    [House Hearing, 118 Congress]
    [From the U.S. Government Publishing Office]

                         THE SEMI-ANNUAL REPORT OF THE
                    BUREAU OF CONSUMER FINANCIAL PROTECTION

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

                                    HEARING

                                   BEFORE THE

                        COMMITTEE ON FINANCIAL SERVICES

                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 JUNE 14, 2023

                                   __________

           Printed for the use of the Committee on Financial Services

                               Serial No. 118-32

                                 _________

                     U.S. GOVERNMENT PUBLISHING OFFICE

    53-180 PDF               WASHINGTON : 2023

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                   PATRICK McHENRY, North Carolina, Chairman

    FRANK D. LUCAS, Oklahoma             MAXINE WATERS, California, Ranking
    PETE SESSIONS, Texas                     Member
    BILL POSEY, Florida                  NYDIA M. VELAZQUEZ, New York
    BLAINE LUETKEMEYER, Missouri         BRAD SHERMAN, California
    BILL HUIZENGA, Michigan              GREGORY W. MEEKS, New York
    ANN WAGNER, Missouri                 DAVID SCOTT, Georgia
    ANDY BARR, Kentucky                  STEPHEN F. LYNCH, Massachusetts
    ROGER WILLIAMS, Texas                AL GREEN, Texas
    FRENCH HILL, Arkansas                EMANUEL CLEAVER, Missouri
    TOM EMMER, Minnesota                 JIM A. HIMES, Connecticut
    BARRY LOUDERMILK, Georgia            BILL FOSTER, Illinois
    ALEXANDER X. MOONEY, West Virginia   JOYCE BEATTY, Ohio
    WARREN DAVIDSON, Ohio                JUAN VARGAS, California
    JOHN ROSE, Tennessee                 JOSH GOTTHEIMER, New Jersey
    BRYAN STEIL, Wisconsin               VICENTE GONZALEZ, Texas
    WILLIAM TIMMONS, South Carolina      SEAN CASTEN, Illinois
    RALPH NORMAN, South Carolina         AYANNA PRESSLEY, Massachusetts
    DAN MEUSER, Pennsylvania             STEVEN HORSFORD, Nevada
    SCOTT FITZGERALD, Wisconsin          RASHIDA TLAIB, Michigan
    ANDREW GARBARINO, New York           RITCHIE TORRES, New York
    YOUNG KIM, California                SYLVIA GARCIA, Texas
    BYRON DONALDS, Florida               NIKEMA WILLIAMS, Georgia
    MIKE FLOOD, Nebraska                 WILEY NICKEL, North Carolina
    MIKE LAWLER, New York                BRITTANY PETTERSEN, Colorado
    ZACH NUNN, Iowa
    MONICA DE LA CRUZ, Texas
    ERIN HOUCHIN, Indiana
    ANDY OGLES, Tennessee

                         Matt Hoffmann, Staff Director

                                C O N T E N T S

                                  ----------
                                                                       Page
    Hearing held on:
        June 14, 2023................................................     1
    Appendix:
        June 14, 2023................................................    77

                                   WITNESSES
                            Wednesday, June 14, 2023

    Chopra, Rohit, Director, Consumer Financial Protection Bureau
      (CFPB).........................................................     5

                                    APPENDIX

    Prepared statements:
        Chopra, Rohit................................................    78

                  Additional Material Submitted for the Record

    Barr, Hon. Andy:
        Written statement of the Association of Credit and Collection
          Professionals (ACA)........................................    82
        Letter to Rohit Chopra from Representatives Barr and Huizenga
          re: Freedom of Information Act (FOIA) requests, dated June
          14, 2023...................................................    87
        Written statement of the Consumer Bankers Association........    89
        Writtten statement of the Credit Union National Association
          (CUNA).....................................................    93
    Garcia, Hon. Sylvia:
        Letter to the CFPB from the Consumer Bankers Association,
          dated July 2, 2018.........................................   101
        Consumer Bankers Association White Paper, ``The Case for
          Regulation Through Rulemaking & Guidance,'' dated October
          2021.......................................................   106
    Velazquez, Hon. Nydia:
        Excerpt from House Small Business Committee hearing on March
          28, 2023...................................................   114
    Waters, Hon. Maxine:
        Written statement of the Asset Building Policy Network (ABPN)   118
        ``Who Opposes the Fifth Circuit Decision in CFSA vs. CFPB?...   121
        Written statement of UnidosUS................................   124
    Chopra, Rohit:
        Written responses to questions for the record from
          Representative Barr........................................   132
        Written responses to questions for the record from
          Representative Davidson....................................   157
        Written responses to questions for the record from
          Representative De La Cruz..................................   158
        Written responses to questions for the record from
          Representative Donalds.....................................   163
        Written responses to questions for the record from
          Representative Flood.......................................   208
        Written responses to questions for the record from
          Representative Garbarino...................................   212
        Written responses to questions for the record from
          Representative Hill........................................   213
        Written responses to questions for the record from
          Representative Houchin.....................................   215
        Written responses to questions for the record from
          Representative Kim.........................................   219
        Written responses to questions for the record from
          Representative Nunn........................................   225
        Written responses to questions for the record from
          Representative Pettersen...................................   236
        Written responses to questions for the record from
          Representative Sherman.....................................   238
        Written responses to questions for the record from
          Representative Steil.......................................   243
        Written responses to questions for the record from
          Representative Timmons.....................................   246
        Written responses to questions for the record from
          Representative Velazquez...................................   250

                           THE SEMI-ANNUAL REPORT OF
                             THE BUREAU OF CONSUMER
                              FINANCIAL PROTECTION

                                  ----------

                            Wednesday, June 14, 2023

                 U.S. House of Representatives,
                       Committee on Financial Services,
                                                       Washington, D.C.
        The committee met, pursuant to notice, at 10:04 a.m., in
    room 2128, Rayburn House Office Building, Hon. Andy Barr
    presiding.
        Members present: Representatives Sessions, Posey,
    Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, Hill,
    Emmer, Loudermilk, Mooney, Davidson, Rose, Steil, Timmons,
    Norman, Meuser, Fitzgerald, Garbarino, Kim, Donalds, Flood,
    Lawler, Nunn, De La Cruz, Houchin, Ogles; Waters, Velazquez,
    Sherman, Meeks, Scott, Lynch, Green, Cleaver, Himes, Foster,
    Beatty, Vargas, Gottheimer, Casten, Pressley, Horsford, Tlaib,
    Torres, Garcia, Nickel, and Pettersen.
        Mr. Barr. [presiding]. The Financial Services Committee
    will come to order.
        Without objection, the Chair is authorized to declare a
    recess of the committee at any time.
        Today's hearing is entitled, ``The Semi-Annual Report of
    the Bureau of Consumer Financial Protection.''
        I now recognize myself for 4 minutes to give an opening
    statement.
        Thank you, Director Chopra, for being here today. As the
    Director, you wear a lot of hats. You are a member of the
    Federal Deposit Insurance Corporation (FDIC) and the Financial
    Stability Oversight Council (FSOC).
        This committee has spent a lot of time understanding how
    regulators reacted to the failures of Silicon Valley Bank and
    Signature Bank. Given that both the FDIC and FSOC played
    critical roles in those failures, I am looking forward to
    hearing about your involvement in the decision-making process.
        As we said when FDIC Chair Gruenberg and Federal Reserve
    Vice Chair Barr testified before this committee, there was and
    continues to be a lack of transparency surrounding the
    regulators' decision-making that first weekend in March. Was
    there an ideological lens that impacted your response? Did your
    views regarding bank consolidation lead to a delayed resolution
    and greater uncertainty in the financial sector? Let's spend
    more time on this when we get to questions.
        Turning today to your job as Director of the Consumer
    Financial Protection Bureau (CFPB), your agency is responsible
    for regulating and enforcing consumer financial laws. Clear
    rules and expectations of how to comply with those rules
    benefit all participants in the consumer financial marketplace.
        Unfortunately, under your leadership, the CFPB is doing the
    exact opposite. First, your agency identifies consumer harm in
    one instance for a specific product. From there, you
    extrapolate that that harm occurred everywhere and everyone
    should be under suspicion. In fact, every act is presumed
    abusive until the CFPB or a court decides maybe they aren't.
        You use compliance bulletin circulars and advisory opinions
    to sow doubt and confusion in the marketplace. You vilify
    entire industries simply because they are politically unsavory,
    in your opinion. The practice of name-and-shame first, verify
    later, isn't consumer protection. It is McCarthyism. This harms
    consumers and the economy at large while propping up trial
    lawyers and consumer activist groups. Let me be clear: That is
    not the mission of the CFPB.
        Finally, I will turn to what appears to be your most-recent
    appointment as an appendage of President Biden's re-election
    campaign. When the President started talking about junk fees,
    the current hyperpartisan CFPB engaged in a campaign about its
    effort to clamp down on--you guessed it--junk fees.
        Look, it is an easy target. No one likes fees. And to be
    clear, some fees should be questioned to ensure that people are
    not getting ripped off. But to indiscriminately label fees as
    abusive is a blatant attempt to pander to Americans who have
    been hung out to dry in the Biden economy.
        My Democratic colleagues will likely turn to their favorite
    talking point, corporate greed, to explain away the need for
    fees. But do you know who else relies on fees? The government.
    The IRS charges late fees on taxpayers. If you want to enter
    most national parks, you pay a fee. Even the CFPB charges fees
    on Freedom of Information Act (FOIA) requests. So why would the
    CFPB believe that the same costs that these fees cover or the
    actions they are designed to deter do not exist in the private
    sector?
        I will finish with this. The current CFPB operates in an
    opaque, increasingly-partisan, and analytically-weak manner. We
    experienced this under Director Richard Cordray, and his legacy
    lives on with you, Director Chopra.
        The CFPB is directly overstepping its bounds and serving as
    judge, jury, and executioner in the consumer financial
    marketplace. That is why committee Republicans advanced a
    package of bills to reform the structure and funding stream of
    the CFPB to ensure transparency and accountability to the
    American people.
        And let me just say one thing about the rulemaking on
    credit cards. I want you to talk about this, Director, because
    we don't understand how it is protecting consumers to force a
    subprime credit card borrower who is always on time and never
    pays late--which is 74 percent, according to your own data; 74
    percent of Americans who have credit cards never pay late--to
    pay a higher interest rate by lowering the late fees on
    borrowers who never pay late?
        And with that, I yield back my time.
        And I now recognize the ranking member of the committee,
    the gentlewoman from California, Ms. Waters, for 4 minutes for
    an opening statement.
        Ms. Waters. Thank you very much.
        Good morning, and welcome, Director Chopra. I am so pleased
    that you are here this morning to share with us the success and
    all of the good that your group has been doing, as we
    predicted, instead of focusing on how we can strengthen
    consumer protections and avoid a catastrophic default of jobs.
        Republicans are focused on undermining the CFPB, the only
    Federal agency with the singular mission of protecting
    consumers. As we speak, extreme MAGA Republicans are teaming up
    with predatory payday lenders to challenge the
    constitutionality of the CFPB's funding in the Supreme Court,
    based on a fringe legal theory.
        Every single other court has affirmed the validity of the
    CFPB's funding, but just like MAGA Republicans who continue to
    deny election results, they are continuing to deny these facts,
    also.
        So, let me state the facts simply. The Constitution is
    clear. Congress can fund the Executive Branch, including the
    CFPB, banking regulators, and other agencies however it likes
    and has done so for nearly 250 years. This attack on the CFPB
    is yet another destructive effort by Republicans to undermine
    all types of government programs, including and especially
    Social Security and Medicare.
        Let's take a look at last month. I was proud to lead an
    amicus brief with 144 current and former Members of Congress
    supporting the CFPB against this reckless challenge.
    Republicans are also advancing legislation to undermine the
    operations of the CFPB. These efforts are a direct attack on
    consumers and the safeguards that protect them in our nation's
    ever-evolving financial system.
        Despite these attacks, the CFPB's record under Director
    Chopra speaks for itself. The CFPB has successfully combated
    junk fees, relieved the burden of medical debt on consumers
    credit reports, fought back against housing discrimination and
    redlining, and held large financial institutions like Wells
    Fargo accountable for repeatedly breaking the law and harming
    people across America.
        In fact, the CFPB has returned more than $17 billion to 200
    million harmed customers. That is why 80 percent of people,
    including 75 percent of Republicans, support the CFPB and want
    the agency to continue to do its job. Republicans should start
    listening to their constituents, who can tell them what a junk
    fee is and explain why they need to support this critical
    agency's work.
        Additionally, the CFPB's new small business lending rule
    implementing Section 1071 of the Dodd-Frank Act will go a long
    way toward finally rooting out discrimination in small business
    lending. It will open up new funding opportunities to help
    small businesses start up, grow, and thrive. It will do this in
    part by tracking data of minority- and women-owned businesses,
    as well as LGBTQ+-owned businesses, which we are especially
    focused on during pride month.
        Democrats will reject Republican efforts to use the
    Congressional Review Act to eliminate this long-overdue rule,
    while Republicans refuse to stand up for consumers, including
    LGBTQ+ small business owners. They continue to protect the
    interests of large corporations.
        I yield back.
        Mr. Barr. The gentlelady's time has expired.
        The Chair now recognizes Mr. Loudermilk, who is also the
    Vice Chair of our Subcommittee on Financial Institutions and
    Monetary Policy, for 1 minute.
        Mr. Loudermilk. Thank you, Mr. Chairman.
        And thank you, Director Chopra, for once again coming to
    speak with us this morning.
        Unfortunately, since the last time you were here, it
    doesn't seem like much has changed. The CFPB is still an
    unaccountable agency with centralized leadership in a
    constitutionally-questionable funding structure. The Supreme
    Court is currently looking into the latter, and I am hopeful
    their decision will show us a path forward for the agency under
    regular appropriations.
        Industry feedback has been near unanimous that the Bureau
    is acting with little to no regard for the downstream effects
    of their rulemaking on consumers or small businesses.
        Through its wide-reaching disclosure rules, industry
    circulars, and opinions issued across various media, including
    enforcement, the CFPB has collected a wealth of consumer data.
    And in March of this year, we were informed of a significant
    breach at the Bureau that compromised data belonging to
    hundreds of thousands of consumers. This raises important
    questions over whether Congress and the American people can
    trust the Bureau to look out for their own best interests if
    they are not even willing to protect the information they
    collect.
        The Consumer Financial Protection Bureau is deeply flawed,
    deeply troubled, and in desperate need of reform. The best time
    to hold the Bureau accountable is not today; it was 12 years
    ago.
        Mr. Barr. The gentleman's time has expired.
        Mr. Loudermilk. But the second-best time is today.
        Mr. Barr. The gentleman's time has expired.
        The Chair now recognizes the ranking member of the
    Subcommittee on Financial Institutions and Monetary Policy, Mr.
    Foster, for 1 minute.
        Mr. Foster. Thank you, Mr. Chairman, and Director Chopra,
    thank you for being here today.
        In an era where consumer financial transactions have become
    increasingly complex and oftentimes daunting, the CFPB serves
    as a beacon of protection, ensuring that individuals are
    treated fairly in the marketplace, a real example of government
    doing things to make people's lives better.
        As our technology and ability to transact gets faster and
    more efficient, so do the scams and elaborate fraud schemes
    that wish to take advantage of our constituents.
        The CFPB protects the most-sensitive parts of our
    population. You are focused on the protection of older adults,
    and on vulnerable groups from servicemembers to LGBTQ+
    individuals, and your partnership with advocacy organizations
    and your actions against companies violating laws protecting
    servicemembers and others demonstrates your dedication to
    safeguarding those who may be more susceptible to financial
    exploitation. And it does all of this while coming under
    constant attack.
        With the coming onslaught of deep-fake AI impersonation and
    the opaque ChatGPT robo advisors, your job will not get easier.
        So thank you, and I yield back.
        Mr. Barr. The gentleman's time has expired.
        Today, we welcome the testimony of the Honorable Rohit
    Chopra, Director of the Consumer Financial Protection Bureau.
        Director Chopra, we thank you for your time, and we will
    recognize you for 5 minutes to give an oral presentation of
    your testimony. And without objection, your written statement
    will be made a part of the record. You are now recognized for 5
    minutes.

        STATEMENT OF ROHIT CHOPRA, DIRECTOR, CONSUMER FINANCIAL
                        PROTECTION BUREAU (CFPB)

