    [Senate Hearing 118-511]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 118-511

                        THE CONSUMER FINANCIAL PROTECTION
                      BUREAU'S SEMIANNUAL REPORT TO CONGRESS

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

                                    HEARING

                                   before the

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

                        ONE HUNDRED EIGHTEENTH CONGRESS

                                 FIRST SESSION

                                       ON

        THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL REPORT TO
                                    CONGRESS

                                   __________

                               NOVEMBER 30, 2023

                                   __________

      Printed for the use of the Committee on Banking, Housing, and Urban
                                    Affairs

                     [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                    Available at: https://www.govinfo.gov/

                                   ______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    57-729 PDF                WASHINGTON : 2025

                COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                           SHERROD BROWN, Ohio, Chair

    JACK REED, Rhode Island              TIM SCOTT, South Carolina
    ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
    JON TESTER, Montana                  MIKE ROUNDS, South Dakota
    MARK R. WARNER, Virginia             THOM TILLIS, North Carolina
    ELIZABETH WARREN, Massachusetts      JOHN KENNEDY, Louisiana
    CHRIS VAN HOLLEN, Maryland           BILL HAGERTY, Tennessee
    CATHERINE CORTEZ MASTO, Nevada       CYNTHIA M. LUMMIS, Wyoming
    TINA SMITH, Minnesota                J.D. VANCE, Ohio
    RAPHAEL G. WARNOCK, Georgia          KATIE BOYD BRITT, Alabama
    JOHN FETTERMAN, Pennsylvania         KEVIN CRAMER, North Dakota
    LAPHONZA R. BUTLER, California       STEVE DAINES, Montana

                         Laura Swanson, Staff Director

                   Lila Nieves-Lee, Republican Staff Director

                           Elisha Tuku, Chief Counsel

                      Amber Beck, Republican Chief Counsel

                          Cameron Ricker, Chief Clerk

                          Shelvin Simmons, IT Director

                           Pat Lally, Assistant Clerk

                                      (ii)

                                C O N T E N T S

                                  ----------

                          THURSDAY, NOVEMBER 30, 2023

                                                                       Page

    Opening statement of Chair Brown.................................     1
            Prepared statement.......................................    32

    Opening statements, comments, or prepared statements of:
        Senator Scott................................................     3
            Prepared statement.......................................    33

                                    WITNESS

    Rohit Chopra, Director, Consumer Financial Protection Bureau.....     5
        Prepared statement...........................................    34
        Responses to written questions of:
            Chair Brown..............................................    36
            Senator Scott............................................    37
            Senator Britt............................................    52
            Senator Butler...........................................    59
            Senator Lummis...........................................    61
            Senator Warnock..........................................    68
            Senator Warren...........................................    74

                  Additional Material Supplied for the Record

    Semi-Annual Report of the Consumer Financial Protection Bureau--
      Spring 2023....................................................    77
    Letter submitted by Consumer Bankers Association.................   155

                                     (iii)

                      THE CONSUMER FINANCIAL PROTECTION
                   BUREAU'S SEMIANNUAL REPORT TO CONGRESS

                                  ----------

                          THURSDAY, NOVEMBER 30, 2023

                                           U.S. Senate,
              Committee on Banking, Housing, and Urban Affairs,
                                                        Washington, DC.
        The Committee met at 10:15 a.m., in room SD-538, Dirksen
    Senate Office Building, Hon. Sherrod Brown, Chair of the
    Committee, presiding.

                OPENING STATEMENT OF CHAIR SHERROD BROWN

        Chair Brown. The Banking, Housing, and Urban Affairs
    Committee will come to order. Welcome back, Director Chopra.
    Thank you for joining us again and making your case well, as
    you always do. Since CFPB first opened its doors, we have had
    more than a decade of progress toward rooting out abuses and
    injustices for consumers in all types of markets, from
    mortgages to credit cards to payday loans. It matters for
    consumers. It matters for the vast majority of businesses that
    do the right thing, because when an honest business follows the
    rules, it is forced to compete with a predatory business that
    does not follow the rules. We know who is going to win most of
    the time.
        CFPB levels the playing field so that honest people do not
    get penalized for running a business the right way. When
    consumers interact with fair and transparent businesses, they
    can make decisions without worrying about scams or predatory
    practices. Since 2011, the CFPB has returned $20 billion to 200
    million consumers. That is real money in real people's bank
    accounts, or it is real reductions in debt, money back in the
    hands of working families, where it should have stayed in the
    first place.
        We have talked extensively about CFPB, how you stand up to
    special interests and scammers on behalf of servicemembers and
    veterans. The Director and I were just talking about that
    before we started. Protecting servicemembers, protecting
    veterans is one of the most important things that we have
    charged you to do and that CFPB does. When we created the CFPB,
    we made sure it included the Office of Servicemember Affairs.
    The first head of that office was Holly Petraeus, the spouse of
    a servicemember, someone from a family with generations of
    military service, who understood the challenges facing
    servicemembers and their families. These are families for whom
    service and sacrifice to our country are part of who they are.
    It is ingrained in them.
        The CFPB, with its Office of Servicemember Affairs, takes
    on special interests to protect the bank accounts and the jobs
    of our servicemembers, our veterans, and their families. Due to
    their steady paychecks and constant moves, servicemembers are
    often targets for predatory financial companies and scammers.
    Every year, tens of thousands of servicemembers come to you,
    come to the CFPB, seeking assistance reporting a complaint. The
    CFPB goes to bat for them and works to get their money back or
    works to fix the problem.
        You would think that people in Congress would be lining up
    to make sure the agency could effectively do this important
    job, but sadly that is not what we are seeing. Many of the same
    politicians who like to talk about supporting veterans and
    military families have spent more than a decade trying to tear
    down the agency that protects those workers', those
    servicemembers' finances, and helps them get their money back.
        To be clear, financial literacy is not an alternative to
    the CFPB. Financial literacy is not an alternative to the CFPB.
    Some of my colleagues say, ``If only our servicemembers could
    spend more time learning how not to be scammed.'' The men and
    women who serve our country, or any American, should not need
    special training to keep their own money. It should not be on
    our servicemembers to protect themselves from scammers; it
    should be on companies not to scam them. That is why we need
    the CFPB.
        No other Federal agency with this level of responsiveness
    and efficiency, and the ability to take on greedy, big
    corporations and shady lenders. It is how CFPB has returned
    more than $175 million to servicemembers and veterans--$175
    million. Earlier this year, CFPB took action against TitleMax
    for violating the Military Lending Act passed by Congress, by
    charging nearly three times what the statutory cap on interest
    rates calls for. CFPB ordered TitleMax, a repeat offender, to
    return millions to servicemembers and their families.
        Whether you are a servicemember or you are a senior or you
    are a worker, the CFPB goes to bat for you. Last year, CFPB
    clarified that nursing homes cannot go after family members for
    debt. CFPB works toward removing all medical debt from credit
    reporting agencies, something I have called for repeatedly.
    Medical debt can happen to anyone. It is not an effective
    measure of creditworthiness, has no business being on a credit
    report, and consumers should not be harassed for falling sick.
        Then there are the actions the CFPB takes to stop Wall
    Street abuses. Maybe that is the reason corporate interests and
    their lapdogs in this town hate the CFPB. The work CFPB is
    doing to stop junk fees is a top target for Wall Street. I
    think there will be several Members of the Committee asking
    about that. CFPB has proposed a rule that the agency estimates
    will reduce credit card late fees by as much as $9 billion a
    year. An additional $9 billion to American households every
    year would make quite a difference in their lives. If CFPB is
    successful, that means $9 billion less on Wall Street profit
    statements, so of course they are not going to give up without
    a major and well-funded lobbying fight.
        That is always the biggest difference between most
    Americans and Wall Street--Wall Street has a well-funded army
    of lobbyists; the rest of us do not. That is why too often,
    Wall Street gets its way and the American public does not. CFPB
    is their voice to take on the powerful special interests that
    cost them time and stress and money. It is why Wall Street and
    its allies have spent more than a decade trying to destroy the
    CFPB. So far, this is one fight that they have lost. I will
    never stop fighting to ensure consumers continue to have a
    strong CFPB in their corner. As long as I am Chair of this
    Committee, the Committee will continue to fight for the work
    that you do. Senator Scott.

                 OPENING STATEMENT OF SENATOR TIM SCOTT

        Senator Scott. Thank you. Let me start off by saying it is
    certainly good to be back with the Committee. I want to thank
    my fellow Members for their support, and specifically, in
    particular Senator Rounds for all of this support during my
    absence. I would also like to welcome our newest Member,
    Senator Butler, to the Committee.
        Now, turning back to business. Just 2 weeks ago, our
    financial regulators testified before this Committee and faced
    bipartisan concerns about the impact on everyday American
    families that these misguided and partisan regulatory proposals
    would have if implemented as proposed. While those independent
    regulators have become increasingly politicized under the Biden
    administration, the CFPB has a much longer history of skirting
    statutory mandates and avoiding congressional oversight.
        Director Chopra, you know these concerns well, and you have
    heard from me about those concerns. You have heard from my
    fellow Members of the Committee, as well as House colleagues,
    and yet the CFPB is no more accountable today than it was at
    its inception. And I fear, under your leadership, the agency is
    straying even further from its mandated mission. I will wait
    until they finish.
        [Discussion off the record.]
        Senator Scott. The abuse of enforcement powers, rulemakings
    driven by politics instead of policy, and a lack of oversight,
    which only leads to less economic opportunity, have become
    hallmarks under your leadership. The law is clear--when it
    comes to consumer finance, the CFPB should consistently and
    fairly enforce Federal consumer finance law, safeguard access
    to markets for consumer financial products and services, and
    ensure that such markets are fair, transparent, and
    competitive. Sadly, the CFPB's actions do not match up with
    this mandate.
        Under your leadership, the CFPB has operated in blind
    pursuit of additional power, and has become the hallmark of
    Government overreach to the point where I am concerned the
    Bureau is doing more harm to consumers than good. That is why
    in July, I led a bicameral group of 132 Members of Congress in
    filing an amicus brief to the Supreme Court, urging the Court
    to affirm the lower court's decision that the CFPB's funding
    structure is constitutionally defective.
        When you last testified before us in June, we discussed
    your efforts to regulate, through speeches and blog posts, your
    public pressure campaign on fee income, and your attempts to
    stifle innovation. Instead of correcting course, it seems that
    you have only accelerated toward the exact opposite direction
    of your statutory mission. Recent reporting even suggests that
    your agency will be releasing an aggressive fee proposal very
    soon. I really hope the old saying that a tiger cannot change
    its stripes will not be true of the CFPB. And yet we have seen
    that the CFPB recently proposed regulating access to consumer
    data by consumers and authorized third parties. As with
    anything, the devil is always in the details, but as this
    proposal advances through finalization, I hope you weigh the
    new regulator costs against any benefits that this rulemaking
    may provide.
        And on top of all of that, the CFPB is even proposing new
    supervisory authority over nonbank providers of consumer
    payment apps. However, the rationale supporting this proposal
    ignores the real costs of compliance likely to stifle
    innovation, costs that also will undoubtedly be paid for by
    hardworking American families. I wish I could stop there, but
    of course the list goes on. Your agency is even pushing for
    sweeping changes to regulation under the Fair Credit Reporting
    Act, ignoring the longstanding interpretation of clear legal
    authority by courts and other regulators. How do any of these
    costs and the costly actions actually protect consumers? I hope
    you help me understand your perspective on that, where we
    likely will disagree.
        I meant it when I said at our last hearing, the best way to
    provide economic opportunity and protect consumers is to
    encourage competitive markets and set clear rules of the road
    for participants. These principles protect our system by
    fostering competition and innovation rather than vilifying it.
    I will stand by these principles, and I certainly have
    experienced the benefits of having a system where the rules of
    the road are fair and consistently applied. As a kid who grew
    up in poverty and understood that the American Dream was
    available, having access to that for the next generation of
    youngsters is so important from my perspective.
        Unfortunately, we see a common theme from the left, that
    somehow lower-income families lack the wherewithal to manage
    their own affairs and determine what is best for their families
    without some sort of Government intervention. While the Federal
    Government ought to protect consumers from unscrupulous
    practices, bureaucrats in Washington should not dictate what
    families can and cannot have, simply by regulating products out
    of existence and pricing people out.
        As I wrap up, I want to address one final important topic.
    A few weeks ago, several reports were published about the toxic
    work environment and the culture at the FDIC. A few weeks ago,
    we talked about the importance of making sure that employees at
    the FDIC, where you sit on the Board, have a safe, healthy work
    environment. I hope that you will have an opportunity to
    address some of the challenges that we have seen at the FDIC as
    well. Thank you.
        Chair Brown. Thank you, Senator Scott, and welcome back to
    the Committee.
        Senator Scott. Thank you, sir.
        Chair Brown. The Honorable Rohit Chopra has served as a
    director of CFPB since October, 2021. He worked for CFPB in its
    early days, serving as assistant director and student loan
    ombudsman shortly after the agency opened its doors. He has
    also been an FTC commissioner. Welcome, Director. Thank you for
    being here.

