[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

                             SECOND SESSION

                               __________

                            JANUARY 28, 2014

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 113-60




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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              BRAD SHERMAN, California
EDWARD R. ROYCE, California          GREGORY W. MEEKS, New York
FRANK D. LUCAS, Oklahoma             MICHAEL E. CAPUANO, Massachusetts
SHELLEY MOORE CAPITO, West Virginia  RUBEN HINOJOSA, Texas
SCOTT GARRETT, New Jersey            WM. LACY CLAY, Missouri
RANDY NEUGEBAUER, Texas              CAROLYN McCARTHY, New York
PATRICK T. McHENRY, North Carolina   STEPHEN F. LYNCH, Massachusetts
JOHN CAMPBELL, California            DAVID SCOTT, Georgia
MICHELE BACHMANN, Minnesota          AL GREEN, Texas
KEVIN McCARTHY, California           EMANUEL CLEAVER, Missouri
STEVAN PEARCE, New Mexico            GWEN MOORE, Wisconsin
BILL POSEY, Florida                  KEITH ELLISON, Minnesota
MICHAEL G. FITZPATRICK,              ED PERLMUTTER, Colorado
    Pennsylvania                     JAMES A. HIMES, Connecticut
LYNN A. WESTMORELAND, Georgia        GARY C. PETERS, Michigan
BLAINE LUETKEMEYER, Missouri         JOHN C. CARNEY, Jr., Delaware
BILL HUIZENGA, Michigan              TERRI A. SEWELL, Alabama
SEAN P. DUFFY, Wisconsin             BILL FOSTER, Illinois
ROBERT HURT, Virginia                DANIEL T. KILDEE, Michigan
MICHAEL G. GRIMM, New York           PATRICK MURPHY, Florida
STEVE STIVERS, Ohio                  JOHN K. DELANEY, Maryland
STEPHEN LEE FINCHER, Tennessee       KYRSTEN SINEMA, Arizona
MARLIN A. STUTZMAN, Indiana          JOYCE BEATTY, Ohio
MICK MULVANEY, South Carolina        DENNY HECK, Washington
RANDY HULTGREN, Illinois
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:
    January 28, 2014.............................................     1
Appendix:
    January 28, 2014.............................................    77

                               WITNESSES
                       Tuesday, January 28, 2014

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

                                APPENDIX

Prepared statements:
    Cordray, Hon. Richard........................................    78

              Additional Material Submitted for the Record

Hensarling, Hon. Jeb:
    Written statement of the National Independent Automobile 
      Dealers Association (NIADA)................................    81
Ellison, Hon. Keith:
    Report entitled, ``Toward a Sustainable and Responsible 
      Expansion of Affordable Mortgages for Manufactured Homes,'' 
      by Howard Banker and Robin LeBaron, dated March 2013.......    85
Garrett, Hon. Scott:
    Letter to Dr. Thomas Stratmann, University Professor of 
      Economics and Law, George Mason University, dated January 
      22, 2014...................................................   137
    Response letter from Dr. Thomas Stratmann, University 
      Professor of Economics and Law, George Mason University, 
      dated January 23, 2014.....................................   139
Luetkemeyer, Hon. Blaine:
    Letter from Hon. Richard Cordray, Director, CFPB, dated 
      October 31, 2013...........................................   144
    Letter from Peter J. Kadzik, Principal Deputy Assistant 
      Attorney General, U.S. Department of Justice, dated January 
      28, 2014...................................................   146
    FDIC Financial Institution Letter, dated September 27, 2013..   150
Perlmutter, Hon. Ed:
    Letter to Financial Services Committee Chairman Jeb 
      Hensarling, dated January 10, 2014.........................   152
Royce, Hon. Ed:
    Letter to House Speaker John Boehner and Minority Leader 
      Nancy Pelosi from NAFCU, dated January 22, 2014............   154
Cordray, Hon. Richard:
    Written responses to questions submitted by Chairman 
      Hensarling.................................................   158
    Written responses to questions submitted by Representative 
      Huizenga...................................................   181
    Written responses to questions submitted by Representative 
      Mulvaney...................................................   184
    Written responses to questions submitted by Representative 
      Barr.......................................................   190
    Written responses to questions submitted by Representative 
      Stivers....................................................   194
    Written responses to questions submitted by Representative 
      Luetkemeyer................................................   197
    Written responses to questions submitted by Representative 
      Velazquez..................................................   201
    Written responses to questions submitted by Representative 
      Ross.......................................................   203


                         THE SEMI-ANNUAL REPORT

                       OF THE CONSUMER FINANCIAL

                           PROTECTION BUREAU

                              ----------                              


                       Tuesday, January 28, 2014

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:04 a.m., in 
room 2128, Rayburn House Office Building, Hon. Jeb Hensarling 
[chairman of the committee] presiding.
    Members present: Representatives Hensarling, Bachus, Royce, 
Capito, Garrett, Neugebauer, McHenry, Pearce, Posey, 
Fitzpatrick, Luetkemeyer, Huizenga, Duffy, Hurt, Grimm, 
Stivers, Fincher, Stutzman, Mulvaney, Hultgren, Ross, 
Pittenger, Wagner, Barr, Cotton, Rothfus; Waters, Maloney, 
Velazquez, Sherman, Meeks, Capuano, Clay, Lynch, Scott, Green, 
Cleaver, Ellison, Perlmutter, Himes, Peters, Carney, Sewell, 
Foster, Kildee, Murphy, 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.
    This hearing is for the purpose of receiving the testimony 
of the Director of the Consumer Financial Protection Bureau 
(CFPB) concerning the Bureau's semi-annual report.
    I now recognize myself for 4\1/2\ minutes to give an 
opening statement.
    This morning, we welcome back Mr. Richard Cordray, Director 
of the CFPB, for one of his two statutory semi-annual 
appearances before our committee. It is an important appearance 
because, by design, the CFPB is perhaps the single most 
powerful and least accountable Federal agency in all of 
Washington and demands rigorous oversight.
    First, let's speak of its power. When it comes to credit 
card loans, auto loans, and mortgages of hardworking taxpayers, 
the CFPB has unbridled discretionary power not only to make 
them less available and more expensive, but to absolutely take 
them away. This is not the rule of law; it is the rule of 
rulers, and the rulers are unaccountable.
    The Bureau is fundamentally unaccountable to the President 
since the Director can only be removed for cause, fundamentally 
unaccountable to Congress because the Bureau's funding is not 
subject to appropriations, and fundamentally unaccountable to 
the courts because the Dodd-Frank Act requires courts to grant 
the CFPB deference regarding its interpretation of Federal 
consumer financial law. Thus, the Bureau regrettably, remains 
unaccountable to the American people.
    The American people deserve better. They now have witnessed 
a failed stimulus plan, trillions of dollars of unsustainable 
debt that we can witness on the monitors, revelations of NSA 
domestic data collection, and a broken promise of, ``If you 
like your health insurance, you can keep it.'' The American 
people rightfully demand accountability from this 
Administration.
    Therefore, our committee took common-sense steps in 
November to make the Bureau more accountable and transparent 
when we passed six bills that reform the CFPB's flawed 
structure, such as replacing its single unaccountable Director 
with a bipartisan board; putting Bureau employees on the civil 
service pay scale; introducing a safety and soundness check on 
its regulations; and giving American citizens greater control 
over their personal financial data that the Bureau is 
collecting and maintaining on them at this time.
    Our committee took another modest step towards greater 
accountability for the CFPB when we announced that the 
committee's Web site now offers an easy way for the American 
people to let us know how the Bureau's works affect them, good 
or bad. And since many citizens today justifiably fear 
reprisals when it comes to speaking their mind about big 
government agencies, citizens' stories and comments will be 
treated confidentially, upon request.
    We are already hearing a lot of feedback concerning the 
harmful impact on consumers of the Bureau's Qualified Mortgage 
(QM) rule, which went into effect just days ago.
    Let me share a couple of those messages with you. One is 
from Doyle Cooper, a small-town banker in Royse City, Texas. He 
used our Web site and gave his permission to quote him: ``The 
results of Dodd-Frank in the CFPB continue to be a burden on us 
each and every day. We have just this past week decided to 
suspend any and all mortgage products. We know our customers 
and their businesses. But yet, we are being asked to use a one-
size-fits-all underwriting criteria to allow the loan to be a 
Qualified Mortgage. The customers in our community have come to 
rely on us to help their dreams happen, and now we are being 
forced to say, `No, we can no longer help you.'''
    Another small-town community banker wrote in to say this 
about the QM rule: ``Our bank has had to exit this line of 
business''--meaning mortgage lending. ``The bank cannot find a 
way to generate these small-balance loans in a profitable 
manner under the existing regulatory environment. I can't tell 
you the number of times we have had to tell our good, low- to 
moderate-income customers that we can no longer loan them money 
to purchase a home to live in.''
    I have one more story from a small-town community banker 
out West. The community bank, due to the QM rule, discontinued 
making owner-occupied home loans. The banker said, ``A typical 
customer is one without a credit score but whom we have known 
all of his or her life and have made many personal loans to 
them over the years. Often, these are Hispanic customers--60 
percent of our population. And many are more stable than so-
called qualifying secondary market individuals who are simply 
overleveraged.''
    The CFPB has a very important mission. Properly designed 
and led, it is capable of great good, but stories like these 
dramatically show the very real harm that the CFPB can inflict 
on low- and moderate-income Americans. We can all imagine a 
brighter day with abundant economic opportunity for all, 
competitive markets, and where consumers' freedom to choose is 
respected--a day when these consumers are protected not only 
from deceptive practices and fraudulent claims that may come 
from Wall Street, but they are protected from the power grabs 
and excesses of Washington as well. Until that day comes, this 
committee will do everything in its power to hold the CFPB 
accountable to the American people.
    The Chair now recognizes the ranking member, Ms. Waters, 
for 4 minutes.
    Ms. Waters. Thank you, Mr. Chairman.
    Welcome, Director Cordray, on the Consumer Financial 
Protection Bureau's 46th appearance before Congress since its 
inception in 2011. Despite the Bureau's extensive engagement 
with this committee over the past few years, the CFPB has 
managed to do more than just testify before Congress. To the 
contrary, the CFPB has built an unprecedented record of success 
protecting our Nation's customers and consumers and 
servicemembers who have been victimized by unscrupulous 
corporations and financial institutions.
    In fact, the Bureau's enforcement actions have resulted in 
over $3 billion being directly refunded to nearly 10 million 
consumers and servicemembers. And the CFPB has earned the trust 
of the American public. It has received more than 269,000 
consumer complaints, resolved tens of thousands of individual 
problems, and answered more than 1,000 questions posed through 
its online portal.
    Director Cordray, you are here today to discuss findings of 
your semi-annual report, which shows the Bureau's continued 
success and effectiveness on behalf of consumers. In fact, the 
reports shows that in just 1 year--1 year's period--the CFPB 
received approximately 122,000 consumer complaints on issues 
ranging from mortgages, credit cards, and banking services, to 
credit reporting and student loans. These issues matter to our 
Nation's consumers and the CFPB is ensuring that when it comes 
to these industries, protecting consumers is the Bureau's top 
priority.
    Moreover, we know that when consumers complain, companies 
listen. Recently, the CFPB has issued a number of important 
regulations that protect consumers from predatory financial 
practices. Most notable is the Qualified Mortgage rule, which 
protects consumers by requiring that lenders only make mortgage 
loans to those who can afford to repay them over the loan term.
    The semi-annual report also indicates the Bureau has 
continued this unprecedented success in enforcement actions 
against a wide range of institutions for unscrupulous actions. 
In Fiscal Year 2013, the CFPB was a party to 13 enforcement 
actions related to deceptive marketing, unlawful debt 
collection, discrimination, unlawful fees, and fraudulent 
mortgage relief schemes.
    I am truly proud of the CFPB's outstanding success on 
behalf of our Nation's active duty military, restoring more 
than $12.5 million to servicemembers.
    I was particularly pleased to see that in November of last 
year, the CFPB took its first enforcement action against a 
payday lender, ordering Cash America to refund $14 million to 
consumers for overcharging our servicemembers and robo-signing 
court documents and debt collection lawsuits. These actions are 
important and must continue.
    In the midst of significant Republican scrutiny, and to 
potential data breaches at the CFPB and other agencies, the 
CFPB has actually helped consumers protect themselves from 
fraud and identity theft and actual breaches, such as the 
recent incidents at Target and other major retailers.
    So, Director Cordray, I would like to take this moment to 
commend you for the CFPB's impressive track record in these 
short years. But despite all these successes, Republican 
attacks on the CFPB continue, unrelenting. Their campaign to 
undermine the Bureau is nothing more than a disservice to our 
Nation's consumers and our men and women in uniform.
    So I look forward to the witnesses' testimony, and I yield 
back the balance of my time.
    Chairman Hensarling. The Chair now recognizes the 
gentlelady from West Virginia, the Chair of our Financial 
Institutions Subcommittee, Mrs. Capito, for a minute-and-a-
half.
    Mrs. Capito. Thank you, Mr. Chairman. And I would like to 
thank Director Cordray for joining the committee this morning.
    For the last 9 months, my subcommittee has spent a 
significant amount of time learning about the Bureau's new 
mortgage rules, and what impact they will have on consumers. 
Community bankers and credit unions are very concerned about 
their ability to offer targeted programs to help low- and 
moderate-income borrowers.
    Last June, the chairman of WesBanco, which is in Wheeling, 
West Virginia, raised concerns about the ability of his bank to 
continue administering a charitable trust that helps low-income 
borrowers to realize that dream of home ownership.
    Just 2 weeks ago, the executive from Orion Federal Credit 
Union in Memphis raised the same concerns that many of his 
members who benefited from the Orion Homerun Program, a 
tailored rent-to-purchase program, will not fit the Qualified 
Mortgage standard. And during that same hearing, the CEO of 
Habitat for Humanity of Charlotte testified that, ``As the 
regulations stand today, Habitat affiliates remain at risk of a 
debilitating liability.''
    In each of these cases, a local lender is losing their 
ability to serve their community. Lenders who previously 
assessed a borrower's ability to repay will be handcuffed by 
arbitrary thresholds and a one-size-fits-all approach.
    I am very concerned that what we are going to end up doing 
with this QM rule is hurting those low- and moderate-income 
borrowers who so desperately need the flexibility and the 
ability to attain a mortgage.
    So I look forward to hearing your comments on that, and I 
want to make sure that these borrowers are not left out of the 
system.
    I yield back.
    Chairman Hensarling. The Chair now recognizes the 
gentlelady from New York, Mrs. Maloney, for a minute-and-a-
half.
    Mrs. Maloney. I thank the ranking member and the chairman 
for calling this hearing.
    And I welcome Director Cordray.
    In just 2\1/2\ years, the CFPB has made huge strides on a 
number of important consumer protections, from mortgage 
disclosures to credit cards to remittance transfers to 
protecting our servicemembers.
    The CFPB has also established itself as a data-driven 
agency. Its rule-writing process has won praise from industry 
and consumer advocates, and both Democrats and Republicans. The 
Bipartisan Policy Center described the CFPB's QM rule writing 
process as ``open, driven by data and research, and focused on 
practical application in the mortgage market.''
    And there is still plenty of work left to do. The Bureau is 
working on some very important issues such as prepaid card 
regulation, payday lending, debt collection, and credit card 
overdraft policies. These are clearly issues that merit 
attention from the CFPB because they affect a large number of 
our constituents and consumers on a day-to-day basis.
    As one who helped author the requirement of the semi-annual 
report to Congress and other provisions in the CFPB law, I look 
forward to Director Cordray's testimony today.
    Thank you for your hard work.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from New Mexico, Mr. Pearce, for 1 minute.
    Mr. Pearce. Thank you, Mr. Chairman.
    And, again, Director Cordray, we appreciate your appearance 
here today. We have heard in previous hearings, and in this 
one, that your job is to protect the consumers, that you, in 
fact, yourself state that you are focused on making financial 
markets work better. My belief is that in rural States like New 
Mexico, you are making the market worse.
    I would quote from a banker in Otero County: ``Hardworking 
people in rural New Mexico are being denied access to credit 
for purchasing a manufactured home because of CFPB policies. 
Their policies are hurting the small guys.'' That is what I 
have maintained in every hearing that we have had with you so 
far.
    In your attempts to protect the small guy, you are actually 
limiting access to credit. Fifty percent of the homes in New 
Mexico are trailer houses, and now, almost all of our lenders 
are out of that market.
    Twenty-five percent have gotten out of loaning money for 
houses completely, so you are hurting--your war on the poor is 
hurting New Mexico, and we would like to express our position 
in this hearing.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green, for a minute-and-a-half.
    Mr. Green. Mr. Chairman, I would like to yield 30 seconds 
initially to Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Green.
    Mr. Cordray, I just wanted to say I think you are doing a 
great job. Keep it up.
    Mr. Green. Thank you.
    Thank you, Mr. Chairman.
    And I thank the Director for appearing.
    I would like to also thank Mr. Dodd and Mr. Frank. And I 
would like to thank Mr. Dodd and Mr. Frank because I liken them 
to Benjamin Franklin, who was questioned after the 
Constitutional Convention of 1787. The question was whether we 
have a monarchy or we have a republic. And his response was, 
``We have a republic if you can keep it.''
    Today, we have a Consumer Financial Protection Bureau. And 
the question is, can we keep it?
    My hope is that what Mr. Dodd and Mr. Frank have done in 
requiring the semi-annual reports will give us enough empirical 
evidence so as to convince the public and Members of Congress 
that this agency is vital and important.
    With this agency having returned $3 billion to 9.7 million 
consumers, I think that speaks volumes. And I would also add, 
the question is whether or not we would have received this $3 
billion placed back in the hands of consumers if we did not 
have the Consumer Financial Protection Bureau. My suspicion is 
probably not, but I will ask the Director to elaborate on that 
at a later time.
    We have it. The question is, can we keep it?
    I yield back.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Wisconsin, Mr. Duffy, for 1 minute.
    Mr. Duffy. Thank you, Mr. Chairman.
    I am here with a hopeful heart that the Director is going 
to renew his commitment to providing us open and transparent 
testimony, consistent with his promise and the promise that has 
been made from the CFPB to the American people.
    I am specifically interested in hearing testimony in regard 
to the data collection program at the CFPB--specifically, the 
extent of the information that is being collected on the 
American people and the extent of the disclosure that the 
American people get when you collect and monitor information on 
their financial transactions.
    I am also interested in hearing about the civil penalties 
fund, how you find victims, designate victims, and decide to 
reimburse victims. We are aware that you have provided $14.6 
million in victim compensation.
    I am also interested in hearing about the Consumer 
Education and Financial Literacy Program, where you have 
designated $13.4 million for that education. But I also want to 
know about the $96 million that has been unobligated and what 
the intent is for the use of those dollars.
    With that, I yield back.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Connecticut, Mr. Himes, for a minute-and-a-half.
    Mr. Himes. Thank you, Mr. Chairman, and welcome, Director 
Cordray. I am glad you are here.
    I was very heartened by the lengthy discussion we had some 
time ago in which you were obviously committed to your mission 
and had an appreciation for the limits of your mission and the 
need you had, of course, to not overly regulate in ways that 
would be harmful for our economy.
    I am glad you are here. You will sense that is not a 
sentiment universally shared in this room.
    As the chairman said, they offered up the opportunity to 
the American public to offer stories about the work you do. I 
have been reading this survey. Apparently, you can help--they 
helpfully point out that you are engaged in a massive data-
collection effort, gathering confidential financial information 
on millions of Americans, adding piles of new burdensome 
regulations on job creators--it goes on and on.
    In my business, this is called ``push-pulling.'' It is 
certainly leading the witness. It is certainly fear mongering. 
And apart from the entertainment value of this white-hot 
partisanship, I got to thinking, what about the stories that 
can't be told?
    How does one tell the story of a predatory loan that didn't 
bankrupt an American family? How does one tell the story of a 
liar's loan that didn't get made and of a family who is not 
sitting on the curb, bewildered, surrounded by their meager 
belongings? This is, of course, where we were, where the 
Majority would put us back to, and I think it is worth 
remembering that.
    It is also worth pointing out that the Dallas Fed produced 
a report just recently putting a price tag on that tragedy. And 
the Dallas Fed said that the price tag per American household 
was $50,000 to $120,000 per household.
    Director Cordray, I thank you for the efforts you are going 
to make to make sure that never happens again.
    And I yield back the balance of my time.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Tennessee, Mr. Fincher, for 1 minute.
    Mr. Fincher. Thank you, Mr. Chairman.
    And welcome, Mr. Cordray. I read in your bio that you are 
from Ohio, so you are somewhat familiar with rural America. I, 
too, live in a small county in Tennessee where we don't have a 
red light in the entire county. I have spent my life farming 
and working in rural communities.
    You may not realize it, but manufactured housing plays a 
significant role in the lives of many folks who live in rural 
communities in my district and across my State. For many 
families, this may be the only home they can afford, and when 
they are just starting out, sometimes rental properties are not 
always abundant in rural areas. Starting this month, though, it 
will be a lot harder for those families to get a loan to buy 
manufactured housing homes.
    I am concerned the CFPB is cutting off access to credit for 
low- and moderate-income home buyers due to the Home Ownership 
and Equity Protection Act (HOEPA) Loan rules implemented this 
month. I have introduced legislation, H.R. 1779, the Preserving 
Access to Manufactured Housing Act, to correct this problem, 
and it has received bipartisan support with over 100 cosponsors 
and a companion bill in the Senate.
    Clearly, this is a problem for a lot of Members, and I am 
hopeful we can work this out before families across America are 
left without access to financing.
    Chairman Hensarling. The Chair now recognizes the 
gentlelady from Arizona, Ms. Sinema, for a minute-and-a-half.
    Ms. Sinema. Thank you, Mr. Chairman.
    And thank you, Ranking Member Waters.
    Director Cordray, thank you for recognizing the 
difficulties faced by homeowners in my State, and specifically 
in Phoenix, and for choosing to hold a field hearing there to 
kick off the Consumer Financial Protection Bureau's new 
mortgage rules.
    As you know, one in five Arizona homeowners with a mortgage 
still owes more than their home is even worth. And across the 
country, that number is roughly one in ten.
    As of December 31st, the CFPB has received almost 6,000 
consumer complaints from Arizonians, including over 2,500 
mortgage-related complaints.
    And my constituent, Mary, was one of these homeowners. Mary 
lost her job. She was attempting to negotiate a short sale with 
her bank but the bank refused to accept the terms of the deal, 
delaying and unnecessarily preventing the sale of her property. 
The problems were endless, and Mary felt like she had no 
recourse. She was at the mercy of her bank until the CFPB 
stepped in and helped facilitate a favorable outcome, which 
allowed Mary to move on with her life.
    Arizona's homeowners are still struggling, and we feel like 
we must do everything we can to help them. The CFPB's new 
mortgage rules protect Arizonians like Mary at every stage of 
the process, from getting the right mortgage to paying back the 
loan, and they provide hardworking families reasonable 
safeguards against bad mortgage deals that ruin credit and cost 
families their homes and financial security.
    In addition to protecting homeowners, the Bureau has also 
vigorously enforced protections for active duty military 
families, restoring millions of dollars to servicemembers under 
the Military Lending Act. This is a huge issue in Arizona.
    Thank you.
    Chairman Hensarling. The Chair now recognizes the 
gentlelady from Missouri, Mrs. Wagner, for 1 minute.
    Mrs. Wagner. Thank you, Mr. Chairman.
    Welcome, Director Cordray.
    It is unfortunate, but by no means surprising, that some of 
the worst fears and predictions regarding the Bureau of 
Consumer Financial Protection have already come true.
    Earlier this month, our committee learned that 
organizations such as Habitat for Humanity, as Mrs. Capito 
referenced, are finding it more difficult to help low-income 
families attain homeownership. Many of us have heard from our 
community banks that are altogether leaving the mortgage 
business or are seeing their compliance costs absolutely 
skyrocket.
    Regrettably, news such as this has become all too common 
since the Bureau's inception, whether it is the unfair way in 
which low- and moderate-income Americans are harmed under the 
Qualified Mortgage rule, the deceptive public database of 
unverified complaints maintained by the Bureau that only serves 
to mislead consumers, or the abusive manner in which the Bureau 
is spending money and irresponsibly gathering the sensitive 
financial information of American families.
    It is clear by now that this Federal bureaucracy is crying 
out for reform. And I hope that today's hearing helps to shine 
further light on the Bureau.
    I thank you, and I yield back.
    Chairman Hensarling. That concludes our opening statements.
    Today, we welcome Richard Cordray, the Director of the 
CFPB. Director Cordray has appeared before this committee 
before, so I believe he needs no further introduction.
    Without objection, the Director's written statement will be 
made a part of the record.
    Again, Director Cordray, welcome, and you are now 
recognized for your testimony.

