Transcripts For CSPAN3 Key Capitol Hill Hearings 20240622

Spends its funds because the cfpb operates outside of the appropriations process. Even the Federal Reserve which funds the cfpb from its earnings does not control the bureaus budget. Because congress cannot tighten the financial reins when Budgeting Issues arise the bureaus current structure makes meaningful congressional oversight very difficult. Socalled independence is one reason cited by the authors of dodd frank for the bureau structure. But other independent agencies such as the securities and exchange commission, the cftc, the ftc, and the cpsc are all subject to the appropriations process. Additionally, the bureau does not even have its own office of Inspector General, relying instead on the Inspector General of the Federal Reserve. Some of us have urged the adoption specific reforms to make the bureau more accountable, and more transparent. Putting the bureau through the appropriations process and establishing a board of director i believe it would resemble other agencies and provide congress with the ability to conduct meaningful oversight. Unfortunately, calls for reform have been rejected in past congresses. Therefore, the only remaining oversight available to the congress is to hold hearings, and hope that any concerns expressed perhaps would be addressed. Director cordray it would be like giving you the authority to the Consumer Financial laws, but withholding the authority to enforce them. I think you would agree that would make you highly ineffective as an Agency Charged with implementing our Consumer Financial laws. Congressional oversight of the bureau is critical now more than ever, because the cfpbs growing reach over the practices of individuals and companies in the financial sector. For the time being, here we will conduct hearings and submit respectful requests that may or may not be addressed. Im confident that the time will come when we will reassert our constitutional prerogative that the supporters of dodd frank sacrificed five years ago in the name of bureaucratic independence. Only then, i believe will the bureau be truly accountable to the peoples representatives. Director cordray welcome back to the Senate Banking committee. Next week marks, as we know, the fiveyear anniversary of the wall street reform acts which created the Consumer Financial protection bureau. Financial crisis, never should we forget the worst this country has seen since the great depression. Exposed many weaknesses in our regulatory system. Most troubling is that no one was looking out for consumers. Consumers were steered into mortgages they couldnt afford, often the terms with terms that were not disclosed, high fees sudden Interest Rate increases. 5 million americans lost their homes in foreclosure. And home state of the director and my state alone, half a million homes were foreclosed upon between 2006 and 2011. Half a million homes. The height of the crisis in 2009 1 in 3 ohioans were underwater. One in every six mortgage holders was at least 30 days delinquent or in foreclosure. The banking regulators are supposed to be enforcing Consumer Financial laws. Too often they look elsewhere. A number of industries developed in the shadows with no clear federal oversight. More importantly, no federal regulator was expressly tasked with ensuring consumers were treated fairly in their financial transactions. We created the cfpb to fill this void, to make sure that never again would consumers be an afterthought in our nations financial system. Cfpb opened its doors just shy of four years ago. In these four years, its proved over and over that its creation was one of the big Success Stories of wall street reform. As the chairman speaks of the cfpbs budget i think its important to note that the cfpb has returned 10 billion to the pockets of 17 million consumers. It has fined countless companies for egregious consumer abuses, including Credit Card Companies secretly adding on unwanted products, phone companies cramming fees onto consumers bills, or mortgage servicers and lenders illegally foreclosing on homeowners and Service Members. The Agency Served as an important place for consumers to turn over 650,000 complaints have been filed with the bureau. Cfpb is to be commended for these successes. The ongoing Enforcement Actions though, show us that work is not done. Just last week the cfpb, 47 states, and District Of Columbia took action against a bank for robo signing Court Documents and selling zombie credit card debt, or debt that had lfr been cleared. Today i want to introduce a bill that will address zombie debt along with several of my colleagues in the introduction. Last week the fed published numbers showing the consumer borrowing is at a record high, 3. 4 billion by steady increases in student loans, auto loans and credit card loans. I look forward to hearing from director cordray and what the cfpb views as areas to watch in the consumer market, and what this agency will do moving forward. Weve seen in state after state the predatory lenders as soon as the state passes legislation to rein them in, the lenders morph into something else. We saw that in ohio after a ballot issue passed about six years ago, ohio enacted a shortterm lender loan. Was strong bipartisan support. It was shortlived as payday lenders by adding fees. This creativity at the state level necessitates continued vigilance by the Consumer Bureau, and i hope that the cfpbs rules governing shortterm loans close these loopholes. Much of the cfpbs most important work is centered on mortgage regulation. The agencys ability to repay rules, ensure that consumers are not trapped in mortgages they cant afford. Cfpbs rules will help consumers understand whats happening at the table during closing. All of these actions speak for themselves as to why this agency is so so important to millions of americans. Yet, opponents continue to work to undermine the agency by weakening its independence, but changing its structure. Lately there have been attempts to chip away the action theyve taken on in arbitration in small dollar loans. They argue the agency should not be able to collect data about markets that were formally nontransparent and unregulated. I will continue to fight as so many members of this committee will to fight all these attempts to destabilize the cffb. Our consumers deserve a strong watchdog that can do its job independently. Its our job to make sure that happens. Thank you, mr. Chairman. Thank you, senator brown. Without objection, at this time id like to enter into the record statements from the Credit Union National association, and the National Association of federal Credit Unions. Director cordray welcome to the committee again. Your written testimony will be made part of the record. You can proceed as you wish. Thank you, mr. Chairman. Ranking member brown members of the committee. Thank you all for the opportunity to testify today about our latest semiannual report to congress. We appreciate your continued oversight and leadership as we Work Together to strengthen our financial system. And ensure that it serves consumers, responsible businesses in the longterm foundation to the american economy. I would reiterate mr. Chairman that we take very seriously the oversight that we get from congress. These hearings are from the Senate Banking committee which are required by law. Its important oversight for us. We listen carefully for what is said and take it to heart as we go about our work. Next week marks five years since the passage of the dodd frank wall street reform and Consumer Protection act. As has been noted. And its four years since the Consumer Bureau actually opened its doors. As you know, congress created this agency in response to the financial crisis with the purpose and sole focus of protecting consumers in the financial marketplace. We understand our responsibility to stand on the side of consumers, and ensure that they are treated fairly. Through fair rules, consistent oversight, appropriate enforcement of the law, and broadbased Consumer Engagement the Consumer Bureaus working to restore Peoples Trust and confidence in the markets they use for everyday Financial Products and services. To date the bureaus enforcement activity has resulted in 10. 1 billion in relief for over 17 million consumers. Our supervisory actions have resulted in Financial Institutions correcting many subpar and illegal practices. And providing almost 200 million in redress to over 1. 6 million consumers. Weve now handled as was mentioned more than 650,000 complaints. A matter that is particularly important to us. From consumers that address all manners of Financial Products and services. These consumers are your constituents in each of your states. For example, one excerpt of a complaint from a Service Member in alabama reads, we opened an account. We paid as agreed until we were unable to pay the full amount. We agreed to pay a lesser amount and paid by allotment. The bank got a judgment against us while i was training. I was informed of it when my wages began to be garnished. Weve asked repeatedly to have this be fixed. We have paid the Company Nearly 25,000 over the last 11 years for furniture. The furniture is not lasted. However, the payments and ruin continue. We need assistance as we have tried every other step possible to fix this without aid. Another excerpt from a consumer in my home state of ohio and Ranking Members home state reads, i elected and agreed to a reduced payment plan with a student loan servicer. My Monthly Payment was incorrectly allocated which was resulting in late fees and delinquency notice. After speaking with Customer Service representatives, no resolution has been reached. These are the stories that motivate us in our work. In this most semiannual report to congress, we attempt to achieve our efforts on behalf of the tsunamis. Consumers. Consumers fell victim to various violations of Consumer Protection laws. Along with over 32 million in civil money penalties. For example we took action again a company for illegal Debt Collection practices that resulted in 2. 5 million in relief for Service Members. We also stopped an illegal kimback scheme for Marketing Services which resulted in 11. 1 million in redress to wronged consumers. We worked with the department of education to obtain 480 million to student loan borrowers who were wronged, for a forprofit chain of colleges that has since declared bankruptcy. The bureau also issued a number of proposed final rules. In october 2014, we issued a final rule to reduce burdens on industry by promoting more effective privacy disclosures from Financial Institutions to their customers. In november 2014, the notice of proposed rule making provides Consumer Protections for the first time for prepaid cards and accounts. In december 2014, the bureau issued a proposal to clarify various provisions of the Mortgage Servicing bureaus. In january 2015, further changes were made to the mortgage rules to facilitate mortgage lending by small creditors particularly those in rural or underserved areas, Community Banks and Credit Unions. This would increase the number of institutions offering different types of mortgages in rural or underserved areas and adjust the Business Practices to comply with the new rules. As the data driven institution, there are several reports during this reporting period that highlighted important topics in consumer finance, such as medical debt arbitration grelts reverse mortgages, and Consumer Credit scores and Credit Reports. We released a tool kit that will encourage consumers to shop for mortgages and better understand how to go about the important task of buying a home. In the years to come, we look forward to continuing to fulfill Congress Vision of an agency thats dedicated to cultivating a Consumer Financial marketplace based on transparency, responsible practices, sound innovation, and excellent Customer Service. Thank you for the opportunity to testify today. Mr. Chairman, i look forward to your questions. Thank you. Director cordray youve said many times that youre accountable to congress. However, you get to determine your budget and how to spend it. Neither congress nor the fed can tell you how to allocate taxpayers money. Many members of congress have expressed