    [Senate Hearing 116-8]
    [From the U.S. Government Publishing Office]

                                                          S.Hrg. 116-8

                     THE CONSUMER FINANCIAL PROTECTION
                    BUREAU'S SEMIANNUAL REPORT TO CONGRESS

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

                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                       BANKING,HOUSING,AND URBAN AFFAIRS
                              UNITED STATES SENATE

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

       A REVIEW OF THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL
                               REPORT TO CONGRESS

                                   ----------

                                 MARCH 12, 2019

                                   ----------

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

    [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

          Available via the World Wide Web: http://www.govinfo.gov

                                   __________

                        U.S. GOVERNMENT PUBLISHING OFFICE
    36-014                     WASHINGTON : 2019

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                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                          MIKE CRAPO, Idaho, Chairman

    RICHARD C. SHELBY, Alabama           SHERROD BROWN, Ohio
    PATRICK J. TOOMEY, Pennsylvania      JACK REED, Rhode Island
    TIM SCOTT, South Carolina            ROBERT MENENDEZ, New Jersey
    BEN SASSE, Nebraska                  JON TESTER, Montana
    TOM COTTON, Arkansas                 MARK R. WARNER, Virginia
    MIKE ROUNDS, South Dakota            ELIZABETH WARREN, Massachusetts
    DAVID PERDUE, Georgia                BRIAN SCHATZ, Hawaii
    THOM TILLIS, North Carolina          CHRIS VAN HOLLEN, Maryland
    JOHN KENNEDY, Louisiana              CATHERINE CORTEZ MASTO, Nevada
    MARTHA MCSALLY, Arizona              DOUG JONES, Alabama
    JERRY MORAN, Kansas                  TINA SMITH, Minnesota
    KEVIN CRAMER, North Dakota           KYRSTEN SINEMA, Arizona

                         Gregg Richard, Staff Director

                          Joe Carapiet, Chief Counsel

                    Brandon Beall, Professional Staff Member

                Laura Swanson, Democratic Deputy Staff Director

                     Elisha Tuku, Democratic Chief Counsel

               Corey Frayer, Democratic Professional Staff Member

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                        Charles J. Moffat, Hearing Clerk

                              Jim Crowell, Editor

                                      (ii)

                                C O N T E N T S

                                  ----------

                            TUESDAY, MARCH 12, 2019

                                                                       Page

    Opening statement of Chairman Crapo..............................     1
        Prepared statement...........................................    33

    Opening statements, comments, or prepared statements of:
        Senator Brown................................................     3
            Prepared statement.......................................    34

                                    WITNESS

    Kathy Kraninger, Director, Consumer Financial Protection Bureau..     5
        Prepared statement...........................................    35
        Responses to written questions of:
            Senator Brown............................................    40
            Senator Cotton...........................................    45
            Senator Perdue...........................................    46
            Senator Tillis...........................................    48
            Senator Moran............................................    51
            Senator Reed.............................................    54
            Senator Menendez.........................................    55
            Senator Warner...........................................    57
            Senator Warren...........................................    61
            Senator Cortez Masto.....................................    70
            Senator Sinema...........................................    83

                  Additional Material Supplied for the Record

    Semiannual Report of the Bureau of Consumer Financial
      Protection--Fall 2018..........................................    86
    Letter submitted by the Association of Credit and Collection
      Professionals..................................................   128
    Letter submitted by the Credit Union National Association........   138
    Statement submitted by Scott S. Weltman, Managing Shareholder,
      Weltman, Weinberg, and Reis Co., LPA...........................   143
    Letter submitted by the Consumer Banker's Association............   349

                                     (iii)

        THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL REPORT TO
                                    CONGRESS

                                  ----------

                            TUESDAY, MARCH 12, 2019

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10:08 a.m., in room SD-538, Dirksen
    Senate Office Building, Hon. Mike Crapo, Chairman of the
    Committee, presiding.

                OPENING STATEMENT OF CHAIRMAN MIKE CRAPO

        Chairman Crapo. The hearing will come to order, and, Ms.
    Kraninger, please take your seat.
        Today we will receive testimony from CFPB Director Kathy
    Kraninger on the CFPB's most recent semiannual report.
        On February 12, the CFPB issues its fall 2018 semiannual
    report which outlines the CFPB's significant work between April
    2018 and September 2018, including rulemakings and supervisory
    and regulatory activities.
        The report also provides insight into what the CFPB plans
    to undertake in the coming work period.
        In the report, Director Kraninger said, ``As I begin my
    stewardship of the CFPB, I will also be moving forward with the
    agency as a team to make sure the American people have access
    to the financial products and services that best suit their
    individual needs, the financial institutions that serve them
    are competing on a level playing field, and the marketplace is
    innovating in ways that enhance consumer choice.''
        Providing individuals and businesses with access to a wide
    array of financial products and services is foundational to
    robust economic growth and job creation.
        Under Director Kraninger's leadership, the CFPB has already
    started to take action to ensure that regulations that could
    affect consumers' access to credit are based on solid evidence
    and legal support, rather than flawed analysis.
        On February 6, the CFPB proposed to rescind the mandatory
    underwriting provisions of its payday lending rule and delay
    their compliance date.
        The decision was made nearly 1 year after initially
    noticing its intention to revisit the rule and after conducting
    extensive due diligence.
        The CFPB found insufficient evidence and legal support for
    the mandatory underwriting provisions and said that it is
    concerned that those provisions would reduce access to credit
    and competition in States that have determined it is in their
    residents' interest to be able to use such products, subject to
    State law.
        The CFPB has also taken steps to implement provisions of
    the Economic Growth, Regulatory Relief, and Consumer Protection
    Act--Senate bill 2155--that increase protections for consumers.
        On March 4, the CFPB issued an advance notice of proposed
    rulemaking to gather information on residential Property
    Assessed Clean Energy financing, or PACE loans, that will be
    used in its proposal to implement Section 307 of the bill.
        In September, the CFPB announced as effective a provision
    of S. 2155 that provides consumers concerned about identity
    theft or data breaches the option to freeze and unfreeze their
    credit for free.
        A New York Times article commenting on the provision noted
    that, ``one helpful change . . . will allow consumers to
    `freeze' their credit files at the three major credit reporting
    bureaus--without charge. Consumers can also `thaw' their files,
    temporarily or permanently, without a fee.''
        Susan Grant, director of consumer protection and privacy at
    the Consumer Federation of America expressed support for these
    measures, calling them ``a good thing.''
        In August, the CFPB issued an interpretive and procedural
    rule to implement Section 104 of S. 2155 to exempt qualifying
    community banks and credit unions partially from reporting
    certain data points under HMDA.
        The CFPB took another positive step on HMDA reporting in
    December issuing policy guidance describing HMDA data that it
    intends to publicly disclose in a manner that protects
    consumers' privacy.
        The Committee will continue to make implementation of S.
    2155 a top priority this Congress, and I encourage the CFPB to
    take the necessary steps to provide meaningful relief that will
    ultimately benefit consumers.
        Data privacy is another issue that the Committee will spend
    significant time on this Congress.
        Americans are rightly concerned about how their data is
    collected and used and how their data is secured and protected
    by both Government agencies and private companies.
        I have long raised concerns about big data collection by
    the CFPB, especially with respect to credit card and mortgage
    information.
        Although there have been positive changes in recent years
    under new leadership, the CFPB must ensure that the collection
    of consumer information is limited, information is retained
    only as long as is absolutely necessary to fulfill the CFPB's
    obligations, and that appropriate safeguards are in place to
    protect it.
        It is also worth examining how the Fair Credit Reporting
    Act, or FCRA, should work in a digital economy, and whether
    certain data brokers and other firms serve a function similar
    to the original consumer reporting agencies.
        The FCRA establishes standards for the collection and
    permissible purposes for dissemination of information by
    consumer reporting agencies and gives consumers access to their
    files and the right to correct information.
        The CFPB, through its supervision of larger participants it
    defines by rule, oversees a large segment of the consumer
    reporting marketplace.
        I look forward to working with the CFPB to identify
    opportunities to update FCRA so that it works in a digital
    world.
        During this hearing, I look forward to hearing more about
    Director Kraninger's priorities for the CFPB in the upcoming
    work period, additional legislative or regulatory opportunities
    to provide widespread access to financial products and
    services, and steps that could be taken to increase the
    protection of consumers' financial and other sensitive
    information.
        Director Kraninger, again, thank you for joining the
    Committee this morning to discuss the CFPB's activities and its
    plans.
        Senator Brown.
        Senator Brown. Still trying to get that quorum over here,
    Mr. Chairman.
        Chairman Crapo. I appreciate your help on that.

               OPENING STATEMENT OF SENATOR SHERROD BROWN

        Senator Brown. Thank you, Mr. Chairman. And welcome,
    Director, to the Committee again.
        We created the Consumer Financial Protection Bureau to
    crack down on Wall Street predators and shady lenders that prey
    on hardworking families. Wall Street, as we know, as we see
    here about every day, has armies of lobbyists fighting for
    every tax break, every exemption, every opportunity to be let
    off the hook for scamming customers and preying on families,
    and in some cases destroying communities.
        Ordinary Americans do not have those lobbyists. They do not
    have that kind of power. The Consumer Protection Bureau is
    supposed to be their voice, it was created to be their voice,
    created to fight for them.
        When a toxic mortgage robs a family of their home, it is
    not the CEO of Bank of America, it is not the top management at
    Wells Fargo who sits down with those kids and has the tough
    conversations around the table. It is those families explaining
    that to their children, explaining their house is being taken
    away, explaining they are going to have to change schools,
    explaining why they are going to have to get rid of their
    family pet. It is the parents who were ripped off by corporate
    greed, those are the people who have to look their children in
    the eye and explain things away.
        We created the CFPB so there would be fewer of those
    conversations--to look out for danger before it crashes down on
    hardworking families, robs them of their homes, their jobs,
    their savings. Like food inspectors, the CFPB is supposed to
    hunt down scammers trying to sneak toxic products onto kitchen
    tables. But under new leadership, the Consumer Bureau has
    turned its back on that job.
        CFPB inspectors used to show up at Wall Street banks and
    other lenders to make sure they were obeying the Military
    Lending Act. That is a law that protects active-duty
    servicemembers and their families from predatory loans. Under
    new leadership, CFPB inspectors simply are not protecting
    servicemembers the way they used to.
        The CFPB used to protect borrowers from shady lending
    practices that trapped hardworking families in that endless
    cycle of debt. Now the CFPB Director is giving payday lenders
    and car title lenders free rein. In fact, Director Kraninger
    wants us to believe that an endless cycle of debt is a benefit
    to hardworking families.
        The CFPB used to make sure loans have clear explanations
    that regular Americans could understand. Now the CFPB has
    created the George Orwell-type named ``Office of Innovation'',
    which as far as we can tell is dedicated to helping big banks
    and tech firms innovate new ways to trick customers into new
    loans and other complicated financial products.
        The old CFPB prosecuted debt collectors who used shady
    tactics to harass borrowers and threaten them in their homes or
    at their jobs. Now the CFPB is considering a proposal to let
    debt collectors call borrowers as many times as they want. You
    thought telemarketers were bad? Try being harassed over your
    student loan debt.
        If the Director of the Consumer Financial Protection Bureau
    wanted to help customers, she would not have to look very far
    to find people in need.
        Student loan debts have reached record levels, record
    delinquency rates. Seven million Americans, as we read, are
    more than 3 months behind; 7 million Americans 3 months behind
    on their car payments--the highest level in 19 years, worse
    than during the Great Recession. Forty percent of Americans do
    not have enough savings to cover a $400 emergency expense.
        Instead, CFPB is siding with the rest of this
    Administration that looks like an executive retreat for Wall
    Street. It is clear whose side everyone in this Administration
    is on. They continue to create excuses for eliminating
    financial protections, saying they are ``increasing access to
    credit.''
        What they really mean is increasing access to bad credit
    that drains people's savings and traps them in debt. Right now
    today, at this time, Tim Sloan, CEO of Wells Fargo, is
    testifying in the House Financial Services Committee about a
    laundry list of ways his bank abused its consumers.
        Millions of Americans got hurt because this bank cared more
    about their profits than about their customers and about their
    employees. It was the CFPB, as we remember, the old CFPB, that
    helped uncover this scandal. It was the CFPB that got many
    Americans their money back. That is what Ms. Kraninger's job
    should be about.
        Chairman Crapo. Thank you, Senator Brown. I will go first
    on the questions, and as I indicated in my opening statement--
    oh, excuse me. I do not want to get to my questions before I
    let the Director speak. Senator Brown has corrected me twice
    now in this hearing.
        [Laughter.]
        Chairman Crapo. Director Kraninger, please make your
    opening statement, and then I will jump into questions.

