[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

                             FIRST SESSION

                               __________

                              MARCH 3, 2015

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 114-6
                            
                            
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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
ROBERT DOLD, Illinois
FRANK GUINTA, New Hampshire
SCOTT TIPTON, Colorado
ROGER WILLIAMS, Texas
BRUCE POLIQUIN, Maine
MIA LOVE, Utah
FRENCH HILL, Arkansas

                     Shannon McGahn, Staff Director
                    James H. Clinger, Chief Counsel
                            
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 3, 2015................................................     1
Appendix:
    March 3, 2015................................................    83

                               WITNESSES
                         Tuesday, March 3, 2015

Cordray, Hon. Richard, Director, Consumer Financial Protection 
  Bureau (CFPB)..................................................     6

                                APPENDIX

Prepared statements:
    Cordray, Hon. Richard........................................    84

              Additional Material Submitted for the Record

Ellison, Hon. Keith:
    Letter to Hon. Richard Cordray, dated March 4, 2015..........    88
Cordray, Hon. Richard:
    Written responses to questions for the record submitted by 
      Representatives Barr, Duffy, Fincher, Fitzpatrick, Foster, 
      Kildee, Moore, Pittenger, Schweikert, Sinema, Westmoreland, 
      and Williams...............................................    91


                       THE SEMI-ANNUAL REPORT OF
                         THE BUREAU OF CONSUMER
                          FINANCIAL PROTECTION

                              ----------                              


                         Tuesday, March 3, 2015

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 2:36 p.m., in 
room HVC-210, Capitol Visitor Center, Hon. Jeb Hensarling 
[chairman of the committee] presiding.
    Members present: Representatives Hensarling, Lucas, 
Garrett, Neugebauer, McHenry, Pearce, Posey, Fitzpatrick, 
Westmoreland, Luetkemeyer, Huizenga, Duffy, Stivers, Fincher, 
Stutzman, Mulvaney, Hultgren, Ross, Pittenger, Wagner, Barr, 
Rothfus, Messer, Schweikert, Dold, Guinta, Tipton, Williams, 
Poliquin, Love, Hill; Waters, Maloney, Velazquez, Sherman, 
Capuano, Clay, Lynch, Scott, Green, Cleaver, Perlmutter, Himes, 
Carney, Foster, Kildee, 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.
    Today's hearing is for the purpose of receiving the Semi-
Annual Report of the Consumer Financial Protection Bureau 
(CFPB).
    I want to thank Director Cordray for coming today to 
testify before us. I also want to acknowledge that votes are 
expected throughout his appearance today, so we will ask for 
your indulgence, Mr. Director.
    I have been informed by the cloakroom that the next vote 
series will hopefully consist of only one vote. If that proves 
to be true, then we will not have to interrupt the hearing. And 
we will hopefully find some way to take turns here.
    I wish to also inform Members that the Director has no hard 
stop of time, so he is making himself available to all Members.
    I now recognize myself for 3 minutes to give an opening 
statement.
    The CFPB undoubtably remains the single most powerful and 
least accountable Federal agency in all of Washington. When it 
comes to the credit cards, auto loans, and mortgages of 
hardworking taxpayers the CFPB has unbridled discretionary 
power, not only to make those loans less available and more 
expensive, but to absolutely take them away.
    Consequently, Americans are losing both their financial 
independence and the protection of the rule of law. The Bureau 
is fundamentally unaccountable to the President because the 
Director can only be removed for a cause; fundamentally 
unaccountable to Congress because the Bureau's funding is not 
subject to appropriations; and fundamentally unaccountable to 
the courts because the Dodd-Frank Act requires courts to grant 
the CFPB deference regarding its interpretation of Federal 
consumer and financial law.
    Thus, the Bureau regrettably remains unaccountable to the 
American people, and that is why we need the CFPB on budget and 
led by a bipartisan commission. Mere testimony is not the 
equivalent of accountability.
    I was struck by a comment made by one of my Democratic 
colleagues, who argued during our committee's mark-up of our 
budget views and estimates that the Bureau needed to be 
protected from ``the whim of whomever are the legislators.''
    I would remind all of my colleagues that the legislators 
are chosen by the American people under the provisions of our 
Constitution.
    Powerful Washington bureaucrats must answer to the American 
people and not the other way around.
    I find it most ironic to hear any Democrat arguing against 
democracy. I am reminded of a warning by author and theologian 
C.S. Lewis who said, ``Of all tyrannies, a tyranny sincerely 
exercised for the good of its victims may be the most 
oppressive.'' All of this, once again, begs the question, who 
will protect consumers from the overreach of the Consumer 
Financial Protection Bureau?
    Free checking has been cut in half. QM increasingly stands 
for ``quitting mortgages'' as community bank after community 
bank finds that they can no longer offer mortgages to many of 
their deserving customers.
    Now, we are to the subject of overdraft protection. I heard 
from one of my constituents, Tamara from Athens, Texas, in the 
5th Congressional District, ``I wish to keep the overdraft 
protection. I should have the right to choose.''
    And that is really what this debate is all about, 
protecting the rights, the fundamental and economic liberties 
of the American citizen, so that we can seek economic growth, 
and they can find their financial independence.
    True consumer protection requires access to competitive, 
transparent, and innovative markets which are vigorously 
policed for force, fraud, and deception. True consumer 
protection empowers consumers and respects their economic 
freedoms to make important, informed choices free from 
government interference and fiat.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Clay, for 1\1/2\ minutes for an opening statement.
    Mr. Clay. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for your testimony today.
    The CFPB's work on behalf of American consumers speaks for 
itself: over $5.3 billion in direct relief to over 15 million 
consumers; over half a million consumer complaints processed; 
and over 1,000 consumer questions answered. What is perhaps 
most remarkable about the CFPB's performance to date has been 
the CFPB's ability to deliver for American consumers in spite 
of the relentless attacks from Republicans to undermine the 
agency at every turn.
    Any serious conversation about what contributes to the 
wealth gap in this country must include a frank discussion 
about the wealth stripping effects associated with certain 
financial products such as predatory auto loans, payday loans, 
and check cashing stores that exploit the lack of financial 
sophistication among economically disadvantaged populations.
    Given the CFPB's role in reining in the kinds of wealth 
stripping products and services that exacerbate the wealth gap, 
the CFPB is on the front lines of reducing the wealth gap and 
bringing vulnerable consumers into the economic mainstream.
    The fact that the important work of combating the wealth 
gap and protecting consumers has often been relegated to 
debates about renovations and fountains, and to doing the 
bidding of special interests, is a sad commentary on the 
priorities of some who ignore the commendable work of this 
important agency.
    I thank you again, Director Cordray, and I look forward to 
hearing your testimony.
    And, Mr. Chairman, I yield back the balance of my time.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Texas, Mr. 
Neugebauer, the chairman of our Financial Institutions 
Subcommittee, for 2 minutes.
    Mr. Neugebauer. Thank you, Mr. Chairman.
    Consumer protection is important to a well-functioning and 
sustainable financial marketplace. However, consumer protection 
must be done in a smart, tailored, and politically--excuse me.
    Mr. Chairman, could I start over?
    Chairman Hensarling. Reset the clock please so you can 
start--we will give the gentleman from Texas a do-over.
    Mr. Neugebauer. Yes. Consumer protection is important to a 
well-functioning and sustainable financial marketplace, however 
consumer protection must be done in a smart, tailored, and 
politically neutral manner. It should not be used to advance 
ideological policies. If the pendulum of consumer protection 
swings too far you have nothing left to protect.
    Today, we are approaching the 5-year anniversary of the 
Dodd-Frank Act which created the CFPB. Unfortunately, since its 
creation I see an agency that has yet to prove it can function 
in a sustainable manner. Its actions have demonstrated a lack 
of transparency and a lack of accountability. It has 
demonstrated that it is susceptible to political influence, 
bringing into question whether it is independent.
    Some of my Democratic colleagues will allege that 
Republicans want to get rid of the CFPB. I look back over the 
last 5 years and see a field of proposals to restructure the 
CFPB, not to get rid of it.
    This week I will introduce the first of several bills to 
refocus the CFPB. Perhaps one of the most important reforms is 
to introduce a balanced and consultative process into the 
decision-making process.
    Many have forgotten that Elizabeth Warren, our former 
colleague Barney Frank, and even the President originally 
supported a board leadership structure. Today, I hope to 
reflect and focus on what consumer protection means for credit 
availability, the cost of credit, and consumer choice.
    I remain concerned that many of the Bureau's actions 
demonstrate a regulatory paternalism which assumes that the 
American consumer doesn't know how to make the right choices 
for themselves. It is a dangerous scenario when the government 
bureaucrats start making decisions for the American people.
    In my district there is a single mom with three kids who 
uses prepaid cards to budget finances, and overdraft protection 
for an occasional cash shortage scenario. This single mom is 
barely in the financial mainstream.
    I know that each of you has constituents who face these 
financial circumstances, and as the Bureau moves forward with 
the rulemaking in these areas, we must truly understand the 
qualitative and the quantitative costs and benefits of each 
rule.
    Consumer protection doesn't happen in a vacuum. New 
regulations and regulatory actions have real consequences for 
real people. If the marketplace is not allowed to innovate, 
doesn't have clear rules of the road, and is steered into 
politically influenced areas, the consumer may lose.
    Today, we start examining whether the pendulum of consumer 
protection is starting to swing too far.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Georgia, Mr. 
Scott, for 1 minute.
    Mr. Scott. Well, thank you very much.
    Mr. Cordray, certainly we want to welcome you back and it 
is good to see you. I have appreciated working with you on a 
number of issues that we brought to your attention and you 
responded to.
    I also want to take this opportunity to call your attention 
to a letter that I have sent to you, or which is in the process 
of getting to you. I don't know whether or not you have 
received it. But it involves one of my constituent companies in 
Georgia, the TSYS Company, that works with consumer debit and 
credit card procedures.
    And we wanted to express our concerns about a particular 
rulemaking on that. My hope is that once you get that letter--
and I did put a recommendation in the letter for how we might 
be able to solve the problem that my constituent is facing.
    The company is located and headquartered in Columbus, 
Georgia. It is the TSYS Company. I think you have had some 
correspondence with them.
    Thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green, for one minute.
    Mr. Green. Thank you, Mr. Chairman.
    And thank you, Mr. Cordray, for being here. Mr. Cordray, I 
would like to associate myself with the remarks of Mr. Clay, 
who gave some indication as to how efficacious CFPB has been.
    I would like to highlight the $5.3 billion in relief for 15 
million American consumers. I think this is very important.
    Your enforcement actions have amounted to $175 million in 
civil penalties that have been ordered to be paid. The CFPB is 
working and the CFPB merits some consideration. I would also 
like to mention that there will be some indication that you 
have not given timely responses. I have some indication, 
however, that the Bureau has made significant efforts to comply 
with requests.
    And my hope is that you will be given an opportunity to 
give your explanations such that we may totally understand what 
is going on with reference to a request, as well as response.
    Thank you. I yield back.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Connecticut, Mr. Himes, for 1\1/2\ minutes.
    Mr. Himes. Thank you, Mr. Chairman.
    And, Director, it is a pleasure to welcome you back before 
the committee. Again, I want to associate myself with the 
comments of Mr. Clay.
    The achievements of your organization as a new organization 
really speak for themselves. I speak of numbers, and those 
numbers are in the billions of dollars of relief that you have 
provided to consumers for behavior that frankly I think either 
side of the aisle would agree is not the kind of behavior to 
which we want our constituents subjected. So I want to say 
thank you for your very good work.
    Frankly, Director, we have talked about this before. I 
don't really understand the deregulatory thrust of my friends 
on the other side of the aisle. I think we all agree that 
consumers can make their own choices, but we all know that 
across-the-board, whether it is our toaster or our automobile, 
the insulation in our house or whatever it is, we do have 
standards so that consumers are not taken advantage of.
    Somehow my friends on either side of the aisle seem to 
believe that in contrast to the fact you can't buy a toaster 
that will burn your house down, you ought to be able, perhaps, 
if you so choose, to buy a mortgage that will burn your house 
down. I don't get that.
    And of course, we see in the guise of reform ideas that 
would ultimately hamstring your ability to do what you have 
done, ideas like appropriating funds and appropriating your 
budget. Of course, that would make you the only regulator out 
there whose budget was appropriated and subject to the tender 
mercies of the politics of this Congress.
    And so, I do want to thank you for what you do.
    As I always do, Director, I also want to ask that while you 
go after the bad guys doing bad things, please be very, very 
careful of our smaller banks. I continue to hear that they sort 
of feel like CFPB is in there quite a bit. And you are doing 
great work, but please do be mindful of our smaller banks.
    Chairman Hensarling. The time of the gentleman has expired. 
As we are essentially in the basement of the Visitor Center, 
your smartphone may not be quite so smart down here, I wish to 
alert Members that there is a single vote taking place on the 
Floor now, with 12 minutes, 38 seconds remaining. But we will 
go ahead and hear the testimony of the Director, and perhaps 
Members can take turns casting their one vote and returning.
    So today, we welcome the testimony of the Honorable Richard 
Cordray, Director of the CFPB. He 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.

