know how Chairman 
Frank got to my right, I don't know. That disturbs us both.
    Recognizing the time constraints this morning, we are 
expecting first votes sometime between 10:15 and 10:30. The 
ranking member and I have agreed to limit opening statements to 
8 minutes per side. Without objection, it is so ordered.
    At this time, I will recognize myself for 5 minutes for an 
opening statement.
    This morning, we welcome Richard Cordray, the Director of 
the Consumer Financial Protection Bureau (CFPB) to deliver the 
Bureau's latest Semi-Annual Report. Mr. Cordray, we recognize 
that the Bureau's latest Semi-Annual Report may be a little bit 
dated due to the legal controversy that previously surrounded 
your appointment, and thus delayed your timely appearance. 
Nonetheless, we welcome you today and congratulate you on your 
recent Senate confirmation.
    The CFPB is arguably the single most powerful and least 
accountable Federal agency in the history of America. Thus, it 
is an agency that demands rigorous oversight and consequently 
will undoubtedly demand numerous congressional hearings and 
inquiries. So again, not only do we welcome the Director today, 
but we look forward to welcoming you to our hearing room for 
many further appearances before us.
    As all of us know, the CFPB was designed to operate outside 
the usual system of checks and balances that applies to almost 
every other government agency.
    Number one, the CFPB is effectively unaccountable to 
Congress; it is exempted from the congressional budgetary and 
appropriations process. Thus, unlike many other agencies, there 
is no check to ensure that the CFPB Director is spending the 
peoples' money effectively to promote consumer protection, much 
less effectively in a time of runaway debt and deficits.
    Not even the agency from which the CFPB obtains its 
funding, the Federal Reserve, has oversight over the CFPB 
Director's spending.
    The CFPB is unaccountable to the Executive Branch. Once 
appointed and confirmed, the Director can only be removed by 
the President for cause. Neither can the Nation's Chief 
Executive enforce spending discipline on the Bureau because it 
is not subject to the Office of Management and Budget nor does 
the CFPB have its own Inspector General.
    I also find it fascinating, as Syria has dominated our 
national consciousness, that it merely takes a majority vote of 
Congress to launch military action or to go to war, but it 
takes a super majority vote to the Executive Branch Financial 
Stability Oversight Council to overturn a ruling of the CFPB, 
and then only if that ruling can be shown to threaten the 
safety and soundness of the entire U.S. financial system.
    Next, the CFPB is uniquely unaccountable to the courts, 
since Section 1022 of the Dodd-Frank Act provides that where 
the Bureau disagrees with any other agency on the meaning of a 
provision of Federal consumer financial law, the reviewing 
court must give deference to the Bureau's view under the 
Chevron Doctrine.
    Finally, in many respects the CFPB is uniquely 
unaccountable even to itself since there is fundamentally no 
``it,'' no ``they,'' only a ``he.'' There is no commission, 
only one omnipotent Director fundamentally accountable to no 
one.
    Combined with this breathtaking lack of accountability is a 
grant of power under Dodd-Frank to the CFPB Director that is 
unilateral, unbridled, and unparalleled. The Director can 
unilaterally declare virtually any financial product or service 
as unfair or abusive at which point Americans will be denied 
that product or service even if they need it, understand it, 
and want it.
    Be he our credit czar, national nanny, or benevolent 
financial product dictator, Mr. Richard Cordray is now 
empowered fundamentally to decide what types of credit cards 
Americans are allowed to have, what types of mortgages they may 
have, and whether or not they can access a payday lender.
    All of this does beg the question, who will protect 
consumers from the Consumer Financial Protection Bureau? True 
consumer protection requires access to competitive, 
transparent, and innovative markets vigorously policed for 
force, fraud, and deception.
    True consumer protection empowers consumers and respects 
their economic freedom to make informed choices free from 
government interference and FOIA.
    Consumer protection is not a zero sum game where for 
consumers to win, producers must lose, or where borrowers can 
only win when lenders lose.
    And consumer protection is not having powerful government 
agencies ``nudge'' consumers to make correct choices, since 
they believe that consumers are incapable of making rational 
decisions for themselves.
    When it comes to true consumer protection, and when it 
comes to the Consumer Financial Protection Bureau, this 
committee will do everything we can to demand the highest 
levels of accountability, transparency, and answers.
    I will now recognize the ranking member for 4 minutes.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Director Cordray, congratulations again on your 
confirmation. I am so pleased that you are here today. Your 
presence before this committee is long overdue, particularly 
after the nearly 6 months of Republican obstruction that has 
threatened consumer protection in order to score certain 
political points.
    As you know, the Wall Street reform law requires the 
Director of the Consumer Financial Protection Bureau to appear 
before this committee every 6 months to discuss the agency's 
Semi-Annual Report. The report that you are here to discuss 
today was released back in March. Unfortunately, at that time 
we were denied the benefit of your perspective.
    The timing of this hearing turns out to be somewhat 
appropriate, however. This month, we must observe the 5-year 
anniversary of the Lehman bankruptcy rooted in the risky and 
irresponsible lending and financial practices that brought the 
economy to the brink of collapse, wiped out the life savings of 
many of our constituents, and set off a foreclosure epidemic 
that has left many States still struggling.
    The Consumer Financial Protection Bureau was born from that 
crisis as one of the cornerstones of the Dodd-Frank Act. The 
CFPB is now on the front lines of protecting consumers from bad 
actors in the financial system and ensuring nothing like what 
happened 5 years ago ever happens again.
    Mr. Director, I would like to commend you on how well you 
have worked with a wide array of stakeholders during your 
tenure, for your careful leadership of this young agency. You 
have consistently earned praise from both consumer advocates 
and industry leaders.
    Those of us in Congress know that is not an easy task. Your 
leadership has resulted in achievements at the Bureau that 
cannot be understated. In just 2 short years, the CFPB's 
enforcement actions have resulted in $432 million being 
directly refunded to over 6 million consumers victimized by 
unscrupulous actors in the financial system.
    Importantly, the CFPB has ensured for the first time that 
someone is monitoring a number of industries that have a 
history of problematic interactions with consumers. These 
include the hundreds of millions of consumers interacting with 
consumer reporting agencies, debt collectors, and payday 
lenders, just to name a few.
    In just the past few months, we have seen the agency 
investigate and raise concerns about the harmful impact of a 
number of practices on consumers including overdraft fees, 
private education loans, and the cycle of debt that payday and 
deposit advance loans can become.
    Mr. Director, your agency has also finalized several 
mortgage rules that help guard against the risky and 
irresponsible lending that brought the economy to its knees 
just 5 years ago.
    These rules aim to protect consumers from irresponsible 
mortgage lending, establish strong protections for homeowners 
facing foreclosure, and prevent lenders from steering 
homebuyers into risky mortgages at a time when numerous Dodd-
Frank regulations--we have seen indefinite delays, and I am 
very pleased with your progress.
    But, Mr. Director, while your accomplishments are 
significant, issues such as data collection practices continue 
to need your attention. I believe all Federal agencies 
regulators--credit report bureaus, financial service providers, 
and others--must proceed with caution on this front, affording 
the highest respect to the protection of consumer privacy. The 
CFPB is a data-driven agency, as you know.
    The Dodd-Frank Act specifically prohibits the CFPB from 
gathering or analyzing any information that is personally 
identifiable. I trust you are carefully adhering to the letter 
of the law and carefully balancing your Bureau's duty to 
monitor the market with your responsibility to protect consumer 
privacy.
    I strongly support the important work of the CFPB and Mr. 
Director, I want to congratulate you for the Bureau's 
impressive record of accomplishments for our Nation's 
consumers.
    I look forward to your testimony.
    And I yield back the balance of my time.
    Chairman Hensarling. The Chair now recognizes the Chair of 
the Financial Institutions and Consumer Credit Subcommittee, 
the gentlelady from West Virginia, Mrs. Capito, for 3 minutes.
    Mrs. Capito. Thank you, Mr. Chairman, and I would like to 
thank the chairman for having this hearing. This marks the 
first appearance by Mr. Cordray as full Director, and 
congratulations to you.
    I also would like to thank you for including me in 
conversations. It is very important that we have a good 
relationship and communication, and you have certainly extended 
the hand of welcome to me. So, I appreciate that.
    I would also like to thank you for the CFPB's reaction to 
the ability-to-repay rule for stay-at-home spouses that Mrs. 
Maloney and I worked on. I know you worked on that and reshaped 
the rule, so thank you so much for that.
    Last month, I held a roundtable with lenders from across my 
district. We addressed numerous challenges, but one issue that 
everybody expressed great concern about is the mortgage rules 
that are expected to come into effect in January.
    Many of the lenders I talked to are extremely concerned 
about their ability to have their systems in place to be fully 
compliant with the rules. In fact, in the PATH Act we address 
these concerns by pushing back the implementation by 1 year.
    This extra time is especially important to community 
lenders, like those we have in West Virginia. It is 
unreasonable to expect the small community lender with one 
compliance officer to be able to absorb the challenges of 3,500 
pages of new regulations proposed and the additional amendments 
that have been issued throughout the year.
    Community lenders need to ensure their systems are 
compliant in order to properly extend credit to their 
consumers. I noticed in a report that you had addressed this 
issue with the community bankers in North Carolina most 
recently, and you said that you are going to be releasing a 
second set of amendments to its ability-to-repay rule any day 
now.
    I wonder what kind of adjustments--you did express some 
flexibility here--I would be interested, if we can dig down on 
that in the question portion.
    Another issue we learned about in a previous hearing is the 
inability of some institutions' charitable programs to comply 
with the new mortgage rules. We heard testimony about a program 
that has served borrowers in one county in West Virginia for 
nearly 50 years.
    This institution's trustees work with borrowers to 
determine their ability to pay on a case by case basis with 
great success. However, the institution remains concerned that 
this program will not comply. These are folks who would never 
be able to secure a home without the help of the charitable 
program.
    I have deep concerns that the Qualified Mortgage rule will 
result in less availability of credit for low- and moderate-
income borrowers. Yet, these are the consumers that supporters 
of these rules claim to help. Are they better off if we would 
extend credit, if credit becomes more difficult to obtain.
    I think the problem with the rules--and the chairman talked 
about it--really points to something that we have had 
discussions on in this committee, and that is the structure of 
the CFPB.
    We still continue to, and I still continue to, believe that 
creating rules and having a buy-in from a committee would 
actually better serve the consumer and the institutions that 
are set up to serve the consumer.
    So with that, I yield back.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Illinois, Mr. Foster, for 1 minute.
    Mr. Foster. Thank you, Mr. Chairman, and Ranking Member 
Waters.
    I would like to take a moment to congratulate Director 
Cordray for his long overdue confirmation, and welcome him 
before this committee.
    Since its inception in 2011, the CFPB has been a very 
effective advocate for consumers and taxpayers. I would note 
that in just 2 years, the CFPB's enforcement actions have 
resulted in $432 million being directly refunded to more than 6 
million consumers.
    And for the first time, consumers have an advocate at some 
of the highest levels of government to fight on their behalf, 
and to help level the regulatory playing field.
    Just 5 years ago, American families lost $16 trillion in 
wealth in less than 2 years. Our economy lost 8 million jobs 
and the unemployment rate jumped to over 10 percent.
    Measured as a decline in the percentage of household net 
worth, the 2008 crisis was actually worse than the Great 
Depression. This was no accident; it was the result of reckless 
deregulatory policies that allowed certain bad actors to prey 
on the most vulnerable members of our communities with little 
or no economy.
    I want to thank Mr. Cordray for the transparent and 
effective manner he has gone about engaging on these issues, 
and I look forward to his testimony. Thank you, and I yield 
back.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Michigan, Mr. Kildee, for 1 minute.
    Mr. Kildee. Thank you, Mr. Chairman, and Ranking Member 
Waters.
    And welcome, Mr. Cordray, and congratulations to you.
    You and I have both served as county treasurers at the same 
time in our neighboring States, and I congratulate you on that, 
and I particularly congratulate you on choosing Michigan State 
University as your college, rather than the one in closer 
proximity to your home.
    I will tell you that I am really glad that you are in the 
position that you are in. For as long as I have known you, I 
have known you to be a careful and diligent steward of the 
public trust, and I am very confident that you will continue to 
do the great job that you have.
    I do ask that you address two issues as you move forward. 
The first is to carefully look at ways to provide additional 
protection from predatory lending for our Nation's 
servicemembers. This is a significant issue that needs to be 
addressed, and I know you are aware of it.
    Second, to carefully review the proposed guidance being 
issued on fair-lending practices to indirect auto lenders, and 
I know you are examining that, ensuring that the proposed 
guidance provides consumers access to credit.
    And finally, we know now, in my State and in California, 
that we still do need to have significant regulation. What we 
have seen in energy trading is--
    Chairman Hensarling. The time--
    Mr. Kildee. I encourage you to continue--
    Chairman Hensarling. --of the gentleman has long since 
expired.
    Mr. Kildee. Thank you, Mr. Chairman.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Washington, Mr. Heck, for 1 minute.
    Mr. Heck. Thank you, Mr. Chairman, and Ranking Member 
Waters. Director Cordray, thank you, in general, for what you 
do and for your presence today.
    And before we get into what I would euphemistically 
characterize as challenging questions, a couple of which I have 
of my own, I wanted to say something else: Thank you.
    I have the honor of representing the third largest military 
installation in America, with tens of thousands of 
servicemembers. I feel a strong sense of duty to them, as you 
might imagine. And I have no better ally in my efforts than 
your office.
    In particular, the Office of Servicemember Affairs, ably 
led by Holly Petraeus, has been instrumental in several 
efforts. They helped me successfully draft language to the 
Defense Authorization Act that will literally help people save 
their homes.
    On an individual casework basis, they have been not just 
responsive, but proactive, and I think the most important thing 
that we need to remember here is that this work makes a 
difference in people's lives, and I thank you, sir, very much.
    Chairman Hensarling. The Chair now recognizes the 
gentlelady from Ohio, Mrs. Beatty, for 1 minute.
    Mrs. Beatty. Thank you, Mr. Chairman, and thank you, 
Ranking Member Waters.
    I want to extend a sincere thanks to Director Cordray for 
being here. I have never been prouder or more honored to serve 
here. I would certainly like to disclose that I have known Mr. 
Cordray for a number of years.
    I had the proud honor, when he was the Franklin County 
treasurer, as well as the State of Ohio--our hometown 
treasurer--that we had the opportunity to work across the 
breadth of that State, making a difference in lives, whether it 
was financial literacy, home mortgages, looking at credit and 
protecting folks--your being here makes a difference.
    Ditto to everything my other colleagues have said. Let me 
just say to this body here, he has a proven track record of 
integrity, transparency, and scholarship.
    I am pleased that you are here. I look forward to working 
with you, and I make a commitment to support your endeavors. 
Job well-earned.
    Chairman Hensarling. Today, we welcome the testimony of 
Richard Cordray, who was confirmed by the Senate to serve as 
the CFPB's first Director on July 16th of this year. Prior to 
his service at the CFPB, Director Cordray served the people of 
the State of Ohio as treasurer and solicitor general.
    Without objection, the Director's written statement will be 
made a part of the record. Again, we welcome Director Cordray, 
and you are now recognized for your oral statement.

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

    Mr. Cordray. Thank you, Mr. Chairman, Ranking Member 
Waters, and members of the committee for inviting me to testify 
today about the third Semi-Annual Report of the Consumer 
Financial Protection Bureau (CFPB).
    Born out of the worst financial crisis since the Great 
Depression, the CFPB is the Nation's first Federal agency whose 
sole focus is protecting consumers in the financial 
marketplace. We are dedicated to improving the lives of 
everyday Americans, and to restoring trust in consumer 
financial markets.
    The Semi-Annual Report we are discussing today embodies our 
work over the last 6 months of 2012. The Report illustrates the 
ways we are using the tools Congress has provided us to empower 
consumers--as you have said, Mr. Chairman, and I agree, it is 
so important to promote a fair, transparent, and competitive 
marketplace for consumer finance.
    We have taken steps to improve the workings of markets, 
particularly those in which consumers cannot choose their 
financial service providers.
    One such market is debt collection. Concerned about 
systemwide problems that pose risks to consumers, we gained 
authority at the beginning of the year to supervise debt 
collectors.
    The debt collectors covered by our supervisory authority 
account for over 60 percent of the industry's annual receipts 
in that market. Bad actors in this market are a detriment to 
consumers, and to every debt collector that operates lawfully.
    We also expanded our supervision program to include the 
larger credit reporting companies. Credit reports have a 
profound impact on people's lives, although people often do not 
realize it. Previously, these companies were not subject to any 
Federal supervision and consumers often struggled to get errors 
resolved.
    In addition to our new supervision program, we began 
handling consumer complaints about credit reporting issues, all 
of which will open a clear window into the actual operations of 
these companies.
    As a result, the Bureau can now evaluate whether Federal 
consumer laws are being followed throughout the process, from 
credit origination to debt collection. By identifying problems 
and rooting them out early, we are working to minimize consumer 
harm.
    Our report also encompasses the Bureau's first enforcement 
actions, which were against credit card companies that deceived 
and misled consumers. In some cases, the companies targeted 
economically vulnerable consumers with low credit scores and 
low credit limits.
    We were able to secure $425 million in relief for 6 million 
consumers, and we also imposed penalties on the companies to 
deter such activity in the future.
    There is more to come in this area, and these actions will 
serve as a warning signal for anyone who seeks to profit by 
deceiving or misleading consumers.
    In the second half of 2012, we also tackled issues in the 
market for private student loan debt, with a total of about 
$150 billion in outstanding student loan debt. Our studies 
detailed the struggle students and recent graduates are 
experiencing in that market, which they tell us about every 
day.
    Together with Education Secretary Arne Duncan, we have made 
recommendations to policymakers and common-sense reforms to 
ensure that the risky underwriting practices of the past are 
not repeated.
    The work I have discussed here today and will discuss is 
merely a snapshot of our efforts on behalf of consumers. We are 
also addressing consumer complaints on a growing number of 
financial products and services, totaling more than 130,000 as 
of the end of last year, and now exceeding 200,000.
    We have adopted comprehensive new mortgage regulations, 
banning irresponsible lending practices which helped bring 
about the recent financial crisis. Our ability-to-repay rule 
follows the simple principle that lenders should offer 
consumers mortgages which they can actually afford to pay back.
    We have actively conducted outreach on various issues to 
older Americans, students, servicemembers, and others, and what 
we have heard from them has guided the direction of our work.
    Each day, we take another step in pursuit of our vision to 
create a consumer financial marketplace where customers can see 
crisis and risk up-front, and easily make product comparisons, 
in which no one can build a business model around unlawful 
practices, and that works well for individual consumers, for 
responsible businesses, and for the economy as a whole.
    We will continue to persist in this work, and we appreciate 
your oversight. It is very meaningful to me, and to the Bureau. 
As always, I will be glad to answer your questions and 
certainly to stay as long as you like. Thank you.
    [The prepared statement of Director Cordray can be found on 
page 74 of the appendix.]
    Chairman Hensarling. The Chair now recognizes himself for 5 
minutes.
    Thank you, Mr. Cordray, in particular for your last 
statement about your willingness to answer our questions, and 
my first question, or statement, frankly has to do with that. I 
know that the agency, and you yourself, take great pride in the 
commitment to transparency and accountability, and frequently 
speak about the number of appearances that you and your staff 
have had before our committee, but it is not really a question 
of quantity; it is a question of quality.
    And frequently we have found, Mr. Director, that members of 
your staff can be uniquely unresponsive to our inquiries, 
particularly on July 9th, your number two, I believe, Steven 
Antonakes, appeared before our committee, dealing with what the 
ranking members spoke of, this very sensitive issue of data 
collection regarding our citizens. And here is just a snippet 
of what we had to deal with if we could please roll the video.
    [Begin video.]
    ``Mr. Antonakes. I don't have the exact number. I would be 
happy to follow up with you on what the number is. I can get 
back to you with precise numbers.
    ``Voice. Will you send those to us?
    ``Mr. Antonakes. We are happy to provide the contract 
information to you.
    ``Voice. Thank you.
    ``Mr. Antonakes. I would have to verify that, Congressman. 
I can verify that for you. I would have to get back with you.
    ``Voice. Could you get back with us on that?
    ``Mr. Antonakes. Yes.
    ``Voice. We would be interested to know that.
    ``Mr. Antonakes. I would have to confirm that for you, 
Congressman.
    ``Voice. Okay.
    ``Mr. Antonakes. I would have to get back with a precise 
number. And we could provide that information to you.
    ``I would have to provide that information for you. I want 
to be accurate.
    ``I would have to get that information for you.
    ``I have to verify the contract to see exactly what type of 
information we are--
    ``We can seek to provide that information to you. We will 
do it in as timely a fashion as possible.
    ``Voice. Okay.''
    [End video.]
    Chairman Hensarling. Now, Mr. Director, that appearance was 
on July 9th, which was over 2 months ago. Because your number 
two was unable or unwilling to answer so many questions, there 
have been roughly 100 follow-up questions from both sides of 
the aisle, and we have yet to hear any response, 
notwithstanding the fact that Mr. Antonakes said he would get 
right back to us, so the question is, do you have any knowledge 
of when your agency plans to respond to this committee?
    Mr. Cordray. Thank you, Mr. Chairman, and thank you for 
raising that set of issues.
    I have reviewed the transcript of that hearing, and 
whenever someone else comes to testify rather than myself--and 
as you know, I was not invited to testify during that period--I 
always make it a habit to review the transcript and follow up 
within the Bureau on things that are raised.
