Transcripts For CSPAN3 Consumer Watchdog Director Comes Under Fire At Oversight Hearing 20170420

Consumer financial Protection Bureau. This portion is about an hour and 15 minutes. Okay. Well call the hearing back to order. Well be respectful of the directors time here. We do have a number of members that have returned. So again, we appreciate the indulgence of the director as well as other members here. At this point we are going to recognize the gentleman from washington, mr. Heck, for five minutes. Thank you, mr. Chairman, very much. Mr. Cordray, thanks so much for being here. The testimony earlier in the day reminded me of a conclusion i had come to quite sometime ago about what the best thing that could conceively happen to congress would be. And it would be this. Fewer adjectives, more announcements. Fewer decibels, more listening. So im going to endeavor to listen. I want to first provide you an opportunity maybe to follow up on mr. Lynchs line of questioning. Members of this committee represent in the aggregate an incredible number of Service Members. The following bases, white sands, ft. Hood, Patrick Air Force base, and my very favorite, joint base lewis mccord, which i have the privilege to represent. You seemed pretty rushed at the end of that discussion about what it is that the Affairs Office is doing to provide you with an opportunity to expand if you have anything at all to add to it. And i just have one other question. Thank you. I am appreciative of the chance to talk about this. And i think there were high ranking officials from each of the services that testified recently in the senate about how helpful it has been for them, since theyre really focused on how to do the job of the military, to have the cfpb work with them to make sure that in terms of readiness, the Service Members feel supported and protected on that front so that theyre not consumed with that kind of anxiety. So thats quite important. And we are looking at the entire life cycle for the military from going into the service to begin with to coming back out, transitioning into society and issues involving families as well. So these are all part of our focus. And some of the curriculum that weve worked on with the department of defense is now being incorporated as a standard matter into some of the training and readiness work that theyre doing. And its just a great thing. And im quite confident that while cantwell, who has now taken over this position, is a great person to show the leadership in succeeding ms. Petraeus, who was a truly great leader, we wont miss a beat on that front. Thank you. And my acknowledgement to holly, who did i thought a spectacular job. One of the aspects of the standing up of the Consumer Financial Protection Bureau that i always found appealing was its effort in effect to level the Playing Field between Financial Institutions and nonbank institutions so that theoretically they could compete on a more even footing in the marketplace on the basis of their innovation and their efficiency and the like. We dont ever seem to talk about that in here. Im just interested in your reflections several years later about the degree to which youre thinking were making progress in that regard. Yeah, actually its a great point and it gets lost a little bit, but one of the things that was done with the cfpb was were supposed to try to put the banks on a level with the Nonbank Financial Companies that often compete against them in the same market, such as mortgage lending, mortgage servicing, auto lending, a number of others. And we have been working to do that from the beginning. And thats unique to this agency. Nobody was in a position to do this before because the banking agencies deal with the banks, and the ncos with the credit unions, and other agencies including department of justice have dealt with everybody else. And you want them to be supervised in the same way, subject to the same standards and the same expectations. If not, some of that falls back to the state level where theres some very good work done, but it can be uneven depending on different state laws or different state authorities or state resources. And so we work closely with the states. But for us to try to make that Playing Field level is an important thing. And the way i say it is, if you only regulate part of a marketplace and leave part of it unregulated, its going to be a recipe for failure because a lot of things are going to gravitate to that end that is not under the same microscope. Plus, its unfair to these financial companies. They should be competing on the level. And were trying to make that happen more and more. Thank you, sir. Mr. Chair, with that i yield back the balance of my time. The gentleman yields back. Next we go to the gentleman from new york, mr. Zeldin, who is recognized for five minutes. Thank you, mr. Chairman. Director cordray, we have asked before about the wasteful renovations to a Headquarters Building it does not own. One fundamental question remains. Who is responsible . In other words, who authorized the renovations . Getting an answer to this simple question has been surprisingly difficult. One of your prior appearances before this committee, representative wagner, now oversight and investigations subcommittee chair wagner, asked you to identify the individual responsible for giving the official goahead to renovate the Headquarters Building. You responded, and i will quote you directly, and why does it matter to you . I cannot recall a more dismissive answer by an agency witness, especially one who goes to Great Lengths to stress his agencys accountability and transparency. Yet, we did deduce several facts from your testimony. You claim that the decision was made before your tenure as director which began january 24th, 2012. You also said it was someone at treasury that, quote, there are people in treasury who contributed to that decision. Well, we asked treasury and they only pointed us to the build contract, which was signed on your watch, but which tells us nothing of who committed the cfbp to the renovation in the first place. Here is another fact. In 2011, Elizabeth Warren while serving as treasury announced she had selected 1700 g street as location of the bureaus headquarters. We also know from documents provided to us by the office of the comptroller of the currency at the time this location was selected, it was known that renovations would be needed. So now logic would dictate that the one person who, a, selected the location, b, knew of the need for renovations, and c, had the power at treasury to authorize the renovations is in fact the person who authorized the renovations. Strangely, the Federal Reserve found no documents to substantiate the decision and you have not provided documents either. So let me ask plainly. Did Elizabeth Warren authorize the renovations to the cfpb building at 1700 g street even though she never was given this authority through the advice and consent of the senate or appointed to run the cfpb . So that was about two minutes of narrative and had several points about it. First answer my question. Okay. So i dont know who made that decision initially, as ive answered before. I feel that i was misquoted or taken out of context by some, not by you but by others, who have made it sound like i thought that inquiring into the expenditures for the building was, why does that matter to you. I know why that matters to you. Its a lot of money and it does matter to you. It was the issue of who originally authorized that