        Mr. Chopra. Chairman Barr, Ranking Member Waters, and
    members of the committee, thank you for holding this hearing
    today.
        I am pleased to report that the CFPB continues to deliver
    tangible results for the public, ensuring that consumers are
    protected, ensuring that honest businesses are safeguarded, and
    preparing for the future as Big Tech and artificial
    intelligence reshape the industry.
        I want to share a few observations about the state of
    household balance sheets in the United States as well as some
    highlights of our work.
        American families continue to benefit from a resilient
    labor market. Consumer spending is quite robust, and borrowing
    has accelerated. Inflation in key categories such as vehicles
    and others has contributed to rising levels of household debt.
    Americans now own $17 trillion in mortgages, auto loans,
    student loans, credit cards, and other consumer loans. Rates
    are higher than they were a few years ago, and some families
    are paying much more.
        Overall, current indicators of distress on consumer credit
    remain fairly muted, although there are modest signs of
    increased delinquency. We will continue to monitor the impact
    of changes in interest rates and home prices closely as well as
    other changes that might impact large segments of the
    population.
        We are on high alert for shocks to the system that might
    unsettle household financial stability. The failures of Silicon
    Valley Bank, Signature Bank, and First Republic Bank
    highlighted significant vulnerabilities in the banking system,
    and regulators took a series of extraordinary actions that
    limited the fallout to the broader economy. But it is clear
    that policymakers need to take steps to avoid the need for
    emergency measures in the future.
        With respect to congressional directives, the CFPB has made
    major progress on proposing, finalizing, or implementing
    required rules on credit reporting for survivors of human
    trafficking, small business lending data, PACE lending, the
    LIBOR transition, and more.
        We are reviewing old rules to find opportunities to
    simplify and future-proof them. We built on the work of my
    predecessor to publish more advisory opinions and guidance that
    helps small and nascent firms looking to develop new products
    and services.
        We are focusing more heavily on supervision of nonbank
    financial firms, which have not always been subject to the same
    oversight as local banks and credit unions. We are activating
    unused authorities to minimize regulatory arbitrage by nonbank
    firms seeking to gain a competitive advantage.
        We have shifted the focus of our enforcement program away
    from targeting small actors and putting more attention on large
    and repeat offenders. And since then, we have recovered $4.6
    billion in refunds and penalties. We are handling an average of
    10,000 consumer complaints per week and obtaining successful
    resolutions for individuals outside of legal proceedings.
        But equally important is our work to address how technology
    is transforming financial services. I think the U.S. has a
    choice. Are we going to harness technology to maintain and
    enhance relationship banking, drive more competition, and
    protect privacy? Or will we continue our lurch towards a system
    marked by surveillance that is fully-automated and controlled
    by just a handful of firms?
        The CFPB is working to ensure broad benefits for consumers
    and businesses alike when it comes to technological progress.
    One of our most-important initiatives is to accelerate the
    shift in the United States to open banking, allowing consumers
    to more easily switch and gain access to new products while
    protecting their financial data.
        We have been leading a number of efforts in artificial
    intelligence, and we are working to bring more technical talent
    inside the agency. We are taking steps to guard against
    algorithmic bias, and we are working to ensure that data
    brokers respect long-standing laws on the books.
        The work of the CFPB in an age of Big Tech and artificial
    intelligence has never been more important.
        Thank you, Chairman Barr, for the opportunity to appear
    before you. I look forward to your questions.
        [The prepared statement of Director Chopra can be found on
    page 78 of the appendix.]
        Mr. Barr. Thank you, Director Chopra.
        And I will now yield myself 5 minutes to ask some
    questions.
        As an FDIC Board Member, you were involved in the decision-
    making related to Silicon Valley Bank and its resolution.
    During the weekend of March 9th, did you express any views to
    FDIC Chairman Gruenberg, any member of the FDIC Board of
    Directors, any FDIC staff, or any officials in the
    Administration regarding the class of banks that should or
    should not be considered as a viable buyer of Silicon Valley
    Bank?
        Mr. Chopra. No. In a bank failure particularly, the most-
    efficient way to contain any fallout is to ensure there is
    continuity. The Bank Merger Act specifically talks about
    financial stability. It was important if we had a viable buyer.
        Mr. Barr. Did you express an opinion that a large Wall
    Street, too-big-to-fail bank should not be in the class of
    institutions that would be eligible to purchase the bank?
        Mr. Chopra. I think we would have taken any potential
    buyer.
        Mr. Barr. Okay.
        Mr. Chopra. We did not receive a bid.
        Mr. Barr. Okay. I appreciate your answer.
        And I ask because when you were FTC Commissioner, you
    submitted a comment to DOJ on bank mergers, criticizing those
    that occurred during the 2008 financial crisis. You opined
    that, ``Policymakers compounded the damage by orchestrating
    several more megamergers, forming even bigger banks.'' We also
    know you used procedural games in December 2021 to try to force
    a bank merger process review.
        Did you see the Silicon Valley Bank failure as an
    opportunity to take your personal views on megamergers, and
    implement them in a real-world crisis?
        Mr. Chopra. No. But what you are referring to, I talk about
    where there is tremendous government assistance. It was a
    different situation. We were faced with one of the fastest bank
    failures in history.
        Mr. Barr. Director, one more time, did you in any way try
    to influence the FDIC analysis of the bids?
        Mr. Chopra. We did not receive any bids that weekend for
    Silicon Valley Bank. We sought to get as many bids as possible.
    The FDIC's law requires minimizing costs to the Deposit
    Insurance Fund (DIF), and that is what we did.
        Mr. Barr. We talked a little bit about this offline, that
    some healthy mergers can avoid losses to the DIF. I want you to
    take that back to Chairman Gruenberg, that we need a better
    merger process to avoid losses to the DIF. And we can talk
    about that further.
        Director Chopra, in your new abusive acts and practices
    policy statement, do you include the following as fitting into
    what will now be considered abusive and a violation of consumer
    financial law? And I will ask that you answer yes or no.
        A pop-up or drop-down box?
        Mr. Chopra. I don't believe that, on its own, is any
    violation.
        Mr. Barr. Okay. Multiple click-throughs?
        Mr. Chopra. I don't believe that, on its own, is any
    violation. I think there was a series of examples used to look
    at material interference.
        Mr. Barr. What about consumer confusion?
        Mr. Chopra. That is part of the statutory----
        Mr. Barr. What if it is unreasonable consumer confusion?
        Mr. Chopra. Unreasonable on the part of the consumer----
        Mr. Barr. On the part of the consumer.
        Mr. Chopra. ----would not be the issue. That would not meet
    the statutory standard. The standard has two prongs with some
    sub-prongs. One is material interference with the consumer's
    ability to navigate, and the second is taking unreasonable
    advantage----
        Mr. Barr. What about customer support taking too long? Is
    that abusive?
        Mr. Chopra. Is that in the proposed----
        Mr. Barr. See, your confusion is the problem. Nobody knows
    what constitutes, ``abusive.'' We still don't. If you don't
    know, and you are the Director, and you issue the guidance----
        Mr. Chopra. We have sought in the proposed policy statement
    to summarize all of the supervisory actions by State and
    Federal law as well as enforcement to say, this is the body of
    law we have. We have a common law system in the United States.
    We are seeking to provide as much clarity to be responsive to--
    --
        Mr. Barr. Because I have limited time, these are examples
    that you say that you are listing, and you can't tell me
    whether or not these examples constitute, ``abusive.'' And
    complying with these new additions, these examples to the,
    ``abusive'' prong, means that companies will now have to change
    the way they present information or manage customer services.
    This means that these institutions have new obligations, and
    you are not following notice-and-comment rulemaking, and you
    are imposing new requirements on them by listing these----
        Mr. Chopra. I completely disagree with that
    characterization, respectfully.
        Mr. Barr. I know you do.
        If it is not new requirements, here is the problem. It is
    kind of like Supreme Court Justice Potter Stewart in 1964 when
    he was asked to describe his test for obscenity. He said, ``I
    know it when I see it.''
        This vague and ill-defined guidance on what, ``abusive,''
    means under Unfair, Deceptive, or Abusive Acts of Practices
    (UDAP) sounds a lot like Justice Stewart's test for obscenity.
    ``Abusive'' is whatever you say it is.
        Mr. Chopra. It is not. Congress wrote the words. It is in
    statute. We have tried our very best to be able to articulate
    with fidelity to those words, to give examples and facts.
        Mr. Barr. My time has expired. You tried, but respectfully,
    I think you failed. Nobody knows what it is. It is what you say
    it is, and that is the problem.
        My time has expired. The ranking member of the committee,
    the gentlewoman from California, Ms. Waters, is recognized.
        Ms. Waters. Yes, your time has expired. And I certainly
    hope that you recognize that as I start with my questions.
        First of all, I want to go back to what the gentleman was
    implying when he asked you about what you said. Whatever you
    said had nothing to do with what the final results were that
    were accomplished when we were able to save this country from
    bank runs, et cetera.
        Would you like to take a moment to talk about how
    successful we were when, over 48 hours, you all worked very
    hard to ensure that when we woke up on Monday morning, the
    banks would be safe and secure, and that, again, they would not
    be bankrupt? Give America some examples of the fine work that
    was done.
        Mr. Chopra. I think what happened that weekend was
    something we should never want to repeat and have to do again.
    We had to take emergency steps. The unanimous vote of the Fed
    Board and the FDIC Board, with the concurrence of the Treasury
    Secretary and the President, was to insure uninsured deposits.
    It was extraordinary, and it is something we do not want to
    have to repeat. It was one of the fastest bank runs in history
    pushed digitally; social media in the modern age was involved.
        We are going to have to take steps to make sure that
    financial institutions can stay resilient even in these times
    of stress. I also think it woke people up to uninsured
    deposits, and there are more places where these uninsured
    deposits exist for consumers, and we need to make sure people
    know how to keep their money safe.
        Ms. Waters. I thank you very much for reminding this
    committee of the good work that our government did in order to
    ensure that our banks are safe and secure.
        I want to go to a question that I think needs to be given
    some explanation. I applaud you and the CFPB staff for issuing
    long-overdue rules implementing Section 1071 of Dodd-Frank to
    provide transparency to the small business lending market. I
    worked with Congresswoman Velazquez and others to ensure that
    this measure was included in Dodd-Frank so that the same kind
    of transparency in market lending could be made in small
    business lending.
        My colleagues on the opposite side of the aisle are quick
    to point to the burdens of data collection on lenders. Would
    you discuss how you took the concerns of small community banks
    and credit unions into account in the final rule?
        Mr. Chopra. We made substantial changes from the proposal,
    including changing thresholds, which actually led, I believe,
    to 2,000 of the smallest banks which do not do much small
    business lending, to not have to report.
        We also changed the implementation period so the large ones
    would go first with much more time for the smaller ones. We
    sought to simplify. The final rule allows small banks and
    others to work together with their industry associations to
    help with reporting. We did a lot to make changes, but we had
    to implement the statute as the court directed.
        Ms. Waters. Thank you. Now, would you also discuss the
    benefits that small businesses of all types will see from this
    rule, particularly for LGBTQ small businesses? And will
    transparency in this opaque market help make the market more
    competitive and reduce costs for all small businesses?
        Mr. Chopra. Certainly, the Paycheck Protection Program
    (PPP) was a real sign that the government really lacked, and
    the market also lacked details about patterns of small business
    lending. We see that with more mortgage data, you actually
    invite smaller players to enter the market to fit unmet needs.
        I hope this dataset is going to be able to be used also to
    identify opportunities, meet needs, and really work together
    with other rules that are currently on the books, with which
    people can achieve compliance.
        Ms. Waters. Thank you. One thing I am focused on is getting
    more information about the type of government programs
    supporting small businesses, including Small Business
    Administration (SBA) loans, and loans from Community
    Development Financial Institutions (CDFIs). I believe this kind
    of data would help Congress to better understand the full
    impact of these various programs that have been supporting
    small businesses in underserved rural and urban areas and to
    help us to strengthen them.
        Do you agree?
        Mr. Chopra. Yes.
        Ms. Waters. If so, would you work with me on how best to
    design such a requirement?
        Mr. Chopra. We always want to work with you, Congresswoman.
    Many of those loans may be captured partially, but we will work
    with you.
        Ms. Waters. I thank you very much for your presentation
    here today, and I thank you for always working with us on
    behalf of the people of this country.
        I yield back.
        Mr. Barr. The gentlelady's time has expired.
        The gentleman from Arkansas, Mr. Hill, is recognized.
        Mr. Hill. Thank you, Mr. Chairman.
        Director, we are glad to have you here before the committee
    today. We are doing a lot of work, and we have done that under
    the leadership of former Chairwoman Waters and current Chairman
    McHenry in the whole fintech space and the digital future for
    financial services. It is a major megatrend, of course, across
    the world. And the building blocks of that future digital
    financial services space include cyber protection standards,
    digital identity--a favorite topic of my friend from Illinois,
    Dr. Foster--and privacy.
        And I want to start out our discussion talking about
    Section 1033, the rulemaking that talks about open banking. In
    the last 8 months, the Bureau has released the Small Business
    Regulatory Enforcement Fairness Act (SBREFA) outline. SBREFA is
    the acronym for 1033, which sheds some light into the agency's
    thinking about the advance of a rulemaking, I think, that you
    are considering for October.
        Are you still on track for an October release of that rule?
        Mr. Chopra. Yes, sir.
        Mr. Hill. Data privacy and enshrining consumer data rights
    are a top priority of Chairman McHenry, which is why this
    committee passed our Data Privacy Act a few months ago. So, we
    have a keen interest in your views on open banking in this
    rulemaking.
        I thought it was notable that in your initial proposal, you
    were only covering deposit accounts and card accounts from
    depository institutions, and weren't tackling or applying the
    rule to services provided by nonbanks, even though the Bureau
    acknowledges that nonbank data providers offer numerous
    consumer financial products, including mortgages, auto loans,
    et cetera.
        Can you tell the committee how you reached the decision to
    set the scope only at Reg E and Reg Z for your initial
    proposal?
        Mr. Chopra. Sure. And just to be clear, open banking is
    going to probably be one of the most important things we should
    all work on together. It is basically about the future of
    finance, and how do we shape it in ways that are good for
    consumers, businesses, and others.
        Congressman Hill, we did not just include depository
    institutions. What we said was--we asked industry, asked
    experts, what is the most valuable types of data to get? And
    what they said was, it is transaction data. Cash flow data. So
    by getting all of that transaction account information--and we
    include nonbanks, I believe, in the SBREFA--we got input on
    that because that is what is going to give a mortgage lender,
    an auto lender, or others the ability to say, maybe I shouldn't
    rely on this credit score. Maybe I should look at their actual
    income and expenses.
        I think that is why we started there. I am very open to
    figuring out ways to expand it, and I see this as a sequencing
    just like other jurisdictions in the Organization for Economic
    Co-operation and Development (OECD) have done.
        Mr. Hill. Thanks. We will follow up on that. I want to make
    sure we get this right. This is something on which the
    committee wants to collaborate.
        You also, in your advance notice on SBREFA, did not address
    liability for data breaches or data security noncompliance. a
    key issue that I am going to talk more about if we have time
    remaining. You have gotten a lot of comments on that. Do you
    expect the proposed rule this fall to include addressing
    liability for data breaches?
        Mr. Chopra. Yes. The comments we got--I think institutions
    who are providing information want some understanding that if
    there is mischief on the other side, they won't be held liable.
    When we propose the rule, expect us to address some of that.
        Mr. Hill. Okay. Good.
        Mr. Chopra. So, that we can make it clear for the entities.
        Mr. Hill. And speaking of data breaches, nobody has more
    data breaches than the U.S. Government. It is a huge
    frustration for all of us on this committee, and recently, even
    the CFPB had a former agency employee leak personally
    identifiable information (PII) and confidential supervisory
    information, which could have potentially impacted 250,000
    American consumers and 50 financial institutions.
        And whether it is this breach or the one from Office of
    Personnel Management (OPM) back in 2015, or the Postal Service,
    or the IRS, how in the world can the citizens trust their
    government to keep their private information private?
        Mr. Chopra. Yes. It is an extremely serious situation. We
    were dealing with an insider threat. Our systems were not
    breached or hacked, but we identified indicia that an employee
    had sent some emails to their personal email account. We
    immediately investigated.
        Mr. Hill. Is there monitoring now so you can stop that from
    happening in the future? Or do you now monitor that more
    successfully in the interim?
        Mr. Chopra. Yes, sir. We have already been implementing
    ways to address this. But I will share with you that the issue
    of insider threats is a really serious----
        Mr. Hill. Let me share with you that you and the bank
    regulators make that a living nightmare for every depository
    institution to make sure they do it right through internal and
    external penetration testing, and I think the citizens should
    demand the same of the Federal Government.
        I yield back, Mr. Chairman.
        Mr. Barr. The gentleman yields back.
        The gentlewoman from New York, Ms. Velazquez, is now
    recognized.
        Ms. Velazquez. Thank you, Mr. Chairman, and Ranking Member
    Waters.
        Director Chopra, thank you for being here today.
        I want to say that, along with many of my colleagues,
    especially Ranking Member Waters, I was proud to sign on to the
    amicus brief and support the good work of the CFPB.
        I know that there has been some confusion about the
    Bureau's recent small business lending rule, also known as
    Section 1071, so I would like to clarify a few things. Can you
    tell me why the Bureau is doing this rule now?
        Mr. Chopra. Congress passed it in 2011, and the Bureau did
    not do it, and then a court order demanded the Bureau complete
    it by March 31st, and we did.
        Ms. Velazquez. So it wasn't just the CFPB's idea or your
    idea, Director Chopra?
        Mr. Chopra. It was the Legislative Branch's idea.
        Ms. Velazquez. Isn't it true that there were major
    substantial changes between the regional proposal and the final
    rule based on input from industry stakeholders?
        Mr. Chopra. Yes. And they have acknowledged that we made
    substantial changes, including one that would reduce the number
    of local banks that would have to report. We have tried our
    best to accommodate and figure out a way to achieve the
    statutory objectives, and we tried our best.
        Ms. Velazquez. Okay. Does the CFPB's rule require banks to
    ask customers about their race and ethnicity and sexual
    orientation?
        Mr. Chopra. The statute makes clear that a borrower does
    not need to provide that information. We did publish a sample
    form that institutions can use where borrowers can self-
    identify with checkboxes if they would like to, but it is not
    mandatory.
        Ms. Velazquez. And does the rule allow for customers to
    decline to provide that information?
        Mr. Chopra. Absolutely.
        Ms. Velazquez. Aren't you allowing banks to partner with
    other banks and trade associations to fill out and report this
    data?
        Mr. Chopra. Yes. Many of them can use consortia third
    parties. If they don't want to ask, they can direct their
    borrowers to, ``Go fill this out over here.'' There is lots of
    flexibility because we heard those comments and wanted to make
    sure we were responding to them adequately.
        Ms. Velazquez. That all sounds pretty reasonable to me.
        Is it true that smaller banks have more time to comply with
    this rule?
        Mr. Chopra. Yes. We gave substantial extra time compared to
    the proposal for those that were smaller in the marketplace. We
    are actively working with vendors and others to provide and
    partner with them to figure out how to make it as smooth as
    possible.
        Ms. Velazquez. And what else do you do in this rule to ease
    the compliance burden on small banks? Weren't some banks
    exempted completely?
        Mr. Chopra. Yes. We estimate that about 2,000 will not have
    to report under this. We visited with a lot of these
    associations and banks to figure this out. We were, again,
    under a court order to do it. We identified places where we
    could simplify. The way in which we are doing it is going to
    leverage technology. And, again, we understand this will
    require some effort, and we want to work, but we have to
    faithfully implement the law that was passed.
        Ms. Velazquez. Director Chopra, this requirement was
    included in Section 1071 because small business lending data is
    a critical tool to help identify and combat this combination in
    small business lending. Not only that, but this data can
    ultimately help spur investment and programs to support the
    needs of America's small businesses.
        Can you briefly describe what benefits we expect to see
    from this dataset and what benefits we would have seen if these
    had been in place several years ago, as Congress originally
    intended?
        Mr. Chopra. I think due to the fact that this was delayed
    so long there has been a cost to that. Efficiencies and other
    government small business lending programs like the Paycheck
    Protection Program, as I mentioned with Ranking Member Waters.
    I think we would have been able to make sure we achieve fair
    lending all over the country and know exactly what is happening
    to so many small businesses, franchisees, and more.
        Ms. Velazquez. As the ranking member on the House Small
    Business Committee, I am a strong supporter of the
    implementation of Section 1071. Thank you.
        Mr. Barr. The gentlelady yields back.
        The gentleman from Texas, Mr. Sessions, is now recognized.
        Mr. Sessions. Mr. Chairman, thank you very much.
        Director Chopra, welcome to the Financial Services
    Committee.
        The CFPB has been engaged in and is engaged in--as you
    mentioned--a lot of data breaches that occur in the private
    sector and in banks, financial institutions, and the
    government.
        What have you learned from those that you have taught the
    government?
        Mr. Chopra. Yes. One of the things that was very unique to
    the recent insider threat at the Bureau was that we have put in
    a lot of things over the years--penetration testing and other
    things--to make sure systems can't be hacked. We are now at the
    point where I think other----
        Mr. Sessions. The systems can't be hacked?
        Mr. Chopra. That is where the efforts have gone in for
    outsiders. But insider threats, I think, is one where there is
    more attention that all of the agencies, including the CFPB,
    need to guard against--a now former employee emailed themselves
    a set of emails, which was in complete violation of acceptable
    use policies.
        Mr. Sessions. What did you do to that employee?
        Mr. Chopra. I am prohibited from talking in specifics about
    personnel matters, but I can----
        Mr. Sessions. Did you refer the matter for prosecution?
        Mr. Chopra. We have referred the matter to investigators,
    including the Inspector General and others. We are cooperating
    with all of them. They have various authorities that go beyond
    our authority, civil, criminal, and others.
        Mr. Sessions. So, you think that some of the breaches come
    from internal employees?
        Mr. Chopra. In this recent incident that we informed
    Congress about, it was from a CFPB employee. And that is
    something that, especially with more devices, phones, and
    recordings, we need to figure out how----
        Mr. Sessions. What have you taught the government in your
    investigation to help them? Because I recognize that your focus
    is entirely on beating the stuffing out of the free enterprise
    system.
        Mr. Chopra. That is not true, sir.
        Mr. Sessions. There is sufficient evidence to suggest that
    my statement would be true and yours would be also, sir.
        What have you taught the government?
        Mr. Chopra. I think in this incident, we have been working
    with all of the appropriate agencies, the Office of Management
    and Budget (OMB), and others. I think as we have talked to the
    other banking regulators, we recognized that we all need to
    figure out, how do we ask and allow institutions to give us
    data in even more-protected forms, and what can we do to police
    insider threats effectively?
        I think there is so much that government employees across
    the government have access to in terms of sensitive
    information, and ensuring that it does not get disclosed is
    absolutely critical.
        Mr. Sessions. Evidently, Homeland Security and, to a large
    part, the Secret Service have large jurisdictions for
    investigating and prosecuting these incidents. What are your
    regular conversations with them about what you have learned?
        Mr. Chopra. Primarily, in these situations, OMB and other
    guidance says to work with the Inspector General, and of
    course, others, like the Justice Department, and as you know,
    the FBI is under the Justice Department. We try and provide all
    of the evidence to them. They have to conduct their own
    investigation.
        But as a policy matter, I do think we want to contribute
    our learnings on insider threats, which may be an issue across-
    the-board that we all have to carefully combat, especially with
    new technologies to which individuals have access.
        Mr. Sessions. You are the Director. I am not. You and I
    could have different ideas about what we believe the focus
    should be. But I would hope that you would put a major focus on
    data security, from the things that you have learned, and be a
    leader in that field. I am not arguing that you are not today.
    But I believe that a major focus of your 1,600 employees could
    be almost single-handedly across that until we defeat those who
    want to steal our intellectual property, our personal data, and
    other things.
        Mr. Chairman, I want to thank you for this time.
        Director Chopra, thank you.
        Mr. Barr. I thank the gentleman.
        The gentleman from California, Mr. Sherman, is now
    recognized.
        Mr. Sherman. I want to strongly endorse one of the
    statements the acting Chair made in his opening statement. Mr.
    Chopra, you are indeed continuing the legacy of Director
    Cordray in your work. Congratulations.
        The CFPB's importance is demonstrated every day. Nothing
    proves it more than the incredible efforts made here in
    Washington to silence and defeat you. You are the most-
    effective consumer protection organization I think the world
    has seen in the area of financial services. And it is critical
    that we win this case before the Supreme Court. I say, ``we,''
    because I joined the ranking member and so many others in the
    amicus brief to make sure you get the same kind of funding that
    the Fed has had for well over 100 years.
        As you point out in your opening statement, you have
    secured $4.6 billion in refunds and penalties against
    violators, and that is just the tip of the iceberg. Because
    every time you collect a fee, you get many, many other
    companies to change their policies or to not engage in policies
    in which they might otherwise engage. And as you point out, you
    deal with 10,000 consumer complaints every week.
        I want to thank you for focusing in your opening statement
    on two issues important to me. First, thank you for your work
    on the London Interbank Offered Rate (LIBOR) transition. Some
    $16 trillion of instruments, including trillions of dollars of
    home mortgages, are going through that transition.
