Transcripts For CSPAN Key Capitol Hill Hearings 20160317

Consumers. Our Enforcement Actions have based on careful and thorough investigations and most have identified deceptive practices by the parties involved. During this reporting period, the orders entered in our Enforcement Actions led to approximately 5. 8 billion in total relief for consumers victimized by violations of the law. These consumers are located in every one of your districts nationwide. Were also working to provide tools and information to develop practical skills and help people understand the choices theyll be making to manage the ways and means of their lives. Our ask cfpb resource provides guidance to inquiries across the entire spectrum of consumer finance. Our major moment in time decisional tools include paying for college, owning a home and planning for retirement. We developed the new partnership with the Financial Services round table to Work Together on Financial Education in the schools, in the work plates and on behalf of older american which is proving to be productive. Listening and responding to consumers is central to our mission. We continue to refine the capabilities of our office of consumer response to receive, process and respond to Consumer Complaints, including those referred to us by your offices. We also continue to expand our Consumer Complaint database ask which is now populated about over half a million complains complaints. We marked a milestone for Consumer Empowerment when we began to publish Consumer Complaint narratives which allow people to share in their own words their experiences in the Consumer Financial marketplace. Reasonable regulations are essential to protect consumers from harmful practices and ensure that Consumer Financial markets operate in a fair, transparent, competitive manner. We focus on markets like the Mortgage Market where consumer can shop effectively for Financial Products and services and are not subject to unfair, deceptive or abusive acts or practices. During this reporting period, we issued several proposed rules, final rules, o requests for information. To support industry compliance with our rules, we published plain language compliance guides and other resources to aid in their implementation. Were also seeking to streamline, modernize and harmonize regulations weve inherited from other agencies. Over this reporting period, the bureau continued to expand its efforts to support and protect consumers in the financial marketplace. Recent data end dates that sound Consumer Protections in our major markets are strengthening them for consumers and providers alike. The Mortgage Market has been expanding briskly for two years now, since our major rules took effect. The credit card market is greatly um improved with stronger Consumer Protections and increasing consumer satisfaction. The auto lending market is supporting record sales of cars and trucks to meet consumer demand. The growing sense of consumers that these markets can actually work for them without fear of tricks and traps and other predatory conduct is stoking their confidence and restoring their trust. These developments reflect well on the work being done by the Consumer Bureau and taken as a whole, theyre making substantial contributions to the continued gradual recovery in the american economy. Mr. Chairman, Ranking Member waters an members of the committee, thank you again for the opportunity to testify today and to discuss all the work were doing on behalf of consumers. We will continue to listen closely to all of our stake holders, and we will attend carefully to your oversight in order to ensure that all americans can be assured fair treatment in the Consumer Financial marketplace. I look forward to your questions. Mr. Hensarling the chairman recognizes himself for five minutes for questions. As you are well aware, in late 2013, the buy row entered a suit with allied financial based upon a legal theory of disparate impact. At the time, ally had an important yet unrelated pending approval. The c. E. O. Of ally said the charges were, quote, trumped up that your bureau brought against ally. The went on to say that ally had been strong armed by the cfpb and the cfpb, quote, absolutely knew they had leverage over us. Isnt it true that you and senior staff in the office of fair lending knew ally was seeking to achieve Financial Holding Company Status prior to the settlement . Mr. Cordray i read the interview mr. Hensarling just a simple yes or no. Were you aware or not aware of the pending application prior to the consumers. Mr. Cordray we pursued this for well over a year before ally themselves mr. Hensarling were you aware or were now not aware. Mr. Cordray we pursued this for more than a year before they brought it to our attention. Mr. Hensarling so you were aware. Isnt it true they were in discussions with both the Federal Reserve and the fdic on how to thousand the determination of an ecoa violation could adversely impact their application, is that true . Mr. Cordray we had no Decision Making authority over those matters. We were attempting to conclude our investigation. Mr. Hensarling but were they in discussion . Was senior staff with the fair lending of the cfb in discussion with the Federal Reserve and the fdic regarding this application . Mr. Cordray i believe there were consultations about them. Mr. Hensarling you say consultation, we say discussion. Pull up slide number six, please. I believe on october 7, 2013, a decision memorandum was prepared for you, im not sure you saw this but it has the operative phrase, staff is in a dialogue with both the Federal Reserve board and fdic. It begs the question, what does this have to do with a potential violation of eoca . Now im also led to believe did you receive this memo . Do you know . Mr. Cordray i do not know. Mr. Hensarling go to the next slide, please. What is also interesting is that the last sentence of the previous slide was deleted. Instead we have somebody with the initials of p. A. F. , perhaps patrice fickland, saying lets refrain from this discussion and instead, quote from the securities filing which seems to me that either senior staff attempted to cover up the discussions or they tried to withhold this information from you. Did senior staff try to withhold this information from you prior to the determination . Mr. Cordray i dont believe so. I think youve got the entire matter exactly backwards, mr. Chairman. Mr. Hensarling regardless of whether you saw this october 7 memorandum you certainly saw the one on october 17. I believe these are your initials, decision memorandum for the director, and in it it says, this could have a material adverse effect on allys business, result of operation in financial position, and seemingly you initialed this. Are you at least familiar with this report . Mr. Cordray i think youve got this matter exactly backwards. Mr. Hensarling the question is did you initial this memorandum . And if so, it would seem to indicate that you knew ahead of time that you had advantage over ally and you used it. Mr. Cordray again, i think you have this backwards i would be glad to explain. Mr. Hensarling you will have ample opportunity within this hearing but i wanted to know. If you saw this memo. So i have another question. In employing your in determining the racial characteristics of borrowers in auto lending contexts, you dont actually have the racial characteristics that you know for a fact. Mr. Cordray we use the same thats used in discrimination cases. Mr. Hensarling we have the names and salaries of the bureaus employees in our possession. And our committee has used a public search tool to match home addresses and match names using your own surname geocoding, what we have discovered is that you pay black employees almost 16,000 less than their white counterparts. Which would suggest that either, one, you are presiding over a racist organization, and if you are not, mr. Cordray, should not the same disparty Impact Analysis you apply to others be applied to you and if you dont believe our analysis, i would assume you actually know the racial characteristics of your employees, i invite you to do your own analysis, but should disparate Impact Analysis be applied to the cfpb . Mr. Cordray i have no idea what analysis youre referring to. Disparate analysis was upheld by the u. S. Supreme court last june in an important decision. And if youre going to do that analysis you need to correct for pay bands and different jobs, i have no idea whether you did that or not so i would not mr. Hensarling i would invite you to do your own analysis. Im not sure theres any justice taking place here. I fear we are seeing shake couns for headlines. The chair is way beyond his time and now recognize the Ranking Member. Ms. Waters thank you very much, mr. Chairman. Mr. Cordray, i do not want you to be intimidated or to be made to feel bad by these accusations that are being made by the chairman. I would like to think that the chairman and the opposite side of the aisle are truly interested in discrimination. Theres nothing in their work or their history that shows they are. And so you continue to do your work and make sure that the work that you do on disparate Impact Analysis is work that will benefit all of the people who are being harmed by it. And so lets get on with the real issues. Lets talk about payday lending. Despite the fact there is substantial support for payday operations on the opposite side of the aisle, we know that these operations have targeted minority communities and poor communities and people are getting hooked on these payday loans and i want to talk about for a minute what is happening here in florida. But before i do that, i have asked my staff to get me more information about where they are locating and how many are locating and what areas theyre locating. We do know this. As it has been said by the Federal Reserve in st. Louis, there are more payday loan operations than there are mcdonalds stores. So a number of states like florida and ohio have attempted to reform payday lend bug even after socalled reforms, loopholes and other gaps remain, still leaving vulnerable borrowers susceptible to exorbitant Interest Rates and cycles of debt. For example, even after floridas reform, florida januarys still take out an average of about nine loans a year, according to the center for responsible lending with an annual Interest Rate of about 312 . According to one report an investigation into florida auto lenders who expanded dramatically after floridas socall red form, one florida consumer appeared to have renewed her loan 17 times in one and a half years. Another woman borrowed 3,100 and made 2,600 in payments and after rolling her loan over seven time she is still owed 3,900. I can give more examples of this but what im giving examples of is how poor people get hooked on payday loans. The fact that these borrowers have to take out multiple loans shows that the loans are not affordable. They are trapped borrowers. Into a cycle of debt. Tell me why you are issuing guidance on payday loans . What have you discovered about them and how they work . Mr. Cordray what we have discovered, and this is through careful and comprehensive research into the payday lending industry is that the description you provided is substantially correct and accurate. About half of payday loans in the United States today are made to borrowers trapped in a cycle of 10 or more loans. Thats about half the loans being made nationwide. Thats what we found in our research that looks into millions of such transactions. And its difficult to see how that assists a consumer in improving their financial well being. Now there are plenty of payday borrowers who get in and get out with one or two or three loans and thats perfectly great and we are not attempting to cut off any such lending. But it is the debt trap being stuck in the debt cycle, living your life off of those massive rates of interest and difficult collection practices and the like that weve seen that creates a tremendous amount of consumer harm. Ms. Waters according to the work you have done, research you have done, is this a profitable industry . Are they making money . Are they making large sums of money . Whats keeping them going . Mr. Cordray its actually a difficult product economically. Theres high costs involved in defaults, high costs involved in customer acquisition. So there are not super normal profits being made in that area. But what keeps them going, the Business Model for the average payday lender is rolling the customer into loan after loan after loan so that eventually you have recovered more in fees than they borrowed in the first place and your example was an apt one of someone who takes out a loan, pays back more in the end than they borrowed to begin with and still owes in the end more than they borrowed to begin with. Thats a normal part of this business. Ms. Waters this is why theyre referred to as debt traps. People get trapped. They cant get out. They keep rolling them over. Is that what