[Senate Hearing 117-761]
[From the U.S. Government Publishing Office]


                                                        S. Hrg. 117-761


    THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL REPORT TO 
                                CONGRESS

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

                                HEARING

                               BEFORE THE

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

                    ONE HUNDRED SEVENTEENTH CONGRESS

                             SECOND SESSION

                                   ON

    THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL REPORT TO 
                                CONGRESS
                               __________

                           DECEMBER 15, 2022
                               __________

  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
                    
53-823 PDF                WASHINGTON : 2023   


            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                     SHERROD BROWN, Ohio, Chairman

JACK REED, Rhode Island              PATRICK J. TOOMEY, Pennsylvania
ROBERT MENENDEZ, New Jersey          RICHARD C. SHELBY, Alabama
JON TESTER, Montana                  MIKE CRAPO, Idaho
MARK R. WARNER, Virginia             TIM SCOTT, South Carolina
ELIZABETH WARREN, Massachusetts      MIKE ROUNDS, South Dakota
CHRIS VAN HOLLEN, Maryland           THOM TILLIS, North Carolina
CATHERINE CORTEZ MASTO, Nevada       JOHN KENNEDY, Louisiana
TINA SMITH, Minnesota                BILL HAGERTY, Tennessee
KYRSTEN SINEMA, Arizona              CYNTHIA LUMMIS, Wyoming
JON OSSOFF, Georgia                  JERRY MORAN, Kansas
RAPHAEL WARNOCK, Georgia             KEVIN CRAMER, North Dakota
                                     STEVE DAINES, Montana

                     Laura Swanson, Staff Director

                 Brad Grantz, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                 Dan Sullivan, Republican Chief Counsel

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                        Pat Lally, Hearing Clerk

                                  (ii)


                            C O N T E N T S

                              ----------                              

                      THURSDAY, DECEMBER 15, 2022

                                                                   Page

Opening statement of Chairman Brown..............................     1
        Prepared statement.......................................    30

Opening statements, comments, or prepared statements of:
    Senator Toomey...............................................     5
        Prepared statement.......................................    31

                                WITNESS

Rohit Chopra, Director, Consumer Financial Protection Bureau.....     8
    Prepared statement...........................................    33
    Responses to written questions of:
        Senator Sinema...........................................    36
        Senator Warnock..........................................    37
        Senator Scott............................................    39
        Senator Moran............................................    39
        Senator Daines...........................................    45

              Additional Material Supplied for the Record

Semi-Annual Report of the Consumer Financial Protection Bureau--
  Spring 2022....................................................    48

                                 (iii)

 
                   THE CONSUMER FINANCIAL PROTECTION
                 BUREAU'S SEMIANNUAL REPORT TO CONGRESS

                              ----------                              


                      THURSDAY, DECEMBER 15, 2022

                                        U.S. Senate
           Committee on Banking, Housing, and Urban Affairs
                                                    Washington, DC.
    The Committee met at 10 a.m., in room 538, Dirksen Senate 
Office Building, Hon. Sherrod Brown, Chairman of the Committee, 
presiding.

          OPENING STATEMENT OF CHAIRMAN SHERROD BROWN

    Chairman Brown. The Committee on Banking, Housing, and 
Urban Affairs will come to order. Our witness is in person. 
Welcome, Mr. Chopra. The Committee is in hybrid format. Some 
Members might do this remotely.
    Let me start by talking about two of our colleagues who are 
retiring at the end of this Congress.
    Senator Toomey sat by my side, I by his side, for 87 of the 
89 hearings the Committee held this Congress. We each missed 
one. I was sick one day, and he had a family issue. I mention 
that because it shows how seriously he takes this job, both as 
Senator and as Ranking Member, and I will always, always 
remember that and be grateful. I am sure there were many 
hearings he did not want to sit through, but he did, and I give 
him credit for that.
    I have enjoyed getting to know him as we sat together and 
got to know each other better for literally hundreds of hours 
over the last 2 years. We moved dozens of nominees through the 
Committee, we worked together on crucial national security 
issues like China, most recently we have worked together on 
FTX, and off the Committee worked on important maternal health 
issues.
    While we have our disagreements, there may be no other 
Republican as passionate as Senator Toomey, and it is backed by 
his strong world view and intellect, especially on financial 
matters. He was a critical voice in our Committee's response to 
the COVID crisis and the Congressional oversight afterwards. 
The quality of debate and discourse in this Committee was 
improved because Pat and his incisive intellect--I use that 
word again--were engaged.
    I also want to commend Pat's staff--Brad Grantz, Dan 
Sullivan, John Crews. I thank them and the rest of the team for 
their hard work and diligence.
    I wish Pat, Kris, and their three children the best in the 
next phase of Pat's career.
    I have not known a Banking and Housing Committee without 
Senator Shelby. I came to the Committee in 2007, in the middle 
of the financial crisis, and Senator Shelby points out that on 
his first day on the Committee, Senator Proxmire, of Wisconsin, 
who was the predecessor to Senator Cole, was chairing this 
Committee.
    He has helped shape the agenda of the Committee for 35 
years--during Enron, during Sarbanes-Oxley, the Great Recession 
of 2008, Dodd-Frank, the COVID pandemic, and so many other 
critical moments in the history of this Committee. He served in 
leadership roles as either Chair or Ranking Member for more 
than a decade, working as Chair with Senators Sarbanes, Dodd, 
Johnson, and then finally me in the last 2 years as the leader 
of this Committee. No one on the Republican side was a greater 
proponent of strong capital at banks, something I always 
admired about Senator Shelby's philosophy and work.
    I wish you and Annette well in your retirement. Thank you.
    Welcome back Director Chopra.
    The Banking, Housing, and Urban Affairs Committee used to 
be referred to simply as the Senate Banking Committee because 
it was mostly all about Wall Street. When Democrats took 
control, 19, 20 months ago, we changed that.
    So it is fitting that this Committee's last hearing for the 
117th Congress is the CFPB's Semi-Annual Report, because 
fighting for consumers is one of the most important things we 
can do on this Committee.
    Since the CFPB first opened its doors 12 years ago, the 
consumer agency has returned about $15 billion--with a B--$15 
thousand million to consumers, including principal reductions, 
canceled debts, and other relief. That is $14.9 billion. Over 
183 million consumers have been eligible for that relief. The 
CFPB has a track record of helping real people get real 
compensation for real harm from financial institutions that 
have wronged them.
    In 2012, just over a year after becoming fully operational, 
the CFPB ordered American Express subsidiaries to refund $85 
million to an estimated 250,000 consumers for illegal credit 
card practices, including charging unlawful late fees.
    In 2014, the CFPB reached a settlement requiring Sallie Mae 
to pay $60 million to an estimated 60,000 servicemembers 
serving our country, for overcharging them on student loans.
    In 2016, the CFPB fined Wells Fargo $100 million for 
opening unauthorized accounts and ordered Wells to refund an 
estimated $2.5 million in fees accrued.
    This year, the CFPB fined Bank of America $10 million for 
unlawfully garnishing consumer accounts.
    When financial institutions illegally took consumers' hard-
earned money through unlawful late fees, through too-high 
interest rates, through unauthorized fees, and through improper 
garnishment, the CFPB cracked down and ensured that consumers 
keep their hard-earned money.
    No other agency fights for consumers like the CFPB. It is 
no wonder Wall Street hates the agency. Since the passage of 
Dodd-Frank, Wall Street and its allies have aimed their fire at 
the CFPB, trying over and over again to undermine and gut the 
agency responsible for fighting for Main Street and consumers.
    Republicans have proposed bill after bill to weaken the 
CFPB, to take away the effective single director structure, to 
put the agency's funding in the limbo of congressional 
appropriations, or to simply undo the CFPB.
    But Congress created it and specifically designed its 
funding structure to make the agency an effective consumer 
watchdog.
    According to this Committee's report on Dodd-Frank, ``the 
assurance of adequate funding, independent''--independent, my 
emphasis--``of the Congressional appropriations process, is 
absolutely essential to the independent''--again, that word 
independent--``operations of any financial regulator,'' which 
is why other financial regulators like the Federal Reserve, 
OCC, FDIC, and NCUA are independently funded and not subject to 
congressional appropriations.
    And when Wall Street and Republicans in Congress, always 
allies on these kinds of things, tried to put the CFPB out of 
business, the public loudly and clearly said ``no.'' So even in 
a unified, all-Republican President, House, Senate, they could 
not put it out of business. It has remained intact because it 
does its job--helping consumers.
    Consumers know Wall Street does not have their best 
interest at heart.
    Consumers know that Wall Street needs a strong regulator to 
keep it in check.
    Consumers remember the damage that Wall Street wrought on 
the economy, on their neighborhoods, and on their wallets. I 
live in Cleveland, Ohio. My ZIP code had the highest number of 
foreclosures in 2007 of any ZIP code in America. I know where 
that damage comes from.
    And consumers know that CFPB follows the facts. They go 
after bad actors, from banks overcharging customers to 
predatory payday lenders trapping consumers in debt. The CFPB 
stands up to Wall Street. Director Rohit Chopra and the CFPB 
use all of their powers to fight discrimination, and they 
continue to go after financial institutions for their treatment 
of Black and Brown consumers.
    In 2021, the CFPB required a bank to pay $5 million to 
address redlining that harmed Black consumers. This year the 
agency announced that it will reexamine whether discrimination 
violates the Dodd-Frank prohibition against unfair, deceptive, 
and abusive acts and practices.
    And in July, in response to a local lender's failure to 
serve Philadelphia's majority-minority neighborhoods, the CFPB, 
along with the DOJ's Combatting Redlining Initiative, brought 
$18 million in funds to support home ownership in those 
neighborhoods.
    In total, the CFPB has gotten $637 million from 
discriminatory financial institutions, tens of millions of 
which have gone directly to minority consumers who experienced 
that discrimination.
    There is a reason why the civil rights community was 
instrumental in the creation of Director Chopra's agency. They 
knew that they needed an agency that was empowered and unafraid 
to fight against discrimination. It is creating a fair, 
transparent, and competitive economy.
    Major and consequential CFPB rules like the Ability to 
Repay rule not only provide protections for consumers buying 
homes, but also create rules for financial institutions and the 
broader economy.
    That is why we created the CFPB, to ensure that the 
financial marketplace is fair for everyone, and that 
corporations cannot rig the system and get away with it. That 
is the essence of capitalism.
    Ranking Member Toomey.
    Senator Toomey. Thank you, Mr. Chairman.
    Mr. Chairman, if it is OK with you I would like to say a 
few words about my time serving here with you. I would like to 
say a couple of words about my time with former Chairman 
Shelby, and then, if I could, yield to him for brief comments 
before I go into the opening comments on the subject at hand.
    Chairman Brown. Of course.
    Senator Toomey. Thank you very much.
    First of all, thank you, Mr. Chairman, for the kind words 
that you said. The fact is, Chairman Brown and I actually have 
more in common than many people might think. We both represent 
big, complicated States. We both love baseball and politics, 
probably in that order. We actually get along quite well, 
despite the fact that we have diametrically opposed views of 
the world, and his are mistaken but they are sincerely held.
    And I have to say I do really appreciate the really good, 
constructive working relationship that we have had. Sherrod 
Brown is honest, he is a straight shooter, and we have our 
disagreements. I think they have been cordial, and when it has 
been possible to find agreement we have tried to do that, and I 
think we have had some success.
    I also want to personally thank your staff, the majority 
staff on the Committee. These are very, very capable, smart, 
hardworking and collegial folks, and I am grateful to them for 
their hard work, as, of course, I am for my own staff. I think 
we have had a terrific team, and in these 2 years they have 
done tremendous work, and I will always be extremely grateful 
to them.
    And so my last wish is I wish you well, and 2 years from 
now I wish you well as the Ranking Member of the Committee.
    Chairman Brown. Which would suggest you are supporting my 
reelection in 2024.
    [Laughter.]
    Senator Toomey. Well, that is an interesting inference.
    Let me say a couple of things about Senator Shelby. He and 
I also have some things in common, believe it or not, one of 
which is we both had the good sense to marry women who are 
smarter than we are. And that was the best decision I ever 
made. I think Richard probably feels the same way.
    But I am very grateful to him for the very, very long and 
very distinguished career that he has had. I understand that he 
has served on the Senate Banking Committee longer than any 
other human being in the history of the Committee. He has 
served as its Chairman. He has served as the Ranking Member. 
His accomplishments are too numerous to enumerate, but for me 
he has been a role model and an example of how to be a really 
effective Senator and a great representative for his State.
    Last, about Senator Shelby, I will always remember him as 
simply too big to fail. Senator Shelby.
    Senator Shelby. Thank you. Thank you. Chairman Brown, thank 
you first for your kind remarks, and also I want to thank 
Senator Toomey.
    Thirty-six years ago--it is hard to believe--36 years ago I 
came on this Committee. I think I was sitting way down there, 
maybe on the other side of the TV, somewhere. I wanted to be 
recognized one time--Senator Proxmire was the Chairman--and I 
had to ask two or three times before he even looked my way. So 
we go through this.
    This is a great Committee. It covers everything. It is 
essential. It is essential to our economy, everything that we 
do here. It is also essential in the SEC, what the SEC, what 
the Chairman coming before us today does, everything. But it is 
essential to free markets because it is the banking system that 
we have.
    But 36 years is a long time. It seems like yesterday. I 
have had the great privilege to, as the Senator said, to be 
Ranking three different Congresses and Chairman three different 
Congresses. It is an awesome responsibility. I have served some 
good people on both sides of the aisle.
    I remember the late John Heinz. He would have been Chairman 
of this Committee but he had a big accident and lost his life. 
Senator Proxmire was when I first came on, as the Chairman 
mentioned. By gosh, he was a good Chairman, good, tough, fair.
    Then Senator Riegle, then Senator D'Amato, and Senator 
Gramm, Phil Gramm, and so forth. Senator Brown, Senator 
Sarbanes. Senator Sarbanes, we worked together like you two. We 
had our differences. We were good friends. We traveled 
together. We ate together. We did some good things together, we 
thought, for the American people. But I remember sitting here 
with so many smart, good people, both sides of the aisle, both 
sides.
    But I want to say we have had, since I have been on the 
Committee, smart staffers, good staffers. They flock to be on 
this Committee from everywhere, on both sides, you know, our 
staffs working together. And I want to thank all of them for 
what they have done over the years. A lot of them have gone on, 
as you know, to bigger and greater things.
    But I will always miss this Committee I have served on. I 
have chaired four Committees. This is a very interesting 
Committee. That is why Senator Brown is Chairman and Senator 
Toomey would have been Chairman.
    So thank you for your kind remarks. I will miss you, but 
carry on. Thank you very much.
    Chairman Brown. Thank you. Senator Toomey.