strong disapproval of your the costly Building Renovations which include a waterfall and fourstory glass staircase, and now stands at more than 3 1 2 times my understanding the original estimate. Has this disapproval by people caused you to change your renovation plans in any way . And if so tell us what changes you made if any. Two answers to that question. The first on the overall issue of accountability and oversight. We are accountable to this congress in numerous ways that are in our statute. The gao does a regular audit of our expenses and expenditures each year, which is not common to federal agencies. We are subject to an independent audit also by our statute. Were subject to reviews by our Inspector General which have been vigorous. Im required by law to testify in front of this committee thats where the Congress Puts the jurisdiction, and has seemed appropriate in your oversight twice a year. We have numerous other accountability mechanisms as well. And like the other banking agencies, we are not subject to the appropriation process, but that is not unique. It would be odd if we were different from the others in that respect. As to the building project that has been overhyped. And misrepresented. The building costs have remained essentially static from before we took on this building, and the office of thrift supervision had performed an audit that saw that the building was in disrepair, and needed an overhaul if it was going to remain a productive government asset. The Construction Costs have been pretty steady. Between 95 and 120 million, approximately. We recently let the contracts do Competitive Bidding and they come in thus far underbudget. And the gsa is managing a program which feels more appropriate to me they know more about it than i do and they have stated this is an appropriate government renovation project, well within the cost estimates of similar projects. Thats my understanding of that issue. Thank you. Yesterday the bureau announced a settlement of an enforcement action against american honda finance corporation, one of the nations largest auto industries. As part of the settlement, honda, its my understanding, must substantially reduce or eliminate entirely the ability of auto dealers to raise or lower the finance rate offered to consumers. A recent american banker article quoted from a cfpb memo stated that the bureau is seeking to accomplish quote these significant limitations of dealer discretion. Considering that auto dealers were explicitly exempted from the cfpbs jurisdiction in dodd frank, how can can this be seen as anything other than a back door effort to regulate the auto dealers which were basically exempt from dodd frank . Three things on that. The first is and the Justice Department, were not alone in enforcing the equal opportunity act, we did resolve a matter with honda yesterday. And its to hondas credit, i would commend them, they have taken farreaching steps to constrain the discretionary markup, which we think has led to discrimination for consumers. The Justice Department has led to discrimination for consumers. It was industry leadership that honda demonstrated yesterday and i commend them for that. Second, in terms of our responsibility here, we have been very careful to observe a line that was not necessarily an obvious or logical line that congress drew, which was to say that the Consumer Bureau has jurisdiction over auto lenders. But does not have jurisdiction over auto dealers. That jurisdiction as i understand it is given to the federal trade commission. We feel that means that the law has spoken clearly, that we have a responsibility to address any sort of issues of discrimination, or other violations of the law by lenders. But not by dealers. That may be illogical but thats the line we have. And we have taken our responsibilities seriously there. As i say we have a partner in this work, which is the department of justice. And we Work Together to address these issues. I think thats been appropriate. But im always willing to hear more from members of this committee, and members of congress. We are simply looking to enforce the law, and do it accurately and appropriately. On march the 26th, the bureau released an outline of its proposed plans to end payday debt traps. Every state, its my understanding, either regulates or outright prohibits payday lending. What analysis did the bureau conduct of state laws and regulations prior to deciding it should preempt their regulations . And if you have it could you provide that analysis to the committee . Do you want to comment on it . Sure. In our statute, there were four issues that were very explicitly given full jurisdiction to the Consumer Bureau. Mortgage origination, Mortgage Servicing, payday lending and private student lending. Those were specifically called out in our statute. Weve been working on the issue for years. Since we became an agency. We have published two extensive white papers that really detail our analysis of this market. They involved scrutiny of upwards of 15 million loans. Its the most comprehensive work thats ever been done on this industry. What we concluded from that was that the problem of debt traps rollovers of loans, was a very significant problem for consumers, and who are in the small lend market. There is a representation this is a product that people get a loan, and repay it, and they get in, get out and dont end up in a trap. And what we found was that well over half the loans are repeat loans, in sequences of 6, 8, 10 12 loans, where people are living their lives off of 400 or 500 interest. Thats the issue that were looking and working to address. It is a very complex issue, i will say. We want to preserve access to credit for people who need that credit, and we recognize there is a demand for that credit. At the same time we do not want consumers to end up harmed by being stuck in a debt trap they cannot get out of. And harming their finances. Thats the dilemma were trying to confront there. Thank you. Senator brown . Thank you mr. Chairman. Before i begin questions, id like to comment on recent attempts to undermine the Consumer Bureau. Last month the House Appropriations committee passed a bill that kills the cfpbs independence. Similar attempts have been made in the senate, including the idea that the cfpb governance should be changed to a commission. The argument is that it would be better led by a commission its clearly designed to cripple the bureau and set up one nomination fight after another. We are, inl believe, the only committee in the senate to hold a hearing on many of our nominees, most of whom were sent to the committee in january. In 2007, when senator tester and i joined this committee, when we were in the seventh year of the bush administration, this committee had three nomination hearings and reported out a dozen or so nominees before the august recess. We have important jobs open waiting for us to act. From a fed nominee, to the treasury undersecretary for terrorism and financial crimes changing the cfpbs governance would stop the agency in its tracks, and again leave consumers without a federal watchdog. And i would again point out with the criticism that we hear so frequently of the cfpb on budgets, on buildings, all that, that the cfpb has returned over 10 billion to 17 million americans. Now, my question director i was encouraged to see the release of study of forced arbitration as we required in wall street reform. Im concerned, but not surprised that the bureau found no evidence that forced arbitration leads to lower prices for consumers. 3 out of 4 consumers didnt even know they were subject to an arbitration clause. A couple of months ago, a number of members of this committee sent a letter to the bureau urging swift rule making to ban forced arbitration in consumer contracts. What is the bureaus thinking on this issue . When can we expect to see action . Thank you, Ranking Member brown. As to nominees all i can say is, i was very pleased to have the opportunity to be confirmed by the senate in july of 2013. It took a while. But ultimately was a strong vote. And i really appreciated the care with which the Senate Considered that nomination. I cant speak to the others youre talking about. On the arbitration report we did issue an arbitration report. Congress required us to do that as part of the dodd frank act. What they said was actually, congress did a couple of things that were interesting in arbitration in that law. They first said that they were going to ban outright any sort of arbitration clauses, predisputed arbitration clauses in my mortgage contract. This was a significant shift away from the permissive attitude to the act developed over decades. They also said, and this is what were getting to here, as to the the rest of Consumer Financial products and services, they required the bureau mandated that the bureau perform a study and a report to congress on the potential effects of arbitration agreements of that kind. We did that very carefully and deliberately. It took us a couple of years of work, lots of research, and ultimately a significant report that looked into areas that had not been looked into comparing arbitration in the consumer context with judicial resolutions. We did issue that report to Congress Earlier this year. What the statute then says is, having done that, having performed that task, it was then for the bureau to consider what might be done, consistent with the Public Interest, and consistent with the results of that study to either modify or address predispute arbitration agreements for other Consumer Financial products and services. We have determined at this point, having digested our own study, and gotten a great deal of feedback from industry and others on it that we will be moving ahead with rulemaking in this area. And well be in due course here convening a Small Business review panel as the first step in considering what actions to take. So that is where it stands as of this point. Thank you. We hear from banks about issues related to coordination of exams with prudential regulators. I know the Inspector General recently reported it is not found duplication of regulators oversight responsibilities. Id like you to talk for a moment about your examinations. Whats the value of your examination, and supervision authority, what are you doing to improve coordination without with other agencies of your exams, particularly of smaller institutions so that because obviously exams can be costly to them and we want to make sure theres not duplication. This is an area of real focus for us where weve made a tremendous amount of progress over the last several years. If you had asked me that question back in 2012 when we were just undertaking our examination program, we were only man mally staffed up. We were probably at about a third of what we needed in terms of manpower. The coordination wasnt as good as we would have liked it to be. At this point i think the coordination has become quite good. Not perfect, but quite good. I would say in particular on the nonbank side, we coordinate with the conference of state and supervisors who have primary responsibility in that area prior to the Consumer Bureau entering the scene and we have done numerous coordinated exams with them. And we share information with them back and forth consistently. With the other federal banking agencies which is also quite important, because they have credential safety and Soundness Authority which is significant over these institutions distinct from our protection authority, the law mandates that we dlab rate. The law mandates that we share drafts of examination reports which we do back and forth. The law mandates that as we go about proposing rules that they have a lot of input into those rules, which they have had. And i think that that has improved enormously. Not to say that i dont still hear isolated instances now and then where it feels to me the coordination could be somewhat better. But i think certainly the leadership at those agencies, at the Federal Reserve, at the fdic and occ have been committed to collaborating with the fcpb and understand that we have distinct but related roles to be integrated, so institutions dont have to face what i regard are unfair situations that they would not know how to proceed. I dont think were hearing that. I tell institutions all the time, let us know about your complaints in this regard so we can fix them, and again, i think theres been tremendous progress over the last three years. Thank you. Thank you mr. Chairman. Director cordray, as you know recently in congress weve been debating the question of whether the nsa should be allowed to access telephone records of americans. And i have been very concerned about the massive Data Collection that the cfpbs been engaged in. The last congress, as you know, i asked that the cfpbs Data Collection program be reviewed by the Government Accountability office. And that gao report established and id just like to confirm the facts with you, but that gao established as i understand that the cfpb has an ongoing collection of up to 600 million credit cards that are being evaluated, the data is being collected on 11 million Credit Reports, 700,000 auto sales 29 million mortgages and 5. 