      STATEMENT OF KATHY KRANINGER, DIRECTOR, CONSUMER FINANCIAL
                           PROTECTION BUREAU

        Ms. Kraninger. Thank you, Mr. Chairman.
        Chairman Crapo, Senator Brown, Members of the Committee,
    thank you for the opportunity to present the Consumer Financial
    Protection Bureau's most recent Semiannual Reports to Congress.
    While the reports describe actions undertaken before I arrived,
    they provide a touchstone as we create a fresh outlook at the
    agency under my leadership.
        Since my confirmation, I have been engaged in a listening
    tour to meet as many of our stakeholders as possible, including
    many of you. I have visited our regional offices in San
    Francisco, Chicago, and New York, interacting first and
    foremost with Bureau staff. I have been impressed by the
    exceptionally talented staff and their commitment to our
    mission of protecting consumers.
        In D.C. and in the field, I have held roundtables and met
    with consumer advocates, faith leaders, banks of all sizes,
    credit unions, nondepository institutions, innovators, and
    fellow regulators at the Federal and State level. I have spoken
    with current and former members of the Consumer Advisory Board
    and many individuals who care about the bureau, such as Senator
    Dodd, Congressman Frank, and former Director Cordray. Hearing
    all perspectives is critical to bringing the best thinking as
    we carry out our mission.
        The following gives you a flavor for the discussions that 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 examinations, financial institutions and nonbank
    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
    about how they play whack-a-mole against bad actors until one
    of the Bureau's enforcement actions deters certain behaviors.
        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 the Members of this
    Committee to visit our headquarters on Monday, May 20th. I hope
    that all of you are able to attend.
        In the midst of the listening tour, I have ensured that the
    important work of the Bureau continues apace, and I will
    highlight a few of our recent activities.
        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 in the short-
    term, small-dollar lending rule. We want consumers to be
    empowered to make their own decisions that best suit their
    individual financial needs. And we want to make sure that our
    evidence is sufficiently robust and rigorous. I have an open
    mind on this matter and look forward to reviewing the comments
    and evidence 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 an urgently needed one,
    given a study showing that 40 percent of adults lack enough
    liquid savings to cover a $400 emergency expense, as Senator
    Brown noted. Savings in addition to manageable debt and good
    credit are cornerstones of financial well-being.
        We have issued a number of important reports on topics
    including assessments of our significant rules, consumer credit
    trends related to first-time homebuying by servicemembers, and
    trends related to suspicious activity reports on elder
    financial fraud.
        Lastly, 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 Congress
    provided this agency, I feel a deep sense of responsibility for
    ensuring that we become a model for efficient and effective use
    of our resources.
        Looking forward, I will be setting 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 gave us, broadening our efforts to focus on
    prevention of harm as a primary goal of our actions.
        Thank you for the opportunity to present the CFPB's work to
    you and provide you with an update on the activities of the
    Bureau in my tenure. I would be happy to answer your questions.
        Chairman Crapo. Thank you, Director Kraninger, and now I
    will proceed with my questions.
        My first question, as I indicated, is going to be on data
    privacy, and I want to focus on FCRA rather than the CFPB
    first. In today's digital economy, there appear to be companies
    that serve a very similar function to those that were
    historically regulated by FCRA in terms of the impact and
    function that they performed in access to credit and credit
    reporting in our economy.
        It seems to me, though, that the scope of FCRA has not been
    able to keep up with the scope of activities in the marketplace
    in terms of our digital world and data collection to adequately
    provide us the necessary regulatory and statutory oversight
    that is necessary for these types of functions. And the CFPB
    plays an important role in the credit reporting marketplace
    overseeing consumer reporting agencies that are larger
    participants and shares the FCRA enforcement responsibility.
        First of all, can you commit to working with this Committee
    to find a balanced approach to making FCRA more effective in
    the digital economy? And, second, could you comment on this
    issue?
        Ms. Kraninger. Yes, Senator. I am committed to working with
    Congress on this. I recognize again that in a digital world
    there are a lot of things that are changing with respect to how
    financial products and services are interacting with consumers,
    and that is something that we need to spend some more time
    looking at.
        Chairman Crapo. All right. I appreciate that. And we will
    be looking very aggressively at that and, as I said, welcome
    your input and advice on where you see the need to fine-tune
    FCRA and other jurisdictional aspects of this Committee on the
    entire data collection arena today.
        So let us move to the CFPB. As you are well aware, I have
    long been concerned about the ever-increasing amounts of big
    data collected by the Government in addition to that collected
    by the private sector. And when CFPB was established, it began
    a number of data collection undertakings that I felt were far
    excessive to what was necessary and which exposed Americans to
    ever-increasing collection of data about their private lives
    and the potential to violate that privacy that I believe
    Americans deserve.
        In September of 2018, the CFPB issued a report on its
    sources and uses of data that detailed its major data bases as
    well as how this data is gathered, used, and protected. I
    appreciate those efforts of the CFPB--in fact, I should say
    finally the CFPB is starting to be responsive to these
    concerns--and I appreciate our new leadership being transparent
    about its data practices.
        What I would like to know is what the CFPB's next steps are
    with respect to its data collection, its use, and its
    protection of that data.
        Ms. Kraninger. Mr. Chairman, I share your concerns, and we
    certainly discussed this last summer. I can say first and
    foremost that the first principle is to only collect the
    information that you absolutely need to carry out the mission.
    That is a conversation that we are having on a regular basis as
    we look at the data collections that the Bureau determines are
    necessary, limiting the personally identifiable information
    that is collected, because if it is not collected, it does not
    have to be protected.
        Moving to the next iteration of this, we are looking at the
    comments that came back on the data uses and sources report
    that we put out. We are also looking at making sure that our
    internal processes are laid out properly. I had the honor of
    signing the Data Access Policy that governs the way the Bureau
    will utilize information internally, and there is also a group
    that is looking at data intake on a regular basis. So
    institutionalizing those processes to make sure that we are,
    again, limiting our collection and then protecting it is
    important.
        Chairman Crapo. Well, thank you. And I know that at the
    outset, one of the--well, the agency was collecting data on
    credit card transactions, on mortgages, and on car loans, I
    believe. Is that correct, on car loans?
        Ms. Kraninger. Yes, Senator. For a number of different
    reasons, supporting rulemakings, conducting research, yes.
        Chairman Crapo. And student loans? And just to look at
    credit cards, for example, I think one of the original goals of
    the CFPB was to collect data on something like 900 million
    credit card accounts. Is that accurate, or do you know?
        Ms. Kraninger. Senator, there is certainly a lot of
    information collected pursuant to the CARD Act and our
    responsibilities, but we do try to limit at least account level
    information and individualized information, and I can get back
    to you with the exact number.
        Chairman Crapo. All right. I would appreciate that because,
    frankly, I have had a hard time getting the CFPB to give me an
    exact number of all the credit card accounts that it is
    collecting data on and the number of data sets that it is
    collecting on each transaction. So I would appreciate you
    getting back to me on that.
        Chairman Crapo. My time has expired. Senator Brown.
        Senator Brown. Thank you. Thank you, Mr. Chairman.
        Payday lender ACE Cash Express used this chart to train its
    employees. There is a copy that I believe Mr. Hardy just put on
    the table, a copy on the table for you. This is what the payday
    loan cycle of debt looks like without an ability-to-repay
    requirement, which you have proposed to repeal. Now lenders do
    not even have to consider if borrowers even have a shot at
    repaying their loans, and you can see this is the document that
    this company, one of the largest payday lenders, ACE Cash
    Express, put out, and this document is a training document for
    its employees.
        Director, can you show me on this chart where in this cycle
    a family actually pays off their loans?
        Ms. Kraninger. Senator, I have seen this document. I know
    it was part of the rulemaking process that the Bureau went
    through and finalized in 2017. It certainly is going to be part
    of the record that we take forward as we are reconsidering the
    rule as well. All of the evidence that has been submitted in
    the past as well as any new evidence and data will be
    considered as part of the rulemaking going forward.
        Senator Brown. Well, but the question, where in this
    cycle--the customer applies for a loan around and around and
    around. This is the training provided. This is the training
    document to train payday lenders at one of the--to train the
    workers at payday lending firms, one of the biggest in the
    country, and there appears to be--this is just a circle where
    you get one loan and then another and then another.
        So where on here, if you would again examine it and read
    each of those descriptions, where on here does this company or
    do you expect them to repay the loan? Where is that?
        Ms. Kraninger. Senator, again, with respect to the loan
    itself and the products that are out there, I would like to see
    a broad panoply of products available to consumers so that they
    can make the best decision possible for themselves looking at
    the product----
        Senator Brown. I am sorry to interrupt, but every time they
    go through the cycle, you know what happens. They know what
    happens. This is the reason they put out this training
    document. You know what happens; they know what happens. They
    get a loan. They spend the money. They had to have the loan.
    Their car breaks down. They cannot pay it back right away. Then
    the customer does not make a payment. The account enters
    collections. The customer applies for another short-term loan,
    around and around. And you know four out of five people who get
    a payday loan either have to get another loan to pay off the
    first or they default. You know that happens. And when you
    eliminate the ability-to-repay requirement, we know what is
    going to happen again more and more and more. And this led to
    the--this was part of the finding, part of the rule, part of
    the reason they did the ability-to-repay requirement.
        Let me move to another question. Eric Blankenstein, one of
    your top deputies in charge of enforcing antidiscrimination
    laws, his title I believe is ``Chief of Supervision,
    Enforcement and,'' I underscore, ``Fair Lending''. You may
    remember reporters uncovered he has a history of writing racist
    statements on his blog. If Mr. Hardy would come forward and
    please present this to the Director, these are some of the
    statements that Mr. Blankenstein made, if you would take a look
    at those.
        These are statements--the worst statements he made I did
    not print, some that are just really unspeakable in the halls
    of the Senate and unbelievable to me in the year 2018 when he
    said these. Would you be willing to read any of those aloud to
    us, his statements?
        Ms. Kraninger. Senator, the words here are not words that I
    would use.
        Senator Brown. I guess that means no, right? So if you are
    not willing to say those things aloud to the Committee, do you
    think someone who wrote them--remember, he did not write these
    in college. He wrote these last year. They were written in
    2018. Do you think someone who wrote them, someone who feels
    that way about people of color should be in charge of enforcing
    antidiscrimination laws?
        Ms. Kraninger. Senator, I understand what you are getting
    at, and I can tell you that the matter in total that happened
    last fall when statements were covered by the press is a matter
    that was referred to the Inspector General by my predecessor.
    He made that public. There is an ongoing investigation, and so
    it is not appropriate for me to comment on----
        Senator Brown. Yet he still works there, correct?
        Ms. Kraninger. That is correct, and there is----
        Senator Brown. He was hired by your predecessor. When you
    took over, I asked you to remove him because if he has those
    attitudes--I mean, you know these numbers. Black homebuyers are
    still denied mortgages at more than twice the rate, twice as
    often as white homebuyers. You know that racism is still--I
    think you know that racism--I do not think your President may
    know, but you know--you are a smart, educated young woman--that
    racism is lending is still very real in this country.
        So because you resisted my pleas and others' to remove him,
    I assume that means you personally endorse having him, somebody
    who thinks like him, in charge of our antidiscrimination
    policy. Really?
        Chairman Crapo. And if you could keep your response brief,
    please.
        Ms. Kraninger. Senator, I believe in due process, and I
    certainly believe that the process should be followed in this
    case, as in the cases of any of the other employees who have
    worked for me if there are issues that are raised. And so the
    process is being followed.
        Senator Brown. This is not due process in terms of a court
    of law. This is someone who has proudly uttered racist
    statement after racist statement after racist statement, and
    you have chosen to keep him in a job to enforce laws on
    antidiscrimination in lending. Correct?
        Ms. Kraninger. The process is being followed, Senator, and
    we will certainly get back to you when that changes.
        Chairman Crapo. Senator Shelby.
        Senator Shelby. Thank you.
        Director Kraninger, you launched the ``listening tour,'' we
    call it, which I thought was very good, to meet with your
    regional offices as well as with the regulators and other
    stakeholders last year. We have talked about that some. What
    did you learn from going out in the field, which I think was
    very important? What did you learn?
        Ms. Kraninger. Thank you for the question.
        Senator Shelby. Overall.
        Ms. Kraninger. Yes, overall, there are a number of
    stakeholders across the country who are truly committed to the
    mission of consumer protection. I have met with financial
    educators. I have met with reporters, even, financial reporters
    who want to further the education base across the country and
    really push literacy. I have talked to many of your colleagues
    about this issue. I think the Bureau has been given tremendous
    authorities, including a number of tools that, as we mature as
    an agency, we need to utilize all effectively, so certainly the
    education tool.
        Having clear rules of the road is the other thing that I
    have heard from every entity out there, and that includes our
    partners at the State level who are also working with us to
    ensure that financial institutions understand what the rules
    are and are following them. Frankly, it makes much more clear
    those who are not seeking to actually comply with the law and
    provide their consumers with good financial services and
    products. So taking those enforcement actions continues to be a
    priority.
        Senator Shelby. I want to get into another area that we
    have talked about a long time. Cost-benefit analysis I think is
    very important for rulemaking and regulations. I was pleased
    that you announced the creation of the Office of Cost-Benefit
    Analysis in 2018 at the CFPB. I want to commend you for
    emphasizing that, increasing the use of cost-benefit analysis,
    because everything costs money.
        There is no better consumer than an informed consumer. We
    know that. But how has the rulemaking process changed with the
    creation of this office?
        Ms. Kraninger. Senator, the issue of cost-benefit analysis
    is important across the Bureau, and I am looking at the best
    way to structure that. My predecessor announced the office, and
    we are actually going to bring someone in to look at the role
    of economists across the Bureau in general. Right now that
    responsibility is still sitting in our Research, Markets, and
    Regulations Division, but we are going to look holistically at
    how we can utilize the economists and economic rigor and cost-
    benefit analysis across all of the activities at the Bureau. I
    look forward to getting back to you about the path I decide to
    take on that issue.
        Senator Shelby. Absolutely. Another issue is in the
    rulemaking process. I have some issues with that. It is the
    practice of regulation through enforcement rather than
    rulemaking. For many years, the Bureau overwhelmingly looked to
    enforcement actions to impose policies rather than going
    through the rulemaking process. We are talking about due
    process.
        I am pleased to see the Bureau under your leadership has
    prioritized ensuring that future rulemaking is both fair and
    transparent. I think it has to be both.
        Could you provide an update on where you are to increase
    transparency, which helps us all as consumers, in the
    rulemaking process?
        Ms. Kraninger. Thank you, Senator. I agree completely that
    we need to be transparent with stakeholders and those who are
    interested about what the rulemaking actions are that we can
    take. Last year, the Bureau issued a request for comment on all
    kinds of issues across the spectrum. With respect to
    regulation, we received 1,750 comments back about how to reduce
    regulatory burden and increase transparency. We are going
    through all of those ideas and looking at how we make a more
    rigorous process.
        Senator Shelby. Chairman Crapo got into this just a little
    bit--I have just got maybe a minute or less--and that is data
    protection, which is so important, privacy and so forth. A lot
    of privacy--data is everywhere. A lot of it is unnecessary. How
    are you trying to tailor that to only get the data you need
    rather than just sweeping everything that is extraneous and
    violates people's privacy?
        Ms. Kraninger. It is truly important, and I am committed to
    making sure that we have a very clear understanding of the
    information that we need. Rulemaking is a good example. We need
    to understand the effectiveness of the rules and whether we are
    getting the outcomes that we planned for, and that does require
    actually having data on the impacts and the process at every
    stage.
        But there is a way to limit that, again, making sure that
    we are putting rigor to the process of identifying which types
    of data are going to be most important, figuring out if that
    data is already collected and by whom, and doing the due
    diligence to make that a robust but, again, limited process and
    limited collection.
        Senator Shelby. Thank you.
        Thank you, Mr. Chairman.
        Chairman Crapo. Thank you.
        Senator Cortez Masto.
        Senator Cortez Masto. Thank you, Mr. Chair.
        Ms. Kraninger, thank you for being here. Thank you for the
    call regarding the PACE loans. I appreciated that.
        There is another issue that I have concerns about, and I
    want to talk to you about it. It is the Military Lending Act.
    As you know, I joined with every Democrat in the Senate who
    sent you a letter opposing your decision to no longer require
    the Bureau to supervise financial institutions for compliance
    with the Military Lending Act.
        Now, the Military Lending Act, as you well know, provides
    servicemembers and their immediate families against exploitive
    loans that charge more than 36 percent interest or include
    various predatory features. By choosing not to include the MLA
    as part of the CFPB's supervisory exams, particularly of payday
    lenders, you appear to be putting the burden on servicemembers
    and their families to complain about violations of the MLA
    before your agency can take action. That is a change in the
    position of the CFPB.
        Can you explain why there is that change?
        Ms. Kraninger. Yes, Senator. I share the concern over the
    unique challenges that servicemembers face. That is certainly
    what motivated Congress to enact the Military Lending Act. It
    is what motivated Congress to create an Office of Servicemember
    Affairs in the Bureau. And so it is an issue we spend a lot of
    time on.
        Senator Cortez Masto. But you agree, the CFPB is required
    to enforce the MLA?
        Ms. Kraninger. Absolutely. We have clear authority to
    enforce the Military Lending Act----
        Senator Cortez Masto. So why have you changed your position
    in actually going out there and as part of your exams--because
    you do engage in examination of payday loan companies, right?
        Ms. Kraninger. Yes.
        Senator Cortez Masto. So why would you take out the MLA
    provision in there as part of ensuring they are complying with
    the MLA when you conduct that exam?
        Ms. Kraninger. So the examiners do have the ability if they
    actually--in the course of other exams, see a violation, to
    highlight that, and we can take action on it. But the Military
    Lending Act was not designated by Congress as one of the
    enumerated Federal consumer financial laws, and----
        Senator Cortez Masto. No, but it was designated right in
    the Military Lending Act that the CFPB would be the enforcer,
    and so I am curious as to why there is this semantics between
    enforcement and supervision. I do not understand it, and that
    is what--it is a change in the CFPB provision. That is why a
    number of Attorneys General, that is why many military
    organizations, including the Democrats here on the Committee
    and in the Senate, are challenging why you have made this
    change. I am trying to understand it.
        Ms. Kraninger. In Title X, the supervision authority and
    the enforcement authorities are laid out separately, so it
    really does get back to Section 1024 and the authorities that
    are given there. There has been an assertion that 1024(b)(1)(c)
    actually gives us broad authority to supervise for basically
    anything, the opportunity to assess risk to consumers broadly.
        At the same time, though, in the other part of that
    section, there was a stipulation about the enumerated consumer
    laws that we are supervising for. So that is the tension in the
    issue. If----
        Senator Cortez Masto. It does not make sense to me. So you
    are basically saying--so, for instance, a police officer,
    literally what you are basically saying is that anytime a
    police officer can take action is if a complaint is filed. So
    those beat cops that are on the street every day, that are
    engaging in community policing, that are educating, that are
    talking in the community, they literally should not be on the
    street under your analysis and should be waiting and sitting at
    a desk for a complaint to come in. That is what I am hearing,
    and I do not understand that.
        So what made the CFPB--why did you change that position?
        Ms. Kraninger. If I could, Senator----
        Senator Cortez Masto. Was there something specific that
    changed that position in your mind?
        Ms. Kraninger. Yes, it really is the reading of the
    supervision authority that the Bureau has----
        Senator Cortez Masto. Your reading of it or somebody else's
    reading of it?
        Ms. Kraninger. Yes, it is my reading, and it is based on--
    --
        Senator Cortez Masto. In your letter to us, you said that
    you relied on legal analysis. Who did the legal analysis?
        Ms. Kraninger. The Bureau lawyers have looked at this issue
    over a number of years, and we outlined the information and
    perspective that was----
        Senator Cortez Masto. Do you have a written legal analysis
    that changed your position?
        Ms. Kraninger. There is a legal analysis, yes, and we
    provided----
        Senator Cortez Masto. I saw an addendum of that. Can I see
    the full legal analysis that made that determination that
    changed your mind that you would no longer actively engage in
    supervision of the MLA when it comes to those examinations?
        And here is the other thing. Let me ask you, under your
    statute--I noticed on your website that you actually go out and
    you engage in prevention, and you tell consumers how to prevent
    waste and fraud or consumer fraud, and you educate them. Where
    in the statute, based on your analysis, do you have the
    specific and explicit authority to educate people? Is there
    some specific language in there that says you can engage in
    education?
        Ms. Kraninger. Yes.
        Senator Cortez Masto. Where is the language?
        Ms. Kraninger. There are a number of provisions, actually,
    in Title X that do that. It is a responsibility and authority
    of the Bureau--actually, it is one of our primary mission
    objectives to educate consumers. There is an Office of
    Financial Education with enumerated responsibilities in the
    statute.
        Senator Cortez Masto. So then you actually educate military
    families about the MLA?
        Ms. Kraninger. We do that with the Department of Defense. I
    am not 100 percent sure, frankly, if we do that specifically,
    but----
        Senator Cortez Masto. Well, that would be part of your
    authority under the MLA----
        Ms. Kraninger. ----it would certainly be part of----
        Senator Cortez Masto. ----and what you are saying is to
    educate them on the MLA. So you would educate them on their
    rights under the MLA. You would enforce the MLA. But you would
    not actively go out as part of your examinations that you
    engage in already with payday lenders to ensure those payday
    lenders are not abusing the law when it comes to MLA. Is that
    what I am understanding?
        Ms. Kraninger. Yes, my reading----
        Senator Cortez Masto. And I notice my time is up, so can
    you send me that legal opinion? In your response to us, you
    explicitly stated that you changed your position based on a
    legal analysis that was given, and you gave us a summary of
    that. I would like to see a full copy of that analysis and who
    wrote that analysis for the CFPB. If you would provide that,
    that would be helpful.
        Ms. Kraninger. I understand, Senator, why you are asking. I
    would say there is a protection of the deliberative process
    within the executive branch----
        Senator Cortez Masto. So then why did you provide us with
    any of it?
        Ms. Kraninger. I provided you with a summary that we could
    argue was definitely not deliberative, and I want to work with
    you to get you the right information. But I would assert that I
    am asking Congress to explicitly give me the authority to----
        Senator Cortez Masto. But I am arguing you already have the
    authority.
        Ms. Kraninger. I understand, and my----
        Senator Cortez Masto. One final thing, and I know I am
    running out of time, but is your opinion based on a challenge
    to that authority in the courts? Did somebody challenge----
        Ms. Kraninger. No, Senator.
        Senator Cortez Masto. Did anybody come and challenge your
    legal authority the CFPB had to move forward already under the
    supervision and examination?
        Ms. Kraninger. Senator, I think it is appropriate----
        Senator Cortez Masto. That was a no?
        Ms. Kraninger. ----for an agency to actually make sure that
    it is complying with the law and carrying out the
    responsibilities that Congress gave it under the law.
        Senator Cortez Masto. Thank you. I notice my time is up.
    Thank you for the indulgence.
        Chairman Crapo. Senator Scott.
        Senator Scott. Thank you, Mr. Chairman. Good morning,
    Director. Thank you for being here this morning.
        Ms. Kraninger. Thank you.
        Senator Scott. I am going to try a new concept. I am going
    to ask you questions, and I am going to actually give you time
    to answer the questions, so we will see if that works here.
        You were kind enough to come by my office and talk about a
    few topics that are important to me and I think important to
    the Nation as well as to South Carolina specifically. We talked
    a little bit about indirect auto lending; we talked a little
    bit about insurance and some about credit unions--three issues
    that I think are incredibly important that we understand and
    appreciate the boundaries that the CFPB should have and I think
    from a legislative perspective should follow as it relates to
    under your leadership.
        So I think it is clear that last year Congress and the
    President spoke definitively on this issue when the President
    signed S.J. Res. 57 repealing CFPB's 2013 regulations on
    indirect auto lending and compliance. CFPB overreached on a
    variety of levels as it relates to indirect auto lending.
        Can you confirm to me that no one at the CFPB is trying to
    bring an enforcement matter under this theory of law?
        Ms. Kraninger. I will admit to you, Senator, that there are
    a number of open investigations, and the Bureau attorneys take
    that action without the Director's involvement. I can certainly
    assure you that they are following the law, and Congress spoke
    very clearly when it came to that CRA.
        Senator Scott. OK. Thank you.
        Let me move to the topic of insurance. As you know, I spent
    my professional career in the insurance arena, so it is
    important to me that we understand and appreciate the
    limitations the CFPB has. As you know, Dodd-Frank did not
    provide the CFPB authority to regulate insurance products.
    Given that the CFPB's actions in this area have caused
    confusion, let us set the record straight.
        Do you view the CFPB as an insurance regulator?
        Ms. Kraninger. No, Senator, I do not. Dodd-Frank stipulated
    in Title X that we do not regulate State-regulated insurance.
        Senator Scott. I do think that the best system of
    regulating insurance in the world is the State-based regulation
    system that has worked very well in every State in this Union
    as long as we have had it. I hope that we continue to see that
    as the direction that CFPB will continue. Thank you for that
    answer.
        Credit unions have served a number of our fellow citizens
    very well for a very long time. About 115 million Americans are
    credit union members. About 1.5 million South Carolinians are
    members of credit unions. Credit unions provide sound
    resources, sound professional services to those credit union
    members.
        The challenge has been that so often the one-size-fits-all
    approach has been detrimental to not only credit unions but to
    the credit union members. The 65 credit unions in South
    Carolina have had about a $67 million regulatory burden placed
    on them. Given your position, how do you plan to address rules
    that hinder credit unions and their operations? Is there a way
    that you see of unwinding any unnecessary burdens placed on
    credit unions through the CFPB?
        Ms. Kraninger. Senator, it was certainly an objective of
    the Bureau in Title X to understand and reduce undue regulatory
    burden. As I noted to Senator Shelby, we received a number of
    comments in last year's call for evidence on this topic and are
    looking at ways that we can tailor and address opportunities to
    reduce burden.
        I would also say--and I have said this in other contexts as
    well--that certainly is a mission that we have, and it is
    important, but it is also about how this impacts consumers in
    terms of access to credit and the cost of credit. So those are
    the things that we are looking at holistically as we approach
    any rulemaking action and ensure that we are looking at the
    impacts to these institutions.
        Senator Scott. Thank you. I would close with saying that
    anytime we see an increased regulatory burden, that means an
    increased cost associated with those burdens, which means fewer
    dollars to be loaned out and more people focusing on the
    Government as opposed to the actual members where you can see
    lives improved by the access to credit. So every time we see an
    additional unnecessary burden placed on institutions, we see a
    reduction in the loan volume and a reduction for those who are
    creditworthy to be able to receive the credit that they need to
    improve the quality of lives that they are experiencing.
        Thank you.
        Chairman Crapo. Senator Warren.
        Senator Warren. Thank you, Mr. Chairman.
        So before the 2008 crisis, it was open season on consumers.
    Giant financial institutions cheated people on mortgages, on
    credit cards, and a bunch of other financial products, and
    Government regulators did nothing.
        After the crisis, the CFPB was created to be a cop on the
    beat to aggressively enforce laws that protect consumers,
    especially those who get regularly cheated.
        So, Director Kraninger, during your confirmation hearing
    you testified, ``Under my stewardship, the Bureau will take
    aggressive action against bad actors who break the rules.'' Is
    that still your plan?
        Ms. Kraninger. Yes, Senator, it is.
        Senator Warren. Good.
        Ms. Kraninger. I have actually signed----
        Senator Warren. You also said before you became Director
    that the Interim Director, Mick Mulvaney, never made a decision
    you disagreed with. So let us put that together and see how you
    and Director Mulvaney have been doing in your combined year and
    a half running the CFPB.
        Let us start with student loans. The law that set up the
    CFPB established a student loan ombudsman at the Bureau because
    Congress believed that students needed a regulator who had
    their back when loan companies and for-profit colleges tried to
    cheat them.
        Director Kraninger, in the past year-and-a-half, how many
    lawsuits has the CFPB filed against student loan companies?
        Ms. Kraninger. I do not know the specific answer to that
    question.
        Senator Warren. Well, I can tell you because it is a matter
    of public record.
        Ms. Kraninger. Yes, we do have active litigation.
        Senator Warren. How many have you filed?
        Ms. Kraninger. There are two active cases in this area.
        Senator Warren. Gee, what the public record seems to show
    is zero. Right, not one single action against lenders and
    servicers who scam students, not one dollar returned to
    students who get cheated.
        In contrast, when he led the CFPB, Rich Cordray filed 15
    cases, and he recovered $712 million for those students who had
    been cheated.
        In fact, you have done worse than nothing. You and Mulvaney
    disbanded the Office of Student Ombudsman. It was so bad that
    your student loan ombudsman resigned because the ``leadership
    of the Bureau has abandoned its duty to fairly and robustly
    enforce the law.'' So that is student loans.
        Now let us ask about discrimination. Before the financial
    crisis, banks targeted communities of color for the worst of
    the worst--cheating mortgages. So after the crash, Congress
    said there would be a special office at the CFPB to enforce
    laws to stop lending discrimination.
        Director Kraninger, in the last year-and-a-half, how many
    lawsuits has the CFPB and the DOJ filed for fair lending
    violations?
        Ms. Kraninger. I can tell you, Senator, that we do have
    ongoing investigations in this area.
        Senator Warren. How many have you filed?
        Ms. Kraninger. I have been on the job for 3 months as of
    today. There are active----
        Senator Warren. That is right, and you have Mick Mulvaney,
    together you have said you agree with everything he has done.
    That is a year-and-a-half period. How many have been filed in a
    year-and-a-half? It is a matter of public record.
        Ms. Kraninger. I understand that----
        Senator Warren. And the answer is zero.
        Ms. Kraninger. ----have been filed, but there is active
    investigation happening.
        Senator Warren. The answer is zero that you have filed. Not
    one single action against lenders who discriminate, not one
    dollar returned to borrowers who got turned down or charged
    more because of the color of their skin.
        Rich Cordray filed 11 lending discrimination cases,
    recovered almost $620 million for consumers who were targets of
    discrimination.
        And, again, in this area you have done worse than nothing.
    You took enforcement powers away from the CFPB experts who were
    in charge of the Office of Fair Lending. And who did you put in
    charge of the office? A political appointee with a history of
    writing racist blogs.
        OK. Student loans, lending discrimination. Now let us do
    credit reporting companies and debt collectors. Two-thirds of
    the complaints that come through the CFPB hotline are about
    credit reporting or debt collection. Under Rich Cordray, the
    CFPB brought 20 debt collection cases and 24 credit reporting
    cases, putting almost $1.2 billion back into the pockets of
    consumers who were cheated.
        Director Kraninger, in the last year-and-a-half, the CFPB
    has filed three cases alleging violations of credit reporting
    or debt collection laws. How much relief did the Bureau win for
    consumers in those cases?
        Ms. Kraninger. With respect to restitution and----
        Senator Warren. How many dollars----
        Ms. Kraninger. ----remedies, there are a number----
        Senator Warren. ----went back to the consumers?
        Ms. Kraninger. Senator, I am assuming that you have it in
    front of you----
        Senator Warren. I do have it in front of me because it is a
    matter of public record. I am a little surprised----
        Ms. Kraninger. I recognize that, yes.
        Senator Warren. ----you do not know the answer, because the
    answer is the same in all three of the questions I have asked
    you. It is zero. You have put zero dollars back in the pockets
    of consumers who were cheated.
        So student loans, lending discrimination, credit report
    companies, debt collectors. Much more we could talk about, but
    I see I am out of time. It seems pretty clear to me that you
    stopped enforcing the laws designed to protect consumers. Money
    returned to consumers as a result of the CFPB's lawsuits has
    slowed to a trickle. And when you do bring a case, the
    settlements you have secured from the companies average about
    \1/125\ the size of the ones that Rich Cordray got. That is
    hundreds of millions of dollars that companies stole from
    consumers and that you are permitting them to keep.
        Director Kraninger, you are supposed to be the cop on the
    beat, but you are only watching out for the crooks who are
    cheating American consumers. If you had any decency, you would
    either do your job or resign.
        Thank you, Mr. Chairman.
        Chairman Crapo. Thank you. And before we move to Senator
    Menendez, Senator Brown asked for----
        Senator Brown. Yeah, thank you. On one of my questions, I
    misspoke. The press stories about Mr. Blankenstein were from
    2018. The quotes were from 2016 and when he was in law school.
    The point still stands that he is not fit to be in charge of
    enforcing antidiscrimination laws and preventing discrimination
    when he has had these racist writings.
        Chairman Crapo. All right. Thank you.
        Senator Menendez.
        Senator Menendez. Thank you, Mr. Chairman.
        Director, we are in the midst--I want to follow up on
    Senator Warren's comments--of a full-blown student debt crisis.
    Forty-four million Americans owe $1.56 trillion in student loan
    debt, more than credit card debt and auto loans combined. The
    amount of student loan debt has shaken the very foundation of
    the American middle class. And yet in the last 15 months, the
    CFPB has not taken a single new action--not a single one--to
    help these 44 million student loan borrowers.
        On the contrary, the CFPB closed the only office in the
    Federal Government whose sole priority is to protect student
    borrowers, withdrew a planned student loan servicing rulemaking
    that would have provided enhanced student protections, and
    refused to publish findings about how big banks were charging
    students outrageous fees, among other examples.
        So when I voted to create this agency, that certainly was
    not the type of action that I had envisioned the CFPB taking.
    And there are problems all over the student loan market.
        Take, for example, the Public Service Loan Forgiveness
    Program. More than 99 out of every 100 public service workers
    who applied for loan forgiveness had been rejected since the
    Department of Education started accepting such applications.
    That is a major problem. What is the CFPB doing about it?
        Ms. Kraninger. Senator, I understand it is a significant
    issue, and we still have an office that is focused on student
    issues. They are engaged in regular education efforts
    expansively across the spectrum of dealing with students at
    every stage of the process.
        I would also tell you that I take seriously that Congress
    created that private education loan ombudsman position. It has
    been vacant. Congress gave the authority to appoint the
    position to the Secretary of the Treasury for some reason, and
    so since I arrived, we have been working back and forth to get
    that position moved forward. The position posted last week, so
    I am very much looking forward to having someone in that place.
        We also have some responsibilities under the statute
    working with the Department of Education on an MOU to do
    information sharing on complaints and other things, and all of
    that is work that we will take on as soon as I can get the
    person on board who is going to oversee that.
        Senator Menendez. Well, two things. Number one, the reason
    that you have a vacancy in the office is because in his
    resignation letter, Mr. Frotman, who had this position, said,
    ``The Bureau has abandoned the very consumers it is tasked by
    Congress with protecting. The Bureau has undercut enforcement
    of the law, undermined the Bureau's independence, shielded bad
    actors from scrutiny.'' That is why you have a vacancy.
        So you have an environment and the wrong mission, and you
    did not respond to my question about the Public Service Loan
    Forgiveness. Why is it that 99 percent of PSLF applicants are
    being denied? Are loan servicers at fault?
        Ms. Kraninger. Senator, that is a question for the
    Department of Education. Certainly it is their process and
    program when it comes to Federal student loans. As you know, 92
    percent of the market is with the Federal side. That is why I
    do want to have a conversation with the Department of Education
    about their responsibilities and our responsibilities and how
    we can make sure we are working together to----
        Senator Menendez. Well, you know, it is your responsibility
    to oversee, whether it is the Department of Education, whether
    it is a private lender, whoever it is, to make sure that you
    are protecting consumers. Telling me that it is the Department
    of Education is just simply not acceptable. And the fact that
    you have not had that conversation as of yet when 99 percent
    are being denied, there is something desperately wrong.
        In 2017, the CFPB updated its manual for student loan
    servicer supervision to include examining loan servicers'
    practices around the PSLF program. So pursuant to the
    examination manual that is currently on your website, have you
    examined why 99 percent of PSLF applicants have been rejected?
        Ms. Kraninger. Senator, again, I understand why you are
    asking the question, and it is an important one. With 3 months
    on the job, I do not have a specific answer to your question on
    this topic. It is one that is important, and we will look----
        Senator Menendez. Can you tell me whether it is no longer
    the CFPB's practice to review how loan servicers handle the
    PSLF program despite it being in your examination manual?
        Ms. Kraninger. Senator, I would have to get back to you to
    answer your question specifically, which I am happy to do.
        Senator Menendez. Well, let me just say on that, on
    following up, I think one of my colleagues raised the question
    of the Military Lending Act. You have authorities over the
    entities that you--supervisory authority over entities you
    regulate, do you not?
        Ms. Kraninger. With respect to enforcement, our authority
    is very clear, and we will continue to take action where we
    find violations of the Military Lending Act.
        Senator Menendez. Well, you need to use your authorities,
    and you are just not doing that. And 3 months on the job, that
    is not the answer. You know, you need to make this a priority.
    And if you do not, you are not helping consumers. And the whole
    purpose of this entity is to stand up for the little guy
    against those who have enormous power and the ability to push
    back.
        Thank you, Mr. Chairman.
        Chairman Crapo. Senator Smith.
        Senator Smith. Thank you, Chair Crapo. And thank you very
    much, Director, for being with us today, and I appreciated our
    conversation yesterday. And I indicated yesterday I was
    interested in also diving into this student loan question a
    little bit, so that is what I would like to focus on.
        As my colleagues have said, we have $1 trillion in student
    loan debt and 44 million Americans, a high number, trying to
    manage that debt. And so here is what I hear from my
    constituents: that there is just a deep frustration with the
    loan servicing organizations. It is hard to get a straight
    answer. You get different answers from different people at
    different times. And what they are trying to do is to figure
    out how to stay out of default and to work with the loan
    servicing organizations. But it is just not working, and it
    feels to the people in my State with these crushing student
    loans like all the power is with these big companies. And they
    do not have any real remedy.
        And so I thought it was really a good thing when the CFPB
    published this proposal to get data from the student loan--from
    these big private loan servicing companies to try to figure out
    what is going on and to get some accountability and kind of
    rebalance the power a little bit.
        So that was announced in February of 2017, and there was a
    comment period. And then when that was done, as is typical,
    that was submitted to OMB for its routine review. And there it
    sits--no approval to move forward, even when Mr. Mulvaney, you
    know, was running both agencies. And, meanwhile, since that
    happened, 1.5 million Americans have defaulted on their loans,
    and there is just so much frustration.
        So can you help me understand this? You have worked at both
    agencies, right?
        Ms. Kraninger. Yes, Senator.
        Senator Smith. So has OMB told you why they are sitting on
    this proposal?
        Ms. Kraninger. Senator, I was unaware of this prior to last
    week. We have certainly had conversations about what is going
    on in the student lending space and the Bureau's
    responsibilities, and I talked with you a little bit, as I did
    earlier, about getting the private education loan ombudsman
    position filled and in place to work with the Department of
    Education on what their responsibilities are when it comes to
    student servicers because, in particular, they are contracted
    with the Department of Education.
        But on this collection in particular, it was not an issue
    that had been raised to me before last week. It is something we
    will absolutely look at to figure out, again, why that was
    submitted, where it stands. I do not have all the answers on
    that at the moment, but it is something we will look at.
        Senator Smith. Well, I think it is really important, and I
    think you should be looking at it. I mean, are you aware of
    Secretary DeVos or anybody, any other political appointee,
    encouraging this to move forward or not to move forward or to
    express their opinion one way or another on this?
        Ms. Kraninger. I am not aware of anything on that front,
    but, again, I am looking into this to understand what motivated
    the request, where it stands, and what we need to do going
    forward.
        Senator Smith. But wouldn't you agree that you would need
    to have some data in order to be able to assess, you know, what
    is happening with these student loan servicing organizations
    and why there is so much frustration and why sort of the
    consumer side of this has been so, you know, basically hung out
    to dry? Would you agree that having that data would be
    valuable?
        Ms. Kraninger. Senator, I do not know what was specifically
    laid out in that particular data request. That is why I
    hesitate to give you a very direct answer to that question. But
    I can tell you that we absolutely want the information
    necessary to assess the marketplace, as is our responsibility,
    and move from there.
        Senator Smith. Well, it has been described to me that this
    is a little bit of a black box, that nobody really knows. So I
    do not know how we can provide protection to those 44 million
    Americans who are living with student debt if we do not have
    some basic answers to the questions about what is going on with
    these loan servicing organizations. I think this is very--you
    know, it is very important, and our job is to sort of be on the
    side of people when they need to be--you know, that is why we
    have consumer protection, because sometimes the power is out of
    balance between these big companies and people. So I think this
    is a really core responsibility.
        Mr. Chair, I want to just add my concern about the way in
    which the agency is, in my view, sort of choosing not to
    enforce a key part of the military lending--you know, standing
    up to our military against these predatory lenders. I do not
    understand how we can--if we cannot examine whether there has
    been an issue, how we can enforce that. That is what I just am
    struggling to understand here. And I understand that you think
    that you do not have the authority, but it strikes me that
    since there has not been any lawsuits complaining about a
    misuse of authority, I mean, that to me is very telling.
        Mr. Chair, I am out of time. I just wanted to issue that
    concern as well. Thank you.
        Chairman Crapo. Thank you.
        Senator Van Hollen.
        Senator Van Hollen. Thank you, Mr. Chairman, and thank you,
    Ms. Kraninger.
        So I am very concerned about your decision to first delay
    and then rescind the mandatory underwriting provisions of the
    payday lending rule. It seems to me you are giving a total
    green light to predatory lenders around the country to take
    advantage of consumers.
        Senator Merkley, myself, and 47 Senators sent you a letter
    on February 13 on this issue. Did you get it?
        Ms. Kraninger. Yes, Senator, I did.
        Senator Van Hollen. Have you responded as of today?
        Ms. Kraninger. I believe we did.
        Senator Van Hollen. I just checked with Senator Merkley's
    office about the letter.
        Ms. Kraninger. Oh, I am sorry, Senator. The response is due
    on Friday, and we are pulling the response----
        Senator Van Hollen. Is that due--I think it would have been
    useful, knowing that you were going to come in front of this
    Committee, to give us a response. It has been almost a month.
        Ms. Kraninger. I understand, Senator. I think the due date
    was actually in the letter, but I recognize that it is not----
        Senator Van Hollen. I think it was probably set before that
    date, and since we have got a hearing today, it would have been
    useful to have that information.
        I am looking at both the notice you provided in the Federal
    Register on the delay rule and on the rescind proposal. Let me
    ask you this: Bank regulators for years have found that an
    aspect of predatory lending is deliberately lending to people
    who do not have the ability to repay their loans and relying
    instead on their ability to seize the collateral of those
    consumers, whether it is a house or a bank account.
        So if you can tell me why payday lenders should be allowed
    to have a business model where they prey on people who cannot
    afford to repay their loans, why should we carve out that
    particular exception for payday lenders?
        Ms. Kraninger. Senator, the reason for the reconsideration
    of the rule is the underlying legal and factual basis around
    the Bureau's determination of unfairness and abusiveness
    without those underwriting rules, as you noted, and that is the
    issue at hand, and that is what we----
        Senator Van Hollen. So you are rescinding a rule that is
    designed to protect consumers, right?
        Ms. Kraninger. That was certainly the opinion of the agency
    at the time, and, again, we are looking at that. And I have an
    open mind----
        Senator Van Hollen. You are proposing--I am just reading
    your documents here. You are proposing to rescind it, are you
    not? Yes or no.
        Ms. Kraninger. Yes, Senator.
        Senator Van Hollen. OK. The CFPB, when they put that rule
    in, they did a lot of research. One of their findings was four
    out of five payday loans ends with the borrower unable to pay
    or having to take out another loan to pay off the first. Do you
    dispute that finding?
        Ms. Kraninger. No, Senator, but that was also a finding in
    the context of many other findings that----
        Senator Van Hollen. I am just asking you on that finding.
    They also found that over 60 percent of loans result in
    borrowers paying more in interest and fees than the amount they
    borrow. Do you dispute that finding?
        Ms. Kraninger. Senator, that was, again, one of the
    findings of----
        Senator Van Hollen. It was a finding. I am asking you
    whether you dispute the finding.
        Ms. Kraninger. No, Senator, I do not----
        Senator Van Hollen. OK. Thank you.
        Ms. Kraninger. ----dispute the finding in the----
        Senator Van Hollen. Now, listen, so I am looking at your
    analysis here now. Are you familiar with the Dodd-Frank Act
    Section 1022(b)(3) analysis that accompanied the notices?
        Ms. Kraninger. Yes, Senator.
        Senator Van Hollen. OK. And are you familiar with the fact
    that you found that the payday lending industry on an
    annualized basis would save about $7.3 to $7.7 billion that
    they would not otherwise have under the previous rule?
        Ms. Kraninger. Senator, again, there were a number of
    things that were looked at, including what----
        Senator Van Hollen. I am just asking you about this
    provision, which is right here in the documents you submitted.
    Does it conclude that by rescinding the rule on an annualized
    basis, payday lenders will be able to pocket $7.3 to $7.7
    billion more? Isn't that what it says right here?
        Ms. Kraninger. Yes, Senator, it does.
        Senator Van Hollen. That is what it says. And isn't that
    money coming from harming consumers? These are consumers that
    the previous analysis concluded could not pay these loans on
    time. Is that not true?
        Ms. Kraninger. Senator----
        Senator Van Hollen. Is that not true?
        Ms. Kraninger. Senator, yes, I understand where you are
    getting, and----
        Senator Van Hollen. It is not where I am getting. I am just
    looking at the facts. Is that not true?
        Ms. Kraninger. There are a number of facts here, and we had
    a responsibility to look at the full record of this rulemaking.
    We are in litigation actively on the issue, so the rule was
    already stayed, and the Bureau did pledge to the court that the
    reconsideration would be part of its process.
        Senator Van Hollen. You chose to move forward on this
    decision to rescind the rule, right? That was your decision?
        Ms. Kraninger. Absolutely, and it was very----
        Senator Van Hollen. Absolutely. And in your own documents,
    it says, does it not, that the payday lending industry will
    pocket over $7.3 billion additional on an annualized basis?
    Isn't that what it says right here in your own analysis?
        Ms. Kraninger. Yes, Senator, and there are----
        Senator Van Hollen. And isn't it true that, based on the
    previous analysis, that $7.3 billion is coming from harm done
    to consumers by payday lending? Isn't that true?
        Ms. Kraninger. Senator, there are 12 million consumers that
    take advantage of the payday loan----
        Senator Van Hollen. I am asking you----
        Ms. Kraninger. ----products in the States where they are
    allowed to do so----
        Senator Van Hollen. The question is----
        Ms. Kraninger. ----and the States have looked at----
        Senator Van Hollen. ----not whether we should just pull off
    the reins off payday lending, which is what you are trying to
    do so. The question is whether we should be protecting
    consumers. I would like an answer to my question. Isn't it true
    that that $7.3 billion that you say will now be in the pocket
    of the payday lending industry is as a result of harm done to
    consumers according to the previous analysis by your Bureau?
        Ms. Kraninger. Senator, I would note that there are 12
    million----
        Senator Van Hollen. I am just looking for a yes-no answer
    on that $7.3 billion.
        Ms. Kraninger. But, again, individuals are accessing these
    products and making the best----
        Senator Van Hollen. I know they are accessing these
    products. And then we they cannot pay them back when the
    lenders should have known it, they are coming after their cars
    and other possessions. Isn't that true?
        Ms. Kraninger. Consistent with State law, but, again, there
    are places where that is not the case----
        Senator Van Hollen. But isn't your job to protect people
    from predatory lending where people are just scamming and
    taking advantage of people's situations? Isn't that your job?
        Ms. Kraninger. Senator----
        Chairman Crapo. And if you would answer briefly.
        Ms. Kraninger. Yes, taking action against bad actors who
    are engaged in what you would----
        Senator Van Hollen. You are opening the door----
        Ms. Kraninger. ----predatory activity----
        Senator Van Hollen. ----to bad actors. It is really
    outrageous what you have done here--outrageous--because there
    were protections in place based on a detailed analysis, and
    your own writings show that you are just going to give a big
    payday to payday lenders.
        Thank you, Mr. Chairman.
        Chairman Crapo. Senator Reed.
        Senator Reed. Well, I think Senator Warner was here before
    me.
        Chairman Crapo. It was not on my list. Senator Warner,
    you----
        Senator Reed. Will that take him off the list?
        [Laughter.]
        Senator Warner. The very generous support of Senator Reed,
    I appreciate it. Thank you, Mr. Chairman.
        I actually want to follow up a little bit with my colleague
    from Maryland. I think you made a dreadful error in rescinding
    the payday lending rules. And what I am trying to also
    understand is that the agency spent 5 years doing research into
    this rule, and I can remember when the CFPB issued this rule
    back in 2017, and opponents of the rule at that moment in time
    said, ``Oh, my God''--I think it was 1,690 pages--``this is way
    too much information, way too much data.''
        Now, when you rescind, you are basically throwing all that
    data and all that information out for this new approach. What
    has factually changed that undermined the 5 years of data and
    research that went into the original payday lending rule that
    has allowed you to make this determination?
        Ms. Kraninger. Senator, if I could, the full record from
    the prior rulemaking is absolutely part of the process going
    forward, so that is an important thing that I would note.
        Senator Warner. But that full rulemaking included
    conclusions that were indicated based upon the Senator from
    Maryland's criteria that this was a rule that was well needed
    to protect a whole host of consumers. The fact that now all
    this work is kind of in a sense thrown out, what has factually
    changed in the underlying analysis that has allowed you to, I
    believe rather arbitrarily, throw out this rule?
        Ms. Kraninger. The Bureau is in active litigation over the
    very issue that the reconsideration is intended to address, and
    that is the legal and factual basis, whether it is robust and
    rigorous enough to warrant the determination of abusiveness and
    unfairness in this market without those mandatory underwriting
    requirements. And so that is the very issue that is being
    looked at in the reconsideration.
        Senator Warner. Respectfully, we remember how long this
    rule took to put in place. We remember how much research was
    done. I do not believe you have got a factual basis. I think
    this was a politically driven decision, and I am deeply
    concerned by your decision.
        I want to move to another area around the GSE patch. As you
    know, the CFPB's QM rule created an exemption from the 43
    percent DTI cap for mortgages under Fannie and Freddie, and
    this is a subject matter that the Chairman and I and a number
    of us on this Committee have spent an awful lot of time on.
    This exemption, as we all know, is commonly known as the ``GSE
    patch,'' which is set to expire on January 10, 2021, or the day
    on which the GSEs would exit the conservatorship.
        I am very concerned about what termination of the patch
    could mean for affordable housing, particularly in communities
    of color, because the number one reason, as we all know, that
    mortgage applications are rejected is because of the DTI
    requirement, and nearly 30 percent of the GSE mortgages are in
    that 43 to 50 percent DTI range.
        So the question is: If, again, the role of your agency is
    to protect consumers, if the role of your agency is for folks
    to get a fair shake, how do you view the GSE patch? And how do
    you view CFPB's authority to act on this issue?
        Ms. Kraninger. Senator, I am well aware of the stats that
    you noted in terms of how large a role the GSE patch plays in
    the mortgage space today. When the rule was finalized on the
    ability to repay and stipulating what the qualified mortgage
    safe harbor would be, there was an intent at the time or an
    expectation at the time that a non-QM market would stem from
    that. And there was a determination that the patch was intended
    to be at least shorter term or nearer term at the time the
    Bureau stipulated that, so in place for 7 years.
        We just completed our 5-year lookback assessment that was
    released in January on that rulemaking and the outcome of that
    rule, and it is evident that the non-QM market has really not
    materialized for a number of reasons. And so the Bureau is
    faced with responsibility in this area. Important to note,
    though, is that that 7-year QM patch could expire at the end of
    the conservatorship of Fannie and Freddie, so those two things
    were tied in the rulemaking. This is something that I am
    looking at very closely, and we are looking to make sure--there
    will not be any dramatic actions taken with respect to the
    mortgage market by me, and I can tell you I do not want to make
    news on this topic here. It is a very market-moving issue, as
    you well know, and it is something that I will look at
    responsibly and in a timely manner, and I appreciate your
    interest in----
        Senator Warner. All I would say--and the Chairman and I and
    a number of us have worked on this issue, and affordability is
    extraordinarily important. I am still hopeful we can get a
    legislative solution, but I hope you will look at this data.
    And as you indicated, the non-QM market has not moved forward,
    and the extraordinarily detrimental effect that would have on
    affordability, if there were arbitrary and capricious actions,
    again, in terms of getting rid of that patch.
        Thank you, Mr. Chairman.
        Chairman Crapo. Thank you.
        Senator Reed.
        Senator Reed. Well, thank you very much, Mr. Chairman. And
    thank you, Director Kraninger.
        Like several Members of this Committee, I spent my youth in
    the military. I commanded paratroopers at Fort Bragg, and I saw
    on a daily basis soldiers being victimized by predatory
    lenders. Not surprising. They were not from around there. They
    were transients. Most of them were 18, 19, 20 years old, not a
    lot of financial sophistication. And they needed to be helped.
    I felt sort of useless, really, because all I could do was
    inform the lender that what they were doing was wrong or
    illegal, but I had no authority.
        So when I got here, I was very active in trying to fix that
    problem because it was not theoretical to me. It was real. So I
    was active in passing the Military Lending Act along with my
    colleagues, particularly active in creating the Office of
    Servicemember Affairs in your organization. That was an
    amendment that former Senator Scott Brown of Massachusetts and
    I passed because we wanted to give, in your organization,
    special emphasis. In fact, I think it is the only subset that
    is dedicated to a specific group of individual Americans. And I
    am, frankly, appalled that you have decided that it is not
    within your supervisory responsibilities to cover the MLA.
        You do have enforcement responsibilities, which you admit,
    but supervision is the key to preventing enforcement. We
    learned that in Dodd-Frank. If we had been supervising these
    financial institutions and these nonbank banks and all the
    other bad actors of 2008 and 2009, we would not have had the
    crisis and the corruption that we witnessed.
        So did anyone from the Office of Servicemember Affairs
    comment about your decision to exclude the MLA? Did you seek
    comments and were there any objections raised?
        Ms. Kraninger. Senator, there was certainly a robust
    discussion at times in the history of the Bureau where this
    conversation was had. I can tell you that the determination is
    mine, and that is what Congress gave me, as Director, the
    authority and responsibility to do.
        Senator Reed. Well, thank you. I think you have made the
    wrong determination. In fact, I think your legal counsel feels
    you have made the wrong determination, but let me get to that
    later. When this decision was made, we asked the Department of
    Defense, who has a vested interest in protecting the men and
    women of the military. Their comments to us on a letter of
    September 7, 2018: ``The Department believes that the full
    spectrum of tools, including supervisory examinations,
    contribute to effective industry education about, and
    compliance with, the MLA.'' I think that is right. And they
    certainly have a vested interest in this, and it is not a
    partisan, political interest. It is the protection of the men
    and women who protect us. Now every veterans organization of
    note has indicated the same feeling.
        Now, your view is that you cannot do it, but your own legal
    analysis, that you submitted to us in your letter, states,
    ``One possible reading of the statute would allow that the
    Bureau may seek to uncover and remedy violations of the MLA in
    the course of exercising its authorities.'' So you do have the
    legal authority to do it. You have chosen to read the statute
    to protect payday lenders even though your own legal counsel
    said the statute can be read, as the Department of Defense and
    as many of my colleagues feel, to protect the men and women of
    the armed forces. Is that right?
        Ms. Kraninger. Senator, I agree with the Department of
    Defense that I would like the full panoply of authorities----
        Senator Reed. You have the full panoply. That is exactly
    what your counsel said. ``One possible reading of the
    statute''--this is your legal counsel, not me--``would allow
    that the Bureau may seek to uncover and remedy violations of
    the MLA in the course of exercising its authorities.'' That
    would be including your supervisory authorities. You chose not
    to read that section. You sort of omitted it.
        Ms. Kraninger. I have, Senator, and the reason for that is
    that then the Bureau could be engaged in examinations for
    safety and soundness. The Bureau could be engaged in
    examinations for tax law and other criminal law----
        Senator Reed. No.
        Ms. Kraninger. The all-encompassing provision----
        Senator Reed. No, no.
        Ms. Kraninger. ----there is about any risk to consumers.
        Senator Reed. That is the fallacy: if you follow the law,
    you can make up things. That is not true. There is no one here
    asking you to examine, generally speaking, safety and soundness
    of payday lenders. What we are saying is we passed the Military
    Lending Act, we passed supplemental language giving you the
    clarity to do this in Dodd-Frank so that you would protect
    consumers, and you are not doing it. And particularly military
    consumers. And what is so frustrating to me is that if this is
    the policy of your Administration, I do not know how on
    Memorial Day and Veterans Day everyone stands up and says,
    ``Oh, we have to do all we can for the service men and women in
    this country. They do so much for us,'' and you have decided
    you should not supervise these companies. And we know
    supervision prevents the need for enforcement. That is one of
    the great lessons of Dodd-Frank. Had we been supervising these
    institutions, we would not have had the collapse we had.
        So I cannot say how profoundly distressed I am with your
    rejection of the opportunity to protect the soldiers, sailors,
    Marines, and airmen and Coast Guardsmen of the United States.
        Thank you, Mr. Chairman.
        Chairman Crapo. Thank you.
        Senator Kennedy.
        Senator Kennedy. Thank you, Mr. Chairman. Madam Director,
    welcome.
        You believe in protecting consumers, do you not?
        Ms. Kraninger. Yes, Senator, I do.
        Senator Kennedy. Do you consider that your guiding mission
    as Director?
        Ms. Kraninger. Yes, I do.
        Senator Kennedy. You have a lot of experience in
    Government. What mistakes were made when the agency was
    established?
        Ms. Kraninger. Senator, as you noted, I have a lot of
    experience in Government, and that includes involvements in
    startups in Government, and I do believe that those who stood
    up the Bureau took the mission very seriously and tried to
    carry out the authorities that Congress gave them in the
    context they were operating in. A lot of things happen fast and
    furious in the early part of an agency.
        Senator Kennedy. What mistakes were made?
        Ms. Kraninger. Senator, I really make it a point of not
    looking back to criticize those who I did not have the
    opportunity to serve with who truly understand a lot of
    challenges during the time, as you well know.
        Senator Kennedy. Well, if you do not look back, then how do
    you fix the agency in the future?
        Ms. Kraninger. So one thing that my predecessor did
    extensively--and you are aware of it--is the call for evidence
    and a lot of requests for information from all the stakeholders
    that the Bureau has on ways to improve how the Bureau operates
    going forward, and that I absolutely believe in, and we are
    taking to heart all of those comments that we have gotten.
        Senator Kennedy. Let me ask you this, Madam Director: Do
    you think the agency would be better governed by a board?
        Ms. Kraninger. I believe that is an issue for Congress to
    determine and, Senator, I would----
        Senator Kennedy. I am in Congress. I am asking your
    opinion.
        Ms. Kraninger. I understand. I would welcome whatever
    changes Congress sees fit to make that will increase the
    transparency and accountability of the agency. I am absolutely
    dedicated and focused on that.
        Senator Kennedy. Would you support something like that?
        Ms. Kraninger. Senator, I am making it a point to not
    endorse legislation, but I appreciate why you are considering
    the issue.
        Senator Kennedy. All right. My copy of the Constitution
    says that Congress gets to appropriate the money, but that is
    not the case with your agency, is it?
        Ms. Kraninger. No, it is not.
        Senator Kennedy. Do you think we ought to fix that? Would
    you oppose legislation--let me put it this way: Would you
    oppose legislation if we decided to make your agency
    financially accountable to Government?
        Ms. Kraninger. If Congress put such legislation in front of
    the President and the President signed it, I would dutifully
    carry that out. I think that is--again, anything that increases
    transparency and accountability in Congress' estimation is
    something I would welcome.
        Senator Kennedy. When you took over, Madam Director, and
    had a chance to catch your breath and look around and assess
    things, what are the three biggest problems you see?
        Ms. Kraninger. I think with respect to the agency in
    general, there are some really dedicated people who are focused
    on the mission and the mission is our strength. It is really
    now----
        Senator Kennedy. I know, but they are not a problem. I am
    interested in----
        Ms. Kraninger. Understood.
        Senator Kennedy. ----the three problems, biggest problems
    that you see, if you could answer my question.
        Ms. Kraninger. One is continuing to mature the agency and
    its processes. There are a lot of stovepipes that were created
    in the divisions, and I think there is a lot of power that
    comes----
        Senator Kennedy. What does that mean?
        Ms. Kraninger. There are six different divisions in the
    Bureau, and they did kind of operate in a bit of an
    individualized way.
        Senator Kennedy. Do they have turf battles?
        Ms. Kraninger. I think it is, again, with the mission in
    mind and individuals being very proud of what they do, but,
    yes, there is a little bit of an understanding that there is an
    individual vantage point.
        Senator Kennedy. Is each one headed by somebody? There are
    supervisors who run the divisions?
        Ms. Kraninger. Yes.
        Senator Kennedy. Can you fire them?
        Ms. Kraninger. No.
        Senator Kennedy. Do you think that is a problem?
        Ms. Kraninger. There are a lot of challenges with civil
    service law, Senator, and that is probably another area where,
    again, should Congress take action----
        Senator Kennedy. Well, you can fire them, but they can sue
    you, right?
        Ms. Kraninger. There are a lot of challenges in terms of
    removing people, but I would say in this case I----
        Senator Kennedy. Well, let us suppose one of your directors
    of one of those little areas of turf, you fired them, and they
    said, ``You cannot fire me.'' And you said, ``I just did.'' And
    they said, ``I am going to sue.'' And you say, ``Good. I can
    draw you a map to the courthouse.'' And they said, ``I am going
    to get a lawyer.'' You say, ``Well, I am going to get a lawyer,
    and I can get more lawyers than you because my budget is
    bigger.''
        Why doesn't that ever happen?
        Ms. Kraninger. Following your hypothetical, Senator, is
    dangerous, but I would say that there are cases where----
        Senator Kennedy. Why is it dangerous?
        Ms. Kraninger. It is a----
        Senator Kennedy. You know that would happen in the real
    world.
        Ms. Kraninger. And in the Government, there are a lot of
    protections that are appropriate for civil servants.
        Senator Kennedy. I mean, you are sitting here as Director
    trying to run this thing, and you have got people under you you
    cannot fire who are fighting among each other and presumably
    not following all of your directives. Is that right?
        Ms. Kraninger. Senator, I would not go that far with it. I
    think there is an intent to follow the direction and they
    really are welcoming the stability that I am bringing and the
    consistency that I am bringing.
        Senator Kennedy. You need to fire somebody. That is what is
    wrong with Government and what is wrong with the bureaucracy.
    Nobody is ever held accountable, and nobody ever gets fired.
    And they know that.
        I am done. Thank you.
        Chairman Crapo. Senator Jones.
        Senator Jones. Thank you, Mr. Chairman. Thank you for
    coming here today, and I apologize for being a little bit late.
        Ms. Kraninger, I want to ask you about--I think it was
    Senator Kennedy who talked about the guiding missions of the
    Bureau, and one of those under the objectives under the statute
    is that consumers are protected from unfair, deceptive, and
    abusive acts and practices, and from discrimination.
    Discrimination in fair lending is also a guiding mission of the
    CFPB, and it seems to me that under the leadership of Acting
    Director Mulvaney, there was a total lack of commitment toward
    enforcing fair lending laws and that guiding mission of the
    agency. For millions, it is not just your income or your credit
    that determines how you receive financial services. The reality
    is that it can also be the color of your skin. That is why the
    Government has to be committed to enforcing laws prohibiting
    discrimination. For years, that discrimination has been direct
    and explicit, but today it is much more subtle and beneath the
    surface.
        In your confirmation hearing, I asked you about that and
    asked you if you were committed to using disparate impact
    theory to enforce fair lending violations, which I think is a
    strong tool that you have in your toolbox to enforce fair
    lending laws. And I think your answer at that time was you
    would have a detailed conversation with staff, if confirmed,
    about the use of disparate impact.
        Have you had that conversation? And what was the result?
        Ms. Kraninger. Senator, we have started that conversation.
    As you may be aware, the Bureau, in its unified regulatory
    agenda, stipulated that this is something that may be worth a
    prerulemaking activity so that we can have a conversation about
    whether disparate impact is cognizable and how under the Equal
    Credit Opportunity Act. And so that is an issue that I think
    does deserve some conversation in the public sphere, and we are
    looking at the best way to facilitate that and take the
    prerulemaking action.
        Senator Jones. All right. What is your personal opinion
    about the use of disparate impact?
        Ms. Kraninger. Senator, we are still having conversations
    with staff on that issue. Given that it is in a pre-rulemaking
    stage, I do not think it is appropriate to talk about a
    personal opinion on this matter. I can tell you that I am
    committed to our fair lending mission, and we have taken a lot
    of steps to look at that and make sure that we are robustly
    both engaged in education on that issue and engaged in
    supervision and enforcement work on that issue.
        Senator Jones. All right. So let me talk about payday
    lending as well. I know that that has been a subject of a
    number of questions, and it is obviously a huge concern in my
    State. And I have been just incredibly disappointed, and
    confused, quite frankly, as to why you rolled back critical
    parts of the rule after so many public comments on the issue.
    And when you did so recently, made the announcement to roll
    back those critical parts of this rule, particularly on ability
    to pay, the CFPB cited a decade-old study that used surveys
    from 2001 and 2007 that found consumers were generally
    satisfied with their short-term loans. Are you familiar with
    that?
        Ms. Kraninger. Senator, I do believe there were studies
    similar to that. I would tell you that we are looking at the
    full panoply of studies that have been available----
        Senator Jones. Well, you cited the study that did surveys
    from 2001 and 2007, and that study itself said it accounted for
    differences between the 2001 and 2007 surveys by saying,
    ``Economic conditions changed and affected survey results.''
        I know you are aware that in 2008 and 2009 we had a major
    recession in this country, one of the worst since the
    Depression. So my question--and your change, you said that the
    results of that study ``add to the Bureau's preliminary
    conclusion that its interpretation in the 2017 Final Rule of
    limited data''--which I would disagree with it was limited
    data--``from the Mann Study provides an insufficiently robust
    and representative foundation for the findings on which the
    Bureau relied in concluding that its identified practice was
    unfair and abusive.''
        How in the world can you justify using a survey from 2001
    and 2007 when the economy was doing pretty well and not in
    today's world and the reality after the 2008 and 2009
    recession? How do you justify using that as a way to get rid of
    so many parts of the payday lending rule?
        Ms. Kraninger. Senator, we did not rely on any one survey
    or study from that time period or more recently. We are looking
    at both the full evidence base that underlies the 2017 rule and
    evidence that may come forward----
        Senator Jones. Well, this was the only rule that I saw that
    was cited. This was the only study that I saw that was cited. I
    did not see anything about surveys of people today in today's
    world or even 5 years ago when they were having trouble. So
    this study that I am talking about was relied on pretty heavily
    in this, and I am trying to figure out how that rule was even
    cited as representative of what is happening in 2019.
        Ms. Kraninger. It is a proposed rule that we welcome
    additional evidence and comments on. There are studies that I
    have seen in press reports that we have also looked at across
    the board. We definitely welcome the most robust and rigorous
    evidence we can for this reconsideration process.
        Senator Jones. Well, Ms. Kraninger, you had millions of
    comments earlier, and you apparently chose to ignore them. So I
    candidly do not know how additional comments are going to
    change your mind.
        Thank you, Mr. Chairman.
        Chairman Crapo. Thank you.
        That concludes the questioning for today's hearing. For
    Senators who wish to submit questions for the record, those
    questions are due to the Committee by Tuesday, March 19. And,
    Director Kraninger, we ask that you respond to those questions
    as promptly as you can.
        Unfortunately, we did not have a quorum present to vote on
    the three nominees that Senator Brown and I spoke about at the
    beginning of the hearing. We will vote off of the Senate floor
    this afternoon on the first vote that is called at 2:30.
        Again, we thank you for being here, Director Kraninger. We
    appreciate your work at the CFPB. And with that, this hearing
    is adjourned.
        [Whereupon, at 11:41 a.m., the hearing was adjourned.]
        [Prepared statements, responses to written questions, and
    additional material supplied for the record follow:]
                   PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO
        Today, we will receive testimony from Consumer Financial Protection
    Bureau (CFPB) Director Kathy Kraninger on the CFPB's most recent
    semiannual report.
        On February 12, the CFPB issued its Fall 2018 Semiannual Report,
    which outlines the CFPB's significant work between April 2018 and
    September 2018, including rulemakings and supervisory and regulatory
    activities.
        The report also provides insight into what the CFPB plans to
    undertake in the coming work period.
        In the report, Director Kraninger said, ``As I begin my stewardship
    of the CFPB, I will be moving forward with the agency to make sure the
    American people have access to the financial products and services that
    best suit their individual needs, the financial institutions that serve
    them are competing on a level playing field and the marketplace is
    innovating in ways that enhance consumer choice.''
        Providing individuals and businesses access to a wide array of
    financial products and services is foundational to robust economic
    growth and job creation.
        Under Director Kraninger's leadership, the CFPB has already started
    to take action to ensure that regulations that could affect consumers'
    access to credit are based on solid evidence and legal support, rather
    than flawed analysis.
        On February 6, the CFPB proposed to rescind the mandatory
    underwriting provisions of its Payday Lending rule and delay their
    compliance date.
        This decision was made nearly 1 year after initially noticing its
    intention to revisit the rule and after conducting extensive due
    diligence.
        The CFPB found insufficient evidence and legal support for the
    mandatory underwriting provisions, and said that those provisions would
    reduce access to credit and competition in States that have determined
    it is in their residents' interest to be able to use such products,
    subject to State law.
        The CFPB has also taken steps to implement provisions of the
    Economic Growth, Regulatory Relief, and Consumer Protection Act (S.
    2155) that increase protections for consumers.
        On March 4, the CFPB issued an advance notice of proposed
    rulemaking to gather information on residential Property Assessed Clean
    Energy financing, or PACE loans, that will be used in its proposal to
    implement Section 307 of the bill.
        In September, the CFPB announced as effective a provision of S.
    2155 that provides consumers who are concerned about identity theft or
    data breaches the option to freeze and unfreeze their credit for free.
        A New York Times article commenting on the provision noted that,
    ``one helpful change . . . will allow consumers to `freeze' their
    credit files at the three major credit reporting bureaus--without
    charge. Consumers can also `thaw' their files, temporarily or
    permanently, without a fee.''
        Susan Grant, director of consumer protection and privacy at the
    Consumer Federation of America expressed support for these measures,
    calling them ``a good thing.''
        In August, the CFPB issued an interpretive and procedural rule to
    implement Section 104 of S. 2155 to exempt qualifying community banks
    and credit unions partially from reporting certain data points under
    HMDA.
        The CFPB took another positive step on HMDA reporting in December
    issuing policy guidance describing HMDA data that it intends to
    publicly disclose in a manner that protects consumers' privacy.
        The Committee will continue to make implementation of S. 2155 a top
    priority this Congress, and I encourage the CFPB to take the necessary
    steps to provide meaningful relief that will ultimately benefit
    consumers.
        Data privacy is another issue that the Committee will spend
    significant time on this Congress.
        Americans are rightly concerned about how their data is collected
    and used, and how their data is secured and protected by both
    Government agencies and private companies.
        I have long raised concerns about big data collection by the CFPB,
    especially with respect to credit card and mortgage information.
        Although there have been positive changes in recent years under new
    leadership, the CFPB must ensure that the collection of consumer
    information is limited, information is retained only as long as is
    absolutely necessary to fulfill the CFPB's obligations and that
    appropriate safeguards are in place to protect it.
        It is also worth examining how the Fair Credit Reporting Act, or
    FCRA, should work in a digital economy, and whether certain data
    brokers and other firms serve a function similar to the original
    consumer reporting agencies.
        The FCRA establishes standards for collection and permissible
    purposes for disseminating information by consumer reporting agencies,
    and gives consumers access to their files and the right to correct
    information.
        The CFPB, through its supervision of larger participants it defines
    by rule, oversees a large segment of the consumer reporting
    marketplace.
        I look forward to working with the CFPB to identify opportunities
    to update the FCRA so that it works in a digital world.
        During this hearing, I look forward to hearing more about Director
    Kraninger's priorities for the CFPB in the upcoming work period;
    additional legislative or regulatory opportunities to provide
    widespread access to financial products and services; and steps that
    could be taken to increase the protection of consumers' financial and
    other sensitive information.
        Director Kraninger, thank you again for joining the Committee this
    morning to discuss the CFPB's activities and plans.
                                     ______

