[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]







                      THE 2016 SEMI-ANNUAL REPORTS
                       OF THE BUREAU OF CONSUMER
                          FINANCIAL PROTECTION

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 5, 2017

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 115-15





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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
STEVAN PEARCE, New Mexico            GREGORY W. MEEKS, New York
BILL POSEY, Florida                  MICHAEL E. CAPUANO, Massachusetts
BLAINE LUETKEMEYER, Missouri         WM. LACY CLAY, Missouri
BILL HUIZENGA, Michigan              STEPHEN F. LYNCH, Massachusetts
SEAN P. DUFFY, Wisconsin             DAVID SCOTT, Georgia
STEVE STIVERS, Ohio                  AL GREEN, Texas
RANDY HULTGREN, Illinois             EMANUEL CLEAVER, Missouri
DENNIS A. ROSS, Florida              GWEN MOORE, Wisconsin
ROBERT PITTENGER, North Carolina     KEITH ELLISON, Minnesota
ANN WAGNER, Missouri                 ED PERLMUTTER, Colorado
ANDY BARR, Kentucky                  JAMES A. HIMES, Connecticut
KEITH J. ROTHFUS, Pennsylvania       BILL FOSTER, Illinois
LUKE MESSER, Indiana                 DANIEL T. KILDEE, Michigan
SCOTT TIPTON, Colorado               JOHN K. DELANEY, Maryland
ROGER WILLIAMS, Texas                KYRSTEN SINEMA, Arizona
BRUCE POLIQUIN, Maine                JOYCE BEATTY, Ohio
MIA LOVE, Utah                       DENNY HECK, Washington
FRENCH HILL, Arkansas                JUAN VARGAS, California
TOM EMMER, Minnesota                 JOSH GOTTHEIMER, New Jersey
LEE M. ZELDIN, New York              VICENTE GONZALEZ, Texas
DAVID A. TROTT, Michigan             CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia            RUBEN KIHUEN, Nevada
ALEXANDER X. MOONEY, West Virginia
THOMAS MacARTHUR, New Jersey
WARREN DAVIDSON, Ohio
TED BUDD, North Carolina
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York
TREY HOLLINGSWORTH, Indiana

                  Kirsten Sutton Mork, Staff Director
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    April 5, 2017................................................     1
Appendix:
    April 5, 2017................................................   113

                               WITNESSES
                        Wednesday, April 5, 2017

Cordray, Hon. Richard, Director, Consumer Financial Protection 
  Bureau.........................................................     5

                                APPENDIX

Prepared statements:
    Cordray, Hon. Richard........................................   114

              Additional Material Submitted for the Record

Hill, Hon. French:
    Slides.......................................................   125
Huizenga, Hon. Bill:
    Settlement Agreement Between Consumer Financial Protection 
      Bureau and National Treasury Employees Union...............   126
Hultgren, Hon. Randy:
    Notes from the Auto Finance Discrimination Working Group 
      (``AFDWG'') Attended on behalf of Nonbank Supervision by 
      Kali Bracey................................................   130
Scott, Hon. David:
    Written statement of the Electronic Privacy Information 
      Center.....................................................   133
    Letter from various undersigned organizations in support of 
      the Dodd-Frank Act.........................................   135
Wagner, Hon. Ann:
    Slides.......................................................   138
Williams, Hon. Roger:
    Slides.......................................................   143
Cordray, Hon. Richard :
    Written responses to questions for the record submitted by 
      Chairman Hensarling and Representatives Barr, Beatty, 
      Crist, Hultgren, Luetkemeyer, Maloney, and Posey...........   145

 
                      THE 2016 SEMI-ANNUAL REPORTS 
                       OF THE BUREAU OF CONSUMER 
                          FINANCIAL PROTECTION

                              ----------                              


                        Wednesday, April 5, 2017

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:04 a.m., in 
room 2128, Rayburn House Office Building, Hon. Jeb Hensarling 
[chairman of the committee] presiding.
    Members present: Representatives Hensarling, McHenry, 
Royce, Lucas, Pearce, Posey, Luetkemeyer, Huizenga, Duffy, 
Stivers, Hultgren, Ross, Pittenger, Wagner, Barr, Rothfus, 
Messer, Tipton, Williams, Poliquin, Love, Hill, Emmer, Zeldin, 
Trott, Loudermilk, Mooney, MacArthur, Davidson, Budd, Kustoff, 
Tenney, Hollingsworth; Waters, Maloney, Velazquez, Sherman, 
Meeks, Capuano, Clay, Lynch, Scott, Green, Cleaver, Ellison, 
Perlmutter, Himes, Foster, Kildee, Delaney, Heck, Vargas, 
Gottheimer, Crist, and Kihuen.
    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 entitled, ``The 2016 Semi-Annual Reports 
of the Bureau of Consumer Financial Protection.''
    I now recognize myself for 5 minutes to give an opening 
statement.
    Today, we receive the testimony of Richard Cordray as he 
presents, again, the semi-annual report of the CFPB.
    Mr. Cordray, I know that you are here at our committee's 
invitation for a statutory appearance, but I am otherwise 
surprised to see you here in that, as you well know, there have 
been many press reports saying that you would otherwise have 
returned to Ohio to pursue a gubernatorial bid. Perhaps the 
rumors of your political aspirations are greatly exaggerated.
    On the other hand, I am also surprised that you are here 
because, as you are well aware, the President, under the PHH 
case, can dismiss you at will. Under Dodd-Frank you can be 
removed for cause.
    Either way, I believe the President is clearly justified in 
dismissing you and I call upon the President, yet again, to do 
just that and to do it immediately.
    There is no greater form of consumer protection than 
fostering competitive, innovative, and transparent markets, and 
then vigorously policing them for fraud, theft, and deception. 
In policing our markets, under Mr. Cordray's leadership, the 
CFPB's success record is anything but clear.
    What is clear, though, is that under Mr. Cordray's 
leadership the CFPB has shown an utter disregard for protecting 
our markets and has made credit more expensive and less 
available in many instances. This is particularly true for low- 
and moderate-income Americans.
    What is also clear is that under Mr. Cordray's leadership 
the CFPB has acted unlawfully, routinely denied market 
participants due process, and abused its powers. The CFPB has 
now finalized a rule that would reduce access to prepaid card 
products, harming nearly 70 million consumers who do not or 
cannot use traditional banking services.
    Thanks in part to CFPB's oversight, credit card rates have 
risen significantly, with many would-be borrowers being priced 
out of the market entirely. Many credit-worthy borrowers could 
pay almost $600 more for their auto loans due to CFPB's 
indirect auto lending guidance. According to researchers at the 
University of Maryland, as a result of Dodd-Frank and the CFPB, 
middle-income borrowers, ``not only didn't obtain cheaper 
mortgages, but were cut out of the mortgage market 
altogether.''
    For all the harm inflicted upon consumers, Richard Cordray 
should be dismissed by the President.
    In the CFPB's short 6-year history, the record is replete 
with instances where it has abused or exceeded its statutory 
authority. In the PHH case, where the CFPB structure was ruled 
unconstitutional, the facts show that Mr. Cordray unilaterally 
reversed accepted law with regards to Section 8(c) of RESPA, 
and did so not with formal rulemaking--that is, with notice, 
comment, and due process--but with an ad hoc enforcement action 
instead.
    Then, to make matters worse, Mr. Cordray attempted to apply 
this new rogue standard retroactively. The D.C. Circuit Court 
ruled against him in both instances.
    On March 31, 2013, CFPB issued bulletin 2013-2, attempting 
to impose control over dealer indirect auto lending 
compensation. In doing so, CFPB sought to illegally regulate 
companies over which it has no statutory authority and which, 
in fact, are expressly exempt under the Dodd-Frank Act. CFPB 
then failed to afford due process to regulated companies under 
the Administrative Procedures Act.
    For conducting unlawful activities, abusing this authority, 
and denying market participants due process, Richard Cordray 
should be dismissed by our President.
    Not only must Mr. Cordray go, but this current CFPB must 
go, as well. American consumers need competitive markets and a 
cop on the beat to protect them from fraud and deception; they 
don't need Washington elites trampling on their freedom of 
choice and picking their financial products for them.
    Today, Mr. Cordray and his CFPB don't just act as a cop on 
the beat; they act as legislature, prosecutor, judge, and jury 
all rolled into one. CFPB represents the summit of unelected, 
unaccountable, and unconstitutional agency government.
    It represents a dagger aimed at the heart of our 
foundational principles--namely coequal branches of government, 
checks and balances, due process, and justice for all. Clearly, 
you can be a Democrat--uppercase ``D''--and believe in the 
CFPB, but you cannot be a democrat--lowercase ``D''--and 
believe in this institution.
    Thus, this debate has import way beyond the fate of fines, 
credit cards, and mortgage access. It represents nothing less 
than one of the key battles to defend and protect our 
Constitution.
    As James Madison wrote in Federalist 47, the combination of 
all power--legislative, executive, and judiciary--may justly be 
pronounced the very definition of tyranny. This tyranny must 
end and the people's constitutional rights returned to them.
    I now recognize the ranking member for 5 minutes for an 
opening statement.
    Ms. Waters. Thank you very much, Mr. Chairman.
    And I thank you, Director Cordray, for joining us again to 
discuss the numerous ways in which the Consumer Financial 
Protection Bureau continues to fight for hardworking Americans 
who have been harmed by illegal predatory financial schemes.
    I am delighted that you are here. I am so pleased that you 
are here. I am so honored that you have done the work that you 
have done for all the consumers in America.
    I would also like to thank you for your sustained, long, 
strong leadership despite unyielding Republican efforts to 
impede your work and their unfounded desire to remove you from 
your position prior to the expiration of your term.
    The Consumer Financial Protection Bureau has successfully 
recovered nearly $12 billion for 29 million consumers who have 
been victim to predatory financial practices. In addition, the 
Consumer Bureau has handled over a million consumer complaints 
and has worked diligently to promote clear disclosures and root 
out bad practices committed by financial institutions.
    The Consumer Financial Protection Bureau and Director 
Cordray are doing exactly the job they are supposed to do, and 
they are doing it well.
    Following the foreclosure crisis, Congress recognized that 
Americans needed a new watchdog that would swiftly and 
effectively crack down on unscrupulous practices and products. 
In the Dodd-Frank Wall Street Reform and Consumer Protection 
Act we deliberated extensively and created a consumer agency 
with a single director who operates independently in order to 
effectively serve consumers and regulate financial markets.
    We could not have had a better person than Director 
Cordray. Despite what you will hear from Republicans, the 
leadership structure of the Consumer Bureau is not unique. In 
fact, there are other Federal regulatory agencies with similar 
structures.
    But these facts haven't stopped Republicans and some in the 
industry from making legal challenges to its structure. That is 
why last week I led 40 other current and former Members of 
Congress to file an amicus curiae brief with the D.C. Circuit 
Court of Appeals in support of the Consumer Financial 
Protection Bureau's independent structure and its clear 
constitutionality.
    Republicans have been clamoring to weaken, impede, and 
ultimately destroy the Consumer Financial Protection Bureau 
since its creation. First, they did everything they could to 
block a director from being appointed in the first place. And 
since then, they have pushed measures to defund and dismantle 
the Consumer Financial Protection Bureau.
    The chairman has called for the Consumer Financial 
Protection Bureau to be functionally terminated, and it is 
unclear why. There are constituents in every State who have 
been ripped off by financial institutions. Why aren't 
Republicans fighting for them and for their financial security?
    I reject these misguided attacks on the Consumer Financial 
Protection Bureau, and I will continue to stand up for the 
hardworking American consumers that the agency defends every 
day. The Consumer Financial Protection Bureau is an invaluable 
ally to consumers, and its work must continue.
    Director Cordray, I look forward to hearing your testimony. 
I can't thank you enough for what you have done and the way 
that you have conducted yourself, the way that you have allowed 
everybody to come in and talk with you and share their concerns 
with you, the way that you have traveled all over this country 
meeting with consumer groups.
    I will be with you forever. And I know that legally your 
term doesn't end until July, but I would hope that this 
President--even though I doubt it--would have the wisdom to ask 
you to stay on.
    I yield back the balance--well, I yield to Mr. Kildee. Is 
there any time left?
    Somebody else yield him some time along the way. Thank you.
    I yield to Mr. Kildee.
    Mr. Kildee. Thank you.
    And, Mr. Chairman, I thank you and Ranking Member Waters 
for holding this hearing.
    Mr. Cordray, it is good to see again. I have known you for 
a long time, since you and I were both county treasurers. Your 
public service in that role and every role since has been 
stellar, especially in this role.
    The mission of the Consumer Financial Protection Bureau is 
to protect the American consumer. When Wells Fargo opened 
thousands of fraudulent accounts, it was the Consumer 
Protection Bureau that sounded the alarm. When Moneytree, a 
payday lender--
    [laughter]
    Mr. Kildee. Mr. Chairman?
    Chairman Hensarling. The committee will come to order. The 
committee will come to order.
    The gentleman from Michigan is recognized.
    Mr. Kildee. I wonder if the chairman might reset the clock 
so I would have some time?
    Chairman Hensarling. We will give the gentleman an 
additional 20 seconds.
    Mr. Kildee. Thank you, Mr. Chairman.
    I do find it somewhat ironic that when clearly some of the 
success of the Consumer Protection Bureau from the work that 
you have done is noted, whether it is Wells Fargo, whether it 
is Moneytree, or whether it is Bridgepoint Education, where the 
Consumer Bureau that you lead has restored, returned millions 
and millions of dollars to consumers, that that notation is met 
with some ridicule.
    I suppose it may be that when it comes to which side we 
stand on, institutions that have incredible influence over this 
community, this town, or the people back home, people have to 
choose which side they are on. And I am glad that in the role 
that you have taken you have always been on the side of the 
consumer, and I thank you for the work that you are doing.
    Chairman Hensarling. The time of the gentlelady and the 
gentleman has expired.
    Today, we welcome the testimony of the Honorable Richard 
Cordray. Director Cordray has previously testified before this 
committee, so I believe he needs no further introduction.
    Mr. Cordray, without objection, your written statement will 
be made a part of the record, and you are now recognized for 5 
minutes to give an oral presentation of your testimony. Thank 
you.