             STATEMENT OF SENATOR PATRICK J. TOOMEY

    Senator Toomey. Thank you very much, Senator Shelby.
    Today's hearing, of course, is about the CFPB. It would be 
understandable if Director Chopra is pleased that it is the 
last time he will be here dealing with me on this Committee. So 
let me express my concerns.
    The last time Director Chopra testified I did raise 
concerns about the CFPB's overreach in pursuit of a politicized 
agenda, and unfortunately, this behavior is nothing new for the 
CFPB, and under Director Chopra, my concern is it is more out 
of control than it has ever been. So I am disappointed, but not 
surprised, to note, yet again, that the CFPB has continued this 
pattern of overreach.
    In our constitutional system of checks and balances, only 
Congress has the power to appropriate money. James Madison 
called this, and I quote, ``the most complete and effectual 
weapon with which any constitution can arm the immediate 
representatives of the people,'' end quote.
    But the Dodd-Frank Act exempted the CFPB from 
appropriations. It empowers the CFPB to simply take funds from 
the Fed, which is itself also not subject to appropriations, 
thereby doubly insulating the CFPB from any congressional 
control.
    I acknowledge there are other financial regulators not on 
appropriations, and we can disagree about whether they should 
be. But it is indisputable that Congress has precisely zero 
leverage over the CFPB. It is very hard for me to imagine that 
our Founders intended an agency to have the power of the 
legislative branch, and precisely zero accountability to the 
legislative branch. And in any case, clearly the CFPB is 
overreaching and does not seem to care about Congress' view.
    This is why the Fifth Circuit recently found the CFPB's 
funding structure is, in fact, unconstitutional. The court 
noted, and I quote, ``The Bureau's perpetual insulation from 
Congress' appropriations power . . . renders the Bureau `no 
longer dependent and, as a result, no longer accountable' to 
Congress and, ultimately, to the people,'' end quote.
    Well, what can we expect from an agency designed to be 
unaccountable to Congress, if not overreach? For example, under 
Director Chopra, the CFPB unilaterally decided that the Dodd-
Frank's grant of authority to prevent unfair, deceptive, or 
abusive acts or practices, known as UDAAP, now includes 
controversial disparate impact liability. It announced this 
change by fiat, without rulemaking. It ignored not only the 
text of Dodd-Frank but also the fact that Congress never 
contemplated that UDAAP would encompass disparate impact. 
Congress took the UDAAP language from the FTC Act. For nearly a 
century, the FTC never interpreted that language to include 
discrimination or disparate impact. Finally, the CFPB willfully 
ignored the fact that Congress overturned the CFPB's disparate 
impact guidance for auto lending in 2018.
    So it is extremely implausible to think that an agency that 
was dependent on Congress for appropriations would engage in 
activity so clearly contrary to Congress' intent.
    In addition, the CFPB has publicly targeted businesses for 
taking lawful actions, like its smear campaign against bank 
fees for overdraft services. By the way, this campaign does 
nothing for consumers. It will just cause banks to shift fees 
to less transparent means of recouping the costs of providing 
overdraft services.
    This week, the CFPB doubled down on its use of name-and-
shame tactics with a new proposed rule. It would create a 
public database of enforcement orders, judgments, and 
settlements, against nonbank financial institutions, obtained 
by Federal and State regulators and attorneys general, 
including under State consumer laws that are not applicable 
nationwide. Now maintaining such a list may well make sense, 
but making it public is different, and would create the false 
impression that the orders of the most activist States are the 
nationwide standard.
    What is more, the proposal would require a senior official 
of certain nonbanks to attest to the CFPB that they are 
complying with these orders. That would effectively give the 
CFPB enforcement power over other agencies' orders for 
violations of State and Federal laws. The CFPB has no 
jurisdiction to enforce. And there is no limiting principle to 
stop the CFPB from extending this rule from nonbanks to all 
financial institutions.
    These examples are just some of the symptoms of an agency 
that is out of control and knows Congress cannot do a thing 
about it. That is why I am introducing legislation, along with 
Senator Hagerty, to place the CFPB on appropriations. The best 
way to make the CFPB accountable to Congress is through 
appropriations.
    Through its rulemaking, the CFPB can exercise legislative 
power, and it does. What is ambiguous about the first line in 
the first paragraph of the first article of the Constitution? 
It says, and I quote, ``All Legislative powers herein granted 
shall be vested in a Congress of the United States,'' end 
quote. At the very least, Congress should carry out the 
responsibility that the Constitution assigns to us, and 
exercise control over agencies like the CFPB that exercise 
legislative power.
    But that is not all our legislation will do. It will also 
replace the agency's single director with a five-member, 
bipartisan commission, like the SEC and the FDIC. This 
structure will ensure that the CFPB considers a diversity of 
voices when it forms policy. And it is not a new idea. 
Bipartisan legislation to convert the CFPB into a commission 
has been repeatedly introduced. These accountability measures 
will help make the agency more responsible, more balanced, and 
more measured, and Congress will have to accept the 
responsibility for what the CFPB does, as it should.
    What is more, if Congress does not put the CFPB on 
appropriations, the Supreme Court may very well do it for us. 
The Court is expected to consider, and I think might very well 
uphold the Fifth Circuit's decision that the CFPB's funding 
structure is, in fact, unconstitutional. If it does, I have no 
doubt Congress will act swiftly to provide the CFPB with 
appropriate funding. After all, Congress has plenty of 
experience at appropriations.
    But, by acting now, through legislation, Congress can 
ensure the smoothest possible transition. This is in the best 
interest not only of the CFPB and Congress, but also consumers 
and the economy. That is why I call on my colleagues, Democrats 
and Republicans, to join me in supporting this sensible reform. 
Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Ranking Member Toomey. I will 
introduce today's witness.
    The Honorable Rohit Chopra is Director of the Consumer 
Financial Protection Bureau. Director Chopra previously served 
at the Federal Trade Commission commissioner after the passage 
of Dodd-Frank. He joined the CFPB as Assistant Director and 
then was appointed as the CFPB student loan ombudsman. He 
subsequently served as a special advisor in the Department of 
Education.
    Director Chopra, welcome, and please proceed. Thank you.

