    [Senate Hearing 116-428]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 116-428

       THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMI-ANNUAL REPORT TO
                                    CONGRESS

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

                                    HEARING

                                   before the

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

                         ONE HUNDRED SIXTEENTH CONGRESS

                                 SECOND SESSION

                                       ON

      RECEIVING AND DISCUSSING THE CONSUMER FINANCIAL PROTECTION BUREAU'S
        SEMI-ANNUAL REPORT TO THE COMMITTEE ON RECENT RULEMAKINGS, AND
         SUPERVISORY AND REGULATORY ACTIVITIES, AS WELL AS FUTURE PLANS

                                   __________

                                 MARCH 10, 2020

                                   __________

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

      [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                    Available at: https: //www.govinfo.gov /

                              ______

                 U.S. GOVERNMENT PUBLISHING OFFICE
    44-072PDF            WASHINGTON : 2022

                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

                    Laura Swanson, Democratic Staff Director

                       Jan Singelmann, Democratic Counsel

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                        Charles J. Moffat, Hearing Clerk

                                      (ii)

                                C O N T E N T S

                                  ----------

                            TUESDAY, MARCH 10, 2020

                                                                       Page

    Opening statement of Chairman Crapo..............................     1
        Prepared statement...........................................    34

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

                                    WITNESS

    Kathleen L. Kraninger, Director, Consumer Financial Protection
      Bureau.........................................................     5
        Prepared statement...........................................    37
        Responses to written questions of:
            Senator Brown............................................    51
            Senator Reed.............................................    60
            Senator Toomey...........................................    61
            Senator Tillis...........................................    66
            Senator Menendez.........................................    70
            Senator Warren...........................................    72
            Senator Cortez Masto.....................................    85
            Senator Sinema...........................................    91

                  Additional Material Supplied for the Record

    Semi-Annual Report of the Bureau of Consumer Financial
      Protection--Fall 2019..........................................    94
    Letter submitted by ACA International, the Association of Credit
      and Collection Professionals...................................   178
    Letter submitted by the Consumer Bankers Association.............   184
    Letter submitted by the Credit Union National Association........   195
    Letter submitted by the National Association of Federally-Insured
      Credit Unions..................................................   202

                                     (iii)

                       THE CONSUMER FINANCIAL PROTECTION
                    BUREAU'S SEMI-ANNUAL REPORT TO CONGRESS

                                  ----------

                            TUESDAY, MARCH 10, 2020

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10:01 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. This hearing will come to order.
        Today we will receive testimony from CFPB Director Kathy
    Kraninger on the CFPB's semi-annual report.
        On February 3, the CFPB issued its fall 2019 semi-annual
    report, which outlines the CFPB's significant work between
    April 2019 and September 2019, including rulemakings and
    supervisory and regulatory activities.
        The report also provides insight into what the CFPB plans
    to undertake in the upcoming work period.
        Consumer protection is vital for a properly functioning
    financial market and is best determined by a robust,
    quantitative analysis.
        Under Director Kraninger's leadership, the CFPB has
    demonstrated a commitment to ensuring that its regulations are
    data driven, appropriately tailored to satisfy statutory
    obligations, and based on sound evidence and legal support.
        There have been promising changes at the CFPB under
    Director Kraninger's leadership.
        But it remains abundantly clear that the fundamental
    structure of the CFPB must be reconsidered to make it more
    transparent and accountable.
        Last week, the Supreme Court heard arguments for Seila Law
    v. CFPB, a case that examines the constitutionality of the
    CFPB's leadership structure.
        On March 2, 2020, the Wall Street Journal editorial board
    referred to Seila Law v. CFPB as the ``constitutional case of
    the year'' and stated that the question presented by this case
    ``goes to the heart of the separation of powers and whether the
    administrative state is accountable to the people.''
        It has long been my position that the CFPB's current single
    Director structure lacks sufficient accountability, and I look
    forward to the Supreme Court ruling on this case later this
    summer.
        With that in mind, I continue to advocate for establishing
    a bipartisan board of directors to oversee the CFPB; subjecting
    the CFPB to the annual appropriations process, similar to other
    Federal regulators; and establishing a safety-and-soundness
    check for the prudential regulators.
        The Banking Committee has spent significant time this
    Congress evaluating the collection, protection, and use of
    consumer data by Government agencies and private companies.
        I have repeatedly voiced concerns about the wide-scale
    collection of personally identifiable information by the CFPB,
    especially with respect to credit card and mortgage data.
        On February 26, the CFPB hosted a symposium on the access
    and use of consumer-permissioned financial data to determine if
    agency action is necessary to promote consumer access to their
    financial data.
        I find it concerning that when consumers choose to share
    their financial data with a third party, they often unknowingly
    involve a data aggregator to facilitate the transmission of
    this data.
        The CFPB and Congress should explore ways to ensure that
    consumer data remains protected when it is shared.
        We need a fundamental foundational change to our data
    privacy laws that applies broadly, across industries, and
    ensures domestic and international cohesion via preemption and
    interoperability, respectively.
        During this hearing, I look forward to hearing more about
    key initiatives undertaken by the CFPB in the last year;
    Director Kraninger's priorities for the CFPB in the upcoming
    work period; and additional legislative or regulatory
    opportunities to encourage financial innovation and widen
    access to financial products and services.
        Director Kraninger, thank you again for joining the
    Committee this morning to discuss the CFPB's activities and
    plans.
        Senator Brown.

               OPENING STATEMENT OF SENATOR SHERROD BROWN

        Senator Brown. Thank you, Mr. Chairman. Welcome, Director
    Kraninger.
        I want to say a few words first about the coronavirus and
    the toll it is taking on our communities, on our healthcare
    system, and on our entire economy. Our first concern has to be
    for Americans' safety. We also cannot ignore the millions of
    Americans who are losing paychecks and the small businesses
    that are losing customers. When times get tough, we come
    together as Americans; we rise to the challenge. I am confident
    we can do that again, and that means support for everyone who
    makes this country work, not just Wall Street.
        Moments like this are a reminder of why we created the CFPB
    after the last financial crisis--to make sure hardworking
    Americans have a voice in the room, especially at times like
    this.
        We know that in times of crisis, Wall Street has armies of
    lobbyists who will fight to make sure we do what we need to do
    to stabilize financial markets. But most people do not have
    lobbyists; most people do not have that kind of power. We have
    to fight for them, too. The CFPB is their voice.
        During its first 6 years, the Bureau delivered results. The
    CFPB made new, strong rules that protected consumers from
    abusive practices. It sent Bureau employees into banks and
    other corporations to make sure they were following the law. It
    returned more than $12 billion to 29 million Americans. Think
    of that: $12 billion to 29 million Americans.
        Unfortunately, President Trump has tried to turn the
    Consumer Protection Bureau into another agency that helps his
    wealthy friends at the expense of the people that the agency is
    supposed to serve.
        Under President Trump's first appointed Director, Mick Mul-
    vaney, the CFPB saw a shift away from protecting servicemembers
    and rooting out discrimination to doing favors for private
    corporations at the behest of political hires.
        Director Kraninger has continued down the same path--
    corporate protection instead of consumer protection.
        Under her leadership, we see a clear pattern: sabotaging
    the agency's work to hold corporations accountable.
        She sided with companies, including a company the CFPB sued
    for scamming 9/11 survivors, to argue that the Bureau is
    unconstitutional in the Supreme Court.
        It would be quite a coup for big banks and other
    corporations if the Supreme Court gutted the agency that is
    supposed to keep an eye on them.
        Director Kraninger has also allowed Education Secretary
    Betsy DeVos to block the Bureau from protecting the 43 million
    Americans with Federal student debt.
        If you do not think that Director Kraninger's failure to
    stand up to Secretary DeVos has consequences--and we know of
    Secretary DeVos' power in the Republican Party and in the
    Cabinet room and with the President. But if you do not think
    that Director Kraninger's failure to stand up to Secretary
    DeVos has consequences, talk to the tens and tens of thousands
    of teachers and nurses and firefighters and servicemembers who
    are paying more money in student loans every single month
    because Betsy DeVos denied them the loan forgiveness that they
    earned.
        Like other Trump appointees, Director Kraninger has
    dutifully carried out the Administration's assault on civil
    rights protections:
        She weakened rules that identify discriminatory lending.
        She dismantled the CFPB office that used to ferret out
    discriminatory lending practices.
        And she left Eric Blankenstein, a Mulvaney-era political
    appointee with a history of racist and sexist writings, she
    left Eric Blankenstein in charge of enforcing civil rights
    laws.
        And look at the result: Under Mulvaney and Kraninger, the
    Consumer Protection Bureau has not brought a single case of
    illegal discrimination. Not one.
        They have not returned a single dollar to victims of
    discrimination.
        Last October we learned that, in exchange for contributions
    to the Trump campaign, payday lenders were bragging about being
    able to ``pick up the phone and get the President's attention''
    to fend off regulation. They were bragging about their access
    to the President because of that.
        Director Kraninger has given them exactly what they paid
    for:
        She gutted rules that would protect borrowers from
    predatory payday loans that trap them in cycles of debt.
        She hasn't filed any new lawsuits against payday lenders.
        She even let a payday lender keep $1.3 million it had
    volunteered to pay back to consumers it had ripped off.
        And it is not just payday lenders. Director Kraninger has
    gone out of her way to let debt collectors and other
    corporations keep the money they scammed from consumers.
        Just last week we learned that, as he was on his way out
    the door, Eric Blankenstein promised the CEO of Wells Fargo
    that he would hide the bank's bad conduct and let them off
    without a fine.
        Let us be clear about what is happening here in this Trump-
    Mulvaney-Kraninger America, in this Trump-Mulvaney-Kraninger
    world: A CEO asks for a special favor, and he gets it. Never
    mind the cost to everyone else.
        If a worker gets laid off in Ohio or her car breaks down,
    she cannot afford to pay her credit card bill that month, Wells
    Fargo is still going to charge them interest. They cannot call
    in any special favors to let them off the hook.
        But we have seen over and over again that in President
    Trump's Washington, Wall Street plays by different rules.
        Director Kraninger continues to surround herself with
    appointees with a history of bigotry and hostility to
    consumers.
        She retained Paul Watkins, a Mulvaney appointee, who worked
    as senior legal counsel for a hate group--for a hate group--
    that wants to criminalize LGBTQ people.
        She recently hired Leonard Chanin to serve as her number
    two. This is someone who failed at protecting consumers at the
    Fed in the years leading up to the financial crisis.
        More recently, Mr. Chanin worked at a bank--I believe he
    was an Ohioan at that point--worked at the bank that the Bureau
    just sued for the same type of fake account fraud that we saw
    at Wells Fargo.
        What we see from Director Kraninger is the same thing we
    see across the Administration: protect corporations from
    accountability at all costs.
        It comes back to one question, Ms. Kraninger: Whose side
    are you on?
        Wall Street megabanks, payday lenders, and other
    corporations all have allies looking out for them in the White
    House and down the hall in Mitch McConnell's office.
        The CFPB is supposed to be an independent advocate on the
    side of everyone else.
        Director Kraninger should return the CFPB to its core
    mission: Put consumers first. Anything less is a neglect of
    duty.
        Thank you.
        Chairman Crapo. Director Kraninger, we appreciate again
    your attendance and look forward to our discussions with you
    today. I want to remind you to honor and remember the 5-minute
    rule for your oral testimony so that we have time for questions
    and remind our Senators of the 5-minute rule for the
    questioning period.
        With that, Director, please begin with your statement.