        STATEMENT OF ROHIT CHOPRA, DIRECTOR, CONSUMER FINANCIAL
                           PROTECTION BUREAU

        Mr. Chopra. Chairman Brown, Ranking Member Scott, and
    Members of the Committee, thank you for holding this hearing
    today. This is my tenth appearance before Congress since
    becoming Director in October of 2021. I am grateful to many of
    you on this Committee on both sides of the aisle who have taken
    time to meet with me, provide advice to the CFPB on the
    challenges and opportunities we must face. There are so many of
    them--protecting sensitive personal financial data, dealing
    with big tech companies and their entry into finance, reducing
    credit reporting errors, preserving relationship banking, and
    so much more.
        Since I was here in June, I am pleased to share that the
    CFPB has reached many milestones, like accelerating open
    banking in the U.S., protecting financial privacy, and just as
    Senator Scott mentioned, continuing to enforce the law fairly
    and consistently, with clear rules of the road. These deliver
    results for consumers and law-abiding businesses, but I want to
    share a few observations about household financial stability
    and highlight some progress.
        Americans now owe more than $17 trillion in household debt.
    Outstanding credit card debt has eclipsed a trillion dollars
    for the first time since the CFPB began tracking it. Auto loans
    have also grown quickly, to an estimated $1.6 trillion. Our
    analyses have found that rates and fees are contributing to
    persistent credit card debt for a growing number of consumers.
    Americans paid $130 billion in interest and fees on credit
    cards alone last year, with annual percentage rates rising far
    above the cost of offering credit. The CFPB is taking a number
    of steps to increase competition here. The return to repayment
    for Federal student loans continues to be an area we are
    looking at closely. Outstanding auto loan debt has also grown,
    given the higher cost of vehicles, especially during the
    pandemic, and the higher rate environment. And interestingly,
    auto loans are now eating up a bigger portion of monthly
    budgets than they used to do, before the pandemic. We are
    actively monitoring credit performance, repossession activity,
    and more. And of course, residential mortgage activity has
    declined precipitously due to the rate environment.
        We do see that fees, discount points, and other costs have
    increased, and many people question how they will be able to
    refinance in the future. We are looking at ways to facilitate a
    lot more refinancing activity, if and when prevailing mortgage
    interest rates subside, to ensure that the borrowers who
    experience any financial distress can navigate alternatives to
    foreclosure with their mortgage servicer, by streamlining rules
    and procedures for servicers to offer loan modifications.
        Since our last report, we have proposed a rule under
    Section 1033 to shift to open banking in the United States. We
    have initiated a process to improve accuracy and accountability
    in credit reporting, especially for data brokers. We are taking
    steps to address widespread inaccuracies on Americans' credit
    reports when it comes to medical bills. Our Supervision and
    Enforcement program is protecting both consumers and the honest
    financial firms who must compete against those who egregiously
    violate the law. In the last 2 years, we have obtained orders
    totaling $8 billion in redress and penalties. We are tackling
    junk fees that have been creeping across sectors of the economy
    that interfere with the competitive market. We have shifted our
    supervisory resources toward nonbanks to account for the
    growing role they play in financial services, including a
    proposed rule to ensure that the big tech companies and other
    payment providers adhere to the same rules that banks and
    credit unions are following.
        In August, our complaint data base reached four million
    submissions, and I am proud of the CFPB's work in getting
    consumers the resolutions they deserve, often through referrals
    from your offices, local organizations, and much more. I want
    to thank you again for the opportunity to appear before you
    today, and I look forward to your questions.
        Chair Brown. Thank you, Director. Thank you for your
    ongoing work on protecting workers' hard-earned money. I want
    to discuss something that we have talked about privately and
    many in this Committee have asked about, and one of the real
    highlights of what CFPB does is the Servicemembers' Civil
    Relief Act. We passed it to provide active-duty
    servicemembers--just generally what you are doing with
    servicemembers, but specifically passed it to provide active-
    duty servicemembers with the financial relief, guarantee
    servicemembers and their families a reduction in interest rates
    on any pre-service loans.
        My first question is, Director, would you say that all
    servicemembers are receiving the benefits that Congress
    intended for them to have?
        Mr. Chopra. No, they are not, and in fact we saw the
    destructive impact of that years ago with the illegal
    foreclosures of active-duty military families, in violation of
    the Servicemembers' Civil Relief Act. You know, with a higher
    rate environment, they are entitled to a 6 percent cap on
    preservice obligations, and we do not see many of them always
    getting it. We estimate that fewer than 10 percent of eligible
    auto loans and 6 percent of personal loans to activated members
    of the Guard and Reserve were getting those rate reductions.
        Chair Brown. So what can financial institutions be doing to
    ensure that they get the financial benefits that Congress
    intended?
        Mr. Chopra. Well, certainly many of them are starting to
    just give it automatically. They can often know if a
    servicemember is activated, and they can do it rather than
    making the servicemember go through an obstacle course of
    paperwork.
        Chair Brown. OK, thank you. I am going to work toward
    ensuring financial institutions proactively check for SCRA
    reductions. Our servicemembers and families should be able to
    keep their money, as you have continued to fight for. Thank
    you.
        Mr. Chopra. And on the Military Lending Act, we have
    pursued more actions, and we are litigating there to go after
    the egregious repeat offenders. The Military Lending Act is one
    of the most important protections, not only to protect those
    families, but as the Department of Defense would share, our
    force readiness as well.
        Chair Brown. OK, thank you. This Committee, particularly
    with credit agencies, have talked a lot about medical debt and
    what we do. The complexity of medical billing, coupled with the
    vulnerability of consumers seeking to obtain and finance
    medical services, creates opportunities for abusive--maybe that
    is the wrong word--for abusive practices by predatory medical
    debt collectors. Discuss what actions CFPB will take to hold
    medical debt collectors accountable when they attempt to
    collect bills that are not owed, or engage in other unfair,
    deceptive, and abusive practices.
        Mr. Chopra. Well, we have already been taking some actions
    on the enforcement front, but there is going to be more. We
    have conducted quite a bit of analysis about medical debt, and
    you know, this is not like a normal loan. You do not sign up
    like a credit card or a mortgage. It happens to you, and then
    often a bill is put on your credit report, even if you have
    paid it, even if the insurance company has covered it, and you
    are stuck in the middle. Many people end up just paying it to
    get rid of it, and we are exploring whether it is even
    appropriate, given the widespread inaccuracies with credit
    reporting, whether it should be on credit reports at all. Many
    financial institutions will tell you, that data is often not
    even predictive at all, and it should not be used to coerce
    people into paying something they do not owe.
        Chair Brown. So walk through--I mean we have, we have had
    the three major credit agencies in front of this Committee. We
    have done it 2 years in a row. It is a practice we started and
    will continue to do, talking especially--one of the main topics
    has been medical debt and what it does to consumers, as you
    just explained. Some 10 million Americans have had their credit
    histories harmed by medical debt. Talk more specifically--this
    is my last question--walk through what that rule, what you are
    working on to fix that. If we cannot get the credit agencies to
    do the right thing--they have taken steps, but not enough--tell
    me what you would do.
        Mr. Chopra. So the three credit reporting conglomerates
    have already taken steps to remove certain amounts of the debt.
    We are proposing or exploring rules that would limit credit
    reporting of certain medical bills. We are collecting feedback
    from small businesses right now about it. We have been talking
    to the medical industry--hospitals, medical debt collection,
    providers--and we may, although we have not made any firm
    conclusions, propose a rulemaking to restrict the reporting of
    medical bills on credit reports.
        Chair Brown. OK. Thank you, Director. Senator Scott.
        Senator Scott. Thank you, sir. Last month, the CFPB
    announced that it was proposing to expand its own authority to
    supervise technology companies, a move that should be called
    out for what it is--another attempt to stifle financial
    technology and financial innovation. I firmly believe
    innovation in finance has made it easier for lower-income
    families to access financial services, such as basic checking
    and savings accounts, as well as even more complicated products
    like mortgages. Private sector competition and new, innovative
    technologies can bring financial opportunity to all Americans.
        While new technology needs appropriate supervision and
    guardrails, American innovation should be encouraged, not
    crushed by bureaucratic red tape, and yet the CFPB ended its
    Financial Innovation Sandbox, which offered safe harbors to
    firms attempting to further democratize finance in a safe
    manner.
        While I understand the need to ensure consumers are not
    targeted or taken advantage of by bad actors, what rationale
    supports preventing responsible, well-regulated companies from
    releasing new products within the confines of a safe harbor
    program?
        Mr. Chopra. So let me address everything you have said. So
    first of all, let me just share--you said something earlier
    that I totally agree with, that the competitive markets really
    deliver a lot, especially when there is clear rules of the road
    that are consistently enforced. I actually am a huge believer
    in the role of technology to really bring a lot of benefits. It
    is why we proposed our Open Banking Section 1033 rule. But you
    mentioned oversight of the large tech companies, payment apps.
    We are not expanding our authority. They are currently subject
    to our enforcement authority, and I think in our judgment,
    rather than resolving issues through litigation, we should look
    at those large firms serving tens of millions of people, and
    make sure that they are following the law just like small banks
    are doing. Supervision of nonbanks and banks is a key way that
    makes those laws consistently enforced. So I am trying to make
    sure that where we see fraud--and there is, on some of these
    payment apps, huge amounts of fraud--where we see collection
    and surveillance of data, we need to make sure that it is
    compliant with the law. But I totally agree with your question,
    that we want firms to be able to get products out to the
    market, if they are with the right guardrails. And you asked
    about the safe harbors--we conducted an analysis of these
    special no-action letters, and here is what we found. Some of
    the companies receiving them claimed that they were endorsed by
    the Government, or that they were the exclusive provider. So
    what we have done is we want some of those programs to be
    applicable to lots of organizations, not just crowning one
    member of the industry. That is really what competition is
    about. It is not about picking winners and losers, sir.
        Senator Scott. Well, I certainly wish that were true for
    the Government, but certainly our Government, particularly the
    Biden administration and particularly the CFPB, seems to want
    to pick winners and losers. As a guy who was in business for
    several years and started several businesses from scratch, the
    one thing you need from your Government is not competition; it
    is certainty and predictability. When you set the rules of the
    road, step back and give the market time to actually absorb the
    changes. Innovate, be creative, take the calculated risk, and
    come to a conclusion whether it works for the business. If it
    does not work for the business, it is because the consumers are
    not benefiting from the products or the services in the
    marketplace. When that happens, the brilliance of a free market
    system works. When the oppressive nature of your agency and the
    Biden administration comes in and starts tweaking the rules of
    the road, as you would suggest, thousands of fintech firms
    working in the marketplace, and some--that could be 5; it could
    be 500--I would love to see what that looks like from your
    perspective. But the reality of it is that when you have an
    opportunity to engage in a free market system with the rules of
    the road, without the Government being oppressive and stifling
    innovation, then the consumer benefits.
        If you want to have access to more opportunities for the
    poorest Americans, the way that you get there is by having a
    framework and a playing field that does not discriminate. Well,
    the beauty of the financial technology innovation engine is
    that you have more people accessing more products, more
    services with an app. That is what brilliance looks like. But
    when you have----
        Mr. Chopra. And I agree with everything----
        Senator Scott. Let me finish.
        Mr. Chopra. ----that you have said.
        Senator Scott. When you have the uncertainty brought into
    the marketplace by agencies, the challenge that we see is that
    the ROI goes down, the cost-benefit analysis goes up, and so
    players in the market space, they leave. And what that leaves
    poor families to do is to go into brick-and-mortar only and
    make decisions. There is just a better way, and hopefully we
    will have a second round to get some more questions.
        Chair Brown. Thank you, Senator Scott. Senator Reed of
    Rhode Island is recognized.
        Senator Reed. Well, thank you very much, Mr. Chairman, and
    Director, thank you, particularly for your support of the
    Servicemembers' Civil Relief Act. I think Senator Brown's
    questioning is right on target, and you are right--it does
    contribute to the readiness. As someone who served for 12 years
    in the Army and had to deal with these issues as an executive
    officer, you have to be on guard constantly against lenders who
    do not respect, except in their advertising and in the multiple
    flags they have on their property, but they do not respect the
    soldiers as much as they should. So thank you, and please keep
    it up.
        By the way, when I was on active duty, it was called the
    Soldiers' and Sailors' Civil Relief Act, but then with the end
    of the Civil War, they changed it. I am joking now.
        Mr. Chopra. Yes.
        Senator Reed. Sorry.
        [Unknown.] I got it, Jack.
        [Laughter.]
        Senator Reed. A little levity. Credit rating bureaus sell
    so-called trigger leads, which are essentially a tip that a
    consumer is shopping for a mortgage. The trigger lead can
    generate hundreds of contacts, and some of them more confusing
    than helpful. And you have a responsibility for both the
    mortgage lending process and also the credit reporting bureau.
    Is there anything you could do to help clear up the situation,
    under existing authority, to protect consumers from
    misinformation and just the deluge of----
        Mr. Chopra. So one of the things that a prospective
    homeowner will talk to a mortgage lender, and then all of a
    sudden they will start getting a barrage of calls, and they
    actually think that the original mortgage lender told everyone,
    and they wonder what is going on. This is something that I
    think our authority is somewhat limited, but I think we are
    happy to look at different solutions to make it clear that that
    is not happening because the mortgage lender is really telling
    everyone; it is because the credit reporting company is really
    making that information available.
        You know, you have raised the issue of SCRA and data on
    credit reports. We have a lot more of these companies
    collecting sensitive information, not just what loan you apply
    for--your geolocation, you know, where you go, and that data is
    increasingly being weaponized, and so we are looking at all of
    these data issues and figuring out how to make sure we are
    protecting the public.
        Senator Reed. Well, a simple approach might be to--and this
    would require our action--is to give the consumer the right to
    erase all the data, or only hold it for----
        Mr. Chopra. A period of time.
        Senator Reed. ----a limited period of time, or prevent the
    sale of data, with some exceptions. We have to think about that
    as more of these situations take place. Buy now, pay later is
    becoming very popular, and we are now seeing that essentially
    the regulation is State-based. I think there really is a area
    of responsibility that your bureau could assume in order to
    make sure that this buy now, pay later situation does not
    really hurt the consumer, as it could. Any comments or thoughts
    on that?
        Mr. Chopra. Yes, I agree. We issued a report with a number
    of actions. We have started acting on all that, including
    supervision of some of these firms. I have been checking day to
    day when it came to Black Friday, Cyber Monday, what is
    happening with the growth on buy now, pay later, and I hope to
    report more to you about that. The bottom line on this is,
    there is a lot more buy now, pay later providers. We cannot