decision that after the question was asked three or four times, i think i got a little impatient in answering it. But i dont know who made that decision. But ive also said since that i have reaffirmed the decision. So i treat it its basically my decision. So if people have a problem with it, im quite happy to be here and answer the questions. I have a limited amount of time. Just to be clear, Elizabeth Warren did Elizabeth Warren authorize the renovations . As i said, i dont know. I dont have any way of knowing that. I wasnt in the leadership of the bureau at the time. I wasnt privy to those decisions. But i will say its also an increasingly good news story about the building. Its coming in on time and under budget, on budget. And will be im sorry. Thats a different line of questioning. Its relevant. Mr. Director, a cynic would say youre carrying water for senator warren to prevent her political embarrassment and you dont want the American People to know the truth about who was behind the throne, both before and after you took over the cfpb. Are you answering this question as far as who authorized the renovations under any duress, coercion, or compulsion at all, any type of threat . From whom . I dont even know what youre talking about here. Have you ever discussed the cfpb renovations with senator warren . Have i ever discussed the renovations with senator warren . I dont know if i have or havent. Ive discussed them with many of you. I dont know if i have. In terms of who made the decision, i dont know. Ive never seen records on that. Whether someone else at treasury is the one who had to authorize that, i honestly dont know. But i ratified the decision and i believe its been a good decision and the project has gone well, and gsa is doing an exemplary job. Reclaiming my time, you do not recall whether or not youve had any conversations with senator warren with regards to cfpb renovations . I may have. Thats different from who made the decision about the building. I have one quick question. Two weeks ago, chairman sarling sent you a letter. Will you continue your future as the director . You owe it to the public to state your intentions. I will ask you, absent action by the administration, will you fulfill your term at cfpb director . I have no insights to provide on that. You are unable to give your assurance right now that you will fulfill your term as director . The whole issue isnt even within my control. We have this court case pending. Were all watching to see what happens with that. So, you know, your speculation about that is as good as mine. The gentlemans time has expired. The gentleman from michigan is recognized for five minutes. Thank you, mr. Chairman. And thank you, mr. Cordray. Ill have a couple of questions for you, and ill apologize in advance if this is redundant, because i have not been able to participate in the entire hearing, although ive been able to catch a good deal of it on the closed circuit. Its mustsee tv, i will tell you. But i want to express to you something that i mentioned earlier, and thats your public service. As i said earlier, ive known you for a long time in a variety of roles. One of the things that you bring both to this position and especially to this hearing is a seriousness and a calm that would serve this town really well if people adopted your approach. Some of the tone that ive witnessed both when i was here and on television is not becoming of this committee. And thats not on you to respond to, but i will say that im very pleased that you continue to take the position and the work that you do very seriously and answer questions fully to the extent you can and in a manner that is quite becoming a public servant, so thank you for that. Could i just say, im not bothered by any of the tone. I know that people on both sides of the aisle have strong feelings on some of these subjects and they care a lot about it. So theres going to be a certain amount of tone. And i do hope that i can remain calm amidst all of that. But im listening hard, and what they have to say substantively is why im here, and thats important oversight. I just want to stress again to everybody that i take it very seriously, our bureau takes it seriously. There are many things weve changed or done differently as a result of discussions weve had in these Committee Hearings and in your offices. And im sure that will continue in the future. Thank you. I appreciate that. The one editorial comment that ill make is that what frustrates me in watching some of the questions is the attempt to confuse what is policy difference, which is legitimate and actually something that we ought to accept as a part of a normal process of democratic governance, but to confuse policy differences with questions that are raised about integrity while on the other hand, this body, and particularly the majority, seems to ignore legitimate questions of integrity in the executive branch as if they were only differences of policy. And i appreciate the tone that you take. I wonder, and when i opened, i raised a reference to what the bureau did in the case of bridgeport education, which is a forprofit College Chain that deceives students into taking out high cost private loans. And you may have answered this question already previous. I havent. I wonder if you can describe to us that case or what you can recall from that case and what the outcomes have been as a result of the cfpbs intervention. There have actually been three such cases. So i may sometimes have some of the facts confused among them, but theyre of the same genre. One involved itt, a chain of schools. One involved corinthian, which was also a chain of schools, and bridge point, which i believe was a chain of a number of schools as well. And the concerns that we have are that loans are being made to Prospective Students and their families where everything thats supposed to be disclosed is not disclosed, and some facts are hidden on the back end, so theres misleading marketing of the loans. Also the loan may be marketed against a backdrop of Graduation Rates and job placement rates, which are being misrepresented to the students and their families so that they end up paying a lot and not getting very much out of the education, but the loan is premised on those predicates. Thats a real problem. And we have pursued several of these cases, and weve done well in the courts on them. And they have led to significant relief for students and their families and to significant disruption of what were very bad Business Practices at some of those places. Bridge point is not the same as itt and corinthian. And i dont have all the nuanced distinctions in mind here, but thats the general concern that we have had. We continue to look for those kind of problems and will continue to address them as they arise. In the last few seconds and if the rest of the forprofit marketplace is cleaning up as a result, thats a very good thing. I suppose that you can just answer yes or no if you like. Had it not been for cfpbs intervention, the practices that caused your intervention would still be ongoing, people would be basically ripped off by those sorts of loans and it would just continue and be encouraged by inaction by any other agencies . Its hard to know for sure, the road not taken. I think what we can know for sure is what happened because of our actions here. And i think that it was in the public interest. Thank you very much. The gentlemans time has expired. Well recognize next mr. Trott of michigan for five minutes. Thank