this is all about . Mr. Cordray yes. Industry objected to that notion but its the best description ive seen of what happens in the marketplace. Ms. Waters thank you, i yield back. Mr. Hensarling the chair recognizes the gentleman from texas, chairman neugebauer for five minutes. Mr. Neugebauer this committee spent a considerable amount of time studying the shortterm, small dollar marketplace. Recently, your Deputy Director testified at my subcommittee on this issue. Many of my colleagues did not walk away with much confidence in the direction youre headed with the rule making particularly on the issue of state and tribal sovereignty. At issue are roughly 38 states who allow these products to be offered in some form and the federal preemption that will occur if your rule goes forward as outlined by the bureau, i have a few questions. Ill use some slides during that questioning, i hope you will be brief and forthright in your answers. Slide number one, please. So after reviewing the current regulatory framework, does any state, did you find any state that does not have the authority to enact and regulate shortterm small dollar loans . Mr. Cordray states have authority in this area and the federal government has authority in this area as well. Mr. Neugebauer you didnt find anybody who didnt have the authority . States have the authority to regulate . Mr. Cordray as is true in many areas of law, states have authority and the federal government also has authority. Mr. Neugebauer slide two, please. Can you list the states that have laws in place that have contributed to the problem that you have identified . Which states have failed to protect their citizens . Mr. Cordray what i can say is, as you indicated, approximately 37 states or so that allow some form of payday lending with different degrees of regulation. And our study that analyzed millions of such transactions nationwide showed that repeatedly in this business, across the country, many consumers fall into the debt trap, more than half of the loans are made to people with 10 or more loans in a row. Mr. Neugebauer which states are allowing the debt trap . Mr. Cordray all the areas, all the states that were examined in the study. Mr. Neugebauer do you have a list of those states . Mr. Cordray it would be all the areas where payday lending is authorized. Mr. Neugebauer you looked at all the states . Mr. Cordray we looked at millions of transactions nationwide in every state. Mr. Neugebauer so you mentioned theres a floor, is anything below that void . Mr. Cordray we dont have a rule, we have an initial framework and this kind of input is relevant to our process but as with our Mortgage Services rule which is are final, we did not preempt state law there. We did provide a federal policy judgment about Mortgage Servicing practices and indicated in line with the statute that congress enacted that gives us authority in the area that our rules would be a floor for consume brother text not a ceiling. Mr. Neugebauer you do not think youre preempting state law . Mr. Cordray we are not preempting state law. Typically the federal government when its active in an area could seek to occupy the field that would be broad preemption, were not doing that. They could also seek to preempt state law in specific respects, were not doing that. Whatever we do in this area will coexist with state law. There will continue to be state regulation of payday lend, there will now be federal regulation as well. Thats true of many areas of law, telecommunications law, environmental law mr. Neugebauer but the attorney general disagrees with you. Mr. Soler disagrees with you. Mr. Cordray i know the Indiana Attorney general, we served together, we have both been interested and concerned about issues of federal preemption going back to our time in State Government and for myself i spent 20 years in State Government. So mr. Neugebauer if one state has a fiveday cooling off period and the rule comes out that you require a 60 day, have you preempted the state that says five days is appropriate cooling off period and you say 60 is, isnt that preempting that state . Mr. Cordray a common aspect of federalism in our system is that there may be federal regulation and state regulation. Mr. Neugebauer what is your definition of preemption then . Mr. Cordray preemption is when the froth overrides state law and invalidates state law. Mr. Neugebauer so my state has a fiveday cooling off period you say that 60 is the new norm, then havent you preempted my state . Mr. Corcray you could say the same about securities law, states have securities laws to protect people that are investing, the federal government have laws as well. They coexist. They dont necessarily jive in every particular. Mr. Neugebauer so heres the question, these 37 states have gone out there, theyve had hearings, theyve had, you know, debates on the floor, theyve passed laws, what do you know that they dont know . Mr. Cordray you could say anything about any of these laws, the telecommunications act, states regulated that for years and the federal government had authority, Congress Gave authority and they acted mr. Neugebauer im sorry, mr. Chairman. One last. If you brought those attorneys general of these states and the various groups of the state, if you brought them in to have a discussion about them . Mr. Cordray i have talked to them all the time. Mr. Neugebauer have they had an opportunity to comment . Mr. Cordray i speak to them in meetings, i have spoken to them individually, i have spoken to attorney general zoeller. Mr. Hensarling the time of the gentleman has expired. The chair recognizes the gentlelady from new york, mrs. Maloney. Mrs. Maloney welcome, mr. Cordray. My question concerns the credit card bill of rights the second bill president obama signed into law. And rahm emanuel, his former chief of staff told me that its one of the most popular thing he is ever did because it touches so many consumers. In that card act we require you, the bureau, conduct a review every two years of whether the act was having the effects that we intended. So first of all, i want to know what is the response to the card act when you get complaints are you getting complaints about credit cards to the extend you were before the card act went into effect . And what about the clear and transparent disclosures . Has that worked . And no more hidden fees or unexpected Interest Rate hikes that are hidden . The bill wanted to crack down on unfair and abusive tactics by Card Companies on consumers. And your report found that the card act has dramatically improved the credit card market, making it fair, more transparent, and even as the cost and availability have improved. I for one think its useful to have this type of regular review of a major bill and my question is, are there lessons that youve learned from your two card act report that was been useful to the bureau in writing other rules and have you used those lessons Going Forward . Also, two celebrated reviews, one by the pew foundation, said that the card act saved consumers 10 billion a year. The n. Y. U. Review with others said it was anywhere from 16 billion to 20 billion a year and have you conducted any reviews similar to what they have done to see whether it is as good a stimulus package as actually a stimulus package that president obama signed into law because it keeps the money in the consumers hands, so your comments please on the card act and those various things. Mr. Cordray we have had a chance to review the credit card market and do that on a biannual basis to report to congress. I would congratulate the congress, the congress did an excellent piece of work in passing the card act. And it has made an enormous difference for consumers. Different assessment of amounts that consumers have been saved in terms of previously exploited exploitive fees rang from 16 billion to whatever. But its porn to recognize that this is Going Forward every year and every year consumers are saving. The second piece is, this shows, and by the way my experience gos back to when i was in State Government before the card act was pass and we would hear tremendous complaints and concerns about the credit card product at that time. And im now in the federal government, since the card act was passed and we are doing a regular review of this and watching the j. D. Power consumer surveys which show increasing Customer Satisfaction in this marketplace, year in and year out. Its a tremendous success story. And it show what is can be done with serious, substantive, evenhanded regulation, better performance by the industry, which there is, and i give them credit for that, especially on their Customer Service in the credit card industry, and better consumer performance. People are being more careful with cards coming out of practice of the financial crisis. So thats important. It shows that if we Work Together in a balanced and reasonable way we can improve those markets so consumers can get more value from them and thats what we all should want. Mrs. Maloney also in your report you highlighted the socalled Deferred Interest promotions and i quote, impose significant costs on many consumers, end quote. I think thats really important and my question is, what, if anything, should be done to address the risk the bureau has identified in Deferred Interest promotions . And also your comments on the overdraft, you know, we have also a bill that i offered on overdrafts, bills on the credit card bill of rights, your comments on where we stand on that rule making. Mr. Cordray we did indicate we have significant concerns about Deferred Interest products. The reason is, the core principle of the card act was back end pricing which is never transparent to the consumer upfront by definition, and its confusing and harmful to consumers because they think theyre making a deal and having certain terms and it turns out its going to be changed after the fact in a way that was not disclosed to them. Deferred interest operates much in that same fashion so thats something we spotlighted in our most recent report. Its an issue were looking at carefully and well be taking actions as appropriate. I think that credit card issuers would be mind should be mindful of thinking about their Deferred Interest products and the harm thats hp happening to a number of consumers who end up with back end pricing that is very different from what was represented to them upfront. Thats an ongoing concern. Mr. Hensarling the time of the gentlelady has expired. Mr. Hensarling the chair recognizes the gentleman from michigan. Mr. Huizenga thank you, mr. Chairman. I appreciate it. And director cordray, i have to tell you, im a little surprised, a little stunned. You just have laid out a case where you are intentionally trying to create conflict between state law and federal law. Now, a number of my colleagues over on the other side have been working on a slightly different issue that im sure youre familiar with. Medical marijuana law. Not lining up with federal law. And how that has affected banking. Usually theres an understanding that were going to try and solve that problem, not create the conflict. And i just couldnt let that pass as my colleague from texas was asking you about the lending mr. Cordray do you want me to respond to that . Mr. Huizenga very briefly, sure. Why would you want to create additional conflict . Mr. Cordray i spent years in State Government. In the state legislature, state attorney general, state treasurer. It was very common across many fields of law for us to be administering and enforcing state law in conjunction with Common Administration of federal law. It happens all the time. Mr. Huizenga i did that as well. But you dont have, in what we typically have, for example in environmental law is you have preemptive state law that goes in. First it has to clear that hurdle. I served in the state legislature as well. Thats not the direction i want to continue to ask. I want to pursue a little bit about orb tration agreements and i know arbitration agreements and i know that was brought up earlier. In march of 2015, the bureau released a report on the use of arbitration agreements and disputes between consumers and Financial Product providers. However, the report was criticized by a number of academics and industry for completely ignoring major pieces of data. On june 17 of 2015, over 80 members of congress, including me, signed a letter asking that the bureau reopen the arbitration study citing issues with the megged odds on which the study was conducted, including the processes that developed the study that were not, quote, fair, transparent or comprehensive. Id like to submit the letter for the record without without objection, mr. Speaker. Mr. Hensarling without objection. Mr. Huizenga it also noted the precedent of dispute resolution which exists in streamlining the american judicial system. One of the complaints i hear all the time is were bogged down in court. Arbitration was a tool introduced to streamline that. Not to eliminate anybodys