[Senate Hearing 116-441]
[From the U.S. Government Publishing Office]
S. Hrg. 116-441
THE CONSUMER FINANCIAL PROTECTION
BUREAU'S SEMIANNUAL REPORT TO CONGRESS
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HEARING
BEFORE THE
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
ON
RECEIVING UPDATES ON THE CONSUMER FINANCIAL PROTECTION
BUREAU'S SEMIANNUAL REPORT TO CONGRESS
__________
JULY 29, 2020
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Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available at: https: //www.govinfo.gov /
__________
U.S. GOVERNMENT PUBLISHING OFFICE
44-519 PDF WASHINGTON : 2023
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
MIKE CRAPO, Idaho, Chairman
RICHARD C. SHELBY, Alabama SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania JACK REED, Rhode Island
TIM SCOTT, South Carolina ROBERT MENENDEZ, New Jersey
BEN SASSE, Nebraska JON TESTER, Montana
TOM COTTON, Arkansas MARK R. WARNER, Virginia
MIKE ROUNDS, South Dakota ELIZABETH WARREN, Massachusetts
DAVID PERDUE, Georgia BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana CATHERINE CORTEZ MASTO, Nevada
MARTHA McSALLY, Arizona DOUG JONES, Alabama
JERRY MORAN, Kansas TINA SMITH, Minnesota
KEVIN CRAMER, North Dakota KYRSTEN SINEMA, Arizona
Gregg Richard, Staff Director
Laura Swanson, Democratic Staff Director
Sarah Brown, Professional Staff Member
Jan Singelmann, Democratic Professional Staff Member
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Charles J. Moffat, Hearing Clerk
Jim Crowell, Editor
(ii)
C O N T E N T S
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WEDNESDAY, JULY 29, 2020
Page
Opening statement of Chairman Crapo.............................. 1
Prepared statement........................................... 30
Opening statements, comments, or prepared statements of:
Senator Brown................................................ 2
Prepared statement....................................... 30
WITNESS
Kathleen L. Kraninger, Director, Consumer Financial Protection
Bureau......................................................... 5
Prepared statement........................................... 32
Responses to written questions of:
Senator Brown............................................ 43
Senator Toomey........................................... 73
Senator Menendez......................................... 77
Senator Warren........................................... 79
Senator Cortez Masto..................................... 87
Additional Material Supplied for the Record
The Spring 2020 Semi-Annual Report of the Bureau of Consumer
Financial Protection........................................... 89
(iii)
THE CONSUMER FINANCIAL PROTECTION
BUREAU'S SEMIANNUAL REPORT TO CONGRESS
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WEDNESDAY, JULY 29, 2020
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met by videoconference at 10:02 a.m., Hon.
Mike Crapo, Chairman of the Committee, presiding.
OPENING STATEMENT OF CHAIRMAN MIKE CRAPO
Chairman Crapo. This hearing will come to order.
This hearing is another remote video hearing. I will go
through quickly some of the standard reminders to remind
everybody that once you start speaking, there will be a slight
delay before your picture shows on the screen.
To minimize background noise, please remember to click the
mute button until it is your turn to speak. And as always, if
there is a technology issue, we will move on until that gets
resolved.
Again, I remind all Senators and the witness that the 5-
minute clock still applies, and you do have a box on your
screen labeled ``Clock'' that will show how much time is
remaining. Some Senators have said they do not seem to be able
to find that. If you go to the right-hand side of your screen
and move your cursor, your mouse, some options will show up,
and one of them is the grid view. If you click grid view, you
will see a grid of everybody, and one of the things you will
see as a part of that grid is the clock. And, again, I will try
to remember to gently remind people because some Senators have
asked for that reminder because they cannot see the clock.
Again, to simplify the speaking order, Senator Brown and I
have agreed to go by seniority in this hearing.
Today we are receiving testimony from CFPB Director Kathy
Kraninger on the CFPB's semiannual report.
On July 2, the CFPB issued its Spring 2020 Semiannual
Report, which outlines the CFPB's significant work between
October 2019 and March 2020, including rulemakings and
supervisory and regulatory activities.
The report also provides insight into what the CFPB plans
to undertake in the coming work period.
Director Kraninger last appeared before this Committee on
March 10, 3 days before President Trump declared a national
state of emergency related to the COVID-19 outbreak.
Shortly thereafter, the CARES Act was signed into law,
which included measures to help families directly, provide aid
to small businesses, and to stabilize our markets.
In implementing the CARES Act, the CFPB has taken important
actions related to mortgage origination and servicing, consumer
credit reporting, and data reporting to further address the
economic impact of the ongoing pandemic.
The CFPB has also announced several policies and valuable
educational initiatives intended to help consumers take steps
to protect their finances during the COVID-19 emergency, and to
ensure that regulated entities can take reasonable and prudent
steps to assist communities impacted by the coronavirus.
I commend Director Kraninger and her staff for taking these
steps to help consumers, families, and small businesses as they
continue to weather this global coronavirus pandemic.
Last month, the Supreme Court issued a ruling on Seila Law
v. CFPB that found that the agency's structure, led by a single
director only able to be removed ``for cause,'' is
unconstitutional.
The Court's decision on this case is consistent with what
many in Congress have long said: The CFPB's structure lacks
sufficient accountability and transparency.
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.
On July 7, the CFPB finalized a rule rescinding the
mandatory underwriting provisions of its small dollar loan
rule.
The availability of short-term, small dollar credit is
essential to millions of Americans.
Updating this rule is an important step toward ensuring the
availability of credit that is essential to so many consumers
who struggle to access or qualify for other options.
The changes made by the 2020 small dollar loan final rule
carefully balances ensuring the widespread availability of
credit to all Americans while preserving strong protection for
all consumers.
During this hearing, I look forward to hearing more about
the impact of the COVID-19 emergency on consumers and the
financial marketplace; key COVID-19 response initiatives
undertaken by the CFPB in recent months; additional regulatory
and legislative changes that can further support the economy;
and Director Kraninger's priorities for the CFPB in the
upcoming work period.
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, for holding this
virtual hearing, and thank you, Director Kraninger, and
welcome. Thanks for participating in this remote hearing and
practicing social distancing to prevent the potential spread of
coronavirus, which is still spreading, and is still taking the
lives of hundreds of Americans every day.
Across the country, in big cities and small towns alike,
Americans are calling for their Government to work for them.
Nearly everyone has had their lives upended by this pandemic,
but this disease is not spreading in a vacuum.
You know, Ms. Kraninger, that workers have seen their wages
stagnate for years, while Washington shovels more tax cuts to
their wealthy friends and to the largest corporations.
Families' expenses have only grown. The cost of housing,
child care, prescription drugs, all those costs have gone up,
leaving 40 percent of Americans unable to come up with $400 in
an emergency.
Black and Brown Americans have never had their hard work
pay off like it should, and they live every day with systemic
racism that threatens their health and their safety and their
lives.
From Jim Crow to redlining, you know that Black families
have never had the same freedom and opportunity to choose where
they live. They have watched this administration dismantle a
critical element of the Fair Housing Act.
We have the widest homeownership gap in 50 years. The Urban
Institute said this: ``The gap in homeownership rate between
Black and White families in the U.S. is bigger today than it
was when it was legal to refuse to sell someone a home because
of the color of their skin.''
The racial wealth gap has actually increased: the average
White family now has 10 times the wealth of the average Black
family.
Director Kraninger, you know that Black and Brown consumers
disproportionately lack access to basic financial services,
forcing them to rely on risky and costly alternatives.
This leads to so-called reverse redlining, where companies
target minority communities for exploitative loans and other
abusive financial products.
That is why it is easier to find a payday lender in
communities of color; it is easier to find a payday lender than
to find a bank branch.
For years, American workers and families have watched the
people who are supposed to serve them look out for the biggest
corporations while their financial problems continued to mount.
People are angry and they are frustrated.
Americans watch CEOs pay themselves while laying off
workers. They see corporations scam people and get away with it
while people of color spend their entire lives paying for one
wrong move. They are told to pull themselves up by their
bootstraps while Wall Street gets bailouts and handouts.
Americans feel like no one is on their side, especially in
this administration.
That is where the Consumer Financial Protection Bureau is
supposed to come in.
Your job, Director Kraninger, is to look out for everyone
else--the workers and families without lobbyists, who do not
have wealth and connections to throw around. That is why we
created this agency a decade ago.
In a moment when Americans of all ages and backgrounds are
demanding justice for our Black and Brown neighbors and
accountability for the corporations that exploit them, you have
the power as the Director to actually do something about it.
The CFPB has the tools, the resources, and a legal
requirement to root out discrimination in lending and to
protect communities of color from shady financial products that
strip away their wealth.
Under Director Cordray, the Bureau wielded these tools to
hold banks, credit card companies, and other corporations
accountable when they engaged in illegal discrimination,
returning more than $500 million to Black, Latinx, and Asian
Americans.
Under Director Kraninger and Acting Director Mulvaney, the
Consumer Bureau did not bring one single action, one single
case of illegal discrimination for more than 2\1/2\ years.
Sadly, that is about what we would expect from a President
who seems to have made it his mission to roll back civil rights
protections and a President of the United States who openly
uses race to divide us.
We might have hoped that in this moment of national crisis,
we might have hoped, with 150,000 Americans who lost their
lives and 30 million Americans have lost their jobs, we might
have hoped that in this moment of national crisis President
Trump and his appointees would rise to the occasion.
Instead, Director Kraninger, like other Trump appointees,
you have exploited the coronavirus pandemic to roll back
protections for American families instead of actually
strengthening them.
During the pandemic, Americans have reached out in record
numbers seeking your help. We have seen an 86-percent increase
in complaints about credit reporting. But instead of cracking
down, Director Kraninger announced the CFPB would do nothing to
punish banks or debt collectors or other corporations that make
mistakes on consumers' credit reports.
Millions of Americans have fallen behind and missed
mortgage payments because of the President's failure to get
this pandemic under control. But instead of helping struggling
homeowners, the Consumer Bureau weakened requirements that
banks and lenders contact homeowners to help them avoid
foreclosure.
Last, families have been forced to turn to credit cards to
make ends meet. The CFPB, the agency that is supposed to look
out for them, has made it easier--easier, not harder--for these
credit card companies rip off consumers, making it easier for
credit cards to hide their terms and true price.
Director Kraninger also decided that a worldwide pandemic
just seems to be the right time to push consumers into
predatory payday loans.
In March, the Bureau released guidelines encouraging banks
to get into the payday business.
In May, the Consumer Bureau released information on how
banks that offer payday loans can apply for prospective
immunity from Bureau oversight or enforcement.
And in July, despite extensive evidence of a corrupted
rulemaking process and bicameral calls for an Inspector General
investigation, the CFPB released a new payday rule that
eliminated the basic requirement that lenders make sure a
consumer can pay back the loan.
Director Kraninger has gone so far as to tell financial
firms that it will give them a pass when they break the law, so
long as they make a ``good faith'' effort to comply.
This is exactly why most people think our system is broken.
If your utility payment is withdrawn before your paycheck
clears and if you overdraw your account, the bank does not
waive the fee because you made a ``good faith'' effort to
deposit that check.
We have one system for corporations and the powerful and
the wealthy and the well-connected, one where you get away with
just about anything in this town and around the country, and a
different one for everyone else, where your ``good faith''
effort never seems to be enough.
Director Kraninger, we did not need a Supreme Court
decision to tell us you would not be independent from President
Trump.
I have got to hand it to you. You have done exactly the job
the President of the United States asked you to do. You have
protected a system where corporations play by one set of rules
with a different set for everyone else.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you, Senator Brown.
Director Kraninger, thank you again for being here today.
We appreciate your attendance and look forward to our
discussion with you. I would like to ask you to remember to
honor the 5-minute rule for your oral testimony so that
Senators have time for their questions and also remind our
Senators that we have the 5-minute rule and we have the clock
and I intend to stick to it.
With that, Director Kraninger, please begin your statement.
STATEMENT OF KATHLEEN L. KRANINGER, DIRECTOR, CONSUMER
FINANCIAL PROTECTION BUREAU
Ms. Kraninger. Thank you, Mr. Chairman.
Mr. Chairman, Ranking Member Brown, Members of the
Committee, thank you for this opportunity to provide you with
an update of the CFPB's important work.
I appear before you as the country is engaged in a national
conversation on racial inequality as well as confronting the
unprecedented pandemic. Today I would like to discuss both
topics with you.
Under my leadership, the CFPB is taking steps to help
create real and sustainable changes in our financial system so
that African Americans and other minorities have equal
opportunities to build wealth and close the economic divide.
Yesterday I authored a blog outlining the Bureau's
important work on fair lending. We also issued a request for
information on how best to create a regulatory environment that
prevents credit discrimination in all aspects of a transaction
and expands access to credit. The information that is submitted
will help us enforce the Equal Credit Opportunity Act, or ECOA.
Among the topics the public can comment on are how to
better protect consumers with limited English proficiency as
well as applicants who derive income from any public assistance
program. I encourage the public to respond so that we can build
a financial system that treats everyone fairly and provides
clear rules of the road.
Having clear standards helps us identify any violations in
fair lending helps us identify any violations in fair lending
laws. Recently the Bureau filed a lawsuit alleging a lender had
violated ECOA by discouraging African Americans from applying
for loans through its advertising.
The Bureau also announced a settlement last year with a
mortgage corporation that violated the Home Mortgage Disclosure
Act and Regulation C by intentionally submitting years of
mortgage loan data that contained errors in the fields of race,
ethnicity, and sex.
Since my last testimony before the Committee, I have
requested critical authority from Congress to allow the Bureau
to compensate whistleblowers. In our enforcement work, we have
seen firsthand that whistleblowers can provide key information
on fair lending violations.
I want to thank Senator Cortez Masto for introducing
legislation similar to what I requested, and I stand ready to
work with the Congress to secure this important authority.
Now let me take a moment to discuss how we are protecting
consumers during the pandemic. We have worked to expand our
reach to consumers to provide them with actionable, useful
information about their rights, options, and expectations in
the marketplace for consumer financial products and services.
We have produced over 70 blogs and videos that have been
accessed directly by more than 3 million users. Through our
social media reach, staff estimates our materials have been
sent to 41 million users. These materials are available in
seven different languages and have been constantly updated to
adapt to the changing dynamics. We have also promoted our
consumer complaint system. When consumers submit complaints to
the Bureau, they help inform our work in supervision,
enforcement, regulation, and education.
Specifically in response to complaints and other market and
stakeholder feedback during the pandemic, we worked with
interagency partners to quickly address a student loan-related
credit reporting issue as well as CARES Act mortgage
forbearance lump sum payment concerns.
From January 1 through July 26, 2020, consumers have
submitted more than 270,000 complaints to the Bureau of which
more than 14,000 complaints specifically referenced
coronavirus. Each month from March through June set a new
monthly record for complaints, yet our consumer contact center
and our online portal have operated efficiently and effectively
throughout the pandemic to take consumer complaints and refer
those complaints to companies for response.
We also partnered with other Federal agencies to develop
and launch a unified housing website to provide consumers with
comprehensive and accurate information on their rights during
this time. The Bureau has also developed a new targeted
supervisory approach called ``Prioritized Assessments'' to
focus on those markets and institutions that pose the greatest
risk of consumer harm as a result of pandemic-related issues.
We remain fully engaged in the execution of the Bureau's
critical mission, including continued progress on our
regulatory agenda, which is relevant to the pandemic and
ultimate economic recovery, as well as our supervisory and
enforcement work. We work closely with partners and
stakeholders recognizing the important roles that others play
in supporting our consumer protection mission and preventing
harm. I am particularly proud of the Bureau's staff and its
excellent work during these challenging times, and I thank you
for the opportunity to testify today and look forward to your
questions.
Chairman Crapo. Thank you, Director Kraninger.
This month, the CFPB issued a final rule amending the 2017
small dollar loan rule by rescinding the mandatory underwriting
provision. The CFPB justified revising the rule after
determining that the evidence underlying the mandatory
underwriting provisions is not sufficiently robust and reliable
to support their continued inclusion in the rule.
I appreciate the CFPB for taking action to ensure that
regulations that could affect consumers' access to credit are
based on solid evidence and legal support rather than flawed
analysis. Can you explain why the 2017 analysis on mandatory
underwriting provisions was flawed and limited rather than
facilitating consumer choice?
Ms. Kraninger. Thank you, Senator, for raising this
important issue. We have seen that the demand for small dollar
products is substantial. Consumers need that access to credit.
That absolutely includes responsible small dollar products from
banks and credit unions. And in the past decade, a number of
different policy and actions by governments and others have
limited the availability of that kind of credit and limited the
number of market participants that are offering that kind of
credit.
The payday rule, as we looked at it and reconsidered it,
looking at again the evidentiary base and the impact that it
had on the availability of small dollar credit was substantial.
By the Bureau's own analysis in that 2017 rule, it would reduce
the availability of that credit by at least 70 percent.
So looking again holistically at this, taking a step back
at what is available in that market and really taking a look at
the evidence that was there, promoting competition and enabling
consumers to understand the products that are available to
them, a huge part of where we are today, both rescinding the
mandatory underwriting provisions that were very specific and
did not really avail themselves to small dollar lending,
putting forward the payment provisions so those--it is my
intention, working through the litigation that we are in now,
to have those payment provisions go into effect, and also doing
the work we are doing on testing disclosures to again see if we
can promote greater understanding of those products, that is, I
think, the best approach for how to proceed in the small dollar
marketplace.
Chairman Crapo. Well, thank you. In fact, to me the notion
that the previous rule, the 2017 rule would reduce access by 70
percent by the Bureau's own statistic, that is correct, right?
That is what you found or what the Bureau found?
Ms. Kraninger. Yes, Senator.
Chairman Crapo. That is remarkable. Now, the Bureau and you
are being criticized for this adjustment to the rule, claiming
that it is pushing people into the laps of predatory lenders.
How would you respond to that?
Ms. Kraninger. Senator, I think as I noted, the desire to
increase competition and ensure that there are fair and
transparent markets, as is part of the Bureau's mission, that
is our focus. I can tell you we still are very much engaged in
supervision and enforcement in this space. We have taken public
enforcement action against bad actors in this market. There are
bad actors in every market that the Bureau supervises and
enforces against. But that is not something that should
preclude the actions of those that are seeking to comply with
the law and are seeking to provide options to consumers, in
addition to recognizing that the States have made their own
determinations about what kinds of products should be available
to their consumers and continuing to enable the States to, you
know, again, oversee those aspects of the market.
Chairman Crapo. Will the proposed new rule open access to
companies, financial institutions that are currently not
providing small dollar loans but give them the opportunity to
provide those small dollar loans?
Ms. Kraninger. That is absolutely part of the intent,
Senator. In addition to that, we issued a no-action letter
template to encourage banks to offer responsible small dollar
products, and we anticipate that a number of them will do that
in the coming months, so looking forward to, again, continuing
to promote that. There are also credit unions that offer
similar products, and we are trying to, again, facilitate that
kind of availability of credit for consumers who are going to
need that.
Chairman Crapo. So it seems to me that the intended outcome
here is that we maintain protection and security against
predatory practices, but significantly increase access to
credit.
Ms. Kraninger. Absolutely, Senator. That is the intent.
Chairman Crapo. Thank you.
Senator Brown.
Senator Brown. Thank you.
Ms. Kraninger, I would like to ask you about the payday
rule that cuts protections for consumers. I have an internal
CFPB memo about the payday rulemaking that was made public in
April. This memo was written by a senior career employee who
was closely involved in the payday rulemaking. Have you read
this memo, Director?
Ms. Kraninger. Senator, I have.
Senator Brown. Thank you. The memo, as you know, describes
repeated efforts by your political appointees to manipulate
economic research. The memo contains details, specific dates,
the names of individuals involved, identifies corroborating
emails and other documents. According to the memo, your
political appointees ignored research they disagreed with in
order to repeal the rule.
Is it appropriate for CFPB to ignore research to repeal
this rule?
Ms. Kraninger. Senator, the full record is available in the
rulemaking process, both the 2017 process and the updated
process.
Senator Brown. I know you are really good at testimony. You
are very good. But, you know, the question is: Is it
appropriate to ignore research as this memo claims? Is it
appropriate to ignore it?
Ms. Kraninger. Senator, the memo----
Senator Brown. Is it appropriate to ignore the research?
Ms. Kraninger. We have a full record of research that we
relied on in the entire process, and it is----
Senator Brown. You are obviously not going to answer. The
fact that you proceeded to finalize a rule, Director, despite a
clearly corrupted process, again, this that you have read,
raises questions about whether you have followed the law. So
let me ask some quick basic questions.
Under the Administrative Procedures Act, should the CFPB
determine the outcome before it begins the rulemaking process?
Yes or no.
Ms. Kraninger. That has never occurred. The process and the
public back-and-forth are critical to it. I have certainly
testified to that with respect to this topic and others
before----
Senator Brown. Certainly from this memo it certainly did.
Let me ask another question. Under the APA should it ignore
research that reaches a conclusion that the agency head
disagrees with? Yes or no.
Ms. Kraninger. Senator, the full record, again, is out
there for public comment, and my decision was based on that.
Senator Brown. OK. According to this, not. But I just asked
the basic question: Should the Director overturn what
recommendations? So if the CFPB had done any of these things
during the payday rulemaking process, would it violate the APA?
Yes or no. If, in fact, they had ignored, they had overridden,
they had ignored, they had not taken into account, is that a
violation of the APA?
Ms. Kraninger. Senator, some of this is hypothetical, but
the full record is available for the public to review, and that
is the basis upon which I made the decision.
Senator Brown. Thank you. Your nonanswer raises questions
about your leadership. It confirms my concerns and the concerns
of so many about the corruption of the rulemaking process. It
again shows that you are doing the bidding of the President of
the United States, the President who always sides with
corporate interests and with big banks and with payday lenders
against the public.
Let me shift to fair lending. I have been highly critical,
as you know, of your decision to reorganize and strip the
Office of Fair Lending of its oversight duties. I warned you
this decision would cripple the Bureau's ability to bring fair
lending cases. You assured us this was not the case. Well, look
how things have turned out. During Director Cordray's tenure,
CFPB returned more than $500 million to consumers who had been
discriminated against by credit card companies, auto lenders,
and mortgage lenders.
During your tenure, how much has the CFPB returned to
consumers who were discriminated against by credit card
companies? What is the figure?
Ms. Kraninger. Senator, I do not know that there has been a
continuation of the kinds of cases you are noting. I would like
to note that could be read as a success of the original
enforcement actions----
Senator Brown. No, I----
Ms. Kraninger.----make sure that those companies have
actually corrected----
Senator Brown. In fact, there was $500 million with Cordray
and zero dollars with Kraninger. It is not that the world got
cleaned up when President Trump came to town and drained the
swamp. It is clear that people are still being cheated, and
this Bureau is not doing anything.
So let me ask a question specifically. How much has CFPB
returned to consumers discriminated against by auto lenders? Is
the number also zero?
Ms. Kraninger. Senator, all of our restitution and
enforcement
actions that are public are out there. I take your point. Fair
lending cases are actually incredibly challenging to bring.
That is why I have sought whistleblower compensation authority,
but we----
Senator Brown. Ms. Kraninger, they are challenging to bring
against auto lenders, mortgage lenders, credit card companies,
but they were not so challenging that Director Cordray could
recover $500 million. So we have seen the CFPB has not returned
a single dollar to victims of discrimination since you became
Director. That record speaks for itself.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Kennedy, are you there?
[No response.]
Chairman Crapo. Senator Kennedy?
[No response.]
Chairman Crapo. I think we have several of the other
Senators who are not yet--they have had to go check in at other
hearings. I am going to wait another 5 or 10 seconds, then go
from Senator Kennedy to Senator Menendez. Is Senator Menendez
available?
[No response.]
Chairman Crapo. Senators who are available, click your
camera on so I can see you. I see Senator Cortez Masto. Senator
Tester is on. He beat you, Senator Cortez Masto. Senator
Tester, we will go to you.
Senator Tester. Thanks, Mike. Thank you, Mr. Chairman. I
appreciate you having this hearing, and thank you to the
Ranking Member also.
I want to kind of follow up on the Ranking Member's
questions, because the statistics out there, I mean, you talked
about in your opening statement what a fine job that is being
done on supervision and enforcement. But in 2015, there were 55
enforcement actions taken, and these figures may be incorrect.
If they are, let me know. In 2018, there were 11. That is an
80-percent cut, if my math is correct.
What do you attribute that to, if, in fact, as you have
stated previously, you are aggressively taking action against
bad actors?
Ms. Kraninger. Senator, I can tell you certainly in 2018 I
was not at the Bureau, but the transition in leadership is
something that I have testified to is logically requires folks
getting up to speed, getting comfortable. Every enforcement
action is a decision by the Director, and it is one that I can
tell you I take seriously.
Last year, we had 22 public enforcement actions in addition
to resolving a number of prior litigation actions, and I expect
that that number at the end of this fiscal year will be notably
higher. We continue to work our way through appropriate
enforcement
actions, and one real focus area for me is actually making sure
we have timely action both for those who are potential victims,
but also----
Senator Tester. So let us just follow this up. I had a
friend that worked for an auto dealership that was a lender,
and he quit the job because he did not feel right because he
knew he was taking advantage of people. This was long before I
got to the Senate.
The Ranking Member brought up the fact that there were zero
dollars returned to consumers from auto lenders. Can you tell
me why? Is it you do not think auto lending is within your
purview, or you do not think they are doing anything wrong?
What is the reason for that?
Ms. Kraninger. Senator, the question that Senator Brown
asked was with respect to----
Senator Tester. This is a question that I am asking.
Ms. Kraninger. Oh, yes. I would like to distinguish the
questions, though, because you are asking in general about auto
lenders as opposed to a fair lending case, just to be clear and
related to discrimination. But there have been enforcement
actions against auto lenders, including restitution and
compensation through our supervisory activities as well. Some
of that, certainly what we get through public enforcement
action is public, and I can get you that number.
Senator Tester. Is any of that returned to the consumer,
any of those dollars?
Ms. Kraninger. Yes. Yes, they have been.
Senator Tester. Can you tell me how much?
Ms. Kraninger. Off the top of my head, I am sorry, sir, I
cannot. But we will absolutely get back to you on that number.
Senator Tester. OK. I would appreciate that.
Senator Tester. Has the Bureau changed its enforcement
actions during this crisis?
Ms. Kraninger. Yes, Senator. Well, we continue to robustly
engage in it. We are very mindful of interagency discussions
around fraud, particularly fraud and scams, and keeping an eye
out for those kinds of activities in our slice of the market.
Senator Tester. Have enforcement actions increased because
of this crisis?
Ms. Kraninger. I can tell you that the number of
investigations ongoing has increased related to that. We are
moving as swiftly as we can.
Senator Tester. By how much?
Ms. Kraninger. The number of investigations that we have
open is not a public number. I am actually looking at that,
Senator, because I----
Senator Tester. I am asking for a percentage.
Ms. Kraninger. Percentage increase? Again, I would not want
to give you a percentage increase off the top of my head, but
we can certainly talk about numbers with your office that are
appropriate given the confidential nature of enforcement
actions.