    My understanding of those exchanges that were edited and 
truncated there was that this committee is quite interested in, 
and I think quite appropriately concerned about the manner in 
which the Bureau collects information and what it is being used 
for.
    I do think that the statute and the law contemplates that 
an agency should be well-informed in its work, and that as we 
report to you, report to Congress, write regulations, you have 
required--
    Chairman Hensarling. Mr. Cordray, you know our time is 
short. I am happy to get the background, but do you have the 
answers? The committee has been waiting for 2 months. Do you 
know when we can anticipate answers to these questions?
    Mr. Cordray. Yes. Let me be specific about that, then. That 
hearing occurred on July 9th, as you indicated. There were a 
few questions for the record provided to the Bureau in the days 
thereafter, but there was a huge slug of questions that 
actually totaled close to 200 that came to the Bureau on August 
12th, so more than a month after the hearing. It took time, 
obviously to prepare those and to make sure we had 
comprehensively addressed the issues. We have been working in 
the ensuing now month to prepare responses to the questions for 
the record, and also to gather contract documents and other 
information. You will have that--
    Chairman Hensarling. I understand that, Mr. Cordray. Right 
now, I have less than 1 minute of time. Is there an estimate?
    Mr. Cordray. You will have that any day now.
    Chairman Hensarling. Any day now.
    Mr. Cordray. You will. Yes. Certainly by--week.
    Chairman Hensarling. Thank you. In the limited time that I 
have remaining--I know a number of other Members will be asking 
questions regarding QM.
    It is a standard that I fear may be simultaneously 
underinclusive and overinclusive, but I am somewhat curious, 
and perhaps in my limited time--you may have to answer in 
writing. But as I speak to a number of community financial 
institutions, they are very concerned about a line being drawn 
at 43 percent debt-to-income.
    It begs the question, what if somebody has 44 percent debt-
to-income, but is willing to put 20 percent down, and has a 740 
FICO score, which is a great credit score, but apparently they 
will be denied credit under this standard, versus somebody who 
has a 43 percent DTI, has a 440 FICO, and puts 0 percent down.
    So on the one hand, you could be restricting credit to 
deserving creditworthy borrowers, and on the other hand, 
although I know you are not a safety and soundness agency, you 
could be helping put the government's imprimatur on exactly the 
type of mortgages that helped bring about the crisis in the 
first place.
    My time has lapsed. The Chair now recognizes the ranking 
member for 5 minutes.
    Mr. Cordray. Did you want me to respond to that question, 
or not?
    Chairman Hensarling. I would like you to, but I am going to 
attempt to set a good example for the rest of the Members. 
Perhaps you could submit that in writing, and I will go ahead 
and yield to the ranking member.
    Ms. Waters. Mr. Chairman, would it be appropriate for me to 
yield at least a minute to Mr. Cordray so he can respond?
    Mr. Cordray. Thank you. And--
    Chairman Hensarling. Without objection, by unanimous 
consent.
    Ms. Waters. Thank you.
    Mr. Cordray. I appreciate the questions about the Qualified 
Mortgage rule, which I know is a focus of tremendous interest 
among Members here, and I was in North Carolina yesterday 
addressing the American Mortgage Conference, where there was 
tremendous interest as well.
    The point that we made, and I just want to address it 
because it is not entirely accurate to say that every mortgage 
has to have a 43 percent or less debt-to-income ratio. That is 
one of the categories, bright-line categories that get you to a 
Qualified Mortgage.
    There is a separate category, also a bright-line category, 
that the loan is eligible for purchase by any of the GSEs in 
conservatorship, Fannie Mae or Freddie Mac. That is a very 
significant band of things. It could be above a 43 DTI.
    A third category that we drew in response to some of the 
concerns that members of this committee and community bankers 
across the country brought to us is that if you are a smaller 
creditor of under $2 billion in assets, and you make mortgages 
that you keep in portfolio, those also are Qualified Mortgages, 
regardless of the 43 DTI, so it is not one-size-fits-all. It is 
not a procrustean bed fitting everybody into one metric. It is 
an attempt to respond to different considerations we have heard 
around the country. I am happy to address that in more detail 
as Members wish.
    Chairman Hensarling. I think you will have that 
opportunity. The Chair now yields 5 minutes to the ranking 
member.
    Ms. Waters. Thank you very much. Mr. Cordray, I want you to 
know that as the chairman described the questions that were 
asked of your assistant, he said there were 170 from both sides 
of the aisle.
    This side of the aisle only had one question, so I guess it 
was 169 from the other side, and I also would like to tell you 
that if you had not been blocked from coming to this committee, 
we would not have had to rely on other people.
    You are very well-qualified to answer any questions, and I 
am so glad that you are confirmed and you are here now, so I 
would like to continue with that line so that you can, as you 
had started to do, so expertly explain what has happened with 
QM.
    A lot of my friends on the opposite side of the aisle talk 
about wanting to help community banks, and I have been trying 
desperately to reach an agreement so that we could do more. I 
just want to know how, and perhaps you can give some 
assistance, some resources, to help our community banks get 
into compliance. So will you continue with that line of 
discussion on QMs?
    Mr. Cordray. Sure. And in background, I want to say that 
when the Dodd-Frank Act was passed in July of 2010, there were 
provisions in the statute that could have simply taken effect 
of their own momentum, and they would have taken effect in 
January of 2013, governing the mortgage market.
    If this Congress had not created this agency and not 
authorized us to write rules, that is what would have been the 
timeframe.
    The rules that we wrote actually contoured the criteria of 
what was in the statute in ways that were very responsive, 
deliberately responsive, to the concerns that we heard from 
community banks, credit unions, and many others in the mortgage 
market who were very concerned that in this era, maybe was not 
true in 2006 and 2007 about access to credit, and we are very 
concerned about it as a result of what we have heard.
    With respect to the community banks and credit unions and 
helping them to get into compliance, we have been working at 
that intentionally and purposefully, and alongside them every 
day of this year. We have developed plain language guides to 
the rules that translate them, frankly, into understandable 
English, because none of us, including myself, enjoys reading 
the Federal Register.
    We have made compliance videos, how-to guides, and we have 
also worked with the other agencies to make the examination 
procedures clear. They have been finished and published well in 
advance of the effective date, which I think is unprecedented 
in past recent experience.
    So we are working very hard. We are also taking questions 
every day and attempting to address issues. And when you 
mentioned some amendments to the rules, all of those amendments 
have been in response to industry questions and concerns about 
making it more operational, and making it easier for them to 
implement.
    There has not been a single thing which has added burden. 
They have all been burden-relieving, and we continue to be 
devoted to that effort.
    It is very important for us to recognize that we can write 
rules, and we can say to industry, ``Now, it is your problem.'' 
That would not be an appropriate approach. It is a problem for 
all of us. We want the rules to be effective. We want them to 
be able to successfully implemented.
    We want the lenders to be lending in the mortgage market, 
and the housing recovery, which is well under way, to continue. 
And we are working to make sure that we understand those issues 
and I tend to be responsive, not only to the Members here, but 
to those across the country who have such a stake in that 
market, most of all, average Americans.
    Ms. Waters. Thank you very much. On this side of the aisle, 
many of our Members are convening our meetings with community 
banks. We have been doing that all during our break, and we are 
very engaged with them to find out how we can perhaps get them 
out from under the yoke of regulations that should not apply to 
them. And, of course, we have been centered on QM as I have 
indicated.
    So, I would like to know if we could have someone from your 
shop attend one of our meetings where we have convened the 
community banks? Would you make someone available so that we 
can make sure that they have access to the information that can 
help them come into compliance that many of them may not know 
about or easily understand?
    Mr. Cordray. Gladly. And I make that offer to Members on 
both sides of the aisle, whether they are on the committee or 
not: Feel free to convey to your colleagues, I know there are a 
lot of questions and issues people are having.
    We have met just this week with at least five or six State 
community banking organizations. I have met with several myself 
personally. We have a number of people out and around who can 
attend those meetings.
    As you know, we have worked on meetings in your district 
before, and I am happy to do that with all the Members to make 
sure people understand and have their questions addressed. That 
is something we want to do and I appreciate any invitations we 
have on that score.
    Ms. Waters. Let me thank you for the attention that you 
have given to the community banks. It is high on our list of 
priorities on this side of the aisle, and I appreciate your 
support and assistance.
    Chairman Hensarling. The Chair now recognizes the Chair of 
the Financial Institutions and Consumer Credit Subcommittee, 
the gentlelady from West Virginia, Mrs. Capito, for 5 minutes.
    Mrs. Capito. Thank you, Mr. Chairman.
    Mr. Director, I would like to go back--I would like to 
stick with the QM discussion. I mentioned in my opening 
statement that in roundtables with institutions, this obviously 
has been number one, because of the pressure of the deadline 
coming in January.
    You mentioned being in North Carolina, and mentioned some 
adjustments that were going to be made. Do you have full 
assurance that this is going to be ready for prime time, that 
community institutions are going to be able to have their back 
office and IT and everything ready to meet the challenges if 
you are still changing some of the rules and provisions?
    I would like to hear--we would be interested in pushing it 
back. Is there any thought in your mind that might be a good 
idea?
    Mr. Cordray. Yes, it is a very live topic at the moment.
    Let me say several things. The first thing I would say is 
we have been in close touch with both larger and smaller 
institutions and both lenders but also REALTORS and home 
builders and appraisers and everybody else who has a stake in 
this market over the course of this year. Most of the 
institutions have told us that they will be in compliance, but 
they have had concerns about it. They have been nervous about 
it.
    They have been looking for questions to be answered and 
certain relief to be given on operational issues. I think that 
for the most part, they have said they will be in substantial 
compliance by January 10th.
    With the smaller institutions, we did include special 
provisions, and I alluded to them a moment ago, that sometimes 
the smaller banks and credit unions don't seem to be yet aware 
of, and so it is incumbent on us and I am happy to work with 
all of you to get that message out.
    Some of them are worried about the QM rule. I had this come 
up in North Carolina yesterday. We had it come up with some 
Oklahoma bankers earlier in the week. If they are under $2 
billion in assets, if they make fewer than 500 mortgages a 
year, it covers the vast majority of community banks and credit 
unions in this country. Then anything they make and keep in 
portfolio, which is what many of them do, which means they pay 
close attention to ability to repay is a Qualified Mortgage 
rule and has the Safe Harbor.
    Many of them don't seem to fully appreciate that there 
actually was a further amendment and further work we did after 
January 10th that took effect in May and we want to make sure 
we get that message out.
    Beyond that, there was another piece I wanted to say about 
that, and I can't honestly remember what it was. So, if it 
comes back in my mind, I will pass that along.
    Mrs. Capito. Let me shift gears a little bit here. One of 
the provisions in Dodd-Frank was that you and others and the 
Secretary of the Treasury would be looking at old and outdated 
regulations. Because this is another complaint we hear. It is 
just a complete compounding on top of regulation upon 
regulation.
    Mr. Cordray. Yes.
    Mrs. Capito. And one of the charges of Dodd-Frank was to 
look at these old and outdated regulations. How much time do 
you really spend at the CFPB scraping out any old and outdated 
and irrelevant regulations, and can you name a few of those?
    Mr. Cordray. Yes, thank you for that question. It is a 
concern of mine and I think it is an appropriate concern for 
you all because I do think it is a question in the regulatory 
world. Each individual rule, people focus on it, they have a 
rationale, they have a justification and they think it is great 
and needed and what they often don't do is look at the totality 
of it. What is the overall burden? So, we are trying to be very 
accessible to institutions and invite them to raise those 
issues with us.
    We embarked on a streamlining initiative last year, put it 
out for notice and comment for people to tell us what kinds of 
things they would like to see us streamline. There is a certain 
amount of streamlining we have been doing all along as we write 
rules. We do try to find ways to weed things out.
    Mrs. Capito. But you could actually give me a listing of 
rules that have sort of been--
    Mr. Cordray. Yes, I--
    Mrs. Capito. --grandfathered out.
    Mr. Cordray. I think as we write each rule, we are finding 
things that we peel out of what was there previously, as well 
as updating. But in particular, we were working on the ATM 
sticker issue which in the end--
    Mrs. Capito. Right, we have--
    Mr. Cordray. --in the end--
    Mrs. Capito. --right.
    Mr. Cordray. --in the end Congress addressed it.
    Mrs. Capito. Right.
    Mr. Cordray. We are in the process of writing a rule.
    The next one that we are going to be taking on, which I 
think has been an issue some of you have raised, is the annual 
privacy notices in which we think the burden there may outweigh 
the benefits to consumers. We are going to be looking at that 
and that will be under way in the next few months.
    And if there are other things that you would like us to 
look at, please submit them to us, because I am interested in 
doing that. I think it would help build our credibility to be 
addressing those.
    Mrs. Capito. I think it would definitely help your 
credibility and I think it would help the institutions that are 
under your purview. If you could as a follow up, maybe we could 
get together and you could--
    Mr. Cordray. That would be fine.
    Mrs. Capito. --show me some of the proof that this is 
actually occurring because in the field, it doesn't seem to be 
as such.
    I do want to register a concern because I am one of those 
who asked for certain data from the last hearing in July and we 
still don't have a follow up and I would like to have that as 
well.
    The other question I have and I have only 8 seconds so you 
are not--the other issue I would like to raise maybe in another 
forum is when you are collecting fines, you are retaining some 
of the fine, you are not giving it all to the person who has 
been wronged, whether it is a credit card or mortgage or 
whatever. I would like to talk further about what you are doing 
with the remains of those dollars, but I am out of time.
    Mr. Cordray. Yes, I don't think I would characterize it 
that way. We try to seek full compensation for victims. If 
there is overage in terms of fees, we can potentially offer 
that to uncompensated victims either in that matter or in other 
matters, that is something we are trying to focus on.
    Chairman Hensarling. The--
    Mrs. Capito. I think it is important to know that is adding 
up to tens of millions of dollars right now.
    Chairman Hensarling. --time of the gentlelady has expired.
    The Chair now recognizes the gentlelady from New York, Mrs. 
Maloney, for 5 minutes.
    Mrs. Maloney. Welcome, Director Cordray.
    The creation of the CFPB was one of the most important 
victories for consumers in a generation. It is extremely 
important that we have one regulator whose sole focus is 
protecting consumers so the consumer is not an afterthought or 
a secondary thought, a third thought, or not thought about at 
all as we saw they were treated when we moved towards the 
financial crisis.
    And in my opinion, the Bureau has done an excellent job so 
far in working with both consumers and the financial industry 
to write common-sense rules of the road.
    I want to give one specific example, which was a rule that 
came out in April at the request of Chairwoman Capito and 
myself as it concerned the Credit Card Bill of Rights, the Card 
Act.
    The interpretation from the Fed was that stay-at-home 
spouses could not have access to credit, and that was not 
Chairwoman Capito's and my intent. When we wrote that law, we 
appealed to every single regulator and you finally took action 
and had a rule that allows credit card issuers to consider 
income that a stay-at-home spouse applicant shares with a 
spouse.
    That is just common sense. And I think that this rule is a 
concrete example of the agency working with consumers and the 
financial industry to allow responsible access to credit and 
liquidity to American families. So I want to thank you for 
responding to the chairwoman's and my request. You took too 
long, but you got it done. And so we are very grateful, and 
consumers across this country are, as well.
    I would like to go back to the chairman's issue of focusing 
on data collection, and I would say that this is getting a 
tremendous amount of attention before Congress now throughout 
government, and under Dodd-Frank, we required the Bureau to 
collect data in order to improve your rule making, your 
understanding and supervisory functions.
    And Dodd-Frank also included numerous safeguards to protect 
consumers' personal privacy and to prevent the misuse of 
confidential information. That was an important hearing, and 
after that hearing, Chairwoman Capito and I feel that it is not 
only important for you to give us this data, but that every 
financial regulator gives us this data.
    So, we have appealed to the GAO for a bipartisan report on 
what all the financial regulators are collecting so that we can 
see if there is any inefficiency. Is there any overlap? Is 
there sharing between the agencies? And what are the specific 
safeguards for the personal privacy of individuals?
    I would like to use my remaining time to hear from you, 
first of all, what data are you collecting? I know it is--it 
can't be exact, but you will get that to the chairman. But off 
the top of your head, what are you collecting? And what are the 
safeguards that you have put in place to protect consumers' 
personal information? This is very personal information and it 
is important to protect it.
    Mr. Cordray. If I could, just a brief word on the credit 
card rule that you mentioned that both you and Congresswoman 
Capito pushed so hard on and effectively. When you raised that 
to me, I thought of my mother who passed away now 33 years ago 
and was a working mom and she would have felt exactly as both 
of you did, and that was important to me in thinking about 
addressing that issue.
    On data collection, we welcome the GAO examination of this 
issue, and we have worked closely with the GAO on a number of 
matters. They also do an annual audit of us, which is unusual 
among the Federal agencies. They will deal with this, I think 
appropriately, and help us. Potentially, they will have 
suggestions for improvement, which we welcome.
    Second, in terms of the data that we collect, it is 
information that has nothing to do with individual consumer 
behavior patterns; we are not interested in whether Richard 
Cordray went to this restaurant and spent X dollars on dinner 
last night. That is not what we do. That is what private 
financial institutions do in the private sector. They are all 
about that. Our issue is that we have to oversee the financial 
institution. We have to be able to understand the pattern of 
how they treat their customers in order to understand that 
financial consumer laws are being followed or being violated.
    So we collect data in, sort of, three main buckets. One is 
in our consumer complaint function, where people come to us 
voluntarily because they have a complaint they want us to 
resolve. They obviously need to give us information in order 
for that to happen, the same as with constituents who come to 
your offices.
    A second is the area of supervision, where our job is to 
supervise these financial institutions. Some of the biggest, 
most powerful financial institutions in the country and the 
world, and we have to be able to go in and gather enough 
information--
    Chairman Hensarling. Mr. Cordray, if you could quickly 
summarize the rest of your answer. The time of the gentlelady 
has expired.
    Mr. Cordray. Okay.
    Chairman Hensarling. Or did that summarize your answer?
    Mr. Cordray. There was a third bucket I could just do in 30 
seconds.
    Chairman Hensarling. If you could quickly, quickly.
    Mr. Cordray. The third is our market monitoring function, 
which I think is an appropriate subject of inquiry from this 
committee, where we are sampling data from different markets to 
assess.
    We have a CARD Act report due to this Congress by October 
1st. It wouldn't be a very good report if we didn't have 
information to base it on. And so, that is a big part of our 
work as well, and I am happy to address that more as other 
Members--
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from California, Mr. 
Miller, for 5 minutes.
    Mr. Miller. Thank you, Mr. Chairman. Welcome, Mr. Cordray. 
I enjoyed your opening statement. You talked about empowering 
consumers, fair, transparent, and competitive marketplaces, and 
dealing with bad actors, which we saw plenty of before 2007. 
And you expanded your supervisory program to include larger 
credit reporting companies.
    The one thing that is kind of glaring to me is you took 
title insurance and you tagged it as optional for the buyer. 
And that is a real concern for me because I--
    Mr. Cordray. I'm sorry. What--
    Mr. Miller. Title insurance policies.
    Mr. Cordray. Yes.
    Mr. Miller. You have tagged those as optional. Now, any 
time a buyer would look at something that says ``optional'' and 
it costs money, generally they don't do it, because most people 
really don't understand what ``optional'' means or they don't 
know what title insurance really means, but your bank 
regulators and GSEs all require title insurance before they 
make a loan.
    But the issues they look at in title insurance are 
completely different than what a buyer would look at on a title 
insurance policy. Banks look at financial encumbrance. Does 
anyone know if they have free and clear titles? So, they really 
don't get into the back pages on title policies.
    But I have been in real estate and buildings since I was in 
my early 20s, and often you find historic easements, right-of-
way issues that will come up in the back pages of title 
policies that lenders really don't--they are not concerned 
with, they don't care about.
    And if we are concerned about empowering consumers, we 
really should be concerned about their safety. Why would you 
take something that I believe is very, very important which 
could arise in the future and put ``optional'' on it?
    Mr. Cordray. I am not sure I am following exactly what you 
are referring to in terms of--
    Mr. Miller. A buyer does not have to get a title insurance 
policy.
    Mr. Cordray. No, I understand, but in what manner--
    Mr. Miller. Generally, they will now.
    Mr. Cordray. Yes. In what manner have we addressed that 
issue in a way--
    Mr. Miller. You put it as optional for a buyer.
    Mr. Cordray. In what?
    Mr. Miller. To be able to be required--
    Mr. Cordray. No, in some document or some rule or what--
    Mr. Miller. Yes, on your RESPA TILA proposal, you have in 
there that title insurance is optional.
    Mr. Cordray. Okay.
    Mr. Miller. And if you are going to really protect 
consumers, that is something I would be very concerned about, 
because you could have historic utility easements. You could 
have right-of-way easements on property, and especially many 
seniors are downsizing and they are not necessarily getting a 
loan.
    They are taking and selling an expensive home and they are 
buying a smaller home because they just don't need the big home 
any longer. So, they are not even involved with a lender. They 
are going in and buying a piece of property and it says 
``optional.'' In many cases, they won't pull a title policy.
    Mr. Cordray. I'm sorry. I am now up-to-speed on what you 
are asking. So you are talking about the TILA RESPA proposed 
rule which has not yet been finalized but I hope will be 
finalized--
    Mr. Miller. Yes. That is what I am trying to get you to 
consider.
