[Senate Hearing 113-194, Volume 1]
[From the U.S. Government Publishing Office]


                                                   Hrg. 113-194, Vol. I

 
    THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL REPORT TO 
                                CONGRESS

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                VOLUME I

                                   ON

    THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL REPORT TO 
                                CONGRESS

                               ----------                              

                           NOVEMBER 12, 2013

                               ----------                              

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs



                                                S. Hrg. 113-194, Vol. I


    THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL REPORT TO 
                                CONGRESS

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

                                HEARING

                               before the

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                VOLUME I

                                   ON

    THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL REPORT TO 
                                CONGRESS

                               __________

                           NOVEMBER 12, 2013

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs


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            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                  TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island              MIKE CRAPO, Idaho
CHARLES E. SCHUMER, New York         RICHARD C. SHELBY, Alabama
ROBERT MENENDEZ, New Jersey          BOB CORKER, Tennessee
SHERROD BROWN, Ohio                  DAVID VITTER, Louisiana
JON TESTER, Montana                  MIKE JOHANNS, Nebraska
MARK R. WARNER, Virginia             PATRICK J. TOOMEY, Pennsylvania
JEFF MERKLEY, Oregon                 MARK KIRK, Illinois
KAY HAGAN, North Carolina            JERRY MORAN, Kansas
JOE MANCHIN III, West Virginia       TOM COBURN, Oklahoma
ELIZABETH WARREN, Massachusetts      DEAN HELLER, Nevada
HEIDI HEITKAMP, North Dakota

                       Charles Yi, Staff Director

                Gregg Richard, Republican Staff Director

                  Laura Swanson, Deputy Staff Director

                        Jeanette Quick, Counsel

                 Adam Healy, Professional Staff Member

                    Phil Rudd, Legislative Assistant

                  Greg Dean, Republican Chief Counsel

                    Jared Sawyer, Republican Counsel

                       Dawn Ratliff, Chief Clerk

                      Kelly Wismer, Hearing Clerk

                      Shelvin Simmons, IT Director

                          Jim Crowell, Editor

                                  (ii)
?

                            C O N T E N T S

                              ----------                              

                       TUESDAY, NOVEMBER 12, 2013

                                                                   Page

Opening statement of Chairman Johnson............................     1

Opening statements, comments, or prepared statements of:
    Senator Crapo................................................     2

                               WITNESSES

Richard Cordray, Director, Consumer Financial Protection Bureau..     3
    Prepared statement...........................................    31
    Response to written questions of:
        Chairman Johnson.........................................   181
        Senator Crapo............................................   183
        Senator Reed.............................................   195
        Senator Merkley..........................................   196
        Senator Toomey...........................................   197
        Senator Moran............................................   200
        Senator Coburn...........................................   204

                                 (iii)


    THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL REPORT TO 
                                CONGRESS

                              ----------                              


                       TUESDAY, NOVEMBER 12, 2013

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 2:34 p.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Tim Johnson, Chairman of the 
Committee, presiding.

           OPENING STATEMENT OF CHAIRMAN TIM JOHNSON

    Chairman Johnson. I call this hearing to order.
    Director Cordray, welcome back to the Committee and 
congratulations on your Senate confirmation. We are here today 
to continue our regular oversight of the CFPB, giving this 
Committee another opportunity to review the important work of 
the agency to protect consumers and empower them to make 
responsible financial decisions, promote fair competition, and 
enable access to financial services for all Americans.
    The CFPB has made good progress in fulfilling its mission. 
The Bureau has undertaken critical analysis of the most common 
financial products in a consumer's life, including mortgages, 
student loans, credit cards, and deposit accounts, and has 
taken actions to improve the consumer experience with these 
products. For example, for student loans, the Bureau has 
focused on key elements through its Paying for College Project, 
which streamlines the college financing process through 
extensive outreach to lenders, students, and educators.
    The CFPB has also proven to be a strong enforcer of 
consumer laws and has shown a no-tolerance policy for 
violators. Since the CFPB opened just 2 years ago, it has 
obtained $750 million of refunds for harmed consumers,
    This careful analysis and strong enforcement would not be 
possible without the Bureau's ability to collect data. The CFPB 
is the first Federal agency to look at financial products and 
companies that had no supervision--and about which nobody had 
adequate information. All of the other Federal financial 
agencies collect data to inform their supervision of the 
marketplace. The Federal Reserve, OCC, and FDIC understand, as 
does the CFPB, that smart regulations need smart data. While we 
live in a world where more and more data about consumers is 
used by business and Government alike, information security and 
data privacy must be safeguarded, and I am encouraged by the 
Bureau's efforts to address these issues.
    Earlier this year, the CFPB finalized rules to strengthen 
mortgage standards, including rules on QM and servicing. These 
rules were well received by consumer and industry groups.
    However, I remain interested in hearing from Director 
Cordray on how these rules will impact rural lending. With the 
effective date just a couple months away, I look forward to 
hearing your expectations for compliance with these rules in 
January, especially for small lenders.
    Finally, the Committee's exploration of housing finance 
reform is well underway. As we move forward, I am interested to 
hear your thoughts on the interaction of your mortgage rules, 
including QM, with a new system and any conflicts or unintended 
consequences for the primary and secondary mortgage markets.
    With that, I turn to Ranking Member Crapo.

                STATEMENT OF SENATOR MIKE CRAPO

    Senator Crapo. Thank you, Mr. Chairman.
    Today we will hear from Director Cordray on the Consumer 
Financial Protection Bureau's Semiannual Report. This hearing 
provides an opportunity to discuss the future of the agency and 
to evaluate its past performance.
    Thank you, Director Cordray, for your two recent actions 
that the agency has taken. Back in the spring, it was brought 
to our attention that the presence of enforcement attorneys 
attending onsite supervisory examinations was negatively 
affecting the process, and very recently the Bureau announced 
the decision to remove the enforcement attorneys from 
examinations, which will now allow a free examination of 
information between banks and their examiners and ultimately 
result, I believe, in better supervision.
    In addition, at a September House hearing, the Director 
noted that the annual privacy notice requirement under Gramm-
Leach-Bliley may be placing unnecessary burdens on institutions 
without much benefit to consumers. Senators Brown and Moran 
have a bill pending in the Senate, and I hope we can soon move 
it across the finish line to accomplish this. These actions 
were a move in the right direction, and I appreciate Director 
Cordray taking them.
    Consumer protection is vital for a properly functioning 
financial marketplace. We are now 3 years removed from the 
creation of the Bureau, and while some growing pains have been 
expected, it is a time now for the Bureau to be viewed and 
treated as a seasoned regulator.
    As a part of our oversight role, we expect all of our 
banking regulators to operate efficiently, to demonstrate 
transparency, and to act responsibly.
    While I appreciate the positive steps the Bureau has taken 
in recent months, it has also taken several actions that have 
been widely criticized, calling into question efforts to meet 
those expectations.
    Earlier this year, the Bureau issued a bulletin on indirect 
auto lending that represents a major shift in policy. However, 
there was no public input prior to this change being made. This 
particular policy shift could ultimately increase the cost of 
credit and reduce options for financing when an individual goes 
to buy a car or a truck. A bipartisan group of Senators sent a 
letter to the Bureau last week highlighting these concerns.
    The CFPB has also become very active as an agency in other 
areas, and with this increased activity, the Bureau has the 
responsibility to prevent potential regulatory burden and 
overreach, especially as it begins to supervise new markets and 
products.
    Small institutions, like those in Idaho, are being 
significantly affected by the sheer volume of new CFPB 
regulations that they are forced to comply with, as well as the 
constantly changing regulatory scheme. Some simply do not have 
the resources to meet these new regulatory demand. In previous 
hearings, I have also raised my concerns of the Bureau's big 
data collection of consumer financial information. Examples of 
personal privacy failures by our Federal agencies have only 
increased since that time.
    Just last week, it was announced that the Internal Revenue 
Service was complicit in a huge identity theft scheme that left 
1.6 million American taxpayers vulnerable. And identity theft 
is just one of the harmful consequences of irresponsible data 
collection.
    With regard to the CFPB's data collection efforts, basic 
questions still remain to be answered: How many credit card 
accounts is the Bureau following on a monthly basis? And who at 
the agency holds the keys to view and use this data?
    The Bureau's lack of clearly identifiable and articulated 
purpose for this data collection is also troubling. For these 
reasons, I requested that the Government Accountability Office 
investigate the CFPB's data collection to determine its 
purpose, scope, intended use, and specific legal authority. 
Data collection touches every aspect of the Bureau's 
activities. As a result, this Committee needs a clear and 
complete understanding of this process.
    Thank you, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Crapo.
    Are there any other Members who would like to give brief 
opening statements?
    [No response.]
    Chairman Johnson. If not, I would like to remind my 
colleagues that the record will be open for the next 7 days for 
additional statements and other materials.
    Mr. Richard Cordray is the Director of the Consumer 
Financial Protection Bureau. Mr. Cordray, you may begin your 
testimony.

