    [House Hearing, 119 Congress]
    [From the U.S. Government Publishing Office]

                     A NEW ERA FOR THE CFPB: BALANCING POWER
                     AND REPRIORITIZING CONSUMER PROTECTIONS

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

                                    HEARING

                                   before the

                     SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

                                     of the

                        COMMITTEE ON FINANCIAL SERVICES
                         U.S. HOUSE OF REPRESENTATIVES

                        ONE HUNDRED NINETEENTH CONGRESS

                                 FIRST SESSION

                                   __________

                                 MARCH 26, 2025

                                   __________

                               Serial No. 119-11

           Printed for the use of the Committee on Financial Services

                     [GRAPHIC NOT AVAILABLE IN TIFF FORMAT]

                                www.govinfo.gov

                                   ______

                     U.S. GOVERNMENT PUBLISHING OFFICE

    59-940 PDF                WASHINGTON : 2025

                     HOUSE COMMITTEE ON FINANCIAL SERVICES

                        FRENCH HILL, Arkansas, Chairman

    BILL HUIZENGA, Michigan, Vice        MAXINE WATERS, California, Ranking
        Chairman                             Member
    FRANK D. LUCAS, Oklahoma             SYLVIA R. GARCIA, Texas, Vice
    PETE SESSIONS, Texas                     Ranking Member
    ANN WAGNER, Missouri                 NYDIA M. VELAZQUEZ, New York
    ANDY BARR, Kentucky                  BRAD SHERMAN, California
    ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York
    TOM EMMER, Minnesota                 DAVID SCOTT, Georgia
    BARRY LOUDERMILK, Georgia            STEPHEN F. LYNCH, Massachusetts
    WARREN DAVIDSON, Ohio                AL GREEN, Texas
    JOHN W. ROSE, Tennessee              EMANUEL CLEAVER, Missouri
    BRYAN STEIL, Wisconsin               JAMES A. HIMES, Connecticut
    WILLIAM R. TIMMONS, IV, South        BILL FOSTER, Illinois
        Carolina                         JOYCE BEATTY, Ohio
    MARLIN STUTZMAN, Indiana             JUAN VARGAS, California
    RALPH NORMAN, South Carolina         JOSH GOTTHEIMER, New Jersey
    DANIEL MEUSER, Pennsylvania          VICENTE GONZALEZ, Texas
    YOUNG KIM, California                SEAN CASTEN, Illinois
    BYRON DONALDS, Florida               AYANNA PRESSLEY, Massachusetts
    ANDREW R. GARBARINO, New York        RASHIDA TLAIB, Michigan
    SCOTT FITZGERALD, Wisconsin          RITCHIE TORRES, New York
    MIKE FLOOD, Nebraska                 NIKEMA WILLIAMS, Georgia
    MICHAEL LAWLER, New York             BRITTANY PETTERSEN, Colorado
    MONICA DE LA CRUZ, Texas             CLEO FIELDS, Louisiana
    ANDREW OGLES, Tennessee              JANELLE BYNUM, Oregon
    ZACHARY NUNN, Iowa                   SAM LICCARDO, California
    LISA McCLAIN, Michigan
    MARIA SALAZAR, Florida
    TROY DOWNING, Montana
    MIKE HARIDOPOLOS, Florida
    TIM MOORE, North Carolina

                          Ben Johnson, Staff Director

                                     ------

                     SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

                         ANDY BARR, Kentucky, Chairman

    BARRY LOUDERMILK, Georgia,           BILL FOSTER, Illinois, Ranking
        Vice Chairman                        Member
    BILL HUIZENGA, Michigan              NYDIA M. VELAZQUEZ, New York
    ROGER WILLIAMS, Texas                GREGORY W. MEEKS, New York
    JOHN W. ROSE, Tennessee              DAVID SCOTT, Georgia
    WILLIAM R. TIMMONS IV, South         BRAD SHERMAN, California
        Carolina                         AL GREEN, Texas
    RALPH NORMAN, South Carolina         JUAN VARGAS, California
    DANIEL MEUSER, Pennsylvania          SEAN CASTEN, Illinois
    YOUNG KIM, California                STEPHEN F. LYNCH, Massachusetts
    BYRON DONALDS, Florida               JOYCE BEATTY, Ohio
    SCOTT FITZGERALD, Wisconsin          CLEO FIELDS, Louisiana
    MIKE FLOOD, Nebraska
    MONICA DE LA CRUZ, Texas
    TIM MOORE, North Carolina

                             C  O  N  T  E  N  T  S

                                  ----------

                           Wednesday, March 26, 2025
                               OPENING STATEMENTS

                                                                       Page
    Hon. Andy Barr, Chairman of the Subcommittee on Financial
      Institutions, a U.S. Representative from Kentucky..............     1
    Hon. Bill Foster, Ranking Member of the Subcommittee on Financial
      Institutions, a U.S. Representative from Illinois..............     3

                                   STATEMENTS

    Hon. French Hill, Chairman of the Committee on Financial
      Services, a U.S. Representative from Arkansas..................     4

                                   WITNESSES

    Mr. Bryan A. Schneider, Partner, Manatt, Phelps & Phillips, LLP..     5
        Prepared Statement...........................................     8
    Mr. David Pommerehn, General Counsel, Head of Regulatory Affairs,
      Consumer Bankers Association (CBA).............................    19
        Prepared Statement...........................................    21
    Ms. Ana Fonseca, President and CEO, Logix Federal Credit Union...    29
        Prepared Statement...........................................    31
    Ms. Rebecca E. Kuehn, Partner, Hudson Cook, LLP..................    50
        Prepared Statement...........................................    52
    Mr. Seth Frotman, Former General Counsel and Senior Advisor to
      Director Chopra, Consumer Financial Protection Bureau (CFPB)...    66
        Prepared Statement...........................................    68

                                    APPENDIX

                       MATERIALS SUBMITTED FOR THE RECORD

    Hon. Bill Foster:
        Americans for Financial Reform (AFR).........................   104
        Consumer Action..............................................   114
        National Association of Consumer Advocates (NACA)............   117
    Hon. Daniel Meuser:
        Association of Credit and Collection (ACA)...................   120

                     RESPONSES TO QUESTIONS FOR THE RECORD

    Written responses to questions for the record from Mr. Bryan A.
      Schneider
        Representative French Hill...................................
          Question...................................................
          Response...................................................
        Representative John Rose.....................................   126
          Question...................................................
          Response...................................................
        Representative Maxine Waters.................................   130
          Question...................................................
          Response...................................................
    Written responses to questions for the record from Mr. David
      Pommerehn
        Representative French Hill...................................
        Representative Maxine Waters.................................   130
        Mr. Seth Frotman.............................................    00
          Question...................................................
          Response...................................................
    Written responses to questions for the record from Ms. Ana
      Fonseca
        Representative French Hill...................................
        Representative Maxine Waters.................................
    Written responses to questions for the record from Ms. Rebecca E.
      Kuehn
        Representative William R. Timmons............................
        Representative Maxine Waters.................................

                                  LEGISLATION

    H.R. ------, the Business of Insurance Regulatory Reform Act of
      2025...........................................................   141
    H.R. 2183, CFPB Dual Mandate and Economic Analysis Act...........   144
    H.R. ------, CFPB-IG Reform Act of 2025..........................   148
    H.R. ------, Commission of the Bureau of Consumer Financial
      Protection Act.................................................   153
    H.J. Res. 74, Disapproving the rule submitted by the Bureau of
      Consumer Financial Protection relating to "Prohibition on
      Creditors and Consumer Reporting Agencies Concerning Medical
      Information (Regulation V).....................................   169
    H.R. 1606, the Making the CFPB Accountable to Small Businesses
      Act of 2025....................................................   171
    H.R. 1652, the Rectifying Undefined Descriptions of Abusive Acts
      and Practices (UDAAP) Act......................................   174
    H.R. 1653, the Civil Investigative Demand Reform Act of 2025.....   183
    H.R. 654, the Taking Account of Bureaucrats' Spending (TABS) Act
      of 2025........................................................   188
    H.R. ------, the Transparency in CFPB Cost-Benefit Analysis Act..   208

                     A NEW ERA FOR THE CFPB: BALANCING POWER
                     AND REPRIORITIZING CONSUMER PROTECTIONS

                                  ----------

                           Wednesday, March 26, 2025

                 U.S. House of Representatives,
                Subcommittee on Financial Institutions,
                            Committee on Financial Institutions
                                                        Washington, DC.

        The subcommittee met, pursuant to notice, at 10:05 a.m., in
    room 2128, Rayburn House Office Building, Hon. Andy Barr
    [chairman of the subcommittee] presiding.
        Present: Representatives Barr, Huizenga, Williams of Texas,
    Rose, Norman, Meuser, Kim, Donalds, Fitzgerald, Flood, De La
    Cruz, Moore, Foster, Scott, Sherman, Vargas, and Casten.
        Also present: Representative Hill.
        Chairman Barr. The Subcommittee on Financial Institutions
    will come to order.
        Without objection, the chair is authorized to declare a
    recess of the committee at any time.
        This hearing is titled, ``A New Era for the CFPB: Balancing
    Power and Reprioritizing Consumer Protections.''
        Without objection, all members will have 5 legislative days
    within which to submit extraneous materials to the chair for
    inclusion in the record.
        I now recognize myself for 4 minutes for an opening
    statement.

         OPENING STATEMENT OF HON. ANDY BARR, CHAIRMAN OF THE
     SUBCOMMITTEE ON FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
                             FROM KENTUCKY

        Thank you to our witnesses for joining us today for our
    first Financial Institutions Subcommittee hearing in the 119th
    Congress. I am excited to lead this subcommittee again,
    especially at a time when we have an administration which
    understands the costs of burdensome overregulation. Nowhere has
    overregulation and overreach been more evident than at the
    Consumer Financial Protection Bureau (CFPB), which became the
    most unchecked and unaccountable agency in the entire Federal
    Government under the previous administration. Under former
    Director Chopra, the CFPB prioritized politics over sound
    policy, leading to disastrous outcomes for American consumers.
        The good news is that a new era has begun under President
    Trump, an era where businesses are not attacked through press
    releases or tweets, curtailing their ability to offer financial
    services and products. Instead, they are encouraged to provide
    them in a competitive, safe, and sound manner. An era where the
    Bureau's approach is not opaque and abusive but transparent and
    fair. An era where those in charge prioritize administrative
    law over overregulation by enforcement, avoiding extortionary
    Civil Investigative Demands, or Civil Investigation Demands
    (CIDs). I look forward to working with the CFPB in this new
    era.
        Past abuses, like those under Director Chopra, stem from
    significant structural flaws at the CFPB, which reduce
    accountability and lead to regulatory swings that stifle
    innovation and competition. Republicans have long called for
    reforms to ensure the Bureau is accountable to the American
    people. Today, we will propose transitioning the CFPB to a
    bipartisan commission and bringing it under congressional
    appropriations.
        I recently reintroduced the Taking Account of Bureaucrats'
    Spending (TABS) Act, which would require the CFPB to go through
    the traditional congressional appropriations process. This
    would restore the power of the purse to Congress and ensure
    that the elected representatives of the American people have a
    say in the Bureau's operations and budget.
        Beyond the structural flaws that we will explore today, I
    want to highlight two areas where the CFPB has abused its power
    and threatened--not helped--consumers in the process. The first
    is the abuse of CIDs.
        Under Director Chopra, the Bureau forced law-abiding
    financial services providers to sift through thousands of pages
    of business documents and sit for hours of oral testimony
    without specifying alleged wrongdoing, just hoping to find
    something. These fishing expeditions were designed to litigate
    companies into bankruptcy or destroy their reputations, doing
    nothing to protect consumers, but harming them by eliminating
    products and services from the market. Alarmingly, Director
    Chopra acted as judge, jury, and executioner in each case,
    rejecting even the appearance of due process.
        In response, I introduced the CID Reform Act to impose
    guardrails on the use, scope, and process surrounding CIDs.
        The second is the Bureau's Rectifying Undefined
    Descriptions of Abusive Acts and Practices (UDAAP) authority.
    The abusiveness prong in the CFPB's UDAAP authority is
    undefined. Under Director Chopra, the CFPB identified
    abusiveness in the same way Supreme Court Justice Potter
    Stewart did in describing his threshold test for obscenity: ``I
    know it when I see it.'' This lack of guidance gives
    institutions no clarity on how to comply and opens the door for
    abuse by a rogue director.
        During President Trump's first term, Bureau Director Kathy
    Kraninger defined abusiveness. Unsurprisingly, Director Chopra
    revoked this much-needed guidance. My bill, Rectifying UDAAP
    Act, defines abusiveness to inject clarity and certainty,
    encouraging financial services providers to operate
    confidently, and, in turn, increasing consumer access to vital
    products and services.
        The best consumer protection is consumer choice. A
    transparent, law-abiding Bureau will foster an environment that
    promotes competition and delivers better outcomes for all
    Americans. I look forward to discussing these issues today, and
    I yield back.
        The chair now recognizes the ranking member of the
    subcommittee, Dr. Foster, for 4 minutes for an opening
    statement.