you, chairman. Thank you, director, for your time today. I want to go back to a line of questioning that was pursued by the chairman of the committee. In defending your press releases regarding resolution of enforcement actions, you said a couple of times, i know the facts. It kind of reminded me of Jack Nicholsons line from a few good men, you cant handle the truth. Suffice it to say, your statement suggests to me youre quite comfortable being judge and jury, so lets look at one of the press releases that was issued august 26th of 2016 in regard to the resolution of First National bank omaha. That isnt how i intended the statement. You somewhat see my point, perhaps. You said, First National bank of omaha violated the trust of its customers by illegally signing them up for credit card addon products. Lets look at the actual agreement, section 2. Respondent agrees to the urban wants of the Consent Order without admitting or denying any of the findings of fact or conclusions of law. So do you think thats an accurate press release . They didnt make an admission of guilt, but your press release sure made it sound like they did some bad things, would you agree . Absolutely it did, and they did do some bad things. Again, the distinction is between what i know, and i dont know it because im just dreaming it up, what i know is that we conducted an investigation. We uncovered the facts, documentary evidence, talked to employees, talked to people, and this is what it showed. Im going to reclaim my time. Ive heard that answer before. Im going to reclaim my time. Let me suggest a different scenario. So youve settled a number of actions with employees who have been treated unfairly by the cfpb. How would you feel if i issued a press release that said director cordray today apologized and adm adm admitted responsibility for sex and Racial Discrimination against the employees and the rampant retaliation against its employees, he will not change the behavior because none of the folks that were guilty of this conduct are going to be fired, but this is my press statement. Is that an accurate press statement . If you read that, would you say i did a good job on that . If it were an Inaccurate Press statement, i would not like it because its inaccurate. If it were an accurate press statement, i wouldnt like it because you never admitted guilt to these employees. Its analogous to the First National bank of omaha. No, i dont think it is. Lets continue to talk about another incidence of hypocrisy. I want to continue. Last summer, the sheriff v. Gilley case. It came out of ohio, i believe. It sure did. It involves how an attorney general who is able to appoint a special contractor for the purposes of collecting debt to the state of ohio, and you filed an amicus brief on behalf of the cfpb supporting the use of attorney general letterhead by the special contractor violated section 1692e of the fair Debt Collection practices act. The Justice Department filed that brief. We worked with them on that. The Justice Department controlled joined in the amicus brief; isnt that correct . As attorney general of ohio, isnt it true you used special contractors to collect debts owed to the state in the same exact fashion . I did, and i know you have a lot of background in this area and know it well, so yes. So your amicus brief would not have been something you were supportive of when you were attorney general of the state of ohio . Im not entirely sure about that. You said in response to one of the democratic questions, no one can complain that they cant get their voices heard at the cfpb. I go home every weekend and i hear from realtors, mortgage brokers, community bankers, title agents, Small Business owners, attorneys, theyre terrified by the cfpb. One person a couple of weeks ago youre not going to be at all pleased with this comment. He made an analogy and said the cfpb is like the mafia. They show up at your business and say, its a nice place, i hope nothing happens to it. How do those people get their voices heard . Do you think youve given Prior Guidance to Small Business owners that are honest people trying to do right by the consumer . Certainly mr. Hills question referencing the website, thats convoluted to again an answer to a specific question, thats indicative about how people feel about getting answers out of the cfpb. Is that a fair statement on my part . I dont think so, but im sure it depends on very much who were talking to. There are 320 million different americans after all. Not all the same experiences, im sure. I appreciate your time, sir, and i yield back to the chair. Thank you. Gentleman yields back. Next ill recognize the gentleman from georgia. Its been a long today. Looks like a little more intimate setting here now, so maybe we can get through a few things. Ive got another line of questioning, but i wanted to continue on with something mr. T trott said. I work with a lot of whats left of the Community Banks in the state of georgia. And as were working on repealing some of the owners regulations brought in by doddfrank and in my opinion of most people is bad law that has closed off the economy from the average american, provided protection for those who are on the inside, i have learned one thing. The people out there are more afraid of you and the cfpb than any other element of our federal government. Im getting that from the banks, the bankers, every Financial Institution, and it just reminds me of something that Thomas Jefferson i believe it was Thomas Jefferson was quoted as saying is when the government fears the people, theres liberty. But when people fear the government, theres tyranny. And it almost feels like in this Financial Services sector thats where we are, but i just wanted to throw that out there. You dont have to respond to that. I actually want to talk about the reports that weve received. I actually have some honest to goodness questions. Ive been reading over the report that was left on our desk and the latest numbers we have received from your office this week. And in the most recent report that we received your numbers show that in 2016 the cfpb handled 291,000 consumer complaints. Does that sound about right, the 291,000 in 2016 . Yeah, Something Like that. And of that, according to your report, 17,000 of those were resolved with monetary relief for the consumer, which is about 16 im sorry, 6 of all the complaints have monetary relief for the consumer and 94 resulted in no monetary relief. I believe thats what was in the report. There can be monetary relief. There can be nonmonetary relief. If something comes off your credit report, suddenly you can get a mortgage. Or a debt collector thats harassing you, you get them to stop. One thing i didnt see in the report that i was looking for is what percentage of those had Civil Penalties. I didnt see that in the report anywhere. We cant impose civil pe penalties. In your report you outline Civil Penalties on several cases. But you never show what percentages was a civil penalty or a penalty that was imposed upon a business . Do you have those percentages of the 291,000 cases . Im getting a little lost here. We dont impose Civil Penalties on consumer complaints at all. We dont have the ability to do that. If we did, we would be struck down by a court or something. We can only do it in cases where we file an enforcement action and its potentially reviewable by a court so thats judicial or administrative action . Could be either, but it is all subject in a quarter, it can be reviewed by a