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

    Mr. Cordray. A new place. Thank you, Mr. Chairman. And I am 
cheerfully at your service in terms of timing today as you 
indicated.
    Chairman Hensarling, Ranking Member Waters, and members of 
the committee, thank you for the opportunity to testify today 
about the Consumer Financial Protection Bureau's Sixth Semi-
Annual Report to Congress.
    We appreciate your continued leadership and oversight as we 
work together to strengthen our financial system so that it 
better serves consumers, responsible businesses, and our 
economy as a whole.
    As you know, the Consumer Bureau is the Nation's first 
Federal agency whose sole focus is protecting consumers in the 
financial marketplace. Products like mortgages, and student 
loans involve some of the most important transactions in 
people's lives.
    Since we have opened our doors, we have focused on making 
consumer financial markets work better for the American people, 
and helping them improve their financial lives. Through fair 
rules, consistent oversight, appropriate law enforcement, and 
broad-based consumer engagement, we are working to restore 
people's trust and protect them against illegal conduct.
    Much of the Bureau's early work centered on the mortgage 
market, the primary cause of the financial crisis, and thus 
where Congress saw reform as essential.
    Our Ability-to-Repay rule, also known as the Qualified 
Mortgage (QM) rule, put new guardrails in place to prevent the 
kind of sloppy and irresponsible underwriting that brought 
about the crisis. Other rules addressed problems in the 
mortgage market also deemed in need of repair.
    During this reporting period in particular we continued to 
provide tools and resources to help industry to implement our 
mortgage rules including the rule Congress required of us: to 
consolidate mortgage disclosure forms at the application and 
the closing stages, what we call ``Know Before You Owe.''
    We also undertook considerable analysis to prepare a 
proposed rule that would provide more room for residential 
mortgage lending by small creditors such as community banks and 
credit unions.
    The Bureau shares the committee's respect on both sides of 
the aisle--I have heard it again and again--for these 
institutions, and is committed to promoting access to credit 
for consumers in rural and underserved areas. And so our 
proposal would expand the definition of ``small creditor'' by 
adjusting the origination limit to encourage more lending by 
these small local institutions.
    We are also proposing to expand the definition of ``rural'' 
areas to provide more access to credit in those areas. We are 
accepting public comments on these issues through March 30th.
    During this reporting period we also issued some other 
proposed and final rules. We issued final clarifying revisions 
to the remittance rule, responding in part to concerns by 
industry. We moved forward on reporting requirements for the 
Home Mortgage Disclosure Act, along with new and improved tools 
to allow the public to utilize this data more effectively. And 
we finalized a rule to improve annual privacy notices from 
financial institutions to the customers which eases burdens for 
many companies.
    In addition to our rulemaking efforts the Bureau continues 
to make progress in all areas of our work. Today, we have 
helped secure through enforcement actions more than $5.3 
billion in relief to more than 15 million consumers victimized 
by violations of Federal consumer financial laws, including 
$1.6 billion during this reporting period.
    We continue to build out a risk-based supervision program 
both for banks and non-bank financial firms to achieve more 
consistent treatment and ensure compliance. This will help 
level the playing field among competing firms in various 
consumer financial markets.
    The premise at the heart of our mission is that consumers 
deserve to be treated fairly in the financial marketplace and 
they should have someone stand on their side when that does not 
happen. So far the Office of Consumer Response has received 
more than 540,000 consumer complaints about mortgages, credit 
cards, student loans, auto loans, credit reporting, debt 
collection, and many other consumer financial products or 
services.
    That has resulted in relief for many consumers, both 
monetary and non-monetary, and it provides valuable insight for 
our regulatory supervisory and enforcement work.
    We are also developing educational tools for consumers, 
including the Your Money, Your Goals toolkit. This 
comprehensive guide is designed to be used social workers, 
legal aid attorneys, and volunteers to empower the people they 
serve in personal financial decision-making. And we will soon 
be embarking on a financial coaching program for transitioning 
veterans and economically vulnerable populations of consumers 
in 60 locations all over the country.
    The progress we have made has been possible thanks to the 
engagement of hundreds of thousands of Americans who have 
utilized our consumer education tools, submitted complaints, 
participated in rulemakings, and told us their stories through 
our Web site and at numerous public meetings from coast to 
coast.
    We have also benefited from an ongoing dialogue and 
constructive engagement with the institutions we supervise, 
with community banks and credit unions with whom we regularly 
meet, and with consumer advocates throughout the country.
    Our progress has also resulted from the extraordinary work 
of my colleagues at the Bureau. They are dedicated public 
servants from a variety of different backgrounds. And I am 
proud to say that they have regularly risen to the challenges 
we face. They have consistently delivered great results so that 
consumers all over the country, in every one of your districts, 
are treated fairly in the financial marketplace. The American 
people certainly deserve it.
    Thank you for the opportunity to testify today. I look 
forward to your questions.
    [The prepared statement of Director Cordray can be found on 
page 84 of the appendix.]
    Chairman Hensarling. The Chair now recognizes himself for 5 
minutes.
    Director Cordray, we have spoken about the Qualified 
Mortgage rule on more than one occasion. Those of us on this 
side of the aisle have a great concern, ultimately, about how 
it will impact the ability of many of our constituents to 
access mortgage credit.
    I will take note of the recent rules that you have 
respecting the rural designation. I think it is a step in the 
right direction. And I know that you don't often hear 
complimentary words from my mouth, so I thought--
    Mr. Cordray. I also appreciate it.
    Chairman Hensarling. --I would throw you a curveball there. 
I want to go back though, and we have spoken about this before, 
but as you well know the Federal Reserve came out with a study 
which I think dates back almost a year ago now which showed 
that 22 percent of those who bought a home in 2010, one out of 
every five borrowers, would no longer qualify under your debt-
to-income (DTI) rule. And roughly one-third of African-
Americans and roughly one-third of Hispanic borrowers would not 
qualify as well.
    So we have talked about this before, but you have had ample 
opportunity now to take a look at the study. Do you disagree 
with its methodology, or do you disagree with its conclusion, 
either one?
    Mr. Cordray. I disagree with the conclusion. And I think 
the premise here is off-base. If we had finalized our rules 
solely around--
    Chairman Hensarling. If I could stop you right there, as I 
understand it, for 6 more years you essentially exempt the rule 
for any mortgage that is bought by Fannie Mae and Freddie Mac, 
so assuming they remain in conservatorship, in 6 years would 
the study be valid but for the fact that you essentially, for a 
lack of a better term, told the statute?
    Mr. Cordray. Again, the premise of the study is a rule that 
was not adopted. The rules we adopted were more generous toward 
mortgage lending, recognizing access to credit is a critical 
need in this market now and the market is very different now 
than it was before the crisis. So that is important.
    We are required to review our rules 5 years in and we will 
be doing that carefully. The other piece I want to add, and you 
are very aware of this, is that we needed to be careful about 
writing rules in light of not knowing how Congress was going to 
handle GSE reform.
    Chairman Hensarling. If Congress does not act on GSE reform 
then what is your intention 6 years hence because this gets--
still, we could quibble over the percentages, but I assume that 
you think there is some validity to the fact that many of these 
people will no longer be able to access mortgage credit.
    Mr. Cordray. Our intention 4 years hence would be that we 
will have completed the 5-year review of these rules and as 
needed we will adjust the rules to take account of the issues 
you raised. My point is those are legitimate issues, they are 
legitimate concerns. That is why we didn't adopt the rules in 
that form in the first place and that is why we will review 
them on the 5-year mark to make sure that they are calibrated 
to the market.
    Chairman Hensarling. So you were saying that the Fed study 
is inconsistent with the rule that you adopted?
    Mr. Cordray. The point is, the study is not describing the 
rules we have adopted. The rules we have adopted have the 
Fannie and Freddie patch and that has been a very important 
element. Everybody has recognized it; we recognized it.
    Chairman Hensarling. I understand that, but the Fannie and 
Freddie patch will end one day.
    Mr. Cordray. Yes. It will end one day, but before it ends 
we will have reviewed the rule and made adjustments as needed--
or Congress will have enacted GSE reform and we will then have 
to adjust.
    Chairman Hensarling. But if you are anticipating making 
adjustments, why put in place such a draconian rule in the 
first place? How is it a good rule if you are simply going to 
change it once it actually impacts hardworking American 
taxpayers?
    Mr. Cordray. Because that rule is not the rule that is in 
place. The rule that is in place is a broader rule that has 
blessed a considerable amount of mortgage lending, has not had 
much impact on the marketplace, and also gives us an ability to 
respond to events. When the Congress decides what to do about 
GSE reform, we will all need to review in light of that. That 
will be a major thing, but we obviously couldn't anticipate 
that.
    Chairman Hensarling. I simply offer the coucil, again, as 
you well know. And I am very glad that you have your community 
banking advisory council.
    There is a reason that so many community bankers now refer 
to the QM rule as ``quitting mortgages.'' And I think we are 
seeing that nationwide. In the small time I have remaining, 
with respect, apparently you are anticipating rolling out a 
payday lender rule which is discretionary under Dodd-Frank, not 
mandatory.
    Payday lenders, as you well know, are regulated. They are 
just not regulated by you and your Bureau. Can you, if you are 
going to roll out a rule, tell me which particular States you 
believe do not adequately regulate payday lending so as to 
justify the preemption of this local power?
    Mr. Cordray. With respect, I am going to return to your 
prior question for a moment, because you ended by saying that 
many community banks think that the QM rule requires them to 
quit mortgages. That is inconsistent with the small creditor 
provision which exempts 95 percent of them from the QM rule in 
the sense that their loans will be covered by the QM rule, so 
there is no reason--I don't want any community bank to take a 
message from this hearing that they should be quitting 
mortgages. We are encouraging them to engage in relationship 
lending.
    Chairman Hensarling. I think we both know that they are 
``quitting mortgages.''
    Mr. Cordray. I don't know that this is so in fact. As to 
payday lending, this is an area, as will be true in a number of 
respects, where we are trying to calibrate and understand the 
market and gauge the potential for consumer harm. We have been 
careful and thoughtful and thorough in our approach to this. We 
have done two significant White Papers that have been broader 
than anything that has ever been done in this area.
    Chairman Hensarling. I understand that but what is the 
reason to preempt the current legal structure?
    Mr. Cordray. Okay. So when you say ``preempt,'' that is 
sort of a loaded term. I don't know what ``preempt'' means here 
and we have not embarked on a specific notice-and-comment 
rulemaking yet.
    Chairman Hensarling. Are there specific States that you 
believe have inadequate protections? I believe there are 
roughly a dozen States that functionally outlaw it today. So, 
again, this is a discretionary rulemaking, as I understand it 
under Dodd-Frank, not mandatory. There is some reason that you 
are going to undertake this, so I can only assume that you feel 
that there are certain States that have inadequate protections, 
and I am curious as to which ones. And I assume that you have 
undertaken a study of which States are involved.
    Mr. Cordray. Okay. What I will is say we have done a study 
of the market. And in the market what we find is there is a 
demand for small dollar credit, and we recognize the need to 
have access to such credit.
    We have also recognized that there is a problem that many 
consumers experience, which is that they fall into a debt trap. 
They roll these loans over and over and over, and they end up 
living their life off of 390 percent interest, or 570 percent 
interest. That is of concern to us. We have made that plain in 
a couple of different ways.
    Chairman Hensarling. But there is no specific State that 
you find has an inadequate regulatory regime to protect 
consumers?
    Mr. Cordray. I am not thinking about it in that way. What I 
am thinking about are problems in the marketplace, consumers 
are being harmed, what is the right response to that. That is 
what we are grappling with, very carefully and thoroughly I 
believe.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Texas, Mr. Green, for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. I thank the ranking 
member as well.
    And, Mr. Cordray, I thank you for appearing. Mr. Cordray, I 
am confident that at some point in the course of this hearing 
today there will be some questions about your responses to 
various letters that have been written to you.
    And while I think that you have given responses, I don't 
think I should speak for you. I think you should be accorded an 
opportunity to just speak for yourself. I have one document 
that indicates that you have made significant efforts to comply 
with the requests that have been made and you list some 10 or 
more indications of what your efforts have been.
    But would you kindly now take the time that you need to 
explain the circumstance and the responses that you have given?
    Mr. Cordray. Sure. And I am glad to have the opportunity. I 
will just simply say I think this is, in many respects, a 
natural back and forth between the Congress which has the 
rightful and important responsibility of oversight, and an 
Executive Branch agency like our own which is of course 
ultimately accountable to the Congress, both for carrying out 
the statute that Congress has enacted, that is the law that we 
are supposed to implement, and to make sure that you have the 
information that you need to be able to oversee our operations.
    There is no disagreement about that. There is no resentment 
about that. It can be a lot of work to respond to aggressive 
oversight. But I don't begrudge it. I think it is an 
appropriate role of the Congress.
    Beyond that, there can be individual disagreements when a 
document request was made to us and we responded to it, whether 
it was done as fast as it might have been, or whether it was 
done as fully as it might have been. There are a lot of reasons 
why some of these document requests take a fair amount of time 
to comply with, particularly if they involve detailed email 
searches or document searches. And they sometimes involve 
thousands and thousands of pages, particularly if they involve 
any kind of personally identifiable information.
    We are required by Federal law to be careful about how we 
handle that information. But having said that, those are the 
parameters we all operate within. We understand that. We 
understand your responsibilities. I think we understand our 
responsibilities.
    It is our every intention to make sure that this committee 
has all the information it needs. Whenever we are told that we 
haven't done that we are glad to have more discussion. We have 
offered in camera reviews where that is appropriate. We have 
provided documents where that is appropriate. We will continue 
to work through each issue to the point where we are both 
satisfied. That is my intention and it continues to be my 
intention.
    Mr. Green. I am honored to know what your intentions are, 
and I say this to you candidly because there is an indication 
that a subpoena dices tecum may be issued. And of course as a 
lawyer you understand what that means in terms of compelling 
you to produce documents.
    My hope is that you will be given an opportunity to explain 
yourself when specific questions are asked with reference to 
this. Now let's move to something else, let's talk about the 
small banks for just a moment. I am a big proponent of doing 
what we can to be of assistance to small banks. I have heard 
many concerns expressed and my desire is to give them some 
level of relief.
    I am pleased to hear you talk about helping small banks. 
Small banks, for the most part consist of about 90 percent of 
the banks in this country because about 90 percent of the 
banks, a little bit more by some standards, are under a billion 
dollars. And in this country today, if you are under a billion 
dollars, you are considered a small bank, maybe even a very 
small bank.
    I know that the public probably doesn't quite understand 
but by the standards that we have now, if you are under a 
billion dollars you are probably a very small bank. I want to 
do what I can and have offered to work across the aisle to help 
small banks.
    I always find, however, that when we get engaged in this 
process we find ourselves with wording, language that will not 
only include the small banks but also the mega-banks, the banks 
that actually produce these exotic products, the teaser rates 
that coincided--the interest rates that were offered to you to 
get you into a contract and then have a prepayment penalty that 
would not allow you to get out of the contract so as to benefit 
from having an additional rate that would not be locked in for 
some period of time that would be harmful to you.
    These teaser rates that coincide with prepayment penalties 
were a problem. So do what you can to help the small banks. I 
am all for that and we may have to do something to--get some 
other relief at a later time, but let's help those small banks, 
and I appreciate it.
    Mr. Cordray. Okay.
    Mr. Green. I yield back.
    Mr. Cordray. Thank you, sir.
    Mr. Neugebauer [presiding]. Thanks, gentlemen.
    The Chair recognizes himself for 5 minutes.
    Director Cordray, thank you for being here. As you know, 
the CFPB is in the process of a major rulemaking for prepaid 
cards. And as you and I have previously discussed, I have 
serious concerns about the Bureau's direction in the 
rulemaking. In particular, I am concerned about the new 
structure and limitation placed on the overdrive features of 
prepaid cards and that this could possibly force some of these 
issuers to discontinue some of the features of their products. 
And I am very concerned that at some point in time, it would 
limit some of the choices for consumers.
    Recently one of my constituents, Gracey from Lubbock, 
actually wrote to the CFPB to discuss her use of prepaid cards 
and overdraft protection, and I want to read her comments.
    ``As a single mother of three children, sometimes funds run 
tight. With the overdraft protection on my prepaid card, I have 
a little breathing room between paychecks and for that I am 
very grateful.
    ``I have been a prepaid user for almost 5 years now and I 
would love to continue to utilize this service. But if the 
overdraft protection coverage is no longer offered, it will 
absolutely put a strain on our already strained finances.
    ``I choose to have overdraft protection on my prepaid card. 
I believe I should have the right to choose to utilize the 
services such as overdraft protection. Please ensure that the 
final CFPB rules allow me to choose the features that are most 
beneficial to my needs.''
    I think the question that I have is, as you are looking 
into this rulemaking process, how are you balancing consumer 
protection with a high demand in product usage for prepaid 
cards and the overdraft protection. Obviously, this young woman 
needs that, has been utilizing it, and she has a pretty 
difficult task anyway of being a single mom raising three kids.
    Mr. Cordray. Thank you for the question. I appreciate the 
discussion you and I have had on this subject personally one-
on-one. First of all, I want to be a little careful here 
because that is a proposed rule, it is not yet a final rule. In 
fact, the comment period is not yet closed on that. That 
comment period extends until later this month. And I know that 
we are hearing a lot of comments both ways on that particular 
aspect of prepaid cards. So I don't want to prejudge that. We 
will obviously get the comments, digest them, and think 
carefully about how to proceed.
    What I will say is in the proposal, what we set out and one 
of the things that we are taking input on, was that on prepaid 
cards that credit products would be subject to credit card-like 
protections which I think--frankly I think most of the public 
is totally unaware that prepaid cards right now have no 
consumer protection whatsoever. You can't get a dispute 
resolved, you can't get an error corrected, you have no rights, 
no disclosure requirements. So that is part of what we are 
trying to address here.
    But we determined in our proposal to subject that to credit 
card-like protections. That is what has been imposed under the 
CARD Act that is working well in the credit card market. And so 
we are interested to hear people's reactions to whether that 
works or how well that would work here. So that is one of the 
things we are interested in getting input on and we will think 
more about as it relates to your question.
    Mr. Neugebauer. I think the question then is, when you sit 
down and you start looking at this rulemaking, do you sit down 
with industry and say, ``Walk me through how your customers are 
using this product?'' So instead of thinking about it from the 
regulatory standpoint of, ``You must be doing something that we 
don't like. We are just trying to figure out what that is,'' 
that when you sit down, you analyze how this young woman is 
using that card and how important that is to her. And in other 
words, she feels like things are pretty good because she has 
been doing this for 5 years.
    Mr. Cordray. Yes, we do. We have had numerous stakeholder 
meetings with the industry, the prepaid card industry and 
prepaid accounts going beyond cards, those prepaid account 
products which are a little broader. We will continue to hear 
from them and think about this, we are always interested in 
data that they will provide us. Some industries are more 
interested in doing that and some seem to be quite standoffish 
and do not provide us with data. When they don't, we don't have 
as good a foothold to go on, so I always encourage them to do 
so. But we have had numerous discussions and I am sure we will 
hear plenty more before we come to ground on this.
    Mr. Neugebauer. Did the Bureau do a qualitative and 
quantitative analysis of the cost and benefit analysis of this 
rule?
    Mr. Cordray. We are required under our statute to assess 
the costs, burdens, and benefits of any regulation. We do take 
that seriously. We have done that with our rules and we will 
continue to do that, yes.
    Mr. Neugebauer. Very quickly, the CFPB is in the midst of 
implementing a new major rule for Truth in Lending disclosures 
and disclosures on RESPA which would be integrated effective 
August 1st.
    Mr. Cordray. Yes.
    Mr. Neugebauer. There is a lot of concern out there in the 
industry that having new programs, integrating that so that the 
servicers and the closers and the lenders are all--have the 
system in place. I think there is a question of whether we can 
be ready for primetime by August 1st. Would you be amenable to 
a 60-day non-enforcement window once the rule becomes, in fact, 
effective so that--making sure the industry has had an 
opportunity to adequately implement the system?
    Mr. Cordray. We always listen to people's ideas. I will say 
that this rule was finalized 21 months in advance of the 
effective date. It was finalized not last November, but 
November the year before, so people will have had close to 2 
years to be ready for this. And we have been working with them 
all along. We have done what we do to make it easy for them to 
provide plain language guides, provide simplified guidance, 
respond to questions. And we have really been urging the 
industry to be ready for this. Nobody should be surprised by 
this and people are working hard to get ready so we will see 
how it transpires. But people have had a long time on this. 
This wasn't a rule that was adopted yesterday with an August 
deadline. It was November of 2013, so--
    Mr. Neugebauer. My time has expired. The Chair recognizes 
the gentlewoman from California, the ranking member, for 7 
minutes.
    Ms. Waters. Thank you very much.
    Welcome, Mr. Cordray. I am always very pleased and 
delighted to have the opportunity to discuss the work that you 
are doing at the Bureau and you have done a magnificent job. As 
a matter of fact, I say this time and time again, that in all 
of the work that was done with the Dodd-Frank reform, I believe 
that the creation of the Consumer Financial Protection Bureau 
is the most significant part of that reform. And I am very 
pleased with the way that you have taken on this responsibility 
and the way that you have produced for our consumers.
    Having said that, there are two issues that I have been 
working on all of my career starting in the California State 
legislature and continuing since I have been in Congress: one 
is payday lending; and the other is private post-secondary 
schools and the way that they operate.
    So, first, I would like you to share with us the research 
that you have done on payday lending. What have you discovered 
and what are your recommendations? I know that we can't simply 
just put people out of business, but the payday lending 
operation in this country is such that people are still paying 
400 percent interest on these loans and they get trapped in the 
loans. What have you done and what do you see as possibilities 
for correcting the situation in the future?
    Mr. Cordray. For me, this has been a major issue at the 
Bureau going all the way back to when I first became the 
Director in January of 2012. The very first field hearing we 
held after I became the Director occurred in Birmingham, 
Alabama. It was on the topic of small dollar lending and we 
heard extensive testimony from a packed house on both sides of 
this issue. And I made plain at that time that we were 
concerned about maintaining access to credit for people who 
have emergency needs, which is something that long pre-existed 
the payday lending industry, and goes back more than a century 
in this country since we have had a money-based economy.
    But at the same time, there are people who get caught in a 
debt trap and a high number of payday borrowers end up rolling 
over the loans again and again and again and end up paying out 
well more in cost than the loan--they borrowed.
    Ms. Waters. So this has turned out not to be just for 
emergency lending. It has grown.
    Mr. Cordray. We have done two substantial White Papers with 
more extensive research than has ever been done in this area 
over the past 3 years. And we have found that to be a key 
phenomenon in this industry and it is the concern that we have. 
We are now working toward putting out a proposal that would 
lead to a rulemaking on this subject. We are getting very close 
on that process being publicly under way. But I would say that 
this is a--it is a very difficult issue. It is a complicated 
issue, but it is an important issue that affects a lot of 
consumers in this country both pro and con and we hear a lot 
from them.
    Ms. Waters. The Department of Defense has proposed rules to 
close loopholes under the Military Lending Act that would limit 
covered credit to a 36 percent annual percentage rate. Do you 
agree with that?
    Mr. Cordray. Congress spoke I thought pretty loudly and 
clearly on this in 2007 with the Military Lending Act. Congress 
then spoke I thought loudly a couple of years ago about 
reopening the regulations that have been adopted and suggesting 
that they needed to be broader, stronger, and more 
comprehensive. The Department of Defense has moved forward I 
think quite responsibly and steadily on this project. Many 
other agencies have been asked to collaborate with them and 
work with them on this. We have been among those agencies. They 
continue to move forward and I think it is a very important set 
of protections for servicemembers.
    Ms. Waters. In your research, have you discovered the role 
that the banks play in perhaps providing capital resources for 
payday lenders?
    Mr. Cordray. I know there has been discussion of that. We 
also have had the opportunity now in the last several years to 
perform a number of examinations of payday lenders. It is the 
first time that has ever been done by a Federal supervisor, to 
really dig into their business operations and understand their 
business model and understand both the pros and the cons for 
consumers and also ensure their compliance with the law as it 
exists today.
    Ms. Waters. Is there a direct link between capital that is 
provided by major banks to payday lenders?
    Mr. Cordray. I think that different companies and every 
sector of our economy get financing in different ways. 
Sometimes it is through loans from banks, sometimes they raise 
it from shareholders; it depends on their corporate model. 
Certainly, there is some amount of that here although there is 
nothing illegal about any of that.
    Ms. Waters. Do you believe that there is any way we can 
bring payday lending under control any time soon?
    Mr. Cordray. So when you say bring under control, as I said 
we are--
    Ms. Waters. I would like to do something that would 
eliminate the ability for them to get 400 percent interest from 
people who are desperate.
    Mr. Cordray. I hear you loud and clear on that. We are, as 
I said, in the late stages of--beginning of the public process 
to write rules with respect to this industry and it will be 
based on substantial research and analysis we have done. I 
would say check back with us soon and you will see work under 
way here.
    Ms. Waters. I have 2 seconds left. On Corinthian, I would 
like to thank you for some loan forgiveness that you had to 
initiate for Corinthian students. Corinthian is just one of the 
many private postsecondary schools that have been basically 
creating serious problems for consumers for a long time now.
    And we also have some Corinthian students who have decided 
that this is predatory lending and they are not going to repay 
those debts. They are organizing and I support them.
    It is not just Corinthian. It is a whole slew of these 
private postsecondary schools, many of whom have schools where 
they are collecting government money, they don't have 
credentialed teachers, and they don't really teach anything. 
The students end up with big debts. They then can't get loans, 
and we can't do anything.