Senator Tester. Mr. Chairman, I will tell you that Director
Kraninger is very, very good at not answering questions. By the
way, that is not a good quality. I did that once on a news
show, and I had a manager of mine call me up and say, ``You are
an idiot.'' And I never did it again.
These hearings with Director Kraninger have been a total
waste of time. I hope this administration goes away because,
quite frankly, we need somebody who will protect consumers and
not just give us a spiel.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman.
Census survey data indicates that about 17 percent of Black
homeowners and 8 percent of Latino homeowners reported having
missed their mortgage payment in May compared to about only 4
percent of White homeowners. Adding to this hardship is the
fact that Black and Latino households are much less likely than
White homeowners to access foreclosure prevention measures like
entering into forbearance plans, leaving minority communities
out of home-saving relief.
The numbers are clear. Black and Latino homeowners are 4
and 2.2 times, respectively, more likely to report completely
missing mortgage payments than deferring payments. White
homeowners, however, are only 1.4 times more likely to miss
payments than defer mortgage payments.
It is clear there is a major problem with minority families
accessing mortgage forbearance. So, Director Kraninger, what
are you doing to address this problem and ensure that minority
homeowners are taking advantage of mortgage forbearance and
loan modification options?
Ms. Kraninger. Thank you, Senator. It is a crucial question
during the times we are facing now. Two responses.
One is making clear that servicers are held to the
requirements under the CARES Act. We are doing that in
partnership with the other Federal regulators so we send a
clear message to them. We have worked on scripts so that when
borrowers call them, they have the right information, clear
information about their rights.
The second aspect of this is, in addition to the unified
housing website that we pulled together, really doing
everything we can to reach consumers through consumer advocate
groups and other community organizations, through their
lenders, we have produced videos and blogs of what their rights
are under the CARES Act and the questions that they should ask
their servicers when they contact them, so really trying to
provide both sides of that.
Senator Menendez. Let me just say the CFPB released its
joint supervisory statement regarding mortgage servicing rules
back in April. Black and Latino homeowners have not entered
into mortgage deferral programs at the same rate as White
homeowners since the beginning of this pandemic. Now, this
could be for myriad reasons. Perhaps their mortgage is not
covered by the CARES Act. But perhaps they are not aware of
their rights under the CARES Act. The fact remains that
minority homeowners are missing mortgage payments at a higher
rate than they are entering into forbearance, including since
the time the CFPB's joint supervisory statement, as well as
that in terms of consumer education, that website has been up
for months. So it is clear that your consumer
education efforts are not closing the gap here to ensure all
homeowners receive necessary relief. And I would also note that
you still do not encourage homeowners to file a fair lending
complaint with you. People are always sent to HUD for fair
housing complaints and told to call the CFPB only if the
servicer does not fix the problem first, which makes it seem
that the CFPB does not want to hear about discrimination, and,
frankly, that does not inspire much confidence that you will
take a racial disparity problem seriously.
So I will ask you again: What are you going to do to make
sure that Black and Hispanic homeowners do not fall into
greater dire circumstances, lose their homes? Are you ready to
be more proactive? Because if not, we are going to see a
tsunami of foreclosures on communities that can ill afford that
the one element that they have for wealth is their home.
Ms. Kraninger. Senator, again, I agree with you that this
is a critical issue. I do want to distinguish between the Fair
Housing Act and the Equal Credit Opportunity Act. We do not
have jurisdiction over the Fair Housing Act. So that is the
distinction we are trying to make.
I welcome any of your ideas or thoughts with respect to how
we can continue to be as proactive as possible in getting
consumers the information they need. They have rights. They
have options. And we have, you know, again, tried to reach--we
have reached over 3 million people directly, including
specifically that video on CARES Act options.
Senator Menendez. Evidently, you are not reaching Black and
Hispanic homeowners, I can tell you that right now.
One final question. The COVID-19 health crisis also created
an economic crisis. Current unemployment is 11.1 percent.
According to the Federal Reserve, nearly 40 percent of
households earning less than $40,000 a year had already lost at
least one job by May. As indebted consumers begin to face
delinquency or defaults, it is only a matter of time before we
see financially insecure Americans suffer abuse and harassment
by some debt collectors.
Do you expect debt collectors to go after more Americans
given the current state of affairs? And what----
Chairman Crapo. [Inaudible] has left his desk.
Senator Menendez. If I may just finish my question,
Chairman. And what are you going to hold them to in terms of
the standard?
Ms. Kraninger. Mr. Chairman, I guess very quickly I can
respond. Senator, it is an important question, and we are
working hard to address the issues you raised and to see where
we can go. So these are important issues, but I know I am out
of time here.
Senator Menendez. Well, it deserves a better answer than
that.
Chairman Crapo. Thank you.
Senator Kennedy, are you on?
[No response.]
Chairman Crapo. Senator Moran?
Senator Moran. Mr. Chairman, I am here. This is Jerry
Moran.
Chairman Crapo. Go ahead, Jerry.
Senator Moran. Thank you.
Ms. Kraninger, good morning. I want to talk about data
privacy for a moment. I chair a Subcommittee in the Commerce
Committee that has jurisdiction over data privacy. I have
worked with a number of my colleagues, Republicans and
Democrats, trying to develop a data privacy bill. Let me talk
about it in the fintech arena, which our Subcommittee would not
have jurisdiction, would not want Chairman Crapo to think that
we are stepping on his toes. But he, too, has a great interest
in data privacy based upon the conversations we have had.
Nontraditional financial service providers have grown
significantly in past years as Americans have increasingly used
mobile devices for banking, for investing, or for borrowing
services. And many of those financial technology companies
aggregate significant amounts of data from bank websites after
being given authorization by the bank customer, by the
consumer.
Given the rise of third-party access to this sensitive
consumer financial information, data privacy and security has
become even more important and a topic that we need to deal
with.
Section 1033 of the Dodd-Frank Act ensures that consumers
have access to and the ability to leverage the data in their
records subject to rules by the CFPB. And on July 24th, the
CFPB announced plans to issue an Advance Notice of Proposed
Rulemaking related to consumer-authorized access to financial
records.
Ms. Kraninger, what are the goals of the CFPB in this
rulemaking process? What are the specific data privacy risks
that are posed that you are attempting to address? And what
voluntary actions have companies taken to date to better ensure
consumer data is protected?
Ms. Kraninger. Thank you, Senator. Section 1033, of course,
Congress anticipated an issue in this area, did note that
consumers should have the ability to authorize access to their
own financial data, and there has been quite a bit of activity
in this space, as you noted, with fintech providers being
engaged in it.
Congress anticipated rulemaking. I would say the Bureau has
issued principles in the past that remain true today, certainly
allowing consumers to provide that permission. But there are
security and cybersecurity implications and privacy
implications for some of that data, as well as proprietary
issues that some of the financial services providers have with
what data is accessed and certainly what data aggregators can
do with that data when they access it. And we had a symposium
earlier this year where we pulled together experts. I was truly
impressed with the conversation because we were able to in just
a few hours really encapsulate a lot of the different dynamics
that are happening in this space. But it is clear, at least to
the Bureau at this point, that we want to move forward in a way
that is slightly more formal with that Advance Notice of
Proposed Rulemaking to get some more fidelity over whether we
should do a rulemaking.
It is a challenging area. Again, the principle that
consumers should control their own data is clear. But precisely
what that means, particularly if consumers are providing their
credentials to particularly their bank and their bank
information to a third party and what that means in terms of
the bank's ability to fulfill their responsibilities to protect
that data. So those are some of the dynamics that are at play
here, but I think it is clear that consumers want to share
their data. They like the services that a lot of the fintech
providers are providing them, and the CFPB was told by Congress
to engage in this space, and so there is an opportunity for us
to continue to move forward to make sure that it is operating
the way it should.
I would say just with respect to industry action, there has
been progress on, rather than screen scraping that data away,
using APIs to get to that data. And so we are, again, following
that dynamic as well in the market.
Senator Moran. I cannot see the clock, so I am going to
just follow up. But what your answer suggests to me is that
this is very early in the process in what you are going to
develop?
Ms. Kraninger. I am sorry, Senator. Is what in what I am
going to develop?
Senator Moran. What I take from your answer is that the
CFPB is just beginning the process to determine what its rules
might be.
Ms. Kraninger. Yes.
Senator Moran. And, therefore, there is nothing that you
could announce as where you are headed. It is not that specific
or that known.
Ms. Kraninger. That is correct, Senator, other than the
principles that the CFPB issued several years ago remain the
principles at play here.
Senator Moran. Thank you.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Warner.
Senator Warner. Thank you, Mr. Chairman. Director
Kraninger, it is good to see you, albeit it remotely.
You and I have spoken a couple of times on the CFPB's
proposed changes to the ability to repay and the QM rule, and I
do appreciate your engagement with me on this issue because I
really think the Bureau needs to work to make changes that will
help increase access to borrowers of color, and particularly
gig workers, who I think have been disproportionately
challenged in a variety of rulemakings.
We all know that consumer groups have said that efforts to
eliminate a hard DTI and Appendix Q, while adding a pricing
limit or cap would really benefit consumers while maintaining
appropriate loan quality. I actually think, again, eliminating
the strict DTI cap would particularly help those lower-income
borrowers. Gig workers in particular, as we have talked about,
have a difficulty at times in documenting their earnings, who
under the current rule, let us face it, have been really
excluded from getting mortgages. QM has really hurt them. And I
think those folks are particularly suffering right now in the
midst of the pandemic.
So I have got a couple of questions about where I hope we
are headed. While the rule that you proposed appropriately
proposes moving away from a hard DTI cap for QM, I would hope,
though, that the Bureau still plans to maintain the
responsibility on lenders to consider and verify debt and
income of borrowers. Is that correct? Can you speak to that?
Ms. Kraninger. Yes, Senator, and that is specifically in
Title 14, so that is statutory, and a little bit of devil in
the details as to what that means, as you noted, for self-
employed people and gig workers. But the requirement to
consider and verify debt and income is essential.
Senator Warner. And to be clear, while you are going
through this proposal, the CFPB is not planning on eliminating
any of the other consumer protections that are part of
qualified mortgages, including provisions that bar interest-
only loans or those with excessive balloon payments. Both of
those have been estimated to have really hit about half of the
foreclosures during the financial crisis. So you are not going
to move away from these consumer protections in your final
rule, are you?
Ms. Kraninger. Here again, statutory precluded features in
qualified mortgages would continue.
Senator Warner. How are you going to make sure, again, on a
more generalized basis, are you going to make sure that
responsible credit is available particularly in these low-
income communities and, again, a particular interest of mine,
and I see Senator Schatz on the line as well, of gig workers?
Ms. Kraninger. Senator, I think it comes down to--and this
is a conversation we are very interested in getting comments
on--what verification and consideration of debt and income look
like, what standards the stakeholders can come together on,
definitely encouraging industry and consumer advocates to come
together in some kind of stakeholder group to develop standards
that would get to the issues that you are raising, you have
raised and are concerned about. We have not had enough time,
frankly, to do that ourselves, and I do not know that the
Bureau should do that. I think there is an opportunity here for
other standards, but also rely on the other Federal standards,
in addition to asking for comment on whether Fannie and
Freddie's standards should be considered as acceptable under
the rule as well. So that is where this really comes into play.
But as you noted, Appendix Q was fairly limited and strict and
really did--if it were to be applied more broadly than it was,
would affect gig workers and self-employed folks pretty
severely.
Senator Warner. Well, we want to keep working with you on
both getting rid of the DTI cap, working with you on Appendix
Q, but also not at the price of sacrificing the consumer
protection.
I have only a moment for one more question. You know, we
have seen a huge uptick, I think, increased by 86 percent, of
complaints about credit reporting agencies, and as a matter of
fact, in March I sent a letter to the Big Three credit
reporting agencies and you guys, urging you to make sure that
consumers that have been disproportionately hurt by the
coronavirus do not have permanent marring of their credit.
Unfortunately, one of the few actions CFPB has taken is
simply to give the credit bureaus more time to pursue these
actions, so I really hope we can expect more. We have seen this
uptick in negative comments. I think we need to make sure that
we do not bar people permanently from their credit during the
coronavirus. And I know our time has expired, but this is an
issue that I want to come back and visit with you in great
detail. It is terribly, terribly important.
Ms. Kraninger. Senator, it is incredibly important, so
thank you.
Senator Warner. Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Kennedy.
Senator Kennedy. Thank you, Mr. Chairman.
Ms. Kraninger, good morning. Can you hear me OK?
Ms. Kraninger. I can.
Senator Kennedy. How many entities do you regulate?
Ms. Kraninger. Many thousands. It depends on whether we are
talking about the regulations we issue, the entities that we
examine directly, all of them--thousands upon thousands.
Senator Kennedy. What percentage of them do you think are
honest?
Ms. Kraninger. Senator, that is a tough one to put a number
on. I think it probably gets to how many people you generally
think are honest and those you associate with or those in the
world generally. I think there are many who are, and there are
some who are not.
Senator Kennedy. How many of them intentionally abuse
consumers?
Ms. Kraninger. I would say, Senator, unfortunately, more
than we would like there to be.
Senator Kennedy. Well, is it most of them?
Ms. Kraninger. I certainly do not believe that, no, sir.
Senator Kennedy. Is it 40 percent?
Ms. Kraninger. Again, I would hesitate to put a number on
this specifically, and that is why I said ``more than we would
like there to be,'' because clearly there are some. And some of
the challenge is in sorting those out who are intentionally
seeking to do that and those who make mistakes and those who
are absolutely complying with the law. So that is our job to
sort that out.
Senator Kennedy. Has anybody ever checked?
Ms. Kraninger. In terms of checking compliance across, we
certainly are doing our best to tackle that in a layered
approach way. We have continued to----
Senator Kennedy. I am not interested in a layered approach.
I am interested in whether any academic, or otherwise, or the
agency, have ever assessed what percentage of the entities you
regulate intentionally abuse consumers.
Ms. Kraninger. I am not aware of anything, Senator, in
terms of an actual analysis of that. It may very well exist,
but I am not aware of it.
Senator Kennedy. How much money did your agency spend last
year?
Ms. Kraninger. Roughly about $500 million for our own
activities.
Senator Kennedy. All the rules and regulations and actions
that your agency takes, what is the cost of that on our
economy?
Ms. Kraninger. Well, Senator, again, I do not know that
there has been a full analysis of the cost on that, much less
the benefit of consumer protections. It is a fair question, but
I think there is a little bit of cost and benefit there as
well.
Senator Kennedy. Well, if you were in the private sector
and you went to your bank and asked to borrow half a billion
dollars, I think they would ask you, ``What for?'' And you
would tell them. And they would ask a question that, in effect,
would be: ``What are your costs and benefits?'' We have not
done that for your agency?
Ms. Kraninger. Not specifically in those terms, sir. I
certainly would concede that in the wake of the financial
crisis there was certainly a conclusion that consumer
protection needed to be done by one agency, and so that
consolidation----
Senator Kennedy. Let me ask you one last question,
Director, because I am about to run out of time. How does the
United States of America and its businesses rank against the
other economies throughout the world in terms of honesty and
consumer abuse, in your opinion?
Ms. Kraninger. Senator, I really have not done a good
comparative across the world, but I would certainly say that we
have a robust set of laws and regulations intended to protect
consumers and promote that fair----
Senator Kennedy. I know that, but how do we rank with other
countries? This is my final comment. It looks to me like we are
flying blind here.
That is all I have, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Warren. Thank you, Mr. Chairman.
So in 2008, when the bottom fell out of the economy and
people were cheated on their mortgages and credit cards and
auto loans and other financial products, there was no cop on
the beat to protect them, and that is why 10 years ago last
week, President Obama created the Consumer Financial Protection
Bureau to protect consumers from abusive financial products.
And so now here we are in the middle of another financial
crisis, this time caused by a global pandemic, and now more
than at any time since the last crisis, consumers need strong
leadership at the CFPB.
Now, one of the ways that the CFPB monitors problems is
through its consumer complaint hotline. Director Kraninger, do
you know how much the volume of consumer complaints that the
Bureau receives every month has increased since this pandemic
started?
Ms. Kraninger. It is close to 30 percent. As I noted in the
opening, March, April, May all did set records in terms of how
many complaints we have received in an individual month.
Senator Warren. So I actually looked at your numbers and
thought it was about 50 percent, and those, as you say, are the
highest monthly complaints ever in the Bureau's history. So let
us talk about what those complaints show.
Today the biggest category of COVID-related complaints to
the CFPB are coming from people struggling to pay their
mortgages. It is the CFPB's job to ensure that the companies
that handle mortgages are following the law so that families do
not end up in foreclosure when the law says they should not.
So, Director Kraninger, over 9 million people lost their
homes to foreclosure during the last crisis, and now we have
rules to guard against those foreclosures. But instead of
enforcing those rules, you issued guidelines to tells servicers
that so long as they act ``in good faith,'' the Bureau will not
step in if they break the law.
Director Kraninger, can you give me other examples of when
law enforcement says, for example, to a thief that, ``As long
as you claim you are in good faith, you are not going to be
held responsible when you break the law''?
Ms. Kraninger. Senator, if I could, the number of mortgage
complaints were early in that process in March and April, and I
think they are actually a great example of the Bureau
responding to that and working with our Federal partners to do
that, so the number of complaints----
Senator Warren. But I would just like an answer to my
question. Can you give me another example in law when
enforcement steps in and says, ``As long as you guys are in
good faith, we are not going to enforce the law''?
Ms. Kraninger. Senator, that is not what the guidance says.
Our guidance says that compliance with the law is critical.
However, again, you know well the discretion that all law
enforcement entities have with respect to the cases they take
on and where they spend their energy. And so the ability to----
Senator Warren. Let me just stop you right there. Actually,
the guidance specifically says that the rules that are written
into law will not be enforced so long as the mortgage servicer
claims that it is in good faith. And I am just asking, because
I know of nowhere else that guidances like that are put out. If
Congress had wanted to write into law a good-faith exception,
we certainly could have done that. But we did not do it. Not
enforcing the law has a real impact, and in the 2 months since
you handed out a ``Get Out of Jail Free'' card to every
mortgage servicer, consumer complaints related to foreclosures
have gone up, not down. The Bureau even acknowledged this in
the latest bulletin it put out this month to summarize the
coronavirus compliance complaint.
So let us move on to credit reporting. Errors on
individuals' credit reports can cost consumers thousands of
dollars, hurt their scores for years to come. People are under
a lot of financial pressure right now, so let us take a look at
what you have done.
Director Kraninger, you told the credit reporting companies
they did not need to bother complying with the law when a
consumer disputes something on a credit report. So why do you
think your job is to write the rules to allow credit reporting
companies to break the law?
Ms. Kraninger. Senator, I would also say that is false. The
point of fact with respect to dispute resolution is that it
needs to be done, but it is difficult to resolve a dispute if,
for example, the merchant in a small business that could be a
subject of this is actually closed and the credit reporting
agency cannot reach them. So we still--that is where the good-
faith example comes into play.
Senator Warren. Director Kraninger, I just read what it is
that you actually put out. Now, what you put out said you are
not going to enforce the 30- or 45-day deadlines that are
written into law under the Fair Credit Reporting Act so long as
the credit reporting agencies are making a good-faith effort.
For me, you did not limit it to small businesses. You did not
say we will take one-off advice on when we think someone is in
good faith. You just sent it out there across the board, and to
me that is an invitation to break the law. And it matters
because we know now there has been an 86-percent increase in
the complaints about credit reporting since the pandemic
started. Your own data shows that since you put out this
guidance, complaints have continued to go up, not down.
So let us recap. You are getting more and more complaints
from desperate consumers, but instead of using the Bureau's
full authorities to enforce the law, you just told companies
you are going to help them when they cheat consumers. And these
are the same companies that had no problem screwing over
consumers during the last financial crisis. There is no doubt
that consumers are in a better position because the CFPB is out
there, and I am grateful to the employees who do this every
day. But your leadership has been a miserable failure based on
your actions in this pandemic. You should resign.
Chairman Crapo. Senator Scott.
Senator Scott. I hope you are doing well, Director
Kraninger. Thanks for being with us today.
I have a couple questions as it relates to home ownership.
I think it is really important for us to recognize from our
perspective that as many people pursue the American dream, part
and parcel of achieving that dream really is home ownership.
And so that is one of the ways that we can build wealth in
homes throughout this country and in families and in family
systems throughout the country. So I think it is really
important for us to maintain a strong focus on home ownership.
One of the questions I have is I know that there is a
proposal for us to go from, as we call it, the DTI, the debt-
to-income ratio, 43 percent, to more of a pricing model. So my
question for you is: Can you explain the rationale behind
leaving the safe harbor at the 150 basis points while the QM
status moves to 200 basis points? Because from my perspective,
that might actually make it more challenging for some folks to
become homeowners if we go from the debt-to-income of 43
percent to a pricing model.
Ms. Kraninger. Thank you, Senator. Certainly the intent--it
is a Notice of Proposed Rulemaking that is out for comment, but
the intent is to address many of the issues in the original
ATR/QM rule that just did not quite bear out. The patch had a
distortionary effect because 43 percent DTI was not a hard and
fast cap for the GSEs, and roughly a third of the loans that
the GSEs backed in 2018 had DTIs that were higher than 43
percent, and that data is in our rulemaking.
So looking at that and understanding that the intent here
is that pricing is actually more holistic, it is not just debt-
to-income ratio alone, but it is other factors that might allow
particularly minority borrowers to come into the system, again,
if they can demonstrate the ability to repay, and they are
getting loans that are meeting the QM features in the statute.
So I think there is an opportunity here to look at all of that,
but we are taking comment.
I take your point on the 200 basis points versus the safe
harbor and rebuttable presumption standards. The thresholds for
safe harbor and rebuttable presumption are actually the current
thresholds, but it is something that we are taking comment on
and looking at and thinking about, again, how all of this works
together. But the intent is to balance that. Congress clearly
told us ability to repay is critical, so we are balancing that
against making sure that we can continue to enable home
ownership, particularly for minority communities in particular.
Senator Scott. I would agree with you. I think we should do
all that we can for creditworthy borrowers to become homeowners
when it makes sense. I think harmonizing the QM and the safe
harbor might make it easier for financial institutions to not
go to the default position of the safe harbor that is 50 points
lower.
Let me hop to another question as my time starts to seep
away so quickly in these hearings. I know our friends in the
House, so to speak, passed the HEROES Act, and a part of the
HEROES Act is this notion of suppressing bad debt during the
pandemic. And it is hard to argue that you would not want to
give some leeway, some flexibility to borrowers to catch up,
hence the 120-day provision afterwards.
Here is my question to you, and you will have to work with
me if I do not say it as artfully as I would like to. If we
suppress bad debt, especially indefinitely, after the pandemic
is over, don't we start distorting the market? And if we
distort the market, doesn't that make it harder for
decisionmakers at institutions to make good, sound judgments?
And if that happens, won't many creditors decide to pull back
away from extending credit as opposed to leaning into
creditworthy folks because there is clarify in the marketplace?
Am I missing that point or not?
Ms. Kraninger. You are raising a very important point
because that is why accuracy is so important in the law with
respect to the credit reporting system. But we are, to your
point, making at least some accommodations. For example, even
in the QM Notice of Proposed Rulemaking, we asked for comment
on how income and debt during this time period should be
treated and how we can think about that. So I think there are
perhaps other ways to get at this than reducing the accuracy in
the credit reporting system.
But I would also note obviously any action Congress takes
on this that becomes law will be something we would enforce.
Senator Scott. Well, let me just use my final 20 seconds,
Mr. Chairman, to say this: Ultimately I hope that the CFPB will
commit to ensuring that, absent any congressional action, they
will administer no rule that requires credit market
participants to suppress or delete credit data. That will make
it harder for creditworthy borrowers, not easier, in the long
run.
Thank you so much.
Chairman Crapo. Thank you.
Senator Schatz.
Senator Schatz. Thank you, Director Kraninger, for being
here. Credit reporting agencies under the CARES Act are
supposed to report consumers as current if they receive any
accommodation under the CARES Act. What is the CFPB doing to
make sure that actually happens?
Ms. Kraninger. So, Senator, we have actually worked very
closely with the big national credit reporting agencies as well
as with furnishers, so we have had a number of webinars; we
have worked with them on the direction that they send out to
furnishers. You know well there are thousands of entities
across the country that furnish data. So trying to make sure
they understand what current means is important. So we have
worked----
Senator Schatz. So you do some sort of--I mean, you have to
do this education process with furnishers and the agencies and
all the rest of it. What happens if there is noncompliance?
What happens if someone who has received an accommodation under
the CARES Act is reported as not current? If there is an error
on their credit report, then they go to the CFPB and complain.
Then how do you dispose of that complaint?
Ms. Kraninger. We have got a good example in the student
loan space because there were also other provisions related to
student loans in the CARES Act. There was a student loan
servicer that was actually reporting information inaccurately
that was affecting credit scores that was immediately seen by a
number of students and other borrowers who submitted
complaints. We also heard from stakeholders in the market
saying, ``What is going on with this?'' It was with respect to
one particular scoring mechanism.
We intervened very quickly with the Department of
Education, figured out what was going on. It was corrected both
on the front end of that process in terms of how that was
reported, and it was corrected in the model.
Senator Schatz. OK. So does this worry you as sort of a
global problem? Do you think that this is no longer occurring
except in individual instances? Or do you think you need to
continue--because I am all for getting the word out, but I do
think that, you know, that is fine but you need a stick. And
just educating these furnishers may not be enough.
Do I have your commitment to lay eyes on this problem from
the perspective of being an enforcement agency as well as
everything else that you do?
Ms. Kraninger. Senator, I would give you one quick example,
too, is our prioritized assessments. We are sending examiners
into furnishers, and we have a constant presence at the NCRAs
to look at particularly this.
Senator Schatz. OK, great. The CARES Act establish a
national eviction moratorium for federally supported rental
properties spanning multiple agencies, and it also prohibits
fees and penalties for missed payments during that time. You
sort of have the same problem here, small landlords who may not
exactly know what their tenants' rights are, or even big
landlords who want to systematically ignore the CARES Act for
their own financial reason.
So here is the question: Are you collecting any data on
eviction actions taken? Are you collecting any data on
penalties assessed so that you cannot just--you know, you and I
can characterize the scale of this problem as a percentage of
the whole, but we are just supposing how big this problem is.
Do you have your arms around this in terms of actual data?
Going back to what Senator Kennedy said, his question was
more global and, I would argue, unanswerable. This is not an
unanswerable question. Are you collecting data on the extent of
compliance with this sort of pillar of what the CARES Act was
all about, which is everybody is supposed to get a little bit
of, both officially speaking, forbearance but also a little bit
of kindness, a little bit of room, right? And the room that I
see you providing is to the big boys, right? It is to the
credit reporting agencies. It is to the lenders. And I am
wondering to what extent are you aggressively collecting data
on the legislative intent of the CARES Act originally, which is
you have got to give regular people a little bit of room and
not just assume that the big boys are complying with the
statute. So are you collecting the data necessary to ensure
compliance?
