[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
THE SEMI-ANNUAL REPORT OF
THE BUREAU OF CONSUMER
FINANCIAL PROTECTION
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
SECOND SESSION
__________
MARCH 16, 2016
__________
Printed for the use of the Committee on Financial Services
Serial No. 114-78
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HOUSE COMMITTEE ON FINANCIAL SERVICES
JEB HENSARLING, Texas, Chairman
PATRICK T. McHENRY, North Carolina, MAXINE WATERS, California, Ranking
Vice Chairman Member
PETER T. KING, New York CAROLYN B. MALONEY, New York
EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
FRANK D. LUCAS, Oklahoma BRAD SHERMAN, California
SCOTT GARRETT, New Jersey GREGORY W. MEEKS, New York
RANDY NEUGEBAUER, Texas MICHAEL E. CAPUANO, Massachusetts
STEVAN PEARCE, New Mexico RUBEN HINOJOSA, Texas
BILL POSEY, Florida WM. LACY CLAY, Missouri
MICHAEL G. FITZPATRICK, STEPHEN F. LYNCH, Massachusetts
Pennsylvania DAVID SCOTT, Georgia
LYNN A. WESTMORELAND, Georgia AL GREEN, Texas
BLAINE LUETKEMEYER, Missouri EMANUEL CLEAVER, Missouri
BILL HUIZENGA, Michigan GWEN MOORE, Wisconsin
SEAN P. DUFFY, Wisconsin KEITH ELLISON, Minnesota
ROBERT HURT, Virginia ED PERLMUTTER, Colorado
STEVE STIVERS, Ohio JAMES A. HIMES, Connecticut
STEPHEN LEE FINCHER, Tennessee JOHN C. CARNEY, Jr., Delaware
MARLIN A. STUTZMAN, Indiana TERRI A. SEWELL, Alabama
MICK MULVANEY, South Carolina BILL FOSTER, Illinois
RANDY HULTGREN, Illinois DANIEL T. KILDEE, Michigan
DENNIS A. ROSS, Florida PATRICK MURPHY, Florida
ROBERT PITTENGER, North Carolina JOHN K. DELANEY, Maryland
ANN WAGNER, Missouri KYRSTEN SINEMA, Arizona
ANDY BARR, Kentucky JOYCE BEATTY, Ohio
KEITH J. ROTHFUS, Pennsylvania DENNY HECK, Washington
LUKE MESSER, Indiana JUAN VARGAS, California
DAVID SCHWEIKERT, Arizona
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas
TOM EMMER, Minnesota
Shannon McGahn, Staff Director
James H. Clinger, Chief Counsel
C O N T E N T S
----------
Page
Hearing held on:
March 16, 2016............................................... 1
Appendix:
March 16, 2016............................................... 73
WITNESSES
Wednesday, March 16, 2016
Cordray, Hon. Richard, Director, Consumer Financial Protection
Bureau (CFPB).................................................. 5
APPENDIX
Prepared statements:
Hinojosa, Hon. Ruben E....................................... 74
Cordray, Hon. Richard........................................ 75
Additional Material Submitted for the Record
Beatty, Hon. Joyce:
Report entitled, ``Fair Credit Compliance Policy & Program''. 80
Guinta, Hon. Frank:
Written statement of the National Automobile Dealers
Association................................................ 100
Huizenga, Hon. Bill:
Letter to Hon. Richard Cordray from various undersigned
Members of Congress........................................ 103
Waters, Hon. Maxine:
Center for Responsible Lending report entitled, ``Non-
Negotiable: Negotiation Doesn't Help African Americans and
Latinos on Dealer-Financed Car Loans,'' dated January 2014. 109
Letter to U.S. Representative G.K. Butterfield from the
National Association of Minority Automobile Dealers........ 141
Cordray, Hon. Richard:
Written responses to questions for the record submitted by
Representative Barr........................................ 142
Written responses to questions for the record submitted by
Representative Guinta...................................... 143
Written responses to questions for the record submitted by
Representative Hinojosa.................................... 150
Written responses to questions for the record submitted by
Representative Huizenga.................................... 152
Written responses to questions for the record submitted by
Representative Hultgren.................................... 154
Written responses to questions for the record submitted by
Representative Luetkemeyer................................. 157
Written responses to questions for the record submitted by
Representative Meeks....................................... 165
Written responses to questions for the record submitted by
Representative Messer...................................... 166
Written responses to questions for the record submitted by
Representative Moore....................................... 173
Written responses to questions for the record submitted by
Representative Mulvaney.................................... 174
Written responses to questions for the record submitted by
Representative Murphy...................................... 175
Written responses to questions for the record submitted by
Representative Posey....................................... 181
Written responses to questions for the record submitted by
Representative Ross........................................ 183
Written responses to questions for the record submitted by
Representative Sinema...................................... 187
Written responses to questions for the record submitted by
Representative Stivers..................................... 188
Written responses to questions for the record submitted by
Representative Tipton...................................... 195
Written responses to questions for the record submitted by
Representative Velazquez................................... 198
Written responses to questions for the record submitted by
Representative Westmoreland................................ 199
THE SEMI-ANNUAL REPORT OF
THE BUREAU OF CONSUMER
FINANCIAL PROTECTION
----------
Wednesday, March 16, 2016
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:03 a.m., in
room 2128, Rayburn House Office Building, Hon. Jeb Hensarling
[chairman of the committee] presiding.
Members present: Representatives Hensarling, Royce, Lucas,
Garrett, Neugebauer, Pearce, Posey, Fitzpatrick, Westmoreland,
Luetkemeyer, Huizenga, Duffy, Hurt, Stivers, Mulvaney,
Hultgren, Ross, Pittenger, Wagner, Barr, Rothfus, Messer,
Schweikert, Guinta, Tipton, Williams, Poliquin, Love, Hill,
Emmer; Waters, Maloney, Velazquez, Sherman, Meeks, Hinojosa,
Clay, Scott, Green, Cleaver, Ellison, Perlmutter, Himes,
Sewell, Foster, Murphy, Delaney, Sinema, Beatty, Heck, and
Vargas.
Chairman Hensarling. The Financial Services Committee will
come to order. Without objection, the Chair is authorized to
declare a recess of the committee at any time.
This hearing is entitled, ``The Semi-Annual Report of the
Bureau of Consumer Financial Protection.''
I now recognize myself for 3 minutes to give an opening
statement. Not that we need a reminder, but if there is one
thing that the Presidential campaigns of both parties have
shown us, it is that the American people are, indeed, angry.
And they have a right to be angry.
After 7 years of Obamanomics they are still suffering
through a failed economic recovery, the slowest and worst in
our lifetimes. This is indisputable.
Americans are even angrier, though, at having their lives
increasingly ruled by out-of-touch Washington elites. Every day
they see their liberties slipping away as Washington inexorably
grows larger, more intrusive, more distant, and more arrogant.
As Thomas Jefferson once warned, government agencies are
sending, ``swarms of officers to harass our people and eat out
their substance.''
Today, the poster child of Jefferson's lament is the
Consumer Financial Protection Bureau (CFPB). Its Director, our
witness, is neither elected nor accountable to the American
people. Yet, when it comes to consumer financial products, he
is vested with the awesome power of the entire United States
Congress.
This is amazing; this is frightening; and this is tragic.
Soon, Mr. Cordray will presume to decide for all Americans
whether he will allow them to take out small-dollar loans to
keep their utilities from being cut off or to keep their car on
the road so they can make it to work.
Soon, Mr. Cordray will decide whether he will permit
Americans to resolve contract disputes through arbitration or
simply hand over the keys to the CFPB's luxury office building
to the wealthy, powerful, and politically well-connected trial
lawyers' lobby.
Already, Mr. Cordray has decided who in America will be
able to receive a mortgage under his qualified mortgage rule,
which, when fully implemented, will disqualify almost one-
fourth of all Americans who qualified for a home mortgage just
a few years ago.
Already, Mr. Cordray has decided that countless Americans
should pay more for auto loans based upon junk science and a
dubious legal theory of statistical, unintentional
discrimination; all the while, his agency reels from countless
accusations of actual discrimination.
Now, apologists for the Bureau, along with Mr. Cordray,
frequently cite the tens of millions of dollars of fines they
have imposed as proof that they are, indeed, protecting
consumers. But the Bureau operates as legislature, cop on the
beat, prosecutor, judge, and jury, all rolled into one.
Fines imposed in such an abusive structure tell us nothing
about justice; they tell us nothing about consumer welfare.
Nothing.
In short, Congress has made Mr. Cordray a dictator. And
when it comes to the well-being and liberty of American
consumers, he is not a particularly benevolent one.
Congress must address this critical problem because
Congress helped create the problem. It has outsourced much of
its legislative authority to the Executive Branch in general,
and the CFPB in particular, and in doing so, has compromised
our foundational principles of co-equal branches of government,
checks and balances, due process, and justice for all.
Congress must reclaim its Article I authority and reclaim
it now. There is no better place to start than the CFPB, an
agency that has abused its power that it never should have had
in the first place.
It is time to uphold our oath to the Constitution. It is
time to strip the CFPB of its rulemaking authority and return
it to the elected Representatives of we, the people.
I now recognize the ranking member for 5 minutes.
Ms. Waters. Thank you, Mr. Chairman.
And thank you, Director Cordray, for joining us again to
discuss the Consumer Financial Protection Bureau's semi-annual
report to Congress.
The Bureau's accomplishments under your leadership have
helped more Americans participate in a financial system that is
fair and strong. The work that you do is so important because
it means that consumers can access the financial products and
services they need to live prosperous lives without the risk of
deceptive or abusive practices. It also means that consumers
can have recourse when they have been wronged and recoup any
finances they may have lost.
Those accomplishments are reflected in the $11.2 billion
you have returned to 25.5 million Americans. They are reflected
in the 830,000 consumer complaints you have handled on issues
from debt collection to credit reporting. They are reflected in
the increased share of mortgages made to minority borrowers in
recent years and the expansion of access to credit cards,
despite Republican claims to the contrary.
Director Cordray, you are helping consumers succeed, to the
benefit of the entire financial system. I would like to
highlight a few of these particularly important efforts.
I am encouraged by the Bureau's work so far on payday
lending, including soliciting input from small businesses on
the forthcoming regulations. We need rules that will protect
low-income and minority communities from unreasonable loan
terms and unaffordable rates.
Despite modest efforts by some States to curb predatory
practices, most payday loans are simply used to help pay off
another payday loan. We must stop this debt trap, and we must
fight any efforts to weaken, roll back, or stop the CFPB's
upcoming rule.
The Bureau has also led the charge against the
discrimination that still exists in the auto lending industry.
We should be doing all we can to prevent minority borrowers
from being charged higher interest rates and from overpaying on
their auto loans.
Unfortunately, too many Members of Congress have been
misled by Republican arguments against the data and methodology
used by the CFPB in this important work. While Republicans are
attempting to protect lenders, the Bureau has fined banks and
captive lenders, such as Toyota, Honda, and Fifth Third Bank,
for discriminatory practices.
Additionally, in the months since his last report, the
Bureau has successfully won a case against an unscrupulous for-
profit college that deceived students into taking out expensive
private loans and engaged in illegal debt collection practices.
As you know, I have worked on this issue my entire career.
Just recently the Department of Education announced a
proposal to ban mandatory arbitration in student lending. I
hope the Bureau will follow in their footsteps by offering this
protection not only to students but also to Americans that have
found these unfair clauses in their credit cards, prepaid
cards, bank accounts, and mobile phone contracts.
Despite a successful track record of helping consumers,
whether looking to buy a car, own a home, or attend college,
Republicans have turned the CFPB into a political punching bag,
attempting to undermine its work at every turn. This tactic is
at odds with the public's support for the CFPB and the Bureau's
efforts to remain accountable and transparent.
I would like to remind my colleagues that the CFPB has now
testified 59 times before Congress since it was created, issued
more than 40 reports on its activities in the last year alone,
and provided tens of thousands of documents in response to a
never-ending list of Republican fishing expeditions.
Director Cordray, I am thankful for the work that you are
doing. I look forward to hearing your testimony on how the
Bureau continues to help consumers and improve our economy.
Thank you so much, and I yield back the balance of my time.
Chairman Hensarling. The gentlelady yields back.
The Chair now recognizes the gentleman from Texas, Mr.
Neugebauer, chairman of our Financial Institutions
Subcommittee, for 2 minutes.
Mr. Neugebauer. Thank you, Mr. Chairman.
Today I want to use this opening statement to address an
issue that Director Cordray actually raised himself in speaking
before the Consumer Bankers Association conference a couple of
weeks ago. In speaking before the group of bankers, the
Director highlighted the virtues of bringing market-changing
enforcement actions instead of going through a transparent and
formalized rulemaking process. Some call this practice,
``regulation by enforcement.''
Further, he critiqued his critics, saying their concerns
were misguided. After hearing these comments, I feel it
necessary to respond.
Businesses of all sizes deserve certainty. From the largest
financial institution to the three-office title lender,
regulatory risk drives up cost and stunts economic growth.
Federal agencies that are authorized to enforce Federal law
act appropriately when they take actions to hold unlawful
actors accountable. However, when a Federal agency routinely
brings enforcement actions instead of undertaking rulemaking,
with the sole purpose of changing the entire market behavior,
it begins to look like a deliberate evasion of public notice
and comment.
And public notice and comment is a crucial check on the
regulatory overreach and abuse of regulatory power. Not only
does it allow the public to provide unique business insight
into the marketplace, but it diversifies and balances the
decision-making.
At the CFPB, this point is all the more important, given
the agency's current structure: a single, unelected individual
who can unilaterally authorize an agency action.
This celebrated Bureau practice is most obvious and
concerning in the indirect auto industry market. In the midst
of significant public and congressional pushback on the
Bureau's policy positions, it chose to strong-arm lenders into
changing certain practices through media-driven enforcement
headlines. It chose to do this instead of allowing a
transparent process driven by public comment. Some even say
that it purposely evaded the public dialogue.
Unfortunately, this example highlights the very problem
with regulation by enforcement. It allows regulators to use
their regulatory authority outside a transparent and structured
process. It provides an opportunity for regulatory overreach
and abuse. Further, it inserts significant regulatory risk into
the business of our Main Street job creators.
In closing, the Director told the Consumer Bankers
Association, ``When you push back, we welcome your input.'' The
Director should expect continued and aggressive congressional
pushback to continue his regulation by enforcement.
Chairman Hensarling. The time of the gentleman has expired.
Today, we welcome the testimony of the Honorable Richard
Cordray, Director of the Consumer Financial Protection Bueau.
Director Cordray has previously testified before our committee,
so I believe he needs no further introduction.
Director Cordray, without objection, your written statement
will be made a part of the record, and you are now recognized
to give an oral presentation of your testimony.
Thank you.
STATEMENT OF THE HONORABLE RICHARD CORDRAY, DIRECTOR, CONSUMER
FINANCIAL PROTECTION BUREAU
Mr. Cordray. Thank you, Mr. Chairman, Ranking Member
Waters, and members of the committee, for the opportunity to
testify today about the Consumer Financial Protection Bureau's
semi-annual report to Congress. I appreciate our continued
dialogue as we work together to strengthen our financial system
and ensure that it serves consumers, responsible businesses,
and the long-term foundations of the American economy.
As we continue to build this new agency, we have made
considerable progress on the core responsibilities to exert
supervisory oversight over the Nation's largest banks and
nonbank financial companies, and to enforce the consumer
financial laws enacted by the Congress. Our analytical approach
to risk-based supervision is leading to more systematic,
consumer-friendly changes at these financial institutions, and
we are making progress on leveling the playing field for all
market participants.
During this reporting period, our supervisory actions
resulted in financial institutions providing more than $95
million in relief to over 177,000 consumers. Our enforcement
actions are based on careful and thorough investigations, and
most have identified deceptive practices by the parties
involved.
During this reporting period, the orders entered on our
enforcement actions led to approximately $5.8 billion in total
relief for consumers victimized by violations of the law. These
consumers are located in every one of your districts
nationwide.
We are also working to provide tools and information to
develop practical skills and help people understand the choices
they will be making to manage the ways and means of their
lives. Our Ask CFPB resource provides guidance and responds to
inquiries across the entire spectrum of consumer finance. Our
major moment-in-time decisional tools now include paying for
college, owning a home, and planning for retirement.
We have developed a new partnership with the Financial
Services Roundtable to work together on financial education in
the schools, in the workplace, and on behalf of older
Americans, which is proving to be productive.
Listening and responding to consumers is central to our
mission. We continue to refine the capabilities of our Office
of Consumer Response to receive, process, and facilitate
responses to consumer complaints, including those referred to
us by your offices.
We also continue to expand our public consumer complaint
database, which updates nightly and is now populated by over
half a million complaints from consumers about the broad range
of consumer financial products and services. We marked a
milestone for consumer empowerment when we began to add public
consumer complaint narratives, which allow people to share in
their own words their experiences in the consumer financial
marketplace.
Reasonable regulations are essential to protect consumers
from harmful practices and ensure that consumer financial
markets operate in a fair, transparent, and competitive manner.
We have focused our efforts on promoting functional markets,
such as the all-important mortgage market in particular, where
consumers can shop effectively for financial products and
services and are not subject to unfair, deceptive, or abusive
acts or practices.
During this reporting period, we issued several proposed
rules, final rules, or requests for information. To support
industry compliance with our rules, we have published plain-
language compliance guides and other resources to aid in their
implementation. We are also seeking to streamline, modernize,
and harmonize financial regulations that we have inherited from
other agencies.
Over this reporting period the Bureau has continued to
expand its efforts to support and protect consumers in the
financial marketplace. Recent data indicate that sound consumer
protections in our major markets are strengthening markets for
consumers and providers alike.
The mortgage market has been expanding briskly for 2 years
now, since our major rules took effect. The credit card market
is greatly improved, with strong consumer protections, better
industry performance, and increasing consumer satisfaction. The
auto lending market is supporting record sales of cars and
truck to meet consumer demand.
The growing sense of consumers that these markets can
actually work for them, without fear of tricks and traps and
other predatory conduct, is stoking their confidence and
restoring their trust. These developments reflect well on the
work being done by the Consumer Bureau. Taken as a whole, they
are making substantial contributions to the continued gradual
recovery in the American economy.
Mr. Chairman, Ranking Member Waters, and members of the
committee, thank you again for the opportunity to testify today
and to discuss all the work we are doing on behalf of
consumers. We will continue to listen closely to all of our
stakeholders, and we will attend carefully to your oversight in
order to ensure that all Americans can be assured of fair
treatment in the consumer financial marketplace.
I look forward to your questions.
[The prepared statement of Director Cordray can be found on
page 75 of the appendix.]
Chairman Hensarling. The Chair now recognizes himself for 5
minutes for questions.
Director Cordray, as you are well aware, in late 2013 the
Bureau entered into a consent order with Ally Financial over
alleged violations of the Equal Opportunity Credit Act based
upon a legal theory of disparate impact. At the time, Ally had
an important yet unrelated application pending before the
Federal Reserve to become a financial holding company.
On February 21st of this year, Michael Carpenter, former
CEO of Ally, said that the charges that your Bureau brought
against Ally were ``trumped up.'' He went on to say that Ally
had been ``strong-armed'' by the CFPB, and that the CFPB
``absolutely knew they had tremendous leverage over us.''
Mr. Cordray, isn't it true that you and senior staff in the
Office of Fair Lending knew Ally was seeking to achieve
financial holding company status prior to the settlement?
Mr. Cordray. I read the interview with Mr. Carpenter, who,
of course, is no longer employed by Ally--
Chairman Hensarling. Mr. Cordray, it is just a simple yes-
or-no question. Were you or were you not aware of the pending
application prior to the consent order?
Mr. Cordray. We had pursued this investigation against Ally
for well over a year before Ally themselves made--
Chairman Hensarling. Mr. Cordray, it is a simple yes-or-no
question. Were you aware or were you not aware?
Mr. Cordray. As I said, we had pursued this investigation
for more than a year before Ally brought that to our attention.
Chairman Hensarling. Okay, so you were aware. That is the
answer to the question.
Isn't it true that senior staff in the Office of Fair
Lending were in discussions with both the Federal Reserve and
the FDIC on how CFPB's determination of an ECOA violation could
adversely impact their application? Is that true?
Mr. Cordray. We had no decision-making authority over those
other matters. We were simply attempting to conclude our
investigation and get to an appropriate--
Chairman Hensarling. But the question is, were they in
discussion? Was senior staff of the Fair Lending Division of
the CFPB in discussion with both the Federal Reserve and the
FDIC regarding this application?
Mr. Cordray. I believe there were some consultations about
them wanting to know if we were completing this investigation.
Chairman Hensarling. Okay, so consultation--you say
``consultation,'' we say ``discussion.''
Can we pull up slide number six, please?
I believe on October 7, 2013, a decision memorandum was
prepared for you. I am not sure you saw this, but it has the
operative phrase, ``staff is in a dialogue with both the
Federal Reserve Board and the FDIC.'' It begs the question,
what does this have to do with a potential violation of EOCA?
Did you receive this memo, Mr. Cordray? Do you know?
Mr. Cordray. I do not know.
Chairman Hensarling. Okay. Go to the next slide, please.
What is also interesting is that the last sentence of the
previous slide was deleted. And instead, we have somebody with
the initials of ``P.A.F.,'' perhaps Patrice Ficklin, saying,
``Let's refrain from this discussion and instead quote from the
securities filing.'' It seems to me that either senior staff
attempted to cover up these discussions, or they tried to
withhold this information from you.
Did senior staff try to withhold this information from you
prior to the determination?
Mr. Cordray. No, I don't believe so. And I think you have
the entire matter exactly backwards, Mr. Chairman. I would be
glad to explain.