        STATEMENT OF KATHLEEN L. KRANINGER, DIRECTOR, CONSUMER
                      FINANCIAL PROTECTION BUREAU

        Ms. Kraninger. Chairman Crapo, Ranking Member Brown,
    Members of the Committee, thank you for the opportunity to
    present the Consumer Financial Protection Bureau's most recent
    Semi-Annual Report to Congress.
        A year ago, following my listening tour, I established the
    Bureau's top priority in carrying out our important mission:
    prevention of harm to consumers. Ultimately, we prevent harm by
    supporting dynamic and competitive markets that provide for
    consumer choice. On a day-to-day basis, we prevent harm by
    educating consumers to protect themselves in the moment, by
    having clear rules of the road for regulated entities, and by
    using supervision and enforcement to promote compliance with
    the law. While prevention is not always possible, it is the
    right goal, saving consumers from financial headaches,
    setbacks, and devastation.
        Last week, I announced three actions furthering our
    strategy to prevent consumer harm. I will briefly outline those
    actions and close with the agency's response to coronavirus.
        First, the Bureau will launch an advisory opinion program
    as another means to provide clear, transparent rules of the
    road. Today if a regulated entity has a question about how
    particular regulations apply to particular circumstances or
    seeks an interpretation of a regulation, that entity cannot ask
    the Bureau for clarification. In fact, we have a robust
    guidance mechanism to provide such clarification and do so in a
    fairly responsive way. However, responses to individual
    regulatory inquiries are generally available only to the
    individual requester. Under the advisory opinion program, the
    Bureau will provide that response to such requests in the
    Federal Register and on its website so that all companies,
    consumer groups, and the public generally will benefit from
    that interpretation.
        Second, the Bureau updated its Responsible Business Conduct
    bulletin to emphasize the importance of such conduct and to
    strengthen the Bureau's approach for encouraging it. The
    bulletin identifies four categories of responsible conduct:
    self-assessing, self-reporting, remediating, and cooperating.
    If an entity meaningfully engages in these activities, the
    Bureau will favorably consider it along with other relevant
    factors in addressing violations of Federal consumer financial
    law and supervisory and enforcement matters.
        Responsible conduct by businesses facilitates timely
    detection of issues and potential violations of Federal
    consumer financial laws, increases the effectiveness of the
    Bureau's supervisory and enforcement work, and ensures more
    consumers in more matters promptly receive financial redress or
    other meaningful remedy for the harm they may have experienced.
    But let me be clear: Responsible conduct by businesses does not
    preclude the Bureau from bringing an enforcement action or
    seeking a remedy if it believes such a course is necessary and
    appropriate.
        Finally, we want to incentivize whistleblowers to report
    unlawful conduct to the Bureau. To that end, last week the
    Bureau submitted its second legislative proposal to Congress,
    which seeks to establish a whistleblower award program. The
    Bureau envisions a program similar to those of other regulators
    whereby whistleblowers who bring original information forward
    that prompts the Bureau to launch an investigation which
    culminates in monetary sanctions through settlement or
    litigation would receive payment. Such a program would
    significantly assist our enforcement actions, especially
    against bad actors who are not engaged in responsible business
    conduct, and especially as it relates to fair lending
    violations. I urge your consideration of this proposal and
    stand ready to assist in the legislative process.
        In short, these three steps will advance the Bureau's
    efforts to promote a fair, competitive, and transparent
    consumer financial marketplace and prevent consumer harm and
    help build a culture of compliance across the industries we
    regulate.
        Let me provide a few words on the Bureau's preparedness and
    response efforts related to coronavirus.
        First and foremost, we are focused on the health and safety
    of our employees and our ability to perform our important
    mission. In order to make the best decisions possible in a
    timely manner, we have established several mechanisms to ensure
    that we have the best possible information from public health
    and emergency management officials and from our staff. Our
    internal working group is led by my Director of Security and
    Emergency Management, who reports through the Chief Operating
    Officer to me. It is compromised of representatives from every
    division in the Bureau in coordination with the NTEU, with a
    two-way information flow of questions and answers coming in and
    responses going out. My Director of Security is also our
    conduit in routine calls with fellow independent regulators, so
    we are able to align with our peers accordingly.
        We are also in communication with Treasury, which serves as
    our touch point for coordination with the Vice President's
    taskforce, OPM, CDC, and FEMA to coordinate our operations.
        Collectively, the financial regulators are in routine
    contact with the institutions we regulate and have been
    ensuring prompt
    response to their inquiries as well. This is a fluid situation
    that requires clear lines of communication and constant
    assessment to determine appropriate actions based on up-to-the-
    minute information. In this changing dynamic, we are working to
    ensure the health and safety of our workforce while continuing
    to protect consumers in the marketplace.
        Thank you for your time today, and I look forward to your
    questions.
        Chairman Crapo. Thank you.
        My first question is on the coronavirus, and yesterday, as
    you indicated, the CFPB, the CSBS, FDIC, the Federal Reserve,
    the NCUA, and the OCC issued a jointly developed statement that
    mirrors the guidance that is generally issued after natural
    disasters. The statement calls on financial institutions to
    work with affected borrowers and notes that prudent efforts
    will not be subject to examiner criticism so long as they are
    consistent with safe and sound lending practices. The agencies
    are also offering operational support in affected communities
    and will be flexible in scheduling examinations and
    inspections.
        I know you have already discussed this, but I just want to
    say this joint statement was appropriate and to ask you to be
    sure you keep the Committee updated on these efforts.
        Ms. Kraninger. I am happy to do so, Mr. Chairman. Thank
    you.
        Chairman Crapo. Thank you.
        Last September, you informed Congress that the CFPB would
    no longer defend the constitutionality of its structure and
    directed the CFPB to join a Department of Justice petition
    requesting the Supreme Court to review the Ninth Circuit Court
    of Appeals ruling in Seila v. CFPB that upheld the
    constitutionality of the Bureau. Now, the Supreme Court, as you
    know, accepted the position and last week held oral arguments
    on the case.
        Could you please explain your position and how you view the
    CFPB's structure in the context of our constitutional system?
        Ms. Kraninger. Yes, Mr. Chairman. After heavy consideration
    of the cases that were pending with the CFPB, the history of
    those cases, the position of the Department of Justice, the
    rulings by courts at many levels, I came to the position that
    the Department of Justice recommended, recognizing that the
    directorship and the removal clause only for neglect of duty,
    malfeasance, and inefficiency was a limitation on the
    President's powers under the Constitution. And the overriding
    concern that I am looking to remedy and why I was incredibly
    encouraged by the Supreme Court accepting the Seila Law case is
    to get certainty and clarity. Only the Supreme Court and
    Congress can provide that certainty. The oral arguments were
    heard last week, as you mentioned. I was there, as were many
    others, and we are paying very close attention to this.
        It has thwarted many of our enforcement actions in the
    history of the Bureau. It is an issue that is raised regularly
    in litigation, and it is one that that clarity will provide
    great help to the important delivery of our mission going
    forward.
        Chairman Crapo. Well, thank you. I agree with your
    position, and we look forward to a clear resolution of this
    issue by the Supreme Court.
        Last year, the CFPB issued a proposal to amend its 2017
    small-dollar lending rule by rescinding the mandatory
    underwriting provisions. The proposal stated that the CFPB made
    the determination there is a lack of evidence and legal support
    for the provisions. In a recent speech, you indicated that the
    CFPB intends to issue a final rule on this proposal no later
    than April of this year.
        Could you please discuss why the CFPB determined it was
    necessary to update the 2017 small-dollar lending final rule
    and how the revised proposal would improve consumer outcomes
    and access to credit?
        Ms. Kraninger. As you noted, Mr. Chairman. the rationale of
    the proposed rule is around the rigor of the underlying
    evidence in that particular rulemaking, and so it is something
    that we are considering carefully. We have received 190,000
    comments in response to that proposal to rescind the
    underwriting provisions, and we are working through those
    comments and our final position to issue a rulemaking or at
    least some decision with respect to that rulemaking in April.
        I think there are a number of issues that you raised, too,
    that are related to this that we can do. It is evident that
    there is continued demand for small-dollar short-term products
    in the marketplace. This is something that consumers have
    indicated they need. There are steps that the prudential
    regulators can take to make sure that institutions understand
    that they cannot offer such products and responsible products
    to consumers who need them.
        And the other thing that we are looking at very carefully
    is research into disclosures. There are consumer protection
    actions that we could take potentially short of the rulemaking
    that the CFPB originally offered. So I think that is something
    that we are very much looking at, a holistic approach to this.
    Making sure that consumers understand the products that they
    are engaging with in the marketplace is a priority.
        Chairman Crapo. Well, thank you very much. My time is up. I
    did have another question on consumer data protection, but let
    me just say I appreciate the approach you are taking to try to
    assure greater protection of consumer data.
        With that, Senator Brown.
        Senator Brown. Thank you, Mr. Chairman.
        Director Kraninger, yesterday I spoke at some length with
    Treasury Secretary Mnuchin. In addition to telling me--
    incredulously, I thought--that there is nothing we could have
    done to prepare for the financial turmoil we have seen in the
    last couple days, he said he has no plans to meet immediately,
    to convene FSOC immediately in the midst of the financial and
    the public health crisis that our country and our financial
    institutions and our customers and employees face.
        Director Kraninger, you serve on the Board of FSOC--I am
    sorry--on the Board of FDIC and on the Board of FSOC. Is that
    right?
        Ms. Kraninger. Yes.
        Senator Brown. FSOC has not met since November. The
    statutes says they should meet quarterly. As I said, the
    President does not plan on calling for a meeting in the
    immediate future. Do you think that is a good idea?
        Ms. Kraninger. Senator, I believe there is actually a
    meeting scheduled later in March already. And, in addition,
    there is extensive communication amongst the FSOC members and
    through the interagency process.
        Senator Brown. I hear that, and that is what he said, too.
    But he has nothing to--considering what is happening in the
    financial markets, considering what is happening in public
    health around the country, and considering the law says
    quarterly, you wonder what they are doing. Would you stand up
    now and demand that Secretary Mnuchin call a meeting
    immediately of the Council and explain publicly what this
    Administration's plan is to make sure regular Americans do not
    end up paying the price? Would you speak out on that today?
        Ms. Kraninger. Senator, we have one scheduled, and I
    believe, too, there are conversations even happening today with
    the Senate and the House leadership on economic responses to--
    --
        Senator Brown. None of the conversations are public. The
    FSOC, the purpose of FSOC was to preempt and--to predict, to
    preempt, to understand, to put plans together so things were
    not happening with such chaos as they are now in the financial
    markets, and also the statute says that these meetings would be
    public. And you can talk about discussions, and you can talk
    about meetings of deputies, but the principals have not done
    what they should be doing.
        Let me shift to something else. Last year, I raised
    concerns about Eric Blankenstein, the person you put in charge
    of enforcing fair lending laws. I was critical of him because
    of his history of racist statements. Last week, we found out
    that Blankenstein also promised Wells Fargo's CEO that the
    Bureau would settle any unresolved matters in private--there we
    go back to private, not public--without fines. Blankenstein
    knew his time at the CFPB was coming to an end, and he promised
    that another one of your political appointees would take care
    of Wells Fargo.
        Did you know he promised the CEO of Wells Fargo that the
    Bureau would settle any matter in private without fines?
        Ms. Kraninger. Senator, I can tell you with respect to the
    ongoing oversight of Wells Fargo, the buck stops with me, and I
    can also tell you----
        Senator Brown. Did you know that----
        Ms. Kraninger.----that that is an alleged statement that is
    complete hearsay in a staff report that the Committee has not
    even actually voted on or in any way pushed forward.
        Senator Brown. You have a reputation of being a little easy
    on Wells Fargo and perhaps on Eric Blankenstein, too. Has the
    Bureau brought any public enforcement action against Wells
    Fargo since last May?
        Ms. Kraninger. We have ongoing oversight of them, the
    ongoing consent orders. We also have, as the Committee knows,
    tolling agreements with respect to other areas that we continue
    to work with them on.
        Senator Brown. The answer is no. The answer is you have not
    brought an action against Wells Fargo.
        Ms. Kraninger. Well, we levied a $1 billion fine on them,
    which is the largest fine in the agency's history.
        Senator Brown. Which did not seem to affect much of their
    behavior.
        Just yesterday, CFPB sued Fifth Third Bank for the same
    type of fake account scandal as at Wells Fargo. FDIC Chair
    Jelena McWilliams would have known about the fake accounts. She
    was legal officer at Fifth Third for a couple-year period.
    Leonard Chanin was also her deputy at Fifth Third before he
    became deputy at the FDIC. He would have known about the
    Bureau's fake account investigation of Fifth Third. Even with
    this background, you recently named Mr. Chanin to serve as
    Deputy Director. Did you know about his role in the fake
    account scandal at Fifth Third when you hired him?
        Ms. Kraninger. I can assure you that Mr. Chanin is a
    longstanding public servant who served at the Fed, who was the
    head of regulations at the CFPB when it was established----
        Senator Brown. Is the answer yes? It is a pretty easy
    question. Did you know about--you brought the action, you as
    head of the CFPB brought the action.
        Ms. Kraninger. Yes.
        Senator Brown. Did you know about his role in that when you
    hired him?
        Ms. Kraninger. I knew that he worked at Fifth Third, yes.
        Senator Brown. So did you not know about his role or you
    did know about his role? Your people were investigating Fifth
    Third at the time, and you hired him. Did you know of his role
    in this. Of course, you knew he worked there. But did you know
    of his role in it? Yes or no.
        Ms. Kraninger. Senator, these are all--as you know, it is
    confidential investigative information with respect to, you
    know, what--and there is a privacy right here as well. So I am
    happy to follow up with you with any information that we can
    provide from that ongoing----
        Senator Brown. It is not a--Director Kraninger, it is not a
    privacy right on whether or not you knew of his involvement in
    something when you hired him to be your number two. I do not
    know what to make of the fact that you just do not want to
    answer that question.
        Chairman Crapo. Senator Shelby.
        Senator Shelby. Thank you, Mr. Chairman.
        Director Kraninger, thank you for your service. Thank you
    for what you do and your leadership over there. It is a
    difficult job, a challenging job.
        In past hearings before this Committee, we have discussed
    the importance of utilizing cost-benefit analysis in order for
    agencies--not just yours but others--to effectively achieve
    intended policy outcomes. Ultimately consumers--all of us are
    consumers--bear the costs of regulation. As such, we must
    ensure that the benefits of any proposed agency action justify
    the cost, I believe.
        How does the CFPB currently utilize cost-benefit analysis?
    How do you work it? And do you believe such analysis is
    essential to achieve effective, tailored regulation?
        Ms. Kraninger. I absolutely agree, Senator, that we need to
    consider cost-benefit, whether that is qualitative in some
    cases or quantitative to the extent that we can. And we do it
    pretty rigorously in our rulemaking efforts with a view to
    improve it.
        Senator Shelby. How important is it and why is it
    important?
        Ms. Kraninger. Essential, Senator, because, again, we need
    to understand the impacts of what we are doing and make sure
    that it will be beneficial to the marketplace and to consumers
    in that marketplace.
        Senator Shelby. Give us an example of something you could
    bring forth and explain how you did--a reg that you would
    evaluate, what it would do for the consumers, what the cost-
    benefit would be, and all this.
        Ms. Kraninger. It is a legitimate question, Senator, so one
    of the things that we are moving through is the debt collection
    Notice of Proposed Rulemaking.
        Senator Shelby. OK.
        Ms. Kraninger. And so, again, understanding that consumers
    to want to pay their debts and it is good for society for
    consumers to pay their debts and pay what they owe, but
    understanding the way that that collection can take place, what
    the communication mechanisms are, what the limitation is in
    terms of, frankly, the law requires the limit----
        Senator Shelby. Stay within the laws and the regulations.
        Ms. Kraninger. Absolutely. Absolutely.
        Senator Shelby. So that is very, very important. Under your
    leadership, I believe that the agency has made significant
    strides in becoming more efficient and transparent. What
    accomplishments or improvements to the CFPB are you most proud
    of? And what areas do you believe that you are challenged and
    will need to be addressed? I know there are many things that
    pop up.
        Ms. Kraninger. Yes. Increased transparency and
    communication has really been a huge focus of mine. It is
    something that I believe we are trying to do in terms of
    forecasting, the kinds of issues we are thinking about, seeking
    public input on it, and the best example I have are some of the
    most challenging issues we are facing, having public symposiums
    on those issues and really bringing experts together, live-
    streaming those symposiums----
        Senator Shelby. Is this kind of like focus groups?
        Ms. Kraninger. Yes, and experts, bringing experts together
    and making that public.
        Senator Shelby. How does that work? How would you work it?
    Do you appoint them? Do people appoint them? Or do you look for
    a strata of society that could be effective here?
        Ms. Kraninger. Yes, we look at, again, who are the experts
    out in the field. For example, on cost-benefit analysis, we are
    having a symposium at the end of April on that topic, really
    bring people in to look at the way we do this, the way other
    agencies do it, to see what we can incorporate into our
    processes and what we can learn from others in that area.
        Senator Shelby. Thank you for the job you are doing.
        Thank you, Mr. Chairman.
        Chairman Crapo. Thank you.
        Senator Tester.
        Senator Tester. Thank you, Mr. Chairman. I want to thank
    you and the Ranking Member for having this hearing. I want to
    thank you for being here, Director Kraninger.
        In your opinion, are we in an economic emergency at this
    moment in time?
        Ms. Kraninger. Senator, we are certainly responding to a
    public health emergency.
        Senator Tester. I got you. Economically, though, do you
    classify this as being an emergency or just a downturn in the
    market?
        Ms. Kraninger. We are certainly watching the response and
    taking calibrated action----
        Senator Tester. I got you.
        Ms. Kraninger.----and I take my lead----
        Senator Tester. I got you.
        Ms. Kraninger. I take my lead, Senator, from the Secretary
    of the Treasury in terms of the way that this is being framed
    in----
        Senator Tester. I got you, but you do have some stroke in
    this. Do not downplay your belief as the Director of the CFPB.
    I mean, do you feel that we are in an economic emergency? No?
    Yes?
        Ms. Kraninger. We are absolutely looking at how the
    emergency----
        Senator Tester. OK. So I am going to classify that as a no
    because you did not say yes. OK? The market has dropped 5,500
    points. It is down 11 in the last 13 days. Yesterday we saw the
    biggest drop since 2008. And you did say there is an FSOC
    meeting for the end of March that we do not even have a date
    for yet.
        I was here in 2008, and I was very disturbed with the folks
    at that moment in time, who are all smart people, too, that
    kind of surprised us. I do not think there is any surprise
    here. We have got a problem, and let us hope it is not a
    problem. But why wouldn't it be important for the principals to
    get together and talk? The deputies have. The principals have
    not. Is that too much to ask for when you have got people that
    are put out on a limb?
        And, by the way, if Mnuchin is the person who makes the
    call, then why do we have directors for everything else?
        Ms. Kraninger. So, Senator, there is a scheduled meeting. I
    do not----
        Senator Tester. But it is not set up. It is not set up.
    There is not a certain date.
        Ms. Kraninger. There is. I just do not remember off the top
    of my head what it is.
        Senator Tester. It is not public if there is. I certainly
    do not know. I just had my staff look, and they could not tell
    me.
        Ms. Kraninger. Yes.
        Senator Tester. OK. So I appreciate your testimony. You
    talked about prevention to harm consumers was the first thing
    that you talked about. And then you talked about regulated
    entities, if they need information, you have got it, you
    clarify it, you put it on the website. You talked about
    responsible business conduct, what that meant, self-assessment,
    self-reporting. You talked incentives for whistleblowers, which
    I think is great, although I do not know what whistleblower
    would ever come forward after they witnessed what the President
    did to the last one, calling him a ``traitor'' and basically
    treated like a traitor.
        Have you done anything as far as educating consumers?
    Because the name of the agency is the ``Consumer Financial
    Protection Bureau.'' Have you done anything in that regard?
        Ms. Kraninger. Yes, Senator. I am happy to talk further
    about it.
        Senator Tester. Let us get more specific.
        Ms. Kraninger. OK.
        Senator Tester. Have you done anything as it relates to
    educating veterans or college students?
        Ms. Kraninger. Yes, both, extensively. We have offices that
    focus on precisely the needs and concerns of those two
    populations.
        Senator Tester. So in December, I sent you a letter asking
    what the CFPB was doing to educate, coordinate, and monitor
    servicemembers and college kids. In your response, you pointed
    out to me--and, by the way, folks who use predatory tactics
    against veterans or college kids, as far as that goes, are the
    lowest form of life, in my opinion. But in your response, you
    pointed out to me an education resource from March of 2015. In
    fact, most of the educational material was from 2014 and 2015.
    Is that the material you use to educate now? Or do you have
    newer material?
        Ms. Kraninger. We absolutely have newer and updated
    material. I thought one----
        Senator Tester. So why wasn't that referenced in the
    letter?
        Ms. Kraninger. I believe--Senator, I apologize. I do not
    have it in front of me. I remember the letter, but I do not
    remember the detail. I thought we did have updated information
    specifically on the issue you raised, which was information for
    veterans and their pensions, advancing their pensions.
        Senator Tester. The truth is you do not have to look very
    far, at least not in my position, to find veterans who have
    been scammed. We had a veteran in Montana that was homeless
    that served in our military that was taken to the cleaners.
        Can I ask you another question? Somebody just passed you a
    note. Maybe that helps you with the answer to that question
    that I just asked you.
        Ms. Kraninger. Yes, it does. It is not a public date, but
    it is definitely happening in the next 10 days.
        Senator Tester. That is going to be published?
        Ms. Kraninger. When it happens, it will be, yes. The
    Secretary is to announce, but it is scheduled.
        Senator Tester. OK. So let us just be honest. 2014 and 2015
    is quite a while ago; 5, 6 years in the financial business is a
    lifetime. The number of complaints, I am told, increased from
    2015 to 2018 from 19,000 to 33,000. That is a pretty
    significant increase. Enforcement actions have decreased. Can
    you explain that?
        Ms. Kraninger. Senator, with respect to complaints, I
    believe it is the job we keep doing to make the database known
    and make sure that actually complaints----
        Senator Tester. Yeah, but that is not the problem here. The
    problem here is the complaints were known, they came in,
    enforcement actions have decreased. Can you explain that?
        Ms. Kraninger. We continue to take appropriate action on
    all the complaints that come in.
        Senator Tester. Well, I will tell you that the Chairman
    talked about data driven in his opening remarks, and I agree,
    but I am not sure that you are doing things that are driven by
    data.
        Thank you, Mr. Chairman.
        Chairman Crapo. Senator Cotton.
        Senator Cotton. Thank you, Ms. Kraninger, for appearing
    before us. I would say I am struck by the contrast between
    Senator Crapo's line of questioning on the one hand and Senator
    Brown and Senator Tester's line of questioning on the other
    hand. And the contrast does not reflect on you. It reflects on
    us.
        Senator Crapo talked about the constitutionality of your
    office and your Bureau. Senator Brown and Senator Tester are
    obviously dissatisfied with some of the Bureau's policies. I
    would say you exercised commendable restraint in the way you
    responded to them when you really have no reason to be
    restrained. What can any of us do to you or your Bureau? The
    answer is nothing. You have got a 5-year term. You are barely a
    year into that term. You do not come to us for your budget. You
    go to the Federal Reserve. And you tell the Federal Reserve how
    much money you want. You do not ask them for it; you tell them.
        Senator Brown wanted you to talk about whether the FSOC
    should have convened, presumably a great tension between you
    and Secretary Mnuchin, and maybe President Trump would be
    dissatisfied. Well, guess what? President Trump does not have
    much say over what you do either. You can only be removed for
    cause. You may be the single most powerful person in the entire
    executive branch of the Government because we created your
    office in that fashion.
        If the EPA Director were in front the Environmental
    Committee, I bet that they would be more deferential because
    they have to come to this body every year for a budget. Or if
    the SEC Commissioner were in front of this Committee, he would
    be deferential, because not only does he have to come every
    year for a budget, but he also has to come almost every year to
    get one of his five Commissioners confirmed.
        So nobody in Congress, whether they are talking about you
    or whether we are talking about your predecessor or even the
    facts or the programs you are doing right now that we do not
    care for as Republicans, has much recourse because the body was
    designed in this way, and it is totally antithetical to our
    founding principles. Men are not angels. If they were, no
    Government would be necessary. If angels were to govern men,
    neither elections nor the separation of powers would be
    necessary to keep them in check. That is James Madison
    describing the foundational principles of our Constitution. And
    the CFPB turns all those things on its head.
        Again, I commend you for your restraint and the way you
    responded to Senator Brown and Senator Tester's questions when
    there is no real reason from an incentive standpoint for you to
    be restrained.
        I would just say that all the complaints that we have about
    your Bureau, the Democrats have, it does not reflect the fact
    that the people working in the CFPB are necessarily bad people,
    but they are people. They are people. They are not angels. Just
    like we are certainly not angels up here on this dais or no one
    else is either; and, therefore, they should not be given the
    kind of unfettered power that this Bureau has been given.
        That is why I say, with Senator Crapo, I hope the Supreme
    Court corrects the errors in the Dodd-Frank law and makes this
    Bureau more accountable to the American people through its
    elected representatives. But until then, I want to raise the
    question about how you are making sure that your people are
    accountable.
        My office has been in touch with yours in the past, as you
    know, to encourage transparency and feedback around exams. Too
    often what we hear is that examiners are doing things they
    should not be doing. They have an attitude they should not
    have. They treat guidance as law. But these institutions are
    understandably reluctant to speak up.
        Has the Bureau yet created any formal feedback mechanisms
    outside of the ombudsman channel?
        Ms. Kraninger. Senator, I had hoped that I would have an
    answer for you on this. We do believe that we should do surveys
    of institutions after an exam. The ombudsman's office is the
    one that will run that, just to keep some independence from the
    Supervision and Enforcement Division that oversees this, just
    so that institutions feel better about the anonymous nature of
    the feedback that they will provide. But I want that feedback,
    and so we should have a process in the next couple months to
    launch that.
        Senator Cotton. Good. I am glad to hear that it will be in
    the next couple months. It has been 8 years now. I understand
    that you have only been there for a little over a year. But we
    need that in place, some simple, confidential post-exam survey
    that examined institutions can provide feedback, so you
    understand what is happening on your front lines in some kind
    of systematic fashion.
        I thank you for your effort on that. That is maybe the best
    next step we can take. Hopefully the Supreme Court, though,
    will take the step we should have taken long ago in making this
    Bureau more accountable to the American people through our
    elected representatives.
        I am glad you are there to hold your examiners to account.
    But as Madison also said, ``Enlightened statesmen will not
    always be at the helm.'' And, again, we certainly know that
    that is the case. Both Democrats and Republicans alike know
    that is the case. So let us do what we should have done and
    make the Bureau more accountable.
        Chairman Crapo. Senator Menendez.
        Senator Menendez. Thank you, Mr. Chairman.
        Director, the Federal Reserve estimates that 40 percent of
    Americans cannot afford a $400 emergency expense. That leaves
    over 130 million Americans vulnerable to predatory financial
    practices in the event that a case of coronavirus leads to a
    loss of income or an unexpected medical bill. And, furthermore,
    financial hardship brought on by coronavirus could affect a
    person's credit report and impact their ability to access
    credit in the future.
        In 2018, the CFPB performed research and issued educational
    material on the financial aspects of preparing and recovering
    from a natural disaster. What we are facing now may be a public
    health emergency that is more geographically dispersed but just
    as financially dangerous for American families.
        Early last month, the SEC and FTC issued warnings to
    Americans about coronavirus investment in product scams. But
    even though yesterday the CFPB and other regulators encouraged
    financial institutions to meet the needs of customers affected
    by the virus, the CFPB's website still does not have any advice
    for Americans on how to financially prepare or avoid scams and
    fraud that may come as a result of the coronavirus spread.
        So I am asking you a very simple question: Director, will
    you commit to immediately develop and publish such advice so
    that Americans whose health and lives are disrupted by the
    virus are not also exploited by scam artists and fraudsters?
        Ms. Kraninger. Senator, I appreciate the question you are
    asking. I will look to update the things that we do have that
    generally help consumers and make sure that we reference
    coronavirus appropriately. It is an excellent point, so thank
    you.
        Senator Menendez. All right. So I hope you will not only
    take that to heart but take it into action, because while
    general scams and frauds and advice on that may be worthwhile,
    the specific elements of fraud that we are beginning to see
    already and scams we are beginning to see already as a result
    of this I think merit the Bureau's attention.
        Now, I would like to follow up on an important issue raised
    by Ranking Member Brown. Can you commit to the Committee that
    any unresolved matters still pending with Wells Fargo will be
    handled in public?
        Ms. Kraninger. Senator, we have a current understanding
    with Wells Fargo with respect to this going through a lot of
    requirements that we will remain in the supervisory tool, if we
    can. And that merits cooperation and progress with respect to
    their compliance plans and actually providing the remediation
    and taking the right actions that were placed there----
        Senator Menendez. So you cannot make that commitment, is
    what you are telling me?
        Ms. Kraninger. I can say that we will continue to pursue
    our own responsibilities, and we are watching this incredibly
    closely.
        Senator Menendez. Well, the responsibilities, Mr.
    Blankenstein assured Wells Fargo that matters pending would be
    resolved in private--in private--through the Office of
    Supervision. So if we cannot have these actions speak in
    public, it seems that the CFPB does intend to keep Mr.
    Blankenstein's promise to Wells Fargo after all, because doing
    this in public would, in fact, be preferable obviously to
    secrecy. It may not lessen the gravity of Mr. Blankenstein's
    actions under your leadership, but to suggest that I am going
    to take care of you politically through supervision, that does
    not create any sense of confidence for consumers, especially
    those who have banked at Wells Fargo and have a long history--
    Wells Fargo has a long history of perversing the interests of
    those consumers.
        I would just say to you that, you know, we need assurances
    that you can provide the Committee that the CFPB's political
    appointees are not promising these companies that they will
    handle any violations of law it uncovers at these companies in
    private. You know, public scrutiny is far better. And if you
    are saying we will do it in private without public scrutiny and
    potentially without fines, that is a problem. That is a
    problem.
        Has the CFPB at this point in time resumed supervisory
    examinations and oversight of companies that service the $1.2
    trillion of loans owned by the Federal Government?
        Ms. Kraninger. Senator, yes, we have an agreement with the
    Department of Education and are moving forward with a joint
    exam, in fact, this month.
        Senator Menendez. So you are doing supervisory
    examinations?
        Ms. Kraninger. Yes, Senator, starting this month.
        Senator Menendez. And when you say you are--let me just
    understand. You said a joint effort here. It is your
    responsibility to do these supervisory examinations. So is the
    CFPB--I want to make sure I have got this for the record
    straight so we do not end up having a different consequence. Is
    it the CFPB who is doing the supervisory examination of these
    loans?
        Ms. Kraninger. Yes, with respect to consumer financial
    laws, and the Department of Education has the contract
    oversight of their contractors.
        Senator Menendez. Well, I will close just simply by saying,
    as you know, I have raised this with you several times that you
    have been here. We need to make sure that you use the full
    scope of your authority, including if you are not getting the
    direct access to audits going to court as your predecessor did,
    to ensure that
    student borrowers are protected. So I will look forward to
    following up with you on this issue.
        Thank you, Mr. Chairman.
        Chairman Crapo. Senator Rounds.
        Senator Rounds. Thank you, Mr. Chairman.
        I listened with interest to Senator Cotton's message today,
    and I had been thinking prior to his discussion with you that I
    feel the same way that Senator Cotton had expressed. I think he
    did a very nice job of sharing the concern that we have about
    the leadership structure within your organization. And I think
    today's discussion, particularly that of our Ranking Member and
    several other Members and their dissatisfaction that they have
    expressed, and the fact that it lends credibility to the
    argument that there should be direct oversight by Congress of
    your organization.
        I also recognize that you have clearly laid out before the
    Supreme Court your position that the existing structure is not
    appropriate. Would you agree with me on that analysis?
        Ms. Kraninger. Yes, Senator. With respect to the removal
    provision, certainly yes.
        Senator Rounds. Thank you. I think today's hearing has gone
    a long ways in pointing out the reason why many of us feel that
    way. At the same time, I most certainly appreciate your being
    here before us today.
        You may remember that late last year I joined a number of
    my colleagues in sending a letter to you regarding reforms to
    the definition of qualified mortgage (QM) under the CFPB's
    ability-to-repay rule. In your response, you mentioned that the
    Bureau is considering a revision that was move away from the
    DTI, or debt-to-income, and include an alternative such as a
    pricing threshold.
        My question is: Since your response, have you come to a
    more defined position about how the Bureau will proceed? And
    are there any misconceptions about your approach that you would
    like to take the opportunity to correct?
        Ms. Kraninger. Thank you for that question, Senator. I
    would say that the timeline for the Notice of Proposed
    Rulemaking that I issued publicly is May, so we will have a
    full rulemaking there outlining the details of the proposal.
        The statute absolutely requires consideration of debt-to-
    income ratio as part of the underwriting decision and ability-
    to-repay decision that an institution formulates in the loan
    process.
        So what we are moving away from or going to propose to move
    away from is the DTI 43 percent threshold that was established
    as what makes a QM, what provides safe harbor. So that is the
    issue that is, I think, a little bit misunderstood. Debt-to-
    income ratio still is part of the consideration, but we will
    not have at least in this proposal--we will see what comments
    come in. We will not have a hard limit on 43 percent.
        Senator Rounds. Thank you. You may be aware that previously
    I have cosponsored legislation called the ``Business of
    Insurance Regulatory Reform Act'' that would affirm or reaffirm
    the CFPB's relationship with respect to the insurance industry.
    Does the CFPB in your opinion have the legal authority to
    regulate insurance?
        Ms. Kraninger. Definitely not. The Dodd-Frank Act provides
    that the States continue to regulate State-regulated insurance.
        Senator Rounds. Thank you. I think Senator Tester was
    looking for the opportunity or providing you with an
    opportunity to respond to the concerns that many people have
    expressed about what is going on right now with the
    coronavirus, the impact that it has had on our economy and so
    forth. The question, as I believe he phrased it, was: Is this
    an emergency? I would like to give you an opportunity to
    respond with regard to perhaps the way that you see the
    response from your department back to the ongoing issues before
    the economy right, recognizing the market has fallen, there are
    issues with regard to supply chain competencies or capabilities
    in the future.
        Can you give us in your words the direction that you see
    your organization participating or responding with regard to
    the current financial situations in this country and throughout
    the world?
        Ms. Kraninger. Thank you, Senator. It clearly is a public
    health emergency that has significant economic impact. It is
    something that the Administration is, again, looking at day to
    day, that, frankly, your security and emergency management
    staff are looking at day to day here at the Capitol and on the
    Hill. So it is something every organization needs to have,
    having a business continuity plan, which is a regular part of
    business these days. And, in fact, the Bureau has a pandemic
    plan. We have reminded institutions we regulate that they
    should have pandemic plans. So there is, again, an ongoing
    business continuity concern.
        There is a mission concern in terms of how this is
    affecting consumers and making sure that we are getting the
    best possible information out, and certainly my own staff as
    part of that business continuity effort, to make sure that we
    are safe and healthy as we look to continue to perform the
    mission.
        So it is a constant balance. It is something that every
    organization is looking at and should be looking at and
    involves up-to-date information, so there is a lot of
    information sharing happening at the interagency level, and
    guidance is being regularly updated as to what appropriate
    responses are, what responses people are taking.
        I have taken action with respect to larger events at the
    CFPB. We have several things that were scheduled for this week.
    We have now said the public can join via live stream rather
    than coming to the building. So that is something that we are
    working through and thinking about again as we go forward every
    day.
        Senator Rounds. My time has expired. Thank you.
        Thank you, Mr. Chairman.
        Chairman Crapo. Thank you.
        Senator Warner.
        Senator Warner. Thank you, Mr. Chairman.
        Director Kraninger, it is great to see you. I will start
    with what my colleagues have said, and particularly Senator
    Cotton called you maybe the most powerful person in the
    executive branch. I think you do have power. I was
    disappointed, gravely disappointed, by your last response. I
    think this will be an economic crisis. I am gravely concerned
    that some of the solution sets that we are talking about right
    now, the general tools, interest rate cuts, broad-based
    stimulus, X amount of money for every family in America,
    targeted tax cuts by industries, or the more recent suggestions
    of a payroll tax cut miss the mark. A payroll tax cut is going
    to do nothing if you have been furloughed. It is going to do
    nothing if you are a waiter or waitress at a restaurant that is
    shut down.
        I think we desperately need to look at those affected by
    the health restrictions, quarantine and otherwise. People
    should not be losing their jobs, should not be losing their
    pay, should have flexibility if their kids' school is shut
    down.
        I think we should be looking at those industries especially
    around travel, hospitality, food and beverage that, through no
    fault of their own, people are not out because they are taking
    the healthcare recommendations, will be put in dire straits. My
    hope would be we can find some common ground on this on a
    bipartisan basis and make sure that we target our relief.
        But as a very powerful person, as indicated by our
    colleagues, you have a remarkable ability to influence how this
    economic crisis will affect consumers. As you know, a number of
    members sent you a letter recently--just yesterday, I believe--
    to take action. I think there is precedent again here. In the
    case of natural disasters, we have seen the circumstance where
    the short-term financial hardships on a family or a small
    business will last well beyond the effects of the national
    disaster, affect credit card scores, affect the ability to
    maintain credit if you are a small business.
        My feeling is we are going to see that. We are going to see
    that soon. We are already seeing it in an area that I have
    looked at for a long time and have been urging colleagues on
    both sides of the aisle to look at--independent contractors,
    gig workers--who have no social insurance to fall back on. So
    we are seeing the lack of that social insurance, any kind of
    paid leave. I am actually happy to see some platform companies,
    even the old bad boy of the industry, Uber doing a little bit
    in terms of talking about some benefits or potentially some
    shared healthcare activity for workers that may be constrained
    due to the coronavirus.
        But I do think there is going to be more. Every one of
    these workers in terms of what will be immediately needed from
    their employer is one set-up, but they are also going to have
    financial obligations to deal with. They have got student loans
    due. They have got car payments to make. They have got mortgage
    and rent payments to make.
        So I want to hear what specific steps you will take in the
    immediate coming days. For example, have you gone to the auto
    lenders or credit card lenders yet and talked about forbearance
    as these kind of notes come due?
        Ms. Kraninger. Senator, we did issue yesterday--in fact, I
    think your letter crossed our action with respect to notifying
    financial institutions that they are going to have supervisory
    flexibility for any accommodation decisions they make. You
    referenced disasters. This is, again, the typical step that we
    take that is similar to a disaster context or a national
    disaster context.
        With respect to going forward, we are looking day to day,
    and there are conversations even happening on the Hill today--
    --
        Senator Warner. Respectfully, I do not think your
    response--and I know this is a quick turnaround--had any level
    of detail to it, it seemed to me. And, again, if you are the
    most powerful person in the executive branch, you ought to take
    that power and use it now. I would like to see specifically
    what kind of guidance you are giving or urging auto and credit
    card lenders to give.
        You mentioned disasters, so let us talk for a moment about
    that. When you have disasters, credit card guidance,
    particularly in terms of credit reporting relief, can be
    granted so that a credit reporting enterprise can identify with
    what is called ``trade lines'' that they were affected by a
    natural disaster that would give the credit bureaus some
    ability to note that the person's credit may have slipped a
    little bit, but that it was affected by that natural disaster.
    So have you been willing to reach out to the rating agencies,
    the credit card reporting agencies, to use these trade lines?
    And if not, why not?
        Ms. Kraninger. Senator, we are monitoring this day to day.
    We are in communication with industry and going back and forth
    on this, and I definitely will take your recommendation under
    advisement going forward and how we should deal with this.
        Senator Warner. Mr. Chairman, I know my time has expired,
    but if we do not jointly get ahead of this, this is not going
    to be an event that ends on a single day. And I think the
    American people are looking for bipartisan creative action.
    This is not going to be business as usual, and the traditional
    tools that we have used will not be effective this time. We