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

    Mr. Cordray. Thank you, Chairman Hensarling, Ranking Member 
Waters, and members of the committee.
    I am reporting today on our work over the past year. The 
Consumer Financial Protection Bureau was created to stand up 
for consumers and make financial markets work more fairly. Over 
the past 5 years we have returned almost $12 billion to 29 
million consumers all over the country in every State, in every 
district, and imposed about $600 million in civil penalties.
    We have put in place strong safeguards against reckless 
mortgage practices that led to the financial crisis that hurt 
so many people in so many communities. We are arming consumers 
with unbiased information and resources so they can make 
better-informed decisions for themselves and their families.
    Our complaint system gives consumers a voice that matters 
so they can address their own concerns and report on broader 
patterns of problems or abuse. To date, we have fielded over 
1.1 million complaints, so more and more people are finding 
this option to be worthwhile.
    These are just some of the ways we are standing up for 
consumers.
    Markets that work for consumers, as the chairman said, are 
also good for responsible businesses and the economy as a 
whole. Consumer lending has been ramping up in mortgages, 
credit cards, and auto loans, and delinquencies remain at 
historic lows.
    Last year auto sales reached record levels and consumer 
spending has been leading the recovery for the past 4 years, 
growing faster than GDP. Banks are showing solid profits, and 
community banks and credit unions are growing their share of 
the mortgage market.
    Still, we know that we have much more work to do to clean 
up the consumer financial marketplace. These markets are huge 
and they touch all of us in one way or another.
    Years of uneven Federal oversight on behalf of consumers 
allowed a lot of bad behavior to go unchecked. As the 
independent consumer watchdog, we are solely focused on the job 
Congress gave us of assuring that these markets are fair, 
transparent, and competitive, and that consumers have access to 
sound financial products and services.
    Today I want to highlight some areas where people remain 
vulnerable without the Consumer Bureau to stand up for them.
    The first area is markets that create frustrating and 
harmful dead ends for consumers. When people are forced to deal 
with companies they did not choose and cannot change, they lose 
much of their power because they lack the freedom to simply 
take their business elsewhere.
    A prime example is credit reporting. If your credit report 
contains inaccurate information you can suffer severe and 
lasting harm. Yet, many people do not know what is in their 
credit report, and if they do find something wrong it is way 
too hard to get anybody to pay attention and make it right.
    The Consumer Bureau is the first Federal agency to 
supervise this industry and the companies that supply the 
credit information, and we are making steady progress to clean 
up these problems.
    We also recently took enforcement actions against all three 
major credit bureaus for deceiving consumers in marketing 
credit scores. But we are still flooded with credit reporting 
complaints, so clearly more work remains to be done.
    Another dead-end market for consumers is debt collection. 
Consumers often find their debt is sold off or its collection 
is outsourced to some new company. They often do not know what 
to do when these collectors treat them badly.
    We hear horror stories about constant harassing phone 
calls, relatives or employers tracked down and wrongly 
contacted, or even false threats of arrest if the debt is not 
paid. These tactics are indefensible and they are against the 
law.
    People deserve to be treated with dignity, whether or not 
they owe a debt. We have taken action on several fronts to 
address widespread abuses in debt collection, but, like credit 
reporting, it is a big problem that will take time to fix 
properly.
    Another area of focus is financial performance incentives 
which encourage results that hurt consumers. This systemic 
issue spans all markets and products.
    A prominent example is Wells Fargo's practices that led to 
millions of consumers having accounts opened in their name 
without their knowledge.
    In 2013 the Consumer Bureau got a whistleblower tip about 
pressure to meet aggressive cross-selling goals and the 
problems it was causing. The investigation was conducted with 
our Federal and local partners that documented the widespread 
practice of secretly opening up unauthorized accounts.
    By completing a public enforcement action with a record 
fine we blew open a scandal whose far-reaching effects are 
being felt across financial markets to this day. We are keeping 
a close eye on these practices and insisting that all banks and 
financial companies must carefully monitor their incentive 
programs to avoid such problems.
    Issues like this demonstrate why the Consumer Bureau is so 
important to protect consumers. And incentive programs that 
cause improper conduct are not limited to Wells Fargo; they 
show up in areas like overdraft and credit card add-on 
products, where we are rooting out bad practices and getting 
money back to consumers.
    We will remain vigilant and crack down on these abuses 
wherever we find them.
    Those who talk about weakening or destroying the Consumer 
Bureau are missing the importance of the work we are doing to 
stand up for individuals and families all over the country. 
Nobody should want to return to a system that failed us and 
produced a financial crisis that damaged so many lives.
    I look forward to answering your questions about what we 
have accomplished over the past year. Thank you.
    [The prepared statement of Director Cordray can be found on 
page 114 of the appendix.]
    Chairman Hensarling. Thank you, Mr. Cordray.
    I now yield myself 5 minutes for questions.
    First, Mr. Cordray, I want to deal with the important 
subject of Congressional oversight. As I trust you are well 
aware, yesterday I reissued a subpoena for this Congress for 
matters that were pending from subpoenas in the last Congress 
that were never complied with. Some of these matters have been 
pending for 382 days.
    I just wish to remind you and all personnel at the CFPB 
that under Title 18, Section 1505, it is unlawful to influence, 
obstruct, or impede the due and proper exercise of the power of 
inquiry under which any inquiry or investigation is being had 
by either House or any committee of either House. And I suspect 
that you will find that the Justice Department will no longer 
turn a blind eye to obstruction.
    As you are also probably aware, there is a December 21st 
article that appeared in the National Review dealing with the 
CFPB and Congressional oversight. The article stated, ``The 
unwritten policy of it supervising attorneys, and in particular 
of one former Democratic Senate staffer was, `Never give them 
what they ask for.'''
    It goes on to say, ``Soon a career professional in the unit 
who had resisted pressure to engage in witness coaching and 
other unethical practices was reprimanded for insubordination 
and reassigned. The Inspector General investigated and issued a 
report to Cordray that concluded the reprimand was unwarranted 
and the supervisors had engaged in obstruction.''
    Mr. Cordray, is anything in this article true?
    Mr. Cordray. I have seen that article. It is filled with 
hearsay and opinion--
    Chairman Hensarling. Okay. Is any of it true?
    Mr. Cordray. --and it is not fact.
    Chairman Hensarling. Is any of it true, or do you deny all 
of the assertions in the article?
    Mr. Cordray. I don't know what all of the assertions in the 
article are.
    Chairman Hensarling. The ones I just quoted, Mr. Cordray.
    Mr. Cordray. It is not the kind of article that anybody 
pays close attention to, but I would be happy to have my 
staff--
    Chairman Hensarling. Well, then let me be specific.
    Mr. Cordray. --on any particular issues--
    Chairman Hensarling. Mr. Cordray, has the Federal Reserve 
Inspector General ever communicated with you regarding a 
supervisor who worked on oversight requests?
    Mr. Cordray. Say that again?
    Chairman Hensarling. Has the Federal Reserve Inspector 
General ever communicated with you regarding a supervisor who 
worked on oversight requests?
    Mr. Cordray. I do not, I am not sure what you are referring 
to, so I am not sure what to--
    Chairman Hensarling. You don't know the answer. Okay.
    Are you aware of any Inspector General inquiry into any 
aspect of the CFPB's handling of Congressional inquiries?
    Mr. Cordray. I don't recall that offhand, but I would be 
happy to talk to--
    Chairman Hensarling. You are unaware of any Inspector 
General inquiry into your handling of Congressional inquiries? 
You are unaware of this, is that correct?
    Mr. Cordray. What I would tell you is I don't always know 
all the inquiries the Inspector General is conducting. I am not 
supposed to know all the inquiries the Inspector General is 
conducting. So I am not sure what to tell you, but I would be 
happy to have staff--
    Chairman Hensarling. But if I could, Mr. Cordray, the 
article states that the Inspector General issued you a report 
of the findings of its investigation. Have you ever received a 
report from the Inspector General detailing any aspect of 
CFPB's handling of Congressional inquiries? Surely you would 
know if you had received a report.
    Mr. Cordray. I have gotten dozens of reports from the 
Inspector General. I try to pay close attention all of them. I 
am not sure what you are referring to, but I would be happy to 
talk to you--
    Chairman Hensarling. So you don't know if you have ever 
received a report from the Inspector General dealing with how 
Congressional inquiries are handled. This is a terribly 
important matter, going to the whole foundation of our 
Constitution and oversight, and you are unaware of any 
Inspector General report.
    Mr. Cordray. I can tell you, you started from an article 
that is based on opinion and hearsay, and there were claims 
made that we don't provide documents responsive to--
    Chairman Hensarling. Okay, but you are unaware of this 
Inspector General report. In that case, Mr. Cordray, again, if 
necessary, we will subpoena such report. I can't believe that 
you would be unaware of this. In the time I have remaining--
    Mr. Cordray. What I am saying to you is if you want to 
have--if you want to show me the report and refresh my memory, 
I am happy to have a discussion with--
    Chairman Hensarling. I am kind of hoping you will show me 
the report because I don't have a copy of it.
    Mr. Cordray. Is it a published report?
    Chairman Hensarling. I am asking you the question. You say 
you are unaware of the report.
    Mr. Cordray. I am unaware of a published report. I am not 
sure what you are referring to. I honestly am not sure what you 
are referring to--
    Chairman Hensarling. We will request the document.
    In the time I have remaining, Mr. Director, as I think you 
know, Section 1071 of Dodd-Frank requires financial 
institutions to collect and report women-owned, minority-owned, 
and small business credit application information. I personally 
don't believe the information is necessarily of great value, 
but that is not the point.
    Six years ago the Bureau's General Counsel stated the 
Bureau would not enforce the statute against financial 
companies until the Bureau issued its rules. You have been at 
the helm for almost 5 years.
    Mr. Cordray. Yes.
    Chairman Hensarling. You have failed in your duty to 
prescribe a rule under Section 1071. The same is true of 
Section 1033.
    Two years ago Democrat committee members, led by the 
ranking member, said, ``Your unwillingness to prioritize 
implementing Section 1071 is unacceptable.''
    So, Mr. Director, can you cite any section of Dodd-Frank 
that permits you to ignore mandatory rulemakings for 5-plus 
years, knowing that you have engaged in discretionary 
rulemaking such as the payday rule, the arbitration rule, and 
the prepaid card rule, and why these are not grounds for 
removal for cause?
    Mr. Cordray. Okay. I am happy to address that if you want 
to give me a few moments to do so.
    Chairman Hensarling. Please.
    Mr. Cordray. Section 1071 is a required rulemaking. There 
have been a number of required rulemakings; there have been 
more than a dozen or so that we have been required to enact. We 
have adopted those rules at a reasonable pace over time.
    One of those rules was updates to the Home Mortgage 
Disclosure Act reporting and collection and publication of 
information process. That also involves bringing over from the 
Federal Reserve the operational job of actually conducting the 
data collection and publication, which is a big job; there are 
lots of people involved with that.
    And we had made the judgment, I think reasonable, that the 
small business lending data collection and reporting, which has 
never existed before--the HMDA has been in operation for 40 
years--is something that should be in order just behind the 
HMDA rule.
    The HMDA rule has now been finalized and we are at work on 
the small business lending rule, and that is what I can tell 
you at this point. I would be happy to--
    Chairman Hensarling. I appreciate that, Mr. Cordray but 
again, you have engaged in discretionary rulemaking for almost 
5\1/2\ years; mandatory rulemakings have gone undone. And 
again, I think it, frankly, proves removal for a cause grounds.
    I now yield to the ranking member.
    Mr. Cordray. I will be happy to take your advice and move 
forward speedily on that rule as fast as we reasonably can 
move, if that is what--
    Chairman Hensarling. I now yield to the ranking member.
    Mr. Cordray. --direction to be.
    Ms. Waters. Thank you very much, Mr. Chairman.
    Mr. Cordray, I would like you to absolutely ignore the 
National Review. The article was done by someone who used to 
work for Mr. Hensarling, and I just don't think that is 
credible.
    And let me just say that you organized this Consumer 
Financial Protection Bureau wonderfully well in a short period 
of time. You put together what Dodd-Frank asked you to do in an 
extraordinary period of time, and I know that you have dealt 
with every aspect of organizing the Consumer Financial 
Protection Bureau.
    I trust you, and I believe in you, and I believe that you 
have moved as quickly as you possibly could to implement 1071. 
I have no problems with it, and if I don't have any problems 
with it as a minority woman, I don't think anybody else should 
have any problems with it because I have not seen some of those 
who complain step up to the plate to deal with the problems of 
minorities and small businesses and women, et cetera.
    Having said that, let's get to some real issues.
    On Wells Fargo, they would like to take the credit away 
from you about what you have done to deal with the fact that 
Wells Fargo created these accounts in clients' names without 
them knowing about it. Would you please tell us what you did 
and how you did it? And don't let them deny what you have done 
and what you have accomplished with the Wells Fargo problem.
    Mr. Cordray. Sure. No, I know that there are people who 
just don't like to see any positive work from the Consumer 
Bureau and want to try to explain it away wherever they can.
    The Wells Fargo matter was a very significant matter. We 
first began to hear about potential problems in the institution 
in 2013. We received a couple of whistleblower tips.
    At that time it appeared to be an employee-employer 
problem. It evolved over time.
    Obviously, millions of accounts weren't opened in a day. 
This was a problem that did evolve over time.
    Our work on the problem also evolved over time. We began by 
reviewing the issues in supervision, and over time it became 
clear that they were growing and they were significant and it 
needed to move over to our enforcement area, which involved our 
own investigation together with our partners; we brought the 
OCC in and we worked with the L.A. City Attorney's Office.
    But we conducted depositions of bank officials which was 
the first time that that was able to be done. We compelled the 
production of thousands of pages of documents, which was the 
first time those documents were able to be turned over. And we 
were able to document and specify that there were, in fact, 
millions of deposit and credit card accounts that have been 
opened illegally, that this was a widespread practice involving 
thousands of employees. I have never seen a situation like this 
where more than 5,000 employees were fired because of the 
extent of the irregularities within the institution.
    We completed successfully an enforcement action with our 
partners, which is always difficult to do and time-consuming 
but was important to do quickly because that is what exposed 
this matter to the public and has brought lots of follow-on 
actions by other public officials, other regulators, the 
Congress of the United States, the press, and individuals who 
have brought their own claims. And it is an ongoing matter.
    We have installed a monitor at Wells Fargo that has 
continued to make sure that all consumers are being remediated 
properly, including ancillary issues, that the problems are 
being cleaned up going forward and will not occur again. There 
is a horizontal review that we are engaged in across other 
institutions to see if similar problems are occurring and to 
make sure they are being cleaned up.
    And we have issued a bulletin to put the entire industry--
bank and non-bank companies--on notice that any problems of 
this kind around incentive compensation programs, whether it is 
in bank accounts, or credit cards, or mortgages, or debt 
collection, or wherever, will not be tolerated and needs to be 
monitored carefully. So that is significant work and it is 
ongoing.
    Ms. Waters. The city attorney that I am referring to and 
you are referring to is Mike Feuer, in my city of Los Angeles. 
He has nothing but praise for you. He has nothing but praise 
for you because he has never, he said, been able to work with 
anyone in the way that he worked with you and how you moved so 
quickly not only to follow up and to further investigate and 
explore, to do what you are able to do to make sure that you 
sanctioned them with the fines in the way that you did.
    So I want you to know that I am very appreciative. My City 
is appreciative. The city attorney is appreciative.
    And don't let anybody take credit away from the work that 
you have done to protect the consumers from the fraud that was 
being perpetrated by Wells Fargo.
    Mr. Cordray. Our feeling is mutual for Mike and his team 
and we look forward to working on other matters in the future 
as they may arise.
    Ms. Waters. Thank you so very much.
    And I yield back.
    Chairman Hensarling. The gentlelady yields back.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Luetkemeyer, chairman of our Financial Institutions 
Subcommittee.
    Mr. Luetkemeyer. Thank you, Mr. Chairman.
    Welcome, Mr. Cordray.
    Director Cordray, I want to start by asking you about the 
Bureau's proposed amendments relating to disclosure of records 
information issued in August of last year. As I understand it, 
this amendment would impose what amounts to be an unprecedented 
gag order on any individual entity under investigation by CFPB.
    In your proposal, as I understand it, you allow for 
absolutely no judicial review.
    Mr. Director, even recipients of national security letters 
of law enforcement are permitted due process. No other Federal 
regulatory agency has an outright prohibition on the disclosure 
information--not the SEC, not the FTC.
    Can you provide me with a compelling reason why the Bureau 
needs this unprecedented gag order authority?
    Mr. Cordray. I will say two things.
    Number one, I don't think that the rule has the far-
reaching effects you are describing. But let me say that we 
have received those comments from you and your colleagues. We 
think they raise legitimate concerns. We are going back to the 
drawing board in terms of what we are doing on that issue, and 
we will produce a rule that I believe that you will respect and 
appreciate that we have responded to those questions.
    Mr. Luetkemeyer. Well, Director, I have here with me this 
morning a letter from the ACLU, of all people. And the letter 
is dated October 20, 2016; it is from the legal director. In 
there it delineates basically what I just said with regards to 
other agencies--they don't have this prohibition.
    In fact, in your rule it indicates that if you look at it 
the recipient of the subpoena would not even be able to put 
that information on their own website, which you can do on your 
website. And even they recite here the concern with regards 
to--even in national security interests there is a very strict 
protocol that has to be observed in that situation even, to be 
able to protect that information. And yet, you are going beyond 
that.
    So again, this elimination of due process is basically 
unconstitutional. In fact, in their letter they cite that 
provision. So I am very concerned about that, and to me, we 
need to withdraw the rule. It makes no sense. It doesn't have 
any bearing. I don't know why you even are going down this 
road.
    Mr. Cordray. Yes. So I am hearing what you are saying. It 
is reinforcing the concerns that you had raised and others have 
raised. I think they are legitimate concerns and we are going 
back to the drawing board on that, and I think you will be 
happy to see that when that is completed.
    Mr. Luetkemeyer. Okay. With regards to another issue, with 
regards to small-dollar lending and access to credit, you and I 
have talked about this at length over the years, and I am still 
very concerned about some of the actions that your agency has 
taken.
    The small-dollar lending rule is, in my view, so punitive 
that it will close businesses and leave consumers in my 
district out of options. And I will give you an example.
    Let me read a quick part of a letter that I got from a 
gentleman named Nick in Sinclair, Missouri. Nick writes, ``The 
CFPB has made a rule that will really hurt people who turn to a 
payday loan to help solve the personal finances. This is not 
just a bad idea, this is a horrible one. Please do not let this 
rule stand, Congressman Luetkemeyer.
    ``My car broke down recently and I was worried that I 
wouldn't be able to afford all the repairs. I went to my local 
cash advance store and was quickly approved to get a loan. I am 
glad I used these loans to help me get my car fixed and back on 
the road.''
    Director Cordray, I know you think that everybody can turn 
to other sources of credit whenever they are in--like in Nick's 
situation here, he needs some immediate cash to fix an 
immediate need. But if the government decides that he can't 
have this kind of loan, where does he go to get this? What is 
your solution to this?
    Mr. Cordray. Yes. So I want to be careful with what I say 
because this proposal was out for comment. We received over a 
million comments on it, some of them along the lines of what 
you just said, some of them quite the reverse. And we are 
trying to work through that; it is a complicated subject.
    I will say there are 14 States in the union that have no 
payday lending. South Dakota is the most recent one to join 
their ranks because the voters in that State, by 76 percent, 
approved a ballot measure last fall to essentially bar payday 
lending in the State, and that is tens of millions of Americans 
in those States who seem to get by just fine.
    So, that is an interesting experiment that you have, part 
of the country that has no payday loans and part of it does.
    Mr. Luetkemeyer. With all due respect, Director, they are 
still there. They are going offshore, and you know this as well 
as I do. And those aren't regulated, so therefore I don't know 
how you get around them, just saying, well, there is no access, 
period.
    There are other ways to do this. They increase their credit 
card debt, their prepaid cards. These are all things that are 
other options, but that shows that they are--in those 
situations they have higher credit card past dues and things 
like that.
    This is a need for immediate cash and this rule is so 
restrictive it is driving people into certain areas they don't 
want to go to.
    Mr. Cordray. Yes, that is not what I intended to say. It is 
just that payday lending is one way to meet that need; there 
are many other ways to meet that need. And in the States that 
do not have payday lending people find many other ways to meet 
that need.
    But it is a legitimate discussion. It is something we are 
thinking hard about and we have gotten, as I said, many, many 
comments on both sides of that issue.
    Mr. Luetkemeyer. I yield back. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from New York, Mrs. 
Maloney, ranking member of our Capital Markets Subcommittee.
    Mrs. Maloney. Thank you. Thank you, Mr. Chairman, and 
Ranking Member Waters.
    Director Cordray, I would like to ask you about the 
Consumer Bureau's prepaid card rule, which I believe went into 
effect in November. The prepaid rule requires minimum 
disclosures, limits the amount of overdraft on prepaid cards, 
and establishes a process for resolving errors and customer 
disputes. The prepaid card market is growing very, very quickly 
and it has a great deal of potential.
    But there are virtually no Federal consumer protections for 
prepaid cards, and that is why the rule coming from your agency 
is so important.
    The rule was supposed to take effect in October 2017, but 
the Bureau recently proposed delaying the effective date by 6 
months, to April 2018. In its proposed delay the Bureau said 
the additional time would allow the Bureau to, ``evaluate 
concerns raised by industry participants regarding certain 
substantive aspects of the rule.''
    So my question is, is the Bureau open to making 
substantial, substantive changes to the prepaid rule before it 
goes into effect? And if the Bureau is open to that, what 
aspects of the rule is the Bureau open to changing? I am 
particularly interested in the disclosure requirements and the 
issues that affect digital wallets.
    Mr. Cordray. Okay. Thank you. And I will say two things in 
response to that question.
    The first is--and it is important to keep this in mind as 
some people are talking about trying to overturn that rule--the 
rule was finalized last fall but it has an implementation 
period for companies to be able to work on their packaging and 
other things and get ready, had an implementation of 12 months. 
We have now determined from what we have heard that that time 
period may be too short, and we have put out a proposal to 
reopen the issue of extending that period of time for 6 more 
months.
    Let's understand where that rule comes from.
    Probably most Americans, almost all of those in this room, 
have bank accounts. On those bank accounts we have certain 
legal rights. We have rights to get errors corrected; we have 
rights to get disputes resolved; we have rights to certain 
disclosures on those accounts. Nobody wants to roll back those 
rights for those of us who have bank accounts.
    There are millions of Americans now who do not have bank 
accounts and for whom prepaid cards and prepaid accounts are an 
increasingly satisfactory solution, but they have none of those 
protections. This is meant to level the playing field and make 
sure they have the same protections that more privileged 
members of our society who have bank accounts have, that we 
take for granted and are basic.
    Now, having said that, we recently proposed to extend the 
effective date of the rule by 6 months and we have been hearing 
from industry during this time about a few issues that have 
come up as we have been working with them to implement the 
rule.
    And we have heard enough that we believe it makes sense to 
seek comment on at least two of the issues in the following 
rulemaking in the coming weeks, and perhaps there will be 
others. The first relates to the linking of credit cards into 
digital wallets that are capable of storing funds, and the 
second issue relates to error resolution for prepaid cards that 
have not been registered.
    Both of these could have disclosure implications. Both of 
them we are going to take a serious look at and we intend to 
try to figure out how to address them.
    Mrs. Maloney. So you are open to substantial changes?
    Mr. Cordray. We are always open to hearing more from 
stakeholders--that is all sides, consumer groups and industry--
about what else could be done to improve the functioning of our 
rules.
    Mrs. Maloney. I am interested in overdraft fees, and my 
question is, do you plan to propose a rule on overdraft fees 
before your term expires in 2018? And if so, when can we expect 
to see this proposed rule?
    Mr. Cordray. As you know, and we have discussed this a 
number times, overdraft is an issue that the Consumer Bureau 
has been looking at from the outset. There have been some 
problems in that area.
    I think private lawsuits have demonstrated certain problems 
that have resulted in significant resolutions. The Federal 
Reserve had just tried to address this issue before we became 
an agency with its opt-in rule.
    The different Federal agencies have different approaches to 
overdraft, which is probably not the right landing place. And 
it is something that we have been looking at for quite some 
time.
    As to when we would or would not initiate a proposed 
preliminary framework for rulemaking, which is what we need to 
do with small business review panels, I can't speak to the 
timing on that, but it is something we would be happy to keep 
you and your staff posted on as we go, and it is an issue that 
is on our minds very much.
    Mrs. Maloney. Okay. My time has expired, but I wanted to 
hear also your safeguards to mortgage products. But my time--
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from New Mexico, Mr. 
Pearce, chairman of our Terrorism and Illicit Finance 
Subcommittee.
    Mr. Pearce. Thank you, Mr. Chairman.
    And thanks, Mr. Cordray, for being here.
    I appreciate your strong interest in consumer complaint 
filings. You draw out that you have had more than a million 
filed. Have you got any rough breakdown on how many of those 
complaints have been against community banks?
    Mr. Cordray. We don't actually take or put in our database 
any complaints against community banks.
    Mr. Pearce. Okay. How about from rural counties? Do you 
break it down by rural counties?
    Mr. Cordray. We can break down complaints, certainly, by 
State. There may be smaller divisions we could put them into. 
If you are interested in that I would be happy to have my staff 
talk to your staff about--
    Mr. Pearce. How many complaints against the CFPB?
    Mr. Cordray. Beg your pardon?
    Mr. Pearce. How many complaints against the CFPB? In other 
words, I hear quite frequently when I go to the district that 
the CFPB is intrusive: ``They do this; they are limiting our 
access.'' So how many complaints against CFPB?
    Mr. Cordray. I see. So our database is about consumer 
complaints about the financial institution with whom they have 
a relationship--
    Mr. Pearce. Okay, so you don't track when people--you don't 
have any kind of one-star, two-star, three-star rating for 
yourself?
    Mr. Cordray. No, although we do hear--
    Mr. Pearce. How many of the complaints--I appreciate that 
you don't track those.
    And so now, keep in mind that when you first started our 
discussion here was about rural and you are defining Luna 
County in the same category as New York City. Luna County has 8 
people per square mile and New York City has 28,000 people per 
square mile.
    You have a lot more options there in New York City than you 
do in Luna County. And so everything you might do which would 
choke off access we were creating tremendous friction with you, 
if you recall that.
    Mr. Cordray. Yes.
    Mr. Pearce. And so I am interested in page four, where you 
say: ``We are tailoring our approaches to financial decision-
making,'' and then you give all these subgroups, but you didn't 
put rural in there.
    Rural is a big part of America. Why didn't you include that 
in your list? You tell everything else that you are doing.
    Mr. Cordray. I should have included that on the list 
because we have actually made good progress there.
    Mr. Pearce. Okay, fine. You should have put it there.
    Mr. Cordray. No, but we have also changed our definition of 
``rural'' twice in response to comments that you have made to 
me and others have made.
    Mr. Pearce. Yes. And so I guess my point is that it took 
about 3 to 4, maybe 5 years to get that change from a Member of 
Congress.
    Mr. Cordray. That is right.
    Mr. Pearce. So when I see that you have done a million 
complaints I kind of wonder about those people who are not 
Congressman, the ones from rural areas, saying, ``You are 
making life very difficult for us.''
    One of the things that you and I discussed--and you sent 
the lady up to my office for an hour, hour-and-a-half--was the 
idea of seller finance. You get people in New Mexico and they 
are making $25,000, $30,000 a year is kind of the average.
    Over their lifetime they end up owning five trailer houses 
and then that is their retirement. They sell a trailer and they 
will take the payments and it helps Social Security.
    We have worked with you, our office, for over 2 to 3 years 
on one sentence. Just go back to what it was before, where you 
can sell five of those and then you need to be a mortgage loan 
originator. No, you have changed it to where if you sell one, 
you have to be a mortgage loan originator, and you have taken 
away the possibility of people having--just comparing it to the 
transportation system: In the city if your car breaks down, you 
go out and you get on the subway, or you get an Uber, you get 
anything, you rent a bicycle.
    The person that we are interviewing for my office in Las 
Cruces right now lives 65 miles away. There aren't any rental 
bikes out there; there is no Uber out there; there are no cabs 
out there. And if she has to go get a payday loan to fix the 
transmission, you say that you are going to shut off 75 percent 
of it.
    And so I have asked you before, the guy in the oil field 
who is just trying to get through every day says, ``What 
business is it of Mr. Cordray's if I want to borrow $100 on 
Monday and on Saturday, when I get my check, I am going to pay 
back $120?''
    I will guarantee you there is no one in New York City that 
is going to come out and lend that hundred bucks, and yet you 
are going to say that you can't have seller financing of 
trailer houses, you can't have any access to payday loans, you 
can't have this. And so I don't think it was an oversight on 
page four when you didn't include rural.
    I don't think it is in your mindset because I know the 
number of community banks that have closed down. I know the 
total assault on them. They are not the ones who caused the 
problem in 2008. They did not.
    And yet, you treated them the same in the initial 
definition. It takes 3 years to kind of unbundle that, and 
still they are the ones complaining to me.
    Go ahead, sir. I'm sorry I--
    Mr. Cordray. Could I have a moment to respond?
    Mr. Pearce. Yes, sure.
    Mr. Cordray. Okay.
    On the rural, what you are pointing to is a success story. 
It took longer than it might have, and we worked with Congress 
ultimately and the rural definition has been fixed. So it is an 
example, maybe not perfect, but of us listening and responding 
and not just digging our heels in.
    In terms of New Mexico, we have two call centers to take 
complaints around the country. One of them is in New Mexico in 
the area you described. We are very familiar with that area.
    We are happy to talk to you further about the seller 
financing issue if you want us to follow up on that--
    Chairman Hensarling. The time of the gentleman--
    Mr. Pearce. The rural problem is not fixed, with all due 
respect, and I appreciate your observation.
    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.
    And, Dr. Cordray, thank you for the work you do on behalf 
of working families and consumers in the country, particularly 
on behalf of my--New York City's--the people that I represent.
    Dr. Cordray, I would like to share with you and the 
committee some stats regarding small business lending 
practices, in terms of the most vulnerable population of the 
small business sector, women and minorities, to show why I 
strongly disagree with the chairman of the committee about 
Section 1071.
    One study found that among women who sought financing, 32 
percent received approvals, compared to 35 percent of men. They 
were also more likely to receive short-term funding with APRs 
varying from 14 to 50 percent or higher than men.
    On average, women paid a 13 percent higher interest rate 
for the same product, even on SBA loans. These are loans 
guaranteed by the Federal Government.
    Women received less funding on average than men, the 
average being nearly $60,000 for women and over $156,000 for 
men. The same ran true for minority business owners. They are 
approved for lower loan amounts and pay higher interest rates 
than non-minorities.
    So it is important to be able to collect data so that it 
shows us whether or not we need to come up with legislative 
solutions to level the playing field in terms of making lending 
credit accessible to every sector of the small business 
community.
    Mr. Cordray. I find that very persuasive. I also heard the 
chairman loud and clear when he said that he wants us to move 
ahead quickly with that small business lending rulemaking, and 
we will respond to that oversight.
    Ms. Velazquez. Thank you.
    Director Cordray, increasingly, homeowners are purchasing 
rooftop solar panels as a way to reduce their monthly utility 
bills. Unfortunately, along with the growth of the solar panel 
market there have also been reported increases in consumer 
complaints regarding abusive or deceptive acts by solar 
companies in their sales, financing, and marketing practices.
    What is the CFPB doing to address consumer complaints in 
this industry?
    Mr. Cordray. We have been hearing two different things, and 
increasing amounts about both. One is that the sale of solar 
panels directly may involve abuses of consumers. There are 
limitations around our jurisdiction if it is a loan in 
connection with the sale of a retail product, so that is 
difficult for us. But we are talking to attorneys general and 
others to try to understand who can do what on that problem.
    There is a separate issue that may or may not be what you 
are referring to, which has to do so-called PACE loans, where 
one of the ways in which the solar panels are financed is that 
States have set up a superior priority tax lien on the property 
to be able to finance the energy efficiency changes, and that 
creates some real complexities in the real estate market that 
we are hearing a lot about from mortgage lenders and others and 
that we are trying to think about carefully and talk to FHFA 
and others about those. So we are hearing the same things you 
are hearing, I believe.
    Ms. Velazquez. Thank you.
    Credit unions in New York recently approached me and they 
expressed that it is becoming increasingly difficult to provide 
overseas remittances due to the escalating costs of complying 
with the associated rules and regulations. What is the CFPB 
doing when reviewing the remittances rules to make sure the 
cost has not gone up for consumers? And if you find it has, how 
will you address that?
    Mr. Cordray. I was going to a portion of my book, because I 
know we have some new data that folks provided me with on the 
issue of remittances. Ninety-six percent of that market is 
money transfer operators rather than banks and credit unions, 
so it is a market that is dominated by non-bank players. We're 
talking about people like Western Union, MoneyGram, and now, 
increasingly, online products that are going to be disruptive 
in that market and perhaps beneficial to consumers, like Xoom 
and some others that we have seen.
    In terms of the credit unions, we did exempt, by creating a 
threshold, more than 80 percent of credit unions from coverage 
under our rule. But we have been talking to all the players and 
there may be more we can do on that front. That is something we 
are going to look at.
    We are doing a retrospective review of the remittance rule, 
as Congress requires us to do on all significant rules 5 years 
after it takes effect. That is going to be our first example of 
a--
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Michigan, Mr. 
Huizenga, chairman of our Capital Markets Subcommittee.
    Mr. Huizenga. Thank you, Mr. Chairman.
    And thank you, Director Cordray.
    It is my understanding that parties entering into a consent 
order with the Bureau are not actually admitting guilt, 
correct?
    Mr. Cordray. I'm sorry. There was a little noise. Are not 
what?
    Mr. Huizenga. Yes, it is a little noisy with the doors 
opening. It is my understanding that parties entering into a 
consent decree with the Bureau are not actually admitting 
guilt, correct?
    Mr. Cordray. Typically that is not the case, but I will 
tell you my perspective on it.
    Mr. Huizenga. I'm sorry, they are admitting guilt?
    Mr. Cordray. Typically it is not the case, and I will give 
you my perspective on it if you would like.
    Mr. Huizenga. Well, hold on. First of all, I just want to 
establish that because these consent orders normally contain a 
paragraph labeled ``stipulation,'' which states, ``Respondent 
agrees to the issuance of the consent order without admitting 
or denying any of the findings of facts or conclusions of law, 
except that the Respondent admits the facts necessary to 
establish the Bureau's jurisdiction over a Respondent in the 
subject matter of this action.''
    That is included in those consent decrees, correct?
    Mr. Cordray. I would be glad to offer you my perspective on 
that, if you would like.
    Mr. Huizenga. It is yes or no. Are those included?
    Mr. Cordray. That is true of many orders, yes--
    Mr. Huizenga. Yes, okay. All right, well, so--
    Mr. Cordray. --not necessarily all, but--
    Mr. Huizenga. --myself and many others in this committee 
have previously raised this with you, what I believe has been a 
significant problem with the way that the Bureau has issued 
their press releases around these consent orders. Specifically, 
in virtually every one of your settlements you don't prove any 
facts alleged--
    Mr. Cordray. I don't agree with that.
    Mr. Huizenga. --the company doesn't admit to any violation 
of the law, yet in your press releases that you send out there 
is regularly alleged, again without factual basis, that the 
company actually violated the law.
    Mr. Cordray. So again, could I give you my perspective on 
that?
    Mr. Huizenga. Quickly, please.
    Mr. Cordray. Okay. When we complete an action it is because 
we completed a thorough investigation of the facts. We know 
what the facts are; the company knows what the facts are. That 
is why they end up--
    Mr. Huizenga. So you don't believe that any of these 
companies that would sign a consent decree would feel 
intimidation or maybe the fact that this could draw out for 
years, that maybe they are too small to fight City Hall or the 
CFPB at this point?
    Mr. Cordray. I think the main reason why companies enter 
into a consent decree is we have done a thorough investigation. 
We know the facts; they know the facts. They don't have a leg 
to stand on, all right?
    Mr. Huizenga. Okay, like PPH.