court. What happens to those penalties, the monetary value . Im wondering. Im asking. I know youre allowed to keep some of that. Its all whatever im not trying to get you at anything. Im trying to ask honest questions. Its all specified by law, and congress provided for it. Those penalties go into a penalty fund and they can either be used to compensate victims in other cases who were unable to receive compensation because, say, a Fraudulent Company went out of business, so they never got their money back or they can be used for the statute says two things. One says Financial Institution programs. More than 90 of the money has gone to victims in other cases, and a small amount has gone to one Financial Education program which is helping veterans transitioning back into service let me reclaim my time because im quickly running out of time, and i want to follow up on the previous question i had. Are you indicating that only 6 of the cases you can actually have consumer relief . I mean, or is it just youre unable to do it . We have two Different Things here that are getting that seems like an awfully low number. These are two Different Things. We have complaints that people file with us that we try to get those resolved and get relief where we are. Then theres matters where we bring a case which is an entirely different thing on behalf of thousands or millions of consumers. And in those cases that are subject to review by court, we can impose penalties and get money back for people. In those matters, were almost always getting money back for people. If they dont get paid, we can go to the Civil Penalty Fund and get their money back if it is available. Gentlemans time has expired. Next go to mr. Mcarthur, gentleman from new jersey, recognized for five minutes. Well, thank you. Good afternoon, directo director cordray. Good afternoon. I think everyone in this hearing wants to protect consumers. All right. Thats a good start. Getting it right obviously, i think, is critical. I want to explore a little bit about who pays the penalties that are imposed on the companies that you go after, the enforcement penalty. Who pays those penalties . The companies do or the individuals, if it is individualed involved. Is it fair to say that most of those companies are publicly Held Companies . Theres a mix, but a lot of them are, yes. And those companies typically, like all public companies, are owned by shareholders, pension funds, 401k funds, just ordinary americans who invest in the stock market and try to put money away for a rainy day. Is it fair to say that these penalties erode, decrease, have some impact, whether its fair or not thats not the point, but they have some negative effect on the value of those companies . Look, it depends on a lot of things i imagine, but i think logically they have to be paid by the company. Sure. And thats accountability. In the public markets, historically earnings times about 15 is the value of the company. Its running a little higher now. But if you reduce earnings by a million dollars, youve probably effe effected the value of the company by about 18 million. Im not looking for a response. The reason this matters is we cant have conflicting guidance from different parts of the federal government, and i want to take about captive mortgage insurance in particular. In 1996 and 97, the office of the comptroller issued guidance to the mortgage industry about providing mortgage insurance, and both of them occs interpretive letter number 743 and hud gave later guidance, they laid out where companies could get involved in providing captive mortgage insurance. And dozens of Companies Got involved. You took a different approach. In 2013, you decided that you didnt think that was appropriate and you went after a number of companies. I wont list them all because i want to focus on one, but i have a list in front of me of a half a Dozen Companies that you imposed fines of 15. 6 million. Times 18, thats about 300 million of market value that evaporated sorry, captive mortgage insurance . Mortgage insurance. Remortgage insurance. Im only familiar with one case. There are others. Raiden guaranty, united guaranty. Okay. But all of these fines have a negative value on these companies. I want to focus on phh for a moment. They are domiciled in my district, southern new jersey. 3500 employees, and you set up a process where basically they were tried inside cfpb, a court of your making. You didnt go to the federal court to do it, and that resulted in congress provided for that. That resulted in a penalty of 6. 4 million. You then overruled that penalty, and you imposed a penalty of 109 million on a company that entered the market with guidance from the office of the comptroller of the currency and the National Bank act. Im forgetting who that oh, hud. Hud was the other agency. I understand you disagreed with that guidance, but you then went back ten years no, no. Let me finish. Went back ten years, applied no statute of limitations, took a judgment of 6 pn 6. 4 million turned it into 109 million. Do you know what the market value of that company was on the day you opened the investigation . I do not. 7 billion. Do you know what it is today . No. It is 1 million. Im not suggesting all of that is due to this action. That would be quite erono erroneous, yes. How you go after companies in the name of the consumer is vitally important. Youre not just exacting a price from some ethereal entity out there. I understand that. Youre exacting a price that effects 401k plans. You say youre collecting in the name am i going to have a chance to come back on this . My time is expiring. If they violate the law with impunity im asking you to be extraordinarily careful about punishing companies who relied on other federal agencies for guidance and you had a different opinion and you cost real people real money. Could i speak to that . Let him answer the question. No more questions. Let him answer the question. I didnt just sort of make something up because i dont like the company or i thought it should be more money. There was a specific legal point in the case that had to be decided one way or the other, and the issue was whether since they violated the law, which was what the Administrative Law judge held on the factual record and what i agreed with, and others may disagr disagree, but its in the courts, either the right amount they had to pay was what they got on contracts after a specific date, contracts that were entered into after a specific date, or everything they were paid on contractors after a specific date, even those contracts may have been entered into. Okay. Its not obvious one way or the other. I made the judgment it was the other issue. Gentlemans time has expired. It cant be anything in between. Gentlemans time has expired. Court overruled you. Wasnt done cavalierly. Time has expired, gentlemen. Next well go to the gentleman from north carolina, mr. Budb, recognized for five minutes. Thank you, mr. Chairman. My mistake. My mistake. Its mr. Davidson from ohio for five minutes. Thank you, mr. Chairman. Director cordray, you were attorney general in the state of ohio. Is that correct . Yes, i was. Yes. Did you ever have a case as attorney general that the state prosecuted where the defendant was found not guilty . I dont recall specific cases, but im sure we did. You cant win all of them. Correct. In your role as director, cordray, in this new role, when you do these settlements, youre doing press releases that say effectively youve won every case. You