    Mr. Cordray. --sometime this fall. First of all, I take 
your point. Your point is obviously meritorious. Title is often 
in question with properties in different parts of the county 
more so than others. Title insurance obviously is meant to 
address the risks of that. I will be happy to go back and take 
a look at the point you are raising about how we are 
characterizing it on that proposed--
    Mr. Miller. I would encourage it because many times you 
will have a utility easement, but if there is no utility used 
at that point in time, but later the utility company comes in, 
and they can't put in a pool. They can't do things on their 
property that they would otherwise want to do.
    I think that is an issue we really--if we are dealing with 
consumer safety and empowering them, I think that is something 
we need to encourage them to do, if anything.
    But I know QM has been talked about. And I have some real 
concerns. You exempted Freddie and Fannie, which I think 
probably increased the number of loans that you would say would 
quality under QM with their exemption from--if you took it, 
CoreLogic showed 48 percent would not quality today that 
qualified in 2010.
    And if you are looking at liquidity and stability in the 
marketplace, a tremendous amount of lenders I am talking to are 
very concerned about this issue. And if you put Fannie and 
Freddie back into the equation, which--they put themselves in 
the equation. They said they will not be exempted. You are 
talking about almost half of the loans that were made in 2010, 
which are good-performing loans, that will not be made now.
    Now, don't get me wrong. There are a lot of lenders that 
made predatory loans and they tagged them as subprime. They 
should be put in jail and they never were. But we are going to 
have guidelines that are so stringent based on a worst-case 
situation that would not be applicable today using good 
underwriting standards. Is that not a concern for you?
    Mr. Cordray. It is a concern for me. And I thank you for 
the question because there has been some confusion around the 
CoreLogic analysis. They at first indicated that the way we 
drew the rule, only half of the loans in the market would now 
be covered.
    They have since clarified that is not correct, that in 
fact, the vast majority of loans will be covered now. What we 
tried to do, frankly, was to leave room for Congress. We know 
you are looking at GSE reform. That is a matter for Congress to 
determine.
    We had to write a rule for the mortgage market that allowed 
some flexibility depending on what would happen with GSE 
reform. We tried to make sure that we were covering the market 
broadly as it is now, and I think everybody has recognized we 
are--
    Mr. Miller. I am out of time, but please would you look at 
that? Because that is--I am not attacking you, but I am very 
concerned about liquidity.
    Mr. Cordray. We will continue to monitor this as we go. And 
as you all perhaps address GSE reform, we will respond and 
react to that to make sure we don't freeze the mortgage market 
or constrain it.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from New York, Ms. 
Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman. Director Cordray, 
medical debt reporting continues to be a source of 
consternation for many consumers. The Medical Debt 
Responsibility Act, which I co-sponsor, will require paid or 
settled medical debt to be removed from credit reports within 
45 days. That bill directly addressed the negative impact such 
information has on consumer's credit score.
    With the CFPB now regulating credit bureaus, do you plan to 
address how medical debt is treated on credit reports?
    Mr. Cordray. I think that question and issue is one of many 
things I have run across at the Bureau that is fairly 
complicated and not necessarily very helpful to consumers, 
frankly.
    Many of us will go to the doctor's office and will end up 
potentially with a bill that is covered by insurance, maybe it 
is all covered. Maybe there is a copay. Maybe we have to pay 
something. We may not know when we leave the office exactly how 
it is going to be handled. And sometimes, that can end up being 
reported as a debt.
    We may not even owe it. It may be just a battle among 
insurance companies, or it may be that we owe $10 or $20 but it 
wasn't billed to us immediately. So, there are lots of things 
that end up showing up on peoples' credit reports that they are 
unaware of, that probably are not necessarily correct, and that 
may or may not be justified.
    So, the issue of medical debt is a particularly difficult 
one. Many of those amounts are very small, but they can loom 
large in terms of qualifying for a mortgage or something. So, I 
do think it is a fair point that you raise that it may be a 
subject for legislative attention and or action.
    It is something we are looking at, at the Bureau. It is 
clear that medical debt is kind of a separate category that is 
tripping up a lot of Americans, and often in ways that they 
would not anticipate or understand and don't necessarily seem 
to be appropriate.
    Ms. Velazquez. Thank you. Section 1071 of the Dodd-Frank 
Act requires banks and lenders to collect and report credit 
application data on small businesses, as well as minority- and 
women-owned businesses. Can you elaborate on how collecting 
this information will help enforce fair lending laws and enable 
lenders to identify opportunities for improvements in 
underserved communities?
    Mr. Cordray. Yes. There are a couple of different issues 
there. First of all, I think the logic of what Congress did in 
Dodd-Frank makes a great deal of sense. My understanding is 
that there were some efforts to collect this data maybe by the 
Fed at one time. They had a survey that was discontinued at 
some point. This Congress obviously expressed its will that 
that data, which is important, and can shed light on lending 
patterns, needs to be developed.
    It was determined to create a provision in the Act which 
puts some responsibility on us to take this up. We want to work 
with the Small Business Administration, which obviously is much 
more knowledgeable in that area than we are. There has also 
been some talk and efforts among some other departments in 
terms of how to work on this. We are trying to first of all 
figure out what is the best way to proceed.
    The second thing I want to point out is we are going to be 
undertaking, and we have indicated now, the HMDA data, which 
has been very valuable but is in need of an update. Everybody 
pretty much agrees.
    Congress also addressed that, and we are going to be 
undertaking new rules to govern HMDA data. And out of that, we 
expect to learn a lot that relates to small business data 
collection, and there may be some overlap there operationally 
as well. So, we are under way. We are thinking about this. We 
understand the importance of it and why you are looking for it.
    It is not necessarily in our immediate comfort zone because 
we deal with consumers typically, and it is about the only area 
where we are given any responsibility in business. So, we want 
to work with others to make sure that can be done properly and 
appropriately.
    Ms. Velazquez. When can we expect the CFPB to publish rules 
implementing that section?
    Mr. Cordray. I can't give you a date in terms of when we 
will publish rules. I can give you the assurance that as of 
this fall, we are under way. We are thinking about how to staff 
that, how to work with the other agencies, how it intersects 
with the HMDA update, which is extremely important and that we 
are under way with immediately. And there may be things there 
that can be jointly collected, which would obviously be 
efficient. So--
    Ms. Velazquez. Regarding the remittance transfer providers, 
last year the Bureau published a rule and critics took 
exception with a rule for potentially increasing the cost on 
small banks and credit unions. What changes did the CFPB make 
to the final rule, and when that is supposed to take effect 
next month?
    Mr. Cordray. I'm sorry. Which rule are we talking about?
    Ms. Velazquez. The one that will require remittance 
transfer providers to provide senders with certain disclosures.
    Chairman Hensarling. I am afraid the time of the gentlelady 
has expired.
    Mr. Cordray. I would be happy to follow up or--
    Chairman Hensarling. If the Director could add that to the 
list of answers to submit in writing, please. The Chair now 
recognizes the gentleman from Alabama, the chairman emeritus of 
the committee, Mr. Bachus, for 5 minutes.
    Mr. Bachus. Thank you, Mr. Chairman. Director Cordray, I 
sent you a letter on indirect lending, and you responded to 
that letter. In fact, 35 of my fellow members on this committee 
joined that letter. Your response, in my opinion, was very 
general.
    So, I just wanted to alert you that I will be sending a 
follow-up letter.
    Mr. Cordray. Okay.
    Mr. Bachus. And I would like the agency, as soon as 
possible, to give me a more detailed response.
    Mr. Cordray. I will look forward to that--
    Mr. Bachus. Thank you.
    Director, Section 1022 of Dodd-Frank says that, ``The 
Bureau may not use its authorities under this paragraph,'' and 
that is to obtain records from other agencies and other 
individuals, ``for purposes of gathering or analyzing 
personally identifiable financial information of consumers.'' 
You are aware of that section, are you not?
    Mr. Cordray. I am, yes.
    Mr. Bachus. Is the agency collecting personally 
identifiable financial information of individual consumers?
    Mr. Cordray. Yes. I want to address this kind of carefully 
and comprehensively. There are different provisions in our 
statute about gathering information needed to do our work that 
Congress expects us to do and carry out our responsibilities, 
so if we have no information, we can't carry out the 
responsibilities. That is pretty clear. Section 1022 is 
referring to efforts we might undertake to monitor markets in 
order to be able to understand patterns and--
    Mr. Bachus. And getting information from other agencies 
that might have personal information in it.
    Mr. Cordray. So if we undertake to gather that information 
to monitor the market, we are required to proceed by either 
rule or order. We had not, until very recently, proceeded under 
Section 1022 at all. We did just now send out an order to a 
number of companies to provide us with template consumer credit 
agreements as part of our efforts on the arbitration study, but 
there are other areas where we are permitted to collect 
information, and it is obviously necessary. The consumer 
complaint function, again, is one where we--
    Mr. Bachus. All right, let me ask you this--
    Mr. Cordray. Yes. Personally identifiable information.
    Mr. Bachus. You are aware that back on May 11th of last 
year, your agency approached the U.S. Trustees Program and 
asked them to make a request before the Federal District Court 
in Tampa, Florida, for 5 million bankruptcy files?
    Mr. Cordray. We don't typically comment on the details of 
enforcement matters. I understand that other parties feel free 
to comment, and apparently do feel free to comment on those. We 
are working with a number of different agencies, including the 
Justice Department, to carry out our responsibilities, and we 
will try to do that in an appropriate--
    Mr. Bachus. You may not want to comment, but those 5 
million files have all sorts of personal information in them. 
Let me ask you this: If you did that, hypothetically, and you 
were to receive personal financial or private information on 
U.S. citizens from the U.S. Trustees Program, that came from 
the files of attorneys, would that not violate the Act?
    Mr. Cordray. First of all, no, and second, let me be--
    Mr. Bachus. No, it would not?
    Mr. Cordray. Let me be straightforward about this, and let 
me give you a related example. We had enforcement actions 
against a number of credit card companies.
    Mr. Bachus. Now, let us just use that example.
    Mr. Cordray. No, I am just saying we had to make 
restitution to millions of consumers--
    Mr. Bachus. If you used that information--let me say, 
Director--
    Mr. Cordray. In order to do that--
    Mr. Bachus. If you requested that the U.S. Trustee's Office 
file an action, or request the files of every bankruptcy file 
in this country, would that not violate the Act?
    Mr. Cordray. First of all, there is some garbling going on 
in the facts. Not on your part, but on those who are trying to 
report the facts. That was the subject of a--
    Mr. Bachus. I am just asking, would it violate the charge 
of the specific limitation, and you are aware that you have 
been walled off from obtaining, from interfering with the 
practice of law, or intervening in the judicial process. Let me 
just say this: That is a data mining and data collecting 
process that you request the U.S. Trustees Department to do, 
without the knowledge or consent of citizens of the United 
States. Now, is that true, or not? You can answer yes or no, or 
you can say you can't talk about it.
    Mr. Cordray. No, I think it is a general principle that 
when we have an enforcement action, and we are trying to figure 
out--
    Chairman Hensarling. The gentleman can give a brief answer.
    Mr. Cordray. --to consumers, we need to understand 
individual consumer harm, and we will do that. We need to do 
that in order to be effective.
    Chairman Hensarling. The time--
    Mr. Cordray. The number of people around the country who 
are purporting to be--
    Chairman Hensarling. --of the gentleman has expired.
    The Chair now recognizes the gentleman from North Carolina, 
Mr. Watt, for 5 minutes.
    Mr. Watt. Thank you, Mr. Chairman, and welcome, Director 
Cordray. I just have two quick questions, and I will leave all 
the rest of the time for you to answer, and if that is not 
enough time, then maybe you can answer in writing.
    There seems to be a proliferation of online payday lending, 
which seems to be able to evade State laws governing payday 
lending, and I am interested in knowing, now that the CFPB has 
the ability to regulate payday lending, what options you are 
exploring in this arena and what is your timetable for doing 
so?
    Second, a couple of my constituents, bank constituents, 
have raised questions about a recent rule that requires them to 
issue separate statements for bank accounts and loan accounts 
on the theory that it requires them to duplicate mailing costs 
and drives up the cost of the regulation.
    I am wondering whether you have the ability to go back and 
take a look at that or provide information to me that justifies 
why that requirement is necessary? Particularly, small and 
community banks and credit unions are concerned that the extra 
cost of mailing, in much the same way as the cost of mailing 
privacy policies, is just an onerous cost.
    So if you could address those, in the 3 minutes that I have 
remaining. And if you need additional time, you can submit it 
in writing. Thank you.
    Mr. Cordray. Thank you, Representative Watt. A number of 
your friends in North Carolina said hello yesterday when I was 
down there and wanted me to pass that on to you.
    On the second point, I don't know that I am familiar with 
the question you are raising. It is not a concern that I recall 
hearing, that there is some sort of duplication in terms of 
bank accounts and loan accounts and extra costs of mailing, but 
I would be very interested to hear about it. We will follow up 
with you. If there are--
    Mr. Watt. They have indicated to me it is a recent rule, so 
maybe that is the question you will want to get back to me on, 
preferably after we do--
    Mr. Cordray. Maybe it is a proposal or something. We will 
get back to you. We certainly wouldn't want that to be the 
result, and I would agree with you on that.
    On your first question, which is a very good question, and 
a very active topic right now, the issue of online payday 
lending, online payday lending is interesting because first of 
all, much brick-and-mortar payday lending is migrating to the 
Internet now. It is estimated that the majority of payday 
lending will have gone to the Internet in the next several 
years.
    And what often happens is that can create problems in 
States where there is a usury cap, as you know, in North 
Carolina and, and in I think 13 States. So if the loan is being 
made into that State above the rate of interest that can be 
charged legally in that State, that is problematic.
    If the loan is being made into that State by someone from 
the Internet who is not licensed to provide a loan in that 
State, that also can be problematic.
    These are issues that obviously require us to coordinate 
and cooperate with different State authorities, both banking 
regulators and also attorneys general. I met with Attorney 
General Roy Cooper yesterday in North Carolina, and he is very 
concerned about this issue.
    It also requires us to coordinate with financial 
regulators, and as you have seen, there has been some activity 
now about trying to understand some of these online lenders, 
and what their relationship is with banking institutions.
    Typically, they can only operate if there is both a 
transmission mechanism and a collection mechanism with the 
financial entities, and that can be problematic. It is a 
subject of some considerable scrutiny right now, by us and by 
others.
    So I wouldn't say more than that right now, but we are 
mindful of the fact. I would go back to my experience as 
attorney general in Ohio. Internet practices can be very 
difficult for law enforcement authorities at the State level 
because they are borderless; they go beyond jurisdictions. They 
go beyond the national jurisdiction as well. So--
    Mr. Watt. Do you anticipate the CFPB having some rules 
issued at some point in this area?
    Mr. Cordray. I think at the moment it is an issue that we 
see as a potential issue for enforcement and supervision. 
Perhaps rules, we are looking at the payday and small title 
lending industry. I think that is known. We have indicated that 
in our unified regulatory agenda.
    These are things that we are looking at, because they are 
hard problems. I have seen them at the State level. I know 
their frustrations. I work with the attorneys general 
constantly. We want to make sure that we all can be effective 
together.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the chairman of our Capital Markets 
Subcommittee, the gentleman from New Jersey, Mr. Garrett.
    Mr. Garrett. Thank you, Mr. Chairman. Mr. Director, when a 
senior government official comes before a hearing of Congress 
and fails to answer questions in a timely manner, I believe, in 
the minds of the American public, there is an appearance of 
impropriety by that individual and by his agency as well.
    When that same agency is responsible for secretly looking 
into the private papers of an American public as well, I think 
that raises even to a higher level. Let me understand your 
testimony, then.
    Your testimony is that you were well aware of these 
questions that were asked of your second in command at your 
agency back on July 9th, and yet over a month went by, all the 
way to, according to your testimony, August 12th, and you still 
had not answered any of those questions, and the excuse that 
you give to Congress today is that more questions came in after 
that fact.
    Mr. Cordray. No. No, that is not my testimony. If you want 
me to restate it.
    Mr. Garrett. Can you explain why you did not answer in the 
first 5 weeks after July 9th?
    Mr. Cordray. On July 9th, with the testimony, there were a 
few, just a few questions submitted.
    Mr. Garrett. Correct.
    Mr. Cordray. And there were multiples of that then 
submitted on August 12th, so it took the committee--
    Mr. Garrett. Can you explain why you did not answer in the 
first 5 weeks?
    Mr. Cordray. No. It took the committee a month to formulate 
the vast majority of the questions. It is a huge amount of 
information.
    Mr. Garrett. Can you explain why you did not answer those 
basic questions in the first 5 weeks?
    Mr. Cordray. Okay. There were a few questions submitted to 
us. We would have had an easy time answering those. At the same 
time--
    Mr. Garrett. Can you explain why you did not do what you 
just said is easy, then?
    Mr. Cordray. I would like to respond to your question, if 
you would like to give me a chance to respond. Would you like 
to give me a chance to respond?
    Mr. Garrett. So far, you have not answered why you did not 
answer the first time--
    Mr. Cordray. There were a few questions submitted that we 
could have answered easily in a timeframe. As we were working 
on those, a vast number of almost 200 questions were further 
submitted--
    Mr. Garrett. How many--
    Mr. Cordray. --that intersected with the other questions 
and they involved gathering contracts and other things. It took 
this committee more than a month to formulate the questions. We 
have had less than a month now to respond to them, but we 
will--
    Mr. Garrett. Let me just--
    Mr. Cordray. --have responses to you--
    Mr. Garrett. Let me just--
    Mr. Cordray. --in a matter of days--
    Mr. Garrett. You still have not answered the basic 
question. We gave you a number of questions. As you said, they 
were easy to answer, and yet, in 5 weeks, you could not answer 
those questions.
    Mr. Cordray. That is not--
    Mr. Garrett. Here is, for example--
    Mr. Cordray. That is not my testimony. But if you want--
    Mr. Garrett. Your testimony is--
    Mr. Cordray. [Off mike.]
    Mr. Garrett. Your testimony, a moment ago, to quote you 
just now, was that ``some of those questions would have been 
easy to answer''--
    Mr. Cordray. Had they not been followed by a vast number of 
questions that intersect with them and affect the answers--
    Mr. Garrett. Did you know--
    Mr. Cordray. --and need to be responded to.
    Mr. Garrett. --in the week after July 9th, that there were 
subsequent questions coming?
    Mr. Cordray. I beg your pardon?
    Mr. Garrett. Did you know on July 10th, 11th, and 12th that 
separate other questions were coming?
    Mr. Cordray. Our staff has had regular contact with your 
staff. We are very responsive to questions for the record. We 
always respond.
    I would add that I am supposed to be back here, as the 
chairman has indicated, to testify again next month. So, you 
will have plenty of opportunity with me on these.
    My understanding is that we have received over 200 
questions for the record. We have taken less time to respond 
than the committee took to formulate the questions, and we will 
have the answers in days.
    Mr. Garrett. Here is a question: ``Will you commit to 
sending us all the contracts engaged with third party 
vendors?'' ``Yes, we are happy to provide that contract and 
information.'' It is 2 months later. You haven't provided that.
    Mr. Cordray. They are being provided in response--
    Mr. Garrett. Another question: ``Do you have agreements 
with any foreign countries?'' ``I can verify that for you, 
Congressman.'' You haven't provided that answer.
    We can go through--these are what you just said were the 
easy questions and you said you couldn't answer them because 
you were waiting for the other ones. If you would like--
    Mr. Cordray. No, we don't have any agreements with foreign 
countries. Mr. Antonakes testified to that at the hearing, and 
that is the answer. So, there is nothing--
    Mr. Garrett. I'm sorry, no, he did not. You said you read 
the transcript--
    Mr. Cordray. He did, in fact--
    Mr. Garrett. I will verify that for you.
    Mr. Cordray. That is fine, but that is the answer.
    Mr. Garrett. Okay.
    Mr. Cordray. But look, we are going to have the answers to 
you in days. It is an immense amount of information, you will 
see. Our staff has been working incredibly hard and they have 
been communicating back and forth with your staff on it.
    You will have a crack at me next month; I will be happy to 
answers your questions, at that point.
    Mr. Garrett. So, I will--
    Mr. Cordray. I have no intention here to be unresponsive. I 
take the oversight responsibilities of this committee and of 
our Bureau very seriously, and I think that has been our track 
record, and we will continue to try to establish that track 
record.
    I want to satisfy you on this point.
    Mr. Garrett. Obviously, you haven't satisfied today--
    Mr. Cordray. I know I haven't, yet.
    Mr. Garrett. One of the other questions--I will submit my 
questions to you. Of course, I am not going to get into in 35--
mine are basic questions, and I have your commitment, I can 
have some answers from you by the beginning of next week?
    Mr. Cordray. We will take all the questions for the record 
that are submitted. If there are a lot, it will take us a 
little while to respond to them. If there are a few, it will 
take us--
    Mr. Garrett. How many U.S. consumer accounts is the CFPB 
monitoring in its data collection? Basic question.
    Mr. Cordray. Okay. There are several pieces to that answer. 
And I am sorry it is a complicated answer, but it is. We have 
our consumer response function, where there are over 200,000 
consumers who have submitted information to us, and that is one 
basket.
    There is our supervision program, which deals with the 110 
largest financial institutions in the country, who have an 
extensive customer base, across this country that we deal with 
all the time--
    Mr. Garrett. When will it--
    Mr. Cordray. Third, is our market monitoring--
    Mr. Garrett. When can we expect answers to these questions?