    Mr. Cordray. So we document those orders in detail--
    Mr. Huizenga. Well--
    Mr. Cordray. --so everyone knows what was done, and it 
doesn't matter to me whether the company says they don't admit 
or deny. Does anybody doubt that Wells Fargo had the problem 
that we described when they fired 5,000 employees?
    Mr. Huizenga. Whoa, whoa, whoa. Hold on. Wait a minute. You 
are an attorney and you just said that it doesn't matter what 
they signed--
    Mr. Cordray. It doesn't matter to the truth--
    Mr. Huizenga. --as a legal document with the CFPB?
    Mr. Cordray. It doesn't matter to the truth of the facts of 
our investigations. What it does matter to--
    Mr. Huizenga. Okay, so you intentionally know that the CFPB 
signs consent orders that lie?
    Mr. Cordray. No. What it does matter to is whether--
    Mr. Huizenga. Well, you just said they are not factual.
    Mr. Cordray. Do you want me to answer you?
    Mr. Huizenga. I would like you to answer my question, yes.
    Mr. Cordray. I am happy to answer you.
    Where this matters is whether facts are already established 
for follow-on lawsuits by private plaintiffs' attorneys. I 
don't feel it is my job to make that happen for them.
    Mr. Huizenga. Okay.
    Mr. Cordray. My job is to conclude the investigation, to 
lay out the facts as they are. The company can dispute it or 
not as they please, but the facts are the facts. They are made 
public--
    Mr. Huizenga. So the facts are the facts, okay, perfect.
    Mr. Cordray. They are clear. Everybody can learn from that.
    Mr. Huizenga. We are going to disagree. I have a minute-
and-a-half here, but I would call this trial by press release, 
but maybe we can put it in slightly--
    Mr. Cordray. No.
    Mr. Huizenga. --different terms here.
    Several employees have filed claims of racial and sexual 
discrimination and retaliation with the Bureau's Office of 
Equal Opportunity and the Equal Employment Opportunity 
Commission (EEOC). You have settled some of these cases, 
including one with a whistleblower who has testified before our 
committee.
    I would like to enter into the record one of those 
settlements, which is dated October of 2014, if we could do 
that?
    Chairman Hensarling. Without objection, it is so ordered.
    Mr. Huizenga. And so using your standard, the fact that you 
settled these cases means that you and your managers, frankly, 
are guilty of racial and sexual discrimination, correct?
    Mr. Cordray. No, I don't agree with that. We have--
    Mr. Huizenga. Well, wait a minute. You just said it doesn't 
matter what it says, that the facts supersede what the paper 
says.
    Mr. Cordray. There is a consent order that is entered which 
has specifics facts in it--
    Mr. Huizenga. No.
    Mr. Cordray. --and that is a different issue--
    Mr. Huizenga. Director Cordray--
    Mr. Cordray. --in a private settlement.
    Mr. Huizenga. --using your own standard, you settled claims 
and thereby admit to your crimes, but you won't fire the 
managers responsible for that.
    Mr. Cordray. No. No, that is not correct. When we get 
complaints and grievances we look to resolve those through 
whatever process we can. We use mediation quite a bit and--
    Mr. Huizenga. Wait a minute. So you are saying that 
sometimes signing an agreement doesn't mean you are guilty.
    Mr. Cordray. No, no. You are not making a distinction--
    Mr. Huizenga. Wait a minute. You are either guilty of the 
things--
    Mr. Cordray. You are not making a distinction--
    Mr. Huizenga. --that you just settled, or the other people 
whom you have forced into settlement agreements might not be 
guilty of what you charged them.
    Mr. Cordray. No. A public consent order is an order entered 
by either the Bureau or the court, okay? It is an independent--
    Mr. Huizenga. It is for remediation, correct?
    Mr. Cordray. --independently authorized order. That is 
distinct from a settlement agreement, which may be a 
contractual matter.
    Mr. Huizenga. Here is the simple fact, Director Cordray: 
What is good for the goose is good for the gander, and you are 
not willing to accept the same standard that you apply to 
others on the outside for your own Bureau that you are--
    Mr. Cordray. It is apples to oranges.
    Chairman Hensarling. The time of the gentleman has expired.
    Mr. Cordray. I would be happy to follow up with you further 
if you would like.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from New York, Mr. 
Meeks.
    Mr. Meeks. Thank you, Mr. Chairman.
    And Director Cordray, let me first thank you because we 
voted 62 times previously on the Affordable Care Act only to 
find out that many of my colleagues, when it came time that 
they were in power, they realized that many of their 
constituents benefited from the Affordable Care Act.
    And you, sir, have now, I think, testified before Congress 
over 62 times. And I think that your responsiveness to Congress 
and who you are responsive to is consumers. They ask about 
accountability.
    Sir, isn't, in fact, your accountability to the consumers 
of America?
    Mr. Cordray. I believe it is to the public, yes, and every 
member of the public is a consumer, so--
    Mr. Meeks. And prior to the establishment of the CFPB, do 
you know of any such agency that would be reflective of the--
and responsible directly to the public or the consumers? The 
corporations or the banks, they have--they there responsible, 
as they tell me, to their board, to their stockholders, which 
is a limited crew, and to their corporate board.
    Who is responsible to the American public, the American 
people?
    Mr. Cordray. I think this Congress did a good thing in 
2010, and it is very important to have an independent watchdog 
looking out for consumers, standing on their side, making sure 
they are treated fairly in the financial marketplace, where it 
is typically not a fair fight when they are in a struggle with 
a large financial company.
    Mr. Meeks. In fact, when we had the greatest financial 
crisis since the Great Depression, the fact of the matter was 
because nobody was out there watching out for the consumer, 
many of the no-doc loans and bad products are what brought this 
country down. Is that not correct?
    Mr. Cordray. And do you know what that meant? That meant 
lots of people lost their jobs who had nothing to do with any 
of this; lots of people lost their homes--millions of people; 
and we all lost significant retirement savings. We all suffered 
because of that failure on the part of the regulatory system.
    Mr. Meeks. And the fact of the matter is, those people who 
lost their homes and jobs, et cetera, they were not just 
minorities; they were not just people from urban America; they 
were not people just from rural America; they were not people 
just from the east, the west, the north or the south; they were 
all Americans.
    They were not just Democrats. They were Democrats and 
Republicans. Is that not correct? They all fit within that 
group.
    Mr. Cordray. That is correct, and I will give you a great 
example.
    Maybe some people got into irresponsible mortgage loans. 
Maybe they should have known better; maybe they were defrauded.
    In that subdivision, if there were 10 foreclosures, 
everybody else in the subdivision, even though they had fine 
mortgages and they were okay initially, was going to get hurt 
because their home values were going to plummet and they were 
going to be innocent bystanders of this. And it happened to 
many, many millions of Americans, as you say, from all walks of 
life, of all backgrounds, of all origins.
    Mr. Meeks. So this is not a battle--you are not there just 
to represent minorities or just to represent urban America. You 
are there making sure that there are solutions for consumers 
wherever they be, no matter who they are, but you are the one 
agency that we have now to make sure that the American public 
has someone who has their back.
    That is whose back you have, right? The American public. 
The average, everyday Mary and Joe.
    Mr. Cordray. That is our job. It is a big job. We try to do 
it as best we can. When we don't get it right, we look to fix 
it.
    Mr. Meeks. In fact, you have something that is called the 
Consumer Complaint Portal. Is that correct?
    Mr. Cordray. We do.
    Mr. Meeks. Can you tell me something about how many people 
have responded to your Consumer Complaint Portal? Because if 
you are not doing your job then I guess you are only getting a 
few complaints, right? Because everybody else must be 
accountable--if you get rid of this Bureau and get rid of you 
there must be accountability somewhere, so there must be only a 
few people who are complaining to you. Is that correct?
    Mr. Cordray. That is not the way it seems to be working. We 
have had over 1,150,000 complaints so far. They are coming in 
at the rate of 25,000 to 30,000 a month.
    And people have--you know what this is like. Think about 
your mothers and fathers, sisters and brothers, sons and 
daughters. They have issues. They aren't sure how to fix them. 
It is a big, distant financial company that may or may not be 
responsive immediately to their concerns.
    To have a place to turn to, to come to this Consumer 
Bureau, to say the complaint in their own voice, and to make 
sure we will work with the company to try to get it fixed and 
they can get relief in many instances, that is really important 
for people. It is a good thing. It is something that we should 
want to preserve and it is very important.
    Mr. Meeks. And I would say it is fair to say, because I 
have looked at some of the people, where they come--some come 
from Nebraska, some come from Texas, some come from New York. 
So they have to be Democrats and Republicans and Independents 
and people who don't vote at all.
    There is no litmus test that is utilized. Is that correct?
    Mr. Cordray. And in fact, we get complaints referred to us 
from Congressional offices in all districts all across the 
country, Democrat, Republican, it doesn't matter, we are just 
trying to work on behalf of consumers. And we welcome those, 
and we encourage the offices to send them to us.
    Mr. Meeks. So I would say that every Member of Congress, 
Democrat or Republican, should say thank you. Thank you for 
helping our constituents on a regular basis, because without 
you they wouldn't have anybody.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Wisconsin, Mr. 
Duffy, chairman of our Housing and Insurance Subcommittee.
    Mr. Duffy. Thank you, Mr. Chairman.
    Welcome, Director Cordray.
    How long have you been the Director of the CFPB?
    Mr. Cordray. I first went into that position in January of 
2012.
    Mr. Duffy. So that would be 5 years and 3 months, right?
    Mr. Cordray. I guess that is right.
    Mr. Duffy. And--
    Mr. Cordray. Time flies when you are having fun.
    Mr. Duffy. When we are having fun it does.
    And the original intent of the Congress, a bill written by 
exclusively Democrats in Dodd-Frank, had the intent that the 
Director would serve for how long?
    Mr. Cordray. I wasn't here then. I understand there were 
some Republicans who supported that bill in the House--
    Mr. Duffy. Let's not take my time. This is an easy answer. 
The answer was they intended that the Director serve for 5 
years Not 5 years and 3 months, not 6 years and 6 months, but 5 
years.
    Mr. Cordray. No, I don't think so. That is not what the 
statute says.
    Mr. Duffy. And so when we look at your tenure, you were--
obviously you were brought in and it was found under the 
Supreme Court that the NLRB recess appointment issue would 
apply to you, as well, so you were brought in 
unconstitutionally by the President and then were reappointed, 
which will then give you a timeframe to the middle of next 
year. Is that fair to say?
    Mr. Cordray. That is one perspective on the matter, I 
suppose.
    Mr. Duffy. So you weren't appointed unconstitutionally. Is 
that your position?
    Mr. Cordray. I don't know that I have ever been ruled on 
that, but I would accept that the Noel Cannon case is the 
holding of this U.S. Supreme Court, and we accept it and 
respect it, certainly, as people do--
    Mr. Duffy. I'm sorry. You are over the 5-year time period, 
which would give you great cause right now to say, ``Listen, I 
have done my 5 years. I am going to comply with the spirit of 
my party and the intent of the law. I am going to step down.'' 
You have chosen not to do that thus far.
    Mr. Cordray. Could I--
    Mr. Duffy. One second. I will give you a chance to respond.
    Mr. Cordray. Okay.
    Mr. Duffy. As I look at the PHH case discussing whether the 
President has the authority to remove you, or that you serve at 
his pleasure, or if you can be removed for cause, the CFPB has 
appealed that case, which means you prefer the standard that 
you be removed for cause.
    And my question for you is would you prefer that the 
President--and again, we are going to note your political 
aspirations in Ohio--that we will walk through the racism, the 
sexism, we will walk through the intimidation and the 
retaliation--all the things that we did on our oversight 
committee and more--do that very publicly to have you removed 
for cause, or do think it is probably easier for you to say, 
``I have done my 5 years. I will step down and go?''
    What is the better way to do this? For you even, 
politically, what is the best way?
    Mr. Cordray. So to go back to your previous point--
    Mr. Duffy. No, make this one. Answer the question first.
    Mr. Cordray. --I was nominated by the President and 
confirmed by the Senate on a significant bipartisan vote in 
July of 2013 to serve a 5-year term. That is what the statute 
provides for and that is where we are at the moment.
    The PHH case, as you noted, is pending. It is an 
interesting constitutional set of arguments that is being 
presented there, and the court will sort it out.
    Mr. Duffy. Director Cordray, I would prefer we do this 
publicly. You have a rotting agency. We brought in women and 
minorities who have talked about the Bureau and how they treat 
women and African-American women.
    I'm sorry. I would be happy to have that public 
conversation because, guess what, I think Democrats even in 
Ohio would be aghast at what has happened at the CFPB.
    I want to move on. Do you know how--
    Mr. Cordray. You--
    Mr. Duffy. Do you believe that 25 million people--
    Mr. Cordray. Do I get a chance here?
    Mr. Duffy. Do you believe that 25 million people--
    Mr. Cordray. I don't get a chance. Okay.
    Mr. Duffy. --is a lot of people? 25 million people.
    Mr. Cordray. I'm sorry? I'm sorry, I was trying to respond 
to you and I missed your question.
    Mr. Duffy. Is 25 million people a pretty good chunk of 
folks?
    Mr. Cordray. 25 million people is a pretty good chunk of 
folks. I would agree with that.
    Mr. Duffy. So on this side of the aisle in this committee, 
collectively we represent 25 million people right here. And as 
the chairman pointed out, we have sent you subpoenas for years, 
and you fail to comply with those subpoenas.
    Mr. Cordray. I don't agree with that.
    Mr. Duffy. And on occasion when you do comply, you don't 
certify that you have complied with our requests. Other 
agencies certify that they have complied with the subpoena that 
has come from Congress, but not the CFPB. We won't certify 
compliance.
    Mr. Cordray. I don't know what you are referring to or--
    Mr. Duffy. How about Ally? Have you complied with our 
subpoena in regard to the Ally case that goes back to 2015?
    Mr. Cordray. I believe that we have complied with all of 
your subpoenas--
    Mr. Duffy. No, no. Let's talk Ally.
    Mr. Cordray. --and if you send us more, we will work to 
comply with those--
    Mr. Duffy. Have you complied with our Ally subpoena?
    Mr. Cordray. I beg your pardon?
    Mr. Duffy. Have you complied with our Ally subpoena?
    Mr. Cordray. I believe we have, and--
    Mr. Duffy. Have you certified--
    Mr. Cordray. --and let me say--
    Mr. Duffy. No, no, no. Have you certified that you have 
complied?
    Mr. Cordray. Let me say that that--
    Mr. Duffy. Have you certified that you have complied?
    Mr. Cordray. I am not sure what you are referring to, and I 
don't know that there is--
    Mr. Duffy. It is pretty clear. You are an attorney.
    We have a certification requirement in our subpoena that 
you certify your compliance. Have you certified to the 25 
million people that we represent that you have complied with 
our subpoena? Yes or no?
    Mr. Cordray. If that is an issue for you I would be glad to 
discuss it with--
    Mr. Duffy. No, my question is for you, Director. Have you 
certified your compliance with our subpoena? Because you have 
come in and said, ``I have complied.'' Have you certified that 
compliance? Yes or no?
    Mr. Cordray. What I will say is as of the end of last year 
we understood that--
    Mr. Duffy. What I will say is that you are dodging. You 
haven't certified compliance with any of our subpoenas.
    Chairman Hensarling. The time of the gentleman has expired.
    Mr. Cordray. Could I respond for 30 seconds?
    Chairman Hensarling. A brief response from the Director.
    Mr. Cordray. Okay. My understanding is that in response to 
that subpoena we have supplied yet more documents and we were 
engaged in discussions with staff, and at the end of last year 
staff said that they would engage in further discussions with 
us and they thought that would--we heard nothing until this 
week.
    Mr. Duffy. Never compliance.
    Mr. Cordray. And so--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from California, Mr. 
Sherman.
    Mr. Sherman. Mr. Cordray, thank you for your service.
    I want to associate myself with the ranking member's praise 
of you, except for the part perhaps where she posited the 
possibility that Donald Trump would appoint you for another 
term, that nothing other than that could diminish the high 
esteem that I have for you.
    We have up behind you on the board the trade deficit 
statistics. I know that we didn't have quite as big a trade 
deficit last month as was expected, but that was a quirk 
because of the Chinese New Year and some interruption in 
shipments.
    Mr. Cordray, we have the know-before-you-owe mortgage 
disclosures in TRID. It has resulted in transparency for 
consumers, and better accountability for financial 
institutions. But ongoing compliance issues remain, costing 
time and money for consumers and for the industry.
    When will the latest proposed rule be finalized, and do you 
plan to issue any additional guidance clarifying this rule that 
could be relied upon the industry as implementation continues?
    Mr. Cordray. It is apparently not appropriate for us to 
comment on the timing of a rulemaking since they are pending. 
These are issues somewhat like judicial opinions. They are done 
when they are done. So I am not sure what to tell you there.
    Mr. Sherman. But you understand the social utility of being 
done as expeditiously as you can be?
    Mr. Cordray. I always do, and I am sometimes disappointed 
at how slowly the Federal Government works even though I am 
trying to be there and make it work faster, yes.
    Mr. Sherman. And we have these PACE loans, which are home 
improvement loans for alternative energy, but they are 
structured as part of the property tax bill. Are you sure your 
agency can't--they are basically home improvement loans--exert 
jurisdiction in this area?
    Mr. Cordray. It is a pretty complicated subject is what I 
have learned, because in the States where those exist typically 
the State legislature has passed State laws that provide for 
priority liens, which involves the government in both the 
making and collection of those loans, and that is a very 
significant complicating factor for us. It is something that we 
have a team of people looking at and trying to work through 
because we are hearing enough about it to be concerned, as I 
think you are here, as well.
    Mr. Sherman. I would hope that your legal staff would work 
with us. I hope that this is an area--home improvement loans is 
an area that you ought to be involved in. And if you need 
legislation--
    Mr. Cordray. Home improvement loans, we are involved in--
    Mr. Sherman. Well, this is--
    Mr. Cordray. --but where there are government tax liens 
passed by State law--
    Mr. Sherman. --this is a--
    Mr. Cordray. --that is more difficult.
    Mr. Sherman. --this is a special, super-duper--
    Mr. Cordray. Yes, yes.
    Mr. Sherman. --home improvement loan--
    Mr. Cordray. Yes, it is.
    Mr. Sherman. --and if you need legislation I hope that we 
would work with you on this.
    Studies have shown that in some geographic areas it is 
possible to determine the identity of nearly 100 percent of the 
borrowers using the data that lenders are required to collect 
and report by the Home Mortgage Disclosure Act (HMDA). This is 
despite the fact that that Act supposedly provides for 
anonymous data in its final form.
    The revised and greatly expanded HMDA rule is slated to 
become effective on January 1st of next year and includes many 
highly sensitive data points, including the borrower's credit 
score. The Bureau has stated in its final rule that it would 
propose a balancing test to determine which of many data points 
would be re-disclosed to the public.
    What is your timeline? I realize this is another timeline 
question but--
    Mr. Cordray. That is all right. No, it is--
    Mr. Sherman. --some regulation for that process, and what 
does the CFPB plan to protect highly sensitive consumer data, 
like the borrower's salary or their credit score, from being 
publicly disclosed?
    Mr. Cordray. I am very well aware of that issue. It is 
something we are wrestling with.
    We do not want to be increasing the re-disclosure 
possibility for consumers, and it is something we are working 
on. We are mindful of the fact that although people would be 
reporting starting in January--and that, of course, was a 
mandatory rule that Congress required--we need to give guidance 
about the privacy aspects of this, and we are very sensitive to 
it.
    So I don't have a timeframe for you, but we are well aware 
of how these things fit together and the need for people to--
    Mr. Sherman. And let me just quickly urge you to use your 
authority to have a simpler version of many of your rules 
applying to smaller financial institutions.
    Mr. Cordray. Yes.
    Mr. Sherman. Otherwise they are driven out of the market 
and everybody has to go to Wells Fargo, and then you end up 
with 20 accounts.
    Mr. Cordray. We are trying to do that where we can, and I 
believe that is a sentiment shared on both sides of the aisle 
and it is something we hear quite a lot.
    Chairman Hensarling. The time of the gentleman has expired.
    Now, pursuant to clause d(4) of committee rule three, the 
gentlelady from Missouri, Mrs. Wagner, chairwoman of our 
Oversight and Investigations Subcommittee, will be recognized 
for an additional 5 minutes upon the conclusion of the time 
allocated to her under the 5-minute rule. The gentlelady is now 
recognized.
    Mrs. Wagner. Thank you, Mr. Chairman.
    And, Director Cordray, thank you for appearing here today 
before us. I want to ask you today about the widespread failure 
in consumer protection that occurred at Wells Fargo over a 
number of years regarding fraudulent sales practices in which 
Wells Fargo fired 5,300 employees for opening, gosh, up to 1.5 
million deposit and credit card accounts without the customers' 
knowledge or consent.
    Sir, despite receiving more than 140,000 pages of 
responsive records from Wells Fargo, the OCC, and the CFPB, 
this committee to date has seen no evidence that the CFPB had 
an ongoing independent investigation relating to Wells Fargo 
sales practices prior to May 8, 2015. This is 4 days after 
Wells Fargo informed the CFPB that the L.A. city attorney filed 
a civil complaint against the bank that same day, and over 500 
days, sir, after the original article by the L.A. Times first 
broke the story about fraudulent accounts at Wells.
    Director Cordray, there is a binder just to your right, 
sir. It has a Congressional seal on it. Will you grab it 
please?
    The binder to your right, sir. You don't care to take the 
binder?
    All right. It is in front of you. There are documents, sir, 
I am going to be referencing. Perhaps you would like to 
reference them also.
    And I would like the record to reflect that the gentleman 
has ignored the binder that Congress has put in front of him.
    I will be referencing--and I would appreciate it if you 
would keep your answers very, very short, sir. Simply yes or no 
on most of them.
    Mr. Cordray. I am quite familiar with the background--
    Mrs. Wagner. Sir, do you recall when you first read the 
December 2013 L.A. Times article I am referring to?
    Mr. Cordray. I beg your pardon? Have I read that article?
    Mrs. Wagner. When did you first read the article?
    Mr. Cordray. I do not know when I first read that article.
    Mrs. Wagner. At the Senate Banking Committee's hearing in 
September 2016 on Wells Fargo--well let me ask you, did you 
read it?
    Mr. Cordray. I have read that article.
    Mrs. Wagner. All right.
    Mr. Cordray. I don't recall when I first read it.
    Mrs. Wagner. All right. At the Senate Banking Committee's 
hearing in September 2016 on Wells Fargo, L.A. City Attorney 
Michael Feuer noted in his testimony that upon reading the L.A. 
Times article, he ``immediately instructed his staff to 
investigate the allegations.''
    Do you believe that was an appropriate response? Yes or no?
    Mr. Cordray. I believe that Mike Feuer and his team 
conducted themselves--
    Mrs. Wagner. Was that an appropriate response? Yes or no?
    Mr. Cordray. --in an exemplary fashion throughout this 
case.
    Mrs. Wagner. Did you also instruct your staff to 
immediately investigate the allegations made in the L.A. Times 
article after you read it? Yes or no?
    Mr. Cordray. Actually, we had had previous indication that 
there might be problems at Wells Fargo--
    Mrs. Wagner. Did you instruct them? Yes or no?
    Mr. Cordray. We had two whistleblower tips earlier--
    Mrs. Wagner. Did you instruct them? Yes or no? I will get 
to that in a moment, sir. I am asking you a yes-or-no question.
    Mr. Cordray. So it wasn't the L.A. Times article that 
tipped us off to the fact--
    Mrs. Wagner. All right. I will--
    Mr. Cordray. --that there might be a problem.
    Mrs. Wagner. Let me reclaim my time. Did the CFPB first 
initiate a supervisory review of Wells Fargo branch sales 
practices on May 8, 2015?
    Mr. Cordray. No, that is not correct. That is not a 
correct--
    Mrs. Wagner. Exhibit one in the binder that you prefer not 
to look at in front of you is a letter dated March 3, 2016--it 
is up here for review, also--from Edwin Chow, an employee of 
yours, a CFPB regional direct for the west region, where he 
indicated to Wells Fargo that the CFPB, ``initiated a 
supervisory review of Wells Fargo's branch sales practices on 
May 8, 2015.''
    Mr. Chairman, I would like to enter this letter in the 
record.
    Chairman Hensarling. Without objection, it is so ordered.
    Mrs. Wagner. Are you denying that the CFPB initiated its 
supervisory review of Wells Fargo's branch sales practices on 
May 8, 2015? Yes or no?
    Mr. Cordray. We actually had engaged in supervisory 
activity prior to that time.
    Mrs. Wagner. Did the CFPB notify Wells Fargo on March 3, 
2016, that the CFPB had decided to--
    Mr. Lynch. Mr. Chairman?
    Mrs. Wagner. --refer this matter to enforcement, sir?
    Mr. Cordray. That is the key point that I want to make sure 
you are clear on, okay?
    Mr. Lynch. Mr. Chairman?
    Mr. Cordray. We were engaged in--what is happening?
    Mr. Lynch. Just a point of parliamentary--
    Chairman Hensarling. The clerk will suspend.
    For what purpose does the gentleman from Massachusetts seek 
recognition?
    Mr. Lynch. Mr. Chairman, I am just wondering, according to 
the rules, am I entitled to any of the documents that we are 
questioning the witness on? Because I would really like to get 
copies of the documents, if I could.
    Chairman Hensarling. They will be provided to all Members.
    Mr. Lynch. But we are doing the investigation now, and I 
was just wondering if I could get copies of--if copies of the 
documents have been provided to all the Members as is required 
under the rules?
    Chairman Hensarling. Members may request copies of the 
documents and they will be provided to Members after the 
request.
    Mr. Lynch. May I make a formal request to get the 
documents, please?
    Chairman Hensarling. I'm sorry, would the gentleman repeat 
the question?
    Mr. Lynch. May I get the documents then? I guess I have to 
ask for them.
    Chairman Hensarling. Apparently, they are being provided to 
you as we speak.
    Mr. Lynch. Thank you, Mr. Chairman. I appreciate that.
    Chairman Hensarling. The clerk will start the clock again.
    The gentlelady is once again recognized.
    Mrs. Wagner. Are you denying, sir, that the CFPB initiated 
a supervisory review of Wells Fargo branch sales practices on 
May 8, 2015? Yes or no?
    Mr. Cordray. Well, no. A moment ago you said, ``enforcement 
investigation,'' and as I said--
    Mr. Clay. Mr. Chairman--
    Mr. Cordray. --in my introductory--
    Mr. Clay. Excuse me.
    Mr. Chairman, is it possible for--
    Chairman Hensarling. The gentlelady will suspend.
    For what purpose does the gentleman from Missouri seek 
recognition?
    Mr. Clay. I would love to see these documents, too. The 
gentlewoman has raised some interesting points and I think that 
the documents should be shared with the committee.
    Mr. Huizenga. Mr. Chairman?
    Mr. Cordray. Mr. Chairman?
    Ms. Waters. Will the gentleman yield?
    Mr. Cordray. Mr. Chairman--
    Mr. Clay. I will yield.
    Ms. Waters. Mr. Chairman, why don't we just give the 
documents to all the Members over here?
    Chairman Hensarling. They will be provided in a timely 
fashion. They are not violative of any committee rules, and I 
think so far what the gentlelady has alluded to is also put 
onto the committee screens.
    The gentlelady from Missouri is recognized yet again.
    Mrs. Wagner. Can I have my time restored, Mr. Chairman, 
please?
    Chairman Hensarling. The time was stopped.
    Mrs. Wagner. Did the CFPB, sir, notify Wells Fargo on March 
3, 2016, that the CFPB had decided to refer this matter to 
enforcement? Yes or no?
    Mr. Cordray. Yes. When that happened there had been 
previous work done on the matter.
    Mrs. Wagner. Okay. But you do not deny that the CFPB 
represented in writing that it referred this matter to 
enforcement on March 3, 2016, correct?
    Mr. Cordray. So let me clarify this for you. The letter--
and I am--
    Mrs. Wagner. Sir, my time is limited and I have a lot of 
question.
    Mr. Cordray. I understand. The letter dated March 3rd is a 
point at which we decided that the matter had risen to a level 
where it was no longer a supervisory matter and, in fact, had 
become an enforcement matter.
    Mrs. Wagner. Reclaiming my time, did the CFPB refer this 
matter to enforcement around the same time that the L.A. city 
attorney began settlement negotiations with Wells Fargo?
    Mr. Cordray. Yes, but that is not when we initiated work on 
the matter.
    Mrs. Wagner. Wow. What an amazing coincidence because, in 
fact, the CFPB referred this Wells Fargo matter to enforcement 
on March 3rd, 2016. The L.A. city attorney referred it on March 
2nd, 2016. What an amazing coincidence.
    Did the CFPB, sir--
    Mr. Cordray. These aren't coincidences. We are in contact 
with local officials--
    Mrs. Wagner. Sir, reclaiming my time--
    Mr. Cordray. We are in contact with officials around the 
country--
    Mrs. Wagner. --did the CFPB first request--
    Mr. Cordray. --and we work cooperatively with them.
    Mrs. Wagner. Director Cordray, did the CFPB first request 
that Wells Fargo delay the destruction of records relating to 
its branch sales practices on May 8th, 2015?
    Mr. Cordray. I'm sorry, say that again?
    Mrs. Wagner. Did the CFPB first request that Wells Fargo 
delay the destruction of records relating to its branch sales 
practices on May 8th, 2015?
    Mr. Cordray. Consistent with the fact that it had become--
it had migrated and graduated into an enforcement action, yes.
    Mrs. Wagner. I would like to enter into the record Edwin 
Chow's letter from the CFPB, Mr. Chairman, as exhibit three.
    Chairman Hensarling. Without objection, it is so ordered.
    Mrs. Wagner. Sir, so you agree. So you do not deny that the 
CFPB first requested on May 8, 2015, that Wells Fargo delay the 
destruction of records pertaining to its branch sales 
practices. Yes or no?
    Mr. Cordray. So that is just a reminder of obligations--
    Mrs. Wagner. Is that a yes or no, sir?
    Mr. Cordray. --that already exist under the law, so.
    Mrs. Wagner. Is that when you sent the request? Yes or no?
    Mr. Cordray. That is a reminder of the obligations that 
already exist under the law, yes.
    Mrs. Wagner. I will take the reminder as a yes.
    If this was the first time that the CFPB made this request 
to Wells Fargo, then why didn't the CFPB produce those records 
to this committee, given the fact that such records would be 
responsive to the committee's record request of September 16, 
2016, which is exhibit five, Mr. Chairman--that is in your 
binder--that I would also like to have entered into the record.
    Chairman Hensarling. Without objection, it is so ordered.
    Mr. Cordray. So, I'm sorry, we have given you documents, 
and if there are more documents that you want we are happy to 
work with your staff.
    Mrs. Wagner. We have been asking for documents, as everyone 
on this side of the aisle has referenced, for hundreds and 
hundreds and hundreds of days, sir, and you are in woeful 
compliance.
    Let me move on.
    Mr. Cordray. If there are documents you don't have, I would 
be happy to try to provide them.
    Mrs. Wagner. Director Cordray, I want to stay on this 
measure. Did the CFPB first request on May 8, 2015, that Wells 
Fargo produce items such as sales practice policies and actions 
taken by the bank regarding fraudulent sales practices at the 
bank? Yes or no?
    Mr. Cordray. Those are the compelled production of 
documents--
    Mrs. Wagner. Yes or no, sir?
    Mr. Cordray. --that became very significant to this 
investigation.
    Mrs. Wagner. Yes or no, sir?
    Mr. Cordray. Yes.
    Mrs. Wagner. All right. Good. So you do not deny that the 
CFPB first requested that Wells Fargo produce this information 
on May 8, 2015?
    Mr. Cordray. No. I don't, and that is not correct. And you 
are conflating things, and I don't want you to build on that in 
an erroneous fashion.
    Mrs. Wagner. Well, let me move on then. If you are saying 
that this--
    Mr. Cordray. They are already--
    Mrs. Wagner. --isn't the first time--
    Mr. Cordray. No.
    Mrs. Wagner. If you are saying this isn't the first time 
the CFPB requested this information from Wells Fargo, then why 
didn't the CFPB produce those records to this committee--
    Mr. Cordray. Look, first--
    Mrs. Wagner. --given that such records would be responsive 
to the committee's request of September 16, 2016, which is 
exhibit five that has been put in. I have a few more.
    Mr. Cordray. First of all--
    Mrs. Wagner. Director, did the CFPB ever contact Wells 
Fargo about its fraudulent branch sales practices before Wells 
Fargo informed the CFPB on May 4, 2015? Yes or no?
    Mr. Cordray. We had had supervisory activity prior to that 
time and subsequent to that time, which ultimately resulted--
    Mrs. Wagner. I will take that as a yes. Were you aware that 
the earliest correspondence between the CFPB and the Wells 
Fargo that you have produced is the Edwin Chow letter of May 8, 
2015?
    Mr. Cordray. There was supervisory activity prior to that 
time--
    Mrs. Wagner. All right. Let's get to that.
    Mr. Cordray. --and subsequent to that time.
    Mrs. Wagner. Is this the earliest correspondence between 
the CFPB and Wells Fargo pertaining to the bank's sales 
practices?
    Mr. Cordray. I don't know exactly, but--
    Mrs. Wagner. All right. Well, I will leave it at that.
    Did the CFPB depose or interview only three Wells Fargo 
employees in connection with the fraudulent accounts scandal?
    Mr. Cordray. The CFPB took the only depositions that 
occurred in this case.
    Mrs. Wagner. Were there three? Yes or no, three?
    Mr. Cordray. The only ones that occurred in this case--
    Mrs. Wagner. Were there three, sir?
    Mr. Cordray. --we took them.
    Mrs. Wagner. Is that correct? That is correct then. Yes.
    Wow. You tout CFPB's investigation as both independent and 
comprehensive. Director Cordray, only interviewing 3 employees 
for such widespread cases of fraudulent practices where 5,300 
employees were fired does not seem very comprehensive to me, 
sir.
    In your letter to this committee on September 23, 2016, you 
indicate that Bureau staff first became aware of some related 
issues around Wells Fargo. This was well over a year before 
either initiating a supervisory review or containing the bank 
about fraudulent practices, sir. It is most concerning.
    I don't have much time left.
    Mr. Cordray. So, let me--
    Mrs. Wagner. No, I am going to close here, sir. And then--
    Mr. Cordray. Okay. You don't want to give me a chance to 
respond? That is okay.
    Mrs. Wagner. --can yield or not.
    Director Cordray, from the minimal records you have given 
to this committee thus far, and based on your testimony, the 
only conclusion there is to draw regarding the Wells Fargo 
scandal is that the CFPB was asleep at the wheel, Director 
Cordray, under your leadership--
    Mr. Cordray. That is not correct.
    Mrs. Wagner. --and that your investigation--
    Mr. Cordray. That is not correct.
    Mrs. Wagner. --in this matter was far from independent and 
comprehensive, sir.
    You have claimed that the CFPB was created to root out this 
kind of widespread consumer harm, but the L.A. Times, the OCC, 
and the L.A. city attorney all got there before you did, sir. I 
would encourage you--
    Chairman Hensarling. The time--
    Mrs. Wagner. --after your testimony to--
    Chairman Hensarling. The time of the gentlelady--
    Mrs. Wagner. --revise your remarks, sir.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    Mrs. Wagner. I yield back my time.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Massachusetts, Mr. Capuano.
    Mr. Capuano. Thank you, Mr. Chairman.
    Mr. Cordray, boy, they really hate you, don't they?
    Mr. Cordray. They don't want to give us--
    Mr. Capuano. I don't know if it is you or the agency.
    Mr. Cordray. --any credit for anything good that we do. I 
understand that. That is part of the game.
    Mr. Capuano. I think I have entered the bizarro world now. 
We have already had somebody call for you to get fired, call 
the agency a rotting agency.
    First, they complained that you enforced too much. Now we 
just heard a 10-minute rant that you didn't enforce enough.
    And, bizarro of all bizarros, the people on the other side 
of the aisle have now become the sole and perfect defenders of 
workers' rights, women's rights, and minority rights. 
Unbelievable.
    We had better stay here a little longer because eventually 
they are going to be in favor of the health care law and all 
the other good things of America.
    Mr. Cordray, we have had many interactions, and sometimes I 
disagree with you, and sometimes I disagree with the agency. 
And I would love to sit here and talk about those things.
    But let's be honest: You and your agency are called here 62 
times not to have the typical oversight that is our 
responsibility, but to beat the hell out of you and to try to 
make sure we get rid of this agency. That is why we are here.
    That being the case, a thoughtful presentation here is 
really not called for. And with that, since nobody on that side 
of the aisle seems to want to give you the opportunity to 
actually address a misleading question based on wrong facts, I 
will lend you 3\1/2\ minutes to address--
    Mr. Cordray. All right.
    Mr. Capuano. --you can pick a bunch. Which one of the most 
ridiculous assertions that were just made would you like to 
address?
    Mr. Cordray. That is fine. And I'm sorry that the previous 
questioner has left the room, but--
    Mr. Capuano. Well, it doesn't matter.
    Mr. Cordray. --let me recap.
    Mr. Capuano. They weren't going to listen to you anyway.
    Mr. Cordray. Maybe.
    Let me recap the events. So we had the first whistleblower 
tips in the middle of 2013 before the L.A. Times story, 
although I will say that was a splendid piece of investigative 
reporting, and investigative reporting often aids government 
law enforcement investigations and did so here, as well as 
follow-up stories by the L.A. Times.
    At the time there were issues around whether employees were 
being abused by the employer, whether they were being held to 
unrealistic sales goals, and the like. Over time this problem 
migrated into something bigger and our look at it migrated into 
something bigger as the problem itself evolved.
    We were engaged in supervisory activity through 2014 and in 
2015, and at that point, as the Congresswoman noted, the matter 
had become serious enough and clear enough that it migrated and 
was graduated into an enforcement action. That is a very 
serious matter and it involved taking depositions.
    We didn't need to take hundreds of depositions here. We 
took three key depositions that had not been able to be taken 
in the case because of evidentiary restrictions on what the 
L.A. city attorney's office could do. They shared with us 
information from other interviews they had had. We didn't need 
to duplicate that work.
    We also compelled the production of documents from Wells 
Fargo that were very significant to detailing and documenting, 
and nobody denies this. We established it through this joint 
investigation, and it is clear and no one denies that millions 
of accounts were opened illegally, improperly, in the name of 
consumers who didn't know a thing about it and were often hurt 
by it, in terms of costing them fees or affecting their credit 
reports or the like.
    We worked with the L.A. city attorney's office and brought 
the OCC into a joint work with the L.A. city attorney's office, 
and we resolved the matter--not just on the basis of the 
boundaries of California, which is what the L.A. city attorney 
could have done, but nationwide and with broad injunctive 
relief that this will not happen again at Wells Fargo. And 
because it is a public enforcement action and all the facts are 
detailed--when the Congresswoman talks about 5,300 employees 
fired and millions of accounts opened, we know that because of 
the public enforcement action.
    That is what broke this matter open. Nobody was talking 
about it before then.
    That is leading to the entire industry taking a look and 
being more careful about whether they are engaging in any of 
the same kind of fraudulent practices toward their own 
customers. So this will have cleaned this up throughout the 
entire industry and put everyone on notice that this is a very 
serious matter; it is not to be taken lightly. You can't just 
put out these sales goals and say you should meet them and we 
will turn a blind eye to how you meet them even if it violates 
the law.
    And if we establish that principle there will be a lot of 
problems avoided in the future and a lot less work for the 
Consumer Bureau, and I will be glad of it.
    Mr. Capuano. Thank you, Mr. Director.
    And with that, I am going to yield the committee back 8 
seconds.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Kentucky, Mr. 
Barr, chairman of our Monetary Policy and Trade Subcommittee.
    Mr. Barr. Thank you, Mr. Chairman.
    And, Director Cordray, in your response to my friend, Mr. 
