[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
SECOND SESSION
__________
JUNE 13, 2024
__________
Serial No. 118-96
Printed for the use of the Committee on Financial Services
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
www.govinfo.gov
______
U.S. GOVERNMENT PUBLISHING OFFICE
56-523 PDF WASHINGTON : 2026
HOUSE COMMITTEE ON FINANCIAL SERVICES
PATRICK McHENRY, North Carolina, Chairman
FRENCH HILL, Arkansas, Vice MAXINE WATERS, California, Ranking
Chairman Member
FRANK D. LUCAS, Oklahoma SYLVIA R. GARCIA, Texas, Vice
PETE SESSIONS, Texas Ranking 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
TOM EMMER, Minnesota EMANUEL CLEAVER, Missouri
BARRY LOUDERMILK, Georgia JAMES A. HIMES, Connecticut
ALEXANDER X. MOONEY, West Virginia BILL FOSTER, Illinois
WARREN DAVIDSON, Ohio JOYCE BEATTY, Ohio
JOHN W. ROSE, Tennessee JUAN VARGAS, California
BRYAN STEIL, Wisconsin JOSH GOTTHEIMER, New Jersey
WILLIAM R. TIMMONS, IV, South VICENTE GONZALEZ, Texas
Carolina SEAN CASTEN, Illinois
RALPH NORMAN, South Carolina AYANNA PRESSLEY, Massachusetts
DANIEL MEUSER, Pennsylvania STEVEN HORSFORD, Nevada
SCOTT FITZGERALD, Wisconsin RASHIDA TLAIB, Michigan
ANDREW R. GARBARINO, New York RITCHIE TORRES, New York
YOUNG KIM, California NIKEMA WILLIAMS, Georgia
BYRON DONALDS, Florida WILEY NICKEL, North Carolina
MIKE FLOOD, Nebraska BRITTANY PETTERSEN, Colorado
MICHAEL LAWLER, New York
ZACHARY NUNN, Iowa
MONICA DE LA CRUZ, Texas
ERIN HOUCHIN, Indiana
ANDREW OGLES, Tennessee
Matthew Hoffmann, Staff Director
C O N T E N T S
----------
Thursday, June 13, 2024
Page
OPENING STATEMENTS
Hon. Patrick T. McHenry, Chairman of the Committee on Financial
Services, a U.S. Representative from North Carolina............ 1
Hon. Maxine Waters, Ranking Member of the Committee on Financial
Services, a U.S. Representative from California................ 2
STATEMENTS
Hon. Andy Barr, Chairman of the Subcommittee on Financial
Institutions and Monetary Policy, a U.S. Representative from
Kentucky....................................................... 4
Hon. Bill Foster, Ranking Member of the Subcommittee on Financial
Institutions and Monetary Policy, a U.S. Representative from
Illinois....................................................... 4
WITNESSES
Hon. Rohit Chopra, Director, Consumer Financial Protection Bureau 5
Prepared Statement........................................... 7
APPENDIX
ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD
Hon. Andy Barr:
Navy Federal Credit Union.................................... 74
Hon. French Hill:
Consumer Financial Protection Bureau (CFPB).................. 75
Hon. French Hill and Hon. Bill Huizenga:
Can the Fed Fund the CFPB.................................... 78
Hon. Maxine Waters:
Americans for Financial Reform............................... 85
RESPONSES TO QUESTIONS FOR THE RECORD
Written responses to questions for the record from Hon. Rohit
Chopra.........................................................
Hon. Blaine Luetkemeyer...................................... 91
Hon. Gregory Meeks........................................... 98
Hon. William Timmons......................................... 100
Hon. Monica De La Cruz....................................... 102
Hon. Scott Fizgerald......................................... 103
Hon. John Rose............................................... 108
Hon. Nydia Velazquez......................................... 111
Hon. Ann Wagner.............................................. 113
Hon. Mike Flood.............................................. 115
Hon. Andrew Ogles............................................ 116
Hon. Wiley Nickel............................................ 121
Hon. French Hill............................................. 122
Hon. Joyce Beatty............................................ 124
Hon. Brad Sherman............................................ 127
Hon. Daniel Meuser........................................... 130
Hon. Zachary Nunn............................................ 132
Hon. Young Kim............................................... 135
THE SEMI-ANNUAL REPORT OF THE BUREAU
OF CONSUMER FINANCIAL PROTECTION
----------
Thursday, June 13, 2024
U.S. House of Representatives,
Committee on Financial Services,
Washington, DC.
The committee met, pursuant to notice, at 10:45 a.m., in
room 2128, Rayburn House Office Building, Hon. Patrick T.
McHenry [chairman of the committee] presiding.
Present: Representatives McHenry, Lucas, Sessions, Posey,
Luetkemeyer, Huizenga, Wagner, Barr, Williams of Texas, Hill,
Loudermilk, Davidson, Rose, Steil, Timmons, Meuser, Fitzgerald,
Garbarino, Kim, Donalds, Flood, Lawler, Nunn, De La Cruz,
Ogles, Waters, Velazquez, Sherman, Meeks, Scott, Lynch, Green,
Cleaver, Himes, Foster, Beatty, Vargas, Gottheimer, Gonzalez,
Casten, Pressley, Torres, Horsford, Tlaib, Garcia, and
Pettersen.
Chairman McHenry. The committee will come to order.
Without objection, the chair is authorized to declare
recess of the committee at any time.
This hearing is titled ``The Semi-Annual Report of the
Bureau of Consumer Financial Protection.''
Without objection, all members will have 5 legislative days
within which to submit extraneous material to the chair for
inclusion in the record.
I will now recognize myself for 4 minutes to give an
opening statement.
OPENING STATEMENT OF HON. PATRICK T. MCHENRY, CHAIRMAN OF THE
COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
NORTH CAROLINA
Last month, the Supreme Court upheld the funding structure
of the Consumer Financial Protection Bureau created by Congress
in the Dodd-Frank Act. My Democratic colleagues quickly called
it a victory. Mr. Chopra, you say the Bureau will now be
``firing on all cylinders.'' Unfortunately, for my friends
across the aisle, I am not sure if they fully understand what
the Court's ruling means, and this may not be the one that they
think it is.
The opinion stated Congress has the power to determine or
create novel funding mechanisms for Federal agencies, referring
to Congress' power of the purse. I think that is a good thing.
This also solidifies that Congress has the power to change a
funding stream. Republicans have a legislative solution to make
the Bureau more transparent and accountable to the American
people. This is something we should all be in favor of, so I
encourage my Democratic colleagues to hold off on their victory
lap. Instead, they should work with Republicans, with the
Consumer Financial Protection Bureau (CFPB) on the
appropriation cycle and enact commonsense reforms to rein in
the Agency. I can guarantee you, if the political shoe is on
the other foot in the future, you will wish you had worked with
us now. I think civility here would be a welcome and good
thing.
We are already seeing the harm a radicalized CFPB can
inflict. Director Chopra, under your leadership, the so-called
independent Agency has become, in my view, an arm of President
Biden's political operation. Data facts, economics, and sound
analysis take a backseat to politically favorable talking
points. Even the Washington Post has called the numbers
``fuzzy'' surrounding how much consumers would actually save in
so-called junk fees, if they were cut. You are taking your eye
off the ball on consumer financial protection and are instead
chasing a shiny political object in an election year. We see
how this ends. It is never a good outcome for our financial
system or the American people.
While shirking your responsibility to consumer protection,
you have also painted entire swaths of the financial services
sector as bad actors. I want to remind you, Director Chopra,
these are not all nameless, faceless institutions. They are
made up of hardworking employees, many of whom are neighbors
and members of the communities we represent. The Biden
Administration's inflammatory rhetoric does nothing to root out
actual fraudsters and bad actors, but it does sow distrust and
fear among the very people who rely on the services provided by
these financial institutions.
Speaking of bad actors, yesterday, the committee held a
hearing to better understand the toxic workplace culture at the
Federal Deposit Insurance Corporation, the failed leadership of
Chairman Gruenberg. Director Chopra, you are a member of the
Federal Deposit Insurance Corporation (FDIC) Board of
Directors. You also played a role in forcing out Mr.
Gruenberg's predecessor, who, by all accounts was working to
address the abusive behavior within the FDIC and trying to
address and help employees. It is also alarming that you have
not directly commented on Chairman Gruenberg's mistreatment of
his staff and the failure to address the misconduct at all
levels of the Agency. It is safe to assume that if this were a
private sector financial institution, you would have quickly
called for the removal of its leadership. Instead, we see
partisanship on full display. Once again, I urge you to stop
putting politics ahead of people and work with and help improve
the financial services marketplace.
I will now recognize the ranking member of the full
committee, the gentlewoman from California, for 4 minutes for
an opening statement.
OPENING STATEMENT OF HON. MAXINE WATERS, RANKING MEMBER OF THE
COMMITTEE ON FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM
CALIFORNIA
Ms. Waters. Thank you very much, Mr. Chairman. First, let
me say to Director Rohit Chopra, thank you for your patience
this morning. I know that you have been waiting for about 45
minutes. I am very pleased that you took the time to not only
recognize many of the members that you work with, but I also
want to thank Mr. McHenry. Despite the fact that he waited, he
decided to go ahead and get the meeting started, and I am very
pleased about that, and I hope that the other members will show
up. They are being held up by Mr. Trump, who decided to come
over and hold a meeting, and that is what is happening this
morning.
So I am pleased to welcome you back, Mr. Chopra. After 14
years of attacks from congressional Republicans and the
industry, last month the Supreme Court sided with consumers and
affirmed what I and committee Democrats have been saying all
along: the CFPB is constitutional and here to stay. Now, never
in a million years did I think I would be thanking Justice
Clarence Thomas or applauding his ultra-conservative court, but
they made the right decision to put consumers first by
upholding the constitutionality of the CFPB and rejecting the
baseless attacks led by greedy payday lenders, extreme Make
America Great Again (MAGA) Republicans, and a convicted felon
and former President. Even a conservative Supreme Court was
able to see right through the privilege challenges to the
CFPB's funding structure.
While my colleagues on the other side of the aisle still
choose to remain willfully ignorant about this, the
Constitution is clear that Congress can fund the executive
grant, including the CFPB, the Federal Reserve, and other
agencies, however it likes and has done so since the Nation's
founding. Now, I am pleased that the Agency can continue its
work as the only Federal watchdog for our Nation's consumers in
the financial marketplace.
Under the leadership of Director Chopra, the CFPB is
combating excessive and illegal junk fees, fighting against
housing discrimination and redlining, and holding mega banks
accountable for breaking the law and harming consumers. In
addition, this week, the CFPB released a proposal that would
ban medical debt from credit reports. If finalized, this rule
will relieve medical debt for more than 15 million Americans
with medical bills and ensure that health issues no longer mean
families have to endure financial hardship due to lower credit
scores. I applaud the CFPB for this proposal and for its work
to cut access to credit card late fees and reduce the typical
fee from $32 to $8. Additionally, the CFPB has returned an
astounding $20.7 billion to 205 million consumers harmed by
financial institutions since we created Dodd-Frank. Given the
successful track record, it is no surprise that 82 percent of
Americans, including 77 percent of Republicans, support the
Agency.
However, despite all of this great work and the recent
Supreme Court ruling, Republicans have made clear that their
effort to undermine and eliminate the Agency will continue.
There is a long-term strategy by radical extremists to not just
challenge and undermine the CFPB, but also critical Federal
regulators like the Federal Reserve, which are also funded
outside of the annual appropriations, as well as the
independent funding of Social Security and Medicare. The very
first financial services resolution Republicans brought to the
House floor demonizes Social Security, Medicare, and it has
been so-called socialist programs that are destroying America.
The assiduous Project 2025 similarly calls for eliminating CFPB
and ending the Federal Reserve (Fed), Social Security, and
Medicare as we know it. Rest assured, committed Democrats will
never ever stop fighting to block these harmful and misguidance
attacks, and when it comes to consumers, we will continue to
craft legislation to build on the historic efforts of the CFPB.
I thank you very much for the time, and I yield back.
Chairman McHenry. Well, thank you. I would note for the
record that the announcement of this morning schedule had
almost every Democratic member of the committee here before 10
a.m., which I would mark is a record for this Congress, and so
there is a legislative benefit to apparently the former
President's schedule. Unfortunately I could not take advantage
of it because, well, I was the only Republican, so anyway.
Ms. Waters. Thank you for recognizing that we were here.
[Laughter.]
Chairman McHenry. If only this would be a regular
occurrence with us being on time.
I will now recognize the chairman of the Subcommittee on
Financial Institutions and Monetary Policy for 1 minute, Mr.
Barr.
STAEMENT OF HON. ANDY BARR, CHAIRMAN OF THE SUBCOMMITTEE ON
FINANCIAL INSTITUTIONS AND MONETARY POLICY, A U.S.
REPRESENTATIVE FROM KENTUCKY
Mr. Barr. Thank you, Mr. Chairman. Director Chopra, good to
see you again. You continue to inject uncertainty into markets,
take partisan actions that harm consumers, and show disdain to
Congress and industry. You unfairly mislead and propagandize to
vilify businesses and their employees through charged rhetoric
accompanied by enforcement threats without adjudication. You
act unilaterally and arbitrarily, often outside any statutory
mandate routinely, without engaging in notice-and-comment
rulemaking in violation of the Administrative Procedures Act,
and engage in extortionary civil investigative demands devoid
of any due process where you act as judge, jury, and
executioner.
CFPB's analytical work under your tenure has lost
credibility and increasingly amounts to junk economics. The
CFPB is opaque under your tenure. Recently, you even refused to
provide a witness for a hearing in the subcommittee that I
chaired. Your current goal is to supply talking points for the
President and his reelection campaign, all while denying
Americans access to the credit they desperately need at a time
of inflation.
Chairman McHenry. The gentleman's time has expired. I will
now recognize the ranking member of the Financial Institutions
Subcommittee, Mr. Foster, for 1 minute.
STATEMENT OF HON. BILL FOSTER, RANKING MEMBER OF THE
SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND MONETARY POLICY, A
U.S. REPRESENTATIVE FROM ILLINOIS
Mr. Foster. Thank you, Mr. Chairman and Director Chopra,
and I have to say I concur with the chairman that Congress
does, in fact, work far better when Democrats show up and
Republicans take a walk.
Since this committee has helped create the CFPB in 2010,
the Bureau has effectively fulfilled its mission to protect
consumers from unfair, deceptive, and abusive practices in
financial markets, and despite being supported by 82 percent of
Americans, the Bureau has come under continual attack from
those wishing to undermine its mission. Just last month, the
Supreme Court rightly sided with the CFPB against a misguided
attack on its funding structure. In fact, the hyper partisan,
poison-filled appropriations process that we are seeing in
Congress this week is a perfect example of why the CFPB is
appropriately shielded from the appropriations process, and
this decision by the Supreme Court prevents harmful disruptions
to the Bureau's work and preserves countless protections that
it provides for everyday Americans.
The Bureau's work is felt across the country, including in
my State of Illinois. as technology progresses, time and again,
the CFPB has responded to new and emerging challenges stemming
from new scams, new financial products, and rapid changes to
the financial system. So thank you again for joining us, and I
yield back.
Chairman McHenry. Today we welcome the testimony of Hon.
Rohit Chopra, director of the Consumer Financial Protection
Bureau. Director Chopra, thank you for being here. You will
have 5 minutes to give an oral presentation.
Without objection, your written statement will be made part
of the record.
You are now recognized for 5 minutes.
STATEMENT OF HON. ROHIT CHOPRA, DIRECTOR, CONSUMER FINANCIAL
PROTECTION BUREAU
Mr. Chopra. Thank you, Chairman McHenry, Ranking Member
Waters, and members of the committee, thank you for holding
this hearing.
Since its creation, the CFPB has returned $20.7 billion to
consumers through our law enforcement and supervision, and we
have created unquantifiable returns for the over 205 million
Americans and honest businesses harmed by the illegal practices
that we have stopped. We are currently on track to save people
$20 billion in junk fees every year, and we also expect to
process over 2 million complaints from Americans this year.
Since my last report, we have advanced a number of key
initiatives on credit cards, on medical debt, artificial
intelligence, open banking, and more. My written testimony and
the CFPB's semiannual report details much of this work.
Today, though, I want to highlight the pressing need for
the Financial Services Committee and the CFPB to address the
protection of personal data and financial privacy in an
increasingly digital and algorithmic marketplace. The U.S. has
to lead when it comes to a competitive and innovative market of
the future, and at the same time this cannot be at the expense
of unchecked surveillance like we have seen in China and other
markets. I see this as a critical issue with high stakes for
our economy, our national security, and our liberty.
For over 50 years, the House Financial Services Committee
has played a major role to protect data in our society. The
Fair Credit Reporting Act is one of America's only data
protection laws that covers all background reports assembled
about Americans for use and sale by third parties. The Fair
Credit Reporting Act (FCRA) includes meaningful restrictions to
prevent abuse and misuse of data. Section 1033 of the Dodd-
Frank Act provides consumers with the right to access and
control their personal data, and the CFPB takes very seriously
our mandate when it comes to these laws on privacy and data
protection. We are progressing toward finalizing open banking
rules to develop data-sharing standards that are secure and
have privacy protections when people transfer their personal
financial data to competing companies.
We finalized a key part of the framework last week, which
will set the stage for finalizing the rest of the rule this
fall. We are also moving forward to propose a rule under the
Fair Credit Reporting Act to restrict uses of certain sensitive
data by so-called data brokers, who are assembling dossiers
about each of us without our consent or permission. We are
pursuing this as part of a broader government effort, a
bipartisan effort to protect our national security and our
servicemembers from countries of concern that might seek to
purchase and exploit sensitive data on Americans. We see how
this is not just for fraud, but this is also to undermine our
country.
While the CFPB is taking important steps on protecting
data, it is critical that House Financial Services acts, too.
In my discussions with members on both sides of the aisle here,
there is clear interest in doing more to protect privacy,
ranging from the intrusive communications related to trigger
leads when applying for mortgages or addressing concerns about
the privacy of our sensitive payment transaction data. Big Tech
giants are increasingly entering financial services and
harvesting personal data, and since my last appearance, there
has been public reports that large financial firms, ranging
from PayPal to JPMorgan Chase, are developing plans to fuel
more targeting and advertising using their data. These plans to
potentially monetize sensitive financial transaction data are a
reminder that the U.S. is slowly lurching toward more financial
surveillance and even financial censorship.
We are eager to work with this committee and all of you to
do more to protect against abuse and misuse of data, including
by enshrining more protections into law. We also believe there
are more opportunities to advance legislation to accelerate
open and decentralized banking in our country that also further
protects people's most sensitive data. So I do think there is
so much more we can do together to tackle this problem. I am
really encouraged by all of the efforts that we have been doing
together, and I would like to continue to work on that with
you. Thank you. I look forward to your questions.
[Prepared statement of Mr. Chopra follows:]
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Chairman McHenry. Well, thank you, Director Chopra. I will
now recognize myself for 5 minutes for questions.
I want to begin with data privacy. This is something that
you spent time on as director of the Bureau. It is something
that we in Congress have spent some time on, the last few
Congresses, on trying to update our data privacy standards for
financial services, so let us start there. When we discussed
our data privacy bill at the beginning of this Congress and
passed it out of committee, we focused on Gramm-Leach-Bliley.
Speak to the portfolio of data privacy laws that you enforce
and how you do that.
Mr. Chopra. Yes. So I would think about the range of
privacy laws that are not just financial in nature. The Fair
Credit Reporting Act is not just about the credit reports we
think about. It is also about all the other data that is
collected about us and sold. You also put into law Section
1033. That is about how consumers have control over their data
and how they can permission it and protect it. There are also
key data security standards that the laws that you oversee have
important roles to play.
So, Mr. Chairman, the CFPB is very, very eager to make sure
we are enforcing this properly and that we are developing the
rules that are fit for the times of artificial intelligence and
more intrusive data collection.
Chairman McHenry. Okay. So you spoke specifically in your
opener about bad actors internationally harvesting Americans'
financial data through unregulated or loosely regulated means.
Explain.
Mr. Chopra. Well, when this committee 50 years ago was
involved in putting into place protections, they were worried
about these companies collecting data and sometimes rumors
about us for sale, so the answer was the Fair Credit Reporting
Act, but we see there are new types of data brokers that may
not see themselves as having to comply with that. I think we
all need to do work together to make sure that they know they
have to respect those data protection.
Chairman McHenry. There are a lot of controversial things
that the Bureau does. It is uncontroversial that you are the
repository of data, financial data protection, and there is no
controversy around your enforcement of existing laws. So let us
drill down on FCRA, Gramm-Leach-Bliley, and 1033. Gramm-Leach-
Bliley standard from the 1990s, it was much more about the
financial use of data among affiliates within a corporate
structure. We have a bill to update those data privacy
standards modeled in large part out of California, and we have
had a set of questions in exchange about secondary use of that
data, but how would you in a measured way update the Gramm-
Leach-Bliley data standards?
Mr. Chopra. I think we should accept that notice that we
get all the time is not really effective when it comes to
having meaningful control. I would urge you all to think about
some commonsense permissible purposes or restrictions that
really draw the line of how that data can be in some way shared
or reused or monetized. In some ways, it is similar to what was
put into place in the Fair Credit Reporting Act as well.
Chairman McHenry. Okay. You mentioned trigger leads. Why do
you mention trigger leads as it relates to data protection?
Mr. Chopra. Well, it is a privacy issue. I think that when
you apply for a mortgage loan, sometimes you then get inundated
with calls sometimes from sketchy players. I do not think most
people think that when they apply for something there is going
to be a deluge that everybody knows about it, and mortgage
lenders feel that their customers say to them did you tell
everyone. This is a privacy issue, too, in addition to one
about fairness.