    Mr. Cordray. The QFRs that you all submitted, approximately 
200, and you will see that it is pages and pages of luminous 
answers and documentation--
    Chairman Hensarling. The time--
    Mr. Cordray. --will be within days.
    Chairman Hensarling. --of the gentleman has expired.
    The Chair now recognizes the gentleman from New York, Mr. 
Meeks.
    Mr. Meeks. Thank you, Mr. Chairman.
    Director Cordray, let me first thank you for your 
cooperation in working with this committee, and getting us 
information and being willing to extend your staff to come to 
anything that we ask and we ask you to, as you, in response to 
Ranking Member Waters, when she asked to have staff available 
to ask questions dealing with the queue and anything else, you 
were more than willing to say that whatever you need, not only 
on this side of the aisle, but both sides of the aisle, and 
whether or not people are on the committee.
    So, I just want to thank you for your cooperation with 
this--and being open and transparent about it. I think that is 
tremendously important, and something that we need to get done.
    And clearly, for the American people, I want to thank your 
agency again. Over 6 million consumers have received refunds 
since you have been in office; over 200,000 consumer complaints 
have been recorded, and there have been several rules and 
guidelines issued that affect millions of Americans and 
consumer protection rights, which we didn't have.
    So, it is been a real service, I think, to the American 
people, and I want to thank you and your agency for what you 
are doing in that regard.
    In your answer, you talked and referred, in one of the 
questions, to your own personal life, with your mother, when 
you answered the question of the gentlelady from New York.
    I often do the same thing when I think about credit. I look 
at my family, who lived in public housing and didn't have many 
resources, and therefore, had to try to get banking--
institutional banking, sometimes they would deny it, and try to 
figure out other ways in which they could make a living without 
going to a loan shark--
    And so, to that end, again, I applaud you for showing 
leadership on the issue, which I think you had it released in 
June of final rules to establish procedures to cover--to bring 
and recover non-banks, who are lending money under your 
supervisory authority, including those that may--payday loans, 
et cetera.
    So, I was wondering, first, could you comment on the study 
that the CFPB has been undertaking to bring clearer 
supervisions to the industry, and have you looked at what some 
of the borrowing or analyzed some of the borrowing activity by 
the consumers that Mr. Watt was talking about, who are using 
online payday loans?
    Because we are trying to figure out how they could have 
access to credit also, but not be abused, and how the CFPB 
could be involved there.
    And lastly, and then I will just be quiet and let you 
answer the questions, I also have been trying--I had a 
conversation with some banks yesterday, asking them, why won't 
they compete in this market?
    And they said that they would like to, and they were 
complimentary of you, but they said that they thought that 
there was some conflict at times, between your rulings and some 
of the jurisdiction between either the FDIC or the OCC that 
seems to be conflicting, and so, they are not clear, but they 
would like to be under, clearly, the rulings that would--
dealing with consumers, under the CFPB. So, could you give me 
some responses in that regard?
    Mr. Cordray. Okay. Actually, I am intrigued by your last 
point, because I would be glad to hear more about that. I do 
think that many financial institutions could make small dollar 
loans cheaply.
    They would have very little cost in doing so. A lot of 
credit unions have done this, and that would be helpful to 
provide more of that kind of credit to people who need it, and 
potentially could avoid some of the higher cost cycles of 
indebtedness that they get into.
    I want to go back a couple of comments. First, the point 
you made about thinking about your own family and so forth. 
That is something that I try to preach at the Bureau all the 
time.
    In preparing for this hearing, I was looking at the 
backgrounds of the members of this committee; there are very 
sophisticated people here. A lot of people with real estate 
background, a lot of legal background, extensive legislative 
background, but none of us has to look very far in our lives to 
think about mothers and fathers, sisters and brothers, sons and 
daughters, who struggle with these issues. And those are the 
people that we are working for. I think it is important for us 
to keep that in mind.
    And as we work for them, one of the issues is, how do we 
protect them against some of the predatory practices that, 
frankly, do unfortunately exist, in a number of these markets?
    You mentioned our White Paper on payday and deposit advance 
lending earlier this year. There were a number of concerns we 
had identified in that report, and it is a great example of 
how, if we don't have the data or information that we need to 
make those judgments, we are going to be very ill-informed in 
our policy judgments. We are going to be pretty wild in 
targeting what, exactly, are the major concerns.
    The better data and information we have about what is going 
on in these markets, the more precisely we can pinpoint what is 
an appropriate action and what is not, which is something you 
all, I think, should want and do want, and that is as to the 
importance of us gathering information on these issues.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the chairman of our Housing and 
Insurance Subcommittee, the gentleman from Texas, Mr. 
Neugebauer.
    Mr. Neugebauer. Thank you, Mr. Chairman.
    Director Cordray, I have here in my hands a copy of the 
CFPB's supervision and examination manual, which is referenced 
in your Semi-Annual Report. And I assume that this is intended 
to give your field people some direction on their examinations, 
is that correct?
    Mr. Cordray. It is that general problem--you are running an 
agency, you have intentions, but you need to make sure 
everybody in the field is doing what you intend and--
    Mr. Neugebauer. But it is a guidance document, is that 
correct?
    Mr. Cordray. It is a guidance document, yes.
    Mr. Neugebauer. So, it has three sections. It talks about 
unfair, deceptive, and abusive acts or practices.
    And when you look at the--has a statutory definition of 
``unfair,'' and it has a number of examples to it--a fairly 
large number--and then it has deceptive acts, and it also has a 
statutory definition of what deceptive acts are, and then a 
number of examples so that, I guess, a person in the field 
could know what to look for there.
    And then, when we get over to abusive acts, it is a small 
paragraph here, and it just has a statutory definition, but it 
doesn't have any examples. And so, I guess the first question I 
have is, who is telling the examiners what abusive is, and are 
the examiners just making that call as they are out in the 
field?
    In the first two examples there, you are very detailed 
about what to look for, but when you get to abusive acts or 
practices, you just give a definition. And so, are you telling 
them what an abusive act is, and that is what they are looking 
for, or are they making that decision on their own?
    Mr. Cordray. I appreciate the question, Congressman. It has 
been an issue, as you know, that we have gone around the block 
on before a few times, both you and others. In fact, under our 
statute, ``unfair'' is a defined statutory term.
    ``Deceptive'' is not a defined statutory term. Congress 
gave us no specific guidance on that, but there is a fair 
amount of case law we can work with in terms of what is 
deceiving someone, and that is a fairly straightforward 
concept, I suppose. ``Abusive'' is another term that Congress 
defined.
    So, in terms of what our examiners are looking for, they 
are looking for what meets the definition Congress itself laid 
down. We are not making anything up. Congress imposed this 
term, Congress defined the term.
    In terms of examples, they have been a little harder to 
come by. I will certainly agree with that, and we have talked 
about this before.
    We have not been actively oppressing people with some 
concept of what is abusive that is not unfair and deceptive, 
and one of the questions in this area is there is presumably a 
circle of what is unfair, and there is a circle of what is 
deceptive, and they overlap to some degree. And, there is a 
circle of what is abusive, and that also overlaps to some 
degree.
    The hard question for me is what is abusive that is not 
also unfair and deceptive. Many things would be both or all 
three at the same time.
    Mr. Neugebauer. So here is the question, have you brought 
any enforcement action or determined that practices or products 
were abusive up until this point?
    Mr. Cordray. We have brought several and they have involved 
pretty egregious examples of outright defrauding of customers.
    Mr. Neugebauer. Could you furnish examples?
    Mr. Cordray. Yes.
    Mr. Neugebauer. If those are examples, then why wouldn't 
they be in this document?
    Mr. Cordray. Yes, so some of that we are working through as 
we go, as we see new situations. Those instances were 
subsequent to that examination guidance. We will be updating 
that from time to time. I am happy to have our staff provide 
you with more information.
    Some of what we have done has been public, in terms of 
consent decrees, and other resolutions of cases. I'm happy to 
give you more.
    But I would say it is still a difficult issue for us and it 
is one that we have tried to tread carefully on and not be wild 
and overly aggressive in terms of making up things that can't 
be easily defended.
    Mr. Neugebauer. Yes, I think some more transparency here is 
certainly warranted.
    Mr. Cordray. Fair enough.
    Mr. Neugebauer. I have two other quick issues. I want to go 
back to the data collection issue. I think the American people 
are very concerned about data collection and one of the things 
that I hear from the people that your agency has been in to do 
examination is that you are requesting a huge amount of data, 
as a couple of things. One, it is very sensitive information; 
and two, it is very costly.
    The examination process is generally meant to be a 
sampling, going in and looking at a few records and confirming 
if there is a pattern or practice here. As I understand it, in 
many cases you are requesting almost the entirety of the 
records of those companies. I don't think that was the intent 
of Congress.
    We have OFR, they are collecting data. We have the IRS 
collecting data and I think that one of the things we need to 
hear from you is who has access to that data and what you are 
doing to secure that data.
    Mr. Cordray. I--
    Chairman Hensarling. Brief answer, please.
    Mr. Cordray. We typically do proceed by sampling and intend 
to do so. Sometimes, it is situational, for example, if we are 
into an enforcement situation, we may need to know all the 
consumers affected to make sure they are getting restitution as 
appropriate. I am happy to follow up with you further on that. 
I think I share your instinct, we should be sampling, not 
oppressing institutions, and that is what we are trying to do.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Hinojosa.
    Mr. Hinojosa. Thank you, Chairman Hensarling.
    I also want to thank Director Cordray for his testimony and 
his hard work on behalf of America's consumers.
    Director Cordray, I would like to congratulate you on your 
bipartisan confirmation in the Senate. While I hear many of my 
friends across the aisle in this committee bemoaning the work 
of Director Cordray and his Bureau, let me remind everyone that 
17 Senate Republicans voted for cloture and 12 Senate 
Republicans voted to confirm Mr. Cordray as the Director of the 
CFPB.
    It is possible that those Senate Republicans had heard of 
the impressive accomplishments of the young Bureau, including 
$432 million refunded to 6 million consumers because of the new 
Bureau's enforcement actions.
    They probably also heard of the Bureau's work on behalf of 
college students, of older Americans, and our servicemen and 
servicewomen and a full commission by the AARP, two-thirds of 
respondents agreed that this Bureau is a needed institution and 
I could not agree more.
    My first question to Director Cordray is as follows, can 
you provide highlights of the forthcoming financial literacy 
efforts of the Bureau including research results, pilot 
programs, and the recently announced financial coaching 
initiative?
    Mr. Cordray. Thank you, Congressman. That is actually a 
subject very near to my heart. I am putting a lot of emphasis 
at the Bureau on financial education with an eye to, as the 
chairman noted at the outset, not trying to dictate the 
decisions that consumers make.
    They have to make their own decisions and make their own 
choices. We would like to feel confident that they are in a 
position to know more and to make more responsible choices, 
based on their judgment, that they can live with over the 
course of their lives and not regret.
    So, in the financial education area, we are trying to focus 
on how can we deliver more information to consumers in an 
effective manner. It is not an easy issue. People have been 
working at this for decades and we do a very poor job in this 
country at preparing young people to go out into the world and 
deal with some of the fairly complicated financial decisions 
they are going to be asked to make in an increasingly complex 
financial marketplace.
    We are trying to focus on schools, focus on workplaces, and 
focus on faith communities. I was in North Carolina to speak to 
the National Baptist Ministers Convention recently, and we are 
going to be doing more outreach of that kind. We want groups of 
people around this country to focus on the importance of having 
people be in a position to fend for themselves, to stand up for 
themselves, to stand up for their rights, and to see that they 
are making good decisions. And that is quite a bit of work that 
we are going to be doing on that score.
    We are working with the Financial Literacy Education 
Commission and other Federal agencies. We are reaching out to 
folks at the State level including governor's offices to try to 
get more focus on this. Nobody seems to ever say that this is 
not important. They just don't always manage to prioritize it. 
We need to prioritize it, it has been getting second shift to 
everything else in this country for way too long.
    Mr. Hinojosa. I want to say that I worked very closely as 
co-chair with Judy Biggert on the other side of the aisle to 
start a bipartisan caucus here in Congress 10 years ago, and 
that number is close to 100. I recommend that you see who those 
Congressmen are on both sides of the aisle because they are 
half and half, 50 percent Republicans and 50 percent Democrats 
and--
    Mr. Cordray. It is an excellent--
    Mr. Hinojosa. --engage them because together, we cover lots 
and lots of people and there are over 100 partners in the 
JumpStart umbrella that has many banks and the U.S. Treasury 
and the U.S. Federal Reserve so that together we need to move 
it up and do what you said that we are lacking communication 
out there to the institutions you mentioned.
    Mr. Cordray. Excellent suggestion. I have heard from 
Congressman Stivers on this point, and he is interested in 
working with us to figure out how we can better deliver good 
financial education that provides meaningful help to both young 
people and adults. It is something that I am very focused on 
and I intend for us to make headway over the next several 
years.
    Mr. Hinojosa. I understand that you are appointed to the 
President's forthcoming advisory council on financial 
capability for young Americans, and seeing that we have a debt 
of $1 trillion in college student loans, I wish you would 
address that and help us.
    Mr. Cordray. Okay, thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair would like to announce that there are votes on 
the Floor. They just began, so it is the Chair's intention to 
clear two more Members, the gentleman from North Carolina, Mr. 
McHenry, and the gentleman from Missouri, Mr. Clay.
    Other Members who wish to go to the Floor now, if they 
would leave quietly after clearing two more Members for 
questions, we will declare a recess and ask for the patience 
and indulgence of our witness. I am told that there are two 
votes on the Floor, so it shouldn't take too terribly long, and 
then we will reconvene as soon as votes have concluded on the 
Floor.
    So at this time, I would like to recognize the Chair of the 
Oversight and Investigations Subcommittee, the gentleman from 
North Carolina, Mr. McHenry.
    Mr. McHenry. Mr. Cordray, thank you for being here.
    You authorized, did you not, the creation of the Academic 
Advisory Commission or Council?
    Mr. Cordray. I think it is called the Academic Research 
Council, but yes.
    Mr. McHenry. And you authorized it?
    Mr. Cordray. It was before I became Director, but it is 
something that has existed at the Bureau for some time.
    Mr. McHenry. Okay, now does that Council report to the 
Assistant Director of Research, who was until recently Sendhil 
Mullainathan?
    Mr. Cordray. Yes, I wouldn't say ``report to,'' it is an 
advisory council that is meant to assist us in our work and 
give us broader perspective on many of these issues.
    Mr. McHenry. But in the organizational chart, where would 
they report to?
    Mr. Cordray. They are not with the Bureau. They are folks 
from outside who are willing to--
    Mr. McHenry. Sure, okay.
    Mr. Cordray. --spend some of their time helping us think 
about these issues.
    Mr. McHenry. Okay, but this is a group that you gather in 
and you decided this was a good idea to have this board.
    Mr. Cordray. Again, this existed since before I was the 
Director, but yes, it is a good idea.
    Mr. McHenry. Okay.
    So have you heard of the company called Ideas 42?
    Mr. Cordray. I believe I have heard that name.
    Mr. McHenry. Okay.
    What do you know about it?
    Mr. Cordray. Not much.
    Mr. McHenry. Okay.
    Are you aware that the CFPB awarded a research contract for 
$5 million to Ideas 42?
    Mr. Cordray. I believe I knew that, I am not familiar with 
all the details of that.
    Mr. McHenry. And was this a process that was a competitive 
bid process or was this more of a single source contract?
    Mr. Cordray. All of our procurements at the Bureau go 
through the regular Federal laws and contracting guidelines and 
we have been audited on that. And I don't know offhand whether 
that was--
    Mr. McHenry. Single source contracting--
    Mr. Cordray. --competitive or single source--
    Mr. McHenry. Yes.
    Mr. Cordray. --but it was done according to government 
procedures.
    Mr. McHenry. No, I understand, but single source 
contracting exists. Right? And that is permissible.
    Mr. Cordray. I believe so, yes.
    Mr. McHenry. Okay.
    So if you would let us know whether or not that was 
competitive bids, how many bids there were, and from what 
companies?
    Mr. Cordray. Okay.
    Mr. McHenry. And then furthermore, you know the full 
process for this.
    Mr. Cordray. Okay.
    Mr. McHenry. It is a $5 million contract and that is 
important.
    Are you aware that Sendhil Mullainathan was a co-founder of 
the company, Ideas 42?
    Mr. Cordray. I don't know if I was familiar with that or 
not. I don't believe so.
    Mr. McHenry. Okay.
    But he was the former head of research, right? Or assistant 
director for research?
    Mr. Cordray. That is correct, he was. He is no longer 
employed by the Bureau, but he is a well-regarded economist, a 
MacArthur grant winner and well-known in the field.
    Mr. McHenry. Yes, and the question I asked is about your 
policies and procedures.
    Mr. Cordray. Yes.
    Mr. McHenry. For a former staffer of yours to get a $5 
million contract without any apparent bids, he is the co-
founder of this company and--go ahead, please respond.
    Mr. Cordray. Yes, I don't know that the details of that are 
all accurate. I don't believe as far as I know that Sendhil is 
involved in the management of that company but--
    Mr. McHenry. No, he is the co-founder of that company.
    Mr. Cordray. At one time, yes.
    Mr. McHenry. And are you aware that four of your six 
members of the Academic Research Council have direct 
connections to Ideas 42?
    Mr. Cordray. Again, I don't know what you mean by ``direct 
connections.''
    Mr. McHenry. One is a founder and board member of Ideas 42, 
one is an adviser, and two are affiliates of that firm.
    Mr. Cordray. I don't know what you mean by adviser or 
affiliates. And when you say ``founder,'' are you talking 
about--
    Mr. McHenry. This is, yes.
    Mr. Cordray. Okay. I am happy to have our staff follow up 
with you. I am quite confident that everything done there, as 
has been true of all of our procurements, was done properly and 
in accordance with government procedures.
    Mr. McHenry. So do these connections raise any questions 
about conflicts of interest? When you have an advisory board, 
and four of the six members have a connection to a company that 
gets a direct contract from the CFPB for $5 million? And 
furthermore, that you have a founder, who was formerly with 
your employ, and we are not sure of the circumstances of his 
leaving, but he has apparently departed in the ensuing amount 
of time between, in the last year, it appears.
    Mr. Cordray. Right. That is correct.
    Look, I am quite confident that everything was done 
properly, and that we have carefully vetted these kinds of 
conflicts of interest. I am happy to have my staff work with 
your staff to go through it in detail.
    Mr. McHenry. We would like to have some answers on this, 
because it appears to us--
    Mr. Cordray. And if there is, it will be a concern to me. 
So--
    Mr. McHenry. It appears to us an enormous conflict of 
interest. And it raises greater concerns that we have with the 
policies and procedures you have to avoid conflicts of interest 
with your staff and former members of your staff who have 
enormous connections both with policymaking, without much in 
the way of a cooling-off period of any sort before they come 
back to either receive a no-bid contract, or maybe even a 
competitive contract. We don't know. So, I would like to have 
answers to these questions.
    Mr. Cordray. That would be fine. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Clay.
    Mr. Clay. Thank you, Mr. Chairman, for conducting the 
hearing.
    And thank you, Mr. Cordray, for your leadership at the 
CFPB.
    My questions are related to mortgages. As you are aware, 
part of the issues concerning our economic meltdown going into 
2007 was shaky mortgages, and the whole process of steering 
people who normally would be qualified for conventional 
mortgages into subprime mortgages.
    I was wondering, what has been the CFPB's record of 
preventing those kind of abuses, especially now, since it is a 
little more difficult to obtain a mortgage. I was wondering, 
what has been your experience there in the leadership of the 
CFPB and how have you addressed it?
    Mr. Cordray. Thank you for the question. That is one of the 
responsibilities Congress gave us, that they really highlighted 
as being very important to this country and gave us the 
responsibility to write the set of mortgage rules, and a very 
specific, firm deadline for doing that, both so that the 
mortgage market could be protected and safe, and also so that 
it could proceed forward and industry could have certainty. And 
we understood those various aspects of the problem.
    What you mentioned goes directly to our ability-to-repay 
rules of the so-called Qualified Mortgage rule, which is 
intended to root out some of the practices that were 
inappropriate and improper. They weren't necessarily illegal in 
the somewhat lacking regime that we had before the crisis. And 
many were being offered by lenders that were not being 
supervised or overseen by anyone.
    The other issue was the steering, as you say, of people who 
actually would have qualified for a prime rate mortgage and 
didn't know it. They assumed the person across the table was 
being straightforward with them, but people actually had 
financial incentives to steer them into a higher-cost mortgage 
and then they get a kickback on that.
    That is totally inappropriate and that is very exploitive 
of consumers. And it happened to millions of Americans. There 
is a loan originator compensation rule that, first of all, the 
Federal Reserve wrote, and then we have had a further round 
which is meant to prevent the use of yield spread premiums, 
which was the mechanism by which--that is a somewhat 
bureaucratic term--but that is how it actually worked.
    And the point is to make sure that can't happen again. We 
have been working hard to see that is actually happening. We 
are focused very much on the issue you raise.
    Mr. Clay. And have you taken any action if you have found 
players in the market who have steered people into these high-
cost, high-risk mortgages?
    Mr. Cordray. We have. I typically am not in a position to 
talk about--first of all, the regulation is important because 
going forward, that is not going to be possible. We are 
supervising around that issue every day. Second, we recently 
filed an action against a lender that we found was still 
engaged in that process as a sort of routine business model, 
which is inappropriate and violates the law. And we will 
proceed whenever we see that.