        And second, you mentioned Property Assessed Clean Energy
    (PACE) lending. As to PACE lending, I want to commend you for
    your new regulation as required by law to require Truth in
    Lending Act (TILA)disclosures and ability-to-pay
    determinations. But the battle is not over. The industry will
    fight back, and I hope that you stand strong.
        You, under Section 1071, are requiring disclosures on small
    business lending to women-owned businesses, minority-owned
    businesses, and LGBTQI-owned businesses. And I know you have
    pledged to help lenders, especially small lenders, implement
    that rule. I am told that some lenders have submitted questions
    over a month ago, and they submitted to those designated
    mailboxes and are not getting responses. So, I hope you can go
    back and get them those responses.
        Credit repair scams are not just annoying television
    commercials. They charge you a lot of money. They just
    blanketly contest everything on your credit report. Your score
    then goes up for a little while until they realize that most of
    those entries were accurate, and then it goes back down. What
    are you doing to deal with the scheme where you get your credit
    report improved for a little while?
        Mr. Chopra. Yes. We are looking hard at all the ways in
    which consumer credit report issues can spawn scams. We have
    brought a number of enforcement actions here. We do work with
    the Federal Trade Commission (FTC), and State Attorneys General
    to bring action. But we don't want to play Whac-A-Mole.
        We want to figure out what is the way that consumers
    themselves can know how they can dispute inaccurate
    information. We want to make sure that fraudsters are not
    parking or placing debt on credit reports that is not even
    owed. So, there is a lot to work, and I know many on this
    committee--
        Mr. Sherman. And I will furnish you one idea: When they
    start advertising about what percentage of their customers they
    improve the score for, they should not be claiming temporary
    improvements.
        Mr. Chopra. Yes.
        Mr. Sherman. Under Section 1031, you are dealing with
    privacy. Data aggregators and fintechs are not subject to a lot
    of the Federal supervision that banks are, so what steps are
    you taking to protect Americans from the misuse of their data
    by data aggregators and fintechs?
        Mr. Chopra. We have started, as I mentioned in my
    testimony, to put more emphasis on nonbank supervision,
    especially the firms that sometimes touch millions and millions
    of consumers who have not been subject to similar supervision.
        We want to make sure that the abuse you mentioned is not
    collected for one purpose but monetized for a completely
    different one. It is going to be a challenge, but we are
    starting by making sure we are targeting our supervisory
    resources properly.
        Mr. Sherman. And finally, I hope that you would look at
    these for-profit debt relief agencies that keep you from
    talking to your bank first because often you can revolve it
    with the--
        Mr. Barr. The gentleman's time has expired.
        The gentleman from Missouri, Mr. Luetkemeyer, is now
    recognized.
        Mr. Luetkemeyer. Thank you, Mr. Chairman.
        Mr. Chopra, welcome. Last time you were here, we discussed
    your schedule, about the fact that you don't meet with people
    from the industry. We showed your schedule to you. You made
    some comments about it.
        We sent you a letter and asked you to fill in the blanks
    and tell us that you actually did meet with people in the
    industry. You responded to us with a letter, but in that
    letter, you didn't respond and explain the lack of data in that
    schedule.
        So from that, I can assume two or three things here. Number
    one, the letter was to me, Mr. Huizenga, and Mr. Barr. You
    thumbed your nose at us and said, you are not worthy of a
    response, or else we were correct in that you are not meeting
    with industry people as they tell us, or both, which I think is
    probably the case. It's very disappointing.
        Mr. Chopra. Let me just say that there are many industry
    associations. We have done----
        Mr. Luetkemeyer. Mr. Chopra, we have been down this road
    before. The problem is that you don't meet personally; your
    staff does.
        Mr. Chopra.No, no, no. I meet personally.
        Mr. Luetkemeyer. No, you don't. Your schedule doesn't back
    that up.
        I want to move on.
        Ms. Waters. Please allow the gentleman to answer.
        Mr. Luetkemeyer. Reclaiming my time, I want to move on to
    another subject here.
        Director, you have clearly chosen to regulate by press
    release, guidance, and the threat of enforcement action instead
    of through rulemaking governed by the Administrative Procedure
    Act (APA).
        As you know, the APA allows for public notice and comment
    on proposed rules, which gives regulated entities an
    opportunity to provide feedback and share their concerns or
    incorporate an agency's rules in order to produce workable
    policies.
        Since public statements are not rulemakings or official
    actions, and the guidance you issue is not legally binding, are
    financial institutions and firms within their rights if they do
    not adhere to your proclamations?
        Mr. Chopra. I could not hear you.
        Mr. Luetkemeyer. Okay. Since public statements are not
    rulemakings or official actions, and the guidance you issue is
    not legally binding, are financial institutions and firms
    within their rights if they do not adhere to your
    proclamations?
        Mr. Chopra. Yes. Guidance advisory opinions don't create
    new obligations. One of the pieces of feedback this committee
    has given is concerns about using enforcement only. I have
    continued a practice from my predecessor, Director Kraninger,
    to issue more informal guidance and opinions because it helps
    give transparency about what approach the agency is taking.
        Mr. Luetkemeyer. Okay.
        Mr. Chopra. But it is not intended to create any new----
        Mr. Luetkemeyer. That doesn't answer my question, though.
    My question is, are the firms within their rights to not adhere
    to your proclamations or to this guidance?
        Mr. Chopra. No. They have to follow statute and regulation.
        Mr. Luetkemeyer. That is not my question. They are within
    their rights, then, to not adhere to your proclamations and
    your guidance, is that correct?
        Mr. Chopra. I think I am trying to be responsive. I think
    the answer is, yes, they only have to look to statute and
    regulation as for what is binding.
        Mr. Luetkemeyer. Okay. That is right.
        Mr. Chopra. These other forms--we got input from the
    Consumer Bankers Association a few years ago that they wanted
    to see more guidance and----
        Mr. Luetkemeyer. Okay. It is clarification, then. It is
    clarification that you are using guidance and official actions,
    right?
        Mr. Chopra. I think what we are trying to do is--the market
    is so dynamic, and it changes so much. So, we often have
    entities saying, do I need to hire a lawyer to figure this out?
        Mr. Luetkemeyer. That is fine to discuss. I know what you
    are trying to do, Director. But it is not enforceable. That is
    my point.
        Mr. Chopra. It is trying to restate existing law and
    regulations.
        Mr. Luetkemeyer. It is not enforceable. Is that correct?
        Mr. Chopra. That is right. I am sorry if I----
        Mr. Luetkemeyer. Guidance is not enforceable, correct?
        Mr. Chopra. It does not provide any legal----
        Mr. Luetkemeyer. Okay. Clarification through official
    documents, such as your compliance bulletins, is not
    enforceable, correct?
        Mr. Chopra. That does not provide any obligation, so there
    is nothing to enforce.
        Mr. Chopra. Okay. So, it is not enforceable. That is your
    statement. You agree with that?
        Mr. Chopra. Yes.
        Mr. Luetkemeyer. Wonderful. We finally got here.
        It is very disconcerting because you have compliance
    bulletins here--I think there are 12 compliance bulletins and
    opinions, which is great. It gives clarification to folks. But
    it is not enforceable.
        This is very concerning to me because you turn around and
    you threaten different entities all the time. You have become
    the greatest extortionist in the history of this country by
    what you are doing with these actions when you issue press
    releases, and make up new terms like, ``junk fees.''
        ``Junk fees'' is not a legal term. It is not an enforceable
    term. I have checked with attorneys. I have looked at the
    people who design and work through financial and legal
    dictionaries. This is not an enforceable term. You made it up
    to give yourself more authority to be able to have more impact
    on things and extort more money from people.
        Mr. Chopra. I completely and respectfully disagree with
    that.
        Mr. Luetkemeyer. Well, I am glad----
        Mr. Chopra. Every action we have taken is based on laws
    that this body has enacted, but through legislation----
        Mr. Luetkemeyer. Director, junk fees is not a legal term.
    It is not an enforceable term, period. Just like guidance is
    not enforceable. And yet, you try and impose that on people.
    You extrapolate from the UDAP authority using the term, ``junk
    fees,'' to be able to have new authorities. You can't create
    authorities out of thin air. Only Congress can give you that
    authority, and you are creating it yourself.
        With that, I yield back.
        Mr. Barr. The gentleman yields back.
        The gentleman from New York, Mr. Meeks, is now recognized.
        Mr. Meeks. Thank you, Mr. Chairman, and Ranking Member
    Waters.
        And thank you, Director Chopra, for being here.
        In listening to some of this debate, I can't help but say,
    thank God that we created the CFPB, which is singularly
    focused, because I hear the interest of other groups who have
    people to advocate on their behalf. Most of the industries and
    anyone else has someone to advocate on their behalf.
        What I don't understand is why it is so bad to have an
    agency, which you represent, to advocate on behalf of the
    American consumer. Throughout history, we have seen the
    consumer be ripped off, taken advantage of--so much, that is
    why we have to have labor unions--because we know and we have
    seen that folks on their own don't see a move in the benefit of
    everyday people.
        So, there has to be someone to advocate on their behalf, to
    look at it, to make sure that the playing field is level for
    consumers. Not to harm businesses, but to level the playing
    field so that the consumer has a voice and someone there to
    say, don't rip us off.
        This is a bad product. I lived it in the financial crisis
    of 2008. That is why you are here, because we said we can never
    allow that to happen again.
        And one of the proudest moments of my career here was
    working with Ranking Member Waters and others to create the
    Consumer Financial Protection Bureau. So, I thank you for doing
    your job. And your job is to advocate on behalf of consumers.
    That is your job.], singularly focused on helping the American
    people.
        And you help all of them. Not just Democrats. You are
    helping the American consumer who is a Democrat, who is a
    Republican, who is an independent, no matter where they are,
    rural or urban. Thank you for doing that.
        Now, the recent bank failures of Silicon Valley, Signature,
    and First Republic Banks dominated the media and the media
    attention, and this committee particularly this spring. We had
    an opportunity to speak with the potential regulators
    responsible for the oversight of the institutions and continue
    to look at what could have been done to prevent the failures,
    but we have not yet had the opportunity to speak with you in
    the aftermath, the voice and the advocate for the consumer.
        So from your perspective, how do the recent bank failures
    highlight the need for a strong CFPB, now more than ever?
        Mr. Chopra. As you referenced, in your own community and
    almost everyone's, the financial crisis was absolutely
    devastating. And the victims of financial crises--the first
    ones are often those who can least afford the shock.
        So, we had to take extraordinary steps to mitigate some of
    that damage. But also, people are now learning about deposits
    and safety and insurance. And there are places where people may
    be holding their money that aren't insured. And we are going to
    obviously want to make sure that any instability in financial
    markets does not impact the consumer, as you say.
        The failure of credit sweeps as well in the forced merger
    with UBS was a big concern at the CFPB to figure out, how could
    it affect our mortgage markets, our auto loan markets, and
    others? So, financial stability and consumer protection
    absolutely go hand in hand.
        Mr. Meeks. Thank you. We also heard that the CFPB teamed up
    with the Federal Reserve, the FDIC, the FHFA, the National
    Credit Union Administration, and the OCC to propose a rule
    designed to make the automated home valuation process fair. And
    I believe that it is going in the right direction.
        But I am curious, when we talk about AI, would this rule
    promote automated appraisals over human appraisals?
        Mr. Chopra. No. I think that it is trying to make sure that
    AI and algorithms, when used to automatically compute homes, do
    not bake in any sort of discrimination. I think everyone
    deserves a fair and accurate appraisal, and that is what the
    proposal which implements Federal law seeks to provide.
        Mr. Meeks. Thank you.
        Mr. Barr. The gentleman's time has expired.
        The gentleman from Michigan, Mr. Huizenga, is now
    recognized.
        Mr. Huizenga. Thank you, Mr. Chairman.
        And, Director Chopra, welcome back.
        I have a number of things to get to here, but I was
    curious, when my colleague, French Hill, was asking you about
    the breach, it seemed like you were downplaying it. You said,
    ``insider threat,'' that that person, ``sent some emails.''
    Later, to another question, you indicated it was a, ``set of
    emails.''
        Would you classify the incident that happened as a minor
    incident, a sort of medium-sized incident, or was it a major
    incident?
        Mr. Chopra. It was an extremely serious and major incident.
    There is no question about that.
        Mr. Huizenga. Okay. Great. I'm glad to hear you backing
    that up.
        Mr. Chopra. And I apologize. I don't want to underplay it
    in any way. We have looked hard to make sure we are following
    all of the steps. We have begun notification of----
        Mr. Huizenga. Yes.
        Mr. Chopra. Sorry.
        Mr. Huizenga. I understand that. And I was back conferring
    with our attorneys as to exactly how much we could talk about
    publicly because we don't want to get in the way of an
    investigation. I know you don't, and I don't, either. But I do
    have some concerns.
        You were notified in March to let the committee know in May
    about what you now call a major incident, and we asked for a
    briefing on that. A briefing was granted at the staff level,
    however, when our attorneys asked your briefers--I don't know
    who they were. Maybe they were attorneys; maybe they weren't.
    But when they were asked basic questions like, ``Did anyone at
    CFPB speak to the individual?'', staff from your agency could
    not answer the question and advised committee staff to speak to
    the Inspector General.
        Your staff explained the only reason why CFPB knew about
    the breach was from a different employee. You have talked about
    that. Committee staff asked about the identity of the other
    employee and about the circumstances surrounding the employee
    raising concerns. Your staff could not or would not give a
    single answer to any of these basic questions.
        CFPB staff emphasized that there was no reason to suspect
    the information was disseminated--which I think we were all
    glad to hear--because it is my understanding, from what I have
    been briefed on, which I don't believe is public information as
    of yet, that this was a major incident with significant
    consequences, potentially. However, when they were pressed,
    they confirmed that the only evidence to sustain the claim was
    that, so far, there had been no suspicious activity.
        For a little perspective--I won't go into all that, but we
    all have seen what has happened with Equifax and others that
    have had serious data breaches, and you have been a part of
    punishing others that have had serious data breaches.
        And I am glad to hear you say it is serious, and I am glad
    to hear that you are cooperating with law enforcement, but we
    also expect you to fully cooperate with this committee, and
    Congress writ large, and with our Oversight and Investigations
    Subcommittee, which is called that for a reason.
        These are basic questions that we are asking, and we expect
    full and complete answers, and your staff couldn't give basic
    answers, and sometimes, there wasn't any answer at all.
        I am sorry to be suspicious here, but I know how D.C.
    works, and with your sort of dismissive attitude towards
    Congress that has come across in previous hearings and previous
    interactions, it makes me wonder if you intentionally sent
    someone who didn't know what was going on so that they wouldn't
    pass that information on to us? Were they somehow opaque in
    their answers for some reason?
        I am not expecting you to answer that because I am not
    looking specifically for a response. But I am making sure, once
    again, you are put on notice that we will be following up, and
    we expect our questions to be answered.
        One last thing I am going to pivot to is the Bureau's
    website provides fund transfer request letters that you have
    made to the Fed before every quarter of the financial year and
    the Fed's response.
        To your knowledge, has the Fed ever denied your agency's
    funding request?
        Mr. Chopra. Not to my knowledge.
        Mr. Huizenga. Okay. Has the Fed ever provided feedback on a
    quarterly budget request, meaning, has the Fed ever told you
    that a request was too high or too low?
        Mr. Chopra. I believe the Fed's feedback is usually about
    when we should request it because they manage it for liquidity
    purposes.
        Mr. Huizenga. Okay. The last time that the shared Fed and
    CFPB Office of Inspector General (OIG) did an audit of the
    Bureau's budget and funding process in July of 2020, it was
    done at the request of Chairman McHenry, and that was almost 3
    years ago. Are you aware of any other oversight conducted about
    the CFPB's budget?
        Mr. Chopra. Yes. We do have an audit by----
        Mr. Huizenga. Sorry, my time is up.
        I do have a letter to be submitted for the record, Mr.
    Chairman, a letter that I sent along with your signature, and
    we wanted to make sure that that was--regarding the concerns--
    --
        Mr. Barr. Without objection, it is so ordered. The time has
    expired.
        Mr. Huizenga. I yield back. Thank you.
        Mr. Barr. The gentleman from Georgia, Mr. Scott, is now
    recognized.
        Mr. Scott. Thank you.
        Director Chopra, there are a lot of problems with this
    crypto asset fraud business. In November of last year, you all
    published a complaint bulletin that dealt with these
    complaints, fraud, theft acts, scams. All of them were
    significant problems.
        And your analysis suggests that the bad actors are
    leveraging crypto assets to specifically perpetuate fraud on
    American consumers. And from October 2018 to September 2022,
    you all received 8,300 complaints.
        Director Chopra, has the CFPB determined whether certain
    vulnerable groups are at particular risk for these scams?
        Mr. Chopra. Yes. I believe we specifically mentioned older
    adults. It used to be more common, for example, for a scammer
    to ask someone, go buy me some gift cards, but we are now
    seeing it shift to more digital, often using crypto assets.
        We have also identified a place where it has some
    interaction with identify theft, where it is not always crypto-
    specific, but servicemembers can be targeted for ID theft in
    ways that can really expose them to certain harm----
        Mr. Scott. Let me ask you this, because we have to find
    some answers to this. The problems are overwhelming. You all
    have some great people over there at the CFPB. And we
    established this for a purpose, and we have to find some
    answers here.
        Let me ask you, will financial literacy, financial
    education help? This is being put on people who are having
    difficulty.
        Mr. Chopra. Yes. I think it is actually really important
    that we shift financial education and literacy so that it is
    really adapted to the digital world. There are lots of
    different ways in which digital technologies--and with
    generative AI, we could have voice cloning in ways where it can
    sound like a family member is calling you. We could have
    different ways in which digital images can look like reality,
    and we want to make sure we can arm people on how they can spot
    some of this.
        Mr. Scott. That is very good. With what you said in mind,
    Director Chopra, and because we are concerned about this, can
    the committee get a clear commitment from you today that the
    CFPB will use a portion of the more than $600 million in
    unallocated civil penalty funds to support financial literacy,
    financial education, for our consumers, in a program?
        We have to arm our people with the weapons. They are the
    ones who are being targeted. We have to put some arms on them,
    soldier them with the full armor of protection. Use this money.
    That is what it is there for. Will you commit to doing that
    today?
        Mr. Chopra. We will commit to using funds for financial
    education purposes. We may use other statutory funds to do
    that. The fund you referenced is also to be used for victims'
    relief for people who are victims of scams, and we want to make
    sure that they can receive payouts.
        We do have other funds, and we can share with you what some
    of our spending will be on financial education, but we may want
    to use our general funds, not the victims'.
        Mr. Scott. But the priority ought to be to stop them from
    becoming victims.
        Mr. Chopra. I totally agree. But there are so many people
    whose lives are changed when they are able to get----
        Mr. Scott. Can we get this commitment from you? I am not
    asking you how much to use, I am saying, will you use this
    money and----
        Mr. Chopra. We will certainly use funds that we have access
    to for financial education, but I would like to discuss further
    with you the tradeoffs about using the fund.
        Mr. Barr. The gentleman's time has expired.
        The gentlewoman from Missouri, Mrs. Wagner, is now
    recognized.
        Mrs. Wagner. Thank you, Mr. Chairman, and welcome, Director
    Chopra. I would like to follow up on a line of questioning that
    my colleague, Mr. Luetkemeyer, began, discussing the CFPB's
    industry outreach and specifically your public calendar.
        On February 7, 2023, my colleagues, Mr. Luetkemeyer, Mr.
    Barr, and Mr. Huizenga, sent you a letter, requesting specific
    information regarding your calendar and industry outreach.
        In your response to their letter, dated February 21, 2023,
    you stated, ``like my predecessors, I have continued the
    agency's commitment to transparency through our long-standing
    policy of publicly posting the calendars of senior leaders.''
        Director Chopra, it appears that your commitment to
    following this long-standing policy has been completely absent
    this year.
        The CFPB's website states that each month's calendar will
    appear at least a few weeks after each month has concluded, but
    it has been almost 6 months--22 weeks--since your calendar has
    been publicly disclosed. There is nothing here.
        Can you please tell me why your calendar has not been
    publicly disclosed for half the year?
        Mr. Chopra. I am not actually aware that that is the case,
    but if it is the case, we will look to make sure that it
    happens in a faster way.
        Mrs. Wagner. It is, it is absolutely the case, and I am
    just reading to you directly from a letter to Congress in
    response, dated February 21st. So, there are the quotes. It is
    concerning.
        Mr. Chopra. I will just share, though, that with respect to
    industry outreach, we have----
        Mrs. Wagner. I am not asking about that.
        Mr. Chopra. Okay, sorry.
        Mrs. Wagner. I reclaim my time.
        Mr. Chopra. I apologize.
        Mrs. Wagner. Would you say a 6-month hiatus of public
    disclosure is your way of showing commitment to transparency,
    sir?
        Mr. Chopra. We would want to do that in a fashion that is
    responsive, and I will take a look directly----
        Mrs. Wagner. Yes, your own website states, ``due to the
    time-intensive preparation process, each month's calendar will
    appear on this page at least a few weeks after that month has
    concluded,'' and that is just clearly not true.
        Moving on, the comment period to the CFPB's proposal to
    adjust the safe harbor dollar amount for credit card late fees
    was just 36 days. You received more than 55,000 comments, many
    of which were submitted weeks prior to the deadline, which was
    May 3rd, the majority of which came from real consumers and
    retail investors. But they weren't posted in the comment file
    until a full month after the deadline closed.
        What was the reason for the delay in posting these
    comments, sir? Was the Bureau overwhelmed by volume, or did you
    intentionally delay the posting of these comments?
        Mr. Chopra. No, definitely not. When we receive large
    amounts of comments, one of the things that we do have to do,
    manually often, is to make sure it does not include account
    information. Sometimes, people might be trying to file a
    complaint. We do not want it to be a vector of identify theft.
        And I will also just share, 36 days from the time we
    published the proposal, there were more than 36 days, and I
    would be happy to get you those details.
        Mrs. Wagner. I will tell you this then, you should have had
    more than ample time to begin with, to post some of those over
    55,000 comments out there, in real-time, sir, because you don't
    wait until after to delay it further. I consider that
    intentional, and frankly, Director Chopra, I am just seeing----
        Mr. Chopra. No, absolutely not. We are trying to do our
    best----
        Mrs. Wagner. Reclaiming my time, sir, I am seeing an
    extremely troublesome theme here, and that is what I am trying
    to get to.
        You claim to be for transparency--I am for transparency--
    but the blatant lack of timely public disclosure says
    otherwise. I don't care whether it is your calendar or you
    publishing comments. So, I would like you to take a serious
    look at that.
        Mr. Chopra. I will make sure--I do believe we are in line
    or better than most of our peer agencies, but I will get back
    to you, Congresswoman.
        Mrs. Wagner. Okay. I am concerned about what is your
    responsibility. The CFPB's credit card late fee proposal
    ignores the important role that late fees play in deterring
    consumers from paying their bills. If late fees are capped at
    such a low amount and the deterrent effect is nonexistent, more
    consumers will pay their bill late, leading to a higher share
    of delinquent accounts, which will be reported to credit
    bureaus and result in lower credit scores.
        Director Chopra, I am not going to have enough time for you
    to answer, but I would like an answer in writing. Why is the
    Bureau proceeding with a rulemaking that has no consumer
    benefit and would actually result in tremendous harm to
    consumers?
        Mr. Barr. The Director can answer for the record, and it is
    a good question.
        Mrs. Wagner. Thank you, and I yield back.
        Mr. Barr. I now recognize the gentleman from Massachusetts,
    Mr. Lynch.
        Mr. Lynch. Thank you, Mr. Chairman.
        Welcome, Director Chopra. It's good to see you again. And I
    do want to push back on the suggestion that you are not
    amenable to meeting with industry representatives and business
    concerns, as well as consumer groups. I think you have been
    exceedingly accommodating on each and every instance, at least
    to my knowledge.
        I do want to put one quick issue before you. The Peterson
    Institute for International Economics defines junk fees as,
    ``surprise charges that customers do not discover until they
    nearly complete a transaction, such as booking an airline
    flight, renting a car, checking out of a resort, or paying by
    credit card.''
        Is that basically your understanding of what a junk fee
    would be?
        Mr. Chopra. I think it is a colloquial term, and I also
    hear a lot about what are the fees that are not subject to real
    competition and competitive pricing.
        Mr. Lynch. Right.
        Mr. Chopra. Really, ones that may not be subject to the
    normal forces of shopping.
        Mr. Lynch. Right. And as more and more retail happens
    online, is the incidence of those junk fees growing or
    becoming----
        Mr. Chopra. Each industry is different. I think we see,
    based on the empirical research, about where can firms be able
    to use, sometimes drip pricing where they can advertise one,
    but really the full costs are lifetime costs, and come later in
    the process when the consumer has less ability to negotiate.
        Mr. Lynch. Right. And I know President Biden identified
    that in his State of the Union Address, and he called upon
    Congress to eliminate those hidden junk fees from consumers'
    transactions.
        I want to talk about something else. There has been a real
    shift among financial services firms to use chatbots, and I
    know you have done some work on this. I know you issued a
    memorandum, just an executive summary, on chatbots and consumer
    finance.
        What are we seeing out there? I guess it is anecdotal, but
    my constituents are complaining about the fact that when they
    have a problem with the bank, they are getting hooked into
    these chatbots, and sometimes their problems are not resolved,
    which leads them to call me.
        And I am just wondering, are we meeting our obligations to
    consumers when we allow banks to put a chatbot in an interface
    between them and the consumer that doesn't adequately resolve
    their problems?
        Mr. Chopra. I think this is one use of generative
    artificial intelligence we are going to start seeing more and
    more. And one of the things we identified is, when a consumer
    has a very straightforward question--where is the closest
    branch, something that has a defined answer like in a FAQ--they
    may be able to get it.
        There are places where consumers have to provide a lot of
    account information, personal information, and it is important