Ms. Kraninger. Let me quickly answer you on that. There was
not an enforcement mechanism for any Federal agency, and I will
say this is outside the purview directly of the CFPB in terms
of any enforcement or data collection on that. What we have
done, though, is made sure, again, through education efforts
and with the interagency partners engaged in education of
landlords, of renters, what their rights are, we have
facilitated complaint submission, again, making sure that State
Attorneys General are connected, and so that is----
Senator Schatz. All right. You go through this education
process. I am all for that. I think that is part of that. But
it is not that you--just because the CARES Act did not direct
the CFPB to collect data that you have, therefore, pivoted from
collecting data or acting on behalf of consumers. That is
actually the statutory mandate of the agency. You do not need
specific instructions from the CARES Act to go ahead and
protect mortgage holders and renters. That is your job.
Thank you.
Chairman Crapo. Senator Cotton.
Senator Cotton. Thank you, Mr. Chairman. Thank you,
Director Kraninger.
My office has been in touch with your Bureau about
encouraging transparency and feedback around exams. We also
spoke about that at your last appearance here in March. At the
time you said the Bureau was going to be implementing a new
feedback mechanism housed in your Ombudsman's Office that would
allow financial institutions to provide feedback on their exams
and bring problems to the agency's attention. At the time in
March, you predicted the new process would be implemented in
roughly 2 to 3 months. I, of course, understand the pandemic
might have delayed this new procedure from starting as quickly
as you would have expected, but can you please give me an
updated timeline on when this feedback mechanism will be
implemented?
Ms. Kraninger. Yes, Senator. It is certainly my hope that
we can do that in the fall. Part of the dynamic is that we need
to have the traditional exams in place to facilitate that, and
our Ombudsman is very dedicated to working with industry to
understand, you know, what their challenges might be and what
they would like that feedback mechanism to look like. She has
very robust processes, and she has a measure of independence,
too. But I will say that this is something that we are
committed to doing, and I think it is an excellent idea.
Senator Cotton. Can you be a little more specific than
``the fall''? That is anywhere from September 20th to December
20th, roughly.
Ms. Kraninger. I agree. As I said, the Ombudsman's measure
of independence means that she did not even want me to say
``the fall.'' I will acknowledge to you that I fully believe we
should be able to do it in that timeframe, and we will get you
some more specificity and some, you know, activities that she
is undertaking to make that happen so you have more assurance
on progress.
Senator Cotton. OK. Thank you. You do agree that there
would be fewer problems with, say, the use of guidance if
everyone involved knew at the end of the exam the financial
institution had a chance to fill out a survey with specific
questions like: Was the guidance used appropriately? Was it
used inappropriately?
Ms. Kraninger. I think it is an important mechanism to get
this feedback, and I do think that the examiners have clear
guidance and are following it about the use of her application
of guidance that would be inappropriate. We are there to ensure
compliance with the law, which includes regulations but does
not include guidance.
Senator Cotton. And that is because--I mean, most people
tend to behave somewhat differently if they know that there is
going to be transparency and accountability for their actions
as opposed to if there is no transparency, no accountability.
Would you agree with that?
Ms. Kraninger. I would like to think people generally would
comply with the law in general because they need to. But, yes,
I would say that is one principle of examination. We send the
examiners in expecting institutions to comply and that that
will, again, foster greater compliance because they know they
are being watched.
Similarly, to your point, the fact that there could be
feedback on the examiners' activity should have a similar
effect.
Senator Cotton. Has the Bureau given any thought to
allowing regulated institutions to record their interactions
with regulators?
Ms. Kraninger. Senator, no one has raised that with me in
the past, so I--this is new one, at least for me.
Senator Cotton. OK. And how do you assess the performance
of your examiners and whether or not they are behaving and
acting properly and performing their job in accordance with law
and regulations and your expectations of professionalism? Is
there any kind of rating system for examiners the way, say, the
military will provide annual performance reviews and senior
commanders can only rate so many so high and so many so low?
Ms. Kraninger. We have a performance system at the Bureau
that is really pass-fail at this point in time. But that does
not mean that we do not value the feedback that we provide. We
have got a good field manager structure in place. We have
liaisons to institutions that are separate from the exam team,
so there is that opportunity again to try to get feedback. And
I think the mechanism that we have been talking about of doing
surveys, post-exam surveys, that will be another mechanism to
kind of get that good feedback. But I would say our training
regime as well as our commissioning process of trying to
continue to build the skills and capabilities of the
examination force is important, too.
Senator Cotton. Thank you very much for your answers, Dr.
Kraninger--Director Kraninger. I will give you a doctorate if
you want one.
Chairman Crapo. Senator Cortez Masto.
Senator Cortez Masto. Thank you.
Director Kraninger, thanks for being here. Thanks for the
report that you provide to the Congress as well.
So let me start with enforcement. You and I have had this
conversation quite often, and I appreciate you engaging with me
on this. At least the data that I show since December of 2018
when you arrived at the Bureau, it looks like there have been
39 enforcement actions, which include multiple companies and
individuals. Is that about right?
Ms. Kraninger. I think that is right.
Senator Cortez Masto. OK. And this is what you and I have
talked about, and we continue, I think, to talk about because
this is a concern of mine. I have noted a number of these cases
resulted in suspended judgments, meaning that--and particularly
as I look at the debt collection companies along with auto
title companies and travel companies, they paid much smaller
fines than was agreed to in the original judgment, and let me
give an example. In Florida, a debt collection company was
charging illegal fees to 7,300 customers. And to resolve their
case, which went to court, the company was ordered to pay a
$3.8 million judgment.
However, the Bureau suspended that nearly $4 million
judgment and required the company to pay only $5,000, and the
two business owners to pay only $7,000 and $10,000,
respectively. So I guess--not I guess. I know my question to
you is: Why was 99 percent of the fine suspended if the Bureau
found that customers, 7,300 of them, were illegally overcharged
$4 million that those responsible only paid $23,000?
Ms. Kraninger. Senator, I do greatly respect your interest
in this issue, and it is an important one for how we carry out
our enforcement tool. I think you know well, too, that settling
some of these judgments is something that does happen
frequently in the law enforcement context in trying to get to
resolution, particularly when it is determined, as is part of
actually our statutory process for mitigating factors, if the
entity does not have the resources to pay. So there is----
Senator Cortez Masto. So is that what you looked for in
this particular case as to whether this payday lender has the
ability to pay the judgment?
Ms. Kraninger. Senator, I do not want to stipulate anything
with that particular case in mind. We can come back to you on
it if there is anything more that needs to be said or could be
said there. But, generally speaking, yes, that is a significant
part of it. It is the estimation of how much time we want to
spend continuing to litigate, which, of course, is our
resources, and how much effort there would need to be to go
after funds from an entity that does not have the funds to pay.
Senator Cortez Masto. And so in making that determination,
do you get some sort of official document from them? Do you get
an affidavit or some sworn affidavit verifying why that
company--that they do not have the ability to pay? Is that how
it works?
Ms. Kraninger. It is a conversation, I know, between the
enforcement attorneys and the other party. So, again, depending
on where the case is or what case--I do not want to hold myself
to that particular case. But it absolutely is a career staff
conversation that generally I am not even involved in.
Senator Cortez Masto. So can I ask you this: How do the
customers get redress? If the companies, the bad players, are
not--the $4 million judgment is not followed through, how do
customers get redress then?
Ms. Kraninger. In many cases that is why we are charging a
civil money penalty of a dollar, I know, which does get them
attention or of a more--a lesser amount so that they can access
the civil money penalty fund that we have at the Bureau. So
that is a means by which at least--again, I do not want to
specify in this case, but in cases generally, we continue to
get redress for consumers we can identify.
Senator Cortez Masto. So do you see the hypocrisy here? You
have bad players that payday lend, that they literally--you
determine whether they have the ability to pay their judgments,
and then you bail them out by using this civil monetary fund.
But then actually the borrower, the payday lender, we do not
look at their ability to pay. And there are predatory lenders
out there. I mean, do you see the hypocrisy there and why some
of my colleagues are saying this is absolutely ridiculous? You
are looking at the big corporations. You are bailing them out
with this civil monetary penalty fund. But when it comes to the
actual borrower, you are saying, no, these payday lenders do
not have to look at their ability to pay? It is hypocritical,
and I think that is the concern that you see from my colleagues
at all of this enforcement action and why we are talking about
why are all these bad players getting away with taking
advantage of consumers and the consumers are not being
protected.
I know my time is up. I will submit the rest of my
questions for the record.
Senator Cortez Masto. Thank you, Mr. Chairman.
Chairman Crapo. Thank you, Senator.
Senator Van Hollen.
Senator Van Hollen. Thank you, Mr. Chairman, Ranking Member
Brown. Director Kraninger, thank you for your testimony.
I really just want to pick up really where my colleague
Senator Cortez Masto left off with respect to the payday
lending rule changes that you made reversing the earlier
protections. And I must say it is outrageous that in the middle
of this pandemic, when so many people are struggling to make
ends meet, you provided this big payday to payday lenders at
the expense of consumers. I think it is about a $7 billion
payday for those that make loans knowing that the people who
are receiving the loans cannot repay them, and then coming
after them. And it is bad at any time, but especially egregious
at a moment when so many families are struggling to make ends
meet.
This has been a conversation you and I and others have had
since the beginning of this administration, really, really
outrageous that this rule was finalized and consumers will be
badly hurt.
Let me turn to the flip side of that, which is the debt
collection part, because many of these people who received
predatory loans and are victims of predatory lending, of
course, end up on the debt collection end of the spectrum. I
understand that you are working on a debt collection rule that
I am also worried will undermine, you know, the rights of
consumers. But we are in the middle of a pandemic. Many people
are, of course, out of work. It is hard to pay their bills.
Senator Murphy and I just introduced a bill in the Senate
yesterday that says that during this pandemic hospital systems
and major medical providers that are receiving hundreds of
millions of dollars in taxpayer assistance to do important
work, but they should not be turning around during this
pandemic and garnishing people's wages for medical debt.
Have you considered issuing any emergency protections
against collection of--practices like garnishment of wages or
seizing bank accounts for the collection of medical debt during
this pandemic?
Ms. Kraninger. Senator, we have given very clear direction
as the financial regulators and with the prudential regulators
that accommodation of their customers of consumers and
borrowers during this time is paramount. That is balanced by
safety and soundness considerations and certainly the continued
compliance with consumer protection law, but that is the
requirement at play that we provided in terms of direction. And
I would also note on the rulemaking that we are engaged in, the
continued enforcement of abusive activities around debt
collection continues to be the case. So that is something that
has been established by courts, and so the more abusive
activities--or, I should say, unfair and deceptive activities
and constant harassing phone calls or otherwise contacts, that
is still precluded and will be.
Senator Van Hollen. So my understanding--and correct me if
I am wrong--at least the current drafts of this rule would
actually make it easier for debt collectors to sort of harass
people, things like text messaging and instant messaging. Is
that true?
Ms. Kraninger. Not harassing contacts, because that, again,
continues to be precluded. What we are trying to at least
support is clarity around how consumers can be contacted and
letting consumers, frankly, dictate how they would like to be
contacted. There are a measure of consumers who would prefer a
text to a phone call or would prefer an email to a phone call.
And so it is using the contact mechanism that the consumer used
with their creditor before that we are trying to provide some
clarity around. No final decision has been made on what that
threshold is. It is very much something that we got a lot of
comments on, which I welcome. And so we are poring through
those comments.
Senator Van Hollen. All right. As you said, if the purpose
is to prevent harassment, people can be harassed via text
message as well as they can by phone calls.
Let me just close--I see I have just a few seconds left--by
asking you either to get back to us on the issue of zombie
debt--this is debt where it is past the statute of limitations,
but my understanding is the way the current rule is shaping up,
you would open the door to people who are coming after debtors
for zombie debts. So if you could get back to me on that issue,
it is something that we are following closely.
Chairman Crapo. Thank you.
Senator Jones.
Senator Jones. Thank you, Mr. Chairman. Thank you, Director
Kraninger, for being with us today. I appreciate it.
You know, I know that there have been a number of my
colleagues that asked about the payday lending situation here
and the payday lending rule, but it is so important to my
State. And I know you have got a lot of other things on your
plate as Director, but that is just so important, I do not want
to let it go.
In Alabama, there are more payday and title lenders in my
State than we have got hospitals, high schools, movie theaters,
county courthouses combined. That is a significant number. They
can charge up to 456 percent APR, and Alabamans paid more than
$100 million in fees for these payday lenders just last year.
Even before the coronavirus, three-fourths of American workers
were living paycheck to paycheck with little or no savings.
So I want to pick up kind of where we went off--and you
have touched on it, and we have had some questions about it,
where we left off in March about the ability to repay, which
has now been removed from your rule. When I asked about that in
March, you said, ``Well, Senator, in fairness this is a
proposed rescinding of the underwriting provisions, and so I
cannot give you a fulsome articulation of a decision on that
because it is an ongoing rulemaking process.''
Well, the rule was finalized July 7th, as you know, so I
would like to give you this chance to give a fulsome response
as to how the payday lending rule that does not include a
review of the ability to pay is going to affect 200,000 people
in Alabama that now get these payday loans and how it will not
keep them from spiraling into a financial death spiral.
Ms. Kraninger. Senator, thank you for that. I know you are
interested, and I would tell you that we continue to supervise
and enforce particularly UDAP requirements against payday
lenders, because there are bad actors in this market, as I have
said, as there are in every market. So that is the important
action that will continue, that has continued, and has actually
affected the enforcement actions that relate to activities in
Alabama and entities in Alabama.
But with respect to the rule, the mandatory underwriting
provisions were particularly onerous. The access to small
dollar products in general is something that consumers clearly
have demonstrated a need and demand for. And so what we are
trying to do is promote competition in this space, make it
clear that we want banks and credit unions, fintech companies,
to be offering small dollar credit options to consumers so they
have the ability to access those types of products in a
responsible way, and also that consumers understand the
tradeoffs of the products that are available to them in the
marketplace. So we are engaging in disclosure testing around
this.
I would say a lot of the research that is in the full
rulemaking record demonstrates that there are a number of
consumers who do understand their engagement with payday
products. Again, the data showed that you had a significant
portion of borrowers who paid within the term of the loan, so
within that payday loan. There were a number of consumers who
defaulted on those loans very pointedly early in the process,
which, again, demonstrates some knowledge and understanding of
the product as a rational decision based on where they might be
financially.
Senator Jones. Can I follow up on that real quick? Because
I know that there is like the credit union--and I am running
out of time. The credit unions have this payday alternative
program. But they require the credit unions to look at
somebody's ability to pay to see what risk would be associated
with that. So if a consumer who has no ability to pay but yet
needs the money, that is not a real--that is a false choice for
them, it would seem. So I am not sure the movement that way and
the competition is really competing with folks who just really
need the money. I appreciate your answer. I may follow up to
get a more complete answer in writing since I am running out of
time.
The other thing I want to ask real quick, in the CARES
package, we deferred student loan obligations to September
30th. We had hoped that this virus would be on the downside.
You know, we had deadlines coming up like this week concerning
unemployment and those things, but we put the deadline off for
student loans a little bit longer knowing the financial
hardships. But now this virus is still with us. It is still a
serious problem. Would you support extending what we have done
on the moratorium for student loans? Would you support
extending that for a period of time beyond September 30th?
Ms. Kraninger. Senator, I appreciate what you are asking. I
tend to try to stay out of these particular--giving particular
feedback on particular legislation. I defer to Congress'
judgment on that, and we will carry out anything that Congress
pushes, passes, and the President signs.
Senator Jones. All right. Thank you.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
That concludes the questioning. Are there any other
Senators logged in I am not aware of who have not asked
questions yet?
[No response.]
Chairman Crapo. All right. Well, Director Kraninger, I
appreciate you being with us today. That does conclude the
questioning for the hearing. And for Senators who wish to
submit questions for the record, those questions are due to the
Committee by Wednesday, August 5. And, Director, we ask that
you respond to those questions as promptly as you can.
Again, we thank you for being here. I thank you for your
service, and this hearing is adjourned.
[Whereupon, at 11:33 a.m., the hearing was adjourned.]
[Prepared statements, responses to written questions, and
additional material supplied for the record follow:]
PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO
Today, we will receive testimony from CFPB Director Kathy Kraninger
on the CFPB's semiannual report.
On July 2, the CFPB issued its Spring 2020 Semiannual Report, which
outlines the CFPB's significant work between October 2019 and March
2020, including rulemakings and supervisory and regulatory activities.
The report also provides insight into what the CFPB plans to
undertake in the coming work period.
Director Kraninger last appeared before this Committee on March 10,
3 days before President Trump declared a national State of emergency
related to the COVID-19 outbreak.
Shortly thereafter, the CARES Act was signed into law, which
included measures to help families directly, provide aid to small
businesses, and to stabilize our markets.
In implementing the CARES Act, the CFPB has taken important actions
related to mortgage origination and servicing, consumer credit
reporting, and data reporting to further address the economic impact of
the ongoing pandemic.
The CFPB has also announced several policies and valuable
educational initiatives intended to help consumers take steps to
protect their finances during the COVID-19 emergency, and to ensure
that regulated entities can take reasonable and prudent steps to assist
communities impacted by the coronavirus.
I commend Director Kraninger and her staff for taking these steps
to help consumers, families, and small businesses as they continue to
weather this global coronavirus pandemic.
Last month, the Supreme Court issued a ruling on Seila Law v. CFPB
that found the agency's structure, led by a single director only able
to be removed ``for cause,'' is unconstitutional.
The Court's decision on this case is consistent with what many in
Congress have long said: The CFPB's structure lacks sufficient
accountability and transparency.
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.
On July 7, the CFPB finalized a rule rescinding the mandatory
underwriting provisions of its Small Dollar Loan rule.
The availability of short-term, small dollar credit is essential to
millions of Americans.
Updating this rule is an important step toward ensuring the
availability of credit that is essential to so many consumers who
struggle to access or qualify for other options.
The changes made by the 2020 Small Dollar Loan final rule carefully
balances ensuring the widespread availability of credit to all
Americans while preserving strong protection for all consumers.
During this hearing, I look forward to hearing more about the
impact of the COVID-19 emergency on consumers and the financial
marketplace; key COVID-19 response initiatives undertaken by the CFPB
in recent months; additional regulatory and legislative changes that
can further support the economy; and Director Kraninger's priorities
for the CFPB in the upcoming work period.
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, for holding this virtual hearing, and
thank you, Director Kraninger, for participating in this hearing
remotely to practice social distancing and to prevent the potential
spread of coronavirus, which is still spreading, and is still taking
the lives of hundreds more Americans every day.
Across the country, in big cities and small towns alike, Americans
are calling for their Government to work for them. Nearly everyone has
had their lives upended by this pandemic--but this disease is not
spreading in a vacuum.
You know, Ms. Kraninger, that workers have seen their wages
stagnate for years, while Washington shovels more tax cuts to their
wealthy friends and the largest corporations.
Families' expenses have only grown--the cost of housing, childcare,
prescription drugs has all gone up, leaving 40 percent of Americans
unable to come up with $400 in an emergency.
Black and Brown Americans have never had their hard work pay off
like it should, and live every day with systemic racism that threatens
their health and their safety and their lives.
From Jim Crow to redlining, you know that Black families have never
had the same freedom and opportunity to choose where they live. And
they've watched this Administration dismantle a critical element of the
Fair Housing Act.
We have the widest homeownership gap in 50 years. As the Urban
Institute put it: ``The gap in homeownership rate between Black and
White families in the United States is bigger today than it was when it
was legal to refuse to sell someone a home because of the color of
their skin.''
The racial wealth gap has actually increased: the average White
family now has 10 times the wealth of the average Black family.
Director Kraninger you know that Black and Brown consumers
disproportionately lack access to basic financial services, forcing
them to rely on risky and costly alternatives.
This leads to so-called reverse redlining--where companies target
minority communities for exploitative loans and other abusive financial
products.
That's why it's easier to find a payday lender than a bank branch
in communities of color.
For years, American workers and families have watched the people
who are supposed to serve them look out for the biggest corporations,
while their financial problems continued to mount.
People are angry and they're frustrated.
Americans watch CEOs pay themselves, while laying off workers. They
see corporations scam people and get away with it, while people of
color spend their entire lives paying for one wrong move. They're told
to pull themselves up by their bootstraps, while Wall Street gets
handouts and bailouts.
Americans feel like no one is on their side. Especially in this
Administration.
That's where the Consumer Financial Protection Bureau is supposed
to come in.
Your job, Director Kraninger, is to look out for everyone else--the
workers and families without lobbyists, who don't have wealth and
connections to throw around. That's why we created the agency.
And in a moment when Americans of all ages and backgrounds are
demanding justice for our Black and Brown neighbors and accountability
for the corporations that exploit them, you have the power to actually
do something about it.
The CFPB has the tools, the resources, and a legal requirement to
root out discrimination in lending and protect communities of color
from shady financial products that strip away their wealth.
Under Director Cordray, the Bureau wielded these tools to hold
banks, credit card companies, and other corporations accountable when
they engaged in illegal discrimination, returning more than $500
million to Black, Latinx, and Asian Americans.
Under Director Kraninger and Acting Director Mulvaney, the Consumer
Bureau did not bring a single case of illegal discrimination for more
than 2\1/2\ years.
Sadly, that's about what we would expect from a president who seems
to have made it his mission to roll back civil rights protections, and
openly uses race to divide us.
But we might have hoped that in this moment of national crisis,
when more than 150,000 Americans have lost their lives and 30 million
have lost their jobs, President Trump and his appointees would rise to
the occasion.
Instead Director Kraninger--like other Trump appointees--you have
exploited the coronavirus pandemic to roll back protections for
American families, instead of strengthening them:
During the pandemic, Americans have reached out in record
numbers seeking the Consumer Bureau's help. We've seen an 86
percent increase in complaints about credit reporting. But
instead of cracking down, Director Kraninger announced the CFPB
would do nothing to punish banks, debt collectors, and other
corporations that make mistakes on consumers' credit reports.
Millions of Americans have fallen behind and missed
mortgage payments because of the president's failure to get
this pandemic under control. But instead of helping struggling
homeowners, the Consumer Bureau weakened requirements that
banks and lenders contact homeowners to help them avoid
foreclosure.
Families have been forced to turn to credit cards to make
ends meet. And the CFPB, the agency that's supposed to look out
for them, has made it easier--easier, not harder--for these
credit card companies rip off consumers, making it easier for
credit cards to hide their terms and true price.
Director Kraninger also decided that a worldwide pandemic is the
right time to push consumers into predatory payday loans.
In March, the Consumer Bureau released guidance encouraging
banks to get into the payday loan business.
In May, the Consumer Bureau released information on how
banks that offer payday loans can apply for prospective
immunity from Bureau oversight or enforcement.
And in July--despite extensive evidence of a corrupted
rulemaking process and bicameral calls for an Inspector General
investigation--the Consumer Bureau released a new payday rule
that eliminated the basic requirement that payday lenders make
sure a consumer can pay back the loan.
Director Kraninger has even gone so far as to tell financial firms
that it will give them a pass when they break the law, so long as they
make a ``good faith'' effort to comply.
This is exactly why most people think our system is broken.
If your utility payment is withdrawn before your paycheck clears,
and you overdraw your account, the bank doesn't waive the fee because
you made a ``good faith'' effort to deposit that check.
We have one system for corporations and the wealthy and the well-
connected, one where you get away with just about anything--and a
different one for everyone else, where your ``good faith'' effort never
seems to be enough.
Director Kraninger, we didn't need a Supreme Court decision to tell
us you would not be independent from President Trump.
I've got to hand it to you, you've done exactly the job he asked of
you--you have protected a system where corporations play by one set of
rules, with a different set for everyone else.
Thank you, Mr. Chairman.
______
PREPARED STATEMENT OF KATHLEEN L. KRANINGER
Director, Consumer Financial Protection Bureau
July 29, 2020
Chairman Crapo, Ranking Member Brown, and distinguished Members of
the Committee, thank you for the opportunity to present the Consumer
Financial Protection Bureau's (Bureau's or CFPB's) most recent Semi-
Annual Report to Congress.
Today, I am happy to present the Bureau's Spring 2020 Semi-Annual
Report (October 1, 2019-March 31, 2020) to Congress and the American
people in fulfillment of our statutory responsibility and commitment to
accountability and transparency. My testimony is intended to highlight
the contents of this Semi-Annual Report (Report).
I remain committed to strengthening the Bureau's ability to use all
of the tools provided by the Dodd-Frank Wall Street Reform and Consumer
Protection Act (Dodd-Frank Act), and I remain resolved that the most
productive use of Bureau resources is the prevention of harm to
consumers in concert with our many partners. The Bureau's mission, as
you are aware, is to ensure access to fair, transparent, and
competitive markets for consumers, and we are committed to executing
the mission through:
Empowering Consumers and Turning Financial Education into
Action,
Ensuring Clear Rules of the Road,
Ensuring a Culture of Compliance, and
Holding Bad Actors to Account and Deterrence through
Enforcement.
Preventing harm to consumers, I believe, is the most effective,
efficient way to carry out our mission of ensuring consumer access to a
fair, transparent and competitive market. To me, prevention of harm
comes through helping consumers gather financial know-how, fostering a
culture of industry compliance where consumers know their rights and
industry knows their responsibilities and limitations, and maintaining
a back stop of enforcement.
Clearly, the COVID-19 pandemic had a profound impact on the
Bureau's work during the reporting period, one that will continue well
into the future. These remain challenging times facing our Nation and
the world. Yet the uncertainty and dramatic change underscore the
importance of the Bureau's mission on behalf of American consumers.
Further, this Report and my testimony today give me the
opportunity to highlight the fantastic work of our incredibly talented
and dedicated staff in facing this emergency.
Under the banner of ``Safety First, Mission Always,'' the
professionals at the CFPB tirelessly work to protect, promote, and
preserve the financial well-being of the American consumer.
To further our statutorily driven objectives, we have teamed, and
will continue to work, with our stakeholders, particularly our Federal
partners, to ensure consumers are armed with accurate facts and helpful
warnings in this unprecedented time.
Since the first days of the pandemic, the Bureau has taken swift
action to protect consumers and ensure financial institutions have the
direction and flexibility to work with their customers in need. Those
actions range from efforts to empower older Americans, to guidance
offered about how to avoid potential scams related to the virus, to
roadmaps of what relief is available to renters and mortgage holders
under the Coronavirus Aid, Relief, and Economic Security Act (CARES
Act) legislation. In April, the Bureau worked with Federal partners to
launch a new mortgage and housing assistance website.\1\ The Bureau
also released timely information on new programs aimed at helping
struggling consumers during this time. These programs include stimulus
payments;\2\ student loan payment suspension;\3\ mortgage
forbearance;\4\ and the paycheck protection program.\5\ Additionally,
the Bureau has established a centralized webpage with information on
how consumers can protect their finances during the pandemic.\6\
Trusted, authoritative Government sources are critical conduits for the
distribution of information to the public. As such, I am proud to note
that as of this month, over 3.1 million users have accessed our
educational web content in response to COVID-19.
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\1\ See https://www.cfpb.gov/housing/.
\2\ See https://www.consumerfinance.gov/about-us/blog/guide-covid-
19-economic-stimulus-checks/.
\3\ See https://www.consumerfinance.gov/about-us/blog/what-you-
need-to-know-about-student-loans-and-coronavirus-pandemic/.
\4\ See https://www.consumerfinance.gov/about-us/blog/guide-
coronavirus-mortgage-relief-options/.
