[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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