     OPENING STATEMENT OF HON. BILL FOSTER, RANKING MEMBER OF THE
     SUBCOMMITTEE ON FINANCIAL INSTITUTIONS, A U.S. REPRESENTATIVE
                             FROM ILLINOIS

        Mr. Foster. Five.
        Chairman Barr. Oh, 5 minutes. Excuse me. 5 minutes for an
    opening statement.
        Mr. Foster. Well, thank you, Chair Barr, and to our
    witnesses.
        Under normal circumstances, a change in administration will
    naturally result in a recalibration of policies and introducing
    new legislation with ideas old and new to reflect those shifts
    in policies will be part of that. Our witnesses today make some
    valid points about some CFPB policies which could be discussed,
    but these are not normal times.
        Since taking office, President Trump, Elon Musk, and
    Russell Vought have abused their authority to shut down the
    CFPB and other agencies that Americans rely on for their
    financial security. After Department of Government Efficiency
    (DOGE) employees raided the Bureau's headquarters, CFPB
    employees were told to stop all work. Hundreds were let go. Its
    contracts were canceled. Lawsuits brought by the agency against
    bad actors were summarily dropped, and even the Bureau's name
    was ripped from the building.
        These are not reforms. They are illegal attacks on the
    CFPB's congressionally mandated existence and also attacks on
    the dedicated civil servants that fight every day to protect
    consumers and hold big financial firms accountable. In fact,
    this hearing today, discussing tweaks to the CFPB policies and
    organizations, feels a bit like Republicans rearranging the
    deck chairs on the Lusitania after they torpedoed it.
        Members who were in office in the wake of the 2008
    financial crisis will never forget what it was like. Holding
    workshops for terrified families facing foreclosure and
    bankruptcy, but the unregulated storefront mortgage originators
    that talked them into those mortgage contracts had all gone
    bankrupt. They were being squeezed by credit card companies
    using a parade of horribles like double-cycle billing and
    universal default, with pages of fine print deliberately
    written to be so complex that no human beings could ever read
    and understand them. There was almost nothing that we could do
    to help them. They have signed contracts, and we are a country
    of laws. The best that we could do is to make sure that it
    never happens again.
        Following the financial crisis, Congress established the
    CFPB as the primary agency responsible for enforcement of
    consumer financial protection laws. Since its creation, the
    financial watchdog has helped millions of Americans get more
    than $21 billion back from scammers and financial companies
    that have violated the law. The Bureau's Office of
    Servicemember Affairs returned more than $363 million to
    military servicemembers harmed by financial companies. The
    CFPB's Office for Older Americans monitored for abuses
    targeting senior citizens and shut down nationwide
    telemarketing scams. Just one enforcement action by the Bureau
    returned more than $53 million to American seniors who had been
    cheated.
        Despite these accomplishments, after the DOGE raid on the
    CFPB, Bureau employees were informed that new leadership
    intends to turn the CFPB into a single room with ``five men and
    a telephone.'' That is not Congress' intent.
        In the last administration, the CFPB wrote important new
    rules protecting Americans from overdraft fees, rules giving
    consumers control over their financial data, and rules to
    ensure that a medical emergency, domestic violence, or elder
    abuse, will not ruin an individual's credit score and financial
    future.
        The Bureau also regulates nonbank financial companies. I
    expect many of our witnesses today will agree that nonbank
    financial companies should face similar regulatory requirements
    to banks and credit unions if they offer similar services, but
    with the CFPB shut down, that is not going to happen.
        The CFPB was the only cop on the beat for consumer finance,
    and without it, it will once again be open season for scammers
    preying on hardworking American families. Big Tech companies
    will have a free rein to invade the regulated financial system
    without accountability, while banks and credit unions continue
    to be highly regulated.
        Finally, I do not believe it is an accident that Elon Musk
    and his DOGE crew shut down the CFPB exactly at the time that
    Musk is planning to turn X into a payments and financial
    platform that the CFPB would naturally have the authority to
    regulate.
        The CFPB was created to protect consumers from abuses by
    some of the most powerful financial institutions in their
    lives. The Bureau's work is important, it is constitutional,
    and consumers benefit when financial firms are held
    accountable. We need to reopen the CFPB and let its employees
    do their jobs. I yield back.
        Chairman Barr. The gentleman yields.
        The chair now recognizes the chairman of the full
    committee, Mr. Hill, for 1 minute.

      STATEMENT OF HON. FRENCH HILL, CHAIRMAN OF THE COMMITTEE ON
        FINANCIAL SERVICES, A U.S. REPRESENTATIVE FROM ARKANSAS

        Chairman Hill. Thank you, Chairman Barr. I appreciate your
    leadership for holding this hearing on the CFPB.
        Since its creation, the CFPB has acted as an overreaching
    regulator. Partisan political agendas have led to burdensome
    regulations and truly redundant, duplicative supervision that
    overlooks the impact on Americans' access to credit and
    discouraging innovation. The CFPB urgently needs reform to
    ensure accountability and transparency to Congress and the
    American people.
        Financial institutions, particularly smaller banks and
    credit unions, have reported increased compliance burdens that
    are making their operations unnecessarily difficult. Today's
    witnesses will discuss real-world consequences of the CFPB's
    misguided policies.
        I look forward to hearing these ideas for reforms today
    that will foster clarity and consistency so that financial
    institutions, in fact, can innovate, grow, and better serve
    their customers, because it is competition and innovation, not
    government mandates, that are the best ways to improve access
    and reduce costs for financial services. I yield back.
        Chairman Barr. The gentleman yields. Thank you.
        Today, we welcome the testimony of Mr. Bryan Schneider, a
    Partner at Manatt, Phelps & Phillips in Chicago, Illinois,
    where he focuses on advising clients through the gamut of
    consumer financial services and regulatory and enforcement
    matters, particularly as it relates to supervision enforcement
    and fair lending. He previously held roles at the Consumer
    Financial Protection Bureau and was Secretary of the Illinois
    Department of Financial and Professional Regulation under
    Governor Bruce Rauner.
        Mr. David Pommerehn is general counsel and head of
    regulatory affairs at the Consumer Bankers Association, a trade
    association representing financial institutions offering retail
    lending products and services.
        Mrs. Ana Fonseca is the CEO of Logix Federal Credit Union
    in Valencia, California, and is testifying on behalf America's
    credit unions. She has been with Logix for over 20 years and
    previously served as chief operating officer and chief
    financial officer.
        Mrs. Rebecca Kuehn is a Partner with Hudson Cook, LLP, a
    consumer financial services law firm in Washington, DC, where
    she counsels businesses on compliance with financial and
    consumer laws, fair lending, and other Federal and State
    regulations. She was formerly an Assistant Director for the
    Division of Privacy and Identity Protection at the Federal
    Trade Commission where she was responsible for leading
    enforcement policy outreach and rulemaking activities for the
    FTC's Fair Credit Reporting Act program.
        Finally, Mr. Seth Frotman is the former general counsel and
    Senior Advisor to Director Rohit Chopra at the Consumer
    Financial Protection Bureau.
        We thank each of you for taking the time to be here. Each
    of you will be recognized for 5 minutes to give an oral
    presentation of your testimony. Without objection, your written
    statements will be made part of the record.
        Mr. Schneider, you are now recognized for 5 minutes for
    your oral remarks.

      STATEMENT OF BRYAN A. SCHNEIDER, PARTNER, MANATT, PHELPS &
                             PHILLIPS, LLP

        Mr. Schneider. Thank you, Mr. Chairman, Ranking Member
    Foster, and members of the subcommittee. Thank you, again, for
    the opportunity to testify at today's hearing.
        My name is Bryan Schneider. I work at the law firm of
    Manatt, Phelps & Phillips, where I focus my practice primarily
    on advice concerning consumer financial matters. The views I
    offer today, however, are my own.
        I previously served as Associate Director for Supervision
    Enforcement and Fair Lending at the CFPB, and prior to that, I
    did serve as Secretary of the Illinois Department of Financial
    and Professional Regulation, the chartering, licensing, and
    supervisory authority for all financial services companies
    operating in the land of Lincoln.
        I appreciate the opportunity to submit written testimony,
    and I will highlight at this time some points that I believe
    could be most relevant as you and your colleagues consider
    options for setting new priorities for consumer financial
    regulation.
        Acting through rigorous compliance with the Administrative
    Procedure Act and related laws is indeed the hallmark of
    careful regulation. Similarly, risk-based supervision is key to
    the successful oversight of the financial services system.
    Supervision facilitates the prevention of consumer harm before
    it occurs, but supervision must be built on confidence that a
    supervisory exam is not a civil enforcement investigation by
    another name. The involvement of enforcement staff in the
    planning or execution of supervisory exams should be
    prohibited.
        Enforcement is a tool that is essential to the CFPB's
    mission--during my tenure at the Bureau, we brought dozens of
    enforcement actions--but enforcement should be reserved for
    situations in which the CFPB has determined that it must
    proceed against a bad actor whose behavior has caused
    significant consumer harm, and has allowed it to operate out of
    compliance to the detriment of its competitors that follow the
    law.
        The aim of enforcement should be on stopping the entity
    from engaging in the prohibited conduct, and the prompt and
    fulsome remediation and redress of all consumer harm. Civil
    penalties unquestionably play a role in a reasoned enforcement
    regime, but eye-popping finds just for the sake of grabbing
    headlines should have no place.
        Moreover, enforcement should be undertaken only when the
    entity's actions violate clearly articulated statutory or
    regulatory requirements. When Congress has given the CFPB
    broader, less specific authorities--such as the prohibitions
    against unfair, deceptive, or abusive acts or practices--its
    enforcement activity should be stayed in advance of development
    of a procedurally valid regulatory requirement or proceed in an
    incremental matter that provides clarity for regulated entities
    through the careful development of the common law.
        The CFPB must rigorously abide by its statutory obligations
    to coordinate with Federal and State prudential banking and
    financial services regulators. The CFPB should respect their
    expertise and not discharge its obligation to coordinate by
    merely listening to the appropriate fellow regulator and then
    opening its own new duplicative examination or investigation.
        I make no quarrel with the CFPB nor the fine people that
    work there, but because their work occurs within an agency
    whose very structure seems designed to subvert constitutional
    principles, it will, in its current form, likely never be able
    to fulfill its mission.
        Some ideas on what to do. In the wake of the recent
    multiyear blizzard of guidances, blog posts, interpretations,
    manual amendments, and speeches, the CFPB ought to rescind or
    repeal those that fail to comply with the Administrative
    Procedure Act (APA), or that exceed its lawful authority.
    Pending enforcement action should be similarly reviewed.
        The CFPB should balance its resources to effectively deploy
    each of its four tools: rulemaking, supervision, enforcement,
    and often overlooked, consumer education. The CFPB's current
    funding mechanism, while constitutional, is troublingly
    inconsistent with fundamental principles of separation of
    powers and ordered liberty.
        While serving the government of the State of Illinois, I
    had to request appropriations for our operations from the
    Illinois General Assembly. Despite some occasional messiness,
    Illinois legislators consistently discharged their duties and
    provided our agency with the necessary resources to do its work
    in a manner consistent with the authority they gave us. The
    same can be expected from Congress and should be demanded.
        Congress should consider the need for the establishment and
    strengthening of limitation periods concerning both the
    issuance of Civil Investigative Demands and underlying conduct,
    and Congress should evaluate the need to cabin the CFPB's use
    of its UDAAP authority to situations where the entity has acted
    in good--has not acted in good faith with respect to its
    compliance obligations.
        Thank you for the chance to testify. I look forward to your
    questions.

        [The prepared statement of Mr. Schneider follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Barr. Thank you.
        Mr. Pommerehn is now recognized for 5 minutes.

      STATEMENT OF MR. DAVID POMMEREHN, GENERAL COUNSEL, HEAD OF
            REGULATORY AFFAIRS, CONSUMER BANKERS ASSOCIATION

        Mr. Pommerehn. Thank you, Chairman Barr, Ranking Member
    Foster, and members of the subcommittee. The Consumer Bankers
    Association (CBA) greatly appreciates the opportunity to
    testify today on the CFPB's recent activities and the agency's
    future.
        My name is David Pommerehn. I am General Counsel for the
    CBA, the only national trade association focused exclusively on
    retail banking.
        To start, I want to make it clear that CBA supports a
    credible and durable consumer regulator. However, the political
    shifts over the past few years have created instability and
    uncertainty, and we have now directly seen the need for reform
    at the agency. The reform should be focused on ensuring that
    the Bureau is following the law while protecting consumers.
        In the past, we have worked closely with the Bureau to
    ensure rulemakings do not have adverse effects. However, under
    the leadership of the former director, the Bureau has failed to
    follow the law and exceeded its statutory authority. This has
    resulted in an unprecedented number of lawsuits against the
    agency by the entities it regulates. CBA believes that facts
    matter, and that regulators must represent facts accurately.
        Under its previous leadership and in an attempt to justify
    its rulemakings, the Bureau misrepresented its own data about
    the state of the consumer financial services market. The prior
    administration's politicization of the Bureau eroded public
    confidence, damaged the Bureau's long-term credibility, and led
    to policy outcomes that were optimized for short-term political
    gains at the cost of consumers' long-term financial health.
        There are a number of positive administrative changes that
    could easily be implemented by the new leadership at the
    Bureau. However, as we have seen with the increasingly drastic
    political swings, any of these changes can just as easily be
    undone by the next administration. To create long-term
    stability and credibility for the Bureau, legislative reforms
    are needed.
        CBA supports enacting legislation that would ensure the
    Bureau operates within its authority and creates greater
    stability, transparency, and credibility. CBA has long
    prioritized the need for reform at the Bureau--of the Bureau's
    UDAAP authority, and we strongly support Chairman Barr's
    Rectifying UDAAP Act.
        Treating customers fairly and closely following consumer
    protection laws are core to banks' business models. However,
    the Bureau's UDAAP authority has been largely undefined and
    closed to input from stakeholders. A clear and defined process
    will provide guardrails which are needed to ensure regulated
    entities know what is or is not permitted and how they can
    comply.
        The Bureau has put all companies it regulates at risk of
    inadvertent noncompliance because it is unclear how and when
    the abusive standard will be applied. In particular, CBA
    supports requiring the Bureau to refrain from using its unfair
    and abusive authorities to seek monetary relief, unless it has
    previously articulated a specific harm. In other words, the
    Bureau should not be able to move the target without letting
    the market know first.
        There are additional pieces of legislation that would
    directly impact the Bureau's oversight. For example, the TABS
    Act would place the Bureau's funding structure under the
    appropriations process. This would allow for greater
    congressional oversight and hold the Bureau more accountable to
    Congress.
        CBA also supports the Consumer Financial Protection
    Commission Act, which would update the Bureau's leadership
    structure to a five-person, bipartisan commission instead of a
    sole director. We believe this would help reduce the radical
    pendulum shifts between administrations and bring long-term
    stability to the Bureau.
        It is also necessary for the Bureau to conduct a more
    robust cost-benefit analysis in its rulemakings, which is
    provided for in the Transparency in CFPB Cost-Benefit Analysis
    Act. We believe it is also important for the Bureau to have an
    independent inspector general, which is provided for in the
    CFPB IG Reform Act. These legislative proposals would ensure
    the rulemaking processes, and the law are being properly
    followed.
        Other ways Congress could improve the Bureau's regulation
    and supervision would be to create independent lookbacks to
    review major rules that would require a rule to sunset or be
    reproposed if that rule's cost outweighs its benefits. We also
    believe the Bureau should commit to considering self-reporting
    and remuneration of compliance issues when weighing whether it
    brings an enforcement action or saddles a supervised
    institution with a matter requiring attention.
        Thank you, Chairman Barr. Thank you, Ranking Member Foster
    and the subcommittee for the opportunity to testify here today.
    We appreciate you convening this very important hearing, and we
    stand ready to work with you and the subcommittee to achieve
    thoughtful and effective policies to ensure the Bureau is a
    durable and strong consumer protection regulator. Thank you.