    Mr. Clay. Thank you for that response.
    Home mortgages and student loan debt are the two largest 
categories of outstanding consumer debt in America. We are 
still feeling the effects of the subprime mortgage crisis and 
are only beginning to understand the threat that excessive 
student debt possesses to the economy.
    What steps are being taken at the CFPB to promote 
transparency of student loans and other financial products?
    Mr. Cordray. It has been a big issue for us. We have a 
great ombudsman, a student ombudsman that was created by 
Congress in the law. It was an excellent insight and it is an 
important position for us.
    We have worked on a ``know before you owe'' effort around 
student loans, because for many people, it is new to them. They 
are engaging in it for the first time as their son or daughter 
is thinking of going off to college or getting any kind of 
further education, whether training school or vocational school 
or community college.
    We have also developed the financial aid shopping sheet so 
you can actually compare and contrast institutions, and created 
more uniformity in the disclosures there. And all of this has 
been folded into a suite of tools on our Web site that we want 
people to use and we are working to get out to guidance 
counselors, teachers, and parents called ``paying for 
college.''
    It is an excellent, excellent Web site. I recommend to all 
Members that you should be promoting it to your constituents 
who are all going to potentially be in this position of having 
to deal with paying for school. And there is great advice and 
expert information that will benefit them.
    Mr. Clay. Thank you for your responses.
    Chairman Hensarling. The time of the gentleman has expired.
    Pending the termination of votes on the Floor, the 
committee stands in recess.
    [recess]
    Chairman Hensarling. The hearing will come to order.
    The Chair now recognizes the gentleman from California, the 
Chair of our Monetary Policy and Trade Subcommittee, Mr. 
Campbell, for 5 minutes.
    Mr. Campbell. Thank you, Mr. Chairman, and good morning, 
and welcome back, Director Cordray.
    For a number of the things that the CFPB is looking into, 
like home mortgages and so forth, there are some pretty obvious 
reasons as to why you are doing that. They contributed 
substantially to the 2008 financial meltdown, or there is a 
significant number of consumer complaints, or whatever.
    Now, we may disagree on whether the solutions are helping 
or hurting the problem, but the need to wade into some of those 
areas and to look into some of those areas is pretty evident.
    The question I have for you is about car loans. This is an 
area of lending which clearly did not contribute to the 
financial crisis. No one makes any assertions to that regard. 
There has been, even through the 2008-2009 period, a relatively 
slow delinquency rate, certainly relative to other forms of 
lending.
    There are a lot of them, over 10 million a year, new and 
used car loans. It is extremely competitive. Virtually every 
financial service provider in the United States--bank, credit 
union, non-bank--makes car loans, most of them aggressively, 
with an extremely low number of consumer complaints.
    Like a point zero zero zero-type, very low number of 
consumer complaints. So, as the old adage goes, ``If it ain't 
broke, don't fix it,'' and it would seem to me that is an area 
that is not broke.
    But yet, the CFPB has waded in, in a couple of areas, one 
of which was recently--on a car loan application, there is no 
indication of race or ethnicity, so there is no way, even if a 
financial provider wants to discriminate that they can, because 
they don't know to whom they are lending. But yet, you, at one 
point, the agency considered introducing race and ethnicity, I 
guess so you could discriminate on that basis into it. And I 
just want to ask you broadly, what are you doing in the area of 
car loans and why?
    Mr. Cordray. Thank you, Representative Campbell, for asking 
about this subject. And I would agree with much of what you 
said.
    First, I am from Ohio and we make cars in Ohio, and I would 
agree with you that for a number of years in the middle of the 
last decade, we were not selling enough cars in the United 
States as shown by the average life of the car on the road is 
now higher than ever, I think 11 years. That is even older than 
my car, which is already fairly old. Second--
    Mr. Campbell. I believe it is 12 years.
    Mr. Cordray. I am appreciative to see the recovery in the 
auto market, and it has been pronounced and it has been 
significant, and it is actually one of the things very much 
contributing to economic recovery, and I think it will continue 
to do so. In terms of what we are doing, we did release a 
bulletin for what you are referring to back in the spring.
    Congress was very specific about how they divided up 
jurisdiction in this market. Auto dealers are not subject to 
the jurisdiction of the CFPB, but auto lenders are subject to 
our jurisdiction. We both have to be careful not to exceed our 
jurisdiction with respect to auto dealers, and to exercise our 
jurisdiction appropriately with auto lenders.
    The purpose of the bulletin was to remind auto lenders that 
if you have a lending program, it is important for you to 
recognize that just because you are also working with third 
parties, whether they are dealers or someone else, you still 
are responsible for your program and how it is carried out.
    That was essentially the gist of that bulletin. There has 
been no indication in the wake of that--a number of months 
ago--that any of that has affected the auto sales market, which 
continues to be very robust. August was one of the best months 
we have had in some time.
    We are mindful of the need for access to credit. We are 
mindful of the number of different players in the market. We 
are concerned. There are a fair number of complaints that do 
occur about potential discrimination in this area, as was also 
true in mortgage lending. Nobody should have access to credit 
denied or put at a higher price because of their ethnic 
background. I think we all appreciate that and recognize that, 
and we are trying to do careful work to sort of gauge whether 
there are issues or concerns of that kind in this market.
    But I will be happy to continue to be in touch with you and 
your staff about--
    Mr. Campbell. Okay, just in my last 6 seconds, the only 
thing I would say is if you don't know--you can't discriminate 
on the basis of something you don't know, and so if we keep it 
that way, that is the best way to not discriminate. I believe 
my time has expired.
    Chairman Hensarling. The time of the gentleman has indeed 
expired.
    The Chair recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. I am happy to yield to a Democrat who would 
like 5 minutes of time.
    Mr. Carney. I will be happy to go, Mr. Chairman.
    Chairman Hensarling. Okay, apparently the gentleman from 
Delaware is recognized for 5 minutes.
    Mr. Carney. I would like to thank my colleagues on this 
side for allowing me to go, and I want to thank the gentleman 
from Delaware. I used to be down there when you first came in. 
I am up here now.
    Mr. Cordray. I wasn't sure who was going to end up asking 
the question.
    Mr. Carney. I want to thank you for coming in and for your 
great work. I have a number of questions, some of which you and 
I have spoken about before.
    Mr. Cordray. Yes.
    Mr. Carney. But I would like to talk just about a couple, 
and maybe follow up with your staff on the others. You and I 
have talked before you were confirmed about non-bank lending, 
and the focus there, particularly on payday lending, subprime 
lending, that kind of thing. Could you just highlight a couple 
of things that you think we need to continue to do that you are 
not satisfied with yet, with respect to those lenders--those 
non-bank lenders?
    Mr. Cordray. When you say ``we,'' do you mean what I think 
Congress needs to do?
    Mr. Carney. No, I mean you.
    Mr. Cordray. We need to continue--
    Mr. Carney. You at the CFPB.
    Mr. Cordray. Yes. So, I think there are, as there are 
throughout the mortgage market, and all the lending markets, 
competing considerations. One is, we need to make sure that 
some of the abuses that did occur, no question about it, and 
they were part of what helped to create problems, both for the 
mortgage market and the economy, occurred in the subprime 
market, that those don't recur again.
    Our ability-to-repay rule is designed to root out some of 
those practices. The yield spread premium provision, and the 
mortgage loan originator rule that we discussed a little bit 
ago, are also designed to address those. It is important for us 
to monitor as we go, and hear from the market and make sure 
that we are actually addressing this problem appropriately.
    At the same time, there is an access to credit issue, and 
it is an access to credit issue for low and moderate-income 
Americans, much of which falls in the subprime market that we 
need to be mindful of as well. So, it is something of a 
delicate balance.
    We try to address that by being very accessible and hearing 
from lots of different points of view, and also having access 
to the kind of data we have talked about today, but it is 
critically important, if we are going to do--
    Mr. Carney. --and it would be more so as we try to reform 
our housing finance system and to keep credit available for 
folks who have difficulty getting it--
    Mr. Cordray. I agree.
    Mr. Carney. So I appreciate your attention to that. In a 
related issue, mortgage foreclosure prevention, there was a 
piece on public radio this morning that you may have heard, 
that talked about people who get themselves underwater, if you 
will, not getting access to the Federal programs to help them. 
Have you looked at that problem? I know it is something that 
has been on your radar.
    Mr. Cordray. Yes, definitely, the underwater mortgage 
issue, which of course is more of an issue in some parts of the 
country than others, and more pronounced in some parts of the 
country than others has been a major problem with economic 
recovery.
    First of all, the problem is easing a bit, month by month, 
as the housing market has recovered. There are millions of 
Americans who had been underwater, who have come out and gotten 
their heads back above water, but there are still millions who 
are not yet.
    Mr. Carney. What about this access to some of the Federal 
programs? The idea was that the servicers or the banks were 
foreclosing before they had an opportunity to avail themselves 
maybe of something that would help.
    Mr. Cordray. Yes, yes. There have been ongoing changes 
being made in both the HAMP program, and the HARP program, 
which we don't have direct jurisdiction over, we have 
jurisdiction over the mortgage servicers, so there is an 
intersection there, changes being made in FHA programs and 
others to try to address the underwater mortgage problem.
    It is a difficult problem. There is no easy fix, by any 
means. But there is continuing attention to it. We are paying 
attention to it. I don't really have more to say, other than 
that we are all working toward the day where we have addressed 
that problem sufficiently and the market has recovered to the 
point where it is more manageable, and it is not--
    Mr. Carney. One of the issues that I have been trying to 
work on, particularly over the last several months, is college 
affordability. And I notice that you have done some reports on 
student loans and private lenders in that regard. Is there 
something there that jumps to mind?
    One of your reports was more generic in terms of the effect 
that it is having on the ability of those young adults to 
purchase in the economy. What else in terms of the structure of 
the loans?
    I have heard from a lot of students and families, frankly, 
that they didn't really know what they were getting into. I 
think part of it was maybe they weren't paying attention to the 
fine print or what have you. What have you found there, if 
anything?
    Mr. Cordray. There are a variety of problems there. First 
of all, it is a more than $1 trillion issue in this country 
now. It is very significant. It is something we need to--
    Mr. Carney. It is killing our young people, just--
    Mr. Cordray. And it is killing them. It is driven in part 
by losing control over tuition costs, which is an issue that 
goes well beyond the CFPB.
    Mr. Carney. And the bigger problem, in my view, that is the 
bigger problem. But I just--
    Mr. Cordray. Yes. But in terms of us, we have been noting, 
and increasing numbers of Federal policymakers are noting, the 
domino effect of this, that the student loan albatross around 
young people's necks is keeping them out of the housing market, 
and it is keeping them out of starting businesses or starting a 
family.
    Mr. Carney. My time is up, but this is something that 
hopefully I can follow up on with you and your staff.
    Mr. Cordray. Absolutely.
    Mr. Carney. I appreciate it. Thanks very much for your good 
work.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Luetkemeyer, for 5 minutes.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    And, Mr. Cordray, I appreciate your comments earlier, your 
testimony with regards to the ATM bill, which I was a lead 
sponsor on last year, that managed to get through. And now, we 
have the privacy bill that is sitting in the Senate.
    So if you are anxious to help in that regard, we sure 
wouldn't oppose a phone call or a letter or some sort of 
something to get the Senate on the ball there, to help us along 
with that.
    Mr. Cordray. Okay. And I will say, I do find the things we 
tend to focus on most immediately are also things that Congress 
is focused on most immediately. And if Congress addresses an 
issue, we are always happy to see that. If it needs to be us 
who addresses it, we are happy to do that and work with you, 
either way.
    Mr. Luetkemeyer. Thank you very much.
    I would like to follow up on a couple of things that have 
been discussed a little bit with regards to online lenders. It 
is come to my attention, with the number of banks that have 
called, as well as a number of online lenders that have called 
our office, that the FDIC is really coming down on the banks 
who have online lenders who have accounts and clearing their 
third-party payments through them.
    In the Wall Street Journal the other day, there was a 
comment made by a Department of Justice spokesman who said, 
``they intend to choke online lenders off from the very air 
they need to survive.''
    Are you aware of this activity going on by the Department 
of Justice and the FDIC to choke online lenders off from the 
very air they need to breathe, to survive?
    Mr. Cordray. I don't know about that characterization. I am 
aware, and there is work going on to try to understand the 
relationship between online lending, which, as I indicated 
before, is a very difficult law enforcement problem, because it 
tends to be borderless, and how that relates to the involvement 
and responsibilities of financial institutions.
    Mr. Luetkemeyer. Mr. Cordray, your agency, if I am not 
mistaken, is primary over all these nonbank lenders. From the 
regulatory side?
    Mr. Cordray. I don't know if we are primary. We have 
jurisdiction over non-bank lenders, yes.
    Mr. Luetkemeyer. You are the primary regulator--
    Mr. Cordray. --also has some involvement. The State 
attorneys general have involvement. State banking regulators, 
and--
    Mr. Luetkemeyer. But you are the primary Federal regulator.
    Mr. Cordray. Yes, with the FTC.
    Mr. Luetkemeyer. Are the FDIC and the DOJ coordinating with 
you with regards to these efforts that they are undertaking to 
force online lenders out of banks?
    Mr. Cordray. We pretty much coordinate with the FDIC, the 
OCC, and the Fed on--
    Mr. Luetkemeyer. So they are coordinating with you, then, 
on these efforts?
    Mr. Cordray. There is work going on, and we are trying to 
work with a broad range of partners, some of--
    Mr. Luetkemeyer. So you are aware, and you are working with 
them to get the online lenders out of the banks. Is that 
correct?
    Mr. Cordray. Again, trying to characterize the objective is 
one thing. We are working to try to understand how the online 
lenders work--
    Mr. Luetkemeyer. It is pretty simple. They just have a 
business model, like every other business that is online, where 
they use the banks as a clearinghouse for their transactions.
    Mr. Cordray. That is right, but if they are making loans 
that are illegal, or if they are making loans where they are 
not licensed to make loans, then that is a business model that 
we don't want to endorse.
    Mr. Luetkemeyer. From the banks I have talked to and the 
online lenders I have talked to, that is not the problem. I am 
not here to support the bad actors. What we have is a problem 
where there is this blanket policy, as the DOJ spokesman has 
indicated, as the FDIC, with the way they are carrying out 
their activities, they are out there to just get rid of them, 
period.
    And to me, I guess my question would be, what is your 
stance on online lending? Are you here to get rid of all these 
online lenders as well?
    Mr. Cordray. My stance on online lending, as with all 
lending, is that it should be done legally; it should be done 
by folks who are licensed and qualified to do it. It should be 
done in compliance with Federal and State law.
    Mr. Luetkemeyer. So your stance would be, then, if they are 
licensed and they are behaving according to the laws, then you 
should have no problem with them being in business.
    Mr. Cordray. Anybody who is behaving according to the law, 
is behaving according to the law. And our job is to make sure 
that is happening.
    Look, I know you get this. You were both a bank official 
and also a bank regulator. So, you have been on both sides of 
the table.
    That is our job, to make sure they are complying with the 
law. But we have to investigate and understand the--
    Mr. Luetkemeyer. Mr. Cordray, I appreciate the fact you did 
your homework. The problem here is you also have a--also don't 
need to be punitive in the way that you take action against 
these people if they are behaving in a business-like manner, 
according to the law, we don't need to be punitive about this 
and drive them out of business. That is my concern.
    One of the things that we are discussing with these online 
lenders is a national charter that would give you the ability, 
and then whoever, wherever we land with this charter, the 
ability then to enforce it on a national basis.
    Would you support something like that?
    Mr. Cordray. You are talking about a national charter for--
    Mr. Luetkemeyer. For online lenders.
    Mr. Cordray. For online lenders?
    Mr. Luetkemeyer. Yes. That way, you don't have to, that 
would alleviate the State-by-State-by-State situation, where 
you--
    Mr. Cordray. Yes.
    Mr. Luetkemeyer. --making it, according to this law, that 
rule, this rate or whatever.
    Mr. Cordray. You know, I--
    Mr. Luetkemeyer. --support something like that?
    Mr. Cordray. I don't know what to say about that. The 
online problem, unfortunately, is a bigger problem, because 
some of the online lending is coming now from outside the 
borders of the United States.
    Mr. Luetkemeyer. The question, then--this is a way to solve 
the problem. I just asked a simple question, do you support it 
or do you not?
    Mr. Cordray. I would have to look at that and think about 
it. I don't have a position for you today.
    Mr. Luetkemeyer. Okay.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. Thank you, Mr. Chairman.
    I want to pick up on Mr. Luetkemeyer's comments. And, 
again, he and I have carried this bill to eliminate unnecessary 
privacy notifications.
    Mr. Cordray, is there any way that you could, in effect, 
implement, that bill without legislation, through regulation, 
or do we have to rely upon the House of Lords--I mean, the 
United States Senate--to move on that?
    Mr. Cordray. We have been working on this issue and looking 
at it. And it has risen to the top of our list of streamlining 
things that we hear a lot about from community banks and 
others, and we tend to agree, as is often the case in the 
consumer space, there is often more disclosure than the 
consumer benefits from, but it is burdensome.
    So our sense is that there is quite a bit we could do by 
regulation. It may or may not be everything that Congress 
wants. Congress can always do whatever they want within the 
Constitution.
    I would be happy to have more conversations with you. But I 
think we think we could make considerable headway--
    Mr. Sherman. I will ask you to do all you can to deal with 
this through regulation, and do all you can to get the Senate 
to move on the bill.
    Mr. Cordray. Let me say two things--
    Mr. Sherman. We in the House have passed it through this 
committee and through the Floor 3 times.
    Mr. Cordray. Let me say two things. We would be happy to 
work with you and have you understand our thinking about what 
we can do by regulation, and see if that falls short of what 
you are trying to do by legislation.
    We are also happy to work with you if you are working on 
legislation to think about how to craft that and whether there 
are particular technical issues or so forth with which we could 
help you.
    Mr. Sherman. I know the gentleman from Missouri and I look 
forward to working with you on this.
    Mr. Cordray. Either way. Yes.
    Mr. Sherman. The next issue is that some credit rating 
agencies are tagging homeowners as if they went through a 
foreclosure simply because they did a short sale.
    Now, a short sale is not an A-plus, smiley face, financial 
institution thing on your record. But it is not a foreclosure.
    What can you do to make sure that the credit rating 
agencies say a foreclosure is a foreclosure, and just because 
you began the foreclosure process and went into a short sale 
does not mean that you have a foreclosure on your record?
    Mr. Cordray. Thank you for the question. As you know, we 
worked on this quite a bit this summer. It is a complicated 
issue. It involves lots of different actors.
    We could have walked away from it and said, ``Well, we 
can't solve it ourselves,'' but we thought it was important to 
address it. It is wrong for people who are not foreclosed on--
when we are actually encouraging short sales and public policy 
is encouraging short sales--to then be tagged with a 
foreclosure in their credit records.
    We worked very closely on this issue. It has been a success 
story for us with Fannie Mae, and with the credit reporting 
agencies, to get processes changed and fixed so that this will 
no longer be a problem. It was a very complicated undertaking, 
and I am happy to report that we were able to push and pressure 
for progress, working significantly with Senator Nelson and 
others.
    And I am pleased with the work our staff did, which was 
great work, hard work, and important work.
    Mr. Sherman. You are pleased that the hard workers--is this 
problem solved, or you are just moving in that direction?
    Mr. Cordray. No, the problem is being solved. It involves 
changes in the computer processes of Fannie Mae and one of the 
credit reporting agencies, and they are making those changes, 
and they have committed to making those changes. And we are 
monitoring to make sure the changes are made correctly.
    Mr. Sherman. My final issue is remittances, which are 
important in my district. A number of banks and credit unions 
have looked at the new regulations and decided to just get out 
of the remittance business.
    What can you do to keep a high level of competition and at 
the same time protect consumers?
    Mr. Cordray. Several things. First of all, there is a high 
level of competition in the remittance area. And it is an area 
where technology is changing it dramatically. Prepaid cards are 
now a method of remitting money. Phones may be a method of 
remitting money in some areas. Online and PayPal and other 
things are methods of remitting. So there is a lot of 
competition in this space, and it is hard to separate out all 
the cause and effect.
    We did go back after--we had finalized that rule at a time 
when we were reluctant to think of further changes. Industry 
came to us, and they said they had three significant problems.
    They had a problem of being responsible for errors when 
they didn't do anything wrong. They had a problem with trying 
to understand what fees were being imposed in some other 
country that they didn't control. And they had a problem with 
having to be able to understand and report taxes that might be 
imposed at several different levels in other countries and were 
not transparent to them.
    We went back and reopened the rule and made changes 
specifically to address all three of those concerns. And we 
have heard very little further anxiety around anything that we 
can do operationally to make the rules work.
    I know there will be some unease since this is now an area 
that has consumer protections, and it didn't before so, that 
imposes some costs and there will be some change in the market 
but we are open to hearing more from people if they have 
specific concerns.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Huizenga.
    Mr. Huizenga. I appreciate that, Mr. Chairman.
    And Mr. Director, thank you for your time.
    I have a couple of things; I think I am going to save them 
for the end about college tuition and about the online loan 
situation that my friend Mr. Luetkemeyer was talking about.
    But I want to touch a little bit on QM rules. As you know, 
current QM rules have included affiliated title insurance and 
that 3 percent points and fees trigger. Unaffiliated title 
insurance is not included in that, however, and since title 
insurance rates are filed by underwriters and approved at the 
State level, is there really any reason to differentiate 
between affiliated versus unaffiliated title insurance?
