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





 
                       IMPROVING TRANSPARENCY AND

                    ACCOUNTABILITY AT THE BUREAU OF

                     CONSUMER FINANCIAL PROTECTION

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

                                HEARING

                               BEFORE THE

                 SUBCOMMITTEE ON FINANCIAL INSTITUTIONS
                          AND CONSUMER CREDIT

                                 OF THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             SECOND SESSION

                               __________

                              JUNE 6, 2018

                               __________

       Printed for the use of the Committee on Financial Services

                           Serial No. 115-98
                           
                 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
                 
                               __________                 
                 
                     U.S GOVERNMENT PUBLISHING OFFICE
                     
31-474 PDF		   WASHINGTON : 2018                     
                 

                 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

                     Shannon McGahn, Staff Director
       Subcommittee on Financial Institutions and Consumer Credit

                 BLAINE LUETKEMEYER, Missouri, Chairman

KEITH J. ROTHFUS, Pennsylvania,      WM. LACY CLAY, Missouri, Ranking 
    Vice Chairman                        Member
EDWARD R. ROYCE, California          CAROLYN B. MALONEY, New York
FRANK D. LUCAS, Oklahoma             GREGORY W. MEEKS, New York
BILL POSEY, Florida                  DAVID SCOTT, Georgia
DENNIS A. ROSS, Florida              NYDIA M. VELAZQUEZ, New York
ROBERT PITTENGER, North Carolina     AL GREEN, Texas
ANDY BARR, Kentucky                  KEITH ELLISON, Minnesota
SCOTT TIPTON, Colorado               MICHAEL E. CAPUANO, Massachusetts
ROGER WILLIAMS, Texas                DENNY HECK, Washington
MIA LOVE, Utah                       GWEN MOORE, Wisconsin
DAVID A. TROTT, Michigan             CHARLIE CRIST, Florida
BARRY LOUDERMILK, Georgia
DAVID KUSTOFF, Tennessee
CLAUDIA TENNEY, New York


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    June 6, 2018.................................................     1
Appendix:
    June 6, 2018.................................................    43

                               WITNESSES
                        Wednesday, June 6, 2018

Day, Steven G., President, American Land Title Association.......     4
Hunt, Richard, President and Chief Executive Officer, Consumer 
  Bankers Association............................................     6
Prochaska, Kate (Larson), Director, Center for Capital Markets 
  Competitiveness, U.S. Chamber of Commerce......................     7
Shelton, Hilary O., Director, NAACP Washington Bureau, Senior 
  Vice President, Advocacy and Policy, National Association for 
  the Advancement of Colored People..............................     9
Whitaker, Elmer K., Chief Executive Officer, Whitaker Bank 
  Corporation of Kentucky........................................    11

                                APPENDIX

Prepared statements:
    Day, Steven G................................................    44
    Hunt, Richard................................................    61
    Prochaska, Kate (Larson).....................................    73
    Shelton, Hilary O............................................    87
    Whitaker, Elmer K............................................    97

              Additional Material Submitted for the Record

Luetkemeyer, Hon. Blaine:
    Written statement from the Association of Credit and 
      Collection Professionals (ACA).............................   103
    Written statement from the Credit Union National Association 
      (CUNA).....................................................   130

 
                       IMPROVING TRANSPARENCY AND

                    ACCOUNTABILITY AT THE BUREAU OF

                     CONSUMER FINANCIAL PROTECTION

                              ----------                              


                        Wednesday, June 6, 2018

                     U.S. House of Representatives,
                     Subcommittee on Financial Institutions
                                       and Consumer Credit,
                           Committee on Financial Services,
                                                   Washington, D.C.
    The subcommittee met, pursuant to notice, at 2:04 p.m., in 
room 2128, Rayburn House Office Building, Hon. Blaine 
Luetkemeyer [chairman of the subcommittee] presiding.
    Present: Representatives Luetkemeyer, Rothfus, Lucas, 
Posey, Ross, Pittenger, Barr, Tipton, Williams, Love, Trott, 
Loudermilk, Kustoff, Tenney, Hensarling, Clay, Maloney, Meeks, 
Scott, Velazquez, Green, Heck, and Crist.
    Also present: Representative Duffy.
    Chairman Luetkemeyer. The committee will come to order. 
Without objection, the chair is authorized to declare a recess 
of the committee at any time.
    I apologize for the coming and going here of everybody, but 
we had votes on the floor, so there will be some more members 
coming and going. And obviously, we have got one witness that 
is still looking for the Rayburn building, apparently, so we 
will see how that works out. But we do thank our witnesses for 
being here today, and I think we have got a great panel of 
folks, and I think we are going to have a great hearing.
    So this hearing is entitled, ``Improving Transparency and 
Accountability at the Bureau of Consumer Financial 
Protection.'' Before I begin, I would like to thank the 
witnesses for appearing today, and we appreciate your 
participation and look forward to the discussion.
    I now recognize myself for 5 minutes for the purpose of 
delivering an opening statement.
    As prescribed in Dodd-Frank, the mission of the Bureau of 
Consumer Financial Protection is to regulate the offering and 
provision of consumer financial products or services under the 
Federal consumer protection laws, and to educate and empower 
consumers to make better informed financial decisions. 
Unfortunately, the Bureau has failed to carry out its mission.
    The Bureau of Consumer Financial Protection hasn't 
regulated based just on Federal consumer protection laws. Under 
Director Cordray, the agency took upon itself to essentially 
write law through guidance and regulate through enforcement. 
Further, the Bureau hasn't worked to educate and empower 
consumers to make better informed financial decisions. This 
hasn't been a partnership between the Government and the 
people. Rather, the bureaucrats have worked diligently to 
eliminate options for Americans verily thinking that they are 
better equipped than consumers to make financial decisions.
    Thankfully, Acting Director Mulvaney is striving to foster 
an environment that promotes transparency, legitimacy, and 
greater consumer choice. He also would like to have us call the 
Bureau by its correct name, which is Bureau of Consumer 
Financial Protection, instead of Consumer Financial Protection 
Bureau (CFPB).
    The Bureau of Consumer Financial Protection hasn't 
regulated--excuse me. There we go. We will get 'er done.
    Mr. Mulvaney has committed to a more temperate and data-
driven process. He is outlining a vision that for the first 
time conforms to Congress' mandate. The acting director is to 
be commended for the progress he has made thus far, but we must 
recognize that not all reforms can be done administratively.
    In his latest semiannual report to the President and 
Congress, Mr. Mulvaney sent a clear message to us: Congress 
must act in an effort to establish meaningful accountability. 
Specifically, Acting Director Mulvaney first pointed to the 
need to fund the Bureau through the congressional 
appropriations process. Next, subject the Director to the full 
power of the President's executive authorities. Further, 
require legislative approval of major Bureau rules. And 
finally, establish an independent inspector general to oversee 
the Bureau, its leadership, and its staff.
    Members of this committee have promoted these very ideas 
since the inception of the Bureau. I am very pleased to see 
that the House Appropriations Subcommittee on Financial 
Services and General Government Chairman Tom Graves included 
all these provisions in his Fiscal Year 2019 Financial Services 
bill.
    Today, our distinguished panel will discuss their views on 
these and other ideas for reform, many of which were also 
included in title VII in Chairman Hensarling's CHOICE Act. We 
look forward to a productive conversation of initiative that 
will increase transparency and ensure that the Bureau focuses 
more intently on its actual mission, rather than abusing its 
authorities to promote a political agenda and in actuality does 
little to protect consumers. The American people deserve a 
Bureau of Consumer Financial Protection that enforces law 
rather than creates it, and that gives power and choice back to 
the consumers.
    We thank our witnesses for appearing and look forward to 
your testimony.
    With that, the Chair recognizes the gentleman from 
Missouri, Mr. Clay, the Ranking Member of the subcommittee, for 
5 minutes for an opening statement.
    Mr. Clay. Thank you, Mr. Chairman. Let me thank the panel 
of witnesses for being here today.
    For 6 years, America's consumers had a bureau that won 
significant victories in the name of financial justice. The 
CFPB was so effective that 29 million consumers received nearly 
$12 billion in the aftermath of the housing crisis that 
devolved into a deep recession, a Federal law assigned 
authority to accept complaints, investigate, and when 
warranted, take enforcement actions against bad financial 
actors.
    Rules affecting financial transactions as large as 
mortgages and as small as payday loans were finalized after 
extensive public hearings where lenders and borrowers alike 
were afforded the opportunity to share their respective views 
before any decisions were reached. And that is called 
transparency and accountability. Homeownership was touted by 
Presidents Clinton and Bush as a means of increasing minority 
wealth through home equity, but the relaxing of regulations of 
the housing market by Members of both parties produced the 
dramatic rip-off of the most vulnerable.
    Black and brown college grads lost more than 60 percent of 
their wealth during the 2007-2008 financial crisis because of 
laxed regulations. These homeowners have not recovered from 
their losses to this day.
    In June, the CFPB uncovered discriminatory lending 
practices by BancorpSouth. According to the Department of 
Justice, CFPB alleged that BancorpSouth bank violated the Fair 
Housing Act and the Equal Credit Opportunity Act by using 
policies and practices that unlawfully discriminated against 
African Americans and other residents of predominantly minority 
communities.
    The CFPB took the uncommon practice of using secret 
shoppers in its investigation. The settlement agreement 
dictates that BancorpSouth pay millions of dollars in relief 
and civil penalties. And that is called accountability.
    In 2014, when a company named U.S. Bank illegally billed 
customers for services they never received, the CFPB ordered 
that the bank refund these consumers $48 million. And that is 
called transparency.
    And so I look forward to this testimony, and I yield back.
    Chairman Luetkemeyer. The gentleman yields back.
    Today we welcome the testimony of Mr. Steven Day, 
President, American Land Title Association; Mr. Richard Hunt, 
President and CEO of Consumer Bankers Association; Ms. Kate 
Larson Prochaska, Director, Center for Capital Market 
Competitiveness, U.S. Chamber of Commerce; Mr. Hilary Shelton, 
Director of the Washington Bureau and Senior Vice President for 
Advocacy and Policy, NAACP.
    And at this moment I would like to recognize the gentleman 
from Kentucky, Mr. Barr, for purposes of introducing the final 
witness.
    Mr. Barr. Thank you, Mr. Chairman.
    And Chairman Luetkemeyer and Ranking Member Clay, it is an 
honor to introduce my constituent, the CEO of Whitaker Bank, 
Elmer Keith Whitaker. As a third-generation banker and head of 
the largest family owned community bank in Kentucky, Mr. 
Whitaker works every day with Kentucky consumers who have been 
negatively impacted by the Consumer Financial Protection 
Bureau, and is here today to help Congress better understand 
what we can do to reform the Bureau to help consumers.
    Mr. Whitaker, his father Jack, and his late grandfather 
Elmer, who rose from the coal fields of eastern Kentucky as a 
coal miner to build a very successful banking business, really 
represent the best in the financial services industry, not only 
as successful bankers, but also as philanthropists whose 
charitable activities and community involvement reflect their 
strong faith and their commitment to lifting up the people of 
Kentucky, and we thank you for that.
    So from financing a car loan, donating money to establish a 
new YMCA, or helping a family purchase a home, to the 
University of Kentucky Whitaker Bankshot, which is my favorite, 
that supports the Cawood Ledford Scholarship Fund, community 
banks are critical to our towns, and I am pleased to welcome 
Mr. Whitaker here today.
    I yield back.
    Chairman Luetkemeyer. I thank the gentleman.
    And we want to thank and welcome our witnesses. Just a 
little bit of a tutorial on the timing mechanism, the lights in 
front of you. Each one of you has 5 minutes to give your 
presentation. The light when it turns green, means go. Please 
pull the microphones to you. Those boxes in front of you do 
move forward, so please pull them forward because we like to 
have you very close to the microphones. It works very well that 
way. And when a light comes on and it is yellow, that means you 
have 1 minute to wrap up, and when it is red, we need to stop 
and move on.
    So with that, Mr. Day, you are recognized for 5 minutes, 
and you may begin.