        [The prepared statement of Mr. Pommerehn follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Barr. Thank you.
        Ms. Fonseca, you are now recognized for 5 minutes.

      STATEMENT OF ANA FONSECA, PRESIDENT AND CEO, LOGIX FEDERAL
                              CREDIT UNION

        Ms. Fonseca. Good morning, Chairman Barr, Ranking Member
    Foster, and members of the subcommittee. My name is Ana
    Fonseca, and I am testifying today on behalf of America's
    credit unions. I certainly serve as the President and CEO of
    Logix Federal Credit Union, a $9.8 billion institution
    headquartered in Valencia, California. Thank you for the
    opportunity to share our thoughts and perspectives on the CFPB
    and consumer financial protection.
        At Logix, we pride ourselves on our programs to serve our
    members. Logix was founded during the Great Depression as
    Lockheed Aircraft Employees Federal Credit Union. What started
    as a small financial cooperative on Lockheed's Burbank campus
    has grown into a trusted financial institution serving 253,000
    members and managing $9.8 billion in assets.
        As we have grown, we remain true to our founding
    principles. Logix is a member-owned and not-for-profit
    institution prioritizing affordable, consumer-friendly
    financial services over profit. This is just part of the credit
    union difference. Our member-owned cooperative structure makes
    credit unions the original consumer financial protectors.
    Still, credit unions find themselves subject to the rules,
    burdens, and costs associated with being regulated by the CFPB.
        For an institution like Logix, our expected crossing of the
    arbitrary $10-billion threshold that subjects us to greater
    CFPB scrutiny has a cost. Our own internal estimates are that
    those burdens that come with crossing that threshold will
    average about $4 million a year, and that does not count the
    roughly $10 million a year that we expect to lose in debit
    interchange income due to the Durbin Amendment, and that is
    just in the first year.
        With such a significant decrease in revenue combined with
    the substantial increase in CFPB compliance-related expenses,
    our ability to deliver the superior value our members have come
    to expect over the past 88 years will be severely impacted.
        Credit unions are different than other entities that are
    regulated by the CFPB in that there are a number of statutory
    consumer protection provisions included in the Federal Credit
    Union Act that other types of financial institutions do not
    have. Credit unions also do not have the armies of lawyers that
    large Wall Street banks have to keep up with the pace and scope
    of regulations coming out of the CFPB. Yet, we are still
    subject to them either directly or indirectly. This has led to
    significant consolidation in the industry since the passage of
    the Dodd-Frank Act and the creation of the CFPB.
        Recent years have also seen the CFPB focus less on its
    statutory mission and become more focused on changing the
    marketplace in a politicized fashion. My colleagues in the
    credit union industry feel as though they are dying a death of
    a thousand cuts. The revenue on all fronts is under attack, and
    their costs to comply with ever-increasing regulation continue
    to mount. Change needs to come to CFPB, and we believe the time
    for Congress to act is now.
        We support and would recommend a series of legislative
    changes that include, first, moving the leadership to a
    bipartisan commission. A single director makes the Bureau more
    political and does not allow for open robust discussion like a
    five-person commission would. Second, increasing congressional
    oversight of the CFPB through subjecting the Bureau to
    congressional appropriations and creating its own inspector
    general. Third, providing greater clarity on UDAAP. Fourth,
    expanding and clarifying exemptions for credit unions from the
    CFPB. Fifth, increasing CFPB usage of cost-benefit analysis and
    Small Business Regulatory Enforcement Fairness Act (SBREFA)
    panels. Finally, reforming the civil investigative demand
    process.
        These statutory changes and clarifications should be
    combined with the renewed focus and commitment from the Bureau
    to be data-driven--to be a data-driven organization that
    focuses on its specific statutory obligations to protect
    consumers from unregulated entities and bad actors operating in
    the financial system. Any new CFPB rulemaking should follow the
    principles outlined in my written testimony that will help
    ensure this approach.
        In conclusion, consumer protection in financial services is
    important. Making these changes now will help ensure that we
    have an apolitical focus on consumer protection moving forward.
    We applaud the subcommittee for beginning this difficult
    discussion on how to reform and improve the CFPB. I thank you
    for the opportunity to appear before you today and welcome any
    questions you may have.

        [The prepared statement of Ms. Fonseca follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Barr. Ms. Kuehn, you are now recognized for 5
    minutes for your oral remarks.

        STATEMENT OF REBECCA E. KUEHN, PARTNER, HUDSON COOK, LLP

        Ms. Kuehn. Good morning, Chairman Barr, Ranking Member
    Foster, and members of the subcommittee. Thank you for the
    opportunity to appear----
        Chairman Barr. Ms. Kuehn, if you could start over and turn
    on your microphone.
        Ms. Kuehn. Push the button. Yes. Thank you, sir.
        Chairman Barr. Yes. Thank you. Thank you.
        Ms. Kuehn. Good morning, Chairman Barr, Ranking Member
    Foster, and members of the subcommittee. Thank you for the
    opportunity to appear before you.
        My name is Rebecca Kuehn, and I am a Partner at the law
    firm Hudson Cook, which focuses on consumer financial services
    law. Earlier in my career, I worked for the Federal Trade
    Commission as an assistant director in the Division of Privacy
    and Identity Protection. I am appearing today in my own
    capacity, and my remarks are my own and not those of my firm or
    any particular client of the firm.
        The CFPB is a comparatively young agency by Federal agency
    standards, but its approach to consumer protection,
    particularly its use of enforcement actions to define the
    activities that the CFPB violates--believes violates the law,
    has raised significant concerns about regulatory overreach, and
    has created uncertainty in the financial services market.
        My testimony today will be focused on two areas that are in
    need of reform: The CFPB's exercise of its enforcement
    authority over alleged violations of the Dodd-Frank Act,
    prohibition against unfair, deceptive, or abusive acts or
    practices or UDAAP, and the CFPB's use of its investigatory
    authority, in particular, its use of CIDs or Civil
    Investigative Demands.
        The Dodd-Frank Act grants the CFPB the authority to take
    action against companies to prevent unfair, deceptive, or
    abusive acts or practices in connection with a consumer
    financial product or service. The concepts of deception and
    unfairness have a long history in case law, largely from the
    work of the Federal Trade Commission, but the concept of
    abusive does not. The contours of the Bureau's abusiveness
    authority, particularly how it differs from unfairness and
    deception--remain unclear to this day.
        The Bureau has primarily used its enforcement authority to
    declare what it believes is abusive, but the cases themselves
    have not shown how that is different from unfairness or
    deception, and they have been inconsistent in applying the
    abusiveness prongs to similar facts and circumstances. The
    result is that the enforcement looks arbitrary or results-
    oriented, and, as some have said, it is regulation by
    enforcement.
        This approach has real due process and fairness concerns.
    The CFPB can simply declare an existing practice abusive and
    penalize financially companies without giving them a chance to
    adjust their policies. To provide regulatory certainty, the
    CFPB should be required to clearly define the standard for
    finding an act or practice abusive through a notice-and-comment
    rulemaking, and the CFPB should only seek monetary relief,
    where it has defined a specific practice as abusive through
    formal rulemaking or it has obtained a prior order against a
    company. This would provide more regulatory certainty while
    allowing the CFPB the ability to address new and emerging
    issues.
        The CFPB investigative process similarly needs reform.
    Civil Investigative Demands or CIDs are one of the primary
    tools used by the CFPB to compel companies to produce
    documents, answer questions, and even provide oral testimony to
    the CFPB before any formal enforcement proceedings commence.
    CIDs impose enormous costs on companies and result in business
    disruptions that last months, often years. The demands involve
    a substantial electronic discovery cost, not to mention
    attorneys' fees, and there is a real human cost for the
    employees of the companies who are subjected to these demands.
        The law allows the CFPB to issue a CID when it has reason
    to believe that there is a violation. Where there is no reason
    to believe there is a violation, no CID should be issued, but
    that is not our experience. The CFPB has not limited its use of
    the CIDs to that. Rather, they use it to gather information
    about a particular segment of the market or to conduct top-to-
    bottom reviews of businesses that have been disfavored by the
    CFPB, even where they do not have examination authority over
    those entities.
        The law gives companies the right to file a petition to
    modify or limit a CID, but if you do that, then your
    investigation is made public. This has the effect of making a
    confidential investigation open to public view, and it
    dissuades companies from exercising their rights to object to
    what are otherwise overbroad, or unduly burdensome consumer
    investigation demands.
        The bill before us, H.R. 10036, would reform the CID
    process by creating a process to address concerns early in the
    investigation to adjust the scope of it to an appropriate size,
    and it would require the CFPB to treat petitions to modify as
    confidential. This would make the process more fair.
        Thank you for the opportunity to testify before you today.
    I am happy to answer any questions.

        [The prepared statement of Ms. Kuehn follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Barr. Thank you.
        Mr. Frotman, you are now recognized for 5 minutes.

     STATEMENT OF SETH FROTMAN, FORMER GENERAL COUNSEL AND SENIOR
       ADVISOR TO DIRECTOR CHOPRA, CONSUMER FINANCIAL PROTECTION
                                 BUREAU

        Mr. Frotman. Chairman Barr, Ranking Member Foster, my name
    is Seth Frotman. Until about a month ago, I was general counsel
    at the Consumer Financial Protection Bureau, but today, I am
    speaking for myself about the profound disconnect between a
    hearing that purports to be about, ``consumer protection,'' and
    the devastation that this administration's actions and
    legislative agenda will unleash for working people.
        Over the last 4 years, the CFPB cracked down on junk fees,
    tackled the crushing impact of medical debt, protected military
    families from fraud and widowed spouses from scams, and took on
    Big Tech's relentless stampede into consumer finance. We stood
    up to unscrupulous corporations and billionaires on behalf of
    working families, the people that this administration promised
    to fight for. The CFPB has gotten back more than $20 billion
    for working people on a budget that is the fraction of that
    size.
        All that came to a screeching halt when President Trump,
    Elon Musk, and Russell Vought, took over the CFPB. They have
    taken Wall Street's cops off the beat, granting shameless
    pardon after shameless pardon to companies that ripped off
    their own customers. This administration's attack on the CFPB
    drips with disdain for everyday Americans. The actions of this
    administration to take money from working people and give it to
    the rich speak louder than words, especially in the empty
    rhetoric about reprioritizing consumer protection that will be
    said at this hearing.
        I will repeat what I told this committee almost 6 years ago
    about the vital role of the CFPB. It is important to recall
    what people's lives looked like, and what this Nation looked
    like as the CFPB opened its doors in 2011. It had been 3 years
    since the peak of the financial crisis, but for millions across
    the country, the crisis was still raging. Families were losing
    their homes. Servicemembers were falling victim to financial
    predators who viewed them as dollar signs in uniforms.
        Everyday Americans were targeted with bogus add-ons and
    hidden fees, leading to financial ruin by a thousand cuts. The
    combined forces of these ripples of deceit and devastation left
    millions of shattered families and shattered dreams. That is
    where the CFPB stepped in.
        Six years later, we are on the verge of returning to that
    bleak and dangerous past, and while this is going on, we are
    now subjected to the same old tired industry talking points.
    The same push for deregulation that makes too-big-to-fail
    bankers, Big Tech, and billionaires rich while leaving working
    people and their communities bankrupt when the music stops.
        A lot of people in this town--the K Street lobbyists, the
    revolving-door lawyers--try to make straightforward things
    complicated. The battle over the future of the CFPB is not. It
    comes down to a handful of simple questions. Are you on the
    side of military families or the predators who lurk outside the
    base? Are you on the side of parents struggling with error-
    ridden medical bills or the debt collectors trying to make a
    quick buck on their backs? Are you on the side of people who
    get debanked or the financial institutions that fight like hell
    to keep doing it?
        When you look past the rhetoric, the deceptively labeled
    bill touting through-the-looking-glass reform, and what is
    going on in the executive branch alongside what is being pushed
    here in Congress, it really boils down to one-time tested
    proposition: Which side are you on?
        If you are going to stand idly by while the Nation's
    consumer watchdog is decimated, if you push a legislative
    agenda of more junk fees, abusive medical debt collection
    practices, Big Tech domination, and predatory lending, then the
    answer is pretty clear.
        I want to close with this: You, your family, your
    neighbors, and your community are at risk today because
    President Trump and Elon Musk have corruptly handed over the
    keys of our Nation's consumer watchdog to the largest banks and
    tech companies in the world. To be clear, the rogue efforts to
    shut down an agency that was created in the wake of the worst
    financial crisis in memory are blatantly illegal.
        Right now, there is an $18-trillion ticking time bomb of
    consumer debt, a real and imminent threat to your family's
    future. We have seen this movie before, and the sequel may be
    much worse than the original. It is time to end this debacle.
    The CFPB must get back to work. A hearing that purports to be
    about consumer protection that focuses on anything else is an
    insult to the many hardworking Americans who just want a fair
    shake in today's economy. Thank you.