Chairman McHenry. Okay. Now, 1033. I have a concern that if
your regs are put in place, your proposed regs, that this
really entrenches incumbents and the value of incumbents with
financial data. How do you address that?
Mr. Chopra. I think what we want to do is make sure that
you cannot have a bait-and-switch. You cannot say I am offering
you an auto loan, really to harvest it and sell for other
purpose. So what we are trying to do, Mr. Chairman, is find out
with respect to secondary uses, product optimizations, how do
we get that line right so that it does not really entrench
anyone, but still respects people's privacy. The bait-and-
switches that we see, we should have no tolerance.
Chairman McHenry. Okay. Do you have a timeline for this
rule?
Mr. Chopra. We are going to finalize it this fall. My goal
is October.
Chairman McHenry. Okay. With that, thank you. I know there
are other specific questions members have, but thank you for
addressing data privacy in particular. I will now recognize the
ranking member, the gentlelady from California, Ms. Waters.
Ms. Waters. Thank you very much, Mr. Chairman. I would like
to, again, thank Director Chopra for the fantastic job that you
are doing and the leadership that you are providing, and the
way the consumers now have a real voice with your leadership. I
want to talk about one more issue that I think is so important
to all of the people of this country, and that is what you are
moving to do on medical debt. I understand that you have moved
to get started with a rule on medical debt. Will you explain to
us what you are doing?
Mr. Chopra. Yes. So under the Fair Credit Reporting Act,
Congress put into place a prohibition when it comes to medical
information, but there has been a tweak in the rule from many
years ago that has really allowed, in many cases, unverified
medical bills to be permeating people's credit reports. What we
have seen, Congresswoman Waters, is that the accuracy issues
are so serious on those medical bills. We have a situation
where people are facing a total surprise that something is on
their credit report, they cannot rapidly fix it, and it really
can jeopardize their ability to get that loan or to pass some
background check. So we have looked at this issue for years.
There is not even much predictive power of these medical bills.
We have not proposed getting rid of medical credit cards or
other medical loans, just these bills that are often stuck in
an insurance company doom loop. We are going to be looking for
feedback on this, but I think this will be a positive step in
direct line with what Congress wanted of prohibiting this
medical information on credit reports.
Ms. Waters. Let me just go back to another concern that I
have, and this is about late fees and junk fee. Well, I can
tell you how concerned I am about it. Why do you not just tell
us exactly what you are doing about junk fees?
Mr. Chopra. Well, there is an all-of-government effort to
combat this creep of fees that has really permeated throughout
the economy. This is not something that is really a negotiated
price. It is often not upfront. So we have taken a series of
steps to make sure that existing congressional prohibitions,
like in credit cards and in truth in lending, are being adhered
to. At the end of the day, we think markets work best when
people can see the prices upfront, compare it, and people
offering the best service and price can win out. The more we
shift this upfront, the better. I know there has been
legislation passed by the House when it comes to things like
hotels and tickets. We do need to do more to make our markets
work free of these junk fees.
Ms. Waters. Thank you very much. You have made it a
priority also to hold large financial institutions accountable
for their repeated violations of the law. In a speech, you
said, ``Corporate recidivism has become normalized and
calculated as the cost of doing business,'' and I cannot agree
with you more. I appreciate the approach you decided to take to
rein in repeated misbehavior by nonbank firms that callously
violate the law and harm consumers. Can you, again, further
help us out by discussing the rule you issued to implement a
public registry for nonbank repeated offenders and how it will
help CFPB rein in bad practices in the marketplace?
Mr. Chopra. Well, I think it is a problem that when a small
business or small company gets in trouble, they face being
totally wiped out, but for the same exact conduct, a very large
player really can just pay a fine and move on. There has to be
some equal justice. When you have the same misconduct, there
should be a similar sanction. You cannot have a situation where
small businesses just get the hammer and everyone else is sort
of getting a light touch. We have put into place a rule that
will allow law enforcement to coordinate and stop repeat
offenses before they go on. We have seen scammers set up shop
in one State, get caught, move to another State. I think this
is a needed effort to make sure we do end this practice of
constant rinse/repeat offenses.
Ms. Waters. Thank you so much. Of course we have seen banks
like Wells Fargo repeatedly break the law, and then with
regional bank failures last year, we saw how repeated
supervisory warnings were ignored by Silicon Valley Bank, and
more and more and more. Thank you for your work.
Chairman McHenry. I will now recognize the gentleman from
Kentucky, Mr. Barr, for 5 minutes.
Mr. Barr. Director, I am looking at a survey right now.
Seven out of 10 consumers rank good fraud protection as their
top consideration when choosing a financial service provider,
and it stands to reason because in 2023, total global fraud
costs reached almost a half a trillion dollars, including
payments, check, and credit card fraud. This is clearly a major
risk to our financial system institutions and American
consumers. Unfortunately, your regulatory efforts will actually
decrease financial institutions' ability to provide meaningful
fraud protection by making it more costly to provide these
services. For example, your flawed credit card late fee
overdraft and the credit card reporting rules or guidance on
remittance transfers, impeding a financial institution's
ability to charge consumers for a service they provide, is your
attempt to make financial institutions public utilities and not
free market businesses.
Do you recognize, Director Chopra, that fraud detection and
prevention is very, very important, number one. Number two, and
I know you care about consumers, do you recognize that the
``junk fee agenda'' will actually hurt consumers by reducing
fraud prevention?
Mr. Chopra. So let me be very clear. What you are saying is
not accurate in my view, respectfully. We have done so much to
make sure that we can do more to detect and deter fraud. I
think fraud, when it comes to identity theft, when it comes to
the use of generative AI, is going to be an increasing issue,
and even old school check fraud is increasing.
Mr. Barr. I agree. Director, reclaiming my time. I agree
that AI and all of these other technological innovations can
help with fraud prevention, but do you actually talk to the
financial service providers that you oversee about the junk fee
agenda and how that is going to reduce their ability to invest
in fraud protection? Do you actually talk to them about this,
the regulated entities that you oversee?
Mr. Chopra. Very, very frequently.
Mr. Barr. Well, they tell us that you do not listen because
what they are telling us is that your junk fee agenda is going
to limit their ability to prevent fraud, and I want you to take
a look at that. I think you need to take a look at that because
if you do not, it is all junk economics.
Mr. Chopra. Well, we are doing a lot more. I am sorry.
Mr. Barr. Second question. Let me move on because I want to
talk about data that is supposed to undergird your
administrative decision making. Under your leadership, the data
collection efforts and cost-benefit analysis have simply lost
credibility. The Bureau has played fast and loose with the data
you rely on, ultimately leading to harmful rulemakings that
rely on junk economics. For example, the Bureau's so-called
analysis of the deterrence effects of late fees is largely
unjustified speculation that favors political results you seek.
The overdraft rule ignores market trends and innovation and
instead cites data that is more than decades old.
In the credit card late fee rule, your calculation of the
impact to annual percentage rates changed significantly between
the release of the proposed and final rules, relying on a mere
assumption from a previous academic paper rather than any
credible quantitative analysis. The mortgage closing costs,
request for information (RFI), cites only two data points.
Shockingly, for the credit header provision of the FCRA
rulemaking outline, you are not even appealing to data at all.
So Mr. Chopra, with so many examples of misuse or complete
avoidance of data and increasing use of unjustified conclusions
from what can only be loosely called analysis, how can the
public or Congress trust the rulemakings or the administrative
decisions that you promulgate?
Mr. Chopra. Well, some of it is really a balance. We try
and make sure that we are using existing data that is already
there because we often get feedback, including from you, about
doing too many collections. So we will rely and look at old
studies as well as new studies to see changes in the market. I
would say empiricism is a foundational part of the CFPB's work
because that is a lens in how we can make the best possible
decisions. I agree, sometimes we will not always have the
newest and freshest in fast-moving markets, but it is also a
balance about making sure we are not engaging in too much
burden as well.
Mr. Barr. You have to do a lot better job because you just
do not have credibility. The data is not there to support any
of what you are doing.
Mr. Chopra. I would respectfully disagree.
Mr. Barr. I know you disagree with that. I disagree with
you about that. The Bureau should want rigorous cost-benefit
analysis to defend the Bureau's decisions. This is in the
interest of the director's office. It is in the interest of the
Bureau to have defensible data, and you do not have it. Final
question, Director Chopra. Who decides if a civil investigative
demand appeal is approved or denied?
Mr. Chopra. With Criminal Investigation Divisions (CIDs),
sometimes they go to a district court. Sometimes they can go to
appeal to the director. Oftentimes, it is negotiated before it
goes through that appeal process.
Mr. Barr. Yes. So my time has expired, but this is the
problem. You are the judge, jury, and executioner, and that is
why people do not see the process as due process.
Chairman McHenry. The gentleman is time has expired.
Mr. Barr. I yield.
Chairman McHenry. The gentlewoman from New York, Ms.
Velazquez, now recognized for 5 minutes.
Ms. Velazquez. Thank you, Mr. Chairman. Director Chopra,
welcome, and thank you for being here.
Earlier this week, the World Bank upgraded its outlook for
the global economy, estimating that it will expand by 2.6
percent this year on the strength of sustained growth in the
United States: not Russia, in the United States. The Agency
expects the U.S. economy to expand by 2.5 percent in 2024. All
this is happening thanks to the economic policies President
Biden and agencies like the CFPB are taking. Director Chopra, I
am grateful for your work of putting over $20 billion back in
the pockets of working families. As the ranking member of the
Small Business Committee, I am particularly grateful for
consistently communicating the importance of spurring
competition and making opportunities available to small
businesses and new entrants.
I also appreciate that you have committed the CFPB to
ensuring we have the data to make sure all Americans have the
opportunity to access credit. For too long, we have
marginalized huge numbers of our country because we lack clear
data on lending. These policies will keep the U.S. a country
where all small businesses can succeed. When you are creating
rules, do you ever tailor them with smaller institutions in
mind?
Mr. Chopra. Yes, and under my leadership, we have
routinely, in many ways, proposed exemptions for them.
Ms. Velazquez. Is it not true that over the last couple of
years, you actually exempted smaller institutions from some of
your requirements, like the Section 1071 rule, to make sure
they had the flexibility to serve their communities and grow?
Mr. Chopra. Yes. We exempted thousands of institutions in
some of our rules.
Ms. Velazquez. Have you not also provided smaller
institutions with more time to comply with a new rule than
their larger counterparts?
Mr. Chopra. Yes, substantially more time.
Ms. Velazquez. Is it not also a fact that you have
intentionally focused the Bureau's enforcement activities on
larger repeat offenders and avoided going after smaller, less-
resourced businesses?
Mr. Chopra. Yes. I inherited an enforcement docket that I
think was too heavily focused on small players, and we have
instead shifted to players engaged in nationwide market-wide
harm.
Ms. Velazquez. Thank you. From what I have seen of your
work, the CFPB has incorporated the concerns of small
businesses and their unique needs throughout its work,
specifically when it comes to the final rule on credit card
late fees. I understand that it only applies to the top 30 or
35 issuers. Is that not correct?
Mr. Chopra. That is correct.
Ms. Velazquez. And that financial institutions under $10
billion in assets are completely exempt, which includes small
banks and virtually, all credit unions. Is that not also
correct?
Mr. Chopra. That is right, and we see small banks and
credit unions wanting to provide them tools to gain more share
as they are offering lower rates on average and they are not
building business models on back-end fees.
Ms. Velazquez. I thank you for your thoughtful work on
behalf of consumers and smaller institutions. Director Chopra,
you and I have talked extensively about the need to enhance
Federal disclosure requirements for small business financing.
Increasingly, we have seen States becoming more active on
commercial financial disclosures. Seven States have already
passed laws requiring disclosures for small business borrowers,
and seven additional States are debating similar measures.
However, not all disclosures are created equal with some
enacted laws requiring Annual Percentage Rate (APR) disclosures
and others do not. What is the practical impact of this
patchwork of requirements, both on commercial lenders and small
business borrowers?
Mr. Chopra. One of the things that is important for the
committee to recognize is many small businesses actually use
both consumer credit, especially the smallest businesses, in
addition to small business loans. I think comparability and
standardization of how one can compare apples to apples is key,
and I do encourage you to continue pushing for clear small
business loan disclosures.
Ms. Velazquez. Thank you. Mr. Chairman, I yield back.
Chairman McHenry. The gentlelady yields back. I will now
recognize the gentleman from Missouri, Mr. Luetkemeyer, for 5
minutes.
Mr. Luetkemeyer. Thank you, Mr. Chairman. Good morning, Mr.
Chopra. You made a lot of comments a minute ago about data
protection, and I think it is one of the most serious issues we
have facing us today. My comment would be, if you are really
serious about data protection, I hope that you work with us
with regards to us being able to rein in beneficial ownership
and the rulemaking that goes with it. Originally, it was only
four data points. Now it is 52 data points that we are looking
at. That really endangers a lot of information on our citizens
and businesses unnecessarily. This is where you can help us. If
we can rein this in and get it back to where the rule
originally was, we would sure appreciate your help on that.
Mr. Chopra. Some financial institutions and others have
raised this with me. It is part of a Financial Crimes
Enforcement Network (FinCEN) rulemaking, and I am actually
happy to talk about that with you.
Mr. Luetkemeyer. I look forward to it. One of the things
that we talk about here is junk fees. That word really riles me
up because it is not a legally enforceable term. It is
something you guys have made up, but one of the things that is
included in junk fees, in your definition anyway, is late fees.
I have here a Cato Institute letter from Nicholas Anthony, 101
late fees charged by the government. Have you looked into any
government late fees at all?
Mr. Chopra. Yes. Actually, I think there is a need to do a
wholesale review of some of the fees that are being charged,
even by government. There has been ongoing discussions about
how to make sure that they are in line with what Congress
wanted, that they are sensible, that we have a good policy
around that, so I would really support looking at a lot of
those fees.
Mr. Luetkemeyer. Mr. Chairman, I would like to introduce
for the record, without objection, the letter.
Chairman McHenry. Without objection.
[The information referred to was not submitted prior to
printing.]
Mr. Luetkemeyer. Thank you, also title insurance. Director
Chopra, Congress explicitly omitted the business of insurance
from CFPB statutory authority under Dodd-Frank. In fact, the
business of insurance was explicitly excluded from the
jurisdiction of CFPB because it is effectively regulated at
State level. You have confirmed under oath and on the record
before this committee that CFPB has no authority to regulate
the business of insurance. Do you stand by that?
Mr. Chopra. Correct. The business of insurance is in the
Federal Trade Commission (FTC) Act, the Consumer Financial
Protection Act (CFPA). It is in the McCarran-Ferguson Act. It
describes a certain set of activities related to it.
Mr. Luetkemeyer. So why are you asking for information with
regards to title insurance fees and trying to get in that
business?
Mr. Chopra. Well, just so you know, we do regulate aspects
of insurance. Certainly, the Real Estate Settlement Procedures
Act, the CFPB, I think, for years has taken enforcement actions
related to title. We have important roles when it comes to
mortgage insurance. We also have a role in homeowner's
insurance. So I think the business of insurance really relates
to some capital and liquidity issues, but do know I am very
aware about the restrictions we have, and we are trying to be
very mindful about where we do have explicit authority.
Mr. Luetkemeyer. Well, it would appear to me that there is
a severe encroachment there on the insurance folks when you are
looking at this, at title insurance. I do not see any reason
for the CFPB to involve itself.
Mr. Chopra. Well, the Real Estate Settlement Procedures Act
specifically goes through how things are disclosed, including
title insurance. It also talks about kickbacks.
Mr. Luetkemeyer. If it is correctly disclosed, where is
your authority?
Mr. Chopra. Well, I am happy to share with you, we have a
range of authority as it relates to insurance in the mortgage
market. Again, as it relates to the business insurance that the
State regulators oversee, we respect their role completely.
Mr. Luetkemeyer. Okay, very good. You talked a minute ago
about credit cards for medical payments, and I wrote a letter
to you some time ago. In fact, it was almost a year ago,
actually, back in October 2023, and I got a letter back that
did not answer my questions with regards to that. I am very
concerned. It is a good way for some people to pay their bills.
It is a regulated product, and yet you are trying to restrict
that, from what I understand, and the questions in my letter
were not answered. So let us try and go through them very
quickly. Please indicate where the term ``medical payment
product'' is used anywhere in statutory law.
Mr. Chopra. Let me just clarify. The rule we have proposed
as it relates to credit reporting and medical debt does not
include medical credit cards. So medical credit cards are a
fairly more advanced innovation of recent years where there is
point-of-sale loans or credit card brokering at the healthcare
facility. We have been studying this market because it has been
growing quite quickly, and it has been a source of some
significant consumer complaints. We have not taken any sort of
specific action on it, but I think we do want to understand
when a patient is----
Mr. Luetkemeyer. What is your authority to do that?
Mr. Chopra. Under the Truth in Lending Act.
Mr. Luetkemeyer. Okay. To regulate medical product, medical
payment product?
Mr. Chopra. No. So Congress in 1968 set the parameters for
extensions of credit in the Truth in Lending Act and did assign
authority to enforce that to the CFPB. So even if you are
getting a third-party medical loan, regardless of where it is
offered----
Mr. Luetkemeyer. Thank you. My time has expired. I yield
back, Mr. Chairman.
Chairman McHenry. The gentleman from California, Mr.
Sherman, is recognized for 5 minutes.
Mr. Sherman. Mr. Chopra, thank you for all your Agency
does. They do not give me enough time to go through the whole
list of everything you have accomplished. I do hope that you
are successful with limiting late fees on credit cards, and I
know that is held up in the Court, but this is a chance to save
$10 billion annually for American consumers. Of course, with
today's computers, the cost that the bank incurs dealing with
the issue, I mean, I remember in the 60s, the 70s, people, a
human being would have to look at your late fee and then decide
what to do. Human beings are not involved in determining what
to do if my credit card payment comes in late.
Second, I want to thank you for your prompt response and
look forward to working with you on the issue of getting your
payment in by a particular hour because we in California are
told your bill is due June 30. So if at 2:30 p.m. on June 30,
you try to pay, you get a late fee. In fact, today, especially
with automated systems, people think if it is due June 30th,
they can watch the 11:00 news and still get their payment in on
time, and then instead, they get a late fee.
I want to pick up on what the ranking member of the Small
Business Committee pointed out. How important it is that you
craft your regulations for small and community-based financial
institutions, and I do want to say you are quoted as calling
title insurance a junk fee, and you are shaking your head. You
would not call that a junk fee, neither would I. Now, Senator
Kennedy, with whom I have worked with well on a few things, has
asserted that the CFPB is not following the law because this
year, most recent year, the Federal Reserve has revenue but
does not have earnings, and I think the senator may have it all
wrong. It is true that due to higher interest rates, a smaller
Fed portfolio, the Fed has not had extra money to transfer to
the U.S. Treasury in a particular year, but Congress certainly
did not expect that your operation would shut down or
repopulate based on whether the Fed is making money in a
particular year. That is why we use the word ``earnings,'' but
Senator Kennedy thinks that we use the word ``net earnings.''
No, net earnings is found elsewhere in the Federal Reserve
Act, meaning that anyone looking at that act knows that there
is a difference between net earnings, which is net profits and
earnings, which is revenue. Of course, the senator seems to
lose track of the fact that the Fed has made a lot of money in
prior years, and there is nothing in the bill that says that
your budget has to come from earnings in a particular year.
I do want to focus on manufactured identities. You hosted
an academic research meeting on auto lending research in the
first half of 2023. Manufactured identities cost the auto
lending industry almost $2 billion. That is up substantially.
Will you consider studying different ways to prevent the fraud
from manufacturer-synthetic identities?
Mr. Chopra. Yes. Industry and the regulators need to be
thinking with Congress about future ways of doing identity
verification. I think our way of doing it now is expensive, and
it also does not deter fraud.
Mr. Sherman. I will also point out that our colleague, Mr.
Foster, has the concept of digital identity for all Americans.
That makes an awful lot of sense. Credit header data is used to
combat fraud and to comply with the Know Your Customer
requirements. People on this committee know how important those
requirements are to our society and to me personally, but if we
called a credit header data report a ``consumer report,'' that
would interfere with the process. Can we provide that credit
header data is not a consumer report when used to comply with
the Know Your Customer?
Mr. Chopra. Well, compared to others, it is sort of a
short-form consumer report, but I take the point. It is
important for financial institutions to be able to use certain
information to combat fraud, and we are going to make sure we
can keep that going.
Mr. Sherman. Thank you.
Chairman McHenry. The gentleman time has expired. The
gentleman from Michigan, Mr. Huizenga, is now recognized for 5
minutes.
Mr. Huizenga. Thank you, Mr. Chairman. I would like to just
start with submitting an article for the record from Law and
Liberty, ``Can the Fed Fund the CFPB?''
Chairman McHenry. Without objection.
[The information referred to can be found in the appendix.]
Mr. Huizenga. So the analysis from my Certified Public
Accountant (CPA) friend from California, let us just say that
is not a universal view of how the CFPB can or cannot be funded
through those Federal funds.
Mr. Chopra, I want to talk a little bit about the complaint
data base. I am assuming it would not surprise you if I told
you that the complaint data base has increased nearly fivefold
since 2022. I mean, earlier you just said, I think--I am
sorry--I think it was 2 million complaints that you have. You
are aware of that, correct?
Mr. Chopra. I do not know if it is exactly fivefold, but we
have seen quite an increase.
Mr. Huizenga. Okay. Our data indicates fivefold or
thereabouts. Would you be surprised, however, to hear that the
duplicative narratives, when it comes to those complaints, are
somewhat of a regular occurrence in the data base?