    that that information, if it is used to train AI, how is it
    being protected? When the consumer has to invoke a right to
    dispute under the Fair Credit Billing Act, can the chatbot
    actually handle it?
        So, we are just reminding institutions that if they are
    moving everyone to this, they still have to adhere to these
    important legal protections and make sure that they are not
    violating privacy and more. And it can really undermine
    relationship banking if not tailored appropriately.
        Mr. Lynch. Right. I understand that the more basic
    questions could be dealt with by a chatbot, and I am sure that
    there are personnel savings there and efficiency issues that
    are certainly favorable. But as you mentioned, when matters
    become more complex, it doesn't seem at this point that the AI
    chatbots are capable of resolving those complex issues.
        Is there any thought of providing an opt-out for when the
    issue becomes so complicated that the consumer would have an
    ability to go to a default which would provide a human being on
    the other side of that?
        Mr. Chopra. Yes. I think that is a place where financial
    institutions need to be careful about denying access to a human
    in some form because it can lead to real frustration and a doom
    loop.
        Mr. Lynch. Okay.
        Thank you, Mr. Chairman. I yield back.
        Mr. Barr. The gentleman yields back.
        The gentleman from Texas, Mr. Williams, is recognized.
        Mr. Williams of Texas. Thank you, Mr. Chairman. And thank
    you, Director Chopra, for being here.
        I was just sitting here thinking that the consumer needs to
    be protected from the Federal Government, from all the things
    we are talking about.
        And another thing, as we have been talking about these bank
    failures, I am from Texas, as you know, and I don't like well-
    run Texas banks--I want to go on record with this--bailing out
    badly-run California banks. I think that is really bad policy.
        Director Chopra, the first time you came here before this
    committee, you said you would protect the interests of small
    businesses. I proudly serve as the Chair of the House Small
    Business Committee, and I can tell you that we don't feel too
    protected. And ever since you joined the CFPB, your agency
    continues to add burdensome requirements without any
    consideration of their impact on small businesses and small
    lenders.
        When talking to community bankers back in my district in
    Texas and, quite frankly, all over and across the country,
    every single person tells me how miserable and terrified they
    are about the CFPB's Section 1071 small business data
    collection rulemaking. They are concerned that the complicated
    reporting requirements will tie up loan officers and increase
    compliance costs, plus compliance officers, costs which will be
    passed down to the consumer, guys like me who borrow every day.
    We will pay for all this.
        And they are concerned this will push the industry towards
    a standardized small business loan product and kill
    relationship banking, what free enterprise and capitalism are
    based on.
        And everybody is concerned, too, that it is going to push
    the industry toward a standard-size small business loan and
    kill relationship banking, as I said, and they are concerned
    that this will force their employees to treat privacy as an
    afterthought and collect more data than necessary on small
    business loan applications, which is what we don't want to have
    happen. Right now, small businesses are struggling with rising
    costs due to inflation, increased interest costs, and ongoing
    labor shortages, and this out-of-touch rule will only build on
    these issues.
        This is a hard time for small business. And the Section
    1071 rule is an attack on Main Street America--that is the only
    way you can look at it--which is why I introduced the
    Congressional Review Act, with Congressmen Barr and Ogles, to
    halt the implementation of the CFPB's final 1071 rule.
        Senator Kennedy is leading the Senate companion of this
    resolution and has the support of over 45 State and national
    associations, further proving the urgent need to block this
    regulatory overreach and make sure it does not take effect.
        It is bad business, it is bad for Main Street, it is bad
    for consumers.
        Now, Director Chopra, how have you been working with small
    businesses? How have you been helping them to ensure that your
    regulations are not causing any undue burdens on our country's
    small business owners? How have you been doing that? Because
    there is real concern that they don't hear from you.
        Mr. Chopra. One of the things we have done is, we have
    focused a lot of our engagement on institutions that we don't
    supervise. I have met with, I believe, 28 State bankers
    associations, each of which have dozens of members. We have
    done the same thing with credit union leagues. I believe we
    have hit 20 States and the District of Columbia. I just want to
    say I take your points very, very seriously, and we tried to
    adjust the rule in ways that would reduce some of those costs.
        Mr. Williams of Texas. Reclaiming my time, you don't think
    it creates a burden for these financial institutions? Do you
    think it eases it?
        Mr. Chopra. Oh, we certainly publish what we believe will
    be some of the costs. We tried our best to figure out what are
    the ways in which we can limit it, and we also created and made
    significant changes so that the smallest banks, 2,000 of them,
    will not have to do it. I hear you completely. We don't want
    standardized small business lending----
        Mr. Williams of Texas. And it does trickle down to the
    consumer like me, the borrower.
        Let me ask you this. The CFPB's funding mechanism that we
    talked about leads to very little congressional oversight of
    the budget, and instead your budget is given to you by the Fed.
    There are many more court challenges out there regarding your
    funding mechanism, and the actions of the Bureau do not comply
    with regular order, therefore, creating more uncertainty in
    markets as everyone waits for the courts to decide.
        In order to ensure your accountability and transparency to
    Congress, it is imperative that your operation be subject to
    congressional appropriations. So, Director, if the Supreme
    Court strikes down your funding mechanism, will you be
    accepting of being subject to congressional appropriations?
        Mr. Chopra. We will comply with any Supreme Court decision
    and make sure that we are following the law and doing so
    accordingly.
        We don't agree. The Solicitor General has filed a petition
    seeking reversal. There are conflicting opinions in the circuit
    courts, and we will look forward to the results in that matter.
        Mr. Williams of Texas. Lastly, the CFPB fined Equifax for a
    data breach. Did you fine yourselves?
        Mr. Chopra. I was not part of that. I am happy to tell you
    in more detail----
        Mr. Williams of Texas. But have you fined yourselves for
    what you----
        Mr. Chopra. This is an insider threat. It is a different
    situation, but it is a very serious one.
        Mr. Williams of Texas. My time is up. I yield back.
        Mr. Barr. The gentleman's time has expired.
        The gentleman from Illinois, Dr. Foster, is now recognized.
        Mr. Foster. Thank you. And I would like to thank my
    colleague for his admiration of the Texas banking system.
    Although we, in Illinois, have not forgotten the tens of
    billions of dollars that we spent bailing out corrupt and
    mismanaged banks in Texas and California during the savings-
    and-loan crisis.
        Director Chopra, some have argued that innovations in the
    financial services space, such as open banking, have the
    potential to facilitate consumer choice and increase access to
    credit for many underserved Americans in ways that our broken
    credit reporting system cannot. For example, open banking could
    provide access to a much wider range of consumer data than the
    credit bureaus currently access, which could give a more
    accurate picture of an individual's financial history, but it
    also provides the possibility for all kinds of bias to creep
    in.
        The last time you appeared before our committee, you shared
    an update on the CFPB's small business review panel to advance
    proposals under Section 1033 of the Dodd-Frank Act. Could you
    give an update on that rulemaking?
        Mr. Chopra. Yes. We will be proposing it. It is scheduled
    for October. We have released more on this, including the
    important role that industry standard-setting will play. We
    want to make sure that standards are giving the ability to
    switch, to consumers and all market participants. And I will
    tell you, it is not just more access to credit, lower interest
    rates for borrowers, and higher interest rates for savers. I
    think it is also going to have an impact on customer service
    quality. When a consumer has the power to vote with their feet,
    you will see how our system will give them better service as
    well.
        Mr. Foster. Thank you, and thank you also for going on the
    alert early over the threat of generative AI being used for
    identity fraud. This is coming at us like a tsunami.
        People who have looked at this identify two possible
    government interventions that could help consumers. One of them
    is to simply provision citizens who wish to have one, with the
    means of proving they are who they say they are online, with a
    secure digital identity, sometimes referred to as a Mobile ID
    or a digital driver's license. These are things that allow you
    to present you and your cell phone and your Real ID-compliant
    driver's license to present digital proof in an online or an
    offline environment that you, in fact, are who you say you are.
    And that is one avenue that we can, I think, make a difference
    on.
        The other one are these so-called, ``Blade Runner'' laws.
    There is simply a requirement that any electronic communication
    coming from a machine must start by identifying itself as being
    machine-generated.
        Do you have any comments on either of those two and their
    effectiveness?
        Mr. Chopra. I completely agree that if we can solve this
    identity verification issue, as a core part of infrastructure
    in our country, we could actually reduce a lot of fraud as
    well. The benefits would also be big for market participants.
        How we actually do it, obviously, is the question, but you
    see jurisdictions that have solved that identity verification
    layer get a lot of benefits of it.
        In terms of stating who it is, it is very interesting. You
    are seeing a lot of generative AI, including chatbots and
    others, give themselves human names. This is, in some ways, to
    make it appear that they are an actual person. And with voice
    cloning, it really can simulate a human interaction.
        I do agree that there may be places where, across the
    economy, some of this generative AI, there is a lot more we
    need to do, but people should at least know, are they talking
    to a human or not.
        Mr. Foster. Certainly. And you are going to see things
    where the regional accent or the ethnic accent is matched to
    what the consumer will trust. And this is a huge problem.
        First off, I want to thank you for the work that you did on
    the early versions of AI, trying to to deal with the fairness
    versus accuracy problem. You did some really high-quality work
    on that.
        But the problem we are now facing with generative AI and
    chatbots that learn as they evolve is much more complicated. It
    is sort of analogous to, you raise your child perfectly, but
    then they get exposed to new things as they grow up that will
    make them do evil things that you never would have suspected.
        So, how do you anticipate you are going to be looking at AI
    that evolves and learns?
        Mr. Chopra. Yes. For machine learning and other ways in
    which AI evolves, one of the things we are trying to do at a
    base level is to be able to give information about how existing
    law applies. For example, AI needs to be able to determine, if
    you get an adverse credit decision, what the reasons are. If it
    is constantly changing and it can't do that, it is not able to
    comply with existing law, there is not a generative AI
    exemption in our consumer protection laws.
        Mr. Foster. Thank you.
        Mr. Barr. The gentleman's time has expired.
        The gentleman from Georgia, Mr. Loudermilk, is recognized.
        Mr. Loudermilk. Thank you, Mr. Chairman. Director Chopra,
    thank you for being here.
        Chairman Barr mentioned something in his opening statement
    that I would like to start out with, which is that according to
    your own data, 74 percent of Americans pay their credit cards
    on time. That is to say, they never pay the late fees.
        According to your own proposed rule, however, cardholders
    who do not pay late fees will be paying higher fees and higher
    interest on interest-paying accounts, and will receive lower
    rewards because of the cross-subsidy.
        Under Section 1022 of Dodd-Frank, you are required to
    consider the cost of all CFPB rulemakings. I can't see how this
    rule that rewards irresponsible cardholders at the expense of
    responsible ones is a net benefit.
        With that said, how did this rule survive a rigorous cost-
    benefit analysis?
        Mr. Chopra. I appreciate the question, Congressman. What
    you mentioned, those were not predictive. That was potential
    scenarios we looked at. And the core of what we are doing----
        Mr. Loudermilk. What was not predictive?
        Mr. Chopra. The idea that there are potential ways in which
    the market could shift. What I am trying to explain is the core
    of what that real review is doing, that is reviewing a
    congressional prohibition on unreasonable penalty fees. What we
    are trying to accomplish is making sure, yes, if institutions
    have costs, how can they make sure that it is a reasonable
    cost? And we are specifically looking at the Fed's rule they
    put into place, that we inherited, which did not have much data
    backing it, in order to make sure it fits the modern realities.
        No, there are still going to be late fees. It will just--
    how they make sure that they are in line with the congressional
    prohibition. That is our----
        Mr. Loudermilk. Reclaiming my time, you said that the fees
    are reasonable. That is very subjective. Now, these are fees
    that the user agreed to when they took the credit card because
    the fees, as you mentioned, do recoup costs, but they are also
    designed to be slightly punitive to stop bad behavior from
    happening again.
        What you are proposing is basically taking that away and
    then giving the punitive charge to those who are obeying the
    contract or the agreement they made with the credit card
    company.
        Mr. Chopra. No, that is not right, and I just want to make
    sure something is clear. ``Reasonable,'' is not the CFPB's
    word. That is actually what is in the statute. The statute says
    that the penalties must be reasonable and proportional to the--
    --
        Mr. Loudermilk. But did they not agree to whatever fee
    structure it was when they agreed to take the credit card?
        Mr. Chopra. That is true, but the reasonable and
    proportional is a separate prohibition. So, again, one of the
    things that is in there is, institutions can certainly be able
    to show why there is reasonable--and we have proposed a
    framework----
        Mr. Loudermilk. But why are you even going this direction?
        Mr. Chopra. The reason is what we have found across
    consumer credit markets is that it is not a fair and
    competitive market when an institution has an incentive for
    someone to default or be late. We learned the hard way about
    this with subprime mortgages, where an originator actually
    could benefit even if the borrower defaulted.
        Most credit card companies, especially small ones, don't
    have that business model, and our review is that they don't
    actually build a business model or profit more when someone is
    late.
        In some cases, a borrower might just be a day late or a few
    dollars off and get a very large fee. That is what Congress was
    seeking to prohibit, and we want a market where a creditor
    really wants the person to pay back.
        Mr. Loudermilk. Really what I see is, we are intruding in
    what should be the responsibility of the consumer, because they
    agreed to go into this agreement.
        Earlier this year, FHFA finalized changes to the loan level
    price adjustment tables that resulted in borrowers with good
    credit scores paying higher rates for their home. This is
    obviously unpopular with consumers.
        Aren't you concerned that you are sending the same message
    to consumers with this rule?
        Mr. Chopra. No.
        Mr. Loudermilk. Because 75 percent pay theirs on time.
        Mr. Chopra. In fact, I think what this will do is actually
    help consumers compete on up-front pricing. Consumers are
    really smart in the credit card market. As soon as an issuer
    starts raising annual fees, they look to switch. It is easier
    for them to know the full price that way.
        So, what we are hoping to do is adhere to the congressional
    prohibition on unreasonable fees, which is--the word,
    ``reasonable,'' is in the statute--while creating that ability
    for more competition up front.
        Mr. Loudermilk. Thank you. My time is expiring, but I would
    think that consumer education would be more effective.
        Mr. Chairman, I yield back.
        Mr. Barr. The time of the gentleman has expired.
        The gentlewoman from Ohio, Mrs. Beatty, is recognized.
        Mrs. Beatty. Thank you.
        Director, thank you for being here, and I would like start
    by thanking you for your work, your integrity, and your
    leadership at the CFPB to protect consumers.
        We have heard about the billions of dollars in consumer
    relief to the hundreds of thousands of Americans, and those
    Americans, would you say, are in all districts, Democrat and
    Republican districts?
        Mr. Chopra. All across the country.
        Mrs. Beatty. Thank you. And that means that it ensures
    fairness, transparency, and competition in our financial
    system.
        Let me say for the record, Mr. Chairman, there is no doubt
    in my mind that consumer protection problems are rampant in our
    financial system, and I want to go on the record saying,
    Americans would be much worse off if the CFPB was no longer
    able to continue its work.
        I have two questions I would like to get through, but
    first, since there has been a lot of attention to your schedule
    and your time, it seems like we alternate terms or Congresses
    when we decide to pick on the individual or the CFPB.
        Mind you, since I have been here and many of my colleagues
    on this committee, I remember when former member of this
    committee, Congressman Mulvaney, said some of the most
    disparaging things about the CFPB and about the Director at
    that time, Mr. Cordray, whom he was replacing. Operative words.
    He went here, yet he took a job to be in the same position you
    are in.
        If we want to talk about integrity, if we want to talk
    about putting politics over people or maybe even money, but to
    his calendar in the committee, he said he worked 3 days a week.
    Now, people are questioning you on a calendar. Do you work more
    than 3 days a week?
        Mr. Chopra. Yes.
        Mrs. Beatty. And he said when he wasn't working, he loved
    watching baseball, and he put a TV in one of his offices so he
    could watch baseball and protect our people.
        So if we want to talk about you being an, ``extortionist,''
    as somebody said, I want to use the word, ``hypocrisy,'' and
    enter it into the record for everyone on the other side of the
    aisle who chose to support beating you up over a calendar when
    you work more than 3 days a week.
        Now, let me get to my questions. We sent you a letter that
    I signed onto about the Section 1033 rule of including EBT and
    other government benefit accounts in that rule. First of all,
    let me say thank you for responding to the letter, and
    acknowledging that it was an issue and that you would continue
    to look into it. I don't know if you have anything you would
    like to add for the committee about these types of benefits
    being considered within the scope of the final rule?
        Mr. Chopra. One of the things we are going to do is, a
    bunch of these rules for mortgage products and others were
    raised before. With EBT and other government benefits, part of
    what we are doing is, we want to talk to the Department of
    Agriculture and others that administer these, because we really
    want to understand any technical issues. But I completely share
    your view that for all transaction accounts, we want that data
    to be able to be used to help----
        Mrs. Beatty. Thank you. Let me move to my next question.
    Since our Chairman McHenry said we were going to put diversity
    in every committee--I am the ranking member on a subcommittee--
    we haven't had a diversity hearing yet. But I would like to
    commend you for 53 percent of the CFPB executives being women,
    and 40 percent identifying themselves as minorities.
        Would you be willing to work with us or respond in writing
    where you are with contracting out to diverse groups, whether
    that is in legal services, contracting, et cetera? And that is
    a yes or a no for my time.
        Mr. Chopra. Yes.
        Mrs. Beatty. Okay. Thank you.
        And in fairness, since I am giving equal opportunities, the
    Director prior to you, Republican-appointed, did hold meetings
    with Democrats and Republicans, and did talk about diversity.
        So, I wanted to thank her for the work that she did do, and
    I also think she worked more than 3 days a week. I don't know
    what her calendar was, but I want to commend you for the work
    that you are doing.
        And also, one of my colleagues said that not much has
    changed. For the record, let me say, you could not receive
    10,000 complaints weekly that you respond to. You could not do
    what you have done with AI. You could not do what you have done
    with algorithms. You could not do what you have done with bank
    failures. So, again, thank you, and my time is up.
        Mr. Barr. The gentlelady yields back.
        The gentleman from Tennessee, Mr. Rose, is recognized.
        Mr. Rose. I want to thank Chairman McHenry and Ranking
    Member Waters for holding this hearing, and Director Chopra,
    thank you for being with us today.
        I want to begin by responding to Mrs. Beatty by saying I
    actually preferred the way that Director Mulvaney ran the
    agency.
        Director Chopra, in CFPB v. Brown, the 11th Circuit Court
    of Appeals found the CFPB's assertion of work product
    objections to avoid identifying witnesses or facts supporting
    claims against the defendants to be egregious. The court held
    that the CFPB clearly violated Federal Rule of Civil Procedure
    30(b)(6), and severe sanctions were warranted.
        Director Chopra, do you believe that the Federal Rules of
    Civil Procedure apply to the CFPB and its attorneys?
        Mr. Chopra. Absolutely, and----
        Mr. Rose. Thank you, yes, of course, they do. So, Director
    Chopra, would you commit to reminding your staff and counsel
    that they are not exempt from the Federal Rules of Civil
    Procedure and that they must abide by them like the rest of us?
        Mr. Chopra. Yes.
        Mr. Rose. Thank you.
        Mr. Chopra. And can I just address that really quickly?
        Mr. Rose. I will give you just a second.
        Mr. Chopra. Litigation often can be very, very heated. That
    was brought many years ago. There was this decision, of course,
    in an overwhelming number of matters, and we have completely
    been respected by the courts for our----
        Mr. Rose. Thank you. I appreciate that commitment to make
    sure your staff understands that the basic Rules of Civil
    Procedure do apply to the agency
        Following passage of the Dodd-Frank Act, then-Special
    Advisor to the Secretary of the Treasury for the CFPB,
    Elizabeth Warren, testified that the Bureau would be
    accountable to Congress.
        I have her testimony right here in front of me, and first,
    then-Special Adviser Warren said that the CFPB is subject to
    the requirements and limitations of the Administrative
    Procedure Act (APA).
        But, Director Chopra, isn't it true that you have routinely
    acted unilaterally and arbitrarily without engaging rulemakings
    in compliance with the APA like you did with the update to the
    UDAP section of the examination manual or by using the
    Paperwork Reduction Act to seek approval for a junk fee timing
    study, just to name a couple?
        Second, then-Special Adviser Warren stated that the CFPB,
    ``is the only banking regulator that is required to conduct
    small business impact panels to gather input from small
    businesses about the potential impact of proposed rules.''
        Director Chopra, isn't it true that you have routinely
    bypassed the Small Business Regulatory Enforcement Fairness Act
    (SBREFA) process like you did in your Notice of Proposed
    Rulemakings for non-bank registries for repeat offenders and
    terms and conditions of form contracts?
        Mr. Chopra. No. We completely comply with all of it, and,
    in fact, we published the analysis. We have solicited comments
    on the analysis.
        You also mentioned the Administrative Procedure Act. All of
    our work is reviewable under that law. To suggest--and I have
    heard this suggestion now a number of times--that we don't
    comply with that is absolutely false. What we seek to actually
    do is provide more information, based on feedback from this
    committee, about how to make sure entities know what is
    expected of them----
        Mr. Rose. Specifically, though, I would actively discourage
    you from using the Paperwork Reduction Act when the APA would
    be, I think, a more fair and responsible way for proposing new
    rulemakings, and would criticize the Bureau for not doing that.
        Mr. Chopra. The Paperwork Reduction----
        Mr. Rose. Third, then-Special Adviser Elizabeth Warren said
    that the, ``checks on the CFPB's rulemaking are more stringent
    than the checks on other banking regulators because FSOC can
    veto any rule issued by the CFPB.''
        Director Chopra, has the FSOC ever overruled a CFPB
    rulemaking, and don't you serve on the FSOC?
        Mr. Chopra. I believe the FSOC did begin a review many
    years ago of one, but that rule was set aside for other
    reasons. We have not had a voluminous number of them, but FSOC
    absolutely has the power to do so.
        Mr. Rose. They may have the power, but the truth is, the
    threshold that has to be met is effectively impossible to meet.
        Mr. Chopra. It is unique among banking agencies, though.
    There is no other agency that is subject to FSOC----
        Mr. Rose. But those other agencies have other checks and
    balances.
        Finally and fourth, then-Special Adviser Warren said the
    CFPB's funding structure is a significant source of
    accountability because it faces certain constraints by having
    to request funding from the Federal Reserve.
        Has the Fed ever denied or scrutinized the CFPB's
    Director's budgetary requests? I will let you respond in
    writing for the record. My time has expired, and I yield back.
        Mr. Barr. The gentleman's time has expired, and the
    Director can answer for the record. And I would just remind
    Members to direct their comments to the Chair.
        With that, the gentleman from California, Mr. Vargas, is
    now recognized.
        Mr. Vargas. Thank you very much, Mr. Chairman. I direct my
    comments to the Chair. You look great up there, sir, and of
    course, the ranking member always does. I would prefer her to
    be in the other seat, but it has been a pleasure to be here.
        Director, I think you have done a great job, I really do,
    and I think we owe you a great debt of gratitude.
        The hyperbole today has actually been rather remarkable. I
    have been here for quite some time, and sometimes people say
    rather ridiculous things, but today was particularly fun. They
    said that you were the greatest extortionist to the country of
    all time. Is that true, are you the greatest extortionist?
        Mr. Chopra. Obviously, that is offensive.
        Mr. Vargas. Of course, it is offensive.
        Mr. Chopra. But I want to just say that we and our staff
    try to discharge our public service obligations faithfully and
    to the best of our ability as we swear an oath to our
    Constitution and our country.
        Mr. Vargas. I wanted to give you an opportunity to react to
    that.
        Now, are you beating the stuffing out of the free
    enterprise system?
        Mr. Chopra. No. And in fact, we have made an emphasis about
    the importance of new entry, nascent entry, the ability for new
    players not to have to stumble through and hire so many high-
    priced lawyers.
        Our country benefits when consumers have more choices and
    when honest businesses are protected from those who violate the
    law.
        Mr. Vargas. Of course. Now, here comes a tougher question.
        You were accused of, ``McCarthyism.'' Is it, ``Kevin
    McCarthyism,'' or, ``Joseph McCarthyism,'' and what is the
    difference?
        Mr. Chopra. I will withhold responding, Mr. Chairman.
        Mr. Vargas. Okay, we will leave that for another time.
        Mr. Barr. The gentleman will suspend. The Speaker is
    protected, so the gentleman will refrain from disparaging and
    using personalities.
        Ms. Waters. I hope that will include----
        Mr. Vargas. I certainly will, but the accusation was of,
    ``McCarthyism.'' You heard it, I heard it, and it wasn't
    defined, so I wanted the definition.
        But I will be happy to move on. I do not want to disparage
    the Speaker in any way. In fact, we have been friends for 23
    years, and I respect him greatly. Thank you.
        I do want to ask you about this. Most of the questions
    today on the other side have been about the industry. They seem
    to think that the industry is not pleased with you, that you
    don't meet with them enough, that they don't like you because
    of some of your policies. Is it your job to please the
    industry?
        Mr. Chopra. My job is to execute the objectives of the law,
    to enforce the law and supervise for it fairly. We go
    overboard, and I think I have exceeded the types of engagement
    that some of my predecessors have engaged in. But, yes, there
    are certain times, particularly when there are law violations,
    that there will be disagreements.
        Mr. Vargas. Of course, there will.
        What is your duty to the consumers?
        Mr. Chopra. Our duty is to ensure, as the statute said, a
    fair, transparent, and competitive market and to faithfully
    discharge----
        Mr. Vargas. And I think you are doing a great job.
