[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]




                 PUTTING CONSUMERS FIRST? A SEMI-ANNUAL
                    REVIEW OF THE CONSUMER FINANCIAL
                           PROTECTION BUREAU

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

                                HEARING

                               BEFORE THE

                    COMMITTEE ON FINANCIAL SERVICES

                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             MARCH 7, 2019

                               __________

       Printed for the use of the Committee on Financial Services

                            Serial No. 116-6
                            
                            
                            
                [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]  
              
              
                                 ________
                       
                     U.S. GOVERNMENT PUBLISHING OFFICE
                
36-461 PDF                     WASHINGTON: 2019
              
              
                            
                            

                 HOUSE COMMITTEE ON FINANCIAL SERVICES

                 MAXINE WATERS, California, Chairwoman

CAROLYN B. MALONEY, New York         PATRICK McHENRY, North Carolina, 
NYDIA M. VELAZQUEZ, New York             Ranking Member
BRAD SHERMAN, California             PETER T. KING, New York
GREGORY W. MEEKS, New York           FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri              BILL POSEY, Florida
DAVID SCOTT, Georgia                 BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas                      BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri            SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado              STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut            ANN WAGNER, Missouri
BILL FOSTER, Illinois                ANDY BARR, Kentucky
JOYCE BEATTY, Ohio                   SCOTT TIPTON, Colorado
DENNY HECK, Washington               ROGER WILLIAMS, Texas
JUAN VARGAS, California              FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey          TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas              LEE M. ZELDIN, New York
AL LAWSON, Florida                   BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam            ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan              WARREN DAVIDSON, Ohio
KATIE PORTER, California             TED BUDD, North Carolina
CINDY AXNE, Iowa                     DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois                TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts       ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah                    JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York   BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia            LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts      DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota

                   Charla Ouertatani, Staff Director
                   
                   
                   
                   
                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on:
    March 7, 2019................................................     1
Appendix:
    March 7, 2019................................................   113

                               WITNESSES
                        Thursday, March 7, 2019

Davis, Jennifer, Government Relations Deputy Director, National 
  Military Family Association....................................    82
Frotman, Seth, Executive Director, Student Borrower Protection 
  Center.........................................................    83
Jun, Linda, Senior Policy Counsel, Americans for Financial Reform    80
Kraninger, Hon. Kathy, Director, Consumer Financial Protection 
  Bureau (CFPB)..................................................     5
Shelton, Hilary O., Director & Senior Vice President for Advocacy 
  and Policy, National Association for the Advancement of Colored 
  People (NAACP).................................................    78
Weltman, Scott, Managing Shareholder, Weltman, Weinberg & Reis 
  Co., LPA.......................................................    85

                                APPENDIX

Prepared statements:
    Davis, Jennifer..............................................   114
    Frotman, Seth................................................   120
    Jun, Linda...................................................   136
    Kraninger, Hon. Kathy........................................   150
    Shelton, Hilary O............................................   158
    Weltman, Scott...............................................   163

              Additional Material Submitted for the Record

Waters, Hon. Maxine:
    Written statement of Veterans Education Success (VES)........   369
Garcia, Hon. Sylvia:
    CFPB report entitled, ``Spotlight on serving limited English 
      proficient consumers,'' dated November 2017................   377
Tlaib, Hon. Rashida:
    ``Riding the Stagecoach to Hell: A Qualitative Analysis of 
      Racial Discrimination in Mortgage Lending''................   407
Kraninger, Hon. Kathy:
    Written responses to questions for the record submitted by 
      Chairwoman Waters..........................................   426
    Written responses to questions for the record submitted by 
      Representative Budd........................................   457
    Written responses to questions for the record submitted by 
      Representative Cleaver.....................................   458
    Written responses to questions for the record submitted by 
      Representative Garcia of Illinois..........................   469
    Written responses to questions for the record submitted by 
      Representative Gonzalez of Texas...........................   472
    Written responses to questions for the record submitted by 
      Representative Kustoff.....................................   475



 
                        PUTTING CONSUMERS FIRST?
                        A SEMI-ANNUAL REVIEW OF
                         THE CONSUMER FINANCIAL
                           PROTECTION BUREAU

                              ----------                              


                        Thursday, March 7, 2019

             U.S. House of Representatives,
                   Committee on Financial Services,
                                                   Washington, D.C.
    The committee met, pursuant to notice, at 10:07 a.m., in 
room 2128, Rayburn House Office Building, Hon. Maxine Waters 
[chairwoman of the committee] presiding.
    Members present: Representatives Waters, Maloney, 
Velazquez, Sherman, Meeks, Clay, Scott, Green, Cleaver, Himes, 
Foster, Beatty, Heck, Vargas, Gottheimer, Gonzalez of Texas, 
Lawson, San Nicolas, Tlaib, Porter, Axne, Casten, Pressley, 
McAdams, Ocasio-Cortez, Wexton, Lynch, Adams, Dean, Garcia of 
Illinois, Garcia of Texas, Phillips; McHenry, Wagner, Lucas, 
Posey, Luetkemeyer, Huizenga, Stivers, Barr, Tipton, Williams, 
Hill, Emmer, Zeldin, Loudermilk, Mooney, Davidson, Kustoff, 
Hollingsworth, Gonzalez of Ohio, Rose, Steil, Gooden, and 
Riggleman.
    Chairwoman Waters. The Financial Services Committee will 
come to order. Without objection, the Chair is authorized to 
declare a recess of the committee at any time.
    Today's hearing is entitled, ``Putting Consumers First? A 
Semi-Annual Review of the Consumer Financial Protection 
Bureau.'' I will now recognize myself to give an opening 
statement.
    Today, this committee convenes for a hearing on the Semi-
Annual Report of the Consumer Financial Protection Bureau 
(CFPB). Testifying today before the committee for the first 
time is the Consumer Bureau's new Director, Kathy Kraninger. 
The Consumer Bureau is the centerpiece of the Dodd-Frank Wall 
Street Reform and Consumer Protection Act, which Congress 
passed after the financial crisis to provide America's 
consumers with a watchdog that would swiftly and effectively 
crack down on unscrupulous financial practices, products, and 
actors.
    Under the leadership of former Director Richard Cordray, 
the Consumer Bureau was a tremendous success, returning nearly 
$12 billion to over 30 million consumers who were harmed, 
handling over 1.2 million consumer complaints about financial 
institutions, and making the financial marketplace stronger and 
fairer for all Americans. Because of the Consumer Bureau, 
American consumers no longer must worry about exploding 
mortgages, hidden prepaid card fees, or unnecessary 
foreclosures due to weak servicing standards.
    The Consumer Bureau has also helped to take the confusing 
jargon out of consumer lending by requiring clear disclosures 
from financial institutions and providing consumers with easy-
to-understand materials to empower them to make the best 
decisions. However, despite the successes, congressional 
Republicans have done everything they can to stymie the 
Consumer Bureau's good work, and the Trump Administration has 
undertaken a sustained effort to destroy the agency. I am 
deeply concerned about the damage they have done.
    During his tenure running the Consumer Bureau, Mick 
Mulvaney--who is currently Trump's acting Chief of Staff--took 
many actions that hurt consumers. Mr. Mulvaney closed the 
Office of Young Consumers, stripped the Office of Fair Lending 
of its ability to enforce fair lending laws, cozied up to 
payday lenders, gave lenders a free pass to abuse active-duty 
servicemembers and their families, and fired the Consumer 
Bureau's Consumer Advisory Board.
    His mission was to dismantle the agency from within and he 
leaves behind no less than 12 political appointees who are 
continuing to cause damage. I am disappointed Mr. Mulvaney 
declined to respond to our invitation to testify here today. 
This committee still has serious questions for him, so I am 
expecting our new Director, Director Kraninger, to answer for 
him.
    As chairwoman of this committee, I am committed to 
reversing the damage that Mr. Mulvaney caused, to ensure that 
the Consumer Bureau can resume its important work. That is why 
I have reintroduced my bill, H.R. 1500, the Consumers First 
Act, which restores the agency's supervisory and enforcement 
powers, and provides the transparency and accountability needed 
for the agency to carry out its important mission.
    This committee will not tolerate the Trump Administration's 
anti-consumer actions and we will act to ensure that the 
Consumer Bureau is fully empowered to protect consumers. So I 
look forward to Director Kraninger's report on the Consumer 
Bureau's activity, and to discussing the agency's recent 
harmful proposal to undermine its payday rule, as well as the 
loss of more than 10 percent of agency staff, among other 
important issues. I also look forward to the second panel's 
testimony on how Congress can help ensure the Consumer Bureau 
is putting consumers first.
    The Chair now recognizes the ranking member of the 
committee, the gentleman from North Carolina, Mr. McHenry, for 
4 minutes for an opening statement.
    Mr. McHenry. Thank you, Chairwoman Waters, for yielding.
    And Director Kraninger, thank you for being here. And thank 
you for your first testimony before this committee. Many of us 
have expressed serious reservations over the establishment of 
the CFPB. Those are still the initials, as you have re-
established. Our concerns were driven by the fear that Congress 
was creating one of the most powerful and unaccountable 
bureaucracies ever; unfortunately, we were right.
    For nearly a decade, America's small businesses, community 
banks, and families have experienced firsthand what an 
unacceptable agency looks like. Since 2011, the CFPB has run 
roughshod over due process and advanced a political, partisan 
agenda rather than serving as a place to help consumers.
    Want to know whether the CFPB thinks the product is 
abusive? Well, the Bureau knows it when it sees it. And you 
will find out as soon as there is an enforcement action. Want 
to understand how to comply with financial regulations? Yes, 
you will see that, too, just wait and see if the Bureau's 
enforcement team visits you. It is called ``regulation by 
enforcement'' and it is a dangerous and destructive approach to 
supervision.
    That is why we invited Scott Weltman on the second panel 
today. He is someone who fought Mr. Cordray's CFPB and its 
abusive practices and won. Several years ago, Mr. Weltman's 
firm was awarded a State contract by Ohio's then-Attorney 
General, Richard Cordray. Mr. Weltman's firm worked with Mr. 
Cordray on disclosure language and ultimately had his contract 
renewed.
    The debt collection disclosures were acceptable to Attorney 
General Cordray, but not to then-CFPB Director Richard Cordray, 
who charged that Mr. Weltman's firm had harmed consumers by 
using the very disclosures he had previously approved. Now, 
keep in mind, there is no evidence of consumer harm and the 
Bureau had never promulgated standards on debt collection; yet, 
the Bureau still tried to extract $1 million from this firm 
because, well, they just didn't like the look of it. Is that 
how we are going to regulate? Is that a government standard? Is 
that best practices?
    Despite the heavy-handed approach, Mr. Weltman decided to 
fight the CFPB in court and won. The good news is that it is a 
new day in the CFPB, and I welcome that. Under Director 
Kraninger's leadership, she has pledged to provide more 
transparency and stop the Bureau's ugly history of regulation 
by enforcement. And she has prioritized the importance of 
financial innovation to drive greater financial inclusion, 
which should be the core of the mission for the Bureau.
    Director Kraninger, I applaud your commitment to 
innovation. I welcome your new leadership for this Bureau. The 
work being done by your Office of Innovation is very important 
and I hope you will continue to make it a priority.
    Still, today you will face criticism from my friends on the 
other side of the aisle over some of the steps you have taken. 
The reality is that you have had unilateral authority to do 
whatever you want, and I am not sure everyone in this room 
thinks that is a good idea; they have a point.
    While we have seen more transparency in the last year since 
the inception of the Bureau, the structure of the agency still 
alarms me. It is run by a single individual who has no real 
oversight or accountability. We expect that you will testify 
next year as well, and we are hopeful you will respond to 
letters in the meantime. That is not really the best way for us 
to have executive oversight.
    The Bureau still has an unfettered line of credit with the 
Federal Reserve and there still isn't a CFPB Inspector General. 
It is not you, Director Kraninger, that has me worried, it is 
your successor, and your successor's successor, and what we do 
to American regulation going forward.
    Good government should not be a partisan exercise. So to 
you I offer a welcome, and my hope that you will follow the 
rule of law and the letter of the law at the creation of the 
Bureau. But in spite of the improvements that we have sought 
legislatively, the Bureau still is in need of reform.
    And to my friends on the other side of the aisle, I ask you 
to work with us to pursue sensible improvements to the CFPB. 
Let us not allow politics to distract the consumer protection 
that is so vital and so important and that we all hold so dear.
    I yield back.
    Chairwoman Waters. Thank you.
    The Chair now recognizes the subcommittee Chair, Mr. Meeks, 
for 1 minute.
    Mr. Meeks. Thank you, Chairwoman Waters, for calling this 
very important hearing.
    An often-overlooked driver of the financial crisis was the 
failure of prudential regulators to identify and curb systemic 
patterns of consumer abuse. When Wall Street collapsed and 
businesses across the country began to fail, American families 
and consumers bore the brunt of the financial burden, losing 
their jobs, their homes, and what little savings they had. To 
address this systemically, we established the CFPB, an 
independent bureau focused solely on consumer protection.
    And I am extremely concerned that actions taken since 
President Trump assumed office have undermined these central 
pillars of the organization. The independence of the CFPB is 
greatly undermined by the inappropriate injection of a dozen or 
more un-vetted senior political appointees, focused not on 
fulfilling the organization's mission but rather on political 
outcomes at the expenses of the American consumers. I hope that 
Director Kraninger will address this in detail and commit to 
remedy this promptly.
    And I yield back.
    Chairwoman Waters. The Chair now recognizes the 
subcommittee ranking member, Mr. Luetkemeyer, for 1 minute.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman.
    Director Kraninger, we are happy to welcome to you to your 
semi-annual testimony before this committee, and to 
congratulate you as the newly confirmed Director of the Bureau 
of Consumer Financial Protection. The Bureau is a unique 
entity. As CFPB Director with no commission or board over you, 
you are accountable to no one. To quote your predecessor, Mr. 
Mulvaney, ``The Director has a kind of absolute power which 
would frighten most of us.''
    In the past, my Democratic colleagues sang the praises of a 
CFPB Director's ability to independently lead the Bureau in its 
well-intended mission. Today, my colleagues are going to pick 
apart every single decision you have made or could make as 
Director, simply because President Trump appointed you.
    Transparency and accountability are guiding principles of 
our American democracy, not the tenants of partisan politics. I 
trust that in your tenure at the CFPB, you will ensure 
consumers are well protected by prioritizing increased 
accountability and transparency in the actions of the Bureau 
and those it oversees. I congratulate you, again, on your well-
deserved confirmation. I look forward to working alongside you 
as you lead the Bureau to meet its mission.
    And I yield back.
    Chairwoman Waters. Today, we have two panels. I want to 
welcome the first panel, the Honorable Kathy Kraninger, the 
Director of the Consumer Financial Protection Bureau. Ms. 
Kraninger has served as Director of the CFPB since December 
2018 and is appearing for the first time before the committee.
    Prior to assuming this position, Ms. Kraninger was 
Associate Policy Director at the Office of Management and 
Budget (OMB), where she was involved in overseeing the budgets 
of the Departments of Homeland Security, Justice, and Treasury, 
among others. Prior to her work in OMB, she served as a 
committee staff member for several Senate and House committees, 
finishing as Clerk for the Senate Appropriations Committee's 
Subcommittee on Homeland Security.
    Ms. Kraninger, without objection, your written statement 
will be made a part of the record. You will have 5 minutes to 
summarize your testimony. When you have 1 minute remaining, a 
yellow light will appear. At that time, I would ask you to wrap 
up your testimony so we can be respectful of both the 
witnesses' and the committee members' time.
    You are now recognized for 5 minutes to present your 
testimony. Thank you, Ms. Kraninger.

STATEMENT OF THE HONORABLE KATHY KRANINGER, DIRECTOR, CONSUMER 
               FINANCIAL PROTECTION BUREAU (CFPB)