                   STATEMENT OF STEVEN G. DAY

    Mr. Day. Thank you, Chairman Luetkemeyer, Ranking Member 
Lacy Clay, and members of the subcommittee. My name is Steven 
Day. I am the President of National Agency Operations for 
Fidelity National Title Group. I am testifying today in my role 
as President of the American Land Title Association (ALTA).
    ALTA believes that the best step Congress can take to 
improve the accountability and transparency at the Consumer 
Financial Protection Bureau is require that the agency provide 
the businesses it regulates with written reliable guidance on 
how to comply with the law and protects consumers in real world 
scenarios.
    As I travel the country talking with small business 
members, I have learned a simple truth: More information is 
never a bad thing when it comes to decisionmaking. This is why 
we urge Congress to pass H.R. 5534, the Give Useful Information 
to Define Effective Compliance Act, introduced by 
Representatives Sean Duffy and Ed Perlmutter. This bipartisan 
bill creates a process for the Bureau to ensure formal and 
reliable written guidance on how to comply with its 
regulations.
    In May, Acting Director Mulvaney spoke to our members. He 
mentioned his philosophy that the Bureau should tell companies 
the rules of the road and provide concrete guidance and 
examples prior to enforcement. Guidance helps people and 
businesses make more informed decisions on how to comply with 
law in real life. This differs from former regulations that 
implement and prescribe laws.
    Guidance can come in the form of advisory opinions, 
bulletins, no action letters, statements of policy, and answers 
to frequently asked questions. These tools can apply widely to 
guide an entire industry like a bulletin or be narrow and 
specific to a single person, like an IRS private letter ruling.
    Clear reliable guidance and examples are important for two 
reasons. First, it provides businesses with a solid basis for 
making decisions and investments that they know will not harm 
consumers or lead to potential enforcement actions and fines. 
Second, guidance improves the effectiveness of regulators' 
supervision by providing a reference point for judging business 
practices for compliance.
    Our industry acutely felt the need for guidance when 
implementing TRID, where both the quality and quantity of the 
Bureau's guidance was lacking. Hundreds of questions arose as 
we implemented this rule. Rather than answer these questions in 
writing, the Bureau hosted five webinars. The problem with 
these webinars is that from onset, staff read a disclaimer 
telling us not to rely on their answers. At the same time, the 
Bureau drafted 11 sample disclosures reflecting generic real 
estate transactions. Despite their usefulness, the Bureau 
refused to develop additional samples of more complex 
transactions, such as construction loans and FHA (Federal 
Housing Administration) and VA (Veterans Administration) loans.
    The GUIDE (Give Useful Information to Define Effective) 
Compliance Act would require the Bureau to have a standard 
process for assessing these requests and timelines for 
responding to them.
    In the past, the Bureau refused to publish guidance under 
the belief that saying less to the companies it regulates will 
provide them with more flexibility. This was the case with the 
Bureau's three-page memo that reminded banks they needed to 
oversee their third-party service providers.
    Instead of providing flexibility, it had the opposite 
effect and led to confusion. Lenders tried to read the Bureau's 
tea leaves and developed compliance processes that reduced 
consumer choice or treated small businesses the same as large 
national firms.
    A more valuable bulletin would provide banks and nonbanks 
with examples of vendor management programs based on different 
risks. This is what the OCC (Office of the Comptroller of the 
Currency) and the FDIC (Federal Deposit Insurance Corporation) 
did in their comparable bulletins.
    I also mention to you ALTA's support of a commission for 
more bipartisan leadership at the Bureau.
    And last, we want to applaud this committee and the House 
for passing the bipartisan TRID (TILA RESPA Integrated 
Disclosure) Improvement Act. The TRID Improvement Act fixes one 
of the most confusing requirements of the Bureau's mortgage 
disclosure rule and a main topic of questions the Bureau did 
not address in guidance. We urge the Senate to follow the 
House's lead on this important bill.
    Thank you for offering us this opportunity to share our 
views on how to improve the Bureau. Compliance is about more 
than protecting consumers; it protects a company's reputation, 
financial well-being, and employee morale. As an industry 
predominantly made up of small and medium-sized businesses, we 
need a regulator that helps remove the gray. We need a 
regulator that matches simple and clear regulations with 
helpful and illustrative guidance and examples. The GUIDE 
Compliance Act makes us part of the Bureau's DNA, and we urge 
Congress to pass this legislation. Thank you.
    [The prepared statement of Mr. Day can be found on page 44 
of the Appendix.]
    Chairman Luetkemeyer. Thank you, Mr. Day.
    And one little housekeeping thing right quick before we 
move on. Without objection, each of the written statements will 
be made part of the record.
    So with that, Mr. Hunt, you are recognized for 5 minutes.

                    STATEMENT OF RICHARD HUNT

    Mr. Hunt. Chairman Luetkemeyer, Ranking Member Clay, and 
members of the committee, a very good afternoon. Thanks for the 
invitation to discuss the importance of bringing increased 
transparency and accountability to the Bureau of Consumer 
Financial Protection. My name is Richard Hunt, and I am 
President of the Consumer Bankers Association (CBA). Our 
members operate in all 50 States, provide $4 trillion in 
consumer loans, serve 140 customers, and employ 1.7 million 
people in the United States.
    Let me say from the onset, CBA and our members support the 
mission of the Bureau, the mission to protect consumers and 
take action against companies that break the law. That is why I 
am happy to be here today to talk about the ways to strengthen 
and to depoliticize the Bureau.
    When Congress created the Bureau, it was granted 
jurisdiction of over 11,000 banks and credit unions, as well as 
countless nondepository institutions. It was given 
unprecedented rulemaking, supervision, and enforcement powers 
for nearly every financial institution and virtually every 
financial consumer product.
    All that power was given to one single director, which 
means one person decides all enforcement actions. One person 
decides all rules. One person controls every dollar of their 
$600 million budget and has the power to adjudicate appeals of 
their own enforcement decisions. It also means the next 
director has the sole authority to undo every one of these 
actions, like a political pendulum, swinging with each new 
Administration.
    As Congress contemplates changes to the Bureau, any 
meaningful discussion should start with the Bureau's leadership 
structure. Congress should create a bipartisan Senate-confirmed 
commission to ensure all views, voices, and opinions are given 
a seat at the table. Also to achieve greater balance and 
stability for consumers and the industry and in an attempt to 
depoliticize the Bureau.
    I want to thank Representatives Ross, Sinema, Wagner, 
Scott, Luetkemeyer, Gonzalez, and McHenry for their bipartisan 
approach in introducing and supporting legislation to achieve 
this goal. They are not the only ones who believe the 
commission is the right way to go.
    The House of Representatives recently passed legislation to 
enact a commission at the Bureau, and as a reminder, as the 
then Dodd-Frank bill was moving through the House and this 
committee in 2009, it contained a five-person bipartisan 
commission. Acting Director Mulvaney; former FDIC Chair, Sheila 
Bair; members of this committee; and the American people in a 
recent Morning Consult poll all support or have supported a 
commission over a sole director.
    In Mr. Mulvaney's testimony before this committee in April, 
he expressed support for a commission and also outlined four 
other recommendations.
    Number one, he recommended creating an independent 
inspector general at the Bureau. CBA fully supports that 
endeavor. He also recommended placing the Bureau under 
congressional appropriations. In the absence of a bipartisan 
commission and other meaningful reforms, CBA supports this 
recommendation. He also recommended making the director 
fireable at will. We believe this would increase the overt 
political nature of the Bureau. Finally, he recommended 
congressional approval of major rulemaking. Our member 
institutions need clarity, and requiring congressional approval 
could create uncertainty. Also, Congress already has the 
Congressional Review Act authority to overturn rulemaking.
    Looking beyond those four recommendations, CBA also 
supports the Protecting Consumers from Frivolous Claims Act, 
the GUIDE Act, and ECOA (Equal Credit Opportunity Act). 
Improving the financial lives of consumers is a goal that 
unites lawmakers, regulators, and the industry. There are many 
changes that can be made to enhance the functioning of the 
Bureau and increase access to credit for consumers. But 
improving the Government structure of the Bureau underpins them 
all.
    A bipartisan commission of the Bureau would depoliticize 
it, bring long-term stability, and benefit consumers and small 
businesses. We stand ready to work with Congress, and I am 
happy to answer any questions you may have.
    [The prepared statement of Mr. Hunt can be found on page 61 
of the Appendix.]
    Chairman Luetkemeyer. Thank you, Mr. Hunt.
    Ms. Prochaska, you are recognized for 5 minutes.

              STATEMENT OF KATE (LARSON) PROCHASKA

    Ms. Prochaska. Good afternoon, Chairman Luetkemeyer, 
Ranking Member Clay, and members of the subcommittee. My name 
is Kate Larson Prochaska, Director at the Center for Capital 
Markets Competitiveness (CCMC) at the U.S. Chamber of Commerce 
where I lead consumer finance issues.
    The Chamber is the world's largest business federation 
representing the interests of more than 3 million businesses of 
every size, sector, and region. Thank you for holding this 
important and timely hearing about improving transparency and 
accountability at the Bureau of Consumer Financial Protection. 
We at the Chamber have long advocated for improvements to this 
influential agency and are grateful for the opportunity to 
share our views here today on behalf of the businesses we 
represent.
    Title X of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act created the Bureau to consolidate consumer 
protection functions under one roof. We strongly believe in the 
Bureau's statutory mission to, quote, seek to implement and, 
where applicable, enforce Federal consumer financial law 
consistently for the purpose of ensuring that all consumers 
have access to markets for consumer financial products and 
services, and that the market for consumer financial products 
and services are fair, transparent, and competitive.
    However, we believe the Bureau lost sight of portions of 
their mandate, namely the directives to foster transparent and 
competitive markets and to ensure that all consumers have 
access to markets for the consumer financial products. Indeed, 
the lack of accountability of the Bureau led to an abuse and 
lack of process that made it difficult to meet this mandate and 
to provide certainty needed for consumer protection.
    Since the Bureau's inception, we tried to work with the new 
leadership and create a trustworthy dialog between industry 
stakeholders and policymakers. However, we were disappointed to 
find our insight seemed more perfunctory rather than seriously 
considered. With new leadership there is an opportunity to make 
the Bureau a more mature, transparent, and accountable agency. 
Only with this approach will the Bureau adequately fulfill its 
entire mandate.
    The Chamber deeply supports strong consumer protections and 
a robust, transparent marketplace of consumer products and 
services. This is why this past March, we released a 
comprehensive agenda to reform the Bureau.
    In the report, we noted that any consumer protection 
agency, including the Bureau, has a three-part mission: One, 
ensure consumers have access to the marketplace and choice in 
products and services. Two, promote the availability of 
information that consumers can use to make informed decisions. 
And three, provide protection against bad actors.
    We made six principal reforms that encompassed 23 
individual recommendations to offer a series of concrete steps 
to improve the Bureau. One, provide clear rules of the road. 
Two, enforce the law fairly. Three, educate consumers with 
accurate data-driven information. Four, commit to transparency. 
Five, avoid regulatory duplication and burden. And six, 
structure the Bureau for long-term success. The 23 
recommendations are discussed extensively in my written 
testimony, and the full report can be found on the CCMC 
website.
    We have also been providing feedback to the Bureau on how 
to create a more transparent and accountable agency through 
recent comment letters. We thank the Bureau for releasing their 
call to evidence, which is a compilation of 12 separate 
requests for informations to audit the agency. To date, we 
filed six comment letters addressing civil investigative 
demands, adjudication proceedings, the enforcement process, 
supervision process, external engagements, and the complaint 
database. We look forward to filing our rulemaking comment 
tomorrow and the subsequent comments through July 16.
    This brings me to the Bureau's 13th semiannual report that 
was issued in April. In his opening letter, Acting Director 
Mulvaney suggested four statutory changes to the Bureau: One, 
fund the Bureau through appropriations. We have long supported 
putting the Bureau under true congressional oversight and 
included this in our reform agenda. A CCMC Morning Consult poll 
found that 66 percent of those surveyed recognized the 
importance of appropriations to provide effective checks and 
balances over Governmental agencies.
    Two, require legislative approval of major Bureau rules. 
While we do not take a position on this legislation, we do 
think there should be more oversight.
    Three, ensure the Director answers to the President in the 
exercise of executive authority. We also believe that a 
commission structure would be a more balanced approach, 
however, there should not be insulation from the Presidential 
authority. Create an independent inspector general for the 
Bureau. Just based on sheer bandwidth, an IG would be better 
instead of looking at the Federal Reserve as well.
    I look forward to working with the committee and this 
subcommittee on legislative proposals that make the Bureau more 
mature, accountable, and transparent. Thank you again to the 
Chairman, Ranking Member, and committee for holding this 
hearing and for the opportunity to testify. I am happy to take 
any questions.
    [The prepared statement of Ms. Prochaska can be found on 
page 73 of the Appendix.]
    Chairman Luetkemeyer. Thank you, Ms. Prochaska.
    And, Mr. Shelton, you are welcome. I saw from your bio you 
are from Missouri, so welcome to a fellow Missourian. You may 
begin. Five minutes. Please turn on your microphone, sir.

                 STATEMENT OF HILARY O. SHELTON

    Mr. Shelton. Thank you.
    Good afternoon, Chairman Luetkemeyer, Ranking Member Clay, 
and esteemed members of this subcommittee. Thank you so much 
for inviting me here today to testify and requesting the input 
of the NAACP (National Association for the Advancement of 
Colored People). We currently have more than 500,000 card-
carrying members, 2,200 membership units across the Nation. We 
have members in every one of the 50 States, as well as units on 
military bases throughout the world.
    Earlier this year, the National Fair Housing Alliance 
released a report which demonstrated that racial and ethnic 
minorities are, on average, charged a higher interest rate, 
offered fewer financial options, and subjected to submissive 
and disrespectful treatment more frequently than their 
Caucasian counterparts who had lower credit scores. In fact, on 
average, non-White testers who experienced discrimination would 
have paid almost $2,700 more over the life of a loan than well-
qualified White testers.
    The important study demonstrates the continuing economic 
discrimination faced by people of color every day. It is 
because of this ongoing bias and the resulting persistent 
wealth gap between people of color and Whites in America that 
financial empowerment and the economic security of communities 
served and represented by the NAACP has been and continues to 
be a cornerstone of our national policy agenda.
    We need a strong, robust, and vibrant Consumer Financial 
Protection Bureau which operates as it was intended by law. 
Americans need facts and data which they can make informed 
decisions. We also need protections from unscrupulous predatory 
individuals and companies; industry needs to know where 
corrections and their practices are needed. The policymakers 
need to have concrete indisputable facts from which it makes 
laws and regulations.
    In my written testimony, I have made 10 suggestions which, 
if taken, will allow the CFPB to continue on its current 
important trajectory to protect and educate Americans 
everywhere. By brevity's sake, I will summarize my suggestions 
with this:
    Suggestion No. 1, do not subject the CFPB to congressional 
appropriations process. This will threaten its independence and 
effectiveness.
    No. 2, promulgate the short-term loan rule which covers 
payday and car title loans as originally crafted and 
implemented in the time set. Payday and car title lenders tend 
to concentrate their abusive operations which charge an average 
of almost 400 percent equivalent of interest and fees for a 2- 
to 3-week loan in communities of color.
    No. 3, Reassert the enforcement powers of the Office of 
Fair Lending. By moving the Office of Fair Lending, the CFPB is 
demonstratably weakening its efforts to fight discrimination in 
the consumer financial marketplace, even as the Bureau returned 
over $400 million from discriminatory financial institutions to 
American families who have been overcharged and denied credit.
    No. 4, do not require explicit congressional approval of 
any proposed regulation in order for the rule to take effect. 
This requirement will create crippling barriers to 
administrative actions necessary to protect the public and 
implement the law.
    No. 5, do not revise or reduce access to CFPB's complaint 
database. The current public complaint database is a tool that 
empowers individuals to inform and protect themselves in the 
financial services marketplaces.
    No. 6, retain and reinvigorate the Office of Student and 
Young Consumers. To close this office is an incredibly short-
sighted move with far reaching consequences which will harm 
millions of students who are already struggling with debt or 
those who are seeking an affordable higher education.
    No. 7, increase, do not decrease, the amount of information 
and the number of mortgage lenders required to make public 
their loans under the Home Mortgage Disclosure Act. Without 
this crucial data, regulators and others like the NAACP are 
once again left without the full information we need to 
determine patterns in loan terms and loan amounts that could 
increase costs and risk of foreclosure for borrowers.
    No. 8, retain a single director of the CFPB as opposed to a 
commission. A single director facilitates effective 
decisionmaking and ensures a clear point of responsibility. A 
single director can often move quickly to respond when a new 
national threat has been discovered.
    No. 9, do not create a situation in which the director of 
the CFPB must be responsive to the whims of a President. Make 
sure that he or she retains independence.
    And No. 10, reject efforts to establish an independent 
inspector general for the CFPB. You see, the CFPB already has 
an IG shared with the Federal Reserve within which the CFPB is 
housed. To create an independent IG would be of questionable 
value and debatable as to the use of taxpayers' money.
    In closing, I would just like to say, reemphasizing the 
need of a CFPB to stay on course, to remain a strong, 
transparent, and robust tool for protecting all consumers in 
the often confusing and too often predatory world of financial 
services.
    Dodd-Frank was enacted and the CFPB was created to respond 
in response to the economic crisis of 2008. As of late, we 
appear to be going backward in a pre-Dodd-Frank deregulation 
much to the detriment and the potential economic ruin of the 
American consumer.
    We have not forgotten that many of our people and 
communities are still hurting from the recession of 2008. Many 
will never own a home again, have a nest egg pass or be able to 
pass the nest egg on to future generations as a result. We have 
not forgotten many of our people were targeted by unscrupulous, 
nefarious lenders who had no concern for the economically 
destructive--
    Let me just say in closing, sir, I look forward to your 
questions. I think you get my point.
    [The prepared statement of Mr. Shelton can be found on page 
87 of the Appendix.]
    Chairman Luetkemeyer. Mr. Whitaker, you are recognized for 
5 minutes.