Mr. Chopra. Yes. We do have this issue, for example, when
someone has a mortgage servicing issue. They may file it
against the lender or the servicer or when there is multiple
parties involved, but we also want to make sure that we are
seeing how different users are using the system so that we can
better control it.
Mr. Huizenga. Okay. So what I am hearing, I think you are
trying to parse to say, well, it might be really the same
complaint there or the same person, so that is why they are
using the same language. According to third party and then you
were, I think, acknowledging at the end there that, well, you
are trying to figure it out.
Mr. Chopra. Yes. We are trying to see if there are some
parties that are filing multiple. We are always policing.
Mr. Huizenga. Well, let us explore that a little bit.
According to third-party analysis that we have received, it
appears that some are using the CFPB's data base to discharge
legitimate debt that they owe. That would be a concern. In
fact, there are videos online that promise results if they
follow certain steps, including using your data base, that
there is going to be debt relief. For example, you have some
narratives that are literally word for word, character for
character being repeated thousands of times. In fact, the top
narrative in the complaints this past year was repeated over
8,000 times. So I am assuming you cannot view this as a
coincidence.
Mr. Chopra. Yes. Yes. We have to figure out to the extent
that there are algorithms being used or AI being used or
providers who are seeking to dispute that relief.
Mr. Huizenga. Yes. I think that trail of breadcrumbs is
pretty clear.
Mr. Chopra. Yes. Yes, and this has been an issue for many
years that we have to be always attuned to, and that is why
when we forward it for----
Mr. Huizenga. I am so sorry. I have 2 minutes. I need to
move on because I also need to touch on the FDIC. I know the
chairman had done this. The independent report that had gone
out, you did not mention that in your written opening, but do
you agree with the findings?
Mr. Chopra. Yes. I think it is very important that the
recommendations be effectuated quickly.
Mr. Huizenga. All right. So as the head of an Agency
yourself, you agree, as the report said, culture starts at the
top?
Mr. Chopra. Well, certainly I think leadership, the board
is----
Mr. Huizenga. Okay. That is all right. I am looking for
short answers. As a director of the FDIC, do you believe that
you have a responsibility to ensure that there is a working
environment that is free from discrimination, sexual
misconduct, and harassment?
Mr. Chopra. Yes. The law delegates to the board the
responsibility.
Mr. Huizenga. Okay. Let us explore that a little bit.
Yesterday, Director McKernan indicated that although the FDIC
is ``run by a board, most of the decision making is actually
done by the chair.'' I assume that has been your experience,
but I am curious. How much of the day-to-day operations are you
involved in?
Mr. Chopra. I am not, but I try to make sure I understand
all of the things that are appropriate for the board and
certainly this issue.
Mr. Huizenga. Sorry. I have 50 seconds left. Based on the
report and the widely acknowledged problems outlined by the
Cleary Gottlieb report, are you prepared to play a more active
role in making sure the culture is fixed at the FDIC?
Mr. Chopra. Yes, and since the report, I have been
increasingly engaged in making sure that we are----
Mr. Huizenga. Great. Now, yesterday, some of my colleagues
on the other side of the aisle stated that, ``Female leadership
was needed at the FDIC.'' Now, we have talked about this before
in committee and private, your active role in forcing out the
last female chair of the FDIC.
Mr. Chopra. She actually resigned.
Mr. Huizenga. She resigned under a tremendous amount of
pressure, sir, a tremendous amount of pressure. You talked to
her privately. You talked to her publicly. It is a tremendous
amount of pressure that you helped apply.
Mr. Chopra. I do not agree.
Mr. Huizenga. How would you respond to my colleagues who
suggest--how would you suggest--my time. How would you respond
to my colleagues who suggest female leadership is needed?
Mr. Chopra. Well, at the end of the day, we want diverse
leadership so everyone feels included and valued.
Chairman McHenry. The gentleman's time has expired.
Mr. Chopra. That is very important.
Mr. Huizenga. I yield back.
Chairman McHenry. I will now recognize the gentleman from
New York, Mr. Meeks, for 5 minutes.
Mr. Meeks. Thank you, Mr. Chairman. I want to start by
saying, Mr. Director, how pleased I am by the Supreme Court's
recent decision to uphold the funding structure of the CFPB.
The CFPB has a long track record of success, helping hundreds
of millions of people, constituents in both red and blue
States, you know, and it causes them to be made whole. I hope
that these types of funding challenges are now behind us so
that the CFPB and you, Mr. Director, can remain focused on
doing the good work of delivering consumer relief for the
people, and that is why we created this Bureau, for the
consumer, the only one that did not have a voice here in
Congress.
Now, the CFPB has a wide variety of rulemakings underway,
and I want to try to touch on two--hopefully, I have the time
to do that--one, the proposals under consideration related to
the Fair Credit Reporting Act. I appreciate your engagement on
the issue of protecting consumers from identity theft. The
impacts of this can be devastating, and I know we all want to
make sure our constituents and loved ones are strongly
protected from bad actors.
In a recent response letter to me and several of my
colleagues, you stressed that ``The Bureau takes seriously the
need for financial institutions to be able to prevent identity
theft, fraud, and money laundering,'' and that you will not
issue a rule that will prevent financial institutions from
meeting the requirements of the Bank Secrecy Act. So I thought
this was very good, so let me just make sure. I want to confirm
that when you issue the proposed rule, it will not include
restrictions that make it more difficult for banks to use their
state-of-the-art tools to combat identity fraud and comply with
anti-money laundering laws. That is correct?
Mr. Chopra. Yes. We are still going through the process of
developing a proposed rule, but certainly fraud detection,
verifying identity is just so critical to how the banking
system works, and I know you know this well. We are seeing all
sorts of entities trying to harvest data about people for
illegitimate uses, stalkerware, national security issues, but
when it comes to reasonable fraud detection, we want to make
sure they can continue.
Mr. Meeks. That is correct, and I thank you for that. Let
me just follow up on that one real quick. How does the CFPB
plan to tailor the rulemaking to distinguish between companies
that only collect consumer data versus those that sell consumer
data?
Mr. Chopra. Yes. So we are working on this in the scope of
the Fair Credit Reporting Act, and I just want to raise, as
Chairman McHenry and I were discussing, there is a need to
update a lot of our data protection laws. I understand, the
CFPB, we are going to administer our rules, but we are dealing
with a statute that is old. I think it is time to constantly be
thinking about ways that you all can be updating it as well,
especially for the digital age and where we have fundamentally
different threats.
Mr. Meeks. Thank you for that. The second area is that the
Bureau has said its proposed rule under Section 1033 would
grant consumers more control over their financial data and
protect it from misuse, discourage junk fees, and give
consumers power to walk away from bad service. Now, I am very
excited, actually, about that prospect because I hear that even
at my own home, so this is good.
Under the proposed rule, data accessed from banks through
data aggregators for primary use would be allowed, and because
incumbent banks already have the consumer's data being
considered in the rulemaking, they would not be subject to the
limitations for assessing data that newer and smaller firms
would be subject to. Given the fact that incumbent banks and
other institutions already hold years of accumulated consumer
data considered in the rulemaking, I am concerned that the
limitations introduced by the proposed rule could mean that
larger, more traditional incumbents will have a large
competitive advantage compared to innovative fintechs, credit
unions, and smaller banks. How would a rule issue ensure that
newcomers and smaller players can compete on a level playing
field?
Mr. Chopra. Well, that is exactly the goal. You will be
able to take all of your data with that incumbent bank,
permission it securely and safely to any bank, fintech,
whatever it may be of your choice. This is a huge way of
unlocking the hold that sometimes an incumbent has over you,
and it is a slow way to ultimately get to faster switching.
Consumers are going to be better off if they can quickly switch
without going through lots and lots of paperwork and
bureaucracy, and that is exactly what we are trying to achieve.
Mr. Meeks. Thank you for that.
Chairman McHenry. I will recognize the gentleman from
Georgia, Mr. Loudermilk, for 5 minutes.
Mr. Loudermilk. Well, thank you, Mr. Chairman. Director
Chopra, thank you for being here.
In October of last year, 2023, the CFPB and the Department
of Justice jointly warned lenders that denying lines of credit
to borrowers based on the borrower's immigration status may be
a violation of the Equal Credit Opportunity Act. Specifically,
you warned that immigration status could be used as a proxy for
protected characteristics and lead to civil rights violations.
Now, I am concerned with this overall guidance. Others are
concerned that it is just vague. I think it could have a
chilling effect on certain sound risk-based lending practices,
which could leave institutions with little choice but to lend
to borrowers who are unlawfully present in the United States.
Does the Bureau still stand by this October 12 joint
guidance on immigration status in lending?
Mr. Chopra. Well, I am happy to clarify. This guidance is
very clear that you absolutely can use immigration status when
you are thinking about----
Mr. Loudermilk. You cannot?
Mr. Chopra. You can.
Mr. Loudermilk. You can?
Mr. Chopra. It is very clear that you can. I think what we
are trying to also warn about, you may have seen the
enforcement action against Citigroup for discriminating against
Armenian Americans. So national origin discrimination is
illegal, so the guidance----
Mr. Loudermilk. That is different than immigration status.
Mr. Chopra. Oh yes. You cannot use national origin, but you
can use immigration status, and what we are trying to say is
almost exactly what you are saying. If it is a part of a risk
determination, that is fine. By the way, it did not have
anything to do with unlawful immigration. It had to do with
even immigration status green card versus naturalized citizen.
It is much broader. So I hope we can do more to clarify that
and make sure it is clear. The guidance does say you may use
immigration status.
Mr. Loudermilk. So based on what you are telling me here,
it definitely needs to be clarified because lenders out there
are looking at is the CFPB trying to force lenders to lend to
illegals.
Mr. Chopra. No, we are not trying to force lending to
anyone, and I think we have gotten some questions about this,
and we are going to try and continue to work with institutions
who have questions, but overall, we have actually received some
positive feedback from institutions about this.
Mr. Loudermilk. Can you clarify this to ensure that lenders
can use whether or not somebody is here legally----
Mr. Chopra. Well, it is written in the guidance, so we will
figure out----
Mr. Loudermilk. Right.
Mr. Chopra. I am happy to talk to you further, and
especially, if you hear an institution that has specific
concerns, we would be happy to meet with them at that----
Mr. Loudermilk. Let me just make sure we clarify because a
lot of times things are said in committee, but by the time
those who are here testifying get back to their organizations,
things change. Is it unreasonable to assume that if someone
because they are not clear on this regulation and we have
seen--are we in an era to where there is not a perceived
partnership between regulators and lenders or financial
institutions. They see you guys as opponents because of the way
that things have been operating. Taking that approach and with
vagueness of a rule, they feel like that they have to make
loans to those who are not here legally. You do not have to be
a naturalized citizen to buy property, but if you are not here
illegally, you are subjected to deportation. Do you agree that
adds additional risk to a lender if they lend to someone who
could be deported, and if they are, how do they recoup that?
Mr. Chopra. Yes. We never tell institutions who they have
to lend to or that they have to lend to someone. What is
prohibited under Federal law and where we have found issues is
discrimination based on religion or discrimination based on
national origin. That is codified in statute. So there is
immigration status. What the guidance tried to articulate is
just be wary that you are not engaging in certain types of
prohibited discrimination, but you can use immigration status
in your risk determination. What you said upfront, I think that
is what the guidance is getting at.
Mr. Loudermilk. Well, I think it definitely needs to be
clear and I will argue the point that you may not say that you
are forcing a business to loan or act in a way, but through
rules and through enforcement actions, indeed, not just you,
but many regulators actually do.
Mr. Chopra. Well, respectfully, I think the issue you are
concerned about, many of those individuals cannot even be
authenticated under Bank Secrecy Act. So I think I am happy to
talk with you further.
Mr. Loudermilk. All right. Thank you. I yield back.
Chairman McHenry. The gentleman yields back. The gentleman
from Georgia, Mr. Scott, is now recognized for 5 minutes.
Mr. Scott. Thank you, Mr. Chairman. Excuse my cold. I have
been on this committee 22 years, and no one has greater respect
for my Republican colleagues than I do, to tell you the truth,
but as the good Lord told David in the book of Psalms, the man
I was named after in the Bible, he said this to him, ``Ye shall
know the truth, and the truth shall set you free.'' Here is the
truth. In 2023 alone, the CFPB resolved lawsuits that required
law breakers to pay consumers over $3 billion in compensation
and $500 million in civil penalties. Under your leadership,
Director Chopra, your leadership, the CFPB bill has held
financial institutions responsible for engaging in predatory
practices, ensuring fair treatment of consumers when they open
accounts. Listen to this one very carefully: just in this past
year as of May 2024 and also in 2023 alone, the CFPB resolved
lawsuits that required law breakers to pay consumers $3 billion
in compensation and $500 million in civil penalties.
You have an outstanding record, and not only your record,
but the record of President Biden and your staff, and please
tell them that we respect that. The truth is here, and that is
what I wanted to get clear in the very beginning. No ill
feelings to my Republicans. They have to do what they have to
do, but I wanted to make sure that we spoke the truth for the
American people.
Here is what I am concerned about, this repeatism. I want
you to talk about that and let us know what you are doing with
that because thanks to this little deal right here, these scam
artists are doing a job on our American people and they are
repeating it, and they look at it as a cost of doing business,
and they will go in another part of the country and repeat the
same thing. This is the issue before you today. Take a few
moments and share with the American people how you are
protecting them from these scam artists who do it repeatedly.
Mr. Chopra. I think it is a huge problem when someone can
defraud people in one part of the country, get caught, and then
set up shop elsewhere and almost do the same thing just with
different names. We are going to do our part. We are looking
more beyond fines, individual liability, more restrictions. We
are setting up a registry to deter repeat offenders to have
better law enforcement coordination. I think I would also urge
all of you, and Senator Shelby, when he was on the Banking
Committee, also raised concerns about the unfairness of the
system when some people are held to account and others get off
scot-free. I do want to urge you all to rethink on whether we
should enhance some of the criminal liability provisions for
some of these outright frauds.
Mr. Scott. Also I was here, as I mentioned, when Congress
gave the CFPB the authority to establish a registry of nonbank
offenders in the Consumer Financial Protection Act. Tell us why
it is very important to include nonbank financial companies in
any repeat offender rule.
Mr. Chopra. Well, we already have a list of insured banks
and credit unions. It is a finite list where we know a lot, but
when it comes to the tens of thousands or more of others, we
have much less visibility.
Mr. Scott. Thank you, Director.
Chairman McHenry. The gentlewoman from Missouri, Mrs.
Wagner, is now recognized for 5 minutes.
Mrs. Wagner. Thank you, Mr. Chairman. Good morning,
Director Chopra. Yes, let us talk some truth, and let us do it
quickly with brief answers because I have a lot of questions
here.
Do you believe, sir, financial institutions should engage
in risk-based pricing when making loans to their customers?
Mr. Chopra. I do not think we should force it, but I think
they often do because it is appropriate----
Mrs. Wagner. Should they or should they not risk-based
pricing when making loans? A simple ``yes'' or ``no.''
Mr. Chopra. Again, I am trying to answer. It is not to
order them, but it is appropriate for them to be able to
measure risk.
Mrs. Wagner. Yes, they have to measure risk in order to
give a loan. Good. The credit card late fees and overdraft
rules will make it harder for lenders to price loans according
to the risk involved. Why is the CFPB writing rules that erode
the fundamental principle of risk-based pricing?
Mr. Chopra. Actually, will not it encourage better risk-
based pricing? I am not sure why making late fees in line with
the congressional prohibition would undermine risk-based
pricing. In fact, risk-based pricing, they have the data they
need to price it more effectively, so I actually do not follow
at all----
Mrs. Wagner. Then answer this ``yes'' or ``no.'' Yes or no,
is there a strong likelihood that by drastically reducing the
fee for paying late, this rule will actually encourage more
consumers to pay their credit card bill late?
Mr. Chopra. Well, I hope you are aware that----
Mrs. Wagner. The answer is ``yes'' or ``no.''
Mr. Chopra. No because credit card----
Mrs. Wagner. Okay. Really?
Mr. Chopra [continuing]. companies have the ability to
raise your interest rates if you are late. They have the
ability to----
Mrs. Wagner. It will not encourage more consumers to pay
their credit card late? Really?
Mr. Chopra. No, no, no. You are forcing me to say ``yes''
or ``no'' and not allowing me to clarify, so I would like to
get----
Mrs. Wagner. I am going to clarify.
Mr. Chopra. Feel free.
Mrs. Wagner. Really? If the point of the late fee rule is
to reduce the penalty from $32 to $8, will it not be cheaper
for the consumer to pay late?
Mr. Chopra. No. So you are allowed to charge a late fee in
excess of $8. The financial institution needs to show their
math. The CARD Act bans unreasonable late fees. We are using an
old formula to help them do that. They will still be able, do
not worry, to punish their customers for paying late.
Mrs. Wagner. All right. Let us talk about CFPB's most
recent CARD Act Report. It defines the term ``persistent debt''
as a consumer paying more for interest and fees on a loan than
they are paying toward the principal in a given calendar year.
Given that the credit card late fees rule will undoubtedly
result in more consumers paying late--we are dropping it from
32 bucks to 8 bucks--and, therefore, getting deeper into debt,
is it not true that your late fee rulemaking will cause
persistent debt to increase?
Mr. Chopra. Well, I guess I would say this. Would you not
think that if a financial institution then raised the minimum
payment, that person would then pay more, but they would be
less likely to be in persistent debt? So the response is
different----
Mrs. Wagner. Director, your own rule indicates that more
card holders will pay late. Your rule indicates that more card
payers will be late.
Mr. Chopra. I think you are taking that out of context, but
certainly, we want to make sure that the congressional
prohibition, respectfully, that bans unreasonable fees has
fidelity.
Mrs. Wagner. Will you commit to measure the impact of the
proposed rule on persistent debt and then require that the rule
be rescinded if it does?
Mr. Chopra. Well, it would be illegal for us to require a
rescission in that way, but certainly in our biannual CARD Act
Reports, we will always seek to study all of these things
that----
Mrs. Wagner. You are encouraging persistent debt----
Mr. Chopra. We are not. We are actually encouraging common
sense.
Mrs. Wagner [continuing]. and encouraging people to pay
late, Director Chopra.
Mr. Chopra. We are encouraging common sense.
Mrs. Wagner. Well, let us go further. As part of the fee
schedule charged by the CFPB for a Freedom of Information Act
(FOIA) request, the CFPB charges $23 per 15 minutes or $92 per
hour. A professional staff conducts a search for information,
which may be a rate set by the Office of Management and Budget.
Ninety-two dollars per hour to search for documents seems
pretty darn high and very similar in concept to your definition
of junk fee, which, again, you define as one in which the fee
exceeds the CFPB's cost of searching and therefore leads to
profit for the CFPB. Will the CFPB take action to examine this
junk fee and reduce the amount charged for FOIA requests
instead of profiting off of hardworking Americans who are
simply seeking to learn about how government decisions are made
within the opaque CFPB?
Mr. Chopra. Yes, I actually think those have only been
charged 2 or 3 times in the past few years. It is very rare,
but I will look at that.
Mrs. Wagner. It is not very rare, sir.
Mrs. Kim [presiding]. The gentlewoman's time is up.
Mr. Chopra. I do not think actually----
Mrs. Kim. Director Chopra, you can respond to Mrs. Wagner's
questions in writing.
Mrs. Wagner. I yield back.
Mr. Chopra. I think it goes to the Treasury.
Mrs. Kim. Time is up.
Mrs. Kim. I would like to now recognize the gentleman from
Missouri, Mr. Cleaver, for 5 minutes.
Mr. Cleaver. Thank you, Madam Chair. Mr. Director, thank
you very much for being here today and for your accessibility.
I appreciate it very much. I do realize that the Agency you
head is not a regulatory Agency, but I and a few others have
been involved with this American company, Credit Union, Navy
Federal. I know that you also are aware of what I think should
be an embarrassment to the Federal Government and to them, for
that matter.
They approved, as you may recall, 75 percent of all white
borrowers and 50 percent of black and brown borrowers, and the
minorities had the same income as the majority, and the
disparity is just embarrassing. I know that this is not a
period in our history when we like to talk about bigotry, but
here, even in 2024, bigotry is still around, and it poisons our
past and it terrorizes our future. So, I am still very
concerned about what is happening.
A number of us have met with the Navy Federal Credit Union,
which, by the way, is the largest credit union on planet Earth,
and they are larger than probably almost any bank that we are
doing business with, except probably the top 10. It bothers me
a lot because I wish that you could be involved based on the
statements you issued. It is my strong and irreversible belief
that you were right in the statement you gave to the final rule
implementing the Community Reinvestment Act. You said it is
time for State legislators to accelerate efforts to ensure
certain nonbank entities have community reinvestment-like
requirements, particularly in sectors where there are
significant public subsidies or support for business
activities. Credit unions are exempt. Bankers have been
demanding that they be included since I have been here, which
is 20 years.
What say you on the whole issue about coming up with some
kind of similar process to Community Reinvestment Act (CRA)
that would be used in credit unions like Navy Federal?
Mr. Chopra. Well, let me just say I want to be careful. We
do have enforcement authority over large credit unions, so I
want to be mindful. More generally, it is very hurtful to
people when they think that even in serving in the military,
working hard, serving their country that they still may face
discrimination. So we take this very seriously.
With respect to CRA, we have seen many States enact CRA for
certain nonbanks. Banks are required to do it, but many of
those institutions that are not banks are getting a lot of
direct or indirect benefits. The majority of mortgage lending
is now outside of banks, and so we should really look hard,
whether by Congress or continued by the States. The banking
lobby is no fan of the CFPB, but I think they would also agree
that we should have stronger CRA requirements for other
mortgage lenders that enjoy those benefits.