                  PREPARED STATEMENT OF SENATOR SHERROD BROWN
        We created the Consumer Financial Protection Bureau to crack down
    on Wall Street predators and shady lenders that prey on hardworking
    families. Wall Street has armies of lobbyists fighting for every tax
    break, every exemption, every opportunity to be let off the hook for
    scamming customers and preying on families.
        Ordinary Americans don't have those lobbyists. They don't have that
    kind of power. The Consumer Protection Bureau is supposed to be their
    voice, to fight for them.
        When a toxic mortgage robs a family of their home, it's not the CEO
    of Bank of America or Wells Fargo who has to sit down with those kids
    and have the tough conversations around the kitchen table--explaining
    that their house is being taken away, explaining they're going to have
    to change schools, explaining why they are going to have to get rid of
    the family dog.
        It's the parents who were ripped off by corporate greed who have to
    look their children in the eyes.
        We created the CFPB so there would be fewer of those
    conversations--to look out for danger before it crashes down on
    hardworking families and robs them of their homes and their jobs and
    their savings.
        Like food inspectors, the Consumer Financial Protection Bureau is
    supposed to hunt down scammers trying to sneak toxic products onto our
    kitchen tables.
        But under new leadership, the Consumer Bureau has turned its back
    on that job.
        CFPB inspectors used to show up at Wall Street banks and other
    lenders to make sure they were obeying the Military Lending Act--that's
    a law that protects active-duty servicemembers and their families from
    predatory loans.
        Under new leadership, CFPB inspectors aren't protecting
    servicemembers anymore.
        The CFPB used to protect borrowers from shady lending practices
    that trapped hardworking families in an endless cycle of debt.
        Now, the CFPB Director is giving payday lenders and car title
    lenders free rein. In fact, Director Kraninger wants us to believe that
    an endless cycle of debt is a benefit to hardworking families.
        The CFPB used to make sure loans have clear explanations that
    regular Americans could understand.
        Now, the CFPB has created the Orwellian-ly named ``Office of
    Innovation'', which as far as we can tell is dedicated to helping big
    banks and tech firms innovate new ways to trick their customers into
    new loans and other complicated financial products.
        The old CFPB prosecuted debt collectors who used shady tactics to
    harass borrowers and threaten them in their homes or at their jobs.
        Now, the CFPB is considering a proposal to let debt collectors call
    borrowers as many times as they want. You thought telemarketers were
    bad? Try being harassed over your student loan debt.
        If the Director of the Consumer Financial Protection Bureau wanted
    to help consumers, she wouldn't have to look very far to find people in
    need.
        Student loan debts have reached record levels, and record
    delinquency rates. Seven million Americans are more than 3 months
    behind on their car payments--the highest level in 19 years, worse than
    during the Great Recession. Forty percent of Americans don't have
    enough savings to cover a $400 emergency expense.
        But instead, she's siding with the rest of this Administration that
    looks like an executive retreat for Goldman Sachs. It's clear whose
    side everyone in this Administration is on.
        And they continue to create excuses for eliminating financial
    protections, saying they are--``increasing access to credit.''
        What they really mean is, increasing access to bad credit that
    drains people's savings and traps them in debt. Right now, Wells Fargo
    CEO Tim Sloan is testifying in the House Financial Services Committee
    about a laundry list of ways his bank abused its customers.
        Millions of Americans got hurt because this bank cared more about
    profits than its customers. It was the CFPB that helped uncover this
    scandal and it was the CFPB that got many Americans their money back.
    That's what Ms. Kraninger's job should be about.
                                     ______