rights. Not to eliminate a fair hearing. But purely to start to break the log jam. Im very curious, do you really believe thats just that report reflects accurately how these consumers use these tools . Mr. Cordray if i may. Our report has been widely recognized as the single most comprehensive and informative report on this issue ever done. Had access to new data from the American Arbitration Association and others and it is an outstanding report. I have seen and we have tended closely to criticism of that report. The been mostly incident. We sat down with the authors of the one critical study, one of them agreed to sit down with us and talk it through. The other did not. But we have looked at all of that. Mr. Huizenga where does the study estimate the transaction costs associated with the consumers pursuing a claim in federal court versus arbitration . Mr. Cordray what we looked at was how the judicial process compared to the arbitration process in terms of outcomes. And the like. And what we found by the way was, as a matter of history, what you say is somewhat correct in terms of arbitration started off as a business to business dispute resolution mechanism and it is reasonable in that context. In more recent times its been used to cut off access to mr. Huizenga does the study compare ability of consumers to pursue a claim without a lawyer in federal court versus arbitration . Mr. Cordray the study comprehensively addresses many aspects of the jish process, many aspects of the judicial process, many aspects of the arbitration prospects and compares outcome between the two. Mr. Huizenga for those watching on cspan and the rest, the answer to both of those questions is no. Mr. Cordray my answer is to describe what our study did. Its the most comprehensive study ever done. Nobody disputes. Mr. Huizenga i understand its comprehensive but theres a number of people involved in that space that believe that there were major flaws in the data and how it was used. Mr. Cordray weve looked at what they had to say and the not particularly credible, frankly. Mr. Huizenga so, you would have no problem then asking or heeding the requests that over 80 members of congress and the house and the senate had of saying, ok, bead like to open this up and wed like to open this up and express some of our concerns in this . Mr. Cordray im going to continue to enforce the law. Congress asked us to do a broad comprehensive study. We spent years three years on it. Were now moving ahead with congress direction. Mr. Huizenga what i need to know is how you can make a meaningful comparison between class actions and arbitration in this report. I dont see that. And many others in the space do not see that. And that ultimately is the concern that i have. Somebody receiving a check for 25 cents, being part of a class action suit, which often happens as these major class action suits go on, the trial lawyers and the attorneys are all paid up. Theyre the ones that make the money. Its not the consumers. And i would argue that arbitration actually benefits the consumer as much as it benefits anybody else in that process. Because it streamlines it. It sounds to me that youre trying to protect the trial. Mr. Cordray virtually no relief to consumers in the arbitration process. Billions of dollars of relief to consumers in the judicial process. Thats the comparison. Mr. Huizenga as long as attorneys are paid. Mr. Hensarling the gentlemans time has expired. The chair recognizes the gentlelady from new york. Ms. Velazquez thank you, mr. Chairman. Mr. Cordray, we have seen some indications from the cfpb that the lines between what is Consumer Lending and what is commercial lending are blurred. Can you explain your views on how the agency distinguishes between Consumer Lending and commercial lending . Are there circumstances in which a loan to a Small Business could be a Consumer Loan . And if so, can you elaborate on the nature of those circumstances . Mr. Cordray sure. There are areas where the line between commercial lending and Consumer Lending is blurry. For example, a lot of startup Small Businesses are being financed by individuals, by putting debt on their credit cards, so thats why the card act becomes so important. Because it actually protects not just vids but also many individuals but many fledgling Small Businesses. Its also the case that home equity loans are often used to get capital to start businesses or improve businesses or grow businesses. If i had my way, i dont have my way, on many things, we would do what i did when i was a attorney general and seek to protect not only individual consumers as the statute authorizes but also Small Businesses who often operate in a marketplace with no greater clout than an individual household does. If the Congress Sees fit to give us that authority, we will aggressively pursue that. And it would help Small Businesses across the country. As it is, again, as you say, the protections that we put in place for consumers often will end up helping certain individual Small Businesses that start out as individuals, a very small number of individuals, and seek to grow. Ms. Velazquez one area where im concerned is regarding online lending. This is an increasingly popular choice for Small Businesses to quickly access capital. Yet the Regulatory Environment has yet to catch up. What role do you see the cfpb playing in the Small Business online lending marketplace . Mr. Cordray we are very interested in financial innovation. And socalled fintech. Weve had marketplace lenders in to talk to us because we have jurisdiction over them. The treasury has convened both a set of actors and is working on a white paper in this subject. The something i think were all interested in. Because it is a new source of capital. For Small Businesses. But needs to be subject to certain oversight and protections as well. So thats something well continue to work on. I think we have im hearing from you a great deal of interest in this area. Others have a great deal of interest as well. Ms. Velazquez thank you for answering my letter. Dr. Cordray, to date five attorney generals have issued consumer alerts about deceptive advertising practices by Rooftop Solar Companies and a handful of settlements were reached in arizona last year alone. Is the cfpb presently working with various state regulatory bodies, interviewing complaints and investigating the depth of the problem were hearing about . Mr. Cordray i cant speak to specific enforcement activity being engaged in by the bureau. But across the country, when there is consumers complaining about harm done to them or perceived mistreatment in the marketplace, thats the kind of thing that gets identified to us through our Consumer Complaint line and those are things we prioritize for, investigation and potential action. I think i can say that much. Ms. Velazquez thank you. In may, 2015, the cfpb issued a bulletin providing guidance to help lenders avoid discriminating against applicants participating in the section 8 housing choice voucher Home Ownership program. Can you explain this bulletin and how it will help increase access to credit for eligible consumers . Mr. Cordray im not sure if this is the direct answer to your question but under the equal credit opportunity act, it is illegal for lenders to discriminate against potential borrowers based on the fact that theyre receiving public assistance income. That is good income and its supposed to be part of the calculation. Weve had several actions now where we found that lenders were not taking appropriate account of that kind of income. And theyve made corrective actions accordingly. In general, this is our approach to the equal credit opportunity act is one of the statutes that both we and the Justice Department administer. And we will do that faithfully and vigorously to make sure people are being protected and prohibited classes are not being discriminated against under that statute. Ms. Velazquez thank you. I yield back. Mr. Hensarling the gentlelady yields back the balance of her time. The chair now recognizes the gentleman from new jersey, mr. Garrett, chairman of the Capital Markets subcommittee. Mr. Garrett thank you, mr. Chairman. Im just coming in, im over in budget right now. I just want to follow up on the issue of arbitration. So, Congress Passed a law, passed a bill, it was signed into law, and the president signed it, which validated the use of arbitration. My understanding now is the study was done mr. Cordray im sorry, what law is that . Mr. Garrett the federal arbitration act. Mr. Cordray ok. 1929 or so. Mr. Garrett are you familiar with that law . Mr. Cordray i am. Mr. Garrett is that still the law of the land . Mr. Cordray it is. Mr. Garrett you disparage it by saying 1929. Mr. Cordray no. In 2010 Congress Passed the doddfrank act which changed arbitration, including outlawing arbitration clauses in mr. Garrett its still the law of the land. Mr. Cordray although the been modified by congress in several respects now. Mr. Garrett it is now your agencys decision to, what, upend that law through a comprehensive action . Mr. Cordray no. Congress has now intervened and superseded the federal arbitration act in specifics. Mr. Garrett has congress ended the ability for arbitration . Thats a yes or no question. Mr. Cordray in several respects, yes. They have. Mr. Garrett i didnt say in several respects. Mr. Cordray under the military lending act, they barred arbitration clauses and lending contracts to service members. Under doddfrank they did for Residential Mortgage contracts. Mr. Garrett we totally eliminated arbitration . Mr. Cordray no. But they gave us then authority, congress, congress im not making it up. Mr. Garrett [inaudible] eliminate arbitration . Cord considered because congress specifically said and we carry out the will of congress, Congress Said that we should issue a report, do a study, issue a report, and then act in terms of addressing arbitration in light of that study and report. Mr. Garrett [inaudible] perform the will of congress, when 80 members of Congress Write to you and ask for a specific question, do you believe that you should answer those questions . Yes or no . Mr. Cordray i pay close to attention to what members of Congress Tell me. Its my job to enforce the law that congress has enacted. Mr. Garrett when 80 members of congress ask you a question, do you believe you have the responsibility to respond and answer those questions . Mr. Cordray i respond to individual members of congress but i enforce the laws that congress enacts. Mr. Garrett so the answer is no. Mr. Cordray the answer is yes. Mr. Garrett we sent a letter back on june 17 of last year. Were still waiting for let answer complete answers. You have disclosed all topics that have been covered by this study . Thats a yes or no. Mr. Cordray im not sure what back and forth cords there has been. I know we responded to that letter. Wed be happy to work with you further. Mr. Garrett i also you also failed to provide the general public with any meaningful opportunities to provide input for the thing. Was there a reason why you decided that certain information would be held confidential and not disclosed to the public . Mr. Cordray some of the information, depending on how we obtain it from the American Arbitration Association and others, businesses have deemed confidential, may involve trade secret information and the like. Those would be the obstacles. Wouldnt be any desire on my part. Mr. Garrett are those the only sections that are precluded from being public . The trade secrets . Or is it a broad swath of areas . Mr. Cordray id be glad to have my staff who are expert in this area deal with your staff mr. Garrett here we are in march. Were still looking for complete answers. Mr. Cordray we have responded to the letter and if that response was deemed insufficient, wed be glad to work with you further to get you more information. Mr. Garrett it goes back to your initial answer to the question. Whether you feel that its your responsibility to answer to 80 members of congress, when you were first came to this committee, i asked you, i guess the seminal question, if the house of representatives said you shouldnt do something, are you accountable to them . The response was no. When i said, if the senate said you should be doing something, should you respond to them and respond . Your answer was no. I said, if the president asked whether or not that you should be doing something, the answer was no. Mr. Cordray i dont remember it in that way. Mr. Garrett the final question was, are you accountable to anyone and the answer to this letter and that question back then was mr. Cordray thats not what im saying and thats not a legitimate characterization of this. I respond to members mr. Garrett thats on the record. Mr. Cordray i have a responsibility to enforce laws enacted by congress. Not by individual members. Mr. Garrett the law of 1929 has been enacted by congress. Mr. Cordray so has the law of 2010. Yes. Mr. Hensarling the gentlemans time has expired. The