    STATEMENT OF ROHIT CHOPRA, DIRECTOR, CONSUMER FINANCIAL 
                       PROTECTION BUREAU

    Mr. Chopra. Thank you so much, Chairman Brown, Ranking 
Member Toomey, and Members of the Committee.
    Our economy and our consumer finance markets are truly in 
transition, out of a pandemic and further into a digital era. 
Given the economic uncertainties in today's markets, the CFPB 
is focused on monitoring these markets carefully, to prevent 
the type of widespread harms that we saw in the financial 
crisis more than a decade ago.
    Over the last year we have recovered hundreds of millions 
of dollars in victim redress and penalties, and in our 
enforcement program we have sharpened our focus on repeat 
offenders, to protect both consumers and law-abiding 
businesses. Congress has directed the CFPB to implement several 
rules, and we have prioritized getting these done.
    While we continue to address the challenges consumers face 
today, the CFPB is also preparing for the future. When 
companies can take on incumbents and when consumers can easily 
switch providers in a decentralized market structure, we are 
all better off.
    In October, the CFPB kicked off a rulemaking process under 
Section 1033 of the Consumer Financial Protection Act. The 
proposals under consideration would require that financial 
firms provide consumers access to their own financial data. 
Consumers would then be able to provide permissions to this 
data safely and securely to other financial firms.
    The CFPB is also focused on refinance markets, including an 
auto, credit card, and mortgage, and have been making it a 
priority to identify ways to lower barriers to entry to small 
banks and small firms and to foster innovation that addresses 
important market gaps.
    We are taking a hard look at how big tech and other 
technology conglomerates are entering payments in consumer 
finance, and the threats they pose to relationship banking and 
free choice.
    Over the past year we have had discussions with members 
from both chambers and on both sides of the aisle on reforms 
that can be advanced on a bipartisan basis. First, I would 
really urge Congress to take action to protect our payment 
system. Facebook's Libra proposal, in 2019, was a wakeup call 
to regulators around the world when it came to virtual 
currencies. There is now growing concern about how a small 
group of payment platforms, including Google, Apple, PayPal, 
Venmo, and others, are gaining a greater foothold in the 
payment system. Large tech firms are now the conduit for 
trillions of dollars in transactions, and the CFPB is 
conducting an ongoing study into how these companies are 
playing a role in the payment system.
    The rise in dominance of a small group of these firms 
raises questions about how they can suppress, suspend, or even 
discriminate against some users over others. The CFPB has heard 
considerable concern about payment apps kicking off users or 
even fining users for their speech, and we have also heard 
concerns from dominant firms abusing their positions to hike 
fees on small banks, merchants, and consumers. Our Nation's 
payment system serves as core economic plumbing that should be 
nondiscriminatory and neutral.
    Second, Congress needs to do more to strengthen financial 
privacy protections. More than 20 years ago, Senator Shelby and 
others on this Committee began raising concerns about the 
creation of behavioral profiles, using our credit and debit 
card data. Today, with the rise of tech platforms and e-
commerce that monetize user behavior with lots of data, these 
concerns are even more acute. I worry that the notice-based 
privacy regime of the Gramm-Leach-Bliley Act is ineffective in 
the modern world. Privacy policies for financial services are 
often all or nothing, and consumers must choose to accept the 
company's terms wholesale or decline to use the product 
altogether.
    So while Congress is looking at privacy protections across 
all sectors of economy, I hope you will also consider looking 
at the Gramm-Leach-Bliley Act to provide limitations on the 
collection, use, and sharing of personal financial data. There 
are a number of other opportunities for bipartisan efforts, and 
the CFPB is eager to work with this
    Committee on these and many other issues.
    Thank you again for the opportunity to appear before you. I 
look forward to your questions.
    Chairman Brown. Director, thank you, and good to see you 
again.
    Protecting Americans from harmful medical debt, as you 
point out and as your predecessors also pointed out, is a 
priority for this Committee and for the CFPB. Earlier this 
year, Experian, Equifax and TransUnion announced they would no 
longer include some forms of medical debt on consumer credit 
reports. But according to a recent report that your office 
released, it sounds like the changes announced by industry will 
not make as meaningful a difference as we had expected going 
in. Your report said, quote, ``In terms of dollar amount, a 
large majority of reported medical collections likely will 
still remain.''
    My question is your report clearly indicates that changes 
on how medical debt is reported are not enough. How do we make 
sure that medical debt on credit reports is not crippling far 
too many Ohio, Pennsylvania, and American families?
    Mr. Chopra. Well, medical debt is one of the top items now 
in terms of collections on consumer credit reports and is a 
major challenge when it comes to accuracy. You know, oftentimes 
providers, patients, and insurance companies are going round 
and round, and in many cases consumers are being asked to pay 
something they already paid or never owed in the first place. 
So we have to make sure that credit reports are not a tool to 
coerce someone into paying something that they do not owe.
    Accuracy issues in credit reporting are very, very acute in 
medical debt. We are going to continue to look at ways to make 
sure that medical debt does not, especially when it is 
inaccurately reported, does not really harm a person's ability 
to participate in the economy.
    Chairman Brown. Thank you. Important answer.
    To ensure consumers keep their money where it belongs, in 
their purses, in their wallets, the CFPB issued guidance 
advising financial institutions that surprise overdraft fees 
may be unfair and unlawful. How are consumers being harmed by 
surprise overdraft fees?
    Mr. Chopra. Well, sometimes a consumer might expect just 
one overdraft fee and then they see they get three or four, 
even when their balance showed that they had enough money in 
their account. This is the type of overdraft practice where, on 
the back end, there can be not just mischief but illegal 
practices. We have taken action. Other regulators have done so 
as well, and in some cases institutions have ignored repeated 
warnings and decided to do it anyway, and we are committed to 
holding them accountable.
    Chairman Brown. Did industry request additional guidelines 
on this matter?
    Mr. Chopra. Industry is actually always looking for more 
information and more clarity. It is one of the reasons why the 
CFPB has published so many advisory opinions and other 
interpretations. We have continued the practice from my 
predecessor, Director Kraninger, on the Advisory Opinion 
program, and will continue to do so. Of course, guidance does 
not create any new legal requirements but it seeks to provide 
transparency on obligations under existing law.
    Chairman Brown. And it speaks to--you were criticized, as 
you know, by a number of particularly conservative lawmakers 
and interest groups. But it does point to how you have tried to 
build as cooperative a relationship with people as you possibly 
can, and I think on that it shows.
    Mr. Chopra. Yeah. I think there has been sometimes the term 
``regulation by enforcement,'' and, of course, we have to 
enforce existing law. But where we can provide more information 
about what law-abiding businesses are trying to make good-faith 
efforts to comply, we are going to do that. They might not 
always like what existing laws require of them, but of course, 
that is one of the best ways we seek to also protect law-
abiding businesses and help them.
    Chairman Brown. Thank you. One last question. Some 50 years 
after passing the Fair Housing Act, 40 years after fair lending 
laws, we know that redlining still exists in our housing 
system. In July, CFPB helped to identify one lender in 
Philadelphia that, through its office locations, through its 
lending, and through the racist language of its employees 
showed a clear pattern of discrimination. Because of CFPB's 
actions, more borrowers in communities of color will have 
access to a mortgage.
    So my question is how is CFPB working with DOJ and other 
agencies to make sure everyone has equal access to mortgage 
credit?
    Mr. Chopra. Well, one of the great things about that action 
in Philadelphia was that it was not just the CFPB but also the 
three State attorneys general of the Philadelphia metropolitan 
area also participated, because their counties were impacted 
too.
    The Department of Justice and the Attorney General of the 
United States have a redlining initiative, and we are not just 
looking at traditional forms of redlining but also digital 
redlining as well, and there is much more work to do there.
    Chairman Brown. Thank you. Senator Toomey.
    Senator Toomey. Thank you, Mr. Chairman.
    Director Chopra, when you came before this Committee for 
your nomination hearing you said that you preferred that the 
CFPB not be on appropriations because you believed that 
independent agencies are able to stay more clear of political 
influence. Do you stand by that opinion?
    Mr. Chopra. I do.
    Senator Toomey. OK. Here is the problem. Under your tenure 
at the CFPB it has become as politicized and as far left as I 
have seen any Federal agency ever. It seems the only political 
influence the CFPB is not subject to is the influence of the 
elected representatives of the American people, which is 
sometimes known as democracy.
    Now some have suggested that the CFPB is accountable 
because you were confirmed several years ago and because you 
have to come up here twice a year and answer, or not answer, 
questions from my colleagues and me. But let us be honest about 
the reality here. We are going to raise a lot of concerns 
today, and at the end of the hearing you are going to leave, 
and if you want to, you can choose to just ignore everything 
that is said here at this podium, and there is nothing anybody 
here can do about it.
    I would remind my colleagues the Fifth Circuit Court has 
recognized this lack of accountability to be unconstitutional. 
There is a very good chance the Supreme Court will as well. And 
that is why I think it would be a good idea to begin 
discussions now about legislation that would remedy this.
    Quick, I think this is a yes-or-no question also, Mr. 
Chopra. Do you believe that Congress should change the CFPB's 
governance structure to that of a multimember commission?
    Mr. Chopra. Well, that is really Congress' decision.
    Senator Toomey. I get that. You are correct, 100 percent, 
it is Congress' decision. But would you recommend it to 
Congress?
    Mr. Chopra. Well, my own experience, having served on both 
a multimember and a single director, there are pros and cons of 
each. I think there is more accountability with a single 
director. With a commission you can point the fingers at others 
when something does not get done----
    Senator Toomey. I am about to run out of time. I get it. 
But the suggestion that there is accountability, I am sorry, 
that is hard to take seriously. There is no accountability 
here. And at least if there were a commission there would be 
multiple voices. There would be different points of view. There 
would have to be a vote to advance various proposals. I think 
that would make a lot of sense.
    Mr. Chopra. Well, Senator Toomey, I think we take all of 
the congressional oversight very, very seriously. In fact, a 
lot of what we have done just in the past year is truly in 
response to some of the things that you have shared as issues 
with the CFPB as well as your colleagues.
    We also think that for the long term there are so many 
issues that we ultimately have to do together, and we try our 
best to be responsive to all of that.
    Senator Toomey. I appreciate that.
    Mr. Chopra. In fact, Congress has passed laws many times--
--
    Senator Toomey. I am going to run out of time here. I 
understand. I have no doubt that that is your impression, but I 
know that you are aware that impression is not shared by most 
Senators on my side of the aisle. So there is a difference of 
opinion there.
    Let me ask you a couple of questions about the new rule 
that you proposed this week, and let me start with a 
hypothetical. Let us say the California Department of Financial 
Protection agrees to a consent order to settle an enforcement 
action that it brought against a nonbank lender for violating 
State consumer law, and in this case the CFPB is not involved 
in the case in any manner whatsoever. It seems clear to me that 
the CFPB has no authority to enforce California's consent 
order.
    But under the rules you proposed this week, the nonbank 
would have to report the consent order to the CFPB to be 
included in a new public database, and a senior executive of 
this nonbank would have to attest as to whether or not their 
institution was complying with this order.
    Now here is my question. What would you do if this nonbank 
said it was compliant with the order but you disagreed?
    Mr. Chopra. So as a factual matter, what you are saying is 
not exactly accurate. It is for certain supervised entities 
that attestation would be required. So this is a proposed rule, 
and what I would share is that in the proposal we outline what 
are the consumer laws that in some ways are derivatives of 
similar unfair, deceptive, or other consumer financial laws.
    So generally speaking, this is really for States and all of 
us to coordinate. Often you have an entity that violates the 
law in one State and picks up and moves to someplace else. This 
helps everyone coordinate and detect fraudsters, which often 
rip off people----
    Senator Toomey. So my concern is this could be used as a 
hook to give the CFPB leverage to enforce other agencies' State 
consent orders.
    Mr. Chopra. Well, generally----
    Senator Toomey. And that is not the authority----
    Mr. Chopra. ----violations of law, some of these State 
consumer laws, sometimes are often Federal law violations. But 
I hear what you are saying and we will take the comments in the 
record very seriously.
    Senator Toomey. Well, that is a real concern that I have. I 
am also concerned about--and I know I am out of time but let me 
just make my point here, Mr. Chairman, and that is that the 
CFPB is, in fact, implementing a disparate impact standard 
without using that phrase, and I worry that the effect of that 
is the possibility that the CFPB would not feel obligated to 
observe the guardrails that the Supreme Court has imposed on 
the application of disparate impact.
    Mr. Chopra. May I respond, Mr. Chairman?
    Chairman Brown. Of course.
    Mr. Chopra. I think that is not accurate. If you look 
carefully at the unfairness language in the statute that was 
codified by Congress in 1994, in the FTC Act, and repeated in 
the Consumer Financial Protection Act in 2010, that is not 
about disparate impact. It is about injury, reasonable 
avoidability, and countervailing benefits. I am happy to talk 
with you more about that, Senator Toomey, but I just totally 
disagree.
    Senator Toomey. Well, I know you do, but in your press 
releases and in the exam manual you refer to UDAAP authority 
providing the prohibition on unfair practices and that it does 
not require an element of intent. This starts to sound a lot 
like the definition of disparate impact without using the 
phrase ``disparate impact.'' And what concerns me is the 
application of disparate impact is constrained by the Supreme 
Court and you should follow that constraint if you were to be 
implementing it.
    And finally, UDAAP is a longstanding concept, in fact, 
codified, and for 100 years nobody discovered that disparate 
impact was somehow embedded. But----
    Mr. Chopra. I think that reflects a fundamental 
misunderstanding of unfairness, what Congress codified in 1994. 
And again, I am happy to speak to you about it afterwards.
    Senator Toomey. Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Toomey.
    Senator Reed, of Rhode Island, is recognized.
    Senator Reed. Well, first let me begin by saluting Senator 
Toomey for his service and dedication, his thoughtfulness and 
professionalism. We have a major event in common. We both went 
to the same high school, LaSalle Academy in Providence, Rhode 
Island. What I do not have in common with Senator Toomey is I 
was not first in the class and I was not accepted at Harvard 
College. So you have got a couple of things up on me, Patrick.
    Let me also say to Senator Shelby, congratulations for your 
service. I arrived here 25 years ago, and he was a leader then, 
and he is a leader now, and an extraordinary gentleman.
    Now let me turn to the director. First, a question that has 
come to mind as I have listened to the discussion. The decision 
by the Fifth Circuit also calls on the question of validity of 
the Federal Reserve. Is that correct?
    Mr. Chopra. Well, the CFPB's funding is the same funding as 
the Federal Reserve system. So I think yes, it certainly does, 
and that is part of what the Solicitor General, in her petition 
for cert to the Supreme Court, has articulated.
    Senator Reed. So we should really start warning Wall Street 
right now and get their reaction to a Federal Reserve that is 
subject to congressional appropriations. And by the way, we are 
trying to get that wrapped up a few months later than normal. 
But I think that is something that should be at least on the 
table and considered.
    But let me direct my major attention to the Military 
Lending Act because I was helpful in getting it passed. Can you 
tell us, give us an update on what you have done this year with 
supervision and enforcement of the Military Lending Act?
    Mr. Chopra. Yes. We have actually taken a number of actions 
including against repeat offenders of the Military Lending Act. 
We have sued First Cash, the Nation's largest pawn lender. We 
have taken action in a number of other places, including 
Moneylion Technologies a few months ago.
    Let me say pretty straightforwardly that when this law is 
not adequately enforced the effects on the force are real. 
People can lose their security clearances. They can face their 
own financial distress for them and their families. So we are 
very committed to fully prosecuting this law and being very 
clear about our expectations.
    Senator Reed. Let me shift to another piece of legislation. 
That is the Servicemembers Civil Relief Act. When I was in the 
service it was called the Soldiers and Sailors Civil Relief 
Act. But it provides, among other things, a maximum interest 
rate of 6 percent. And last week I believe CFPB published some 
research findings. Can you provide us some details of that?
    Mr. Chopra. Yeah. So what we identified is for 
servicemembers' preservice obligations they are entitled to a 6 
percent rate cap to ensure that, especially if they are 
activated Guard or Reserve, that their financial life does not 
move into disarray. So we identified that there are millions of 
dollars in extra interest that servicemembers are paying when 
they are activated, and we are particularly worried about the 
Guard and the Reserve.
    I will also say as interest rates in the economy go up, 
that is bigger money when it comes to activations and what 
happens to those families.
    Senator Reed. Thank you, because I think you have made the 
point quite clearly that this not just an issue of financial 
transactions, it is an issue of military readiness and the 
impact on families and individual servicemembers.
    Let me shift gears again to the Buy Now, Pay Later 
phenomenon which is going on. It is getting more and more 
popular. Are these loans, Buy Now, Pay Later, being structured 
to avoid the Military Lending Act?
    Mr. Chopra. So I do not want to say that it is 
intentionally done a certain way, but certainly the 
applicability of the Military Lending Act gets trickier when it 
comes to Buy Now, Pay Later. One of the things that we have 
been working with Buy Now, Pay Later firms on is how can they 
also get credibility and certainty in the market and make sure 
that, you know, if it is a substitute for credit cards, how 
might we make sure that disclosures and other protections are 
equivalent?
    I think we have seen what happens when there is no 
credibility in a product, and it can be chaotic. I think Buy 
Now, Pay Later is going to continue to be a major way people 
borrow, and I think it is important we continue to think about 
the servicemember and military protections in that.
    Senator Reed. Thank you very much, Mr. Director, and keep 
up your good work. Thank you.
    Chairman Brown. Thank you, Senator Reed.
    Senator Tester, of Montana, is recognized.
    Senator Tester. Yeah. Thank you, Mr. Chairman, and before I 
get to Mr. Chopra, which I appreciate being here today, I also 
want to say thank you to Patrick Toomey. I remember the first 
time we worked on a bill and we were in the dining room of the 
Capitol, and I said, ``You are not nearly as crazy as the 
scouting report indicates you are,'' and I think you said 
something like, ``You want to keep that perception.'' So I 
appreciate everything that you have done, and even though it 
has ruined my career calling you a ``smart dude,'' I do want to 
say that it has been good to work with you.
    And in honor of Shelby, I will just let you know I have my 
Roll Tide coffee cup, so it is all good.
    Look, Rohit, you and I have discussed the importance of 
making sure that we are holding big tech companies accountable 
for how they are using consumers' data, especially when they 
are providing services like those at local bank and other 
regulated financial institutions traditionally provide.
    So what are you seeing at the CFPB around big tech 
companies and where they may be trying to skirt the law?
    Mr. Chopra. Well, I think what we are seeing is that big 
tech firms [technical issue] payment system, and they are 
collecting an extraordinary amount of very detailed and 
personal information.
    We also know that some of the other big financial players 
are getting into data assets that small banks would never 
really even get near, and I think we have to address that 
together.
    Senator Tester. So how will the CFPB [technical issue] 
standards that regulated financial institutions meet so that 
consumers are protected?
    Mr. Chopra. Well, Senator Toomey raised the issue of 
nonbank registration. [Technical issue] they are subject to 
supervision, and one of the big things they ask for the CFPB is 
to make sure there is a level playing field. So we have focused 
much of our supervisory attention on these nonbanks who are not 
subject to the same oversight as normal banks.
    Senator Tester. Senator Reed asked about the Military 
Lending Act. For veterans and their families, what kind of 
risks are you seeing from your chair?
    Mr. Chopra. Generally, you know, I think veterans right now 
[technical issue], you know, how long they have been out of 
service. We have very serious issues with economic instability 
among our veterans in our country. Many have a whole set of 
issues with housing and credit and debt. Financial issues are a 
major driver of challenges.
    So, of course, the Military Lending Act [technical issue] 
do not apply to those out of service. In particular, we see 
medical debt being pretty severe. We worked [technical issue] 
how the VA's own medical debt programs can be fair and not be 
overly punitive and to really help veterans get through things.
    So we have a lot [technical issue] but the challenge may be 
growing.
    Senator Tester. Is there anything Congress needs to be 
doing?
    Mr. Chopra. Well, I think as it relates to veterans and 
credit and debt, especially medical debt, [technical issue] I 
hate to see when veterans are not able to get through a tenant 
screening [technical issue]. I hate to see when they cannot 
pass an employment verification check because of coding issues 
in their background.
    So I [technical issue] that we can tangibly focus on 
fixing. Of course, I also want to make sure that if there is 
changes in the mortgage markets and housing prices [technical 
issue] veterans be subject to unlawful foreclosures, the VA and 
its mortgage program play a huge role in making sure that those 
veterans can get loan modifications, that they are not subject 
to churning. And so housing is going to be a big piece when it 
comes to the veterans mortgage market.
    Senator Tester. Just very quickly, [technical issue] in 
contact with the VA on these issues on a regular basis?
    Mr. Chopra. We do. I would say the Secretary himself is 
also very supportive of thinking about financial issues that 
our veterans are facing [technical issue] with them and you on 
that.
    Senator Tester. Thank you. Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Tester.
    Senator Hagerty, and I apologize. I did not see you come in 
and I should have called on you before Senator Tester, so thank 
you for joining us.
    Senator Hagerty. No worries, Mr. Chairman. Chairman Chopra, 
good to see you here today.
    I really want to direct my comments, Mr. Chairman, toward 
our Ranking Member today, if that might be OK. I have not known 
you long [technical issue] I have a soft place in my heart for 
you. Someone who was a derivatives trader at Chemical Bank and 
Morgan, Grenfell. Your knowledge and depth of experience in the 
financial [technical issue] experiences here in Washington I 
feel have left an indelible mark. And if I think about how you 
have been a leading voice, and really a staunch advocate for 
conservative [technical issue] you helped us navigate through 
some very uncertain times, particularly these past few years as 
we have come into recession--we have seen inflation like we 
have never seen, challenges to the economy that have [technical 
issue]. You have been very strong in terms of making certain 
that the policies that come from this Committee will have long-
term and enduring benefits for hardworking Americans, for job 
creators, and for our competitive [technical issue].
    And on a personal level, I would just like to say this. 
From my wife, Christy, and our kids, we have enjoyed getting to 
know Chris. Patrick, Bridget, and Duncan are just treasures 
[technical issue], and I think they are very happy you are 
coming home, I am sure, and we are all looking forward to where 
you career may take you next. Thank you for your wonderful 
service.
    Thank you, Mr. Chairman.
    Senator Toomey. Mr. Chairman [technical issue] and the 
respect and admiration is mutual.
    Chairman Brown. And, Senator Hagerty, you have a couple of 
minutes left if you would like to do a question or two.
    Senator Hagerty. I yield my time back. Thank you.
    Chairman Brown. Senator Menendez.
    Senator Menendez. ----we have not always agreed, but I have 
always known where you stood and your views and the way in 
which you pursue it. We have enjoyed our relationship on behalf 
of [technical issue]----the CFPB doing to ensure that MOHELA 
provides an acceptable level of customer service to borrowers?
    Mr. Chopra. Well, I cannot comment on a specific 
supervisory [technical issue] to do so with----
    Senator Menendez. Well, I would urge you to be robust about 
it, because the consequence to consumers----
    Mr. Chopra. Is enormous.
    Senator Menendez. ----is enormous.
    A 2021 report by the Financial Health Network found that 
nearly 60 percent of all overdraft fees in 2020 were paid by 
low- and moderate-income households, and about 25 percent were 
paid by Latino households specifically. According to the CFPB, 
the banks made $15 billion a year in overdraft and 
nonsufficient funds. To put that into context, the banks 
altogether made $71.7 billion in the third quarter of 2022.
    Do overdraft fees appear to be a major source of revenue 
for banks?
    Mr. Chopra. So they certainly have been. What we are 
seeing, though, is a shift in the market where they are finally 
starting to compete, and some banks are drastically reducing 
them, eliminating them. And the key consumer problem is 
sometimes a consumer expects one overdraft fee but they get hit 
with a ton of bricks and three fees, even though when they 
looked in their balance they had enough money. We are trying to 
take action to go after illegal overdraft practices to make 
sure that these are not an unnecessary financial hardship and 
that there is compliance with the law.
    Senator Menendez. Yeah, it seems to me that these 
institutions would be well successful in terms of their 
financial wherewithal without these fees, and the particularly 
affect the most significant in our society who are already at a 
disadvantage. So I urge your continued engagement on this and 
appreciate it.
    I continue to hear story after story from New Jersey 
constituents who have fallen victims to scams and fraud on 
Zelle, and in many instances been denied relief by their banks. 
I understand that the big banks that own Zelle are considering 
a plan to require the network members to compensate victims of 
certain kinds of scams. That would be [technical issue]. CFPB 
was working on guidance regarding liability from Zelle scams. 
Has that work progressed? Where are we at with that?
    Mr. Chopra. Well, we have been talking to banks, small 
banks and big ones, about how to reduce the scourge of fraud in 
real-time payments. This is not just about Zelle. It is also 
about other P2P apps, some small banks who are not part of the 
ownership structure of Zelle and others are really wondering 
how they too can make sure that they investigate what is going 
on and get answers to their own customers. So we continue to 
work to make sure that as our country moves to real-time 
payments that we do not add more vectors of fraud where people 
can run.
    You know, in many cases these network rules are established 
by the industry, and I hope that the industry too can set up 
frameworks that actually reduce the total amount of fraud when 
it comes to P2P apps and bank-owned solutions.
    Senator Menendez. Well, I appreciate that. I know that 
Senator Reed, myself, Senator Warren, and others have urged the 
agency to continue to be engaged in this space, and it is 
incredibly important.
    And, Mr. Chairman, if I have one more minute, I just want 
to note the bipartisan work we did here in Congress to shepherd 
the Debt Bondage Repair Act into law. That bill was led by 
Ranking Member McHenry in the House and [unclear] in the 
Senate, and certainly I helped make it happen.
    This helps the survivors of human trafficking have a 
mechanism to remove negative marks associated with their abuse 
from credit reports. In June you issued a final rule to 
implement the legislation, and I want to thank you for the hard 
work you put in to get that done. I think we should all be 
reminded of the scourge of human trafficking, and in this case 
how we can provide some relief to the victims.
    Mr. Chopra. I would add that I have similar concerns about 
impacts on victims of domestic violence and how credit 
reporting can be used as a weapon. We are trying to think about 
all of the ways in which all of your work on human trafficking, 
other [unclear].
    And by the way, Senator Menendez, this is another example 
of one of the many times that Congress has passed a law and the 
CFPB has faithfully implemented it. Every time Congress acts in 
statute, the CFPB responds and is accountable for it.
    Senator Menendez. One of the many reasons we need CFPB. 
Thank you very much.
    Chairman Brown. Thank you, Senator Menendez.
    Senator Scott, of South Carolina, is recognized.
    Senator Scott. Thank you, Chairman Brown. I wanted to stop 
by as well to pay my regards to Ranking Member Toomey as well 
as to former Chairman Shelby. We certainly will miss his 
service from the State of Alabama. But Pat has been a great 
friend of mine, and certainly a mentor as it relates to the 
Banking Committee and all things financial. I will never forget 
our work on the TCJA and the hours upon hours that we spent 
trying to figure out how to make America healthier financially 
and to look for ways to grow the small business community 
through our economy, to focus on making sure that this great 
land of opportunity, the United States, was open and 
accessible, from a financial perspective, to all Americans. 
Your hard work on this Committee, since I arrived in the 114th 
Congress, is going to be sorely missed.
    I know that this is not the end. It is just a new chapter 
opening up for you. But we certainly [technical issue] the work 
that you have started on this Committee to make sure that this 
incredible country works for every single American and that we 
continue to look for ways to strengthen our economy to increase 
opportunities across this country. I will hear from you, 
hopefully often, and we will stay in touch. But I thank you for 
your years of service to this Committee, and frankly, your 
philosophical wisdom [technical issue] left or the right on the 
American people.
    Senator Toomey. Mr. Chairman, if I could take just a moment 
to say a big thank you to Senator Scott, a great friend, and a 
great American. Your service to the State of South Carolina has 
been tremendous, your contribution to the Republican Conference 
has been tremendous, and you have an unlimited future in front 
of you that I will be very eagerly watching.
    Senator Scott. I have had the good fortune of being the 
Ranking Member on the Aging Committee this year, and the 
Committee has been meeting at the exact same time as the 
Banking Committee. So I cannot think of a better place to serve 
right now than in the Aging Committee, perhaps the Banking 
Committee, and I look forward to coming back over here. It has 
been a blessing to be there, and unfortunately I have missed a 
lot over here, but will be here next year. Thank you.
    Chairman Brown. Do you have questions?
    Senator Scott. No, sir.
    Chairman Brown. Senator Warren, of Massachusetts, is 
recognized.
    Senator Warren. Thank you, Mr. Chairman, and actually I 
want to add my thanks as well to Senator Toomey. I want to say 
thank you for your many years of public service and how well 
you have served the people of Pennsylvania and the people of 
the United States. I also want to say thank you for your 
willingness to work across the aisle. We do not see eye to eye 
on every issue, in fact very few, but where we can, we do, and 
I appreciate that.
    So let us talk about CFPB. Big businesses and their 
lobbyists have spent the last decade trying their hardest to 
take down the CFPB, and throughout it all, the CFPB has done 
its job holding banks and giant corporations accountable. So it 
is no wonder that the Chamber of Commerce and its corporate 
clients have now launched a new campaign, spending hundreds of 
thousands of dollars to attack the CFPB and to attack you, 
Director Chopra. And that is on top of the many millions of 
dollars it has already spent fighting for giant banks and 
corporations in their right to cheat, trick, and discriminate 
against consumers.
    So I just want to talk about a few of the things that CFPB 
does that big banks really seem to hate. Director Chopra, one 
of the first things that you did when you took over the CFPB 
was to launch an initiative against junk fees, you know, the 
couple of dollars here, and a couple of dollars there, that 
banks and other businesses are increasingly loading on families 
in order to boost corporate profits. We are talking about 
things like way-high overdraft fees, hotel resort fees, other 
random fees that people cannot usually see until it is too 
late.
    Now the Bureau recently issued guidance to crack down on 
junk fees. I just want to ask you, how much do you think 
consumers will be able to save if you can get rid of these fees 
in their lives?
    Mr. Chopra. Well, our estimate is just on surprise 
overdraft fees. There is about $1 billion that has already been 
cut out, and when it comes to others in the market, $3 billion 
in overdraft fees, and I think the list is going to go on and 
on and on.
    Let me just say this. If you believe in a market system 
where people can compete with each other, when you hide fees or 
jam fees onto people that they cannot reasonably avoid, that is 
not really a market system.
    Senator Warren. That is right. All right. So when financial 
institutions insist on continuing to saddle consumers with junk 
fees, you have been successful in taking enforcement actions 
against them. I see one here, Regents Bank, for example, was 
found to have charged surprise overdraft fees to its customers. 