  STATEMENT OF RICHARD CORDRAY, DIRECTOR, CONSUMER FINANCIAL 
                       PROTECTION BUREAU

    Mr. Cordray. Thank you, Mr. Chairman, Ranking Member Crapo, 
and Members of the Committee. Thank you for inviting me to 
testify today about the fourth Semiannual 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.
    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 more than $750 million back in the 
pockets of millions of consumers who fell victim to various 
violations of consumer financial protection laws. This includes 
a refund of more $6 million to tens of thousands of U.S. 
servicemembers in a case involving the military allotments 
system.
    Because of our supervisory work, financial institutions are 
making make changes to their compliance management systems to 
prevent violations and reduce risks to consumers. In addition, 
because of our efforts, a number of entities have self-
identified violations and are providing restitution to even 
more 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. This important rule requires mortgage 
lenders to make a good-faith, reasonable determination that 
borrowers can actually afford to pay back their loans.
    We also enacted the mortgage servicing rule, which is 
designed to clean up sloppy practices and ensure fairer 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 Consumer Bureau 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 of the rules, created and 
posted video guidance, and met with major market players and 
the full range of industry stakeholders, including the vendors 
who serve many of our smaller institutions. 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 also have coordinated with other 
regulators to ensure we all have a shared understanding to 
promote consistent supervision of compliance with these rules.
    While we work in 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 decisionmaking, so we are 
providing consumers with useful tools, including the AskCFPB 
section of our Web site, where we have developed answers to 
more than 1,000 frequently asked consumer questions. We 
encourage you to send your constituents to ConsumerFinance.gov 
to get the benefit of this expert, 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 has 
strengthened its Office of Consumer Response, and we have now 
received more than 230,000 consumer complaints on mortgages, 
credit cards, student loans, auto loans, bank accounts, credit 
reporting, debt collection, and money transfers.
    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 in Miami on student loan 
debt, it became clear that there are many troubling 
similarities to the mortgage market before the 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 closely monitor this market 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 has also been thanks to the cooperation of 
those we regulate, and we attempt to remain considerate of the 
obstacles 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 
but also help responsible businesses compete on an evenhanded 
basis and reinforce the stability of our economy as a whole.
    Thank you for the invitation to appear before you today. As 
always, we welcome your oversight, and I am glad to have the 
opportunity to hear and address your concerns. Thank you.
    Chairman Johnson. Thank you for your testimony.
    As we begin questions, I will ask the clerk to put 5 
minutes on the clock for each Member.
    Director Cordray, the CFPB recently changes its QM rule to 
permit small lenders to make balloon payment QM loans 
regardless of geographic location until 2016. After 2016, the 
CFPB will only permit small lenders in rural or underserved 
areas to make balloon QM loans.
    While I am encouraged by the new transition period, I am 
concerned about how small lenders will be impacted in rural 
States like South Dakota. What process will the CFPB use to 
determine how to define a rural area?
    Mr. Cordray. Thank you, Mr. Chairman, and this is one of 
the issues on which we got a lot of early feedback from the 
field from smaller institutions, both community banks and 
credit unions who lend in rural areas. We were attempting to 
implement rules that were proposed by the Federal Reserve, 
which came to us to finalize. We determined that the definition 
of ``rural'' as it originally was proposed was too narrow, and 
we broadened it substantially. We pretty much quintupled the 
percentage of the population that would be covered by the rural 
exception from 2.2 percent in the original proposal to, I 
think, 9.7 percent in our proposal.
    Over time, we heard from folks that it was still viewed by 
them as too narrow, and I saw maps of different counties and 
different States, your State and that of Ranking Member Crapo's 
and a number of others, my own State of Ohio, Senator Brown's 
State, and I agreed upon seeing that that we had drawn the 
definition too narrowly.
    So we bumped that back for 2 years. Nobody has to worry 
about any of that until January of 2016. In the meantime, we 
made a commitment to go back and reconsider how we had drawn 
rural in terms of being the Department of Agriculture's Urban 
Influence Code, particularly micropolitan counties which are 
rural but around a metropolitan county. And we will look at 
that carefully, take a lot of input before resolving it. But 
the last thing we are looking to do is upset the kind of 
lending that goes on in rural areas that is pretty critical to 
many of the small towns, and communities across the country.
    Chairman Johnson. Well, I know that you have engaged in 
outreach to lenders before and after the CFPB's mortgage rules 
were published. I want to make sure that small lenders are not 
adversely impacted by these rules taking effect in January. Can 
you describe whether you think lenders will be compliant by the 
January date and how the Bureau will examine for compliance?
    Mr. Cordray. It is a very fair question. There were a lot 
of rules that Congress directed us to write. They gave us a 
fast timeframe. We had to have them in place by January of 
2013. Notably, if we had failed to do so, the Dodd-Frank Act 
Title 14 would have taken effect of its own force, and people 
would have had to have lived under those laws already for the 
last 10 months.
    By enacting our rules, we backed that process up by a year. 
We have stayed close to the industry over the course of this 
year to understand any kind of practical, operational, or 
interpretive problems that we are running into in implementing 
the rules. It is our clear sense from lots of discussions and 
ongoing input that the vast majority of institutions will be in 
substantial compliance with the rules by January 10th. That is 
both large and small institutions. With the small institutions, 
many of them rely on vendors, and we have been in very close 
contact with the vendors to make sure they are going to be 
ready.
    The other thing we did that was notable for the QM rule, 
maybe the most important of these rules, we added an additional 
element that took effect in May which exempted institutions 
that make loans with less than $2 billion in assets, fewer than 
500 mortgages a year, which is the vast majority of community 
banks and credit unions, that if they keep those loans in their 
portfolio, as many of them do, those will all be qualified 
mortgages. So if they keep them in portfolio or if they sell 
them in the secondary market to the GSEs, which is also a 
common thing for them to do, they are in compliance. And that 
was done specifically listening to them and understanding that 
we needed to do more to relieve burden from small institutions.
    So we attempted to tailor our rules. We have also indicated 
that in the early months we do not expect perfection, and we 
have talked with the fellow regulators who are in agreement on 
this point, that we are looking for good-faith compliance, 
good-faith efforts to come into substantial compliance by that 
date.
    Chairman Johnson. The Bureau's consumer complaint database 
has been up for a year. Can you describe what safeguards have 
been put in place to make sure that the data is reliable? How 
do you envision it being used going forward?
    Mr. Cordray. So we have iterated that process a number of 
times, had a lot of input from industry and the public alike. I 
think some of the concerns about the database in the early 
going were valid. When you have a small amount of information, 
it is not clear that it is reflective or representative of what 
is going on in the country.
    When you get to having a larger amount, it is kind of like 
having pixels on a TV screen. The more of them there are, the 
more into focus the picture becomes. We have now received more 
than 230,000 complaints, and the picture is coming into much 
sharper focus.
    We continue to improve the system for verifying the 
relationship between the business organization and the consumer 
who is complaining. We do not put things into the database 
until they have moved through the entire process, and we have 
had give-and-take with the institution. And I think we continue 
to try to be responsive to the sort of concerns people have 
raised, while understanding the important function that this 
serves. Every business ought to play close attention to the 
complaints their customers bring to them. Good businesses do, 
and we are seeing more and more reaction in the market where 
more emphasis is being put on that. And, therefore, strong 
customer service, strong customer retention, that is a very 
good thing, and we are encouraging that and promoting it.
    Chairman Johnson. Senator Crapo.
    Senator Crapo. Thank you, Mr. Chairman. And, Director 
Cordray, thank you for appearing here before us today.
    It is probably not going to surprise you that the first 
issue I want to get into is big data. Director Cordray, how 
many individual credit card accounts is the Bureau monitoring 
using its supervisory authority on a monthly basis?
    Mr. Cordray. So I have been asked this question a number of 
times and I have said a number of times that that is not the 
way in which we proceed. We are not looking to monitor 
individual consumers' credit card accounts. We have no interest 
in what individuals like you and I are spending or what our 
habits or patterns are. What we are trying to do is monitor the 
practices of large institutions, how they treat things like 
late fees, interest rate changes, and so forth for their 
customers. And so we are looking at it from the standpoint of 
monitoring large institutions, not individual consumers.
    Senator Crapo. Well, I understand, and I know you have 
answered it that way many times.
    Mr. Cordray. Yes.
    Senator Crapo. But isn't it correct that the Bureau has a 
contract with a data aggregator and that you collect data from, 
I think, up to nine financial institutions and that, as I 
understand it, under your contract you require the financial 
institutions to submit close to 100 data fields for each credit 
card that you are monitoring, account that you are monitoring 
every month? Is that not correct?
    Mr. Cordray. That is roughly correct, but what I would say 
is this is not something new that we are doing that does not 
exist previously. We are simply accessing the very same set of 
information that has been developed privately by the private 
market, that has been utilized by fellow regulators, and we are 
not--when you say ``100 fields,'' that is not something new or 
different. We have not added a large number of additional 
fields. We are simply drawing on existing information.
    Senator Crapo. Well, as I have gotten into this, I have 
realized that there actually are other Federal regulators 
seeking access to the same information, and I understand that. 
That does not necessarily make it OK. The Bureau, as I 
understand it, has set a goal of monitoring 80 percent of the 
U.S. credit card market. Just extrapolating from that, using 
the U.S. Census Bureau data, that goal would represent about 
900 million credit card accounts. Is that an accurate 
reflection of the Bureau's goal and their activities in terms 
of reviewing credit card account activity?
    Mr. Cordray. Again, the Bureau is not about reviewing any 
number----
    Senator Crapo. I understand that point.
    Mr. Cordray.----of individual consumer accounts. What we 
are doing instead is illustrated by what we just did a month 
ago. Congress required us to do a report on the credit card 
industry and the credit card market to examine how the CARD Act 
has affected that market and to be able to report to you, you 
as a Member of Congress----
    Senator Crapo. I understand your----
    Mr. Cordray.----on how you can make policy around this and 
how you did with the CARD Act. We cannot do that without data.
    Senator Crapo. I understand that, and I understand that you 
want to focus it on the institutions and the market. But the 
fact is that you are collecting data on individual credit card 
accounts. Is that not correct?
    Mr. Cordray. We do not have any different data than 
industry has itself----
    Senator Crapo. I understand that.
    Mr. Cordray.----and the fellow regulators have. There is 
nothing new or different about this----
    Senator Crapo. And would the number of accounts be 
approximately 900 million credit card accounts?
    Mr. Cordray. I do not know what the number of the account 
is, and, again, that is not our focus. It is to oversee the 
number of credit card issuers, not----
    Senator Crapo. I understand----
    Mr. Cordray.----monitor the behavior of individual----
    Senator Crapo. I understand your stated purpose, but the 
point is that to in order to achieve the purpose you describe, 
you are collecting individualized information on, as we 
calculate it, about 900 million accounts. I just want you to 
acknowledge whether that is correct.
    Mr. Cordray. What I want to say to you is we are not doing 
anything new. The notion----
    Senator Crapo. I understand that.
    Mr. Cordray.----that we are coming up with some brand new 
database or some brand-new data or it is somehow different in 
kind, it is not.
    Senator Crapo. Would it be incorrect, though, to say that 
the nine institutions who you have providing information to you 
are providing to you on a monthly basis about 100 data points 
on every credit card account that they manage?
    Mr. Cordray. Again, it would be accurate to say that what 
we are getting is the same thing that fellow regulators have 
gotten, and it is the same thing that industry itself is using 
to oversee the credit card----
    Senator Crapo. I take your answer to be that that is 
accurate and that other institutions and private sector 
entities are doing the same thing. Is that your answer?
    Mr. Cordray. I do not dispute--I do not dispute what you 
are saying, but I think it is important to understand, again, 
this is not about monitoring individual consumer behavior. I do 
not care about any individual, and we are not tracking 
anybody's credit card spending of any sort. What we are trying 
to do is, if I am going to oversee the largest financial 
institutions in this country and be able to take enforcement 
actions as we have done against a number of credit card 
issuers, we have to know what they are doing; we have to know 
what the effect is on the market; we have to know whether laws 
are being complied with.
    I make no apologies. We need the data to do that, and we 
cannot do it without the data, nor could we report to you on 
what is happening in the credit card market so that you could 
consider whether you want to make adjustments in the CARD Act 
or not.
    Senator Crapo. Well, Director, I understand that, and I 
know you have given that answer multiple times. But I just want 
you to state directly to us what--as you collect this data, 
what the extent of individual account data it is that you are 
collecting. Is my description of it inaccurate?
    Mr. Cordray. We are collecting, as I said, the same data 
that has already been collected----
    Senator Crapo. I understand.
    Mr. Cordray.----by fellow regulators. Nothing new or 
different about that, and the reach----
    Senator Crapo. But I did not ask who else was collecting 
it.
    Mr. Cordray. The reach of it is such to give us confidence 
that we can oversee the credit card market, know what the 
patterns of treatment are by financial institutions to 
consumers, and protect consumers if, in fact, somebody is 
violating the law or harming----
    Senator Crapo. Well, Director, I take your answer to be 
that I did correctly describe it. Thank you.
    Chairman Johnson. Senator Reed.
    Senator Reed. Well, thank you very much, Mr. Chairman.
    You mentioned in your opening statement, Director, the 
efforts you have undertaken to protect American servicemembers, 
and I think the day after Veterans Day that is an important 
thing to do. I want to particularly commend Holly Petraeus and 
her work.
    One of the issues is the Military Lending Act, and the 
Department of Defense has the authority to prescribe the 
regulations, but you are working with them. Can you sort of 
give us an idea of how you and Holly Petraeus are working with 
the Department of Defense to provide even more protection to 
servicemembers?
    Mr. Cordray. Yes, Senator, thank you for the question. What 
we are trying to do is faithfully implement the changes in the 
law that you all brought about in December of last year, which 
reopen and allow updating of the Military Lending Act 
regulations so that we can more broadly cover protections for 
servicemembers on the use of consumer credit.
    We have been hard at work. There has been a drafting team. 
It is not limited to the Department of Defense and the CFPB. 
The representatives of all the major financial agencies, 
including the FTC and the Treasury Department, they have done 
exceptional work. We are close to having a proposal to go out 
for public comment. There is a process of submitting that 
product to OMB for initial review before that happens. But we 
are on track, on target, and it is, I think, going to be the 
kind of work that you expected and intended when you reopened 
the Military Lending Act last year, and we are grateful for 
that, and we have learned a lot from this process.
    Senator Reed. Thank you. Just for the benefit, what we are 
essentially trying to do is protect servicemembers from 
interest rates on credit products that are above 36 percent. So 
it seems to me a very reasonable effort to make sure that that 
protection is broad and not narrow. The 36 percent interest 
rate, we are not talking about something that is sort of 
competitive with some of the rates the large institutions get 
daily.
    Let me turn to another issue, and that is, there is 
obviously a growing concern with accumulating student debt. A 
recent survey of the National Association of Realtors suggested 
that 49 percent of the respondents said that the biggest hurdle 
to home ownership is not a downpayment or anything else. It is 
that they have this student debt that they will not be able to 
resolve, about $1.2 trillion.
    What are you doing with respect to student debt to help 
people, one, cope with it and, two, avoid it and, three, 
perhaps even refinance it?
    Mr. Cordray. This is a pretty important issue for the 
future of this country, and we have been among a number of 
officials, agencies, what have you, who have been trying to 
call attention and increasingly, I think, gaining visibility 
with how the student loan debt problem, which now, as you say, 
exceeds--I think it exceeds $1.2 trillion--is affecting the 
economy in this country. It has a domino effect, as I indicated 
in my written testimony, on the housing market, people's 
ability to move into the housing market, especially some of our 
college graduates who you would expect would be some of the 
folks who would be in a better position to do that, to form 
small businesses, and to participate meaningfully in the 
economy, household formation and the like. We are seeing that 
they are having a hard time entering into those pursuits, and 
it is because of the overhang of student loan debt.
    We have been at work, as I think you know, and I talked 
previously about our efforts to bring more transparency and 
greater understanding to the student debt choices that people 
make when they go to college and then helping people manage the 
choices they have already made. They do not get to make them 
over again, and they have an overhang of student loan debt, 
understanding their repayment options, their rights, 
understanding how, if they are trying to pay that debt down 
faster, they can make sure that it is being allocated properly 
and servicers are not misallocating it for whatever other 
purposes, sometimes self-serving. And these are ongoing efforts 
of ours, including the proposal now that we would supervise and 
examine student loan servicers in that market.
    Again, very important work that we are doing with the 
Department of Education, to some degree with the Department of 
Treasury, and others to get a handle on this problem.
    Senator Reed. Thank you, Mr. Director.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Corker.
    Senator Corker. Thank you, Mr. Chairman, and Mr. Director, 
thank you for coming in for your fourth report.
    Back to Senator Crapo's questions, the materials that are 
coming in do not have any individual's name on them. Is that 
correct?
    Mr. Cordray. That is correct.
    Senator Corker. So it is a compilation of all the credit 
card activity within an institution with certain 
characteristics, but does not identify that by individual?
    Mr. Cordray. Yes, I think that the phrases that I 
understand are ``anonymized,'' ``de-identified.'' They help us 
to establish patterns of how institutions are treating their 
customers. They are not about how any individual customer 
decides how to use their credit cards.
    Senator Corker. I want to go to some practices that are 
internally happening. The Bipartisan Policy Center has done 
some reports on the consumer agency, and I think you all got 
very high marks on QM rulemaking. I think most people felt like 
you all really went through a process that was open, you got a 
lot of input, and to my knowledge, most people are very happy 
with that process. Dodd-Frank also, though, made you do that. I 
mean, it was part of the law that you had to go through that 
process.
    There has been some criticism--and I am sure you have read 
it in the Bipartisan Policy Center report--that says we are not 
doing that on other things. You were made to do it on one. On 
the other processes, it is not occurring. And, look, I think 
all of us want the same thing, that is, we want good practices 
out there. But I wondered if you wanted to publicly respond to 
the report on that issue.
    Mr. Cordray. I would, and what I would say is several 
things. I think in general what the Bipartisan Policy Center 
said, that where you engage in a process that involves more 
openness and broader input, it tends to be a better process. 
You learn more, and you come away with better rules. That has 
been the process we have very consistently and broadly followed 
on every one of our rulemakings, including our remittance rules 
where we actually went back and re-did it to fix some problems 
that were identified and pointed out to us, on all of our 
mortgage rules not just the QM rule.
    We also have, in other areas where we were not obliged to 
do so, gone out and sought significant public input. For 
example, we are going to be moving forward with debt collection 
rules. We are starting with a request for public information, 
which is a broad gathering of information before we get 
started, and we have done that in other areas such as with 
prepaid cards and the like. So we----
    Senator Corker. If I could, since there is just 5 minutes, 
they cite examples, though, where that is not happening. I 
guess I would just like for you, since we are doing oversight, 
to respond that you plan to do that on all processes, not just 
the few that you are referring to right now.
    Mr. Cordray. So where I was going was on rulemakings I 
think we have been very open and accessible. In a lot of other 
areas where we are not required to do so, we have made a point 
to be open and accessible. There are times when we have issued 
bulletins. Those are not the same as rulemakings. They are not 
trying to change the law or figure out how the law should be 
modified or improved. They are simply restatements of existing 
law, and they are not themselves making--they are just 
clarifying or restating.
    For example, one of the items that I think was criticized 
was a Fair Lending Bulletin we put out last year where we were 
simply joining with our fellow regulators who had stated their 
point of view on this aspect of fair lending law 15 years 
before and had consistently adhered to it since, as has the 
Justice Department. As a new agency, it was unclear what our 
approach would be, and we clarified that we also understood the 
law the same way. That was not making some change in the law--
--
    Senator Corker. Do you think any of the concerns that were 
expressed by this bipartisan group are merited? Is there some 
work that the agency needs to do to ensure that there is a 
diverse set of views on the bulletins and other kinds of things 
that you are dealing with?
    Mr. Cordray. I do think there is some merit in what they 
said. I think some of it was overstated in one direction, but I 
think it is something that it is important for us to think 
about and respond to not just verbally at a hearing but think 
about it in our work. For example, auto lending is an area that 
is of considerable sensitivity, it appears, and we have now 
scheduled and are going to be holding a public forum on auto 
lending actually later this week in order to make sure that we 
are engaging with the key stakeholders in that area. And I 
think that is an area where I would agree with some of the 
criticism, like to have a little more openness and 
transparency, and we are going to provide that.
    Senator Corker. Thank you. I think there was another 
comment made about just the staff professionalism. I know you 
are gearing up. I know a lot of the regulators have been around 
a long time. You have not. But one of the concerns has been 
just their ability to get back in a timely fashion like the 
other regulators are when there are questions out there. I 
think some of the entities want to know what the response is 
going to be on the report. And I know, again, I assume that you 
are building toward that over time. Is that correct?
    Mr. Cordray. We are. What has hampered us in the early 
going is, first of all, we were not staffed up. We are still 
only about 80 percent of where we intend to be on supervision 
personnel. That hampered us in the early going.
    The other thing was we had a tradeoff we had to make a 
decision about. Did we want speed or did we want quality and 
consistency? And we opted for quality and consistency, somewhat 
at the expense of speed. We had to make a choice. I believe an 
industry will be finding--I think they are already finding that 
we are now accomplishing both more readily, but I think a year 
from now they will see even more progress than they have seen 
in the last few months.
    Senator Corker. And if I could just one more--thank you for 
those, and I hope you will get back with us even before the 
next report on those issues.
    Mr. Cordray. OK.
    Senator Corker. QM, basically you have laid out the outer 
limits on what consumers should be expected to pay back, and 
anybody who is outside that limit could be subject to a 