chair now recognizes the gentleman from new york. Mr. Meeks meeks thank you, mr. Chairman. Good morning, mr. Cordray. The director cordray. Great to see you this morning. Let me first join many of my colleagues, i know on the democratic side, i think it should be on both sides, because we all should be thanking you for all the work that youve been doing to help the american consumer, for the work youve been doing to help our veteran, to help our students, to help our mortgagees, and especially for the work that you do for lowincome and minority communities that are always the most victimized. Its those on the bottom. And the work that youre doing to try to make sure that there is a level playing field. I would think that, given the scenario, both sides of the aisle should be appreciative of the agency and the work it does. I see theres room that we can work collectively together. For example, whats important is that since the financial crises, a number of Financial Services have closed. Theres been over 5,000 branches of closures of, especially, most of them in lowincome and communities of color. Leaving behind banking deserts which are neighborhoods with no mainstream Financial Services. But the people in those neighborhoods cannot live without access to Financial Services. And therefore to meet those great needs, there are alternative products. Such as shortterm lenders, and hear my colleagues talking about that and prepaid call providers, ette. Of which, you know, i just think about my parents, i was poor, lived in public housing, went to a bank at that time, some banks they were not bankable. But they needed to have options. So they used other options. Back then, some of the options are dark. We dont want folks to go to the dark. It would seem to me, your agency is a god send to me, is not to wipe out all of those businesses, but to try to make sure that we have we regulate them. So that there is a good practice, so that people are not being ripped off. So that there is a strong and functioning alternative Financial Services, so theyre not being denied access to Financial Products also, as they would have. Sometimes i know my dad needed an extra few dollars to make it to the next month, until the next paycheck came. We need that kind of service but we dont want it where people are caught in that forever. I think that would be good for both sides. Nobody should want that. We dont want anybody taking advantage of it. So if we have an agency like yours that can put in some rules and regulations so we can make sure that the consumers are not getting ripped off, but also and i think that would be good for those who are providing good services, they would want that also. Because we want to get rid of the bad folks. We dont want to get rid of everybody. We want to get rid of the bad folks. That would seem to me to be the goal. That is the right approach that we should take and i think that thats the approach that youre trying to take in this. Not just eliminating an entire but eliminating the bad guys. And lets make sure that we uplift the good so poor folks and lowincome areas would have some opportunities to continue to bank. Is that correct . Mr. Cordray i found myself sitting here thinking that youre saying a lot of things that i try to say when im sitting here in this seat testifying and i think you may have just said it better. I would just agree with you. Mr. Meeks let me just give in the little time i have left, what i was concerned i saw about the bureaus latest enforcement and findings, because im shocked here we are in 2016 and theres still red lining going on. And the red lining, especially in the mortgage lending, in the steering of consumers in high cost loans, it amazes me that were still finding institutions thrivinging from this egregious practice. Can you please discuss with us in the little time left what is going on in those cases and what the bureau has done to address it . Mr. Cordray weve seen a lot of things over the past few years. 90 or more of our Enforcement Actions involve deceptive conduct by Financial Institutions. Which is discouraging in some ways. We were somewhat surprised to see what we thought was very blatant red lining occurring. This is the enforcement action that we and the Justice Department jointly took involving hudson city savings bank. And the patterns when they were mapped were very clear. And so its a significant resolution and a shot across the bow to the entire marketplace. That this is not acceptable behavior, it is not acceptable approach and people need to review what theyre doing and correct it if in fact they have gone down that road in any respect. Mr. Meeks i only have seven seconds to i yield back. Mr. Hensarling the gentleman yields back the balance of his time. The chair now recognizes the gentleman from missouri, mr. Luetkemeyer, chairman of our housing and insurance subcommittee. Mr. Luetkemeyer thank you, mr. Chairman. Mr. Cordray, you and i have had a number of discussions in regards to trip. And certainly i appreciate your willingness to discuss it with us. As weve seen, youve delayed the implementation of the rule until october. And since then weve seen a lot of concern by the industry, theyre struggling with this rule. Some of the Software Programs that theyve utilized have not been as good in implementing this as they would have liked to have seen and theyre still struggling. So my question is, what do you see from your position as an enforcer of this, as well as, you have had any Enforcement Actions taken against anyone at this point . Mr. Cordray i think we see and hear much the same things that youre describing. I think the i. T. Problems here have been much larger than maybe people would have expected. In particular because a Mortgage Lender cant control the i. T. Systems of realtors or title agents or settlement agents and others. And they have to all Work Together. So i know there was a bill in congress proposing to have a hold harmless period through february 1 of this year. What i had said, and ive worked with the other regulators to jointly say was, we were going to be corrective in dying not tick, not punitive, as we saw this implementation period, and it was open ended. It remains open ended. We are now midway through march today and it remains open ended. Weve taken no Enforcement Actions. I dont expect us to take Enforcement Actions unless somebodys blatantly failing to try to implement the new rule. And to the extent that they are making some mistakes, but trying to get it right, were attempting to provide more clarification to them, which is something industry is asking us for and also recognizing nobody is really trying to exploit consumers here. This is just a matter of getting these forms right and getting them correct. By the way, the whole purpose behind this is Something Congress wanted and its a positive purpose which is taking what used to be two bureaucratic forms at the application stage and streamlining them into one. And the same at the closing stage. Thats what we have done here. Mr. Luetkemeyer are you going to issue Additional Guidance on this . Or you feel everybodys doing ok with whats going on . Mr. Cordray we have been monitoring this very closely. The last thing i want is for any of our rules to cause a jamup in the market beyond anything that anybody would intend. I think were getting more guidance inquiries every day. But the trade associations are working together to provide some joint questions that they think are most important. We will attempt to be responsive to that. And you feel free to keep after us to make sure we do that. Mr. Luetkemeyer we will. Trust me. Also, along a different line, the federal trade Commission Act grants the federal trade the f. T. C. And pranking banking regulators with the power to pursue regulations. Doddfrank marked an unprecedented expansion of the authorities for the cfpb including for the first time the term abusive. Expanded series of powers for c. P. B. Has become a primary enforcement tool. I realize the last week you spoke to the Consumer Banker association, rejected the notion that youre regulating by enforcement. I beg to differ. When it comes to cfpbing the authority, you have issued little to no guidance, regarding any Financial Institution from any sort of predictability. You use your authority on a case by exace basis. Isnt that the definition of regulation by enforcement . Mr. Cordray were doing the very same thing that the federal trade commission does and that the state attorneys general do. It is difficult to know how to do more than case by case when youre talking with cases of fraud. Or deceptive conduct. But we attempt to give guidance to the entire market by very specific orders that are issued in these cases, so that everyone knows that if theyre doing this, they should stop. If thats called regulation by enforcement, i think its a strong deterrence and its important as a law and order mechanism for signaling to other actors. Mr. Luetkemeyer the last time you were here, i asked the question, just before we got finished up, with regards to a Debt Collection company that you wound up settling a situation for 12 million based on a proposed rule. Not a rule thats enforced. But a proposed rule. Mr. Cordray what matter are we talking about . Mr. Luetkemeyer encore. Mr. Cordray ok. Debt collection. Mr. Luetkemeyer and this was based on not a rule that was enforced but it was a proposed rule you thought you made down the road, have enforced. So that they had a formula thats noncompliance. Is that not regulation by enforcement . Mr. Cordray i dont think thats what we did in that matter. We did a careful investigation, thorough investigation of the facts. We found that there were violations of either federal Debt Collection practices act or of the unfair and deceptive prong that were given by congress. And we enforced against that. The notion that because we may issue a rule on Debt Collection several years down the road or maybe next year, whenever it will be, that in the meantime we cant stop people from engaging in an unfair and deceptive conduct i just dont think is the right approach for us. Mr. Luetkemeyer my times expired. I yield back the balance of my time. Mr. Hensarling the gentlemans time has expired. The chair now recognizes the gentleman from texas, mr. Hinojosa. Mr. Hinojosa thank you very much, chairman hensarling, and Ranking Member waters. For holding this important hearing. On the cfpbs semiannual report. Director cordray, i want to thank you for your appearance here today and for your exemplary leadership at the Consumer Financial protection bureau. Before i proceed with my questions, i wish to voice my strong support for cfpb and its mission of protecting american consumers. Mr. Chairman, hensarling, i ask unanimous consent to enter my Opening Statement into todays record. Mr. Hensarling without objection. Mr. Hinojosa with that ill be able to move right into my questions. Director cordray, many argue that the bureau issues a payday lending rule in line with the released outline, that if you do that, it will eliminate a crucial source of lending for many lowincome people that have no other options. Why does the bureau see the need to regulate payday lenders and why do you believe consumers will be better off with cfpb oversight . Mr. Cordray again, we were given authority by congress to address this marketplace among others. In fact, it was specifically called out in the Consumer Protection act of 2010. The doddfrank act. We have done extensive research, weve assessed and analyzed millions of transactions. And again, what we found was a significant portion of the customer base, half of the total loans being made, payday loans nationwide, go to customers who are in a sequence of 10 or more loans. That is a debt trap, i dont know what else to call it. It creates tremendous harm for consumers. Its the exact point that was being made earlier, in the Ranking Members example of someone taking out x dollars in loans, ening up repaying more in fees than they ever borrowed in the first place and still owing more at the end of all that than they borrowed in the first place. Mr. Hinojosa thank you for your response. I strongly support your efforts to rein in those harmful payday loan practices. In my community weve seen some programs that cost 1 10 of what payday lenders charge but there just arent enough of these programs. Tell me about the 5 option included in the proposed rule, and will it be included in the final rule . Mr. Cordray i cant speak to what may be in the final rule. Were just coming up on a proposal stage here. Were going to continue to take input from many different stakeholders and of course they have very dramatically conflicting input. Thats something we try to sort through. What i can say is that in approaching this rule, were attempting to both address significant and actual harms to consumers, and were also trying to make sure that there are ample avenues that remain for small dollar lending to be available to consumers. And Community