                 STATEMENT OF ELMER K. WHITAKER

    Mr. Whitaker. Chairman Luetkemeyer, Ranking Member Clay, 
and members of the subcommittee, my name is Elmer Whitaker. In 
addition to being CEO of Whitaker Bank, I am President of 
Whitaker Bank Corporation of Kentucky, a family owned bank 
holding company founded in 1978 and located in Lexington, 
Kentucky. We operate two banks and Kentucky Trust Company, 
which offers wealth management and insurance services with 45 
locations in 17 counties and total assets of $1.75 billion.
    I am pleased to be here today to share my views on 
improving transparency and accountability at the Bureau of 
Consumer Financial Protection. Before speaking on this subject, 
I would like to first commend Chairman Hensarling and Members 
of the House of Representatives for their support of the 
Economic Growth, Regulatory Relief and Consumer Protection Act. 
This commonsense legislation is long overdue. This new law will 
help community banks like mine better serve our customers and 
communities.
    I would also like to thank Congressman Andy Barr for his 
steadfast support on a number of provisions in the bill. In 
particular, his leadership on creating a safe harbor for 
qualified mortgage products. As a community banker, I fully 
support effective consumer protection.
    As you are aware, proposals have been introduced to replace 
the position of director of Consumer Financial Protection 
Bureau with a bipartisan five-member commission, similar to 
other financial regulatory agencies. We believe a commission 
would broaden the perspective on rulemaking and enforcement 
activity of the Bureau. It would provide appropriate checks and 
balances and a better appeals process. The Bureau has been 
given the broad authority that can alter financial markets, but 
it lacks accountability that comes with budget oversight.
    Today, the Bureau is funded by a fixed portion of the 
Federal Reserve's total operating expenses. I believe this 
should be changed to have the Bureau funded through the regular 
congressional appropriations process. This would allow the very 
consumers who the Bureau was designed to protect to hold it 
accountable through their elected officials.
    Similarly, we support efforts to create transparency by 
creating an independent inspector general. The inspector 
general's function is to serve as an independent unit that 
conducts audits, investigations, and reviews programs and 
operations. I would hope the CFPB would welcome an independent 
review of its operations. This is generally deemed a best 
practice by the other regulatory agencies.
    Mr. Chairman, as I noted, my bank supports consumer 
protection. However, even the best intended regulations must be 
reviewed to ensure they are meeting their intended purpose. 
Bank regulatory changes have a big impact on the cost of 
providing banking products and services and can adversely 
impact consumers. In many communities, appraisal costs alone 
for a home loan have doubled since the implementation of Dodd-
Frank.
    Many community banks simply lack the resources and staffing 
to stay up to date with the rapidly changing rules. The cost to 
implement training is overtaxing, but the time it takes to 
conduct the training is worse. This is time taken away from 
serving the daily needs of their customers. It is the consumer 
that suffers in that scenario. The rules in Dodd-Frank have 
caused some banks to stop offering certain loan products, and 
some banks have been forced to merge with other banks.
    As reported by the Federal Reserve Bank of St. Louis, from 
the first quarter of 2011 to the first quarter of 2018, the 
number of commercial banks in Kentucky has been reduced by 20 
percent. The number of commercial banks nationally has been 
reduced by 24 percent.
    Simply stated, community banks continue to be the backbone 
of Kentucky and hometowns all across America. My bank's 
presence means we have a personal stake in the economic growth, 
health, and vitality of the communities we serve. By 
eliminating unnecessary impediments and ensuring that the 
agencies that oversee our products are fully transparent, 
Congress can help stem the tide of the community bank 
consolidation driven by unnecessary regulation which negatively 
impacts every community across the United States.
    Thank you again for the opportunity to testify today, and I 
welcome your questions.
    [The prepared statement of Mr. Whitaker can be found on 
page 97 of the Appendix.]
    Chairman Luetkemeyer. Thank you, Mr. Whitaker. I appreciate 
your input this afternoon.
    And with that, I recognize myself for 5 minutes as we begin 
our questioning portion of the hearing.
    Let me just begin by asking you a question with regards to 
data collection. I know that Director Mulvaney made the 
comment--or when he first came in, suspended the ability or the 
collection of information. And recently I think as last week, 
he went back to beginning to collect some information again 
because of their concerns with regards to protecting 
information.
    Are any of you concerned about that? Do any of you have 
some ideas about that particular action of the Director?
    Ms. Prochaska. Sure. I will start. We definitely have 
concerns about that. We all know that the Federal Government is 
not immune to data breaches, and to have everything in one spot 
for the hackers to come in I think is a huge concern. I think 
for most consumers who are getting a mortgage, they would be 
surprised that all of their mortgage data is then put into a 
giant database. So I think for a lot of folks that would be a 
little bit upsetting to them, so I do hope that the privacy 
protections are adequately in place.
    Chairman Luetkemeyer. I know that Director Cordray made the 
statement that he collects 80 percent of all the credit card 
transactions of this country, which is very, very, very 
disturbing to me, so I appreciate the comment.
    Ms. Prochaska, you made the comment during your discussion 
here in your presentation, and I went back through your 
testimony because I was concerned when you didn't indicate that 
you were supporting a cost-benefit analysis of something. But 
in your testimony, you did make that comment as one of your 
recommendations. So would you like to elaborate on the 
importance of having a cost-benefit analysis on all the rules 
and regulations?
    Ms. Prochaska. Absolutely. I think a lot of the rule 
writers formerly at the CFPB, it is hard to know how it is 
going to happen in practice, and so a robust cost-benefit 
analysis, which is conducted at most of the other agencies, is 
critical to see how this is actually going to impact consumers 
and small business organizations. So I think that is a 
preeminent concern that we have at the Chamber, especially 
because we are so focused on economic growth and how that is 
going to be in the marketplace.
    Chairman Luetkemeyer. Mr. Whitaker, would you like to 
elaborate on how much it costs you to comply with some of these 
rules and regulations and guidance that the CFPB has put out?
    Mr. Whitaker. I would simply state that as a small bank, in 
terms of national presence, it has significantly changed my 
cost structure. Hundreds of thousands of dollars a year just in 
compliance staff has been added since the beginning of Dodd-
Frank.
    Chairman Luetkemeyer. Have you changed your business model 
as a result of this?
    Mr. Whitaker. I'm sorry?
    Chairman Luetkemeyer. Have you changed your business model 
as a result of this?
    Mr. Whitaker. I have been forced to, yes. I have had to add 
locations just to house the staff to process work.
    Chairman Luetkemeyer. Mr. Hunt, I know you have lots of 
members that are dealing with these additional costs. Can you 
give us a little--elaborate on some of the costs that your 
members are incurring, or the total amount perhaps, of what 
CFPB is costing?
    Mr. Hunt. Yes. I don't have the total amount, but I will 
tell you, in the first quarter of next year, we are going to be 
giving to the regulators all the new HMDA (Home Mortgage 
Disclosure Act) requirements that is going to increase it two- 
to threefold from previously. So we are collecting information.
    There was a report earlier by the inspector general a 
couple--8 months ago, I believe, saying there were not enough 
safeguards. We fully supported Mr. Mulvaney taking down the 
collection of the data for a while until those safeguards are 
there. Thankfully, he has concluded the safeguards are now in 
place.
    Chairman Luetkemeyer. One of the questions I have got is, 
several of you have all advocated for the commission. And I 
know that Mr. Shelton's testimony actually made the comment 
that he supported, actually, something that would be illegal, 
quite frankly, because the Congressional Review Act says that 
Congress should be presented with all rules and guidance to be 
able to be approved, and in his testimony he suggests that that 
not happen, which quite frankly, would be illegal. So I would 
point that out to Mr. Shelton and to all of you.
    From the standpoint that I know recently we passed in the 
Senate and now in the House a couple weeks ago, and it was 
signed a week before last by the President, with regards to the 
congressional Review Act, a recision--a rescinding of a rule 
that was done by CFPB with regards to indirect auto lending.
    So would any of you have some other rules or regulations 
that you are familiar with that need to be reviewed under the 
CRA and perhaps rescinded? And if you don't, I have got a 
homework assignment for each one of you.
    Mr. Hunt. Well, I don't think there are any more rules that 
fall within the 60-day calendar. They just obviously lead to 
arbitration last year by a landslide 50 to 50 vote in the 
Senate. I can't think of any rule that is forthcoming by the 
Bureau that will require a CRA rule.
    Chairman Luetkemeyer. OK.
    Ms. Prochaska. One guidance I think that might be worth 
looking at is the vendor management guidance. I think that that 
might be tantamount to a rule, and GAO might want to take a 
look at that.
    Chairman Luetkemeyer. OK. All right. Very good. Well, thank 
you.
    So again, I will make mention of that when we close the 
hearing that we do have a homework assignment for you. OK.
    Thank you very much. My time is up.
    With that, I recognize the gentleman from Missouri, Mr. 
Clay, the Ranking Member, for 5 minutes.
    Mr. Clay. Thank you, Mr. Chair.
    I just wanted to point out that I wanted to welcome a young 
man from my hometown, St. Louis, and our State of Missouri, 
back to the committee, Mr. Shelton, who I will start with.
    As you know, the Center for Investigative Reporting 
recently published results from their extensive analysis of 
lending throughout America, and found modern-day redlining in 
more than 60 metro areas across the country. And this is 
despite the fact that most banks, some 99 percent of banks get 
passing grades on their Community Reinvestment Act, or CRA 
exams, even though that law was intended to help combat 
discriminatory lending practices. And now, Mr. Mulvaney is 
reorganizing the CF--the Consumer Bureau's Fair Lending Office, 
eliminating its enforcement capabilities and diminishing fair 
lending as an important priority of the Bureau.
    So, Mr. Shelton, will Congress be helping to combat 
discriminatory lending or weakening those efforts if we advance 
proposals to radically reform and weaken the Bureau?
    Mr. Shelton. Well, it would certainly weaken them, 
Congressman. And it is very good to see you.
    Indeed, we have not forgotten the challenges and problems 
that we had that actually pushed us to create a Consumer 
Financial Protection Bureau or pass the Dodd-Frank reform bill 
as we did. We saw what happened with the so-called protections 
that were in place and, quite frankly, the disparate impact 
that they had on racial and ethnic minorities, women-owned 
houses and other properties, and other problems in our 
communities.
    Anything can be done to actually step back or put back in 
place the lack of oversight and protections would be derelict, 
to say the least. In essence, it has not been that long. It has 
not been that long since we sat before this very committee, 
quite frankly, with other victims of those who were not 
provided the protection of regulatory oversight that lost their 
homes, that found themselves victim to predatory lending 
processes and practices throughout the country. We need these 
protections to prevent this from happening again.
    Mr. Clay. OK. The regulators are discussing modernizing 
CRA, though some seem to be more focused on making those CRA 
exams easier. Does that make sense to you that now is the time 
to make CRA exams easier, even though most banks pass their 
exams, and yet we have pervasive redlining throughout this 
country?
    Mr. Shelton. Clearly, with the problems that we have now, 
doing anything to weaken those very protections, again, would 
be extremely problematic. It is moving in the wrong direction. 
The reason we need a robust, powerful, comprehensive, and 
transparent process that is covered by the CFPB is for these 
very reasons.
    You were, I believe, here when we heard from many of the 
victims of the forms of discrimination that we are very well 
trying to provide protections for. It would be outrageous to 
make things weaker and easier for this kind of discriminatory 
practice to continue.
    Mr. Clay. Thank you for that response.
    Mr. Hunt, do you believe that the time has come and gone 
for the Fair Housing Act and collecting HMDA data or have we--
or do you think we have closed the disparity gaps in mortgage 
lending and the way it impacts certain communities of color? 
And is everything OK in the mortgage lending?
    Mr. Hunt. Mr. Clay, thank you very much for the question. 
First off, let me say, discrimination is just morally wrong. It 
should not be allowed, and it cannot be allowed. It is totally 
unacceptable. There is no place for it.
    Credit profile is what we are looking at when we are trying 
to find somebody who is creditworthy. We are about to send to 
the regulators tons of information under HMDA. We were not 
exempt under the Crapo bill, like other institutions were, so 
we are fully in compliance. We are fully in compliance with the 
ECOA and the fair housing law as well.
    So, look, we don't want to have any discrimination. We want 
to make sure our customers are happy and being served, and if 
they choose to have a mortgage, make sure they are creditworthy 
to make sure they can afford the monthly payment. And I go back 
to what you addressed in your opening comments. We want the 
Bureau to be very strong and diligent as well with us, so we 
are not trying to weaken the Bureau at all in this regard.
    Mr. Clay. So can we do both? Can we ensure that we close 
the disparity gap, while still correcting, making corrections 
at the Bureau? Can those both run simultaneously?
    Mr. Hunt. I have no doubt in my mind that Acting Director 
Mulvaney is going to make sure no one is discriminated against.
    Mr. Clay. Thank you for that response.
    Chairman Luetkemeyer. The gentleman's time has expired.
    With that, we go to the gentleman from Pennsylvania. The 
Vice Chairman of the committee, Mr. Rothfus, is recognized for 
5 minutes.
    Mr. Rothfus. Thank you. Thank you, Mr. Chairman.
    Mr. Day, in your testimony, you discussed the importance of 
having clear rules of the road. Unfortunately, until Acting 
Director Mulvaney took over, the Bureau tended to prefer 
ambiguous rules that provided a platform for broad regulation 
by enforcement.
    Can you provide an example of how uncertainty about the 
rules of the road has hurt the members of the American Land 
Title Association?
    Mr. Day. Certainly. Probably the prime example is with 
regard to, in my testimony, the three-page memo with regard to 
lenders; just reminding lenders as to the requirements to 
police their third-party vendors. There was not a lot of 
explanation concerning that, and it left two issues in that 
regard. One from the lending community. They were unsure as to 
the best way to control that. Are we able to control based on a 
sizing of that? Do we treat an agent who has five employees in 
a rural community the same way we do with someone who has 