    Ms. Kraninger. Chairwoman Waters, Ranking Member McHenry, 
and distinguished members of the committee, thank you for the 
opportunity to present the Consumer Financial Protection 
Bureau's most recent semi-annual reports to Congress. While the 
reports describe actions undertaken before I arrived, they 
provide a touchstone as we create the fresh outlook at the 
agency under my leadership.
    This testimony appropriately takes place during National 
Consumer Protection Week. As such, I want to take a moment to 
thank the dedicated team at the Bureau. I am impressed by these 
exceptionally talented staff and their commitment to the 
mission.
    I also want to recognize the many partners in our work, 
stakeholders in Congress, the media, financial institutions, 
educators, consumer advocates, as well as fellow regulators at 
the Federal and State level. Since my confirmation, I have been 
engaged in a listening tour to meet as many of those 
stakeholders as possible, including many of you, and those I 
just mentioned.
    I have visited our regional offices in San Francisco, New 
York, and Chicago, interacting first and foremost with Bureau 
staff. In D.C., and in the field, I have held roundtables and 
met with consumer advocates, faith leaders, banks of all sizes, 
credit unions, non-depository financial companies, and 
innovators.
    I have spoken with current and former members of the 
Bureau's Consumer Advisory Board, and many individuals who care 
about the Bureau, including Senator Dodd, Congressman Frank, 
and former Director Cordray. Hearing all perspectives is 
critical to bringing the best thinking as we carry out our 
mission of protecting consumers.
    The following gives you a flavor for the discussions I have 
been having. I have heard far and wide that the Bureau produces 
phenomenal financial education content. Stakeholders and the 
Bureau, however, are struggling with the challenge of measuring 
how education changes behavior and leads to action. I have 
talked to my examiners about working with institutions to build 
a culture of compliance and how supervision should be a more 
prominent tool in the Bureau's toolkit.
    Also, on exams, financial institutions and non-bank lenders 
alike have noted the value of the exam process, as well as 
their interest in having clear rules of the road. State 
Attorneys General and bank supervisors have cited the valuable 
work that we have done together, particularly on enforcement 
actions. And I have heard from legal aid providers how they 
play whack-a-mole against bad actors until one of the Bureau's 
enforcement actions deters certain behavior.
    As I look to wrap up my listening tour this month, I have 
pledged that these engagements will continue on a regular 
basis. As one example, I have invited all the members of this 
committee to visit the headquarters on Monday, May 20th. I hope 
that all of you will be able to participate in this event.
    In the midst of the listening tour, I have also ensured 
that the ongoing work of the Bureau continues at-pace. I will 
highlight a few of our most recent actions.
    First, I pledge to protect consumers from bad actors, and 
the Bureau's enforcement attorneys continue their work to that 
end. I have announced five enforcement actions since I started, 
including one against a payday lender that failed to prevent 
overcharges, and made harassing collection calls; and a second 
against an online lender that debited consumers' bank accounts 
without authorization, and failed to honor loan extensions.
    Second, with the intent to maintain access to credit and 
ensure more choice for consumers in need of emergency funds, 
the Bureau is reconsidering the sufficiency of the evidence and 
analysis supporting the underwriting requirements of the short-
term, small-dollar lending rule. We want consumers empowered to 
make their own decisions that best suit their individual 
financial needs and we want to make sure our evidence is 
sufficiently robust and reliable. I have an open mind on this 
matter and look forward to reviewing the comments and evidence 
that are submitted in response to our proposals.
    During America Saves Week, I announced the Start Small, 
Save Up initiative to help promote the importance of savings 
among Americans. A simple message but one urgently needed, 
given a study that 40 percent of adults lack enough liquid 
savings to cover a $400 emergency expense. We have also issued 
a number of important reports, including our assessments of 
significant rules and some on consumer credit trends, as well 
as an analysis of suspicious activity reports on elder 
financial fraud.
    Last, I have spent significant time understanding the 
Bureau's operations and looking at ways to improve delivery of 
the Bureau's mission. With the incredible flexibility that 
Congress has provided this agency, I feel a deep sense of 
responsibility for ensuring we become a model for efficient and 
effective use of resources in delivering that mission.
    Looking ahead, I will be setting our priorities for the 
Bureau, including setting the tone for how we will operate as 
an agency. I expect to emphasize stability, consistency, and 
transparency as hallmarks as we mature the agency and 
institutionalize the many partnerships that are key to our 
success in protecting consumers. I am also examining how we can 
best utilize all of the tools that Congress has given this 
agency, broadening our efforts to focus on prevention of harm 
is a primary goal for our actions.
    Thank you, again, for the opportunity to present the CFPB's 
work to you and to provide you with an update on the activities 
so far in my tenure. I would be happy to answer your questions.
    [The prepared statement of Ms. Kraninger can be found on 
page 150 of the appendix.]
    Chairwoman Waters. Thank you very much, Ms. Kraninger.
    I want to start by recognizing myself for 5 minutes for 
questions. My first question has to do with fair lending.
    Mr. Mulvaney's tenure at the Consumer Bureau was extremely 
harmful to consumers. In just over a year, the Consumer 
Bureau's staffing was reduced by more than 10 percent, and 
public enforcement actions dropped nearly 70 percent from 2017 
to 2018. In addition, there was zero fair lending public 
enforcement actions taken during Mr. Mulvaney's tenure.
    Perhaps that should not come as a surprise since he 
stripped the Office of Fair Lending and Equal Opportunity of 
its supervisory and enforcement powers, and he installed a 
political appointee with a well-documented perspective, who is 
not worthy of overseeing fair lending enforcement.
    Director Kraninger, I have several questions for you. Given 
the lack of fair lending public enforcement actions since Mr. 
Mulvaney's tenure, does the Consumer Bureau have any ongoing 
fair lending investigations that have been initiated since you 
became Director?
    Ms. Kraninger. Chairwoman Waters, I can assure you that 
fair lending is a continuing priority in the Bureau. 
Supervision and enforcement work is ongoing. Many of the 
examiners and enforcement attorneys who did that work prior to 
the transition continue to do it.
    Chairwoman Waters. Ms. Kraninger, I am going to interrupt 
you--
    Ms. Kraninger. There are currently open investigations--
    Chairwoman Waters. I am going to interrupt you and reclaim 
my time.
    Ms. Kraninger. Yes.
    Chairwoman Waters. I am asking you a direct question. I am 
asking you, does the Consumer Bureau have any ongoing fair 
lending investigations that have been initiated since you 
became Director?
    Ms. Kraninger. There are--
    Chairwoman Waters. Yes or no?
    Ms. Kraninger. --ongoing investigations in the fair lending 
space--
    Chairwoman Waters. Has the Bureau initiated any lending 
investigations since you became Director? Not ongoing ones. I 
want to know what you have done since you have been there.
    Ms. Kraninger. Generally speaking, the opening of an 
investigation is actually a decision made by the enforcement--
by attorneys.
    Chairwoman Waters. Excuse me. I am going to reclaim my 
time. What you are saying is, ``no.''
    Ms. Kraninger. I am actually saying enforcement attorneys 
make the decision to open an investigation.
    Chairwoman Waters. I am saying that you are not able to 
answer the question by saying that there have been fair lending 
investigations that have been initiated since you became 
Director, that you know about.
    Will you restore the Office of Fair Lending and Equal 
Opportunity's supervisory and enforcement powers?
    Ms. Kraninger. The ongoing work of the Bureau in 
enforcement and supervision of fair lending laws continues. The 
change with respect to where the Office of Fair Lending is and 
bringing that into the office of the Director, I believe, 
facilitates the larger policy interests and considerations for 
outreach and education, and brings fair lending--again, 
broadening it across the agency to make sure that we are 
focused--
    Chairwoman Waters. Thank you very much.
    Ms. Kraninger. --absolutely on that mission.
    Chairwoman Waters. Do you believe that there is a need to 
restore the Office of Fair Lending and Equal Opportunity's 
supervisory responsibility and powers? Do you believe that it 
has been weakened and that it needs to be restored?
    Ms. Kraninger. I believe that it has indeed been 
strengthened, Madam Chairwoman, with the Director's office--
    Chairwoman Waters. Do you believe that it needs to be 
restored because of what Mr. Mulvaney has done? And will you do 
it?
    Ms. Kraninger. I believe that the importance of fair 
lending has actually been enhanced by the change in the 
organization.
    Chairwoman Waters. So you are saying that you do believe 
that there is a need to restore it and you will do that, is 
that right?
    Ms. Kraninger. I commit to you that fair lending continues 
to be a strong priority.
    Chairwoman Waters. I am asking you, do you believe that it 
needs to be restored and that you will do it? You will restore 
the Office of Fair Lending and Equal Opportunity's supervisory 
and enforcement powers. Will you do that?
    Ms. Kraninger. The mission of fair lending has been 
enhanced by the reorganization, in my perspective.
    Chairwoman Waters. I am going to move on. Mr. Mulvaney 
appointed Eric Blankenstein to oversee supervision and 
enforcement, including fair lending enforcement, even though 
many of his colleagues at the Consumer Bureau believe his blog 
posts uncovered by The Washington Post and The New York Times 
were racist, and that these posts directly conflict with the 
agency's mission and responsibility.
    Let me quickly review some of the racist and reprehensible 
comments that he has written. I will not repeat them all, but 
let me just ask, are you aware of this comment on the 
University of Virginia's honor code and acting against hate 
crimes? He wrote, ``Until a hood-wearing KKK member is caught, 
why should the honor system be changed?'' Are you aware of 
that?
    Ms. Kraninger. Chairwoman, I have read what is--
    Chairwoman Waters. Are you aware of that? Please, Ms. 
Kraninger, just answer the question.
    Ms. Kraninger. I have read what is reported by the press. 
All of this took place in his--
    Chairwoman Waters. Oh, so you know that the press has 
indicated that this was something that he said, you are aware 
of that?
    Ms. Kraninger. I have read what has been covered in the 
press, I would also--
    Chairwoman Waters. And so you are aware of the fact that 
this was reported in the press. You have seen, heard or you 
know about that, is that correct?
    Ms. Kraninger. That is correct and I would--
    Chairwoman Waters. Okay. Thank you.
    Ms. Kraninger. There is an ongoing investigation on it.
    Chairwoman Waters. That is all I need to know. Here is 
another quote, fine, let's say they called him the n-word, this 
is a quote from him, ``Would that make them racists, or just an 
a-hole?'' Are you aware of that quote?
    Ms. Kraninger. Chairwoman, I have stipulated that I have 
read the press reporting on this matter and--
    Chairwoman Waters. Okay. Then you are aware--
    Ms. Kraninger. --it preceded my time at the Bureau.
    Chairwoman Waters. You are aware that that has been quoted. 
Thank you very much. We will continue to move on.
    Mr. McHenry, the ranking member, the gentleman from North 
Carolina, is recognized for 5 minutes.
    Mr. McHenry. Director, I said in my opening statement that 
the design of your Bureau, you have a fixed term of office, and 
absent--as the courts have found and the statute pertains--some 
exceedingly grievous act, you can't be removed from office. So 
the Bureau, as designed by my Democrat colleagues without 
Republican votes in the Dodd-Frank Act, designed this Bureau to 
be unaccountable.
    The chairwoman spent time, I would say, badgering you about 
the design of offices within your Bureau that are fully within 
the purview of you as Director to design. So let me just drill 
in on this question of independence of your Bureau. Would you 
describe, as you see it, what Dodd-Frank, the Act that created 
the CFPB and your office, gives you the power to do?
    Ms. Kraninger. Congressman, as you stipulated, there is 
tremendous authority that Dodd-Frank vests in the Director of 
the Bureau, including related to the organization of the Bureau 
itself. Section 1012 stipulates that the Director has the 
flexibility to organize the Bureau as it sees fit. Many of the 
sections of the Act stipulate that the authority is vested, in 
fact, in the Director and certain activities can be delegated 
further at the Director's discretion.
    Mr. McHenry. Okay. So that does include the power to make 
decisions as to staffing?
    Ms. Kraninger. Yes.
    Mr. McHenry. Does it include limitations on political 
appointees or no limitations on political appointees?
    Ms. Kraninger. Dodd-Frank reiterates the powers to the 
Executive Branch under Title V for the hiring authorities that 
are there.
    Mr. McHenry. So does that include the availability of a 
consumer complaint database?
    Ms. Kraninger. Yes, it does. There is a responsibility to 
collect consumer complaints, and Dodd-Frank stipulates some 
ways that those complaints should come to the Bureau.
    Mr. McHenry. Okay. Does that include redesigning offices 
within the Bureau, to the question of the chairwoman?
    Ms. Kraninger. Yes, it does.
    Mr. McHenry. So you have that capacity to change the 
structure of the offices that report to you as Director?
    Ms. Kraninger. Yes. There are some offices that are listed 
in the statute that shall exist, but, again, there is 
flexibility with respect to which responsibilities go to those.
    Mr. McHenry. So absent a change of statute, you have that 
flexibility on reporting structures?
    Ms. Kraninger. That is correct.
    Mr. McHenry. Okay. And as you highlighted, you think this 
reporting structure that you currently have is better than what 
you previously saw?
    Ms. Kraninger. With respect to fair lending, I do believe 
that. Again, the purpose was to enhance the prominence of that 
as part of the Bureau's mission. In the office of the Director, 
as in many other agencies across the government, putting that 
in the front office is something that actually enhances the 
ability of that office to influence the other activities and 
coordinate activities across the entire agency.
    Mr. McHenry. And you also have flexibility on the 
membership and structure of the Consumer Advisory Board, do you 
not?
    Ms. Kraninger. Yes, the statute does stipulate some skill 
sets that must be present in the membership but there is much 
flexibility there.
    Mr. McHenry. Okay. Have you had a chance to review the 
Consumers First Act that the chairwoman has offered?
    Ms. Kraninger. Yes, I am generally familiar with it. We are 
still looking at it. I know it is similar to, in some ways, a 
previously introduced legislation--
    Mr. McHenry. And it seems as though that legislation 
mandates specifics on every one of the questions I just asked, 
does it not?
    Ms. Kraninger. I believe that it does.
    Mr. McHenry. But you could also implement all the changes 
within this legislation without the bill getting signed into 
law, could you not?
    Ms. Kraninger. Some of them, certainly, with respect to 
organizational issues you raised, yes.
    Mr. McHenry. So if we are talking about the Democrat 
message today, it is that you are an independent Bureau but we 
don't like you, right? It is a very confusing thing when we see 
legislation to get into your space and interfere with your 
independence, right?
    We are talking about the broad structural challenges at the 
CFPB we see and how that impacts consumers. So I think we just 
have a fundamental debate here within Congress that is a debate 
for us as lawmakers to make.
    You need to act under the statute as designed, not based 
off of what is being yelled at you via a congressional hearing. 
We would like for you to hear our input. Unfortunately, in the 
design of your statute, you don't have requirements to do so.
    I want to change that statute so that we have a structure 
that is a bipartisan board, a structure that puts you on 
budget, but that is something that is for me to fight about, 
not you. You are the Director and you have a statute to operate 
under. The final thing I would ask for is one final--
commensurate with your time, chairwoman--question about 
innovation.
    We had a hearing last week about consumer credit reporting 
agencies. In your written testimony, you say the number one 
consumer complaint in 2018 was about consumer credit reporting 
agencies. Do you believe that innovation in the marketplace and 
competition can create better options for consumers?
    Ms. Kraninger. As a general matter, absolutely, yes.
    Chairwoman Waters. The gentleman's time has expired.
    Mr. McHenry. Would you please let her finish answering the 
question? I didn't hear, if you--
    Chairwoman Waters. I will give you that courtesy. You know 
the time has expired, but I will give you that courtesy.
    Mr. McHenry. I would give the witness that courtesy.
    Chairwoman Waters. I will give it to you; you are asking 
for it, for the witness.
    Ms. Kraninger. As a general matter, the answer to that 
question is absolutely, yes, Congressman.
    Mr. McHenry. Thank you.
    Chairwoman Waters. Thank you very much.
    The gentlewoman from New York, Mrs. Maloney, the Chair of 
our Investor Protection Subcommittee, is recognized for 5 
minutes.
    Mrs. Maloney. Thank you, Chairwoman Waters, and Ranking 
Member McHenry. And thank you, Chairwoman Waters, for 
introducing yesterday the Consumers First Act.
    Welcome, Director Kraninger.
    Director Kraninger, the Consumer Bureau published a study 
on overdraft fees in 2014. Are you familiar with this study?
    Ms. Kraninger. Congresswoman, we had a very nice 
conversation about this. I did go back and look at the 
overdraft reports we have issued. I can't say I will be able to 
recite every fact from them, but I have a general familiarity.
    Mrs. Maloney. Do you have any reason to question the 
numbers in that study? Have you reviewed the study and found 
any factual errors?
    Ms. Kraninger. I know that the Bureau continues to look at 
this issue from a research standpoint. But I would stipulate 
that we are continuing to look at the issue.
    Mrs. Maloney. Okay. Well, let me just remind you that the 
Bureau study found that most overdraft fees are incurred on 
purchases of just $24 or less and are paid back within 3 days. 
But the median overdraft fee for these small overdrafts is 
still a whopping $34. So if I overdraft with a cup of coffee, 
my fee would be $34.
    Now, if you borrowed $24 for 3 days and paid $34 in 
interest, do you know what the annual percentage rate on that 
loan would be?
    Ms. Kraninger. It would be substantial, certainly.
    Mrs. Maloney. Yes, it is. I will tell you exactly what it 
will be. It is an annual percentage rate of about 17,000 
percent.
    So my question is, given the Consumer Bureau's own research 
on overdraft fees, which you don't dispute, do you plan to do 
anything about these excessive overdraft fees? Do you plan on a 
rulemaking on overdraft?
    Ms. Kraninger. Congresswoman, I absolutely appreciate where 
you are coming from on this issue and know that you have spent 
a lot of time on this issue. I have asked the staff about this 
topic per our conversation. We are actively looking at what the 
priorities are for the rulemaking agenda. I commit to you that 
this is certainly on the table in terms of what we would look 
at and when we can get to it.
    Mrs. Maloney. Thank you. I want to ask you about the Credit 
CARD Act, which I authored along with many Democrats on this 
committee. In that bill, we required the Consumer Bureau to do 
a study on the credit card market and the impact of the CARD 
Act every 2 years.
    Now, the bill cut down on unfair, deceptive practices but 
we wanted a report on what it meant. When the Bureau published 
its CARD Act study in 2015, it estimated that the bill had 
saved consumers roughly $16 billion in unnecessary fees and 
that credit had actually become more available and more 
affordable. I call this the ``Democratic stimulus package'' 
because it kept the money in the consumers' hands.
    But when the Bureau published its latest CARD Act study in 
December of 2017, it removed that estimate of how much the bill 
has saved consumers. So my first question is, why did the 
Bureau remove that estimate?
    Ms. Kraninger. Well, Congresswoman, I am, again, generally 
familiar with this issue. I knew you would ask this question 
about it and I understand your concern. My understanding is 
that there was an assessment of what is required under the 
statute to be reported and that was what is included in the 
report.
    Mrs. Maloney. Okay. Well, do you believe that the CARD Act 
has saved consumers money?
    Ms. Kraninger. I will say I have not spent detailed time on 
that topic, but I take you at your word in terms of what the 
prior reports say.
    Mrs. Maloney. Well, $16 billion a year. That is a lot of 
money.
    Now, in the Consumer Bureau's recent payday loan proposal 
it said that one of the reasons it was removing the ability-to-
repay requirement was that it ``does not believe it is cost-
effective for itself and for lenders and borrowers to conduct 
the necessary research'' to determine whether an ability-to-
repay requirement is necessary.
    By refusing to even do the necessary research, you are 
basically putting your head in the sand, which I think is 
totally inappropriate for the agency charged with protecting 
consumers. Will you commit to doing the necessary research on 
the need for an ability-to-repay requirement for payday loans 
before finalizing the Bureau's revision to the rule?
    Ms. Kraninger. Congresswoman, as I know I will discuss 
extensively, and as I mentioned in my opening statement, the 
review of the short-term, small-dollar lending rule does look 
at the sufficiency of the legal arguments as well as the fact 
basis. That proposal is out for open comment right now under 
the Administrative Procedure Act. We welcome all of the 
comments and data and we will certainly look at the full record 
going forward once all that information is in--
    Chairwoman Waters. The gentlelady's time has expired.
    Mrs. Maloney. Okay. I yield back.
    Chairwoman Waters. The gentlelady from Missouri is 
recognized for 5 minutes, Mrs. Wagner, the vice ranking member.
    Mrs. Wagner. I thank the Chair.
    Protecting consumers is one of my most important missions. 
But the Consumer Financial Protection Bureau deprives consumers 
of necessary choices and complicates access to financial 
products. Director Cordray's CFPB abused its power and it 
issued regulations that make it more difficult for consumers to 
qualify for a mortgage, obtain auto loans, and access forms of 
credit. It is imperative that this committee exercises 
oversight over the CFPB to reign in abuses. And I can't tell 
you how much I am looking forward to your leadership, Director 
Kraninger.
    Director Kraninger, thank you for your testimony and, 
again, your leadership at the CFPB. You took the helm in 
December, and have since taken what I believe to be a 
thoughtful approach to the duties of an agency that many of my 
colleagues, myself included, believed to be unconstitutionally 
structured.
    You have conducted a 3-month listening tour to hear from 
State regulators and consumer advocates, and to talk with your 
employees to see what is working well and what isn't. What have 
you discovered through these discussions in terms of how to 
ensure the Bureau is actually helping consumers and not abusing 
its powers?
    Ms. Kraninger. Thank you for that question, Congresswoman; 
it is a really central one to what I am trying to do in hearing 
from all perspectives on this matter. I think, again, 
protecting consumers is our mission and I have been truly 
impressed by the staff who are there, and are truly dedicated.
    I have had a lot of discussions with our own examination 
staff, understanding even the most mundane pain points that 
they are experiencing from how they have to manage their 
travel. That is time away from the mission and that is my focus 
on how we best utilize our resources. It is, again, how do we 
make sure that every dollar is actually going to protect 
consumers and not towards administrative activities, 
bureaucratic things that are standing in people's ways. So 
certainly, they have raised those issues.
    I have talked to educators about the most effective ways to 
get the American people and the public to understand better the 
products and services they are interacting with, how to help 
Americans make the best financial decisions for themselves in 
their own lives, and to give them the information that they 
need to do that, and carry out all the missions of the Bureau, 
of which there are many.
    Mrs. Wagner. When your predecessor appeared before this 
committee last April, he was very blunt. And he described the 
scope of his individual authority and power as Director, 
explaining at the outset that he could, if he chose, decline to 
answer any questions from committee members or refuse even to 
appear at all. Because the plain reading of this failed statute 
does not require it.
    He went on to describe the Director's sole authority and 
complete discretion to define entire classes of financial 
institutions and products, to target regulations and 
enforcement actions as he alone saw fit.
    In your read of the law, do you as Director have unfettered 
power and authority?
    Ms. Kraninger. Congress vested tremendous power and 
authority and responsibility in the Director, yes.
    Mrs. Wagner. Which is something that we, here in Congress, 
need to fix. How will you approach the directorship to best 
serve Americans, and what tools does the Bureau need from 
Congress to be successful in following through with your 
mission to end the era of regulation by enforcement?
    Ms. Kraninger. I appreciate that question, Congresswoman. 
We have, certainly, a very important responsibility to 
establish clear rules of the road. As I noted, I have heard 
that from industry; in some respects, I have heard that from 
the examiner's staff as well, making sure that they can hold 
institutions accountable and to have clear rules and ensure a 
culture of compliance in the way that they are operating.
    So that is something that I am looking at very carefully. I 
don't have a specific ask of Congress to that point. There is a 
lot of flexibility in how we do things, but the law is 
certainly our touchstone in terms of what we undertake for 
supervision.
    Mrs. Wagner. I thank you for your answers. I thank you, 
again, for your leadership. We look forward to your leadership, 
moving forward. You do not deserve to be berated or badgered; 
you are a fine public servant, and I appreciate all of the work 
that you are doing.
    It is Congress' job to change the statutory authority and 
rein in the CFPB. I thank you, and I yield back.
    Chairwoman Waters. The gentlelady from New York, Ms. 
Velazquez, is recognized for 5 minutes.
    Ms. Velazquez. Thank you, Madam Chairwoman. Director 
Kraninger, I was here for the passage of Dodd-Frank. We 
designed the CFPB to be an independent organization, outside 
the influence of Congress and, most importantly, from the 
Executive Branch.
    At his appearance before the committee last year, I 
expressed my concerns to Mr. Mulvaney about his dual roles at 
OMB and the CFPB. Given your previous employment at OMB, and 
your reported close ties to Mr. Mulvaney, I feel it is 
necessary to ask you a similar set of questions.
    First, how many conversations have you had with Mr. 
Mulvaney since being confirmed as Director of the CFPB?
    Ms. Kraninger. I have certainly seen Mr. Mulvaney several 
times socially since I was confirmed.
    Ms. Velazquez. Okay. So no conversations--
    Ms. Kraninger. I have seen him socially. I can assure you, 
if where you are going is about the independence of my 
decisions--
    Ms. Velazquez. Yes, correct.
    Ms. Kraninger. I can tell you that I absolutely take 
seriously the responsibilities vested in me, and that the 
decisions that I make at the Bureau are my decisions.
    Ms. Velazquez. Reclaiming my time, how many conversations 
have you had with President Trump since being confirmed as 
Director of the CFPB?
    Ms. Kraninger. None.
    Ms. Velazquez. Has the President given you any directive 
that you felt interfered with your authority as an independent 
regulator?
    Ms. Kraninger. No.
    Ms. Velazquez. Has Mr. Mulvaney or any other person from 
inside the Trump Administration given you a directive that you 
felt interfered with your authority as an independent 
regulator?
    Ms. Kraninger. No, definitely not.
    Ms. Velazquez. Have you been to the White House since you 
have been sworn in as the Director of the CFPB?
    Ms. Kraninger. I went there for one social event.
    Ms. Velazquez. Just one social event. Have you conducted 
official CFPB business from within the White House since you 
have been sworn in?
    Ms. Kraninger. I have only been there once for a social 
event.
    Ms. Velazquez. Okay. Director Kraninger, last week The 
Washington Post published an article describing how a lawyer 
with ties to the payday lending industry directed a report 
which concluded that repeatedly taking out payday loans didn't 
harm borrowers, and then later discussed those results with a 
CFPB economist.
    First, is it your continued position that the CFPB was not 
influenced by the payday lending industry lobby on the issue as 
you were reconsidering the rule?
    Ms. Kraninger. I also saw the article you referenced by The 
Washington Post. I have never heard that person's name before. 
I can tell you that in the entire history of the prior 
rulemaking in addition to this one, the Bureau has taken input 
from all kinds of stakeholders.
    Ms. Velazquez. Okay. Thank you. Specifically, what evidence 
and academic research did the CFPB use in its recent 
determination to rescind the original rule?
    Ms. Kraninger. The reconsideration of the rule is driven by 
a concern about the legal and factual sufficiency of the 
determination of unfairness and--
    Ms. Velazquez. Legal interpretation is not influenced by 
the report by the payday lending industry, so tell me, what 
evidence did you use? What report or study did you use as you 
were rescinding this rule?
    Ms. Kraninger. Again, it is a proposal, so we are in the 
comment phase and we welcome all comments and evidence as we 
have stipulated, and I continue to stipulate publically, there 
is a decision to make on the full docket but as a result of 
what was the reconsideration--
    Ms. Velazquez. Okay, so no research and no study.
    I would also like to point out for the record that the 
Community Financial Services Association, which is the trade 
association for the payday lending industry, held their 2018 
Annual Conference at the Trump National Doral Club in Miami.
    So maybe it is true that the CFPB was not influenced by the 
payday industry when making its determination to rescind the 
rule, but holding their conference at the President's golf 
club, and the Director's prior connection to Mr. Mulvaney 
certainly gives the appearance of impropriety and corporate 
influence.
    I yield back.
    Chairwoman Waters. The gentleman from Florida, Mr. Posey, 
is recognized for 5 minutes.
    Mr. Posey. Thank you very much, Madam Chairwoman.
    Not a single person in this room, I believe, would suggest 
that consumers shouldn't be protected from unfair practices in 
dealing with financial institutions to obtain the products and 
services that they need.
    But I regret to say that the history of the Bureau and the 
legislation that created it has caused many of us pause to see 
what we feared when Dodd-Frank was actually passed.
    The Bureau gets direct funding from the Federal Reserve and 
it is completely outside the oversight of the annual 
appropriations process. The history of the Bureau under Mr. 
Cordray has received just criticism for the heavy-handed way 
that it regulated through enforcement.
    Consumer protection is important, for sure, but when it is 
pursued with excess intimidation as it has been, the very 
consumers we seek to protect suffer a decline in services as 
financial institutions face negative incentives and crippling 
uncertainties to take risks and serve the public. The power to 
regulate should not become the power to destroy. I am pleased 
former Acting Director Mulvaney had a year to right the ship 
and curb the excesses, or many of them. And I look forward to 
your leadership and to the moderate and temperate protection of 
consumers.
    Director Kraninger, in the last Congress I sponsored the 
Bureau Advisory Opinion Act that was ultimately included in the 
House financial package, the CHOICE Act that passed on the 
House Floor. As you know, Federal regulations can be 
complicated and hard for smaller businesses to comprehend 
unless agencies are willing to offer guidelines.
    They can say, we want this done in red. And we know there 
are a thousand different shades of red, from fire engine red to 
Ferrari red and 998 more others in between. And the agency 
seemed to get some kind of thrill out of saying, ``Oh, you 
chose the wrong red.''
    And so, the advisory opinions, I would suggest, would let 
people know specifically which red, just for example, you were 
talking about. Many Federal agencies already do that. And we 
had hoped the CFPB would on its own do that but they refused 
to, said there was no need. I don't believe that is true.
    I was just wondering if you would consider implementing 
such a rule administratively?
    Ms. Kraninger. I appreciate the question. Because, again, 
the clarity of what the rules are and ensuring that 
institutions who are seeking to comply and working to comply 
know what those rules are, is critically important.
    We need to spend time taking enforcement actions against 
those true bad actors who have no intention of complying, and 
that is where the focus should be on the enforcement front. 
That is why we have a great supervision tool; we have 
regulatory authority to provide the clarity you are discussing.
    Mr. Posey. Well, thank you.
    Before us today, we have a bill called the Consumers First 
Act. Now, most of the text of this bill is a set of findings, 
including a long list of complaints about Mr. Mulvaney's tenure 
as acting Director.
    One of the complaints is that he had the nerve to create an 
Office of Cost-Benefit Analysis to see actually what the cost 
was to consumers for the alleged benefits that they receive on 
the other end. Many, many other agencies have those. President 
Reagan issued such a directive. President Clinton and President 
Obama continued along that same line. And it seems like 
applying the same principle to the Bureau regulations makes 
sense to me. Can you comment on that principle?
    Ms. Kraninger. Absolutely, I agree that it is an important 
principle in the way the government should operate in looking 
at the costs and benefits, and weighing those, and quantifying 
them.
    To the extent that there is an opportunity to do that, 
really laying those out is a core part of every part of 
analysis that we should be doing with the Bureau's activities. 
I am certainly looking to do that moving forward, and working 
with the staff about how we do that best and how we best 
organize to do that.
    Mr. Posey. Well, I want to thank you for your direct 
answers, and I want to apologize for some of the contentious 
approaches, antagonistic approaches toward you today. Keep up 
the good work.
    I yield back, Madam Chairwoman.
    Chairwoman Waters. The gentleman from California, Mr. 
Sherman, is recognized for 5 minutes.
    Mr. Sherman. Thank you for being here, Director.
    Dodd-Frank Section 1022 allows the Bureau to exempt certain 
classes from rulemaking at its discretion or to have one rule 
applied to the giant institutions and a separate rule applied 
to smaller institutions, or even small or medium-sized 
institutions. And I would hope that as you go through the 
process, whether it is reviewing older regulations or 
promulgating new ones, that you fully use that power because it 
was not the intent of Congress that one size would fit all.
    I want to draw your attention to what are called PACE 
loans, the property assessed clean energy loans. We are all for 
clean energy, but even if you are buying an improved air 
conditioning system that will help save the planet, you still 
should be protected from any kind of loan document that you 
don't fully understand, and that is why the Economic Growth and 
Regulatory Relief and Consumer Protection Act has led to you 
issuing regulations dealing with PACE loans.
    I know that you have issued the advanced notice of proposed 
rulemaking on this issue. I hope you will give it a high 
priority and move it forward. But if it is still germane, I 
hope that you would consult with California Commissioner of 
Business Oversight Jan Owen. These loans started in California. 
We have had a wealth of experience, we have passed legislation, 
and I think that it can provide you with additional input.
    Ms. Kraninger. Thank you, Congressman. If I may on that, I 
actually have met with Jan, and spoke to her about this topic, 
and I appreciate what California has done on it. We are working 
very closely together on it.
    Mr. Sherman. Thank you. Because these things come in as, in 
effect, something higher than a first trust deed.
    And another issue that has confronted us is wire fraud. I 
had a chance to--when Jay Powell was there at the Fed, this is 
both a bank regulatory issue and consumer protection issue. 
What happens is people are buying a home, so they know they are 
going to be wiring a bunch of money to somebody. Somebody hacks 
their account, impersonates the home seller, and gets them to 
wire the money to the Bahamas, Peru, or Saint Petersburg.
    So I hope that you, along with the bank regulators, would 
look at what we can do. What Britain has done is payee 
identification, so that when you wire money you are not just 
wiring it to a numbered account. You are wiring it to a 
numbered account that must be held in the name of the person 
you are trying to send the money to. And I hope that you would 
view that as a consumer protection issue.
    We have had some recent court decisions that have been 
helpful in interpreting the Real Estate Settlement Procedures 
Act (RESPA). Will the CFPB work to eliminate the uncertainty 
that led to this litigation to begin with, and issue new 
regulations, particularly in light of the new judicial 
decisions?
    Ms. Kraninger. Congressman, I think you are talking about 
the TILA-RESPA Integrated Disclosure? Or is there a particular 
RESPA issue that perhaps I am not as familiar with? The 
disclosures that Congress directed us to do a rulemaking on, 
combining the Truth in Lending Act and Real Estate Settlement 
Procedures Act disclosures process and that is a rulemaking 
that I have heard from stakeholders that there are perhaps some 
questions or clarifications that we need to deal with. So that 
is something that we are looking at.
    Mr. Sherman. I hope that you would look at whether to 
modify or withdraw the 2015 RESPA bulletin which has been 
problematic, and I believe that recent court decisions point to 
different conclusion than that document.
    With that, I will yield back, unless you have any further 
comments?
    Chairwoman Waters. Thank you, the gentleman's time is 
almost expired. You have 20 seconds.
    Ms. Kraninger. Congressman, no, I appreciate the issues you 
have raised and they are certainly all the ones that I am 
looking at. I am not familiar with that 2015 RESPA bulletin but 
we will go back and look at it.
    Mr. Sherman. We will get you some material. Thank you. I 
yield back.
    Chairwoman Waters. Thank you. The gentleman from Michigan, 
Mr. Huizenga, is recognized for 5 minutes.
    Mr. Huizenga. I thank the Chair for that, and it's good to 
see you, Director Kraninger.
    How do you define success for the Bureau?
    Ms. Kraninger. I am obviously listening right now to a lot 
of different stakeholders to hear their perspectives. I am 
starting to think around a philosophy of focusing on prevention 
of harm. Again, we have tremendous tools and powers that 
Congress gave us to drive to that end.
    There are certainly institutions that are also motivated to 
support their customers and consumers and prevent harm. That is 
what is going to be what is best for consumers at the end of 
the day. I think that is certainly, again, a goal that I have 
that doesn't take away from the fact that we know there are bad 
actors who absolutely are seeking to take advantage of and 
engage in unfair practices that need to be addressed.
    But I think that is the kind of message and the power that 
I think the Bureau can bring forward.
    Mr. Huizenga. So it is not just the Bureau that is 
concerned about consumers?
    Ms. Kraninger. No, a myriad of stakeholders are, as I have 
heard across the country and certainly here.
    Mr. Huizenga. Should success be defined by the number of 
complaints that the Bureau receives or the number of fines or 
the amount of those fines or the number of employees that the 
Bureau has? Should that be the standard? Because that is what 
we heard earlier.
    Ms. Kraninger. I do not believe any of those measures alone 
tell the story that is important to tell.
    Mr. Huizenga. Because I kind of think it would be nice to 
have fewer complaints and fewer reasons to have these 
complaints coming in. And, in fact, you had kind of the closing 
statement in your testimony that prevention of harm was a 
primary goal. And I want to commend you on that. Because I 
think that really ought to be the goal. Not the number of 
paychecks that are collected by CFPB employees but about the 
number of people who don't need the services of the CFPB, that 
ought to be your measurement.
    I have a background in real estate and construction, and 
something that has been an issue that I have been dealing with 
for a number of years now, or a number of Congresses, has been 
on points and fees. You certainly have a qualified mortgage 
situation, and I am concerned that there is a difference 
without a distinction that we have here with affiliated and 
unaffiliated companies, and the distinction that that this 
causes is for first time homebuyers especially, but all 
homebuyers, to potentially be paying more in costs, not less in 
costs.
    And I think it stems from a lack of understanding of 
exactly how the mortgage industry--title insurance industry 
works. It may be one way in Massachusetts where lawyers are 
doing this but it is very different in Michigan where everybody 
has to charge the exact same amount for title insurance.
    And in addition to this affiliated/unaffiliated 
distinction, because of vagaries in the Dodd-Frank Act, 
escrowed homeowner's insurance premiums may count as points and 
fees in this, which makes absolutely no sense and is not even 
connected to any of the affiliation or non-affiliation.
    The Bureau has repeatedly asked Congress to deal with this; 
we have attempted to deal with it; I certainly have attempted 
to deal with it in this committee, and this committee has moved 
forward on a few of those things.
    But, in the meantime, I am curious what the CFPB is doing 
to help these smaller companies, especially these title 
insurance companies, compete in the mortgage lending space 
while we are working on a legislative fix. And do you agree 
that supporting these businesses actually increases access to 
mortgage credit and consumer choice and, therefore, lowers 
those costs for those buyers?
    Ms. Kraninger. Certainly, access to credit and the cost to 
consumers are key considerations. I know through the request 
for information that we have put out and the call for evidence, 
there were a lot of ideas on reducing regulatory burden.
    I believe we received 1,750 comments specific to that, 
including on the issue that you raised. So there are a number 
of regulatory issues that, to the extent we have the authority, 
we certainly are looking at how we can prioritize and act on 
them.
    Mr. Huizenga. Are you considering changes to that 3 percent 
cap as you review the QM?
    Ms. Kraninger. That is something we have been asked to 
reconsider. It is something I am talking to the staff 
extensively on the issues that are--
    Mr. Huizenga. Okay. Well, please do. And, by the way, let's 
get into the structure of the CFPB. That is all we can do is 
request. Because the way that my friends--I wasn't here for the 
passage of Dodd-Frank but I am living with the echo effects. 
And I guess for some folks, a double standard is better than no 
standard. Before, they wanted no accountability for this 
Bureau; now, they want all of the accountability in Congress. I 
hope that they will be working with us on this side, who have 
been consistent in asking to make sure that we have the same 
type of structure in place for the CFPB--
    Chairwoman Waters. The gentleman's time has expired.
    Mr. Huizenga. --as other agencies. I yield back.
    Chairwoman Waters. The gentleman from New York, Mr. Meeks, 
the Chair of our Subcommittee on Consumer Protection and 
Financial Institutions, is recognized for 5 minutes.
    Mr. Meeks. Thank you, Madam Chairwoman.
    Madam Director, let me ask first, how many career staff are 
on board currently with the CFPB?
    Ms. Kraninger. We have a total of just about 1,500 
employees on staff now. That is roughly the number.
    Mr. Meeks. Okay. Well, have you worked with any of the 
career staff members there, sort of the upper echelon?
    Ms. Kraninger. I have made it a priority to meet as many as 
I possibly can. I would venture to say I have met with hundreds 
of the staff to date, including in New York and Chicago and San 
Francisco, how could I forget.
    Mr. Meeks. So would you say that many of the career staff 
who are there came because they were motivated and dedicated, 
had some background with regards to consumer protection?
    Ms. Kraninger. I have found all the staff to be truly 
dedicated and committed and, frankly, a very talented staff.
    Mr. Meeks. And do you rely upon them?
    Ms. Kraninger. I absolutely rely upon them.
    Mr. Meeks. And have you heard about any dissatisfaction? 
Because I understand that at least 10 percent of them have 
left.
    Ms. Kraninger. I can tell you that certainly there are 
people--
    Mr. Meeks. Low morale.
    Ms. Kraninger. --who reported--I'm sorry, the?
    Mr. Meeks. They have low morale since Mr. Mulvaney has been 
there, and now you.
    Ms. Kraninger. Yes, certainly it is natural for people to 
depart from an agency. I can give you an example. I actually 
knew a number of the chiefs who departed recently and knew 
their reputation, they knew me--
    Mr. Meeks. But I am just trying to--
    Ms. Kraninger. They were moving on for again their own 
time. They would have been there for 5 or 6 years--
    Mr. Meeks. I am just trying to find out, because when I 
look at your background, for example, prior to this job, you 
never had an interest in consumer protection. You have not done 
anything in that regard, correct?
    Ms. Kraninger. I am a consumer and I would definitely 
stipulate I have--
    Mr. Meeks. No, no. You have never had as a motivation as 
far as your career is concerned, or any of your ambition or 
anything that you have done previously has not related to 
consumer protection.
    Ms. Kraninger. Certainly, I have had an extensive public 
service career and one that I take seriously. And I welcome the 
opportunity to do this job.
    Mr. Meeks. I think the answer to that is no, just looking 
at your resume. And it is a fine resume. But this is a serious 
agency, correct? And, you agree with that, that the agency's 
focus should be on consumer protection and you have hired or 
there had been hired a number of individuals who interviewed 
and went through an interview process.
    And they were evaluated based upon their expertise in 
consumer protection and how they could fulfill their roles. Is 
that not correct?
    Ms. Kraninger. I would hope that everyone who was 
interviewed--
    Mr. Meeks. I would hope so also.
    Ms. Kraninger. --was actually looked at from the lens of 
their interest in the mission.
    Mr. Meeks. Good.
    Ms. Kraninger. And carrying out their responsibilities--
    Mr. Meeks. So, correct. So, when you also see that--because 
it has been reported that there are a number of individuals--I 
look at Mr. Brian Johnson. I guess he is your number two, 
correct?
    Ms. Kraninger. He is the acting Deputy Director, yes.
    Mr. Meeks. Right. And when I looked at his resume, I also 
see that there is nothing in there that he has ever done that 
has resulted from a desire and an opportunity to help and be 
involved in consumer issues.
    Now the reason I asked that question is because if you look 
at any of our other regulatory agencies, you would always find 
at the top of those agencies, someone who has done something 
and has worked in those areas for an extensive period of time.
    Because I would imagine that a President of the United 
States, in putting whomever they put in, they would put someone 
in who has experience in that area.
    Now, if you don't want a--or don't consider an agency to be 
significant and important because the mission of this agency is 
consumers, then you put in someone who may not have that 
experience. Generally, you would work your way up.
    From the way I look at it, though, I don't see anyone now, 
I saw before those who had some experience, were in the top of 
the chain at 10 percent. Most of those who left weren't those 
guys on the bottom, they were those on the top who came there 
because their mission in life was to make a better way.
    And now they felt that under the current leadership, they 
cannot perform their jobs to do what they were there to do. And 
as a result, they left. I am out of time, unfortunately.
    Ms. Kraninger. If I could, Madam Chairwoman, I would just 
note that I am sure you would stipulate that congressional 
staff absolutely care and have experience in the issues, and 
frankly, make great hires in the Executive Branch and across 
the government and in industry as well.
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Missouri, Mr. Luetkemeyer, is now recognized for 
5 minutes.
    Mr. Luetkemeyer. Thank you, Madam Chairwoman. Welcome, 
Director Kraninger. The last time Mr. Mulvaney reported for 
this committee, he outlined four ways to make the CFPB more 
transparent and accountable.
    Those four proposals included requiring the CFPB to be 
funded through the congressional appropriations; requiring 
major CFPB regulations to be reviewed by Congress; compelling a 
CFPB Director to answer to the President; and creating a 
dedicated Inspector General for the Bureau.
    I guess my first question will be, do you agree that these 
principles would improve transparency and accountability for 
the CFPB?
    Ms. Kraninger. Congressman, I will say that is a matter for 
Congress to determine. I can tell you I am committed with the 
authority that I have to transparency and accountability.
    Mr. Luetkemeyer. Do you believe that Congress should enact 
these principles, then?
    Ms. Kraninger. I believe that is up to Congress. I 
recognize where you are coming from, and certainly I welcome 
additional accountability and transparency.
    Mr. Luetkemeyer. Very good. Yes, I think this is a concern 
that we all have. And I think going down the road of 
questioning your abilities for the job, this is a job for the 
Senate to confirm you.
    And I think we need to continue to require of you that you 
do what the law says, which is I think what Mr. Mulvaney tried 
to do: to get the CFPB back in this pew so to speak to be able 
to adhere to the law and the principles of the law. So, we 
thank you for that.
    In terms of the recent actions taken by the CFPB on payday 
lending, the proposed rulemaking discusses how aspects of the 
original final payday rule had insufficient evidence and legal 
support. What about this evidence of legal support was 
insufficient in your view?
    Ms. Kraninger. I'm sorry, I missed the premise--are we 
talking about the short-term small dollar lending rule, sir? Or 
is there something else?
    Mr. Luetkemeyer. Yes, in the rulemaking, discuss how 
aspects of the final payday rule had insufficient evidence and 
legal support to be able to come to a decision, apparently. And 
so, what about this evidence of legal support is insufficient, 
in your mind?
    Ms. Kraninger. The basis of the rulemaking was certainly 
the determination that it was inherently unfair and abusive to 
engage in short-term small dollar lending without stipulating 
the mandatory underwriting requirements that were laid out in 
the rule itself. That is the subject of an ongoing litigation, 
and the courts in fact have stayed our ability to move forward 
with the rule. Last year, the Bureau told the courts that there 
would be reconsiderations.
    I look forward to the full evidence. But that is largely 
what this is about. It is that the basis of the rulemaking 
itself and the opportunity to gather the evidence on that 
issue.
    Mr. Luetkemeyer. So what you are saying is that the 
previous Administration's Director basically didn't do his due 
diligence on this and didn't support his decisions with the 
kind of evidence and fact-based stuff that would be important 
to be able to put something like this together? Is that what 
you basically just said?
    Ms. Kraninger. Congressman, I certainly would not say it 
that way.
    Mr. Luetkemeyer. You wouldn't say it that way, well 
doggone.
    Ms. Kraninger. I have a responsibility to protect the 
record of the agency and we are reconsidering it. But--yes.
    Mr. Luetkemeyer. Okay, let me ask the question this way: Do 
you suspect other actions by the Cordray regime were conducted 
with insufficient evidence and legal support?
    Ms. Kraninger. As I noted in my opening statement, I have 
spoken to Director Cordray, and I do appreciate the challenges 
of standing up an organization, and I know that the staff of 
the Bureau have certainly done their best with not a lot of 
time on a lot of different tasks that they undertook in the 
early days of the agency.
    Mr. Luetkemeyer. Just a final comment here before I yield 
back. In the fall of 2018, in some annual report submitted to 
Congress, the CFPB listed the current enforcement actions of 
the Bureau. I went though and counted those actions, and there 
are roughly 35 current enforcement actions ongoing by the CFPB.
    I know you cannot discuss ongoing cases. However, many of 
the cases currently pending for the CFPB are from the Cordray 
regime. For these cases, the CFPB, in my judgment, should look 
directly at the consumer harm. If consumer harm is present, 
CFPB needs to pursue these bad actors.
    However, if there is no consumer harm, I would hope that 
you would dismiss the case as quickly as possible. The CFPB 
needs to protect consumers and be good stewards for the tax 
dollars and not tie up businesses with unnecessary litigation 
for years to come. Would you like to comment?
    Ms. Kraninger. I certainly am reviewing all of the ongoing 
matters. I take advice and input from all sides, and certainly 
from my own staff, so we are certainly looking at the issues 
here and making the best use of our resources to protect 
consumers as a focus.
    Mr. Luetkemeyer. Thank you. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Missouri, 
Mr. Clay, Chair of our Housing, Community Development, and 
Insurance Subcommittee, will be recognized for 5 minutes.
    Mr. Clay. Thank you, Madam Chairwoman. Director Kraninger, 
in a report published in November of 2018, the Senate Banking 
Committee's minority staff noted that the enforcement role of 
the Bureau is intended to be mandatory, not discretionary.
    In all fairness, this was written in response to Mr. 
Mulvaney's actions which stripped the agency of its enforcement 
and supervisory powers. And why is that important? Because the 
Bureau had adjudicated over $400 million in remediation for 
consumers who were harmed under fair lending statutes and 
policy. But post-Mulvaney, zero dollars--not one penny has been 
reclaimed for consumers. Have you read this report?
    Ms. Kraninger. Yes, Congressman, I have read the report.
    Mr. Clay. And what are the staffing plans for fair lending? 
How many attorneys and examiners would devote all or a portion 
of their time to make sure our markets don't discriminate?
    Ms. Kraninger. I appreciate the question, Congressman, 
because fair lending continues to be a substantial priority.
    I can tell you I am absolutely looking now at the resources 
that are allocated across the Bureau, and particularly within 
supervision enforcement and fair lending where that supervision 
and enforcement work continues on fair lending, as well as in 
the office of fair lending which has moved into the Director's 
office. It is looking at coordinating the fair lending 
activities and issues across the Bureau and working with 
partner agencies on that issue.
    Mr. Clay. Okay, give me a number--how many attorneys and 
examiners?
    Ms. Kraninger. I don't have the specific number of that--
now, I can tell you that many of the examiners and enforcement 
attorneys who worked on fair lending before continue to do 
that, and I have talked with some of them about some of the 
cases they are working on.
    Mr. Clay. Wait a minute, now, does your staff sitting 
behind you have a number?
    Ms. Kraninger. I can tell you it is certainly--it is 
similar to what was the case before the reorganization, but I 
may have to get back to you on very specific--
    Mr. Clay. Okay, give us a hard number, please.
    Ms. Kraninger. Yes.
    Mr. Clay. Are you familiar with a coalition called 
Americans for Financial Reform?
    Ms. Kraninger. Yes, I am.
    Mr. Clay. Okay, Linda Jun, who will provide testimony this 
morning, notes in her statement that after 2 months on the job, 
you haven't gotten the memo. She notes that you have already 
presided over the proposed repeal of the heart of the CFPB's 
rule against payday and car title lending abuses, and lax 
enforcement actions that are missing the mark when it comes to 
trying to curb abuses that harm consumers.
    And harm consumers in my district in St. Louis, Missouri, 
and across this nation--and I ask you in all sincerity, are you 
prepared to reverse the course of your predecessor, Mick 
Mulvaney, and return the CFPB to its mandate of consumer 
protection?
    Ms. Kraninger. I pledge to you, Congressman, that 
protection of consumers and the mission of this agency is at 
the heart of every decision that I will make, and certainly has 
been at the heart of every decision I have made so far.
    Mr. Clay. Okay. Consumers are supposed to get relief when 
they are harmed, so can you explain how they are entitled to 
relief in your last few orders like payday lending? What kind 
of relief is there for consumers?
    Ms. Kraninger. So there were civil monetary penalties that 
were imposed in several of the cases that I had the honor of 
signing in terms of the consent orders that have finalized 
under my term. It is a years-long investigation in many cases, 
as you know, to get to this stage of the game.
    The one thing I would say is that restitution and harm to 
consumers, and the remedies there are certainly something that 
we consider as we are seeking to get justice in these cases. 
There are a lot of factors that go into the decision to, for 
example, bring suit and litigate, or settle a case. In 
addition, the settlements consider that remedies, injunctive 
relief and--
    Mr. Clay. Okay--
    Chairwoman Waters. The gentleman's--
    Mr. Clay. My time is up--but restitution is important for 
consumers.
    Chairwoman Waters. The gentleman's time has expired. The 
gentleman from Oklahoma, Mr. Lucas, is recognized for 5 
minutes.
    Mr. Lucas. Thank you, Madam Chairwoman. Director Kraninger, 
many members of this committee have some concerns about the 
recent small-dollar rule from the Bureau. And I also have 
concerns, specifically, that the rule allows three pings on an 
account for an automatic payment.
    In my opinion, this feels like an arbitrary number that has 
no real consequences. For longer loans and loans offered by 
online lenders, an automatic payment is often the only way 
payment happens over the life of the loan. If the number stays 
at three, I worry that lenders who rely at all on automatic 
payments might be forced to use the third ping as a balloon 
payment, or send the loan to the collection agencies.
    In my opinion, that puts lenders in a tough spot--we are 
trying to eliminate balloon payments, and also find ways to 
preserve credit scores of consumers. The payments section of 
the proposed rule, I think endangers both of those objectives. 
Director, can you walk us through any steps you think should be 
taken to ensure that the payments options don't damage credit 
reports?
    Ms. Kraninger. I appreciate the question. I have certainly 
heard from a number of entities on the payments portion of the 
rule. Our focus on the reconsideration of the underwriting 
requirements was, again, related to the legal and factual 
basis. That was a little different when it came to the payments 
provisions.
    In the reconsideration we said that certainly entities can 
submit comments on the payments portion, but we are not looking 
at that at this time through that method. But we have also 
gotten a petition for reconsideration of the payments 
provisions and that is something that under the Administrative 
Procedure Act, we have to consider. So the short answer is that 
we are considering the issue there and looking at it.
    Mr. Lucas. I will give you a short question, would you 
support reopening the payment portion to implement those steps?
    Ms. Kraninger. I don't want to pre-judge the outcome of 
that process, Congressman.
    Mr. Lucas. Thank you.
    Lastly, Director, I want to commend your agency for being 
willing to consult with lending entities of all sizes and 
shapes. I represent a few in Oklahoma that really appreciate 
the Bureau's willingness to discuss various issues, and I thank 
you for that.
    And in the efficient use of my time, I yield back, Madam 
Chairwoman.
    Chairwoman Waters. Thank you very much.
    The gentleman from Georgia, Mr. Scott, is recognized for 5 
minutes.
    Mr. Scott. Thank you very much, Madam Chairwoman.
    Director, it is very important for you to understand why 
this hearing is so important. It is important for this reason. 
First of all, Director Mulvaney did some very, very terrible 
things in his position as Director that really affected what is 
the sole purpose of the CFPB: consumer protections.
    First, he stopped monetary payments from the Civil Penalty 
Fund to consumers who were harmed. Second, he stopped efforts 
to combat discrimination for consumers and he failed to promote 
fair lending.
    And this one gets me most of all. Under Director Mulvaney, 
he abandoned supervision of regulated entities for compliance 
with the Military Lending Act, which gives critical protections 
for our precious military servicemembers and their families.
    That is why we are here, to erase those things. And so that 
is why I am a proud co-sponsor with Chairwoman Maxine Waters of 
the Consumers First Act. And here's what we want to do, we want 
to reverse these things. And they are there to protect 
consumers.
    We also want to re-establish a definite and dedicated 
Student Loan Office. So many of these problems emanate from our 
student loans, and we have to correct that. And it will re-
establish transparency at the CFPB. Now, will you support our 
bill?
    Ms. Kraninger. Congressman, I understand that--
    Mr. Scott. No, no, no, I don't have much time. I have to 
know your answer. Yes or no, please?
    Ms. Kraninger. Congressman, I--
    Mr. Scott. You are a very pleasant person, I enjoyed 
meeting you, but please, will you support the--I don't see how 
in the world you can't. That is your job. To lessen the 
protections for our military? To do away and to stop monetary 
payments for consumers who are harmed? Won't you support us?
    Ms. Kraninger. Congressman, I very much support your 
oversight actions. And what Congress finds--
    Mr. Scott. Well, all right. Let me say this then--I 
understand, because I have another important one coming--I want 
to talk with you. I want to help you be a great Director here. 
But in order to do that you have to help us fix the damage that 
your predecessor did.
    I have another question, the FDIC said in 2017, that 25.2 
percent of all American families are unbanked or underbanked. 
So I have introduced a bill that would put your agency at the 
leadership in helping the unbanked and underbanked establish 
stable relationships with depository banks. Could you support 
that bill?
    Ms. Kraninger. I absolutely share your interest in the 
issue--
    Mr. Scott. No, no, but--
    Ms. Kraninger. --and have taken actions on it.
    Mr. Scott. Listen, we have a serious problem here. And I 
hope you will leave this hearing with the knowledge that we 
have to correct this mess--and it is a mess. I like Mr. 
Mulvaney, we served together. He is a friend. He served on this 
committee. But you know it was the wrong situation for him when 
the President turns right around and puts him in another 
position at the same time: he is Director of the CFPB, and he 
is the Budget Director. That lets you know right there that 
consumer financial protection was on a backburner at this 
Administration.
    Chairwoman Waters. The gentleman's time has expired.
    Mr. Scott. Thank you.
    Chairwoman Waters. The gentleman from Kentucky, Mr. Barr, 
is recognized for 5 minutes.
    Mr. Barr. Thank you, Madam Chairwoman.
    And Director Kraninger, welcome to the committee. 
Congratulations on your appointment to the CFPB. I want to 
follow up on my friend, Mr. Scott's, line of questioning 
related to the Military Lending Act.
    And I ask this question to you, not only as a member of 
this committee, but also as a member of the House Veterans 
Affairs Committee. And we are all very interested in making 
sure that our military families, not only are protected, but 
also have access to credit given the financial strains that 
many of these families are facing on an annual basis.
    Director, my staff shared with you a draft of my latest 
legislation that would grant Military Lending Act supervision 
authority to the CFPB. And I would like to quickly discuss the 
need for this legislation. My friend from Georgia's questions 
seemed to insinuate that Director Mulvaney pulled back the 
Bureau's supervisory authority.
    But just for the record, clear this up for us. Do you 
believe that the current law, that the current statute actually 
gives the CFPB authority to supervise lenders for MLA 
compliance?
    Ms. Kraninger. I do not.
    Mr. Barr. And so the issue is not that your predecessor 
withdrew the CFPB from supervisory activities; it is that the 
law does not grant the CFPB that authority, is that your 
interpretation?
    Ms. Kraninger. That is correct.
    Mr. Barr. And would you, Director Kraninger, like a bill 
like mine to fix that and actually grant specifically in 
statute authority to you to supervise for MLA compliance?
    Ms. Kraninger. Yes, I would, and I have submitted draft 
legislation to the Members here.
    Mr. Barr. Thank you. And I think that helps, maybe, clear 
this up. Now, I do want to address Chairwoman Waters' draft 
bill. In her draft text released before this hearing, and I 
think we all have a copy of it, there is a provision that would 
direct the Bureau ``to reverse all anti-consumer actions taken 
during Mr. Mulvaney's tenure.'' And this presumably would 
include the MLA supervision issue. Would that provision, and 
would that language in her bill, prevent the Director who 
follows your tenure from acting under the same interpretation 
that you just provided to the committee?
    Ms. Kraninger. I don't have that particular language in 
front of me, so I don't want to offer a legal opinion as I am 
sitting here, but I do want explicit authority from Congress to 
carry on this kind of supervisory work.
    Mr. Barr. Yes. And so, let me ask the question a different 
way. Wouldn't it be better that we would--if we wanted to do 
this, if we wanted to confer a CFPB supervisory authority for 
MLA, wouldn't it better to clear this up with an explicit 
statement giving the Bureau supervisory authority as opposed to 
the language that I just read to you?
    Ms. Kraninger. Yes, getting explicit authority is what I am 
seeking.
    Mr. Barr. Okay. Thank you for that. Let me ask you about 
unfair, deceptive or abusive acts and practices (UDAP) really 
quickly, in the remaining time that I have. Section 1031 of 
Dodd-Frank gave the Bureau what is called UDAP authority.
    However, when I talk to lenders back in Kentucky, they tell 
me that there is no clear definition or guidance regarding what 
exactly constitutes an ``abusive act or practice under UDAP.''
    Further, these institutions state that they are in full 
compliance with the regulations of their primary regulator, but 
because of the lack of clarity from the Bureau about UDAP 
violations, and what constitutes an abusive act or practice, 
they sometimes fall short of these unknown standards.
    The result of this regulatory uncertainty is less financial 
innovation, less consumer choice, less competition, and, 
ultimately, less access to credit for Americans. Can you 
provide more clarity about what constitutes a UDAP violation, 
and what do you plan to do to provide that clarity?
    Ms. Kraninger. So with respect to the definition of 
``abusive,'' there certainly is one in the statute, and the 
Bureau has taken actions in its history that rely on that 
definition. The one thing that I would note also though is that 
the regulatory agenda for the agency includes consideration of 
pre-rulemaking activity to have a discussion around that 
definition.
    In particular, the statute contemplates--it involves an 
unreasonable advantage taken of a consumer. If there is an 
unreasonable advantage, then there must be reasonable 
advantage. And certainly, the definition of that reasonable 
advantage is one that deserves some exploration and 
conversation in a transparent way.
    Mr. Barr. Thank you. I encourage you to pursue that and 
provide additional guidance and clarity for the regulated 
parties.
    Chairwoman Waters. The gentleman's time has expired.
    Mr. Barr. Thank you. I yield back.
    Chairwoman Waters. The gentleman from Texas, Mr. Green, the 
Chair of our Subcommittee on Oversight and Investigations, is 
recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. I thank the witness 
for appearing as well. Madam Director, you are a Georgetown 
lawyer. Is that correct?
    Ms. Kraninger. That is correct, sir.
    Mr. Green. And as a Georgetown lawyer, you understand that 
the public has a right to know certain things, true?
    Ms. Kraninger. Absolutely. I believe in accountability and 
transparency.
    Mr. Green. And as a believer in accountability and 
transparency, you understand that persons who commit felonies 
are exposed to the public before they are convicted, and some 
who are never convicted have their names published. Some of the 
President's friends have been charged, and we know who they are 
and we know what at least one is charged with. That is the 
public's right to know. Do you think the public doesn't have 
the right to know this kind of information?
    Ms. Kraninger. Certainly, when a case is filed and the--
    Mr. Green. I take it your answer is ``yes.'' Thank you so 
much. And I would also add that the public has a right to know 
because they can make decisions based upon what they know. The 
Consumer Complaint Database has served us well, 1.5 million 
consumers have many complaints, and 97 percent of these 
consumers receive timely responses.
    They have a right to know; they file their complaints. 
There is a belief that you do not support the public's right to 
know, that the public should be placed in a position such that 
regulators can find out about these complaints but that the 
public can't. That is what people think.
    My guess is that if you were given the opportunity to say 
that you would have the complaint database that exposed Wells 
Fargo that you would have this complaint database continue to 
remain public because the public has a right to know. Do you 
think the public has a right to know and see the complaints 
that are not felonies, that are not criminal charges, but to 
see these complaints?
    Ms. Kraninger. Congressman, you are asking a very 
reasonable question.
    Mr. Green. I understand that it is reasonable. If I may, I 
don't mean to be rude, crude, and unrefined, but this is a 
question wherein I will tell you the answer. The answer is yes, 
I think the public has a right to know. Now if you hesitate or 
equivocate--if you don't do this without hesitation, 
reservation or consternation, then I have to conclude that you 
don't think the public has a right to know. Again, I ask, does 
the public have a right to know?
    Ms. Kraninger. Congressman, the statute establishes a 
process for submission of complaints--
    Mr. Green. I do understand. But will you allow that 
process, that statute, to continue to expose the names of the 
complaints that have been filed, as has been the case for over 
1.5 million complaints? No consumers are complaining about 
this. The public believes that it has a right to know. Now I 
will give you final response, and when you finish, then I will 
give my commentary.
    Again, will you keep the database in place because you 
understand that even if felons, they have their names published 
and they are found not guilty, not felons, people just simply 
charged, found not guilty, or cases are dismissed--you are a 
Georgetown lawyer, you know many cases are dismissed, but their 
names have been exposed to the public. Does the public have a 