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

    Mr. Cordray. Thank you, Chairman Hensarling, Ranking Member 
Waters, and members of the committee. Thank you for inviting me 
to testify about the fourth semi-annual report of the Consumer 
Financial Protection Bureau. Since we opened our doors just 
over 2 years ago, the Bureau has been focused on making 
consumer financial markets work better for consumers and honest 
businesses.
    Representative Himes, you said you are not sure that 
everybody is glad to see me today. My sense is different. I 
think everybody here is glad to see me; they just may have 
different reasons.
    [laughter]
    The report we are discussing today describes the Bureau's 
efforts to achieve this vital mission. Through fair rules, 
consistent oversight, appropriate enforcement of the law, and 
broad-based consumer engagement, the Bureau is helping to 
restore trust in consumer financial markets.
    Through our collaborative enforcement work with fellow 
regulators, we are putting approximately $3 billion back into 
the pockets of millions of consumers who fell victim to various 
violations of consumer financial protection laws. This includes 
a refund of more than $6 million to thousands of U.S. 
servicemembers based on failure to properly disclose costs 
associated with repaying auto loans through the military 
allotment system and expensive auto loan add-on products sold 
to active duty military.
    Because of our supervisory work, financial institutions are 
making changes to their compliance management systems that have 
prevented violations, reduced risk to consumers, and resulted 
in financial restitution to many thousands of additional 
consumers. That is good work by our supervision team, good 
business practice for the companies, and good for consumers, 
who deserve to be treated fairly under the law.
    Over the past year we have enacted a number of new rules to 
meet the mandates of the Dodd-Frank Act, including the 
Qualified Mortgage rule, which I understand we will be talking 
about today. This important rule requires mortgage lenders to 
make a good-faith, reasonable determination that borrowers can 
actually afford to pay back their loans. It is a back-to-basics 
approach to mortgage lending. We also enacted the mortgage 
servicing rules, which are designed to clean up sloppy 
practices and ensure fair and more effective processes for 
troubled borrowers who may face the loss of their homes. And we 
adopted a remittance rule that provides transparency and 
consumer protections for international money transfers for the 
very first time.
    During this period, the CFPB has also been closely focused 
on making sure that businesses--both small and large--have what 
they need from a practical and operational standpoint to 
understand and comply with the new mortgage rules. We have put 
up plain language versions of the rules, created and posted 
video guidance, and met with major market players and the full 
range of industry stakeholders, including vendors and smaller 
lenders. We have worked with our fellow regulators to publish 
interagency examination procedures well before the 
implementation date so that industry understands our 
expectations and has time to make necessary adjustments. We 
have also coordinated with other regulators to ensure we all 
have a shared understanding to promote consistent supervision 
of compliance with these rules.
    While we work on all of these important efforts, we also 
recognize that consumers bear their own share of responsibility 
for how they participate in the financial marketplace. We need 
to promote informed financial decision-making. So we are 
providing consumers with useful tools, including the ``Ask 
CFPB'' section of our Web site, where we have developed answers 
to more than 1,000 frequently asked consumer questions. I 
encourage you to encourage your constituents to use these 
resources. Send them to consumerfinance.gov to gain the benefit 
of this expertise, and unbiased, helpful financial information.
    The premise that lies at the very heart of our mission is 
that consumers deserve to have someone stand on their side and 
see that they are treated fairly. To this end, the Bureau 
strengthened its Office of Consumer Response, and we have now 
received over 270,000 consumer complaints on mortgages, credit 
cards, student loans, auto loans, bank accounts, credit 
reporting, debt collection, and money transfers, I venture to 
say, from constituents in every one of your districts across 
the country.
    In the past year, in fact, we have received thousands of 
private student loan complaints and nearly 30,000 comments in 
response to our request for public information about how 
student debt is affecting individual consumers and the economy 
more generally. At a field hearing we held in Miami last May on 
student loan debt, it became clear that there are many 
troubling similarities to the mortgage market before the 
financial crisis. The burden of student debt is having a domino 
effect on our economy by jeopardizing the ability of young 
Americans to buy homes, start small businesses, and save for 
the future. We consider it a priority to continue to monitor 
this market closely as it develops over time.
    The progress we have made in the past 2 years has been 
possible thanks to the engagement of thousands of Americans who 
have used our consumer education tools, submitted complaints, 
participated in rulemakings, and told us their stories through 
our Web site and at numerous public meetings from coast to 
coast. Our progress also reflects the cooperation of those we 
regulate, and we attempt to remain considerate of the 
challenges they confront. Each day, we work to accomplish the 
goals of renewing consumers' trust in the marketplace and 
ensuring that markets for consumer financial products and 
services are fair, transparent, and competitive. These goals 
not only support consumers as they climb the economic ladder of 
opportunity, but also help responsible businesses compete on an 
evenhanded basis, and reinforce the stability of our economy as 
a whole.
    Mr. Chairman, I saw with interest yesterday the 
announcement that this committee would be accepting stories 
from the American people about the effects of the CFPB on their 
daily lives. That will provide good data on what our work has 
been and how it is affecting people across this country, and we 
hope and expect for transparency in understanding what stories 
you are receiving from people across the country. We have 
confidence in the stories they will tell.
    Thank you for the invitation to appear before you today. If 
we are quoting Ben Franklin, he said during the Revolution 
that, ``We must all hang together or, most assuredly, we will 
hang separately.'' As always, we welcome your oversight, and I 
am glad to have the opportunity to hear and address your 
concerns.
    Thank you very much.
    [The prepared statement of Director Cordray can be found on 
page 78 of the appendix.]
    Chairman Hensarling. Thank you, Mr. Cordray.
    The Chair now recognizes himself for 5 minutes.
    Mr. Cordray, I have no doubt that you have figured out that 
the Majority of this committee feels that your agency is 
unaccountable by design, but we are increasingly concerned it 
may be unaccountable by practice, as well.
    As you can tell from the monitors, the Majority also is 
very focused on the unconscionable, unsustainable, and, 
frankly, immoral debt that is being left to our children. So 
how you expend the people's funds is a very salient issue.
    You were last before the Senate Banking Committee on 
November 12th, where Senator Coburn asked you, ``Can you tell 
me why you need a $95 million building?'' I believe he was 
referring to your renovation budget.
    You answered, ``By the way, we do not own it, and I would 
rather not spend a penny on it.'' You went on to say, ``The 
HVAC and electrical apparently has to be brought up to snuff.'' 
And finally, ``It is not like we are building some palace for 
the Bureau over the long term.''
    Mr. Cordray. That is correct.
    Chairman Hensarling. I discovered on December 16th of last 
year, it says the Bureau released its financial report. Is it 
not true that on page 39 of the report, it says that the 
headquarter's renovation costs have now jumped to $145.1 
million?
    Mr. Cordray. I don't believe that is correct in terms of 
construction costs. There are additional costs. We are using--
    Chairman Hensarling. That is not part of the renovation 
costs on page 39 of the report?
    Mr. Cordray. I am just saying we are using GSA now to 
oversee this renovation because it has, as we understood, 
received scrutiny, and we want to make sure things are being 
done right, so--
    Chairman Hensarling. Let me ask you about the GSA, then, 
because as I understand it, the GSA owns or leases 354 million 
square feet in 9,600 buildings across 2,000 communities, and 
that your $145 million renovation budget now is equivalent to 
over half of their entire annual budget nationwide. Were you 
aware of that?
    Mr. Cordray. I don't know much about GSA's operations. That 
is not the agency I run. I know a lot about the CFPB's 
operations. What I would say is they are the experts at dealing 
with these types of projects, so we got them involved.
    Chairman Hensarling. Okay, so is the $145 million merely to 
update the HVAC and electrical?
    Mr. Cordray. No, and there have been different numbers 
here, and the most recent number that I have seen is $114 
million for construction. What I am told is that about two-
thirds of it is required in order to upgrade the basic 
structure--the building. We bought a tough building, 
apparently, and when I say ``bought,'' we have leased a tough 
building. It is--
    Chairman Hensarling. So, it is not your building, and you 
are--
    Mr. Cordray. That is correct.
    Chairman Hensarling. --renovating a building that you do 
not own--putting in almost as much as the entire value of the 
building.
    I have tried to get some comparable real estate costs. As 
you say, ``We are not building some palace for the Bureau over 
the long term.''
    Apparently, your renovation cost is now $483 per square 
foot, which is triple the typical Washington, D.C., luxury 
commercial class-A luxury renovation rate of $150 per square 
foot--3 times as much as the D.C. Metro area.
    You are spending more per square foot than the Trump World 
Tower, which came in at $334 per square foot. You are spending 
more than the Bellagio Hotel and Casino which, at the time it 
was completed, was the most expensive hotel ever built--$333 
per square foot.
    And if I am pronouncing this correctly, you are more 
expensive than the Burj Khalifa, the tallest skyscraper in the 
world, located in Dubai, which came in at $450 per square foot, 
and which is known as a ``world class destination,'' a `` New 
York urban masterpiece, superlative in every respect,'' 
designed by ``the world's most esteemed designers,'' one of 
which was the architectural firm Skidmore, Owings & Merrill 
LLP, while the Bureau paid $7.5 million for architectural and 
engineering services at your headquarters.
    So, here is the deal--what on God's green earth is going on 
here?
    Mr. Cordray. It is a--
    Chairman Hensarling. Explain to me, Mr. Director, why I 
shouldn't be outraged and why the American people shouldn't be 
outraged.
    Mr. Cordray. Thank you for asking a question, Mr. Chairman, 
and let me restate.
    First of all, we do not own this building. It is an asset 
of the Federal Government. It is owned by the Comptroller of 
the Currency.
    We have leased the building. The renovations that are 
performed there will make the building serviceable for years to 
come, probably far outlasting the time of our lease.
    The notion that we would try to build some palace that we 
don't even own or control doesn't make much sense to me.
    I am told that in order to--
    Chairman Hensarling. I don't think it makes much sense to 
the taxpayers, but you are spending the money.
    Mr. Cordray. If I might finish, I am told that we have to 
do certain things so that the building can be brought up to 
code and work properly. We are going to have to vacate the 
building while this is going on. None of this is convenient for 
myself and our employees; none of this is something that we 
would prefer to do.
    We worked with GSA to try to understand what space was 
available in Washington, D.C., and there is very limited space 
for an agency with over 1,000 employees, so--
    Chairman Hensarling. My guess is cheaper space could have 
been found in Reston, and the American taxpayers would have 
appreciated--
    Mr. Cordray. We--
    Chairman Hensarling. I am beyond--
    Mr. Cordray. We looked around at surrounding areas, as 
well.
    Chairman Hensarling. I am beyond my time.
    The Chair now recognizes the ranking member for 5 minutes.
    Ms. Waters. Thank you very much.
    Mr. Cordray, allow me to apologize for my chairman with 
his, ``I got you'' politics. You are here to give your semi-
annual report and supposedly, as Members of Congress, we are 
here for oversight and to try and work out problems.
    I could ask and talk a lot about all the good work that you 
are doing with students, our men and women in uniform, 
predatory lending, payday lending. We have alluded to some of 
that in our opening statements. But I wish to talk about 
solving problems, not give political messages.
    I heard some of the Members on the opposite side of the 
aisle talk about manufactured housing. To tell you the truth, 
if the chairman and I are really interested in providing 
leadership, we would be working with you and the members to 
deal with an issue that keeps being brought to our attention.
    Would you please give me your take on what is happening 
with manufactured housing? What are the differences here? What 
can we do to solve this problem?
    Mr. Cordray. Thank you, Ranking Member Waters.
    I do think that the chairman's questions are fair, and I 
want to have a chance to address them fully because as far as I 
am concerned, this is an unavoidable one-time expense that we 
simply want to put behind us.
    And again, it is not something I would choose to do if we 
could avoid it.
    In terms of manufactured housing, I appreciated the 
gentleman's comments--the Representative from Tennessee. I have 
family who have lived and live in manufactured housing. I went 
to school with many of my friends and other children who grew 
up in manufactured housing in my area in Ohio. It is a useful, 
beneficial, and often important housing alternative for people, 
particularly in rural areas.
    My understanding is that some of the issues around 
manufactured home loans go back to the changes in the HOEPA 
rule and before, that there was a certain retreat from 
manufactured home lending at that time. We had executives from 
the American Bankers Association come in recently and say that 
many of the people who retreated at that time because they 
feared the ability-to-repay regime under the HOEPA rules have 
now come back into the market, realizing that they overreacted.
    There is further concern now with the ability-to-pay regime 
and the Qualified Mortgage rule. I personally have met with 
leaders from the manufactured home community, both builders and 
lenders.
    We will continue to meet with them, and I want to 
understand their concerns and what we can do to address them. I 
do recognize that in parts of America this is the premiere 
alternative for putting a roof over peoples' heads and giving 
them a chance, and we want to make sure that happens. To the 
extent that we can address their concerns and monitor the 
market to see what the actual effect is, as opposed to doomsday 
predictions that are easy to make in the early days of a rule 
in a room like this, we will. We want to know what is actually 
happening, and work with them to address those concerns.
    Ms. Waters. I give you the rest of the time to address 
those concerns. And I want to work with you.
    If my chairman does not care enough about this issue to 
spend some time on it, we will work with you and see if we 
can't convince him that his Members on his side of the aisle 
really do have some concerns about manufactured housing.
    If you would like to address some of those concerns you 
alluded to, please do that now.
    Mr. Cordray. There are special difficulties with the kinds 
of properties on which you would put a manufactured home, and 
then the loans around those.
    Almost inevitably, those are specialty properties. I refer 
to the Representative from West Virginia and Southeastern Ohio 
that I am familiar with in my area of Ohio. There are lots of 
places where you cannot necessarily build a home and dig down a 
foundation. A manufactured home provides an alternative to 
that. Some of them are pretty basic; some of them are more 
elaborate.
    But the bottom line is it is a useful piece of the housing 
market, and it is a necessary piece in certain areas.
    Many of those loans are lower dollar loans, so there are 
particular issues around the points and fees cap that Congress 
imposed, which does become larger as you get to a smaller 
dollar loan, and that is how we attempted to build it.
    To the extent that there is any modification or change that 
needs to be made to make sure that this market can work, we are 
all ears, and we will continue to be all ears, both to the 
Members of this committee and also to industry and consumers 
who are affected by the rule.
    Ms. Waters. You have done such a great job on solving 
problems and providing leadership.
    I would like to meet with you on this issue because I think 
we need to demonstrate that we can solve difficult problems, no 
matter the chairman's unwillingness to work on this issue and 
to resolve it, but rather to simply do the political messaging. 
I will meet with you on behalf of not only our constituents on 
this side of the aisle, but his constituents that he fails to 
pay attention to.
    Thank you very much.
    Chairman Hensarling. The Chair now recognizes the 
gentlelady from West Virginia, the Chair of our Financial 
Institutions Subcommittee, Mrs. Capito.
    Mrs. Capito. Thank you, Mr. Chairman.
    Mr. Director, let's start with the Habitat for Humanity 
issue. I have expressed this to you in a private meeting and I 
am very concerned about the impact on folks who have the 
nonprofits that are--either a rent-to-own program or one like 
they have at WesBanco or Habitat for Humanity.
    They still don't feel like they are on firm ground in terms 
of the rules to be able to move forward with their programs and 
give themselves a level of comfort that they can move forward 
in the way that they have conducted business in the past, which 
is working with families individually.
    They think they need more legislation in this issue. We are 
ready to do that. What is your response to that?
    Mr. Cordray. I actually share your concern about these 
issues, and let me go back and review.
    Last year when we were first finalizing the Qualified 
Mortgage rule, Habitat for Humanity came to us and they had 
several concerns about that rule. We told them that we shared 
those concerns if they had them.
    We worked with them. We sat down, we did a supplemental 
proposal that was proposed and then finalized in May or June of 
last year that provided a broad provision for coverage for 
501(c)(3) charitable organizations such as Habitat.
    My understanding at the time was that addressed their 
concerns.
    Now we come to the end of last year, beginning of this 
year, and they have identified some additional concerns that 
they did not present to us at that time. These are new 
concerns; I understand circumstances change and new experiences 
can occur.
    We have been working to figure out how we can address those 
concerns through further activity. I had a conversation with 
Jonathan Reckford, the CEO of Habitat for Humanity, yesterday 
to walk through specifically three issues that they have.
    Mrs. Capito. If I could cut you off here, just quickly--
    Mr. Cordray. Yes.
    Mrs. Capito. Do you think these can be solved in your space 
or is it--
    Mr. Cordray. We do.
    Mrs. Capito. --legislation?
    Mr. Cordray. We do. And that--
    Mrs. Capito. How quickly can you respond to this?
    Mr. Cordray. We can respond during the course of this year. 
And I asked Jonathan that directly: what kind of timeframe are 
they looking at where this will start to pinch them?
    And by the way, the main one involves how you characterize 
first and second liens, which was an issue that--
    Mrs. Capito. Right. It seems to me if you have already 
identified the problem, we could go ahead and have the fix if 
we--if you already know what it is--
    Mr. Cordray. Yes.
    Mrs. Capito. --and you think you could fix it--
    Mr. Cordray. There are processes--
    Mrs. Capito. I would encourage you to do it.
    Mr. Cordray. --that we have to work through, in terms of 
notice and comment, rulemaking, and the like.
    But there are only six of their affiliates of the thousands 
of affiliates nationwide that are affected by that. I will just 
say that.
    Mrs. Capito. --the large one--
    Mr. Cordray. And of those six, they all would be addressed 
by the discussion we had yesterday. So, we will--
    Mrs. Capito. I will--
    Mr. Cordray. --move forward to address those.
    Mrs. Capito. Okay, I--
    Mr. Cordray. I think we can, in fact, address these by 
regulatory means and we have made a commitment to work with 
them to do that--
    Mrs. Capito. I would heavily encourage you to do that, but 
there are other programs out there that don't have the voice 
that Habitat had who are--
    Mr. Cordray. Yes.
    Mrs. Capito. --deeply affected by this.
    In your statement, you mentioned that the Qualified 
Mortgage rule requires mortgage lenders to ``make a good-faith, 
reasonable determination that borrowers can afford to pay back 
their loans.''
    Now, if I was just reading that and didn't know anything 
about this, I would think that you are giving the bankers or 
the lenders the flexibility to make those determinations and 
yourself, and really, that is not what the QM rule does. It 
says, ``Here is a box. You write the mortgage within it and if 
it doesn't fall within that, then you are going to''--and this 
is not just me speaking. That is coming from testimony after 
testimony after testimony from credit unions and community 
banks who feel that they are not going to be able to have the 
flexibility to give the farmer, to give the med student, to 
give the single mother the ability to get the home because they 
are not going to fit into this QM box.
    So my question is, what is plan B here? How long do you 
think it is going to take before you see and we see what effect 
this is having and when are you going to be able to react to 
this or--
    Mr. Cordray. I could not disagree more with that 
characterization of our rule. I remember at the time we 
finalized the rule, we saw a press release from this committee 
before anybody had even read what we did saying it is one-size-
fits-all.
    That has been a narrative from the beginning. It is not 
true.
    We had a special provision that we added for small 
creditors, community banks and credit unions, which covers 
thousands of them--exactly the people you are talking about--
and says if they keep loans in portfolio they can do anything 
that they traditionally have done in terms of lending. They 
have carte blanche because we trust them on the lending that 
they do.
    Many of them, when we hear these complaints and I call them 
and I speak to them, they just haven't understood that was 
added to the rule. And we will continue to try to get the 
message out to them.
    Mrs. Capito. So the question is--
    Mr. Cordray. For a small lender, with less than $2 billion 
in assets, who makes fewer than 500 mortgages a year, every 
mortgage they make is covered by the Qualified Mortgage rule, 
either in its main provisions, or the small creditor provision. 
And this is just an unreasoned and irrational--
    Mrs. Capito. So the best thing for the two of us is to wait 
and see when the data comes out. How long will that be?
    Mr. Cordray. That is fine. Absolutely.
    Mrs. Capito. Two months, 30 days, 6 months, 1 year? These 
are families who are affected by this.
    Mr. Cordray. There is data that comes out every month on 
the mortgage market--
    Mrs. Capito. So, monthly.
    Mr. Cordray. --and the housing market. And as I have said, 
and I said to you when we met, we are very open to hearing what 
that data shows, and also stories. Frankly, we are interested 
in hearing stories--
    Mrs. Capito. But by your own comments, though, you have 
said publicly that we are going to have flexibility here. That 
signals to me that you know there are problems ahead. With 
that, my time--
    Mr. Cordray. No, that is not correct. From the beginning, 
we have made further changes in the rule. We made a number last 
year in response to what we heard from people. We are an open-
minded agency. We are listeners. As we hear more, we don't want 
to have some sort of unexpected effect on this market.
    Chairman Hensarling. The time of the gentlelady has 
expired. The Chair now recognizes the gentlelady from New York, 
Ms. Velazquez.
    Ms. Velazquez. Thank you, Mr. Chairman. Director Cordray, 
since 2012 the CFPB has been supervising credit bureaus. As you 
know, the personal credit rating of small business owners can 
have a direct impact on their ability to obtain financing for 
their businesses.
    Can you provide an update on CFPB supervision of the 
consumer credit reporting market and whether it is having a 
positive impact on small business owners' access to credit?
    Mr. Cordray. Thank you for the question. We have now 
undertaken, as the Bureau, for the first time, to provide 
Federal supervision of the major credit-reporting agencies. It 
is an adjustment for them because they are not used to this.
    We have had examination teams into each of the three 
largest credit-reporting agencies and there are various issues 
that we have been discussing with them, and areas of concern.
    As a result of our efforts, you may have seen that the 
credit-reporting agencies, for the first time, are forwarding 
the information that consumers send them about problems and 
potential errors in their credit reports to the furnishers to 
be evaluated.
    Before they were simply taking all that information, 
translating it into one number code, and not actually sending 
the information along, so there was no way for furnishers to 
actually evaluate whether you were right in saying there was an 
error in your credit report.
    That is a big change, and that change continues to evolve. 
But we are concerned about errors. We are concerned about error 
resolution. And we are concerned about the handling of data.
    I think they know that we are--I know they know that we are 
concerned and that we are going to work hard with them to see 
that these things are fixed.
    For years, that industry was pointed away from consumers. 
It was a business-to-business industry with credit reporters 
dealing with furnishers and then providing information to 
lenders.
    It has a dramatic impact on consumers, many of whom now 
have their credit report checked when they go to apply for a 
job, and all of whom have their credit report checked when they 
go to apply for a loan. And it is an industry that needs to 
take very seriously its obligations to the American public.
    Ms. Velazquez. I am really concerned about access to 
capital for small businesses. And if there are errors and they 
don't have any recourse, it is going to have a negative impact 
on their ability to access capital financing.
    Mr. Director, 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 improvement in 
underserved communities?
    Mr. Cordray. We do understand that is the intent and 
purpose of that provision of the law. It is a difficult area 
for us, frankly, because the Bureau has no interaction with 
business lending, or commercial lending, or any kind of small 
business lending other than that single provision.
    What we have determined is that as we undertake the 
rulemaking that we are also required to do under the Act to 
update the Home Mortgage Disclosures Act rule, which is under 
way now, we will see how we can try to fold the small business 
lending element into that as we develop. We are going to be 
overhauling that whole database and working with the Fed on 
that, which we believe is the right approach.
    But we also very much want to work with the Small Business 
Administration, the people who are more expert in this area 
than we are.
    Ms. Velazquez. And when can we expect the CFPB to publish 
the rules implemented in this section?