Banks, Credit Unions have a product now that we want to make sure that we are protecting and giving latitude for. And other products that may arise around the country. We dont want to squash innovation in this area. We do want, to the extent we can, squash predatory products that are amassing Enormous Consumer harm. Mr. Hinojosa according to the fdic, nearly 50 million fdic, nearly 50 million americans are unbanked or underbanked. Consumers sometimes need access to at least 100 or less to smooth the transition between paychecks when their balance is low, so they can still purchase medicines and groceries and other necessities. Q. M. Rules affected mortgage how have the q. M. Rules affected mortgage lending by community Financial Institutions . Mr. Cordray so this is important because i often see facts alleged that are not accurate. In this area. The share of the market of mortgage lending by Consumer Bank Community Banks and Credit Unions has grown since doddfrank was enacted. It is larger now. It is larger now than it was in large banks in particular. This is exactly the point that i think mr. Meeks just made, which is that if you have evenhanded, sensible regulation of a market, the more responsible actors should be able to thrive because theyre freed from unfair competition by the bottom feeding, law violating actors, many of which came into the Mortgage Market in the middle part of the last decade and engaged in highly irresponsible lending and ended up blowing up the Mortgage Market. So Community Banks and Credit Unions, contrary to much of what is said, their market hair has share has increased and thats a good thing. Mr. Hensarling the gentlemans time has expired. The chair recognizes the gentleman from wisconsin, mr. Duffy. Mr. Duffy thank you, mr. Chairman. Welcome, mr. Cordray. As you know, ive expressed some of my frustration with regard to the lack of compliance with the document requests that this committee has made to the cfpb. Thats with a back drop of barack obama telling us this would be the most transparent and open administration ever. Thats with Elizabeth Warren indicating that sunshine would flow into the cfpb. Thats in regard to the backdrop that youve given with regard to openness and transparency. It gives us great concern that for a number of our subpoenas, they go back several years, and theres been a lack of complains, as you know, theres been a recent subpoena three months ago that have compiled all of our document requests. And we get limited compliance from you. I want to mr. Cordray do you me to speak to that . Mr. Duffy in a second. Youre aware that a report came out from this committee in regard to indirect auto lending. And you would note that there was some documents that we included, quotes in that report from the Consumer Financial protection bureau. Did you provide those documents before this report to this committee . Mr. Cordray i cant speak to individual documents, dont know which ones youre referring to. Mr. Duffy the ones in the report. Mr. Cordray over the course of the last several years in response to numerous requests mr. Duffy id like you to answer my question. Im talking about the report that thank we did on indirect auto lending. Im sure you read that. You made some calls to the hill. Did you provide those documents to us . Mr. Cordray i cant out of context here place individual documents over the last several years. Ive been very responsive to your request. Youve gotten tens of thousands of pages of documents. Mr. Duffy you can send me tens of thousands, if you dont send me the ones i asked for, just like Hillary Clinton can send thousands emails, but if you dont send the 10 that are relevant, if you want to talk about recordings in watergate, you could send hours or days of recordings, but if you miss a few minutes, its those that are relevant. Mr. Cordray we continue to work with mr. Duffy you know you didnt send us these documents. Even after this report came out, weve again asked you for the documentation in this report and youve refused to comply with our request. That is incredit incredibly frustrating when youve made commitments to being open and transparent. Mr. Cordray ill be glad to work with you on those. Mr. Duffy weve been trying to Work Together for years. Mr. Cordray i still am trying to work with you. And will continue to try to work with you. Mr. Duffy working is easy. Give us the documents. Send them to us. Send us what we asked for. Mr. Cordray well be glad to sit down and talk further. Mr. Duffy i want to highlight some of the before we go there. In the allied settlement, lets talk about that. You used your proxy data, in regard to your analysis on proxy data, what percentage of accuracy do you have in regard to ally . Mr. Cordray it depends on what youre talking about. Theres different degrees of accuracy for Different Things. We work to provide a high degree of accuracy in terms of potential charges of disparity im dispar aye at impact disparate impact. Mr. Duffy what percent of accuracy do you have . Mr. Cordray it depends on what were talking about. The auto market, the Mortgage Market. Mr. Duffy auto market. Mr. Cordray a high degree of accuracy. Mr. Duffy what is the percent . Mr. Cordray i cant give you specific percentages. Mr. Duffy its fair to say that you are not 100 accurate, is that right . Mr. Cordray i dont know if anybodys ever 100 accurate. Mr. Duffy is it fair to say there are some white borrowers who may be included in your analysis that will get checks from the ally settlement . Mr. Cordray if youre administering any redress to consumers, and this is across the entire spectrum of what we do, what attorneys general do, what courts do, it is always possible that redress will find its way mr. Duffy so disparate impact checks will go to white borrowers potentially. Thats fine. Mr. Cordray theres nothing unique in this area. Mr. Duffy in your analysis im sure that you saw some africanamericans who paid higher rates than the white average and some africanamericans who paid less than the white average. Is that right . Mr. Cordray what we saw was systemically africanamericans and or hispanic borrowers in certain mr. Duffy is it your testimony that nobody paid less than the white average . Mr. Cordray i dont know that i would say that. Mr. Duffy is someone who paid less than the white average, are they also getting a disparate impact check . Mr. Cordray im not sure ma what matter youre talking about or what data youre talking about. What i would say is disparate impact discrimination is something thats been under attack. Mr. Hensarling the gentlemans time has expired. Pursuant to clause 24 of Committee Rule 3, the gentleman from wisconsin is recognized for an additional five minutes. Mr. Duffy thank you. Were talk about the ally settlement. Youre well aware of that. Im talking about the numbers that you used for that settlement. So im asking you a simple question. Are white borrowers getting disparate impact money . Youre stonewalling me here. Youre not answering my question. This is a Pretty Simple line of questions. If you want to be open and transparent, be it here. Answer my questions. That was one that youre trying to waffle on. Mr. Cordray im ready to do it. Mr. Duffy the next question is, you have individuals who probably, i know this for a fact, paid less than the white average. Do those africanamerican borrowers get disparate impact checks as well . Or are you only sending checks to africanamericans who paid more than the white average . Mr. Cordray if you want to specify someone to me, we can look at it. We set up a process here working with the Justice Department, who has experience in these matters going back decades, and that is a process that everyone has confidence in. It is getting mr. Duffy you havent sent me the information on ally. But we do have the information in regard to toyota. This comes from a document dated november 19, 2004, it was initialed by you and on page, i believe its 15, is a chart that shows nonsubvented africanamericans, the total number of affected at 116,500. Do you have the document in front of you . Mr. Cordray no. Mr. Duffy look at the screen. You can see that right there. The number of harm prohinted harm prohibited basis borrowers is 66,000. So the my reading of this document that there are 56 of africanamericans who paid more than the white average, and 44 who paid less. Fair enough . In the toyota study . Mr. Cordray im not easily able to analyze these numbers. Mr. Duffy you signed off on the document. If you want to go down to the subvented africanamericans, the number that were affected was 7,559. But the number that had prohibited or were harmed was 2,668. So meaning, on the subvented class of africanamericans, only 35 paid more than the white average. 65 paid less. These are your documents. I want to be clear, if youre not going to give me the ally documents, well use toyota. Mr. Cordray subvented auto loans can behave differently from normal auto loans. And that is something we take account of in our analysis. Mr. Duffy i gave them both to you. Look at the chart. In this document, you dont show great disparity between africanamerican rates and white rates. Mr. Cordray i would disagree with your conclusions there. We did pursue a matter with toyota. We thoroughly analyzed the underlying facts. The automaker lender mr. Duffy that would show you pay africanamericans 16,000 less than white employees at the cfpb, before the chairman cut you off, i think you were trying to say but, but, it doesnt take into account pay bans. You want to make sure that we consider what information you might have that could account for that disparity. In regard to indirect auto lending, did you take into account credit scores, tradeins and tradein values . Whether the car was new or used, the amount financed, the length of the term finance sthd this wag up a this was all information that the auto lenders tried to get you to consider but you refused to do it. When the role was reversed and mr. Hensarling asked you those questions mr. Cordray i wouldnt agree with that. Mr. Duffy well do it in writing. I want to hand you a document. This was provided to us in response for a subpoena, number 20e and 22. This was the only document that was in compliance with our subpoena. This is in regard to records in the final remuneration plan in regard to ally. Do you have that document in front of you . Mr. Cordray no. Mr. Duffy your staff has it. This is basically a computer printout, if youd hand it to the director, please, this is a computer precipitationout. This is the only document that youve given us to show us what the plan is. Could you read this document for the committee so we can understand what this document says . In your sunshine in compliance with the committee . Mr. Cordray do you want me to just start down here and read it . Is that what youd like . Confidential . Mr. Duffy cap equals 900 what does this mean . This doesnt mean anything. Mr. Cordray if you ask for documents in an area, we give you the responsive documents that we can. And it may be that you arent in a position to interpret this document. I dont know about that. Mr. Duffy are you . Mr. Hensarling the gentlemans time has expired. The gentlemans time has expired. Pursuant to the committees rules for extended questioning, the Ranking Member is now recognized for an additional fiveminute question period. Ms. Waters thank you very much, mr. Chairman. At the beginning of this hearing, we started talking about the cfpbs work and Racial Discrimination in auto lending and specifically the cfpbs 9 million settlement with ally. I also mention 98 million settlement with ally. I also mentioned in my Opening Statement that the bureau has fined banks and captive lenders such as toyota, honda, Fifth Third Bank for discriminatory practices. These banks and auto lenders that you have fined, if they dont think that youre correct, if they want to oppose you, if they want to fight you, can they go to court . Can they sue . Can they defend themselves in some way . Mr. Cordray sure. There are a number of institutions that have required us to take them to court, not responded to the results of investigations. And if so, we pursue it and the courts have the ability to make that determination. Ms. Waters did ally do this . Mr. Cordray they could have, but they did not. Ms. Waters they did not. Did toyota do this . Mr. Cordray they did not. Ms. Waters honda . Mr. Cordray they did not. Ms. Waters while they are pretty big companies, they have the right to sue, they have the right to go to court, and even though they have friends on the opposite side of the aisle who would like to serve as their lawyers, they could have gone to court if they had wanted to. Is that right . Mr. Cordray certainly. Ms. Waters thank you very much. Lets go further. The republicans are alleging that the cfpb used allys desire to change its status to a bank Holding Company to leverage the settlement. Isnt it true that the cfpb was investigating Racial Discrimination at Ally Financial prior