locations in 45 States and hundreds of locations? So lenders 
tended to shrink their controls and actually impact the 
consumer choice.
    On the other side, with our members, they look at it and 
say which--where do we have to go to be able to be in 
compliance? And some sought out our best practices as a way of 
going forward. We could not get clarification from the Bureau 
as to whether or not this was a viable way for the lenders to 
feel comfortable that third-party vendors, our members were 
going to be in compliance with the Act. So it added additional 
expenses, additional concerns, the threat of enforcement. So it 
just--that uncertainty really impacted a number of especially 
small businesses.
    Mr. Rothfus. Mr. Hunt, in your testimony, you wrote that 
the Bureau, quote, ``has an unprecedented scope of authority 
over almost the entire universe of consumer financial service 
providers, ultimately touching almost all Americans.'' Can you 
describe some of the consumer impacts that have followed from 
the Bureau's aggressive use of its broad authority?
    Mr. Hunt. Sure. There are many I could describe. I will 
start with small dollar lending. They just wrote a rule not too 
long ago that would not make it desirable for our banks to get 
into small dollar lending. You have to keep in mind, some 50 
percent of all Americans in this country do not have $500 in 
their bank account to meet an emergency need. We need to be in 
that space. I think they also played politics with that rule. 
They exempted in financial institutions doing less than 2,500 
loans.
    Now, when it comes to consumer protection, I think every 
consumer should be protected, not based upon where you bank. So 
you can bank at Bank of America and have one set of rules, but 
if you go to the local community in Kentucky, there will be a 
different set of rules over there for the consumer. Not for the 
bank, but for the consumer. So I think that has severely 
impacted the short-term liquidity needs when Americans need it 
most to meet a financial need.
    Mr. Rothfus. Ms. Prochaska, we are all committed to 
ensuring that the rules and enforcement actions taken by the 
Bureau are fair to all parties and maximize consumer 
protection. Putting the Bureau on appropriations will go a long 
way toward improving the responsiveness of this agency and 
enhancing the integrity of its rulemaking. Do you believe that 
putting the Bureau on appropriations would in any way harm 
consumer financial protection?
    Ms. Prochaska. Thank you very much for the question, first. 
And second, I do not think it would harm consumer protection in 
any way, shape, or form. The rules are on the books. Mr. 
Mulvaney has made it absolutely clear that he is a steward of 
the law, that he is going to execute the law fairly and 
accurately.
    Just because the Fair Lending Office has now been rolled 
into the Director's office doesn't necessarily mean that a ECOA 
has been repealed, the Fair Housing Act has been repealed, HMDA 
has been repealed. I think there is a discussion, and there can 
be an argument made that that has actually made it even more of 
a priority. So I think that having some sort of oversight over 
the Bureau would be much better in the long term for everyone.
    Mr. Rothfus. I have long been an advocate of putting it on 
the appropriations process and also having a commission, 
because this goes to some of the core principles of our 
country, our republic. There is a whole notion of self-rule and 
self-government, and recalling Abraham Lincoln even talking 
about Government of the people, by the people, and for the 
people, and this does happen through elected representatives. 
It has to do with the nature of law in this country and the 
three branches of Government we have. The Executive branch, to 
enforce the law; the Legislative branch, to make the law; the 
Judiciary branch, to adjudicate.
    And when you see an agency that would make rules that the 
people are not making, that really goes against, to me, the 
principles of self-rule and self-government. Certainly, a 
commission I could think be as effective as a single director, 
perhaps more effective at going after discrimination. You have 
a diversity of ideas that are going to be exchanged among 
multiple commissioners.
    So again, I thank everybody for participating in this 
hearing, and it has been very informative. Thank you.
    Chairman Luetkemeyer. The gentleman's time has expired.
    With that, we go to the gentleman from Georgia. The 
distinguished Mr. Scott is recognized for 5 minutes.
    Mr. Scott. Thank you very much, Chairman. This is a very 
important and very timely, timely hearing. And I have been 
sitting here and I have been very impressed by the diversity of 
thought on this most pressing of financial services industry.
    The CFPB represents the interests and the protections of 
over 330 million Americans. They cover the entire waterfront of 
our financial services system. It is the greatest financial 
service system in the world, but it is a very complex system. 
It is a very diversified system.
    Now, the CFPB has done some great things, no question about 
that, but here is the situation. The CFPB has become a 
political fire pit. Now, let me explain what I mean. And I hear 
Mr. Shelton who brought some excellent points, but here, we 
have a CFPB that is constructed to shift and sway with 
political winds. All of what Mr. Shelton was so grateful for 
occurred when the sole director reported to and was authorized 
by President Barack Obama, but he is no longer President. And 
so we have another President. And they have another sole 
director that is coming in and trying to erase everything that 
the previous Administration did. That is why we are in the fix 
we are in. And that is why when we worked hard to put the CFPB 
together, we did it as a commission for a reason: So it 
wouldn't be subjected to this every 4 years. That 
Administration comes in, changes what it does.
    Here is a headline my staff just handed me, and it just 
came over from the Associated Press: Mulvaney disbands Consumer 
Advisory Board. The only simple thing there. That is gone. 
There has been a lessening of the fair housing; changes made.
    So here is my point: We worked hard to put this together, 
this commission, and let me just say, Elizabeth Warren, the 
President, Barney Frank, all of us here, most of us, all of us 
here for sure, worked on this, passed it out as a commission. 
But when it got over in the Senate, something happened. That 
was, in my estimation--and even Barney Frank came back and 
said, man, this is deceitful what they have done, they changed 
this. And you know what happened? They never even had the 
courtesy or the decency in the Senate to bring it back over 
here. They passed it at that. But President Obama is not going 
to be President for life. It changes, and so we have a measure 
that is bipartisan.
    Let me just tell you, let's suppose the Securities and 
Exchange Commission wasn't a commission or the Commodities and 
Futures and Trading Commission wasn't a commission. Look, if 
you want stability, if you want accountability, that has to 
come from the entity that birthed it. We did in Congress. We 
must in Congress reclaim our position of responsibility in 
bringing that accountability.
    And so we have a bill I want to mention. It is House 
Resolution 5266. Now, we all can come together and figure this 
out with this piece of legislation and do it the way it should 
have been in the first place and make it a commission with 
direct responsibility, shared responsibility and authority with 
the Executive branch and us, but the buck will stop here where 
it was born.
    Chairman Luetkemeyer. The gentleman's time has expired, and 
we appreciate his eloquence.
    With that, we go to the gentleman from Oklahoma. Mr. Lucas 
is recognized for 5 minutes.
    Mr. Lucas. Thank you, Mr. Chairman.
    If I could, I would like to, with our witnesses, turn back 
to the issues I hear back at home. And, with this, I would like 
to begin with you, Mr. Hunt.
    I hear frustrations from our bank and credit union folks 
that multiple regulators are in their offices asking the same 
questions. And this has the appearance of a lack of 
coordination and redundancy.
    Could you share with us what you hear from your members 
with respect to regulatory coordination? And do you think more 
can be done to improve the communication or, at the very least, 
try to reduce some of the duplication of effort?
    Mr. Hunt. So thank you very much for the question.
    I will tell you, unfortunately, there is or there has not 
been any regulatory coordination. I do believe, in the last 
couple of years, each of the agencies has been trying to 
justify their existence, trying to prove their value.
    I will give you a perfect example under cross-selling. The 
OCC and the CFPB and the FDIC took upon themselves, rightly so, 
to go to our banks and examine cross-selling practices. I 
understand that. It was very important. It was something that 
needed to be done.
    However, at several of our banks, you would have the OCC 
and the CFPB in the bank at the same time asking sometimes for 
the same identical documents. Sometimes one of the agencies 
would hear what the other agency wanted, ask for the same 
information, and said, ``We need more than that.'' That is 
absurd. There is no reason you can't have one regulator in 
there supervising us at all times. And I am hoping, under the 
new heads of the agencies, that is something they will address 
quickly.
    Mr. Lucas. Follow up on that, if I could, Ms. Prochaska.
    I believe your report included a little bit about the CFPB 
in particular duplicating the activities of the other agencies. 
Can you describe some of your findings and ways in which the 
Bureau might improve on that duplication?
    Ms. Prochaska. Yes. Thank you so much for the question, Mr. 
Lucas.
    To echo Richard's point, I think we get a lot of feedback 
from bankers that there is inconsistent guidance within the 
agency, different standards. So that can be incredibly 
confusing, especially from an examiner level. And then one 
note, at least--actually, two examples, one of which being the 
small dollar rule. As we know, the OCC and the FDIC eradicated 
the deposit advance product back in 2013 with their guidance. 
The OCC has now repealed that guidance, and we hope that the 
FDIC will follow suit.
    But then the CFPB has their small dollar rule hanging out 
there as well. And so then that creates confusion in the 
marketplace. When, as Mr. Hunt mentioned earlier, according to 
the Federal Reserve, 40 percent of the country can't foot an 
emergency $400 expense, that, to me, is a travesty. And the 
fact that there still is going to be that demand, even if there 
isn't the small dollar loans out there. So we need to be able 
to get consumers into those small dollar loans.
    Another piece of duplication that I think has been a little 
bit frustrating for industry both in banks and in online 
lenders and other innovative companies is the confusion around 
no action letters and who is minding the store when it comes to 
innovation? Is there going to be an OCC fintech charter? Is the 
FDIC going to get into the space. So those are two things that 
have been very confusing.
    Mr. Lucas. Mr. Whitaker, in your testimony, you also 
mention whether there might be some duplication by the Bureau 
when it comes to HMDA disclosures.
    If someone were to do an analysis to the rule surrounding 
HMDA, do you, as a community banker, manager think that the 
analysis would find significant duplication between CFPB and 
the other agencies?
    Mr. Whitaker. What we have seen is the trickle down of CFPB 
guidelines trickling down into the other agencies. While they 
are not always applicable to a financial institution of my 
size, I am often held to the standard of larger institutions 
because of that trickle-down effect.
    Mr. Lucas. Mr. Whitaker, one last question to you. And 
there is lots of discussion in different quarters about the 
idea potentially on the table of establishing an independent 
inspector general at CFPB.
    As a regulated entity of CFPB, do you have any sense of how 
an inspector general would affect institutions like yours when 
interacting with the Bureau?
    Mr. Whitaker. I think it would add stability. That is the 
number one thing. It adds accountability to the CFPB so that 
perhaps we don't have the trickle down, and the rules stay on 
the levels and platforms they were intended to stay when the 
CFPB was created out of congressional law.
    I think ultimately you have to have that accountability. I 
have internal auditors. I have external auditors. I have State 
regulators. I have the Federal Reserve as my primary 
regulators. And it adds accountability. And I think you have to 
have the inspector general to run those audits for the CFPB 
just for that same checks-and-balance system.
    Mr. Lucas. One last thought, Mr. Chairman, if you will 
tolerate me. Being one of those folks who was here for the 
conference committee process on Dodd-Frank, I would simply note 
to my colleagues everything in Dodd-Frank has worked exactly 
the way I think the authors intended at the time. None of this 
has been accidental.
    I yield back, Mr. Chairman.
    Chairman Luetkemeyer. The gentleman's time has expired.
    With that, we go to the gentlelady from New York. Ms. 
Velazquez is recognized for 5 minutes.
    Ms. Velazquez. Thank you, Mr. Chairman.
    Mr. Shelton, whenever Republicans talk about the need to 
structurally reform the CFPB to make it more accountable, I 
always like to remind people of where we have come from. The 
American consumers lost $19.2 trillion in wealth, $3.4 trillion 
in retirement money.
    So can you describe the factors that led to the 2008 
financial crisis and why it was so important to create the 
strong consumer watchdog in the first place?
    Mr. Shelton. Thank you very much, Congresswoman, for that 
question.
    The issues and challenges that we had at that time were we 
had so many Americans, and disproportionately racial and ethnic 
minority Americans, women-owned households, the elderly, that 
were actually being abused by many of the financial services 
institutions because of a lack of protection and regulation. 
Many of them were approached by not only the lending 
institution themselves but, in many cases, actually by brokers 
that actually came forward offering them great deals to address 
other challenges happening at that time.
    That was also a time in which fuel costs were surging. And 
as such, we had a number of Americans that were on fixed 
incomes that had paid off their mortgages who were approached 
by brokers telling them that they could refinance their homes 
to put in everything from systems to provide more insulation, 
windows, new heating systems, and the like.
    I sat next to a woman at this very table whose husband had 
worked hard his entire life for a rather large tire company in 
Ohio. He had retired with a pension and with other retirement 
funds and Social Security. He passed away. Fuel prices began to 
go up. She needed to do something about the home in which she 
lived in, that she owned.
    What they brought her was a mortgage that started out at 
about $25,000 as a loan. But before things were over, it had 
compounded to over $100,000 in something we call an exploding 
ARM. Let me just say the sadness of those problems went far 
beyond her just losing her home. The day that the marshals came 
to take her home--her furniture out on the side of the street. 
One of the other things her husband left behind was an old 
shotgun. Sadly, she used that shotgun on herself as well.
    That was simply one indication of how extraordinary those 
circumstances were and how clear it was to us that the 
protections that everyday American consumers need in the 
financial services arena are not there.
    Ms. Velazquez. Thank you.
    Mr. Shelton. There is so much more that needs to be done.
    Ms. Velazquez. Thank you.
    Mr. Shelton, when OMB Director Mulvaney was here in April, 
I questioned him on his dual role as head of OMB and the CFPB. 
During our exchange, he did nothing to reduce my concern that 
his dual roles present a conflict of interest and potentially 