    Mr. Cordray. Thank you for the question. It has been raised 
to me by a number of folks and raised to our staff by a number 
of folks, including the folks at Quicken Loans who are affected 
by this. They have told us--
    Mr. Huizenga. If I can make the--I am from Michigan, by the 
way--
    Mr. Cordray. Yes.
    Mr. Huizenga. --we can get into a little debate about 
Michigan and Ohio, the auto building and cars, from your 
earlier answer, but yes, Michigan is home to Quicken, it is 
home to Flagstar, it is also home to my former real estate firm 
that I was affiliated with, Woodland-Schmidt, which has its own 
title insurance, Fivestar and Lighthouse Insurance, so it is 
big, but it is also small. And they are all being pinched by 
this.
    Mr. Cordray. Yes.
    So the 3 percent points and fees was imposed by Congress in 
the law. We had to try to figure out how to apply it, which we 
did. There is a--
    Mr. Huizenga. Would you support changing it?
    Mr. Cordray. --pretty strong statement in the law. There 
are two sides to this, right? There are affiliates where there 
was some abuse of steering people and potential payments being 
made and so forth and then there are other affiliates where it 
is very much an efficiency and a synergy that creates.
    So we did our best to sort of write the rule within an 
understanding of those polar opposite views of affiliates both 
of which have some validity. We are happy to think further 
about these things in response to that request. I have begun 
talking to our staff about whether title insurance is different 
because it is regulated.
    Mr. Huizenga. It certainly seems to me that it would be, 
and I fail to see the true benefit to the consumer if title 
insurance is purchased through an affiliated or unaffiliated, 
and my colleague from New York, Mr. Meeks, and I are sort of 
leading that charge with House Bill 1077 which was included 
within the Path Act as well.
    Mr. Cordray. We would be happy to work with you to provide 
technical assistance if you are looking at--
    Mr. Huizenga. I would like your support, frankly. If this 
is something on which we need a determination, and we need to 
figure out why if something is regulated by the State and has a 
cost attached to it, we are actually penalizing people who can 
deliver it more efficiently, in my view. So, I appreciate your 
looking further at that.
    Mr. Cordray. I understand the question, yes, and the issue.
    Mr. Huizenga. Okay, I look forward to that.
    The other element that I had, and I was glad to hear you 
say--I think I wrote down this quote accurately--that in 
response to some of the discussion about student loans, losing 
control of tuition costs which is beyond the CFPB, so I am 
glad, Mr. Chairman, we have found an area that is beyond the 
control of the CFPB.
    Mr. Cordray. We are not as powerful as people seem to 
think.
    Mr. Huizenga. You are still pretty darn powerful, because I 
am concerned about that as well. We have to have parents and 
students, and as a father of a couple of high schoolers and 
with more following, I am keenly aware of that, and I just want 
to make sure that we are not going in and shooting the 
messenger.
    As parents are making decisions and the students are making 
decisions, they need to have their eyes wide open, there should 
not be anything hidden from them, but at the same time, the 
system shouldn't be penalized for providing opportunities for 
them to go after college educations that they are looking for 
whether they really truly believe that they need to be going to 
the Ivy League versus maybe the community college, that is 
another thing.
    And then I do have lastly in my last little bit here, as 
Blaine Luetkemeyer was talking about, I am a bit concerned 
about an uneven playing field being created if 50 percent of 
all online lending occurs offshore and we are going to start 
putting in regulations that are really going to be hampering 
ours but I am curious specifically, do you count the Native 
American reservation-based companies that are doing this as 
well as ``offshore?''
    Mr. Cordray. What do you mean, ``count?''
    Mr. Huizenga. Would you categorize them as offshore or 
beyond your control?
    Mr. Cordray. No, they are not beyond our control. I think 
it is well-established in Federal law that the Federal 
Government can regulate tribal business activities affiliated 
with Tribes.
    There is some question whether States can do so and so it 
has been a somewhat difficult area. But that is different from 
outside of the United States which is a particular 
jurisdictional problem, which mirrors the one I described as 
Ohio attorney general when people would lend from other States 
and would not necessarily be licensed in our State, that is the 
problem.
    Chairman Hensarling. The time of the gentleman has expired.
    Mr. Huizenga. Thank you, Mr. Chairman.
    Chairman Hensarling. The Chair recognizes the gentleman 
from Texas, Mr. Green.
    Mr. Green. Thank you, Mr. Chairman.
    I thank the ranking member, as well.
    And I thank you, Mr. Cordray, for appearing today.
    I want to compliment you on your fine job that you are 
doing, and I look forward to working with you. I do have a 
couple of concerns that I would like to call to your attention. 
As the ranking member indicated, over our district work 
period--and I do emphasize ``work period,'' not ``break;'' 
there seems to be a misunderstanding about that we do. Over the 
district work--
    Mr. Cordray. I don't misunderstand it. I know how hard you 
work.
    Mr. Green. Thank you.
    Mr. Cordray. Yes.
    Mr. Green. Over the district work period, as she indicated, 
many of us decided that we would visit some of the community 
banks, smaller banks. I visited at least three of them, and 
upon visiting with them, I was amazed at some of the things 
that were presented to me.
    To be very honest with you, the term ``paperwork'' is a 
nebulous term until you have an opportunity to see what 
``paperwork'' actually looks like from the point of view of a 
smaller bank, an institution which has one person, possibly 
multitasking, doing more than one thing within the bank, all 
proper of course.
    But after having this opportunity to visit with the smaller 
banks, many of whom keep loans on their portfolios, I am 
absolutely convinced, Mr. Cordray, that they need some help. 
And I am going to work with the ranking member to do all that I 
can to provide them some assistance.
    But I just want to add my voice to her voice in letting you 
know that I believe that there sincerely, really is a problem 
that needs our attention for the smaller community banks. So in 
the weeks and months to come, perhaps we will talk to you more 
about it.
    I did ask that they provide proposed solutions, so at some 
point I will start to get these proposed solutions in. I will 
visit with the ranking member before passing them on, but I 
hope that we will be able to help you at least with some 
thoughts as to how we might provide some degree of help for 
them.
    Now moving to several things that have been called to my 
attention, the second appraisal for the smaller lenders, loans 
that are maintained on portfolios under $250,000, how are you 
proposing to address this concern that has been raised?
    Mr. Cordray. First of all, Congressman, I very much hear 
your point of view about the smaller institutions, community 
banks and credit unions. I have said time and again, they 
really were not at all causes of the financial crisis and we 
should not be oppressive in our responses in how they may 
affect their operations.
    So we did draw special provisions, that I mentioned earlier 
to the chairman, for the Qualified Mortgage rule. Smaller 
creditors who make loans and keep them in portfolio, the kind 
you just described, are deemed to be Qualified Mortgages 
regardless of the other aspects of that rule and have a safe 
harbor from litigation which is designed to help them feel 
confident in continuing to make the kinds of loans they make 
that work very well and support our communities. So, that is 
essentially how we are trying to address that.
    I am always interested to hear more from the smaller 
institutions, that is why we have a Credit Union Advisory 
Council, and that is why we have a Community Bank Advisory 
Council, so that we can know how we are affecting them, which 
otherwise we don't know, because we don't examine them 
directly. Anything you want to pass on to us or any way we can 
hear from you about what you are hearing, we are probably 
hearing it already, but just in case, we would like to have you 
share it--
    Mr. Green. Thank you.
    Let me move forward to sophisticated borrowers and the 
homeownership counseling. Many of these persons have net worths 
that are fairly substantial if you are a sophisticated 
borrower, has there been any thought given to how you will 
address these persons and their homeownership counseling 
requirements?
    Mr. Cordray. Are you talking about unsophisticated 
borrowers or--
    Mr. Green. I actually I am talking about those who happen 
to be high net worth.
    Mr. Cordray. Oh, I see.
    Mr. Green. Yes.
    Mr. Cordray. High net worth borrowers?
    Mr. Green. Yes, sir.
    Mr. Cordray. That doesn't generally seem to me to be an 
area of great concern at the Bureau. What we saw recently is 
the jumbo loans being made to higher net worth borrowers are 
actually being offered now at an interest rate in the market 
surprisingly and historically below that for other borrowers.
    So high net worth borrowers generally take care of 
themselves very well and institutions serve them. We have no 
problem with any of that of which I am aware.
    Mr. Green. Is there a requirement of counseling for a high 
net worth borrower?
    Mr. Cordray. I am not familiar with that, but I would be 
happy to get back to you.
    Mr. Green. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Wisconsin, Mr. 
Duffy.
    Mr. Duffy. Thank you, Mr. Chairman.
    And Director Cordray, welcome to the committee room and the 
hearing.
    I want to focus on data. We have touched on that a little 
bit today. I want to go back to that conversation and give you 
an opportunity to tell the committee how many Americans you are 
collecting their financial debt on--how many Americans do we 
have that you collect on?
    Mr. Cordray. So again, and I have tried to give this answer 
several different times.
    Mr. Duffy. I am looking for a number, how many Americans?
    Mr. Cordray. Okay.
    It is not the way the question can be answered.
    Mr. Duffy. Let me--
    Mr. Cordray. Do you want me to try to answer it?
    Mr. Duffy. Do you have a number?
    Mr. Cordray. Okay.
    Mr. Duffy. Do you have a number?
    Mr. Cordray. Three different buckets of pieces--
    Mr. Duffy. All right.
    Mr. Cordray. --there is consumer complaint data, a couple 
hundred thousand--
    Mr. Duffy. So some are bringing it directly to the 
supervisory capacity. How many Americans do you collect from 
here?
    Mr. Cordray. Okay, we don't collect directly from any 
Americans in a supervisory capacity--
    Mr. Duffy. So--
    Mr. Cordray. We go to institutions and we work with the 
institutions to understand how they are affecting their 
customers.
    Mr. Duffy. How many institutions collect from Americans--
how many Americans are collected for you through these third-
parties?
    Mr. Cordray. Okay.
    So, we oversee approximately 110 large banks and a few 
credit unions with assets of $10 billion or more. They have 
significant customer base--
    Mr. Duffy. Mr. Cordray, how many Americans? That is my 
question for you. Give me an answer.
    Mr. Cordray. That is not the way the work is done, sir. It 
is like asking me, what color is this song. That is just not 
quite the same thing. So--
    Mr. Duffy. Let us go to credit cards. How many actual 
credit cards are you collecting on Americans--credit card data, 
credit card information?
    Mr. Cordray. So, three different ways. One would be they 
may come to us with a consumer complaint. That would--
    Mr. Duffy. Mr Cordray, listen, I think America wants to 
know a number of how many you are collecting. And you are 
giving me a lot of explanation, but I want an answer of how 
many credit cards does the CFPB collect data on?
    Mr. Cordray. Okay. We don't collect any data from 
individuals about their credit card accounts, other than those 
who come to our consumer response functions. What we do is we 
go to credit card issuers who we are required to oversee and 
make sure they are complying with the law. And we need to look 
at their institutions and their practices to see if they are 
complying with the law.
    And by the way, some of them have not--and we have gotten 
back--
    Mr. Duffy. Do you monitor credit card accounts? Do you 
monitor credit cards through your agency or through any of your 
third party contractors any credit card accounts?
    Mr. Cordray. And that is the third bucket, okay? So, 
consumer complaint, supervision, and then market monitoring. On 
the market monitoring, as we have indicated before, and--has 
indicated to you, we are gathering sample data on the credit 
card market.
    Mr. Duffy. I am going to reclaim my time for a second. Mr. 
Antonakes was asked these questions. You were asked these 
questions by the Senate Banking Committee. And you came today 
ill-prepared to give us numbers on the number of Americans who 
have their financial transactions and data collected by the 
CFPB.
    Mr. Cordray. So, what I am fully prepared to do is to give 
you explanations of how these programs work--
    Mr. Duffy. And what I think America deserves is the 
transparency that you promised.
    Mr. Cordray. Okay. So again--
    Mr. Duffy. And you are not giving us that transparency.
    Mr. Cordray. Again, what we are delivering for consumers on 
credit cards is enforcement actions--
    Mr. Duffy. I am asking the questions, so would you give me 
the names of the banks, the financial institutions for which 
you--
    Chairman Hensarling. The time belongs to the gentleman from 
Wisconsin.
    Mr. Duffy. You are not going to give me a direct number. I 
am fine with that.
    Mr. Cordray. Okay.
    Mr. Duffy. Stonewall me.
    Let us talk about financial institutions. Will you give me 
the names of the financial institutions for which you collect 
financial data on Americans? Will you give me those names?
    Mr. Cordray. Okay.
    Mr. Duffy. Yes or no?
    Mr. Cordray. What we are collecting is--your question, I 
just need to correct the premise of the question.
    Mr. Duffy. Will you give me the information on--
    Mr. Cordray. We are collecting data on how those 
institutions comply with the law. And they haven't always 
complied with the law.
    Mr. Duffy. Would you give me the names of those banks?
    Mr. Cordray. All right. There are 110 large institutions--
    Mr. Duffy. Reclaiming my time, do you want to answer my 
question?
    The claim for transparency, Mr. Director, isn't being met. 
So let me say this, I am going to ask you this. The American 
people don't know what the CFPB is doing. And if you look at 
another agency, it is called the NSA. And they collect 
information about Americans' phone records.
    America has said, ``My phone company has information about 
my phone records. But, man, am I outraged when the Federal 
Government takes that information from me.''
    You are here to protect consumers, and you are taking this 
financial data that they have said it is okay for the financial 
institution to have, and you are taking it and you are not 
giving them any transparency about the information you are 
taking, how much you are taking, or from whom you are taking 
it.
    And that is incredibly frustrating. Why don't you just 
level with us? We have asked you these questions over and over 
again. And you come in and you stonewall. You try to explain. 
But never do we get answers. Never does America get answers.
    Mr. Cordray. Look, I understand that you want to make a 
speech and I appreciate that, but there is no comparison 
between the NSA and the CFPB.
    Mr. Duffy. Oh, there is.
    Mr. Cordray. It is a false comparison.
    Mr. Duffy. Oh, no--
    Mr. Cordray. We are doing work to protect the consumers--
    Mr. Duffy. Do you have numbers for me?
    Mr. Cordray. Six million consumers have benefited--
    Mr. Duffy. Do you have numbers for me?
    Mr. Cordray. --and many more will benefit.
    Mr. Duffy. Do you have names of banks or numbers of 
consumers who had their data collected--do you have those 
numbers or those names?
    Mr. Cordray. There are 110 banks, okay? I can name a number 
of them. We are looking at credit card matters at Morgan Chase. 
We are looking at credit card matters at Bank of America. We 
are looking at credit card matters at Capitol One. We are 
looking at credit card matters at Discover, American Express, 
all of the biggest--
    Mr. Duffy. Now, America knows that those are the greatest--
    Mr. Cordray. And we are going to make sure that they are 
complying with the law--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Minnesota, Mr. 
Ellison.
    Mr. Ellison. Thank you, Director Cordray. And 
congratulations on your confirmation.
    Mr. Cordray. Thank you.
    Mr. Ellison. And thank you also on behalf of so many 
Americans who have benefited from the good work of your agency. 
I believe there is a total of $432 million being directly 
refunded to more than 6 million consumers because of your work.
    You have had to endure criticism regarding data and I think 
questions that people want answered, but I think the 6 million 
people whom you helped get refunds are pretty happy about the 
work you are doing. So many proclamations made in the name of 
Americans, but those 6 million are Americans, too.
    For example, the members of the United States military who 
were refunded about $6. 5 million due to deceptive car loans. 
They are Americans and they are glad that they got their money 
back.
    I happen to have a very close relative who is an 18-year-
old enlisted member of the Army. And every time he walks 
outside that base, he sees those low terms. I don't want him to 
get financially caught up. And because of your work, he won't 
be or is less likely to be.
    Also, Capital One paid about $210 million because they 
engaged in deceptive credit card practices. What is in your 
wallet? The CFPB has a little bit more left in Americans' 
wallets than would have been if you guys hadn't had acted. And 
also, the CFPB has fined 4 private mortgage insurance companies 
for more than $15 million for alleged kickbacks.
    So, I don't begrudge my colleagues at all for asking 
questions of concern to themselves or their colleagues. That is 
fine. That is what Congress is all about. But I just don't want 
it to be lost that literally millions of Americans and millions 
of dollars have been refunded because of your good work. In 
fact, I don't claim that the CFPB couldn't work better. Maybe 
it could. But I do believe that you guys are off to an awesome 
start and you are operating as we contemplated.
    And I could tell you this, there is no such thing as a 
Republican or Democrat consumer fraud. They happen in 
everybody's district, all over this country, all the time. And 
no matter how you voted in the last election and no matter how 
you plan to vote, if you are getting full measure for your 
dollar, then the CFPB is well-justified. And I thank you for 
the work that you are doing.
    I just also want to note that there are issues that we want 
to inquire about. And before my time runs out, I do want to 
just get to one of them. One of the things that I am concerned 
about is the credit-invisible. These are folks who aren't 
banked at all.
    But what we have learned, and what has come to my attention 
is that if cell phone records and utility bills were able to be 
counted, then maybe some of these people could get a score and 
might be credit-visible.
    And therefore, that could improve their lives, reduce the 
cost of purchases, and even employment, which might hinge upon 
a good credit score. People might be able to acquire that. 
Could you talk a little bit about how you see this issue? And 
if anything, what the CFPB is doing about it or might do about 
it?
    Mr. Cordray. Thank you, Congressman. It is an important 
area, an interesting area. There are a lot of people who make a 
lot of payments in their lives, and they don't seem to get much 
credit for it when it comes to positives showing up in their 
credit report or boosting their credit score.
    It is an issue we are very interested in. We have been 
studying the impact of remittances, which is one of the kinds 
of payments some people make very steadily and very 
persistently, how that could affect credit scores. The same, as 
you say, with utility payments, rent payments, and the like.
    There are some interesting pilots and models out there to 
try to figure out how we can do this better. Because, frankly, 
up to now, the credit reports tend to reflect only certain 
kinds of credit that tend not to be as common among low- and 
moderate-income Americans. And so, it is something of a skewed 
picture of the market.
    So, it is a good line of inquiry and one that we are 
interested in and happy to work with your staff on.
    Mr. Ellison. Yes, me and Democrats and Republicans, the 
bipartisan bill that we have, we would love to get your 
technical assistance on it, because we would like to help 
people improve their financial outlook.
    Mr. Cordray. Yes.
    Mr. Ellison. And again, I do want to encourage you to go 
after that student loan thing. This is a big, big deal. You 
mentioned the overhang on individual students and families. 
What about the macroeconomy? We are expecting those kids to go 
out and buy refrigerators one day.
    Mr. Cordray. Yes.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Ohio, Mr. 
Stivers.
    Mr. Stivers. Thank you, Mr. Chairman.
    Director Cordray, I want to congratulate you on your 
appointment. My questions are around three areas that are all 
around the theme of transparency. You were congratulated for 
your transparency, and I want to talk to you about three things 
on transparency. One is the Inspector General, and then some 
information on advisory panels, and then activities.
    First, with regard to your Inspector General--and if you 
can give me brief answers to the first two questions. They are 
kind of yes-or-no questions.
    Mr. Cordray. Sure. Okay.
    Mr. Stivers. Is your Inspector General solely dedicated to 
the CFPB? Yes or no?
    Mr. Cordray. We share an Inspector General with the Federal 
Reserve.
    Mr. Stivers. With the Federal Reserve.
    Mr. Cordray. We are within that system.
    Mr. Stivers. And is your Inspector General Senate-
confirmed?
    Mr. Cordray. I actually don't know, offhand, the answer.
    Mr. Stivers. The answer is no, and I didn't mean to answer 
your question for you. But--
    Mr. Cordray. Okay. Fair enough--
    Mr. Stivers. I guess given what Representative McHenry, the 
chairman of our Oversight Subcommittee, talked about earlier 
with regard to Ideas42, some stuff that has been in the paper 
with--data. I don't want you to comment on either of those 
particular possible conflicts. But I believe an independent, 
Senate-confirmed Inspector General is important because of the 
challenges of accountability of this agency with regard to 
having a budget that is not part of the normal appropriations 
process, and then not having a board. Boards normally preserve 
the rights of the minority view and then give a voice for that.
    And so, given those things, I think it is really important 
that you have a separate Inspector General who is focused on 
you, who is Senate-confirmed. And if you can give me brief 
comments on that. I don't want to get you sideways with your 
current Inspector General or anything.
    Mr. Cordray. I would just say two things on the Inspector 
General. We have an Inspector General. We share with the Fed, 
but a very strong I.G., strong staff, and they have been 
working to improve our operations and are doing so in a number 
of respects.
    Whatever Congress provides is what we will carry out. And 
it is true of all of our oversight provisions, the numerous 
audits we're subject to; the mandatory testimonies both here 
and in Senate Banking and FSOC veto and other things.
    Mr. Stivers. Great.
    Mr. Cordray. You know--
    Mr. Stivers. Thank you.
    So, the other thing I want to focus on is advisory panels. 
And you mentioned earlier that the CFPB doesn't know a lot yet 
about payday lending, doesn't completely understand it. You 
have done some White Papers on it.
    But you got a letter signed by 30-some members of the 
committee here. Then, I know you got a letter from at least one 
Democrat who is very prominent, and holds a position outside 
the Congress, saying you should consider having an advisory 
panel.
    And I know Section 1014 of the Dodd-Frank Act actually 
requires you to have this consumer advisory board or--and you 
have set up one for credit unions. You have set up one for 
community banks. That is great.