to any knowledge of allys desire to change its stat news is mr. Cordray im glad to have the chance to correct the record on that. Some of the members who asked those questions are not present in the hearing room, i understand. But maybe theyll see the transcript. We opened an investigation against ally in to potential discrimination in auto lending more than a year, maybe a year and a half before the matter was resolved. As often happens, parties that are being investigated, it moves slowly, theyre not eager to resolve the matter and sometimes they drag their feet, sometimes it just takes a while. At one point ally wanted to move more quickly to resolve the matter much that was a decision that they made and that was a choice they were making for their own reasons. I wasnt familiar with why those were. They then explained to me why they wished to proceed in that fashion. Our purpose was to complete and resolve an investigation into discrimination in auto lending. That was our job. That is our job, to enforce the law. That is what we did. And we reached an appropriate resolution that the company agreed to and was willing to enter into. And could have fought in court if they wished to do so. That was up to them. Those were choices they made. Those were not choices i was making. Our choice was, we were trying to enforce the law. We were seeking to complete an investigation and resolve a matter and we did so. Thats all there is to it as far as im concerned. Ms. Waters isnt it true that cfpb only consulted with the fdic and fed regarding ally status after ally themselves informed the cfpb of their desire to change their status . Mr. Cordray i believe that is correct. Ms. Waters isnt it also true that the cfpb had evidence that Ally Financials policies surrounding discretionary dealer markup resulted in widespread Racial Discrimination . Mr. Cordray that is certainly correct. Ms. Waters can you speak more about your veffings ally and how you came to that settlement . I know you just did, but i want you to reiterate. Because i think that my colleague on the opposite side of the aisle has framed this in such a way that you have been unfair, that somehow youre not following the law and that somehow you leveraged their desire to change their status. Would you please go ahead. Mr. Cordray i would say quite the opposite. The law of the land reaffirmed the by the Supreme Court last reaffirmed by the Supreme Court last june is that disparate impact discrimination is against the law. It is a violation of fair lending laws. Given that that is so, our responsibility is to enforce the law. Its a law that congress enacted. That we have a job to enforce the Laws Congress enacted. We approach every investigation in the same way. Some of them start with exams. That then lead to developing facts and conclusions. That may lead to Enforcement Actions. Some of them start as enforcement investigations. We approach them all the same way. To comprehensively establish the facts, to determine legal conclusions, to work with the entity, to try to resolve the matter if we can by consent. If we cant, by litigation. And if we work with the Justice Department on these matters, theyre our active partner and we Work Together on them and we see eyetoeye. Mr. Hensarling the gentleladys time has expired. The chair recognizes the gentleman from california, mr. Royce, chairman of the House Foreign Affairs committee. Mr. Royce thank you, mr. Chairman. On the question of exemptive authority, as it applies, as it applies to your ability, you argued in a recent speech that it was not plausible for you to use such authority to override congress own judgment on such a broadbased policy matter. As you know, section 1022 of the doddfrank act gave the cfpb the authority to adopt regulations, by allowing it to exempt any class of entity from its rulemakings. Just this week 329 members of this house wrote to you, it was mr. Stivers letter, actually, wrote to you to tailor regulations for Community Banks and Credit Unions citing section 1022 exemptive authority specifically. Do you believe that section 1022 gives you the ability to tailor regulations for community Financial Institutions, and does a letter this would be over 3 4 of congress, does such a letter change your view of congressional intent . Mr. Cordray i would say two things. First of all, we have routinely tailored our rules to take account of different circumstances of small lenders as opposed to large lendsers. We did that with our Mortgage Origination rule. We did it with our Mortgage Servicing rule. We did it with our remittance rule. We will continue to do it where appropriate. Second, i always attempt to be responsive to letters from members of congress. I was in a more humble station, a member of the state legislature in ohio, and i have understood the legislative role and i respect it. I would also say that i think what i think i know here, i may not know as much as you all do about the legislative process in the congress, and i wasnt around for the doddfrank debates, but both of the Major Credit Union trade associations have said publicly that they sought a broad exemption from regulation or oversight of any kind, when doddfrank was being debated. In both cases apparently it was rejected by the congress. It was not written into the law. What was written in was differential treatment of banks under and Credit Unions under 10 billion in assets as opposed to those above. Weve gone beyond that and at times provided special dispense sations or special provisions for smaller creditors, often those of 2 billion in assets or below. And we will continue to do that where we find that to be appropriate on the facts. But in terms of a broad overriding what have congress made a judgment about in that statute, which was not to simply exempt all Credit Unions from everything having to do with Consumer Protection, i feel that congress has spoken on that. Mr. Royce let me ask you another question. In november, 2015, you released your updated rulemaking agenda indicating that you expect to issue a final rule on prepaid cards in the spring of twick. I would ask if thats still accurate. Mr. Cordray i think that is still roughly accurate. I would comment that the spring starts next week and will extend until the third week in june or so. Mr. Royce in proposing this rule governing prepaid cards, was it the bureaus intent to prohibit issuers from offering overdraft protection to card users . If customers want and like overdraft protection for their prepaid card, is it the bureaus position that they should still be denied the opportunity to choose such a feature . Mr. Cordray in the proposal for the rule, that is not what we did. We could have done that. We could have sought to ban overdraft. There were a number of stakeholders who suggested that to us and actually urged us to do so. We opted for more of a middle ground, which was that overdraft could be provided on prepaid products. But if so, it should be subject to the same regulations approach as is used with credit cards, which is an accepted approach thats been in place for credit cards for many years. And thats what we proposed. We will be finalizing that rule roughly on the time frame you described. And we continue to consider how to approach that issue, among others. By the way, i would say one thing thats happened since the last time i testified here on that shows me we need strong Consumer Protections for prepaid cards for which none exists today. Mr. Hensarling the gentlemans time has expired. The chair now recognizes the gentleman from missouri, mr. Clay, Ranking Member of the Financial Institution subcommittee. Mr. Clay thank you, mr. Chairman. And thank you, director cordray, for attending today. Just to expand on my friends inquiry from california. Can you give us a sampling of what cfpb rules can you give us an example of what cfpb rules are supposed to be finalized this year . Mr. Cordray its hard for me to hazard a guess on what exactly will be finalized when because the process, its kind of like a judicial opinion. Its under advisement and it just gets done when it gets done. I think we clearly expect to finalize our prepaid rules this year. I think we clearly expect to finalize further amendments to the Mortgage Servicing rules this year. I think we are under way on a number of other rulemakings and i just couldnt really hazard a productive guess at this point as to exactly when those will be completed. Mr. Clay thank you for that. Switching subjects. It has recently come to my attention that some of my constituents are offered loans by lenders that are notlanded to operate in missouri. My understanding is that a customer will click on the online ad of a lead generator, with the customer doing so under the assumption that they are dealing with a licensed entity. But instead their information may be sold to an unlicensed tribal or offshore lender. In march, 2015, Missouri Attorney general shut down eight online payday lenders that were operating illegally and whose illegal lending practices impacted more than 6,000 missouri residents. In one instance a missouri resident was charged a 500 origination fee on a 1,000 loan, which was immediately rolled into the principal of the loan where she was then charged a 194 a 194 annual percentage rate, eventually paying 4,000 for 1,000 loan. Can you share insight on mr. Cordray ive heard some horrific stories from the state of missouri on lending that is occurring at sbtr rates effectively 1,950 annualized. Ive read this in a Court Opinion from a Missouri Court of appeals case in which they gave some examples from the record. What i would also say is that attorney general with whom i served when i was the attorney general in ohio is absolutely right here. Anybody who seeks to make loans without being licensed in a state is violating state law. We believe that if they attempt to collect on those loans under federal law, they may be violating the federal Debt Collection practices act. And we have and federal unfair and deceptive practices. We have open matters on that in the courts. And i think that thats all quite appropriate. Mr. Clay and so missouri has caught your attention as far as the abuses are concerned of consumers . Mr. Cordray very definitely. Mr. Clay thank you for that. As it relates to estimating the racial or ethnic impact of auto discrimination, to your knowledge, do any statistical methodologies exist at eliminating all false positives and false negatives . Mr. Cordray im not a social scientist but it seems to me unlikely that in any field of social science or Natural Sciences that thats easily possible. I wouldnt claim to be an expert. Mr. Clay ok. If republicans have concerns about using estimates for race or ethnicity, shouldnt Congress Just tell Auto Finance Companies to start collecting this data as hmda does for mortgages . Wouldnt that eliminate the need for estimation . Mr. Cordray actually it would, yes, i believe so. Mr. Clay or proxy are proxy methodologies used in other civil Rights Enforcement contexts . Mr. Cordray have been for decades. Mr. Clay well, i appreciate your response. Mr. Chairman, i yield back. Mr. Hensarling the gentleman yields back the balance of his time. The chair now recognizes the gentleman from new mexico, mr. Pearce. Mr. Pearce thank you, mr. Chairman. Dont want to catch you off balance, mr. Cordray. But i would like to thank over here. I would like to thank you for the past couple of years, your staffs been working with the coalition to save several financing, basically streamlining the rules under title 14 of doddfrank. Just pertains to the financing. Thats something that weve discussed in one of our meetings. I appreciate whatevers going on there. Theres some sense that well come to resolution there. At what level do you think that people who are using payday loans are trapped . In other words, how many loans in a row does that does constitute that . Mr. Cordray i dont know if theres a hard and fast definition but i guess from what we have seen, if half of the loans being made in that marketplace, more than half of the loans being made in that marketplace are going to people mr. Pearce im trying to get an idea mr. Cordray for whom the market is a shortterm 14day loan, more than half the loans are going to people who have rolled them 10 or more times. Seems like that crossed the line somewhere along the way. Mr. Pearce thats not the direct im going but i appreciate that input. Do you have a figure, the problem payday loans, about how much the people owe when they get to be problems . In other words, if somebody owes 100, is that a problem . Or does it need to get to 1,000 or 10,000 . Mr. Cordray talk about tribal payday loans in particular . Mr. Pearce yes. Mr. Cordray i wouldnt have a specific figure to put on that. Mr. Pearce is there a figure at which you identify people having payday loans, that theyre kind of in trouble . Mr. Cordray i would say the overwhelming consensus of a lot of people who look at it, rolling loans in long sequences, where you pay more