    have a race to the bottom. We have to have some basic standards
    for which they will not try and use regulatory arbitrage to
    cheat people. They too are also harvesting quite a bit of data,
    and we are going to be looking at that. So I want to make sure
    that whether you use a buy now, pay later loan or a credit
    card, that you can have your Federal protections and it is not
    arbitrage.
        Senator Reed. And I think what would be helpful to us, if
    you could generate some information about the insidiousness of
    this data that is collected, because I am sure there are some
    very graphic examples. And what that would give us, I hope, is
    the motivation to give you the authority to take appropriate
    steps.
        Mr. Chopra. Well, I worry that actually State and non-State
    actors are going after this data. We saw with the Equifax data
    breach that it ended up in indictments of members of, you know,
    the Chinese Army. So we have to look at this not just as
    consumer, but really our data and our security.
        Senator Reed. Thank you very much, Mr. Director.
        Mr. Chopra. Thank you.
        Chair Brown. Thank you, Senator Reed. Senator Rounds of
    South Dakota is recognized.
        Senator Rounds. Thank you, Mr. Chairman. Director Chopra,
    welcome. Let me just begin by talking a little bit about
    Regulation Z. Overdraft protection helps consumers in making
    ends meet when a deposit account balance is low, particularly
    for those consumers who are unable to qualify for traditional
    credit products. News broke this week that the CFPB would soon
    be releasing its much-anticipated rulemaking on overdraft
    protection. When the Federal Reserve constructed Regulation Z
    almost 50 years ago, it intentionally excluded overdraft,
    because it was clear that applying the Truth in Lending Act and
    Regulation Z to overdraft would be impractical. However, the
    Spring 2023 Unified Agenda indicates the CFPB intends to do
    just that. When will this rule be published?
        Mr. Chopra. To be clear, that is not what the regulatory
    agenda says. We are looking at what the Federal Reserve did
    many years ago, in the era of paper checks and mailing checks.
    We have not made any conclusions, but I am hoping--we continue
    to get industry feedback that they would actually like some
    clear rules. I do not have an exact timing on it, but I will
    share this. I agree with you that people need to be able to
    access liquidity. You know, with respect to when they have a
    deposit account shortfall, there is lots of ways we are looking
    to address that. In fact, borrowing is really how families and
    businesses survive. So I do want to assure you, there is not an
    effort to eliminate, or make that need not able to be
    fulfilled, but again----
        Senator Rounds. So it is----
        Mr. Chopra. ----we have not proposed a rule yet.
        Senator Rounds. ----there is not a rule that you are
    anticipating releasing with regard to----
        Mr. Chopra. Well, we are, we are working on something, and
    I think what we are trying to address is a number of issues
    that if you look at some of our past work on this, there is
    certain data and enforcement work where we reached an
    enforcement action with Regions Bank and Wells Fargo where some
    of it involved moving around the payments in order to generate
    not one overdraft fee for the day, but sometimes four. So we
    have to address the harms, while still allowing consumers to be
    able to access the liquidity when they have a shortfall.
        Senator Rounds. I guess the reason why I bring it up is,
    number one, you know, you have released data that indicates a
    major reduction of overdraft fees over the last several years.
    In fact, overdraft revenue in the 4th quarter of 2022 was 48
    percent lower than overdraft revenue in the 4th quarter of
    2019. It just seems to me that as a part of any study that you
    are doing, before you release a new rule, I would hope that you
    would look at whether or not--if you decided to do something on
    it, whether or not it would actually limit access to overdraft
    protection if it is subject to Regulation Z's requirements, and
    the impact that that would have on consumers. I hope that that
    would be included in any proposed rule that you may very well
    come up with.
        Mr. Chopra. Well, let me share with you, we actually do see
    quite a bit of differences between the relationship banks and
    the non-relationship banks. I do want to commend a lot of the
    banks, the industry for really starting to compete now on
    overdraft. Many of them are showing their lower fees or the
    buffers that are provided. So I agree with the spirit of
    everything you said, and we are continuing to work on it.
        Senator Rounds. You mentioned earlier the issue of medical
    bills and whether or not they should be included in a report,
    or at least if someone is identified as not making a payment on
    one. As part of your analysis, are you looking at how the
    health care industry is responding and what they are doing if
    the folks that normally would be the collection services for
    them----
        Mr. Chopra. Yes.
        Senator Rounds. ----if they cannot put that on the report,
    it seems to me that there is a possibility that some of those
    health care providers, who have to pay their bills, too, may
    very well look at cash only or payment up front on some of
    those services that these folks may not be able to afford. Will
    that be included as a part of the analysis that you do?
        Mr. Chopra. Yes. So we have been talking to a lot of
    players in the market. There is a heterogeneity. We see a lot
    of places do not do reporting; we see some that do reporting.
    We do have very serious concerns about inaccuracy and coercion,
    and I think that is really a big problem, but I am pretty
    sensitive to the issue you said. For what it is worth, we do
    see a lot of the health care industry already shifting to a
    credit card up front, and I think that some of those are issues
    that are really outside the scope of the CFPB, but it is
    certainly something we are looking at very carefully to
    determine how we proceed with this.
        Senator Rounds. If it makes it more difficult for them to
    collect on a bill, some of these folks who do not want to are
    looking at this, saying, look, if we cannot get our bills paid,
    chances are we are going to have to take a different approach,
    and that puts a bigger burden on some folks that probably can
    least afford it. And I would simply hope that if you do any
    rulemaking on this, that you take that into account and are
    able to share that with this Committee.
        Mr. Chopra. And I am happy to discuss this with you
    further, because we want to get it right.
        Chair Brown. Thank you, Senator Rounds. Senator Tester of
    Montana is recognized.
        Senator Tester. Yes, thank you, Mr. Chairman. I want to
    welcome Senator Scott back to Committee. Even though Senator
    Rounds did an outstanding job, he is no Tim Scott. You know
    what I mean?
        [Laughter.]
        Senator Tester. And I would also say that I am sad that you
    got out of the race, because I think you are fundamentally a
    good man, and----
        Senator Scott. Thank you very much.
        Senator Tester. ----and we appreciate your efforts.
        Senator Scott. Well, you will serve in one of my future
    Administrations.
        Senator Tester. Sure, absolutely. And I also want to
    apologize, because Senator Brown and I were talking about the
    China--and I--when you were giving your opening statement. We
    have got some issues. This is a bill that Senator Rounds and
    you are familiar with, as well as the Chairman--that comes out
    of this Committee. Exactly. And just to release a little
    frustration I have, there are some over in the House, a
    chairman in particular, that does not think the Chinese
    Communist Party is a threat to this country, and that bothers
    me a lot. And I have visited with the good senator from South
    Dakota on this already, and we will figure out a path forward.
    But the truth is is that it is better to deal with stuff before
    it happens than afterwards.
        Senator Scott. Yes, I appreciate that. I appreciate your
    apologies. I hope that your Chairman is kind enough to you to
    extend a little extra time to you. I know how hard he is to
    deal with sometimes, so----
        [Laughter.]
        Senator Tester. I just----
        Chair Brown. I will always give extra time when people say
    nice things about Tim Scott.
        Senator Tester. Exactly. He is a tough character.
        Senator Tester. Director Chopra, thank you for being here.
    I appreciate your work. I chair the Veterans' Affairs
    Committee. I have been working with Chairman Brown to protect
    the folks after they get done with their service to the
    country----
        Mr. Chopra. Yes.
        Senator Tester. ----the veterans, and we have had an issue
    with Home Loan Guaranty Benefits and veterans losing their
    homes due to foreclosure. The VA took quick action--I applaud
    them for that--after we sent a letter off on the VA Home Loan
    issue, and hopefully they are able to work for a permanent
    solution moving forward. But I am concerned about how these
    folks got into the situations to begin with. We need to make
    sure that our veterans, the servicemembers, as Chairman Brown
    said, and their families are being served in the right way by
    the VA, by the lenders, and by the mortgage servicers. So do
    you know if this is something the CFPB has been hearing about
    from our veterans and our servicemembers?
        Mr. Chopra. Yes, and in fact, if you will recall, we had
    some things that rhymed with this many years ago with the VA
    Home Loan churning, with refinancing. And I also want to agree
    with you; I am happy the Department of Veterans Affairs, the
    actions they are taking. The VA Home Loan program is enormous,
    it is critically important, but of course we do see bad actors
    targeting beneficiaries.
        Senator Tester. And what tools do you have to stop that?
        Mr. Chopra. So our authority is really on the lenders and
    the servicers. So we have to police for our laws, but of course
    the Department of Veterans Affairs, we work with them on their
    program guidelines to make sure that the homeowner is
    protected. And I will tell you, a wrongful foreclosure of a
    veteran, especially an older one, it is a very, very
    devastating consequence to deal with, and we are looking at
    ways to prevent avoidable foreclosures like that.
        Senator Tester. Thank you for that. Last month in the VA
    Committee, we had a hearing on financial protection for our
    veterans and their families, and discussed ways that the folks
    in our military community, our veterans, have been taken
    advantage of, and the responsibility that the VA has, that the
    CFPB has, that the FTC has to protect them. Just for a little
    background, there are accredited Veteran Service Organizations
    out there that help veterans access or earn benefits, but there
    are also a growing number of organizations trying to take
    advantage of our veterans for money. This always tends to be
    the case when you have a steady flow of income into a
    community.
        A lot of this I believe is in your bailiwick, like watching
    the companies trying to collect on debt related to unaccredited
    VA claims consultants. Number one, is this on your radar
    screen? Number two, what trends are you seeing?
        Mr. Chopra. Yes. So in our regular sessions that I
    participate with our VSOs and military family advocates, the
    unaccredited consultants, I think a major way they are getting
    in is often through social media advertising, and I think we
    have to figure out how they are using, you know, TikTok, others
    to reach those veterans, make claims. I worry about how we will
    be able to detect perpetrators there, but it certainly is
    something of ongoing discussion in our Office of Servicemember
    Affairs and the VA, and I have to be honest with you--I think
    it is going to maybe also need to involve criminal law
    enforcement.
        Senator Tester. OK. One of the things that crossed my mind
    during the hearing is, are we seeing the cases of these folks
    being taken advantage of more prevalent in the veterans'
    community, or the active-duty community, or is this stuff
    happening regardless, that there is no difference between those
    two?
        Mr. Chopra. Well, generally speaking, I think you will see
    more in the veterans' community, because there is often a
    target of a Government benefit, so that is a place that people,
    you know, will see dollar signs----
        Senator Tester. Yes.
        Mr. Chopra. ----and immediately go after it. In many ways,
    it is pretty easy to identify a military family or veteran,
    often through social media and the data broker world that now
    exists.
        Senator Tester. And I think you have already touched on
    this, but I wanted to flesh it out a little more. What do you
    see as the biggest risk that the CFPB can help with as it
    applies to the financial solvency of our veterans?
        Mr. Chopra. Well, certainly I think home ownership, and
    being kicked out of your home, and being able to get a loan
    modification. By sheer dollars, it is a huge amount of money,
    and that is why we are looking at streamlining some of our
    mortgage servicing rules to allow more people to more easily
    get loan modifications and be able to avoid foreclosure.
        Senator Tester. OK. Thank you.
        Chair Brown. Thank you, Senator Tester. Senator Vance from
    Ohio is recognized.
        Senator Vance. Thank you, Mr. Chair. Thanks, Mr. Chopra,
    for being here. So I want to talk about a couple of issues, one
    of which is the Department of Justice and CFPB's joint
    statement, effectively discouraging banks from asking about
    immigration status in loans. Here is what worries me about
    this. So first of all, of course we have a historic human- and
    drug-trafficking crisis on the Southern border. I worry about
    the Biden administration effectively signaling to banks that
    they should make it easier to lend to folks who have come into
    the country illegally, and I worry that could frankly
    exacerbate the crisis that we already have.
        The second point that I make on this is just if I look at
    this from the perspective of a bank, it seems totally plausible
    and reasonable to me that if you are lending to an illegal
    alien, that is maybe a riskier loan than lending to a legal
    alien or a citizen of the country. So just to sort of strongly
    discourage you guys from going down that route, and I think we
    should try to make it easier, maybe, for the financial system
    to discourage the immigration crisis that we have before us.
        I actually wanted to ask about a separate question, and I
    know, Mr. Chopra, you share some of the concerns that I have
    about the concentration in the financial system. And you know,
    I still do not think the American people have gotten a full
    accounting and understanding of what happened with the Silicon
    Valley and First Republic bank collapses. And I want to kind of
    lean in there and maybe just start with the very basic question
    of, when First Republic was acquired, we have heard a number of
    different arguments, or a number of different claims, publicly
    and privately, about what the spread was between the PNC offer
    and the JPM offer, which eventually was of course the
    successful offer to buy First Republic. Are you willing to tell
    me on the record, what was the spread between the JPM offer and
    the PNC offer?
        Mr. Chopra. There were multiple bidders.
        Senator Vance. Of course.
        Mr. Chopra. I do not know if I am permitted under law to
    say the specifics, but let me just say this, which is that
    JPMorgan Chase's purchase would have ordinarily been completely
    prohibited by law.
        Senator Vance. Yep.
        Mr. Chopra. That was not a decision of the FDIC. The FDIC
    had to look at what the least cost was, and there was a
    determination that JPMorgan's bid was higher, and then that
    went through Bank Merger Review by the other agencies. But we
    will try our best to give you more information on the multiple
    bids.
        Senator Vance. Yes, I would appreciate that, because one
    claim that I have heard is $20 billion, right? A spread of $20
    billion is significant, and obviously we want to minimize the
    risk to taxpayers and to the depository insurance program. I
    have also heard the claim of $1 billion, and if the difference
    between the bids was $1 billion, that seems like a small price
    to pay relative to the massive concentration problem raised by
    First Republic going to the largest bank as opposed to a
    significantly large but still fundamentally regional bank.
        Let me sort of ask this question, Mr. Chopra. Let's say--
    understanding you cannot give me an answer right now, and I
    would appreciate you following up--if the spread was a billion
    dollars, do you think that raises some pretty significant
    concerns about how that bid and purchase process unfolded?
        Mr. Chopra. Well, yes, although the statute as written does
    require the FDIC Board to accept the least cost, but of course
    the Federal Reserve Board, the other regulators, they have the
    ability to disqualify under the Bank Merger Act.
        Senator Vance. Right.
        Mr. Chopra. So I think that is really the two pieces, and
    we would be happy to share with you how the statute could be
    tweaked to avoid this.
        Senator Vance. And I appreciate that, and just the last
    question here. So you mentioned this earlier, but FDIC Chair
    Gruenberg waived the requirement that would effectively cap any
    purchaser from putting the financial system at a situation
    where a single entity contained more than 10 percent of
    national deposits.
        Mr. Chopra. No, the FDIC cannot waive that. That is the
    other regulators----
        Senator Vance. That is the other regulators, OK.
        Mr. Chopra. Yes.
        Senator Vance. OK, OK, thank you. Did you have any concerns
    with waiving that requirement? Recognizing that was not your
    decision, do you have concerns with waiving that requirement?
        Mr. Chopra. Well, certainly I think you have talked about