    Mr. Cordray. The HMDA overhaul will be getting under way 
this year. It feels to me that the right spot for this, and we 
have talked to a number of folks both from industry and 
consumer side groups, is to make the HMDA overhaul part of the 
later stages of that. So, it is coming, but not immediately.
    Ms. Velazquez. Okay. As required by Section 1451 of the 
Dodd-Frank Act, HUD is currently developing information on 
materials to educate borrowers on the importance of home 
inspections. These inspections are a simple, cost-effective way 
for borrowers to identify problems with a property prior to 
purchase and reduce their future risk of foreclosure.
    Do you expect CFPB to adopt similar regulations to help 
educate and protect homeowners under your jurisdiction?
    Mr. Cordray. I am not entirely sure what our authority and 
what HUD's authority would be and how they overlap, but I find 
it remarkable that you are asking that question, because when I 
was in the Ohio legislature, now 23 years ago, one of my very 
first bills there was called the Residential Real Estate 
Disclosure Act, and it was exactly the problem you are 
describing.
    I am going to sell my property. I may know it has termites. 
But the buyer doesn't know any of that. If I don't say 
anything, they are going to get a raw deal. Or maybe there are 
problems in the plumbing or electrical that I have experienced 
but they wouldn't know.
    And it was about making disclosure of those items required 
so that there would be fair information back and forth across 
the table.
    I find it remarkable that 20 years later, we are still 
talking about the same thing that was State legislation in 
Ohio, which we enacted at that time. That seems like the basic 
principle of fairness to me, and if we can work with HUD--I 
don't know who should do what on that--that seems to me the 
right--
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the chairman emeritus of the 
committee, Mr. Bachus, from Alabama, for 5 minutes.
    Mr. Bachus. Thank you.
    Director, first of all, I appreciate your remarks about 
manufactured housing, what is commonly referred to sometimes as 
mobile homes.
    In the South, they replaced tar-paper shacks, and often 
without indoor plumbing or electricity. So they are, many 
times, the only affordable alternative for people.
    Mr. Cordray. Yes.
    Mr. Bachus. And I would like to continue to work with you 
as you refine your approach to lending.
    We have had many conversations, and I know you have also 
had conversations with Jerry Moran in the Senate, about 
automobile lenders--indirect automobile lenders who go through 
auto dealers to make loans on auto loans.
    You have issued a directive or a bulletin, and I think it 
is clear that you can compensate these dealers with a flat fee 
per transaction. And there is some move in the market to go to 
that.
    You have also indicated there are other nondiscriminatory 
practices to compensate automobile dealers other than the flat 
fee, and I know you have been asked before to be more specific 
about maybe what some of those are.
    You have said, because of--I think there was a legal 
action, which I think was resolved in December, you didn't want 
to go into more detail, but could you give me some other 
examples of what indirect auto lenders can use, other than the 
flat fee system?
    Mr. Cordray. Yes. And in fact, I would say that is a good 
example of what I was trying to respond to Representative 
Capito, who was saying that if you think you are considering 
changes, it must mean that you think there are problems.
    It doesn't mean that. It simply means that we don't know it 
all. We were making our best judgment at the time, but if there 
is new information and it turns out that there is something 
that occurs to us and is brought to our attention that we 
didn't understand or appreciate at the time, we are open to 
making changes.
    Here, too, in our bulletin we made it clear that flat fees 
are one mechanism by which lenders could address this issue, 
but it is by no means necessarily the only mechanism.
    And my real answer to your question is, I don't know that 
we know all the mechanisms yet that would be satisfactory, and 
we are open to auto lenders and others bringing those to our 
attention.
    But we did say flat fees are one possibility. A flat 
percentage of the loan might be a possibility. Some combination 
of that with different durations of the loan, different levels, 
and potentially other things that we haven't thought of but 
others in the industry may think of and bring to our attention. 
So, we are open-minded on that.
    Mr. Bachus. As you make determinations on some 
alternatives, can you make those public, too?
    Mr. Cordray. We will. As we know more and we become 
convinced of more and, frankly, some of the other alternatives 
I just described have come from further discussions with auto 
lenders who said, ``Well, what about this? What about that?'' 
And we are open to having those further discussions.
    We also have tried to be very careful in this space, 
because as you no doubt recall, in Dodd-Frank it was very 
clearly defined that we do not have jurisdiction over auto 
dealers.
    Mr. Bachus. The separation--
    Mr. Cordray. We have jurisdiction over auto lenders.
    Mr. Bachus. Sure. And I understand that is limited due to--
but I appreciate that. I think they just want to be--they want 
to know there are some alternatives.
    Mr. Cordray. We are open to having discussions with them. 
We just wanted to be careful and not have people think that we 
were--
    Mr. Bachus. And I think before we enforce some of this, it 
needs to get to the point of them knowing what they can do and 
what they can't.
    Mr. Cordray. Yes. Fair enough.
    Mr. Bachus. Many people--my constituents and others--get 
calls from card servicers, which are--it is a fraudulent 
enterprise, I think. And I know the FTC made a settlement in 
December with some of those people, but I can tell you that the 
calls have continued.
    I know you advise and work with the Federal Trade 
Commission (FTC), and I have talked to Chairwoman Ramirez. Are 
you aware of that problem? They are promoting a financial 
scheme which is absolutely fraudulent.
    Mr. Cordray. We are aware of it, and particularly when it 
comes to advertising these schemes, the Federal Trade 
Commission has more jurisdiction than we do. I would say, 
actually, they advise us more than we advise them. They have 
been around for 100 years; we have been around for 2 years.
    But we have a very good working relationship with them. We 
are trying to make sure that we don't duplicate resources and 
that we think there are more problems out there than both of us 
can handle. It has been a very good working relationship so 
far, and I appreciate that very much.
    Mr. Bachus. Let me end with this. Almost every day I get 
solicitations, as do most Americans, for financial products 
that appear to be sponsored or promoted by the government or 
approved by the government.
    Mr. Cordray. Yes.
    Mr. Bachus. I have one example that just came. This was 
actually yesterday.
    Mr. Cordray. That looks pretty good.
    Mr. Bachus. And if you will keep an eye--I would like some 
discussions on that. It is just getting overblown.
    Mr. Cordray. Yes.
    Mr. Bachus. Where the U.S. Government is inviting you to do 
this, and Congress is authorizing this at a certain price.
    Mr. Cordray. It is a terrible practice. I started seeing it 
when I was Attorney General in Ohio. People will mimic the 
government because it has a certain amount of credibility, 
although not everybody agrees.
    When we have the opportunity to enforce against those 
things we take them very seriously, because what it does is it 
pollutes the market for all of the legitimate programs that are 
being offered. And it undermines all of the honest, self-
respecting businesses that are trying to do things right.
    Mr. Bachus. I appreciate that--
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from California, Mr. 
Sherman, for 5 minutes.
    Mr. Sherman. A financial institution must hit an incredible 
low in its credibility if it thinks that cloaking itself in 
Congress is a step up.
    Mr. Cordray, on ability to repay, if somebody wants to 
mortgage their house to start a business--say, a risky 
business. Will your rules in effect imperil the bank which 
makes that loan, knowing that if the business doesn't work out, 
it is going to be very difficult to repay the loan?
    Mr. Cordray. That would be the very same consideration that 
the bank or lending institution has always given, which is they 
try to assess your ability to repay. They make a reasonable 
determination--
    Mr. Sherman. What if there is a one in ten chance you are 
going to be a billionaire and buy the bank, and there is a 50 
percent chance your business is going to go down and we are 
going to--and you are going to have to sell the house in order 
to pay this loan or you are going get foreclosed on. Is the 
bank, in effect, punished for making that loan?
    Mr. Cordray. No, I don't see--
    Mr. Sherman. They have made a loan that, in all likelihood, 
the borrower cannot repay.
    Mr. Cordray. The bank has to make a reasonable 
determination in good faith whether that loan would be repaid, 
but that is their judgment to make.
    Mr. Sherman. Gotcha.
    Mr. Cordray. All they have to do under our rule is document 
that they did that. And if it is a reasonable, good-faith 
determination, then that is totally satisfactory. Banks have to 
make these judgments about the risks that they are taking with 
their capital--
    Mr. Sherman. Okay.
    Mr. Cordray. --and it is up to--
    Mr. Sherman. And that is a different kind of loan, when you 
know that there is a good chance you are going to have to take 
the home or force the sale of the home, but--
    Mr. Cordray. At some point what you are describing may 
become an actual commercial loan as opposed to a residential 
loan. I am not entirely clear on what you are describing.
    Mr. Sherman. I want to pick up on Mrs. Capito's questioning 
with regard to the affiliated title company versus 
unaffiliated. Are you formally studying this--the 
discrimination on the affiliated--as a consumer, I couldn't 
care less whether my title company is affiliated or 
unaffiliated, I just want the best possible deal. So are you 
looking formally at how to fix that?
    Mr. Cordray. Congress did seem to care, and in Dodd-Frank--
    Mr. Sherman. Yes.
    Mr. Cordray. --they, in various places, wrote in concerns 
and protections about sometimes affiliated entities, where 
there would be steering and--
    Mr. Sherman. Yes. You certainly don't want the steering.
    Mr. Cordray. On the other hand, affiliated entities can 
provide more efficient one-stop shopping as well, so that is 
something that we are aware of, as I have talked to a number of 
the people in the industry who are affected by different 
aspects of these rules. That is one where we have said very 
clearly, ``We are very interested in what the data will show us 
in terms of what impact this has and how that intersects with 
the 3 percent point and fee cap,'' and we are interested to 
have them come and show us what they are finding and what their 
experience is.
    Mr. Sherman. And I hope that if you see a need for a 
legislative fix, you will be back to us with a clear proposal.
    Mr. Cordray. Certainly. We will be receptive to thinking 
about that as well.
    Mr. Sherman. Okay. With regard to automobile dealers, there 
is a lot of controversy about whether to even cover anything 
that the automobile dealers did and do. Of course, the Equal 
Credit Opportunity Act is something for you to focus on.
    As it happens in our society, those with lower incomes and 
lower credit scores pay more for credit. It is more difficult 
to arrange the loan, it takes more time, and of course, there 
is a greater risk.
    In the work you are doing, do you believe that the CFPB has 
sought and considered adequate input from the stakeholders on 
the issue of fair lending in vehicle finance?
    Mr. Cordray. I think we are always interested in having 
more input from stakeholders. And frankly, I will say that we 
have had more in the last 6 months than we had in the 6 months 
before that. I think it has refined our thinking and it is 
helpful to us.
    It is, as you say, typically the way of the world that the 
tougher it is to make the loan, the more people have to pay. 
And that is a creditworthiness determination. That is fair 
enough.
    What we think is problematic is when a creditworthy 
determination has been made and there is a rate that is gauged, 
that somehow that rate will be pushed up because of financial 
incentives for people to push that up higher at the expense of 
the consumer. That is the yield spread premium we saw in the 
mortgage market, which Congress acted to stamp out.
    It is not quite the same dynamic in the auto lending 
market, but there are some similar concerns.
    Mr. Sherman. I yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the Chair of our Capital Markets 
Subcommittee, Mr. Garrett of New Jersey, for 5 minutes.
    Mr. Garrett. Thank you, Mr. Chairman.
    Mr. Director, you started your comments out by saying that 
someone needs to stand beside the consumer. After hearing the 
chairman's questioning on the flagrant spending by the CFPB, I 
guess we should also agree that someone needs to stand beside 
the American taxpayer, between them and you.
    I come here today because there are a number of questions 
that were put to you months ago and still have not been 
answered. And that is perhaps because your agency, as someone 
else from your agency once testified, is not accountable to 
Congress or to anyone else.
    One of the questions we sent to you back in September was, 
why is it necessary for the CFPB to collect consumer credit 
card information on so many--literally millions?
    According to the CFPB, the combined data collected from the 
18 card issuers represents 80 to 90 percent of credit card 
accounts. The Census Bureau projects there were approximately 
over a billion credit card accounts in the United States, held 
by over 100 million card holders last year.
    It would appear that the CFPB is collecting account-level 
data on at least 991 million credit card accounts, which would 
account for literally 60 percent of the adult population here 
in the United States.
    So, I will ask the question from September: Why is it 
necessary to collect so many credit card accounts on so many 
Americans?
    Mr. Cordray. A couple of things, Congressman. First of all, 
I do strongly believe that the Bureau is needed and Congress 
passed the measures that created the Bureau to stand on the 
side of consumers and see that they are treated fairly.
    I also very much agree with you that the Bureau needs 
people looking over our shoulder to see that we are called to 
account for how we do what we do. And that is the role of this 
committee and others, and that is why I am here today, and I am 
here regularly, as you know.
    Mr. Garrett. Right. So let--
    Mr. Cordray. Now on the credit card industry, as I said at 
the time, the purpose of information-gathering by any agency is 
to be able to make informed judgments about policy.
    Mr. Garrett. Let me get into the--
    Mr. Cordray. You would not want us shooting darts at a 
board; you want us to be informed.
    Mr. Garrett. Director, it is my time.
    Since you did not answer the question, and you still 
haven't, I ask the chairman, by unanimous consent, to submit my 
letter to Dr. Thomas Stratmann, professor of economics and law 
at George Mason University, and his response, for the record.
    Chairman Hensarling. Without objection, it is so ordered.
    Mr. Garrett. He is an expert in econometric analysis and he 
looked at what you have been doing. We asked him to review the 
CFPB credit card data collection efforts on over 900 million 
credit card accounts, which represents over 60 percent of the 
American public, and this is what he said about what you are 
doing. He said, ``The CFPB is collecting far more data than is 
necessary,'' and that, ``It is both expensive and risky.''
    He concluded that if the CFPB limited its sampling to 1 
percent of the population, like the Census Bureau does, the 
CFPB would achieve its monitoring goals as well as bring the 
CFPB more in line with the Census Bureau, which makes 
anonymized granular data available to researchers and only 
provides 1 to 5 percent samples for statistical analysis.
    Why is the CFPB overcollecting credit card data by over 
70,000 percent, more than what the Census Bureau does for their 
data?
    Mr. Cordray. With all due respect to Professor Stratmann, 
and I don't mean to disparage him in any way, I have learned 
that there are economic experts on about 16 sides of every 
issue.
    But on this one, what we have found when we work with 
industry, and we are collecting information for them in the 
very same way that other agencies have done so, they often 
prefer to provide it wholesale rather than having to go in 
themselves and develop a sampling device, every piece of which 
costs them money. It is a little easier sometimes for them just 
to provide the information. That has been our experience with 
them, and that is why we have proceeded as we have.
    Mr. Garrett. Do you tell the consumer that you are 
collecting this data on them. Do you inform them? I have never 
received a notice from you that you have collected data on me.
    Mr. Cordray. We have had this conversation a number of 
times, myself, with you and your colleagues. We are not 
collecting information about Mr. Garrett or Mr. Cordray. We are 
collecting aggregated information that is aggregated before it 
comes to us about what credit card issuers are doing to their 
customers and how they are treating their customers. That is 
our focus.
    Mr. Garrett. Let me just clear the record on that. I dug 
into some of the contracts you have where you collect some of 
this data, not necessarily on the credit card data but other 
type of data.
    Some of the information that you are collecting, true, you 
don't have my name and my address, but with regard to one of 
the contracts you do provide the zip code and the four digit 
zip code after it. And you also get the date of birth.
    So let me tell you, if you have my zip code and my last 
four digits, and you know what my date of birth is, well there 
is only one guy in my house who has that.
    If you go to my neighbor and you go to his house, you will 
know what his--and know what his daughter's birth date is.
    Mr. Cordray. No. No. No.
    Mr. Garrett. You are collecting that type of data, 
according to your contracts.
    Mr. Cordray. Look, you are not the only house in your zip 
code. There are thousands--tens of thousands of houses in your 
zip code.
    Mr. Garrett. No, you are also collecting a four-digit zip 
code afterwards. That goes right to my house.
    Mr. Cordray. Look, we don't have information where we are 
trying to reverse-engineer anything.
    Mr. Garrett. This is in your contract, Mr. Director. This 
is in your contract.
    Mr. Cordray. I am not sure what you are talking about at 
this point. You said this is no longer the credit card, it is 
some other data collection.
    Mr. Garrett. Experian Information Solutions is the contract 
that you have.
    Mr. Cordray. Okay, so you are talking about credit 
reporting at that point. Yes. Again, we aggregate the data, and 
that is what we are doing.
    I have no interest in where you spend money and on what and 
why and how. I have no interest in what I do.
    The private industry does; that is exactly what they are 
about. They want to know exactly what you are doing so they can 
market to you.
    But we are about aggregate information so we can determine 
what is going on in these markets, so that we can bring law 
enforcement actions against people for violating the law. We 
can get money back to consumers.
    If you don't want us to do that--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from New York, Mr. 
Meeks, for 5 minutes.
    Mr. Meeks. Thank you, Director Cordray. And I appreciate 
you being here. I think our State is number three--we are 
keeping you busy--in complaints, especially in regards to 
mortgage complaints. So we know that we are keeping you busy, 
but we appreciate the work that you are doing.
    I want to also just briefly say that I look forward to 
continuing to work with you, and to work with you in the area 
of manufactured housing. I think that it is important that we 
have a voice and work together and try to fix and work 
collectively together. So I wanted to add my voice to the many 
that are looking forward to working collectively in resolving 
and working with you on manufactured housing. So I look forward 
to doing that. I think that it is important for us to work 
together to get that done.
    My issue is trying to help the unbanked. I come from an 
area up--since I come--I have lived the life myself from coming 
from my parents, who were struggling, and banks--they didn't--
weren't qualified or did not have enough money, but still they 
needed certain credit to make ends meet.
    Working paycheck to paycheck is a common thing. And I find 
that I know many Americans are working paycheck to paycheck. 
And going to a bank is not available to them, and so therefore, 
they go to products that are nonbankable.
    I have been working very closely, trying to make sure that 
they still have access to some credit, to nonbank institutions. 
And I have been working with my colleagues on the other side 
there to try to get something done there.
    But I want to make sure that the products are safe. I want 
to make sure, because there is a statement that it is extremely 
expensive to be poor.
    So I was wondering if you could tell us how the CFPB is 
making sure that underserved consumers will be able to access 
affordable and better-suited products from some of the 
regulated credits?
    Mr. Cordray. Thank you for the question, and also for the 
background. We have known for years that it is expensive to be 
poor, particularly where you don't have good products and 
services being offered to you.
    We recognize that there is a real need and demand among the 
public for small-dollar credit and, as you say, particularly 
for people who don't have direct access to the banking system, 
for a variety of reasons.
    We have been careful in trying to assess the actual 
dynamics of that marketplace. We put out a White Paper last 
year on payday lending and on the deposit advance product by 
banks that has been very similar to payday lending, and looked 
at the need for that credit, and how it is being met. One of 
the problems and concerns that we have is that the business 
model seems to depend on a significant lump of consumers who 
end up rolling loans over 6, 8, 10 times. They end up living 
their lives off of 390 or 520 percent rate of interest, which 
is not benefiting or helping them.
    Now, there are others who use these products, and can get 
in and out of them responsibly. And it is not solely payday 
loans. It is car title loans; it is certain types of 
installment loans. There is pawn brokering. It is a somewhat 
complicated, dynamic market.
    We have indicated that we are going to move ahead with 
making some policy judgments and regulations in this area, and 
we will. But our concern is exactly yours. We want people to 
have access to the credit they need, but the kinds of products 
that are going to make things better for them, not worse. And 
there are many complicated dynamics around that.
    Mr. Meeks. But that is important, because I can tell you 
some--you hear the word just get rid of these--all the 
products, but then those folks have no resource. And then they 
end up, as I have seen--some of my friends' parents do when I 
was growing up--there is the old loan shark. That is the person 
I would want to make sure stays out of business, because not 
only--they come in, they do some bad things.
    Mr. Cordray. Yes.
    Mr. Meeks. The American Banker reported last week that T-
Mobile will be joining a growing list of companies which are 
enabling consumers to bank without going to banks also by 
offering the reloadable prepaid Visa cards. Can you tell me 
what--has the CFPB done any research on that? And any comments 
on those kind of products?
    Mr. Cordray. Yes, that is a great question. It is something 
we watch very closely. A concern of mine is, can we stay ahead 
of how fast moving some of these markets are? There are many 
innovators trying to make their way into the space of mobile 
banking and various products, and many of them of them may be 
offered by phone. There may be other mechanisms, as well, such 
as peer-to-peer lending.
    We are trying to stay close to that. Some of it is 
happening more quickly, some of it less quickly. It is very 
difficult to predict how that is going to evolve. But you can 
look around the world and see that it is arriving in various 
ways in other countries and likely will arrive here, as well. 
And it poses challenges to a regulatory system that is built on 
a more physical notion of banks or phones. And the FCC does 
phones, and so forth and so on.
    So it is something that we are both trying to be very aware 
of, trying to stay on top of, and also recognize we are going 
to need to work with other regulators if we are going to be 
effective in this space. And probably we will need help from 
Congress addressing this.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Neugebauer, Chair of our Housing and Insurance Subcommittee, 
for 5 minutes.
    Mr. Neugebauer. Thank you, Mr. Chairman.
    Director Cordray, thank you for coming this morning.
    Several high-profile data breaches at major U.S. retailers, 
including the most recent breach at Target, have raised 
Americans' anxiety levels about the security of their personal 
financial information. Yet, I think most Americans would be 
surprised to learn that one of the largest repositories of 
financial data in the country is maintained not by a retailer 
or a financial institution but by the CFPB.
    The Bureau is tracking, as my colleague from New Jersey 
mentioned, 991 million credit card accounts, at least 8.6 
million individual credit reports, and now as many as 227 
million mortgages. We know that the Bureau has already 
experienced three breaches at its consumer complaint portal, 
and the government's less-than-stellar track record in this 
area suggests that there may be many more to come.
    So my question to you, Mr. Cordray, is, can you personally 
guarantee that consumers' personal financial information is 100 
percent secure?
    Mr. Cordray. First of all, there are a lot of comparisons 
made, some of them very casually, in relation to us to the 
stimulus bill, which we have nothing to do with, us to the NSA, 
which we have nothing to do with, us to health care, which we 
have nothing to do with.
    What we do have to do with is the work that we are doing on 
behalf of consumers and the issues we can control. And the 
issue you raise is an important one, and it is one that I take 
very seriously, just as you take it very seriously. And it 
would be pretty bad for our agency if we didn't take it very 
seriously.
    What I can say is we attempt to safeguard any information 
we have about the American public in two ways. First of all, 
wherever possible, we are trying to gather aggregated 
information. I don't really care or want to know anything about 
your personal spending habits. All that does is get in my way 
because there are provisions in the Federal law for that kind 
of personal information, and how carefully you have to 
safeguard it.
    Where we do gather that information necessarily, like 
through our consumer response function, where people have to 
give us their details in order to have their complaint handled, 
we are complying with all of the security and privacy 
provisions that are pretty extensive in Federal law. We are 
trying to do that very carefully, and people are looking at us 
to see how we are doing that, including our Inspector General 
and the GAO. It is something that I personally am very mindful 
of and we will do our absolute best not to have a problem in 
this area, because I recognize that a problem would hurt this 
agency, hurt our mission, and not be what you or we want.
    Mr. Neugebauer. So, you are collecting a lot of data. You 
are doing the best you can, obviously.
    I want to quote the President. He said recently, ``All of 
us understand that the standards for government surveillance 
must be higher. Given the unique power of the State, it is not 
enough for leaders to say, `Trust us, we won't abuse the data 
we collect.' For history has too many examples of when that 
trust has been breached.''