Capuano from Massachusetts, I think you said this is just, 
``part of the game.'' Well, let me tell you what is not a game.
    What is not a game is your agency denying vital financial 
services to servicemembers serving abroad from my commonwealth 
in communicating with their families back home.
    Mr. Cordray. Well, we are not--
    Mr. Barr. As you may know--let me ask you the question.
    Mr. Cordray. Okay.
    Mr. Barr. As you may know, the Bureau has issued 
regulations on international remittances. And in Kentucky we 
have a number of military bases; Fort Knox, Fort Campbell, the 
National Guard headquarters is located in my district. Credit 
unions are no longer able to offer their members this product, 
and here is why--I'll give you a real-life story from a 
constituent.
    Fort Knox Federal Credit Union has members all across the 
world and they have discontinued offering this much-needed 
service due to fear of not being compliant after 100 
remittances a year. Now, you can imagine that for this credit 
union it doesn't take long to reach 100 when you have over 
85,000 members, many of whom are deployed overseas.
    Mr. Cordray. Yes, I see that.
    Mr. Barr. When the Kentucky Credit Union contacted you 
about the rule and its unintended consequences it is reported 
to me that your comment was, ``No, this is the intended 
consequence,'' and that you were not concerned about these 
customers--
    Mr. Cordray. I don't know about that statement--
    Mr. Barr. --hardworking military men and women who are now 
having to pay much higher fees to remit funds home to their 
families because their credit union can't comply with this 
onerous regulation.
    Why won't you provide relief to servicemembers and their 
families?
    Mr. Cordray. We are doing a lot of great work for 
servicemembers and their families, and I would be happy to 
detail it if I am given a chance. In terms of remittances in 
particular, are you aware of who required there to be that 
rule?
    Mr. Barr. What I am telling you--
    Mr. Cordray. Congress required that rule. That is in the 
law. We are merely following the law and carrying it out.
    Mr. Barr. Director Cordray, I will reclaim my time. The 
Bureau has the discretion to provide the relief to these credit 
unions who are no longer able to deal with a workable rule that 
would allow these remittances and have priced these members out 
of their credit union and, as a result, these credit unions are 
no longer able to provide.
    And I want you to revisit that. That is a request of you to 
revisit that rule to provide relief to these servicemembers.
    Mr. Cordray. We would have the discretion to do that if 
Congress provided it in the law. It is not in the law, so--
    Mr. Barr. No. Well, once again--
    Mr. Cordray. --that is my problem.
    Mr. Barr. Once again, I think the Bureau is taking an 
overly restrictive view of your administrative--certainly you 
exercise a whole lot of discretion to take away financial 
services and products from the American people. I think you 
could probably revisit this, and I would love to continue that 
conversation, but let me move on to another problem.
    Mr. Cordray. We will be glad to continue that--
    Mr. Barr. Another problem: In March of 2015, Director 
Cordray, you testified before this committee and you said you 
needed data showing that the CFPB rules related to ``high-cost 
loans'' were, in fact, constraining the manufactured housing 
market.
    Well, according to Home Mortgage Disclosure Act data, 
manufactured housing loans from $50,000 to $75,000 have 
decreased by about 14 percent as a result of your regulation. 
There is clear data--
    Mr. Cordray. According to data from whom?
    Mr. Barr. The Home Mortgage Disclosure Act data.
    Mr. Cordray. I'm sorry, the data from--
    Mr. Barr. The government's data. The government's data is 
telling you that the manufactured housing credit is down 
because of your regulations.
    Why in the world, when we have an affordable housing 
crisis, when many rural Americans struggling in Kentucky and 
elsewhere need access to affordable housing, why don't you 
provide relief to working Americans who need access to 
manufactured housing credit when the government's own data is 
telling you that your regulations are hurting low-income 
Americans?
    Mr. Cordray. So, first of all, I don't think the government 
data says that. The government data doesn't--
    Mr. Barr. 14 percent.
    Mr. Cordray. The government data doesn't ascribe causation, 
so there are a lot of reasons why this could be, but I would be 
happy to follow up with your office.
    I know this is a point of particular importance to you and 
to other members of the committee, and we have talked about it 
before and I would be glad to talk about it further.
    Mr. Barr. I think we should because I think you have the 
discretion to stop these rules that are contributing to the 
affordable housing crisis and making it harder for Americans, 
particularly in rural areas, to afford manufactured homes.
    Finally, on October 7, 2016, the Office of Advocacy of the 
U.S. Small Business Administration--another government agency--
submitted a comment letter to the Bureau related to your 
proposed rule regarding small-dollar consumer loans. The 
comments pointed out that the economic impact of the proposed 
rule on small entities and consumers would be greater than what 
is indicated in the Bureau's analysis pursuant to the 
Regulatory Flexibility Act.
    This is corroborated by my own constituent small businesses 
who say that the SBREFA process was a joke. They went and told 
you that they were going to go out of business and you ignored 
them.
    So you have our constituents saying they are going out of 
business because of your rule and another government agency 
saying that that is true, and you are ignoring it.
    Mr. Cordray. No, no, no. Not at all, Congressman. We are 
not ignoring that. And the reason we have that process and hear 
from everyone is to hear what they say and to process it and 
digest it and analyze it.
    Just because we don't necessarily agree with every single 
thing people say to us--often they are saying conflicting 
things so we can't agree with it all.
    Chairman Hensarling. The time of the gentleman has expired.
    Mr. Cordray. I would be glad to follow up with your office 
on these points if you would like, on the remittances and the 
manufactured housing--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Missouri, Mr. 
Clay, ranking member of our Financial Institutions 
Subcommittee.
    Mr. Clay. Thank you, Mr. Chairman.
    And thank you, Director, for being here.
    I really don't know where to start today. My neighbor from 
Missouri, Mrs. Wagner, sounded as though she was sounding the 
alarm, that you had done something wrong and that she was in 
defense of Wells Fargo. Then my friend from Wisconsin, Mr. 
Duffy, brings up the issue of race.
    So let's focus on race first.
    I noted in your semiannual report that mortgage companies 
and auto loan companies continue to charge higher interest 
rates to African-American and Hispanic borrowers than to non-
Hispanic, White borrowers. In the case of PNC, $35 million has 
already been recovered to the injured and given back to the 
injured, as well as Ally auto loans with about $80 million in 
damages already recovered.
    And I would hope my friends on the other side of the aisle 
would understand that this has a severe financial impact on 
African-American and Hispanic families that prevents them from 
building wealth for their family. It keeps them in a hole.
    And so I want to commend CFPB for finding these atrocities 
and making these companies pay. And that is part of why you 
were created, and I appreciate the job you do.
    Can you speak to that and what you are finding in these 
industries?
    Mr. Cordray. Sure.
    Let me start just by correcting the record on one point on 
PNC. The discrimination there was by National City Bank. PNC 
later took them over, but they weren't really responsible for 
any of that; they actually helped us clean it up.
    But the point you are making is, we think, really 
important. A lot of people would like to think discrimination 
is a thing of the past and it is a vestige of the past, and we 
have found ongoing instances of discrimination, some of them 
significant, some of them involving redlining, which a lot of 
people want to think is a practice that went out of fashion 
decades ago, but we have found that it hasn't. And we have 
taken action where that was appropriate and where the evidence 
demonstrates that action is needed.
    And what is this about? It is about making sure that people 
are treated fairly and equally in the financial marketplace 
where they live so much of their lives, that they are seeking a 
mortgage that they are going to be able to get credit and be 
charged the same interest rate that they would if they had a 
different ethnic background or a different racial or skin 
color.
    That is a very American principle but it requires enforcing 
the law to make it happen and make it stick. And it makes 
people uncomfortable.
    Now, some of the law in this area is complicated. I will 
grant that. We try to work through it as best we can.
    The U.S. Supreme Court reinforced the validity of that law 
2 years ago in the Inclusive Communities decision, and we do 
our best to faithfully follow all of those decisions. But it is 
important work.
    Our Office of Fair Lending and Equal Opportunity does that 
work on a daily basis. They have encountered obstacles at times 
in doing that work, but they have been splendid in persevering 
and getting justice for Americans in so many circumstances, and 
I am very proud of their work.
    Mr. Clay. And I am proud of the work that you do, also.
    Just out of curiosity, I noticed that you describe some of 
your public meetings and community roundtables with 
stakeholders like community banks and credit unions. Do you get 
many complaints from the public about the creation and 
existence of the CFPB? Have you gotten many of those?
    Mr. Cordray. No, I don't think so. We do hear--everybody 
comes before us in a variety of forums, and we encourage that. 
And they all have different things to say, and some of them are 
complimentary and some of them are critical, and we try to 
listen to them all.
    Frankly, it is the critical things they say that are often 
the most helpful because they tell us where we should think 
about doing something differently. The complimentary things, of 
course, we love to hear them when people are willing to say 
them, but that just means keep doing what you are doing, which 
is a good message, but we don't learn quite as much from that.
    So we do try to be very accessible, and I think nobody can 
complain about the fact that they can't get their voice heard 
at the Consumer Financial Protection Bureau, and that is the 
way it should be--
    Mr. Clay. And it seems to be pretty effective. Looking at 
the chart on the screen, it looks like people from all around 
the country participate and bring their complaints to you.
    So I see my time is up, but thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from California, Mr. 
Royce, chairman of the House Foreign Affairs Committee.
    Mr. Royce. Thank you.
    Director Cordray, Mr. Luetkemeyer raised some concerns 
along the same line that I have here, and one of the things in 
particular that I am concerned about is the largely unchecked 
power that the CFPB has to issue the civil investigative 
demands, or CIDs, to inquire about a company's activity.
    And what is unusual here, I think, is that the CFPB is not 
required to possess evidence of wrongdoing before initiating a 
probe. And I wanted to talk to you about that.
    I think he was making this argument basically: Companies 
deserve due process. They deserve the ability to appeal to a 
body other than the CFPB itself, and I think companies deserve 
the assurance that the agency will objectively review any 
petition or set aside or limit a CID.
    In terms of my questions, I am interested in your selection 
process for CIDs.
    Do you look at this number of complaints that come up in 
the database? Is that how you do it? And specifically, if a 
company has zero complaints or has been proactively taking 
steps to address concerns, would you launch an investigation 
under that situation?
    Mr. Cordray. Let me just say that you just talked for a 
minute and 40 seconds and I agreed with everything you said, 
including that companies have a right to due process. They do 
under our Constitution.
    We do not open investigations where there is no evidence of 
wrongdoing. That would be a waste of our time. We have limited 
resources.
    Mr. Royce. Okay. Let me explain the only reason I am going 
to interject here.
    Mr. Cordray. Yes.
    Mr. Royce. I want to ask an additional question, but there 
are examples--
    Mr. Cordray. Yes.
    Mr. Royce. --where you have had an investigation without 
complaints that I am--
    Mr. Cordray. No, no, but we would have some sort of 
evidence of wrongdoing or some reasonable basis for--and--
    Mr. Royce. Right, but I am just explaining, without any 
complaints--
    Mr. Cordray. --that can be appealed to the courts, and some 
have been appealed to the courts and sometimes the courts 
disagree. That is a check. That is fine, yes.
    Mr. Royce. Right, but I am pointing out that you have 
opened up the investigations without any complaints.
    When you make the decision to initiate a probe, you refer 
to the company as a ``target.'' Do you think that type of 
language creates an adversarial posture at the outset or 
presumes wrongdoing on the part of the--
    Mr. Cordray. Actually, we changed that very early on.
    Mr. Royce. I appreciate that you changed--
    Mr. Cordray. We talk about companies as ``subjects'' 
because we don't want to prejudge.
    Mr. Royce. I appreciate--
    Mr. Cordray. And by the way, let me also say, it is 
important to note, we have opened a number of investigations 
that we later closed because we did not find enough basis to 
proceed. And so we do that. We are willing to do that.
    I tell our lawyers when that happens, ``Don't be 
disappointed. You looked at it and there wasn't anything and 
that is the right outcome. Don't feel like you have wasted your 
time. You did the right thing there.''
    But there has to be a reasonable basis for thinking that 
something is amiss before we would open an investigation at 
all, and courts can and do check us on that if they think we 
didn't get that right.
    Mr. Royce. Right, in your opinion, but that is, again, with 
zero complaints in some of these cases.
    Now, let me just go to--
    Mr. Cordray. Yes.
    Mr. Royce. --a company that visited my office recently--
    Mr. Cordray. Okay.
    Mr. Royce. --which explained that as part of the initial 
inquiry in the CID process the second question they were asked 
was about their annual revenue. Why is such a question relevant 
to the initial inquiry, I would ask?
    Mr. Cordray. So it could go to scope, trying to figure out 
how big the problem is. If it is a small problem at a small 
institution it is probably not the right expenditure of 
resources by the Bureau. If it is a smaller problem at a larger 
institution then it can look a lot more like a larger problem 
at a smaller institution. These are just things you try to make 
your best judgments about.
    Mr. Royce. I just want to explain how it seems to some 
smaller institutions.
    Mr. Cordray. Yes, and I understand. That is not how it was 
intended.
    Mr. Royce. With all due respect, Director, let me explain 
how it seems. It seems to them a little like the car mechanic 
in ``National Lampoon's Vacation.'' I will just give you this 
example as he relayed it to me.
    Mr. Cordray. I have lived through those examples myself.
    Mr. Royce. Yes, he says, you know, when Clark Griswold 
asks, ``How much is the bill for repair?'' he responds, ``How 
much you got?''
    That, at least for many of these smaller companies, is the 
way they view it. And we need to restore, I think, some balance 
or sanity in the process, right?
    Mr. Cordray. Actually, sir--
    Mr. Royce. Let me just close with this: An investigation or 
an examination is not supposed to be a ``gotcha'' moment or a 
hold-up, and I am just explaining, in terms of many companies 
in cases where there were zero complaints, their feeling about 
the attitude when somebody comes in and says, ``You are a 
target.''
    Mr. Cordray. Ten seconds? Zero complaints is one bit of 
evidence; there may be other bits of evidence that point in a 
different direction.
    The other thing is sometimes when we are asking about 
resources it is because we would limit any kind of penalty 
based on their ability to repay because we don't want to send 
that company out of business.
    Chairman Hensarling. The time--
    Mr. Cordray. We just want--
    Chairman Hensarling. The time of the gentleman has expired.
    Pursuant to clause d(4) of committee rule three, the 
gentleman from Massachusetts, Mr. Lynch, will be recognized for 
an additional 5 minutes upon the conclusion of the time 
allotted to him under the 5-minute rule. The gentleman is now 
recognized.
    Mr. Lynch. Thank you, Mr. Chairman.
    Mr. Cordray, thank you very much for your hard work and for 
your attention. Do you need a couple more seconds to finish 
your thought on that? I know we were speaking when you ran out 
of time.
    Mr. Cordray. No, I don't think so. I think Congressman 
Royce and I--
    Mr. Lynch. All right.
    I do want to revisit the whole Wells Fargo scenario just 
for a second. According to my records, you testified before the 
Senate Banking Committee and your testimony was that you had 
received whistleblower complaints regarding fraudulent accounts 
being opened up. And that was in, I believe, July of 2013.
    Mr. Cordray. Correct.
    Mr. Lynch. And the expose written by the L.A. Times wasn't 
until December, 6 months later.
    Mr. Cordray. And it detailed certain aspects of the 
situation, but again, it's important to understand the 
situation itself unfolded over time. There weren't millions of 
accounts opened in a single day.
    Mr. Lynch. Right.
    Mr. Cordray. This was a practice that started in a very 
limited way and then maybe spread to other employees and then 
spread through the grapevine that this is the way you can make 
your bonuses. It became exponential over time.
    And so as the problem evolved and our look at it evolved, 
that is why anybody can look back and say, ``You should have 
known everything on day one.''
    Mr. Lynch. Right.
    Mr. Cordray. Well, everything wasn't even happening on day 
one, so that is kind of a misplaced criticism, I think.
    Mr. Lynch. And there was an active effort by Wells Fargo to 
conceal this. They had originally, if I am correct, back in 
2011 fired hundreds of employees allegedly for opening 
fraudulent accounts.
    Mr. Cordray. Yes. The timing on the firings is not entirely 
clear.
    Mr. Lynch. Okay.
    Mr. Cordray. There was a suggestion that there was a same 
pace of firings all along. I think the firings accelerated 
later in the process because the problem became greater and the 
awareness of the problem became higher.
    But we do not think that the company came forward in a 
responsible way to let the regulators know about anything that 
they were seeing. And as I say, some of it occurred and 
magnified later on.
    Mr. Lynch. And I do appreciate that it was CFPB that made 
that a global settlement and--
    Mr. Cordray. I would say that working together with our 
partners. The L.A. city attorney's office brought things to the 
table that were critical; the OCC brought things to the table 
that were helpful; and I think the CFPB brought things to the 
table that were essential in making it, as you say, a national 
resolution with injunctive relief to make sure they stopped it 
going forward and didn't just throw some money at it and then 
go on about their business.
    Mr. Lynch. Okay.
    I want to shift attention now to our veterans and to our 
servicemembers. Ironically, President Trump, when he came into 
office, put a hiring freeze on in the Federal Government, and a 
lot of people don't realize that the Federal Government is the 
largest single employer of veterans in this country.
    We have 632,000 veterans who work for the Federal 
Government. And of those 632,000 veterans who work for the 
Federal Government, 145,000 of those veterans have a disability 
rating of 30 percent or greater. So I am very proud of the 
Federal Government's willingness and eagerness to hire our 
veterans.
    Now, the problem is that with the President's hiring freeze 
we block these kids coming back from Iraq and Afghanistan from 
going to work at the V.A. and DOD; DOD is the single largest 
department, in terms of hiring our veterans.
    So with the situation we have right now, with these young 
veterans coming home after multiple tours of duty--I was in 
Camp Leatherneck in Afghanistan a while back and I had a chance 
to chat with a rifle company there, and one of the young 
fellows told me that this was his seventh tour of duty.
    So we have these veterans coming home after multiple tours 
of duty; we have an elevated suicide rate--highly elevated 
suicide rate among our returning veterans. Very tough 
situation. Substance abuse, and other issues.
    And so what we do? What do we do to welcome our veterans 
home? We put a hiring freeze at the largest employer of 
returning veterans so they can't come back and go to work.
    And coming back and transitioning to civilian life, that 
job is critical. That is the difference-maker.
    And so when I hear Members here say that you are not doing 
enough as a Federal agency to take care of our servicemembers, 
and I know that I had a young veteran in my office last week 
trying to go to work at the Federal Government and he can't get 
a job because of the hiring freeze, it just--not only is it 
unfair, but it is so hypocritical of what we are doing today.
    I have a bill, H.R. 1001, that would waive the ban on 
hiring in the Federal Government as respects returning 
veterans. Basically what the bill would do was, as the largest 
employer of veterans it would exempt any qualified veteran--and 
one of the veterans I had a couple of weeks ago was a 
radiologist, so they have been trained well within the 
military--it would allow any qualified veteran to go to work in 
spite of the fact of having the President's freeze on hiring 
within the Federal Government.
    I think it is the right thing to do, but I am still waiting 
for some Republican cosponsors. I am still waiting for some 
Republican cosponsors. I have a lot of Democrats on the bill 
with me, but I would love to get some Republican support 
because I know my brothers and sisters across the aisle agree 
with me on this issue. I know they do. I know they do. I am 
certain of it.
    Mr. Cordray. Could I--
    Mr. Lynch. What I wanted you to do--and you have more than 
3 minutes here--I wanted you to talk about what we are doing at 
the Office of Servicemember Affairs for our military veterans 
and our active military and their families. I want you to take 
your time. I know you have a 25-year veteran over there, I 
forget his name, who is running that Veteran Services program.
    Mr. Cordray. Paul Kantwill.
    Mr. Lynch. That is right, Paul Kantwill. And I get high 
remarks on it from my veterans. I have three big V.A. hospitals 
in my district; I have a ton of veterans in my area, and he 
gets high marks from them.
    So I would like you to talk for as long as you would like 
about what you are doing on behalf of our servicemembers, our 
veterans, and their families.
    Mr. Cordray. All right. Thank you.
    And by the way, first of all, that is a very powerful point 
you just made about the Federal Government as an employer of 
veterans, and that blocking hiring, blocks employment of 
veterans. I had not heard that before. I think it is worth 
pressing.
    The hiring freeze, which we are honoring--we have been told 
is a temporary freeze. They are reconsidering what to do either 
later this month or next month.
    I think that is a powerful point to make in terms of 
returning veterans having access to jobs, and it is true across 
the entire Federal Government.
    So in terms of servicemembers, we do have an Office of 
Servicemember Affairs. That was a good idea by Congress. It is 
in the statute, so we were required to do that.
    We have embraced it with enthusiasm. As you know, Ms. Holly 
Petraeus ran that office and set it up for the first 5 years or 
so. She did an extraordinary job, and has left a legacy of 
helping veterans--not just servicemembers, but veterans and 
their families have a better understanding of financial matters 
and assistance and support.
    And she helped us deal with specific problems, such as 
people who had change-of-duty-station orders who were not able 
to sell their home during the financial crisis were given 
different treatment than they otherwise would have been because 
we intervened and made it clear that they were in a tough 
situation and they should be treated as hardship cases. That is 
just an example.
    And the ending of the military allotment system, which had 
been set up back in the 1950s or 1960s as a means of 
convenience to pay your bills. Now all the banks have bill pay 
and so you don't necessarily need it for that purpose, but it 
was being used, especially by predatory lenders, to be able to 
have leverage over military borrowers, and it was very 
problematic what was happening there.
    I would also say that the new head of the office, Paul 
Kantwill, the person you referenced, came to us from the 
Pentagon, where he had worked on some of these issues there. 
And he is first-rate, and he is having us think about the 
entire military lifecycle and how it fits.
    And we have work that we are doing on--it is called delayed 
entry, where we help servicemembers as they go into service to 
understand financial issues. Think about this: It is a lot of 
18-, 19-year-old kids, young men and women, leaving home for 
the first time, going into the military, positioned away from 
home, have a guaranteed paycheck. They are magnets for 
predatory lenders and they often can get into trouble, and 
giving them a sort of foundation before they go into the 
service is very important.
    We are also helping transitioning veterans coming out of 
the service back to civilian life, which poses enormous 
challenges as well.
    So we are doing a lot of good work. There was testimony 
from each of the branches of the military in the Senate 
recently where they talked extensively about how important the 
CFPB's work was and how helpful it was to them because they are 
not experts in the area themselves.
    I'm sorry, Mr. Chairman.
    Chairman Hensarling. The time of the gentleman--
    Mr. Cordray. I have a hard time cutting myself off on this.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Florida, Mr. 
Posey.
    Mr. Posey. Thank you very much, Mr. Chairman.
    Director Cordray, the last time you were here, we discussed 
legislation that I introduced in the past few Congresses to 
create an advisory opinion process at the Bureau.
    Mr. Cordray. Yes.
    Mr. Posey. A process which exists at many other executive 
agencies today, it would allow companies to seek out the CFPB's 
particular detailed view of a regulation and receive a response 
to the inquiry to interpret the regulation.
    The companies would cover the cost incurred by the Bureau 
by issuing the opinions, and ultimately they would have a 
better understanding of how to comply with the law and serve 
consumers. This bipartisan, commonsense idea that would bring 
certainty, clarity, predictability, whatever you want to call 
it, to the supervision and enforcement process at the CFPB.
    Unfortunately, instead of working with me towards this 
goal, the Bureau has actively sought to undermine the 
legislation. For example--
    Mr. Cordray. I don't--
    Mr. Posey. --when asked by the Congressional Budget Office 
about my proposal you claimed the Bureau would be tasked with 
issuing nearly 50,000 advisory opinions over a year, and that 
seems not to pass a straight--
    Mr. Cordray. That doesn't sound right to me, but yes.
    Mr. Posey. And that wildly inflated number is just as 
absurd as the no-action letter policy you created, which is so 
restrictive that the CFPB estimated issuing only one to three 
letters per year.
    Now, that is not an effective policy, I don't believe, and 
it is a pretense to avoid taking meaningful steps to address 
uncertainty surrounding the agency.
    When I questioned you about the limited policy last year 
you said it was a fair line of questioning and you intended to 
do more than the expected one to three letters, if you recall. 
You also said that you created the no-action letter policy to, 
``capture the spirit of the bill you are talking about in terms 
of people being able to get their questions answered and have 
some clear space forward.''
    It has been over a year since the no-action letter policy 
was finalized, and so the question is, how many of these 
letters has the Bureau issued at this time?
    Mr. Cordray. So I thank you again for digging in on this 
issue, and I remember we talked about it last year and here we 
are this year. And I would say we continue to struggle with it.
    But let me set the framework. We actually respond to 
people's request for advice in three different ways, okay?
    One is we get guidance calls all the time from people in 
the industry wanting to know how they can comply with this, 
what can they do about that, if they have two ways in mind can 
they do one rather than the other, et cetera. We field those 
calls, often hundreds of calls per week, certainly a steady 
stream of calls, thousands per year, and we do our best to 
answer those.
    That is one way in which we deal with this. And you 
wouldn't want to write all those into advisory opinions because 
you would--that would eat up all the time we have.
    On the other end, when they raise issues to us and it 
becomes clear it is a systematic issue--it is not something 
specific to that institution but it is the kind question others 
might be wanting to ask and might be wanting to know the answer 
to--we work through rulemaking processes to amend and clarify 
our rules. And we have done that numerous times. It has been 
not dozens but hundreds of different issues we have addressed 
in that manner.
    But it is clunky. It takes time; it takes resources. We do 
that and we are willing to do that, but it is not always the 
best answer, although it sometimes is a good answer. And we 
have some rulemakings like that pending right now.
    The in-between is what you are describing, the advisory 
opinion or the no-action letter, and we have now instituted 
that policy. It has been a lot harder than I would have thought 
to get that done within the Bureau, and it has not yet 
generated a lot of demand. And so maybe it is not working 
right. I don't know what to make of that as it stands.
    I am not hostile to advisory opinions. When I was attorney 
general in Ohio we issued them under the State law, 80--
    Mr. Posey. Have any--
    Mr. Cordray. --to 100 a year.
    Mr. Posey. Have any requests been denied by the agency?
    Mr. Cordray. No, I don't believe so, although I think there 
are discussions where sometimes people decide it is not the 
best approach, or maybe they get their questions answered 
informally and they are satisfied with that, or maybe it leads 
to us undertaking a rulemaking to amend our rules, so--
    Mr. Posey. I have been to the website and I have tried to 
search for this--
    Mr. Cordray. Yes.
    Mr. Posey. --and I can find nothing at all. So I would 
think even--
    Mr. Cordray. Yes. I would say it is--
    Mr. Posey. --if you have issues that you wanted to 
clarify--
    Mr. Cordray. We haven't--
    Mr. Posey. --you would post them on the site to save you 
from the redundancy--
    Mr. Cordray. Yes.
    Mr. Posey. --of having to do it again, and also providing 
easily accessible certainty.
    Mr. Cordray. Yes. Look, I would say to you we have not yet 
satisfactorily found that in-between. We do thousands of 
questions that we answer and we do a lot of issues through 
rulemaking; the in-between we have not yet--we haven't mastered 
that yet.
    We could perhaps use some help and working back and forth 
with the Congress to try to figure that one out.
    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.
    I just want to say, Mr. Cordray, that the first thing I 
want to say is thank you. Yours is a difficult job. It is 
probably the most challenging job in Washington, quite 
honestly.
    Mr. Cordray. Probably not right, but--
    Mr. Scott. And I am particularly anxious to say a few words 
about this job you are doing because people need to know. This 
is a free enterprise system; it is a free financial system. And 
when you live in a free system you are free to do good and you 
are free to do bad, and that is why we need organizations and 
agencies like yours in the middle there to separate the wheat 
from the chaff.
    Now, Mr. Cordray, I want to thank also your staff who has 
worked with me in my office. As you know, you and I have had 
some differences, but these differences have been done in a way 
to make sure that those elements, particularly of the low-
income and poor people, because they are taken advantage of by 
some of those unsavory characters.
    And you know, Mr. Cordray, I just love the book of Psalms. 
And in that 44th Psalm it says: ``Blessed is that man, all 
right, that helps the poor, and the Lord will be with him in 
his time of trouble. The Lord will deliver him. The Lord will 
preserve him and keep him alive and he will be blessed in all 
the Earth.''
    And since I have been working with you, you and I share 
that common bond of caring about the poor, and I think it is 
important because we got to working together and you and the 
CFPB came up with an excellent program, the safe harbor. That 
needs to be known--the safe harbor for those qualified 
mortgages, the Q.M.s.
    We also came up with the exemption that the CFPB gave for 
remittance to those small creditors. And so I want to commend 
you for that work, and it has been a joy to work with you on 
it.
    And as I said, my deep concern is--and I have found out is 
yours--that we have to make sure in this immensely complicated 
and competitive financial system that the poor, that those at 
the lower income, are not taken advantage of, that we give them 
a seat at the table. And I appreciate you for having an open 
mind as I have pursued that.
    So with that in mind, let me ask you, what steps are you 
taking in your rulemaking now to make sure that we are not 
putting an unfair burden on those that have to serve the poor, 
those--because there are so many of them. We have 70 million 
who are unbanked and underbanked. So what are you doing to make 
sure that the credit unions, the small banks, the--and the 
predatory lenders, they serve them, pawn shop operators--what 
are you doing to make sure that there that your rulemaking is 
not putting any unfair burdens on them?
    Mr. Cordray. I thank you for those comments and for the 
question.
    It is pretty much a daily concern at the Bureau for how our 
rules apply to community banks and credit unions, and in many 
cases under our mortgage origination rules, our mortgage 
servicing rules, our remittance rules, we have created 
thresholds that have exempted thousands of community banks and 
credit unions in each instance because we recognize--and I 
agree with them when they tell me--they can't bear the same 
burden of rules as larger institutions can, and they may not be 
as necessary in their cases because they know their customers, 
they are rooted in the community, they are subject to community 
norms. Those things are powerful. You and I have talked about 
that. We know that.
    So that is something that we are trying to do all the time, 
and we are always open to hearing input from any of you, and 
these oversight hearings are valuable in that respect, about 
how we can go back and do a better job on that. Because I know 
what we hear you hear, as well; and when you tell us about it 
that matters to us.
    The prepaid card rule is also very important in this 
respect because, as I said, many Americans have bank accounts, 
most Americans have bank accounts, but there are many Americans 
who do not and are shut out of that system, and the prepaid 
cards can make all the difference in the world to them.
    They can transact safely on them; they don't have to carry 
cash around. And having the basic protections there that bank 
account holders have feels to me like equal justice and a very 
important principle.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from North Carolina, 
Mr. McHenry, vice chairman of the committee.
    Mr. McHenry. Director Cordray, are you aware of any 
confidential leaks from the CFPB that led to insider trading?
    Mr. Cordray. Say that again. Am I aware of any what?
    Mr. McHenry. Are you aware of any confidential leaks from 
the CFPB that have led to insider trading?
    Mr. Cordray. I don't believe I am aware of any, but 
something that I have learned is critical to be careful about 
all the way back to when I served as a law clerk on the D.C. 
Circuit and got our very first--
    Mr. McHenry. Sure, I know you are versed in this, so--
    Mr. Cordray. Yes.
    Mr. McHenry. --unfortunately, the committee staff has 
learned of suspicious trading activity for the Navient 
Corporation the morning before the announcement of CFPB's 
enforcement action. Are you aware of this unusual trading 
activity?
    Mr. Cordray. I am not, and if there is something, I would 
be very concerned about it, so I would be glad to hear more.
    Mr. McHenry. I know you take it seriously. And so 
specifically on this, you are not aware of any suspicious 
trading activity or market activity connected with any CFPB 
enforcement actions?
    Mr. Cordray. As far as I know, this is the first I have 
heard that there might be any such concerns. But if there are 
concerns and if there is some basis for it, I would like to 
know it and like to know what we can do to make sure that none 
of that is happening.
    Mr. McHenry. Sure, sure.
    Mr. Cordray. We just saw the Federal Reserve Chair in 
Richmond had to step down, I think yesterday, because of this 
kind of thing. And it is not the first time these things have 
happened in the Federal Government, and--
    Mr. McHenry. So has anybody at the CFPB been investigated 
for insider trading?
    Mr. Cordray. Not that I am aware of. I am--
    Mr. McHenry. Okay. And you would be willing to cooperate 
with an investigation, obviously, if there were one?
    Mr. Cordray. I would. I actually thought you might be 
getting at a different point, whether maybe some sort of 
information leaked out somewhere and somebody else did trading, 
or are you actually suggesting any CFPB employees were engaged 
in trading because--
    Mr. McHenry. It is unclear at this point.
    Mr. Cordray. --they would be barred from doing anything to 
affect a company that was under their work or their purview. 
And we have good ethics lawyers who are very zealous in this 
regard, I can tell you that.
    Mr. McHenry. And so you would pledge the Bureau's full 
cooperation with the Securities and Exchange Commission, the 
Department of Justice, and this committee if there were an 
investigation of these trades?
    Mr. Cordray. I would.
    Mr. McHenry. Okay. And thank you for that.
    It is really a twofold question: one, insider trading and 
Bureau employees doing that themselves; the other is the 
sharing of confidential information.
    Mr. Cordray. I think just any kind of trading in stocks in 
any company that you were involved in doing work on or had 
information about would be--that would be illegal regardless of 
whether you have leaked information--
    Mr. McHenry. And I would like to yield the balance of my 
time to the chairman.
    Chairman Hensarling. I thank the gentleman for yielding.
    Director Cordray, I want to go--
    Mr. Cordray. I would be glad to follow up with you offline, 
sir, if there is something we should know.
    Mr. McHenry. Sure.
    Chairman Hensarling. I would like to go back and follow up 
on a line of questioning by the gentleman from Michigan, Mr. 
Huizenga.
    My review of the records shows that there have been 181 
enforcement actions in the history of the Bureau. Does that 
sound about right to you?
    Mr. Cordray. I think it is closer to 200 now, but maybe 
depending--
    Chairman Hensarling. Approximately 200.
    Mr. Cordray. Yes.
    Chairman Hensarling. Our review of this shows that of those 
enforcement actions, four have been adjudicated, and the others 
have ended in settlement agreements or consent orders. Does 
that sound about right to you?
    Mr. Cordray. Well, no. That is a partial picture because we 
have a lot of matters pending in the courts and they don't all 
get to final resolution very quickly. So there are a lot of 
matters--
    Chairman Hensarling. Settlement agreements or consent 
orders, I have yet to find one where the company admitted to 
wrongdoing. Do you have records on consent orders or settlement 
agreements where the company that has paid the fine has 
admitted to wrongdoing?
    Mr. Cordray. So again, I gave my perspective on this issue 
earlier but I will state it again. We conduct an investigation. 
When a matter is resolved--
    Chairman Hensarling. I understand that, but I am just 
asking a simple question because I have not been able to find 
in any of the settlement agreements or consent orders where 
there has been an admission of guilt. And if I am reviewing the 
records incorrectly, do you have records showing where the 
parties have admitted guilt?
    Mr. Cordray. Again, it is not that simple an issue. I would 
just like to give you little bit of background on it, which 
is--
    Chairman Hensarling. Can we start with either a yes or no 
and then give the perspective, Mr. Director? Do you have in 
your possession settlement agreements or consent orders where 
the party that has paid the fine has admitted to wrongdoing?
    Mr. Cordray. I would be happy to have my staff follow up 
with your staff on that, but I will say--
    Chairman Hensarling. So you are unaware--
    Mr. Cordray. --when we do orders we have completed an 
investigation--
    Chairman Hensarling. No, I understand that, Mr. Cordray. It 
is a simple question.
    Mr. Cordray. --and we specify all the facts.
    Chairman Hensarling. You are avoiding a simple question. 
Either you don't know the answer or the answer is yes or no. Do 
you have them in your possession? Because I am unaware of any.
    Mr. Cordray. I am here at the committee. I don't have any 
in my possession, but I would be glad to follow up with your 
staff on that and get you answers on that.
    But I will say again, when we issue orders that is one of 
the paragraphs of an order.
    Chairman Hensarling. I understand--
    Mr. Cordray. The order details exactly--
    Chairman Hensarling. The time--
    Mr. Cordray. --what we found in our investigation--could I 
just for moment--and that stands as the law of what happened.
    They can say, ``Oh, I didn't do it,'' but it speaks for 
itself.
    Chairman Hensarling. Okay. I understand that, Mr. Director, 
but that is exactly the same thing you did at accusations of 
gender discrimination and racial discrimination.
    Mr. Cordray. No, that is--
    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.
    Thank you for being here, Mr. Cordray. I also want to 
express here that the rural definitions were, in fact, changed 
and Marshall, Missouri, the three Houston banks that were--that 
came to me complaining, are, of course, very appreciative. I 
actually have a letter from the president of the bank 