        How much money has your Bureau redirected back, gotten back
    to consumers, how much?
        Mr. Chopra. Over $17 billion.
        Mr. Vargas. And how many people has that affected?
        Mr. Chopra. Hundreds of millions.
        Mr. Vargas. Of course. And it is interesting that I don't
    get complaints from consumers, just the opposite, they say that
    you guys are doing a great job. And I appreciate the job you
    are doing.
        Now, I want to talk about remittances. Remittances, I
    think, are a problem, and the reason for that is hardworking
    Americans and other U.S. residents send money overseas. And
    when they do that, they don't know the full cost of those
    remittances--they are not easily understandable--and I think it
    is something important for your agency to work on.
        Mr. Chopra. One of the things when you go get a disclosure,
    sometimes these remittances can be charged--or, sorry--as no
    fee, but in reality the exchange rate might be adjusted, so it
    doesn't look like there is a fee, but there is really a cost to
    it.
        I also want to say, Congressman, that other nations,
    developed countries, have started thinking about, through their
    central banks, ways in which consumers and small businesses can
    transfer money more easily. There is some work between--I
    believe the Fed has an agreement with the Central Bank of
    Mexico. We should look at more partnerships like that, to have
    lower costs.
        Mr. Vargas. And lastly, we did talk about diversity. I did
    look at the numbers, however, and it looks like when it comes
    to--I think this is your Semiannual Report--when it comes to
    Latinos, the percentage is actually quite low. And I hope that
    you are taking a look at that.
        Mr. Chopra. Yes.
        Mr. Vargas. And I will let you answer if I have enough
    time, but I do want to make this comment. It is interesting,
    every time I come here, I hear the accusations that are placed
    against you or others on the other side. There is never
    protestation from the Chairs. I never hear it.
        And then, when you are defended, there seem to be
    protestations. I don't think that that is fair. I think you are
    doing a great job, and I hope that we are a little more careful
    with our language around here when we accuse people of
    McCarthyism, extortionism, and all of these other things for
    respected people like yourself.
        I yield back.
        Mr. Barr. The gentleman yields back. The time has expired.
        The gentleman from Pennsylvania, Mr. Meuser, is now
    recognized.
        Mr. Meuser. Thank you, Mr. Chairman. And thank you, Mr.
    Chopra. I talk to a lot of banks--small banks under a billion
    dollars, $5 billion, regionals, and super-regionals throughout
    Pennsylvania, and big guys on Wall Street--and they are really
    not happy with your agency. So, let's just start there. Across-
    the-board, banks, from the largest banks down to the smallest,
    have many concerns.
        So, the idea that the CFPB is doing a great job is foreign
    to me, because every single bank I talk to--I am not talking
    about 3 out of 5; it is more like 19 out of 20. I assume you
    have some sort of reviews taking place, taking information in
    on your final rules to be responsive to the clientele that you
    are supposed to be helping.
        Mr. Chopra. Just to be clear, the clientele of the CFPB is
    not banks. The clientele is the public, and often, it is true
    that there will be differences with entities that we
    supervise----
        Mr. Meuser. Who serves the public? Do the banks serve the
    public?
        Mr. Chopra. Of course, they are important public----
        Mr. Meuser. So, they are a link in the chain.
        Mr. Chopra. Of course. And we want those who follow the law
    to be able to not get disadvantaged by those who don't. I hear
    your concerns, but at the end of the day, we have to make sure
    that our consumer protection objective----
        Mr. Meuser. You are going too far.
        Now, let's talk about Section 1071 that keeps coming up,
    how somehow, that is wonderful. I had a Small Business
    Committee hearing the other day, and we had four Republican and
    Democrat witnesses, and they all thought it was terrible, the
    type of questions that needed to be answered.
        Now, I know in the final rule, you have retracted some of
    the insane information that you wanted to derive, not making it
    required, but you are asking banks to ask for really personal
    information about people's race, and their sexual preferences.
    Where does that fit into looking out for the public good?
        Mr. Chopra. That is a statutory directive. We were under a
    court order to implement Section 1071 of the Dodd-Frank Act. It
    requires collection of information on race and other
    categories.
        Again, I appreciate that those are types of questions that
    sometimes are difficult. We tried to work with the industry to
    figure out what is the best way to limit some of that----
        Mr. Meuser. If you actually would do that, work with the
    industry to figure out the best way to provide guidance and
    oversight so they can handle and serve their customers best,
    but honestly, it doesn't sound as if you are doing that. I was
    in the business world, and the more you talk to your customers,
    the better of a company you become.
        So that is on 1071, but there is also 13 data points. The
    statute requires the collection of 13 data points while the
    rule requires 81. So, there is a lot of concern from banks,
    small business banks, primarily community----
        Mr. Chopra. Let me just make clear, there is not 81 data
    points. There is a difference between data fields. So, what we
    are trying to do is create----
        Mr. Meuser. I am going to reclaim my time. And if it is not
    81, then is it 50?
        Mr. Chopra. No. I believe it is about 19, 20-something----
        Mr. Meuser. Okay. Then, perhaps, I stand corrected. That is
    the information I have.
        Let me ask you about screen scraping. It should be
    addressed in the 1033 rulemaking. Fraud is a serious problem,
    as we all know. Can you update the CFPB's approach to screen
    scraping, and can the 1033 rulemaking address this practice?
        Mr. Chopra. Yes, I actually think we can. I think we can
    set the stage for making sure screen scraping is not going to
    be part of our financial infrastructure in the future. I think
    it is something we should all talk about, because I do think
    that screen scraping is not really a viable long-term way for
    data-sharing.
        Mr. Meuser. Great. I'm very happy to hear that.
        And I am just going to go back to 1071 quickly, if you all
    could just do some sort of analysis on the compliance costs,
    primarily for small banks because that is where they amount and
    they are more a percentage of their operating costs, if you all
    could do that and maybe we could talk about that, I would
    appreciate it.
        Mr. Chopra. I am happy to talk to you about it, including
    where we have created some changes in hurdles, but, yes, let's
    talk about it.
        Mr. Meuser. Great.
        Thank you, Mr. Chairman. I yield back.
        Mr. Barr. The gentleman yields back.
        The gentlewoman from Texas, Ms. Garcia, is now recognized.
        Ms. Garcia. Thank you, Mr. Chairman, and thank you,
    Director Chopra, for being here with us today. It is always
    good to see you. I am always glad to get an update from you,
    given your relentless--relentless--commitment to protecting our
    nation's consumers.
        Under your leadership, the CFPB has successfully worked on
    junk fees, medical debt, credit scoring, housing
    discrimination, and many other major issues. I have enjoyed
    reviewing your report. It is excellent and certainly is
    reflective of the fine work that you are doing.
        I would like to make sure that all Americans understand
    just what it is you are charged to do. I reviewed a useful fact
    sheet about the services that you offer our constituents, like
    free credit reports, protection from scams for older adults
    which is really key in my district, help with surprise medical
    billings that impact so many Americans across our country, and
    resources on mortgages and borrowing.
        I want to make sure that the word is getting out
    effectively, and I wanted to know how the Bureau makes sure
    that all Americans are aware of all the services, because there
    seems to be some confusion here as to exactly whom charged to
    advocate for.
        Can you provide us some more information on just exactly
    what your mission is?
        Mr. Chopra. Yes. We are there to make sure that the
    consumer financial protection laws are followed. We are there
    to make sure that consumers can file complaints and get them
    resolved.
        We are there to take enforcement actions to help those who
    have been ripped off. We have gotten refunds for tens of
    millions of Americans, and our work has helped so many more.
        Our job really is to give consumers the ability to have a
    market that really works for them.
        Ms. Garcia. So, you are there to help consumers when they
    get into a challenge with any retail outlet or a bank. This is
    not an anti-bank operation. You are there to help a consumer
    with a number of entities in all of their transactions.
        And I want to tell you, I am thoroughly impressed that you
    handle 10,000--10,000--complaints a week, and I know that you
    reviewed 745,400 complaints, just to make sure that the
    companies that you make the referrals to are responding
    effectively and really responding to the complaint. So, thank
    you for that.
        And I can tell you that I would hope that all of our
    agencies are that responsive to complaints and get to them as
    quickly as you do, so thank you for that.
        I also, like Mr. Vargas, however, did note in your
    workforce report, that Latino representation does fall short.
    The CFPB workforce is only 7-percent Latino compared to 13
    percent to the benchmarks of the United States Census National
    Survey of Labor Force. Further, Latino employees make up the
    lowest percentage of new hires, at 3.6 percent, compared to all
    the other groups. Can you tell me today, Director Chopra, what
    you will be doing to fix this problem?
        Mr. Chopra. Yes. We have a number of things in motion to
    make sure that we are attracting a diverse workforce at all
    levels, and we are very proud that we have senior Latino
    employees at the highest levels as well.
        I am happy to discuss that with you in more detail, but we
    want to make sure we are reaching everybody, that everyone has
    an opportunity to work for us. And I will say, making sure our
    workforce is reflective of the country will also help give us
    more connection to the people that we serve.
        Ms. Garcia. Great. Well, Latinos are the fastest-growing
    minority group in this country, and certainly have a big market
    share in terms of the growth as consumers, so thank you for
    that.
        I would also like to make sure that you are committed to
    working on this problem, and I will follow up with you, of
    course, in the future.
        Let's turn now to the small businesses, because that is
    another area where Latinos, especially Latinas, are the
    highest-growth area.
        The issues with your lending rules, can you please clarify
    why it is critical for the CFPB to advance rulemakings on
    lending?
        Mr. Chopra. Part of the reason we implemented the statute
    as required is to make sure that we have good data and the
    government and the public has good data about those trends.
        You are right, there are so many immigrants, minorities,
    and others who start businesses, franchises and others, and
    that data, I think, would have been critically helpful in the
    Paycheck Protection Program.
        Ms. Garcia. Okay. Just a quick one, how are we doing on the
    language barrier issues?
        Mr. Chopra. I will update you, but we are making progress.
        Ms. Garcia. Okay. Good. Thank you.
        I yield back.
        Mrs. Houchin. [presiding]. The Chair now recognizes the
    gentleman from South Carolina, Mr. Timmons, for 5 minutes.
        Mr. Timmons. Thank you, Madam Chairwoman.
        I want to get back to the data breach that Congressman
    Huizenga discussed with you earlier. Can you describe how the
    CFPB found out about this breach?
        Mr. Chopra. Another employee identified a specific
    indicator. It was reported to our team. We brought them
    together----
        Mr. Timmons. The breacher cc'd their manager in an email,
    and the manager caught it? Is that correct?
        Mr. Chopra. I don't want to go into anything related to the
    investigation, but it was another manager who identified----
        Mr. Timmons. Okay. And how long between that manager
    pushing this breach up the chain did you notify the quarter
    million Americans and 45 companies involved in the breach about
    their exposure? How long did it take?
        Mr. Chopra. We found some documents that did have consumer
    names. No information like Social Security----
        Mr. Timmons. Was it 24 hours, was it 72 hours, or was it 2
    months?
        Mr. Chopra. We didn't have their contact information.
        Mr. Timmons. So, you had their personally identifiable
    information, but you didn't have their contact information?
        Mr. Chopra. Yes, we just had very few pieces of----
        Mr. Timmons. But you didn't notify the companies, like you
    probably should have? Is that correct?
        Mr. Chopra. We did. What we did is, we partnered with the
    companies whose----
        Mr. Timmons. How long did it take you to partner with them?
        Mr. Chopra. I can look at the timeline, but as soon----
        Mr. Timmons. Was it 72 hours? The answer is no, it wasn't
    72 hours.
        Mr. Chopra. I think we tried our best to identify where we
    had any potential----
        Mr. Timmons. It wasn't 72 hours, and, again, you are
    responsible for enforcing cybersecurity breaches, and if a
    company----
        Mr. Chopra. We are not actually----
        Mr. Timmons. Well, you have sued----
        Mr. Chopra. But we do not enforce breach notification laws.
        Mr. Timmons. Correct. But when you fine companies for
    violating best practices, those companies are considered to be
    in egregious breach if they do not notify the consumers who
    were breached within 72 hours.
        Mr. Chopra. No, that is not accurate, but I am happy to
    follow up with you on that.
        Mr. Timmons. Okay. So if a company is breached and they
    don't notify anybody within 72 hours, you are not going to
    consider that an aggravating factor in whether to fine them and
    how much?
        Mr. Chopra. Generally speaking, the safeguards rule that
    governs financial institution breaches is enforced by other
    agencies. They are separately----
        Mr. Timmons. Okay.
        Mr. Chopra. This is a serious issue.
        Ms. Waters. Please allow the gentleman to answer the
    question.
        Mr. Timmons. If you would answer the question.
        Mrs. Houchin. [presiding]. It is the gentleman's 5 minutes.
        Mr. Timmons. Okay. I find it an egregious breach of best
    cybersecurity practices to have this information available to
    this individual in the way that it is.
        Do you believe, in retrospect, that the information should
    have been siloed, and it should not be that easy to email a
    document?
        Mr. Chopra. Yes. We are looking at making sure--we already
    have systems in place so that there is not the ability to
    transfer that. The issue can sometimes be when there are
    communications with the entity.
        Mr. Timmons. How many people have been fired because of
    this data breach?
        Mrs. Houchin. Will the gentleman pause for just a moment
    while we fix the clock?
        Mr. Timmons. Sure. I think I was at, like, 2:40.
        Ms. Waters. Do we know how much time was left?
        Mrs. Houchin. The gentleman can continue.
        Mr. Timmons. Okay. Thank you.
        Mr. Chopra. Do you want me to answer?
        Mr. Timmons. It is really concerning that you have this
    color of law, this theoretical authority to force these
    businesses to give you this information, and then you are
    unable to protect it, and the individuals who have been
    breached have no recourse. They are not going to get a
    settlement. They are not going to get any money.
        I already have a number of instances where people whose
    data was breached--these criminals have filed unemployment
    insurance claims, and they have already been damaged, and there
    is no recourse, because you are a governmental entity operating
    under the color of law. And I say, ``operating under the color
    of law,'' obviously, because there is a Supreme Court decision
    that we are expecting here pretty soon.
        What would you tell the individual who has been damaged by
    the CFPB's incompetence as it relates to the cybersecurity
    breach? What is their recourse? How will they be made whole?
    Are you going to write a check?
        Mr. Chopra. This is a very serious issue. And one of the
    things we are doing for consumers who are customers of the
    entity, is we are working with the financial institution to
    figure out----
        Mr. Timmons. Are you going to make them pay for the breach?
        Mr. Chopra. No, of course not.
        Mr. Timmons. Okay. Of course not? You make other companies
    pay for the breach.
        Ms. Waters. Please allow the gentleman to answer the
    question.
        Mrs. Houchin. It is the gentleman's time.
        Mr. Timmons. So, you are not going to write a check to make
    these people whole?
        Mr. Chopra. We are working with the institutions, and
    fortunately, the information that was transferred on an
    unauthorized basis did not have indicia of risk of identity
    theft.
        But I take your point that, of course, the data that is
    collected must be protected. This was a serious problem. The
    employee who was responsible--I can't go into details there--is
    not currently an employee anymore.
        Mr. Timmons. I will reclaim my time. Is that the best way
    to do it?
        So, Director Chopra, you are required to appear before this
    committee twice a year, meaning we will likely see you again in
    about 6 months. And with the pending Supreme Court decision on
    the constitutionality of the CFPB, it may very well be your
    last appearance before our committee. Please try to do the
    least amount of damage as possible between now and then. The
    American people would really appreciate it.
        Consumer Protection Financial Bureau: the quarter million
    consumers are not protected. You cause them damage, and they
    will never be made whole.
        With that, Madam Chairwoman, I yield back.
        Mrs. Houchin. The gentleman's time has expired.
        The gentleman from Illinois, Mr. Casten, is now recognized
    for 5 minutes.
        Mr. Casten. Director Chopra, it's nice to see you again.
    Thanks for coming in today.
        This is, in some ways, not at all germane to today's
    hearing, but now we have a whole subcommittee focused on crypto
    issues and lots of bills that we are discussing about how and
    where to regulate the crypto industry. I am not going to ask
    you to opine on all that.
        But it did catch my eye that you just issued a 2022
    complaint bulletin looking at complaints related to digital
    assets. And if I have this quote right, it says that you found
    that, ``fraud, theft, hacks, and scams are a significant
    problem in crypto asset markets that appears to be getting
    worse.''
        That was a year ago. And I would welcome your thoughts on,
    is that still true, and would you care to elaborate on what you
    found in that bulletin?
        Mr. Chopra. We are going to take another look at that
    dataset again.
        I guess I would say that fraudsters are trying to use
    methods of payment that are hard to track. Gift cards were a
    really common one before. There are other ways in which they
    have been used.
        But more in the digital world, we are seeing that crypto
    assets--in some ways, they might tell an elderly person, go buy
    this and transfer it to me. It can be done without the person
    going to a superstore or department store to buy a gift card,
    which means it can be faster. It can be bigger amounts of
    money. And that is certainly something we want to figure out
    how we to stop so we can protect those individuals who have
    been defrauded in a world where identity verification is
    challenging.
        Mr. Casten. When you say, ``we,'' I assume you are
    referring to the CFPB?
        Mr. Chopra. Yes. Frankly, law enforcement, the DOJ,
    others--as you know, fraud against older Americans in
    particular has been a pernicious problem.
        Mr. Casten. But are the crypto asset platforms working with
    you? Are they constructive partners in this?
        Mr. Chopra. That hasn't been a place where we have invested
    much effort. The way I understand it, and I can ask our staff,
    it that is being transferred outside of those platforms. So,
    that has not been a place where we have engaged.
        Mr. Casten. Following up on the prior question, I would
    assume that they have a lot of the data and they could either
    be constructive or not. Is there anything we can do to help?
        And you mentioned the elderly. Is the concern primarily
    with elder consumers who are being targeted, or are there other
    consumer groups that you are watching?
        Mr. Chopra. Yes. It is disproportionately those who are
    older. That is not to say that people of all walks of life are
    not at risk, especially when voices can be cloned. There are
    lots of ways to impersonate now.
        But certainly, romance scams, dating websites--that is a
    place where elderly and others are targeted. We have some
    evidence to suggest that those who are widows and widowers are
    more likely to be targeted.
        Mr. Casten. I appreciate your support. I am reminded that,
    I think probably about 3 years ago, your predecessor sat here,
    and in spite of repeated questions, refused to acknowledge that
    the CFPB has an obligation primarily to look out for the
    interests of consumers. I am grateful that we are prioritizing
    those interests.
        Out of curiosity, have you ever done the math on how much
    money do you think the Bureau has saved consumers since its
    conception?
        Mr. Chopra. Just in refunds, it has been $17 billion. But
    in terms of the reforms of the mortgage market and others--the
    ability now to get a competitive mortgage, it is totally
    different now, and it is hard to put a number on it.
        The ways in which I think we have stopped certain actors
    from engaging in system-wide harm--we don't have a dollar
    figure, but the benefits are very, very big.
        Mr. Casten. And in our office, we hear stories from
    constituent services about the veterans who are helped, the
    elderly, that you mentioned, and the folks who are not as
    proficient at working through these.
        Are there particular classes of consumers whom you think
    most depend on the work you do?
        Mr. Chopra. It's funny, the other weekend, I was in
    Virginia and was stopped at a restaurant. We had done an event
    at a local military base. And someone in the group who attended
    had mentioned that they had just gotten a $5,000 check. We
    occasionally hear from people who really were ashamed and
    thought that it was all their fault, but they were actually
    sometimes a victim of a scheme and got over $10,000 back. Some
    people have had their homes saved. So, it is not just the
    financial piece; it is also a huge amount of dignity for them.
        Mr. Casten. I appreciate it. I am out of time. But I hope
    you don't take personally some of my colleagues' attacks on
    you. The idea of looking out for veterans and students and the
    elderly may be partisan, but I am glad you are----
        Mrs. Houchin. The gentleman's time has expired.
        Mr. Casten. I yield back.
        Mrs. Houchin. The gentleman from South Carolina, Mr.
    Norman, is now recognized for 5 minutes.
        Mr. Norman. Thanks for coming, Director Chopra.
        On the civil investigative demands, a lot of the businesses
    that have been subject to it have said it was ill-defined, and
    it was onerous. Do you have an idea of, for actions that do not
    result in enforcement actions, the amount of money and time
    that the firms have had to bear to produce the information?
        Mr. Chopra. Yes. I don't have that offhand. But you raise a
    good point, which is, what are the ways in an investigation to
    get the information to ascertain if there is a violation
    without it being costly or, frankly, taking a lot of time? This
    is especially concerning for----
        Mr. Norman. Is CFPB required to provide the company with
    credible evidence that there has been a violation of the law
    prior to serving a criminal investigation?
        Mr. Chopra. The statute is consistent, I believe, and
    actually may be enhanced compared to other civil investigative
    demands (CID) authorities around the government. We are
    required, I believe, to state a notification of purpose that
    really gives a sense of what we are looking for.
        Mr. Norman. Is it law? Can you cite the law that has been
    violated before you do a CID?
        Mr. Chopra. Yes. In the notification, we will sometimes be
    able to describe the particular type of violation that----
        Mr. Norman. All the time or just sometimes?
        Mr. Chopra. I would need to check.
        Mr. Norman. Could you get back to me in writing on that?
        Mr. Chopra. Sure.
        Mr. Norman. Now, on the Fair Debt Collection Practices Act
    and the Fair Credit Reporting Act, they are basically silent on
    the treatment of medical debt and if that differs from any
    other debt. The CFPB has drastically altered the collection of
    unpaid medical debt.
        What in the Fair Credit Reporting Act gives the CFPB
    authority to encourage furnishers to report inaccurate
    information about legally-owed and legitimate debt?
        Mr. Chopra. Actually, no. It is just the opposite. Our push
    is accuracy. The Fair Credit Reporting Act requires reasonable
    procedures to ensure maximum possible accuracy. There actually
    is a provision that is related to health as well in there.
        Mr. Norman. So, the CFPB has not made any efforts to
    rewrite portions of the Fair Credit Reporting Act as far as the
    reporting of unpaid medical debt?
        Mr. Chopra. The statute is Congress' to change. When it
    comes to accuracy of furnishing on credit reports, that is an
    incredibly important responsibility for the enforcement
    agencies, the States, and others. We do not want the credit
    report being a way to coerce people into paying something they
    already paid or didn't owe in the first place.
        Mr. Norman. So, you basically are hands-off with trying to
    rewrite that, as I stated?
        Mr. Chopra. We cannot rewrite statute. We are trying to
    administer the Fair Credit Reporting Act, enforce it fairly,
    and there are real problems when it comes to----
        Mr. Norman. Let me ask you this. On the $8--I think they
    have been called junk fees--but the credit card late fees, in
    your rulemaking, you say that it is not a cap, but people need
    to show their work to get--to approve the fees that are
    charged. How do you define that? What process?
        Mr. Chopra. Yes. It is not a preapproval. What we have done
    is put in the proposal--and the same thing exists currently in
    the Fed's rule promulgated over a decade ago--that if you don't
    want to use the immunity provisions, where you don't have to
    show any work at all, you will have to spell out your
    calculations based on what it is. As one of your colleagues
    mentioned, the statute says the fees must be reasonable and
    proportional.
        Mr. Norman. ``Reasonable,'' as defined by whom?
        Mr. Chopra. It could be through case law. But one of the
    things we are trying to do is to provide clarity and
    predictability for businesses to spell out how they can make
    sure they can comply with it.
        When Congress passes laws with words like, ``reasonable,''
    it can be a benefit to businesses that they know how that is
    going to be interpreted.
        Mr. Norman. How is that different----
        Mr. Chopra. That is what we try and do all the time.
        Mr. Norman. Yes, but, ``reasonable,'' is kind of like,
    ``beauty is in the eyes of the beholder.'' The criticism of the
    CFPB is the fact that it is vague. People are getting hit with
    CIDs that they don't understand. It is just vague as
    interpreted by the CFPB.
        Mr. Chopra. That is exactly why we have tried to provide
    more advisory opinions and guidance so that people know what is
    expected of them without creating new obligations.
        Mr. Norman. In this country, small businesses are under
    tremendous stress now, and I would just--please don't----
        I yield back.
        Mrs. Houchin. The gentleman's time has expired.
        The gentlewoman from Massachusetts, Ms. Pressley, is now
    recognized for 5 minutes.
        Ms. Pressley. Thank you, Director Chopra, for joining us
    today. And thank you for the critical role that the CFPB plays
    in protecting consumers and holding bad actors accountable. I
    am grateful to you and your dedicated 1,500-plus employees.
        Tomorrow is actually World Elder Abuse Awareness Day. And
    my mother, for many years, was a social worker to the elderly,
    trying to protect them from elder abuse. So, I did just want to
    take a moment in particular to thank you for all that the CFPB
    does specifically around fighting elder fraud, exploitation,
    and abuse. Thank you for all that you do for our most-
    vulnerable veterans, seniors, and students.
        Speaking of another vulnerable group, Director Chopra, a
    recent New York Times review of hundreds of Federal lawsuits
    filed against tenant screening companies highlighted how a
    pattern of inaccuracies in these reports led to the denial of
    rental housing for people across the United States.
        What problems has the CFPB found with tenant screening
    reports and the impact they can have on finding affordable,
    quality housing?
        Mr. Chopra. I think when someone is falsely matched with
    the wrong report, it is almost like they have been given a
    different identity. And that can be relied on to foreclose them
    from even accessing rental housing, and in some cases, we have
    heard of it leading to homelessness.
        We have to make sure that, when there are these third-party
    dossiers collected about people, that they are actually
    accurate. We have found, Congresswoman, that people with common
    surnames are more likely to be victims of this, and we have to
    make sure the law is being followed.
        Ms. Pressley. Thank you. Clearly, a lack of regulation in
    the tenant screening industry is resulting in inaccurate
    reports and false information, particularly about people's
    criminal backgrounds. However, even when the reports do include
    accurate information, housing providers often use them to deny