    the tradeoffs between the cost to the deposit insurance fund
    and how the increases in concentration should be weighed.
        Senator Vance. Yes.
        Mr. Chopra. I personally have great worries that the
    largest institutions, if they are able to scoop up all the
    failed institutions, even when there is other bidders, it
    raises some real issues.
        Senator Vance. Great. Thanks, Mr. Chopra. Thank you, Mr.
    Chairman.
        Chair Brown. Thank you, Senator Vance. Senator Menendez of
    New Jersey is recognized.
        Senator Menendez. Good to see you, Mr. Chopra. While some
    banks have either decreased or eliminated overdraft fees
    altogether, in large part due to increased scrutiny and
    oversight, banks still collected an estimated $7.7 billion in
    2022 in overdraft and nonsufficient fund fees. Furthermore, a
    recent report from California State regulators showed that 30
    credit unions earned half or more of their net profit just from
    overdraft and NSF fees. Director, who typically pays for the
    expensive overdraft fees that banks and credit unions charge?
        Mr. Chopra. It is typically families who live paycheck to
    paycheck, the lowest income.
        Senator Menendez. So from your perspective, what can be
    done at the CFPB to rein in these excessive fees?
        Mr. Chopra. Well, we have taken a number of actions on the
    enforcement side, supervision. We are also looking at where
    there may be rules to rein in some of these abuses. At the end
    of the day, we know we want people to be able to access credit,
    but sometimes it is not subject to the normal competitive
    forces, and they can really be gouged. And so there has been
    many institutions that have shifted. The vast majority of
    institutions I think are doing a good job, but there are many
    bad actors that we have to deal with.
        Senator Menendez. So you are considering a rule.
        Mr. Chopra. Yes.
        Senator Menendez. Well, overdraft fees are one major reason
    why so many Americans are still hesitant to enter the formal
    financial system, so I look forward to what you do in this
    regard. I was pleased to see the CFPB's proposed rule earlier
    this month establishing supervisory authority over large
    nonbanks with person-to-person payment apps such as Venmo,
    PayPal, Cash App, mobile peer-to-peer payment applications
    which are growing evermore popular and are expected to
    facilitate transactions worth over a trillion dollars this
    year.
        You and I and several other Members of this Committee have
    spoken and written letters about the rampant scams and frauds
    on these apps, as well as the difficulty consumers can face in
    being made whole as a result of these activities. Can you
    explain how the proposed rule will make these apps more secure
    and protect users?
        Mr. Chopra. Well, we have seen a number of issues with
    these big apps. You mentioned fraud, but there is also very
    significant data collection occurring on them. In many ways, it
    resembles what we see in China with WeChat Pay and Alipay. So
    we have proposed a rule to be able to supervise them for these
    existing Federal laws--no new one, there is no expansion--and
    we think that that will help level the playing field and make
    sure that these consumer payments companies operating outside
    of the banking system are protecting consumers the way they
    ought to be under Federal law.
        Senator Menendez. Well, I look at the rule as an important
    first step in creating a fair and more secure digital payment
    ecosystem, and I look forward to your continued work in this
    regard.
        Mr. Chopra. Well, thank you so much. And as I have
    mentioned with many of you, we are also thinking about how
    these apps are trafficking remittances, and I think we will
    continue to look there to make sure that those sending
    remittances get a low, competitive cost, and they have the same
    consumer protections.
        Senator Menendez. Let me turn to student loan repayment,
    which has restarted. Borrowers have experienced a multitude of
    issues with their services. I have heard from constituents who
    have noted extremely long wait times to hear from a service or
    representative, and incomplete and unhelpful information from
    automated systems. On top of that, millions of borrowers have
    been moved to a different servicer. Earlier this year, I sent a
    letter to the Department of Education asking that they get
    answers from MOHELA, the servicer who manages the Public
    Service Loan Forgiveness Program, regarding the issue borrowers
    were confronting with a return to repayment.
        Given these and many more issues, I am pleased to see the
    CFPB open an investigation into MOHELA, Nelnet, EDFinancial,
    and Aidvantage's customer service practices in October. Can you
    speak more to what the CFPB is doing to hold student loan
    servicers accountable and support borrowers?
        Mr. Chopra. Well, we know that many of the servicers during
    the pandemic made a business decision to lay off, or to
    otherwise no longer employ a number of employees. They now are
    ramping up, and there has been issues where people are
    experiencing very long wait times or getting incorrect bills. I
    cannot comment too much further other than to say, we are
    certainly working with the Department of Education and the
    States to address any violations of law.
        Senator Menendez. Well, the repayment process has begun; it
    is hitting many heavily. Getting the right answers and being
    able to speak to a servicer that actually services you is
    critical. Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator Menendez. Senator Hagerty
    of Tennessee is recognized.
        Senator Hagerty. Thank you, Mr. Chairman. Welcome,
    Director. I have three quick things to cover with you. First is
    looking at the recent SBREFA outline that you have released on
    the FCRA rule. Some of the changes proposed strike me as
    particularly aggressive, and it is unclear how they can be
    justified as necessary or appropriate as the law requires.
    First, the outline uses a new term, data broker, that as
    proposed would significantly expand what constitutes a consumer
    report, and consumer reporting agency. But it does not
    reference or explain the specific FCRA authority for this
    expansion.
        Second, the outline states that the CFPB is considering a
    proposal to, quote, ``clarify the extent to which credit header
    data constitutes a consumer report.'' And given the
    longstanding recognition by both Congress and the FTC that this
    data does not constitute a consumer report--they have always
    been treated separately in legislation--it is puzzling to me
    how such a drastic change of course is necessitated,
    particularly when you think about how putting limits on credit
    header data would have serious impacts on community lenders'
    antifraud efforts, and it would seriously hamper law
    enforcement's ability. You may have seen the article in the
    Wall Street Journal yesterday from an FBI agent who used credit
    header data to block a terrorist attack. Can you explain to the
    Committee specifically what statutory language gives the CFPB
    the authority to make these changes to the----
        Mr. Chopra. Sure. It is in the Fair Credit Reporting Act,
    and let me give you some more context. So data brokers, they
    are some of the same types of firms that Congress was concerned
    about when passing the Fair Credit Reporting Act, assembling
    very sensitive dossiers about each of us, for sale. And I think
    it is not just for sale to commercial companies, but to even
    foreign agents. So we want to make sure that the business
    models that exist today, we are providing the appropriate
    clarity rather than just doing law enforcement investigation.
        Senator Hagerty. I want to make sure that there is clear
    regulatory authority, too, and I want to make certain that you
    take into account these areas of concern as well.
        Mr. Chopra. We will, and I am happy to discuss it with you.
    And we will share with you specifically, if we do propose a
    rule, the actual authority for which we would promulgate.
        Senator Hagerty. Yes. Let me turn to a different issue now,
    and this is deeply concerning to me in my home State. Prior to
    the release of the Basel Endgame Proposal, which as a member of
    the FDIC, you voted on, a letter was sent to the heads of the
    three regulators in charge of this proposal by a number of
    groups, including the NAACP. They were concerned about the
    impacts of this rule on credit availability, especially to less
    affluent Americans. In their letter, they say, and I am going
    to quote this, quote, ``Such a significant increase in capital
    standards will lead to reduced credit availability for all
    types of lending, and undermine economic growth. If these
    standards are adopted, they will have a devastating impact on
    our efforts to increase Black home ownership, and disadvantage
    all first-time, and in particular, first-generation homebuyers,
    who do not have the benefit of multigenerational wealth or
    higher than average incomes.'' Do you agree with these
    concerns, Director Chopra, and what would you intend to do
    about it?
        Mr. Chopra. Well, let me share with you long-term. One of
    the things that was so devastating to those underserved
    communities you mention was when there was a financial crisis
    because banks held inadequate capital. A financial crisis
    that----
        Senator Hagerty. So you are talking about raising capital,
    and making that capital available. We have been through the
    financial crisis. We have been through reregulating after the
    financial crisis. We have been through a stress test like we
    have never seen before with the pandemic. You are talking about
    taking capital away----
        Mr. Chopra. Well, no----
        Senator Hagerty. ----from this group.
        Mr. Chopra. ----what we are trying to do is avoid bailouts,
    avoid massive taxpayer----
        Senator Hagerty. And at the same time depriving first-time
    owners, Black American homeowners. My constituents----
        Mr. Chopra. Well, what we are doing----
        Senator Hagerty. ----in Memphis, Nashville----
        Mr. Chopra. Is we are collecting----
        Senator Hagerty. ----Chattanooga, Knoxville----
        Mr. Chopra. ----we are collecting comment on that, the
    three bank regulatory agencies, and I can assure you I will
    personally look into that issue, because----
        Senator Hagerty. I appreciate that assurance.
        Mr. Chopra. ----there is nothing I would want to see--I
    want our financial system working to serve everybody fairly.
        Senator Hagerty. As do I, and this cuts against that very
    clearly, in my mind. Last question for you, Director Chopra,
    and this is a grave concern to all of us in terms of the
    competence that is being demonstrated here, or not being
    demonstrated, and the lack of confidence that the American
    public has in our agencies. In April, the CFPB notified
    Congress of a data breach. From within the CFPB, this data
    breach occurred where over 250,000 consumers' personal data was
    sent to a staffer's personal account. That presents a massive
    security risk, and it also really endangers the public's
    confidence in your agency. So I would like to give you the
    opportunity to update us today on what has taken place there.
    Was that person compromised by any foreign authority? Was the
    data sold or transferred? Can you give us assurances that that
    has not happened?
        Mr. Chopra. Yes. So the insider threat issue was extremely
    serious. That employee is no longer working at the CFPB. We
    have taken a whole host of steps to figure out how to--it
    should never recur. Consumers have been notified. But I can
    confirm that----
        Senator Hagerty. Was the data sold or transferred? Have you
    been able to get to----
        Mr. Chopra. Well, we are working with all appropriate law
    enforcement, but I have no evidence to suggest in any way that
    it was related to a foreign agent or intelligence operation. We
    have some----
        Senator Hagerty. You can see the threat that I am concerned
    about.
        Mr. Chopra. Oh, of course. I mean I worry so much about
    insider threats, because there is data across our ecosystem and
    online and others that can be misused and abused, and we take
    it very seriously.
        Senator Hagerty. I think you should. The confidence of the
    American public is critical here, and I think we continue to
    see it erode when we see mismanagement like that.
        Mr. Chopra. Well, thank you for raising that.
        Senator Hagerty. Thank you. Thank you, Mr. Chairman.
        Chair Brown. Thank you, Senator Hagerty. Senator Warner of
    Virginia is recognized.
        Senator Warner. Thank you, Mr. Chairman. Director, it is
    good to see you again. I want to raise an issue I do not
    believe has been raised today, and that is how you are thinking
    about artificial intelligence. And let me acknowledge, as I
    have in this Committee before, I cannot think of a topic that
    is less linear, at least with me, in terms of the amount of
    time I spend does not mean I am getting any smarter on this. It
    obviously is changing everything around us. I particularly sit
    from my perch as Chairman on the Intelligence Committee looking
    at some of the national security risks. I think there are huge
    risks in terms of discrimination. I want to give a shout-out to
    Lisa Rice in the National Fair Housing Alliance, the good work
    they have been doing on making sure some of these AI tools do
    not----
        Mr. Chopra. Agree.
        Senator Warner. ----add to discriminatory practices. Where
    I have talked with lots of Members on this Committee are two
    areas where AI, not in terms of next generation but in today's
    generation tools could have dramatic effect in undermining
    public confidence. One all of us as elected officials I think
    immediately get is potentially undermining faith in public
    elections. The other, though, is public trust in our markets.
    And candidly, I have been surprised that we have not seen more
    massive use of AI tools, beyond kind of the fake tools, to
    manipulate our markets. And this can happen at such scale and
    speed using AI that it could have dramatic, dramatic effects. I
    know you have been thinking about this a lot----
        Mr. Chopra. Yes.
        Senator Warner. ----as well as you have kind of gone down
    your own self-learning path. How are you thinking about framing
    any sense of guardrails around AI as we think about public
    trust in the public markets?
        Mr. Chopra. So I think of two vectors this could occur. One
    is where there is extremely opaque AI that magnifies
    disruptions in a market that turn tremors into earthquakes. We
    actually have seen some of this in the past with high-frequency
    trading in securities, but I could see it being dramatically
    magnified, particularly if many firms are depending on the same
    foundational model, which is likely, I think, potential to
    occur.
        The second is a deliberate use of mimicry of human
    communication, or other ways of fakery and fraud to create a
    financial panic at a particular financial institution, or at a
    financial market utility, an exchange. There are many ways this
    could happen, even a credit reporting agency. I think we have
    to look very hard about the financial stability effects of
    this, because this may not be an accident; this may actually be
    a purposeful way to disrupt the U.S. financial system, and we
    should look at it with that mindset.
        Senator Warner. This is one of the things I have been
    wrestling with and talked to some of my Republican friends on
    this is, you know, a lot of times in terms of market
    manipulation, in our existing structure, you come back to
    intent. But I would argue that you could have some of these AI
    tools that someone could hide and say, I had no intent; I
    simply told the tool----
        Mr. Chopra. Yes.
        Senator Warner. ----to make money, and if the process of
    making money led to----
        Mr. Chopra. Blowing up the system.
        Senator Warner. ----blowing up the system, or creating fake
    accounts. So what level of liability, even if there is not
    proven intent? Have you thought about that?
        Mr. Chopra. Yes. Well, it is one of the reasons why the
    U.S. has always had, for over a century, prohibitions on things
    like deception, unfairness, that have multiple prongs but do
    not necessarily require intent, because you can create a huge
    amount of harm. It is in some ways like data breaches. You have
    put some obligations on firms to make sure they are secure to
    stop the downstream harm. So I share your view that intent-
    based standards will be almost useless when it comes to certain
    uses of generative AI.
        Senator Warner. One thing that we have been working on, and
    again in a bipartisan way, is using one of the tools created by
    Dodd-Frank that I think has been--candidly, its record is a
    little bit mixed in terms of FSOC. The notion that, you know,
    how do you get the regulators looking beyond their individual
    area, to look across the whole system? And boy, oh boy, if
    there was ever something that seems tailor-made for an FSOC
    examination. I know we have shared some of our ideas with you
    guys. Got any thoughts on----
        Mr. Chopra. Well, I agree with you. I do think that the
    entry of big tech companies into finance and other large pools
    of data, as well as the use of advanced computational models
    and generative AI, including in the cloud, I think that is very
    worthy of the FSOC to look at whether it needs to use any of
    its tools. I take seriously the concern from many of you that
    the FSOC has become over time a book report club, rather than
    using the tools that were passed into law to protect the
    system.
        Senator Warner. Thank you, Mr. Chairman.
        Thank you, Senator Warner. Senator Britt from Alabama is
    recognized.
        Senator Britt. Thank you, Mr. Chairman. Thank you, Director
    Chopra, for being with us today. A number of questions that my
    colleagues have already hit on, but wanted to start with one
    that I asked some of the bank regulators before this Committee
    a few weeks ago. And I asked them whether they believed our