expressing appreciation for that rule change.
    But let me talk about FinTech, the financial technologies. 
We are not going to be able to hold back progress that is going 
to happen, and there is nothing that we can do and perhaps 
there is nothing we should try to do.
    The problem, of course, is that with each new technology we 
have new challenges. And studies are showing that algorithms 
are not necessarily unbiased, that they can be biased.
    And so, as small businesses are trying to get these online 
loans through FinTech, is there something that the Consumer 
Protection Bureau can do to assure that these algorithms are 
not used exclusively to the detriment of minorities?
    Mr. Cordray. So it is an excellent question, and I know we 
just had an exchange of correspondence on this.
    Let me first go to your first point, though, because you 
made the point that the rural definition issues did get cleared 
up.
    Mr. Cleaver. Yes.
    Mr. Cordray. And maybe it took longer than it should and 
maybe we were too narrow to begin with, but we listened and we 
worked with the Congress on it and we got it fixed. And if 
people are still having any concern about that rural 
definition, I would be glad to hear it or to deal with any 
particular institutions, because I think it is now in pretty 
solid fashion, and I would thank the Congress because your 
intervention mattered on that.
    As to the FinTech issues that you are raising, we have just 
put out a request for information because we are very 
interested in these issues around the data that is used to 
underwrite loans, and there are some new opportunities to look 
at different data. We are not imprisoned within the narrow 
lines of the old credit reporting system, which often was kind 
of clunky and only--like it only counted, your housing if you 
had a mortgage because then that was a loan and it was 
``credit.'' But if you paid rent faithfully for 20 years they 
gave you no credit at all for that on your credit report, so it 
was like you didn't exist. That doesn't feel like the right 
answer.
    The algorithms that are being used and other methods that 
are being used now pose risks. They also create opportunity, 
and we have put out a request for information to hear from all 
sides. I think that is open until--I can't remember. There are 
two that are open and this one may be open until May.
    We want to hear what the risks are, the same kind of issues 
you raised with us, how they can be mitigated, and we also want 
to think about whether this might open up the credit box for 
more Americans. We did a report--a very notable report that got 
a lot of interest--on the fact that there are 45 million 
Americans who are essentially credit-invisible. They either 
don't have enough in their credit file to offer them any credit 
or it has maybe been inactive too long--45 million Americans 
are shut out of the credit system and they can't get loans, and 
they can't have opportunity from loans. That is a bad thing.
    We are in favor of access to credit, access to sound 
credit, and the issue here is whether there are other ways to 
look at other data and underwrite these loans so that more 
people could--and many of them are in minority communities or 
disadvantaged communities--that they could be really understood 
more fully to be good credit risks. At the same time, that 
could pose risk and we want to be careful about that.
    So I think we are embarked on an inquiry of exactly the 
kind that I think you are interested in and we will be glad to 
keep you posted on that as we go. We either have just heard or 
are going to hear a lot from people by mid-May, and then that 
is going to spawn further conversations and possible actions, I 
would guess, depending on what we hear.
    Mr. Cleaver. You probably won't have time to respond to 
this, but I am becoming increasingly concerned looking at these 
young people out here behind you in the green shirts. They look 
college-age and we are having a problem that I think is going 
to eventually explode.
    Right now there is $1.3 billion in defaults.
    Mr. Cordray. Yes, yes.
    Mr. Cleaver. I don't have time to go any further, but it is 
a big problem. We have over 3,000 student loans defaulting 
every day. That is one every 28 seconds. Thank you.
    Mr. Ross [presiding]. The gentleman's time has expired.
    Would you like to respond?
    Mr. Cordray. Just 10 seconds.
    Mr. Ross. Absolutely.
    Mr. Cordray. We hope to work with the new Administration's 
Department of Education, just as we had worked with the prior 
Administration's Department of Education on those issues, and 
we are open to having further productive dialogue and action 
around that problem. It is a significant problem.
    And it is not just young people. We did a report. Many 
older Americans actually owe student loans, either for their 
children or grandchildren, and it is a broadening concern 
throughout our society.
    Mr. Ross. Thank you, Director.
    The Chair now recognizes the gentleman from Illinois, Mr. 
Hultgren, for 5 minutes.
    Mr. Hultgren. Thank you, Mr. Chairman.
    And thank you, Director, for being here.
    I want to follow up on my friend's comment on bipartisan 
work, just to get your thoughts on student loans and 
specifically student loan disclosure. To your knowledge, is 
there any other form of consumer loan other than Federal 
student loans, a consumer loan that is not required to disclose 
the annual percentage rate before issuance?
    Mr. Cordray. So you are asking if there are any other 
loans--
    Mr. Hultgren. Consumer loans, yes, that don't disclose 
annual percentage rate before issuance?
    Mr. Cordray. I think that is typically required by statute 
under the Truth in Lending Act for most loans. There may be 
some exceptions or exemptions here and there so I don't want to 
be categorical, but that is--
    Mr. Hultgren. Yes. Again, something that we are doing in a 
bipartisan way is--and I would ask, would you agree that all 
borrowers of student loans, including those issued by the 
Federal Government, would benefit from the disclosure of the 
annual percentage rate when making the decision to assume 
student loan debt?
    Mr. Cordray. People have different views on that. I will 
just say it is typically required by statute. But when we did 
testing with consumers on the APR on our Know Before You Owe 
forms, consumers were quite confused by that.
    Mr. Hultgren. Let me move on to my next thing. And we agree 
in a bipartisan way, many of us, that it is helpful. 
Transparency is important and there is a problem there.
    Mr. Cordray. Yes, I am just--
    Mr. Hultgren. Let me move onto something else--
    Mr. Cordray. --not everybody agrees--
    Mr. Hultgren. Mr. Director, in past hearings in the 
committee, staff reports we have alleged that the true purpose 
of your indirect auto activities was to regulate auto dealer 
compensation, over which you have no jurisdiction under the 
Dodd-Frank Act. The Campbell-Brownback Amendment could not have 
been more clear on that.
    You have always testified to the effect of saying that you 
are only addressing lenders and that you are careful not to 
step over that line, but we now know that--
    Mr. Cordray. Yes. That is right.
    Mr. Hultgren. --answer is hogwash.
    Mr. Cordray. No, no--
    Mr. Hultgren. You may ask, how do we know this? And, well, 
because we have your documents, Mr. Director.
    I want to enter into the record a document dated July 9, 
2012, entitled, ``Notes from the Auto Finance Discrimination 
Working Group (`AFDWG') Attended on Behalf of NonBank 
Supervision by Kali Bracey.'' Mr. Director, this document--
    Mr. Ross. Without objection, it is so ordered.
    Mr. Hultgren. --has not been previously released by this 
committee. It contains a detailed summary of the second ever 
meeting of a special working group put together to discuss 
Direct Auto. According to this document, the working group was 
chaired by Patrice Ficklin and Rick Hackett.
    The document describes the Bureau's preliminary research 
efforts, and then comes the smoking gun. The document says, 
``To figure out what to do to prevent disparate impact the 
thought is that we should eliminate dealer markup.''
    So, Mr. Director, there you have it. Notwithstanding your 
prior testimony, the operating theory behind all of your 
agency's indirect auto efforts from the beginning has been to 
``eliminate dealer markup.'' Mr. Director, aren't you alarmed 
that your agency planned to regulate dealer compensation in 
clear violation of the law?
    Mr. Cordray. No, no. I think there are several things that 
aren't correct about that account, okay? First of all, when you 
are referring to a document from 5 years ago, I am not familiar 
with it offhand, but I will say this--
    Mr. Hultgren. We will make sure you get--
    Mr. Cordray. --we have never--
    Mr. Hultgren. It is from your office.
    Mr. Cordray. We have never taken any enforcement or 
supervisory activity against any dealership unless they were 
buy-here-pay-here, which is within our jurisdiction. We have 
been very careful to observe that line.
    But we do have responsibility over auto lenders, and we had 
the dilemma of how to deal with that responsibility when, in 
fact, they and dealers often work together in making the loans.
    Mr. Hultgren. Well, that is not what this document says. 
Again, it says, the intent here--
    Mr. Cordray. No, it says--
    Mr. Hultgren. Let me keep moving on. I only have a minute-
and-a-half left.
    Mr. Cordray. If I could--
    Mr. Hultgren. Other people have 10 minutes; I have 5 
minutes.
    According to the other Bureau documents, on May 20, 2013, 
you held a meeting with your senior staff in preparation for 
which a briefing memorandum was circulated stating the 
meeting's purpose was to, ``continue discussion around a 
market-tipping settlement that would resolve the discriminatory 
practices caused by dealer markup by eliminating markup at many 
major automotive dealers.''
    Do you recall this memorandum?
    Mr. Cordray. I don't offhand, but that would refer to 
dealer markup as part of lenders lending--
    Mr. Hultgren. Again, we will provide that to your staff. 
And we actually did provide it to your stuff ahead of the 
hearing to help you refresh your recollection. We also released 
it publicly as part of our staff report in 2015.
    Mr. Cordray. Yes.
    Mr. Hultgren. At the time, your Bureau was pursuing a 
consent order with Ally. Isn't that right?
    Mr. Cordray. We did pursue and conclude a consent order 
with Ally. I am not sure exactly what timeframe you are 
referring to.
    Mr. Hultgren. Your own Bureau documents say that you were, 
on October 7, 2013, a draft decision memorandum states that 
your Bureau sent Ally a proposed action response request letter 
informing the company that an enforcement--
    Mr. Cordray. I don't dispute that.
    Mr. Hultgren. --action was likely on January 15, 2013.
    Director Cordray, your Bureau reached its indirect auto 
lending settlement with Ally at a time when it had an 
unprecedented leverage over Ally. At the time, Ally had an 
application pending before the Federal Reserve for status as a 
financial holding company.
    The CFPB sent notice of its intent to bring an enforcement 
action against Ally on January 15, 2013. Ally would have to 
divest its insurance and used-car remarketing operations if the 
Federal Reserve did not approve its application for holding 
company status by December 24, 2013.
    At the same time, the FDIC was conducting a Community 
Reinvestment Act review of Ally. Your staff drafted the 
decision memorandum dated October 7, 2013, showing that your 
Bureau was fully aware of the implications of this.
    I think there are real problems here. Again, using 
authority at a time to force auto dealers and to push an 
agenda.
    My time is about to expire. I yield back.
    Mr. Cordray. If I could? Can I?
    Mr. Ross. Please.
    Mr. Cordray. Okay.
    Mr. Ross. Briefly.
    Mr. Cordray. When we bring an action we always hope to 
resolve it on appropriate terms. Sometimes the institution is 
not willing to resolve it and sometimes they are.
    That is up to them. That is a choice they make. That was a 
decision that they made.
    It is not a decision that affected--that involved 
dealerships. We have never brought an action against 
dealerships that are not buy-here-pay-here; that is not within 
our jurisdiction. It is the case--it is an unfortunate thing in 
this market--that lender programs and dealer programs kind of 
intersect and you can't--
    Mr. Hultgren. What bothers me is that--it is stated--and 
using power to force--
    Mr. Ross. The gentleman's time has expired.
    Mr. Cordray. I don't think that is what we did. Not what we 
did.
    Mr. Ross. The gentleman's time has expired.
    The Chair recognizes the gentleman from Illinois, Mr. 
Foster, for 5 minutes.
    Mr. Foster. Thank you.
    And thank you for appearing today, Director Cordray. It has 
been too long since you have been before this committee.
    Mr. Cordray. I missed you, too.
    Mr. Foster. Thank you. I was on the Financial Services 
Committee both during the financial collapse at the end of the 
Bush Administration and the regulatory response, the Dodd-Frank 
bill, to ensure that families in America never had to undergo 
this sort of catastrophe again.
    The catastrophe was caused by the simultaneous collapse of 
all three legs of our financial system: the collapse of 
Republican monetary policy; Republican fiscal policy; and 
Republican regulatory policy.
    And if you look more closely at the regulatory failures 
that led to this, there were really two parts. The Wall Street 
collapse was driven by largely inadequate bank capital 
requirements and huge off-balance sheets, unregulated driven 
exposures. But more important to the middle class was the part 
that was driven by inadequate consumer protection that drove a 
housing bubble that decapitalized the middle class and injected 
trillions of dollars of questionable mortgages into our 
financial system and ultimately destabilized it.
    As a result of that, the average American family lost over 
$100,000 and millions of Americans lost their jobs.
    During the debate over the Dodd-Frank Act we considered 
whether the agency should be headed by a single director or be 
a commission, and obviously that debate continues both in the 
courts and perhaps in legislation.
    But no matter how this debate turns out, there should be no 
debate that the CFPB has been just a tremendous victory for the 
American consumer and a victory for the long-term financial 
stability of this country.
    And a previous questioner brought up your work on FinTech, 
which was--I had intended to make the main line of my 
questioning. And I just want to comment that that is government 
regulation at its best when you are looking around the corner 
at future threats that will destabilize the financial system in 
the U.S. and future threats to consumer safety.
    And so the fact that you are looking ahead of the curve on 
that, I think, is just an indication of the high quality of the 
operation that you have set up. So I thank you for that.
    There has been a lot of discussion in the previous 
questioning about rural and community banks, and small 
community banks are under stress. And I think that it is 
important that we not mistake the financial stress that small-
town America has been under for decades and, frankly, is likely 
to continue. It is due to fundamental, long-term economic 
trends and it breaks my heart, and I don't know an easy 
solution.
    But we should not confuse the stress of small-town American 
and--with--and the stress of small financial institutions with 
the need to adequately regulate them, that just as much damage 
is done to someone in a rural area where--when they are subject 
to financial abuse.
    And I didn't see a big difference when they displayed the 
number of complaints you have had from rural States to urban 
States. I think that you get a comparable number of complaints 
per person from either area, and I think that you have to keep 
your eyes open in both, so thank you for that.
    There is a trend that has been important in trying to 
ensure the survival of small community banks, for which there 
is a lot of support on both sides of the isle, and that is 
because of the economies of scale for things like cyber defense 
and everything else, small community banks are more and more 
using third-party data--back-office data systems.
    And this provides an opportunity to really lessen the 
burden of regulation on them when the data can be extracted in 
a standardized way from the third-party data vendors directly. 
And there are two things. I have heard, actually, from some of 
the State-regulated banks that there are difficulties in the 
data-sharing between Federal and State regulators that cause 
some duplicity--not duplicity, but duplication of inspections.
    And so this is something where I think some positive 
improvement can be made to take advantage of those economies of 
scale. And I was wondering, have you started to experiment 
using direct data extraction so that the compliance can be 
verified using the third-party vendors? And is that a promising 
avenue for lessening the regulatory burden on us?
    Mr. Cordray. I think it is. And we have started to put even 
more emphasis on technology in our examination processes.
    We also collaborate closely with the Conference of State 
Bank Supervisors and we have a very productive relationship 
with them. They are very helpful to us and we try to be very 
helpful to them, and we try to share a lot of information.
    So to the extent that was true in the past, I think it is 
less true now that we have any difficulties in sharing 
information.
    I think Federal-State has been a problem area in the past. 
I know it from the State Government side before.
    But what I would say is we are also now starting to look 
directly at some of these large technology service providers to 
the banks and credit unions, understanding that going to look 
at the bank or credit union may be less useful than looking at 
back-office operations that supply the same function for 
hundreds or even thousands of institutions, and if we can make 
sure that they get it right then it is that much easier for the 
bank or credit union to know that they are getting it right, 
and that becomes a technology issue.
    Mr. Ross. The gentleman's time has expired.
    I now recognize myself for 5 minutes.
    Mr. Director, one of the things that I think is impressive 
about financial regulations in our country has been the State-
based system of insurance regulation. With regard to capital 
requirements, with regard to rate-making, and with regard to 
consumer protections, our State-based system of regulation over 
insurance has been somewhat successful, and I would say 
probably a model throughout the world.
    Would you agree that under Dodd-Frank the CFPB has no 
jurisdiction over the business of insurance?
    Mr. Cordray. Correct. As a basic matter, mortgage insurance 
within the mortgage market can be relevant but--
    Mr. Ross. And specifically with regard to the proposed 
arbitration rule, which seeks to broaden the scope to take in 
life insurance policies to require arbitration with regard to 
the extension of credit on whole life policies, is that not a 
little bit over-reaching?
    Mr. Cordray. I think if we were trying to dictate something 
for the life insurance industry, that would be over-reaching 
and--
    Mr. Ross. Because actually the contract of insurance is in 
and of itself the policy. Without the contract there would be 
no insurance; without the collateral, the cash value, there 
would be no loan, and any loan taken against it would be really 
just offset from the proceeds of the insurance.
    Mr. Cordray. I may not be capturing all of the nuances, but 
I do generally agree with you. Insurance is typically regulated 
at the State level and it is outside the preview of the CFPB by 
a specific exception.
    Mr. Ross. And so you would agree, then, that the proposed 
arbitration rule would not apply to the scope of life insurance 
policies?
    Mr. Cordray. As a general matter, I think that is right. 
Whether there is some sort of corner issues here I am not 
entirely sure, but I think that is right.
    Mr. Ross. And are you aware of anything else going on 
within the CFPB to regulate insurance products whatsoever?
    Mr. Cordray. Again, mortgage insurance, when it is caught 
up as part of the mortgage transaction, there are some issues 
there around disclosures and the like. I believe, in fact, the 
PHH case has to do with the captive reinsurance program that we 
believe violated the RESPA statute. And, of course, the company 
disagrees, and that is in front of the courts and the courts 
will decide it.
    Mr. Ross. Let me change--
    Mr. Cordray. But basic insurance is not part of our--
    Mr. Ross. Right.
    Mr. Cordray. It is in some countries; it is not in the 
United States.
    Mr. Ross. Not. And therefore, the CFPB should really not 
participate in that--
    Mr. Cordray. And if you have--if there are issues you are 
hearing about that we should know about, feel--
    Mr. Ross. You got it.
    Mr. Cordray. Feel free to have--
    Mr. Ross. You will be the first.
    Mr. Cordray. Yes.
    Mr. Ross. Let me ask you with something with regard to 
payday lending. This has been an industry that has been, again, 
regulated predominately by some States. Some States regulate 
it; some States outlaw it.
    Mr. Cordray. Yes.
    Mr. Ross. Some States just don't have any regulation on it 
at all. And yet, you have a proposed rule, and I think to date 
you have received over 1,334,000 comments--
    Mr. Cordray. Sounds about right.
    Mr. Ross. --and I think 600,000 have come from Florida.
    When do you anticipate the rule to be released and 
implemented?
    Mr. Cordray. I don't know. I can't tell you.
    As you just described it, digesting and analyzing those 
comments is a big job and they are supposed to influence what 
we would think about the rulemaking, and they will.
    Mr. Ross. My concern is that if this essentially 
annihilates this particular supply of credit that is being used 
by millions of Americans every day, what is the recourse?
    And specifically, here is a comment made, sent to Monica 
Jackson, Office of Executive Secretary, from a lady in Florida, 
a Ms. Pritchard from Leesburg, Florida. And she says, ``I am a 
single parent and lately there have been issues with my child 
support payments posting to my card on time. Unfortunately, my 
kids still have to eat and whatever necessities they are in 
need of.
    ``The cash advance is a big help to me. I can only borrow 
what I can pay back and I have a steady job. If these new laws 
take place this would place me in a financial hardship, and my 
credit is poor so I can't get a loan through a bank or other 
lender. Please don't punish us with these changes.''
    How would you respond to Ms. Pritchard if the payday 
lending industry was eliminated by way of rule?
    Mr. Cordray. Yes. And, by the way, I have had a number of 
these discussions with your banking supervisor from Florida, 
Drew Breakspear, who is a very capable--
    Mr. Ross. Very good man, yes. I agree.
    Mr. Cordray. --a strong regulator. And essentially--
    Mr. Ross. She has to have a--
    Mr. Cordray. Yes, I know.
    Mr. Ross. This is a demand-driven industry that requires a 
supply.
    Mr. Cordray. Understood.
    The proposal here was an effort--and we may not have gotten 
it right, and this is something we are thinking about in light 
of comments--to make sure that people could get access to a 
loan when they need it, but that they wouldn't get trapped into 
this cycle of 8, 10, or 12 loans--
    Mr. Ross. I agree, and I think Florida has been a good 
example of that. But then again, if the rule effectively 
eliminates this particular industry, where else do they go?
    If they can't go to a bank, do they go online? Do they go 
overseas? Do they go to a loan shark?
    We are not eliminating the demand, and I think that is what 
we have to be very compassionate about.
    Mr. Cordray. You are absolutely right on that. It is an 
absolutely fair and very good question.
    And again, a notable point here is there are 14 States in 
which these particular kinds of loans are outlawed. That is not 
something the Bureau is proposing to do, but it is true of 14 
States, tens of millions of Americans, and there are other 
credit products that they access, including pawn loans or 
including credit card loans, advances, or other things. And 
there does not seem to be any particular harm to those 
consumers in those areas and they avoid that prolonged debt 
trap.
    These are the kind of hard issues that have brought us to 
this--
    Mr. Ross. I agree. And again, I ask you just to take a 
look--
    Mr. Cordray. Yes.
    Mr. Ross. --at the State of Florida. I think it has done a 
very good job as a State regulator in that industry.
    My time has expired.
    The Chair now recognizes the gentleman from Maryland, Mr. 
Delaney, for 5 minutes.
    Mr. Delaney. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for your exceptional 
public service. The job you have done across the last several 
years has been a very difficult job, considering some of the 
opposition you have received, obviously, and considering the 
scale of the undertaking you had to assume.
    But it has been a very important job, and I think you have 
done it to a remarkably high standard, and I applaud you. I 
hope you do stay on, but if that doesn't happen I am sure you 
will be incredibly successful in whatever field of endeavor you 
choose in the future. So I just wanted to start by thanking you 
for your service.
    Mr. Cordray. That is very kind.
    Let me just say, the so-called opposition doesn't bother 
me. I always hope that I can be persuasive and we can see eye 
to eye and find common ground--
    Mr. Delaney. And you seem run at criticism, which I think 
is a good--
    Mr. Cordray. That is all right. That is okay. Criticism is 
fine because criticism we can learn from, and I try to do that.
    Mr. Delaney. And they--
    Mr. Cordray. It is a hard job because there are all these 
markets and all this--all these difficult issues and--
    Mr. Delaney. And you have had to stand up this agency.
    Mr. Cordray. --many of the--many of your colleagues have 
raised today, so--
    Mr. Delaney. And you have had to stand up to this agency, 
which I applaud you, too, because I think the work of the 
agency has been terrific.
    I wanted to kind of ask you about kind of a more of a kind 
of a pure public policy question, which is one area that I have 
worked on is trying to create nonprofit financial institutions, 
nonprofit banks, which are not technically allowed under 
banking regulations right now because banks--and you can 
understand why regulators feel this way; they would like to see 
banks make a profit because that contributes to capital and 
makes them safer and more sustainable.
    But it seems to me in some of these markets that have been 
underserved by traditional financial services, where 
unfortunately consumers or citizens in those markets really do 
have to turn to some of these financial products that we know 
really entrap them--very high rates and things that they can't 
get off of--that if we could create a mechanism for 
philanthropists, many of which want to invest in these 
communities, and they do substantially--they do it through 
investing in low-income housing; they do it through financial 
literacy programs; they do it through a whole variety of ways 
where they are trying to actually help some of these people who 
have largely been left behind.
    But at the center of anyone's kind of normal financial life 
is a bank. And so many of these people are unbanked.
    And it seems to me if we could create banking institutions 
that had a nonprofit charter that had a revenue model--in other 
words, they charge interest and fees, normal kind of levels--
but that their operations were further supported by 
philanthropic dollars probably coming from that community so 
that they could add that layer of financial literacy, so that 
they could go into markets where the cross-sell opportunities 
aren't available to make the business model work, that that 
would actually create an alternative for these citizens in some 
of these markets.
    But they can't do it right now. They have to work around 
it.
    There have been some efforts to do it. It has been very, 
very hard.
    So I am just interested in your thoughts on, as a matter of 
public policy, do you think this is an interesting direction 
for us to be thinking about? Because I want to not only think 
about appropriate regulations to rein in, but also stimulating 
more appropriate, prudent, fair financial services in some of 
these communities that desperately need them.
    Mr. Cordray. Yes, it is an interesting question. And I know 
from your background you have an unusually sophisticated 
perspective on these kinds of issues, and we do not deal with 
the setting up or the licensing or the structure of banks--
    Mr. Delaney. Right. That is why it is more of a question of 
policy.
    Mr. Cordray. But we do deal with the credit unions, which 
are nonprofit financial institutions, and they do tremendous 
good work across this country on behalf of their members and 
often in rural communities. And then we have the CDFIs, which 
have a particular focus more along the lines of what you 
describe, and they do tremendously good work if they get 
support and have the support that they need. And I would say 
that those things are very helpful.
    We also have been trying to think about in these markets--
and it goes to the questions Congressman Scott was asking 
earlier about what about those who are shut out of the banking 
system or shut out of the credit system? How can we provide 
access for them? Is it possible to do that on a responsible 
basis?
    And the prepaid cards and accounts are one way if they have 
the right protections. That is important.
    And also, I would say that safe accounts at banks and 
credit unions that don't necessarily involve overdraft or that 
kind of risk. Many banks and credit unions are offering those 
accounts and they are getting a lot of take-up, especially 
among millennials who are worried about these kinds of fees and 
things that surprise them.
    So anyway, it is an ongoing problem in America: How do you 
open more opportunity in more places where people don't 
necessarily share in the same opportunities as others? We don't 
like to think our lives are bounded by our zip code that we 
come from, whether in education or anything else.
    And if there are ways that we can help on that, we want to 
do so. We are glad to work with both sides of the aisle on 
those kinds of issues.
    And your idea might be a good one. I just don't know enough 
to say one way or the other.
    Chairman Hensarling. The time--
    Mr. Delaney. Thank you again, Director.
    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, good afternoon.
    Director Cordray, I come as one who is here to--
    Mr. Cordray. Congratulations on the national championship, 
by the way.
    Mr. Pittenger. Yes, sir. Thank you. I had my Carolina towel 
on yesterday. It was a great day.
    But I come as one who has his responsibilities in oversight 
through Article One. I have my responsibilities to the 
taxpayers of my district and this country. And knowing that, I 
realize that your appointment as Director, given through the 
Dodd Frank Act, gives you really unlimited power and basically 
unchecked. You are not responsible to us except to come twice a 
year for a few hours to--
    Mr. Cordray. I take that very seriously.
    Mr. Pittenger. Thank you. And I--
    Mr. Cordray. And hope you see that.
    Mr. Pittenger. --I am glad that you do. But essentially, 
you get your budget from the Fed--your funding. There is really 
no budget.
    And there is essentially no accountability. The President 
can't fire you except for some egregious fraud or abuse.
    So in that context, I would like to ask you a few 
questions.
    Mr. Cordray. Okay.
    Mr. Pittenger. The GAO conducted a study recently of the 
advertising and public relations funds that were spent by the 
various agencies in the government. Maybe it is known by you, 
but the CFPB won. You were the big winner in terms of 
percentage overall spent from your budget.
    Mr. Cordray. I'm sorry, spending on what?
    Mr. Pittenger. On advertising and public relations.
    Mr. Cordray. Okay. All right.
    Mr. Pittenger. Yes, sir.
    And this is an amount that equaled about 2.5 percent, a 
very significant amount of money. And there was no other agency 
that came close to you. In fact, you were greater than the 
Department of Defense.
    I guess I would like to ask you, do you feel like the 
mission of your agency is more important than the Department of 
Defense, whose objective, of course, is to recruit--
    Mr. Cordray. No, I certainly don't. I certainly don't think 
so.
    Mr. Pittenger. So you would--
    Mr. Cordray. And by the way, we read that report 
differently. It pointed out that there are 10 agencies of the 
Federal Government that do 95 percent of the advertising of the 
Federal Government, and we are not one of those.
    We do devote a small percentage of our budget--
    Mr. Pittenger. The ones studied, sir--
    Mr. Cordray. --to marketing.
    Mr. Pittenger. --I must say--let me claim my time. The ones 
that were studied showed that you spent more than any other 
agency. Now, point of fact there.
    Mr. Cordray. Depending on how you--
    Mr. Pittenger. Your budget had $20 million for advertising 
that went to one firm, GMMB. This is a well-known, progressive 
advertising firm with close ties to the Obama Administration, 
and then Clinton came--
    Mr. Cordray. I don't know anything about that.
    Mr. Pittenger. --Jim Margolis. He was a senior partner for 
the GMMB and served as senior advisor for President Obama and 
senior immediate advisor for the Clinton campaign in 2016.
    Mr. Cordray. So--
    Mr. Pittenger. In that context, do you--
    Mr. Cordray. I don't--
    Mr. Pittenger. --do you feel like--
    Mr. Cordray. I don't have anything to do with making those 
awards. That is done through competitive bidding and through 
the proper processes--
    Mr. Pittenger. It just happened that the--
    Mr. Cordray. --and we get scrubbed regularly by the I.G. 
and GAO on those processes.
    Mr. Pittenger. That is about 3 percent of your budget. Your 
advertising budget was $20 million. It is a huge amount that 
just happened to be--
    Mr. Cordray. No, it was less than that.
    Mr. Pittenger. --that you were aligned with a very 
progressive, known group. Does this reflect that you are 
biased, or does it really mean that your message is 
fundamentally progressive and Democrat activists are really the 
best ones to carry the message?
    Mr. Cordray. I didn't know anything about that until I read 
articles making that point. Again, these are awarded 
competitively. I don't even know who these people are.
    I am not trying to make an award to some crony or 
something, if that is the implication. I just think, if you 
look around, almost all the contracts of the Federal Government 
may have--they helped someone or other. I don't know who they 
are.
    We do competitive bidding. I--
    Mr. Pittenger. Sir, there are a lot of things--
    Mr. Cordray. --pretty much stay out of those things.
    Mr. Pittenger. --today that you have not been familiar with 
that we have brought to your attention many times, so I guess 
we have to take that in balance.
    So your budget, you spend double of what any other agency 
spends on advertising. This is a record that we have. And a 
substantial portion of this, of course, goes, as I said, to one 
firm.
    Do you feel like that there is any impropriety in this?
    Mr. Cordray. I think that marketing is consistent with our 
statutory mandate to make tools and resources available to 
Americans, which can only happen if they are aware of them. We 
do precious little of it compared to what the private sector 
does--
    Mr. Pittenger. Do you understand the perception that is out 
there--
    Mr. Cordray. --in terms of advertising products.
    Mr. Pittenger. --in the marketplace and the concerns that 
we have in terms of the alignments with progressive groups that 
are very outspoken progressive groups that would be--
    Mr. Cordray. Look--
    Mr. Pittenger. --your support for--
    Mr. Cordray. What I would say--we actually are--
    Mr. Pittenger. It is consistent with--
    Mr. Cordray. --we are a smaller contracting agency than 
most, but you could look across all of our contracts and you 
could look and see who they are, and you might get--I don't 
know what the picture would be. I honestly don't know what the 
picture would be.
    We are just trying to do our job as best we can. We are not 
trying to reward people--
    Mr. Pittenger. I hear that more times--
    Mr. Cordray. --or do favors for people.
    Chairman Hensarling. The time of the--
    Mr. Cordray. It is just not what we are about.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Green.
    Mr. Green. Thank you, Mr. Chairman.
    Thank you for appearing, Mr. Cordray. And I would remind 
persons that you are the first and only agency with a single 
mission of protecting consumers.
    You are it. There is nothing like you in the United States. 
When I say ``you,'' I mean the agency itself.
    Mr. Cordray. I think both sides of the aisle could agree 
that there is nothing like us in the United States perhaps, 
yes.
    Mr. Green. And some of us would be grateful that you exist. 
There may be others who would differ.
    But you are the only agency with this purpose, and you have 
succeeded. The empirical evidence indicates that you have 
succeeded: billions of dollars returned to consumers--by one 
estimate, $12 billion or more; millions of complaints having 
been filed, but you have had over a million complaints that you 
have processed one way or another.
    And as I listen to my colleagues, one might think that you 
are the culprit, that you are the entity that ought to be 
persecuted and possibly prosecuted.
    Let's talk about Wells Fargo, for example. It was Wells 
Fargo that opened up approximately 2 million--depending on who 
is counting and how you count--accounts without authorization, 
not the Consumer Protection Bureau.
    Mr. Cordray. You are right. I didn't do that.
    Mr. Green. You didn't do that; it was Wells Fargo. It was 
Wells Fargo that has been fined and penalized about $185 
million, not the CFPB.
    But listening to my colleagues, one would think that it was 
the Consumer Protection Bureau, the agency that is there to 
protect consumers, that is the culprit.
    It is Wells Fargo, quite frankly, that ought to have 
somebody prosecuted. To date, has anybody been prosecuted for 
what happened over at Wells, Mr. Cordray?
    Mr. Cordray. I am not aware of any charges, although I 
believe that a number of different agencies and prosecutors at 
different levels of the government have said that they have 
opened investigations, so I don't know where those stand.
    Mr. Green. I think that investigations ought to be opened 
and I think somebody ought to be prosecuted. We can't have a 
circumstance where you open up millions of accounts without 
authorization and the guy at the top gets a golden parachute 
and he is out.
    People at the bottom, the entry-level employees, may end up 
holding the bag. They may be prosecuted.
    My hope is that some of these people in upper management 
will be prosecuted. The evidence is there at least for a 
prosecution.
    There may not be a conviction but there is probable cause, 
and I am going to write the Justice Department. I am going to 
ask the Justice Department to investigate for the purposes of 
prosecuting persons who committed crimes at Wells.
    Wells Fargo is a good company, otherwise. I am not a guy 
who thinks that Wells Fargo ought to go out of business because 
they have made some mistakes, just as I think my colleagues 
ought not want to put the CFPB out of business because of a few 
mistakes that may have been made there.
    The judiciary makes mistakes. If you would listen to some 
of my constituents and their complaints about the judiciary, 
you would think that the whole judiciary is a fiasco of some 
sort. But nobody wants to put the judiciary out of business.
    We want to see a judiciary continue to function. We want it 
to function efficaciously, but we want to see it continue to 
function.
    So I can't understand, to be quite honest with you, why 
people would want to eliminate the first and only agency with 
the mission of protecting consumers. That is your sole mission: 
protecting consumers.
    And, Mr. Cordray, I want to compliment you for standing 
your ground against the odds. What kind of odds? $2.3 million 
per day being spent against the CFPB. $2.3 million per day, and 
you still stand. Sixty-plus hearings where you have had to come 
and testify, and you still stand. People are trying to sue you 
to get you out of office, and you still stand.
    I compliment you for standing for consumers, Mr. Cordray. 
And I want to give you just a few seconds, if you would, to say 
a few things about why you are standing.
    Mr. Cordray. Stubbornness, I guess.
    But, look, we saw what things were like in the lead-up to 
the financial crisis. And by the way, when we are talking about 
community banks and credit units, nothing kills them off faster 
than a financial crisis that blows up the economy and a bunch 
of them go out of business. And that happened in 2008, 2009, 
and 2010, and it happens every time we have a crisis going all 
the way back to the Depression, so--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes--
    Mr. Green. Thank you, Mr. Cordray.
    Chairman Hensarling. --the gentleman from Pennsylvania, Mr. 
Rothfus.
    Mr. Rothfus. Good afternoon, Director Cordray. I would like 
to ask a few questions about the CFPB's Civil Penalty Fund. 
This committee has been trying to understand how the CFPB goes 
about identifying uncompensated victims eligible for payment 
and assessing the extent of damages for which the victims 
should be compensated.
    As far as I can tell, this is an incredibly opaque process 
and the CFPB has been less than forthcoming in response to 
committee inquiries. The Global Client Solutions case is a good 
example of this.
    The CFPB settled with GCS, a debt settlement payment 
processor, over its alleged involvement in facilitating the 
collection of illegal upfront service fees. It is important to 
note that GCS is a service provider for debt settlement 
companies and not a debt settlement company itself that would 
have a direct relationship with consumers.
    Nonetheless, CFPB reached an agreement with GCS in August 
2014 requiring the firm to pay $6 million in relief to 
consumers and a $1 million civil penalty. In the consent order 
GCS did not admit nor deny allegations in the complaint.
    The CFPB then allocated $107.9 million from the Civil 
Penalty Fund to compensate eligible victims of the debt 
settlement firms that contracted with GCS for eligible 
uncompensated harm.
    Again, the CFPB took in $1 million from GCS, the backend 
service provider for debt settlement companies, and disbursed 
over $100 million to alleged victims of the actual debt 
settlement companies that would have had the relationship with 
the consumers.
    Mr. Cordray, who is responsible for allegedly charging the 
illegal upfront fees to consumers?
    Mr. Cordray. There were a number of companies that used 
Global Client Solutions as essentially their mechanism for 
succeeding in ripping off thousands and thousands of consumers 
across the country. We believed and--
    Mr. Rothfus. Is GCS--
    Mr. Cordray. --we found--