\5\ See https://www.consumerfinance.gov/about-us/blog/help-small-
businesses-during-covid-19-pandemic/.
\6\ See https://www.consumerfinance.gov/coronavirus/.
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The Bureau also has taken a number of actions to provide guidance
to the financial industry to ensure their resources are aimed at
assisting consumers in need.\7\ The Bureau has and will continue to
actively engage with regulated entities, consumer advocates, State
partners, and other stakeholders to ensure we are providing appropriate
flexibilities to support consumers during this time.\8\
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\7\ See https://www.ffiec.gov/press/PDF/
FFIEC%20Statement%20on%20Pandemic%20Plan-
ning.pdf; https://files.consumerfinance.gov/f/documents/
cfpb_interagency-statement_small-dollar-lending-covid-19_2020-03.pdf;
https://files.consumerfinance.gov/f/documents/cfpb
_hmda-statement_covid-19_2020-03.pdf; https://
files.consumerfinance.gov/f/documents/cfpb_data-collection-
statement_covid-19_2020-03.pdf; and https://files.consumerfinance.gov/
f/documents/cfpb_supervisory-enforcement-statement_covid-19_2020-
03.pdf.
\8\ See Section 3.4 of the Report for the items released in
response to COVID-19 after the reporting period ending on March 31,
2020.
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During this emergency, the mechanisms of rulemaking, our
supervisory examinations, enforcement of Federal consumer financial
law, and the handling of consumer complaints have continued. The Bureau
also has developed ``Prioritized Assessments,'' which consist of high-
level inquiries designed to obtain information from entities to assess
the impacts on consumer financial product markets due to pandemic-
related issues. These Assessments will allow the Bureau to identify
potential risk to consumers across a large number of entities, while
continuing to reduce the burden on institutions and allowing examiners
to continue to work safely from their home-duty stations. The Bureau is
monitoring the marketplace in real time and coordinating on an ongoing
basis with fellow Federal and State regulators in order to take swift
action when we identify companies or individuals that violate the law
to take advantage of the pandemic and resulting economic uncertainty.
While so many aspects of our daily life were effectively shut down this
spring, the Bureau's efforts on behalf of impacted consumers never
slowed.
I am uniquely proud to share with you our semiannual report and
welcome your questions and thoughts about our efforts outlined here,
and our mission overall.
Empowering Consumers and Turning Financial Education into Action
As I have said before, the Bureau cannot be everywhere, with
everyone, at every transaction--nor should it try to be. Therefore,
empowering consumers to help themselves, protect their own interests,
and choose the financial products and services that best fit their
needs is essential to preventing consumer harm and building financial
well-being.
To carry out its financial education mandate, the Bureau seeks to
enhance the financial knowledge and skills of all Americans, from
childhood to later life, so that individuals can effectively use these
skills to build their financial well-being. The Bureau is employing a
three-part strategy to accomplish this task. The three elements of the
strategy are:
Providing financial education to the public, directly and
by expanding and augmenting the local delivery of financial
education;
Sharing research on effective financial education and
financial well-being with financial educators and others; and
Addressing needs for inclusion and financial security of
servicemembers and veterans, older Americans, traditionally
underserved consumers and communities, and students.
During the previous year, the Bureau has continued to put thought
into action and made strides in consumer education. A few key examples
outlined in the Report are:
Start Small, Save Up Initiative.\9\ The Start Small, Save Up
initiative aims to increase opportunities for Americans to save and
achieve their financial goals. Through Start Small, Save Up, the Bureau
is working to help consumers build emergency savings over the next few
years by working with employers to prioritize emergency savings and
automated solutions in the workplace; engaging with partners to
highlight emergency savings products that work and make more accessible
products available; and partnering with trusted community institutions
to tailor savings solutions to unique audiences. The Start Small, Save
Up initiative includes a robust research and evaluation component to
ensure the Bureau is learning about its own efforts, as well as the
efforts of others who are also working toward a similar goal of helping
consumers save. The Bureau launched a series of saving resources
including the CFPB Savings Boot Camp, a multiweek email course to guide
people through the fundamentals of saving. The Bureau also released the
fourth in a series of booklets for social services providers to talk
with people about money topics that are important to them: ``Building
your Savings? Start with Small Goals.'' The booklet contains colorful,
engaging tools to support people in setting savings goals, preparing
for the unexpected, finding a place to save, and making the most of tax
services providers, financial coaches, and financial educators. The
Bureau also hosted a convening with several financial institutions to
engage them in a dialog about helping consumers and their workforce
build emergency savings, exploring new research opportunities,
understanding successful ways to market savings solutions to consumers,
and seeking opportunities to collaborate with the Bureau on these
efforts.
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\9\ See https://www.consumerfinance.gov/start-small-save-up/.
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Convening Communities To Build Elder Fraud Prevention and Response
Networks Report.\10\ This report describes the Bureau-facilitated
convenings in Florida, Oklahoma, Tennessee, Montana, and Oregon, which
informed our efforts during the reporting period and sparked the
creation of new elder fraud prevention and response networks or the
enhancement of existing networks. The lessons learned from these pilot
convenings can help other communities develop networks that improve
coordination and collaboration between responders and service providers
to protect older people from financial harm. Although outside of the
reporting period, in June 2020, the Bureau built upon this effort and
released an online resource to help communities form networks to
increase their capacity to prevent and respond to elder financial
abuse.\11\ The Elder Fraud Prevention and Response Networks Development
Guide (Networks Development Guide) offers planning tools, templates,
and exercises to help communities create a collaborative network to
fight elder fraud or refresh or expand an existing network. We hope
this resource will help launch networks in fighting elder financial
exploitation in communities where networks do not currently exist. For
those communities with an existing network, the Networks Development
Guide can help to refresh or realign its priorities and activities or
expand the diversity of its membership to include new stakeholders. We
encourage the use of the guide by communities across the Nation to
build their capacity to prevent and respond to elder financial
exploitation.
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\10\ See https://www.consumerfinance.gov/data-research/research-
reports/convening-communi-
ties-build-elder-fraud-prevention-and-response-networks/.
\11\ See https://www.consumerfinance.gov/practitioner-resources/
resources-for-older-adults/elder-protection-networks/.
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Misadventures in Money Management for Active Duty Servicemembers.
The Bureau made Misadventures in Money Management (MiMM) available for
active duty servicemembers reporting to their first service station.
MiMM is an online training that engages servicemembers with real life
financial choices in a fun and interactive manner and provides a just-
in-time financial curriculum. MiMM is also available to future
servicemembers in the Delayed Entry Program (DEP), as well as future
leaders in the Junior Reserve Officers' Training Corps (JROTC) and
Reserve Officer Training Corps (ROTC).
Ensuring Clear Rules of the Road
Another tool for preventing consumer harm is rulemaking and
guidance--articulating clear rules of the road for those we regulate.
Rules that promote competition, increase transparency, and preserve
fair markets for financial products and services. The Spring 2020
Report includes information on significant rules and orders adopted by
the Bureau, as well as other significant initiatives conducted by the
Bureau, during the preceding year. In addition, the Spring 2020 Report
includes a plan for rules, orders, and other initiatives we expect to
undertake during the upcoming period. I would like to highlight just a
few of our activities in this space.
Request for Information, Proposed Rule, and Final Rule:
Remittances.\12\ In April 2019, and December 2019, respectively, the
Bureau issued a Request for Information (RFI) and a Notice of Proposed
Rulemaking (NPRM) on remittance transfers. Although outside of the
reporting period, it is worth noting that in May 2020, the Bureau
issued a final rule, which allows certain banks and credit unions to
continue to provide estimates of the exchange rate and certain fees
under certain conditions, where otherwise they generally would have had
to provide exact amounts due to the expiration of a statutory exception
on July 21, 2020. The final rule also increases the annual threshold
that determines whether an entity makes remittance transfers in the
normal course of its business and is subject to the Remittance Rule
from 100 to 500 remittance transfers. Entities making 500 or fewer
transfers annually in the current and prior calendar years will not
need to comply with the Rule. This increase will reduce the burden on
over 400 banks and almost 250 credit unions that send a relatively
small number of remittances--less than .06 percent of all remittances.
---------------------------------------------------------------------------
\12\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
issues-request-information-remittance-rule/; https://
www.consumerfinance.gov/about-us/newsroom/cfpb-issues-notice-proposed-
rulemaking-remittance-rule/; and https://www.consumerfinance.gov/about-
us/newsroom/cfpb-issues-final-remittance-rule/.
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Debt Collection Notices of Proposed Rulemaking. In May 2019, the
Bureau issued an NPRM, which would prescribe rules under Regulation F
to govern the activities of debt collectors, as that term is defined
under the Fair Debt Collection Practices Act (FDCPA).\13\ The Bureau's
proposal would, among other things, address communications in
connection with debt collection; interpret and apply prohibitions on
harassment or abuse, false or misleading representations, and unfair
practices in debt collection; and clarify requirements for certain
consumer-facing debt collection disclosures. The proposal builds on the
Bureau's research and pre-rulemaking activities regarding the debt
collection market; the conduct of debt collectors remains a significant
source of complaints to the Bureau. The Bureau expects to take final
action in October 2020 with regard to the May 2019 NPRM. The Bureau has
also engaged in testing of time-barred debt disclosures that were not
addressed in the May 2019 proposal. In February 2020, after completing
the testing, the Bureau issued a supplemental NPRM related to time-
barred debt disclosures.\14\
---------------------------------------------------------------------------
\13\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
proposes-regulations-implement-fair-debt-collection-practices-act/.
\14\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
issues-supplemental-nprm-on-time-barred-debt-disclosures/.
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Advance Notice of Proposed Rulemaking: Home Mortgage Disclosure
Act.\15\ In May 2019, the Bureau issued an Advance Notice of Proposed
Rulemaking (ANPR), seeking information to determine whether to propose
changes to the data points that the Bureau's 2015 Home Mortgage
Disclosure Act (HMDA) rule added to Regulation C or revised to require
additional information. The ANPR sought information regarding the costs
and benefits of these data points. Additionally, the Bureau solicited
comments relating to the requirement that institutions report certain
business- or commercial-purpose transactions under Regulation C. The
Bureau expects to issue an NPRM following up on the ANPR later this
year.
---------------------------------------------------------------------------
\15\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
proposes-changes-hmda-rules/.
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Final Rules: Home Mortgage Disclosure (Regulation C)--2019 Final
Rule and 2020 Final Rule.\16\ In May 2019, the Bureau issued an NPRM to
reconsider the thresholds for reporting data about closed-end mortgage
loans and open-end lines of credit under the Bureau's 2015 HMDA rule.
In October 2019, the Bureau issued the first of two final rules
amending these thresholds. The October 2019 final rule amended
Regulation C to adjust the threshold for reporting data about open-end
lines of credit by extending to January 1, 2022, the current temporary
threshold of 500 open-end lines of credit. The Bureau also incorporated
into Regulation C the interpretations and procedures from the
interpretive and procedural rule that the Bureau issued on August 31,
2018, and implemented further Section 104(a) of the Economic Growth,
Regulatory Relief, and Consumer Protection Act (EGRRCPA). Although just
outside of the reporting period, it is worth noting that, in April
2020, the Bureau issued a second final rule adjusting Regulation C's
institutional and transactional coverage thresholds for closed-end
mortgage loans and open-end lines of credit. Effective July 1, 2020,
the final rule permanently raises the closed-end coverage threshold
from 25 to 100 closed-end mortgage loans in each of the two preceding
calendar years. Effective January 1, 2022, when the temporary threshold
of 500 open-end lines of credit expires, the final rule sets the
permanent open-end threshold at 200 open-end lines of credit in each of
the two preceding calendar years.
---------------------------------------------------------------------------
\16\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
issues-final-hmda-rule-provide-relief-smaller-institutions/; https://
www.consumerfinance.gov/about-us/newsroom/cfpb-issues-final-rule-
raising-data-reporting-thresholds-under-hmda/.
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Final Rule: Payday, Vehicle Title, and Certain High-Cost
Installment Loans; Delay of Compliance Date; Correcting Amendments.\17\
In June 2019, the Bureau issued this final rule to delay the August 19,
2019, compliance date for the mandatory underwriting provisions of the
regulation promulgated by the Bureau in November 2017 governing Payday,
Vehicle Title, and Certain High-Cost Installment Loans. Compliance with
the mandatory underwriting provisions was delayed by 15 months to
November 19, 2020. The Bureau also made certain corrections to address
several clerical and nonsubstantive errors it identified in other
aspects of the rule.
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\17\ See https://www.consumerfinance.gov/policy-compliance/
rulemaking/final-rules/payday-vehicle-title-and-certain-high-cost-
installment-loans-delay-compliance-date-correcting-amendments/.
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Advance Notice of Proposed Rulemaking and Notices of Proposed
Rulemaking: Ability-to-Repay and Qualified Mortgages.\18\ In July 2019,
the Bureau issued an ANPR asking for information relating to the
expiration of the temporary Government-Sponsored Enterprise (GSE)
provision (GSE Patch) of the Bureau's Ability-to-Repay and Qualified
Mortgage Rule. Under the GSE Patch, while the GSEs operate under the
conservatorship or receivership of the FHFA, mortgages that are
eligible for purchase or guarantee by one of the GSEs and that satisfy
certain statutory criteria relating primarily to features of the
mortgage are generally deemed to be Qualified Mortgages (QMs). This
provision is scheduled to expire in January 2021. The Bureau's ANPR
sought information to determine whether to propose changes in the
General QM loan definition considering that expiration. Although
outside of the reporting period, it is worth noting that in June 2020
the Bureau issued an NPRM to propose amendments to the General QM loan
definition that would remove the General QM loan definition's 43
percent debt-to-income (DTI) limit and that would instead establish a
pricing threshold (i.e., the difference between the loan's annual
percentage rate and the average prime offer rate for a comparable
transaction) for loans to qualify as General QM loans. General QM loans
would still have to meet the statutory criteria for QM status,
including restrictions related to loan features, upfront costs, and
underwriting. The Bureau also issued a second NPRM that proposed to
extend the GSE Patch until the effective date of the final amendments
to the General QM loan definition to help ensure a smooth and orderly
transition away from the GSE Patch by (among other things) allowing the
Bureau to complete this rulemaking and to avoid any gap between the
expiration of the GSE Patch and the effective date of the proposed
alternative. The Bureau did not propose to amend the provision stating
that the Temporary GSE QM loan category would expire if the GSEs exit
conservatorship. Finally, the Bureau is considering adding a new
``seasoning'' definition of QM, which would be proposed in a separate
NPRM. This definition would create an alternative pathway to QM safe-
harbor
status for certain mortgages when the borrower has consistently made
timely payments for a specified period.
---------------------------------------------------------------------------
\18\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
releases-qualified-mortgage-anpr/; see also https://
www.consumerfinance.gov/about-us/newsroom/cfpb-takes-steps-address-gse-
patch/.
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Assessment of Significant Rule: TRID Rule (the Truth in Lending Act
and Real Estate Settlement Procedures Act).\19\ In November 2019, the
Bureau publicly initiated the assessment of the TRID rule by requesting
public comment on its plans to conduct the assessment. Section 1022(d)
of the Dodd-Frank Act requires the Bureau to conduct an assessment of
each significant rule or order adopted by the Bureau under Federal
consumer financial law. Under Section 1022(d)(2), assessment reports
must be published not later than 5 years of the effective date of the
significant rule or order. As part of its assessment, the Bureau
intends to address the TRID rule's effectiveness in meeting the
purposes and objectives of Title X of the Dodd-Frank Act, the specific
goals of the rule, and other relevant factors. The public was invited
to comment on the feasibility and effectiveness of the assessment plan,
recommendations to improve the assessment plan, and recommendations for
modifying, expanding, or eliminating the TRID rule, among other
questions.
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\19\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
to-assess-integrated-mortgage-disclosure-rule/.
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Business Lending Data (Regulation B). The Bureau is working to
develop rules to implement Section 1071 of the Dodd-Frank Act. Section
1071 amended the Equal Credit Opportunity Act (ECOA) to require
financial institutions to collect, report, and make public certain
information concerning credit applications made by women-owned,
minority-owned, and small businesses. The Bureau resumed pre-rulemaking
activities on Section 1071. In November 2019, the Bureau conducted a
symposium on small business loan data collection. In addition, the
Bureau has developed, and earlier this month started conducting, a
survey of lenders to obtain estimates of one-time costs lenders of
varying sizes would incur to collect and report data pursuant to
Section 1071. The Bureau's next step 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, to hear from representatives of small businesses on which
Bureau rules to implement Section 1071 may impose costs.
Although also outside of the reporting period, the Bureau recently
took several notable steps in our ongoing rulemaking activity.
Notice of Proposed Rulemaking: Amendments to Regulation Z to
Facilitate Transition From LIBOR.\20\ In June 2020, the Bureau released
a NPRM concerning the anticipated discontinuation of LIBOR, including
proposing examples of replacement indices that meet Regulation Z
standards for both open-end and closed-end credit products. Some
consumer credit contracts use LIBOR as a reference rate. This proposed
rule would facilitate creditors for home equity lines of credit
(HELOCs) (including reverse mortgages) and card issuers for credit card
accounts transitioning existing accounts away from LIBOR if certain
conditions are met to an alternative index on or after March 15, 2021,
well in advance of LIBOR's anticipated expiration at the end of 2021.
The proposed rule also would address change-in-terms notice provisions
for HELOCs and credit card accounts and how they apply to the
transition away from LIBOR, to ensure that consumers are informed of
the replacement index and any adjusted margin. The Bureau's work is
also designed to facilitate compliance by open-end and closed-end
creditors and to lessen the financial impact to consumers by providing
examples of replacement indices that meet Regulation Z standards. The
proposed rule also would address how the rate reevaluation provisions
applicable to credit card accounts apply following the transition from
LIBOR to a replacement index, to facilitate compliance by card issuers.
Commencing a notice-and-comment rulemaking will enable the Bureau to
facilitate compliance by creditors with Regulation Z as they transition
away from LIBOR.
---------------------------------------------------------------------------
\20\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
facilitates-libor-transition/.
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Notice of Proposed Rulemaking: Higher-Priced Mortgage Loan Escrow
Exemption.\21\ In July 2020, the Bureau released a proposal to amend
Regulation Z, which implements the Truth in Lending Act (TILA), as
mandated by section 108 of the EGRRCPA. The amendments would exempt
certain insured depository institutions and insured credit unions from
the requirement to establish escrow accounts for certain higher-priced
mortgage loans. Prior to the enactment of the Dodd-Frank Act, the
Federal Reserve Board (Board) issued a rule requiring the establishment
of escrow accounts for payment of property taxes and insurance for
certain ``higher-priced mortgage loans,'' a category which the Board
defined to include what it deemed to be subprime loans. Pursuant to the
Dodd-Frank Act, the Bureau in 2013 issued a rule creating an exemption
from the escrow requirement for creditors with under $2 billion in
assets and meeting other criteria. Section 108 of the EGRRCPA, codified
at 15 U.S.C. 1639d, directs the Bureau to conduct a rulemaking to
exempt from the escrow requirement loans made by certain creditors with
assets of $10 billion or less and meeting other criteria. In
anticipation of future rulemaking activity, the Bureau conducted a
preliminary analysis of the number of lenders potentially impacted by
implementation of Section 108 of EGRRCPA. The Bureau released the
analysis in late summer 2019 and it showed that a limited number of
additional lenders would be exempt under Section 108 of EGRRCPA once
implemented by rule. The comment period for the July proposed rule is
60 days from its upcoming publication in the Federal Register, and the
Bureau plans to consider the comments and move expeditiously to issue a
final rule providing the new exemption.
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\21\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
issues-proposed-rule-escrow
-exemptions-high-priced-mortgage-loans/.
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Final Rule: Payday, Vehicle Title, and Certain High-Cost
Installment Loans, Revocation.\22\ Earlier this month, the Bureau
issued a final rule concerning small-dollar lending in order to
maintain consumer access to credit and competition in the marketplace.
The final rule rescinds the mandatory underwriting provisions of the
2017 rule after reevaluating the legal and evidentiary bases for these
provisions and finding them to be insufficient. The final rule does not
rescind or alter the payments provisions of the 2017 rule. In addition,
the Bureau denied a petition for rulemaking from a provider asking to
exclude debit cards from the Payment Provisions of the 2017 rule and
issued a statement on the Bureau's approach to the payment provisions
for loans large enough to exceed the Regulation Z coverage threshold.
---------------------------------------------------------------------------
\22\ See https://www.consumerfinance.gov/f/documents/
cfpb_supervisory-highlights_issue-19_092019.pdf.
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Ensuring a Culture of Compliance
Another tool for the prevention of harm is the Bureau's supervisory
authority, which can keep violations of laws and regulations from
happening in the first place. Supervision is the heart of this agency--
something underscored by the percentage of our personnel and resources
dedicated to conducting exams. I am focused on ensuring we use this
tool as effectively and efficiently as possible and that we apply it in
a consistent way. Heading trouble off at the pass may not grab big
headlines, but it will prevent a lot of headaches for consumers and
industry.
During the period covered by the Spring 2020 Report, the Bureau
published three issues of Supervisory Highlights:\23\ Winter 2020,
covering supervisory findings in the areas of debt collection, mortgage
servicing, small-dollar lending, and student loan servicing; Consumer
Reporting Special Edition, covering supervisory findings in the
consumer reporting area; and Summer 2019, covering supervisory findings
in the areas of automobile loan origination, credit card account
management, debt collection, furnishing, and mortgage origination.
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\23\ See Winter 2020, https://files.consumerfinance.gov/f/
documents/cfpb_supervisory-highlights_issue-21_2020-02.pdf; Consumer
Reporting Special Edition, https://files.consumer
finance.gov/f/documents/cfpb_supervisory-highlights_issue-
20_122019.pdf; Summer 2019,
https://files.consumerfinance.gov/f/documents/cfpb_supervisory-
highlights_issue-19_092019
.pdf.
---------------------------------------------------------------------------
In addition, the Bureau's Fair Lending Supervision program assesses
compliance with Federal fair lending consumer financial laws and
regulations at banks and nonbanks over which the Bureau has supervisory
authority. As a result of the Bureau's efforts to fulfill its fair
lending mission in this reporting period, the Bureau's Fair Lending
Supervision program initiated 14 supervisory events at financial
services institutions under the Bureau's jurisdiction to determine
compliance with Federal laws intended to ensure the fair, equitable,
and nondiscriminatory access to credit for both individuals and
communities, including the ECOA and HMDA. In the current reporting
period, the Bureau issued more matters requiring attention (MRAs) or
memoranda of understanding (MOUs) than in the prior period. MRAs and
MOUs direct entities to take corrective actions and are monitored by
the Bureau through follow-up supervisory events.
Holding Bad Actors To Account and Deterrence Through Enforcement
Education, rulemaking, and supervision alone will not prevent every
violation. A purposeful enforcement regime can foster compliance, deter
unlawful conduct, help prevent consumer harm, and right wrongs. Public,
decisive action against wrongdoers sends a clear message to the
marketplace--one that should deter unlawful behavior and support a
level playing field--all while reaching a just outcome for harmed
consumers. However, I am also committed to ensuring that we move as
expeditiously as possible to resolve enforcement matters, whether
through public action or a determination that a particular
investigation should be closed.
During the period covered by the Spring 2020 Report, the Bureau
brought, or continued ongoing litigation in, numerous public
enforcement actions for violations of Federal consumer financial law.
These activities included: an action against a bank for violating the
Consumer Financial Protection Act's (CFPA) prohibition against unfair
and abusive acts or practices, as well as TILA and the Truth in Savings
Act and their implementing regulations;\24\ three actions against
brokers of contracts offering high-interest credit to veterans, many of
whom were disabled, and to other consumers for violating the CFPA's
prohibition against deceptive and unfair acts or practices and against
providing substantial assistance to deceptive and unfair acts or
practices of others;\25\ an action against a bank for violating TILA
and its implementing Regulation Z, including TILA provisions passed
under the Fair Credit Billing Act (FCBA) and the CARD Act;\26\ an
action against certain entities and individuals for violating the Fair
Credit Reporting Act (FCRA), the CFPA, and the Telemarketing Sales Rule
(TSR) by wrongfully obtaining consumer report information, charging
unlawful advance fees, and engaging in deceptive acts and practices in
connection with the marketing and sale of student loan debt relief
products and services;\27\ an action against a company and its owner
for violating the CFPA by misrepresenting the true cost of credit for
loans for airline tickets to servicemembers and their families, failing
to provide certain required disclosures about the terms of credit in
violation of TILA and Regulation Z, and failing to disclose the total
costs of purchasing airline tickets through financing in the course of
telemarketing the loans in violation of the TSR;\28\ an action against
a company for engaging in deceptive practices in violation of the CFPA
by overcharging servicemembers and their families for a debt-
cancellation product that was offered in connection with loans for
airline tickets, and for violating Regulation V, which implements
FCRA;\29\ an action against an employment background screening company
for violating FCRA;\30\ an action against debt relief companies for
engaging in deceptive practices and charging unlawful advance fees in
connection with the marketing and sale of student loan debt relief
services to consumers;\31\ an action against a debt collection company
and its owner for violating the CFPA, FCRA, Regulation V, and the
FDCPA;\32\ an action against a foreclosure relief services company, its
CEO, and its auditor, for engaging in deceptive and abusive acts and
practices and charging unlawful advance fees in connection with the
marketing and sale of financial advisory and mortgage assistance relief
services to consumers;\33\ an action against a debt-collection company
for violating the FDCPA and CFPA;\34\ an action against a remittance
transfer services provider for violating the Remittance Transfer Rule
under Electronic Fund Transfer Act (EFTA), and the CFPA;\35\ an action
against a credit reporting agency for engaging in unfair and deceptive
practices in connection with a data breach that impacted approximately
147 million consumers;\36\ an action against a company set up to hold
and manage private student loans for providing substantial assistance
to unfair acts and practices;\37\ an action against a mortgage lender
for violating HMDA and Regulation C by submitting mortgage-loan data
for 2014 to 2017 that contained errors;\38\ an action against a
mortgage servicer for violating the CFPA, the Real Estate Settlement
Procedures Act, and TILA;\39\ an action against a debt collection law
firm for violating the FDCPA and CFPA;\40\ an action against a company
for violating the TSR by requesting and receiving payment of prohibited
upfront fees for their credit repair services and for violating the TSR
and CFPA by making deceptive representations or substantially assisting
others in doing so;\41\ and an action against a student loan servicing
company for engaging in unfair practices in violation of the CFPA by
failing to adjust in a timely manner principal balances of student
loans made under the Federal Family Education Loan Program.\42\
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\24\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
files-suit-against-fifth-third
-for-allegedly-opening-unauthorized-accounts-enrolling-consumers-in-
unauthorized-products/.
\25\ See https://www.consumerfinance.gov/policy-compliance/
enforcement/actions/candy-kern-fuller-howard-sutter-iii-and-upstate-
law-group-llc/; https://www.consumerfinance.gov/policy-compliance/
enforcement/actions/snyder-et-al/; https://www.consumerfinance.gov/
about-us/newsroom/cfpb-arkansas-state-ag-settle-brokers-high-interest-
credit-offers/.
\26\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
announces-action-against-citizens-bank/.