    What are we going to do about the issue of private 
postsecondary schools who have been ripping off the government 
for so long?
    Mr. Cordray. We have brought two lawsuits to date that 
remain pending. I want to be a little careful about what I say 
about those because they are in front of courts, but our 
complaints speak for themselves in terms of what we found in 
our investigation and believe to be the case there.
    In the Corinthian case, I will say I thought there was 
spectacular work by colleagues of mine at the Bureau to 
generate and secure significant debt relief for student loan 
borrowers whom, I believe, were misled into being deeply harmed 
by predatory loans.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Luetkemeyer, chairman of our Housing and Insurance 
Subcommittee.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. Director Cordray, 
thank you for being here today. And I want to first start off 
with following up on a couple of conversations we have had in 
the interim here, from the last time you were here, with 
regards to a letter that we asked you to put together and you 
agreed to write and sign. And it was with regards to making a 
statement to your examiners, not going after illegal businesses 
doing illegal business, to allow the marketplace to decide the 
viability of a business.
    And through the course of conversations, you sent us the 
letter, finally. And I asked you at the time that we finalized 
this if you were going to disseminate that letter to your 
examiners to let them know that this was your policy.
    And so my request--or my first question today is, did you 
disseminate that letter?
    Mr. Cordray. I actually don't honestly know as I sit here 
whether that happened or not, but I will take that back and--
    Mr. Luetkemeyer. Well, my staff was talking to your staff 
today and they indicated that it didn't happen.
    Mr. Cordray. Okay.
    Mr. Luetkemeyer. That has to happen, Mr. Director. If that 
doesn't happen, then there is no reason to have the letter. The 
letter going out to the staff indicates your position with 
regards to, basically, Operation Choke Point means something 
that you support and that you allowed to happen or continue to 
happen.
    If that letter does not go out, as a policy from your 
office, then we have grave concerns. I have a bill to stop 
Operation Choke Point. We do not have you included in the bill 
yet. But if there is not going to be a dissemination of 
information to examiners, I certainly think that we are going 
to put you in there.
    Mr. Cordray. I would simply say, I don't know that we have 
ever sent out a letter to a Member of Congress to examiners 
before. That is not normal. We send out guidance to our 
examiners through examination handbooks and the like, so it 
is--
    Mr. Luetkemeyer. I asked you if it was your policy to do 
this and you said, ``No,'' so I said, ``Therefore, you should 
be willing to put that in a letter to your examiners,'' and you 
said, ``Yes.''
    Mr. Cordray. No. That was a letter to you. I believe we 
responded to you.
    Mr. Luetkemeyer. Okay. And I asked if you would be willing 
to send that letter as policy statement out to your--
    Mr. Cordray. --so just a couple of things, number one, you 
asked for a letter to you and I have sent a letter to you. That 
letter represents my position and the Bureau's position. It is 
what it is. As for whether we send letters to Members of 
Congress to our examination staff that is not something we have 
ever done. That is not a normal thing for us to do.
    Mr. Luetkemeyer. Well, you just did. It is in your policy 
now.
    Mr. Cordray. If you want--
    Mr. Luetkemeyer. And you are not going to tell your staff 
about your policy?
    Mr. Cordray. If you are now talking about adopting policy, 
which we were often criticized for doing without notice and 
comment rulemaking and all the process and so forth. If I am 
just going to write a letter and then send it out to our 
examiners--I would think carefully about that.
    Mr. Luetkemeyer. --it is really clarification and the 
procedure--
    Mr. Cordray. I don't think--
    Mr. Luetkemeyer. I would think that would be a normal 
process.
    Mr. Cordray. --that would be how we would communicate that.
    Mr. Luetkemeyer. With regards to Choke Point, the FDIC in 
January, as a result of the oversight reform report--which 
indicated that there is a political as well as a value judgment 
going on within that agency with regards to the examiners and 
how they implement the termination of accounts and their 
process with regards to the banks they oversee--changed their 
procedures to match the tenets of a bill that I put together 
with regards to requesting, that when they request termination 
of an account, they will have it in writing, number one, cite 
the legal reason that it needs to be terminated and have that 
approved by a regional director.
    My question to you today is, are you willing to do the 
same?
    Mr. Cordray. I will have to take that back and consider 
that. I believe the FDIC had put out some--I don't remember 
exactly what the FDIC did but there was some sort of list of 
different activities or--
    Mr. Luetkemeyer. They had a list up of the activities that 
were reputational risks to banks. That list has since been 
taken down. And now they have, as a result of our discussions 
with them, put together a memorandum that they--and they had a 
conference call with the entire examiner staff as well and all 
of their examiners now receive this memorandum, as well as the 
banks, indicating this is a new process, and the procedures and 
protocols they are going to put in place.
    Mr. Cordray. I see. I will be happy to look and see what 
the FDIC has done.
    Mr. Luetkemeyer. Okay. Thank you. One quick question while 
I have 30 seconds left here with regards to, you said on FSOC, 
and they have designated now three insurance companies, the 
last one being MetLife.
    Can you tell me exactly why you believe that an insurance 
company is a systemically important institution? What other--
    Mr. Cordray. I want to be a little careful here because my 
understanding is one of those companies has now sued the FSOC 
and has a case pending in Federal court. I wouldn't want to be 
affecting the case by any kind of pronouncement here.
    There is a significant and voluminous record on the 
designations and what the rationale was for those of the FSOC 
as a body, so I--
    Mr. Luetkemeyer. From CFPB's point of view though, sir, 
what is your criteria that you used to make sure that people 
believe in your judgment that they are systematically 
important.
    Mr. Cordray. I am a member of the FSOC, but I don't regard 
that as a Bureau position. That is a--
    Mr. Luetkemeyer. You represent the Bureau on the FSOC--
    Mr. Cordray. Yes. That is correct. So the criteria I would 
apply and always would apply and did apply is the statutory 
criteria under the FSOC's statutes for designating an 
institution. Nothing more, nothing less.
    Mr. Luetkemeyer. Thank you, Mr. Chairman. I yield back.
    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, 
for 5 minutes.
    Mrs. Maloney. I thank the chairman for yielding, and I 
thank you, Director Cordray, for being here. As you know, I 
have had a overdraft bill in for several years that cracks down 
on unfair and deceptive practices that drive up fees--that 
some, not all, but some financial institutions put forward.
    So I would like to ask you about these fees and what the 
Bureau is doing about it. You have published two excellent 
reports that I have seen on overdraft fees. And these reports 
clearly demonstrate that overdraft fees are still far too high 
and are eating into some of the most vulnerable citizens' 
savings.
    There are some startling statistics from the Bureau's 
latest overdraft study. Most overdraft fees are incurred on 
purchases of just $24 or less and are paid back within 3 days. 
But the median overdraft fee for these small overdrafts is 
still a whopping $34. So you have a $24 overdraft and you pay a 
$34 fee for 3 days of borrowing money.
    And according to your report, consumers would be paying, 
for these 3 days, a 17,000 percent annual percentage rate. The 
ranking member was concerned about a 400 percentage annual rate 
and I agree with you. But I think everybody in this room can 
agree that a 17,000 percentage annual rate for borrowing--for 3 
days borrowing a $24 overdraft is outrageous.
    So my question is, what do you plan to do? Or do you plan 
to do anything about these excessive fees? What is your plan?
    Mr. Cordray. I would agree with you the 17,000 percent rate 
of interest is quite high.
    Mrs. Maloney. It is so much, it is unbelievable.
    Mr. Cordray. Quite high. However, what I will say is as you 
indicated, first of all we are well-aware of your interest in 
this area and your legislative efforts and have had a number of 
discussions with your staff that have been helpful, I think on 
both sides, in understanding the issue better.
    We have indicated on our unified agenda which is where we 
publish to the world in a transparent way what we see as on our 
agenda for rulemaking in advance. Overdraft is on that agenda.
    It is a crowded agenda at the moment. We are trying to--we 
will work to finalize rules on prepaid cards. We will work to 
finalize the rules on the Home Mortgage Disclosure Act. As I 
indicated we are very close to starting the public process on 
payday and small dollar rules.
    Debt collection is also on that agenda and that is a very 
large subject. Overdraft is on that agenda as well. Here we 
have as you said done a fair amount--a considerable amount of 
research here, again published, I think, two White Papers, both 
of which represent very detailed analysis of the overdraft 
issues.
    We have also done examination work of institutions around 
the issues involving overdraft that has resulted in remediation 
to consumers, so we have come at this and begun to understand 
this problem from a number of different angles and it is 
something that we do intend to take up as we can.
    Mrs. Maloney. Thank you. And going back to the prepaid 
cards, many people in this committee and I would say some of 
the biggest players in the industry such as Wells Fargo, Green 
Dot, and others and I understand that they are the largest 
prepaid card companies in the country, it is my understanding 
that they called on the Bureau to simply ban overdraft programs 
for prepaid cards because these cards should be exactly that--
prepaid. They should not be a de facto credit card.
    I was pleased to see that your proposed rule took strong 
steps to limit overdraft on prepaid cards. But the proposed 
rule stopped short of an outright ban. So, I am concerned that 
this could incentivize companies to find loopholes in the rule 
that would allow them to keep collecting overdraft piece on 
prepaid cards.
    And I understand you are still considering an outright ban 
on overdraft for prepaid cards. Is this something that you are 
going--what is your plan for this? What are we going to see in 
the final rule?
    Mr. Cordray. I can't prejudge that at this point. We have a 
proposal out that as you indicated would put any kind of 
overdraft product--credit product in a framework that would be 
governed by the Card Act which, I think, was a very appropriate 
framework, frankly. I know you are a strong advocate of that 
and champion of it.
    We have comments still coming in through the end of this 
month and then we will consider and digest those and move to 
finalize in accordance with what they raised to us so that is 
about all I can say at the moment.
    Mrs. Maloney. And when do you expect this to happen?
    Chairman Hensarling. Go ahead and get your question out.
    Mrs. Maloney. Just the timing, when will this rule be out?
    Mr. Cordray. Later this year.
    Mrs. Maloney. Later this year?
    Mr. Cordray. Yes.
    Chairman Hensarling. The time of the gentlelady 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, and good afternoon, Mr. 
Director.
    I think there are a lot of do-gooders in Washington who are 
out there trying to protect a lot of folks and oftentimes over 
here. A lot of times we applaud the effort, stopping fraud, 
deceit, misrepresentation, there is no disagreement on those 
efforts in the CFPB. We all agree in your mission to stop those 
practices.
    But sometimes, I think you are out trying to do good but in 
the end what you do creates harm to an industry where people 
are using products where they actually know what they are 
getting into. There is clarity in the cause, there is clarity 
in the consequence, and they analyze and come up with the idea 
that this is a good product for them.
    I have an individual in my district in Central Wisconsin, a 
guy by the name of Ron, who said in regard to the overdraft 
services on prepaid cards, ``I receive Social Security direct 
deposit, and since this is a fixed income, there are months in 
which I need the overdraft protection, such as winter months. I 
don't want those available resources taken away from me.''
    See, you might not know this, but often in Wisconsin in the 
winter it gets really cold and our heating bills go up and for 
guys like--
    Mr. Cordray. I have seen some Packers games.
    Mr. Duffy. Yes, that is cold. That is tough on him. And 
these are products that he knows the cost of, but he is ready 
and willing to accept the cost because it helps him to manage 
his fixed-income through Social Security.
    And I think you have to analyze these things through the 
eyes of end-users, stopping fraud and deceit. But if there is 
clarity in the products, don't take them away from people who 
actually use them and it helps them.
    So with that said, I want to switch to Mr. Luetkemeyer's 
topic on Operation Choke Point. You are a board member on the 
FDIC, right?
    Mr. Cordray. I am.
    Mr. Duffy. And you are aware that on the FDIC, they set out 
a list of industries that were subject to Operation Choke 
Point.
    Mr. Cordray. I don't know if that is quite accurate. Just 
to be clear, I am an outside Director. I am not as engaged in 
the day-to-day operations. I have a full time job with the 
CFPB.
    Mr. Duffy. I know. But?
    Mr. Cordray. But I am aware that there was--
    Mr. Duffy. But the DOJ and at least the FDIC were targeting 
certain industries, whether it was payday lending, gun dealers, 
ammunition manufacturers, or smoke shops.
    Mr. Cordray. I have read about that.
    Mr. Duffy. But as a director or as a board member you had 
no idea about it from the inside?
    Mr. Cordray. I was not aware of that, that is correct, 
until it burst into public view.
    Mr. Duffy. Okay. Do you support the idea of Operation Choke 
Point, of choking off banking ability for certain industries?
    Mr. Cordray. I don't think that we should be in the 
business of distinguishing between different kinds of economic 
activities that are legal merely because someone might favor or 
disfavor one or another.
    Mr. Duffy. And you would agree that payday lending, gun 
dealers, ammunition manufacturers, those are all legal 
businesses, right?
    Mr. Cordray. Some are constitutionally protected.
    Mr. Duffy. So, in regard to those who are implementing 
these policies within the FDIC--actually, I would argue they 
are actually un-American policies. For me this--we are looking 
like the old Soviet Union, Venezuela, and Cuba, and we are 
using the banking sector to go after industries we don't like. 
Do you think those folks should have a place in our government, 
who are implementing the Operation Choke Point?
    Mr. Cordray. Actually, I am not clear that is what people 
are actually doing. I think some of this may be--
    Mr. Duffy. Answer my question.
    Mr. Cordray. --overdone. But?
    Mr. Duffy. So, my question for you?
    Mr. Cordray. I don't think that.
    Mr. Duffy. Reclaiming my time, Director Cordray--
    Mr. Cordray. I think I am agreeing with you. I don't think 
that people should be pressured into not lending to 
businesses--
    Mr. Duffy. Yes. But that is not my question. My question 
for you is, do you think if you are using the power given to 
you at the FDIC in partnership with the DOJ to put certain 
lines of businesses that are legal that have no due process, no 
judge, no jury, no trial, no due process, you have actually put 
them out of business. Do you think you should have a job at the 
FDIC or the DOJ?
    Mr. Cordray. Again, I am not clear on that.
    Mr. Duffy. A simple question, yes or no?
    Mr. Cordray. I am not clear that is what happened. I don't 
think it is what happened. And I believe if I am understanding 
it correctly--
    Mr. Duffy. What happened then?
    Mr. Cordray. --that there has been a modification of 
policies that I think--
    Mr. Duffy. I will take that as an honest answer to the 
question. I would tell you; listen, if this is what you are 
doing, you have no place in government. I only have a minute 
left--40 seconds left. You and I had a private conversation. I 
dropped a bill which dealt with concerns about the consumer 
advisory council and it being open to the public.
    You are not FOMC. You are not setting monetary policy and 
you are not the CIA. You actually called me and said, ``Listen, 
thanks for bringing this to my attention, we are going to open 
it up.'' But lo and behold, from what I am seeing, you put out 
a consumer advisory board notice for September 11th on the 
Internet that only gives a portion of the actual schedule that 
was offered to those who attended the meeting.
    So, actually the whole meetings are not made public. There 
was also a meeting from October 15th for the community bank 
advisory council where only a couple of hours was public but 
you actually--they started at 2:40 but you actually began 
meeting at 8:30.
    Mr. Cordray. I don't think that is quite accurate. But 
number one, you talked to me about our consumer advisory board 
which is not governed by the Federal Advisory Committee Act 
(FACA) and we talked about it. And I determined that I thought 
you were right as a matter of appropriateness.
    Mr. Duffy. Thank you.
    Mr. Cordray. That we should comply with the FACA which we 
are now doing. It used to be that none of those sessions were 
open to the public--
    Mr. Duffy. My time has expired. Maybe I could send you 
follow-up documentation, and you can respond in writing--
    Mr. Cordray. Absolutely. But under the FACA the 
subcommittees are not necessarily required to be open to the 
public just as you are on the Floor that is open to the public 
but when you caucus, that is not open to the public.
    Mr. Duffy. --for the record.
    Mr. Cordray. I would be happy to follow up.
    Mr. Duffy. Thank you. I will follow up, as well.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from New York, Ms. 
Velazquez, for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Director Cordray, Section 1071 of the Dodd-Frank Act 
requires banks and lenders to collect and report credit 
application data on small businesses as well as minority- and 
women-owned businesses.
    Can you elaborate on how collecting this information will 
help enforce fair lending laws and enable lenders to identify 
opportunities for improvement in their served communities?
    Mr. Cordray. Yes, and thank you for the question. My sense 
is that both the theory and the practice of this would be 
similar to the Home Mortgage Disclosure Act, where more data on 
what loans are being offered and in what locations and to what 
kinds of customers would give us a kind of a roadmap into 
whether lending is being done in some evenhanded way across 
different communities.
    And there has been no substitute for the HMDA data, that 
this can be easily seen and easily analyzed and crunched. And 
by the way, one of the things we are required to do under the 
Dodd-Frank Act is to overhaul the HMDA rules and make them more 
effective, which we are working on right now.
    And we also are bringing over from the Federal Reserve the 
data collection itself so that we will be the ones who are 
managing that data collection. I think they have done a great 
job over the years, and I now think there are ways we can 
update and improve it even further.
    That, as I think we have talked about before, becomes the 
jumping off point for us to then fulfill what is also the 
requirement in the Dodd-Frank Act, but again, not on a 
particular deadline of going about small business data 
collection.
    This year, we are going to undertake our first examination 
of a financial institution on small business lending under the 
authority of the Dodd-Frank Act and that will help us have 
guidance on this.
    As the HMDA moves forward, we plan to build on that for the 
small business data as well. And I think this is eventually--I 
know it takes awhile for these things to unfold--going to be a 
very significant tool.
    Ms. Velazquez. So when can we expect the CFPB to publish 
rules? Do you think before the end of the year or after?
    Mr. Cordray. No, it could not be before the end of the 
year, and I honestly can't give you a date, but I can tell you 
that we have a process here that I think make sense, which is 
to complete the HMDA, which is one of the required tasks for 
us. Then, move to this small business data and have it build 
together so that the data collection is being done in the most 
efficient manner.
    Ms. Velazquez. It is a very important part of the law and 
it helps us here understand the dynamics in terms of small 
business lending.
    Mr. Cordray. Yes.
    Ms. Velazquez. New York consumers submit thousands of debt 
collection complaints to the Bureau every year. As you know, 
onerous and illegal debt collection practices can be a 
significant burden to families' finances and ability to obtain 
credit.
    It is our understanding that CFPB is in the process of 
drafting a rule to address these complaints. Can you describe 
the main tenets of the rule and the types of abusive collection 
activities you hope to eliminate?
    Mr. Cordray. My experience with this subject goes back to 
when I was Ohio attorney general--it was the most complained 
about activity other than identity theft in the office at that 
time--and it has always been one of the most complained about 
activities at every level of government.
    I actually would like to compliment the New York 
regulators, the courts, the attorney general, and the banking 
superintendent, who have done a lot of work around debt 
collection in that State. We have learned a lot from the work 
they are doing, we have had a lot of consultation back and 
forth.
    We will be moving forward as Dodd-Frank authorized us to do 
to adopt regulations that will completely update the Fair Debt 
Collection Practices Act, which was enacted in 1977, that is 
the year I graduated from high school, and you think how much 
technology has changed since then, how much the practice of 
debt collection has changed since then.
    There is a lot that we need to address. There are many 
abuses, people being harassed, people being bothered in the 
workplace when they should not be. Military servicemembers, 
commanding officers being pursued which is totally 
inappropriate and it affects the servicemember. There are a lot 
of things that go on out there.
    We have had numerous enforcement actions. We have had 
numerous examinations leading to relief. There is a lot of work 
to be done on this.
    Ms. Velazquez. Do you have a timeline as to when a rule 
will be released?
    Mr. Cordray. That is also on our unified agenda along with 
overdraft. We will be starting on that, I imagine, later this 
year.
    Ms. Velazquez. Thank you. Thank you, Mr. Chairman.
    Chairman Hensarling. The gentlelady yields back. The Chair 
now recognizes the gentleman from Michigan, Mr. Huizenga, 
chairman of our Monetary Policy and Trade Subcommittee.
    Mr. Huizenga. Thank you, Mr. Chairman, and Director 
Cordray, I appreciate you being here. I would like to talk 
about the enforcement today and when Congress--I wasn't here 
for this, unlike a number of my colleagues--created the 
Bureau--
    Mr. Cordray. I wasn't here either.
    Mr. Huizenga. Yes, I am aware. We are both living with the 
echo effects here. But just like any other regulator that the 
Congress has created we wanted the Bureau to punish those that 
violate the law.
    At the same time, I think Congress wanted the Bureau to 
help support good actors who were trying to do the right thing 
and comply with the law. But it seems to me when the Bureau 
conducts an enforcement action, typically you publish a press 
release.
    A number of those press releases that I have gone over seem 
rather than offering guidance or to help the providers to how 
to avoid an outcome like this, they really seemed to be over 
the top and sort of this, well, we just stopped them from 
kicking the neighbor's dog kind of line of story telling that 
kind of comes out of the CFPB and I am curious, why is that?
    Mr. Cordray. If they were actually kicking the neighbor's 
dog, then it is appropriate for a press release to say that we 
stopped them from doing it.
    Mr. Huizenga. I wholeheartedly agree, but when they are 
not?
    Mr. Cordray. Look, I would be glad to walk through 
individual press releases with your staff.
    Mr. Huizenga. That is where it gets a little tough though 
because those individual companies don't want us to go over 
individual press releases because they are afraid of what the 
echo effect might be on them.
    But if you look at broad stroke things that have been out 
there, large companies such as JPMorgan, GE Capital, and 
Fidelity Mortgage Corp., I think there have been a number of 
those very high-profile things that have been sort of over the 
top in my judgment and I think I am judging a lot of others.
    But a lot of smaller places--I have had community banks, 
title companies, I have them in my own State as well where 
there hasn't been a violation admittedly by the Bureau, but 
there has been kind of an example that has been needed to be 
set.
    And I have to tell you that the press releases just seem 
completely over the top.
    Mr. Cordray. Wait a second, if we have an enforcement 
matter, that is a law enforcement matter. I have heard people 
on both sides say they want the law to be enforced and it is 
appropriate for there to be a press release to let the world 
know what happened because that determines--
    Mr. Huizenga. Yes, but why would you?
    Mr. Cordray. But we wouldn't do a press release if there 
wasn't a law enforcement matter.
    Mr. Huizenga. So the Bureau ombudsman has an announcement 
they are going to be conducting an independent review with 
differences in the language use between consent orders and 
their corresponding Bureau press releases; why is that?
    Mr. Cordray. I encouraged them to do that because we have 
had people who made the inquiry, but I don't think it is--
    Mr. Huizenga. So you admit there was a problem?
    Mr. Cordray. No, I don't think--I don't know that there was 
a problem, we are going to look at it and see and I am happy to 
do that. But, and the ombudsman has some independence from me, 
which is appropriate.
    Mr. Huizenga. But hold on, my understanding of entering 
into these consent orders is that the Bureau has not actually 
proven that a respondent has actually violated statute or law, 
correct?
    Mr. Cordray. I don't think that is quite right. When we 
enter into a consent order--
    Mr. Huizenga. But then why not go for a jury verdict or 
some sort of judgment?
    Mr. Cordray. If we can achieve all of our objectives, 
getting relief for consumers and stopping the conduct and the 
company will agree with that, then we don't need to go forward 
and--
    Mr. Huizenga. But all that the respondent has agreed to in 
the settlement order is to end the enforcement action brought 
by the Bureau.
    Mr. Cordray. No, that is not quite right. They often agree 
to injunctive relief going forward to stop doing what they were 
doing that was in violation of the law. This has always been 
done at the end of an investigation by us where we have 
established--
    Mr. Huizenga. But there was not an admission that there was 
a violation.
    Mr. Cordray. We don't necessarily require an admission, 
however, they stop the conduct, they come into compliance with 
the law, and they remediate consumers for the harm done. That 
is what we are going for; we don't necessarily need to drag 
them through a trial if we can get that.
    Mr. Huizenga. But wait a minute, there was a trial in the 
press releases, because I have seen it--I have seen it where 
good companies, small companies, medium companies, large 
companies who have been out there and have had great 
reputations end up on the front page of their local newspaper 
getting dragged through the mud by the Bureau.
    Mr. Cordray. I don't know what you are talking about in the 
sense that we don't enforce the law against institutions, banks 
of $10 billion or less. So, the notion that we are doing that 
with community banks is wrong, and I would like to know the 
specific instance you are talking about.
    It is commonplace across this country that when law 
enforcers enforce the law, they let the public know what they 
have done so that other people who were considering violating 
the law in the same way are deterred from doing so; that is 
pretty important.
    And as long as--
    Mr. Huizenga. We understand but why would the Bureau insist 
that a company has violated the law if it has not proven that 
the company has done so?
    And that is how I have read those press releases.
    Mr. Cordray. We have conducted a full investigation. We 
think that the facts have been established. I have no doubt 
about that in our cases. Thank you.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from Massachusetts, Mr. 
Capuano.
    Mr. Capuano. Thank you, Mr. Chairman. And thank you, Mr. 
Director, for being here. Mr. Director, I think you are doing a 
pretty good job. I like pretty much everything your agency is 
doing and I have been supportive from day one.
    So I just want to thank you for what you have done and are 
continuing to do. But I, like everybody else, have a little 
bone to pick--I don't have a bone to pick so much as a 
clarification to ask.
    Mr. Director, have you ever heard the term, ``triple 
decker?''
    Mr. Cordray. ``Triple decker?''
    Mr. Capuano. Yes.
    Mr. Cordray. I know it is a sandwich, the Big Mac. I used 
to work at McDonalds, so I have heard of that.
    Mr. Capuano. And hence, the problem.
    Mr. Cordray. Okay.
    Mr. Capuano. A ``triple decker'' in my district is housing. 
It is generally working class housing and look, I have a little 
problem, because I usually hate these things, but I did because 
it is necessary, okay.
    There are triple deckers in my district. I know Mr. Lynch 
knows what I am talking about, I presume Mr. Himes knows what I 
am talking about. I presume Mr. Guinta knows what I am talking 
about, and I'm not sure, but maybe Mr. Garrett, as well. I know 
they have them in New Jersey.
    Mr. Cordray. I see. We don't have those in Ohio, in my 
area.
    Mr. Capuano. I know. You have missed out on some things, 
and that is one of them. These are housing units generally 
owned and occupied by working class people. My brother owns a 
triple decker. I have a two-family house.
    And I bought a two-family house, which I still live in, 
because when I bought it I needed the rent to help pay the 
mortgage. In my brother's triple decker, he lives on the first 
floor, one of his sons lives on the third floor, and his other 
son used to live on the second floor with his two children. 
That is a classic situation.
    And for reasons that are beyond my comprehension, except 
for the lack of knowledge, which is fine--that is why I am 
trying to educate you and your staff.
    In New England, a triple decker usually is a classic entry 
into homeownership for working people who could not otherwise 
afford to buy a home, and yet for reasons that I don't 
understand they are exempted from the QM rule which I like.
    Mr. Cordray. I think I see where you are going.
