[Congressional Record Volume 169, Number 162 (Tuesday, October 3, 2023)]
[Senate]
[Pages S4912-S4914]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]



                  Consumer Financial Protection Bureau

  Mr. REED. Mr. President, after hearing oral arguments earlier today, 
the Supreme Court will rule on a case that will determine whether 
average Americans will continue to have an independent Federal watchdog 
to push back against the abuses of big financial institutions.
  The case I am speaking of is the Consumer Financial Protection 
Bureau--CFPB v. Community Financial Services Association of America. It 
deals with an outlandish ruling of the Fifth Circuit Court of Appeals 
that would invalidate the congressionally approved funding scheme of 
the CFPB. If it stands, the ruling will starve the Bureau of funding 
and effectively prevent it from working on behalf of the American 
people.
  But let's take a step back to remember why the CFPB was created over 
a decade ago.
  In the runup to the great recession, lenders were aggressively 
marketing subprime mortgages with predatory features to borrowers they 
knew had no ability to repay. Reckless Wall Street firms bundled those 
mortgages into securities and sold them to investors, including pension 
funds. And weak regulators stood by as all of this unfolded.
  Borrowers ultimately discovered that they could not repay their 
mortgages. The securities backed by these mortgages took a nosedive, 
causing a meltdown of the banking system and taking down the entire 
economy.
  While Wall Street got a lifeline from the Congress and the Federal 
Government, millions of Americans did not. They paid with their jobs, 
their homes, and their savings.
  The unemployment rate peaked at 10 percent; nearly 7.5 million 
families lost their homes; and Americans lost $20 trillion in household 
wealth.
  At the time, people rightfully asked who was looking out for them. 
The truth was no one, really.
  American families were ill-served by financial regulators and by the 
system. A half dozen Federal Agencies shared responsibility for making 
sure that working families didn't get ripped off, but they all failed. 
In many cases, they seemed to regard their primary mission as 
protecting the big players in the financial system. And they were 
hamstrung by the Bush administration, which used the appropriations 
process to starve Agencies, like the SEC, of the resources and 
personnel they needed to be effective.
  So while these Agencies all had some responsibility for protecting 
consumers, none of them pursued it vigorously. The performance of 
regulators at the time put truth to the saying that ``when everyone is 
responsible, no one is responsible.''
  This weakness in our regulatory system and structure is why Congress 
created the CFPB and gave it a singular mission to protect Americans 
from the worst kinds of financial abuses, not just for mortgages but 
for every single consumer financial product.
  The creation of this Agency is arguably one of the most important 
reforms made following the financial crisis.
  I recognize that Wall Street and big financial companies have always 
feared the CPPB. That is because the CFPB is the only financial 
regulatory Agency that exclusively focuses on protecting consumers 
against abusive practices.
  But Wall Street also fears the CFPB because its funding structure 
insulates it from regulatory capture, aggressive lobbying, and 
political pressure. Wielding its power judiciously and effectively, the 
CFPB has delivered results for American families. In a little more than 
a decade, the Bureau has obtained $17.5 billion in relief for 200 
million consumers.

[[Page S4913]]