So how much money did CFPB recover for cheated consumers once 
it took on Regents Bank?
    Mr. Chopra. Just in that one we got $141 million in victim 
restitution, and then a $50 million civil penalty. And it is a 
repeat offender so we had to take it seriously.
    Senator Warren. Yeah, and that is money that stays in 
people's pockets because of your work.
    Let me turn to another example. CFPB has also been working 
to protect student loan borrowers. You identified student loan 
servicers engaging in deceptive practices and tricking teachers 
and firefighters and nurses out of the opportunity to access 
loan forgiveness under the Public Service Loan Forgiveness 
Program.
    Director Chopra, is the CFPB action going to put money back 
in the pockets of public services like nurses and firefighters 
and teachers?
    Mr. Chopra. Yes. They will have, in many cases, their 
financial lives will be completely [unclear].
    Senator Warren. All right. So let us take a look then at 
housing. The CFPB has been looking into shoddy tenant screening 
services that too often result in families of color being 
unfairly denied rental housing. Earlier this year, the Bureau 
issued guidance warning tenant screening companies to clean up 
their practices. Director Chopra, will CFPB's work on this 
issue help reduce barriers to affordable quality housing?
    Mr. Chopra. Yes, and it will also be good for landlords 
too, who want to be able to find a tenant that works for them 
and not be shut out because of erroneous background reporting.
    Senator Warren. OK. So once again, making markets work 
better, just making them work for consumers as well.
    I am going to do one more quick example here. Many people 
pay more for car loans, for credit cards, and for mortgages 
because they have unpaid medical bills that that tarnish their 
credit ratings. So in March, the CFPB issued a report showing 
just how severe this problem is, and here is what I love. 
Before you even had to deliver some kind of rule around this, a 
few weeks later, the three big credit reporting agencies 
announced they would eliminate nearly 70 percent of medical 
collection debt from consumers' credit reports. Director 
Chopra, how many families will this change impact?
    Mr. Chopra. Millions, I think. Inaccurate credit reporting, 
especially on medical debt, can be a blockade to so much, and I 
think our work on credit reporting will continue to pay 
dividends for families and individuals.
    Senator Warren. Well, I want to say thank you. Now there we 
have. Junk fees, student loans, housing, medical debt--I could 
keep going on if we had more time--all of the things that CFPB 
has accomplished under your first year at the helm. The CFPB is 
saving tens of millions of families a lot of money.
    I know that big banks and their lobbyists may hate that, 
but I am glad American families have a cop on the beat who is 
working for them.
    Thank you. Thank you, Mr. Chairman.
    Chairman Brown. Thank you, Senator Warren.
    Senator Daines, of Montana, is recognized.
    Senator Daines. Mr. Chairman, thank you for your remarks 
and I have a few questions. I too want to recognize Ranking 
Member Toomey. I remember my days at Procter and Gamble. One of 
my earlier mentors told me, ``When you hire, you look for 
people that can check three boxes: integrity, intelligence, and 
initiative.'' Everything else you can coach, but you have got 
to have those three fundamental attributes.
    Senator Toomey, you have truly modeled that for me 
personally, as you have served in the U.S. Senate, as you have 
led so well as the Ranking Member on this Committee. You will 
be dearly missed. Thank you for your sacrifice, your service 
for our country, and for your strong leadership, and I, too, 
echo Senator Scott's comments. I will never forget the work we 
did together on the tax cut bill, and cutting taxes for small 
businesses as well as other businesses. But it was a moment, we 
did a big thing together, and thank you for that.
    In a petition to the Supreme Court on November 14th, the 
CFPB asked the Court to reverse the Fifth Circuit Court of 
Appeals ruling that determined that CFPB's unprecedented power 
to defund itself was unconstitutional. The petition claims that 
the CFPB's funding is constitutional because Dodd-Frank 
authorized the CFPB director to unilaterally decide how large 
its budget can be and mandates that Federal Reserve transfer 
the requested funds. However, the Constitution prohibits 
Federal agencies such as the CFPB from spending Federal 
Treasury without, quote, ``appropriations made by law,'' end 
quote.
    In its decision, the Fifth Circuit writes that ``an 
expansive agency, insulated from Congress' purse strings, 
expressly exempt from budgetary review, and headed by a single 
director removable the President's pleasure is the epitome of 
the unification of the purse and the sword of the Executive.'' 
I believe it is highly likely that the Supreme Court ultimately 
reviews this case and upholds the Fifth Circuit decision.
    My Republican colleagues and I have continually asked for 
our colleagues on the other side of the aisle to join us in 
reforming the CFPB. That offer sincerely remains on the table.
    And now turning to my questions. Director Chopra, during 
your last appearance before the Committee you stated, following 
a question of mine, that, quote, ``Consumers benefit from a 
transparent and competitive market. A transparent and 
competitive market will help develop lower-cost, small-dollar 
loan products,'' end quote.
    Director Chopra, under your leadership what steps has the 
Bureau taken to create an open and competitive market for 
consumers to ensure continued access to small-dollar loan and 
financing products?
    Mr. Chopra. That is a great question. Two things come to 
mind. One is that we have really put an effort to make sure 
that our credit card market is extremely vibrant. Credit cards 
are the biggest source of small-dollar loans in America. It is 
a place where so many people are able to afford things, even if 
they may not have the liquidity. We are looking at ways for 
small banks and credit unions to be able to play a bigger role 
in the credit card market, to be able to help refinance credit 
card debt, and much more.
    We have also proposed implementing a long-dormant authority 
called Section 1033. This is how fintechs, nonbanks, and small 
banks may be able to access customers at lower customer 
acquisition costs by allowing permission data. So you would be 
able to move your data and use it as a way to be underwritten 
potentially for lower-cost credit elsewhere.
    So I really see that technology, we can harness it in a way 
that creates more opportunities for new entrants, more 
opportunities for small players. Because right now, small-
dollar lending and credit cards, it is dominated by just a 
handful of the largest. The truth is local banks would be very 
good at serving people in that market, and we are looking for 
more ways to support them doing that as well.
    Senator Daines. Thank you, Director Chopra. And I want to 
go to another lane here and that is about abusive practices. In 
late September, the U.S. Chamber of Commerce filed a lawsuit 
challenging the legality of CFPB's changes to the Unfair, 
Deceptive, or Abusive Acts or Practices, UDAAP, Exam Manual. 
While lawmakers such as myself and many here expect the CFPB to 
enforce legislation that protects consumers against 
discrimination, it seems as though the Bureau has unilaterally 
decided, without congressional oversight, that UDAAP now 
includes disparate impact liability.
    In the 12 years since Dodd-Frank was enacted, neither 
Congress nor the CFPB has claimed that the legislation 
authorizes disparate impact under UDAAP. Unfortunately, instead 
of implementing these changes in an open and very transparent 
rulemaking process, your Bureau simply issued a press release 
announcing a very controversial change.
    Back in 2018, the CFPB disparate impact guidance for auto 
lending was overturned by Congress after the Bureau's 
enforcement methodologies were found to be flawed and, 
importantly, not authorized by statute. Now it appears as if 
your Bureau is attempting to implement disparate impact 
guidance not just for lenders but for all consumer financial 
products and services, and we are hearing a lot about that.
    Putting aside whether this tactic is legal or not, which I 
do not believe it is, do you think the CFPB's implementation of 
disparate impact guidance through a press release, without 
congressional authorization or a notice and comment rulemaking, 
is a transparent way to make policy changes?
    Mr. Chopra. So I appreciate the question, Senator Daines. 
This is not a disparate impact. Senator Toomey has claimed this 
many times and it is just not true. I am happy to talk you 
through the legal details of it, but I want to answer the 
question you really posed at the end, which is about 
transparency.
    One of the things that Senator Toomey and others have 
really expressed is that they worry about regulation by 
enforcement, the sense that firms should know what is obligated 
of them under existing law. So one of the things we have done 
is we have tried our best to find lots of different ways to 
issue guidance that does not have the force of law but it gives 
entities a sense of what does the current law require.
    In the case you mentioned of the exam manual, that is 
really also about consistent examination. The manual is 
guidance for examiners, that when they are investigating 
potential discriminatory or other unlawful conduct, how might 
it implicate some of the existing laws that Congress has 
authorized and prohibited? In many situations, illegal conduct 
can violate multiple laws.
    But I want to figure out, and I am happy to work with you 
to figure out what is the way to be transparent but also how to 
best----
    Senator Daines. I am way over time. One last sentence. I 
appreciate you expressing interest in supporting community 
banks, smaller banks, and competition. I think it is important 
you get the feedback early in that rulemaking process, from all 
entities, including these smaller banks and community banks.
    Thank you. Mr. Chairman, thanks for your patience.
    Senator Smith. I am Senator Smith.
    [Laughter.]
    Senator Smith. Thank you, Chair Brown.
    Senator Toomey, Pat, we wish you the best in whatever 
adventures you have before you. I am sure they will be 
exciting, and thank you for your service to Pennsylvania and to 
the United States of America through the Senate. So we wish you 
the very best.
    Senator Toomey. Thank you very much, Senator Smith.
    Senator Smith. Thank you.
    So Director Chopra, thank you so much for being with us, 
and I appreciate your testimony and your answers to the 
questions today.
    You know, markets need to work for consumers as well as the 
private sector businesses that serve those consumers. It needs 
to be fair and transparent so that people are not taken 
advantage of. And I want to thank you for the work that you and 
CFPB do to make that value real. And it does seem like there 
are new scams that hop up constantly.
    Here is an example that I want to ask you about. In 
November, ProPublica and the Sahan Journal copublished a story 
describing practices targeting the Somali community in 
Minnesota. Real estate investors are apparently pitching 
contracts for deed, sometimes known as land contracts or seller 
financing, as an interest-free way of purchasing a home, and 
this is, of course, particularly attractive to Somali buyers, 
many of whom have religious tenants, forbidding paying 
interest.
    Under these arrangements, a buyer pays a seller directly in 
installments and there is no mortgage or bank, and there are 
also very few consumer protections for buyers, and the 
contracts are often structured to contain large, unmanageable 
balloon payments. And so this is what happens. Families end up 
defaulting on their mortgages and are at risk of losing their 
homes. The stories are really terrible when you read them.
    So I to just ask if you are aware of this issue, have you 
heard about this, and what could you do in response to these 
practices to protect these consumers?
    Mr. Chopra. Well, I saw this report and one of the things 
that I think I have shared with some of you before is this 
issue of exploiting religious beliefs----
    Senator Smith. Yes.
    Mr. Chopra. ----I think is very pernicious. And I think to 
the extent to which--I do not know all the facts to see if it 
violates the law. It certainly raises red flags when there may 
be deception or, frankly, taking someone's home without the 
appropriate safeguards in place.
    I want to make sure that--the CFPB is not in the business 
of projecting the future of the economy, but we are always 
paranoid about what could come. And I think housing and housing 
insecurity and evictions and all of the associated rules, we 
need to make sure that we can stop some of these before they 
really go nationwide.
    Senator Smith. Exactly, before they take off. And that is 
my concern too, that what is happening here is bad actors 
exploiting this prohibition amongst Muslim folks to not pay 
interest, and then taking advantage of them.
    Similarly, I am also concerned about recent reports about a 
new deceptive practice that seems specifically designed to 
deceive homeowners. It is related to contracts for providing 
up-front cash to homeowners in exchange for an exclusive right 
by a real estate firm to serve as their listing agent for out 
to 40 years. And so this up-front cash is described as a loan 
alternative, and the only way that a homeowner can exit this 
arrangement is to pay 3 percent of the home value back to the 
realtor company, and then that is enforced as a lien against 
the property. It is just another example of the way, just as 
you say, the way that this huge challenge that we have around 
housing in our country is being taken advantage of, it appears, 
by these bad actors.
    Mr. Chopra. And I also, in that situation, particularly 
worry about older homeowners who are often sitting in homes 
they have lived in for a long time, and often that is their 
core source of wealth and their ability to finance their 
retirement.
    I will say on this issue we have seen the Florida AG; we 
have seen other AGs take actions. Sometimes it implicates our 
authorities. Other times it does not. But that is part of the 
reason we want more State AG and State regulator coordination 
with us, because often if it does not trip our laws it may trip 
theirs, and that is why we have really put a premium on 
investing in those State AGs, and I want to commend your State 
for really being part of that work.
    Senator Smith. Yes. Our Attorney General does excellent 
works and keeps consumer protection at the forefront of his 
efforts, so I appreciate that.
    Thank you, Mr. Chair.
    Chairman Brown. Thank you, Senator Smith.
    The Senator from Nevada is recognized.
    Senator Cortez Masto. Thank you. Thank you, Mr. Chair, and 
Ranking Member Toomey, again, as I said yesterday in the 
Banking hearing, I just wish you all the best and it has been a 
pleasure to know you and be able to work with you. Thank you.
    Senator Toomey. Thank you very much. The feeling is mutual.
    Senator Cortez Masto. Director Chopra, it is great to see 
you. You know how I feel, as a former Attorney General. The 
work that you do is just so important, and that partner with 
the AGs across the country, like you said, is key to really 
address some of the consumer challenges that we are seeing. 
Every time there is a law that is passed, usually there is some 
predatory actor trying to figure out another way to take 
advantage, and so we have to stay diligent and be on top of all 
of these issues.
    One of them that has been important to me, and Jack Reed 
has talked a little bit about this, is our servicemembers and 
their families. I know in 2021, our servicemembers and their 
families submitted more than 42,000 complaints to the Consumer 
Bureau. The most common type of complaint, more than 60 
percent, were about credit reporting and debt collection. I 
know also that servicemembers have complained to the Bureau 
about billing inaccuracies and that debt collectors use 
aggressive tactics to recover allegedly unpaid medical bills.
    So how has the Bureau protected servicemembers and their 
families from unfair practices? Can you talk about what you are 
trying to do to address that?
    Mr. Chopra. Yes. We have actually taken a number of 
enforcements actions on the Military Lending Act. Last week we 
released a report about the Servicemembers Civil Relief Act, 
which provides important protections.
    Let me just say, more broadly though, the impact of the 
credit report for a servicemember, it is different than for 
civilians, because when they are moving a lot or when there are 
certain life events, they need to be able to rely on that, 
sometimes even for security clearances. So credit reporting 
issues are really tough.
    Senator Cortez Masto. Or continuation in the military.
    Mr. Chopra. That is right.
    Senator Cortez Masto. This is an important thing, and this 
is what I hear from our servicemen and women in the State of 
Nevada.
    Mr. Chopra. And one of the things that I worry, too, is 
they are more likely to be victims of identity theft. So the 
issue of servicemember data and privacy and their credit 
reports I think is going to continue to be a top issue. I know 
this is also a place where the Federal Trade Commission has put 
in work, and they have authorities, and we are going to 
continue to work with them.
    The DoD has been a very good partner in figuring out other 
indicia of military family readiness, and so there is more work 
which we can brief you on.
    Senator Cortez Masto. Please do. I look forward to it. I 
know Jack talked about, and you addressed the Civil Relief Act 
and the concern that our active-duty, particularly our Reserve 
and National Guard, are paying an extra $9 million in interest 
every year. And so I appreciate your work in addressing it.
    Let me jump back to just, in general, credit reporting. For 
years the top complaint from consumers, in general, and this is 
even when I was Attorney General, has been inaccurate credit 
reports. And thanks to the Bureau's efforts we are seeing some 
improvements with getting real and timely responses to the 
complaints.
    Can you talk about that progress that the Consumer Bureau 
has had with improving responsiveness from some of these credit 
reporting companies, but also what else do we need to be doing 
and what can Congress do to address this issue?
    Mr. Chopra. Well, I think that the three credit reporting 
conglomerates obviously do not face the same competitive 
constraints that a normal business does. Consumers are not 
their customer often. So consumers are the product, and I think 
that is a fundamental market failure that requires us to make 
sure that they are taking accuracy and disputes seriously. It 
is clear that for some of them they are willing to pay the 
occasional fine or class action lawsuit, but ultimately there 
is a serious issue when it comes to their incentives.
    I want to share that I also worry about the new generation 
of data broker and background screeners that are even 
collecting data on small businesses, collecting data on others. 
We need to make sure that those secret dossiers that 
individuals have rights to make sure they are accurate and they 
can dispute wrong issues.
    Senator Cortez Masto. I do too, and I will just say, you 
know, as a former Attorney General dealing with the subprime 
mortgage crisis, I cannot tell you how many homeowners I even 
heard from that they were trying to work with a credit 
reporting company and they were being punitive against them. It 
is an area that we really have to focus on.
    Mr. Chopra. And that lingers with people for so long. And 
often if one of your three reports has problems, you are shut 
out.
    Senator Cortez Masto. That is right. It is devastating. So 
thank you again. Thank you for the work, and I look forward to 
continuing that work with you and the Bureau, and your 
incredible staff.
    Chairman Brown. Thank you, Senator Cortez Masto.
    Senator Ossoff, from Georgia, is online from his office.
    Senator Ossoff. Thank you, Mr. Chairman, and thank you, 
Director Chopra, for your service and your testimony here 
today.
    Building on what Senator Cortez Masto was just discussing 
in terms of the impact that adverse credit reports can have on 
Americans, let us talk about how this can impact veterans and 
what you can do, Director Chopra, to protect veterans from 
improper billing and collections from providers of community 
care services referred by the VA. You published the Office of 
Servicemember Affairs 2022 Annual Report. It noted that you 
receive many complaints from veterans who incur medical debt as 
a result of a community care health care provider that is a 
third-party provider, to whom the veteran is referred by the VA 
for some outpatient services, who trust that those community 
care providers will bill the VA, but instead they bill the 
veteran improperly, and then it gets referred for collections, 
and then suddenly this veteran has collectors coming after 
them, maybe an adverse credit reporting event.
    The report that you issued, Director Chopra, recommended 
that medical providers and third-party billing companies should 
have adequate systems in place to serve veterans. Of course, 
they should.
    What else can you do with the powers at your disposal to 
protect veterans who are at risk of becoming trapped by medical 
debt, having adverse credit reports because of the failures of 
these health care providers to properly bill the VA?
    Mr. Chopra. Let me just say that credit reports should not 
be a tool to extort money out of someone who does not really 
owe it. And I think for many veterans, and frankly, many 
Americans, they end up just paying it because it is such a 
headache.
    We have already taken a few steps. One, we have put some 
focus on nursing home debt collection. This is a place where we 
want to make sure that debt collectors who are collecting on 
nursing home debt know that when there might be indicia that 
those debts are invalid.
    This issue of outpatient referrals from the VA, we are 
really pleased to work with the VA on how they are dealing with 
credit reporting. They have updated some of their rules about 
when medical debts will be reported. It will drastically reduce 
the number that are reported. Because ultimately, I think we do 
not want to penalize veterans for getting medical care for 
which the law entitles them to receive as benefits of their 
service.
    So, Senator Ossoff, I think there are other places in 
credit reporting and debt collection that we continue to find 
concrete solutions to address these issues.
    Senator Ossoff. I appreciate that, Director Chopra. Let us 
talk about new mothers and the costs of pregnancy and 
childbirth. A University of Michigan study published last year 
found 24 percent of pregnant and postpartum women report unmet 
health care needs due to cost. One in 5 parents receive an 
unexpected charge, averaging $744, on their hospital bill 
following childbirth. That is on top of $4,500 in out-of-pocket 
spending, on average, that each woman spends on care from 12 
months before to 3 months after delivery. We know, and we have 
been discussing, the impact that medical debt can have on 
families. We are talking about families with new children.
    How do you address the impact that this can have on 
pregnant women and new mothers? What more can you do to protect 
them?
    Mr. Chopra. I think that there are big concerns about how 
big medical events can often trigger personal bankruptcy. It is 
a financial distress that is often--an underpinning is often 
medical issues. And I think the last thing we would want is to 
see that, you know, pregnancy and new mothers having to deal 
with mistaken credit reporting, surprise billing.
    Of course, the CFPB's role is really on credit reporting 
and debt collection. But of course, we are happy to brief you 
further on the work with the Department of Health and Human 
Services, the work we do with others to address this really 
complex and convoluted system of medical billing and how it is 
becoming the No. 1 collection item over time on individuals' 
credit reports.
    Senator Ossoff. Director Chopra, thank you, and I think 
that these issues faced by veterans and new mothers speak to 
the essential role that the agency plans in protecting 
consumers.
    My final question is about servicemembers who, for example, 
are undergoing security clearance investigations. Your Office 
of Servicemember Affairs report found that in 2021, credit 
reporting companies were ``not responsive to servicemembers' 
requests for investigations, jeopardizing their security 
clearances, job security, and promotion eligibility.'' They are 
not getting timely responses from the credit reporting 
companies when, for our military servicemembers, their jobs and 
clearance is on the line.
    What more can your agency do to ensure that credit 
reporting companies respond in an efficient and effective 
manner to these servicemembers' requests and when 
servicemembers bring complaints to you?
    Mr. Chopra. Well, we have certainly seen a bit of an uptick 
in their responsiveness, but ultimately we are going to have to 
assess them for legal compliance too. They have requirements to 
assure maximum possible accuracy, using reasonable procedures, 
and I think that is a place where we are very, very focused on 
whether they are meeting their legal obligations on dispute and 
accuracy.
    So of course their compliance with the law has huge ripple 
effects on all segments of the population across the country, 
and so we will continue to do work when it comes to the Fair 
Credit Reporting Act, including exploring potential rules.
    Senator Ossoff. Thank you. And Mr. Chairman, I know my time 
is up. I will just say this, Director Chopra. The Congress 
authorized your agency to undertake these activities, 
explicitly in statute, precisely so that you could protect 
consumers, such as we have discussed today.
    Thank you for your testimony.
    Chairman Brown. Thank you, Senator Ossoff.
    We will close. Senator Toomey has some parting words.
    Senator Toomey. I will be brief. Mr. Chairman, thank you 
very much. I just want to remind my colleagues of the 
legislation that Senator Hagerty and I have proposed does two 
things. It would change the governance of the CFPB to a 
bipartisan commission, and it would change the funding of the 
CFPB to funding through appropriations.
    This in no way would end the CFPB. It would in no way 
prevent the CFPB from carrying out its mission. But what it 
would do is it would restore much more accountability than we 
have today. The Constitution is so unambiguously clear that all 
legislative powers are to be vested in the Congress. We hand 
over powers to write rules which have the force of law to the 
CFPB. That is a legislative power. It really only makes sense 
that we actually exercise some control over this body to which 
we have delegated our own responsibility.
    So I would urge my colleagues to consider supporting our 
legislation, and I thank you, Mr. Chairman.
    Mr. Chopra. Chairman Brown, can I just offer one thing?
    Chairman Brown. Very briefly.
    Mr. Chopra. I did not get to do this, but I also want to 
thank Senator Toomey, over the past few years. Congratulations 
on finishing your service and returning to Pennsylvania, or 
wherever you may go. And also to Senator Shelby, who over the 
past decade I have had the chance to work with him and his 
staff on so many things. You know, many years ago he was very 
clairvoyant about data and data privacy, and so I again want to 
thank him too for all his work.
    Senator Toomey. Thank you.
    Chairman Brown. Thank you for those kind words, Director. A 
moment about accountability and then I will adjourn.
    The CFPB director can be fired by the President. We know 
that. The director is confirmed by this body. The CFPB submits 
quarterly financial reports to OMB. CFPB's operations and 
budgets are subject to a private sector, independent audit. It 
is subject to numerous additional audits by the Office of the 
Inspector General and GAO. It is the only independent banking 
regulator with a cap on its funding, and annually audits the 
financial transactions, the GAO does, of the CFPB, and the 
director appears, as you know, painfully or not, in front of 
this Committee twice a year.
    These are just some of the accountability measures the CFPB 
complies with. It is clearly accountable. It is not really the 
objection here. It is the fact that CFPB is such an effective 
watchdog for consumers, to the detriment of Wall Street. That 
is why the CFPB is under attack.
    Thank you, Director, for being here today. Senators who 
wish to submit questions, those questions are due 1 week from 
today, on Thursday, December 22nd. Director, please submit your 
responses to questions for the record within 45 days from when 
you receive them.
    And as I adjourn, again thanks to Senator Toomey. It is our 
87th hearing together, and I appreciate his public service and 
his attention to detail and his good, intellectual, and 
principled insight, and I learn from him on all kinds of 
issues.
    So Pat, thank you. Director, thank you. The Committee is 
adjourned.
    [Whereupon, at 11:37 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
              PREPARED STATEMENT OF CHAIRMAN SHERROD BROWN
    Today's hearing is in a hybrid format. Our witness is in-person, 
but Members have the option to appear either in-person or virtually.
    Let me start by talking about two of our colleagues who are 
retiring at the end of this Congress.
    Senator Toomey sat by my side for 87 of the 89 hearings the 
Committee held this Congress. We each missed one. I mention that 
because it shows how seriously he takes this job--both as Senator and 
as Ranking Member. I'm sure there were many hearings he didn't want to 
sit through. But he did.
    I've enjoyed getting to know him as we sat together for hundreds of 
hours over the last 2 years. We moved dozens of nominees through the 
Committee, we worked together on crucial national security issues like 
China, most recently we've worked together on FTX, and off the 
Committee worked on important maternal health issues.
    While we have our disagreements, there may be no other Republican 
as passionate as Senator Toomey, and it's backed by his strong 
worldview and intellect, especially on financial matters. He was a 
critical voice in our Committee's response to the COVID crisis and the 
Congressional oversight afterwards. The quality of debate and discourse 
in this Committee was improved because Pat and his incisive intellect 
were engaged.
    I also want to commend Pat's staff--Brad Grantz, Dan Sullivan, John 
Crews, and the rest of the team for their hard work and diligence.
    I wish Pat, Kris and their three children the best in the next 
phase of his career.
    I have not known a Banking and Housing Committee without Senator 
Shelby. I came to the Committee in 2007 in the middle of the financial 
crisis.
    Senator Shelby helped shape the agenda of the Committee for 35 
years--during the Enron scandal, Sarbanes-Oxley, the Great Recession of 
2008, Dodd-Frank, the COVID pandemic, and so many other critical 
moments in the history of this Committee and our country. He served in 
leadership roles as either Chair or Ranking Member for more than a 
decade, working with Senators Sarbanes, Dodd, Johnson, and me.
    There was no one on the Republican side who was a greater proponent 
of strong capital at banks, something I always admired.
    Senator Shelby, I wish you and Annette well in your retirement.
    Welcome back Director Chopra.
    The Banking, Housing, and Urban Affairs Committee used to be 
referred to as the Senate Banking Committee because it was all about 
Wall Street. When Democrats took Control in the 117th Congress, we 
changed that.
    So it's fitting that this Committee's last hearing for the 117th 
Congress is the CFPB's Semi-Annual Report--because fighting for 
consumers is one of the most important things we can do on this 
Committee.
    Since the CFPB first opened its doors in 2011, the consumer agency 
has returned $14.9 billion to consumers, including principal 
reductions, canceled debts, and other relief. That's $14.9 billion, 
with a B.
    Over 183 million consumers have been eligible for that relief.
    The CFPB has a track record of helping real people get real 
compensation for real harm from financial institutions that have 
wronged them.
    In 2012, just over a year after becoming fully operational, the 
CFPB ordered American Express subsidiaries to refund $85 million to an 
estimated 250,000 consumers for illegal credit card practices, 
including charging unlawful late fees.
    In 2014, the CFPB reached a settlement requiring Sallie Mae to pay 
$60 million to an estimated 60,000 servicemembers for overcharging them 
on student loans.
    In 2016, the CFPB fined Wells Fargo $100 million for opening 
unauthorized accounts and ordered Wells to refund an estimated $2.5 
million in fees accrued.
    This year, the CFPB fined Bank of America $10 million for 
unlawfully garnishing consumer accounts.
    When financial institutions illegally took consumers' hard-earned 
money through unlawful late fees, through too high interest rates, 
through unauthorized fees, and through improper garnishment, the CFPB 
cracked down and ensured that consumers keep their hard-earned money.
    No other agency fights for consumers like the CFPB.
    It's no wonder Wall Street hates the agency. Since the passage of 
Dodd-Frank, Wall Street and its allies have aimed their fire at the 
CFPB, trying over and over again to undermine and gut the agency 
responsible for fighting for Main Street and consumers.
    Republicans have proposed bill after bill to weaken the CFPB, to 
take away the effective single director structure, to put the agency's 
funding in the limbo of congressional appropriations, or to simply undo 
the CFPB.
    But Congress created the CFPB and specifically designed its funding 
structure to make the agency an effective consumer watchdog.
    According to this Committee's report on Dodd-Frank, ``the assurance 
of adequate funding, independent of the Congressional appropriations 
process, is absolutely essential to the independent operations of any 
financial regulator.''
    Which is why other financial regulators like the Federal Reserve, 
OCC, FDIC, and NCUA are independently funded and not subject to 
congressional appropriations.
    And when Wall Street and Republicans in Congress tried to put the 
CFPB out of business, the public loudly and clearly said ``no''.
    The CFPB has remained intact because it does its job: helping 
consumers.
    Consumers know Wall Street does not have their best interest at 
heart.
    Consumers know that Wall Street needs a strong regulator to keep it 
in check.
    Consumers remember the damage that Wall Street wrought on the 
economy, on their neighborhoods, and on their wallets.
    And consumers know that CFPB follows the facts. They go after bad 
actors, from banks overcharging customers to predatory payday lenders 
trapping consumers in debt.
    The CFPB stands up to Wall Street. Director Rohit Chopra and the 
CFPB use all of their powers to fight discrimination. And they continue 
to go after financial institutions for their treatment of Black and 
Brown consumers.
    In 2021, the CFPB required a bank to pay $5 million to address 
redlining that harmed Black consumers.
    This year the CFPB announced that it will examine whether 
discrimination violates the Dodd-Frank prohibition against unfair, 
deceptive, and abusive acts and practices.
    And in July, in response to a local lender's failure to serve 
Philadelphia's majority-minority neighborhoods, the CFPB, along with 
the Department of Justice's Combatting Redlining Initiative, brought 
$18.4 million in funds to support home ownership in those 
neighborhoods.
    In total, the CFPB has gotten $637 million from discriminatory 
financial institutions, tens of millions of which have gone directly to 
minority consumers who experienced discrimination.
    There is a reason why the civil rights community was instrumental 
in the creation of the CFPB. They knew that they needed an agency that 
was empowered and unafraid to fight against discrimination, wherever it 
may be found.
    The CFPB is creating a fair, transparent, and competitive economy.
    Major and consequential CFPB rules like the Ability to Repay rule 
not only provide protections for consumers buying homes, but also 
create rules for financial institutions and the broader economy.
    That's why we created the CFPB--to ensure that the financial 
marketplace is fair for everyone, and that corporations cannot rig the 
system and get away with it. That's the essence of capitalism.
                                 ______
                                 