    need to target these, and you have a remarkable amount of power
    to urge that kind of forbearance from the lender community,
    from the credit rating agencies. And for those of us who have
    questioned your commitment to these issues with this enormous
    power, I hope you will prove us wrong and act forthright.
        Thank you, Mr. Chairman.
        Chairman Crapo. Senator Cramer.
        Senator Cramer. Thank you, Mr. Chairman. Thank you,
    Director, for being here.
        I want to explore a little bit something that Senator
    Tester started on, and at least he referenced it. I have never
    been a financial regulator, but I have been a regulator, and
    the use of self-reporting can be a wonderful tool. It can be a
    wonderful incentive for companies to self-report. Or it can be
    quite a disincentive, depending on how the agency responds to
    that.
        I would be interested in how it is going for you under your
    leadership, you know, now after a year, what is your sense of
    it, and maybe just even a little bit of how it has gone and
    your philosophy with regard to self-reporting. And what is the
    right level of response, I guess, from the agency? I realize
    that is a broad question, and maybe it has a broad answer, but
    I would be interested. And then I might explore just a little
    deeper on a follow-up.
        Ms. Kraninger. Understood. Thank you, Senator.
        Last Friday, I reissued and really strengthened our
    Responsible Business Conduct bulletin, so it is something that
    outlines for institutions what this means, what it means to
    self-identify and report, assess--I should say self-assess and
    self-report, and then remediate and cooperate. And it is
    fundamental, frankly, to our ability to target out resources.
    There are absolutely predatory lenders out there. There are bad
    actors who have no intent of complying with the law, some who
    are even ignorant of the law. And we have a broad mandate with
    respect to both, you know, financial institutions, nonbank
    entities. So making sure that we are focused on where we need
    to be focused on, we need those who are truly engaged, who have
    compliance management systems, who have a glitch or make a
    mistake or have a bad actor inside the institution, when they
    identify that and they report that to us, we are saying we will
    favorably consider that in our actions and supervision and
    enforcement around that, and true cooperation, even just
    identifying an issue, it may not be a violation. The
    institution does not have to concede it is a violation. It is
    really letting us know about the issue, having the dialogue,
    bringing that forward in a constructive way so that any harmed
    consumers can be helped and that this can be addressed quickly.
        So that is the kind of behavior we are trying to encourage.
    My examination force is a very dedicated team of people. We are
    adding to those ranks, too, and so making sure that they
    understand that and they are conveying that to institutions, it
    is an ongoing training effort. But I have heard very positive
    things from institutions as I interact with them and go around
    and talk to them about this.
        Senator Cramer. Well, what sort of prompted me to ask the
    question that way was that Senator Tester and you had an
    interesting dialogue with relation to enforcement action versus
    complaints. And he was drawing, I think, a distinction or at
    least thought there should be a correlation where the more
    complaints there are, the more enforcement action there ought
    to be. And if we played ``gotcha'' regulation with every
    complaint, guess what? You do not get a lot of--you might not
    get a lot of complaints, at least from within an organization.
        So I would be interested maybe in just a little bit to wrap
    up your thoughts or your philosophy about the role of a
    regulator with regard to enforcement action versus helping the
    lenders be compliant. And I know sometimes it can be a tricky
    line, but how you treat, for example, self-reporting will mean
    more than the training in terms of whether you continue to have
    that type of cooperation.
        Ms. Kraninger. Absolutely, Senator, I agree. And the way I
    have outlined our mission is really a continuum. It does start
    with consumers, and we do need to educate them so they know
    when they are engaging in the marketplace what they should
    expect. It is getting clear rules in place and guidance
    mechanisms for institutions that are trying to comply, the
    ability to have back-and-forth on their questions and
    interpretation issues. That is also engaged in through the
    supervisory process. So what does compliance mean? How do we
    get the right rigorous systems in place? And then enforcement,
    it is a blunt tool but a very important one, and we need to use
    it effectively to make sure we are incentivizing the right
    behavior in the marketplace and going after those who are bad
    actors in the system. That hurts everyone in a competitive
    marketplace.
        Senator Cramer. That was very well said, and I commend you
    on it, considering that we are having this interesting debate
    on the creation of a completely unaccountable, blank-check,
    self-funded regulatory agency. It is nice to see somebody
    exercising that type of balance in that role until such time as
    it can be changed.
        Thank you, Mr. Chairman.
        Chairman Crapo. Senator Cortez Masto.
        Senator Cortez Masto. Thank you. Director, thank you for
    being here.
        Let me follow up on the conversation and let us talk a
    little bit about payday lenders. Do you think there is any
    payday lender companies or agencies that are predatory?
        Ms. Kraninger. I would say there are entities in every
    single market that are probably operating in that kind of
    fashion.
        Senator Cortez Masto. So let us talk about payday lenders.
    If you identify one that is predatory, what action would you
    take?
        Ms. Kraninger. So we do have enforcement tools, and, in
    fact, we do have ongoing investigations in most corners of our
    market, including in that space.
        Senator Cortez Masto. Sure, so let me ask you, what
    enforcement would you take? Would you take action against a
    predatory lender? And what would you specifically do?
        Ms. Kraninger. So, Senator, we have had this conversation
    back and forth. Every case really is fact-specific and
    circumstance-specific. We look at the law. We look at the
    potential violations. We look at the evidence that we have been
    able to build, and first priority is really remediation of
    consumers who may have been harmed. That does take different
    forms in different cases, and we have the full panoply from
    injunctive relief to the consumer penalty--sorry, the civil
    penalty that we can assess and remediation for consumers.
        Senator Cortez Masto. So let me ask you this, because there
    has been this line of questioning, and I agree with it. I think
    many of us are worried that predatory online lenders will step
    up their efforts to target vulnerable and financially
    vulnerable struggling families with expensive loans during this
    coronavirus crisis. And critics of your decision to weaken the
    Consumer Bureau's 2017 small-dollar lending rule say that
    lenders no longer have to verify a borrower's income, debt, and
    spending habits to assess their borrowing threshold before
    underwriting their loan. Do you agree with that?
        Ms. Kraninger. Senator, the rule that is in question
    stipulated very specific means by which that underwriting would
    be conducted. That rule never went into effect also because it
    is actually pending litigation as well. So what currently
    happens----
        Senator Cortez Masto. Do you intend to put it into effect
    if successfully through the litigation the ability to pay is
    found legitimate by the court? And you are putting----
        Ms. Kraninger. We are assessing all of the comments that we
    have received back on the proposal to rescind the----
        Senator Cortez Masto. No, I appreciate that. But at some
    point in time, you have got to make a decision.
        Ms. Kraninger. Yes.
        Senator Cortez Masto. And so my question to you is: If the
    lawsuit goes in favor of keeping that rule and the ability to
    repay, would the CFPB still continue that as well, or would you
    look to change the rule?
        Ms. Kraninger. All of this is a pending decision before me.
    I am not trying to avoid the question directly. In April, we
    will have some more information about all of this as we look at
    all the comments we have received.
        Senator Cortez Masto. So you are still waiting to go
    through the comments to determine whether the ability to repay
    should be a variable that predatory--or lenders look at in
    general?
        Ms. Kraninger. Not waiting. Ongoing. And that decision then
    will be----
        Senator Cortez Masto. So you have not made a decision one
    way or the other?
        Ms. Kraninger. Correct.
        Senator Cortez Masto. OK. Let me ask you this: You sit as a
    member of the FDIC in your current position. Is that correct?
        Ms. Kraninger. Yes, it is.
        Senator Cortez Masto. So is this true, that as an FDIC
    Board member, you voted in November 2019 for a proposed rule
    that would eviscerate State laws' caps on the interest rates on
    loans and allow unregulated predatory payday lending across the
    Nation? Is that true?
        Ms. Kraninger. Senator, I certainly would not characterize
    it that way.
        Senator Cortez Masto. So please characterize it how you
    would. What was your vote to allow the removal of those caps?
        Ms. Kraninger. It is about the valid-when-made rule in
    terms of the way this is characterized, you know, I think
    factually, such that when a loan is made, it is valid. If that
    loan is then sold or otherwise transitioned, the terms of that
    loan would carry forward.
        Senator Cortez Masto. OK. So the State laws do not have any
    effect at that point in time based on what your analysis of----
        Ms. Kraninger. That is--again, there are limited
    circumstances, and there are other cases where that would be
    the case. This gets more complicated, but in its simplest
    terms, yes.
        Senator Cortez Masto. So there has been a lot of talk about
    lack of enforcement. You probably have had this conversation as
    well. I understand that the Consumer Financial Protection
    Bureau has not examined Federal student loan servicers for
    compliance with the law for more than 2 years. Is that correct?
        Ms. Kraninger. I think we are--yes, we are probably at 2
    years on that point, but I can tell you----
        Senator Cortez Masto. Let me just ask further, because I
    understand that Betsy DeVos, the Secretary of the Department of
    Education, has refused to allow Federal student loan servicers
    to provide the Bureau with access to borrower information. Is
    that correct?
        Ms. Kraninger. I have sent letters back to Congress on
    this, so, yes, that is correct. But I did tell Senator Menendez
    a little earlier that we have an agreement, and we are going to
    move forward with a joint exam this month with respect to the
    Federal portfolio of the student loan servicer.
        Senator Cortez Masto. Thank you. I have further questions.
    I will submit those for the records.
        Thank you again for being here.
        Ms. Kraninger. Thank you, Senator.
        Chairman Crapo. Thank you.
        Senator Tillis.
        Senator Tillis. Thank you, Mr. Chairman. Director
    Kraninger, thank you for being here. And also, as Senator
    Rounds said about Senator Cotton's comments, I want to
    associate myself with them. I remember telling then-Director
    Mick Mulvaney I bet his heart rate was about four or five. Many
    people come before these committees. I am sure that they are
    more concerned. But the fact of the matter is you just have to
    come to this Committee and then go back and do whatever you
    want to do.
        Now, I for one think you are doing a good job, but I think
    there are fundamental problems with having a regulatory entity
    that is absolutely unchecked by any congressional oversight and
    action. So thank you for your patience. I am not quite so sure
    in response to some of the questions and some of the cutoff
    back and forth that I have seen here that I would have been
    quite as patient with.
        I have a question about the QM patch that is set to expire,
    Freddie, Fannie. You are very familiar with it. You sent us a
    letter back in January, and I think in one of the passages you
    were talking about moving away from the DTI toward a pricing
    approach as well as a seasoning mechanism. Can you tell me--I
    know that you are receiving comments right now, but can you
    give me an idea or expand a little bit more on conceptually
    what that means?
        Ms. Kraninger. Yes, Senator. So we will issue a proposed
    rule in May with respect to the first part of that. With
    respect to the seasoning proposal, looking at something a
    little bit later than that because we are still working through
    it.
        Of course, all of this starts with the law, and Title 14 of
    the Dodd-Frank Act outlines what this all means with respect to
    ability to repay. There are things that a lender must consider,
    including debt-to-income ratio, in that underwriting decision.
    But what the Bureau did several years ago when it issued its
    rulemaking and there were subsequent changes and we assessed
    this rule 5 years after to understand its impact better, there
    are comments and concerns that we have gotten with respect to
    how specific those things were, particularly as it applied to
    the safe harbor of the QM.
        So what we are looking at is what was in that QM in terms
    of specific underwriting actions and how you determine ability
    to repay that went beyond the statute, how limiting that was.
    And then also with respect to the QM, the debt-to-income ratio
    threshold set at 43 percent, as you know, the patch allowed
    Fannie and Freddie to set their own rules, and there are many,
    really hundreds of thousands of borrowers who otherwise would
    not have a home whose debt-to-income ratio is higher than 43
    percent and, in fact, some that were given loans, given the
    mitigating factors, of more than 50 percent DTI.
        So that in and of itself did not seem to be the right QM
    threshold. It is still very much a back-and-forth in terms of
    taking comments, as you noted, so there is no final decision.
    But the proposal we are looking to finalize here and then put
    out in May will rely instead on a pricing threshold, and so the
    difference there.
        So that is the part that we are very much looking at
    comments on. What should that pricing threshold be? But DTI
    still is very much a part of the process.
        Senator Tillis. And at the end of the day, allowing the QM
    patch to expire and moving to this new mechanism is one that
    would be basically the rule for anybody underwriting a
    mortgage? That seems to be the appropriate----
        Ms. Kraninger. Yes, really having an equal playing field.
        Senator Tillis. Is there any rational basis for why you
    would come back and reconsider the QM patch if you are moving
    toward this mechanism?
        Ms. Kraninger. No. With respect to the patch, no. I made
    very clear that that is ending as intended.
        Senator Tillis. Good. Thank you.
        I have one question here about balancing access to credit
    with consumer protections, the balance, I should say. And I was
    wondering, are you guys engaging with the MBS investor
    community as it seeks to strike a balance here?
        Ms. Kraninger. With respect to, I am sorry?
        Senator Tillis. I am sorry. Actually, we are talking about
    balancing access to credit with consumer protections. I know
    that you are dealing with that. But it seems that the crisis--I
    am doing a bad job of gluing together my thought, but what I am
    trying to do is figure out how do you allow access to credit
    but protecting consumer--having appropriate consumer
    protections in there. This is basically the discussion we had
    over here with Senator Cortez Masto. I am worried, on the one
    hand, if we do not strike a balance, that there is an entire
    segment of the people that will be underbanked and unbanked.
        Ms. Kraninger. Yes.
        Senator Tillis. And I think if we overreach on some of
    these things that I know get the headlines and make everybody
    feel like they are being protectors of the consumers, at the
    end of the day--I have seen this in North Carolina--there are
    going to be people who are unbanked, underbanked, or going
    toward funding mechanisms that are far worse than a well-
    regulated regimen or execution under your control.
        Ms. Kraninger. Thank you, Senator. You have articulated it
    well, and it is a balance that we constantly need to look at.
    And disclosure is, again, a typical means of consumer
    protection. It is something that we look at as a first action,
    making sure consumers have the information they need to make
    the best decision for themselves. That is something we look at
    regularly.
        Senator Tillis. I just think it is important to--we want to
    target one segment of lenders as bad actors and eliminating
    them, and if we do that with a broad brush, without looking at
    bad actors across the spectrum of the financial services
    industry, then we run the risk of taking a segment of our
    population out of any sort of financial network that provides
    some ability to give them the capital they need. As a kid that
    grew up on 90-day notes with my dad, I understand if you do not
    get cash to a certain segment of society, they are either not
    going to be able to do their job, not be able to pay their
    bills, or not be able to have the opportunities that I had when
    we were living on 90-day notes.
        Chairman Crapo. Senator Van Hollen.
        Senator Van Hollen. Thank you, Mr. Chairman. Welcome,
    Director Kraninger. And thank you for the statement you made at
    the outset about your plans to address whatever needs arise
    with your own employees with respect to responding to the
    coronavirus.
        Do you have a telework plan that have you put in place?
        Ms. Kraninger. We do have telework policies for literally
    just about every single employee. We are actually trying to get
    the last 50 holdouts, get them done so that we have that. It
    includes situational telework and a weather provision that we
    can work through to meet the current circumstances as well.
        Senator Van Hollen. Good. I am glad you are taking those
    steps.
        I also want to associate myself with Senator Warner's
    comments about the need to use both your persuasive abilities
    but also your authorities with respect to forbearance by credit
    card companies and others with respect to consumers who are now
    going to see their debts go up and maybe not be able to pay on
    those debts and credit cards because they are out of work
    because of the coronavirus.
        I did see the statement that was issued. I hope in the
    coming days you will take even more aggressive action, because
    that could obviously turn a lot of households upside down. We
    know that 40 percent of households are literally $400 away from
    essentially going underwater and are not going to be able to
    make the payments on car payments, mortgage payments, those
    kinds of things. So I really hope we will have a comprehensive
    response there.
        Let me turn to student debt. In the next couple days, we
    may have a vote here with respect to the Administration's
    overturning of what was the borrower's defense rule, which is
    designed to protect students who were effectively defrauded by
    student loan agencies and some mostly private colleges in the
    process. I hope that this body will have a majority vote to
    overturn that.
        In the meantime, I was glad to hear that finally--it is
    long overdue--you have entered into this MOU with the
    Department of Education, and I hope you will keep us posted on
    what actions you are actually taking. As you know, it has been
    a source of great frustration to many of us that this has taken
    so long, that you got rid of the old MOU that had been in place
    during the previous Administration, finally reinstated this new
    one. I think you are going to see a lot of Members of this
    Committee actively watching to see how that is implemented.
        Another area of student debt is in the area of credit cards
    and debit cards. And as you know, years ago Congress passed the
    CARD Act that essentially prohibited colleges from teaming up
    with credit card companies and co-marketing credit cards at
    really usurious rates to students. We limited that. But debit
    cards were not included, and there was a study done by the CFPB
    during the previous Administration. It got kind of deep-sixed
    early in this Administration, but it surfaced through what I
    believe was a FOIA request. And it pointed out that Wells
    Fargo, which has been in the news a lot lately, had been
    charging excessive amounts for debit cards.
        So my question is: Are you using your authorities today to
    address that issue of potentially abusive practices in the
    debit card space aimed at students on campuses?
        Ms. Kraninger. Senator, I am aware of the report that you
    are referencing. As you noted, the CARD Act did not address any
    debit card issues associated with this area. But I can assure
    you that we absolutely are using our enforcement power to take
    any action that we deem necessary really in any area of
    predatory lending. And so I am happy to take any particular
    circumstances you might be aware of. We take it from every
    source of information we can. We are continually looking at
    CARD Act compliance and making sure that that is happening as
    well. So it is an ongoing effort.
        Senator Van Hollen. So you agree that it is within the sort
    of scope of work and jurisdiction of CFPB to look at these? If
    there were fraudulent or predatory debit card practices going
    on on campuses, you agree that that is within your
    jurisdiction, right?
        Ms. Kraninger. Yes.
        Senator Van Hollen. OK. Thank you, Mr. Chairman.
        Chairman Crapo. Senator McSally.
        Senator McSally. Thank you, Mr. Chairman.
        Director Kraninger, I am a veteran. I served 26 years. I
    have always said there is a special place in Hell for people
    who prey upon our military and our veterans. The last time that
    the Office of Servicemember Affairs at CFPB published an annual
    report was January of 2019. Can you tell me what major themes
    and trends you are seeing related to our military and veterans
    since then? And when can we see the next report?
        Ms. Kraninger. Absolutely, and we are working actually
    internally to finalize that next report, as you know, outlining
    the complaints that we have received from servicemembers and
    some of the outreach activities that we have done, including
    with the Department of Defense, to make sure we are constantly
    assessing what information servicemembers are facing and
    veterans are facing in the marketplace and looking at what
    actions we can take to help them arm themselves, certainly
    including any enforcement actions that we should take. So we
    have ongoing efforts in many of those areas.
        In terms of the complaints that we have received, there are
    some with respect to student loan servicing and understanding
    different processes, and so in that respect, servicemembers are
    similar to the student population generally. So there are
    things we are working through on that front, some things, too,
    with respect to add-on products in the auto loan context. And
    that is not going to be highlighted in this current report
    because we think there has been some clarification on that
    particular issue that has happened in the last year.
        I know there was a third highlight in that last year's
    report, but I am not recollecting what that is.
        Senator McSally. OK.
        Ms. Kraninger. But we very much look at those complaints
    that come in, highlight the ones that are most prevalent, and
    what we are doing about them.
        Senator McSally. Great. I appreciate that. I want to ensure
    that there are appropriate financial protections for our
    veterans and our military families as they are serving. The
    last thing they need to worry about, especially when they are
    deployed, is being preyed upon in the financial marketplace,
    them and their families.
        I believe that Congress should very clearly codify into law
    that the Bureau clearly has supervisory authority over the
    Military Lending Act, something many Republicans and Democrats
    agree upon. If we were to pass this legislation, how would that
    impact your posture specifically for your supervisory
    authority?
        Ms. Kraninger. Thank you, Senator. It is something that I
    am seeking. It is the first legislative proposal that I sent to
    the Congress, explicitly calling for that authority. The
    Military Lending Act is not one of the enumerated Federal
    consumer financial laws, and for that reason, given our
    supervisory authority is different in the statute from our
    enforcement authority, that is something I have determined we
    do not have the ability to do, is supervise in that context.
        Senator McSally. So if you had that authority, how would
    that better protect veterans and military?
        Ms. Kraninger. It would really enable us to make that a
    pointed effort of our exams, and it gets back to my push to
    prevent harm. That supervisory tool that we have helps
    institutions comply with the law, understand what compliance
    means, is a faster ability to engage with an entity than the
    enforcement tool, which, you know, does take time to bear out
    an investigation.
        Senator McSally. Great. Thanks. And you believe, I assume,
    that the CFPB is the best agency for MLA supervision and
    enforcement?
        Ms. Kraninger. Yes, with respect to nonbank entities,
    because the prudential regulators can do this with respect to
    banks and credit unions. It is really the nonbank space where
    that is in question.
        Senator McSally. OK. Great. And if you had that authority,
    that would also allow the Bureau to work with other agencies to
    promulgate rules and regulations to protect active-duty members
    and veterans?
        Ms. Kraninger. We have the ability to do rulemaking
    separate from, so I will say that at least, in some respects. A
    lot of the Military Lending Act rules come from the Department
    of Defense, though. But we have other areas where we can
    certainly declare--address issues of rulemaking as needed.
        Senator McSally. OK. Great. Is there any downside, in your
    view, from us just passing this and making it very clear that
    you have the authority for that supervisory----
        Ms. Kraninger. That is an interesting question. I certainly
    do not see a downside to Congress providing clarity,
    particularly where it is clear that everyone would like us to
    act, I would like to act, and I do not have the authority
    today.
        Senator McSally. Great, nor do I, and I plan on leading on
    that legislation in order to give that clear authority so we
    can protect my fellow servicemen and -women and veterans and
    give you the authorities you need in order to protect them.
    Thank you.
        Ms. Kraninger. Thank you.
        Senator McSally. Thank you, Mr. Chairman.
        Chairman Crapo. Senator Jones.
        Senator Jones. Thank you, Mr. Chairman. Thank you, Director
    Kraninger, for being here.
        I want to return to the payday lending questions that
    Senator Cortez Masto asked, and you and I have talked about
    this. It is a huge problem in Alabama where, you know, the
    average payday borrower in Alabama takes out eight loans a
    year. And I have got a concern like Senator Tillis does. I do
    not want to just--I want to make sure that people that need the
    ability to get cash and access to credit have that. And like
    him, my dad, and me to some extent, had these 90-day notes. But
    my guess is--and this is just a hunch, but my guess is neither
    Senator Tillis' dad or mine had to pay 300 to 400 percent
    interest on those 90-day notes. And my guess is they also
    either had to put up some collateral or there was some
    indication that they would ultimately have the ability to repay
    that 90-day note, either continuing just to pay interest on it
    or do whatever.
        So I am concerned, frankly, that the updated payday lending
    rule does not require lenders to determine whether borrowers
    can pay back a loan. And Senator Cortez Masto asked you that.
    To me, that just seems like a no-brainer, that looking at the
    ability to pay a loan is integral to whether or not to give
    that loan in the first place. There could be other factors, but
    explain to me why this is even under discussion that that would
    not be something that every payday lender should be looking at.
        Ms. Kraninger. Senator, I can tell you that the rule
    stipulated specifically how that underwriting would be done and
    had an impact on the availability of credit in general to
    consumers that was dramatic and substantial. And that is----
        Senator Jones. In what way--I mean, I am trying to
    understand, and I have not seen all of it, but I am trying to
    understand how dramatic and how substantial, because it seems
    to me if they cannot pay it back, they are going to get caught
    in this circle of debt. So how do these new rules have a
    dramatic impact on those folks so that they can ultimately
    stroke a check and pay this back without having to take out
    another loan from another lender?
        Ms. Kraninger. So the rule took one tack, Senator, and it
    really was a complete turning-over of the industry as it
    operates and reducing--the numbers should be at my head, but we
    are talking roughly 70 percent of the availability out there
    with respect to branches. That was the CFPB's assessment of the
    impact on the reduction in access to small-dollar loans.
        I would say, too, several years ago the prudential
    regulators issued guidance that was taken to heart by banks
    that they should not provide small-dollar products. And so that
    is in my estimation another part of the problem because we want
    responsible institutions to provide the kind of credit that
    consumers are seeking.
        There is a product that credit unions can offer under the
    NCUA's rules, and it is called ``PAL.'' I forget what it stands
    for, but they have been looking to update that, too. And so
    what I would like to see is encouraging competition with
    responsible products by responsible service providers, to look
    at the opportunity potentially for disclosures in this space,
    because the bottom line is making sure that consumers
    understand and are informed about what products they are
    actually seeking in the marketplace to meet their own needs,
    and enforcement. It is our backstop. Predatory lending is
    absolutely not appropriate in any market.
        Senator Jones. But if you do not have any rule or
    regulation that requires them to look at whether or not you can
    ever pay this back, ever pay it back, how are you going to
    enforce something that you are not even beginning to regulate
    in the first place? I am sorry, but I am just having a real
    hard time with everything you are saying only because it just
    seems like we are just getting this payday lending spiraling
    people into debt. Eight loans a year from folks in Alabama.
    They need help, but they also need the help paying it back as
    well.
        You know, I am just having a hard time with this and
    understanding why that is not even a consideration. And I am
    not sure you have really answered why it is not a
    consideration.
        Ms. Kraninger. Well, Senator, in fairness, too, this is a
    proposed rescinding of that underwriting provision that is in
    front of me now, so I cannot give you a fulsome articulation of
    a decision on that because it is an ongoing rulemaking process.
        Senator Jones. And that has been ongoing ever since I have
    been in the Senate just about, since January of 2018. When will
    that be final so that you can give me that information?
        Ms. Kraninger. We are going to assess this and make the
    decision, whether that be a final rule or otherwise, in April.
    So it is very soon.
        Senator Jones. All right. Thank you. I will have some other
    questions because I really want to ask about housing since
    there seems to be no housing discrimination in America anymore,
    which I think is great, because there is no enforcement
    actions. I do have some questions about that for the record,
    but I will save those since I am 14 seconds over, Mr. Chairman.
        Senator Jones. Thank you very much.
        Chairman Crapo. Thank you.
        Senator Reed.
        Senator Reed. Well, thank you, Mr. Chairman. And, Director,
    I was paying attention as you spoke with Senator McSally. I am
    very disappointed that you do not exercise supervisory
    responsibility over payday lenders. I think you do have the
    authority. It is under your leadership that change took place.
    I believe your predecessor made it clear that he felt he had
    that authority.
        As you know, the Department of Defense has stated in
    writing that, ``The Department believes that the full spectrum
    of tools, including supervisory examinations, contribute to
    effective industry education about, and compliance with, the
    MLA.'' And those are the people who have very strong vested
    interest in protecting soldiers, sailors, airmen, and marines.
        Even your own legal analysis states, and I quote again,
    ``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, i.e., supervision.''
    So your own agency has concluded that there is a reading of the
    statute that would allow you to do this, yet you ignore that.
    Instead, you would ask for different legislation, which I think
    in the context is not really a plea for supervisory authority.
    It is an excuse and a diversion so that you do not have to
    supervise for the benefit of the payday industry, which I find
    very disappointing.
        If we are going to pursue legislation, then we should, I
    believe, extend the benefits of the MLA, the chief benefit,
    which is a 36 percent interest cap, to all Americans. That is
    why many of us on a bipartisan basis support the Veterans and
    Consumers Fair Credit Act. This would, I think, be strong
    legislation. In fact, it is
    supported by a significant coalition including the Iraq and
    Afghanistan War Veterans, Military Officers Association of
    America, the United States Conference of Catholic Bishops, and
    the Committee on Domestic Justice and Human Development.
        So I do think you have the authority, and I think you are
    reneging on that authority, and it is a great disappointment.
    Do I make myself clear?
        Ms. Kraninger. Yes, Senator, and I respectfully disagree. I
    know we have had this conversation. I very much do want the
    authority to do this. I do not believe that I have it.
        Senator Reed. Well, your own analysis by your own legal
    department in the material they have submitted says there is an
    interpretation that will give you that authority. Has this
    authority ever been challenged in court when it was exercised
    by your predecessor?
        Ms. Kraninger. Senator, it has not, and we----
        Senator Reed. Well, isn't that a good indication that even
    the people who are subject do not object, at least do not
    have--feel the legal footing to object?
        Ms. Kraninger. I believe that is a very slippery slope, and
    I do believe I have the responsibility to determine where our
    authority lies. And, certainly, as I noted to you, the possible
    reading would lead to many other interpretations that would be,
    I think, problematic and detrimental.
        Senator Reed. I think this reading would lead to the
    interpretation that you are going to protect men and women who
    are protecting us from being abused by lenders, and I would
    hope you would reconsider. Thank you.
        Chairman Crapo. Thank you. That concludes all of the
    Senators. Senator Brown has asked for an additional 5 minutes,
    and so, Senator Brown, please proceed.
        Senator Brown. Thank you, Mr. Chairman. Thank you always
    for your--and thank you for staying around a little bit longer,
    Director Kraninger.
        I want to follow up on something you had said earlier when
    I asked you whether the CFPB had taken any public action
    against Wells Fargo since Eric Blankenstein private promises
    last May. I think you used the word ``hearsay'' when we
    actually have emails, which decidedly are not hearsay. But,
    more importantly, you referenced a $1 billion fine. I just want
    to make clear that was in--you had said that CFPB did that,
    which was a true statement, but it was in 2018, before you were
    Director. And so we have not--the implication was that you had
    been tough on them when you decidedly have not been. So we hope
    that you will reconsider that.
        Let me ask a couple of questions on a couple of subjects.
    We created the CFPB because we knew that too many other
    agencies were not protecting consumers. There may be no better
    example of that than what a few people have asked about, the
    Department of Education under Secretary DeVos. She has gutted
    rules to protect student borrowers. She has shut down
    investigations of abuse and fraud by for-profit colleges. She
    was recently held in contempt by a Federal court. For the past
    2 years, she blocked the CFPB from doing its job to protect
    more than 43 million student borrowers.
        Why would you hand over the Consumer Financial Protection
    Bureau's responsibility to protect student borrowers to
    Secretary DeVos? Why would you do such a thing?
        Ms. Kraninger. Senator, I have not done that. As we have
    talked about very clearly, I believe it is in the interest of
    the Federal Government to speak with one voice and to have
    agreement with respect to how the CFPB carries out its
    responsibilities for ensuring compliance with Federal consumer
    financial law, and the Department of Education has a very real
    role. These are their contractors, their servicers. They have
    contract provisions that they need to oversee. Doing those two
    things in concert is what is in the Government interest and in
    the consumers' interests.
        Senator Brown. I would like to think that is true. I would
    like to think that you are genuine about doing something. I
    have sat here and you have sat there before over the last year,
    and we have asked you many times why you have not examined
    Federal student loan servicers. You have said for a year you
    will take action. Now you are saying--I would like to ask you,
    whatever you are going to do on joint exams, that you would
    disclose to us what the specific plans are. But I just do not
    understand the question as Americans--I mean, another year is
    wasted, and more students are overwhelmed by their debt. And
    they do not want to hear excuses. Your job is to fight for
    student borrowers, and I do not understand why you think you
    need permission from Betsy DeVos.
        So my request of you is to publicly tell us that you will
    be public about this entire process with the timetable with
    Secretary DeVos on this joint exam that you talk about.
        Ms. Kraninger. Senator, I pledge that we will share what we
    can publicly as I am doing today. As you know, the supervisory
    process is confidential inherently, and it should be to be
    effective. So we have to balance those interests. But I was
    very clear in wanting to make sure you knew that we are
    carrying out our responsibilities.
        Senator Brown. I just am discouraged--that disappoints me
    because I think a year from now we might be having this same
    conversation. So prove me wrong.
        Last question, or series of questions. You formed a
    taskforce that is supposed to provide recommendations on how to
    update Federal consumer financial laws. You select the members
    of the taskforce, correct?
        Ms. Kraninger. Yes. It was through a public competitive
    process.
        Senator Brown. OK. You selected a gentleman named Howard
    Beales, correct?
        Ms. Kraninger. Yes.
        Senator Brown. He was described by the Wall Street Journal,
    not a liberal publication, as an academic whose studies have
    been used by a tobacco company to fight Federal regulators. He
    actually argued that Joe Camel and other big tobacco campaigns
    were not trying to get kids to smoke. He argued that payday
    loans with a 448 percent interest rate are beneficial to
    consumers.
        You also selected Todd Zywicki for the taskforce, correct?
        Ms. Kraninger. Yes.
        Senator Brown. In addition to his career trying to
    influence the Bureau on behalf of Wall Street, Mr. Zywicki
    helped defend a debt relief company that the Bureau sued that a
    court later found cheated consumers out of well in excess of
    $100 million. These are the people that you selected,
    competitive bidding or not, competitive process or not. So is
    it true that two of the taskforce members have such close ties
    to industry they needed a waiver of Federal ethics laws to
    participate in the taskforce?
        Ms. Kraninger. Senator, we wanted the foremost experts on
    consumer financial law and economics, and I believe that we
    have found that. These are five individuals who have extensive
    public service careers----
        Senator Brown. You gave two of them----
        Ms. Kraninger.----and who have represented industry
    because, again, they are individuals who have experience with
    how the laws----
        Senator Brown. But they needed----
        Ms. Kraninger.----and regulations actually apply in
    practical circumstances. So that is hugely beneficial. There
    will also be an extensive public engagement. In fact, we are
    starting that today. We have our first roundtable where the
    taskforce members are engaging with leaders in trade
    associations, consumer advocacy groups, as well as business
    trades, and engaging with our Advisory Committee members this
    week. So this is going to be an ongoing process to really bring
    in the best information that we can to think about the way to
    move forward.
        Senator Brown. The best information from sort of Wall
    Street's viewpoint. You asked for the waiver. The waivers were
    granted. You personally gave them the waivers, your office did.
    I mean, there is already--the criticism of you, the
    dissatisfaction with the work you do, is that it is always too
    slanted toward the most privileged, wealthy interest groups in
    this Government and in this country. This just plays more to
    that perception. This is where the advice comes from. You have
    made it clear to me and to a lot of us that you are not here to
    carry out the CFPB's mission of protecting consumers. You are
    here to carry out President Trump's agenda of protecting Wall
    Street mega banks and the richest interest groups in this
    swamp.
        Thank you.
        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 17th.
        Director Kraninger, we ask that you respond to those
    questions as promptly as you can. Again, thank you for your
    service and for being here with us today.
        This hearing is adjourned.
        [Whereupon, at 11:42 a.m., the hearing was adjourned.]
        [Prepared statements, additional material, and responses to
    written questions 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 semiannual report.
        On February 3, the CFPB issued its Fall 2019 Semiannual Report,
    which outlines the CFPB's significant work between April 2019 and
    September 2019, including rulemakings and supervisory and regulatory
    activities.
        The report also provides insight into what the CFPB plans to
    undertake in the coming work period.
        Consumer protection is vital for a properly functioning financial
    market place and is best determined by a robust, quantitative analysis.
        Under Director Kraninger's leadership, the CFPB has demonstrated a
    commitment to ensuring that its regulations are data driven,
    appropriately tailored to satisfy statutory obligations, and based on
    sound evidence and legal support.
        There have been promising changes at the CFPB under Director
    Kraninger's leadership.
        But, it remains abundantly clear that the fundamental structure of
    the CFPB must be reconsidered to make it more transparent and
    accountable.
        Last week, the Supreme Court heard arguments for Seila Law LLC v.
    CFPB, a case that examines the constitutionality of the CFPB's
    leadership structure.
        On March 2, 2020, the Wall Street Journal Editorial Board referred
    to Seila Law v. CFPB as the ``constitutional case of the year,'' and
    stated that the question presented by this case ``goes to the heart of
    the separation of powers and whether the administrative state is
    accountable to the people.''
        It has long been my position that the CFPB's current single
    director structure lacks sufficient accountability, and I look forward
    to the Supreme Court ruling on this case later this summer.
        With this in mind, I continue to advocate for establishing a
    bipartisan board of directors to oversee the CFPB; subjecting the CFPB
    to the annual appropriations process, similar to other Federal
    regulators; and establishing a safety-and-soundness check for the
    prudential regulators.
        The Banking Committee has spent significant time this Congress
    evaluating the collection, protection and use of consumer data by
    government agencies and private companies.
        I have repeatedly voiced concerns about wide-scale collection of
    personally identifiable information by the CFPB, especially with
    respect to credit card and mortgage data.
        On February 26, the CFPB hosted a symposium on the access and use
    of consumer-permissioned financial data to determine if agency action
    is necessary to promote consumer access to their financial data.
        I find it concerning that when consumers choose to share their
    financial data with a third party, they often unknowingly involve a
    data aggregator to facilitate the transmission of this data.
        The CFPB and Congress should explore ways to ensure that consumer
    data remains protected when it is shared.
        We need a foundational change to our data privacy laws that applies
    broadly, across industries, and ensures domestic and international
    cohesion via preemption and interoperability, respectively.
        During this hearing, I look forward to hearing more about key
    initiatives undertaken by the CFPB in the last year; Director
    Kraninger's priorities for the CFPB in the upcoming work period; and
    additional legislative or regulatory opportunities to encourage
    financial innovation and widen access to financial products and
    services.
        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
        Thank you, Mr. Chairman.
        First I want to say a few words about the coronavirus, and the toll
    it's taking on our communities, on our healthcare system, and on our
    entire economy.
        Our first concern has to be for Americans' safety. We also can't
    ignore the millions of Americans who are losing paychecks and the small
    businesses that are losing customers.
        When times get tough, we come together as Americans and we rise to
    the challenge. I'm confident we can do that again--and it has to mean
    support for everyone who makes this country work, not just Wall Street.
        Moments like this are a reminder of why we created the CFPB after
    the last financial crisis--to make sure hardworking Americans have a
    voice in the room, especially at times like this.
        We know that in times of crisis, Wall Street has armies of
    lobbyists who will fight to make sure we do what we need to do to
    stabilize financial markets. But most people don't have lobbyists and
    don't have that kind of power. We have to fight for them too. And the
    CFPB is their voice.
        During its first 6 years, the Bureau delivered results: the CFPB
    made new, strong rules that protected consumers from abusive practices.
    It sent Bureau employees into banks and other corporations to make sure
    they were following the law. And it returned more than $12 billion to
    29 million Americans.
        Unfortunately, President Trump has tried to turn the Consumer
    Protection Bureau into another agency that helps his wealthy friends at
    the expense of the people it's supposed to serve.
        Under President Trump's first appointed director, Mick Mulvaney,
    the CFPB saw a shift away from protecting servicemembers and rooting
    out discrimination to doing favors for private corporations at the
    behest of political hires.
        Director Kraninger has continued down the same path-corporate
    protection instead of consumer protection.
        Under her leadership, we see a clear pattern: sabotaging the
    agency's work to hold corporations accountable.
        She sided with corporations--including a company the CFPB sued for
    scamming 9/11 survivors--to argue that the Bureau is unconstitutional
    in the Supreme Court.
        It would be quite a coup for big banks and other corporations if
    the Supreme Court gutted the agency that's supposed to keep an eye on
    them.
        Director Kraninger has also allowed Education Secretary Betsy DeVos
    to block the Bureau from protecting the 43 million Americans with
    Federal student debt.
        If you don't think that Director Kraninger's failure to stand up to
    Secretary DeVos has consequences, talk to the tens of thousands of
    teachers, nurses, firefighters, and servicemembers who are paying more
    money in student loans every single month because Betsy DeVos denied
    them the loan forgiveness that they earned.
        Like other Trump appointees, Director Kraninger has dutifully
    carried out the Administration's assault on civil rights protections:

        She weakened rules that identify discriminatory lending.

        She dismantled the CFPB office that used to ferret out
            discriminatory lending practices.

        And she left Eric Blankenstein, a Mulvaney-era political
            appointee with a history of racist and sexist writings, in
            charge of enforcing civil rights laws.

    And look at the result--under Mulvaney and Kraninger, the Consumer
    Protection Bureau has not brought a single case of illegal
    discrimination.
        They have not returned a single dollar to victims of
    discrimination.
        Last October we also learned that, in exchange for contributions to
    the Trump campaign, payday lenders were bragging about being able to
    ``pick up the phone and get the President's attention'' to fend off
    regulation.
        Director Kraninger has given them exactly what they paid for:

        She gutted rules that would protect borrowers from
            predatory payday loans that trap them in cycles of debt.

        She hasn't filed any new lawsuits against payday lenders.

        And she even let a payday lender keep $1.3 million it had
            volunteered to pay back to consumers it had ripped off.

        It's not just payday lenders. Director Kraninger has gone out of
    her way to let debt collectors and other corporations keep the money
    they scammed from consumers.
        Just last week we learned that--as he was on his way out the door--
    Eric Blankenstein promised the CEO of Wells Fargo that he would hide
    the bank's bad conduct and let them off without a fine.
        Let's be clear about what's happening here--a CEO asks for a
    special favor, and he gets it. Never mind the cost to everyone else.
        If a worker in Ohio gets laid off, or their car breaks down, and
    they can't afford to pay their credit card bill that month, Wells Fargo
    is still going to charge them interest--they can't call in any special
    favors to let them off the hook.
        But we have seen over and over again that in President Trump's
    Washington, Wall Street gets to play by different rules.
        Director Kraninger also continues to surround herself with
    appointees with a history of bigotry and hostility to consumers.
        She retained Paul Watkins, a Mulvaney appointee, who worked as
    senior legal counsel for a hate group that wants to criminalize LGBTQ
    people.
        She also recently hired Leonard Chanin to serve as her number two.
        This is someone who failed at protecting consumers at the Fed in
    the years leading up to the financial crisis.
        More recently, he worked at the bank that the Bureau just sued for
    the same type of fake account fraud that we saw at Wells Fargo.
        What we see from Director Kraninger is the same thing we see across
    the Trump administration: protect corporations from accountability at
    all costs.
        It comes back to one question--whose side are you on?
        Wall Street megabanks, payday lenders, and other corporations all
    have enough allies looking out for them in the White House and in Mitch
    McConnell's office.
        The CFPB is supposed to be an independent advocate on the side of
    everyone else.
        Director Kraninger should return the Consumer Protection Bureau to
    its core mission: put consumers first.
        Anything less is a neglect of duty.
        Thank you, Chairman Crapo.
                                     ______

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

     RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN FROM KATHLEEN
                              L. KRANINGER

    Debt collection
    Q.1. The interaction between the debt collection notice of
    proposed rulemaking (NPRM) and the supplemental time-barred
    disclosure rule the CFPB recently released allows debt
    collectors to send required notices by electronic means. The
    NPRM does not require compliance with the E-Sign Act or
    consumer consent to receive communications from the debt
    collector before attempting electronic communications with
    consumers, making it even more likely that many consumers may
    not even receive the disclosure.

    Q.1.a. What is the CFPB's plan to address?

    A.1.a. The May 2019 notice of proposed rulemaking (May 2019
    NPRM) described how a debt collector can provide three required
    disclosures--the validation notice, the original-creditor
    disclosure, and the validation-information disclosure--
    electronically. These disclosures are subject to the E-SIGN
    Act. The NPRM proposes to require compliance with the E-SIGN
    Act plus additional requirements. The NPRM also proposes an
    alternative under which the Bureau would create an exception to
    the E-SIGN Act but impose alternative consumer protections,
    including providing the consumer notice and an opportunity to
    opt out of receiving hyperlinked delivery of these notices. The
    NPRM also proposes special consumer protections where the
    validation notice is the collector's initial communication with
    the consumer. In all cases, under the proposed rule, the debt
    collector would also be required to take other steps--
    including, for example, monitoring for notices of
    undeliverability and providing validation notices in a
    responsive format--to increase the likelihood that consumers
    receive and access required disclosures delivered
    electronically.
        In response to the May 2019 NPRM, the Bureau received over
    14,000 comments, a significant number of which addressed
    electronic delivery of required disclosures. The Bureau is
    analyzing those comments as part of the process of taking final
    action on the May 2019 NPRM.

    Q.1.b. Will the CFPB amend the proposed rule to require
    consumer consent before sending electronic communications?

    A.1.b. In response to the May 2019 NPRM, the Bureau received
    over 14,000 comments, a significant number of which addressed
    electronic communications. The Bureau is analyzing those
    comments as part of the process of taking final action on the
    May 2019 NPRM.

    Q.2. The CFPB's disclosure testing report shows that almost
    half (45.76 percent) of people in the study are not willing to
    receive a required notice by email (45.76 percent). Problems
    with hyperlinks are well established--they often contain
    viruses and interfere with data security and privacy. To no
    surprise, the number of people who are unwilling to click on
    any notices received through hyperlinks are much higher in the
    CFPB's disclosure testing--70.12 percent are not at all willing
    to click on a link delivered in an email, and 82.21 percent are
    not at all willing to click on a link delivered by text
    message. Hyperlinks by text and email are expressly permitted,
    without any limits, in the current NPRM. Given these results,
    will the CFPB amend the proposed rule to not allow hyperlinks?

    A.2. As noted in the previous response, a number of provisions
    in the May 2019 NPRM address required disclosures delivered
    electronically. In response to the May 2019 NPRM, the Bureau
    received over 14,000 comments, a significant number of which
    addressed electronic communications and, specifically, the use
    of hyperlinks or text messages. The Bureau is analyzing those
    comments as part of the process of determining the provisions
    the Bureau may decide to include in a final rule. As noted, the
    Bureau also completed testing subsequent to the release of the
    May 2019 NPRM and is considering the results of that testing as
    part of its current work.

    Q.3. The FTC filed comments on the CFPB's proposed debt
    collection rule stating that the FTC and courts have said that
    ``it is a violation of the FDCPA for a debt collector . . . to
    file an action in court to collect on a time-barred debt'' and
    also that it is ``likewise a clear violation of the FDCPA to
    threaten to file such an action.'' The debt collection
    proposals outlined by Director Cordray for the small business
    review panel in 2016 would have codified these clear rules. The
    CFPB has instead proposed to inject a state of mind element
    that would bar lawsuits or threats only if the collector
    ``knows or should know'' that the legal deadline has passed.
    How does the CFPB square this proposal with the FTC's position
    that ``requiring a showing that the debt collector knew or
    should have known the debt was time-barred places unnecessary
    additional burdens on law enforcement agencies?''

    A.3. The Bureau's May 2019 NPRM proposed to prohibit a debt
    collector from bringing or threatening to bring a legal action
    against a consumer to collect a debt that the debt collector
    knows or should know is a time-barred debt. In proposing the
    ``know or should know'' standard, the Bureau noted that, in
    many cases, a debt collector will know, or can readily
    determine, whether the statute of limitations has expired. In
    some instances, however, a debt collector may be genuinely
    uncertain even after undertaking a reasonable investigation;
    this could occur, for example, when the case law in a State is
    unclear as to which statute of limitations applies to a
    particular type of debt. In response to the May 2019 NPRM, the
    Bureau received over 14,000 comments, a significant number of
    which addressed time-barred debt, including the proposed ``know
    or should know'' standard. The Bureau is analyzing those
    comments as part of the process of taking final action on the
    May 2019 NPRM.

    Q.4. Under what types of circumstances would the CFPB find that
    a debt collector ``should'' have known that a debt was so old
    it could not be pursued in court?

    A.4. Please see the response to question 3.

    Q.5. What is the justification for not requiring debt
    collectors to be responsible for knowing if the legal deadline
    has passed before they sue or threaten a lawsuit on an old
    debt? Why should courts have to figure out the debt collector's
    state of mind?

    A.5. Please see the response to question 3.

    Q.6. In 2016, when the CFPB first released its outline of
    proposals for debt collection rulemaking, it discussed the
    serious problem of collectors pursuing the wrong person or
    wrong amount, and identified ``substantial deficiencies in the
    quality and quantity of information collectors receive at
    placement or sale of the debt.'' But the current proposal,
    without providing any guidance on what documentation collectors
    must have, protects debt collection attorneys who make false,
    deceptive or misleading representations in court pleadings as
    long as they review unspecified ``information.'' Why shouldn't
    a debt collector be required to review original account
    documents and admissible evidence, and otherwise be held
    responsible for filing a lawsuit with false accusations?

    A.6. Debt collection attorneys who make false, deceptive, or
    misleading representations in debt collection court pleadings
    would, in general, violate Federal laws (including the Fair
    Debt Collection Practices Act (FDCPA)) or State laws or
    professional ethical standards for attorneys. The May 2019 NPRM
    addressed the specific potentially deceptive claim that
    consumers may take away from an attorney's name on a court
    pleading that the attorney has been meaningfully involved in
    the preparation of that pleading. To reduce uncertainty as to
    when an attorney has been meaningfully involved in the
    preparation of such a pleading, the May 2019 NPRM provides that
    an attorney has been meaningfully involved in the preparation
    of debt collection litigation submissions if the attorney: (1)
    drafts or reviews the pleading, written motion, or other paper;
    and (2) personally reviews information supporting the
    submission and determines, to the best of the attorney's
    knowledge, information, and belief, that, as applicable: the
    claims, defenses, and other legal contentions are warranted by
    existing law; the factual contentions have evidentiary support;
    and the denials of factual contentions are warranted on the
    evidence or, if specifically so identified, are reasonably
    based on belief or lack of information. The factors in the May
    2019 NPRM are similar to some of the nationally recognized
    standards for attorneys making submissions in civil litigation.
        In response to the May 2019 NPRM, the Bureau received over
    14,000 comments, including a number of comments on the safe
    harbor for meaningful attorney involvement in debt collection
    litigation. The Bureau is analyzing those comments in deciding
    what provisions to include in a final rule.