undermines the independence of the Bureau.
    Do you share my concerns?
    Mr. Shelton. Absolutely. I know what the job is like at the 
CFPB. I have had an opportunity to spend much time with Rich 
Cordray, our former Director. We have been in and out of that 
office addressing the many issues of the communities that the 
NAACP serves. It is very clear to me: If one person can handle 
that job well, it is extraordinary. But suggesting a man can 
run two major U.S. agencies at the same time is rather 
concerning.
    Ms. Velazquez. And we all know that Mulvaney's mission is 
to basically deconstruct the CFPB. They cannot eliminate it. 
They will gut it.
    Mr. Shelton. Exactly.
    Ms. Velazquez. And today's announcement is a clear example 
of that.
    So according to--well, yes, we heard, and I echo the 
concerns expressed by Mr. Scott regarding the announcement of 
Mr. Mulvaney today.
    Mr. Day, in your testimony, you talk about the Bureau 
needing to provide more regulatory guidance in the form of 
examples of what will be permissible and impermissible business 
practices.
    Could you explain a situation in which more examples from 
the Bureau will be helpful?
    Mr. Day. Thank you for the question.
    Yes, the example again concerning TRID when we were 
involved with, we had--and I would say that the department was 
very forthcoming with assisting the--giving information. But 
having clarity as far as the examples, we have an industry that 
wants to do the right thing. But, it is like getting a speed 
limit guidance to understand where directions should you follow 
or a street map. If we had more information on this is how the 
disclosure should read on a more complicated situation, be it a 
construction loan, be it a VA loan, an FHA loan, it would be 
helpful for our members to then have that and to be able to 
share that information with the consumers. So that is all we 
are really looking for is to have better information that we 
can best serve the consumer as far as the information we share.
    Ms. Velazquez. So that is not an argument to say that the 
CFPB should be restructured in a way that will be unable to 
provide the protections to consumers.
    Mr. Day. Certainly we support the department and what--and 
the Bureau in what they have done relative to consumers, 
because we share that concern. And so we are looking forward to 
just having that clear guidance which will be necessary for our 
operations.
    Ms. Velazquez. I yield back, Mr. Chairman.
    Chairman Luetkemeyer. The gentlelady yields back.
    With that, we go to Mr. Ross. The gentleman from Florida is 
recognized for 5 minutes.
    Mr. Ross. Thank you, Chairman. And I thank the panel for 
being here.
    All of us here have experienced the adage that elections 
have consequences, and to the victor goes the spoils, and 
usually at the detriment of the electorate. And I think this 
example that we have talked about today with a single Director 
of CFPB is a shining example of that; as has been explained by 
my colleague Mr. Scott so well, that it has been not only the 
desire of this committee but the sense of this House that the 
CFPB be a commission, that no one person, especially with no 
accountability to Congress or anyone else, should be in this 
position, not only for purposes of a denial of due process but 
also for protection of the consumers.
    And so my concern has been, and why I filed H.R. 5266, 
which creates a commission, a five-member commission, is that 
we need to have continuity and stability in the decisionmaking 
process and the rule-promulgation process of the CFPB.
    As members of this panel have discussed today, there is a 
sense of uncertainty because of whomever is in power will 
appoint whomever they want to do whatever is necessary to 
implement their desires, and then the next Administration who 
is contrary to that will appoint something just differently. 
And as a result, we have seen an investment in capital that 
would otherwise be used to help the commerce of this country to 
now be tied up in the regulatory compliance arena.
    And so my first question to Mr. Hunt, this pendulum swing, 
what effect does it have on consumers and small businesses from 
a banking perspective?
    Mr. Hunt. Sure.
    It has tremendous effect on everything they do, every 
financial product, every loan they make. What are new rules? 
What are the new regulations every single time?
    I actually am going to agree with Mr. Shelton here for a 
second. He said it is hard for one man to run the agency. One 
person. He is correct. You can't have one person with all this 
power under them to run this agency, this Bureau. So we concur 
it should be a five-person commission from day one.
    It is not just the rules but examination mentality, 
enforcement mentality. One person gets to get up out of bed 
every day with all that power.
    You are having a great debate right now. There is no debate 
at the Bureau about--
    Mr. Ross. And can you estimate how much capital is tied up 
in trying to just being able to anticipate the uncertainty of 
who may be next Director of CFPB without any continuity?
    Mr. Hunt. Sure.
    S&P had an estimate that came out of about $30 billion in 
the United States that is tied up in complying with all the 
different rules and regulations.
    Mr. Ross. That could be used to oil the wheels of commerce 
and allow for innovators to start news businesses and expand 
and employ more people and grow this economy.
    Now, my concern about one person. Look, I know my 
limitations, and I think everybody knows, to some degree, their 
limitations. And it is why we rely on others to assist us in 
performing our obligations. And so a commission might have 
certain expertise in one area different from another 
commissioner, different from another commissioner that would 
allow even a safety net so that those commissioners can oversee 
that what one may have missed in their expertise would be found 
in their expertise.
    So my concern is, would not there be a greater sense of 
accountability and maybe even a better sense of innovation for 
consumer protections if you have a commission of five as 
opposed to a person of one?
    Mr. Shelton--
    Mr. Shelton. Oh, I would be delighted. Thank you so much 
for giving me the opportunity to respond to that.
    Our biggest concern is the lack of flexibility. Having five 
people trying to make decisions as we play a game of whack-a-
mole that we--
    Mr. Ross. But we do that in the SEC.
    Mr. Shelton. May I finish?
    Mr. Ross. We do it in FSOC. We do it in all types of--
    Mr. Shelton. And we also have the President--
    Mr. Ross. We do it with the Supreme Court.
    Mr. Shelton. We have an Attorney General that runs an 
incredible agency. We have many single people that run 
Government agencies throughout this country that do an 
excellent job. A commission under these circumstances, in our 
opinion, would create the same kind of problems we had before.
    Mr. Ross. But it would not abridge the rights of the 
individuals and consumers.
    Mr. Shelton. --lending products that pop up looking just 
like the last lending product with a different name and expect 
the commission to respond as flexibly as it needs to be, as 
quickly to respond to these kinds of problems is exactly the 
situation we found ourselves in prior to the 2008 economic 
downturn.
    Mr. Ross. I appreciate that, Mr. Shelton.
    Mr. Hunt, do you want to respond?
    Mr. Hunt. I do.
    The Attorney General was appointed by the President, can be 
fired by the President, fired at will. So that is not an 
independent agency.
    Mr. Ross. And there's congressional oversight there too--
    Mr. Hunt. Yes. The CFTC, the NCUA. Remember, the NCUA is a 
commission of three. Just three. So they can operate with 
three. We are looking for five. Maybe we go down to three. I 
don't know.
    But also the FDIC, the FCC (Federal Communications 
Commission), even the Consumer Product Safety Commission, a 
commission the Bureau was modeled after, a commission.
    Mr. Ross. Correct.
    I see my time is up. I yield back.
    Chairman Luetkemeyer. The gentleman yields back.
    With that, we go to the gentleman from New York.
    Mr. Meeks is recognized for 5 minutes.
    Mr. Meeks. Thank you, Mr. Chairman.
    And I thank you, each and every one of you, for your 
testimony. And I think that, just for the record, what I want 
to do is to make sure--I will start with Mr. Day and just go 
down the line.
    Do you agree that there is a need for the CFPB?
    Mr. Day. I do.
    Mr. Meeks. Mr. Hunt?
    Mr. Hunt. We do indeed.
    Mr. Meeks. Ms. Prochaska?
    Ms. Prochaska. We do.
    Mr. Meeks. Mr. Shelton?
    Mr. Shelton. Yes, sir.
    Mr. Meeks. Mr. Whitaker?
    Mr. Whitaker. Yes. It doesn't apply to my community banks, 
but I do think we have a need for it in the country, yes.
    Mr. Meeks. Right. Because what happened after--
    Mr. Whitaker. Just because of my size. Just because of my 
asset size. Someday maybe.
    Mr. Meeks. And I think I want to subscribe to some of the 
things that Mr. Scott said and the reason why we worked hard 
and created the CFPB, because there was a need. We didn't have 
one, and we looked at it. And we saw that there were, in fact, 
individuals who could not deal with and comprehend a lot of the 
complicated issues that come to consumers. Because we would 
agree that financial services, and at times, I know even here 
in Washington, we have members on the committee who have not 
been in the business of financial services; they don't 
understand. So we need somebody at least that can give people 
advice on what is or is not predatory because I think we would 
also agree that certain individuals, individuals--and this is 
whether you are Democratic or Republican or not, you don't 
understand a product, and you can be taken advantage of. You 
can be gouged. And I think Mr. Shelton indicated that it seemed 
to be particularly prevalent with people of color where they 
were gouged. And I think that was clear when we talked about 
the financial crisis that we had and the mortgages. It was 
clear that a lot of the high mortgages were steered toward 
people of color when people had equal credit ratings.
    So, if we can agree, and I think we can all agree, in the 
history of our country, there has been redlining and things of 
that nature. Will everybody agree with that? So there have been 
some bad actions that have taken place that I don't think that 
anybody that has a reputable bank or credit union or financial 
institution, you want to get rid of the bad guys so that you 
can continue to do your business. I think the chamber would be 
in accord with that.
    Ms. Prochaska. Absolutely.
    Mr. Meeks. Is that correct?
    Ms. Prochaska. Absolutely.
    Mr. Meeks. And I know here the argument that we are having 
now, whether or not we are going to--whether it is a single 
person or a commission, I think Mr. Scott was right in that, 
when it initially left the House--I worked on it--we did talk 
about a commission at the time so that we did not get into the 
kinds of headaches and the problems that we are having now so 
that it swings--the pendulum swings one way or the other so 
drastically as the result of who is in power, because for me 
the Consumer Financial Protection Bureau is to protect the 
American citizen, and it shouldn't be part of the politics. But 
it is difficult.
    And then I think that the problem that we have and how we 
are in this now, when we look at--well, Mr. Hunt, I think you 
just said in your testimony, we just spent a lot of money 
complying with this new Government agency, complying with the 
rules. The last thing we want to do is spend the same amount of 
money going 180 degrees in the opposite direction, which I 
think gives everybody a problem, because what you want to do 
is--really is--we may have some arguments whether or not a rule 
is too stringent or too loose, et cetera. But I think that it 
will benefit everyone if you just know what the rule is so that 
you can comply by the rule. And, so those arguments are going 
to go back and forth. But if we know what the rule is, then I 
think that makes it easier for everybody. And it is easier to 
give the consumer the advice because we know what those rules 
are. So we got to set those rules. And I think that is what we 
are trying to do other than--because what we see now, rules 
were set. Whether you like commission, whether you not, or an 
individual person, rules had been set. That is what Mr. Hunt 
had said. And to apply by those rules, you spent a lot of 
money. And now we want to change the rules.
    Mr. Hunt. Please don't mistake what I meant by that. There 
are some rules that need to be turned 180 degrees but not every 
4 years by a new Administration.
    Mr. Meeks. Right. But there is going to be some debates on 
that already. You look at sports. There are the rules. When you 
play the games, some people say that shouldn't be the rule. 
They want to change the rules. But the game--the rules are the 
rules, and you got to abide by the rules, right?
    That is what this thing is all about. And I think that what 
Mr. Shelton was talking about was that we have some rules; 
let's abide by the rules because if you get rid of the rules, 
guess who gets hurt? What did you say it was? The 330 million 
Americans that are dependent upon the CFPB. If we don't abide 
by rules that have certain rules, 330 million American 
citizens, American consumers, are the ones that will get hurt. 
That is who I think that we should all be here to protect. They 
are our constituents.
    I yield back.
    Chairman Luetkemeyer. The gentleman's time has expired.
    With that, we go to the gentleman from North Carolina, Mr. 
Pittenger. He is recognized for 5 minutes.
    Mr. Pittenger. Thank you, Mr. Chairman.
    And thanks to each of you for your willingness to come and 
offer your advice.
    I would like to say that my concerns related to the CFPB in 
its inception, that they have essentially pushed the envelope 
on the enforcement of regulatory matters, which, in many cases, 
has done more harm than good, in any opinion. Director 
Mulvaney, I believe, has done a very good job in addressing 
many of these matters, but there is a lot of work left to be 
done.
    In that light, Mr. Hunt, I would like to ask you what can 
be done at this time by regulators to encourage banks to offer 
short-term credit to our constituents?
    Mr. Hunt. Go back and look at the small dollar rule offered 
by the Bureau. First off, as Ms. Larson mentioned earlier, A, 
the OCC has removed its guidance. That is terrific. I am 
hoping, under Ms. McWilliams, the FDIC will do the same thing. 
We had six of our banking institutions offering short-term 
liquidity needs. Once our Federal Government did that through 
the OCC and FDIC, all six exited that business. Now, the OCC is 
trying to get our banks back in because we have a much better 
product than payday lending trying to help people meet their 
financial emergency needs.
    The CFPB needs to craft a rule that does not require banks 
to underwrite a $500 loan as they would a $500,000 mortgage. 
That is absurd to do that.
    Allow us the flexibility to work with our customers. The 
deposit advance product, sir, was one of the most favorably 
rated products we had at the bank. Once it was removed from the 
bank, guess what happened? Complaints at the CFPB rose, and the 
CFPB then got on us for having more complaints. It was a 
circular firing squad. So we need to be in this arena. We need 
to do so very quickly.
    Mr. Pittenger. Thank you.
    Mr. Day, I am curious about something that you highlighted 
in your testimony about the Bureau's third-party service 
provider bulletin. You mentioned that some small businesses 
were pushed to exit the market because of confusion among the 
lenders whether they met the Bureau's service provider 
requirements.
    What exactly were lenders concerned about which led them to 
end these business relationships?
    Mr. Day. Thank you for the question.
    And, actually, that was part of the confusion in our 
request for improving on as far as guidance because the lenders 
were given just a three-page edict of ``you have to be 
concerned'' but not a lot of guidance of, what should they be 