have a perfect record in your case. Then the courts come over and in the case of phh you are overturned because due process is finally given the opportunity to prevail. Was the cfpb have the ability to conduct formal or informal investigations without court order . We can commence an investigation without court order. Does the cfpb give notice to a target when it is under investigation . Can i answer the question . You answered it. Can the cfpb give notice to a target when it is under investigation . Typically, we commence an investigation giving notice to the cids, not the target. So the target of the investigation is not advised youre initiating an investigation once you have menaced. They are. They typically are because they get a civil investigative demand. Thats when we start to engage back and forth. When you send a civil investigative demand, or a cid, you have this Unlimited Power of discovery and the entity is never advised as to whether theyre the target of the investigation or merely answering a question where they could have data related to it. Couple times now. We dont have Unlimited Power of discovery. They can take us to court. Thats happened a number of times. In the case of phh when they followed the procedure, the next case is they disagreed with the proceedings. Then they appeal to the administrative judge. Do you appoint the administrative judges . I do. When they disagree with that, they can bring it to the director. In the case of phh that proved to be very high risk. They can also appeal to the court, and they have done so and this matter is in the courts. I just want to understand the path here. Let me explain. Ive got it down. I say the director, you, sign off to investigate the target. The director assesses the case and issues a penalty. The target will either sign a Consent Order or appeal to an administrative judge that you appointed. And if the target loses the appeal, the case is brought back to you where you will no doubt reject, and as we have seen, perhaps even increase the penalty. The target can then appeal to the federal court, but not before its reputation has been tarnished and legal fees in the millions of dollars or in the case sometimes over 100 million, and you have presented it as you have already won. Simply that its alleged, you present it as if youve achieved a victory. Is that an accurate description of what goes on here . Not accurate in a number of ways. But if you want me to, ill spell it out. Congress has provided different ways to take an enforcement action. A company at any time can take us to court. They can take us to court over the civil investigative demand, as a number have done. They can take us to court and refuse to settle a case, if they think they have grounds to do so. Reclaiming my time, they do have a path to the courts, but long after their reputation has been severely damaged. You have served as jury and executioner. You present it in the media as if it is. When the same set of facts thats been stated over and over by my colleagues, you refuse to concede the point youre guilty as charged when youre on the exact opposite side of the same settlement. Thats not correct. We dont present it in the press until a matter is final and its concluded and we have concluded an investigation, we know what the facts are. You present it as if they are found guilty when the Consent Orders clearly say they have not admitted guilt. I do look forward to you producing one that says something other than that. Its not a criminal matter. Its a civil matter. We know what the facts are and we set out the facts, all right . Always your facts are right. Thats your assertion. Your facts are always right. Like every other part of the federal government and no different for us, what we do can be challenged in the courts. Reclaiming my time. All agencies need a better appeals process. What ive seen concluding as a new member we really need to address due process, particularly in your agency. I yield back. Gentlemans time has expired. Now we go to the gentleman from north carolina, mr. Budd, is recognized for foive minutes. Thank you, mr. Chairman. I want to talk about what for lack of a better term is a revolving door. Policymakers, rule makers, attorneys have left in recent months lured by opportunities in the private sector. Many have landed at law firms, compliance shops, banks where their insider knowledge of how the agency works is coveted. Other articles just last year noted that more senior staff had departed for major banks like capital one. A representative of a Public Citizen called this eed these ala alarming. President trump recently signed an executive order imposing an unprecedented fiveyear lobbying ban on certain officials who leave the executive branch. This is it. Do you support this executive order . The president s always sets ethics requirements that go beyond the requirements of the law and theyre free to do so. I dont have any criticism of that order, if thats what youre asking. Do you support it . I dont have any criticism of that order. Its not my jurisdiction to do the president s job. Do you think it might be good in your agency, in the cfpb, to use something similar to prevent the revolving door . We abide by all the governments ethics rules and we take them very seriously and abide by them carefully. It is a free country. I cant control what employees do when they no longer work for me. I dont know what else to tell you. Sure. Do you think you give the appearance of a highly Ethical Organization you would want to commit all employees to sign an agreement that prevents them from lobbying . They do have to do so for a period of time, and it is specified in the governments ethics rules. We abide by those directly and follow them closely. Do you know what that period of time is . I dont know for sure. Ive never left the agency myself. Its either a year or 18 months or two years maybe depending on the circumstances, but id be happy to have my staff fill your staff in on what those requirements are. It still gives the appearance of a highly complicated, highly regulated organization that has highly marketable skills once they leave cfpb. What do you want these people to do, just retire . They have to follow the ethics rules. They do follow the ethics rules. If the ethics rules should be changed, id be happy to have them changed and ill be happy to abide by them. It really strikes me the lack of a lobbying ban at your agency has a real cost. They cannot do certain things for some period of time. I dont know all the details of it, but i would be glad to fill you in. They have the same restrictions as everybody else in the federal government. If theyre not the right rules, they can review them and change them. We abide by them. Director, this is a pattern we have seen prior to the existence of cfpb. People that created complex regulations going into the private sector to interpret those. I really hope your right. I hope its not a problem, but it certainly appears to be a problem. I want to yield back my time. Gentleman yields back. Next well recognize the gentleman from tennessee for five minutes. Thank you, mr. Chairman. Thank you, director cordray, for being here this morning and this afternoon. Im a recovering lawyer and a former United States attorney, and id like to talk to you if i can, some of these questions, lawyer to lawyer, if you will. Okay. Ill talk to you, if i can, about District Court for a moment. You agree in order for a court to consider a claim or a lawsuit that a party must