5 million student loans. I certainly would agree with figures that are set forth in the gao report. They did a very careful evaluation of us over the better part of a year. We worked closely with them. I have nothing to dispute in that report. As you know in several places the dodd frank legislation prohibits the cfpb from collecting personally identifiable information. The cfpb claims its not doing so because it is not collecting certain things like the names Social Security number and address of the person whose credit card data, for example they are collecting. Could you tell me what data points the cfpb is not collecting on those credit Card Transactions . You mentioned the fact that we have developed credit card data base. Were working on a National Mortgage database Consumer Credit panel. In all of those areas, this information, its really significant to get this, because its often misunderstood. This is identified anonemized information as you noted. Name address, Social Security number, account number, is not included in any of that material. So its actually pretty uninteresting data from the standpoint of, say, you or i being concerned about our privacy. What it does is gives us a sense of patterns of Consumer Protection, consumer abuse in the industry. Thats what were looking for. Its like a gdp or Unemployment Rate analysis its not about what you or i do in our daily lives. Im uninterested in that. You and i have had this conversation before. One of the concerns i have is that its easy to say that data has been anoneimized, and its relatively easy to deanoneemize. Just the dates and locations of four purchases are enough to identify about 90 of the people in a credit card data set. So are you telling me that the information the cfpb collects did not be deanonemize the. I dont think it would be worth anybodys while to do that. Personally identifiable information within the federal Government Agency is only a problem to us doing our work. It creates all kinds of issues. And we try to avoid it as much as possible. So to avoid making extra work for ourselves on those issues. Just to get clear on the scope on those issues. Just to get clear on the scope, my understanding is youre collecting data somewhere around 80 to 90 of all credit cards. Is that correct . In that one, all the other areas we do sampling. In that one we dont because industry told us it is more efficient and less costly for them to simply do a data dump than to have to organize a representative sample. And this is consistent with other agencies treatment of the same issues. Well because of time, im going to move on. I want to continue this conversation. Thats fine. I do believe the protection for americans is not adequate. Happy to speak to you personally and your staff in your office wherever youd like. The last question i want to get into is the paperwork reduction act designed to ensure the greatest possible Public Benefit from and maximize the utility of information collected, maintained and disseminated by the federal government. And to improve the quality and use of federal information, Decision Making and so forth. Its my understanding that each of the ten 22 orders issued to date by the cfpb which is the orders to collect this data has been sent to fewer than Nine Companies to avoid the review of the request by the office of management and budget. You could tell me how many time has the cfpb utilized the exception for reviewing Data Requests by sending 1022 requests to fewer than Ten Companies . We utilized it several times and went through the full process several times. Thats one way of characterizing what weve done. As were seeking data, if we can limit the number of institutions so that we dont have to burden other institutions, i assume thats what you would like us to do. Its another version of sampling. So rather than seeking the data from hundreds of institutions, if we can get a representative sample and fewer than nine, thats easier for us. You could clarify for me and maybe can you do it since my time up is maybe can you do it in a written response. Id like to know the exact data rather than several times this wayen that way. Out of all of the Data Requests you made how many have avoided the omb review . Today is military protection day. Fitting you should be here. One of the prouder achievements is in the service of Member Affairs which is in your Organization Led by holly petraeus. So thank you for all youre doing to help protect our servicemen and women. The basic Legal Protection for these Young Americans and Service Members goes back to the civil war. Enforcement is scattered about. They have Civil Authority civil action banking regulation. But the enforcement is really lax. You pointed out last week when you did a report which indicated that Service Members continue to report difficult obtaining their Service Members and civil relief protection of 6 on loans. The lower going back a long time ago. If you get anything in the Arms Services is 6 . And i have put legislation in to give authority for enforcement to see if there is background. If congress were to enact this legislation, how would the cfpb be better equipped to protect them from social harm . If there are more cops on the beat to protect our troops in terms of potential abuses or problems and Financial Products and services which for them are just a distraction from their ability to focus on the job which is defending and protecting all of us. That that would be a helpful thing. I note that the congress a couple years ago and i think it was under your urging did provide enforcement support. I think that is a positive step forward. We work with partners, particular lit department of justice is active in this area. Again, they only have so many resources. We only have so many resources. If theres ever an area where we should be training and focusing resources on the problem its making sure that our Service Members are treated appropriately and fairly in the financial marketplace so they dont have to worry about those problems. Thank you very much. And you made reference the military lending act. That was passed in for the fiscal year 2007 National Defense act. It gives you authority but it puts the burden on the defense. Theyre trying to do that again. They had a series of regulations that were well intentioned but didnt address the problems that face servicemen and women. Can you briefly explain what how these members remain vulnerable today. I appreciate you have had a very constant and sharp focus on these issues. And youve seen to it that progress moves along in this area. I think were close to having a new set of rules. I commend the department of defense for the speed with which they recognized the importance of working on this problem. The difficulty is that military lending act passed in 2007 there was a sest rules meant to implement it. They were too narrow and too easy circumvented. This is very much the problem that senator brown pointed out earlier of people being able to swim around the otherwise well intentioned rules and you still can see website after website of online lenders to Service Members at triple digit percentages and some are 400, a 500, 600 going under the current set of rules which is why congress has directed that this be redone. I believe that very shortly were going to have a new set of rules and Service Members will have new important protections that they probably should have had several years ago. Thank you very much. Again, were all rightfully appreciative of the service that these men and women render the country and we say that repeatedly. But if their rights cant be adequately protected, then the let rhetoric is nice but its better to have the access to the rules and protections. A number of the members of the committee can speak to this personally from their own experience from service. So i think its quite important. Thank you very much. Thank you mr. Chairman. Thank you. Like a lot of members and a lot of citizens, im really concerned about the vast amounts of data that cfpb collects on all citizens or related to the financial transactions. I have a proposal to allow any citizen to see what personal identifiable data the cfpb has collected on them at least once a year. Would you support that concept . So in general our approach to this is were not interested in personally identifiable data where we can at all avoid it. It and causes problems for us as an agency in our work. The data were collecting to monday tort credit marred market Mortgage Market issues youll all ask us from time to time whether laws have gone too far, whether theyve gone far enough. How can we possibly answer the questions if we dont have data on the marketplace . Now that is very different from me wanting data on what senator vitter does in individual transactions. We have consumer response where consumers give us their data so that we can work on the complaint the same way constituents go to your office and give you data so can you work you collect significant personally identifiable data . No. And then the you dont . We dont. You dont collect any of that . We have no reason to do that. And you dont collect any of that . For example oushgs credit card data, we do not have name. We do not have address. We do the no have Social Security number or account number. Were not interested in that. Do you collect it before you scrub it . We asked for the data to be scrubbed before it comes to us. Who gets it and o scrubs it . Depends on which data base were talking about. Id be happy to have a full briefing for you on this. So somebody involved in the process has that. It is scrubbed before it comes us to. They care very much what we do in our personal transactions and always marketing to us on that. Thats where the focus should be. We dont have that data. We dont care about. That were trying to monitor markets as a whole. Its a big difference and its often misunderstood and misstated by people. So thats what i would say to them. So what about these data bases, the collection of one time collection of 100,000 to 500,000 departmented advance accounts that contained department account and transaction level data . Did you never collect that . Weve had particular collections from industry in order to work on particular reports. Again, were tip beingly not interested in transaction level data. Or individual transactions. So what i did reference did include transaction level data . Again number of different collections over different times. If youd like us to have people come to your office and speak very specifically about anything in particular you want to know more about happy to do it. If its a problem in your mind, then its a problem in my mind. I have seen personally identifiable transaction related data that have been collected. You have seen that . How have you seen that . Ive read about at least three specific data bases that you all have collected that contain that, number one. Give us a chance to brief you and question speak to this number. And number two, there is all sorts of dat yau collect that involve that information, at least before it gets to you. Would you support citizens being able to see what data is being collected because of regulations of cfpb . This sounds good in the abstract typically the data were collecting, we cant tell what you citizen