right to know about these complaints at the Consumer Financial 
Protection Bureau by and through its complaint database?
    Ms. Kraninger. We have a responsibility to take in 
complaints, and absolutely--
    Mr. Green. I understand. Look, I know a ``no'' when I hear 
it. I know when a person says, ``no.'' Madam Director, you are 
not the person for this job. You don't believe in the public's 
right to know. I yield back.
    Chairwoman Waters. The gentleman's time has expired. Mr. 
Williams, the gentleman from Texas, is recognized for 5 
minutes.
    Mr. Williams. Thank you, Madam Chairwoman. And first of 
all, a lot of people are beating up on Mr. Mulvaney. I thought 
he did a great job. Ms. Kraninger, I think you are doing a 
great job and you are certainly qualified. And thanks for 
speaking to us, Director. I start off asking all witnesses 
before this committee a simple question. Are you a capitalist 
or are you a socialist?
    Ms. Kraninger. I am a capitalist.
    Mr. Williams. Thank you for that. I am, too. I am a Main 
Street businessman, have been for 50 years, and I am a car 
dealer. And I am probably the only person in this room who was 
affected by Operation Chokepoint, where the bankers decided 
that they would not want my business anymore because 
government--that the government was playing such a heavy hand 
on with--with CFPB. And for those who think Obamacare was a 
mess, I can tell you the CFPB was a mess to Main Street 
America; it cost a lot of jobs. And we have been talking about 
consumer protection and maybe since you are a consumer, you are 
qualified for this job.
    And I can tell you the best people to take care of the 
consumer is Main Street America because if we don't take care 
of consumers, we don't have consumers. And so this is a lot of 
bureaucracy we do not need. During the Obama years, under the 
direction of Director Cordray, it seemed as if the sentiment of 
the CFPB was that business is bad, and if you are being 
profitable, it must be because you are taking advantage of the 
consumer rather than giving service to the consumer. This 
simply isn't true and everybody knows that. And profits are a 
good thing, not a bad thing.
    So I asked Federal Reserve Chairman Powell the other day a 
question, and I would love to get your opinion as well. The 
question is this: Do you believe that the probability of an 
industry is justification for increasing regulations?
    Ms. Kraninger. No, I do not.
    Mr. Williams. Thank you. And I said earlier, I am a small 
business owner: 50 years. I know how uncertainty affects 
business decisions. This is especially true for smaller 
financial institutions that operate along tighter profit 
margins. I received information from a community mortgage 
lender whose compliance costs for every single loan increased 
by 35 percent because of the uncertainty surrounding CFPB 
supervision authority. They had to hire more compliance 
officers than they did loan officers. And it was a lot easier 
to just not make the loan than to mess with this bureaucracy. 
So when these small institutions have to spend more money on 
compliance, it reduces, as I said, the amount of money that is 
loaned in the communities they serve and affects the consumer 
and affects the economy.
    So my question is, what steps has the CFPB taken to try to 
better tailor regulations and supervision for smaller 
institutions?
    Ms. Kraninger. I truly appreciate that question, 
Congressman, because that is what I have been asking as well. 
Certainly, reduction of the burden is something that we have as 
a statutory responsibility on institutions as well as 
authorities to look at tailoring appropriately based on 
considerations, again, in a lot of the different statutes that 
we enforce and regulate under.
    One issue about which I have heard extensively from smaller 
entities, and one thing that I am looking at--and we are in the 
middle of the discussions again about it is how to most 
effectively carry out our examination process, certainly 
looking at, to your point, how much time we spend with 
different institutions, how much we require of them when they 
are setting up their compliance management system.
    So many of them feel helped by the examination process, so 
we have had those conversations. I think, too, on the 
regulatory front, as I noted to one of your colleagues, there 
were 1,750 comments that came back on reduction of regulatory 
burden. And we are working through those. Many of them were 
comments about how best to tailor. So I am certainly looking at 
that issue.
    Mr. Williams. Thank you. Leadership from the top down is 
important in any business or government agency. From its 
conception, the CFPB has commonly been referred to as Elizabeth 
Warren's brainchild. Now I don't think that is a very good 
label to have. If you want to be taken seriously, you don't 
need that. And as a nonpartisan financial regulator, you don't 
want to be an organization that is being described as a 
brainchild, so how have you been changing the culture of the 
CFPB into an agency that protects consumers without removing 
choice from the marketplace?
    Ms. Kraninger. Congressman, I think that is an important 
point as well. Certainly at this stage, I am 86 days in, and 
that includes weekends, holidays, and snow days that we have 
had, so it is a conversation that we are having. I believe the 
staff is dedicated and committed and frankly excited to have 
stable, consistent leadership and I am setting that tone with 
respect to making sure that we are looking at maintaining 
choice in the marketplace and understanding what impact we have 
on consumers' access to credit when we are looking to take 
action.
    Mr. Williams. Thank you very much. I yield back.
    Chairwoman Waters. The gentleman from Illinois, Mr. Foster, 
is recognized for 5 minutes.
    Mr. Foster. Thank you. Director Kraninger, thank you for 
being here today.
    I would like to talk about an issue of tremendous 
importance to the people in my district and to 44 million 
Americans across the country, the enormous economic and 
consumer protection challenges posed by student debt. Today, 
you have heard a lot of enthusiasm for fact-based policies here 
and there is a considerable concern across the ideological 
spectrum about the significant lack of data for what is now the 
second largest consumer debt market in the country.
    Collecting data to better understand consumer markets and 
so being able to anticipate the next crisis before it happens 
was a critical design goal when we created the Bureau less than 
a decade ago, one that I hope the Bureau still considers a top 
priority. And with that backdrop in mind, I was heartened to 
see the Bureau under Director Cordray take steps to begin 
systematically collecting data on the student loan market. In 
February 2017, the Bureau, using its specific authorization 
under Section 1022(c)(4) of Dodd-Frank published a proposal to 
require that the largest private companies in the student loan 
industry, including some of the biggest banks and the 
government's biggest contractors, provide data directly to the 
Bureau about the performance of more than $1 trillion in 
outstanding student debt and about the borrowers' experiences 
in repaying that debt.
    This included information, for example, about the total 
size of the loan market, the percentage of the loan 
modifications that are entered into, delinquency rates, 
forbearance of the deferment rates, default and discharge 
information. You know, basic stuff, but all of which would be 
crucial in understanding the student loan market at a macro 
level and potentially preventing version 2.0 with the mortgage 
lending crisis. And after taking public comment on this 
proposal, the Bureau then submitted it to the OMB in September 
2017, 8 weeks prior to Director Cordray's departure.
    The OMB would then normally evaluate comments from the 
public and authorize the Bureau to finalize this market 
monitoring initiative, collecting data and greatly improving 
the transparency of the student loan market. But in this case, 
no OMB approval was issued, and your agency has done nothing. 
Notably, Mick Mulvaney was operating both as acting Director of 
the CFPB and the Director of OMB during much of this time. It 
now appears that this critical data collection initiative has 
been in a state of limbo for nearly a year and a half, during 
which time more than 1.5 million Americans defaulted on their 
student loans.
    What I am trying to understand is why this important 
initiative, one that simply seeks to gather data and shed 
greater transparency on the student loan market, has been 
ignored for so long. You know, I am a scientist, and I see this 
as really a troubling pattern from this Administration of 
suppressing even the collection of data, when they are afraid 
that the facts may not support their opinions, a pattern that 
we see everywhere from climate change to the default rates for 
for-profit colleges. So Director Kraninger, first question, did 
Betsy DeVos or any other political appointees at the U.S. 
Department of Education provide feedback or encourage the 
Bureau to abandon or delay this proposal?
    Ms. Kraninger. Congressman, I am sorry to say that I am 
unfamiliar with the proposal you are referring to. I have 
actually just asked the staff too, and we are trying to find 
out what it is. I have not had anyone mention this to me 
before.
    I understand why you would be interested in it. I certainly 
understand the extent of the marketplace and the growing 
student debt issues. It is something that I am paying attention 
to. I can tell you some things that I am doing in this space, 
but I will have to get back to you on this particular study.
    Mr. Foster. Okay, yes, I would like to know specifically 
any feedback you received from any political personnel after 
the Department of Education, whether the Office of Management 
and Budget has ever communicated any specific concerns about 
this, or did they just sit on that?
    And does the Bureau plan to retract it, or continue? And I 
encourage you to perhaps contact Mr. Frotman, a member of the 
second panel, who is familiar with some of the details in this.
    So let's see, I have 44 seconds--just quickly to another 
issue, it has been noted that several recent CFPB enforcement 
settlements didn't require compensation for victims for any of 
the harm they suffered from the firm's conduct, and so who 
personally takes that decision as to whether or not a firm 
should have to pay restitution to victims?
    Ms. Kraninger. That is a complicated issue. Certainly in 
the course of the investigation, the enforcement attorneys are 
looking at trying to quantify consumer harm and look at how 
they can identify--
    Mr. Foster. But who makes the decision, do you make the 
decision, or--
    Ms. Kraninger. Ultimately, I make the decision based on the 
recommendations of the staff who worked the issue and reviewed 
it along the way to get to me.
    Mr. Foster. Thank you. I yield back.
    Chairwoman Waters. The gentleman's time is up. The 
gentleman from Colorado, Mr. Tipton, is recognized for 5 
minutes.
    Mr. Tipton. Thank you, Madam Chairwoman. Director, thank 
you for being here, I appreciate the effort that you have made 
in the 86 days--I think it was commented--that you have been in 
office. I come from a rural district, and one of the most 
important things is to be able to grow jobs and to be able to 
create opportunities, and one of the big issues that we face 
continues to be--and we have had the concern in this committee 
as well, is going to be on access to capital. I do coach here 
the Small Business Caucus, here on the House side.
    We have had a variety of different meetings and I thought 
there were some interesting statistics that came out. The U.S. 
Chamber of Commerce just reported in the fall of last year that 
lending to small businesses--which are the businesses that make 
up my district--is down 13 percent since 2008.
    Now on top of that, a recent report which came from the 
Senate found that women account for just 16 percent of the 
conventional small business loans and received only 4 percent 
of all commercial loan dollars. So Director, is this an issue 
that has come to your attention during your limited tenure at 
the CFPB? And do you think that this is part of an issue that 
could possibly be addressed in terms of some of the regulatory 
burden that you mentioned?
    Ms. Kraninger. Yes, in terms of small business lending we 
have--when it comes to the Equal Credit Opportunity Act, and we 
have some authority there to look at discrimination in small 
business lending which we have done at our supervisory and 
enforcement work.
    And we also have responsibility under Section 1071 to enter 
into a rulemaking to try to assess what is happening in this 
small business lending space.
    Mr. Tipton. Great. I appreciate that, and would encourage 
you to go ahead and formalize that rule to be able to get that 
data--7 out of 10 jobs in the country are created by small 
businesses. A lot of them are out in the rural areas, and I 
think that is going to be important for us to be able to keep 
the economy moving.
    You have had a few comments that you have been making here 
that I would like you to maybe follow up and expand on a little 
bit. Your predecessors had opposing views when it came to the 
use of enforcement actions and determining policy. Could you 
expand on that, maybe just a little bit more, would you share 
those thoughts on regulations versus enforcement?
    Ms. Kraninger. I am certainly committed to having clarity 
in the rules that entities that are seeking to comply can rely 
upon, and I do think that the regulatory tool that Congress 
gave the Bureau is an important one in terms of setting out 
what those rules are. Certainly, the supervisory and exam 
process that we have is also, again, geared to that.
    I am looking at all of the tools that the Bureau has in 
trying to assess how best to utilize them and apply them in 
terms of a rubric perhaps of prevention of harm, and thinking 
about how that can really assist in thinking about the way that 
we carry out our mission. When it comes to enforcement 
specifically, it is absolutely still a critical tool that we 
use because we know there are entities that have no intention 
of trying to comply.
    They are not going to be the ones that are going to self-
report what they have found or mistakes that have been made. 
They are not going to be in a productive relationship with 
their regulator, they are going to be thwarting and they are 
going to be engaged in unfair practices vis-a-vis consumers, 
and that is where the enforcement tool really is most effective 
and where we need to focus it.
    Mr. Tipton. So would we be in agreement that you don't 
enforce first, then regulate? You stay within the boundaries of 
congressional intent and the law? And would you make any 
recommendations on--is there something that Congress should 
actually be doing to help give you clarity on those boundaries?
    Because this is an unbridled agency that it seems when we 
looked at Director Cordray and the enforcements that he was 
putting into place that extended, in the opinion of many, far 
beyond some authorities--is there something that we should be 
doing legislatively to be able to put those guardrails in place 
to give you greater clarity?
    Ms. Kraninger. The law is certainly my guidepost in the 
activities that I will undertake, and the approach I am taking 
to the position of Director. I do leave to Congress 
consideration of what other things should be enacted, and I 
encourage, as I mentioned earlier, continued transparency and 
accountability of the agency.
    Mr. Tipton. And with just a few seconds left, you didn't 
really get a chance to answer on the fair lending, in regards 
to in the investigative process. I assume you don't 
individually do that, but do you want to lay out quickly what 
that process is for fair lending?
    Ms. Kraninger. Yes, it is similar to all the other 
enforcement actions. The enforcement attorneys are the ones who 
open investigations and they certainly carry that through 
research stages, and others it takes many, many months and 
years to build the case for those who are litigators they know 
that. Certainly, it becomes public at the time of actually 
filing the case, or having a consent order in place.
    Chairwoman Waters. The gentleman's time has expired--
    Mr. Tipton. I yield back.
    Chairwoman Waters. The gentleman from Missouri, Mr. 
Cleaver, the Chair of our Subcommittee on National Security, 
International Development and Monetary Policy, is recognized 
for 5 minutes.
    Mr. Cleaver. Thank you, Madam Chairwoman. I will announce 
my pedigree, as I guess we are going to start doing that. I am 
a Methodist, not a capitalist or a socialist, just a Methodist.
    What I would like to do is to focus in on--well, first of 
all, I was here when we did Dodd-Frank and I didn't miss any 
meetings. I never remember having a meeting about how we could 
politicize it. It didn't happen; in fact, it was the contrary.
    We were trying to figure out a way to avoid the 
politicization of it by having a Director who would go over one 
term, so that it would be possible for a Director to serve, 
actually, under two different Presidents. And there was no 
funding to be received from Congress, there was no decision to 
be ratified by the President or Congress, and the budget wasn't 
going through the congressional budget process.
    Do you agree with those decisions that we made as it 
relates to the CFPB?
    Ms. Kraninger. Congressman, I take the law as it has been 
presented to me in the responsibilities that I have as 
Director. I did note that I am going to take advantage of the 
flexibility I have in terms of administering the agency when it 
comes to the resources, certainly, as an example.
    Mr. Cleaver. Because what I just laid out about the 
independence is actually the same independence for the Federal 
Reserve. And actually the Federal Reserve, as you very well 
know, provides the funding. And their structure is very similar 
to the--to the Federal Reserve. Do you support the Federal 
Reserve as an independent agency as well?
    Ms. Kraninger. I will leave to Congress these issues in 
terms of how these entities are established, but I certainly 
work closely with them.
    Mr. Cleaver. Do you believe that the CFPB should be 
independent?
    Ms. Kraninger. I am carrying out my duties as Director, 
consistent with the independent agency status.
    Mr. Cleaver. I am with you on that, except that the problem 
was we tried to make sure that was one political appointee, the 
President appointed Mr. Cordray, one. And I am just wondering 
what the number of political appointees is today?
    Ms. Kraninger. The number of political appointees, I would 
say, specifically it is a Schedule C appointment. The Dodd-
Frank Act did give us the ability to hire under all of the 
Title V authorities, including Schedule C.
    Mr. Cleaver. Yes, I am not mad.
    Ms. Kraninger. There are 13 Schedule Cs at the Bureau 
today.
    Mr. Cleaver. Yes, that is what I was getting at.
    Ms. Kraninger. Yes.
    Mr. Cleaver. I am not upset. I am not growling or anything. 
I want you to look at the difference. We were saying, let's 
depoliticize it. I think you would agree that the 
politicization is a little higher, based on your answer a few 
minutes ago.
    Ms. Kraninger. Well, if you are stipulating because there 
are Schedule Cs, I would note that there were more than 500 
people hired at the Bureau appropriately, by the way, under a 
waiver authority from Congress who were noncompetitively hired. 
And that was over the first 4 years of the Bureau's 
establishment: 423 of them are still at the Bureau today.
    Mr. Cleaver. Yes, I am not saying anything was done wrong, 
and some of the people--I know at least one of the people, and 
I know that person is eminently qualified. But I just--there is 
this push that suggests that somehow there was a plan that 
politicized this agency, and there wasn't.
    And one of the problems that we are having right now is 
that the MLA, and I--because my time is running out--all these 
are military agencies, all of them, who are opposed to what 
just took place with MLA--all, it is not just something a 
Democrat is pushing. These military agencies are concerned 
about what is going on, all of them.
    I will give you this. You probably already know all of them 
because I think they have communicated with your office. Does 
this give you pause to want to make corrections?
    Ms. Kraninger. I am committed to protecting servicemembers. 
I have worked much of my career with servicemembers.
    Mr. Cleaver. I know, Madam Director. I am not mad at you. 
You look like a nice person and you probably, you know, cheer 
for the Chiefs and stuff. But all I am just trying to get you 
to say is, don't you agree that something needs to be done?
    Ms. Kraninger. I do, and I have asked Congress to grant the 
Bureau the authority to supervise for the Military Lending Act 
specifically.
    Mr. Cleaver. All right, thank you.
    Chairwoman Waters. The gentleman's time has expired.
    The gentleman from Arkansas, Mr. Hill, is recognized for 5 
minutes.
    Mr. Hill. I thank the Chair. I appreciate that.
    And Director, thank you for appearing before the committee. 
During my first two terms in Congress, I spent a lot of time 
with Director Cordray working through all the problems with the 
TRID rule, which is the merger of Truth in Lending with Real 
Estate Settlements, which is very costly to the industry, and 
confusing to consumers. So I tried to get them to make 
improvements along the way. And he was very cooperative and 
recognized that his guidance wasn't informative, his guidance 
wasn't binding and that, occasionally, the rule was very 
confusing.
    One of those things was the consumer disclosure for 
combined rate on title insurance. And I had a bill last 
Congress to straighten that out, to make sure consumers really 
knew what they were paying. Because the current disclosure 
required by the lawyers--the Georgetown lawyers, I am sure--at 
the Bureau make it appear that it is more expensive than it 
actually is for a consumer. Would you support changing that 
disclosure rule?
    Ms. Kraninger. I can tell you, Congressman, that I am aware 
of the issue. I have heard it from you and I know that you have 
a bill on the issue. We are looking at this very carefully, so 
I don't want to prejudge the outcome of what we can and cannot 
do, and how fast, but I am absolutely aware of the issue.
    Mr. Hill. Well, I would ask you to study that. And I will 
be reintroducing that legislation and I would like to--I think 
you have the authority to change it at the Bureau and not go 
through the legislative process. So thank you for that.
    I was looking at your consumer complaints, only 0.8, so 
less than 1 percent, 0.8 percent of consumer complaints relate 
to payday lending. So I guess that is good. That must mean 
that, generally, regulation of payday lending across the 
country is decently successful, looking at your consumer 
database.
    But I wondered when I was looking at your rule--following 
up on Congressman Lucas' question--NACHA, the clearinghouse, 
has a common set of ways of looking at this issue of how many 
times you can try to debit in an account in a payday rule. Did 
you look at the NACHA standard and consider just using that, 
since that is already out in the marketplace?
    Ms. Kraninger. Congressman, you raise an interesting point. 
It is actually a question that I had as well in terms of 
looking at this issue. It is something that I want to explore 
further.
    I can tell you, with respect to the reconsideration of the 
rule, the basis of that really is the sufficiency of the legal 
and factual basis for that unfairness and abusive 
determination. That is really where the reconsideration is 
focused.
    Mr. Hill. Thank you, because you know if you do try to 
debit the debit card, that doesn't go against the NSF. And so, 
I thought that was a good point. I would urge you to take a 
look at that in your rule.
    As you know, the committee is very interested in financial 
technology (Fintech) and the CFPB has been a leader on that 
under Director Cordray and under Director Mulvaney and now you 
to urge innovation to reduce compliance costs and get consumer 
products out to our consumers, particularly the underserved 
community.
    Are you aware of the U.K.'s effort at open banking and 
giving consumers more control over their data when it comes to 
selecting financial products?
    Ms. Kraninger. Yes. I probably know enough to be dangerous 
on that particular topic. But we are certainly looking at what 
other countries are doing, and Paul Watkins, who heads up the 
Office of Innovation, knows this deeply and understands it.
    Mr. Hill. I think that is a real trend, to make sure that 
the consumer controls more of their information and protects it 
more capably and is not preyed upon by either Facebook or a 
financial services company.
    I note in your annual report that education is a major part 
of the Bureau's mandate. And so, when you look at again your 
customer complaints that are reported to the Bureau, over 50 
percent relate to credit or consumer reporting and debt 
collection way over 50 percent.
    And so, when you look at FICO Scores, the FICO Score of 
400--something under 500, that is considered a very poor FICO 
Score. Does the Bureau help consumers with information about 
how to improve their credit through either education resources 
at your website or when they file a complaint?
    Do you help them understand how to improve their score, 
because clearly someone with a 400 credit score has a financial 
literacy challenge or a huge financial problem in their family 
at that time?
    Ms. Kraninger. There are a number of tools on our website 
and that we share with financial educators around this issue, 
because having a good credit history is part of financial well-
being. It is part of your ability to build opportunity and 
certainly build wealth.
    So, there are a number of things that we have produced on 
that front, the challenge largely is getting that information 
to those who need it in the best way that they can receive it 
and measuring the effectiveness of our efforts in changing 
people's behavior.
    Chairwoman Waters. The gentleman's time has expired.
    Mr. Hill. Thank you, Madam Chairwoman.
    Chairwoman Waters. The gentlewoman from Ohio, Ms. Beatty, 
Chair of our Subcommittee on Diversity and Inclusion, is 
recognized for 5 minutes.
    Mrs. Beatty. Thank you, Madam Chairwoman, and to our 
witnesses, thank you for being here today. I am going to start 
with a question that I have asked every one of your 
predecessors since I have been here. I have asked every 
Director and Chair who has sat in that seat as a witness. So, I 
wanted to start with that.
    But before I ask you the question, how did you prepare for 
this hearing? Did you have your staff talk about some of the 
questions and answers to Director Mulvaney or to Director 
Cordray?
    Ms. Kraninger. First and foremost, it is the time on the 
job. I actually have been spending a lot of time with the staff 
getting briefed on various topics.
    Mrs. Beatty. But did you listen to or watch any of the 
tapes with the questions?
    Ms. Kraninger. Yes, I have watched prior hearings of this 
committee.
    Mrs. Beatty. Okay. So, you know that we have had Directors 
sit in that seat who have been questioned for some 5 hours, and 
some reports have said that it was a new level of hostility by 
those in charge. Others have said it was a withering attack on 
Mr. Cordray, very contentious.
    And the only reason I do this is, a couple of my colleagues 
have used the word ``battered.'' So, I don't want you to feel 
that I am battering you. I am just trying to ask a few 
questions. My question that I have asked everyone--as you 
heard, I serve as the Chair of the Subcommittee on Diversity 
and Inclusion, and the Office of Minority and Women Inclusion 
(OMWI) falls under that.
    I read your press release on January 25, 2019, where CFPB 
announced changes in senior leadership and acknowledged Lora 
McCray as your new Director of OMWI. So my question to you is, 
does the OMWI office have enough staff and resources to carry 
out the responsibilities in Section 342? Yes or no?
    Ms. Kraninger. I can tell you--
    Mrs. Beatty. Yes or no, please. Either they have it or they 
don't. I know you--
    Ms. Kraninger. I certainly--
    Mrs. Beatty. Let me finish. I know you didn't go out and 
hire somebody who has been the Vice Chair of Diversity through 
the Federal Reserve, with all of her experience, and bring her 
into an environment where there is not enough money or enough 
staff.
    So, do you believe that the office has enough staff and 
resources to carry out the responsibilities of Section 432? 
Please, yes or no?
    Ms. Kraninger. I--
    Mrs. Beatty. Yes--that means you either have the money--
    Ms. Kraninger. Moment--
    Mrs. Beatty. I will if you give me the answer--
    Ms. Kraninger. Lora--
    Mrs. Beatty. --to my question.
    Ms. Kraninger. Lora and I are both very new. And she knows 
that I am committed to ensuring that she does have enough 
resources, and she has the ability to--
    Mrs. Beatty. So, that would be a yes?
    Ms. Kraninger. --ask for them. So again, we are absolutely 
assessing that. The answer is there are--
    Mrs. Beatty. So, you hired somebody without knowing if she 
is going to have enough staff and funding to do her job?
    Ms. Kraninger. She absolutely will. You are asking me to 
affirmatively say--
    Mrs. Beatty. So--
    Ms. Kraninger. At this moment--
    Mrs. Beatty. So, then let me ask the question--
    Ms. Kraninger. The answer is yes.
    Mrs. Beatty. --differently. Will you assure us that as you 
testify today, the OMWI office will have enough staff and 
resources to carry out the responsibilities as identified in 
Section 342 of Dodd-Frank?
    Ms. Kraninger. The answer is absolutely yes.
    Mrs. Beatty. Okay, thank you. And welcome aboard, Ms. 
McCray. My next question is, have you heard of the term that is 
being used inside the Consumer Financial Protection Bureau 
called the ``Mulvaney Discount?'' Have you heard of that?
    Ms. Kraninger. I have certainly heard the term, yes.
    Mrs. Beatty. Okay, because I have a press release right 
here with your picture on it. I think this is you where you all 
talk about it.
    Ms. Kraninger. I would say--
    Mrs. Beatty. Well, it is mentioned in the headlines.
    Ms. Kraninger. I certainly have not talked about it.
    Mrs. Beatty. Okay, where it was brought up, and I can read 
you some quotes. So, you are familiar with it?
    Ms. Kraninger. I have heard the term used.
    Mrs. Beatty. So for those situations where people have been 
abusing and some would say swindling veterans, minorities, and 
others, and the fee for something, if you swindled somebody out 
of hundreds of thousands of dollars, you would have to pay 
thousands in fees, while the Mulvaney Discount is $1.00.
    Do you agree with that? And do you plan to continue it, yes 
or no? Do you plan to continue, because it exists, I can give 
you case after case.
    Ms. Kraninger. Every--
    Mrs. Beatty. Wait a minute; I am going to let you talk 
afterwards. Do you plan to continue it, yes or no?
    Ms. Kraninger. Every enforcement case presents its own 
facts--
    Mrs. Beatty. Will you have dollar discounts for people who 
have been swindled out of hundreds of thousands of dollars?
    Ms. Kraninger. These are all negotiated settlements. And 
there are factors--
    Mrs. Beatty. So, you are not answering. Okay. My time is 
up.
    Ms. Kraninger. --that are taken into consideration.
    Chairwoman Waters. Mr. Loudermilk, the gentleman from 
Georgia, is recognized for 5 minutes.
    Mr. Loudermilk. Thank you, Madam Chairwoman. Director, I am 
going to make sure I see this. It doesn't say, ``Mulvaney,'' it 
says, ``Kraninger,'' am I right? Okay. I just want to make sure 
that we are actually--it seems that a lot of the discussion we 
have had here is as though you were your predecessor, and I 
think it's important that we engage on what is actually 
happening in the Bureau right now. And I appreciate you being 
here. I understand by Dodd-Frank you are required to come 
occasionally and provide a report, but as it was brought up 
before, I don't think the law requires you to even answer the 
questions when you are here, so the fact that you are here and 
engaging, I appreciate that.
    Before I get to the questions--because I want you to answer 
the questions. I think there's so much that we need to be doing 
and there are so many issues out there, it's important that we 
engage and we have a relationship and that we can work together 
and just not be adversarial. When Director Cordray was here, I 
questioned him on the consumer complaint database because I 
felt like at the time it was actually being used as a shaming 
system of businesses. And I apologize that you were not given 
the opportunity to answer the questions--obviously, there was a 
preconceived idea there. I just want to give you a moment.
    Is there anything you would like to--I will give you a 
moment of my time to answer the question that you weren't given 
the opportunity to answer earlier.
    Ms. Kraninger. Thank you, Congressman. I recognize how 
important an issue this is. I have certainly heard from 
consumer groups and researchers in particular--I was actually 
visiting Consumer Reports last week and they talked about how 
much they use the data that is available in the consumer 
database. So also on the other side of that, certainly some 
very real reputational harm concerns from institutions about 
making sure people understand what the complaints that they are 
seeing mean will put them in some kind of context. So I have 
heard those comments.
    This is certainly an active issue. I am talking to the 
staff inside the Bureau. We did a whole request for information 
on this issue as well about what should be public, and what 
should not be public. Those were all questions that were asked 
and I am actively looking at the issue now.
    Mr. Loudermilk. Thank you, I appreciate that. Because the 
only way that we are going to be able to get things resolved is 
to actually have dialogues. And I think you deserve the respect 
to bring that up. I think a lot of the frustration that you 
hear is that regardless of what you answer, there's not really 
a thing we can do about it. That is because of the 
organization, the way it was established. So one of the years 
that is key to me is in the Fintech community. I from Georgia, 
and we have two-thirds of the country's payment processing 
there. I also come from an IT background, and I understand the 
value of technology and how it empowers the individual, the 
consumer, and I'm particularly interested in the bank Fintech 
partnerships.
    One of the concerns that we usually hear is how these 
partnerships can raise safety and soundness and consumer 
protection concerns. So the question I have is, when a Fintech 
company is interfacing with a consumer and it's actually a bank 
or credit union that's filling the loan, the loan has to meet 
the same safety and soundness protection standards as if the 
consumer walked into the local bank, is that correct?
    Ms. Kraninger. Yes, I believe so.
    Mr. Loudermilk. Okay. What is it that we, and I am talking 
about Congress and the regulators, what can we do to ensure 
that these partnerships can continue and flourish?
    Ms. Kraninger. That is an excellent question because 
innovation and facilitating innovation are a key part of the 
Bureau's mission, something we take very seriously. I have met 
with innovators and seen the kind of things that they are 
doing. I would note that I recognize the concerns that 
advocates have brought up on the other side of this. But I 
would certainly venture that the entities that are actually 
actively coming forward seeking to work with the regulators, 
seeking to understand what the rules are so that they can 
follow them, are those that certainly like to be--there looks 
to be an opportunity there. And certainly for the underserved, 
as Mr. Hill mentioned.
    Mr. Loudermilk. And one of the things about technology is 
you get into areas where the rules don't exist if you are 
really progressing and bringing in new technology. An example 
is the Wright Flyer, which is on display down at the Air and 
Space Museum here. These guys were bicycle mechanics and they 
achieved something scientists and engineers couldn't. I don't 
think you could replicate that today because of the adversarial 
relationship between regulators and innovators. I think the 
sandboxes are important to give them the ability to try new 
products, new ideas. Can you briefly--I know we are out of 
time, but this Office of Innovation, what is it that you are 
doing to help innovators?
    Ms. Kraninger. In the last 6 months in all we have issued 
proposals for a disclosure sandbox policy, a no-action letter 
policy and a product sandbox policy, and we got robust comments 
back on all of them. That is also something that I am actively 
looking at and we are looking to close out and address those 
and again, put these processes in place to facilitate 
innovation.
    Chairwoman Waters. The gentleman's time--
    Mr. Loudermilk. Thank you.
    Chairwoman Waters. --has expired. The gentleman from 
Washington, Mr. Heck, is recognized for 5 minutes.
    Mr. Heck. Thank you, Madam Chairwoman, very much. Thank 
you, Director Kraninger, for being here. Thanks for the phone 
call a couple of weeks ago to introduce yourself. I suspect you 
know where I am going with my time opportunity today.
    As you will recall, I have the honor to represent some 
44,000 men and women who report to work every day at Joint Base 
Lewis-McChord. I consider it frankly a sacred part of my job to 
look out for their best interest. Do you consider it an 
important part of your job to look out for the servicemembers 
and their families?
    Ms. Kraninger. I absolutely do. I have been honored to also 
work with servicemembers and their families throughout my 
career. And I certainly recognize that Congress created an 
office inside the Bureau specifically to ensure that--
    Mr. Heck. We will get to that in a second. So have you yet 
visited a military base or met with a military community?
    Ms. Kraninger. Yes, I have. I was actually at Travis Air 
Force Base outside of San Francisco as one of my first trips.
    Mr. Heck. I noted that on January 25th, you announced the 
hiring of 5 senior positions. We kind of did a little research 
and dug down. It does not appear--and I hope I am wrong--as 
though any of them is a veteran or a member of the Reserves or 
the National Guard.
    Ms. Kraninger. I do not recall if any of them are. I can 
tell you that it is certainly a consideration in the hiring 
process and an important one. And there are a number of 
veterans.
    Mr. Heck. And yet five senior people were hired without any 
of them being veterans or members of the Reserve or the Guard. 
In fact, the position of the Office of Servicemember Affairs 
Director has been ``acting'' for a year and a half. Can you 
share with us today what your specific and concrete plans are 
to name a permanent Director of the Office of Servicemember 
Affairs?
    Ms. Kraninger. I can tell you that I have one. He started 
on the job literally--I believe last week. We are gathering--
    Mr. Heck. A permanent Director?
    Ms. Kraninger. A permanent Director who actually--who is a 
veteran, by the way. His name is Jim Rice, and he just started, 
as I said, 2 weeks ago, and we are going to gather up again 
some more--
    Mr. Heck. Somebody is trying to get your attention behind 
you.
    Ms. Kraninger. Oh. Oh, he starts Monday. Well, then, I am 
making news. I thought he was here already since I was talking 
to folks about it.
    Mr. Heck. Great.
    Ms. Kraninger. But he starts on Monday.
    Mr. Heck. We weren't aware of that. I want to tell you--
    Ms. Kraninger. Yes.
    Mr. Heck. I am very pleased that you have done this. 
Finally, have you allowed the Bureau's examiners to resume 
reviewing compliance with the Military Lending Act?
    Ms. Kraninger. I know that we are not in agreement on this 
issue, Congressman. I want to just at least note that. I would 
say that I do not believe that we have the authority, that is 
why I sought, to again specifically--
    Mr. Heck. Well, wait a second, they have been doing it.
    Ms. Kraninger. --conduct compliance for the Military 
Lending Act.
    Mr. Heck. They have been doing it for--
    Ms. Kraninger. We have robust enforcement authority--
    Mr. Heck. They have been doing it since the inception of 
the Bureau and it is at a minimum, arguable, at a minimum. I 
assert in fact, you absolutely do have the authority to do 
this. General Cantwell, who is the former Director of the 
Office of Servicemember Affairs, likens failure to exam, as 
standing down the guards or the sentinels around military base. 
It seems like a perfect analogy--at a minimum, after nearly 10 
years of actually doing it, it is arguable given that you have 
said that it is an important part of your job to look out for 
servicemembers.
    Why wouldn't you continue to do that which has occurred for 
10 years, if in fact your values are as you state they are? 
Because I want to remind you of, I think the eternal wisdom of 
the suffragette movement, which in Great Britain and later in 
the United States, adopted the slogan, ``deeds not word.'' So 
we would be looking for deeds, not words, to comport with what 
you assert are your values, that you care about servicemembers.
    Ms. Kraninger. We absolutely continue to take enforcement 
actions and look at enforcement issues associated--
    Mr. Heck. That is completely reactive. If you are not 
examining to look for that, then all you are doing is reacting 
to the committee--it is as though you have stood down the 
sentinels of the base, and only when they have come over the 
ramparts, do you react. How is it that you can deny the 10-year 
history of these examinations, never having been stated in a 
court of law as not being within your authority?
    Please be clear. We will not go gently into the night on 
the issue of how it is we protect the servicemembers, the 
people who put on uniforms and put themselves in harm's way on 
our behalf every single day, nor their families, especially in 
the context of the long-standing practice of the agency.
    Ms. Kraninger. Congressman, to read into the statutory 
authority--
    Chairwoman Waters. The gentleman's time has expired.
    Ms. Kraninger. --is beyond what I believe I should do. I am 
staying true--
    Mr. Heck. And you are wrong.
    Chairwoman Waters. The gentleman from Tennessee, Mr. 
Kustoff, is recognized for 5 minutes.
    Mr. Kustoff. Thank you, Madam Chairwoman. Thank you, 
Director, for appearing today. We appreciate it. If I could, I 
would like to follow back up on some comments that you made in 
your opening statement, and also the line of questioning by 
Congressman Lucas and Congressman Hill, about the small dollar 
lending rule, if I could. I do applaud the efforts by the CFPB 
in taking and reviewing certain provisions of the rule as the 
rule is written.
    We know that the CFPB issued a notice of proposed 
rulemaking that would examine the underwriting provisions of 
the rule and also issue a delay until, I believe August the 
19th of this year. I believe that is correct as the compliance 
date. While I think that the two notices do not address the 
provision governing payments, it is my impression that the CFPB 
may be still evaluating the comments and also the evidence 
prior to making a decision as to whether to reopen this portion 
of the rule as well.
    I do have concerns, and I know that Congressman Hill asked 
about this as it relates to debit cards, debit cards and method 
of payment on the loans. Payment provision, the way I 
understand it is written, would apply when a payment is made 
through a debit card, despite the fact that this method of 
payment doesn't result in a charge to the consumer if there are 
insufficient funds.
    Now in light of the fact that debit cards could prevent 
overdrafts or further economic harm, should the CFPB promote 
this method of payment as a preferred choice to consumers 
instead of maybe limiting it?
    Ms. Kraninger. I certainly have heard a number of concerns 
about the payment provisions in addition to the underwriting 
portion of the rule. The proposal seeks specifically to address 
the underwriting issues because of the access to credit 
concerns and the impact to the industry in general as that 
relates to access for consumers of credit. On the payment 
provisions, we have a petition in hand that is asking us to 
reconsider, and under the Administrative Procedure Act, that is 
absolutely something that we now need to respond to. So that is 
something that we are looking at.
    Mr. Kustoff. I would appreciate that. I appreciate your 
candid answer. Education is an important part of the CFPB, part 
of your mandate, part of the agency's mandate. Can you talk 
about what role education has in promoting clarity and 
guidance, if you will, to consumers, and also the businesses to 
seek and understand the responsibilities that they may have?
    Ms. Kraninger. Definitely. I think it is an important part 
of our mandate and we strive to put the tools in consumers' 
hands, both by working with educators and putting things on our 
website to get them the right tools in their hands so they can 
make the best decisions for themselves financially. There are a 
lot of products and services and a lot of issues and we seek to 
have it organized in a way that consumers can get to it readily 
and easily.
    But it is a challenge, frankly, for any education process, 
to understand what the impact of that is and how to continue to 
improve that, improve the access to the information, and it is, 
I think, an exciting part of what we are doing, that we have 
tailor-made for different types of consumers, whether it is 
those looking to buy a home, so the whole know-before-you-owe 
and homebuyer guides.
    If you are looking to get a student loan, if you are 
looking to bolster your savings and ways to do that, so all of 
those things are critical. I think Mr. Hill or others asked 
about understanding what the credit reporting agency's role is, 
and what your credit score actually means. So a lot of things 
like that, that we are seeking to make sure there is good 
information for consumers on.
    Mr. Kustoff. Thank you very much. In my remaining time, in 
past Congresses in this committee, we have discussed and 
debated about an Inspector General for the CFPB. Can you talk 
in your term now as Director, as I understand it, now less than 
3 months or around 3 months, the importance, in your opinion, 
one way or the other, of having your own Inspector General?
    Ms. Kraninger. I understand why you are asking the 
question, Congressman. I have noted this is a matter certainly 
for statute and Congress to consider, and anything that 
Congress would pass to address accountability and transparency 
concerns that they have, I would welcome.
    Mr. Kustoff. Thank you. I yield back my time.
    Chairwoman Waters. Thank you. The gentleman from Guam, Mr. 
San Nicolas, is recognized for 5 minutes.
    Mr. San Nicolas. Thank you, Madam Chairwoman. Forgive me, 
Director, is it ``Kraninger'' or ``Kraninger?''
    Ms. Kraninger. I accept both, but it is ``Kraninger,'' 
thank you.
    Mr. San Nicolas. ``Kraninger.'' Well, thank you for being 
here today and thank you for answering everyone's questions. I 
wanted to first begin with a casual observation. It appears 
that depending on what snapshot in time you are looking at, at 
the CFPB, you have both sides of the aisle upset at some point.
    And it has been my experience that when we have both sides 
of the aisle upset about something, we are either dealing with 
a colossal mistake or a colossal success. But I think that the 
variable on either extreme has been the predecessors who have 
sat in your chair. And I think that variable has caused either 
side of the aisle to want to always try and find balance 
because they felt like the boat was tipping too far one way or 
too far the other.
    And that is why in Chairwoman Waters' bill, the Consumers 
First Act, I think she is doing her due diligence in trying to 
rebalance the boat that she feels, and I feel because I co-
sponsored it, that your predecessor might have tipped too far. 
I do have a deep appreciation for your position. Your 
predecessor is the right hand of the individual who appointed 
you to the position.
    And I can understand how that would make it very difficult 
for you to reconsider or walk back or change some of the 
activities that he has put into place. And so, at this 
juncture, we are left with having to rely on you to be that 
source of balance, so to speak, but also with the context of 
having to do so with that weight of your predecessor and his 
position and how that reflects on the position that you are in.
    I wanted to, I guess, tie it all together by saying that 
one of the things that provides a lot of stability to 
organizations is not just the leadership that is in place, but 
everybody behind the leadership. And all of the employees who 
make up the organization can have a very strong balancing 
effect on whether or not the organization is going to continue 
to pursue its purpose and its mission with the veracity for 
which it is intended.
    And so, I wanted to pose a question to you as to whether or 
not you would be open to establishing a precedence within CFPB 
to perhaps do a biannual survey of the employees, as to whether 
or not they feel that the organization is staying true to its 
mission and whether or not you would allow for that survey to 
perhaps be done anonymously and provide it to this committee?
    Ms. Kraninger. I do appreciate the question because the 
people of the Bureau are absolutely essential to how we carry 
out the mission and are fundamental to it. They are very 
important to me, in supporting my decision-making processes. On 
the survey specifically, there is an annual employee survey 
that happens. It is anonymous. The Bureau actually has added 
some specific questions, Bureau-related, to it over time. And 
the results of that are certainly something I am using, looking 
forward, so that we can make sure we address concerns that the 
staff have.
    Mr. San Nicolas. I think that it would be useful for those 
results perhaps to be done--for these surveys to be done a 
little bit more frequently and for those surveys to even be 
forwarded to the committee. Not necessarily as a reflection on 
you, but as one of my colleagues on the other side of the aisle 
mentioned, it may not necessarily be you who are concerned 
about it but those who may come after you.
    But if we have that precedent established within CFPB, 
especially given the very unique powers that your single 
position has, it could really help for this committee to be 
able to review those surveys to provide the necessary checks 
and balances, because the rank and file employees, the boots on 
the ground, might, on an anonymous basis, be willing to express 
concerns that, if brought to the attention of this committee, 
we may able to address and ask specifically.
    So I would like for you to perhaps consider, in the 
interest of finding that balance in your position and setting 
that kind of precedence, perhaps doing that survey more 
frequently and making the results of the survey available to 
the committee. Thank you, Madam Chairwoman. And I yield back.
    Chairwoman Waters. Thank you. The gentleman from Indiana, 
Mr. Hollingsworth, is recognized for 5 minutes.
    Mr. Hollingsworth. Good afternoon. I am so excited that you 
are here, and I really appreciate the testimony and the answers 
that you have given thus far and I really appreciate the work 
that I know you are doing and I know you are committed to doing 
going forward. Obviously, the CFPB's aims are laudatory, and 
many of us welcome the work that will be done in protecting 
consumers.
    But many of my Hoosiers back home feel that they would been 
disempowered by some of the regulatory efforts that have taken 
place before you. They feel like they have been pushed further 
away from the financial system instead of included in the 
financial system. I represent a part of Indiana that has some 
suburban areas, a great college town, and also some rural 
areas.
    And those rural areas are dramatically underserved, 
compared to their suburban and urban counterparts, with regard 
to financial services. And I wonder, as you continue to look at 
the process--you are going on this listening tour, continuing 
to undertake an understanding of the wide variety of impacts 
that regulatory actions can have on individuals and Americans 
from sea to shining sea--if you are continuing to take into 
account the fact that the higher the regulatory burden, the 
more challenges and hoops these companies have to go through in 
order to serve customers and potentially find new customers, 
and that more and more people might be pushed aside and pushed 
further from the banking system, that 6.5 percent of Americans 
remain unbanked and we want to get them into the system.
    We want to create better financial futures for them and 
then give them the power to create better financial futures for 
themselves. And I wondered if you might talk a little bit about 
the effort that is being undertaken, just to understand the 
other side of the argument, that though the aims are laudatory, 
that perhaps sometimes that misguided approach ends up hurting 
the very people we all in this committee want to help the most.
    Ms. Kraninger. Certainly, the outcomes are critically 
important to understanding. I think there are two things that I 
would say in response to that. One is that Congress did have 
the foresight in looking at our regulatory actions to require a 
5-year assessment to say, what was the actual impact of that 
regulation. And I am looking at the process of that. I want to 
make sure it is robust; I want to make sure we have the 
information and the evidence base to actually make a judgment 
on that, that is valuable.
    Mr. Hollingsworth. Right.
    Ms. Kraninger. I will say, with the ones we have done so 
far in the mortgage space, it was challenging because pulling 
apart various regulations on their own, in terms of the impact 
they had on the marketplace, with all of the changes that 
happened after the financial crisis, on mortgages, was a huge 
challenge, but again, the economists are endeavoring to do 
that, and I am challenging them to do that.
    I want that 5-year look back to truly be a mechanism for us 
to look at reconsideration and address things. The second thing 
I would say is very much related. The flexibility that Congress 
did give the Bureau is a flexibility that we can take in 
applying logic and reason to these things. If something didn't 
work, we can throw it away.
    Mr. Hollingsworth. Great.
    Ms. Kraninger. And that is absolutely what I want to do to 
get to the right outcomes to protect consumers.
    Mr. Hollingsworth. I love that. The evaluation of these 
rules that have been put in place and their effects, not only 
on the consumers who were already part of a system but those 
consumers who aren't a part of the system, is hugely important 
to me and hugely important to my rural Hoosiers back home.
    So I really appreciate the fact that you are going through 
that robust process and acknowledge that, on occasion, we have 
to revise and even remove rules that have had a more 
deleterious impact than expected. Now you mentioned a little 
bit about the process. The other thing I wanted to ask about 
the process is, I know Mr. Mulvaney, under his leadership, had 
sent out an RFI to talk about what is the practice that we can 
do in order to improve enforcement, and you have talked about 
that a lot already.
    But I wondered if you might talk a little bit about some of 
the early indications that you have gotten. We have seen some 
of that referenced, under Mr. Cordray, how enforcement actions 
were perhaps taken. But in addition to that, fishing 
expeditions were undertaken to where one opened an 
investigative process that seemingly had no results and 
seemingly cost these companies millions of dollars in order to 
provide the information necessary and cost the taxpayer more 
and more dollars to go about all these fishing expeditions.
    Can you talk a little bit about that and the process that 
you are trying to reform there?
    Ms. Kraninger. Yes. I certainly want to talk about that 
looking forward. I would say from where I sit, the enforcement 
tool is one that is not the first tool we used. For entities 
that are seeking to comply, for entities that self-report, that 
is the mechanism for examination. The supervisory authority we 
have is a great way to work with those kinds of entities, where 
enforcement is, I think, most powerful is obviously those who 
are not seeking to comply and who are bad actors in the system 
and are engaged in unfair practices and they are the ones that 
enforcement, under my leadership, will go after.
    Mr. Hollingsworth. Great. Well, I certainly agree with 
that. Mitch Daniels, the Governor of Indiana, used to say we 
are going to hit the bad actors with a sledgehammer but we are 
going to enable and empower the good actors to serve more 
Hoosiers and more Americans. Thank you for the service that you 
undertake, and with that, I will yield back.
    Chairwoman Waters. Thank you. The gentlewoman from 
Michigan, Ms. Tlaib, is recognized for 5 minutes.
    Ms. Tlaib. Thank you so much. Thank you, Director, for 
being here. The 2018 report detailed how a subprime auto-
lending company called Credit Acceptance Corporation has been 
preying on consumers for decades, extending credit to people it 
knows are likely to default. Indeed, the Credit Acceptance 
Corporation has admitted that it repossesses 35 percent of its 
vehicles it finances.
    And its debt collectors have hounded consumers for as many 
as 25 years. Ground zero for this crisis, and I believe it is a 
crisis, is in my district: one out of eight civil lawsuits 
filed in the district court in my district and collection cases 
filed by the actual corporation. And I mentioned 12 percent of 
those are open civil lawsuits in my district.
    And tens of thousands of my constituents are subject to 
wage garnishment actions which can take up to 25 percent of 
their wages and push more families into bankruptcy. Please tell 
me what the CFPB is doing to hold predatory subprime auto 
lenders accountable, including what the Bureau is doing to hold 
the Credit Acceptance Corporation accountable.
    And one other question, if you can remember that one for 
me, please, I just want to get this one in because this is the 
one that really shocks me. Increasingly, subprime auto lenders 
have been using kill switches that allow them to turn off and 
lock a car when a consumer misses a payment. Owning or leasing 
a car is the price of admission to the economy and society in 
much of America, including my district, where public transit 
fails to connect our region very much. And we still struggle 
with it. What is the Bureau doing to investigate the use of 
kill switches? And do you think it should be permitted?
    Ms. Kraninger. Congresswoman, I appreciate where you are 
coming from, certainly this being a priority. I can tell you 
that I have not committed to memory every enforcement action 
that was reported in the reports, I apologize for that; 86 days 
on the job and things that occurred prior to my arrival. But I 
can tell you that this is an issue, so we will get back to you 
on specifically what is happening with the Credit Acceptance 
Corporation and where the status of that is and holding them 
accountable pursuant to what I presume is a consent order, but 
as I said, I don't have it in front of me.
    With respect to auto lenders in general and our posture, we 
are continuing to conduct the supervisory work, and look at 
enforcement actions in a wide variety of markets and areas 
within our purview. This is something that I will continue to 
have more conversations with the staff about specifically.
    As I said earlier, the enforcement matters that do come to 
the Bureau come via myriad methods, frankly certainly 
complaints from consumers through the supervisory process from 
State partners whether it is attorneys general or State 
supervisors. And so those opportunities to work in partnership 
with them are also important.
    Ms. Tlaib. So are you familiar with kill switches?
    Ms. Kraninger. Oh, I'm sorry--on kill switches--
    Ms. Tlaib. Please do, yes.
    Ms. Kraninger. I am familiar with it as a concept, but I do 
not know at this stage what the Bureau has looked at on that 
issue.
    Ms. Tlaib. I would love maybe a follow-up, maybe 
investigate more, Director. But do you think it should be 
permitted? I think this would lead to a huge crisis in our 
country to have kill switches on these vehicles, especially 
when we know that they are targeting certain communities they 
know will not be able to pay for the vehicle, and they have no 
business loaning to those individuals in the first place.
    One of the things that I heard in committee--profits are a 
good thing, and I am not against that, I don't think anybody 
really is, right? But not when it is a scam. When it is 
scamming the people we serve, and it is a scam, a scheme, or 
whatever you want to call it. We serve people, not the 
corporations. And I feel like the Bureau--the full intent was 
that. Do you believe that we even need the Bureau at all?
    Ms. Kraninger. I absolutely believe consumer protection is 
a responsibility of the Federal Government, and as I said, 
Congress created the Bureau to that end.
    Ms. Tlaib. One of the things that I struggle with also is 
where people--I think the first thing I heard in committee was 
``regulation by enforcement.'' I am a lawyer just like you, and 
I don't know--how do we make people do the right thing?
    Especially when it comes to corporate greed, how do you 
make a corporation not do the things that they do, primarily 
because they are looking only at numbers, not the impact or the 
harm on people?
    And I applaud you for saying you want to prevent the harm, 
but the only way you could ever do that is to really hold them 
accountable, and that is to hold investigations and open them 
up, and really hold their feet to the fire. It is a really 
important approach, I think for the Bureau, and I really would 
urge you to do so.
    Chairwoman Waters. The gentleman from Tennessee, Mr. Rose, 
is recognized for 5 minutes.
    Mr. Rose. Thank you, Chairwoman Waters, and Director 
Kraninger, thank you for being here with us today and 
subjecting yourself to these questions. I think it is an 
important part of the transparency that the American people 
demand and deserve, and my only concern is that I am not sure 
you are really obligated to be very forthcoming, and I would 
like to change that so that both you and those who might follow 
you are held to a stricter standard by the Members of this 
Congress.
    Back in my district, and I am a new Member of Congress 
having been here about 8 or 9 weeks--one of the people I look 
to for guidance and advice is a fellow named Senator Ferrell 
Haile, and Senator Haile is a Senator in the State Senate in 
Tennessee, and he has a good way of saying it, I think when it 
comes to the regulatory function of government and that is that 
he views the role of regulators to be to help the regulated 
comply, not first to punish them when they fail to comply.
    I think Senator Haile is exactly right about that, and so I 
encourage you as you pursue your reign--and I use that word 
somewhat euphemistically--at the CFPB that you would encourage 
the staff around you, including the career staff to keep in 
mind that what we want is to protect consumers, not to punish 
premarket actors when they might make a mistake.
    And so I encourage you to go about that business 
aggressively so that free market actors know what they are 
supposed to do, and don't just get punished for it.
    I have a little boy who is 17-months-old, I think I showed 
you a picture of him recently, and his name is Guy. Guy is at 
that age where he is starting to explore the boundaries of his 
world, and anyone who has children has been through that. Guy 
is constantly looking to see what he can get by with, and what 
can he do? And so he has learned very much the meaning of the 
word, ``no.''
    In fact, he is at that very early stage of using the word 
``no.'' And so what I have learned as a young parent--or a new 
parent, I am not young--with a new child is that it is 
important to set those boundaries and to set them clearly.
    And so again my point here is that I hope that your 
leadership at the agency will guide the agency away from 
regulation by enforcement, or in some cases what I have seen is 
regulation by press release and more toward regulation by rule 
making and by setting boundaries, and by working with the 
regulated and the industries that touch consumers, so that they 
understand what they are supposed to do and so they can follow 
the rules.
    Guy likes to follow the rules; he doesn't like to get 
spanked. And I hope my colleagues on the other side of the 
aisle would agree that it is probably not good when Guy gets a 
lot of spankings for breaking the rules. It would be better if 
we told him what the rules were and then he learned to follow 
them.
    I want to echo the comments from Mr. Lucas and Mr. Hill and 
Mr. Kustoff about the small-dollar rule, particularly the 
ability-to-repay section, but also the payment provision 
including both ACH and debit card use, and I think those are 
good options for consumers, and I hope you will take a strong 
look at those and make sure that we are not denying these 
important tools to customers who want to borrow money and need 
access to credit.
    I want to shift gears now and talk a little bit about 
Section 1035 of Dodd-Frank, which conferred jurisdiction over 
private student loans to the Bureau. During the reign of one of 
your predecessors, they saw fit to expand the scope beyond 
private student loans, which is clearly set out in the statute, 
I think without statutory authority to do so, and brought an 
enforcement action that is still ongoing today against what 
they thought was a borrower harm, but where no borrower harm 
has been identified, it is my understanding. And I know you 
can't comment on existing litigation, but I would encourage you 
to take a strong look at those enforcement actions where 
millions of dollars have been spent, and yet no borrower harm, 
it is my understanding, has yet to be identified.
    I know you have an unlimited budget, courtesy of the 
Federal Reserve, and so unfortunately consumers end up picking 
up the tab for defending those actions even when they are 
meritless. And so I hope you will take a look--will you take a 
look at those cases and make sure that there are justifications 
for continuing them?
    Ms. Kraninger. I certainly am looking at all the ongoing 
litigation and getting familiar with the history of the issues.
    Chairwoman Waters. The gentlelady from California, Ms. 
Porter, is recognized for 5 minutes.
    Ms. Porter. Hello, Director. Could you please explain to 
this committee the difference between an interest rate and an 
APR?
    Ms. Kraninger. APR is the extrapolation if it were a 1-year 
term in terms of the loan. So that is the calculation that is 
laid out in particular.
    Ms. Porter. So if I take the stated interest rate, and do 
the math to deal with the fact it is annualized, the APR, I 
would be correct?
    Ms. Kraninger. Yes.
    Ms. Porter. Okay. Ms. Kraninger, the annual percentage 
rate--and I will be happy to send you a copy of the textbook 
that I wrote, which explains that the APR is derived from the 
finance charge, the amount financed, and the payment schedule. 
It is a mathematical transformation of those three numbers into 
the cost of credit expressed at a yearly rate.
    Ms. Kraninger. It is a simplification, I understand, that 
you know well--
    Ms. Porter. Well, my concern is whether you know well, 
ma'am, because you are the one responsible for making sure that 
American consumers know well when they take out loans. Let's do 
an example. I am a single mom, I am by the side of the road, 
and my car is broken down. I need money right now. I pick up my 
cell phone, and I call Speedy Cash, an online lender. I am in 
California, I have to get to work, and I have to have the cash 
to fix my car to get to work.
    I can barely read the little disclosure on my phone. The 
cost of Speedy Cash is--you may want to write this down--$10 
per $100 borrowed. I need $200 to fix my car. The origination 
fee is $20. The term of the loan is 2 weeks, typical, for what 
I get paid. What is the APR? And if you would like a 
calculator, we have one for you.
    Ms. Kraninger. I understand what you are getting at. At the 
end of the day, the issue is certainly when you actually are 
able to repay the loan and whether or not you take out an 
additional loan going through this and you are certainly--
    Ms. Porter. Ms. Kraninger--
    Ms. Kraninger. --short-term small dollar--
    Ms. Porter. Reclaiming my time. Ms. Kraninger, I am asking 
you what the APR is. I am not asking you to wax eloquently on 
the pros and cons of--
    Ms. Kraninger. I understand. This is not a math exercise, 
though, this is a policy conversation about what the 
implications are--
    Ms. Porter. Reclaiming my time.
    Ms. Kraninger. --and what the appropriate level of an 
interest rate--
    Ms. Porter. Reclaiming my time.
    Ms. Kraninger. And--
    Ms. Porter. Reclaiming my time.
    Chairwoman Waters. The time belongs to the gentlelady from 
California.
    Ms. Porter. Thank you, Madam Chairwoman. I am asking if you 
could even ballpark on a $200 loan for a term of 2 weeks with a 
$20 origination fee and a rate of $10 per 100, that is 10 
percent. Ballpark, what is the APR?
    Ms. Kraninger. And I am telling you that the APR 
calculation is--
    Ms. Porter. Is that a ``no?''
    Ms. Kraninger. --a math exercise and the question is--
    Ms. Porter. Okay, but it is a--
    Ms. Kraninger. --when am I going to pay off the term of my 
loan--
    Ms. Porter. Reclaiming my time.
    Ms. Kraninger. --and what are the other issues that are 
happening in my life?
    Ms. Porter. Reclaiming my time, I take that as a ``no,'' 
that you cannot do the calculation, but I am particularly 
concerned about this given that you could not even correctly 
define the APR. Changing directions, since that isn't going 
well, do you think the Military Lending Act harms 
servicemembers?
    Ms. Kraninger. I think Congress passed the Military Lending 
Act to provide protections to servicemembers.
    Ms. Porter. Can I count on you personally, in your role as 
Director, to robustly enforce and defend the Military Lending 
Act?
    Ms. Kraninger. The Bureau has very clear enforcement 
authority when it comes to the Military Lending Act and 
absolutely, we will carry out that authority.
    Ms. Porter. In your capacity as Director, how many military 
servicemembers or their families have you met with since you 
began service, to understand the way in which servicemembers--
the challenges that they face in the marketplace for consumer 
financial services?
    Ms. Kraninger. With 86 days on the job, I visited Travis 
Air Force Base in San Francisco--outside of San Francisco--and 
I met with a number of servicemembers and educators, their 
C.O.s, I met with the chaplain, I met with a number--
    Ms. Porter. Great. Thank you. I am glad you did that.
    Ms. Kraninger. --at the air force base.
    Ms. Porter. The Consumer Financial Protection Bureau, in 
2015--I am going to contrast two things--took 56 enforcement 
actions and there were 168,000 complaints; in 2016, 42 
enforcement actions, 191,000 complaints; in 2017, 32 
enforcement actions, 243,000 complaints; and in 2018, 6 
enforcement actions. The number of complaints is going up and 
your number of enforcement actions is going down. Thank you.
    Chairwoman Waters. The gentleman from Ohio, Mr. Gonzalez, 
is recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman. Thank 
you, Director Kraninger, for being here and sitting through 
this interesting experience, to say the least.
    You testified earlier and I think it has been well-
established that the CFPB has broad authority and almost 
unilateral authority to do essentially whatever it wants. And I 
think Director Cordray, when he was in your shoes--and we are 
going to hear from someone just outside my district later on 
about just how abusive that can be. To me, as we sit here, it 
makes no sense why Congress would provide an agency with such 
broad authority and no accountability. I believe the lesson we 
have learned today, quite frankly, is that neither side is 
really happy with this outcome and that we need structural 
reforms.
    I think the case for structural reform is actually very 
clear and that it should be a bipartisan initiative. One of my 
concerns--and I have had this concern since we started this 
Congress--is that all the bills that come forth are purely 
partisan, appear to have no input from the other side, and so 
therefore I can't help but sit here and think that as long as I 
am in Congress, if this is going to continue to be the M.O., 
that we will be right back in this position next time you are 
here and for the next Director and the Director after that.
    We simply have to solve these in a bipartisan way, and I 
think we all agree that the CFPB is just not working the way 
that we want. Having said that, the issue specifically that I 
want to ask you about today is the 3 percent cap. As you are 
aware, the Dodd-Frank Act requires that the CFPB cap, the total 
on mortgage cost of 3 percent of the loan amount. I am 
personally not a big believer in price controls. I think you 
have all kinds of unintended consequences. You see that 
wherever they are used. Given the fact that just creating a 
mortgage costs close to $8,500 per loan, how do you see this 
affecting lower loan amounts, loans for middle-income and 
lower-income folks?
    Ms. Kraninger. Certainly, this is something that the Bureau 
has looked at and that a number of lenders have mentioned to 
us, particularly smaller banks and community banks and credit 
unions and entering into these loans and the cost of even 
providing that service to their members. So I recognize the 
challenge that you are laying out. There is not a decision 
directly before me at this time. This is something that we are 
looking at carefully.
    Mr. Gonzalez of Ohio. Okay. And then are you aware of any 
studies that have been done to kind of look at the effects that 
this has had? And if not, are you currently looking at 
conducting any yourself?
    Ms. Kraninger. I would like to get back to you on that. I 
think I know the answer, but I would rather give you an 
accurate answer.