    banking system to be strong, and every one of them said yes. So
    my question to you is, do you agree with them, that in your
    opinion, the U.S. banking sector is strong?
        Mr. Chopra. Yes, I think it is a strong system, and one
    where we occasionally see some places where there could be
    resilience issues. Senator Warner just mentioned one of them.
        Senator Britt. So----
        Mr. Chopra. But certainly we always have to be looking to
    ensure that resilience.
        Senator Britt. Yes, and I do, I appreciate that all of you
    believe that. In my opinion, I look across the board, I look at
    some of the new rules, I look at some of the new
    implementations, and in my opinion, while everyone says it is
    strong, I feel like we are doing things simultaneously that are
    actually going to weaken the system overall, and particularly
    for the end user. Particularly for the small businesses,
    particularly for everyday, average Americans. And so I am
    concerned by what I have seen, both at the Fed, at the FDIC,
    which I hear you play a significant role in, and at the SEC.
        So there are countless examples of regulators reaching
    beyond the mandates that we have given, and seem to be rushing
    into very complex rulemaking, not thinking about how these
    things work together and then what that impact overall is going
    to be. And I believe it will be detrimental to our economy, and
    more importantly, when I am looking at the people that I
    represent, I think small-town Alabama is going to pay the
    price.
        So I want to start with the 1071 Rule. So community banks
    provide over 60 percent of small businesses' credit needs, and
    that is nearly two-thirds of all small business loans. And to
    give you an insight into me, both of my parents were small
    business owners, so to me, this stuff matters. These banks
    offer a reliable and available source of credit to all of our
    small business community, and I am sure that you agree that you
    want to see those people thrive as well. So Mr. Chopra, do you
    believe that this rule, as currently written, will help support
    small banks' ability to continue being the primary lender for
    small businesses?
        Mr. Chopra. Well, I want to make sure--I share your view
    that we want local banks to be able to provide small business
    credit----
        Senator Britt. But do you think that this is going to----
        Mr. Chopra. ----to everyone.
        Senator Britt. Continue to----
        Mr. Chopra. Well, let me share more, which is that we do
    know that there has been a lot of questions about who is
    getting small business loans, who is not, and that really
    undermined PPP. So we were under a legal mandate, a court order
    to complete the rule. We exempted, I believe----
        Senator Britt. And you----
        Mr. Chopra. ----an additional 2,000 banks from it. We
    reduced the number of data points----
        Senator Britt. ----and so court orders do matter to you. So
    what the Supreme Court says goes kind of thing.
        Mr. Chopra. Well, of course, but we----
        Senator Britt. Of course.
        Mr. Chopra. ----were also under----
        Senator Britt. That is good to know.
        Mr. Chopra. We were sued because the rule was not----
        Senator Britt. Yes, and so----
        Mr. Chopra. ----complete a few years ago.
        Senator Britt. ----but real quick, when you are talking
    about this rule, you have said that you are going to post these
    things online, if I understand correctly, some of the findings
    that you get from this expansive rule----
        Mr. Chopra. So just like the Home Mortgage Disclosure Act,
    there is going to be analyses of the data----
        Senator Britt. So will it like show where we could tailor
    it down to who, in what community, how many people are asking
    for certain loans, who got them, who did not?
        Mr. Chopra. Well, certainly we cannot allow it in any way
    to identify a small business owner.
        Senator Britt. Right, so that is my question. Like so will
    it be broad-brush, or will you say, in Franklin County,
    Alabama, this is who got it and this is who did not?
        Mr. Chopra. Well, that sounds way like it could re-
    identify. So here is what----
        Senator Britt. Well, it----
        Mr. Chopra. ----we have outlined in the rule. We will not
    be able to post things for probably years. We will look at the
    data, and we will go through the process of making sure that we
    are publishing analyses. Many of them may be aggregated at the
    State level, regional level----
        Senator Britt. So you are saying, though, that you will
    not--because you are from, is it Plainville? Is that right?
        Mr. Chopra. No.
        Senator Britt. Where are you from?
        Mr. Chopra. I am from outside Philadelphia.
        Senator Britt. Outside of Philadelphia.
        Mr. Chopra. Yes.
        Senator Britt. And so how big of a community is that?
        Mr. Chopra. It is a pretty large metropolitan area.
        Senator Britt. So I just think to this, and it is
    interesting to hear you say it will be years, because we have
    small community banks that are struggling with how they are
    going to do this, and they serve a community of 3,000 people--
    Red Bay, Alabama----
        Mr. Chopra. Well, then that would not be published, just
    like the Home Mortgage Disclosure Act----
        Senator Britt. Right, so----
        Mr. Chopra. ----does not publish that.
        Senator Britt. ----because there are certain things that
    you are asking for that--well, it goes from protecting a
    consumer to invading their privacy.
        Mr. Chopra. Yes, I agree with that. You do not----
        Senator Britt. And then----
        Mr. Chopra. ----you do not want especially demographic----
        Senator Britt. ----do you promise that----
        Mr. Chopra. ----data to be----
        Senator Britt. Exactly.
        Mr. Chopra. ----published that way.
        Senator Britt. So you are saying that you will request it,
    but you are not going to publish it. Is that right?
        Mr. Chopra. Well, you know there is often data that is used
    by law enforcement in order to determine----
        Senator Britt. And I have----
        Mr. Chopra. ----whether laws have been followed----
        Senator Britt. ----I only have 10 seconds. I am so sorry--
    --
        Mr. Chopra. So that is why--if you can let me finish--I do
    not want there to be any sense----
        Senator Britt. Please let me ask one more question.
        Mr. Chopra. ----that we are going to publish, kind of, and
    identify individual borrowers.
        Senator Britt. Great, because in 3,000 people, it
    certainly----
        Mr. Chopra. Agree.
        Senator Britt. ----100 percent would, and I think that that
    is a deterrent. The last question that I wanted to ask you was
    about community banks. Have you sat down with community banks
    to talk about the implementation of this rule and what they
    believe it means, or NFIB, small business owners? Have you done
    that?
        Mr. Chopra. Yes, so I have actually met, I believe, with
    community bankers from every single State represented on this
    Committee. I think we have met with maybe over 1,000 in small
    group meetings to talk about all the issues.
        Senator Britt. OK.
        Mr. Chopra. We are actually on a--most small banks, so you
    are aware, will have a much-delayed implementation date. The
    large banks will go first, and we have devoted some----
        Senator Britt. Yes, because the small banks----
        Mr. Chopra. ----some more resources to that.
        Senator Britt. ----do not have the resources to do----
        Mr. Chopra. I agree.
        Senator Britt. ----this kind of stuff. And if you have not
    met with Alabama community bankers, if we look at this and you
    have not, would you----
        Mr. Chopra. Oh, of course.
        Senator Britt. Would you sit down with them for me?
        Mr. Chopra. Of course. I think we may have met with Alabama
    credit unions, but we will check, and please help us organize--
    --
        Senator Britt. And I would love for them to have a face-to-
    face with you. Would that be OK?
        Mr. Chopra. Of course.
        Senator Britt. OK, thank you.
        Chair Brown. Thank you, Senator Britt. Senator Warren from
    Massachusetts is recognized.
        Senator Warren. Thank you, Mr. Chairman. So I want to talk
    about junk fees. You know, Americans are getting hit with junk
    fees over and over and over. Try to book a flight or rent an
    apartment or buy a home or pay a phone bill, even pay off a
    loan, and a consumer can get hit with junk fees. I am really
    glad that the Biden administration has made eliminating junk
    fees a central part of its agenda, to try to lower costs for
    working families. And the CFPB is on it. You have already
    forced big financial institutions to cough up $140 million in
    refunds on junk fees, mostly on overdraft charges. And now, the
    CFPB is taking on credit card late fees.
        Now nobody picks a credit card because they know how much
    the company will charge if you are 2 hours late getting your
    payment in, but those junk fees can really add up. Credit card
    late fees run as much as $41 for being even 2 hours late, and
    it gives big payoffs to these credit card companies. Last year,
    the junk fees scooped up more than $14 billion in late fees.
    Now the CFPB says it is fine for credit card companies to make
    customers pay additional collection costs on late payments, but
    they cannot use late fees just to boost company profits. That
    is gouging.
        CFPB says that if a credit card company is charging more
    than $8 in late fees, the company is actually going to have to
    show its work, that is, show that it costs the bank more than
    $8 to deal with these late fees. Otherwise, $8 is the most that
    they can charge. Now the banks have responded to this proposed
    rule with their usual approach, howling about regulation and
    unleashing an army of lobbyists to swarm Congress. And why not?
    After all, there is $14 billion in late fees at stake, fees
    that are either all going to go to the banks, or some of which
    might be saved by the families.
        So Director Chopra, industry lobbyists claim that these
    sky-high late fees are necessary--and here is what they say--to
    punish and deter borrowers so they will pay on time. Does your
    analysis support the lobbyists' view, or does it show that this
    is just one more junk fee that is mostly used to boost bank
    profits?
        Mr. Chopra. Our analysis shows that they have many ways to
    punish borrowers. They can jack up their rates. They can put a
    bad mark on their credit report. They can even sue them. So
    there is plenty of ways, and honestly, if it was not a major
    part of their profit model, our proposal allows them to collect
    back their costs. They should be supportive of that if it is
    not a core part of their profit model.
        Senator Warren. Thank you. So in fact, the data show that
    companies make five times more from late fees than it costs
    them to collect late payments, so I guess it is no surprise
    that the industry lobbyists are out there going hard against
    this rule--they want to keep that money. Now earlier this year,
    I wrote to ten of the largest credit card companies, and I
    asked why their late fees were so high. Not one single company
    provided any evidence that they needed to charge $41 to deter
    late payments. In fact, Wells Fargo provided data showing that
    the late fees it collected exceeded the cost of collections by
    tens of millions of dollars. Now meanwhile, we are also seeing
    record-high interest rates for credit cards. Director Chopra,
    how much did credit card companies make in interest last year?
    Do you know?
        Mr. Chopra. It is roughly $105 billion.
        Senator Warren. Wow. And did credit card companies
    generally hike up their interest rates last year?
        Mr. Chopra. So we found that credit card companies
    increased rates far beyond the increase in the Fed Funds Rate,
    even as charge-offs declined.
        Senator Warren. So the Fed raised its rates, but the credit
    card companies raised their rates far higher? Is that----
        Mr. Chopra. Even as their performance was doing OK.
        Senator Warren. OK, so here we are. We have got credit card
    companies that are raking in record profits, and they are
    determined to keep junk fees as one more way to make money,
    more than $14 billion here. I support the CFPB's proposed rule
    on credit card late fees, and I urge the CFPB to finalize this
    as quickly as possible. You know, getting rid of junk fees is
    just one more example of the CFPB working for the American
    people. So thank you, Director Chopra, for your work protecting
    older Americans. Thank you for your work protecting our
    veterans. Thank you for your work protecting active-duty
    servicemembers, student borrowers, and families all across this
    country. Thank you.
        Chair Brown. Thank you, Senator Warren. Senator Daines from
    Montana is recognized.
        Senator Daines. Chairman Brown, thank you. Director Chopra,
    thanks for appearing before the Committee today. I continue to
    hear from folks across my State of Montana about the adverse
    impact your agency's actions are having, from increased
    compliance costs to one-size-fits-all mandates that just do not
    work in rural communities. And it appears to me the CFPB under
    your leadership has become a political arm in the Biden
    administration, rushing through progressive actions that in
    many cases have bipartisan opposition here in Congress. One
    example of this is the 1071 Rule, which I will get to
    momentarily, but first I want to start with credit card late
    fees. I saw Senator Warren was asking some of the same
    questions.
        In February, CFPB proposed a rule to reduce late fees that
    credit card issuers can charge customers, but your own data at
    CFPB shows that 74 percent of customers make payments on time
    and will not see any positive impact from this proposal. They
    will, however, see potential impact on increased annual fees,
    reduced rewards, lower credit limits, because prudential
    regulators require banks to offset the credit risk so as to
    maintain safety and soundness.
        Further, I have serious concerns that this rule will lead
    to more consumers paying bills late, which will in turn
    negatively impact their future creditworthiness. In other
    words, they are going to stop or lower the penalties paid for
    those who are not paying bills on time, in tradeoff for
    increasing costs or reducing rewards for those who do pay on
    time. So my question is, why would your agency proceed with a
    rule that would potentially cause hardship to those it actually
    seeks to help?
        Mr. Chopra. So respectfully, that is actually not how the
    credit card business works. The way credit card underwriting
    works is it is an individualized interest rate. So it is
    underwritten based on your own individual data. They do not
    have one price or one rate that they give everyone and cross-
    subsidize amongst them. Our goal is to make sure that the CARD
    Act is being followed. The CARD Act prohibits unreasonable or
    disproportionate penalty fees. Our proposed rule, which we are
    still working through, allows a company, an issuer, to recoup,
    and as Senator Warren just mentioned, they just have to be able
    to show the math. And of course, it does not take away the
    ability of the card issuer to lower their credit limit if they
    are late, to increase their interest rate, or if they never
    pay, to sue them.
        Senator Daines. So let me ask you this. As you say, you are
    still in the deliberative phase, perhaps, on this rule. To what
    extent did your agency engage with the prudential regulators
    while crafting this proposal?
        Mr. Chopra. Well, we certainly communicate and consult with
    the prudential regulators on these types of rules. In fact, I
    believe we may even be required to. There is many ways in which
    various banking regulations intersect with each other, so we--
    --
        Senator Daines. Yes. What kind of feedback did you get from
    those regulators?
        Mr. Chopra. I need to really check, because I am sure we
    talked to each individual one as well as in a group, but I
    would generally say----
        Senator Daines. Did they have any concerns about it
    generally?
        Mr. Chopra. I would need to check. I am happy to answer for
    the record for you, but as I said before, because the credit
    card industry does not have one price, it does underwriting, I
    think the effect----
        Senator Daines. But----
        Mr. Chopra. ----that you are mentioning----
        Senator Daines. But----
        Mr. Chopra. ----is unlikely----
        Senator Daines. But do you have like a top-line summary? I
    mean you said you have to check. I mean that is pretty
    important feedback from the prudential regulators----
        Mr. Chopra. Yes, I think that the overall feedback is that
    it would not have an impact on safety and soundness of
    financial institutions.
        Senator Daines. Have any adverse effect on some credit card
    holders?
        Mr. Chopra. Well, I think again, our consultation with them
    I think is on safety and soundness, but I am happy to check and
    answer more for the record. And just so you know, I am with
    you. I do not want to create a situation where some people are
    incentivized to not pay, but we also need to make sure that
    this is reasonable. When I talk to smaller credit card issuers,
    they are not building a business model where they are rooting
    for their customers to be late.
        Senator Daines. Let me switch gears on the 1071--and thank
    you, Director Chopra. I have got serious concerns of the impact
    of your regulation on small businesses. In fact, it is
    something I hear pretty much across the board from folks back
    home, virtually unilaterally. I am not alone, because as you
    know, a bipartisan majority of both the House and the Senate
    voted recently to scrap the rule. The final rulemakes certain
    data reporting requirements optional, but you have also noted
    that low response rates could lead to supervisory problems for
    lenders. My question is this. I know that many small businesses
    are not going to want to report this data, so what will you do