is what. You and i dont want us to know. That and we do not know it. Therefore, we couldnt even answer that question. It would only apply to what im describing. You would support citizens having access to that to understand what is being collected . Again, id be happy to talk to you about that. They gave us the saturdaya so question work the problem just as do you the arms of your offices. If its enforcement or reaction to get relief to people, we need to know who should get the relief. I dont care and dont want to know who an individual is and we typically do not know it. And therefore, we cannot tell an individual anything about their data. We dont know whose data it is. Thats the way i want it. Senator menendez . Thank you mr. Chairman. With the fifth anniversary of the wall street reform act this month has been a lot of discussion about what the law did well, where there might be room for improvement and as i look back, i think its quout question that establishing the Consumer Protection bureau is one of the corner stone achievements of the law. People have a cop on the beat on their side to identify and stop predatory and some deceptive practices. Now i fought hard for the creation as a member of the committee as well as many of the protections it is charged with enforcing. Such as strong Mortgage Servicing rules to stop foreclosure abuses and protections to end abusive and deceptive credit card practices. And while the law is not perfect and some important challenges remain, the last five years have shown that overall theres a lot it got right. The cfpb has been at the forefront of manufacture the gains which is a testament that work that you and senator warren and the cfpb put in to stand up the agency from scratch and continue the positive development. I want to commend you for being a force for good. Some of the credit card reforms that i fought for in the 2009 credit card act. I want to talk you to about those. Im pleased that the bureau made these a priority. Our economy and Housing Market continue to recover from crisis. There are still many parts of the country struggling with mortgage debt and foreclosure including my home state of new jersey which has the highest rate of the country of home currently in foreclosure. Despite the cfpbs new rules, in homeowners behind in the mortgages continue to face obstacles to obtain modifications that can help. Until it is complete homeowners are not available for duel tracking protections which prohibit a servicer from moving forward with a foreclosure while the home owner is pursuing lost mitigation. While they xram to believe pull together document after document, they accumulate additional fees and burdens that make them even more likely to default. Some Services Request documents on a peace meal basis and request the same documents. Making it an infective loss mitigation a pipe dream. Do you have concerns that services are intentionally obstructing the loss mitigation process to favor foreclosure . If so what more can be done to protect consumers . We do and i do have concerns for that. I saw the difficulties that Mortgage Servicing problems were creating for individual homeowners who really didnt deserve to have that heaped on top of financial distress. When we created our new Mortgage Servicing rules which went into effect in january of 2014 we look closely at the Consumer Complaint line frequently and work to address them. We have further work that were doing both in Enforcement Actions. We had several Enforcement Actions where this is part of the problem. And part of the answer in orders that we had to impose. And also we highlighted last edition. So that all of the industry could know again that this is a focus for us. It is a problem persisting for years. Its one they need to clean up. It is a complex problem. As you noted different states have different situation thats theyre in with underwater homeowners or with foreclosure processes that differ dramatically from judicial to nonjudicial foreclosure states. I think theyre saving consumers 21 billion a year. The bureau released you its own report that found similar successes but also identified market practice thats are concerns for consumers. Can you give us an update in that regard . I can. I will tell you. I go back to the state level. We saw all kinds of complaints people were making about credit cards. This is 2005, 2006. Before the card act, before the financial crisis. They corrected flobz late fees, universal default, other issues. Some of the real problems have been cleaned up. Second, Credit Card Companies themselves have done a better job on Customer Service. Can you see in the j. D. Power surveys. The net promotion score index which they used in hand willing credit card calls from customers has been an enormous shift. Putting financial incentives behind the way people handle the calls so theyre more consistent with what the customers looking for rather than just trying to get them off the phone. I would think about ustion those across the customers and the Financial Products. That will be a good thing. They know how to do it. They should do it. The third thing is consumers themselves, coming out of the financial crisis, consumers are more responsible about thinking about how to approach the credit card debt. Whether youre a consumer managing your own debt, youll have better experience with the company and marketplace. That to me is one of the Success Stories. There are issues that were concerned about and looking at. Deferred interest is an issue of some concern for us. How the rewards programs are advertised, we just want to be careful about that. And i think much of that has been cleaned up. But i would say the credit card industry is a hopeful sign for me that Financial Institutions when they come under pressure from congress and others and also when they understand the importance of doing it themselves have the ability to clean up their act. I would urge them to consider what they are doing there and how they can do it elsewhere. Thank you mr. Chairman. Good morning. Good morning. They have become automotive giant in the sector of transportation. We certainly have seen a lot of jobs created by the manufacturers that depend on dealers in South Carolina and around the country being able to sell cars. Thats why im particularly concerned about the cfpbs 2013 bulletin on indirect auto lending which impose az one size fits all cookie cutter regulations on lenders and dealers. As senator shelby has already stated, cfpb has no jurisdiction over auto dealers but seems that your bureau is regulating heavily the relationship between lenders anders. Dealers. Im not as concerned about the dealers or lenders. Im really concerned about the consumers in South Carolina whether its greenville or charleston who will pay a higher price for their vehicles because of the governments involvement in trying to make things better. Director, lit itting the ability to compete for customers business will mean that the customer, simply the customer, ultimately pays a higher Interest Rate. How do we explain that back at home, cfpbs involvement forces some south carolinians to pay higher Interest Rates on a car note and how does that provide greater Consumer Protection . Yeah. So a couple things. Thank you for that question. First of all, just understand my background, too, is i come from a strong automotive state. I talked to senator brown you know gm, ford, chrysler, honda are very significant presence in that city. When i was the Ohio State Attorney general, we had to deal with all the issues, first the chrysler and then the General Motors bankruptcies which were tremendously burdensome for everybody involved but kaum to a good result. The resultion that we understand the importance of employment in that area. Pensions and health care for people who work in that field. Im the director of the bureau. The last thing i want to do is things that hamstring important markets like auto lending, mortgage lending and the like f i do that, it will be to the detriment of my agency and the american public. We had the hottest auto market in the last several years than we ever had before, i believe in the history of this country. And thats at the same time that the Consumer Bureau was gathering its wings and coming into existence. Im pleased about that. I think consumers benefit when they have access to automotive transportation, probably in your area as in mine. If you dont have the ability to get around through a car or truck, youre really in a lot of trouble in your life. So thats important. We also believe that people should not be subject to higher priceors onerous terms based on their ethnic, racial, or jenldgender background. The Justice Department feels strongly about that as well. The bulletin that you described was actually a bulletin that was a pretty straight forward restatement of the law. It wasnt a change in the law several years ago which simply stated that if youre a lender and you have an automotive Lending Program youre subject to the equal credit opportunity act that is an undeniable proposition. You need to think carefully about what your program is. I hate to interrupt you. I need to go to another question. A large numbers of the legislation members and i would suggest that members of the cbc are very concerned about discrimination and perhaps your approach to the indirect lending market is inconsistent with the outcome that i think you sincerely desire to achieve. My other question and some of the time i have remaining is on our conversation before we started the panel as it relates to the trade issues. I think senator donnelly and myself submitted a letter in may asking for a grace period, some time so that those good actors in the Mortgage Business are trying to transition to the new forms would have bhor time than october to have less liability exposure as they move to the new forms. I would love to hear your response as we talked about earlier. We have the know before you owe mortgage rule which is Something Congress required us to do, just as a reminder. Its in the law. Im retired to do this. Its a good thing. It takes a regime that has grown up historically that didnt make a lot of sense where the consume her to get two different forms at the application stage from two different government agencies, hud and the Federal Reserve. And then two different forms at the closing stage. Very confusing to consumers. Why am i getting two forms . How do they differ . What am i supposed to take about that . We were supposed to reduce that to one form at each stage which we have done in that rule. Thats a good thing. There is still pain in the transition. That requirement was in the law five years ago when it was passed. We worked on this very carefully over time. Very transparent about it. We finalized the rule in november of 2013. As we get to the end of it some people are not ready. We heard from you and others in the spring and it was its an example of the oversight, mr. Chairman, you talked about. When we get congressional oversight, i take it seriously. I dont regard myself as able to blow off concerns that people raise to me f youre raising a concern on behalf of your constituents theyre the people im trifg toying to serve as well. So we did in the end it was due to an error in our part, but we did back up the implementation date further out in the end of the summer sale season. It is now under consideration to put that in october. A lot of people dont like a date of Something Like january because when we did our first round of mortgage rules, we were under requirement of time frames from congress, it was january and so many systems change thats they do or systems freeze thats they do at the end of the year that is inconvenient. And in specific response to your question, we went out and worked with the other agencies to get an agreement which we have that the early examination of this will be diagnostic and corrected. We dont think people are out there going to be trying to exploit consumers on Something Like this. Theyre going to be trying to get it right. And so for the first period which may last many months of the other agencies as we look at this, if we seerors well see what they are and how they should be corrected. Well not be looking to be punitive toward