        [The prepared statement of Mr. Frotman follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        Chairman Barr. Thank you, Mr. Frotman.
        Let us examine who the real predator is, the Orwellian
    predator, the Consumer Financial Protection Bureau.
        Since President Trump took office, we have heard multiple
    complaints from my Democrat colleagues about executive power
    and DOGE and Elon Musk controlling funding. For example,
    Ranking Member Waters referred to Elon Musk as, quote, an
    unelected billionaire Co-President, end quote, multiple times
    in front of this committee and that, quote, they attempted to
    illegally kill the CFPB, end quote, and, quote, unelected
    billionaire Elon Musk seizes control of American people's
    money, end quote. My friend, Representative Casten, brought up
    how Elon Musk is violating Congress' power of the purse.
        My question really should be geared toward my friends
    across the aisle. If you are so concerned about unelected
    officials in the executive branch controlling funding and the
    future of the Bureau, why are you not supporting reforms to the
    Bureau's structure to bring oversight back to Congress? If you
    are so worried about violations to the power of the purse, why
    are you not supporting my TABS Act and bringing appropriations
    powers back to Congress?
        Ms. Kuehn, during your tenure at the Federal Trade
    Commission, did you find that a commission structure or being
    funded through the normal congressional appropriations process
    somehow prevented you from protecting consumers?
        Ms. Kuehn. No, I did not. The Commission structure at the
    Federal Trade Commission (FTC) allowed business to continue
    even through changes of administration, as it is now, and it
    allowed the work to have the insight of both sides of the
    aisle. So, issues were fairly considered in front of the
    Commission.
        Chairman Barr. Well, under Director Chopra, the Bureau
    engaged in fishing expeditions through its CID process,
    burdening institutions with requests for documentation, time,
    resources, and other demands without any foreseeable end in
    sight.
        Ms. Kuehn, you, I think, in your written and oral testimony
    really laid out the abuses from the Bureau, and this is why I
    introduced the CID Reform Act.
        Ms. Kuehn, you have represented clients who have been
    victimized by these fishing expeditions. Can you describe what
    these small business owners, these American citizens have to
    endure with these CIDs?
        Ms. Kuehn. Yes, sir. I think it is really telling because I
    think the focus of Mr. Frotman's opening remarks were talking
    about large banks, but the clients I represent are not large
    banks. They are small businesses in your local community trying
    to serve a variety of needs of consumers, and when they receive
    a CID, it is exhausting. It is a lot of documents under short
    time frames.
        The usual return date for a CID is 30 days, and there can
    be 30 or 40 requests in a particular CID. That is a lot of time
    and effort on the part of the company to try to gather that
    information, and there are very limited abilities of the
    company to bring objections in a meaningful way that does not
    expose the investigation.
        Chairman Barr. I think your testimony brings to light who
    the real predator is here.
        Mr. Schneider, how do these demands discourage financial
    providers from offering financial products and services to
    consumers?
        Mr. Schneider. Well, if you do not know what the rules of
    the road are, it is very difficult to innovate. It is very
    difficult to know what you can bring to the market that is not
    going to be immediately attacked. You just end up spending a
    lot of money trying to figure out--hiring lawyers and trying to
    figure out what you need to do just to keep going with your
    current products, and your innovation is lost. That is never
    seen, quite frankly. What does not happen is never seen.
        Chairman Barr. We want cops on the beat, but we want due
    process. CIDs from the Bureau lack due process. Can you speak
    to that?
        Mr. Schneider. I would echo my colleague's statements.
    These are extraordinarily broad requests. They are often
    seeking information about conduct that could never be the
    subject of an enforcement action. There are extraordinarily
    tight deadlines. If you have any objection to the scope of the
    CID, you have to go back and hope to get relief from the entity
    that has delivered it to you.
        I might add, when you do that--if you dare to petition to
    modify or set the CID aside--that becomes part of the public
    record. You are tainted with as being an entity under
    investigation, merely by the action of seeking to make it more
    reasonable for you to respond.
        Chairman Barr. Yes. I think it is also reasonable just to
    require the CFPB to tell the target why they are actually doing
    this investigation.
        Mr. Pommerehn, last question to you. In fulfilling the
    America First Agenda, the President has begun removing
    government waste and overreach and ending the disastrous
    Diversity, Equity and Inclusion (DEI) cancer that has spread
    throughout our financial system.
        In the finalized Section 1071 small business data
    collection rulemaking, this rule requires small business
    lenders to collect 81 data fields from small businesses,
    including whether the applicant is minority-owned or Lesbian,
    Gay, Bisexual, Transgender, and Queer (LGBTQ), the sex,
    ethnicity, race of the principal owners, et cetera, increasing
    compliance costs and reducing loan availability.
        Can you discuss some of the costs of this rulemaking and
    elaborate why it must be rescinded to protect small business
    access to credit?
        Mr. Pommerehn. The 1071 rulemaking has lots of different
    avenues right now. Of course, it is subject to litigation. The
    original statutory language only required 13 data fields. I
    believe the end result was 81 data fields, which is why the
    Bureau was sued in the first place.
        Our concern with the 1071 data fields beyond the 13 is that
    it will complicate the process. Banks have spent a lot of time
    going in and out of compliance and preparing for compliance
    with this rule.
        Chairman Barr. My time has expired. I am sure there will be
    more questions about this later.
        The chair now recognizes the ranking member of the
    subcommittee, Dr. Foster, for 5 minutes.
        Mr. Foster. Thank you, Chair Barr.
        As a threshold manner, do any of our witnesses believe that
    five men and a telephone will provide adequate consumer
    protection in our country?
        Okay. I will let the record say that I saw no hands here.
        What about protecting financial businesses who are good
    actors against new unregulated online competition? Do you
    believe that five men and a telephone will provide adequate
    protection for those good actors?
        Again, no hands. I think that is really what is at the
    heart of this hearing.
        Mr. Frotman, can you sort of give us the lay of the land in
    what is actually currently happening at the CFPB?
        Mr. Frotman. Thank you, Congressman.
        What is happening at the CFPB now is devastating for
    working people, it is a boondoggle for the billionaires calling
    the shots in this administration, and it is nothing more than
    sheer corruption.
        Since the beginning of February, this administration has
    been hell-bent on destroying the Nation's consumer watchdog.
    The financial inspectors that were spread across the country
    making sure that businesses were following the law and making
    sure there was a level playing field for honest businesses were
    sent home. They are still not back on the job. There have not
    been exams of financial institutions to make sure they are
    following the consumer financial protection laws by the CFPB in
    over a month.
        They have dropped nearly a dozen enforcement actions. Just
    to give you a few examples: They dropped the CFPB's enforcement
    action against Zelle and the Nation's largest banks for
    allowing hundreds of millions of dollars of fraud to fester on
    their payment system.
        They dropped the Bureau's case against Cap One where they
    tricked and deceived people with savings accounts from getting
    the interest rate that they were entitled to, money that could
    have been used to help them pay for groceries.
        They dropped a case against SoLo Funds, an outfit that was
    ripping off working people with junk fees and tip schemes and
    dark patterns that numerous other State attorneys general and
    regulators from coast to coast had already taken into account.
    The current CFPB director tried to take credit for this and was
    shamed so much in a community note on X that we have not heard
    from him since.
        This is what is happening across the board. They shut down
    the Bureau's office that this Congress created to protect
    servicemembers, to protect students, to protect older
    Americans. I do not see who this benefits. It does not benefit
    the honest businesses that we have heard so much today from our
    panelists. It does not protect American consumers who
    desperately need help. The only people this help are too-big-
    to-fail bankers and Silicon Valley billionaires.
        Mr. Foster. So, right now, if a servicemember or an elder
    gets ripped off, who do they go to? Where do they actually get
    help from today?
        Mr. Frotman. It is entirely unclear. We have had sworn
    testimony in Federal court talking about how this
    administration broke the consumer complaint system. The system
    where if servicemembers call in or write a complaint--more than
    400,000 military families have done this--that system is not up
    and running. It is not getting them the information they need.
        The examiners on the ground making sure that banks and
    nonbanks are complying with key military consumer protections
    like the Military Lending Act, the Servicemembers Civil Relief
    Act--those inspectors are not on the ground making sure that
    these companies are following the law.
        I spent years of my life at the Bureau trying to protect
    military families, and the idea that we would just shut off
    this incredibly important tool--that is not only important for
    individual families' financial future, but imperative for our
    military readiness--is just appalling.
        Mr. Foster. Thank you. One of the key promises from the
    Trump--from President Trump on the campaign trail was to drive
    down prices and make America affordable again starting on day
    one. A key element of that was his promise to cap credit card
    interest rates at 10 percent, which I do not think we see
    legislation on this or any action on that front.
        Could you say whether overall the shutting down the CFPB
    and the rest of the actions are actually going to lower costs
    for Americans?
        Mr. Frotman. They will do nothing to lower costs. I had a
    chance to look through the agenda, and it is hard to believe
    that this is on track with a President who, on the campaign
    trail, talked a big game about taking on banks and driving down
    credit card interest rates; nothing in the agenda you see here.
    The fight to make sure that people pay more junk fees when it
    comes to their bank account, their credit card or on medical
    debt will do nothing to make working people's lives better.
        Mr. Foster. Thank you. I yield back.
        Chairman Barr. The gentleman yields.
        The gentleman from Michigan, Mr. Huizenga, the sponsor of
    the Consumer Financial Protection Commission Act, is recognized
    for 5 minutes.
        Mr. Huizenga. Thank you, Mr. Chairman. Mr. Chairman, I see
    Mr. Chopra has surrounded himself with like-minded activists,
    and I quite honestly never thought I would pine for the days of
    Richard Cordray to have some reasonableness injected into the
    CFPB.
        But the CFPB's unique structure prevents Congress from
    conducting meaningful oversight. I know this, because last
    session, I was Chairman of the Oversight and Investigations
    Subcommittee, and I know too well the roadblocks and speed
    bumps and, frankly, brick walls we ran into with the CFPB. A
    single director who has no accountability, no boundaries,
    limitless funding, and will go and push the accepted and legal
    bounds of their organization is a recipe for disaster. I think
    that is why we have seen this one agency be challenged so much
    over its own existence and its actions.
        Unlike other agencies such as the FDIC, the Federal Reserve
    System (Fed), the alphabet soup of all the regulators who
    paused their rulemaking after President Trump was elected,
    Director Chopra made the very conscious decision to continue to
    push forward on rules that he knew would be unlawful and
    overturned. You saw it with the overdraft. You saw it with
    medical debt. He was the one regulator that decided to not put
    his pen down and allow someone else to make some of those
    decisions.
        Mr. Pommerehn, in your written testimony, you called the
    Bureau a, ``political lightning rod'' that can have, ``radical
    pendulum shifts depending on who occupies the White House.'' My
    observation would be it seems most of the time when it is the
    Republicans--that they come in and say, hold on, we have gone
    too far, too fast, let us just stop in place, while the
    Democrats just continue to blow through these legal bounds.
        Anyway, the idea of converting them into a commission
    structure is not a new concept. I have been here for now--this
    is my year 15, and I think for 15 years, this has been a
    discussion because there is a recognition of the dangers of
    this structure. What advantages do you see with changing that
    structure?
        Mr. Pommerehn. We are at a critical point in time, right?
    There is an inflection point here where we can make the Bureau
    more credible, more durable going forward. We believe that a
    five-person commission and a bipartisan commission would allow
    for the aforementioned dissent and debate that is required to
    actually form the policy and take some of the political
    ideology----
        Mr. Huizenga. Which is the structure that virtually every
    other regulator--Securities Exchange Commission (SEC), others--
    they all have internal checks and balances, not CFPB.
        Mr. Pommerehn. CFPB does not.
        Mr. Huizenga. Is it important to have industry experience
    when you are leading?
        Mr. Pommerehn. We believe so. I mean, it is good to have
    the background of industry and how products and services
    actually work. Oftentimes, they are misunderstood.
        Mr. Huizenga. Okay. This is a structure that Mr. Barr and I
    have talked about.
        Do you believe that the CFPB can and will actually still
    protect consumers with this new structure?
        Mr. Pommerehn. I believe so. The CFPB has a statutory-
    required duty that it has to carry out. I do not think having a
    commission structure is going to----
        Mr. Huizenga. So, wait a minute. Just because we changed
    President does not mean we have automatically thrown out
    consumer protection. That is what we hear from the other side.
        Mr. Pommerehn. That is correct.
        Mr. Huizenga. Okay. I just wanted to clarify that. That
    does not seem to be the narrative.
        Okay. Basically, essentially, enforcement has become
    arbitrary. The current Bureau sends a signal to industry that
    the Bureau will let you know when you have violated the law or
    harmed consumers because they have given themselves that broad
    authority. Not that Congress has, not that anybody else has,
    but they have now suddenly--through enforcement letters and
    other things, they are bending the will of the law to what they
    view as what is proper. By the way, CFPB cannot actually give a
    clear and consistent, definitive definition to the term
    ``abusive'' regarding unfair, deceptive, or abusive acts or