Mr. Cleaver. I am 100 percent certain that they would agree
with what you just said based on my history with them. I just
want to make sure that everyone understands that this is not a
theory. We have the proof. Fifty percent of the black and brown
borrowers who apply for loans were turned down with the same
income and debt-to-income ratios as the whites, who had 75
percent more. Thank you very much, Madam Chair. I yield back.
Mrs. Kim. Thank you. I now recognize the gentleman from
Tennessee, Mr. Rose, for 5 minutes.
Mr. Rose. Thank you, and thanks to Chair McHenry and
Ranking Member Waters for holding this hearing, and, Director
Chopra, thank you for your time and for being here with us
today.
Director Chopra, one of my top priorities this Congress, as
I think you are aware, is dealing with the issue of abusive
mortgage trigger leads. I am curious, both from consumers and
industry, how much have you heard and how much has the CFPB
heard about this issue and what are their concerns?
Mr. Chopra. It is one of the top three or four issues I
hear from mortgage lenders. They feel that they are working
with a borrower to close a mortgage, but then all of a sudden
that borrower gets dozens or hundreds of communications. The
borrower thinks that the mortgage lender outed them in some
way, and it creates a lot of friction, and many of the offers
they are getting are sketchy at best.
Mr. Rose. Thank you. Director Chopra, as you might be
aware, Representative Torres and I have introduced the
Homebuyers Privacy Protection Act. This bipartisan bill would
limit the sale of mortgage trigger leads to financial
institutions and financial technology companies that have a
preexisting relationship with customers. The bill would also
give consumers the option to opt-in for trigger leads if they
choose to. Would you agree that based on the complaints that
you have just characterized from industry and consumers, is it
time for Congress to legislate protection for homebuyers on
this issue?
Mr. Chopra. Yes, I really support the goal of this, and, in
fact, this is another example of what I talked about in my
opening remarks about even these trigger leads feel like
privacy intrusions. This is a financial privacy issue. It
directly relates to the Fair Credit Reporting Act, and we are
really happy to work on both sides with you to figure out how
we get some solutions. We are also working to see if there is
any solution we can help to advance this issue, but it is
always better when Congress can act.
Mr. Rose. Well, thank you. I agree with that perspective,
and thank you for your insights there, and hopefully, we can on
a bipartisan basis move that issue along.
I want to shift gears a little, Director Chopra. Two days
ago, you proposed a ban that would remove medical debt
information from credit reports. In your statement on the
proposed rule, you highlighted that medical debt is ``taken on
unexpectedly in a time of crisis.'' It is my understanding that
the structure of this proposed rule would mean that medical
debt information is defined as including elective procedures.
To be clear, Director Chopra, if someone, for example, had an
elective tattoo removal procedure and had failed to make their
payments for that procedure, it would not show up on their
credit report under this proposed rule?
Mr. Chopra. So actually, we really talked to a lot of
people in the healthcare industry about this, so I want to make
sure we are using precise language. ``Elective'' can still be
medically necessary. It just means that it is scheduled as
opposed to an emergency surgery. I think you are sort of
referring to non-medically necessary or discretionary cosmetic.
We actually looked at how that industry is structured, and we
do not find that medical bills on credit reports really exist
there because they are not insured and paid by insurance, and
they tend to be paid upfront or financed separately. So we are
not really sure that is something that would occur. I
appreciate the point, though, and I think if you want to submit
a comment to make sure that we think about that differently, I
am very open to that, but we do not really see that as an issue
right now.
Mr. Rose. Okay. Well, thank you for the clarification, and
we may take you up on that because I guess I would have a
concern for non-emergency elective procedures in that----
Mr. Chopra. Yes. It is many ways in which we see medical
financing or people being paid upfront in a way that is not
sent to insurance because those types of things are not covered
by insurance.
Mr. Rose. So your view is that if it is not medically
necessary and, therefore, not probably covered by insurance----
Mr. Chopra. Well, I guess I would put it this way. You
know, when you use a credit card or other type of loan, the
FCRA actually prohibits medical information on credit reports,
so I think we are trying to adhere to that with some degree of
fidelity.
Mr. Rose. Okay. Thank you for that. Well, pardon me. In the
remaining time, I would like to shift gears now and talk about
the Civil Penalties Fund. Between 2012 and 2022, the Consumer
Protection Financial Bureau collected $1.3 billion, last year
alone 1.9 billion. Can you explain how in 1 year the CFPB has
collected more fines than in the past 10 in 5 seconds?
Mr. Chopra. I do not think that is true. Well, I think we
have allocated quite a bit. In my tenure, we have collected
several billion in fines, but we have allocated it to victims
pursuant to the statute.
Mr. Rose. Thank you, and I yield back.
Mrs. Kim. The gentleman's time is up. I would like to
recognize the gentlewoman from Ohio, Mrs. Beatty, for 5
minutes.
Mrs. Beatty. Thank you, Madam Chair. To Chair McHenry and
Ranking Member Waters, thank you for holding this hearing. Let
me first say thank you, Director Chopra, for being here, and it
is always good to see you here and to listen to you as you
explain all of the issues that we are addressing.
Let me just make this comment first in light, Madam Chair,
of how this hearing opened. It opened with saying, ``If this
were a private sector meeting, what would happen?'' Well, let
me also say this. If this were a private sector board meeting
with board members on this side and board members here, we
would not have had a director who has, over the time of his
Agency, delivered $20.7 billion, to have waited. Certainly, in
a private sector meeting, since the chairman opened with ``if
this were a private sector, what would happen,'' we would not
have been sitting here as board members in a private sector
meeting waiting while other board members, Republicans, were
meeting with Mr. Trump, someone who has been indicted with over
some 88 charges.
Then, Madam Chairman, it even got worse, and I am only
bringing this up because I think words matter. When we have
another chair of the subcommittee of jurisdiction here to use
words like ``extortionist'' and to say that this director was
the judge and jury and accused him of things that are not
actually factual, that kind of grits at me, and to also
question the credibility and to say that this director had no
credibility. Now, that came from a member. I do not know what
it was based on. I was always taught when you do scholarly work
or you say scholarly things, you have to have some citation.
Well, let me just say what the U.S. Government
Accountability Office said after doing their review, and this
is a review of April 19, 2024. In their review, they said a lot
of things that are direct opposite of credibility. They felt
that their work was done well. It was fair. They gave
recommendations. Most of the recommendations had been adhered
to. So I think if we are going to talk about someone's
credibility, we should have citations for that.
So I just wanted to say that for the record because we have
a lot of people who watch these hearings that have not watched
previously, have no history of the great work that this
organization does. I also want to applaud you, Director Chopra,
for how you have dismantled the attacks on you with intellect
and with character, and I think you set the example of when
witnesses come in that you do not buy into the attacks, but you
simply told the truth. When you agreed with Republican
statements, you said it.
So I think that is worth being noted because it was also
said that you were only here to do speech writing for the
President and try to imply that. I know all of his speech
writers, I know his communications directors, and let me just
say I think you are amazing, but that is not something that I
know you do. So I just needed to say that more to the people
who are watching because sometimes you watch and you only see
one segment, so I wanted to bring some fairness and balance.
Now, with that, let me just say that I echo many of my
colleagues in saying how thrilled we were with the Supreme
Court decision, and now you can get back to the work of
protecting the American consumers from harmful financial
practices and putting money back into their pockets. Again,
thank you, and thank you for continuing the work because I do
not think $20.7 billion is anything to sneeze at.
I would also like to thank you for your opening remarks on
1033, so let me start with that 1033 open banking rule. I want
to commend you for advancing 1033 to ensure that personal
financial data rights are protected so that consumers can shop
and switch to better or more affordable financial solutions. I
also want to thank our ranking member because she has to put
this at the forefront.
Mrs. Kim. With all due respect----
Mrs. Beatty. So my time is up.
Mrs. Kim [continuing]. the gentlewoman's time is up. Mr.
Chopra, would you please respond to Mrs. Beatty's question in
writing?
Mr. Chopra. Yes.
Mrs. Kim. Okay. Thank you.
Mrs. Kim. I now recognize myself for 5 minutes of
questioning, and Mr. Chopra, it is really good to see you again
here before our committee.
I know in your written testimony you tout the tens of
billions of dollars that CFPB has returned to consumers, but,
again, you fail to mention how persistent inflation has caused
harm to consumers, especially for those lower-income families
that are having trouble meeting ends meet. I am going to refer
to New York Fed report recently. According to that report,
about a third of balances associated with maxed-out borrowers
have hit a delinquency in the last year, and these are the
borrowers using 90 percent or more of their credit limit. So
can you point to any enforcement actions that are actually
helping maxed-out borrowers that are at risk of default?
Mr. Chopra. Yes. Actually, many of those borrowers have low
credit balances and are getting up to it, and they are often
some of the people who are the lowest income people in our
society. They are the ones where just a little bit of extra
unfair fees or a little bit of a scam really can send them into
a financial panic. So I closely monitor this data, and I really
appreciate all the work being done to focus on them. I know you
were a big part in fighting junk fees and leading legislation
on that, so I want to thank you, Congresswoman Kim, for that.
Really, we have to be focused on how those low-income people
are getting by, so I really appreciate the question.
Mrs. Kim. Sure. Are you saying that some of the maxed-out
borrowers are actually getting some money back to consumers in
that way?
Mr. Chopra. Most of the redress that is administered is
done by the companies themselves. So we typically order
redress, and we do know that the types of cases we have been
pursuing, they are not ones that are really focused on the
highest income. They are the ones who are often the most
vulnerable consumers. So we have looked at things in the
automobile area, in the credit card area. Often, those are the
ones that I think are the consumers you are asking about, but
we do not really do a matching in that way because there are
some privacy issues around----
Mrs. Kim. I am just pointing it out because I want the CFPB
to really focus on addressing the root causes of indebtedness
and the high cost of living, but let us switch gears to another
matter.
It is our understanding that your subject matter experts
are collaborating on issues that includes Big Tech in finance,
artificial intelligence, and more with the EU through the
informal dialog. You know that I sent you a letter regarding
that informal dialog, and our committee staff have told me that
they finally had a briefing after about 8 months of requesting
it. I am glad you did it, but can you commit to providing
minutes of the meetings that you and your staff are having with
the European Commission officials as well as the list of
subject matter experts involved in your foreign policy dialog?
Mr. Chopra. I apologize for the delay. I think it is
because those meetings did not really occur until much later.
There was one or two meetings with me and European Commission
officials. I participated in something related to financial
literacy. I think, Congresswoman Kim----
Mrs. Kim. Okay. Then let me reclaim my time.
Mr. Chopra. Well, I just want to say I think we have
posted----
Mrs. Kim. Yes.
Mr. Chopra [continuing]. the information publicly, but I
will go ahead and check to see what we have posted, but I think
we want to----
Mrs. Kim. I just want to get your commitment that you will
not export or embrace the EU laws in the form of U.S. financial
consumer regulations. Can I get your commitment on that?
Mr. Chopra. That we will not export U.S.----
Mrs. Kim. Yes, I----
Mr. Chopra. I mean I actually think the way the U.S. does
things, we should not be cutting and paste China, we should not
be cutting and paste Europe. If anything, I think we should
be----
Mrs. Kim. I will take that as your commitment that you are
not going to export any----
Mr. Chopra [continuing]. promoting a lot of the way that
the U.S. promotes competition and privacy.
Mrs. Kim. Okay. Thank you. The CFPB also released
interpretive guidance related to buy now, pay later loans on
May 23 of this year, but I am deeply concerned that this is
another example of the Bureau exerting its authority by
effectuating a substantial policy change through interpretation
or enforcement. So do you agree that a substantive policy
change in how the Bureau regulates an entire class of financial
products requires a formal Administrative Procedure Act (APA)
rulemaking, and can you commit to using formal rulemaking for
any change in the Bureau's approach to buy now, pay later?
Mr. Chopra. So my predecessor, Director Kraninger, started
the Advisory Opinion Program to provide interpretations. I
think a lot of companies want to know how does the existing law
apply and what should they expect. So we went through a process
to do that, and I think it was welcomed by many, but I am happy
to talk to you further about it, and it is also up for comment.
Mrs. Kim. I want to be respectful. My time is up, too. So
let me now recognize the gentleman from California, Mr. Vargas,
for your 5 minutes of questioning.
Mr. Vargas. Thank you very much, Madam Chair. I appreciate
the opportunity. I want to thank the ranking member also.
Director Chopra, it is a pleasure to see you again here.
When I first got on this committee, it was Dodd-Frank that
was the problem according to my colleagues on this side, and
they said how illegal it was, how terrible it was. Now, of
course, I listen to them, and it is the gold standard, you
know. They say, we do not need anything beyond Dodd-Frank. It
is the gold standard. Then they started picking on you. In
fact, I was going to ask you a couple of tough questions here.
One, do you remember all the insults that you received because
of the funding aspect of CFPB? That is a question, sir. Do you
remember some of them?
Mr. Chopra. I certainly remember some of the harsh things
said to me, yes.
Mr. Vargas. In fact, I found it interesting because it
seemed to me, as the Court said clearly, that the funding is
well within the appropriations clause of the Constitution, in
fact, fits clearly within it. They had to go forum shopping to
the Fifth Circuit to find a circuit that would say it was
illegal because this was so right down the middle. In fact, it
is interesting. Seven of the justices in a very conservative
court decided this was right down the middle. This was not even
a hard decision for them.
Mr. Chopra. Yes. Justice Thomas' opinion really spells out
how this is completely consistent with the Constitution. Those
pauses, though, had a real harm to consumers, though. Many of
our litigations, many of our work just stopped, and justice
delayed is often justice denied, but we are going to keep going
to make sure those consumers get their redress.
Mr. Vargas. Well, in fact, since you mentioned it, let me
ask you this. It was claimed by the other side that you have no
credibility. The CFPB, what is your approval rating?
Mr. Chopra. I do not know, but I think we serve consumers
in every single neck of the woods of this country.
Mr. Vargas. Well, I can tell you because I have looked it
up. It hovers around 78 or 80 percent, sometimes even higher.
Do you know what our approval rate is? Again, you are not under
oath, but you have to tell the truth.
Mr. Chopra. I do not.
Mr. Vargas. Do you think it is higher or lower than that?
Mr. Chopra. I do believe it is higher because our----
Mr. Vargas. You think that ours is higher? Our approval
rating is higher? What have you been smoking today? Ours is not
higher. That is the only time I have ever disagreed with you.
You know, ours is very low. It is about 13 percent, about 13
percent. So when we question your credibility or the
credibility of the Bureau, it is ridiculous. It really is
utterly ridiculous. I mean, it reminds me of 1994 when they
brought the tobacco people up, and they said, hey, nicotine, is
it addictive? Oh no, it is great stuff, you know. You got to
give it to your kids. It is the same thing with these junk
fees, with these late fees, and I hear my friends, oh, that is
good for consumers. They love the late fees. They love all
these junk fees. Do consumers love the late fees? Do they love
the junk fees?
Mr. Chopra. I think consumers are sick and tired of
surprise or unfair fees that are creeping across the economy,
and it really hurts those who can least afford it.
Mr. Vargas. Of course, and, in fact, we get complaints
about that all the time, and we give praise all the time for
your work now, but I do want to talk about one thing
specifically now that I got that off my chest because I
listened to all the BS all these years about the funding, it is
illegal. It this hair on fire, and, of course, the Supreme
Court did not even break a sweat and said, hey, guys, it is
right down the middle. This thing is easy. This is not a tough
one.
I do want to ask about remittances. I do think that there
is problems with remittances. I do think there are a lot of
hidden fees there. People work very hard to send that money
oftentimes to families that are impoverished, and this is a way
out of poverty for them, and I think it is very unfair the way
the system is set up. Could you speak to that? I know we have
been working a little bit, but we need to do more.
Mr. Chopra. I agree we need much more cheaper and faster
and safer remittances. We have taken a number of enforcement
actions against those who have violated the law. There is often
marketing that says it is free, but, in fact, the exchange rate
is being manipulated. It is very hard. I would like to see more
and the banking industry participate in some of the Fed's
programs to help people send money. This is also an important
national security issue as well.
Mr. Vargas. I agree. My time is almost up, but again, I
wanted to thank you. I think you have done a hell of a job. I
think you have done a really good job now that you have the
ability to go forward without all the nonsense about the
illegality of the things that we passed. By the way, it is not
you. You do not set up the funding mechanism. We did. You know,
we were attacking you when we were the ones that did it, but I
do hope you go forward quickly because we have delayed justice.
Thank you. With that, I yield back.
Mrs. Kim. Thank you. I now recognize the gentleman from
Wisconsin, Mr. Steil, for 5 minutes.
Mr. Steil. Thank you very much, Chairwoman. I thank our
coach of the Republican baseball team for his graciousness in
letting me jump him in line today.
Mr. Williams of Texas. Winning coach.
Mr. Steil. I am supporting your win. Mr. Chopra, I have
significant concerns as it relates to data privacy at the CFPB,
and last year, the CFPB had a major data breach of 250,000
consumers. I have an article from The Wall Street Journal dated
April 19, 2023 that describes a CFPB employee taking consumers'
confidential information and emailing it to a personal account.
The headline is, ``CFPB Says Staffer Sent 250,000 Consumers'
Data to Personal Account.''
I ask unanimous consent to insert that into the record.
Mrs. Kim. Without objection.
[The information referred to was not submitted prior to
printing.]
Mr. Steil. This individual also stole confidential
supervisory information on 45 banks, which could be market
moving. The CFPB has a pilot program as it relates to auto
loans, and the CFPB, under this proposal that you are moving
forward with, is looking to collect over 120 data points from
around 4,000 auto lenders. Some of the data points include
borrower's income, credit score, zip codes, how much they paid
for their car, and their interest rate. If implemented in full,
as you are potentially proposing to do, it will cause
significant data collection efforts with major compliance
costs, but importantly, with privacy concerns. There are about
100 million car loans in the United States, so that means your
project threatens the privacy of millions of families, and the
Bureau does not have a good track record on protecting our
data.
You claim that the data you are using is anonymized. You
claim that, but as recently as last month, you admitted that
anonymized data can be re-identified. Can you give the American
public 100-percent confidence that in the collection efforts
that you are making, when that data comes to the CFPB, that
their personal and private information will be protected?
Mr. Chopra. Yes. Well, we solicited comment on this. I
think we got a question from Congressman Barr about----
Mr. Steil. I got you. We can come back to the broader
issue, but what I am asking you writ large is, and this
question, I think, is really important and why we should have
this dialog is, can you guarantee the American people that if
you collect this information, that their information, including
their income, their zip code, the car they purchase will be
secure? You do not have a good track record of this.
Mr. Chopra. Well, we take very serious----
Mr. Steil. I understand you take it seriously, but can you
tell the American people with 100-percent confidence that you
will protect it?
Mr. Chopra. I would love to answer the question. We want to
make sure that when we collect any data, we are doing so in
ways that eliminates or dramatically reduces, wherever
possible, any chance of any data protection issue. We are
heightening our ability to assess that because it is true with
more algorithms, more AI, those consumers'----
Mr. Steil. I got you. So in other words, you are
heightening it, but you cannot guarantee the American people
that there is not going to be a breach.
Mr. Chopra. We have not done the data. We have not done it,
so----
Mr. Steil. Right, but we have incidents where 250,000 data
points were sent----
Mr. Chopra. We have not done the auto data collection you
have mentioned, so----
Mr. Steil. Yes, but I hope you see the concern the American
public should have and then let us look at the auto dealer side
of this equation. So you would agree that the CFPB requests
dealers' zip codes. Say an individual goes and buys a car in
Delavan, Wisconsin, zip code 53115. There is only one Ford
dealer, there is only one Chevy dealer, and so you can
unanonymize that data, but if you go back and we look at U.S.
Code 12.5519, you do not have the authority to regulate auto
dealers. In effect, you are really operating in this proposed
rule as a backdoor mechanism to actually regulate auto dealers
because in any given zip code, you can actually identify where
the auto loan is made, correct?
Mr. Chopra. This is not a proposed rule. We are trying to
survey the market of a $1.6 trillion market. I do not know if
we will proceed with it. We do not have authority to bring
enforcement actions against auto dealers. So I want to do
everything I can to assuage your concern about this, but we
have not done this auto data collection. It is the biggest
market for which there is not much information about trends
other than some credit reporting data, so we are happy to take
your concerns. We do not even know if we are doing it, but that
is why----
Mr. Steil. I hope you understand the concern, I think the
concern that millions of Americans would have because the track
record of the CFPB along with a number of Federal Government
agencies is abysmal as it relates to data privacy. If you are
in the----
Mr. Chopra. Well, I take that very seriously.
Mr. Steil. I hope you do because you cannot guarantee that
this information will not go public, and it holds 100 million
Americans' information.
Mr. Chopra. We do not collect personally identifiable
information in these things, but I take your concern very
seriously.
Mr. Steil. I appreciate your time, Director.
Mr. Chopra. Thank you.
Mr. Steil. Madam Chair, I yield back.
Mrs. Kim. Thank you. Wow. Thank you, Director Chopra, for
sitting with us for almost 2-and-a-half hours. I think it is
time that we take about 5-minute break.
Mr. Chopra. Five minutes?
Mrs. Kim. Yes. Hopefully, that will be enough for you to
take a bathroom break. For the members, we will resume with the
hearing in about 5 minutes.
[Recess.]
Mr. Hill [presiding.] The committee is back in session, and
I call on the gentleman from Illinois, Mr. Casten, for 5
minutes.