    to ensure that lenders are not penalized solely due to a low
    response rate?
        Mr. Chopra. Yes. That is not the intent, and in fact, no
    one is forced to complete this information. They have an
    absolute right to refuse it. But of course, if you think about
    it, we have to make sure that it is actually being provided and
    not saying, oh, you can just throw this out. So we are really
    trying to be reasonable about it.
        Senator Daines. OK. Mr. Chairman, thank you.
        Mr. Chopra. Thank you, Senator.
        Chair Brown. Thank you, Senator Daines. I believe no one
    else is coming, so thank you, Senator Daines. I have one more
    question; then we will adjourn. About big tech, we know that
    people have major concerns about how much control over American
    lives and information. Big tech enjoys encroaching on our
    financial lives, too. We are seeing digital payment products
    serve as a substitute for traditional bank accounts, but we
    know that new tech does not have the same consumer protections
    and oversight that traditional banking does. What are you doing
    to ensure that big tech offers the same consumer protections as
    traditional banking services?
        Mr. Chopra. Well, like I said to your colleagues, too, we
    do not want to see the market move just by exploiting loopholes
    or regulatory arbitrage. So if we have very, very large firms
    competing in the same market, we want to make sure that they
    are held to the same standards as the medium- and small-sized
    banks. We have seen issues with some of these apps, that the
    money may not be insured. We have seen other places where the
    data is being harvested. So I do think we all need to be
    careful and make sure that those large tech firms are playing
    by the same set of rules.
        Chair Brown. OK, thank you. And Senator Warnock is on his
    way, so I have one more question. I am concerned about the
    risks posed by AI, and in lending decisions, CFPB recently
    issued guidance reaffirming that current laws apply to credit
    denials, including those utilizing artificial intelligence.
    Specifically, you all reaffirmed that financial institutions
    are required to provide accurate explanations for adverse
    actions like credit denials. How is CFPB ensuring that these
    explanations faithfully reflect the actual reasons for the
    credit denial when AI is used?
        Mr. Chopra. Yes. One of the things we have done is making
    sure that it is clear--there is no fancy technology exception
    to Federal law. Federal law requires you to inform a consumer
    about the reasons for an adverse action or denial. You cannot
    make up the reasons. You cannot just put it in a form if it is
    not true. So we will be making sure that when there is uses of
    AI or other technology, that it is not side-scaping existing
    law, and we will be using our authorities to make sure that
    people are complying.
        Chair Brown. OK, we will hold for a minute. Senator Warnock
    is close.
        Mr. Chopra. Senator, may I address a previous question?
        Chair Brown. Sure, sure, of course.
        Mr. Chopra. You know, I really respect, actually, Senator
    Vance's concerns. I do want to be clear that the Justice
    Department-CFPB statement actually affirmed that creditors can
    use immigration status when lending, but of course they have to
    avoid national origin discrimination. And of course, you know,
    all of the authorities under the Bank Secrecy Act, Anti-Money
    Laundering, to ensure that that they know who that person is,
    and for non-U.S. persons, the Bank Secrecy Act requires certain
    documents. You know, again, immigration status, according to
    the guidance, can be used, but just not with illegal
    discrimination against national origin.
        We have seen in our recent enforcement action against
    Citibank a whole, and in some ways deliberate, attempt to
    discriminate against Armenian Americans. Citibank essentially
    denied people with the suffix of the last name of -yan and -
    ian, and then provided them notices essentially fabricating the
    reasons for denial. So all we are trying to do is make sure
    that we are in accordance with the law, and faithfully
    enforcing the prohibition on national origin discrimination.
        Chair Brown. Another comment, again awaiting--Senator
    Warnock is on the way. You had said in a response to Senator
    Britt that you would be willing to meet with Alabama community
    bankers. I would just like to put out there that there may be a
    number of people on this Committee who would make the same
    request, and that you honor it. For whatever State, large and
    small, that community bankers want to meet with you, that you
    would be willing to do that.
        Mr. Chopra. Yes, and in fact, I may have beaten you to it.
    I believe that I have reached almost all 50 States when it
    comes to either their State banker association or credit union
    association. But if we have missed anyone, we would be happy
    to.
        Chair Brown. OK. And in Ohio, the community bankers, for as
    long as I have been on this Committee, 15 years, have come to
    meet, usually in this room. In Ohio, there are maybe 100 that
    come, and there are maybe 40 or 50 from credit unions, and you
    have always been open. I do not think you have come
    specifically to meet with them, but I may call on you for that
    later.
        Mr. Chopra. Of course. My staff is sharing, we met with the
    Alabama Bankers Association in September of 2022, and also the
    Southeastern Credit Union League, which includes Alabama,
    Georgia, and Florida, also in 2022.
        Chair Brown. OK, one last question. I normally do not end
    the Committee this way, but by special request. Talk about your
    work with allotments and our servicemembers.
        Mr. Chopra. Yes. So allotments, just so everyone is aware,
    this is where a consumer is really paying for an obligation
    through the DoD payroll system. So DoD's payroll system allows
    an active-duty servicemember to identify certain payees. This
    is really to assist them if they are away, or if they are
    unable to manage their finances, to not miss out on bills. Over
    the years, we have seen some lenders and others abuse that
    allotment system. We have been working with the DoD over time
    to make sure that the allotment policy is not an invitation for
    predatory actors and scammers.
        I actually worry about this, Chairman Brown, too, because
    there is a lot of surveillance on servicemembers and their
    families. A lot of information is collected about them,
    targeted, and I think that is something that raises a lot of
    risks in how they might be manipulated or otherwise harmed.
        Chair Brown. Speaking of that, you may have heard my
    opening statement--I think you appeared to be listening--about
    TitleMax.
        Mr. Chopra. Yes.
        Chair Brown. Any elaboration on that, the several-million-
    dollar fine and----
        Mr. Chopra. Yes, so----
        Chair Brown. ----the size of the company and what they
    might be doing?
        Mr. Chopra. ----and restitution. I do not have the exact
    statistics in front of me, but there has been several actions
    we have taken--FirstCash, TitleMax, others--specifically
    related to the Military Lending Act, or other perpetrations of
    fraud or misconduct against servicemembers.
        Chair Brown. OK. Senator Warnock of Georgia is recognized.
        Senator Warnock. Thank you so very much, Mr. Chair. Under
    your leadership, the CFPB has done a lot to address the burden
    of medical debt that families fall into as a result of illness
    or unexpected trips to the emergency room. This issue matters
    because so many Americans are crushed under high health care
    costs, and they usually do not have a choice about whether or
    not they need that medical attention. Whether it is in the
    budget or not, sometimes you just need to go to the doctor. And
    this is particularly true for those who are living with
    diabetes, especially in a State like Georgia that sadly has not
    expanded Medicaid, and as a result, many of the counties in
    Georgia are a part of what I called in a recent report released
    by my office, insulin deserts.
        We released this bipartisan report earlier this month.
    There are some 813 counties all across our country with high
    rates of Americans who are uninsured and they have diabetes,
    and thus they are left unprotected from high insulin costs, and
    particularly vulnerable to medical debt. In fact, in
    preparation for this hearing, my office found that 365 insulin
    deserts, nearly half, also have high rates of medical debt. So
    Director Chopra, what is the CFPB doing to address medical
    debt, particularly unfair medical debt collection and credit
    reporting practices? I know that we have already had some
    conversation about that today, but 813 insulin deserts, or
    counties across our country, a lot of them in Georgia, and all
    across the country. So these are folks who are dealing with a
    chronic disease, and we are seeing the impact of that on them,
    both in terms of their health, but also financially. And so as
    you think about a disease like that, if you would say a little
    bit more about your work addressing this issue.
        Mr. Chopra. Well, I think we have all been able to see some
    of the individuals. I recall one teenager who overheard his
    parents struggling financially because of his insulin expenses.
    I think he was 13, and he decided to self-ration----
        Senator Warnock. Yes.
        Mr. Chopra. Because he was worried so much about his
    parents and their financial situation. You know, in my past
    work, I looked hard at the issue of potential price-fixing by
    insulin providers. I think when we talk about medical debt, we
    also have to remember that this might ultimately lead people to
    not get care that they need to live. When a teenager is self-
    rationing insulin and then hospitalized, we know we have a
    system that is not working. And then on top of it, Senator,
    when I went to Georgia and met with some of your constituents,
    one was Liz Coyle, talked about how medical debt is affecting
    people locally, and really, it is now the largest item of
    delinquency on credit reports. We have studied this
    exhaustively, and we are currently initiating the process to--
    and we may end up proposing that medical debt be ineligible for
    reporting on credit reports, given the unique dynamics and the
    widespread inaccuracies. I really hate to see that medical
    debt, especially when people are sick, being forced to pay even
    when they may not even owe, almost coerced to pay, and we want
    to really address that.
        Senator Warnock. On the question of rationing that you
    raise with this particular 13-year-old, about 1 in 4 folks who
    are on insulin--1 in 4, in our country--have reported that they
    have rationed their insulin at some point or another. And so I
    am interested in exploring how Congress can work with CFPB to
    protect consumers, especially those with chronic illnesses,
    from medical debt. So thank you for your work. I think that as
    a start, we can pass my bipartisan bill that I put forward with
    Senator Kennedy and others, to cap the cost of insulin for
    everybody. That would help prevent people with diabetes from
    going into medical debt in the first place. And I look forward
    to continuing to work with you on this important issue, and
    exploring medical debt more in my subcommittee in Congress.
    Thank you very much.
        Mr. Chopra. Thank you, Senator.
        Chair Brown. Thank you, Senator Warnock, and thanks for
    your comments about medical debt. We have had a number of
    conversations, privately and publicly, on this Committee. As
    you know from our hearing with--you had a really good term with
    the rating agencies. You used--what word did you use to
    describe the rating agencies?
        Mr. Chopra. Well, they are the three conglomerates.
        Chair Brown. The conglomerates, yes.
        Mr. Chopra. Yes.
        Chair Brown. Thank you for that, and we will continue to
    bring them in, and continue to work with Senator Warnock and
    others to get medical debt off of credit reports, so thank you
    for that.
        Senators who wish to submit questions for the hearing
    record, they are due 1 week from today, Thursday, the 7th of
    December. To the witness, please submit your response to
    questions for the record 45 days from the day you receive them.
    The Committee is adjourned. Thank you.
        [Whereupon, at 11:50 a.m., the hearing was adjourned.]
        [Prepared statements, responses to written questions, and
    additional material supplied for the record follow:]
                   PREPARED STATEMENT OF CHAIR SHERROD BROWN
        Welcome back, Director Chopra.
        Since the CFPB first opened its doors, we have had more than a
    decade of progress towards rooting out abuses and injustices for
    consumers in all types of markets, from mortgages to credit cards to
    payday loans.
        It matters for consumers, and it matters for the vast majority of
    businesses that do the right thing--because when an honest business
    that follows the rules is forced to compete with a predatory business
    that doesn't follow the rules, we know who's going to win.
        The CFPB levels the playing field so that honest people don't get
    penalized for running a good business the right way.
        And when consumers interact with fair and transparent businesses,
    they can make decisions without worrying about scams or predatory
    practices.
        Since 2011, the CFPB has returned over $20.2 billion to more than
    205 million consumers.
        That's real money in real people's bank accounts, or real
    reductions in debt--money back in the hands of working families, where
    it should have stayed in the first place.
        We've also talked extensively about how the CFPB stands up to
    special interests and scammers on behalf of servicemembers and
    veterans.
        Protecting servicemembers and veterans is one of the most important
    things the CFPB does.
        When we created the CFPB we made sure it included the Office of
    Servicemembers Affairs.
        The first head of that office was Holly Petraeus--the spouse of a
    servicemember, someone from a family with generations of military
    service, who understood the challenges facing servicemembers and their
    families.
        These are families for whom service and sacrifice to our Country
    are part of who they are. It is ingrained in them.
        The CFPB, with its Office of Servicemember Affairs, takes on
    special interests to protect the bank accounts and the jobs of our
    servicemembers, veterans, and their families.
        Due to their steady paychecks and constant moves, servicemembers
    are often targets for predatory financial companies and scammers.
        Every year, tens of thousands of servicemembers go to the CFPB
    seeking assistance or reporting a complaint--and the CFPB goes to bat
    for them, working to get their money back or fix the problem.
        You would think that people in Congress would be lining up to make
    sure the agency could effectively do this important job.
        But sadly, that's not what we are seeing.
        Many of the same politicians who like to talk a lot about
    supporting veterans and military families have spent more than a decade
    trying to tear down the agency that gets them their money back.
        And to be clear: financial literacy is not an alternative to the
    CFPB.
        Some of my colleagues say, if only our servicemembers could spend
    more time learning how to not be scammed.
        The men and women who serve our country--or any American--shouldn't
    need special training to keep their own money.
        This shouldn't be on our servicemembers to protect themselves from
    scammers--it should be on companies not to scam them.
        This is why we need the CFPB.
        There is no other Federal agency with this level of responsiveness
    and efficiency and the ability to take on greedy big corporations and
    shady lenders.
        It's how the CFPB has returned more than $175 million to
    servicemembers and veterans.
        $175 million.
        For example, earlier this year, the CFPB took action against
    TitleMax for violating the Military Lending Act by charging nearly
    three times more than the statutory cap on interest rates.
        The CFPB ordered TitleMax--a repeat offender--to return millions to
    servicemembers and their families.
        Whether you're a servicemember or you're a senior or you're a
    worker, the Consumer Financial Protection Bureau goes to bat for you.
        Last year, the CFPB clarified that nursing homes cannot go after
    family members for debt.
        And the CFPB is working towards removing all medical debt from
    credit reporting agencies--something I have called for repeatedly.
        Medical debt can happen to anyone. It is not an effective measure
    of creditworthiness. It has no business being on a credit report and
    consumers should not be harassed for falling sick.
        And then there are the actions the CFPB takes to stop Wall Street
    abuses. Maybe that's the reason corporate interests and their lapdogs
    in this town hate the CFPB.
        The work the CFPB is doing to stop junk fees is a top target for
    Wall Street.
        The CFPB has proposed a rule that the agency estimates will reduce
    credit card late fees by as much as $9 billion each year.
        An additional $9 billion to American households every year would
    make a big difference.
        But if the CFPB is successful, that means $9 billion less on Wall
    Street profit statements. So of course, they're not giving that up
    without a major--and well-funded--lobbying fight.
        And that's always the biggest difference between most Americans and
    Wall Street. Wall Street has a well-funded army of lobbyists.
        The rest of us don't.
        That's why too often Wall Street gets its way, and the American
    public doesn't. The Consumer Financial Protection Bureau is their voice
    to take on the powerful special interests that cost them time and
    stress and money.
        And it's why Wall Street and its allies have spent more than a
    decade trying to destroy the CFPB.
        So far, this is one fight they've lost. And I will never stop
    fighting to ensure consumers continue to have a strong CFPB in their
    corner.
                                     ______