    practices.
        Is there anything that is considered abusive that is not
    considered unfair or deceptive?
        Mr. Pommerehn. That is unclear at this point.
        Mr. Huizenga. It seems like a layman would actually be able
    to discern that, but we are talking about legalese, right?
        Mr. Pommerehn. Without the guidance from the former
    administration under Director Kraninger, we do not have a
    definitive definition of abusive.
        Mr. Huizenga. Yes. All right and I have a few seconds.
        Ms. Fonseca, I am sorry. I am running out of time.
        Community and financial institutions are often caught in
    the cross hairs, and we know about the cost of compliance. If
    the CFPB has its way--and I would like to take your answer in
    writing, if I could--but if the CFPB has its way, what would
    the cost of eliminating and reducing overdraft products have on
    consumers that you serve? I look forward to having that answer
    in writing. Thank you.
        Ms. Fonseca. Okay. Thank you.
        Chairman Barr. The gentleman's time has expired.
        The gentleman from Georgia, Mr. Scott, is now recognized.
        Mr. Scott. Mr. Frotman, how are you?
        Mr. Frotman. Great. Thank you, sir.
        Mr. Scott. Please excuse my cold.
        I think it would be very helpful if you explained this
    phrase that is being used in these exchanges. They say, ``with
    prejudice.'' Explain to us what that means in terms of the
    relationship to the CFPB making any charges.
        Mr. Frotman. Great. Thank you. If I could just have 1
    minute, I would just like to respond to some of the questions
    before that referenced our agenda.
        We are talking a lot about boards and funding. I think that
    people need to look around. They are firing FTC commissioners.
    One of the FTC commissioners who was fired is in the room down
    the hall. They are impounding funds. To be lectured about
    separation of powers at this moment of time is something else.
        We are so through the looking-glass that I think people
    need to go back to the drawing board in terms of what we are
    talking about and update the talking points that are now a
    decade old because, if we want to talk about executive
    overreach, if we want to talk about separation of powers, we
    should be talking about how this committee and this Congress
    created an office to look after military families that was shut
    down. We should be talking about how this committee, and this
    Congress, created an office to look after people with student
    loans that were shut down.
        These are the issues that are actually happening around us,
    but we keep going back to these same old tired talking points
    and bills, and it is just ever clear what they were always
    about. They were always about hamstringing the Bureau, making
    it easier for big banks to rip people off and making it easier
    for Silicon Valley to steal people's data when they make a
    transaction. We should just be honest. If you care about
    separation of powers, if you care about executive overreach, we
    could talk about that because that is what is happening right
    now at 1700 G Street.
        Congressman Scott, I think to your question--if I
    understand it correctly--what we have seen now is the current
    leadership of the CFPB has dropped nearly a dozen cases where
    the Bureau brought forward credible evidence that companies
    were ripping off their own customers to the tune of billions
    and billions of dollars. In each of those instances, the
    current leadership chose to dismiss, with prejudice, those
    cases, meaning that the Bureau could never again try to get
    money back on behalf of those people, whether they were ripped
    off because a company lied to them when they were trying to buy
    manufactured housing, when they were just trying to take out a
    loan to make it through the week.
        Student loan borrowers who were ripped off by an enormous
    student loan company who was collecting on discharged debt,
    that is this administration's priority now. Dropping those
    cases and making sure the Bureau can never again help those
    borrowers, your constituents.
        Mr. Scott. Yes. I think that is very important for people
    to understand that the CFPB--once they use that ``with
    prejudice,'' it means that case goes bye-bye. How damaging is
    that?
        Mr. Frotman. It is tremendously damaging. I mean, it is
    damaging for the Bureau, but it is damaging for the people on
    the ground.
        I think one of the things that we heard on the campaign
    that we heard from the administration is they want to help
    people with costs. You know what would help people pay for
    groceries and pay for eggs? If they had a little more interest
    in their savings account at Capital One. But that company chose
    to deceive their own customers into not getting billions of
    dollars of interest. That would have helped real people, and
    that case was dismissed with prejudice.
        Mr. Scott. Had it been dismissed without the CFPB first
    trying to provide help to them?
        Mr. Frotman. No. I think this is one of the most
    frustrating things to see, which is each of these cases
    involved thousands of hours of people's time. These are cases
    before a Federal judge, and all of that work--all of the work
    to try to make working people's lives a little better basically
    lit on fire, for what?
        Mr. Scott. I hope, Chairman, that we can find a way to
    really address the impact that this is having on the lower
    income and the people who need the help the most.
        Chairman Barr. The gentleman's time has expired.
        The gentleman from Texas, the Chairman of the Small
    Business Committee, Mr. Williams, is now recognized.
        Mr. Williams of Texas. Thank you, Mr. Chairman. Thank you
    all for being here.
        I must say, listening to all of this, that under a Trump
    Administration, my business, my family, my friends, and my bank
    are much better off today with a diluted CFPB. The CFPB's 1071
    small business lending rule requires financial institutions to
    report 81 unnecessary data points on the loan. For smaller
    institutions, this rule creates a mountain of compliance,
    burdens, and will harm the relationship with consumers, which
    many are community banks and credit unions, and who they rely
    on. This also leads to a reduction in the amount of small
    business loans, and the cost of a loan will skyrocket and
    decrease excess to capital.
        Now, my bill, the 1071 Repeal Protect Small Business
    Lending Act, will repeal this burdensome rule and give relief
    to the financial institutions who serve small businesses every
    single day.
        Ms. Fonseca, how will complying with these burdensome 1071
    data requirements impact your ability to provide affordable
    access to credit for your small business members, and could you
    expand on the benefits of repealing this burdensome regulation?
        Ms. Fonseca. Yes. Complying with this burdensome
    requirement is going to limit our ability to lend to small
    businesses.
        Mr. Williams of Texas. Regulations keep you from loaning,
    basically?
        Ms. Fonseca. Absolutely.
        Mr. Williams of Texas. Okay. When I talk to friends of mine
    that are bankers, accountants back home in Texas, one of the
    biggest concerns with CFPB is regulatory agenda and the
    compliance burdens that accompany that agenda under former
    President Biden and former Director Chopra. The CFPB was left
    unaccountable and regulated through blog posts, speeches, and
    other illegitimate means. This left the financial service
    industry in a constant state of worry, never knowing what
    regulations or enforcement was coming next and how it would
    affect them and their customers.
        We must prevent this approach to regulation, the
    uncertainty it brings to smaller entities and other
    institutions and hold the CFPB accountable to Congress. That is
    a new word to them, by the way.
        Mr. Schneider, can you explain to the compliance--can you
    explain the compliance difficulties that financial institutions
    face when dealing with the CFPB, those always expanding and
    often opaque regulatory regime?
        Mr. Schneider. During the past--preceding 4 years, it was
    certainly an exciting time to pick up the trade press in the
    morning because there was going to be a new blog or a post or
    something that your clients would be calling you about because
    it seemed to speak with the force of law that there is some new
    requirement that you have to deal with.
        There was absolutely no formal process that surrounded
    that. Not only are you questioning the legitimacy of the rule
    itself because of the manner in which it was announced, but you
    have no real way to understand what is required. You are
    searching in the dark, you are spending a lot of money seeking
    advice from counsel, but I guess that is great for lawyers, but
    I am not sure it is good for institutions that could be
    devoting those resources to lowering the cost of credit and
    providing more innovative products.
        Mr. Williams of Texas. Mr. Pommerehn, in your testimony,
    you mention that CFPB had misrepresented data to justify their
    policy decisions. I agree with you when you say facts matter
    and regulators must represent facts accurately.
        It is deeply troublesome the CFPB misrepresented data to
    support their highly politicized actions, and industry
    participants should be able to trust that regulators are not
    falsifying information to achieve a political victory. This
    kind of behavior could have detrimental effects on our
    financial system.
        Mr. Pommerehn, could you elaborate on the most serious
    examples of the CFPB misrepresenting data and explain the harm
    caused by these practices?
        Mr. Pommerehn. Sure. Take the credit card late fee rule.
    This is a rule that would exponentially lower the late fee from
    $32 down to $8. The Bureau's justification for this was that
    there was a lack of competition in the marketplace and that the
    four largest issuers actually kind of dominated that market,
    when actually their data shows that those four issuers actually
    lost 4 percent of the market the previous year.
        It is important for them to be intellectually honest with
    the data when they are presenting it to the public. Otherwise,
    we are being led down roads based on intellectual dishonesty
    that will possibly affect the access to credit, especially for
    some prime borrowers, if we are not actually looking at the
    data correctly.
        Mr. Williams of Texas. Thank you. I just would close by
    saying the Trump Administration, I said earlier, is right on
    the right path with the CFPB. As a business owner myself for
    over 50 years, car business in Texas, an economy with a lesser
    CFPB is much better than one that is under steroids like we
    have seen in the past.
        Thank all of you for being here. I yield my time back.
        Chairman Barr. The gentleman yields.
        The gentleman from California, Mr. Sherman, is recognized.
        Mr. Sherman. Ms. Fonseca, I want to thank you and the other
    Southern California credit unions for helping us after the
    Palisades fire. I represent the Pacific Palisades.
        Mr. Chair, I could not agree with you more that we need
    oversight. A hearing like this, we do not have any government
    witnesses. In fact, this committee and its subcommittees have
    not had a government witness except from the Fed, but none that
    are part of the administration. You cannot have meaningful
    oversight by Congress if you do not have government witnesses,
    and I look forward to us bringing Russell Vought and others
    before this committee.
        Mr. Huizenga tells us that Chopra should not have taken
    action that might be overturned by the court. Boy, I wish we
    had a current administration that not only adhered to court
    rulings but even was reluctant to take action that they thought
    might face a credible attack in the court.
        I have been here for a long time and today is a throwback
    to the committee that I have understood for so long. We are
    talking about the structure of the CFPB and the regulation
    process, and we have businesses telling us that there are high
    compliance costs, and the Republicans are making some good--
    some good points about the CID system. We are being told by--
    that regulations are too tough, and Democrats are--God, this
    feels like nine--90 days ago.
        Today is different. Today is not a hearing about whether
    the CFPB has a good or bad regulation. Today is a day when Elon
    Musk says CFPB RIP, and we have thousands of people sitting at
    home subscribing to Netflix and being paid by the U.S.
    Government. The question that is really before us is, how do
    the generals react--how would the generals react when they are
    instructed by the President to arrest all the leaders of
    Democratic Party?
        We are acting like this is normal times. It makes me feel
    better to spend these--this last hour in a normal committee
    hearing where Democrats and Republicans are saying the normal
    things they always say but that is not the real situation here.
    It is not a matter of do we get rid of this or that regulation.
        The CFPB has returned $21 billion to Americans since 2011
    when it was founded, collected $5 billion in penalties. We have
    to not defund the police if we are going to deal with crime in
    the suites. Not only do we have the enforcement actions with
    the dollar amounts I indicated, but think of all the crimes and
    all the abuses that are not occurring that never even get past
    the thinking stage because we have had a CFPB.
        Of course, the CFPB has protected veterans and secured $363
    million in monetary relief for them. The structure of the CFPB
    was approved in a decision by Justice Clarence Thomas, not a
    member of my political party.
        We also have a major conflict of interest in that we see
    that Elon Musk is moving to make the X platform a payment
    system.
        Mr. Frotman, could that payment system be more profitable
    if there was no CFPB?
        Mr. Frotman. Thank you for the question, Congressman.
        I think that this is one of the central issues, I think,
    before the committee if we are going to talk about oversight,
    if we are going to talk about separation of powers, is there is
    no secret that Elon Musk wants to turn Twitter into a payment
    system.
        I found this tweet on the platform from him speaking in
    2003 that says, ``Elon Musk says if done right, X would become
    half of the global financial system.'' That should be
    petrifying to----
        Mr. Sherman. Now, this payment system, we have bank
    regulators that regulate most of the folks represented here and
    credit union regulators. Musk would not have any of that
    regulation and he would not have any CFPB regulation.
        Correct me if I am wrong. I mean, the--they sent up the
    most recent email saying, oh, we did not tell you not to do any
    work, we just told you to do no work except the statutorily
    required work.
        Is anybody at the CFPB doing any consumer protection today?
        Mr. Frotman. They are certainly not overseeing the nonbank
    payment system in this country, which is the direct ambitions
    of Elon Musk and most of Silicon Valley.
        Mr. Sherman. Thank you.
        Chairman Barr. The gentleman's time has expired.
        Before we move on to the next question, I ask unanimous
    consent to insert into the record a bill I have sponsored in
    the past, the Financial Protection for Our Military Families
    Act. The bill helps correct the record from the testimony of
    Mr. Frotman, former CFPB Director Kraninger alerted us that she
    did not have the statutory authority to supervise Military
    Lending Act violations and asked that Congress grant the Bureau
    this authority. My bill would have done that, but we were
    never, never able to get Democratic support to move it.