    But because you are, essentially, the sole Federal 
regulator or the primary sole--Federal regulator for non-bank 
financial institutions, and because you can potentially 
regulate them out of business as was referred to earlier, it 
would be great if you would try to set up some type of advisory 
panel. And even if you set up one that had diverse interests--
because I know you talk about--
    Mr. Cordray. Yes.
    Mr. Stivers. When you and I talked, you talked about--you 
have credit bureaus. You have student loans.
    Mr. Cordray. Yes, that is right.
    Mr. Stivers. You have other financing agencies. But if you 
set up one as a voice for non-bank financial institutions, even 
though there would be disparate interests at the table, it 
would be great for you to have that input and feedback.
    So I guess that is more of an urging than anything. I would 
ask you to consider that. If you want to make a brief 
statement, I have one more thing I want to talk about really 
quickly.
    Mr. Cordray. Yes, that is fine. Look, I have responded to 
the letter. It is a--we have the Credit Union and Community 
Bank Advisory Councils because they fill a hole. We don't 
examine them. We don't see them day to day. We are constantly 
dealing with the non-bank focus.
    We do have examination authority. So we are working with 
them day to day. That is what felt different to me. I am happy 
to talk with you further and--
    Mr. Stivers. Maybe we can talk offline a little bit about 
it. The last thing is more of an activities warning. It has 
come from multiple sources. Mr. Campbell talked about it. Mr. 
Luetkemeyer talked about it.
    Sometimes, the activities you do target financial 
activities that you might not like, whether it is specific 
types of car loans or online lending, they can actually--if 
they are products that consumers demand, your activity can 
actually result in credit allocation that hurts borrowers. And 
I am really concerned about that.
    And I want to focus on one piece of it. Do you think it is 
appropriate to have non-written guidance that, basically, tries 
to force people, force businesses to not have a banking 
relationship without any due process? Because I think that is 
what is happening with online lending.
    Mr. Cordray. I am not understanding. Forcing--
    Mr. Stivers. Okay, so--
    Mr. Stivers. It is not you. It is the FDIC--
    Mr. Cordray. Yes.
    Mr. Stivers. --that is twisting some banks' arms saying, 
``Don't bank these particular types of companies.'' And if they 
are following State laws; should that happen? Shouldn't we make 
sure that--and you stated it earlier--
    Chairman Hensarling. Very brief answer, since the time of 
the gentleman has expired.
    Mr. Cordray. If people are following all the laws, then 
there is not a problem. If they are not following all the laws, 
I understand that is what people are looking into. And there 
may be, obviously, a distinction between the financial 
institutions following the law, whether the online lender is 
following the law, and what they know about each other. Those 
are the complexities we are all trying to work through.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Ohio, Mrs. 
Beatty.
    Mrs. Beatty. Thank you, Mr. Chairman, and Ranking Member 
Waters.
    Again, thank you, Mr. Cordray, for being here. And let me 
join others in congratulating you on your confirmation and also 
receiving the bipartisan accolades prior to your confirmation 
on your credentials and character.
    I have three questions also. Certainly, as you are aware, 
the Attorney General in Ohio has taken an extremely aggressive 
approach to scrutinizing the consumer credit reporting 
companies for failing to investigate and correct. And, 
certainly, we all know how important credit reports are.
    He went so as much to go on record and drew attention not 
only from national media, but ``60 Minutes,'' in saying he 
thought they were breaking the law. And there is an article, 
Mr. Chairman, I need to enter into the record.
    Chairman Hensarling. Without objection, it is so ordered.
    Mrs. Beatty. That happened in August, around the last week 
of August. Let me just say how much I appreciated your 
immediate response to that, coming out with your release in 
strong words of holding them accountable. So I wanted to thank 
you for that.
    I also, before I ask my two questions to allow you enough 
time to answer, wanted to say I really appreciate your 
deliberate detail in somewhat lessly, but historical answers. 
Because there are at least a dozen of us who were not here July 
21st of 2011 when your agency went into effect from Dodd-Frank.
    And as we move forward, especially since a lot of my 
colleagues on the other side of the aisle have wanted us to 
move the needle, it is very much appreciated that you help 
educate us on where we were.
    Secondly, had you had the opportunity to be here before 
when we were going through some of those questions and issues, 
I think we would have been served. Unfortunately, you were not 
invited and not here. And I appreciate your bipartisan 
responses to some of the questions.
    Let me move forward. For many, financial literacy--as you 
know, we made many changes in Ohio through your leadership. I 
would like to go on record in bipartisan support to say that I 
would like to join Mr. Stivers in working with you on financial 
literacy. Because I think as we look at our young folks, they 
are the economic engines of the future for financial growth.
    My question that I would like an answer to from you is on 
the Office of Minority and Women Inclusion (OMWI). As you have 
heard repeatedly on this side of the aisle, our ranking member, 
Congresswoman Maxine Waters, defined break for us, i.e., work. 
So, we have had the opportunity to work through that break.
    Mr. Cordray. Yes.
    Mrs. Beatty. And even most recently, had the opportunity to 
have a mini town hall meeting with those new Directors of OMWI. 
So having a big interest in what happens with small businesses 
as a small business owner, can you help us when we talk about 
women and minorities and Federal contracts of how you propose 
to help us increase those numbers and make a difference?
    Mr. Cordray. Yes, so thank you for that question. Thank you 
for all your comments.
    On the Office of Minority and Women Inclusion (OMWI), which 
is what OMWI represents, first of all, I am very pleased and 
have developed a deep respect for the OMWI at the CFPB, whom 
you met the other day, maybe met before, former commissioner of 
the EEOC and really very thoughtful about the work that we are 
doing in this area.
    There are three areas of work. The first is hiring 
practices at the different Federal agencies. The second is 
contracting practices at the different Federal agencies. We 
have been very mindful of that, and we have made some changes 
in our own human capital and procurement processes to reflect 
some of that input.
    And the third is the issue of diversity in the financial 
services industry itself, which is a broader issue. There are 
not any compulsory tools that have been given to the agencies 
to effect that. And it feels to me that is going to be a 
cooperative effort back and forth between the agencies and the 
industry on that front.
    We are just working to--I think we are finalizing a 
memorandum of understanding with standards within the next 
month or two, maybe one month. And we will move forward from 
there. But we are very mindful of our obligations here. We take 
them seriously, and I think it is going to be interesting and 
important work.
    Mrs. Beatty. Thank you.
    And, Mr. Chairman, I actually yield back my time.
    [laughter]
    Chairman Hensarling. The gentlelady from Ohio is setting a 
fine standard for this committee.
    [laughter]
    The Chair now recognizes the gentleman from Pennsylvania, 
Mr. Rothfus.
    Mr. Rothfus. Thank you, Mr. Chairman.
    And congratulations, Director Cordray, on your 
confirmation.
    A recent survey from the Independent Community Bankers of 
America (ICBA) reveals that more than 10 percent of the 
community banks are indicating that they are going to get out 
of the mortgage lending business due to the QM rule. How does 
the fact that these banks will be exiting this market help 
increase access to credit?
    Mr. Cordray. First of all, I am not familiar with this 
survey, although I will now look for it. You say it is an ICBA 
survey?
    Mr. Rothfus. Yes.
    Mr. Cordray. Okay. It would be unfortunate, in my mind, if 
community bankers who had been making loans, typically, 
according to a very responsible underwriting model that is safe 
and sound and often performed extremely well, even during the 
worst economic crisis of our lifetimes, were to stop making 
mortgages because they have some anxiety around the rules that 
I think is not justified.
    The smaller banks, as I said, we have a special provision 
to cover them so that they make loans and keep them in 
portfolio. They are Qualified Mortgages with a safe harbor from 
litigation. It would be a bad business decision if they were to 
leave that money on the table and not make those loans.
    Mr. Rothfus. Yes, I think it is important that you reach 
out to the--
    Mr. Cordray. I know. They need to know. Some of them don't 
seem to know that yet.
    Mr. Rothfus. If I could just talk a little bit about some 
transparency issues. We are coming up on a very sad anniversary 
in this country in November--
    Mr. Cordray. Yes.
    Mr. Rothfus. --with the death of President Kennedy. And one 
of the things I have always heard about his Administration was 
the call to public service. Indeed, you look at some of his 
words, ``Let the public service be a proud and lively career. 
And let every man and woman who works in any area of our 
national government in any branch at any level be able to say 
with pride and with honor in future years, `I served the U.S. 
Government in that hour of our Nation's need.'''
    And, of course, we all remember, ``Ask not what your 
country can do for you. Ask what you can do for your country.'' 
President Kennedy also told the American people to ask of those 
in public service the same, to hold them to the same high 
standards of strength and sacrifice that we ask of the American 
people.
    There was an ad on the American Bankers Web site from the 
CFPB, advertising employment. ``Not satisfied with your day to 
day? Why not give public service a try? Take your private 
sector skills and put them to good use at the CFPB. Make a 
difference without compromising premium salary and benefits. 
Now hiring: all levels of our supervisory team.''
    There are 741 staffers at the CFPB: 61 percent make a six-
figure salary; 111 staffers make more than $179,000; 56 
employees make more than $199,000; and 14 make more than 
$227,000, which is how much the Vice President of the United 
States gets paid.
    Does the CFPB pay bonuses in addition to these salaries?
    Mr. Cordray. So, first of all--
    Mr. Rothfus. Does the CFPB pay these people who are making 
the six-figure and higher salaries bonuses? Yes or no?
    Mr. Cordray. We have had limited supplemental pay 
adjustments--
    Mr. Rothfus. Okay, so would that be a bonus?
    Mr. Cordray. I don't consider it a bonus.
    Mr. Rothfus. Okay, do you know what the top enforcement 
attorneys make at the Department of Justice?
    Mr. Cordray. I know that they are on a different pay 
schedule than the independent Federal agencies, but I don't 
know what they make.
    Mr. Rothfus. And do you know that the people who have those 
top enforcement jobs at the Department of Justice could be 
making a lot more money on the outside?
    Mr. Cordray. And I believe many of our people could be 
making a lot more money on the outside as well.
    Mr. Rothfus. But they are making more than the attorneys at 
the Department of Justice, is that correct?
    Mr. Cordray. Different people make different amounts at 
different levels that have--
    Mr. Rothfus. Do you know what the top salaries are for the 
people at the Consumer Product Safety Commission?
    Mr. Cordray. Again, the Federal banking agencies are on a 
different pay scale than the GS scale. One of the things that I 
want to note, it is very important here. Our statute requires 
us, it requires us, this is the law of the land that we are 
bound to follow that we are to have a pay scale comparable to 
that of the Federal Reserve. Last I checked on our statistics, 
we were 1 percent lower in average salary than the Federal 
Reserve, so we are complying with the law--
    Mr. Rothfus. But who sets your salary, Director?
    Mr. Cordray. I beg your pardon?
    Mr. Rothfus. Who sets your salary?
    Mr. Cordray. Congress.
    Mr. Rothfus. Congress sets the salary.
    Mr. Cordray. And it is lower than many of the people at the 
agency, but I am willing to do that to--
    Mr. Rothfus. Would you support legislation that sets 
guidelines for what salaries at the CFPB should be?
    Mr. Cordray. Congress has set those guidelines so they 
specifically provided in our statute, that, like the other 
Federal banking agencies, we would be on a pay scale, and that 
wouldn't--
    Mr. Rothfus. Would you oppose legislation that would make 
the pay scale be comparable to the enforcement people at the 
Department of Justice?
    Mr. Cordray. Again, I don't know what level you are talking 
about, apples-to-apples comparison. I am happy to have our 
staff talk to your staff about pay if that is an issue for you. 
But we are just following the law. We are trying carefully to 
follow the law.
    Mr. Rothfus. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Washington, Mr. 
Heck.
    Mr. Heck. Thank you, Mr. Chairman, and Ranking Member 
Waters. Director Cordray, I want to pick up on the line of 
inquiries made by Congressman Green and others, namely the 
relative layer of regulatory burden on small institutions. I 
actually don't think this is rocket science. I think it is 
axiomatic. Small institutions run on people. Big institutions 
run on processes. And fairly understandably, the CFPB's 
regulatory approach is geared to processes.
    So given what you had said earlier about there being a lack 
of culpability on the part of smaller banks and credit unions 
to contribute to the economic crater we experienced, is there 
anything else that you can do that would ease that regulatory 
burden to enable them to continue to be a part of the rich 
fabric, the financial institutions that offer services to 
consumers?
    Indeed, is there anything you can even say that would help, 
I think virtually everyone on this committee, feel better that 
you really get this? Indeed, Director Cordray, if you want to 
take today to announce a new initiative in this regard and make 
news, please feel free.
    Mr. Cordray. So thank you, Congressman, and I think there 
are things that I can say that are important. First of all, I 
have never worked at a big financial institution. That is not 
my background. It is of some, and it is an important experience 
that some bring to the Bureau and bring to this Congress.
    I am from a small town in Ohio. I grew up there. I commute 
from there now which gives me an appreciation for all of you 
who commute from all over the country and you go 3 time zones 
as I understand. That is above and beyond. And we did that 
because we want to serve this country, and we take pride in 
having a role in helping lead this country.
    In terms of the smaller banks, they are the backbone of the 
economy in many parts of America. We have a unique small 
banking system in this country that is not replicated in 
Europe. It is not replicated in most countries around the 
world.
    A banker told me recently that he had been in China and 
they were very curious about, ``How could they set up a bank, a 
system of 7,000 or 10,000 small banks?'' It is not easily done. 
It required decades and decades of work.
    It is important for us to preserve that system, because I 
know in many small towns, if the local bank or local credit 
union is not providing that credit, bigger banks aren't going 
to come in and do it. I was taken by your initial comment, 
which I think is exactly right. Larger institutions tend to 
work on processes, and smaller institutions on persons, who 
often exercise a lot of discretion and judgment.
    The way they have exercised that discretion and judgment 
historically has been sound and responsible and deserves our 
respect and our admiration. It is a model that performed well 
through the worst financial crisis of our lifetimes, and 
continues to perform well.
    We are trying to figure out where we can make special 
exemptions and special provisions to recognize that model and 
encourage it and not oppress it with a slew of rules that they 
don't necessarily need to meet because they were not part of 
the problem.
    We will continue to do that and I meet regularly with them, 
to hear from them, both the State institutions, State-to-State 
association level, individual institution-level, the ICBA, 
credit union groups, and also our advisory council.
    It is something that I mean for this agency to be able to 
point to as a success and not as a failure, and I appreciate 
your input to help us accomplish that.
    Mr. Heck. Please hear us, it is universal.
    Mr. Cordray. Yes.
    Mr. Heck. Maybe quickly, on the QM, I have the sense that 
you had gone back and done a retrospective analysis of how many 
loans made in the last few years would have been enabled or 
allowed under the QM.
    But I am actually more curious, especially given the 
decision on QRM as to whether or not you have gone back and 
done any analysis retrospectively on how many loans would not 
have been allowed in the years of a run up to the crater, and 
whether or not you think that it would have helped us, 
materially helped us avoid bursting that bubble by having fewer 
people placed in loans for which they probably shouldn't have 
been?
    Mr. Cordray. Yes, two points. First, your question is, how 
can we continue to monitor how the mortgage market may be 
affected by our rules, and make sure that we are not having 
undue effects of the kinds the chairman has referenced that we 
don't want to have.
    We have to have data and information in order to do that. 
There is no substitute for it. If you cut us off from having 
information about the markets, we won't do a very good job, and 
you will justly criticize us for that. In terms of this issue 
in particular, the QRM is a rule that we are not involved in 
writing.
    There seems to be a growing proposal by the other agencies 
now to conform that significantly to the Qualified Mortgage 
rule, which I assume is a complement to that rule. We will 
continue to work with the other agencies to help them get that 
right in their judgment. It is not our rule, it is their rule, 
but we are happy to continue to work with them on it.
    Chairman Hensarling. The time of the gentleman has now 
expired. The Chair recognizes the gentleman from South 
Carolina, Mr. Mulvaney.
    Mr. Mulvaney. Thank you. Mr. Cordray, in looking over the 
reports, something jumped out at me, which was the section 
regarding the amount of money you had requested from the 
Federal Reserve for the first quarter of this year.
    It said that as of December 31st, you had requested--
Federal Reserve filling $136.2 million to fund your operations. 
But later on in the same document, it says that you only spent 
$85.9 million. What did you do with the extra $50-odd-million?
    Mr. Cordray. We make quarterly requests to the Federal 
Reserve.
    Mr. Mulvaney. I know what you do, and again, I am not 
trying to cut you off. I really just want to have a 
conversation.
    Mr. Cordray. I know.
    Mr. Mulvaney. I am not going to give speeches. What did you 
do with the extra $50 million?
    Mr. Cordray. I know how it works. Yes, what I am saying is, 
you need to look at it over time. Some quarters we are asking 
for more because we spent more before. Some, we are asking for 
less because we spent less before. It is an ongoing thing, and 
it is a reasonable answer--
    Mr. Mulvaney. --and that is why I went back to look at 2011 
and 2012.
    Mr. Cordray. Yes.
    Mr. Mulvaney. In leading up to your question for 2013--in 
2011, you asked for $161 million and spent $123 million.
    Mr. Cordray. Yes.
    Mr. Mulvaney. In fiscal 2012, you asked for $343 million 
and only spent $299 million before you asked for $136 million 
versus only spending $85 million in the first quarter of 2013. 
So by my calculations, going back to the beginning of your 
existence, you have asked for roughly $135 million more than 
you have spent. I want to know where the money is going?
    Mr. Cordray. Let me say a couple of things. First of all, I 
hope you understand, there is a challenge to creating a new 
agency out of nothing. We had no agency, no personnel, no 
structures, anything in July of 2010. We are about 3 years old 
now.
    We have had something of a pattern in the early phases of 
the Bureau as we have been building up, of underspending. In 
part, because we had anticipated a hiring trajectory that has 
been slower than we intended--
    Mr. Mulvaney. How long do you expect it to be before your 
quarterly requests start to line up more closely with your 
quarterly expenditures?
    Mr. Cordray. I think they are beginning to line up more 
closely now. The other piece I want to mention is--
    Mr. Mulvaney. I don't have the second or third quarter 
numbers in 2013, but how closely did they line up, say for your 
most recent request?
    Mr. Cordray. Okay. So the other piece that I wanted to get 
out on the table is, we are leasing a building that is 
apparently in need of substantial renovation--
    Mr. Mulvaney. I understand all that.
    Mr. Cordray. And we have had timing issues where we have 
requested funds for that, and then the renovation wasn't able 
to proceed yet, so some of those numbers have looked larger 
than they have turned out to be. That is the other piece.
    Mr. Mulvaney. Your authority to ask the Federal Reserve for 
money seems to come from Section 1017 which gives you the right 
to, ``an amount determined by the Director to be reasonably 
necessary to carry out the authorities, et cetera.'' Okay, that 
is the statutory authority for your ability to go request money 
from the Federal Reserve. If anybody thought that your request 
was unreasonable, who could make that challenge?
    Mr. Cordray. I think we are subject to oversight by the 
Congress right here. You are the only--
    Mr. Mulvaney. No, the only oversight we have on your 
spending is the caps that are set every single year as a 
percentage of the expenses of the Federal Reserve, so I am 
asking you, has your Inspector General ever asked you about the 
relationship between the size of your requests and the size of 
your expenditures?
    Mr. Cordray. We are subject to a GAO audit every year. We 
are subject to an additional outside audit every year. This is 
all the law of the land. We are subject to Inspector General--
    Mr. Mulvaney. I don't care about that. Has anybody ever 
asked you that question?
    Mr. Cordray. I think that question has been asked several 
times, actually in these hearings, it has been asked before, 
because people want to make sure, just as you are legitimately, 
and very validly, as far as I am concerned, asking now. How is 
our spending matching up with our budget--
    Mr. Mulvaney. And the reason I ask, Mr. Cordray, is because 
the money comes directly from the Fed, and because the Fed 
remits its extra earnings back to the Treasury, this is money 
that comes straight off of the bottom line. This is money that 
would go to reduce the deficit that you all are sitting on. 
Again, my calculations, roughly $135 million plus interest.
    Mr. Cordray. Yes. Again, there has been some underspending 
issues around the hiring trajectory and also the timing of 
building renovations that will smooth over time. As for us, we 
are like every other banking agency, but we have a hard cap on 
our budget which the others do not have.
    Mr. Mulvaney. Are you operating under a specific plan to 
run up the amount in that account?
    Mr. Mulvaney. How large do you expect that amount to be?
    Mr. Cordray. I expect that as soon as the building 
renovations get under way, I am sorry to say, because I would 
rather spend $0 on it, much of that will be--
    Mr. Mulvaney. Good, because that will happen some time.
    I want to follow up very briefly now on something that Mr. 
Green and Mr. Heck both asked about the smaller financial 
institutions. My understanding is that you have some primary 
authority over the larger, and then some secondary authority 
over some of the smaller institutions of less than $10 billion.
    Tell me, sir, how you handle your rule-making, your 
oversight authority differently for the small institutions 
versus the large ones, and the specific example I am interested 
in, there is the prohibition on financing credit insurance 
premiums which I understand rules now apply the same for the 
large institutions versus the small. So tell me how you treat 
those two institutions differently in that particular 
circumstance.
    Mr. Cordray. The institutions are treated differently in 
part under the law because we don't have any authority to 
examine any institutions with assets of $10 billion or less. So 
we have no examination teams that go in, we are just not part 
of that. It is a very significant difference and its one that I 
understand people lobbied hard for in the Dodd-Frank Act.