                     PREPARED STATEMENT OF KATHY KRANINGER
                 Director, Consumer Financial Protection Bureau
                                 March 12, 2019
        Chairman Crapo, Ranking Member Brown, and distinguished Members of
    the Committee, thank you for the opportunity to present the Consumer
    Financial Protection Bureau's most recent Semiannual Reports to
    Congress. While the reports describe actions undertaken before I
    arrived, they provide a touchstone as we create a fresh outlook at the
    agency under my leadership.
        The Bureau presents these Semiannual Reports to Congress and the
    American people in fulfillment of its statutory responsibility and
    commitment to accountability and transparency. The Bureau's Spring 2018
    (October 1, 2017, to March 31, 2018) and Fall 2018 (April 1, 2018, to
    September 30, 2018) Semiannual Reports meet this mandate. My testimony
    highlights the contents of these reports.
    Significant Problems Faced by Consumers in Shopping for or Obtaining
            Consumer Financial Products or Services
        In each Semiannual Report, the Bureau identifies relevant trends
    affecting consumers shopping for or obtaining consumer financial
    products or services. In the two Reports submitted to Congress in 2018,
    the Bureau identified a total of four trends of relevance.
        First are credit products marketed to ``nonprime borrowers.'' Given
    the higher late payment and default rates associated with ``nonprime
    borrowers,'' products issued to these consumers generally feature
    higher all-in costs than products issued to consumers with higher
    scores, but offer such consumers the dual possibility of access to the
    credit card market as well as an avenue for building or rehabilitating
    credit records when timely repayments are made.
        Second are secured credit cards. Consumer awareness and demand for
    secured cards have increased in recent years, however, low product
    awareness remains a barrier to secured credit card adoption. Outside
    research has found that many ``nonprime borrowers'' may not be aware
    that secured credit cards are a potential option for them, or even that
    the product exists.
        Third, the Bureau found that credit invisibility--i.e., lacking a
    credit record that is treated as ``scorable'' by widely used credit
    scoring models--among adults 25 and older is concentrated in rural and
    highly urban geographies. Lack of internet access appears to have a
    stronger relationship to credit invisibility than does the presence of
    a bank branch. Among consumers who successfully transition out of
    credit invisibility, the overall rate of using a credit card as an
    entry product is much lower for those living in rural areas and in
    lower-income neighborhoods.
        Lastly, many homebuyers do not comparison shop for their mortgages
    even though mortgage interest rates and loan terms can vary
    considerably across lenders. Reasons may include that rates change
    regularly, getting an accurate rate quote generally requires sharing
    personal financial information, and most consumers believe comparison
    shopping doesn't make a difference. A Bureau study found that consumers
    who were encouraged to comparison shop became more knowledgeable and
    confident regarding the mortgage market.
    Justification of the Budget Request of the Previous Year
        The Bureau is funded principally by transfers from the Federal
    Reserve System, up to the limits set forth in the Dodd-Frank Act.
    Funding from the Federal Reserve System for FY2018 is capped at $663
    million. As of September 30, 2018, the Bureau had received a total of
    $381.3 million in transfers for FY2018, which was added to the $177.1
    million the Bureau had in unobligated balances at the end of FY2017.
        As of September 30, 2018, the end of the fourth quarter of FY2018,
    the Bureau had spent approximately $553 million in FY2018 funds to
    carry out the authorities of the Bureau under Federal financial
    consumer law. Approximately $320.5 million was spent on employee
    compensation and benefits for the 1,510 Bureau employees who were on-
    board by the end of the quarter.
    Significant Rules and Orders Adopted by the Bureau, as Well as Other
            Significant Initiatives Conducted by the Bureau, During the
            Preceding Year and the Plan of the Bureau for Rules, Orders, or
            Other Initiatives To Be Undertaken During the Upcoming Period
        In its Semiannual Reports, the Bureau set forth the rules it had
    produced during the year preceding each report and the initiatives it
    intends to take during the upcoming reporting period. Below is a
    selection of the most relevant such matters.
        Significant Rules Adopted by the Bureau During the Preceding Year:

        Final Rule: Payday, Vehicle Title, and Certain High-Cost
            Installment Loans.

        Final Rule: Arbitration Agreements (note, however, that
            this rule will not go into effect because Congress subsequently
            adopted a joint resolution of disapproval which the President
            signed pursuant to the Congressional Review Act). \1\
    ---------------------------------------------------------------------------
         \1\ www.federalregister.gov/documents/2017/07/19/2017-14225/
    arbitration-agreements; www.federalregister.gov/documents/2017/11/22/
    2017-25324/arbitration-agreements

    ---------------------------------------------------------------------------
        Less Significant Rules:

        Final Rule: Mortgage Servicing Rules Under the Truth in
            Lending Act (Regulation Z). \2\
    ---------------------------------------------------------------------------
         \2\ www.federalregister.gov/documents/2018/03/12/2018-04823/
    mortgage-servicing-rules-under-the-truth-in-lending-act-regulation-z

        Final Rule: Rules Concerning Prepaid Accounts Under the
            Electronic Fund Transfer Act (Regulation E) and the Truth in
            Lending Act (Regulation Z). \3\
    ---------------------------------------------------------------------------
         \3\ www.federalregister.gov/documents/2018/02/13/2018-01305/rules-
    concerning-prepaid-accounts-under-the-electronic-fund-transfer-act-
    regulation-e-and-the-truth

        Interim Final Rule: Mortgage Servicing Rules Under the Real
            Estate Settlement Procedures Act (Regulation X). \4\
    ---------------------------------------------------------------------------
         \4\ www.federalregister.gov/documents/2017/10/16/2017-21912/
    mortgage-servicing-rules-under-the-real-estate-settlement-procedures-
    act-regulation-x

        Final Rule: Equal Credit Opportunity Act (Regulation B)
            Ethnicity and Race Information Collection. \5\
    ---------------------------------------------------------------------------
         \5\ www.federalregister.gov/documents/2017/10/02/2017-20417/equal-
    credit-opportunity-act-regulation-b-ethnicity-and-race-information-
    collection

        Final Rule: Home Mortgage Disclosure Act (Regulation C).
            \6\
    ---------------------------------------------------------------------------
         \6\ www.federalregister.gov/documents/2017/09/13/2017-18284/home-
    mortgage-disclosure-regulation-c

        Final Rule: Amendments to Federal Mortgage Disclosure
            Requirements Under the Truth in Lending Act (Regulation Z). \7\
    ---------------------------------------------------------------------------
         \7\ www.federalregister.gov/documents/2017/08/11/2017-15764/
    amendments-to-federal-mortgage-disclosure-requirements-under-the-truth-
    in-lending-act-regulation-z

    ---------------------------------------------------------------------------
        Significant Initiatives:

        Notice of Proposed Policy Guidance: Policy To Encourage
            Trial Disclosure Program.

        Symposium on Building a Bridge to Credit Visibility.

        Call for Evidence.

        Plan for Upcoming Initiatives

        Policy Statement: Public Release of Home Mortgage
            Disclosure Act Data.

        Pre-Rule Activity: Threshold Adjustment to Escrow Provision
            for Higher Priced Mortgage Loans.

        Plan for Upcoming Rules

        Payday, Vehicle Title, and Certain High-Cost Installment
            Loans: The Bureau announced in January 2018 that it intends to
            open a rulemaking to reconsider its 2017 rule titled Payday,
            Vehicle Title, and Certain High-Cost Installment Loans. The
            Notice of Proposed Rulemaking was issued by the Bureau on
            February 6, 2019. \8\
    ---------------------------------------------------------------------------
         \8\ www.consumerfinance.gov/policy-compliance/rulemaking/rules-
    under-development/payday-vehicle-title-and-certain-high-cost-
    installment-loans-delay-of-compliance-date/

        Debt Collection Rule: The Bureau is working toward
            releasing a proposed rule regarding FDCPA collectors'
    ---------------------------------------------------------------------------
            communications practices and consumer disclosures.

        Home Mortgage Disclosure (Regulation C): The Bureau
            announced in December 2017 that it intends to engage in a
            rulemaking to reconsider various aspects of the Bureau's 2015
            rule under the Home Mortgage Disclosure Act (Regulation C),
            which could involve issues such as the institutional and
            transactional coverage tests and the rule's discretionary data
            points.

        Partial Exemptions From the Requirements of the Home
            Mortgage Disclosure Act Under the Economic Growth, Regulatory
            Relief, and Consumer Protection Act (Regulation C):

                The Bureau will incorporate into Regulation C
            interpretations and procedures set forth in an interpretive and
            procedural rule issued to implement and clarify the
            requirements of section 104(a) of the Economic Growth,
            Regulatory Relief, and Consumer Protection Act, which amended
            certain provisions of the Home Mortgage Disclosure Act.
    Analysis of Complaints About Consumer Financial Products or Services
            That the Bureau Has Received and Collected in Its Central
            Database on Complaints During the Preceding Year
        The Bureau's Office of Consumer Response analyzes consumer
    complaints, company responses, and consumer feedback to assess the
    accuracy, completeness, and timeliness of company responses. The Bureau
    uses insights gathered from complaint data to scope and prioritize
    examinations and ask targeted questions when examining companies'
    records and practices, to help understand problems consumers are
    experiencing in the marketplace, to provide access to information about
    financial topics and opportunities to build skills in money management
    that can help them avoid future problems, and to inform enforcement
    investigations to help stop unfair, deceptive, or abusive acts or
    practices.
        In the Spring 2018 Semiannual Report, the Bureau noted that it had
    received approximately 326,200 consumer complaints and sent
    approximately 260,200 (or 80 percent) to companies, and companies
    responded to approximately 94 percent of complaints that the Bureau
    sent to them. In the Fall 2018 Semiannual Report, the Bureau received
    approximately 329,000 consumer complaints and sent approximately
    263,200 (or 80 percent) to companies, and companies responded to
    approximately 93 percent of complaints that the Bureau sent to them.
    The Bureau does not verify all the facts alleged in complaints, but
    takes steps to confirm a commercial relationship between the consumer
    and the company.
        In both reports, the credit or consumer reporting categories
    received the most complaints, at 37 percent in the most recent report,
    and debt collection received the second highest number of complaints,
    at 25 percent in the most recent report. The remaining categories, from
    highest to lowest percentage of total complaints, are: mortgage (10
    percent), credit card (9 percent), checking or savings (7 percent),
    student loan (3 percent), money transfer or service or virtual currency
    (3 percent), vehicle loan or lease (3 percent), personal loan (1
    percent each period), payday loan (0.7 percent), prepaid card (0.7
    percent), credit repair (0.3 percent), and title loan (0.2 percent).
    Public Supervisory and Enforcement Actions to Which the Bureau Was a
            Party During the Preceding Year
        The Bureau's supervisory activities with respect to individual
    institutions are nonpublic. The Bureau has, however, issued numerous
    supervisory guidance documents and bulletins described in the Spring
    and Fall Semiannual Reports.
        The Reports note that the Bureau was a party in several public
    enforcement actions, as well as actions involving Office of
    Administrative Adjudication Orders with respect to covered persons
    which are not credit unions or depository institutions, between the two
    Reports. For a list of each case, along with brief descriptions, please
    refer to the Bureau's Semiannual Reports.
    Actions Taken Regarding Rules, Orders, and Supervisory Actions With
            Respect to Covered Persons Which Are Not Credit Unions or
            Depository Institutions
        The Bureau's Semiannual Reports list all its public enforcement
    actions, noting when the action was taken against a covered person that
    is not a credit union or depository institution. Additionally the
    Bureau's Supervisory Highlights publications provide general
    information about the Bureau's supervisory activities and key findings
    at banks and nonbanks without identifying specific companies.
    Assessment of Significant Actions by State Attorneys General or State
            Regulators Relating to Federal Consumer Financial Law
        For purposes of the section 1016(c)(7) reporting requirement, the
    Bureau determined that any actions asserting claims pursuant to section
    1042 of the Dodd-Frank Act are ``significant.'' The reporting period of
    the two most recent Semiannual Reports is October 1, 2017, through
    September 30, 2018. The Bureau is aware of three State Attorney General
    actions that were initiated during the reporting period(s) and that
    asserted Dodd-Frank Act claims: State of Alabama et al. v. PHH Mortgage
    Corporation, No. 18-cv-0009 (D.D.C. Jan. 3, 2018); Navajo Nation v.
    Wells Fargo & Company, Wells Fargo Bank, N.A., and Does 1-10, No. 17-
    cv-1219 (D.N.M. Dec. 12, 2017); and Commonwealth of Pennsylvania v.
    Navient Corporation and Navient Solutions, L.L.C., No. 17-cv-1814 (M.D.
    Pa. Oct. 5, 2017).
    Analysis of the Efforts of the Bureau To Fulfill the Fair Lending
            Mission of the Bureau
        The Bureau's Spring and Fall 2018 Semiannual Reports highlight the
    Bureau's fair lending enforcement and rulemaking activities, along with
    its continued efforts to fulfill the Bureau's fair lending mission
    through, for example, supervision, interagency coordination, and
    outreach.
        For exam reports issued by Fair Lending Supervision during the
    reporting period, the most frequently cited violations of Regulation B
    and Regulation C were:

        Section 1002.5(d)(2): Improperly requesting information
            about an applicant's source of income.

        Section 1002.6(b)(2): Improperly considering age or whether
            income is derived from any public assistance program.

        Section 1002.9(c)(2): Failure to adequately notify an
            applicant that additional information is needed for an
            application.

        Section 1002.14(a): Failure to routinely provide a copy of
            an appraisal report to an applicant for credit secured by a
            lien on a dwelling.

        Section 1003.4(a): Failure by a financial institution to
            collect data regarding applications for covered loans that it
            receives, originates, or purchases in a calendar year, or,
            failure to collect data regarding certain requests under a
            preapproval program in a calendar year.

        In the Spring Report, the Bureau conducted fewer fair lending
    supervisory events, and issued fewer matters requiring attention (MRAs)
    or memoranda of understanding (MOUs) than in the prior period, and
    cleared a substantially higher number of MRAs or MOU items from past
    supervisory events than in the prior period. In the Fall Report, the
    Bureau initiated a higher number of fair lending supervisory events,
    and issued a greater number of MRAs or MOUs than in the prior period,
    and found that entities satisfied a lower number of MRAs or MOU items
    from past supervisory events than in the prior period.
        In addition to fair lending supervision, the Bureau has the
    statutory authority to bring enforcement actions pursuant to the Home
    Mortgage Disclosure Act (HMDA) and the Equal Credit Opportunity Act
    (ECOA). The Bureau announced a fair lending public enforcement action
    involving credit cards, as described in the Semiannual Reports.
        The Bureau continues to administer prior fair lending enforcement
    actions, including consent orders requiring defendants to pay redress
    to affected consumers. These matters include ongoing orders pertaining
    to autolending that govern American Honda Finance Corporation and
    mortgage lending governing Provident Funding Associates and
    BancorpSouth Bank.
        The Bureau also conducts fair lending outreach through issuance of
    Reports to Congress, Interagency Statements, Supervisory Highlights,
    Compliance Bulletins, letters and blog posts, as well as through the
    delivery of speeches, meetings, and presentations addressing fair
    lending and access to credit matters. As set forth in the two most
    recent Semiannual Reports, Fair Lending staff worked directly with
    stakeholders, and, on September 17, 2018, the Bureau held a day-long
    symposium titled Building a Bridge to Credit Visibility. The symposium
    explored challenges related to access to consumer and small business
    credit and potential innovations and strategies to expand credit
    access. On the day of the symposium, the Bureau also released a new
    research publication providing a closer look at the relationship
    between geography and credit invisibility.
        The Spring and Fall 2018 Semiannual Reports also describe that Fair
    Lending staff coordinated with partners on the Interagency Task Force
    on Fair Lending, the Interagency Working Group on Fair Lending
    Enforcement, and the Federal Financial Institutions Examinations
    Council (FFIEC) HMDA Data Collection Subcommittee.
    Analysis of the Efforts of the Bureau To Increase Workforce and
            Contracting Diversity Consistent With the Procedures
            Established by the Office of Minority and Women Inclusion
            (OMWI)
        The Bureau developed its ``Diversity and Inclusion Strategic Plan
    2016-2020'' to guide the Bureau's efforts to manage its diversity and
    inclusion goals, and objectives. The Bureau also publishes an Annual
    OMWI report in the spring of each year; its 2017 report was issued on
    March 29, 2018.
        As of September 2018, an analysis of the Bureau's current workforce
    reveals the following key points:

        Women represent 49 percent of the Bureau's workforce in
            2018 with no change from 2017.

        Minorities represent 40 percent of the Bureau workforce in
            2018 with a 1 percentage point increase of ethnic minority
            employees (Hispanic, Black, Asian, Native Hawaiian/Other
            Pacific Islander (NH/OPI), American Indian/Alaska Native (AI/
            AN), and employees of Two or More races) from 2017.

        As of September 30, 2018, 12.4 percent of Bureau employees
            (excluding interns) identified as an individual with a
            disability. Out of the workforce, 3.2 percent of employees
            identified as an individual with a targeted disability. The
            Bureau has already exceeded the workforce goals of 12 percent
            for employees with disabilities and 2.0 percent for employees
            with targeted disabilities--exceeding in both salary categories
            as required in the EEOC's Section 501 regulations.

        The Bureau enhances diversity by recruiting, hiring, and retaining
    highly qualified individuals from diverse backgrounds to fill positions
    at the Bureau. To promote an inclusive work environment, the Bureau
    focuses on strong engagement with employees and utilizes an integrated
    approach to education, training, and engagement programs that ensures
    diversity and inclusion and nondiscrimination concepts are part of the
    learning curriculum and work environment. The Bureau also ensures that
    senior leaders are aware of demographic trends of the Bureau's
    workforce. Planning is done to increase inclusion and retention of the
    diverse workforce.
        Further, in accordance with the mandates in section 342(b)(2)(B) of
    the Dodd-Frank Act, the Bureau takes efforts to increase contracting
    opportunities for diverse businesses including Minority-owned and
    Women-owned Businesses (MWOBs), including: creating and publishing a
    procurement forecast; proactively making recommendations that promote
    the use of qualified MWOB contractors in Bureau contracts; updating,
    distributing, and publishing online technical assistance guides for
    businesses; publishing the Bureau's supplier diversity policy on the
    Bureau website; participating in four national supplier diversity
    conferences aimed at MWOBs; and providing technical assistance meetings
    to businesses new to Government contracting or doing business with the
    Bureau. As a result of these efforts, 32.6 percent of the $139 million
    in contracts that the Bureau awarded during this time went to MWOBs.
        Finally, in accordance with the mandates in section 342(c)(2) of
    the Dodd-Frank Act, the Bureau's Diversity and Inclusion Plan describes
    the Bureau's efforts to determine that a contractor will ensure, to the
    maximum extent possible, the fair inclusion of women and minorities in
    the contractor and subcontractor workforce. The Bureau developed and
    inserted a contract clause, known as the Good Faith Effort, into all
    Bureau contracts, and as a result more than 200 Bureau contractors will
    submit documentation detailing their workforce diversity practices in
    FY2019.
    Conclusion
        The reports describe actions undertaken before my tenure as
    Director of the Bureau, yet they provide a touchstone as we create a
    fresh outlook at the agency under my leadership.
        Since my confirmation, I have been engaged in a listening tour to
    meet as many of our stakeholders as possible, including many of you.
    Through listening, I am building relationships, both inside and outside
    of the Bureau. Hearing all perspectives is critical to bring the best
    thinking as we carry out our mission of protecting consumers.
        Looking ahead, I will be setting 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. I am also examining how we
    can best utilize all the tools that Congress has given us--broadening
    our efforts to focus on prevention of harm as a primary goal for our
    actions.
        Thank you again for the opportunity to present the CFPB's work to
    you.
            RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
                          FROM KATHY KRANINGER

    Q.1. In November 2016, the CFPB issued ``A snapshot of
    servicemember complaints'' noting that veterans had reported
    ``being targeted with aggressive solicitations by lenders to
    refinance'' their home loan using a Department of Veterans
    Affairs (VA) product. \1\ Veterans also reported that
    solicitations were ``potentially misleading.'' \2\ One year
    later, the CFPB and the Department of Veterans Affairs (VA)
    issued a joint Warning Order about aggressive and potentially
    misleading advertising of VA home loan refinances. \3\
    ---------------------------------------------------------------------------
         \1\ https://files.consumerfinance.gov/f/documents/112016-cfpb-OSA-
    VA-refinance-snapshot.pdf
         \2\ Id.
         \3\ ``CFPB and VA WARNO: VA Refinancing Offers That Sound Too Good
    To Be True'', Patrick Campbell and Anthony Vail, November 20, 2017,
    available at https://www.consumerfinance.gov/about-us/blog/cfpb-and-va-
    warno-va-refinancing-offers-sound-too-good-be-true/.
    ---------------------------------------------------------------------------
        Most recently, the VA published an Advanced Notice of
    Proposed Rulemaking (ANPR) \4\ and a subsequent interim final
    rule \5\ on cash-out refinances on VA loans, in compliance with
    Section 309 of P.L. 115-174, the Economic Growth, Regulatory
    Relief, and Consumer Protection Act. Both of these documents
    indicated that potential lender abuses remain a substantial
    problem. That ANPR stated that ``perhaps more than 50 percent
    of [VA] cash-out refinances remain vulnerable to predatory
    terms and conditions'' and that ``some lenders are pressuring
    veterans to increase artificially their home loan amounts when
    refinancing, without regard to the long-term costs to the
    veteran and without adequately advising the veteran of the
    veteran's loss of home equity.'' \6\
    ---------------------------------------------------------------------------
         \4\ ``Loan Guaranty: Revisions to VA-Guaranteed or Insured Cash-
    Out Home Loans'', 83 FR 61573, November 30, 2018, available at https://
    www.federalregister.gov/documents/2018/11/30/2018-26021/loan-guaranty-
    revisions-to-va-guaranteed-or-insured-cash-out-home-loans.
         \5\ ``Loan Guaranty: Revisions to VA-Guaranteed or Insured Cash-
    Out Refinance Loans'', 83 FR 64459, December 17, 2018, available at
    https://www.federalregister.gov/documents/2018/12/17/2018-27263/loan-
    guaranty-revisions-to-va-guaranteed-or-insured-cash-out-home-refinance-
    loans.
         \6\ See 83 FR 61573.
    ---------------------------------------------------------------------------
        Since November 2016, has the CFPB received referrals from
    the VA or Ginnie Mae to review potentially unfair, deceptive,
    or abusive actions and practices or other violations of
    consumer protection laws by VA mortgage lenders? If so, how
    have the volume and nature of those referrals changed over
    time? If not, why not?

    A.1. Since November 2016, Consumer Financial Protection Bureau
    (Bureau) staff has met with the Veterans Affairs (VA) staff to
    discuss the VA's concerns that veterans are the subjects of
    aggressive and potentially misleading advertising of VA home
    loan refinances. Periodically, the VA has provided the Bureau
    with samples of potentially misleading advertisements.

    Q.2. Does the CFPB participate in the VA and Ginnie Mae's
    Lender Abuse Task Force to address harmful practices in the VA
    loan refinance market? If so, what steps is each agency in the
    Task Force taking to address lender abuses in the VA loan
    refinance market? If not, why not?

    A.2. Although the Bureau was not asked to be a member of the
    Task Force, certain Bureau offices have provided technical and
    market expertise on a limited basis when requested by Ginnie
    Mae and/or the VA. Such expertise has been limited to a review
    of specific advertisements and some product offerings.

    Q.3. What additional steps has the CFPB taken or will the CFPB
    take to address complaints received from consumers or referrals
    from the VA or Ginnie Mae (if applicable) to communicate with
    consumers and address practices in the VA loan refinance market
    that may be abusive or misleading and ultimately harm
    servicemembers?

    A.3. The Bureau does not generally comment publicly on
    confidential enforcement investigations. In a public action,
    the Bureau partnered with the Department of Veterans Affairs to
    issue a consumer advisory, \7\ CFPB and VA WARNO: VA
    Refinancing Offers That Sound Too Good To Be True, on November
    20, 2017.
    ---------------------------------------------------------------------------
         \7\ https://www.consumerfinance.gov/about-us/blog/cfpb-and-va-
    warno-va-refinancing-offers-sound-too-good-be-true

    Q.4. Appraisals--In December 2018, the Office of the
    Comptroller of the Currency (OCC), the Board of Governors of
    the Federal Reserve System (Fed), and the Federal Deposit
    Insurance Corporation (FDIC) jointly proposed to increase their
    agencies' appraisal threshold on residential mortgage loans
    from $250,000 to $400,000. \8\ Lenders would instead be
    required to obtain an evaluation for any mortgage loan below
    $400,000 not otherwise subject to requirements by the mortgage
    insurer or guarantor or the secondary market. \9\
    ---------------------------------------------------------------------------
         \8\ ``Real Estate Appraisals'', 83 FR 63110, December 7, 2018,
    available at https://www.federalregister.gov/documents/2018/12/07/2018-
    26507/real-estate-appraisals.
         \9\ Id.
    ---------------------------------------------------------------------------
        This proposal comes less than 2 years after these same
    banking regulators and CFPB rejected an increase in the
    residential loan appraisal threshold based on ``considerations
    of safety and soundness and consumer protection'' in their
    Economic Growth and Regulatory Paperwork Reduction Act (EGRPRA)
    report. \10\
    ---------------------------------------------------------------------------
         \10\ Joint Report to Congress: Economic Growth and Regulatory
    Paperwork Reduction Act, Federal Financial Institutions Examination
    Council, March 2017, p. 36, available at https://www.ffiec.gov/pdf/
    2017_FFIEC_EGRPRA_Joint-Report_to_Congress.pdf.
    ---------------------------------------------------------------------------
        As you know, the Financial Institutions Reform, Recovery,
    and Enforcement Act of 1989, as amended by the Dodd-Frank Wall
    Street Reform and Consumer Protection Act, requires the Federal
    banking regulators charged with setting appraisal exemption
    thresholds to receive concurrence from the CFPB to ensure that
    ``such threshold level provides reasonable protection for
    consumers'' before any amendment. \11\ In the EGPRA report, the
    banking regulators noted that ``CFPB staff shared concerns
    about potential risks to consumers resulting from an expansion
    of the number of residential mortgage transactions that would
    be exempt from the Title XI appraisal requirement'' if the loan
    threshold was raised. \12\
    ---------------------------------------------------------------------------
         \11\ 12 U.S.C. 3341(b).
         \12\ Id.
    ---------------------------------------------------------------------------
        Did the Federal banking agencies confer with staff or
    leadership at the CFPB or seek concurrence before issuing the
    proposal to increase the appraisal exemption threshold? If not,
    at what point in the regulatory process do Federal banking
    agencies seek concurrence with the CFPB on appraisal threshold
    changes?