            PREPARED STATEMENT OF SENATOR PATRICK J. TOOMEY
    Today's hearing is about the CFPB.
    The last time Director Chopra testified, I raised concerns about 
the CFPB's overreach in pursuit of a far-left agenda. Unfortunately, 
this lawless behavior is nothing new for the CFPB, and under Director 
Chopra, it's more out of control than ever before. Today, I'm 
disappointed--but not surprised--to note, yet again, that the CFPB has 
continued this pattern of overreach.
    In our constitutional system of checks and balances, only Congress 
has the power to appropriate money. James Madison called this: ``the 
most complete and effectual weapon with which any constitution can arm 
the immediate representatives of the people.''
    But, the Dodd-Frank Act exempted the CFPB from appropriations. It 
empowers the CFPB to simply take funds from the Fed, which is itself 
also not subject to appropriations, thereby doubly insulating the CFPB 
from any congressional control.
    I acknowledge there are other financial regulators not on 
appropriations--and we can disagree about whether they should be. But, 
it's indisputable that Congress has precisely zero leverage over the 
CFPB. It's hard for me to imagine our Founders intended an agency to 
have the power of the legislative branch, and precisely zero 
accountability to the legislative branch. And, in any case, clearly the 
CFPB is overreaching and doesn't care.
    That's why the Fifth Circuit recently found the CFPB's funding 
structure is unconstitutional. The court noted: ``The Bureau's 
perpetual insulation from Congress's appropriations power . . . renders 
the Bureau `no longer dependent and, as a result, no longer 
accountable' to Congress and, ultimately, to the people.''
    What can we expect from an agency designed to be unaccountable to 
Congress, if not overreach and hubris? For example, under Director 
Chopra, the CFPB unilaterally decided that Dodd-Frank's grant of 
authority to prevent unfair, deceptive, or abusive acts or practices--
known as UDAAP--now includes controversial disparate impact liability. 
It announced this change by fiat, without rulemaking. It ignored not 
only the text of Dodd-Frank, but also the fact that Congress never 
contemplated that UDAAP would encompass disparate impact. Congress took 
the UDAAP language from the FTC Act. For nearly a century, the FTC 
never interpreted that language to include discrimination or disparate 
impact. Finally, the CFPB willfully ignored the fact that Congress 
overturned the CFPB's disparate impact guidance for auto lending in 
2018.
    It's extremely implausible to think that an agency that was 
dependent on Congress for appropriations would engage in activity so 
clearly contrary to Congress' intent.
    In addition, the CFPB has publicly targeted businesses for taking 
lawful actions, like its smear campaign against bank fees for overdraft 
services. This campaign does nothing for consumers, it just causes 
banks to shift fees to less transparent means of recouping the costs of 
providing overdraft services.
    This week, the CFPB doubled down on its use of name-and-shame 
tactics with a new proposed rule. It would create a public database of 
enforcement orders, judgments, and settlements, against nonbank 
financial institutions, obtained by Federal and State regulators and 
attorneys general, including under State consumer laws that are not 
applicable nationwide. While maintaining such a list may well make 
sense, making it public is different, and would create the false 
impression that the orders of the most activist States are the 
nationwide standard.
    What's more, the proposal would require a senior official of 
certain nonbanks to attest to the CFPB that they're complying with 
these orders. This would effectively give the CFPB enforcement power 
over other agencies' orders for violations of State and Federal laws 
that the CFPB has no jurisdiction to enforce. There's no limiting 
principle to stop the CFPB from extending this rule to all financial 
institutions.
    These examples are just some of the symptoms of an agency that's 
out of control and knows Congress can't use the power of the purse to 
rein in its overreach. That's why I'm introducing legislation--along 
with Senator Hagerty--to place the CFPB on appropriations. The best way 
to make the CFPB accountable to Congress is through appropriations.
    Through its rulemaking, the CFPB can exercise legislative power. 
What's ambiguous about the first line in Article I of the Constitution: 
``All Legislative powers herein granted shall be vested in a Congress 
of the United States''? At the very least, Congress should carry out 
the responsibility that the Constitution assigns to us, and exercise 
control over agencies like the CFPB that exercise legislative power.
    But that's not all this legislation will do. It will also replace 
the agency's single director with a five-member, bipartisan commission, 
like the SEC and FDIC. This structure will ensure that the CFPB 
considers a diversity of voices when it forms policy. And it's not a 
new idea. Bipartisan legislation to convert the CFPB into a commission 
has been repeatedly introduced.
    These accountability measures will help make the agency more 
responsible, balanced, and measured. And Congress will have to accept 
some responsibility for what the CFPB does.
    What's more, if Congress does not put the CFPB on appropriations, 
the Supreme Court will likely force us to. The Court is expected to 
consider and uphold the Fifth Circuit's decision that the CFPB's 
funding structure is unconstitutional. If it does, I have no doubt 
Congress will act swiftly to provide the CFPB with appropriate funding. 
After all, Congress is experienced at the appropriations process.
    But, by acting now, through legislation, Congress can ensure the 
smoothest possible transition. This is in the best interest not only of 
the CFPB and Congress, but also consumers and the economy. That's why I 
call on all of my colleagues, Democrats and Republicans, to join me in 
supporting this sensible legislation.
                                 ______
                                 