    And so, you are saying you are not doing it, but the 
President is saying, we can't always take that at face value.
    I think the question that I want to follow up with is 
something Mr. Garrett mentioned, can this data be reverse-
engineered?
    Mr. Cordray. First of all, again, you are giving me quotes 
about the NSA, which is not us, and not what we are doing, and 
I don't think there is any comparability there, so--
    Mr. Neugebauer. But you are still collecting--almost as--I 
think you and the NSA are in a contest of who can collect the 
most information. And I think the jury is still out as--
    Mr. Cordray. I fundamentally reject that--
    Mr. Neugebauer. --to who is going to win that contest.
    Mr. Cordray. --categorization. However, in terms of what we 
are doing, we are making every effort to be very careful, both 
in satisfying the Federal law in terms of security and privacy, 
and in terms of treating consumers properly. If we are careless 
with their information, that is not consistent with our 
mission, and we are not.
    Mr. Neugebauer. And so the question is, can this data be 
reverse-engineered? That was the question.
    Mr. Cordray. The issue of whether data can be reverse-
engineered is a complicated one. That is why we try to 
aggregate as much as we can at a very high level. There may be 
information-gatherings that the government has done across many 
sectors that at one time could not be reverse-engineered but 
may become more capable of having that happen. That is 
something we are very careful about and mindful of and thinking 
about.
    My point is, that is not an issue that you can answer at 
one time for all time. It is something that may change over 
time.
    Mr. Neugebauer. So the fact that you are concerned about 
it--does that mean that you think it can be reverse-engineered?
    Mr. Cordray. I think we are concerned about making sure 
that could not happen as much as possible. Nobody at the 
Bureau, I can tell you, is reverse-engineering anything. Nobody 
has the time or interest to do that. It would only cause us 
trouble.
    However, we are trying to be mindful of, as we gather 
information, making sure that it wouldn't be subject to 
reverse-engineering by us or anyone, because I don't need that 
kind of headache, frankly.
    Mr. Neugebauer. I think it is one of the things that you 
evidently have some concern about, because in one of your 
contracts with CoreLogic, you say they must agree not to 
attempt or directly or indirectly reverse-engineer. So 
evidently that capability exists or you wouldn't have that in 
your contract.
    Chairman Hensarling. The time of the gentleman has expired.
    Mr. Cordray. Again, we try to make sure that will not 
happen. And that is a term in our contract and we are going to 
hold our contractors to that--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Clay, for 5 minutes.
    Mr. Clay. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for your testimony this 
morning.
    The ranking member and several members of the Majority have 
expressed interest in working with the CFPB to solve challenges 
like making sure that manufactured housing remains a viable 
alternative for the many families who benefit from this 
important product.
    As you know, many times when we attempt to address these 
types of issues, we unintentionally create loopholes that 
undermine consumer protections instead of fixing the problem.
    Can you commit to working with us to address the concerns 
of the manufactured housing industry while continuing to 
protect our constituents from the actual bad actors that the 
rules are meant to target?
    Mr. Cordray. I do commit to that. I believe I have 
committed to it today already, but I commit to it now.
    We have been open and accessible to representatives from 
both the building and lending industries. They have made a 
strong case for why this fits a particular need in the 
population. And it was a case that, as I said, I am familiar 
with from my own personal experience and where I grew up and my 
family, particularly in Eastern Ohio.
    So yes, we are very interested in those issues.
    Mr. Clay. Thank you for that response.
    In the area of mortgage rules, what steps has the CFPB 
taken to educate and help lenders as well as consumers 
understand your new rules?
    Mr. Cordray. I am actually really proud of the work we have 
done in that area, because when we finalized our rules last 
January we could have easily said, and it would have been a 
classic response to industry, ``Well, we are done, and it is 
your problem now, and we are moving on to other things.''
    But instead, we dug in alongside with them and made it 
clear that we had a whole project around regulatory 
implementation. We wanted to hear from them about what kind of 
practical problems they might be running into that we hadn't 
foreseen, and they hadn't foreseen, because they told us 
everything that they thought they had problems with before we 
finalized the rules.
    And there have been a number of things, including the small 
creditors that I talked about with Representative Capito and 
the special provision we made that covers thousands of 
community banks and credit unions. That was in addition to the 
original rule and it was meant to address concerns we heard 
that we absolutely found to be valid and legitimate.
    The examination protocols were done 6 months in advance so 
people could get familiar with them. We continue to work with 
industry. In fact, by the fall, they said to us, ``We 
appreciate that you have been so helpful. Please stop being so 
helpful until January 10th because we now need to finalize.'' 
But we have been taking further comments and issues, and we 
will address some of those this year as well.
    And again, there will be new circumstances people will run 
into that we didn't quite anticipate, and they didn't quite 
anticipate. We will listen to them and see what they have to 
tell us and see what the data shows about actual impacts on the 
market.
    We do not want to upset the housing or mortgage market. We 
are here to help--
    Mr. Clay. Do we have any data yet on any decline in the 
issuance of mortgages or--
    Mr. Cordray. It is so soon that it is very hard to say 
anything. The rules took effect January 10th. It is now January 
28th.
    I will say, I did see that mortgage lending was up for each 
of the first 2 weeks under our rule, but that is such a small 
slice that it is very hard to make anything of that over the 
week before we finalized our rule.
    Mr. Clay. Thank you for that response.
    In the area of servicemembers, the Dodd-Frank Act created 
the Office of Servicemember Affairs to address the specific 
challenges faced by servicemembers, veterans, and their 
families. This office, which monitors complaints from 
servicemembers in conjunction with consumer response, received 
approximately 3,800 complaints between July 1, 2012, and June 
30, 2013.
    What are some of the most common grievances expressed by 
servicemembers, and what has the Bureau done or can it do to 
address their concerns?
    Mr. Cordray. Congressman, I am lucky with the people I get 
to work with at the Bureau, and one of the best we have is 
Holly Petraeus, who runs that office, and has tremendous 
credibility across the country with servicemembers, their 
families, and veterans. And she has lived that life herself.
    We had a gentleman from Massachusetts tell us about his son 
whom he thought was treated unfairly on an auto lending 
program. We looked into it, and found a lot of complaints. We 
addressed that through an enforcement action and got $6.5 
million back to thousands of servicemembers.
    We have addressed a lot of individual complaints. We have 
addressed problems like permanent change of station orders, 
which didn't qualify people for the kinds of adjustments that 
other people were getting in the mortgage market.
    And the Department of Defense and Veterans Affairs, I will 
say, to their great credit, have been very responsive to the 
problems we identify to them that we hear from servicemembers 
and veterans and they have solved a lot of problems. It is a 
great partnership that we have with them.
    Mr. Clay. And thank you for your advocacy on behalf of 
consumers in this country.
    I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from North Carolina, 
Mr. McHenry, the Chair of our Oversight and Investigations 
Subcommittee.
    Mr. McHenry. Director Cordray, to follow the chairman's 
opening line of questions about your building renovation, would 
you provide the committee with the occupancy agreement between 
the Bureau and the OCC?
    Mr. Cordray. I don't know that there would be any reason 
why we could not provide that, and I would be surprised if we 
haven't provided it, but I don't know offhand if we have--
    Mr. McHenry. You haven't. So if you would, that would be 
helpful for us to understand this.
    Mr. Cordray. Yes. That was an agreement signed after I 
became Director, but it is what we are going to be living under 
for the next--
    Mr. McHenry. Even easier then.
    Mr. Cordray. --30 years, so--
    Mr. McHenry. No, even easier--
    Mr. Cordray. Well--
    Mr. McHenry. --since it is a 20-year contract that you have 
disclosed in your report.
    The reason why we ask this is because you spent $12 million 
a year in rent. You disclosed that. And we appreciate the fact 
you disclosed that.
    We also know from a Treasury audit that the value of the 
building that you are occupying is $153.7 million as of 2011. 
And yet, you are spending--first, we find out $55 million, 
based on your disclosures, then $95 million, then $150 million. 
So it looks very odd to us, and that is why we would like to 
know the details of this. Don't you think that is reasonable?
    Mr. Cordray. I do think that is reasonable, yes.
    Mr. McHenry. Okay. Thank you.
    You said today that you will actually have to move out of 
this building that you are leasing--you don't own it, you are 
leasing it. And you are going to have temporary space.
    Mr. Cordray. Yes, it is a very annoying problem for us, and 
it hasn't made anybody happy, including me.
    Mr. McHenry. But, you think about the cost of it and seems 
a little insane that you are spending $150 million of taxpayer 
money and spending $12 million in rent and you are not even 
going to be in it.
    Mr. Cordray. Look, there is much that I am unhappy with 
about this situation. It is a building that is a deteriorated 
building. It is a classic white elephant.
    Mr. McHenry. How old is it?
    Mr. Cordray. It is going to cost a fair amount of money to 
bring it back up to standard.
    Mr. McHenry. How old is it?
    Mr. Cordray. It is not that old.
    Mr. McHenry. No?
    Mr. Cordray. It must have been used pretty heavily. It was 
built in the 1970s--
    Mr. McHenry. Yes, this place looks pretty--
    Mr. Cordray. --or the 1960s, I think, but--
    Mr. McHenry. Yes. You know, Kennedy laid the cornerstone on 
this little building.
    Mr. Cordray. Yes.
    Mr. McHenry. It is a little heavily used here, too. So 
anyway--
    Mr. Cordray. If I were a consumer--
    Mr. McHenry. --I just want to find out--
    Mr. Cordray. --I would be complaining a lot about that 
building if I owned it.
    Mr. McHenry. --if you would provide us with the details of 
this arrangement for space, and what it is going to cost? Would 
you do that?
    Mr. Cordray. I think--as you have seen--
    Mr. McHenry. Not today, but--
    Mr. Cordray. As you have seen, our budget and spending has 
become more and more transparent as we build up this agency.
    Mr. McHenry. Sure.
    Mr. Cordray. All of that is available on our Web site each 
quarter.
    Mr. McHenry. Okay. And let me follow up on that.
    Mr. Cordray. Yes.
    Mr. McHenry. I wrote you a letter at the beginning of the 
month. I appreciate your responding in a timely manner.
    You provided back--and my question--and I know you receive 
letters--a few. And I understand that my letter request was 
about the details of your budget. You responded back with some 
links on your Web site, and I appreciate that. One was a newly-
issued report on your financials for the year.
    What I asked for was the resource detail and operating 
levels detail within your budget. Now, the report you sent me a 
link to--I went to it, looked at it, and the level of detail 
there is fairly nonspecific. And I will give you an example.
    What I am asking for is a line item structure of this and 
you have a $166 million line item that has 3 lines of 
description in order to add up to $166 million. And it has a 
great name: ``Prevent financial harm to consumers while 
promoting good practices that benefit them.''
    I don't know that we oppose that idea, we would just like 
to know what it is. Now, your Bureau has also done something I 
think is proper. You disclose contracts. So, we are able to ask 
you about contracts.
    Mr. Cordray. Right.
    Mr. McHenry. Right? So I know that you spent $2.5 million 
to pay for Web ads to drive traffic to your Web site. I know 
that. And I know you contracted with well-known firms. Now, I 
also know whether it is a no-bid contract, a bid contract, 
right? And I appreciate that--
    Mr. Cordray. And you have seen that we have placed a real 
emphasis on competition in our contracts.
    Mr. McHenry. Yes, and I appreciate that. I also saw the no-
bid contracts, and we could have questions about that.
    Now, as a policymaker you are also spending a substantial 
amount in salaries and benefits. You disclose that, but not in 
the detailed level. In your budget estimates, we know you have 
238 people working on one area, but we don't know anything more 
than that.
    So what is going to happen to you is you are going to come 
before Congress, and we are going to have a lot of questions 
about your contracts, even if you have enormous amounts of 
wasteful spending to the tune of $300 million, $400 million a 
year, and we don't know the details of it.
    What I would ask you to submit to us is that budget line 
item that other agencies who have to go through the 
appropriation process submit on a regular basis. Would you 
submit that to our committee?
    Mr. Cordray. So what I would say is, as I said, the extent 
of detail of our budget has grown greater as we have been 
staffing the agency--
    Mr. McHenry. It is still insufficient, sir.
    Mr. Cordray. --and have the ability to do that.
    It is my understanding that the amount of information we 
provide about our budget is comparable to that of other 
agencies, and we are now providing it on our Web site on a 
quarterly basis, which other agencies do not do. If you have 
other views about how much detail we should be providing, I 
am--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Georgia, Mr. 
Scott, for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman.
    Over here, Mr. Cordray. How are you?
    Mr. Cordray. Good.
    Mr. Scott. Mr. Cordray, I want to ask you about the 
Bureau's March 2013 fair lending guidance for our automobile 
dealers. This is very important to me. I represent a district 
that represents the six largest counties around Atlanta, which 
means the suburbs, which means transportation, which means auto 
dealers and auto consumers.
    Now, I am very concerned about this because I, along with 
12 other members of this committee, wrote you a letter 
expressing our concerns on May 28th, and asked you to respond, 
but we haven't gotten a response as of yet.
    This is very, very critical. Number one, there was no study 
that was done on the impact of flat fees for consumers or how 
it would affect consumers and the availability of them getting 
credit. This is very serious.
    I am very concerned about the Bureau's actions because they 
have had unintended consequences of: one, raising credit costs 
for consumers; and two, pushing the marginally creditworthy out 
of the market entirely.
    And if, for example--if you learn, as many of us here in 
Congress have learned, that the broad adoption of dealer 
compensation methods that do not permit consumers to negotiate 
lower prices would hurt marginally creditworthy consumers, 
including many minorities, of which you are admirably trying to 
make sure have fairness--but if you knew this, would the Bureau 
review this guidance that it has used to finance sources that 
you issued last March?
    Mr. Cordray. I am trying to follow all of what you 
described.
    First of all, I believe we have responded to your May 28th 
letter, and we will get to the bottom of that and make sure 
that we are on the same page. I would be very surprised if we 
had let 7, 8 months go by without responding--
    Mr. Scott. Just to correct you, I have checked with my 
staff in my office and you didn't. But I understand. That is 
not the point here. I just mentioned that so you could see the 
urgency of moving forward.
    Mr. Cordray. Yes.
    Mr. Scott. We need to treat both our auto dealers and our 
consumers with fairness and the March 23rd guidance is not 
fair.
    Mr. Cordray. Let me say a couple of things about that. The 
problem that we are trying to address is one where people walk 
in to get a loan to buy a car, which, as you say, is a critical 
thing in suburban and rural areas in order to get around. And 
we find that they are treated differently. They are required to 
pay different amounts, higher amounts, based solely on the 
color of their skin or their ethnic background.
    That is not right. That is what we are trying to address.
    Now, in terms of how we are trying to address it, it 
becomes a more complicated issue. The bulletin we put out last 
March, there was nothing unfair about it.
    It was restating law that has been on the books and 
followed by all the other agencies, including the Department of 
Justice, for almost 20 years. We, as a new agency, laid out 
that we also felt that we were going to take the same approach.
    The auto industry has a lot of concern about this, but the 
auto lending industry is doing just fine. In fact, it had a 
banner year in 2013 and I expect it will have a banner year in 
2014. So the notion that we are somehow destroying lending or 
killing off the ability of people to compete in this market, we 
are not.
    We are going to continue to work with people to address 
concerns. You saw that we had an enforcement action that did 
bear fruit against Ally for $98 million--
    Mr. Scott. But, Mr. Cordray, please, my time is running 
out. Here is the point--and all your points are here--and I 
want you to do a great job. But if the people--if what you are 
doing is not great within the auto industry and the consumers 
between the people who are buying the cars and are not--and if 
they have input, which, in fact, they did not--considering how 
controversial this guidance was and has become, wouldn't it 
have been more prudent for you to receive input from them, 
which you didn't, to hear concerns from them, to hear their 
concerns directly who are directly impacted by this guidance 
before it was issued?
    This could have been avoided.
    Mr. Cordray. Look, the guidance itself is exactly a 
restatement of existing law. That is all it is. I don't know 
what people are telling you, but if they are making more of it 
than that, they are wrong.
    We have had lots of discussions with lenders over whom we 
have jurisdiction. We were careful about not trying to reach 
out to dealers over whom we don't have jurisdiction and 
respecting the line that Congress drew.
    Mr. Scott. Allow me to say this, please--my time is up.
    But this is one Congressman who represents probably per 
capita--certainly my area, because I represent the suburbs 
where the action is--where they have to get fair treatment. If 
you could work with my office more closely to make sure my 
dealers and consumers are treated more fairly--
    Chairman Hensarling. The time--
    Mr. Cordray. I am happy to do that.
    Chairman Hensarling. --of the gentleman has expired.
    The Chair now recognizes the gentleman from New Mexico, Mr. 
Pearce.
    Mr. Pearce. Thank you, Mr. Chairman.
    And thanks again, Director, for being here.
    Just a follow up to Mr. Neugebauer's questions--a Federal 
judge ruled the metadata collection by the NSA was 
unconstitutional, and my question is, will you submit a request 
for the Federal judge to look at your data collection and see 
if it is constitutional? Would you do that?
    Mr. Cordray. We will follow our statute, which is the law 
Congress gave us, and that is what we will do.
    Mr. Pearce. That was not my question.
    Mr. Cordray. And by the way, I will say that we have an 
enforcement action in which--
    Mr. Pearce. If I could reclaim my time, sir--
    Mr. Cordray. --the constitutionality of the Bureau was 
raised--
    Mr. Pearce. I just asked you a simple question. I asked a 
simple question.
    Mr. Cordray. --in the Federal district court in 
California--
    Mr. Pearce. Mr. Chairman, if I could reclaim my time?
    Chairman Hensarling. The time belongs to the gentleman from 
New Mexico.
    Mr. Pearce. I know that Mr. Snowden was not a planned asset 
of the agency, and I know that the IRS didn't plan for things 
to be released, but I will say that the collection of data like 
you are collecting has tremendous value in political campaigns, 
and I worry that there might just be someone down the system 
who might release that information. And you are saying that, 
no, you are not going to ask a judge if it is constitutional.
    I found your testimony almost amusing where you described 
how many of your friends live in manufactured housing. That 
smacks of a condescension that was rejected two generations 
ago, and I wonder, have you personally talked to any people who 
deal with manufactured housing?
    On January 23rd, I got this unsolicited e-mail from a 
friend of mine. I didn't tell him I was looking for 
information.
    ``Good morning, Steve. I just returned from an educational 
seminar that explained how we have to conduct our business as 
manufactured home retailers now that the new laws are in 
effect. I honestly can't believe what I have to do to sell 
homes and how difficult it will be not to trip up. It just 
takes the wind out of my sail and all others that are in my 
industry. It just keeps getting more and more difficult to 
operate a business and more and more easy to get sued for not 
dotting I's or crossing a T.''
    That is the legacy which lives in the manufactured housing 
industry that you have given lip service to today and for the 
last year.
    But I will tell you that I found amusing your indignation 
that the one-size-fits-all characterization, before you even 
came here, was so offensive. And yet, you are doing the same 
thing today.
    You are declaring today that many times the mobile home, 
the manufactured housing--that a regular house can't be built 
there. Now, my county is flat from one end to the other; 50 
percent of the homes are manufactured homes. And to declare 
that one lot is not suitable for regular homes but is suitable 
for those that many of your friends live in, I found to be 
generalistic thinking--one-size-fits-all thinking.
    You characterized that even your initial rules were coming 
because you feared the ability to repay. Now, I wonder how many 
banks who lend to manufactured home buyers you actually talked 
to, because they tell me that they have the highest rate of 
repayment of any form of home.
    And you still have one-size-fits-all in the balloon 
payments, which then kicks us out--kicks a lender out of the 
Qualified Mortgage market without a secondary. When you do that 
in New Mexico--we have 70 days of capital to lend for houses in 
the entire State, and when you kick them out of the secondary 
mortgage market, you then say that you have to lend that money 
for that piece of property, and when it pays off 30 years from 
now you can lend for a new house.
    You are going to choke, then, the rural, small areas--the 
areas that don't fit your definition of what is really right 
for people to live in and your idea that balloon mortgages 
aren't somehow okay.
    None of your people from Wall Street are going to come to 
New Mexico and lend on a trailer house and give them a 30-year 
note because they can deteriorate or they can be held in good 
condition for 50 years.
    And so I find your indignation that we might have said or 
might even be saying still that one-size-fits-all is not 
working, it is a war on the poor that is being conducted by you 
and this Administration and it is one where low-income people 
suffer the most. They don't have other options.
    So I find your testimony today to be diminishing, demeaning 
to the people who are suffering the most. I wish that you would 
change the rules instead of coming here and giving lip service.
    Thank you, Mr. Chairman. I yield back.
    Mr. Cordray. Mr. Chairman, point of personal privilege as 
the witness at this hearing for the 5-minute filibuster that 
resulted in no questions to me--
    Chairman Hensarling. The gentleman--
    Mr. Cordray. That is some of the most offensive--
    Mr. Pearce. I asked a question early on.
    Mr. Cordray. --some of the most offensive comments I have 
heard from this committee--
    Chairman Hensarling. The committee will come to order.
    It is the gentleman from New Mexico's time. As a courtesy 
to the witness, if he would like a brief moment to respond, the 
Chair will yield him a brief moment.
    Mr. Cordray. I would.
    The completely unfounded suggestion that we are using data 
for political campaigns, which you have not a shred of evidence 
for, this is an independent agency and--
    Mr. Pearce. I did not say that, Mr. Chairman.
    Mr. Cordray. --is not subject to be controlled like--
    Mr. Pearce. I said the possibility--
    Mr. Cordray. That is what you said.
    Mr. Pearce. --of Snowden, who would release that 
information without your consent--
    Mr. Cordray. And the notion that I am being condescending 
in talking about manufactured housing because, in fact, I have 
friends and family members who have lived and live in 
manufactured housing--I don't begin to understand where you are 
coming from on that.
    You are being blunt with me--
    Chairman Hensarling. Your brief moment--
    Mr. Cordray. --and I will be blunt with you.
    Chairman Hensarling. --has expired.
    Mr. Cordray. And I expect courtesies from this committee--
    Chairman Hensarling. The Chair--
    Mr. Cordray. --of reasonable discussion.
    Chairman Hensarling. --now recognizes the gentlelady from 
New York, Mrs. Maloney, for 5 minutes.
    Mrs. Maloney. I thank the Chair for yielding.
    And I thank Mr. Cordray for your hard work.
    I would like to yield him as much time as he would like to 
respond to the line of disrespectful questioning.
    Mr. Cordray. So the notion that we are being condescending 
in trying to take account of these issues and recognize that 
there are different guides of properties that have different 
needs in rural, suburban, and urban areas is--and that is 
somewhat amusing to you, it is not amusing to me.
    We are trying to take this seriously. We are trying to meet 
the needs of consumers across this country.
    That is the mandate of this Bureau, and we will do it as 
best we can. The notion that we are somehow going to take 
information and use it for political campaigns is deeply 
offensive.
    You haven't a shred of evidence on which you are basing 
that. That is just a wild allegation, and it is not befitting 
of this committee, Mr. Chairman.
    Thank you.
    Mrs. Maloney. Okay.
    Mr. Cordray, as you and my colleagues know, we created the 
CFPB to protect consumers. We saw in the financial crisis that 
consumers were often not thought about at all, or as an 
afterthought. And it is highly appropriate to have one agency 
whose prime focus is to make sure that abusive practices and 
unfair deceptive practices are not out on the market.
    I believe your record speaks for itself in really coming 
forward with well-thought-out, researched positions that help 
the economic security of our country by being fair to people 
and giving notice to people about the products that they are 
purchasing.
    I would also like to ask specifically about an area that 
you are working on which is becoming an emerging important 
market, and that is prepaid cards. Prepaid cards hold a lot of 
potential, but they are not subject to uniform Federal 
protections or disclosure standards, and that makes it 
difficult for consumers to be able to do comparison shopping.
    I know that your office has been working on a proposed rule 
for prepaid cards for quite a while and I look forward to 
seeing what you come out with.
    So I have two basic questions in this area. First, when 
does the Bureau plan to release its prepaid card proposal?
    And second, based on your research into this market, how 