  And so, the industry has never given up on killing the CFPB. The 
industry hit pay dirt when an activist panel of judges on the Fifth 
Circuit Court of Appeals issued a bizarre and potentially sweeping 
decision, which invalidates the CFPB's funding structure based on a 
distortion of the Constitution's appropriations clause. The court's 
reasoning is flimsy. It relies on a single concurring opinion and a 
series of law review articles, some of which were written by students.
  (Mr. KELLY assumed the Chair.)
  According to Georgetown Professor Adam Levitin, the argument about 
the CFPB's funding was a ``throw-away point'' in the litigation, with 
the parties dedicating a paltry 370 words apiece to this issue in their 
briefs.
  Unfortunately, the results of the Fifth Circuit's decision are not 
academic. They are very real for the hard-working Americans whose 
financial well-being is now at risk. If upheld, the Fifth Circuit's 
ruling would call into question the validity of all the Bureau's past 
actions.
  The work of the CFPB matters to ordinary people. It is the only 
Federal Agency that supervises nonbank mortgage lenders, private 
student lenders, credit reporting bureaus, debt collectors, 
international money remitters, and auto finance companies. Because 
there has been a CFPB for the last decade, people in Rhode Island and 
across the Nation have had someone who is working to make sure they 
will be treated fairly, that their banks and lenders will deal with 
them honestly, and that their interests would be protected whenever 
financial institutions try to take advantage of them.
  That will change if the Fifth Circuit's ruling stands.
  I want to particularly highlight what that means for military 
families because this has been an aspect of the CFPB's authority that I 
have been deeply committed to since the beginning. Simply put, without 
the CFPB, military families will be stripped of their financial 
protections under the Military Lending Act. The CFPB has brought 40 
public enforcement actions involving harm to servicemembers and 
veterans, securing more than $175 million in relief.
  The Agency plays a unique role in watching out for our Nation's 2 
million servicemembers and their families, whether they are deployed in 
the United States or overseas. The CFPB protects members of the Armed 
Forces from exploitation at the hands of unscrupulous lenders and debt 
collectors, who have charged servicemembers interest rates as high as 
600 percent and who have threatened to derail their careers if they do 
not pay up.
  More than recovering money, the CFPB, through its supervisory powers 
and by its simple existence, acts as a deterrent. If the Supreme Court 
shuts it down, predatory lenders will reoffend against our troops again 
and again and again, with little chance of being penalized.
  The Presiding Officer understands this very well because, as a naval 
aviator and leader of troops, like myself, who was a paratrooper, 
executive officer, and company commander, we saw all the shenanigans 
that lenders were playing, selling trucks to the young enlisted people 
for a great bargain--nothing down but almost a 1,000-percent interest 
rate. We saw them come and take those trucks later when the young 
soldiers, sailors, and airmen couldn't pay--time and time again.
  Finally, through the Military Lending Act and the CFPB, we stood up 
and said: This is not fair. And in one of the great ironies, of course, 
if you ever went off base, all of these car dealers and other service 
agencies proudly had the American flag waving red, white, and blue, 
while they were systematically, in many cases, stealing from the men 
and women who protect this country.
  In a letter written to Banking Committee Chairman Brown, Veterans' 
Affairs Committee Chairman Tester, Intelligence Committee Chairman 
Warner, and myself, in February, the CFPB Director said:

       I am gravely concerned that this trend could impact 
     companies' compliance with the Military Landing Act and the 
     Federal consumer financial laws that protect servicemembers 
     and their families. The impact would be dire--effectively 
     stripping servicemembers and their families of legal 
     protections that are critical to maintaining military 
     readiness. . . . In the Fifth Circuit alone, which covers 
     Texas, Louisiana, and Mississippi, this could affect 300,000 
     servicemembers and their families.

  Mr. President, I would ask unanimous consent that a copy of the 
letter from the Director of the Consumer Financial Protection Bureau be 
printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                Consumer Financial


                                            Protection Bureau,

                                 Washington, DC, Feburary 6, 2023.
     Hon. Jack Reed,
     U.S. Senate,
     Washington, DC.
       Dear Senator Reed: Thank you for your letter regarding the 
     Consumer Financial Protection Bureau's (CFPB) work to protect 
     servicemembers and their families in the consumer financial 
     marketplace. As you note in your letter, a three-judge panel 
     of the Fifth Circuit recently vacated the CFPB's 2017 payday 
     lending regulation in Community Financial Services 
     Association v. CFPB. The Fifth Circuit panel found that the 
     statutory provisions funding the CFPB's operations violate 
     the Constitution's Appropriations Clause, and as a result, 
     vacated the payday lending rule that is the subject of that 
     litigation.
       I believe that decision was incorrect, and the Solicitor 
     General has asked the Supreme Court to reverse it. In the 
     Dodd-Frank Wall Street Reform and Consumer Protection Act 
     (Dodd-Frank Act), Congress established the CFPB as an 
     independent bureau of the Federal Reserve System. Like the 
     Federal Reserve Board of Governors and other federal banking 
     regulators, Congress authorized the CFPB's funding through 
     its organic statute rather than through annual spending 
     bills. This type of funding for banking regulators has long 
     been a vital part of the nation's financial regulatory 
     system, providing stability and continuity for the agencies 
     and the system as a whole.