        [The information referred to can be found in the appendix.]

        Chairman Barr. The gentleman now from Tennessee, Mr. Rose,
    is recognized for 5 minutes.
        Mr. Rose. Thank you, Chairman Barr and Ranking Member
    Foster, for holding this hearing. Thank you to our witnesses
    for taking time to be with us. I will dive right in.
        Mr. Kuehn, can you talk about why many financial
    institutions would prefer to settle with the CFPB versus having
    their name dragged through the mud by an activist CFPB in
    litigation? I am sorry, Ms. Kuehn.
        Ms. Kuehn. Thank you for that question.
        A lot of companies are pressured to settle because CFPB has
    enormous penalty authority. It has a lot of tools in its
    ability to issue expansive demands on companies. Rather than
    drag this out, they seek the certainty of a settlement rather
    than the uncertainty of lengthy litigation.
        Mr. Rose. Thank you. From your experience of watching this,
    do those settlements--would you say that the decision to settle
    has anything to do with the settling party's belief that they
    have done--that they have acted inappropriately?
        Ms. Kuehn. If you look at the language of settlements, the
    companies do not admit that they have done anything wrong. A
    lot of times there is uncertainty, particularly where new or
    innovative--I will put a nice word on it--theories are brought
    by the CFPB. Rather than risk uncertainty in going to
    litigation and fighting over it, they will resolve it even if
    they do not agree with it. That includes whether or not they
    think the CFPB has authority to bring the enforcement action.
        There have been several enforcement cases settled with
    companies who do not appear to be under the CFPB's
    jurisdiction, but they would rather settle than have to deal
    with that uncertainty which impacts their businesses.
        Mr. Rose. Thank you for that further insight. That is my
    experience and observation as well.
        Mr. Pommerehn, can you discuss how government price
    controls like those that the CFPB instituted on credit card
    late fees and overdraft service limits--services limit--limit
    the ability of financial institutions to offer products and
    services to consumers?
        Mr. Pommerehn. Yes. Thank you for the question.
        Placing artificially low fee caps on services will
    ultimately result in those services not being available or that
    credit not being available to consumers. Who is going to hit
    the hardest? That is probably going to hit the subprime
    borrowers the hardest because they are harder to underwrite and
    there is more risk involved.
        When you place these--and overdrafts, a whole another
    thing, because of this issue around whether or not it is
    actually credit or not and whether or not the alternatives
    given in the overdraft rule are actually real alternatives.
    Most banks will have to get rid of those products, and the
    customers that utilize them and depend on them will no longer
    have access to short-term liquidity.
        Mr. Rose. From my experience--and you might just give me
    whether you agree with this or not. From my experience, the
    alternatives that consumers face are far less desirable than
    perhaps a modestly higher fee. Is that a fair assessment of
    what the alternatives are then?
        Mr. Pommerehn. I think that is a fair assessment, and we
    believe that consumers ultimately fare better in the depository
    system.
        Mr. Rose. I appreciate that.
        Ms. Kuehn, what is the purpose of the Administrative
    Procedures Act, and how does adhering to its requirements
    benefit consumers?
        Ms. Kuehn. The purpose of the Administrative Procedures Act
    is to allow a regulator a full opportunity to develop a record
    in support of whatever it wants to do. Basically, you take in
    evidence, you take in comments, you look at cost-benefit
    analysis in connection with a regulation that you are looking
    to promulgate.
        The Administrative Procedures Act allows for sunshine on
    the process, full notice and comment, so that all participants
    and folks who can be affected by a particular regulation will
    have an opportunity to provide information to the agency to
    consider in development of its rule.
        Mr. Rose. Thank you.
        Unfortunately, many banks have withdrawn from small-dollar
    consumer lending due to the significant uncertainty regarding
    regulatory treatment of these products.
        Mr. Schneider, during your tenure at the CFPB, you oversaw
    small-dollar lending. Can you discuss the importance of the
    CFPB issuing clear, well-justified rules with robust cost-
    benefit analysis for the small-dollar lending industry? You
    have 20 seconds.
        Mr. Schneider. Small dollar--many companies that provide
    small-dollar products are smaller companies. The compliance
    costs are going to hit them even harder, quite frankly, on a
    proportionate basis. If they do not know what they are supposed
    to do, if they do not know how they are to do it, they have no
    choice but to raise costs on everybody or withdraw from the
    market.
        Mr. Rose. Thank you. My time has expired. I appreciate
    those answers, and I yield back.
        Chairman Barr. The gentleman yields back.
        The gentleman from Illinois, Mr. Casten, is recognized.
        Mr. Casten. Thank you.
        Quick question first. Ms. Fonseca, Mr. Pommerehn, would you
    both agree that nonbanks that engage in bank-like activities
    should abide by the same consumer protection rules that are
    required of banks? Just yes or no.
        Mr. Pommerehn. Yes.
        Ms. Fonseca. Yes.
        Mr. Casten. Okay. I thought you would say that.
        I raise that because I want to respond to something that
    Mr. Barr said in his opening testimony. He said that we have
    entered a new era where businesses are not attacked by tweets.
    Of course, they are not because the owner of Twitter put a
    couple hundred million dollars into President's election
    campaign and, in exchange, got himself a job in the White House
    where he is hoping to earn a return on that investment.
        If the President were to attack Twitter or if the
    President's sycophantic enablers in the Republican Party were
    to attack him on Twitter, I mean, I do not know, that would
    require a level of patriotism, courage, and public-mindedness
    that they have never shown. Of course, they are not--does not
    make it right. Of course, they are not attacking by tweet.
        Let us talk instead about how Elon Musk plans to get a
    return on his $200 million because if we give a damn about
    consumer protection, if we give a damn about competition and
    functioning markets, we should be petrified by what Musk is
    doing.
        Mr. Frotman, you mentioned briefly with Mr. Sherman that
    Elon Musk is talking about this new payment system, X Money,
    that is expected to launch later this year. I believe you had
    referred to his quote when he said he hopes--I am going to
    misquote it. He said he hopes to have users conduct their
    entire financial world on X.
        The former Certified Financial Planner (CFP) Chief
    Technologist said that he has been given ``God-tier access'' to
    the CFPB system. I guess my first question for you, Mr.
    Frotman, is have you ever seen a CEO of a bank, a nonbank, or
    anybody being given God-tier access to the CFP data system
    before?
        Mr. Frotman. Absolutely not.
        Mr. Casten. Can you describe exactly what that means and
    what data Musk is now getting that nobody else in the private
    sector has access to?
        Mr. Frotman. Sure. This is tremendously concerning, I
    think, for consumers and competition is that here is a person
    who has billions of dollars on the line when it comes to the
    dream of turning Twitter not only into a payments company but
    into a super app, like we see happening in China and other
    places. You have the person who stands to benefit from this
    seemingly in charge and making decisions over what is basically
    their only Federal regulator.
        I think there are significant questions, if we want to talk
    about oversight by this committee, if we want to talk about
    investigations by the Inspector General about what happened
    when DOGE employees were in the CFPB on February 7th, and then
    that same day Elon Musk is tweeting ``CFPB RIP.''
        Mr. Casten. Can you just clarify, though, because he is
    getting information that Zelle, Venmo, Cash App, they do not
    have that information about specific consumers, right?
        Mr. Frotman. I think he is not only getting information
    about consumers; he is getting information about his
    competitors.
        Part of the job of the CFPB, as tasked by Congress, is to
    make sure we understand markets and where there is risk. There
    is a ton of risk when it comes to nonbank payments.
        Mr. Casten. I want to say something very partisan. I think
    the richest man in the world is rich enough, but apparently
    that is not a widely held opinion.
        Justice Brandeis famously back in the 1930s said that when
    you have great concentrations of wealth in society, you only
    have three options. You can either allow wealth to take over
    the government, which is to embrace fascism; you can allow the
    government to take over the wealth, which is to embrace
    communism; or you can break up the wealth and embrace
    competition.
        What is clear and the fact that it is so partisan to attack
    the fact that the richest man in the world is now taking over
    our system is that it is partisan to attack fascism. To say
    anything else in this committee at this hearing at this moment
    is naive.
        Now, we are shortly going to move to marking up stablecoin
    legislation. It is my understanding that Mr. Musk is saying he
    would also like to use a stablecoin rule in order--some
    stablecoin legislation in order to facilitate what he is doing
    in the CFPB, which would--unless we put really strict
    guardrails, is going to make it even harder.
        So I guess, with the last 40 seconds, Mr. Frotman, let us
    assume that he has all that data. Let us assume that he has a
    very permissive stablecoin environment. It sounds to me like we
    have a nonbank that is going to compete the hell out of all of
    the banks and all the systems that we have right now in a way
    that is deeply anti-competitive. Please tell me if I am wrong.
        Mr. Frotman. You are a hundred percent correct.
        Mr. Casten. Are we going to defend capitalism around here?
    We are going to defend competition or are we going to put in a
    ball gag, climb down to the dungeon and just do whatever Trump
    tells us to do?
        I yield back.
        Chairman Barr. The gentleman yields back.
        The gentleman from South Carolina, Mr. Norman, the sponsor
    of the Congressional Review Act (CRA) disapproving the Bureau's
    prohibition on creditors and consumer reporting agencies
    concerning medical information, is recognized for 5 minutes.
        Mr. Norman. Thank you, Mr. Chairman. I think it is--and
    thank all of you for taking the time to come.
        I am a businessman. I am a real estate developer.
        Mr. Frotman, your comments are outrageous, to be honest
    with you. You are talking to Democrat points. I am glad you are
    bringing up Elon Musk. The American people owe a debt of
    gratitude to a man that is showing where tax money is going.
    They do not agree with it. Seventy-seven million people do not
    agree with the former President, and in your--you resigned
    twice under Trump. You resigned most recently in February 2025.
    I kind of wish you had stayed because you would be the first
    one to get fired. Let me just say this. The fact that----
        Mr. Frotman. Congressman, could I reply?
        Mr. Norman. The fact that you--on the student loan, you
    formed the Student Borrower Protection Center. You took part in
    the Biden Administration's forgiveness of loans. The people
    that you talk about, the veterans and the poor families, their
    tax dollars meant to pay student loans, they are forced to
    pay----
        Mr. Frotman. Congressman, I think what----
        Mr. Norman. I am reclaiming my time. I am reclaiming my
    time.
        Mr. Frotman [continuing]. is appalling is this is a man in
    America telling dedicated public servants who want to protect
    servicemembers and students----
        Mr. Norman. Do you not have any decency? Do you not have
    any--this is not your platform. I have 3 minutes left. I am
    going to ask some sane people over here. The fact that you took
    money, took part in paying off loans that the taxpayers had no
    say-so in is unbelievable.
        Ms. Kuehn, one of Dr. Chopra's midnight rulemaking moves
    before he left, was to remove medical debt information from the
    consumer report and prohibits lenders from examining the credit
    history of a borrower. We have a bill that we are trying to get
    out of committee, but do you think the CFPB even has the
    authority under the Fair Credit Reporting Act to require the
    removal of a debt that they owe? The payment of it I think is
    an important part of a credit report. Why is it being removed,
    and does the CFPB have that right to do it?
        Ms. Kuehn. I do not believe they have that right. The Fair
    Credit Reporting Act actually addresses medical debt--and it
    protects consumers' privacy with respect to their medical
    information. It allows financial institutions to use the
    financial aspect--does a consumer have significant medical
    debt, and consider that in connection with making a loan or a
    larger mortgage transaction, for example.
        The rule ignores the restrictions and requirements of the
    Fair Credit Reporting Act. It ignores data that had been
    supplied. It relies on 10-year-old studies that really have no
    bearing on what today's market looks like.
        From the time those studies were conducted by the CFPB to
    the issuance of the rule, the market had changed. It had
    already made significant changes, and so it is based on faulty
    premises. It has a terribly weak record associated with it, and
    even the Small Business Administration filed comments raising
    concerns about the process that led to the rule.
        I agree that I do not believe they have the authority, and
    even under the administration--Administrative Procedures Act,
    they do not have the record that supports the steps that they
    took.
        Mr. Norman. That is the audacity of Mr. Chopra and his
    disdain for the American people.
        If you go--exclude medical debt, what about paying your
    credit card off? What about paying your loan on your house off?
    Why not exclude that? Why not just exclude everything so you
    really--and student loan repayments, what is left, that was so
    much advocated by Mr. Frotman to give away from--or to force
    the American people to pay for, what about excluding that?
        Ms. Kuehn. That is one of the concerns about the approach
    that the CFPB took in the medical debt rule. What is the next
    thing that is not popular is that they want to take out of the
    financial system to hide or mask information?
        The legal theory that they use to support the actions they
    took and the rules which support them basically anything they
    are not happy with, small dollar or student loans or things
    like that, it is my view that is the role of Congress to make
    those decisions.
        The Fair Credit Reporting Act has a whole section where
    Congress has decided what is fair to include and what is not,
    and they ignore that entirely in the rule.
        Mr. Norman. Okay. Thank you so much.
        Chairman Barr. The gentleman's time has expired.
        The gentleman from Pennsylvania, Mr. Meuser, the author of
    the CFPB IG Reform Act, is now recognized.
        Mr. Meuser. Thank you, Mr. Chairman. Thank you to our
    witnesses.
        Mr. Chairman, we are maybe pleased Mr. Frotman is here. His
    testimony outlines precisely why the CFPB needs to be
    completely overhauled. Mr. Chairman, I mean, the level of
    arrogance that we saw when the CFPB was in existence, the
    seemingly superiority complex, the dogmatic ideology, the
    narrow-mindedness, the unwillingness to listen to even the
    testimony that is here, the unchecked power, Mr. Chairman, is
    dangerous to our government. Clearly, absolute power corrupts
    absolutely.
        Listening to what has been cited by the other witnesses,
    they fail to follow the law, that is a pretty serious comment
    from an objective stakeholder. Dying a death of a thousand
    cuts, meaningless to the previous CFPB and to one of the
    witnesses up here. Weaponizing the Bureau to use $700 million
    to carry out its unauthorized mission, while being asked simply
    for credible and durable Consumer Protection Bureau is what is
    being asked, Mr. Chairman.
        I have never heard anything from stakeholders that was
    positive about the CFPB under Mr. Chopra and apparently under
    this Mr. Frotman, except from Democrats who on this committee
    are protecting bureaucratic power while they could control it.
        To get to questions. Ms. Fonseca, the--many institutions
    cap their growth quite deliberately to avoid crossing the $10
    billion triggering the CFPB activities. However--and I know
    this from--speaking of those in the field and throughout the
    industry--10 billion--under 10 billion still feel the pressure
    to build out compliance teams just in case.
        Can you give us an example of what sort of fear existed and
    forced you to slow down or scale back services to your members?
        Ms. Fonseca. Yes. We have not scaled back services.
    However, we have spent the last four, now going on the fifth
    year of preparing for CFPB oversight.
        As I mentioned in my testimony, that is going to cost us
    about $4 million a year. We have spent at least half a million
    dollars so far, and that is in addition to the $10 million-plus
    that we are going to incur in lost interchange revenue from
    debit cards.
        Mr. Meuser. Thank you.
        Ms. Kuehn, over the last 4 years, CFPB stretched its
    authority, ignored the law, as been pointed out. Can you
    provide some examples where the CFPB was intrusive, not
    helpful, even damaging?
        Ms. Kuehn. The CFPB has taken upon itself in the last
    several years to look at companies that are on the edge and
    often outside of their authority. Using their CID authority,
    they have the ability to look at a company to see if they are
    covered. They have not thought about that first.
        So they have issued expansive demands on companies in areas
    that have nothing to do with consumer financial services, and
    they require those companies to expend a lot of money just to
    prove a negative to say, hey, no, we are not covered by you, we
    have not violated the law, there is nothing here.
        Mr. Meuser. What did that look like in terms of business
    loss, operations disrupted, reputations damaged?
        Ms. Kuehn. For many of these companies, they have a
    relatively small compliance group. These are small-to mid-sized
    businesses that requires everyone to put work on hold to comply
    with these demands. It required a lot of expenses from
    electronic discovery demands.
        There is a several-page list of specifications that the
    CFPB will send and say, we want your data, but you have to
    synthesize it and make it fit in exactly the way we want to
    look at it. That is very expensive for small-to mid-sized
    businesses.
        Mr. Meuser. Many irrational disclosure requirements, sure.
        Do you all agree that CFPB should become more focused or
    maybe even solely focused on addressing consumer fraud?
        I will start with you, Mr. Schneider.
        Mr. Schneider. It is certainly an important part of their
    mission and would be resources well spent.
        Mr. Meuser. To the other witnesses?
        Mr. Pommerehn. I would agree that they are an important
    part of the equation. There are many parts of the government
    that should be claimed in that space as well.
        Ms. Fonseca. I agree as well. Fraud has grown
    significantly, and many consumers are being impacted by fraud.
        Mr. Meuser. Okay, great. What do you all think as well
    about the CFPB being structured with a bipartisan commission,
    like the FTC, with a three-member bipartisan board?
        Mr. Schneider. It would certainly facilitate discussion.
    Staff would have to appeal to a broader set of interests as
    they make presentations.
        Mr. Pommerehn. I would agree. I would say a five-person
    bipartisan board would work best here. For the reasons
    mentioned, we certainly have to have debate and dissent. It is
    important in the policy.
        Mr. Meuser. Thank you. My time has expired. I yield back.
        Chairman Barr. The gentleman yields back.
        The gentleman from Wisconsin, Mr. Fitzgerald, is now
    recognized, and he is the author of the Making the CFPB
    Accountable to Small Business Act.
        Mr. Fitzgerald. Thank you, Chairman Barr. Thank you for
    holding this hearing. Thank the witnesses for being here today.
        Seems to be a little bit of revisionist history going on
    here this morning, kind of in line with everything else I have
    seen in my other committee, Judiciary.
        For years, I mean, the CFPB has operated kind of with
    significant regulatory power, and Director Chopra sat before us
    many times with that grin on his face because I think that
    certainly he enjoyed the havoc that he was creating and raising
    throughout the private sector. He thought that was part of his
    mission, I am convinced of it.
        While consumer protection is critical, the regulations are
    overly burdensome and are poorly analyzed. They can reduce
    access to financial products and that has been the issue since
    the CFPB came into play on these issues.
        The bill that the chairman is referring to, I think the
    CFPB being accountable to Small Business Act, it kind of
    addresses some of the concerns that we have been discussing
    here this morning. I think strengthening the agency's
    obligation to do the cost-benefit analysis--I mean, that is
    fine if you are going to come up with ideas, how you are going
    to have a direct effect on financial institutions, but if you
    do not have any cost-benefit analysis, it flies in the face of
    financial services, right. I mean, that is--we kind of live and
    die by the idea that the numbers tell the truth.
        Mr. Pommerehn, can you discuss how kind of failing to
    tailor the regulations for a small business institution has a
    direct effect on their ability to serve small business and
    consumers? This has been the problem for us, is that you cannot
    come in here and listen to Director Chopra tear apart the banks
    and the credit unions of this Nation and then on Tuesday bring
    in the same committee and have a discussion about, well, it
    just does not seem like the banks or the credit unions are
    really helping the average consumer at this point.
        So, there was this discussion that continued over the last