    A.4. Staff of the Federal banking agencies conferred with
    Bureau staff before publication of the December 7, 2018, Notice
    of Proposed Rulemaking (NPRM). During the November 20, 2018,
    Federal Deposit Insurance Corporation (FDIC) Board meeting at
    which the FDIC Board voted in favor of the FDIC moving forward
    with issuing the NPRM, then Bureau Acting Director Mick
    Mulvaney indicated that his vote in favor of such action in his
    capacity as an FDIC Board member was not an exercise of the
    Bureau's concurrence authority under section 1112(b) of the
    Financial Institutions Reform, Recovery, and Enforcement Act of
    1989 (FIRREA), \13\ and that the Bureau will make its
    determination of whether to concur at the final rule stage.
    ---------------------------------------------------------------------------
         \13\ Id.

    Q.5. Is the CFPB aware of any changes in the real estate market
    or in appraisal or evaluation services that would affect its
    consumer protection concerns, cited in the EGRPRA report, with
    increasing the residential mortgage appraisal threshold above
    ---------------------------------------------------------------------------
    $250,000? If so, please detail these changes.

    A.5. As reflected in the EGRPRA report, the Federal banking
    agencies were particularly interested at that time with
    addressing potential appraiser availability issues in rural
    areas, and, among other things, the Federal banking agencies
    planned to issue a statement regarding how section 1119(b) of
    FIRREA provides authority for temporary waivers of appraiser
    certification or licensing requirements where there is a
    scarcity of qualified appraisers, \14\ without proposing to
    raise the residential mortgage appraisal threshold pursuant to
    section 1112(b) of FIRREA. \15\ Bureau staffs conversations
    with staff of the Federal banking agencies about increasing the
    residential mortgage appraisal threshold pursuant to section
    1112(b) of FIRREA occurred in the context of these discussions
    and do not constitute a Bureau concurrence determination
    regarding a proposed increase to the residential mortgage
    appraisal threshold. Now that the Federal banking agencies have
    issued the NPRM, Bureau staff are currently in the process of
    assessing the availability of information to enable me to make
    a determination of whether to concur.
    ---------------------------------------------------------------------------
         \14\ 12 U.S.C. 3348(b).
         \15\ See Joint Report to Congress: Economic Growth and Regulatory
    Paperwork Reduction Act, Federal Financial Institutions Examination
    Council, March 2017, pp. 36-37, available at https://www.ffiec.gov/pdf/
    2017-FFIEC-EGRPRA-Joint-Report-to-Congress.pdf.

    Q.6. What factors does the CFPB consider when determining
    whether or not to grant concurrence on proposals to increase
    ---------------------------------------------------------------------------
    the residential mortgage appraisal threshold?

    A.6. As noted above, section 1112(b) of FIRREA provides that
    the Federal banking agencies may establish a threshold level
    described therein only if the agency ``receives concurrence
    from the [Bureau] that such threshold level provides reasonable
    protection for consumers who purchase 1-4 unit single-family
    residences.'' \16\ As also noted above, the Federal banking
    agencies' NPRM includes a requirement that the lender must
    obtain an evaluation where a lender does not obtain an
    appraisal due to the proposed threshold (unless another
    exemption not carrying the evaluation requirement applies). As
    a result, among the information the Bureau is interested in is:
    (1) information regarding the presentation or content of
    evaluations in practice, including what valuation information,
    if any, consumers would lose in practice if more evaluations
    are performed rather than appraisals; (2) the extent to which
    appraisals or evaluations provide benefits or protections for
    consumers that are purchasing l-4 unit single-family residences
    (including the nature and magnitude of the differences between
    using evaluations rather than appraisals, if any, in consumer
    protection, such as with respect to credibility); and (3)
    information relating to current and potential future use of
    evaluations by lenders.
    ---------------------------------------------------------------------------
         \16\ 12 U.S.C. 3341(b).

    Q.7. Wells Fargo--In April 2018 consent orders with Wells
    Fargo, both the CFPB \17\ and the Office of the Comptroller of
    the Currency (OCC) \18\ required Wells to develop Remediation
    Plans or Programs and submit them to the Regional Director at
    the CFPB and Examiner-in-Charge at the OCC for nonobjection.
    These orders also allowed the Regional Director and Examiner-
    in-Charge to require Wells to submit future remediation
    programs for review and nonobjection while the consent orders
    remained effective.
    ---------------------------------------------------------------------------
         \17\ See https://files.consumerfinance.gov/f/documents/cfpb_wells-
    fargo-bank-na_consent-order_2018-04.pdf.
         \18\ See https://www.occ.gov/static/enforcement-actions/ea2018-
    025.pdf.
    ---------------------------------------------------------------------------
        Beginning in its August 2018 10-Q report \19\ and in
    subsequent materials, \20\ Wells Fargo disclosed that an
    internal calculation error led the lender/servicer to
    improperly deny modifications to 870 homeowners, 545 of whom
    were subsequently foreclosed upon, between 2010 and 2018. To
    date, neither the CFPB nor the OCC has taken a public
    enforcement action with respect to these modification denials
    and foreclosures. Wells Fargo's initial disclosure indicated
    that they have set aside just $8 million to remediate harmed
    consumers.
    ---------------------------------------------------------------------------
         \19\ Wells Fargo and Company Form 10-Q, August 3, 2018, available
    at https://www08.wellsfargomedia.com/assets/pdf/about/investor-
    relations/sec-filings/2018/second-quarter-10q.pdf.
         \20\ Wells Fargo and Company Form 10-Q, available at https://
    www08.wellsfargomedia.com/assets/pdf/about/investor-relations/sec-
    filings/2018/third-quarter-10q.pdf.
    ---------------------------------------------------------------------------
        Does the CFPB have the authority under existing consent
    orders or other law or policy to review Wells Fargo's methods
    for determining how many borrowers were harmed by the bank's
    modification errors? If so, has the CFPB reviewed those
    methods? If not, why not?

    A.7. I am firmly committed to ensuring that Wells Fargo fully
    complies with the requirements of Federal consumer financial
    law. The Bureau has authority to examine certain institutions,
    including Wells Fargo, to assess compliance with the
    requirements of Federal consumer financial law. It also has the
    authority to bring enforcement actions for violations of
    Federal consumer financial law. As part of the April 2018
    Consent Order, Wells Fargo was required to develop a
    Remediation Program, which would include, among other things,
    developing Consumer Remediation Plans when it identifies
    violations of Federal consumer financial law. The Bureau
    expects Wells Fargo to comply with this requirement and has the
    capability to examine for that compliance.

    Q.8. Does the CFPB have the authority under existing consent
    orders or other law or policy to request to review Wells
    Fargo's remediation plan for the 870 borrowers that Wells has
    determined were harmed by the bank's calculation errors?
        If the CFPB has this authority:
        Has the CFPB reviewed or requested to review Wells Fargo's
    remediation plan?
        If the plan has been reviewed, has the CFPB approved Wells
    Fargo's remediation plan? If so, why? If not, why not?
        If the plan has not been reviewed, why not?
        If the CFPB does not believe it has this authority, why
    not?

    A.8. As noted in my previous response, I am firmly committed to
    ensuring that Wells Fargo fully complies with the requirements
    of Federal consumer financial law. The Bureau has authority to
    examine certain institutions, including Wells Fargo, to assess
    compliance with the requirements of Federal consumer financial
    law. It also has the authority to bring enforcement actions for
    violations of Federal consumer financial law. As part of the
    April 2018 Consent Order, Wells Fargo was required to develop a
    Remediation Program, which would include, among other things,
    developing Consumer Remediation Plans when it identifies
    violations of Federal consumer financial law. The Bureau
    expects Wells Fargo to comply with this requirement and has the
    capability to examine for that compliance.
        The information you requested related to specific
    activities undertaken by the Bureau in the course of its
    supervisory relationship constitutes confidential supervisory
    information.
        The Bureau has issued regulations governing the disclosure
    of confidential supervisory and investigative information. See
    12 CFR 1070.41, 1070.45. These rules are designed to protect
    the integrity of the law enforcement process, including the
    confidentiality and due process interests of those subject to
    supervisory or investigatory activity.

    Q.9. How does the CFPB determine whether remediation for
    consumers who were wrongfully denied a loan modification is
    adequate?

    A.9. Many factors are weighed to determine the precise mix of
    restitution, penalties, and injunctive relief appropriate in
    each case. At the center of that effort is serving justice in
    the public interest. Generally, when analyzing remediation, the
    Bureau considers all relevant facts and circumstances and seeks
    to make consumers whole for losses caused by a party's illegal
    conduct.

    Q.10. How does the CFPB determine whether remediation to
    consumers who wrongfully lost their home to foreclosure is
    adequate?

    A.10. As noted in my previous response, generally, when
    analyzing remediation, the Bureau considers all relevant facts
    and circumstances, including the extent of direct and indirect
    harm, and seeks to make consumers whole for losses caused by a
    party's illegal conduct.

    Q.11. The President's Budget claims to save $5 billion over the
    next 10 years by ``restructuring the CFPB.'' \21\ That figure
    represents most of the agency's budget. In order to recognize a
    $5 billion reduction in CFPB spending, which programs,
    services, and staff would you cut at the Bureau?
    ---------------------------------------------------------------------------
         \21\ Budget of the U.S. Government for Fiscal Year 2020, p. 127,
    March 11, 2019, available at https://www.whitehouse.gov/wp-content/
    uploads/2019/03/budget-fy2020.pdf.
    ---------------------------------------------------------------------------
        What impact would this budget reduction have on the ability
    of the CFPB to investigate and enforce against consumer abuses?

    A.11. The President's budget proposes a change in law regarding
    how the Bureau is funded for Congress' consideration. As
    Director, 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 Congress
    provided this agency, I feel a deep sense of responsibility for
    ensuring we become a model for efficient and effective use of
    resources. Should Congress change the way the Bureau is funded,
    I will take all appropriate steps consistent with those changes
    to support the Bureau's mission.

    Q.12. During your service at the Office of Management and
    Budget, did you assist in the consideration or publication of
    budget proposals that reflected similar reductions in CFPB
    spending?
        Did you object to those reductions and if not, why not?

    A.12. The President's budget request is precisely that. As
    stated above, the President's budget proposes a change in law
    regarding how the Bureau is funded for Congress' consideration.
    Should Congress change the way the Bureau is funded, I will
    take all appropriate steps consistent with those changes to
    support the Bureau's mission.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR COTTON
                          FROM KATHY KRANINGER

    Q.1. Director, the concept of easing balloon-payment
    requirements and increasing payment affordability for consumers
    was clearly of interest to the CFPB when the original rule was
    published. Installment loan products offer alternatives to
    balloon-payment loans, but the payment section of the rule
    requiring reauthorization after two failed ACH or debit
    attempts increases the repayment risk for multipay products.
        Do you believe the payment provisions create an incentive
    for lenders to offer single payment loans over longer term
    installment loan products?

    A.1. No. The Bureau's 2017 Payday Rule's cap on making further
    attempts to debit a consumer's account after two consecutive
    attempts have failed due to nonsufficient funds applies to all
    loans covered by the Rule, including short-term loans with
    balloon payments and longer-term loans. The cap's provisions
    are based on the conclusions the Bureau reached in the 2017
    Final Rule based on its analysis of internal and external data
    showing that when some covered lenders attempt to debit
    consumers' accounts after two consecutive failures, all
    subsequent attempts are far more likely than not to result in
    failure. In 2017, the Bureau concluded that two consecutive
    failed debit attempts are a strong indication that a consumer's
    account is in severe distress and is therefore no longer a
    reliable means of ensuring repayment. Thus, the Bureau
    determined in 2017 that the relatively small subset of
    consumers to whom the cap's protections apply have already
    demonstrated a high repayment risk at the time the cap is
    triggered. The 2017 Payday Rule's cap is not intended to be an
    absolute prohibition on collecting payments from that subset of
    consumers. Rather, the Rule's reauthorization and related
    provisions required lenders to obtain a new and specific
    authorization to obtain payment from consumers.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR PERDUE
                          FROM KATHY KRANINGER

    Q.1. Director Kraninger, similar to the prudential regulators,
    the CFPB has market monitoring powers under Section 1022(c) of
    Dodd-Frank. Unlike prudential regulators, who use these
    extraordinary powers to ensure safety and soundness of the
    financial system, the CFPB's role is a consumer protection
    watchdog and its market monitoring powers are far more
    expansive than any of the prudential regulators. In the past,
    the CFPB has undertaken massive data collection of American
    consumers' detailed financial information. Especially under
    your predecessor, some of these massive data collections were
    to help develop solutions for nonexistent problems.
        What is your view on when the CFPB should use its market
    monitoring powers?

    A.1. Section 1022(c) of the Dodd-Frank Wall Street Reform and
    Consumer Protection Act provides that ``[i]n order to support
    its rulemaking and other functions, the Consumer Financial
    Protection Bureau (Bureau) shall monitor for risks to consumers
    in the offering or provision of consumer financial products or
    services, including developments in markets for such products
    or services.'' The Bureau is also required to evaluate the
    costs, benefits, and impacts of rules it is considering and to
    conduct retroactive assessments of significant rules.
    Guidelines for exercising these authorities are described
    further in that section. I believe the Bureau should only
    collect that data that it needs to perform its statutory
    functions, including market monitoring, and the Bureau must be
    vigilant to keep data secure to protect the privacy of data
    about consumers the agency collects, maintains, or uses. In
    September 2018, the Bureau issued a report on the ``Sources and
    Uses of Data at the Bureau of Consumer Financial Protection''
    \1\ and a Request for Information (RFI) with respect to the
    Bureau's data collection activities. The Bureau is reviewing
    the comments received in response to that RFI and considering
    whether modifications are appropriate with respect to data
    collection activities.
    ---------------------------------------------------------------------------
         \1\ https://files.consumerfinance.gov/f/documents/bcfp_sources-
    uses-of-data.pdf

    Q.2. Do you believe the CFPB needs to provide a specific cause
    ---------------------------------------------------------------------------
    for each time it uses its market monitoring powers?

    A.2. As stated above, I believe the Bureau should only collect
    data that it needs to perform its statutory functions,
    including market monitoring, and the Bureau must be vigilant in
    protecting the privacy of consumers in any data the agency
    collects, maintains, or uses.

    Q.3. Director Kraninger, the Paperwork Reduction Act was
    enacted to reduce the total amount of paperwork burden the
    Federal Government imposes on individual businesses. However,
    the Paperwork Reduction Act did not require the OMB to approve
    the collection of data in situations where there were less than
    10 parties involved. Under Director Cordray, the CFPB often
    took advantage of certain chokepoints within the financial
    industry, where 3 to 4 companies held the data of tens of
    millions of Americans because they comprised 95 percent of the
    market share of a certain industry.
        From your experience at the OMB, do you believe that under
    10 parties' exemption to the Paperwork Reduction Act was made
    for de minis data collection efforts and the CFPB violated the
    spirit of the law when it undertook such massive data
    collection actions?

    A.3. Under the Paperwork Reduction Act (PRA), any collection of
    information addressed to all or a substantial majority of an
    industry is presumed to involve ten or more persons and is not
    subject to exemption; therefore, the Bureau generally would not
    authorize a collection of information from nine or less
    companies that comprise 95 percent of the industry without
    first obtaining approval from OMB under the PRA.

    Q.4. What actions have you undertaken at the CFPB to ensure
    that the Agency adheres to the Paperwork Reduction Act?

    A.4. The Bureau maintains a PRA compliance program that is well
    integrated into the Bureau's overall information management
    program under the leadership of a Chief Data Officer, in
    compliance with Title II of the Foundations for Evidence-Based
    Policymaking Act of 2018--Open Government Data Act. The PRA
    program is integrated into the Bureau's data management
    processes to ensure that before the Bureau requests information
    from the public, the collection of that information is
    justified, has practical utility, and is not unduly burdensome,
    in keeping with the PRA.
        The Bureau's PRA program facilitates the Office of
    Management and Budget (OMB) information collection process and
    provides guidance and assistance to program offices to ensure
    that data intakes meet OMB requirements and compliance with the
    PRA.

    Q.5. Director Kraninger, under Section 1071 of the Dodd-Frank
    Act, the BCFP was instructed to create a HMDA like reporting
    process for business loans. I have very grave concerns about
    the chilling effect such a process will have on the small
    business community and the availability of capital.
        What are your thoughts on the timing of future rulemaking
    mandated by Section 1071?

    A.5. In connection with its Spring 2019 Rulemaking Agenda, \2\
    the Bureau announced it intends to recommence work within the
    next year to begin to develop rules to implement section 1071
    of the Dodd-Frank Act. The Bureau also has announced that it
    intends to hold a symposium to hear from a diverse group of
    experts with respect to the issues implicated in developing a
    data collection regime for small business loans. Before issuing
    a rule that may have a significant impact on a substantial
    number of small entities, the Bureau is required to convene a
    panel under the Small Business Regulatory Enforcement Fairness
    Act and confer with small entity representatives about the
    proposals the Bureau is considering putting forward. After
    completing that process, the Bureau is required by the
    Administrative Procedure Act to publish a proposal in the
    Federal Register and provide an opportunity for public comment
    on the proposal. Given those requirements, the Bureau will not
    be releasing a final rule under Section 1071 this year.
    ---------------------------------------------------------------------------
         \2\ Diane Thompson, ``Spring 2019 Rulemaking Agenda'' (May 22,
    2019), https://www.consumerfinance.gov/about-us/blog/spring-2019-
    rulemaking-agenda/.

    Q.6. In connection with both your comments on cost-benefit
    analysis and limiting the scope of data collections, would any
    ---------------------------------------------------------------------------
    rule coming out of Section 1071 run afoul of both concerns?

    A.6. Considering costs and benefits is an important part of our
    Dodd-Frank Act statutory responsibility when issuing rules.
    There are costs associated with any data collection which have
    to be evaluated along with the benefits. The Bureau recognizes
    that certain financial institutions may not be collecting and
    reporting information regarding small business lending in
    connection with other regulatory requirements and that
    therefore a new data collection requirement could pose
    implementation and operational challenges. The Bureau is
    interested in exploring potential ways to implement section
    1071 in a balanced manner with a goal of providing timely data
    with the highest potential for achieving the statutory
    objectives, while minimizing burden to both industry and the
    Bureau.

    Q.7. Is it even possible to construct a rule that will not
    impede business lending and stifle of economic growth?

    A.7. Small businesses are critical engines for economic growth
    and access to credit is a crucial component of their success.
    The Bureau is sensitive to concerns about costs imposed by
    regulations and would like to explore ways to implement Section
    1071 in a balanced manner to fulfill its statutory objectives
    while minimizing burden on industry. The Bureau will also
    carefully consider the costs and benefits of regulations as
    part of its Dodd-Frank Act statutory responsibilities. As noted
    above, the Bureau will begin to develop rules to implement
    section 1071 with a symposium to hear from a diverse group of
    experts with respect to the issues implicated in developing a
    data collection regime for small business loans.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS
                          FROM KATHY KRANINGER

    Q.1. With respect to the CFPB's enforcement actions related to
    the National Collegiate Student Loan Trusts (NCSLT), there have
    been allegations of potential conflicts of interest between the
    CFPB and one party of the securitization trust--Vantage Capital
    Group. To that end, a proposed consent order filed by the CFPB
    under the former Director Cordray in this matter would appoint
    Vantage Capital to become the special servicer of the trusts'
    student loan assets even though they have no prior special
    servicing experience. Additionally, no other party to the
    securitization trust approved such change as required by the
    parties' contractual agreements.
        What is the Bureau's rationale for endorsing and attempting
    to appoint, Vantage Capital, an unproven servicer to service
    the debt of student loan borrowers which are the assets of the
    NCSLT trusts?
        And what is the Bureau's rationale for attempting to
    unilaterally appoint Vantage Capital in contradiction to the
    contractual terms agreed to by the securitization parties
    (where these specific terms also represent fundamentally
    important protections provided to investors across transactions
    in the securitization market)?

    A.1. As a general matter, the Bureau does not comment on active
    litigation except through its public filings.

    Q.2. One of the cited contributors to the failure of the
    private label RMBS market to rebound from its crisis-driven
    lows are market concerns around the inviolability of their
    contracts and a general lack of trust that securitization cash
    flows will be allocated as dictated by the transaction
    documents. Actions initiated under former CFPB Director Richard
    Cordray, that the CFPB continues to pursue today, appear to
    have aggravated those concerns among securitization
    participants. Specifically, the CFPB filed a case against the
    National Collegiate Student Loan Trusts while simultaneously
    filing a proposed consent judgment whereby the CFPB's proposed
    consent judgment is seeking to:
        Penalize investors, including pension plans, retirement
    plans, and by extension the consumers that have entrusted their
    savings to them, for alleged violations of a third party
    service providers and rewrite the contractual provisions that
    the securitization parties had agreed to without the
    involvement of any of the key parties to the securitization
    transactions. Why has the CFPB chosen to not follow long-
    standing precedent of other regulatory bodies, and the CFPB's
    other enforcement actions, whereby the parties whose actions
    allegedly violated the law were pursued for wrongdoing?
        Has the CFPB evaluated the impact of holding investors in
    the securitization market responsible for other parties'
    actions on the availability and cost of credit to consumers
    given the significant funding the securitization market
    provides to consumers?

    A.2. Please see the response to Question 1.

    Q.3. The richness and diversity of financial data available to
    lenders for accurately assessing a borrower's ability to repay
    have made the rigid guidance provided in Appendix Q outdated.
        In order to expand access to high quality mortgages for all
    Americans, is the Bureau open to permitting other Government
    approved documentation standards, such as those used by GSEs,
    FHA, and VA, for determining a consumer's DTI instead of
    Appendix Q?

    A.3. You raise an important question that the Bureau is
    currently considering recognizing the expiration of the
    ``patch'' described further below. A provision of the Ability
    to Repay/Qualified Mortgage rule (ATR/QM) currently allows
    creditors to obtain Qualified Mortgage (QM) status for a loan
    by establishing the loan's eligibility for purchase or guaranty
    by the GSEs. A creditor may establish this by, among other
    things, demonstrating that the loan satisfies GSE underwriting
    requirements, including GSE standards for the consideration and
    verification of a borrower's income and debt obligations. This
    regulatory provision, known as the ``patch,'' is temporary and
    scheduled to expire no later than 2021. Currently Federal
    Housing Administration and Veterans Affairs verification
    standards can be used under those agencies' own QM definitions.
    The Bureau's own General QM definition currently allows use of
    Appendix Q verification standards only. The Bureau's report \1\
    assessing the effectiveness of the ATR/QM rule identified
    concerns that Appendix Q is too limiting and rigid. The Bureau
    is open to improvements to it and to identifying alternative
    standards for consideration and verifying income and debt
    obligations.
    ---------------------------------------------------------------------------
         \1\ https://www.consumerfinance.gov/data-research/research-
    reports/2013-ability-repay-and-qualified-mortgage-assessment-report/

    Q.4. Entrepreneurs and self-employed Americans help drive
    economic growth and innovation in communities across the
    Nation. Yet the underwriting standards in Appendix Q have
    prevented self-employed individuals from qualifying for QM
    loans, thus hindering a potential area of growth in the market.
        Because Appendix Q contains a set of underwriting standards
    that are written into regulations, these standards have not
    kept pace with changes in the market. Are you willing to work
    with industry and other market participants to find ways to
    make QM underwriting standards more dynamic?

    A.4. The Bureau understands the concerns that Appendix Q is too
    limiting, especially when it comes to self-employed consumers.
    The Bureau recognizes the importance of regulatory standards
    keeping up with changes in the market. The Bureau is currently
    considering this issue, particularly recognizing the expiration
    of the ``patch'' as articulated in the prior response. We
    welcome suggestions on this topic from industry, consumer
    advocates, and other stakeholders.

    Q.5. Ensuring high-quality and affordable mortgage access for
    underserved, creditworthy borrowers is an essential mission
    that helps drive economic growth. Currently, the QM patch is
    key to helping achieve that mission with the overall U.S. home
    ownership rate rising to the highest level (64.8 percent) since
    2014.
        If the GSEs remain in conservatorship beyond January 2021
    and the QM patch were to expire without any sort of reliable
    substitute, approximately 30 percent of loans backed by the
    GSEs could face new liability which would negatively impact
    home values and create instability across the secondary market.
        The June 2017 Department of Treasury report examining core
    principles for regulating the U.S. financial system outlined
    important areas for reform with respect to the Ability to
    Repay/Qualified Mortgage (ATR/QM) Rule and the QM Patch, which
    is currently set to expire on January 10, 2021, or when the
    GSEs exit conservatorship, whichever comes first.
        As discussions around conservatorship status continue and
    the Patch expiration date quickly approaches, can you commit to
    working with market participants, including financial
    institutions and consumer advocates, to align QM requirements
    with GSE eligibility requirements in order to preserve a robust
    market?

    A.5. I understand the importance of maintaining the smooth
    functioning of the mortgage market and avoiding any unnecessary
    or undue disruption that would interfere with consumers' access
    to credit. The potential expiration of the patch is a complex
    situation, and the Bureau is working diligently to formulate
    and implement appropriate strategies to handle it. Further, we
    have been discussing it with other appropriate regulators,
    given the interconnected nature of the decisions we are
    separately facing. In addition, we have been consulting with
    various market participants, including financial institutions
    and consumer advocates, to identify appropriate methods that
    will ensure that QM requirements impose as little burden on
    industry and consumers as possible and that access to credit is
    preserved.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                          FROM KATHY KRANINGER

    Q.1. As you know, the Dodd-Frank statute includes a requirement
    that the CFPB tailor its supervision of nonbanks based on
    factors which include a firm's size and volume, product risk,
    and extent of State supervision. Under the last Administration,
    the CFPB provided a one-size-fits-all approach to regulating
    mortgage lenders.
        When do you expect to apply Section 1024(b)(2) to
    regulating lenders based on more appropriate attributes,
    specifically the absence of any systemic risk to the mortgage
    lending market?

    A.1. The Consumer Financial Protection Bureau (Bureau) uses a
    risk-based prioritization process, consistent with the
    requirements of, and applying the factors set forth in 12
    U.S.C. 5514(b)(2) in determining where to focus supervision
    resources. The Bureau evaluates each institution product line
    based on potential for consumer harm related to a particular
    market; the size of the product market; the supervised entity's
    market share; and risks inherent to the supervised entity's
    operations and offering of financial consumer products within
    that market. Accordingly, the Bureau's prioritization approach
    assesses risks to the consumer at two levels: the market level
    and then the institution level.

        At the marketwide level, we assess the risk to the
            consumer from the products and practices being followed
            in a particular market.

        At the institution level, we start with
            institution's market share within an individual product
            line, which corresponds to the number of consumers
            affected.

        Our prioritization approach augments this size
    consideration significantly with qualitative and quantitative
    factors for each institution product line, such as:

        the strength of compliance management systems;

        the existence of other regulatory actions;

        findings from our prior exams;

        metrics gathered from public reports;

        the number and severity of consumer complaints we
            receive; and

        Fair-lending-focused information.

        Taken together, the information that we gather about each
    institution product line at the market level and at the
    institution-level allows us to focus our resources where
    consumers have the greatest potential to be harmed. We apply
    this disciplined risk assessment process to each market in
    which the Bureau conducts supervisory authority, including the
    mortgage market.

    Q.2. Community and smaller banks that fall outside of the
    CFPB's jurisdiction use service providers that are considered
    nonbank entities. These nonbank entities are almost always
    small businesses that like the banks they service are overseen
    by prudential banking regulators. In the past, the CFPB gave no
    deference to this prudential banking oversight.
        Will you commit to reevaluating this policy to assist our
    Nation's small businesses minimize their regulatory burden and
    lessen the duplicative regulatory oversight?