    Mr. Gonzalez of Ohio. That is fine. And then switching 
gears, I want to touch base on what I think is a positive 
initiative taking place at the CFPB. Too often, I think 
lawmakers and regulators are not forward-thinking with our 
ideas. This is why I was encouraged to see the CFPB with the 
No-Action Letter proposal. Can you discuss how this proposal 
would allow for innovation but also ensure that consumers 
remain protected?
    Ms. Kraninger. Absolutely. I do think, as I have said 
before, facilitating innovation is an important part of our 
mission. I think there was a recognition, frankly, in the past 
by the Bureau that it is a challenging balance to strike. And 
the prior No-Action Letter policy was a step in seeing that we 
didn't get entities coming forward, wanting to use it. We are 
looking at reassessing it.
    We issued the new No-Action Letter proposal with a number 
of protections for consumers in place, first of all, that there 
is a self-selection. These are entities that are voluntarily 
coming forward because they are seeking a way to provide a 
service and make sure that they are complying and make sure 
that they understand what the rules are.
    There is, of course, the application process where they 
would have to identify consumer harms, if we laid it out. The 
Bureau reviews that. We certainly could revoke that, in what 
was stipulated. And there is room for reporting, as well as 
enforcement action where the entities would not comply. So, we 
have some guardrails. We got back comments on it, too. So we 
are looking at those comments, but I would like to put a robust 
process in place.
    Mr. Gonzalez of Ohio. Great. Thank you. And I yield back 
the balance of my time.
    Chairwoman Waters. The gentlewoman from Ohio, Mrs. Axne, is 
recognized for 5 minutes.
    Mrs. Axne. Thank you, Madam Chairwoman, and thank you, 
Director Kraninger, for being here. I appreciate it. I just 
want to follow up on Ms. Porter and Mr. Heck's earlier 
questions about our military. In my State, in Iowa alone, we 
have 255 active duty men and women and another 10,000 National 
Guardsmen.
    When you took office as Director, I was really hoping that 
you would reverse Mr. Mulvaney's misguided decision not to 
supervise the Military Lending Act. In your response to Mr. 
Heck, you said that you don't have the authority to conduct 
examinations. However, in your opening statement, you said that 
supervision should be a more prominent tool.
    Can you provide me with a legal analysis backing up this 
decision not to use that tool? Because I have a letter, right 
here, from 33 State attorneys general, including my own Tom 
Miller from my own home State, that said you do have that 
authority and that you are failing to abide by your statutorily 
mandated duty to enforce the MLA by not using it.
    Ms. Kraninger. I have asked Congress for this authority. I 
would very much like to get this authority. As you look at the 
Dodd-Frank statute, there were a number of places where the 
authority on supervision was specifically limited. The 
reference that I think the people are hanging their hat on is 
in--
    Mrs. Axne. I appreciate that, but can you provide me with a 
legal analysis backing up your decision?
    Ms. Kraninger. I'm sorry. I was trying to get to that, but 
if you would like it in writing, we can do that as well.
    Mrs. Axne. What is the exact legal--
    Ms. Kraninger. Yes. So what the legal pin that people are 
hanging their hat on here is 1024(b)(1)(c) that gives the 
Bureau the ability, and I want to make sure I say it properly, 
to assess and determine risks to consumers. It is to conduct 
examinations, and to do that in a very broad sense. But again, 
it is very deep in where limitations are already otherwise 
provided.
    Mrs. Axne. I understand what you just said, but I am not 
following where there is a legal decision to not use that tool 
of oversight.
    Ms. Kraninger. So the reason not to, again, it is the 
reading of that specific language that is the point of 
contention in where I made my determination that I do not have 
the authority to do it. It is that--
    Mrs. Axne. So am I correct--
    Ms. Kraninger. There is an encouragement of an incredibly 
broad reading of that provision that would actually open the 
door to all kinds of other things--
    Mrs. Axne. Reclaiming my time, please. So am I correct 
here, when you said you made the decision to not use that 
authority, that you would discount the legal decision by 33 
State attorneys general, including my own attorney general, who 
is the longest-serving attorney general in this whole United 
States?
    Ms. Kraninger. I met him, yes.
    Mrs. Axne. Wonderful, isn't he?
    Ms. Kraninger. Yes, he is. I am saying I made the 
determination that that statute does not actually grant this 
authority in this case.
    Mrs. Axne. Okay. So if I am hearing this correctly, you 
believe that your understanding of this authority outweighs 
that of 33 State attorneys general, including the longest-
serving attorney general in the United States?
    Ms. Kraninger. I am telling you that Congress vested this 
authority and responsibility for running this agency in the 
Director, and that is me. So, yes.
    Mrs. Axne. Well, thank you so much for that. I would argue 
that the lack of supervision puts all the onus on our 
servicemembers to fix, and that absolutely contradicts with our 
earlier statement that said prevention of harm is your primary 
goal.
    But moving onto another topic that I know we are all 
concerned with, 65 percent of my Iowa college students did have 
student loans in this past year, owing an average of almost 
$30,000.
    But despite that--and more than $1.5 trillion in student 
loans nationwide--unfortunately, Mr. Mulvaney eliminated the 
CFPB's office for protecting students.That was the Office of 
Students and Young Consumers. Do you, and I am not tying you to 
what his decisions were, but I am asking if you will 
reestablish the Office of Students and Young Consumers?
    Ms. Kraninger. There is an office for protecting students; 
it is called a section. I don't want to parse things or make 
you think things are different. But we have a group of people 
at the Bureau who are focused on student issues, and that 
continues. I have actually posted the job that is a statutorily 
required position to hire, which is the private education loan 
ombudsman--so that position would leave that office.
    Mrs. Axne. I appreciate an office that serves our students, 
but I believe earlier you mentioned that it is about financial 
literacy, less about financial protection. Is that correct?
    Ms. Kraninger. It is the same organization that office was 
in before. So that is--
    Mrs. Axne. So are you focused on financial protection for 
our students or financial literacy? What is the priority?
    Ms. Kraninger. The organization, writ large, our 
responsibility is consumer protection. And we do that using all 
of the tools that Congress gave us.
    Mrs. Axne. But I believe that what you are providing more 
is financial literacy. Is that correct?
    Ms. Kraninger. So again, the office that you are referring 
to that was the source of concern existed in that same division 
which is called consumer education and engagement.
    Mrs. Axne. Okay. Thank you.
    Chairwoman Waters. The gentlelady's time has expired. The 
gentleman from Wisconsin, Mr. Steil, is recognized for 5 
minutes.
    Mr. Steil. Director, thanks for joining us. If there is any 
benefit of being at the end of the dais at the end of a long 
hearing, it is that I get to hear a lot of my colleagues on 
both sides of the aisle ask you questions.
    If there is one theme, and it really seems like there is 
today, it seems like both sides want to provide oversight to 
CFPB, which is kind of interesting, because we have an entity 
that doesn't allow for congressional oversight. And if you look 
at the funding mechanism, it comes from the Fed. So you would 
logically think, being relatively new to Congress and from the 
private sector, that logically that oversight would stem from 
the Fed. But that is not true. It is an independent entity 
without oversight, so if I look at the questions--some of which 
seem a little big badgering to you--being from Wisconsin, I 
like the Badgers in general, but it seems like you are getting 
badgered. Congress should sit and have that conversation as to 
how we allow Congress to do our role of oversight and not to 
allow independent agencies to be off and running. But that is a 
conversation for us; that is not a conversation for you.
    So I would like to ask you a couple of questions. Early in 
your tenure you said that the Bureau would follow the rule of 
law and not engage in regulation by enforcement. And I am 
concerned that there are still cases of regulation by 
enforcement that are ongoing inside the agency. And so I would 
like to ask you, have you conducted a review of the factual 
basis for CFPB's claims in the cases that it is currently 
pursuing?
    Ms. Kraninger. Congressman, I appreciate the question 
fully, and I take that responsibility to do that. In the 86 
days that I have been Director, I have not gone through every 
case. We have been looking at the cases, particularly 
enforcement actions as they are coming to decision. But that is 
something that--
    Mr. Steil. Understood. So you can't assure us that today, 
regulation by enforcement is not occurring?
    Ms. Kraninger. I can tell you that I believe that the staff 
are trying to carry out the mission, and are following the 
direction that I have given them as the leader. They welcome 
the stability and consistency and my approach to this, so I 
have had some very good conversations with them.
    I believe that they are seeking to follow the direction. 
The one thing I would say is that it is challenging when you 
have ongoing actions, there is a regulatory record--there is a 
litigation record, there is a reputation with the courts in 
terms of making sure that we continue to be recognized from 
that vantage point too. So all of those things need to be 
considered as we look at what actions we might take going 
forward.
    Mr. Steil. I appreciate that--I appreciate your direction, 
obviously new to the tenure, but I will just reiterate my 
concern that we are looking at cases where there are actual 
consumers who are treated illegally or harmed rather than 
looking at the broad picture. And so I appreciate your efforts 
in that regard.
    Before coming to Congress, I served on the University of 
Wisconsin Board of Regents, and was heavily involved in higher 
education. And so student loan debt is front of mind for me, as 
we look at student loan debt increasing dramatically 
approaching $1.5 trillion that is sitting out there. And given 
that CFPB's mission is to protect and educate financial 
consumers, I assume you are concerned with this trend of 
increasing student debt?
    Ms. Kraninger. Yes, I am.
    Mr. Steil. What role can the CFPB play in improving the 
outcomes for students and their families? What are you working 
on?
    Ms. Kraninger. There are a number of things--I referenced 
earlier some of our education efforts, there is a literacy 
component to this, certainly in terms of understanding when you 
actually enter into a loan what that means for you.
    We have a few things going on in this space, one is seeking 
to hire the person who is going to be responsible for thinking 
about these issues on an hour and minute basis as opposed to 
where I am coming from.
    So that position is out to hire, and Congress created that 
position of the private education loan ombudsman. The other 
thing that Congress directed the Bureau to do is to enter into 
a memorandum of understanding with the Department of Education.
    Obviously, the largest in the student loan market--the 
largest part of it is the Federal Government in terms of both 
the lender and the servicing arrangements and by contract that 
they enter into. So that is an important relationship that we 
are just starting--at least under my tenure to make sure that 
we can work on there. I hope to have some progress on that 
front before the next time I come before you.
    Mr. Steil. I appreciate that. I look forward to following 
up, and I appreciate your efforts in those regards. Thank you. 
I yield back the remainder of my time.
    Chairwoman Waters. The gentleman from Illinois, Mr. Casten, 
is recognized for 5 minutes.
    Mr. Casten. Thank you, Madam Chairwoman, and thank you 
Director. Staying on the theme of student loan debt, as you 
know, in our next panel we are going to have Seth Frotman, who 
in August of 2018 resigned from the CFPB, and in his 
resignation letter to your predecessor, he said that the 
Bureau, under your leadership, has abandoned the very customers 
it is tasked by Congress with protecting. Are you aware of any 
changes that were made in response to his concerns with the 
Bureau?
    Ms. Kraninger. I can tell you certainly I am taking a fresh 
look at everything that the Bureau does. The office of 
students, which is now a section focused on student issues, 
there is certainly a robust focus on research and other things 
that we need to do across markets. I can't speak specifically 
to those allegations, frankly, but I am certainly making sure 
that we are protecting the consumers that we are directed to 
protect.
    Mr. Casten. Between August and March, the ombudsman who was 
tasked to be your ombudsman said that you were failing in your 
obligations that were granted by Congress. So are you aware, 
during the prior 6 or 7 months, whether any changes were made 
to address those concerns?
    Ms. Kraninger. So again we--I moved to hire that position, 
it is a statutory position--it is important to have someone who 
is carrying out those responsibilities. That is certainly where 
I am going to go in my tenure is working with that individual 
to set the path forward.
    Mr. Casten. Okay, well, let me roll back the clock a little 
bit earlier then. Back in January of 2018, acting Director 
Mulvaney said, ``We work for the people and that means 
everyone, those who use credit cards and those who provide 
those cards, those who take out loans and those who make them, 
those who buy cars and those who sell them.''
    Essentially, he was saying that he saw an obligation both 
to consumers and lenders. Do you share Mr. Mulvaney's sentiment 
that your job is to serve both the consumers and the industry?
    Ms. Kraninger. The Dodd-Frank Act, in fact, gives us a 
number of responsibilities--and just speaking specifically to 
industry setting a fair and competitive marketplace or setting 
it is an overstatement. Supporting a fair and competitive 
marketplace is certainly part of that niche, and I would say 
that does help lenders--good lenders that are looking to offer 
credit and help consumers--
    Mr. Casten. No, but I am asking specifically--
    Ms. Kraninger. --and reducing regulatory burden. Those are 
the two things with respect to the market and the lenders 
themselves for which we have a responsibility.
    Mr. Casten. I am asking very specifically--in the title of 
the Bureau is ``Consumer Protection Bureau,'' not ``Lender 
Protection Bureau.'' Is it your experience that lenders are 
regularly victimized by consumers and need Federal protection?
    Ms. Kraninger. I understand what you are saying, 
Congressman. But I would say that the impact to consumers of 
what regulatory actions are taken vis-a-vis the market are the 
things that we are looking at. When there is a burden or a 
cost, the lenders are in many cases passing that on to 
consumers, so it has a consumer impact.
    Mr. Casten. So what--
    Ms. Kraninger. That is the part that is our focus is 
certainly the consumer impact.
    Mr. Casten. So it is your view that the Consumer Financial 
Protection Bureau has an obligation to pursue a deregulatory 
agenda at the expense of consumer protection, is that what you 
are suggesting?
    Ms. Kraninger. I am telling you that Congress gave us as a 
responsibility among others, that we need to weigh--and I need 
to weigh in every action that we take, that regulatory burden 
is a consideration.
    Mr. Casten. I guess I would submit to you that Mr. 
Mulvaney's quote was not held by his predecessor. My last 
question is, in March of 2018 the Department of Education said 
that student loan services should be exempted from State rules 
that may be tougher than Federal law. This matters for us in 
Illinois because we recently passed a student loan bill of 
rights, and all other States have adopted a wide range of 
requirements to protect borrowers and keep students in check.
    Do you agree that the Federal Government should be able to 
override States' rights, and that States' rights should not be 
allowed to set a higher standard of protection than the Federal 
Government provides when the Federal Government is failing to 
fully protect consumers, in the views of the States?
    Ms. Kraninger. There is a lot packed into that question, 
Congressman. I would tell you that certainly what is happening 
in the student lending marketplace is important for the Bureau 
to understand. We have a responsibility to act from many 
different facets on that and I certainly do, from my 
standpoint, as a very general matter, support the States' 
abilities to exercise their authorities on behalf of their 
consumers in a variety of ways.
    That is something that is important. When it comes to this 
issue that you raised very specifically, that is something that 
I think we will need to talk to the Department of Education 
about. I would say having that conversation is something I have 
not gotten to yet, but it is important. I wanted to have my 
private education loan ombudsman in place before we had that 
conversation.
    Chairwoman Waters. The gentleman's time has expired.
    Mr. Casten. Thank you.
    Chairwoman Waters. The gentleman from Texas, Mr. Gooden, is 
recognized for 5 minutes.
    Mr. Gooden. Thank you, Madam Chairwoman. And thank you, 
Director, for the great work you are doing. I realize your job 
is not to comment on pending legislation, but to carry out what 
is already passed. Would you agree with that?
    Ms. Kraninger. Yes, thank you.
    Mr. Gooden. And kind of think going down the same path with 
respect to congressional intent of the legislation that created 
your CFPB and with your oversight responsibilities, do you feel 
that the CFPB has oversight authority over insurance products 
in the insurance industry?
    Ms. Kraninger. The Dodd-Frank Act specifically precluded 
activity that is State-regulated when it came to insurance.
    Mr. Gooden. So that would be a ``no?'' Okay, thank you. I 
yield back.
    Chairwoman Waters. The gentlewoman from New York, Ms. 
Ocasio-Cortez, is recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you, Madam Chairwoman. Many of my 
colleagues here today have rightfully highlighted the extent of 
the student loan crisis. And it is not just a concern, it 
really looks like it is a debt crisis that is going to get 
worse. And so I want to make sure that we are doing everything 
we can to make sure that we are preventing what could be a 
major threat to our overall economy.
    Bloomberg News has reported that the student loan debt 
crisis is about to get worse, and in fact, the next generation 
of graduates will include more borrowers who will never be able 
to repay their loans. Student loans are growing--I have seen 
almost 157 percent cumulative growth, compared to auto loans, 
which is just 52 percent. They are being issued at 
unprecedented rates as tuition and interest rates get higher 
but wages aren't keeping pace.
    Student loan debt currently has a 90 percent delinquency 
rate of all household debt despite the fact that it is now the 
second largest amount of debt load. So all of these things are 
pointing to a crisis. In fact, Fed Chairman Powell told 
Congress last year that these delinquencies may come with a 
significant negative impact on the broader economy.
    It is preventing household formation: millions of houses 
and apartments aren't being purchased. And in fact, Ira Jersey, 
the chief U.S. rate strategist for Bloomberg stated, ``You have 
to wonder if the lack of transparency surrounding student loans 
is intentional.'' He also said that students shouldn't assume 
their loan servicer has their best interests in mind. So with 
all that, I have a few questions to make sure we are addressing 
these issues.
    Section 1035 of the Dodd-Frank Act requires the Bureau to 
send Congress reports every year documenting consumer 
complaints submitted by student loan borrowers. And the Bureau 
has sent a report to Congress each October from 2012 to 2017. 
Did the Bureau publish that report in October 2018, as required 
by Federal law?
    Ms. Kraninger. No, because the position that is required to 
submit it under Federal law, which is the private education 
loan ombudsman--there was no one in that position at the time.
    Ms. Ocasio-Cortez. So, has it been filed in the 5 months 
since?
    Ms. Kraninger. No, it has not been. I am actually in the 
process of hiring that position and that is, again a part of 
the reason why it has not been done.
    Ms. Ocasio-Cortez. When do you think we will be able to get 
that report?
    Ms. Kraninger. It is going to take a little bit of time. 
There are staff in the student office, in terms of--
    Ms. Ocasio-Cortez. Is there a projection? Six months, a 
year?
    Ms. Kraninger. I would certainly hope that we can get the 
next report in timely. It is just what time period that is 
meeting. I hope to get someone on board relatively quickly, but 
it is a--
    Ms. Ocasio-Cortez. So no hard time commitment on when we 
will get the 5-month-overdue report?
    Ms. Kraninger. I am happy to get back to you, 
Congresswoman, on that, specifically.
    Ms. Ocasio-Cortez. Great. Let me see here, in December of 
2016, the Bureau explained how banks and colleges are teaming 
up to gouge college students with high debit bank account fees, 
and committed to publishing a report each year documenting the 
risks to students as part of the annual report on college 
credit card agreements required by Congress.
    In December of 2017, did the Bureau include information in 
its college credit card report about banks like Wells Fargo 
that are charging exorbitant debit card fees on college 
campuses across the country?
    Ms. Kraninger. My understanding--and I responded to another 
one of your colleagues earlier on this--is that the report 
included what was statutorily required to be included, but that 
does pre-date me.
    Ms. Ocasio-Cortez. Great. And I am concerned as well that 
in this balance between wrongdoing by some lenders and 
consumers, that the agency may be erring too much on the side 
of these lenders that may be engaging in predatory practices.
    In July of 2017, the CFPB settled with TCF National Bank, a 
regional bank in Minnesota. The CFPB issued a fine in 2017, 
claiming the bank deceitfully forced customers to opt into its 
overdraft services for debit and ATM card transactions, 
subjecting them to costly fees when their balance dropped too 
low. In fact, the CEO of the bank that was sued, was also the 
former head of the Minnesota Republican Party. He owned a yacht 
named, ``Overdraft.'' But the CFPB issued a fine of $5 million. 
He agreed to remit $3 million of that to the Federal 
Comptroller's office. The TCF carries assets that are very 
large, and I am wondering why the agency agreed to reduce the 
amount of their fine by $3 million?
    Ms. Kraninger. Congresswoman, that case in particular, 
predates my term, but we are happy to get back to you on what 
we can on that.
    Chairwoman Waters. The gentlelady's time has expired. The 
gentleman from Virginia, Mr. Riggleman, is recognized for 5 
minutes.
    Mr. Riggleman. Thank you, Madam Chairwoman, and thank you, 
Director, for testifying today. You know, I am pretty new to 
politics, so before I get started, I would like to address an 
issue that many of my colleagues have mentioned today, which is 
the politicization of the Bureau. And I would like to note that 
former Director Cordray, who ran the CFPB from 2012 to 2017, 
then ran for Governor of Ohio, and was a Democrat. So I think 
it is inherently political, it is seems to me, based on, we 
passed a law for the CFPB, but that is suddenly new to 
politics. So maybe I am naive.
    It is not a secret and it shouldn't be a secret that I am a 
freshman Member of Congress. And compared to many of my 
colleagues on both sides of the aisle, I don't have a whole lot 
of experience. But even without political experience, I have 
live experience as a former and current business owner; as 
somebody who dealt in strategic intelligence, and helping DHS; 
and also as a 9/11 veteran.
    And there is something I wanted to thank you for, I looked 
at your resume. Thanks for what you did during 9/11. I was part 
of that operation as soon as it happened, so it is something I 
am very impressed with. I am a novice in politics, but after 
looking at your resume, I think you are uniquely qualified to 
do this.
    With me doing multiple businesses, people would say, ``Why 
are you running for politics? Why are you trying to get into 
government?'' I think life experience in trying to manage 
people but also resources, assets, operational issues, measures 
of effectiveness, anything to do with H.R., but also mission 
creep, mission specifics, and every piece of language when you 
are actually running an organization that big is an incredible 
challenge. So I thank you for being here today. You are not a 
novice; I am.
    So anyway, as we get going, as Director of the Consumer 
Financial Protection Bureau, you have an awesome amount of 
power and authority in the Federal financial regulatory sphere. 
Wouldn't you agree?
    Ms. Kraninger. I would agree.
    Mr. Riggleman. Yes. And--
    Ms. Kraninger. As granted by Congress.
    Mr. Riggleman. Yes, granted by Congress. And on the website 
of the CFPB, it reads, ``The aim is to make consumer financial 
markets work for consumers, responsible providers, and the 
economy as a whole. We protect consumers from unfair, 
deceptive, or abusive practices and take action against 
companies that break the law. We arm people with the 
information, steps, and tools that they need to make smart 
financial decisions.''
    As a new Member of Congress, I can already see--including 
as recently as yesterday in the committee--that the debate 
about your agency is not about the Bureau's mission or 
objectives, but about a power grab that is dictated by the 
political seesaw of what party is in the Majority. I fully 
support your agency's mission and I think most of my colleagues 
would agree with that.
    My question for you, Director Kraninger is, in your 
opinion, what has your agency done well to protect consumers 
and what are some areas where that agency has fallen short of 
its mandate?
    Ms. Kraninger. I appreciate that question, Congressman, 
because we always seek ways to continually improve how we are 
delivering on that mission, and that is certainly where I am 
coming from. I can tell you, with my interactions with the 
staff, they have raised themselves opportunities to improve, 
issues to address, ways to do things better and differently, 
and I am encouraging that kind of thinking because, again, I 
don't think it is a full-scale criticism of the past.
    You know, this is an agency similar to--again, experiences 
that you noted--standing up any agency or an organization, in 
the early days there are a lot of mandates that are before you 
and a lot of things that have to happen in a short period of 
time given pressure and, frankly, the mission need. And the 
financial crisis was certainly something that drove many people 
to come to the Bureau and to want to serve.
    So I think, in terms of ways to improve, we have talked 
about using all of the tools at our disposal and thinking about 
how best to do that. Certainly in our conduct of exams, we have 
matured and will continue to. I want to be more agile in our 
examination process as we think about how we are able to pivot 
to address the risks that we see, how we are able to work with 
entities that are seeking to comply in a more consistent and 
stabilized manner.
    And education, frankly, I am very interested in how we can, 
again, measure the effectiveness of the things that we are 
doing in that arena. I am finding a staff that is very excited 
about the opportunity to do that.
    Mr. Riggleman. Well, my time is short, but I want to say 
this. My staff in Congress has allowed me to transition in a 
way I didn't think possible, especially the professionalism of 
it. It looks like your staff has done the same thing.
    And obviously, I had two or three more questions because I 
actually read some of this and I am pretty excited about what 
the CFPB could do for consumers, but I am also well aware of 
what overreach and regulatory weaponization can do to 
companies, based on when I have been in the DOD, but also in 
the manufacturing space and also trying to get loans in rural 
areas.
    So I thank you for your time. I am not even going to go 
over time. I think we have about 10 seconds left. So, thank 
you.
    And I yield back.
    Chairwoman Waters. Thank you very much. And let me just 
remind Mr. Riggleman that serving as the Director of the 
Consumer Financial Protection Bureau, no matter what your party 
is, does not eliminate your choice to run for office.
    The gentlewoman from Virginia, Ms. Wexton, is recognized 
for 5 minutes.
    Ms. Wexton. Thank you, Madam Chairwoman.
    And thank you, Director Kraninger, for joining us here 
today. As you know, the CFPB was created to protect consumers 
from unfair, deceptive or abusive practices in the financial 
marketplace. But I am troubled by many of the anti-consumer 
actions taken by the CFPB under your leadership and that of 
your predecessor, Mick Mulvaney, someone who called the CFPB a 
``sick, sad joke'' and sponsored legislation to dissolve the 
very agency he later headed.
    And it is troubling to me because I am no longer confident 
the CFPB will fulfill its mission. Now, Director, in your 
written remarks you discuss the nine items that you are 
statutorily mandated to report to us about semi-annually. Is 
that correct?
    Ms. Kraninger. That is correct.
    Ms. Wexton. Okay. And the first of those items is 
significant problems faced by consumers in shopping for or 
obtaining consumer financial products or services. Is that 
correct?
    Ms. Kraninger. Yes.
    Ms. Wexton. Yes. And the first item that you mention are 
credit products marketed to non-prime borrowers, correct?
    Ms. Kraninger. I think that might be the spring one? There 
are two reports here and both pre-date me. So I apologize, but 
I am probably a little more familiar with the fall points. I 
will address it when you have asked the question.
    Ms. Wexton. Generally, one of the top things that--
    Ms. Kraninger. Yes.
    Ms. Wexton. That appears in that section, right?
    Ms. Kraninger. Yes.
    Ms. Wexton. Okay. And would you agree that payday loans and 
car title loans are lending instruments that are marketed to 
subprime borrowers?
    Ms. Kraninger. I believe that it is important to ensure 
that we do have access to credit. That is why we are looking at 
this issue--
    Ms. Wexton. No. Would you agree--the question was, do you 
agree that those are loans that are marketed to subprime 
borrowers?
    Ms. Kraninger. I do believe that is available to a wide 
variety of consumers. But I think there have probably been 
studies to that point.
    Ms. Wexton. I am from Virginia, and we instituted very 
strict consumer protection rules on payday lenders at the State 
level. But I appreciate your remarks about whack-a-mole here 
today.
    Because what we have seen is that, although we don't have 
payday lenders really anymore, we have a lot of car title 
lenders who have popped up. These storefronts have popped up in 
low-income areas or especially near our military bases. We have 
Marine Base Quantico, Norfolk Naval Base, and a number of 
others here in Virginia.
    They are not required at this time to determine ability to 
repay, is that correct, in making those loans?
    Ms. Kraninger. I won't stipulate exactly what every single 
company decides to do with respect to its underwriting and with 
State laws that are in place. There are a number of things--
    Ms. Wexton. The question was, they are not required to by 
the CFPB? The rule that would require that assessment has not 
gone into effect, is that correct?
    Ms. Kraninger. It was set to go in effect in--or is set in 
August, except that it is stayed by the court. So yes, there is 
not a Federal requirement on them on this point.
    Ms. Wexton. Okay. Now, would it surprise you to hear that 
despite the fact that these are marketed as short-term loans, 
in Virginia in 2015, the average duration of such a loan was 
354 days, or just short of a year? Would that surprise you?
    Ms. Kraninger. There are a lot of studies that have been 
done on this in terms of what happens in different States--
    Ms. Wexton. Right, but this is--
    Ms. Kraninger. I am not familiar with that particular 
study--
    Ms. Wexton. Well, I will tell you that I am using 
statistics from the Virginia State Corporate Commission--
    Ms. Kraninger. Understood.
    Ms. Wexton. So it is not a study, it is statistics from the 
State itself. Okay, would it surprise you to hear that the 
average APR for these loans in 2015 in Virginia was 221 
percent? Does that surprise you?
    Ms. Kraninger. Again, you are listing statistics I haven't 
seen, but I stipulate that they are accurate.
    Ms. Wexton. But would it surprise you that these loans that 
are marketed to people who by definition have more trouble 
repaying them than wealthy folks, or than people who don't have 
to put their car on the block for it, does it surprise you to 
hear that the average APR is 221 percent?
    Ms. Kraninger. I understand what you are getting at in 
terms of looking at this industry in general. The 
reconsideration of the rule, and the--
    Ms. Wexton. I'm sorry, we are running out of time. If you 
don't want to give me a yes or a no, I will just reclaim my 
time. Does it surprise you to know that more than 38 percent of 
these borrowers went into arrears by 60 days or more and 
incurred additional fees and penalties, does that surprise you, 
yes or no?
    Ms. Kraninger. Again, I know what you are getting at, and 
in terms of--
    Ms. Wexton. Thank you. Reclaiming my time, would it 
surprise you to know that more than 15 percent of these people 
had their cars repossessed in 1 year?
    Ms. Kraninger. Again, I will stipulate that you are listing 
statistics from the cite that you said in terms of what happens 
in Virginia.
    Ms. Wexton. Okay, thank you very much. Given statistics 
like those, it surprises me that you want to rescind this rule 
that protects these people. And with that, I yield back.
    Chairwoman Waters. The gentleman from Utah, Mr. McAdams, is 
recognized for 5 minutes.
    Mr. McAdams. Thank you, Chairwoman Waters. Director 
Kraninger, I know this is your first appearance before our 
committee, so I want to welcome you to the committee and I hope 
that we can work together in the coming years to fulfill the 
CFPB's mission of protecting consumers, while also making sure 
that consumers have safe access to financial products--that is 
important.
    In general, I am a believer that capitalism with proper 
guardrails and direction can be a force for good. The modern 
financial system is able to provide credit to borrowers who 
would otherwise be locked out, and lending can fuel economic 
growth, which is also important.
    Whenever I talk to small businesses in my district, they 
always mention access to capital as one of the biggest hurdles 
in starting a business and scaling up their business. And so I 
want to encourage that form of capitalism in particular, 
because I know the potential a small business loan can unleash 
for an entrepreneur.
    And unlike some of my colleagues, I was not in Congress 
when the Dodd-Frank Act was enacted into law. And I know that 
everything in that law wasn't perfect, but I remember the Great 
Recession, and I know, and remember, the pain so many Utah 
families suffered as they lost their homes.
    I don't want to go back to those days, and I don't want to 
go back to the days before the CFPB existed, because I believe 
it has an important mission and that it fills a critical role--
a critical void that existed during the financial crisis.
    So Director Kraninger, I wanted to ask you about one of the 
first steps you took after you were confirmed and sworn into 
your current role regarding the rollback of the payday rule. In 
the CFPB's press release announcing the payday rule rollback, 
and the proposal to rescind ability to pay requirements, your 
agency said, ``Rescinding this requirement would increase 
consumer access to credit.''
    I wanted to contrast that statement with findings from the 
CFPB's 2017 final rule, and in the 2017 final rule the CFPB 
found that half of all storefront payday loan sequences contain 
at least four loans. One-third contained 7 loans or more, and 
almost one-quarter of loan sequences contained at least 10 
loans in a row.
    So Director Kraninger, my question, for the one-quarter of 
people who have taken out 10 loans in a row is, is access to 
credit their biggest problem, or are they stuck in a debt trap?
    Ms. Kraninger. I understand the premise of your question, 
and I would say there are--again, a lot of the rulemakings have 
different impacts on a number of different consumers.
    We looked at a wide variety of things from the number of 
loans affected, the storefronts affected, the loan revenue 
affected, physical access affected--how that worked with 
respect to the vehicle title loans versus the payday loans, and 
the lien sequence--the loan sequences affected. So there are a 
vast array of cost and benefits that we need to continue to 
look at.
    The preceding issue really is the legal sufficiency of the 
basis for the unfair and abusive practice determination. That 
is what is being looked at--that is what is being litigated as 
well, so we were in litigation when I took office--there is a 
stay in place on that particular issue. It is with that pledge 
to the court to reconsider and take action--
    Mr. McAdams. Expanding access to credit certainly is 
important, but my question is, what role did consumer 
protection play in making that decision, because there is a 
balance between expanding access to credit, and consumer 
protection, so what role did consumer protection play in making 
that decision to rescind the rule?
    Ms. Kraninger. I would say again that is certainly at the 
heart of what we do as an agency, but at the same time, the 
guidepost is the law. The legal sufficiency of the arguments 
that we make is paramount and critically important.
    I have an open mind because this is an active rulemaking, 
and because I am telling you that I do have an open mind on 
this issue, we need to review the record and the evidence 
through this process, and--
    Mr. McAdams. Are you concerned that the proposal on the 
table now will subject more consumers to high-cost loans that 
they can't afford and that they will never be able to pay off? 
How much is that weighing into the factor?
    Ms. Kraninger. Again, that is certainly a consideration as 
we are looking at the full body of evidence, and the data that 
comes forward on this.
    Mr. McAdams. You know, I think ultimately payday lending 
can quickly become a debt trap, and I don't think that the 
proposed rollback strikes the right balance between consumer 
protection and access to credit. Thank you. I yield back.
    Chairwoman Waters. The gentlewoman from Pennsylvania, Ms. 
Dean, is recognized for 5 minutes.
    Ms. Dean. Thank you, Madam Chairwoman. Director, just in a 
sentence or, for the clarification of the folks who may be 
listening in who hate acronyms just as much as I do, what is 
the mission of the agency that you direct?
    Ms. Kraninger. The mission of the agency in short is 
consumer protection, that is absolutely at the heart of what we 
do.
    Ms. Dean. Wonderful, and I am so glad for that 
clarification because it seemed like it morphed into consumer 
protection and lender protection. So I am so glad to get that 
clarity from you. With whom did you interview before becoming 
Director of this agency?
    Ms. Kraninger. There were certainly a variety of people 
involved in the process as there are in any of the personnel 
processes in the White House, and ultimately it is the 
President's decision whom he is going to nominate.
    Ms. Dean. So could you tell us some of the people you 
interviewed with? Names?
    Ms. Kraninger. I would say again, I don't want to get 
outside--National Economic Council--again if anyone has worked 
inside the system they know that is the core organization 
inside the White House that would be responsible for providing 
policy input--
    Ms. Dean. I don't know who those people are. Could you say 
who you interviewed with in order to achieve this terrific 
position?
    Ms. Kraninger. Well, I can tell you that Larry Kudlow is 
the National Economic Advisor who runs that organization.
    Ms. Dean. Meaning you interviewed with Larry?
    Ms. Kraninger. Yes, I did.
    Ms. Dean. Okay.
    Ms. Kraninger. The Presidential Personnel Office, again, 
helps through the process. And there were interviews with folks 
there.
    Ms. Dean. Director Mulvaney?
    Ms. Kraninger. No, Director Mulvaney was not part of the 
process.
    Ms. Dean. Okay. And through that interview process, how 
were you informed that you got the job?
    Ms. Kraninger. I had my last step with the President, and 
my nomination went forward from there.
    Ms. Dean. So you spoke with the President about the 
position?
    Ms. Kraninger. Yes, I did. It is his nomination.
    Ms. Dean. Okay. And what direction did the President give 
you in order to appoint you to this important position?
    Ms. Kraninger. The President told me to go do a good job.
    Ms. Dean. By that, he meant what?
    Ms. Kraninger. I presume he meant that I should carry out 
the responsibilities Congress has given this position as I 
intend to do and have done.
    Ms. Dean. He didn't specifically articulate what he thought 
the job was?
    Ms. Kraninger. He did not give me any particular direction. 
I know that is what you are looking for, in terms of anything 
that I should do on the job or not. He wanted to make sure and 
satisfy himself that I was the person he wanted to nominate for 
the job.
    Ms. Dean. Okay. Well, I am not clear on what the 
conversation was like, but we will move on from there. In terms 
of student loan debt, I too care deeply about that because I 
come from Pennsylvania, and in my home State of Pennsylvania, 
students have an average debt when they leave college of almost 
$37,000.
    Unfortunately, we suffer the second-highest rate in the 
United States. And as many of our colleagues have discussed, 
this is not just a problem of student loan debt but the 
barriers that it creates to other types of borrowing, whether 
this cripples them from being able to borrow for purchase of a 
house or save for retirement.
    So I was interested that the agency, under your stewardship 
for the last 3 months, left open the ombudsman position. Could 
you explain to us why that was left open for 6 months?
    Ms. Kraninger. Yes. I would say first that my predecessor 
was hoping that I would get the opportunity to actually appoint 
that position. So it did take a little bit of time to get 
confirmed. In the time that I have been on board, we had to 
work with the Treasury Department because Congress actually 
gave the authority to appoint this position to the Treasury 
Secretary, despite the fact that the person works for me. There 
was a little bit of conversation to work out. The position was 
posted just this week because we got through all of that.
    Ms. Dean. It was actually posted yesterday.
    Ms. Kraninger. Yes.
    Ms. Dean. I was fascinated. One of my colleagues--
    Ms. Kraninger. And I could tell you, actually, despite the 
fact that you may be skeptical, it literally was as fast as I 
could do it. It had absolutely nothing to do with this hearing. 
It was getting that done--
    Ms. Dean. No, nothing to do with that. ``Wednesday, March 
the 6th, at 1:30 pm, good afternoon. We are currently seeking 
candidates for the private education loan ombudsman position.'' 
I think that is terrific. Finally, we are going to fill that, 
and we let it go for 6 months, a statutorily created and 
required position. I might go on.
    Ms. Kraninger. There are folks in the student offices who 
are paying attention to student lending issues, and I have 
certainly met with them and talked to them. But I think that 
is--
    Ms. Dean. Even though your predecessor shattered those.
    Ms. Kraninger. It is an important note to know.
    Ms. Dean. In your passion for controlling student loan 
debt, what recommendations have you made or will you make to 
this committee to address the student debt crisis?
    As many of my colleagues have talked about, $1.5 trillion 
is approaching the burden of home mortgage debt. What specific 
ambitions do you have to tamp that down and to control 
predatory lending and to help young people claim their 
education without burdening their future?
    Ms. Kraninger. I can tell you very quickly, since we are 
being gaveled, that education already, I know, is a huge part 
of this. We need to give students the information, and the 
parents and the grandparents who are helping them the 
information they need to assess whether to undertake the loan 
to begin with. And there is certainly much more.
    Chairwoman Waters. The gentlelady's time has expired.
    Ms. Dean. Thank you, Madam Chairwoman.
    Chairwoman Waters. Mr. Garcia, the gentleman from Illinois, 
is recognized for 5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman. Good 
afternoon, Director. In some of the previous remarks that you 
made, you mentioned bad actors in the financial services 
market. Can you tell us who some of the bad actors are?
    Ms. Kraninger. Congressman, I appreciate why you are asking 
that. I would say, I can't stipulate that. There are a number 
of entities who have had enforcement actions taken against them 
by the Bureau. There are ongoing investigations right now that 
are not public, where there is a concern that unfair practices 
and other violations of the law have taken place.
    Mr. Garcia of Illinois. Okay. I appreciate ongoing 
investigations, but who are some of the bad actors that were 
moved on by the Bureau?
    Ms. Kraninger. Perhaps the best example I can give you of a 
public action that was recently taken, and that is one that I 
know the committee asked about but perhaps it sets the tone, in 
terms of injunctive relief--one of the things that the Bureau 
can do is actually preclude an entity from engaging in and 
debarring them from an opportunity to even participate in the 
marketplace to begin with. We had an entity with an 
extraterritorial presence. They were not present in the United 
States and they were yet trying to deceive and engage in 
illegal conduct in the process.
    Mr. Garcia of Illinois. And who was that?
    Ms. Kraninger. It is Northway that we were--it is a 
complicated, again, structure, in terms of who it is.
    Mr. Garcia of Illinois. Any others come to mind?
    Ms. Kraninger. That one just, at least, gives you the 
example because they are completely debarred as part of the 
consent order from engaging at all in our financial system.
    Mr. Garcia of Illinois. Okay, fair enough. Any others 
within the last 3 months of your tenure?
    Ms. Kraninger. Certainly, there are enforcement actions 
that have been taken. I mentioned in my statement, and it is 
public information, that I signed consent orders on Cash Time, 
Enova, Sterling Jewelers, and an individual name, Mr. Corbitt.
    Mr. Garcia of Illinois. Okay, good. I like the specificity. 
I think that helps to send a message to the bad actors if we 
truly care about that. Let me change gears quickly to the topic 
of student lending, which previous Members have raised with 
you.
    Latinos comprise about one-third of the folks who are not 
currently making payments on their student loans. This is less 
than African Americans but still slightly higher than whites. 
Of those Latinos who are not making payments, almost half, 46.4 
percent, are not making payments because they are in 
forbearance or in the grace period.
    What is the CFPB looking at doing for communities of color, 
in terms of student debt counseling? And how are student 
debtors being guided away from forbearance and default?
    Ms. Kraninger. I can tell you, Congressman, we do provide a 
number of educational tools, and information to students. I 
think we can do a better job getting some of that information 
out more widely in the different stages of the process.
    Mr. Garcia of Illinois. Are you going to?
    Ms. Kraninger. Yes, it is absolutely something I am looking 
at. As I noted, having the private education loan ombudsman 
position filled will be extremely helpful, in terms of getting 
recommendations on the inside.
    I have a number of individuals dedicated to this issue, in 
the students' office. And they have made recommendations and 
certainly set a strategic plan of the activities that we are 
going to undertake in this space by their recommendation. But 
having the person in charge of the office will certainly help.
    Mr. Garcia of Illinois. We will be watching closely on that 
front. My last question is, are you seeking to renew the 
memorandum of understanding (MOU) that was done away with by 
the Secretary of Education and your agency, since it seemed to 
have a pretty doggone good purpose and function?
    Ms. Kraninger. I would agree that it had a good purpose and 
function. And I would note that, obviously, Congress required 
us to have that MOU in place. So it is a priority to have the 
conversation--
    Mr. Garcia of Illinois. By when?
    Ms. Kraninger. --with the Department of Education on that.
    Mr. Garcia of Illinois. So is that a yes?
    Ms. Kraninger. Yes, it is. It is a definitely a priority to 
move forward on that.
    Mr. Garcia of Illinois. Okay. Thank you. I just want to 
point out that matters like the MOU and the student loan study 
are very, very important, and it is very key to be aware of the 
student loan study, and to have a full understanding of the 
student debt problem, particularly as it is affecting 
communities of color. And I will be asking in the future for 
reports on that.
    Thank you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you very much.
    The gentlewoman from Texas, Ms. Garcia, is recognized for 5 
minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman.
    And thank you, Director, for your endurance. I know it has 
been a long hearing. And the good news is, I am the last one 
who appears, unless Mr. Phillips shows up. So the end is in 
sight, perhaps. Somebody else is waiting, too? Well, that is 
what happens.
    Ms. Kraninger. Yes.
    Ms. Garcia of Texas. But I want to zero-in on your 
listening sessions. I had some questions related to payday 
loans and payday lenders. I always tell everybody payday 
lenders do nothing but make poor people poorer.
    And I don't usually even use the word ``hate'' because my 
parents taught me at an early age, and my faith, not to hate 
anybody. But I really do hate anchovies, eggplant, and payday 
lenders. Because I really do think that they prey on poor 
people and the most vulnerable populations. And I hope that you 
do reconsider changing any of the rules that have been in 
place, that have provided more protections.
    But I wanted to zero-in on people who have cultural 
language barriers, that add to this issue and that make it 
harder for them to do business with some of the financial 
institutions that are under your oversight. I saw that you all 
have looked at fair lending enforcement. I looked at this and I 
also found a report that you all made on serving the limited 
English language population.
    So I was curious, when you went to New York and Chicago and 
San Francisco on your listening tours, did you visit any of the 
minority or poverty populations, or any of the community-based 
organizations that are involved with representing them, to 
really look at the concerns of that population of consumers?
    Ms. Kraninger. I did absolutely meet with the 
organizations. It was due to time and some very constrictive 
things that I didn't get to go out to those organizations but I 
have expressed my interest in doing that. But I have met with--
    Ms. Garcia of Texas. Which organizations did you visit 
with?
    Ms. Kraninger. We can probably get back to you with a list. 
I apologize that it is not readily at my fingertips. But it was 
a myriad of organizations and hearing their concerns was 
important to me.
    Ms. Garcia of Texas. Right. Because it strikes me that at 
least New York, Chicago, and San Francisco--I may have missed 
one that you mentioned--are certainly recognized as financial 
banking centers. I was afraid that you were listening to the 
lenders and not to the poor consumers.
    Ms. Kraninger. No. I absolutely have met with consumer 
advocates in those cities, legal aid organizations as I said, 
too. And I did have a housing counselor and his client actually 
there at one of them, and he was an Hispanic-American 
gentleman.
    Ms. Garcia of Texas. Well, I would certainly hope that when 
you continue these sessions--and I would encourage you to do 
that--that, of course, you come to Texas, you come to Houston--
    Ms. Kraninger. Yes.
    Ms. Garcia of Texas. And that you come to listen to those 
who are not as proficient in English or not as culturally used 
to using some of our lending in financial institutions.
    And Madam Chairwoman, I do have a document I wanted to 
submit for the record. It is called, ``Spotlight on Determining 
Limited English Proficient Consumers--
    Chairwoman Waters. Without objection, it is so ordered.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman.
    Also, I wanted to zero-in on immigrant communities. Have 
you visited with any immigrant communities, or any people who 
deal with immigrant communities other than payday lenders? 
Because immigrant communities, from some of the data I have 
seen, make up about 14 to 15 percent of the consumer borrowing, 
consumer transactions in this country, so they are obviously 
contributing a lot.
    So what protections are you going to plan, or are you 
involved with or what is on your horizon as you are moving on 
with your position, on making sure that we protect the 
immigrant population from the abuse of payday lenders and 
others?
    Ms. Kraninger. I can tell you that the purview of the CFPB 
is to protect all consumers and I take that seriously. I did 
remember one other institution that, perhaps, gets to an answer 
of both of your questions. There was a community banker, 
actually, who was in a New York meeting who was an Asian 
American and running a bank specifically to help the Asian 
American community in New York where much of the population was 
immigrants--
    Ms. Garcia of Texas. Thank you. I would encourage you to do 
more of that. And very quickly, what efforts would you be 
making for outreach to those communities? I know this same 
report that you gave us today outlines a lot of materials, 
pamphlets.
    And it takes more than just preparing a preparing a 
pamphlet in Spanish. It takes more than preparing a pamphlet in 
Chinese. It is really about outreach and making sure that 
people have an opportunity to learn how to use the banking 
system and, frankly, they learn how not to get ripped off.
    Chairwoman Waters. The gentlelady's time has expired.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman.
    Ms. Kraninger. If I could, Madam Chairwoman, there is an 
Office of Public Engagement and External Affairs and an Office 
of Community Affairs that is responsible for thinking about the 
issues that those populations face.
    Ms. Garcia of Texas. Okay. Thank you.
    Chairwoman Waters. Thank you.
    The gentleman from West Virginia, Mr. Mooney, is recognized 
for 5 minutes.
    Mr. Mooney. Thank you, Madam Chairwoman.
    Direcor, if there was anything else you wanted to follow-up 
on that, I am happy to yield you another minute.
    Ms. Kraninger. No, but thank you.
    Mr. Mooney. Okay. Well, I know it has been a long day and I 
am sure you have had a lot of tough questions. And some of my 
friends on the other side of the aisle would like to see you be 
more active, go outside your area, be more aggressive.
    I am, frankly, the opposite of that. I don't think your 
department should exist. I would abolish it tomorrow if I 
could. It should never have been created to begin with.
    But that being said, you are there now, and your 
predecessor testified last year. And he bragged that for every 
dollar CFPB used to investigate people, they were able to bring 
back $7 into the CFPB. And that was, for him, a point of pride.
    I was a little concerned that he is measuring his success 
by how much money he can get from people he investigates. How 
do you measure your success in what you are doing? Is it by how 
much money you can get from people in settlements?
    Ms. Kraninger. Congressman, this is a very important 
question because I think it gets to the heart of how we do what 
we do. I am still in the midst of my listening tour, really 
trying to hear from all the stakeholders about what they think 
on that front.
    What I am starting to formulate around is a focus on 
prevention of harm, that is obviously a challenge to measue, to 
your point, in getting at measuring success is important, 
looking at that challenge from how education changes behavior 
certainly in this space and how we can get our education 
materials to those who need them, and see change happen, 
frankly all communities in need on that front.
    But no one measure, as in the number of fines that are 
imposed, or the measure of staff that we have--others have said 
that to me, it is not that alone, it really is about outcomes 
and achievement of the mission which is protecting consumers.
    Mr. Mooney. Well, thank you for that. There is a new 
movement in this country of socialism, some of my colleagues on 
the other side of the aisle are socialists--they don't think 
capitalism should exist in America. They don't think that 
companies that they would like you go to after should exist as 
profitable companies. They have a different view of the world, 
and I hope you do not take that view.
    This country was founded and became successful because of 
capitalism and free markets, and just because they have a 
corporation after their name or their business is profitable 
doesn't make them bad, doesn't make them guilty. And I think 
there are those who believe all companies are somehow guilty, 
and they have to prove that they are innocent, and I take great 
offense at that.
    Everybody is innocent until proven guilty in this country--
not guilty until proven innocent. And I think from what I have 
seen in a lot of departments in the last Administration and in 
your department, there might have been a view--I am not saying 
you have this view, I hope you do not.
    But I think there was a view that you just go after these 
businesses and you dig, and dig, and dig until you find 
something. And they are all going to be guilty, so let's just 
keep going until they basically pay a settlement and beg for 
mercy and get out of whatever investigation is going on.
    So I urge you not to do that going forward. Follow-up 
question, the CFPB structure has been an issue in multiple 
jurisdictions. Judge Loretta Preska of the U.S. District Court 
for the southern district of New York ruled the structure to be 
unconstitutional, limiting the Bureau's authority to pursue 
claims, how do you interpret these rulings?
    Ms. Kraninger. Congressman, I recognize that the litigation 
is ongoing on these issues, and I don't intend to comment on, 
nor does the Bureau comment on ongoing litigation. I will tell 
you that it is my responsibility to continue to carry out the 
mission that Congress gave this Bureau until that changes.
    Mr. Mooney. Okay. I am just going to conclude by saying 
there are a lot of patriotic Americans who love this country, 
who have built businesses and treat their employees very well. 
They want to make a profit so that their employees can have 
good paying jobs and take care of their families, invest in 
their children's futures, be able to go to college and have a 
better life.
    There are a lot of good men and women out there who have 
done this, that I think have been unfairly treated by their own 
government from various agencies. So I am glad we have some new 
blood in there now. Again, as I said at the beginning, I don't 
think this ever should have been created and Dodd-Frank was a 
mistake, but I encourage you to be fair to people. Thank you.
    Chairwoman Waters. Mr. Mooney, I would caution you to 
refrain from identifying others or characterizing them in 
relationship to their political party or whether or not they 
are capitalists or socialists. I don't think anybody has 
identified that to you, and so I would hope you would refrain 
from doing that--
    Mr. Mooney. If the Chair is announcing a point of 
parliamentary procedure--
    Chairwoman Waters. No, the Chair is not, the Chair--
    Mr. Mooney. But if the Chair is giving an opinion, this is 
not a conformist--
    Chairwoman Waters. The Chair is taking the opportunity to 
utilize her ability to intervene when she thinks it is 
necessary.
    Mr. Mooney. Am I allowed to say my friends on the other 
side of the aisle--
    Chairwoman Waters. No, you may not.
    Mr. Mooney. Is that against the rules too?
    Chairwoman Waters. The gentlewoman from Massachusetts is 
recognized for 5 minutes.
    Mr. Mooney. Is the Chair stating a point of parliamentary 
procedure? Is the Chair stating a point of parliamentary 
proceeding--
    Chairwoman Waters. No, the Chair is not asking or stating 
parliamentary procedure. The Chair has made her statement and 
is moving on.
    Mr. Mooney. Does the Chair believe in free speech? I hope 
you believe in free speech because I do.
    Chairwoman Waters. The gentlewoman from Massachusetts, Ms. 
Pressley, is now recognized for 5 minutes.
    Ms. Pressley. Thank you, Madam Chairwoman, and thank you, 
Director Kraninger. You know, certainly you have a job to do, 
and it just so happens that our job is to make sure that you 
are doing your job, which is to protect borrowers.
    I will be picking up on some of the line of questioning 
that was offered earlier, and I apologize in advance if it is 
repetitive, but some things I just want to make sure that we 
have clarity on for the purposes of the record, if you will 
indulge me.
    So across my home State of Massachusetts, more than 850,000 
people owe $33 billion in student debt. As was alluded to 
earlier, the Massachusetts seventh district is certainly not an 
anomaly; this is true for many Congressional districts.
    This debt is acting as a barrier to economic mobility and 
further exacerbating inequities and economic disparities--it 
impacts purchasing power, one's ability to start a family, to 
purchase a home, to save for retirement.
    So there is an individual impact and then a tsunami of 
hurt, I do believe, on our economy and perhaps for generations. 
Yes or no, would you agree that we have a student debt crisis 
in our country?
    Ms. Kraninger. Certainly, growing student debt is a concern 
that we absolutely need to look at and ensure that people going 
into debt--
    Ms. Pressley. Yes or no--would you agree that we have a 
student debt crisis in this country?
    Ms. Kraninger. I think that word is a very loaded word 
and--
    Ms. Pressley. I will take that as a ``no.'' Okay. Research 
has shown that student debt, particularly defaults and 
delinquencies, have a disproportionate impact on certain 
borrowers, particularly black and Latino borrowers.
    Despite the fact that all Federal student loan borrowers 
have a right under Federal law to an affordable student loan 
payment, the Bureau is responsible for administering fair 
lending laws including the Equal Credit Opportunity Act 
intended to protect consumers including student loan borrowers 
from discrimination by financial service firms. Does the Bureau 
expect student loan companies, specifically student loan 
servicers, to abide by these fair lending laws, yes or no?
    Ms. Kraninger. Yes.
    Ms. Pressley. Thank you. In April 2017, under Director 
Cordray, the Bureau announced that it was prioritizing 
oversight of student loan servicers in its fair lending work. 
Since the Bureau's 2017 announcement, has the CFPB ever 
informed the public that it is no longer your priority to 
police discrimination in the student loan servicing market, yes 
or no?
    Ms. Kraninger. I think what you are asserting is not 
perhaps accurate. I think that we continue to take actions 
through the supervisory work and through the enforcement work 
in this area. The broader challenge is of course that the 
Federal Government is a very large player in the student loan 
arena and so the Department of Education has roles and 
responsibilities here that have also been given to them by 
Congress.
    Ms. Pressley. Okay, so are you honoring the law or not?
    Ms. Kraninger. Absolutely, the Bureau continues to operate 
in this space, with identified student loan servicers as a 
larger participant in the market place. The issue is Federal--
    Ms. Pressley. And policing specifically discrimination, 
because this is what I am really concerned about--that the 
Bureau is unwilling to take on Betsy DeVos and the student loan 
industry to obtain the records and data needed to effectively 
police this potential discrimination or fair lending violations 
in the student loan market.
    Ms. Kraninger. So now you are getting to the heart of the 
matter. I absolutely want to address this issue with the 
Department of Education. We have a responsibility in statute to 
have a memorandum of agreement on the issue that you are 
relating.
    Ms. Pressley. Okay.
    Ms. Kraninger. It is not an MOU that is in place today. It 
is a conversation that we need to have. I want to have the 
private education loan ombudsman in place to have that 
conversation and facilitate a productive working relationship 
going forward with the Department of Education so they can 
carry out their responsibilities and the Bureau can carry out 
its responsibilities.
    Ms. Pressley. Very good. Has any student loan servicer ever 
relied on the December 2017 memo or refused to provide 
documents to the Bureau's office of supervision, or office of 
fair lending?
    Ms. Kraninger. I'm sorry, can you repeat the beginning of 
that? I am not sure I am familiar with the particular matter--
    Ms. Pressley. Okay, so this is the matter that you said was 
getting at the heart of the matter. In December 2017, the 
Department of Education sent a memo to all the private sector 
companies it contracts with to perform student loan servicing. 
The memo specifically instructed these firms to stop sending 
documents to third parties, which in turn blocked State law 
enforcement officials, such as attorneys general, from 
accessing key records. Are you familiar with that?
    Ms. Kraninger. Yes, I am.
    Ms. Pressley. Okay. Has any student loan servicer ever 
relied on this December 20, 2017, memo, and refused to provide 
documents to the Bureau's office of supervision or office of 
fair lending, yes or no?
    Ms. Kraninger. I do not know the answer to that question, 
but we can certainly find out.
    Ms. Pressley. Thank you.
    Chairwoman Waters. The gentlelady's time has expired.
    Ms. Pressley. I yield back.
    Chairwoman Waters. Thank you. The gentleman from 
Connecticut, Mr. Himes, is recognized for 5 minutes.
    Mr. Himes. Thank you, Madam Chairwoman, and thank you for 
that attempt to call out the intellectually bankrupt statement 
of one of our colleagues on the other side.
    I have a slightly different view, which is that if that is 
the best they got, calling us who are here because we want a 
capitalist market system that is regulated in such a way as to 
provide a decent opportunity to most Americans--if they are so 
intellectually bankrupt that they can only respond to that by 
name-calling and taking Fox talking points and calling us 
socialists, if they would rather do that than defend the one 
thing they got done which was a massive tax cut handing $2 
trillion to the very wealthiest people in this country, if all 
they have is to point at us and call us socialists, Madam 
Chairwoman, I would say let us let them do that and let us let 
the American people see what is going on.
    But Director, I want to say thank you for being here. I may 
be the last questioner and I appreciate your-stick-to-it-
iveness on this hearing. I really believe that the mission of 
the CFPB is essential, and we talked about this when we had a 
phone call a number of weeks ago. I don't understand why people 
would look to do away with an agency, even as we have a debate 
about how it should be structured and what its scope of 
activity should be, I don't know why we would do away with an 
entity that has returned $12 billion to consumers who were 
defrauded when we all know that there is predatory behavior out 
there.
    I have a set of questions that you have heard before and I 
am hoping to elicit maybe some specific commitments on your 
part. You have heard a lot about student borrowing here and I 
think that is because there has been a track record of actions 
taken prior to your leadership of the agency that have really 
taken some of the fangs out of the institution with respect to 
student learning. And we care about this because we are talking 
about a very vulnerable group of young people in which we have 
a huge outstanding volume of student loans. There will be some 
testimony later on that alleges a couple of things and I would 
like to get your specific responses to them.
    The Student Borrower Protection Center is testifying that 
in December of 2017, the Bureau refused to publish findings 
documenting the behavior of large banks with respect to their 
treatment of student borrowers, alleging that in February 2018, 
the political leadership of the Bureau blocked attempts by 
career staff to stop the Department of Education from 
regulating the market. In May of 2018, the political leadership 
of the Bureau shuttered the only office in the Federal 
Government whose sole mission was protecting student borrowers. 
So I would love to get you in this last 2 minutes or so to 
respond to those.
    Do you support them, do you intend to reverse those things, 
and specifically, apart from the ombudsman which you have 
talked about, what specific commitments can we expect from you 
in terms of protecting student borrowers?
    Ms. Kraninger. Thank you for the question, Congressman. I 
think the ombudsman position heads up the office--it is called 
a section, so I think that is where we are parsing words here, 
but there is a group of people at the Bureau who are focused on 
this particular set of borrowers and the challenges that they 
face. And so that office is already actively engaged in looking 
at the needs of students in particular and trying to respond to 
them consistent with our mission. We have a number of 
educational tools and things that are available to students to 
think about how they enter into the process, what they can 
expect after the process, so we are trying to get that 
educational information out as best we can.
    I would say the means of providing education these days and 
technology changes to reach students is something that I think 
we need to look at further to make sure we can actually reach 
them where they want to be reached with this kind of 
information. But that is--
    Mr. Himes. Let me stop you there quickly because you are 
describing an office that exists. I appreciate that and you 
said you think it needs to be looked at. I guess I am looking 
for just a little bit more sense from you as a Director with a 
great deal of discretion about how you allocate resources and 
where you focus. I guess I am looking for a specific statement 
from you about how important you think this is and whether you 
think you will devote a meaningful portion of your time and 
resources to making sure that this market is well-regulated and 
fair to students beyond what exists today.
    Ms. Kraninger. Understood. It is certainly a significant 
market. I think it is something that the Bureau needs to work 
on with the Department of Education to set up what the rules 
are going to be in this space and make sure they can carry out 
their responsibilities and we can carry out ours.
    And that is a conversation that, again, in my short term I 
have yet to have and I would like to have the private education 
loan ombudsman position in place to do it. But you certainly 
have my commitment that we will move forward on that MOU with 
them and we will understand better what those relationships 
need to be so that we can provide the certainty and carry out 
what the Federal Government's responsibilities are.
    Mr. Himes. I appreciate that. In my remaining 2 seconds, I 
would just draw your attention in particular to the fact that a 
lot of students experience problems as loans are sold to 
additional servicers. So I would just highlight that. I had 
some personal experience with that and I would just highlight 
that as an area where I hope for focus on your part. And thank 
you, Madam Chairwoman. I yield back.
    Chairwoman Waters. Thank you. The gentleman's time has 
expired, and that is our last Member who will be questioning 
you today, Ms. Kraninger. I would like to thank Ms. Kraninger 
for her testimony and her time. I know it has been 4 hours, and 
I appreciate the fact that you were able to stay with us today 
and respond to our concerns. So thank you very, very much. With 
that, the committee will take a 30-minute recess and reset the 
room for the second panel. The committee will stand in recess.
    [recess]
    Chairwoman Waters. The committee will come to order. We now 
have a distinguished second panel: Mr. Hilary Shelton, director 
and senior vice president for advocacy and policy, National 
Association for the Advancement of Colored People, that is the 
NAACP; Ms. Linda Jun, senior policy counsel, Americans for 
Financial Reform; Ms. Jennifer Davis, government relations 
deputy director, National Military Family Association; Mr. Seth 
Frotman, executive director, Student Borrower Protection 
Center; and Mr. Scott Weltman, managing director at Weltman, 
Weinberg and Reis.
    Without objection, your written statements will be made a 
part of the record. Each of you will have 5 minutes to 
summarize your testimony. With 1 minute remaining, a yellow 
light will appear. At that time, I will ask you to wrap up your 
testimony, so we can be respectful of both the witnesses' and 
the committee members' time.
    Mr. Shelton, you are recognized for 5 minutes to present 
your oral testimony.