\27\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
settles-monster-loans-thomas-chou-sean-cowell-and-related-companies/;
see also https://www.consumerfinance.gov/about-us/newsroom/cfpb-
announces-action-against-monster-loans-lend-tech-loans-and-student-
loan-debt-relief-companies/.
\28\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
settles-military-travel-lender-and-servicer/.
\29\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
settles-military-travel-lender-and-servicer/.
\30\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
settles-employment-back
ground-screening-company/.
\31\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
announces-action-again
st-student-loan-debt-relief-operation/.
\32\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
files-suit-against-fair-collections-outsourcing-and-michael-e-sobota/.
\33\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
files-suit-andrew-lehman-michael-carrigan-proposed-settlement/.
\34\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
settles-asset-recovery-associates/.
\35\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
settles-maxitransfers-corporation/.
\36\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
ftc-states-announce-settlement-with-equifax-over-2017-data-breach/.
\37\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
settles-student-cu-connect-cuso-over-itt-private-loan-program/.
\38\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
settles-freedom-mortgage
-corporation/.
\39\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
settles-bsi-financial-ser-
vices/.
\40\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
files-suit-against-forster-garbus-llp/.
\41\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
files-suit-against-lexing-
ton-law-pgx-holdings-and-related-entities/.
\42\ See https://www.consumerfinance.gov/about-us/newsroom/bureau-
settles-conduent-educa-tion-services/.
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In addition to the actions taken above, the Bureau referred four
matters to the U.S. Department of Justice (DOJ) about discrimination
pursuant to Section 706(g) of the ECOA. The referrals involved
redlining in mortgage origination based on race and/or national origin,
discrimination in mortgage origination based on receipt of public
assistance income, and discrimination in auto origination based on race
and national origin. Like other Federal bank regulators, the Bureau is
required to refer matters to the DOJ when it has reason to believe that
a creditor has engaged in a pattern or practice of lending
discrimination.
During the reporting period, the Bureau continued to pursue ongoing
litigation, as well as implementation and oversight of compliance with
the pending public enforcement orders that were entered by Federal
courts or issued by the Bureau's Director in prior years.
Activities and Data Supporting All of the Tools
The mission of the Bureau is to protect consumers, which, as I have
discussed today, we carry out through education, regulation,
supervision, and enforcement. These tools are all provided in the Dodd-
Frank Act, and I am determined to use the Bureau's capabilities to
achieve the best results for American consumers. That includes using
research, market monitoring, stakeholder outreach, and the complaint
process to inform the use of our tools. Complaints, along with other
inputs, give us insight into consumer experiences in the marketplace
that we analyze and use to improve our mission execution. Related to
the pandemic, the Bureau has experienced record numbers of complaints
that underscore this point. In March 2020, we saw a notable increase in
inquiries related to trouble making mortgage payments. Those inquiries
also highlighted concerns about when deferred payments would be due
after the CARES Act forbearance period. The complaints, in addition to
stakeholder feedback from the mortgage industry and consumer advocates
among others, led the Bureau to work expeditiously with our interagency
colleagues to address the lump sum payment issue and the concerns
regarding consumer confusion around CARES Act forbearance options.
During the reporting period, we also continued to roll out
enhancements to the complaint database announced in September 2019.
Those enhancements included integration of financial information and
resources into the complaint process to help address questions and
better inform consumers before they submit a complaint, as well as
modification of disclaimers to provide better context to the published
data. Although outside of the reporting period, it is worth noting that
in April 2020 and July 2020, respectively, the Bureau unveiled a
geospatial and trends view. The new trends and map views build upon the
existing capability to filter and search, and emphasize aggregation and
analysis of information, while continuing to make all the underlying
data available for closer examination. These new capabilities allow
users to gain deeper insight into changes in the location, type, and
volume of complaints over time, which provides valuable context into
consumers' experiences in the financial marketplace.
While the Bureau publishes complaint data and reports on complaint
trends annually in the Consumer Response Annual Report, here is the
data for the period April 1, 2019, through March 31, 2020. The Bureau
received approximately 372,700 consumer complaints.\43\ This is an
approximately 9 percent increase from the prior reporting period.\44\
Consumers submitted approximately 84 percent of these complaints
through the Bureau's website and 7 percent via telephone calls.
Referrals from other state and Federal agencies accounted for 6 percent
of complaints. Consumers submitted the remainder of complaints by mail,
email, and fax. The Bureau sent approximately 304,200 (82 percent) of
complaints received to companies for review and response.\45\ Companies
responded to approximately 95 percent of complaints that the Bureau
sent to them for response during the period. The remaining complaints
were either pending response from the company at the end of the period
or did not receive a response. Company responses typically include
descriptions of steps taken or that will be taken in response to the
consumer's complaint, communications received from the consumer, any
follow-up actions or planned follow-up actions, and a categorization of
the response. Companies' responses describe a range of relief. Examples
of relief include correcting inaccurate data provided or reported in
consumers' credit reports; stopping harassing calls from debt
collectors; correcting account information; issuing corrected
documents; restoring account access; and, addressing formerly unmet
customer service issues. Ninety-nine percent of complaints sent to
companies received timely responses.
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\43\ This analysis excludes multiple complaints submitted by a
given consumer on the same issue and whistleblower tips. The Bureau
does not verify all the facts alleged in complaints and does not
publish complaints in the Consumer Complaint Database until the company
responds, confirming a commercial relationship with the consumer, or
after it has had the complaint for 15 days, whichever comes first. For
more information on our complaint process refer to the Bureau's website
at https://www.consumerfinance.gov/complaint/process.
\44\ The prior reporting period, October 1, 2018, to September 30,
2019, reported 342,500 consumer complaints. See Consumer Fin. Prot.
Bureau, Semi-Annual Report Fall 2019 (Feb. 2020), available at https://
files.consumerfinance.gov/f/documents/cfpb_semi-annual-report-to-
congress_fall-2019.pdf.
\45\ The Bureau referred 13 percent of the complaints it received
to other regulatory agencies and found 5 percent to be incomplete. At
the end of this period, 0.4 percent of complaints were pending with the
consumer and 0.4 percent were pending with the Bureau. Percentages in
this section of the report may not sum to 100 percent due to rounding.
---------------------------------------------------------------------------
Legislative Reforms
Earlier this year, the Bureau requested that Congress advance
proposed legislation \46\ that would authorize the Bureau to award
whistleblowers who report violations of Federal consumer financial
law.\47\ The proposal would amend Title X of the Dodd-Frank Act and
provide authority to establish a whistleblower award program. The
incentive created for employees to report wrongdoing to the Bureau will
assist in advancing enforcement cases, especially as it relates to fair
lending violations. Under the proposed legislation, in cases where a
whistleblower provides voluntary information that leads to a successful
enforcement action, the Bureau will be able to pay an award based on a
percentage of the monetary sanctions collected in the action. The
legislative proposal was part of a suite of initiatives to advance one
of my key priorities: prevention of consumer harm.
---------------------------------------------------------------------------
\46\ See https://www.consumerfinance.gov/documents/8627/
cfpb_whistleblower-proposed-statutory-text_2020-03.pdf.
\47\ See https://www.consumerfinance.gov/about-us/newsroom/cfpb-
takes-key-steps-prevent-consumer-harm-proposes-whistleblower-award-
program/.
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In addition, in 2019, the Bureau requested that Congress provide us
with clear legal authority to supervise financial institutions for
Military Lending Act compliance. As part of that request, the Bureau
transmitted proposed legislative language that would achieve this goal.
I continue to stand ready to work with Members of this Committee to
provide the Bureau with this authority to assist in our work to prevent
harm to our servicemembers and their families. The Bureau continues to
use its education and enforcement tools in this space, but the
authority to supervise would make these efforts even more effective.
Conclusion
My testimony today does not attempt to cover all the things the
Bureau does to meet our mission. The full Report, which is enclosed
with my testimony, covers more than I can highlight in the time I have
today. As reflected in my opening message in the Report, I want to
close my testimony today by commending the work of all Bureau
employees. During this global health emergency, our team truly rose to
the occasion as they grappled with challenges in their own lives,
protecting their health and the health of their loved ones, and working
from home. In the midst of COVID-19, the Bureau staff continue to be
focused on protecting consumers in the financial marketplace. That
effort entails ensuring consumers have information on their rights,
protections, and options as well as ensuring financial institutions are
in compliance with Federal consumer financial law. We will continue to
monitor the evolving landscape across all the markets we regulate. And
lest I forget, the work of this Committee helps all of us at CFPB meet
our mission. I look forward to our continued work in the next year on
behalf of American consumers.
Thank you again for the opportunity to present this Semi-Annual
Report of the Bureau's work in support of American consumers.
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN FROM KATHLEEN
L. KRANINGER
Preemption
Q.1. Since you became Director, has the OCC consulted with the
CFPB regarding a preemption determination under section 25b of
the National Bank Act?
A.1. The OCC has not consulted with the Consumer Financial
Protection Bureau (Bureau) regarding a preemption determination
under section 25b of the National Bank Act. In addition, the
Bureau is not aware of anyone raising OCC preemption
determinations that were subject to the consultation
requirements of section 25b.
Payday Lending
Q.2.a. On March 9, 2020, the Bureau joined other financial
regulators to issue a joint statement encouraging
``responsible'' small-dollar lending in response to COVID-
19.\1\ The statement did not provide any guidelines on what the
Bureau considers a ``responsible'' small-dollar loan, such as
an interest rate cap, a prohibition on reborrowing, or require
the lender to determine whether the consumer has the ability to
repay the loan.
---------------------------------------------------------------------------
\1\ https://files.consumerfinance.gov/f/documents/
cfpb_interagency-statement_small-dollar-lending-covid-19_2020-03.pdf.
---------------------------------------------------------------------------
Does the Bureau have any specific parameters or
characteristic for assessing what constitutes a ``responsible''
small dollar loan? If so, please identify each parameter or
characteristic.
A.2.a. The March 9, 2020, statement, which predated the
declaration on March 13, 2020, of an emergency by the President
due to the COVID-19 pandemic, was not focused on small-dollar
loans. Rather, in that joint statement the Federal financial
institution regulators and state regulators encouraged
financial institutions to meet the financial needs of customers
and members affected by the pandemic.
Subsequently, on March 26, 2020, the Bureau signed on to a
``Joint Statement Encouraging Responsible Small-Dollar Lending
in Response to COVID-19,'' along with a number of other Federal
agencies, recognizing the potential for the pandemic ``to
adversely affect the customers and operations of banks, savings
associations and credit unions (referred to in the statement
collectively as ``financial institutions''). The statement
specifically encouraged financial institutions to offer
responsible small-dollar loans to both consumers and small
businesses. In the statement, the agencies stated that they
``recognize the important role that responsibly offered small-
dollar loans can play in helping customers meet their needs for
credit due to temporary cashflow imbalances, unexpected
expenses, or income short-falls during periods of economic
stress or disaster recoveries.'' The focus of the March 26
joint statement, which is relatively brief, is on small-dollar
lending by financial institutions.
The March 26 joint statement is broad enough to encompass a
range of consumer and financial institution circumstances and a
range of statutory authorities. Neither the Bureau nor the
other financial regulators that issued the statement have
defined what a ``responsible'' small-dollar loan would be
pursuant to this statement. The joint statement provides, in
part, that ``The current regulatory framework allows financial
institutions to make responsible small-dollar loans. Such loans
can be offered through a variety of loan structures that may
include, for example, open-end lines of credit, closed-end
installment loans, or appropriately structured single payment
loans.''
Q.2.b. Does the Bureau consider a loan that a consumer does not
have the ability to repay ``responsible''?
A.2.b. Please see response to Q.2.a.
Q.2.c. Is there an interest rate above which the Bureau would
not consider a small-dollar loan ``responsible'' Does the
bureau consider a loan with a 100 percent APR, 1,000 percent,
or 10,000 percent APR ``responsible''?
A.2.c. Please see the response to Q.2.a. In addition, the
Bureau notes that section 1027(o) of the Dodd-Frank Act
expressly precludes the Bureau from ``establish[ing] a usury
limit applicable to an extension of credit offered or made by a
covered person to a consumer, unless explicitly authorized by
law.''
Q.2.d. The Bureau's statement ``encourages'' financial
institutes to consider workout strategies that ``mitigat[] the
need to reborrow.'' Does the Bureau consider a loan
``responsible'' if a consumer cannot repay the loan and must
reborrow?
A.2.d. Please see the response to Q.2.a. In addition, the joint
statement describes small-dollar lending by financial
institutions during the COVID-19 emergency and emphasizes that
``[f]or all products, financial institutions should offer loans
in a manner that is consistent with safe and sound practices,
provides fair treatment of consumers, and complies with
applicable statutes and regulations, including consumer
protection laws.'' The Bureau and other joining agencies
recognize in the statement that there may be situations where
the consumer must reborrow.
Q.2.e. Does the Bureau believe a loan product that requires
multiple periods of reborrowing is a ``responsible'' product?
A.2.e. Please see the response to Q.2.d.
Q.3.a. On April 30, 2020, the New York Times published an
internal memorandum written by a CFPB economist who worked on
the payday rulemakings. That memorandum that contains detailed
concerns regarding the conduct of your political appointees
during the payday rulemaking process. The memorandum is
detailed--it includes dates, specific individuals, and
supporting emails and memoranda.
Have you taken any steps to investigate the concerns set
forth in the memorandum? If so, please describe, including
whether you have taken any disciplinary or other action against
any individual.
A.3.a. The memorandum presents the author's opinions and views
about many different Bureau employees and many different
actions by them. It is not clear from the question which
employees, if any, would be subject to disciplinary action for
what conduct described in the memorandum. Moreover, if the
agency has taken disciplinary action against any individual
related to the memorandum, any such action would be legally
protected from disclosure except in certain circumstances.
As Director, I am proud of the staff of the Bureau and
continually impressed by their dedication to the agency's
mission. Within any organization, there will be differing
opinions and viewpoints among staff and with any major decision
of the Bureau, as well as countless subsidiary decisions, there
are often views and ideas competing for consideration. Staff at
the Bureau know that I welcome these competing views as this
results in better decisions. Bureau staff also know that the
decision regarding the agency's action, after considering the
best advice and analysis the staff brings forward, rests with
me as the Director.
Q.3.b. One of the listed concerns is that the Bureau's front
office ``predetermine[] . . . the course of action for the
NPRMs'' (notices of proposed rulemakings). Do you contend that
it is appropriate to predetermine a course of action prior to
concluding the rulemaking process under the Administrative
Procedures Act? Please respond with a ``Yes'' or ``No'' and the
reasons for the response.
A.3.b. Under the Administrative Procedure Act, an agency must
formulate a proposed rule and then seek public comment on it.
An agency therefore must decide what issues to include in a
Notice of Proposed Rulemaking (NPRM) for comment, such as
decisions the Bureau made as to the issues on which to seek
comment through the 2019 NPRM. After considering the relevant
matter in the rulemaking record, including that which is
provided through public comments, an agency makes decisions on
these issues as necessary and appropriate to issue a final
rule. The Bureau did not determine the outcome of the payday
rulemaking process, that is, whether to revoke the rule's
mandatory underwriting provisions, until after it considered
the comments and other relevant matter. Specifically, the
Bureau determined the outcome of the rulemaking when it
finalized its 2020 Payday Rule on July 7, 2020, with the rule
published in the Federal Register on July 22, 2020. I
maintained an open mind throughout the rulemaking process as to
whether and what final rule the Bureau might issue.
When the Bureau chooses to employ its rulemaking authority,
it engages in a serious and thorough deliberative process and
consults broadly with other appropriate Federal agencies, state
counterparts, and the Bureau's many stakeholders. As required
by law, the Bureau considers the benefits and costs of any
rulemaking on consumers and market participants, including, as
specifically required by its organic statute, ``the potential
reduction of access by consumers to consumer financial products
or services resulting from such a rule.'' When the Bureau
publishes an NPRM,
it includes its assessment of the benefits and costs of the
proposed rule. That assessment is publicly available as part of
the NPRM and the Bureau solicits feedback on its assessment, as
well as the policy and legal judgments underlying any proposal,
in the form of public comments. Those comments were considered
and addressed in the final rule. The Bureau followed this
process here and believes that the merits of its analysis
should be judged on the basis of the final rule itself.
Q.3.c. According to the memorandum, the CFPB did not engage in
any cost-benefit analysis to support the decision to rulemaking
to reconsider the 2017 Payday Rule. Did the CFPB engage in
cost-benefit analysis to support the rulemaking to reconsider
the 2017 Payday Rule? If not, what is the Bureau's reason for
not doing so?
A.3.c. Please see the response to Q.3.b.
Q.3.d. According to the memorandum, Anthony Welcher (one of
your political appointees) informed industry participants at
the Financial Services Center of American Annual Conference in
Las Vegas on October 4, 2019, that the Bureau would be revoking
the ability-to-repay provisions of the 2017 Payday Rule.
According to the memorandum, at the time the Bureau was also
telling Congress that the Bureau had not made a decision on
whether to revoke the ability-to-repay provisions of the 2017
Payday Rule.
Did Mr. Welcher disclose to attendees at the Financial
Services Center of American Annual Conference in Las Vegas on
October 4, 2019, that the Bureau would be revoking the ability-
to-repay provisions of the 2017 Payday Rule?
A.3.d. This annual conference took place in October 2018 before
I became Director in December 2018. I do not have knowledge of
what Mr. Welcher may have said at the conference and he is no
longer on staff at the Bureau.
Q.3.e. On what date did the Bureau decide that it would revoke
the ability-to-repay provisions of the 2017 Payday Rule?
A.3.e. After considering comments from the public on its NPRM,
the Bureau finalized its 2020 Payday Rule, which revoked the
mandatory underwriting provisions of the 2017 Payday Rule, on
July 7, 2020. The rule was published in the Federal Register on
July 22, 2020.
Q.3.f. Do you contend that it was appropriate for Mr. Welcher
to disclose to conference attendees that the Bureau had decided
to revoke the ability-to-repay provisions of the 2017 Payday
Rule? Please respond with a ``Yes'' or ``No'' and the reasons
for the response.
A.3.f. Please see the response to Q.3.d.
Q.4.a. During my questioning at the July 29, 2020, hearing, you
did not answer certain questions I asked about the payday
rulemaking process. The questions below do not ask whether any
particular conduct occurred, but instead ask for the Bureau's
position on requirements under the Administrative Procedures
Act.
Under the Administrative Procedures Act, should the CFPB
determine the outcome before it begins the rulemaking process--
yes or no?
A.4.a. Under the Administrative Procedure Act, an agency
formulates a proposed rule and then seeks public comment on it.
An agency issues a final rule after considering the relevant
matter in the rulemaking record, including that which is
provided through public comments. The Bureau did not determine
the outcome of the payday rulemaking process, that is, whether
to revoke the rule's mandatory underwriting provisions, until
after it considered the comments and other relevant matter.
Specifically, the Bureau determined the outcome of the
rulemaking when it finalized its 2020 Payday Rule on July 7,
2020, with the rule published in the Federal Register on July
22, 2020.
Q.4.b. Under the Administrative Procedures Act, should the CFPB
ignore research that reaches a conclusion that the agency head
disagrees with--yes or no?
A.4.b. No, and the Bureau considered all the relevant research
of which it was aware in proposing the final rule and in
issuing the final rule. See 2019 NPRM: Payday, Vehicle Title,
and Certain High-Cost Installment Loans, 84 FR 4252, 4281 (Feb.
14, 2019), and 2020 Final Rule: Payday, Vehicle Title, and
Certain High-Cost Installment Loans, 85 FR 44382, 44431 (July
22, 2020).
Q.4.c. Under the Administrative Procedures Act, should the CFPB
ignore comments from the public--yes or no?
A.4.c. No, and the Bureau considered all of the approximately
197,000 public comments submitted in response to the 2019 NPRM
before deciding to issue the 2020 Final Rule (85 FR 44382,
44431 (July 22, 2020)).
Q.5.a. The OCC recently reaffirmed a 2003 Advisory Letter
stating that in its experience ``a departure from fundamental
principles of loan underwriting generally forms the basis of
abusive lending without a determination that a borrower can
reasonably be expected to repay the loan.''\2\
---------------------------------------------------------------------------
\2\ https://occ.gov/news-issuances/Federal-register/2020/nr-occ-
2020-97a.pdf.
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Do you agree with the OCC that it is abusive to make a loan
without a determination that a borrower can reasonably be
expected to repay the loan? If yes, explain how you are
ensuring that lenders determine that a borrower can reasonably
be expected to repay the loan. If no, explain why you do not
believe that all lenders should determine that a borrower can
repay the loan?
A.5.a. The cited passage from 2003 OCC guidance relates to that
agency's exercise of its statutory responsibilities in
supervising national banks, with an emphasis on issues
associated with mortgage lending. It does not analyze the
specific set of issues regarding small-dollar credit products
that were relevant to the Bureau's 2020 Payday Rule. The
preamble to the Bureau's rule explains the basis for the
Bureau's decision, under its statutory framework, to revoke the
mandatory underwriting provisions for small-dollar lending.
Among other reasons, revoking those provisions ensures that
consumers have access to credit and ensures competition in that
market. The Bureau is committed to ensuring that consumers can
make well-informed choices among the small-dollar products
available to them. To assist in achieving that objective, the
Bureau announced that it will undertake new research focusing
on whether and how additional information on payday loans might
improve consumer understanding.
Q.6. You have repeatedly talked about the importance of
consumer choice and disclosure. At the July 29, 2020, hearing,
you stated the Bureau was ``enabling consumers to understand
products.'' What concrete steps have you taken to ensure that
consumers understand payday products?
A.6. The Bureau has several consumer education resources about
payday loans. Payday loans are one of the featured topics under
the ``Consumer Tools'' section of the Bureau's homepage. Within
the payday loans page, consumers can learn how payday loans
work, how to assess if a payday loan is a good option for the
individual's circumstances, typical costs and fees associated
with a payday loan, how to resolve common issues, and
consumers' rights associated with payday loans.
The Bureau has also published more than 30 ``Ask CFPB''
questions about payday loans. ``Ask CFPB'' is a series of
commonly asked questions and answers about financial topics
that are presented in an easy to understand manner.
Additionally, there is a section on payday loans in the
Bureau's Your Money, Your Goals toolkit that explains how
payday loans work and how to calculate the costs and fees
associated with the loan. Your Money, Your Goals is a suite of
financial empowerment tools and resources that social services
staff and volunteers who work with economically vulnerable
consumers can use to build their own financial skills and
confidence and help the people they serve better manage their
finances.
Q.7. When the CFPB finalized the 2020 Payday Rescission rule,
the CFPB press release indicated that the Bureau would be
starting a research project on payday lending disclosures.
Please provide details as to the number of staff working on
that project, what their mandate is, and what the expected
timeframe is, and what, if anything, staff have learned to
date?
A.7. Several researchers and other Bureau staff in the Division
of Research, Markets, and Regulation are working on the payday
disclosure research. The proposed research focuses on whether
and how additional information on payday loans might improve
consumer understanding. The current disclosure testing timeline
anticipates a completion date for the qualitative testing in
2021. The Bureau has no findings to share at this time given
cognitive interviews (formal testing) have not yet started,
though the Bureau anticipates issuing the Federal Register
notice for a 30-day public comment period this fall.
Debt collection
Q.8. The CFPB has the authority under the FDCPA to prohibit
debt collectors from engaging in any conduct ``the natural
consequence of which is to harass, oppress, or abuse.'' Given
the current economic crisis, why hasn't the CFPB considered
emergency relief to halt certain debt collection activities?
Please state whether the CFPB will pursue the following (and if
not, explain why not).
A.8. The Bureau will continue to use all of its tools to
address the acts and practices of debt collectors that violate
the law and cause injury to consumers. On March 20, 2020 (and
updated on June 17, 2020), the Bureau published information for
consumers specific to debt collection and the potential
economic impact of coronavirus.\3\ Much of the other
substantial support the Bureau has given consumers is intended
at least in part to help them take steps that would help them
manage their credit and prevent their debts from going into
collection.
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\3\ https://www.consumerfinance.gov/about-us/blog/coronavirus-and-
dealing-debt-tips-help-ease-impact/.
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The Bureau is currently finishing a major update of
consumer protections in debt collection. The Bureau issued an
NPRM on May 7, 2019, and received over 14,000 comments in
response. The proposal would provide consumers with specific
protections against harassment by debt collectors and
straightforward options to address or dispute debts. Among
other things, the NPRM proposal would establish clear, bright-
line limits on the number of calls debt collectors may place to
reach consumers on a weekly basis; clarify how collectors may
communicate lawfully using technologies, such as voicemails,
emails and text messages, that have developed since the Fair
Debt Collection Practices Act (FDCPA) passage in 1977; and
require collectors to provide additional information to
consumers to help them identify debts and respond to collection
attempts.
The Bureau issued a Supplemental NPRM on February 21, 2020.
The proposal would prohibit collectors from using nonlitigation
means (such as calls) to collect on time-barred debt unless
collectors disclose to consumers during the initial contact and
on any required validation notice that the debt is time-barred.
Consumer research conducted by the Bureau found that a time-
barred debt disclosure helps consumers understand that they
cannot be sued if they do not pay. That can help consumers make
better informed decisions whether to pay the debt or not.
In accordance with the Administrative Procedure Act, the
Bureau has carefully considered comments received on the May
2019 proposed rule that would prescribe rules under Regulation
F to govern the activities of debt collectors, as that term is
defined under the FDCPA and expects to issue a final rule in
October 2020. In December 2020, the Bureau also plans to issue
a final rule on its supplemental proposal issued in February
2020, which addressed time-barred debt disclosures, and any
remaining proposed issues. The Bureau extended the deadline for
comments on that proposal to August 4, 2020, in light of the
COVID-19 pandemic.
Q.8.a. Issue an interim rule or guidance banning collectors
from threatening or filing collection lawsuits?
A.8.a. Please see the response to question 8.
Q.8.b. Issue an interim rule or guidance banning in-person debt
collection during the pandemic?
A.8.b. Please see the response to question 8.
Q.8.c. Issue an interim rule or guidance prohibiting bank
account or wage garnishment during the pandemic?
A.8.c. Please see the response to question 8.
Q.8.d. Issue an interim rule or guidance prohibiting
garnishment or offset of CARES Act Economic Impact Payments?
A.8.d. Please see the response to question 8.
Q.8.e. Issue an interim rule or guidance prohibiting car
repossessions so that people can drive to doctors and do not
need to risk their lives on public transportation (if public
transport is even available)?
A.8.e. Please see the response to question 8.
Q.8.f. Issue an interim rule or guidance prohibiting
repossessions of mobile homes and other personal property used
as a dwelling while stay-at-home orders are in effect?
A.8.f. Please see the response to question 8.
Q.9.a. The CFPB has received record-setting levels of
complaints, especially involving debt collection.
What are the top issues raised in consumers' debt
collection complaints since March 1?
A.9.a. From March 1, 2020, through August 31, 2020, the Bureau
received approximately 266,100 complaints, including
approximately 41,000 about debt collection. (For the same
period in 2019, the Bureau received approximately 184,300
complaints, including approximately 40,300 complaints about
debt collection.)
For debt collection complaints submitted from March 1,
2020, through August 31, 2020, consumers submitted
approximately 21,100 complaints about attempts to collect debt
not owed and approximately 7,700 complaints about written
notification of debt. These top issues are consistent with
other complaints for the same period in 2019.