    A.2. The Bureau has authority to examine service providers to
    financial institutions that are otherwise subject to the
    Bureau's examination authority. \1\ With respect to service
    providers to insured depository institutions with total assets
    of $10,000,000,000 or less, the Bureau's supervisory authority
    is limited to service providers to ``a substantial number'' of
    such institutions. \2\ If the Bureau conducts an examination or
    requires a report from such a service provider, the Bureau is
    required to coordinate with the appropriate prudential
    regulator. \3\
    ---------------------------------------------------------------------------
         \1\ 12 U.S.C. 5514(e), 5515(d).
         \2\ 12 U.S.C. 5516(e).
         \3\ Id.; 12 U.S.C. 5514(e), 5515(d).
    ---------------------------------------------------------------------------
        To date, the Bureau has focused its examinations of service
    providers on a targeted group of major service providers to
    both large depository institutions and nonbanks subject to its
    supervisory authority. As a general matter, absent significant
    indicia of risk of consumer harm, the Bureau likely will
    continue to focus on larger service providers to the large
    banks and nonbanks subject to the Bureau's supervisory
    authority. More broadly, I am engaged with the prudential
    regulators on ways to help minimize regulatory burden and
    duplication on all supervised institutions, while accomplishing
    our separate, distinct, and independent statutory mandate.

    Q.3. In the past, the CFPB Enforcement Office propounded
    onerous Civil Investigative Demands on these small businesses.
    As you can imagine, responding to such Federal Government
    demands can be time consuming and impose an extraordinary cost
    on such businesses.
        Will you commit to reviewing this practice to help protect
    small businesses that form the backbone of hardworking America?

    A.3. A Civil Investigative Demand (CID) is an important tool
    that the Bureau uses to investigate possible law violations. In
    crafting CIDs and participating in meet and confer discussions
    with CID recipients, the Bureau considers the burden on the
    recipient and alternative, less burdensome means to obtain
    information required for the investigation. Under my
    leadership, this practice will continue.
        On April 23, 2019, the Bureau announced changes to its
    policies regarding the notification of purpose included in
    Civil Investigative Demands (CIDs). \4\ Now CIDs will provide
    more information about the potentially applicable provisions of
    law that may have been violated. CIDs will also typically
    specify the business activities subject to the Bureau's
    authority. In investigations where determining the extent of
    the Bureau's authority over the relevant activity is one of the
    significant purposes of the investigation, staff may
    specifically include that issue in the CID in the interests of
    further transparency.
    ---------------------------------------------------------------------------
         \4\ https://www.consumerfinance.gov/about-us/newsroom/cfpb-
    announces-policy-change-regarding-bureau-civil-investigative-demands/
    ---------------------------------------------------------------------------
        The new policy takes into account recent court decisions
    about notifications of purpose, and is consistent with a 2017
    report by the Bureau's Office of Inspector General that
    emphasized the importance of updating Office of Enforcement
    policies to reflect such developments. The new policy is also
    consistent with comments the Bureau received in response to the
    Requests for Information it issued in 2018, seeking feedback
    about various aspects of its operations, including its use of
    CIDs in enforcement investigations.

    Q.4. I've also heard from constituents that in the past, the
    CFPB has brought enforcement actions on small businesses that
    effectively terminate innovative offerings and their ability to
    provide certain products merely because it was politically
    convenient to do so. For example, prepaid cards have helped
    bring banking services to the underbanked and underserved. The
    CFPB's new Prepaid Card Regulation is about 1,800 pages of
    burden that hampers innovation and small business development.
    I understand that this regulation is set to go into effect next
    month.
        Can you commit to undertaking a thorough cost-benefit
    analysis as it relates to this regulation and any additional
    regulatory burden of any industry or small business?

    A.4. Before issuing any regulation, the Bureau is required by
    section 1022(b)(2)(A) of the Dodd-Frank Wall Street Reform and
    Consumer Protection Act to consider the benefits and costs to
    consumers and to providers of consumer financial products or
    services, including the potential reduction of access by
    consumers, impacts on small depository institutions, and the
    effect on consumers in rural areas. In addition, if a proposed
    rule will have a significant impact on a substantial number of
    small entities, the Bureau is required under the Small
    Business. Enforcement and Regulatory Fairness Act to convene a
    panel to confer with a group of small entity representatives. I
    am committed to assuring that the Bureau's cost benefit
    analysis are rigorous and robust and that the Bureau carefully
    considers the regulatory burden of any proposed or final rule.
        The Prepaid Rule, which took effect on April 1, 2019,
    contains a cost benefit analysis prepared pursuant to section
    1022(b)(2)(A). In issuing the Rule, the Bureau determined that
    it would not have a significant impact on a substantial number
    of small entities based on the determination that there were
    not a substantial number of small entities which issued prepaid
    accounts or managed prepaid account programs, and not a
    substantial number of small entities that would experience a
    significant economic impact from the rule. Congress also
    required the Bureau to assess the effectiveness of each
    significant rule within 5 years of the effective date of such
    rules. The Bureau will continue to monitor the implementation
    of the Prepaid Rule and take comment from stakeholders
    regarding any issues.

    Q.5. I've heard from many small businesses that have been under
    the thumb of the CFPB Enforcement Office--some rightfully so
    and others not. The commonality that I have heard is that no
    matter how cooperative the small business is with the CFPB
    Enforcement Office, the CFPB never discloses what it believes
    may be a violation of law until after its investigation with a
    ``gotcha'' phone call. A more transparent process would lead to
    more efficient and cost-effective investigation and be far less
    burdensome for the entity being investigated.
        Will you commit to reevaluating this practice to provide
    businesses with more transparency regarding their alleged
    wrongdoing?

    A.5. As I indicated in an earlier response, the Bureau
    announced changes to its policies regarding the notification of
    purpose included in Civil Investigative Demands (CIDs). Now
    CIDs will provide more information about the potentially
    applicable provisions of law that may have been violated. CIDs
    will also typically specify the business activities subject to
    the Bureau's authority. In investigations where determining the
    extent of the Bureau's authority over the relevant activity is
    one of the significant purposes of the investigation, staff may
    specifically include that issue in the CID in the interests of
    further transparency.
                                    ------

             RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED
                          FROM KATHY KRANINGER

    Q.1. Why has the CFPB decided to use its discretion to
    establish an Office of Innovation and an Office of Cost Benefit
    Analysis, two offices not explicitly authorized in the statute,
    while at the same time failing to continue prior agency
    activities designed to protect student consumers by monitoring
    campus financial products?

    A.1. Section 1012(a)(3) of Title X of the Dodd-Frank Wall
    Street Reform and Consumer Protection Act (Dodd-Frank Act)
    authorizes the Director to establish the general policies of
    the Consumer Financial Protection Bureau (Bureau) with respect
    to all executive and administrative functions, including:
    ``directing the establishment and maintenance of divisions or
    other offices within the Bureau, in order to carry out the
    responsibilities under the Federal consumer financial laws, and
    to satisfy the requirements of other applicable law'' as well
    as ``distribution of businesses among personnel appointed and
    supervised by the Director and among the administrative units
    of the Bureau.'' \1\ Consistent with those authorities and the
    objective in section 1021 of the Dodd-Frank Act to ensure that
    markets for consumer financial products and services operate
    transparently and efficiently to facilitate access and
    innovation, the Office of Innovation was established. While I
    have not made a decision to establish an Office of Cost Benefit
    Analysis, I have prioritized ensuring robust evidence and cost-
    benefit analysis undergird our efforts at the Bureau. Writ
    large, the Bureau's responsibility is consumer protection and
    we do that using all of the tools that Congress gave us. The
    Bureau has an office, the Section for Students and Young
    Consumers, focused on student issues, and the individuals in
    that section have made recommendations and set a strategic plan
    for Bureau activities going forward. These efforts include a
    robust focus on research and other market issues.
    ---------------------------------------------------------------------------
         \1\ 12 U.S.C. 5493.
    ---------------------------------------------------------------------------
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
                 SENATOR MENENDEZ FROM KATHY KRANINGER

    Q.1. You have asserted that the CFPB lacks statutory authority
    to include the Military Lending Act (MLA) in its supervisory
    exams, despite the fact that the 2013 National Defense
    Authorization Act (NDAA) specifically states that the MLA
    ``shall be enforced'' by the CFPB ``under any other applicable
    authorities available to such agencies by law.'' \1\
    ---------------------------------------------------------------------------
         \1\ 10 U.S.C. 987(f)(6).
    ---------------------------------------------------------------------------
        If the 2013 NDAA, which is now law, states that the CFPB
    shall enforce the MLA with all of its applicable authorities
    (including supervisory authority), why is the Bureau failing to
    use all of its authorities and conduct supervisory exams that
    include the MLA?

    A.1. When Congress created the Consumer Financial Protection
    Bureau in 2010, it did not give it the authority to supervise
    for compliance with the Military Lending Act (MLA). In 2013,
    when Congress amended the MLA, it explicitly gave the Bureau
    enforcement authority, but not supervisory authority.
        The Bureau remains committed to the financial well-being of
    America's servicemembers, and that commitment includes ensuring
    that those lenders subject to our jurisdiction comply with the
    MLA. I submitted a legislative proposal to Congress on January
    17, 2019, to explicitly grant the Bureau authority to supervise
    for compliance with the MLA by amending the Consumer Financial
    Protection Act. The requested authority would complement the
    work the Bureau currently does to enforce the MLA. Furthermore
    the Bureau has worked with members of Congress as well as
    military and veterans' advocacy groups to develop legislative
    language to amend the MLA to give the Bureau explicit
    supervisory authority.

    Q.2. On what date did the CFPB stop including the MLA as part
    of its supervisory exams?

    A.2. By August 2018, the Bureau stopped including reviewing for
    MLA compliance as part of any new supervisory exams. By
    October, 2018, all ongoing supervisory work on MLA compliance
    issues concluded.

    Q.3. You have stated that your focus at the CFPB is on
    ``prevention of harm.'' And yet, enforcement actions have
    dropped by about 75 percent and consumer complaints have risen
    to new highs. Moreover, the enforcement actions the CFPB does
    take are weaker than ever. For example, earlier this year the
    CFPB fined a pension advance company $1 for scamming veterans
    out of their pension funds. \2\
    ---------------------------------------------------------------------------
         \2\ https://www.consumerfinance.gov/about-us/newsroom/consumer-
    financial-protection-bureau-settles-broker-high-interest-credit-offers/
    ---------------------------------------------------------------------------
        As part of your role to prevent harm, shouldn't the Bureau
    penalize companies for cheating consumers so they will not
    engage in these practices again, and also send a message to
    other would-be bad actors?
        When calculating how much to fine a company pursuant to an
    enforcement action, is it your practice to take the
    recommendations of career staff?
        According to a report by the Washington Post, leadership at
    the Bureau has ignored or circumvented career staff
    recommendations. Notably, Eric Blankenstein--a political
    appointee with a history of despicable, racist writing--has
    been a part of this dynamic. \3\ According to the report,
    despite recommending that a debt collector return $60 million
    dollars to consumers and pay a heavy fine, Mr. Blankenstein
    decided to scrap consumer restitution and levied only an
    $800,000 penalty on the company.
    ---------------------------------------------------------------------------
         \3\ https://www.washingtonpost.com/investigations/how-trump-
    appointees-curbed-a-consumer-protection-agency-loathed-by-the-gop/2018/
    12/04/3cb6ed56-de20-11e8-aa33-
    53bad9a881e8_story.html?utm_term=.08814a64a5d9
    ---------------------------------------------------------------------------
        Will you commit that you will not circumvent reasonable
    recommendations from career staff in favor of imposing lower
    penalties on companies pursuant to enforcement actions?

    A.3. Many factors are weighed to determine the precise mix of
    restitution, penalties, and injunctive relief appropriate in
    each case. At the center of that effort is serving justice in
    the public interest. The Bureau determines whether a penalty is
    warranted, and, if so, in what amount, based on the facts and
    circumstances of a particular matter. The Consumer Financial
    Protection Act (CFPA) provides three tiers of penalties,
    escalating based on the degree of intent behind the conduct. To
    determine the appropriate penalty amount, the Bureau takes into
    account the policy goals of civil penalties to accomplish
    specific and general deterrence and the mitigating factors in
    12 U.S.C. 5565(c)(3), including the size of financial
    resources and good faith of the person charged, the gravity of
    the violations, the severity of the risks to or losses of the
    consumers, and ``such other matters as justice may require.''
    The Bureau is also authorized to modify or remit any penalty.
        In authorizing the Office of Enforcement to settle or sue
    in a matter in which the Bureau seeks to impose a penalty, I
    apply the law to the facts and circumstances at issue, and
    consider any Bureau staff recommendation.

    Q.4. The Consumer Advisory Board (CAB) is integral to the
    CFPB's ability to successfully fulfill its mandate to protect
    consumers. The CAB not only advises and consults with the CFPB
    on how the Bureau can best implement consumer protection laws,
    but also informs the CFPB of potential emerging threats to
    consumers.
        What role do you think the CAB should play in informing the
    Bureau's work?

    A.4. I have seen firsthand how the Bureau benefits from the
    valuable input provided by the Consumer Advisory Board (CAB)
    and the Bureau's other advisory committees. The CAB is an
    important resource for providing market intelligence and
    feedback on the Bureau's work. In the Dodd-Frank Wall Street
    Reform And Consumer Protection Act, section 1014(a) provides
    specific direction and requires the Director to establish the
    CAB ``to advise and consult with the Bureau in exercise of its
    functions under the Federal consumer financial laws, and to
    provide information on emerging practices in the consumer
    financial products or services industry, including regional
    trends, concerns, and other relevant information.'' I intend to
    utilize the CAB for this important, statutorily mandated
    purpose.

    Q.5. How does the current composition of the CAB comply with
    statutory requirements under the Dodd-Frank Wall Street Reform
    and Consumer Protection Act? \4\
    ---------------------------------------------------------------------------
         \4\ 12 U.S.C. 5494.

    A.5. The current composition of the CAB is reflective of the
    requirements of the Dodd-Frank Wall Street Reform and Consumer
    ---------------------------------------------------------------------------
    Protection Act, section 1014(b).

    Q.6. When did the CAB meet last? When is the CAB's next
    scheduled meeting?

    A.6. The CAB last met on June 5-6, 2019. I am looking forward
    to having them return for their in person meetings in October
    2019.

    Q.7. As a result of Mr. Mulvaney's actions to reduce the size
    of the CAB from 25 members to 9 members, there are fewer civil
    rights, consumer protection, and fair lending representatives
    than in the previous CAB.
        Can I get your commitment to increase the numbers of civil
    rights, fair lending, and consumer protection representatives
    on the CAB?

    A.7. On March 21, 2019, the Bureau announced a series of
    enhancements to the advisory committee program. The
    enhancements are a result of my engagements with current and
    former advisory committee members during a 3-month listening
    tour and feedback from the CAB, CUAC, and CBAC meetings earlier
    that same month. The listening tour and meetings demonstrated
    how the Bureau benefits from the valuable input provided by the
    CAB and the other advisory committees; these groups help to
    improve our work on behalf of consumers. With these
    enhancements the membership will increase and terms for the
    committees will be extended from 1 year to 2 years, and the
    terms will be staggered. The 1-year term of all existing
    members expires September 2019, however a 1-year term extension
    will be provided to the appropriate number of current members
    in order to transition to the staggered terms and ensure
    continuity. In addition to a Chair, each committee will be
    assigned a Vice-Chair. The number of meetings will be increased
    to three in-person gatherings per year. Bureau staff are in the
    process of reviewing applications for the next round of
    appointments. I will seek to ensure that the membership of the
    committees includes, a broad array of experts meeting statutory
    requirements, mission needs, and demographic diversity.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNER
                          FROM KATHY KRANINGER

    Q.1. As you know the CFPB's QM Rule created an exemption from
    the 43 percent DTI cap for mortgages eligible for purchase by
    Fannie Mae and Freddie Mac. This is known commonly as the ``GSE
    patch.'' There's evidence from historical default rates that
    show looking at mortgage rate is a better predictor of default
    than the DTI ratio alone.
        Do you believe changing the current DTI-heavy framework
    with one that captures risk more holistically would strike
    better balance between expanding access while mitigating credit
    risk?

    A.1. The Consumer Financial Protection Bureau (Bureau) has been
    considering the impact of the ATR/QM rule and the role of the
    GSE patch in the mortgage market, recognizing the expiration of
    the patch no later than 2021. The potential expiration of the
    patch is a complex situation, and the Bureau is working
    diligently to formulate and implement appropriate strategies to
    handle it. Further we have been discussing it with other
    appropriate regulators, given the interconnected nature of the
    decisions we are separately facing. Your specific question
    about the weight given to the debt to income ratio (DTI) is one
    that would require significant research, particularly in terms
    of developing an alternative that would strike the balance you
    suggest. However, we have been consulting with various market
    participants, including financial institutions and consumer
    advocates, to identify appropriate methods that will ensure QM
    requirements impose as little burden on industry and consumers
    as possible and that access to credit is preserved.

    Q.2. Ensuring high-quality and affordable mortgage access for
    underserved, creditworthy borrowers is an essential mission
    that helps drive economic growth. Currently, the QM patch is
    key to helping achieve that mission with the overall U.S. home
    ownership rate rising to the highest level (64.8 percent) since
    2014.
        If the GSEs remain in conservatorship beyond January 2021
    and the QM patch were to expire without any sort of reliable
    substitute, approximately 30 percent of loans backed by the
    GSEs could face new liability which would negatively impact
    home values and create instability across the secondary market.
        The June 2017 Department of Treasury report examining core
    principles for regulating the U.S. financial system outlined
    important areas for reform with respect to the Ability to
    Repay/Qualified Mortgage (ATR/QM) Rule and the QM Patch, which
    is currently set to expire on January 10, 2021, or when the
    GSEs exit conservatorship, whichever comes first.
        As discussions around conservatorship status continue and
    the Patch expiration date quickly approaches, can you commit to
    working with market participants, including financial
    institutions and consumer advocates, to align QM requirements
    with GSE eligibility requirements in order to preserve a robust
    market?

    A.2. I understand the importance of maintaining the smooth
    functioning of the mortgage market and avoiding any unnecessary
    or undue disruption that would interfere with consumers' access
    to credit. The expiration of the patch is a complex situation,
    and the Bureau is working diligently to formulate and implement
    appropriate strategies to handle it. We have been consulting
    with various market participants, including financial
    institutions and consumer advocates, to identify appropriate
    methods that will ensure that Qualified Mortgage requirements
    impose as little burden on industry and consumers as possible
    and that access to credit is preserved.

    Q.3. Data Security--In your written testimony, you mention that
    the number one consumer complaint in 2018 was about consumer
    credit reporting agencies. According to the CFPB's data, the
    Bureau has handled well over 150K credit reporting complaints.
        I have a bill with Senator Warren--the Data Breach
    Prevention and Compensation Act--that would impose strict
    liability for breaches involving consumer data at credit
    reporting agencies. It provides additional authority to the FTC
    to levy fines, but that's certainly not the only workable
    approach. I'm interested to know more about how you view the
    CFPB's authority to regulate these firms, both with respect to
    data reporting accuracy and cybersecurity.
        How has the CFPB used its supervisory authority to address
    complaints over data accuracy at the credit reporting agencies?

    A.3. In carrying out its supervisory function, the Bureau has
    focused on the accuracy of consumer reports provided by
    consumer reporting agencies (CRAs) as well as the accuracy of
    information supplied by furnishers. The Bureau also focuses on
    dispute handling. Complaints regarding data accuracy are
    reviewed and evaluated to assess the CRA's compliance with the
    accuracy requirements of the Fair Credit Reporting Act (FCRA).
    Often consumer complaints focus on a dispute about the accuracy
    of information contained in a consumer report. Frequently,
    these complaints implicate those provisions of the FCRA that
    require CRAs and furnishers to take certain actions in response
    to a dispute. Thus, complaints about disputes receive
    particular attention from the Bureau and are one of many data
    points evaluated when deciding to conduct supervisory
    examinations of CRAs and furnishers.
        The Bureau previously summarized the results of its
    consumer reporting Supervision program in its March 2017
    edition of its Supervisory Highlights publication. \1\ As
    discussed in the report, the Bureau has focused its supervisory
    work on the key elements underpinning accuracy. As a result of
    these reviews, the Bureau directed specific improvements in
    data accuracy and dispute resolution at one or more CRAs,
    including:
    ---------------------------------------------------------------------------
         \1\ https://www.consumerfinance.gov/documents/2774/
    201703_cfpb_Supervisory-Highlights-Consumer-Reporting-Special-
    Edition.pdf

        improved oversight of incoming data from
    ---------------------------------------------------------------------------
            furnishers;

        institution of quality control programs of compiled
            consumer reports;

        monitoring of furnisher dispute metrics to identify
            and correct root causes;

        enhanced oversight of third-party public records
            service providers;

        adherence to the independent obligation to
            reinvestigate consumer disputes; including review of
            relevant information provided by consumers; and

        improved communication to consumers of dispute
            results.

        In addition, the Bureau directed both bank and nonbank
    furnishers, consistent with the FCRA's requirements, to develop
    reasonable written policies and procedures regarding accuracy
    of the information they furnish and to take corrective action
    when they furnished information they determined to be
    inaccurate. The Bureau also found that furnishers failed to
    either conduct investigations or send results of dispute
    investigations to consumers and required that these furnishers
    bring their dispute handling practices into compliance with
    legal requirements.
        In addition to supervisory work, the Bureau has brought
    enforcement actions and entered into settlements related to
    institutions' violation of the FCRA's accuracy and dispute
    investigation requirements. \2\ The Bureau's work in this
    important area is ongoing, using the authority and tools
    provided by FCRA, the Dodd-Frank Wall Street Reform and
    Consumer Protection Act, and other statutes.
    ---------------------------------------------------------------------------
         \2\ See, e.g., http://files.consumerfinance.gov/f/201510-cfpb-
    consent-order-general-information-service-inc.pdf; http://
    files.consumerfinance.gov/f/201512-cfpb-consent-order-clarity-services-
    inc-timothy-ranney.pdf; https://files.consumerfinance.gov/f/documents/
    bcfp-security-group-inc-consent-order-2018-06.pdf; https://
    files.consumerfinance.gov/f/documents/201701-cfpb-CitiFinancial-
    consent-order.pdf.

    Q.4. Do you believe the CFPB has the authority to supervise
    ---------------------------------------------------------------------------
    financial institutions with respect to cybersecurity?

    A.4. The Bureau has certain statutory authorities that may be
    used to examine supervised entities for data security issues,
    but it is important to note that the Bureau has been excluded
    from exercising authority over certain cybersecurity statutes
    and rules.
        As a general matter, the Bureau may ``require reports and
    conduct examinations'' of financial institutions within its
    supervisory authority for the purposes of (1) assessing
    compliance with the requirements of Federal consumer financial
    law, (2) obtaining information about compliance systems or
    procedures, and (3) detecting and assessing for risks to
    consumers and to markets for consumer financial products or
    services. \3\ Federal consumer financial law includes most
    provisions of the Fair Credit Reporting Act (FCRA), certain
    provisions of sections 502 through 509 of the Gramm-Leach-
    Bliley Act (GLBA), and the Dodd-Frank Wall Street Reform and
    Consumer Protection Act's prohibition on unfair, deceptive, or
    abusive acts or practices. \4\ Aspects of an institution's data
    security may implicate these provisions depending on the facts
    and circumstances, particularly in the event of a breach. The
    Bureau can supervise financial institutions within its
    supervisory authority for compliance with these provisions and
    require those institutions to so comply.
    ---------------------------------------------------------------------------
         \3\ 12 U.S.C. 5514(b)(1)(A); see also 12 U.S.C. 5515(b)(1)(A).
         \4\ 12 U.S.C. 5531, 5536.
    ---------------------------------------------------------------------------
        Critically, however, Congress specifically excluded certain
    statutory provisions related to data security from the Bureau's
    purview. The Bureau does not have authority to supervise for,
    enforce compliance with, or write regulations implementing the
    GLBA's safeguards provision or the FCRA's red flags and records
    disposal provisions. The GLBA safeguards provision and
    implementing rules and guidelines require certain financial
    institutions to develop, implement, and maintain comprehensive
    information security programs that contain administrative,
    technical, and physical safeguards. The FCRA records disposal
    provision and implementing rules require certain financial
    institutions to take reasonable measures to protect against
    unauthorized access to or use of consumer report information in
    connection with its disposal. Finally, the FCRA red flags
    provision and implementing rule and guidelines require certain
    financial institutions to implement written Identity Theft
    Prevention Programs designed to detect, prevent, and mitigate
    identity theft.

    Q.5. Do you believe CFPB has the authority to levy fines
    against Equifax through its Unfair and Deceptive Acts and
    Practices authority for the exposure of over 146 million
    Americans' credit files?

    A.5. If an entity violates Federal consumer financial law, the
    entity can be required to pay a civil penalty. The Bureau
    determines whether to seek a penalty, and, if so, in what
    amount, based on the facts and circumstances of a particular
    matter. The Consumer Financial Protection Act (CFPA) provides
    three tiers of penalties, allowing for higher penalties based
    on the degree of intent of the person who has been charged. To
    determine the appropriate penalty amount, the Bureau takes into
    account the mitigating factors in 12 U.S.C. 5565(c)(3), which
    include the financial resources and good faith of the person
    charged, the gravity of the violations, the severity of the
    risks to or losses of the consumers, and ``such other matters
    as justice may require.'' The Bureau is also authorized to
    modify or remit any penalty. In general, the Bureau does not
    comment publicly on confidential enforcement investigations to
    protect the integrity of the law enforcement process, including
    the confidentiality and due process interests of those subject
    to supervisory or investigatory activity.

    Q.6. Does this type of behavior warrant such a fine?

    A.6. As noted in my previous response, in general, the Bureau
    does not comment on confidential enforcement investigations.
    Premature disclosure can interfere with investigations and
    create reputational harm. The Bureau determines whether it
    believes a penalty is warranted and, if so, in what amount
    based on the facts and circumstances of a particular matter and
    the statutory factors set forth in the CFPA.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
                          FROM KATHY KRANINGER

    Q.1. Operations--Please provide staffing levels for each
    division (e.g., SEFL) and office (e.g., Enforcement, NE Region)
    at the Bureau at the end of the pay period closest to November
    17, 2017, December 11, 2018, and today.

    A.1.
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]

    Q.2. In her testimony, Director Kraninger mentioned that
    Director Mulvaney had asked to the CFPB Inspector General to
    investigate conduct by Policy Associate Director Eric
    Blankenstein. Please provide a copy of the referral. If you're
    unable to provide the referral, please describe in detail what
    the Inspector General was asked to investigate.

    A.2. Pursuant to Section 6 of the Inspector General Act, the
    Inspector General may make such investigations and reports
    relating to the administration of programs and the operations
    of the Bureau as are, in the judgment of the Inspector General,
    necessary or desirable. To protect the privacy and due process
    interests of everyone involved, it would not be appropriate for
    me to comment further on this matter. I will consider carefully
    any findings or recommendations of our Inspector General.

    Q.3. Rules--On February 6, 2019, the CFPB proposed rescinding
    the mandatory underwriting provisions of its rule on Payday,
    Vehicle Title, and Certain High-Cost Installment Loans (payday
    rule).
        Did the CFPB have any new facts or evidence to justify the
    new rule or was the change an interpretation of existing
    evidence?

    A.3. As discussed in part V.B. of the Payday Reconsideration
    Proposal, the Bureau, in tentatively determining to reconsider
    the Bureau's mandatory underwriting requirements, focused its
    analysis primarily on the weight to be accorded to the key
    evidence, including research, on which the Bureau relied for
    the 2017 Final Rule. Nevertheless, in developing the Payday
    Reconsideration Proposal, the Bureau also considered other
    potentially relevant evidence, including research which became
    available between the time the Bureau issued the 2017 Final
    Rule in October 2017 and the time the Bureau published its
    Payday Reconsideration Proposal in February 2019. Although
    there were relatively few new studies made available during
    this limited interval, the Payday Reconsideration Proposal
    describes and analyzes several of them. See Bureau of Consumer
    Financial Protection, Payday, Vehicle, Title, and Certain High-
    Cost Installment Loans, 84 FR 4252, 4292-94 (Feb. 14, 2017).
    The Bureau also sought public comment on the Payment
    Reconsideration Proposal, including the submission of any
    potentially relevant research.

    Q.4. The text of the new rule suggests that the existing
    evidence ``is not sufficiently robust and reliable to support
    that determination, in light of the impact those provisions
    will have on the market for covered . . . loans, and the
    ability of consumers to obtain such loans.'' Does the Bureau
    plan to do additional research related to the short-term loan
    market, including into the ability of payday customers to
    anticipate whether they will be able to repay the loans in full
    and on time?