    Mr. Capuano. I hope so.
    Mr. Cordray. So the question is whether a triple decker as 
you describe it should be considered residential real estate 
or--
    Mr. Capuano. Yes. And as I understand the rule, it is 
currently not considerered to be. Yet, if the same triple 
decker as in my district is bought by some outside investor and 
ripped apart and put back together on a TV show as some high-
end unit, if they rip them apart and ``condo-ize'' them to sell 
them to some gentrifier, those are considered qualified.
    But the working person who has it doesn't qualify which 
means their local bank cannot hold their mortgage.
    Mr. Cordray. Okay. I will tell you what, I had not heard of 
this issue in my own experience. If we think there is an 
interesting animal out there in the housing field that doesn't 
fit easily within our definitions and we need to rethink that, 
we will be happy to work with your staff to try to understand 
the issue and consider what is the right answer to it.
    Mr. Capuano. I would like to do this quickly because in my 
district, in Boston alone, there are 9,000 triple deckers, 
27,000 units, and that is just Boston, never mind the rest of 
my district.
    So, I appreciate the offer and I look forward to working 
with you as quickly as humanly possible not to get any 
advantage but to simply treat them as you treated other multi-
units with two family homes like I have.
    Mr. Cordray. We will take a good look at that.
    Mr. Capuano. I know how to quit when I am ahead, so with 
that, I yield back the rest of my time.
    Chairman Hensarling. The gentleman yields back. The Chair 
now recognizes the gentleman from New Jersey, Mr. Garrett, 
chairman of our Capital Markets Subcommittee.
    Mr. Garrett. I thank the Chair and yes, we do have them, we 
do have triple deckers, I say triple deckers are not quite 
triple deckers but just slightly--
    Mr. Capuano. You don't use that little extra, add the extra 
little ``R,'' we don't use that too much, triple decker.
    Mr. Garrett. Okay. Thank you. So let's talk about--and I 
don't know whether this topic was covered and forgive me if it 
was, but I was in three other hearings--predatory lending and 
your work in that area to try to find the bad actors, find the 
bad lenders who are engaged in predatory lending. Predatory 
lending probably has a technical definition, but I just think 
of it like when you have teaser rates trying to attract people 
in at a rate that is lower than it is going to be later on, 
trying to get people into triple deckers or regular deckers 
that they may or may not be able to afford because the rates 
are going to change and so forth.
    And there probably is a definition of it if you looked at 
the books of the company, the track record of those people that 
I just described who you got in there have a higher default 
rate, right, than everybody else.
    That's a nontechnical definition of predatory lending. You 
are nodding your head, so yes?
    Mr. Cordray. I think it is a pretty good one. If you are 
lending in such a way that the borrower is set up to fail, and 
you have consistently higher default rates than others, that is 
a pretty good indication that something is not working right.
    Mr. Garrett. Okay. So it was about a week or so ago we had 
the head of the FHA here and they described what they do and 
that is exactly what they do. So will you commit to us today, 
since you are charged with looking at predatory lending, to 
look at the practices of the FHA and their practices which you 
have just defined as predatory lending?
    Mr. Cordray. I am not--well, slow down a little bit. What 
are you talking about with the FHA?
    Mr. Garrett. The FHA has loans and they just lowered the--
basically allowed for teaser rates, lower rates now than you 
will be getting later on, that they will use to try to attract 
people by lowering the premiums by a difference of $25 or $75 
as their insurance rates that they have on there.
    Having a default rate that is 150 percent relative to the 
rates as I described with all the others, those are all the 
things that came out in the testimony of the FHA, which you 
just described as, and agree with me is, predatory lending.
    Shouldn't we really be looking at that, because isn't it 
unfair to the 150 percent of those folks who fall in that 
category who are now suffering because of those loans that they 
got into through the FHA?
    Mr. Cordray. To me, a teaser rate is one where you offer a 
rate to begin with but then it is going to change later on. I 
don't know if that is accurate to the FHA program.
    And as for reducing premiums, if they are reduced and 
people can therefore afford to get a loan, that doesn't feel 
like--
    Mr. Garrett. Well, no, they can't afford the loan because 
their default rate falling into these categories is 150 percent 
compared to the--
    Mr. Cordray. I see. Look, I do think high default rates 
would be a warning sign, but if you are talking about FHA 
programs that were just changed, I don't know if we have data 
yet as to whether they are leading to high default rates for--
    Mr. Garrett. That is a good point. So will you commit to us 
to examine that data and get back to us whether their data--
    Mr. Cordray. It could be awhile before we have anything 
like that.
    Mr. Garrett. Will you start, will you commit to us that you 
will look at both data that they already have and at the new 
data under the plan and report back to us on a regular basis to 
see what they are doing?
    Mr. Cordray. Here is what I will say: We have created the 
national mortgage data base and it is exactly the data that 
will allow this sort of thing to be looked at over time.
    We will be glad to have you and your staff work with us to 
see how data shapes up on these and other things over time, 
that will give us the window on the mortgage market, I think.
    Mr. Garrett. If I told you that there was a particular 
institution in my town that was engaged in this, would you tell 
me that it will take awhile to extract the information, that 
they just set up the program that they are doing in the bank 
and you don't have to worry about getting back to us for a long 
period of time?
    Is that how you would handle any other institution?
    Mr. Cordray. It depends on what the ``this'' is. If 
``this'' is dropping rates in a misleading way and then raising 
them later, that I think is problematic, but I am not clear 
that's what FHA is doing. If it means lowering prices and loans 
become more affordable and default rates go down, that also 
would not be problematic.
    If you are lending and consistently default rates are high 
and there are outliers--
    Mr. Garrett. Right. So any one of these things by itself 
would not be a factor when you have multiple factors you 
would--can you commit to us at all that you will be looking at 
what they are doing?
    Mr. Cordray. We will have data in the national mortgage 
database.
    Mr. Garrett. But will you commit to us at all that you will 
look at them as you would look at any other institution? Are 
they somehow special that they don't deserve your attention?
    Mr. Cordray. No. I am not allowed to enforce the law 
against other government entities but we do collaborate and 
coordinate all the time on different programs both with FHA and 
other aspects of the Federal and State and local governments.
    Look, we are developing data just so these kinds of things 
can be looked at. And if your folks are interested in seeing 
what we can see, we will be glad to share it.
    Mr. Garrett. Thank you.
    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. Director Cordray, could 
you provide specific examples of regulatory relief measures 
that the Bureau has already extended to small financial 
institutions?
    Mr. Cordray. Sure. And we talked about some of them today 
which is that in the mortgage market in particular when we were 
required by Congress to adapt the Qualified Mortgage rule, what 
we call the ability-to-repay rule, we weren't required to do 
so, but we determined that--and I feel strongly committed to 
this--we believe smaller institutions like community banks and 
credit unions lend responsibly.
    And I believe data has shown that their default rates are 
lower--this is going back to the Congressman's point a moment 
ago--than other lenders and were especially so through the 
crisis, then we should try to find ways to tier our regulation 
such that we can encourage them to engage in that kind of 
lending, which is good lending and very important in our 
communities.
    And we did adopt a provision that applied to 90-plus 
percent of the community banks and credit unions in the 
country. We then went back and I determined, I thought we 
hadn't drawn it broadly enough, I thought we should draw it 
even broader.
    Because we not only want to encourage them to lend but we 
want to give some room to grow in that lending. And in fact, 
the community banks are growing in their share of the mortgage 
lending market now in this past year we have seen, and we have 
a proposal to expand that further. That is an example of it.
    We have had other provisions for regulatory relief. Annual 
privacy notices, we adopted a new rule to reduce these burdens 
on many, many companies. We were working toward the ATM machine 
sticker problem when Congress resolved it with our support as 
another means of regulatory relief.
    And where we can do things that we think relieve burden on 
industry without hurting consumer protection, we are willing to 
consider doing that, and if people have ideas in that regard 
they should share them with us.
    Mr. Clay. Can you give examples of the impact that the 
community bank advisory council has had on the Bureau's actions 
relating to community banks?
    Mr. Cordray. What the community bank advisory council--and 
that is another good example--we are not required to have such 
a body, but I thought we weren't going to be naturally hearing 
enough from community banks because we don't have the 
examination or enforcement authority of them, so we don't 
engage with them day-to-day.
    We did set up a community bank advisory council and a 
credit union advisory council, which again we are not required 
to have but I think they have been very helpful to us and they 
influence our thinking.
    We talk to them about the work we are doing on mortgage and 
other things, they talk to us about what kind of operational 
effect those things have on them, they tell us about what kind 
of problems and concerns they have in the marketplace that we 
might not otherwise see.
    We have spent a lot of time with them and I think it has 
been very valuable to us. And I personally spend a lot of time 
sitting through those sessions, I don't just farm that out to 
other people.
    I want to hear from them directly and I, again, am 
continuing to do this because I think it is very helpful and I 
think it has benefited the Bureau and I think it has benefited 
community banks as well.
    Mr. Clay. Thank you for that response. We often hear from 
our colleagues that a regulated institution somehow lacks the 
requisite access to the CFPB to voice their concerns about 
actions taken by the CFPB or to shape the CFPB's policymaking 
process outside of formal channels like the ABA's notice-and-
comment period.
    Could you elaborate on the ways that institutions subject 
to the CFPB's jurisdiction can interface with the agency when 
they take issue with the agency's action?
    Mr. Cordray. Sure. First, we do have these advisory 
councils. Second, we did set up--in response to concerns from 
industry--a new office that we call the office of financial 
institutions and business liaison, which is the way that people 
in the industry can interface with the Bureau and make sure 
they can navigate the Bureau and have their concerns heard.
    We meet regularly with both community bankers and 
separately with credit union leaders in every State when we go 
out and around the country and when they come in to do their 
fly-ins to speak to all of you, they typically will come and 
speak to us as well.
    I remember I met with Congressman Neugebauer recently and 
my folks had told me about meetings we had with Texas bankers 
and credit unions in the past year. It was five or six 
different meetings we had and I told him I felt like I am a 
member of the delegation.
    But it is something that I think is important for us to do 
and we gain a lot of insight from it and it gives them an 
ability to talk to us and have us hear from them.
    And it has led to things like the small creditor provision, 
potentially expanding that provision, rural treatment where 
this is really a key to supporting communities by supporting 
their community banks and credit unions.
    Mr. Clay. And hopefully the consumers of Texas appreciate 
the CFPB's efforts. I yield back.
    Mr. Cordray. I hope so.
    Chairman Hensarling. I could bite on that one, but I won't. 
The Chair recognizes the gentleman from New Mexico, Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman, and thank you, 
Director Cordray, for being here today. I am over way on the 
side.
    Mr. Cordray. Okay. But everybody is in a different place--
    Mr. Pearce. We noted with interest that the change, the 
revised rules on QM for rural institutions, that was a matter 
of comment between us during previous hearings. And I really 
appreciate that we are already getting feedback that has been 
constructive.
    We are starting now to hear from people who would be 
affected by the title insurance section that you announced in 
August, so be aware there probably ought to be someone looking 
at how that is going to affect the market also.
    So I have put up on the screen here a threat map and I 
would draw your attention to it because another matter that we 
have talked about when you were here is cyber security and data 
collection. This is a real-time depiction of cyber threats and 
it goes on 24 hours a day. I know that when you testified 
previously you had said that you were going to handle it 
internally.
    Just today, Apple and Google both experienced problems, and 
with the constant attacks, I get deeply concerned about the 
inadvertent release of that data, and we kind of have the 
recent releases of information.
    So, again, my recommendation is, if we haven't done it, to 
visit with the FBI, with security agencies, and be aware that 
this is highly sophisticated stuff.
    Mr. Cordray. Yes. All I can say is, you are absolutely 
right on that, this is a major concern. It is something that a 
number of the agencies are all realizing that we need to work 
together on--Treasury is deeply involved in this as well.
    And it is threatening not only banks and financial 
institutions but potentially government and also merchants and 
others. And it is a highly sophisticated way of committing 
crimes against the American public.
    Mr. Pearce. I appreciate that understanding there. Now, you 
say repeatedly, and I appreciate the chance to talk about 
consumer protection and the way I visualize that you are 
protecting every single transaction.
    Would it be helpful if this body were to put the GSEs under 
the same limitation or under your regulation, because then you 
just have one source, you go to the GSEs and say, you can't 
relax your standards, you can't relax the underwriting.
    That was a great deal of the problem back in 2008 and 
preceding up to the meltdown and it just seems like if you 
could affect that one institution, FHA or the GSEs, then you 
could cascade out and protect hundreds of thousands of loans 
with a miniscule amount of effort. Is that something that you 
would be opposed to if we put in legislation to that effect?
    Mr. Cordray. That is a very interesting and insightful 
point because when we first started out as a Bureau we were 
given about seven or eight tasks by Congress. It was in our law 
that we had to fulfill them, which we worked to do in the 
mortgage market.
    Since that time we have gotten to know it better, as you 
know, HUD has significant authority in the market through FHA 
and otherwise. And the FHFA, working with Fannie and Freddie, 
has significant authority in the market.
    So it makes a lot of sense for me, for us to coordinate 
closely with one another so the left hand and the right hand 
know what they are doing. There are a lot of things as you say 
that the GSEs can affect in the market and people have to 
respond to them because there is some--
    Mr. Pearce. Yes. If the GSEs did not purchase those loans, 
then people would be stuck with them and they are not going to 
live with the abuses that you are here trying to stop and so I 
appreciate that.
    But I know that, and it has been a previous question of 
mine that no government agency--you all really don't interact 
with them and I am not sure that is always right.
    Just this month a local constituent was forced into an IRS 
sale forfeiture of assets and was denied due process, the local 
sheriff was standing beside him, and finally the guy got so 
nervous he said, ``Hey, everybody is scaring me with what they 
are saying is going to happen if I persist on my rights.''
    And so at some point that protection for consumers from the 
government agencies is something that would be very effective, 
too. And again, I think you maybe in the past had perceived 
that I was picking on you or maybe not serious, but I am deadly 
serious in saying that I would appreciate it if you would give 
your commitment that you would gladly oversee some of the 
actions by our own government.
    Mr. Cordray. I don't have authority in our statute but I--
    Mr. Pearce. That is assuming that we would put it into the 
statute, I agree with you.
    Mr. Cordray. Yes, yes.
    Mr. Pearce. Thank you. I yield back.
    Mr. Pearce. The time of the gentleman has expired. The 
Chair now recognizes the gentleman from Massachusetts, Mr. 
Lynch, for 5 minutes.
    Mr. Lynch. Thank you, Mr. Chairman, and thank you for your 
testimony, Director Cordray, we appreciate it. And I do want to 
support my colleague, Mr. Capuano's, concern about the language 
surrounding three deckers.
    I have known Mr. Capuano for many years and there is an old 
story about his dad and his three decker. At one point when 
Mike was a young boy, the election commissioner got a report 
that there were over a hundred registered voters residing at 
Mr. Capuano's three decker.
    And so they went out to Mr. Capuano's house and the 
election commissioner said, ``Can you explain why there are a 
hundred registered voters living at this three decker?'' And 
Mr. Capuano said, ``Easy, the top floor is empty.''
    Anyway, I do want to talk to you about reverse--
    Mr. Cordray. For the record, he is not here to defend 
himself at the moment.
    Mr. Lynch. All true, I am sure. The CFPB just completed a 
report on reverse mortgages and this issue is percolating in my 
district. It seems we are having more and more concerns among 
seniors about consumer risks associated with reverse mortgages.
    I know there has been some outreach but it seems to be sort 
of hit or miss depending on the neighborhood, at least in my 
district. How was the CFPB going out and communicating the risk 
that might be present in some of these reverse mortgages, 
especially since we are talking about an elderly community, 
people who are less sophisticated, and in many cases, they have 
their whole life savings wrapped up in their homes?
    And you have a lot of very, I would say, slick 
advertisements on TV, and in some cases misinformation. What 
are you doing at the CFPB to sort of counteract that?
    Mr. Cordray. Yes. Okay. So, first of all, Congress required 
us to do research on a report on reverse mortgages as an early 
part of our work that we did very carefully and very thoroughly 
and it highlighted a number of concerns about the reverse 
mortgage product.
    The reverse mortgage product can work well for some people, 
if it is appropriately customized to their situation. It means 
they can stay in their home for the rest of their life free 
from worry. But there are a lot of complexities around the 
product, particularly if it is only one spouse on the mortgage 
rather than both.
    And when they think that is going to be the case, there is 
a lot of uncertainty about the taxes and insurance, which are 
typically not covered by the mortgage, and that may not be 
appropriately marketed to people. So, we pointed out a number 
of issues and worked with HUD in terms of various revisions 
that have been made to the reverse mortgage product that they 
put out.
    Secondly, on the advertising--I see when I am on the road 
and in the hotel late at night on the TV all of these ads and 
it concerns me. Some of what is being represented doesn't seem 
to be accurate or it is misleading at best.
    We took our first enforcement action against reverse 
mortgage advertising recently. We will consider doing more in 
that area. It needs to be cleaned up. As you say, some of it is 
pretty slick and pretty glib. And if it is misleading people 
into a product, that is a concern.
    So, we share the concern. We have done as I said a fair 
amount of research in the area and we have various things that 
we want to make sure are not harming consumers.
    Mr. Lynch. I appreciate that. Just a couple of thoughts--
one of my constituents had a provision in their reverse 
mortgage that if they vacated the home for any reason, 
including a long-term hospital stay, that would trigger the 
dissolution and the person would basically lose their home if 
they couldn't come back.
    So, that was a problem and it wasn't clearly articulated. I 
do want to say that in connection with the Affordable Care Act, 
they did do a pretty good job with advocacy and outreach; that 
is a very complex bill as well.
    Mr. Cordray. Yes.
    Mr. Lynch. There is a group called SHINE--what is it, the 
Servicing the Health Insurance Needs of Elders. And they just 
go out en masse and they go to these senior--in our 
neighborhoods it is oftentimes just a neighborhood group that 
is centered on seniors. But they go out and they will explain 
that and word goes out so that these people have the ability to 
defend themselves. I am not sure if you are equipped to do that 
type of advocacy and education but I think it is needed in this 
area.
    Mr. Cordray. I don't think we have a lot of people to do 
it. But we have an Office for Older Americans that strategizes 
in this space and how to work with partners around the country 
and--
    Mr. Lynch. Yes. The Council on Aging is also a very 
effective group.
    Mr. Cordray. Yes. That is true.
    Mr. Lynch. Thank you.
    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, last Congress I introduced legislation to 
require the Consumer Financial Protection Bureau to issue 
advisory opinions similar to what a lot of other Federal 
agencies do. This would allow businesses to better understand 
the regulations they are faced with and in turn better comply 
with those regulations.
    According to the CBO score based on the information 
provided by the CFPB, it was estimated that your Bureau would 
issue 5,000 advisory opinions every year for 10 years. And you 
heard that right Members, 5,000 per year for 10 years. Not only 
did the estimate strike me as a little bit high but it is also 
perplexing that the CFPB is contending that this unusually high 
number of opinions will never decrease over a 10-year period.
    I am interested in understanding how that number was 
reached and whether or not you consulted other Federal agencies 
that enlist similar procedures, because if you did I think you 
would find that the number is extraordinarily high.
    For example, according to the estimates provided by my 
staff, in 2014 the SEC issued only 17 advisory opinions. HHS 
issued only 10. The only agency that I could find that is even 
remotely close to your estimate is the IRS and even then your 
estimate is roughly twice the amount that they issued in 2014. 
Do you still believe 5,000 per year is a realistic estimate?
    Mr. Cordray. So, let me just understand, what you are 
talking about is a CBO scoring that was done. Is that what you 
mean?
    Mr. Posey. The CBO scoring, you know what the cost was and 
that is probably what killed the bill, it is the cost imputed 
by your agency saying they would be burdened with these 5,000 
advisory opinions when I have never heard of any agency issuing 
that many.
    Mr. Cordray. But we didn't score that. The CBO scored it, 
is that correct?
    Mr. Posey. They scored it based on your input.
    Mr. Cordray. Okay.
    Mr. Posey. Your agency said it was required to do 5,000 a 
year and they tried to cost that factor out.
    Mr. Cordray. I see. Okay. Okay. I am not fully conversant 
with all of that. I do know--
    Mr. Posey. No. No. Let me explain it to you clearly.
    Mr. Cordray. Yes.
    Mr. Posey. If you say the cost is--well, you do the math, 
over $800,000 divided by 5,000 so they came up with that figure 
based on information that your agency gave them.
    Mr. Cordray. Okay.
    Mr. Posey. They said we have to do this 5,000 and the cost 
of it will be over $1,000 each.
    Mr. Cordray. I see. So, again, I am not fully clear on this 
and I could look into it more. But what I will say is I do know 
that we do receive thousands of questions and inquiries each 
year. That is what it has been at least, we have only been 
around as you know, a couple of years, 3 years.
    But we are receiving thousands of questions from people who 
want advice about how to interpret rules, what things mean, 
whether they can do it this way rather than that way. And we 
spend a lot of full-time equivalent hours on those and they 
come in all the time through email and on calls. And we do our 
best to respond to those.
    Now, whether that is the same as a sort of ``formal 
advisory opinion,'' as you know, different agencies define what 
that means differently. When I was the attorney general in 
Ohio, we did advisory opinions. We did about 100 a year and 
those were fully written out documents that took days to 
research and so forth. That is a little bit different from 
this. Now, where we are in between I am not sure.
    Mr. Posey. I think the assertion by your agency is that is 
what you have to do over 5,000 times a year. We do know that is 
incredibly excessive. Now, what many agencies do is just a 
matter of common sense, I forgot the term they used, but if 
they find there are a lot of businesses that are asking the 
same question, they will post on there and they will say look?
    Mr. Cordray. We are doing that. Yes.
    Mr. Posey. --we are not going to--so, that relieves a lot 
of that--
    Mr. Cordray. We are doing that and we are still getting 
asked the question so--but when we get the same question 
repeated over time, we will try to do a webinar or we will put 
something up so that others can just see the answer rather than 
having to call in and get it.
    But it may be partly a function of us being a new agency, I 
am not sure. People may not be as familiar with us and these 
processes may have not gotten in the grooves. But I do think it 
is accurate that we received thousands of questions last year 
on the mortgage rules and the like.
    And it may be that will be true for some time and then 
let's just say maybe it will settle down. I would like to hope 
so. I would like to think we could speak more clearly than that 
over time but I don't know when that will be.
    Mr. Posey. Yes. The question was if you thought that was 
excessive and what your trend is on that now, and the next 
question was going to be, did you consult any other agencies to 
see why--
    Mr. Cordray. We have looked at other agencies and, again, 
they have very different processes. Some of them are quite 
confining and they only do a very few, a handful of advisory 
opinions. Some do hundreds--I think the IRS does private letter 
rulings, but I don't know what the volume is exactly.
    And then they all answer questions as well. And that is a 
whole different category and that is pretty large at most 
agencies.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Cleaver, ranking member of our Housing and Insurance 
Subcommittee.
    Mr. Cleaver. Thank you, Mr. Chairman. And I thank the 
ranking member, as well.
    Mr. Cordray, let me first of all express some appreciation 
to the agency, CFPB, for two things, one for the rule change 
for many of the rural bankers, the post-financial crisis rules 
which I was a part of, that unintentionally saddled them with 
cures to ills that they did not have.
    Mr. Cordray. Yes.
    Mr. Cleaver. And as they call themselves country bankers, 
they would say they really appreciate that. The other is the 
Ask CFPB, this interactive online portal which I think--I don't 
know whose idea it was but it was great. The people in my 
district think it was mine but--
    Mr. Cordray. Take credit for it.
    Mr. Cleaver. Yes. And I have already done that.
    Mr. Cordray. All the rest of you could take credit for it, 
too.
    Mr. Cleaver. But before I go to my other question, do you 
have any data on how much that is working, how well the public 
is responding?
    Mr. Cordray. I know that we are getting a significant 
number of page views on those tools now. And I believe we had--
it is in the millions of page views that we now get for these 
tools which is encouraging because they are only useful if they 
are used, right?
    And I would encourage all of you to feel free to direct 
your constituents to look at things like Ask CFPB which has--if 
you are being pursued by a debt collector suddenly what are 
your rights, you don't know--but you can go there and get the 
specific answers.
    You can have letters that respond to try to assert your 
rights. Or if you have a mortgage problem you can figure out 
exactly how it works. That is what these tools are for and I 
hope people will use them.
    Mr. Cleaver. Yes. I am doing that and I would also 
encourage my colleagues to do so. I think it is one of the best 
things that is going on in the agency. But on the other side, I 
want to talk about the mandatory arbitration.
    Now, I am assuming that you are going to--that the agency 
will issue some rules with regard to the mandatory arbitration. 
I don't even think--most people don't even think about 
mandatory arbitration until they have a problem with a credit 
card company. And then all of a sudden, they start talking 
about suing and then they discover little tiny print which 
essentially prevents them from going to court.
    Because they have agreed--it is my understanding that they 
agree not to go to court when they get the credit card. They 
sign the credit card saying, I am hereby agreeing to 
arbitration. Is there anything--I am sure the credit card 
companies are pushing back on that--that may ultimately require 
legislation or is this something that CFPB can deal with 
through rules only?
    Mr. Cordray. I hesitate to speak to legislation. That is up 
to the Congress, of course. In Dodd-Frank, the Congress did two 
things. They did ban pre-dispute arbitration clauses in 
mortgage contracts. And they then said for any other consumer 
financial contracts, the Bureau shall--we are required to do a 
study and report to Congress on this study. We are getting very 
close--very close to that point. Then--
    Mr. Cleaver. To the study--
    Mr. Cordray. The study being published to Congress. Yes.
    Mr. Cleaver. Okay.
    Mr. Cordray. And then depending on what that says we should 
take action as we deem in the public interest consistent with 
the results of the study to either limit or condition such 
arbitration clauses. So, I want to be very careful not to--we 
have been careful not to prejudge the results of the study.
    It will include a consumer survey as to what consumers 
think has happened when they sign up for products and--that 
have arbitration clauses. It is pretty extensive and it will be 
out I think I can say as I sit here very, very soon. And then 
we will work on how to go from there.
    Mr. Cleaver. Thank you very much. I yield back the balance 