Chairman Hensarling. Okay. Well, regardless of whether or
not you saw this October 7th memorandum, you certainly saw the
one on October 17th--I believe these are your initials--
``Decision Memorandum for the Director.''
And it says, ``This could have a material adverse effect on
Ally's business, results of operations, and financial
position,'' and seemingly you initialed this. Are you at least
familiar with this report?
Mr. Cordray. Again, I think you have this matter exactly
backwards. I would be glad to explain.
Chairman Hensarling. That is not the question, Mr. Cordray.
The question is, did you initial this memorandum? And if so, it
would seem to indicate that you knew ahead of time that you had
an advantage over Ally and you used it.
Mr. Cordray. Again, I think you have this exactly
backwards. I would be glad to explain.
Chairman Hensarling. Okay. Mr. Cordray, you will have ample
opportunity within this hearing, but I wanted to know--
Mr. Cordray. Should we do it now?
Chairman Hensarling. --whether or not you saw this memo.
I have another question. In determining the racial
characteristics of borrowers in the auto lending context, you
don't actually have the racial characteristics that you know
for a fact; instead, the Bureau uses Bayesian Improved Surname
Geocoding. Is that correct?
Mr. Cordray. We use the same approach that is used in
employment discrimination--
Chairman Hensarling. Do you use Bayesian Improved Surname
Geocoding (BISG) or not?
Mr. Cordray. We do the same approach that is used in
employment discrimination cases across--
Chairman Hensarling. Okay. So it is Bayesian Improved
Surname Geocoding.
We have the names and salaries of the Bureau's employees in
our possession, and our committee has used a public search tool
to match home addresses and match names using your own Bayesian
Improved Surname Geocoding. What we have discovered is that you
pay Black employees almost $16,000 less than their White
counterparts, which would suggest that either, one, you are
presiding over a racist organization, and if you are not, Mr.
Cordray, shouldn't the same disparate impact analysis you apply
to others be applied to you?
And if you don't believe our analysis, I would assume you
actually know the racial characteristics of your employees. I
invite you to do your own analysis. But should disparate impact
analysis be applied to the CFPB?
Mr. Cordray. I have no idea what analysis you are referring
to or how carefully it was done. Disparate impact analysis
applies throughout this field of law. It was upheld by the U.S.
Supreme Court last June in an important decision.
And if you are going to do that analysis, you would need to
correct for pay bands and different jobs. I have no idea
whether you did that or not, so I would not--
Chairman Hensarling. Mr. Cordray, I would invite you to do
your own analysis. And I must admit, the evidence is fairly
overwhelming. I am not sure there was any justice taking place
here, and I fear what we are seeing are shakedowns for
headlines, and this has to stop.
The Chair is way beyond his time.
I now recognize the ranking member.
Ms. Waters. Thank you very much, Mr. Chairman.
Mr. Cordray, I do not want you to be intimidated or to be
made to feel bad by these accusations that are being made by
the chairman. I would like to think that the chairman and the
opposite side of the aisle are truly interested in
discrimination. There is nothing in their work or their history
that shows they are.
And so you continue to do your work, and make sure that the
work that you do on disparate impact analysis is work that will
benefit all of the people who are being harmed by it.
Let's get on with the real issues. Let's talk about payday
lending.
Despite the fact there is substantial support for payday
operations on the opposite side of the aisle, we know that
these operations have targeted minority communities and poor
communities, and people are getting hooked on these payday
loans. And I want to talk about, for a minute, what is
happening here in Florida.
But before I do that, I have asked my staff to get me more
information about where payday lenders are locating, how many
are locating, and in what areas they are locating. We do know
this: As it has been said by the Federal Reserve in St. Louis,
there are more payday loan operations than there are McDonald's
stores.
So a number of States like Florida and Ohio have attempted
to reform payday lending, but even after so-called reforms,
loopholes and other gaps remain, still leaving vulnerable
borrowers susceptible to exorbitant interest rates and cycles
of debt. For example, even after Florida's reforms, Floridians
still take out on average about 9 loans a year, according to
the Center for Responsible Lending, with an annual interest
rate of about 312 percent.
According to a ProPublica investigation into Florida auto
lenders, who expanded dramatically after Florida's so-called
reforms, one Florida consumer appeared to have renewed her loan
17 times in 1\1/2\ years. Another woman borrowed $3,100 and
made $2,600 in payments, and after her loan over 7 times she
still owed $3,900.
I can give more examples of this, but what I am giving
examples of is how poor people get hooked on payday loans. The
fact that these borrowers have to take out multiple loans shows
that the loans are not affordable. They have trapped borrowers
into a cycle of debt.
Tell me why you are issuing guidance on payday loans? What
have you discovered about them and how they work?
Mr. Cordray. What we have discovered--and this is through
careful and comprehensive research into the payday lending
industry--is that the description you just provided is
substantially correct and accurate. About half of payday loans
in the United States today are made to borrowers who are
trapped in a cycle of 10 or more loans. That is about half of
the loans being made nationwide.
That is what we found in our research that looked into
millions of such transactions. It is difficult to see how that
assists a consumer in improving their financial well-being.
Now, there are plenty of payday borrowers who get in and
get out with one, or two, or three loans, and that is perfectly
great. We are not attempting to cut off any such lending. The
debt trap--being stuck in the debt cycle, living your life off
of these massive rates of interest and difficult collection
practices and the like that we have seen--is what creates a
tremendous amount of consumer harm.
Ms. Waters. According to the work that you have done, the
research have you done, is this a profitable industry? Are they
making money? Are they making large sums of money? What is
keeping them going?
Mr. Cordray. It is actually a difficult product
economically. There are high costs involved in defaults; there
are high costs involved in customer acquisition. So there are
not super normal profits being made in that area.
What keeps them going, what is at the heart of the business
model for the average payday lender, is rolling the customer
into loan after loan after loan so that eventually you have
recovered more in fees than they borrowed in the first place.
Your example was an apt one, of someone who takes out a loan,
pays back more in the end than they borrowed to begin with, and
still owes in the end more than they borrowed to being with.
That is a very--
Ms. Waters. So this is why--
Mr. Cordray. --normal part of this business.
Ms. Waters. --they are referred to as debt traps.
Mr. Cordray. Yes.
Ms. Waters. People get trapped. They can't get out. They
keep rolling them over. Is that what this is all about?
Mr. Cordray. Yes. Industry has objected to that notion, but
it is the best description I have seen of what actually happens
in the marketplace.
Ms. Waters. Thank you.
I yield back.
Chairman Hensarling. The Chair now recognizes the gentleman
from Texas, Mr. Neugebauer, chairman of our Financial
Institutions Subcommittee, for 5 minutes.
Mr. Neugebauer. Director Cordray, this committee spent a
considerable amount of time studying the short-term, small-
dollar marketplace, and most recently your Deputy Director
testified at my subcommittee on this issue. I will say this,
that many of my colleagues did not walk away with much
confidence in the direction that you are headed in the
rulemaking, particularly on the issue of State and tribal
sovereignty.
At issue are roughly 38 States who allow these products to
be offered in some form, and the Federal preemption that will
occur if your rule goes forward as outlined by the Bureau. I
have a few questions, and I will use some slides during that
questioning, and I hope that you will be brief and forthright
in your answers.
Slide number one, please?
So after reviewing the currently regulatory framework, did
you find any State that does not have the authority to enact
and regulate short-term, small-dollar loans?
Mr. Cordray. What I would say is, States have authority in
this area and the Federal Government has authority in this
area, as well.
Mr. Neugebauer. So you didn't find anybody that didn't have
the authority? So the States have the authority to regulate
that, is that your answer?
Mr. Cordray. Again, as is true in many areas of the law--
securities law, antitrust law, telecommunications law--States
have authority and the Federal Government also has authority.
Mr. Neugebauer. Slide two, please?
Can you list the States, then, that have laws in place that
have contributed to the problem that you have identified? And
which States have failed to protect their citizens?
Mr. Cordray. What I can say is, as you indicated, there are
approximately 37 or so States nationwide that allow some form
of payday lending with different degrees of regulation. Our
study that analyzed millions of such transactions nationwide
showed that repeatedly in this business across the country many
consumers fall into the debt trap, more than half of the loans
are made to people who take out 10 or more loans in a row.
Mr. Neugebauer. Which States, then, are allowing the debt
trap?
Mr. Cordray. That would be all of the areas--all of the
States that were examined in the study.
Mr. Neugebauer. Do you have a list of those States?
Mr. Cordray. It would be all the areas where payday lending
is authorized in this country.
Mr. Neugebauer. So you looked at every State?
Mr. Cordray. We have looked at millions of transactions
nationwide that occurred in all of the States.
Mr. Neugebauer. In your rule, you mention that there is a
floor. So does the floor mean that anything below that standard
is void?
Mr. Cordray. First of all, again, we don't have a rule at
this point. We have an initial framework and we are working
toward a proposal. It is all in process, and this kind of input
is relevant to our process.
Mr. Neugebauer. I think, Mr. Cordray--
Mr. Cordray. But as with our mortgage servicing rules,
which are final, we did not preempt State law there. We did
provide a Federal policy judgment about mortgage servicing
practices and indicated, in line with the statute that Congress
enacted that gives us authority in the area, that our rules
would be a floor for consumer protection, not a ceiling.
Mr. Neugebauer. So is your position that you do not think
that you are preempting State law?
Mr. Cordray. We are not preempting State law. Typically the
Federal Government, when it is active in an area, could seek to
occupy the field. That would be broad preemption. We are not
doing that.
They could also seek to preempt State law in specific
respects. We are not doing that.
Whatever we do in this area will coexist with State law.
There will continue to be State regulation of payday lending;
there will now be Federal regulation as well.
That is true of many areas of law--telecommunications law,
energy law, environmental law. States and the Federal
Government work together.
Mr. Neugebauer. I understand that is your position, but the
attorney general, Mr. Zoeller, disagrees with you.
Mr. Cordray. I'm sorry? Say that again?
Mr. Neugebauer. Mr. Zoeller disagrees with you.
Mr. Cordray. I know the Indiana attorney general. We served
together. I was a bordering State attorney general of his in
Ohio. We have both been interested and concerned about issues
of Federal preemption going back to our time in State
Government. For myself, I spent 20 years in State Government.
Mr. Neugebauer. So if one State has a 5-day cooling off
period and the rule comes out that you require a 60-day cooling
off period, haven't you then preempted the State that says 5
days is an appropriate cooling off period? Isn't that
preempting that State?
Mr. Cordray. Again, a common aspect of federalism in our
system is that there may be Federal regulation and there may be
State regulation of individuals, and they coexist.
Mr. Neugebauer. So what is your definition of
``preemption'' then?
Mr. Cordray. ``Preemption'' is when the Federal Government
overrides State law and invalidates State law.
Mr. Neugebauer. So if my State has a 5-day cooling off
period and you say that 60 days is the new norm, haven't you
preempted my State?
Mr. Cordray. You could say the same thing about securities
law. States have securities laws that protect people who are
investing, and the Federal Government has securities laws as
well. And they coexist. They don't necessarily jibe in every
particular, but they coexist and they are regulated at both
levels.
Mr. Neugebauer. Here is the question. These 37 States have
gone out there, they have had the hearings, they have had
debates on the floors, they have passed these laws. What do you
know that they don't know?
Mr. Cordray. You could say the same about any of these
areas of the law. The Telecommunications Act Congress passed in
1996--States had regulated that area for years, and the Federal
Government had authority--Congress gave it the authority, and
they acted and then those regimes coexisted.
Mr. Neugebauer. Have you brought those attorneys general of
these States and the various groups from those States in to
have a discussion about this?
Mr. Cordray. I talk to them all the time. Those are my
former colleagues.
Mr. Neugebauer. No, I mean, have you had a forum where they
had an opportunity to comment?
Mr. Cordray. I have spoken to them at the National
Association of Attorneys General meetings; I speak to them
individually; I have had a chance to speak to Attorney General
Zoeller since he testified in your committee. We talk all the
time. We coordinate on many things including enforcement
actions against payday lenders--
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentlelady from New York, Mrs.
Maloney, ranking member of our Capital Markets Subcommittee.
Mrs. Maloney. Welcome, Mr. Cordray.
My question concerns the Credit Card Bill of Rights (CARD
Act), which was the second bill that President Obama signed
into law. And Rahm Emanuel, his former chief of staff, told me
that it is one of the most popular things that he ever did
because it touches so many consumers.
And in that CARD Act we required you, the Bureau, to
conduct a review every 2 years of whether the Act was having
the effects that we intended. So first of all, I want to know,
what is the response to the CARD Act?
When you get complaints, are you getting complaints about
credit cards to the extent you were before the CARD Act went
into effect? And what about the clear and transparent
disclosures? Has that worked? And no more hidden fees or
excessive interest rate hikes that are hidden?
The bill wanted to crack down on unfair and abusive tactics
by card companies on consumers, and your report found that the
CARD Act has dramatically improved the credit card market,
making it more fair, and more transparent, even as the cost and
availability have improved.
I, for one, think it is useful to have this type of regular
review of a major bill. And my question is, are there lessons
that you have learned from your two CARD Act reports that have
been useful to the Bureau in writing other rules, and have you
used those lessons going forward?
Also, two celebrated reviews, one by the Pew Foundation,
said that the CARD Act saved consumers $10 billion a year. The
NYU review, with others, said it was anywhere from $16 billion
to $20 billion a year. Have you conducted any reviews similar
to what they have done to see whether it is as good a stimulus
package--it is actually a stimulus package that President Obama
signed into law because it keeps the money in the consumer's
hands.
So your comments, please, on the CARD Act and those
various--
Mr. Cordray. As you say, we have had a chance to review the
credit card market and we do that now on a biannual basis and
provide a report to Congress.
I would start by congratulating the Congress. The Congress
did an excellent piece of work in passing the CARD Act, and it
has made an enormous difference for consumers.
Different assessments of amounts that consumers have been
saved, in terms of previously exploitative fees, range up to
$16 billion, but it is important to recognize this is going
forward year by year, and every year consumers are saving,
which is quite important.
The second piece is this shows--and, by the way, my
experience here goes back to when I was in State Government
before the CARD Act was passed, and we would hear tremendous
complaints and concerns about the credit card product at that
time. Although I was not in the Federal Government when the
CARD Act was passed, we are doing a regular review of this and
watching the J.D. Power consumer surveys, which show increasing
customer satisfaction in this marketplace year in and year out.
It is a tremendous success story, and it shows what can be
done with serious, substantive, even-handed regulation; better
performance by the industry, which there is, and I give them
credit for that, especially on their customer service in the
credit card industry; and better consumer performance--people
are being more careful with cards coming out of the financial
crisis.
That is important, and it shows that if we work together in
a balanced and reasonable way, we can improve these markets so
that consumers can get more value from them, and that is what
we all should want.
Mrs. Maloney. Okay. Also in your report you highlighted the
so-called deferred interest promotions--
Mr. Cordray. Yes.
Mrs. Maloney. --and I quote: ``impose significant costs on
many consumers.'' And I think that is really important.
And my question is what, if anything, should be done to
address the risks the Bureau has identified in deferred
interest promotions? And also your comments on the overdraft--
we have also a bill that I offered on overdraft that builds on
the Credit Card Bill of Rights--your comments on where we stand
on that rulemaking?
Mr. Cordray. Yes. We did indicate we have significant
concerns about deferred interest products.
The reason is the core principle of the CARD Act was back-
end pricing, which is never transparent to the consumer up
front by definition. It is confusing and harmful to consumers
because they think they are making a deal and they are having
certain terms, and it turns out it is going to be different; it
is going to be changed after the fact in a way that was not
disclosed to them. That is very harmful.
Deferred interest operates much in that same fashion, so
that is something we spotlighted in our most recent report. It
is an issue that we are looking at very carefully and we are
going to be taking actions as appropriate.
I think that credit card issuers should be mindful of
thinking about their deferred interest products and the harm
that is happening to a number of consumers who end up with
back-end pricing that is very different from what was
represented to them up front. That is an ongoing concern.
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now recognizes the gentleman from Michigan, Mr.
Huizenga, chairman of our Monetary Policy and Trade
Subcommittee.
Mr. Huizenga. Thank you, Mr. Chairman. I appreciate it.
And, Director Cordray, I have to tell you that I am a
little surprised, and a little stunned. You just have laid out
a case where you are intentionally trying to create conflict
between State law and Federal law.
Now, a number of my colleagues over on the other side have
been working on a slightly different issue that I am sure you
are familiar with: medical marijuana law not lining up with
Federal law and how that has affected banking.
Usually, there is an understanding that we are going to try
and solve that problem, not create the conflict. And I just
couldn't let that pass as my colleague from Texas was asking
you about the lending--
Mr. Cordray. Do you want me to respond to that or not?
Mr. Huizenga. Very briefly, sure.
Mr. Cordray. Okay.
Mr. Huizenga. Why would you want to create intentional
conflict?
Mr. Cordray. Look, I spent years in State Government: in
the State legislature, as State attorney general, as the State
treasurer. It was very common across many fields of law for us
to be administering and enforcing State law in conjunction with
common administration of Federal law. It happens all the time.
It happens with environmental law, and it happens with
securities law.
Mr. Huizenga. I did that as well, but you don't have--in
what we typically have, for example in environmental law, is
you have preemptive State law that goes in. First, it has to
clear that hurdle. I served in the State legislature as well.
But that is not the direction I want to continue in. I want
to pursue a little bit about the arbitration agreements, and I
know that was brought up earlier.
In March of 2015 the Bureau released a report on the use of
arbitration agreements and disputes between consumers and
financial product providers. However, the report was criticized
by a number of academics and industry people for completely
ignoring major pieces of data.
On June 17, 2015, over 80 Members of Congress, including
me, signed a letter asking that the Bureau reopen the
arbitration study, citing issues with the methods on which the
study was conducted, including the processes that developed
that study that were not ``fair, transparent, or
comprehensive.''
And I would like to submit the letter for the record,
without objection, Mr. Chairman.
Chairman Hensarling. Without objection, it is so ordered.
Mr. Huizenga. The letter also noted the lengthy historical
precedent in favor of arbitral dispute resolution, which
assists in streamlining the American judicial system.
One of the complaints that I hear all the time is that we
are bogged down in court. Arbitration was a tool introduced to
streamline that, not to eliminate anybody's rights, not to
eliminate a fair hearing, but purely to break the logjam.
Because I am very curious, do you really believe that this
report accurately reflects how consumers use these tools?
Mr. Cordray. If I may, our report has been widely
recognized as the single most comprehensive and informative
report on this issue ever done. We had access to new data from
the American Arbitration Association and others, and it is an
outstanding report.
I have seen and we have attended closely to criticism of
that report. It has been mostly incidental.
We sat down with the authors of the one critical study. One
of them agreed to sit down with us and talk it through; the
other did not. But we have looked at all of that--
Mr. Huizenga. Where does the study estimate the transaction
costs associated with consumers pursuing a claim in Federal
court versus arbitration?
Mr. Cordray. What we looked at was how the judicial process
compared to the arbitration process in terms of outcomes and
the like. What we found, by the way, was, as a matter of
history, what you say is somewhat correct in terms of
arbitration starting off as a business-to-business dispute
resolution mechanism, and it is reasonable in that context.
Mr. Huizenga. It is also individuals.
Mr. Cordray. In more recent times it has been used to cut
off access to--
Mr. Huizenga. Okay. So does the study compare the ability
of consumers to pursue a claim without a lawyer in Federal
court versus arbitration?
Mr. Cordray. The study comprehensively addresses many
aspects of the judicial process, many aspects of the
arbitration process, and compares outcomes between the two.
Mr. Huizenga. So for those watching on C-SPAN and the rest,
the answer to both of those questions is ``no.''
Mr. Cordray. No, my answer is to describe what our study
did, and it is the most comprehensive study ever done. Nobody
disputes that.
Mr. Huizenga. I understand it is comprehensive, but there
are a number of people involved in that space who believe that
there were major flaws in the data and how it was used. And it
seems to me that--
Mr. Cordray. We have looked at what they have had to say,
and it is not particularly credible, frankly.
Mr. Huizenga. So you would have no problem, then, heeding
the request that over 80 Members of Congress in the House and
the Senate had of saying, ``Okay, we would like to open this up
and express some of our concerns in this?''
Mr. Cordray. I am simply going to continue to enforce the
law. Congress asked us to do a broad, comprehensive study; we
spent 3 years on it. We are now moving ahead with Congress'
direction to engage in policy intervention based on that
report.
Mr. Huizenga. Okay. What I need to know is how you can make
a meaningful comparison between class actions and arbitration
in this report? I don't see that, and many others in the space
do not see that.
And that ultimately is the concern that I have is somebody
receiving a check for 25 cents being part of a class action
suit, which often happens as these major class action suits go
on. The trial lawyers and the attorneys are all paid up. They
are the ones who make the money; it is not the consumers.
And I would argue that arbitration actually benefits the
consumer as much as it benefits anybody else in that process
because it is streamlined. And so it sounds like to me that you
are just trying to protect--
Mr. Cordray. That is not what our report showed, and it is
a comprehensive study of this issue. There is virtually no
relief to consumers in the arbitration process, and billions of
dollars of relief to consumers in the judicial process. That is
the comparison.
Mr. Huizenga. As long as their attorneys are paid.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentlelady from New York, Ms.
Velazquez.
Ms. Velazquez. Thank you, Mr. Chairman.
Mr. Cordray, we have seen some indication from the CFPB
that the lines between what is consumer lending and what is
commercial lending are blurred. Can you explain your views on
how the agency distinguishes between consumer lending and
commercial lending?
Are there circumstances in which a loan to a small business
could be a consumer loan? And if so, can you elaborate on the
nature of those circumstances?