should we as policymakers think about the prepaid card 
policies? Should we focus primarily on clear, consistent 
disclosure of fees to consumers, or are there other limitations 
that need to be placed on prepaid cards?
    Mr. Cordray. Thank you, Representative Maloney.
    The issue you raise is a very important one, and an 
increasingly important one for many low- and moderate-income 
consumers for whom a general purpose, reloadable prepaid card 
may increasingly become some sort of alternative mechanism to a 
bank account or check cashing or other things that can be very 
costly at times for low- and moderate-income individuals.
    The state at which the prepaid card issue is at at the 
Bureau, is the proposed rule state. This means that we are on 
the verge of undertaking to write rules governing prepaid 
cards, which, as you know, and I know from your attention to 
this, is right now a hole in the fabric of consumer protection.
    Just as remittances had no consumer protections before we 
acted to adopt those rules, prepaid cards are the same. Most 
consumers don't realize the differences when they reach in 
their wallet and pull out a credit card, a debit card, or a 
prepaid card. I think they think they have the same protections 
across all of those cards. It is not true. Prepaid cards are 
not protected at all.
    So we will be writing rules to take account of the 
importance of providing protections in that area.
    And what I would say is you are asking about kind of the 
balance between: Do you simply proceed through improving 
disclosures or is there some substance to be provided here?
    My general impression is that in most of these markets, we 
need better disclosures and we need better substance in the 
rules. I don't want to prejudge the rulemaking process. We will 
be putting out a proposal for comment and then finalizing it.
    But action here is very much needed and it is an emerging 
market that is now well over $100 billion being loaded onto 
these cards every year and people need protections in a 
balanced way.
    We will welcome the input of members of this committee, as 
well as consumers and industry, on getting those rules right.
    Mrs. Maloney. And where do we stand on your rule on 
overdraft protections? I understand you were reviewing that.
    Overdraft would not be part of a prepaid card. That would 
not be part of it. But the overdraft protection rule, where do 
you stand on working on that area?
    Mr. Cordray. In the Unified Agenda, which we publish, and 
we publish on our Web site, actually in response to a 
suggestion Representative McHenry made about a year ago, maybe 
a couple of years ago now, that is at the pre-rule stage. It is 
not as far along as prepaid cards but it is something that we 
are looking at and trying to figure out. We are doing analysis 
right now of the market to try to understand.
    There are many ways in which the overdraft product is good 
for consumers, like helping them avoid NSF fees. There are some 
practices that concern us in that area, so we are moving 
forward in trying to figure out how to approach those issues, 
but it is not as far along as prepaid cards.
    Mrs. Maloney. My time has expired. Thank you.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from California, Mr. 
Royce, the Chair of the House Foreign Affairs Committee.
    Mr. Royce. Thank you. Thank you very much, Mr. Chairman.
    And, Director, thank you.
    I wanted to raise some concerns, but maybe in the process 
lower the blood pressure a little bit over this issue on the 
question of the Bureau's National Mortgage Database project 
with the FHFA. I think you understand that beyond this room 
there are others who have concerns with the privacy--
    Mr. Cordray. I do.
    Mr. Royce. --issue here, and at the end of the day you put 
together a database like that and it is going to include credit 
information on 50 million people here in the United States. 
That is just the project.
    Now, in your opinion, this information--the data collected 
from market monitoring--does not include personally 
identifiable information?
    Mr. Cordray. That is my understanding. Yes.
    Mr. Royce. Yes. And the real question here is, is it 
searchable? Can it be reverse-engineered? And I assume that you 
don't believe that you can identify a single individual through 
that process.
    But if we look at the actual risk that consumers have, we 
saw the recent Target breach, which in theory should not, could 
not happen. We saw what happened with Michael's. Even with the 
best of intentions, even with high security--in these cases you 
have companies with great reputational risk on the line. They 
had done everything they could do to make sure that a breach of 
personal information didn't happen, and it happened.
    But now we are talking about the Federal Government. And 
breaches of information at the Federal Government level--
according to the GAO, in 2012, there were 22,000 data breaches. 
Now, some of that is small in terms of breaches of personally 
identifiable information, but some of them were very large.
    It was a 42 percent increase from the year before. It was 
over a 100 percent increase from the year before that.
    I would like to play a short video clip from a presentation 
given last year by Bob Avery. He is the FHFA's Project Director 
for the National Mortgage Database--that is this database.
    So let's go to that if we could, Mr. Chairman.
    [Video plays.]
    Mr. Royce. So Mr. Avery states, in fact, the information 
included in the database is, in his words, easily reverse-
engineered. And even more troubling, it will be available to 
any Federal employee in the country and possibly others.
    Now, this is why from the perspective of privacy advocacy, 
there is this concern about consumer privacy in this case. And 
personally, I don't believe that the project should move 
forward until these issues are adequately addressed.
    So I guess my question is, from your standpoint, you are 
weighing the assumed benefits of the database. Do you believe 
that outweighs the real privacy concerns here?
    Mr. Cordray. Ultimately, it is a judgment and a balance. 
But I would say two things in response to your line of 
questioning.
    The first is, in fact, the homeowner market is one where 
there is a tremendous amount of information freely available to 
the public. I don't know quite how they do things in 
California, but in Ohio, the home that I own is on our county 
auditor's Web site. There are pictures of it. There is a 
valuation of it. There is the amount of taxes I pay. At a time 
when I had a mortgage, there was the amount of the mortgage 
that I owed.
    All of that information was public information.
    I had a law school class that told me back in 1990 how much 
information there is out there. I wasn't sure I understood. 
They brought in and they knew all about all of my homeowner 
transactions. It was available on the Internet. That was true 
20 years ago.
    So nonetheless, it doesn't lessen the privacy concerns.
    But let's get the paradox here of how important this is. I 
am getting questions from you and your colleagues, in your 
case, so far, your colleagues, about what we should be doing in 
the mortgage market. Have we drawn too tightly the box around 
QM? Is manufactured housing being unfairly affected or 
undermined here?
    In order to make judgments about that, in order to respond 
to you, in order to get this right and for you to get it right 
and us to get it right, we have to have information about the 
market.
    What we found with the mortgage database was that we didn't 
always have the kind of information we would have liked to have 
had about the mortgage market. This will help us provide it.
    Then we will be able to all have confidence as to whether 
we are getting this right or should adjust it. That is what 
your colleagues are crying for. It depends on information.
    Mr. Royce. And I am pointing out we had 20,000 breaches.
    Mr. Chairman, I would like to submit something else for the 
record, a recent letter from the National Association of 
Federal Credit Unions to House leadership on data security and 
protection, if I could?
    Chairman Hensarling. Without objection, it is so ordered.
    Mr. Royce. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman.
    And, Mr. Cordray, I thank you again for coming before us 
today. I look forward to your visits. I am up here, Mr. 
Cordray.
    Mr. Cordray. You moved on me.
    Mr. Green. I relocated temporarily.
    I am appreciative of the fact that you are willing to stand 
up for consumers. And when I say stand up, I mean you take a 
firm position. You really believe in what you do. And it comes 
through, and that is important to consumers.
    I want to visit with you about the $3 billion in refunds--
$3 billion. That is a lot of money, impacting 9.7 million 
consumers.
    Can you give just a brief overview of this $3 billion that 
9.7 million consumers have had an opportunity to receive?
    Mr. Cordray. Thank you, Congressman. This is essentially 
basic law enforcement work. On both sides of the aisle in this 
committee, I know one basic principle everybody agrees with is 
that people should have to comply with the law, and if they 
violate the law, they should be held accountable.
    And if they violate the law in a way that hurts people, 
harms people financially, those people should have a right, if 
possible, to get their money back. That is something we are 
trying to do.
    We have been engaged in addressing violations of the law 
with credit card add-on products, which has been a big source 
of redress for consumers. Hundreds of millions of dollars are 
going back into people's pockets who were victims of 
fraudulent, deceptive, and misleading marketing of products. 
And that has been, I think, well-established. And it is not 
unique to the United States; they had similar problems in the 
United Kingdom.
    The large mortgage servicing settlement we reached recently 
with a large nonbank mortgage servicer, again, for violations 
of the law, and practices that were unfair and deceptive to 
consumers.
    These are things that in a marketplace that works, the 
good, honest businesses are also protected against those who 
violate the law and potentially get a competitive advantage by 
doing so. So, it is in everybody's interest for us to do this 
work.
    It does depend, I will say, on having information, being 
able to analyze what is going on in the markets, not just 
shooting blindly at problems. And that is part of why we feel 
so strongly about having the information on which to base this.
    But we will continue to do that work. We will continue to 
be, I think, appropriately aggressive, while not unreasonable. 
Where people are violating the law, it is our job to make sure 
that they are held accountable.
    Mr. Green. You received 122,000 complaints between July 1st 
of 2012 and June 30th of 2013, over half of which or 
thereabouts relate to mortgages; 3,800 of these complaints 
dealt with service people.
    I am sure that these complaints would have gone someplace 
if the CFPB did not exist. I am sure they would have gone 
someplace.
    Mr. Cordray. Maybe to you.
    Mr. Green. Probably.
    Mr. Cordray. And your colleagues.
    Mr. Green. But I am not sure that they would have received 
the kind of attention that they have received by virtue of the 
CFPB being there. And I am curious about the types of 
complaints. I want to give you a chance to just talk about some 
of them, because we will always hear about things that don't go 
well. We don't hear enough about the things you do that benefit 
the consumer.
    So this is an opportunity for you to just take a moment, 
and tell us about some of these complaints that have been 
successful, where you have helped people, if you would?
    Mr. Cordray. Sure. And Congressman, I know you understand 
this. Stories that we hear from people when they file a 
complaint are very similar and in fact, in many cases, are 
exactly the same stories they are telling people in your 
offices and your staff get all the time: somebody struggling 
with their mortgage and they can't get anybody to respond to 
them; they submitted the paperwork, it got lost again and 
again; people won't answer the phone. Those are some of the 
things we hear and we help cut through that.
    We hear people who feel like they had an improper charge on 
their credit report. They can't get the credit reporting agency 
to pay attention and take it off and get it corrected, but it 
is affecting them. They can't now get a mortgage or a car loan 
because that blights their credit. And we get those things 
fixed and get them removed.
    People harassed by debt collectors. Debt collectors have 
every right to do their job and collect money that people owe 
and people should pay, but there are laws that say you can't 
call after 9 p.m.
    You can't harass people at their workplace if they ask you 
not to. You are not supposed to do that. It is a violation of 
the law. It is cheating and giving you an unfair advantage over 
some other debt collector who actually abides by the law.
    Those are the kinds of things that we are addressing and 
dealing with every day. And again, a number of these are being 
referred by your offices, people on both sides of the aisle 
here. And we are happy to address these issues for all 
consumers, all constituents, wherever the complaint comes from. 
And we regard it as part of our job.
    The other thing is, we learn from it. As we get hundreds of 
complaints about a particular issue, then we know it is a real 
big problem and we ought to address it more systematically. 
Maybe we should write a rule about it. Maybe we should bring an 
enforcement action to clean it up. Those are the kinds of 
things we are trying to do.
    Mr. Green. Thank you, Mr. Chairman.
    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.
    Mr. Cordray, let me change speeds here a little bit and 
talk to you a little bit about a different issue here. I 
sponsored an annual privacy notice bill and you were kind 
enough to--I wrote you a letter with regards to that in October 
of this past year. You sent a letter to me and agreed that it 
was something that we needed to do.
    You supported it and I thank you for that. It was a timely 
letter. And we may need your help in trying to get it pushed 
through the Senate. They seem to be dropping the ball on the 
issue over there.
    But in your letter you also made the comment that you may 
be able to do this by some rulemaking authority that you have. 
Could you elaborate on that just for a moment?
    Mr. Cordray. Yes. And thank you for asking about that. I 
will say that sometimes processes move kind of slowly because 
of different provisions in our law, in terms of how we proceed.
    I do know that internally, we have been working on that 
issue, and I believe that there is a presentation going to be 
made to me fairly soon on it.
    I am hopeful we can move forward on that. One of the things 
I will find from the presentation is, do we think we can 
comprehensively address the issues you are trying to raise 
through your legislation? If so, you may not need the 
legislation. On the other hand, if you move the legislation and 
that resolves it and we don't need to work further on it, that 
is fine too.
    I don't care how we proceed, but I do think there are 
issues, you have identified some of them and I think we are 
identifying others, that need to be addressed and fixed. And 
there can be a reasonable balance struck here that doesn't 
burden institutions unnecessarily in ways that don't 
necessarily benefit consumers.
    Mr. Luetkemeyer. Very good. I appreciate that. With 
unanimous consent, I would like to enter the letter into the 
record, Mr. Chairman.
    Chairman Hensarling. Without objection, it is so ordered.
    Mr. Luetkemeyer. Thank you.
    With regards to another subject, Director, we have--online 
lending is something that is very concerning to me. A lot of it 
is offshore, and we need to be regulating it to make sure that 
our consumers aren't being taken advantage of.
    By the same token, there is a lot of discussion right now 
within the FDIC and the DOJ about payday lending, online 
lending, and those sorts of things. And we have actually found 
people within those agencies who, because of personal bias, 
have tried to basically shut down those industries.
    And they have admitted such to us, and we had them on 
record to that effect and have had lengthy discussions with the 
FDIC and the DOJ. And both of them have, as a result of those 
discussions and the investigations of the oversight committee--
or I should say potential investigations--have given a letter 
to not only us but the industries, saying that they are going 
to allow these industries to continue. They believe that they 
are worthwhile.
    Any abuse that has taken place will stop. These are 
legitimate industries. As long as they behave within the 
confines of the law, they will be allowed to continue to do so.
    And I would like your opinion on that. And if we could 
perhaps get you to also do a letter similar to that, as what 
they have done, to say that as long as these lenders are 
behaving within the law, they have every legitimate reason to 
be in business and provide credit to a lot of folks who can't 
get it.
    I know we had a lengthy discussion a minute ago with Mr. 
Meeks, who brought this issue up as well, at least on the 
peripheral parts of it, and indicated this is a very necessary 
area of lending. Whether you like it or not, there are a lot of 
folks for whom this is the only way they can get lending.
    And I think as long as we regulate it properly, it doesn't 
need to be here with things like Operation Choke Point, trying 
to choke it off. So could you respond?
    Mr. Cordray. Much economic activity is gravitating online. 
That is the way of the world, and it seems to be in our 
society.
    A lot of commerce is going online. My wife orders a lot of 
things now online, and I do, that before, we would have gone 
somewhere to get. It is natural that lending would gravitate 
there as well.
    There are, however, important law enforcement issues. And I 
struggled with them when I was attorney general of Ohio. And I 
hear from my colleagues, former colleagues, that they struggle 
with them now because online Internet activity doesn't have 
clear jurisdiction, as there is nothing physical or tangible 
about it.
    It can be originating in a different State but not 
complying with State laws here. It can be originated in a 
different country and not complying with any American laws.
    I think law enforcement officials are grappling with a 
strategy for how to deal with that, because online lenders that 
are legitimate and valid deserve protection against online 
lenders that are undercutting them by violating the law and not 
complying with the same requirements with which they comply.
    So it is definitely a difficult subject and one that we 
have been trying to hash out and understand with the State 
attorneys general and others. We will continue to do that.
    I definitely agree that there is a lot of online lending 
that is perfectly proper and valid and may even cut some costs 
over physical, in-person lending. There are also risks there, 
and there is a risk of being able to evade law enforcement.
    Mr. Luetkemeyer. Would you be willing to put that in 
writing?
    Mr. Cordray. I would be happy to. You mentioned a letter? I 
would be happy to take a look at it. I don't obviously know--
    Mr. Luetkemeyer. Okay. Without objection, I ask unanimous 
consent to place in the record a copy of the letter from DOJ 
indicating their concerns and their willingness to also allow 
these businesses to be lawfully there as long as they are 
behaving within the confines--
    Chairman Hensarling. Without objection, it is so ordered. 
The time of the gentleman has expired.
    The Chair now recognizes one of the committee's reputed, 
most rabid Seattle Seahawks fan, Mr. Perlmutter, from--
    Mr. Perlmutter. I thank the chairman, and I want to thank 
the gentleman from Missouri--
    Mr. Luetkemeyer. A point of order, Mr. Chairman, for the 
choice of the color of his tie in support of the Denver 
Broncos. So with that, I will stop breaching the decorum of 
this committee and just, I want everybody to know I am united 
in orange against the Seattle Seahawks.
    Chairman Hensarling. We see the gentleman's cap. Now, he 
may remove it.
    Mr. Perlmutter. Mr. Cordray, thank you for your testimony 
today. And thank you again for your fairly even-keeled 
testimony. I did appreciate your response to Mr. Pearce, 
because there is a lot of data out there, and in your position, 
whether it is gathering mortgage data, or anything else, there 
is just a lot of data out there. We don't want it abused. We 
have seen politicians in the past abuse it, and at the top of 
the list would be Richard Nixon.
    So I do understand your response. I understand his fear 
that it can be abused because it has been in the past. But 
there is a lot of mega data out there.
    Mr. Royce brought up the Target Corporation. My wife and I 
are Target shoppers. And she has a saying, if Target doesn't 
have it, she doesn't need it.
    But I also used my Target card--or I used my debit card in 
Target in that period where their data was breached. So I am 
one of 100 million people, apparently, or 100 million 
cardholders who was affected by this. And when I went to Wells 
Fargo and I said that I had used my card, they immediately took 
my card and switched it out for a new card.
    What is the CFPB's role in something like this, where there 
has been a major data breach that affects millions of 
consumers?
    Mr. Cordray. We have been looking at that since this 
occurrence. Of course, this is not, as you know, the first 
occurrence of this kind. It is just one of the largest and most 
stunning ones, and the most recent one.
    In the past few days, we issued a bulletin to consumers: If 
you are one of the people who is or feels that you may have 
been victimized or affected by this, here are some steps you 
can take to protect yourself, the kinds of information you need 
to respond to this situation.
    There are broader issues here for the credit card industry 
and for retailers in terms of how they manage information. 
Frankly, a lot of the same concerns that people have raised 
appropriately, I think, with me about our agency today.
    Everybody who has information is going to need to jealously 
safeguard it in order to protect consumers. And there is real 
consumer harm that happens, whether somebody steals your 
identity or not.
    Even switching out your card, as you did, involves 
inconvenience and time and effort. You may have to change 
accounts and account information may cause you to miss a 
payment on something here or there. That can cause real harm to 
people as well.
    So, I think that the guidance we have provided to consumers 
is meant to be very helpful. It is drawing, again, on some of 
that expert, neutral information and advice I indicated is 
available to your constituents on our Web site at 
consumerfinance.gov, and we urge you to take advantage of it. 
That is intended to help people.
    Mr. Perlmutter. Thank you.
    And, Mr. Chairman, if I could, I would like to introduce 
for the record a letter that we--a number of Democrats--sent to 
you on January 10th concerning some kind of hearing on this 
breach of data.
    Chairman Hensarling. Without objection, it is so ordered.
    Mr. Perlmutter. Mr. Cordray, I would like to also ask you a 
little bit about the QM situation. You have had a number of 
questions already, but because you and I have had this 
conversation on QM, the 43 percent debt-to-income ratio. Were 
there other ways that a lender, if it didn't fit into that 43 
percent box--were there other ways a loan might be considered 
eligible under your rules? And if so, what are they?
    Mr. Cordray. Okay, so there are actually three main boxes, 
and sometimes it does get misstated and people either 
intentionally or unintentionally don't quite get the purpose of 
the debt-to-income ratio of 43 percent or less, which is a 
pretty generous number by historic standards. We used to advise 
people not to spend more than a third of their income on 
housing, and then 36 percent was the number, and now people use 
43 percent. It is meant to be broad--to provide a broad area 
for mortgage lending. That is one box.
    A second box--and this is very notable--any mortgage loan 
that would qualify to be purchased by any of the GSEs--Fannie 
Mae or Freddie Mac, if it qualifies as an FHA loan, if it 
qualifies under VA or Ginnie Mae--all of those are also 
Qualified Mortgages. That significantly extends and then covers 
a lot of loans that are above a 43 percent debt-to-income 
ratio. That is second.
    As long as they are in conservatorship, that is a temporary 
measure. This Congress may act on housing finance reform at 
some point. We weren't sure where that was going, so we had to 
sort of take account of that and draw that into our 
calculations. That is a second box.
    And it is very easy for a lender: 43 DTI or you just plug 
it in, and you get a yes or no. You don't have to sell it to 
Fannie or Freddie, it is just if it is eligible for sale.
    The third box is the small creditor provision that I have 
mentioned before. It covers thousands of community banks and 
credit unions. Any mortgages they make, if they sell them in 
the secondary market to Fannie or Freddie, are covered by that 
second box. If they keep them in portfolio, they are covered by 
this third box.
    Mr. Perlmutter. Thank you sir, for your testimony.
    I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Huizenga.
    Mr. Huizenga. Thank you, Mr. Chairman. I appreciate that.
    And, Director Cordray, I appreciate you being here. 
Obviously, you have heard a lot of concern, some of it a little 
more heated than others, but concern on both sides of the 
aisle, frankly, about everything from auto loans to the 
security of the data that is being collected.
    QM has really sort of dominated this Qualified Mortgage 
definition, and I would like to head a little in that 
direction, and point out that there had been an American Banker 
article entitled, ``Blacks and Hispanics Likely To Be Hurt by 
Qualified Mortgage Rule,'' which reported on a Federal Reserve 
Board report that found that ``roughly one-third of Black and 
Hispanic borrowers would not meet the requirements of a QM loan 
based solely on its debt-to-income requirement.'' That is what 
we were just addressing.
    I am a former REALTOR myself. I have dealt with those. 
Frankly, I come from an area where the median income and the 
median mortgage and household transaction, home sale 
transaction, is far below any of those major markets like 
California or New York or other places that might be falling 
into a jumbo-loan trap.
    But frankly, whether it is jumbo or whether it is small 
loan borrowers, what we are anecdotally hearing, and it is only 
half-funny, is that QM is quickly becoming ``quit mortgages,'' 
and I am very concerned about that. For those people out there 
trying to lend, this--these assets, there is a real fear that 
there is too much of that constriction on there.
    Sort of the response, one of the things that was part of 
the original Dodd-Frank bill was the 3 percent cap on 
affiliated mortgages. I recognize that the CFPB has sought to 
limit the impact of the 3 percent cap by providing more 
generous ``points and fees allowance for loans under 
$100,000.'' But frankly, it is not enough.
    That has brought me to introduce H.R. 1077, and H.R. 3211. 
My friend from New York, Mr. Meeks, is a cosponsor of that. It 
is a bipartisan bill. We also have been working with Senator 
Vitter and Senator Manchin. There is a Senate companion to 
that, S.949 and S.1577.
    Based on a survey conducted by the Real Estate Settlement 
Providers Council, the inclusion of title charges causes 60 
percent--60 percent of loans under $60,000 to fail as Qualified 
Mortgages. These loans actually become high-cost, as we were 
discussing earlier, these HOEPA loans, because of points and 
fees that exceed 5 percent of the loan amount. The survey also 
found that 45 percent of affiliated loans between $60,000 and 
$125,000--so we are not talking massive jumbo-loans--failed to 
qualify as Qualified Mortgages.
    In fact, 97 percent of the loans that failed as QMs were 
under $200,000, simply due to the inclusion of title insurance 
on that. And if title insurance is excluded, only 3 percent of 
those same loans would fail as QMs.
    Now, the States by and large regulate most of this, and as 
I have been working with people in the industry, I have had 
some conversations with colleagues across the Capitol, some who 
may or may not, not to name names, have been very involved in 