    Q.7. The CFPB has proposed to allow debt collectors to deliver
    legally required information about the debt and people's rights
    through hyperlinks in emails or texts sent to people who have
    not agreed to receive emails or texts from the debt collector.
    How does the DFPB reconcile this proposals with CFPB, FCC, and
    FTC warnings that consumers should not click on links from
    unknown parties and encourage phishing scams that impersonate
    debt collectors?

    A.7. The Bureau is aware of concerns about consumers accessing
    disclosures through hyperlinks; the May 2019 NPRM states that
    ``[f]ederal agencies have advised consumers against clicking on
    hyperlinks provided by unfamiliar senders'' and cites to two
    Federal Trade Commission (FTC) articles and a Federal Deposit
    Insurance Corporation (FDIC) publication on this topic. Because
    of these concerns, proposed Sec.  1006.42(c)(2)(ii) and
    1006.42(d) describe consumer notice-and-opt-out processes meant
    to ensure that, before a debt collector sends a required
    disclosure by hyperlink, the consumer expects to receive it and
    does not object to such receipt. By helping the consumer
    identify the sender in advance, a notice-and-opt-out process
    may also reduce the risk that the consumer will treat an email
    containing a hyperlink as spam. The Bureau requested comment on
    the use of hyperlinks to deliver disclosures and is reviewing
    those comments now. The Bureau will continue to consider
    feedback and other information in reviewing the proposed rule's
    interventions as it moves forward toward a final rule.

    Q.8. The CFPB surveyed a large number of consumers as part of
    the recent supplemental debt collection rulemaking. Results of
    that survey indicated that fewer than 15 percent of consumers
    are very willing to receive information from a debt collector
    by email, not even 6 percent are very willing to receive
    information by clicking a link delivered in an email, and under
    3 percent are very willing to receive information by clicking a
    link delivered in a text message. In light of these results,
    will the CFPB amend the NPRM to prohibit debt collectors from
    using these methods to contact consumers without their consent?

    A.8. In response to the May 2019 NPRM, the Bureau received over
    14,000 comments, a significant number of which addressed
    electronic communications and, specifically, the use of
    hyperlinks or text messages. The Bureau is analyzing those
    comments in deciding the provisions to include in a final rule.
    The Bureau also completed disclosure testing subsequent to the
    release of the May 2019 NPRM and is considering the results of
    that testing as part of its current work.
    Taskforce Qs
    Q.9. In the Bureau's February 19, 2020, letter, the Bureau
    indicated that two members of the Taskforce on Federal Consumer
    Law had received ethics waivers. Please provide the following
    information:

    Q.9.a. Identify the Taskforce members who received the waivers:

    A.9.a. Pursuant to 18 U.S.C. Sec.  208(d)(1), a copy of a
    determination to grant an exemption under Section 208(b)(1) may
    be made available upon request pursuant to the procedures set
    forth in Section 105 of the Ethics in Government Act. Those
    procedures require a requester to make attestations
    acknowledging the legal prohibitions on certain uses of the
    information, which can be done by completing OGE Form 201. See
    5 CFR Sec.  2634.603(c).

    Q.9.b. Identify the Bureau employee who signed the waivers.

    A.9.b. Pursuant to 18 U.S.C. Sec.  208(b)(1), the waivers are
    issued by the Government official responsible for appointing
    the employee to his (or her) position. Both waivers were signed
    by the Bureau's Chief Human Capital Officer, Mr. Jeffrey
    Sumberg.
    Restitution
    Q.10. The Bureau has claimed that it obtained $777 million in
    relief for consumers in FY 2019. Please identify the name of
    each such action and, for each action, provide the following:

    Q.10.a. The type(s) of consumer relief (e.g., restitution,
    damages);

    A.10.a. See the table below.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Q.10.b. For each type of consumer identified in (a), the amount
    of consumer relief;

    A.10.b. Please see the response to question 10.a.

    Q.10.c. Whether the entity provided the entire amount of the
    consumer relief or whether any amount was suspended based on
    the entity's financial condition; and

    A.10.c. Please see the response to question 10.a.

    Q.10.d. Any relief provided to consumers through the Bureau's
    civil penalty funds.

    A.10.d. The $777 million in relief does not include amounts
    distributed or allocated to consumers from the Civil Penalty
    Fund. In fiscal year (FY) 2019, $120 million was allocated to
    harmed consumers in five cases. Also during FY 2019, the Bureau
    had seven active and ongoing Civil Penalty Fund case
    distributions. Funds related to those cases were initially
    distributed in FY 2017 and FY 2018 and totaled approximately
    $350 million. During FY 2019, the Bureau released funds in one
    new case totaling approximately $1 million.
    Advisory Opinions
    Q.11. On March 6, 2020, the CFPB announced an advisory opinion
    program. The current guidance mechanism advises inquirers that
    the interpretations offered by staff are not binding. Will the
    advisory opinions under the new program also be nonbinding?

    A.11. Advisory opinions under the new program will be
    interpretive rules under the Administrative Procedure Act that
    respond to a specific request for clarity on an interpretive
    question. The Bureau summarized the manner in which
    interpretive rules can be binding in its Request for
    Information Regarding Bureau Guidance and Implementation
    Support, 83 Fed. Reg. 13959, 13960 (Apr. 8, 2018), https://
    www.federalregister.gov/d/2018-06674.

    Q.12. When will procedures for the new advisory opinion program
    be announced?

    A.12. The announcement date for further program details is
    still under internal consideration at this time. Full details
    of the program will be announced at a later date, at which time
    the Bureau will also notify the Committee and relevant Member
    offices.

    Q.13. Will the public be given an opportunity for notice and
    comment on advisory program procedures?

    A.13. Program procedures are still under internal consideration
    at this time. Full details of the program, including any
    requests for public comment on program procedures, will be
    released at a later date.

    Q.14. How will the CFPB ensure that the advisory opinions
    comply with APA standards, executive orders on guidance, and
    all existing statutory interpretations?

    A.14. In formulating advisory opinions, the Bureau will review
    their compliance with any applicable law and their consistency
    with existing statutory interpretations through its internal
    review processes.

    Q.15. How will the CFPB make sure that consumer interests are
    adequately represented in issuing advisory opinions? Will the
    CFPB consult with consumer advocates or other organizations
    before issuing advisory opinions or will it rely entirely on
    the requester for information?

    A.15. Program procedures are still under internal consideration
    at this time. Full details of the program will be announced at
    a later date.

    Q.16. Which office at the CFPB will have responsibility for the
    advisory opinion program?

    A.16. Program procedures are still under internal consideration
    at this time. Full details of the program will be announced at
    a later date.

    Q.17. Does the CFPB plan to include TILA in the advisory
    opinion program? If so:

    A.17. Program parameters are still under internal consideration
    at this time. Full details of the program will be announced at
    a later date.

    Q.17.a. Will the CFPB update the introduction to the TILA
    Official Interpretations which provides that the commentary is
    the vehicle by which the CFPB issues official interpretations
    on TILA and that no official interpretations are issued other
    than through the commentary?

    A.17.a. Please see the response to question 17.

    Q.17.b. Will the CFPB afford an opportunity for notice and
    comment on any proposed changes to that language?

    A.17.b. Please see the response to question 17.

    Q.17.c. How does the CFPB reconcile TILA Simplification process
    with an advisory opinion program?

    A.17.c. The Bureau does not see any conflict between an
    advisory opinion program and the Truth in Lending
    Simplification and Reform Act of 1980, commonly referred to as
    TILA simplification.

    Q.17.d. Does the CFPB believe that advisory opinions would
    afford creditors the good faith reliance defense under Section
    130(f) of TILA?

    A.17.d. Generally, if the Bureau were to issue an advisory
    opinion under TILA, acts done or omitted in good faith in
    conformity with it would qualify for the safe harbor from
    liability in Section 130(f) of TILA.
    Coronavirus
    Q.18. When will the CFPB issue more detailed guidance to its
    regulated entities on forbearance and loss mitigation?

    A.18. The Bureau, along with other regulators, released
    guidance\1\ publicly over the past few weeks to financial
    institutions, lenders, and creditors encouraging them to work
    constructively with borrowers and customers affected by COVID-
    19. In addition, the Bureau, along with other regulators,
    released guidance on forbearance and loss mitigation.\2\
    ---------------------------------------------------------------------------
        \1\ See https://www.consumerfinance.gov/about-us/newsroom/agencies-
    provide-additional-information-encourage-financial-institutions-work-
    borrowers-affected-covid-19/, https://www.con-
    sumerfinance.gov/about-us/newsroom/cfpb-provides-flexibility-during-
    covid-19-pandemic/, and https://www.consumerfinance.gov/about-us/
    newsroom/federal-agencies-encourage-banks-savings-associations-credit-
    unions-to-offer-responsible-small-dollar-loans-consumers-small-
    businesses-affected-covid-19/.
        \2\ See https://www.consumerfinance.gov/about-us/newsroom/federal-
    agencies-encourage-mort-
    gage-servicers-work-struggling-homeowners-affected-covid-19/.

    Q.19. Will the CFPB impose any affirmative obligations on its
    regulated entities to assist borrowers during and in the wake
    ---------------------------------------------------------------------------
    of the crisis? If so, please explain. If not, why not?

    A.19. The Bureau, along with other regulators, released
    guidance\3\ publicly over the past few weeks to financial
    institutions, lenders, and creditors encouraging them to work
    constructively with borrowers and customers affected by COVID-
    19. The Bureau is considering issuing more guidance to assist
    borrowers.
    ---------------------------------------------------------------------------
        \3\ See https://www.consumerfinance.gov/about-us/newsroom/agencies-
    provide-additional-infor
    -mation-encourage-financial-institutions-work-borrowers-affected-covid-
    19/, https://www.consu-
    merfinance.gov/about-us/newsroom/cfpb-provides-flexibility-during-
    covid-19-pandemic/, https://www.consumerfinance.gov/about-us/newsroom/
    federal-agencies-encourage-banks-savings-associations-credit-unions-to-
    offer-responsible-small-dollar-loans-consumers-small-businesses-
    affected-covid-19/, and https://www.consumerfinance.gov/about-us/
    newsroom/federal-agencies-encourage-mortgage-servicers-work-struggling-
    homeowners-affected-covid-19/

    Q.20. What steps is the CFPB taking to minimize predatory
    ---------------------------------------------------------------------------
    lending during the pandemic?

    A.20. The Bureau continues to employ its tools of education,
    regulation (including guidance), supervision, and enforcement
    aggressively to address the impacts of the pandemic on
    consumers in the consumer finance marketplace. As U.S.
    consumers confront the spread of the COVID-19 pandemic, many
    are struggling with its economic impact. The virus, and the
    necessary actions to combat it, have affected the U.S. economy,
    and therefore U.S. consumers, profoundly. Using market
    monitoring, stakeholder engagement, law enforcement
    partnerships, our complaint system, and our aforementioned
    tools, we are seeking to prevent consumer harm and acting on
    issues of concern as they arise, including any instances of
    predatory lending. The Bureau does not comment on nonpublic
    supervisory or enforcement matters.

    Q.21. Is the CFPB taking any steps to assess the adequacy and
    appropriateness of its loss mitigation rules under RESPA during
    the pandemic? Has the CFPB, for example, evaluated whether the
    timeframes for borrowers to submit documents are reasonable
    during a pandemic?

    A.21. The Bureau has received questions about the loss
    mitigation provisions and has taken steps already to provide
    guidance on these issues.
        On March 9, 2020, the Bureau, with its interagency
    partners, issued a press release encouraging financial
    institutions to work constructively with borrowers and other
    customers affected by COVID-19. The Bureau has existing
    regulatory flexibilities on our mortgage servicing rules that
    should make it easier for mortgage servicers to quickly offer
    short-term help (such as forbearance) to homeowners who may
    start to have trouble making their mortgage payments.\4\ We
    know consumers' first stop in the face of hardship is with
    their creditors and their financial institutions, so our
    message was important for regulated entities to hear. We also
    know many financial institutions want to help customers
    navigate this situation. We will continue to work with our
    Federal and State partners, and seek feedback from
    stakeholders, to ensure we are providing appropriate
    flexibilities to benefit consumers during this time.
    ---------------------------------------------------------------------------
        \4\ See https://files.consumerfinance.gov/f/documents/
    bcfp_statement-on-supervisory-practices
    _disaster-emergency.pdf.
    ---------------------------------------------------------------------------
        On March 18, 2020, I issued a statement after the U.S.
    Department of Housing and Urban Development (HUD) and the
    Federal Housing Finance Agency (FHFA) announced a moratorium on
    foreclosures and evictions.\5\ In the statement, I noted that
    actions taken by HUD and FHFA are timely and an important step
    in providing assurance to consumers.
    ---------------------------------------------------------------------------
        \5\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
    director-kraninger-statement-joint-hud-fhfa-announcement-foreclosure-
    and-eviction-moratorium/.
    ---------------------------------------------------------------------------
        On March 22, 2020, the Bureau, the Federal financial
    institution regulatory agencies, and the State banking
    regulators issued an interagency statement encouraging
    financial institutions to work constructively with borrowers
    affected by COVID-19 and providing additional information
    regarding loan modifications.\6\
    ---------------------------------------------------------------------------
        \6\ See https://www.consumerfinance.gov/about-us/newsroom/agencies-
    provide-additional-in-
    formation-encourage-financial-institutions-work-borrowers-affected-
    covid-19/.
    ---------------------------------------------------------------------------
        Finally, on April 3, 2020, the Bureau, the Federal
    financial institution regulatory agencies and the State
    financial regulators issued a joint policy statement providing
    needed regulatory flexibility to enable mortgage servicers to
    work with struggling consumers affected by the COVID-19
    emergency.\7\
    ---------------------------------------------------------------------------
        \7\ See https://www.consumerfinance.gov/about-us/newsroom/federal-
    agencies-encourage-mort
    gage-servicers-work-struggling-homeowners-affected-covid-19/.
    ---------------------------------------------------------------------------
        The Bureau is continuing to monitor the impact of COVID-19
    and will issue additional information and guidance, as
    warranted. Regularly checking our website:
    www.consumerfinance.gov/corona-
    virus will ensure that you have the most recent information
    that the Bureau has posted.

    Q.22. How is the CFPB planning to conduct examinations given
    limitations on examiners being able to go onsite to examined
    institutions?

    A.22. Despite the unprecedented nationwide disruptions being
    caused by COVID-19, the Bureau is continuing to perform
    examinations and other supervisory work, but we are doing that
    important work remotely for the time being. Our examiners are
    conducting supervisory activities from their home-duty stations
    by leveraging technology and adjusting work as necessary. We
    also remain in close contact with our sister Federal and State
    regulatory agencies as we continue to ensure consumers are
    protected, coordinating across regulatory jurisdictions.

    Q.23. What are the CFPB's plans to examine financial
    institutions if the Coronavirus pandemic restricts examiners
    for going onsite for more than 2 months, 6 months, 12 months?

    A.23. While we have adjusted our work in the short term to
    accommodate offsite examinations, we are planning for multiple
    contingencies in the event that health and safety concerns
    dictate that we continue to conduct examination work from
    alternate locations for a longer term. We will continue to be
    in close contact with other Federal and State regulatory
    agencies, as well as with our supervised entities, to ensure
    that we continue to protect consumers through our supervisory
    work while working to ensure the health and safety of our
    remote examination staff and employees of our supervised
    institutions. As we conduct our supervisory work, we will
    consider the circumstances that supervised entities are facing
    and will be sensitive to ensuring those entities focus good-
    faith efforts to assist consumers, particularly those in need
    during the pandemic.
    Chanin
        On March 3, 2020, the Bureau announced that Director
    Kraninger had selected Leonard Chanin to serve as Acting Deputy
    Director. Mr. Chanin will serve part time in this position
    while he remains Deputy to FDIC Director McWilliams. Prior to
    joining the FDIC in March 2019, Mr. Chanin was the Deputy
    General Counsel and Senior Vice President at Fifth Third Bank
    since March 2017.
        The Bureau filed suit against Fifth Third Bank on March 9,
    2020, alleging that it had opened unauthorized bank and credit
    card accounts for consumers from 2008 through ``at least
    2016.'' The lawsuit does not foreclose that the alleged illegal
    activity occurred in 2017.
        As Deputy General Counsel and Senior Vice President at
    Fifth Third Bank beginning in March 2017, Mr. Chanin either
    worked at the bank while it was still engaged in alleged
    illegal activity or would have known about the prior alleged
    illegal activity and participated in defending Fifth Third Bank
    from the Bureau's investigation.

    Q.24. Did the Bureau provide a waiver of Federal ethics law to
    Mr. Chanin. If so, please state whether the waivers are under:

       L18 U.S.C. Sec.  280(b)(1);

       L18 U.S.C. Sec.  208(b)(3);

       LExecutive Order 13770;

       LAn authorization under 5 C.F.R. Sec.  2635.502(d);
            or

       LOther.

    A.24. No. The Bureau has not issued any waivers of Federal
    ethics law to Mr. Chanin. Currently, Mr. Chanin is recusing
    himself from participating in particular matters involving
    specific parties in which Fifth Third Bank is a party at the
    Bureau.
                                    ------

    RESPONSES TO WRITTEN QUESTIONS OF SENATOR REED FROM KATHLEEN L.
                               KRANINGER

        The Memorandum of Understanding (MOU) the Consumer
    Financial Protection Bureau (CFPB) recently signed with the
    Department of Education regarding student loan borrower
    complaints includes the following provision:

        For complaints regarding private loans with Federal
    consumer financial law issues, the Bureau is responsible for
    attempting to resolve informally such complaints, in accordance
    with 12 U.S.C. Sec.  S535(c)(l), and as appropriate, will
    discuss issues with ED regarding products offered by, or on the
    premises of, Institutions of Higher Education or other issues
    that may impact Federal programs overseen by ED.

    Q.1.a. Will CFPB be working with the Department of Education to
    review and analyze the Tier 1 and Tier 2 financial agreements
    between institutions of higher education and financial service
    providers and identify those having higher than average fees,
    such as the previous finding for Wells Fargo, for violating the
    requirement that they be ``not inconsistent with the best
    financial interests of students''?

    A.1.a. The complaints MOU provides a mechanism for the Bureau
    and the Department of Education to discuss and collaborate on a
    variety of issues related to complaints, and the attempted
    resolution of complaints, within their respective roles and
    responsibilities. The MOU contemplates discussion and
    collaboration regarding products offered on college campuses
    which includes those products offered under Tier 1 and Tier 2
    agreements.
        Tier 1 agreements are between colleges and a third-party
    servicer under which the servicer performs one or more of the
    functions associated with processing direct payments of Title
    IV funds on behalf of the college, and offers one or more
    financial accounts under the arrangement, or where the college
    or third-party servicer directly communicates information about
    the account to students. Tier 2 agreements are 1) between a
    college and a vendor that offers financial accounts through a
    financial institution and 2) under which financial accounts are
    offered and marketed directly to students.
        The Credit Card Accountability Responsibility and
    Disclosure Act (CARD Act) mandates annual reporting on college
    credit card agreements. The Bureau's reports have complied with
    the requirements of the CARD Act regarding reporting on college
    credit card agreements and will continue to do so.
    Additionally, the Bureau is committed to vigorously monitoring
    financial markets which impact students. Whenever the Bureau's
    market monitoring efforts uncover harm or risk of harm, the
    Bureau employs its most effective tool or tools, including
    education, regulation, supervision, and enforcement, to
    mitigate or remediate those harms and risks.

    Q.1.b. Will CFPB make such analysis available to the public?

    A.1.b. In meeting its mission, the Bureau is committed to
    transparency and public discourse. In the abstract, it is
    challenging to commit to making analysis available. However,
    through mechanisms such as the CARD Act reporting referenced in
    the response to question 1.a., the Private Education Loan
    Ombudsman's annual report, our research efforts, our
    Supervisory Highlights, and my testimony, the Bureau provides
    extensive information to the public and will continue to do so.
                                    ------

    RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY FROM KATHLEEN
                              L. KRANINGER

    Q.1. Director Kranginger, I appreciate that the CFPB signed a
    joint statement on the coronavirus with other banking
    regulators that promised to ``provide appropriate regulatory
    assistance to affected institutions subject to their
    supervision.'' The statement also noted that ``[p]rudent
    efforts [to help borrowers impacted by the coronavirus] that
    are consistent with safe and sound lending practices should not
    be subject to examiner criticism.'' How does the CFPB intend to
    implement this regulatory and supervisory flexibility? Does the
    CFPB intend to provide any more concrete details about these
    flexibilities to regulated entitites?

    A.1. The Bureau, along with other regulators, released
    guidance\1\ publicly over the past few weeks to financial
    institutions, lenders, and creditors encouraging them to work
    constructively with borrowers and customers affected by COVID-
    19. This guidance emphasizes that prudent efforts to modify the
    terms on existing loans for affected customers will not be
    subject to examiner criticism. For example, when appropriate, a
    financial institution may restructure a borrower's debt
    obligations due to temporary hardships resulting from COVID-19
    related issues. Such cooperative efforts can ease cash-flow
    pressures on affected borrowers, improve their capacity to
    service debt, and facilitate the financial institution's
    ability to collect on its loans. The Bureau's guidance also
    provides temporary and targeted flexibility for financial
    institutions to apply their resources to consumers' most urgent
    needs by deferring less urgent regulatory obligations. The
    Bureau continues to consider what guidance it can issue to
    regulated entities that will help consumers through this time
    and has issued guidance on myriad topics, including compliance
    with the assistance provided under the CARES Act.
    ---------------------------------------------------------------------------
        \1\ See https://www.consumerfinance.gov/about-us/newsroom/agencies-
    provide-additional-information-encourage-financial-institutions-work-
    borrowers-affected-covid-19/, https://www.con-
    sumerfinance.gov/about-us/newsroom/cfpb-provides-flexibility-during-
    covid-19-pandemic/, https://www.consumerfinance.gov/about-us/newsroom/
    federal-agencies-encourage-banks-savings-associations-credit-unions-to-
    offer-responsible-small-dollar-loans-consumers-small-businesses-
    affected-covid-19/ and https://www.consumerfinance.gov/about-us/
    newsroom/federal-agencies-encourage-mortgage-servicers-work-struggling-
    homeowners-affected-covid-19/.
    ---------------------------------------------------------------------------
        The Bureau has also provided flexibility with respect to
    certain reporting requirements, comment submissions, and data
    collections, preferring that institutions focus their resources
    on accommodating consumers in need. Specifically, the Bureau
    extended the comment period on its Supplemental Notice of
    Proposed Rulemaking implementing the FDCPA to June 5, 2020. The
    Bureau also announced on March 26, 2020, that:

      a. LUntil further notice the Bureau does not intend to cite
            in an examination or initiate an enforcement action
            against any institution for failure to report its HMDA
            data quarterly;

      b. LUntil further notice the Bureau does not intend to cite
            in an examination or initiate an enforcement action
            against any entity for failure to submit to the Bureau
            certain information relating to credit card and prepaid
            accounts; and

      c. LThe Bureau will work with affected financial institutions
            in scheduling examinations and other supervisory
            activities to minimize disruption and burden.

    Furthermore, the Bureau continues to work closely with other
    financial regulators and has issued additional joint statements
    with them, including the Joint Statement Encouraging
    Responsible Small-Dollar Lending in Response to COVID-19 on
    March 26, 2020.\2\ The Bureau anticipates making additional
    statements and taking further action as appropriate in the
    coming days and weeks.
    ---------------------------------------------------------------------------
        \2\ https://www.consumerfinance.gov/about-us/newsroom/federal-
    agencies-encourage-banks-savings-associations-credit-unions-to-offer-
    responsible-small-dollar-loans-consumers-small-businesses-affected-
    covid-19/.
    ---------------------------------------------------------------------------
        The Bureau also provided concrete details about regulatory
    and supervisory flexibility in its September 2018 Statement on
    Supervisory Practices Regarding Financial Institutions and
    Consumers Affected by a Major Disaster or Emergency.\3\ In that
    statement, the Bureau noted a few examples from Regulation B,
    Regulation X, and Regulation Z where supervised entities can
    make use of existing regulatory flexibility where doing so will
    benefit consumers affected by a major emergency. For example,
    the Bureau noted regulatory flexibility in Regulation X that
    permits servicers to offer relief to borrowers affected by a
    major disaster or emergency without first having to collect a
    complete loss mitigation application. The Bureau also noted in
    that statement that ``when conducting examinations and other
    supervisory activities, the Bureau will consider the
    circumstances that supervised entities may face following a
    major disaster or emergency and will be sensitive to good-faith
    efforts to assist consumers.'' The Bureau's 2018 statement
    remains applicable to the current pandemic.
    ---------------------------------------------------------------------------
        \3\ https://files.consumerfinance.gov/f/documents/bcfp_statement-
    on-supervisory-practices
    _disaster-emergency.pdf.
    ---------------------------------------------------------------------------
        At the same time, the Bureau has focused its efforts on
    being a resource to consumers with accurate, timely information
    regarding their rights and expectations in the consumer
    financial marketplace during this challenging time. We have
    made resources available in multiple formats and languages,
    including emphasizing the continued availability of the
    complaint database for consumers who encounter issues. The
    Bureau also continues to employ its supervision and enforcement
    tools to enforce compliance.