lawsuit. I mean, that is what you did per your QM rulings. Do 
you think it makes sense within this body that is now looking 
at housing finance reform to use those same kinds of criteria 
as the outer limits as it relates to making loans? Because it 
makes no sense for a Federal agency to be involved in backing 
loans that you have already said are the outer limits of what a 
consumer ought to be acknowledged to be able to pay back. Would 
that be a fair way of looking at what we are doing?
    Mr. Cordray. It may be. I want to tread carefully here 
because, as you describe, as I understood your question, we are 
getting into areas that are really more subject to the Federal 
Housing Finance Administration and increasingly, I think, this 
Congress, as you are trying to figure out GSE reform, and I see 
progress being made there. I do not want to opine on things 
that go outside my lane. But what I would simply say is, you 
know, in response to the congressional framework laid down in 
the statute, there is a qualified mortgage space, and there are 
others that are not qualified mortgages, but many of which are 
very responsible loans and should be made and have been made in 
the past and performed well, particularly for smaller 
institutions. That is why we gave them a broad exemption and 
provision in the QM rule.
    So it is a somewhat more complicated subject, and I would 
not feel that comfortable being seen as the expert in that area 
when we get into housing finance administration matters.
    Chairman Johnson. Senator Brown. Brown came first.
    Senator Brown. I agree, Mr. Chairman. Thank you.
    [Laughter.]
    Senator Brown. Director Cordray, good to see you again. 
Thank you for being here. I think this is your first time 
testifying as a confirmed Director.
    Mr. Cordray. It is. It does not feel much different, 
frankly.
    Senator Brown. A little different.
    I want to thank Senator Crapo, our Ranking Member, for 
mentioning the legislation that I have been working on with 
Senator Moran, and also Chairman Johnson for his cosponsorship. 
The CFPB has explored making this change as part of its notice 
and request for information on streamlining inherited 
regulations. How much of this change can be done by regulation 
versus legislation? And are you supportive of Congress moving 
on the legislation in this area? And do you look at the Senate 
bill as providing the adequate protection for consumers that we 
think it does?
    Mr. Cordray. So as I indicated, we have been looking at the 
privacy notices issue, and it was one of the things identified 
in our streamlining initiative, and we have also indicated that 
we plan to move forward with rulemaking on that issue in the 
fairly near future.
    Can we do all of the things that Congress could do in that 
area? Not necessarily. I think we can do quite a bit of it. But 
certainly if Congress acts in the area, we will faithfully 
implement what Congress does. It reminds me a little bit of the 
ATM sticker issue which came up over the last couple years. We 
were fully prepared to move forward with a rulemaking on that. 
Congress ended up legislating on the issue last year, resolved 
it. We implemented that by rule. If that happens here, that is 
certainly fine by us. But if it does not happen, if there is 
not congressional action, we do plan to move ahead on that.
    Senator Brown. And the Senate bill does provide the 
protections that you have called for?
    Mr. Cordray. We have not fully--since we are at the 
beginning of a potential rulemaking, we have not fully defined 
exactly what our approach would be, but my sense is that we are 
moving in roughly the same direction, yes.
    Senator Brown. OK. Thank you.
    I held a hearing in July with our Subcommittee examining 
debt collection, at which Corey Stone from your shop testified. 
Last week, the CFPB released an Advance Notice of Proposed 
Rulemaking on reforms to the Fair Debt Collection Practices 
Act. The American Banker quoted one collection executive 
saying, ``It is just unpleasant and sad that we need this, but 
I can fully appreciate where the CFPB is headed.''
    What are your views on the issues in debt collection that 
need to be addressed, including one area that Senator Reed 
mentioned on student loan debt collection?
    Mr. Cordray. So, Senator, good question. We are obviously 
actively now involved in this area and have been in other 
aspects of the Bureau, both supervision and enforcement as 
well. I think the debt collection market is similar to a number 
of other markets, not necessarily all, in that you have a 
number of players that are responsible in trying to comply with 
the law, and they feel undercut by the fact that there are 
other participants in the market who do not have the same 
scruples or the same focus on compliance and may feel that they 
get an advantage by being able to break the law and get away 
with it. That is not something that we regard with much 
admiration at the Consumer Bureau.
    In the debt collection area, there are a couple of major 
concerns that we identified in our Advance Notice of Proposed 
Rulemaking. One is accuracy of information that is accompanying 
these debts as they float around in the market. They may get 
contracted out to a third-party debt collector. They may get 
actually sold to someone who buys them and then goes to collect 
on them.
    If the information is not accurate, if a consumer is being 
pursued for a debt that they do not owe or a debt that they may 
have paid or that they may be validly disputing and is not 
recognized by the collector or the debt buyer, that is a big 
problem. And those things are getting reported on peoples' 
credit reports and potentially interfering with them accessing 
credit for mortgages, auto loans, and the like.
    A second issue is just the way people are treated when they 
are being pursued on their debts. People should pay their 
debts. I will be the first one to acknowledge that, and that is 
important. We have 30 million people coming out of the 
financial crisis who have debts in collection, an average of 
about $1,400 apiece. Just because people owe money and they are 
in difficult circumstances does not mean they should not be 
treated with dignity and respect. There are laws in place that 
may not be entirely adequate to ensuring that that occurs, and 
we are going to review that and consider that as we go. And I 
think it is a fundamental American principle that people 
deserve to be treated with respect regardless of their economic 
circumstances.
    Senator Brown. Thank you. Thank you, Director.
    Chairman Johnson. Senator Coburn.
    Senator Coburn. Thank you, Director Cordray, for being 
here. You mentioned student debt. As you have looked at the 
student debt problem, have you collected any data on the amount 
of student debt that has been incurred that does not have 
anything to do with education? In other words, it does not have 
anything to do with tuition, housing, food, sustenance, and 
books? And would you comment on that?
    Mr. Cordray. Good question, Senator. We do not have really 
any way to parse out exactly the way in which student loan debt 
is used by the student. We did have a field hearing in Miami 
earlier this year at which there was some testimony that 
indicated that there is a problem out there, that there are 
certain students who feel a lot of pressure from their families 
to maximize the amount of student loan money they can get 
because it may be necessary to support their families. It is 
not necessarily a wrong decision for that family in those 
circumstances, but we have had some concern all along that some 
students may be borrowing more than they need for various 
reasons. Sometimes they are encouraged and it is pushed on them 
to do so. Sometimes they may just be making a decision that may 
or may not be a good one. But it is--I do not know exactly how 
to collect data on that other than maybe surveys, but it is a 
question that would interest us a great deal.
    Senator Coburn. It is an important area because it may mean 
that we need to maybe modify some of the student debt 
parameters and restrict its use somewhat, because my 
information has a large portion of this comes from lack of 
responsibility, it is available so I will take it, and then 
they are not good stewards of the money that they borrow.
    Mr. Cordray. That is possible. There is also an issue of--
there is a certain amount of education debt being incurred that 
is not student loans, and it is hard to measure what the total 
magnitude of this problem is. A lot of people are putting 
education debt on credit cards or they are putting it on home 
equity lines of credit. So I think the student loan financing 
problem is even bigger than $1.2 trillion.
    Senator Coburn. On the QM rule, your statements in terms of 
the response, the rule beyond January, good-faith efforts with 
the law in early months, and the vast majority of people are 
not having a problem with your rule. Can you define for me what 
a good-faith effort--what you all are going to determine to be 
a good-faith effort, and what does ``early months'' mean?
    Mr. Cordray. So good-faith effort here means the same thing 
it pretty much does in most supervision, which is we are 
looking for entities to have taken the responsibility 
seriously, that they have compliance management systems in 
place so that this is something that is brought to the 
attention of the leadership and the board, that there is 
monitoring in place around it. That does not mean that every 
detail will be perfect at the level of execution at the line 
level, but that they have made, you know, real efforts to put 
in place the rules, to put in place the systems to monitor 
themselves for compliance with the rules, and we expect them to 
be substantially in compliance, but we are not going to be 
playing a game of ``gotcha'' with people in the early months 
where they are still perhaps doing some training or 
implementing what their vendors have given them.
    Senator Coburn. Yes, there are some problems with software 
for these people that are above $2 billion and 500 mortgages. 
They are having trouble with their vendors saying they are 
going to have this in. And so getting a clarification of what 
does ``early months'' mean, does that mean June? Or does that 
mean February? What does that mean for these people?
    Mr. Cordray. So I have not defined it at this point. You 
know, the effective date in January 10th, so we could have 
simply left it at that. By indicating how we intend to approach 
this and fellow regulators I had discussions with are going to 
approach supervision in the early months, that is what we have 
said. I am not trying to pin it on a calendar here, and I would 
be kind of reluctant to do that here. But ``early months'' 
would mean, you know, the early months, several months after 
January 10th.
    Senator Coburn. Can you explain for the Committee why your 
new headquarters cost $95 million, almost twice what it was 
estimated? You had a contract for architecture of $7.2 million, 
and what we are spending on your building alone is almost the 
entire GSA--what it spent in the entire rest of the country. 
Can you tell me why we needed a $95 million building?
    Mr. Cordray. So I think I can clear up a few points there. 
We never estimated that that renovation of that building--
which, by the way, we do not own, and I would rather not spend 
a penny on it, but it has systems that have outlived their 
useful life, including key systems like HVAC and electrical 
that apparently have to be brought up to snuff.
    The $55 million figure was not an estimate of what that 
would cost, but it was an initial budget number for the first 
year of what we saw as a multi-year project. And we do not yet 
know exactly what it will cost because there are still some 
processes unfolding, such as what our restrictions are for 
historic preservation, whether we can build on a seventh floor 
or not, and other things.
    It has been a frustrating process for me. It has taken 
longer to get to understanding it than I would have liked. We 
still do not have some of the decisions that have to be made by 
others made. As I said, it is not going to be our building. It 
is not like we are building some palace for the CFPB over the 
long term.
    Senator Coburn. I understand. I would just note for the 
record that the average--the $316 per square foot average, the 
$150 per Class AAA in this town, it is twice what it costs to 
renovate other buildings in this town. I will drop that, and I 
have one other question if I might go on.
    Mr. Cordray. I would be happy to have our staff talk to 
your staff.
    Senator Coburn. I will be happy to work with you on that.
    Mr. Cordray. Yes, OK.
    Senator Coburn. The other question I have for you, the 
employees that you have hired on average cost $42,000 more than 
the average Federal employee with benefits. Please explain that 
to me.
    Mr. Cordray. We are following the law, Senator. The law 
requires us in Dodd-Frank to pay salaries and benefits that are 
comparable to those of the Federal Reserve and, by extension, 
the other FIRREA agencies. That is what we are required to do. 
We would be out of compliance with the law if we did not do 
that, and the last I checked and understood, we were about 1 
percent different from the average Federal Reserve salary. So I 
think we are doing a pretty good job of being in compliance 
with the law.
    The banking agency pay scale is higher than that for the 
general Government. That has been true for a long time. I think 
the thinking there, as I understand it--I was not around when 
that was created, but if you are going to regulate the largest, 
most powerful financial institutions in the world, even though 
you cannot keep up with their salaries, you need to be at least 
roughly able to hire people who can appropriately monitor their 
operations. We have lost people to some of them who have had 
their salaries tripled, but for the most part, this is a system 
that is working pretty well for us and the other regulators, 
and we are simply complying with the law on this.
    Senator Coburn. I would note for the record it is $172,770 
per employee.
    Mr. Cordray. That is not salary. That is salary and 
benefits combined.
    Chairman Johnson. Senator Menendez.
    Senator Menendez. Well, thank you, Mr. Chairman. And, you 
know, one of my concerns when we were doing Dodd-Frank was that 
the marketplace had gotten ahead of where the regulators were, 
and I say ``the regulators'' broadly defined. And the 
intellectual and other fire power of the regulators, while 
good, could not meet the challenges of the private marketplace 
that was way out there in both developing instruments and a 
whole host of circumstances which really in some cases, from my 
perspective, ran circles around the regulators. So I think it 
is important to have a staff that can actually go toe to toe 
with the universe.
    In that respect, Director Cordray, there are four 
economists--one from the University of Chicago, NYU, OCC, the 
National University of Singapore--that recently released an 
independent valuation of reforms under the Credit CARD Act, 
something that I strongly supported, many of the elements which 
I authored. And looking at the data from over 150 million 
accounts, the study found some huge benefits, estimating that 
the reforms are saving consumers almost $21 billion per year--
$21 billion per year. I was listening to the amounts that my 
colleague was raising with you. Well, this is $21 billion--this 
is just one area, $21 billion a year of savings. The average 
consumer's borrowing costs have been reduced by an annualized 
2.8 percent of average daily balances. And some of the people 
with the lowest FICO scores saw declines of more than 10 
percent. And yet the study also found that consumers' access to 
credit has not been reduced.
    So given the success--and I believe you have released your 
own--the Bureau has released its own report on the act and 
found similar successes. Given the success of the Credit CARD 
Act reforms, what lessons can the Bureau draw for its work to 
protect consumers and improve transparency as it relates to 
both credit cards and other consumer financial products?
    Mr. Cordray. Thank you, Senator, and I thank the entire 
Congress for the work that they did on the CARD Act, which, as 
our report to Congress mandated by Congress just showed on 
October 1st, has been largely successful at addressing the kind 
of concerns people set out to address in the CARD Act. So when 
you all legislate, you do not always know whether you got it 
right, whether you solved the problems, what the effect will be 
in the market. Now 4 years on, we were able to assess that, and 
it was fascinating because, as you say, you cited one, there 
were two other studies that came out around the same time, all 
with a very similar message.
    So to me, among the lessons are, number one, when there are 
problems and concerns about how consumers are being treated in 
a market, substantive changes in the law can actually address 
and eliminate or reduce problems to a considerable degree, such 
as universal default and the way late payment fees were 
calculated and timed and the way rates were adjusting. A lot of 
that, as you say, has saved consumers an awful lot of money.
    The other thing is often when we go to change the rules or 
change the law in a financial area to protect consumers, we are 
met with the criticism, well, it is going to dry up access to 
credit, nobody will lend if they have to actually protect 
consumers, like that is some horrible unmentionable, you know, 
impossible to understand objective.
    In this case, what we were able to determine was that the 
access to credit issues were limited. To the extent there was 
some constriction in the access to credit that can be parceled 
out from the effects of the financial crisis, which itself 
caused significant restrictions on access to credit, they were 
in terms of product lines that were not being utilized by 
consumers. There is still plenty of unused product line, but 
some of that was cut back in that regard. And some of it was 
intended by the act. There were a lot of concerns about college 
students going off to college, first leaving home, having 
credit cards aggressively marketed to them and getting into 
credit where they had no apparent income to repay, and there 
was a lot of heartburn about that. I remember when I was the 
State Treasurer in Ohio hearing a great deal about that. That 
was an intended effect of the act, to slow down the marketing 
of cards to young people, and it has had that effect.
    Senator Menendez. I appreciate it. That was a pretty 
extensive answer. Let me, in the few seconds I have left, 
piggyback on that to a different card, which is prepaid credit 
cards. I had legislation last year to deal with this. I am 
going to reintroduce it again. I believe the Bureau is 
considering the possibility of regulatory actions in this 
arena, starting with a request for public comment.
    You know, this is also a very significant area where a lot 
of money gets spent and people do not know what they are 
buying. And, you know, you have all types of fees that are 
beyond what I believe are necessary. Certainly to make a 
profit, I understand why the prepaid card industry is in the 
field. But by the same token, there are all types of fees, from 
asking for your account balance to cancellation of the card and 
a whole host of other things that are above and beyond.
    So can you give us an update on the status of the Bureau's 
work in this regard relating to prepaid cards? And what is your 
anticipatory timeline so that I think about that in the context 
of my own legislation?
    Mr. Cordray. Yes, and thank you, and we have discussed your 
legislation, and I expressed my view that it is helpful in 
helping industry understand that change is coming in the area 
of prepaid cards, whether it is by regulation by the Bureau or 
by legislation. It is going to come one way or the other.
    We have issued an anticipatory Notice of Proposed 
Rulemaking indicating our commitment to engaging in regulation 
of prepaid cards. They are one of the problem areas in consumer 
financial protection because they are a hole in the current 
fabric. Debit cards are covered by the law for consumer 
protection. Credit cards are covered by the law, but prepaid 
cards are an odd and a new product and fall in the cracks. That 
is very problematic because this product has exploded in recent 
years. I have seen indications that maybe as much as $175 
billion will be loaded on to prepaid cards by the end of next 
year. So we are playing catch-up.
    But it is very important that we put in place regulations 
or legislation, either way, that make sure that consumers get 
the benefits of disclosures, that they get the benefits of 
error correction, dispute resolution, the same kinds of 
protections that they have on their credit and debit cards. And 
I think they would naturally assume they have the same thing on 
their prepaid cards, but currently they do not.
    Senator Menendez. Well, thank you, Mr. Chairman. I do not 
know if you have a quick answer here, but if not, for the 
record, maybe you could quantify for us what the Bureau has 
saved consumers through its actions in this country so we can 
look at a cost-benefit relationship.
    Mr. Cordray. I cannot do that today. I do not know the 
answer to that. I hope and expect over time there will be 
considerable benefit to consumers, and also there are 
nonquantifiable benefits like having your credit reports be 
right, not being harassed in the workplace or have you 
relatives harassed by debt collectors, other things that go to 
the dignity of individual consumers that is also important to 
them.
    Senator Menendez. Thank you, Mr. Chairman.
    Chairman Johnson. Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman, and thank you, 
Director Cordray, for joining us.
    A quick question about the database that Senator Crapo 
alluded to. My understanding is that on a couple of occasions 
the Federal Reserve Inspector General has raised some questions 
about data security and controls on this data, and I am just 
wondering, have you or do you intend to implement their 
recommendations regarding data security on this database?
    Mr. Cordray. We do, and by the way, that is not solely the 
Federal Reserve's Inspector General. It is the CFPB's Inspector 
General, and they have been very vigorous at overseeing us and 
have led to a number of recommendations that have improved our 
operations, and this is one of the areas where that is true, 
yes.
    Senator Toomey. So have you already adopted their 
recommendations or----
    Mr. Cordray. We have been working to adopt their 
recommendations to understand the bases for them and to make 
sure that we are paying the appropriate, very diligent, precise 
attention to the issues that you and Senator Crapo and others 
have raised around privacy and security of this data.
    Senator Toomey. So it is an ongoing process that is in 
the----
    Mr. Cordray. It is. It is an ongoing process. It may be 
that we have already implemented all of those recommendations 
at this point and maybe some of them take some time because 
they are more complex. We have also been looked at by outside 
auditors in this regard, and we will now be looked at by the 
GAO in response to the Ranking Member's request. We welcome 
that. If there are issues, we want to make sure we are 
addressing them, and if we are different from the other 
agencies in this regard, we will know that. But either way, we 
take this very seriously. The fact that you all raised this in 
these hearings make me take is very seriously. And I understand 
that the agency has to be getting this right, and if we do not, 
we will be undermining our mission.
    Senator Toomey. Thank you. I want to go back to something 
that Senator Corker raised, actually, and that is this 
Bipartisan Policy Center report. They stated that, and I will 
just quote a little phrase here, ``When the CFPB has used a 
closed-door process to issue guidance and has not broadly 
gathered input from stakeholders, quality has suffered.''
    I think you alluded to one case where you thought that it 
would not be fair to include it in this critical category, 
which was the issuing of a bullet in defining the practices of 
potentially unfair, deceptive, or abusive debt collection 
practices, if I follow that correctly.
    But I just wonder if you could explain that to me, because 
it seems to me that the legislation authorizes you to define 
what are those unfair and deceptive practices. You did it 
through a bulletin when it might have been done through a 
rulemaking process, or do I have that mistaken? Could you 
explain that to me?
    Mr. Cordray. Yes. So there are rulemaking processes which 
are not only most appropriate but they are legally required 
when you are changing the law in some fundamental respect or 
some respect that was not clear before. When you are restating 
or clarifying the law--and the example I used was not the one 
you used, a different one, but this is an example as well. I 
was using the Fair Lending Bulletin from last year as an 
example of simply clarifying that we adhere to the same 
position in understanding the law as fellow regulators and the 
Department of Justice.
    On debt collection, we have had a couple different 
bulletins. One was where we first enforced on the credit card 
add-ons, which has been the basis of a lot of the $750 million 
in relief we have gotten for consumers. We issued a bulletin at 
the same time which was around the issue of deceptive 
marketing. Again, you can try to define, and define that for 
individual cases, but the law is clear. It is the application 
to the facts that is the issue, and that is something that 
typically has to be done through enforcement or maybe 
supervisory action.
    In terms of the debt collection bulletin that you are 
referring to where we indicated and made it clear what we think 
was already clear in the law, but just reminding--we often say 
``reminding''--institutions that third-party debt collectors 
are covered by the Fair Debt Collection Practices Act, but 
first-party debt collectors are also covered by the--they had 
been covered by Section 5 of the FTC Act before. They now are 
covered by the Dodd-Frank Act, and they also were responsible, 
when they are collecting debts in their own right, for treating 
consumers fairly in compliance with the UDAAP processes.
    Again, we thought that was a mere restatement of the law. 
Some people may take it differently. We are going to, as 
indicated before, be undergoing a significant rulemaking 
project in the many months ahead on debt collection, which will 
clarify a lot of this further.
    Senator Toomey. Yes, I mean, it seems to me that it is not 
entirely restating existing law. You were asked to define a set 
of practices that were not defined in the law, but I hear your 
point.
    My next question actually goes to this next phase, and that 
is, to the extent that you make it more difficult or more 
costly for lenders to recover portions of bad debts, that is 
very likely to end up being reflected in higher costs or lesser 
availability of credit as a general matter, as lenders have to 
price that reality into their decisionmaking process. To what 
extent do you try to quantify that and weigh the costs to 
consumers who, in fact, pay their bills on time in full? Do you 
do a cost-benefit analysis? Do you consider that tradeoff? And 
if so, how do you quantify that cost?