concerned about?
    So the natural recourse of that is to be very restrictive. 
And in doing that, one, as I mentioned earlier, it eliminated 
consumer choice as to being able to select a provider for title 
insurance because they were no longer on an approved lenders 
list. It also made it difficult for those who were lenders who 
came up with creating standards to the same degree for an 
entity that was doing 2,000 loans a month for someone who does 
two or three loans. And we think there is an appropriateness 
for scalability to be able to say this is a provider that I 
have a notice and comfort with that I should be able to allow 
that provider to service and not have to put them under the 
same constraints and restrictions and all of the expense to 
meet the guidelines, many of them either merged out or just 
closed their businesses because they could no longer engage in 
that expense.
    Mr. Pittenger. Very good. Thank you.
    Mr. Hunt, I am concerned about the effects of section 1071, 
which requires HMDA-like reporting for business loans, and what 
that will have on the small business community and the 
availability of capital.
    What are your thoughts on the timing of future rulemaking 
mandate about section 1071? And in your view, is it even 
possible to construct a rule that will not impede business 
lending and stifle economic growth?
    Mr. Hunt. Yes, sir. We are very concerned about this rule 
that may be coming down from the Bureau within, I don't know, 
the next 4 to 5 years. Who knows.
    I think this is a tough one. The Bureau has been working on 
developing some type of rule for the last 6 years under 
Director Cordray, and they could not reach a favorable 
conclusion as well.
    A small business loan is completely night-and-day different 
than a mortgage loan. A mortgage loan is actually quite simple. 
But a small business loan is very complex determining the 
definition of a small business, how many people own the small 
business, and the different types of loans as well. We will 
continue working with the Bureau. But I think, sir, at the end 
of the day, this is going to be tricky. What I don't want to 
see happen is it to become so complex and erroneous that our 
banks exit the small business area.
    Mr. Pittenger. Thank you.
    One last quick question. I would just like to know, do 
enforcement actions provide companies with enough information 
to know how to operate within the law? How do these companies 
respond to an enforcement action against another company in 
your industry? Mr. Day.
    Mr. Day. Yes. I am sorry. Thank you.
    No. Unfortunately, a lot of these enforcement actions are 
negotiated resolutions. They are also fact-specific. So 
although they may have reached a result, it is hard to glean 
guidance from that to really understand that, how do I conduct 
my business so as to not be subject to a future enforcement 
action?
    Mr. Pittenger. Thank you.
    My time is expired.
    Chairman Luetkemeyer. The gentleman's time has expired.
    With that, we go to the gentleman from Texas.
    Mr. Green is recognized for 5 minutes.
    Mr. Green. Thank you, Mr. Chairman. I thank the Ranking 
Member as well. I welcome the witnesses.
    Mr. Chairman, it appears to me that Mr. Mulvaney has 
indicated that he would like to ensure that the Director 
answers to the President in the exercise of executive 
authority, the Director being the Director of the CFPB, 
Consumer Financial Protection Bureau.
    The law currently, as codified, allows the President to 
remove the Director of the CFPB for cause. For cause. And I 
must tell you that I am adamantly opposed to the President who 
would ban the LGBTQ from the military with a tweet. The same 
President who would ban Muslims from this country. The same 
President who refers to professional athletes as SOBs, meaning 
their mothers are dogs. The same President who found that there 
was some very fine people among those at Charlottesville who 
were saying Jews will not replace us, blood and soil. One can 
only imagine if one of them happens to be a banker how he would 
treat a loan from a person of African ancestry or a Jewish 
person.
    The same President who says that countries in Africa refers 
to some of them as s-hole countries. The same President who 
would fire the current AG, but for his belief that it would 
impact his future; has already fired one AG. I am adamantly 
opposed to this President having the ability to fire the 
Director of the CFPB at will.
    This President has already demonstrated that he is 
including, integrating, if you will, his bigotry into policy. 
This President, if he had complete authority over the CFPB, 
given the way he is treating the Justice Department, one can 
only imagine what he would require of the CFPB. I am adamantly, 
absolutely, totally, and completely opposed to this President 
having that kind of authority to interfere with the 
independence of the CFPB.
    Now, let's talk about discrimination. Everybody says: I am 
opposed to discrimination. I don't think anybody ought to be 
discriminated against. As a matter of fact, let's do this 
quickly, if you think that people should be discriminated 
against in lending, raise your hand, please.
    Let the record reflect that no one has raised their hand.
    Now the question becomes, do you believe that 
discrimination in lending exists? If you believe that it 
exists, raise your hand, please.
    Only one person on the panel--let the record reflect that 
of the persons on this panel, but one person has raised his or 
her hand indicating a belief that discrimination exists in 
banking.
    For fear that someone may have misunderstood my question, 
allow me to ask it again politely. Sirs and ma'am, do you 
believe that discrimination exists in lending in banking 
institutions? If you do, would you kindly raise your hand.
    Mr. Hunt. I don't think it is a yes-or-no question.
    Mr. Green. Again, there is only one hand. And we have one 
person who believes that it is not a yes-or-no question as to 
whether or not discrimination exists in lending in this country 
today as I speak.
    The empirical evidence shows it. Testing has revealed it. 
It exists, and we know it. And what we do is deny the existence 
so that we don't have to do anything about it. And for 
prominent persons such as yourselves to, by and through your 
testimony, indicate that you don't believe that invidious 
discrimination exists in banking--maybe I didn't use 
``invidious.'' Permit me to ask again.
    Do you believe that invidious, harmful--that is what 
``invidious'' means--harmful discrimination exists in lending 
in the United States of America today? If you do, raise your 
hand.
    Let the record show that Mr. Shelton is the only person who 
has raised his hand.
    Ms. Prochaska. I will second Mr. Hunt. I don't think it is 
a yes-or-no question.
    Mr. Green. You don't think it is a yes-or-no answer.
    We have come a long way. But, my friends, we have a long 
way to go because you control what happens. And if you control 
what happens, you control what happens, and you sincerely 
believe that there is no discrimination in lending, we have 
come a long way, but we have a long way to go.
    I will yield back the balance of my time because there is 
not enough time to go into the behavior that has manifested 
itself today in this testimony. It is a sad day for this House.
    I yield back.
    Chairman Luetkemeyer. The gentleman's time has expired.
    With that, we go to the gentleman from Kentucky, Mr. Barr.
    Mr. Barr. Thank you, Mr. Chairman.
    And since my colleague did not offer the opportunity for 
Mr. Hunt to offer an explanation and testimony, I will provide 
that to him right now.
    Mr. Hunt. Thank you very much for that opportunity to 
respond.
    I will tell you, our banks move Heaven and Earth to make 
sure there is no discrimination, period. We do not support it. 
Obviously, we work with the regulators all the time through 
examinations, through the ECOA, through the Fair Housing Act. 
On and on again, we do not--we totally--condone any type of 
discrimination at our banks. As I mentioned earlier, I hope the 
only profile we look at is the credit profile, that and that 
alone.
    Mr. Barr. Mr. Whitaker, again, welcome to the committee. 
And as a constituent, I am honored to have you here in front of 
us. And as I said in my introduction of you, I have had the 
privilege of meeting your father. I had the privilege of 
meeting your late grandfather. And they were pillars of our 
community. And as I said, we are so grateful for the 
philanthropy, not just the business and banking services that 
you provided to the consumers of central and eastern Kentucky 
all these many years, protecting consumers by offering them 
opportunities of credit and giving them the American Dream, but 
also, sir, for the charitable work that you and so many in your 
industry offer to your communities.
    The YMCA that you built in Hamburg and Lexington, the 
Whitaker Bankshot, the scholarships that your institution has 
provided for years and years and years. So not just protecting 
consumers but lifting people up. Lifting people up. Thank you 
to you and your industry for helping people. That is the 
business you are in. And I know you have learned humility from 
your dad and your grandfather. I know that about your family.
    But I want you to just put that humility aside for a 
minute. And I want to just confirm what I read in your written 
testimony was that, when your grandfather started that bank in 
1978, he started it with about $59 million in assets. Is that 
about right?
    Mr. Whitaker. That is correct.
    Mr. Barr. And today your bank has grown to $1.7 billion in 
assets. Is that correct?
    Mr. Whitaker. That is correct.
    Mr. Barr. So, by my reading, in over about 40 years, you 
have grown about 30 times. Is that about right?
    Mr. Whitaker. That is correct.
    Mr. Barr. You are still a relatively small institution 
relative to the banking sector. You are a community bank still. 
But let me just ask you this, asking you to set that 
instinctual humility aside. How did you grow? How did your bank 
grow?
    Mr. Whitaker. We grew primarily through acquisition and 
product development and through integrity and our reputation of 
treating people fairly and honestly.
    Mr. Barr. Yes. And so you picked up customers because you 
offer good service, because you offered affordable products, 
because you provided folks with opportunity that they didn't 
have before.
    Let me ask you this: What would happen if one of your 
competitors didn't do that? What would happen if one of your 
competitors mistreated or discriminated against a customer? 
What would happen then?
    Mr. Whitaker. To your question, Congressman, that is why I 
always say that community banks like mine, we function without 
regulation because our reputation is our regulation. And if I 
had a competitor that treated people unfairly, my company would 
grow.
    Mr. Barr. And so you grew by offering good services, by 
serving your customers well, and by not--and by performing with 
integrity.
    Let me ask you this: Does it help or hurt consumers when 
banks consolidate? When there are fewer community banks, does 
that help or hurt customers?
    Mr. Whitaker. That hurts our customers because it makes 
credit less accessible, especially in our rural communities 
where, if you close down the only bank in town, it is very 
challenging for them to obtain the credit they need to help 
recover that economic condition in those communities.
    Mr. Barr. And so that just counsels in favor of exactly 
what we are saying. Reform the CFPB, give you all more 
flexibility, encourage greater competition and choice, and 
guess what the result is? Better consumer protection.
    Mr. Whitaker, as you know, and you pointed out, the Bureau 
is not subject to the congressional appropriations process. And 
you have supported putting it on the congressional 
appropriations process. I introduced a bill, H.R. 2553, the 
Taking Account of Bureaucrats' Spending Act, which would 
subject the Bureau to the congressional appropriations process.
    Let me quickly go back to Mr. Hunt.
    Mr. Hunt, you testified that the current Bureau receives 
direct funding from the Federal Reserve at the request of the 
Director capped at 12 percent of the Federal Reserve's 
operating expenses. And you said, as long as the budget request 
falls below this cap, the budget request cannot be denied.
    Mr. Hunt, does that mean that Acting Director Mulvaney has 
the legal discretion to make a budget request well below its 
budget today?
    Mr. Hunt. He can, and he has.
    Mr. Barr. And so I would like to finish with Mr. Shelton.
    Mr. Shelton, would you or the NAACP have a grievance if 
Acting Director Mulvaney did what is in his legal authority to 
do, which is request a much lower budget?
    Mr. Shelton. I would say that we would want to make sure 
that the budget that is being requested is one that would 
actually fulfill the task and needs of the--
    Mr. Barr. And so Mr. Shelton--
    Mr. Shelton. --in the communities we serve.
    Mr. Barr. --this is the whole point.
    Mr. Shelton. --demonstration--
    Mr. Barr. Why wouldn't you want Congress to have the 
authority to appropriate?
    You have no--and your organization has no input into the 
process. If you have a grievance, we want your grievance to be 
recognized by your elected Representatives in Congress.
    My time has expired, and I yield back.
    Mr. Shelton. And, Mr. Chairman, if I might respond to the 
question he left on the table with the time that is not left 
for him at this point.
    We had no problems whatsoever with the previous CFPB 
Director in getting our points, our concerns, and the issues of 
our communities heard by that very important agency. And as a 
result, we were able to get much done to prevent the kinds of 
discrimination that led to the economic downturn and the 
discriminatory impact in the African American community and--
    Chairman Luetkemeyer. We are going to allow a little bit 
longer to go here because we are running out of folks here, and 
we do have some time this afternoon.
    So, Mr. Barr, if you would like another minute or two, I 
see--
    Mr. Shelton. Well, we could go for a drink.
    Mr. Barr. Mr. Shelton--
    Chairman Luetkemeyer. OK. Mr. Barr, you are recognized to 
continue.
    Mr. Barr. Very quickly, Mr. Shelton.
    So I recognize we have a difference of opinion on some of 
these things. But I do think we have an agreement here. And the 
agreement is that you would have--the point is you would have a 
grievance with Acting Director Mulvaney. And you have expressed 
some of those grievances today.
    And my only point is this. Let's go back to the Founding 
Fathers, the two of us together, and look at what James Madison 
said. James Madison wrote in Federalist No. 58 that the power 
of the purse may, in fact, be regarded as the most complete and 
effectual weapon with which any constitution can arm the 
immediate representatives of the people for obtaining a redress 
of every grievance and for carrying into effect every just and 
salutatory measure. And so the point is this: I want you, as a 
citizen of the United States, to be able to hold this Congress 
accountable for this grievance that you have. Under the current 
law, you cannot do that because the statute says you have no 
say in your Government.
    And I yield back.
    Mr. Clay. Would the gentleman yield before he yields his 
time?
    Mr. Barr, could I engage you just--
    Chairman Luetkemeyer. You have 1 minute left, guys.
    Mr. Clay. Thank you.
    Just to bring your attention. You talk about the power of 
the purse string. You talk about antidiscrimination measures.
    When you look at how much wealth was stripped from the 
minority communities during the Great Recession--I am from 
Missouri. And in Missouri, we have a saying: You have to show 
us.
    Anybody on this panel that would not answer Mr. Green's 
question, all I ask for is the data to show me that you are 
being fair, that you are being fair with your customer, that 
you actually can show me by ZIP Code, not by credit score, by 
ZIP Code, that you are lending into these ZIP Codes. And not 