Q.9.b. How does the proposed debt collection rule address the
issues raised in these complaints since March 1?
A.9.b. As noted in the response to Q.9.a., the top issues
raised in consumers' debt collection complaints since March 1,
2020, have been largely consistent with the complaints
historically raised by consumers. The Bureau considered and
incorporated concerns raised in consumer complaints when
evaluating and issuing the proposed debt collection rule and
continues to consider further feedback, including over 14,000
public comments, in its rulemaking activities.
Q.9.c. Will the CFPB reopen the comment period on the debt
collection rule in light of any lessons learned from the
pandemic?
A.9.c. In accordance with the Administrative Procedure Act, the
Bureau has carefully considered comments received on the
May2019 proposed rule that would prescribe rules under
Regulation F to govern the activities of debt collectors, as
that term is defined under the FDCPA and expects to issue a
final rule in October 2020. In December 2020, the Bureau also
plans to issue a final rule on its supplemental proposal issued
in February 2020, which addressed time-barred debt disclosures,
and any remaining proposed issues. The Bureau extended the
deadline for comments on that proposal to August 4, 2020, in
light of the COVID-19 pandemic.
Q.9.d. What other steps is the CFPB taking to address the top
issues for debt collection complaints during the pandemic?
A.9.d. The Bureau routes consumers' complaints about financial
products and services--and any documents they provide--directly
to financial companies, and works to get consumers a timely
response, generally within 15 days. Where appropriate, the
Bureau refers consumer complaints to other Federal agencies
including debt collection complaints submitted about depository
institutions with less than $10 billion in assets and
complaints submitted about telecommunications companies,
homeowners' associations, and landlords.
On March 20, 2020, the Bureau posted a comprehensive guide
for consumers who are concerned about dealing with debt and
debt collectors during the pandemic. The guide was updated on
June 17th. The guide describes for consumers the rights they
have under the FDCPA, outlines steps consumers can take to
manage debt during the pandemic, provides links to the Bureau's
preexisting sample letters that consumers can use to
communicate with debt collectors, and warns consumers about
protecting themselves against debt collection scams. The guide
is one of a number of resources created for consumers to help
them manage and protect their finances during the pandemic.
In addition to the Bureau's education tools, we continue to
monitor the market for law violations. We also continue to
process comments on our NPRM on time-barred debt as well as
continue to work on our final rule on debt collection.
Q.9.e. Will the CFPB provide any guidance to debt collectors
warning them about risks to consumers?
A.9.e. In accordance with the Administrative Procedure Act, the
Bureau has carefully considered comments received on the May
2019 proposed rule that would prescribe rules under Regulation
F to govern the activities of debt collectors, as that term is
defined under the FDCPA and expects to issue a final rule in
October 2020. The Bureau intends to continue its debt
collection work through enforcement, supervision, and
rulemaking. In addition, the Bureau's supervisory findings in
examinations of larger participants in the consumer debt
collection market are regularly reported to the public through
Supervisory Highlights.
Q.10. Has the CFPB reassessed the proposed debt collection rule
in light of consumer complaints since March 1?
A.10. The Bureau's proposed debt collection rule focuses on
debt collection communications and disclosures, as well as
addressing related practices by debt collectors. The Bureau
closely follows issues raised in consumer complaints that
relate to topics covered by the proposed debt collection rule.
As noted above, the complaints to the Bureau concerning debt
collection during the pandemic raise issues that are consistent
with issues raised in prepandemic complaints, and the Bureau
reviewed prepandemic complaints closely for information
relevant to the rulemaking. As such, no reassessment in light
of the pandemic complaints was necessary. The Bureau will
continue to consider feedback and other information in
reviewing the proposed rules as it moves forward toward final
rules.
Q.10.a. Has the CFPB received complaints about collection
activities involving various forms of electronic
communications? If so, what actions is the CFPB taking in
response to these complaints?
A.10.a. The Bureau's complaint submission process is designed
to centralize the collection of, monitoring of, and response to
complaints about consumer financial products and services.\4\
When submitting complaints to the Bureau, consumers identify
the issue-and when applicable, the sub-issue--that best
describes the problem they experienced and provide their
description of what happened.
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\4\ See Dodd-Frank Wall Street Reform and Consumer Protection Act
of 2010, Pub. L. No. 111-203 (Dodd-Frank Act), Section 1013(b)(3)(A).
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The Bureau takes several actions in response to complaints.
The Bureau routes complaints directly to financial companies
and works to get consumers a timely response. The Bureau also
analyzes and shares complaint data. These analyses support the
Bureau's work to supervise companies, enforce Federal consumer
financial laws, propose rules, spot and assess emerging issues,
and develop tools that help empower consumers to make informed
financial decisions.
Q.10.b. Has the CFPB received complaints about debt collector
communications with employers? If so, what actions is the CFPB
taking in response to these complaints?
A.10.b. From March 1, 2020, through August 31, 2020, consumers
submitted approximately 200 debt collection complaints to the
Bureau in which they identified debt collectors contacting
their employers as the sub-issue that best describes their
problem with debt collectors. The Bureau takes the same actions
described in 10(a) in response to these complaints.
Q.10.c. Has the CFPB received complaints about the collection
of time-barred debt? If so, what actions is the CFPB taking in
response to these complaints?
A.10.c. From March 1, 2020, through August 31, 2020, consumers
submitted approximately 900 debt collection complaints to the
Bureau in which they identified debt collectors threatening to
sue them for very old debt as the sub-issue that best describes
their problem with debt collectors. The Bureau takes the same
actions described in the response to question 10(a) in response
to these complaints.
Q.10.d. Has the CFPB received complaints about wage or bank
garnishment involving time-barred debt? If so, what actions is
the CFPB taking in response to these complaints?
A.10.d. A keyword search of the database for terms related to
wage garnishment (e.g., garnishment) returns approximately 100
keyword matches for debt collection complaints where consumers
described garnishment for very old debts for data from March 1,
2020, through August 31, 2020. The Bureau takes the same
actions described in the response to question 10(a) in response
to these complaints.
COVID-19 response
Q.11. What research has the CFPB undertaken on the
repercussions of COVID-19 on the consumer financial markets or
on consumers?
A.11. On May 1, 2020, the Bureau published a report on the
effects of the pandemic on credit applications, examining how
the pandemic shaped the demand for credit in the early weeks of
the crisis.\5\ The Bureau also released a report on August 31,
2020, on the pandemic's early effects on consumer credit. Both
reports rely heavily on the Consumer Credit Panel.\6\ As
economic conditions evolve, we anticipate issuing additional
research reports that track the impact of the pandemic on
consumers and consumer financial markets using the Consumer
Credit Panel. Also, the Bureau is fielding two waves of the
Making Ends Meet survey during the pandemic, one wave in May,
and the other wave this fall. This survey is linked to the
Consumer Credit Panel and will provide additional insights into
how the pandemic is affecting consumers.
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\5\ https://www.consumerfinance.gov/data-research/research-reports/
covid-19-early effects-credit-applications/.
\6\ https://www.consumerfinance.gov/data-research/research-reports/
special-issue-brief-early effects-covid-19-pandemic-on-consumer-
credit/.
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Q.11.a. Why has this not been a bigger priority at the CFPB?
A.11.a. This has been a Bureau priority, as illustrated by the
research described above. The Bureau welcomes feedback on the
research agenda described above, as well as suggestions for
other research.
Q.11.b. How is the CFPB using the Consumer Credit Panel in
making policy decisions during COVID, if at all?
A.11.b. The Consumer Credit Panel has been a resource the
Bureau has relied upon for several years in its policy
decisions, including during the pandemic. With the Consumer
Credit Panel, we are able to monitor consumer credit markets
with short lags, as well as to keep abreast of the status of
the financial health of consumers. Findings from the data
inform many of the decisions the Bureau takes.
Q.12. I wrote to you in May seeking additional information on
the Borrower Protection Program (BPP) that CFPB and the Federal
Housing Finance Agency (FHFA) announced in April.
Unfortunately, several of my questions were not fully answered
in your response. Please respond to the following questions.
Q.12.a. Has the CFPB requested or will the CFPB request
information on race, ethnicity, and other protected classes
under the Equal Credit Opportunity Act from FHFA under the BPP
to
facilitate oversight of fair lending requirements in mortgage
servicing? If not, why not?
A.12.a. Based on my understanding of the data that the FHFA
possesses, the Bureau has not requested borrower-level
information, including with respect to race, ethnicity, and
other protected classes.
Q.12.b. Has the CFPB requested or will the CFPB request
information on servicemember status from FHFA under the BPP to
facilitate compliance with the Servicemembers Civil Relief Act?
If not, why not?
A.12.b. The Bureau did not request and does not plan to request
such information. The Bureau does not have oversight or
enforcement responsibilities as to the Servicemembers Civil
Relief Act.
Q.12.c. Has the CFPB begun any prioritized assessments based on
the information received under the BPP? If not, why not?
A.12.c. Supervision's efforts conducting Prioritized
Assessments and the Bureau's receipt and evaluation of
information under the BPP are both ongoing. The results of this
analysis and the monitoring of any trends will help the Bureau
determine whether any follow-up work at particular institutions
is warranted. Such follow-up work could be under the
Prioritized Assessment framework or could involve more in-depth
supervisory work.
Q.12.d. Is the CFPB using FHFA data for any purpose other than
determining whether to conduct prioritized assessments? If not,
why not?
A.12.d. This servicer-specific forbearance data supplements
other sources so the Bureau can better monitor how servicers
are handling these forbearances, informing ongoing risk-
assessments that might inform future examinations and other
supervisory work, as well as our market monitoring activities.
In addition, through the Bureau's Government Portal, FHFA can
securely view near real-time information about consumer
complaints in a user-friendly format that allows simple
identification of complaints referred to the Bureau or another
Federal regulator or agency and other archived complaints.
Q.13. The HUD and Federal Housing Finance Agency Inspectors
General found that many mortgage servicer websites had
incomplete, inconsistent, and incorrect forbearance
information. Has the Bureau taken any steps to penalize
servicers that are not in compliance with the CARES Act
forbearance requirements?
A.13. Supervision is engaging in work to assess the information
servicers are providing to borrowers about forbearances during
this crucial time period consistent with their responsibilities
under the law. We do not comment on Enforcement investigations,
and we have not announced any public actions to date on this
topic.
Q.14. On April 1, 2020, the Bureau issued guidance regarding
furnishers' responsibilities under the CARES Act.\7\ That
guidance announced that ``in response to staffing and resource
constraints on lenders and credit bureaus due to the
pandemic,'' the Bureau ``does not intend to cite in an
examination or bring an enforcement action against firms who
exceed the deadlines to investigate such disputes as long as
they make good faith efforts during the pandemic to do so as
quickly as possible.''
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\7\ https://www.consumerfinance.gov/about-us/newsroom/cfpb-issues-
credit-reporting-guidance-during-covid-19-pandemic/.
Q.14.a. What evidence did the Bureau have that lenders and
credit bureaus were suffering from ``staffing and resource
---------------------------------------------------------------------------
constraints?''
A.14.a. The Bureau has indicated that it will consider the
unique challenges that furnishers and consumer reporting
agencies (CRAs) face due to the COVID-19 pandemic and that
these challenges may depend on a company's size,
sophistication, and the type of business in which it engages.
As the Bureau noted, furnishers include a wide variety of
businesses that vary in size and sophistication and can range
from small retailers to very large financial services firms.
The Bureau, through its market monitoring function, is in
frequent contact with lenders and creditors to better
understand the impact of the pandemic and other market
influences on consumers.
Q.14.b. Please identify each lender, credit bureau, or trade
association that submitted information that lenders and credit
bureaus were suffering from ``staffing and resource
constraints.''
A.14.b. The Bureau has been engaged with financial institutions
and trade associations from almost every market as well as
consumer advocates and other stakeholders most of whom have
identified staffing, operational, and resource constraints
resulting from the pandemic. Letters written to the Bureau by
the National Association of federally Insured Credit Unions and
the Credit Union National Association are on their websites.
The topic has also been discussed in our advisory board and
council meetings and other public events by affected entities.
Q.14.c. Has the Bureau determined that lenders and credit
bureaus continue to have ``staffing and resource constraints''
that justify the relief the Bureau provided to lenders and
credit bureaus from responding to consumers disputes with the
statutorily required time period?
A.14.c. We are continuously monitoring the situation through
our supervisory, stakeholder engagement, and market monitoring
functions.
Q.14.d. What guidance, if any, has the CFPB provided to
furnishers and credit reporting companies about what
constitutes a ``good faith effort''?
A.14.d. The Bureau has stated that furnishers and CRAs remain
responsible for conducting reasonable investigations of
consumer disputes in a timely fashion and that it will evaluate
individually the efforts and circumstances of each furnisher
and CRA in determining if it made good faith efforts to
investigate disputes as quickly as possible. The Bureau has
indicated that it will consider the unique challenges that
furnishers and CRAs face due to the COVID-19 pandemic and that
these challenges may depend on a company's size,
sophistication, and the type of business in which it engages.
As the Bureau noted, furnishers include a wide variety of
businesses that vary in size and sophistication and can range
from small retailers to very large financial services firms.
Q.14.e. Since April 1, for each month, how many consumer
complaints has the Bureau received that lenders and credit
bureaus have not timely responded to credit reporting disputes?
A.14.e. From April 1, 2020, to August 31, 2020, consumers have
submitted 5,900 credit reporting complaints about
investigations that took more than 30 days. See below for a
breakdown by month.
On March 26, 2020, the Bureau announced that it was
postponing some data collections ``to allow companies to focus
on responding to consumers in need and making changes to its
supervisory activities to account for operational challenges at
regulated entities.'' This includes: ``Quarterly information
reporting by certain mortgage lenders as required under the
Home Mortgage Disclosure Act (HMDA) and Regulation C'';
``Reporting of certain information related to credit card and
prepaid accounts under the Truth in Lending Act, Regulation Z,
and Regulation E''; ``A survey of financial institutions on the
cost of compliance in connection with pending rulemaking on
Section 1071 of the Dodd-Frank Act''; and ``A survey of firms
providing Property Assessed Clean Energy financing to consumers
for the purposes of implementing Section 307 of the Economic
Growth, Regulatory Relief, and Consumer Protection Act.''
Q.15.a. For each data collection that was suspended, what
evidence supports the Bureau's contention that postponing data
collection was necessary?
A.15.a. The Bureau received comments from a number of trade
associations that the COVID-19 pandemic was impacting their
member organizations' ability to function. Standard operating
procedures such as call-centers and other centralized staffing
were severely impacted, when companies moved staffs to remote
working conditions. This was not an option for all companies
and all markets.
The Bureau provided needed flexibility to enable financial
companies to work with customers in need as they respond to the
COVID-19 pandemic. As part of this effort, the Bureau postponed
data collections from industry on certain Bureau-related rules
to allow companies to focus on responding to consumers in need
and made changes to its supervisory activities to account for
operational challenges at regulated entities. Some of the data
collections discussed above (HMDA quarterly reporting, TILA
reporting) were not suspended, since they are required by
statute/rule, and instead the Bureau provided supervisory/
enforcement flexibility. These flexibilities are temporary and
targeted to support consumers by allowing financial companies
to focus their resources on assisting consumers.
The Bureau has resumed certain data collections, including
the survey of financial institutions on the cost of compliance
in connection with pending rulemaking on Section 1071 of the
Dodd-Frank Act. Additionally, the Bureau has taken initial
steps to field the survey of firms providing Property Assessed
Clean Energy financing to consumers for the purposes of
implementing Section 307 of the Economic Growth, Regulatory
Relief, and Consumer Protection Act.
Q.15.b. Please identify each entity that requested such
postponement.
A.15.b. Letters written to the Bureau by the National
Association of federally Insured Credit Unions and the Credit
Union National Association are on their websites. The topic has
also been discussed in our advisory board and council meetings
and other public events by affected entities.
Q.15.c. What evidence supports the Bureau's contention that
postponing data collection would allow companies to focus on
responding to consumers and making changes to supervisory
activities?
A.15.c. The Bureau received anecdotal comments from industry
indicating that postponing data collection requirements would
allow entities to focus limited resources on serving their
customers. Examples cited were Home Mortgage Disclosure Act
(HMDA) and Regulation C requirements that can be resource
intensive for those entities required to satisfy the data
reporting requirements of HMDA. In response to this feedback,
the Bureau announced that it will not expect quarterly HMDA
reporting in order to provide supervised financial institutions
with flexibility, reduce administrative burden, and allow each
institution to focus its time and attention on serving its
customers.
Some entities stated that due to business conditions
brought by the pandemic, there was not enough time to timely
resolve error disputes (Reg E) and requested an extension to
three or four billing cycles to resolve error disputes and
inquiries. Another concern of both trade associations and
individual card issuers was the ability of companies to issue
timely resolution to billing disputes. They identified the
challenge of accurate billing during the pandemic. Due to
limited staff, lenders may need more than the Reg Z required
10-day acknowledgment. Industry requested the Bureau provide a
safe harbor for good faith efforts to comply.
Q.16.a. The Equal Credit Opportunity Act applies to lending to
small businesses and the Bureau has supervisory and enforcement
authority under the ECOA.
How many examinations has the Bureau conducted to date with
respect to whether lenders complied with the ECOA in
implementing the PPP?
A.16.a. Information regarding specifics about the number of
institutions the Bureau is assessing or plans to assess is
confidential supervisory information (CSI), and the Bureau
cannot comment on such CSI. I can say that the Bureau is
committed to using its supervisory authorities and resources to
fulfill its mission on a risk-prioritized basis. The Bureau's
supervision program reviewed and analyzed current pandemic-
related market developments to determine where COVID-19-related
issues are most likely to pose a risk to consumers. As a result
of that review, the Bureau launched a new supervisory effort,
called Prioritized Assessments, to focus on where it believes
the risks are highest to consumers who have lost jobs or income
and have trouble making loan payments that are due. The Bureau
is also prioritizing markets where Congress provided special
provisions to help consumers or small businesses in the CARES
Act. Accordingly, the Bureau is deploying some of its
resources--on a risk-assessed basis--to Prioritized Assessments
of institutions participating in the PPP in order to evaluate
fair lending compliance risks.
Q.16.b. Will you commit to making this a priority for
examinations for the remainder of this year?
A.16.b. The Bureau is committed to using our supervisory
authority to prevent violations of Federal consumer financial
law and consumer harm, including in the context of small
business lending. Please see the response to Q.16.a.
Q.17. As Senator Menendez made clear, there are indications
that there are racial disparities emerging in access to
mortgage forbearances. Please explain what actions the CFPB is
taking to determine if there are differences in access to
forbearance or post-forbearance outcomes by race, gender,
national origin.
A.17. During the pandemic, the Bureau continues to be committed
to enforcing fair lending laws in all markets under our
jurisdiction. We are monitoring the marketplace in real-time
and coordinating on an ongoing basis with Federal and state
agencies and regulators. Specifically, regarding fair lending,
the Bureau continues to enforce the Equal Credit Opportunity
Act (ECOA). In doing so, we are monitoring the market for
potential illegal activity in high-risk areas, including
discrimination in the provision of forbearance, mortgage
modifications or other accommodations. Currently, the Bureau is
conducting Prioritized Assessments, which focus in part on
mortgage servicing. Implemented in response to COVID-19
pandemic, Prioritized Assessments are specifically designed to
obtain real-time information from entities that operate in
markets posing elevated risk of consumer harm due to pandemic-
related issues.
Q.18.a. The CFPB has promised mortgage servicers that it will
not enforce the loss mitigation rules provided they are making
a good faith effort to assist borrowers during the pandemic.
What guidance, if any, has the CFPB provided to mortgage
servicers about what constitutes a ``good faith effort''?
A.18.a. On April 3, 2020, the Bureau, along with the Board of
Governors of the Federal Reserve System, the Federal Deposit
Insurance Corporation, the National Credit Union
Administration, the Office of the Comptroller of the Currency,
and the Conference of State Banking Supervisors issued the
Joint Statement on Supervisory and Enforcement Practices
Regarding the Mortgage Servicing Rules in Response to the
COVID-19 Emergency and the CARES Act (Joint Statement). The
Joint Statement acknowledges that the COVID-19 emergency could
pose temporary business disruptions and challenges for mortgage
servicers, including staffing challenges and high call volumes,
that could impede servicers' ability to assist consumers at
this critical time. To provide flexibility during this time,
the Joint Statement indicates that the agencies do not intend
to take supervisory or enforcement action against servicers for
delays in sending certain required notices or in taking certain
required actions, provided that servicers are making good faith
efforts to send these notices or take these actions within a
reasonable time. The Bureau has not provided separate guidance
to mortgage servicers about what constitutes a ``good faith
effort.''
The Bureau is conducting Prioritized Assessments including
of mortgage servicers. Through Prioritized Assessments, the
Bureau is expanding its supervisory oversight to cover a
greater number of institutions than our typical examination
schedule allows, gaining a greater understanding of industry
responses to pandemic-related challenges, and helping ensure
that entities are attentive to practices that may result in
violations of Federal consumer financial law or consumer harm.
To better understand these risks and better ensure institutions
comply with their obligations, the Bureau sent Prioritized
Assessments to a range of mortgage loan servicers. Each of the
mortgage servicers that we selected for a Prioritized
Assessment received targeted information requests covering
information necessary to help us better understand how
servicers are communicating repayment options to consumers, to
analyze operational risk at servicers in executing on
forbearance programs, and to review servicers' furnishing
activities.
Importantly, while we are willing to work with companies in
a temporary and targeted manner to help them help their
customers, we will not tolerate those who would exploit the
current crisis at the expense of consumers. We are committed to
vigorously enforcing consumer financial law in all markets
under our jurisdiction and the pandemic does not change that.
Q.18.b. Can you identify any actions a servicer would take that
would be inconsistent with the CFPB's interpretation of good
faith efforts?
A.18.b. The Bureau does not anticipate issuing public guidance
on the definition of ``good faith efforts,'' which is dependent
on particular facts and circumstances. Supervision is currently
conducting Prioritized Assessments and the Bureau's receipt and
evaluation of information is ongoing now. The results of this
analysis and the monitoring of any trends will help the Bureau
determine whether any follow-up work at particular institutions
is warranted.
Q.19.a. Senator Menendez asked you about your coronavirus
webpage, and why it only offers a venue for housing
discrimination complaints at HUD, but is silent on the ability
of the CFPB to take fair lending complaints under ECOA.
Do you believe the CFPB have the ability to take fair
lending complaints under ECOA?
A.19.a. Yes, the Bureau is able to, and does, take fair lending
complaints under ECOA. Consumers' complaints support the
Bureau's work to supervise companies and enforce Federal
consumer financial laws, including ECOA. The Bureau handles
complaints about consumer financial products and services,
including with respect to potential discrimination under ECOA.
The Bureau has previously provided the public with information
on warning signs for discrimination and encouraged consumers to
submit a complaint to the Bureau if the consumer believes that
a lender has discriminated against the consumer.\8\ When
consumers submit complaints, the Bureau asks them to identify
the consumer financial product or service with which they have
a problem. Consumers describe what happened and are prompted to
include dates, amounts, and actions they have taken or actions
of the company about which they are submitting a complaint.
Consumers can attach supporting documentation to their
complaint, which often helps companies assess issues raised by
consumers.
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\8\ https://www.consumerfinance.gov/fair-lending/.
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The Bureau also shares consumer complaint information with
prudential regulators, the Federal Trade Commission, other
Federal agencies, and state agencies to inform their work.
Q.19.b. Do you agree that ECOA covers mortgage servicers?
A.19.b. Yes, to the extent that they are ``creditors'' under
ECOA and its implementing regulation, Regulation B. ECOA and
Regulation B apply to all creditors and prohibit discrimination
in any aspect of a credit transaction on the basis of race,
color, religion, national origin, sex, marital status, age
(provided the applicant has the capacity to contract), receipt
of public assistance income, or exercise in good faith of any
right under the Consumer Credit Protection Act. (12 CFR
1002.2(z), 1002.4(a)). Credit transactions encompass ``every
aspect of an applicant's dealings with a creditor regarding an
application for credit or an existing extension of credit.''
Q.19.c. Will the CFPB take fair lending complaints?
A.19.c. Consumers can submit complaints about consumer
financial products and services, including fair lending issues.
Q.19.d. Why is the CFPB's signature coronavirus response, the
joint webpage with HUD and FHFA, silent on lending
discrimination?
A.19.d. The Bureau continues to accept complaints from
consumers involving fair lending issues. Information on how to
file complaints with the Bureau, with direct links to our
complaint intake system, is provided in the content on many of
the Bureau's webpages, including our main webpage for consumer
resources related to the coronavirus pandemic.\9\
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\9\ https://www.consumerfinance.gov/coronavirus/.
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We have also clarified on the interagency Mortgage and
Housing Assistance portal that borrowers are protected by
Federal law against lending discrimination.
Q.20. Do you think lending discrimination was a factor in PPP
lending? Why or why not?
A.20. The Bureau takes seriously our responsibility for
enforcement of the Equal Credit Opportunity Act and Regulation
B, which includes fair lending in the small business lending
market. Recognizing the risks of consumer harm during the
pandemic, the Bureau is engaged in Prioritized Assessments
across product lines and entities, including small business
lending. It is notable that the Bureau also supported the Small
Business Administration (SBA) and the Department of the
Treasury (Treasury) in promoting awareness of the PPP and its
benefits, particularly outreach to minority-owned small
businesses and financial institutions. As part of that support,
a senior executive with extensive knowledge of mission-focused
small business lending and lenders was detailed to SBA soon
after the launch of the program to help advise the agency on
how to best use this channel to reach underserved small
businesses. The advice provided helped inform Treasury and SBA
on program enhancements they made which ultimately helped to
lower the average PPP loan size and more actively engage
Community Development Financial Institutions, Minority
Depository Institutions and other mission lenders.
Q.21. What steps, if any, has the CFPB taken to mitigate the
harm done to small business owners of color who were unable to
access Paycheck Protection Program loans?
A.21. Please see the response to Q.21.b.
Q.21.a. Does the CFPB agree that it has jurisdiction over PPP
lenders?
A.21.a. The Bureau is responsible for providing oversight and
enforcement of certain Federal laws intended to ensure fair,
equitable, and nondiscriminatory access to credit for both
individuals and communities. These Federal laws include ECOA,
which prohibits creditors from discriminating on a prohibited
basis in any aspect of a credit transaction against any
applicant. This statute is an enumerated consumer law over
which the Bureau has supervisory, enforcement, and rulemaking
authority. While the Bureau has authority to supervise large
banks for compliance with ECOA, we do not have authority to
assess compliance of smaller banks.
Lenders that fit the definition of a creditor under ECOA,
and its implementing regulation, Regulation B, must comply with
the statute and the regulation, whether they provide consumer
credit or business-purpose credit, including credit extended to
small businesses. Accordingly, ECOA protects business owners,
including applicants to the PPP, from discrimination on the
basis of race, color, national origin, sex, and other protected
characteristics.
Q.21.b. When did the CFPB first become aware of the racial
disparities in PPP lending?