Mr. Casten. Thank you, Mr. Hill. Director Chopra, always
lovely to see you here. Several of us are upset, but I do just
want to apologize for the delay. We had a 40-minute delay and
did not start the official business of the House because my
colleagues were all at a political event off the Hill. It is
disrespectful, but you deserve better. I do not know what they
spoke about there, but I strongly suspect it was not about
endorsing and celebrating and effectuating the rule of law that
was passed by an independent judiciary. I say that because
while I think we are all happy about the recent ruling by the
Supreme Court protecting your funding.
I do not want to rest on my laurels. I want to read you a
quote. The Heritage Foundation's Project 2025, that aims to be
the blueprint for the next government should the Republicans
take over, says, ``Provided the Supreme Court affirms the Fifth
Circuit holding in Community Financial Services of America, the
next conservative President should order the immediate
dissolution of the CFPB. Until this can be accomplished,
however''--obviously it did not happen--``Congress should
require that no CFPB funds are spent on enforcement actions
that are not based on a rulemaking that complies with the
Administrative Procedures Act.'' Can you speak to what would
happen to consumer protection in this country if Congress were
to carry that out?
Mr. Chopra. Well, I think eliminating the CFPB would be
chaos. I think the mortgage market would suffer. I think all of
the innovative companies that rely on a sound marketplace and,
most importantly, the consumers in every part of the country
would then be greeted with more unlawful practices. That does
not just harm them; That harms the whole marketplace.
Mr. Casten. We are always grateful for your consumer
protection, and I wish it was not so partisan.
I want to shift to a separate issue, hopefully, not
partisan. In October 2023, at a Brookings Institution speech,
you talked about tech firms blurring the lines between payments
and commerce, engaging in bank-like activities while not
actually being regulated as banks, and the sort of broader sort
of need to maintain a separation between commerce and banking.
There has recently been a number of large brokerage firms, one
in particular, that are talking about entering the credit card
space where they are both issuing brokerage accounts. You have
a brokerage account, they issue a credit card space. I guess I
am wondering, are you paying attention to this, and do you have
any concerns that we should be vigilant against it?
Mr. Chopra. Well, certainly they are not exempt from the
consumer financial protection laws, but you are right. There
are a lot of issues now with firms that are entering consumer
products. Right now, there is a very chaotic and disturbing
situation where people cannot access their funds. It needs to
be clear whether you have an insured account or not, and often
the blurring between Big Tech firms and banking, I think, is
actually really causing some confusion and issues that Congress
and the CFPB really need to address.
Mr. Casten. Okay. So I want to get a little bit specific.
Robinhood Financial. You know, we have talked about this
before. Alex Kearns was a constituent who took his life after
being falsely told that he was upside down on an options trade,
and I think his note said that he does not know why he was
allowed to trade options when he only had $5,000 to his name.
Robinhood is now talking about issuing these credit cards to
their gold members who can trade on margin. I think the obvious
concern that raises is if you are getting the data that you
would have as a credit card firm that can identify people who
are prone to risky behaviors and you are selling something that
is attractive to people with risky behaviors, do you have the
tools to protect that in advance, or do you have to wait for
some violation that you can pursue a compliance action
against----
Mr. Chopra. Yes, I do not think we can. I think that for
broker-dealers or brokerages securities, they have to follow
securities laws and inasmuch that they are doing consumer
lending, given our current status of privacy and protection of
financial data. It is pretty weak when it comes to that type of
sharing. So I do not think we would have the tools to really
stop it in advance.
Mr. Casten. So you are saying that wall between commerce
and banking can be breached?
Mr. Chopra. Has eroded.
Mr. Casten. And it is not until you are violating the
spirit of those laws that you can deter----
Mr. Chopra. Yes. I think I would need to check under the
securities laws about whether there could be some limitations,
but my understanding is that data if it is disclosed in that
notice, it can be transferred back and forth.
Mr. Casten. Maybe we have some work to do legislatively
because----
Mr. Chopra. We do, yes.
Mr. Casten [continuing]. it troubles me given some of the
past behaviors if we are chasing on the back end. Well, thank
you for your time. We will follow up offline, and I yield back.
Mr. Hill. The gentleman yields back. It is a pleasure to
call on the winning coach for the House baseball contest
between Republicans and Democrats in continuous play since
1909. Roger Williams is recognized for 5 minutes.
Mr. Williams of Texas. Thank you, Chairman, and thank you,
Director, for being here today. You and I have reminded each
other I am a car dealer, so I have a lot of interest in this
today. So good to see you.
I have concerns regarding your plans to establish a nonbank
registry for so-called repeat offenders, and I am concerned how
you plan to use the information obtained and put it in this
registry. The registry appears to be a misguided effort
designed to increase the CFPB's supervisory and enforcement
powers by leveraging State laws and orders over which the CFPB,
frankly, has no authority. Additional supervision by the CFPB
is unnecessary. It harms consumer protection efforts and wastes
the Agency's resources. So the proposed registry is a solution
in search of a problem.
Now, my question would be, Director, how do you justify the
need for additional CFPB supervision when State agencies
already have robust enforcement mechanisms and why are you
trying to do the States' jobs for them when your Agency has no
such authority?
Mr. Chopra. Yes. So we are not doing additional
supervision. Consumer financial protection asks us to register
nonbank companies. So I think that was originally contemplated
as registering auto or payday or whatever it may be in the
nonbank sector. We have taken a much more humble approach and
focused on the frauds and scams and repeat offenders. So all we
are saying is that if there is a public enforcement order, that
has to be reported to the CFPB. This is going to allow law
enforcement to really cooperate together to be able to see if
there is misconduct, criminal behavior moving from State to
State, and I think it will help us stop that. We are not really
creating new supervision. We do not enforce State law. States
enforce State law, but I do think this is important law
enforcement cooperation, and we have seen this in many other
contexts.
Mr. Williams of Texas. In January, the CFPB proposed a
price cap on overdraft fees. Overdraft services are very
popular, as we all know. A recent survey found that more than
two-thirds of consumers find that their bank's overdraft
services are valuable. In that same study, 8 out of 10
consumers who have paid an overdraft fee were glad that their
bank covered their overdraft instead of rejecting the payment.
So overdraft is a tool that allows consumers, and has for a
long time, flexibility during times of emergencies or tough
financial situations. Should you move forward with these
regulations, however, many banks will be forced to stop
overdraft fee services to their consumers.
So a question, Director. Why is the Bureau trying to
regulate this product to death, disproportionately impacting
those who have limited access to alternative liquidity options?
Furthermore, what are the sources of short-term liquidity do
you expect consumers to use if they do not have this overdraft
fee?
Mr. Chopra. Respectfully, and you know I like you on this,
but it is not right that there is a price cap. What we have
proposed is that if large banks--we have exempted all the small
ones--if the large banks want to make money on overdraft loans,
they should disclose it just like they would disclose a credit
card or another loan. That will allow consumers to compare. We
have essentially created an exemption if they are charging a
reasonable amount below an industry average. That will allow
them to make choices: Are they going to offer it as a
convenience, or are they going to offer it as a loan? We
revisited a 1969 interpretation on this, and I think we think
this brings more competition, more choice, and the ability for
people to really look at a credit card, or a line of credit, or
an overdraft loan to be able to compare what is best for them.
Mr. Williams of Texas. Okay. In the time I have left, there
are nearly 900 pages in the final rule on Dodd-Frank. Section
1071 is inherently overwhelming. Small businesses lending is
already a complex environment with many different channels and
types of credit. The rule that is finalized creates confusion
for lenders across the board who are critical lifeline for our
Nation's small businesses, much like mine. In addition to
creating confusion with respect to the collection and reporting
of the data, the rule itself lacks substantial information
about how the data will be used once it is reported and what
safeguards will be put in place by the Bureau.
Director, under your leadership, you have gone after Big
Tech for their data practices. What about the Bureau's data
practices? How will the Bureau ensure transparency for small
businesses regarding the use and protection of their data?
Mr. Chopra. This is much delayed. We are not going to see
reporting for a while, but certainly, with respect to how that
data is handled, I am actually really happy to talk to you more
about how we are thinking of making sure that we can protect
it. We know that small business is totally different than
mortgages, and we are going to have to pay real close attention
to how we handle this.
Mr. Williams of Texas. Yes. Small business is very stressed
right now. I yield my time back. Thank you.
Mr. Chopra. Thank you, sir.
Mr. Hill. The gentleman yields back. The gentlewoman from
Texas, Ms. Garcia, is recognized for 5 minutes.
Ms. Garcia. Thank you, Mr. Chairman, and thank you,
Director Chopra, for joining us today. I just want to make it
clear that we Democrats were here because we believe in your
Agency, we applaud the Supreme Court decision, and we love the
work that you are doing. So thank you so much for being there
to stand up for consumers. For me, I want to just particularly
thank you for the work that you have done with the Think
Finance, the Texas online lender. You returned back $384
million. Even for Texas that is not chump change.
Think Finance has illegally collected loans that were void
under Texas State laws that govern interest rate caps and
lender licensing requirements. The company misrepresented to
consumers that they were owed money on these loans, made
electronic withdrawals from their bank accounts, and even sent
them demanding letters. I think more people need to understand
you are the only Federal Agency created with a sole purpose of
protecting consumers and for the record, I googled it. You have
a 79 percent approval rating, and yes, Congress has a dismal 13
percent. So your credibility is high, the public does love you,
and you are doing the work that your mission statement has
demanded.
I have a few other questions, but I will submit them in
writing because I was concerned with you not having enough time
to clarify the question from one of my colleagues about whether
or not immigration status can be considered when reviewing an
application for credit. You said something about national
origin. You said something about immigration status, and for
everyone that is listening, can we just be clear on what the
guidance did say and did not say?
Mr. Chopra. Yes. Immigration status cannot be used as some
sort of pretext to discriminate against people illegally. We
are really worried when someone uses a type of characteristic
to discriminate against a whole protected class as a ruse. So
what the guidance made clear is that national origin
discrimination is one of many protected classes that is illegal
to discriminate against under Federal law. While the guidance
does not say you have to lend to a certain person or not, when
you use immigration status in a way that is pretextual to
discriminate against a certain group of people that is
protected under law, that is illegal. I think we want to make
sure that lenders are doing it in a careful risk-based way and
not just a way to exclude a whole category of people that are
protected under Federal law.
Ms. Garcia. So their application should be reviewed just
like any other consumer?
Mr. Chopra. Correct. You should not be----
Ms. Garcia. They cannot simply look at it and say, oh no,
they are not U.S. citizens, we are not even going to look at
it?
Mr. Chopra. Yes. It is one of many factors, and it should
be done with care so as to not be so broad that it just
automatically disqualifies a whole group of people who have
protections under Federal discrimination----
Ms. Garcia. Right. I think the words that you all use in
the guidance is the creditors rights regarding repayment,
unnecessary or overbroad reliance.
Mr. Chopra. That is exactly right.
Ms. Garcia. All right. So if anyone were to suggest that
you said that it was okay to consider immigration status, would
they be correct?
Mr. Chopra. Well, you can use immigration status. You
cannot use it in a way that is so overbroad that it ends up
discriminating against people based on a protected
characteristic under the Equal Credit Opportunity Act. That is
what the Justice Department and the CFPB tried to articulate,
and it is true that there are some cases where people will use
or look or assess different characteristics. It cannot be done
in a discriminatory way against a protected class.
Ms. Garcia. Well, thank you for that. Now, I will just ask
you another quick one. The rule related to remittances, or was
it a guidance? I forget.
Mr. Chopra. Yes.
Ms. Garcia. Could you just briefly tell us what that says?
Mr. Chopra. Well, we are really worried when remittance
companies claim that they are offering something that is free,
but in reality, it has real costs, including through how they
deal with the currency exchange rate spread. So it is really
important that consumers be able to know the costs of how they
are going to pay a remittance. We need to do more to offer a
competitive, cheap way, especially using digital technology.
Ms. Garcia. Right. Well, the other item that I have on my
list is when you talk about the fraud toward seniors. We need
to go----
Mr. Hill. The gentlewoman's time has expired.
Ms. Garcia [continuing]. Federal home insurance. Thank you.
Mr. Hill. The gentlewoman yields back. Please be responsive
to her question in writing, Director.
Mr. Hill. Director, I am yielding myself 5 minutes for
questions. Thank you for being here before us to answer the
committee's questions. We always are grateful for your visits
annually, or more frequently as needed.
Can you provide for the record to me in writing, not try to
rattle it off, under your statutes that you are responsible for
as delegated to you by Dodd-Frank, which ones go through Office
of Management and Budget (OMB) review, or can you testify today
that all regulatory rulemaking proposals issued by the CFPB do
not go through the OMB----
Mr. Chopra. There are aspects----
Mr. Hill. It is a mix, is it not?
Mr. Chopra. Yes, there is a mix. There are aspects of our
rules that do go through, I believe, the Office of Information
and Regulatory Affairs within OMB. I cannot say exactly----
Mr. Hill. Would you just submit for the record----
Mr. Chopra. Yes, sure.
Mr. Hill [continuing]. educate me on----
Mr. Chopra. Sure.
Mr. Hill [continuing]. what does and what does not as it
relates specifically to your Agency?
Mr. Chopra. Sure. Sure.
Mr. Hill. Because that is I think important for our work.
It allows us to be a better judge of APA compliance by the
agencies under our----
Mr. Chopra. Of course.
Mr. Hill [continuing]. oversight jurisdiction.
Mr. Hill. CFPB, you would consider an independent Agency?
Mr. Chopra. Yes. Our enforcement supervision is really
totally independent. We go through a process to make sure that
there is not any unnecessary interference in our enforcement.
Mr. Hill. Yes. So that is why I wonder if it has been
appropriate for you to associate yourself by coordinating 4 or
5 months out from an election with the White House for a press
rollout of a new proposal on medical debt. You think that is in
keeping with your role as an independent regulatory Agency?
Mr. Chopra. Well, it is certainly consistent with my
predecessors. One of the things that has been a better part of
what we have been doing is coordinating broadly with other
agencies. For example, some of the work we are doing on data
protection is not just going to impact consumers. There is some
real national security equities there, so a lot of what we do
is in coordination, and actually, we are required under our
statute to be in coordination. Let me just say, Congressman
Hill, I will stand with any of you who wants to join me in
celebrating the successes of the CFPB and what we are doing for
consumers.
Mr. Hill. Thank you, Director. Always smooth in your
answers. One of the ways that the CFPB was insulated in a big
picture way, of course, has been debated here recently and gone
before the Court about the way the Agency is funded. Can you
state for the record how Dodd-Frank directs that the CFPB
should be funded on an annual basis?
Mr. Chopra. The CFPB is a unit of the Federal Reserve
System, so we are funded a very similar way that the Federal
Reserve Board of Governors, except we are not able to set our
budget. I can request to the Federal Reserve Board transfers
from the Federal Reserve System in the same way they transfer
moneys from the Federal Reserve banks to fund their operations.
Mr. Hill. But you do set that amount. They do not set the
amount, right?
Mr. Chopra. Actually, Congress sets the cap on that, and we
have stayed below that cap.
Mr. Hill. What is that cap?
Mr. Chopra. We have been going through budgeting for the
future, but I believe that it is set in statute and then there
is an index called the Employment Cost Index, ECI. Maybe that
is the wrong acronym.
Mr. Hill. But is it a cap of a percentage of what, the
Federal Reserve's earnings?
Mr. Chopra. It is basically a hard number that is adjusted
by that index year by year, so it does not vary based on other
performance. It is sort of a set number with a cost inflator.
Mr. Hill. When was the last time the Fed showed a net
profit? Do you know that number?
Mr. Chopra. Yes. So the nonprofits and government agencies,
they do not report profit and loss in the way a private sector
company would.
Mr. Hill. No, but they report positive or negative cash-
flow. So when was the last time that----
Mr. Chopra. Actually, cash-flow is a totally different
indicator.
Mr. Hill. Okay. When was the last time there was a net
positive result from the Federal Reserve, the last time they
generated positive earnings?
Mr. Chopra. So I think the Federal Reserve Act would call
it excess earnings.
Mr. Hill. Okay. When was the last time they had excess
earnings?
Mr. Chopra. I believe that in early 2023 or late 2022. I
cannot remember the exact one.
Mr. Hill. Yes.
Mr. Chopra. Again, that uses different terminology.
Mr. Hill. That is true. That is true. September 2022. So
good analysis on your part, but since then, the Fed has
actually had a deficit in earnings of $172 billion.
Mr. Chopra. No, that is not true. If you look at their
audited financial statements, again, just like in the private
sector, nonprofits use different accounting terminology.
Mr. Hill. Yes, but we are not debating that today.
Mr. Chopra. I am happy to supply you their audited
financial----
Mr. Hill. I get it. I read it. I know what it says, and I
know it is running a deficit, and, therefore, instead of
sending money to the Treasury, they are crediting a contra
account at the Treasury. My point is that when you ask for
funding, you are asking for that on top of their losses.
I yield back. Mr. Davidson, I recognize you--from Ohio--for
5 minutes.
Mr. Chopra. Thank you, sir.
Mr. Davidson. I thank the chairman. Director, I thank you
for your work, especially on privacy. We have had clear
disagreements on all sorts of policy matters, not to be
unexpected given the nature of the appointments and all that. I
have really been encouraged by your commitment to privacy, and
I hope that we can make that truly bipartisan.
We have had important wins on the Fourth Amendment's Not
For Sale. We got very much the spirit of what you are talking
about with data brokers and their abuse of the Fair Credit
Reporting Act with that, and it was 123 Republicans and 96
Democrats. It was one of the things that broke differently than
pure partisan lines, and so I hope you continue to be a voice
for that. As you know, we are working on the Payment Privacy
Act. We highlighted it at your last appearance. It is very
complementary to the 1033 process that you have been
undertaking, and I appreciate your collaboration and feedback
on that. I just thought I would offer you a chance to offer
anything else about the concept of the Payment Privacy Act and
appreciated your dialog with Chairman McHenry at the start of
the hearing.
Mr. Chopra. I think that being able to know all of our
individual payments and transactions without our permission or
really just happening in the background, I do not think this is
just sort of a question about fairness in the economy. I think
this has some very real questions about individual liberty and
freedom. I am very worried about the potential for financial
censorship and the ability for others to have more control over
us, including by manipulating us in some ways. I think this is
a big concern, particularly when countries of concern can get
this information, and they do that through data brokers.
Mr. Davidson. Yes. Thank you for that. In the financial
services realm, we are used to things that maybe in energy and
commerce they are not used to because apparently in the FTC, if
you put it in the terms and conditions anywhere, you can do
pretty much whatever you want. They do not really even have the
wherewithal to understand what is being put in the terms and
conditions, let alone hold companies accountable for delivering
on those and not breaching them.
Here in the financial services space, on the other hand,
even if you really want to put in the terms and conditions,
there is certain things you cannot do, and I think one of those
has to be sharing someone's private information, their data
without their consent, and I think that is the spirit of what I
think you are trying to do there. I hope we can continue to
collaborate that.
You know, Director Chopra, the CFPB's recent larger
participant rule proposal covering general use digital wallets
is kind of an expansion of the space in a sense, but I do
believe one of the most important consumer protections we could
have is self-custody. Really, it is a protection of private
property. They should have no fear that the government would
take that, except the government continues to try to take that
under both Republican and Democrat Administrations. FinCEN
targeted that. What is your thinking on this, and why do you
believe CFPB should be able to focus on this?
Mr. Chopra. Yes. One of the reasons we proposed this is
that we are seeing a lot more big tech companies, other tech
firms entering into payments. Our jurisdiction is really
consumer payments, the Electronic Fund Transfer Act, other
consumer protections. We are not expanding. We just want to
make sure that where there is already our enforcement
jurisdiction, we have some ability to make sure that when it
comes to fraud, privacy, and other issues there is some
consistency between bank and nonbank. I will share with you
that the Fair Credit Reporting Act is one of the most important
privacy laws in the country which has real restrictions on use,
and I hope that both sides can figure out how to do something
as it relates to these payments.
Mr. Davidson. Well, I share your concern and really enjoyed
Mr. Vargas' commitment and Casten talking about remittances and
protecting consumers in that way. When you look at digital
assets, self-custody is really the epitome of it. It is
permissionless peer-to-peer payments that are being protected
in that sense. They are private, they are secure, and they are
protected from third parties doing anything with them, and so I
hope that we can stake that out as a common ground that we
defend. It would be great to see bipartisan support for the
Keep Your Coins Act as an example that would protect that.
One area that I am concerned with, especially given the
protection for privacy that you have espoused, is this auto
loan data collection. I mean, you say that you are not yet
committed to go with that when you were talking to Mr. Steil,
and I appreciate that. Nevertheless, the pilot is underway. It
is collecting lots of stuff. I do not know why if you buy a car
someone needs to know not only the income things that he is
talking about or zip code you live in, but race, gender,
ethnicity, sexual preference, all kinds of things like that. It
seems kind of creepy and spying. How do you reconcile that?
Mr. Chopra. Yes. So none of the work we have been doing has
sought to collect additional information from borrowers. It is
already what is in the system. But----
Mr. Meuser [presiding]. The gentleman's time has expired.
Mr. Chopra [continuing]. you and I should talk about it
because I think that we are not committed to proceeding with
this, but we do want to make sure that we have some data on the
auto loan market, which is now $1.6 trillion----
Mr. Meuser. You can answer in writing, Director.
Mr. Davidson. My time is expired, and I yield back.
Mr. Meuser. The gentleman yields back. I now recognize
myself for 5 minutes. Director Chopra, nice to see you.