                   PREPARED STATEMENT OF ROHIT CHOPRA
             Director, Consumer Financial Protection Bureau
                           December 15, 2022
    Chairman Brown, Ranking Member Toomey, and distinguished Members of 
the Committee, I am pleased to present the Consumer Financial 
Protection Bureau's (CFPB) submission of the Semiannual Report to 
Congress.
    Our economy and our consumer finance markets are truly in 
transition, out of a pandemic and further into the digital era. I will 
offer some observations about the state of the economy today, as well 
as what the CFPB is doing to prepare for the future, especially as we 
confront the challenges of Big Tech in banking. I will also highlight a 
number of opportunities for bipartisan reforms. \1\
---------------------------------------------------------------------------
     \1\ Statement Required by 12 U.S.C. 5492; The views expressed 
herein are those of the Director and do not necessarily reflect the 
views of the Board of Governors of the Federal Reserve System or the 
President.
---------------------------------------------------------------------------
The Current State of the Economy and Household Finance
    The CFPB's market monitoring and supervision of financial 
institutions provides one lens into the state of the economy. Consumer 
demand has rebounded as our country transitions out of pandemic 
conditions. While the labor market remains strong, household debt has 
increased rapidly. The rise in household payment burdens from auto 
loans and credit cards has been particularly pronounced, given rising 
interest rates, the cost of vehicles, and the impact of inflation on 
other goods and services in the economy.
    As consumers continue to navigate the economic impacts and ripple 
effects of the pandemic, their financial patterns have adapted and 
responded to changing conditions--as have the companies that serve 
them. For example, the CFPB has observed a notable increase in use of 
Buy Now, Pay Later products over the past few years. As interest rates 
on credit cards increase--and correspondingly, outstanding balances--a 
low- or no-interest Buy Now, Pay Later product that spreads the cost of 
goods over four payments can be particularly appealing. The CFPB's 
recent study on Buy Now, Pay Later noted a significant increase in use 
of these products to fund essential goods and services. The CFPB is 
working to ensure that Buy Now, Pay Later lenders adhere to the same 
protocols and protections as other similar financial products to avoid 
regulatory arbitrage and to ensure a consistent level of consumer 
protection.
    Homeowners and home buyers are likewise adjusting to today's 
economic environment, which is characterized by higher interest rates 
and softening home prices. With interest rates above 6 percent for 
fixed-rate mortgages and average monthly mortgage payments on the rise, 
weekly mortgage applications for purchases are down 40 percent from the 
same time last year. Adjustable-rate mortgages have increased from less 
than 5 percent to nearly 10 percent of mortgages in just the last 3 
years, suggesting that buyers seeking lower interest rates may be 
increasingly looking for alternatives to fixed rate mortgages.
    Unsurprisingly, refinancing volumes have declined substantially. 
Given the importance of the mortgage market to both consumers and the 
economy, we will continue to assess trends closely, identify risks that 
require attention by regulators, and keep the public informed of their 
options. Medical debt continues to be a significant pain point for many 
Americans. Our analysis of consumer credit reports revealed that 
approximately 43 million credit reports contained a medical debt 
collection item. Given the complexities of medical billing in the 
United States, there are serious questions about the accuracy of 
medical debt credit reporting. The three major credit reporting 
companies are voluntarily making changes that will lead to reductions 
in the number of credit reports with medical debt items. We continue to 
examine how medical debt burdens are impacting household balance 
sheets.
    Given the outlook for the global economy, we are also working 
across Government to be prepared if the macroeconomic environment 
deteriorates. We will be closely monitoring any impacts on U.S. 
consumer finance markets and the effects on household debt and 
household financial stability.
Promoting Competition and a Decentralized Market
    In an open and competitive market, consumers can choose products 
and services that meet their needs and shift away from providers that 
treat them poorly. When new companies can challenge incumbents and when 
consumers can easily switch in a decentralized market structure, we are 
all better off. That's one of the reasons why Congress charged the CFPB 
with ensuring that consumer finance markets are competitive.
    In recent years, Big Tech companies and other digital giants have 
leveraged their existing platforms to expand their reach into banking 
and finance. While new entry is typically welcome news, Big Tech's 
entry raises broader concerns about competition and user choice. The 
CFPB has been closely studying these firms' expansion into consumer 
finance markets, particularly with respect to payment platforms, like 
Apple Pay, Google Pay, PayPal, and Venmo. We also continue to examine 
the effects of large technology conglomerates entering payments and 
financial services in other jurisdictions, like in China, where Alipay 
and WeChat Pay have extraordinary reach.
    Big Tech firms can tie their payment platforms to their social 
media offerings or their mobile operating systems. Users may be 
restricted in how they make contactless payments (like ``tapping'') 
outside of the proprietary app affiliated with that operating system. 
Since there are strong network effects from payment systems, other 
payment apps have a strong incentive to leverage their scale to harvest 
data for purposes other than moving money from one party to another.
    We have issued orders to a number of these firms to determine what 
data they are extracting from transactions and whether they can use 
that data to preference their other business lines. We are also 
particularly interested in how these payment platforms implement 
existing consumer protections, as well as how they make decisions on 
account approvals, freezes, and terminations.
    In addition to identifying emerging risks to competition, the CFPB 
is working to proactively create conditions for small firms and start-
ups to challenge incumbents. One way to prevent excessive 
centralization is to accelerate the shift to open banking and open 
finance. That is why it is a key priority for the CFPB to expand 
personal financial data rights through a rulemaking under section 1033 
of the Consumer Financial Protection Act. This long dormant authority, 
once implemented, can give consumers more control over their personal 
financial data.
    In October, the CFPB launched the rulemaking process. The proposals 
under consideration would require that financial firms provide 
consumers access to their own financial data on deposit accounts, 
credit cards, and other transaction accounts. Consumers would then be 
able to provide permissions to this data safely and securely to other 
financial firms. We are also exploring how to limit firms from sharing 
or misusing this sensitive data.
    I am encouraged by the positive reactions this rulemaking process 
has elicited from across the consumer finance ecosystem, and I look 
forward to continuing the rulemaking process over the coming months.
    We are also focused on promoting competition and new entry in 
refinance markets, including in mortgage, auto, and credit cards, and 
we have made it a priority to identify ways to lower barriers to entry 
and to foster innovation that addresses important market gaps.
Bipartisan Action Needed by Congress
    Over the past year, the CFPB has had productive discussions with 
members from both chambers and on both sides of the aisle. There are a 
wide range of issues where I expect commonsense reforms can be advanced 
on a bipartisan basis.
Protect the Neutrality of the Payments System
    The transfer of money in commerce is at the core of a market-based 
economy. Digital technology is driving greater ease for individuals and 
small businesses to transfer funds in a fast and frictionless way.
    Facebook's Libra proposal in 2019 was a wake-up call to regulators 
around the world. While the proposal was largely scrapped, it was an 
important reminder of the power and potential that tech giants hold, 
and of the duties of financial regulators to carefully monitor how 
large tech conglomerates and other platforms enter the payments system 
and financial services.
    Analysts estimate that payment apps from large tech firms are the 
conduit for trillions of dollars in transactions. There is growing 
concern that a small set of players, including some of the largest tech 
companies, are gaining a greater foothold in the payments system.
    The rise in dominance of a small group of payment platforms raises 
questions about how firms can suppress, suspend, or discriminate 
against certain participants over others. The CFPB has heard 
considerable concern about payment apps kicking off users, or even 
claiming the ability to reach into their accounts and fine users 
without a clear reference to any legal infraction. For example, the 
operator of a major payment network recently suggested that it could 
impose fines on users for their online speech. Policymakers need to 
determine whether it is appropriate for platforms to shut off a user's 
account access without suspicion of fraud, money laundering, or other 
illicit activity.
    Public commenters also raised concerns that dominant payment 
players will abuse their positions by substantially increasing fees on 
small banks, merchants, and consumers.
    Congress must ensure that payments systems are neutral and 
nondiscriminatory, by eliminating the incentive for firms to use their 
control over payments to favor their other interests. This could 
require, for example, separations between payment utilities and 
ancillary businesses. In the coming months, the CFPB will be sharing 
more results from its study with this Committee and others in Congress.
Strengthen Financial Privacy Protections
    More than 20 years ago, legislators began raising concerns about 
the creation of behavioral profiles using our credit and debit card 
transaction data. \2\ With the rise of e-commerce and tech platforms 
that monetize user behavior through targeted advertising, these 
concerns are even more acute. Making digital payments and transferring 
funds online has become almost obligatory in our modern economy, and as 
a result, subjecting oneself to digital surveillance has become 
obligatory too.
---------------------------------------------------------------------------
     \2\ See, for example, Freedom from Behavioral Profiling Act of 
2000, S. 536, 107th Cong. (2001). https://www.congress.gov/bill/107th-
congress/senate-bill/536?s=1&r=6
---------------------------------------------------------------------------
    The CFPB has found that large tech firms are able to ingest 
extremely detailed data about a user, including sensitive information. 
Firms we have studied have laid the groundwork, through loose privacy 
policies and expansive data retention practices, to use this data in 
ways that challenge traditional notions of privacy and autonomy.
    The Gramm-Leach-Bliley Act requires that consumers are provided 
with a notice and a right to opt out of certain data collection and 
sharing practices. I am concerned that this privacy notice is 
ineffective. Privacy policies for financial services are often all-or-
nothing: consumers must choose to accept the company's terms wholesale 
or decline to use the company's product. Given the importance of many 
financial services to consumers' daily lives, this can create a false 
choice between submitting to data harvesting or foregoing access to 
critical banking services.
    The financial services landscape has changed significantly in the 
past two decades, and our approach to privacy must evolve as well. 
While Congress is broadly looking at privacy protections across sectors 
of the economy, I hope that financial privacy can be a top 
consideration for this Committee. Specifically, I hope you can explore 
meaningful limitations on the collection, use, and sharing of personal 
financial data. The CFPB will be looking closely at ways to better 
protect privacy in areas under our jurisdiction, including, for 
example, the collection and distribution of personal data in credit 
reporting and the use of data authorized by a consumer under the CFPB's 
personal financial data rights rulemaking.
    There are a number of other opportunities for bipartisan 
legislative efforts, such as reforming the Appraisal Foundation, 
expanding awards for whistleblowers, and protecting relationship 
banking. The CFPB is eager to work with this Committee to craft 
potential solutions on these and many other issues.
    Thank you again for the opportunity to appear before you. I look 
forward to responding to your questions.
        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SINEMA
                       FROM ROHIT CHOPRA

Q.1. Director Chopra, in the context of pending litigation 
about the CFPB's structure and funding mechanisms, there has 
been discussion about the value the CFPB has provided to 
consumers. In addition to the value provided to consumers, the 
CFPB has also provided value to the housing market through 
vital safe harbors and other actions that provide regulatory 
certainty. Is there anything the Bureau can share about the 
value its actions, including safe harbors, regulations, and no-
action letters, have provided to the overall functioning of the 
housing market?