Mr. Cordray. Yes. There are areas where the line between
commercial lending and consumer lending is blurry.
For example, a lot of start-up small businesses are being
financed by individuals putting debt on their credit cards, so
that is why the CARD Act becomes so important because it
actually protects not just individuals but also many fledgling
small businesses. It is also the case that home equity loans
are often used to get capital to start businesses or improve
businesses or grow businesses.
If I had my way--I don't have my way on many things--we
would do what I did when I was Ohio attorney general and seek
to protect not only individual consumers, as our statute
authorizes us to do, but also small businesses who often
operate in the marketplace with no greater clout than an
individual household does.
If the Congress sees fit to give us that authority, we will
aggressively pursue that. And it would help small business
across the country.
As it is, again, as you say, the protections that we put in
place for consumers often will end up helping certain
individual small businesses that start out as individuals or a
very small number of individuals and seek to grow.
Ms. Velazquez. Mr. Cordray, one area where I am concerned
is regarding online lending. This is an increasingly popular
choice for small businesses to quickly access capital, yet the
regulatory environment has yet to catch up.
What role do you see the CFPB playing in the small business
online lending marketplace?
Mr. Cordray. We are very interested in financial innovation
and so-called FinTech. We have had the major marketplace
lenders in to talk with us because we do have jurisdiction over
them. The Treasury has convened a set of actors and is working
on a White Paper on this subject.
It is something I think we are all interested in because it
is a new source of capital for small businesses but needs to be
subject to certain oversight and protections, as well.
That is something we will continue to work on. I am hearing
from you a great deal of interest in this area. Others have a
great deal of interest, as well.
Ms. Velazquez. Thank you for answering my letter.
Mr. Cordray. Yes.
Ms. Velazquez. Thank you.
Director Cordray, to date, five attorneys general have
issued consumer alerts about deceptive advertising practices by
rooftop solar companies, and a handful of settlements were
reached in Arizona last year alone. Is the CFPB presently
working with various State regulatory bodies, interviewing
complainants, and investigating the depth of the problem we are
hearing about?
Mr. Cordray. I can't speak to specific enforcement activity
being engaged in by the Bureau, but across the country when
there are consumers complaining about harm done to them or
perceived mistreatment in the marketplace, that is the kind of
thing that gets identified to us through our consumer complaint
line and those are things we prioritize for investigation and
potential action. I think I can say that much.
Ms. Velazquez. Thank you.
In May 2015 the CFPB issued a bulletin providing guidance
to help lenders avoid discriminating against applicants
participating in the Section 8 housing choice voucher
homeownership program. Can you explain this bulletin and how it
will help increase access to credit for eligible consumers?
Mr. Cordray. Yes. I am not sure if this is a direct answer
to your question, but under the Equal Credit Opportunity Act it
is illegal for lenders to discriminate against potential
borrowers based on the fact that they are receiving public
assistance income. That is good income and is supposed to be
part of the calculation.
We have had several actions now where we found that lenders
were not taking appropriate account of that kind of income, and
they have made corrective actions accordingly.
In general, this is our approach. The Equal Credit
Opportunity Act is one of the statutes that both we and the
Justice Department administer, and we will do that faithfully
and vigorously to make sure people are being protected and that
prohibited classes are not being discriminated against under
that statute.
Ms. Velazquez. Thank you.
Chairman Hensarling. Does the gentlelady yield back?
Ms. Velazquez. I yield back.
Chairman Hensarling. The gentlelady yields back.
The Chair now recognizes the gentleman from New Jersey, Mr.
Garrett, chairman of our Capital Markets Subcommittee.
Mr. Garrett. Thank you, Mr. Chairman. I am just coming in.
I am over in Budget right now.
But I just want to follow up on the issue of arbitration.
So Congress passed a bill, it was signed into law, and the
President signed it, which validated the use of arbitration. My
understanding now is a study was done--
Mr. Cordray. I'm sorry, what law is that?
Mr. Garrett. The Federal Arbitration Act.
Mr. Cordray. Okay, in 1929 or so, yes.
Mr. Garrett. Yes. Are you familiar with that law?
Mr. Cordray. Beg your pardon?
Mr. Garrett. Are you familiar with it?
Mr. Cordray. I am.
Mr. Garrett. Is that still the law of the land?
Mr. Cordray. It is still the law of the land, yes.
Mr. Garrett. But you disparage it by saying, ``1929.''
Mr. Cordray. No, no. I am just saying in 2010 Congress
passed the Dodd-Frank Act and made a number of changes in terms
of how arbitration began, including outlawing arbitration
clauses in residential mortgage contracts. Most residential
mortgage--
Mr. Garrett. The Federal Arbitration Act, which allows for
arbitration, is still the law of the land.
Mr. Cordray. Although it has been modified by Congress in
several respects since then, yes.
Mr. Garrett. And it is now your agency's decision to, what,
up-end that law through a comprehensive action?
Mr. Cordray. No. Congress has now intervened and superseded
the Federal Arbitration Act in specific respects. On the
Military Lending Act--
Mr. Garrett. Has Congress ended the ability of arbitration?
Mr. Cordray. In the Military--
Mr. Garrett. That is a yes-or-no question.
Mr. Cordray. In several respects, yes, they have.
Mr. Garrett. I didn't say in several respects. I said--
Mr. Cordray. Yes, in several respects they have.
Mr. Garrett. --have they ended the use of arbitration?
Mr. Cordray. Under the Military Lending Act they barred
arbitration clauses in lending contracts to service members.
Mr. Garrett. So we can't seem to get--
Mr. Cordray. Under Dodd-Frank they barred it in residential
mortgage contracts, for the most part.
Mr. Garrett. Have we--
Mr. Cordray. They also--
Mr. Garrett. Have we totally eliminated arbitration?
Mr. Cordray. No, but they then--
Mr. Garrett. Okay. Thank you.
Mr. Cordray. --but they gave us, then, authority--Congress
conferred it to us. I am not making it up.
Mr. Garrett. And so is it your intention now to eliminate
arbitration?
Mr. Cordray. Congress specifically said--and we merely
carry out the will of Congress--that we should issue a report--
do a study, issue a report, and then act in terms of addressing
arbitration in light of that study and report.
Mr. Garrett. So when you say that it is your intention to
perform the will of Congress, when 80 Members of Congress write
to you and ask specific questions, do you believe that you
should answer those questions? Yes or no?
Mr. Cordray. I pay close attention to what Members of
Congress tell me. It is my job to enforce the law that Congress
has enacted.
Mr. Garrett. When 80 Members of Congress ask you questions,
do you believe that you have the responsibility to respond and
answer those questions?
Mr. Cordray. I respond to individual Members of Congress,
but I enforce the laws that Congress enacts.
Mr. Garrett. So the answer is no, since you did you not say
that--
Mr. Cordray. No. That is not correct.
Mr. Garrett. --it was your responsibility.
Mr. Cordray. The answer is yes.
Mr. Garrett. You do? We sent a letter back on June 17th of
last year. We are still waiting for a complete answer.
With regard to that so-called comprehensive study, the
Bureau ignored requests to disclose the topics that would be
covered by the study. Have you disclosed all topics that have
been covered by the study? Yes or no?
Mr. Cordray. I am not sure what all back-and-forth in
correspondence there has been. I know we responded to that
letter. If you think that response was insufficient, we would
be happy to work with you further and get you more information.
Mr. Garrett. You have also failed to provide the general
public with any meaningful opportunities to provide input for
the topic because the materials were kept behind closed doors.
The final arbitration study included entire sections that were
not included in the preliminary report that was provided to the
public.
Was there a reason why you decided that certain information
would be held confidential and not disclosed to the public?
Mr. Cordray. Some of the information, depending on how we
obtain it from the American Arbitration Association and others,
businesses have deemed confidential, may involve trade secret
information and the like. Those would be the obstacles.
Mr. Garrett. And are those--
Mr. Cordray. There wouldn't be any desire on my part.
Mr. Garrett. Are those the only sections that are precluded
from being public, the trade secrets, or is it a broad swath of
areas?
Mr. Cordray. I would be glad to have my staff who are
expert in this area deal with your staff and speak specifically
to specific pieces of the report.
Mr. Garrett. Obviously, since we are talking about a letter
from June and here we are in March, we are still looking for
complete answers.
Mr. Cordray. We have responded to the letter, and if that
response was deemed insufficient we would be glad to work with
you further to get you more information.
Mr. Garrett. It goes back, I guess, to your initial answer
to the question of whether you feel that it is your
responsibility to answer to 80 Members of Congress.
Now, when you first came to this committee, I asked you, I
guess the seminal question: ``If the House of Representatives
said you shouldn't do something, are you accountable to them?''
And the response was, ``No.''
And I asked, ``If the Senate said that you should be doing
something, should you respond to them and respond?'' Your
answer was, ``No.''
I said, ``If the President asked whether or not you should
be doing something,'' the answer was, ``No.''
Mr. Cordray. I don't remember any of this discussion.
Mr. Garrett. Final answer was--
Mr. Cordray. I certainly don't remember it in that way.
Mr. Garrett. Yes. That was my series of questions. The
final question was, ``Are you accountable to anyone?''
And the answer to this letter and that question back then
was--
Mr. Cordray. No, that is not what I am saying and that is
not a legitimate characterization of this.
Mr. Garrett. Actually, that is--
Mr. Cordray. I respond to Members of Congress--
Mr. Garrett. --on the record.
Mr. Cordray. --but I have a responsibility to enforce laws
enacted by Congress, not by individual Members.
Mr. Garrett. And the law of 1929 was enacted by Congress,
and it would appear that you--
Mr. Cordray. And so has the law of 2010, yes.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from New York, Mr.
Meeks.
Mr. Meeks. Thank you, Mr. Chairman.
Good morning, Director Cordray, it's great to see you this
morning.
And let me first join many of my colleagues--I know on the
Democratic side, I think it should be on both sides--because we
all should be thanking you for all the work that you have been
doing to help the American consumer, for the work that you have
been doing to help our veterans, to help our students, to help
our mortgagees, and especially for the work that you do for
low-income and minority communities who are always the most
victimized--it is those who are on the bottom--and the work
that you are doing to try to make sure that there is a level
playing field.
And I would think that, given the scenario, both sides of
the aisle should be appreciative of the agency and the work it
does. I see there is room that we can work collectively
together.
For example, what is important is that since the financial
crisis, a number of financial services have closed. There have
been over 5,000 branches of closures of--especially in--most of
them in low-income and communities of color, leaving behind
banking deserts, which is a neighborhood with basically no
mainstream financial services.
But the people in those neighborhoods cannot live without
access to financial services. And therefore, to meet those
great needs, there are alternative products such as short-term
lenders, and I hear my colleagues talking about that, and
prepaid card providers, et cetera, of which--I just think about
my parents. I lived in public housing, went to a bank--at that
time some banks were not bankable, but they needed to have
options so they used other options.
Back then, some of the options were dark. We don't want
folks to go to the dark, so it would seem to me where your
agency is a godsend to me is not to wipe out all of these
businesses, but to try to make sure that we regulate them so
that there is a good practice, so that people are not being
ripped off, so that there are strong and functioning
alternative financial services so they are not being denied
access to financial products also, as they would have been.
Sometimes, I know my dad needed an extra few dollars to
make it to the next month till the next paycheck came. And we
need that kind of--but we don't want it where people are caught
in that forever.
And I think that would be good for both sides. Nobody
should want that. We don't want anybody taken advantage of.
And so if we have an agency, like yours, that can then put
in some rules and some regulations so that we can make sure
that the consumers are not getting ripped off but also--and I
think that would be good for those who are providing good
services. They would want that also.
Because we want to get rid of the bad folks. We don't want
to get rid of everybody; we want to get rid of the bad folks.
That would seem to me to be the goal.
And so I think that is the right approach that we should
take, and I think that is the approach that you are trying to
take in this, not just eliminating an entire--but eliminating
the bad guys, and let's make sure that we uplift the good so
that poor folks in low-income areas would have some
opportunities to continue to bank. Is that correct?
Mr. Cordray. I found myself sitting here thinking that you
are saying a lot of things that I try to say when I am sitting
here in this seat testifying, and I think you may have just
said it better. So I would just agree with you.
Mr. Meeks. So now, let me just give, in the little time I
have left, what I was concerned I saw about the Bureau's latest
enforcement and findings, because I am shocked here we are in
2016 and there is still redlining going on, and that redlining
especially in the mortgage lending and the steering of
consumers in high-cost loans. It amazes me that we are still
finding institutions thriving from this egregious practice.
And so can you please discuss with us in the little time I
have left what is going on in those cases and what the Bureau
has done to address it?
Mr. Cordray. We have seen a lot of things over the last few
years, and frankly, again, 90 percent or more of our
enforcement actions involve deceptive conduct by financial
institutions, which is discouraging in some ways. But even we
were somewhat surprised to see what we thought was very blatant
redlining occurring.
This is the enforcement action that we and the Justice
Department jointly took involving Hudson City Savings Bank, and
the patterns when they were mapped were very clear. It is a
significant resolution and a shot across the bow to the entire
marketplace that this is not acceptable behavior; it is not an
acceptable approach, and people need to review what they are
doing and correct it if, in fact, they have gone down that road
in any respect.
Mr. Meeks. I only have 7 seconds, so I yield back.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the gentleman from Missouri, Mr.
Luetkemeyer, chairman of our Housing and Insurance
Subcommittee.
Mr. Luetkemeyer. Thank you, Mr. Chairman.
Mr. Cordray, you and I have had a number of discussions
with regard to TRID, and I certainly appreciate your
willingness to discuss it with us. As we have seen, you have
delayed the implementation of the rule until October, and since
then we have seen a lot of concern by the industry. They are
struggling with this rule; some of the software programs that
they have utilized have not been as good in implementing this
as they would have liked to have seen and they are still
struggling.
So my question is, what do you see from your position as
the enforcer of this, as well as are you--have you had any
enforcement actions taken against anyone at this point?
Mr. Cordray. I think we see and hear much the same things
that you are describing. I think the I.T. problems here have
been much larger than maybe people would have expected, and
particularly because a mortgage lender can't control the I.T.
systems of REALTORS, or title agents, or settlement agents,
and others, and they have to all work together.
I know there was a bill in Congress proposing to have a
hold-harmless period through February 1st of this year. What I
had said and I have worked with the other regulators to jointly
say was we were going to be corrective and diagnostic, not
punitive, as we oversaw this implementation period, and it was
open-ended.
It remains open-ended. We are now midway through March
today and it remains open-ended.
We have taken no enforcement actions. I don't expect us to
take enforcement actions unless somebody is blatantly just
failing to try to implement the new rule.
To the extent that they are making some mistakes but trying
to get it right, we are attempting to provide more
clarification to them, which is something industry is asking us
for, and also recognizing nobody is really trying to exploit
consumers here; this is just a matter of getting these forms
right and getting them correct.
By the way, the whole purpose behind this rule was
something Congress wanted, and it is a positive purpose, which
is taking what used to be two bureaucratic forms at the
application stage and streamlining them into one, and the same
at the closing stage. That is what we have done here.
Mr. Luetkemeyer. Are you going to issue an additional
guidance on this, or you feel that everybody is doing okay with
what is going on?
Mr. Cordray. No, no. We have been monitoring this very
closely. The last thing I want is for any of our rules to cause
a jam-up in the market beyond anything that anybody would
intend.
I think we are getting more guidance inquiries every day,
but the trade associations are working together to provide some
joint questions that they think are most important. We will
attempt to be responsive to that.
Feel free to keep after us to make sure we do that.
Mr. Luetkemeyer. Oh, we will. Trust me.
Mr. Cordray. Okay.
Mr. Luetkemeyer. Also, along a different line, the Federal
Trade Commission Act grants the FTC and banking regulators with
the power to pursue enforcement actions based on unfair and
deceptive acts or practices (UDAP).
Dodd-Frank marked an unprecedented expansion of UDAP
authorities for the CFPB, including for the first time the term
``abusive.'' An expanded series of powers for the CFPB referred
to as UDAP has become a primary enforcement tool.
I realize that last week you spoke to the Consumer Bankers
Association and rejected the notion that you are regulating by
enforcement. I beg to differ, sir.
And when it comes to the CFPB's UDAP authority, you have
issued little to no guidance preventing any financial
institution from any sort of predictability. You use your UDAP
authority on a case-by-case basis. Isn't that the definition of
regulation by enforcement?
Mr. Cordray. We are doing the very same thing there that
the Federal Trade Commission does and that the State attorneys
general do. It is difficult to know how to do more than case-
by-case when you are talking about cases of fraud or deceptive
conduct.
We attempt to give guidance to the entire market by very
specific orders that are issued in these cases so that everyone
knows that if they are doing this, they should stop. If that is
called regulation by enforcement, I think it is just strong
deterrence and it is important as a law and order mechanism for
signaling to other actors.
Mr. Luetkemeyer. Along that line, the last time you were
here, I asked the question just before we finished up with
regards to a debt collection company that you wound up settling
a situation for $12 million based on a proposed rule. Not a
rule that is in force, but a proposed rule.
Mr. Cordray. I'm sorry, what matter are we talking about?
Mr. Luetkemeyer. Encore.
Mr. Cordray. Okay, debt collection. Got it.
Mr. Luetkemeyer. Debt collection. And this was based not on
a rule that was in force, but it was on a proposed rule that
you thought you may down the road have in force and said that
they had a form that was noncompliant. So is that not
regulation by enforcement?
Mr. Cordray. Yes, I don't think that is what we did in the
Encore matter.
In the Encore matter we did a careful, thorough
investigation of the facts. We found that there were violations
of either the Federal Debt Collection Practices Act or the
unfair and deceptive prong that we are given by Congress, and
we enforced against that.
The notion that because we may issue a rule on debt
collection several years down the road, or maybe next year,
whenever it will be, that in the meantime we can't stop people
from engaging in an unfair and deceptive conduct, I just don't
think is the right approach for us.
Mr. Luetkemeyer. I see my time has expired. I yield back
the balance of my time.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Texas, Mr.
Hinojosa.
Mr. Hinojosa. Thank you. Thank you very much, Chairman
Hensarling and Ranking Member Waters, for holding this
important hearing on the CFPB's semi-annual report.
Director Cordray, I want to thank you for your appearance
here today and for your exemplary leadership at the Consumer
Financial Protection Bureau. Before I proceed with my
questions, I wish to voice my strong support for the CFPB and
its mission of protecting American consumers.
Chairman Hensarling, I ask unanimous consent to enter my
opening statement into today's record.
Chairman Hensarling. Without objection, it is so ordered.
Mr. Hinojosa. With that, I will be able to move right into
my questions.
Director Cordray, many argue that if the Bureau issues a
payday lending rule in line with the released outline, it will
eliminate a crucial source of lending for many low-income
people who have no other options. Why does the Bureau see the
need to regulate payday lenders, and why do you believe
consumers will be better off with CFPB oversight?
Mr. Cordray. Again, we were given authority by Congress to
address this marketplace, among others. In fact, it was
specifically called out in the Consumer Protection Act of 2010,
the Dodd-Frank Act.
We have done extensive research. We have assessed and
analyzed millions of transactions. And again, what we found was
a significant portion of the customer base, half of the total
loans being made--payday loans nationwide--go to customers who
are in a sequence of 10 or more loans.
That is a debt trap. I don't know what else to call it. It
creates tremendous harm for consumers. It is the exact point
that was being made earlier in the ranking member's example of
someone taking out ``X'' dollars in loans, ending up repaying
more in fees than they ever borrowed in the first place, and
still owing more at the end of all that than they borrowed in
the first place.
Mr. Hinojosa. Thank you for your response. I strongly
support your efforts to rein in those harmful payday loan
practices.
In my community we have seen some programs that cost one-
tenth of what payday lenders charge, but there just aren't
enough of these programs.
Tell me about the 5 percent option included in the proposed
rule, and will it be included in the final rule?
Mr. Cordray. I can't speak to what may be in the final
rule. We are just coming up on a proposal stage here.
We are going to continue to take input from many different
stakeholders. Of course, they have very dramatically
conflicting input, and that is something we try to sort
through.
What I can say is that in approaching this rule we are
attempting to both address significant and actual harms to
consumers, and we are also trying to make sure that there are
ample avenues that remain for small-dollar lending to be
available to consumers. Community banks and credit unions have
a product now that we want to make sure that we are protecting
and giving latitude for, and other products that may arise
around the country. We don't want to squash innovation in this
area.
We do want to, to the extent we can, squash predatory
products that are causing enormous consumer harm.
Mr. Hinojosa. According to the FDIC, nearly 50 million
Americans are either unbanked or underbanked. Consumers
sometimes need access to $100 or less to smooth the transition
between paychecks when their balance is low so that they can
still purchase medicines and groceries and other necessities.
How have the Q.M. rules affected mortgage lending by
community financial institutions?
Mr. Cordray. This question is important because I often see
facts alleged that are not accurate in this area.
This share of the market of mortgage lending by community
banks and credit unions has grown since Dodd-Frank was enacted.
It is larger now. It is larger now than it was in the mid-
1990s. This has come at the expense of large banks in
particular.
This is exactly the point that I think Congressman Meeks
just made, which is that if you have even-handed, sensible
regulation of a market, the more responsible actors should be
able to thrive because they are freed from unfair competition
by the bottom-feeding, law-violating actors, many of which came
into the mortgage market in the middle part of the last decade
and engaged in highly irresponsible lending and ended up
blowing up the mortgage market.
Community banks and credit unions, contrary to much of what
is said, their market share has increased, and that is a good
thing.
Mr. Hinojosa. My time has--
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Wisconsin, Mr.
Duffy, chairman of our Oversight and Investigations
Subcommittee.
Mr. Duffy. Thank you, Mr. Chairman.