people. We said that explicitly. Ill say it on the record again to you. Thats how it will be. I can tell you that what we said about the mortgage rules two years ago and that is how it has been and nobody has said otherwise or complained and we have taken that to heart here as well. Happy to talk further about it. Weve been trying to get a fair amount of leeway here and moving forward with an important chafrpgschange thats good for consumers and help them understand the transaction better. Senator tester . Thank you, mr. Chairman. We appreciate the extension you gave. You did respond to a letter that i and mr. On this committee had signed. I want to talk about nativeamericans. Its a different ball game there because of the issues of sovereignty. And the issues of con stantation. I heard montana tribes that are very unhappy with the consultation process. To be fair, ive also heard from an Oklahoma Bank that youre doing good things. So the question comes up, is the consultation process, is there a policy on what you do and how you do it that applies to every tribe across the country. In fact in response to back and forth that you and i had on this subject and others from that area of the country in particular, but other parts of the country may have a tribe or two as well. We formalized that and shared it and got input on it from the leading tribal counsel. We have since been requested can we put together an mou that will be more specific about some of the aspects of how this works. We have shot back to the tribes sort of as a whole. I dont want to get into having individual consultations with individual tribes. There are a00 of them across the country. Were trying to deal with them as a group. Theyre very concerned about the small dollar lending, potential regulations there. We have had two consultations with them on that subject at their request. There is a considerable amount of input from them. We try to be as an agency accessible to people at all times. I think tham proves our work if we know it and it doesnt help to not know it. I say that, too. Im happy to hear further from you. And well try to help where we can help. Earlier this year, the Bureau Proposed several changes. While i think there are a few things we can work on, were appreciative of what the bureau did and made positive changes. One chf was expanding the definition of rural states and now under the changes, almost entire state of montana is considered rural which is correct, by the way. Are you still hearing from folks who think they are in rural areas that they havent defined very well . I still recall meeting in your office in which you pressed upon me that i thought i said that i understand something about rural from parts of ohio which are quite rural. And that led to how to expand this definition. Before we came into being an agency and the deaffinition would have covered 2. 2 of the American Population which was plausible but somewhat narrow. We looked at it and we decided it was too narrow. We came out with a different definition that was more like 9. 9 of the population. And even after that then people showed me maps of ohio, county by county. And senator brown and i could do this in our sleep. There were a bunch of counties that were rural in my mind from what i know about them. One thing about the bureau i appreciate about the strong team there is we want to get it right. If we didnt get it right, were not going to pretent we did and say we cant change it. It is much broader in the entire state and covers it 22 of the American Population. It feels appropriate to me. Weve had zrements within the agency over it. But were working to finalize rules on that which we should do by the end of summer. I think noefrt part theyre fairly well received. We hope people will think more about it. I was very concerned about this hearing about the information youre selecting. And because of the data breach at opm. Maybe this data base will be breachable, too. I was very encouraged where youre not collecting Social Security numbers, names, addresses, account numbers. I think if we to pass a bill that would tell you to release personnel, personally dat yachlt you would have to go back and put names and addresses and social securities to that data which would take a ton of time. I really would not like to have to do that. Thank you very much. Director, want to raise the issue with several people raised in a bipartisan level of the cost of your building. What i understand from your Inspector General, total cost of this building which used to be used by the off the of the thrift supervision is 216 million all in. This is a facility which you gutted and youre putting in a two story waterfall in a glass staircase. That will lead to a per employee cost of hecking them in washington, d. C. 148,046 per employee. I would say thats senseless building that is way okay with the odds of thrift supervision. How come you need 216 million in upgrade of what they already had . Several things. How does the two story waterfall help you do your job . That one in particular, i dont begin to see how it helps us do our job and probably we wont end up with a waterfall in this building. But any two bit Shopping Mall in america can you find a waterfall. I think that is very overstate bid people. In any event the office of thrift supervision had this building before and they recognized and did an audit and recognized the building was in deep need of fundamental repairs. Were talking about use let me interrupt a little bit and follow on the line of senator tester. You certainly would be able to pick up the collection of bulk work that youre doing. Had you taken the specific action i would ask you again having taken the specific action to take members of congress out of your Data Collection and members of the Supreme Court out of your Data Collection . Do you see the issue on separation of powers . So you now kind of piled up two questions on me that i havent had yet a chance to answer. Id like to go back to the building first if i may. They recognize that systems were reaching into the useful life. Get back to the secondary question. And you had made sure that you have not collected the credit card data of Supreme Court justices . We have not collected credit card data on any member of congress or any Supreme Court justice. I would we have no purpose for me to do so. Into is it more important of the privacy of the individuals across the country where were not collecting their data either. Are you sure you have not collected Supreme Court Justice Information . Why i would do that . Because of the separation of powers. But why would i be collecting Supreme Court justice data . This is a scandal. It is a bit like the nsa scandal. It gives you at built to abuse this power and intimidate the court. Intimidate the court . I dont really follow that at all. Nor it would make any sense for me to do. That all it would do is discredit i think senator tester picked up on the issue. The only person of collecting data is to be able to access it and the problem is as you collect this not so. For private sector the purpose of collecting this information is to access it. For us its to monitor markets. Chinese Intelligence Service had it before you do when they now that weve seen on the order of 10 or 200 Million People compromised by opm . The problem is we dont even trust you to keep us secure. I see you setting up a number of hypothetical is and id be happy to speak with you to make you feel better. Why is 148,000 per employee necessary to your mission . Those numbers are off. Theyre actual lit numbers of your Inspector General. Look theyre talking about things liction other rents, theyre talking about other services. The Construction Costs have remained actually fairly consistently constant. Weve now let the contracts and theyre coming in under budget. And theyre fairly consistent with what the otfs first opined was necessary six or seven years ago before the cfpb even existed. I think this is vastly overdone. Thats my view. Im happy to talk further with you about it. I would gently suggest you make sure youre not collecting intel on members of the Supreme Court or the congress. Eyed ill be glad to take a look at. That i cant imagine were doing that. And if we were doing that i think that would reassure us all. Okay. Make sure the chinese dont have it before you do. Well look into that. Thank you, very much. So since it opened the doors four years ago theyve had a Consumer Complaint hotline where consumers can call in. They can go online. They can launch a complaint about a Financial Product or service. And thats what consumers have been doing. They come in and they complain about sketchy fee onz the checking account. Errors on a Credit Report. Harassment by a debt collector. The agency then sends those complaints on to the company who then has some time to respond to both consumer and the cfpb and to try to resolve the issue. The agency received 6 auto50,000 complaints throughout the hotline. Can you give us a figure of how many of the complaints were resolved to the Consumers Satisfaction . And how much consumers have recovered financially through this process . Yeah. And ill say the arc of Consumer Complaints continues to increase in terms of volume. I believe that say function of there is still a lot of lack of visibility. People dont know what the cfpb is and theyll know more over time and i hope theyll see were providing value to them much thats what we aim to do. I think we had Something Like 770 credit card complaint the first month. What happens then is we give the consumer a chance to tell whether they were satisfied with the resolution of their complaint or if not what they continue to be concerned about. And we then prioritize issues for further investigation or perhaps enforcement action or supervisory activity. And the institutions know that. Consumers continue to feel they have a dispute once we work through the process and we have steps we can take. In terms of how much resolution is for consumers its been many millions of dollars. Its had a toward know exactly for sure. They dont always tell us how the matter was resolved. Many of them come back to the tell your story line. And tell us, you know, often with real gratitude that they did get a resolution and they couldnt get a resolution for months and months and months. There is a lot of nonmonetary relief people get on those. Getting something fix ond their Credit Report looms for them and it is hard to quantify. Maybe they can get a mortgage that they couldnt get. That may be worth thousands of dollars to them. Debt collection issues are constant source of irritation for consumers. The wrong debt or not the right person or whatever. They cant get people to stop calling their home. I dont know how to put a price on. That getting 12 calls a day or calls in the workplace and thats not the right person or whatever it is us being able to stop that looms large for people. Another point you made to me is its sometimes easier its always easier to quantity fi the amount of relief we give back to people for things that happened to them before today. And we cant easily quantify the benefit to them of thing thalz not happen to them tomorrow because of changes made today. We dont have a waive putting a pricetag on that. Great. You created this website. Were getting 25,000 people a month who come on the website. And rising. Website and phone. We say were getting resolution. 