of my time.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Georgia, Mr. 
Westmoreland.
    Mr. Westmoreland. Thank you.
    And thank you, Mr. Cordray, for being here. I represent a 
district that has a lot of really good, hardworking folks in 
it, and a lot of them live paycheck to paycheck. If you were 
me, what would you tell them if they came to you and said they 
had an emergency and they needed to get $50 or $100 for a week 
or 3 or 4 days, where would you tell--where would you advise 
them to go to get that kind of credit?
    Mr. Cordray. I don't know, there are any number of places, 
but I don't generally stand in their shoes and tell consumers 
what to do.
    Mr. Westmoreland. You don't?
    Mr. Cordray. No, I don't. I don't.
    Mr. Westmoreland. You tell them what they can't do. And 
that is my point. I was in the building business. I have loaned 
people $20 or $50 or $100, they were coming to me because a 
child was hurt, a transmission was out, or they had to turn on 
their electricity.
    Mr. Cordray. Yes.
    Mr. Westmoreland. And I have seen in their eyes and it 
seems to me like the CFPB is trying to tell these folks that 
they don't have enough sense to be able to manage their own 
affairs. And you are trying to make rules that do away with 
payday lenders, pawnshops, and prepaid credit cards where 
people can have an overdraft protection so the card wouldn't be 
turned down if they are going into a drugstore to buy medicine 
for a child or whatever.
    You say you don't advise them where they can go but you are 
trying to make it to where they can't go to these people that 
they have been dealing with for years. And a lot of their 
families have been dealing with these people for years.
    So, I would like to hear what you want to tell these folks 
and then I can go tell them when their sources of these small 
dollar loans, maybe just for 2 or 3 days, maybe for a week, 
maybe for 2 weeks, I want you to tell me where to tell them to 
go because if they go to the bank to get a $50 loan for 2 days, 
the bank fees will be so high they wouldn't be able to get it 
even if the bank would consider loaning it to them.
    So, if you could just tell me what you want me to do?
    Mr. Cordray. Sure. Okay. A couple of things, number one, 
you are making a judgment that we are going to do this, we are 
going to do that. We are at the beginning of a rulemaking 
process on payday and other small dollar loans and that will 
unfold and there will be a lot of public input into it.
    I have said time and again, and I said it earlier in this 
hearing that we believe that people need access to credit for 
those purposes for exactly the kinds of things you talked 
about, emergency needs. But they should not--we should not 
easily tolerate that people end up rolling loans over and over 
and over and they end up paying far more in fees than they 
borrowed in the first place and they are in a debt trap--they 
tell us about it all the time in comments that they submit to 
our agency.
    That is a concern. That is harming the consumer, not 
helping the consumer. How to balance that is difficult. It is a 
complicated thing. We have been working on this for now 3 
years. It is a very difficult task, I would agree, but we are 
going to do our best to try to strike that balance.
    Mr. Westmoreland. You talk about making rules to keep them 
from rolling over. I am sure there will be rules about what 
percentage rate they can be charged. And you have to understand 
that most of these people are not banked. They are non-banked 
individuals.
    Mr. Cordray. We are well aware of that. Yes.
    Mr. Westmoreland. Okay.
    Mr. Cordray. Yes.
    Mr. Westmoreland. And so, if you have ever--have you ever 
loaned anybody any money?
    Mr. Cordray. Actually, we are well aware that most payday 
lender borrowers are banked. They have a bank account. That is 
where the money is coming from. That is where they write the 
check on. So, by definition, most of them actually are banked.
    Mr. Westmoreland. I am sure that all of them are banked.
    Mr. Cordray. I have not myself been an extensive lender--
    Mr. Westmoreland. Have you ever had anybody--in my case, I 
would have somebody come and say hey, I need 50 bucks until 
Friday. And I knew--saw it in his eyes that he was going to get 
$50 and it was either me loaning the $50 and take a chance of 
getting it back Friday, or lose a saw or a generator or 
something of that nature. And so, I think when you are making 
these rules I hope that you will understand there are people 
who do use these types of ways to get credit and especially now 
that this prepaid credit card has come out then this an avenue 
that at least from what we have heard for people to allow their 
kids to have an allowance or college spending or whatever on 
the prepaid cards then they would much appreciate if there was 
just, say, a $15 overdraft fee rather than these people being 
denied credit at a time when they need it the most.
    So with that, Mr. Chairman, I yield back.
    Mr. Cordray. Thank you.
    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 testifying again 
today. Certainly we have asked you a wide array of questions 
ranging from credit to payday lending, a little bit about--and 
the list goes on and on. And so, the good and the bad news is I 
am going to add to that list. But one of the things that we 
talked about when you were here before in the last Congress is 
we talked about credit reports and now, after having the 
opportunity to look through your document and saying on--I am 
going to reference, Mr. Chairman, page 28--when we look at 
number of complaints and the things with constituents, 76 
talked about incorrect information.
    And then when you look at the other pies on your chart, it 
made me want to ask the question because on this committee, we 
talk about a whole host of things and whether it is on our 
Housing Subcommittee, whether it is on working with banks, it 
all comes back to your credit and what you put into that 
investment in credit, if you go to purchase a home or if you 
are starting a business and yet we are finding out that 
oftentimes the information is incorrect on there. And it 
becomes almost impossible to the lay consumer or constituent to 
get that removed or get it changed.
    So, you talked a lot about tools today. Can you give us any 
update or information on what we can say to our constituents 
about that?
    Mr. Cordray. Sure. Yes. And frankly, you and I may be more 
sensitive to this issue because it is our hometown newspaper 
that has done some of the best investigative reporting on the 
issue of credit reports, credit scores, and accuracy.
    That is something that we have been looking at very 
carefully and thoroughly at the Bureau. We are the first agency 
ever anywhere to be able to examine and go in and really get 
this sense of how things work within the three big national 
credit reporting agencies. And that has led to changes already.
    They used to have a paper-based process that was reduced to 
a three-digit number for correcting errors on your account if 
you wanted to submit a dispute and they didn't necessarily pass 
the paper on to the furnisher that originally supplied the 
information.
    We have worked with them to change that process. It is now 
changed. Your information will go in so that the furnisher can 
see what the basis for the dispute is. It is not reduced to a 
three-digit number. That is a significant improvement.
    We also indicated late last year that we would begin 
requiring regular credit reporting accuracy reports--akin to 
call reports to the banks--that we are moving forward with. And 
we are doing a great deal of work around improving accuracy in 
these numbers.
    The other thing we are doing that I think is important is 
we have been encouraging the open credit score initiative which 
a few lenders got started with with FICO and now has grown to 
more than 50 million Americans who now have free access to 
their credit scores on their credit card bills and other 
potential loan documents.
    That is going to create a lot more awareness on behalf of 
the public that, this is my information and it matters to me 
and it may be changing and I need to find out more about it. I 
think that is going to be a sea change for the entire industry 
and that is something that we are really encouraged about.
    As consumers know more, as they can stand up for themselves 
more, they will be getting more responses from these companies 
and we also are putting pressure on this to see to it that 
happens.
    Mrs. Beatty. Thank you. My last question is, this past week 
I have had a lot of--all of us have had a lot of people come in 
to see us over this whole issue with cyber threats. Is there 
any more that maybe you haven't said or that I did not hear--we 
had a lot of our community banks and regional bank folks come 
in and say that with the number of credit cards that are being 
compromised, and I know firsthand, because I used my credit 
card, went to pay the bill, and my private banker said to me 
oh, there is something wrong with your credit card.
    Now, I was pretty sure that was inaccurate. She told me it 
had been compromised. And so, they cut it in two. That was the 
good news. My sister's was compromised that same day but 
someone had used hers repeatedly to the tune of thousands of 
dollars.
    Now, the banks are telling me they are making that whole 
versus the Neiman Marcus or the Targets or wherever you used it 
get off free. Any thoughts on what we should say back to our 
bankers?
    Mr. Cordray. I know that this has been a subject of 
potential legislation by the Congress and I know people talk 
about how powerful this agency is, but when it comes to 
merchants and security of the information, that is not 
something we have authority over.
    There is a battle going on between the merchants and the 
banks over who should bear the cost of these kinds of breaches. 
Everybody is going to have to do a better job and there are 
improvements coming in card security and other things. But it 
is--I could just say it is a big problem. It affects consumers. 
It affects all of us.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Ohio, Mr. 
Stivers.
    Mr. Stivers. Thank you, Mr. Chairman.
    Welcome, Mr. Cordray. It is not every day I have a 
constituent testify, so it is good to have you here. And 
apparently it is Central Ohio time because Mrs. Beatty went and 
now I am going. In the back you will see some folks from the 
Mid-Ohio Foodbank in Grove City, your hometown, that I am going 
to meet with after this.
    I want to thank you for what you are doing to try to 
protect consumers. But I will tell you I do have some concerns 
about some of the methods your agency is using. And I would 
like to kind of--if I have time--talk about auto dealers, 
prepaid cards, and then if we get to it, TILA and RESPA.
    Mr. Cordray. Okay.
    Mr. Stivers. You may know that the Department of Justice 
has created a framework and I think both the national 
automobile dealers and the minority-owned--the minority auto 
dealers have developed a fair credit compliance program around 
the Department of Justice model. But I don't think any of that 
was used in the CFPB rule you are creating around participation 
of auto dealers. I am just curious, do you think the DOJ model 
doesn't work or it is not good or did that just not enter into 
your thinking?
    Mr. Cordray. The way Congress drew our statute--again, this 
is another area where supposedly we are so powerful, but we did 
not have jurisdiction over auto dealers.
    Mr. Stivers. But you do have and you are working on getting 
information on their participation with lenders. So, you are 
using the lender to get into the dealers.
    Mr. Cordray. No. We have responsibility to oversee fair 
lending by auto lenders but not by auto dealers. So, the dealer 
program that they have developed may well be an excellent 
program and we have talked to them about it at their 
suggestion. It is really more for the Justice Department to say 
what they think of that; it is not really within my 
jurisdiction.
    Mr. Stivers. I do want to share that I talked with one of 
my auto dealers and they gave me some stories about some folks 
from my area--your area--who actually got car loans through 
work at one of the auto dealers in our town, Reicart Automotive 
just down from where you live.
    Mr. Cordray. Sure--
    Mr. Stivers. And a lot of college students, a lot of first 
time buyers, a lot of people with damaged credit have actually 
been able to secure car loans. I want to tell the story of a 
lady who needed a car to get back to work.
    She was a young lady in her 30s, recently divorced. Her 
husband had ruined their credit. She had three children. She 
needed to get back to work. She couldn't find a loan to get a 
car and that dealership helped connect her with a lender that 
gave her a loan.
    And I think that is a really good outcome. But they are 
worried that under your proposed rules, they might not be able 
to work with that lender to help increase the competition and 
get people like this lady who needed to go back to work a loan 
so--
    Mr. Cordray. Yes. I actually agree with you on that.
    Mr. Stivers. Yes.
    Mr. Cordray. I think it is a good outcome. I think people 
need--at least where we live--cars to be able to transport 
themselves to work and keep a job. But if they can't do that, 
it is worse than having a mortgage problem because they can 
always rent if they don't own a home.
    Mr. Stivers. Right.
    Mr. Cordray. But here, they do need these loans and I do 
think the auto industry is going gangbusters right now. Sales 
of cars are up.
    Mr. Stivers. It is but there are still people who can't get 
access to loans right now for cars.
    Mr. Cordray. Yes.
    Mr. Stivers. If you can't get access to a loan, you can't 
get access to a car, so?
    Mr. Cordray. I certainly don't want that to be as tight 
as--
    Mr. Stivers. I certainly wouldn't want your unintended 
consequences to be that you allocate loans away from the people 
who are most in need.
    Mr. Cordray. Fair enough. That is not what I intended.
    Mr. Stivers. I would use the Soviet grocery store as an 
example. So, sure, a Soviet grocery store never sold anybody 
bad vegetables or bad meat because they never sold anybody 
vegetables and meat. They were always out of it.
    Mr. Cordray. Yes. Yes.
    Mr. Stivers. So, you can--that is not the right way to 
protect--
    Mr. Cordray. That is right. That is not what we intended 
either.
    Mr. Stivers. --consumers, so it is really important that I 
get that across and that transitions me to my next issue with 
regard to people who are in prepaid. And you talked about the 
short term lending. And many of the folks who do short-term 
lending, so called payday lending, might be banked, but for a 
lot of people on prepaid cards, that is their bank account.
    Mr. Cordray. Agreed.
    Mr. Stivers. Their card is their bank account.
    Mr. Cordray. Yes.
    Mr. Stivers. And the way that the proposed rules--and I 
know you are still taking--I think you are still taking 
comments?
    Mr. Cordray. We are.
    Mr. Stivers. The way the proposed rules work is that 
overdraft protection would be treated as a credit card or a 
loan but it is really--and so, they have to take an 
application. They have to do some underwriting.
    It really will deny real access to these people and I would 
ask you as strongly as I can to take a look and see if there 
are practices you want to limit, if you think there is 
something that are best practices you want to encourage, you 
can do that. But don't take away people's access to this 
because if you make them opt in through an application, it will 
never happen. And these people will get denied access to that 
overdraft protection that they would have gotten if it was in a 
bank.
    But because their card is their account, they are being 
denied access. So, I would ask you to look at the unintended 
consequences every time you do things from the car loans to the 
prepaid cards to TILA and RESPA, which unfortunately I didn't 
get to because my time is up. But please, look at it because 
you could become the--you could make us the Soviet finance 
system if you deny access.
    Thank you, Mr. Chairman. I yield back.
    Mr. Cordray. Okay. I would be glad to talk to you further 
about these issues.
    Mr. Stivers. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. Thank you.
    Director Cordray, thanks for being here. On August 1st, the 
new TILA-RESPA integrated disclosure home closing forms now 
known as TRID--a nice catchy name--
    Mr. Cordray. I don't particularly like that acronym, 
frankly.
    Mr. Sherman. --Okay, are scheduled for implementation. What 
does the Bureau have to do to support industry in 
implementation right in August and are you considering 
announcing a short-term restrained enforcement like HUD 
previously used on other disclosure changes? This might help 
small businesses work through the kinks that they may find in 
the properly or improperly acronymed TRID.
    Mr. Cordray. Okay. We haven't heard very much about that 
and we did give a 21-month implementation period. This rule was 
actually passed in November of 2013 so people have had a long 
time to lead up to this.
    We have worked hard--this is something that has been a 
hallmark of the Bureau on all of our rules is we don't just 
pass a rule and then sort of say to the industry it is your 
problem now, we are no longer interested.
    We care about their ability to implement the rule 
effectively because if they can't then it is not going to work 
for people. And we do a lot of work around taking what is 
pretty dense legalese of the Federal Register and turning it 
into plain language guides, ``how to'' guides, guidance and we 
answer and respond to questions.
    We have done webinars for hundreds, if not thousands--I 
think thousands of folks on these rules. And we are trying to 
make sure that they will be ready to go because that is what we 
want. If the rules are an improvement--and here they are--
consumer surveys have shown us that this is more intelligible 
and understandable disclosure than existed before. Plus, we 
have taken two forms at each stage and boiled it down to one 
form which is what Congress told us to do. That is all a good 
thing. We are working hard--
    Mr. Sherman. Would you consider the idea of a restrained 
enforcement at the beginning?
    Mr. Cordray. Look, what I would say is the effective date 
is August of this year. That is 21 months from when the whole 
thing was finalized. And by the way, there was plenty of time 
before it was finalized when people could see it coming.
    It is not like we are going to come in the very next day 
and say, ``Aha, now, we can bring the hammer down on people.'' 
But at the same time, people should be getting ready for this. 
They should take it seriously and that is the date as I 
understand it.
    Mr. Sherman. Okay. You don't regulate insurance companies. 
You don't regulate depository institutions winding up in 
bankruptcy. But you are the closest thing we have to a national 
advocate for insurance consumers and the consumers of other 
financial products.
    When AIG had certain affiliates go bankrupt, their 
regulated insurance companies stood strong. They had been 
regulated by the State governments. Have you thought of taking 
a position to try to protect the insurance consumers of this 
country to say that when you have an insurance company and you 
have a related depository institution, that the folks who 
regulate the depository institution can't reach in and grab the 
assets of the insurance company to the disadvantage of the 
insurance consumers?
    Mr. Cordray. That is not an issue that has come to my 
attention before. I know that very explicitly in our statute, 
we do not have jurisdiction over insurance companies--if there 
is mortgage insurance and it is part of the mortgage that is 
something different, but typically that is outside of our 
range, so I haven't--I have neither thought about that nor do I 
have any real comment.
    Mr. Sherman. On the theory that you are looking for more 
things to do, I hope you would look at the sorts of restraint 
legislation because you are the closest thing to a national 
advocate of the consumer as of--
    Mr. Cordray. Right. I appreciate that. You know we have a 
lot to do.
    And we are going to be very careful of our jurisdiction.
    Mr. Sherman. I have one more question to sneak in. I am 
interested in knowing about your forthcoming small dollar 
payday loan rule, which I know you haven't proposed yet. Will 
it target all forms of small dollar credit or be limited to 
payday, and what are your chief concerns about the small dollar 
loans, rollovers, ability to repay, and cycle of debt?
    Mr. Cordray. We published two extensive White Papers on 
this subject and they have indicated both our appreciation for 
this credit in certain circumstances and also our concerns 
about how this credit can trap people in debt in other 
circumstances.
    We have been working to try to square the circle between 
those two in any kind of policy intervention we would do. That 
will begin with small business review panels under our statute 
and that is when this will become public as the beginnings of 
what will eventually be rules.
    People will have, I am sure, plenty of say on that, on all 
sides. It is obviously of extreme interest. And it is something 
that we are working on very carefully.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from Illinois, Mr. 
Hultgren.
    Mr. Hultgren. Thank you, Mr. Chairman.
    And thank you, Director Cordray. Director, I would like to 
focus on CFPB's proposed changes to the Home Mortgage 
Disclosure Act rule. I thoroughly support the original goal of 
the legislation preventing discriminatory lending practices.
    However, I am concerned that these changes will pose a 
significant burden on mortgage lenders, including community 
banks and credit unions. The small financial institutions are a 
key way that many people access the American Dream and yet they 
are struggling under a tsunami of burdensome and needless 
regulation.
    CFPB's efforts thus far to narrowly tailor proposed HMDA 
requirements have been insufficient; even Dodd-Frank mandates 
17 new data fields. CFPB has proposed an additional 20 required 
fields, imposing meaningful compliance costs on struggling 
small banks.
    Director Cordray, will the CFPB do more to provide much 
needed HMDA regulatory relief to these small financial 
institutions that need the most help?
    Mr. Cordray. As you are clearly aware, and I appreciate 
your interest in this subject, we have proposed rules that were 
out for comment and we have received extensive comment, 
hundreds of comments on them.
    They do include some additional fields that were required 
by the Congress in the statute and some additional fields that 
we thought were necessary to help monitor the mortgage market 
along the lines of what was discussed earlier and at the same 
time, we have done some other things that we are trying to 
relieve burden, such as exempting certain small creditors from 
having to report at all and also updating the technology, so it 
should be easier for people to report with less burden.
    So how all that mixes together in the grand scheme of 
things is something that we are trying to figure out and we 
appreciate the comments we have had and we will do our best to 
digest those and--
    Mr. Hultgren. I really do hope you take them into 
consideration. The concern has been bipartisan, of really the 
weight on, especially community banks, smaller banks, credit 
unions.
    Mr. Cordray. Yes.
    Mr. Hultgren. It is not just this side, but really both 
sides have recognized that. And I do recognize the exemption 
that is there. I would say that the exemption is too low and I 
would encourage you to look at a larger number there.
    Mr. Cordray. Sure. You are not alone in that suggestion, so 
yes.
    Mr. Hultgren. That is right. Director, does CFPB still 
expect to finalize the HMDA rule in July? If so, when would 
companies be expected to comply? Given the immense resources 
expended in implementing the mortgage roles in TILA-RESPA, 
would the CFPB consider maybe a conformance period, similar to 
the one granted by the Federal Reserve for the Volcker Rule 
where during this period banks would not be subject to 
enforcement actions if they showed a good faith effort to 
comply with the new rule.
    Mr. Cordray. I don't want to say specifically that it will 
be July, but it will be somewhere in that timeframe. I also 
would say there will be a significant implementation period.
    It is not like it is going to go into effect immediately. 
So as to whether people will need a further relief from that, 
that it is pretty premature at this point, but again there will 
be a fair amount of time for people to comply, I believe.
    Mr. Hultgren. Well, again--
    Mr. Cordray. And we have comments on that.
    Mr. Hultgren. We are hearing from people who are concerned, 
so don't think it is not a concern.
    Mr. Cordray. That is right.
    Mr. Hultgren. I think there is concern there. I think there 
are precedents for something as I mentioned where there is a 
window if they are making a good faith effort to comply, and 
this conformance period, to me, seems realistic and the proper 
thing to do to accept that.
    Let me go on. By including home equity lines of credit and 
commercial loans secured by dwelling, the CFPB is going far 
beyond the HMDAs statutory purpose: to ensure customers have 
access to mortgage credits. This will greatly distort the HMDA 
data; not only will you be comparing apples and oranges but the 
systems and loan process is completely different for those 
different types of loans.
    Given these concerns, wouldn't customers be better served 
if the HMDA continued to apply solely to mortgages?
    Mr. Cordray. This is a good example of the kinds of things 
we are wrestling with. We wrestled with this and came out with 
our proposal. There is comment on it, lots of comments on both 
sides. Again, I think hundreds of comments, we are wrestling 
with what people are saying around that.
    We are trying to make sure that this will effectively give 
the right window into the lending market. HELOCs, as you say, 
are often not for purposes of the mortgage itself, but they are 
secured by the home.
    Mr. Hultgren. You want to serve customers and protect them.
    Mr. Cordray. Yes.
    Mr. Hultgren. That is the idea, I think. But when you so 
protect them that they can't even have access to this, be able 
to apply, I think there is a real problem there.
    Mr. Cordray. Right.
    Mr. Hultgren. I would also just mention--my time is almost 
expired, so I will just say I am also concerned about 
protecting highly sensitive consumer information. I know much 
of this is a part of the application process and I am very 
concerned. I am hearing back from my constituents about 
concerns of potential breaches with that information.
    My time has expired. 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, Mr. Chairman.
    Director Cordray, I have a real concern regarding the 
Bureau's December 23, 2014, proposed rulemaking for prepaid 
accounts under the Electronic Fund Transfer Act Regulation E 
and the Truth in Lending Act Regulation Z.
    My specific concern involves the proposed changes required 
for overdraft features associated with the general purpose 
reloadable GPR cards. In particular, defining GPR cards that 
offer draft features as credit cards subject to the requirement 
of Regulation Z is concerning to me.
    So what I want to request is that the Bureau consider as it 
reviews comments adjusting this to allow an optional opt-in 
approach consistent with the requirements currently in place 
for similar overdraft products regulated under Regulation E. Is 
that possible?
    Mr. Cordray. That is one of a number of approaches that 
could be taken to this. We have worked this through as 
carefully as we can and came out with a proposal. We are still 
taking comments on that and we will continue to take comments 
until later this month when the period ends.
    And then we will digest those comments. It was again, our 
thinking that where you have credit on a prepaid card and it is 
credit, it is a loan of funds that could be treated similar to 
the way it is treated under the credit card rules in the CARD 
Act.
    I am sure there are going to be favorable comments on that 
approach. And there are going to be unfavorable comments on 
that approach and we are going to listen carefully to what 
exactly people say and how convincing it is. And if anybody is 
giving us data, we are interested in that as well. But this 
will be all part of our thinking as we work toward a final 
rule.
    Mr. Scott. I just want you to understand how important this 
is to me. I represent Georgia. NetSpend Inc. is a leading 
provider of GPR cards groups. And it is a subsidiary of Total 
System Services, a corporation that is located in my State of 
Georgia, so quite naturally I am very concerned about that.
    I have taken the liberty of writing you a letter concerning 
this. I also wrote one along with my colleague, Congressman 
Gregory Meeks, concerning the same issue a while back.
    The impact that this is having is very negative for our 
industry. NetSpend, for example, currently offers an optional 
opt-in overdraft feature for eligible cardholders that includes 
a number of consumer safeguards that should be there.
    Customers must opt-in and meet direct deposit requirements. 
Customers must provide an email address or text number for 
real-time notifications about overdraft. Customers pay no fee 
when they repay, moreover NetSpend's overdraft fee is well 
below the average bank overdraft fee.
    Consumers are able to use NetSpend's overdraft features to 
meet short-term liquidity needs such as purchasing extra 
groceries and in emergency situations, handling medical 
emergencies, and covering unexpected car repairs.
    The proposed rules, however, make it impractical for my 
consumers and for NetSpend to continue to offer this feature. 
Not only may this limit NetSpend's ability to compete with 
similar financial products in the marketplace but it may most 
notably also harm consumers who benefit most from this short-
term liquidity.
    And so, I wanted to use this example, so that you could see 
the seriousness of this and I appreciate your addressing my 
constituents' concern.
    Mr. Cordray. We have actually sat down and heard directly 
from NetSpend about their issues here. That is all part of the 
comment process and we are going to hear as I say quite a bit 
from a large number of people--we already have--and I am sure 
we will hear much more before the deadline. That is all what we 
will take into account and try to reach the right balance in 
the end.
    Mr. Scott. Thank you very much, Director. I appreciate 
that. And keep me informed, please. Thank you.
    Chairman Hensarling. The gentleman yields back. The Chair 
now recognizes the gentleman from Tennessee, Mr. Fincher.
    Mr. Fincher. Thank you, Mr. Chairman.
    And, Director, thank you for being here with us today. I 
have a couple of questions. I am going to go through them 
quickly to give you enough time to respond to me.
    Mr. Cordray. Right.
    Mr. Fincher. The first one, I am no stranger to 
manufactured housing.
    Mr. Cordray. Yes.
    Mr. Fincher. I talked about this. It is a bipartisan 
effort. In response to a question by Ranking Member Waters 
during last year's hearing when you were before the committee, 
during 2014, regarding what the CFPB was doing to solve the 
ongoing issues with CFPB's HOEPA Rule and its impact to 
manufactured housing lending, you said the CFPB was going to 
address their concerns and monitor the market, to see what the 
actual effect is. And we want to know what is actually 
happening and we will work with them to address those concerns. 
We know what is happening. We have seen some of the 
manufactured housing lenders reducing the amount of loans being 
offered.
