[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

                               ----------                              

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                                Affairs
                                
                                
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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\
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     \1\ www.federalregister.gov/documents/2017/07/19/2017-14225/
arbitration-agreements; www.federalregister.gov/documents/2017/11/22/
2017-25324/arbitration-agreements

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    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

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    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.
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    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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STATEMENT SUBMITTED BY SCOTT S. WELTMAN, MANAGING SHAREHOLDER, WELTMAN, 
                      WEINBERG, AND REIS CO., LPA
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