creating your Bureau, who constantly bring up title insurance, 
apparently not understanding that this is regulated by the 
States, those amounts of what people are having to go in and 
pay for their title insurance.
    So introducing the Mortgage Choice Act is trying to seek 
relief for the major players, like the Quicken Loans and 
Flagstars of the bank, which are doing these across the Nation. 
Both are headquartered in Michigan but do business in virtually 
all 50 States, to the small firms, like myself, which was a 
small real estate firm that put together its own title company, 
not because they were trying to be out gouging consumers, not 
because they were trying to charge more than what the other guy 
down the road was going to charge for their title insurance, 
but for the ease and convenience of the consumers.
    And I know that is one of your stated goals of the Bureau, 
but I am curious if you could comment on that.
    And then I am--you had mentioned earlier about waiting for 
data. How long are we going to have to wait for that data to 
address this as well, that I believe is going to show that 
there has been a reduction in mortgages offered?
    Mr. Cordray. Yes. So again, as you say, we attempted to 
alleviate some of the concern about the 3 percent points and 
fees cap, which was a pretty blunt instrument in the statute, 
by providing for graduated, higher levels on loans of under 
$100,000. It is not clear to me exactly what we will all think 
a year from now, whether that should be somewhat higher, 
whether it should be $150,000 or where that should be set. That 
is a question.
    I have had discussions with Bill Emerson from Quicken about 
their model, which they touted, and which is a very efficient 
one-stop shopping model. And affiliate models can be that. He 
also was very frank in acknowledging there had been some 
affiliate abuses over the years, and we have all seen them. 
Congress drew a line on that, we thought, and we are trying to 
respect that line.
    I think the--
    Chairman Hensarling. I'm sorry, the time of the gentleman 
has expired.
    Mr. Huizenga. Mr. Chairman, I know my time has expired, but 
I would--in writing, I would like to ask, how long are we going 
to be able to wait? We think we have evidence now, after 30 
days, so do we need 30 days of evidence, 60 days of evidence, 
because the longer that we wait the more people are going to be 
impacted and hurt by that.
    Mr. Cordray. I haven't seen any data yet, but within a few 
months I think we will get a sense of the impact.
    Chairman Hensarling. Now, the time of the gentleman has 
really expired.
    Mr. Cordray. Sorry.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Massachusetts, Mr. Lynch.
    Mr. Lynch. Thank you, Mr. Chairman.
    I want to thank the ranking member as well.
    And, Director Cordray, I appreciate your willingness to 
come here and help the committee with its work.
    Just as--at the outside, I would just like to say that I 
think you present--well, the CFPB presents far less risk to 
American security than, say, Target or some of these credit 
card companies that actually have the specific data on 
individual consumers as opposed to the aggregated, anonymous 
data that is presented to the CFPB.
    Now, I think we all understand, because of the housing 
crisis, the need to have Qualified Mortgage regulations and 
standards. That much being said, where the line is drawn, I 
guess, is open to interpretation, and I guess it is a bit 
subjective.
    I do share some of the concerns with my colleagues across 
the aisle, especially with respect to community banks and 
making sure that the creditworthy population has that 
opportunity to get a mortgage.
    And there is the danger, I guess, if we use this bright 
line, 43 percent, that there may be people in some of our 
neighborhoods, especially communities of color, who might not 
meet that bright line test but nevertheless, because of their 
individual circumstances, should get a mortgage.
    And I am just wondering, as my previous colleague just 
mentioned, is there some ability going forward to look at the 
data to see if we are boxing out some meritorious segment of 
the population who should be getting mortgages but are getting 
shut out, either because of demographics or urban versus 
suburban versus rural? Is there some opportunity here going 
forward to sort of tweak this in a way that we make sure that 
folks aren't left out?
    Mr. Cordray. Thank you, Congressman, and I agree with you, 
and there will be and is opportunity to consider further those 
provisions and the effect they are having. And I will just 
point back to when we finalized this rule a year ago, we did 
not have a provision for small creditors. We added that on.
    That was the first very significant tweak of the rule and 
it was meant to address exactly what you say. There are people 
who won't qualify on some sort of boxed-up metric analysis, but 
community banks and credit unions will work with people in 
their community that they know and they have the personal 
relationship to understand their situation, and will make that 
loan.
    The whole point of the small creditor exemption was to give 
thousands of community banks and credit unions the flexibility 
to continue doing the same kind of traditional lending they 
have always done, which works well, pays attention to the 
person's ability to repay, and makes good judgments about it. 
They have that latitude under the rule.
    Now, whether we have drawn all the lines exactly in the 
right places or whether we could move them is something that we 
will continue to hear from people about and listen to people 
about. Over the course of the year, we will start to get a 
sense of how this is affecting the market, and if it is 
affecting the market in ways that you and I think were not what 
we are trying to accomplish, then we will be open to thinking 
further about it.
    We have said that many a time, and I am happy to say it 
again today.
    Mr. Lynch. Are we hearing anything from our smaller credit 
unions, smaller community banks right now in terms of--what is 
the feedback so far?
    Mr. Cordray. I hear from them all the time. We heard from 
them before we adopted the rule last January and we heard from 
them after we adopted the rule. We solicited their input and 
comments on the small creditor provision and incorporated a lot 
of what they told us.
    They talk to us constantly. I have a Community Bank 
Advisory Council and a Credit Union Advisory Council I didn't 
have to set up, but I did, because I wanted to have more 
feedback from them.
    I think we have our ear pretty close to the ground. I think 
a lot of what you hear we are also hearing. There is a fair 
amount of concern, some of which is justified and some of which 
is not. But as we go, if we need to make adjustments we are 
open to considering that, as we have already shown that we have 
been willing to do.
    Mr. Lynch. Lastly, I know this is not necessarily in your 
wheel house, but I am hearing from my constituents. I represent 
a coastal area. There is a lot of pressure on REALTORS with 
respect to these new flood maps. Have you encountered any 
feedback in terms of what it is doing to the real estate 
market?
    I know it is--for folks on low income or fixed income, I 
know it has had a dramatic impact on them. I am just wondering 
if you are hearing anything on that end.
    Mr. Cordray. Contrary to those who think we are all-
powerful, that is not in our wheel house. I don't know much 
about it. We are probably hearing some things about it, but I 
don't have a perspective on it at the moment.
    Mr. Lynch. Thank you, Mr. Chairman. I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair recognizes the gentleman from Wisconsin, Mr. 
Duffy.
    Mr. Duffy. Thank you, Mr. Chairman.
    I would just lend my voice and concern to the QM rule, 
especially its impact on low- and moderate-income families and 
the impact of the rule. And when you have banks--financial 
institutions that are holding these loans in portfolio, we have 
concern how that is working, especially across our districts.
    But I am not going to spend my time there. I do want to 
move to data and data collection.
    We are all aware that the Bureau is collecting and 
monitoring financial information on millions of Americans. That 
is clear.
    Earlier today, I forget who the exchange was with, but you 
indicated that you weren't sure that the information that is 
collected from individuals or third-party contractors could be 
reverse-engineered, which concerns me because Mrs. Capito and 
I, on July 9th of last year, asked you if it is possible for 
the CFPB or any third-party vendor working on behalf of the 
CFPB to reverse-engineer raw data to identify individual 
consumers. That was the question.
    And part of the response was: ``The Bureau purposely 
reduces the likelihood of data being re-identified by 
restricting access to data to those whose work requires it and 
providing privacy and security training to Bureau personnel on 
how to handle and protect data appropriately.''
    So your response over half a year ago indicates, yes, you 
do get information that can be reverse-engineered and identify 
individuals, and today you are not as clear about that in the 
question and answer. My--
    Mr. Cordray. Do you want me to respond and clarify that for 
you?
    Mr. Duffy. Let me ask you a question.
    Mr. Cordray. Okay.
    Mr. Duffy. I think today you also said that you work on 
behalf of consumers. You would agree with that, right?
    Mr. Cordray. That is how I view my job, yes.
    Mr. Duffy. Would you object to getting permission from 
consumers, those people you work for, before you collect or 
monitor their information?
    Mr. Cordray. So, a couple of things. First of all, as to 
whether there is any inconsistency in my testimony today with 
that letter, I don't believe there is. I don't want to have you 
mix apples and oranges, peaches and plums here. You have had a 
big focus with us on the credit card data and we are very 
careful about avoiding any prospect of reverse-engineering on 
that.
    The question to me earlier had to do with mortgage data, 
where there is zip code information. And what I have said is I 
think we are always concerned and want to be very careful about 
the prospect of reverse-engineering. It is something that is 
going to continue to evolve over time as more information is 
publicly available, that it can be matched against and so 
forth. So it is something we are going to be very mindful of 
and very careful about.
    As to your question of would we go to individual consumers 
and ask their permission before we seek, say, aggregate data 
about the credit card market, that is, I believe, intended to 
and certainly would have the purpose of completely making it 
impossible for the agency to have any kind of data to know what 
is going on in these markets. Because to ask many, many 
consumers for their permission before we could aggregate data 
about them would mean that I wouldn't know anything about the 
mortgage market when you want me to get the QM rule right, I 
wouldn't know anything about the credit card market when you 
want me to report to Congress on that, and how would that--
    Mr. Duffy. I am going to reclaim my time.
    Mr. Cordray. --and how--
    Mr. Duffy. --I reclaim my time.
    I don't know if you have done any polling to see what the 
American consumer thinks about you monitoring and collecting 
information. So I am concerned that you may not be aware of 
where the American population is.
    I would bet if you asked them, they would love to have the 
opportunity to give you permission to access their information 
or deny you permission, or in the least, I don't think you have 
an opt-out provision on your Web site. So if you say, ``Listen, 
I am one who doesn't want the group of people who claim to be 
working for me--I don't want to give them my information,'' you 
can't even opt out, which would be very easy for consumers, and 
that concerns me.
    And there has been some comparison to the Bureau and the 
NSA, and I know that is a burr under your saddle and you don't 
like it. The NSA does not ask Americans permission to collect 
their phone records and e-mails and texts. And the CFPB does 
not ask permission to collect information on the American 
financial consumer.
    I would love if you would differentiate yourself from the 
NSA and actually ask the people that you work for, for 
permission before you access information, or at least give 
America an opportunity to opt out.
    And I will ask you another question here. As you go to your 
Web site--I pulled it up and looked at the disclosure of what 
the information that you collect. It is horrible that you have 
this much data on the American consumer that can be reverse-
engineered and they don't have that information and that 
disclosure clearly and crisply delineated on the Web site is of 
concern.
    Mr. Cordray. Wait, what are you talking about there? Are 
you talking about our consumer response function or what?
    Mr. Duffy. On the bottom of your Web site--consumer--when 
you talk about the data information on the Web site. If you 
want a copy if you haven't looked at it, I can provide it to 
you. Privacy policy and legal notices is what I am referring 
to.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Peters, for 5 minutes.
    Mr. Peters. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for appearing before the 
committee today. Certainly, I appreciate all of your hard work 
in protecting American consumers in relation to these financial 
products. I know it is a difficult task and you are doing a 
wonderful job.
    To me, however, college affordability is probably one of 
the top priorities we need to be focused on. And I believe that 
the CFPB has done an excellent job of shining the light on some 
of the difficulties that so many of our students are facing 
now.
    A CFPB report from last summer cited stakeholder comments 
suggesting that it might be useful to allow for the 
rehabilitation of private student loans on which borrowers have 
defaulted. And as you know, there are currently more than 
850,000 private student loans in default in the amount of about 
$8 billion.
    For many, student loans are a young person's first 
experience with credit. And after graduation, many students 
struggle for months and sometimes even years to find their 
first good-paying job, especially as our economy continues to 
recover.
    This is why I have worked across the aisle, with my 
colleague Michael Grimm, to introduce the Federal Adjustment in 
Reporting Student Credit Act, which would allow seriously 
delinquent private student loan borrowers a one-time offer to 
remove a default from their credit report after making a series 
of on-time payments.
    This already exists for Federal student loans, which make 
up a significant majority of the student loan market. Our 
proposal basically allows private student loan furnishers to 
offer a rehabilitation program similar to what is already 
available for the public student loan borrowers, but doesn't 
require them to do so. The bill creates no new regulations and 
actually gives private lenders another tool to help borrowers 
get back on track once they get that first job and are able to 
make those payments.
    I appreciate having the Financial Institutions Subcommittee 
Chair, Shelley Capito, as a cosponsor of the legislation and 
that both she and Chairman Hensarling have agreed to work with 
me on putting together a hearing on this issue.
    And I appreciate that, Mr. Chairman.
    But, Director Cordray, I realize that it is difficult for 
you to talk about a specific piece of legislation, particularly 
one that is not in front of us right now, but maybe if you 
could just generally discuss how harmonizing the public and 
private loan rehabilitation policy would help recent graduates 
get back on track?
    Mr. Cordray. And thank you for saying that, Congressman, 
because I do want to always be careful about just responding 
off the top of my head to legislative ideas when I haven't seen 
the text. But in general, I think I have a positive reaction to 
what you have described.
    As we have found in the mortgage market, with mortgage 
servicers, the more tools that are available for them to give 
people opportunities to get back on track, first, they have the 
opportunity to collect money where they otherwise were going to 
get none, and second, often people do need a second chance and 
circumstances change. Maybe now they are employed, whereas at 
the time they defaulted, they were not employed. That is 
obviously going to be a big difference for people.
    And the fact that it is analogous to what is being done 
with Federal student loans, actually we would like to see more 
of the practices that exist on Federal student loans, such as 
income-based repayment and other things, be taken up in the 
private sector on private student loans.
    So in general, we think that private student lenders could 
be doing more to provide options to their borrowers. We think 
they would benefit by doing so. They would probably collect 
more money.
    At the same time, there is a tremendous overhang in our 
economy right now. I described it as a domino effect earlier 
about the student loan millstone around the neck of some of our 
biggest achievers in society who have managed to get a higher 
education and training and just happened to graduate into a 
tough job market or didn't have the means and therefore have to 
come out of college with tens of thousands of dollars in debt.
    We want those people to be able to succeed, and giving them 
some options to respond to their circumstances seems to me to 
be a good thing.
    Mr. Peters. I appreciate those comments. In fact, I have 
heard from a number of private lenders who believe that if this 
bill passes, they can start offering loan rehabilitation 
shortly after enactment. This would be an incentive for folks 
to really step up and move forward and rehabilitate their 
credit and pay those loans down.
    Do you agree that this is a market-driven policy change 
that would help a significant number of borrowers, as far as 
you know, from at least hearing it on the surface of this item?
    Mr. Cordray. I would be happy to have our very strong 
office of students and our student ombudsmen work with your 
office--maybe they already are, for all I know--in terms of 
ironing out some of the details and seeing if something could 
be moved on this.
    It is a crying need in our society right now. The student 
loan problem is weighing down a generation of young people who 
should be our next generation of leaders.
    Mr. Peters. I appreciate your support of this legislation. 
We will look forward to working closely with you. And 
hopefully, we can get it passed with the help of Chairman 
Hensarling.
    Thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Ohio, Mr. 
Stivers, for 5 minutes.
    Mr. Stivers. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for being here. I want to 
thank you for your service to our home State of Ohio, as well 
as your service to the Federal Government as the Director of 
the CFPB.
    I have three sort of big area questions around mostly 
organizational culture.
    The first question I have for you involves a bipartisan 
bill that Representative Tim Walz and I have introduced which 
would create a standalone Inspector General for the CFPB. I am 
curious if you would oppose that bill or not.
    Mr. Cordray. So this--
    Mr. Stivers. If you can be brief in these answers--
    Mr. Cordray. Yes. Yes, I will. You know I have that 
problem, Congressman. He is my Congressman, so he knows that I 
am not always brief.
    We have an Inspector General now. That Inspector General 
has a strong staff and is doing a very good job with us. We are 
subject to, I think, 10 open inquiries and supervision 
processes right now. I think they are doing an excellent job.
    Obviously, we will live by whatever Congress makes the law. 
And the law that we have right now has us with a strong 
Inspector General who is, I think, doing the kind of work that 
you want him and his staff to be doing.
    Mr. Stivers. And I can say, our bill is not an indictment 
on the Fed's Inspector General. This is about an organization 
that now has 1,300 people, is growing in size and scope. And we 
just believe you deserve your own Inspector General.
    The sort of second area I want to go through is the role of 
your agency. Can you tell me, if I was to poll your 1,300 
employees, would you say they would tell me that you are an 
enforcement agency or a supervisory agency primarily?
    Mr. Cordray. I believe I know exactly what they would say--
the same thing I would say: We are both.
    Mr. Stivers. The problem that I have with your culture and 
the way I believe it is going--you are both, but I believe you 
need to make the rules of the road clear first and then enforce 
those rules of the road.
    I want to share with you a conversation I had with a bank 
in my area recently where they told me their interactions with 
the CFPB. The CFPB identified a problem area, and the 
compliance officer asked for guidance on how they could make it 
right, and the CFPB official said to them--and I will give you 
this quote: ``You do what you think is right and we will tell 
you later if it was okay or not.''
    I have a problem with that. I believe you need to make it 
clear what the rules of the road are first, and then use your 
enforcement actions to focus on those and get that done.
    I also noticed in your written testimony that you said, 
``Through our enforcement and supervisory actions,'' so you put 
enforcement first, too. And I just would ask you to think about 
that, when you are building an organizational climate and 
culture, about what comes first.
    I have a couple other questions. I want to follow up on a 
question that Representative Luetkemeyer had, and this is just 
a yes-or-no question. Will you put in writing the same thing 
the DOJ and the FDIC have done that makes it clear what your 
guidance is for small-dollar, short-term lenders? I would love 
it sooner rather than later, but I guess what I would like is a 
commitment that you will ultimately put something in writing 
that gives them guidance with regard to whether they can do 
business with banks and processors and all that.
    Mr. Cordray. Again, I don't have a yes-or-no answer. It is 
actually a fairly complicated issue. How they should do 
business is not just a simple matter of a one-page sheet.
    I would be happy to look at the letters you are talking 
about.
    Mr. Stivers. That would be great. The DOJ and the FDIC have 
managed to do it, so I would hope you would try to do it.
    The next thing I--and this all goes to sort of 
organizational culture. I hope you will solicit input from the 
folks you are charged with regulating. In fact, the CFPB's 
Section 1011 actually says you are supposed to solicit and get 
input. I know you are supposed to get representation from these 
covered groups.
    And I would just ask you to take a look whether some--you 
can have somebody from somewhere in these short-term loan 
marketplace--somebody who has knowledge in it on one of your 
existing groups that you have for input. So that is just me 
urging you. It is not really a question, but take a look at 
that again. You and I have had this conversation for--
    Mr. Cordray. Yes.
    Mr. Stivers. --a year.
    Mr. Cordray. I think we are doing that, Congressman, and we 
will continue to. I have probably spoken to some of the same 
executives you are speaking to.
    Mr. Stivers. Great.
    Mr. Cordray. In defense of my folks, if they said, ``you do 
this, and then we will tell you afterwards,'' that is not our 
attitude. Sometimes, things are more complicated. That is all.
    Mr. Stivers. I have one more question I want to follow up 
on really quick.
    Mr. Scott actually brought up a really good point about the 
Bureau, and this goes to my bigger point of supervisory versus 
enforcement--and I would ask you to do what you can with regard 
to indirect auto lending to create a more formal rulemaking 
process, because what is happening is, as you do enforcement 
actions and not rulemaking, they don't get input. And so, I 
would ask you to look at your overall organizational culture.
    I am going to submit a few other questions in writing. I 
apologize for going over my time.
    I yield back the balance of my nonexistent time.
    Mr. Cordray. Thank you.
    Chairman Hensarling. The gentleman's nonexistent time has 
expired.
    The Chair now recognizes the gentleman from Illinois, Mr. 
Foster.
    Mr. Foster. Thank you.
    And thank you, Director Cordray, for your service.
    I would like to return to this issue of the National 
Mortgage Database and databases more generally. I believe this 
will be, over time, a tremendously valuable feature of our 
government. During the collapse of the housing bubble, 
homeowners in America lost roughly $9 trillion, which is 
$30,000 for every man, woman, and child in the United States.
    And one of the things that drove the housing bubble was 
simply that regulators did not have the information to know 
what was going on. Basic information like consolidated loan to 
value, including second liens and stuff, was not available to 
the Federal Reserve and others who, at the time, had the 
authority to control mortgage origination in this country.
    I would also like to point out that the PATH Act that 
passed out of this committee, with the unanimous support of the 
Republicans on the committee, in fact, had provisions to adjust 
the underwriting requirements for mortgages on a county-by-
county basis in response to market conditions. That would have 
required exactly the sort of a database that you are talking 
about developing for the National Mortgage database.
    But there are questions about statistical sampling, I 
think, that were raised by Congressman Garrett, and I think 
that they are actually valuable. This business with personally 
identifiable data is a problem in the commercial world, and it 
is a problem in the--and it is a problem for any federally-held 
data set.
    I think it was an interesting question of why you have 
chosen 60 percent sampling, roughly, for credit cards and the 
National Mortgage Database is a 5 percent sample, if I 
understand correctly.
    But I also understand that you have--a lot of the abuses 
you are trying to identify are micro-targeted with the same 
sort of micro-targeting that you are seeing for legitimate 
marketing. You can easily imagine--and I am sure it has 
happened--that you find abuses practices targeting, for 
example, unmarried Asian women in manufactured housing.
    So you are trying to track down abuses in small statistical 
corners. You will have to slice and dice the data tremendously 
and you get into statistical problems when you look for these.
    And so how do you view that problem, and how do you intend 
to handle it managing these data sets?
    Mr. Cordray. First of all, it is a very fair concern, and 
the smaller the category gets, the less confidence you can have 
in trying to extrapolate patterns from it. So I think that is 
just a general challenge in the work that we are doing and, 
frankly, for the industry and everybody concerned about what is 
happening in these markets.
    I don't have much to say. You aptly, and I think very 
eloquently, described the importance of having the information, 
that people missed what was happening in the mortgage market 
and caused all the harm that resulted from the financial 
crisis, is--continues to be a scar on this entire generation, 
and we are still trying to build back both household wealth, 
and people trying to get their jobs back, and so forth.
    If we can avoid that, by having information and knowing 
what is happening in real time, I think it is clear what the 
choice should be. We should make sure that we know what is 
going on, so we can try to respond to it and prevent it where 
we can.
    Mr. Foster. I also think that you are correct in making the 
distinction between you and the NSA. The NSA is interested in 
targeting individual terrorists. You are looking for patterns 
of abusive behavior in the market, and I think that is a 
fundamental difference.
    Mr. Cordray. Again, said better than I said, so thank you.
    Mr. Foster. Listen, I want to change gears a little bit. 
Having to do with--many immigrant communities--this is a 
question of notarios and fraudulent advice being provided, 
specifically targeting immigrant communities.
    Many immigrant communities across the country fall victim 
to what are sometimes called notarios. As you know, in many 
Latin American countries a notario or a notario publico refers 
to State-appointed lawyers whose qualifications are equal or 