    2 years that really made no sense, but there were never any
    numbers to back it up. I was wondering if you could comment on
    that.
        Mr. Pommerehn. We are certainly in favor of a more robust
    cost-benefit analysis when the Bureau is considering policy
    considerations that are going to affect either the consumer or
    small businesses. Oftentimes, the Bureau will ignore its own
    data that shows that there will be detrimental effects to
    actual small businesses or consumers but proceeds with those
    rulemakings because of ideological guidance.
        We believe that the cost-benefit analysis needs to be paid
    attention to. We need to understand how it is going to affect
    the economy, how it is going to affect consumers, and not just
    throw out pejorative terms to prove a point.
        Mr. Fitzgerald. Thank you.
        Under former Director Chopra, the CFPB saw a significant
    shift in its approach to consumer protection, right. I mean, it
    was characterized by overextension of its power. I think the
    Director was proud of the idea that he could continue to kind
    of stir the pot on many of these different fronts.
        Ms. Kuehn, how would greater statutory clarity and limits
    on the Bureau's authority to improve regulatory certainty just
    bring more of a competitive and consumer-friendly marketplace?
        Ms. Kuehn. When companies know what the rules are, then
    they are better able to compete. If it is more of a gotcha
    game--right--where you have already innovated and created new
    products and then to find out that someone in Washington has
    decided they do not like that. That is unfair to companies, and
    it really does stifle innovation and the creation of new
    products and services to serve consumers.
        Mr. Fitzgerald. I do not want to put you on the spot, but
    is there something--is there an example of that really comes to
    mind where everyone, whether you were in a banking or credit
    union environment, knew that it was absolutely an overextension
    of the CFPB's authority?
        Ms. Kuehn. I think the most recent example is a rule that
    is still out for comment, which is the revisions to the Fair
    Credit Reporting Act rule. There are a lot of proposed new
    interpretations that are well outside the statute.
        Companies have built their businesses with an understanding
    of the law and if what the CFPB has proposed were to go forward
    as a rule, it would require a complete overhaul of the consumer
    data industry of financial services uses of consumer reports.
    That is a significant change and will result in a significant
    cost. It also will drive many companies out of business,
    because in the proposed rule, the CFPB says we want to now
    declare these companies who have not been viewed as a consumer
    reporting agency to be ones, and then they will have to comply.
        Mr. Fitzgerald. Thank you, Chairman. I yield back.
        Mrs. Kim [presiding]. Time is up. Thank you.
        I now recognize myself for 5 minutes of questioning. I know
    we have--subcommittee Chairman Andy Barr just left, but I want
    to thank him for holding this hearing and I want to thank all
    the witnesses for joining us today. This is an important
    hearing as we discuss the future of the Consumer Financial
    Protection Bureau.
        The CFPB was created to, as the namesake says, to look out
    for the American consumers, and at times it has lived up to
    that mantle. However, in most cases it has become a political
    tool with little to no oversight. That is why the Senate must
    confirm Director McKernan so that the important process of
    refocusing the agency back on consumer protection can finally
    begin.
        Ms. Fonseca, I want to ask you a question. Thank you for
    making the trip all the way from Southern California, where I
    am from, to testify before us today about how the CFPB has hurt
    your ability to better serve your--or in our communities.
        As an institution that is approaching the $10 billion
    threshold for greater CFPB scrutiny, have you examined the
    impact and costs that will be crossing this arbitrary
    threshold?
        Ms. Fonseca. Yes. Thank you very much for that question,
    Congresswoman, and nice to see you again.
        Mrs. Kim. Nice to see you.
        Ms. Fonseca. Yes. As I mentioned in my testimony, we have
    spent the last 4 years, going on our fifth year, preparing for
    regulatory oversight by the CFPB and that we have already spent
    over half a million dollars, and we will be spending about $4
    million a year forward. That includes the addition of at least
    30 staff members to oversee compliance related to CFPB
    regulation.
        Mrs. Kim. Would you say your focus on how you serve your
    members be any different as a $10.1 billion institution or if
    you are a $9.9 billion institution?
        Ms. Fonseca. Yes. It does not even make sense that it would
    have to change at all but having to focus on CFPB oversight
    takes that focus away from our ability to serve our members,
    and that is why we are here. Credit unions are here to serve
    our members.
        Mrs. Kim. Thank you.
        Ms. Kuehn, as you know, CFPB is required to maintain a
    consumer complaint system and publish an annual report to
    Congress. That report should summarize complaints received in
    the previous year, and this system is used by the CFPB to
    sometimes even support agency actions or include the major
    rulemaking.
        I have heard that the system has been overrun by large
    volumes of fraudulent disputes by bad actors that have
    distracted from their legitimate wrongful conduct complaints.
    This is not only unfair, but it skews the complaints and also
    undermines the integrity of the complaint data. Do you share my
    concerns regarding this integrity of the data?
        Ms. Kuehn. I do. The CFPB's consumer portal was stood up to
    collect complaints for consumers. What it has become for a lot
    of companies is an avenue for credit repair and that is
    affecting not only consumer reporting agencies, but also
    financial institutions who want to hear from their consumers if
    they have an issue. Instead, these third-party companies are
    flooding the system with disputes about credit reporting that
    have nothing to do with the complaints about a financial
    product or service.
        Mrs. Kim. As Director McKernan comes in, do you have any
    advice for him to improve the customer compliance system? How
    would he do a better job?
        Ms. Kuehn. Yes. I think that he could direct his office
    that runs the complaint system to meet with industry, to look
    at these complaints, and to talk through ways in which we can
    identify when it is being abused by third parties and not for
    the benefit of a consumer.
        Mrs. Kim. Thank you.
        Ms. Fonseca, let me come back to you again. You are part of
    an institution that is regulated by a bipartisan board, the
    National Credit Union Administration. We all know that
    regulated entities do not always agree with everything that
    comes from the regulator. Would you say that the--overall, the
    regulatory environment is more stable and transparent when you
    are regulated by the National Credit Union Administration
    (NCUA) board?
        Ms. Fonseca. Absolutely. There is transparency, we are able
    to add insights into their board meeting discussions, and there
    are not--there is not a lot of volatility, but you are right,
    we do not always agree with them, but it works, and it works
    very well.
        Mrs. Kim. Given its long track records, I think you would
    agree that NCUA has been able to be an effective financial
    regulator with a bipartisan board.
        Ms. Fonseca. Absolutely.
        Mrs. Kim. Thank you. I think the NCUA is a great example of
    how we could reform the CFPB to be more bipartisan and
    accountable. Thank you for being here.
        Now, I yield back my time.
        I want to recognize the gentleman from California,
    Representative Vargas, for 5 minutes of questioning.
        Mr. Vargas. Thank you very much, Madam Chair. I appreciate
    it. Apologize, I had to slip out for a second. That is what
    happens when they double-book you around here, but I am back,
    and I heard most of the testimony earlier.
        I represent the San Diego region. The San Diego region is
    blessed by having the Navy there and many, many military
    personnel. We are very blessed because many of them stay there.
    They retire there. Unfortunately, they become victims
    oftentimes of financial scams.
        Mr. Frotman, in San Diego--in the San Diego region, we have
    96 percent more CFPB consumer complaints filed by
    servicemembers. You know that, I am sure. Could you talk a
    little bit about what is happening right now and how we have
    helped them before and how we are not helping them right now?
    Because I am getting these complaints right now from people,
    and they are saying they are calling, there is nobody there.
        Mr. Frotman. Thank you so much for the question,
    Congressman. I have actually visited the Marine Corps depot and
    training facility with Holly Petraeus.
        So this is critically important. One of the central tasks
    that Congress directed the CFPB to do was look after military
    families, and the track record of the Bureau across
    administrations before the most recent change, I think, was
    stellar. We got back more than $200 million for military
    families through enforcement actions. We helped with 400,000
    complaints.
        What you see now is just devastating to military families.
    They told the people who staff the office that the Congress
    required the Office of Servicemember Affairs to stop working.
    They broke the complaint system.
        We heard a ton today about overreach. We have heard these
    amorphous vague comments about CFPB overreach. Is it overreach
    when the Bureau took enforcement actions against a bunch of
    scammers who ripped off military families, who ripped off
    veterans, who ripped off retirees?
        We have heard a lot in the abstract about the Bureau and
    the prior leadership, but we have not heard specifics because I
    think this is one example of exactly what the Bureau was tasked
    to do, and they are not doing right now.
        Mr. Vargas. The other thing that I think is very important
    also is to talk about the elderly. Again, San Diego is a young
    town, but it is not that young. I mean, a number of us are
    retired--not me, I am not retired, for the record--but a number
    of people are, and there are a lot of scams, again, against the
    elderly.
        Before, I got all these positive comments about how the
    CFPB was doing its job. Now, I am getting all these complaints
    because nobody is there. Could you comment about that?
        Mr. Frotman. That is correct. The acting Director Vought
    told the Office of Older Americans to stop working. The people
    who submit complaints about themselves or an elderly parent or
    grandparent saw that system broken.
        There have been a lot of charges leveled, but I think one
    of the things that I think we all agree on is that the CFPB
    needs to work. The CFPB needs to work on behalf of consumers
    and servicemembers and older Americans. It needs to work on
    behalf of honest businesses, and it is not now.
        The inspectors that are supposed to take care of
    servicemembers and older Americans are sitting at home instead
    of doing their job.
        Mr. Vargas. Mr. Frotman, I want this on the record because
    I think that I have been around long enough now that you see
    cycles and the unfortunate cycles are this. We have talked
    about predators, and we have seen this. Oftentimes, my
    colleagues on the other side ultimately control government, and
    then you do see an overreach all right, but by the banks and
    others, and we get into a financial slide. Then we get into a
    recession, then we get into real trouble. Then consumers, we
    saw in 2008, get ripped off.
        We heard today that the CFPB is the predator, that you guys
    are the predator, that you were the predator. Could you
    straighten the record out on that? I want this on the record
    because I think it is going to happen again, and I want to make
    sure that you tell the truth. Go ahead, sir.
        Mr. Frotman. Thank you so much. We have heard a lot of
    attacks on CFPB leadership, but these are really attacks on
    dedicated public servants who wake up every single day just
    trying to make their neighborhoods safe.
        So many of us who work at the CFPB lived through the
    financial crisis and watched community after community
    decimated, while a bunch of billionaire bankers got off scot-
    free. What we do every day at the Bureau or what we did every
    day at the Bureau was to try to make sure that does not happen
    again.
        What is happening now at the Bureau where there is no
    oversight over massive nonbanks in this country is bad for
    businesses. It is bad for consumers. They are setting up the
    situation that there will be another financial crisis in this
    country, and you all or the people sitting in the chairs after
    you will be forced to deal with it once again.
        Mr. Vargas. I agree.
        I do want to last, with 10 seconds, just thank the people,
    the dedicated servants of the CFPB, for all their hard work.
    Thank you.
        I yield back.
        Mrs. Kim. Thank you.
        I now recognize the gentlewoman from Texas, Representative
    De La Cruz, for 5 minutes.
        Ms. De La Cruz. Thank you, Chairwoman and thank you,
    witnesses, for being here today.
        My district lies in deep south Texas on the border of
    Mexico and Texas encompassing Hidalgo County, which is over 80
    percent Hispanic. That being said, in speaking with my
    community banks in my district, we are a rural area. Community
    banks, regional banks play an important role in our community
    and helping first-time entrepreneurs, which I once was as a
    Hispanic female-owned business; It is hard. It was hard to be a
    first-time entrepreneur and not have a wealthy family that
    could help subsidize my desire to 1 day be a business owner. I
    leaned into my regional banks that provided me the American
    dream as a Hispanic female in a rural community.
        That being said, the work that the regional banks and the
    community banks do in our community is very, very important.
    Unfortunately, under the Biden Administration, the CFPB became
    a political organ for the administration. It pushed partisan
    rulemaking, like the 1071 rule, which everyone disliked,
    including minority depository institutions, as I said, that are
    in my district.
        I am a proud original cosponsor of my fellow Financial
    Services Committee member and Chair of the Small Business
    Committee, Roger Williams, to repeal section 1071. We have to
    use our control in Congress to set the CFPB straight and
    enhance transparency and establish guardrails.
        As a freshman in the last Congress, it baffled me that in a
    House that had a very slim majority, where Republicans and
    Democrats could hardly agree on anything, there was one thing
    that we agreed on in both the House and the Senate and that is-
    that 1071 was bad for minority communities like mine, it was
    bad for entrepreneurs like I once was, it was bad all the way
    around.
        I want to remind everybody in this room that the House
    agreed that 1071 was bad. The Senate agreed that 1071 was bad,
    and when it went to the White House, the Biden Administration,
    President Biden, vetoed the repeal of 1071. Thus saying that
    the people's voice in the House, the people's voice in the
    Senate did not matter and that they were going to put this
    burdensome regulation on community banks, regional banks that
    make a real difference in Hispanic districts and minority
    districts like mine--that they were going to forge forward in
    having 1071 hurt communities like mine.
        It is despicable. It was gross that the Biden
    Administration moved forward and vetoed what the House and
    Senate wanted to move forward in repealing this.
        That being said, I am going to ask Mr. Pommerehn, can you
    share the benefits of passing Chair Williams' bill to repeal
    1071 and why it is necessary to ensure small businesses are
    able to access the critical capital and continue to serve our
    communities?
        Mr. Pommerehn. A repeal of the rule would certainly reduce
    compliance costs for lenders to lend to small business. That
    would increase the number of small businesses out there, and,
    of course, that is good for the economy.
        Absent a repeal, the rule should be looked at and possibly
    reproposed to lessen that burden going forward.
        Ms. De La Cruz. What I am hearing is the repeal of 1071 is
    going to be good for minority communities like mine, it is
    going to be good for entrepreneurs who have the American dream
    of owning their small business, and that it is going to be good
    for the economy. Is that correct?
        Mr. Pommerehn. That is correct, Congresswoman.
        Ms. De La Cruz. Then I see no reason why it should not be
    repealed.
        With that, I yield back.
        Mrs. Kim. Very well. Thank you very much.
        I now recognize the gentleman from Nebraska, Representative
    Flood, for 5 minutes.
        Mr. Flood. Thank you, Madam Chairman.
        There is a fundamental problem that I think is going to
    continue to come up in this committee related to the CFPB. The
    Bureau has been at work extending its authority for as long as
    possible when led by Democrat-appointed directors. A good
    example of this is CFPB's larger participant rulemaking
    targeting consumer payment applications.
        The rulemaking lumps several different types of payment
    actors under the same umbrella. The Bureau even hinted via an
    employee's speech that merchants might be implicated as large
    payment players in the future.
        Last year, I asked Director Chopra about the merchant
    exclusion and whether payments alone continued--constituted
    commerce. In a response via question for the record, the
    director made the case that a merchant, quote, that
    incorporates payment capabilities directly into a website, end
    quote, could potentially blur the lines between banking and
    commerce and, therefore, be subject to CFPB oversight in the
    future.
        To be clear, Dodd-Frank--Mr. Frotman--Dodd-Frank explicitly
    calls for an exclusion for merchants from the CFPB's regulatory
    purview. The idea that a merchant engaged in consumer financial
    activity due to payments activities in the merchant's own store
    or website is ridiculous. Using that logic could lead the CFPB
    to have examination authority over every mid-size to large
    retailer in the country.
        This part of a larger pattern from the Bureau, it extends
    its--this is part of a larger pattern by extending its reach
    and authority as far as possible over time with limited checks.
    That is why it is so incredibly important that Congress work to
    rein in the Bureau's authority and lack of accountability.
        Mr. Schneider, given your experience working at the CFPB,
    do you have any thoughts on how Congress and the new Director
    should aim to keep the Bureau from expanding its own authority
    in the future?
        Mr. Schneider. Put them under appropriations, then they
    have to explain to you what they want to use resources for, and
    you can decide if you wish to approve that.
        I think putting meaningful restrictions on their use of
    their Unfair, Deceptive and Abusive Practices (UDAP) authority
    is too broad. They should articulate a principle before they
    bring an enforcement action. There is a case that they brought
    that would upend the entirety of indirect auto lending, and it
    is brought on a UDAP theory that, I might add, stands in
    contravention of their own interpretations of an actual
    regulation. I think that is ripe for--that is certainly ripe
    for reform.
        Mr. Flood. Continuing with you, Mr. Schneider. One of the
    interesting things about your testimony is that you made the
    observation that enforcement staff should not be involved with
    directly planning or executing the exams.
        Can you speak to why it might be problematic to have
    enforcement staff directly involved with planning routine
    examinations?
        Mr. Schneider. Supervision is a confidential prudential
    process. It is quite powerful, in my experience. It requires
    cooperation between the Bureau and the entity, and it can
    result in a very quick action to stop unlawful activity and to
    redress consumers.
        If the entity feels that this is really just a fishing
    expedition that is going to get handed off to the enforcement
    team, they are going to treat it like it is a law enforcement
    matter. They are not going to cooperate, and the entire thing
    is just going to become an enforcement action, which is going
    to delay redressing to consumers.
        So there has to be a divide, and having any involvement of
    enforcement personnel in supervisory activities I think is
    troubling.
        Mr. Flood. As a Member of Congress who is very interested
    in our housing supply issues and getting first-time homeowners
    into homes, I think it is interesting that the cost to
    originate a mortgage has gone up nearly 50 percent over the
    last 4 years. It is nearly triple what it was before 2010.
        Mr. Schneider, to what degree do you think this increase in
    the cost of mortgage origination is a result of regulatory
    burden, including from the CFPB?
        Mr. Schneider. It intuitively seems a lot can be attributed
    there. There are State regulators that have always regulated
    mortgage services. They are quite well-equipped. They have
    extraordinarily broad powers that are extended to them by their
    State governments. They have been working very dutifully in the
    past several years to coordinate their activity on a nationwide
    basis.
        Simply layering on another level of Federal oversight, to
    some extent, is adding additional costs that could very easily
    be handled by the State system.
        Mr. Flood. Thank you very much.
        At the end of the day, we do need to protect consumers. We
    need to think about fraud. We need to think about deepfakes.
    Fraud is monopolizing the time of a lot of folks in this lane,
    and I want to see the consumer protection of the Federal
    Government folks more on fraud and less on gotcha tactics.
        With that, I yield back.
        Mrs. Kim. Thank you.
        Before I go to the next member, I would like to recognize
    Ranking Member Foster.
        Mr. Foster. Thank you.
        I would like to ask unanimous consent to enter three
    statements into the hearing record from groups strongly
    opposing the Republican bills that we are considering today
    that would undermine the CFPB and weaken consumer protections,
    including one from Americans for Financial Reform, a second one
    from Consumer Action, and a third from the National Association
    of Consumer Advocates.
        Mrs. Kim. Without objection. Thank you.