Welcome, Mr. Cordray. As you know, I have expressed some of
my frustration with regard to the lack of compliance with the
document requests that this committee has made to the CFPB.
That is with the backdrop of Barack Obama telling us that
this would be the most transparent and open Administration
ever. That is with Elizabeth Warren indicating that sunshine
would flow into the CFPB. That is in regard to the backdrop
that you have given with regard to openness and transparency.
It gives us great concern that a number of our subpoenas go
back several years and there has been a lack of compliance. As
you know, there has been a recent subpoena 3 months ago that
compiled all of our document requests, and we get limited
compliance from you.
I want to direct your attention--
Mr. Cordray. Do you want me to respond to that?
Mr. Duffy. Oh, in a second.
Mr. Cordray. Okay.
Mr. Duffy. You will have plenty of time.
I want to direct your attention--you are aware that a
report came out from this committee in regard to indirect auto
lending. And you would note that there were some documents that
we included, quotes in that report from the Consumer Financial
Protection Bureau.
Did you provide those documents before this report to this
committee?
Mr. Cordray. I can't speak to individual documents because
I don't know which ones you are referring to, but what I can
say is over the--
Mr. Duffy. The ones in the report. I am referring to the--
Mr. Cordray. --course of the last several years, in
response to numerous requests--
Mr. Duffy. Director Cordray, I would just like you to
answer my question. I am talking about the report that we did
on indirect auto lending, the one that came out on November
24th. I am sure you read that because you made some calls to
the Hill.
Did you provide those documents to us?
Mr. Cordray. I can't, out of context here, place individual
documents over the last several years. I know that--
Mr. Duffy. I am talking about the documents--
Mr. Cordray. --we have been very responsive to your
requests. You have received tens of thousands of pages of
documents. If there are particular ones that you are looking
for--
Mr. Duffy. Director Cordray, I love that--you could send me
tens of thousands, you could send me tens of millions of
documents, but if you don't send me the ones that I ask for--
just like Hillary Clinton can send thousands of e-mails, but if
you don't send the 10 that are relevant--
Mr. Cordray. Sure.
Mr. Duffy. If you want to talk about recordings in
Watergate, you could send hours of recordings, days of
recordings, but if you miss a few minutes, it is those that are
relevant.
Mr. Cordray. We continue to work with you on those
responses. We will be glad to continue to work with you on
those responses.
Mr. Duffy. I know that you know what I am talking about in
regard to this report, and you know that you didn't send us
these documents. And even after this report came out, we have
again asked you for the documentation in this report and you
have refused to comply again with our request.
And that, sir, is incredibly frustrating when, again, you
have made commitments to being open and transparent.
Mr. Cordray. We continue to be glad to work with you on
those, Congressman Duffy.
Mr. Duffy. Mr. Director, we have been trying to work
together for years, and I don't--
Mr. Cordray. I still am trying to work with you and will
continue to try to work--
Mr. Duffy. Working is easy. Give us the documents. Send
them to us. Send us what we asked for.
Mr. Cordray. We will be glad to sit down and talk further.
I know our people are talking further.
Mr. Duffy. I want to just kind of highlight some of the--
before we go there, I--in the Ally settlement--let's talk
specifically about that--you use your proxy data. In regard to
your analysis on proxy data, what percentage of accuracy do you
have in regard to Ally?
Mr. Cordray. So it depends on--look, it depends on what you
are talking about. There are different degrees of accuracy for
different things.
We work to provide a high degree of accuracy in terms of
potential charges of disparate impact discrimination under the
law and--
Mr. Duffy. Disparate impact.
Mr. Cordray. --reaffirmed by the Supreme Court last--
Mr. Duffy. So on disparate impact, what percentage of
accuracy do you have?
Mr. Cordray. Again, it depends--
Mr. Duffy. You can't tell me?
Mr. Cordray. --on what we are talking about. Are we talking
about the auto market, the mortgage market? Are we talking
about--
Mr. Duffy. I'm sorry, we are talking about the auto market.
Mr. Cordray. Okay. A high degree of accuracy.
Mr. Duffy. What is a percent?
Mr. Cordray. I can't give you specific percentages, but if
you want my staff to work with your staff on specifics there we
can do that.
Mr. Duffy. So it is fair to say that you are not 100
percent accurate, is that right?
Yes?
Mr. Cordray. I don't know if anybody is ever 100 percent
accurate, but we get as--
Mr. Duffy. So is it fair to say that--
Mr. Cordray. --close as we can.
Mr. Duffy. --there are some White borrowers who may be
included in your analysis who will get checks from the Ally
settlement?
Mr. Cordray. I would say that if you are administering any
redress to consumers--and this is across the entire spectrum of
what we do, what attorneys general do, what the courts do--
Mr. Duffy. Yes or no?
Mr. Cordray. --it is always possible that redress will find
its way--
Mr. Duffy. So disparate impact checks will go to White
borrowers potentially--
Mr. Cordray. It--
Mr. Duffy. --and so that is fine--
Mr. Cordray. It is nothing unique in this area.
Mr. Duffy. Great. So in your analysis I am sure that you
saw some African-Americans who pay at higher rates than the
White average, and some African-Americans who paid less than
the White average. Is that right?
Mr. Cordray. What we saw was systematically African-
Americans and/or Hispanics--
Mr. Duffy. So are you telling--
Mr. Cordray. --borrowers in certain matters were paying
more.
Mr. Duffy. Is it your testimony that nobody paid less than
the White average?
Mr. Cordray. Beg your pardon?
Mr. Duffy. Is it your testimony that no one paid less than
the White average?
Mr. Cordray. I don't know that I would say that, but
again--
Mr. Duffy. Okay, so my question for you is--
Mr. Cordray. --it depends on what matter we are talking
about and what data we are talking about--
Mr. Duffy. --is someone who paid less than the White
average--are they also getting a disparate impact check?
Mr. Cordray. Again, I am not sure what--
Mr. Duffy. Yes or no?
Mr. Cordray. --matter you are talking about or what data
you are talking about. But what I would say is--
Mr. Duffy. Director Cordray--
Mr. Cordray. --disparate impact discrimination is something
I know has been under attack in certain quarters.
Mr. Duffy. --are you--
Mr. Cordray. The Supreme Court reaffirmed--
Chairman Hensarling. The time of the gentleman has expired.
Pursuant to clause (d)(4) of committee rule 3, the Chair
recognizes the gentleman from Wisconsin for an additional 5
minutes.
Mr. Duffy. Thank you, Mr. Chairman.
We are talking about the Ally settlement. You are well
aware of that, right? And I am talking about the numbers that
you used for that settlement.
So I am asking you simple questions. Are White borrowers
getting disparate impact money? You are stonewalling me here.
You are not answering my question and I think this is a pretty
simple line of questions.
If you want to be open and transparent, do it here. If you
are not going to give me the documents, answer my questions.
Mr. Cordray. Sure. Okay.
Mr. Duffy. And so that was one that you are trying to
waffle on. The next question is--
Mr. Cordray. I am ready to do it.
Mr. Duffy. Hold on, and the next question is, you have
individuals who probably--I know this for a fact--paid less
than the White average. Do those African-American borrowers get
disparate impact checks as well, or are you only sending checks
to African-Americans who paid more than the White average?
Mr. Cordray. If you want to specify someone to me, we can
look at it. What I know is that we set up a process here,
working with the Justice Department who has experience in these
matters going back decades, and that is a process that everyone
has confidence in--
Mr. Duffy. So you haven't--
Mr. Cordray. --and it is getting redress--
Mr. Duffy. I will reclaim my time. You haven't sent--
Mr. Cordray. --hundreds of thousands of consumers.
Mr. Duffy. Director Cordray, you haven't sent me the
information on Ally, but we do have the information in regard
to Toyota.
This comes from a document dated November 19, 2004; it was
initialed by you. And on page, I believe it is 15, is a chart
that shows non-subvented African-Americans, the total number of
affected at 116,500, okay, if you want to look up at the--do
you have the document in front of you?
Mr. Cordray. No, I don't.
Mr. Duffy. Look at the screen. You can see that right
there.
And the number of harmed prohibited basis borrowers is
66,000. So it is my reading of this document that there are 56
percent of African-Americans who paid more than the White
average and 44 percent who paid less. Fair enough, in the
Toyota study?
Mr. Cordray. I am not easily able to analyze these numbers
taken out of context, but--
Mr. Duffy. You signed off on the document.
Mr. Cordray. --but, go ahead with your questions--
Mr. Duffy. Okay. So if you want to go down to the subvented
African-Americans, the number who were affected was 7,559, but
the number that I had prohibited--or were harmed was 2,668. So
meaning on the subvented class of African-Americans only 35
percent paid more than the White average; 65 percent paid less.
These are your documents, sir.
Mr. Cordray. What I would say is--
Mr. Duffy. I want to be clear: If you are not going to give
me the Ally documents, we will use Toyota.
Mr. Cordray. What I will say is subvented auto loans can
behave differently from normal auto loans, and that is
something we take account of in our analysis.
Mr. Duffy. That is why I gave them both to you. Look at the
chart.
Mr. Cordray. Yes.
Mr. Duffy. In this document you don't show great disparity
between African-American rates and White rates.
Mr. Cordray. I would disagree with your conclusions there.
We did pursue a matter with Toyota. We thoroughly analyzed the
underlying facts. The automaker lender had access to the same
underlying facts--
Mr. Duffy. I am going to reclaim my time.
In regard to the analysis that you have done, I find it
interesting when the chairman brought up when they did their
own statistical analysis on the CFPB and that would show, based
on that analysis, that you pay African-Americans $16,000 less
than White employees at the CFPB, before the chairman cut you
off I think you were trying to say, ``But it doesn't take into
account pay bands. It doesn't take into account job--''
Mr. Cordray. I didn't know if it did or not. It didn't have
any of the analysis--
Mr. Duffy. You want to make sure that we consider what
information you might have that could account for that
disparity.
And so in regard to indirect auto lending, did you take
into account credit scores, trade-ins and trade-in values,
whether the car was new or used, the amount financed, the
length of the term financed? Because this was all information
that the auto lenders tried to get you to consider but you
refused to do it.
Now, when the role was reversed and Mr. Hensarling asked
you those questions you wanted to make sure, ``Whoa, whoa,
whoa--''
Mr. Cordray. I wouldn't agree with that--
Mr. Duffy. --``there is qualifying information for this,
sir.''
Mr. Cordray. I wouldn't agree with that characterization,
but I am happy to explain if you want me to.
Mr. Duffy. I won't have you explain to me. We will do it in
writing. Maybe I will get some documents from you.
I want to put up another exhibit. Or actually, I am not
going to put it up; I am going to hand you a document.
This was provided to us in response to our subpoenas number
20 and 22. This was the only document that is in compliance
with our subpoena, and this is in regard to records
memorialized in the final remuneration plan in regard to Ally.
Do you have that document in front of you?
Mr. Cordray. No, I do not.
Mr. Duffy. I believe your staff has it.
This is basically a computer printout--if you would hand it
to the Director, please--it is a computer printout. This is the
only document that you have given us to show us what the
remuneration plan is. Could you read this document for the
committee so we can understand what this document says in your
sunshine and compliance with the committee?
Mr. Cordray. What do you want me to do? You want me to just
start down here and read--
Mr. Duffy. Yes, read it for me.
Mr. Cordray. Okay. ``For official use only.'' Is that what
you would like?
Mr. Duffy. I was thinking in regard to--
Mr. Cordray. ``Confidential. Not for distribution.''
Is that--
Mr. Duffy. Compute, space, back, equals, 900, period,
backslash, star, money sign, dash, cap, on full, dash, term.
What does this mean? This doesn't mean--
Mr. Cordray. All I know is if you ask for documents in an
area, we give you the responsive documents that we can--
Mr. Duffy. This is the one that you sent us.
Mr. Cordray. --and it may be that you aren't in a position
to interpret this document. I don't know about that.
Mr. Duffy. Are you? Can you interpret this document?
Mr. Cordray. I am not going to read you the document.
Chairman Hensarling. The time of the gentleman has expired.
Pursuant to the committee's rules for extended questioning,
the ranking member is now recognized for an additional 5-minute
question period.
Ms. Waters. Thank you very much, Mr. Chairman.
At the beginning of this hearing we started talking about
the CFPB's work in racial discrimination in auto lending, and
specifically the CFPB's $98 million settlement with Ally. And I
also mentioned in my opening statement that the Bureau has
fined banks and captive lenders such as Toyota, Honda, and
Fifth Third Bank, for discriminatory practices.
These banks and auto lenders that you have fined, if they
don't think that you are correct, if they want to oppose you,
if they want to fight you, can they go to court? Can they sue?
Can they defend themselves in some way?
Mr. Cordray. Sure. And there are a number of institutions
that have required us to take them to court, not responded to
the results of investigations. And if so, we pursue it and the
courts have the ability to make that determination.
Ms. Waters. Did Ally do this?
Mr. Cordray. They could have, but they did not.
Ms. Waters. They did not.
Did Toyota do this?
Mr. Cordray. They could have, but they did not.
Ms. Waters. Did Honda do this?
Mr. Cordray. They could have, but they did not.
Ms. Waters. So while they are pretty big companies, they
have the right to sue, they have the right to go to court, and
even though they have friends on the opposite side of the aisle
who would like to serve as their lawyers, they could have gone
to court if they had wanted to. Is that right?
Mr. Cordray. Certainly.
Ms. Waters. Thank you very much. Now, let's go further.
The Republicans are alleging that the CFPB used Ally's
desire to change its status to a bank holding company to
leverage the settlement. Isn't it true that the CFPB was
investigating racial discrimination at Ally Financial prior to
any knowledge of Ally's desire to change its status?
Mr. Cordray. I am glad to have the chance to correct the
record on that, and some of the Members who asked those
questions are not present in the hearing room I understand, but
maybe they will see the transcript.
We opened an investigation against Ally into potential
discrimination in auto lending more than a year, maybe a year-
and-a-half before the matter was resolved. As often happens,
parties that are being investigated, it moves slowly, they are
not eager to resolve the matter, and sometimes they drag their
feet, sometimes it just takes a while.
At one point Ally wanted to move more quickly to resolve
the matter. That was a decision that they made, and that was a
choice that they were making for their own reasons. I wasn't
familiar with why those were. They then explained to me why
they wished to proceed in that fashion.
Our purpose all along was to complete and resolve an
investigation into discrimination in auto lending. That was our
job. That is our job to enforce the law.
That is what we did, and we reached an appropriate
resolution that the company agreed to and was willing to enter
into and, as you say, could have fought in court if they wished
to do so. That was up to them. Those were choices they made;
those were not choices I was making.
Our choice was we were trying to enforce the law, we were
seeking to complete an investigation and resolve a matter, and
we did so. That is all there is to it as far as I am concerned.
Ms. Waters. Isn't it true that the CFPB only consulted with
the FDIC and the Fed regarding Ally's status after Ally
themselves informed the CFPB of their desire to change their
status?
Mr. Cordray. I believe that is correct.
Ms. Waters. Isn't it also true that the CFPB had evidence
that Ally Financial's policy surrounding a discretionary dealer
markup resulted in widespread racial discrimination?
Mr. Cordray. That is certainly correct.
Ms. Waters. Can you speak more about your investigation of
Ally and how you came to that settlement? I know you just did,
but I want you to reiterate because I think that my colleague
on the opposite side of the aisle has framed this in such a way
that you have been unfair, that somehow you are not following
the law, and that somehow you leveraged their desire to change
their status.
Would you please go ahead and--
Mr. Cordray. I would say quite the opposite.
The law of the land, reaffirmed by the Supreme Court last
June, is that disparate impact discrimination is against the
law. It is a violation of fair lending laws.
Given that is so, our responsibility is to enforce the law.
It is a law that Congress enacted, again, that we have a job to
enforce the laws Congress has enacted.
We approach every investigation the same way. Some of them
start with exams that then lead to developing facts and
conclusions that may lead to enforcement actions; some of them
start as enforcement investigations.
We approach them all the same way, to comprehensively
establish the facts, to determine legal conclusions, to work
with the entity to try to resolve the matter--if we can, by
consent; if we can't, by litigation. And we work with the
Justice Department on these matters. They are our active
partner, and we work together on them and we see eye to eye.
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now recognizes the gentleman from California, Mr.
Royce, chairman of the House Foreign Affairs Committee.
Mr. Royce. Thank you, Mr. Chairman.
On the question of exemptive authority, Mr. Corduroy, as it
applies to your ability to exempt community banks and credit
unions from rulemakings, you argued in a recent speech that it
was not plausible for you to use such authority to override
Congress' own judgment on such a broad-based policy matter.
And, Director, as you know, Section 1022 of the Dodd-Frank
Act gave the CFPB the authority to adopt regulations by
allowing it to exempt any class of entity from its rulemakings.
Just this week 329 Members of this House wrote to you--it was
Mr. Stivers' letter, actually--to tailor regulations for
community banks and credit unions, citing Section 1022
exemptive authority specifically.
Do you believe that Section 1022 gives you the ability to
tailor regulations for community financial institutions, and
does a letter from--this would be over three-quarters of
Congress--does such a letter change your view of congressional
intent?
Mr. Cordray. I would say two things.
First of all, we have routinely tailored our rules to take
account of different circumstances of small lenders as opposed
to large lenders. We did that with our mortgage origination
rule; we did it with our mortgage servicing rule; we did it
with our remittance rule. We will continue to do it where
appropriate.
Second, I always attempt to be responsive to letters from
Members of Congress. I was in a more humble station, a member
of the State legislature in Ohio, and I have understood the
legislative role and I respect it.
I would also say that I think--what I think I know here--
and I may not know as much as you all do certainly about the
legislative process in the Congress, and I wasn't around for
the Dodd-Frank debates--but both of the major credit union
trade associations have said publicly that they sought a broad
exemption from regulation or oversight of any kind in--when
the--when Dodd-Frank was being debated. In both cases
apparently it was rejected by the Congress. It was not written
into the law.
What was written was differential treatment of banks under
$10 billion--and credit unions under $10 billion in assets as
compared to those above.
We have gone beyond that and at times provided special
dispensations or special provisions for smaller creditors,
often those of $2 billion in assets or below. And we will
continue to do that where we find that to be appropriate on the
facts.
In terms of a broad overwriting of what Congress made a
judgment about in that statute, which was not to simply exempt
all credit unions from everything having to do with consumer
protection, I feel that Congress has spoken on that.
Mr. Royce. Let me ask you another question. In November
2015 you released your updated rulemaking agenda indicating
that you expect to issue a final rule on prepaid cards in the
spring of 2016, and I would ask if that is still accurate?
Mr. Cordray. I think that is still roughly accurate. I
would comment that the spring starts, as I understand it, next
week and will extend until the third week in June or so.
Mr. Royce. In proposing its rule governing prepaid cards,
was it the Bureau's intent to prohibit issuers from offering
overdraft protection to card users? If customers want and like
overdraft protection for their prepaid card, is it the Bureau's
position that they should still be denied the opportunity to
choose such a feature?
Mr. Cordray. In the proposal for the rule that is not what
we did. We could have done that. We could have sought to ban
overdraft. There were a number of stakeholders who suggested
that to us and actually urged us to do so.
We opted for more of a middle ground, which was that
overdraft could be provided on prepaid products, but if so, it
should be subject to the same Regulation Z approach as is used
with credit cards, which is an accepted approach that has been
in place for credit cards for many years, and that is what we
proposed.
We will be finalizing that rule roughly on the timeframe
you described, and we continue to consider how to approach that
issue, among others.
By the way, I would say that one thing that has happened
since the last time I testified here on prepaid cards was we
did have this significant fiasco with the RushCard, where many
thousands of consumers had prepaid money onto these cards and
could not get access to the money. If anything, that shows me
we need strong consumer protections for those prepaid cards,
for which no consumer protections exist today.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Missouri, Mr.
Clay, ranking member of our Financial Institutions
Subcommittee.
Mr. Clay. Thank you, Mr. Chairman.
And thank you, Director Cordray, for attending today.
Just to expand on my friend from California's inquiry, can
you give us a sampling of what CFPB rules are expected to be
finalized this year?
Mr. Cordray. This year?
Mr. Clay. Yes.
Mr. Cordray. It is hard for me to hazard a guess on what
exactly will be finalized when because the process--it is kind
of like a judicial opinion. It is under advisement and it just
gets done when it gets done.
I think we clearly expect to finalize prepaid rules this
year. I think we clearly expect to finalize further amendments
to the mortgage servicing rules this year.
I think we are underway on a number of other rulemakings,
and I just couldn't really hazard a productive guess at this
point as to exactly when those will be completed.
Mr. Clay. I see. Thank you for that.
And switching subjects, it has recently come to my
attention that some of my constituents are offered loans by
lenders that are not licensed to operate in Missouri. My
understanding is that a customer will click on the online ad of
a lead generator, with the customer doing so under the
assumption that they are dealing with a licensed entity. But
instead, their information may be sold to an unlicensed tribal
or offshore lender.
In March 2015 Missouri Attorney General Chris Koster shut
down 8 online payday lenders that were operating illegally and
whose illegal lending practices impacted more than 6,000
Missouri residents. In one instance, a Missouri resident was
charged a $500 origination fee on a $1,000 loan, which was
immediately rolled into the principal of the loan, where she
was then charged a 194 percent annual percentage rate,
eventually paying $4,000 on a $1,000 loan.
Can you share insight on what--
Mr. Cordray. Yes. I have heard some horrific stories from
the State of Missouri on lending that is occurring at interest
rates effectively 1,950 percent annualized, and I read this in
a court opinion from a Missouri court of appeals case in which
they gave some examples from the record.