    STATEMENT OF HILARY O. SHELTON, DIRECTOR & SENIOR VICE 
PRESIDENT FOR ADVOCACY AND POLICY, NATIONAL ASSOCIATION FOR THE 
             ADVANCEMENT OF COLORED PEOPLE (NAACP)

    Mr. Shelton. Thank you, and good afternoon, Chairwoman 
Waters, Ranking Member McHenry, and the sitting members of the 
Financial Services Committee. It is a real honor and pleasure 
to be here today to speak on a crucial issue to the NAACP: the 
need for the restoration of a strong Consumer Financial 
Protection Bureau. As I have often said in congressional 
hearings and briefings prior to the passage in 2010 of the 
Dodd-Frank Wall Street Reform and Consumer Protection Act, 
predatory lending is one of the leading civil rights equal 
opportunities and equal protection issues of our era.
    During those briefings, I was referring primarily to 
targeted, unsustainable mortgage lending. Although predatory 
lending, in fact, refers to this problem and so much more. In 
2010, however, Congress passed and the President signed into 
law, the Dodd-Frank Wall Street Reform and Consumer Protection 
Act. This bill not only prohibits some of the most outrageous 
practices we were witnessing by predatory mortgage lenders, but 
it also created the CFPB.
    From our perspective, it is the job of the CFPB to educate 
and protect consumers from experiencing any horrors, the like 
of the economic collapse of 2008. This is especially important 
to groups like ours, and the people we serve at present and 
represent in every State in our country as well as American 
soldiers, including those deployed overseas.
    These are the people who were targeted by unscrupulous 
lenders. In the first 5 years of its existence, I would argue 
the CFPB was on the right track in terms of informing the 
American people and protecting American consumers. In my 
written testimony, I have supplied a number of CFPB successes 
up to December of 2016.
    They are sufficiently numerous that I will simply refer you 
to my written testimony. Today, unfortunately, the CFPB is but 
a shell of its former vibrant and effective self. In just 2 
years, Congress and the current Administration have effectively 
neutered the CFPB.
    And in doing so, they have dramatically decreased the 
protections we were able to gain. Since 2016, Congress has 
passed and the President has signed no fewer than 16 
congressional view acts, CRA resolutions, some of which were 
aimed at actions taken and rules issued by the CFPB. Congress 
also passed, and in May of last year the President signed, the 
misnamed Economic Growth, Regulatory Relief, and Consumer 
Protection Act.
    Among other things, this law will represent 85 percent of 
depository and lending institutions from full reporting on loan 
data under the Home Mortgage Disclosure Act or HMDA.
    Without this crucial data, which is currently required, 
regulators and others like the NAACP would once again be left 
without the information we need to see patents and loan terms 
and loan amounts that would unfairly increase cost and risk of 
foreclosure for borrowers.
    Furthermore, Acting Director Mulvaney took the teeth out of 
the office of Fair Lending and Equal Opportunity by 
illuminating its supervisory and enforcement powers, a trend 
which has sadly been continued by his successor, Director 
Kraninger.
    There is also the fact that CFPB's Office of Fair Lending 
and Equal Opportunity is now being led by a political appointee 
who has expressed numerous questionable views on the challenges 
faced by every American it is meant to protect. To say that he 
does not inspire the confidence of racial and ethnic minority 
communities served by the NAACP, as well as other members of 
protected classes, is simply being polite.
    We fear for the economic well-being of our families, 
neighborhoods, communities, and our nation because we were 
beginning to see the good that a strong CFPB can do, and we 
know what we are losing.
    The NAACP is proud to support a number of pieces of 
legislation to rebuild the CFPB, most notably the bill which 
was introduced by you, Chairwoman Waters, and many of our 
colleagues here today, entitled the Consumers First Act.
    Put simply, the Consumers First Act pushes the CFPB back to 
the carrying out of its statutory purpose of putting American 
consumers first and protecting them from bad actors by taking a 
number of proactive, pro-consumer steps.
    Madam Chairwoman, the income gap between white Americans 
and Americans of color continues to widen. Yet, our communities 
are consistently being targeted by nefarious financial 
servicers with their unsustainable wealth steaming products. We 
need protection.
    I have often compared the communities we represent and 
serve to the proverbial canary in the coal mine. The weakening 
of the very agency that was designed to provide information and 
protection should be seen as a warning, one that we remember 
all too well leading up to the 2008 financial meltdown.
    The decimation of the CFPB hurts all Americans. We should 
all be concerned and quite frankly outraged. Thank you again 
for allowing me to testify. I stand ready to answer whatever 
questions the committee may have. Thank you so much.
    [The prepared statement of Mr. Shelton can be found on page 
158 of the appendix.]
    Chairwoman Waters. Thank you very much. Ms. Jun, you are 
now recognized for 5 minutes to present your oral testimony.