A.21.b. The Bureau takes seriously our responsibility for
enforcement of the Equal Credit Opportunity Act and Regulation
B, which includes fair lending in the small business lending
market. Recognizing the risks of consumer harm during the
pandemic, the Bureau is engaged in Prioritized Assessments
across product lines and entities, including small business
lending. It is notable that the Bureau also supported SBA and
the Treasury in promoting awareness of the PPP and its
benefits, particularly outreach to minority-owned small
businesses and financial institutions. As part of that support,
a senior executive with extensive knowledge of mission-focused
small business lending and lenders was detailed to SBA soon
after the launch of the program to help advise the agency on
how to best use this channel to reach underserved small
businesses. The advice provided helped inform Treasury and SBA
on program enhancements they made which ultimately helped to
lower the average PPP loan size and more actively engage
Community Development Financial Institutions, Minority
Depository Institutions and other mission lenders.
Q.21.c. What steps, if any, has the CFPB taken to address those
racial disparities?
A.21.c. Please see the response to question Q.21.b.
Fair Lending
Q.22.a. During your testimony on July 29, 2020, you stated that
there were ``challenges'' to brining fair lending actions.
Aside from the whistleblower program, what is the CFPB
doing to bring fair lending cases?
A.22.a. The Bureau uses a risk-based approach to prioritize
fair lending enforcement activity. This approach helps ensure
that the Bureau focuses on areas that present substantial risk
of credit discrimination for consumers. The prioritization
process incorporates a number of factors, including: emerging
developments and trends, tips and leads from industry
whistleblowers, advocacy groups, and Government agencies;
supervisory and enforcement history; consumer complaints; and
results from analysis of HMDA and other publicly available
data. In recent years, one key area in which the Bureau is
focusing its fair lending enforcement efforts has been
addressing potential discrimination in mortgage lending,
including the unlawful practice of redlining. In bringing
enforcement actions, the Bureau engages in research, issues
subpoenas, and holds investigational hearings. The Bureau has
independent litigating authority and can file cases
administratively or in Federal court alleging violations of
fair lending laws under the Bureau's jurisdiction. Like other
Federal bank regulators, the Bureau refers matters to the
Department of Justice when it has reason to believe that a
creditor has engaged in a pattern or practice of lending
discrimination.
Q.22.b. What hurdles has the CFPB identified to bringing more
fair lending cases?
A.22.b. Because credit discrimination is often hidden or even
unintentional, it is difficult to identify. The Bureau's
mission is to ensure all consumers have access to consumer
financial products and services and that markets for consumer
financial products and services are fair, transparent, and
competitive. The Bureau will continue to fulfill that mission
while exploring ways to increase access to credit for all. The
Bureau is committed to fair lending and will continue to
vigorously enforce fair lending laws within our
jurisdiction. To further strengthen our fair lending
enforcement, the Bureau has asked Congress for the authority to
compensate whistleblowers who can provide information allowing
us to take swift action against companies for violating the
law. While discriminatory policies can be challenging and time
consuming to uncover in an examination or investigation, an
employee with first-hand knowledge can be a key source of
information to help the Bureau identify and address fair
lending violations.
Q.22.c. Has the CFPB hired any additional attorneys or
economists to conduct fair lending investigations?
A.22.c. As of August 2020, Enforcement has an allotted
headcount of approximately 150 full-time employees including
over 80 line attorneys to conduct its work, including fair
lending investigations. In addition, Enforcement has economists
and obtains outside experts as needed in its fair lending
investigations. Enforcement attorneys are generalists who can
participate in the investigation of any potential violation of
Federal consumer financial law, including those focused on fair
lending. The resources Enforcement deploys on any particular
matter is dependent on a number of factors, including the facts
and circumstances of that particular investigation.
Q.22.d. What does the CFPB believe accounts for the persistence
of lending discrimination in the market and what steps is the
CFPB taking to reduce its persistence?
A.22.d. I welcome discussion and evaluation of the possible
cause or causes of the persistence of lending discrimination in
the market. The Bureau will continue to enforce fair lending
laws in our jurisdiction to prevent and deter such lending
discrimination. The Bureau uses the tools Congress has
provided--education, regulation, supervision, and enforcement--
to carry out its fair lending responsibilities.
Q.23.a. Director Kraninger, you referenced the CFPB blog on
fair lending during the July 29, 2020, hearing. In that blog
the CFPB identified consumer education and skills building
tools as part of the CFPB's response to fair lending.
Do you believe consumers have an obligation to protect
themselves from discrimination in the market?
A.23.a. The Bureau plays an important role in informing
consumers of their rights in the consumer financial
marketplace. The purpose of ECOA and its implementing
regulation, Regulation B, is to promote the availability of
credit to all creditworthy applicants without regard to race,
color, religion, national origin, sex, marital status, or age
(provided the applicant has the capacity to contract); to the
fact that all or part of the applicant's income derives from a
public assistance program; or to the fact that the applicant
has in good faith exercised any right under the Consumer Credit
Protection Act. The regulation further prohibits creditor
practices that discriminate on the basis of any of these
factors. To further the intended purpose of ECOA and Regulation
B, the Bureau continues to enforce fair lending laws within our
jurisdiction. The Bureau uses the tools Congress provided--
education, regulation, supervision, and enforcement--to carry
out its fair lending responsibilities.
Q.23.b. How do the CFPB's skill building tools address
discrimination?
A.23.b. Specifically, the Bureau has several resources to
educate and engage consumers on issues related specifically to
lending discrimination. The Bureau's educational offerings are
available online and in print. The Bureau has a webpage solely
dedicated to fair lending that provides information on ECOA and
how consumers are protected under the law.\10\ The website
serves as a hub for information on the Bureau's fair lending
efforts, providing access to recent blog posts, reports, press
releases regarding fair lending public enforcement actions and
other resources to help educate and empower consumers. The
Bureau has also directly addressed fair lending concerns in
three recent blog posts, pertaining to the importance of fair
and equitable access to credit for minority and women-owned
businesses,\11\ Bureau resources available in languages other
than English,\12\ as well as Special Purpose Credit
Programs,\13\ which are intended to meet the credit needs of
underserved communities.
---------------------------------------------------------------------------
\10\ https://www.consumerfinance.gov/fair-lending/.
\11\ https://www.consumerfinance.gov/about-us/blog/fair-equitable-
access-credit-minority-
women-owned-businesses/.
\12\ https://www.consumerfinance.gov/about-us/blog/cfpb-
multilingual-resources-webinar/.
\13\ https://www.consumerfinance.gov/about-us/blog/expanding-
access-credit-underserved-communities/.
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The Bureau developed brochures on lending discrimination
for consumers (in both English and Spanish)\14\ and for
organizations that work with consumers (also in both English
and Spanish).\15\ Because lending discrimination is frequently
hidden, it can be difficult to identify. The brochures describe
potential warning signs and offer specific tips on how
consumers can help protect themselves from discrimination. Due
to its popularity, the Bureau is currently translating the
English and Spanish-language ECOA brochures into Chinese,
Vietnamese, Tagalog, Korean, French Creole, Arabic, and
Russian.
---------------------------------------------------------------------------
\14\ https://files.consumerfinance.gov/f/documents/
201703_cfpb_handout_ECOA_
consumers.pdf and https:// files.consumerfinance.gov/f/documents/
201601_cfpb_handout_ ECOA_consumers-Spanish.pdf.
\15\ https://files.consumerfinance.gov/f/documents/
201703_cfpb_handout_ECOA_
helping_consumers.pdf and https://files.consumerfinance.gov/f/
documents/201601_cfpb _handout_ECOA_helping_consumers-Spanish.pdf.
---------------------------------------------------------------------------
Further, HMDA data may be used to help identify potential
fair lending risks. The Bureau hosted three (3) webinars on
HMDA for community groups and consumer advocates. These skill-
building webinars provided background information on HMDA,
including the types of mortgage transactions and the specific
data points reported under the law, and a live step-by-step
demonstration on how to use our HMDA Data Browser.
The Bureau regularly engages in direct outreach with
consumers and other stakeholders, including civil rights
organizations, community groups, consumer advocates, industry,
academia, and other Government agencies, to educate them about
fair lending and access to credit issues.
Q.23.c. What is different about the CFPB's approach to consumer
education from prior efforts at consumer education that have
failed to eradicate lending discrimination?
A.23.c. The Bureau uses all the tools Congress provided--
education, regulation, supervision, and enforcement--to carry
out its fair lending responsibilities. Financial education
helps consumers make better informed financial decisions. To
that end, the Bureau has published consumer-facing materials
that educate consumers and practitioners on the warning signs
of discrimination.\16\ The Bureau's approach to financial
education is grounded in research on building blocks and
drivers of financial well-being as well as the principles of
effective financial education. Bureau research shows that
financial skill, along with financial behavior are important
factors in individual financial well-being. The Bureau's tools
for consumers and financial educators are designed to help
consumers understand how to find, process and use relevant
financial information, and take actions to reach their
financial goals. These resources include steps to take; and
questions to ask to help empower consumers to navigate the
financial marketplace, including information about lending
discrimination and how to submit a complaint to the Bureau.
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\16\ See generally, https://www.consumerfinance.gov/fair-lending/.
Q.23.d. What measurable impact, if any, does the CFPB expect
its consumer education to have on lending discrimination? How
will the CFPB measure that impact to ensure it is wisely
---------------------------------------------------------------------------
dedicating its resources to such efforts?
A.23.d. The Bureau uses all the tools Congress provided--
education, regulation, supervision, and enforcement--to carry
out its fair lending responsibilities. Financial education
helps consumers make better informed financial decisions. The
Bureau's education tools are grounded in research about
effective financial education. The Bureau hopes consumers will
use its educational tools to help identify their own financial
best interests and to help overcome opaqueness, discrimination,
misrepresentations, or other obstacles to obtaining them. We
monitor usage of the resources and work to ensure the
information is available to consumers and organizations that
work with consumers. For example, the Bureau's ECOA brochure is
available in Spanish and English and is being translated in
seven other languages, due to its high demand.
Student Lending
During your March 10, 2020, testimony before the Senate
Committee on Banking, Housing, and Urban Affairs, you described
a ``pilot'' program with the Department of Education to conduct
the Bureau's first examination of a servicer of federally held
student loans in more than 2 years. The Department of Education
(Department) also has described this joint examination as a
``pilot'' program. During a staff briefing on July 24, 2020,
Brian Schneider, the Bureau's Associate Director for the
Division of Supervision, Enforcement, and Fair Lending,
reiterated that the joint examination was just a ``pilot'' and
that the Bureau and Department had not reestablished the
Memorandum of Understanding necessary for the Bureau to examine
servicers of federally held student loans (Supervisory MOU).
Yet, during your testimony before the House Financial Services
Committee on July 30, 2020, you stated that the Bureau is
``unencumbered'' by the Department of Education in carrying out
supervisory examinations of servicers of federally held student
loans.
Q.24.a. Has the Bureau reestablished the Supervisory MOU with
the Department?
A.24.a. The Bureau has not entered into a new Supervisory MOU
with the Department of Education. Supervision is coordinating
with the Department of Education on supervisory work at student
loan servicers covering Federal loans. The Bureau generally
considers the number of supervisory engagements in a particular
product line confidential supervisory information and has only
provided the total number of supervisory events in a given
fiscal year rather than any subset associated with a particular
product line or law (with the exception of fair lending).
This quarter, our supervisory work includes Prioritized
Assessments to obtain information from student loan servicers
and other entities that operate in markets posing elevated risk
of consumer harm due to pandemic-related issues.
Through Prioritized Assessments, the Bureau is expanding
its supervisory oversight to cover a greater number of
institutions than our typical examination schedule allows, gain
a greater understanding of industry responses to pandemic-
related challenges, and help ensure that entities are attentive
to practices that may result in violations of Federal consumer
financial law or consumer harm. To better understand these
risks and better ensure institutions comply with their
obligations, the Bureau sent Prioritized Assessments to a
number of student loan servicers.
Each of the student loan servicers that we selected for a
Prioritized Assessment received targeted information requests
covering information necessary to help us better understand how
servicers are communicating repayment options to consumers, to
analyze operational risk at servicers in executing on programs
designed to help consumers manage financial difficulties, and
to review student loan servicers' furnishing activities. We are
coordinating with the Department of Education on this effort
and look forward to evaluating the responses we receive related
to both private and federally owned loans.
Q.24.b. As of July 30, 2020, was the Bureau under any
restrictions from the Department in accessing borrower loan or
other information necessary to conduct complete and
comprehensive examinations of servicers of federally held
student loans?
A.24.b. Please see the response to Q.24.a.
Q.24.c. Has the Department agreed to allow the Bureau access to
all information required for the Bureau to conduct complete and
comprehensive supervisory examinations of servicers of
federally held student loans?
A.24.c. Please see the response to Q.24.a.
Q.24.d. If yes, please provide a copy of the MOU or any other
document that memorializes the Department's agreement.
A.24.d. Please see the response to Q.24.a.
Q.24.e. Aside from the ``joint'' examination that the Bureau
previously disclosed, is the Bureau currently examining any
other servicers of federally held student loan?
A.24.e. Please see the response to Q.24.a.
Q.24.f. Does the Bureau have any other examinations of
servicers of federally held student loans scheduled during
2020?
A.24.f. Please see the response to Q.24.a.
Task Force/Advisory Committees
Q.25. During Director Cordray's tenure there was considerable
controversy over the Bureau's advisory committees. Director
Cordray chose to follow the Federal Advisory Committee Act even
before Congress amended the Dodd-Frank Act to apply FACA to the
Bureau. Yet when you created a Task Force on Consumer Financial
Laws you made its members employees of the Bureau at
considerable cost so that you could get around the Federal
Advisory Committee Act. What are the reasons for your decision
to establish the Taskforce outside of the requirements of FACA?
A.25. The Taskforce is an intragovernmental committee and not
subject to the Federal Advisory Committee Act (FACA). It would
not be appropriate for me to comment further as the Taskforce's
creation is now the subject of active litigation.
Q.26. Please state how much the CFPB has compensated each
Taskforce member for each month since January, as well as total
expected compensation for their tenure as Taskforce members.
A.26. Four Taskforce members--Howard Beales, Thomas Durkin,
William MacLeod, and Jean Noonan--are Bureau hires designated
as Special Government Employees. These individuals serve in
excepted service positions and are on intermittent work
schedules. Their Special Government Employee(``SGE'')
designations reflect the Bureau's determination at the time of
their appointments that they would serve no more than 130 days
during the ensuing 365 consecutive days. Their total
compensation will depend on the number of hours they ultimately
work and the amount of work required to complete the
Taskforce's objectives. The compensation of these individuals
is:
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
The remaining work (hours) and remaining compensation columns are based
on their SGE designations noted above, assuming a standard 8-hour work
day.
The Bureau's Taskforce also includes Todd Zywicki. Mr.
Zywicki was assigned to the Bureau under the Intergovernmental
Personnel Act, and the Bureau will not provide any compensation
to Mr. Zywicki. The Bureau will reimburse Mr. Zywicki's
permanent employer George Mason University for Mr. Zywicki's
labor at the Bureau. Mr. Zywicki will be on an intermittent
schedule and is anticipated to work approximately 200 days at 8
hours each day, for a total of 1,600 hours for the term of his
agreement. This is approximately 75 percent of a full-time
schedule of 2,080 working hours in a year.
His hourly rate to be paid to the university is $141.84.
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
*The remaining work (hours) and remaining compensation columns address
possible remaining hours given the work schedule limitations of Mr.
Zywicki's term noted above.
Q.27. In my February 5, 2020, and March 4, 2020, letters to
you, I raised concerns that you had only selected individuals
for the Taskforce who represent payday lenders and other
financial institutions or have pressed deregulatory viewpoints
to the exclusion of consumer and civil rights advocates.
Q.27.a. Does the Bureau contend that the Taskforce has a
``fairly balanced membership,'' as that term is used in 41
C.F.R. Sec. 102-3.60(b)(3)--yes or no?
A.27.a. The Taskforce is composed of individuals of varying
professional backgrounds and experiences, including past public
service within the Federal Government advocating for fair,
competitive, and transparent markets that work for all
consumers. As noted in response to question 25, the Taskforce
is not subject to FACA, including its requirement of a ``fairly
balanced membership.'' It would not be appropriate for me to
comment further as the Taskforce's creation is now the subject
of active litigation.
Q.27.b. If yes, please explain.
A.27.b. Please see the response to Q.27.a.
Q.27.c. If no, please explain why the Bureau does not believe
it needs to select a ``fairly balanced membership'' for the
Taskforce.
A.27.c. Please see responses to Q.25.a. and Q.27.a.
Q.28. Howard Beales, one of the Taskforce members, has worked
for a consulting firm hired by industry and provided services
to a payday lender that the Bureau had sued for servicing and
collecting on loans up to 448 percent Annual Percentage Rate
(APR) that the Bureau alleged were void under state law. Mr.
Beales argued that such loans were not ``predatory'' but
instead were ``beneficial to consumers.''
Do you agree with Mr. Beales that loans with a 448 percent
APR are ``beneficial to consumers''?
A.28. As I have previously stated, I established the Taskforce
to objectively and independently evaluate the current
regulatory framework for Federal consumer financial law. Given
the independent nature of the Taskforce, the views and opinions
of the Taskforce members do not necessarily reflect those of
the Bureau. However, it is a matter of public record that Dr.
Beales' professional career demonstrates a commitment to
protect and serve consumers which is consistent with the
Bureau's mission. Notably, during his tenure as Director of the
Bureau of Consumer Protection at the Federal Trade Commission
(FTC), Dr. Beales was instrumental in establishing the national
Do Not Call Registry, obtained the largest redress orders in
FTC history, and attacked high-volume fraud. His Federal
service, integrity, and dedication to improving the lives of
consumers makes him a valued addition to the Taskforce.
Q.29.a. The CFPB advisory committees established during your
tenure appear to be overwhelming White and male and not
representative of the population of the United States.
For each of the advisory committees (Taskforce on Federal
Consumer Financial Law, the Consumer Advisory Board, the
Academic Research Council, the Community Bank Advisory Council,
and the Credit Union Advisory Council), please provide
demographic information about committee members.
A.29.a. As noted in response to Q.25., the Taskforce is not an
advisory committee. The Bureau strives to ensure the Consumer
Advisory Board (CAB), the Community Bank Advisory Council
(CBAC), the Credit Union Advisory Council (CUAC), and the
Academic Research Council (ARC) reflect a balanced membership.
Pursuant to the Federal Advisory Committee Act (FACA), the
advisory committees must be fairly balanced in its membership
in terms of the points of view represented and the functions to
be performed. The advisory committee membership represents
geographic and demographic diversity as well as broad socio-
economic member perspectives. On a yearly basis, the Federal
Reserve Banks (FRB) provide CAB candidate referrals to the
Bureau in order to meet Dodd Frank's requirements. Per the
statute, not fewer than six members shall be appointed to the
CAB upon the recommendation of the FRB Presidents on a rotating
basis. Overall, 40 percent of the advisory committee membership
is female, and the leadership of the committees also includes
women and African Americans engaged in the consumer finance
marketplace. Year after year, the Bureau strives to have a
diverse advisory committee program. Our Office of Minority and
Women Inclusion (OMWI) is a regular participant in internal
deliberation meetings to identify highly qualified new advisory
committee members and OMWI also assists with outreach
initiatives to ensure the Bureau has a diverse candidate pool
of applicants. Advisory committee membership composition
changes annually, here is the current composition by cohort.*
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Q.29.b. Please identify the individual who selects members of
the advisory committee.
A.29.b. Ultimately, I make these selections. Prior to opening
the application window for the advisory committee vacancies,
the Bureau engages with internal teams and offices across the
Bureau for outreach purposes, including OMWI. Applicants for
the vacancies on the advisory committee go through an extensive
review process by Division leadership, a cross-Bureau selection
committee and interviews, and are subject to a Personnel
Security vetting process. The OMWI Director also served as a
member of the cross-Bureau Selection Committee, which provides
recommendations to me as the Director. The composition of the
advisory committees is at my discretion as the Director, within
the statutorily established parameters outlined in the response
to Q.29.a.
Q.29.c. Please describe what efforts, if any, the CFPB has in
place to ensure representation of racial and ethnic minorities
on its advisory committees.
A.29.c. The Bureau strives to ensure membership of the advisory
committees reflects balanced points of view, aligns with
statutory membership requirements laid out in the Dodd-Frank
Act, and represents geographic and demographic diversity as
well as broad socio-economic perspectives. The Bureau's OMWI
actively participates on the cross-Bureau Selection Committee,
which is tasked with identifying highly qualified candidates
for the Bureau's advisory committees for recommendation of
appointment to the Director.
Prior to the annual application window opening for
vacancies on the advisory committees, a needs assessment is
conducted to determine what gaps will exist at the end of the
following term. This assessment takes into consideration
statutory knowledge, gender, race/ethnicity, region and in the
case of community banks and credit unions, asset size, to
ensure there is a wide-range of experiences, views and
expertise. This representation is based on the charter of the
respective advisory committee, and the membership balance
plans, and external outreach is conducted with the above in
mind. In addition, the Bureau engages OMWI for outreach
purposes.
Diversity and Inclusion/Hiring
Q.30. What steps are you taking to ensure a diverse and
inclusive workforce?
A.30. The Bureau continues its commitment to ensure a diverse
and inclusive workforce as part of the drive to achieve the
Bureau's mission. Having a diverse and inclusive workforce
helps to ensure that regulations and policies developed by the
Bureau are of the highest quality and are relevant for all
consumers. The Bureau's diversity and inclusion strategy is
based on Section 342 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act, Executive Order No. 13583--
Establishing a Coordinated Governmentwide Initiative to Promote
Diversity and Inclusion in the Federal Workforce, the updated
Governmentwide Diversity and Inclusion Plan issued by the
Office of Personnel Management (OPM) in 2016, and on existing
regulations and guidance from the Equal Employment Opportunity
Commission (EEOC).
Recruitment and Outreach
The Bureau participates in diversity-focused recruitment
and outreach activities. We include members of our Employee
Resource Groups (ERGs) and our Diversity and Inclusion Council
of Employees (DICE) on the teams of employees that represent
the Bureau at recruitment and outreach events. Specifically, in
2020, we are virtually participating in the Ascend National
Convention and Career Fair, the largest gathering of Pan-Asian
business leaders and professionals in North America, and the
Prospanica National Conference and Career Expo, an association
of Hispanic MBAs and business professionals. The Bureau has
implemented a digitally focused recruitment strategy using the
eQuest tool to access diverse websites and job boards. Access
to these diversity sites will allow the Bureau to post
positions specifically to diversity and inclusion networks,
increase our visibility, and broaden talent pipelines.
Strategic Planning
OMWI works with Bureau leaders to develop and implement a
Diversity and Inclusion Strategic Plan for each Division that
includes a focus on workforce diversity, workplace inclusion,
and supplier diversity. The divisional plans ensure that a
culture of diversity and inclusion is integrated into daily
Bureau operations. Each Division, or large office, has a
designated Diversity and Inclusion point of contact to lead the
effort within their division. OMWI conducts meetings with each
Division to review divisional data and explore demographic gaps
when compared to relevant standards (Division, Bureau or
governmentwide) and to analyze and evaluate employee experience
on inclusion in the workplace. OMWI works with each Division to
prioritize and explore strategies and recommendations to
address the identified priority areas and monitors the
implementation and results of the diversity and inclusion
strategic plans.
Inclusion at the Bureau
The Bureau continues to engage in a broad array of programs
and initiatives to promote an inclusive work environment,
foster equity, collaboration, innovation, and greater
productivity. The Bureau recognizes heritage events and
commemorative observances to raise cultural awareness and
foster an environment of cultural intelligence. ERGs, Bureau
recognized networks of employees with similar interests,
backgrounds and experiences, and DICE are available to
employees and play an active role in supporting the Bureau in
hiring, retaining, and developing its diverse workforce.
In March 2020, the Bureau created a professional-quality
promotional video explaining what Equal Employment Opportunity
(EEO) means at the Bureau. In the video, Bureau Senior and
Executive leaders discuss and underscore the organization's
commitment to a discrimination-, harassment-, and retaliation-
free work place. We state that all employees are, and will be,
treated equally under the law and pledge to enforce civil
rights protections for all employees and applicants. The video
was shared with all Bureau employees via the Bureau's intranet,
and in the weekly newsletter, to convey the Bureau's commitment
to inclusivity.
Racial Equity
Under my leadership along with the OMWI, the Bureau
developed and implemented a forward-leaning action plan shortly
after the death of George Floyd on May 25, 2020, to provide
staff and management with tools and resources to assist them in
dealing with the events that followed. The OMWI collaborated
with its peers to plan and deliver a Federal multifinancial
agencies OMWI webcast titled ``Beyond Words: Race, Work, and
Allyship amid the George Floyd Tragedy'' on June 24. As a
follow-up, I invited National Credit Union Administration
Chairman Rodney Hood to speak to all Bureau employees in a
virtual discussion on racial equity issues, which was held on
July 10.
OMWI created and provided racial equity learning resources
to all Bureau employees that addressed specific racial issues
such as bias and allyship, as well as management-focused
guidelines and resources for addressing racial issues in the
workplace. In addition, the Bureau launched a series of OMWI
Dialogues centered around a variety of racial equity themes and
topics open to all employees, and regularly posts quickly
accessible learning resources on our intranet, that are also
available to all employees.
Q.31. What is the racial and gender composition of the heads of
Offices and Divisions now? How has that changed from when you
were confirmed?
A.31. The racial and gender composition of heads of the
Bureau's Offices and Divisions are 46.7 percent Women and 35.0
percent Minorities (8.3 percent Asian, 21.7 percent Black and
5.0 percent Hispanic). The diversity for the heads of Offices
and Divisions has increased since I was confirmed.
At the time of my confirmation on December 6, 2018 the
Bureau's Offices and Divisions heads were comprised of 44.4
percent Women and 28.6 percent Minorities (9.5 percent Asian,
12.7 percent Black and 6.4 percent Hispanic). The overall
percentage of minorities increased and specifically with the
representation of Black employees as heads of divisions/
offices.
Q.32. What recruiting has the Bureau done for the new Associate
Director of Research, Markets, and Regulations? What, if any
steps, did the CFPB take to ensure a diverse pool from which to
select the new Associate Director of RMR?
A.32. In addition to a public announcement posted on USAJobs
from July 17, 2020-July 30, 2020, the Office of Human Capital
worked with the Division of Research, Markets, and Regulations
to create a recruitment flyer with a direct link to the job
announcement and distributed it to diversity organizations and
networks. We ran recruitment campaigns on LinkedIn, Indeed,
Google, Bing, Yahoo, and several other digital media. We also
reached out to many diversity organizations and networks
including Hispanic Federation, African American Federal
Executive Association, National Association of Asian American
Professionals, National Society for Hispanic Professionals,
Veterans One Stop, as well as LGBTQ and Disability
organizations.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR TOOMEY FROM KATHLEEN
L. KRANINGER
Q.1. Director Kraninger, I was pleased to see the Supreme Court
hold in Seila Law v. CFPB that the CFPB's leadership by a
single director, removable only for cause, is unconstitutional
for violating the separation of powers. Besides the fact that
the President can now remove the director for cause, what are
the implications of this decision for the CFPB?