    Mr. Cordray. Yes, that is something that we will be engaged 
in, in debt collection where we are going to be undertaking 
rulemaking, as we indicated. We are required in Section 1022 of 
our statute, when we undertake a rulemaking, to consider 
benefits, costs, and burdens of any proposed regulation. What 
you described in terms of how it could affect pricing if people 
feel like they are going to end up with a certain amount of 
debt they cannot collect is the kind of consideration that will 
be considered and weighed in the course of that process, yes.
    Senator Toomey. Thanks, Mr. Chairman.
    Chairman Johnson. Senator Warren.
    Senator Warren. Thank you, Mr. Chairman, Director Cordray. 
As you know, there are nearly 60 million car loans outstanding 
for a total of about $780 billion, and for many families the 
car loan is the second largest loan they have got outstanding, 
smaller than their mortgage but bigger than their student loans 
and credit card debt.
    Now, car dealers do not finance most of these loans. 
Instead, they often act as intermediaries between the buyers 
and the financial institutions. The buyer asks the dealer about 
financing, and the dealer turns around and asks the financial 
institution for a quote, and then the dealer passes the 
information back to the consumer. But too often, the dealer 
gives the consumer a higher interest rate than the financial 
institution quoted and then pockets the difference.
    One study estimated that these costs aggregate more than 
$26 billion annually. That is $26 billion straight out of the 
pockets of working families every year. Other studies have 
found that minorities are paying a higher share of those costs.
    Now, as you know, the CFPB has the authority to regulate 
nearly every kind of consumer loan, but the big exception is 
car loans. I know the CFPB has some indirect ways of getting at 
this problem, but a recent report from the Bipartisan Policy 
Center, this report that has been cited now several times, 
recommends that Congress close this loophole and give the CFPB 
the authority to make sure that car loans are on the up and up.
    So my question is: Do you think that would be good for 
consumers?
    Mr. Cordray. So I have several thoughts, Senator, in 
response to the question. I think you have laid out actually 
quite succinctly the kind of concerns we have in this area, and 
I would simply say when you say that dealers get a quote and 
they pass that information back to consumers, in fact, 
typically they do not pass that information back to consumers. 
If the dealer gets a buy rate of 4 percent that I actually 
qualify for, they are typically not telling me that. They are 
simply quoting back some other rate, 8 or 10 or 14 percent, and 
not telling me that the buy rate that I actually qualified for 
based on my creditworthiness was 4 percent. That is one of a 
number of concerns we have in this area.
    The law that we have is the law that we are working with, 
and when Dodd-Frank went through--and I was not in Washington 
at the time, did not see the fascinating events unfolding that 
led to the enactment of that law--there was apparently a 
compromise struck where auto dealers would not be subject to 
the jurisdiction of the Consumer Bureau but instead would be 
covered by the FTC. But auto lenders were very explicitly made 
subject to the jurisdiction of the Consumer Bureau.
    Our efforts here are to carry out what we understand to be 
our responsibility to monitor the practices of auto lenders 
who, if they set up a program, whether it is direct or indirect 
lending, remain responsible for the effects of that program, 
and that is what we are trying to do here.
    Senator Warren. Good. I appreciate that, Director Cordray, 
and I just want to say I think the CFPB has done great work, 
and great work in this area as best it can. But it makes no 
sense to me that there should be any exception here for 
consumers who are being tricked out of billions of dollars 
every year on car loans.
    I want to ask you about another issue, and that is, in 
September I had the opportunity to participate in two military 
and veterans roundtables in Massachusetts with Holly Petraeus, 
the head of the CFPB's Office of Servicemember Affairs. One 
major issue for veterans is a growing scam involving the VA's 
aid and attendance benefit, the benefit that helps cover the 
costs of nursing homes and in-home health aides for our 
disabled vets who do not have many resources.
    Now, from what I understand, the details of this scam are 
really grisly. A company offers to help a veteran sign up for 
the benefits. If the company determines that the veteran has 
too many assets to qualify for the benefits, it tries to hide 
some of those assets by moving them to an irrevocable trust or 
an annuity. That not only violates the spirit of the program, 
it often ends up hurting the veteran. The company generally 
charges huge fees, takes a fat cut of whatever financial 
product they end up selling to the veteran, and moves the 
assets where the vets cannot easily reach them, meaning that 
the veteran is actually in much worse financial shape than 
before the person applied for help. I understand one case where 
a veteran got set up with an annuity that would not start 
paying out until he was in his 90s.
    So can you tell me what the CFPB knows about these scam 
artists and what Congress could do to help stop them from 
preying on older veterans?
    Mr. Cordray. Thank you for that question. Assistant 
Director Petraeus has seen these issues and educated all of us 
at the Bureau about them, not just in Massachusetts, as you 
note and as you know, but all over the country. These kinds of 
efforts to prey upon what often are seniors who are also 
veterans are beyond reprehensible.
    We think that there are things that we can do as the 
Consumer Bureau, particularly working with State Attorneys 
General who have been pretty aggressive in this area, and I 
think will continue to be if we highlight issues and problems 
for them. In the State of Washington, the Attorney General took 
a very helpful action on this. So has the State of Oregon, and 
we are going to try to coordinate yet others.
    In terms of what Congress could do, I have not thought that 
issue through, but anything that you can do I think would be 
welcomed by us and by others. We want to try to stamp this out, 
and we want to make sure that people who are entitled to 
benefits, precious benefits that are not that extensive under 
the law as it is and that they have earned by serving their 
country, are not going to be stripped of those by frauds and 
scams of the kind that we see in lots of markets, but this one 
in particular.
    Senator Warren. Well, thank you very much. The aid and 
attendance benefit is a significant way that we show our 
veterans our appreciation, and these scams are turning a 
benefit into something that actually undermines the financial 
security of our older veterans. So I hope we can find, I want 
to find a way to put an end to them.
    Thank you, Mr. Chairman.
    Chairman Johnson. Senator Moran.
    Senator Moran. Mr. Chairman, thank you very much. Mr. 
Cordray, Director Cordray, thank you for being here and the 
opportunity to ask you a couple of questions.
    You are aware in regard to automobile financing a number of 
us sent a letter to you, to the Consumer Financial Protection 
Bureau. That letter was dated October 30th, and it was signed 
by, I think, 21 or 22 of us, requesting some information. You 
have responded. Thank you for your response. But I want to 
follow up and see if you can provide a broader answer and 
perhaps a more specific answer.
    What we asked in that letter was for details concerning the 
statistical methodology the Bureau employs to determine whether 
disparate impact is present in an auto creditor's portfolio, 
including the quantitative degree of accuracy that applies to 
that methodology for each group of consumers that the Bureau 
has examined. And what I know is that the borrowers do not 
self-identify, so they do not say their gender or their race, 
and you are using, the Bureau is using a proxy to determine 
those criteria. But apparently a conclusion has been reached 
that there is discrimination or disparate finance charges based 
upon those characteristics. And you describe in the letter back 
to us the nature of that analysis, but one of the things we 
asked for is the evidence that that use of the proxy is 
providing an accurate methodology to reach the conclusions that 
you are reaching.
    Has there been analysis done to demonstrate that the proxy 
is providing accurate information for which you are now basing 
decisions on?
    Mr. Cordray. Yes, thank you, Senator, and it is a somewhat 
complex area. However, several things.
    Number one, we are using an approach that is sort of time 
honored and well tested, both in social science literature and 
by the Justice Department and our fellow regulators. There was 
a Webinar earlier this summer in which our head of our fair 
lending participated with the Federal Reserve, and the proxy 
methodology that they use is very similar to ours. Ours is 
refined in a couple respects, so they are not exactly the same, 
but they are very much in harmony.
    We are going to be having, as I said, now in response to 
some of the concerns raised by you and others, an auto forum on 
Thursday in which more of this will be aired out, and the major 
players in the industry will have a chance to probe some of 
these issues with us. But, again, our proxy methodology, it is 
something that has been used not just in these kind of lending 
cases, but in a variety of other cases--employment 
discrimination cases and others--and is considered to be state-
of-the-art.
    Now, people may have their issues with state-of-the-art, 
but we are not embarking on some novel or untested or brand-new 
approach here.
    Senator Moran. Well, let me see if I understand what you 
are telling me. The approach, according to what you are saying, 
has been around a while. It is regarded, it is considered to be 
accurate. Has the Bureau done specific analysis on the data 
collected to confirm that in this case?
    Mr. Cordray. We have scrubbed the proxy methodologies that 
are used. We have refined them to some degree to include some 
elements of census tract and other things as a further 
refinement in an attempt to render more precise the data.
    I want to be a little careful about talking about what we 
have found because this is an ongoing investigatory effort 
where we are working with the Justice Department, so the order 
of the day on those things is confidentiality unless or until 
you get to the point of taking some sort of public action. And 
so I want to be a little careful about not breaching that.
    But, yes, we have looked very carefully at what we are 
doing and trying to understand prior approaches, that our 
approach is in line, that that approach is accurate and 
calibrated to the problem. And we are very much trying to do 
that, understanding that anything we do could ultimately be 
tested in court, and a court would have to have confidence in 
our methods.
    Senator Moran. I was going to critique the idea of having a 
financing seminar on Thursday, but you have already responded 
by saying it is a result of inquiries that you are doing it. I 
was going to suggest that if it perhaps were earlier----
    Mr. Cordray. If you have further suggestions, feel free to 
make them.
    Senator Moran. Earlier in the process might have made more 
sense.
    Mr. Cordray. Maybe.
    Senator Moran. But if you are giving us credit for raising 
these issues and in response you are having Thursday's program, 
you have somewhat taken the wind out of my sails. It does seem 
to me that this is the kind of conversation that should have 
taken place before this week.
    Mr. Cordray. I will just say that one of the complexities 
for us--and Senator Warren alluded to the issue--asked very 
directly about it, did not just allude to it--under our statute 
what is very clear is we do not have jurisdiction over auto 
dealers. We do have jurisdiction--and, in fact, we understand 
it to be a responsibility under the law--to monitor and oversee 
auto lenders. That is complex for us. We do not want to be 
misperceived as somehow trying to extend our reach over auto 
dealers, which Congress very carefully put on one side of the 
line. However, we do not feel that we can fail to exercise our 
duty with respect to auto lenders who are on our side of the 
line. And so some of the reaching out we might have naturally 
done has been difficult for us because we do not want to be 
greeted by, ``There they go. They think they now control auto 
dealers.'' We know that we do not. We are trying very hard to 
observe the line Congress drew. It is not a natural line, as 
Senator Warren mentioned, but it is in the law, and that is 
something we are trying to be careful about.
    Senator Moran. I appreciate that difficulty. Let me just 
point out again, I think, in this arena what Senator Toomey was 
asking, perhaps in a broader sense. The effect of a flat fee 
compensation system, I want to make certain that there will be 
analysis about the increasing costs or the increasing interest 
rates that may be charged consumers if you move to a flat fee 
financing system under the theory that, as Senator Toomey said, 
consumers will pay for those increasing costs. And I assume 
that you would confirm that that analysis is necessary to avoid 
increasing the cost so that consumers do not--while your 
efforts may be to eliminate discrimination, if fewer consumers 
can borrow money to purchase a car, we have done a lot of 
damage to consumers and to the economy.
    Mr. Cordray. I think that is a fair point. It is the same 
point that we ran up against as we wrote our mortgage rules. 
You want to impose the right protections, make sure people are 
treated fairly, and particularly you want to make sure they are 
treated in a nondiscriminatory basis. But we do not want to dry 
up access to credit, and maintaining that balance is quite 
important.
    I will say--and I think it is notable--people have been 
reacting to our fair lending bulletin on auto lending going 
back to as far as the spring and are concerned about what the 
impact may be. The auto lending market is red hot right now. We 
are selling more cars than we have in a number of years. I 
believe that will continue. We cheer that on at the Consumer 
Bureau. We understand that for a lot of people autos mean 
opportunity. It means being able to get back and forth to work 
in the suburbs and rural areas. It is a basic functional part 
of existence, being able to get around. And we understand that 
credit means opportunity for a lot of consumers if it is used 
responsibly.
    We also want to make sure that when a consumer goes in to 
get a loan to buy a car that they are not unwittingly being 
forced to pay more based on assumptions made about their racial 
or ethnic background, and I think that is a very bedrock 
American principle as well. We will be taking great care as to 
how we move forward here. But we think that there are some key 
core American principles at stake.
    Senator Moran. Mr. Cordray, thank you.
    Chairman Johnson. Senator Vitter.
    Senator Vitter. Thank you, Mr. Chair, and thank you, 
Director, for being here.
    I want to go back to a topic that several Members touched 
on, which is the massive data collection your agency is in the 
midst of, and I apologize if I repeat any questions.
    Mr. Cordray. It is all right.
    Senator Vitter. But I do think it is important, so I do 
think it merits the time, at least.
    During your April 23rd appearance before us, I believe you 
asserted clearly that CFPB is not collecting personally 
identifiable financial information about consumers. Is that 
correct or incorrect?
    Mr. Cordray. No, I do not believe that I said that, because 
that is not, in fact, correct. There are some very limited 
areas where we do have a certain amount of personally 
identifiable information which, as you know, is kind of a term 
of art under Federal law. Particularly in our consumer 
complaint function, consumers come to us and they provide 
personally identifiable information in order to make a 
complaint and have it be processed. They give us their name; 
they give us their address. They may give us their bank account 
information or Social Security number, whatever is necessary in 
order to process that complaint. And it is very important for 
us to make sure that that information is safeguarded, both from 
a security and a privacy standpoint, and we have been as 
careful as we can to do that.
    Senator Vitter. But what about other broad categories like 
information you collect about credit card transactions or 
mortgages?
    Mr. Cordray. Yes, that information is anonymized or de-
identified, as apparently an IT term of art. We are not 
interested with the credit card data--and the Ranking Member 
and I had a colloquy about this earlier, but we do not need or 
want to know what you and I or other individuals are spending 
or what our patterns of behavior are. What we are looking for 
is the kind of information that will allow us to oversee the 
financial institutions who themselves--how they are treating 
their customers. Are they complying with the law? What is the 
pattern of late fees and interest rates and those types of 
things?
    It is the same data that we use to fulfill our 
responsibility to Congress. You all mandated that we do a 
report on the state of the credit card market and the effects 
of the CARD Act. We could not----
    Senator Vitter. So is none of that--so all the data you 
collect about mortgages or credit card accounts, is none of 
that searchable by personally identifiable information?
    Mr. Cordray. My understanding is that none of that data has 
personally identifiable information and, therefore, would not 
be searchable--that is correct. That is our intention, and I 
believe that is, in fact, the case, yes.
    Senator Vitter. Well, I have looked at what appears to be 
conflicting information. Can you go and double-check that and 
report to us in the record by listing exactly what categories 
do have personally identifiable information and what other 
categories do not have personally identifiable information?
    Mr. Cordray. Yes, so as I am sure you would imagine, this 
is an issue that people worked to prepare me carefully for a 
hearing like this, knowing that it is a point of sensitivity 
for you all, and, therefore, it is a point of sensitivity for 
us. The two areas where we have some personally identifiable 
information are the consumer complaint area, where it is 
inevitable. That is what it is. It is an individual identifying 
their personal situation so that we can seek to address it. In 
the supervisory context, at times we end up with some 
personally identifiable information because, for example, if we 
are cleaning up a practice in an institution, we may need lists 
of consumers who were victimized by the practice to make sure 
that relief is going to the right individuals, that sort of 
thing. Some of that is just necessary.
    But in terms of our data collection, which is, I think, the 
focus, if I understand it, of some of the sensitivity that we 
are supposedly collecting this massive amount of credit card 
information or massive amount of mortgage information, all of 
those efforts to monitor the markets are done on an anonymous, 
de-identified basis. Again, we are not interested in, it is not 
any part of our effort to try to understand what an individual 
consumer is doing or somehow track or follow their practices. 
That is just not helpful for us. If we had personally 
identifiable information, it would only complicate our efforts 
there. It is the patterns, it is the oversight of the 
institutions that we are looking to do. It is fulfilling our 
responsibilities to report to Congress in an informed way 
rather than just shooting in the dark. That is essentially what 
we are trying to do there.
    Senator Vitter. OK. Well, again, if you could just 
supplement for the record the complete lists in each category 
just so that we know, you know, this is the exhaustive list 
where personally identifiable information exists and this is 
the exhaustive list where it does not exist, I think that would 
be very helpful.
    Mr. Cordray. I think we may have done that, but I am happy 
to have our staff work with yours or, if there are questions 
for the record here, to, again, as always, try to be as 
responsive as we can.
    Senator Vitter. OK. Thank you.
    Chairman Johnson. Senator Crapo has one more question.
    Senator Crapo. Thank you, Mr. Chairman, and I just want to 
follow up on the question that Senator Vitter just asked about 
the personally identifying information.
    Let me tell you what my understanding is, Director, and 
please help me to know if I have this understood correctly. 
There are approximately nine institutions who are required by 
the CFPB to submit information on credit card transactions. As 
I indicated to your earlier, from other answers and information 
we have estimated that that is about 900 million. I am not 
asking you to confirm that number, unless you will today. But 
as that data is collected, it is not anonymous and not de-
identified. It is the whole story. That information is then 
transmitted to a third party who you have contracted with, who 
then goes in and de-identifies it or makes it anonymous before 
they transmit it to the agency. And they create a personal 
identifier for each one of those accounts that is not--it is a 
number. It is not a name of a person. Am I correct so far?
    Mr. Cordray. I believe that may be correct, but understand 
that none of that is new. If you are talking about Argus, which 
is----
    Senator Crapo. Yes.
    Mr. Cordray.----which is a private firm that collected this 
information for credit card companies themselves and also has 
collected it for other regulators, again, the point is no 
information that arrives at our agency is personally 
identifiable. It is anonymized. It is de-identified. All of 
what happens before anything comes to our agency has been 
happening for quite some time, and we are simply contracting 
for the very same processes that have been used again and again 
by other regulators and are used by the industry themselves.
    Senator Crapo. I understand that, and actually, as I said 
earlier when we talked about this, I am quite concerned to find 
out that you are not the only ones doing this. But the fact 
that you are collecting the full data set, you are then having 
it de-identified, means that someone could go in and then re-
identify. And the question is not so much about your motives, 
Director. I fully trust your motives. But as we recently saw 
with the Internal Revenue Service problem and with the other 
problems that other agencies that collect this kind of data on 
Americans are running into, we do not always have that kind of 
absolutely airtight security and protection about the data. 
And, in fact, an agency director could someday decide that he 
or she wanted to use that data on a personal basis. That is why 
we wrote it into the statute to prohibit it.
    And so my concern is that even though you have--and I 
appreciate it--contracted with Argus to de-identify this data, 
the fact is you have the data--or you have given it to Argus, 
and Argus is your agent.
    Mr. Cordray. The credit card companies have given it to 
Argus. It does not pass through us.
    Senator Crapo. But they have given it to Argus under an 
order from the CFPB.
    Mr. Cordray. They give it to Argus all the time. They have 
done it for other fellow regulators. They do it for the credit 
card companies themselves.
    Senator Crapo. Now they are doing it for a legal mandate. 
That is the point.
    Mr. Cordray. Look, I would say you are right to have this 
concern, and I want you to know that I hear you loud and clear 
in having this concern, and the fact that you are going to have 
GAO look at this very carefully, we welcome that. We will be 
glad to let them see everything they need to see in order to 
make an assessment of what we are doing.
    If I as the head of this agency were to do anything like 
what you just described that could be done, there is nothing 
more stupid I could do that would more undermine the mission of 
this agency. That is the last thing that I would ever want to 
do and that any of us working at the agency would want to do. 
We need data and information in order to be able to do our job, 
in order to be able to keep up with and oversee and ensure 
compliance with the law by some of the most powerful financial 
institutions in the world. We need data to be able to report to 
Congress, as you require us to do all the time, about what is 
happening in these markets so that you can make good judgments 
about how to proceed in the area of public policy.
    As for knowing what any individual is doing in terms of 
buying something at Kmart or going online to buy something from 
Amazon, I do not care in the least about that. Nobody at the 
agency does. What we are trying to do is understand the 
patterns of how institutions treat their consumers so that we 
can make sure those consumers are protected in accordance with 
the law.
    Senator Crapo. Thank you, and I will just close with this. 
I know the Chairman wants me to finish this question quickly. 
Again, as I said, I understand and appreciated and trust your 
motives. We have had experiences recently in other agencies 
where phenomenal abuses of this kind of information were 
undertaken. And as I see it, the fact is that all that is 
necessary for this phenomenal amount of data that is being 
collected on Americans to be made available is for someone to 
unlock the key that the third-party contractor has put in 
place. That is the only barrier that I see.
    Now, maybe as we go through the GAO audit and through other 
examples here, those concerns will be allayed. But the point is 
the data is being collected, and it is now being collected by a 
Federal Government agency with enforcement power that I see as 
different. I still agree with you that there are--at least I 
see concerns with this happening in other contexts. But at 
least when the Federal Government steps in, with its ability 
and its force and authority of law, I think that elevates the 
concern. That is all.
    Mr. Cordray. OK. And, again, you are right to be concerned; 
you are right to point out that there have been problems and 
issues in the Government really at all levels. I saw it in 
State government as well at times. I do not want there to be 
concerns about this agency. We welcome the GAO review. I want 
to make sure that you are satisfied in these fronts because I 
also want to be satisfied in these fronts. I share your 
concern. And I do think it would undermine the mission of our 
agency if we were seen to be and were cavalier about security 
or privacy and we ended up with one of the problems of the kind 
you describe, the last thing I want.
    And so everything you do to scrub us and make sure that we 
are performing up to snuff in this area is what I want us to be 
doing as well. So it feels to me this is a mutual concern that 
we share.
    Senator Crapo. Thank you.
    Thank you, Mr. Chairman.
    Chairman Johnson. Mr. Cordray, I thank you for your 
testimony today and your leadership of this important agency.
    This hearing is adjourned.
    [Whereupon, at 4:06 p.m., the hearing was adjourned.]
    [Prepared statements and responses to written questions 
supplied for the record follow:]