submit a pleading that contains a short and plain statement which shows that the complainant is entitled to relief. You would agree to that, wouldnt you . It is a requirement and it is policed by the courts, yes. Thank you. In order to meet the pleading standard, what is required under the federal rules of civil procedure, this relief must be plausible. It must be credible. You would agree with that as well, that thats an accurate statement . I have no reason to contest your statement, although im a little rusty in some of these procedural issues. Courts will decide if we did that or didnt do that, and we abide by that. Sounds right. Yes. You would also agree that the Supreme Court, our Supreme Court, has made a point to distinguish whats called likely harm from conceivable harm. The latter of which would not be allowed to proceed. Is that correct . Likely harm from conceivable harm. Im starting to wish i had you a law school professor, but that sounds sensible to me, yes. Fair enough. In other words, the threshold to get into federal court is a fairly low standard. You would agree with that as well . To bring a case, yes. Of course, it has to survive motion to dismiss or motion for summary judgment, but thats my understanding of how the rules have been drilled. I would agree with what you just said. I do want to talk to you about the matter that the cfpb brought in the Eastern District of north dakota, which i think mr. Tipton touched on briefly. Yes. The order against intercept corporation. Im generally familiar with the case, yes. It is a thirdparty payments processor company. Yes. And the allegation was against violations by its consume consumers. Is that correct . Well, it was against the payment processor as i think aiding and abetting and facilitating violations against consumers with enough knowledge to be held responsible and to kind of get to where youre going, the court found we did not plead enough facts to make out a case and granted a motion to dismiss in this case. It goes to show we do not win every case, and were right now still digesting that opinion and trying to figure out what it means for the investigation we were conducting there. In my remaining time i want to ask you about that. Yes. Because judge ralph erikkson made some fairly sharp remarks. He said although the complainant and im quoting does not contain detailed factual allegations, it need not contain those. It must contain an unadorned unlawfully harmed accusation. Thats a quote unquote. You will agree that is what was said in the opinion. The judge certainly decides accordingly. We have to then absorb that, understand it, and figure out how to deal with it. In fact, he said that the facts in the complaint must be plausible, not merely conceivable. He found they were not plausible and merely conceivable, i guess. And he further cited or stated in his opinion, his opinion, quote, that pleads facts sufficient to support the legal conclusion that consumers were injured or likely to be injured, closed quote, and that, quote, it does not contain sufficient factual allegations to back up conclusry statements or allegations. Us and we prevailed on the motions. When you were u. S. Attorney in tennessee, i assume you didnt win every case even though you tried. The difference is i wouldnt have brought a case unless i thought someone broke the law and i could prove i understand but we didnt bring a case where nobody broke the law. We thought they did and the judge disagreed. This court found there was no nexus to the consumer. Agreed. Thats what the court found. Im sure you brought cases where you thought you would get a guilty verdict and you didnt and they were prosecuted or whatever. It happens. Its not a big mark of honor for us that we had a case dismissed. They felt we misjudged it. The gentlemens time expired next to the gentle lady, new york. I just would like to refocus a little bit as im a Small Business owner and i come from a community that has been devastated by a poor economy and many areas were ranked dead last in the national economy. My concern is over regulations and a lot of regulations dealing with the Auto Industry. I noticed in your comments from last winter that the bureau dropped its equal credit opportunity act for the fair priorities this year. These enforcements in my opinion were flawed out of financing the process and that also barred consumers from participating in the process and commenting on it and created a lot of uncertainty in the 905 billion auto lending market. My question is going to be why did the bureau pull out of this type of financing guidance and at some point why was that a decision made . That are restated existing law and didnt add anything to it. What we did say is we have a Fair Lending Program and limited resources and set up priorities every year. And at this point in time, we were determining priorities and specified they would bey red lining Mortgage Loan servicing and Small Business lending. I will get back into the Auto Industry. In fact what you are doing in my view you are taking the financing industry and trying to circomvent constitution and go at the auto dealers without having the authority to do that without coming in on the financing side. You dont see how we can justify that. You realize there was an overreach on this issue. Congress drew it and not me. We have jurisdiction and responsibility to deal with auto lenders. How do you do that . It doesnt work very well. Let me reclaim my time and ask you are they talking about the Auto Industry such as new york state which is a very aggressive scheme to them and is it an overreach for the process to go in and go after an all right regulated field . We havent gone after any auto dealers. We will exercise it as they see fit. I dont have that authority and therefore the responsibility and the duty to lend with them and they get in each others way. Thats unfortunate. Hold on a second. Let me reclaim my time and sigh its unfortunate the way it was drawn. Are you trying to pursue the lending . Not the way you wanted it drawn so you created your own . Not at all. We have a responsibilities to pursue auto lenders. Thats the way the market is. You are conceiting that it wasnt the way you should have been and you used the lending to get into the dealers . Not at all. People will be able to criticize us because it has consequences down the line. Specifying the priorities as you noted, auto is not among them. We proceeded with different actions with 20 of the latest auto lenders. We will supervise around this, but we needed to look at others as well. That was a sound judgment. Let me reclaim my time and say you withdraw from having this as a priority program. You are using the regulatory process with lenders to try to reach into the Auto Industry . Im not trying to reach into anything. I top the give the job Congress Gave us. You said the job Congress Gave you, but you said congress didnt have it in the statute the way you needed it. Not the way i needed it, but i dont think its logical frankly. You are conceiting that it doesnt cover the dealers . We have never taken an action against them. It doesnt mean they may not affect dealers like if the Federal Reserve raises interest rates, that will affect the dealers. Time for the gentle lady expired. We recognize the gentlemen from indiana. Thank you, mr. Chairman for being here this afternoon. I know it has been weary some and you are reaching the end quickly. Invigorating. Something you said earlier sparked me. You said you are