I do want to focus on some things that we have talked about
in the past, some of the ideology, I believe, out of the CFPB
and some examples of some overreach, and even some
unwillingness to listen to industry feedback, which I think is
extremely important. I continue to hear from banks, large and
small, super regionals, community banks, that some of the
activities and regulations that are coming out of your Agency
are burdensome and not helpful, in fact, very duplicative at
times, what they are already doing, just it being done
differently.
I want to just start with on cost-benefit analysis, which
we have talked about in the past. It is an important part of a
rulemaking process. It is important to understand how your
rules hurt businesses or help and, subsequently, their
customers. So can you walk us through a little bit about your
rulemaking and how you take a cost-benefit analysis into
consideration and the sort of outreach and information that you
take in order to make the best rules possible?
Mr. Chopra. Yes. We try, obviously, to make sure that we
are looking analytically at any type of potential rule or
intervention we are taking. I mean, it is not good if there are
not more benefits.
Now, I will share this. Sometimes we also get feedback just
like the last question I got from Congressman Davidson do not
collect this data because of burden. So sometimes we like to
rely on existing data that we have or third-party data that has
been published. So we always subject that to public comment and
where we do get additional submissions of data, we look at that
very carefully to see the methodology and how we would factor
it in, but we absolutely do comply with all the requirements
and go beyond that.
Mr. Meuser. You must get some feedback, as I do, that your
comment periods are not always adequate. You kind of made a
remark regarding the timeframe for the auto industry
requirements to be very minimal. You said 20 minutes, and I
know you did not mean that cumulatively, but that did not seem
like an understood response, that most of the industry
disagreed with your figure in that case.
Mr. Chopra. Yes, and we have made no decision on that one
and we are going to look at what we said. What I think is
different about auto compared to, say, what companies have to
do under Federal law for mortgage, there is no new data
collection requirement. I think we are trying to find a
representative sample to get insight----
Mr. Meuser. Again, taking feedback from----
Mr. Chopra. We are, and we certainly subjected it to that.
Mr. Meuser. All right. Okay. So you know, I am going to ask
you about this. You have had some press release and tweets--I
cannot say exactly when, but they exist--that came across as
very kind of mean-spirited perhaps, malicious phrases, such as
you referring to industries or sectors as cartels, as liars, as
deceitful, sometimes in reference to entire industries, or at
least that is how it was interpreted. Do you believe entire
industries in the financial services marketplace should be
tainted in this way?
Mr. Chopra. No, we have not done that. In fact, I will say,
though, the London Interbank Offered Rate (LIBOR) rigging and
cartel cost all of us billions and billions of dollars. That
was a serious offense that also had raised criminal issues. So
yes, that was cartel-like behavior, and it was totally
inappropriate.
Mr. Meuser. That is not really how it came across.
Mr. Chopra. Well, I welcome you to share that with me
because that is what I remember.
Mr. Meuser. Is there an industry that you think does treat
its customers well?
Mr. Chopra. That is what we want. We want people to compete
on treating people well, giving them a good product at a great
price.
Mr. Meuser. You and your staff have referred to banks as
being similar to a utility. Do you believe in the competitive
marketplace of tens of thousands of banks and credit unions, or
do you see them more as a utility that needs to be run by the
heavy hand and high regulations, which the banks already have,
such as utilities?
Mr. Chopra. No, I think what we have said is it is critical
infrastructure for the economy. So I do not think people fully
appreciate, if the banking system is not working, nothing
works. It is as important as the electric grid or the
transportation network. So it is so important, which is why we
need to make sure it is always working, always on, and when
there are risks to the financial system, we have to safeguard
against that.
Mr. Meuser. My time has expired. I appreciate the
clarification. I now recognize from New Jersey, Mr. Gottheimer,
for 5 minutes.
Mr. Gottheimer. Thank you, Mr. Chairman. Director, thank
you for being here. I want to start off with some great news.
When you were here last in front of this committee in November
2023, you committed to investigating the revenue that financial
institutions were making off of the outrageous congestion tax
in New York. I am glad to let you know that the Metropolitan
Transportation Authority (MTA) has in a flash of common sense
put an end to the congestion tax cash grab. That is one
investigation off your list. Thank you for your partnership in
that effort. You can celebrate if you want, or we can do it
later if you would like over a beer.
Switching gears. Like you, I share the objective of
protecting consumers from harmful practices. Are you familiar
with crisis pregnancy centers, or CPCs?
Mr. Chopra. Yes. I do not have deep knowledge, but I am
aware.
Mr. Gottheimer. CPCs offer a master class in deceptive
anti-choice marketing, often misleading women and attempt to
block their access to reproductive healthcare. That is why
watchdog groups have called on our Federal Government to
investigate these centers for deceptive marketing practices.
Director, you understand consumer fairness perhaps better than
anyone else in this room. Will you commit to using CFPB
resources to look into this issue and protect consumers who
come into contact with these centers, especially women?
Mr. Chopra. Well, certainly, they are not a financial
provider, so it would be out of our jurisdiction. In as much
that there are deceptive or unlawful claims, there are agencies
in the Federal Government who do have jurisdiction. Of course,
we always want a marketplace where advertising claims are
truthful.
Mr. Gottheimer. I think in this case, I will follow up with
you. There are some financial crossovers, and I encourage you--
--
Mr. Chopra. I see.
Mr. Gottheimer [continuing]. to look at this issue and hold
these centers accountable for deceptive practices and
disinformation, and I will follow up with you, if that is okay.
Mr. Chopra. Of course.
Mr. Gottheimer. Thank you. Director, I would like to talk
to you about coerced debt, which occurs when the abuser in a
violent relationship obtains credit in a survivor's name
through threat, force, or fraud. Far too often, women survivors
are the ones targeted in these situations. Right now, a card
holder cannot be removed from a joint credit card account
unless both parties agree to terminate the account. Has the
CFPB looked into solutions that help survivors take their name
off joint accounts without penalties?
Mr. Chopra. Yes. So we have actually completed a rulemaking
under the Fair Credit Reporting Act regarding survivors of
human trafficking. That is one of the best examples of coerced
debt. We really do see this also for those who have suffered
from domestic violence or other types of relationships, where
they might incur debt that they did not even seek.
One way that a bad actor can really keep control over
someone is when they are financially paralyzed, and destroying
their credit report with unpaid debts is another way that they
can maintain that control. So I would really urge us all to
think about ways the Fair Credit Reporting Act can also be used
to stop not just abusers or protect survivors of human
trafficking, but also those who have been subject to domestic
violence.
Mr. Gottheimer. That is a big issue on the domestic
violence side. I hear often from men and women who have told me
that they are scared to leave a relationship or they cannot
because financially they just cannot get out from the financial
abuse----
Mr. Chopra. We would really like to work on this with you.
There was a bill that came out of this committee about
survivors of human trafficking. The CFPB implemented that rule
pursuant to the deadline. I think we can consider more work on
this.
Mr. Gottheimer. I really would like to work together with
you on this issue. We need to ensure survivors have the support
they need to rebuild their lives, and I would be honored to
work with you on that. According to the Federal Bureau of
Investigation's (FBI's) 2023 Elder Fraud Report, seniors had
more than $3.4 billion stolen from senior scammers last year.
What is the CFPB, if I can ask, doing to crack down on this
staggering fraud?
Mr. Chopra. Well, elder financial exploitation has always
been something that I have been worried about. We are looking
to find ways to partner with industry and others to detect some
of these scams. I am actually really worried about the use of
generative AI here, where someone's voice can be cloned and
they can make a call to an older adult. There is really no way
for that older adult to distinguish it, and it can often lead
to very serious harms. I would like to see the banking industry
also step up when it comes to older adults who are suspiciously
sending major wire transfers to scammers.
Mr. Gottheimer. I agree. In fact, I am leading a bipartisan
Empowering States to Protect Seniors from Bad Actors Act with
my friend Representative Nunn to equip States with the support
they need to address scams. It is a critical issue, and I
believe this legislation will be a valuable tool in the scam
response toolkit. Thank you so much, and I yield back.
Mr. Meuser. The gentleman yields back. The gentlewoman from
Texas, Ms. De La Cruz, is now recognized for 5 minutes.
Ms. De La Cruz. Thank you, Mr. Chairman, for holding the
hearing today, and thank you, Director Chopra, for appearing
before us.
The CFPB was created with a special mandate to guard
against consumer harm. However, it seems that many of your
rules written are specifically penalizing our small financial
institutions that serve local communities like mine. My
community is largely Hispanic and a rural area as well. Small
banks and community banks are key contributors to places like
mine. They help with economic growth and development, and like
I said, my district stems from the border in Deep South Texas
all the way up north to San Antonio. So our banks, of course,
have a unique community which they serve. I am concerned about
many of the regulations that the CFPB has written over the last
3 years.
Many organizations and associations have shared with you
that Section 1071 Rule are going to hurt our small businesses,
the small businesses that have been leading efforts in our
community. Many people in the community are seeking capital to
grow their businesses and do not want their racial or other
demographic information to be part of the loan process. My
biggest concern is that the rules that the CFPB and the other
Federal financial regulators have drafted over the last 3 years
were all written in a vacuum. Yet, the totality of all the
regulation has drastically increased the compliance burden on
the financial institutions.
Director Chopra, is anyone at the CFPB looking at the
cumulative impact of all of these new regulations and the
ability of smaller financial institutions to digest them
properly to comply?
Mr. Chopra. Yes, we have actually received feedback on
this, and one of the places I have been working with our staff
on is to really look at what is the roadmap for which
institutions, including the smallest banks are making changes.
For example, we tried to make sure that any of the rules that
we were required to promulgate by Congress, they are working in
concert with others, such as the required Section 1071 Rule
that we had to promulgate is working with any Community
Reinvestment Act one. We are also looking at the systems and
vendors that they are using. Often these smaller institutions
do not have much choice when it comes to software vendors, so
we tend to work closely with them to understand what are some
of the things they are prioritizing and implementing.
I take your point. We really need community financial
institutions, small banks, small institutions all over the
country serving people. I do not want to see a world where
people only have three or four choices.
Ms. De La Cruz. Director Chopra, as you just said, you are
looking at these, having discussions. Would you commit to
having some type of research investigation, a report to
actually analyze how this affects the community banks before
implementing the 1071 Rule? Can you commit with that?
Mr. Chopra. Well, one of the things we did was we actually
exempted a large number of institutions from it based on some
of the concerns that you are raising. We wanted to see that it
becomes something that we implement what Congress mandated with
fidelity, while also growing the balance----
Ms. De La Cruz. I am reclaiming my time here. As I speak to
regional banks in Texas, the regional banks that are growing in
Texas, one of the fastest-growing States, they are saying that
they want to scale back their loan process because of how this
is going to implement. Then my smaller banks that you have
actually exempted are saying they do not want to grow. Why?
Because they do not want to have to comply to this rule and all
the mandates. They feel that it will actually hurt them.
So what you are actually doing is you are pushing against
the small banks and their desire to grow in communities who are
Hispanic like mine, and you are also affecting regional banks
to want to scale back loans to small businesses, mortgage
lenders, real estate agents, those type of people because they
do not want to grow anymore. So I think that this is something
that needs to be reported on before it is actually implemented.
Thank you, Mr. Chairman. I yield back.
Mr. Meuser. The gentlewoman yields back. The gentlewoman
from Massachusetts, Mrs. Pressley, is now recognized for 5
minutes.
Ms. Pressley. Thank you, Mr. Chair. Thank you for joining
us, Director Chopra, and thank you for leading the Consumer
Financial Protection Bureau in its mission to save consumers
billions of their hard earned dollars by cracking down on junk
fees, helping wipe out 70 percent of medical debt from consumer
reports, and ensuring that our data is accurate and secure.
Before I go further, I just want to take a moment for the
record. You know, after many attacks on the CFPB, could you
just for the record say what the Supreme Court of the United
States (SCOTUS) ruling was?
Mr. Chopra. In an opinion that was 7 to 2, authored by
Justice Clarence Thomas, the Supreme Court made crystal clear
that the CFPB's funding mechanism complies with all aspects of
the appropriations clause. While we prevailed in this, it was a
very costly delay. So many of our lawsuits against bad actors
were stalled, paused, and in other cases, companies were not
complying in the way we would expect them to.
Ms. Pressley. Well, yes or no, for the record, is the CFPB
constitutional according to the Supreme Court?
Mr. Chopra. Yes.
Ms. Pressley. Louder for the far-right folks in the back.
Mr. Chopra. Yes.
Ms. Pressley. Very good. All right. In a few months,
millions of students will be returning to their college
campuses to continue their education and start their freshman
year, including in my district, the MA 7th, which is home to
one of the largest concentrations of higher learning
institutions in the country. This is an exciting time for a new
generation of young people--two of my incredible interns join
us today, in fact--for whom this is often their first time
living alone, managing a budget, exploring their potential
academic and career futures. However, many of these students
have little or no financial experience, zero income, and a lack
of sufficient savings cushions for emergencies. In other words,
they are vulnerable to financial exploitation.
The CFPB has documented numerous cases of financial abuse
in the student loan and credit card markets. It is increasingly
clear that students are being driven toward more expensive
products in the student prepaid and debit account markets as
well.
I would like to enter for the record the College Banking
and Credit Card Agreements Annual Report to Congress.
Mr. Lawler [presiding.]. Without objection.
[The information referred to was not submitted prior to
printing.]
Ms. Pressley. Director Chopra, the report raises concerns
about transparency and compliance of banking products marketed
to college students. What actions has the CFPB taken to ensure
appropriate disclosure requirements are being met by the
universities?
Mr. Chopra. Well, I think this is a very, very significant
problem that in some ways represents problems of the past. We
saw how student lenders were giving kickbacks to colleges,
steering them into a specific loan. We saw how credit card
issuers were targeting on-campus in college. Congress banned
those student loan kickbacks. They banned that on-campus
giveaways by credit card companies. I do think we need to
continue to make sure that not just the banks are providing the
right disclosures, but we are really looking with the
Department of Education about the relationships between
colleges and banks.
Ms. Pressley. Thank you. The report further highlights that
the products marketed to students are often more expensive. For
example, the debit cards marketed to students often consist of
high overdraft fees, inactivity fees, and monthly service fees
even though cheaper options are available, resulting in some
students saying that they had to fast for days, use candles to
reduce electricity costs, and even forego textbooks. This is
unacceptable and frankly shameful, and it is all because of
predatory and unnecessary fees charged to their accounts.
Director Chopra, these stories are horrifying and they are
just a small snapshot of how students are being impacted. What
steps is the CFPB taking to protect students from being
directed to these expensive banking products which exploit
their financial situation and inexperience?
Mr. Chopra. Well, we are going to continue with the
Department of Education's rules and our rules to make sure that
there is not predatory and exploitative practices. We want to
make sure that every college student that is starting this
summer knows they should also look for an account maybe before
they come to campus. They do not have to accept what the
college may be pushing on them and there needs to be some real
look about whether colleges should be getting kickbacks for any
of this.
Ms. Pressley. Finally, Director Chopra, I am concerned by
the report's finding that financial inducements to institutions
of higher education from financial service providers may
compromise the institution's ability to prioritize their
student's financial well-being. I think we can agree that it
poses a conflict of interest. So how is the CFPB monitoring
these agreements and what steps are being taken to mitigate any
conflict of interest?
Mr. Chopra. Well, what is fortunate is many of these
agreements are now public. The credit card agreements are
public, we make them public, but we will also take further
enforcement action if there is violations of law. I also think
Congress should be thinking about reasonable limitations when
it comes to these colleges profiting from it.
Ms. Pressley. Thank you for your incredible work that you
and your staff at the CFPB are doing. We appreciate your sweat
equity and hard work immensely on behalf of consumers. I yield
back.
Mr. Lawler. The gentlelady yields back. The gentleman from
Nebraska, Mr. Flood, is now recognized for 5 minutes.
Mr. Flood. Thank you, Mr. Chairman. Scams and fraud in the
financial system are an ever-growing threat to consumers and
businesses with the cost reaching tens of billions. According
to the FTC, consumers reported losing more than $10 billion to
fraud in 2023, and that is a new benchmark. Victims of
cybercrime registered 880,418 complaints to the FBI in 2023,
with potential losses exceeding $12.5 billion, representing a
22-percent increase in losses from the previous year. Mr.
Chopra, will you commit to issuing a final rule on 1033 that
does not discourage industry efforts to build critical tools to
detect and prevent fraud?
Mr. Chopra. Yes, I am totally aligned with that goal, and
we are working to make sure that we can implement the rules to
promote competition, protect data, but also to make sure that
we are deterring, detecting, and stopping fraud.
Mr. Flood. Right. Are you considering the development of
these tools as it relates to restrictions on the secondary use
of data?
Mr. Chopra. This is a tough one. Secondary uses of data are
often really difficult to police. It is hard to know what
people are using the data for. So we know that there will be
some who want to say they are offering a loan but really are
just saying that and they want to use it to sell or otherwise
share. So we are looking about all the ways in which we can
craft the rule to make sure that there is not bait and switches
and that there is really reasonable uses of the data that are
not intrusive or engaging in surveillance.
Mr. Flood. Thank you. I would like to switch gears to a
different issue. Last year, your general counsel gave a speech,
where he argued that the merchant exclusion within Dodd-Frank
only applies to ``mom and pop'' merchants. Is it your view that
the CFPB has jurisdiction over retail stores, airlines,
electric utilities, and anyone else who sells things as long as
they are a bigger company than a mom and pop?
Mr. Chopra. It is not the full context. First of all, we
absolutely do have jurisdiction over retailers, others when it
comes to things like the Fair Credit Reporting Act, other----
Mr. Flood. Any retailer, even a mom and pop store?
Mr. Chopra. I think under the Fair Credit Reporting Act if
they are a furnisher, that has not been a focus of ours in any
way, but I would say the merchant exclusion is in the law. We
have always adhered to that, and certainly we are not looking
at mom and pops when it comes to our work.
Mr. Flood. So we are having trouble understanding because I
would like to remind you that the congressional intent was
absolutely crystal clear as it related to this merchant
exclusion. Senator Dodd of the Dodd-Frank fame said on the
Senate floor, ``It was certainly always our intent not to
include retailers and merchants under the auspices of the
Consumer Financial Product Safety Commission. That language
they have now offered and on which they work so hard makes that
abundantly clear.''
Do you take the position that Senator Dodd was mistaken
about the clear meaning of the Dodd-Frank Act, a bill that he
wrote with then Financial Services Committee Chair Barney
Frank?
Mr. Chopra. No. I think that merchant exclusion relates to
who is an offeror of a loan or a financial provider in the
meaning of the Consumer Financial Protection Act. I am sorry to
get technical on it. We absolutely adhere to that. I think that
was supposed to address a store that was offering the ability
for someone to pay later for something to exclude it. That is
not a loan.
Mr. Flood. Finally, I like to close by highlighting an
exchange I had with Acting Comptroller Hsu last month. Hsu
said, ``Banking consists of three services that are bundled
together: facilitating payments, making loans, and taking
deposits. When payments becomes unbundled from that on its own,
that is commerce, that is not banking.'' Director, do you agree
with that description of the line between banking and commerce,
and more so and more importantly, are payments alone commerce?
Mr. Chopra. I need to think about that a bit more, but
generally speaking, we think about banking as collecting
deposits, making loans, and movement of money. I think that
banks are really the critical component for doing all of it. I
need to think about what that says. I think it sounds right
roughly, but I need to put more thought on that.
Mr. Flood. I would ask that you in your extended comments
to this committee answer that question----
Mr. Chopra. Sure.
Mr. Flood [continuing]. before the deadline----
Mr. Chopra. Of course.
Mr. Flood [continuing]. proposed by the chair.
Mr. Flood. With that, Mr. Chair, I yield back.
Mr. Chopra. I am happy to discuss that with you, too.
Mr. Flood. Thank you.
Mr. Lawler. The gentleman yields back. The gentleman from
Texas, Mr. Green, is now recognized for 5 minutes.
Mr. Green. Thank you, Mr. Chairman. I thank the ranking
member, and of course I am always honored to have our director
here with us. Thank you so much for what you are doing to
protect consumers, and if I may, I would like to thank your
staff, too. You have some very good staff members. They are
always available to us to assist us.
Let me start with this. The Supreme Court seems to have
indicated that the CFPB is being properly funded, and I am
pleased to know that you can now take a breath. I am not sure
that the battle is over because I have an article from Politico
styled, ``Regulating Through Blog Posts: ``Republicans Poised
to Attack CFPB Director.'' So the battle is not over.
Apparently, the new challenge will emanate from the Agency's
funding, and it depends on the definition of the term
``earnings,'' Federal Reserve earnings. My hope is that people
will understand that definition is one that allows for the
earnings to mean total net income, not net profits, but that is
a battle that you will have to continue to fight. You fight to
protect the consumer, and then you have to fight to protect the
Agency from my colleagues, who would like to end the Agency.
You have quite a battle on your hands.
Let us talk about the absence of the CFPB and what veterans
would have to contend with because currently, you are serving
1.3 million active duty servicemembers, 1.5 family members of
active duty servicemembers, 770,000 members of the National
Guard, 980,000 National Guard and Reserve family members, and
18 million veterans. What is it that these persons in the
absence of CFPB would have to contend with? We know that there
are people who target them, who would take advantage of them
when it comes to lending practices. Tell us if you would.
Mr. Chopra. Well, one of my former colleagues, Holly
Petraeus, used to describe some companies looking at
servicemembers as nothing more than a dollar sign in a uniform.