                 PREPARED STATEMENT OF RICHARD CORDRAY
    Richard Cordray, Director, Consumer Financial Protection Bureau
                           November 12, 2013

    Chairman Johnson, Ranking Member Crapo, and Members of the 
Committee, thank you for inviting me to testify today 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 the American 
people, and helping them improve their financial lives.
    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 families' trust in 
consumer financial markets, protect consumers from improper conduct, 
and ensure access to fair, competitive and transparent markets.
    Through our enforcement and supervisory actions, and together with 
our fellow regulators, our efforts so far will be putting more than 
$750 million back in the pockets of millions of consumers who fell 
victim to various violations of consumer financial protection laws. 
This includes a refund of over $6 million to tens of thousands of U.S. 
servicemembers in a case we settled in June that arose from a 
supervisory examination, based on failure to properly disclose costs 
associated with repaying auto loans through the military allotments 
system and expensive auto loan add-on products sold to active-duty 
military. CFPB's supervisory actions have also caused financial 
institutions to make changes to compliance management systems to 
prevent violations and reduce risks to consumers. In addition, through 
this process a number of supervised entities have self-identified 
violations and made financial restitution to many thousands of 
additional consumers.
    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 requires mortgage lenders to make a good faith, reasonable 
determination that borrowers can afford to pay back their loans; the 
mortgage servicing rule, which is designed to clean up sloppy practices 
and ensure fairer and more effective processes for troubled borrowers 
who may face the loss of their homes; and the remittance rule, which is 
designed to bring new levels of transparency and new consumer 
protections to international money transfers. Since then, the Bureau 
has 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 our new regulations, which are designed both 
to help consumers and create a level and fair playing field for 
companies that play by the rules.
    The central concept behind this undertaking is our belief that 
compliance with regulations is a concern we all share, because 
successful compliance is good for everyone--consumers, industry, and 
regulators. So we have put out plain language versions of the rules, 
created and posted video guidance, met with major market players and 
the full range of industry stakeholders (including vendors), and made 
further tweaks to respond directly to industry input about points 
needing to be clarified or modified to take account of practical and 
operational concerns. With respect to the mortgage rules, we worked 
with our fellow regulators to publish inter-agency examination 
procedures on the new rules, well before the implementation date, to 
familiarize industry stakeholders with our expectations. With respect 
to our international money transfer rules, the Bureau has coordinated 
with other regulators to ensure we all have a shared understanding of 
the new rules to promote consistent supervision of remittances 
providers.
    At the same time, we recognize that consumers bear their own share 
of responsibility for how they participate in the financial 
marketplace. To promote informed financial decisionmaking, we have 
continued providing consumers with useful tools, including the AskCFPB 
section of our Web site, where we have developed answers to over 1,000 
frequently asked consumer questions. In July, we issued our financial 
literacy report describing the Bureau's strategy and the financial 
literacy activities it has undertaken during its first 2 years of 
operation. The Bureau is uniquely positioned to help bridge the gap 
between people's current levels of financial understanding and the 
increasingly complex financial decisions they have to make. The 
Bureau's financial education agenda is focused on providing consumers 
with tools and information to develop practical skills and support 
sound financial decisionmaking. These include tailored approaches to 
address financial decisionmaking circumstances for specific 
populations, including servicemembers and veterans; students and young 
adults; older Americans; and low-income and economically vulnerable 
Americans. The Bureau's strategy to increase consumers' financial 
literacy and capability includes foundational research, collaborative 
education initiatives with stakeholders who can reach consumers where 
they are, and providing tools and information directly to the public to 
help them navigate the financial choices they face.
    The premise that lies at the very heart of our mission is that 
consumers deserve to be treated fairly and to have someone stand up 
when they have been treated unfairly. The Bureau has strengthened its 
Office of Consumer Response and we have now received more than 230,000 
consumer complaints on credit reporting, debt collection, money 
transfers, bank accounts, and services, credit cards, mortgages, 
vehicle and other consumer loans, and private student loans since we 
began taking complaints.
    In the past year, 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 the field hearing we 
convened in April on student loan debt, it became clear that too many 
borrowers took out loans with less attractive rates and terms than they 
could have qualified for, and many struggle to find refinancing and 
loan modification options. We have seen too many of these troubling 
similarities to the broken mortgage market before the crisis, and we 
will continue to monitor this market closely. The burden of student 
debt is jeopardizing the ability of young Americans to buy homes, start 
small businesses, and save for the future.
    The progress we have made in the past 2 years has been possible 
thanks to the engagement of thousands of Americans who have utilized 
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 has also 
resulted from the extraordinary work of the Bureau's employees--
dedicated public servants of the highest caliber who are committed to 
promoting a healthy consumer financial marketplace. I am proud to work 
alongside them and to serve now as their confirmed Director. Our 
progress has been obtained with and through the cooperation of those we 
regulate, and we attempt to remain considerate of the obstacles 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, reinforcing the stability of our 
economy as a whole.
    Thank you for the invitation to appear before you today. I am, as 
always, very glad to answer your questions and have the benefit of your 
active interest and oversight.

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RESPONSE TO WRITTEN QUESTIONS OF CHAIRMAN JOHNSON FROM RICHARD 
                            CORDRAY

Q.1. Director Cordray, in response to my question on rural 
lending at the hearing, you stated that the CFPB will ``go back 
and reconsider how [it] had drawn rural in terms of being the 
Department of Agriculture's Urban Influence Code, particularly 
micropolitan counties which are rural but around a metropolitan 
county. And we will look at that carefully, take a lot of input 
before resolving it.'' Can you describe how the CFPB plans to 
reconsider this definition over the next 2 years, what the 
expected timeline is for soliciting input, and from whom?

A.1. Our current QM rule provides a 2-year temporary qualified 
mortgage window for balloon loans that small creditors\1\ make 
and hold in portfolio without regard to where the creditor 
operates. In other words, small creditors across the country 
can make balloon loans (with certain limitations including 
meeting certain criteria under the statute such as having to be 
at least a 5-year term) that qualify as QM loans for 2 years 
after the rule goes into effect. During this period, as you 
note, our staff has committed to further studying the topic of 
small creditor balloon loans, especially with regards to access 
to credit in rural or underserved communities. In so doing, the 
Consumer Financial Protection Bureau intends to review whether 
the definitions of rural or underserved should be further 
adjusted for purposes of the QM rule. We have begun internal 
deliberations this winter, and we will follow up with your 
office as we work out timeframes for this review. Before 
issuing a final rule, the Bureau would seek public comment.
---------------------------------------------------------------------------
    \1\ Small creditors are ones that have $2 billion or less in assets 
and, who together with their affiliates, make 500 or fewer first lien 
mortgage loans per year.

Q.2. Director Cordray, as you know, outstanding student loan 
debt now exceeds $1.2 trillion. In the Bureau's latest student 
loan report, the Student Loan Ombudsman suggested that there be 
additional oversight of servicers, and the Bureau proposed a 
rule defining larger participants in the student loan servicing 
market early this year. When might we expect to see the CFPB 
finalize a rule and begin supervision of these companies?
    Additionally, due to increasing concerns about rising 
student debt, I want to make sure that we appropriately monitor 
the actions of those private participants in the student loan 
market under the Banking Committee's jurisdiction, including 
private student lenders and servicers. What suggestions do you 
have to improve the functioning of the private student loan 
market? Do you believe that legislative changes are needed to 
effect these improvements, and what other suggestions do you 
have for the Banking Committee to consider in working with the 
HELP Committee on the Higher Education Act reauthorization?

A.2. On December 3, 2013, the Consumer Financial Protection 
Bureau issued a final rule defining larger participants in the 
nonbank student loan servicing marketplace. This rule will go 
into effect on March 1, 2014, at which point the Bureau will 
have the authority to examine larger nonbank student loan 
servicers. Student loan servicers impact tens of millions of 
Americans, and this rule is a critical step to ensure that the 
breakdowns in the mortgage servicing market do not repeat 
themselves in the student loan market.
    As I noted in a Senate Banking Committee hearing you 
chaired this past April, student debt should be of concern. 
With $1.2 trillion in outstanding debt, many of us in the 
financial regulatory community have noted that this may be an 
impediment to economic growth and a roadblock for families 
looking to climb the economic ladder. The Department of 
Education and the Consumer Financial Protection Bureau have 
also been working together to ensure that borrowers of Federal 
and private student loans are being fairly treated by financial 
services providers who administer their loans.
    Private entities participate across the life cycle of a 
Federal or private student loan and must comply with a number 
of Federal consumer financial laws that the Bureau administers. 
Notably, student loan servicers must comply with the Electronic 
Funds Transfer Act and Fair Credit Reporting Act, and student 
loan debt collectors must comply with the Fair Debt Collection 
Practices Act. And, these entities may not engage in unfair, 
deceptive, or abusive acts and practices.
    In 2008, the Senate Banking Committee worked with the 
Senate Committee on Health, Education, Labor and Pensions to 
draft legislation, as part of the reauthorization of the Higher 
Education Act, to amend the Truth-in-Lending Act to enhance 
disclosures for consumers seeking to borrow a private student 
loan.
    Since that time, Congress has enacted legislation to 
enhance consumer protections and improve the functioning of the 
mortgage and credit card markets. As noted in an October 2013 
report from the Bureau's student loan ombudsman, policymakers 
might look at these changes and determine whether similar 
changes might also provide benefits to the student loan market.
    For example, the report noted that many student loan 
borrowers holding multiple loans face payment processing 
problems when seeking to repay their debt more quickly. Student 
loan servicers' payment processing policies vary and may not be 
transparent to many borrowers. The Credit CARD Act of 2009 
addressed related issues. The Act and its implementing 
regulations ensure that borrowers who make payments in excess 
of the minimum amount due will have their payments promptly 
applied to credit card balances with the highest interest rate.
    Additionally, the report also described how certain changes 
to laws governing mortgage servicing address challenges that 
might also be present in the student loan market. For example, 
as part of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act (the Dodd-Frank Act), Congress also amended the 
Real Estate Settlement Procedures Act and Truth-in-Lending Act 
that enhanced protections for borrowers in the mortgage 
servicing market. As implemented by Regulation X and Regulation 
Z, mortgage servicers will have certain obligations to correct 
errors asserted by borrowers, ensure prompt crediting of 
mortgage payments, and provide responses to requests for payoff 
amounts.
    The Bureau has also published a number of other reports 
which may be useful to Banking Committee Members in preparation 
for the upcoming reauthorization of the Higher Education Act. 
Bureau staff is available to further understanding of our 
analyses as the Committee seeks to address this large, growing 
financial services market.
                                ------                                


  RESPONSE TO WRITTEN QUESTIONS OF SENATOR CRAPO FROM RICHARD 
                            CORDRAY

Q.1. The Qualified Mortgage Rule (QM) has been widely debated, 
and we are roughly 60 days out from its effective date. 
Financial institutions, especially the small ones in Idaho, 
have struggled to ramp up their compliance operations. How will 
the rule change the mortgage shopping experience for the 
consumer and what steps has the Bureau taken, or planning to 
take, to educate consumers about how these rules will affect 
their shopping experience?

A.1. The Consumer Financial Protection Bureau's mortgage rules 
will be important in addressing some of the most serious 
problems that had undermined the mortgage market during and 
leading up to the financial crisis. The Bureau's mortgage rules 
protect consumers from irresponsible mortgage lending by 
requiring that lenders make a reasonable, good-faith 
determination that prospective borrowers have the ability to 
repay their loans. The mortgage servicing rules establish 
strong protections for homeowners as they repay their loans, 
and especially for those facing foreclosure.
    The Bureau took special care to ensure that our rules are 
balanced for community banks and credit unions and the 
consumers they serve. For instance, the Bureau has tailored the 
Ability-to-Repay rule and the standards for Qualified Mortgages 
(QMs) to enable small creditors to continue providing certain 
credit products, while carefully balancing consumer 
protections.
    In addition, the Bureau has provided a 2-year transition 
period, during which balloon loans made by small creditors and 
held in portfolio will be treated as QMs regardless of where 
the creditor predominantly operates. This decision will allow 
time for the Bureau to review whether its definitions of 
``rural'' and ``underserved'' should be adjusted. The Bureau is 
committed to conducting such a review to ensure that the 
Bureau's definitions accurately reflect significant differences 
among geographic areas, to calibrate access to credit concerns, 
and to facilitate implementation.
    To help consumers navigate the marketplace and take 
advantage of the benefits of the new rules, the Bureau has 
developed a consumer education and engagement plan. Among other 
things, the Bureau has developed consumer education materials 
including tips for homeowners; summaries of new mortgage rules 
and mortgage servicing rules; a set of common answers to 
frequently asked questions for our AskCFPB tool; and consumer 
guides and supporting graphics to explain the new rules. The 
Bureau has also published updated versions of certain mortgage 
publications that are required by statute or regulation to be 
delivered to home buyers and those applying for adjustable-rate 
mortgages and home equity lines of credit, to reflect the new 
rules: Shopping for Your Home Loan--Settlement Cost Booklet, 
previously published by the U.S. Department of Housing and 
Urban Development; and Consumer Handbook on Adjustable-Rate 
Mortgages and What You Should Know About Home Equity Lines of 
Credit brochure, previously published by the Board of Governors 
of the Federal Reserve System. These publications are available 
on the Bureau's Web site at consumerfinance.gov/learnmore.
    To help homeowners who may be facing foreclosure or 
encountering other issues related to the servicing of their 
mortgages, the Bureau has begun to train housing counselors and 
other intermediaries about the new mortgage servicing rules 
governing loss mitigation. This effort has been coordinated 
with the Department of Housing and Urban Development.
    Finally, the Bureau is preparing to launch a new suite of 
tools and information that will guide prospective and current 
homeowners through the process of owning a home. The Bureau 
will provide guidance, decisionmaking tools, and information to 
help consumers become better shoppers, savvier negotiators, 
and, ultimately, more successful long-term homeowners.

Q.2. The CFPB's Indirect Auto Lending Bulletin came out in 
March. The Bulletin represented a major policy shift without 
public input. On November 14, 8 months after the Bulletin was 
published, the Bureau finally held a public forum on auto 
financing bringing together consumers, auto finance companies, 
and auto dealers.
    The Federal Trade Commission (FTC) spent more than a year 
conducting a study on the consumer protection issues that may 
arise in the sale, financing, and leasing of motor vehicles. It 
held focus groups, solicited public comments, and held industry 
roundtables. The FTC's final report is still pending and the 
agency has not yet conducted any rulemaking in this space. What 
coordination efforts did the CFPB undertake with the FTC when 
drafting the CFPB Bulletin, and why was a similar public 
outreach campaign not undertaken?

A.2. The Consumer Financial Protection Bureau's March 21, 2013, 
Indirect Auto Bulletin was published to offer guidance to 
indirect auto lenders about compliance with the existing fair 
lending requirements of the Equal Credit Opportunity Act 
(ECOA).\1\ The Auto Bulletin did not represent a policy shift, 
but instead highlighted the fair lending risk that some 
indirect auto lenders' markup and compensation policies can 
create based upon the discretion those policies permit, and 
financial incentives to exercise that discretion in particular 
ways.
---------------------------------------------------------------------------
    \1\ Indirect Auto Lending and Compliance with ECOA, CFPB Bulletin 
2013-02, Mar. 21, 2013 available at http://files.consumerfinance.gov/f/
201303cfpb_march_-Auto-Finance-Bulletin.pdf.
---------------------------------------------------------------------------
    The Bulletin explains that the standard practices of 
indirect auto lenders likely make them ``creditors'' under ECOA 
and that a lender's discretionary markup and compensation 
policies may alone be sufficient to trigger liability under 
ECOA if the lender regularly participates in a credit decision 
and its policies result in discrimination. By describing the 
applicable laws and regulations that apply to indirect auto 
lending, the Bulletin aims to help indirect auto lenders 
recognize and mitigate the risk of discrimination resulting 
from discretionary dealer markup and compensation policies. 
This is the type of fair lending risk of which lenders need to 
be aware and monitor in their portfolios.
    The Bureau has a number of tools at its disposal when 
dealing with practices that cause consumer harm, including 
nonpublic supervisory action, enforcement actions, rulemaking, 
and consumer education, among others. There are many factors 
that the Bureau considers when deciding which tools to use, and 
in determining what is the most appropriate tool to address a 
certain issue. When we consider whether to engage in 
rulemaking, a key question is whether existing law, regulations 
and official commentary already address the topic under 
consideration.
    ECOA and Regulation B, which was the result of notice and 
comment, make it illegal for a ``creditor'' to discriminate in 
any aspect of a credit transaction because of race, color, 
religion, national origin, sex, marital status, age, receipt of 
income from any public assistance program, or the exercise, in 
good faith, of a right under the Consumer Credit Protection 
Act.\2\
---------------------------------------------------------------------------
    \2\ U.S.C.  1691 et seq.; 12 C.F.R. pt. 1002.
---------------------------------------------------------------------------
    The Bureau published the Indirect Auto Bulletin to remind 
lenders of their responsibilities under ECOA and to offer 
guidance on how they might address the identified risks. 
Consistent with Bureau procedures, the Bulletin was reviewed 
prior to issuance to ensure compliance with all applicable 
legal requirements. The Administrative Procedure Act (APA) sets 
out the principles by which Federal agencies engage in 
regulatory activity and in applicable cases instructs an agency 
to provide an opportunity for public comment before issuing a 
rule. The APA does not impose a notice and comment requirement 
for general statements of policy, nonbinding informational 
guidelines, or interpretive memoranda. Accordingly, the Bureau 
was not required to solicit comments about the indirect auto 
compliance bulletin.
    Recognizing the Federal Trade Commission's (FTC) shared 
responsibility in this area, the Bureau began a dialogue with 
the FTC during the summer of 2011 regarding fair lending issues 
in the auto lending arena, including dealer markup. As part of 
this coordination, the Bureau participated in the FTC's Second 
Motor Vehicle Roundtable, which focused on military consumers, 
financial literacy, and fair lending and was held August 2-3, 
2011, in San Antonio, Texas. In this manner, we shared 
resources with the FTC and gathered valuable public information 
and input on this topic. Likewise, Bureau personnel attended 
the Third FTC roundtable held in Washington, DC in December 
2011. Since that time we have had an ongoing dialogue about 
dealer markup in indirect auto lending with both the FTC and 
Federal Reserve Board of Governors (FRB), more recently joining 
with the FRB in their August 6, 2013 Webinar, titled Indirect 
Auto Lending--Fair Lending Considerations. Representatives of 
both agencies participated in the forum that the Bureau held on 
November 14, 2013.
    We also regularly coordinate with the FTC on fair lending 
enforcement matters, including meeting with them on a bi-
monthly basis.