    A.4. As the Bureau noted in its Payday Reconsideration
    Proposal, ``[a]fter many years of rulemaking, outstanding
    questions that the Bureau and other stakeholders have on
    whether the identified practice is unlawful and whether the
    Bureau intervention (i.e., the Mandatory Underwriting
    Provisions) is appropriate remain; the Bureau therefore
    preliminarily concludes that significantly more time, money,
    and other resources would be needed from the Bureau, industry,
    consumers, and other stakeholders to engage in the research and
    analysis required to develop specific evidence that might
    support determining that the identified practice is unfair and
    abusive and that imposing an ability-to-repay regulatory scheme
    is a necessary and appropriate response to that practice.''
    That being said, the Bureau will consider relevant research
    that is available in deciding its future steps for its Payday
    Reconsideration Proposal.

    Q.5. The CFPB has filed numerous enforcement actions against
    entities that would have been covered by the payday rule. Did
    CFPB consider evidence gathered in the investigations or
    contained in the record of any cases before rescinding the
    underwriting standards?

    A.5. In short, yes. In developing the Payday Reconsideration
    Proposal, ``the Bureau relied on its expertise and experience
    in supervisory matters and enforcement actions concerning
    covered lenders in making judgments about the covered short-
    term and longer-term balloon-payment loan markets.'' \1\
    ---------------------------------------------------------------------------
         \1\ 84 FR 4266.

    Q.6. The CFPB is reportedly in the process of writing a rule to
    implement the Fair Debt Collection Practices Act. Debt
    collection is consistently one of the top sources of consumer
    complaints.
        What do you think are the most important issues facing
    consumers with respect to debt collection and how do you
    propose to address these problems?

    A.6. On May 7, 2019, the Bureau issued a Notice of Proposed
    Rulemaking (NPRM) to implement the Fair Debt Collection
    Practices Act (FDCPA). The proposal would provide consumers
    with clear protections against harassment by debt collectors
    and straightforward options to address or dispute debts. Among
    other things, the NPRM would set clear, bright-line limits on
    the number of calls debt collectors may place to reach
    consumers on a weekly basis; clarify how collectors may
    communicate lawfully using newer technologies, such as
    voicemails, emails, and text messages, that have developed
    since the FDCPA's passage in 1977; and require collectors to
    provide additional information to consumers to help them
    identify debts and respond to collection attempts. The Bureau
    will carefully consider feedback received in response to the
    NPRM before issuing a final rule.
        As the Bureau summarized in its 2019 Fair Debt Collection
    Practices Act Annual Report, \2\ written notifications about
    the debt were the second-most common debt collection issue
    consumers complained to the Bureau about in 2018, while
    complaints about communication tactics were the third-most
    common issue. Any final debt collection rule issued by the
    Bureau will aim to bring clarity for both consumers and
    collectors as to the application of this over 40-year-old
    statute.
    ---------------------------------------------------------------------------
         \2\ https://www.consumerfinance.gov/data-research/research-
    reports/fair-debt-collection-practices-act-annual-report-2019/

    Q.7. Is the CFPB considering exempting limited content
    communications that ask a consumer to call back, potentially
    ---------------------------------------------------------------------------
    paving the way for unlimited contacts from debt collectors?

    A.7. The proposal would not exempt limited content
    communications from the FDCPA. The FDCPA prohibits collectors
    from harassing or abusing consumers or engaging in unfair
    practices. These standards apply today and under the proposed
    rule; they would continue to apply, including where limited
    content messages are used to harass or abuse consumers or
    subject them to unfair practices. A collector who emails or
    texts too frequently may face liability, even if the emails or
    texts are limited content messages.
        The Bureau's proposed rule would define, and provide
    example language for, a ``Limited-content message'' that a debt
    collector could send by, for example, voicemail or text and
    which would include a request that the consumer reply to the
    message. The proposal would further provide that a limited-
    content message is an attempt to communicate but is not a
    communication. The Bureau's proposed rule generally would limit
    debt collectors to no more than seven attempts by telephone per
    week to reach a consumer about a specific debt including
    telephone calls that are limited content messages. Once a
    telephone conversation between the debt collector and consumer
    takes place, the debt collector must wait at least a week
    before calling the consumer again. The Bureau will carefully
    consider feedback received in response to the NPRM before
    issuing a final rule.

    Q.8. Data obtained by FOIA from the FTC indicate that, in 2017,
    more than 200,000 consumers complained about repeated calls
    from debt collectors. \3\ Do you think it is important to
    impose stringent limits on the number of times collectors can
    call?
    ---------------------------------------------------------------------------
         \3\ National Consumer Law Center ``Consumer Complaint About Debt
    Collection'', February 2019, https://www.nclc.org/images/pdf/pr-
    reports/report-analysis-debt-coll-ftc-data.pdf.

    A.8. FDCPA section 806 prohibits a debt collector from engaging
    in any conduct the natural consequence of which is to harass,
    oppress, or abuse any person in connection with the collection
    of a debt. FDCPA section 806(5) describes one example of debt
    collector conduct that section 806 prohibits: causing a
    telephone to ring or engaging any person in telephone
    conversation repeatedly or continuously with intent to annoy,
    abuse, or harass any person at the called number.
        As noted in the previous response, the Bureau's proposed
    rule generally would limit debt collectors to no more than
    seven attempts by telephone per week to reach a consumer about
    a specific debt. Once a telephone conversation between the debt
    collector and consumer takes place, the debt collector must
    wait at least a week before calling the consumer again. The
    proposed rule also would clarify how debt collectors may
    lawfully use newer communication technologies, such as
    voicemails, emails, and text messages, to communicate with
    consumers and would protect consumers who do not wish to
    receive such communications by, among other things, allowing
    them to unsubscribe to future communications through these
    methods. The Bureau will carefully consider feedback received
    in response to the proposed rule before issuing a final rule.
    In addition, the Bureau has taken law enforcement action
    against a debt collector whose calling practices violated FDCPA
    section 806 and 806(5). \4\
    ---------------------------------------------------------------------------
         \4\ https://www.consumerfinance.gov/policy-compliance/enforcement/
    actions/green-tree-servicing-llc/

    Q.9. Will the cost benefit analysis for the new rule count as a
    harm to a consumers the collections of debts that are beyond
    ---------------------------------------------------------------------------
    the statute of limitations?

    A.9. Pursuant to section 1022(b)(2) of the Dodd-Frank Wall
    Street Reform and Consumer Protection Act, the Bureau is
    considering the benefits and costs to consumers and covered
    persons of proposed regulation under the FDCPA. In conducting
    its analysis under section 1022(b)(2), the Bureau generally
    takes as a baseline the state of the world absent the proposed
    rule and evaluates potential benefits and costs of the proposal
    relative to that baseline. The Bureau is not considering
    proposed rules that it would expect to increase collection or
    attempted collection of debts that are beyond the statute of
    limitations, and therefore the Bureau does not expect that
    proposed rules would harm consumers in that way.

    Q.10. You visited a debt collection agency last month while you
    were in Chicago. \5\ Have you visited any legal services
    programs that help people with alleged debts? Any credit
    counseling agencies? Any trial courts where consumers are being
    sued on debts?
    ---------------------------------------------------------------------------
         \5\ AccountsRecovery.Net ``Behind the Scenes of Kathy Kraninger's
    First Visit to a Collection Agency'', https://www.accountsrecovery.net/
    2019/02/20/behind-the-scenes-of-kathy-kraningers-first-visit-to-a-
    collection-agency/.

    A.10. Since becoming Director of the Bureau, I have made it a
    priority to hear from various community and consumer groups,
    including legal aid organizations that provide direct client
    services. I have hosted a series of listening sessions and met
    with consumer advocates including legal aid attorneys to learn
    more about consumer finance issues affecting their communities.
        On January 18, 2019, I hosted a community listening session
    in San Francisco, CA, where I met with approximately 21
    consumer advocacy, civil rights, community organizations as
    well as legal service providers including staff representing
    the following organizations: the East Bay Community Law Center,
    National Housing Law Project, and Western Center on Law and
    Poverty. Debt collection was one of several issues discussed
    during the meeting.
        On January 22, 2019, I met with nearly 40 consumer
    advocacy, civil rights, and community organizations at the
    Bureau headquarters to discuss a variety of topics, including
    debt collection. The National Consumer Law Center (NCLC) and
    the National Association of Consumer Advocates (NACA), both of
    which represent legal aid and private consumer attorneys,
    participated as did representatives from the Atlanta Legal Aid
    Society and Texas Rio Grande Legal Aid.
        On February 5, 2019, I hosted a community listening session
    in Chicago, IL, where I met with approximately 14 consumer
    advocacy, civil rights, community organizations as well as
    legal service providers including staff representing the
    following organizations: Legal Assistance Foundation, Northwest
    Side Housing Center, Shriver Center on Poverty Law, and Spanish
    Coalition for Housing. The legal aid attorneys and local
    advocates in attendance discussed debt collection alongside
    other issues affecting local consumers.
        On March 28, 2019, I met with approximately five consumer
    advocacy, civil rights, and community organizations. Debt
    collection was the primary topic of my meeting with consumer
    groups in New York City. Representatives from legal aid
    organizations, including Legal Services NYC, Mobilization for
    Justice, and The Legal Aid Society relayed client stories and
    made policy recommendations.
        On April 30, 2019, I hosted a community roundtable in Los
    Angeles with approximately 20 community groups. Debt
    collections was one of few topics discussed. Representatives
    from legal aid organizations, including Bet Tzedek Legal
    Services, Legal Aid Foundation of Los Angeles, Legal Aid
    Society of San Diego, Public Counsel, NACA, and the University
    of Berkeley Center for Consumer Law and Economic Justice. I
    also visited Bet Tzedek Legal Services during that trip.
        On May 8, 2019, I hosted a community roundtable in
    Philadelphia following a public town hall on debt collection.
    NCLC, Clarifi, Community Legal Services of Philadelphia,
    National Consumer Bankruptcy Rights, Public Interest Law
    Center, Senior Law Center, and members of NACA attended to
    discuss their views on the Bureau's proposed debt collection
    rule.
        Most recently, I met with legal aid and private consumers
    attorneys in Austin on May 22, 2019, including Texas RioGrande
    Legal Aid and members of NACA to discuss a few policy issues,
    including debt collection.
        Bureau staff continue to engage in discussions with these
    groups to maintain regular exchanges of information about how
    issues such as debt collection affect consumers. In addition,
    Bureau subject matter experts have met with credit counseling
    agencies, such as Money Management International, and legal
    advocacy organizations, such as NCLC and the National
    Association of Consumer Bankruptcy Attorneys (NACBA), to
    discuss debt collection and debt settlement issues.

    Q.11. Enforcement--In the first 6 months of his tenure, former
    Interim Director Mick Mulvaney indicated \6\ that he had not
    initiated any new enforcement actions. How many investigations
    have been initiated since November 17, 2017? How many since
    December 11, 2018?
    ---------------------------------------------------------------------------
         \6\ Politico, ``Mick Mulvaney Isn't Blowing Up the CFPB'', April
    30, 2018, https://www.politico.com/story/2018/04/30/mick-mulvaney-
    consumer-protection-507460.

    A.11. The Bureau does not generally comment publicly on
    ---------------------------------------------------------------------------
    confidential enforcement investigations.

    Q.12. In March 2018, the CFPB acknowledged that it was
    investigating consumer abuses related to the massive security
    breach announced by Equifax on September 7, 2017, but a year
    later, no enforcement action has been announced. \7\ Is the
    enforcement action still ongoing?
    ---------------------------------------------------------------------------
         \7\ American Banker ``Equifax Cites `Ongoing Investigation' by
    CFPB, Other Agencies'', March 2, 2018, https://www.americanbanker.com/
    news/equifax-cites-ongoing-investigation-by-cfpb-other-agencies.

    A.12. On February 21, 2019, Equifax published its Form 10-K,
    which disclosed that the Bureau, among other Government
    entities, was investigating the 2017 data breach. Beyond
    sharing what is in the public record, the Bureau will not
    comment further publicly on the details or status of this
    ---------------------------------------------------------------------------
    investigation at this time.

    Q.13. On March 12, 2019, an OCC spokesman said ``[w]e continue
    to be disappointed with Wells Fargo Bank N.A.'s performance
    under our consent orders and its inability to execute effective
    corporate governance and a successful risk-management program.
    We expect national banks to treat their customers fairly,
    operate in a safe and sound manner, and follow the rules of
    law.'' The OCC partnered with the CFPB on an enforcement action
    against Wells Fargo in April 2018, related to its auto and
    mortgage lending practices. \8\
    ---------------------------------------------------------------------------
         \8\ CFPB ``Bureau of Consumer Financial Protection Announces
    Settlement With Wells Fargo for Auto-Loan Administration and Mortgage
    Practices'', April 20, 2018, https://www.consumerfinance.gov/about-us/
    newsroom/bureau-consumer-financial-protection-announces-settlement-
    wells-fargo-auto-loan-administration-and-mortgage-practices/.
    ---------------------------------------------------------------------------
        Is the CFPB satisfied that Wells Fargo is satisfying the
    terms of its consent order in the April 2018 case?

    A.13. I am firmly committed to ensuring that Wells Fargo fully
    complies with the consent order, including the requirements of
    remediation and restitution for harmed consumers. The current
    details and specific status of Wells Fargo's remediation plan
    is confidential supervisory information under the Bureau's
    regulations. I can tell you that while the Bureau is working
    with Wells Fargo to ensure its compliance with the consent
    order, I am not satisfied with the Bank's progress to date and
    I have made that clear.

    Q.14. If not, what tools does the CFPB have to force Wells
    Fargo to comply?

    A.14. The Bureau expects Wells Fargo to comply with the terms
    of the consent order, and has the capability to examine for
    that compliance as well as take further enforcement action. In
    dealing with complex issues involving large institutions such
    as Wells Fargo, it is important that the Bureau consult with
    our regulatory partners in determining appropriate next steps.
    More specific information regarding the Bureau's deliberations
    in this matter implicates longstanding Executive Branch
    confidentiality interests that protect the Government's
    deliberative process and law-enforcement proceedings.

    Q.15. Has Wells Fargo fully complied with the terms of its
    September 2016 consent order with the Bureau related to fake
    accounts?

    A.15. The Bureau continues to work with Wells Fargo to ensure
    it fully complies with the Bureau's September 2016 consent
    order related to fake accounts.
                                    ------

                   RESPONSES TO WRITTEN QUESTIONS OF
               SENATOR CORTEZ MASTO FROM KATHY KRANINGER

    Q.1. Budget--Will you reverse the decisions to eliminate
    positions, freeze new hiring, and draft an adequate budget that
    ensures the CFPB is fulfilling its statutory mission?

    A.1. I have been working with Bureau leadership since my
    confirmation to understand the immediate staffing needs of the
    Consumer Financial Protection Bureau (Bureau) and have already
    approved at least 100 exceptions to the hiring freeze to date,
    which has resulted in over 190 internal and external personnel
    actions and/or hires across different program areas to ensure
    the important work of the Bureau continues with minimal
    interruptions during this initial transition period.
        As I said in my testimony, I have also spent significant
    time understanding the Bureau's operations and looking at ways
    to improve execution of the Bureau's mission. With the
    incredible flexibility Congress provided this agency, I feel a
    deep sense of responsibility for ensuring we become a model for
    efficient use of resources. I will continue to examine how we
    can best utilize all the tools that Congress has given us--
    broadening our efforts to focus on prevention of harm as a
    primary goal for our actions.
        With that in mind, I have approved a number of initiatives
    designed to help determine optimal staffing for the long term
    to ensure the Bureau runs as effectively as possible in service
    of our mission and that we dedicate resources to those
    functions that are of the highest value to consumers. These
    initiatives include better aligning resources with top policy
    priorities and improving how mission, administrative, and
    operational functions are performed across the Bureau. I am
    working with Division Leaders on a Staffing Planning exercise
    which will take the Bureau out of the hiring freeze. Senior
    Leadership is aligning staffing resources and requests to
    ensure we can accomplish our mission in the most efficient and
    effective way possible. I expect we will complete the Staffing
    Planning before the start of Fiscal Year 2020, October 1, 2019.

    Q.2. Staffing at the CFPB--How many lawyers now work in the
    enforcement division?

    A.2. As of June 28, 2019, 104 attorneys work within the Office
    of Enforcement in the Division of Supervision, Enforcement, and
    Fair Lending.

    Q.3. How many lawyers work in enforcement now compared to when
    Richard Cordray left the agency?

    A.3. As of June 28, 2019, 104 attorneys work within the Office
    of Enforcement. On the date Director Richard Cordray resigned,
    the Office of Enforcement had 111 attorneys.

    Q.4. Are you hiring new lawyers for the enforcement division or
    does your hiring freeze include attorneys who investigate
    consumer complaints for fraud and deceptive practices?

    A.4. The Office of Enforcement is subject to the agency-wide
    hiring freeze. However, the Office has been granted an
    exception to the freeze in order to hire new line attorneys.

    Q.5. What is the status of the Pathways Program now?

    A.5. The hiring freeze includes the Pathways Program. The
    Bureau is not currently hiring paid interns, recent graduates,
    or Presidential Management Fellows under the Pathways Program.
    The Director's Financial Analyst (DFA) program has continued. A
    new cohort of DFAs just began.

    Q.6. How many Pathways Program participants still work at the
    Bureau?

    A.6. There are not any Pathways Program participants who still
    work at the Bureau.

    Q.7. Are you recruiting a new cohort of applicants for the
    Pathways Program?

    A.7. The Bureau is not actively recruiting new applicants for
    any of the Pathways Programs. As provided in response to
    earlier questions, I am working with Division Leaders on a
    Staffing Planning to ensure we can accomplish our mission in
    the most efficient and effective way possible. In addition, I
    have asked for a proposal related to the Pathways Program.

    Q.8. Political Appointees at the CFPB--How many political
    appointees have you hired at the Bureau?

    A.8. The Bureau has hired four political appointees during my
    tenure at the Bureau.

    Q.9. What are their positions?

    A.9. The four positions are:

        Policy Associate Director for External Affairs
            (replacing a departing incumbent of this position)

        Deputy Assistant Director for Communications

        Deputy Chief of Staff, and

        Deputy Director.

    Q.10. What are their salaries?

    A.10. The salaries of the four political appointees are:

        Policy Associate Director for External Affairs:
            $259,500

        Deputy Assistant Director for Communications:
            $185,615

        Deputy Chief of Staff: $239,595, and

        Deputy Director: $259,500.

    Q.11. Please explain why the Bureau has hired this many
    political appointees?

    A.11. The Dodd-Frank Act vests significant authority in the
    Director, including with regard to fixing the number and means
    of appointment of all Bureau employees, in accordance with the
    provisions of title 5, United States Code. It is a priority for
    me to develop a diverse, capable, and motivated team at the
    Bureau to carry out our important mission. As such, I will use
    the authorities Congress provided to that end.

    Q.12. Do you plan to hire more political appointees? If so, in
    what positions?

    A.12. With the above response in mind, the Bureau does not have
    any requests pending with OPM for additional Schedule C
    appointments.

    Q.13. Data Collection on the Student Loan Market--During your
    testimony before the House Financial Services, Representative
    Foster asked you about a proposal by the Consumer Financial
    Protection Bureau to collect and analyze data on the student
    loan market.
        Do you have further information on the Bureau's proposal to
    collect student loan debt?
        Did you receive any feedback on the proposal from the
    Department of Education or the Office of Management and Budget?
        Do you plan to continue with this proposal to analyze the
    student loan market?

    A.13. In accordance with the Paperwork Reduction Act of 1995
    (PRA), the Bureau published two notices in the Federal Register
    soliciting comment on a new proposed information collection--
    the ``Student Loan Servicing Market Monitoring'' project. The
    collection was submitted to the Office of Management and Budget
    (OMB) and the second notice was published in the Federal
    Register on September 6, 2017. The comment period for this
    notice closed on October 6, 2017. As of July 1, 2019, the
    information and collection request is still pending at OMB. At
    the hearing, I noted the priority of hiring the statutorily
    required position of Private Education Loan Ombudsman, which is
    underway. Once this position is filled, we will review the data
    request, assess how the data may support ongoing market
    monitoring, and make a determination after that whether the
    information request appropriately supports our work. This
    evaluation will contribute to the work I am already doing in
    assessing our market monitoring efforts relative to student
    loans. In the meantime, the Bureau continuously monitors this
    market.

    Q.14. Auto Lending--A record 7 million Americans are 3 months
    or more behind on their car payments. Economists suggest that
    rising car loan delinquencies signify major distress for low-
    income families.
        Are you monitoring the large delinquencies in auto lending?

    A.14. Yes. The Bureau's Markets Office includes a program
    dedicated to monitoring the auto finance industry. As part of
    that work, we review market data and information and we work to
    identify the causes of any trends we observe. The absolute
    number of outstanding auto loans has increased by 7 percent
    over the past 2 years which, all else being equal, would be
    expected to lead to some increase in the absolute number of
    delinquent loans. Measured as a percentage of loans, as of the
    end of the first quarter of 2019, 1.49 percent of auto loans
    were 60 days or more delinquent. That was slightly below the
    delinquency rate at the end of the first quarter of 2018 and
    slightly above the delinquency rate at the end of the first
    quarter of 2017. We intend to continue to monitor this issue.

    Q.15. Do you know how many of those borrowers with delinquent
    loans got their loans from a car dealership?

    A.15. Estimates as to the share of auto loans that are
    originated through car dealerships range from a low of 63
    percent to a high of over 80 percent. The data available to the
    Bureau through its market monitoring does not indicate the
    delinquency rate for these loans. The Bureau does monitor
    delinquency rates by credit scores and by the type of
    institution holding the loan and the Bureau has issued a
    research report analyzing the performance of loans by loan size
    and credit score.

    Q.16. The CFPB still has a responsibility to enforce fair
    lending laws in auto lending.
        What are you doing to ensure that borrowers of color are
    not being charged more due to discretionary dealer markups?

    A.16. On May 21, 2018, the President signed a joint resolution
    passed by Congress disapproving the Bureau's Bulletin titled
    ``Indirect Auto Lending and Compliance with the Equal Credit
    Opportunity Act'' (Bulletin), which had provided guidance about
    Equal Credit Opportunity Act (ECOA) and its implementing
    regulation, Regulation B. Consistent with the joint resolution,
    the Bulletin has no force or effect. The ECOA and Regulation B
    are unchanged and remain in force and effect, and the Bureau
    continues to work to ensure compliance with their requirements.
        The Bureau also continues to administer prior fair lending
    enforcement actions, monitor the market generally, and
    investigate, as appropriate, information and complaints that
    come to the Bureau.

    Q.17. Is the CFPB going to limit or prevent auto lenders from
    installing ``kill switches'' in cars that prevent the owner
    from driving them?

    A.17. The Bureau's Markets Office includes a program dedicated
    to monitoring the auto finance industry. As part of that work,
    staff review market data and information that suggests trends
    in the market, and then work to identify possible causes. The
    Bureau is aware of the trend by auto lenders to include ``kill
    switches,'' better known as starter interrupt devices, in cars.
    Bureau staff have been researching various market sources,
    including lenders who utilize the starter interrupt devices,
    and vendors who provide the devices, to better understand their
    use and their effects, including their potential risks to
    consumers.

    Q.18. Military Lending Act--In your testimony before the Senate
    Banking Committee, I requested the CFPB's legal analysis that
    led you to determine the CFPB could not use its supervisory
    authority to ensure compliance with the Military Lending Act
    (MLA). Your staff told me that the legal analysis is considered
    confidentially deliberative analysis and not available.
        Please share whatever information you can regarding your
    MLA decision.

    A.18. In July 2018, Acting Director Mulvaney determined that
    the Bureau lacks statutory authority to supervise for
    compliance with the MLA. I agree with his determination. In
    2013, when Congress amended the MLA, it explicitly gave the
    Bureau enforcement authority, but not supervisory authority.
    This is why I submitted a legislative proposal to Congress on
    January 17, 2019, to explicitly grant the Bureau authority to
    supervise for compliance with the MLA. The requested authority
    would complement the work the Bureau currently does to enforce
    the MLA.

    Q.19. Please provide a list of which stakeholders you spoke to
    in making your determinations.

    A.19. Although there were robust discussions on this topic at
    the Bureau, this determination is mine, per my authority and
    responsibility as the Director of the Bureau. In both my
    confirmation process and since becoming Director, I have
    discussed this issue extensively with Bureau staff, Department
    of Defense officials, members of Congress, and many stakeholder
    representatives. I take seriously my responsibility to protect
    servicemembers and, for that reason, officially transmitted a
    legislative proposal to Congress seeking the authority to
    conduct examinations for MLA compliance.

    Q.20. Please explain how you expect servicemembers to identify
    and report violations of the MLA.

    A.20. There are several ways in which the Bureau could obtain
    information about potential noncompliance. First, the Bureau
    could learn of potential violations of the MLA through a lender
    examination. Examiners might encounter evidence of violation of
    the MLA even though the examination was not specifically
    intended to review for MLA compliance. Absent routine lender
    examinations, the Bureau could learn of potential violations of
    the MLA through means including: (1) Direct complaints to
    Bureau as noted in the question; (2) self-reporting by the
    financial institutions under Bureau jurisdiction; (3) in the
    course of an investigation; (4) complaints to commanding
    officers or The Judge Advocate General's Corps; (5)
    whistleblower tips; (6) referrals or information provided from
    State or other Federal regulators; or (7) consumer advocates.
        While the 2013 amendment to the MLA did not give the Bureau
    explicit supervisory authority, it gave the Bureau explicit
    enforcement authority, which I am firmly committed to
    utilizing. The Bureau works to ensure MLA compliance by using
    its enforcement tools, which include investigations, civil
    investigative demands, and litigation.
        It is important to note that the Department of Defense
    provides a variety of resources to help servicemembers
    understand their legal and financial rights, including legal
    assistance attorneys provided through the Judge Advocate
    General, and Personal Financial Managers. The Bureau routinely
    speaks to these practitioners and highlights the rights of
    servicemembers under the MLA. For example, the Bureau has sent
    staff to provide instruction on the MLA to teach at the Army
    Legal Assistance Continuing Legal Education course. When
    speaking with these stakeholders, Bureau staff routinely
    indicate that if a practitioner or their client suspect the
    client's rights have been violated, or if they have a question
    about a financial product or service, the client can submit a
    complaint to the Bureau.
        The Bureau's Office of Servicemember Affairs has also
    published literature to inform servicemembers directly about
    their rights under the MLA. This material also explains to
    servicemembers that they can submit a complaint to the Bureau
    if they have an issue with a financial product or service.

    Q.21. Please share the impact you expect will occur due to the
    CFPB no longer supervising financial institutions for
    compliance with the MLA.

    A.21. The Bureau is committed to the financial well-being of
    America's servicemembers. This commitment includes ensuring
    that lenders subject to our jurisdiction comply with the
    Military Lending Act, so our servicemembers and their families
    are provided with the protections of that law. One way the
    Bureau promotes MLA compliance is by using its enforcement
    tool, which include investigations, civil investigative
    demands, and litigation. While the Bureau does not have
    explicit supervisory authority, I submitted a legislative
    proposal to Congress on January 17, 2019, to grant the Bureau
    authority to supervise for compliance with the MLA by amending
    the Consumer Financial Protection Act. The requested authority
    would complement the work the Bureau currently does to enforce
    the MLA. Furthermore the Bureau has worked with members of
    Congress as well as military and veterans advocacy groups to
    develop legislative language to amend the MLA to give the
    Bureau explicit supervisory authority.

    Q.22. Enforcement--When Director Cordray left, there were 100
    investigations in the pipeline and 25 in litigation. Complaints
    from consumers to the Bureau are increasing but enforcement
    actions are falling. Under Director Cordray, there were about
    two to four enforcement actions every month. Banks, credit
    cards, credit reporting firms, and online lenders were held
    accountable for deceptive practices.
        How many investigations are the CFPB staff working on now?

    A.22. The Bureau does not generally comment publicly on
    confidential enforcement investigations. I can note that there
    are 18 cases in litigation and that, during my tenure, nine
    consent agreements have been announced.

    Q.23. During your testimony before the House Financial
    Services, Representative Clay asked about staffing plans for
    fair lending. How many attorneys or examiners will devote all
    of their time to enforcing fair lending laws? Please provide a
    number.