80 get some resolution here. So the agency also just recently went live with this Consumer Complaint data base. And here you have a collection of thousands of narratives from real consumers about problems theyre having with Financial Products or with companies. And its all sortable now online. Its possible to go online and see it by product by date by where the consumer lives. For example, just this morning i went to the data base and looked for all the complaints for massachusetts about mortgages. Its a powerful way to see which issues are cropping up in the communities that we represent. Now i know its only been online for just a few weeks. But i wondered if you could describe how you think this will help improve the market for Financial Products. So the data base is actually on line longer. It was really broken into generic categories which were less insightful for people than hearing in the consumers own words. I think that is incredibly important. We described the narrative as the heart and soul of the complaint. For me to make a kplabt and be categorized as Debt Collection, wrong amount, one of a number of complaints and thats all the more you know about it. Just not nearly as insightful as to be able to hear exactly what happened to me. The calls i got at home the effect on my life. It is tangible. Its real. And to me that is very significant. The data base is causing institutions to have to compete on Customer Service. I that i is a positive pressure. There are many members of this committee and congress who are referring complaints over to whus they come to their office. We encourage you to do. That were supposedly the experts and were happy to work the complaints. Can you see and keep track of how they go. We want every american that has a problem to know to come us to and see if we can get it resolved. Zbh i really appreciate. That i see this as a prime example of how government can take small steps that will have a very positive impact on the market. There is now a bit more accountability for companies that mistreat or just plain cheat their customers. On the other hand, there is public acknowledgement for the company whos treat their customers well and resolve complaints quickly. If i k. I just want to slip in one little follow up to the point that senator brown made earlier. And thats about forced arbitration clausses. As they highlighted the report they recently released contained damning clauses. They keep them from effect live fighting back even when theyve been cheated. Now its clear that the biggest banks and some of the republican hands in the house of representatives see the writing on the wall here. Theyre forcing legislation to redo the report before you issue any new rules. I think this is a stall tactic, plain and simple. The report took three years and 728 pages to complete. It carefully documents a wide range of problems. It is thorough and extensive. I just want to ask you very briefly. The chairman is indulging and im over time here. But can we get on the record the steps the agency took to ensure that this study was complete and accurate including soliciting and considering comments from the Financial Services industry . Yeah, sure. First of all, we did a request for information at the very outset to ask people how we should go about doing the study. We broadly solicited peoples thoughts and heard a lot from both industry and different kinds of markets. We were very kprens bif what we should do in the study and do as much as we could. We found in many areas this was breaking brand new ground. There wasnt necessarily data easily accumulated on that. We did go to the american arbitration association. We were able to get significant data about the arbitration process which really shed light on that that people had not had before. We looked at a number of different ways of trying to get a judicial resolutions of similar matters. We were helped in part because there was some class actions involving certain institutions who at one point had stopped doing their arbitration agreements. You can actually see what the before and after was. Did it save consumers money to have this enforced arbitration process and we were able to map that and discern that. We looked at Enforcement Actions as another means of affecting the marketplace. People talk about our Consumer Complaint process as a new element here. Were always happy to hear more. We had tremendous input and we gave other roundtables an opportunity to digest it and thats an on going process. As we now embark on a rulemaking process, there will be Small Business review panels. We found that useful. And there will be noticing comment process on. That everybody will have their say. Well listen to it all. Digest it as best we can and act in the Public Interest consistent with the results of that report to determine what to do about this. Thank you. And thank you mr. Chairman, for your indulgence on this. A yell really appreciate it. Thank you, mr. Chairman. Director earlier in several other members of the panel have requested information concerning the collection of dat yachlt probably the reason why its really an item of real interest is because of opm and the loss of the data there. A lot of employees are concerned about the loss of their people data. I think when we talk about the collection process that you use and utilize to collect the data that you want to do the Market Analysis with, the question comes into really are the organizations that are required to submit data to you are they submitting from them through a third party that scrubs it are they providing data to you thats been scrubbed by the organization itself . Do you have are you aware of how that works in terms of how you actually scrub the dat why or how it gets scrubbed to begin with . They have all this dat yachlt they know everything youre doing. They know everything im doing. They use it to market us to. I dont have myself objection to that. Privacy folks do. It can be positive. It can be negative. There is data that is much more troublesome than anything we have. Where we can get the data on a sampling basis and ask for certain fields, it comes to us in that form. The credit card data base is vetted through a Credit Reporting company. Were trying very hard to make sure our employees do not have access to personally identifiable information. That only cause mez trouble in our work. The opm breaches, they afektd my employees as well as your employees. Were very sensitive to that. It is something that were now dealing with to make sure our employees know what their rights are, whats available to them and im sure you are, too. The notion we could contribute to that ourselves is not something that we ever want to happen. But it brought to light the fact that when you collect data we have an additional obligation to protect that data. Thats right. Im curious if you received the data and then scrubbed it. It sounds like what you indicated is in the case of the larger bulk data amounts, it is scrubbed by a third party britefore it gets you to. A Credit Reporting agency that has this data typically. I have happy to have the folks present to you on each individual thing. I want you to have comfort on this. Were trying to be very careful about it. I want you to know that were trying to be very careful about it. I read and seat stories about the nsa. Im an american citizen. I have the same concerns do you about that. I think that is very different from what were talking about here. Im happy to have folks come and spnd time giving and if you remain concerned thats a good way to leave it and well request. That thank you. Let me move on. Rural appraisal from south dakota, we had challenges i think im not sure how deep you got into this personally but rural appraisals are really tough to get. Im not sure how they are in more urban areas. But in rural south dakota, trying to get an appraisal is very difficult. You tried to set it up so that we can identify rural locations and im asking is there another way in which we can get a third or fourth look at it. We have communities in western south dakota that are clearly rural in nature but theyre not identified that way. Is there a process in place where we can get the challenge set up to get them placed in the appropriate category . Whether we first opened our doors, we had a number of mortgage rules we were required to do by law. And one of them had to do with appraisals. Another is an inner agency rule with the Federal Reserve on appraisals. And ive always been somewhat concerned as to whether we got that right. One of the big issues as youre describing, im familiar it with is in rural areas there are fewer comparables. It is more difficult. Appraisers might have to come from a greater distance. So theyre not as accessible. So just barriers to being able to make rural transactions. Weve been working at trying to alleviate. That i would encourage you to press on that. Youre pressing on it with me here. Ill be taking it back. Well talk to the Federal Reserve about it f there is more relief we can give on that because its a peculiar circumstance of the few and far between areas. We want people to be able to get mortgage theres just as they can in the dense areas. Its two different things. Its the appraisals themselves and whats expected of them and come pz with regard to rural areas which in many cases dont exist. And along with that, youre seeing legislation proposed that would create the ability for some of the banks who are are literally holding the mortgages because they cant qualify on a secondary market. Theyre holding them inside. Yet, we want to make sure that theyre still considered an appropriate asset for the banks that end up doing that. If i could mr. Chairman i just got one more question. I know and you work through the qualified or the consolidated statements. And the goal was to perhaps simplify some of it. Last year as i was moving around south dakota one of my Community Bankers said i got a copy of the most recent release or the qualification statement. He says the new disclosure statement is 164 pages. That was the pdf. The only reason i bring this up if that is actually the case and if hes accurate in his definition and his explanation, look, we have to have disclosure thats people will actually read. Yeah. So, look that, is not correct. What he was talking about was the regulation the rule that actually implemented the forms is lengthy. I wish it werent. It is lengthy. But the actual forms themselves theyre not 164 pages. That would be ridiculous. Theyre shorter than they were before when you had the two forms. Theyre not as short as my friend over here senator warren really wanted it to be, one page at the application stage. One state, one page at the closing stage. We were not able to achieve. That i think it is five pages and three pages. We might find something i agree on. If congress legislates, they legislate. But were at five and three pages. Were looking to to try to do electric closings so a lot of the paper gets taken off and can you focus on key form. We tested the forms with consumers and they have found them to be much easier and more accessible and more understandable. That is a key thing for us. Whether its two pageors three pages, you know might matter in some sense in the abstract. But these are not lengthy forms. Theyre meant to be key summarized forms. And thats what were doing. Again on the rural id be glad to hear more from you. I heard a lot from senator johnson when he was chair of this committee about south dakota and hear from senator tester and other that have western states and the population is spread out. We have been working to give more latitude to banks to portfolio mortgages in their own portfolio and have all the protections of the rule. I think were getting to a good place on. That well hear more if them as we go. My time up is. Increasing the Mortgage Market which im glad of and its a good thing. Thank you sir. Senator warner . Thank you mr. Chairman. Great to see you again. I got two or three areas i want to touch on. Ill try to be brief. One is, you know we started to see all the hacking, huge concerns about opm as well. Im hopeful that they have a couple conversations. One the areas when we started seeing this on the private sector side early on in terms of credit card and debit card hacking was an area that i wasnt even that familiar with of the differential Consumer Protections between credit cards and debit cards. Yes. And you know, i know i think particularly about so many young people using debit cards rather than credit cards. They have different business models. How do we lean in this a little bit to make sure that consumers senator corker and i have legislation that we harmonize the protections. Will you speak to that how we better inform particularly our as a parent of daughters that use debit cards rather than credit cards how do we equalize the protections . I will. This is interesting. Some of the regulation grows up through sort of historical circumstances that dont make logical sense. So credit card protections were developed at a different time and for