tell me about credit scores. A lot of that is discretionary. 
And you know it, Mr. Hunt.
    But that is the point I raise to Mr. Barr.
    Look, the numbers tell it all.
    I see our time has expired.
    Chairman Luetkemeyer. The gentleman's time has expired.
    With that, we go to Mr. Tipton. He is recognized for the 
next 5 minutes. He is from Colorado. You may begin.
    Mr. Tipton. I thank the panel, and I appreciate you taking 
the time to be able to be here.
    Interesting listening to the conversation because I think 
there is a lot of common ground. Nobody is antiregulation. We 
just want to make sure that we have got sensible regulation 
that people can actually understand.
    I would like to actually go back. Mr. Hunt, if you speak to 
this just a little bit. My colleague Mr. Ross brought up the 
ultimate impact ultimately on consumers of overregulation--or 
regulation that can't really be understood and some of the 
costs associated with that.
    What are the real impacts ultimately on the ultimate 
consumer?
    Mr. Hunt. I think it is consumer choice, consumer financial 
product choices. There are only so many products that we will 
be able to offer to our consumer. So, when they need--short-
term liquidity needs or a mortgage, the rules set forth by the 
Bureau may be too draconian for us to stay in that business, so 
they have less choices to do it.
    Mr. Tipton. In some of the cases where you do stay, it is 
marginal. Does it increase the cost for the consumer?
    Mr. Hunt. Of course, it does. In Economics 101, if you 
drive the cost up in one, somebody has to feel the cost, 
whether it is higher interest rates or fees or whatnot.
    Mr. Tipton. So not having clarity and regulations, not 
understanding what the field is actually is hurting access to 
capital for the very people that you would like to be able to 
help.
    Mr. Hunt. Sir, we can handle bad news. What we don't like 
to talk about is uncertainty. Just tell us the clear rules of 
the road, and we can adjust.
    Mr. Tipton. Great.
    Now, when we go back, and we are looking at TRID right now, 
Mr. Day, you had spoken to this a little bit in your testimony. 
And when I looked at your written testimony, you noted that 
webinars were held to try and be able to give some clarity to 
the proposed rule that was coming out, but the Bureau staff 
reading the disclaimer stated this presentation does not 
represent legal interpretation, guidance, or advice from the 
Bureau. Did you say, why are we here?
    Mr. Day. Thank you for the point. It was exactly the--why 
we support the GUIDE Act in saying that it is very important to 
have guidance, but it needs to be guidance we can rely upon. We 
can't just have a conversation and then have our members go 
forward and then have a contrary result come back because, 
well, that really wasn't what we meant.
    And there have been a few examples where we have had these 
kinds of discussions with the Bureau, and they would go so far 
but then not continue it. And I think--I share with Mr. Hunt, 
we are an industry that is very willing to take guidance and to 
understand what the rules are that we need to follow. We just 
need that level of certainty which the GUIDE Act would provide 
to us in being able to not only have the guidance but be able 
to rely upon it.
    Mr. Tipton. Great.
    And I think that led, actually, to my question. You have 
spoken to that, the importance of being able to have actual 
clarity for you.
    And, Mr. Hunt, would you maybe like to be able speak to the 
importance of what the GUIDE Act, Mr. Duffy's bill, can 
actually achieve?
    Mr. Hunt. Yes. I think the overarching theme of the GUIDE 
Act, obviously, is to make sure that we know the rules of the 
road. It is one thing to issue a rule, but a rule could be 800 
pages long. We want to know what the Bureau was thinking at all 
times.
    I love the debate we are having today. We don't have that 
at the Bureau today. I don't think there is anything wrong with 
a five-person commission at 2 p.m. on a Wednesday saying why 
they brought out this rule; here is exactly what we are 
thinking; and here is why we are thinking, to bring more 
clarity to it. Right now, all the person has to do is get up 
and issue a press release, and it is over.
    Ms. Prochaska. Mr. Tipton, could I add to that really 
quickly?
    Mr. Tipton. You bet.
    Ms. Prochaska. I just wanted to tie something back to Mr. 
Meeks' point earlier about sports and how there are certain 
rules and regulations.
    What the Bureau has been doing for the past 6 years, 7 
years now, is calling a strike after the fact and not 
delineating what the actual strike box is and then moving the 
goalpost. So I am mixing metaphors now. But you know what I 
mean. There hasn't been clear delineation.
    Chairman Luetkemeyer. They are all sports, so you are OK.
    Ms. Prochaska. Yes. Exactly, right?
    So there haven't been clear delineations, and that is 
exactly our point. If there were clear regs that institutions 
could follow and clear guidance on how to actually implement 
them, we would think that is wonderful, and at least we will 
know how to meet that.
    The problem is when you do enforcement actions after the 
fact, the disparate impact, the auto cases are a perfect 
example. Not exactly knowing what the rules of the road are and 
then, on the aftermath, getting slapped on the wrist because of 
it.
    Mr. Tipton. Well, I know my colleague Mr. Williams will be 
more than happy to be able to cover some of the auto industry 
rules and regulations as well.
    Ms. Prochaska. Happy to chat any time.
    Mr. Tipton. He is a humble, small businessman.
    But I do appreciate you all taking time to be able to be 
here, and I do appreciate that concept of--I come from the 
small business world. And we had a regular review process in 
business and a very simple philosophy that if it isn't working, 
fix it. If you can't, stop doing it. Not a bad policy. And I 
think we are making some good moves and do applaud the efforts 
by Mr. Duffy with the GUIDE Act.
    And, with that, Mr. Chairman, I yield back.
    Chairman Luetkemeyer. The gentleman yields back.
    And, with that, the gentleman from Texas is also recognized 
now for 5 minutes. Mr. Williams.
    Mr. Williams. Thank you, Mr. Chairman.
    And thank you for holding today's hearing. While the 
regulatory relief package recently signed into law by President 
Trump is a major win for all America, work remains particularly 
concerning to CFPB reform. For too long, the CFPB has 
undertaken a mission to impose big Government, one-size-fits-
all policies with far-reaching implications for businesses and 
consumers. While I am glad Acting Director Mulvaney has begun 
to take steps to rein in this unaccountable Bureau, the burden 
falls on Congress to ensure that lasting reform occurs.
    Ms. Prochaska, I gather you are a baseball fan.
    You mentioned it.
    Ms. Prochaska. I sure am. I played softball for 10 years.
    Mr. Williams. First question. Should Pete Rose be in the 
Hall of Fame?
    Ms. Prochaska. I am a Padres fan.
    Mr. Williams. Let me get to more matters at hand.
    Acting Director Mulvaney recently appeared before this 
committee and offered his perspectives on how to best reform 
the CFPB. Among these reforms, Acting Director Mulvaney 
identified the CFPB through congressional appropriations as a 
way to successfully subject the CFPB to congressional 
oversight.
    So my question to you: Do you feel that subjecting the 
Bureau to true congressional oversight would impede the 
Bureau's ability to successfully carry out statutory consumer 
protection obligations?
    Ms. Prochaska. Absolutely not. I think that Mr. Barr made a 
very good point earlier. Earlier this year, Mr. Mulvaney 
actually did request zero dollars from the Fed. He indicated 
that, because he already had the money allocated in his budget, 
he was able to keep operations going. Theoretically, under law, 
he doesn't have to do that. He could ask for zero yet again and 
yet again, and that can go on for 5 years.
    So, although he is going to be asking for more money in the 
future, the fact that we don't have congressional oversight--
and I will reference again a poll that we conducted--66 percent 
of Americans said that actual checks and balances of 
appropriations are what we need to have over our Governmental 
agencies. Most people, when I go back home to California, don't 
understand what is going on in the regulatory State, and that 
is something that we need to have some purview over.
    Mr. Williams. Thank you.
    Mr. Hunt, one of the most concerning past actions of CFPB 
was their process for creating and implementing rulemakings. 
Past rulemakings have lacked robust industry input, adherence 
to formal rulemaking processes, and a flexible implementation 
process following the issuance of a final rule.
    So, without clear, predictable regulations, the Bureau 
cannot issue proper guidance to ensure compliance across 
countless industries. The CFPB's practice of issuing rules and 
worrying about implementation later has caused damaging effects 
for the consumer and businesses alike.
    So how did the CFPB fall short in previous rulemakings? And 
what must be done to prevent the shortcomings in the future?
    Mr. Hunt. Yes. If I could point to one specific, I think it 
would be the TILA-RESPA implementation. We were not opposed to 
the rule. We understood the rule. But they basically want us to 
implement it overnight. And they did not understand what takes 
place in the banking industry. I would have to guess at the 
Bureau probably less than 10 percent of their 1,600 employees 
have real-world banking experience.
    Now, I am not saying the Bureau should be 90 percent. They 
wanted to create a different type of bureau than other 
regulators, and they have accomplished that. But I do believe 
you need to have real-world experience both from the consumer 
protection side and on the banking side within the Bureau 
itself.
    Mr. Williams. OK. Thank you.
    Mr. Whitaker, as a small business owner myself for over 47 
years, I know all too well that banks like yours are the 
backbone of Main Street America and continue to struggle under 
the weight of an overly burdensome regulatory environment. One 
of the main ways that we can fix this is through reforms 
offered in my bill, the Community Financial Institution 
Exemption Act, that would strengthen already existing language 
within Dodd-Frank by exempting credit unions and community 
banks under $50 billion in consolidated assets from CFPB's 
rulemakings unless the Bureau and other Federal regulators have 
cause to include them.
    So would this kind of reform ease the regulatory burden at 
institutions like yours?
    Mr. Whitaker. It absolutely would. I will say that with my 
current regulators, we have a great working relationship. And I 
would like to see that continued, and that bill would certainly 
help accomplish that.
    Mr. Williams. Thank you.
    Mr. Day, thank you for being here on behalf of the land 
title professionals, many of whom I represent back home in 
Texas. And these small businesses are critical to communities 
across the Nation. And the lack of clarity from the CFPB has 
left them with too many unanswered questions.
    So, briefly, do you feel that enforcement actions of the 
CFPB provide companies with enough information to know how to 
operate within the law? And how do companies respond to an 
enforcement action against another company in your industry?
    Mr. Day. Thank you for the question.
    No, unfortunately, it is difficult to glean from the 
enforcement actions how they would like to proceed, and so that 
is why our focus on the--getting improved guidance. And, in 
fact, you could have an improving factor as far as the 
consumers in having better guidance because we get the rules of 
the road. Our small businesses can follow what are the 
appropriate actions, and then the CFPB would have less 
enforcement actions because it would not be necessary. The 
guidelines would be clear, and we could follow it, and we can 
move forward and protect the consumer.
    Mr. Williams. Thank you.
    I yield back my time.
    Chairman Luetkemeyer. The gentleman's time has expired.
    With that, we go to Mr. Kustoff. The gentleman from 
Tennessee is recognized for 5 minutes.
    Mr. Kustoff. Thank you, Mr. Chairman.
    I do want to thank all the witnesses for appearing this 
afternoon.
    Ms. Prochaska, the years before the Bureau was established, 
prudential regulators collected and helped to resolve 
complaints but refrained from publishing comments as many of 
them contained unsubstantiated and false claims.
    With the enactment of Dodd-Frank, the Bureau was mandated 
to collect complaints. Despite this--I don't think anywhere in 
the statute does it even allude to making these comments 
public, public comments. The Bureau did so regardless of 
whether there was a statutory mandate. In fact, there wasn't. 
And the fact that many times, sometimes the complaints, 
frankly, they are unverified. They provide questionable--in my 
opinion, questionable utility to consumers and certainly could 
compromise consumer privacy.
    With all that, do you think it is appropriate to publish 
these comments or these complaints even though they could be a 
serious threat to consumer privacy and there could be a 
likelihood of misinterpretation? Your response.
    Ms. Prochaska. Congressman Kustoff, thank you for that very 
important question. I can't tell you how many comment letters I 
have written to the Bureau about this exact topic. So very nice 
to speak about it.
    Nowhere in the statute does it say that it needs to be 
public. And as you mentioned, the OCC, the Fed, the FTC, the 
FCC, all of the alphabet soup, keep those complaints private 
for the exact reasons that you just mentioned, one being 
privacy and, two, that it is unverified.
    Another issue is that it is not normalized. It is no 
surprise that the four largest banks generally get the majority 
of the complaints because they have the largest consumer base.
    A couple years ago, the CFPB was producing monthly reports 
that were saying the 10 most complained about companies, while 
in reality, of course, it is the 10 largest companies, and it 
was the same people every month. I don't really think that is 
going to be valuable information for consumers.
    Another point I would like to make as well is in the CFPB's 
annual reports on complaints, 75 percent are closed with 
explanation. So that could be inquiries. So that means that 
there was theoretically nothing wrong that the institution did. 
I have spent hours reading that complaint portal. I am probably 
the only person who does. And, oftentimes there are complaints 
about bank hours or that--there are just so many different 
things that it wasn't an actual issue that arose with the bank.
    So I think in the interest of keeping consumer information 
private, we should have the Bureau just for market monitoring 
purposes at the agency for the time being.
    Mr. Kustoff. I do appreciate the response.
    Earlier, I introduced legislation, and the title of it is 
Protecting Consumers from Frivolous Claims Act. And it seeks to 
prevent the CFPB from making public these consumer complaints.
    Do you have--and I don't know if you are familiar with the 
proposed bill. Do you have any opinion about this bill and 
whether it would, in fact, lead to the prevention of those 
complaints?
    Ms. Prochaska. I am not familiar with the exact text. But 
as you summarized it, it seems like something we would be 
definitely supportive of. I think it has been a large concern 
of industry that it is actually misleading customers by 
thinking that, if you get a complaint, which it may actually be 
an inquiry that you are a bad institution when, in reality, 
that is definitely not the case.
    Mr. Kustoff. Thank you very much.
    Mr. Day, again, I appreciate you being here as well. I have 
listened to all of your comments, your statements. And most of 
you, if not all of you, talked about the complexity of having a 
single inspector general and multiple inspector generals.
    The Bureau and the Federal Reserve, of course, share an 
inspector general. He or she is tasked with conducting the 
audits and investigations relating to the program and the 