    Mr. Rothfus. --responsible for those upfront fees?
    Mr. Cordray. It depends on how much awareness and conscious 
disregard GCS would have had. Let's say it this way--
    Mr. Rothfus. Okay. I have a document that the Bureau 
provided to this community that lists 208 of those debt relief 
companies that used GCS and allegedly charged unlawful advance 
fees to more than 66,000 consumers. Of these 208 companies, how 
many of them did the CFPB hold accountable?
    Mr. Cordray. Look, what I am saying is--
    Mr. Rothfus. How many of the 208 companies that were 
charging the upfront fees did the CFPB hold accountable?
    Mr. Cordray. In some instances we go after both the 
facilitator and the--
    Mr. Rothfus. Were any of the 208 companies held 
accountable?
    Mr. Cordray. Most of them are fly-by-night and they go in 
and out of business.
    Mr. Rothfus. How many of the 208 companies were held 
accountable?
    Mr. Cordray. But here is the problem that we had. You have 
these companies that are fraudulent companies, they go in and 
out of business, but they are all using in this case Global 
Client Solutions--
    Mr. Rothfus. Are all of these 208 companies out of 
business?
    Mr. Cordray. --to be able to effectuate their ill-gotten 
deeds.
    Mr. Rothfus. Are all of the 208 companies out of business?
    Mr. Cordray. I don't know.
    Mr. Rothfus. Okay. On what basis did the CFPB determine 
that there was $107.9 million in uncompensated damages for 
customers of these 208 firms?
    Mr. Cordray. So that would be through records from Global 
Client Solutions because they were the middle man, if you will, 
in these transactions, and they are the ones who had certain 
records that could be looked at.
    One of the problems with many fraudulent schemes is the 
recordkeeping is poor because they are not trying to keep 
records; they are just trying to rip people off. And it is 
often difficult later to identify who the victims are and know 
how much they lost.
    But in this case, you had a payment processing company that 
essentially was making all of this happen for these sketchy, 
fraudulent entities.
    Mr. Rothfus. How do you get from a fairly small settlement 
amount with GCS of $1 million dollars to more than a $100 
million allocation to alleged victims?
    Mr. Cordray. That is the beauty of the scheme, isn't it? So 
I am--
    Mr. Rothfus. That is the beauty of whose scheme? You took 
$1 million from GCS but you gave a whole $100 million to 
consumers.
    Mr. Cordray. Could I lay it out? You have a lot of rip-off 
artists, and they probably all talk to each other and they all 
realize they can use Global Client Solutions to sort of be 
their back office for them essentially.
    Global Client Solutions doesn't have a lot of a lot of 
money--
    Mr. Rothfus. But you got $1 million dollars from GCS.
    Mr. Cordray. --necessarily.
    Mr. Rothfus. You got $1 million dollars from GCS.
    Mr. Cordray. Yes, I understand.
    Mr. Rothfus. Is the CFPB a piggy bank?
    Mr. Cordray. This is a good news story, if you give me a 
chance to tell it.
    Mr. Rothfus. Is the CFPB a piggy bank?
    Mr. Cordray. No. Global--
    Mr. Rothfus. Would you be offended by a characterization of 
the CFPB as a piggy bank?
    Mr. Cordray. No. What I would say is--
    Mr. Rothfus. You would not be offended by the 
characterization of CFPB as a piggy bank?
    Mr. Cordray. That is not a relevant question.
    Mr. Rothfus. Well, it is. For the record, they are--the 
opponents are depicting the CFPB as a piggy bank.
    Mr. Cordray. What I would say is this: All these people who 
were ripped off by these fraudulent artists never get their 
money back, expect that we can use the Civil Penalty Fund to 
get their money back--
    Mr. Rothfus. Okay.
    Mr. Cordray. --and we are getting it back for them.
    Mr. Rothfus. We have requested records--
    Mr. Cordray. That is a really good thing. Don't you want us 
to do that?
    Mr. Rothfus. No, here. We have requested records relating 
to GCS from you months ago. Why has the CFPB been so reluctant 
to provide records to Congress about a major allocation, $100 
million dollars in funds?
    Mr. Cordray. I don't know that we are reluctant to give 
records. I don't think we are. I would be happy to work with 
you to give you all the records you want.
    Mr. Rothfus. We will continue to follow up with that 
because we haven't gotten the records we have requested.
    Mr. Cordray. But this is a good news story. All these 
people who were ripped off--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Minnesota, Mr. 
Ellison.
    Mr. Ellison. Please continue, Mr. Cordray.
    Mr. Cordray. Okay. So you have people who were ripped off 
to the tune of $109 million. Global Client Solutions was the 
mechanism for making that happen.
    They never had $109 million on hand. The only way to 
compensate these victims is to go to our Civil Penalty fund, 
and that is what we are doing.
    That is good. That means people in your district may get 
money back that they got cheated out of. Isn't that a good 
thing? I think it is.
    Thank you.
    Mr. Ellison. Mr. Cordray, there is a chart that has been 
flipping around up behind you and on the sides that says for 
every dollar that your agency gets there is $4 returned to 
consumers. I think that Americans would say this is awesome, 
and a lot of Members of Congress would even say it is a great 
thing.
    But I can see how some people wouldn't see that as good 
news because they might be looking at that money as money that 
could have been returned to some big financial interest and 
they are really upset because they are not getting that money 
that they could be getting.
    So far I think you might have--your agencies returned what, 
$11 billion-plus to consumers. Is that right?
    Mr. Cordray. That is my understanding, yes.
    Mr. Ellison. So that is what I am talking about. For every 
$1 spent funding the Consumer Bureau, more than $4 is put back 
into consumers' pockets. And I think what we are really 
fighting about today is some people think, ``Well, why should 
that money go back to regular Americans when it could be going 
into huge financial firms and be divided up in stock options or 
dividends or bonuses or whatever else?''
    And I really believe that is what we are fighting about 
because I can't get 2008 out of my mind. I remember we had 
bedlam and pandemonium around here. There was a week when it 
looked as though the whole financial system might collapse.
    I think that we had unemployment spiking in some areas as 
high as 15, 16 percent; maybe--I have heard as much as $17 
trillion in household wealth lost; banks going out of business; 
businesses going out of business. All types of trouble going on 
all over the place, neighborhoods being hollowed out.
    And yet, the level of outrage expressed against you is way 
higher than any derision that some of these companies that have 
ripped off people have ever had to experience.
    I wish we would have had at least half of this umbrage and 
outrage directed at CitiMortgage, Wells Fargo, Experian, 
Navient, Equifax, TransUnion, MasterCard, and the list goes on.
    But, I just think that for people watching this we need to 
know that much of what is happening is theater. It is not 
really about any of this stuff. It is about the CFPB helping 
regular people and diverting money into the pockets of ordinary 
working Americans rather than huge financial interests.
    And I am just honored to be on your side, because I am with 
the people, because as Members of Congress we are supposed to 
be working in the public interest, not the private gain. That 
is not what Congress is supposed to do.
    It is really shocking to read someone from this committee 
saying, ``The CFPB has acted unlawfully, routinely denied 
market participants due process, and abused powers.'' Well, I 
am going to tell you there are a whole lot of companies that 
have acted unlawfully and routinely denied market access to 
regular working Americans. I don't see any hate being thrown on 
them.
    And yet, here we go, an agency designed to really sort of 
correct injustice done to Americans being heaped with scorn 
left, right, and center.
    Let me ask you this, sir: Do you believe that the CFPB is 
helping regular Americans? Is it rebalancing some of the 
imbalance that we have seen accruing in this economy?
    Mr. Cordray. I know we are because that is what they tell 
us, and people who get helped on our compliant line and get 
problems resolved often come back and tell us about it and 
thank us for it. And I know that Congressional offices are 
sending us--referring us complaints, and we are helping work 
through those, and that is all a good thing.
    The other thing I would say, when you say that the return 
on the investment is that we have gotten $4 back to consumers, 
people out in the public, for every dollar spent on us, it is 
far more than that because that is what we got back to them for 
things that happened to them in the past. But in each of those 
instances we don't just look at what happened in the past; we 
stop them from doing it in the future.
    So that means over the next period of time they are going 
to save that $4 they otherwise would have lost and it is going 
to be on into perpetuity. That is a great return on investment. 
And I would hope that people who think in those terms would 
recognize the value of the Consumer Bureau and would look to 
support it, and I would hope to change minds. I always hope to 
change minds.
    Mr. Ellison. Mr. Cordray, I want to thank you for the work 
you are doing. I want to urge you not to be discouraged by the 
misbehavior you have seen, and I want to let you know you are 
doing a great service for the American people.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Texas, Mr. 
Williams.
    Mr. Williams. Thank you, Chairman Hensarling, and Director 
Cordray.
    I am going to forego any opening remarks that I might have 
this afternoon and get right down to business.
    Mr. Cordray. Okay.
    Mr. Williams. I think you know by now that I am still a car 
dealer in Texas.
    Mr. Cordray. I didn't know you still were, but I knew you 
had that extensive background, yes.
    Mr. Williams. There you go.
    Mr. Cordray. A very successful one is what I hear.
    Mr. Williams. Thank you. We have talked about this numerous 
times.
    After listening to some of the testimony today I am kind of 
starting to think you don't have much respect for my 
profession. I will get back to that.
    Mr. Cordray. I would be glad to--
    Mr. Williams. Let me make two quick comments on statements 
you previously made today really quickly.
    You said there are no protection on prepaid cards. Well, 
that is false. All funds are stored at bank partner 
institutions and all major prepaid providers have Reg E 
protections.
    And then you said the rule is about leveling the playing 
field. Then why create a different regulatory regime on 
overdraft for prepaid cards than checking accounts?
    So I don't need a comment. That was a statement from me.
    Mr. Cordray. I would like to make one if I could, just 
briefly.
    Mr. Williams. Well, let me move on, if we have time.
    Mr. Cordray. Okay.
    Mr. Williams. Let me start by sharing with you some 
complaints on prepaid cards. Kimberly in Austin, Texas, says, 
``I chose my prepaid card and I believe I should have the right 
to decide to use services like overdraft protection for a 
purchase cushion. Please make sure the final CFPB rules allow 
me to choose features that are best for me.''
    Kathy in Burnet, Texas: ``My prepaid card is just that. It 
is mine. The government needs to stop trying to control 
everything and everybody. Our country sure is turning its back 
on its people.''
    And then there is Christine in Joshua, Texas: ``Overdraft 
is needed to help me get through paycheck to paycheck.''
    And then Sharon in Lampasas, Texas, says, ``Why is the 
Federal Government getting involved in my personal banking 
decisions?''
    And finally, Randall in Cleburne, Texas, who simply says, 
``Leave my card alone.''
    So actually, these are not complaints about what the card 
does; it is about what you are doing.
    And so I believe--
    Mr. Cordray. Could I--
    Mr. Williams. No, let me say this, and we have a lot of 
comments from those kind of people. In fact, let me just show 
you right here. I have all these are comments just like the 
ones you just heard from, from hardworking Americans who have 
actually benefited from prepaid cards, and they should sound 
familiar to you. These comments were filed during the 
rulemaking process.
    But apparently you didn't listen to them when you created 
your one-size-fits-all rule on prepaid accounts, or the 67 
million Americans who have turned to prepaid cards or accounts 
to manage their day-to-day financial needs. This rule doesn't 
solve a problem; it just creates a big problem.
    But let's for a second go back to those--
    Mr. Cordray. Could I have a word or not?
    Mr. Williams. Let me finish and then you can.
    Mr. Cordray. Okay.
    Mr. Williams. I have some questions for you.
    But let's for a second go back to those complaints. From 
2011 to 2016 in October, before this massive 1,700-page rule 
was issued, approximately 1 million complaints--we talked about 
that--were received by the CFPB.
    Of those 1 million complaints 6,000 had to do with prepaid 
cards. So that is just 0.6 percent. Of those 6,000 complaints 
just 1 percent of those received were related to overdraft, 
which represents 0.006 percent. Additionally, only 3 percent of 
prepaid complaints were related to advertising, marketing, or 
disclosures, which represent just 0.018 percent of all 
complaints.
    So you can see from this chart we have up here--or maybe 
you can't see it, we have up on the screen--disclosure 
complaints and overdraft complaints are almost invisible.
    I have a few questions, and these are yes-or-no questions.
    Mr. Cordray. I would like to have a chance just to have a 
word on a few of the things that--
    Mr. Williams. Okay. Let me start here by asking yes or no.
    Did the CFPB base the prepaid rule off complaints received?
    Mr. Cordray. The CFPB based it off--
    Mr. Williams. Was that yes or no?
    Mr. Cordray. You said before that prepaid issues are 
already covered by Reg E. They are not. Banks are covered by 
Reg E, but prepaid issues are not--
    Mr. Williams. So is that a yes or a no?
    Mr. Cordray. --and a big part of this rulemaking was 
putting them on a level playing field.
    Mr. Williams. Yes or no?
    Mr. Cordray. So that is what it was responding to.
    Mr. Williams. Okay.
    Did you consider the thousands of positive comments you 
received from prepaid customers around the country?
    Mr. Cordray. Absolutely we did, yes.
    Mr. Williams. Yes or no, did the CFPB conduct a field 
study? Did you study consumer attitudes on overdraft, 
specifically those who actually use that feature?
    Mr. Cordray. I don't recall offhand all the things that 
were covered in any field study, but we would be glad to get 
back to you on that.
    Mr. Williams. All right.
    And I am sure that you noticed, Director Cordray, I have 
introduced a CRA that would pull back on this disastrous rule. 
And I notice as Congressman Tipton will say, the Bureau has 
attempted to distract Congress from doing their work by 
delaying the rule by 6 months. You talked about that.
    Mr. Cordray. No. That is not--
    Mr. Williams. I am here today to tell you that I am not 
going to be distracted. This is wrong. I will continue to fight 
for those who live on a thin economic margin. I will fight for 
the mother who needs an extra $25 a day to buy food for the 
week and the family who needs $100 for a simple car repair.
    In the end, one way or another, those consumers will be 
heard.
    So going back to auto lending quickly, I have a form right 
here that the CFPB and the DOJ sent out to customers they felt 
were discriminated against when purchasing a car, so I want to 
ask you a quick question here about that.
    Yes or no, can the Bureau decide if someone has been 
discriminated against based on an account number?
    Mr. Cordray. Based on an account number?
    Mr. Williams. Yes.
    Mr. Cordray. No.
    Mr. Williams. Okay. Can the Bureau decide--okay.
    Mr. Chairman, my time is out. I yield back.
    Mr. Cordray. Could I just have a word, please. Kind of a 
point of privilege, if I could, just because the suggestion was 
that I don't have respect for car dealers. That is wrong, and 
if you talk to my friends and the Ohio auto dealers--
    Chairman Hensarling. Sorry. There is no point of privilege 
for the witness, but there is--
    Mr. Cordray. Okay. That is fine.
    Chairman Hensarling. Mr. Director, there is another Member 
on this side of the aisle whom I suspect may be willing to give 
you some time.
    The Chair now recognizes the gentleman from Florida, Mr. 
Crist.
    Mr. Crist. Thank you, Mr. Chairman.
    Did you need some time?
    Mr. Cordray. Thirty seconds?
    Mr. Crist. Go right ahead.
    Mr. Cordray. Congressman Williams, I have a lot of respect 
for auto dealers. I worked with them closely in Ohio when I was 
Ohio attorney general.
    We went through the financial crisis and a lot of them were 
teetering; we went through the GM bankruptcy; we went through 
the Chrysler bankruptcy. There were a lot of dealers who were 
going to lose their dealerships and I fought for extra 
arbitration to get a lot of them saved.
    The auto dealers know the work I did on their behalf. I 
worked closer to them in handling complaints, gave them a 
chance to handle them before we took any actions against them.
    So you can talk to my friends in Ohio and they would tell 
you that I do have respect for you and your profession and all 
of them. That doesn't mean we don't have a job to do here, and 
I try to do it faithfully.
    And the final point on the prepaid rule is that it is often 
misdescribed as a 1,700-page rule. That is not correct.
    Look in the Federal Register. It is 26 pages of rule. Six 
of those pages are forms that are model forms to follow. So it 
is just--I don't want that to be misdescribed.
    Thank you.
    Mr. Crist. Thank you.
    First I want to thank you, Mr. Chairman. I appreciate your 
kindness.
    I also want to thank Ranking Member Waters for bringing us 
together for this important hearing today.
    And I want to thank you, Director. I have only been a 
Member of Congress for about 3 months now, and my observation 
is that you might be one of the most disliked people in 
Washington, D.C., by the Majority, the new Administration, 
lobbyists, money-changers, foreclosure artists, and anyone who 
is in the business of taking a buck from the poor and working 
families, the people who can least afford it.
    I hope that you wear that with pride, sir, because I am 
proud of you and your hard work and your moral compass. People 
of this country are continuing to go through a difficult time 
and what you and your department do is very important to them.
    As a former attorney general myself, I understand being a 
consumer advocate and fighting for them. But for somebody like 
you in the position you have, that doesn't happen.
    When I was Governor of Florida, Tallahassee didn't like me 
a whole lot either. But that is okay because the Constitution 
says that we are a government of the people, by the people, and 
for the people.
    And so when I would meet people at a Publix department 
store in my State, or at the local CVS, or at a McDonalds, 
which I really don't go to, but more so a Subway--turkey on 
whole wheat--they talk to you because you are in their comfort 
zone. And it is important, I think, to do that to stay in touch 
with them and understand what is of importance to them and 
their families.
    All of us would do well to remember that Jesus threw the 
money-changers out of the temple, not the other way around.
    On that note, I want to talk about small businesses, 
particularly minority- and women-owned small businesses in my 
district, which is my hometown of St. Petersburg, Florida, but 
also includes Clearwater and Pinellas Park and Redington Shores 
and about 26 municipalities, believe it or not.
    Traveling around where I grew up in south St. Petersburg in 
particular, it is a predominately minority area. Last fall I 
heard a similar refrain every day: Mom-and-pop businesses could 
not get access to traditional capital.
    If small business lending is restricted in the primarily 
Black neighborhood in my district, that is a problem and it 
needs to be fixed. Its impact in a community that is very 
important to me, it is a disparate impact.
    And by the grace of God I got on this committee, and this 
committee has the opportunity in one way or another to give 
those people, whom I love and I work for--they pay me to 
represent them. And that is one thing I love about this job, 
that your title is also what you do. You represent.
    And this is not just an economic issue. It is an 
economically developing area and it is an issue of fairness, 
frankly. And I know you know that.
    A Black barber shop shouldn't have to go to a payday lender 
to finance payroll and operations. But over and over again 
during the course of last fall I heard stories from people like 
a Black barber shop owner. He wanted to expand, and every 
institution he went to told him, ``no.''
    And the same thing happened to a small restaurant owner in 
the African-American part of St. Petersburg, Florida. They 
wanted to expand and grow and provide more jobs and be 
entrepreneurial, and every time they went to a bank, the bank 
said, ``no.''
    So I guess my question is--
    Chairman Hensarling. The time of the gentleman from Florida 
has expired.
    For what purpose does the gentleman from Georgia seek 
recognition?
    Mr. Scott. Mr. Chairman, I have a unanimous consent request 
that these two letters I have here be made a part of the 
hearing record: one from the Main Street Alliance on the ways 
that Dodd-Frank and the CFPB--
    Chairman Hensarling. Without objection, it is so ordered.
    Mr. Scott. Thank you.
    Chairman Hensarling. The Chair now recognizes the gentleman 
from Maine, Mr. Poliquin.
    Mr. Poliquin. Thank you very much, Mr. Chairman.
    And thank you, Mr. Cordray, for being here.
    Mr. Cordray, your Acting Deputy Director, David Silberman, 
has had direct coordination with special interest groups 
outside your Bureau to develop the payday lending rule. I am 
very concerned about any kind of cozy relationship that your 
people have with outside special interest groups to make rules 
that you folks are supposed to make. I am sure you probably 
share that same concern.
    Mr. Cordray. Yes. That is not right. That is not a fair 
description.
    Mr. Poliquin. No, that is not what the e-mails show us, 
sir. There is a direct coordination between your staff--in 
particular Mr. Silberman--and outside groups.
    Mr. Cordray. We are broadly accessible to all sides.
    Mr. Poliquin. I want to move on, sir.
    That is what the record shows. That is what the e-mails 
show from the FOIA request that we have here at the committee.
    Mr. Cordray. All right.
    Mr. Poliquin. Now, you have a law degree, sir. You are an 
attorney, correct?
    Mr. Cordray. Say that again?
    Mr. Poliquin. You are an attorney, correct? You have a law 
degree?
    Mr. Cordray. I am. I haven't practiced law in some time.
    Mr. Poliquin. Okay. So I am sure you are aware of the 
Federal Records Act that bars any Federal Government employee 
from using a private electronic device, a communication device 
like a cell phone or e-mail or a text, to conduct official 
business unless within 20 days the reporting of that 
communication is then housed in an official platform.
    You are aware of that law, sir?
    Mr. Cordray. I am aware of that law.
    Mr. Poliquin. Okay, good. All right.
    Now let's talk a little bit about this. Through freedom of 
information requests we know that you and about a dozen of your 
senior managers at the CFPB have, in fact, conducted 
communication on private devices to conduct official business, 
which circumvents the law unless, again, sir, unless you have 
reported this and it is on--filed on an official government 
platform.
    Can you guarantee to us right now that, in fact, you have 
complied with the law and you have done everything you said you 
can--
    Mr. Cordray. Yes, this is a trumped-up issue brought about 
by some special interest groups that made a request. You can 
look at the records of the Bureau and find that our government 
business is conducted on the Bureau's--
    Mr. Poliquin. Can you guarantee--
    Mr. Cordray. Just let me, if I would--this is a personal 
issue you are raising--
    Mr. Poliquin. I want a yes-or-no answer, Mr. Cordray.
    Mr. Cordray. --and I would like to have a chance to 
respond.
    Mr. Poliquin. Yes or no, can you guarantee that neither you 
nor anybody at the CFPB has used personal communication 
devices--text, e-mail, cell phones--and have fully complied 
with the Federal Records Act? Yes or no?
    Mr. Cordray. So again, this is a trumped-up issue--
    Mr. Poliquin. Yes or no? Yes or--
    Mr. Cordray. --and if you look at the records you will find 
that if there were ever incidental--if there were incidental--
    Mr. Poliquin. Reclaiming my time, sir--
    Mr. Cordray. I would like to have a--you are making 
accusations and I think I should have a chance to respond to 
them.
    Mr. Chairman?
    Chairman Hensarling. The time belongs--
    Mr. Cordray. Do I have a chance to respond to these 
personal accusations?
    Chairman Hensarling. The time belongs to the gentleman from 
Maine.
    Mr. Poliquin. Thank you, Mr. Chairman.
    If this accusation is false, can you guarantee us that you 
have complied with the law and the folks who work for you 
complied with the law with respect to the issue I just 
mentioned? Yes or no?
    Mr. Cordray. Again, this is a totally trumped-up issue.
    Mr. Poliquin. Can you--
    Mr. Cordray. If there were ever incidental instances--
    Mr. Poliquin. I am going to assume--
    Mr. Cordray. --where a device was used because maybe the 
government Blackberry was--the battery was dead or something of 
that kind--
    Mr. Poliquin. Reclaiming my time, Mr. Chairman.
    Mr. Cordray. --and not to conduct government business in 
any substantive way. That is a--
    Chairman Hensarling. The time belongs to the gentleman from 
Maine.
    Mr. Poliquin. Mr. Chairman, if you could reset the clock, 
please, for another minute or so, because the--
    Chairman Hensarling. The gentleman from Maine may proceed.
    Mr. Poliquin. Mr. Cordray, do you still use a private cell 
phone or e-mail to conduct outside business?
    Mr. Cordray. I think it is unfair and inaccurate to say 
that--
    Mr. Poliquin. Sir--
    Mr. Cordray. --using a private device to conduct government 
business.
    Mr. Poliquin. Do you still use--
    Mr. Cordray. There have been incidental instances where 
perhaps the government Blackberry was--the battery was dead or 
it was unavailable for some reason--
    Mr. Poliquin. So you confirm that, in fact--
    Mr. Cordray. And it is not to conduct--
    Mr. Poliquin. --you were using private e-mail communication 
devices--
    Mr. Cordray. What government business was conducted? Tell 
me what government business was conducted.
    Mr. Poliquin. Thank you for--
    Mr. Cordray. Tell me what government business was 
conducted.
    Mr. Poliquin. Now, my next question is you are probably 
aware that this committee and also folks on the Oversight and 
Investigations Subcommittee here, and Jim Jordan and Jason 
Chaffetz, who work in another part of government, have sent you 
a letter asking you for all of the e-mails and phone messages 
that you have used--and you just confirmed, thank you--that you 
have used on a--
    Mr. Cordray. No, I didn't confirm that.
    Mr. Poliquin. --on a private--
    Mr. Cordray. This is a--
    Mr. Poliquin. --on a private communication device. Are you 
fully in compliance with this letter? Are you going to comply 
to this letter?
    Mr. Cordray. We--
    Mr. Poliquin. The request in this letter?
    Mr. Cordray. We respond to all requests, and we will.
    Mr. Poliquin. Well, when will you--
    Mr. Cordray. But this is a trumped-up issue. I have been in 
this job for more than 5 years, and I conduct all kinds of 
government business all the time. It is all on the system.
    There may be incidental instances where--
    Mr. Poliquin. Okay, so you are--
    Mr. Cordray. --where a Blackberry was dead so a 
communication was made, but it wasn't to conduct government 
business. And I would like to know from you what government 
business was conducted. You seem to think that you have 
something.
    Mr. Poliquin. --all the private communication you have 
had--
    Mr. Cordray. What was it?
    Mr. Poliquin. --for government business based on the answer 
you have given us today sir so you are on the record that you 
have made sure that all this communication is fully housed on a 
government, official platform. I am considering that as a yes.
    Mr. Cordray. We understand the Government Records Act and 
we make every effort to fully comply with it.
    Mr. Poliquin. Do you know what the problem is? We have--
    Mr. Cordray. --and that anything else is just a character 
assassination, and that is what it is.
    Mr. Poliquin. Mr. Chairman, here is the problem. Here is 
the problem. There is no character assassination here.
    Mr. Cordray. Yes, it is.
    Mr. Poliquin. Here is the problem though, Mr. Cordray: You 
have a 5-year--
    Chairman Hensarling. The time--
    Mr. Poliquin. --appointment from the President.
    Chairman Hensarling. The time of the gentleman--
    Mr. Poliquin. You don't report to anybody. We don't 
appropriate any money to you.
    We come here and ask questions and you tell us to go pound 
sand.
    Mr. Cordray. No, I don't tell you to pound sand.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from New Jersey, Mr. 
Gottheimer.
    Mr. Gottheimer. Thank you, Mr. Chairman.
    Director, in February the Consumer Bureau filed a lawsuit 
against RD Legal Funding for allegedly scamming 9/11 heroes out 
of money intending to cover medical costs, lost income, and 
other critical needs. Can you please elaborate on the consumer 
fraud the Bureau found in this instance?
    Thank you.
    Mr. Cordray. It is kind of disgusting just as you told the 
story that briefly, isn't it?
    So you have a company that engages in structured 
settlements that targeted responders--first responders to the 
9/11 attack, who ended up getting money from the Federal 
Government. And the structured settlement company went after 
them and offered them loans that we feel were misleading and 
deceptive and unfair and violated the law.
    They did the same with NFL players who were concussion 
victims and got some sort of a settlement or some sort of pot 
of money available to them, so that attracts--it is like honey; 
it attracts the flies.
    And we have brought an action to pursue relief for those 
consumers to make sure that they are restored the money that 
was, we think, wrongfully taken from them and that these 
practices are cleaned up and stopped for good.
    And in that case--some cases we work on our own; some cases 
we work with partners. We have heard about the Wells Fargo case 
where we worked with partners. Here we are working with the New 
York Attorney General's Office and having a very productive 
investigation of those issues.
    Mr. Gottheimer. Thank you very much.
    Mr. Chairman, I yield back.
    Chairman Hensarling. The gentleman yields back.
    The Chair now recognizes the gentleman from Colorado, Mr. 
Tipton.
    Mr. Tipton. Thank you, Mr. Chairman.
    Director Cordray, I agree with the decision to be able to 
delay by 6 months the prepaid card rule. And in fact, we have 
introduced legislation to be able to delay that actually for a 
year moving forward--
    Mr. Cordray. Yes.
    Mr. Tipton. --because of the potential problems with the 
rule.
    But in dealing with this, as part of the announcement the 
Bureau said that it will be evaluating concerns with 
substantive aspects to it. You had mentioned in earlier 
questioning in regards to digital wallets as substantive 
aspects of it. Were there any others?
    Mr. Cordray. So these are illustrative. What happens when 
we finalize a rule is, the market doesn't stay still and 
things--
    Mr. Tipton. Right. I am just seeking, what are the other 
aspects that you--
    Mr. Cordray. I am just saying things can change, and we 
stay in close touch with the industry because we are helping 
them implement the rule. So we hear a lot even after a rule is 
finalized.
    Here, the linking of credit cards into digital wallets is 
one of the things we have heard enough about to recognize that 
we should consider proposing an invention.
    The other one that I mentioned had to do with error 
resolution for prepaid cards that have not been registered, 
which is causing some concern, and I think some of the 
companies that didn't fully realize it beforehand are realizing 
now that--
    Mr. Tipton. I'm sorry, I have limited time.
    Mr. Cordray. I'm sorry.
    Mr. Tipton. What other one--aspects--
    Mr. Cordray. And there could be others, depending on what 
we are hearing and seeing as we go.
    Mr. Tipton. Okay.
    Earlier when you were talking to Congressman Sherman in 
regards to the rulemaking process you had mentioned, and we 
wrote it down, ``I want to be able to move as fast as 
possible.''
    Director Cordray, the American Action Forum said that the 
average CFPB rule takes 197 days to be able to complete. The 
median rulemaking pace, that is 3\1/2\ times faster than other 
executive agencies.
    Do you believe that the Bureau can complete a thorough 
analysis of public comments and concerns in that timeframe, 
given that you are accelerating it?
    Mr. Cordray. It depends on the rule. Some rules are fairly 
straightforward and can be done very quickly; many of them are 
not straightforward at all.
    And I heard the chairman loud and clear earlier saying he 
wants us to move faster on the 1071 small business lending 
rule, which he thinks that we haven't gone fast enough on.
    So, sometimes we are too fast, sometimes we are too slow. 
Some rules are harder, some rules are easier. Those are the 
kind of considerations that affect this. Averages tell you 
something, but they don't really capture all the--
    Mr. Tipton. But you are comfortable that you are doing it 
in a sensible way?
    Mr. Cordray. I know we are trying to do all of our 
rulemaking in a sensible way. I will say that we have 
finalized--
    Mr. Tipton. All right.
    Mr. Cordray. --a number of rules and sometimes had to go 
back and rework them, and the rural was an example and we had 
to rework it twice, so--
    Mr. Tipton. I find it interesting, because you hold--and 
there are certainly an appropriate areas to be able to do that 
accountability, transparency--
    Mr. Cordray. Yes.
    Mr. Tipton. --in terms of the process. However, the 
American Action Forum also noted that you have issued 13 
corrections on 49 rules that they have sampled. This is a 25 
percent error rate effectively, and going.
    In the private sector, would you be happy with a 25 percent 
error rate when you were moving forward with rules and trying 
to be able to enforce them?
    Mr. Cordray. Again, I think ``error rate'' is too strong a 
term because, as I said, there are things that can change even 
after rulemaking is finalized. Should we refuse to recognize 
that we need to make a change just to be stubborn and just to 
have pride of authorship?
    I think it is a good thing that when we learn more that we 
are willing to go back in and change things to try to get it 
right. If we had stubbornly stood on the first definition of 
``rural,'' people would still be complaining about it and we 
would be hurting people and it wouldn't have come out right.
    To fix that once and then twice is a good thing, but that 
would sound like an error rate.
    Mr. Tipton. We now actually have court cases where you have 
been overruled. We just had a North Dakota case. I think you 
are well aware that the courts have ruled against your standing 
on a variety of cases that have been moving--
    Mr. Cordray. I know we have two cases where--two or three 
cases now where courts have ruled against us on various things, 
and a couple of those are on appeal. But we don't get 
everything right. We are not going to get everything right--but 
we do--we try to be very careful. Sometimes, you have the hard 
issues and courts disagree with you. That happens.
    Mr. Tipton. I am kind of curious. You have had, as you had 
noted, I think it was over 1.3 million public comments on the 
proposed rule on small-dollar loans.
    Mr. Cordray. That is pretty much a record, I think, yes.
    Mr. Tipton. It is. And you said on both sides of it. How 
are you weighting those?
    Mr. Cordray. How are we weighting those?
    Mr. Tipton. Or are they weighted?
    Mr. Cordray. Well, no, I think we always--it is not just 
numbers of comments; it is what they have to say.
    We are supposed to take them on the merits and think about 
what they say on the merits, although I do think numbers of 
comments can show intensity around an issue, which is a little 
different from just what is said about the issue. So I think 
all of that comes into play.
    And if you have other thoughts about how we should handle 
it, I would be glad to hear them because it is a hard issue. 
You get constituent calls, right? And you get them on both 
sides of issues and then you try to weigh them and figure out 
what is the right thing--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentlelady from Utah, Mrs. 
Love.
    Mrs. Love. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for being here today.
    I would like to talk a little bit about checks and 
balances. I believe, especially in today's environment, we need 
to do everything we possibly can to make sure we have checks 
and balances so that the American people aren't subject to the 
political environment.
    So what I would like to explore is the extent to which the 
Bureau is subject to them or not subject to them. So it is 
often noted that one of the few checks and balances on the 
Bureau is in the hands of the Financial Stability Oversight 
Council (FSOC). And FSOC can, in fact, veto final regulations 
promulgated by the Bureau, is that correct?
    Mr. Cordray. That is my understanding of the statute. There 
are grounds on which they are supposed to do that--
    Mrs. Love. I have a couple of things. I will go through 
that. Okay.
    Mr. Cordray. That is fine, yes.
    Mrs. Love. Can FSOC veto enforcement actions? Yes or no?
    Mr. Cordray. I don't believe the statute provides for 
that--
    Mrs. Love. Okay. Can FSOC veto supervisory actions even if 
they find them invasive, harassing, or unnecessary?
    Mr. Cordray. Again, maybe we can short circuit this. I 
believe FSOC, under their statute--
    Mrs. Love. No.
    Mr. Cordray. --has the ability to veto--
    Mrs. Love. No. Yes or no?
    Mr. Cordray. --regulations on specific--
    Mrs. Love. Yes or no, can they super--can they veto 
supervise--we are just going to go through this. Can FSOC veto 
investigations even if they find those investigations to be 
arbitrary, harassing, or unnecessary? Can they veto your 
investigations? Yes or no?
    Mr. Cordray. They can't do a lot of things. They can do--
    Mrs. Love. Okay. Can FSOC veto the Bureau's guidance? If 
they find those guidance to be repetitive, unnecessary, can 
they veto those?
    Mr. Cordray. We can keep going through this if you want.
    Mrs. Love. No, okay. That is okay.
    Mr. Cordray. I am not sure where this--
    Mrs. Love. Is there anything that FSOC could veto, other 
than your final regulations?
    Mr. Cordray. So the FSOC has the ability under the statute, 
as I said--it is repetitive here, but--
    Mrs. Love. I am about to get there--
    Mr. Cordray. --to veto rules on specific statutory 
grounds--
    Mrs. Love. Can they veto--
    Sir, you might find that you agree with me later. We will 
get there. And if you--okay?
    So the only thing FSOC can veto are final regulations, and 
FSOC can't veto--issue a veto unless the regulations would put 
the safety and the soundness of the United States banking 
system or the stability of the financial system of the United 
States at risk?
    Mr. Cordray. That is what Congress did in the law.
    Mrs. Love. I understand.
    Mr. Cordray. I didn't do it. Congress did it.
    Mrs. Love. Yes. I got it.
    So that sets the bar extraordinarily high for FSOC to take 
action. Has FSOC ever vetoed any action the Bureau has taken?
    Mr. Cordray. I would like to think that we would never put 
the FSOC in the--
    Mrs. Love. Have they done it?
    Mr. Cordray. --position of having to do that.
    Mrs. Love. Have they done it?
    Mr. Cordray. So they have not--
    Mrs. Love. Okay. That is it.
    Mr. Cordray. --they have not had to do that because we 
haven't gone afoul of it.
    Mrs. Love. So let me get me this straight.
    So, for instance, if any of these young men and women 
behind you decide that they are going to be part of an 
institution, a banking institution in their community, or 
better yet, they decide that they are going to--they have their 
own business that they have put all of their money into, that 
they have exhausted all of their savings and they want to be 
able to go to a banking institution to expand or get credit, 
whether it is to get a car or whether it is to expand their 
business or whether it is to get a mortgage. And their 
institution is being investigated, supervised, fined by the 
CFPB, they have nowhere to turn unless the final rules find 
that they are taking down the entire financial system of the 
United States Government.
    Mr. Cordray. I am not really--
    Mrs. Love. What is their recourse?
    Mr. Cordray. I am not really following you. First of all, 
we don't have--
    Mrs. Love. What is their recourse?
    Mr. Cordray. --the ability to fine or enforce against any 
community banks or credit unions.
    Mrs. Love. Okay, so you have no ability to fine or 
investigate any financial institutions in--
    Mr. Cordray. Community banks or credit unions, that is 
correct. Community banks or credit unions of under $10 million.
    Mrs. Love. So what you do does not affect the American 
people and their ability to get credit?
    Mr. Cordray. No, that doesn't follow from that question.
    Mrs. Love. Okay.
    Mr. Cordray. But what I was saying is we don't have the 
ability to fine or enforce against thousands of community banks 
and credit unions.
    Mrs. Love. What I am trying to say is that the ability--you 
have to understand that what the Bureau does actually affects 
the ability of the American people to get access to credit to 
be able to go out and achieve their dreams.
    Here is what I am trying to say. The American people should 
be concerned--
    Mr. Cordray. And to be able to access responsible credit so 
that they aren't being victimized by predatory lenders.
    Mrs. Love. --should be concerned, Director Cordray--
    Mr. Cordray. Yes.
    Mrs. Love. Just to take you out of the picture, for 
instance, and let's think about this current President actually 
putting somebody else in your position. Think about that.
    And I think everybody else should think about that also, 
whether they are happy or not, right?
    Mr. Cordray. I have thought about that.
    Mrs. Love. Listen, should the American people not be 
concerned that your agency can spend hundreds of millions of 
dollars each year, employ 1,500 Federal bureaucrats who have 
the power to directly impact the personal finances of every 
single American, and yet, unlike any other Federal agency, is 
not accountable to anyone?
    Mr. Cordray. I don't think we are unlike other Federal 
agencies.
    Mrs. Love. Well--