    Q.2. Director Kraninger, I'd like to continue our discussion
    about the definition of abusive practices under Section 1031 of
    Dodd-Frank, which we discussed when you were in front of this
    Committee last October. I appreciate your leadership in
    directing the CFPB to release clarifying guidance on the
    definition of ``abusive'' under Section 1031. This guidance
    does not and should not impose a legally binding requirement on
    the public.

    Q.2.a. Does the CFPB intend for the guidance to be a standard
    for all new lawsuits filed after the guidance's January 24,
    2020, issuance?

    A.2.a. The Policy Statement describes certain aspects of how
    the Bureau intends to approach its use of the abusiveness
    standard in its supervision and enforcement matters going
    forward. In issuing this Policy Statement, however, the Bureau
    does not foreclose the possibility of engaging in a future
    rulemaking to further define the abusiveness standard.

    Q.2.b. Last month you told the House Financial Services
    Committee that the CFPB would not amend any court filings where
    the CFPB is prosecuting under Section 1031's abusive practices
    prong, despite this new guidance. I'm confused by this because
    it seems to contradict footnote 21 of the new guidance, which
    clarifies that the CFPB may re-evaluate currently pending cases
    in light of this guidance and that the CFPB generally intends
    to ``take this Policy Statement into account when seeking
    monetary relief in pending cases asserting abusiveness
    claims.'' How can the CFPB prosecute cases that do not conform
    to the CFPB's current definition of abusive?

    A.2.b. The Bureau does not intend to amend any Bureau filings
    that pre-dated the Policy Statement based on the Policy
    Statement. In general, however, the Bureau intends to take this
    Policy Statement into account when seeking monetary relief--
    specifically civil money penalties and disgorgement--in pending
    cases asserting abusiveness claims. This is consistent with the
    approach set forth in the Policy Statement.

    Q.2.c. Regarding enforcement actions, you said in an April 2019
    speech that you were reviewing the CFPB's enforcement process
    to reduce rulemaking by enforcement and ensure a more fair and
    effective process. Have you completed this review and
    particularly re-evaluated pending enforcement cases given that
    review?

    A.2.c. The decision to bring an enforcement action or to settle
    an enforcement action is one I make as the Director of the
    Bureau. I take this responsibility seriously and have
    thoroughly reviewed the recommendations brought to me. Given
    relatively new leadership within the Supervision, Enforcement
    and Fair Lending Division and the Office of Enforcement, we
    continue to refine our processes to ensure we are moving
    expeditiously to bring bad actors to justice and applying the
    appropriate tool choice to address a market issue we identify--
    whether that is education, regulation, supervision, or
    enforcement. To your point, because rules are general
    standards, they are not best articulated on a case-by-case
    basis through enforcement actions. To the extent the Bureau
    engaged in that practice in the past, that does not occur
    today.

    Q.3. I have long advocated for the regulatory agencies to use
    guidance documents properly. I led the effort to invalidate the
    CFPB's Indirect Auto Lending Guidance using the Congressional
    Review Act. This effort was necessitated because the CFPB
    violated requirements under this Act when it issued its
    guidance. More broadly, agencies should never sidestep the
    APA's notice and comment rulemaking process by issuing guidance
    that imposes legally binding requirements on the public.
    Unfortunately, Director Cordray seemed to be inclined to follow
    this approach. The CFPB still has many guidance documents from
    Director Cordray's tenure in effect, including those that cover
    credit cards, debt collection practices, and compliance under
    the Real Estate Settlement Practices Act. Has the CFPB reviewed
    all of this previously issued guidance to ensure that they do
    not impose any legally binding obligations to the public and
    are consistent with your philosophy on consumer financial
    protection? If so, what was the result of that review? If not,
    does the CFPB plan to do so?

    A.3. Unlike a law or regulation, a guidance document does not
    have the force and effect of law and the Bureau agrees that
    guidance should not impose legally binding requirements on the
    public. The Bureau has reviewed and will continue to review its
    guidance documents to ensure that the documents do not purport
    to impose legally binding requirements on the public. Through a
    recently issued Policy Statement on Compliance Aids, the Bureau
    has tried to publicly clarify its approach to certain guidance
    documents, including through explaining the legal status and
    role of such documents. The Bureau is currently considering a
    number of issues related to its guidance documents, including
    the review of past guidance to determine, among other things,
    which documents might fall under the Bureau's new Compliance
    Aids policy.

    Q.4. Director Kraninger, my understanding is that the CFPB
    intends to issue a rulemaking to implement Section 1071 of
    Dodd-Frank, which generally requires financial institutions to
    collect and compile demographic data and other information on
    small business lending.
        I'm very concerned about this requirement. The CFPB should
    be a consumer bureau, not a business bureau, and this
    requirement could prove to be unwieldy for small financial
    institutions.

    Q.4.a. At your confirmation hearing, you promised me that you
    would explore invoking your authority under Section 1071 of
    Dodd-Frank to exempt certain financial institutions from this
    requirement. Is the CFPB seriously exploring invoking this
    authority in the rulemaking? For example, while I am skeptical
    of arbitrary asset thresholds, exempting all small financial
    institutions with less than $1 billion in assets from this
    requirement would help 85 percent of banks and thrifts. The
    exemption would, however, only impact 10 percent of the number
    of small business loans.

    A.4.a. As part of its rulemaking process, the Bureau is
    exploring potential ways to implement section 1071 in a
    balanced manner with a goal of obtaining and publishing small
    business lending data that achieves the statutory objectives
    without unnecessarily affecting the cost or availability of
    credit to small businesses and while minimizing burden and
    unintended consequences on financial institutions and small
    businesses.
        Section 1071 authorizes the Bureau to adopt exceptions to
    any requirement in 1071, and to ``conditionally or
    unconditionally [ . . . ] exempt any financial institution or
    class of financial institutions from the requirements'' of
    1071, as the Bureau deems ``necessary or appropriate to carry
    out the purposes of this section.'' The Bureau continues to
    explore what it should consider in making this determination.
    For example, one of the topics the Bureau explored in the
    symposium it held in November 2019 regarding section 1071 is
    whether exempting certain financial institutions, such as
    smaller lenders, would further or diminish the statutory
    purposes of 1071.
        The Bureau's November 2019 symposium also explored how to
    efficiently collect appropriate data without imposing
    unnecessary or undue costs that could limit access to credit
    from existing market participants or discourage new entrants
    into the market for small business credit.
        The next step in the Bureau's rulemaking process will be
    the release of materials in advance of convening a panel under
    the Small Business Regulatory Enforcement Fairness Act, in
    conjunction with the Office of Management and Budget and the
    Small Business Administration's Chief Counsel for Advocacy.
    These materials will describe how the Bureau is considering
    implementing section 1071, discuss other alternatives the
    Bureau has considered, and identify the potential impact that
    the proposals under consideration might have on small entities.
    The information and feedback obtained during the Small Business
    Regulatory Enforcement Fairness Act process will help inform
    the Bureau's policymaking leading to a notice of proposed
    rulemaking.

    Q.4.b. Section 1071 permits but does not require the CFPB to
    collect ``any additional data the Bureau deems appropriate,''
    beyond the statutorily required data points. Given that
    collecting additional data could be costly for small financial
    institutions and could introduce new privacy concerns, can you
    promise to me that the CFPB will not use this authority to
    require the collection of any additional data points?

    A.4.b. The Bureau is not prejudging the outcome of its
    rulemaking. As part of its rulemaking process, the Bureau is
    exploring potential ways to implement section 1071 in a
    balanced manner with a goal of obtaining and publishing small
    business lending data that achieves the statutory objectives
    without unnecessarily affecting the cost or availability of
    credit to small businesses and while minimizing burden and
    unintended consequences on financial institutions and small
    businesses.
                                    ------

    RESPONSES TO WRITTEN QUESTIONS OF SENATOR TILLIS FROM KATHLEEN
                              L. KRANINGER

    Q.1. In 2015, under Director Cordray's leadership, the Bureau
    issued guidance (Compliance Bulletin 2015-05) related to
    marketing service agreements (MSAs). MSAs are currently subject
    to statutory restrictions already in place under the Real
    Estate Settlements Procedures Act (RESPA) and additional
    regulatory restrictions under Regulation X. The Bureau's 2015
    MSA guidance presented a new interpretation of RESPA to caution
    against MSAs altogether. Under Director Cordray, the Bureau
    then brought enforcement actions utilizing this new guidance.
    In 2018, the U.S. Court of Appeals for the D.C. Circuit
    unanimously overturned then-Director Cordray's new
    interpretation of RESPA. In PHH Corp. v. CFPB, the DC Circuit
    ruled that the Bureau's new interpretation ``is a facially
    nonsensical reading of Regulation X.''

    Q.1.a. Director Kraninger, how does the Bureau intend to move
    forward with the MSA guidance?

    A.1.a. In its 2015-05 Compliance Bulletin, the Bureau noted
    that it appeared, based on the Bureau's investigative efforts,
    that many mortgage service agreements (MSAs) ``are designed to
    evade RESPA's prohibition on the payment and acceptance of
    kickbacks and referral fees.'' The Bureau is open to hearing
    concerns about the Bulletin and will consider whether any
    action should be taken to better clarify existing RESPA
    obligations.

    Q.1.b. Is the Bureau using the guidance in any supervisory or
    enforcement programs at present time?

    A.1.b. The Bureau considers the guidance in a manner consistent
    with the Policy Statement on Supervisory Guidance issued in
    2018.

    Q.2. Third-party litigation financing (TPLF) is private
    investment in civil litigation in exchange for a portion of a
    settlement or judgment or some agreed value above the amount
    loaned to a claimant. Despite growth in recent years, this
    industry has largely operated in the shadows as Federal and
    State officials have largely declined to regulate or
    investigate TPLF.

    Q.2.a. Is the Bureau currently working to identify and
    investigate other investors and law firms that may be
    exploiting vulnerable consumers through litigation financing?
    A.2.a. The Bureau cannot comment on any specific matter because
    the Bureau does not comment publicly on confidential
    enforcement investigations or litigation. The Bureau's purpose
    is to ensure all consumers have access to markets for consumer
    financial products and services and that such markets are fair,
    transparent, and competitive.

    Q.3. The Bureau has explored changes to the collecting and
    reporting of data pursuant to the Home Mortgage Disclosure Act
    (HMDA) Rule--including amendments to the reporting thresholds
    and decreasing the total HMDA data set.
        How is the Bureau ensuring this relief for small financial
    institutions reaches those entities?

    A.3. The Bureau's recent final rule that permanently increases
    the thresholds for collecting and reporting data on closed-end
    mortgage loans and open-end lines of credit, respectively, will
    relieve a large number of smaller financial institutions of
    their obligations under HMDA. The Bureau issued an Advance
    Notice of Proposed Rulemaking in May 2019 seeking information
    on data collection and
    reporting requirements to ensure that the data requirements
    established in the 2015 HMDA Rule appropriately balance the
    benefits and burdens associated with data reporting. The Bureau
    is carefully considering the public's input as it determines
    whether to
    formulate a proposed rule relating to changing any of the data
    collection and reporting requirements. This consideration will
    also take into account the relief from collecting most of the
    new data points that some institutions received through the
    Economic Growth, Regulatory Relief, and Consumer Protection Act
    (EGRRCPA). The Bureau intends to release a proposed rule late
    this summer to follow up on the May 2019 Advanced Notice of
    Proposed Rulemaking related to certain data points that are
    reported under the 2015 HMDA Rule and coverage of certain
    business- or commercial-purpose loans.

    Q.4. The Bureau's debt collection proposal would create the
    first substantive rule implementing the FDCPA in the law's 40-
    plus years in existence.

    Q.4.a. Is the Bureau aware of the impact the rule may have on
    collectors?

    A.4.a. As part of the May 2019 NPRM, the Bureau considered the
    proposal's potential benefits, costs, and impacts. The proposal
    would further the FDCPA's goals of eliminating abusive debt
    collection practices and ensuring that debt collectors who
    refrain from such practices are not competitively
    disadvantaged. The proposed rule would also benefit both
    consumers and debt collectors by increasing clarity and
    certainty about what the FDCPA prohibits and requires. As noted
    in the preamble, to better understand potential effects of the
    proposed rule on industry, the Bureau engaged in significant
    outreach to industry, including a survey of debt collection
    operations (https://www.consumerfinance.gov/documents/755/20
    160727_cfpb_Third_Party_Debt_Collection_Operations_ Study.pdf).
    In July 2016, the Bureau consulted with small entities as part
    of the Small Business Enforcement and Regulatory Fairness Act
    process and obtained important information on the potential
    impacts of proposals that the Bureau was considering at the
    time, many of which are included in the proposed rule.
        As discussed in the preamble, the proposed rule would
    affect many aspects of debt collector operations, including the
    way debt collectors communicate with consumers, and the
    potential impacts of the proposed provisions are likely to
    interact with each other. The Bureau received many comments
    from the public, including from debt collectors, about likely
    impacts on debt collectors and it is carefully considering
    these comments as it moves forward with the rulemaking process.

    Q.4.b. I appreciate that the Bureau is reviewing regulations
    and analyzing ways it can relieve regulatory burden for smaller
    and less complex financial institutions such as credit unions.
    What efforts is the Bureau taking in the next year to review
    regulations for these less complex institutions?

    A.4.b. In March 2018, the Bureau released two requests for
    information (RFIs) requesting comments on the Bureau's
    inherited and adopted rules, which included, among other
    things, our plans for reviewing our regulations. The comments,
    including comments from associations representing community
    banks and credit unions, has informed how the Bureau has set
    priorities for rulemakings.
        Moreover, the Bureau has taken steps to identify and
    address outdated, unnecessary, or unduly burdensome regulations
    on industry, including on small and less complex financial
    institutions such as credit unions:

       LIn FY 2019, the Bureau published reports of
            assessments of the Remittance Rule, the ATR-QM Rule,
            and the 2013 RESPA Servicing Rules. The reports
            discussed our findings on the effects of the rules on
            community banks and credit unions.

       LIn FY 2020, the Bureau conducted a review of its
            overdraft rule under RFA section 610, which requires
            agencies to consider the effects of the rule on small
            entities. The Bureau will announce the outcome of the
            review in the Spring 2020 Unified Agenda.

       LIn FY 2021, the Bureau plans to complete a review
            of its credit card rules' effects on small credit card
            issuers under RFA section 610.

       LThe Bureau has also taken actions to implement
            provisions of EGRRCPA that provide regulatory relief to
            community banks and credit unions.

        The Bureau has also engaged in rulemaking with the
    objective of reducing unwarranted regulatory burdens:

       LIn October 2019, the Bureau issued a final rule to
            adjust the thresholds for reporting HMDA that provides
            temporary relief to small lenders. The Bureau also
            announced plans in the Fall 2019 Unified Agenda to
            issue a final rule to address proposed increases to the
            permanent thresholds for collecting and reporting data
            on open-end lines of credit and closed-end mortgage
            loans in 2020.

       LIn December 2019, the Bureau issued a Notice of
            Proposed Rulemaking to amend the Bureau's Remittance
            Rule. One of the amendments would in effect exempt 400
            more community banks and almost 200 more credit unions
            from the rule.

    Q.5. Congress contemplated the need for exemptions to certain
    Bureau rules and crafted the Dodd-Frank Act to authorize the
    Bureau to tailor its rules so those acting responsibly--like
    credit unions and other community-based financial
    institutions--are not negatively impacted by rules addressing
    the behavior of others.

    Q.5.a. What is the Bureau's current perspective on its
    exemption authority under the Dodd-Frank Act?

    A.5.a. The Bureau will use its exemption authority when doing
    so advances the Bureau's overall objectives as expressed in
    section 1021 of the Consumer Financial Protection Act.

    Q.5.b. Has there been a productive dialogue between NCUA and
    the Bureau on issues like small dollar lending and consumer
    protection examinations?

    A.5.b. Yes, the Bureau and NCUA coordinate frequently on our
    priorities and activities. In a recent example on small dollar
    lending, on Thursday, March 26, 2020, the Bureau joined the
    NCUA and other Federal financial regulatory agencies in a joint
    statement to encourage banks, savings institutions, and credit
    unions to offer small-dollar loans to consumers and small
    businesses affected by the COVID-19 coronavirus.\1\ In
    addition, given the Bureau's supervisory authority over insured
    credit unions (as defined in 12 U.S.C. 1752) with more than $10
    billion in total assets and any affiliate thereof, supervision
    staff and management coordinate regularly with their
    counterparts at NCUA to share information about these credit
    unions.
    ---------------------------------------------------------------------------
        \1\ See https://www.consumerfinance.gov/about-us/newsroom/federal-
    agencies-encourage-banks
    -savings-associations-credit-unions-to-offer-responsible-small-dollar-
    loans-consumers-small-businesses-affected-covid-19/.

    Q.6. The Bureau seems to pride itself on being a modern, data-
    driven Government agency. It's clear that a critical part of
    that effort is ensuring rulemakings are always grounded in
    sufficient evidence and research--including cost-benefit
    analysis. The Bureau has recently established an office for
    this very purpose.
        How does the Bureau plan to integrate meaningful cost and
    benefit analysis into its rulemakings going forward?

    A.6. I am committed to ensuring that the Bureau's cost benefit
    analyses are rigorous and robust and that the Bureau carefully
    considers the regulatory burden of any proposed or final rule.
    Before issuing any legislative rule, the Bureau is required by
    section 1022(b)(2)(A) of the Dodd-Frank Wall Street Reform and
    Consumer Protection Act (Dodd-Frank 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. The Bureau's Office of Research continues to
    conduct cost-benefit analysis for rulemakings. Furthermore,
    section 1022(d) of the Dodd-Frank Act uniquely requires the
    Bureau to assess the effectiveness of its significant rules,
    reflecting available evidence and data, within 5 years of such
    rule's effective date. The Bureau is committed to robust
    assessment of its rules and is considering the necessary data
    collection in the rule development process to support later
    assessments.
                                    ------

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MENENDEZ FROM
                         KATHLEEN L. KRANINGER

    Q.1. Director Kraninger, in response to a question I asked you
    regarding the CFPB's oversight of Federal student loan
    servicers, you stated that the CFPB would conduct a joint
    examination this month with the Department of Education.

    Q.1.a. Will these examinations be conducted by the CFPB staff
    reporting up the chain of command at the CFPB, or will they be
    conducted by detailees reporting to the Department of
    Education?

    A.1.a. The Bureau is currently conducting an examination at a
    student loan servicer that includes review of Federal Direct
    Loans and federally held Federal Family Education Loan Program
    (FFELP) loans. This examination is being conducted in
    coordination with the Department of Education's own
    examinations of these servicers for compliance with their
    programmatic requirements. The Bureau
    examiners are conducting this work under the supervision and
    direction of managers and executives of the Bureau. In
    addition, to further development of a coordinated examination
    process, the Bureau has offered to detail two staff members to
    the Department of Education. The detailee(s) will be working on
    a coordinated examination process and supporting the Department
    in building out its contract management oversight capabilities
    to the extent that they want to use Bureau examination
    techniques as a model. As in any detail, the detailee(s) will
    be working under the day-to-day supervision and direction of
    managers at the Department of Education. However, the
    detailee(s) will also report to the Bureau through the Office
    of Supervision Policy to ensure that the Bureau's mission needs
    are met. This is separate from the ongoing supervisory event
    which is being conducted. Due to the pandemic crisis, the
    details have not yet been executed.

    Q.1.b. Will the CFPB have full discretion over which loan
    servicers to examine and the scope of these examinations?

    A.1.b. The Bureau recognizes the public interest in the conduct
    of the current examination. However, the level of information
    provided in response to this question does not set a precedent
    regarding what may be determined in the future as confidential
    supervisory information.
        In the examination that is ongoing, the Bureau coordinated
    with the Department of Education on the requests for
    information. Information from the subject servicer is being
    transmitted directly to the Bureau as well as to the Department
    of Education. However, this examination may not be the model
    for future events.

    Q.1.c. Will the CFPB have unrestricted access to all data and
    loan information while conducting examinations?

    A.1.c. Please see the response to question 1.b.

    Q.1.d. Will the CFPB have sole authority over the findings and
    content of examination reports based on these examinations?

    A.1.d. The Bureau will maintain the integrity of the
    supervisory process and will issue the findings it determines
    appropriate.

    Q.2. You have previously testified that the CFPB is working
    with the Department of Education to reestablish the Memorandum
    of Understanding rescinded by Secretary DeVos over 2 years ago
    that allowed for CFPB to conduct its own supervisory
    examinations and fulfill its statutory oversight obligations.

    Q.2.a. What is the current status of this Memorandum of
    Understanding?

    A.2.a. Please see the response to question 1.a. At this time,
    the Bureau and the Department of Education have not determined
    whether establishing the process will require an MOU.

    Q.2.b. Does reestablishing the MOU remain a priority for the
    CFPB, despite your statement that you would be resuming
    supervisory examinations of Federal student loan servicers this
    month?

    A.2.b. The Bureau is committed to carrying out its supervisory
    authorities consistent with its risk prioritization and will
    take appropriate action to do so.

    Q.3. Debt collector abuses consistently rank as a top issue
    reported to the CFPB's public Consumer Complaint Database. Yet,
    the proposed rule the CFPB issued in 2019 contains no
    requirement that a debt collector have original documentation
    or other information to substantiate that the debt they are
    attempting to collect is legitimately owed by the consumer they
    are contacting. The rule also weakens protections for consumers
    whose debts are no longer enforceable under State or Federal
    law.

    Q.3.a. The FTC filed comments on your proposed debt collection
    rule stating that the FTC and courts have said that ``it is a
    violation of the FDCPA for a debt collector . . . to file an
    action in court to collect on a time-barred debt'' and also
    that it is ``likewise a clear violation of the FDCPA to
    threaten to file such an action.'' You instead have proposed to
    inject a state of mind element that would bar lawsuits or
    threats only if the collector ``knows or should know'' that the
    legal deadline has passed. What is your response to the FTC's
    question whether ``requiring a showing that the debt collector
    knew or should have known the debt was time-barred places
    unnecessary additional burdens on law enforcement agencies?''

    A.3.a. The Bureau's May 2019 NPRM proposed to prohibit a debt
    collector from bringing or threatening to bring a legal action
    against a consumer to collect a debt that the debt collector
    knows or should know is a time-barred debt. In proposing the
    ``know or should know'' standard, the Bureau noted that, in
    many cases, a debt collector will know, or can readily
    determine, whether the statute of limitations has expired. In
    some instances, however, a debt collector may be genuinely
    uncertain even after undertaking a reasonable investigation;
    this could occur, for example, when the case law in a State is
    unclear as to which statute of limitations applies to a
    particular type of debt. In response to the May 2019 NPRM, the
    Bureau received over 14,000 comments, a significant number of
    which addressed time-barred debt, including the proposed ``know
    or should know'' standard. The Bureau is analyzing those
    comments as part of the process of taking final action on the
    May 2019 NPRM.

    Q.3.b. Under what types of circumstances would the CFPB find
    that a debt collector ``should'' have known that a debt was so
    old it could not be pursued in court?

    A.3.b. Please see the response to question 3.a.
                                    ------

    RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN FROM KATHLEEN
                              L. KRANINGER

    Supervision and Enforcement
    Q.1. In January 2020, the CFPB issued a statement of policy
    regarding its use of the standard for ``abusiveness'' in its
    supervision and enforcement matters.\1\ Among the changes
    announced, the Bureau stated that it ``intends to focus on
    citing conduct as abusive in supervision and challenging
    conduct as abusive in enforcement if the Bureau concludes that
    the harms to consumers from the conduct outweigh its benefits
    to consumers.'' This policy substantially narrowed the
    statutory language the Bureau previously cited in its
    enforcement actions, which defined a practice as abusive ``if
    it takes unreasonable advantage of consumers' lack of
    understanding of the material risks, costs, or conditions of a
    financial product or service.''
    ---------------------------------------------------------------------------
        \1\ Consumer Financial Protection Bureau, ``Statement of Policy
    Regarding Prohibition on Abusive Acts or Practices,'' January 24, 2020,
    https://files.consumerfinance.gov/f/documents/cfpb_abusiveness-
    enforcement-policy_statement.pdf.

    Q.1.a. Will the Bureau only consider quantitative costs and
    ---------------------------------------------------------------------------
    benefits to consumers when applying the new policy?

    A.1.a. As stated in the Policy Statement, the Bureau's
    consideration of the harms and benefits of the potentially
    abusive conduct (i.e., its effects) on consumers can be
    qualitative as well as quantitative. That is, a quantitative
    analysis is not necessary for every citation or challenge to
    conduct as being a violation of the abusiveness standard.

    Q.1.b. If the Bureau will consider qualitative costs, how will
    it evaluate whether or not the costs outweigh the benefits?

    A.1.b. The Bureau intends to focus on citing conduct as abusive
    in supervision or challenging conduct as abusive in enforcement
    if the Bureau concludes that the harms to consumers from the
    conduct outweigh its benefits to consumers. The Bureau will
    evaluate whether the harms to consumers outweigh the benefits
    consistent with similar considerations in the application of
    unfairness.

    Q.1.c. The following are two previous enforcement actions for
    which the Bureau has applied the abusiveness standard but did
    not explicitly evaluate the costs and benefits to consumers.
    Please explain how each of these acts would be considered with
    respect to the abusiveness standard under the Bureau's new
    policy.