different purposes than debit card protections. Another example this is prepaid cards. That is another card that people have in their wallet. They have no Consumer Protection. Most people are unaware of that. Thats why people are working to get that rule finalized so we cover that gap. But what youre saying is credit cards and debit cards, they started out as being seen as very different. You know, credit cards were about credit and a way to get away from just store cards and cards and give you credit generally, but debit cards were seen as having to do with atms and other things. Theyve merged together as payment mechanisms and i think people now may pull out one card or the other and not think that carefully about them although some people are quite careful, but there are differential protections. I believe the Fraud Protection on a credit card is 50 limit of exposure and on debit cards i believe its 500. It may have made more sense when debit cards were just about the atm. I dont know that it makes sense today. Its something that i would invite congress to think about and you may have guidance for us on that, whether we could fix it ourselves or not or whether if would have to have a statutory fix, im not clear on that. Even within the industry, i think theres some interest in harmenization. At least people know there are different presbyterians. Let me move to another subject. One of the areas that ive spent some time on in the last eight or nine months is looking at this dramatic growth in the gig economy or the ondemand economy, particularly amongst millennials. One of the good sides and bad sides of that. Obviously, theres a lot of freedom that comes with these new work environments. For some folks its quite lucrative to cobble together these. There are a whole host of questions around the lack of a safety net around workman comp. But something we will have to work through maybe not with a topdown solution, but with Public Private opt in opt out models. Weve been smarting here as more and more, theres some estimates theres much as a third of the workforce falls somewhere along this contingent workers. But, as we think about qualifying for mortgages within qm weve got some concerns, weve heard some concerns that this emerging new kind of 1099 or contingent workforce that traditional Banking System doesnt record their income in an appropriate way. So their ability to qualify for qms are somewhat undermined. My understanding is that appendix q is the section within qm. Is this an area that youve taken a look at . And if not i understand. Theres not a lot of policymakers taking a look at it. But far and away, its the most growing section. Anytime i hear appendix q, i know theyre in the weeds. I didnt know about it until my staff got it. The point you raised is a good one and its something that i have become increasingly aware of and concerned about. So theres different aspects of this id say several aspects. We are moving to an economy in which we have fewer fulltime, fullsalary employees in the old model. Just as we moved over time away from definedbenefit pension systems. This is happening. Interestingly, i read that the Health Care Law is actually proliberty as a piece of legislation in the sense that it doesnt cause people to have to be stuck in a job to get their health care. They can consider being an independent contractor and other things and still get health care. But it does create more complications for people qualifying for a mortgage, because its harder to document their income. Their income may be more fluctuating, but you start adding up, and you start adding up whos intermittent employees, who are temporary employees, who are seasonal employees, its a huge portion of the American Population. So we need to look at our mortgage rules in light of that. Its not an easy thing to figure out how to handle but its something we need to go back and figure out about. But from the wealth and retirement for americans this is going to be a problem for americans. Because Pension Plans and 401 k plans seem to be limited to the fulltime, fullsalary people. And everybody else doesnt have access to the ability to put away savings for retirement or get them matched by an employer. And were going to have to think harder about what we do about that. Treasury is developing a myra account. Its something we need to think about. Because otherwise, people are going to be falling behind in income disparity, but also falling behind in income and wealth disparity. In our office, we talked a little bit about qm. And i know we were all working on this issue way back when. In the bad old days when so much was happening. We were all concerned about a 5 risk sharing if you remember. Thats where everybodys focus was and trying to figure out a way to get that right. One of the things that weve looked at in legislation is dealing with qualified mortgages. And there seems to be this focus to only deal with it at Community Banks, only smaller institutions, and i guess, if you look at a qualified mortgage thats held on portfolio, that means the institutions keeping 100 of the risk. And i guess ive wondered why weve tried to differentiate, if you will, between smaller institutions, holding qualified mortgages but larger institutions being unable to do so. And i know we talked a little bit about it. But i wondered if you might address that, and i have one other question. Thats fine, and we dont have as much time to talk about it today and id be happy to talk about it more with you. We generally are trying to find ways to encourage Community Banks and Credit Unions to do mortgage lending because if you look at the data going through the crisis, they had lower defaults than anyone else. They are the most responsible lenders we have. And the more lending they do in accordance with their traditional underwriting models the better it is for consumers and the economy. Thats why we have focussed portfolio provisions to benefit them. Im concerned about it at upper levels, because i dont, the logic of it you know may or may not obtain at larger levels, but we had, im just experientially, we had a lot of institutions that blew up, that didnt get it right. Washington mutual. Countrywide. Ameriquest. Some of these companies that really threatened the economy because they made such a mess of things, and they were doing portfolio lending. So portfolio lending isnt always a cureall in terms of im bearing the risk so im responsible about it. Although it seems to me that Community Banks and Credit Unions have been incredibly responsible about it. And their share of mortgage lending seems to be on the increase. Thats good for america, i think. Think so it just seems to me that and i agree with much of what you just said, but it seems to me on the port noel yoe lending kmoenant theres Something Different than just stopping it at 2 billion or whatever, and then people just going whole slog into it at certain levels. There ought to be maybe. Something different than that stark line. On manufactured housing, look i live in a state where you know we have a lot of people that have difficulty affording housing. Senator brown lives in a state where there are a lot of people that have difficulty affording housing. Many of us are in the same i know senator cotton does no offense. But the fact is that, you know for some of the lower income citizens that we represent manufactured housing is an outlet. I know senator brown and i sponsored legislation back in 2012 that actually was more expansive than what was in the shelby bill this time. And yet, we have these rules that are in place that really make it difficult, i mean you and i talked about the fact that on a smaller loan a 20,000 loan, a 30,000 or 40,000 loan the costs that are associated with doing that up front end up bumping up against some of the regulations we ask, we have, and i just wondered if you might address that and at least address the fact that you understand thats a problem, and im wondering if we might collectively generate a solution for that. To me the problem that im concerned about, its not limited to manufactured housing. Its as you go to thelier end of the spectrum in terms of the size of the loan. The smaller the loan theres certain amount of costs that have to be incurred in order to make that loan. So at a loan thats 200,000 300,000, 400,000, i guess in california maybe 800,000 the costs are spread over a big base. At 25,000 or 50,000, a lot of houses in my state are of that kind and manufactured houses are that kind the costs start to get larger. The law, as it currently exists and that we implemented does provide for that and it says under 100,000, the 3 points and fees cap can rise to 4 and then to 5 and then at lower levels to be a hard dollar am. Whether those numbers are set at the right smot is a point worthy of attention. Again, thats not specific to manufactured housing. And i want to know that people at the lower end of the cost spectrum can get mortgages and arent blocked by something in the administration or just costs of this. Just as automobile lending actually is going further down the spectrum. People need their cars and to me thats a good thing. So im happy to talk further with that. We have looked weve been trying to look at the data on manufactured housing. People have been raising this question, is it a problem . Is it not really a problem . What we do see is that every month of last year, from the Census Bureau ser survey data, manufactured housing lending was up from the month before. And the leading manufactured housing manufacturers are quite profitable. So i dont know what to make of some of the concerns people are raising to me. But i will say that this issue of costs on a smaller loan, i think, is a universal issue and problem and one that maybe we should be thinking about whether the thresholds are exactly right. Thank you for the time and i would close by saying i pleesht you looking fa data, and i understand that in a growing economy, youre likely to see more people doing these types of things. Weve seen some data that shows that numbers of these people are unable to be served and theyre ending up paying more for rental housing than they could be paying for actually purchasing, again, a lowercost home of either type, whether its conventional areor manufactured that doesnt stand opt malfrom anybodys standpoint. I just want to kind of begin with where we are with Data Collection, because ive listened, and i think in some ways i feel like were ships passing through the night here. And not really hearing. You do not require the transfer of personally identified information, other than to do Consumer Services based on a complaint, is that what im hearing . Thats generally correct, although an enforcement in supervision matters where were going to be getting money back to consumers, we ultimately will immediate to have information to get the money back to consumers. These wouldnt be individual complaints. This would be kind of a broad, sweeping kind of investigation where you, then would require individual information . So, for example, i could name names of institutions that are public. You will mat lay we have to get money back to consumers. Either we can work the institution i think in terms of your day at that claex, the only way would you have personally identified data would be if it were necessary to serve the consumer either in a broad complaint or an individual complaint. I believe thats exactly correct. Theres no purpose of me having it otherwise. It just gets in my way and my teams way in terms of doing our work. Do institutions send you a bulk of data that actually has that information with it requiring you to scrub it or do you always get information thats been scrubbed and where Social Security numbers and personally identifiable information has been removed . So on that what i would like to do is have our staff come and brief your staff i think theres enough from here to report back to the committee would be very helpful. . We did do that. It is typically our aim, and i believe its the case in all circumstances, and im hesitant to say all. I want to make one point on this, which is fromming to me where we are deeply concerned about what you have, we should be equally deeply concerned about the Cyber Security of