    Mr. Cordray. Everything people have said about us--
    Mrs. Love. No, you even mentioned that you are able--you 
enjoy more unilateral authority--
    Mr. Cordray. Not true.
    Mrs. Love. --than other offices and you--
    Mr. Cordray. Not true.
    Mrs. Love. --take that responsibility very seriously.
    Mr. Cordray. It is not true.
    Mrs. Love. Who is to protect the consumer from the Director 
of the Consumer Financial Protection Bureau?
    Mr. Cordray. That is just not true. I am no different from 
the Federal Reserve or the FDIC--
    Chairman Hensarling. The time of the gentlelady--
    Mr. Cordray. Tell me how I am different.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair wishes to inform Members that there is currently 
a vote pending on the Floor. We will call upon one more Member, 
Mr. Hill of Arkansas, and recess, after which we will 
immediately reconvene, and next in the queue will be Mr. Zeldin 
and Mr. Trott.
    The Chair now yields to the gentleman from Arkansas, Mr. 
Hill.
    Mr. Hill. I thank the chairman.
    And I thank the Director for being with us today.
    Mr. Cordray, I have heard from a number of community banks 
across my State of Arkansas that no single mortgage regulation 
has been more vexing than complying with TRID, also known as 
the ``know before you owe'' disclosures regulation.
    The regulation included 1,888 pages. In your testimony this 
morning you assert that the Bureau writes clear rules of the 
road, and in your report you also noted that--
    Mr. Cordray. I would say we try to write clear rules of the 
road. We may not always succeed, yes.
    Mr. Hill. Your report that you released today also says 
that you, under the revised ``know before you owe'' rule, 
attempt to ensure smooth and on-time closings. But in addition 
to hearing from the community bankers, I have also heard from 
consumers that it has been delays, frustration, and increased 
costs.
    And one issue I noted is this issue of the disclosures 
themselves. So a basic disclosure regulation of this sort might 
have a question that the Bureau attempts to ask, ``Does the 
rule require both the consumer and the seller to receive a 
closing disclosure?''
    And to receive an answer to this question a community bank 
must go to the Bureau's website, which I have on the screen, 
click the question index link, which leads you to a webpage 
that says, ``Thank you for visiting the ConsumerFinance.gov. 
You are now leaving the CFPB Web server.''
    The user then downloads an 11-page document called the 
TILA-RESPA Integrated Disclosure Rule Webinar Index. I will 
note that this document does not appear to be on the CFPB 
letterhead and uses an entirely different font and scheme.
    Having done this, the user must find the heading on page 
six that says, ``Closing disclosure general questions.'' Click 
another link, apparently, and then find question 12, which is 
38 minutes and 37 seconds into a recording of a webinar that 
was conducted on April 12, 2016.
    But before the user can get the answer to this most basic 
question and view the recording on the webinar, they must enter 
their name, company, city, State, telephone number, and e-mail. 
If the user is a bank, savings, loan, or credit union, they 
must answer three questions about their institution in order to 
get the answer to this basic question, ``Does the rule require 
both the consumer and the seller to receive a closing 
statement?''
    So you see where I am going here. Would you say this sounds 
like clear rules of the road?
    Mr. Cordray. I would say that if what you just said is all 
correct, I would say that that doesn't sound as user-friendly 
as either you or I would like it to be, does it?
    Mr. Hill. I agree, Mr. Director.
    And, I really think, why can't the CFPB just issue written 
guidance and rule interpretations like the Internal Revenue 
Service or the SEC or the IRS does? The GAO has an excellent 
report on how to seek written answers and get written guidance 
from the agency, and to me that is a more clear way to this.
    Webinars are not legally binding. They are not really that 
helpful to compliance departments or general counsels.
    But let me move on. I think I have--
    Mr. Cordray. Although, I would just say--
    Mr. Hill. Yes.
    Mr. Cordray. --if we write things down more people 
criticize how many pages of stuff there is and--
    Mr. Hill. No, but it is a--I got that, but you know through 
the commission and over at the IRS--
    Mr. Cordray. But everybody wants something to be written 
down, and once you total it all up it is a lot of stuff for 
people to read. It is just a comment--
    Mr. Hill. Yes. I understand.
    When did the TRID rule become effective, Mr. Director?
    Mr. Cordray. I believe it became effective in--I am 
confusing this a bit, maybe October of 2015?
    Mr. Hill. And do you know--do you remember what the 
original effective date was to be?
    Mr. Cordray. I think it was going to be June, maybe, of 
2015, and we backed it up a little?
    Mr. Hill. It was August 1, 2015.
    Mr. Cordray. Okay.
    Mr. Hill. But do you know the reason why it was delayed 
those 2 months to October 3, 2015?
    Mr. Cordray. Yes, I know why it was delayed. It would have 
had to be delayed about 10 days because the Bureau didn't file 
one--a piece of paperwork it should have filed with the 
Congress, and we then decided if we were going to back it up 
anyway we might as well back it up a ways into the school year 
because that would help the industry on their compliance, and I 
understand that it did.
    Mr. Hill. You are correct that it was delayed 2 months 
because you failed to file the Congressional Review Act.
    Mr. Cordray. It didn't have to be 2 months. It would have 
had to have been like 2 weeks, but we made it 2 months to give 
people a little more time, which they--
    Mr. Hill. What would be the consequences of a banker or a 
title agency that didn't follow the disclosure process?
    Mr. Cordray. We said for the first prolonged period that we 
were only going to be interested in efforts--substantial 
efforts in good faith to comply with the rule. And so in an 
individual instance or even a few instances of noncompliance, 
we talked to the other agencies and thought that the right 
answer would be just to help them correct that and not to make 
a big deal out of it.
    Mr. Hill. My time has expired, Mr. Chairman. Thank you.
    Chairman Hensarling. The time of the gentleman has expired.
    Once again, votes are pending on the Floor. The committee 
will now recess. Pending completion of votes on the Floor, the 
committee stands in recess.
    [recess]
    Mr. Luetkemeyer [presiding]. Okay, we will call the hearing 
back to order. We will be respectful of the Director's time 
here, and we do have a number of Members who have returned.
    So again, we appreciate the indulgence of the Director as 
well as other members here.
    At this point we are going to recognize the gentleman from 
Washington, Mr. Heck, for 5 minutes.
    Mr. Heck. I thank you, Mr. Chairman, very much.
    Mr. Cordray, thanks so much for being here.
    Mr. Cordray. Sure.
    Mr. Heck. The testimony earlier in the day reminded me of a 
conclusion I had come to quite some time ago about what the 
best thing that could conceivably happen to Congress would be, 
and it would be this: fewer adjectives, more nouns; fewer 
decibels, more listening. So I am going to endeavor to listen.
    I want to first provide you an opportunity maybe to follow 
up on Mr. Lynch's line of questioning. Members of this 
committee represent in the aggregate an incredible number of 
servicemembers at the following bases: White Sands, Fort Hood, 
Patrick Air Force Base, Nellis Air Force Base, and of course my 
very favorite, Joint Base Lewis-McChord, which I have the 
privilege to represent.
    So I did, because you seemed pretty rushed at the end of 
that discussion about what it is that the Servicemembers 
Affairs Office is doing, provide you with an opportunity to 
expand, if you have anything at all to add to it. And I just 
have one other question.
    Mr. Cordray. Yes. Thank you. And I am appreciative of the 
chance to talk about this.
    I think there were high-ranking officials from each of the 
services who testified recently in the Senate about how helpful 
it has been for them, since they are really focused on how to 
do the job the military, to have the CFBP work with them to 
make sure that in terms of readiness the servicemembers feel 
supported and protected on that front so that they are not 
consumed with that kind of anxiety, and so that is quite 
important.
    And we are looking at the entire life cycle for the 
military, from going into the service to begin with, to coming 
back out, transitioning into society, and issues involving 
families, as well. So these are all part of our focus.
    Some of the curriculum that we have worked on with the 
Department of Defense is now being incorporated as a standard 
matter into some of the training and readiness work that they 
are doing, and it is just a great thing.
    And I am quite confident that Paul Kantwill, who has now 
taken over this position, is a great person to show the 
leadership in succeeding Ms. Petraeus, who was a truly great 
leader, and that we won't miss a beat on that front, so--
    Mr. Heck. Thank you.
    And my acknowledgment to Holly, who did, I thought, a 
spectacular job.
    So one of the aspects of the standing of the Consumer 
Financial Protection Bureau that I always found appealing was 
its effort in effect to level the playing field between 
financial institutions and nonbank institutions so that 
theoretically they could compete on a more even footing in the 
marketplace on the basis of their innovation and their 
efficiency and the like. We don't ever seem to talk about that 
in here, and I am just interested in your reflections several 
years later about the degree in which you think we are making 
progress in that regard.
    Mr. Cordray. Yes. Actually it is a great point and it gets 
lost a little bit, but one of the things that was done with the 
CFPB was we are supposed to try to put the banks on a level 
with the nonbank financial companies that often compete against 
them in same markets, such as mortgage lending, mortgage 
servicing, auto lending, a number of others. And we have been 
working to do that from the beginning.
    And that is unique to this agency. Nobody was in a position 
to do this before because the banking agencies deal with the 
banks, and the NCUA with credit unions, and then other 
agencies, including the Department of Justice, have dealt with 
everybody else.
    And you want them to be supervised in the same way, subject 
to the same standards and the same expectations. If not, some 
of that falls back to the State level where there is some very 
good work done but it can be uneven depending on different 
State laws or different State authorities or State resources.
    And so we work closely with the States, but for us to try 
to make that playing field level is an important thing. And the 
way I say it is if you only regulate part of a marketplace and 
leave part of it unregulated it is going to be a recipe for 
failure because a lot of things are going to gravitate to that 
end that is not under the same microscope.
    Plus, it is unfair to these financial companies. They 
should be competing on the level, and we are trying to make 
that happen more and more.
    Mr. Heck. Thank you, sir.
    Mr. Chairman, with that, I yield back the balance of my 
time.
    Mr. Luetkemeyer. The gentleman yields back.
    Next we go to the gentleman from New York, Mr. Zeldin, who 
is recognized for 5 minutes.
    Mr. Zeldin. Thank you, Mr. Chairman.
    Director Corday, we have asked you before about the 
Bureau's $200 million expenditure on wasteful renovations to a 
headquarters building it does not own. But one fundamental 
question remains: Who is responsible? In other words, who 
authorized the renovations?
    Getting an answer to this simple question has been 
surprisingly difficult. At one of your prior appearances before 
this committee, Representative Wagner--now Oversight and 
Investigations Subcommittee Chair Wagner--asked you to identify 
the individual responsible for giving the official go-ahead to 
renovate the headquarters building. You responded, ``And why 
does it matter to you?''
    I cannot recall a more dismissive answer by an agency 
witness, especially one who goes to great lengths to stress his 
agency's accountability and transparency.
    And yet, we did deduce several facts from your testimony. 
You claimed that the decision was made before your tenure as 
Director, which began January 4, 2012. You also said that it 
was someone at Treasury, that, ``There are people in Treasury 
who contributed to that decision.''
    Well, we asked Treasury, and they only pointed us to the 
bill of contract, which was signed on your watch but which 
tells us nothing of who committed the CFPB to renovation in the 
first place.
    But here is another fact: In 2011, Elizabeth Warren, while 
serving at Treasury and while responsible for standing up the 
CFFB, announced that she had selected 1700 G Street as the 
location of the Bureau's headquarters.
    We also know from documents provided to us by the Office of 
the Comptroller of the Currency that at the time this location 
was selected it was known that renovations would be needed.
    So now logic would dictate that the one person who, A, 
selected the location, B, knew of the need for renovations and, 
C, had the power at Treasury to authorize the renovations is, 
in fact, the person who authorized the renovations.
    Yet strangely, the Office of the Inspector General of the 
Federal Reserve, in its investigation found no documents to 
substantiate the decision, and you have not provided any such 
documents to this committee either.
    So let me ask plainly: Did Elizabeth Warren authorize the 
renovations to the CFPB headquarters building at 1700 G Street 
even though she was never given this authority through the 
advice and the consent of the Senate or appointed to run the 
CFPB?
    Mr. Cordray. So that was about 2 minutes of narrative. I 
had several points about it.
    Mr. Zeldin. Well, first answer my question.
    Mr. Cordray. Okay. So I don't know who made that decision 
initially, as I have answered before.
    I feel that I was misquoted or taken out of context by 
some--not by you, but by others who have made it sound like I 
thought that inquiring into the expenditures for the building 
was, ``Why does that matter to you?'' I know why that matters 
to you. It is a lot of money and it does matter to you.
    It was the issue of who originally authorized that decision 
that after the question was asked three or four times I think I 
got a little impatient in answering it. But I don't know who 
made that decision.
    But I have also said since that I have reaffirmed the 
decision. So I treat it as it is basically my decision, so if 
people have a problem with it, I am quite happy to be here and 
answer the questions about it.
    Mr. Zeldin. Reclaiming my time, I have a limited amount of 
time. Just to be clear, did Elizabeth Warren authorize the 
renovations?
    Mr. Cordray. As I said, I don't know. I don't have any way 
of knowing that. I wasn't in the leadership of the Bureau at 
the time. I wasn't privy to those decisions.
    But I will say it is--
    Mr. Zeldin. Reclaiming my time--
    Mr. Cordray. --it is also an increasingly good news story 
about the building. It is coming in on time and under budget--
or on budget, and--
    Mr. Zeldin. I'm sorry, it is--
    Mr. Cordray. --and will be--
    Mr. Zeldin. That is a different line of questioning.
    Reclaiming my time, Mr. Director, a cynic would say that 
you are carrying water for Senator Warren to prevent her 
political embarrassment and you don't want the American people 
to know the truth about who was behind the throne both before 
or after you took over the CFPB.
    Are you answering this question, as far as who authorized 
the renovations, under any duress, coercion, or compulsion at 
all, any type of threat?
    Mr. Cordray. From whom? I don't even know what you are 
talking about here.
    Mr. Zeldin. Have you ever discussed the CFPB renovations 
with Senator Warren?
    Mr. Cordray. Have I ever discussed the renovations with 
Senator Warren? I don't know if I have or haven't. I have 
discussed it with many of you. Maybe I have.
    But in terms of who made that decision, I don't know. I 
have never seen any records on that, whether someone else at 
Treasury was the one who had to authorize that. I honestly 
don't know.
    Mr. Zeldin. So you are unable to tell this committee--
    Mr. Cordray. But I ratified the decision, and I believe it 
has been a good decision and the project has gone well and GSA 
has done an exemplary job.
    Mr. Zeldin. Reclaiming my time, you do not recall whether 
or not you had any conversations with Senator Warren with 
regards to CFPB renovations?
    Mr. Cordray. I may have. That is different from the issue 
of who made the decision about the building.
    Mr. Zeldin. I have 20 seconds left. I have one quick 
question.
    Director Cordray, 2 weeks ago Chairman Hensarling sent you 
a letter asking a very simple question: Absent action by the 
Administration, will you fulfill your term as CFPB Director?
    You replied saying, ``I have no insights to provide.''
    Mr. Director, there has been a lot of speculation about 
your future so you owe it to the public and this committee to 
state your intentions. I will ask you, absent action by the 
Administration, will you fulfill your term as CFPB Director?
    Mr. Cordray. I have no insights to provide on that.
    Mr. Zeldin. You are unable to give your assurance right now 
that you will fulfill your term as Director?
    Mr. Cordray. The whole issue isn't even within my control. 
We have this court case pending; we are all watching to see 
what happens with that. So, your speculation about that is as 
good as mine.
    Mr. Zeldin. No, no, no. I asked you--
    Mr. Luetkemeyer. Time has expired.
    The gentleman from Michigan, Mr. Kildee, is recognized for 
5 minutes.
    Mr. Kildee. Thank you, Mr. Chairman.
    And thank you, Mr. Cordray. I will have a couple of 
questions for you and I will apologize in advance if this is 
redundant because I have not been able to participate in the 
entire hearing, although I have been able to catch a good deal 
of it--
    Mr. Cordray. I may be the only who has--
    Mr. Kildee. --on the closed circuit. It is--
    Mr. Cordray. --been able to participate in the entire 
hearing.
    Mr. Kildee. It is must-see TV, I will tell you.
    But I want to express to you something that I mentioned 
earlier, and that is your public service. As I said earlier, I 
have known you for a long time in a variety of roles, and one 
of the things that you bring both to this position and 
especially to this hearing is a seriousness and a calm that 
would serve this town really well if people adopted your 
approach.
    Some of the tone that I witnessed, both when I was here and 
on television, is not becoming of this committee. And that is 
not on you to respond to, but I will say that I am very pleased 
that you continue to take the position and the work that you do 
very seriously and answer questions fully to the extent that 
you can and in a manner that is quite becoming of public 
service. So thank you for that.
    Mr. Cordray. Could I just say--
    Mr. Kildee. Sure.
    Mr. Cordray. I am not bothered by any of the tone. I know 
that people on both sides of the aisle have strong feelings on 
some of these subjects and they care a lot about it, and so 
there is going to be a certain amount of tone. And I do hope 
that I can remain calm amidst all of that, but I am listening 
hard and what they have to say substantively is why I am here, 
and that is important oversight.
    And I just want to stress again to everybody that I take 
that very seriously. Our Bureau takes it seriously. There are 
many things that we have changed or done differently as result 
of discussions we have had in these committee hearings and in 
your offices, and I am sure that will continue in the future.
    Mr. Kildee. Thank you. I appreciate that.
    The one editorial comment that I will make is that what 
frustrates me in watching some of the questions is the attempt 
to confuse what is policy difference, which is legitimate and 
actually something that we ought to accept as a--as part of a 
normal process of democratic governance, but to confuse policy 
differences with questions that are raised about integrity, 
while on the other hand this body, and particularly the 
Majority, seems to ignore legitimate questions of integrity in 
the Executive Branch as if they were only differences of 
policy. And I appreciate the tone that you take.
    I wonder if you--and when I opened I raised a reference to 
what the Bureau did in the case of Bridgeport Education, which 
is a for-profit college chain that deceived students into 
taking out high-cost private loans. And you may have already 
answered this question in previous--
    Mr. Cordray. No, I haven't.
    Mr. Kildee. I wonder if you could just describe to us that 
case or what you can recall from that case and what the 
outcomes have been as a result of the CFPB's intervention?
    Mr. Cordray. Yes. There have actually been three such 
cases, and so I may sometimes have some of the facts confused 
among them, but they are of the same genre.
    One involved ITT, one--a chain of schools; one involved 
Corinthian, which was also a chain of schools; and Bridgepoint, 
which I believe is a chain of a number of schools, as well. And 
the concerns we have are that loans are being made to 
prospective students and their families where everything that 
is supposed to be disclosed is not disclosed and some facts are 
hidden on the back end, and so there is misleading marketing of 
the loans.
    Also, the loan may be marketed against a backdrop of 
graduation rates and job placement rates which are being 
misrepresented to the students and their families so that they 
end up paying a lot and not getting very much out of the 
education, but the loan is premised on those predicates.
    That is a real problem, and we have pursued several of 
these cases and we have done well in the courts on them, and 
they have led to significant relief for students and their 
families and to significant disruption of what were very bad 
business practices at some of those places.
    Bridgepoint is not the same as ITT and Corinthian, and I 
don't have all the nuanced distinctions in mind here, but that 
is the general concern that we have had, and we continue to 
look for those kinds of problems and we will continue to 
address them as they arise.
    Mr. Kildee. In the last few seconds--
    Mr. Cordray. And if the rest of the for-profit college 
marketplace is cleaning up as a result, that is a very good 
thing.
    Mr. Kildee. I suppose--you can just answer yes or no if you 
would like--had it not been for CFPB's intervention, the 
practices that caused your intervention would still be ongoing, 
people would still be basically being ripped off by those sorts 
of loans, and it would just continue and be encouraged by 
inaction by any other agencies.
    Mr. Cordray. It is hard to know for sure, the road not 
taken. But I think what we can know for sure is what happened 
because of our actions here, and I think that it was in the 
public interest.
    Mr. Kildee. Thank you very much.
    Mr. Luetkemeyer. The gentleman's time has expired.
    We will recognize next Mr. Trott, from Michigan, for 5 
minutes.
    Mr. Trott. I thank the chairman.
    And thank you, Director, for your time today.
    And I want to go back to a line of questioning that was 
pursued by Mr. Huizenga and the chairman of the committee. And 
in defending some of your press releases regarding the 
resolution of enforcement actions you said a couple of times, 
``I know the facts.''
    It kind of reminded me of Jack Nicholson's line from, ``A 
Few Good Men.'' He said, ``You can't handle the truth.'' And 
suffice it to say, your statement suggests to me that you are 
quite comfortable being judge and jury.
    So let's look at one of the press releases. It was issued 
August 26, 2016. It regarded the resolution of First National 
Bank of Omaha.
    Mr. Cordray. That isn't how I intended the statement, but I 
will go with your question.
    Mr. Trott. You can somewhat see my point, perhaps.
    But anyway, in your press release you said, ``First 
National Bank of Omaha violated the trust of its customers by 
illegally signing them up for credit card add-on products.'' 
Let's look at the actual agreement, section two: ``Respondent 
agrees to the issuance of the consent order without admitting 
or denying any of the findings of fact or conclusions of law 
except that the respondent admits the facts necessary to 
establish subject matter jurisdiction over this matter.''
    So do you think that is an accurate press release? They 
didn't make an admission of guilt, but your press release sure 
sounded like they did some bad things. Wouldn't you agree?
    Mr. Cordray. Absolutely, it did. And they did do some bad 
things.
    Again, distinctions between what I know--and I don't know 
it because I am just dreaming it up. What I know is that we 
conducted an investigation. We uncovered the facts, documentary 
evidence; talked to employees; talked to people. And this is 
what it showed.
    Mr. Trott. Got you. Reclaiming my time--
    Mr. Cordray. And they don't really dispute that--
    Mr. Trott. I have heard that answer before. I am going to 
reclaim my time.
    Let me suggest a different scenario for you.
    So you have settled a number of actions with employees who 
have been treated unfairly by the CFPB. How would you feel if I 
issued a press release that said, ``Director Cordray today 
apologized and admitted responsibility for sex and racial 
discrimination against the employees and the rampant 
retaliation against his employees. He will not change the 
behavior because none of the folks that were guilty of this 
conduct are going to be fired, but this is my press 
statement.''
    Is that an accurate press statement? What would you think--
if you read that, would you say, Trott did a good job on that?
    Mr. Cordray. Well, if it were an inaccurate press statement 
I would not like it because it is inaccurate. And if it were an 
accurate press statement, I wouldn't like it because--
    Mr. Trott. In your admission, though--in your settlement 
you never admitted guilt to these employees, so it is analogous 
to the First National Bank of Omaha.
    Let's talk about--
    Mr. Cordray. No, I don't think it is.
    Mr. Trott. Let me continue. So let's continue to talk about 
another incidence of hypocrisy.
    Mr. Cordray. I would be happy to explain.
    Mr. Trott. So I want to continue. Last summer the Supreme 
Court decided the Sheriff v. Gillie case. Maybe you are 
familiar with it. The CFPB joined in an amicus brief.
    Mr. Cordray. Yes. It came out of Ohio, I believe.
    Mr. Trott. It sure did. And it involves an Ohio attorney 
general who was able to appoint a special contractor for the 
purposes of collecting debt owed to the State of Ohio. And you 
filed an amicus brief on behalf of the CFPB supporting the 
government's position that the use of attorney general 
letterhead by the special contractor violated Section 1692(e) 
of the Fair Debt Collection Practices Act. Isn't that correct?
    Mr. Cordray. Actually, the Justice Department filed that 
brief. We worked with them on it, but the Justice Department 
controlled--
    Mr. Trott. The CFPB joined in the amicus brief. Isn't that 
correct?
    And isn't it also true that as attorney general of Ohio you 
used special contractors to collect debts owed the State in the 
same exact fashion?
    Mr. Cordray. I did. And I know that you have a lot of 
background in this area and know it well. So, yes.
    Mr. Trott. Okay. So your amicus brief wouldn't have been 
something you would have been supportive of when you were 
attorney general of Ohio. Is that fair to say?
    Mr. Cordray. Some of the details of that particular case 
may or may not have come to my attention during my time as 
attorney general. I am not entirely sure about that. Yes.
    Mr. Trott. So let's continue on. You said earlier in 
response to one of the Democratic questions, ``No one can 
complain that they can't get their voices heard at the CFPB.'' 
I go home every weekend and I hear from REALTORS, mortgage 
brokers, community bankers, title agents, small business 
owners, attorneys--they are terrified by the CFPB.
    One person a couple of weeks ago--you are not going to be 
at all pleased with this comment--he made an analogy and said 
the CFPB is like the mafia. They show up at your business and 
say, ``This is a nice place; hope nothing happens to it.''
    So how do those people get their voices heard? Do you think 
you have given proper guidance to those small business owners 
who are honest people trying to do right by the consumer?
    Certainly Mr. Hill's question referencing the website that 
is this convoluted web to get an answer to a simple question, 
that is indicative of how people feel about getting answers out 
of the CFPB. Is that a fair statement on my part?
    Mr. Cordray. I don't think so, but I am sure that it 
depends very much on who we are talking about and different 
reactions in different places around the country by different 
people--320 million Americans, after all, not all the same 
experiences, I am sure.
    Mr. Trott. I appreciate your time, sir.
    And I yield back to the Chair.
    Mr. Luetkemeyer. The gentleman yields back.
    Next, I will recognize the gentleman from Georgia, Mr. 
Loudermilk, for 5 minutes.
    Mr. Loudermilk. Thank you, Mr. Chairman.
    And thank you, Mr. Cordray. It has been a long day. It 
looks like a little more intimate setting here now, so maybe we 
can get through a few things.
    I have another line of questioning but I wanted to continue 
on with something Mr. Trott said. I work a lot with what is 
left of the community banks in the State of Georgia. We lost 
more banks than any other State. And as we are working on 
repealing some of the onerous regulations brought in by Dodd-
Frank and other--what in my opinion and most people is bad law 
that has closed off the economy from the average American, 
provided protection for those who are on the inside, I have 
learned one thing: The people out there are more afraid of you 
and the CFPB than any other element of our Federal Government.
    I am getting that from the banks, the bankers, every 
financial institution. And it just reminds me of something that 
Thomas Jefferson--I believe it was Thomas Jefferson--was quoted 
as saying, ``When the government fears the people there is 
liberty, but when people fear the government there is 
tyranny.''
    And it almost feels like in this financial services sector 
that is where we are. But I just wanted to throw that out 
there. You don't have to respond to that.
    I actually want to talk about the reports that we have 
received. I actually have some honest-to-goodness questions.
    I have been reading over the report that was left on our 
desk and the latest numbers that we received from your office 
this week, and in the most recent report that we received your 
numbers show that in 2016 the CFPB handled 291,000 consumer 
complaints, I believe. Does that sound about right, the 291,000 
in 2016?
    Mr. Cordray. Yes, running about 25,000, 30,000 a month. 
Yes, something like that.
    Mr. Loudermilk. Okay. Thank you.
    And of that, according to your report, 17,000 of those were 
resolved with monetary relief for the consumer, which is about 
16 percent--or 6--I'm sorry, 6 percent of all the complaints 
have monetary relief for the consumer and 94 percent resulted 
in no monetary relief. And that is what I believe was in the 
report.
    Mr. Cordray. So what I would say is they can--there can be 
monetary relief; there can be non-monetary relief, which is 
often quite significant.
    Mr. Loudermilk. I understand.
    Mr. Cordray. If something comes off your credit report, 
suddenly you can get a mortgage you couldn't have gotten. That 
is--
    Mr. Loudermilk. I understand that.
    Mr. Cordray. Or a debt collector who is harassing you, you 
get them to stop. Those things matter a lot to people.
    Mr. Loudermilk. One thing I didn't see in the report that I 
was looking for is what percentage of those had civil 
penalties? I didn't see that in the report anywhere.
    Mr. Cordray. We can't impose civil penalties--
    Mr. Loudermilk. In your report here you outline several 
civil penalties on actual cases.
    Mr. Cordray. In enforcement actions, yes.
    Mr. Loudermilk. But in your report you never show what 
percentage was civil penalties or a penalty that was imposed 
upon the business. Do you have those percentages of those 
291,000 cases?
    Mr. Cordray. I am getting a little lost here. We don't 
impose civil penalties on consumer complaints at all. We don't 
have the authority to do that. We would not do that. If we did 
that, we would be struck down by a court or something.
    We can only do it in cases where we file an enforcement 
action and it is potentially reviewable by a court or--and that 
is when--
    Mr. Loudermilk. So in a judicial or administrative action.
    Mr. Cordray. Could be either, but it is all subject--it is 
either in a court or it can be reviewed by a court.
    Mr. Loudermilk. What happens to those penalties--the 
monetary value? I am wondering. I am asking. I know that you 
are allowed to keep some of that.
    Mr. Cordray. Yes. No, they go in--it is all whatever--
    Mr. Loudermilk. I am not trying to get at anything. I am 
trying to ask an honest question.
    Mr. Cordray. I am just fumbling a little on the answer.
    It is all specified by law, and Congress provided for it. 
Those penalties go into a penalty fund, and they can either be 
used to compensate victims in other cases who were unable to 
receive compensation because, say, a fraudulent company went 
out of business so they never got their money back, or they can 
be used for--the statute says two things--the other is 
financial education programs.
    In our instance more than 90 percent of the money has gone 
to victims from other cases, and a small amount has gone to one 
financial education program which is helping veterans 
transitioning back into--servicemembers transitioning back--
    Mr. Loudermilk. Let me reclaim my time, because I am 
quickly running out of time and I want to follow up on the 
previous question I had.
    Mr. Cordray. That is fine. Okay.
    Mr. Loudermilk. Are you indicating that only in 6 percent 
of the cases you can actually have consumer relief? Or is it 
just you are unable to do it--
    Mr. Cordray. No, we have two different things here that are 
getting--
    Mr. Loudermilk. That seems like an awfully low number to--
    Mr. Cordray. No, no. These are two different things.
    We have complaints that people file with us that we try to 
get those resolved and get relief where we can. Then there are 
matters where we bring a case, which is an entirely different 
thing, on behalf typically of thousands or even millions of 
consumers, and in those cases that are subject to review by a 
court we can impose penalties and we can get money back for 
people.
    So in those matters almost always we are getting money back 
for people, and if we--if they don't get paid we can go to the 
Civil Penalty Fund and get their money back that way if it is 
available.
    Mr. Loudermilk. I yield back, Mr. Chairman.
    Mr. Cordray. Sorry. Sorry about that.
    Mr. Luetkemeyer. The gentleman's time has expired.
    Next, we go to Mr. MacArthur, the gentleman from New 
Jersey, who is recognized for 5 minutes.
    Mr. MacArthur. Well, thank you.
    Good afternoon, Director Cordray.
    Mr. Cordray. Good afternoon.
    Mr. MacArthur. I think everyone in this hearing wants to 
protect consumers. I don't know anyone who wants to see bad 
actors run roughshod over the people that we represent.
    Mr. Cordray. All right. That is a good start.
    Mr. MacArthur. Getting it right, obviously, I think is 
critical. I just want to explore a little bit about who pays 
the penalties that are imposed on the companies that you go 
after--the enforcement penalty. Who pays those penalties?
    Mr. Cordray. The companies do, or the individuals if it is 
individuals at fault.
    Mr. MacArthur. Is it fair to say that most of those 
companies are publicly held companies?
    Mr. Cordray. There is a mix, but a lot of them are, yes.
    Mr. MacArthur. And those companies typically, like all 
public companies, are owned by shareholders, pension funds, 
401(k) funds--just ordinary Americans who invest in the stock 
market and try to put money away for a rainy day.
    Is it fair to say that these penalties erode, decrease, 
have some impact--whether it is fair or not, that is not the 
point, but they have some negative effect on the value on those 
companies?
    Mr. Cordray. Look, it depends on a lot of things, I 
imagine, but I think logically, they have to be paid by the 
company. And that is the accountability.
    Mr. MacArthur. In the public markets historically earnings 
times about 15 is the value of the company. It is running a 
little higher now. But if you reduce your earnings by $1 
million, you have probably affected the value of that company 
by about $18 million dollars. Typically, that is the case. I'm 
not looking for a response, but--
    Mr. Cordray. Could I--
    Mr. MacArthur. --the reason this matters--we will come back 
to it and you will have a chance to respond, but the reason 
this matters is we can't have conflicting guidance from 
different parts of the Federal Government. And I want to talk 
about captive mortgage insurance in particular.
    In 1996 and 1997 the Office of the Comptroller of the 
Currency and HUD both issued guidance to the mortgage industry 
about providing mortgage insurance. And both of them--OCC's 
interpretive letter number 743 and then HUD gave later 
guidance--they laid out where companies could get involved in 
providing captive mortgage insurance. And dozens of companies 
got involved.
    You took a different approach. In 2013 you decided that you 
didn't think that was appropriate and you went after a number 
of companies. I won't list them all because I want to focus on 
one, but I have a list in front of me of a half a dozen 
companies that you imposed fines of $50.6 million. Times 18, 
that is about $300 million of market value that evaporated 
because of those--
    Mr. Cordray. For captive mortgage insurance?
    Mr. MacArthur. For captive mortgage insurance.
    Mr. Cordray. Reinsurance? I am only familiar with one case, 
which is the PHH case.
    Mr. MacArthur. Well, there are others: Republic Mortgage, 
Genworth Mortgage, Mortgage Guaranty Insurance, Radian 
Guaranty, United Guaranty--
    Mr. Cordray. Oh, that is right. They were an aspect of the 
PHH case. Fair enough. Okay, got it.
    Mr. MacArthur. Okay. But all of these fines have a negative 
value on these companies.
    I want to focus on PHH for a moment. They are domiciled in 
my district, southern New Jersey; 3,500 employees, and you set 
up a process where basically they were tried inside CFPB, a 
court of your making. You didn't go to the Federal court to do 
it. And that resulted--
    Mr. Cordray. Congress provided for that.
    Mr. MacArthur. --in a penalty of $6.4 million.
    Mr. Cordray. Yes.
    Mr. MacArthur. You then overruled that penalty and you 
imposed a penalty of $109 million on a company that entered the 
market with guidance from the Office of the Comptroller of the 
Currency and the National Bank Act, I am forgetting who that 
came--oh HUD. HUD was the other agency.
    I understand you disagreed with that guidance, but you then 
went back 10 years--
    Mr. Cordray. No.
    Mr. MacArthur. Let me finish--went back 10 years, applied 
no statute of limitations, took a judgement of $6.4 million and 
turned it into $109 million. Do you know what the market value 
of that company was on the day you opened that investigation?
    Mr. Cordray. I do not.
    Mr. MacArthur. It was $7 billion. Do you know what it is 
today?
    Mr. Cordray. I do not.
    Mr. MacArthur. It is $1 billion. Now, I am not suggesting 
that all of that is due to this action. Frankly, I don't know.
    Mr. Cordray. That would be quite erroneous, yes.
    Mr. MacArthur. I don't know. But I do know this, that how 
you go after companies in the name of the consumer is vitally 
important. You are not just exacting a price from some ethereal 
entity out there; you are exacting a price--
    Mr. Cordray. I understand that.
    Mr. MacArthur. --that affects 401(k) plans, pension funds, 
ordinary Americans. You say you are collecting in their name--
    Mr. Cordray. Am I going to have a chance to come back on 
this?
    Mr. MacArthur. --and they are the ones--if I am out of 
time. If the chairman allows you to respond that will be fine.
    Mr. Cordray. So if that company violates the law, how do 
you hold them accountable?
    Mr. MacArthur. My time has expired.
    Mr. Cordray. Should we never hold them accountable?
    Mr. MacArthur. What I am asking you, sir--
    Mr. Cordray. Can they violate the law with impunity?
    Mr. MacArthur. --is in your remaining time as Director I am 
asking you to be extraordinarily careful about punishing 
companies who relied on other Federal agencies for guidance, 
and you had a different opinion and you cost real people real 
money.
    Mr. Cordray. Could I speak to that?
    Mr. Luetkemeyer. Let him answer the question. No more 
questions. Let him answer the question.
    Mr. Cordray. I didn't just sort of make something up 
because I don't like the company or I thought it should be more 
money. There was a specific legal point in the case that had to 
decided one way or the other, and the issue was whether, since 
they violated the law, which is what the administrative law 
judgment had held on the factual record and what I agreed 
with--and others may disagree, and it is in the courts and the 
courts will ultimately decide it; we will all abide by their 
decision.
    Either the right amount that they had to pay was what they 
got on contracts after a specific date--contracts that were 
entered into after a specific date, or everything they were 
paid on contracts after a specific date even though the 
contracts might have been entered into earlier.
    It was a tough--it is a tough legal issue. It is not 
obvious one way or the other. I made the judgment that it was 
the other issue. It could either be $6 million or $109 million, 
one or the other.
    Mr. Luetkemeyer. The gentleman's time has expired.
    Mr. Cordray. There can't be anything in between. And if a 
court thinks differently then we will abide by that.
    Mr. Luetkemeyer. The gentleman's time has expired.
    Mr. MacArthur. The court overruled you.
    Mr. Cordray. It wasn't done cavalierly, though, yes.
    Mr. Luetkemeyer. Okay. Time has expired.
    Next we will go to the gentleman from North Carolina, Mr. 
Budd, who is recognized for 5 minutes.
    I'm sorry?
    Mr. Budd. Thank you, Mr. Chairman.
    Mr. Luetkemeyer. My mistake. Mr. Davidson from Ohio is next 
for 5 minutes.
    Mr. Davidson. Thank you, Mr. Chairman.
    Director Cordray, you were attorney general in the State of 
Ohio. Is that correct?
    Mr. Cordray. I was, yes.
    Mr. Davidson. Did you ever have a case that the--as 
attorney general that the State prosecuted where the defendant 
was found not guilty?
    Mr. Cordray. I don't recall specific cases, but I am sure 
we did.
    Mr. Davidson. You didn't win all of them.
    Mr. Cordray. Correct.
    Mr. Davidson. So in your role as Director Cordray, in this 
new role, when you do these settlements you are doing press 
releases that say effectively you have won every case. You have 