    We know that one of the companies that offers manufactured 
housing loans, and there are only a few, is no longer making 
loans for $20,000 or less. And we know that one of the banks 
that once offered such loans has completely pulled out of the 
manufactured housing lending market.
    We have heard countless examples of consumers being 
impacted by the rule. And even the CFPB recognized in its own 
White Paper released last year on manufactured housing that the 
HOEPA Rules will have a disproportionate impact on the 
manufactured housing industry.
    The report specifically states the Bureau has recognized 
certain provisions of the Dodd-Frank Act the Bureau implemented 
through the rules, which took effect in January 2014, may 
affect the market for smaller-sized mortgages, and more 
specifically the manufactured housing segment of the market in 
ways that differ from the rule's effect on other market 
segments.
    So I ask you, what have you done besides issue a White 
Paper that proves our point that the majority of manufactured 
housing loans being made are being impacted by the rule, and 
what are you doing to protect my constituents and those looking 
for rural housing in America?
    Now, before you answer, we do have a bipartisan solution, a 
bill, the Preserving Access to Manufactured Housing Act--Mr. 
Barr and Ms. Sewell and Ms. Sinema are original co-sponsors--
that we are trying to move. But it would be much better if it 
could be done through your agency and not through legislation. 
You could help us out a lot by taking care of this at your 
level and not making us do legislation.
    Mr. Cordray. Okay. There are several things. It is a long 
question, so I will try to not to make too long an answer. 
Number one, it was in response to a number of questions from 
people on both sides who are on this committee that we did set 
out to do a White Paper and a deeper analysis in manufactured 
housing industry, because I said at the time as I was hearing 
the questions, I didn't think we knew enough about it. So we 
dug in and did take a close look at it.
    Now, one of the things it showed was that there has been a 
decline in manufactured housing going back 20 years and there 
was a kind of cliff that it fell off about 16, 18 years ago and 
it has been low ever since.
    So that doesn't necessarily indicate that the Dodd-Frank 
Act itself somehow created some new problem. It has just been a 
problem for a while. We also were interested in getting more 
data on this and we worked with Vanderbilt and 21st Century to 
get data from them.
    We had a little bit of a problem importing the data, but we 
now have it and we are able to dig into it and see what more is 
going on. So, to the extent that HOEPA itself is constraining 
this market.
    That is worth us thinking about. At the same time, as I say 
it, is a longer trajectory here that doesn't suggest that it is 
Dodd-Frank in particular that is causing the problem, so I 
think that is worth everybody thinking about as well.
    In terms of whether we should take some particular action, 
we will look again at the legislation you have introduced, but 
I don't know what is the right answer for us here.
    Mr. Fincher. Again, this goes back to--we have talked about 
this before. I will get to my last question. The folks at the 
top for the last 6 years have continued to do pretty well under 
this President.
    But the guys and the gals in the middle and at the bottom 
are the ones being crushed by all of these rules and 
regulations. And whether it is Republican or Democrat and 
whether it is well-intentioned or not, growing the size of 
government never helps folks get on their feet and do better.
    It always hurts, whether it is Republicans or Democrats. So 
let me get to my last question in 20 seconds. The mortgage rate 
checker is something that has been released. It is really 
muddying the waters. Why is it that ahead of this effort, the 
Bureau posted an incomplete and imprecise rate checker to help 
consumers when it is not accurate. Where are you getting that 
information and why did you do it prematurely?
    Mr. Cordray. It actually is quite accurate and it is up-to-
date daily information. But our concern is that we found 
through extensive looking at this that consumers don't shop for 
mortgages; they shop for houses, but they don't shop for 
mortgages.
    They could save a lot of money if they did shop for 
mortgages. What we are doing here is not unique. Google is now 
coming into this market with a tool--
    Mr. Fincher. Where are you getting that information to set 
the rates? Where are you pulling that data from?
    Mr. Cordray. It is the same information lenders themselves 
have, the same databases they are using.
    It is accurate information. I don't think that is--
    Mr. Fincher. But it doesn't include APR. It hides important 
information in fine print, and makes critical assumptions that 
impact rates. It could be very misleading to a consumer's 
actual transaction--
    Mr. Cordray. Yes. And these are all things that have been 
suggested to us, particularly by MBA, and we are looking at and 
thinking about, but at the same time, others are coming to 
this--into this space. Google now has a tool. That is a rate 
comparison tool. There were at least a couple of others in a 
story I saw today.
    Mr. Fincher. Google is different than the CFPB. I yield 
back, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlemen from Washington, Mr. 
Heck.
    Mr. Heck. Thank you, Mr. Chairman. Director Cordray, over 
here--
    Mr. Cordray. Got it. Okay.
    Mr. Heck. Usually I am way down there.
    Kudos for your stamina.
    Mr. Cordray. Right.
    Mr. Heck. I want to switch subjects on you and ask about 
student loans.
    Mr. Cordray. Okay.
    Mr. Heck. You have responsibility as I understand it for 
processing the consumer complaints with respect to the private 
sector portion of student loans which have that--
    Mr. Cordray. I think we take all student loan complaints. 
Yes.
    Mr. Heck. Whether they are private sector or the Federal 
Government ones?
    Mr. Cordray. Yes. People don't often distinguish very 
easily in their minds, so yes.
    Mr. Heck. So you actually receive and act upon complaints 
from consumers regarding their student loans even if their 
student loans are government or government-guaranteed student 
loans?
    Mr. Cordray. I think we get a lot of complaints on all 
types of student loans.
    Mr. Heck. I think I read correctly--and correct me if I am 
wrong--in your semi-annual report that about 3 percent of your 
total was associated with student loans. My math, back of the 
envelope math, says over 7,000. Does that sound about right?
    Mr. Cordray. Yes. I don't know exactly how many. It is 
definitely in the thousands and probably not in--not above 
20,000. So yes, it is--
    Mr. Heck. Yes. Are there any trends there that you take 
note of that should be brought to our attention?
    Mr. Cordray. Yes. We learn a lot from consumer complaints. 
It is something that we really pay close attention to because 
it is really the voice of your constituents telling us about 
their concerns in the marketplace or where they think they have 
been mistreated.
    A lot of what we hear about student loans has to do with 
people expressing a lot of regret. They didn't appreciate what 
they were getting into or what their rights were and they don't 
know what their rights are or what they can do about dealing 
with the debt and they are struggling to repay it.
    There are problems with student loan servicing, so that 
they are not getting the right information or the payments 
aren't being allocated properly or sometimes they are being 
allocated not to the highest cost loan, but something else 
which isn't what a consumer would intend.
    So we hear a great deal from them. And that is informing 
our approach to this, and one of the things we realized is 
people just don't know enough about what their rights and 
opportunities are with student loans and repaying student loans 
and getting into debt.
    That has led to our Paying for College tool. It is on our 
Web site. I encourage you to spotlight it with all of your 
constituents, if somebody and some family for the first time in 
their life is thinking about, how do I send my kid to college?
    How do I compare different offers from different schools, 
what might be the best value? This will help people work 
through that process which otherwise can be pretty intimidating 
for people the first time around. So those are all things that 
we are working on.
    Mr. Heck. And to the best of your recollection, is the 
overall number of complaints associated with student loans 
growing, decreasing, or staying about the same?
    Mr. Cordray. It is growing, I think as people become more 
aware that that is an avenue over time.
    Mr. Heck. All right. Changing the subject on you again, I 
noted with interest and appreciation that you acknowledged in 
your prepared testimony the valuable role that your credit 
union advisory committee and your community bank advisory 
committee have played, and as you know last year Congressman 
Pittenger introduced legislation which just yesterday we 
reintroduced, to codify those business councils and to create 
one for other financial sector representatives, namely the 
escrow appraisal title company.
    Mr. Cordray. Yes.
    Mr. Heck. Obviously, you see a benefit in this. You took 
the time to praise and laud it. What would you describe as 
those benefits as they might exist for the other business 
groups to help provide you with input?
    Mr. Cordray. Look, I can spend my whole life meeting with 
advisory councils and we cover so many markets that I wouldn't 
want to have too many of them. But it was pretty clear to me 
that community banks and credit unions are not only pretty 
important, they were going to be largely outside of our view, 
the smaller ones. And they deal with a great deal of products, 
so there is a lot of input to get as they do deal with 
mortgages, they deal with student loans, they deal with auto 
loans. They deal with, you name it, everything that depository 
institutions do.
    Now, whether we would want to have too many more advisory 
councils, it is very time-consuming to have people come and 
meet with us. We spend--I spend the whole day with them. We 
spend time with them in between meetings hearing from them and 
getting their thoughts.
    I would not want to do too many of those. But at the same 
time, as long as I am there, we are going to continue with the 
community bank advisory council and the credit union advisory 
council because they have shown their worth and I think they 
have been very valuable to us.
    And they have improved their--
    Mr. Heck. I have 8 seconds left, so let me just say, 
neither Mr. Pittenger nor I are giving up. We think listening 
is time-consuming but of incredible value. And I might just add 
that as somebody that you full well know sits up here--and 
often praises, compliments, expresses a appreciation for the 
work of your agency, neither are Mr. Posey and I going to give 
up on the value and utility of advisory opinions or no-action 
letters.
    And I just want to say for the record and publicly, I am 
disappointed in the way in which you characterize a tool that 
you would use frequently. We think there is considerable 
benefit here for the private sector and for the stakeholders to 
make the process work better, which I know as a former attorney 
general, you know full well, if constructed appropriately can 
be a positive tool available to everyone, and make the whole 
system work better.
    My time has expired.
    Mr. Cordray. Could I have just 10 seconds?
    Mr. Heck. Not if you are going to tell me you are not going 
to do it.
    Mr. Cordray. No, no. We put out a proposal on that and we 
have gotten comment back that it is too narrow. It may not be 
sufficient, but it is something we are thinking hard about. As 
I said, I used to do a hundred a year when I was Ohio attorney 
general. I don't know if we struck the right balance here. We 
are going to think more about it.
    Mr. Heck. I appreciate that very much.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from Colorado, Mr. 
Tipton.
    Mr. Tipton. Thank you, Mr. Chairman. Director Cordray, 
thank you for taking the time to be here. I had a few areas 
that I would like to be able to try and cover.
    Mr. Cordray. Okay.
    Mr. Tipton. The first area would be in regards to the 
prepaid card proposed rules that you have and my understanding 
under the Bureau's proposal. I would like to ask how many 
separate disclosures would a card issuer have to make to a 
customer?
    Mr. Cordray. On prepaid cards?
    Mr. Tipton. Yes.
    Mr. Cordray. We have tried to do a couple of things. First, 
recognize that with prepaid cards there is packaging and there 
is limited real-estate there. So--
    Mr. Tipton. So how many is it going to be--three or four 
disclocures?
    Mr. Cordray. Whatever fits on the packaging and that is not 
a whole lot. And then the rest will be on the inside and people 
may never really see that because they typically will have 
bought the card before they ever get to the inside packaging.
    So, the key things, in terms of fees and charges and the 
like and certain protections are on that outside. We have 
several model forms that people have been able to give us 
feedback on.
    Mr. Tipton. No, I am just trying to find out--
    Mr. Cordray. It is very little room. There is not a lot of 
disclosure there, at least on the outside packaging.
    Mr. Tipton. And what about on the inside. That somebody is 
going to pay for that--
    Mr. Cordray. Yes. We are not really--we are not mandating a 
whole lot of that. Most of these disclosures are institutions 
doing it themselves for their own legal protection. It is not 
required by the agency.
    Mr. Tipton. --it is not a ``gotcha'' thing. I am just 
trying to figure out how many you are requiring.
    Mr. Cordray. Yes. It is all in our proposed rule, 
specifically what is being required and then everything else is 
being added by the companies themselves.
    Mr. Tipton. I guess the information we had; it could be up 
to three disclosures, depending on the State and their State 
law. Would that be fairly accurate?
    Mr. Cordray. State law can matter. That is possible. What I 
am saying is on prepaid cards, the number of disclosures is 
going to be pretty limited on the outside of packaging which to 
me is what matters most, because that is what people are going 
to see before they actually decide which card to purchase. That 
is where we are really focused on that.
    Mr. Tipton. I guess, kind of, my point on this and a little 
follow up to maybe some of the previous line of questioning 
here is--
    Mr. Cordray. Yes.
    Mr. Tipton. You are talking about simplifying it, trying to 
make it understandable.
    By your own words, you just made comments that people were 
confused. They didn't understand. But you are putting in more 
disclosures. We have long forms. We have short forms.
    Mr. Cordray. No.
    Mr. Tipton. And, I guess, basically, is that really 
simplifying the process?
    Mr. Cordray. I want to be really clear. On the prepaid 
cards, the amount of disclosures that people will have before 
they decide which card to buy are going to be very limited. 
There is limited real estate there and we have been very 
careful about what is on there and what is not.
    It is a real boiled-down summary of the key terms of the 
product. I think it is in line with what you are saying in 
terms of making it accessible and understandable for people.
    Mr. Tipton. Thanks for that.
    I am new to the committee, and on February 12th, I happened 
to write down what the national debt was, and from February 
12th to today, we have seen that rise over $31 billion.
    And it is pretty much my sense that whether it is by fee or 
by appropriation, the ultimate payer is hardworking folks in my 
district who are frankly struggling right now to be able to 
keep a roof over their head and to be able to make some of 
those car loans that have been discussed.
    But we are looking over some of the expenditures that you 
have made through the CFPB and it is my understanding that you 
have spent over $60 million in business management, is that 
relatively close?
    Mr. Cordray. Yes. And one of the things I would say is we 
started off as an agency from nothing in 2011 and we have been 
an agency over the last 3\1/2\ years.
    Mr. Tipton. That is what--
    Mr. Cordray. We had--
    Mr. Tipton. --you are building Washington.
    Mr. Cordray. Yes--we have had to contract for a lot of 
services as we have been building out our own personnel, so?
    Mr. Tipton. Yes. Tell me, what is ``business management?'' 
That is kind of a nondescript sort of a term to spend $60 
million on.
    Mr. Cordray. It has to do with all of the apparatus of 
running an organization. It can range from things like human 
capital to finances to technology and infrastructure. There is 
a lot that--
    Mr. Tipton. So this infrastructure is included in your 
business management?
    Mr. Cordray. Actually, I don't know offhand exactly what 
document you are referring to or what the definition of that 
term would be, but I would be happy to work with your staff to 
make sure you get--
    Mr. Tipton. I think that would be in those sorts of things.
    Those all come into play as well.
    Mr. Cordray. Okay. If you will show us, we will work with 
your staff and if we understand the document and what the--what 
we are saying, we will try to make it clear to you.
    Mr. Tipton. And just for my own edification, even though 
you have been in business just a short period of time.
    Mr. Cordray. Yes.
    Mr. Tipton. Do you have any former CFPB employees who are 
now working for some of these business management groups?
    Mr. Cordray. I really would not know the answer to that 
question. Not that I know of, but I don't know.
    Mr. Tipton. Okay. Would that be a conflict of interest? Is 
there any kind of a delay period on that?
    Mr. Cordray. There are the same statutes and rules and we 
have our own provisions in terms of people potentially being 
able to go out and engage in a conflict of interest with their 
former employment for a period of time.
    The same as you would have in the Congress I imagine, maybe 
it is somewhat different for a Congressman, I don't know. But, 
yes, we are careful about that.
    Mr. Tipton. Great. I appreciate the clarity on that.
    Mr. Cordray. Yes.
    Mr. Tipton. I yield back.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from Texas, Mr. 
Williams.
    Mr. Williams. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for your testimony today. 
I am a small business owner. I am one of those auto dealers. My 
father bought his first dealership when I was very young after 
moving to Texas to start a new life for his family.
    When I got older, I chose to follow in his footsteps and 
have been in the automobile business for 44 years. Now, my 
daughter is running the business. Last week, in a Bloomberg 
News story you insinuated that auto dealers determine financing 
rates by eyeballing a customer. And that the practice was 
regrettable.
    Let me tell you a quick story, and you have heard some 
stories like this. I had a single mother come into my 
dealership not long ago. She didn't have a lot of money for her 
downpayment and her credit was poor. And she had been turned 
away by her bank but needed a car to get to work, needed a car 
to take the kids to school.
    Guess what, we didn't judge her based on the color of her 
skin or her ethnicity, or her gender. Our job that day was to 
get her into a car that was reliable and that she could afford.
    Now myself, like everybody else in my industry, have 
hundreds of stories like this and most come out really, really 
well. And in my business, I have found in the years I have been 
in business, you have one thing at the end of the day when you 
go home and lock the door, and that is your reputation. And I 
wouldn't trade that for anything.
    Now Director Cordray, Congress has directed a statute that 
the Federal Reserve Board and the Federal Trade Commission 
regulate dealers who are engaging in direct vehicle financing. 
Congress has also empowered the Federal Trade Commission and 
the Department of Justice to bring enforcement actions against 
auto dealers.
    All 50 State attorneys general, as you would know, also 
enforce the Article of Statutes against auto dealers.
    Mr. Cordray. Yes.
    Mr. Williams. So the question I have is this: Do you 
recognize that in Section 1029 of the Dodd-Frank Act Congress 
preserved the exclusive authorities of these agencies to 
regulate auto dealers at the Federal level?
    Mr. Cordray. Yes. And we have been very careful to observe 
that line, very careful.
    Mr. Williams. I hope you mean that because sometimes we 
don't feel it.
    Mr. Cordray. Okay. We have been very careful and--we didn't 
even talk to auto dealers at all until they came to us and 
wanted to talk to us a bit about this whole marketplace. So I 
think we have been--we have not brought any enforcement actions 
against auto dealers other than Buy Here Pay Here, which is 
within our statute.
    We don't supervise any of them and we recognize the 
jurisdiction there lies, as you say, with the FTC, the DOJ and 
of course, as you say, with the States.
    Mr. Williams. Okay. My second question is, do you further 
recognize that any effort by the Bureau that may impact auto 
dealers must be fully coordinated with the appropriate Federal 
regulatory agency in advance of that activity?
    Mr. Cordray. We work closely with the Justice Department in 
the area of enforcing the Equal Credit Opportunity Act and that 
applies to auto lenders, not other auto dealers, where we do 
have a responsibility. And I think there is quite a bit of 
coordination there, yes.
    Mr. Williams. Third question: When the March 2013 auto 
finance guidance was issued did CFPB consolidate it with the 
FTC, the Fed, or the Justice Department beforehand?
    Mr. Cordray. I know that we have pretty constant 
communication with the Justice Department. We, as you no doubt 
have seen, have taken joint enforcement action with the Justice 
Department in this area.
    I believe we have also had coordination and consultation 
with the FTC, what exactly would have happened when that came 
out, I don't recall offhand now. But I know there has been 
discussion back and forth about these issues, recognizing that 
our jurisdiction is limited and others have jurisdiction that 
we don't.
    Mr. Williams. Mr. Chairman, I remind my colleagues that 
over 5 years ago the dealer exemption in Dodd-Frank was 
vigorously debated and passed by Congress and passed by this 
committee. I think it is irrelevant whether or not a Member is 
for or against the CFPB eliminating dealer discounts in the 
showroom.
    Congress has spoken clearly on this issue. I find it 
incredible myself that an agency which under Federal law has no 
supervisory, enforcement or regulatory authority over auto 
dealers is still attempting, I believe, to dictate the manner 
in which auto dealers are compensated and how much they should 
be compensated for facilitating an auto loan for their 
customers.
    Mr. Cordray. I just want to be really clear on this. As I 
understand that statute, and we have looked at it very 
carefully, we have a responsibility and we have jurisdiction 
over auto lenders. We do not have responsibility and we do not 
have jurisdiction over auto dealers.
    To the extent that they are combining with each other, we 
still are responsible for governing auto lenders and their 
compliance with the law and we will continue to do that, and I 
think we have to do that vigorously.
    So beyond that, we have tried to be very mindful of the 
jurisdictional issues here but the notion that we have a 
responsibility to auto lenders it may have some effect on auto 
dealers but that is the way the statute was written. That is 
how I have to enforce the law.
    If Congress changes the statute, then of course I will 
follow the statute, as Congress might change it.
    Mr. Williams. Thank you for being here today.
    Mr. Chairman, I yield back.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Maine, Mr. 
Poliquin.
    Mr. Poliquin. Thank you, Mr. Cordray, for being here. I 
appreciate it.
    Now my understanding, sir, is that you run a new agency 
here in Washington that is an independent agency within the 
Federal Reserve with roughly 1,450 employees in Washington. Is 
that correct, sir?
    Mr. Cordray. It is about 1,400, yes.
    Mr. Poliquin. Yes. And my understanding is that you 
really--because the regulations that you folks go through 
whether it be automobile loans, the car loans or someone 
wanting to add on a convenience store you really--you regulate 
all of the finances that reach into all of our families across 
America.
    Would you say that is about right?
    Mr. Cordray. With the exception that if it is a business 
loan, a convenience store, you said adding on the convenience 
store we have consumer--
    Mr. Poliquin. Okay. That is close enough, but you can see 
where I am going with this, Mr. Cordray, can't you?
    Mr. Cordray. Yes. I would say that we affect--in America, 
yes--
    Mr. Poliquin. Okay. So you are essentially the consumer 
protection agency within Dodd-Frank that is responsible for 
making sure that taxpayers don't get ripped off, right?
    Mr. Cordray. Consumers don't get ripped off.
    Mr. Poliquin. Okay. My understanding, Mr. Cordray, is that 
you have a 5-year term appointed by the President. Is that 
correct, sir?
    Mr. Cordray. And confirmed by the Senate--
    Mr. Poliquin. Okay, great. And during that--
    Mr. Cordray. It took me a while--
    Mr. Poliquin. And during your period of time I believe you 
don't report to anybody. Do you have a board of directors to 
report to?
    Mr. Cordray. I do not have a board of directors--
    Mr. Poliquin. Okay, fine. And the Federal Reserve, through 
their earnings, funds your operations, but since there is no 
appropriation from Congress, there is no oversight from 
Congress on how you spend your money. Is that correct, sir?
    Mr. Cordray. Not correct.
    Mr. Poliquin. That is not correct.
    Mr. Cordray. Not correct.
    Mr. Poliquin. Tell me why?
    Mr. Cordray. We are like every other banking agency in the 
Federal Government where we are not appropriated, but we are 
subject to oversight--
    Mr. Poliquin. By whom?
    Mr. Cordray. We are doing it right now.
    Mr. Poliquin. Yes.
    Mr. Poliquin. The board of directors is also--for the 5-
year term, you can't be fired, correct? You can't be replaced.
    Mr. Cordray. Hold on. Hold on. Do you want the oversight?
    Mr. Poliquin. Quickly, I am--
    Mr. Cordray. The GAO audits our finances annually. We have 
an independent audit by statute. We have an Inspector General 
who looks at us carefully. I testify in front of this committee 
twice a year--
    Mr. Poliquin. Twice a year--
    Mr. Cordray. I do a briefing with the House 
Appropriations--
    Mr. Poliquin. Okay. Okay. So you claim this play of 
oversight. Would you explain to me, sir, so I can explain to 
the hardworking families that I represent in western, central, 
northern, and downeast Maine--who happen to be the most frugal, 
hardworking people you can possibly imagine, and who can 
stretch a dollar further than you can ever imagine--why you 
have a plan to spend $216 million to renovate an office 
building that you don't own?
    Now also, if I may--
    Mr. Cordray. Do you want me to answer the question or not 
answer it?
    Mr. Poliquin. No, not yet.
    Mr. Cordray. Okay.
    Mr. Poliquin. If I am not mistaken, I think there is 
supposed to be a two-story waterfall in the building with a 
splash pool and a daycare center downstairs and a playground on 
the roof, is that correct? Do I have this right or do I have 
this wrong?
    Mr. Cordray. Okay. So I think you got a number of things 
wrong. And by the way I was the State treasurer in Ohio and I 
represented frugal people, just as frugal as the people that 
you were talking about on the Maine north shore--
    Mr. Poliquin. Tell me how wrong.
    Mr. Cordray. Yes, so. Number one, it is apples and oranges 
to talk about spending $215 million. The core construction 
costs as we have said all along are in the range of $95 million 
to $100 million--
    Mr. Poliquin. Are you folks in the office building right 
now?
    Mr. Cordray. I am trying to answer your question. Am I 
going to answer your question or not?
    Mr. Poliquin. I want to make sure that we get to the point 
why you think it is prudent to take taxpayer dollars and spend 
$216 million to renovate a building that you don't own.
    Mr. Cordray. Okay. Number one, we are not spending $216 
million to renovate a building. It is less than half that, 
okay. So that is the apples and oranges difference.
    Second--
    Mr. Poliquin. So it is a $110 million--
    Mr. Cordray. Second, the government owns this building. And 
we got a break on our rent where we are going to pay Class C 
rent for the next 30 years to take into account the renovation 
cost. And overall, it is a market deal, okay. So it is 
sensible.
    Mr. Poliquin. $110 million is a market deal. Okay, fine. To 
me, it doesn't work that way.
    Let's try to end this on a positive note--
    Mr. Cordray. Okay.
    Mr. Poliquin. Okay. There are a bunch of small community 
banks in our district and a bunch of credit unions and they 
have very long, deep relationships with our families in the 
second district. And we have a lot of seasonal workers up 
there.
    Maybe someone is dragging for flounder, or someone is 
lobstering, or someone is working for the tourist industry, but 
our banks and our credit unions know these people, and they 
want to be able to lend to these families. Maybe someone needs 
to put a new diesel on his lobster boat. And they have known 
this family for many years.
    Why don't we exempt any small community bank and credit 
union from what I call these character loans, such that we make 
sure your agency, your Bureau does not choke off credit to our 
families who really, really need it?
    I am very concerned about making sure our small businesses 
and our families can get the loans they need to live better 
lives and grow their businesses and take care of their 
families.
    Don't you think it is a good idea to go down that path, 
sir?
    Mr. Cordray. That is exactly what we are doing.
    Mr. Poliquin. Terrific. Well--
    Mr. Cordray. That is exactly what we are doing. Okay. So it 
is not a criticism what we are doing that is what we are doing 
and you tell me and I will be interested to know which banks in 
Maine have more--less than $2 billion in assets and make more 
than 2,000 mortgage loans a year, not counting anything they 
keep in portfolio. Those are all--those are given special 
treatment under our rule.
    Mr. Poliquin. I have an idea for you, instead of having 
thresholds where the number of loans that deal with the--or 
relate to the QM, why don't we just say if these community 
banks are traditional banks and they are taking deposits and 
they are lending out money, there is no risk to the secondary 
market, they are taking full responsibility and the rest of 
those loans, why aren't they all exempt?
    Mr. Cordray. That is right. You tell me which bank in Maine 
is not exempt under our proposed rule. I would be interested to 
know. I believe there are very few, if any--
    Mr. Poliquin. There shouldn't be any--
    Chairman Hensarling. The time of the gentleman has expired.
    Mr. Poliquin. Thank you.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Colorado, Mr. Perlmutter.
    Mr. Perlmutter. Mr. Cordray, thank you for being here and 
thank you for your service to the United States of America and 
the position that you have taken on.
    And certainly, CFPB as a regulator has its protagonists and 
its antagonists. I just thank you guys--and I am looking at the 
TILA-RESPA disclosure statements and it is a lot simpler than 
other forms that I have seen in a long time. I would ask you to 