    housing to people with a record: 70 million people in the
    U.S.--one in 3 adults--have a criminal record, which means the
    impact of this discrimination is severe and widespread.
        Formerly incarcerated people are 10 times more likely to be
    homeless than the general public. And this is not a
    coincidence. It is a policy choice, one with dark consequences.
        Director Chopra, is the issue of denying housing to people
    after they have completed their sentences a problem that you
    have heard about?
        Mr. Chopra. It is. And I think that is something that the
    Department of Housing and Urban Development, and the Justice
    Department, have also been working on.
        Ms. Pressley. Thank you. When formerly incarcerated people
    do not have stable housing, it is hard for them to access
    healthcare, secure a job, or pursue greater education.
    Additionally, a lack of stable housing can lead to crimes of
    necessity to meet basic needs. So, the cycles of recidivism
    repeat.
        That is why today, I, along with Representative Tlaib, am
    introducing the Housing for Formerly Incarcerated Reentry and
    Stable Tenancy Act, or the Housing FIRST Act. Our legislation
    would disrupt the prison-to-homelessness pipeline by regulating
    what information relating to a person's criminal background
    should appear on a tenant screening report.
        Director Chopra, do you agree that by regulating the tenant
    screening industry on this matter, we can improve access to
    affordable quality housing and confront the prison-to-
    homelessness pipeline?
        Mr. Chopra. I think what you have said about the
    disruptions about returning home and not being able to access a
    home are so serious. I look forward to working with you on
    that. And there is so much at stake to make sure that people
    who have served can really successfully reenter.
        Ms. Pressley. Thank you. Again, thank you for what you do
    day in and day out to protect consumers and to hold bad actors
    accountable for the harm they cause our most-vulnerable people.
    And thank you for your expressed partnership on this matter.
        Housing is a human right, period. And when we deny stable
    housing to people with criminal records, we wrongfully punish
    them after they have already completed their sentences. Our
    bill would remove unjust barriers to housing and affirm that
    safe, stable housing is essential. Thank you.
        And I yield back.
        Mr. Fitzgerald. [presiding]. The gentlelady yields back.
        We will now go to Congressman Davidson for 5 minutes.
        Mr. Davidson. Thank you, Director, for being here.
        And I thank my colleague for her concerns about people who
    have served their sentences and done the time for their crime.
    It wasn't the question I was planning to lead with, but it is a
    good segue to something I had sent a letter to you on in April,
    and I appreciate your response.
        Your response really dealt with the accuracy, and I think
    everyone wants them to be accurate. We don't want someone to be
    falsely denied residence. We also don't want someone to come in
    who maybe should have been screened out. So, we want accuracy.
        But fundamentally, do you believe that tenant screenings
    are valuable to landlords?
        Mr. Chopra. I think when they are fully accurate, it has a
    very different benefit. There are ways in which people can get
    information about a tenant. But I will tell you, the Fair
    Credit Reporting Act has accuracy standards, and I want the
    tenant screening industry to follow them carefully.
        Mr. Davidson. Yes. I agree they should be accurate. But
    sometimes, the quest for accuracy is really just using the law
    to prevent people from doing screenings in the first place.
        We had a great Second Chance Program in the businesses that
    I owned prior to coming to Congress. I am passionate about the
    Second Chance Program. Once you have served your sentence, you
    need to be fully integrated into society; otherwise, they got
    the sentencing wrong.
        So, it is a valuable thing. And it started with trust.
    Somebody was honest about their background. We checked it. It
    matched. Now, we have built trust. I think it can be important.
        Turning to things that we probably are more aligned on, I
    was pleased, even in your opening remarks, that you talked
    about data brokers. And when you look at common concerns that
    we have had that have been bipartisan about privacy, American
    citizens have had their data stolen, hacked, sold, and
    otherwise exploited.
        So, I was encouraged that on March 15th, the CFPB announced
    a Request for Public Input regarding how data brokers collect
    and sell personal consumer information. Last week, I saw that
    you even extended the comment period to July 15th.
        Could you give us an overview of what you are seeing so far
    regarding the data broker industry and how they collect and use
    personal consumer data?
        Mr. Chopra. In the 1960s, this committee, I believe--it had
    a different name--was concerned, and other committees were
    concerned about all of these firms creating dossiers about us.
    And the Fair Credit Reporting Act sometimes focuses a lot on
    the three big credit bureaus.
        But there are more and more companies now that are
    assembling this information, especially collecting it
    digitally. They are selling it, and it is being used for all
    sorts of purposes, including employment insurance and so much
    more.
        We are trying to make sure we know what the new business
    models are that they are using? We do know that there is a lot
    more of them, and many of them may be doing things that are
    covered by the Fair Credit Reporting Act.
        So, I hope this committee really thinks about privacy data
    brokers altogether because what we did, I think 50 years ago,
    was important, but it has to be modernized for the age of Big
    Tech.
        Mr. Davidson. Absolutely. I think there is definitely an
    urgent need for legislation. I think the Fourth Amendment
    protection of privacy is probably the most-abused current
    portion of the Bill of Rights, not that there aren't other
    portions that are under stress.
        You recently noted in remarks at Money20/20 last year that
    the Bureau will be, ``exploring safeguards to prevent excessive
    control or monopolization by a handful of firms. Over the last
    several years, a consortium of the largest financial
    institutions in the U.S. has sought to exert governance over
    data ecosystem and sometimes serving as mandated intermediaries
    between peer-to-peer consumer transactions, thus decreasing
    competition and consumer choice in the marketplace.''
        How do you assess this situation as you address the
    Bureau's goal of providing consumer choice, and frankly, the
    ability of people to protect the privacy of their own financial
    data?
        Mr. Chopra. What you should expect about how we implement
    the statute--and I have shared this with some of you--is we
    want to propose that there are going to be some restrictions on
    secondary uses, so if you are moving your data to someone, they
    should only be using it for the purposes that are permitted. We
    have to figure out how to enforce this properly. We also want
    to think about how to make sure that an intermediary doesn't
    take the data, send the data, but then use it themselves.
        It is not going to be totally easy, but I think we have a
    framework that will get support, and I expect we will propose
    it for comment in October. But the data protection element of
    this is huge.
        Mr. Davidson. Yes. Thank you. And the enforcement mechanism
    is really the challenge. We have our own bill, the It's Your
    Data Act, that recognizes the property right in your individual
    data. So, I look forward to continuing to work with you on
    privacy.
        I yield back.
        Mr. Fitzgerald. The time has expired.
        I will now recognize the gentlewoman from Michigan, Ms.
    Tlaib, for 5 minutes.
        Ms. Tlaib. Thank you so much.
        Director, thank you for being here. Your agency--I won't
    call it an organization--is the only financial regulator that
    is laser-focused on consumer protection, correct?
        Mr. Chopra. That is right.
        Ms. Tlaib. You were created, why? Because there were all
    these bad actors. They were out of control. We had to do
    something about it because people were calling us. It wasn't
    just mortgage fraud. It was so many other things. Is that
    correct?
        Mr. Chopra. And there was a global financial crisis caused
    by that.
        Ms. Tlaib. That is right. I read somewhere that the CFPB
    enjoys overwhelming bipartisan support outside of Congress.
    Something like 75 percent of Republicans actually support the
    work that the Consumer Financial Protection Bureau does.
        I think it is because you did about $17 billion in relief
    for over 200 million consumers through the Bureau's enforcement
    and supervisory activities. And that is why I don't think I am
    surprised by those statistics.
        I actually wanted to look it up, because I know I have
    referred constituents to the Bureau, and the Bureau has been
    very incredibly helpful, especially because I think you all
    actually read the small print of things that get sent out to
    our consumers. Our residents just don't know what their rights
    are.
        I want to talk about the credit card fees, because ever
    since you told me what you are doing on that, I have been
    bragging about it, because I think it is so important to show
    that the Federal Government has your back. That there is this
    agency that we are independently funding that specifically is
    working on this.
        I think the proposed rule on Regulation Z would likely save
    cardholders billions of dollars each year. I read something
    around, what, roughly $12 billion annually?
        Mr. Chopra. That is right.
        Ms. Tlaib. Director Chopra, when I read that for some
    credit card agencies, it is kind of part of their business plan
    that 40 percent of their profit or something crazy--I don't
    know, you might have to correct me--is from late fees. They
    literally have built a profit line specifically all about
    generating profit from late fees. Can you talk about that?
        Mr. Chopra. I just think what Congress wanted when passing
    that law over a decade ago is just some common-sense
    safeguards, that the credit card industry can charge interest,
    can charge fees, make a profit, but when it is designed to
    build a business on penalties, lenders should want their
    customers to pay back and pay on time. We don't want a system
    where people are happy when someone doesn't pay on time or if
    they missed it by a day. All we are looking for is something
    balanced and reasonable.
        Ms. Tlaib. I know I looked, and it really does impact some
    of our working poor communities regarding the late fees. They
    are paying twice as much as any other cardholder.
        I also have been incredibly thankful that--and, again, the
    Bureau didn't have to do this--your report on medical debt
    literally triggered all three of the major the credit reporting
    agencies to do something.
        Can you talk about the fact that you did this study that
    basically said, this is the impact of having medical debt on
    people's consumer reports, and it was pretty drastic. I think I
    saw something like $88 billion in medical debt is on consumer
    credit records, which impacts housing, employment, you name it.
    The credit score and report is used for so many things,
    including auto insurance rates, as we talked about.
        Can you talk about that study? And, I think, days after you
    released that study, what happened?
        Mr. Chopra. Yes. Shortly after the three credit reporting
    conglomerates agreed to really drastically limit what is
    showing up, they also delayed when it would show up. Because
    often the consumer is just sort of debating and dealing between
    the insurance company, the provider, the facility.
        I just think we want to make sure that that credit report
    is not a place that you could threaten someone to pay something
    that they don't owe. But we still have to make sure we look at
    accuracy standards across-the-board. I also hear there are
    other types of bills that show up, that may not actually be
    accurate.
        Ms. Tlaib. Yes. That is the thing in the report I read.
    Something around--over the last decade or so--maybe from 2005
    to now--that there has been a 31-percent increase in inaccuracy
    of medical debt because, basically, people are being misbilled
    and all this stuff and that this is happening.
        Do you support prohibiting and banning medical debt on
    people's credit reports?
        Mr. Chopra. I think we are going to be proposing some more
    safeguards on it.
        It is interesting, medical debt is ill-defined because it
    is also medical credit cards. Also, medical debt can show up in
    other types of debt. So, we are trying to work on the
    specifics.
        Ms. Tlaib. Yes. Director, I was shocked to find out that
    our VA sends medical debt of our veterans to credit reporting
    agencies--collection agencies.
        Mr. Chopra. Yes, although they have made some dramatic
    changes.
        Mr. Fitzgerald. The gentlelady's time has expired.
        Ms. Tlaib. I know. But it is very, very disturbing.
        Thank you. I yield back.
        Mr. Fitzgerald. Next, we will go to the gentleman from
    Wisconsin, Mr. Steil, for 5 minutes.
        Mr. Steil. Thank you very much, Mr. Chairman.
        Thank you for being here, Director Chopra.
        I want to dive right in. As you know, FSOC's SIFI
    designation is a serious authority that carries with it
    significant regulatory supervisory burdens. That is why
    Congress and the courts underscore the importance of the
    analytical rigor and due process as part of the designation
    decision.
        In your statement accompanying the announcement that FSOC
    would change its approach to the SIFI designation, you wrote
    the following, ``In 2019, FSOC effectively repealed the ability
    to designate systemically important nonbank financial
    institutions by adding an array of dubious process
    strictures.''
        In your view, do these strictures include cost-benefit
    analysis?
        Mr. Chopra. The guidance is up for comment right now, the
    changes. Of course, there should be a fair process and a very
    analytically-driven process.
        Mr. Steil. I appreciate that. There absolutely should be.
        You said it added an array of dubious process strictures. I
    am trying to get an understanding of what you view as these
    strictures, and do those strictures include the cost-benefit
    analysis?
        Mr. Chopra. I wasn't referring to that. I believe what I
    was referring to--in the 2019 guidance, it set up a number of
    additional hoops.
        Mr. Steil. Understood. But specifically, is the cost-
    benefit analysis inside your dubious process analysis or
    outside?
        Mr. Chopra. No, I wasn't referring to that when I was
    referring--I was referring to the stages at each level of
    review. And my concerns, I believe, are shared in writing by
    the Secretary of the Treasury.
        Mr. Steil. Okay. I just want to make sure that you don't
    view the cost-benefit analysis----
        Mr. Chopra. No, I was not referring to that.
        Mr. Steil. ----as dubious, because I think that cost-
    benefit analysis is a really important component of our
    regulatory oversight.
        Let me shift gears to a slightly different topic but one
    you speak a lot about, your term, ``junk fees.'' There has been
    a lot of discussion today about that and your efforts to extend
    CFPB's reach into everyday American lives, using what I believe
    is a very vague term. And it is still not clear to me what the
    term, ``junk fee,'' is based on.
        In previous explanations, you argue that our government
    sometimes charges its own citizens junk fees. And I am
    concerned here that the CFPB's proposed restrictions on credit
    card late fees--whether or not that is your term of a junk fee.
        Nobody likes paying late fees, and you don't want people to
    get into financial distress. But I am also trying to look at
    what the trade-offs are here in your cap on fees. I know one of
    your proposals has an $8 cap on fees.
        And I think the question is, do you acknowledge there are
    potential significant trade-offs associated with setting a cap
    on late fees?
        Mr. Chopra. First, to be clear, the $8 proposal is not a
    cap on late fees.
        Mr. Steil. Okay.
        Mr. Chopra. That is the immunity provision, so that
    companies that charge $8 or less do not have to worry----
        Mr. Steil. So, you are creating a safe harbor, $8 or less,
    under that proposal?
        Mr. Chopra. Exactly.
        Mr. Steil. So, it is not a cap. But you are saying, hey, if
    you are under $8, you are safe. Safe harbor. If you are over
    $8, we may or may not come after you.
        Mr. Chopra. No, that is actually not how it is. If you are
    not on the $8, we explain what you should be prepared to
    calculate so you can get certainty.
        Mr. Steil. Okay.
        Mr. Chopra. Congress prohibited unreasonable and
    disproportionate penalty fees. We are trying to provide
    clarity. And it was clear the rule we inherited was way overdue
    for review. There was so much technological progress and
    changes in the credit card market that had to be reflected.
        Mr. Steil. Understood. Going back to my original question
    on this topic, do you believe there are potential trade-offs in
    setting a cap?
        Mr. Chopra. Yes. What I think will happen is that we will
    start seeing things--rather than a business model built on
    penalties, they will compete just like other banks and small
    banks do who offer credit cards, which is really upfront on
    annual fee, on interest rates, and others. I think the
    competitive process will work better. Consumers are smart, more
    likely to switch, and will be healthier over all.
        But we are looking----
        Mr. Steil. So, you don't think that by setting a cap--just
    as we play this out analytically, doing a pure economic
    analysis on this--that you are going to lead to more-expensive
    credit?
        Mr. Chopra. It depends on the competitive factors. You will
    see consumers switched based on that. It really depends on the
    econometric model. But we are looking at all the comments, and
    we will look at it very carefully and analyze it before
    finalizing it.
        Mr. Steil. In my final 15 seconds--and I have asked you
    this before--do you believe the CFPB possesses regulatory
    oversight authority over insurance products or insurance
    companies?
        Mr. Chopra. We do not regulate the business of insurance.
        Mr. Steil. Thank you very much.
        Mr. Chairman, I yield back.
        Mr. Fitzgerald. The gentleman's time has expired.
        We will now go to the gentleman from North Carolina, Mr.
    Nickel.
        Mr. Nickel. Thanks so much, Director Chopra, for being
    here. I know with these 5 minutes for questions, it is tough to
    kind of get everything out in the time that you have. I am
    going to say a few remarks, but I want to just give you a beat
    to think about it. After I say a few things, if you want to
    jump in and supplement some of the comments you have made on
    some other things, I am happy to give you some time.
        But I want to just start off by saying that I was proud to
    sign on to the amicus brief led by Ranking Member Waters
    supporting the CFPB at the Supreme Court. I know you have been
    under attack here today, so I want to just thank you for all
    the work you are doing to protect consumers.
        Do you want to take any time to talk about--get a little
    more time on some of the----
        Mr. Chopra. Yes. I know we have talked about the work we
    have been doing, but I also want to make sure we are thinking
    about the future, too.
        We are seeing very big players, especially tech companies,
    come in. We are seeing the future of money look different.
    Digital payments. Artificial intelligence. It is so important
    that we think about tomorrow and make sure that we don't have
    problems in the future that we can address today.
        Mr. Nickel. Thanks so much. North Carolina has 13
    congressional districts. I represent 49,000 veterans in my
    district. And I want to thank you, again, for the work that the
    CFPB is doing to protect servicemembers and veterans. I think
    it is our duty to support and care for the men and women who
    have served our country. We owe them a debt of gratitude, and
    we have to ensure that they have access to the resources and
    support they need to lead fulfilling and healthy lives after
    their service.
        In June 2022, the CFPB issued a report highlighting
    complaints by servicemembers and veterans about problems with
    coercive credit reporting and false medical bill collections. I
    am very concerned that veterans and servicemembers that I
    represent, just like anyone, have a tough time navigating the
    credit reporting system. If a member of the military has been
    injured or hospitalized while in service, I don't think it is
    right for a medical bill to affect their creditworthiness.
        What trends did the CFPB observe in its report, and what
    type of relief or remedies would you recommend to support
    veterans?
        Mr. Chopra. Yes. Credit reporting--and let me just share
    that we do see differences between active-duty servicemembers
    and their families, and Guard and Reserve versus veterans. Each
    has unique issues.
        I would say with active duty, the implications for problems
    on their credit report are very real. It can even harm their
    career. Many of them are subject to Permanent Change of Station
    (PCS) orders, and have to move frequently, which makes it
    really challenging to make sure that they don't suffer problems
    when they need to move or sell their home. With veterans' VA
    mortgages and other VA benefits, we always want to make sure
    they don't become a haven for abusing people.
        We have done a lot of work on the Servicemembers Civil
    Relief Act, which has a 6-percent cap on pre-service
    obligations. We found Guard and Reserve families aren't always
    taking advantage of it and may not be--financial institutions,
    we want them to work more to honor those rights.
        Mr. Nickel. Thanks. I am also very concerned about the rise
    in abusive debt collection practices, including those that
    target low-income seniors, such as, ``zombie mortgage'' debts.
    Zombie mortgages are those that consumers thought were forgiven
    or satisfied long ago but still exist.
        I was pleased to see that the CFPB held a field hearing on
    this issue in April. Can you tell us what you learned at the
    hearing and more about the CFPB's work in this area to protect
    homeowners targeted by these unfair collection practices?
        Mr. Chopra. We heard from a lot of experts, including one
    homeowner who testified about how they got a mortgage--one of
    those 80/20 piggyback mortgages--before the financial crisis.
    She got it modified, and the second mortgage was satisfied. But
    then fast-forward, with no communication, I believe, for over a
    decade, and now she is getting threatened with foreclosure.
        I think these second mortgages, which many people believe
    were satisfied, are now coming back. And we have tried and
    issued some guidance to make it very clear that when there is
    time-barred debt, there are certain responsibilities. We do not
    want to see this unlawful debt collection behavior especially
    targeting those whose wealth is mostly their home equity.
        Mr. Nickel. Thanks so much.
        And I yield back.
        Mrs. Houchin. [presiding]. The gentleman yields back.
        The gentleman from Wisconsin, Mr. Fitzgerald, is now
    recognized for 5 minutes.
        Mr. Fitzgerald. Director, thanks for being here today. I
    wanted to just go to two different topics, the first being
    something that has already been talked about ad nauseam, but
    the credit card late fees. Specifically because I have
    corporations in my district, and Kohl's Department Store is
    probably the best example.
        I am worried that the rule could have a negative impact
    because I don't know if the differentiation is there between
    bank cards and what you might see with retail, and I am
    wondering if you all have looked at it from that perspective?
        Mr. Chopra. It is a great question.
        With store credit cards, you are right, the market is a
    little bit different than the generally-available bank cards.
    They do work with the financial institution to issue it, to
    provide all the statements and the underwriting. A department
    store like Kohl's will probably work with them. There is
    different demographic--different loan characteristics of it. We
    certainly tried to look hard at those differences when shaping
    the rule.
        At the end of the day, though, a reasonable late fee and
    making sure that there are incentives for consumers to pay, I
    think will be good.
        I will also tell you, those retailers incur some real
    damage sometimes when their customers are not being treated
    fairly by their financial institution partner. So, I am hoping
    that the retailers themselves can also see some benefits from
    this.
        Mr. Fitzgerald. Okay. Thank you for that.
        And then, I am not sure if other members touched on this,
    but I think for some members of the committee--maybe they have
    the answers they want. But regarding the SVB failure, kind of
    that whole weekend that happened--we are 100 days out now. The
    FDIC, the Fed, the Treasury--I don't think we got the answers
    we need from them.
        My question would be, what was your role? Maybe, it was ad
    hoc and kind of developing as that weekend played out?
        Mr. Chopra. Certainly, as a board member--there are five
    members of the board that have to steward the Deposit Insurance
    Fund and take those emergency actions. We were often meeting
    late and taking votes in the middle of the night. It was a very
    fast-moving situation. These entities, I am all familiar with,
    because they are also large banks subject to the CFPB's
    oversight.
        Mr. Fitzgerald. Right.
        Mr. Chopra. We had real issues, and the decision to insure
    uninsured depositors on an emergency basis was a very, very
    serious one. We do think it created some stability in the
    system, but we need to make sure that we are ready for future
    runs like this and that the system is resilient and
    appropriately capitalized.
        Mr. Fitzgerald. Specifically, what is your memory about
    what happened on March 12th at that FSOC meeting? What happened
    during that meeting?
        Mr. Chopra. Was that on a Sunday, maybe? We were all
    working around the clock. We were regularly in touch--the FDIC,
    the Fed--with the Treasury because those emergency powers
    required the consent of the Secretary.
        Anytime there is major movement like this, obviously, there
    is the worry about credit sweeps as well, and we did exchange
    information about the latest intel that we had. I don't know
    the specifics of it, but we certainly like to share
    information.
        Mr. Fitzgerald. Do you feel like decisions were made in
    that there were already--there was already movement on trying
    to sell or save the banks at that point by the time the FSOC
    meeting happened in mid-March?
        Mr. Chopra. I don't remember when the FSOC meeting was, but
    certainly, the failure of Silicon Valley Bank happened at
    around 11:00 a.m. on Friday. It didn't even make it to the end
    of the day. Signature Bank barely made it through and ended up
    failing on Sunday.
        It is not like a normal bank failure where there was clear
    awareness well in advance and the entities can prepare for the
    resolution in the same fashion and find buyers.
        The First Republic resolution was quite different. The
    closure and sale happened over the same weekend, but the speed
    in which SVB occurred was lightning fast. And we did not get, I
    believe, a valid bid submitted that weekend. But over time,
    after the emergency actions, we were able to.
        Mr. Fitzgerald. Okay. Let me ask you a huge question. It
    will be difficult to answer in half a minute. But what is your
    opinion now of where we are at, not just related just to banks,
    but all financial institutions? Is the market stable? And are
    regional banks in a good position as well?
        Mr. Chopra. I think what we have seen is that deposit
    outflows have really stabilized. We are not seeing broad
    movement. We did see a big pool--a big hunk of deposits move to
    money----
        Mrs. Houchin. The gentleman's time has expired.
        Mr. Fitzgerald. Thank you.
        Mr. Chopra. I am happy to talk to you further.
        Mr. Fitzgerald. Thank you.
        Mrs. Houchin. The gentleman from New Jersey, Mr.
    Gottheimer, is now recognized for 5 minutes.
        Mr. Gottheimer. Thank you, Madam Chairwoman.
        And thank you, Director.
        Director, I have previously shared my concern that the
    CFPB's consumer complaint database may be a breeding ground for
    consumer misinformation, where competing small businesses can
    file false complaints about competitors. In 2022 alone, the
    CFPB reported receiving nearly 1.3 million complaints.
        I understand that companies have an opportunity to respond
    to complaints that are filed with the database, but is there a
    vetting process in place at the Bureau to weed out false
    complaints submitted to the website so that these small
    businesses aren't playing defense for those competitors who are
    trying to get them?
        Mr. Chopra. Yes.
        Mr. Gottheimer. Can you talk a little bit more about that?
        Mr. Chopra. Sure. You actually raised this in a previous
    hearing, and I went back to the staff to make sure I fully
    understood it.
        When a company is enrolled in the complaint database, when
    a complaint is received, they are actually able to determine,
    is this even our customer or not? So, that is a key check to
    make sure that there is not any kind of false identification.
    In some cases, more information is needed.
        After you raised it, I also looked to see if there were any
    other indicia of this happening, and we did not see any, but we
    are always looking to make sure that is processed----
        Mr. Gottheimer. So before it is posted, they can stop it
    from being posted?
        Mr. Chopra. It is only posted under certain circumstances,
    and I believe one of the circumstances is that it is actually
    the customer.
        Mr. Gottheimer. Got it. So before it is even posted, you go
    back to the business and say, is this a customer of yours?
        Mr. Chopra. Actually, the way it works is if a consumer
    files it, it almost immediately goes to the entity enrolled in
    our portal. They are able to respond. And it doesn't show up in
    the database until well after. So, there are a bunch of checks
    to limit this.
        Mr. Gottheimer. Got it. So if it is a competitor and not a