                    PREPARED STATEMENT OF SENATOR TIM SCOTT
        Thank you, let me start off by saying, it's certainly good to be
    back with the Committee. I want to thank my Members, fellow Members,
    for their support, specifically in particular Senator Rounds for all of
    his support during my absence.
        I would also like to welcome our newest Member, Senator Butler to
    the Committee.
        Now turning back to business, just 2 weeks ago, our financial
    regulators testified before this Committee and faced bipartisan
    concerns about the impact on everyday American families that these
    misguided and partisan regulatory proposals would have if implemented
    as proposed.
        While those ``independent'' regulators have become increasingly
    politicized under the Biden administration, the CFPB has a much longer
    history of skirting statutory mandates and avoiding congressional
    oversight.
        Director Chopra, you know these concerns well and you've heard from
    me about those concerns, you've heard from my fellow Members of the
    Committee, as well as House colleagues.
        And yet, the CFPB is no more accountable today than it was at its
    inception--and I fear under your leadership, the agency is straying
    even further from its mandated mission.
        The abuse of enforcement powers, rulemakings driven by politics
    instead of policy, and a lack of oversight--which only leads to less
    economic opportunity--have become hallmarks under your leadership.
        The law is clear. When it comes to consumer finance, the CFPB
    should consistently and fairly enforce Federal consumer finance law;
    safeguard access to markets for consumer financial products and
    services; and ensure that such markets are fair, transparent, and
    competitive.
        Sadly, the CFPB's actions don't match up with its mandate.
        Under your leadership, the CFPB has operated in blind pursuit of
    additional power and has become the hallmark of Government overreach--
    to the point where I am concerned the Bureau is doing more harm to
    consumers than good.
        That is why in July, I led a bicameral group of 132 Members of
    Congress in filing an amicus brief to the Supreme Court, urging the
    Court to affirm the lower court's decision that the CFPB's funding
    structure is constitutionally defective.
        When you last testified before us in June, we discussed your
    efforts to regulate through speeches and blog posts, your public
    pressure campaign on fee income, and your attempts to stifle
    innovation.
        Instead of correcting course, it seems that you have only
    accelerated towards the exact opposite direction of your statutory
    mission.
        Recent reporting even suggests that your agency will be releasing
    an aggressive fee proposal very soon.
        I really hope the old saying that a tiger can't change its stripes
    won't be true for the CFPB.
        And yet, we've seen that the CFPB recently proposed regulating
    access to consumer data by consumers and authorized third parties.
        As with anything, the devil's always in the details, but as this
    proposal advances through finalization, I hope you weigh the new
    regulatory costs against any benefits that this rulemaking may provide.
        And on top of all that, the CFPB is even proposing new supervisory
    authority over nonbank providers of consumer payment apps. However, the
    rationale supporting this proposal ignores the real costs of compliance
    likely to stifle innovation. Costs that also will undoubtedly be paid
    for by hardworking American families.
        I wish I could stop there, but of course the list goes on. Your
    agency is even pushing for sweeping changes to regulation under the
    Fair Credit Reporting Act, ignoring the longstanding interpretation of
    clear legal authority by courts and other regulators.
        How do any of these costs and the costly actions actually protect
    consumers? I hope you help me understand your perspective on that where
    we will likely disagree.
        I meant it when I said at our last hearing--the best way to provide
    economic opportunity and protect consumers too is to encourage
    competitive markets and set clear rules of the road for participants.
    These principles protect our system by fostering competition and
    innovation rather than vilifying it.
        I will stand by these principles, and I certainly have experienced
    the benefits of having a system where the rules of the road are fair,
    consistently applied, as a kid who grew up in poverty and understood
    the American Dream was available, having access to that for the next
    generation of youngsters is so important from my perspective.
        Unfortunately, we see a common theme from the left, that somehow
    lower income families lack the wherewithal to manage their own affairs
    and determine what's best for their families without some sort of
    Government intervention.
        While the Federal Government ought to protect consumers from
    unscrupulous practices, bureaucrats in Washington should not dictate
    what families can and cannot have simply by regulating products out of
    existence and pricing people out.
        As I wrap up, I want to address one final, important topic.
        A few weeks ago, several reports were published about the toxic
    work environment and the culture at the FDIC. A few weeks ago, we
    talked about the importance of making sure that employees at the FDIC,
    where you sit on the Board, have a safe, healthy work environment. I
    hope that you'll have the opportunity to address some of the challenges
    we've seen at the FDIC as well.
        Thank you.
                                     ______