What I would also say is that Attorney General Koster, with
whom I served when I was attorney general of Ohio, is
absolutely right here. Anybody who seeks to make loans without
being licensed in a State is violating State law.
We believe that if they attempt to collect on those loans,
under Federal law they may be violating the Federal Debt
Collection Practices Act, and Federal unfair and deceptive
practices. We have open matters on that in the courts, and I
think that is all quite appropriate.
Mr. Clay. So Missouri has caught your attention as far as
the abuses of consumers are concerned?
Mr. Cordray. Very definitely.
Mr. Clay. Thank you for that.
As it relates to estimating the racial or ethnic impact of
auto discrimination, to your knowledge, do any statistical
methodologies exist that eliminate all false positives and
false negatives?
Mr. Cordray. I am not a social scientist, but it seems to
me unlikely that in any field of social science or natural
sciences, that is easily possible. But I wouldn't claim to be
an expert.
Mr. Clay. Okay. If Republicans have concerns about using
estimates for race or ethnicity, shouldn't Congress just tell
auto finance companies to start collecting this data, as HMDA
does for mortgages? Wouldn't that eliminate the need for
estimation?
Mr. Cordray. Actually it would, yes, I believe so.
Mr. Clay. Okay. Are proxy methodologies used in other civil
rights enforcement contexts?
Mr. Cordray. They have been for decades.
Mr. Clay. And they have been for decades.
Mr. Cordray. Yes.
Mr. Clay. I appreciate your response.
And, Mr. Chairman, I yield back.
Chairman Hensarling. The gentleman yields back.
The Chair now recognizes the gentleman from New Mexico, Mr.
Pearce.
Mr. Pearce. Thank you, Mr. Chairman.
I don't want to catch you off balance, Mr. Cordray, but I
would like to thank you. Over the past couple of years, your
staff has been working with the Coalition to Save Seller
Financing, basically streamlining the rules under Title 14 of
Dodd-Frank, just pertaining to the seller financing. That is
something that you and I have discussed in one of our meetings
so I appreciate whatever is going on there. There is some sense
that we will come to resolution there.
So at what level do you think that people who are using
payday loans are trapped? In other words, how many loans in a
row constitutes that?
Mr. Cordray. I don't know if there is a hard and fast
definition, but I guess what--from what we have seen, if half
of the loans being made in that marketplace--more than half of
the loans being made in that marketplace are going to people
for whom this is marketed as a short-term, 14-day loan, and in
fact, more than half of the loans are going to people who have
rolled them 10 or more times. It seems like that crossed the
line somewhere along the way.
Mr. Pearce. That is not the direction I am going, but I
appreciate that input.
Do you have a figure at the problem payday loans, about how
much the people owe when they get to be problems? In other
words, if somebody owes $100 is that a problem, or does it need
to get to $1,000 or $10,000?
Mr. Cordray. I'm sorry, talking about tribal payday loans
in particular or--
Mr. Pearce. Yes, payday loans. That is something you all
really have concentrated--
Mr. Cordray. I wouldn't have a specific figure to put on
that--
Mr. Pearce. --figure at which you identify people having
payday loans that they are kind of in trouble?
Mr. Cordray. I think--
Mr. Pearce. How much? If they owe--
Mr. Cordray. --many people have looked at that and have
different points of view, but I would say the overwhelming
consensus of a lot of people who look at it is that rolling
loans in long sequences where you end up paying more in fees
than you borrowed in the first place and you still owe at the
end more than you borrowed in the first place--
Mr. Pearce. With all due respect, sir, you tell me that
many people have many different ideas. You are the top
regulator in the dadgum country. I am asking you what is your
opinion, and you can't give me an answer, and so I--
Mr. Cordray. My opinion of my authority--we are working
through these issues. We have issued a very--
Mr. Pearce. No. You are going after an industry and trying
to shut them down. We may disagree, but there are people in my
district who use them regularly and say, ``Hey, if it weren't
for that I wouldn't have been able to pay my rent this month.''
But forget that.
Let's go to exploitation. You have talked about
exploitation today. I wrote notes down as you were talking.
Mr. Cordray. Yes.
Mr. Pearce. So at what level are fees exploitative?
Mr. Cordray. Let me correct the record on one thing: We are
not seeking to shut an industry down.
Mr. Pearce. You are doing a pretty good job of it--
Mr. Cordray. We are seeking to restrict certain predatory
practices that--
Mr. Pearce. Please, sir, I am really limited in time. I
would like to move on, and I think your actions speak louder
than your words by far.
But at what level is exploitation a problem? In other
words, would 5 percent per month be an exploitative fee?
Mr. Cordray. I don't have a particular comment on that. I
think--
Mr. Pearce. But you made comments that you are trying to
stop exploitation, so how do you determine if it is
exploitation?
Mr. Cordray. I would say and I think most reasonable people
would agree that if you are offering a loan that you know more
than half of the loans will involve rolling the loan over 10
times, owing--paying more in fees than you borrowed in the
first place and owing more at the end than you borrowed in the
first place--
Mr. Pearce. Well--
Mr. Cordray. --that gets a lot of consumers into a lot of
trouble.
Mr. Pearce. We have already discussed that multiple times
today and I appreciate it. I was hoping to have a substantive
conversation. I don't think that is probably going to happen.
I'm sorry about that.
So the 5 percent per month fee comes straight from the IRS
website page. You are going to pay 5 percent per month when you
are late.
And that, to me, I think crosses into the exploitation
category, and so you and I have discussed this before and I
would just ask you once more for the record: Do you ever deal
with exploitation on the part of the U.S. Government?
Mr. Cordray. We don't have authority to address--
Mr. Pearce. Okay. All right, fine.
Do you have any authority over student loans? Because
student loans charge 5 percent where the Wall Street bankers
pay less than 0.5 percent to get money and student loans you
pay at 5 percent on those. Do you deal with student loans?
Mr. Cordray. I think there are various issues that might be
looked at there, and maybe they are for the Congress.
Mr. Pearce. Yes. So there are various issues that you
haven't looked at. You are looking at other issues.
So if I would wrap the whole thing up in the direction I
was going, you established a Q.M. rule and the Q.M. rule was
supposed to protect consumers. But what it actually did was
drive 95 percent of the loans into the GSEs, which are exempt
according to the legislation that you try to impact.
Mr. Cordray. No, I don't think--
Mr. Pearce. Ninety-five percent are driven into the GSEs
and you have no action that you are taking on GSEs. You are
coming down here and picking on the people who are making loans
to people just trying to pay their rent at the end of the
month, but when you drive them inside the government then your
answer is here, ``We cannot do anything to back the government
off. We don't deal with the IRS; we don't deal with the
government loans.''
And what you do is you are driving people into a market
where you don't care if they are being exploited or not. And so
I just think that is--thank you, Mr. Chairman. I yield back.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Georgia, Mr.
Scott.
Mr. Scott. Thank you very much, Mr. Chairman.
First of all, Mr. Cordray, it is very important for you,
for the CFPB, for this Nation to know that there are Democrats
on this side of the aisle who have serious, serious concerns
and issues about how you are dealing and going forward with
this racial situation at the CFPB. We have legitimate concerns,
and I have expressed those.
But here is the most dramatic fact with the auto dealers,
and that is this: Your methodology--now fair is fair, and when
you start talking about discrimination and you start talking
about giving people checks because they have been discriminated
against, but then you use a methodology that is flawed,
totally, based upon the last names of people.
So now what we have--and you know this for a fact--you have
many White people out here whose last names are Johnson or
Williams or Robinson or Smith or Scott or whatever, who are
getting checks. And they are standing there at the mailbox
wondering, ``Wow, where did I get this check from?''
That is an unintended consequence that needs to be
corrected. Yet, you ignore that glaring fact and continue that
process.
The other area is this: If an African-American customer
goes into a dealer and he tells that dealer that, ``Mr. Dealer,
I can only afford a $350 a month payment for an automobile,''
and that dealer looks at that and he decides that he will go in
and cut his own retail margin into the deal and lower that
discount rate to meet the demands of that African-American's
budget, and yet your rule, your situation would deny that
dealer, would deny that African-American customer whom the bank
won't deal with, many of whom don't even have a credit card.
There are 60 million unbanked or underbanked people in this
country, and a huge percentage of them are African-Americans.
When you discriminate, that is discrimination against
African-Americans when your rule and your action denies them
access to that car. How are they going to get to a job? These
are the unintended consequences.
This is a legitimate business reason, because allow the
dealer to come in there and either meet or beat that. These
dealers are in communities where they know families, in the
rural areas especially. Those car dealers are everywhere in a
community and they have relationships. Why deny this African-
American the opportunity because he doesn't have that budget?
And here is the other point: The Department of Justice,
which is, indeed, the legal and lawful arm of jurisdiction
under which the dealers come--not you; you deal with the
financial end, the lenders. But the unintended consequence of
this is you are strangling the poor dealer and you are denying
the very customers that you are supposedly trying to put this
in view of to try to help. And then much of the money that you
are getting out there for this is going to White people.
Now, that is as plain as the nose on our face. And we need
protection from abuses, but this entanglement improperly was
reflected with the overwhelming support of the Congress. And it
wasn't just Republicans; 92 Democrats also stood up because of
this basic reason.
So my point is that when you are willing and open to look
at the whole picture--not just this narrow aspect, but--I guess
my time is up, but I hope you understand that for both
Democrats and Republicans, this is an issue of soaring
magnitude--
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Florida, Mr.
Posey.
Mr. Posey. Thank you, Mr. Chairman.
Director Cordray, it is no secret that I am still a little
bit apprehensive about the CFPB.
Mr. Cordray. I am trying to help you get through that.
Mr. Posey. Sometimes I get to feeling that despite the
great-sounding name--Consumer Financial Protection Bureau; it
sounds really so wonderful--it is going to just be another
government entity that will be used to punish political enemies
and bully law-abiding citizens, like Lois Lerner and the IRS,
for example. I like to think that is the last thing we need,
that Congress and other agencies like the IRS already do enough
of that.
One of the many, many reasons that we don't have time to go
into today that make me feel that way is your opposition to my
proposed legislation, which would allow businesses and
individuals to ask whether a particular transaction complies
with your rules. Otherwise they might be left playing a
guessing game as to how the CFPB might act or react to what
they are doing or not doing.
Do you think it is important for the Bureau to communicate
with the companies they regulate?
Mr. Cordray. We do all the time.
Mr. Posey. Good.
Mr. Cordray. All the time.
Mr. Posey. Is that a yes?
Mr. Cordray. Yes.
Mr. Posey. Okay. Do you think it is important that
businesses understand the regulations you enforce on them?
Mr. Cordray. We--
Mr. Posey. Yes or no, just--
Mr. Cordray. --we try very hard to make that happen, yes.
Mr. Posey. Okay. Do you think the CFPB has a role in
helping companies understand and comply with the regulations
that you implement?
Mr. Cordray. I think we have been by far the most active
regulator ever in doing that, yes.
Mr. Posey. Thank you. Do you think consumers fare better
when more businesses understand how to comply with your
regulations?
Mr. Cordray. Yes, because if the rules actually don't get
implemented, then they aren't worth anything.
Mr. Posey. Okay.
I like to think that you feel the way you said, which is
why I was so disappointed with the Bureau's final no-action
letter policy. Here is an excellent opportunity to provide some
clarification to companies and individuals who are faced with a
constant stream of new regulations.
In my office I have kept the register for the last 5 years.
It has become a little bit of a tourist spot for people to come
in and have their pictures taken with the regulations that the
Federal agencies--not elected people but unelected people--have
implemented in the last 5 years.
I ask people how high this stack of new regulations is, and
the highest number I have had anybody guess so far was 7 feet.
The reality is that it is 7 stacks over 7 feet.
Yet, it is my understanding that the Bureau is still
expecting merely one to three requests per year, and that the
policy you set up is the expectation that there is only going
to be one to three requests per year. Is that correct?
Mr. Cordray. This is a fair line of inquiry, I think. I
intend for us to do more than that.
We opined that we thought we might get as few as one to
three applications a year. I think we may get more.
We also said that we would work to try to accommodate
greater demand if there is a greater demand.
The purpose, as I had in mind, of having a no-action letter
policy--and it took some time and effort to work through that--
was to try to capture some of the spirit of the bill that you
are talking about in terms of people being able to get their
questions answered and have some clear space to go forward.
By the way, we also do this on a daily basis. We get
thousands of questions a year that we--
Mr. Posey. I understand. Reclaiming my time, I am limited
here, I understand that. Have you had any inquiries yet?
Mr. Cordray. I think the policy has just taken effect and I
don't even know whether the effective date has yet passed, so I
don't know the answer to that at the moment. We would be glad
to keep your staff informed if that is--
Mr. Posey. If resources were taken off the table, if money
wasn't an issue for the CFPB, which it is not, would you then
have any objection to making the no-letters policy more
expansive?
Mr. Cordray. Actually, money is an issue for us. We have a
hard budget cap set by Congress that we have to comply with, so
it--we always have to think about how we are allocating
resources to different things and that bar against each other.
We don't have an unlimited budget.
Mr. Posey. This frustration that I see all the time is the
only time we are concerned about money is if it--when it
really, truly benefits the public--
Mr. Cordray. No, that is not--
Mr. Posey. --like communicating with these people and
letting them know what to expect. We have had--
Mr. Cordray. We are concerned about money all the time.
Mr. Posey. We have had your assistant come in here, and I
think a Member from the other side asked her how much money she
made, and she refused to tell us. Money never seems to be a
problem except when it is trying to help the public.
Mr. Cordray. It is not true. It is not true. Money is an
issue for us all the time, and--
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Texas, Mr.
Green, ranking member of our Oversight and Investigations
Subcommittee.
Mr. Green. Thank you, Mr. Chairman.
And I thank the witness for appearing, as well.
I also thank the ranking member.
Mr. Cordray, you and I and a good many other people are
well aware of what this is all about. There are people who want
to emasculate now the CFPB and ultimately eviscerate the CFPB.
It is over the airwaves. All sorts of things are being
said. There was even an allegation made that I had some
concerns with the CFPB to the extent that it was alleged in a
sort of a sketchy way that I was supportive of emasculating the
CFPB. Not in those words.
So that is really what this is all about.
There are people who really would like to have a Financial
Protection Bureau, not a Consumer Financial Protection Bureau.
And so all of these things are done to give the CFPB a bad
image.
I want to go on record as making it very clear that I
support the CFPB. I support what you are doing to help in the
area of auto lending, to help us with payday lending. I support
these things. I wish we could do more.
I don't believe that all dealerships are engaged in
invidious discrimination. I don't think that all payday lenders
are bad people. But those that are ought to be properly
regulated and they ought to be penalized for what they do.
Let's talk quickly about Ally. It is true that Ally settled
that case for about $80 million I believe. Is that correct?
Mr. Cordray. And they have paid out more since to remediate
further problems year by year.
Mr. Green. And it is true that Ally was prepared, in the
sense that they had their litigation contingency ready to do
battle in court, which is the American way. That is why we have
an independent judiciary. But they were prepared, they were in
court, and they chose to settle the lawsuit. Correct?
Mr. Cordray. I assume so.
Mr. Green. Okay. With them settling this lawsuit, I assume
that they thought this was in their best interest to do so. But
what I marvel at is how these major businesses can lose in
court but come to Congress to win.
Because that is really what this is all about. They want to
now change the rules of the game so that they can continue to
perpetrate these kinds of invidious acts upon people who need
the money they have, are barely making it, and still find
themselves being discriminated against and having money taken
out of their pockets.
Everybody, it seems, wants to fight discrimination until
they have to fight it. And then when they get to the point of
having to do something about discrimination--invidious
discrimination, I might add--that is when none of the tools
seem to work for them.
Using testing doesn't work for them, which is probably one
of the best ways to determine whether invidious determination
takes place because you can send people out and those that come
back with empirical evidence can share that with you, show that
they were discriminated against. Then disparate impact, another
tool, just doesn't seem to work for them.
Any tool that we design doesn't work for them. Everybody
wants to fight invidious discrimination until they have to
fight it or find a way to do it, unless it is at the CFPB.
If it is at the CFPB then all sorts of specious allegations
are made, attempts to do everything that they possibly can to
besmirch the CFPB because they have already said--and I admire
them for being honest--that if ever they get a President they
are going to do things to eviscerate--they don't use that
terminology, but that is what is meant--to eviscerate the CFPB.
It will be taken away from us.
I am reminded of what Ben Franklin said when he came out of
Constitution Hall and someone queried, ``What type of
government, a monarchy or a republic?''
And he said, ``A republic, if you can keep it.''
We have a CFPB if we can keep it. I am not sure we are
going to be able to keep it, to be quite candid with you. I am
going to fight on my watch, but I know that there are many
watches to come.
And just as the same people who are against the CFPB, the
same people who want to do something about Social Security,
they want to privatize it--all of this, in my opinion, goes
back to something the Supreme Court did in Citizens United v.
FEC. The Supreme Court said that money talks.
Money is talking right now. Right now, today, money talks.
These big corporations now know that they have an edge
because they can do whatever they want and challenge us if we
challenge them. It makes a difference in the lives of little
people, people who are not big like the corporations. And we
have to do something about it, and I thank God for what you are
doing.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Ohio, Mr.
Stivers.
Mr. Stivers. Thank you, Mr. Chairman.
I appreciate you being here, Mr. Cordray. I'd like to
welcome you before the committee.
Most people don't know it in the room, but Mr. Cordray is
my constituent, so it is always good to have a constituent in
the room.
I know you answered the question to Mr. Royce, from
California earlier--we sent you a letter with 329 Members of
Congress who signed it, bipartisan, a massive majority of the
members of the Congress. And Mr. Royce asked you a little bit
about it, but he left a little bit out and I just wanted to
follow up a little bit.
Mr. Cordray. Okay.
Mr. Stivers. So did you read the letter by any chance?
Mr. Cordray. I don't think it has come to me yet.
Mr. Stivers. Okay, good. Well, I hope you read it--
Mr. Cordray. I think it came over yesterday and I have not
seen it yet.
Mr. Stivers. I know you are a busy man. I hope you read it
soon.
So the bottom line is the Government Accountability
Office--
Mr. Cordray. I read all the letters; I just haven't gotten
that one yet.
Mr. Stivers. No, I understand. I understand.
The Government Accountability Office did a study and they
found the number of cases where community financial
institutions, both small credit unions and small banks, had to
discontinue or limit access to services as a result of your
regulations. And you have the authority under Section 1022 of
Dodd-Frank to modify your regulations and sort of adapt them to
the people that they are applied to. So I would urge you to do
that.
I am a very visual person, so I have a visual display for
you. Jesse is going to hand you a t-shirt. Could you hold up
that t-shirt and take a look at it really quick and maybe
comment? Is it a nice t-shirt? Is it well-designed?
Mr. Cordray. I am not an expert on t-shirts, although I do
wear--
Mr. Stivers. It looks like a nice t-shirt. Could you hold
it up a second, please?
Ms. Waters. Excuse me.
Mr. Stivers. So, okay, could you try to put it on? What
size--
Mr. Cordray. I dressed in my normal uniform today and I am
reluctant to deviate from--
Mr. Stivers. Does it look like a big t-shirt or a small t-
shirt?
Mr. Cordray. It looks to me like a small t-shirt.
Mr. Stivers. It is a small t-shirt. That is a size 2T t-
shirt, compliments of Sam Stivers.
Mr. Cordray. Two teen?
Mr. Stivers. 2T, compliments of my son, 2T. He is--
Mr. Cordray. What does that mean?
Mr. Stivers. It means he is a toddler.
Mr. Cordray. Okay, got it.
Mr. Stivers. And so it means you wouldn't fit in it. So the
two ways you could fit in that are go on a massive diet and
restrict yourself, which is what a lot of our community
financial institutions are doing to make themselves smaller to
serve their clients less; or they could strain the t-shirt and
break the t-shirt, the t-shirt being the regulation.
That is the problem you are putting folks in. So I would
ask you to take a look--
Mr. Cordray. Could I have a moment?
Mr. Stivers. You can in a second. I will give you time.
And take a look at your authority. You talked earlier about
your authority. You took your authority seriously in another
realm when you were talking to one of my colleagues and said,
``We take our authority very seriously.''
Take your authority under 1022 seriously, too. So what are
you going to do about that? And I will give you about 20 or 30
seconds to tell me what you are going to do to help these folks
under--and you admitted you haven't read it, so you probably
can't tell me what you are going to do, but I guess I will ask
you, are you going to read it and take this seriously? Could
you answer that question?
Mr. Cordray. Sure. But let me also talk about the, because,
for example, CUNA, they have economists on staff who actually
present facts and reports and then they also write certain
opinion pieces that don't jibe with the facts.
Credit union membership last year after 4 years of the CFPB
is at a new all-time high in the Nation. That is good news, I
think, but it is not consistent with this notion that we are
killing credit unions.
Credit unions' share of the mortgage lending market, where
supposedly our rules are stifling them and driving them out of
business, is at its highest level than it has been for the last
20 years of keeping track. They are doing better in a
marketplace that rewards responsible lenders.
It is also the case that we have contoured our rules in
ways that give advantages or give differential treatment to
smaller lenders, whether community banks or credit unions,
because that is consistent with the data coming out of the
crisis that they had lower defaults than other lenders. They
should be able to continue their relationship-lending model,
and our rules have provided specifically for that.
We will continue to think about those things on a case-by-
case basis, but this argument that everybody is being driven
out of business, they are stopping products, they can't fit
into a 2T toddler t-shirt, isn't consistent with the HMDA data,
which shows that total mortgage lenders--numbers of mortgage
lenders were up last year, that credit union membership is at
all-time highs, and that credit union mortgage lending in
particular has increased its share of the market at the expense
of large banks. So let's deal with the facts.