We see in the data that they are much more likely to be
targeted for identity theft, including their money and their
data. We enforce the Military Lending Act. Since I have taken
office, we have brought in a number of enforcement actions to
vindicate those servicemembers' rights. When it comes to
veterans, many of them are subjected to frauds and scams. We
have a dedicated Office of Servicemember Affairs that focuses
on military connected families, and we are very proud of that
work, and it would be a mistake to simply shut that work down.
Mr. Green. Permit me to ask this. In the efforts to shut
down the CFPB, have you seen or have you had presented to you
any proposal as to what would replace it? Any legislation been
presented to you in terms of a proposal to replace the CFPB?
Mr. Chopra. I have heard about just elimination and
defunding.
Mr. Green. Elimination and defund. Sort of like with
Obamacare, as it is called. Elimination is fairly easy, so they
thought, but have not been able to perfect that, but never saw
the plan to replace. Would you think that before we decide that
we are going to eliminate this Agency that is protecting these
millions of veterans and their family members, that we would
have something that we would offer as a replacement?
Mr. Chopra. It also would create chaos for mortgage lenders
and many others who depend on the rules to make sure that they
are lawfully originating mortgages.
Mr. Green. I am pleased that you brought this up because,
unfortunately, I was here when we had the downturn in 2008 and
we discovered all of these many things that were being done to
take advantage of persons who were seeking a mortgage. Some of
the various instruments were just dastardly imposed upon
consumers, so thank you for bringing that up. My belief is that
the CFPB is necessary, and if we did not have it, we would try
to create it, although in this climate I am confident that it
would be impossible to create. So thank you for your service,
and please continue to soldier on. Thank you.
Mr. Lawler. The gentleman's time has expired. I now
recognize myself for 5 minutes. I would just note that this
committee did pass Mr. Barr's bill that would appropriate funds
for the CFPB and create a commission. So the idea that somehow
we are defunding and disbanding is false.
Director Chopra, some of my colleagues have already raised
concerns about the CFPB's directive to eliminate fees that
institutions can charge, will limit access to credit for
certain riskier individuals, and raise the costs of credit and
services for all consumers. As of just this week, the CFPB
initiated a rulemaking process to remove medical debt from
credit reports. If a medical debt is owed by the consumer, how
do you expect it to be collected?
Mr. Chopra. Well, there are many, many medical providers
that do not report and they do collect. I would say this. We
have done years and years of analysis on it, and there is also
a prohibition in the Fair Credit Reporting Act for having
medical-related information on credit reports and we saw really
people seizing on that exemption to often use a credit report
to coerce people into paying debts they already paid or do not
owe. So we have proposed and are accepting comment on how we
might restrict some of that abuse and put it more in line with
what Congress intended.
Mr. Lawler. Okay. If I decided to apply for a mortgage, let
us say, under your rule, and a lender would have no idea that I
skipped out on my medical bills because I do not need to
include it on my credit application, and the lender would not
be allowed to consider the debt that I owe when determining how
much of a mortgage I can afford, correct?
Mr. Chopra. No, that would not be correct.
Mr. Lawler. Why?
Mr. Chopra. Well, it does not really prohibit any lender
from asking about what are people's income, debts, other
things. So again, this is really about looking at the
accuracy----
Mr. Lawler. So you are supposed to self-report?
Mr. Chopra. Well, there are lots of things that are not on
a credit report, including your food expenses, other things
that lenders often do ask. So when it comes to a credit report,
it was meant for a lender to see for the loans that you have
taken out like a mortgage, credit card, auto loan, or a student
loan how are you doing on them.
Mr. Lawler. Right. How are you doing paying your debts,
right?
Mr. Chopra. Yes. So we have not----
Mr. Lawler. So if the objective of a credit report is to
show somebody who is going to provide you----
Mr. Chopra. Yes, your loans.
Mr. Lawler [continuing]. with funding----
Mr. Chopra. Your loans.
Mr. Lawler. Right. But if you are----
Mr. Chopra. So we have not been opposed to excluding----
Mr. Lawler. Right. But if you are----
Mr. Chopra [continuing]. medical loans or medical credit
cards.
Mr. Lawler. Excuse me. The whole purpose of a credit
report, right, is so that somebody knows whether or not
somebody potentially could be a risky person to lend money to.
So if that is the objective and you are saying, well, you do
not need to include this, you do not need to report it, is it
not going to create a situation where they do not have an
accurate financial picture of a prospective borrower, and will
that not have an impact on our credit markets?
Mr. Chopra. Well, I guess I would ask you this. Let us say
I just made up the fact that you owed me $10,000 and I put that
on your credit report. When there are inaccuracies in your
credit report, that has a huge impact on you when it is false,
when it is already paid. What we see is compared to other types
of loans like mortgages, or credit cards, or auto loans, where
you actually signed up for the loan, where there is
documentation around it, there is a lot more information to
assure that it is accurate. On top of that, medical bills also
go through the insurance system, so you are often left with a
situation where things are still pending but often parked on
your credit report and that is why many lenders actually do not
even look at it because they know that it is not necessarily
predictive of your performance on other loans, and that is what
a lot of the research has shown.
We have proposed the rule. We are eager to get feedback on
it, if there are places we should adjust it, but we did a lot
of work over the years to make sure that there is a strong
empirical base for this. At the end of the day, the Fair Credit
Reporting Act really does not permit medical information or
your health data to be there.
Mr. Lawler. In your example, you talk about inaccuracies on
a credit report, but cannot consumers dispute those
inaccuracies?
Mr. Chopra. Yes, but how long is that going to take right
when you are in the middle of applying for a loan? You know, it
will take so much time to file the dispute, wait, and then you
are in some rope-a-dope between the credit reporting agency and
the furnisher. This is why this has systemic problems, and I
really want to encourage you. I know people feel they have to
oppose this, but this is pretty reasonable what we are
proposing.
Mr. Lawler. Yes, but as you acknowledge, there is a process
to dispute for inaccuracies., and ultimately----
Mr. Chopra. Yes, but there is not a process where medical
billers----
Mr. Lawler. Yes, sir. Reclaiming my time. Thank you. My
time has now expired.
The gentleman from New York, Mr. Torres, is recognized for
5 minutes.
Mr. Torres. Thank you. Director Chopra, I commend you for
your decision to propose the exclusion of medical debt from
credit reporting. Medical debt is often the consequence of the
unforeseeable, and, therefore, it reveals next to nothing about
the underlying credit worthiness of an individual borrower.
America's conventional credit scoring methodology to me is
fundamentally obsolete. Not only does it include factors that
have no informative value like medical, it often excludes
factors that have informative value like rental payments. If
credit reporting were to factor in alternative data, like rent
payments, most of the population, if not almost all of it,
would become credit scorable. If Government-Sponsored
Enterprises (GSEs), like the Federal Home Loan Bank of New
York, Fannie Mae, and Freddie Mac, were to use credit scores
that include rent payments and exclude medical debt, as
required by law, millions of more Americans would have access
to homeownership. Twenty thousand of my constituents in the
Bronx in New York 15 would have access to homeownership. So for
me, the single greatest solution to systemic racism in America
is the creation of black and brown wealth through expanded
access to credit and expanded access to homeownership.
For the lowest income communities of color, there is
nothing comparable to homeownership as a tool for broad-based
wealth creation. I appreciate your mentioned earlier of trigger
leads. I have serious concerns that unregulated trigger leads
fundamentally undermine consumer protection and data privacy.
When consumers apply for a mortgage, a credit reporting agency
will often sell their private information without their
knowledge and consent. Within hours of applying for a mortgage,
consumers are often blindsided by a bombardment of
telemarketing calls. Some of the lenders behind these calls are
often bottom feeders, engaging in unfair and deceptive business
practices. So, I worry that poorly regulated trigger leads are
often an open invitation to predatory lending against
unsuspecting borrowers.
I am curious, would you support legislation that would
regulate trigger leads?
Mr. Chopra. Yes, I really have concerns about the big
credit reporting conglomerates making money off of this,
especially when we do not even know if these offers are really
competitive or legitimate. You mentioned, Congressman Torres,
that they might be bottom feeders. We do not even hear that
much that these leads are leading to more competition, but I
really do. I have talked to you and Congressman Rose about it.
I think this is a key privacy issue we should work on.
Mr. Torres. Look, I mean, I feel deregulated trigger leads,
leads to predatory lending under the guise of choice and
competition. Maybe the theory is that it will lead to more
choice and competition, but the reality is that it has led to
more exploitation.
As you know, June is Pride Month, and so I have a few
questions in the spirit of pride month. The Urban Institute
released a report finding a 20-percent homeownership gap based
on sexual orientation and gender identity. Five percent of the
20-percent homeownership gap cannot be explained by existing
data. As the administrator of the Home Mortgage Disclosure Act,
CFPB is in a position to mandate the disclosure of more data so
that researchers like the Urban Institute can ascertain the
causes of the unexplained 5 percent homeownership gap.
Is the CFPB willing to take action to expand the scope of
the Home Mortgage Disclosure Act to include data relating to
sexual orientation and gender identity?
Mr. Chopra. Yes. We are thinking of looking more deeply in
general at the homeownership gap and older homeowners, and
there are certainly issues when it comes to sexual orientation
and other factors. With respect to the Home Mortgage Disclosure
Act, there are a number of issues that we are looking at for
modernization of that, and that is certainly one of them. I
think it is not slated in the very near term, but when we do an
assessment, and we look at it, I think that is going to be
something that we will also have to comply with Supreme Court
precedent on this.
Mr. Torres. The CFPB administers, not only the Home
Mortgage Disclosure Act, but also the consumer complaints data
base, which is an abundant source of data. Is the CFPB willing
to expand the scope of the consumer complaint data base intake
form to include sexual orientation and gender identity?
Mr. Chopra. We may have done some consumer testing on
different identification factors. I think there is always the
balance of how to get people through and file, but I am happy
to ask the staff about whether that has been done before.
Mr. Torres. Just a final question on medical debt: Even if
there is a process for disputing, do you not think we should
get it right the first time?
Mr. Chopra. Yes, and often when people dispute, the
immediate answer is that it is correct without showing any
receipts.
Mr. Torres. But we should try for maximum accuracy at the
very beginning of the process.
Mr. Chopra. Actually, it is the law for those credit
reporting conglomerates to have reasonable procedures to quote
assure maximum possible accuracy.
Mr. Torres. Thank you. My time has expired.
Mr. Nunn [presiding]. Thank you. The gentleman from
Florida, Mr. Donalds, is now recognized for 5 minutes.
Mr. Donalds. Thank you, Chairman. Director Chopra, welcome
back.
Question. So the CFPB refers to Buy Now Pay Later products
as the pay in four--number four product in which consumers
split a retail purchase, typically $50 to $1,000, into four
equal interest-free installments, with the first installment,
the downpayment, due at checkout and the remaining installments
due in 2-week intervals. Would you agree with that?
Mr. Chopra. Yes. Generally, that is how the market is
today.
Mr. Donalds. Okay. So you would agree that buy now pay
later products have a separate and distinct characteristics
from traditional credit cards?
Mr. Chopra. Yes. They actually are, in many ways,
substitutes for it, but they have a different way people borrow
and repay.
Mr. Donalds. All right. So then why is CFPB starting to
interpret credit card regulations to include Buy Now Pay Later
plans?
Mr. Chopra. It is actually how Congress wrote it. So
Congress, when they amended the Truth in Lending Act, they
talked about the different devices and accounts that could be
used to draw and create loans, so what we did was we got
actually a lot of questions. What are the existing provisions
that apply? So a lot of the things that apply to credit cards
do not apply to them right now, but there were some pieces of
it as it relates to billing statements, disputes and errors,
that did apply, and we wanted to make sure that there was some
consistency around that.
Mr. Donalds. Would you not agree that the primary thing
that makes a credit card, a credit carder is interest, and a
Buy Now Pay Later agreements are interest free?
Mr. Chopra. Yes. So the way the Credit Card Accountability
Responsibility and Disclosure (CARD) Act and the Truth in
Lending Act, there is a separate part about finance charges. So
finance charges is what often triggers, you have to show an
annual percentage rate and other pieces. So it is true that not
all aspects of the credit card framework do apply, but some do.
Mr. Donalds. I would argue that without interest, none of
the aspects of the credit card framework would apply.
Mr. Chopra. Well, I think they do not have to disclose, for
example, an interest rate. That is one part of it, but as it
relates to bills and disputes, that is really common for lots
of types of loans.
Mr. Donalds. All right. A couple of other things. For over
50 years, Congress under both Democrats and Republicans have
determined that the best way to promote competition and
consumer choice while also ensuring robust consumer protection
is through disclosure-based laws and regulation. The CFPB has
been initiating a series of blogs, circulars, advisory
opinions, and rulemakings that appear designed to upend that
disclosure-based approach to consumer protection, often by
labeling lawful and fully disclosed bank fees as unfair or
abusive. If consumers cannot be trusted to make their own
decisions after receiving disclosures, do you favor government
mandates about product features and fees?
Mr. Chopra. Well, respectfully disclosures are not the only
things that are required. There are some things that have to be
disclosed, but there are other prohibitions. So like I
mentioned in my opening testimony, in some cases, there are
restrictions when it comes to data and permissible purposes,
and you cannot disclose that away. We have tried our best to
say, here is how existing law applies. Disclosures have their
role, but I would argue, in privacy notices disclosures are not
enough, and you have passed a number of laws over the past 50
years that touch on disclosure and nondisclosure.
Mr. Donalds. Yes, but we are not talking about privacy
aspects. We are talking about fees and fee structure, and CFPB
has--hold on, Director Chopra. CFPB has been labeling different
fees and fee structures as misleading, abusive, et cetera. In
that vein, is the CFPB outside of the framework that has
existed on Capitol Hill for 50 years around disclosure being
the way that consumers are provided information?
Mr. Chopra. Not at all. For example, Congress banned
certain types of fees, all technical----
Mr. Donalds. Well, but real quick to that before you go.
That is Congress banning the situation, not an agency making a
promotional view of a situation that is lawful, correct?
Mr. Chopra. It is consistent what we have done with
congressional prohibition, so what we have done on credit cards
is exactly in line with the congressional prohibition on
excessive or disproportionate fees.
Mr. Donalds. Yes, but you cannot take a congressional
prohibition on something else.
Mr. Chopra. No, no, no, but it is consistent----
Mr. Donalds. Hold on, Director Chopra, and then label it as
abusive on something that is allowed under Federal law. Now you
are picking and choosing.
Mr. Chopra. No, I am not. Everything we have done has been
exactly and squarely with what the prohibitions that currently
exist. Now, if there is a loophole that in the regulations we
inherited, and when we do a look back to determine whether it
made sense, that is part of the process.
Mr. Donalds. Okay. Fair enough. Thank you, Director Chopra,
for coming in. I yield back.
Mr. Nunn. The gentleman yields back. The gentleman from
Nevada, Mr. Horsford, is now recognized for 5 minutes.
Mr. Horsford. Thank you to the chairman, to the ranking
member, for holding this necessary hearing.
We continue to see alarming increases in the frequency,
sophistication, and reach of scams. Meanwhile, the complexities
of our financial system allow many good hardworking people to
be inadvertently harmed by incorrect or incomplete information
being distributed. As evidenced by the stunning 1.5 million
complaints that the CFPB received, there is a massive need for
your Agency to continue to stand up for everyday working
families as they attempt to navigate our financial sector. With
an impressive 99 percent response rate from the offending
parties, the CFPB is regularly delivering results. I want to
thank you on behalf of my constituents and the American people.
When it comes to financial scams or fraud, unfortunately,
our brave servicemembers are among those who are targeted
regularly. As we continue to debate the National Defense
Authorization Act on the floor, I want to stay focused on the
servicemembers at the heart of all of this and follow up with
you on our previous discussions about your initiatives to
protect those who are at risk, so we can keep them safe.
Unfortunately, for my home State, the volume of complaints from
servicemembers ranks third in the country on a per capita
basis. Thanks to your efforts, relief is on the horizon for
many as the CFPB has delivered an astounding $183 million in
redress to servicemembers and to veterans.
Director, your report pointed to increased attention toward
innovative solutions that will make it easier for our
servicemembers to take advantage of these programs. Can you
please discuss some of the areas where you see more
opportunities to streamline current methods for getting
servicemembers the support that they have earned?
Mr. Chopra. Well, certainly the National Defense
Authorization Act has been able to provide lots of different
enhancements from servicemembers on their cars, their
mortgages, their student loans, and more. The Servicemembers
Civil Relief Act, the Military Lending Act, which we enforce,
have real important roles in this. Really, our Office of
Servicemember Affairs has encouraged financial companies to
really streamline the process so that they can automatically
give benefits to servicemembers. We found that a lot of
reservists and National Guard in many cases have left money on
the table because of the bureaucracy around it.
We also see, when it comes to repossessions of an
automobile or foreclosure, those Servicemembers Civil Relief
Act protections are absolutely critical, and of course the Fair
Credit Reporting Act has special provisions for servicemembers
when it comes to protecting against identity theft.
Mr. Horsford. Thank you. Let me turn to the private
identity verification process. Director, there has been a lot
of discussion around the use of credit header data recently. It
would be helpful if you could clarify what exactly is included
in credit header data and what is not?
Mr. Chopra. Yes. So credit headers are the short form of
credit report, so it typically has your name, other names being
used, past addresses. It will typically not include what is
called a trade line, which is what you have been borrowing and
whether you have been paying back. That short form credit
report does have some sensitive data, so we are looking at its
uses, but of course we are going to be thinking hard about how
it is different from the rest of the credit report.
Mr. Horsford. Thank you. Whether it be fraud protection
services or vital public safety initiatives, it is crucial that
you continue to examine ways that the rulemaking surrounding
the Fair Credit Reporting Act could hinder legitimate
businesses and I encourage you to work to mitigate unintended
consequence.
Mr. Chopra. Absolutely.
Mr. Horsford. Thank you. Director, the last time we spoke a
bit about enforcement actions to curtail the unscrupulous
actors in the credit repair marketplace. I wanted to give you
the remainder of the time to discuss any meaningful
developments that you have since last November, particularly--
--
Mr. Chopra. Well, we were able to reach a very significant
multibillion dollar judgment against a ring of credit repair
scammers, Lexington Law, that has been a major step forward
that is going to do a lot for so many people. I do really worry
that when people have inaccuracies on their credit report, they
go to many different ways to try and fix it and often they can
be subject to some very unscrupulous practices, and we are
going to continue to look and work with others to crack down on
this.
Mr. Horsford. Thank you for your work, and I agree with the
exclusion of medical debt from credit reporting, and look
forward to working with you on that as well. I yield back.
Mr. Nunn. The gentleman yields his time. The gentleman from
South Carolina, Mr. Timmons, is now recognized for 5 minutes.
Mr. Timmons. Thank you, Mr. Chairman. I am going to start
out with just the disparity in the view of the role of
government between Republicans and Democrats. Most Republicans
want the Federal Government and every government to do as
little as possible to maintain the rules of the road, to have a
military, to invest in infrastructure, to manage interstate
commerce, and really not much else. My colleagues across the
aisle, Democrats, they want to use the government at every
level to reshape society in their perfect utopian image. It has
not worked. It has been tried before, and I always tell people,
I have one mother, I do not need another one.
I am bringing this up because I think the wild swings in
policies coming out of the CFPB after elections does not
facilitate competitiveness in the global economy, it does not
make the U.S. economy strong, and it impedes business'
abilities to invest because they do not have clear expectations
long term of what policies are coming out of the CFPB. I mean,
can we agree that between 2016 and 2017, and then between 2020
and 2021, the role of the CFPB was very different?
Mr. Chopra. Well, under the law, it should not have been
that different, but, yes, there has been different approaches
by various directors.
Mr. Timmons. You would disagree with a lot of the things
that Mick Mulvaney did as CFPB Director. His approach is
dissimilar.
Mr. Chopra. Yes. I would say we have a more focused rule of
law approach when it comes to our enforcement work. We try and
enforce the law as you write it.
Mr. Timmons. He would probably take a very different
position than you would as it relates to that. He would
probably say that you are exceeding the scope of your
authority, and you are regulated by enforcement, and you are
really impeding customer's ability to get access to credit
because every time that a business is impacted by something
from your office, those costs are passed on. Either customers
are abandoned and denied opportunities because of the
challenges they face, or they have increased costs because
compliance has costs and those costs are passed on. Anyways, I
only bring this up, and I think we can simply agree that with
the Republican Administration, the CFPB has a different role
than a Democrat Administration. I think we can agree on that.
Mr. Chopra. Well, I think the way to address your concern
is often to legislate more.
Mr. Timmons. You are exactly right, and that is what I was
going to bring up. Andy Barr has a bill that would create a
commission that would appoint the CFPB Director and have
additional accountability.
Mr. Chopra. Why not legislate substantively on consumer
protection? Why not actually put in----
Mr. Timmons. We have passed, like, 45 bills this year, so I
am trying to put small points on the board. We are not going to
solve the problems that you seek, but I think if we found a way
to give the director increased accountability and really
bipartisan appointment, I mean, I think that would give the
CFPB additional credibility. More importantly, it would stop
these wild swings in policies that are impeding the U.S.
businesses from competing in the global economy because while
they are competing in the U.S. economy, they are also competing
in the global economy. So do you agree that wild swings in
policies between administrations impede business' ability to
make investments and predict the future?
Mr. Chopra. I would say that having a multi-member
commission and I have heard criticisms of multi-member
commission swinging as well because of their odd number. I
believe elections have consequences, and our democratic system
is the way things work. If you want to change consumer law,
that is the role of Congress to pass laws and do that in the
law of the land.