    A.23. The Office of Enforcement is responsible for the
    enforcement of fair lending laws. As of June 28, 2019,
    Enforcement has 104 attorneys, including the 5 attorneys who
    transferred from the Office of Fair Lending, all of whom are
    generalists who can participate in the investigation of any
    potential violation of Federal consumer financial law,
    including those focused on fair lending. The resources the
    Office of Enforcement deploys on fair lending matters is
    dependent on a number of factors, including the facts and
    circumstances of particular investigations.
        The Office of Supervision Examinations is responsible for
    supervising entities for compliance with fair lending laws.
    Every CFPB examiner is trained to conduct fair lending
    examinations. During the course of a fair lending examination,
    the assigned team of examiners reviews the institutions books
    and records for compliance with fair lending laws using the
    Bureau's fair lending examination procedures. In addition, the
    Office of Supervision Examinations operates a National Fair
    Lending Examination Team, which includes a representative from
    each of the four regions, in addition to a senior examination
    manager, who are fully dedicated to fair lending examination
    work. This national team develops fair lending training,
    creates fair lending job aids and serves as an expert resource
    on fair lending matters for examiners across the country as
    they engage in fair lending work. The Office of Supervision
    Policy's fair lending product team currently includes five
    attorneys and one analyst who are devoted to fair lending
    supervision matters.

    Q.24. Credit--Has the CFPB produced, or in the process of
    producing any new research on Americans' credit scores in the
    last year?

    A.24. During the last year, the Bureau has produced four
    reports on American's credit scores or factors that may be used
    in calculating credit scores. Three of the Bureau's Quarterly
    Consumer Credit Trends reports addressed this topic. The first
    examined the prevalence of telecommunications debt and its
    effect on credit scores. \1\ The second examined the effect of
    natural disasters on credit scores, focusing on Hurricane
    Harvey in 2017. \2\ The third explored the relationship between
    fluctuations in consumers' credit scores and the timing of
    consumers' applications for credit. \3\ The Bureau also
    produced a report that looked at the relationship between where
    Americans reside and the likelihood of remaining credit
    invisible. \4\ This report was the third in a series of reports
    addressing credit invisibles.
    ---------------------------------------------------------------------------
         \1\ https://files.consumerfinance.gov/f/documents/bcfp-consumer-
    credit-trends-collection-telecommunications-debt-082018.pdf
         \2\ https://www.consumerfinance.gov/data-research/research-
    reports/quarterly-consumer-credit-trends-natural-disasters-and-credit-
    reporting/
         \3\ https://www.consumerfinance.gov/data-research/research-
    reports/quarterly-consumer-credit-trends-timing-applications-consumer-
    credit/
         \4\ https://files.consumerfinance.gov/f/documents/help-data-point-
    the-geography-of-credit-invisiblity.pdf

    Q.25. Do you think that credit checks for job applicants are
    ---------------------------------------------------------------------------
    ``racially blind?''

    A.25. Subject to certain requirements, the Fair Credit
    Reporting Act (FCRA) permits the use of consumer reports for
    employment purposes, including reports that contain information
    about a job applicant's use of credit. The FCRA generally
    requires that consumer reporting agencies may provide a
    consumer report for employment purposes only if the person who
    obtains the report certifies that ``information from the
    consumer report will not be used in violation of any applicable
    Federal or State equal employment opportunity law or
    regulation.'' \5\ The Bureau notes that the U.S. Equal
    Employment Opportunity Commission (EEOC) has provided guidance
    to employers on the use of consumer reports in compliance with
    Federal laws that protect applicants and employees from
    discrimination. \6\
    ---------------------------------------------------------------------------
         \5\ 15 U.S.C. 1681b(b)(1)(A)(ii).
         \6\ See https://www.eeoc.gov/ccoc/publications/background-checks-
    employers.cfm.

    Q.26. Do you think that allowing private employers to check the
    credit history of their job applicants can lead to racial and
    ---------------------------------------------------------------------------
    gender discrimination?

    A.26. As noted in the previous response, subject to certain
    requirements, the FCRA permits the use of consumer reports for
    employment purposes, including reports that contain information
    about a job applicant's use of credit. The FCRA generally
    requires consumer reporting agencies to provide a consumer
    report for employment purposes only if the person who obtains
    the report certifies that ``information from the consumer
    report will not be used in violation of any applicable Federal
    or State equal employment opportunity law or regulation.'' \7\
    The EEOC has provided guidance to employers on the use of
    consumer reports in compliance with Federal laws that protect
    applicants and employees from discrimination.
    ---------------------------------------------------------------------------
         \7\ 15 U.S.C. 1681b(b)(1)(A)(ii).

    Q.27. Are the free credit freezes operating as intended? Have
    ---------------------------------------------------------------------------
    there been any problems?

    A.27. The Bureau has been working expeditiously to implement
    the new consumer protections Congress provided in the Economic
    Growth, Regulatory Relief, and Consumer Protection Act, which
    include the new right to free credit freezes. The Bureau issued
    an interim final rule last year to amend the Summary of
    Consumer Rights and the Summer of Consumer Identity Theft
    Rights to conform to the EGRRCPA, including its provisions on
    credit freezes. As part of its efforts, the Bureau is preparing
    to supervise for compliance with the new requirements under the
    FCRA, and we are actively monitoring the implementation of the
    new protections in effect so far. At this time, the Bureau is
    still evaluating the implementation of the right to free credit
    freezes, and has not yet determined whether there are any
    problems or concerns with implementation or with the operation
    of the freezes. For an overview of issues from credit reporting
    complaints, please see our 2018 annual report to Congress, \8\
    which was published on March 29, 2019. This report details
    complaint data and trends across products and services for the
    prior year.
    ---------------------------------------------------------------------------
         \8\ https://www.consumerfinance.gov/data-research/research-
    reports/2018-consumer-response-annual-report/

    Q.28. Civil Penalty Fund--What is the status of the Civil
    ---------------------------------------------------------------------------
    Penalty Fund?

    A.28. The Civil Penalty Fund continues to operate according to
    the guidelines described in the Civil Penalty Fund rule. The
    most recent allocation period ended on March 31, 2019. The most
    recent allocation of funds to classes of eligible consumers
    with uncompensated harm occurred on May 29, 2019. The next
    allocation will be made within 60 days after September 30,
    2019, the date that the next allocation period ends. As of July
    1, 2019, the Civil Penalty Fund has an unallocated available
    balance of $430,083,461.60.

    Q.29. Has every consumer who was harmed during the Fund's
    freeze received redress?

    A.29. To date, all classes of eligible consumers with
    uncompensated harm as of March 31, 2019, which was the end of
    the previous allocation period, have received allocations of
    funds from the Civil Penalty Fund sufficient to fully
    compensate that uncompensated harm. The next allocation, which
    will address uncompensated harm as of September 30, 2019, will
    occur by November 29, 2019. Distributions to consumers in all
    cases where allocations have been made are in progress.

    Q.30. Please provide information on how many consumers have
    received redress from institutions that engaged in harmful and
    deceptive practices for the following firms. Please note the
    median amount of redress per firm/action per consumer, the
    amount of redress derived from the CPF and what percentage of
    the civil penalty damages remains to be distributed for each of
    these firms:
        Hydra and its affiliated firms?

    A.30. Consumers harmed by Hydra and its affiliated firms
    received an allocation of $69,623,528 from the Civil Penalty
    Fund to compensate their harm on November 29, 2018. \9\
    Analysis of the data to determine the amount of compensation to
    each consumer is ongoing.
    ---------------------------------------------------------------------------
         \9\ https://www.consumerfinance.gov/policy-compliance/enforcement/
    actions/ssmhydra-group/

    ---------------------------------------------------------------------------
    Q.31. Wells Fargo's fake accounts scandal?

    A.31. The Wells Fargo consent order provides $5,000,000 in
    estimated remediation. Analysis of actual remediation is
    ongoing. The consent order requires Wells Fargo to provide
    redress to affected consumers. It also includes a civil money
    penalty of $100,000,000. \10\ This penalty is independent of
    consumer redress required by the order. No money from the Civil
    Penalty Fund has been allocated to compensate victims of the
    violations identified in the order addressing Wells Fargo's
    sales practices.
    ---------------------------------------------------------------------------
         \10\ https://www.consumerfinance.gov/policy-compliance/
    enforcement/actions/wells-fargo-bank-2016/

    Q.32. Equifax, Transunion, and Experian's ``educational''
    ---------------------------------------------------------------------------
    credit scores settlement?

    A.32. The Equifax consent order provides for $3,795,643 in
    consumer redress to approximately 340,000 consumers. \11\ It
    also includes a civil money penalty of $2,500,000. This penalty
    is independent of consumer redress required by the order.
    ---------------------------------------------------------------------------
         \11\ https://www.consumerfinance.gov/policy-compliance/
    enforcement/actions/equifax-inc-and-equifax-consumerservices-llc/
    ---------------------------------------------------------------------------
        The Transunion consent order provides for $13,930,000 in
    consumer redress to approximately 700,000 consumers. \12\ It
    also includes a civil money penalty of $3,000,000. This penalty
    is independent of consumer redress required by the order.
    ---------------------------------------------------------------------------
         \12\ https://www.consumerfinance.gov/policy-compliance/
    enforcement/actions/transunion-interactive-inc-transunion-llc-and-
    transunion
    ---------------------------------------------------------------------------
        The Experian consent order provides for a civil money
    penalty of $3,000,000. \13\ It did not provide for consumer
    redress.
    ---------------------------------------------------------------------------
         \13\ https://www.consumerfinance.gov/policy-compliance/
    enforcement/actions/experian-holdings-inc-experian-information-
    solutions-inc-and-consumerinfocom-inc-dba-experian-consumer-services/

    Q.33. Woodbridge Gold & Pawn's deception of annual costs of
    ---------------------------------------------------------------------------
    loans?

    A.33. The consent order provides for $56,763.36 in consumer
    redress. \14\ This redress was administered by the Virginia
    Attorney General. The consent order does not include a civil
    money penalty.
    ---------------------------------------------------------------------------
         \14\ https://www.consumerfinance.gov/policy-compliance/
    enforcement/actions/woodbridge-coins-and-jewelry-exchange-inc-db-
    woodbridge-gold-pawn/

    ---------------------------------------------------------------------------
    Q.34. RushCard's service breakdown?

    A.34. The consent order provides for $10,000,000 in consumer
    redress to approximately 100,000 consumers. \15\ It also
    includes a civil money penalty of $3,000,000. This penalty is
    independent of consumer redress required by the order.
    ---------------------------------------------------------------------------
         \15\ https://www.consumerfinance.gov/policy-compliance/
    enforcement/actions/unirush-llc-and mastercard-international-
    incorporated/

    Q.35. Planet Home Lending's illegal kickbacks for mortgage
    ---------------------------------------------------------------------------
    referrals?

    A.35. The consent order provides for $265,000 in remediation.
    \16\ It does not include a civil money penalty.
    ---------------------------------------------------------------------------
         \16\ https://www.consumerfinance.gov/policy-compliance/
    enforcement/action/planet-home-lending-llc/

    ---------------------------------------------------------------------------
    Q.36. Williamson Law Firm's illegal fee charges?

    A.36. A consent order with the Williamson Law Firm defendants
    was entered on March 27, 2019. \17\ The affected consumers'
    received an allocation of $35,206,275 from the Civil Penalty
    Fund to compensate their harm on May 29, 2019. Analysis of the
    data to determine the amount of compensation to each consumer
    is ongoing.
    ---------------------------------------------------------------------------
         \17\ https://www.consumerfinance.gov/policy-compliance/
    enforcement/actions/vincent-howard-lawrence-w-williamson-howard-law-pc-
    williamson-law-firm-llc-and williamson-howard-llp/

    Q.37. Works and Lentz's provision of inaccurate credit
    ---------------------------------------------------------------------------
    information?

    A.37. The consent order provides for $577,135 in remediation.
    \18\ It also includes a civil money penalty of $78,800. This
    penalty is independent of consumer redress required by the
    order.
    ---------------------------------------------------------------------------
         \18\ https://www.consumerfinance.gov/policy-compliance/
    enforcement/actions/work-lentz-inc/

    Q.38. Debt Collection--Since Richard Cordray left, how many
    ---------------------------------------------------------------------------
    cases against debt collection firms have been dropped?

    A.38. The Bureau does not generally comment publicly on
    confidential enforcement investigations.

    Q.39. Will you survey consumers about their experiences with
    debt collection? If so, when?

    A.39. The Bureau published the results of a survey about
    consumers' experiences with debt collection in January 2017.
    \19\ In November 2017, the Bureau sought Office and Management
    and Budget (OMB) approval under the Paperwork Reduction Act to
    conduct a web survey for the purpose of quantitative testing of
    disclosures in connection with the Bureau's ongoing debt
    collection rulemaking. Then-Acting Director Mulvaney decided
    that, before proceeding with the survey, he wanted to review
    the proposals under consideration for the rulemaking so that
    any data collection could be tailored to the scope of the
    rulemaking. The Bureau withdrew its original submission to OMB
    to permit this review. On February 4, 2019, the Bureau
    republished a 30-day notice regarding this disclosure testing.
    The comment period closed on March 6, 2019, and the Bureau has
    begun the consumer testing.
    ---------------------------------------------------------------------------
         \19\ https://files.consumerfinance.gov/f/documents/201701-cfpb-
    Debt-Collection-Survey-Report.pdf

    Q.40. Consumer Complaint Database--Will you commit to keeping
    the Consumer Complaint database open to public view? Easily
    ---------------------------------------------------------------------------
    searchable? Without removing historic data?

    A.40. I recognize the importance of this issue and have heard
    from consumer groups and researchers on the importance of
    keeping the database open to the public. I have also heard from
    financial institutions that have expressed concerns about
    reputational harm. My predecessor, Acting Director Mulvaney,
    issued a Request for Information on this topic through which
    the Bureau received a number of comments, and I am actively
    looking at this issue now.

    Q.41. Small Business Lending--Will the Bureau release the rule
    for Section 1071 in 2019?

    A.41. In connection with its Spring 2019 Rulemaking Agenda,
    \20\ the Bureau announced it intends to recommence work within
    the next year to begin to develop rules to implement section
    1071 of the Dodd-Frank Act. The Bureau also has announced that
    it intends to hold a symposium to hear from a diverse group of
    experts with respect to the issues implicated in developing a
    data collection regime for small business loans. Before issuing
    a rule that may have a significant impact on a substantial
    number of small entities, the Bureau is required to convene a
    panel under the Small Business Regulatory Enforcement Fairness
    Act and confer with small entity representatives about the
    proposals the Bureau is considering putting forward. After
    completing that process, the Bureau is required by the
    Administrative Procedure Act to publish a proposal in the
    Federal Register and provide an opportunity for public comment
    on the proposal. Given those requirements, the Bureau will not
    be releasing a final rule under Section 1071 this year.
    ---------------------------------------------------------------------------
         \20\ Diane Thompson, ``Spring 2019 Rulemaking Agenda'' (May 22,
    2019), https://www.consumerfinance.gov/about-us/blog/spring-2019-
    rulemaking-agenda/.

    Q.42. How can the Bureau undertake market monitoring activities
    as you describe them without the data collection contemplated
    ---------------------------------------------------------------------------
    by the requirement itself?

    A.42. Within the Research, Markets, and Regulations (RMR)
    division, the Bureau maintains the Office of Small Business
    Lending Markets (SBLM). SBLM serves as the subject matter
    expert regarding small business lending and compiles, analyzes,
    and distributes information on such matters. It is staffed by
    industry experts with extensive small business lending
    experience at various financial institutions including
    commercial banks, Community Development Financial Institutions,
    and the Small Business Administration. The Office provides the
    Bureau with insights from monitoring the market, understanding
    of the operational dimensions associated with such financing,
    and the needs of small business borrowers. SBLM meets on a
    regular basis with key stakeholders including industry (banks,
    credit unions, and nonbank providers), business organizations
    and the community advocacy community. It also provides other
    parts of the Bureau with ongoing support on supervisory and
    regulatory matters related to small business lending.

    Q.43. Is it possible to isolate discrimination in small
    business lending without data broken down by gender and
    ethnicity?

    A.43. Since at least 2015, the Bureau has prioritized small
    business lending in its fair lending examination activity.
    Those examinations have focused on assessing possible
    redlining, discrimination in application, underwriting, and
    pricing processes, and potential weaknesses in fair lending
    related compliance management systems. Redlining assessments
    rely on information about the race and ethnicity that
    predominates in the census tract in which a business's lending
    activity is located. Lending discrimination assessments of
    application, underwriting, and pricing processes rely on race,
    gender, and ethnicity data pertaining to specific applications
    or loan files. The Bureau has utilized standard proxy
    methodologies to develop probabilities for such loan-level
    data.

    Q.44. Payday Lending--Earlier this year, the Bureau proposed
    rescinding the 2017 rule to protect consumers from debt traps.
    The CFPB argued that if the 2017 rule were to take effect there
    would be a reduction in short-term loans under 45 days.
        What are the issues with giving borrowers more time to
    repay? Please cite any data or empirical evidence that supports
    your answer.

    A.44. Neither the 2017 Payday Rule nor the current proposals
    mandate length of loan terms. The 2017 Payday Rule identifies
    the impact of the Mandatory Underwriting Requirements of
    Subpart B on the volume of short-term (loans with terms of
    fewer than 45 days) and longer-term balloon-payment loans. \21\
    The Payday Reconsideration Proposal identifies the likely
    impact of the proposed rescission of these requirements. \22\
    ---------------------------------------------------------------------------
         \21\ See 82 FR 54824-54835.
         \22\ See 84 FR 4287-4288.

    Q.45. What new information did the CFPB rely on before the 2019
    rescission? Please provide a full list and copies of this
    ---------------------------------------------------------------------------
    information if possible.

    A.45. The Bureau has not rescinded the Mandatory Underwriting
    Requirements in the Payday Rule, but rather has only proposed
    such a rescission. The information the Bureau relied on before
    its current proposal is set forth in the Federal Register
    Notice for the 2017 Payday Rule. The information relied on by
    the Bureau for its current proposal (including any information
    in addition to that relied on in the 2017 Payday Rule) is set
    out in the Federal Register Notice for the Payday
    Reconsideration Proposal.
        Specifically with regard to new information, as discussed
    in part V.B. of the Payday Reconsideration Proposal, the
    Bureau, in tentatively determining to reconsider the Bureau's
    mandatory underwriting requirements, focused its analysis
    primarily on the weight to be accorded to the key evidence,
    including research, on which the Bureau relied for the 2017
    Final Rule. Nevertheless, in developing the Payday
    Reconsideration Proposal, the Bureau also considered other
    potentially relevant evidence, including research which became
    available between the time the Bureau issued the 2017 Final
    Rule in October 2017 and the time the Bureau published its
    Payday Reconsideration Proposal in February 2019. Although
    there were relatively few new studies made available during
    this limited interval, the Payday Reconsideration Proposal
    describes and analyzes several of them. See Bureau of Consumer
    Financial Protection, Payday, Vehicle, Title, and Certain High-
    Cost Installment Loans, 84 FR 4252, 4292-94 (Feb. 14, 2017).
    The Bureau also sought public comment on the Payment
    Reconsideration Proposal, including the submission of any
    potentially relevant research.

    Q.46. Did the CFPB conduct any new research on payday lending
    after the release of the 2017 rule?

    A.46. The Bureau did not conduct any new research focused on
    payday lending after the release of the 2017 Payday Rule. The
    information relied on by the Bureau is set out in the Federal
    Register Notice for the Payday Reconsideration Proposal. The
    Payday Reconsideration Proposal, 84 FR 4252, identifies the
    information the Bureau relied on in proposing to rescind the
    Mandatory Underwriting Provisions.

    Q.47. Did the CFPB rely on research done by outside observers?
    If so, please provide a list of this information.

    A.47. The Bureau relied on research by outside observers both
    in issuing the 2017 Payday Rule with its mandatory underwriting
    provisions and in recently proposing to rescind those
    provisions. The information relied on by the Bureau is set out
    in the Federal Register Notice for the Payday Reconsideration
    Proposal. The Payday Reconsideration Proposal, 84 FR 4252,
    identifies the information the Bureau relied on in proposing to
    rescind the Mandatory Underwriting Provisions.

    Q.48. If the lender has direct access to the borrower's bank
    account, should the lender make sure the borrower has the
    ability to repay the loan?

    A.48. Regardless of the 2017 Payday Rule, lenders are free to
    make sure the borrower has the ability to repay the loan. In
    the 2017 Payday Rule, the Bureau mandated, with certain
    exceptions, that lenders follow specific and detailed standards
    in assessing consumers' ability to pay. The Bureau has
    preliminarily concluded that the weaknesses in the legal
    rationales and the evidentiary record on which the Bureau
    relied for these Mandatory Underwriting Provisions in the 2017
    Payday Rule support reconsidering these provisions. The Bureau
    requested comment on this preliminary conclusion and on
    alternatives to the rescission of the Mandatory Underwriting
    Provisions. The comment period ended on May 15, 2019, and the
    Bureau is in the process of analyzing the roughly 190,000
    comments it has received.
                                    ------

            RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                          FROM KATHY KRANINGER

    Q.1. Without including Military Lending Act (MLA) compliance as
    part of the CFPB's routine lender examinations, it is difficult
    to imagine how the CFPB would learn of illegal predatory
    lending--short of military families themselves recognizing on
    an individual basis that a lending product or practice is
    illegal and reporting the lender directly to the CFPB. Please
    provide an exhaustive list of official means, absent routine
    lender examinations, by which the CFPB would learn of potential
    violations of the MLA.

    A.1. Regardless of whether the Consumer Financial Protection
    Bureau (Bureau) conducts examinations specifically intended to
    review for compliance with the Military Lending Act (MLA),
    covered creditors are required to comply with the MLA and its
    implementing regulation. I have indicated that all parties
    would benefit from greater legal clarity from Congress
    regarding the Bureau's authority to conduct examinations
    specifically intended to review for MLA compliance. In the
    meantime, there are several ways in which the Bureau could
    obtain information about potential noncompliance. First, the
    Bureau could learn of potential violations of the MLA through a
    lender examination. Examiners might encounter evidence of
    violation of the MLA even though the examination was not
    specifically intended to review for MLA compliance. Absent
    routine lender examinations, the Bureau could learn of
    potential violations of the MLA through means including: (1)
    Direct complaints to Bureau as noted in the question; (2) self-
    reporting by financial institutions under Bureau jurisdiction;
    (3) in the course of an investigation; (4) complaints to
    commanding officers or The Judge Advocate General's Corps; (5)
    whistleblower tips; (6) referrals or information provided from
    State or other Federal regulators; or (7) consumer advocates.
        As you know, when Congress created the Bureau in 2010, it
    did not give it the authority to supervise for compliance with
    the MLA. In 2013, when Congress amended the MLA, it explicitly
    gave the Bureau enforcement authority, but not supervisory
    authority. The Bureau remains committed to the financial well-
    being of America's servicemembers, and that commitment includes
    ensuring that those lenders subject to our jurisdiction comply
    with the MLA. This is why I submitted a legislative proposal to
    Congress on January 17, 2019, to explicitly grant the Bureau
    authority to supervise for compliance with the MLA by amending
    the Consumer Financial Protection Act. The requested authority
    would complement the work the Bureau currently does to enforce
    the MLA. Furthermore the Bureau has worked with members of
    Congress as well as military and veterans advocacy groups to
    develop legislative language to amend the MLA to give the
    Bureau explicit supervisory authority.

    Q.2. Prior to making this decision, did the CFPB conduct a
    cost-benefit analysis to determine whether or not this decision
    to remove MLA compliance from routine lender examinations is
    the most efficient and effective regulatory approach? If so,
    what did the CFPB conclude? If not, why not?

    A.2. In July 2018, Acting Director Mulvaney determined that the
    Bureau lacks statutory authority to supervise for compliance
    with the MLA. I agree with his determination. In 2013, when
    Congress amended the MLA, it explicitly gave the Bureau
    enforcement authority, but not supervisory authority. This is
    why I submitted a legislative proposal to Congress on January
    17, 2019, to explicitly grant the Bureau authority to supervise
    for compliance with the MLA. The requested authority would
    complement the work the Bureau currently does to enforce the
    MLA.

    Q.3. Did the CFPB consult with the Department of Defense, the
    agency primarily tasked with MLA implementation, prior to
    making this decision?

    A.3. This predates my arrival at the Bureau. I understand that
    on November, 21, 2018, the Bureau communicated to the
    Department of Defense that the Bureau believes it does not have
    clear legal authority to supervise for compliance with the
    Military Lending Act (MLA). In addition to Bureau staff, I have
    discussed this issue with Department of Defense officials,
    members of Congress, and many stakeholder representatives since
    becoming Director. I take seriously my responsibility to
    protect servicemembers and, for that reason, officially
    transmitted a legislative proposal to Congress seeking the
    authority to conduct examinations for MLA compliance.

    Q.4. Regarding the proposed Small Dollar Rule, please provide
    any all research on small-dollar lending published between
    October 5, 2017, and February 6, 2019, that CFPB used to
    justify changes to the 2017 Rule.

    A.4. The information relied on by the Bureau is set out in the
    Federal Register Notice for the Payday Reconsideration
    Proposal.
        As discussed in part V.B. of the Payday Reconsideration
    Proposal, the Bureau, in tentatively determining to reconsider
    the Bureau's mandatory underwriting requirements, focused its
    analysis primarily on the weight to be accorded to the key
    evidence, including research, on which the Bureau relied for
    the 2017 Final Rule. Nevertheless, in developing the Payday
    Reconsideration Proposal, the Bureau also considered other
    potentially relevant evidence, including research which became
    available between the time the Bureau issued the 2017 Final
    Rule in October 2017 and the time the Bureau published its
    Payday Reconsideration Proposal in February 2019. Although
    there were relatively few new studies made available during
    this limited interval, the Payday Reconsideration Proposal
    describes and analyzes several of them. See Bureau of Consumer
    Financial Protection, Payday, Vehicle, Title, and Certain High-
    Cost Installment Loans, 84 FR 4252, 4292-94 (Feb. 14, 2017).
    The Bureau also sought public comment on the Payment
    Reconsideration Proposal, including the submission of any
    potentially relevant research.

    Q.5. In its proposed changes, the CFPB revised its definition
    of ``unfair'' and ``abusive'' for the Ability-to-Repay
    provisions while keeping the current definition of ``unfair''
    and ``abusive'' for the payment provisions. What analysis
    justifies multiple definitions of these terms within the
    context of a single Rule?

    A.5. In the 2017 Payday Rule, Section 1041.4 identified as ``an
    unfair and abusive practice for a lender to make covered short-
    term loans or covered longer-term balloon-payment loans without
    reasonably determining that the consumers will have the ability
    to repay the loans according to their terms.'' Also in the 2017
    Payday Rule, Section 1041.7 identified as ``an unfair and
    abusive practice for a lender to make attempts to withdraw
    payment from consumers' accounts in connection with a covered
    loan after the lender's second consecutive attempts to withdraw
    payments from the accounts from which the prior attempts were
    made have failed due to a lack of sufficient funds, unless the
    lender obtains the consumers' new and specific authorization to
    make further withdrawals from the accounts.''
        The 2017 Payday Rule sets out factual and legal analyses
    identifying as unfair and abusive the practice described in
    Section 1041.4. \1\ The 2017 Payday Rule set out separate
    factual and legal analyses identifying as unfair and abusive a
    separate practice related to payments under Section 1041.7. \2\
    These analyses supporting Section 1041.7 are independent from
    the grounds that support the identification of an unfair and
    abusive practice under Section 1041.4.
    ---------------------------------------------------------------------------
         \1\ 82 FR 53533-54624.
         \2\ 82 FR 54720-54744.
    ---------------------------------------------------------------------------
        The Payday Reconsideration Proposal revisits only the
    identification of an unfair and abusive practice under Section
    1041.4, on factual and legal grounds specific to that practice
    (i.e., originating and underwriting of short-term and longer-
    term balloon-payment loans). The Proposal does not revisit the
    distinct factual or legal grounds supporting the identification
    of unfairness and abusiveness in Section 1041.7.

    Q.6. Additionally, has the CFPB analyzed which types of short-
    term, small-dollar lending products benefit and do not benefit
    from this bifurcated structure? In both instances, please
    provide the analysis in question.

    A.6. The analyses of the predicted impacts of the 2017 Payday
    Rule, including the respective impacts of the mandatory
    underwriting provisions (Subpart B) and the payment provisions
    (Subpart C), are set out in that Rule's Section 1022 analysis,
    found at 82 FR 54814-54853. The analysis pertaining to the
    predicted impact of the proposed rescission of only the
    mandatory underwriting provisions of the 2017 Payday Rule is
    set out in the Payday Reconsideration Proposal's Section 1022
    Analysis, at 84 FR 4281-4295.
                  Additional Material Supplied for the Record
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                                 PROFESSIONALS
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                          WEINBERG, AND REIS CO., LPA
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