just make sure that everybody can deal with these things. They 
just--we have been working with them for a long time and the 
industry is getting ready. But please take into consideration 
the mortgage bankers, the title companies and all that will 
have to use these things and just make sure that everybody is 
ready.
    Mr. Cordray. Okay.
    Mr. Perlmutter. And that will be a day when everybody has 
to accept them and move forward, but let's just make sure we 
have as many people included as possible.
    And I really do congratulate you on your stamina today, and 
the work that the agency is doing. There are some places where 
I disagree with you. Mr. Williams was discussing one of those.
    As you know, I was here when we passed Dodd-Frank. And I 
actually carried the exemption for auto dealers. And so, or I 
was a co-sponsor but I remember it and I was involved in the 
discussion of it.
    And what I am concerned about, sir, is just doing an end-
around. Okay. That while we do have jurisdiction over lenders 
and therefore we are going to scrutinize and make sure that 
there is no disparate impact by some lending that the lenders 
do to the auto dealers because the auto dealers negotiate on 
price and they negotiate on rates. That is how they do it.
    And so, what I am concerned about is CFPB stepping into 
something that I consider to be the purview of the Department 
of Justice, whether or not there is some discrimination in 
setting rates--that really is something that they look at on a 
continuing basis across a whole variety of fields. And I would 
just ask you all to stay in your lane--
    Mr. Cordray. But so do we.
    Mr. Perlmutter. Okay.
    Mr. Cordray. In the Equal Credit Opportunity Act, both the 
Justice Department and the CFPB have enforcement authority 
there over lenders. As I see it, we have a responsibility. 
Congress told us we have that responsibility. We do not have 
authority over dealers and we have been careful not to exercise 
that.
    Mr. Perlmutter. And that is why I am saying to you I 
appreciate that but I also see this is kind of an end-around, 
that--
    Mr. Cordray. Yes. I don't think so. We have been very, very 
careful--
    Mr. Perlmutter. I am telling my perspective.
    Mr. Cordray. Yes. I got it. Yes.
    Mr. Perlmutter. And so, you understand why I have carried 
or co-sponsored some legislation to make it clear that this is 
a place, in my opinion, for the Department of Justice, given 
what we did in Dodd-Frank.
    And I guess my question to you is, does CFPB, is it 
something you desire that in effect there would be a flat rate 
and that really auto dealers only negotiate as to price? 
Everybody gets the same rate?
    There are some in the industry who think that might be a 
simpler and easier way to go, but many in the industry like to 
be able to negotiate on both levels, believing that it helps 
the consumer. Maybe it does and maybe it doesn't.
    We have all been in negotiations at auto dealerships. It is 
not a lot of fun, but you can work through it.
    Mr. Cordray. Yes.
    Mr. Perlmutter. Are you all focused on just trying to get a 
flat rate?
    Mr. Cordray. That would be one of the ways in which this 
issue could be resolved but we have come to understand that is 
by far not the only way.
    We have been open to other suggestions, and people can have 
a compliance management system that feels to me pretty onerous 
and burdensome. I do think that when the customer comes in to a 
dealership and the dealer gets a buy rate for the customer and 
then marks it up without the customer having any idea what is 
going on, or why that is happening, that is problematic.
    And the Justice Department and we both believe that this 
has caused a certain amount of discrimination in the market. It 
is something that should be addressed. But a flat fee is not 
the only approach. I think there are a number of possible 
approaches and we have talked to lenders extensively about 
this. And to the extent that dealers have wanted to talk to us 
about it, we have listened to them as well. But, then no, that 
is not the only means by which this can be addressed.
    Mr. Perlmutter. Okay. I would like to work with you all. I 
know you are familiar with the Charles River study which--
    Mr. Cordray. Yes.
    Mr. Perlmutter. --calls into question the methodology of 
the CFPB. And I just think we should be able to work this out 
but if we can't, then I am going to continue to pursue the 
legislation that I have co-sponsored and--
    Mr. Cordray. I understand that.
    Mr. Perlmutter. All right, thank you very much for your 
time and thank you for your service.
    Mr. Cordray. Thank you.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from Arkansas, Mr. Hill.
    Mr. Hill. Thank you, Mr. Chairman. Director Cordray, thank 
you for being with us today. Thanks for your stamina. Prior to 
joining Congress in January, I spent the last 2 decades in the 
financial services industry both in the brokerage business and 
in the commercial banking business.
    And during that period of time, I never once saw the FDIC 
or the Fed or the OCC or the State securities department or the 
State insurance department ever shirk their consumer obligation 
under both Federal and State statutes.
    And so I really do come to Congress and it wouldn't be a 
surprise to you feeling that the mission of your agency under 
Dodd-Frank is duplicative of that effort, because I learned 
when I got here that no budget authority or positions were 
eliminated from the existing banking or securities or consumer 
agencies when CFPB was formed.
    Was that true or not?
    Mr. Cordray. The Office of Thrift Supervision was 
completely extinguished.
    Mr. Hill. It was, yes, but it had been on its way to 
extinction for a long time.
    Mr. Cordray. Well, yes.
    Mr. Hill. We will take time. We can have a drink and talk 
about that one.
    Mr. Cordray. All right.
    Mr. Hill. I am concerned though about that duplication and 
expense, so it calls me just to look at your budgeting compared 
to the other agencies. And my friend Jim Himes from Connecticut 
referenced that no agencies are subject to appropriation and 
credential supervision area, but obviously the SEC and the CFTC 
are.
    But looking at your budget, Mr. Poliquin noted about 1,400 
employees and there is about an $618 million budget for Fiscal 
Year 2015, is that true?
    Mr. Cordray. That is the cap, but we are not spending at 
that level.
    Mr. Hill. What are you spending, approximately?
    Mr. Cordray. We are more in the 500 range based on last 
year, it is 498, I believe.
    Mr. Hill. In looking at, even at that level, it would be on 
a per-employee basis, so the highest agency I looked at on a 
total spending to per capita basis.
    Mr. Cordray. Yes, although I don't--
    Mr. Hill. Respond to that for me.
    Mr. Cordray. Yes, I don't think that is a good way to look 
at it. As I said, 3 years ago when we started from scratch we 
had no employees and we had to basically contract for many 
services, all of our IT, all of our HR, all of our budgeting 
and all of our structure.
    Over time we have started to move toward our own employees 
doing things and less dependence on Treasury and outside 
contractors, but it is still the case that the total work of 
the agency goes beyond the number of full-time employees that 
we have. So I don't think that is yet a right average. In a few 
years, it will be a fair average.
    Mr. Hill. I do think looking at a productivity basis is a 
good way, and I would ask you to take that into account and 
maybe even establish a goal of being the lowest in government 
and have something to brag about.
    But it causes me to think about, if you spend $600 million 
on selling, general and administrative expenses (SG&A), I 
thought about, what would that buy in Arkansas?
    And I found a publicly traded company with operations in 
Arkansas--Hormel makes Skippy peanut butter in Little Rock and 
they only have 20,000 employees and spend $600 million SG&A 
expense or about $30,000 per employee.
    And they generate, obviously, almost $10 billion in 
revenue. I think this gets compensation in our Federal 
agencies. That is how it compares to the private sector in that 
productivity angle.
    And I don't want there to be an incentive for people to 
leave the private sector and go to the regulated sector. Would 
you reflect, take a minute and talk about pay practices at your 
agency and how those compare?
    Mr. Cordray. Yes. And I will say that I don't have a lot of 
background in the Federal Government. I came here from State 
and local government in the private sector in Ohio.
    And salaries are higher in the Federal Government, they are 
higher in the banking agencies, and my understanding is the 
reason for that is to compete against the financial industry 
for good people.
    But in our case, we are constrained by law, the Congress 
set this and it is the framework we have to operate in. We are 
required to have salaries that are comparable to those of the 
Federal Reserve.
    I am obliged by law to do that whether I think that is 
right or not right. That is what we are trying to do to carry 
out the law that is in our statute.
    Mr. Hill. If Congress wanted to make your agency subject to 
the annual appropriations process, would you support that?
    Mr. Cordray. I would not.
    Mr. Hill. Why not?
    Mr. Cordray. None of the banking agencies, as I understand 
it, are appropriated. And the cautionary tale here is the 
Office of Federal Housing Enterprise Oversight which up until 
2008, was supposed to be overseeing Fannie Mae and Freddie Mac. 
Fannie Mae and Freddie Mac, as I understand it, this history 
that has been described to me, had so much political power that 
they were able to constrain their regulator and the regulator 
didn't rein them in.
    And in 2008, the new statute was passed to create the FHFA 
and one of the major changes that was made was to make FHFA not 
appropriated in order to give it the independence so that it 
could ride herd on the GSEs.
    And that was the Congress' judgment and if that is the 
judgment, then the same logic should apply here.
    Mr. Hill. But do you think the SEC is not independent 
because it is subject to appropriations?
    Mr. Cordray. Look, I don't know all the ins and outs of why 
agencies are as they are, that thing has been around since the 
1930s and I assume that judgment was made at that time and I 
don't really know what to say about it.
    Mr. Hill. I yield back.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from North Carolina, Mr. 
Pittenger.
    Mr. Pittenger. Thank you, Mr. Chairman. Director Cordray, I 
represent the Charlotte, North Carolina, region, a major 
financial center in the country and home of the Bank of 
America, and a major presence for Wells Fargo and many other 
financial institutions, large and small.
    Mr. Cordray. Yes.
    Mr. Pittenger. As I recognize how the major banks have 
sought to absorb the new burdensome regulatory environment, I 
have also been added in the market speaking to lenders that are 
mid-sized and small community banks.
    A couple of weeks ago, I was visiting a one small bank, a 
$265 million bank. They have 60 employees. They have six 
locations.
    Mr. Cordray. Sixty or sixteen?
    Mr. Pittenger. Sixty, 6-0.
    Mr. Cordray. Yes.
    Mr. Pittenger. They are a good bank, with a good balance 
sheet, less than 1 loan losses; this is not a problem bank. 
Only a few weeks before they had 14 regulators come in their 
bank and spend 2 weeks plowing through everything, which was 
enormously disruptive, and in the process of going through 
everything in the bank, they would change opinions of things 
that they were told the previous time.
    So it was an enormous amount of human capital required to 
facilitate all the demands of these auditors and regulators. 
And it really imposed on their ability to function as a 
business.
    Have you ever been in the banking business, Director 
Cordray?
    Mr. Cordray. I haven't been a banker, but I have been a 
county and State treasurer and I worked closely with large and 
small banks in central Ohio.
    Mr. Pittenger. I can tell you being in the consumer 
business and I have been on a bank board and have served for--
the time we formed the bank until the time we sold it.
    It is consumer-driven and it is a people business and you 
have to be ready and accessible to your clients. These banks 
are hiring people to deal with all the demands and the 
requirement of these regulators and they are hiring loan 
officers.
    And I would hope that you would go out in the field, come 
down to my district, I invite you to be there. I would like to 
take you to some of these banks that I hear time and again tell 
me of the compliance issues, the requirements, the time, the 
effort that it takes to deal with it.
    What in the world are 14 regulators doing in a bank, a $265 
million bank for 2 weeks? This is not a problem child.
    Mr. Cordray. I don't know the answer to that, but none of 
them are from the CFPB. So, it has nothing to do with my 
agency. We don't examine any banks with less than $10 billion 
in assets.
    Mr. Pittenger. Forgive me for saying that.
    Mr. Cordray. So that wouldn't be us.
    Mr. Pittenger. But it is the process of oversight. It is 
nonsense for these banks to have the required amount, the 
decent amount of oversight, yet the burden of it today is such 
that it is really impeding these banks to function.
    Mr. Cordray. I am sympathetic to that point of view.
    Mr. Pittenger. As well, I would like to just bring again 
this while notion of the SIFI requirements and I want to go 
back to that again. It just deals with the lack of the 
government's awareness in terms of what is needed and required 
for MetLife to be assigned that rule in the SIFI requirement.
    Where are you in terms of having the right personnel with 
the experience from the real world who can give you advice on 
who should be identified as a SIFI?
    Mr. Cordray. That is the FSOC, the council, I am one member 
of the council.
    Mr. Pittenger. And you represent that. We are here because 
we need to speak with you.
    Mr. Cordray. Okay. I'm sorry, what was the question?
    Mr. Pittenger. I think it is just a matter of having the 
people inside an organization, on the boards giving council who 
really understand the business.
    And that is my concern about the regulators coming in to 
the small banks or identifying who should be a SIFI and who 
shouldn't when they have absolutely no experience.
    You have one insurance person on that board and they voted 
against it and everyone else did and he understood the 
business.
    Mr. Cordray. Look, that may be--the council worked on that, 
on that process of the designation which was an extensive 
process over, I believe, a year or more period.
    There is extensive analysis done to try to determine 
whether the statutory requirements are met. You may disagree 
that was the right answer. I understand they are now suing and 
that will be carried forward in the court and they will make a 
judgment on it.
    Mr. Pittenger. My point, sir, is just that there is a 
disconnect between the reality of what is happening in the real 
world and the burden of the regulatory environment.
    Chairman Hensarling. The time--
    Mr. Cordray. We try to minimize that as much as possible, 
but when you see it, please point it out to us.
    Chairman Hensarling. The time of the gentleman has expired. 
The Chair now recognizes the gentleman from Kentucky, Mr. Barr.
    Mr. Barr. Thank you, Mr. Chairman. Director Cordray, 
welcome back to the committee. And the first question I would 
like to ask you relates to the Qualified Mortgage rule. I 
appreciated that in your testimony, you indicated that the 
responsible lending by community banks and credit unions did 
not cause the financial crisis.
    I also appreciate your views here that the traditional 
model of relationship lending has been beneficial for many 
people in rural areas and small towns across the country.
    I agree with your testimony there and I appreciate the 
Bureau's recognition of this in the exemptions as to small 
creditors and more recent efforts to provide flexibility in 
that area, particularly for rural lenders.
    As you may recall, we have talked about this before. We 
have the kind of ridiculous situation in my district with Bath 
County, which is literally one of the most rural places in 
America, designated by your agency as non-rural.
    I appreciate that you have acknowledged that and taken 
remedial action. We still think the petition process would be 
helpful.
    But given your recognition of the importance of 
relationship lending, let me ask you this question, would you 
support or oppose legislation, additional legislation that I 
have introduced called the Portfolio Lending and Mortgage 
Access Act, which would extend the QM safe harbor to portfolio 
loans, that is those mortgages that lenders originate and then 
hold on their books instead of selling off into the secondary 
market.
    And if you would oppose that approach or modification to 
the QM rule, why?
    Mr. Cordray. What we have done here is we have created a 
provision to cover small creditors, small lenders, and it is 
95, maybe 98 percent of community banks and credits unions.
    If you simply extend that logic to anyone, you are losing 
the concept of small and you are potentially taking into 
account folks like Washington Mutual and Countrywide who in the 
height of the lead-up to the financial crisis were making 
hundreds of thousands of loans, keeping them in portfolio and 
then they blew up the whole system.
    Mr. Barr. Okay. Let me--
    Mr. Cordray. That keeping it small keeps it safer.
    Mr. Barr. Let me follow up that point with the following: 
As you may know, FHFA has reasonably relaxed the standard for 
mortgages eligible for purchases by GSEs. Director Watt and I 
had a discussion about this in this very committee room a few 
weeks ago.
    And Director Watt admitted to me that because of the GSE 
exemption to the Qualified Mortgage rule, these relaxed 
standards would likely result in Fannie Mae and Freddie Mac 
backing mortgages that exceeded the QM 43 percent debt-to-
income limitation.
    If these non-QM mortgages are too risky for banks like the 
ones that you cited, shouldn't they also be too risky for 
taxpayers?
    Mr. Cordray. No, I don't think that is the way the rule 
works. The way the rule works is anything that can be sold to 
Fannie or Freddie counts as a Qualified Mortgage even if it is 
above the 43 debt-to-income ratio.
    Mr. Barr. Exactly, and that is what we are talking about--
    Mr. Cordray. No, we deliberately wrote that--to provide 
that QM applies to those mortgages.
    Mr. Barr. Let me just ask the question this way. Wouldn't 
it be safer for the financial system to put the risk on 
shareholders than on taxpayers?
    In other words, wouldn't the shareholders and the bank 
board have a vested interested in properly underwriting these 
loans instead of having these huge, massive exemptions for GSEs 
that incents the origination of risky loans, loans that your 
agency deems to be risky, and then putting that on taxpayers?
    Mr. Cordray. That might be and I will say that the 
Washington Mutual and Countrywide fiascos which flagrantly blew 
up our system are a cautionary tale that even shareholder or 
investor protection is--it has to be looked at carefully.
    Mr. Barr. Let me just submit that an institution is far 
more likely to underwrite that loan properly if they portfolio 
that loan. But I would, I think, the whole point here 
illustrates the need.
    And I talked to Director Watt about this, the need for you 
to coordinate with FHA and the GSEs and FHFA because there is 
an inconsistency in these mortgage rules and it does not make 
sense that we are putting the risk on taxpayers, but we are 
unwilling to acknowledge the relationship lending model that 
you say should work.
    Mr. Cordray. I actually agree with you very much on that. I 
think there is a lot of room for coordination between ourselves 
and FHFA. We are meeting much more regularly with them.
    Mr. Barr. Thank you.
    Mr. Cordray. And even with HUD and--
    Mr. Barr. And if I may, my time is running out, just really 
quickly. Let me just share a quick story about payday lending. 
This is from your field hearing in Alabama, Mr. Thomas is the 
gentleman's name.
    ``I did have to use a payday loan once before. It was 
because of a family emergency. The fees that I accrued from the 
payday loan were actually cheaper than getting a cash advance 
from my credit card. So it actually benefited me and I was 
really glad it was there, an option available to me. And I 
would like to know in the future it would be there for me in 
the event that I need it.''
    Also, I hope you are taking into account some of these 
personal stories that credit availability in the short-term 
lending market is something that you would not overreact to.
    Mr. Cordray. We get those every week on our tell-your-story 
function from all over the country. That is why we want to 
preserve access to credit here, but not with consumers caught 
in a debt trap, which happens to many of them. It doesn't sound 
like that happened in this particular instance, but it often 
occurs to others.
    Mr. Barr. Thank you, Director. I yield back.
    Mr. Cordray. Thanks.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Arizona, Mr. 
Schweikert.
    Mr. Schweikert. Thank you, Mr. Chairman, and thank you, 
Director Cordray, for your stamina. We are all appreciative of 
it.
    A lot of the best questions have been asked, so we will go 
to the next tier down. And also, being a former treasurer, I 
have some empathy for some of your background.
    Mr. Cordray. Yes.
    Mr. Schweikert. Can I bank through a number of, just sort 
of, bullet points and give me what you have?
    Mr. Cordray. Sure.
    Mr. Schweikert. Owner carry-back, there was a discussion. 
Some of the rules sets up I am selling my home, I own it free 
and clear, I choose to take that property, right, which is my 
equity, and carry the payments back.
    There was discussion about restricting, if I had more than 
a couple of properties, I was selling that way. For those of us 
out West, this has been a very common practice. Do you know 
where that is at?
    Mr. Cordray. What do you mean carrying the payments back?
    Mr. Schweikert. You act as the owner of the property, you 
accept the payments. You act as the, we will call it, the 
lender.
    Mr. Cordray. I see. So I actually--
    Mr. Schweikert. Owner carry--
    Mr. Cordray. I actually sell that property but act as a 
lender for some period of time before--
    Mr. Schweikert. Yes. Because if I remember, there was a 
restriction saying I could not do a 5-year due payment. After I 
was going to be restricted to the number of transactions, I was 
going to end up--
    Mr. Cordray. All right.
    Mr. Schweikert. If I did more than three, I was going to 
have to do--
    Mr. Cordray. Yes.
    Mr. Schweikert. Meet the know-my-customer rules.
    Mr. Cordray. Yes, I see.
    Mr. Schweikert. And for many of us, that is how we got our 
first home.
    Mr. Cordray. My understanding of this--and I am happy to 
have our staff talk to your staff and clarify it further--is 
there is a line that has to be drawn at some point as to 
whether somebody is sort of selling their own home or whether 
they are becoming an actual lender.
    And if you are selling once or twice in a year, that is 
fine--
    Mr. Schweikert. What do you mean--
    Mr. Cordray. But at some point, you become a lender if you 
are rolling houses--
    Mr. Schweikert. I can see the intellectual line on the 
number of transactions.
    Mr. Cordray. Yes, yes. Whether the lines are in the right 
place--
    Mr. Schweikert. But on the due on sale are--as the popular 
vernacular is a balloon after a certain bid of time to restrict 
that.
    Mr. Cordray. I will tell you what. We will be glad to talk 
further with you and to understand some of the details of these 
concerns or meet with people that you want to talk to us about 
it and understand whether--just as we talked before about, this 
is a mess too.
    Mr. Schweikert. Yes.
    Mr. Cordray. Think triple-deckers, whether we--
    Mr. Schweikert. Yes, my fear for those is in deeds-of-trust 
States.
    Mr. Cordray. Okay.
    Mr. Schweikert. This is actually somewhat more common.
    Mr. Cordray. All right.
    Mr. Schweikert. So, also, there was a previous discussion 
about how your rate-checker platform could encourage you to 
approach this a different way.
    Mr. Cordray. Okay.
    Mr. Schweikert. Out there in the market, there are now a 
dozen different platforms, whether they would be--
    Mr. Cordray. At least three in the last month.
    Mr. Schweikert. Yes.
    Mr. Cordray. Yes.
    Mr. Schweikert. But having been a broker in my previous 
life, there are many now offering platforms saying, click this, 
give us your zip code and we will give you your mortgage 
brokers, your bankers, your institutions. Maybe it would be 
better off just putting a list of all the different services 
that do that type of aggregation so you know you are hitting a 
robust sampling of the market.
    Mr. Cordray. I want to think carefully about that. A lot of 
them have rates, but they may or may not be accurate or 
current.
    Some of them are acting as lead generators just to acquire 
customers.
    Mr. Schweikert. Yes, yes, I accept that, but you also have 
to be very careful on the samples being taken.
    Mr. Cordray. Yes.
    Mr. Schweikert. Are you actually getting a true sample of 
underlying loan clause, all the mechanics there. I just--it is 
a path that is going to require probably a lot more staff and 
mechanics than maybe the agency appreciates--
    Mr. Cordray. Yes, when--
    Mr. Schweikert. --when it is actually being done out in the 
marketplace already.
    Mr. Cordray. Yes, we will keep an eye on that as we go. 
Yes.
    Mr. Schweikert. I am just going to bounce to title 
insurance. You were also accounting treasurer. I beg you to be 
respectful for those of us from States where we had worked on 
title insurance rules that is a State-regulated entity.
    Mr. Cordray. Yes.
    Mr. Schweikert. Be respectful for how we address it in 
States. As accounting treasurer, we did a big, big project to 
go after partials that were delinquent, only to find out many 
of them were bad deed recordings, mistakes, splits that hadn't 
been caught. And we went from an environment--Maricopa County 
is, what, the third or fourth biggest county in the United 
States where we had very few title insurance claims to hundreds 
and hundreds and hundreds that we created by doing this 
cleanup. So we want to be respectful. There is a reason that is 
out there, both protecting the lenders, the property owners, 
but also the way a State regulates and approaches that. And I 
would hate to think there is a Federal solution that tries to 
crush those of us at the State level and how we do that.
    My friend over here also touched on payday loans and access 
to capital. A quick example that you might appreciate having 
been accounting treasurer, we were having a little bit of a 
problem a decade ago on the fees on check cashing. People were 
walking in and for cash or a check for 5 days, they were almost 
giving up a day of labor.
    Mr. Cordray. Yes, yes.
    Mr. Schweikert. And we had two options, one was to go and 
regulate that. The other was to go out and encourage everyone 
to get in the check cashing business, and we took that 
approach, where even our local convenience markets were doing 
check cashing, and the price fell through the floor. It is 
almost free.
    May I beg of you when you look at things like payday 
lending and these, maybe the solution is more players in the 
market driving down the cost instead of a regulatory command 
and control system.
    With that, Mr. Chairman, I yield back.
    Mr. Cordray. That is a very good point. And actually banks 
and credit unions may be the low-cost providers here, and I 
would like to think that they could present a suitable product. 
They don't seem to be doing so right now.
    But you made several good points. I am trying to get all my 
notes down here.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Pennsylvania, 
Mr. Rothfus.
    Mr. Rothfus. Thank you, Mr. Chairman. And thank you, 
Director Cordray, for spending your afternoon with us today.
    The gentleman from Colorado, Mr. Perlmutter, mentioned that 
Charles River Associates studied, this is a research paper from 
November, that examined the Bureau's disparate impact 
methodology for any direct auto lending. As you may recall, the 
study concluded that there were significant flaws in the 
Bureau's methodology that led to an overestimating of minority 
populations by as much as 41 percent.
    To date, the Bureau has yet to publicly acknowledge the 
study. Can you comment on whether you would agree with the 
conclusions of the report that the Bureau's methodology is 
error-prone?
    Mr. Cordray. Yes, we don't agree with the conclusions with 
the report and we have looked at it fairly carefully.
    Mr. Rothfus. Has the Bureau--have the results of the study 
caused the Bureau to undertake any changes or consider 
undertaking any changes with respect to its fair lending 
investigations or evaluations?
    Mr. Cordray. We actually sat down and had a discussion with 
the folks from Charles River and the sponsors of the study to 
both discuss the study and be presented with the results. We 
have looked at the results pretty carefully. We don't find some 
obligation to respond to studies out there all the time in all 
aspects of our work.
    But as we always will do with any kind of analysis of data, 
we have looked carefully at it to think about what it might 
mean for our program. And that is where we are at this point.
    Mr. Rothfus. So you are not--are you going to make changes 
or not going to make changes? Are you considering making 
changes?
    Mr. Cordray. I think we are still looking at and thinking 
about that study, but I don't know whether we are going to make 
any changes, not at this point.
    Mr. Rothfus. Would you find some merits in the conclusions 
of the study or no merits in the conclusions of the study?
    Mr. Cordray. I don't want to try to turn it into some 
subjective judgment. The people who work on this stuff are more 
expert than I. I think we disagree with the results of the 
study is what I would just say.
    Mr. Rothfus. I would like to quickly revisit a topic that 
you have addressed in prior hearings, the Bureau civil penalty 
fund. As you know, unlike most Federal regulatory agencies, the 
Bureau does not remit the fines it imposes in its enforcement 
actions back to the American taxpayers, to the Treasury.
    Instead, the Bureau collects that money in its civil 
penalty fund so it can be paid to victims if they can be 
located. If these individuals cannot be located, however, the 
Bureau can use the funds for financial literacy or consumer 
education programs of its choosing.
    In the past, the Bureau's administration of the fund has 
been widely criticized for the small amount that actually has 
gone to victims and the significant amount that has been spent 
on administrative expenses.
    According to the committee's most recent calculations in 
December of last year, the unobligated balance of the Bureau's 
fund now stands at approximately $136 million. This is up from 
$116 million in June 2014 and $126 million in October 2014. And 
of the roughly $182 million that the Bureau has imposed in 
fines thus far, it has only allocated $31 million to 
compensating victims or around 17 percent.
    Why does this unobligated balance remain so high while the 
amounts paid to victims have remained so low?
    Mr. Cordray. I don't think that is an accurate picture of 
where the fund stands and where it is going. I actually think 
it is a success story that you will appreciate. First of all, 
we are merely following our statute. Our statute says that we 
would have a civil penalty fund. A couple of other agencies 