in fees than you are in the first place. Mr. Pearce with all respect, would you tell me people have many different ideas, youre the top regulator in the dadgum country, im asking you what is your opinion, and you cant give me an answer. Mr. Cordray my opinion of my authority, we are working through these issues, weve issued a very mr. Pearce youre going after an industry and trying to shut them down. There are people in my district who use them and say, if it werent for that i wouldnt have been able to pay my rent this month. Forget that. Lets go to exploitation. Youve talked about exploitation, so at what level are feing exploit tative . Mr. Cordray we are not seeking to shut an industry down. Mr. Pearce youre doing a pretty good job of it. Im limited in time i would like to move on. I think your actions speak louder than your words by far. But at what level is exploitation a problem . In other words is 5 per month is that what that be an exploit tative fee . Mr. Cordray i dont have a particular comment on that. Mr. Pearce but you made comments youre trying to stop exploitation. How do you determine if its exploitation . Mr. Cordray again, i would say and most reasonable people would agree that if you are offering a loan that you know more than half of the loans will involve rolling the loan over 10 times, owing, paying more in fees than you borrowed in the first place and owing more at the end than you borrowed in the first place that gets a lot of consumers into a lot of trouble. Mr. Pearce weve discussed that multiple times today, i was hoping to have a substantive conversation, i dont think thats going to happen, im sorry about that. So the 5 per month fee comes straight from the i. R. S. Webpage. Youre going to pay 5 per month when youre late. And that to me, i think crosses into the exploitation category so you and i discussed this before, ill ask you once more for the record, do you ever deal with exploitation on the part of the u. S. Government . Mr. Cordray we dont have authority to address that. Mr. Pearce thats fine. Do you have any authority over Student Loans . Student loans charge 5 where wall street bankers pay less than. 5 , state of the union loans pay 5 . Do you deal with Student Loans . Mr. Cordray i think there are issues that could be looked at there, that might be for the congress. Mr. Pearce there are issues you havent looked at, youre looking at other issues. You established a q. M. Rule and the q. M. Rule was supposed to protect consumers but what it actually did was drive 95 of the loans into the g. S. E. s, which are exempt according to the legislation that you tried to impact. 95 are driven into the g. S. E. s and you have no action that youre taking on g. S. E. s, yourself come do you think here picking on people making loans to people trying to pay their rent on the end of the month. But when you drive them inside of government your answer is, here we cannot do anything to back the government off, we dont deal with the i. R. S. , dont deal with government loans and what you do is driving people into a market where you dont care if theyre being exploited or not. Mr. Hensarling the time of the gentleman has expired. The chair now recognizes the gentleman from georgia, mr. Scott. Mr. Scott thank you very much, mr. Chairman, over here, mr. Cordray. First of all, mr. Cordray, its very important, for the cfpb, for this nation to know that there are democrats on this side of the aisle that have serious, serious concerns and issues about how youre dealing Going Forward with this racial situation at the cfpb. We have legitimate concerns. And i have expressed those. But here is the most dramatic fact with the auto dealers, and that is this. Your methodology. Now fair is fair. And when you Start Talking about discrimination and you Start Talking about giving people checks because theyve been discriminated against, but then you use a methodology that is flawed, totally, based upon the last names of people, so now what we have, and you know this for a fact, you have many white people out here whose last names are johnson or williams or robertson or smith or scott or whatever. Who are getting checks. And theyre standing there at the mailbox wondering, wow, where did i get this check from . That is an unintended consequence that needs to be corrected. Yet, you ignore that glaring fact and continue that process. The other area is this. If an africanamerican customer gos into a dealer and he tells that dealer that mr. Dealer, i can only afford a 350 a month payment for an automobile. And that dealer looks at that and he decides that he will go in and cut his own retail margin end of the deal and lower that discount rate to meet the demands of that africanamericans budget, and yet your rule, your situation, would deny that dealer, would deny that africanamerican customer, who the bank wont deal with, many of whom dont even have a credit card. Theres 60 million unbanked, underbanked people in this country. And a huge percentage of them are africanamericans. When you discriminate, that is discrimination against africanamericans when your rule and your action denies them access to that car. How are they going to get to a job . These are the unintended consequences. This is a legitimate business reason to allow the dealer to come in there and either meet or beat that. These dealers in communities, where they know families, in the rural areas especially, those car dealers are everywhere in a community. And they have relationships. Why deny this africanamerican the opportunity because he doesnt have that budget . And heres the other point. The department of justice, which is indeed the legal and lawful arm of jurisdiction under which the dealers come, not you, you deal with the financial end, the lenders. But the unintended consequence of this is youre strangling the poor dealer and denying the very customers that youre supposedly trying to put this in view of to try to help. And then much of the money that you are getting out there for this is going to white people. Now, that is as plain as the nose on our face. And we need protection from abuses. But this entanglement improperly was reflected with the overwhelming support of the congress and it wasnt just republicans. 92 democrats also stood up because of this basic reason. So my point is that when you are willing, when you are willing and open to look at the whole picture, not just this narrow aspect i guess my time is up, but i hope you understand the reason that both democrats and republicans, this is an issue of soaring magnitude. Mr. Hensarling the time of the gentleman has expired. The chair recognizes the gentleman from florida, mr. Posey. Mr. Posey thank you, mr. Chairman. Director cordray, its no secret im still a little apprehensive about the cfpb. Mr. Cordray im trying to help you get through that. Mr. Posey despite the great sounding name, the Consumer Financial protection bureau, that sounds great, its going to be just another way to punish political enemies and bully lawabiding citizens like lois lerner and the i. R. S. For example. Id like to think that other agencies like the i. R. S. Already do enough of that. One of the many, many reasons that made me feel that way is your opposition to my proposed legislation which would allow businesses and individuals to ask whether a particular transaction complies with your rules. Otherwise they may be left playing a guessing game as to how the cfpb might react or act toward what they are doing or not doing. Do you think its important for the bureau to communicate with the companies they regulate . Mr. Cordray we do all the time. All the time. Mr. Posey is that a yes . Mr. Cordray yes. Mr. Posey do you think its important that businesses understand the regulations you enforce on them . Mr. Cordray we try very hard to make that happen, yes. Mr. Posey do you think the cfpb has a role in helping Companies Understand and recomply with the rules . Mr. Cordray i think we have been by far the most active regulator ever in doing that mr. Posey do you think consumers fare better when more businesses understand how to comply with your regulations . Mr. Cordray yes, if the rules dont get implemented, theyre not worth anything. Mr. Posey id like to think you feel the way you said which is why i was so disappointed in the bureaus no action policy. Heres an excellent opportunity to provide clarification to companies and individuals who are faced with a constant dream of regulations. In my office, ive kept the register for the last five years. Its become a little bit of a tourist spot to have people come in and have their picture take within the regulations, administration, federal agencies, not elected people, but unelected people have had in the last five years. I asked people to guess how high the pile is . The closest i got was seven feet. The reality is, its seven stacks over seven feet. Yet its my understanding that the bureau is still expecting merely one to three requests per year and that the policies set up is the expectation that theres only one to three requests fer year. Mr. Cordray i intend for taos do more than that. We opined that we thought we might get as few as one to three applications a year, i think we may get more. We also said that we would work to try to accommodate greater demand if there is a greater demand. The purpose, as i had in mind of having a no action letter policy and it took some time and effort to work through that was to try to capture some of the spirit of the bill that youre talking about in terms of people being able to get their questions answered and have some clear space to go forward. By the way, we also do this on a daily basis. We get thousands of questions a year. Mr. Posey reclaiming my time, im limited here. Have you had any inquiries yet . Mr. Cordray i think the policy has just taken effect. I dont know if the Effective Date has yet passed. So i dont know the answer to that at the moment. Wed be glad to keep your staff informed. Mr. Posey if resources were taken off the table if money wasnt an issue for the cfpb, which its not. Would you then have action to objection to making the no letters policy more expansive . Mr. Cordray money is an issue for us, we have a hard budget cap set by congress we have to comply with, so we always have to think about how were allocating resources to Different Things and they borrow against each other. We dont have an unlimited budget. Mr. Posey the frustration i see is the only time were concerned about money is when it benefits the public, communicating with these people and letting them know what to expect. Mr. Cordray were concerned about money all the time. Mr. Posey we had your assistant come in here, someone from oh other side asked how much money she made she refused to tells. Mr. Cordray money is an issue for us all the time. Mr. Hensarling the time of the gentleman has expired this echair recognizes the gentleman from texas, mr. Green, Ranking Member of the oversight and investigation subcommittee. Mr. Green thank you, mr. Chairman. I thank the witness for appearing as well. Also i thank the Ranking Member. Mr. Cordray, you and i and a good many other people are well aware of what this is all about. There are people who want to immas cue late now the cfpb and ultimately eviscerate the cfpb. Its over the airwaves, all sorts of things are being said. There was even an allegation made that i had some concerns with the cfpb to the extent that it was alleged in a sort of sketchy way that i was supportive of emasculating the cfpb. Not in those words but thats what this is all about. There are people who really would like to have a financial protections bureau, not a Consumer Financial protection bureau. So all of these things are done to give the cfpb a bad image. I want to go on record as making it very clear, i support the cfpb. I support what youre doing to help in the areas of auto lend, to help with payday lending. I support these things. I wish we could do more. I dont believe that all dealerships are engaged in invidious discrimination. I dont think that all payday lenders are bad people. But those that are ought to be properly regulated and they ought to be penalized for what they do. Lets talk quickly about ally. It is true that ally settled that case for about 80 million, i believe. Is that correct . Mr. Cordray and theyve paid out more since to remediate further problems year by year. Mr. Green and it is true that ally was prepared, in the sense court, which is the american way, thats why we have an independent judiciary, but they were prepared, they were in court and they chose to set they settle the lawsuit, correct . Mr. Cordray i assume so. Mr. Green with them settling this lawsuit, i assume they thought this was in their best interest to do so. What i marvel at is how these major dizzes can lose in court but come to congress to win. Because thats really what this is all about. They want to now change the rules of the game so that they can continue to perpetrate these kinds of invidious acts upon people who need