Mr. Stivers. And I have given you a little time, and I
would like to reclaim my time and tell you the problem is the
number of small credit unions is going down because your
regulations are making it difficult for small credit unions.
Mr. Cordray. No.
Mr. Stivers. They are having to merge, and I had it happen
in my district.
Mr. Cordray. Yes.
Mr. Stivers. Three credit unions merged into one bigger
credit union because of the regulatory burden. We are seeing it
all over this country. The same thing with small banks.
And the regulatory climate is speeding it up. It is not the
only cause, but it is speeding it up. And please use your
authority--
Mr. Cordray. Congressman, it has been happening since the
1920s.
Mr. Stivers. Use your authority--
Mr. Cordray. There is nothing specific about Dodd-Frank
that is changing--
Chairman Hensarling. The time of the gentleman has expired.
Mr. Cordray. --what has been happening since the 1920s.
Chairman Hensarling. The Chair now recognizes the
gentlelady from Ohio, Mrs. Beatty.
Mrs. Beatty. Thank you, Mr. Chairman, and Ranking Member
Waters.
And thank you, Mr. Cordray, for being here today.
There are some benefits in being last. You get to hear all
of the information, good or bad--
Mr. Cordray. I notice you actually sit through the entire
hearing--
Mrs. Beatty. I do.
First, let me just say how proud I am that you are from
Ohio, and certainly I associate myself with all of the words
that have saluted you protecting those folks we need to
protect, which is in your charge.
Let me also say that we have not talked about the billions
of dollars that you and your agency have been able to recover
for those who have been wrongly defrauded.
Now, there are a lot of controversial issues here today,
and I have been a part of some of it. But what is amazing to
me, being a Black woman, is how we talk about protecting
consumers, and we pick and choose when we want to use the words
``disparity'' and ``discrimination.'' And sometimes for me it
has seemed very political, that people are using it--whether it
is you, whether it is President Obama, whether it is anybody
who is helping those folks who look more like me.
I have looked on website pages of some of my congressional
folks here, and it is all about destroying you; it is all about
racism. But we only seem to do it when we are protecting those
folks.
Now, here is what I think, and I am trying to look at both
sides. So if we take one of the most controversial votes that--
for me, and I am all with you. I am supportive. But here is my
issue: I think we have wasted a lot of time in here--a lot of
time arguing without resolve. And I was always taught if you
complain, you should have a resolution.
So if we take the House bill that came up that we had Black
dealers who were against it; we had dealers who let's say were
more majority but there were some minority in there who were
supportive of it. But here is a wonderful document.
And I think we all have it. Mr. Chairman, I would like to
enter it into the record.
Because it is about what you do.
Chairman Hensarling. Without objection, it is so ordered.
Mrs. Beatty. And it talks about fair credit compliances.
All three. You can take the Black folks; you can take the White
folks; you can take the combination. They all signed off on
this document.
So then we get this legislation that we are all in a tiff
about, and the legislation really doesn't resolve the problem,
so whether you are for it or against it it doesn't make any
sense because here is the issue that I am going to allow you
the last half of my time left to answer.
When I think about those African-Americans and minorities
who walk into a dealership, do I think some of them are
discriminated against? Yes. I think some of the people who walk
in this room who look like me are discriminated against because
of all the stereotypes that we all know about and,
unfortunately, we have heard in this room.
Now on the other side, do I think somebody walks in a
dealership that looks like me and is not discriminated against
or they don't automatically get a higher rate? What is the
difference? It might just be that I was more aware, had a
better credit score.
Nobody is talking about the real systemic issues and the
problems. Because we can't change the color that you go in, but
we need to make sure that we put practices and things in place
that is beyond names and zip codes.
But here is the other thing: If we start together on
financial literacy, the seventh State in this United States,
you have done more than any single person on financial literacy
in that State. So my question is, we create Dodd-Frank--and I
am all for Dodd-Frank; I wasn't here--there isn't a part of the
Dodd-Frank legislation that talks about real financial
literacy.
And we are not doing enough in this committee, that is
charged with looking at the banking industries, looking at the
financial industries, looking at the credit union industries,
but we are not talking about a program, even from the minority
dealers in their letter to me it said we are not dealing with
the real issue of the transparency of the people's credit, and
we are not coming up with any legislation.
So Dodd-Frank mandates that the CFPB's Office of Financial
Education shall--not maybe think about it--shall develop and
implement a strategy to improve financial literacies of
consumers, okay? It doesn't say consumers who go into a candy
store, so that means a consumer who goes into a automotive
dealership. They have to have financial counseling; they have
to have information to assist with the evaluation of a credit
product--let's say that product is a car--and the understanding
of credit histories and scores.
Lastly, I had a Member--an African-American person tell me
that they got that high interest rate, and thank God they did
because they could go to work, they could have a car, and they
could feed their family. And I'm sorry I don't have enough time
for you to answer, but--
Chairman Hensarling. The time of the gentlelady has
expired.
The Chair now--
Ms. Waters. I ask unanimous consent to enter into the
record the letter from the National Association of Minority
Automobile Dealers.
Chairman Hensarling. Without objection, it is so ordered.
And Members are reminded that they are all allowed to insert
items into the record under general leave.
Ms. Waters. The National Association of Minority Automobile
Dealers is not in support of H.R. 1737.
Chairman Hensarling. The Chair now recognizes the gentleman
from South Carolina, Mr. Mulvaney.
Mr. Mulvaney. Thank you.
I want to follow up on some of the discussions that Mr.
Neugebauer from Texas had with you about the interplay between
Federal regulation and State regulation. I think Mr. Neugebauer
was asking you specifically about some of your proposed rules
on short-term what people call payday lending and how it
interacts with State action in the same field.
During your questioning--and I am--seriously, despite what
you may think, I am--in this particular circumstance I am not
trying to put words in your mouth. But I think Mr. Neugebauer--
Mr. Cordray. I always take your comments at face value and
listen close--
Mr. Mulvaney. Mr. Neugebauer asked you which States had
failed to protect consumers, and I think in a back-and-forth
you said all 37 who have failed to I think do something to--all
37 that still allow payday lending, or that haven't banned
payday lending? So I will ask the question again, and see if we
can get a clean answer.
In your research as you have prepared to produce these new
rules on short-term lending, which States have you determined
have failed to protect their own consumers?
Mr. Cordray. So again, and maybe I wasn't clear in trying
to respond to the question before, that is not how we approach
the issue. It is not my job to control States or tell State
officials what to do. It is my job--
Mr. Mulvaney. Great. Let's stop right there. That is fine.
Let's take that and go down a different road then.
Mr. Cordray. But it is my job to look at what kind of harm
is occurring in the marketplace and potentially look at ways to
intervene to address certain predatory practices of lenders.
Mr. Mulvaney. All right. Is it fair to assume, then, that
if you promulgate a rule that is more protective of consumers
than a State has made, that you deem that State not to be
adequately protecting consumers?
Mr. Cordray. We will not seek to occupy the field and exert
preemption in that manner. I think it wouldn't be consistent
with the Dodd-Frank Act.
What we will do is if there is a Federal policy
intervention--and again, this is not yet determined at this
point--that will coexist with State regulations and authority
just as it does in the field--
Mr. Mulvaney. Now, you do intend to preempt.
Mr. Cordray. --in other fields of law.
Mr. Mulvaney. Let's be clear and be honest: You do intend
to preempt State law in certain areas.
Mr. Cordray. No, I don't think we intend to preempt State
law. I think that what will happen is--
Mr. Mulvaney. I am just using your words, Mr. Cordray, in
your letter of February 11, 2016, to my office--I asked you
about this particular issue and you said, ``Among the Bureau's
goals is to ensure that consumers are offered certain minimum
protections no matter where they are located or whether they
receive their loans from storefront or online lenders. State
laws that afford consumers greater protection would not be
preempted by a Bureau regulation on small-dollar lending.''
The obvious implication to anybody who speaks the English
language is that States that offer consumers less protection
will be preempted. This is your language.
Mr. Cordray. I don't know, maybe you are drawing that
conclusion. What I would say is, as is true in securities law,
as is true in antitrust law--I worked with these laws as a
State attorney general--State and Federal law coexist.
Mr. Mulvaney. The SEC comes in here and the SEC gets money
from us. The SEC has an entirely different oversight.
You are different. You don't get appropriations from us;
you don't have the same level of oversight. You are your own
thing, so you cannot compare yourself to the SEC.
Let me ask you this--
Mr. Cordray. I wasn't comparing--
Mr. Mulvaney. Your home State has acted in this area. Your
home State, I think the last time they looked at short-term
lending was in 2009. They have done it over the course of the
last 10 or 15 years.
They have not provided a cooling-off period between
transactions; your proposal requires 60 days. I will ask you,
sir, who knows better how to protect consumers in the State of
Ohio: the people of Ohio or the CFPB?
Mr. Cordray. What I would say is policymakers, as I was,
for the State of Ohio do their best to protect the citizens of
Ohio. Policymakers at the Federal level who are given--
Mr. Mulvaney. Have they failed in this circumstance?
Mr. Cordray. Policymakers at the Federal level who are
given authority by Congress, as the CFPB has been given
authority by Congress, do their best to protect people
nationwide. The two coexist together.
Mr. Mulvaney. The last time that Ohio addressed this issue
was in 2009. You were the A.G. in 2009. If you were the A.G.
today in Ohio and the CFPB made a rule that preempted Ohio law,
would you defend the Ohio law or would you acquiesce to the
Federal preemption?
Mr. Cordray. I have been engaged in issues of preemption
going back to when I was solicitor general of Ohio in 1993-
1994, and I have addressed them on both sides of the issues
over the years--
Mr. Mulvaney. Wonderful resume. What is the answer to my
question?
Mr. Cordray. --and so it would very much depend on what
circumstances we were talking about.
Mr. Mulvaney. This one.
Mr. Cordray. Okay.
Mr. Mulvaney. Ohio passes a law that says there is a 2-day
wait period; the CFPB passes a regulation saying there is a 60-
day period. Will you defend Ohio law against Federal
regulation?
Mr. Cordray. That is entirely hypothetical.
Mr. Mulvaney. No, you want to be governor.
Mr. Cordray. We don't even have our proposal here.
Mr. Mulvaney. Can you actually say the words, ``The people
of Ohio know better how to protect consumers in Ohio than the
CFPB?''
Mr. Cordray. The people of Ohio are also people of the
United States. They have a dual capacity. That is--
Mr. Mulvaney. You can't say those words, can you?
Mr. Cordray. --true of our system of federalism.
Mr. Mulvaney. Are you capable--do you believe that
statement?
Mr. Cordray. Do I believe what statement?
Mr. Mulvaney. Do you believe that the people of Ohio--
Mr. Cordray. People of Ohio are also people of the United
States.
Mr. Mulvaney. --are better suited to protect consumers in
Ohio than is the CFPB? Do you believe that statement to be
true?
Mr. Cordray. That is a very general statement and I don't
know what exactly that means.
Mr. Mulvaney. Fair enough. Thank you.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from California, Mr.
Sherman.
Mr. Sherman. I think the gentleman from South Carolina is
misusing the word ``preempt.'' To preempt means to prevent the
State law from being effective. To supplement means that you
have to obey the State law and you have to obey the Federal
law.
Mr. Mulvaney. Will the gentleman yield for a brief--
Mr. Sherman. I'm sorry. I only have 5 minutes.
If the Chair will yield me additional time, I will yield.
Chairman Hensarling. The Chair will yield an additional 30
seconds.
Mr. Sherman. I will yield the gentleman 30 seconds.
Mr. Mulvaney. We had this discussion last time when Mr.
Cordray was here. My State has a law that has a 2-day waiting
period. They are proposing a regulation that is a 60-day
waiting period, and my question is doesn't, thus, the Federal
regulation preempt State law? And I think you would agree that
it would.
Mr. Sherman. No, I would not.
Reclaiming my time, if the Federal law requires me to wear
a belt and the State law requires me to wear suspenders, I will
comply with both laws. If you take the position that the State
legislators are in the position to provide consumer protection,
then you should repeal Dodd-Frank, as I am sure--or at least
these provisions of Dodd-Frank, as I am sure has some support
on your side of the aisle.
When we passed the law establishing the CFPB, we decided
that in addition to following State law, which might provide a
2-day period, there could--there will also be an additional
Federal law. Now you can say that a State that decides to have
no regulation in a financial area has made a conscious decision
that is the best policy for that State. But we passed a Federal
law to say that there will be standards.
Preempt is when you tell a company they don't have to
comply with State law. Supplement is when you say you have to
comply with the State law plus you must comply with the Federal
law.
Mr. Cordray, thank you for all you do. Part of what you do
is coming here to Congress so that we can comment on what you
do and perhaps help you do an even better job.
Mr. Cordray. And I think I just learned from you a little
bit, so I appreciate that.
Mr. Sherman. Okay.
Now, as to Mr. Stivers' letter, there are some who say that
letter, signed by many of us--and I want to say I signed the
letter and I am a step ahead of you, I have read the letter. It
does cite code section 1022(b)(3) and quotes it accurately, and
some have said, ``Well, therefore it is in favor of exempting
some of the smaller institutions,'' so toddlers wouldn't be
wearing shirts at all.
But in fact, it--what it calls for is look at each
regulation, determine whether you can have a one-size-fits-all
regulation--buy hats and one-size-fits-all, or shirts need to
be tailored to the right size. And the only ask in the letter
is to be sure that your regulations don't have unintended
consequences, and the specific focus is that when you write a
regulation and you would want a different regulation or a
different approach for smaller institutions that you have a
portion of the regulation applicable to smaller institutions.
Mr. Cordray. That is sound advice, and it is something we
will continue to try to heed, yes.
Mr. Sherman. And there may be individual circumstances
where we bring to your attention--
Mr. Cordray. And we will be glad to take input on that in
particular issues, yes.
Mr. Sherman. We talked a couple of days ago. You have urged
financial institutions to use text messages, and thank you for
saying you will go to the FCC and make sure that the FCC will
allow financial institutions to use text messages. If I can get
a text message from my bank telling me I am about to overdraft
my account, I will pay my phone company a nickel to get that
information.
I want to focus on TRID. These are complicated regulations.
They are particularly complicated for smaller financial
institutions.
I want to commend you for having the hold-harmless period.
And institutions would like to get more written guidance as to
how to apply the regulations and what remediation steps they
should take when remediation is necessary.
We have talked about the hold-harmless period continuing,
and I think you should continue the hold-harmless period at
least until you can issue the interpretations necessary to
provide written guidance.
Mr. Cordray. That may not go on forever, but we will
continue to be very attentive to the industry, and we have
encouraged them to bring us their prioritized items for
consideration.
Mr. Sherman. At least as long as it takes to answer the
questions that have emerged in the first 4 months. Obviously,
some newer question could come up.
And finally, as we have talked, the regulations require an
inaccurate statement as to the cost of title insurance in those
States like California, where there is a buyer's policy and an
owner's policy and you get a discount on the owner's policy
when you get the lender's policy.
To correct the record, there is a lender's policy and there
is a buyer's policy.
I yield back.
Chairman Hensarling. I was actually reminded that I gave
you an extra 30 seconds, so you have 14 seconds to--
Mr. Sherman. Oh. Thank you.
Chairman Hensarling. --go to town.
Mr. Sherman. So in any case, Mr. Cordray, you will be
looking to make sure that the regulations deal with a situation
where there is a stated price for the policy the buyer of the
home is going to pay for, but there is an automatic discount
that, once disclosed, is the net price that the buyer--
Mr. Cordray. I know that is an issue that has been under
active consideration during the rulemaking process and, I
believe, since.
Chairman Hensarling. The time of the gentleman has now
expired.
The Chair now recognizes the gentleman from Georgia, Mr.
Westmoreland.
Mr. Westmoreland. Thank you, Mr. Chairman.
Director Cordray, on data security, what system do you use
to determine if somebody is fulfilling their commitment on data
security?
Mr. Cordray. There are a number of procedures that have
been developed and actually really enhanced in the Federal
Government over the last several years. The Federal Government
has had some problems in this area, and the private sector has
had many problems in this area. It is something that I think we
are all very attentive to. Nothing would more discredit--
Mr. Westmoreland. What standard do you use if you are going
to go out and evaluate a company and possibly fine them for not
having the--
Mr. Cordray. Oh, I see. I thought you were talking about
our own data security.
We are using the standards that we understand to be common
in the industry. We are using the standards of best practices
at different institutions.
Mr. Westmoreland. What standard would that be?
Mr. Cordray. We are taking some guidance from the Federal
Trade Commission, which is ahead of us on this issue. We just
had an enforcement, actually, against Dwolla in this area.
Mr. Westmoreland. What did you use for that enforcement?
What standard did you use for that?
Mr. Cordray. What we did was we do--whenever we engage in
an enforcement matter we open an investigation, took a look at
their own security protocols, whether they were being followed.
By the way, that is the first thing: Whatever security
level or threshold you are talking about, one is whether it is
there on paper but two is whether it is actually being
followed. If it is not being followed then you have a problem.
That is one of the things that we thought we found--
Mr. Westmoreland. But what standard do you use for the
CFPB?
Mr. Cordray. Again, we are looking at all of the standards
in the industry and attempting to adapt to them. If you want me
to have--
Mr. Westmoreland. So you don't have a standard now?
Mr. Cordray. If you want me to have my staff follow up with
you on some of the details of that--
Mr. Westmoreland. I would just like to know what standard
you are using because--
Mr. Cordray. I am not myself an expert in that area, but we
could certainly inform you better--
Mr. Westmoreland. Okay. You stated that consumers entrust
companies with significant amounts of sensitive personal
information, and it is crucial that companies put systems in
place that protect this information. I am assuming you think it
is just as critical for the CFPB to protect this information
that in your statement you said consumers entrust with
companies, but the CFPB has a lot of information that the
consumer would normally give to a credit agency. Is that true?
Mr. Cordray. I would say two things about that. Number one,
I do think it is fair to hold us accountable for the security
of data that we have.
But number two, the data that we have typically is
anonymized and it is de-identified and it cannot identify
either you or me, so it is less risky than the kind of data you
are talking about private companies having, which tells all
about you and all about me and it is very clear who is being
identified there. That is much more risky. If they get my
credit card information or yours, we can be defrauded; we can
have our--
Mr. Westmoreland. So you think private companies'
information is much more--the information is much more risky
than yours?
Mr. Cordray. It is more risky because it is personally
identified there, and that is typical. They are using it to
market to you and me.
Mr. Westmoreland. Okay.
Mr. Cordray. Our data is not of that kind.
Mr. Westmoreland. Who has tested your data security system?
What company has tested it?
Mr. Cordray. The folks in the Federal Government who deal
with this across all agencies set standards, and they have now
enhanced the standards and improved the standards that we are
all seeking to meet. And I think we are all trying to keep up
with the practices--
Mr. Westmoreland. I know that, but who tested your security
of your data?
Mr. Cordray. Again, our I.T. group could come and give your
office a briefing if you want to know the details--
Mr. Westmoreland. Well, no, I just want to know who tested
it because you mentioned all the information that is available
to other people and that you don't have that much information.
I just want to give you a little rundown--
Mr. Cordray. No. I said we have a different kind of
information. We don't have information that is identified by
you or by me; it is anonymized information for the most part.
Mr. Westmoreland. Okay. I just know that in your system you
have the borrower or co-borrowers' information of the name,
address, zip code, telephone numbers, date of birth, race,
ethnicity, gender, language, religion, Social Security,
education, military, employment records, financial account
numbers, financial events in the last few years, life events in
the last few years, mortgage information, current balance,
current monthly payment, delinquency grid monthly payment,
refinanced amount, bankruptcy information, credit card account
numbers, credit amount, loan balances, past-due amount, minimum
payment requirements, high-balance amount, charge-off amount,
second mortgages, household composition, single male, single
female, presence of children by various age categories, number
of wage earners in the household, household income, property
attributes, number of bedrooms, bathrooms, square footage,
light size, year built, age of structure, units in the
structure, most recently assessed value, longitude, latitude,
census block track, date purchased, origination date,
acquisition. Do you think this is really--
Mr. Cordray. So I am not sure what data you are talking
about. What particular data are we talking about--
Mr. Westmoreland. This data is given to you and is
supposedly in your records--from the National Mortgage
Database.
Mr. Cordray. What are we talking about, the mortgage
market? We were talking about credit card--what are you talking
about here?
Mr. Westmoreland. It is data that is in your system, and I
think that we need to know how it has been protected--
Mr. Cordray. I would be glad to have my folks follow up
with yours--
Chairman Hensarling. The time of the gentleman has expired.
The Chair wishes to advise all Members that votes are
expected somewhere between 1:00 and 1:20. I expect to clear the
Members in order in the queue, and we will adjourn once votes
are roughly 5 minutes out. We will not ask our witness to come
back, but instead we will adjourn at that time.
The Chair now recognizes the gentleman from Illinois, Mr.
Hultgren.
Mr. Hultgren. Thank you, Mr. Chairman.
Director Cordray, as you know, the committee has at length
raised concerns with the guidance the Bureau issued in 2013,
which it dubiously claimed is a simple interpretation of its
authority under ECOA, despite explicit language and intent in
Dodd-Frank to exclude automotive lending--
Mr. Cordray. Are we talking about--
Mr. Hultgren. --from the Bureau purview.
We have also taken issue with the disparate impact theory
and the questionable methodology used by the CFPB to administer
it. This is also a major concern for my automobile dealers in
my district and also all across Illinois.
You have now relied on disparate impact theory of
discrimination under ECOA in at least three separate
enforcement actions against businesses that underwrite auto
loans. I suspect that what you are doing is extending the
Supreme Court's holding in the Inclusive Communities case, but
that case dealt with the Fair Housing Act, not ECOA, and that
decision rested primarily on the unique congressional history
of FHA--history that is plainly inapplicable to ECOA.