a perfect record in your case. Then the courts come over and in 
the case of PHH, as my colleague just referred, you are 
overturned because due process is finally given the opportunity 
to prevail.
    Mr. Cordray. Actually--
    Mr. Davidson. Director Cordray, does the CFPB have the 
authority to conduct informal or formal investigations without 
a court order?
    Mr. Cordray. We can commence an investigation without a 
court order, yes, but ultimately to bring an enforcement 
action--
    Mr. Davidson. Does CFPB give notice to the target when an 
investigation is initiated?
    Mr. Cordray. Could I answer the question?
    Mr. Davidson. No, I just--you answered it. You said yes.
    And I said, so now the question is, does the CFPB give 
notice to the target when an investigation is initiated?
    Mr. Cordray. Typically we commence an investigation by 
issuing CIDs to the subject, not the target--we don't use that 
language.
    Mr. Davidson. So the target of the investigation is not 
advised that you are initiating an investigation once you 
commence, and then--
    Mr. Cordray. No, no, they typically are--
    Mr. Davidson. --to determine which investigation to pursue?
    Mr. Cordray. They typically are because they get a civil 
investigative demand, which is--and that is when we start to 
engage back and forth.
    Mr. Davidson. So when you send a civil investigative 
demand, or a CID, one of the criticisms has been that you have 
this unlimited power of discovery and the person is never--or 
the entity is never advised as to whether they are the target 
of the investigation or merely answering a question where they 
could have data related to it.
    Mr. Cordray. So, again, a couple of times now, we don't 
have unlimited power of discovery. If they don't agree with 
what we are doing they can take us to court. That has happened 
a number of times.
    Mr. Davidson. In the case of PHH, when they followed the 
procedure, in the next case they disagreed with the proceedings 
and then they appealed to the administrative judge. Do you 
appoint the administrative judges?
    Mr. Cordray. I do, but they can also--
    Mr. Davidson. And then when they disagree with that and 
then they--
    Mr. Cordray. They can also--
    Mr. Davidson. --then they bring it to the Director. And in 
the case of PHH, they--that proved to be very high risk. Did 
that--
    Mr. Cordray. They can also appeal to the court, and they 
have done so and this matter is in the courts. And by the way--
    Mr. Davidson. So let me understand this is the path. I just 
want to understand the path here because you are saying, 
``Well, but let me explain.''
    So I have it down. I say the Director, you, sign off to 
investigate the target; the Director assesses the case and 
issues a penalty; the target will either sign a consent order 
or appeal to an administrative judge that you appointed, and if 
the target loses the appeal the case is brought back to you 
where you will no doubt reject and, as we have seen, perhaps 
even increase the penalty.
    The target can then appeal to the Federal court, but not 
before its reputation has been tarnished and legal fees in the 
millions of dollars or, in the case--sometimes over $100 
million. And you present it as if you have already won, not 
that there has been a verdict issued, not that full due process 
this case, but simply that it is alleged--you present it as if 
you have achieved a victory.
    Is that an accurate description of what goes on here?
    Mr. Cordray. No, I think it's not accurate in a number of 
ways, but if you want me to I will spell them out. But among 
other things, Congress has provided for different ways to take 
an enforcement action.
    A company at any time can take us to court. They can take 
us to court over the civil investigative demand, as a number 
have done. They can take us to court and refuse to settle a 
case, if they think that they have grounds to do so.
    Mr. Davidson. Okay, so reclaiming my time, they do have a 
path to the courts, but long after their reputation has been 
severely damaged.
    Mr. Cordray. Not--
    Mr. Davidson. --and you have served as judge, jury, and 
executioner. You have already said that when we have determined 
the facts, we are right.
    Clearly, you don't have a perfect track record, so you are 
not always right. But you present it in the media as if it is, 
and then when the same exact set of facts has been stated over 
and over again by my colleagues, you refuse to concede the 
point that you are guilty as charged when you are on the exact 
opposite side of the same settlement.
    Mr. Cordray. That is not correct. We don't present it in 
the press until a matter is final and it is concluded and we 
have concluded investigation, we know what the facts are, all 
right?
    Mr. Davidson. You present it as if they have--
    Mr. Cordray. If anybody wants to challenge us--
    Mr. Davidson. --been found guilty when, in fact, the 
consent orders clearly say that they have not admitted guilt. 
And--
    Mr. Cordray. We know--
    Mr. Davidson. --I do look forward to you producing one that 
says something other than that.
    Mr. Cordray. There is no guilt. There is no guilt in a 
consent order. It is not a criminal matter; it is a civil 
matter. And we know what the facts are and we set the facts, 
all right?
    But they can always--
    Mr. Davidson. But always your facts are right.
    Mr. Cordray. Like every other part of the--
    Mr. Davidson. That is your assertion, that your facts are 
always right.
    Mr. Cordray. Like every other part of the Federal 
Government, and it is no different for us, what we do can be 
challenged in the courts and--
    Mr. Davidson. Reclaiming my time, I need to mention that 
all agencies really need a better appeals process, and I think 
what we--what I have seen concluding as a new Member, is that 
we really need to address due process, particularly in your 
agency.
    I yield back.
    Mr. Cordray. Okay.
    Mr. Luetkemeyer. The gentleman's time has expired.
    The gentleman from North Carolina, Mr. Budd, is recognized 
for 5 minutes.
    Mr. Budd. Thank you, Mr. Chairman.
    And thank you, Mr. Director. I want to talk a little bit 
about what appears to be, for lack of a better term, a 
revolving door.
    In 2013 Politico reported that dozens of CFPB policymakers, 
rulemakers, attorneys, have left in recent months, lured by 
opportunities in the private sector. Many have landed at law 
firms, compliance shops, and banks, where their insider 
knowledge of how the agency works is coveted.
    The Washington Examiner and Breitbart reported similar 
issues, with staff transitioning in your agency to take 
lucrative jobs in the private sector. Other articles just last 
year noted that more senior staff had departed for major banks 
like Capital One.
    A representative of Public Citizen called this pattern of 
departures alarming and said that the revolving door is one of 
the most pernicious influence-peddling tools that can undermine 
the integrity of government agencies.
    President Trump recently signed an Executive Order imposing 
an unprecedented 5-year lobbying ban on certain officials who 
leave the Executive Branch. This is it. Do you support this 
Executive Order?
    Mr. Cordray. The Presidents always set the--set ethics 
requirements that go beyond the requirements of the law, and 
they are free to do so. I don't have any criticism of that 
order, if that is what you are saying.
    Mr. Budd. Do you support it?
    Mr. Cordray. I don't have any criticism of that order. It 
is not my jurisdiction to do the President's job.
    Mr. Budd. Do you think it might be good in your agency, in 
the CFPB, to use something similar to prevent the revolving 
door?
    Mr. Cordray. So what we do is we abide by all of the 
government ethics rules, and we take them very seriously and we 
follow them very carefully.
    It is a free country. I do not control what employees do 
when they no longer work for me, beyond the fact that they have 
to abide by ethics rules, and I assume they are doing so, and 
if not they are subject to prosecution if they fail to do that.
    So I don't know what else to tell you.
    Mr. Budd. Sure.
    Do you think to give the appearance of a highly ethical 
organization that you would want to commit to require all CFPB 
employees to sign an agreement that prohibits them from 
lobbying and representing clients in matters before the CFPB 
once they have left?
    Mr. Cordray. They do have to do so for a period of time, 
and it is specified in the government ethics rules, and we 
abide by those very carefully and follow them closely.
    Mr. Budd. Do you know what that--Director, do you what that 
period of time is?
    Mr. Cordray. I am not entirely sure. I have never left the 
agency myself. But it is either a year or 18 months of 2 years, 
depending--maybe depending upon the circumstances. But I would 
be happy to have my staff fill your staff in on what those 
requirements are.
    Mr. Budd. Sure. It still gives the appearance of a highly 
complicated, highly regulated organization that has highly 
marketable skills once they leave CFPB.
    Mr. Cordray. So, what do you want these people to do? Just 
retire? They have to follow the ethics rules. They do follow 
the ethics rules. If the ethics rules should be changed I would 
be happy to have them be changed, and we will abide by them. 
But they are Federal Government ethics rules for the Federal 
Government.
    Mr. Budd. I am going to reclaim my time. It really strikes 
me that the lack of a lobbying vantager agency has real cost 
in--
    Mr. Cordray. There is a restriction. They cannot do certain 
things for some period of time. I don't know all the details of 
it, but I would be glad to fill you in.
    It is not as though there is no restriction. They have the 
same restrictions as everybody else in the Federal Government.
    People have set those rules thinking that they are the 
right rules. If they are not the right rules I am sure they can 
review them and change them. We abide by them.
    Mr. Budd. Director, this is a pattern that we have seen 
prior to the existence of CFPB. This is something that we have 
seen with creation of complex regulations, and then people that 
created those going into the private sector to interpret those.
    And I really hope you are right. I hope it is not a 
problem, but it certainly appears to be a problem.
    I yield back my time.
    Mr. Luetkemeyer. The gentleman yields back.
    Next, we recognize the gentleman from Tennessee, Mr. 
Kustoff, for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for being here this 
morning and this afternoon.
    I am, as the chairman would say, a recovering lawyer and a 
former United States Attorney, and I would like to talk to you 
if I can, some of these questions, lawyer-to-lawyer, if you 
will.
    Mr. Cordray. Okay.
    Mr. Kustoff. I want to talk to you about district court if 
I can for a moment.
    In the United States district court you would agree that in 
order for the court to consider a claim or a lawsuit that a 
party must submit a pleading that contains a short and plain 
statement which shows that the complainant is entitled to 
relief. You would agree, wouldn't you?
    Mr. Cordray. That is a requirement and it is policed by the 
courts, yes.
    Mr. Kustoff. Thank you.
    And in order to meet the pleading standard that is required 
under the Federal Rules of Civil Procedure, this relief must be 
plausible. It must be credible. You would agree with that as 
well, that that is an accurate statement?
    Mr. Cordray. I believe that is--I have no reason to contest 
your statement, although I am a little rusty on some of the 
procedural issues. But again, courts will decided whether we 
did that or didn't do that, and we abide by it.
    Mr. Kustoff. Sounds right, though, doesn't it?
    Mr. Cordray. It sounds like a sensible rule. I hope it is 
the rule, yes.
    Mr. Kustoff. And you would also agree that the Supreme 
Court, our Supreme Court, has made a point to distinguish what 
is called ``likely harm'' from ``conceivable harm,'' the latter 
of which would not allowed--be allowed to proceed. Is that 
correct? Likely harm from conceivable harm.
    Mr. Cordray. I'm starting to wish I would have had you as a 
law school professor, but that sounds sensible to me, yes.
    Mr. Kustoff. Fair enough. In other words, the threshold to 
get into Federal court is a fairly low standard. You would 
agree with that as well.
    Mr. Cordray. To bring a case, yes.
    Mr. Kustoff. Okay.
    Mr. Cordray. Of course, it has to survive motion to dismiss 
or motion--summary judgment everything else. But that is my 
understanding of how the rules have been drilled, yes.
    Mr. Kustoff. And I would agree with what you just said.
    I do want to talk to you about the matter that the CFPB 
brought in the Eastern District in North Dakota, which I think 
Mr. Tipton touched on briefly. The--
    Mr. Cordray. Yes.
    Mr. Kustoff. --UDAAP order against Intercept Corporation--
    Mr. Cordray. Yes, and I am generally familiar with the 
case, yes.
    Mr. Kustoff. As I understand it, Intercept Corporation is a 
third-party payment processor company.
    Mr. Cordray. Yes.
    Mr. Kustoff. And the allegation was against the--against 
violations by its consumers, is that correct?
    Mr. Cordray. Well, it was against the payment processor as 
I think aiding and abetting, facilitating violations against 
consumers with enough knowledge to be held responsible. And to 
kind of maybe get to where you are going, the court found that 
we did not plead enough facts to make out a case and granted a 
motion to dismiss in that case.
    So it goes to show, we do not--as we have said, we do not 
win every case, and we are right now still digesting that 
opinion and trying to figure out what it means for the 
investigation we were conducting there.
    Mr. Kustoff. In my remaining time I want to ask you about 
that because--
    Mr. Cordray. Yes.
    Mr. Kustoff. --Judge Ralph Erickson made some fairly sharp 
remarks. He said although the complaint--and I am quoting--does 
not contain detailed factual allegations, it must contain--need 
not contain detailed factual allegations, it must contain more 
than an unadorned, ``the defendant unlawfully harmed me'' 
accusation. You would agree that was what he said in the 
opinion, correct?
    Mr. Cordray. Yes. I think our complaint said much more than 
that, but if that is what--that is the way the judge viewed 
then the judge certainly decides accordingly and we have to 
then absorb that, understand it, and figure out how to deal 
with it.
    Mr. Kustoff. In fact, he said that the facts in the 
complaint must be plausible, not merely conceivable.
    Mr. Cordray. Yes, and he found that they were not plausible 
and merely conceivable, I guess.
    Mr. Kustoff. And he further cited or stated in his opinion 
that the complaint, ``never pleads facts sufficient to support 
the legal conclusion that consumers were injured or likely to 
be injured,'' and that, ``it does not contain sufficient 
factual allegations to back up conclusory statements regarding 
Intercept's allegedly unlawful acts or admissions.''
    Mr. Cordray. So to this point in that case we got it wrong 
to that degree. We have had many, many other cases that we have 
filed where motions to dismiss were filed against us and we 
have prevailed on the motion.
    So when you were U.S. attorney in Tennessee, I assume you 
didn't win every case, even though you tried.
    Mr. Kustoff. The difference is I wouldn't have brought a 
case unless I thought that I--number one, that somebody broke 
the law; and two, that I could absolutely prove--
    Mr. Cordray. I understand, but we didn't bring a case where 
we thought nobody broke the law. We thought they did. The judge 
disagreed with us and okay then. Fair enough.
    Mr. Kustoff. In fact, this court found that there was no 
nexus to the consumer, no--
    Mr. Cordray. Agreed. That is what the court found. And I am 
sure you brought cases where you thought you were going to get 
a guilty verdict and you didn't, or maybe there were even nolle 
prosequi or whatever.
    I am sure that--it happens. It is not a big mark of honor 
for us that we had a case dismissed on a motion to dismiss, but 
usually the vast majority of our cases that survive that 
threshold, and this time this judge felt we misjudged it. Fair 
enough.
    Mr. Luetkemeyer. The gentleman's time has expired.
    Mr. Cordray. We have to learn from that and figure out how 
to--
    Mr. Luetkemeyer. The gentleman's time has expired.
    The gentlelady from New York, Ms. Tenney, is recognized for 
5 minutes.
    Ms. Tenney. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for being here today 
throughout the morning and afternoon.
    Mr. Cordray. Maybe the evening, who knows.
    Ms. Tenney. You are getting to the end of the line here.
    I would like to just refocus a little bit. I am a small 
business owner. I come from a community that has been 
devastated by a poor economy. In fact, in many areas of my 
district we are ranked dead last in the national economy.
    And my concern is over, obviously, regulations and a lot of 
the regulations dealing with the auto industry.
    I noticed in your comments from last winter that the Bureau 
dropped its Equal Credit Opportunity Act lending enforcement 
for fair lending priorities list this year. These enforcements, 
in my opinion, were flawed auto financing guidance process 
issued by the CFPB that also barred consumers from 
participating in this process and commenting on it, and created 
a lot of uncertainty in the $905 billion auto lending market.
    My question is going to be, why did the Bureau pull out of 
this type of financing guidance, and why--at some point, why 
was that a decision made by the CFPB in your--
    Mr. Cordray. We didn't pull out of the guidance. That 
guidance merely, as we understood it, restated existing law and 
didn't add anything to it.
    What we did say is, we have a fair lending program; we have 
limited resources. We set up priorities every year and at this 
point in time we were determining priorities for 2017 and we 
specified that they would be redlining mortgage and student 
loan servicing and small business lending, and that we--
    Ms. Tenney. Let me reclaim my time and get back into the 
auto industry because that is really--
    Mr. Cordray. Sure.
    Ms. Tenney. --where I would like to refocus.
    Mr. Cordray. Yes.
    Ms. Tenney. In effect, what you are doing is, in my view, 
it looks like you are taking the financing industry and trying 
to circumvent the Constitution and go at the auto dealers 
without having really--
    Mr. Cordray. We're not trying to do that.
    Ms. Tenney. --the authority to do that is coming in on the 
financing side of the--I don't see how you can justify that. 
And so I--
    Mr. Cordray. Well, look--
    Ms. Tenney. I am just surmising that you pulled out because 
you realized there was an overreach constitutionally on this 
issue.
    Mr. Cordray. No, no. First of all, that is not what we are 
trying to do and that is not what we did here.
    The statute--Congress drew it, not me--says that we have no 
jurisdiction over auto dealers. But it says we do have 
jurisdiction and therefore a responsibility to deal with auto 
lenders.
    So how do you do that? It doesn't work very well, I will 
agree, and they kind of get in each other's way.
    Ms. Tenney. Let me reclaim my time and ask you, aren't 
there other agencies in government that are regulating the auto 
industry, including on the State level, such as New York State, 
which has a very--
    Mr. Cordray. So the--
    Ms. Tenney. --aggressive regulatory scheme to help 
consumers with the auto dealers?
    So to me it looks like--wouldn't you agree that it is an 
overreach for the Federal Government to use the lending process 
to go in and go after an already regulated field?
    Mr. Cordray. We haven't gone after any auto dealers, other 
than buy-here-pay-here. The FTC has that authority and they 
will exercise it or not as they see fit.
    I don't have that authority. But I do have the authority, 
and therefore the responsibility and the duty, to deal with 
auto lenders, and the two get in each other's way. That is an 
unfortunate way the statute was drawn.
    But in terms of--
    Ms. Tenney. Hold on a second.
    Mr. Cordray. In terms of our decision now--
    Ms. Tenney. Let me reclaim my time and say it is an 
unfortunate way the statute was drawn, so are you outside the 
statute in trying to pursue your lending against auto dealers?
    Mr. Cordray. No. If we pursue auto lenders--
    Ms. Tenney. It wasn't drawn the way that you wanted it 
drawn, so you created your own--
    Mr. Cordray. No, not at all.
    Ms. Tenney. All right.
    Mr. Cordray. We have a responsibility to pursue auto 
lenders. That is going to affect auto dealers. I can't help 
that. That is the way the market is.
    Either we should have had both or we should have had 
neither would have been a better way to do it, but--
    Ms. Tenney. Right. So you are conceding, then, that the 
statute wasn't really the way it should have been, so instead 
you used the lending mechanism to get into the dealers.
    Mr. Cordray. Not at all. It means that as we do our job 
people are going to be able to criticize us because it has 
consequences and ramifications down the line.
    But in terms of specifying our priorities for this year, as 
you noted, auto is not among them, and we indicated that we 
have proceeded with different supervisory enforcement actions 
against 20 of the largest auto lenders. We will continue to 
supervise around this, but that we needed to look at other 
priorities, as well.
    So that, I think, was a sound judgment that we had to make, 
and that is where we are.
    Ms. Tenney. So couldn't you--let me reclaim my time and say 
wouldn't you concede that--you withdrew from having this as a 
priority program, so now you are using the regulatory process 
with lenders to try to reach into the auto industry.
    Mr. Cordray. I am not trying to reach into anything. I am 
just trying to do the job Congress gave us, and if Congress--
    Ms. Tenney. Right. But you just said the job Congress gave 
you, but you just said a moment ago that Congress didn't have 
that in the statute the way you needed it, so now you are kind 
of--
    Mr. Cordray. No, no, not the way I needed it. Just Congress 
did it. I don't think it is very logical, frankly, to give 
somebody responsibility for auto lenders but not auto dealers 
or vice versa.
    Ms. Tenney. Right. So you are conceding that the statute 
really doesn't cover the dealers. So--
    Mr. Cordray. We have never taken an action against dealers. 
We have never done that.
    But it doesn't mean that things we do might not affect 
dealers, just like if the Federal Reserve raises interest rates 
that is going to affect dealers but they are not regulating 
dealers.
    Chairman Hensarling. The time of the gentlelady has 
expired.
    The Chair now recognizes the gentleman from Indiana, Mr. 
Hollingsworth.
    Mr. Hollingsworth. Thank you, Mr. Chairman.
    And thank you, Director Cordray, for being here this 
afternoon. I know it has been wearisome so far, but I can 
assure you that you are reaching the end quickly.
    Mr. Cordray. Actually, quite invigorating.
    Mr. Hollingsworth. Fair enough.
    Actually something you said earlier really sparks me and I 
really liked it. You said you are responsible and accountable 
to the public. I really like that turn of phrase.
    Tell me how--
    Mr. Cordray. I try to be, yes.
    Mr. Hollingsworth. --how do you divine what the public 
wants?
    Mr. Cordray. I suppose no differently from you. I get a lot 
of input from the public. That is why we set up the consumer 
complaint line. Actually, we are required to do that by 
Congress, but we have set it up to be broadly inclusive.
    I try to get a lot of input from stakeholders on all sides 
of these issues, and often there are kind of two sides to the 
issue, but maybe there are more.
    Mr. Hollingsworth. Like you said, like--just like me. I do 
go to the public every 2 years, right, and an election. And I 
think generally we believe elections represent the will of the 
public, right, in ascertaining their will and their desire and 
activities. So would you--
    Mr. Cordray. A big part of our government, yes.
    Mr. Hollingsworth. Yes.
    Mr. Cordray. And as you know, I have a background of that 
sort myself, so--
    Mr. Hollingsworth. Exactly. No doubt.
    And if you serve and are accountable to the public, and the 
public duly elected officials, and those duly elected officials 
decided that it was in their best interests--in the public's 
best interest--for you to no longer direct the CFPB, is that 
something that you would submit to, given that that is how the 
public expressed their will last November?
    Mr. Cordray. I think that if people follow the lawful 
channels and apply the law, then that is the way things should 
be.
    Mr. Hollingsworth. So if you serve the public and the 
public decided to elect an official who asked for your 
resignation, is that something that you would comply with, 
given that is what the public wanted?
    Mr. Cordray. I think that the law has to be followed. 
Congress set up this agency, not me. And Congress set this up 
to be an independent consumer watchdog, as they have set up 
many Federal agencies--the Federal Reserve, the FDIC, and 
others.
    Mr. Hollingsworth. I don't doubt the way it was set up. 
Reading the statute, you can clearly see. I guess I would push 
back against the statement that you are accountable and 
responsible to the public if you are unwilling to follow when a 
publicly elected official decided--
    Mr. Cordray. Let me say this. I am accountable to the 
public. I am also accountable to follow the law. I shouldn't be 
violating the law just because they have something in mind of 
what I should do for the public.
    Mr. Hollingsworth. It is not a violation of the law for him 
to ask for your resignation, is it?
    Mr. Cordray. Not at all.
    Mr. Hollingsworth. Okay. So the only question that remains 
is whether you would tender it willingly?
    Mr. Cordray. I think that is correct, yes.
    Mr. Hollingsworth. Okay. And I guess in honoring the 
public's will or wishes, it would seem that if an elected 
official who was duly elected here decided to ask for your 
resignation, it would seem in the public's interest, given 
their election, for you to willfully tender that, right?
    Mr. Cordray. I think the public elects the Congress every 2 
years. You are now part of it. And it had prior Congresses, and 
those Congresses passed laws under our Constitution that are 
the law of the land and have to be followed, okay?
    And so the authority to remove me would have to follow the 
law of the land, and that could then be reviewed in the courts. 
So that is what I am understanding is the right framework.
    Mr. Hollingsworth. Okay.
    So I guess turning our attention to having to divine other 
things, this regulation by enforcement troubles me. And it 
really troubles me because I think as I continue to hear from 
others around here that you rarely take a course--a court--
excuse me--a case to court--it is getting late, isn't it--a 
case to court. And so rarely--
    Mr. Cordray. It's not true that we rarely do. We have many 
cases pending in the courts right now.
    Mr. Hollingsworth. What percentage of those taken to court 
versus those settled outside of court?
    Mr. Cordray. I don't know exactly, but we could get you 
those numbers.
    Mr. Hollingsworth. I understand the far greater proportion 
were settled outside of court, so how is it that--
    Mr. Cordray. No. That is up to the opposing party. They can 
contest it. Any case they can contest and go through the 
courts. If they prefer not to, they don't have to. I don't 
dictate that to them.
    Mr. Hollingsworth. Are there any constraints on your 
budget?
    Mr. Cordray. Yes.
    Mr. Hollingsworth. Okay. What are those constraints?
    Mr. Cordray. The constraints that Congress set by law. They 
have a fixed budget cap for us, which is not true of any other 
independent agency.
    Mr. Hollingsworth. What is the size of that?
    Mr. Cordray. It is approximately $600 million before the 
sequester.
    Mr. Hollingsworth. $600 million--one of the things my 
grandfather once told me is the Golden Rule, right? He who has 
the gold makes the rules.
    And I worry that in your instance, there is a great 
inclination for them to settle because of the immense amount of 
resources you can bring to bear not only in the ability to 
fight cases but in their reputational harm that they would 
suffer from pushing back against it, even on principle.
    And so I guess what I want to better understand on this 
enforcement--or this regulation by enforcement--is how other 
parties are supposed to determine whether the facts that you 
allege are true and whether those facts indeed apply to them or 
not, and whether it is left to them to try to divine the tea 
leaves and figure out what is in their best interests.
    Mr. Cordray. I don't know that it is divining the tea 
leaves. They should read the orders and they should think 
carefully about what they are doing and judge accordingly.
    That is the same way they read every law and try to decide 
whether it applies to them.
    Mr. Hollingsworth. Even if the facts aren't alleged--even 
if the facts aren't proven to be true.
    Mr. Cordray. The facts are true in our order as a result of 
our investigation.
    Mr. Hollingsworth. That they have agreed to them doesn't 
make them true.
    Mr. Cordray. Whether they have agreed to them or not, they 
are true because they are facts, investigative facts.
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from Minnesota, Mr. 
Emmer.
    Mr. Emmer. Thank you, Mr. Chairman.
    Mr. Cordray, for the past 5 years you have been the 
Director of the Consumer Financial Protection Bureau. And this 
right here that you delivered to us today is your ninth 
semiannual report to Congress on behalf of that agency, 
correct?
    Mr. Cordray. We are actually doing two of them today, 
covering two of them for the past year.
    Mr. Emmer. This is your ninth semiannual report to 
Congress. That is what it says.
    Mr. Cordray. Okay, fair enough.
    Mr. Emmer. I am not making it up--it says, ``our ninth 
semiannual report to Congress and the President.''
    Mr. Cordray. I am not disputing this. I am not trying to 
give you any trouble on that.
    Mr. Emmer. All right. I didn't think so. I am just trying 
to give you what your words are.
    In this report, it says that--I think it is--you have 
provided on page--it is 188 pages, this book, all right? And in 
the book it says you are providing your agency's, ``statutory 
responsibility and commitment to accountability and 
transparency.'' So this whole process is about accountability 
and transparency on behalf of the CFPB, correct?
    Mr. Cordray. Well, the more transparent we are the more 
full the report becomes, yes.
    Mr. Emmer. Okay. So that was a yes. Thank you.
    Now, the Consumer Financial Protection Bureau gets its 
funds from the Federal Reserve, correct?
    Mr. Cordray. Correct.
    Mr. Emmer. Several hundred--
    Mr. Cordray. Actually, we get them from--Congress initially 
sets up the framework, but they specify that they would come 
from the Federal Reserve, yes.
    Mr. Emmer. Yes. You get it from the Federal Reserve. You 
fill out a request that the Congress has put in the Dodd-Frank 
Act that created this, a limit that you can collect based on 
what the earnings are, and the Federal Reserve can send I think 
this year something north of $600 million.
    But you generally take about $350 million to $400 million 
for your operating expenses in the CFPB, correct?
    Mr. Cordray. No. It has changed over time because in 2011 
when we were created there was nothing, and the Bureau has 
built up over time, so--
    Mr. Emmer. The last couple of years, sir. I am going to try 
to get through this as quickly as possible.
    Your general operating budget is about--for the last couple 
of years is somewhere between $350 million and $400 million. 
That is what is documented in--
    Mr. Cordray. It is actually higher than that, but yes.
    Mr. Emmer. All right. Maybe it is higher than that.
    In addition, through these consent decrees that we have 
been talking about at length here the last hour and settlements 
that the CFPB does with--I think Representative Davidson 
identified them as targets--you collect hundreds of millions 
more. And of the dollars that you collect, you put monies into 
an account called the Civil Penalty Fund, correct?
    Mr. Cordray. Correct. Yes.
    Mr. Emmer. And you also allocate monies into a separate 
account called the Consumer Education and Financial Literary 
Programs account.
    Mr. Cordray. No. No. It goes into the Civil Penalty Fund, 
and Congress specified it could be used for either or two 
purposes.
    Mr. Emmer. I'm sorry. So it is one account and you allocate 
it--
    Mr. Cordray. Either to compensate uncompensated victims, 
which is where the vast majority of it has gone, or for--
    Mr. Emmer. Yes, it is one account, so you allocate between 
victims and education, correct?
    Mr. Cordray. Fair enough. Yes.
    Mr. Emmer. Now, in this you have laid it out again in this 
book. Chapter nine, starting on page 131, you give a general 
summary of the monies that you have collected and where you 
have put them. If you look at it, it is right in front of you, 
I think, the book.
    Mr. Cordray. Yes.
    Mr. Emmer. It is interesting that you put in there that you 
have allocated money, but there is no audit in this book. There 
is no audit that shows us detail of these monies.
    Mr. Cordray. We are audited every year by the GAO.
    Mr. Emmer. Do you have an audit? Do you have an audit that 
you can provide to my office?
    Mr. Cordray. Absolutely. We have--
    Mr. Emmer. Fantastic.
    Mr. Cordray. We have an audit--we have two audits every 
year and--
    Mr. Emmer. Have you looked at that recently?
    Mr. Cordray. --the Inspector General reviews the fund.
    Mr. Emmer. Have you looked at the audit recently?
    Mr. Cordray. I look at it every year.
    Mr. Emmer. Can you tell me how many checks have been 
written to actual victims out of this Civil Penalty Fund?
    Mr. Cordray. I think there have been millions of checks to 
victims.
    Mr. Emmer. No, no, no. What you do when I read your report 
is you lump all the money together--
    Mr. Cordray. No, no, no.
    Mr. Emmer. --and you say you have helped millions of 
people.
    But what I would like to know is specific checks, rather 
than seeing, like I do in this report after page 131, that you 
gave a huge chunk of money to some law firm for uncompensated 
victims. I would like to know exactly who you are writing 
checks to.
    Mr. Cordray. We didn't give any chunk of money to a law 
firm.
    Mr. Emmer. Then who is the firm that is identified on page 
132 or 133?
    Mr. Cordray. So it is victims of the--of those practices--
    Mr. Emmer. So there were four--
    Mr. Cordray. --that are individual consumers. Nobody gets 
some big chunk of money from us.
    Mr. Emmer. Page--
    Mr. Cordray. It goes to individual consumers who were 
victims.
    Mr. Emmer. Where is it here? Page 139, The Hoffman Law 
Group, formally known as The Residential Litigation Group.
    Mr. Cordray. Yes?
    Mr. Emmer. That is what I am talking about.
    Mr. Cordray. Yes, they are a--
    Mr. Emmer. So if there is an audit and if this is about 
transparency, I would like to get the audit.
    Mr. Cordray. They are a firm that we found--I believe that 
we found that they violated the law and this money is going to 
the victims that they harmed.
    Mr. Emmer. Again, I will renew it. If there is an audit and 
you can show us exactly who the money has been given to, I 
would like to see it.
    Mr. Cordray. I am always stunned at people disbelieving 
that this Consumer Bureau gets money back to real people--
    Chairman Hensarling. The time of the gentleman has expired.
    Mr. Cordray. --and that is what we have done. And if you 
want to see the evidence of that because you don't believe us, 
we will show you the evidence.
    Mr. Emmer. I would also like to see who educated where, 
how, with what money--
    Chairman Hensarling. The time of the gentleman has expired.
    The Chair now recognizes the gentleman from West Virginia, 
Mr. Mooney.
    Mr. Mooney. Thank you, Mr. Chairman.
    I have different questions for you, Director Cordray. You 
had a former deputy named Steven Antonakes who left the CFPB 
abruptly under unknown circumstances and apparently did so just 
months shy of his pension vesting.
    Now, for all I know, his service was entirely honorable, 
and we appreciate the toll public service takes on family 
sometimes, so I may--I understand his desire to return home. 
But I must ask this question: Was Mr. Antonakes ever the 
subject of an inquiry or investigation by the Federal Reserve 
Inspector General?
    Mr. Cordray. This is kind of outrageous. Steve left the 
Bureau because he remarried, and in remarrying he had three 
small children. And although he had been commuting from Boston 
to Washington for a number of years he no longer could do so.
    Those are the circumstances of his departure, and if you 
want to make something of that you can, but I think that is a 
little beyond the pale.
    Mr. Mooney. Okay. So then are you saying affirmatively that 
no investigation occurred, or that you are just unaware of 
details of an investigation?
    Mr. Cordray. I am not aware of what you think you are 
alleging.
    Mr. Mooney. Okay, so you can't--can you answer 
affirmatively no investigation occurred?
    Mr. Cordray. Of what? Investigation of what? I am not sure 
what you are talking about.
    Mr. Mooney. Of Mr. Antonakes when he left. Was there an 
investigation?
    Mr. Cordray. He got remarried. He had three small children. 
He could no longer commute from Boston to Washington.
    He was very apologetic about it because he thought it was 
important to continue the work of the Bureau, but his personal 
situation meant that he needed to make a change. And I think 
you should--
    Mr. Mooney. And as I said--
    Mr. Cordray. --leave that alone.
    Mr. Mooney. --in my question, we understand the toll public 
service takes on family. But that is not my question.
    My question is, was he ever the subject of an inquiry or 
investigation by the Federal Reserve Inspector General?
    Mr. Cordray. I am not aware of what you are talking about, 
so--
    Mr. Mooney. So you are not aware of any investigation that 
may have occurred?
    Mr. Cordray. I don't know what you are talking about. I 
really don't.
    Mr. Mooney. I am asking you a question.
    Mr. Cordray. Yes, I am saying I don't know what you are 
talking about.
    Mr. Mooney. So you are unaware of any investigation of your 
own deputy that may or may not have occurred?
    Mr. Cordray. Again, I am not aware of what you are talking 
about. If you ask it again I still won't be aware of what you 
are talking about.
    Mr. Mooney. Okay.
    Mr. Chairman, I would like to yield time to the gentleman 
from Tennessee, Mr. Kustoff.
    Mr. Kustoff. Thank you, Mr. Chairman.
    Director Cordray, if I could, I would like to go back, if I 
could, briefly to that Intercept Corp--
    Mr. Cordray. Sure.
    Mr. Kustoff. --action that we talked about out of the 
Eastern District of North Dakota. I am correct that the claim 
was dismissed, your action was dismissed, the CFPB's action was 
dismissed because the court found that there was no nexus to 
consumer harm, correct?
    Mr. Cordray. That was the court's judgment. That is--
    Mr. Kustoff. I am not asking whether you agree with it. 
That is what the--that is the court's judgment.
    Mr. Cordray. I believe that is what the court said, yes.
    Mr. Kustoff. All right.
    Mr. Cordray. I don't have it in front of me, but if you are 
saying so, I don't doubt you.
    Mr. Kustoff. And what the court was also saying, if I am 
correct also, was that the CFPB needs to more clearly define 
the parameters of UDAAP and how you enforce it, correct?
    Mr. Cordray. I don't recall whether the court said that but 
the court apparently found that our pleadings were not specific 
enough or convincing enough to survive the motion to dismiss 
and granted the motion to dismiss. So that is a setback and it 
is something we will take to heart and figure out what to do in 
response.
    Mr. Kustoff. Thank you very much.
    Director Cordray, I have heard from a number of my 
constituents who live in west Tennessee who told me about their 
struggles to get a small-dollar, short-term loan, whether it is 
for medical expenses, whether it is to make a car payment, for 
whatever reason. The rule that the CFPB--and you have testified 
a little bit about this during the hearing today--from last 
year that effectively reduces consumers' ability to get those 
small-dollar loans, we talked about the number of comments that 
have been posted--a million or a million three--
    Mr. Cordray. A lot.
    Mr. Kustoff. It is a large number.
    Mr. Cordray. Yes.
    Mr. Kustoff. One comment specifically was a letter signed 
by 18 State attorneys general, your former colleagues--and 
importantly for me, my attorney general from Tennessee, the 
Honorable Herbert Slatery. Their letter to you states that the 
proposed rule is, ``unnecessary and unlawful and will do more 
harm than good and ought to be withdrawn.''
    My question to you is that, as far as I can tell, you have 
not yet responded to that letter. Am I correct?
    Mr. Cordray. These are comment letters and we don't do a 
response to all of the comments. We are supposed to take them 
and figure out what to do in thinking about our rule.
    And by the way, there were other attorneys general from 
other parts of the country who filed a comment letter on the 
other side. We have not responded to that one either. It is not 
meant to be responded to; it is meant to be telling us their 
thoughts for the rulemaking purposes.
    Mr. Kustoff. Great. So you have no intention of responding 
to those 18 attorneys general?
    Mr. Cordray. If attorneys general communicate with me I 
respond to the attorneys general. But in the notice-and-comment 
process, the 1,300,000 people who submitted comments, we are 
not going to respond to all of them. That is not required by 
law and it is not reasonable.
    So I don't know what to tell you. They are allowed to 
comment into this process like anyone else, but they--
    Chairman Hensarling. The time--
    Mr. Cordray. --don't have a different status.
    Chairman Hensarling. The time of the gentleman has expired.
    There are no other Members in the queue.
    The Chair wishes--
    Mr. Cordray. Could I just correct the record?
    Chairman Hensarling. --to alert Members--
    Mr. Cordray. Mr. Chairman?
    Chairman Hensarling. The Chair wishes to alert Members that 
there is a vote pending on the Floor.
    I do wish to thank the witness for his testimony today. It 
has been a very long day.
    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.
    And I would ask Director Cordray to respond as promptly as 
you are able.
    This hearing stands adjourned.
    Mr. Cordray. Could I just have 1 minute--30 seconds? 
Because I wanted to correct the record on--a couple of times 
you asked about the neither admit nor deny. I am now informed 
that we have admissions in several cases.
    I am aware of the Payday Loan Debt Solutions case, the 
American Debt Settlement Solutions case, the International Land 
Consultants case, the First Alliance Lending case. There may be 
others, but that is what--
    Chairman Hensarling. I thank the Director for his answer. 
This hearing stands adjourned.
    [Whereupon, at 3:24 p.m., the hearing was adjourned.]





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