      I. LOn June 17, 2015, the CFPB brought an enforcement action
            against Security National Automotive Acceptance
            Company, LLC.\2\ The complaint alleged that, through
            their threatened and actual contacts with
            servicemembers' command, SNAAC engaged in abusive acts
            or practices by taking ``unreasonable advantage of
            consumers' inability to protect their interests,
            leveraging consumers' military status in collection of
            debt.''
    ---------------------------------------------------------------------------
        \2\ United States District Court, Southern District of Ohio,
    Western Division, ``Consumer Financial Protection Bureau v. Security
    National Automotive Acceptance Company, LLC,'' June, 17, 2015, https://
    files.consumerfinance.gov/f/201506_cfpb_complaint-security-national-
    automotive
    -acceptance-company.pdf.

      II. LOn November 21, 2016, the Bureau cited the abusiveness
            standard in an enforcement action against Maryland
            Attorney Charles Smith for his relationship with Access
            Funding, a limited liability company that ``provided
            advances to consumers that were to be repaid through a
            deduction from the proceeds of structured-settlement
            transfers once those transactions were completed.''\3\
            Many of the consumers from whom Access Funding
            purchased settlements ``were lead-poisoning victims
            with cognitive impairments.'' Smith was paid by Access
            Funding despite claiming to be an independent financial
            advisor. The Bureau's complaint alleged that Smith did
            not consider information about the consumers' best
            interests and instead advised them ``without having any
            information about the consumers' financial situations''
            and ``took unreasonable advantage of consumers'
            reliance on him to act in their best interests.
    ---------------------------------------------------------------------------
        \3\ United States District Court for the District of Maryland,
    Baltimore Division, ``Consumer Financial Protection Bureau v. Access
    Funding, LLC, et al.'' November 21, 2016, https://
    files.consumerfinance.gov/f/documents/
    201611_cfpb_Access_Funding_Complaint_filed.pdf.

    A.1.c. The Bureau has not conducted a backward-looking analysis
    of enforcement actions to determine whether conduct addressed
    as abusive in any of those actions would potentially not be the
    basis of an abusiveness claim under the policy statement. There
    are several examples of conduct previously addressed as
    abusive, however, that likely would not be affected by the
    ---------------------------------------------------------------------------
    policy statement.

    Q.1.d. The new policy also provides that ``the Bureau generally
    does not intend to seek monetary remedies for abusive acts or
    practices if the covered person made a good-faith effort to
    comply with the law based on a reasonable--albeit mistaken--
    interpretation of the abusiveness standard.'' How will the CFPB
    determine whether a covered person made a ``good-faith effort''
    to comply with the law? How will the Bureau determine whether a
    mistaken interpretation of the abusiveness standard is
    reasonable?

    A.1.d. As stated in the Policy Statement, in determining
    whether a covered person made a good-faith effort to comply
    with the abusiveness standard, the Bureau intends to consider
    all relevant factors, including but not limited to the
    considerations outlined in the Bureau's Bulletin 2013-06
    regarding Responsible Business Conduct,\4\ which was referenced
    in the Policy Statement. The Policy Statement indicates that a
    ``reasonable'' interpretation for purposes of the policy
    statement is one based on the text of the abusiveness standard
    set forth in the Dodd-Frank Act, as well as prior precedent and
    guidance, including judicial precedent, the Bureau's
    administrative decisions, rulemakings, supervisory guidance,
    and past allegations of abusive acts or practices in public
    enforcement actions.
    ---------------------------------------------------------------------------
        \4\ See https://files.consumerfinance.gov/f/
    201306_cfpb_bulletin_responsible-conduct.pdf. See also 12 U.S.C.
    5565(c)(3)(A).

    Q.1.e. Which political appointees assisted with developing this
    policy? For each individual, please include exactly what part
    of the policy they worked on, including their specific input in
    ---------------------------------------------------------------------------
    the process.

    A.1.e. Similar to other Bureau guidance, a number of staff
    across the Bureau supported the development and review of this
    Policy Statement, including appropriate line staff and senior
    executives in relevant divisions. The decision to issue is mine
    as Director.

    Q.2. The CFPB has issued a statement on the use of alternative
    data in credit underwriting with the Federal Reserve, Federal
    Deposit Insurance Corporation, National Credit Union
    Administration and Office of the Comptroller of the
    Currency.\5\ The statement acknowledged, ``data that present
    greater consumer protection risks warrant more robust
    compliance management,'' including ``appropriate testing,
    monitoring and controls to ensure consumer protection risks are
    understood and addressed.''
    ---------------------------------------------------------------------------
        \5\ Board of Governors of the Federal Reserve System, Consumer
    Financial Protection Bureau, Federal Deposit Insurance Corporation,
    National Credit Union Administration, Office of the Comptroller of the
    Currency, ``Interagency Statement on the Use of Alternative Data in
    Credit Underwriting,'' December 3, 2019, https://
    files.consumerfinance.gov/f/documents/cfpb_
    interagency-statement_alternative-data.pdf.

    Q.2.a. Describe how the process and procedures under which the
    Bureau, in its supervision and enforcement activities,
    evaluates the use of alternative data with respect to consumer
    ---------------------------------------------------------------------------
    protection and fair lending laws:

      I. LTraditional lending models

      II. LAlgorithmic lending models

    A.2.a. Fair lending examinations and investigations assess
    whether there is discrimination in policies and practices
    governing a creditor's underwriting or pricing decisions. The
    Bureau cannot comment on or confirm any supervisory activity or
    investigations that may have involved these assessments.
    Examination teams use the Bureau's Equal Credit Opportunity Act
    (ECOA) Baseline Review examination procedures to evaluate how
    supervised firms identify and manage fair lending risks under
    ECOA, including fair lending risks related to models.\6\
    Generally, reviews also include evaluating whether
    underwriting, pricing, or other policies or procedures contain
    factors (including the use of alternative data factors, if
    applicable) that result in disparate treatment or could have a
    disproportionately negative, unjustified impact on a prohibited
    basis.
    ---------------------------------------------------------------------------
        \6\ https://www.consumerfinance.gov/documents/4676/
    cfpb_supervision-and-examination-manual_ecoa-baseline-exam-
    procedures_2019-04.pdf.

    Q.2.b. When evaluating the use of alternative data in an
    algorithmic lending model, against what baselines does the
    ---------------------------------------------------------------------------
    Bureau compare the outcomes of that model?

    A.2.b. In its supervision and enforcement activities, the
    Bureau evaluates compliance with ECOA and its implementing
    regulation, Regulation B. The Bureau enforces fair lending laws
    as they apply to all lenders, whether they use traditional or
    nontraditional lending models. As noted above, the Bureau
    cannot comment on or confirm any supervisory activity or
    investigations that may have involved these assessments. In its
    outreach, innovation and market monitoring activities, the
    Bureau is focused on understanding the benefits and risks
    associated with alternative data or modeling techniques that
    may be used in the market, including whether they produce
    incremental benefit or risk relative to the status quo. Such
    techniques may expand access to credit for consumers who are
    credit invisible or who lack enough credit history to obtain a
    credit score.

    Q.2.c. When evaluating the use of alternative data in a
    traditional lending model, against what baselines does the
    Bureau compare the outcomes of that model?

    A.2.c. Please see the response to question 2.b.

    Q.3. On March 6, 2020, the Bureau released additional details
    regarding its proposed advisory opinion program.\7\ ``Under the
    advisory opinion program, parties will submit requests for an
    advisory opinion to the Bureau via its website. The Bureau will
    issue additional procedures for how requests will be addressed,
    including how the Bureau will prioritize requests. To increase
    transparency and to provide regulatory certainty to all
    regulated entities and other stakeholders, the Bureau will
    publish the responding advisory opinion in the Federal Register
    and on its website. The opinion will include an interpretation
    of the Bureau's existing rules.''
    ---------------------------------------------------------------------------
        \7\ Consumer Financial Protection Bureau, ``CFPB Takes Key Steps to
    Prevent Consumer Harm; Proposes Whistleblower Award Program, Other
    Measures,'' March 6, 2020, https://www.consumerfinance.gov/about-us/
    newsroom/cfpb-takes-key-steps-prevent-consumer-harm-proposes-
    whistleblower-award-program/.

    Q.3.a. Will the advisory opinion program itself, including all
    relevant policies and procedures under which opinions be
    submitted, be published in the Federal Register subject to a
    ---------------------------------------------------------------------------
    notice and comment period?

    A.3.a. Program procedures are still under internal
    consideration at this time. Full details of the program,
    including any requests for public comment on program
    procedures, will be released at a later date.

    Q.3.b. Will the individual advisory opinions published in the
    Federal Register be subject to a notice and comment period?

    A.3.b. Program procedures are still under internal
    consideration at this time. Full details of the program will be
    announced at a later date.

    Q.3.c. Will the opinions be binding on the entire industry or
    exclusive to the particular entity that requests them?

    A.3.c. Recognizing that program procedures are still under
    internal consideration at this time, advisory opinions are
    intended to cover the factual situation presented by the
    requesting entity in its request and all entities in situations
    with relevantly similar facts and circumstances. To increase
    transparency and to provide regulatory certainty to all
    regulated entities and other stakeholders, the Bureau will
    publish advisory opinions in the Federal Register and on its
    website.

    Q.3.d. Will political appointees be involved at any stage of
    the advisory opinion process? If so, please describe which
    appointees and their specific role in selecting which opinions
    to respond to; drafting, reviewing and approving the opinions,
    and any subsequent publication of the opinions.

    A.3.d. While program procedures are still under internal
    consideration at this time, the appropriate staff will be
    involved in the advisory opinion process at the senior and line
    levels. Full details of the program will be announced at a
    later date.

    Q.4. Please describe the CFPB's jurisdiction over the auto
    lending market, including auto dealers, nonbank lenders, and
    bank lenders and the relationships between these different
    parties.

    Q.4.a. As stated in the Bureau's Auto Finance Examination
    Procedures, when a loan is issued via indirect financing, ``the
    dealer, rather than the consumer, typically selects the lender
    that will provide financing,'' and the dealer ``may have
    incentives to select a particular lender over another.''\8\
    ---------------------------------------------------------------------------
        \8\  Consumer Financial Protection Bureau, ``CFPB Examination
    Procedures: Auto Finance,'' June 2015, https://
    files.consumerfinance.gov/f/201506_cfpb_automobile-finance-examination-
    procedures.pdf.

    Q.4.a.i. Does the Bureau believe that this incentive structure
    ---------------------------------------------------------------------------
    can create risks to consumers?

    A.4.a.i. As a general matter, the Bureau has observed through
    its market monitoring, supervision, and enforcement work that
    the unintended effects of incentives can be complex and bear
    careful attention by supervised entities' institutional
    leadership and compliance officers.\9\ As stated in the
    Bureau's Risk Assessment template, incentives may ``encourage
    the sale of high-cost products regardless of [the] consumer's
    request or situation.''\10\ Accordingly, the Bureau expects
    supervised entities that choose to use incentives to institute
    effective controls for the risks these programs may pose to
    consumers, including oversight of both employees and service
    providers involved in these programs. As the Bureau has
    emphasized repeatedly, a robust compliance management system
    (CMS) is necessary to detect and prevent violations of Federal
    consumer financial law. An entity's CMS should reflect the
    risk, nature, and significance of the incentive programs to
    which it applies, and be tailored to the specific incentives
    being offered, considering both intended and unintended
    outcomes for consumers.
    ---------------------------------------------------------------------------
        \9\ CFPB Compliance Bulletin 0016-03, Detecting and Preventing
    Consumer Harm for Production Incentives, available at https://
    files.consumerfinance.gov/f/documents/201611_cfpb
    _Production_Incentives_Bulletin.pdf.
        \10\ Consumer Fin. Prot. Bureau, ``Consumer Risk Assessment,''
    October 2012. https://files.consumerfinance.gov/f/documents/
    102012_cfpb_risk-assessment_template.pdf.

    Q.4.a.ii. Does the Bureau consider whether lenders are
    intentionally charging rates higher than the normal market rate
    ---------------------------------------------------------------------------
    because of their arrangements with auto dealers?

    A.4.a.ii. As a general matter, during its supervisory and
    enforcement work, the Bureau will evaluate risks to consumers
    and whether the entity has complied with applicable Federal
    consumer financial laws and regulations. In conducting reviews
    of auto lenders, the Bureau evaluates all aspects of a lender's
    compliance management program, which usually includes a review
    of arrangements with any affiliated entities. The reviews may
    also include a review of fees and costs paid for by the
    consumer, to ensure that they are in compliance with Federal
    consumer financial laws and regulations.

    Q.4.a.iii. The CFPB's Examination Procedures include
    instructions to ``obtain records of and evaluate the
    communications between the entity and the dealers regarding
    sales incentives and production goals.''\11\ Does the Bureau
    follow these procedures for each examination of an auto lending
    company? If not, under what circumstances would the CFPB not
    follow these examination procedures?
    ---------------------------------------------------------------------------
        \11\ Id.

    A.4.a.iii. Examiners use the examination procedures as a guide
    to ensure that companies that engage in automobile financing
    are complying with the requirements of Federal consumer
    financial law. Typically, Bureau examiners scope their exams on
    a risk-basis, with the goal of ensuring appropriate consistency
    across examinations. The scope of each examination varies by
    product market, and to some extent, by entity within a product
    market, depending on the Bureau's assessment of the risks
    presented by an entity. During an auto finance examination,
    Bureau examiners typically complete the Automobile Finance
    Examination Procedures modules, as scoped and as applicable,
    enabling them to develop a thorough understanding of a
    ---------------------------------------------------------------------------
    regulated entity's practices and operations.

    Q.4.a.iv. What type of actions does the Bureau take when it
    identifies a problematic relationship between a lender and
    dealer? Has the Bureau ever barred a lender from associating
    with a problematic dealer?

    A.4.a.iv. The Dodd-Frank Act excludes from the Bureau's
    authority auto dealers that are predominantly engaged in the
    sale and servicing of motor vehicles, the leasing and servicing
    of motor vehicles, or both.\12\ Thus, on our examinations
    Bureau examiners will focus on the activities of the auto
    lender and its compliance with Federal consumer financial laws.
    If examiners found information indicating violations of law by
    the dealer, and thus not within the Bureau's authority, the
    Bureau would pass that information on to the appropriate
    Federal or State regulator. To date, through the Bureau's
    supervisory work, we have not barred a lender from associating
    with a problematic dealer. In several public enforcement
    actions,\13\ the Bureau found and the DOJ alleged that indirect
    auto lenders who allowed auto dealers to charge a higher
    interest rate when they finalize the deal with the consumer may
    have discriminated against loan applicants in credit
    transactions on the basis of characteristics such as race and
    national origin. In those matters, the injunctive relief the
    Bureau obtained included such things as: remediation; a
    requirement for the lender to implement compliance programs
    that include prompt corrective action against dealers' rate
    disparities; and requirements to reduce the level of discretion
    afforded dealers is setting rates.
    ---------------------------------------------------------------------------
        \12\ The Bureau does have authority, however, over some auto
    dealers that extend retail credit or leases without routinely assigning
    them to unaffiliated third parties. The Bureau's Larger Participant
    Rule for the automobile financing market however excludes these dealers
    from the rule. 12 CFR 1090.108(c)(2).
        \13\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
    and-doj-order-ally-to-pay-80-million-to-consumers-harmed-by-
    discriminatory-auto-loan-pricing/; https://www.consumerfi-
    nance.gov/about-us/newsroom/cfpb-and-doj-reach-resolution-with-toyota-
    motor-credit-to-address-loan-pricing-policies-with-discriminatory-
    effects/; https://www.consumerfinance.gov/about-us/
    newsroom/cfpb-and-doj-reach-resolution-with-honda-to-address-
    discriminatory-auto-loan-pricing/; and https://www.consumerfinance.gov/
    about-us/newsroom/cfpb-takes-action-against-fifth-third-bank-for-auto-
    lending-discrimination-and-illegal-credit-card-practices/.

    Q.4.a.v. When was the last time the Bureau took an enforcement
    action against a lender for incentivizing a dealer to offer a
    consumer a larger loan than the market value of the vehicle?
    ---------------------------------------------------------------------------
    Please provide a list of all such actions.

    A.4.a.v. The Bureau has exercised its authority over lenders,
    including Buy Here Pay Here dealers and auto finance companies,
    in 14 public enforcement actions. It has not brought any
    actions against a lender for incentivizing a dealer to offer a
    consumer a larger loan than the market value of the vehicle.

    Q.4.a.vi. When was the last time the Bureau issued such an
    action against a lender that incentivized a dealer to offer a
    buyer a loan at a greater interest rate than what is typical
    for the market? Please provide a list of all such actions.

    A.4.a.vi. In the public enforcement actions against Ally Bank
    and Ally Financial, Inc.,\14\ Toyota Mortgage Credit
    Corporation;\15\ American Honda Finance Corporation;\16\ and
    Fifth Third Bank,\17\ the Bureau found and the DOJ alleged that
    indirect auto lenders who allowed auto dealers to charge a
    higher interest rate when they finalize the deal with the
    consumer discriminated against loan applicants on the basis of
    characteristics such as race and national origin.
    ---------------------------------------------------------------------------
        \14\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
    and-doj-order-ally-to-pay-80-million-to-consumers-harmed-by-
    discriminatory-auto-loan-pricing/.
        \15\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
    and-doj-reach-resolution-with-toyota-motor-credit-to-address-loan-
    pricing-policies-with-discriminatory-effects/.
        \16\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
    and-doj-reach-resolution-with-honda-to-address-discriminatory-auto-
    loan-pricing/.
        \17\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
    takes-action-against-fifth-third-bank-for-auto-lending-discrimination-
    and-illegal-credit-card-practices/.

    Q.4.b. The CFPB's Examination Procedures instruct examiners to
    ``evaluate the underwriting practices of the entity, including
    the average loan-to-value ratios, lengths of terms, and whether
    the entity originates loans or leases with a high risk of
    default (e.g., determine if there is evidence of false or
    undocumented income.''\18\
    ---------------------------------------------------------------------------
        \18\ Id.

    Q.4.b.i. How does the Bureau determine whether an underwriting
    practice presents a risk to the consumer? Are quantitative
    ---------------------------------------------------------------------------
    thresholds used, and if so, can you describe?

    A.4.b.i. During an auto finance examination, Bureau examiners
    typically complete the Automobile Finance Examination
    Procedures modules, as scoped and as applicable, enabling them
    to develop a thorough understanding of a regulated entity's
    practices and operations.\19\ In doing so, examiners obtain and
    review each entity's loan and lease applications; loan and
    lease underwriting guidelines; and loan and lease account
    documentation, notes, disclosures, and all other contents of
    underwriting.\20\ As part of the examination process, typically
    examiners:
    ---------------------------------------------------------------------------
        \19\ See https://files.consumerfinance.gov/f/documents/
    201908_cfpb_automobile-finance-exam
    ination-procedures.pdf.
        \20\ Id.

       LEvaluate the underwriting practices of the entity,
            including the average loan-to-value ratios, lengths of
            terms, and whether the entity originates loans or
            leases with a high risk of default (e.g., determine if
    ---------------------------------------------------------------------------
            there is evidence of false or undocumented income);

       LEvaluate the entity's early payment default rate;
            and

       LEvaluate the loan agreement and identify potential
            risks of consumer harm.\21\
    ---------------------------------------------------------------------------
        \21\ See https://files.consumerfinance.gov/f/documents/
    201908_cfpb_automobile-finance-exam
    ination-procedures.pdf.

        After its review, the examination staff, in consultation
    with Headquarters, will determine whether the entity's
    underwriting practices comply with Federal consumer financial
    ---------------------------------------------------------------------------
    laws and regulations.

    Q.4.b.ii. Does the Bureau maintain a database with information,
    such as the average Loan-to-Value ratios, length of the loan
    term, and the default rate, for each lender? If so, how does
    the Bureau use this database?

    A.4.b.ii. The Bureau has purchased an off-the-shelf product,
    Experian AutoCount, to produce reports including, but not
    limited to, the following: (1) market share analysis for auto
    lenders based on loan originations; (2) average credit tier
    characteristics by a specific auto lender or a specific lender
    type; (3) comparison analysis of average loan attributes (for
    example, loan term, interest rates, or loan-to-value ratios)
    across the credit spectrum; and (4) market trends based on a
    geographic region. One way in which the Bureau uses this
    database is to inform its risk-based prioritization process for
    determining the institutions, product lines, and scopes of
    examinations being scheduled.
    Rulemaking
    Q.5. Earlier this month, the CFPB issued a supplemental
    proposal on the collection of time-barred debt.\22\
    ---------------------------------------------------------------------------
        \22\ Consumer Financial Protection Bureau, ``Debt Collection
    Practices (Regulation F),'' 85 Fed. Reg. 12672 (March 3, 2020), https:/
    /www.consumerfinance.gov/policy-compliance/rulemaking/rules-under-
    development/debt-collection-practices-regulation-f-supplemental-
    proposal-time-barred-debt/.

    Q.5.a. Time-barred debts are debts for which the statute of
    limitations has expired. Why did the Bureau not ban time-barred
    ---------------------------------------------------------------------------
    debt from being collected at all?

    A.5.a. The Bureau has carefully considered the consumer
    protection concerns surrounding the collection of time-barred
    debt. Consumers unfamiliar with statutes of limitations may
    take away from a debt collector's attempt to collect a time-
    barred debt the misleading impression that the debt is legally
    enforceable--even if the debt collector does not explicitly
    threaten litigation. A consumer with the mis-impression that a
    time-barred debt is enforceable in court may pay or prioritize
    that debt over another debt or expense, in the mistaken belief
    that doing so is necessary to avoid litigation.
        The Bureau tested time-barred debt disclosures on
    approximately 8,000 consumers. The Bureau's quantitative
    testing results suggest that disclosures can be effective in
    preventing the deception associated with the collection of
    time-barred debts and that, therefore, prohibiting the
    collection of time-barred debt and banning revival may not be
    necessary to prevent deception. So, the Bureau's
    proposed disclosure would address the consumer protection
    problem or potential deception in the collection of time-barred
    debt. In addition, banning the collection of time-barred may
    not be necessary and could have unintended consequences for
    consumers, such as increased litigation before expiration of
    the statute of limitations. The Bureau published research
    reports on the testing method and results with the supplemental
    NPRM and welcomes public comment.

    Q.5.b. Who will be responsible for disclosing to the consumer
    that the consumer can no longer be sued for old debt?

    A.5.b. The Bureau's February 2020 supplemental notice of
    proposed rulemaking (February 2020 SNPRM) proposes to require a
    debt collector to provide certain disclosures to a consumer
    when collecting a debt the debt collector knows or should know
    is time barred. Specifically, the February 2020 SNPRM proposes
    to require such a debt collector to provide, in the debt
    collector's initial communication with the consumer and on any
    required validation notice provided to the consumer: (1) a
    time-barred debt disclosure; and (2) if applicable law permits
    revival of the debt collector's right to sue, a revival
    disclosure. The time-barred debt disclosure would inform the
    consumer that the law limits how long the consumer can be sued
    for a debt and that, because of the age of the debt, the debt
    collector will not sue the consumer to collect it. The revival
    disclosure, if applicable, would inform the consumer that the
    debt collector's right to bring a legal action against the
    consumer can be revived and the circumstances in which revival
    can occur. The February 2020 SNPRM also includes model
    disclosures, developed by the Bureau after consumer testing,
    that debt collectors can use to comply with the proposed rule.

    Q.5.c. What tools does the Bureau have to verify that debt
    collectors are complying with these new disclosure
    requirements? How will be Bureau enforce violations?

    A.5.c. The Bureau leverages all the tools granted by Congress
    to protect consumers in the debt collection context. The
    Bureau's toolkit includes supervision and enforcement
    authority. The Bureau will utilize these tools to verify that
    debt collectors are complying with new disclosure requirements
    if they are finalized and put into effect. The Bureau has
    enforced debt collection violations by applying the law to
    particular facts and circumstances of its debt collection
    investigations and examinations. In 2019, the Bureau's debt
    collection enforcement actions resulted in judgments for nearly
    $50 million in consumer redress and $11.2 million in civil
    money penalties. The Bureau also banned eight individuals who
    engaged in serious and repeated violations of law from ever
    working in debt collection again. The Bureau will continue
    vigorous enforcement of violations arising out of any new debt
    collection requirements.

    Q.5.c.i. Will the Bureau reserve the right to pursue collectors
    that do not make these disclosures under its authority to go
    after Unfair, Deceptive, and Abusive Acts of Practices (UDAAP),
    even if the collector does not violate the new rule?

    A.5.c.i. Rigorous enforcement is part of the Bureau's mission.
    When the Bureau discovers violations of Federal consumer
    financial law, enforcement is essential to hold wrongdoers to
    account, make things right for consumers, and deter future
    violations. The Bureau is committed to enforcing debt
    collection violations and seeking all appropriate relief for
    consumers as may be appropriate in each case on the facts
    presented and considering all applicable law.

    Q.5.d. Which political appointees assisted with developing this
    proposal? For each individual, please include exactly what part
    of the proposal they worked on, including their specific input
    in the process.

    A.5.d. As has been true throughout the Bureau's history, the
    Director authorizes the publication of proposed rules developed
    by appropriate Bureau staff at the Director's direction and
    after considering recommendations from appropriate Bureau
    staff.
    Operations
    Q.6. Please provide a list of political appointees currently
    employed, including as detailees from other agencies, at the
    CFPB, their titles, the date they were hired, and their
    salaries.