I wondered if you could spell out in detail the specific
legal basis on which the CFPB is pursuing ECOA enforcement
actions using disparate impact?
Mr. Cordray. I believe there was considerable hope among a
lot of the industry that disparate impact would be disapproved
by the Supreme Court. By the way, I understand there is
interesting news: We have a new Supreme Court nominee this
morning.
And that was a challenge that was raised in the Inclusive
Communities case that you referenced and, in fact, the Supreme
Court resoundingly upheld disparate--
Mr. Hultgren. That was an FHA case, right?
Mr. Cordray. That is correct. That--
Mr. Hultgren. This is an ECOA case, right?
Mr. Cordray. Yes, but--
Mr. Hultgren. Very different. Very--
Mr. Cordray. No, I don't think--
Mr. Hultgren. No, it is very different.
Mr. Cordray. I don't think so.
Mr. Hultgren. --very specific requirements that we have
there--
Mr. Cordray. I think the two--
Mr. Hultgren. --were laid out, housing--fair housing, the--
but you are, I think, extrapolating something that we just
can't find any rationale for.
Mr. Cordray. Two laws have been applied hand-in-glove for
decades--
Mr. Hultgren. ECOA specifically had exemptions for this,
and yet you are using that.
Mr. Cordray. --mortgage market and they work together in
the--
Mr. Hultgren. To me, the sense that we have is you are just
pulling this out of nothing because there is an agenda that is
being pushed.
Mr. Cordray. No, no. That is--
Mr. Hultgren. Let me--
Mr. Cordray. Look, again--
Mr. Hultgren. Let me just move on--
Mr. Cordray. --if that had been upset we wouldn't be
enforcing the law. But we--
Mr. Hultgren. We talked a little bit about HMDA, and I want
to ask you specifically about some concerns--privacy concerns.
My colleague from Georgia, Mr. Westmoreland, raised some issues
of the amount of data that you already have--specific data on
individuals.
And all of us have concerns of the Federal Government, I
think, showing incredible weakness of being able to protect the
privacy of our citizens. I hear it all the time from them.
The recently finalized HMDA rule is especially concerning
to me because it looks like it is not enough. All the
information that Mr. Westmoreland had listed off, item after
item after item, and now it looks like the CFPB is looking for
more private information that I question if it is safe.
Section 1094 of the Dodd-Frank Act, which made changes to
HMDA, also required the Bureau to develop regulations that
``modify or require modification of itemized information for
the purpose of protecting the privacy interests of the mortgage
applications or mortgagors that is or will be available to the
public.''
In a footnote to the final HMDA rule in October 2015 the
Bureau states that, ``Based on its analysis to date, the Bureau
believes that some of the proposed new data points may create
privacy concerns sufficient to warrant some degree of
modification, including redaction, before public disclosure.''
However, the Bureau is only providing opportunity to comment on
the balancing test for consumer privacy, not the actual data
made public by FFIEC.
In a 2005 speech, former Federal Reserve Board senior
advisor Glenn Canner raised concerns about HMDA privacy risks,
noting that, ``Approximately 95 percent of loan records are
unique, meaning loan amounts and census tracks can be
attributed to a single person. With a cross match to private
lien transfer records, one can identify these individuals in 95
percent of the cases.''
Shouldn't the Bureau proceed with extreme caution before
finalizing any policy that would direct FFIEC to publish
additional consumer information, even if steps are taken to
anonymize it?
Mr. Cordray. Thank you for the question. As you pointed
out, and I think you should be pleased, we are approaching this
issue of the privacy issues very sensitively and we have
engaged in a further notice and comment process on that--
Mr. Hultgren. I am not pleased, and my consumers are not
pleased, my banks are not pleased, because they have seen
breach after breach after breach by the Federal Government. Mr.
Westmoreland asked, ``Who is the company that is looking at
it?''
You said there isn't one, basically. It is internal.
Mr. Cordray. No, no, no. That is not what I--
Mr. Hultgren. We have seen failures over and over again,
and no my concern with HMDA is that you would be getting more
information. It is stated by people in the Administration
saying that this does identify people, that 95 percent chance
as you are looking through this we can know exactly who it is
even if it is anonymized.
I don't think it is enough. My citizens are concerned. And
now you are adding more requirement of getting more private
information of my citizens.
I think it is wrong. I think you ought to--all of us ought
to proceed with extreme caution. To me, the least you could say
is, ``Yes, we will proceed with extreme caution.''
I yield back.
Mr. Cordray. We will proceed very carefully in this area,
yes.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Colorado, Mr.
Perlmutter, for 5 minutes.
Mr. Perlmutter. Thanks, Mr. Chairman.
Mr. Cordray, thank you for being here. Thanks for your
service to the United States of America. Thanks to the people
that you lead in the agency.
And as I have said to you many times, being a regulator,
you are never anybody's best friend. And that is not your job
and that is not what you are supposed to be.
But you are supposed to be looking out for the good--the
best interests of the people within the jurisdiction of your
agency, and I thank you for doing that in so many different
ways.
You and I have disagreed on auto lending issues and auto
dealership issues from time to time, but in a civilized, I
think, and a respectful way.
I was very disappointed to learn the other day about the
deposition taken of one of your staff--one of your lead staff.
I don't think that was appropriate, and I wanted to say that
for the record. That kind of thing can happen in court if it
needs to be. Depositions under the oversight of a judge, okay,
that is how our system works.
And I am just saying this, you take it or leave it as you
choose, that I would hope that the agency keeps a dialogue open
with the auto dealer industry in the hopes that there is some
kind of common ground that can be reached without them
continuing to pursue a legislative approach but that there
actually be some kind of an--something that is valuable for
consumers, does our best to root out discrimination, respects
due process.
Good luck. I just ask you to keep the line of communication
open.
Mr. Cordray. I appreciate that.
And, of course, we had difficulty initially because we
tried hard not to be reaching out to auto dealers to be
respectful of our jurisdictional lines. We came to learn
eventually they were interested in talking to us; they continue
to be interested in talking to us on various issues, and we
therefore have been willing to respond to them in kind.
Mr. Perlmutter. And I thank you for that, and I would like
you--I just ask that you keep the lines of communication open.
Mr. Cordray. Yes. All right.
Mr. Perlmutter. To see if there is some kind of resolution
short of legislation or lawsuits all the time, okay?
And I just want to thank you for all the other things that
you have been working on, whether it is mortgages or credit
cards or the like. Because we, the Congress, in Dodd-Frank--and
I know many of my friends on the Republican side, they don't
like a lot of the provisions in Dodd-Frank, and okay, fine, but
we had a lot of problems going into the 2008 collapse of the
financial sector, and a lot of it had to do with respect to
consumer lending and consumer matters. And that is obviously
the mission of the agency, to deal with those kinds of things.
So I didn't have anything specific I wanted to ask you. If
you have--
Mr. Cordray. Yes, if I could just--
Mr. Perlmutter. --anything you would like to talk about?
Mr. Cordray. Yes. There was a point made earlier that I
think is inaccurate and misguided, that somehow our rules have
pushed the mortgage marketplace into the GSEs. The reality is
that the irresponsible lending that precipitated the crisis and
blew up the mortgage market and blew up the economy pushed most
lending now to GSEs and eliminated, destroyed the secondary
financing market, which has not yet recovered.
All of that preceded any of our rules, which didn't even
take effect until 5 years after that. So again, just to set the
record straight, there have been various statements today that
I thought were not consistent with the facts, and I will do my
best to try to set the record straight where I can.
Thank you.
Mr. Perlmutter. And actually, the record is more stark than
you just stated, that in 2008, 2009, 2010 the only entities
buying loans in the secondary market were Fannie Mae and
Freddie Mac.
Mr. Cordray. Yes.
Mr. Perlmutter. There was no secondary market, okay? So,
everybody can go into their rhetoric and their hyperbole--
Mr. Cordray. That is right. It blew up. It destroyed itself
through very irresponsible behavior.
And by the way, another comment I saw the other day was
that the Federal Reserve had kept interest rates too low
leading into the housing crisis, and as I looked back at it,
the interest rates were between 4 and 5 percent during that
period. I am not sure how high people wanted them to be, but
again, the timing on that is not accurate to the facts.
Mr. Perlmutter. The last thing I would say, and just to
remind everybody, you are an agency of the Federal Government.
You have a lot of power, and however you exercise that power,
we all expect you to do it judiciously. I think you have done
that, but it is always something that has to be in the
forefront of the minds of you and your members of your agency.
Mr. Cordray. Yes, and it is power conferred on us by
Congress.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Pennsylvania,
Mr. Fitzpatrick, chairman of our Terrorism Finance Task Force.
Mr. Fitzpatrick. I thank the chairman.
Mr. Director, over here on the right. I just want to follow
up on the issue raised by my friend, Mr. Perlmutter, on
indirect auto lending.
Mr. Director, would you acknowledge that some borrowers,
customers in the indirect auto lending area who have good
credit have ended up paying higher interest rates and higher
fees as a result of the approach of the CFPB and the
enforcement actions that you have brought? Is that possible
that people with good credit who otherwise would have had a
lower rate, lower costs, whose costs have been increased?
Mr. Cordray. What I know our investigations found was that
there were many people with good credit--
Mr. Fitzpatrick. Well, I--
Mr. Cordray. --who belong to different minority groups who
were being charged more for their loans than White borrowers.
Mr. Fitzpatrick. But were some individuals of any racial or
ethnic background who have good credit, did they pay higher
rates and higher fees as a result of the approach and the
enforcement action? Is that possible?
Mr. Cordray. I have heard different views about that.
Mr. Fitzpatrick. But it is possible. You would acknowledge
it is possible?
Mr. Cordray. I have heard different views about that. It
depends in part on what the response to enforcement actions
are.
Mr. Fitzpatrick. Based on what you have heard, is it likely
that has happened?
Mr. Cordray. I wouldn't say that.
Mr. Fitzpatrick. You think it probably has not happened?
Mr. Cordray. I just wouldn't say whether it is likely or
not. It depends very much on the individual responses of
individual lenders.
Mr. Fitzpatrick. Mr. Director, I want to get into an area--
I had some very small community banks that I visited with
yesterday, and they are from Bucks County, Pennsylvania. And it
has to do with the subject of overdraft fees.
There are a lot of us who have concerns that the rulemaking
is--of your Bureau is limiting the ability of small community
banks to serve their customers and to provide real choices to
their customers. And those customers could be individuals or
small business owners. And these are sometimes customers who
would otherwise seek out riskier nonbank alternatives, which is
what I think we all collectively want to see them avoid.
In regards to the overdraft fees--and I am told that you
are looking at a rule and a rule is being formulated now on
this issue at the Bureau. Is that correct?
Mr. Cordray. We are working on that, yes.
Mr. Fitzpatrick. And when is that expected to be released?
Mr. Cordray. I think we have said that the proposed rule,
which will, again, be subject to considerable comment, I am
sure, and a public notice process, will be released this
spring.
Mr. Fitzpatrick. This spring. So this particular bank that
I met with yesterday wanted me to posit to you--she suggested
that I ask the CFPB whether you have any willingness to de-
identify data, which is something you were just talking with
Mr. Westmoreland about, and release it to the public so that
banks and financial institutions can interpret the data for
themselves and can draw their own conclusions.
Is that something you would be willing to do?
Mr. Cordray. What kind of data are we talking about? For
what purpose? What are we--
Mr. Fitzpatrick. The data that you are using to formulate
the role on overdraft fees.
Mr. Cordray. I'm sorry, on small-dollar loans or on
overdraft?
Mr. Fitzpatrick. On any of it.
Mr. Cordray. I thought you were talking about small-dollar
loans when I said we were going to release a proposal this
spring. On overdraft we are not releasing a proposal this
spring.
Mr. Fitzpatrick. You would be willing to release more of
the underlying data that forms the basis of your conclusions?
Mr. Cordray. We issued a couple of different White Papers
on overdraft, if that is what you want me to address. Yes?
Mr. Fitzpatrick. What I would like you to address is to see
if you would be willing to release more information.
I have introduced a bill called the Bureau Research
Transparency Act, H.R. 3131. Are you familiar with that bill?
Mr. Cordray. Not particularly, no.
Mr. Fitzpatrick. What the bill would do is it would require
the Bureau, when you make a report or recommendation or you
issue a rule, that you release the underlying data, which many
times is not released, so that, as I said in my first question,
so that banks can form their own conclusions.
Mr. Cordray. Yes. So let me speak to--
Mr. Fitzpatrick. So are you willing to release more of the
data that--
Mr. Cordray. Let me speak to circumstances where underlying
data is not released, because our orientation and our
inclination is to release as much data publicly as we can
because we want people to be able to do their own analyses,
draw their own conclusions. For example, that is why we have
the public complaint database.
But some of the information we get is trade secret
protected, so although one institution might want to know more
about it, another institution might feel affected or aggrieved
or disadvantaged if it is released--
Mr. Fitzpatrick. This is my question, Mr. Director: If it
is de-identified and if it doesn't fall within one of your
exceptions--and I would like to hear about those exceptions
like trade secret--are you willing to release all the data that
underlies your reports--
Mr. Cordray. Okay, so again--
Mr. Fitzpatrick. --so that the reports are transparent, so
that banks and financial institutions can--and the public can
draw their own conclusions.
Mr. Cordray. Yes. It isn't just whether it is de-
identified; it could contain confidential trade secret
information. It may have been obtained in such a way maybe we
had to buy it from some provider in which there were conditions
that we weren't able to negotiate away. It may be it was
obtained through confidential supervisory information from a
particular institution, which would be compromised if it were
put forward--
Mr. Fitzpatrick. Mr. Director, my time has expired. Would
you be willing to just lay out all the exceptions to
transparency on releasing the data that you were going to give
us today? Can you give us that information in writing?
Mr. Cordray. I think I just kind of verbally laid out--
Mr. Fitzpatrick. You just did.
Mr. Cordray. --much of it.
Mr. Fitzpatrick. Those are all the exceptions?
Mr. Cordray. There may be others, but I think that is the
significant--
Mr. Fitzpatrick. If there are others, please provide it in
writing to me. Would you--
Mr. Cordray. I would be happy--so if you are interested in
this here I would be happy to have our staff brief your staff
and hear from them about what they would like to know.
Mr. Fitzpatrick. Thank you, Mr. Chairman.
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Minnesota, Mr.
Ellison`.
Mr. Ellison. Director Cordray, your agency has been under
attack since its first day. I actually have a--I have something
that I would like to post on the screen right now if I can.
Powerful interests have opposed the agency's every move.
Many call for the abolition of your agency, and I have a slide
up there right now. On the screen is an ad run by a secret
group called Protect America's Consumers.
And I have no idea who is running these ads on MSNBC in
D.C.; I have no idea who is paying for them. We have seen some
addresses that lead us to conclude that they might be very,
very powerful interests, but we haven't received the
confirmation yet.
I was also angry at the deception in this ad and being
quoted out of context by this front group that I made my own
YouTube video.
So, not everyone is an opponent of the work of the CFPB. In
fact, I want to congratulate the people here, the green shirts,
who are standing with the CFPB today. What you are doing is
standing up for consumer justice, and I think that is really
excellent.
So I don't know if--was I planning on running my thing?
Okay, so this is my video setting the record straight that I
have at all times supported the CFPB, quite contrary to what
the deceptive Protect Consumers ad implied.
Then also, you may have heard in a public speech that was
given by our chairman yesterday on his vision of financial
markets. I would like to ask you some questions about some
ideas that were raised.
For example, do CFPB rules requiring lenders provide
closing cost documents to homebuyers 3 days before they buy
their house count as ``regulatory waterboarding'' of community
bankers?
Mr. Cordray. I wouldn't describe them that way, no.
Mr. Ellison. And do you think that limited forced
arbitration in consumer and financial contracts is a ``monument
to arrogance and the hubris of man?''
Mr. Cordray. I understand the proposal to be trying to
implement authority and direction given to us by Congress.
Mr. Ellison. And when we limit interest rates on small-
dollar loans to 36 percent for service members or act to
prohibit lenders for charging African-Americans higher rates of
interest for car loans, is that creating an ``incomprehensible
complexity of government control?''
Mr. Cordray. I think Congress legislated that limitation to
protect service members against being exploited while they are
trying to protect and defend our country. I think it is quite
appropriate, but again, that was congressional judgment.
Mr. Ellison. It is a strange place to be against service
members.
Anyway, when the CFPB requires lenders to tell buyers of
manufactured homes that the loans they are being offered are
more expensive compared to other options in the market, is that
an example of an ``unaccountable, arrogant bureaucracy dragging
us toward the failed economy of a European-style social
democracy?''
You don't need to answer.
Mr. Cordray. I will. I think we are just trying to put
consumers in a position so they can make choices that they
won't regret later, so that they can know what they really
would want to know at the time. That empowers consumers and
promotes personal liberty.
Mr. Ellison. It is fair to say that there--we don't all
agree on this committee about the role of the CFPB, but I will
say this: $11 billion turned back into the economy, in the
hands of ordinary working people, is pretty good.
On the screen is a recent monthly report of consumer
complaints about financial products made to your agency. Many
experts decry the financialization of the economy. They note
that overcharges, hidden commissions, arbitration contracts
cost millions in wealth to ordinary Americans.
And yet, one of the quotes in the chairman's public speech
was quoting Kanye West's statement that the only true freedom
is economic freedom.
Would you say that ensuring a fair financial marketplace
actually furthers economic freedom for American people? Do
people have more wealth now that some of these costly schemes
are stopped? What do you think?
Mr. Cordray. I think that enforcing the law fairly promotes
economic freedom. It helps the free market work against a
backdrop of law and order and law enforcement.
And I think that this Bureau has proven itself to be not
only pro-consumer protection but also pro-consumers and pro-
consumer opportunity. That is certainly how I see things.
Mr. Ellison. And I would say being pro-consumer is being
pro-business, and I will tell you why. If you are an honest
business person trying to give a good product at a fair price,
you are competing against unscrupulous--
Mr. Cordray. I agree.
Mr. Ellison. --competitors and they can beat you out. And
that hurts the marketplace; it doesn't help it.
I--
Mr. Cordray. I agree.
Mr. Ellison. --will yield back to the chairman.
Mr. Cordray. It happened in the mortgage--
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from Florida, Mr.
Ross.
Mr. Ross. Thank you, Mr. Chairman.
Mr. Cordray, you and I have discussed this before and I
would like to bring it up again. I, too, was in the Florida
legislature; I, too, have some experience in dealing with
payday loans.
We had a terrible problem in Florida. We addressed that
back in the early 2000s.
We came out with a bill that I think has done a great deal
of good to eliminate the predatory lending, the bad actors,
and, in fact, make sure that the transaction has a duration
between 7 to 31 days, cannot be greater than $500 dollars, and
a processing fee of no more than $5. There is a cooling-off
period of 24 hours.
We have been able to, in the State of Florida under our
regulatory scheme, reduce the use of online loans, which we
don't want to see our consumers go to--that would eliminate any
regulatory control whatsoever--but we have been able to reduce
it by 82 percent since then. Would you not agree that Florida
by far is the gold standard when it comes to State regulation
of payday loans?
Mr. Cordray. I would not.
Mr. Ross. Why not? Is there another State out there better?
Mr. Cordray. What I would say is I--
Mr. Ross. But is there a State out there better? There
isn't, is there? And that is my point, Mr. Cordray, because,
you see--
Mr. Cordray. I'm sorry, do you want me to answer the
question or--
Mr. Ross. Yes. Is there another State who has a better
track record than--
Mr. Cordray. What I would say is there has been analysis
done of the Florida model, and what it shows is these loans are
still being made at above a 300 percent rate of interest and
they are being rolled over an average of 9 times for many
consumers.
Mr. Ross. And there is no State better, though. But let me
ask you this: Again, you are going to try to eliminate the
demand, thinking--eliminate the supply, thinking you are going
to eliminate the demand, which you are not.
But let's take your statistics up there. We have your
monthly report on payday loans--in fact, my colleague just
before me had it up there--and it shows that since its
inception I believe that payday loans have had complaints
registered with your office of 1.5 percent since 2011 have been
complaints of payday loans.
Now, that is not a significant thing, but when you think
that 10 times that have been credit reporting agencies, and you
are not doing anything about that. Why are we focusing on an
industry that has a need in the market?
Now, let's go back to Florida again--
Mr. Cordray. I appreciate the question. I am glad to lay
out an answer for you.
Mr. Ross. Go right ahead.
Mr. Cordray. For example, what we find is when we look at--
some of these complaints are simply misclassified. People think
they are complaining about debt collection--
Mr. Ross. You are misclassifying. You have the greatest
resources of any agency--
Mr. Cordray. No, no. I am saying that people are
complaining about debt collection. What we find is the
incidence of payday loan debt collection complaints is much
higher than that for student loans or auto loans.
Mr. Ross. Let me help you with the State of Florida again.
Mr. Cordray. So that needs to be counted in, as well.
Mr. Ross. Do you realize they had over 8 million--or right
at 8 million payday loans in the State of Florida last year? Do
you know how many complaints they had registered with the
Financial Services Regulatory? 117.
Mr. Cordray. Let's also look at debt collection complaints
and how many of them proceed from payday loans.
Mr. Ross. Do you know how much that is as a percentage?
Two-one thousandths of a percent.
By gosh, what relationship would be great if all you had is
two-one thousandths of a percent of complaints. We would have
marriages everywhere if we had that.
But what I am suggesting--
Mr. Cordray. You are sort of ignoring the point I am
making, which is--
Mr. Ross. --to you, sir, is you are not using logic and
reason to dictate what is going to be a policy that is
forthcoming in spring. Sunday is spring, so I anticipate there
is going to be a report come this spring, right, after Sunday?