Q.3. The CFPB has been closely examining small dollar credit 
products like payday loans and deposit advances. Have you 
considered how actions affecting these products may in fact 
drive up the cost of credit, or cause borrowers to turn to 
unregulated markets for credit, and how do you plan on 
balancing consumer demand with what you see as a dangerous 
product?

A.3. There are many ways small-dollar credit products are 
offered and the Bureau's job is to ensure that--regardless of 
how a consumer gets a small-dollar loan or from whom--consumers 
are given the full protection of Federal consumer financial 
laws.
    In taking appropriate action to protect consumers across 
the small dollar marketplace, the Bureau recognizes that there 
is a demand for small dollar credit products. Our Offices of 
Financial Empowerment and Financial Education seek to identify 
and develop the tools that consumers, particularly the most 
vulnerable, need to make the best financial decisions for 
themselves and their families. That includes making sure 
consumers understand the full costs and risks of any financial 
product and encouraging consumers to have emergency savings so 
that they can avoid having to seek out short-term loans in the 
first place.
    The Bureau also hears regularly from financial services 
providers who are developing products designed to meet the 
demands of low and moderate income consumers. We seek to use 
the authorities that we have to implement and enforce Federal 
consumer financial laws in such a way that enables the 
functioning of a transparent and competitive marketplace.

Q.4. In October, the CFPB sent an order to over 100 banks 
requesting a copy of the institution's consumer checking 
account agreements. The Federal Paperwork Reduction Act of 1995 
requires Federal agencies to publish a notice for comment in 
the Federal Register anytime an agency seeks to collect 
information from 10 or more private entities including 
information requests and surveys required mandated by statute. 
Please explain why the Bureau did not take steps to comply with 
the Paperwork Reduction Act for this collection of information.

A.4. The Consumer Financial Protection Bureau's orders were 
promulgated pursuant to its authority under Section 
1022(c)(4)(B)(ii) of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (the Dodd-Frank Act), and were issued 
to inform and augment the Bureau's market monitoring efforts, 
as well as to assist the Bureau as it works to complete the 
study mandated by Section 1028(a) of the Dodd-Frank Act. The 
Office of Management and Budget's regulations specify 
categories of items that are not subject to the Paperwork 
Reduction Act, which include among other things samples of 
products or like items so-designated by OMB. (5 C.F.R. 
1320.3(h)(2), (h)(10)). The Bureau's orders sought the 
recipient covered-persons' standard form consumer checking 
account agreements. Collection of the information in question 
is exempt from the clearance requirement in the Paperwork 
Reduction Act.

Q.5. Section 1100G of the Dodd-Frank Act requires the CFPB to 
abide by the Small Business Regulatory Enforcement Fairness 
Act's Small Business Advocacy Review Panel process. Please 
identify all of the Small Business Advocacy Review Panels the 
CFPB held in fiscal year 2013. Additionally, please identify 
all planned proposed rules in fiscal year 2014 for which the 
Bureau will conduct a Small Business Advocacy Review Panel.

A.5. The Bureau is mindful that, without careful consideration, 
new statutory requirements we are implementing can potentially 
burden as well as benefit small financial services providers. 
We use many methods to reach out to small providers. One 
avenue, set out in the Dodd-Frank Act, is to convene a Small 
Business Review Panel under the Small Business Regulatory 
Enforcement Fairness Act (SBREFA) before proposing a rule that 
would have a significant economic impact on a substantial 
number of small entities. In 2012, the Bureau held SBREFA 
panels on TILA-RESPA Federal mortgage disclosures, mortgage 
loan servicing, and Title XIV mortgage loan originator 
compensation. We did not hold any SBREFA panels in fiscal year 
2013 as we were largely focused on finalizing rules that were 
proposed in fiscal year 2012. The Bureau is planning to hold a 
SBREFA panel for a HMDA rulemaking in fiscal year 2014. We have 
not yet determined which of the other rulemakings to be 
conducted by the Bureau in fiscal year 2014 may have a 
significant economic impact on a substantial number of small 
entities, but it is likely that we will use SBREFA before 
commencing rulemaking with respect to debt collection, payday 
lending, and/or overdraft. We regularly conduct extensive 
outreach on the potential effects of a possible proposed rule 
on affected entities, including small entities.

Q.6. Cost benefit analyses are important to ensure that 
entities, including small businesses, are not 
disproportionately burdened by Federal regulations. Please list 
all regulatory efforts the CFPB plans to undertake in 2014 and 
state whether the agency plans to undertake economic analyses 
pursuant to the Regulatory Flexibility Act, E.O. 12866 and/or 
any other economic analysis for each regulatory effort planned.

A.6. A critical part of the Consumer Financial Protection 
Bureau's mission is to make well-designed regulations that can 
help enhance market efficiency and fairness without imposing 
undue burdens. Such regulations benefit consumers, responsible 
firms, and society more broadly. Thus, the Bureau considers 
costs, benefits, and impacts on consumers and financial 
institutions in its rulemakings, and the Bureau seeks 
information more generally on the costs, benefits, and impacts 
of regulations. For example, in November 2013, the Bureau 
completed a report, ``Understanding the Effects of Certain 
Deposit Regulations on Financial Institutions' Operations: 
Findings on Relative Costs for Systems, Personnel, and 
Processes at Seven Institutions.''\3\
---------------------------------------------------------------------------
    \3\ ``Understanding the effects of Certain Deposit Regulations on 
Financial Institutions' Operations: Findings on Relative Costs for 
Systems, Personnel, and Processes at Seven Institutions,'' available at 
http://files.consumerfinance.gov/f/201311_cfpb_report_findings-
relative-costs.pdf.
---------------------------------------------------------------------------
    When the Bureau undertakes a rulemaking for which notice 
and comment are required, and for which the rule is expected to 
have a significant economic impact on a substantial number of 
small entities, the Bureau presents initial and final 
regulatory flexibility analyses as provided by the Regulatory 
Flexibility Act. In addition, the Bureau considers the costs 
and benefits of all of its substantive rules to consumers and 
to covered persons as required by Section 1022 of the Dodd-
Frank Act Wall Street Reform and Consumer Protection Act. The 
Bureau publishes its preliminary cost benefit analysis with the 
proposed rule so that stakeholders have an opportunity to 
provide input through the public comment process. A final rule 
is accompanied by the Bureau's final analysis of costs and 
benefits.
    On December 3, 2013, the Bureau posted its semi-annual 
update to its rulemaking agenda, which is available on 
Reginfo.gov.\4\ As noted in the semi-annual update to the 
rulemaking agenda, the Bureau plans to work on, or participate 
in interagency groups working on, the rules listed below.
---------------------------------------------------------------------------
    \4\ The Consumer Financial Protection Bureau, Rulemaking Agenda, 
Dec. 3, 2013 available at http://www.reginfo.gov/public/do/
eAgendaMain?operation=OPERATION_GET_
AGENCY_RULE_LIST&currentPub=true&agencyCode=&showStage=active&agencyCd=
3170&Image58.x=58&Image58.y=5&Image58=Submit.

---------------------------------------------------------------------------
  1. (Prerule) Home Mortgage Disclosure Act (Regulation C)

  2. (Final Rule) The Expedited Funds Availability Act 
        (Regulation CC)

  3. (Final Rule) Restatement of Federal Consumer Financial 
        Law Regulations

  4. (Final Rule) Equal Access to Justice Act Implementation 
        Rule

  5. (Final Rule) Rules of Practice for Issuance of Temporary 
        Cease-and-Desist Orders

  6. (Final Rule) Further Amendments to 2013 Mortgage Rules 
        (Regulations B, X, and Z)

  7. (Prerule) Annual Privacy Notice

  8. (Prerule) Payday Loans and Deposit Advance Products

  9. (Prerule) Debt Collection Rule

  10. (Prerule) Overdraft

  11. (Prerule) Further Amendments to 2013 Mortgage Rules 
        (Regulations X and Z)

  12. (Proposed Rule) Requirements for Prepaid Cards 
        (Regulation E)

  13. (Proposed Rule) Supervision of Certain Nonbank Covered 
        Persons--Defining Larger Participants in Certain 
        Consumer Financial Product and Service Markets

  14. (Proposed Rule) Amendments to FIRREA Concerning 
        Appraisals

  15. (Proposed Rule) Extension of the Temporary Exception for 
        Certain Disclosures Under the Remittance Transfer Rule

Q.7. Banks have indicated value in the complaint process as it 
helps them identify areas to examine. However, the CFPB is 
publishing thousands of ``unverified'' and ``unnormalized'' 
complaints. Even as the CFPB acknowledges these complaints are 
not verified and may not be valid complaints, we have a 
Government agency then encouraging folks to do their own 
research on this inaccurate information. Some prudential 
regulators have urged banks to avoid areas that could cause 
reputational risk. Do you see the CFPB's posting of unverified, 
inaccurate and unnormalized data as having the potential to 
create reputational risk, and should consumers be making 
decisions off inaccurate and unnormalized data being published 
by the Government?

A.7. The Consumer Financial Protection Bureau is clear that the 
Consumer Complaint Database contains complaints we have 
received, that steps are taken to confirm a commercial 
relationship between the consumer and the identified company, 
and that we do not verify the accuracy of all facts alleged in 
the complaints. In addition, the database includes data about 
the company's response to the complaint.
    The purpose of the Consumer Complaint Database is to 
provide timely and understandable information about financial 
products and services and to improve the transparency and 
efficiency of the market. That data describes the nature of the 
complaint as submitted by the consumer and the company's view 
of its validity based on the company's response. Consumers and 
market participants can look at the information we publish 
about outcomes of complaints to get a good idea of how the 
company and consumer handled the complaint, such as closure 
with or without monetary relief or closure with an explanation. 
In addition to expanding the scope of the products covered by 
the database, we continue to evaluate, among other things, the 
potential for normalization of the data to make comparisons 
more user friendly and will soon be seeking feedback on how to 
normalize the data.
    The Bureau has recently been recognized for its Consumer 
Complaint Database, receiving an Honorable Mention in the 
Administrative Conference of the United States Walter Gellhorn 
Innovation Award, for the innovative and transparent use of an 
online searchable database to empower consumers. The award 
honors the degree of innovation, cost savings to the Government 
or public, the ease of duplicating the best practices at other 
agencies, and the degree to which best practices enhance 
transparency and efficiency in Government. As well, the Project 
on Government Oversight profiled the Consumer Complaint 
Database in highlighting best practices for open and 
accountable Government.
    The Bureau publishes reports about complaint data, which 
may contain its own analysis of patterns or trends that it 
identifies in the complaint data. Reports containing aggregate 
complaint data are found at the bottom of the Consumer 
Complaint Database page. The Bureau's reports include some 
standardized metrics that may be used for comparisons across 
reporting periods and companies.

Q.8. Argus Information and Advisory Services was awarded a $15 
million contract in March 2012 to perform data aggregation, 
analysis, and storage on credit card data in furtherance of the 
Bureau's supervision authority. For each CFPB division and 
office listed below, please identify how many CFPB personnel 
have access to the data collected, analyzed, and/or processed 
by Argus. Additionally, for each CFPB division and office 
listed below, please identify how many CFPB personnel 
participate in onsite examinations.

   Executive Office of the Director

   Office of the CFPB Ombudsman

   Office of the Administrative Law Judge

   Division of Operations

   Office of the Chief Operating Officer

   Office of the Chief Administrative Officer

   Office of the Chief Financial Officer

   Office of the Chief Human Capital Officer

   Office of the Chief Information Officer

   Office of Consumer Response

   Office of Minority and Women Inclusion

   Office of the Chief Procurement Officer

   Office of Equal Opportunity Employment

   Division of Consumer Education and Engagement

   Office of Consumer Engagement

   Office of Financial Education

   Office of Financial Empowerment

   Office of Older Americans

   Office of Servicemember Affairs

   Office of Students

   Division of Supervision, Enforcement, and Fair 
        Lending

   Office of Enforcement

   Office of Fair Lending and Equal Opportunity

   Office of Supervision Examinations

   Office of Supervision Policy

   Division of Research, Markets, and Regulations

   Office of Card Markets

   Office of Credit Information, Collections, and 
        Deposit Markets

   Office of Installment and Liquidity Lending Markets

   Office of Mortgage Markets

   Office of Regulations

   Office of Research

A.8. The Consumer Financial Protection Bureau uses data 
stripped of direct personal identifiers with respect to all 
credit card accounts maintained by a number of large card 
issuers. This data is collected and housed on behalf of the 
Bureau by Argus Information and Advisory Services, a company 
that is in the business of obtaining account-level data for 
credit cards and other financial services from financial 
services companies. The data being provided to the Bureau are 
the same type of data that credit card issuers regularly 
provide to Argus, such as the monthly balance, fees charged, 
interest charged, and payments received on accounts. The data 
the Bureau receives does not include purchase transactions.
    In general, access to the Bureau's data is controlled, and 
access logs to Bureau systems are kept and maintained in 
accordance with Bureau policy based on National Institute of 
Standards and Technology Special Publication 800-53 Recommended 
Security Controls for Federal Information Systems and 
Organizations (NIST SP 800-53) guidelines.
    For security reasons, access to this information is 
continually updated and access numbers may change as a result. 
The Bureau conducts reviews of user access for all in-house 
databases, including data that the Bureau receives from Argus. 
As part of these reviews, the Bureau verifies that all access 
to a given dataset has been approved by the designated 
approving authority.
    Access to the Web-based interface is managed by Argus. Any 
Bureau employee who needs access must have their access request 
approved by the designated approving authority prior to a grant 
of access. The Bureau can remove access for anyone or everyone 
on the list at any time and removes access regularly when 
particular individuals no longer need that access for work 
purposes.
    As of December 2013, a total of 35 individuals had access 
to the information in question. (As noted above, however, that 
number changes from time-to-time based on security reviews.)

   Executive Office of the Director: none

   Office of the CFPB Ombudsman: none

   Office of the Administrative Law Judge: none

Division of Operations: Division total is 17.

   Office of the Chief Operating Officer: none

   Office of the Chief Administrative Officer: none

   Office of the Chief Financial Officer: none

   Office of the Chief Human Capital Officer: none

   Office of the Chief Information Officer: 17 
        (included in the Division of Operations total above)

   Office of Consumer Response: none

   Office of Minority and Women Inclusion: none

   Office of the Chief Procurement Officer: none

   Office of Equal Opportunity Employment: none

Division of Consumer Education and Engagement: Division total 
is none.

   Office of Consumer Engagement: none

   Office of Financial Education: none

   Office of Financial Empowerment: none

   Office of Older Americans: none

   Office of Servicemember Affairs: none

   Office of Students: none

Division of Supervision, Enforcement, and Fair Lending: 
Division total is 4.

   Office of Enforcement: none

   Office of Fair Lending and Equal Opportunity: 1 
        (included in the Division of Supervision, Enforcement, 
        and Fair Lending total above)

   Office of Supervision Examinations: 3 (included in 
        the Division of Supervision, Enforcement, and Fair 
        Lending total above)

   Office of Supervision Policy: none

Division of Research, Markets, and Regulations: Division total 
is 14.

   Office of Card Markets: 5 (included in the Division 
        of Research, Markets, and Regulations total above)

   Office of Credit Information, Collections, and 
        Deposit Markets: none

   Office of Installment and Liquidity Lending 
        Markets: none

   Office of Mortgage Markets: none

   Office of Regulations: none

   Office of Research: 9 (included in the Division of 
        Research, Markets, and Regulations total above)

    With respect to the second question, the Bureau considers a 
number of factors in determining how many examiners are onsite 
for a given examination, including the scope of the review, the 
complexity of the areas being reviewed, and other factors as 
appropriate. The number varies by exam, but is typically 
between 6 and 14 field examiners. From time to time, a smaller 
number of personnel from Headquarters may also participate in 
the onsite portion of exams in some capacity. Such personnel 
are typically from the Supervision and Fair Lending Supervision 
functions. The Bureau's enforcement attorneys provide support 
to examinations through consultation with Supervision 
Headquarters, and do not routinely participate in onsite 
examination activities.

Q.9. The CFPB stated it has entered into 25 memoranda of 
understanding with Federal and State regulators. How many of 
these MOUs allow the Bureau to obtain data from other 
regulators where the data is not directly related to an onsite 
examination conducted by the CFPB?

A.9. The Office of Consumer Response (Consumer Response) has 
agreements to share consumer complaint data with 25 State and 
Federal agencies, including the Federal Trade Commission (FTC). 
Consumer Response contributes data to the FTC's Consumer 
Sentinel, which is available to local, State, and Federal law 
enforcement entities across the country. In addition, the 
Bureau has signed MOUs with the Conference of State Bank 
Supervisors and other signatories from all 50 States plus 
Puerto Rico and the District of Columbia designed to preserve 
the confidentiality of any information shared between the 
parties and related to the operation of the Nationwide Mortgage 
Licensing System and the Mortgage Call Report. The Bureau has 
also signed approximately 40 other MOUs with Federal, State, 
and local governmental entities regarding the sharing of data 
and/or the treatment of shared data.
    The MOUs set forth the terms regarding the treatment of any 
data that the providing agency chooses to share with the 
receiving agency. MOUs do not allow the Bureau to receive 
information that it would not otherwise be authorized to 
receive under applicable law, including but not limited to 
Sections 1024 and 1025 (requiring the Bureau to use existing 
supervisory reports of covered persons provided to a Federal or 
State agency to the fullest extent possible) of the Dodd-Frank 
Wall Street Reform and Consumer Protection Act, the Bureau's 
regulations regarding confidential treatment of information, 12 
C.F.R.  1070.40 et seq., and any applicable regulations of 
other agencies. Thus, to the extent applicable law permits 
another agency to disclose--and the Bureau to receive--
information unrelated to an onsite examination conducted by the 
Bureau, then the MOU between the Bureau and that agency governs 
the terms by which such data will be treated.