    customer, they can stop it from being posted?
        Mr. Chopra. Yes. I don't think it could even show up
    because it is not a customer.
        Mr. Gottheimer. Okay. That is good to hear. And I will
    follow up----
        Mr. Chopra. I will verify, but----
        Mr. Gottheimer. I would like to follow up with you on that.
    That would be great.
        The CFPB's Office of Servicemembers Affairs helps military
    families overcome unique financial challenges and ensures they
    make the best financial decisions.
        Late last year, the CFPB reported that members of the
    Reserve and the National Guard are paying an extra $9 million
    in interest every year because they are not provided their
    rights under the Servicemembers Civil Relief Act (SCRA) to
    request interest rate reductions on loans during active duty.
        Since that report was published in December of last year,
    can you tell me a little bit about what steps you have taken to
    inform servicemembers and financial institutions of the
    benefits provided under the SCRA?
        Mr. Chopra. We did share that report with the financial
    institutions. And it is tricky--many people may not know that
    the Guard and Reserve, when activated, get the benefits
    afforded to active duty. There is a database that the
    Department of Defense makes available. We have shared
    information about how financial institutions can use that.
        In some cases, many of them are automatically given those
    benefits, and I think that is a huge benefit, especially for an
    individual who has been activated, they want to minimize the
    amount of bureaucracy they have to go through.
        Mr. Gottheimer. Of course. Thank you.
        The Supreme Court is expected to rule on the
    constitutionality, as you know, of the Bureau's funding
    mechanisms in the coming months. I believe the Bureau plays an
    important role in protecting consumers from illegal activities
    in the marketplace, and I think it is vital that we be prepared
    for all potential decisions of the court.
        If the Supreme Court rules against the Bureau, what will
    the impact be for consumers? And do you think it is important
    that Congress start to act now to be prepared to promptly
    address a potentially unfavorable outcome?
        Mr. Chopra. We have heard from many corners of the industry
    that if there is a decision that throws uncertainty into--many
    industry players rely on the certainty afforded by, especially
    our mortgage rules. We do not want to see disruption in our
    mortgage markets, especially in the environment in which we are
    in.
        I am happy to talk to you further about it. But the
    Solicitor General has filed a brief with the Supreme Court and
    laid out the argument about why they would--
        Mr. Gottheimer. Do you think we need to start taking
    congressional action to prepare in case the mechanisms change?
        Mr. Chopra. I will take that back. I am happy to take a
    question for the record. But really, we are focused on the
    litigation and how----
        Mr. Gottheimer. Okay. I would like that. Because I don't
    want to find that suddenly the court rules, and then we have to
    scramble. You know, we don't exactly always move very fast
    here.
        I have heard stories about consumer financial services
    offered by unregulated scammers, some of whom operate online,
    and offshore, beyond the reach of State and Federal regulators.
        Does the Bureau place a priority on detecting and deterring
    unregulated financial services operators, and can you give me
    some examples of the steps you are taking in the last few
    seconds here?
        Mr. Chopra. Sure. One of the key things is, outside of the
    insured bank and credit union system, it is our job to protect
    against those entities that violate the law. We are devoting a
    lot of energy, using authorities Congress has given us to
    supervise some of them. When it comes to offshore, that is a
    very challenging problem, especially using digital technology.
        Mrs. Houchin. The gentleman's time has expired.
        The gentleman from New York, Mr. Garbarino, is now
    recognized for 5 minutes.
        Mr. Garbarino. Thank you, Madam Chairwoman.
        And thanks, Director, for being here.
        I just want to get some clarification. I know you talked a
    little bit already about the small business data collection
    rule. I have heard from the private sector that the CFPB's
    small business lending data collection rule would impose 81
    overly-burdensome and complex requirements, and 81 new data
    fields for each loan by some counts. I think you said 15 to 20
    is possible before.
        Mr. Chopra. Yes. I think there is a little bit of apples
    and oranges between data points. I believe there are about 20
    data points. The fields is a little bit of a different issue.
    It is kind of how they input it.
        Mr. Garbarino. So, could 81 be correct, 81 data fields?
        Mr. Chopra. Yes. It is in the way in which it is sent, but
    it is not the points that is in the statute.
        Mr. Garbarino. So, about 81 new data fields for each new
    loan, along with a timeframe of 18 months for some companies,
    and 36 months for others. I have heard from the industry that
    18 months to set up a collection data, protect it, and get
    everything ready with its lenders is going to be too short of a
    time period. And I don't see why it is 18 months when other
    companies are getting 36 months. Are you concerned that the 18
    months could set some of these lenders up for failure? And why
    not just do everybody for 36 months?
        Mr. Chopra. I think we wanted to look at how smaller banks,
    local banks, others--they have different issues that they have
    to deal with when implementing some of this. So, we focus the
    18 months on the largest lenders, which have very large books
    of this and which are often big institutions themselves. That
    is part of the reason we had this phased-in implementation.
        Mr. Garbarino. I understand the reasoning for doing it for
    the smaller banks, or for the smaller lenders, but I am hearing
    from the bigger lenders that 18 months is still not enough time
    to get this done.
        Is the CFPB considering delaying the 18-month timeframe?
        Mr. Chopra. Not at this point. We are working to make sure
    that the system is well prepared for it.
        I will say that many of these are quite large entities and
    have told us they have put in a lot of preparation. But I am
    happy to hear more from those about any challenges. We have set
    up a group that is working with them on implementation.
        Mr. Garbarino. Okay.
        Mr. Chopra. And, again, the reason we phase it in--there
    will be learnings from the first phase that will help us make
    sure that, when the much larger group reports, it has less
    kinks.
        Mr. Garbarino. I understand. And I know you have also
    talked--bless you, by the way--about the data breach. What is
    the CFPB doing to protect against future data breaches?
        Mr. Chopra. Insider threats are something that we are going
    to be putting a lot of effort in. We are also putting
    technological solutions in place. This was a very serious
    incident. We want to make sure not just that our systems are
    safeguarded from being penetrated by outsiders, but that even
    insiders have limited access and are not having to transfer
    things outside of the systems that are most secure.
        We are working with the established guidance on making sure
    that we mitigate and take steps. There are a lot of changes
    that were already in progress. But certainly, it is a serious--
    --
        Mr. Garbarino. How many employees do you have who are
    focused specifically on cybersecurity?
        Mr. Chopra. It is pretty substantial. I don't have the
    exact number. But within our technology and innovation group,
    not only do we have a chief privacy officer, we have
    information security professionals. We also get outside
    support. Outside auditors work with our Inspector General as
    well.
        Mr. Garbarino. Okay. And one last question. This was a
    major cyber incident. When a major cyber incident occurs in a
    Federal agency, they are required to notify the Cybersecurity
    and Infrastructure Security Agency (CISA). Do you know if and
    when CFPB notified CISA about this breach?
        Mr. Chopra. We certainly notified--and I believe we
    notified DHS and CISA. I would have to look at the timeline,
    but----
        Mr. Garbarino. But you did notify them?
        Mr. Chopra. We notified everyone in the OMB guidance, and I
    believe they are listed explicitly.
        Mr. Garbarino. Okay. Director Chopra, unfortunately, the
    CFPB has disbanded the Office of Innovation and offers very few
    collaborative avenues for innovative companies to work with the
    CFPB to gain regulatory clarity on the myriad of announcements
    coming from the Bureau.
        A huge issue in my district is home affordability. The
    average cost to originate a residential mortgage has doubled
    from $5,000 to over $10,000 in the last 10 years. What exactly
    is the Bureau doing to try to lower the cost of homeownership?
        Mr. Chopra. There is so much we are doing. We have actually
    put out and gotten information about how we can streamline----
        Mrs. Kim. [presiding]. The gentleman's time has expired.
        Now, I would like to recognize the gentlewoman from
    Colorado, Ms. Pettersen, for 5 minutes.
        Ms. Pettersen. Thank you, Madam Chairwoman.
        And thank you, Director, for being with us today. This is a
    difficult committee, and you have done a great job. I want to
    thank you for the work that you do every day advocating on
    behalf of our constituents and making sure that some of the
    most-vulnerable people are not being taken advantage of and
    that they have a voice and a backstop.
        I really enjoyed meeting with you in my office to talk
    about the specific services that you are able to provide. And I
    think many people don't even know that some of these tools
    exist. They don't know what is available.
        So, I want to just give you some time to kind of highlight
    the programs and the opportunities that constituents have just
    to--what we should tell our constituents to make sure that they
    know the services that you provide.
        Mr. Chopra. Yes. I think the focus of where we can provide
    so much individual help is our consumer complaint line. It was
    established in the law. We are doing, as it was said, 10,000 a
    week. And we hope that, even if you don't know the name of any
    individual agency, that you know there is a place you can go if
    you are having trouble with a consumer financial product or
    service, you can file a complaint, and it won't go into a black
    hole. It will actually--and in most cases, I believe--transfer
    to the institution.
        And it is such a way that we have been able to get people
    help, but also for the financial institutions to know the
    challenges that are being experienced so that they can make
    tweaks to their processes and mitigate harm going down. I urge
    you all to get the word out about our complaint line.
        Ms. Pettersen. We plan on doing that with some of our
    constituent outreach. Thank you for highlighting that.
        One of the concerns that we have heard come up is with
    limiting the junk fees. And I want to thank you for taking this
    on. While I recognize you don't have the authority to highlight
    these practices, you were able to set a limit.
        And this is something that all of us have experienced,
    where we think that we are going to buy something, and then on
    the back end, we see all of these additional fees of which we
    are unaware. This especially hurts people who are lower income,
    and our elderly. So, thank you for taking this on.
        One of the concerns that has been raised, though, is that
    when we are limiting fees like this, that there won't be the
    financial options for people with lower incomes where--the
    unbanked areas, I guess you could say.
        What can you address in this area on what you are doing to
    make sure that is not the case?
        Mr. Chopra. We have seen a lot of good movement and
    competition to offer lower, no-fee products with no surprises
    to really anybody. Sometimes, we don't necessarily need to jump
    through a bunch of hoops.
        It really is one of the benefits of competition here, and
    we see so many institutions offering these products now. I
    believe thousands--maybe it is hundreds of banks--these no-fee
    accounts. And it is a big benefit to those who live paycheck to
    paycheck.
        Ms. Pettersen. That is great. That is another thing that we
    can highlight for our constituents.
        I know that there were a lot of questions asked of you with
    limited time to respond. I want to know if you have any other
    pieces that you would like to address on some of the concerns
    that have been raised and the questions that my colleagues have
    asked.
        Mr. Chopra. I think there was a question I didn't get to
    fully answer about the Financial Stability Oversight Council. I
    think there were elements of the guidance from 2019 that were
    not related to the law at all. It indicated that there were
    certain procedural hurdles that I think were not appropriate.
    But, of course, we have to carefully consider what Congress
    wanted, and obviously, we do not want there being big nonbank
    institutions who cause a collective calamity for the rest of
    the market.
        I also will say again, there has been a lot of talk about
    our motives. Our motives are to carry out and fulfill the
    objectives you have specified in the law, and I take great
    pride in the work of all of the public servants at the CFPB who
    have helped so many people.
        Ms. Pettersen. Thank you for recognizing that. I also want
    to thank your team for doing their work. I know that it is a
    difficult job. It couldn't be more obvious with the hearing
    today. So, thank you for what you are doing every day.
        And with that, I will yield back.
        Mrs. Kim. Thank you. The gentlelady yields back, and I now
    recognize myself for 5 minutes.
        Director Chopra, I am disappointed that your written
    testimony did not mention financial literacy or education as
    one of your priorities. Consumer education is one of six
    primary functions of the Bureau. It is essential for consumer
    protection.
        I serve as the Co-Chair of the Financial Literacy and
    Wealth Creation Caucus, so I would like to urge you to make use
    of the public-private partnerships to enhance financial
    literacy.
        According to the Civil Penalty Fund annual report published
    in November 2022, the total unallocated balance was more than
    $481 million, and recent reinforcement actions may have
    increased the fund's unallocated balance to exceed $2 billion.
        Why haven't you used the fund for its intended purpose, to
    enhance financial literacy, since you took office as Director
    of the CFPB?
        Mr. Chopra. Let me just say that financial education and
    literacy is a real cornerstone of what we are doing. In the
    annual report that is part of our testimony, we----
        Mrs. Kim. Well, I am glad we agree.
        Mr. Chopra. The Civil Penalty Fund has two purposes: victim
    redress; and financial education, financial literacy programs.
    We actually expend resources on financial literacy through our
    general funds which cannot be used for victim redress.
        Mrs. Kim. Sure.
        Mr. Chopra. But we also want to make sure that those funds
    expended are smart, and that they are not wasteful, that they
    are effective.
        Mrs. Kim. I am glad to hear that, and I also want to echo
    the urgency of my colleague across the aisle, Mr. Scott, to use
    the fund for its intended purposes.
        And can I ask that you, rather than focusing on blog posts
    and press releases, I would remind you that you have other
    tools in your toolbox, like that fund, to prevent fraud and
    scams. So, please, let's use more of them.
        Now, are you concerned about the amount of credit card debt
    held by Americans?
        Mr. Chopra. I don't tend to think about the overall amount,
    but it certainly has accelerated. I worry more about
    delinquency costs, and having a competitive cost of credit.
        Mrs. Kim. I would like to address that issue. In the credit
    card fee proposal, you cite the research that was co-authored
    by two former Bureau economists who use the Bureau's own card
    data. That study states that when the credit card late fee
    decreases, it incentives higher usage and greater likelihood of
    paying late. Is that right?
        Mr. Chopra. I don't know the specific study you are
    referring to, but if you are saying that a late fee may have
    some impact----
        Mrs. Kim. That is a study that is based on peer-reviewed
    academic publication. Are you aware of that?
        Mr. Chopra. Okay. And I apologize, I don't have all the
    facts from that individual study cited, but of course we think
    a lot----
        Mrs. Kim. Right. Despite that, the Bureau--disregarded that
    research and instead you conducted your own analysis, but that
    analysis wasn't peer-reviewed or published in a journal. That
    is our understanding.
        Mr. Chopra. We certainly look at a lot of data sources
    studies on consumer credit. I know you are mentioning one. I am
    happy to take questions for the record on that specific one,
    but the overall goal----
        Mrs. Kim. Your credit card fee proposal is not going to
    reduce prices for consumers. Instead, the reduction in fees
    will lead to an increase in borrowing costs and potentially
    higher debt for families and individuals.
        The CFPB also acknowledged in the credit card fee proposal
    that customers who never pay late, which is about 74 percent of
    all Americans with credit cards, will not benefit from the
    reduced fees and could face higher maintenance fees, lower
    rewards, or higher interest-paying accounts. I just wanted to
    point that out to you, and then, I want to move on to the next
    matter.
        I agree with you that open banking has the potential of
    unleashing innovation and more options for consumers. But the
    CFPB recently issued a Request for Information soliciting
    public feedback about the data broker market. The request uses
    a definition of, ``data broker'' that essentially covers every
    consumer-facing business in existence--firms that collect,
    aggregate, sell, resell, license, or otherwise share consumers'
    personal information with other parties.
        Do you believe that small businesses in Southern California
    like hair salons, gyms, and flower shops should be subject to
    the Fair Credit Reporting Act since they collect personal
    information from consumers?
        Mr. Chopra. No, I think the purpose is about companies that
    are assembling dossiers just like other background screening
    companies or as other tech companies and others. So, we are
    actually soliciting input. That was not a proposed rule. We are
    trying to make sure we get the right type of input.
        Mrs. Kim. Sorry, my time has expired.
        Before I ask the next person to ask questions, I would like
    to enter into the record the Washington Post Fact Checker that
    was dated June 12, 2023.
        Without objection, it is so ordered.
        And I now recognize the gentleman from Missouri, Mr.
    Cleaver, for 5 minutes.
        Mr. Cleaver. Thank you, Madam Chairwoman. And thank you for
    being here, Mr. Director, and I personally appreciate your
    availability to all of us.
        In my real life, I am a United Methodist Pastor, and I deal
    with people mainly when they are in trouble. Rarely does
    someone come by and say, I just wanted to come by and tell you
    that the world is great and everything is really, really nice
    in my life.
        One of the things that people have as a major problem, more
    than anything else, are their finances. And there are those who
    have sought to take advantage of people. In fact, they are
    generally targeted by the so-called credit repair companies,
    organizations which are so fraudulent that they make Bernie
    Madoff seem like the Dalai Lama.
        And they specialize in making people who are hurting, hurt
    more. They are inverted ATM machines. And we are being
    victimized--when I say, ``we,'' I mean that Americans are being
    victimized by other Americans who are running these fraudulent
    organizations, promising to fix bad credit, when in reality,
    they are going to fix you for coming in there.
        So, I am thinking right now that something more needs to be
    done. I am not sure exactly what we can do to stop the
    financially-distressed consumers from being hurt worse, but
    many of those consumers, as I mentioned earlier, are targeted,
    and they are trying to get their financial lives on track.
        What is the Bureau doing? Are you getting a large number of
    complaints about these credit repair companies which are, from
    my perspective, almost committing thievery?
        Mr. Chopra. I don't have the exact numbers, but certainly
    people who are trying to repair their credit, many of them have
    been targeted by those who are fraudsters or scammers.
        There have been a number of enforcement actions. I
    definitely welcome any input on how we can more holistically
    deal with this, because sometimes going after one by one well
    after they have run off with the money won't fix the problem.
        I think accuracy in credit reports, and figuring out how
    people can rebuild is obviously important, but we want there to
    be honesty and compliance with the law.
        Mr. Cleaver. Yes, I don't think it is something that you or
    your agency can repair alone. But there needs to be something
    that we can do with the CFPB and local organizations, maybe
    Ministers, because they hear these ads on the radio. They are
    not on TV much anymore, they are advertising on the radio, and
    I am hoping that we can maybe work together on something.
        I don't want the Bureau sued, but I am just wondering, can
    we do Public Service Announcements, talking about the mortgage
    thievery that is going on, and of course, these credit repair
    organizations, can the agency get involved in trying to get
    public----
        Mr. Chopra. Yes. Actually, even the financial industry has
    helped with warning about some of these things. We try our best
    to help people understand and give them objective information,
    what should you do when you have a potential issue like this.
    It can be hard to get out the word sometimes because people can
    be micro-targeted very specifically. But there is certainly
    more we need to do to make sure people are protected from this.
        Mr. Cleaver. Thank you. I may have some ideas that I will
    share with you later. Thank you very much.
        I yield back, Madam Chairwoman.
        Mrs. Houchin. [presiding]. The gentleman yields back. We
    will now take a 5-minute recess to allow the witness a brief
    break. The committee stands in recess.
        [brief recess.]
        Mrs. Houchin. The committee will come to order. The Chair
    now recognizes the gentleman from Florida, Mr. Donalds, for 5
    minutes.
        Mr. Donalds. Thank you, Madam Chairwoman.
        Director Chopra, thanks for coming in. You have said
    previously that markets work best when rules are simple, easy
    to understand, and easy to enforce. Would you agree that
    markets work best when rules are actually relevant to today's
    marketplace?
        Mr. Chopra. Yes.
        Mr. Donalds. I want to go into a couple of things about
    payment portions of the CFPB's small dollar--I know that this
    is at the center of litigation and that none of us know for
    sure where it will end up.
        Section 1022 of Dodd-Frank requires the CFPB to conduct a
    5-year assessment of each significant rule or order adopted by
    the Bureau under Federal consumer law. This assessment is
    supposed to address the effectiveness of the rule in meeting
    the purposes of the objectives of the Bureau under Dodd-Frank,
    as well as specific goals stated by the Bureau.
        The public would also be allowed to comment on the
    recommendations for modifying, expanding, or eliminating a
    rule.
        If this rule had gone into effect and had not been delayed
    by all the legal challenges, I believe the Bureau would have
    had to complete such assessments of this rule, this year.
        When you look at the data, the alternative credit
    marketplace has shifted dramatically over the past 5 years. So
    if the court were ultimately to decide with the Bureau on the
    legality in question, wouldn't it be prudent to evaluate
    whether the rule is relevant in today's marketplace and is
    really going to meet the objectives that the Bureau intended?
        Mr. Chopra. Yes. One of the things I have done is, I have
    really opened up and increased the analytical rigor of justice.
    So many times they create rules, and it is not future-proofed.
    I am always open to collecting more information to see if there
    are any adjustments that need to be made.
        I don't know the specific provisions you are referring to
    that may have been subjected to technological change. There are
    certainly many rules that were transferred to the CFPB from the
    Fed and the FTC that were not future-proofed and were way too
    complex. And certainly, simplicity is a lodestar. We can't
    always get there, but we want to get there.
        Mr. Donalds. Would you acknowledge that it is prudent for
    the CFPB to periodically review all of its existing rulemakings
    and decide whether they are even necessary in today's
    environment?
        Obviously we know that banking is moving by leaps and
    bounds, becoming far more technical for a myriad of reasons,
    regulation being one of them. Wouldn't it be prudent forCFPB to
    actually review these things periodically, make adjustments, or
    cancel previous rules altogether?
        Mr. Chopra. That is some of what you are seeing me doing
    during my tenure. We are reviewing some older ones, and putting
    them out for public comment. Even the one on credit cards is
    really a rule review at its core, to make sure it is based in
    realty.
        I think you are raising this point, though, on digital,
    that is really important, and we need to make sure that we are
    not just thinking about the human world, but how will it work
    in the metaverse, how will it work in other contexts, because
    otherwise it creates problems if people don't----
        Mr. Donalds. I am glad you raised it for two reasons, one
    with the revision--the re-look at the credit card rule. You
    have talked about--and I think comments from my colleague from
    California brought it up in earlier questioning--the changing
    of late fees from $30 to $8. You are on the record saying that,
    ``By our estimate, 75 percent of late fees, $9 billion, have no
    purpose beyond padding the credit card companies' profits.'' Do
    you stand by that statement?
        Mr. Chopra. Yes. That is based on our estimate, and that is
    based on a point in time where late fees might have been lower
    than they otherwise would have been.
        Congress was clear: Those penalties are supposed to be
    reasonable and proportional, and we do not want loopholes from
    rules being used to evade the law.
        Mr. Donalds. Director Chopra, do you think that it is
    prudent that the CFPB has the abilities to unilaterally decide
    what are going to be late fees on consumer financial products,
    notwithstanding the ability of cost shifting as a result of
    capping fees?
        Mr. Chopra. We don't have unilateral ability. Congress sets
    out the framework in law----
        Mr. Donalds. Director Chopra, I would argue that the CFPB
    is making broad use of their powers, which, by the way, to be
    clear, I do believe wholeheartedly that your agency is
    unconstitutional. I think it was unconstitutional when it was
    created in Dodd-Frank. I think you were given broad latitudes
    under, frankly, partisan government at the time, to not even
    really be accountable to the people's branch of government, the
    legislative body, and so I do have issues with CFPB.
        But let's be clear, you all have taken broad latitude on
    many issues over time----
        Mr. Chopra. And it is always consistent with the laws that
    Congress passes.
        Mr. Donalds. And I would argue that those laws have always
    been----
        Mrs. Houchin. The gentleman's time has expired.
        Mr. Donalds. ----subject to Congress' ability to oversee
    you.
        I yield back.
        Mrs. Houchin. The gentleman's time has expired.
        The gentleman from New York, Mr. Lawler, is now recognized
    for 5 minutes.
        Mr. Lawler. Thank you, Madam Chairwoman, and Director
    Chopra, thanks for being here.
        A huge issue in this hearing has been the egregious lack of
    accountability of the CFPB and the lack of clarity and poor
    process that has been followed in your rulemaking and
    enforcement processes.
        What is your understanding of the Administrative Procedure
    Act (APA)?
        Mr. Chopra. The Administrative Procedure Act has a lot of
    different provisions. It touches on everything from citizens'
    ability to petition their government, to rulemaking--I think it
    is about rulemaking.
        Mr. Lawler. Yes, let's not waste time. What is your
    understanding of the Administrative Procedure Act with respect
    to your job duties and how you do rulemakings?
        Mr. Chopra. Absolutely. It requires that the decisions not
    be arbitrary and capricious. For rulemakings, legislative
    rulemakings, it requires a notice-and-comment period. It
    requires a response in consideration of those comments, a
    proposed rule, and a final rule, and all of those rules are
    subject to court review under that standard.
        Mr. Lawler. And how should that rulemaking process be
    followed? How should the notice-and-comment period operate?
        Mr. Chopra. Based on the other relevant statutes that
    apply, there is a period for which you publish the notice in
    the Federal Register. There is a comment period of 30 or 60
    days, or what have you. After that time, comments need to be
    considered.
        In any final rule, we analyze the comments, and actually,
    substantial parts of the final rule discuss those and explain
    where there were changes made from the proposal to the final
    rule.
        There are other parts of the APA as well, but, again, we
    are subject to quite a bit of review on that.
        Mr. Lawler. And where in the APA does it talk about being
    able to rule-make through blog posts and speeches?
        Mr. Chopra. It doesn't, and the concept of rulemaking
    through blog posts, I don't know where that term came from, but
    when we issue a blog post, we get feedback from various
    industry associations. They want more information about what
    the CFPB is doing, to have more notice to understand specifics
    about programs----
        Mr. Lawler. Right. But you seemingly are using these blog
    posts to issue more information, thereby issuing more rules,
    correct?