operations of each of the agencies. Your opinion, given the 
size, the scope, the complexity of the Bureau and the Federal 
Reserve, do you think--is it hard for a single inspector 
general to have the bandwidth, if you will, to identify 
problems within both agencies? Your response.
    Mr. Day. Thank you for the question.
    I certainly support Acting Director Mulvaney's request that 
there be an independent inspector general for the department. 
It is a Bureau that is quite diverse with a lot of activities 
and feel it would be very appropriate to have an independent 
inspector general in supporting that effort.
    Mr. Kustoff. Thank you, Mr. Day.
    And I have got 2 seconds. I yield back the balance of my 
time.
    Chairman Luetkemeyer. The gentleman's time has expired at 
this moment. We thank him for that.
    Ms. Tenney is now recognized, the gentlelady from New York, 
for 5 minutes.
    Ms. Tenney. Thank you, Mr. Chairman. I appreciate it. And 
thank you so much to all of you for being witnesses here today. 
It has been a little bit more entertaining than most Financial 
Services Committee meetings.
    We have gotten into some sporting events, and now we are 
going to talk a little bit about constitutional issues, which I 
think is one of the most important issues in dealing with the 
new bureau which has a new name, but I will still refer to it 
as CFPB for simplification. And I am just going to follow a 
little bit on what my colleague, Mr. Barr from Kentucky, said. 
And I know I discussed this with Mr. Mulvaney when he was here, 
and this is why I think the constitutional issue is really 
important.
    And I like to look at another section of James Madison's 
Federalist Papers, which is Federalist No. 10 that states, 
``Enlightened Statesmen will not always be at the helm.'' And 
that is the very reason we need to have checks and balances 
like we do with every other agency and why we have checks and 
balances in our Government. If we do have an unenlightened 
person, and God forbid we ever have that happen, never happened 
in the history of the republic, but we have an opportunity to 
vote that person out or we have an opportunity to deal with a 
funding issue. And so I really appreciate your comments.
    I come from a small business community and also an owner of 
a small business, so I know how crushing regulatory burdens can 
really hurt a small business and make it unfair for us to 
compete against larger entities, and also how unfair it is when 
often our competitors who are larger are getting subsidies from 
Government, which makes it even harder. But I wanted to ask Mr. 
Day, because I was really compelled by some of the testimony 
you had.
    First of all, I am a bank attorney. I used to represent a 
number of small business. I was examining counsel until January 
3, 2017, for a small title insurance agency in New York State, 
which, is an attorney State versus a title State, so we are 
still trying to have dominion over title insurance as lawyers 
in New York.
    But some of the issues that I am just shocked to find out 
how big the tentacles are with the Bureau in being able to 
regulate an industry, such as title insurance, where so many of 
your small businesses are really trying to--they are 
exceedingly careful in trying to make sure their loans are--
they are the ones insuring the actual title, which is really 
important in New York, our property rights are important.
    So can you tell me just a couple of things or maybe an 
example of how the rules have made it difficult for your 
industry to function? And you can choose a title or attorney 
State, whichever you--
    Mr. Day. Well, we will stay with New York and certainly the 
practices there. Thank you for the question and the 
opportunity. I believe where the difficulty is with the level 
of uncertainty is that as businesses look to try to align 
themselves with other professionals. Is this an appropriate 
structure? Is this a new venture that will be supportive of 
regulators? When business has looked to get into a new area, 
how much capital do they have to invest to make sure they are 
in full compliance? Can there be a scalability as I startup or 
do I have to be, as you mention, competing with the big boys 
and have to come in and have a SOC 2 audit and be at that level 
to just be able to be approved by a lender?
    So, yes, in our industry, the title end does not fall into 
it, but the settlement practices do. And so with the confusion 
with our lender partners, it then trickles down to confusion as 
to our title entities who are just trying to proceed with their 
settlements and not truly understanding. So that is really a 
level of difficulty as far as--how far do I have to go? Can I 
go and invest here? Will I be subject to constraints or 
controls or possibly enforcement and not have any ability to 
get guidance in that regard?
    Ms. Tenney. And I appreciate your comments and your 
testimony where you are distinguishing between the 
Administrative Procedures Act in the laws versus guidance and 
the failure on the part of the Bureau to really give good 
guidance and tutorials and the ability of these businesses to 
comply. So I do appreciate that.
    And also, I do believe that the old RESPA form, the Real 
Estate Settlement Procedures Act, I had a friend that worked in 
Albany and said they are all in a storage house somewhere in 
Albany and no one has ever looked at them again. But that is 
the essence of overregulation is we regulate to the point where 
we are preventing the most needy, and some people who maybe 
aren't being treated fairly, for having the opportunity to have 
a loan, to buy a house. And as Mr. Williams talked about, to be 
able to buy a car, which is really important.
    So I am going to be running out of my time, but I thank you 
very much all of you. This has been really informative. And I 
am just going to say go Yankees, and I hope you all have a 
great day.
    Mr. Day. Thank you.
    Chairman Luetkemeyer. Keeping up with our baseball theme. 
Thank you for your yielding back.
    And with that, we go to the gentleman from Michigan, Mr. 
Trott. He is recognized for 5 minutes.
    Mr. Trott. I want to thank the Chairman for organizing this 
most interesting hearing today. And for the record, I don't 
believe Pete Rose belongs in the hall of fame.
    So I apologize I didn't hear the opening statements. We 
have the CEO from Ford Motor in today, so I was listening to 
him.
    But let me start with you, Mr. Shelton. You said you spent 
some time with Director Cordray. And Mr. Scott in his 5 minutes 
said that the CFPB has created a political fire pit, and I 
would agree with him. And I think it is in part because it is 
not on budget and it is not accountable. But I would also 
suggest that Director Cordray really had a political--who is 
now running for Governor of Ohio, really had a political agenda 
that he pursued while he was the director.
    Did you ever have occasion to read some of his press 
releases that he issued after he entered into a settlement with 
one of the targets of his investigation?
    Mr. Shelton. Yes, sir.
    Mr. Trott. So isn't it interesting that in the settlements, 
if you look at those, almost always the defendant never 
admitted any guilt or responsibility or culpability, but all of 
the press releases made it sound like the CFPB had brought this 
terrible big, bad company to justice and the consumers can be 
safe once again? Don't you think that contributed to the 
political fire pit problem?
    Mr. Shelton. I am not convinced I agree with your 
characterization of those press releases, though I appreciate 
your right to have the positions you do. Let me say that my 
experiences were quite different.
    Mr. Trott. OK. I appreciate your comment, and we will agree 
to disagree.
    Mr. Day, let me go to you. And so one of the arguments 
proffered by those who oppose any attempt to hold the CFPB 
accountable is that it will lead to rampant pillaging and abuse 
of consumers. So let me give you a hypothetical. You have been 
at Fidelity and Chicago before that for a few years, so you 
would be able to answer this perhaps better than anyone.
    Let's assume that one of your members entered into an MSA 
with a real estate broker that clearly violated and they 
knowingly violated RESPA. If the CFPB was now on budget and 
accountable, do you think that member would have nothing to 
worry about?
    Mr. Day. Thank you for the question. No, absolutely not. It 
is--I think as several of the witnesses here have talked today, 
the intent is still for the protection of the consumer and the 
focusing. And our industry is very much focused on that. And 
the bad practices are the ones that aren't actually being 
controlled through this. It is--the good practitioners who are 
being forced out, the bad practitioners may still be engaged in 
it. I don't think the accountability or--in any way creates a 
limitation that still would restrict the Bureau from enforcing 
the law.
    Mr. Trott. How many lawyers do you have at Fidelity who are 
trying to make sure your company does things right?
    Mr. Day. We have a multitude of lawyers that are--
    Mr. Trott. Thirty, 30 lawyers, 50 lawyers?
    Mr. Day. Probably closer to 50.
    Mr. Trott. Yes. And those lawyers are not only worried 
about the CFPB in compliance with their ambiguous directives, 
but they are worried about State licensing authorities. They 
are worried about litigation. They are worried about 
whistleblowers. They are worried about class action lawsuits. 
They are worried about shareholder liability. They are worried 
about State attorney general, other Federal bodies. Isn't that 
a fair statement? There are an awful lot of people, aside from 
the CFPB, that you are worried about making sure you do things 
right with?
    Mr. Day. And I wouldn't--I don't know if I categorize this 
as worried about, but I would say that, yes, we have a 
multitude of regulators and watchdogs through either private 
actions or public regulators that our industry is subject to 
and regulated by in its rules and regulations, which we have 
been living up to through our careers.
    Mr. Trott. So the Democrats want this discussion to be 
about the Republicans' desire to return to the wild frontier 
where consumers can be abused and discriminated against, but 
your answer--I have a prop; I am glad I went toward the end 
here, Mr. Chairman.
    This is what this discussion is about. This is the 
oversight of the financial services industry. Every one of 
those little dots is a regulatory body or rule that they have 
to worry about.
    Mr. Hunt, I don't know how your members are in business. 
How can you possibly comply with this kind of regulatory 
oversight?
    Mr. Hunt. I will tell you that the fastest growing 
department within a bank is in compliance. If you are a 
lawyer--
    Mr. Trott. And that doesn't generate any money, does it?
    Mr. Hunt. No, sir, it doesn't. If you are a lawyer in this 
country, you are going to be wealthy and fully employed for 
many years.
    Mr. Trott. Let's go back in the remaining seconds here, Mr. 
Day. Let's talk about TRID and the 1,900-page rule. So that 
lack of ambiguity and direction, no advisory opinion, no 
guidance whatsoever, what impact did that have on your members, 
on mortgage companies, and on consumers with respect to real 
estate closings that were either delayed or having to be 
postponed due to the lack of clarity relating to a 1,900-page 
rule?
    Mr. Day. Well initially, it delayed the closing process 
significantly. And as Mr. Hunt noted, that a lot of it was put 
forward without really a consideration of what all of the 
pieces are that needed to be put into play as to allow for its 
implementation. Costs from our members, all of new forms, new 
procedures, understanding with the disclosures, the fear of 
getting it right, and not having a real clarity or guidance as 
to how to go forward. So it was a major disruption, but our 
industry stepped forward, our association and the trade 
association led the charge and I think helped the industry 
overall to comply with it and move forward.
    Mr. Trott. I appreciate it. I am out of time.
    But I will close, Mr. Chairman, I would have raised my hand 
when Mr. Green was asking about whether there is discrimination 
today. Clearly, there is discrimination, unfortunately, in all 
aspects of our society, but the solution that Mr. Green was 
headed toward was to have a member of the central State Federal 
Government be the last decisionmaker on any and all loans, 
because that is the only way he could solve it through a 
Federal bureaucracy.
    Thank you for your time today. I yield back.
    Chairman Luetkemeyer. The gentleman's time has expired.
    And with that, we have exhausted all of our witnesses in 
more ways than one.
    We also thank you, our witnesses, today for being here. It 
has been a very lively and entertaining and informative 
afternoon, and we appreciate your participation.
    Just a couple closing thoughts on my part here. Throughout 
the hearing, I think we have heard a theme of less choice of 
services, more costly services is what has happened as a result 
of some of CFPB's actions. I think we all know, and we have had 
testimony before, with regards to the numbers of banks and 
credit unions are going down one a day. I have even got a 
county or two in my State that no longer have any banks or 
credit unions headquartered in that county whatsoever, so all 
we are left with is so much as a facility or two.
    So what has to happen? Even the director himself was here 
and testified in committee recently and had four suggestions on 
how to improve it. He himself made the comment, he said, I am 
one of the most powerful guys in D.C., and I shouldn't be. And 
so we need to take look at this long and hard as to how we 
continue to work with the CFPB, what we need to be doing.
    Mr. Barr, I think it was, and Ms. Tenney both made some 
good comments with regards to what the Founders believed. They 
believed in checks and balances. That is the nature of our 
system here. You have got the three branches of Government, and 
each one of them should be a check and balance, and the CFPB 
should fall under that same situation, in my judgment. I 
appreciate your comments to that effect.
    And it is kind of interesting because, imagine, if you 
would, the Federal Reserve or the FDIC with no commission over 
it. What would happen if they had a single--if the Federal 
Reserve chairman would be the president of the Federal Reserve 
and he had nobody to answer to, or the chairman of the FDIC 
would have nobody to answer to? That is on the banking side. 
Would you like to have that? I think not. So why would we allow 
the director of the CFPB to be that independent? I struggle 
with that.
    And I think Mr. Hunt made some great points with regards to 
the amount of uncertainty that is caused by this pendulum 
effect that goes back and forth, back and forth. And Mr. 
Whitaker made a comment to that effect as well that, how do you 
prepare for that? How do you as somebody in business sit there 
and try to invest either in services or in people to try and 
figure out how you are going to position yourself to be able 
to, with a crystal ball on your desk, figure out what is the 
next rule and regulation coming down from above that you are 
going to have to figure out?
    This is where we are with this particular agency, and I 
think we have got to look at ways to find--to allow the 
pendulum to swing back where it needs to be where you protect 
the consumers, but you don't run the businesses out, provide 
the services. And so we want to find that sweet spot, and we 
appreciate what you have done today as witnesses to give us 
your information. It has been very helpful.
    The Chair notes that some Members may have additional 
questions for this panel, 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 these witnesses and to place their 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.
    With that, the hearing is adjourned.
    [Whereupon, at 4:15 p.m., the subcommittee was adjourned.]

                            A P P E N D I X


 
                              June 6, 2018
                              
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