[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
                                
                                
                                
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                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.
                                 ______
                                 
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 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.

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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/.
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    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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