 STATEMENT OF LINDA JUN, SENIOR POLICY COUNSEL, AMERICANS FOR 
                        FINANCIAL REFORM

    Ms. Jun. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, I thank you for inviting me to 
participate in today's hearing. My name is Linda Jun, and I am 
senior policy counsel at Americans for Financial Reform (AFR), 
a coalition of over 200 groups working for a safer and fairer 
economy.
    Our member organizations represent the consumers, workers, 
seniors, servicemembers and veterans, students, people of 
color, and unrepresented communities across our country who 
rely on the consumer protections that the CFPB was created to 
strengthen, support, and enforce. But before coming to AFR, I 
was a legal aid attorney representing low-income families in 
foreclosure cases. Most of my clients were people of color.
    My clients, just to give you an example, included an 
African-American police officer who fell behind on his mortgage 
after his sister fell into a coma, an immigrant family from 
Nepal who were tricked into taking out an interest-only 
adjustable rate mortgage to buy their first home in America, 
and a Vietnamese-American homeowner who spent 2 years trying to 
negotiate with his bank on a resolution to save his home when 
the bank sued him anyway on foreclosure without ever giving him 
an answer.
    I saw the most vulnerable consumers, including the elderly 
and disabled, especially them, targeted for scams and predatory 
products. Households like these are the ones who suffered the 
most harm in the 2008 crisis. They are the very people in need 
of the strong consumer protections the CFPB put into place. 
Before the CFPB's mortgage servicing rules went into effect, 
even with my assistance, negotiations with banks would drag on 
for months or years because often banks and their attorneys 
would provide us with inaccurate or incomplete information.
    The CFPB's mortgage servicing rules directly improved my 
ability to help people and have improved outcomes for the 
people I served, because they provided me with a tool to push 
companies to either give us an answer or to properly review my 
client's applications. As a result, we were able to keep more 
people in their homes. We were able to give them the fair deal 
for which they qualified.
    One of my cases that sticks out is of a client who was 
overcharged $3,000 of attorney's fees past the guidelines that 
is allowed to be charged. It was through the CFPB's error 
resolution procedures that we were able to get that amount 
taken off her account. It made her mortgage ultimately more 
affordable.
    The public complaint database also greatly improved my 
ability to help people. Before the database, both my client and 
I suffered enormously trying to get the answers that we needed 
from the bank, froms simple questions about accounting, to more 
complicated answers about why they were being denied whatever 
resolution they were seeking.
    After the complaint database, once we were able to start 
filing complaints, companies started responding. Sometimes even 
just the threat of filing a complaint would finally give us an 
answer we weren't able to get for months, simply because the 
database is a public place. I have seen firsthand, through 
these experiences, how the CFPB has strengthened consumer 
protections, giving the ability to help consumers stand up for 
themselves, which is why I am especially concerned about the 
ways the current CFPB is undermining consumer protection.
    Instead of understanding for people like my clients, the 
Mulvaney CFPB has favorite industry interests, and this pattern 
is continuing with Director Kraninger. Under their leadership, 
the CFPB has proposed to resend the ability-to-pay requirement 
of the 2017 payday rule, which simply requires lenders to 
determine whether a borrower can afford to repay before issuing 
them a loan. These loans again, as we have heard this morning, 
average approximately 300 percent.
    The 2017 rule was a culmination of 5\1/2\ years of 
research, evidence, and stakeholder input, and nothing has 
changed in the payday lending over the last 18 months that 
supports a rollback of these protections. They have also issued 
proposals that would exempt not only individual companies, but 
trade associations and entire industries from oversight, and 
seek to guarantee them a sweeping safe harbor from liability, 
enforcement or supervisory rate findings, both by the CFPB but 
also for enforcement by Federal agencies, States, and 
consumers' own private rights of action.
    There is no guarantee a new product will be better for 
consumers, just because it is new, and there is no guarantee 
that products won't harm consumers, either intentionally or 
unintentionally, and yet the CFPB's no action letter and 
product sandbox policy proposes to just excuse companies from 
liability for a new idea.
    More disturbingly, even despite the particularly unknown 
dangers of new products, the CFPB does not require any consumer 
input into the process or ongoing reporting after their 
application is granted. The CFPB should do more, not less, when 
looking into new products.
    As you have heard this morning, the CFPB has also on 
relaxed its enforcement. We are concerned because robust 
outcomes serve as a deterrence to bad actors, but recent 
settlements have been sending the opposite message. The CFPB 
has an obligation to put consumers first, and it is currently 
falling woefully short. We thank you for holding this hearing 
and ask that you hold the CFPB accountable to the statutory 
purpose of protecting consumers. Thank you.
    [The prepared statement of Ms. Jun can be found on page 136 
of the appendix.]
    Chairwoman Waters. Thank you very much. Ms. Davis, you are 
now recognized for 5 minutes to present your oral testimony.

   STATEMENT OF JENNIFER DAVIS, GOVERNMENT RELATIONS DEPUTY 
         DIRECTOR, NATIONAL MILITARY FAMILY ASSOCIATION

    Ms. Davis. Chairwoman Waters, Ranking Member McHenry, and 
committee members, thank you for holding this hearing and for 
extending the opportunity to testify before the committee on 
behalf of the National Military Family Association.
    As a veteran and a spouse of an active duty servicemember, 
I am both honored and humbled to speak from the military 
community perspective regarding recent policy shifts of the 
Consumer Financial Protection Bureau and the importance of 
protections found in the Military Lending Act.
    Prior to the enactment of the Military Lending Act or MLA, 
quick cash stores, used car lots, pawnshops, and title loan 
companies clustered around military installation gates. The net 
laid by these predatory lenders was extensive, and for some 
military families struggling financially due to a recent move 
or lack of spouse employment, the draw was too great.
    These lenders provided attractive options to military 
families, offering quick loans and anonymity with no intrusive 
questions surrounding credit history or the ability to repay. 
Often, however, interest rates soared into the triple digits, 
annual percentage rates of 200 and 300 percent were common, and 
in States that had no rate caps, they ran as high as 700 
percent.
    And then the Military Lending Act (MLA) was passed. The 
MLA's passage capped interest rates at 36 percent on many loan 
products for servicemembers, and protected military families 
from mandatory allotments of pay, forced arbitration, and 
penalties due to early loan repayment.
    In 2010, the Consumer Financial Protection Bureau or CFPB, 
was created after the financial crisis of 2008, and granted 
executive and administrative authority and implementation of 
Federal consumer financial laws through rules, orders, 
guidance, interpretations and statements of policy, 
examinations, and enforcement actions.
    While the MLA was not included in that group of laws at the 
time, it was CFPB's creation, the Fiscal Year 2013 National 
Defense Authorization Act, that changed that, specifically 
referencing administration of the MLA in compliance with 
Section 108 of the Truth in Lending Act and any applicable 
authorities.
    However, recently we have become alarmed at CFPB's decision 
to no longer supervise lenders for compliance with the Military 
Lending Act. Current leadership has expressed the opinion that 
the agency does not explicitly have the authority to supervise 
examinations to ensure Military Lending Act compliance. We 
disagree. We urge CFPB to reverse this decision.
    In February, CFPB announced a proposal to delay 
implementation of the payday lending rule. Currently, the rule 
is set to be implemented in August of this year, but the 
proposal would push this date back to November 2020. In the 
same announcement, CFPB introduced a proposal to reverse 
underwriting requirements of lenders before issuing loans.
    CFPB's belief is that such a reversal would enable 
consumers to obtain increased access to credit. While reversing 
this provision may, in fact, increase access to credit, what 
would be the cost to consumers? Conventional wisdom and 
economic theory state a lender should ensure a consumer's 
ability to repay before extending credit.
    We believe lenders who do not take this approach are simply 
preying on consumers with a business model that relies on 
revenue from rollovers, late fees, and penalties. Reversal of 
the payday lending rule would place consumers at greater 
financial risk, which goes against CFPB's very purpose to 
protect consumers.
    The National Military Family Association believes, due to 
the importance of the payday lending rule as currently written 
with underwriting requirements included, that any delay by CFPB 
would put consumers--to include veterans and their families who 
are not protected by the MLA--at increased financial risk. We 
urge CFPB to maintain the integrity of the payday lending rule 
as written, thereby protecting consumers.
    Evolving world conflicts keep our military servicemembers 
and their families on call, even as they are dealing with the 
long-term effects of almost 2 decades of war. The government 
should ensure that military families have the tools to remain 
ready, and MLA is one of those tools. The Military Family 
Association implores CFPB to maintain the integrity of the MLA 
and protect the financial readiness of America's servicemembers 
and their families.
    Thank you for your time. I look forward to your questions.
    [The prepared statement of Ms. Davis can be found on page 
114 of the appendix.]
    Chairwoman Waters. Thank you very much.
    Mr. Frotman, you are now recognized for 5 minutes to 
present your oral testimony.