                       PREPARED STATEMENT OF ROHIT CHOPRA
                 Director, Consumer Financial Protection Bureau
                               November 30, 2023
        Chairman Brown, Ranking Member Scott, and Members of the Committee,
    thank you for inviting me to this hearing to present the Consumer
    Financial Protection Bureau's (CFPB) submission of its Semiannual
    Report to Congress.
    ---------------------------------------------------------------------------
        Statement Required by 12 U.S.C. 5492: The views expressed herein
    are those of the Director and do not necessarily reflect the views of
    the Board of Governors of the Federal Reserve System or the President.
    ---------------------------------------------------------------------------
        I am pleased to share that the CFPB has reached important
    milestones on critical priorities, including personal financial data
    rights and credit reporting, while continuing to enforce the law and
    deliver results for consumers and law-abiding businesses. Today, I will
    share some observations about household financial stability and
    highlight our progress on important areas of work.
        As we enter the holiday season after a sustained period of high
    interest rates, the CFPB is sharpening its focus on the evolving
    patterns of household debt. Over the past few years, borrowing has
    accelerated across many key products, including credit cards and auto
    loans, and consumers are increasingly utilizing new ways to borrow,
    like buy now, pay later.
        Americans now owe more than $17 trillion in household debt. Total
    outstanding credit card debt eclipsed $1 trillion last year for the
    first time since the CFPB began tracking it. Auto loans have grown
    quickly to an estimated $1.6 trillion.
        The CFPB's analyses have found that rates and fees are contributing
    to persistent credit card debt for a growing number of consumers.
    Americans paid $130 billion in interest and fees on credit cards last
    year, while annual percentage rates rose far above the cost of offering
    credit. The CFPB is taking a number of steps to increase competition in
    this highly concentrated market.
        The return to repayment for Federal student loans continues to be
    an area of concern for many borrowers, causing families to reallocate
    funds toward student loans after a 3-year pause. We are carefully
    monitoring the practices of loan servicers, given their influence on
    borrower outcomes. We will also be evaluating the effects of student
    loan repayment on consumers' other obligations to better understand the
    full impact of the return to repayment and the payment pause itself.
        Outstanding auto loan debt has also grown, particularly given the
    higher cost of vehicles and higher interest rates. Auto loan payments
    are consuming a greater share of income for many consumers, and we are
    actively monitoring credit performance and repossession activity.
        Residential mortgage activity has declined precipitously during the
    last few years, while interest rates, fees, discount points, and other
    costs have increased. The result is that homebuyers are paying much
    more: average monthly payments on 30-year fixed rate loans increased by
    more than 46 percent from 2021 to 2022. We believe these trends
    persisted during 2023 given the rate environment.
        The CFPB is examining ways to facilitate more refinancing activity
    if and when prevailing mortgage interest rates subside to ensure that
    borrowers who experience financial distress can navigate alternatives
    to foreclosure and to streamline rules and procedures for servicers to
    offer loan modifications.
        Since our last Semiannual Report, the CFPB has proposed a rule to
    accelerate the shift to ``open banking'' in the United States, giving
    consumers the ability to more easily switch to new providers, while
    taking care to safeguard their personal financial data. We have also
    initiated a process to improve accuracy and accountability in credit
    reporting, especially for data brokers. We are also taking steps to
    address widespread inaccuracies on Americans' credit reports when it
    comes to medical bills.
        The CFPB's supervision and enforcement program is protecting both
    consumers and honest financial firms who must compete against those who
    egregiously violate the law. In the last 2 years, we have obtained
    orders totaling $8 billion in victim redress and penalties. We have
    focused on large, repeat offenders. Families across the entire country
    are benefiting from this work.
        The CFPB has also tackled the scourge of junk fees that have been
    creeping across sectors of the economy and interfering with normal
    market forces. We have even uncovered a number of illegal junk fee
    practices across consumer financial products.
        As Director, I have made it a priority to ensure that the CFPB
    continues to modernize its approach to keep pace with a fast-changing
    financial services industry. The CFPB has shifted supervisory resources
    toward nonbanks to account for the significant role they play in
    financial services today. For example, in payments, Big Tech companies
    and nonbank payment apps have become ubiquitous in the United States.
    The CFPB has taken steps this year, including a proposed rule, to
    ensure that these companies adhere to the same rules as large banks,
    credit unions, and other financial institutions.
        In August, our complaint database reached four million submissions.
    Every week, we send more than 20,000 complaints to companies for
    responses. I am proud of the CFPB's work in getting consumers the
    resolutions they deserve, often through referrals from local
    organizations, Congressional offices, and many others.
        Thank you for the opportunity to appear before you.

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