the money they have, are barely making it, and still find themselves being discriminated against and having money taken out of their pocket. Everybody, it seems, wants to fight discrimination until they have to fight it. And then when they get to the point of having to do something about discrimination, invidious discrimination, i might add, thats when none of the tools seem to work for them. Using testing doesnt work for them. Which is probably one of the best ways to determine whether discrimination takes place because you can send people out and those that come back with empirical evidence can share that with you, show they were discriminated against. Then disparate impact. Another tool. Just doesnt seem to work for them. Any tool that we design doesnt work for them. Everybody wants to fight invidious discrimination until they have to fight it or find a way to do it. Unless its at the cfpb. If its at the cfpb then all sorts of specious allegations are made, attempts to do everything that they possibly can to besmirch the cfpb because theyve already said, and i admire them for being honest if ever they get a president , theyre going to do things to eviscerate, they dont use that terminology, but thats what is meant, to eviscerate the cfpb. It will be taken away from us. Im reminded of what ben franklin said when he came out of Constitution Hall and someone queried, what type of government a monarchy or a republic . And he said a republic, if you can keep it. We have a cfpb, if we can keep it. Im not sure were going to be able to keep it, to be quite candid with you. Im going to fight on my watch but i know there are many watches to come and just as the same people who are against the cfpb, the same people who want to do something about social security, they want to privatize it, all of this in my opinion goes back to something the Supreme Court did in Citizens United versus s. E. C. The Supreme Court said that money talks. Money is talking right now. Right now today. Money talks. These big corporations now know that they have an edge because they can do whatever they want and challenge us if we challenge them. It makes a difference in the lives of little people, people who are not as big like the corporations. And we have got to do something about it. I thank god for what youre doing. Mr. Hensarling the time of the gentleman has expired. The chair recognizes the gentleman from ohio, mr. Stivers. Mr. Stivers thank you, mr. Chairman. Appreciate you being here, like to welcome you before the committee, mr. Cordray. Mr. Cordray is my constituent so its always good to have a constituent in the room. And you probably, i know you answered the question to mr. Royce of california earlier, sent you a letter with 329 members of congress, bipartisan a massive majority of members of congress and mr. Royce asked you a little bit about it and left a little bit out. Did you read the letter . Mr. Cordray i dont think its come to me yet. It came over yesterday and i have not seen it. Mr. Stivers the bottom line mr. Cordray i read all the letters, i just havent seen that one. Mr. Stivers they found that community Financial Institutions had to discontinue or limit access to services as a result of your regulations and you have the authority under section 1022 of dodd frank to modify your regulations and sort of adapt them to the people theyre applied. So i would urge you to do that and im a very visual person, i have a visual display for you, and jessie is going to hand you a tshirt. Could you hold that up and take a look at it real quick. Is it a nice tshirt . Welldesigned . Mr. Cordray im not an expert on tshirts. But it looks could you try to put it on . What size are you . Mr. Cordray im kind of reluctant. Mr. Stivers does it look like a big or a small tshirt . Mr. Cordray thats looks like a small. Mr. Stivers thats a 2t. Fits a 2yearold. The two ways you could fit in that, are go on a massive diet and restrict yourself, what a lot of community Financial Institutions are doing to make themselves smaller to serve clients less, or they could strain the tshirt and break the tshirt, the tshirt being the regulation. Ill give you time in a moment. Take a look at your authority, you talked earlier about your authority. You took your authority seriously in another rem when you were talking to one of my colleagues and said we take our authority very seriously. Take your authority under 1022 seriously too. So what are you doing to going to do about that, ill give you 20 or 30 seconds to tell me what youre going to do to help the folks under you admitted you havent read it, you probably cant tell me but i guess, are you going to read it and take it seriously . Mr. Cordray let me also talk about the facts here. For example, they have economists that present facts in reports and then they also write certain Opinion Pieces that dont jive with the facts. Credit Union Membership last year in the wake of four years of the cfpb is at a new alltime high in the nation. Thats good news, i think. But its not consistent with this notion that were killing Credit Unions. Credit unions share of the mortgage lending market where supposedly our rules are stifling them and driving them out of business is at its highest level than its been for the last 20 years of keeping track. Theyre doing better in a marketplace that rewards responsible lenders. It is also the case that we have contoured our rules in ways that give advantages or give differential treatment to smaller lenders, whether Community Banks or Credit Unions, because thats consistent with the data coming out of the crisis that they had lower defaults than other lenders. They should be able to continue their relationship lending model and our rules provided specifically for that. We will continue to think about those things on a casebycase basis but the argument that everybody is being driven out of business, theyre stopping products, isnt consistent with the data that shows that total number of Mortgage Lenders were up last year that credit Union Membership is at alltile highs and that Credit Union Mortgage lending in particular has increased its share of the market at the expense of large banks. Those are the facts. Mr. Stivers the problem is the number of small Credit Unions is going down because your regulations are making it difficult for small Credit Unions, theyre having to merge and i had it happen in my district. Three Credit Unions merged into one bigger credit union because of the regulatory burden. Were seeing it all over this country, same with small banks and the regulatory climate is speeding it up, its not the only cause but its speeding it up. Mr. Cordray thats been happening since the 1920s. Mr. Hensarling the time of the gentleman has expired. The chair recognizes the gentlelady from ohio, ms. Beatty. Mrs. Beatty thank you, mr. Chairman, Ranking Member, and thank you mr. Cordray for being here today. There are some benefits in being last. You get to hear all the information, good or bad mr. Cordray i noticed you sat through the entire hearing. Mrs. Beatty i did. Let me say how proud i am that you are from ohio. I associate myself with all the words that have saluted you for protecting those folks we need to protect. Which is in your charge. Let me also say that we have not talked about the billions of dollars that you and your agency have been able to recover for those who have been wrongly defrauded. Now, a lot of controversial issues here today. And ive been a part of some of it. But what is amazing to me, being a black woman, is how we talk about protecting consumers and we pick and choose when we want to use the words disparity and discrimination and sometimes for me its been very political. That people are using it, whether its you, whether its president obama, whether its anybody thats helping those folks who look more like me. Ive looked on websites, pages of some of my congressional folks here and its all about destroying you, its all about racism, but we only seem to do it when were protecting those folks. Now heres what i think. Im trying to look at both sides. So if we take one of the most controversial votes that, for me, and im all with you, im supporting, but heres my issue. I think weve wasted a lot of time in here. A lot of time arguing without resolve. And i was always taught if you complain you should have resolve. So if we take the house bill that came up that we had black dealers who were against it, we had dealers who, lets say, were more majority but there were some minority in there that were supportive of it. But heres the wonderful document and i think we all have it, mr. Chairman, id like to enter it into the record. Its about what you do. Mr. Hensarling without objection. Mrs. Beatty it talks about fair credit compliance. You can take the black folk the white folk the come by narkse combination all signed off on this document. Then we get this legislation that were all in a tiff about and the legislation really doesnt resolve the problem so whether youre for it or against it, it doesnt make any sense. Because heres the issue that im going to allow you the last half of my left to answer. When i think about those africanamericans and minorities who walk into a dealership, do i think some of them are discriminated against . Yes. I think some of the people who walk in this room that look like me are discriminated against because of all the stereotypes we know about and unfortunately weve heard in this room. On the other side, do i think somebody walks in a dealership and looks like me and is not discriminated against or dont automatically get a higher rate . Well, whats the difference . It might just be that i was more aware, had a better credit score, nobody is talking about the real systemic issues in the problem. And it starts, because we cant change the color that you go , in but we need to make sure we put practices and things in place beyond names and zip codes. But heres the other thing. If we start together on Financial Literacy, the issue you have done more than any other person on Financial Literacy in that state. My question is, we got to create doddfrank, im all for doddfrank, i wasnt here. Theres a part of the doddfrank legislation that talks about real Financial Literacy. And were not doing enough in this committee, thats charged with looking at the banking industries, looking at the financial industry, looking at the credit union, industry, but were not talking about a program, even from the minority dealers in their letter to me, it says, were not dealing with the real issue of the transparency of the peoples credit and were not coming up with any legislation. So doddfrank mandates that the cfpbs office of Financial Education shall, not maybe think about it, but shall develop and implement a strategy to improve Financial Literacy of consumers. It doesnt say consumers who go into a candy store, so that means a consumer who goes into an automotive dealership. They have to have financial counseling, information to assist with the evaluation of a credit product. Lets say that product is a car. And the understanding of Credit Histories and scores. Lastly, i had a member, an africanamerican person, tell me that they got that high Interest Rate and thank god they did because they could go to work, they could have a car and they could feed their family. And im sorry i dont have enough time for you to answer. Mr. Hensarling the time of the gentlelady has expired. The chair ms. Waters can we enter into the record the National Minority automobile dealers. Mr. Hensarling without objection, the chair now recognizes the gentleman from south carolina, mr. Mulvaney. Mr. Mulvaney thank you, mr. Cordray, im over here. I want to follow up on some of the discussions that mr. Neugebauer from texas had with you about the interplay between federal regulation and state regulation. I think mr. Neugebauer is asking you specifically about some of your proposed rules on shortterm, what people call payday lening aened how it interacts with state action in the same field. During the questioning, seriously, despite what you may think, in this particular circumstance im not trying to put words in your mouth but i think mr. Cordray i always take your comments at face value. Mr. Mulvaney you said you mr. Neugebauer asked you which states, you said all 37 that still allow payday lending, so ill ask the question again and see if we get a clean answer. If your research as you prepared to produce these new rules on shortterm lending, which states have you determined have failed to protect consumers . Mr. Cordray maybe i wasnt clear in trying to respond to the question before, thats not how we approach the issue. Its not my job to control states or tell state officials what to do. It is my job its not my job to control states or tell state officials what to do. It is my job mr. Mulvaney thats fair. Mr. Cordray but it is my job to look at harm occurring in the mark place and look at ways to intervene to address certain predatory prackities of lenders. Mr. Mulvaney is it fair to