responsible to the public. How do you define what the public wants . I get a lot of input from the public. Thats why we set up the line. We set it up to be inclusive and i try to get a lot of input from all sides of the issues and there is two sides to the issue. I go to the polls every two years and elections represent the will of the public in ascertaining their will and desire. I have a background of that sort myself. No doubt. If you serve and are accountable to the public and the public duley elected officials and those duley elected officials decided it was in their best interest for you to no longer direct, is that something you would submit to given thats how ey submit their will last november . If people followed the lawful channels and applied the law, thats the way things should be. If you served the publicity and the public decided to elect an official that asked for your resignation, is that something you would comply with given thats something you wanted . Are. Congress set up the agency, not me. Congress set this up to be an independent consumer watch dog as they set up many federal agencies. The Federal Reserve, fdic and others. I dont doubt the way it was set up in reading the statute. You can clearly see they pushed back against the statement that you were accountable to the public if you were unwilling to follow the publicly elected official. Im also accountable to follow the law. They shouldnt follow the law because of that. To ask for your resignation. Not at all. You would tender it willfully or not. Thats correct. In honoring the publics will or wishes, an elected official who was duley elected in the publics interest for you to tender this. The congresses passed laws. They are a constitution that are the law of the land. They would have to follow the law of the land and could be reviewed in the courts. Thats what im understanding is the right framework. Turning our attention to having to define other things, in regulation by enforcement, it troubles me because he continues to be in a case to court. Not true. We have many cases pending right now. We have those taken to court versus those settled out of court. We can get you the numbers. I understand the far greater proportions. Thats up to the opposing party. They can contest it. Any case they can contest and go to the courts. If they prefer not to, they dont have to. I dont dictate that. Are there constraints on your budget . Yes. What are they . The fixed budget cap for us which is not true of any other independent agency. Whats the size of that . Approximately 600 million. One of the things my grandfather told me. Hes who has the gold makes the rules. There is a great inclination to settle because of the immense amount of resources you can bring to bear. Not only in the ability to fight, but the harm they would suffer and the regulation by enforcement and how they are supposed to determine if the facts indeed apply to them or not. Whether its left to them to try to define the tea leaves. I dont know that its defining the tea leaves. They should think carefully about what they are doing and judge accordingly. The same way they read every law and decide whether it applies to them. If they agree, it doesnt make them true. Whether they reach them or not. The chair recognizes the gentlemen from minnesota. Thank you, mr. Chair. For the past five years, you have been the director of the consumer fight financial protection and this right here is your ninth semi annual report to congress on behalf of the agency. We are doing two of them today for the past year. This is your ninth semi annual report to congress. Thats what it says. Im not making that up. It says in this. Im not disputing it. Im not trying to give you trouble. Didnt think so. Im trying to give you what your words are. In this report it says that you have provided on page 188, in the book it says you are providing your agencys statutory responsibility and commitment to accountability and transparency. This whole process is about accountability and transparency, correct . The more transparent they are. They get the funds from the Federal Reserve, correct some. Correct. Several hundred. They get congress to set up the framework that they come from the Federal Reserve, yes. You fill out a request and congress put in the dodd frank law that you can collect based on what the earnings are. Something north of 600 million. You generally take about 350, correct . It changed overtime. In 2011 when we were created, there was nothing. The last couple of years. The general operating budget for the last couple of years is between 350 and 400 million. Maybe its higher. In addition through the decrees we have been talking about in the last hour, what they do with representative davidson identified them as millions more. And of the dollars that you collect you put monies into an account called the Civil Penalty Fund, correct . Correct, yes. And you also allocate monies into a separate account called the Consumer Education and financial literary account. No, it goes into the civil penalty account so its one account. Uncompensated victims which is where the vast majority has gone. One account, so you allocate between victims and education, correct . Fair enough. Again, you laid it out in the book, chapter nine, starting on page 131, you give a general summary the monies that you have collected and where you put them. If you look at it its right in front of you, the book. Its interesting you put in there that you have allocated money but there is no audit in this book, no audit that shows us details of these monies. Were audited every year do you have an audit you can provide to my office . Absolutely. We have two audits every year. Have you looked at the audit recently you tell me how many checks have been written to actual victims out of the Civil Penalty Fund. What you do when i read your report is you lump all the money together and you say you helped millions of people, but what i would like to know, specific checks rather than what i see in this report after page 131 that you gave a huge chunk of money to some law firm for uncompensated victims we didnt give any chunk of money to the law firm . Well, then who is the Firm Identified on page 122 or nobody gets some big chunk of money from us. It goes to individual consumers who were victims. Page 13 where is it here page 139. The hoffman law group, formerly known as the residential litigation group. That is what im talking about. So if there is an audit theyre a firm that we found i believe we found they violated the law and this money is going to the victims that they have harmed. Yeah, and ill renew it. If there is an audit and you can show us exactly who the money has been given to i would like to see it. You know, im always stunned at people disbelieving that the Consumer Bureau gives money back to the people and that is what weve done. If you want to see the evidence of that if you dont believe it i would like to also see the time now expires. The chair now recognizes the gentleman, mr. Moony. Thank you, mr. Chairman. Different questions i have for you. You had a former deputy named steven antonikus who left quickly under unknown circumstances and apparently did so just months shy of his pension vesting. Now for all i know his service was entirely honorable. We appreciate the toll that it takes on family sometimes so i understand his desire to return home. But was he ever the subject of an inquiry or investigation by the fed Inspector General . So this is kind of outrageous. Steve left