        [The information referred to can be found in the appendix.]

        Mrs. Kim. Now I recognize the gentleman from North
    Carolina, Representative Moore, for 5 minutes.
        Mr. Moore. Thank you, Madam Chair.
        A little bit about--I am the--I guess I am the newest
    member on the committee, which is why I get to speak last.
    Before becoming a Member of Congress, for 30 years I was an
    attorney, and I actually represented consumers during that
    time, represented businesses, represented a number of folks,
    and had the opportunity to deal with fraud cases over time.
        When I came as a new Member of Congress, I wanted to see,
    well, what does the CFPB do. I actually had somewhat high
    hopes, which I guess proved my naivete on that subject. As I
    dealt with this, becoming a member of this committee, I
    realized that the comments made by members like Ms. De La Cruz
    to my left and others of the abusive practices, Madam Chair, of
    this agency just shocked my conscience. This is as an American,
    as an attorney, seeing this happen.
        The fact that financial institutions could not even rely
    with any certainty on what was legal and what was not. It was
    completely a game of gotcha. An agency that is not funded by
    the normal appropriations process but is incentivized,
    incentivized to get money by levying fees and fines, it is
    almost like if you had a police officer out there paid more to
    write more tickets or something. I mean, it is antithetical. It
    is completely antithetical to any notion of due process and
    equal protection in any way.
        I think what you have with the way CFPB under the prior
    administration governed was actually--was actually the predator
    in this case by preying on businesses, preying on companies to
    exert fines, forfeitures, and fees.
        With all due respect to Mr. Frotman--I read your comments,
    heard your comments. I have been an attorney for 30 years and
    to approach something like this when it comes to a significant
    part of regulatory law affecting somebody in this country with
    a clear political agenda just shocks my conscience.
        I would ask that--I am glad the new agency is not doing
    that, and I would just ask those that ever want to serve in
    these positions, certainly do not do this. This is--you have
    millions of Americans who count on having access to capital.
    You have individuals, you have companies, businesses that are
    built on providing that capital.
        The one thing that folks need to know is what are the
    rules, what are the rules of the road, and follow those rules,
    and do not change them midstream, and do not do them in such a
    punitive way simply to either exercise or abuse power or to try
    to obtain more money from these entities.
        The more I have studied this, Madam Chair--and I hope that
    it comes to the attention of the American people who see this
    absolute abuse in government, and it is exhibit A of what is
    wrong or what has been wrong in so many things.
        I did think about something. Under the former--under the
    former director, it seems that the CFPB made a habit of
    bypassing the Administrative Procedures Act notice and comment
    requirements, just enacting things. I think there was a whole
    host of these, what, midnight entries. I do not know if they
    were done with an auto pen, I do not know how they were done,
    but they were done.
        I have a question for Mr. Schneider. You have extensive
    experience with enforcement at the CFPB, as well as the APA. I
    am just curious, first off, would you agree that the APA
    applies to the CFPB?
        Mr. Schneider. Of course. Yes, sir.
        Mr. Moore. Is agency guidance, is that a rule?
        Mr. Schneider. It should not have the binding effect of law
    if it has not gone through the appropriate approval process.
        Mr. Moore. What about a press release?
        Mr. Schneider. No. No question there.
        Mr. Moore. All right. How about just a statement by the
    director? Is that a rule?
        Mr. Schneider. No.
        Mr. Moore. So should a press release or a statement by the
    director be the basis of an enforcement action?
        Mr. Schneider. It certainly should not be.
        Mr. Moore. My understanding is that did happen under this
    prior administration. Is that correct?
        Mr. Schneider. Certainly, the prior administration took
    enforcement actions that did not seem to be well grounded on
    any properly promulgated rule and, in some cases, stood in
    contrast to properly promulgated rules.
        Mr. Frotman. That is 100 percent not correct. Over and over
    again----
        Mr. Moore. Mr. Frotman, you are clearly a political hack. I
    did not ask you a question. I did not ask you a question.
        Mr. Frotman. If you want the truth, we could have a
    conversation.
        Mr. Moore. I did not ask you a question, sir.
        I would just simply say that the comments from----
        Mrs. Kim. It is still the gentleman's time.
        Mr. Moore [continuing]. Mr. Frotman are disregarding the
    rules of this committee. His disregarded rules there simply
    show the problems with this agency.
        With that, Madam Chair, I yield back.
        Mrs. Kim. Thank you.
        I now recognize the gentleman from Florida, Representative
    Donalds, for 5 minutes.
        Mr. Donalds. Thank you, Madam Chair.
        In this committee it goes without question my views on the
    CFPB. I have been very clear that this agency is a rogue agency
    that was created on a partisan basis at a time period when,
    frankly, the Democrats were choosing to solely blame bank
    activity for the financial collapse, as opposed to looking at
    the regulatory environment that had been set up which--based
    upon faulty underwriting which cascaded through the financial
    economy.
        There were many people who bear the burden of what happened
    in the economy in 2008 and 2009. Just setting up this
    regulatory behemoth with no oversight and no accountability to
    the American people except to the whims of Democrat politicians
    has always been wrong; in my view, is still unconstitutional,
    and this agency should be repealed never to be seen again.
        I think that the argument of this is the only way to have
    consumer protections at the Federal level is a complete folly,
    and it is wrong, and it is shortsighted. Consumer protections
    have existed in every Federal agency long before the CFPB was
    ever contemplated or created. Those are the facts.
        That being said, if the least we could do is actually
    reform the CFPB and actually be an agency that is responsive to
    Congress and responsible as it executes rulemaking in the
    marketplace, that could have some positive benefits. But my
    position remains that this agency just needs to be completely
    removed and then we move forward to a real and responsible
    regulatory environment that allows our economy to grow in a
    responsible manner going into the future.
        That being said, Ms. Fonseca, as the head of a company
    right on the cusp of being subject to CFPB overreach, can you
    describe how the CFPB stifles growth and innovation?
        Ms. Fonseca. Thank you for the question.
        As I mentioned previously, we have been very focused on
    preparing for CFPB oversight and also concerned about
    classification of junk fees for programs that our members want.
    We are spending way too much time on that and not enough time
    on innovating new products and services for our members.
        Mr. Donalds. Thank you.
        Mr. Schneider, what is the actual cost of compliance
    imposed on the private sector by former Director Chopra over
    the last 4 years?
        Mr. Schneider. I will be perfectly honest, Congressman. I
    do not know that figure. I know, just to respond to an initial
    Civil Investigative Demand, given the short scope of time
    involved and the massive amount of data, it could be tens if
    not hundreds of thousands of dollars. Much less just thinking
    about what a particular proposed speech idea might have, the
    cost to your compliance department would be enormous.
        Mr. Donalds. Tens of thousands or hundreds of thousands of
    dollars just for one company?
        Mr. Schneider. For one company for one investigation.
        Mr. Donalds. Okay. Ms. Kuehn, what was the consumer
    protection regulatory landscape before the creation of the
    CFPB?
        Ms. Kuehn. Before the creation of the CFPB, you had
    prudential regulators who had authority to look at the
    companies that they examine for consumer protection. In
    addition, you had the Federal Trade Commission. I want to take
    exception that there has never been a cop on the beat. As
    someone who ran a division at the Federal Trade Commission, we
    investigated companies for violations of consumer financial
    protection laws and brought cases against those companies.
        Mr. Donalds. Okay. Thank you so much.
        Mr. Pommerehn, how would financial institutions,
    businesses, consumers, and the economy as a whole benefit from
    the abolition of the CFPB?
        Mr. Pommerehn. First and foremost, we need a strong
    consumer regulator. We need one that is going to be fair and
    reasonable.
        I think that, to the points made earlier, when we have
    rules and guidance and even racking to blogs and circulars,
    things of that nature, it is hard to comply with what is
    actually needed to be complied with. It is unclear to comply
    with the uncertainty that is created by an agency that does not
    go through an APA process with notice and comment and the like.
        I think consumer protection needs to be had. We need a
    durable, credible consumer regulator that is going to be fair
    to all the policy stakeholders going forward.
        Mr. Donalds. To add on to your comment--and I think people
    will hear me say get rid of the CFPB. Trust me, I mean it; get
    rid of it. But to that point, yes, there are consumer
    protections that should be durable that follow the
    Administrative Procedures Act and not have an agency which is
    rogue, in my view, depending on the Presidential Administration
    and just moving through our economy with no accountability
    whatsoever.
        With that, I yield back.
        Mrs. Kim. The gentleman's time is up. Thank you.
        Please join me in thanking all of our witnesses for joining
    today and answering the questions from the members.
        Without objection, all members will have 5 legislative days
    to submit additional written questions for the witnesses to the
    chair and the questions will be forwarded to the witnesses for
    your responses. The witnesses, you will have until April 30th
    to provide written responses if you receive that question.

        [The information referred to can be found in the appendix.]

        Thank you very much for being with us today.
        With that, the hearing is now adjourned.

        [Whereupon, at 12:13 p.m., the subcommittee was adjourned.]

                                    APPENDIX

                                  ----------

                       MATERIALS SUBMITTED FOR THE RECORD

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                                   [all]