Can you give us a little trailer on it?
Tell us what it is going to say about the payday loan
industry. Tell us how we are going to eliminate all the State
regulatory environments so that you have a company out there
known as the Self-Help Credit Union that is kind of assisting
you because they want to take over this market.
Are you familiar with the Self-Help Credit Union?
Mr. Cordray. I have no idea what you are talking about. I
have heard that allegation before.
Mr. Ross. You don't know about the Self-Help Credit Union?
Let me ask you this--
Mr. Cordray. Some suggestion that they are trying to take
over this market is sort of beyond--
Mr. Ross. Yes or no: Are you familiar with the Center for
Responsible Lending?
Mr. Cordray. Beg your pardon?
Mr. Ross. Are you familiar with the Center for Responsible
Lending?
Mr. Cordray. Yes, I am familiar with--
Mr. Ross. And they have had some impact on trying to allow
their opinion or influence in promulgating the rule that you
are going to--
Mr. Cordray. Many stakeholders have had impact--
Mr. Ross. Are you also familiar with their subsidiary?
Mr. Cordray. I'm sorry?
Mr. Ross. Self-Help Credit Union, their subsidiary--are you
familiar--
Mr. Cordray. What I am not understanding is this argument--
Mr. Ross. Have you ever heard of the Self-Help Credit
Union, yes or no?
Mr. Cordray. I have, yes.
Mr. Ross. And do you know that they are a subsidiary of the
Center for Responsible Lending?
Mr. Cordray. I am not familiar with the corporate
relationship.
Mr. Ross. Have you had any relationships, any discussions,
any e-mails, any communications with the Self-Help Credit
Union?
Mr. Cordray. I have discussions with many stakeholders.
Mr. Ross. With Self-Help--
Mr. Cordray. We have a payday lending--
Mr. Ross. --on the record. The Self-Help Credit Union--any
discussions, communications, directions, anything whatsoever?
Mr. Cordray. Okay. So--
Mr. Ross. Yes or no?
Mr. Cordray. --what I don't understand--
Mr. Ross. Yes or no?
Mr. Cordray. --is this claim that somehow this is going to
lead to somebody taking over the marketplace.
Mr. Ross. It is not a claim; it is a question. Yes or no,
do you have any communication, any--
Mr. Cordray. I don't see what the basis for that is.
Mr. Ross. So you can't say that you have. So would it
surprise you that you have?
Mr. Cordray. I'm sorry, what are we--what is the question?
Mr. Ross. Would it surprise you that you have had any
communications with Self-Help?
Mr. Cordray. What is the question?
Mr. Ross. Self-Help Credit Union--have you had any
communications with them in any way, shape, or form?
Mr. Cordray. I don't know whether I have or haven't, what
you are talking about exactly.
Mr. Ross. Okay, well you don't know whether you have had
communications with them, is what I am asking you.
Mr. Cordray. Look, I am sure I have. I have had
communications with probably everybody who has had an interest
in our rules going back for 5 years--
Mr. Ross. Okay. Can you give me in 18 seconds or less a
little anticipation of what we may see in the rule you are
going to promulgate this spring with regard to short-term
loans?
Mr. Cordray. First of all, we haven't promulgated it yet so
nothing should be taken to the bank. But I think you can take a
lot out of our White Paper and the small business review
framework we provided, which is that we are going to seek to
eliminate and limit predatory practices by lenders that embroil
many consumers in a debt trap with consistent and prolonged
rollover of--
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentleman from North Carolina,
Mr. Pittenger.
Mr. Pittenger. Director Cordray, you have on a number of
occasions touted the transparency of your agency, the Consumer
Financial Protection Bureau. Is that correct?
Mr. Cordray. Say that again?
Mr. Pittenger. You have touted the transparency of your
agency. Is that correct?
Mr. Cordray. Yes, I--by the way, I would love to see some
more transparency--
Mr. Pittenger. Good. Thank you. So that is my question
there.
Mr. Cordray. --on that group called Protecting America's
Consumers and some attention to that.
Mr. Pittenger. Taking my time back, sir.
Mr. Cordray. Okay.
Mr. Pittenger. Let's be respectful.
Mr. Cordray. All right.
Mr. Pittenger. Mr. Cordray, in that light, you have also
admitted that you and 12 of your Directors have used private e-
mails for official business. Is that not correct?
Mr. Cordray. I think that has been a very limited
practice--
Mr. Pittenger. No, sir. Have you used them or not?
Mr. Cordray. Very limited practice in--
Mr. Pittenger. Then you have used them?
Mr. Cordray. --in days where our technology--
Mr. Pittenger. Mr. Cordray, how does the American public
have any confidence in the records, in the information that is
captured and recorded if you are using private e-mail?
Mr. Cordray. First of all--
Mr. Pittenger. Mr. Cordray, do you approve of what
Secretary Clinton did with her private e-mails?
Mr. Cordray. I am not familiar with those situations.
Mr. Pittenger. You are not familiar with that?
Mr. Cordray. Yes, I am not.
Mr. Pittenger. That is very interesting that you are not
familiar--
Mr. Cordray. I haven't been part of any of that, and I
don't really know what to tell you.
Mr. Pittenger. Do you believe that the public gets a proper
accountability when you are using your private e-mails? Do you
feel like the public is getting all the information that they
deserve to have?
Mr. Cordray. I know that there are policies that we have in
place to make sure that government work is being captured in
government databases and that is--
Mr. Pittenger. Will you turn over to the committee all
these private e-mails?
Mr. Cordray. I don't really know what you are talking
about. I would be glad to have our staff work with your staff
to either try to understand your concerns--
Mr. Pittenger. We would like to have a full understanding
of what has been conveyed over private e-mails regarding
official business. It is just that clear.
Mr. Cordray. I would be glad to follow up with you.
Mr. Pittenger. Thank you, sir. We will.
Regarding our structure in the CFPB, you are the single
Director. Do you believe that it would be more prudent and more
acceptable to have perhaps a five-member bipartisan commission?
Mr. Cordray. I have seen different approaches to different
organizations. In State Government it is quite common to have a
single individual--
Mr. Pittenger. Do you think that you could gain more wisdom
from colleagues?
Mr. Cordray. I'm sorry?
Mr. Pittenger. Do you think that you could gain wisdom from
individuals who would join with you on such a--
Mr. Cordray. I do every day. I have a leadership group at
the Bureau, and every organization does.
Mr. Pittenger. Let's talk about your time in the general
assembly in Ohio. You said you served on the general assembly,
and as such, I am sure you served on committee, correct?
Mr. Cordray. Yes.
Mr. Pittenger. Do you feel like that the public would be
best-served if that committee Chair just issued his decision
without the full support of those who are on the committee and
aware of all those issues? He didn't act alone did he, sir?
Mr. Cordray. Some committee Chairs did and some committee
Chairs didn't, so--
Mr. Pittenger. He had accountability, didn't he?
Mr. Cordray. Sure. And as an individual member I had the
ability to sponsor and introduce a bill if I wished to do so. I
didn't have to ask anybody's permission.
Mr. Pittenger. But you are accountable to nobody, are you,
Director Cordray?
Mr. Cordray. I am accountable in the same way you are. I am
accountable ultimately to the public for the substantive
actions that I take.
Mr. Pittenger. You have already stated that you don't act
in full transparency.
Mr. Cordray. No, I didn't say that.
Mr. Pittenger. You don't have a board.
Mr. Cordray. I don't agree with that.
Mr. Pittenger. You can't be fired without some egregious
abuse.
Mr. Cordray. My role in the Federal Government is a role
that was established by Congress; the conditions were set by
Congress. I didn't get to just write them up the way I please.
Mr. Pittenger. And I think that is our point. I think we
would like to hear your wisdom and what you believe would be
the best accountability for the American people.
Mr. Cordray. Okay, so--
Mr. Pittenger. Do you think it would be in the best
interest of the American people that we had a five-commission
bipartisan board?
Mr. Cordray. One of the things I think is that when I come
here and testify in front of you, you can call me to account.
There is nobody I can blame it on; there is nobody I can say,
``Well, somebody else might think differently.''
Mr. Pittenger. And you spend 3 hours with us and then you
leave for 6 months and come back.
Mr. Cordray. I am accountable directly to you.
Mr. Pittenger. These are difficult hours, I know, for you.
You don't enjoy them because you are having to be accountable.
Mr. Cordray. No, these are not difficult. I actually enjoy
coming before the committee.
Mr. Pittenger. And when you leave this room it is not--you
don't have to be accountable again.
Mr. Cordray. I enjoy coming before the committee. When I
was a single official in charge of the Ohio Attorney General's
Office or the Ohio Treasurer's Office I was also accountable.
I always have felt that I am accountable in public service
ultimately to the public to serve them well. And I appreciate
the oversight of this body, that I come here not only when I am
required but other times when I am invited. And I have never
ducked or dodged, and I have always been willing to stay as
long as you want me to stay, and I continue to do that.
Mr. Pittenger. I think not dodging would mean that you are
responsive when we contact you, when we write you, when we ask
for information. There has been delay after delay in getting
information from you on so many occasions.
Mr. Cordray. I think we have always--
Mr. Pittenger. I am asking you now for the--
Mr. Cordray. I have always read, we have always answered
your letters. If the response is not sufficient, we are happy
to follow up.
We continue to do that. We will continue to do that. If
there is anything that you think that we haven't sufficiently
followed up on, let us know and I will come back.
Mr. Pittenger. You are your own man. You run an agency,
essentially, what, $600 million a year or more, accountable
basically to nobody. You have no board that you are accountable
to, and now--
Mr. Cordray. No, that is--look, we have all kinds of
accountability in our statute. Congress set the terms. Congress
set the terms for special--
Chairman Hensarling. The time of the gentleman has expired.
The Chair now recognizes the gentlelady from Missouri, Mrs.
Wagner.
Mrs. Wagner. Thank you, Mr. Chairman.
Wow. Never ducked or dodged?
Mr. Cordray. Yes.
Mrs. Wagner. Answer all letters?
All right, Director Cordray, let's have a conversation.
Mr. Cordray. Okay.
Mrs. Wagner. Our committee sent you a subpoena back in
December asking for documents regarding a variety of issues
such as discrimination and retaliation, auto lending, and
others. And despite you saying the CFPB is committed to
transparency and compliance, you always answer our letters, you
never duck or dodge, you all have failed once again to respond
adequately to this subpoena.
Additionally, the committee sent this letter right here, I
have a copy of it, I will submit to the good of the order--on
how all of you are complying with the subpoena regarding the--
such terms that you all are using.
Will you commit, Director Cordray, to providing this
information to our committee here right now?
Mr. Cordray. We continue to work with the committee--
Mrs. Wagner. Will you commit to providing information and
complying to the request of this subpoena from your office?
Will you commit to that?
Mr. Cordray. So I would be glad to know specifics from you
about how--
Mrs. Wagner. If so, when?
Mr. Cordray. I would like to know specifics about how we
have not complied. I know that in response to that we have--
Mrs. Wagner. You have failed to comply.
Mr. Cordray. In what way?
Mrs. Wagner. That is the--
Mr. Cordray. Give me a specific--
Mrs. Wagner. You haven't responded to the subpoena or to
the letter.
Mr. Cordray. Of course we have responded. We have produced
another I think 20,000 pages of documents.
Mrs. Wagner. Not in any adequate way, shape, or form.
Mr. Cordray. Well, okay, tell me how it is inadequate? That
is just--
Mrs. Wagner. Will you absolutely right now commit to
complying with our committee? If so, when?
Mr. Cordray. We have been working to comply all along. We
will continue to work to comply.
Mrs. Wagner. Working to comply, Director Cordray, is what
we call ducking and dodging. Let me move on.
Director Cordray, last year I asked a question about who
gave the authorization to renovate the leased headquarters of
your agency, and I haven't forgotten the response you gave to
me, which was, ``And why does it matter to you?'' Well,
Director, it still matters to me because that is government
expenditure of $215 million of taxpayer money.
Last year you said that Treasury made the decision.
However, the committee sent a letter to Treasury asking about
it and they said that you all--you, the CFPB--made the
decision. Clearly, both of you can't be right, sir.
Mr. Cordray. Okay, so--
Mrs. Wagner. You have had a year since that last time I
have asked to look into this, and so who authorized the
renovation, sir?
Mr. Cordray. First of all, this has been misstated and
garbled, okay? I never said that why would you look into an
expenditure of funds. You are entitled to look into an
expenditure of funds and I appreciate that oversight. And we
have given you--
Mrs. Wagner. You said, ``Why does it matter to you?'' And
it matters to the taxpayers--
Mr. Cordray. But the ``it''--
Mrs. Wagner. --to the Missouri 2nd Congressional District
people that I represent.
Mr. Cordray. --was not expenditure of public funds. The
``it'' was who signed off originally--
Mrs. Wagner. Who authorized it? A simple question. Who?
Mr. Cordray. Okay. So--
Mrs. Wagner. Because I have more questions, sir. Who
authorized it?
Mr. Cordray. As I said to you--and I have said it to this
committee numerous times--I later reaffirmed that decision and
I continue to stand behind the decision.
Mrs. Wagner. As you know, Elizabeth Warren--
Mr. Cordray. In terms of who originally--
Mrs. Wagner. Reclaiming my time, because you are clearly
not answering the question--again. As you know, Elizabeth
Warren was working at Treasury as a special advisor and was
understood to be responsible for setting up the Bureau. She
also published a blog post announcing that the CFPB
headquarters would be located at 1700 G Street.
So let me ask you, was it Elizabeth Warren who absolutely
ordered and authorized the renovation, sir?
Mr. Cordray. I don't know. It seems like that is what you
are trying to get me to say. I--
Mrs. Wagner. I want the truth, sir.
Mr. Cordray. Okay.
Mrs. Wagner. Who ordered a $215 million expenditure of
renovations using the taxpayers' money?
Mr. Cordray. First of all, it is not $215 million. That has
never been true. It is not accurate. We have corrected the
record on that numerous times.
Second, I have reaffirmed that decision and I take
responsibility and accountability for it. I am totally--
Mrs. Wagner. So you are saying that you gave the
authorization for that.
Mr. Cordray. I was not in the position at the time--
Mrs. Wagner. All right, reclaiming my time--
Mr. Cordray. --and we did not have authority separate from
Treasury at the time.
Mrs. Wagner. Reclaiming my time, Mr. Cordray, it is my
time.
It is really unbelievable that you don't know who
authorized it and that you won't--
Mr. Cordray. No, no. That is not--look, the first--
Mrs. Wagner. Mr. Cordray--
Mr. Cordray. --the first year--
Mrs. Wagner. Reclaiming my time, especially since you don't
even own it, and you know that the building has been assessed
at $150 million. It really makes me question how else the CFPB
spends its money.
Last month Representative Barr, a great colleague of mine,
questioned Chair Yellen on whether the Federal Reserve approves
the CFPB's budget and whether the Fed is even able to veto
specific funding requests. The answer to both of those
questions was no.
So, Director--
Mr. Cordray. Congress set up that system.
Mrs. Wagner. I am not finished, Director Cordray.
So, Director Cordray, how exactly does this work? You
simply send the Federal Reserve an invoice and as long as it
doesn't hit the caps that were set by Dodd-Frank then it is
approved automatically? How does this happen?
Mr. Cordray. We are simply carrying out the law that
Congress enacted. You and your colleagues in the Congress or
those who preceded you enacted that law. We are carrying it
out.
Chairman Hensarling. The time of the gentlelady has
expired.
Members are advised there are votes on the Floor: there are
10 minutes left in the first vote. We anticipate clearing one
more questioner.
The gentleman from Kentucky, Mr. Barr, is recognized.
Mr. Barr. Thank you, Mr. Chairman.
And, Director Cordray, I will just follow up from my
colleague, Mrs. Wagner, on that question regarding the source
of the CFPB's funding.
In your semi-annual report, you say that the Director of
the CFPB requests transfers from the Federal Reserve System in
amounts that he has determined are reasonably necessary to
carry out the Bureau's mission. What was the transfer requested
in Fiscal Year 2015?
Mr. Cordray. I would have to look at my--
Mr. Barr. What do you anticipate it being in Fiscal Year
2016?
Mr. Cordray. So our published budget for Fiscal Year 2016
is for $606 million.
Mr. Barr. Okay. And does the Fed approve that budget?
Mr. Cordray. The budget has to be within the parameters set
by Congress.
Mr. Barr. I understand it has to be below the cap. Does the
Fed approve that budget?
Mr. Cordray. You mean particulars of the budget--
Mr. Barr. Yes.
Mr. Cordray. --or the overall total of the budget?
Mr. Barr. Both. Total, particulars, anything?
Mr. Cordray. I assume if we were seeking to obtain more
than our cap, that would not be--
Mr. Barr. But otherwise, the Fed doesn't approve the
budget?
Let me ask it this way: Does the Fed ever--
Mr. Cordray. That is correct.
Mr. Barr. Has the Fed ever or does the Fed ever review the
Bureau's transfer request?
Mr. Cordray. I believe they do. We send transfer requests
and they fulfill them.
Mr. Barr. Okay. And it is as simple as that. So to your
knowledge, the Fed has never asked any questions about that
transfer.
Mr. Cordray. I don't deal with the details of the back-and-
forth with the Fed, but I--
Mr. Barr. But to your knowledge they have never asked any
questions about that transfer request.
Mr. Cordray. I wouldn't know what to say to that.
Mr. Barr. Let me ask the question this way: Has the Fed, to
your knowledge, ever denied a particular transfer request?
Mr. Cordray. All of our requests have been within the
bounds of the law established by Congress.
Mr. Barr. And the Fed has never vetoed a particular
allocation of or a particular expenditure made by the Bureau.
Mr. Cordray. Again, that is a system established by
Congress and we are carrying it out.
Mr. Barr. So the Fed is not involved in any way in the
implementation of the Bureau's budget. That is the point.
And to that point, that is our concern, frankly, because
the fact that the Bureau has been able to move forward with a
$215 million luxury renovation to its headquarters, spent $60
million on management consulting services, and pays the average
Bureau employee more than Members of Congress would support the
conclusion that the Fed is merely a rubber stamp to your
expenditures.
And we would hope that since you are not accountable to the
Congress, not subject to the congressional appropriations
process--as you point out, by a statutory design in the Dodd-
Frank law, a fundamental flaw in the Dodd-Frank law, in my
judgment--that we would hope that you would be at least
accountable to the source of your funding.
Mr. Cordray. I think several of the things you just
described are inaccurate, by the way, but I am happy to correct
the record if you wish.
Mr. Barr. No, let's switch gears really quickly and talk
about the arbitration rulemaking and the arbitration study that
we asked about in that letter.
Your response to our letter did not answer our questions
about the deficiencies in the data. Did the study in any way
confirm that arbitration can be faster than a class action
lawsuit?
Mr. Cordray. I think it would depend on the individual
arbitration; it would depend on the class action--
Mr. Barr. Was there any data that supported that
arbitration can result in a faster, more expedited resolution
for the consumer?
Mr. Cordray. Sometimes a lawsuit can go faster; sometimes
an arbitration--
Mr. Barr. Was there any data that arbitration can be less
expensive for a consumer?
Mr. Cordray. Again, depending on the matter, some cases
that go to court would be less expensive, and some cases that
go to arbitration would be more expensive.
Mr. Barr. Okay. And so there is data to support that. Was
there any data that it can be a more effective way for
consumers to resolve disputes?
Mr. Cordray. I don't know what a more effective way to
resolve--
Mr. Barr. The point is that you have said that you have a
duty to enforce the law--the Dodd-Frank law, not the 1928 law--
enacted by statute. Well, here is what the Dodd-Frank law says.
It says that the rule must be in the public interest for the
protection of consumers and consistent with the study.
My point is that your study shows that arbitration can
sometimes--and in many cases--be in the best interest of the
consumer, in terms of a faster resolution, a better result for
the consumer. And so I would encourage the Bureau to not move
forward with a rule that is inconsistent with the benefits of
arbitration.
In preparing this study did the Bureau coordinate with the
American Association for Justice?
Mr. Cordray. Beg your pardon?
Mr. Barr. Did the Bureau, in preparing this study,
coordinate with the American Association for Justice?
Mr. Cordray. I don't know who that is.
Mr. Barr. That is the trade association for class action
lawyers.
The reason I ask is because the Bureau cites a study by
Professor Sovern that purports to analyze consumers' knowledge
of whether their financial agreements contain an arbitration
clause. Do you know how Professor Sovern's study was funded?
Because it was funded by the American Association for Justice.
That is a conflict of interest that you are using data from
a study that is funded by the class action plaintiff's bar.
Mr. Cordray. Look, we took input from all stakeholders.
There were also studies that had been funded by industry. I
don't hear you complaining about the conflict of interest
there. What I would simply say is--
Chairman Hensarling. The time of the gentleman has expired.
I will now recognize the ranking member for a unanimous
consent request.
Mr. Cordray. We will carry out the statutory--
Ms. Waters. I ask unanimous consent to submit for the
record a study from the Center for Responsible Lending
concerning--
Chairman Hensarling. Without objection, it is so ordered.
Ms. Waters. --African-Americans and Latinos on dealer-
financed--
Chairman Hensarling. I want to thank the witness for his
testimony today.
The Chair notes that some Members may have additional
questions for this witness, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to this witness and to place his responses in the record.
I would ask you, Mr. Director, to respond as promptly and
accurately as you are able.
Also, without objection, Members will have 5 legislative
days to submit extraneous materials to the Chair for inclusion
in the record.
This hearing stands adjourned.
[Whereupon, at 1:15 p.m., the hearing was adjourned.]
A P P E N D I X
March 16, 2016
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