A.1. The Supreme Court made clear that the statutory
restriction on the President's authority to remove the Director
was unconstitutional, but that the Bureau's authorities
otherwise remain intact. The Bureau continues to carry out its
statutory mission.
Q.2. My understanding is that the CFPB held a symposium on July
29th on the use of cost-benefit analysis at the CFPB. Will the
CFPB now submit its regulations to OIRA for approval, which
would include a cost-benefit analysis component?
A.2. On July 29, 2020, the Bureau held a symposium on cost-
benefit analysis in consumer financial protection regulation,
including its use and agency incentives as well as
methodological and subject matter considerations. The Bureau is
committed to following the Consumer Financial Protection Act
and all other applicable laws. Section 1022 of that Act
requires that the Bureau, in prescribing a rule under the
Federal consumer financial laws, consider, among other things,
``the potential costs and benefits to consumers and covered
persons . . . resulting from the rule.'' 12 U.S.C. Sec.
5512(b)(2)(A)(i). The Bureau is currently in the process of
assessing the consequences of the Supreme Court's decision in
Seila Law on the Bureau's operations.
Q.3. Now that you serve at the pleasure of the President,
shouldn't the agency that you direct follow his executive
orders including 12866, which requires cost-benefit analysis in
rulemaking, and 13771, which requires agencies to repeal two
existing regulations for every new regulation? Will you provide
us an update on where you are in the planning process for
bringing the agency into compliance with all executive orders?
A.3. The Bureau is committed to following the Consumer
Financial Protection Act and all other applicable laws. Section
1022 of that Act requires that the Bureau, in prescribing a
rule under the Federal consumer financial laws, consider, among
other things, ``the potential costs and benefits to consumers
and covered persons . . . resulting from the rule.'' 12 U.S.C.
Sec. 5512(2)(A)(i). The Bureau is currently in the process of
assessing the consequences of the Supreme Court's decision in
Seila Law on the Bureau's operations.
Q.4. Does the CFPB intend to consult with DOJ and the White
House Counsel's Office on important legal matters? For example,
earlier this month, the CFPB ratified the large majority of its
existing regulations and other regulatory actions that the CFPB
took or finalized between January 2012 through the end of last
month. This ratification was necessary because during that
period, the CFPB operated under an unlawful structure.
Q.4.a. Did the CFPB consult with the DOJ or the White House
Counsel's Office before ratifying all of these actions?
A.4.a. The Bureau collaborates with the Department of Justice,
other Federal agencies, and the White House Counsel's Office on
matters of mutual concern. It would not be appropriate to
comment on any specific matter.
Q.4.b. The Supreme Court didn't opine about ratification of
prior actions. Your agency issued a document that intended to
ratify these actions, but it's far from clear to me that the
director has the authority to do that. This could be unlawful
because an action taken by an unconstitutional agency should be
a nullity that cannot be fixed. There have to be a consequence
for a bad act. What gives the you, as opposed to the President,
the authority to ratify past actions?
A.4.b. I ratified the relevant regulatory actions after the
Supreme Court made clear that I am fully accountable to the
President. Under well-established case law, such a ratification
resolves any constitutional defect in these prior regulatory
actions. It is also worth emphasizing that consumers, the
business community, State and local governments, and other
individuals and entities all relied upon the validity of these
actions in organizing their activities over a period of 8
years. The ratification was important in order to avoid public
uncertainty, which could have interfered with markets for
consumer financial products and services.
Q.5. Now that you serve at the pleasure of the President as
head of the CFPB, will you submit your budget to OMB for
approval? Will you engage in the normal budgeting process for
other departments and agencies?
A.5. The Bureau is committed to following the Consumer
Financial Protection Act and all other applicable laws. We will
appropriately evaluate any requests from the Office of
Management and Budget.
Q.6.a. The President's budget request seeks to have the CFPB
funded through the regular appropriations process.
Do you support that request?
A.6.a. The Bureau is committed to following the Consumer
Financial Protection Act and all other applicable laws in
fulfilling its mission to protect American consumers. The
Bureau will adhere to any legal changes regarding its funding
provisions.
Q.6.b. The President could hypothetically order you to request
zero dollars from the Federal Reserve for FY2021, which would
offer Congress a choice: shut the agency down or fund it
through appropriations. If the President made such an
announcement, would you support him in that effort?
A.6.b. The Bureau is committed to following the Consumer
Financial Protection Act and all other applicable laws. The
Bureau will adhere to any legal changes regarding its funding
provisions.
I appreciate your leadership in directing the CFPB to
release clarifying January 2020 guidance on the definition of
``abusive'' under Section 1031. However, I would like further
clarity on this issue. Earlier this year, I asked you in a
question for the record if the CFPB intended for the guidance
to be a standard for all new lawsuits filed after the
guidance's issuance. In response you said that 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.'' You also
explained that the CFPB does not foreclose a later rulemaking
on abusive practices.
Q.7.a. Can you promise me now that the CFPB will follow its
January 2020 guidance on abusive practices for the remainder of
your time as CFPB Director?
A.7.a. I remain committed to the Policy Statement and it will
continue to guide how the Bureau approaches its use of
abusiveness in its supervision and enforcement matters going
forward.
Q.7.b. Has the CFPB fully followed this guidance after its
issuance?
A.7.b. Since the Bureau clarified certain aspects of how it
intends to approach its use of the abusiveness standard, that
policy has guided Bureau decisions about its use of abusiveness
in its supervision and enforcement matters.
Q.8. I understand that CFPB may 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. Can you provide a
status update on where the CFPB is on this rulemaking?
A.8. 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.
The next step in the Bureau's rulemaking process was the
release of materials in advance of convening a panel under the
Small Business Regulatory Enforcement Fairness Act (SBREFA), in
conjunction with the Office of Management and Budget and the
Small Business Administration's Chief Counsel for Advocacy.
These materials 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 SBREFA process
will help inform the Bureau's policymaking leading to a notice
of proposed rulemaking.
As set forth in the settlement agreement entered in
California Reinvestment Coalition v. Kraninger, the Bureau
agreed to release an outline of proposals under consideration
as part of the small business review process by September 15,
2020, and met that deadline. The Bureau also agreed to convene
a SBREFA panel no later than October 15, 2020 (or, if panel
members are not available to convene, as soon as practicable
thereafter). Pursuant to 5 U.S.C. Sec. 609, the SBREFA panel
is required to complete its report within 60 days of the
panel's convening.
Q.9. I have long advocated for the regulatory agencies to use
guidance documents properly. As you know, I led the effort to
invalidate the CFPB's Indirect Auto Lending Guidance using the
Congressional Review Act, which was possible because the CFPB
violated requirements under this Act when it issued its
guidance. I believe that agencies should never sidestep the
APA's notice and comment rulemaking process by issuing guidance
that imposes legally binding requirements on the public. I am
worried that your agency may have too many guidance documents
from Director Cordray's tenure that are still in effect. When I
asked you earlier this year in questions for the record on
whether your agency was reviewing its guidance documents, you
said that the CFPB was ``currently considering a number of
issues related to its guidance documents.''
Q.9.a. Can you provide a status update on this issue?
A.9.a. I can provide two updates on the Bureau's efforts to
ensure that guidance documents do not exceed their appropriate
role under the Administrative Procedure Act. The first relates
to compliance aids. The Bureau issues compliance aids that are
intended to provide useful information to regulated entities,
as they navigate complying with applicable rules and statutes.
These can include resources like small entity compliance
guides, summaries of regulation changes, flowcharts, and
frequently asked questions. Earlier this year, I issued a
Policy Statement on Compliance Aids. Among other points, the
policy statement makes clear that the Bureau does not intend
``to use Compliance Aids to make decisions that bind regulated
entities,'' and that regulated entities ``are only required to
comply with the underlying rules and statutes.'' 85 Fed. Reg.
4579 (Jan. 27, 2020).
In addition to compliance aids, another type of Bureau
guidance is supervisory guidance, of which the Indirect Auto
Lending Bulletin was an example. The Bureau announced in its
Spring 2020 regulatory agenda that it is cooperating with other
supervisory agencies to jointly propose a rule on the role of
supervisory guidance. As the agenda noted, this includes
providing additional clarity that supervisory guidance cannot
``create binding legal obligations for the public.''
Q.9.b. Does the CFPB plan to rescind any Cordray-era guidance
documents?
A.9.b. In addition to the Bureau's efforts, discussed above, to
comprehensively address the role of these entire categories of
guidance, I am certainly open to reconsidering specific
guidance documents when concerns are raised about them.
Q.10. You have expressed interest in guidance for industries
where the CFPB's position is unclear, particularly after a
previous CFPB director's practice of guidance through
enforcement. Could you give us a status update on the issuance
of guidance for industries that have requested further
clarification, particularly with tribal lending and other
industries affected by dramatic swings in Bureau policies?
A.10. The Bureau believes that providing clear and useful
guidance to regulated entities is an important aspect of
facilitating markets that serve consumers. At our website we
provide extensive regulatory guidance and compliance resources,
as well as information and guidance about the supervisory
process.\1\ In particular, in June 2020, I initiated a new
advisory opinion program to address regulatory uncertainty in
the Bureau's existing regulations, by allowing allow entities
seeking to comply with regulatory requirements to submit a
request where uncertainty exists.
---------------------------------------------------------------------------
\1\ https://www.consumerfinance.gov/policy-compliance/guidance/.
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------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR MENENDEZ FROM KATHLEEN L. KRANINGER
Q.1. As more indebted consumers begin to face delinquency or
default during the COVID-19 pandemic, it's only a matter of
time before we see financially insecure Americans suffer abuse
and harassment by some debt collectors.
Director Kraninger, considering the rise in unemployment,
financial insecurity, and debts, are you planning on releasing
new guidance on what constitutes ``unfair and unconscionable,''
debt collection practices during the COVID-19 pandemic,
including prohibiting debt collectors from starting new debt
collection lawsuits or garnishing wages?
A.1. In accordance with the Administrative Procedure Act, the
Bureau has carefully considered comments received on the May
2019 proposed rule that would prescribe rules under Regulation
F to govern the activities of debt collectors, as that term is
defined under the FDCPA and expects to issue a final rule in
October 2020. In December 2020, the Bureau also plans to issue
a final rule on its supplemental proposal issued in February
2020, which addressed time-barred debt disclosures, and any
remaining proposed issues. The Bureau extended the deadline for
comments on that proposal to August 4, 2020, in light of the
COVID-19 pandemic.
Q.2. On March 10th, you informed this Committee that the CFPB
and Department of Education would soon begin a ``joint''
examination of a Federal student loan servicer, finally
restarting the CFPB's supervision over the largest student loan
companies, after failing for more than 2 years to oversee the
vast majority of the student loan serving market.
Can you give us an update on how this has been handled? How
many examinations have you conducted? How many are planned?
A.2. Supervision is coordinating with the Department of
Education on supervisory work at student loan servicers
covering Federal loans. The Bureau generally considers the
number of supervisory engagements in a particular product line
confidential supervisory information and has only provided the
total number of supervisory events in a given fiscal year
rather than any subset associated with a particular product
line or law (with the exception of fair lending).
Q.3. In response to a Question for the Record by HELP Committee
Ranking Member Murray, Secretary DeVos stated that ``In
general, FSA considered this first joint exam to be a pilot; it
therefore does not currently have any associated monitoring
agreements'' with the CFPB. It appears that you have taken the
position that ED should preapprove all CFPB oversight on a
case-by-case basis.
Given that there is no formal agreement between CFPB and ED
to allow for ongoing, routine supervision, how does CFPB
determine when and whether to examine a student loan servicer?
In the absence of an agreement, how can CFPB exercise its duty
under Dodd-Frank to respond to emerging risks and conduct
independent risk-based examinations in the second-largest
market for consumer credit?
A.3. The Bureau determines when and whether to examine a
student loan servicer through its risk prioritization process
and then consults with the Department of Education to determine
the specifics of the coordination. Bureau examiners conduct our
supervisory work under the supervision and direction of
managers and executives of the Bureau consistent with the
Bureau's risk prioritization process and our authorities.
Q.4. The CFPB recently released two proposed rules to redefine
the definition of a ``Qualified Mortgage'' (QM) and to
temporarily extend the sunset date for the GSE Patch. The
Bureau is proposing to extend the Patch until the effective
date for the new QM definition which would be ``six months
after publication in the Federal Register.''
Q.4.a. Did the CFPB consider a longer timeline for
implementation?
A.4.a. In its NPRM, the Bureau proposed to set an effective
date for the Patch to expire 6 months after the final General
QM amendments are published in the Federal Register. However,
in the proposal, the Bureau requested comment on an appropriate
implementation period for changes to the General QM definition
and will appropriately consider those comments in determining
the implementation period for any final rule.
Q.4.b. Is a 6-month timeframe enough time for stakeholders to
analyze and implement the new standards?
A.4.b. In the proposal, the Bureau requested comment on an
appropriate implementation period for changes to the General QM
definition and will appropriately consider those comments in
determining the implementation period for any final rule.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN FROM KATHLEEN
L. KRANINGER
Actions of the Bureau during the COVID-19 Pandemic
Q.1. In April, the CFPB jointly issued guidance with the other
banking regulators that said that they will not take
supervisory or enforcement action against mortgage servicers
for delaying early intervention and loss mitigation notices or
``good faith efforts'' to establish live contact with
delinquent borrowers.
Q.1.a. Please describe how the Bureau evaluates whether or not
an effort to establish contact was made in ``good faith.''
A.1.a. The Bureau's evaluation of ``good faith'' is dependent
on the particular facts and circumstances before it.
Supervision is currently conducting Prioritized Assessments and
the Bureau's receipt and evaluation of information is ongoing
now. The results of this analysis and the monitoring of any
trends will help the Bureau determine whether any follow-up
work at particular institutions is warranted.
Q.1.b. Will the Bureau take enforcement actions when a servicer
does not make any type of effort to contact a borrower?
A.1.b. While the Bureau is mindful of challenges faced by
institutions, we will not hesitate to take public enforcement
action when appropriate against companies or individuals that
engage in unfair, deceptive, or abusive acts or practices,
discriminate, or otherwise violate Federal consumer financial
protection laws.
Q.2. On April 1, 2020, the CFPB announced that it will not cite
in an examination or bring an enforcement action against
lenders or credit bureaus who exceed under the Fair Credit
Reporting Act to investigate disputes alleging incorrect credit
reporting. In June, the Bureau also released a set of FAQs for
furnishers and credit reporting agencies that specified that
the guidance does not ``give furnishers or consumer reporting
agencies an unlimited time beyond the statutory deadlines to
investigate disputes before the Bureau would take supervisory
or enforcement action.''
Q.2.a. How much time is the CFPB giving furnishers and lenders
to investigate disputes beyond statutory deadlines?
A.2.a. Supervision is conducting Prioritized Assessments
designed to obtain real-time information from entities that
operate in markets that pose elevated risks of consumer harm
due to pandemic-related issues. This includes risks related to
violations of Federal consumer financial law, including the
Fair Credit Reporting Act. If Supervision or Enforcement finds
that a furnisher has not responded within statutory timeframes,
we would then make a fact-based determination as to whether the
furnisher is making good faith efforts to investigate disputes
as quickly as possible. Supervision's Prioritized Assessment
work is still in progress.
Q.2.b. Does that amount of time differ for different furnishers
and lenders? If so, please describe how the Bureau determines
the appropriate extent to which these lenders cam violate the
law, including all factors it evaluates in each individual
circumstance.
A.2.b. Supervision continues to conduct Prioritized
Assessments. As noted above, if Supervision or Enforcement
finds that a furnisher hasn't responded within statutory
timeframes, we would then make a facts-based determination as
to whether the furnisher is making good faith efforts to
investigate disputes as quickly as possible.
Rulemaking
Q.3. Last month, the Bureau released its final version of the
Payday, Vehicle Title, and Certain High-Cost Installment Loans
rulemaking (Payday Rule), which rescinded the mandatory
underwriting provisions in the 2017 final rule.
The final rule states ``the Bureau believes that some
borrowers taking out payday loans may experience additional
defaults under this final rule than they would under the 2017
Final Rule.'' Does the Bureau believe there will be more
defaults than if the mandatory underwriting provisions were in
place? If so, by how much?
A.3. As stated in the text of the 2020 Final Rule, ``the Bureau
does not know the prevalence of the possible increased defaults
nor can it provide an estimate of the total potential cost per
default to consumers.'' See 85 FR 44382 at 44439.
Q.4. The final rule states ``to the extent eliminating the
Mandatory Underwriting Provisions will increase the number of
payday and vehicle title loans and length of loan sequences
relative to the 2017 Final Rule, doing so likely will increase
the frequency of delinquencies and lead consumers to incur
costs associated with those delinquencies.''
Q.4.a. Did the Bureau provide an estimate as to the frequency
of delinquencies and the costs customers incurred?
A.4.a. The Bureau did not provide an estimate as to the
frequency of delinquencies and the costs consumers incurred.
Q.4.b. If not, describe the efforts the Bureau took in its
attempt to develop such an estimate.
A.4.b. As the Bureau explained in its cost-benefit analysis
with the final rule, the Bureau lacks representative data that
could be used to analyze all effects of the final rule. Absent
these data, portions of the analysis rely, at least in part, on
qualitative evidence provided to the Bureau in previous
comments, responses to RFIs, and academic papers; general
economic principles; and the Bureau's experience and expertise
in consumer financial markets. As such, many of the benefits,
costs, and impacts of the final rule are presented in general
terms or ranges (as they were in the section 1022(b)(2)
analysis of the 2017 Final Rule), rather than as point
estimates. Defaults are one of the effects of the rule the
Bureau lacked data to even attempt to estimate.
Q.5. A memo written by a staff economist at the Bureau detailed
an unprecedented political interference in the rulemaking
process, including the manipulation of the agency's own
research by political appointees.
Q.5.a. When were you first made aware of this memo?
Q.5.a. I am familiar with the memo but am not sure precisely
when I became aware of it. It was published by the New York
Times on April 29, 2020.
Q.5.b. When this memo was brought to your attention, what
actions did you take in response to it?
A.5.b. At the end of April, we were finishing up the final
rule, which we released on July 7, 2020. Unfortunately the
reporting in the New York Times story did not represent the
robust process the Bureau engaged in to develop the 2019 NPRM
much less the Bureau's process to consider public comments and
finalize the rule.
Q.5.c. Public reporting suggested that the Bureau was
originally planning on releasing the final rule the week of
April 29th. Was the memo a factor in delaying the release
nearly 3 months?
A.5.c. The memo was not a factor in the timing of the release.
Between the end of April and the release of the final payday
rule on July 7th, the Bureau was engaged in several actions
related to pandemic relief as well as a number of other
regulatory and enforcement actions.
Q.5.d. Were any changes made to the text of the final rule
during the time period between the memo being brought to your
attention and the release of the rule in July? If so, please
identify and describe in detail each of those changes.
A.5.d. It is not appropriate to discuss predecisional changes
to and internal deliberations concerning rulemakings. But I
would note that the published final rule references events that
took place after April 29, 2020, including (1) the issuance on
May 20, 2020, of the second interagency statement on small-
dollar lending by the OCC, FDIC, NCUA and the Board and (2) the
Bureau's May 22, 2020, issuance of a No-Action Letter and
template facilitating small-dollar lending by depository
institutions to the Bank Policy Institute, as well as the
Bureau's determination to deny a pending petition for
additional rulemaking on small-dollar lending.
Q.6. 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.6. Many individual staff members from a range of disciplines,
including career staff and political appointees, work on each
of our rulemakings. The contribution and engagement of
individuals varies depending on their role and function in the
Bureau. Engagement by individuals with competing perspectives
and insights--regardless of their status as career staff or
political appointee--is critical to ensuring a thorough and
informed discussion. As Director, I welcome this engagement,
because rigorous policy evaluation and development generate
better decisions and outcomes. Ultimately, of course, the final
decision rests with me as the Director.
Q.7. In response to Section 1073 of the Dodd-Frank Act, the
CFPB developed a final rule on remittance transfers (Remittance
Rule) to require that consumers who send money abroad are
presented with the costs, including the fees and exchange rates
used. However, banks and remittance providers have still been
able to evade full transparency by indicating that consumers
will pay low fees, but can then drastically raise the exchange
rate based on the initial estimate.
Do you believe that the current regulations in place are
sufficient to provide consumers with the transparency regarding
the total cost of sending money?
A.7. In its report assessing the Remittance Rule, published in
October 2018, the Bureau reviewed the available evidence for
the Remittance Rule's effectiveness in meeting the purposes and
objectives of title X of the Dodd-Frank Act (including that
consumers are provided with timely and understandable
information to make responsible decisions about financial
transactions) and the specific goals stated by the Bureau.\1\
The assessment concluded that the information consumers
received about the price of a remittance transfer before the
Rule became effective varied from provider to provider. Because
consumers generally now receive the disclosures required by the
Rule, in at least some cases consumers are now receiving more
information than they did before the Rule took effect. In a
survey of remittance transfer consumers by a consumer advocacy
group cited in the assessment report, 59 percent recalled that
the Rule-required disclosures included information about fees
and 63 percent recalled that the disclosures included an
exchange rate. The Bureau notes that there are significant
challenges in accurately determining what consumers do with
these disclosures and that some of the available evidence is
conflicting.
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\1\ The assessment report is available at: https://
files.consumerfinance.gov/f/documents/bcfp_remittance-rule-
assessment_report_corrected_2019-03.pdf.
Q.8. Has the Bureau considered, in recent or past
deliberations, adopting the simple ``total cost'' (upfront fees
+ exchange rate markup) model included in the new EU
transparency rules and supported by international organizations
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like the World Bank and others?
A.8. Section 1073 of the Dodd-Frank Act creates a new section
919 of EFTA and requires remittance transfer providers to
provide specific pieces of information about a remittance
transfer to consumers. That information includes the amount of
currency that will be received by the designated recipient of a
remittance transfer, using the value of the currency into which
the funds will be exchanged; the amount of fees charged for the
remittance transfer; and the exchange rate to be used for the
transfer. The disclosures the Bureau adopted in the Remittance
Rule generally reflect what the statutory framework set forth.
The Bureau encourages entities seeking to improve consumer
disclosures to use the Bureau's Trial Disclosure Program Policy
(TDP Policy), through which entities may conduct in-market
testing of alternative disclosures for a limited time upon
permission by the Bureau.\2\ Section 1032(e) of the Dodd-Frank
Act gives the Bureau the authority to provide certain legal
protections for entities to conduct trial disclosure programs,
as outlined in the TDP Policy.
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\2\ https://www.consumerfinance.gov/about-us/newsroom/bureau-
issues-policies-facilitate-compliance-promote-innovation/.
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Operations
Q.9. 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.9.
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Q.10. Does the CFPB have plans to hire additional political
appointees? If so, please provide position descriptions and
salary ranges for their jobs.
A.10. The Bureau does not currently have any pending requests
with OPM for additional political appointees.
Q.11. 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.11.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.11.a.
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Q.11.b. What is CFPB's plan to improve morale among staff?
A.11.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 (albeit virtually now);
and weekly ``office hours'' to provide updates on Bureau
priorities, recognize individual and team efforts and
achievements, and continue to gather staff feedback. This
effort has been well-received by employees, as indicated
through direct communication they make with me and through
leadership. The Annual Employee Survey (AES) is also an
important source of that feedback that I carefully review and
consider.
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 instituted several initiatives to ensure the
health, safety, and well-being of the Bureau's staff
during the COVID-19 pandemic, which included:
LDirecting that all examination activity of Bureau-
supervised institutions be conducted offsite, from
examiners' home duty stations, through January 2, 2021.
LManaging the agency's operating status and posture
starting with mandatory telework through the current
maximum telework position, which includes providing
appropriate safety conditions to support voluntary
return to the office for those who seek that option.
This position is in place through January 2, 2021.
LInstituting additional workplace flexibilities that
will continue through January 2, 2021, which include:
LAuthorizing employees to use administrative leave
if they are unable to perform work at home or at their
home duty station and (1) School or daycare closures
result in a lapse in childcare, which requires one to
provide care or (2) Other reasons one identifies as
related to COVID-19 such as providing care for another
family member in order to prevent exposure/spread of
COVID-19, taking any required sanitation measures, etc.
LProviding up to 2 weeks (80 hours) of emergency
paid sick leave in accordance with the Emergency Paid
Sick Leave Act.
LProviding Bureau employees with updates on
prevention measures, workplace flexibilities, telework
options and best practices, and notifying staff of the
floor and wing location of affected staff through a
variety of communication channels.
LCreating several ways to hear from our employees
through NTEU engagements, a COVID-19 Bureau advisory
group, a Pandemic Inquiries Inbox, leadership
involvement, and through our Employee Resources Groups.
Additionally, we have maintained a frequent cadence of
communicating with FIRREA and other Federal agencies
for situational awareness and alignment, where
possible.
LThe regional offices (New York, Chicago, San
Francisco, and Atlanta) will soon open to their staff
who desire to work in the office--mirroring the
policies, procedures, and posture at headquarters.
LShortly after I became Director, I established a
Workforce Effectiveness Committee (WEC) 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.
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RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM KATHLEEN L. KRANINGER
Q.1. How many forensic accountants and other professionals who
can trace illegally gotten gains does the Bureau have on staff?
Do you have enough staff with the experience and ability to
track financial transactions during investigations?
A.1. Enforcement has two forensic accountants and six financial
investigators, all of whom have the experience and ability to
track financial transactions including tracing illegally gotten
gains.
Q.2. Does the Consumer Bureau have the ability to work with
other agencies like the FBI, IRS, and others to find hidden
accounts that may hold ill-gotten funds? If so, how are those
collaborations working? Does the Bureau refer cases or work
collaboratively on cases?
A.2. Enforcement effectively collaborates with numerous other
Federal agencies, including the Federal Bureau of Investigation
and has not encountered any issues with those relationships.
Q.3. Last month, the Consumer Bureau settled with three
companies \1\ involved in contract for deed contracts.
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\1\ https://files.consumerfinance.gov/f/documents/cfpb_harbour-
portfolio-advisors-et-al_con-
sent-order_2020-06.pdf.
Q.3.a. Why did the Bureau only fine the three companies
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$45,000?
A.3.a. The Bureau imposed a $25,000 civil money penalty against
Harbour Portfolio Advisors, LLC and a $10,000 penalty against
National Asset Advisors, LLC and National Asset Mortgage, LLC
jointly, which will be paid to the Bureau and deposited into
the Civil Penalty Fund created by the Dodd-Frank Act. The
Consumer Financial Protection Act of 2010 provides a framework
for determining the amount of civil money penalties. Under the
Consumer Financial Protection Act of 2010, the Bureau must take
into consideration a number of factors in determining the
amount of civil money penalties, including the size of
financial resources and good faith of the institution, along
with the gravity of the violation, the severity of the risks to
or losses of consumers, any history of previous violations, and
other matters as justice requires. The Bureau took into account
all of these factors in this matter.
Q.3.b. It has been 30 days since the consent order. Have the
companies submitted and instituted the compliance plan as
required in the consent order?
A.3.b. The Bureau monitors defendants' compliance with final
orders by verifying information received from defendants and
assessing whether they are adhering to applicable requirements.
Details specific to a particular consent order are
confidential.
Additional Material Supplied for the Record
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[all]