Q.10. A recent Bipartisan Policy Center whitepaper recommended 
the Bureau make improvements to its Civil Penalty Fund. The BPC 
specifically criticized the Bureau for lack of transparency 
regarding the Fund's selection criteria when distributing 
funds. How does the Bureau identify groups that will receive 
distributions from the Fund, and does the Bureau plan on taking 
steps to further clarify its selection criteria?

A.10. In May 2013, the Consumer Financial Protection Bureau 
issued a regulation to provide transparency about how money in 
the Civil Penalty Fund would be used to compensate victims and 
the circumstances in which funds may be allocated for consumer 
education and financial literacy programs as provided for in 
Section 1017 of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act.
    The Bureau has also adopted a set of criteria for selecting 
consumer education and financial literacy programs to be funded 
by Civil Penalty Fund money. The criteria ensure that funds 
will be used for programs that will serve consumers and improve 
consumer education and financial literacy. These criteria are 
disclosed on the Bureau's Web site. The criteria require, among 
other things, that programs further the Bureau's mission and 
strategic goals; promote or enhance financial literacy and 
consumers' economic security; and include specific outcome 
targets to ensure the programs' effectiveness.
    We have undertaken significant outreach to inform how we 
use money from the Civil Penalty Fund for financial education 
initiatives. These efforts included a public request for 
information (RFI), which generated 50 detailed responses from 
experts around the country; hosting a widely attended 
conference at the Bureau with vendors and financial education 
groups; and, in our study of financial coaching, interviewing 
over two dozen leaders at financial coaching organizations and 
visiting actual training sessions.
    The Bureau has selected the first consumer education and 
financial literacy program that it will fund with Civil Penalty 
Fund money. The Bureau has issued a Request for Proposal to 
deploy a financial coaching program that will serve two groups 
of Americans: (1) recent veterans who are transitioning from 
servicemember to veteran life, as well as military widows and 
widowers, and (2) economically vulnerable consumers who want to 
improve their approach to money management.
    One-on-one financial coaching will help veterans transition 
from military to civilian financial life, and help consumers 
who may be cash-strapped learn how to manage the money that 
they have more effectively to achieve their financial goals. 
Working with a financial coach can also help consumers identify 
and understand how to distinguish between useful financial 
products and frauds and scams, thus safeguarding against them 
becoming victims of frauds and scams in the future. The program 
for recent veterans and military spouse survivors is planned to 
have a presence in all 50 States. The component for 
economically vulnerable consumers, although smaller, will 
provide financial coaching services through locations that are 
diverse in terms of geographic location, and include those from 
urban and rural communities, and from different cultural, 
ethnic, racial, and other backgrounds.
    The Bureau plans to use the Federal procurement process for 
these programs and will post information about the process and 
contract requirements as Civil Penalty Fund money becomes 
available for consumer education and financial literacy 
programs.

Q.11. Industry stakeholders have expressed concern with the 
timeliness of the CFPB's examination process. Specifically, 
they have noted it takes much longer for a CFPB exam to be 
closed out than those conducted by the prudential regulators. 
The CFPB has set a goal of closing out exams in 90-120 days. 
What is the average number of days for current CFPB 
examinations? When do you expect the 90-120 day goal to be 
achieved for all examinations, and will the Bureau adopt an 
official policy establishing timelines for formally closing out 
exams?

A.11. The Consumer Financial Protection Bureau supervises both 
banks and nonbanks. At the outset of our supervision program, 
the Bureau made a purposeful decision to have a strong quality 
control function to ensure consistency in our examinations 
findings across the country and across banks and nonbanks. As a 
consequence, our supervision work balances this goal with the 
need to close out exams. This is particularly important with 
the exams that have found complex and novel issues that need to 
be analyzed carefully and consistently. The Bureau took an 
average of 140 days to close the examinations that completed 
onsite work in 2013 and for which an Exam Report or a 
Supervisory Letter has been mailed. The Bureau is continually 
reviewing and evaluating its examination report review process 
in order to reduce the time it takes to issue Exam Reports and 
Supervisory Letters. As the Bureau continues to stand up its 
supervision and examination operations, we will be in a better 
position to evaluate and establish examination process 
timelines and related policies and procedures.

Q.12. News reports indicated that the CFPB's advisory 
committees have restricted access to the general public in 
attending or listening in on advisory committee meetings in 
violation of the Federal Advisory Committee Act (FACA). What is 
the CFPB doing to inform its advisory committees and related 
bodies to abide by FACA and what steps will the CFPB take to 
ensure compliance with FACA to allow meetings to be fully open 
to the public?

A.12. As an entity within the Federal Reserve System, the 
Bureau is exempt from the FACA. See 5 U.S.C. App. II  4(b)(2) 
(``nothing in [the Federal Advisory Committee] Act shall be 
construed to apply to any advisory committee established or 
utilized by--. . . (2) the Federal Reserve System.''). The 
Consumer Financial Protection Bureau believes that closing 
portions of the meetings of the advisory bodies allows for 
robust and candid dialogue between the Bureau and Committee 
Members who represent a broad range of persons affected by the 
Bureau's official actions. The Bureau is at the same time 
committed to ensuring that the public is aware of the work of 
the advisory bodies. The Bureau publishes agendas of the topics 
under consideration by its advisory groups, as well as summary 
minutes of their deliberations. A portion of each meeting of 
the Consumer Advisory Board is reserved for public observation 
and participation.
                                ------                                


   RESPONSE TO WRITTEN QUESTION OF SENATOR REED FROM RICHARD 
                            CORDRAY

Q.1. Recently, I have heard from Rhode Island constituents who 
have concerns about meeting the January 2014 date when the 
Bureau's mortgage rules, both underwriting and servicing, will 
be in effect. I appreciate that you have said that your 
``oversight of the new mortgage rules in the early months will 
be sensitive to the progress made by those lenders and 
servicers who have been squarely focused on making good-faith 
efforts to come into substantial compliance on time--a point 
that we have also been discussing with our fellow regulators.'' 
What constitutes good-faith effort and substantial compliance? 
What benchmarks will be used to determine whether a good-faith 
effort has been made and whether substantial compliance has 
been achieved?

A.1. As I testified, oversight of the new mortgage rules in the 
early months will be sensitive to the progress made by those 
lenders and servicers who have been squarely focused on making 
good-faith efforts to come into substantial compliance on 
time--a point that the Consumer Financial Protection Bureau has 
also been discussing with our fellow regulators.
    Some of the benchmarks we will look for in whether there 
was a good faith effort to comply with the Ability-to-Repay 
rule include many of the same fundamentals we look for in 
Compliance Management System systems planning. In our reviews 
of new rule compliance, we will be looking for progress in 
these areas: Board or management involvement; development of 
policies and procedures; development of training, support 
systems, and testing; and plans to monitor and audit once in 
effect. It is important to note that lenders do not have to 
make only qualified mortgages. Making a qualified mortgage is 
one way to comply with the Ability-to-Repay rule. If a lender 
makes a qualified mortgage, the lender is presumed to have 
complied with the Ability-to-Repay rule. When a lender makes a 
loan that does not fit the definition of a qualified mortgage 
the lender must still comply with Federal law, including the 
Ability-to-Repay rule.
    In addition, the Bureau has embarked on an implementation 
plan to prepare mortgage businesses for the new rules. To that 
end, we published plain-language compliance guides that will be 
updated as necessary. The Bureau launched a series of videos 
explaining our rules and worked closely with the other 
financial regulators to develop examination guidelines that 
reflect a common understanding of what the rules do and do not 
require, which were published well in advance of the effective 
date. The Bureau intends these efforts to be especially helpful 
to smaller institutions where compliance weighs more heavily on 
fewer employees.
                                ------                                


 RESPONSE TO WRITTEN QUESTION OF SENATOR MERKLEY FROM RICHARD 
                            CORDRAY

Q.1. While the CFPB's March 21, 2013 Auto Bulletin doesn't 
mandate flat fees from lenders to dealers for originating a 
loan, auto dealers in my State are concerned that this is the 
real consequence necessary to protect dealers from charges of 
discrimination.
    Moreover, dealers fear that such flat fees are not in the 
buyers' best interest. For example, flexible fees allow a 
dealer to ``meet or beat'' a competition's financing offer by 
cutting into their own fees.
    Now no one should be incentivized to push a borrower into a 
trick-or-trap loan that is designed to explode on him or her, 
but these loans don't do that--and correct me if I'm wrong. 
Rather, they simply give the auto dealer the ability to keep 
the consumer's business by negotiating the price and financing 
of the car within the structure of an otherwise plain vanilla 
auto loan.
    I would appreciate it if the CFPB could do two things. 
First, it would be helpful to have a study of discrimination in 
the auto marketplace to identify the real problem. Second, 
until such study can shed light on policy options, please 
ensure that the CFPB is not in practice mandating flat fees 
that could potentially hurt both dealers and customers.
    Finally, please explore options for addressing 
discrimination that maintain flexibility for an auto dealer to 
give the consumer the best rate possible.

A.1. The Consumer Financial Protection Bureau's March 21, 2013, 
Indirect Auto Bulletin was published to offer guidance to 
indirect auto lenders about compliance with the fair lending 
requirements of the Equal Credit Opportunity Act (ECOA).\1\ The 
Auto Bulletin highlighted existing fair lending requirements of 
ECOA. The bulletin advises lenders that the Bureau will closely 
review the operations of indirect auto lenders' markup and 
compensation policies based upon the discretion those policies 
permit.
---------------------------------------------------------------------------
    \1\ Indirect Auto Lending and Compliance with ECOA, CFPB Bulletin 
2013-02, Mar. 21, 2013 available at http://files.consumerfinance.gov/f/
201303_cfpb_march_-Auto-Finance-Bulletin.pdf.
---------------------------------------------------------------------------
    Flat fees are mentioned in the bulletin merely as one 
example of a nondiscretionary compensation mechanism; the 
bulletin does not mandate flat fees or any other particular 
system of dealer compensation. It is our understanding that a 
number of indirect auto lenders currently compensate auto 
dealers using a variety of nondiscretionary programs, and 
lenders may choose to adopt a variety of means, including 
alternative compensation policies, to address fair lending 
risk. As a general matter, however, the Bureau believes that 
the legitimate business needs of creditors and fair lending are 
compatible, a judgment that Congress has enshrined in law by 
enacting ECOA and by charging the Bureau with its enforcement.
    The Bureau's and Department of Justice's (DOJ) recently 
announced enforcement action against Ally Financial Inc. and 
Ally Bank demonstrates the type of fair lending risk identified 
in the Bureau's bulletin. In addition to requiring Ally to pay 
$98 million in damages and penalties to resolve these issues, 
the Bureau's and DOJ's coordinated orders require Ally to 
establish a new compliance framework. Specifically, Ally will 
monitor dealer markup in order to prevent or redress future 
discrimination or Ally can decide to eliminate dealer markups 
altogether. Within this framework, Ally will be able to 
exercise its business judgment about how best to achieve 
compliance with fair lending law.
                                ------                                


 RESPONSE TO WRITTEN QUESTIONS OF SENATOR TOOMEY FROM RICHARD 
                            CORDRAY

Q.1. In a recent amicus brief, the Bureau stated that it was 
not ``tak[ing] a position about the proper analysis that the 
Court should engage in to determine how to interpret and apply 
State law'' to tribal lenders. Does existing Federal law bar a 
federally recognized sovereign tribe from extending a loan to a 
consumer at a rate exceeding the rate that would be permitted 
by the law of the jurisdiction in which the consumer resides?

A.1. All lenders should be mindful of State and Federal law and 
must comply with all of the laws applicable to them. Full 
compliance with the law is essential to the operation of a 
fair, transparent and competitive market. The marketplace in 
which payday lenders operate is increasingly diverse, and the 
Consumer Financial Protection Bureau is committed to ensuring 
that consumers receive the full protection of Federal consumer 
financial law--whether they obtain a loan online or from a 
storefront.
    The Bureau has jurisdiction over a broad array of 
companies, including online lenders, loan servicers, and debt 
collectors. We will bring enforcement actions when we determine 
it is appropriate to do so. Recently the Bureau brought its 
first online lending lawsuit, in a significant step in the 
Bureau's efforts to address regulatory-evasion schemes that are 
increasingly becoming a feature of the online small-dollar and 
payday lending industry. In filing that suit, the Bureau has 
worked closely and collaboratively with State attorneys general 
and banking regulators.\1\
---------------------------------------------------------------------------
    \1\ Consumer Financial Protection Bureau v. CashCall, Inc., WS 
Funding, LLC, Delbert Services Corporation, and J. Paul Reddam (2013), 
available at http://files.consumerfinance.gov/f/
201312_cfpb_complaint_cashcall.pdf.

Q.2. The Bureau's Advance Notice of Proposed Rulemaking for 
debt collection practices focuses a great deal on the 
information debt buyers obtain when they purchase charged-off 
consumer obligations from original creditors and seeks 
significant input on whether debt collectors should be further 
restricted in how they communicate with consumers. How will you 
ensure that these new regulations do not prevent responsible 
debt collectors from operating in this new regulatory 
---------------------------------------------------------------------------
environment?

A.2. The Consumer Financial Protection Bureau is committed to 
ensuring that any rules it develops protect consumers without 
imposing unnecessary or undue burdens on responsible debt 
collectors. The Bureau currently is at the initial stage of its 
assessment of potential debt collection regulations, with its 
Advance Notice of Proposed Rulemaking (ANPR) seeking public 
comment on a broad range of possible ideas for debt collection 
rules. The ANPR the Bureau published expressly requests 
comments concerning the advantages and disadvantages of these 
ideas. If the Bureau decides to publish a Notice of Proposed 
Rulemaking (NPR), it would likely convene a Small Business 
Regulatory Flexibility Act review panel to get input from small 
businesses as to the effects of a possible rule's requirements 
and restrictions on them. Within 60 days of the meeting of this 
panel, the Bureau would issue a report describing the 
information presented and its responses to that information. 
Finally, if the Bureau publishes an NPR with the text of a 
proposed rule and a discussion of its provisions, it would 
solicit public comments on the costs and benefits of its 
proposed requirements and restrictions. In short, the process 
that the Bureau would use to develop debt collection rules 
would provide the debt collection industry with ample 
opportunity to submit information concerning the costs and 
benefits of various regulatory ideas and requirements, thereby 
assisting the agency in creating rules that protect consumers 
without imposing unnecessary or undue burdens on responsible 
debt collectors.

Q.3. Do you believe that it is the Bureau's responsibility to 
promote additional State regulation? Please describe all 
contacts by Bureau officials with State regulators and State 
legislative officials on issues related to the debt buyer and 
debt collection industry. Please include specific State 
legislative initiatives and proposed legislation that the 
Bureau supports.

A.3. Many State and local governments license debt collectors 
and regulate their activities. Recently, a number of States and 
local governments have changed or are considering changing 
their statutes, regulations, and rules applicable to debt 
collection litigation. Most of these changes focus on rules of 
court procedure and evidence. These are areas that States have 
traditionally regulated.
    The Consumer Financial Protection Bureau regularly and 
routinely informs State regulators and officials about the 
Bureau's work, and consults and coordinates with them, as is 
expressly authorized and, in many cases, required by Congress, 
most notably throughout the provisions of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, subject to 
applicable limitations and safeguards.\2\
---------------------------------------------------------------------------
    \2\ See, e.g., Dodd-Frank Act sections 1013(b)(3)(D) (``the Bureau 
shall share consumer complaint information with prudential regulators, 
the Federal Trade Commission, other Federal agencies, and State 
agencies''); 1013(c)(2)(B) (``coordinating fair lending efforts of the 
Bureau with other Federal agencies and State regulators''); 
1013(e)(1)(C) (``coordinate efforts among Federal and State agencies, 
as appropriate, regarding consumer protection measures relating to 
consumer financial products and services offered to, or used by, 
servicemembers and their families''); 1013(g)(3)(E) (``coordinate 
consumer protection efforts of seniors with other Federal agencies and 
State regulators''); 1015 (``The Bureau shall coordinate with the 
Commission, the Commodity Futures Trading Commission, the Federal Trade 
Commission, and other Federal agencies and State regulators''); 
1022(c)(6)(C) (providing access to Bureau examination reports for ``a 
prudential regulator, a State regulator, or any other Federal agency 
having jurisdiction''); 1022(c)(7)(C) (``the Bureau shall consult with 
State agencies''); 1024(b)(3) and 1025(b)(2) (``the Bureau shall 
coordinate its supervisory activities with the supervisory activities 
conducted by prudential regulators and the State bank regulatory 
authorities''); 1025(e)(2) (``The Bureau shall pursue arrangements and 
agreements with State bank supervisors''); 1042(b)(1) (``a State 
attorney general or State regulator shall timely provide a copy of the 
complete complaint to be filed and written notice describing such 
action or proceeding to the Bureau''); and 1042(c) (``The Bureau shall 
. . . provide guidance in order to further coordinate actions with the 
State attorneys general and other regulators'').
---------------------------------------------------------------------------
    Indeed, in its recent ANPR on debt collection, the Bureau 
recognized this State role in explaining that it was interested 
in receiving comments concerning ``how proposed rules could 
protect consumers in debt collection litigation without 
adversely affecting the traditional role of the States in 
overseeing the administration and operation of their court 
systems and without imposing undue or unnecessary costs on the 
debt collection process.''\3\ The Bureau also developed a set 
of draft court rules on debt collection litigation, drawn 
directly from provisions already adopted by various States, and 
provided technical assistance on them to State regulators and 
officials who requested it.
---------------------------------------------------------------------------
    \3\ Bureau of Consumer Financial Protection, ``Debt Collection 
(Regulation F); Advance Notice of Proposed Rulemaking, 78 Fed. Reg. 
67848, 67877 (Nov. 12, 2013).
---------------------------------------------------------------------------
    On June 6, the Bureau and the Federal Trade Commission 
jointly hosted a roundtable entitled ``Life of a Debt: Data 
Integrity in Debt Collection.''\4\ The roundtable included 
representatives from industry, consumer advocacy groups, and 
State and Federal officials. In addition, the Bureau's Office 
of Supervision, Enforcement, and Fair Lending interact 
regularly with their State counterparts on confidential 
supervisory or enforcement matters related to the debt 
collection industry. When requested, the Bureau has provided 
technical assistance, including copies of draft court rules 
derived from current State laws and court rules, to State 
regulators and officials that have jurisdiction over debt 
collectors' activities and have or are considering changing 
their statutes, regulations, and rules applicable to debt 
collection litigation.
---------------------------------------------------------------------------
    \4\ http://www.consumerfinance.gov/newsroom/steve-antonakes-
remarks-at-life-of-a-debt-data-integrity-in-debt-collection/.