A.1. I appreciate your support of the Consumer Financial 
Protection Bureau (CFPB), and I share your view that a well-
functioning housing market is critical to our Nation's economy. 
The CFPB plays an important role in ensuring the housing market 
is fair, transparent, and resilient. For example, according to 
a recent paper published in The Georgetown Law Journal, the 
CFPB's ability-to-repay rule enhanced the mortgage market's 
resilience to financial shocks by reducing consumer defaults 
even in the event of a future housing bubble. \1\
---------------------------------------------------------------------------
     \1\ https://www.law.georgetown.edu/georgetown-law-journal/wp-
content/uploads/sites/26/2020/03/Why-the-Ability-to-Repay-Rule-Is-
Vital-to-Financial-Stability.pdf
---------------------------------------------------------------------------
    The CFPB has delivered value to the housing market in many 
ways, and the agency's ongoing work in this space is vital to 
sustaining a stable, functioning housing market. Some examples 
include:

    The CFPB provides implementation guidance and 
        compliance presumptions for lenders, appraisers, loan 
        originators, and others regarding the statutory 
        ability-to-repay, loan originator compensation, escrow, 
        and appraisals requirements contained in the Dodd-Frank 
        Wall Street Reform and Consumer Protection Act (Dodd-
        Frank Act). The CFPB's rulemaking in this area provides 
        presumptions, small entity exclusions, and 
        clarifications as to what constitutes compliance, which 
        would not have been available if the Dodd-Frank Act's 
        statutory provisions had gone into effect in the 
        absence of CFPB rulemaking. In response to comments 
        from the secondary mortgage market and others, the CFPB 
        has taken important action to preserve liquidity in the 
        secondary market and support ongoing consumer mortgage 
        lending.

    Since implementation of the CFPB's rulemaking in 
        this area, mortgage originators and secondary market 
        participants have repeatedly cautioned that, without 
        CFPB's regulatory engagement, any reversion to the 
        Dodd-Frank Act's bare statutory provisions could result 
        in a dramatic reduction in available mortgage credit 
        because it would be very difficult for secondary market 
        participants to gauge their risk exposure to future 
        litigation by borrowers.

    The CFPB's ongoing implementation of the Home 
        Mortgage Disclosure Act has substantially reduced 
        compliance challenges for mortgage lenders. For the 
        more than 30 years before the CFPB's involvement in 
        this area, mortgage lenders were required to make 
        publicly available their mortgage lending data in their 
        branch offices to the public, as well as to report 
        their data to the Federal Reserve Board. The CFPB 
        itself now makes the data publicly available, removing 
        a major compliance burden from lenders as well as 
        facilitating public access to this crucial data.

    In implementing the Congressional directive to 
        combine the Truth in Lending Act (TILA) statutory 
        disclosure with the Real Estate Settlement Procedures 
        Act (RESPA) statutory disclosure, the CFPB provides 
        extensive and ongoing support of and guidance to the 
        housing market, including implementation guides that 
        identify disclosures associated with TILA civil 
        liability. These guides are directly responsive to 
        secondary market concerns regarding possible imputation 
        of TILA civil liability on RESPA provisions that lacked 
        private liability protections.

    The CFPB provides extensive accommodations across 
        its mortgage rules to recognize the important role of 
        small lenders, particularly in rural areas. CFPB rules 
        provide flexibilities for smaller institutions in 
        balloon lending, periodic payment statements, mandatory 
        escrow requirements, process requirements for loss 
        mitigation applications, and expanded presumptions of 
        compliance with the ability-to-repay requirements.

    I am committed to continuing the CFPB's vital, ongoing work 
to protect consumers and support a well-functioning housing 
market.
                                ------                                


       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                       FROM ROHIT CHOPRA

Q.1. In its current rulemaking for Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Pub. L. No. 111-203) 
Section 1071, how does the Consumer Financial Protection Bureau 
plan to address how vehicle finance entities and auto dealers 
will be able to cooperate?

A.1. The rulemaking is ongoing and we are still in the process 
of evaluating the comments and weighing the evidence. We will 
be closely considering the unique facets of the auto financing 
market before finalizing the rule.

Q.2. Auto dealers are not regulated by the Consumer Financial 
Protection Bureau, but by the Federal Reserve. However, in 
indirect auto financing, dealers often originate sales and 
complete transactions. How is the Consumer Financial Protection 
Bureau working with the Federal Reserve to ensure covered 
vehicle finance entities are able to comply with data 
collection compliance?

A.2. You are correct that the Consumer Financial Protection 
Bureau (CFPB) may not exercise any rulemaking, supervisory, 
enforcement, or any other authority, including any authority to 
order assessments, over a motor vehicle dealer that is 
predominantly engaged in the sale and servicing of motor 
vehicles, the leasing and servicing of motor vehicles, or both. 
The rulemaking is ongoing and we are still in the process of 
evaluating the comments and weighing the evidence. We have been 
working with the Federal Reserve and we will be closely 
considering the unique facets of the auto financing market 
before finalizing the rule.

Q.3. What is the Consumer Financial Protection Bureau doing to 
protect student borrowers from companies looking to unfairly or 
deceptively profit off borrower confusion around recently 
announced Federal student debt cancellation?

A.3. The CFPB is engaging in a multi-agency effort to protect 
borrowers from student loan scammers, including by maintaining 
and amplifying resources helping borrowers to recognize red 
flags, and by sharing information with partner law enforcement 
agencies. The CFPB is also monitoring the marketing practices 
of private student lenders that offer refinance products.

Q.4. How has the Consumer Financial Protection Bureau worked 
with the United States Department of Education to hold Federal 
student loan servicers accountable to providing timely, 
accurate information and better service borrowers, particularly 
in light of recently announced Federal student debt 
cancellation?

A.4. The CFPB conducts regular supervision of many Federal 
student loan servicers' compliance with Federal consumer 
financial law, including whether servicers make deceptive 
statements to borrowers or commit unfair or abusive acts or 
practices that inhibit borrowers' access to Federal student 
loan benefits. As detailed in the recent Supervisory Highlights 
Student Loan Servicing Special Edition, the CFPB has cited 
Federal student loan servicers both for providing inaccurate 
information and outsized delays in processing. \1\ While the 
CFPB exercises its authorities independently, including its 
supervisory and enforcement tools, the CFPB consults regularly 
with the Department of Education (ED) to ensure thorough 
understanding of ED's programs and identify potential consumer 
risks. In deploying its supervision and enforcement resources, 
the CFPB has and will continue prioritizing reviewing servicer 
interactions with borrowers regarding the availability of 
student debt cancellation for both accuracy and timeliness.
---------------------------------------------------------------------------
     \1\ Sept. 2022 available at https://files.consumerfinance.gov/f/
documents/cfpb-student-loan-servicing-supervisory-highlights-special-
edition-report-2022-09.pdf.

Q.5. What can I expect to see from the Consumer Financial 
Protection Bureau in the coming months to ensure that low-
income student borrowers and other at-risk groups receive the 
appropriate, and more importantly, correct information from 
---------------------------------------------------------------------------
their Federal loan servicers?

A.5. The CFPB supervises many student loan servicers for 
compliance with Federal consumer financial law, and has on 
numerous occasions found unlawful acts or practices that 
impeded student loan borrowers' access to relief programs and 
required servicers to engage in remediation. \2\ The CFPB has 
also taken enforcement action on similar issues. \3\ The 
existence and nature of ongoing supervisory and enforcement 
action is confidential. However, the CFPB resolves its 
enforcement actions through public consent orders and regularly 
shares key examination findings in Supervisory Highlights.
---------------------------------------------------------------------------
     \2\ In addition to the September 2022 Supervisory Highlights, 
prior supervisory findings were published in 2014 available at https://
files.consumerfinance.gov/f/201410-cfpb-supervisory-highlights-fall-
2014.pdf at 17; 2015 available at https://files.consumerfinance.gov/f/
201510-cfpb-supervisory-highlights.pdf at 23-24; 2017 available at 
https://files.consumerfinance.gov/f/documents/Supervisory-Highlights-
Issue-13-Final-10.31.16.pdf at 16-17; and 2021 available at https://
files.consumerfinance.gov/f/documents/cfpb-supervisory-highlights-
issue-24-2021-06.pdf at 34-36.
     \3\ https://www.consumerfinance.gov/about-us/newsroom/cfpb-sues-
nations-largest-student-loan-company-navient-failing-borrowers-every-
stage-repayment/; https://www.consumerfinance
.gov/about-us/newsroom/cfpb-sanctions-edfinancial-for-lying-about-
student-loan-cancellation/
---------------------------------------------------------------------------
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT
                       FROM ROHIT CHOPRA

Q.1. The CFPB's Sec. 1033 proposal indicates that the Bureau 
want all banks to have certain technical infrastructure--known 
as APIs (application programming interface)--in place for 
consumers to access and share their data with financial 
companies. However, as of today, thousands of small community 
banks and credit unions have not built this infrastructure.
    Will the CFPB act to ensure that community bank customers 
do not lose access to their data if the bank is unable to build 
an API or data access portal, or if it takes several years to 
put one in place?

A.1. I appreciate this question, given the growing concerns 
about how core services providers interact with local financial 
institutions.
    The Consumer Financial Protection Bureau (CFPB) is 
considering whether exemptions from the proposals under 
consideration would be appropriate for any data providers that 
would otherwise be covered data providers. However, in 
determining if exemptions would be appropriate, the CFPB is 
interested in whether there are ways to design the proposals 
under consideration to reduce impact on covered data providers. 
For example, with respect to the third-party access portal 
proposal under consideration, we are seeking feedback on 
whether certain covered data providers should not be subject to 
the third-party access portal requirement on the rule's 
compliance date and instead should be given additional time to 
build a compliant third-party access portal. The CFPB seeks to 
ensure that the proposals under consideration appropriately 
balance benefits provided to consumers with the burden imposed 
on covered data providers, including smaller covered data 
providers, in a manner that is consistent with the statutory 
purposes of the Dodd-Frank Wall Street Reform and Consumer 
Protection Act.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR MORAN
                       FROM ROHIT CHOPRA

Q.1. 1033 Rulemaking--In October, the CFPB released its Small 
Business Regulatory Enforcement Fairness Act outline of 
proposals under consideration for its rulemaking on personal 
financial data rights, as Section 1033 of the Dodd-Frank Act 
requires it to do. The outline applies the requirement to make 
data available to both consumers and other third parties that 
the consumer authorizes.
    I'm concerned about the elevated threat this poses to 
consumers of sensitive data being compromised. Can you tell me 
where Section 1033 says that covered entities must make data 
available to third parties?

A.1. Privacy and security are a top concern for me, 
particularly given the threats that our country faces from 
State and non-State actors.
    Section 1033(a) of the Dodd-Frank Wall Street Reform and 
Consumer Protection Act (Consumer Financial Protection Act) 
generally requires data providers to make information available 
to a ``consumer,'' which includes an agent, trustee, or 
representative acting on behalf of an individual consumer. See 
12 U.S.C. 5481(4). The Small Business Regulatory Enforcement 
Fairness Act (SBREFA) Outline of Proposals released by the 
Consumer Financial Protection Bureau (CFPB) in October explains 
that the agency is considering how to ensure that a third party 
acting for the consumer with respect to data access treats 
consumer data appropriately.

Q.2. Large data aggregators hold a significant portion of 
American consumers' financial data. However, the CFPB's outline 
does not address the Bureau's ability to examine and supervise 
data aggregators to ensure consumers' information is kept 
securely.
    A November report from the Treasury also pointed out that 
these entities ``are not subject to supervision of the CFPB's 
information security and general data practices.''
    How can consumers be assured their personal data is safe if 
the Bureau does not have authority to supervise these third 
parties for compliance?

A.2. The United States will not make a successful transition to 
open banking if consumers cannot be assured that their personal 
data is safe and secure. Congress assigned certain data 
protection requirements, such as the Safeguards framework, to 
other Federal banking agencies and the Federal Trade 
Commission. We are actively working on ways to address your 
concern.

Q.3. It is critical that policymakers, industry, and 
stakeholders understand the ecosystem, then delineate the roles 
and responsibilities of each party. Better defined, yet 
flexible, rules would improve the relationships between the 
parties and outcomes for consumers.
    As technology changes, it is critical that there is a 
common, flexible approach that promotes transparent, informed 
consent, adequate disclosure, sufficient control, and robust 
security.
    The major focus should be on how data aggregation can 
improve financial wellness for consumers (track alternative 
data to improve credit scores, manage finances, etc.).
    Regulatory clarity may ease adoption, but not consumer 
utilization, which can be achieved by balancing thoughtful 
guidance/regs with market forces and consumer needs and wants.
    Privacy and data control requirements are a further 
complicating factor. A State patchwork would only increase 
impediments.
    Lessons learned internationally--with a registration 
process in place in Europe with PSD2, financial institutions 
have mostly seen it as a compliance issue, thus it has not been 
widely adopted. Rather than embracing opportunities, financial 
institutions have done the minimum required to meet 
obligations. Open Banking regulation via PSD2 lacks any 
technical framework, therefore, there is fragmentation across 
markets.
    Does the Bureau agree that the six tenets/principles above 
should guide the upcoming 1033 rulemaking process?

A.3. Generally speaking, yes. Of course, the details of this 
will require significant analysis and stakeholder engagement, 
which we are currently undertaking.

Q.4. Bureau's Account Level Card Database--The CFPB, for over a 
decade, has been collecting vast amounts of consumer data on a 
regular basis from banks that issue credit cards. Monthly, 
these banks provide detailed information on each credit card 
customer's account.
    How does the Bureau use the consumer information it gathers 
via the account level data collection regime?

A.4. Since 2016, the CFPB has not collected collection loan-
level credit card data on an ongoing basis. From 2012 through 
2016, the CFPB collected account-level data maintained by nine 
credit card issuers. The CFPB also obtained account-level data 
from the OCC. The CFPB never received data containing any 
direct personal identifiers nor captured data about individual 
purchases. \1\
---------------------------------------------------------------------------
     \1\ https://files.consumerfinance.gov/f/documents/bcfp-sources-
uses-of-data.pdf
---------------------------------------------------------------------------
    The Board of Governors of the Federal Reserve System 
(Federal Reserve Board) collects data through Reporting Form FR 
``Y-14M'' from bank holding companies that have total 
consolidated assets exceeding $50 billion. \2\ These ``Y-14'' 
data are used to support the Federal Reserve Board's 
supervisory stress test models. The CFPB is one of several 
Government agencies with whom the Federal Reserve Board shares 
Y-14 data.
---------------------------------------------------------------------------
     \2\ See Bd. of Governors. of the Fed. Reserve Sys., Report Forms 
FR Y-14M, https://www.federalreserve.gov/apps/reportforms/
reportdetail.aspx?sOoYJ+5BzDYnbIw+
U9pka3sMtCMopzoV (for more information on the Y-14M collection).
---------------------------------------------------------------------------
    The CFPB has used credit card loan-level data for market 
monitoring, including the preparation of a biennial report to 
Congress on the credit card market and to inform decisions 
about priorities for supervisory examinations. It has also used 
the data for a number of working papers prepared by CFPB 
researchers, as well as for research that has informed 
rulemakings.

Q.5. Why does the Bureau need detailed account-level 
information, as opposed to using sampling data? (For example, 
the Food and Drug Administration and the Department of 
Agriculture protect drug and food safety without examining 
every pill or pound of beef).

A.5. The CFPB uses a 40 percent sample of de-identified 
account-level Y-14 data obtained from the Federal Reserve 
Board.

Q.6. What would be the impact on this program if data 
submissions were made periodically, rather than monthly?

A.6. The frequency of submissions in the Y-14 data collection 
is determined by the Federal Reserve Board to support the 
Federal Reserve Board's supervisory stress test models. The 
monthly data collection improves the CFPB's ability to perform 
its risk-monitoring function by providing more timely data.