may even exceed those of an attorney. But in the United States, 
a notary public, obviously, has only the authority to witness 
certain documents.
    But the linguistic discrepancy is being abused by a number 
of fraudulent or simply incompetent advisers. Much of this is 
on immigration issues, but a significant fraction overlaps 
financial services. And I was wondering what you are doing--
what is on your radar screen in this area?
    Mr. Cordray. Yes, I actually appreciate your asking about 
that.
    I first ran into notario fraud when I was the county 
treasurer in Franklin County, which would have been about 2003, 
2004. And we were working with our Latino community on 
foreclosure issues and starting to translate some of our stuff 
into Spanish, which seemed like not a normal thing in Central 
Ohio at that time. But it has become very much a part of 
dealing with these markets.
    The notario fraud is just as you described it. Many 
people--especially when it comes to things like land contracts, 
which is often common as a means of securing housing--have 
fallen victim to it.
    We continue to work with people like State attorneys 
general and the Federal Trade Commission, who often have more 
to say about advertising types of fraud that aren't linked 
specifically, sometimes, to mortgages and other products that 
we oversee.
    We have some information that we have been developing on 
our Web site for consumers to be careful about this.
    It is, I think, a broadly enough known scam now that there 
is a lot of effort in the Latino community to make people aware 
of it, but it is a problem of language and it is one that 
people have exploited wrongly and hurt poor people as a result.
    Mr. Foster. Thank you. My time has expired.
    I yield back.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Tennessee, Mr. Fincher.
    Mr. Fincher. Thank you. Thank you, Mr. Chairman .
    And, Director Cordray, I appreciate you taking time for us 
again today. It has been almost 3 hours now.
    I learned a few minutes ago that you are a five-time 
``Jeopardy'' champion. Is that--
    Mr. Cordray. That was a long time ago, sir.
    Mr. Fincher. Wow. Well. Phrase your answers in the form of 
a question.
    [laughter]
    Mr. Fincher. On a lighter note. I'm sorry.
    So, Director Cordray, we talked a lot today about 
manufactured housing--and I am from Tennessee, a rural State--
and how important it is that we try to fix this problem.
    I appreciate the chairman allowing us to put this fix in 
the PATH Act. And so many of us were elected for solutions to 
problems, and that is what we have been working with the 
industry and with the CFPB to try to solve this problem.
    You would agree that the CFPB is a data-driven agency, 
correct?
    Mr. Cordray. That is what we strive to be, yes.
    Mr. Fincher. So I guess our concern is we, along with the 
industry, have been actively engaged in providing you with 
many, many pages of data, trying to fix this issue so that an 
estimated 6 million people don't--are not able to access credit 
to buy manufactured housing.
    I guess our problem is as we have been giving you the data, 
and you have responded to us from requests back in September, 
and this is the response from the CFPB: ``The Bureau has met 
with the representatives from the manufactured housing industry 
and has requested additional data from a set of manufactured 
housing lenders to gain more complete understanding of this 
market and the potential effects of this and other rules on the 
market for manufacturing home loans.''
    What my question to you is--and we are willing, my staff, 
industry folks, me, to come down to the CFPB, to sit down, as 
the ranking member said a few minutes ago, whatever we can do 
to try to fix this issue--but why would you go on and let the 
rules go into effect not having all of the documentation or the 
data that you need to have complete clarification of this 
issue? Why could you not just delay the rule until we figured 
out or you figured out or the agency figured out exactly what 
to do?
    Mr. Cordray. Thank you, Congressman. And I believe it was 
your comments that kicked off this entire subject today, which 
has gained a lot of attention in this hearing.
    In terms of delaying the rules, there is a lot of pressure 
on us to delay various aspects of the rules and we could keep 
delaying, delaying, delaying, and go on forever. All that does 
is preserve a lot of uncertainty in the marketplace, and we 
thought it was very important to go forward with the rules on 
January 10th.
    But let me say this: You raised this issue in your opening 
remarks. It was seconded by--and I have made some stars here--
Representative Pearce, Representative Waters, Representative 
Bachus, Representative Meeks, and Representative Clay. A number 
of you want to work with us on this issue. We will reach out to 
work with you on it.
    As I said, we have had a number of meetings with top 
representatives from the industry to try to understand how this 
affects parts of the country that don't always have an easy 
voice--
    Mr. Fincher. Right.
    Mr. Cordray. --in the halls of Washington.
    So we will work with you over the next several months to 
try to understand what we are seeing, what we are finding, 
again, what the concerns are, many of which I think we have 
heard and begun to think about, and see what may need to be 
done.
    Mr. Fincher. Thank you. And again, we want everyone to 
understand that we are willing to come down, we are willing to 
sit down and do everything we can to resolve it.
    And just wrapping up, when I go back home to my district 
almost every weekend and sit down with constituents who don't 
understand the process and don't understand what the CFPB is 
and all of these different things, and I try to explain to them 
why they are being harmed and the unintended consequences, I 
think that is what is critical.
    I don't think your intention or the intention of the agency 
is to knock folks out of buying manufactured housing, but what 
happens, and whether it is Republican, Democrat, any government 
that is as big as the government that we are--we have turned 
into, there is a problem. The right hand doesn't know what the 
left hand is doing. So that is why we are trying to keep this 
small, and hopefully work out these problems going forward.
    So, I appreciate that. We will be in touch. And--
    Mr. Cordray. I worry about what you described as well. Yes.
    Mr. Fincher. Okay. Thanks.
    Chairman Hensarling. The gentleman yields back his time.
    The Chair now recognizes the gentlelady from Alabama, Ms. 
Sewell, for 5 minutes.
    Ms. Sewell. Thank you, Mr. Chairman.
    And thank you so much, Director Cordray. I know that it has 
been a long day for you. But I also wanted to echo the 
sentiment--
    Mr. Cordray. A lot of people work a lot more than 3 hours. 
Thanks, though.
    [laughter]
    Ms. Sewell. I wanted to echo the sentiment of that litany 
of folks who are concerned about manufactured housing. I 
represent the State of Alabama, and in my State, just like 
Representative Fincher's, sometimes manufactured housing is the 
only available option. And I appreciate that the Bureau is 
going to work with us. And you can add my office as one of 
the--
    Mr. Cordray. I will put a star next to your name, as well.
    Ms. Sewell. Thank you so much, sir.
    Can you also talk to us a little bit about the steps that 
the Bureau is going to take to make sure that the voices of 
industries are heard as well as being an advocate for 
consumers, especially on this issue that seems to have taken up 
the topic of the day?
    Mr. Cordray. Okay.
    Ms. Sewell. Can you sort of talk to us a little bit about 
any of the steps--I know you said meeting with industry members 
and with Members of Congress--
    Mr. Cordray. First of all, we have had several insightful 
and productive meetings with representatives of the 
manufactured housing community.
    I think number one was for them to lay out the narrative of 
who this is, how it affects them. Let's face it, when you talk 
about the mortgage market, people typically think about a 
house. They don't naturally, in many parts of the country, 
think about a motor home or a manufactured home. There are lots 
of places in the country where that is what they would 
immediately think about. And as I said, I am familiar with 
those areas from my own background and my own life.
    The fact that there are some special issues around many of 
the manufactured home loans, like a distinction between the 
dwelling and the underlying property which may or may not be 
related to it, creates complexities, which is not, again, the 
normal real estate transaction, where you buy a home and the 
land it sits on.
    And the fact that many of these loans come at higher cost--
many of them are for lower amounts, but at higher cost--for 
years has triggered the HOEPA rules. And that is something that 
the industry had been adjusting to, and I think it goes back at 
least 4 or 5 years, maybe longer, and now these rules to deal 
with them as well.
    So, we will sit down. We will talk more back and forth. We 
will try to understand, as this is unfolding, exactly what the 
impact is on people, get a sense of whether that is what is 
intended and to what extent that is affecting consumers. That 
is going to be our major concern.
    But we do understand, and one of the things that we have 
come to appreciate is that there are a lot of ways in which the 
lending industry serves consumers. If consumers don't have 
credit available, if they don't have opportunities, then you 
don't have anything to protect anyway. So, writing great 
protections is kind of beside the point.
    That is why when it comes to the mortgage rules, I think 
fair-minded people will say that we worked hard to try to 
balance access to credit and consumer protections and try to 
provide both as much as we can.
    Sometimes, there is a tradeoff. In many cases, there is not 
necessarily a tradeoff between them.
    We may not always have gotten those lines right. We may 
need to redraw some of them as we go. We are open-minded to 
recognizing that. We don't think that we know it all or that 
one-size-fits-all.
    And, as I have said, over the last year we have shown 
ourselves open to making practical changes that help these 
rules actually work. We continue to do that and we will 
continue to think about how this affects consumers, which is 
really our pole star on all issues.
    Ms. Sewell. Yes. I just wanted to make sure that we say 
thank you for being open-minded. I think that in jurisdictions 
like mine, where we are mostly rural, sometimes manufactured 
housing is the only option.
    Mr. Cordray. Yes.
    Ms. Sewell. And we want to make sure that we are protecting 
the consumer, and we are also providing access to credit or 
helping that process so that folks have the best shot of 
getting a home that they possibly can.
    So, I thank you for your willingness. Do add my office as 
one of the offices willing to help out.
    Thank you, sir.
    And I yield back the rest of my time.
    Mr. Cordray. Thank you, Congresswoman.
    Chairman Hensarling. The gentlelady yields back.
    The Chair now recognizes the gentleman from Kentucky, Mr. 
Barr, for 5 minutes.
    Mr. Barr. Thank you, Mr. Chairman.
    Mr. Cordray, first a couple of questions about the indirect 
auto lending bulletin, and then I want to ask you a couple of 
questions about the Qualified Mortgage rule.
    On the indirect auto lending bulletin, will failure to 
conform to that bulletin bring adverse consequences to 
noncompliant auto dealers?
    Mr. Cordray. So again, the bulletin on indirect auto 
lending governs lenders. It does not govern dealers.
    And again, this is the landscape that we have been given 
and we are trying to be very mindful of it.
    Mr. Barr. Can auto dealers disregard the bulletin?
    Mr. Cordray. The bulletin covers and is addressed to auto 
lenders. It is not addressed to auto dealers, over whom we do 
not have jurisdiction.
    Now, when you have a transaction in today's market, the way 
it often works is you will have a lender and a dealer engaged 
in that transaction. But the Congress drew a line here and they 
said dealers are subject to the jurisdiction of others; lenders 
are subject to our jurisdiction, so--
    Mr. Barr. Right. This does impact--
    Mr. Cordray. So lenders have to worry about it and comply 
with--
    Mr. Barr. Sure. But it impacts the dealers' markup 
practices, obviously.
    Mr. Cordray. It could, depending on exactly what actions 
are taken in response, yes.
    Mr. Barr. Is it the intent of the Bureau to make this 
legally binding on the auto lenders and, by extension, the auto 
dealers?
    Mr. Cordray. Again, we have a responsibility under our 
statute to govern fair lending practices by auto lenders. We 
have no ability to govern fair lending practices of auto 
dealers.
    Mr. Barr. I understand.
    Mr. Cordray. No ability.
    Mr. Barr. That is really not where I am going. Is it the 
intention of the Bureau to make this legally binding on auto 
lenders?
    Mr. Cordray. Auto lenders are already bound to comply with 
the law. This is a clarification of what the law is. We didn't 
create that; we didn't change it. It is what it has been.
    Mr. Barr. The point of my question, and I think you 
understand what I am getting at, is why are you not using 
notice-and-comment rulemaking here? If the intent is to make 
this legally binding, why don't you give auto lenders and auto 
dealers the opportunity--and the American people the ability to 
comment on what it is that you are doing?
    Mr. Cordray. We use notice-and-comment rulemaking when we 
are actually changing the law. This is not a change in the law. 
It is a restatement of law that other agencies have followed 
for 20 years. They had a guidance document in 1994 or 1995 that 
we were simply restating, so--
    Mr. Barr. So can auto lenders disregard it since it is not 
a restatement or a new law?
    Mr. Cordray. No. They always had to regard it. They had to 
regard it for 20 years. We are simply, again, reaffirming that 
they still have to regard it.
    Mr. Barr. Let me talk about the details of the bulletin, 
and whether or not--and the question that really wasn't 
answered in your response to the letter that we sent you, about 
the analytical controls that you believe are appropriate in 
implementing this.
    We asked what were the controls that you were going to use 
in applying the rule. Is the Bureau going to be using, for 
example, nondiscriminatory factors--taking into account 
nondiscriminatory factors, such as the creditworthiness of 
borrowers?
    Mr. Cordray. Creditworthiness of borrowers is always 
relevant to these considerations and very, very valid criteria.
    Mr. Barr. And the amount financed?
    Mr. Cordray. The amount financed would matter because the 
extent of harm to consumers is going to be potentially greater 
with the greater amount financed.
    Mr. Barr. And the length of time of the loan?
    Mr. Cordray. That is a relevant factor, sure.
    Mr. Barr. And what about the presence of a manufacturer's 
subvention of a right?
    Mr. Cordray. I believe that could be relevant criteria. 
What you are laying out is that it is a somewhat nuanced 
analysis and not so easy to say one-size-fits-all. It depends a 
lot on circumstances.
    Mr. Barr. If I may, with the remaining time, let me just 
move quickly to the Qualified Mortgage rule. As you know, the 
rule provides greater flexibility for lenders in rural and 
underserved areas, particularly to originate balloon loans, for 
example.
    But we have heard from our constituents that there is a 
problem in certain rural areas which have been improperly 
designated as non-rural. My question to you would be whether or 
not the Bureau would be open to allowing a process whereby 
clearly wrongly designated rural areas could petition your 
agency for a proper designation of rural status.
    Mr. Cordray. So here is what we did: I was convinced that 
we got the rural designation wrong or that it merited 
reconsideration, so we took that off the table. None of these 
lenders have to worry about that for the next 2 years while we 
rethink it.
    So I think we have done exactly what they wanted, which is 
nobody is being affected by that designation now. We will 
rethink it, and potentially it will end up being a different 
designation when we are through working through this. And we 
are interested in hearing from them in the meantime.
    I heard a lot from them initially, and that is what caused 
us to pull back on it.
    Mr. Barr. Whether it is in the case of an auto lending 
bulletin or in the case of the QM rule, I would encourage the 
Bureau to allow more participation, whether it is notice-and-
comment or whether it is a petition process where the American 
people can actually correct--
    Mr. Cordray. If you know of anybody who is having trouble 
getting a meeting with us, you let me know. We are pretty 
widely accessible.
    Mr. Barr. Thank you.
    Thank you. I yield--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Florida, Mr. 
Murphy, for 5 minutes.
    Mr. Murphy. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for your testimony. And 
thank you for what you and the Bureau do to protect consumers.
    Regarding Habitat for Humanity, as you know, it is a 
charitable organization, which represents part of what makes 
America great: neighbors all coming together with a simple idea 
that affordable homeownership strengthens communities and helps 
break the cycle of poverty.
    Habitat homeowners enjoy no-interest, charity mortgages, 
designed not to make a profit on the underlying loan, or affect 
the risk of the homeowner, but simply to build communities and 
promote affordable homeownership.
    I have been working closely with my good friend and fellow 
United Solutions Caucus Member Meadows, from North Carolina, 
and the gentlelady from West Virginia, Chairwoman Capito, on 
legislation to improve Wall Street reform by protecting Habitat 
for Humanity and other such charity organizations from a 
regulatory risk, which should be reserved for banks and credit 
unions.
    The process has benefited from the Bureau's responsiveness 
and ongoing willingness to address legitimate concerns. One of 
those concerns is whether forgivable loans actually count as an 
extension of credit. If a borrower will not be expected to 
repay a loan, as in the case for many downpayment assistance 
loans, that borrower should not have that loan count against 
them for the purposes of determining ability to repay.
    Can you explain to the committee the Bureau's position on 
whether forgivable loans are considered an extension of credit 
for the purposes of determining ability to repay debt-to-income 
ratio?
    Mr. Cordray. Yes. And to go back, when we first finalized 
the Qualified Mortgage rule in January of last year there was 
not yet any provision that took account of 501(c)(3)'s like 
Habitat. They spoke to us. They had several concerns.
    We went back and did an additional rulemaking process, 
which resulted in the small-creditor provision, which was very 
important to community banks and credit unions, and a provision 
that governed Habitat. The Bureau took care of their concerns, 
or so I thought.
    By the end of this year, as they worked through other 
problems, they found that they have identified three other 
concerns. This is the leading one, as I understand it. I had a 
discussion with the CEO, Jonathan Reckford, yesterday, and we 
talked back and forth. He had his lawyers in the room 
explaining the details of the issues and we pledged to work to 
see that we can resolve these issues through our rulemaking 
authority.
    Representative Capito, with whom you are working, knows 
full well that we can resolve these issues because we had this 
problem with stay-at-home moms under the credit card rules that 
we inherited, that she raised. I agreed that it was a very 
valid concern and we addressed that through rulemaking, it 
always takes a little longer than we would like, but I think we 
can do the same here.
    Mr. Murphy. Thank you for your responsiveness to these 
consumer concerns. When should we expect a formal, workable 
position from you all?
    Mr. Cordray. We are already working with Habitat to 
understand the granular details of their concerns, including 
this one. As you say, the big-picture issue on this one is very 
much: do second liens have to count in the very peculiar 
circumstances of Habitat, where they put a second lien on often 
as a safeguard to avoid the homeowner getting themselves into 
trouble on a second lien of their own.
    We are working with them already. I think over the course 
of this year, we will solve this problem, and if that is not 
fast enough, we can work with them further to try to organize 
the timeframe.
    But I know in my area, it is a former colleague of mine 
from the State legislature who runs the Habitat in our area. 
They do a very good job. It is something we want to encourage 
and they help a lot of people. So, we are mindful of protecting 
their model.
    Mr. Murphy. Thank you. And as you examine how to best 
protect consumers in the short-term, small-dollar credit 
sphere, I would be remiss to avoid sharing the benefit of good 
regulation and great enforcement that we have in Florida, where 
they are pulled away from unlawful and short-term loans by real 
access to a functional market without castigating or endorsing 
the industry.
    The State of Florida has really demonstrated a workable way 
to protect access and consumers. I hope, as we move forward, 
that you recognize the States that are doing it right.
    And my question is how, in an extremely well-regulated 
market, do you protect consumers by keeping them from the black 
market?
    Mr. Cordray. We are looking at a number of States that have 
developed different provisions on short-term, small-dollar 
payday lending. Florida is one; Colorado is one; Washington is 
one. There are some interesting new approaches.
    I have been in direct contact with Drew Breakspear, who is 
your banking commissioner, and they actually, in the interest 
of the importance of data and information, when we did our 
White Paper on payday lending, they then applied the same 
analysis to their Florida data and were able to show us 
differences in consequences because of their provisions.
    Those are all things we are looking at as we are trying to 
formulate the right approach.
    Mr. Murphy. You are considering it.
    Mr. Cordray. Yes.
    Mr. Murphy. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Florida, Mr. 
Posey, for 5 minutes.
    Mr. Posey. Thank you, Mr. Chairman.
    Mr. Cordray, I wanted to ask you a few questions about the 
time periods the CFPB provides for certain requests.
    This is a set of regulations containing the rule relating 
to investigations--that is 12 CFR 1080. When the CFPB initiates 
a case, it serves a civil investigative demand requesting 
certain information, including answers to questions, documents, 
written reports, and testimony before an investigator.
    Once they receive a civil investigative demand, do you know 
how many days that person has before they have to meet with a 
CFPB investigator?
    Mr. Cordray. So first of all, what I know is this is 
standard--
    Mr. Posey. A one-or two-word answer, please. I only have 5 
minutes. You don't know.
    Mr. Cordray. No, no. It is more than that. Number one, it 
is a standard practice. All attorneys general use the same 
approach--
    Mr. Posey. It is 10 days. It is my time. Ten days is what 
they have.
    Mr. Cordray. Secondly--
    Chairman Hensarling. Sir, the time belongs to the gentleman 
from Florida.
    Mr. Cordray. He asked a question. Don't I get a chance to 
answer?
    Chairman Hensarling. The time belongs to the gentleman from 
Florida.
    Mr. Posey. I asked you how many days. It doesn't take a 
book to answer that.
    Mr. Cordray. We negotiate.
    Mr. Posey. If a person wants to challenge the civil 
investigative demand or modify the scope of the investigation, 
do you know how many days they have to file an appeal with the 
CFPB?
    Mr. Cordray. There is a specified time in--
    Mr. Posey. Twenty days is the answer. It could really be 
answered that simply.
    If a person wants more time to prepare a challenge to the 
CFPB investigative demand, do you know what the CFPB 
regulations say about the extension?
    Mr. Cordray. What I know is our practice has been to 
negotiate that timing with the party and to give them a 
reasonable amount of time. We have done it many times.
    Mr. Posey. Your literature says they are ``disfavored.''
    Do you know what the penalty is for failure to comply 
entirely or only in part with civil investigative demand?
    Mr. Cordray. What I know is we had an example of this 
recently. We investigated a payday lender. It resulted in our 
first enforcement action. They were actually destroying 
documents as they were under investigation.
    Mr. Posey. Okay. The answer to my question is--
    Mr. Cordray. That was totally inappropriate. It resulted in 
a $5 million penalty.
    Mr. Posey. --the Federal district court.
    This is a set of regulations that governs the investigation 
of non-bank-covered persons. It is 12 CFR 1091. When the CFPB 
issues a notice of reasonable cause against a person who offers 
consumer financial products, how much time do they have to 
respond?
    Mr. Cordray. --in our rules.
    Mr. Posey. Thirty days. If that person fails to respond to 
the notice of reasonable cause, do you know what happens to 
them then?
    Mr. Cordray. What I know is these are law enforcement 
activities. People need to take them seriously.
    Mr. Posey. --right to respond and have a decision in order 
automatically entered against them.
    Mr. Cordray. These are law enforcement activities and 
people need to comply with the law.
    Mr. Posey. Do you know what happens to a person if they 
give vague or incomplete answers in their responses to a notice 
of reasonable cause?
    Mr. Cordray. That is something that we negotiate in terms 
of--
    Mr. Posey. They lose the right to rely upon any legal 
argument, document, or other information that they could have 
used in their defense if they fail to include it in their 
response.
    This is a letter from me to you, dated December 21, 2012, 
containing 19 questions about the CFPB consumer data collection 
program.
    This is a CFPB response dated February 21st. This is a 
letter responding to my questions. As you can see, it is three 
paragraphs long. Nineteen questions I asked--the answer is 
three paragraphs long. Paragraph three is a two-sentence 
conclusion, actually.
    How many days do you think it took the CFPB to respond to 
me?
    Mr. Cordray. So let me say, at the time that you 
submitted--
    Mr. Posey. Sixty-two days--
    Mr. Cordray. At the time that you submitted 19 questions, 
others submitted questions. There were well over 150 questions 
that we had to respond to--
    Mr. Posey. Listen, the people that you regulate can have a 
lot of people asking them questions at the same time.
    Mr. Cordray. And nobody got favorable treatment. They all 
were responded to together.
    Mr. Posey. Do you think a three-paragraph, one-page letter 
provided complete and satisfactory answers to my 19 questions?
    Mr. Cordray. I would like to see the letter, but many of 
them were incorporating by reference. Other questions--
    Mr. Posey. The answer is clearly no.
    Mr. Cordray. Other questions were being answered at the 
same time.
    Mr. Posey. This, for the record, as marked, is the 19 
questions I resubmitted in December 2012. Would you like to 
guess when I got the answers to those questions?
    Mr. Cordray. Again, I recall at one period--
    Mr. Posey. These were July 9, 2012, questions for the 
record, and the responses arrived on September 17, 2013.
    Do you know how many days it took to respond to my question 
from July? That is 70 days.
    Do you know how many days it took for me to finally get a 
response to the questions I originally sent you in December? 
That is 270 days.
    It is a bad case of, I think, democracy here--
    Chairman Hensarling. The time of the gentleman has expired.
    Mr. Cordray. What I understand is we have answered all your 
questions. If it takes longer than you like, we will look at 
that again.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Ohio, Mrs. 
Beatty, for 5 minutes.
    Mrs. Beatty. Thank you. Thank you, Chairman Hensarling and 
Ranking Member Waters.
    And I apologize for my voice--I am losing it. But you can 
also imagine when you are at the end of a 3-hour-plus hearing, 
much has been said.
    But, Director Cordray, let me say how honored I am to have 
entered into the record that I can say something that people 