    In terms of how we write our rules, as I indicated in 
several respects, we have tried to take account very carefully 
of the smaller creditors and their particular needs and the 
fact that a few employees can't bear the same compliance burden 
as a 200,000 employee institution, as some of the larger ones 
are or even larger.
    In terms of the things, it is something that we are trying 
to be careful about all the time and that is why we have Credit 
Union and Community Bank Advisory Councils to help with that.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Colorado, Mr. 
Perlmutter.
    Mr. Perlmutter. Thanks, Mr. Chairman.
    Mr. Cordray, equanimity and perseverance are the two words 
that come to mind watching you today. I appreciate the fact 
that you have been very mellow under certain cross-examination 
and also for being here as long as you have been.
    I have three points I want to make.
    The first involves the title insurance question that you 
received from Mr. Miller using the word ``optional,'' title 
insurance being optional.
    I just suggest that you remain--that the document be silent 
that we in the Federal Government are not mandating title 
insurance but in virtually every real estate transaction, if 
you have a lender and a borrower, title insurance is going to 
be required, and if you are fortunate enough not to need a 
lender, you certainly don't want some hazardous waste pipeline 
going across your property that you don't know about. So, I 
would just suggest you get rid of the word optional.
    Mr. Cordray. Okay.
    Mr. Perlmutter. Secondly, on Qualified Mortgages, I think 
that the Bureau is in kind of a dilemma here with its 43 
percent debt to income ratio and the potential that those loans 
remain either with the credit union or with the small bank or 
with the original mortgage lender because they cannot now be 
sold in the secondary market which will then really reduce 
their liquidity, and what I fear is that lower-income borrowers 
are going to be, in effect, redlined out of borrowing.
    And so, there is a potential for discrimination at the same 
time, trying to have legitimate underwriting criteria in place, 
and I would just ask that your Bureau really look at that 
closely because I have had a number of complaints now from 
small banks, credit unions, and other lenders that they feel 
like they are in an impossible position.
    Mr. Cordray. Yes.
    Look, I would just say that I think it is going to be very 
important to us, and we made a commitment to monitor the 
effects of these mortgage rules as we go and as the market 
continues to evolve. And if there is GSE reform or other 
significant changes in the market, we are all going to have to 
think about how those affect the application of some of these 
rules.
    That is again, I just want to stress this again, that is 
why having the information and data about what is actually 
going on in the mortgage market is so critical to us being able 
to do that successfully and making sure that things aren't 
going off the rails. We are also going to be required to review 
these rules within 5 years, that is in the law and consider 
updating or changing them as appropriate once we have more 
experience with them. Again, we won't be able to do that if we 
don't have the information necessary to have a--
    Mr. Perlmutter. I, for one, want you to have the data, you 
need the data to be able to do this right.
    Mr. Cordray. Yes.
    Mr. Perlmutter. But I think this one, you better watch it 
closely from the get-go because--
    Mr. Cordray. Fair enough.
    Mr. Perlmutter. --I think it is going to be a problem.
    Mr. Cordray. Fair enough.
    Mr. Perlmutter. The third thing, and it is a subject that 
has not come up yet today, is marijuana and banking. And the 
reason I bring it up is that in your position at the CFPB, and 
then you also sit on the FDIC Board or one of the other 
financial boards, we now have two States that allow for adult 
use of marijuana, being Washington and Colorado, and 20 States 
that have medical marijuana, so 22 States out of the 50 where 
there is some use of marijuana and under the banking 
regulations whether it is credit unions, banks, the ability to 
provide financial services has been questioned by some.
    And if that is a consequence, everything goes to cash. And 
when it is cash, you have public safety problems. I think you 
were Attorney General in your role, you could see that. People 
are going to be more subject to robbery, obviously fraud, you 
can't follow the money. From a tax point of view or from any 
kind of audit trail kind of a point of view.
    So, this matter came up before the Senate Judiciary 
Committee a couple of days ago, the Attorney General and their 
office has said, look, we understand that there is a banking 
issue here. We have sent, Denny Heck and I have sent you a 
letter on this subject and we would like for you to really be 
on it because we think this is a public safety issue. We now 
have 22 States, something that has to be addressed.
    And with that, I yield the balance of my time to the 
ranking member.
    Mr. Cordray. Do you want me to make a brief statement on 
that, because when you first raised the issue of marijuana and 
banking, I was a little surprised, and then I recalled the 
letter which I did see, and that there are some legitimate law 
enforcement and financial issues here that we will be glad to 
take a look at. I am from Ohio, and we are not one of those 
States, so it is not as front and center in my mind as maybe it 
is elsewhere.
    Mr. Perlmutter. But the law enforcement piece would be.
    Mr. Cordray. Yes.
    Mr. Perlmutter. I now yield to the ranking member.
    Ms. Waters. Thank you.
    I was hoping I would have a little bit more time because I 
think you have been so rudely interrupted on any number of 
issues that you really didn't have time to respond. I don't 
have any time to really give you so we will get with you to 
make sure that we get that information from you.
    Mr. Cordray. Look, I just wanted to say, I understand this 
is oversight. I take it very seriously. It is important to me. 
I understand Members feel strongly about certain issues and 
sometimes it is not easy for me to give a simple answer to a 
question about a complicated matter.
    I hope people can understand and respect that and I know 
that can be frustrating. That is not my intention, not my 
purpose, and I am happy to continue to work with you to see 
that you have the oversight that you want and need.
    Chairman Hensarling. The time of the gentleman from 
Colorado has expired.
    The Chair now recognizes the gentleman from New Mexico, Mr. 
Pearce.
    Mr. Pearce. Thank you. Mr. Cordray, congratulations and 
condolences on your confirmation.
    I represent New Mexico, and 50 percent of the loans in New 
Mexico for housing are for trailer houses, so when your agency 
excluded balloon loans, it made it very difficult to loan money 
on houses that are--if they are misused, they actually 
deteriorate, fall down in 4 or 5 years, so the balloons were 
common practice and you have made that very difficult. Any 
prospects of changing that?
    Mr. Cordray. Thank you, Congressman, and this was an issue 
that we worked hard on to try to give more latitude in the 
rural or underserved areas. I come from an area of Ohio that I 
consider rural. There is a farm across the road but I have come 
to understand that in western States, rural really means 
something quite different from my experience.
    Mr. Pearce. That would bring up then the second point--
    Mr. Cordray. Yes and so--
    Mr. Pearce. --I will show you a map.
    Mr. Cordray. That is right.
    Mr. Pearce. Yes, so this is New Mexico.
    Mr. Cordray. That is right.
    Mr. Pearce. We have 2 million people in the same size 
geographically as the northeast where 55 million people live in 
that same size area. Now if you look over here in this corner 
here, that is Luna County. It is about 2,500 square miles, 
which makes it larger than Rhode Island and Delaware, and it 
has 25,000 people, which means that we have 8 people per square 
mile. In New York, for instance, you have 27,000 people per 
square mile, and they are being treated the same here.
    There is one road north and south, one road east and west, 
and the one town sits right in the middle and they are being 
treated--so this definition of rural and underserved somehow 
doesn't play out--Cibola County right here goes over to the 
Arizona border, it is 6 people per square mile and they are not 
declared rural in your definition.
    Mr. Cordray. Yes, let me just--because I think I can lance 
the boil on this.
    I have seen a similar map for Ohio, and as soon as I saw 
the map, I realized we didn't get that right. What we did then 
was we put in a 2-year moratorium on that. We have given 
everybody comfort and security for 2 years that this will not 
be a problem for anybody in any of those counties for the next 
2 years and it--
    Mr. Pearce. How many home loans fall in the 2-year--0- to 
2-year category, sir?
    Mr. Cordray. No, no, no for 2 years, this does not take 
effect. That is what we have done. We have pulled that back--
    Mr. Pearce. So they could make 100,000 loans, and for 15 
years and they wouldn't have to reconsider those loans. 
Anything done here--
    Mr. Cordray. No, no, no, no. For 2 years, we have 
completely solved this problem. No lender has to worry about 
this for anything they are doing for the next--
    Mr. Pearce. I am asking about the loans that are made 
during this 2-year period that extend beyond the 2-year period.
    Mr. Cordray. Oh that; any loans they make in the next 2 
years, this is not a problem.
    Mr. Pearce. That is--
    Mr. Cordray. We have pulled it back.
    Mr. Pearce. --my question.
    Mr. Cordray. And during those 2 years, we are going to 
reconsider this and redo that definition in a way that is more 
aligned, and we are happy to talk to you and your staff as we 
go. That is back off the table and is going to be reconsidered. 
It is not a problem for people in part because of the input we 
got from people that you are talking about.
    Mr. Pearce. The general prevailing direction--we had Ms. 
Kelley here in this committee room on May 21st, and then she 
came in on July 10th to visit personally with us. We still 
haven't heard any answers. I know you haven't had quite enough 
time to answer some of the things that have come in August, but 
this is now dating back to May and July and still no answers on 
these things.
    Mr. Cordray. But--
    Mr. Pearce. I understand that when you declare that banks 
are going to be okay, they don't have to follow QM if they hold 
things in their portfolio, understand that the portfolio of the 
average bank in New Mexico is 70 days.
    That means we can lend money for trailer houses for 70 
days, then we have to wait until those pay off. So when you 
treat these areas of the west the same way that you treat Wall 
Street, understand that you have a war on the poor that is 
going on.
    That is who suffers access to credit and access to being 
able to borrow money just to get into some used trailer house. 
And so, the one-size-fits-all has been disadvantageous to us 
there in the poor rural areas.
    Some of the counties in New Mexico got $14,000 per capita 
income. So as you make your rules, and again, it would have 
been nice to get answers from Ms. Cochran before now. We had a 
good dialogue on this very thing.
    You gave high praise to community banks, but understand it 
is the community banks who are telling me that they are 
probably just going to shut down and go out of business because 
of the CFPB. That is what I am hearing across the State.
    And so with your high praise for them, understand that your 
rules are the ones that are probably going to choke off the 
banks, and no one from Wall Street is ever going to come to New 
Mexico and lend money for a trailer house.
    Mr. Cordray. We will make it a point--I know we have spoken 
before--to reach out to New Mexico community bankers 
associations and get the word to them. I don't think that 
smaller lenders should be making a decision to get out of this 
market.
    I think it is a bad business decision. But I want to make 
sure that they understand that some of these anxieties are not, 
in fact, accurate and that we are working to continue to 
address--like that rule thing was not done correctly by us. We 
pulled it back. We are going to rethink it.
    And we are avoiding creating that problem. If there are 
other things you bring to our attention, we will listen to 
those, as well. I do realize, as you say, the West is different 
in--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Illinois, Mr. 
Hultgren.
    Mr. Hultgren. Thank you, Mr. Chairman.
    And thank you, Director. I appreciate you being here.
    I had a question about--and I know it is a challenge in 
government to have good staff and to keep good staff. I read 
recently in--I guess it was a little while ago, back in June--
the American Banker said though some turnover was expected, the 
sheer number of senior officials leaving worries bankers. They 
wonder who will fill these vacancies and how the new management 
will treat the industry.
    I think there is a real concern about the number of people 
leaving your organization, the CFPB, but also real concern over 
who is taking these positions. The other thing that I am very 
concerned about is the expertise and uncertainty of people who 
are serving in these positions of not really knowing details of 
the industry and not having a background in the industry.
    I also know there was, back in 2012, a questionnaire that 
asked, ``How satisfied are you with the training you receive 
from your present job?'' At the CFPB, only 38.8 percent of CFPB 
employees agreed that the training they received was 
sufficient.
    I have talked to my bankers. I have talked to some small or 
medium-sized banks around the country. And what I have heard is 
a frustration. They have been in this industry for their entire 
lifetime. They want predictable, understandable regulation and 
regulators who understand.
    One of the quotes I heard from one of the bankers was, ``It 
is very frustrating when I have been in this business for 
decades, and someone who was playing Hacky Sack on the quad 2 
years ago is now regulating my bank.''
    I have some questions.
    Mr. Cordray. Somebody who what?
    Mr. Hultgren. ``Was playing Hacky Sack on the quad 2 years 
ago now is a regulator over my bank.'' That is a concern I have 
heard over and over again. So I wondered if you could respond 
to that, the exodus of senior management, and then also the 
apparent lack of training and having qualified people to serve 
in these important roles.
    Mr. Cordray. Sure. First of all, and there has just been 
some reporting on this that has been off-base. The notion that 
there is some massive exodus of senior officials at the CFPB is 
just wrong. We have turnover at the CFPB, as every organization 
does, but our retention level has been quite high. The turnover 
level is quite low.
    There are people who come and go from time to time. And 
when they go, they are replaced. And we are finding that the 
people we are replacing them with are of equal quality, as good 
or better. We get hundreds of resumes for every opening. And we 
have actually been able to recruit quite effectively.
    Mr. Hultgren. Let me just jump in there. What I am hearing 
is that is not the case, at least that is not the perception of 
the people who are being regulated. Let me switch gears here 
because I have another question. I know you are working on one 
more major mortgage rulemaking, the merging of RESPA and TILA 
mortgage disclosures into one document.
    And the proposed rule was over 1,000 pages and will affect 
everyone involved in a home purchase: home-buyers; lenders; and 
REALTORS.
    As I understand it, given how much technical work must go 
into getting every system updated and ready, I would like to 
think it would be impossible to have this rule implemented 
before January 15th. Is that true? Why or why not?
    Mr. Cordray. It was a special mortgage rule in the sense 
that Congress required us to do it, but didn't give us a 
deadline, which told us that Congress wanted it done, but not 
quite on the same priority maybe as some of the other rules.
    We will now finalize that rule later this year. We will 
give an implementation period for that I think will be 
sufficient for industry. And we are talking and listening 
closely to what they have to say about that. We recognize that 
is going to require a fair amount of systems and process 
changes. And that will lag behind the changes that they are 
making for January--
    Mr. Hultgren. So there will be a delay in implementation 
requirements--
    Mr. Cordray. It is not even finalized yet, that one, unlike 
all the others. And when it is finalized, there will be a 
period of time to recognize they need to finish implementing 
this rule and then have ample time to bring that into effect.
    Mr. Hultgren. Getting very specific on this, I know one of 
the requirements the Bureau's RESPA-TILA proposal is to require 
all disclosure forms to be in machine-readable record format. I 
wonder if you could tell me what that means, what is the 
purpose of machine-readable forms? While I understand and 
appreciate that this will help the Bureau in examination, 
convergence to these systems, as you can imagine, will be 
incredibly costly for small lenders, escrow agents, and title 
companies.
    I wonder what efforts you are taking to help minimize the 
cost burdens on this rule on small businesses?
    Mr. Cordray. Yes, thank you for the question. Just as you 
are hearing about that, we are also hearing about it. We are 
trying to think about exactly what purpose that serves and to 
what extent those benefits are worth the burdens.
    Obviously, the point I know is to create some uniformity so 
that there can be more comparison, more analysis, and more 
understanding of the market. Whether that is all appropriate or 
needs to be done now is something that we are looking at.
    Mr. Hultgren. My time is just about done. I hope you will 
look at cost-benefit analysis. That doesn't happen enough in 
this. And it absolutely is having an impact on small 
businesses.
    Thank you, Mr. Chairman. I yield back.
    Chairman Hensarling. Okay, the time of the gentleman has 
expired.
    The Chair now recognizes the gentleman from Florida, Mr. 
Ross.
    Mr. Ross. Thank you, Mr. Chairman.
    Director Cordray, I want to talk to you about payday loans 
or advanced products, deferred presentment providers. How do 
you feel about those particular products?
    Mr. Cordray. About payday loans?
    Mr. Ross. Yes.
    Mr. Cordray. So, as with all small-dollar loans--and there 
are different ways of providing it: car title loans; pawn 
brokers; and others--they are a mechanism for credit that some 
people find absolutely necessary to meet particular situations. 
They are often a very high-cost loan. We did a White Paper that 
we published in the spring that analyzed this market pretty 
carefully. I think some--
    Mr. Ross. Let me ask you about that White Paper, the April 
24th White Paper of this year.
    Mr. Cordray. Yes.
    Mr. Ross. The detail of the data that you utilized for 
that, have you released any of that yet?
    Mr. Cordray. We did publish the paper.
    Mr. Ross. But the data upon which the paper relies, and the 
data that you collected to write the paper, have you released 
any of that?
    Mr. Cordray. I am not certain that we can. There is a 
certain amount of--
    Mr. Ross. Why can't you? There is not a privacy act out 
there to prevent you. What privilege would you assert--
    Mr. Cordray. What we are talking about is business 
information. There may be proprietary and trade secret issues 
there. There may be--it was provided to us in confidence on the 
understanding it wouldn't be published, could affect the 
competitive position of the companies. There is just some 
concern--
    Mr. Ross. But did it take into consideration just a one-
time user of a payday loan as opposed to a frequent or 
repetitive user of a payday loan?
    Mr. Cordray. We did, in fact.
    Mr. Ross. But did it take into consideration all States and 
their programs that they have here?
    Mr. Cordray. We did, in fact, yes.
    Mr. Ross. The Web site that you have on payday loans has a 
particular graphic that says, ``Would you pay--would you take a 
taxi across--cross-country trip?'' And it discusses the median 
loan, payday loan of $350. The medium number of transactions 
per year is 10. The data--the conclusions here are based on the 
data from your White Paper? Is that--
    Mr. Cordray. I believe so, yes.
    Mr. Ross. Don't you think that the integrity of your 
report, the White Paper itself is going to be somewhat 
tarnished as a result of not disclosing the data?
    Mr. Cordray. Look, we can't always disclose the data. What 
we can do is analyze it and provide the conclusions.
    Mr. Ross. So is it my understanding that you are going to 
refuse to disclose the data?
    Mr. Cordray. Actually, I will have my staff get back to you 
on that.
    Mr. Ross. Thank you.
    Mr. Cordray. But--
    Mr. Ross. I appreciate that.
    Mr. Cordray. --there are proprietary trade secrets--
    Mr. Ross. I understand that.
    Mr. Cordray. --issues, competitive issues--
    Mr. Ross. That is being--
    Mr. Cordray. --be harmed by disclosing that data, you would 
not want that, I would not want that.
    Mr. Ross. I agree with you. But you would also agree though 
that there is a market out there for payday loans that is not 
being met by traditional bank or lending institutions.
    Mr. Cordray. There is a market for payday loans--
    Mr. Ross. And--
    Mr. Cordray. --it is a multibillion dollar market--
    Mr. Ross. Yes. And if we--
    Mr. Cordray. --there are other ways to meet that demand 
too.
    Mr. Ross. --overregulate the good players to where they get 
out of the market, where is the demand going to go? Most 
likely, it will go offshore. Most likely, it will go on the 
Internet. You are not going to eliminate the demand just 
because you eliminate the supply.
    Mr. Cordray. There is actually data on that because there 
are 13 States that basically bar payday loans because they 
don't allow lending above a 36 percent rate of interest, which 
is a pretty healthy rate of interest.
    Mr. Ross. Good point, and I want to talk to you about rate 
States--
    Mr. Cordray. Okay.
    Mr. Ross. --that deals with payday loans because when I was 
in the legislature in Florida, we addressed this. We have by 
far the best regulatory scheme. We address every issue and I 
would ask you to please take a look at how we addressed Florida 
and if I might just share with you--
    Mr. Cordray. Actually, I could help you on that. Drew 
Breakspear is your current superintendent of banking and he 
provided us with their steps after we did our White Paper, they 
took the data and analyzed it for Florida in particular and 
provided us with that so we could see how those provisions you 
are talking about are unique in Florida.
    Mr. Ross. And how did that turn out, do you recall?
    Mr. Cordray. It was similar results to what we had in our 
report, maybe slightly better numbers in some respects because 
of some of the rollover and other types of constraints in 
Florida, but it was an interesting analysis and it was a good 
example of how they could use our approach, analyze their own 
data, provide it to us and then we could have a comparison. It 
was very helpful.
    Mr. Ross. For example, in your warning here that you say 
that the median fees paid for more than $457, repeat borrowing 
often results in a cycle of debt, typical APR on a $350 loan is 
over 300 percent based on your report.
    Now if you look at Florida, Florida limits their borrowing 
to $500 per loan. They may have only one outstanding at a time, 
the maximum fee, the interest rate is 10 percent plus a $5 
verification fee. I wish that was as good on my credit cards.
    They even have to wait 24 hours after they pay off the loan 
before they can go get another loan. The minimum loan is 7 
days, the maximum is 31 days. All I am suggesting to you is 
that there is a system that works.
    It works effectively, it meets the market demand, and I 
would only ask that you please take a look at that and use that 
as your model as you go into the payday loans.
    Mr. Cordray. I thank you, and actually the Florida data was 
very helpful in making a comparison and helping us make 
judgments about what may work or not work around the country, 
and I just want to emphasize this point again, that without the 
data, we can't have any idea what to do about this product. We 
have to have that data and Florida provided it, we have our 
own, and it is very, very helpful to getting this right.
    Mr. Ross. Thank you.
    Mr. Cordray. Thank you.
    Chairman Hensarling. All Members have been heard.
    I would like to thank Director Cordray for his testimony 
today.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    Mr. Cordray. And before those 5 days pass, we will have 
those QFRs everybody has been asking about from the last time--
    Chairman Hensarling. The committee will be most 
appreciative.
    This hearing stands adjourned.
    [Whereupon, at 12:49 p.m., the hearing was adjourned.]









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