      The CFPB's Work to Protect Servicemembers and their Families

       In the Dodd-Frank Act, Congress directed the CFPB to 
     establish an Office of Servicemember Affairs. Since the 
     CFPB's inception, the CFPB's Office of Servicemember Affairs 
     has worked with the Department of Defense, state attorneys 
     general, and other law enforcement agencies to ensure 
     America's servicemembers, veterans, and their families 
     receive the consumer protections they are entitled to by law.
       Each year, the Office of Servicemember Affairs issues a 
     report on the top financial concerns facing servicemembers, 
     veterans, and military families, based on complaints they 
     submit to the CFPB. In its most recent annual report, the 
     Office of Servicemember Affairs noted a nearly 20 percent 
     increase in complaints by servicemembers since 2019 and 
     detailed how servicemembers credit reporting inaccuracies 
     uniquely impact their housing, transportation, and security 
     clearance. A separate CFPB report released in December 2022 
     found that servicemembers appeared to be underutilizing the 
     protections and relief they are entitled to under the 
     Servicemember Civil Relief Act, which include a six percent 
     interest rate cap. Previous CFPB research compared 
     servicemembers' credit usage to their civilian counterparts 
     and identified debt trends among servicemembers during and 
     after they leave active duty.
       The CFPB examines supervised financial institutions for 
     risks to active duty servicemembers and their families from 
     conduct that violates the Military Lending Act (MLA). 
     Additionally, when the CFPB identifies Servicemember Civil 
     Relief Act (SCRA) violations or an absence of SCRA compliance 
     policies and procedures, we refer the matter to appropriate 
     federal and state regulators and assess whether the conduct 
     may also violate other statutes we enforce, such as the 
     Consumer Financial Protection Act. And when companies break 
     the law and harm servicemembers, the CFPB brings enforcement 
     actions to hold them accountable. To date, the CFPB has 
     brought 38 public enforcement actions that involved harm to 
     servicemembers and veterans, including five enforcement 
     actions for violations of the Military Lending Act. These 
     cases have thus far resulted in more than $170 million in 
     monetary consumer relief.
       Here are a few recent examples that illustrate the impact 
     of this work:
       In September 2022, the CFPB filed a lawsuit against 
     MoneyLion and its lending subsidiaries alleging they violated 
     the MLA by charging consumers membership fees and stated 
     interest rates that when combined exceeded the MLA's 36% rate 
     cap, requiring covered borrowers to submit to arbitration, 
     and failing to make required disclosures. The CFPB's 
     complaint also alleges that MoneyLion's restrictive 
     membership cancellation practices are deceptive, unfair, and 
     abusive.
       In November 2021, the CFPB filed a lawsuit against 
     FirstCash, Inc. and Cash America West, Inc. The CFPB alleges 
     that FirstCash and Cash America West made pawnshop loans to 
     active-duty servicemembers and their dependents that violated 
     the MLA. The CFPB alleges that between June 2017 and May 
     2021, FirstCash and Cash America West made over 3,600 pawn 
     loans from four of its stores to more than 1,000 
     servicemembers in Arizona, Nevada, Utah, and Washington at 
     rates that exceeded the MLA's 36% interest cap, as well as 
     other violations.