    A.6. Please see table below.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Q.7. Does the CFPB have plans to hire additional political
    appointees? If so, please provide position descriptions and
    salary ranges for their jobs.

    A.7. The Bureau does not currently have any pending requests
    with OPM for additional Schedule C appointments.

    Q.8. The Partnership for Public Service produces an annual
    ranking of the best place to work using data from the Office of
    Personnel Management's Annual Employee Survey about job
    satisfaction. From 2017 to 2019, CFPB's ranking dropped 20
    points, from 79.9 to 58.4, putting it in the lower quartile of
    all Midsize Agencies.

    Q.8.a. One manifestation of employees' dissatisfaction is
    attrition. Please provide quarterly staffing levels for the
    Bureau, broken up by Division and if possible, by office from
    2017Q1 to present.

    A.8.a. Please see the table of quarterly staffing levels at the
    Bureau broken up by Division and Office from FY 2017 Q1 to
    present. Note the transition of several offices from one
    division to another in the course of this time period.

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Q.8.b. What is CFPB's plan to improve morale among staff?

    A.8.b. The staff of the Bureau are highly committed to the
    Bureau's mission and care deeply about the organization. I
    respect them, I take their views and opinions seriously, and
    their input is integral to my decisionmaking. Further, I am
    committed to leading a diverse, productive, effective
    workforce.
        I engage regularly with employees through Bureau-wide all-
    hands sessions; regular meetings with Division and Office
    teams; visits to Bureau regional staff; and weekly ``office
    hours'' to provide updates on Bureau priorities, recognize
    individual and team efforts and achievements, and continue to
    gather staff feedback. The Annual Employee Survey (AES) is an
    important source of that feedback.
        The Bureau's overall engagement composite score from the
    2019 AES increased by 6.7 points over 2018. This increase led
    the Partnership for Public Service to designate the Bureau as
    the most improved agency among mid-sized agencies for 2019.
    This progress is noteworthy, but fostering an engaged workforce
    is an ongoing responsibility.
        Below are several steps I am taking to build and maintain
    an engaged workforce:

       LI established a Workforce Effectiveness Committee
            (WEC) shortly after I became Director to ensure that
            the Bureau takes a holistic, consistent approach to
            considering workforce-related issues. Since then, I
            have charged the WEC to focus on engagement as its
            highest priority. Issues and programs that the WEC has
            advised on include: the use of Employee Resources
            Groups and the Bureau's Mentoring for Success Program;
            review and consultation on the Bureau's Barrier
            Analysis results and compensation review; and the
            implementation of IdeaBox for capturing staff ideas and
            providing feedback.

       LI created a Customer Experience Office to focus on
            improving our internal staff experience through
            enhanced operational services enabling the workforce to
            be more effective and efficient in meeting the Bureau's
            mission.

       LI have continued to strongly promote diversity and
            inclusion by refreshing the Bureau's Diversity and
            Inclusion Strategic Plan, enhancing the focus on strong
            engagement with employees, and utilizing an integrated
            approach to education, training, and engagement
            programs that incorporate diversity and inclusion
            concepts into the learning curriculum and work
            environment. Employee Resource Groups, which are
            networks of Bureau employees with similar interests,
            backgrounds, or experiences, cultural education
            programs, and diversity and inclusion training are key
            components of this effort.

       LI presented the Director's Mission Achievement
            Award to recognize staff leadership and team
            contributions toward the Bureau's mission. The award is
            the Bureau's highest honor. In accordance with my
            priorities, this year I recognized both leadership
            excellence and outstanding team contributions. Twenty
            leaders and over 200 team members across 29 teams were
            nominated by a joint committee of representatives from
            the union and Bureau management.

       LI approved a succession planning process that will
            aid Bureau leaders to: optimize our current workforce;
            invest in workforce development to meet long-term
            needs; build a healthy management pipeline; and attract
            and retain a diverse and inclusive workforce responsive
            to the needs of our varied stakeholders.

       LI approved the launch of Mentoring for Success, a
            three-part program that includes: 1) leadership speaker
            series; 2) small group discussions, and 3) mentor/
            protege pairs. The program is open to all Bureau
            employees.

       LThe Bureau completed the consolidation of all
            Washington, DC-based staff from two office buildings
            into one to increase the effectiveness of the
            organization and to significantly improve collaboration
            across all teams and divisions.

       LI have directed our Office of Human Capital and
            Office of Equal Opportunity and Fairness to develop new
            and better tools to assist managers in exercising their
            workforce responsibilities. Recent examples include:

         LAn Organization Improvement Action Guide which
            offers practical tips and tools for gathering,
            assessing, and responding to employee feedback,
            including linkages to AES categories and items and an
            action planning template and sample.

         LA three-part series for managers on how to manage
            employees remotely as the Bureau contends with COVID-
            19,
            including how to promote self-care for themselves and
            employees, and tips on how to effectively work
            virtually.
                                    ------

      RESPONSES TO WRITTEN QUESTIONS OF SENATOR CORTEZ MASTO FROM
                         KATHLEEN L. KRANINGER

    Q.1. In the wake of devastating events, we have seen mortgage
    servicers and banks stepped up to provide assistance such as
    payment deferrals and mortgage modifications to help those who
    were impacted. As health officials work to get the novel
    coronavirus contained, we cannot stress enough that people
    prioritize their health and quarantine themselves if they have
    been exposed. In some cases, they can't go to work.

    Q.1.a. Has the Consumer Financial Protection Bureau provided
    guidance to financial firms on how to serve customers who might
    miss a payday because they could not go to work because they
    were sick?

    A.1.a. The Bureau, along with other regulators, released
    guidance\1\ publicly over the past few weeks to financial
    institutions, lenders, and creditors encouraging them to work
    constructively with borrowers and customers affected by COVID-
    19. This guidance emphasizes that prudent efforts to modify the
    terms on existing loans for affected customers will not be
    subject to examiner criticism. For example, when appropriate, a
    financial institution may restructure a borrower's debt
    obligations due to temporary hardships resulting from COVID-19
    related issues. Such cooperative efforts can ease cash-flow
    pressures on affected borrowers, improve their capacity to
    service debt, and facilitate the financial institution's
    ability to
    collect on its loans. The Bureau's guidance also provides
    temporary and targeted flexibility for financial institutions
    to apply their resources to consumers' most urgent needs by
    deferring less urgent regulatory obligations. The Bureau
    continues to consider what guidance it can issue to regulated
    entities that will help consumers through this time and has
    issued guidance on myriad topics, including compliance with the
    assistance provided under the CARES Act.
    ---------------------------------------------------------------------------
        \1\ See https://www.consumerfinance.gov/about-us/newsroom/agencies-
    provide-additional-information-encourage-financial-institutions-work-
    borrowers-affected-covid-19/, https://www.con-
    sumer-finance.gov/about-us/newsroom/cfpb-provides-flexibility-during-
    covid-19-pandemic/, and https://www.consumerfinance.gov/about-us/
    newsroom/federal-agencies-encourage-banks-savings-associations-credit-
    unions-to-offer-responsible-small-dollar-loans-consumers-small-
    businesses-affected-covid-19/.
    ---------------------------------------------------------------------------
        At the same time, the Bureau has focused its efforts on
    being a resource to consumers with accurate, timely information
    regarding their rights and expectations in the consumer
    financial marketplace during this challenging time. We have
    made resources available in multiple formats and languages,
    including emphasizing the continued availability of the
    complaint portal for consumers who encounter issues. The Bureau
    also continues to employ its supervision and enforcement tools
    to reinforce compliance.

    Q.1.b. What steps does the Consumer Financial Protection Bureau
    recommend financial firms do to serve customers who had to stay
    home to take care of their children because their school or
    childcare provider closed?

    A.1.b. Please see response to question 1.a.

    Q.1.c. What specifically can credit card companies do to help
    families who have a temporary financial setback because of the
    pandemic?

    A.1.c. Please see the response to question 1.a.

    Q.1.d. What can student loan companies do to help people who
    have a temporary financial setback because of the pandemic?

    A.1.d. Please see the response to question 1.a. In addition,
    specific to student loans, the activities outlined in question
    1.a. are being utilized, as applicable, to ensure awareness and
    compliance with the CARES Act.

    Q.1.e. What can lenders do to help people who might not be able
    to pay a car note, mortgage or small business loan because of a
    temporary financial setback due to the outbreak?

    A.1.e. Please see the response to question 1.a.

    Q.1.f. How can financial institutions offer affordable small-
    dollar loans to help families survive through the outbreak?

    A.1.f. Please see the response to question 1.a. The Bureau,
    along with other regulators, released a joint statement on
    March 26, 2020, encouraging responsible small-dollar lending in
    response to COVID-19.\2\
    ---------------------------------------------------------------------------
        \2\ See https://www.consumerfinance.gov/about-us/newsroom/federal-
    agencies-encourage-banks
    -savings-associations-credit-unions-to-offer-responsible-small-dollar-
    loans-consumers-small-businesses-affected-covid-19/.

    Q.2. I am very worried that predatory online lenders will
    target families struggling with coronavirus with expensive
    loans. For example, workers quarantined at home, those laid
    off, or working reduced hours could take out high-cost loans
    over the internet that will leave them in a dangerous debt
    ---------------------------------------------------------------------------
    trap.

    Q.2.a. Will you commit the supervision and enforcement staff of
    the Consumer Financial Protection Bureau to the prevention of
    abusive loans using schemes that target those impacted by the
    coronavirus?

    A.2.a. The Bureau continues to employ its tools of education,
    regulation (including guidance), supervision, and enforcement
    aggressively to address the impacts of the pandemic on
    consumers in the consumer finance marketplace. As U.S.
    consumers confront the spread of the COVID-19 pandemic, many
    are struggling with its economic impact. The virus, and the
    necessary actions to combat it, have affected the U.S. economy,
    and therefore U.S. consumers, profoundly. Using market
    monitoring, stakeholder engagement, law enforcement
    partnerships, our complaint system, and our aforementioned
    tools, we are seeking to prevent consumer harm and acting on
    issues of concern as they arise, including any instances of
    predatory lending or fraud and scams. As your question
    specifically seeks assurance regarding supervision and
    enforcement, the Bureau continues to conduct examinations
    across markets consistent with our risk prioritization process
    and our statutory mandate, which includes persons who offer or
    provide payday loans, and to investigate violations of consumer
    financial law within our purview. Generally, the Bureau does
    not comment on nonpublic supervisory or enforcement matters.

    Q.2.b. If your supervision staff learns of abusive loans using
    schemes that target those impacted by the coronavirus, will you
    prioritize full restitution for harmed consumers in any consent
    order or judgment?

    A.2.b. Yes, restitution for affected consumers has always been
    and remains a Bureau priority in any examination, consent
    order, or judgment. In cases where a civil money penalty is
    imposed, the Bureau may also rely on the Civil Penalty Fund to
    compensate victims.

    Q.3. Last year, the CFPB announced a consent order with Enova
    International, an online payday lender. Enova illegally
    withdrew funds from consumers' accounts without their
    authorization.
        Why wasn't Enova required to repay the funds they had
    unlawfully withdrawn from consumers' bank accounts?

    A.3. The Bureau is committed to seeking all appropriate relief
    for consumers, and considers whether redress or restitution may
    be appropriate in each case on the facts presented and in light
    of applicable law. In the Enova matter, the Bureau determined
    that the appropriate resolution in light of the company's
    conduct included imposition of a $3.2 million civil money
    penalty and injunctive relief to benefit consumers.

    Q.4. Last year, the CFPB announced a stipulated final judgment
    with NDG Financial Corporation and other defendants for running
    a payday lending enterprise that engaged in unfair, deceptive,
    and abusive acts or practices in violation of the law.

    Q.4.a. Why was restitution not required for victimized
    consumers?

    A.4.a. The Bureau is committed to seeking all appropriate
    relief for consumers and considers whether redress or
    restitution may be appropriate in each case on the facts
    presented and in light of applicable law. In the NDG matter,
    the Bureau engaged in a protracted legal battle with the
    company and individual defendants, some of whom were ultimately
    sanctioned by the district court for refusal to comply with a
    court order requiring them to cooperate with the Bureau's
    discovery requests. At the Defendants' request, the matter was
    referred to a magistrate judge in October 2018 to facilitate a
    settlement. The Bureau encountered substantial hurdles in
    trying to enforce its discovery demands, in part because the
    Defendants' companies and individuals are based overseas, and
    Defendants refused to cooperate with Bureau discovery requests.
    The Defendants withheld consumer-level information required to
    establish the identities of consumers harmed by the alleged
    violations, as well as the full amount of that harm. Without
    these critical facts, the Bureau was not able to determine the
    amount of redress that might be owed to consumers, or the
    consumers to whom that redress could be paid. In addition,
    because the foreign Defendants did not have assets in the
    United States, the Bureau anticipated potential challenges in
    collecting on any penalties or remediation.

    Q.4.b. Whose decision was it to withhold restitution?

    A.4.b. Please see response to question 4.a.

    Q.5. The CFPB should not require an affirmative complaint from
    someone to provide restitution to victims. Some of the most
    vulnerable victims may not know what it does or its role.
    Others may not know how to submit a complaint to the CFPB. Last
    year, the CFPB took action against Asset Recovery Associates
    (ARA). ARA was a debt collection firm that illegally threatened
    and lied to people for years. Yet, the CFPB only provided
    restitution to consumers who complained about the false
    threats. By limiting restitution to only people who complained
    to the Bureau or State regulators, ARA was able to keep all but
    $36,800 it illegally collected from consumers over a 4-year
    period.
        Will you make sure your enforcement staff does not require
    affirmative complaints for future cases of abusive and
    deceptive practices by financial firms?

    A.5. The Bureau is committed to seeking all appropriate relief
    for consumers and considers whether redress or restitution may
    be appropriate in each case on the facts presented and in light
    of applicable law. The Consumer Financial Protection Act
    authorizes the Bureau to seek redress for consumers in
    appropriate cases as a matter of discretion. While the Bureau
    is committed to seeking all appropriate relief for consumers,
    not every case lends itself to restitution for all potentially
    affected consumers, particularly in the context of a negotiated
    settlement. Particularly in the context of a negotiated
    settlement, the Bureau may choose to pursue the relief it
    determines best serves the public interest. Settlements allow
    the Bureau to avoid expending significant resources proving
    claims in court, mitigate trial risk, achieve speedier results
    for consumers, and provide certainty for companies.

    Q.6. When President Obama appointed Richard Cordray to run the
    Consumer Financial Protection Bureau, he was the only political
    staff member.

    Q.6.a. How many political appointments are at the Bureau?

    A.6.a. Section 1013 of the Dodd-Frank Act states, ``The
    Director may fix the number of, and appoint and direct, all
    employees of the Bureau in accordance with the applicable
    provisions of title 5, United States Code.'' This authority
    includes the appointment of employees under Schedule C hiring
    authority.
        As of March 26, 2020, the Bureau had 11 political
    appointees, including the Director.

    Q.6.b. What is the role of your political appointees?

    A.6.b. Schedule C appointees are commonly used throughout the
    Federal Government, including at other financial regulatory
    agencies. The decision to classify a job as a Schedule C
    position is made by the U.S. Office of Personnel Management
    (OPM) at the request of an agency head. For all Schedule C
    positions at the Bureau, we followed the process established by
    OPM, which reviewed and approved all of the Bureau's Schedule C
    hires.
        The Bureau's political appointees serve in one of the
    following capacities:

       LPolicy determining position by acting for the
            Director and Deputy Director in executing on policy
            priorities, resolving major program issues, and in the
            integration of the various programs in their area.

       LConfidential administrative support position to
            either the Director or high-level Schedule C appointee.

    Q.6.c. What do you say in response to the House Financial
    Services Committee report that reported that Eric Blankenstein
    obstructed and weakened enforcement actions against banks and
    financial institutions that engaged in unfair and deceptive
    practices and break the law?

    A.6.c. I take full responsibility for the Bureau's actions
    under my leadership and again reaffirm my commitment to
    carrying out the Bureau's mission, including enforcement of
    consumer financial law. In FY 2019, the Bureau announced 22
    public enforcement actions and settled six previous lawsuits.
    The final orders and judgments obtained by the Bureau during
    this period required a total of more than $750 million in total
    consumer relief (more than $600 million in consumer redress and
    more than $150 million in other relief) and over $150 million
    in civil money penalties, before adjusting for suspended
    amounts.

    Q.6.d. What are the CFPB political appointees roles in
    determining penalties?

    A.6.d. The Director authorizes Enforcement staff to take public
    enforcement actions, including authorizing settlement
    parameters and determining appropriate penalties, based on
    recommendations from Bureau staff. A number of internal
    stakeholders, including the Deputy Director and heads of
    Divisions, review and weigh in on recommendations seeking
    authority to take public enforcement actions before those
    recommendations are submitted to the Director.

    Q.6.e. Has there been a conflict between career staff's
    recommendations for penalties and political appointees'
    recommendations?

    A.6.e. I am not going to comment publicly on the Bureau's
    internal deliberations regarding confidential law enforcement
    matters. It is critical that internal deliberations be kept
    confidential to protect the free flow of ideas and ensure
    decisionmakers receive candid advice.

    Q.6.f. How are penalties decided if there is a disparity
    between career staff and appointees' recommendations?

    A.6.f. Please see the response to question 6.d.

    Q.6.g. In which cases has there been a difference between
    recommendations, and which recommendation was chosen?

    A.6.g. Please see the response to question 6.e.

    Q.7. Have officials at the White House ever contacted you or a
    member of the Consumer Financial Protection Bureau staff to
    recommend an action related to supervision or enforcement?

    A.7. I am not aware of any instance in which officials at the
    White House have contacted myself or other Bureau staff to
    recommend an action related to supervision or enforcement.

    Q.8. In reviewing your response to my written questions, there
    are a number of fines that were imposed but not collected. For
    example, the Williamson Law Firm was assessed a fine of $40
    million for an illegal debt collection scam but only $1 was
    collected. The National Credit Union Adjusters was fined $6
    million for unlawful debt collection acts and practices that
    harmed consumers, including representing that consumers owed
    more than they were legally required to pay, or threatening
    consumers and their family members with lawsuits, visits from
    process servers, and arrest. According to your response to my
    written questions from last fall, only $250,000 was collected.

    Q.8.a. Why isn't the Consumer Bureau collecting all the fines
    assessed?

    A.8.a. The Bureau is committed to seeking appropriate civil
    money penalties in each case on the facts presented and in
    light of applicable law. Among the mitigating factors that the
    Consumer Financial Protection Act requires the Bureau and
    courts to consider when determining the appropriate penalty
    amount is the size of the institution's financial resources. 12
    U.S.C. Sec.  5565(c)(3). Consistent with this statutory factor,
    the Bureau has suspended the collection of the full civil money
    penalties imposed based on the financial condition of the
    entity. This was the case as to both the matters referenced.
    Moreover, given the imposition of a civil money penalty, harmed
    consumers may be eligible for additional relief from the
    Bureau's Civil Penalty Fund. Furthermore, instances of a
    difference between the fine imposed and the amount collected
    have consistently occurred throughout the Bureau's history and
    is not the result of any changed policy.

    Q.8.b. Why isn't the Civil Penalty Fund being used to
    compensate consumers?

    A.8.b. The Civil Penalty Fund is being used to compensate
    consumers. In FY 2019, $120 million was allocated to harmed
    consumers in five cases. Also, during FY 2019, the Bureau had
    seven active and ongoing Civil Penalty Fund case distributions.
    Funds related to those cases were initially distributed in FY
    2017 and FY 2018 and totaled approximately $350 million. During
    FY 2019, the Bureau released funds in one new case totaling
    approximately $1 million.

    Q.8.c. Why weren't funds allocated from the Civil Penalty Fund
    for financial education in 2019?

    A.8.c. While the Bureau has the authority to allocate funds
    (under certain circumstances) for consumer education and
    financial literacy purposes, the Bureau considers the Civil
    Penalty Fund to primarily serve as a victim fund. In FY 2019,
    $120 million was allocated to harmed consumers in five cases.
    Furthermore, financial education activity is robustly funded
    through the Bureau's budget.
                                    ------

    RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA FROM KATHLEEN
                              L. KRANINGER

    Q.1. If Americans are involuntarily quarantined due to
    potential exposure to the coronavirus, it is possible this
    could cause them to become delinquent on student loans,
    mortgage payments, rent payments, and other forms of debt. What
    assurances can the CFPB offer that will protect the credit and
    financial well-being of Americans subject to involuntary
    quarantine? What directives will the CFPB provide to lenders to
    ensure Americans are not indebted or penalized due to a public
    health outbreak largely beyond their control?

    A.1. The Bureau, along with other regulators, released
    guidance\1\ publicly over the past few weeks to financial
    institutions, lenders, and creditors encouraging them to work
    constructively with borrowers and customers affected by COVID-
    19. This guidance emphasizes that prudent efforts to modify the
    terms on existing loans for affected customers will not be
    subject to examiner criticism. For example, when appropriate, a
    financial institution may restructure a borrower's debt
    obligations due to temporary hardships resulting from COVID-19
    related issues. Such cooperative efforts can ease cash-flow
    pressures on affected borrowers, improve their capacity to
    service debt, and facilitate the financial institution's
    ability to collect on its loans. The Bureau's guidance also
    provides temporary and targeted flexibility for financial
    institutions to apply their resources to consumers' most urgent
    needs by deferring less urgent regulatory obligations. The
    Bureau continues to consider what guidance it can issue to
    regulated entities that will help consumers through this time
    and has issued guidance on myriad topics, including compliance
    with the assistance provided under the CARES Act.
    ---------------------------------------------------------------------------
        \1\ See https://www.consumerfinance.gov/about-us/newsroom/agencies-
    provide-additional-information-encourage-financial-institutions-work-
    borrowers-affected-covid-19/, https://www.con-
    sumerfinance.gov/about-us/newsroom/cfpb-provides-flexibility-during-
    covid-19-pandemic/, https://www.consumerfinance.gov/about-us/newsroom/
    federal-agencies-encourage-banks-savings-associations-credit-unions-to-
    offer-responsible-small-dollar-loans-consumers-small-businesses-
    affected-covid-19/ and https://www.consumerfinance.gov/about-us/
    newsroom/federal-agencies-encourage-mortgage-servicers-work-struggling-
    homeowners-affected-covid-19/.
    ---------------------------------------------------------------------------
        At the same time, the Bureau has focused its efforts on
    being a resource to consumers with accurate, timely information
    regarding their rights and expectations in the consumer
    financial marketplace during this challenging time. We have
    made resources available in multiple formats and languages,
    including emphasizing the continued availability of the
    complaint database for consumers who encounter issues. The
    Bureau also continues to employ its supervision and enforcement
    tools to enforce compliance.

    Q.2. According to the Department of Education, in January 2020
    the Public Service Loan Forgiveness (PSLF) program had an
    acceptance rate of just 1.6 percent of applications. What is
    the reason for such a staggeringly high rate of rejection? How
    can the CFPB educate student loan borrowers about the PSLF
    application process to improve this acceptance rate?

    A.2. The Public Service Loan Forgiveness (PSLF) Program is
    complex. PSLF was established under the College Cost Reduction
    and Access Act of 2007 and provides for loan forgiveness when
    the program's requirements are met. The 4 requirements
    borrowers must meet are as follows: (1) the loans must be
    Direct Loans (starting in 2010, all Federal student loans are
    direct loans); (2) there must be 120 qualifying monthly
    payments; (3) the borrower must be making payments under a
    qualifying repayment plan; and (4) the borrower must be working
    full-time for a qualifying employer. In 2012, the Department of
    Education introduced the voluntary Employment Certification
    Form (ECF), which borrowers can submit to verify that their
    employment qualifies for the PSLF Program and which, if
    submitted annually or whenever borrowers change jobs, can help
    track their progress. In the fall of 2017, borrowers began
    submitting applications seeking loan forgiveness under PSLF.
        As February 29, 2020, the Department of Education\2\ has
    determined the most common reasons for ECF rejections are: (1)
    missing information--77 percent, (2) no eligible loans--10
    percent, and (3) employer not eligible--5 percent. The most
    common reasons for rejections for loan forgiveness are: (1)
    insufficient qualifying payments--59 percent, (2) missing
    information--23 percent, and (3) no eligible loans--14 percent.
    ---------------------------------------------------------------------------
        \2\ https://studentaid.gov/data-center/student/loan-forgiveness/
    pslf-data.
    ---------------------------------------------------------------------------
        Based on the foregoing, the Bureau believes that it can
    engage in effective borrower education and empowerment focused
    on encouraging borrowers to submit ECFs annually, encouraging
    borrowers to complete the ECF, and ensuring that they
    understand the type of loan they have and whether their
    employer is eligible.
        Also, this an opportunity for collaboration with the
    Department of Education's office of Federal Student Aid (FSA)
    to educate and empower borrowers. For example, FSA now provides
    borrowers with a count of their qualifying payments when they
    submit an ECF which addresses, in part, the top reason for
    rejection of PSLF applications.\3\
    ---------------------------------------------------------------------------
        \3\ As of February 29, 2020, the Department of Education has
    determined the most common reasons for rejecting PSLF applications are
    as follows: (1) insufficient qualifying payments--59 percent, (2)
    missing information--23 percent, and (3) no eligible loans--14 percent.
    See, https://studentaid.gov/data-center/student/loan-forgiveness/pslf-
    data.
    ---------------------------------------------------------------------------

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