under Dodd-Frank also have civil penalty funds. The statute 
specifies what the money is used for--
    Mr. Rothfus. What is the current balance of the fund?
    Mr. Cordray. At this point, what I would say is, we have 
collected close to $200 million in civil money penalties over 
the life of the agency.
    Mr. Rothfus. Do you know what the current balance--
    Mr. Cordray. Yes, at this point, yes, what I will say is, 
about $180 million of it now is allocated toward compensating 
uncompensated victims. So the vast majority, above 90 percent, 
is going for that purpose.
    Mr. Rothfus. So there is $20 million in the fund right now?
    Mr. Cordray. I beg your pardon?
    Mr. Rothfus. How much is in the fund right now?
    Mr. Cordray. I can get you those numbers. But it is 
allocated and then it is a matter of getting it to victims. And 
sometimes it is easy and sometimes it is--
    Mr. Rothfus. So it is sitting there right now. You say--you 
don't know what--you will get back to us about how much is in 
there.
    Mr. Cordray. Yes. We have the numbers, but what I will say 
is that it is allocated.
    Mr. Rothfus. Have you identified specific victims to whom 
it will go?
    Mr. Cordray. We have identified specific cases for which it 
will go to victims and then sometimes--
    Mr. Rothfus. Have you identified the specific individuals?
    Mr. Cordray. Yes. Sometimes, that takes some effort. I will 
give you an example, okay? We have a case of essentially 
rampant fraud against a particular defendant and there was no 
money available to pay those victims. So that money to these 
victims will be paid out of the fund. But the paperwork at this 
fraudulent entity is pretty sloppy, as you might imagine.
    So figuring it out is hard--
    Mr. Rothfus. To reclaim my time--
    Mr. Cordray. It takes some time and effort.
    Mr. Rothfus. You say it is allocated. Roughly how much is 
being spent on administrative expenses?
    Mr. Cordray. Very little, and in fact in terms of consumer 
education, there is only one project that has been approved. So 
it is less than 10 percent of the funds. And it is going to 
transitioning veterans, financial education for transitioning 
veterans back into society and other vulnerable populations. So 
I think it is a good program.
    Mr. Rothfus. We would like to follow up with you on the 
balance--
    Mr. Cordray. Absolutely.
    Mr. Rothfus. And what percentage.
    Mr. Cordray. Absolutely.
    Mr. Rothfus. Okay, thank you.
    Mr. Cordray. Yes.
    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. And thank you, 
Director Cordray, for being with us today.
    Mr. Cordray. Sure.
    Mrs. Wagner. Director Cordray, this committee has expressed 
its views on multiple occasions and in multiple ways about the 
wasteful renovations of your building. And there is one 
outstanding question that we have asked of you directly and 
certainly have asked in several different letters: a letter on 
July 18th of last year; a second letter on December 3rd of last 
year; and a third letter on January 12th of this year.
    More than 7 months have passed and we still haven't 
received the answers, sir. So I ask you here again today: Which 
individual made the decision to renovate the building?
    Mr. Cordray. It is not an easy question to answer. This 
decision occurred before I became the Director of the Bureau 
and it is a decision that I have since reaffirmed and I think 
is an appropriate decision, and I think economically and 
financially, it is an appropriate decision.
    So, you can continue to ask that question, but I don't 
really see what is accomplished--
    Mrs. Wagner. To reclaim my time, let me be clear here then. 
What you are saying is that the decision was made prior to your 
leadership by previous leadership. Would that have been the 
gentleman who was just briefly acting Director, Raj Date, or 
was it made by the woman who was in charge of setting up the 
CFPB, Elizabeth Warren?
    Mr. Cordray. What I would say is this, there were different 
people in the position of setting up the Bureau at different 
times.
    Mrs. Wagner. Is there a record somewhere?
    Mr. Cordray. But the--
    Mrs. Wagner. There is no record?
    Mr. Cordray. No. What I am saying is for the first year, 
the Bureau did not exist; it was part of Treasury. So exactly 
whether there are people in Treasury who contributed to that 
decision because they actually were in charge, not Elizabeth 
Warren and not Raj Date--
    Mrs. Wagner. Director Cordray, I am just asking you a 
simple question. If you are not going to answer the question, 
then just say you are not going to answer the question. Are you 
going to tell us who is responsible and who directed--
    Mr. Cordray. I am just saying it is not an easy question to 
answer.
    Mrs. Wagner. And why is that?
    Mr. Cordray. Because the Bureau didn't even exist. It was 
Treasury who was in charge of all Bureau operations--
    Mrs. Wagner. Someone made a decision to spend upwards, as 
the Fed IG said in an estimate, of $215.8 million. And you are 
telling me there is no record, no one responsible--
    Mr. Cordray. I didn't say that.
    Mrs. Wagner. Then who is it? What individual?
    Mr. Cordray. No. There are lots of records on this 
including my reaffirmation of the decision--
    Mrs. Wagner. Who signed off? Who gave the authorization for 
such an incredible--
    Mr. Cordray. And why does it matter to you?
    Mrs. Wagner. Because it is $215 million of taxpayers' 
money.
    Mr. Cordray. No, it is not $215 million.
    Mrs. Wagner. That is why it matters to me.
    Mr. Cordray. That is not correct. It is not $215 million. 
It is between $95--
    Mrs. Wagner. Reclaiming my time, I will move on. Clearly, 
the Director does not choose to answer this question. I find 
that amazing since it has been asked multiple times at this 
committee.
    For the past 3 years, Director Cordray, the CFPB has made a 
name for itself by frankly expanding its own authority while 
limiting consumer choice and raising costs for American 
families. At the same time, the agency has remained insulated 
from accountability, clearly, for its actions, leaving it free 
to continue on its power grab without any ability for Congress 
to conduct oversight, from mortgages to credit cards, to short-
term lending, we have heard it all today.
    The CFPB has time and time again displayed a Washington-
knows-best mentality, allowing the government to deem what 
financial products are good for hardworking Americans and 
leaving them without the freedom to make their own choices when 
it comes to their personal economy.
    Continuing with those past examples of overreach, I was 
disappointed, although not surprised, when last Monday you 
appeared at an event with both President Obama and Senator 
Elizabeth Warren, supporting a new proposal from the Department 
of Labor which would once again limit choices and raise costs 
on consumers regarding their retirement savings. However, it 
remains unclear exactly how the CFPB is involved in this 
misguided rulemaking.
    Director Cordray, why exactly was the CFPB invited to the 
event last Monday and how does this agency have a role in this 
new potential rulemaking?
    Mr. Cordray. We do--I do support that proposal which I 
think will help protect consumers against fraudulent investment 
advice and conflicts of interest.
    Mrs. Wagner. What is your role?
    Mr. Cordray. And we are required by this Congress to have 
an Office of Older Americans, which one of its first 
assignments was to do a report on financial investors for 
seniors and their credentials and make sure that those were not 
being misrepresented to consumers, and we have done 
considerable work to protect older American since. That is--
    Mrs. Wagner. Reclaiming my time.
    Mr. Cordray. --statutory.
    Mrs. Wagner. I understand from Title X of Dodd-Frank that 
the CFPB under statute is unable to regulate retirement savings 
except through financial literacy. The SEC regulates the sale 
of securities and investment advice, while the Department of 
Labor regulates retirement plans.
    Specifically, I will say in Section 1027 of Dodd-Frank, 
right here in paragraph (g)(3) under ``Limitations on the 
Bureau Authority,'' it states that the Bureau may not exercise 
any rulemaking or enforcement authority with respect to 
products or services that relate to any specified plan or 
arrangement. And it defines that as, ``Any employee benefit or 
compensation plan or arrangement, including a plan that is 
subject to Title I of the Employment Retirement Income 
Securities Act of 1974.'' This definition also include IRAs.
    So with that being said, aside from financial literacy, how 
do you see the CFPB fitting in here, sir?
    Mr. Cordray. Actually, I don't think that is what it says. 
What it says is we can work on regulations in conjunction with 
the Department of Labor and the Department of Treasury. That is 
what it actually says in Section 1027(g).
    Mrs. Wagner. I just quoted you, sir, the exact words that 
comprise Section 1027(g).
    Mr. Cordray. Yes, I know exactly what it says. I have 
looked at it very carefully.
    Mrs. Wagner. Again, what is your role? Is it financial 
literacy or are you going to do another overarching rulemaking 
regarding--
    Mr. Cordray. Okay, so again, going back, there are a number 
of different provisions in the statute. One of them required 
our Office of Older Americans to do a study--the Bureau to do a 
study and report to Congress, to you on investor credentials 
for senior financial advice to help protect consumers in that 
area. That goes beyond just financial education.
    Mrs. Wagner. So you are going to go beyond financial 
literacy and education?
    Mr. Cordray. And reverse mortgages.
    Mrs. Wagner. Is that what you are saying here?
    Mr. Cordray. And reverse mortgages, required to do 
another--Congress on reverse mortgages that we had--
    Chairman Hensarling. The time--
    Mrs. Wagner. My time has expired.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from South Carolina, 
Mr. Mulvaney.
    Mr. Mulvaney. Thank you, Mr. Chairman. Am I last?
    Mr. Guinta. No.
    Mr. Mulvaney. Not last, goodness gracious. Well, then, I 
will go quickly.
    Mr. Cordray, before I get to my questions, I couldn't help 
but enjoy the exchange you just had with Mrs. Wagner, and I 
want to ask the same question she just asked to see if I can do 
it a little bit differently.
    Mr. Cordray. Sure.
    Mr. Mulvaney. There are only three possible answers to her 
question about who authorized renovations, right? It is either 
you, Ms. Warren, or Mr. Date, correct?
    Mr. Cordray. No, not correct.
    Mr. Mulvaney. So that decision could have been made without 
the approval of the Director?
    Mr. Cordray. Dodd-Frank was passed in July of 2010.
    Mr. Mulvaney. No, I don't need a history lesson. I just--
    Mr. Cordray. You do.
    Mr. Mulvaney. Who else?
    Mr. Cordray. You do, because it was passed in July 2010.
    Mr. Mulvaney. Who else--let me ask you this today. Who 
else--
    Mr. Cordray. And for the first year the Bureau did not 
exist.
    Mr. Mulvaney. Mr. Chairman, I reclaim my time please. Okay, 
who else besides the Director can authorize that kind of 
expenditure?
    Mr. Cordray. Okay, during the first year we existed, 
Treasury was--
    Mr. Mulvaney. I don't need the beginning of time. Who else 
besides the Director can do it? I am not trying to--
    Mr. Cordray. Now or then?
    Mr. Mulvaney. Then.
    Mr. Cordray. Okay, then. It was part of Treasury. Treasury 
was running our operations.
    Mr. Mulvaney. So somebody at Treasury could have authorized 
that?
    Mr. Cordray. That is quite possible. That is why I say I 
can't be sure. I can't say that it was one of the--
    Mr. Mulvaney. All right.
    Mr. Cordray. Yes.
    Mr. Mulvaney. Then I am going to get to the questions I 
want to ask, because I have heard you talk a little bit today 
about access to credit. We heard some good questions. I thought 
about payday lending and some other facilities that are 
available to people.
    And I remember, I think back when I was in the State Senate 
in South Carolina, the State of North Carolina had just passed 
some rather sweeping restrictions on payday lending, and we 
decided to look at the topic ourselves. And I remember meeting 
a woman from--we put out a letter about folks who used it. We 
went to talk to people who used payday lending.
    And a woman called me up and she started talking to me and 
she said, well, I use it. And I knew who she was, okay? I live 
in a small town.
    Mr. Cordray. Yes.
    Mr. Mulvaney. More importantly, I knew where she worked. 
She worked at a local credit union. And I asked the question, 
why don't you just get it at work? And she said, well, Mr. 
Mulvaney, everybody knows me there, right? I am kind of 
embarrassed that I have to do this. I need this, but I don't 
want everybody to know that I need this.
    And I know you said you have heard the stories, I know that 
we had a field hearing with a bunch of folks who said that they 
wanted to use things like payday lending and they had been able 
to use them successfully. And then I heard you say that you 
want to make sure that folks like that, ordinary people, have 
access to this type of credit, but you wanted to make sure that 
folks didn't get caught in a debt trap.
    Mr. Cordray. Correct.
    Mr. Mulvaney. Is that an accurate--okay.
    Mr. Cordray. Absolutely correct.
    Mr. Mulvaney. So here is my question. I think we would 
agree, right, that not everybody gets caught.
    Mr. Cordray. That is correct.
    Mr. Mulvaney. Some people can use these facilities without 
getting caught in a debt trap.
    Mr. Cordray. Absolutely.
    Mr. Mulvaney. How do you know which ones are going to get 
caught and which ones won't?
    Mr. Cordray. What we can know is what happens to consumers 
over time. We have done two extensive studies, the most 
extensive studies ever done on the subject with considerable 
data. And what we found is that the vast majority of payday 
loans are made to people who roll them over 6, 8, 10 times.
    Mr. Mulvaney. Okay.
    Mr. Cordray. And they end up paying more in cost, far more 
in cost than--
    Mr. Mulvaney. But let me back you up. I don't want to cut 
you off.
    Mr. Cordray. That is fine.
    Mr. Mulvaney. But we live in a world of limited time.
    Mr. Cordray. Yes.
    Mr. Mulvaney. If I walk into a payday lender, how do you 
know if I am one of those people who is going to get caught?
    Mr. Cordray. One way, one possible way would be by trying 
to determine your ability to repay. That would be one way to do 
it. It wouldn't be foolproof, but it would be the kind of 
underwriting we do for many other kinds of loans in our 
society, some of which--
    Mr. Mulvaney. I thought you said earlier today--
    Mr. Cordray. --get turned down and some of which get 
approved.
    Mr. Mulvaney. I thought you said earlier today in the 
response to a question by Mr. Stivers that you don't stand in 
the consumer's shoes or at least you don't try to. Was that 
your testimony earlier today?
    Mr. Cordray. That is kind of a general question. What I 
have said consistently is, we can't make consumers' decisions 
for them. They have to decide for themselves. What we can do is 
try to protect consumers in the marketplace so that they are 
not taken advantage of.
    Mr. Mulvaney. But you would agree with me, Mr. Cordray, 
that when you make a facility, a tool, something, entirely 
unavailable that you are making the consumer's decision for 
them as to that facility.
    Mr. Cordray. And Congress did that with all kinds of 
mortgage products like no-doc loans and liar loans and teaser 
rates--
    Mr. Mulvaney. Thank you, sir. Let's get back to that for a 
second.
    Mr. Cordray. Yes.
    Mr. Mulvaney. Because I think you defined a teaser rate. 
Somebody asked you that earlier today and you said a teaser 
rate was one that starts low and goes up. Do you remember that 
testimony?
    Mr. Cordray. And may not be adequately disclosed to the 
consumer so that they are tricked by it.
    Mr. Mulvaney. Okay, because using the definition of just 
going up, that is an adjustable rate, right?
    Mr. Cordray. No, no. But going up if it is fully disclosed 
and the consumer goes in with eyes wide open is one thing. A 
teaser rate that is going to jump up based on an arbitrary 
finding and so forth--
    Mr. Mulvaney. So you don't have a problem with adjustable 
rate mortgages, for example--
    Mr. Cordray. No, not at all. No. That can be a very good 
product. Yes.
    Mr. Mulvaney. Let me ask you this. Because we talk about 
payday lending a lot, we talk about mortgage lending, but I 
never heard anybody ask this question.
    Mr. Cordray. Okay.
    Mr. Mulvaney. One of the greatest examples of using 
something financial to prey on the poor, in my opinion, is the 
lottery. Do you have the right to regulate those?
    Mr. Cordray. You mean State government lotteries?
    Mr. Mulvaney. State lotteries, yes.
    Mr. Cordray. No, I do not.
    Mr. Mulvaney. Why not? They prey on consumers, they prey on 
the poor. Why not?
    Mr. Cordray. Under our statute, we have no authority to 
enforce against other government agencies--
    Mr. Mulvaney. Yes, but you don't have authority to go after 
the car dealers either. Why don't you go after the folks who 
bank the folks who run the lotteries?
    Mr. Cordray. I'm sorry. So you want me to enforce the law 
against banks who are engaged in a perfectly legal enterprise 
under State law of the lottery?
    Mr. Mulvaney. No, I am asking you why you don't since you 
are doing it in other areas.
    Mr. Cordray. I am not sure what other areas you are talking 
about?
    Mr. Mulvaney. You don't have jurisdiction to go after the 
automotive dealers, but you go after their banks. So if you 
don't have jurisdiction to go after State lotteries--
    Mr. Cordray. We do have jurisdiction to pursue auto 
lenders. It is clear on our statute. We do not have 
jurisdiction for auto dealers. We have carefully walked that 
line, tried hard to carefully walk that line. I don't see how 
your example applies.
    Mr. Mulvaney. Okay. Thank you, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Florida, Mr. 
Ross.
    Mr. Ross. Director Cordray, thank you. I thought I was 
going to be the last one, but I see my good friend, Mr. Guinta, 
has taken--
    Mr. Cordray. It may be perpetual. I may be here tomorrow. 
We will see.
    Mr. Ross. Yes. I appreciate your testimony today, but I 
want to follow up on what my colleague from South Carolina, Mr. 
Mulvaney, is inquiring about with regard to payday loans. And I 
understand that you are in the process of proposing new rules 
and that you have a small business review panel to reach out 
and get feedback from the industry.
    Are there any members of that from Florida on that small 
business--
    Mr. Cordray. I don't know if that panel has been finalized 
yet in terms of exactly who is on it and who is not.
    Mr. Ross. When you were testifying at the beginning here 
earlier today, you commented about your first field hearing 
being in Birmingham, Alabama. Have you had any field hearings 
in Florida?
    Mr. Cordray. We did. We had one in Miami on student loan 
issues.
    Mr. Ross. With regard to, specifically, payday lending 
though.
    Mr. Cordray. By the way, we were also going to have one in 
Tampa on mortgage issues.
    Mr. Ross. Good.
    Mr. Cordray. And it got canceled by a hurricane 2 years 
ago.
    Mr. Ross. I understand. Just as an aside, I think that it 
wouldn't hurt to have a hearing, a field hearing in Florida 
with regard to payday lending, because, as you know, Florida 
has probably one of the best regulatory environments for payday 
lending. In fact, I think that Florida some time ago recognized 
that there is a market demand and there is a market supply to 
meet this need on a regulatory fashion that could be set up to 
make sure that we preserve and protect the consumers.
    And I think--I don't know if your office has any statistics 
that would show whether there has been any abuse in the State 
of Florida with regard to payday loan.
    Mr. Cordray. Yes, actually--and since you raise that--
because I have actually become friendly and know pretty well 
your banking superintendent, Drew Breakspear, who is first 
rate.
    Mr. Ross. Right.
    Mr. Cordray. When we did our first White Paper on payday 
lending, he had his office do a similar analysis based on their 
data about how things were in Florida and shared that report 
with me.
    Mr. Ross. It is good.
    Mr. Cordray. And I shared it with our folks.
    Mr. Ross. For example, if you are looking at parameters, 
limit the loans to $500. That works. They are going to only 
have one outstanding loan at any one time. Their fees are 10 
percent of the amount borrowed plus the $5 verification. They 
have to wait 24 hours before they have another one. There are 
protections in there.
    So all I am suggesting to you is, please, take a look at 
Florida.
    Mr. Cordray. Yes.
    Mr. Ross. And I think that if you look at other States, 
even your State of Ohio, they have the ability, and I think 
they have the foresight, to regulate this industry without 
having to be preempted by the Federal Government.
    Also, I am going to talk to you just briefly about your 
role on FSOC and specifically with regard to systemically 
important financial institutions. Let's talk about asset 
managers.
    Do you feel, both personally and professionally, that asset 
managers, managers that don't carry any assets themselves but 
are managing for others, pose a risk to the financial 
environment?
    Mr. Cordray. I want to be careful about not trying to 
purport to speak for FSOC. I am not the--
    Mr. Ross. I understand. I am not asking you to. Just in 
your role as a member of it.
    Mr. Cordray. What I think has been publicly stated is that 
there is more research and analysis going on into those issues 
and in forums like that.
    Mr. Ross. And don't you think we should have some--in other 
words, preventative maintenance, preventative medicine, if you 
will, is so much better than remedial medicine, being able to 
identify early on with the financial institution through a 
transparency process and let them know if they are moving into 
that direction so that they can self-correct, don't you think 
that is a pretty good way to avoid having to have the 
connotation and the label of being a SIFI and then not knowing 
how you got there or how you are going to get out of there?
    Mr. Cordray. I would agree with that, but I do think that 
the designation process that the FSOC has followed has been 
pretty careful and thorough and comprehensive to date.
    Mr. Ross. But transparent?
    Mr. Cordray. The FSOC is working on that.
    Mr. Ross. And we should have transparency.
    Mr. Cordray. There are new proposals for it.
    Mr. Ross. And I think--
    Mr. Cordray. I do agree with you on that. But, yes.
    Mr. Ross. Thank you. And lastly, just recently I sent you a 
letter, on February 24th. You probably haven't had a chance to 
read it. But I am curious about how you determine and select 
companies, both depository and non-depository, for examination. 
Is there a written procedure? Do you have a checklist? Is it 
based on size? Is it based on revenues? Is it based on 
location? Is it based on number of employees? Things of that 
nature?
    Mr. Cordray. It is actually pretty sophisticated now. Early 
on it wasn't because we were just building up and we didn't 
have these things in place, but some very impressive people 
have worked on this.
    It is a risk-based system. It depends on things like market 
size, market penetration, if it is an individual product line, 
what that size is, is it a risk and harm to consumers--
    Mr. Ross. It is a set of guidelines, if you will.
    Mr. Cordray. You build market research--yes, I wouldn't 
say--it is full of--not necessarily entirely science, but that 
is how we try to prioritize the things that should be 
prioritized.
    Mr. Ross. And in regards to levies of fines, is there a 
guideline as to how much a fine should be or is it a range--how 
is it--
    Mr. Cordray. Like a penalty or something?
    Mr. Ross. Yes.
    Mr. Cordray. Yes. We have a statutory range of penalties 
depending on how serious a violation is and whether it is 
knowing or whether it was--
    Mr. Ross. Thank you. I see my time is up. I look forward to 
the response to the letter and I thank you for being here.
    Mr. Cordray. Okay, right. Thanks. Sure.
    Mr. Ross. I yield back.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from New Hampshire, Mr. Guinta.
    Mr. Guinta. Thank you, Mr. Chairman. And thank you, Mr. 
Cordray, for being here.
    Mr. Cordray. Sure.
    Mr. Guinta. I have been in and out of the hearing, but I 
appreciate the opportunity to speak with you.
    I wanted to just read one component of prior testimony in 
2012.
    Mr. Cordray. All right.
    Mr. Guinta. In an open field hearing in Alabama relative to 
payday loans--it is not really the balance of what I want to 
talk about, but I think it is important to amplify some of the 
favorable stories, because sometimes this is--I think there is 
one side of the story that tends to be communicated.
    And I will just read a portion of what Mr. Tangie Thomas 
stated. He said at this hearing, again, in Alabama in 2012, I 
just wanted to say that I am, I did have the use to a payday 
loan once before and it was because of a family emergency. He 
went on to say, in the fees that I accrued from that payday 
loan were actually cheaper than getting a cash advance on my 
credit card. So it actually benefitted me. And I was really 
glad that it was there, an option available for me. I would 
like to know that in the future that, it would be there in the 
event that I needed it also.
    So his point was, I had multiple options, and this is the 
option that I chose; it was cheaper for me in that emergency 
situation. So I would ask you to consider his testimony and 
that of others that I am sure are in that circumstance.
    In the State of New Hampshire, we have payday lending, and 
we have what I would consider rather rigorous rules around it 
and I think, for the most part, it works fairly well.
    Secondly, I wanted to get to on the semi-annual report of 
the CFPB, page 127. 8.1 is entitled, ``open government,'' and 
it reads, ``A critical part of making financial markets work is 
ensuring transparency in those markets. The CFPB believes that 
it should hold itself to that same standard and strives to be a 
leader by being transparent with respect to its own 
activities.'' I agree with that statement. I think that makes 
sense.
    So my first question would be relative to the concerns that 
my constituents have expressed about the cost associated with 
running the CFPB. Can you tell me in this book where you 
specifically identify the cost of building renovations that 
taxpayers have spent?
    Mr. Cordray. You are talking about the most recent semi-
annual report?
    Mr. Guinta. Yes.
    Mr. Cordray. I don't know if that would have been relevant 
to that period. The money was actually allocated for that 
purpose 2 fiscal years ago.
    Mr. Guinta. Okay.
    Mr. Cordray. But we have budget documents on our Web site 
and we put them out every quarter. We have responded to 
numerous document requests and other things from this 
committee. I would be happy to get you whatever you want on any 
of that to make sure that is clear to you.
    Mr. Guinta. Since I am returning after a couple of years 
away from this institution, would you be kind enough to remind 
me how much you have spent to date?
    Mr. Cordray. Spent to date on what?
    Mr. Guinta. On building renovations.
    Mr. Cordray. On building renovations, I believe we 
allocated approximately $120 million. It is in that range. I 
will get the specific numbers for you. Just to cover actual 
construction cost estimated and contingencies that have to be 
held that may or may not be spent based on how--
    Mr. Guinta. And you feel that is somehow within--part of 
the mission of the CFPB to help consumers to spend that kind of 
money on a renovation?
    Mr. Cordray. To have a reasonably decent place for 
employees to work, absolutely.
    Mr. Guinta. $120 million is a reasonably decent place?
    Mr. Cordray. GSA, who are the experts on this, tell us it 
comes in at about $250 per square foot, which is well within 
the range of reasonableness for this--
    Mr. Guinta. And there has been no other alternative that 
would be cheaper that you would consider reasonable?
    Mr. Cordray. None that we have found. And I would say at 
this point we have bid out the construction contract. It has 
been awarded through a fair and competitive bid and we are well 
down the road on this.
    Mr. Guinta. And so I actually found something--reclaiming 
my time.
    Mr. Cordray. Imagine that we would have reversed course 
now, that would be very wasteful.
    Mr. Guinta. Reclaiming--if I found something that was 
cheaper moving forward, is that something you would consider?
    Mr. Cordray. What do you mean found something cheaper?
    Mr. Guinta. If I found something that was cheaper in 
Washington, D.C., that was suitable for CFPB, would you 
consider that alternative?
    Mr. Cordray. Any input you want to give us I am happy to 
have. But at this point we have already--
    Mr. Guinta. Would you consider the input?
    Mr. Cordray. Look, we have already entered into a 
construction contract.
    Mr. Guinta. Would you consider the input?
    Mr. Cordray. The notion that we would abandon this project 
based on something that you tell me you just found could be 
very wasteful of taxpayer money at this point.
    Mr. Guinta. Okay. The final question I have and I 
understand that I have only a few seconds left--I spoke with 
Rick Wallis, president of Piscataqua Savings Bank in 
Portsmouth, New Hampshire, a $230 million bank.
    He is concerned with the cost associated with the rules 
that are associated under the $10 billion. He is a $230 million 
bank. He has been affected by these very rules. I would love to 
get a sense from you maybe offline or in writing what can be 
done to help that community bank, what I consider a community, 
one branch--
    Mr. Cordray. What is his name?
    Mr. Guinta. His name is Rick Wallis, president of 
Piscataqua Savings Bank.
    Mr. Cordray. Rick Wallis, I will call him and talk to him.
    Mr. Guinta. It is a $230 million bank, 50 employees, one 
location. He is hampered by the same rules that CFPB is 
instituting for institutions under $10 billion.
    Mr. Cordray. Okay. I would like to know his specifics and I 
will be glad to reach out and talk to him.
    Mr. Guinta. Thank you. I yield back.
    Mr. Cordray. And I will give your office a readout on what 
we find.
    Mr. Guinta. Thank you.
    Mr. Cordray. Okay.
    Chairman Hensarling. The time of the gentleman has expired. 
There are no other Members in the queue, so I would like to 
thank--
    Mr. Cordray. I'm sorry--
    Chairman Hensarling. Yes.
    Mr. Cordray. Could you spell the bank name; it sounded kind 
of complicated?
    Chairman Hensarling. Perhaps we could do that off--
    Mr. Guinta. I will give it to you.
    Mr. Cordray. All right. That is fine. We will get it. All 
right.
    Chairman Hensarling. That can be communicated to the 
office. But I do wish to thank you, Dr. Cordray. Four hours is 
a long time to sit at a witness table.
    The Chair notes that some Members may have additional 
questions for this witness, which they may wish to submit in 
writing. Without objection, the hearing record will remain open 
for 5 legislative days for Members to submit written questions 
to this witness and to place his responses in the record. Also, 
without objection, Members will have 5 legislative days to 
submit extraneous materials to the Chair for inclusion in the 
record.
    This hearing stands adjourned.
    [Whereupon, at 6:24 p.m., the hearing was adjourned.]
                            A P P E N D I X



                             March 3, 2015
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