the bureau because he remarried, and in remarrying he had three small children. And although he had been commuting from boston to washington for a number of years he no longer could do so. Those are the circumstances of his departure, and if you want to make something of that you can, but i think that is a little beyond the pale. So you say affirmatively that no investigation occurred or youre just unaware of the details of the investigation . Im not aware of what you think youre alleging. Okay. So can you answer affirmatively, no investigation occurred . Of what . Investigation of what . Im not sure what youre talking about. Of mr. He got remarried. He had three small children and could no longer commute from washington to boston, apologized for it. Because he thought it was important to continue the work of the bureau but his personal situation meant he needed to make a change. And i think you should leave it alone. My question was, was he ever the subject of an inquiry by the Inspector General . Im not aware . Youre not aware of any investigation that occurred . I dont know what youre talking about, i really dont. Well, im asking you a question. Im saying i dont know what youre talking about. So youre unaware of any investigation of your own department that m deputy that may or may not have occurred. Again, i dont know what youre talking about. If you ask again, i still dont know what youre talking about. Okay, i would like to yield my time. Thank you, mr. Chairman. Director, if i could i would like to go back briefly if i could to that action that we talked about out of the Eastern District of north dakota. I am correct that the claim was dismissed. Your action was dismissed. The cfpbs action was dismissed. The court found there was no nexus to the courts judgment i believe that is what the court said yes. I dont have it in front of me but if youre saying so i dont doubt you. And what the court was also saying if im correct also was the cfpb needs to more clearly define the parameters of udab and how you enforce it, correct . I dont recall whether the court said that, but the court apparently found that our pleadings were not specific enough or convincing enough to survive the motion to dismiss. And granted the motion to dismiss. So that is a setback, and its something we will take to heart and figure out what to do in response. Thank you very much. Director, i have heard from a number of my constituents who live in west tennessee who told me about their struggles to get small dollar short term loan, whether its for medical expenses or to make a car payment or for whatever reason. The rule that the cfpb, you testified a little about this today, last year. That effectively, reduces consumers ability to get those small dollar loans. We talked about the number of comments that have been posted. A million or a million three, large number. One comment especially was a letter signed by 18 state attorney generals. Your former colleagues, importantly for me, my attorney general from tennessee, the honorable herbert slatery, their letter to you states i quote, that the proposed rule is quote, unnecessary and unlawful, and will do more harm than good, and ought to be withdrawn. My question to you is, as far as i can tell you have not yet responded to that letter. Am i correct . Well, these are comment letters and we dont do a response to all of the comments. We are supposed to take them and figure out what to do and thinking about our rule. And by the way, there were other attorneys general from other parts of the country who filed a comment letter on the other side. Weve not responded to that one either. Its not meant to be responded to. Its meant to be telling us their thoughts for the rule making purposes. So you have no intention in responding to the 18 attorneys generals. Well, if the attorney generals communicated with me, i responded. But in the comment process, to all that have commented were not going to respond to all of them. Its not required by law or not reasonable. Im n i dont know what else o tell you. Time of the gentleman has expired. There are no other members of the queue, if they wish to alert members there is a vote pending on the floor i do wish to thank the witness for his testimony today. It has been a very long day, without objection all members will have five legislative days within which to smith additional written questions for the witness to the chair which will be forwarded to the witness for his response. And i would ask the director to respond promptly as you are able, this hearing could i just have one minute . 30 seconds . I wanted to correct the record, you talked about neither admit more deny. We have admissions in several cases, im aware of pay day loan Debt Solutions case. American Debt Settlement solutions case. International Land Consultants case, First Alliance lending case, there may be others. I do thank the director for his answer. This hearing stands adjourned. Here is a look at the prime time schedule on the cspan network, starting at 8 00 eastern, a look back at some of president trumps cabinet positions. On the companion network cspan 2, there are authors and science, and cspan 3, a look at the underground railroad and the life of harriet tubman. This week on American History tv on cspan 3, saturday at 7 00 p. M. Eastern, georgia tech history professor gregory nobles about the influence of early 19th century, naturalist and painter, john james audobon, and how he helped pioneer work. He was very, very good at what he did and he did it with no binoculars, field guides or iphone apps, and the proof here i think is in the painting. And at 8 00, on lectures and history, the views on slavery and the dreddscott Supreme Court decision. Sunday at 10 00 a. M. Eastern, Opening Ceremony of the museum of the American Revolution in philadelphia. With speakers former Vice President joe biden, historian and author, david mccullough, and journalist and author, cokey roberts. It is my hope that it inspires those active involved citizens in this very great country, because history has its eyes upon you. And then at 8 00 on the presidency, the author who talks about the first lady and the new president she created as first lady. She has been in hospital, with her kidneys operated on. She could relate to the types of things they were going through. Now it was interesting because out of this veterans cause came the veterans bureau, right . This is the first time the United States actually had a bureau, what we would call the va today. For a complete review, go to cspan. Org. This week on question and answer, historian david mccullough, here we are and what we stand for, a collection of his speeches going back to 1989. The 20th century senator who has been written about the most is joe mccarthy. There were a dozen books written about him. Yet none about the senator who had the strength to stand up against him. Do you know how you went about it . Oh, hardest i have worked on anything i have ever delivered from a podium. Historian david mccullough, a collection of his speeches going back to 1989. A collection of his speeches sunday on question and answer. Congress remains in recess for the easter passover holidays. The house returns tuesday for work on federal spending which expires at the end of the month. Members will also begin the process to raise debt ceiling, see it live on cspan, then, the vote on president trumps choice to head the agriculture department, sonny perdue. Watch the senate live on ffacs 2. Last month, former