STATEMENT OF SETH FROTMAN, EXECUTIVE DIRECTOR, STUDENT BORROWER 
                       PROTECTION CENTER

    Mr. Frotman. Thank you. Chairwoman Waters, Ranking Member 
McHenry, and members of the committee, thank you for the 
opportunity to testify today.
    In March of 2011, I had the honor of joining the CFPB, and 
that is where I would like to start today, by recalling what 
this country looked like in 2011. It had been 3 years since the 
peak of the financial crisis, but for millions across the 
country it was still raging, leaving real, tangible human 
affliction in its wake. And this affliction was fueled by 
companies that had no shame when stealing the last dollar in 
someone's bank account, in large part because they knew they 
could get away with it.
    Across the country, American families needed someone, 
needed their government in their corner, and that is where the 
CFPB stepped in. Congress created the Consumer Bureau to serve 
as this desperately needed lifeline to the families being 
pushed off the edge of a financial cliff. But that was not our 
only job.
    We were tasked with fixing a broken credit market that 
declared open season on American consumers and, in turn, 
destroyed the nation's economy. Were we perfect? Of course not, 
but the work we did during those 7 years mattered. The CFPB 
returned $12 billion back to American consumers, returned over 
half a billion dollars to victims of discrimination, closed 
loopholes exploited by unscrupulous companies that targeted 
military families, and so much more.
    The Consumer Bureau had one simple mission, to protect 
consumers. We were there to make sure our neighbors, our 
grandparents, our children, your constituents, were not being 
ripped off by big banks or small scams. Americans rely on 
credit and a well-functioning credit market to achieve the 
American dream.
    But the stakes are much bigger than simply credit markets. 
At stake is the character of our country, whether the American 
Dream, a house to raise our family, a car to get to work, a 
college education for a better life, will be the province of 
only a select few, while the rest have their money stolen at 
every turn. That is why the Bureau matters, because consumer 
financial protection matters. And that is why the actions of 
the Trump Administration and the political leadership installed 
at the Bureau have been so devastating.
    The last 15 months at the Bureau have been plagued with 
inaction and incompetence, all under the guise of some supposed 
ideology. They have prioritized the wishes of the most powerful 
financial companies in America over the needs of the very 
people they were tasked by Congress to protect, all under the 
selective invocation of statutory restraint.
    The efforts of Mick Mulvaney and Kathy Kraninger are 
hurting people. And perhaps the most poignant example of this 
is how their actions are hurting the 44 million Americans with 
student loan debt. These Americans collectively owe $1.5 
trillion in student debt, and after piling historic levels of 
debt onto an entire generation, we push them into a market 
plagued with illegal practices that drive them to financial 
ruin.
    And that is what the Bureau worked to stop. We helped 
servicemembers, disabled veterans, teachers, nurses, and 
borrowers in all 50 States and in every U.S. territory. We 
never shied away from doing our job of independently 
implementing and enforcing the consumer financial protection 
laws of the United States, even when it made those in the 
Administration, in any Administration, uncomfortable.
    And it worked. In those 7 years, the Consumer Bureau 
returned more than $750 million to student loan borrowers. But 
almost immediately upon the arrival of Mick Mulvaney and his 
political appointees, this work came to a grinding halt. And 
what my written testimony shows, from varying reports and 
shuttering offices, is that the Bureau systemically undercut 
enforcement of the law, undermined the Bureau's independence, 
and shielded bad actors from scrutiny.
    And since I left the Bureau last year, this abdication of 
responsibility has continued. The position of Student Loan 
Ombudsman, as mandated by Congress, sits vacant. The Bureau's 
congressionally mandated student loan complaint report remains 
unwritten. Perhaps most disconcerting, in the last 15 months, 
it is impossible to cite a single significant action that the 
Bureau has initiated on behalf of student loan borrowers.
    There is no ideology that justifies these actions--or more 
accurately, inaction. Shielding companies from the consequences 
of their lawlessness is not ``making markets work.'' Protecting 
Betsy DeVos from the consequences of the Education Department's 
failures is not conservative. The Bureau is not meant to be a 
political appendage of any Administration, particularly one 
that is flailing as it mismanages the trillion-dollar portfolio 
it holds.
    And that is why the work of this committee is so important, 
both in terms of oversight and policymaking. Because right now 
we have $1 trillion black hole in our financial markets. 
Millions of Americans with student debt are falling further 
behind as their Federal Government coddles predatory players.
    So thank you for asking the tough questions of this 
Administration. Thank you for taking on the challenge to make 
sure that student loan borrowers have the rights and 
protections that exist in nearly every other debt market. I 
look forward to your questions. Thank you.
    [The prepared statement of Mr. Frotman can be found on page 
120 of the appendix.]
    Chairwoman Waters. Thank you very much.
    And Mr. Weltman, you are recognized for 5 minutes.