here can't say--that I have had the opportunity to work with 
you for several decades and witnessed your leadership and 
administration. So, for the record, I could tell you that 
condescending is not a word that you would find with this 
Director.
    Let me also say--we have heard a lot about protecting 
consumers--how proud I am that in the capital city of my great 
State of Ohio, that you and our mayor, Mayor Coleman, have set 
up a 311 constituency line, which I think is very rare--that 
you would have a Director and a mayor working together, that 
individuals in my district can actually dial 311 and be 
connected directly to the Bureau to talk about their concerns.
    I would also like to thank you for your attention to ending 
the broken system. And I was very pleased to read about how you 
are working with consumers to make sure that when they are 
getting a mortgage, they are not hit with surprises.
    You have also heard from a lot of my colleagues on 
manufacturing. I have had the opportunity to work with our 
colleague--a Republican colleague who we both serve within the 
House with Habitat for Humanity.
    So it is also important for me to express my support for 
efforts by the Bureau to address the manufacturing housing 
issues without diluting important consumer financial 
protection.
    And lastly, we have heard a lot about the automotive 
association. I have read your reports. The National Automotive 
Dealers Association yesterday came out with a report and 
suggests that its members set up a single markup rate for all 
loans and only reduced the rate for documented reasons such as 
a match or to beat a competitive rate.
    I wanted to know if you have seen that report, and if you 
think that it is something you will work with them on.
    Mr. Cordray. We have just seen it, and to me, it is 
encouraging that people are taking seriously and trying to 
explore ways to address these kind of fair lending concerns, 
and that the Auto Dealers Association, which I have come to 
know as a very respectable body that is interested in solving 
these kinds of problems, is trying to develop a solution for 
dealers as notable.
    The difficulty we have, again, is one that we oversee 
lenders; others oversee dealers. We do not oversee dealers.
    But we are happy to--if everybody understands that we are 
respecting that line--we are happy to try to work together to 
get to a broader solution of this issue and I think we have 
made that plain.
    Mrs. Beatty. Okay, thank you.
    Mr. Chairman, I would like to yield the balance of my time 
to the Director if there are any comments about anything he 
would like to say, or to respond to any of the other questions.
    Mr. Cordray. I appreciate that offer. I will pass at this 
time. Thank you. Thank you very much, Congresswoman.
    Mrs. Beatty. I yield back my time.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from North Carolina, Mr. Pittenger, for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for being here. We are 
near the end of this hearing, so it is time for Double 
Jeopardy.
    Mr. Cordray. Or Final Jeopardy.
    [laughter]
    Mr. Pittenger. Or final--how about that? That is even 
better, isn't it?
    Mr. Director, the Dodd-Frank Act established the Civil 
Penalty Fund and the purpose of this was, of course, for 
penalties that were levied to establish this fund. And unlike 
the Federal Reserve or the OCC or the FDIC, you are in a 
position to deposit these funds in your own account.
    And to that end, I would like to ask this: Based on the 
committee calculations that we have today, the unobligated 
balance of this fund currently stands at about $96 million, and 
roughly $124 million of that you have imposed in fines, which 
would be allocated about $15 million--so, that is about 11.7 
percent. Of that, about $1.5 million has been spent on 
administrative costs.
    I would just like to ask, why are you not using more of 
these funds to compensate victims, as it was designed to be set 
up? And can you not identify these people?
    Mr. Cordray. Thank you, Congressman, for asking about that. 
It is a provision in our statute that we are trying to be very 
careful about and puzzled through.
    What you are referring to, I think, at the moment is simply 
a timing issue. In order to set up this fund and make sure that 
it is subject to appropriate oversight by our Inspector General 
and by the GAO, all of whom audit us, and that you would all 
have confidence in it, we actually put out, as suggested on 
many occasions for notice and comment, a rule on how we would 
administer the fund.
    That took some time setting it up. We now have made the 
first allocations. We are able to compensate some victims in 
matters where they did not get full compensation from the 
perpetrator, often because funds were not available or on their 
way out of business from scams and frauds.
    Second, we have allocated some money for the first 
financial education program, which is financial coaching for 
servicemembers as they transition into civilian life. That is 
something we will be working on with people on military bases 
across the country.
    I think that it is going to be an important initiative, and 
it is very much within the letter and spirit of this law.
    Mr. Pittenger. All right. I just want to clarify, because I 
would like to move on--
    Mr. Cordray. Yes.
    Mr. Pittenger. --that the purpose of the fund--designed 
that you have sole autonomy in--is to benefit these individuals 
and to have educational programs. So, we would just encourage 
you to use it for that.
    Let me go ahead and ask you--
    Mr. Cordray. Subject to oversight by you, the Inspector 
General, GAO, and others.
    Mr. Pittenger. Yes, right. Next question.
    Mr. Cordray. Right.
    Mr. Pittenger. On September 12, 2013, the Bureau announced 
the creation of four advisory groups: the Consumer Advisory 
Group; the Community Bank Advisory Council; the Credit Union 
Advisory Council; and the Academic Research Council
    Director Cordray, I would like you to discuss with us these 
advisory boards and the councils. And why are the boards' 
advisory group meetings held behind closed doors?
    I understand that portions of the Consumer Advisory Board 
meetings are public--
    Mr. Cordray. Right.
    Mr. Pittenger. --but most all other portions are private 
and all other advisory groups meet in secret. Why deny the 
public the right to observe these meetings?
    Mr. Cordray. First of all, the only advisory council we are 
required to have by law is the Consumer Advisory Board that is 
set up by--
    Mr. Pittenger. I am asking really more, as not by law but 
as a matter of policy.
    Mr. Cordray. No, I am trying to get there.
    Mr. Pittenger. Okay.
    Mr. Cordray. That one is by statute. And as you say, we 
always make it a point with every meeting to have an open 
portion and then there is a closed portion where we can get 
their unvarnished advice and we can speak candidly about 
matters that the Bureau is working on, including enforcement 
actions and the like.
    Second, in terms of the other councils, I created a 
Community Bank Advisory Council and a Credit Union Advisory 
Council because we wanted to hear more from them. We don't 
oversee them in the normal course of things--all of those under 
10 billion, which is thousands of them.
    We are not covered by the Federal Advisory Committee Act--
    Mr. Pittenger. I understand.
    Mr. Cordray. --which exempts the Federal Reserve--
    Mr. Pittenger. Director, let me just insert--we only have a 
few minutes--
    Mr. Cordray. Yes.
    Mr. Pittenger. --a few seconds left.
    In the spirit of transparency, will you commit yourself now 
to at least some portions of these meetings being held up to 
the public or permitting Congressional Representatives to be 
there? We, as members of the Financial Services Committee, have 
requested to be there in the past and those requests were 
denied.
    Will you commit yourself to more openness to allow for the 
public to review what takes place in these meetings?
    Mr. Cordray. These are advisory meetings to discuss matters 
that often are not yet public, so they cannot--
    Mr. Pittenger. Just yes or no.
    Mr. Cordray. They cannot be made--
    Mr. Pittenger. Sir--
    Mr. Cordray. --public easily.
    Mr. Pittenger. So, your answer is no?
    Mr. Cordray. We do release minutes on the meetings and 
members who come to speak to us from credit unions and 
community banks can, if they want, go back and talk about what 
we said--
    Mr. Pittenger. Mr. Cordray, is your answer no?
    Mr. Cordray. So I don't think it works for us to do that, 
sir.
    Mr. Pittenger. Thank you.
    Mr. Cordray. And get their candid advice.
    Mr. Pittenger. I yield back my time.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Washington, Mr. 
Heck.
    Mr. Heck. Director Cordray, I would like to start out by 
apologizing on behalf of the committee. I think there are 
instances where individual behavior in this committee does not 
live up to the great heritage of this institution or this 
committee, and I think earlier, there was an egregious breach 
of protocol.
    Indeed, I think the gentleman from Colorado's shameless 
promotion of his individual sports franchise was way over the 
line. And for my part, sir, I will simply allow the Seahawks' 
performance to speak for itself. Let the record show that the 
lady whose husband once played for the Denver Broncos just 
turned my microphone off.
    Mr. Chairman, I noted that Mr. Perlmutter got to start his 
5 minutes over after his shameless self-promotion.
    Chairman Hensarling. Reset the clock to 5 minutes. The 
Chair is feeling rather indulgent at the moment.
    Mr. Heck. I have been here for 3 hours.
    Director Cordray, when you were here before I complimented 
you and the agency, in particular the Office of Servicemember 
Affairs, for the good work that we had done with them on behalf 
of the men and women who wear a uniform. In particular, Holly 
Petraeus has been just outstanding, and her staff. I thank you 
again.
    One of the issues that we continue to get exposed to in my 
area is behavior on the part of high-interest-rate lenders. And 
as you know, in accordance with the NDAA of 2013, the 
Department of Defense was charged with updating the rules and 
regulations associated with the Military Lending Act.
    I recognize that you serve in an advisory capacity to that 
effort, but it was due at the end of the last calendar year. It 
is not here. I think it has recently been announced that it 
will now be out probably by the end of the first quarter, or so 
indicated. But as somebody who does indeed act in an advisory 
capacity, could you provide us with any insight about what the 
holdup is all about? People's lives are being affected every 
day.
    Mr. Cordray. I think I can, yes. We have actually been 
actively engaged in writing new rules with the Department of 
Defense. They have been actively engaged in this, as well as 
our fellow agencies, including the Federal Reserve, the FDIC, 
the OCC, the Treasury Department, and the FTC. And we are well 
along in that process.
    But I will just say it is always difficult to get multiple 
agencies to work together. It is not so easy to do. It always 
takes longer than we think.
    Everything that you in Congress can do to keep our feet to 
the fire and make it clear that you want to see that quickly. 
However, we are trying to balance speed against getting it 
right. We have made tremendous progress and I know the 
Department of Defense wants to proceed on this. If you all just 
keep attending to it and make sure that everybody knows that we 
are on a timeframe and we need to move on that timeframe, that 
is very helpful to all of us trying to get the work done, so--
    Mr. Heck. I think Mr. Perlmutter just reentered the room. I 
am just guessing.
    Chairman Hensarling. The Chair is not going to reset the 
clock again, so if I was the gentleman, I would keep on 
trucking.
    Mr. Heck. I am a little nervous right now, Director 
Cordray.
    Mr. Cordray. Do you have a hat like he does? You might want 
to have a hat like he does.
    Mr. Heck. I want to follow up on the earlier exchange about 
mobile payments. I am pretty excited about mobile payments 
because from my perspective, it removes friction from the 
marketplace. And things that do that, if they are balanced 
against consumer protection, I believe are inherently good. I 
think it accelerates the velocity of a transaction; it benefits 
retailers; and it is an increased convenience to the consumer.
    But I note that we are in the embryonic stages and this is 
growing in dozens of different ways. There is different 
technology, different user interfaces, and different underlying 
payment systems.
    And it just seems to me that as the number one protector of 
consumers' interests, it might be good on the front end of this 
if we had had some kind of an in-depth analysis, I think best 
conducted by your agency, about the pros and cons of developing 
more harmonious consumer protections across these different 
platforms.
    Could I persuade you to be interested in such a thing and 
get out ahead of the curve before--and I realize that you have 
been fairly busy the last couple of years, but this could 
explode on us. Let's get ahead of it.
    Mr. Cordray. Yes. The trouble is that it is a hard area. 
Exactly where it is going and when, and which platforms are 
going to be the ones that get great take-up from the American 
people. People have been working at this for several years 
already and I still couldn't predict to you which ones are 
going to be the dominant technologies of tomorrow and maybe 
even, as you say, tomorrow on the calendar, not just tomorrow 
metaphorically.
    So we are trying to be very attentive to this. We recognize 
prepaid cards have exploded very fast. It is just in the last 
few years that they have ramped--
    Mr. Heck. Sir, may I interrupt with a question in that 
regard?
    Mr. Cordray. I'm sorry, yes.
    Mr. Heck. I apologize.
    Mr. Cordray. No, that is fine.
    Mr. Heck. I understand you have jurisdiction over prepaid 
cards for banks.
    Mr. Cordray. Yes.
    Mr. Heck. But I kind of got lost--
    Mr. Cordray. Not always--not--
    Mr. Heck. Do you have jurisdiction over prepaid cards for 
retailers?
    Mr. Cordray. Yes.
    Mr. Heck. If not, who does?
    Mr. Cordray. We have jurisdiction over the offering of 
financial products and services, and prepaid cards typically 
are, especially the general purpose reloadable cards. So yes, I 
think we do have jurisdiction over prepaid cards, and not just 
banks, but also nonbanks.
    Mr. Heck. Good.
    So I think I am about done, Mr. Chairman, but I wonder, do 
we have a sergeant at arms? I am not feeling particularly safe 
right now.
    Mr. Cordray. The generous Congresswoman who shared a 
microphone with you, she and I wish we could talk about the 
Browns, the Bengals, or the Buckeyes, but we will just have to 
say wait until next year, so--
    Chairman Hensarling. The apparent last questioner will be 
the gentleman from Delaware, Mr. Carney, who is recognized for 
5 minutes.
    Mr. Carney. Thank you, Mr. Chairman. I was expecting 
somebody from the other side, but I appreciate the opportunity 
to be here. I apologize for having to leave and come back.
    And I want to thank you for your service and for your 
patience in this hearing. It has been trying, I am sure, and a 
little disappointing to me, just the tone of it. It just seems 
to me that consumer protection ought to be something that we 
all care about, right?
    And I know there are a lot of differences of opinion over 
the agency and how it was created. I was not here when that 
happened. It seems like now, though, we ought to be able to 
move beyond that.
    I did want to come back to ask you some questions about the 
mortgage lending standards in particular. Something that many 
of us on this side are working on is some of the unfinished 
business, we think, from the near financial collapse--the 
reform of Fannie Mae and Freddie Mac and the GSEs and so on.
    Of course, the committee has passed a bill that would 
address that, we feel like, by eliminating a government 
backstop, which we think will be the end of the 30-year fixed-
rate mortgage and actually cause mortgage interest rates to go 
up and make affordability more difficult.
    I am curious. Obviously, the QM standards are important for 
any kind of securitizing platform, but I want to revisit some 
of the questions that were asked by Members on both sides about 
how the QM rule that you--we are operating under now and 
ability to pay. And you answered to I think Mrs. Capito's 
question some time ago, a couple of hours ago, that you feel 
like it was in a box.
    Could you take a minute or 2 here at the end of the hearing 
to explain why you think that is a good rule and why you think 
it is something that we can work within as we attempt to reform 
our system to address the problems that, frankly, that got us 
into this financial mess the last time, and leading up to a 
reform of the GSEs?
    Mr. Cordray. Sure. No matter what the explanation of all 
the background, and it differs among different people, I know, 
everybody recognizes it was the mortgage market that collapsed 
and caused the financial crisis and all the harm and misery we 
have seen in this country over the last 5 years. And reforming 
the mortgage market was, therefore, the highest priority 
Congress set for us with the Qualified Mortgage rule.
    There are several different ways that a loan can meet the 
Qualified Mortgage test. And by the way, nothing prevents banks 
and others from lending outside the Qualified Mortgage boxes--
    Mr. Carney. As long as they hold the--
    Mr. Cordray. --as long as they make a good-faith reasonable 
determination of the ability to repay. And many of them are 
going to be doing so and have said so.
    But the boxes--
    Mr. Carney. Have you gotten feedback if--sorry for 
interrupting, but have you gotten feedback from the banks, 
positive or negative, about that piece of it? Do they have 
enough flexibility to make that determination? We will hear 
from our community banks and we have heard some testimony 
earlier today that ``the box is too tight'' is the term being 
used.
    What kind of feedback do you get?
    Mr. Cordray. Yes. I think everybody always wants more 
flexibility. They want to do whatever they want to do. We had 
way too much before the crisis and there were a lot of loans 
made that should not have been made.
    Mr. Carney. Correct.
    Mr. Cordray. And Goldman Sachs did a report, not a big fan 
of government regulation, that said that 50 percent of the 
loans that defaulted in 2005, 2006, and 2007 would not have 
been made if the QM rule had been in place. It would have been 
a very different story in the economy of this country.
    But, we drew a box around a 43 percent debt-to-income 
ratio. That is very generous by historical standards, but that 
is one box.
    We drew a box around loans eligible for sale to the GSEs, 
which gives you all latitude to determine what you are going to 
do about GSE reform. This is while they remain in 
conservatorship over the next 5 to 7 years if nothing else 
happens.
    And when we went back and drew another box for small 
creditors, hearing from them and recognizing that their lending 
practices are very important in a lot of communities around 
this country. Thousands of community banks and credit unions 
are covered by those provisions and they have complete 
latitude, whether they sell on the secondary market or keep in 
portfolio, to lend in accordance with their traditional mode. 
And that was an important adjustment that we needed to make and 
we were convinced that we should make.
    Mr. Carney. So, one last thing. You have mentioned a couple 
of times that we will see. We will look at the data.
    Mr. Cordray. That is right.
    Mr. Carney. What will the benchmarks be? What do you think 
will tell us whether it is working or not? Do you have a sense 
of that or what you are going to be looking at in terms of 
benchmarks there?
    Mr. Cordray. Data and information about what is happening 
in the mortgage and housing market will tell us how this is 
going. The thing we will have to be careful of is there are a 
lot of other factors here.
    If the Congress acts on GSE reform, that will be a 
dominating factor in terms of what goes on in the mortgage and 
housing markets. If interest rates go on a sustained period of 
rising which, you never know when or whether things happen in 
that regard, that will obviously dominate this market. There 
are other things that matter, clearly.
    But in terms of our rules, we are going to continue to 
listen closely, as we have all along, both to the consumer side 
and to the industry side, about whether we are getting the 
balance right. I think people have recognized that we have 
tried hard to draw a balance. Many people think we have done 
well at drawing the balance. To the extent we are not sure and 
they are not sure, we are interested in seeing and hearing more 
as we go.
    Mr. Carney. My time is up, but let me thank you again for 
your service, and I hope that we can have an ongoing 
conversation about these issues. Thanks.
    Chairman Hensarling. The time of the gentleman has expired.
    The new apparent last questioner is the gentleman from 
Minnesota, Mr. Ellison, who is recognized for 5 minutes.
    Mr. Ellison. Thank you, Mr. Chairman.
    And thank you to the ranking member.
    Mr. Cordray, as we wrap up, I just want to offer my thanks 
to the CFPB for the great work that you all do. I know this has 
been a tough hearing in many ways. Of course, we are in a 
pretty polarized political environment nowadays, and you are in 
the crossfire. But I just want to say to the millions of people 
that you have helped, I hope that you will continue to do the 
hard work that you are doing, and I just want to let you know 
that you have the support of many of us, including me.
    Let's talk about manufactured housing, if we may. What is 
up on the board is my district and all the little dots are 
manufactured housing. In my congressional district we are very 
proud to represent Hilltop, which is a manufactured housing 
community.
    Let me ask you this about manufacturing--or make these 
points and then get your reflections. We have more than 68,000 
manufactured homes in Minnesota, more than 3 percent of our 
housing stock. And we also have about 900 manufactured home 
communities. One of them, North Country Cooperative, is a 
resident cooperative. And I have asked this chart for 
manufactured homes to be posted on the screen just for your 
reference.
    I want to congratulate the CFPB for taking steps to improve 
the finance options for manufactured home owners. Manufactured 
homes offer attractive, safe, and affordable homes for millions 
of people. But pre-crisis, too many manufactured home buyers 
were only offered high-cost loans with completely inadequate 
consumer protections.
    Recently, I presented a question for the record to you 
asking what data the industry has shared to justify those high 
fees and high interest rates. And I know there are great 
manufactured home loan providers, such as New Hampshire 
Community Home Loan Fund and ROC USA. We should ask them to 
come and testify before this committee.
    I have a bill that strengthens CDFIs, H.R. 3656, which 
invests in manufactured homes. And another of my bills, the 
Common Sense Housing Investment Act, also helps manufactured 
home buyers. I encourage my colleagues to cosponsor the bills.
    Will you work with us to improve housing finance options 
for manufactured home buyers?
    Mr. Cordray. I would be happy to do that. And as I count 
it, there are maybe half a dozen to a dozen Members today who 
have raised these specific issues and we have heard about them 
directly from both industry and consumers, and we are 
interested in knowing more about whether the rules we have 
written that mostly, again, have typical residential housing in 
mind, are fitting in appropriate ways to this particular method 
of housing.
    Mr. Ellison. Good. I would like to introduce for the record 
this report entitled, ``Toward a Sustainable and Responsible 
Expansion of Affordable Mortgages for Manufactured Homes.'' 
This is a report I think would certainly elucidate and 
elaborate on the issues we have.
    Chairman Hensarling. Without objection, it is so ordered.
    Mr. Ellison. Finally, let me just ask you about title 
insurance. In the Qualified Mortgage rule, the CFPB includes 
title insurance costs paid to affiliates in the fee cap. 
Nonaffiliated title insurers are outside of the cap. What was 
the CFPB's reasoning for making this distinction?
    Mr. Cordray. It is a distinction that is drawn several 
places in the statute. There were concerns, as I understand 
it--I wasn't here for the debates on Dodd-Frank--about abuses 
where people were steered toward affiliated companies and 
people benefited financially from that.
    It is not unique to title insurance. It is true of various 
fees that are considered under the 3 percent points and fees 
cap. It has been singled out by some as wondering whether the 
same rationale should apply to title insurance as to other 
things.
    It is a fair question. It is something that we considered 
as we were writing the rules. It is something that we will 
continue to consider what the impact is as we look at how the 
rules are operating going forward.
    But it is the same general rationale as the other fees that 
are treated in the same manner under the statute and under the 
rule.
    Mr. Ellison. I have had a number of constituents come to 
me, and I just want to commend your staff on the fines against 
the sham title agents. I am concerned about consumers, 
particularly when they are being overcharged for the service, 
and it is wrong, I think, for consumers to pay hidden 
commissions and kickbacks.
    So with that, I just want to say again, thank you. Your 
work is very much appreciated around here by some, and we look 
forward to your future success on behalf of American consumers.
    Mr. Cordray. Thanks.
    Chairman Hensarling. I am assuming the gentleman is 
yielding back his 5 seconds.
    I would like to thank Director Cordray for his testimony 
today.
    Before excusing you, Mr. Cordray, I would like to bring to 
your attention several questions that are still pending, 
including one from our Chairman Emeritus Bachus, dated June 
21st, requesting all the studies, analysis, and information 
relied upon by the Bureau in its compliance bulletin for 
indirect auto lenders; one dating back to September 18th from 
myself requesting a list of senior managers who have utilized 
private e-mail accounts to conduct official business; one from 
myself and Chairman McHenry requesting all documents relating 
to the Bureau's awarding a $5 million research contract to 
ideas42; and one dating back to October 22nd, where we have 
requested all data upon which the Bureau relied in preparing 
its April 2013 White Paper on payday lending and deposit 
advance products.
    I would note that, indeed, this committee has given the 
CFPB many, many questions. We have received a number of 
answers.
    I know you find this sometimes voluminous and bothersome 
but, Mr. Director, we consider it to be a critical check and 
balance. This committee would like to continue to work with you 
cooperatively and respectfully, and so I would respectfully 
request that no later than the end of February, we receive full 
answers. Otherwise, you will force us to rely upon our 
compulsory process, which I prefer not to do.
    Mr. Cordray. I will just say that sometimes the requests 
are voluminous. We don't find them bothersome. It is part of 
the vigorous oversight that I have come to expect, and 
appreciate, and I would be disappointed if I didn't get that 
from this committee.
    On each of the four or so matters that you have pinpointed, 
I know there have been multiple rounds of back and forth on 
most, if not all of those. We have a job to do to try to 
determine how best to manage this information. You have a job 
to do, I understand, to oversee us.
    We will try to make sure we can get as much as possible on 
the same page. Sometimes these are not easy things to work 
through, as you know.
    Chairman Hensarling. If you could, Mr. Director, if you 
would pay personal attention to these matters, that would be 
greatly appreciated.
    Mr. Cordray. Okay. Thank you.
    Chairman Hensarling. 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.
    This hearing stands adjourned.

    [Whereupon, at 1:42 p.m., the hearing was adjourned.]

                            A P P E N D I X



                            January 28, 2014
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