        Mr. Chopra. No, those aren't rules. Rules have to go
    through, as you are suggesting, the Administrative Procedure
    Act.
        Mr. Lawler. Right. So why are you using blog posts and/or
    giving speeches talking about what the industry should be doing
    if you are not following the exact rulemaking process?
        Mr. Chopra. Blog posts are something that we put on our
    website as information for consumers and the public. Those are
    not rules. Statutes and regulations, codified in the Code of
    Federal Regulations, are what creates obligations.
        Again, we received input from entities like the Consumer
    Bankers Association who asked us to continue what my
    predecessor, appointed by President Trump, had done on issuing
    advisory opinions, and informal guidance. And that is what we
    have continued to do.
        I am getting two different, conflicting messages about, we
    are trying to transparent and open. Those blog posts for the
    consumers and the public are not rules and not creating new
    obligations.
        Mr. Lawler. Okay. So that we are all clear, your blog posts
    do not have the weight of law, and nobody should follow them?
    Is that what you are saying?
        Mr. Chopra. No one has suggested, I think, that blog posts
    are rules. So, again, we have tried to provide guidance, other
    advisory opinions, very consistent with my predecessor, and
    also what almost every other agency does. There has been a
    request for more of it over the years, so that you don't need
    lawyers as much, and you have more plain-language support. This
    seems like something that is a good government----
        Mr. Lawler. Okay. So going forward, we all agree you will
    be using the Administrative Procedure Act for rulemaking? You
    won't be using blog posts or speeches to put any obligations on
    anybody within the industry going forward?
        Mr. Chopra. There has been no blog post that created a new
    obligation on the industry.
        Mr. Lawler. Good. Okay. Great. We are in agreement.
        Do you agree that you will commit to publicly releasing all
    of the facts and data that are used to support your decisions
    during the rulemaking and enforcement process? There have been
    numerous requests by this committee----
        Mrs. Houchin. The gentleman's time has expired.
        Mr. Lawler. Thank you.
        Mrs. Houchin. The gentleman from Nebraska, Mr. Flood, is
    now recognized for 5 minutes.
        Mr. Flood. Thank you, Madam Chairwoman. Director Chopra,
    thanks for your testimony today.
        I want to talk about student loan repayment. In March,
    Nelnet, the largest Federal student loan servicer, submitted
    SEC filings disclosing a significant modification to its
    Federal contract with the Office of Federal Student Aid, or
    FSA, showing that the Biden Administration has slashed its
    funding for student loan servicing operations as 40-plus
    million borrowers return to repayment on September 1st.
        Nelnet disclosed these layoffs due to the rate cut. Across-
    the-board, Federal student loan servicers are entering return-
    to-payment significantly understaffed. That is a concern. The
    contract modification also shows FSA's acknowledgement that it
    is paying less for student loan servicing as borrowers return
    to repayment.
        At this time, I would like to submit both of Nelnet's 8-K
    filings related to the contract modification for the hearing
    record. They are dated March 22, 2023, and March 27, 2023.
        Mrs. Houchin. Without objection, it is so ordered.
        Mr. Flood. Director Chopra, can you commit to me here today
    that your agency will not enforce against Federal student loan
    servicers for providing service levels commensurate to their
    compensation as articulated in their current contracts?
        Mr. Chopra. They are only responsible with respect to the
    CFPB for Federal consumer financial protection laws. They have
    to adhere to those laws based on--and if they enter into
    contracts with third parties, with governments--I do take
    your----
        Mr. Flood. With all due respect, Mr. Chopra, they are
    entering into a contract with the Biden Administration's FSA
    office. I think I maybe interrupted at a point where you were
    going to acknowledge----
        Mr. Chopra. Yes, I was just going to say that there is no
    question that the resources of the Office of Federal Student
    Aid to hire contractors--I understand that it is a very dire
    situation, and that if they can't adequately get the right
    support, the return to repayment will not be successful.
        But I just want to be transparent and open with you. We
    can't consider--there are contract negotiations when it comes
    to compliance with the law. They are a private party which is
    free to enter into contracts as they deem appropriate, but I
    hear your point.
        Mr. Flood. I am really sounding an alarm here as 40 million
    borrowers come back into repayment. This is a bad situation if
    the FSA does not provide the resources and this Congress does
    not provide the resources to make that happen.
        And would you agree with me, it is going to be the most
    difficult for those re-entering repayment, who need an extra
    level of support and service to ensure that they don't have an
    adverse effect on their credit report, so that they understand
    how to make those payments? Do you share that concern?
        Mr. Chopra. I agree with you, we need to make sure that--
    and in some ways, if there is not adequate support, the
    problems we could incur could be very, very big.
        Mr. Flood. You and I agree.
        The decisions by this Administration to politicize the
    student loan program through extended unnecessary pauses in
    pursuit of illegal loan forgiveness has harmed borrowers, and
    has resulted in a confluence of events that all but guarantees
    repayment to be exceedingly difficult. And no one but this
    Administration is to blame when and if return to repayment is a
    disaster.
        I have more than 3,000 student loan servicer employees in
    my district. When the FSA decides to cut rates, they are
    jeopardizing jobs in my district, but as we have discussed
    here, they are cutting down on the service that are provided to
    people who are going to work, who got an education, and who
    have to pay back these loans.
        And I don't want them to miss the opportunity to figure out
    how to get that money back to the creditor and make sure they
    don't suffer any ill effects on their credit reports, and that
    we get them back on the road to repayment in a good way.
        Mr. Chopra. And an appropriate level of service is probably
    good for everybody. It increases the likelihood of longer
    repayment--or appropriate repayment, and as you mentioned,
    avoids the consequences of default that can be very significant
    for an individual and the system.
        Mr. Flood. Absolutely. And it would be a disaster if the
    Federal Government refuses to pay adequate rates to servicers
    on the one hand, and then starts going after them for service
    quality on the other. And I think that is the point that I
    really want to make.
        And with that, I yield back.
        Mrs. Houchin. The gentleman yields back.
        The gentleman from Iowa, Mr. Nunn, is now recognized for 5
    minutes.
        Mr. Nunn. Thank you, Madam Chairwoman, and Madam Ranking
    Member. And thank you, Director Chopra, for being with us
    today.
        We are almost to the end of the testimony. I know this has
    been a marathon, and I appreciate you being forthright with us
    and having this conversation.
        I am going to ask you some questions that are coming from
    my small businesses, and a lot of my local bankers. These are
    folks from the Midwest and Iowa who are trying to do the best
    they can. They have been very successful in the past, but there
    have been some challenges coming from an agency which, in their
    words, they feel is opaque, potentially increasingly partisan,
    and analytically weak.
        Several of these same colleagues today, on both sides, have
    brought up the funding structure, and its lack of oversight in
    terms of not having an executive board or an independent
    Inspector General, that they find concerning.
        I am going to leave it to the Supreme Court and its highly-
    qualified judges to determine the future on that front, but I
    would like to talk about some of the tactical issues that are
    facing your organization right now.
        I want to start by following up on what Representative Pete
    Sessions highlighted here on the issue of a cybersecurity
    incident that occurred under your watch. Your agency had a
    major breach of personal information just a few months ago.
        I want to share, as a guy who has worked national
    counterintelligence, as a Director of Cybersecurity, that these
    issues have a huge impact on those people who are directly
    impacted.
        I would like to begin by asking, when did the CFPB first
    find out about a data breach?
        Mr. Chopra. The exact timeline, I don't want to get any of
    the dates wrong, but when we identified a potential email that
    was sent to a personal email account that included confidential
    information, we brought together our response team to
    investigate it.
        Mr. Nunn. Approximately when was that?
        Mr. Chopra. I want to say that that was--I don't want to
    get the dates wrong, but late February.
        Mr. Nunn. So, in February. When were you able to inform
    Congress about that?
        Mr. Chopra. I don't have the exact date, but we----
        Mr. Nunn. Approximately?
        Mr. Chopra. I don't want to even give an approximation. I
    want to say it was about a month or maybe a little less.
        Mr. Nunn. So, the individual who was----
        Mr. Chopra. But that was from the time of the suspicious
    email.
        Mr. Nunn. Right.
        Mr. Chopra. So obviously, we had to look to see if there
    was any other----
        Mr. Nunn. Absolutely. Data forensics was required. I fully
    agree with you on that. As an independent organization, though,
    I want to make sure that Congress is getting alerted to these
    things happening.
        Specifically, how many individuals were targeted?
        Mr. Chopra. Targeted?
        Mr. Nunn. Yes. In the data breach.
        Mr. Chopra. Do you mean how many individuals' information
    was----
        Mr. Nunn. No. First, I want to know how many people were
    targeted. Was this solely focused on one individual, or was
    there a mass approach----
        Mr. Chopra. Oh, I see. The issue with the unauthorized
    transfer was with one employee, who is now a former employee.
        Mr. Nunn. Copy. So, one point of entry of which we are
    aware.
        How many individuals had their information hemorrhaged as a
    result of this breach?
        Mr. Chopra. What we did was, we looked at the unauthorized
    transfer of emails, and we looked at the specific documents or
    information that went to their personal emails----
        Mr. Nunn. Director, was it over 100,000?
        Mr. Chopra. Yes. It was approximately 250,000.
        Mr. Nunn. Okay, so a quarter of a million. How many
    consumers and institutions were impacted by this?
        Mr. Chopra. I don't have the exact number of institutions.
        Mr. Nunn. Do you know how many Social Security Numbers were
    compromised?
        Mr. Chopra. It could be zero, but the 250,000----
        Mr. Nunn. Or it could be all of them?
        Mr. Chopra. Oh, no, no, no, the 250,000 did not include any
    Social Security Numbers, or things that might create identity
    theft.
        Mr. Nunn. Dates of birth?
        Mr. Chopra. I don't believe so, but I can check.
        Mr. Nunn. So, no personally identifiable information (PII)?
        Mr. Chopra. Their name was there, and that is PII, and that
    is why we take it so seriously.
        Mr. Nunn. Right.
        Mr. Chopra. And so----
        Mr. Nunn. I was a victim of PII this past January when my
    personal information was hemorrhaged just with the release of
    my name.
        When were these Americans informed that their information
    had been leaked?
        Mr. Chopra. We started notifications, I believe, around
    last month, but, again, we don't have----
        Mr. Nunn. Copy. So we are at a 5-month period here, and
    here is where I think this is so important. We are asking the
    American public to have faith in an institution that is now
    asking my local banks and my lenders to provide up to 21, or
    even more, up to 81, according to them, data points of
    information that you are keeping in a Federal server that has
    been breached. It took a month to notify Congress, and then we
    are going on 5 months now before the individual even knows that
    they are compromised.
        I have a real concern here with not only the data
    management piece of it, but that your organization, by not
    having an independent Inspector General, is now compromised for
    any type of review on this.
        If Congress doesn't have the ability to control your
    budget, if the Federal Reserve is the one in charge of
    monitoring you, and then there is no Inspector General,
    wouldn't you agree that an independent Inspector General has
    made these other organizations stronger as a result of having
    an independent source?
        Mr. Chopra. Because the Fed has so much sensitive
    information, our IG has a strong capability on cybersecurity
    and----
        Mrs. Houchin. The gentleman's time has expired.
        Director Chopra, you can answer the remainder of the
    question in writing for the record.
        Mr. Chopra. Okay.
        Mr. Nunn. Thank you, Madam Chairwoman.
        Mrs. Houchin. The gentleman from Nevada, Mr. Horsford, is
    now recognized for 5 minutes.
        Mr. Horsford. I want to thank the chairman and the ranking
    member for holding this hearing, and thank you, Director
    Chopra, for coming to discuss consumer protection efforts that
    your Bureau has undertaken.
        I am amazed every time that I am reminded that your agency
    is the only Federal agency focused solely on protecting
    consumers from unfair or deceptive practices in our financial
    marketplaces, the only one in all of the Federal Government.
        The imbalance of information between sophisticated
    financial scammers and individual consumers has provided ample
    opportunity for predatory behavior in our financial sector.
        My constituents certainly remember a short time ago before
    we had the CFPB, and they remember how financial institutions
    were able to saddle them with destructive and, in many cases,
    discriminatory loans that caused untold damage to them and to
    our economy.
        Under your leadership, I have been pleased to see that the
    CFPB is standing up for consumers, combating the negative
    effects of medical debt, breaking down barriers to credit, and
    holding the credit reporting companies accountable.
        I have also been interested in your actions to combat
    discrimination in entrepreneurial lending and to allow every
    American a fair shot at starting a small business.
        Here in America, in my opinion, especially in Nevada, the
    enterprising spirit of small business formation is alive and
    well. We have been given the opportunity to succeed. Our
    constituents are industrious and hardworking, with the
    determination necessary to create their own store or service.
    And yet, so many of my constituents, everyday Nevadans, who
    have the dream of being their own boss, have continued to be
    discriminated against simply because of the color of their skin
    or their gender.
        Owning their own business is a crucial way for individuals
    to build wealth and thus a key part of the conversation on how
    to close the racial wealth gap. Unfortunately, for so many of
    our minority and women-owned entrepreneurs, discrimination in
    small business lending has cut that dream short.
        That is why in March, I applauded your finalized rule to
    increase transparency in small business lending as an effective
    way to promote both equity and economic development.
        Director, would you please highlight the benefits for our
    nation's women-owned and minority-owned businesses now that
    this final rule is finalized?
        And additionally, as you look back over previously-
    administered programs such as the Paycheck Protection Program,
    would you consider the data collected under this rule helpful
    to ensure an equitable implementation of those programs in the
    future?
        Mr. Chopra. Just like homeownership, small business
    ownership has been such a vehicle for families and communities
    to build wealth. We do not want to distort it by discrimination
    or other bad practices, which we have seen in our country
    routinely for many years.
        You raised the Paycheck Protection Program, and so many
    minority- and women-owned businesses were not able to access
    those critical funds, and the data will help programs to be
    designed better so that we can make sure these programs are
    working as they are intended.
        Mr. Horsford. And the CFPB also is tasked with enforcing
    financial protections such as provisions of the Military
    Lending Act, which provides indispensable protections for the
    thousands of active duty servicemembers who live and serve
    within my district.
        Nevadans in uniform deserve to devote their entire energy
    to defending our country and should not have to worry that they
    are being taken advantage of by malicious actors. Whether it is
    preventing illegal high-interest loans, standing up to
    aggressive debt collectors, or ensuring adherence to legal
    protections, the CFPB is standing up for our servicemembers
    when and where it counts.
        Within your report and in various blog posts, the CFPB
    mentions that servicemembers are more likely to report certain
    types of consumer harm. Could you detail what those were likely
    to be and whether they filed complaints on those matters, and
    how has the CFPB been able to take that up?
        Mr. Chopra. Credit reporting is very big. Like for the rest
    of the population, it's one of the top areas of concern. And as
    I mentioned before, an inaccurate credit report or being
    hounded for debt that you don't actually owe, for a
    servicemember or a military family is particularly pernicious,
    and we are doing what we can.
        We have brought multiple Military Lending Act enforcement
    action----
        Mrs. Houchin. The gentleman's time has expired.
        Mr. Horsford. Thank you, Director.
        Mrs. Houchin. I will now recognize myself for 5 minutes.
        Thank you, Director Chopra, for your testimony and your
    time today in this lengthy hearing.
        As my colleagues have expressed, many of us have heard from
    our constituents about concerns regarding the Bureau, its
    regulatory overreach, and its lack of transparency. From
    regulation by enforcement, to undue burdens for small
    businesses, it is clear the CFPB, as it is currently operating,
    is not serving consumers or small business owners.
        Director Chopra, the CFPB is unique among Federal agencies.
    Not only is the Bureau not subject to the appropriations
    process, it also does not have an executive board to weigh in
    on decision-making and does not have an Inspector General to
    root out waste, fraud, and abuse. Effectively, you oversee the
    Bureau without any meaningful or direct oversight. As a result,
    there is a remarkable lack of transparency with the CFPB, which
    is something I and many of my colleagues would like to see
    fixed.
        Director Chopra, in May of 2022, you unilaterally issued an
    interpretive rule, without statutory authority, expanding the
    authority of States to pursue and enforce violations of Federal
    consumer protection laws under the Consumer Financial
    Protection Act (CFPA).
        The CFPB further promoted this additional enforcement
    activity by assuring States they may bring an enforcement
    action to stop or remediate harm that is not addressed by a
    CFPB enforcement action against the same entity.
        And the CFPB announced it would enter into more than 20
    agreements with State Attorneys General. While Congress
    intended for the CFPB to enforce Federal consumer financial
    laws and protect consumers in the marketplace, it did not
    intend for the CFPB to intimidate companies by conspiring with
    State agencies to pursue duplicative and sometimes competing
    and confusing enforcement actions.
        The Dodd-Frank Act limits attorneys general in bringing
    Federal enforcement actions, and while State attorneys general
    may enforce the CFPA in cases where the CFPB has not, the law
    does not allow for a State attorney general to become a party
    to an existing CFPB enforcement action. It is, therefore,
    inappropriate for the CFPB to recruit a State Attorney General,
    who is not otherwise investigating a company, to pursue
    enforcement as a means of intimidation.
        Moreover, the effect of your May 19, 2022, interpretive
    rule is different from solely enforcing the law. It is more
    akin to deputizing State attorneys general to enforce the CFPA
    on behalf of the CFPB, something Congress did not authorize.
        How many actions has the CFPB initiated with State AGs
    since the issuance of your interpretive rule?
        Mr. Chopra. I don't have an exact number, but I don't think
    it deviates from prior practice across multiple Directors.
        Mrs. Houchin. Reclaiming my time, would you check to see
    and confirm in writing how many actions the CFPB has initiated?
        Mr. Chopra. Yes.
        Mrs. Houchin. Okay. Of these actions----
        Mr. Chopra. When you say, ``initiated,'' do you mean,
    initiated an enforcement action?
        Mrs. Houchin. Since the issuance of your interpretive rule
    with State AGs.
        Mr. Chopra. Okay.
        Mrs. Houchin. Of these actions, can you explain to me why
    you involved the State AG as opposed to prosecuting the action
    solely under your own authority?
        Mr. Chopra. We saw in the lead-up to the financial crisis
    how preemption deleting State law had very negative effects on
    protecting inside State borders.
        It is very common. The DOJ, the FTC, and others regularly
    partner with State AGs and State agencies. Our statute requires
    us to coordinate. We have memorandums of understanding (MOUs)
    with States and others.
        Mrs. Houchin. Okay.
        Mr. Chopra. I think we are trying to do exactly what the
    law is saying.
        Mrs. Houchin. Reclaiming my time, first of all, I just want
    to reiterate that Congress did not authorize the outside use of
    attorneys general in this instance.
        Does the CFPB----
        Mr. Chopra. Congress explicitly authorized----
        Mrs. Houchin. Excuse me. Does the CFPB engage in forum
    analysis when determining whether to institute an action in its
    own capacity or to engage a State AG?
        Mr. Chopra. We look at enforcement actions based on the
    company's place of business, and whether we have any co-
    plaintiffs. We do exactly, I think, what every other law
    enforcement agency does.
        Mrs. Houchin. The result of this interpretive rule, in some
    instances, has resulted in competing enforcement actions
    between the State's actions and the CFPB's actions.
        The Administrative Procedure Act provides interested
    parties with notice and an opportunity to be heard and the
    right to seek judicial review of agency action. Why did you
    choose to issue an interpretive rule regarding actions by State
    AGs as opposed to engaging in a notice-and-comment rulemaking?
        Mr. Chopra. It restated what the law already authorized, so
    this was not creating any new obligations on the public.
        Mrs. Houchin. Okay.
        Mr. Chopra. But we were trying to be very clear that the
    CFPB does not have a monopoly on consumer protection----
        Mrs. Houchin. Director Chopra, I have one last question for
    you.
        Mr. Chopra. Sure.
        Mrs. Houchin. By using the mechanism of an interpretive
    rule, haven't you avoided the requirements and the procedural
    protections of the Administrative Procedure Act?
        Mr. Chopra. No.
        Mrs. Houchin. I strongly disagree. I do want to say that
    members of this committee, including myself, will continue to
    provide oversight to the Bureau and ensure that we make the
    Bureau responsive to the American people.
        My time has expired.
        The gentleman from Tennessee, Mr. Ogles, is now recognized
    for 5 minutes.
        Mr. Ogles. Madam Chairwoman, thank you. Mr. Chopra, we are
    in the home stretch.
        The data breach has been mentioned, and we have seen
    breaches across the industry, in both the private and the
    public sector. So obviously, I think we all have concerns
    there.
        The CFPB's small business lending final rule states that
    covered financial institutions are required to collect and
    report to the CFPB data on applications for credit for small
    businesses, including those that are owned by women or
    minorities.
        As it pertains to the data on women and minorities, what is
    the purpose of collecting that data?
        Mr. Chopra. That is in the statute. The statute requires
    the collection for minority-owned businesses, and women-owned
    businesses.
        I believe the statute has a number of objectives, including
    things related to community development, fair lending, and
    more, but that was not something that the CFPB decided. We were
    under court order to implement that.
        Mr. Ogles. Okay. Now, when it comes to that--and
    understanding that some of this was perhaps pushed on the
    agency, correct--do you think part of the intent is to prohibit
    or track discrimination but also fraud and abuse?
        Mr. Chopra. I think the primary purpose is like the Home
    Mortgage Disclosure Act, which collects similar data for
    mortgages, and it is used, again, for community development,
    and data analysis, but also to detect and deter potential
    discrimination.
        Mr. Ogles. Part of that is identification, and I will
    borrow from Senator Blackburn. As we are collecting this data,
    definitions are important. So, from the agency's perspective,
    what is a woman?
        Mr. Chopra. The way in which the rule is specified is that
    a borrower--we even published a sample forum--can self-identify
    as to--there will be options for race and ethnicity. It is
    really up to them. They don't have to provide that information.
        Mr. Ogles. Sure.
        Mr. Chopra. There is a specific statutory right to refusal.
        Mr. Ogles. You explained the process, but if data
    collection is important, and it is a data point that is going
    to be used and verified, whether it is in statute or not in
    statute, what, from the agency's perspective, what is a woman,
    and how do you define it?
        Mr. Chopra. We don't get into those questions.
        Mr. Ogles. Then, why would you need that data?
        Mr. Chopra. The agency was sued for not implementing----
        Mr. Ogles. Have you come back to this committee, to
    Congress, and said, Hey, we need some relief here, because this
    data point, this data that we perhaps shouldn't house, nor is
    it relevant to our core mission, have you made that request?
        Mr. Chopra. Fair lending is a part of our mission. The
    Equal Credit Opportunity Act----
        Mr. Ogles. But the data point that you have yet to define
    doesn't seem to be germane to----
        Mr. Chopra. The way it is defined is that a borrower gets
    to self-select. We receive comments in the--the proposal was
    proposed before I was in office.
        Mr. Ogles. I understand that, but you are explaining the
    process of someone checking boxes. Again, you are collecting
    data. It would seem----
        Mr. Chopra. We are actually reporting it.
        Mr. Ogles. ----that that data is not relevant to your core
    mission.
        Mr. Chopra. I don't agree.
        Mr. Ogles. I understand fair lending is part of your core
    mission, but if you can't even define the definition of a
    woman, it is a data point that you can't use in any analysis
    that you might otherwise make.
        And so, you should be coming back and saying, we need
    relief from this, this, this in particular.
        Mr. Chopra. To be honest, that data is important for fair
    lending, and we try to put together and implement the statutory
    directives as faithfully as we could. I do think having
    knowledge on women-owned businesses which did have challenges--
    --
        Mr. Ogles. Women-owned businesses is an important data
    point, just as you just said. So, what is a woman again,
    please?
        Mr. Chopra. I don't really know what you are suggesting
    here, but the idea is that people are able----
        Mr. Ogles. The idea is that----
        Mr. Chopra. ----to self-identify what----
        Mr. Ogles. I will reclaim my time. In subcommittee, and
    when we were talking about the CFPB, it was one of those
    moments. And this is nothing personal against you, you were not
    the person who put this in place, so please don't take this
    personally.
        Is the core mission of your agency, as has previously been
    done by other agencies, and if there was an agency that should
    be disbanded, I will paraphrase Hamlet, ``To be or not to be,
    yours should die a painful death, '' because I do believe it is
    irrelevant. I do believe you have gone outside your core
    mission and you have abused the authority that otherwise
    Congress should take back from you.
        And I would argue in agreement with Mr. Donalds that you,
    your agency--not you, sir, but your agency is unconstitutional.
        With that, Madam Chairwoman, I yield back.
        Mr. Chopra. There was a financial crisis----
        Mrs. Houchin. The gentleman's time has expired. The
    gentleman yields back.
        The Chair now recognizes Ms. Garcia.
        Ms. Garcia. Madam Chairwoman, I have a unanimous consent
    request. I would like to submit two documents from the Consumer
    Bankers Association, which clearly requests the CFPB to not
    only issue rules but also issue guidance to help industry
    comply with the law.
        This seems to contradict what many of my colleagues on the
    other side of the aisle are claiming, that the CFPB should not
    be issuing guidance. In fact, the document reads, the case for
    regulation through rulemaking----
        Mrs. Houchin. Without objection, it is so ordered.
        Ms. Garcia. Thank you.
        The Chair notes that some Members may have additional
    questions for this witness, which they may wish to submit in
    writing. Without objection, the hearing record will remain open
    for 5 legislative days for Members to submit written questions
    to this witness and to place his responses in the record. Also,
    without objection, Members will have 5 legislative days to
    submit extraneous materials to the Chair for inclusion in the
    record.
        I ask you, Director Chopra, to please respond no later than
    July 14, 2023.
        This hearing is adjourned.
        [Whereupon, at 1:57 p.m., the hearing was adjourned.]

                                A P P E N D I X

                                 June 14, 2023

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