the information where it resides which is with the companies that you access every day, and so they are going to have any breach of their data is much more damaging than access to your, to your data that is being used for Market Analysis. Sure, target, home depot, Social Security, thats problematic. . Another thing that would be helpful, and obviously we have found great response from your itsy on whats rural and what isnt, but im curious as to the percentage of land mass in this country that youve determined is ifn fact rural. So if you could get that to me that would be great. Also on senator testers concern about consultation, i would be interested in consultation with tribes as well. Thats part of an overall scheme in a governmenttogovernment relationship we need all entities to understand what that means. And i know you have me coming to visit you. And i do have to say that where we can disagree i think your personal integrity is unimpeachable. And i think youre doing a very difficult job, director and i want to thank you for your service. Someone with your credentials, having i believe clerked for the Supreme Court at one point with your great academic background is someone who is extraordinarily valuable and i of course. Partial to past ags, so were all good. I want to reiterate some of the points about where were at with the people were trying to protect. What were all trying to get at is how do you balance presenting the consumer against access to necessary credit whether it is in smalldollar lending whether its in manufactured housing, whether it is just in access to Rural Communities or nativeamerican communities to the market. I think theres a balance there. And i know ive told you frequently my story. I was probably one of the first people who got beat up by trying to shut down payday lending and predatory lending, and i learned something in that process, which are, sometimes people need diapers, and sometimes they need gas, and they have a flat tire and they cant fix it. And these are folks living on the margin. So i understand the need to protect people. But i also understand the need to have some form of smalldallassmall smalldollar, shorttestimony lend short term lending. How do we achieve that and how do you as the director address the concerns that we have, which is lets give people access to credit. It helps build their credit. It helps build america but lets also protect them. Thats a tough balance. It is. We first saw this issue with the mortgage rules. In the doddfrank act they passed certain things we were required to do. And the underwriting had deteriorated. By the time we had come to write the rules things had crashed. Credit was very tight. It was a hugely different situation. And, so, as we wrote those rules, we really became very keenly aware, face to face with this problem of how do you balance protections, which we want with access to credit, which we do not want to choke off that was something we tried to balance. I think we did pretty well with it, but its something were constantly monitoring and trying to think about. Same thing now in these smalldollar rules. We know people have a demand for smalldollar credit. Theyve had it for over 100 years, and they get that demand serviced in various ways. And some are more responsible and some are less responsible but people have a demand. And we cant choke off a supply to them. But at the same time, we are concerned about this issue of the debt trap. People ending up thinking theyre getting in and getting out, but many of them end up rolling over and getting stuck at very high cost over a long period of time. And thats the issue were trying to address. Now whether the Industry Business model relies on that to subsidize the singledemand loans, im not entirely clear on that. Its something were trying to figure out as were working on these rules, but i have the same objective as youve described. People need to have access to money, and not everybody has an uhical or sister or motherinlaw that they can go to for 300 or 500. And if theyve done it once or twice, they may not be able to do did a third time. At the same time, we dont want people to end up in products that hurt them further. I dont know that im the right person to say what all the right products are. There are certain wrong products we want to rein in a bit. How to get there is a complex difficult issue and im hopeful and were working hard to try to understand it enough to get it right. Thank you mr. Chairman. Thank you senator. I think senator heitkamp raised an important issue. We dont want to drive these small, marginal consumer underground, where there is no regulation. Because thats what weve had before. And i believe that goes right to the thrust of her question. You know, how do we do this without overregulating this and how do we have abscess to some type of credit for these because there will be credit. Its a question, is it going to be little or illegal. And now we can have our senator cotton coming up we can have that ivy League Debate that you referred to. Senator cotton . Thank you, mr. Chairman. Thank you director for appearing before us. I want to return to a topic that senator corker touched upon, affordable housing. Since hud data indicates there may not be a single county in this country that has affordable housing, that represents the rural county or state where i live, there are not a lot of new Single Family homes being built. There is not a large stock of multifamily Housing Units which is why many find manufactured housing as the most affordable option they have. They end up paying less on a mortgage for a manufactured home than they would for a very limited supply of rental stock. As you describe, theres a basic math problem. It takes a certain amount of time and resources to process any loan, whether the loan is 40,000 or 400,000 or 4 million. And over a bigger loan, thats that cost is spread out over a bigger base, and therefore the percentage costs dont appear to be as high. Over a smaller loan like you have for manufactured housing, its a much smaller base to spread out, so it appears to be much higher, even though thats the preference of the consumer and you have many Financial Institutions willing to make those loans. You have regulatory flexibility under the doddfrank act to raise those percentage rate, yet, you havent used that yet. Could you explain why you havent used that and maybe if youre looking ahead to using it to grant some relief for these families and lenders . We did consider this and pretty carefully with a lot of input at the time we adopted our mortgage rules. Our big set of mortgage rules in 2013. And this issue was raised. And the 3 was not seen as appropriate for loans under 100,000. And it went to 4 at some levels, 5 at another levels and other lower levels. That was an effort to address the issue that youre raying that i raising as a very legitimate issue. Whether we got them right, whether we should reconsider them just as we reconsider about the rural and underserved issue is a fair point and one that i will take back from this hearing. I do remain concerned that credit at the smaller, at the lower end, dollar end of the spectrum is tight. It is tight. Its tight for people also often who have lower Credit Scores and more difficult to access the credit. I dont want to try to pretend to redo underwriting thats being done by these institutions on that. But whether those numbers are set at the right level. Whether 100,000 is the right level are things im not entirely clear on. I think we should be looking at some more we should have a fruitful discourse on whether there maybe should be changes there. . Well, thank you for that. In your reference that you have seen some encouraging data which ive seen as well. I think thats limited to the sale of new manufactured housing. I see. So yes, there is still a robust market for refinancing and secondary sales of manufactured housing obviously doesnt have the same lifetime that Single Family housing does. But oftentimes families need manufactured housing at a time in their life when theyre going through a lot of change. When theyre newly married. When they have new children theyre going through economic change hopefully getting higher wages, moving up the economic ladder and moving into a different kind of home when theres another family who would be willing to buy their manufactured home. Director id like to turn to another question now. Last year you brought an enforcement action against a mortgage lender, phh. You went in front of an Administrative Law judge. Rule four issued a judgment of 6. 4 million. You returned that imposed a fine of 109 million. Could you explain your thinking both why you pursued an Administrative Law judge as opposed to an article iii court and what went into your decision to overturn your own alj and impose a fine seven times his initial judgment . Its a discretionary decision. Weve used Administrative Law judges fairleigh sparingly, except for consent orders. Weve been in court and we are in court in many many matters. It does one difference is that the alj route can be faster and can be more streamlined. You know, whether thats a good or bad thing is often in the eye of the beholder. That is, that happened to be the approach that was used in this particular matter. As for the decision, that decision is published. And the reasons for it are set out on their face. I think it was like maybe a 36page decision so its lengthy. The particular point that youre getting at had to do with whether under the law and this is not an obvious point and the Administrative Law judge saw it one way. I saw another way. If you violate the respa statute, is the right relief only contracts that violated the respa statute after a certain date . Or is if payments made after a certain date on contracts that violated the respa statute for that day has to do with limitations period here. Not an obvious point, but its a point that once you decide it one way orts other maybes this huge difference in terms of the a the relief. That is the sole reason for it. I thought the law pretty clearly was one way. Others may see it differently but we we try to come to the right result as we understood the law. Thank you for that explanation, director. Youre right that the implication of my question, the concern im driving at is not necessarily even about that specific decision but just about the structure of Decision Making. Yep. Not even within your own bureau but within independent agencies. Your own bureau has certain features that exacerbates the problem. That youre a single director as opposed to a fivemember commission. This is not a reflection on you or any future director, these are concerns that i have about the future bureau. Madison said that the accumulation of all powers may very justly pronounce the definition of tyranny. So im going to continue to have these concerns. Thats fine. And having said that im here in front of you here and consistently and happy to be speaking to you at any time i regard that legislative oversight as very meaningful and very vigorous. That decision is subject to appeal. It is being appealed to a court. I hope that they will see the case the same way i did and think that i did things right. If they disagree, theyll tell us sewo and well comply by that ruling. And were fwhad to you have here and glad to have judicial review. But initial fact finders are different than fact finders at bureaus like yours. You are not elected, different in people up here when we have to answer to people that we serve back home for the wisdom of those rules. Fair enough. . Not a specific comment tear eye on this particular case or anything that youve done, but i have real reservations about the structure of this bureau. Senator mark li. I want to thank you for having a watchdog fighting for consumers and fairness in financial transactions. In your testimony, you note that the bureau resulted in more than 10. 1 billion in relief for 17 million consumers. Is it my understanding this is specific funds that come from addressing predatory practices that has been returned to 17 million families across america . Yeah. It takes different forms. Some of it is direct restitution. Some of if is uncompensated victims. Some of it is say, mortgage relief