Q.4. Under the Ability-to-Repay rule scheduled to go into 
effect on January 10, 2014, one way a mortgage loan can meet 
the requirements necessary to be classified as a ``qualified 
mortgage'' is for the loan to be eligible for purchase by 
Fannie Mae or Freddie Mac. As I understand it, both of the GSEs 
require loans to be underwritten using a specific credit score, 
despite the fact that there are other newer competing scores in 
the marketplace. Consumers and investors could be better served 
if the GSEs fostered a competitive credit scoring marketplace 
and that competition led to more predictive scores. What are 
your thoughts on allowing a more competitive credit scoring 
---------------------------------------------------------------------------
market for loans intended to be sold to the GSEs?

A.4. The Federal Housing Finance Agency (FHFA) and the 
Government-Sponsored Enterprises (GSEs) make decisions about 
the types of credit scores that the GSEs will accept. In making 
these determinations, the agencies evaluate the predictiveness 
of different scoring models and the relative merits of allowing 
multiple scores. While one might expect allowing lenders to use 
multiple credit scores would promote a more competitive and 
dynamic marketplace for credit scoring, other considerations 
such as the potential for adverse selection if lenders are 
allowed to choose among multiple scores are important 
considerations that need to be taken into account when 
determining which or how many scores to allow. The FHFA and 
GSEs are better positioned to answer questions about these 
tradeoffs, particularly given their more comprehensive access 
to a historical record of mortgage borrower characteristics, 
loan performance, and credit scores.
    It is also worth noting that utilizing GSE eligibility in 
order to obtain qualified mortgage status for a mortgage loan 
is a temporary provision (expiring at the earlier of 7 years 
after the rule's effective date of January 10, 2014, or when 
the GSEs are no longer under the conservatorship of FHFA) and 
is also only one option for obtaining eligibility. Under our 
permanent ``general definition'' of qualified mortgage, credit 
score is not a factor at all in determining qualified mortgage 
status.
                                ------                                


  RESPONSE TO WRITTEN QUESTIONS OF SENATOR MORAN FROM RICHARD 
                            CORDRAY

Q.1. At the hearing, and previously in the auto financing 
letter of October 30 signed by 22 Senators including myself, 
you were asked about the accuracy of the CFPB's proxy 
methodology used to support its March 21 guidance. At the 
hearing, you responded that your proxy methodology was time-
honored and well-tested both in social science literature and 
by the Justice Department and your fellow regulators, was 
state-of-the-art, and similar to that utilized by the Federal 
Reserve Board.
    While a proxy methodology may well be consistent with other 
data collection efforts within the Federal Government, it is 
still unclear to me the exact degree of accuracy produced by 
your methodology with regard to indirect auto lending. As of 
this date, you have not divulged the accuracy or inaccuracy, on 
a percentage basis, of the CFPB's proxy methodology at the 
hearing or in your response to the previously mentioned letter. 
Is the CFPB not currently aware of the degree of accuracy that 
this proxy method yields? If the CFPB does have information on 
the accuracy of the proxy method, why has that number not been 
shared with Congress as has been requested?

A.1. To further inform interested parties, including industry 
and consumers, and to be responsive to inquiries from Congress, 
the Consumer Financial Protection Bureau has provided 
additional information about its proxy methods. As previously 
explained, the Bureau published its March 21, 2013 Indirect 
Auto Bulletin to offer guidance to indirect auto lenders about 
compliance with the existing fair lending requirements of the 
Equal Credit Opportunity Act. The Equal Credit Opportunity Act 
and Regulation B prohibit discrimination on the basis of 
various listed characteristics, such as race, national origin, 
or sex. To comply with these laws, lenders should ensure that 
their practices do not produce an unlawful disparate impact on 
these bases. Statistical evidence is an important tool for 
identifying disparate impact. However, vital demographic 
information, such as race, sex, and ethnicity, is usually not 
collected by nonmortgage lenders. Thus, Federal agencies have 
long used proxy methods in assessing whether to take action 
regarding particular lending practices. Various proxy 
methodologies are publicly available and have been used for 
decades in a number of different Civil Rights contexts, 
including voting rights cases, Title VII cases, and 
constitutional challenges, including jury selection and equal 
protection matters. In addition, Federal banking regulators 
have made clear that proxy methods may be used in fair lending 
exams to estimate protected characteristics where direct 
evidence of the protected characteristic is unavailable.\1\
---------------------------------------------------------------------------
    \1\ See Interagency Fair Lending Examination Procedures, at 12-13, 
available at http://www.ffiec.gov/PDF/fairlend.pdf (explaining that 
``[a] surrogate for a prohibited basis group may be used'' in a 
comparative file review and providing examples of surname proxies for 
race/ethnicity and first name proxies for sex); see also, http://
www.philadephiafed.org/bank-resources/publications/consumer-compliance-
outlook/2012/first-quarter/fair-lending-webinar.cfm.
---------------------------------------------------------------------------
    In general, the proxy methodology used depends on the 
characteristic being proxied. For example, to proxy for gender, 
the Bureau relies on a first-name database from the Social 
Security Administration that reports counts of individuals by 
gender and birth year for first names occurring at least five 
times for a particular gender in a birth year.\2\ The proxy 
method assigns a probability that a particular applicant is 
female based on the distribution of the population across 
gender categories (male or female) for the applicant's first 
name. There are a greater variety of methods to proxy for race 
and national origin. A common method for proxying the 
probability that an applicant is Hispanic or Asian is to use 
the surname database published by the Census Bureau.\3\ Another 
method to proxy for race and national origin-typically referred 
to as ``geocoding''--uses the demographics of the census 
geography (e.g., census tract or block group) in which an 
individual's residence is located, and assigns probabilities 
about the individual's race or national origin based on the 
demographics of that area. This method is frequently used to 
proxy the probability that an applicant is African American, 
and it can be used to proxy for other racial and ethnic groups 
as well.
---------------------------------------------------------------------------
    \2\ See http://www.ssa.gov/oactlbabynames/limits.html.
    \3\ http://www.census.gov/genealogy/www/data/2000surnames/
index.html.
---------------------------------------------------------------------------
    Over the last decade, another method to proxy for race and 
national origin has been developed that integrates the surname 
and geographical approaches described above. This method was 
developed by health research economists,\4\ and it combines the 
respective probabilities generated by the surname and 
geographical proxies. Published research has found that the 
integrated approach produces proxies that correlate highly with 
self-reported race and national origin data and is more 
accurate than using surname or geography alone.\5\ The Bureau 
uses the integrated proxy as the primary method for proxying 
race and national origin in our nonmortgage analyses.
---------------------------------------------------------------------------
    \4\ Marc N. Elliott et al., A New Method for Estimating Race/
Ethnicity and Associated Disparities Where Administrative Records Lack 
Self-Reported Race/Ethnicity, Health Services Research 43:5, Part I 
(Oct. 2008).
    \5\ Marc N. Elliott et al., Using the Census Bureau's Surname List 
to Improve Estimates of Race/Ethnicity and Associated Disparities, 
Health Services & Outcomes Research Methodology (2009) 9:69-83.
---------------------------------------------------------------------------
    We are aware of proxy methods for race and national origin 
that use nonpublic information, such as proprietary databases 
developed in the private sector matching first or middle names 
to certain racial or ethnic groups. For the purpose of 
conducting our supervisory work, we have chosen to use proxy 
methods that rely solely on public data so that lenders can 
replicate our methods without the need to recreate or purchase 
proprietary databases as part of their own fair lending 
compliance management systems.
    As we noted above, proxy methods vary based on the 
characteristic being proxied (race, national origin, or 
gender), and there are several reasonable methods of proxying 
for each of these characteristics. Some methods, for example, 
use solely surname or geocoding. The Federal Reserve Board, 
which publicly released some of its proxy methods in July, uses 
a surname Census database to determine if a borrower is 
Hispanic and geocoding to determine majority minority census 
tracts.\6\ Other methods, like the Bureau's, integrate the same 
sources of data into a single proxy for race and national 
origin. We have chosen the integrated method because we 
consider it appropriate and helpful in evaluating the large and 
complex portfolios of the auto lenders supervised by the 
Bureau. Similarly, we expect lenders to choose a proxy method 
that will support a compliance management system commensurate 
with their size, organizational complexity, and risk profile.
---------------------------------------------------------------------------
    \6\ http://www.philadelphiafed.org/bank-resources/publications/
consurner-compliance-outlook/outlook-live/2013/080613.pdf.

Q.2. When asked if you have done a ``specific analysis on the 
data collected to confirm'' the accuracy of your proxy 
methodology you gave a few more general details and then cited 
``an ongoing investigatory effort where we're working with the 
Justice Department. So the order of the day on those things is 
confidentiality unless or until you get to the point of taking 
some sort of public action, and so I want to be a little 
careful about not breaching that.'' In my estimation, the March 
21st guidance could very well be considered a public action, 
yet we have not seen any information from the CFPB as to how 
accurate the data was that led to the publication of that 
guidance. Will you explain how the March 21st guidance failed 
to meet the criteria of a public action and how the indirect 
auto financing industry can be expected to comply with this 
guidance if there is no information as to the impetus for the 
CFPB's action? How would simply revealing the accuracy of the 
CFPB's proxy methodology affect any ongoing Justice Department 
---------------------------------------------------------------------------
investigations?

A.2. Please see response to question 1.
    The Consumer Financial Protection Bureau published the 
Indirect Auto Bulletin to remind lenders of their 
responsibilities under ECOA and to offer guidance on how to 
address the identified risks to all indirect auto lenders 
within the jurisdiction of the Bureau. ECOA and Regulation B, 
which was the result of notice and comment, make it illegal for 
a ``creditor'' to discriminate in any aspect of a credit 
transaction because of race, color, religion, national origin, 
sex, marital status, age, receipt of income from any public 
assistance program, or the exercise, in good faith, of a right 
under the Consumer Credit Protection Act.\7\
---------------------------------------------------------------------------
    \7\ 15 U.S.C.  1691 et seq.; 12 C.F.R. pt. 1002 et seq.
---------------------------------------------------------------------------
    The Administrative Procedure Act (APA) sets out the 
principles by which Federal agencies engage in regulatory 
activity and in applicable cases instructs an agency to provide 
an opportunity for public comment before the agency issues a 
rule. The APA does not impose a notice and comment requirement 
for general statements of policy, nonbinding informational 
guidelines, or interpretive memoranda. Accordingly, the Bureau 
was not required to solicit comments about the indirect auto 
compliance bulletin.

Q.3. The March 21st guidance was issued without public comment 
or hearing. I have not been made aware of a consultation or any 
input from the Federal Reserve Board (FRB) or the Federal Trade 
Commission (FTC) beyond advising them immediately prior to the 
issuance of the bulletin. Would you please share with me the 
exact date you first contacted and conversed with the FRB and 
the FTC about the bulletin in question?

A.3. The Consumer Financial Protection Bureau's March 21, 2013, 
Indirect Auto Bulletin was published to offer guidance to 
indirect auto lenders about compliance with the fair lending 
requirements of the Equal Credit Opportunity Act (ECOA).\8\ The 
Auto Bulletin did not represent a policy shift but instead 
highlighted the fair lending risk inherent in some indirect 
auto lenders' markup and compensation policies based upon the 
discretion those policies permit.
---------------------------------------------------------------------------
    \8\ Indirect Auto Lending and Compliance with ECOA, CFPB Bulletin 
2013-02, Mar. 21, 2013 available at http://files.consumerfinance.gov/f/
201303_cfpb_march_-Auto-Finance-Bulletin.pdf.
---------------------------------------------------------------------------
    Recognizing the Federal Trade Commission's (FTC) shared 
responsibility in this area, the Bureau began a dialogue with 
the FTC during the summer of 2011 regarding fair lending issues 
in the auto lending arena, including dealer markup. As part of 
this coordination, the Bureau participated in the FTC's Second 
Motor Vehicle Roundtable, which focused on military consumers, 
financial literacy, and fair lending and was held August 2-3, 
2011, in San Antonio, Texas. In this manner, we shared 
resources with the FTC and gathered valuable public information 
and input on this topic. Likewise, Bureau personnel attended 
the Third FTC roundtable held in Washington, DC in December 
2011. Since that time we have had an ongoing dialogue about 
dealer markup in indirect auto lending with both the FTC and 
Federal Reserve Board (FRB). The Bureau more recently joined 
with the FRB in their August 6, 2013 Webinar, titled Indirect 
Auto Lending--Fair Lending Considerations.
    We also regularly coordinate with the FTC on fair lending 
enforcement matters, including meeting with them on a bi-
monthly basis.

Q.4. As you confirmed in your response to questions during the 
hearing, the CFPB is forbidden from exercising any rulemaking, 
supervisory, enforcement or any other authority, including any 
authority to order assessments, over a motor vehicle dealer. 
Did this provision of Dodd-Frank play any role in the CFPB's 
failure to allow for public comments prior to the March 21st 
issuance of the guidance? If the possibility of violating this 
provision of Dodd-Frank did play a role, why was a hearing or 
comment period open only to auto lenders not convened to 
discuss this proposal?

A.4. The focus of the Indirect Auto Lending and Compliance with 
ECOA, CFPB Bulletin 2013-02, was on indirect lending activity, 
not auto dealers. ECOA and Regulation B, which was the result 
of notice and comment, make it illegal for a ``creditor'' to 
discriminate in any aspect of a credit transaction because of 
race, color, religion, national origin, sex, marital status, 
age, receipt of income from any public assistance program, or 
the exercise, in good faith, of a right under the Consumer 
Credit Protection Act.\9\
---------------------------------------------------------------------------
    \9\ 15 U.S.C.  1691 et seq.; 12 C.F.R pt. 1002 et.seq.
---------------------------------------------------------------------------
    The Consumer Financial Protection Bureau published the 
Indirect Auto Bulletin to remind lenders of their existing 
responsibilities under ECOA and to offer guidance on how to 
address the identified risks to indirect auto lenders. The 
Administrative Procedure Act (APA) sets out the principles by 
which Federal agencies engage in regulatory activity and in 
applicable cases instructs an agency to provide an opportunity 
for public comment before the agency issues a rule. The APA 
does not impose a notice and comment requirement for general 
statements of policy, nonbinding informational guidelines, or 
interpretive memoranda. Accordingly, the Bureau was not 
required to solicit comments about the indirect auto compliance 
bulletin.
                                ------                                


 RESPONSE TO WRITTEN QUESTIONS OF SENATOR COBURN FROM RICHARD 
                            CORDRAY

Q.1. The Bipartisan Policy Committee (BPC) issued a report that 
recommended that all fines collected above the amount to 
redress consumer harm should be deposited into the U.S. 
Treasury to pay down debt, just like other Federal regulators 
such as the FTC. Can you justify CFPB's unique ability to 
retain excess penalties to augment the agencies' normal budget 
activities? Does the CFPB's $541 million annual operating 
budget not provide enough resources for financial literacy and 
consumer education activities? Do you agree with the Bipartisan 
Policy Committee recommendation to remit monies in excess of 
redressing consumer harm the U.S. Treasury?

A.1. Congress, in the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (the Dodd-Frank Act), provided that 
funds remaining after fully compensating victims may be 
allocated to consumer education and financial literacy 
programs. The Consumer Financial Protection Bureau's focus is 
on carrying out the requirements under the Dodd-Frank Act, 
including the various decisions that Congress made regarding 
the Bureau's use and management of funds.

Q.2. The Civil Penalty Fund has an unobligated balance of $57.6 
million. How much of the unobligated balance does the CFPB plan 
to utilize for consumer education and financial literacy?

A.2. Every 6 months, the Fund Administrator decides how much 
money, if any, to allocate for consumer education and financial 
literacy programs. The first priority will always be to 
allocate funds for payments to victims. However, if funds 
remain after allocating enough money to provide full 
compensation to all eligible victims who can practicably be 
paid, the Fund Administrator may allocate some or all of those 
remaining funds for consumer education and financial literacy 
programs.
    On May 30, 2013, the Consumer Financial Protection Bureau 
made its first allocation from the Civil Penalty Fund. In 
accordance with the procedures established by the Civil Penalty 
Fund rule, the Civil Penalty Fund Administrator allocated 
$10,488,815 to be used to make payments to eligible classes of 
victims from the Payday Loan Debt Solution, Inc. and Gordon, et 
al. cases--enough to provide full compensation for all eligible 
victims' uncompensated harm. Of the $34,042,863 that remained 
available for allocation, the Bureau allocated $13,380,000 for 
consumer education and financial literacy programs. On November 
29, 2013, the Bureau made its second allocation from the Civil 
Penalty Fund. The Fund Administrator allocated $2,557,231 to be 
used to make payments to eligible classes of victims from the 
American Debt Settlement Solutions and National Legal Help 
Center cases. No funds were allocated to consumer education and 
financial literacy programs. The Bureau will next allocate 
funds from the Civil Penalty Fund between April 1 and May 30, 
2014.
    The Bureau has selected the first consumer education and 
financial literacy program that it will fund with Civil Penalty 
Fund money. The Bureau has issued a Request for Proposal to 
deploy a financial coaching program that will serve two groups 
of Americans: (1) recent veterans who are transitioning from 
servicemember to veteran life, as well as military widows and 
widowers, and (2) economically vulnerable consumers who want to 
improve their approach to money management.
    One-on-one financial coaching will help veterans transition 
from military to civilian financial life, and help consumers 
who may be cash-strapped learn how to manage the money that 
they have more effectively to achieve their financial goals. 
Working with a financial coach can also help consumers identify 
and understand how to distinguish between useful financial 
products and frauds and scams, thus safeguarding against them 
becoming victims of frauds and scams in the future. The program 
for recent veterans and military spouse survivors is planned to 
have a presence in all 50 States. The component for 
economically vulnerable consumers, although smaller, will 
provide financial coaching services through locations that are 
diverse in terms of geographic location, and include those from 
urban and rural communities, and from different cultural, 
ethnic, racial, and other backgrounds.
    The Bureau plans to use the Federal procurement process for 
these programs and will post information about the process and 
contract requirements as Civil Penalty Fund money becomes 
available for consumer education and financial literacy 
programs.

Q.3. Please provide a copy of the original contract or task 
order for each contract valued over $1 million since FY2012.

A.3. Included with this response are copies of contracts and/or 
task orders (excludes modifications) awarded from October 1, 
2011, through December 15, 2013, where the contract or task 
order value is over $1 million.

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