Mr. Timmons. I hear you, but we have 6 months into an
election and all the polls show that there is going to be a
change in administration. If there is a change in
administration, I would imagine that whomever is in your
position in January is going to have a very, very different
view of the role of the CFPB. I probably agree with that
position more, his or her view more of the role of the CFPB,
but I think we can all agree that the wild swings in how the
CFPB performs its function is not conducive to U.S.
competitiveness.
I just really think that we have 6 months to take up Andy
Barr's bill and to make this problem go away or we can talk
about it in 4 years and 6 months, and we are going to have the
same issue again. We are going to have election coming up, and
I just think that the sooner we can stop these wild swings in
policies, the better off we are going to be. With that, Mr.
Chairman, I yield back. Thank you.
Mr. Nunn. The gentleman yields back. The gentlewoman from
Michigan, Ms. Tlaib, is now recognized for 5 minutes.
Ms. Tlaib. Thank you so much. You enforce the law, what is
it, $183 million you got for our veterans?
Mr. Chopra. Yes.
Ms. Tlaib. I mean, come on corporations, businesses, follow
the law. Let us follow the law and it will not cost you any
money. Now, I know you are not going to be able to say that to
my colleague, but it is true. I mean, look at this, 39 public
enforcement actions involved harm to servicemembers and
veterans, including six enforcement actions of violations of
the Military Lending Act. My God, corporate greed is all the
rage here in our country. It is. I mean, it is not like, poof,
the money, it is going to our residents, it is going to our
constituents and our families. I mean, I am just looking at all
of this, like even, which is crazy, the amount of money our
banks were just banking off our residents, that $6.1 billion,
you were able to literally go after these large, Big Banks,
that some of them have business plans that over 50 percent. I
do not know what it was like, maybe that is the credit card
companies, over 50 percent of their business plan was
overdrafts and fees. That is what it was. They were making
money off of charging our residents these fees.
I mean, it is not like you can take this money away from
them, if they applied it under the law, correct? They were
violating consumer law. It is not that is what you are doing.
So if we have a new administration, this is what is going to
happen. Nothing. Do you know how many times I sent various
cases, Ranking Member Waters? You know how many cases I sent
around service loan, folks with student loan issues? Oh my God,
the loan servicers are out of whack. I mean, give me a break.
I want to talk about bye-bye medical debt on credit
reports. I am so incredibly happy to see that. One of the
things that I think, Director, what really was just mind
boggling is hearing my residents talk about the fact that they
would have to file bankruptcy, all of these things because it
was weighing down on them being able to access housing,
employment, and so forth. I know this from the study that you
all showed. When you did the study, it showed the significant
impact on our American families across the country to have
medical debt on their credit report, but it was really an
inaccurate picture of someone's risk profile. It really was.
If somebody gets sick and it gets on their credit report,
having that weigh down as if they bought something--I am not
very good at the car stuff--but something expensive, a luxury
item. So Director, let us talk about that burden, and what this
is going to do. How is it going to transform the families
around the country, their lives?
Mr. Chopra. Well, I think it is going to reduce so much of
the harms, especially from inaccurate credit reporting of
medical bills, which really, debt collectors are not able to
really see----
Ms. Tlaib. You got to explain that because you are really
good at this. Explain that because people do not get it. It
gets on their credit report, and it was incorrect.
Mr. Chopra. Yes. I think this is the difference. There are
so many problems when you park this medical bills there. It may
still be being adjudicated by an insurance company, and on top
of that, no one is seeking out to have medical debt. You borrow
money for a car because you want to get the car to get to work.
You borrow money to get a home. You borrow money for an
education. You are not just sort of eager to get medical debt,
and I think that there are so many different facets of this.
We studied carefully the differences, and we have proposed,
also being more in line with what Congress wanted was to
restrict medical information on people's credit reports, and I
think this is a reasonable intervention to stop a lot of the
inaccuracies. I think one of your colleagues said, well, can
they not dispute it? How long will it take to deal with that,
and what will the harm be when you are applying for that loan?
Ms. Tlaib. I mean, I think our chairman of our committee
was talking about having to dispute it because, I guess, he
actually paid his bill, and it still somehow ended up----
Mr. Chopra. So many people pay it, just because they want
the abuse to stop.
Ms. Tlaib. Yes. Director, what are some of the coercive
practices that debt collectors currently engage in, such as
debt parking? Explain that to the American public.
Mr. Chopra. Debt parking is where you put a debt on
someone's credit report in the hopes that you can coerce them
into paying to remove.
Ms. Tlaib. You are too nice. You mean bully them.
Mr. Chopra. Even if you do not even owe it or you have
never even heard of it. By the way, so much of the public has
also paid one of those debts, even if they did not owe it.
Ms. Tlaib. It is unbelievable. Another concerning practice,
of course, is increasing use of medical credit cards in
financing plans. I mean, corporate greed is just coming up with
all kinds of various inventions. Just to be clear, Director,
this week's proposed rule does not affect debts paid to medical
credit card issuers, does it?
Mr. Chopra. Yes. If you pay a medical expense with a credit
card, any type of credit card, that will be classified
separately and is not covered.
Ms. Tlaib. I think that is something we should actually
look at together, but I really appreciate this. I just do not
want my families, it is not their fault they got sick. They are
just seeking help, and medical debt, again, should not be
weighing down our families. Thank you so much, I yield.
Mr. Nunn. The gentlewoman's time has expired. The gentleman
from Texas, Mr. Sessions, is now recognized.
Mr. Sessions. Chairman, thank you very much. Mr. Chopra,
you are almost at the end of this visit that you have with us,
and thank you for taking time, not just informationally to be
with us, but I think your attitude I appreciate very, very
much. I admit, I was here when we started, and have been gone
for a while, so you may have received this question or have
covered this subject. I appreciate you indulging me to try that
again, if that is true.
Much of business today is concerned about hacking, malware,
a lot of fraud, theft of consumer data, theft of money, putting
companies in the lurch as they try and work with law
enforcement, as they try and figure out the payment of these
things. What does your Agency, what is its role in this regard?
What is your viewpoint and interaction, and what do you see?
Mr. Chopra. I am really disturbed by the increase in
ransomware that we are seeing throughout the U.S. economy. You
do see actors overseas being able to take information that can
then be used to access systems, and then often there is an
extortion payment. I think it is a very challenging issue that
we work with the Treasury and others, particularly to protect
our financial institutions. Some of them have data on half of
America, like the credit reporting agencies. For me, the
Equifax data breach was a huge wake-up call because the hacking
is not just about trying to defraud a consumer, it was used for
statecraft purposes. So it is really protecting data, it is not
just protecting consumers, it is really protecting our country
too.
Mr. Sessions. Is that in your mission or is your mission
only to go protect consumers, not to protect what might be
financial institutions?
Mr. Chopra. Yes. We have certain authorities that our focus
is on protecting consumers, but often when it comes to
safeguarding data, and in the financial space, the Gramm-Leach-
Bliley Act governs some of this. So we have been working more
when it comes to understanding where the risks are, but that is
not really our core mission, that we try and stay abreast of
everything that is going on because it also impacts the broad
array of fraud that is happening everywhere, and especially
with artificial intelligence, generative AI, we expect that to
go up. I do think we have to take some action as a Congress, or
you all should, to make sure our defenses are there.
Mr. Sessions. Okay. Well, what are those ideas that you
have that we have not perhaps reached yet, because as you know,
we are trying our very best to make it easier for companies
that do find themselves in these circumstances to report, to
acknowledge things. Several years back, they were soundly
attacked for allowing these breaches to happen, and I think now
there has been a more recognition that it may be happening to
everybody. Oh, by the way, it happens to government also----
Mr. Chopra. Yes.
Mr. Sessions [continuing]. despite their best efforts to
perhaps criticize others who have these same things. What are
those activities that you think you see from your perspective
that Congress should do a better job at?
Mr. Chopra. I think when it comes to data protection, data
security and data privacy are just two sides of the same coin.
Right now, under the Gramm-Leach-Bliley Act, there is
provisions for safeguarding of information, and then there is
separately privacy disclosures. I think more limitations on
what companies can monetize, I think that will also increase
data security because there will be less thirst for that
information.
Mr. Sessions. Are you saying gather less information that
they would have available? Go back about 15 seconds.
Mr. Chopra. Yes. I think there are places where companies
are engaging, and I see this in the technology sector of
collect every single thing possible and keep it and monetize
it.
Mr. Sessions. But is not that what you are asking banks to
do in some respect with some of your rulemaking?
Mr. Chopra. No, we are actually----
Mr. Sessions. Gather more data and information?
Mr. Chopra. Well, there are places where Congress has asked
us to request more, but when it respects other issues, there
are actually laws on the books to dispose of it and make sure
that it is deleted rather than permanently retained.
Mr. Sessions. Thank you very much. I am going to take to
heart what you have said and go look at it, and I will get with
you offline then. Thank you very much, Mr. Chairman.
Mr. Chopra. Yes. Let us meet again.
Mr. Sessions. Thank you.
Mr. Nunn. I thank the gentlemen from Texas. I now recognize
myself for 5 minutes.
Director Chopra, thank you for joining us here again today,
and I appreciate you taking the time to come and speak to us in
our office. During that time, I shared with you many concerns
we had from my fellow citizens in Iowa. I shared with you that
I have seen since the beginning of your tenure, things that are
frustrating, including an office that seems highly politically
motivated in both its decisions and what I see as the Agency's
overreach and significantly having a negative impact on my
small and community banks in States like Iowa.
In fact, just a few weeks back, we discussed ways to
strengthen Iowa's financial system and the overall tiered
system. As I shared with you, what I heard before and what I
heard as recently as yesterday is that this is not happening,
and they are not getting the answers and responses that your
team pledged that they would make. I find this frustrating. I
ask again, please listen to the folks that you are dealing
with, particularly those further down, regional and small
banks. Your regulations are causing real injury to Iowans and
certainly they come at a cost. So to clarify, listen, learn,
execute. Please do not just regulate.
Specifically, I remain concerned about Section 701 rule,
which requires banks, particularly the smallest ones, to meet
your 81 data field. Now, it was just discussed here we are very
concerned about the amount of information that the financial
institutions are collecting. Ultimately, your institution as
well is taking more and more information and putting it into
what I consider a treasure trove for a cyber actor to exploit.
We will get to that in a moment.
I would first like to talk about the 81 data fields.
Director Chopra, do you believe each one of these data fields
is absolutely essential if you were able to pick which 81 were
being required from our lenders?
Mr. Chopra. I appreciate what you are saying. I do have to
respectfully disagree with the 81 data points point. We were
under a court order to complete this rule by March 2023, there
were certain data points that were required.
Mr. Nunn. I understand, Director. My question for you is,
do you believe each one of those 81 are critical and essential?
Mr. Chopra. We believe that the points that are being
collected are exactly what was in line with the congressional
statute.
Mr. Nunn. So they could not be scaled back in any fashion?
Mr. Chopra. Well, they could be, but there was a provision
in the statute that where we collected comment on, and many
lenders----
Mr. Nunn. Have you provided any guidance to this body on
which ones you would like to see removed?
Mr. Chopra. Well, the rule has been finalized.
Mr. Nunn. Have you provided any guidance to this committee
if any should be removed?
Mr. Chopra. It is statute, and so Congress is the one----
Mr. Nunn. Congress is the one in charge of statute. You are
in charge of the implementation.
Mr. Chopra. That is exactly what I am saying.
Mr. Nunn. But have you provided any feedback on any of the
81 that should be removed? I have not seen any.
Mr. Chopra. There are not 81.
Mr. Nunn. I am going to move to my next point. I heard
directly from a small business owner who has written to you. I
will use the 1071 small business rule leading specifically that
they are a small and rural community bank with 17 full-time
employees. The amount of training required for your 81 points
is not without cost. Software that they do not have must be
implemented.
Additionally, the time involved as being part of an
ineligible burden as a requirement of this regulation. Note to
quote we do not have enough manpower or staff dedicated,
required, would mean one full-time person. Even with that
because of the regulation of Home Mortgage Disclosure Act
(HMDA), reportable transactions not be reported, even if you
are a non-HDMA reporter. As well, this being fully trained
would not only be enough to be able to compile and track the 81
data points, but also to correctly report them. There are
penalties within the regulation for doing this incorrectly. So
it also require a specialist or a quality control officer,
neither of which we have within our small staff. Plus, the loan
officers are not supposed to collect or review these 81 points
because they might be accused of a Fair Lending Act violation.
Costs and direct impact to folks back home.
I want to ask specifically, how did you come up with a
reporting threshold of 100 small business loans?
Mr. Chopra. We actually in the final rule, compared to the
proposal, tailored this and exempted a substantial number of
more banks. We tried our best to create thresholds in a tiered
way of implementation as well.
Mr. Nunn. Director Chopra, do you believe a bank with 17
people would be considered a lower-tiered threshold?
Mr. Chopra. Yes. So we came up with different sizes, not--
--
Mr. Nunn. I appreciate that, but the reality is that your
sizes are a one size fits all because of my 250 small banks in
Iowa, not a single one is exempted.
Mr. Chopra. I think we quadrupled the loan threshold for
the exemption.
Mr. Nunn. The impact has happened to every small bank in
Main Street, Iowa right now, and I am concerned that between
this rule and the beneficial ownership rule and small
businesses are on the hook for 133 additional data points. That
is a cost and a tax on every Iowan. With that, I hope you
listen, Director Chopra.
With that, I yield my time to the gentleman from Wisconsin.
Mr. Fitzgerald is now recognized for 5 minutes.
Mr. Fitzgerald. Thank you, Director. I know you have been
sitting here for a while. I recently sent a letter to you
related to the potential effect of your Fair Credit Reporting
Act rulemaking activity related to data broker's impact on
identity verification and Know Your Customer, KYC,
requirements. In the reply that you guys sent back to us, CFPB
will not issue a rule that will prevent financial institutions
from meeting the requirements of the Bank Secrecy Act. As you
consult with FinCEN and others on the rulemaking, will you be
exploring use-related exemptions if financial institutions are
using data to comply with the Bank Secrecy Act (BSA) and other
identity verification requirements?
Mr. Chopra. Yes. We have not proposed a rule yet, but the
answer to your question is yes. To offer a little bit more
color, I think the concern we have is not when financial
institutions are using that data because they are using it for
financial purposes. It is really when others are using it for
unknown reasons, potentially for nefarious reasons.
Data brokers, they are assembling background reports about
people, and under the Fair Credit Reporting Act, there are
certain limitations that the law provides and we are just
trying to make sure it is keeping up with the times, but the
answer to your question is yes.
Mr. Fitzgerald. Okay. So brief outline of the FCRA
rulemaking stated that CFPB is considering a proposal to
``clarify the extent to which credit header data constitutes a
consumer report, which the CFPB notes would likely reduce,
perhaps significantly, consumer reporting agencies' ability to
sell or otherwise disclose credit header data from their
consumer reporting data bases without a permissible purpose.''
So do you have any idea, like you could give me a percentage on
enforcement actions carried out by FTC or CFPB, dealt with
based on improper use of credit header data? I mean, is this a
big issue or not?
Mr. Chopra. Well, I think it is more, the credit header is
really the short form report. It does have a lot of sensitive
information, not as sensitive as the rest. So I think what we
are trying to do here is to make sure that the FCRA, which
really was restricting how background reports are created, and
I have taken a look at how this works in health, education,
others. There is different frameworks for each.
We are trying to determine what is the right way to make
sure there is adequate protection of that, but again, as it
relates to detecting fraud, we are hyper-attuned to that issue.
When financial institutions are trying to authenticate
identity, we want to make sure we are really cognizant of that.
Mr. Fitzgerald. In May, you spoke at Mortgage Industry
Conference and strongly criticized the business practices of
companies that are providing services to help originate and
close mortgages. It feels as if you guys have reached some
conclusions about closing costs before you even opened up the
request for information. Where exactly in the Federal statutes
is CFPB given the authority to set prices for fees in the
mortgage closing process? I guess that would be the first
question.
Mr. Chopra. We have a number of laws, including the Real
Estate Settlement Procedures Act that governs some of this, but
mortgage lenders around the country have been consistently
complaining to the CFPB about getting ripped off when it comes
to credit scores and credit reports. The price increases they
are facing have been extraordinary, and I think that it is
limiting their ability to evaluate all potential applicants.
So we are working with them on ways that they can actually
obtain this information in a more competitive, cost-efficient
way because ultimately, many consumers will bear this or the
mortgage lenders themselves will bear those costs.
Mr. Fitzgerald. Okay. Let me sneak in one more. In the CFPB
2017 arbitration rule, which was repealed by Congress, the
Bureau would have required financial institutions to submit
arbitration records to the Bureau to publish. Now the Bureau is
proposing a rule that is substantially similar. I guess the
question would be, why can the Bureau not follow Congress' very
clear directive in this area?
Mr. Chopra. We have not proposed a rule that is
substantially similar. It is nothing like what was overturned,
nothing at all like it. The original one restricted the use of
those clauses. This is broadly about understanding contract
clauses that waive rights. It is nothing alike.
Mr. Fitzgerald. Okay. Thank you. I yield back.
Mr. Chopra. Thank you, sir.
Mr. Garbarino [presiding]. The gentleman yields back. I now
recognize myself for 5 minutes of questions.
Director, I think I am the last one to go. I am going to
follow up a little bit on what my colleague was just talking
about with the outline for potential FCRA rule, which included
a rough definition of ``data broker.'' That term, for the
purpose of the outline, included any firm that collects,
aggregates, sells, resells, licenses, or otherwise shares
personal information about consumers with other parties.
Casting such a wide net runs the risk of disrupting
innovation in financial services and classifying many entities
as data brokers whose business does not include the selling of
consumer data. Since consumer data protection starts with the
preservation of consumers' rights and choices, is the Bureau
currently considering any limitations or exceptions to the
outline's broad definition of data broker?
Mr. Chopra. Yes.
Mr. Garbarino. What are they?
Mr. Chopra. We have not proposed a rule yet. I think we
have been trying to track really broadly how do we make sure
that the FCRA, which protects consumer reports, and consumer
report is somewhat broadly defined as the aggregation of
consumer information by a third party. We are trying to see and
look where is the data broker industry doing some of the same
things that the consumer reporting industry, or when are they
assembling consumer reports, so that is our approach. It is
trying to make sure that there are not just rules for those who
agree their consumer reporting agencies and those of which to
sidestep.
So I know that Congress is thinking about more privacy
legislation. As my opening comment said, if you all want to
weigh in on this definition, that would be better and faster.
Mr. Garbarino. Thank you, and I just also want to follow
up. My colleague before asked about this. I think your answer
was yes, when dealing with the Bank Secrecy Act and know your
client rules. To ensure the alignment with your commitment to
members of this committee and what you said in your letter, you
are going to consider exemptions or other safe harbors if
financial institutions and their service providers in good
faith, use the data for purposes of compliance with BSA
obligations?
Mr. Chopra. Yes. I think the concerns that we are trying to
address are really about data brokers who are abusing or
misusing data. I think the financial services industry has
already accepted for decades that they have to undertake
certain limitations when furnishing or processing data, so we
are just trying to create a level playing field. The answer is
yes.
Mr. Garbarino. Yes. Your goal is not to mess with the
things complying with Bank Secrecy Act.
Mr. Chopra. Correct. I do not know why we would want to
mess with that.
Mr. Garbarino. You were being asked about medical debt
before. You had said a lot of people do not actively choose to
have medical debt, but the rule seems to include elective
surgeries in its broader definitions of medical debt. Could you
explain why elective surgery debt should not be reported under
the rule and what about cosmetic procedures, strictly cosmetic
procedures?
Mr. Chopra. Yes. Just respectfully, I think our
understanding of the term elective, they may be medically
necessary, but it is just scheduled. I think you are referring
to sort of discretionary cosmetic.
Mr. Garbarino. Yes. I am not talking about a knee
replacement.
Mr. Chopra. Yes. Yes. Yes. Knee replacement could be
elective, but when you are saying things that are truly that,
we have actually looked at that marketplace. That is not
actually where the issues in medical bills on credit reports
are. Many of those types of procedures, those are not covered
by insurance.
Mr. Garbarino. I understand that.
Mr. Chopra. They often require payment upfront, so we do
not really see that as an issue. If that is something you want
us to explore, to look specifically at cosmetic, we do not see
that as an issue right now, but we are accepting comments on
that.
Mr. Garbarino. All right. I believe it is in the
definition, so we are just----
Mr. Chopra. Well, elective can be medically necessary.
Mr. Garbarino. ``Cosmetic,'' I believe, is in the
definition.
Mr. Chopra. So we will take comment on it and make sure we
are dealing with it.
Mr. Garbarino. Okay. I just want to get a clarification on
the 1071 final rule. There was a grace period policy statement
that I believe gave a grace period of 12 months during which
the CFPB would not penalize bona fide errors. With the new
compliance dates, now that the injunction is up, does the CFPB
intend to keep that grace period as previously promised or does
it take a different position now that the injunction is up?
Mr. Chopra. Yes. So we have to comply with certain aspects
of the court. I do not want to misstate it, but I do believe,
oh yes, we have definitely published updated compliance dates
in accordance with the court. I need to check and get back to
you about if there is other aspects that we have not yet
issued. As a general matter, we are trying to make sure
everything is consistent.
Mr. Garbarino. Wonderful. Thank you very much. I am out of
time.
I would like to thank Director Chopra for his testimony
today.
Without objection, all members will have 5 legislative days
to submit additional written questions for the witness to the
chair. The questions will be forwarded to the witness for his
response. I ask Director Chopra to respond no later than August
1, 2024.
[The information referred to can be found in the appendix.]
Mr. Garbarino. This hearing is adjourned.
[Whereupon, at 2:31 p.m., the committee was adjourned.]
A P P E N D I X
March 6, 2024
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