  STATEMENT OF SCOTT WELTMAN, MANAGING SHAREHOLDER, WELTMAN, 
                    WEINBERG & REIS CO., LPA

    Mr. Weltman. Chairwoman Waters, Ranking Member McHenry, and 
members of the committee, thank you for inviting me today.
    My name is Scott Weltman. I am managing shareholder of 
Weltman, Weinberg & Reis Company, L.P.A., a creditor's rights 
firm headquartered in Cleveland, Ohio. It has been in business 
since 1930. I am grateful for the opportunity to share our 
firm's experience with the CFPB.
    Our case with the CFPB was the epitome of an effort to 
legislate through misguided enforcement instead of by 
rulemaking. We encountered overzealous enforcement attorneys 
with the power of the U.S. Government behind them.
    Our nearly 4-year ordeal included an extensive CID process, 
followed by a lawsuit that we won. Our law firm incurred nearly 
$2 million in attorney's fees. And as a direct result of being 
sued, numerous clients of the firm fired us. And over 100 
employees out of a total 650 lost their jobs.
    Our story with the CFPB, however, began before the Bureau 
was formed. In 2009, our law firm was hired by Ohio Attorney 
General Richard Cordray as special counsel, which meant that 
our law firm was directly responsible for collecting the State 
of Ohio's debts.
    Mr. Cordray not only significantly vetted our firm and 
condoned exactly how we did business; he also required that our 
letters be written precisely to his specifications. And after 
observing firsthand how we did business, he hired us a second 
time.
    Once he became Director of the CFPB, however, Mr. Cordray 
then approved a lawsuit against us, claiming that virtually 
identical letters violated the law. And he authorized a press 
release accusing us of illegal behavior, which was subsequently 
reprinted by every major local and industry news agency.
    That makes Mr. Cordray's deposition testimony in our case 
all the more troubling since he admits, you know, I don't know 
what the state of the law was then--I am not sure what the 
state of the law is now.
    He was a former State Attorney General, the Director of the 
CFPB, and had no clue what the law was or is. I have included 
the full transcript of his deposition in my written testimony. 
I have also submitted and encourage you to read the final 
opinion in our lawsuit from Judge Donald Nugent, whom I would 
like to point out was a democratic presidential appointee.
    The Judge specifically wrote that despite requiring similar 
indications and disclosures of attorney involvement in the debt 
collection letters used on behalf of the State of Ohio, Richard 
Cordray, when he became head of the CFPB, authorized this 
lawsuit against Weltman. The singularly most offensive part of 
the lawsuit against our firm was the aggressiveness with which 
we were pursued by the CFPB despite the complete absence of any 
consumer harm.
    The CFPB continually insisted that our firm provide 
consumer redress but never once identified a single consumer 
harmed by any of our alleged illegal conduct. Our firm provided 
the CFPB with over 1 million call recordings for its review, 
and how many did it play at trial? None. It claimed that our 
phone calls violated the law, but it dismissed that portion of 
the lawsuit, half of its original claims on the first day of 
trial and never had any evidence.
    In my written testimony, I have provided a letter from the 
CFPB enforcement attorneys threatening to pursue us for more 
than $95 million in ill-gotten gains, and over $13 million in 
civil monetary penalties. This claim of ill-gotten gains 
called, ``disgorgement,'' was also dismissed by the CFPB on the 
first day of the trial; again, it never had any evidence.
    I implore the committee to question the CFPB's goals when 
it made its allegation against us in a very public lawsuit and 
press release, the allegations with no facts behind them which 
damaged our firm's reputation and ultimately cost 100 of our 
employees their jobs.
    Additionally, I hope the committee will investigate just 
how much money was spent by the CFPB to pursue our firm's case. 
Those expenses also included the hiring of an expert, a 
marketing professor from Georgetown whose discounted government 
rate was $750 per hour, and whose testimony the judge deemed 
not credible.
    And when the case was over and our firm had won, when the 
CFPB decided not to appeal and was ordered to pay our firm 
about $10,000 out-of-pocket costs, what happened? The CFPB 
asked if we would take a credit card for the $10,000.
    Before I wrap up, I would be remiss if I did not touch on 
rulemaking. When the CFPB was established in 2011, its power to 
make rules in the debt collection area was welcomed. To this 
day, however, 7\1/2\ years after its formation, how many rules 
has it published? None. If it made rules, then it would lose 
its ability to regulate through enforcement.
    On January 23, 2018, former interim Director Mulvaney sent 
an e-mail to every employee of the CFPB in which he stated, 
``It is not appropriate for any government entity to push the 
envelope when it comes to conflict with our citizens.
    ``The damage that we can to do people can linger for years 
and cost them their jobs, their savings, and their homes. If 
the CFPB loses a court case because we pushed too hard, we 
simply move on to the next matter. But where do those who we 
have charged go to get their time, their money or their good 
names back?
    ``If a company closes its doors under the weight of a 
multiyear civil investigative demand, you and I will still have 
jobs at the CFPB, but what about the workers who are laid off 
as a result? Where do they go the next morning?'' I can tell 
you this, for our firm and for our employees who lost their 
jobs, those are empty words. Thank you very much.
    [The prepared statement of Mr. Weltman can be found on page 
163 of the appendix.]
    Chairwoman Waters. Thank you very much. I now recognize 
myself for 5 minutes for questions, and I am going to ask Mr. 
Shelton and Ms. Jun to engage with me about their lending. I am 
looking at information here--data that has been compiled.
    And some of this information, I think paints a picture that 
I think we must be concerned about. The 2017 HMDA data showed 
that disparities in underwriting and pricing persist. 
Underwriting of conventional loans--the type that Fannie Mae 
and Freddie Mac buy--are described as such. The white loan 
origination rate in 2017 was 25.23 percent compared to 58.29 
percent for blacks, thus whites had a 28 percent higher 
origination rate.
    Black loans were denied at 22.97 percent versus 8.14 
percent for whites, which means that blacks were denied 82 
times more often than whites. Also, the black fallout rate was 
10 percent higher than whites, and with respect to pricing, 
blacks had higher cost loans 2.86 times, and Hispanics 2.96 
times more often than whites for conventional home purchase 
loans.
    And this is just part of the information that we had. We 
went through the crisis in 2008, and we discovered an awful lot 
about what was happening in targeted communities, for the most 
part communities of color, where people had been basically 
lured into signing on the dotted line for all of these exotic 
products like interest rates that were going to reset, when 
people didn't understand what they were, and then of course, 
foreclosures started wiping out communities all over this 
country.
    Now without going further into that, I know that you 
panelists kind of know what happened with this targeting, and 
absolutely it was identified that blacks earning the same 
amount of money as whites, and basically paying their bills at 
the same rate, et cetera, were ushered into these bad loans.
    And we would expect the Consumer Financial Protection 
Bureau to have every reason to be concerned about fair lending. 
But yet it seems as if not only have they cut back on it, it is 
not the mission of the Consumer Financial Protection Bureau. 
Could you elaborate a bit on what this means in terms of not 
having enforcement and not having investigations, starting with 
Mr. Shelton?
    Mr. Shelton. Thank you very much, Madam Chairwoman. The 
issue for us has been very clear. In 2008, what we started 
seeing was the kind of targeting that was actually done in 
African-American and other racial and ethnic minority 
communities.
    As opposed to going after those with a fixed income, 
oftentimes brokers were being utilized--we rarely hear that 
term ``utilized'' these days, but brokers were being utilized 
in the most unscrupulous manners.
    I can think of a woman I sat next to testifying in 2008 
from Ohio. Her husband had worked for one of the larger tire 
manufacturers in the country, they had a pension fund, they 
paid off the house as they planned on doing, and after he 
retired, he later passed away, and she was there managing the 
house herself.
    It looked like everything was very well in place, until the 
broker showed up. The broker came into her community, and 
recognized that her home, through nicely kept, was quite old 
and utilizing oil heat, and as such, quite expensive in a place 
like Ohio to manage. As such, he talked to her about how he 
could refinance her home and allow her to pay for all the 
improvements she needed in everything from insulation to new 
windows and everything else, and a new heating system for 
roughly $50,000.
    He told her she could manage it, but gave her an exploding 
ARM mortgage that she knew nothing about, an exploding ARM in 
which she had a very nice introductory rate but it increased 
every 2 years until the end of the sixth year, in which case 
both her insurance, and her taxes were dropped altogether.
    She found herself in an awful position in which she began 
losing the home. She testified at a hearing in Congress. Let me 
tell you the thing that was most outrageous, and why I share 
this story. It is to show you how these issues not only impact 
disproportionately racial and ethnic minorities, but because 
she had no place else to go.
    Sadly, one of the other things her husband left behind as 
he passed away was his old shotgun that she ultimately used on 
herself. This level of outrage is something that we have to 
focus on, and is why the Consumer Financial Protection Bureau 
was put together as it was, to provide the kind of protection 
and oversight we very well needed.
    The last point I will make is this. I heard the term 
``whack-a-mole'' used a little bit earlier. One of the reasons 
that we pushed forward for the passage of the Dodd-Frank Wall 
Street Reform Bill, as well as the Consumer Financial 
Protection Bureau, was because we needed someone at the helm 
that would have the dexterity and the flexibility to be able to 
move very quickly to address these new products with a 
different--
    Chairwoman Waters. Thank you so very much. I know that 
there is a lot more information you could share, but that is 
very striking. The gentleman from Tennessee, Mr. Rose, is now 
recognized for 5 minutes.
    Mr. Rose. Thank you, Chairwoman Waters. Mr. Weltman, thank 
you for joining us today. We appreciate you being here. And 
thank you to the other panel members as well. In earlier 
questioning, I shared with the panel and with my colleagues the 
adage that I have heard and learned about from our State 
senator in Tennessee, and that is his view that regulators 
should be in the business of helping the regulated comply, as 
opposed to punishing them, as in the first instance, for 
failing. Would you agree with that mindset for a regulating 
body?
    Mr. Weltman. Yes, Congressman. Thank you. Yes, I would 
agree with that.
    Mr. Rose. And if you would, tell me a little bit about your 
broader practice, your creditors' rights firm. And so, if you 
could give us a little bit of a sense of a broader 
understanding of what you do.
    Mr. Weltman. Thank you, Congressman. Our law firm is a 
creditors' rights law firm. Again, we are down to about 550 
people, and we practice in the areas of consumer debt 
collection and litigation, and commercial debt collection and 
litigation. I represent creditors of all types in bankruptcies 
and foreclosures, and have a general creditor litigation 
practice as well.
    We are licensed in a number of different States. We have 
offices, more than just in Ohio. And we have a lot of very 
solid professionals who take great pride in their work. And 
quite honestly, we focus on ethics and compliance all the time; 
we invest a lot of money in that area.
    Mr. Rose. And this experience that you have been through 
with fighting with the Consumer Financial Protection Bureau, 
had you ever experienced anything like that in your career?
    Mr. Weltman. Never in my career, at all. It is unique.
    Mr. Rose. One of the concerns that I and think others on my 
side of the aisle have, and I think actually maybe some on the 
other side have about the CFPB is the lack of oversight and the 
lack of control that Congress retained, if you will, or gave 
even to the Executive Branch. Does that concern you?
    Mr. Weltman. Congressman, we focus a lot on our job and 
what we do, we don't get involved in the political issues 
related to the Bureau. We are happy to do our job every day, to 
the best of our ability, and we let Congress worry about those 
things.
    Mr. Rose. Okay. I can appreciate that. Well, it does 
concern me. And you know, as I think about the province of the 
CFPB and the structure that has been set up, it concerns me 
greatly that we have very little oversight opportunity, that we 
do not even control, in any way, their budget or get the 
chance, on behalf of the taxpayers, to exert any influence 
there.
    And so, as I heard of your case and, and looked over some 
of the background information, the old adage of fighting city 
hall came to mind and how it difficult it is when the plenary 
power of government is brought down upon you. And it kind of 
hearkened back in my mind to the earliest days of our country 
and the revolt that led to the formation of this country 
against King George and the notion of taxation without 
representation.
    I believe our founding fathers would be horrified that we 
have created such an entity that draws its funding from a 
source where there are there really no limits to how much money 
it spends, and then uses those resources to, without oversight, 
without really any limits or control, to pursue whomever the 
current leader of that organization chooses to pursue and 
without really any recourse on their part.
    And so, these are major concerns of mine. And I think it is 
something--as I have visited with folks in the 6th District of 
Tennessee at least, I hear very little about what CFPB is doing 
to protect the consumers in my district. I hear a great deal 
about the problems that occur when a regulator is really 
untethered and is able to exert plenary power and doesn't even 
have the restrictions of budgetary controls to limit the 
province of what they do.
    I am sorry that your firm suffered through the ordeal that 
you have, and I appreciate you taking the time to be here today 
and share that story with us. I have heard similar stories from 
other businesses in the 6th District of Tennessee who have 
been, in my opinion, abused by the overreaching of this 
regulator. And so, thank you for being here. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Georgia, 
Mr. Scott, is recognized for 5 minutes.
    Mr. Scott. Thank you, Madam Chairwoman. Mr. Shelton, let me 
start with you. The CFPB took away the Office of Student Loans 
and Young Consumers. Tell me how devastating this is? This is a 
very serious issue, not only in terms of the amount of loans 
that our students have to pay, but there are some unsavory 
characters out there that take advantage of young consumers who 
are eager to consume but are not knowledgeable enough about the 
rules and regulations.
    And these young consumers are taken advantage of. I want to 
ask you, how serious is this? Can you share with us the 
seriousness of this issue of students and the fact that the 
Consumer Bureau removed that office?
    Mr. Shelton. In a very short way, it is overwhelming. As we 
think about just African-American students alone, about 75 
percent of African-American college students come from an 
income level that allows them maximum Pell Grants. That means 
they are the poorest of the poor. And as we are thinking about 
the purchasing power of a Pell Grant, we know that, nowadays, 
it does not cover nearly as much of the tuition or the 
educational cost as we were hoping it would at the time of 
origin.
    What that means is students have to take out more loans 
much more often. The presumption of most students is that their 
lending source is watching out for their best interest. The 
truth is, that is not the case. And as such, we are finding 
that students and even myself found ourselves in a very awkward 
position of now having a great education but not enough income 
to be able to pay off that student loan and other living 
expenses.
    It is tremendous; we are getting more and more reports from 
across the country. It is outrageous on so many levels.
    Mr. Scott. And what do you think we need to do about that, 
Mr. Shelton, to correct that problem? Very briefly.
    Mr. Shelton. Very briefly, greater oversight. The Consumer 
Financial Protection Bureau needs to do what it started doing--
    Mr. Scott. Which means we must pass Ms. Waters' Consumers 
First Act--
    Mr. Shelton. That would be my vote.
    Mr. Scott. --because that is one of the things we are going 
to do, is reestablish this office and the CFPB that will 
address student loans and young consumers. Now Ms. Davis, I 
mentioned earlier when the acting Director was here, about the 
Military Lending Act, and I stated unequivocally that under Mr. 
Mulvaney, they abandoned supervision of regulated entities for 
compliance with the Military Lending Act. They did that. Can 
you explain for the committee how devastating that is in 
removing the protections we have for, as I said, our precious 
military servicemembers and their families?
    Ms. Davis. Thank you for your question. It is devastating. 
And it is a national security, it is a readiness issue for our 
servicemembers and their families. So when you think about what 
we heard earlier was preventing harm, well, when you supervise 
for compliance you are preventing harm.
    What happens when you don't do that is that it puts the 
burden on the servicemember and their family to figure out that 
they have been defrauded, what law applies to them, what 
protections are out there--it is the Military Lending Act, you 
know, in this case that we are talking about--and then what law 
enforcement agency is protecting them, and file the complaint.
    So it distracts from the mission. There are huge ripple 
effects out from there. It is not just the servicemember or 
their family, but it affects the unit, it affects the mission 
downrange and at home.
    Mr. Scott. It is very important because we have a pretty 
sizable C-SPAN audience, and this is very important to this 
committee, pointing out these discrepancies against our 
military servicemembers and our young people, particularly. And 
rest assured, we will address that, and it is also will be a 
part of Ms. Waters' Consumers First Act to reestablish that 
supervision for our military servicemembers. Thank you.
    Ms. Davis. Thank you.
    Chairwoman Waters. The gentleman from Ohio, Mr. Gonzalez, 
is recognized for 5 minutes.
    Mr. Gonzalez of Ohio. Thank you, Madam Chairwoman. I want 
to thank our panel for being here today and for answering all 
of our questions. Mr. Weltman, it is always great to have a 
fellow Buckeye in the room and a Northeast Ohioan, and it is 
great to see your family here. I met your father earlier. So, 
welcome. I am thrilled to have you here. I especially want to 
thank you for sharing your story with the committee and for the 
courage that you had to stand up to the overreach of the CFPB, 
to fight for not only your company's reputation but also for 
the reputation of your family.
    In your testimony, you quoted former interim Director 
Mulvaney's comments on the CFPB, which I think are just so 
powerful they need to be said again. He said, ``It is not 
appropriate for any government entity to push the envelope when 
it comes into conflict with our citizens. The damage we can do 
to people could linger for years and cost them their jobs, 
their savings, and their homes. If the CFPB loses a court case 
because we push too hard, we simply move on to the next matter, 
but where do those that we have charged go to get their time, 
their money or their good names back?'' That is so powerful and 
it speaks directly to your situation.
    Just 2 seconds ago, I Googled your name, just to see what 
would come up, where you work, and profile pages. The first 
article is a negative article written by one of our papers 
about your experience. It talks about how you are being sued 
and all the terrible things that come along with it. That is 
the first article that comes up. So let me ask you this. Do you 
have children?
    Mr. Weltman. Yes, I have three children in college.
    Mr. Gonzalez of Ohio. So if your kids are going to Google 
your name, this is the first thing they are going to see, 
right?
    Mr. Weltman. My kids and probably their friends as well.
    Mr. Gonzalez of Ohio. That is completely unacceptable. Mr. 
Weltman, can you talk more about the impact that this 
experience with the CFPB has had on your company and also your 
family? And let's keep in mind that you won your case.
    Mr. Weltman. Yes, we did win our case. And thank you, 
Congressman. It was a very trying time for our company. It 
caused a lot of internal strife and again, as I mentioned in my 
testimony, within days of being sued--being accused with, as it 
turns out, no evidence, numerous clients of the firm fired us. 
Clients to this day that we haven't gotten back. We have to 
continue to explain our situation, and to be honest with you, 
to add insult to injury, if you were to Google and go to the 
Bureau's active enforcement action website, it shows our matter 
as still active.
    Mr. Gonzalez of Ohio. Really?
    Mr. Weltman. Yes, it does. I went to that website yesterday 
to see the status of our enforcement action, and it shows it as 
active. So we are going to have to continue to explain the 
situation. We did win and we are very proud of that and we 
certainly tout that. We had a lot of clients stay with us, so 
we are still in business and we are doing just fine, thank you 
very much. But it is something we have to explain. And by the 
way, when we go to hire people, we have to explain it.
    Mr. Gonzalez of Ohio. Of course. And just to reconfirm, you 
were initially hired by Richard Cordray?
    Mr. Weltman. Yes. Our managing shareholder at the time was 
appointed a special counsel, which really meant that our firm 
was being hired when Richard Cordray was Attorney General of 
Ohio, yes.
    Mr. Gonzalez of Ohio. And presumably, he vetted you. He 
actually rehired you.
    Mr. Weltman. It was a very extensive vetting process with a 
significant amount of information that had to be provided to 
him twice.
    Mr. Gonzalez of Ohio. And then he became Director of the 
CFPB and sued you?
    Mr. Weltman. That is correct. He authorized that lawsuit 
and was quoted accusing us of illegal activity in a press 
release.
    Mr. Gonzalez of Ohio. I think everybody in this committee, 
everybody here agrees that consumers need to be protected. 
Nobody disagrees with that. We all agree on that.
    But what happened to you is patently unfair. It is unfair 
to you, it is unfair to your employees, unfair to your clients, 
and unfair to your family. The CFPB needs reform but that 
reform needs to be bipartisan.
    The bill that we are talking about today is a pure partisan 
bill. We are going to be--we know for sure it is not going to 
pass. It will pass out of this committee, it might come up to 
the Floor, but it is not going to get passed into law, but we 
actually all agree that this system needs to be reformed, and 
so what I would urge the committee to do is actually put in a 
process where we are going to agree on some things that might 
actually get signed into law, because what happened to you and 
what happens to all the folks who are sitting here, we all 
agree it is broken.
    The system needs to be fixed and it needs to be fixed in a 
way to make sure that we are not having the same arguments over 
and over and over again, every single Congress. So thank you, 
Mr. Weltman, for your testimony. I thank you and your family. I 
am so sorry that this happened to you; it doesn't make any 
sense. It is flat out wrong, and I hope that it never happens 
again. I yield back.
    Chairwoman Waters. Thank you. The gentleman from Texas, Mr. 
Green, the Chair of our Subcommittee on Oversight and 
Investigations, is recognized for 5 minutes.
    Mr. Green. Thank you, Madam Chairwoman. Mr. Weltman, thank 
you for your testimony. You are a litigator, is that correct?
    Mr. Weltman. Yes, I am.
    Mr. Green. And as a litigator, have you had courts rule, 
perhaps against you, and on appeal, have those decisions 
overturned?
    Mr. Weltman. If I can understand your question, you are 
saying, when I am litigating on behalf of a client?
    Mr. Green. Yes, sir. Have you ever lost a case at the trial 
level that you won on appeal at the appellate level?
    Mr. Weltman. I am thinking back over 27 years--
    Mr. Green. Did you win all of your cases?
    Mr. Weltman. I do not win all of my cases.
    Mr. Green. Okay. Well, let's just assume you did. When this 
occurred, do you want to eliminate the judiciary?
    Mr. Weltman. Pardon me?
    Mr. Green. Do you want to eliminate the judiciary? Because 
see, a lot of my friends on the other side, they don't want a 
CFPB at all. And they want to use you, sir, as a part of a 
process to eviscerate and decimate the CFPB. Do you want to be 
a part of that?
    Mr. Weltman. Congressman, I want--
    Mr. Green. I will take it, your answer is ``no.'' Because 
you are a reasonable person, you would not want to be a part of 
the evisceration of the Consumer Financial Protection Bureau, 
would you, simply because of one bad experience?
    Mr. Weltman. Congressman, our experience was not a pleasant 
experience.
    Mr. Green. I understand. I have had unpleasant experiences 
in life, but that doesn't mean that I want to eliminate the 
police department because I had an unpleasant encounter with 
one police officer. Do you tend to be of the type of person who 
takes his one experience as an assault against all of society? 
Is that your position?
    Mr. Weltman. Congressman, our employees were accused of 
illegal activity after a 2\1/2\-year investigation with no 
evidence.
    Mr. Green. I see.
    Mr. Weltman. That was our experience.
    Mr. Green. So from your point of view, the CFPB is of no 
value. All right, let me move on to someone else. Thank you for 
your point of view, kind sir.
    I want talk for just a moment about invidious 
discrimination. My assumption is that everyone on the panel 
agrees that there is invidious discrimination in lending. But 
for fear that I may be incorrect, if you think that there is 
invidious discrimination in lending, would you kindly raise a 
hand?
    Invidious discrimination is harmful discrimination against 
persons who are seeking to borrow money. Please put your hands 
up, and keep them up. Okay, so we have Mr. Weltman, you don't 
believe there is discrimination in lending, I see. And you 
understand ``invidious'' because you are a lawyer. So now you 
want to eliminate the CFPB, and you don't think that people are 
discriminated against in lending. The empirical evidence is 
there to support it.
    Lawsuits have supported it. I am just amazed that you, 
living in the United States of America, would come to the 
conclusion that there is not invidious discrimination in 
lending.
    Let's move on to the next question. There is something 
called ``testing.'' This is the methodology by which we acquire 
the empirical evidence necessary to prove the invidious 
discrimination. As a matter of fact, I know of no better way to 
acquire the empirical evidence.
    If you are familiar with what testing is, would you kindly 
extend a hand into the air? All right, let the record show that 
we have two people who are not familiar. If you will lower your 
hands. For edification purposes, this is where you send in 
persons, lets assume you have three, and one of them happens to 
be Anglo, and the Anglo person will receive a loan at an 
interest rate, let us call it 5 percent, and then two African 
Americans will come in afterwards and they will receive loans 
at a higher interest rate. And the African Americans will be 
more qualified than the Anglo-American that went in.
    That is the way you test to ascertain whether or not 
discrimination exists. Do you believe that this is a fair way 
of acquiring intelligence? If so, would you kindly raise your 
hand?
    Okay, I said, Mr. Weltman, you don't think that testing is 
a fair way to acquire intelligence. So Mr. Weltman, are you a 
person who believes that people like me and others who have 
been discriminated against--and by the way, some of us are 
still being discriminated against--should just suffer, because 
you had an unpleasant incident? I yield back, thank you, Madam 
Chairwoman.
    Chairwoman Waters. Thank you. Our ranking member, Mr. 
McHenry, the gentleman from North Carolina, is recognized for 5 
minutes.
    Mr. McHenry. Well, Mr. Weltman, I don't question your 
motives for being here. I don't think that it would be 
appropriate for a Member of Congress to do that to a panelist, 
I don't think it is becoming of this Congress to do something 
like that, nor do I think that was the intention of anybody who 
was questioning you about your awful experience. And I know you 
have already testified as to your story.
    The reason why you were invited to be on this panel is to 
provide an example of the harm that Richard Cordray's CFPB 
pushed upon consumers and individuals and companies. Let us 
just talk through structural changes here. You have dealt with 
an attorney general, you have dealt with the Bureau, and you 
are quite familiar with the law. So did the CFPB ever provide 
you with any guidance on how to word your disclosures?
    Mr. Weltman. Thank you, Ranking Member McHenry. We had 
discussions with the enforcement attorneys at the CFPB 
throughout the process and actually invited them to provide us 
the language that they would condone and endorse in writing, 
and they would not do that for us.
    Mr. McHenry. Okay, so have you dealt with other banking 
regulators?
    Mr. Weltman. I have not.
    Mr. McHenry. Have you dealt with other regulators?
    Mr. Weltman. Others at our firm--we have a very robust 
compliance department whom I think deal with various other 
regulators. I personally haven't.
    Mr. McHenry. Okay. Were there any rules of the road that 
were given to you from the CFPB?
    Mr. Weltman. Before the enforcement attorneys served us 
with our CID, we had had no interaction with them directly. So 
beyond that, no.
    Mr. McHenry. In the wording of that document, did it give 
you reference to law that they were enforcing, a specific law 
that they were enforcing or words of a law or reference to a 
piece of a criminal code?
    Mr. Weltman. When the Bureau attorneys presented us with 
what they considered to be a consent order that they would 
agree to, it was, for the most part, their way, take it or 
leave it.
    Mr. McHenry. Okay. And you have testified to this, but just 
to be clear, did you just base your disclosures off what would 
have been previously approved by Richard Cordray as attorney 
general?
    Mr. Weltman. Our law firm has invested millions of dollars 
over the years in compliance. And again, we have a very robust 
compliance department, headed by one of my partners, who heads 
up our compliance area, who studies the law constantly and 
stays on top of all the legal requirements.
    And we based our disclosures and how we craft our letters 
on the state of the law at all times, which was confirmed when 
we did work for the State of Ohio and what they would find 
acceptable as well.
    Mr. McHenry. Okay. So in this process, were you ever made 
fully aware of how you violated CFPB rules?
    Mr. Weltman. Well, Congressman, there were no rules that 
were promulgated in this area by the CFPB.
    Mr. McHenry. So as a legal matter, you had no point of 
reference for whether or not you were in fact breaking the law 
until you were served?
    Mr. Weltman. And just to be clear, there is statutory and 
case law that we follow at all times. I think the Bureau had a 
different interpretation, which was found by the court, as it 
turns out, to not be correct.
    Mr. McHenry. Okay. So what you are telling me is what was 
good for Attorney General Cordray was not good for Director 
Cordray. That is something else.
    This scenario has happened many times to many other 
individuals and companies. What other structural reforms do you 
think are needed so that this doesn't happen again? Just as a 
matter of best practices in the law, in your view?
    Mr. Weltman. Again, we like to stick to doing our job and 
doing it to the best of our ability representing our clients. 
And as far as structural changes within the Bureau, I would 
certainly defer to Congress on that.
    Mr. McHenry. Would a rules-based regime be better than 
``sue and find out later?''
    Mr. Weltman. As I stated--
    Mr. McHenry. And I don't mean this as a knock on lawyers.
    Mr. Weltman. As I stated in my testimony, and I am 
certainly aware that there have been discussions of rules in 
the debt collection area, when we have rules, we certainly 
intend on following them. And we would welcome the publication 
of those, finally.
    Mr. McHenry. Thank you.
    Chairwoman Waters. The gentlewoman from Texas, Ms. Garcia, 
is recognized for 5 minutes.
    Ms. Garcia of Texas. Thank you, Madam Chairwoman. And I 
find it really interesting that we have an almost unanimous 
opinion on this and--and I wanted to start with one of the 
questions--I think most of you were in the room when I asked 
them of the Director.
    Do you think that it is necessary to fully implement and do 
outreach for limited English-speaking populations to make sure 
that we reach all consumers? And I just want a yes or no from 
the whole panel.
    Mr. Shelton?
    Mr. Shelton. Yes.
    Ms. Jun. Yes, most definitely.
    Ms. Davis. I'm sorry. Can you ask the question again?
    Ms. Garcia of Texas. I asked her the question about the 
outreach and what we were doing to ensure that the limited 
English-speaking populations of consumers, those particular 
populations were getting the information they need so that they 
would not get ``ripped off.''
    Ms. Davis. Right. Yes.
    Ms. Garcia of Texas. Okay.
    Mr. Frotman. Absolutely, Congresswoman.
    Mr. Weltman. It is--
    Ms. Garcia of Texas. Mr. Weltman?
    Mr. Weltman. It is more for all consumers to get 
information, yes.
    Ms. Garcia of Texas. So is that a yes?
    Mr. Weltman. Yes.
    Ms. Garcia of Texas. Finally, a unanimous decision here. 
Well, thank you. And now I will ask you the follow-up question. 
How can we best do that? And in the interest of time, let's 
keep our answers short.
    Mr. Shelton?
    Mr. Shelton. Mandate that everything is transcribed into 
the language that you are trying to make sure were covered, I 
would think something along the lines of Section 205 of the 
Voting Rights Act, and apply it to these financial services 
issues.
    Ms. Garcia of Texas. Great. Ms. Jun?
    Ms. Jun. I would also just add that the CFPB has done 
really good consumer testing in other areas, and all of those 
documents, once they are translated, should be extensively 
tested to make sure they can reach lots of different 
populations with different dialects and that sort of thing.
    Ms. Garcia of Texas. Ms. Davis?
    Ms. Davis. I would like to answer that one in writing for 
the record.
    Ms. Garcia of Texas. Okay.
    Mr. Frotman. I think this is another example about why 
disbanding things like the Consumer Advisory Board are so 
devastating. I know in my time at the Bureau, we learned a ton 
from that advisory board about how to better do our job. I 
think it is another example about not wanting to necessarily 
hear from consumers because there was a particular point of 
view already.
    Ms. Garcia of Texas. Mr. Weltman?
    Mr. Weltman. Unfortunately, I don't think I am qualified to 
contribute an answer to that. It is not my area of--
    Ms. Garcia of Texas. Do you not have any clients from any 
of the populations I may be talking about?
    Mr. Weltman. Do we have clients that serve that population?
    Ms. Garcia of Texas. No. No--clients, yes, correct.
    Mr. Weltman. Yes, we do.
    Ms. Garcia of Texas. You do? Okay, well, thank you.
    Now the other question I have, and, again, it is for the 
whole panel, is, I, too, was a legal aid lawyer and I did do 
consumer laws, and back then, we were all concerned about 
redlining--do you think that redlining still exists?
    Mr. Shelton. Is it racist? Yes.
    Ms. Garcia of Texas. No. Does it exist?
    Mr. Shelton. Oh, absolutely. Yes.
    Ms. Garcia of Texas. No, I know it is racist. But we were 
talking about that earlier, and my colleague from Houston, 
Congressman Green, was alluding to some of it. But do you think 
that redlining exists? I know that there were so many things 
put in place to try to correct that, but are we there yet?
    Mr. Shelton. The short answer is that it does still exist. 
We get reports about just across streets, as a matter of fact, 
how differently people are treated with various services. So 
the short answer is yes, it does.
    Ms. Garcia of Texas. And do you think it is just in the 
financial services or in other sectors as well?
    Mr. Shelton. Oh, no, many other sectors as well, as a 
matter of fact. I think we find the experience not only in 
financial services but even education and other issues along 
those lines.
    Ms. Garcia of Texas. Ms. Jun?
    Ms. Jun. I think the other thing I will add is we have 
heard a lot about new ideas. And there have been some studies 
about using algorithms and alternative underwriting as if 
hopefully, a computer won't be discriminatory.
    But a lot of studies lately have been showing that those 
automatic computer type models and new ideas are still 
concluding discriminatory results in lending. So I think it is 
still very much a problem and we as a society need to do a lot 
more about it.
    Ms. Garcia of Texas. Ms. Davis?
    Ms. Davis. Again, I would like to answer that one for the 
record.
    Ms. Garcia of Texas. Okay, thank you.
    Mr. Frotman?
    Mr. Frotman. I think it obviously still exists. But I think 
I would encourage the committee to think about it in a broader 
sense than just the traditional mortgage context. I think we 
see this extend out to issues in Fintech, we see it in student 
lending issues, and I think it is a significant problem where 
there are real concerns about the Bureau's commitment to 
addressing it.
    Ms. Garcia of Texas. Mr. Weltman?
    Mr. Weltman. Yes, and I am sorry. I am just not qualified 
to speak to that issue.
    Ms. Garcia of Texas. You are not qualified? I thought 
lawyers knew the answers to everything. I always thought--that 
is the kind of lawyer I was, but maybe that is a discussion for 
another time.
    Now, Ms. Jun, I wanted to ask you because you do the legal 
aid work, if you could think of one single thing that we could 
do in changing to help poor people have more access to credit, 
and to lending, and to being able to have some access to 
capital, what would that be?
    Ms. Jun. I think that is actually just more regulation and 
not less, because what is filling the hole right now are more 
bad choices and more predatory practices. And so I think the 
way you open up the space for better ideas to fill that space 
with better options is to make sure that bad practices are in 
fact very strongly discouraged by the CFPB and other 
regulators, and that real innovation, real new products as 
companies develop them are closely scrutinized to see how they 
are benefiting people.
    Ms. Garcia of Texas. Okay, well, thank you all.
    Chairwoman Waters. The gentleman from Michigan, Mr. 
Huizenga, is recognized for 5 minutes.
    Mr. Huizenga. I appreciate the Chair for recognizing me, 
and Mr. Weltman, I am sorry, it was almost 6 hours ago when 
this hearing started. I was here for a number of hours at the 
beginning, and then had to step out for a few things.
    As I was listening to the ranking member here, I am 
fascinated by this notion that an attorney general would act in 
one way at the State level, and then come to Washington, D.C., 
with a bright, new shiny object called the CFPB and act in a 
completely different way. So why did he reverse course? Did you 
ever hear in the explanation as to why there was a reversal?
    Mr. Weltman. Thank you, Congressman, no, he did not address 
that in his deposition. He was asked the question and didn't 
really provide a sufficient answer.
    Mr. Huizenga. Oh, that would have been like when he was 
here testifying in front of us. But, okay. So literally, he did 
not have an answer as to why he thought it was okay as attorney 
general but then reversed himself--I mean, that is 180 degrees. 
Going back to then try to hold you culpable, whom he had 
blessed, checked the box, whatever you want to say, had 
approved your process that he as attorney general had oversight 
of.
    Mr. Weltman. That is accurate to my testimony, yes.
    Mr. Huizenga. Okay, well, that is stunning--but I had an 
experience around a couple of other things, and I will ask the 
question this way. Do you believe that the tactic of regulation 
by enforcement is a problem?
    Is the Bureau going after a business without issuing any 
guidance or promulgating any rule--so in other words, there is 
a course of action--this might be a little different than what 
you had dealt with, but there is a course of action, and that 
is deemed legal and acceptable, and then suddenly a regulator 
decides that no longer is that acceptable--and by the way we 
are going to then go after you for doing something that had 
been approved before?
    Mr. Weltman. I am familiar with our experience and haven't 
really spent a lot of time worrying about other experiences 
outside of our own. I certainly felt that our experience was an 
attempt at regulation through enforcement, just based upon some 
of the terms that the Bureau was requiring us--if they weren't 
going to sue us, things that weren't the current law, things 
that they didn't include in the lawsuit.
    Mr. Huizenga. Explain that a little bit--unpack that a 
little bit.
    Mr. Weltman. Well, their tactic, after their 2\1/2\-year 
investigation and before they sued us, they came to us and 
said, we are going to sue you unless you sign a consent order. 
And we asked to see what it would look like because certainly 
we were interested--
    Mr. Huizenga. You would want to know what you are agreeing 
to.
    Mr. Weltman. We wanted to know what they had in mind--
    Mr. Huizenga. Yes.
    Mr. Weltman. And what they had in mind, again, some of 
which was not the current state of the law and it was something 
that we felt they were going to use that as an example to tell 
people what the law should be.
    Just because we agreed to something--we wouldn't agree to 
it because it wasn't the law. And again, that was validated 
that when they finally filed the lawsuit--and again, the 
lawsuit had no basis as it turned out. But they didn't even 
include those terms in the lawsuit because it wasn't law--they 
couldn't have even gotten--
    Mr. Huizenga. Well, that is exactly the experience I had 
with a small title insurance company back in the second 
district of Michigan, and I won't incriminate my colleague on 
the other side of the aisle because I want him to have a future 
here in Washington. But he actually helped me when I went to 
him with this issue and called the CFPB on my behalf to kind of 
work through this. And it was exactly that situation.
    They were conducting themselves in a way that was 
completely legal and acceptable, but the CFPB decided that they 
no longer wanted companies to act like that, so they sued them 
and fined them, would have put them out of business had it not 
been for my friend on the other side of the aisle who helped 
mitigate that a bit.
    I think that is why a number of us believe that there need 
to be some safeguards that the Dodd-Frank Act didn't have in 
it, but we need to have some safeguards to prevent the CFPB 
from overreaching. And I am assuming in your opinion that would 
have helped your situation have more clarity, transparency? 
Knowing the rules of the road as you were moving forward?
    Mr. Weltman. We asked the CFPB for the rules that they 
wished us to follow because we certainly are interested in 
those and would love them to be published.
    Mr. Huizenga. I think that that had been the last 
Administration's M.O. I am hopeful that this current 
Administration and Director Kraninger, who was here earlier, is 
going to follow through that. My time is expired. I appreciate 
your time.
    Chairwoman Waters. Thank you. The gentlewoman from North 
Carolina, Ms. Adams, is recognized for 5 minutes.
    Ms. Adams. Thank you, Madam Chairwoman, and thank you for 
convening today's hearing, and to the witnesses, thank you very 
much for your testimony. Each of you know that the Consumer 
Financial Protection Bureau's primary role is to protect 
consumers, and I have never believed that that should be a 
partisan issue. But having said that, let me ask a question 
first of all to Mr. Shelton. I was troubled by the way Mr. 
Mulvaney fired the 25 members of the Consumer Advisory Board 
last June, and by the changes that he made which seemed to 
diminish the role that the board plays with the agency.
    And yesterday, as you have heard me introduce compliments 
in legislation--the Consumers First Act attempts to address 
this issue. But can you just share from your point of view 
which steps should be taken to ensure that the Consumer 
Advisory Board and the other advisory boards are diverse and 
inclusive in every opportunity to provide meaningful advice to 
the Consumer Bureau's staff?
    Mr. Shelton. Let me first say that I believe passing the 
Consumers First Act is a good start. Mandating many of these 
provisions and making sure that the voices of the American 
people, as diverse as they may be, as those of us who worked on 
passing the original Dodd-Frank Wall Street Reform bill had 
intended.
    I think it is crucial that that kind of information is 
available, and again with the great diversity we call the U.S., 
and of course the type of redlining and other problems we have 
experienced with the financial institutions in our country.
    Ms. Adams. I am curious about whether your organization or 
any other organizations represented here on the existing 
boards--anybody from NAACP?
    Mr. Shelton. Can you say that one more time--I'm sorry, the 
last part?
    Ms. Adams. Is anyone from the NAACP on the board?
    Mr. Shelton. We were with the first board--
    Ms. Adams. Oh, okay.
    Mr. Shelton. We weren't more recently.
    Ms. Adams. So you were asked off, pretty much?
    Mr. Shelton. Yes, ma'am.
    Ms. Adams. Okay. Let me follow up and ask--I was an 
educator for 40 years, I taught at the Bennett College in 
Greensboro, and I believe deeply in the value of creating 
opportunities for students to access and complete their higher 
education. For many, especially students who attend 
Historically Black Colleges and Universities (HBCUs), it is the 
key to upward economic mobility.
    But our students today are young and overburdened by the 
student loan debt that is putting the so-called American Dream 
out of reach. So can you talk a little bit about--I understand 
that we don't have an ombudsman anymore for young people to 
stand in the gap for them, no one looking out for them. And I 
would really like to hear your thoughts about that, not only 
from Mr. Shelton, but also from Mr. Frotman.
    Mr. Shelton. Let me just start it by saying very quickly, 
that of course the cost of higher education continues to spiral 
upwards. And as such, we are looking at some of the tools that 
have been made available in the past. The Pell Grant program 
was one of the most effective and successful ways to keep from 
going into debt, because that provided resources that we didn't 
have to pay back.
    But unfortunately, if you can go back to 1980 in the Reagan 
Administration, first cutting Pell Grants and then freezing 
them and thus never catching up with the buying power that was 
intended for Pell Grants, which are a really good start for 
low- and moderate-income students. Just look at the lack of 
control for student loans as we know, we continue to raise that 
issue here for the assumption, we have to address as well. It 
means more and more students are dependent on student loans 
that have to be paid back with a group of lenders that are 
quite frankly not regulated in the manner in which they should 
be.
    Ms. Adams. Mr. Frotman, I understand that you were the 
former student loan ombudsman and you are not there anymore, 
you resigned. Can you tell me a little bit about your concerns?
    Mr. Frotman. Thank you for the question. On top of the 
historic debt that we have pushed upon tens of millions of 
Americans, they face a financial marketplace that is littered 
with predatory players, from for-profit schools to student loan 
servicers, debt collectors, private student lenders, private 
equity funds, you name it, that view the trillion plus dollars 
in student debt as their chance to make a quick buck. And that 
is what we worked on at the Bureau for 7 years while I was 
there.
    This is an issue that should know no partisan bounds. The 
fastest growing segment of student loan borrowers is actually 
older Americans. We see huge problems in rural America. Issues 
impacting everything from infantrymen to clergyman. And what I 
saw at the Bureau, nearly instantaneously after Director 
Cordray left, there was just zero desire to actually work on 
these consumer protection issues anymore. Maybe because of 
partisan reasons, maybe because of industry, but the result is 
the same.
    Ms. Adams. Thank you very much, I am out of time. Madam 
Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much. The gentlelady from 
New York, Ms. Ocasio-Cortez, is recognized for 5 minutes.
    Ms. Ocasio-Cortez. Thank you, Madam Chairwoman. Mr. 
Frotman, can you very quickly tell us why the CFPB was 
established?
    Mr. Frotman. I think the CFPB was established for two 
reasons. One is that families throughout America were hurting 
after the financial crisis and we were there to help those 
individual folks. And when I first started, it was helping 
servicemembers who were ripped off by predatory lenders. Later, 
it was individual borrowers who were struggling with student 
loans. But we always had a view that was broader, which was 
that our job was to be sure nothing like the financial crisis 
ever happened again.
    Ms. Ocasio-Cortez. And in your time there, can you give, 
maybe a quick example of some of the most important and vital 
pieces of work and protections that you all, kind of carried 
out?
    Mr. Frotman. Sure. In my first job, standing up for 
military families, it was definitely helping the Department of 
Defense strengthen the Military Lending Act. Because for years, 
I was lucky enough to travel the country with Holly Petreaus, 
and everywhere we went, we saw predatory lenders just camped 
outside of military bases. So for years, we worked with all the 
banking regulators within the Department of Defense to pass a 
rule to close all of those loopholes. In my second role at the 
Bureau, working on student lending issues, we did a 
considerable amount of work, especially on predatory for-profit 
colleges, but also around the fundamental breakdowns in student 
loan servicing.
    Ms. Ocasio-Cortez. Thank you. And do you think that it is 
possible there are special interests or industries that would 
like to see the CFPB weakened or abolished?
    Mr. Frotman. Absolutely. I think the steps that Mick 
Mulvaney and Kathy Kraninger have taken are pretty indefensible 
across the board.
    Ms. Ocasio-Cortez. And sorry to interrupt, just because I 
have a short period of time, what would some of those special 
interests that would really want to abolish the CFPB be? Who 
would be some of those actors?
    Mr. Frotman. When it comes to student lending issues, I 
think the fundamental issue is that the Bureau has become the 
political arm of the Department of Education and is willing to 
do anything that Congress casts it to do to stand up for 
student loan servicers.
    Ms. Ocasio-Cortez. So the Department of Education under the 
leadership of Secretary Betsy DeVos, has kind of the interest 
there, could have sought, potentially with political 
appointments to the CFPB, to dismantle it from within, north, 
in order to continue predatory student lending? Is that what 
you are--
    Mr. Frotman. I think that the Bureau is unwilling to do 
anything that they think makes the Department upset.
    Ms. Ocasio-Cortez. Now, why on earth would a corporation or 
a special interest group, so let's say, for-profit colleges or 
universities, want to dismantle that? What is going on here? 
Why do you think that these political appointments are 
happening? To what end does it serve?
    Mr. Frotman. We now have $1.5 trillion in debt and a lot of 
folks want to get rich off of the misery of student loan 
borrowers, and for 7 years, the Bureau stood as the most vocal 
bulwark against that happening. And unfortunately, now the 
Bureau is in a place where it is open season on student loan 
borrowers.
    Ms. Ocasio-Cortez. So you are saying that the Consumer 
Financial Protection Bureau was one of the guardrails against 
this runaway student lending crisis, and so there is a vested 
interest to take that guardrail away?
    Mr. Frotman. Absolutely.
    Ms. Ocasio-Cortez. Do you think we are kind of on the way 
to a potential precipice or cusp with the student lending?
    Mr. Frotman. I know there is a lot of debate about where we 
are in the student lending market. I think the truth is you are 
unable to say this is anything but a crisis. There are now 8 
million student loan borrowers in this country who are in 
default, and another million student loan borrowers default 
each and every year. That means every 28 seconds, another 
student loan borrower defaults. We heard on this morning's 
panel, Director Kraninger talk a lot about how she is getting 
up to speed. In her nearly 90 days at the Bureau, 250,000 
student loan borrowers have defaulted.
    Ms. Ocasio-Cortez. And very quickly, you bring up an 
excellent point about earlier, and so you are saying that the 
Consumer Financial Protection Bureau is one of the only 
agencies that we have to check the student loan crisis? And 
just this morning, Director Kraninger was asked by my colleague 
here from Michigan, if she thought the CFPB should even exist, 
and she refused to say yes, unequivocally. Do you believe that 
it should exist?
    Mr. Frotman. Of course. I think for the nearly 45 million 
Americans with student debt and the 300 million American 
consumers, the CFPB is a lifeline for them in the consumer 
financial markets.
    Ms. Ocasio-Cortez. Thank you.
    Chairwoman Waters. The gentleman from Illinois, Mr. Foster, 
is recognized for 5 minutes.
    Mr. Foster. Thank you, Madam Chairwoman, for holding this 
hearing and thank you to our witnesses here. Mr. Frotman--well, 
first off, I want to thank you for your current work at the 
Student Borrower Protection Center and your previous work at 
the CFPB as a student loan ombudsman, and the light that you 
have shed on all of the issues surrounding the student loan 
market. This is something that affects 44 million Americans and 
yet we are not doing what we should about it.
    You probably saw during the previous panel during my 
questioning of Director Kraninger--well, I personally was very 
surprised to learn that after almost 3 months in the job that 
she was unaware of the--that neither she nor her company staff 
actually seemed aware of the market monitoring data initiative 
that the Bureau had previously spearheaded and was specifically 
authorized under Section 1022(c)(4) of Dodd-Frank. Did this 
surprise you that she and her staff seemed unaware?
    Mr. Frotman. It did. It is hard to be surprised a lot now, 
right? But I think this is exactly why the United States 
Congress created the CFPB: to better understand the emerging 
risks on the horizon so they could take action and folks on 
this committee could understand what steps were necessary.
    This was an action that was entirely authorized within 
Dodd-Frank Section 1022(c)(4), which specifically authorizes 
the Bureau to engage in market monitoring activity. And this 
was an effort that we spent a ton of time getting right.
    And it is just another example of the indefensible. This is 
the second largest class of consumer debt in America. People 
are really hurting, and the fact that the Bureau has been 
sitting on their hands for months on this project, it is just 
indefensible.
    Mr. Foster. What are the sort of risks that that opens us 
up to if we don't have access to this data?
    Mr. Frotman. As I mentioned before, we are in the midst of 
a student debt crisis, and I think one of the goals of this 
project, which I guess has been put in the drawer, at OMB, was 
for regulators to better understand what was happening. Student 
loans are a completely opaque market. Even some of the tools we 
have in the mortgage context like OCC--had an ability for 
policy makers--for regulators to understand what the true harm 
was.
    I was the top person in charge of student loans at the CFPB 
for years, and I couldn't tell you right now what the true 
scope of the problems were in the market because we just don't 
have access to the data. And for whatever reason, if it was to 
appease industry or to appease the Department of Education that 
this project was just stopped, runs fundamentally in the 
opposite direction of where the Bureau needs to be.
    Mr. Foster. Was the absence of this data going to be 
something that will make it difficult to identify the bad 
actors? For example, for-profit colleges with a very high rate 
of student loan defaults?
    Mr. Frotman. It will be. This project was 100 percent 
focused on trying to better understand where there were 
problems in this market on the student loan servicing side. So, 
what type of borrowers were being driven into consecutive 
forbearances and not getting help? Where was that happening?
    And I think this is a testament to what the Bureau was 
trying to be and what this committee tried to create, which was 
a data-driven enterprise which would look at where the data 
was, where consumers were hurting, and take action from that. 
By essentially stonewalling and stopping this project, the top 
regulator in charge of overseeing over a trillion dollars of 
non-bank serviced loans is just putting its head in the sand 
when it comes to student debt.
    Mr. Foster. In the remaining minute or so, what are the 
emerging things having to, risks having to do for example with 
Fintech that we are going to need the CFPB's help with?
    Mr. Frotman. I think one of the big issues that I worked on 
and you had one of the experts here talk about this, too, is 
the concern about using alternative data as a part of black box 
algorithms and what comes out the other end.
    One of the things I would love to talk to you more about is 
the use of educational criteria in terms of underwriting 
decisions which I think raises a whole host of fair lending 
concerns.
    Mr. Foster. Thank you.
    Ms. Jun, did you have any comments?
    Ms. Jun. I think I will just add that there are a lot of 
new interesting ideas in the world and I think that it is 
really important that CFPB keeps track of how they are actually 
doing in the market. I hope some of those ideas are actually 
good and to the results and the consequences that they intend, 
but I think it is really important that we keep an eye on all 
of that because there are dangers that come with new things, 
too.
    Mr. Foster. Thank you. I yield back.
    Chairwoman Waters. Thank you.
    The gentlewoman from Pennsylvania, Ms. Dean, is recognized 
for 5 minutes.
    Ms. Dean. I thank you, Madam Chairwoman.
    Good afternoon. It has been a long day. Before I came to 
public service, in my previous life I taught at La Salle 
University for 10 years. It was a real privilege. And so, I 
have to point out that we are joined today by a former student 
of mine, Christopher Goins, who is here reporting for us today. 
How about that? So, it is heartwarming to have you here.
    But the underlying subject matter is particularly 
troubling. I care deeply about student loan debt for the 
reasons that I was a professor, but also because I am a parent. 
My community members struggle with it. It is certainly not 
something that anyone should want to ignore or anyone should 
want to shut down an agency tasked with an independent 
oversight in this area.
    I said earlier this morning that in Pennsylvania, my home 
State, students have an average debt when they leave college of 
nearly $37,000. Unfortunately, we are the second highest rate 
in the United States. And as you, Mr. Frotman, have pointed 
out, it is not just the crushing burden of the debt. It is the 
long-term consequences, and it is of course consequences to our 
economy whether we want to grow it or not, because those 
struggling with this kind of debt are hindered by predatory 
loan services.
    They wind up in short-term repayment processes that are 
crippling, that keep them from borrowing for buying houses. It 
keeps them from saving for retirement. All of these things 
build up and become something much greater.
    I read with interest your letter of resignation and your 
testimony. And I have to tell you and maybe I want to know your 
reaction, I was baffled by our earlier panel, because I didn't 
hear a passion for the mission and in fact, we heard a split 
passion that somewhere along the way and I think you 
experienced this in your professional journey, somewhere along 
the way, this agency went from a goal of protecting consumers 
to a tug-of-war between protecting consumers and undoing 
regulations because lenders didn't like them.
    That is what I heard. That is what I think is at the crux 
of this problem and who's caught in the balance? Student loan 
debt, students, and all other consumers. So, I ask you and I 
will read just a little bit of your letter really quick: ``It 
is with great regret that I tender my resignation.'' This 
letter was to Acting Director Mulvaney. ``It was an honor of a 
lifetime to spend the past 7 years working to protect American 
consumers. However, after 10 months under your leadership, it 
has become clear that consumers no longer have a strong, 
independent consumer bureau on their side.''
    And I will skip down, ``Instead, you have used the Bureau 
to serve the wishes of the most powerful financial companies in 
America.'' Can you describe to us what you saw in the change of 
mission and specifically who got caught? And what does student 
loan debt look like in its problematic pieces?
    Mr. Frotman. Sure. So, for years, I ran the Bureau's 
student loan work and it was obviously a massive team effort. 
We did a lot of good. I think the flipside of that is we saw 
families across the country hurting. We got 60,000 complaints 
from student loan borrowers. These were active duty 
servicemembers, nurses, and teachers who were just trying to 
get a better life for them and their families.
    And they chased the American Dream like we all do and we 
want for our families. And then, they were pushed into a market 
that was just littered with predatory players. Your home State 
Attorney General is suing one of the largest servicers for a 
lot of these practices. And for years, we worked with the 
Department of Education when they wanted to help borrowers, but 
never once under my tenure, under Director Cordray, or under 
Elizabeth Warren, did we ask for a permission slip to do the 
right thing.
    And for months, I have been trying to figure out how to 
articulate this, and I think you heard it this morning in 
response to your questions and others, the answer to what is 
the Bureau going to do on student debt always came back to, 
``We want to meet with the Department of Education.'' That is 
not why this committee created the Bureau.
    Ms. Dean. I really appreciate that. I apologize because we 
are tight on time.
    Mr. Frotman. Yes.
    Ms. Dean. I just want to note, and I am sure you noted that 
the Ombudsman position, a statutory position, was left empty 
for 6 months. And yesterday, one of my staff members learned 
that there is an opening, ``Good afternoon. CFPB is currently 
seeking candidates.'' This was 1:39 yesterday--coincidence? I 
don't know.
    I want to end on the payday lending issue and I want to get 
your opinion of this, the Director said that the removal of the 
rule of checking whether or not there was an ability to repay 
had to do with--I love this euphemism--access to borrowers. We 
want to give them access.
    If I could--may I indulge just to ask for a response to the 
question?
    Chairwoman Waters. The gentlelady's time has expired. We 
must move on. We are going to have a vote on the Floor in a few 
minutes.
    Ms. Dean. Thank you, Madam Chairwoman.
    Chairwoman Waters. All right. Thank you.
    The gentlewoman from Michigan, Ms. Tlaib, is recognized for 
5 minutes.
    Ms. Tlaib. Thank you, Madam Chairwoman. Thank you all so 
much for being here.
    Mr. Weltman, I have a question for you. Do you believe the 
Bureau should exist?
    Mr. Weltman. I spend my time focusing on our firm and doing 
our job. And again, I leave those type of policy issues for 
Congress.
    Ms. Tlaib. But you are before our committee. I mean, I 
honestly as your expertise, a lot of colleagues on the other 
side ask you a question I am just asking. Like, in your 
opinion, I mean you are here before congressional body 
educating us on the pros and cons or your experiences. Do you 
believe the Bureau should exist?
    Mr. Weltman. I was invited today to share my experience.
    Ms. Tlaib. Sure.
    Mr. Weltman. And certainly the way we were treated--
    Ms. Tlaib. Yes. You wouldn't answer it either. It is so 
bizarre to me that out of anybody we could have had here is to 
have somebody who actually doesn't support consumer protection. 
I mean, the whole idea of the Bureau was actually in many ways 
supported by a lot of colleagues on both sides. That is what's 
so bizarre about it. And now, we are here trying to dismantle 
it in many ways by some of the rhetoric.
    Thank you. This question is for the panel. You all know Mr. 
Mulvaney. We keep hearing about him. He clearly did not act in 
conformity with the Dodd-Frank Act, nor within the spirit and 
purpose of what the Consumer Bureau was designed by Congress to 
do. We all remember the period of reckless and unchecked 
lending that nearly sent this nation into a second Great 
Depression and most certainly caused the Great Recession of 
2008.
    I saw it in my neighborhood in Detroit. So many people to 
this day are still struggling to get out of it. Trillions of 
dollars of household wealth was lost and many hardworking 
communities are still recovering from this disaster caused by 
unchecked predatory lending. In your opinion, how important is 
it that we have a strong and functional Consumer Bureau for 
America's families?
    Second, and this one I am really wanting you to dig deep, I 
know it is hard to pick one, but if you could ask the Director, 
if she was here right now, to do at least one thing for 
consumers in her position, what would that be?
    Mr. Shelton. The one thing would be simply to restore it 
back to the conditions and the position it was in, in 2016 at 
the time they took over and took office. In essence, what we 
are trying to do is restore something that proved to be 
successful and let us continue to move in that direction.
    Ms. Jun. The people that you just mentioned, and all of the 
clients, they are all the people who were destroyed by the 
foreclosure crisis and even the ones who were able to save 
their houses are still struggling.
    So, yes, overall, pre-CFPB is one that really, really 
disturbs me. That idea scares me. And I was trying to think of 
one thing, but I feel like to tie this entire hearing together, 
it would be to put consumers first again and to protect 
consumers. And whether you reduce regulation or create new 
rules or do anything else at this Bureau, the whole point, 
number one, is to protect consumers. So, I think that would be 
the one thing I would choose.
    Ms. Davis. I was going to say the same thing, put consumers 
first and upholding the authorities that have been granted 
regarding examinations and comprehensive rules and exercising 
all the authorities given.
    Mr. Frotman. I think, listen to the career staff. The 
people that I worked with for 7 years were some of the best and 
brightest out there. And where you see the worst coming out of 
the Bureau is the politicization, from the dropping of Golden 
Valley to the Military Lending Act. This is what is happening 
when you politicize an agency that is supposed to be 
independent and standing up for consumers.
    Mr. Weltman. Again, thank you. I don't know that I am 
qualified to comment on the operation of the Bureau, but what I 
would ask her to do is exactly what I ask you to do: just do 
her job to the best of her ability.
    Ms. Tlaib. Sure. So, please tell me, if any of you know, 
the last time that the Bureau brought a fair lending 
enforcement action against a financial institution and tell me 
what you think is happening with racial discrimination in 
mortgage lending?
    Mr. Shelton. The last time we can remember?
    Ms. Tlaib. Yes.
    Mr. Shelton. It was prior to 2016, and the second part of 
your question was--
    Ms. Tlaib. That is fine. It is part racial discrimination--
I am just going to submit this for the record. I am new here 
and this timing thing, there is nothing that Chairwoman Waters 
can do, but it really--it is just awful, and I come from the 
Michigan legislature and we never had this like timing thing. 
But I want to submit this for the record.
    But I think it is really important to show that right now 
black applicants were almost twice as likely to be denied 
conventional home purchase loans as white applicants in 2016, 
and Detroit alone ranked 44 out of 48 communities nationally 
that found blacks were denied loans at a higher rate. That is 
really important and I want the Bureau to be able to address 
that, but I will submit this for the record.
    Thank you, Madam Chairwoman.
    Chairwoman Waters. Without objection, it is so ordered.
    Mr. Garcia, the gentleman from Illinois, is recognized for 
5 minutes.
    Mr. Garcia of Illinois. Thank you, Madam Chairwoman.
    I want to return to the office of ombudsman, because I 
think it is so important given the crushing amount of student 
indebtedness that is out there. So, for 7 years, the Bureau's 
Office of Students and Young Consumers was led by an 
independent student ombudsman who stood up for student loan 
borrowers and young consumers.
    And according to the Consumer Federation of America, among 
some of the good work that was done was returning over $750 
million to student loan borrowers. You helped more than 60,000 
borrowers demand answers from student loan companies and you 
held predatory companies like Navient and ITT Tech accountable 
for their practices.
    So, earlier today, it seemed that Director Kraninger 
conflated the ombudsman role which she now says she is hiring, 
which I think is a positive development, with the Office of 
Students and Young Consumers which has been shuttered. So, my 
question is, how is the student loan ombudsman role more 
limited now that the Office for Students and Young Consumers 
has been eliminated, if that is the case?
    Mr. Frotman. When they first, in May, announced that they 
were closing down my office, the Office for Students and Young 
Consumers, there were a lot of promises about how nothing was 
going to change. We obviously quickly realized that that was 
not the case.
    You don't have to take my word for it. There was a 
Bloomberg article recently published titled, ``New Head of 
Student Loan Oversight Office Will Have Less Power.'' This is 
just factually true. And I think it is really concerning, 
because what you heard on the panel earlier, every answer the 
Bureau had about student debt, about education, trying to 
encourage borrowers to make better decisions, which we all 
agree with.
    What you didn't hear once was how is the Bureau going to go 
after financial companies that are preying on student loan 
borrowers, and that is the flipside of a very important mission 
that the Bureau undertook. And I think based on everything that 
I witnessed, based on what you guys heard this morning, there 
is a real concern about whether the Bureau is still undertaking 
that role and this is where that work used to emanate from.
    Mr. Garcia of Illinois. Thank you.
    Ms. Jun, you relayed in your testimony earlier a powerful 
story about a consumer in New York who was able to get $1,200 
back from their bank after filing a complaint in the CFPB's 
public database. As you know, while he was heading the CFPB, 
Mr. Mulvaney said of his compliance database, ``I don't see 
anything in here that says I have to run a Yelp for financial 
services sponsored by the Federal Government.''
    Can you elaborate on why it is important that the database 
remain public?
    Ms. Jun. Sure. And I will again draw back on my legal aid 
experiences. That story in my testimony is actually from a 
colleague of mine, and I saw her handle that case. Another 
example with the complaint database that comes to mind is we 
had a client who couldn't get a copy of their credit report. 
They kept calling Equifax, requesting it. They just couldn't 
get it. Her attorney filed a complaint with the complaint 
database and suddenly Equifax was mailing the report. The 
reason this all works though as you alluded to, Congressman, is 
because it is public. Companies are aware that it is public and 
they want a good reputation.
    In one of my foreclosure cases, opposing counsel would not 
give me an answer, and the bank would not give my client an 
answer, but their accountant eventually had filed a complaint 
and I remember the attorney was very, very upset with me and he 
said, ``My client really doesn't like being called out in 
public.'' And I share that all to say the reason this database 
works is not because the CFPB is merely collecting the 
complaints, but because that information is available for 
anyone to see it.
    Individual consumers can use it to decide where they want 
to take their business. Advocacy organizations can look at 
patterns. Regulators can look at that and do research on what 
is going on in the marketplace. That all happens because it is 
public and available to a lot of people as an important tool.
    Mr. Garcia of Illinois. And when it isn't public, what 
happens?
    Ms. Jun. I would fear that--I would refer again to the pre-
CFPB world where I was litigating, where either you would have 
to try to sue to get that information and I am a lawyer. So, I 
have other tools. But an individual consumer probably just 
keeps calling the 1-800 number for months or years on end, and 
if they are lucky enough, they might be able to get help and if 
not, I would really be afraid that they would just never get 
the information or the help that they need.
    Mr. Garcia of Illinois. Thank you.
    Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much.
    The gentleman from Florida, Mr. Lawson, is recognized for 5 
minutes.
    Mr. Lawson. Thank you, Madam Chairwoman, and welcome to the 
committee, witnesses.
    In a debate that we had earlier today, I was very 
disappointed that Congress allowed the CFPB to have the 
independent status that they have today, and they have people 
in control of the organization right now who really I don't 
think really care about the consumers.
    I have heard the testimony from you all which I think was 
very credible but one of the things that really bothered me, 
and I know it is a stressful time and probably the Federal 
Government still makes about $1.6 billion off of students. And 
from the standpoint of the vampires at the corporate level, 
makes even more than that.
    Even though you stress, Mr. Frotman, that we have about 
$1.5 trillion in defaults, people are still making a tremendous 
profit off of students, and according to Mr. Shelton and he is 
absolutely right, higher education cost is increasing. So, 
higher education cost increases, student loans increase, and as 
a result, it creates more debt, and higher education can 
continue to increase because we can't stop it the way it is 
exploding.
    But we have corporate vampires that are sucking the blood 
out of this situation. And there is something that needs to be 
done. It is going to have to be Federal legislation that really 
changes it. And I don't know whether any of you all care to 
respond. The $1.6 billion that was made by the Federal 
Government in 2016, now in 2018, how much money is still being 
made by the Federal Government? I don't think the Federal 
Government should be, in my opinion, making a profit off of the 
back of students. If you all care to respond, please do.
    Mr. Shelton. I might start it. I think the response is we 
have to be--we have to think about it freshly and anew. If you 
think about when programs like Pell Grants were initially put 
in place and student loan programs were simple, they were done 
to respond to the present cost of higher education hoping to 
open the doors of real opportunity for all students across the 
country.
    We have to go back to that, at least look at the programs 
they put in place and see what the buying power is now. Forcing 
students into debt is absolutely unacceptable. We are very 
clear on that. We are seeing today on how damaging and 
destructive it is to one's future. Going to college in the 
first place, making that investment in yourself in the first 
place or your children was all set planning for that future and 
indeed, what we are seeing is something that is doing just the 
opposite, we see those who are making tremendous profits again 
at the hides and the very future of our young people.
    So, we are going to have to move along those, assess each 
of the programs, move them away from student debt into Pell 
Grant programs and other grant programs along those lines. So, 
again, every student in our country can truly get an 
opportunity.
    Let me say this last point. We are one of the few 
industrialized countries on the face of the earth that forces 
our students into this level of debt. Let's take a look at some 
of those other countries as well and see why it is different. I 
met a Ph.D. candidate who works for one of our Congresswomen 
right now here in Washington who was in Germany because the 
tuition to get her Ph.D. was free.
    Mr. Lawson. Wow.
    Mr. Frotman, would you like to respond?
    Mr. Frotman. Just to add quickly, we also see a whole host 
of private sector companies who are getting hundreds of 
millions of dollars, of taxpayer dollars, to then service that 
debt. So, one of the things that the Bureau spent a lot of time 
on was trying to improve Federal student loan servicing, which 
is good for consumers, but also represents the fact that we are 
paying these companies to try to help borrowers and they are 
failing miserably.
    One of the companies, in Federal court, Navient, wrote, 
``There is no expectation that the servicer will act in the 
interest of consumers.'' And that is what the Bureau was trying 
to tackle while I was there.
    Mr. Lawson. I am not going to ask, my time is running out, 
but what is happening at the university level? I am a former 
coach and athlete, and they are paying athletes now more money 
to perform. They don't leave with debt. But at the same time, 
and wind it down is our students at the same level leave with 
tremendous amount of debt.
    Madam Chairwoman, I yield back.
    Chairwoman Waters. Thank you very much.
    I would like to thank our witnesses from this second panel 
for your testimony today. I am so appreciative for your 
patience. Many of you or all of you I think have been here all 
day. You sat through the first panel and you stayed. You didn't 
run away and I am very grateful for that, and I thank you so 
very much.
    And while we don't normally give applause to our witnesses, 
I break the rules all the time.
    [applause]
    The Chair notes that some Members may have additional 
questions for these witnesses, 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.