Q.7. What CFPB rulemaking or enforcement activities have been 
based exclusively or principally on data from the account-level 
credit card database?

A.7. The account-level database has been a data source for CFPB 
activities including market monitoring, research, and 
rulemaking. For example, a study conducted by CFPB economists 
in connection with the Debt Collection Practices rule used 
account-level data to analyze the impact of State data 
collection laws on access to credit, thereby helping to assess 
the impact of the CFPB's own debt collection rules.

Q.8. Why is this aggregate data used rather than information 
obtained through the examination process, information requests, 
or compulsory process requests?

A.8. The Y-14 data are already provided to the Federal Reserve 
Board. The CFPB uses these data, rather than developing its own 
duplicative collection processes, for efficiency purposes. 
Using Y-14 data reduces costs to industry and to the CFPB. On 
occasion, the CFPB also uses information requests to supplement 
the Y-14 data that it receives from the Federal Reserve Board.

Q.9. How does the Bureau protect the security and privacy of 
the consumer information in this database, for example, when it 
has provided access to the database to outside academic 
researchers in the U.S. and abroad?

A.9. Privacy and security are top of mind for us. The CFPB 
protects this account-level information by secure access 
control procedures maintained in accordance with the CFPB's 
data policies. These procedures apply regardless of whether the 
user is a CFPB employee or an academic researcher working at 
the CFPB pursuant to an Intergovernmental Personnel Act (IPA) 
agreement. The CFPB does not have any IPA agreement with any 
researcher outside the United States.

Q.10. UDAAP--The incorporation of discrimination into the 
unfairness doctrine suggests that the Bureau is attempting to 
broaden Federal regulatory prohibitions on discrimination. The 
examination manual does not have the same status of a 
regulation, but may be considered supervisory guidance. Under 
the CFPB's statement on supervisory guidance, it does not have 
the force and effect of law, and the Bureau does not take 
enforcement action based on supervisory guidance. As a result, 
the Bureau is seemingly attempting to broaden Federal 
regulatory prohibitions on discrimination with respect to 
consumer financial products and services beyond those already 
in place for lending/real estate secured. How can institutions 
be expected to build a framework to demonstrate absence of 
discrimination in products/services unrelated to lending when 
they do not ask required information as they do for lending 
products?

A.10. I appreciate your concern about this issue, and I share 
your commitment to ensuring fair enforcement of the law. It is 
important to underscore that the CFPB is not attempting to 
enforce a prohibition that does not already exist in Federal 
law.
    The Consumer Financial Protection Act's (CFPA) prohibition 
on unfair acts and practices applies equally to all consumer 
harm that meets the statutory prongs--there is no exception in 
law for discriminatory conduct. For many years, companies have 
used a variety of methods to ensure that they comply with 
Federal and State prohibitions on unfair acts or practices. One 
of the most important ways of doing this is to assess consumer 
complaints and feedback, as well as insights from employees and 
managers. There is also an array of qualitative and 
quantitative data that firms use to track their own business 
performance, and these data may also help them spot systemic 
problems. The CFPB is not seeking to impose new obligations on 
supervised entities. We expect that most, if not all, 
supervised entities have long had systems in place designed to 
aid in compliance with the prohibitions set forth by Congress 
in the CFPA.

Q.11. Artificial Intelligence/Machine Learning--Some observers 
have expressed concerns and raised questions about risks of 
Artificial Intelligence and Machine Learning technologies 
resulting in unpredictable behavior or reinforcing biases. 
However, AI/ML technologies, correctly applied, can be used to 
reduce bias. This occurs when AI/ML is responsibly deployed by 
regulated financial services companies and implemented with 
strong controls/testing, rigorous risk management and 
meaningful objectives:
    The potential risks associated with using AI are not unique 
to AI, but inherent to an effective model risk management 
framework. Banks already account for these risks and are 
examined and supervised in a manner that ensure banks are 
addressing these risks.
    Heavily regulated and supervised banks adhere to legal and 
compliance measures, including ECOA and Model Risk Management 
(SR 11-7), and all financial services providers should have a 
similar oversight structure in place. Doing so could help 
preserve and advance the significant benefits that these 
technologies can provide to consumers, such as greater access 
to safe and responsible credit, better pricing, and reduction 
of service costs.
    The current lack of consistency in the way financial 
services providers define terms related to AI/ML reduces 
transparency for consumers and regulators. One potential 
solution is SR 11-7, which serves as a foundational governing 
standard for financial services companies, and can serve as a 
blueprint for legislative proposals.
    Do you agree, that the shared goals of consistent consumer 
protections and outcomes, reduced risks and errors, and 
improved fraud prevention and AML/BSA reporting can be 
supported by public policies that promote flexibility and 
innovation?

A.11. In general, yes. Historically, many financial regulations 
have been complicated and prescriptive, rather than outcome-
focused. At the CFPB, we are attempting to shift away from this 
approach and toward simplicity and bright lines.

Q.12. That providing clarity on the appropriate levels of 
transparency, explainability, and accountability in lending 
decisions can address potential negative consumer impacts such 
as model bias, discrimination, and inconsistent explanations?

A.12. In general, yes. The CFPB has endeavored to clearly 
communicate how existing law applies to emerging technologies. 
For example, we have issued guidance that helps firms ensure 
they are staying on the right side of the law.

Q.13. That public policies which incentivize transparency and 
mitigate bias through consistent rules and usage risk standards 
can carefully balance filling regulatory gaps without creating 
impediments to the ability to meet consumers expectations and 
needs?

A.13. In general, yes.

Q.14. Remittance Fees--We may not always see eye-to-eye on what 
you classify as a ``junk fee'', but one hidden fee that we may 
agree on is the marked-up exchange rates for international 
remittance transactions. I'm particularly concerned by how 
these fees impact our men and women in uniform serving abroad. 
I am not in favor of setting rates, but I do believe in 
disclosing rates.
    What has the CFPB done on this type of price transparency 
to help our troops around the world better understand the 
exchange rates they are paying when digitally transferring 
money to pay for housing and durable goods?

A.14. I share your concern about the impacts of fees and lack 
of transparency on military families, especially those serving 
abroad.
    The CFPB wants a remittance market that offers fast, fair, 
competitive, and transparent transactions for all consumers, 
including servicemembers. To facilitate price transparency for 
servicemembers, as well as other consumers that send remittance 
transfers, the Remittance Rule generally requires all 
remittance transfer providers to disclose the exchange rate and 
fees that apply to a transaction and provides remittance 
transfer providers with model disclosures that they could use. 
The model disclosures were tested with consumers to help ensure 
and facilitate consumer understanding of the key components of 
a remittance transfer, including, as applicable, the exchange 
rate that applies to a transfer.
    The CFPB has also taken actions to ensure remittance 
providers are compliant with the law. Most recently, the CFPB 
took enforcement actions against Servicio UniTeller \3\ in 
December 2022 and Choice Money Transfer \4\ in October 2022, 
both of which allegedly violated Regulation E. Moreover, in 
April 2022, the CFPB brought a joint enforcement action with 
the Attorney General of New York against one of the largest 
remittance providers, known as MoneyGram. \5\ MoneyGram is a 
repeat offender, however, having been previously sanctioned by 
the Federal Trade Commission in 2009 and 2018. The CFPB has 
also taken similar enforcement action against Trans-Fast 
Remittance, LLC, \6\ in August 2020, and Envios de Valores La 
Nacional \7\ in December 2020.
---------------------------------------------------------------------------
     \3\ https://www.consumerfinance.gov/about-us/newsroom/cfpb-orders-
servicio-uniteller-to-refund-fees-and-pay-penalty-for-failing-to-
follow-remittance-rules/
     \4\ https://www.consumerfinance.gov/enforcement/actions/choice-
money-transfer/
     \5\ https://www.consumerfinance.gov/about-us/newsroom/cfpb-and-ny-
attorney-general-sue-repeat-offender-moneygram-for-leaving-families-
high-and-dry/
     \6\ https://www.consumerfinance.gov/enforcement/actions/trans-
fast-remittance-llc/
     \7\ https://www.consumerfinance.gov/enforcement/actions/envios-de-
valores-la-nacional-corp/

Q.15. Has the CFPB proactively worked with the Department of 
---------------------------------------------------------------------------
Defense on this issue? If not, why not?

A.15. Yes. The CFPB regularly meets with representatives from 
the Department of Defense (DoD) to discuss all issues involving 
consumer protection policy, outreach, and educational 
initiatives for servicemembers (including remittance 
transfers). CFPB's Office of Servicemember Affairs (OSA) 
routinely coordinates with DoD's Office of Financial Readiness 
on consumer financial protection issues. OSA and the Office of 
Enforcement also convene quarterly meetings with the Service 
Chiefs of the Offices of the Judge Advocates General, the DOJ's 
Office of Civil Rights, and Consumer Protection Branch, legal 
assistance attorneys at military installations, and professors 
from each of the three military JAG schools.
    The CFPB works closely on policy with the DoD for 
compliance and transparency. As part of its rulemaking to amend 
the Remittance Rule in 2020, CFPB staff met with DoD staff in 
light of public comments received from industry. We were able 
to ensure that the CFPB's Remittance Rule did not adversely 
affect servicemembers given the DoD's requirement that on-base 
credit unions offer remittances at an exchange rate ``no more 
favorable'' than the base's Military Banking Facility.
                                ------                                


        RESPONSES TO WRITTEN QUESTIONS OF SENATOR DAINES
                       FROM ROHIT CHOPRA

Q.1. During your testimony before the Senate Banking Committee 
on December 15, 2022, you stated in response to my question 
about the March 2022 amendment to the CFPB's examination manual 
that ``This is not disparate impact. Senator Toomey has claimed 
this many times. And it's just not true.''
    The facts do not support this claim. In the press release 
announcing the update, the CFPB stated that ``consumers can be 
harmed by discrimination of whether it is intentional'' and 
that CFPB examiners now consider ``discriminatory outcomes.''
    What is your definition of disparate impact?

A.1. I appreciate this question. I use the legal definition of 
``disparate impact.'' Disparate impact is a longstanding legal 
doctrine under various civil rights laws recognized by Federal 
courts and used by regulators, agencies, and others for nearly 
five decades. It is used to prove illegal discrimination under 
numerous laws, including the Fair Housing Act, Title VII of the 
Civil Rights Act of 1964, and the Equal Credit Opportunity Act, 
particularly when a policy purports to be neutral regarding the 
characteristics protected by those laws.
    Disparate impact is a wholly separate legal doctrine from 
unfair acts or practices under the Dodd-Frank Wall Street 
Reform and Consumer Protection Act (Consumer Financial 
Protection Act), which are assessed based on the prongs of the 
statutory unfairness standard.

Q.2. Will the CFPB examine for discriminatory outcomes 
regardless of intention under UDAAP? If so, how does that 
differ from disparate-impact liability in your view?

A.2. Consistent with the Consumer Financial Protection Act's 
unfair, deceptive, or abusive acts and practices (UDAAP) 
prohibition, Consumer Financial Protection Bureau (CFPB) 
examiners will continue to look for any practices that cause or 
risk causing substantial injury to consumers. As noted above, 
disparate impact is a wholly separate legal doctrine; the CFPB 
will rely on the statutory standards set out by Congress in the 
Consumer Financial Protection Act, 12 U.S.C. 5531, when 
assessing whether practices are unfair to consumers.

Q.3. Director Chopra, as you referenced in your Semiannual 
report your agency has been working for quite some time now to 
issue a rule requiring financial institutions to allow 
consumers to access their financial data and if they wish, 
authorize it to be shared with others. A consumer's ability to 
access and share their data with whomever they wish seems to be 
a fundamental right and would foster competition within the 
financial services industry.
    What progress have you made towards issuing this rule and 
when can we expect it to be issued?

A.3. I completely agree with your sentiment and appreciate the 
need to complete this long overdue rulemaking.
    In October 2022, the CFPB outlined options to strengthen 
consumers' access to, and control over, their financial data as 
a first step before issuing a proposed data rights rule that 
would implement section 1033 of the Consumer Financial 
Protection Act. The document released is an outline of 
proposals and alternatives under consideration for the CFPB's 
data rights rulemaking. The rulemaking process will include 
panel convenings to seek feedback from small entities on the 
proposals under consideration. Later, the panel will prepare a 
report on the input received from the small entities, and the 
CFPB will consider the input as it develops a proposed rule. 
The CFPB will then publish a Notice of Proposed Rulemaking 
(NPRM), solicit and consider comments on the NPRM, and issue a 
final rule by 2024.

Q.4. Director Chopra, your efforts to issue a rule under Dodd-
Frank 1033 will allow consumers to access and share their 
financial data. This could have a tremendous impact on 
consumers' ability to fully understand their total financial 
health, including what assets they have, what debt they're 
responsible for, and their sources of income and expenses. 
Small businesses in the U.S. have a similar need that has been 
intensified by current economic circumstances.
    Should small business owners, especially sole 
proprietorships, have similar access to their financial 
information?

A.4. Small businesses, especially sole proprietorships, also 
face similar needs as households when it comes to navigating 
the financial marketplace. The CFPB believes that the 
competition benefits of data rights for small businesses are 
likely significant. The CFPB's Proposals Under Consideration 
would implement section 1033(a) of the Consumer Financial 
Protection Act. Section 1033(a) applies to information 
concerning ``the consumer financial product or service that the 
consumer obtained from [ ] a covered person.'' The Consumer 
Financial Protection Act defines ``consumer'' as ``an 
individual, or an agent, trustee, or representative acting on 
behalf of an individual.''

Q.5. What can the agency do to help small business owners gain 
access to their financial information?

A.5. The pandemic was a stark reminder about the need to do 
more to support small business owners. The CFPB has multiple 
workstreams to increase transparency with regard to financial 
information. Consistent with its authority under section 1071 
of the Consumer Financial Protection Act, the CFPB is 
undergoing a rulemaking that would require financial 
institutions to collect and report to the CFPB data on 
applications for credit for small businesses, including those 
that are owned by women or minorities. The CFPB has also 
initiated the Small Business Regulatory Enforcement Fairness 
Act (SBREFA) process to consider proposals under section 
1033(a) of the Consumer Financial Protection Act. We note that 
section 1033(a) requires that information be made available 
``to a consumer'' concerning ``the consumer financial product 
or service that the consumer obtained from [ . . . ] a covered 
person.''

Q.6. In October, your agency announced its Small Business 
Advisory Review Panel for Required Rulemaking on Personal 
Financial Data Rights. As part of that effort, your agency 
shared an outline of proposals regarding what a future Dodd-
Frank 1033 rule may look like. The proposal recommended that 
the rule require financial institutions to only allow consumers 
to access and share their bank account and credit card data.
    In November, the Federal Reserve Bank of New York's Center 
for Microeconomic Data issued its Quarterly Report on Household 
Debt and Credit. The Report showed household debt increasing by 
$351 billion (2.2 percent) to $16.51 trillion. Mortgage 
balances rose by $282 billion and auto loan balances increased 
by $22 billion in the third quarter. In total, nonhousing 
balances grew by $66 billion.
    It seems that consumer access to debt information would be 
very important to helping consumers manage or reduce their debt 
and help foster greater competition within these industries.
    If the CFPB's 1033 rule initially focuses on only savings 
and credit card data, how will the agency look to expand the 
types of financial information that consumers can access and 
share in the future?

A.6. The CFPB intends to evaluate how to proceed with regard to 
other data providers in the future. This coverage enables use 
cases such as transaction underwriting, payment services, 
comparison shopping for financial products and services that 
best fit the consumer's deposit and transaction patterns, 
overdraft and other fee avoidance, and personal financial 
management. Specifically, these use cases rely on data from 
consumers' asset and credit card accounts, and this coverage 
would ensure that consumers are able to provide access to data 
from these accounts to third parties that provide these 
products and services. This coverage also addresses some of the 
most significant areas of potential consumer risk, given the 
significant potential for abuse of consumers' payment data in 
particular. At the same time, from the perspective of 
feasibility of industry implementation, this coverage would 
leverage, to the greatest extent presently possible, existing 
industry infrastructure for consumer-authorized financial data 
sharing.
    In addition, the Outline of Proposals specifically asks 
stakeholders for their feedback on whether the CFPB should 
consider alternative approaches to product coverage in the 
initial rule. The CFPB is accepting comments from the public on 
that Outline of Proposals and will carefully consider all 
feedback received.
              Additional Material Supplied for the Record

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