[[Page S4914]]

       In December 2020, the CFPB issued a consent order against 
     Omni Financial of Nevada, Inc. The CFPB found that, among 
     other things, Omni violated the MLA's prohibition against 
     requiring repayment of loans by allotment. While Omni claimed 
     that other payment options were available, the CFPB found 
     that employees told servicemembers they were required to 
     repay by allotment, and records show that 99 percent of 
     active-duty servicemembers who took out loans repaid them via 
     allotment. The CFPB uncovered these violations as part of a 
     sweep of investigations of multiple lenders that were 
     suspected of violating the MLA.
       Also in December 2020, the CFPB sued LendUp for violating 
     the MLA by charging interest in excess of 36 percent, 
     requiring covered borrowers to submit to arbitration, and 
     failing to make required disclosures. The parties entered 
     into a stipulated judgment in that action in early 2021. In 
     December 2021, the CFPB sued LendUp again for violating that 
     order. The parties entered into a stipulated judgment that 
     resulted in a court order that prohibited the company from 
     making new loans and collecting on outstanding loans.


    Impact of the Fifth Circuit Ruling on the CFPB's Protection of 
                             Servicemembers

       The Fifth Circuit's ruling has the potential to put the 
     CFPB's work to protect servicemembers at risk. While that 
     ruling only applied to the CFPB's payday lending rule, some 
     entities are attempting to use that ruling to try to escape 
     legal liability. For example, citing the Fifth Circuit's 
     ruling, lenders FirstCash and Cash America West filed a 
     motion seeking to dismiss the case and prevent the CFPB from 
     obtaining relief for harmed servicemembers, and the case is 
     stayed while CFSA is before the Supreme Court. Several other 
     defendants, both within and outside the Fifth Circuit, have 
     also sought to dismiss or delay CFPB enforcement actions 
     based on the Fifth Circuit's ruling.
       I am gravely concerned that this trend could impact 
     companies' compliance with the Military Lending Act and the 
     Federal consumer financial laws that protect servicemembers 
     and their families. The impact would be dire--effectively 
     stripping servicemembers and their families of legal 
     protections that are critical to maintaining military 
     readiness and preventing involuntary separations, goals which 
     the Department of Defense reaffirmed when finalizing the 2015 
     regulations implementing the MLA. In the Fifth Circuit alone, 
     which covers Texas, Louisiana and Mississippi, this could 
     affect 300,000 servicemembers and their families.
       The CFPB shares your commitment to protecting 
     servicemembers in the consumer financial marketplace, and I 
     appreciate your efforts to ensure that military financial 
     protections such as the MLA are being implemented as Congress 
     intended. Thank you for your attention to this important 
     issue.
       Should you have any additional questions, please do not 
     hesitate to contact me or have your staff contact Janel 
     Fitzhugh in the CFPB's Office of Legislative Affairs.
           Sincerely,
                                                     Rohit Chopra,
                                                         Director.

  Mr. REED. Mr. President, the Military Officers Association of America 
and a dozen veterans organizations have validated the CFPB's strong 
track record. In their words:

       All told, the CFPB has become an indispensable agency for 
     protecting the legal rights and financial readiness of 
     servicemembers, veterans, and their families. The stability 
     of the CFPB's funding is therefore vital to the tremendous 
     work it does on [their] behalf.

  Finally, let me add that it is not just average Americans who will be 
put at risk. Responsible lenders will lose the protections of the 
regulatory safe harbors created by the CFPB. These rules essentially 
protect the industry against the risk of enforcement, so long as they 
play by the rules and provide standardized disclosures in plain 
English. Those responsible actors in our financial system, who extend 
credit on fair terms and deal honestly with their customers, have a lot 
to lose.
  It all adds up to this: The Fifth Circuit's decision prioritizes the 
interests of predatory lenders over responsible lenders, relies on 
falsehoods over facts, and chooses chaos over stability. That is 
certainly not what any court should be doing.
  I hope sincerely that the Supreme Court reverses the Fifth Circuit's 
dangerous decision. I hope it recognizes that this is not about 
expensive lawyers and trade associations and big businesses. This is 
about Americans, many of them wearing the uniform of our country. They 
deserve the sympathy and the support of the Court.
  I yield the floor.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The senior assistant legislative clerk proceeded to call the roll.
  Mr. REED. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________