Transcripts For CSPAN3 Richard Cordray Testimony On Semiannu

the committee will come to order without objection. the chair is authorized to declare a recession of the committee at any time. the hearing is the annual report of the bureau of consumer for natural protection. i now recognize myself for three minutes to give an opening statement. not that we need a reminder, but if there's one thing that the presidential campaigns of both parties have shown us, that the american people are indeed angry. they have a right to be angry. after seven years of obama-nomics, they are suffering through a failed economic recovery. americans are even angrier though at having their lives increasingly ruled by out of touch washington elites. every day they see their liberties slipping away as washington grows more larger, more distant and more arrogant. as thomas jefferson warned, they are sending swarms of officers to harass our people. the poster child of jefferson is the cfpb. its director, our witness is, neither elected nor accountable to the american people. yet when it comes to consumer financial products, he is vested with the awesome power of the entire united states congress. this is amazing. this is frightening. this is tragic. soon mr. cordray will presume to decide for all americans whether he will allow them to take out small dollar loans to keep their utilities from being cut off or to keep their car on the road so they can make it to work. soon mr. cordray will decide whether he will permit americans to resolve contract disputes through arbitration or hand over the keys to the cfpb's luxury office building to the welly, p and politically corrected lobby. mr. cordray decided who had will be able to receive a mortgage under his qualifying mortgage rule which when fully implemented will disqualify almost one-fourth of all americans who qualify for a home mortgage just a few years ago. all right mr. cordray has decided that countless americans should pay more for auto loans based pond junk science and a dubious theory of inintentiunin discrimination while his agency reels from this. they have imposed fines as prove that they are protecting consumers. the bureau operates as legislature, cop on the beat, prosecutor, judge and jury all rolled into one. fines imposed in an abusive structure tell us nothing about justice, nothing about consumer welfare, nothing. in short, congress has made mr. cordray a dictator. when it comes to the well-being and liberty of american consumers, he is not a benevolent one. congress must address this critical problem because congress helped create the problem. it has outsourced much of its authority to the executive branch in general and cfpb in particular and has p procompromised cheprocompromise this. congress must reclaim its authority and reclaim it now. there's no better place to start than the cfpb, an agency that abused its power that it never should have had in the first place. it's time to uphold our oath to the constitution. it's time to strip the cfpb of its rule making authority and return it to the elected representatives of we the people. i now recognize the ranking member for five minutes. >> thank you, mr. chairman. thank you director cordray for joining us again to discuss the consumer financial protection bureau's semiannual report to congress. the bureau's accomplishments under your leadership have helped more americans participate in a financial system that is fair and strong. the work that do you is so important, because it means that consumers can access the financial products and services they need to live prosperous lives without being the risk of deceptive or abusive practices. it also means that consumers can have recourse whether they have been wronged and recoup any finances they may have lost. those accomplishments are reflected in the $11.2 billion you have returned to 25.5 million americans. they are reflected in the 830,000 consumer complaints you have handled on issues from debt collection to credit reporting. they are reflected in the increased share of mortgages made to minority borrowers in recent years and the expansion of access to credit cards. despite republican claims to the contrary. director cordray, you are helping consumers succeed to the benefit of the entire financial system. i would like to highlight a few of these particularly important efforts. i'm encouraged by the work so far on payday lending, including soliciting input from small businesses on the fourth coming regulations. we need rules that will protect low income and minority communities from unreasonable loan terms and unaffordable rates, despite modest efforts by some states to curve predatory practices, most payday loans are simply used to help pay off another payday loan. we must stop this debt trap. we must fight efforts to weaken roll back or stop the cfpd's yun coming rule. the bureau has led the charge against the discrimination that still exists in the auto lending industry. we should be doing all we can to prevent minority bow oborrowers overpaying on auto lyons. too many members of congress have been misled by republican argument against the data and methodology used by the cfpb in this important work. while republicans are attempting to protect lenders, the bureau has fined banks and captive lenders such as toyota, honda and fifth third bank for discriminatory practices. in the months since his last report, the bureau has won against a for profit college that deceived students into taking out expensive, private loans and engaging in illegal debt collection practices. as you know, i worked on this issue my entire career. just recently, the department of education announced a proposal to ban mandatory arbitration in student lending. i hope the bureau will follow in their footsteps by offering this protection not only to students but also to americans that have found these unfair clauses in their credit cards prepaid cards bank accounts and mobile phone contracts. despite a successful track record of helping consumers whether looking to buy a car, own a home or attend college, republicans have turned the cfbp into a political punching bag, attempting to undermine its work at every turn. this tactic is at odds with the public's support for the cfpb and the bureaeabureau's efforts remain accountable and transparent. the cfpb has testified 59 times before congress since it was created, issued more than 40 reports on its activities in the last year alone and provided tens of thousands of documents in response to a never ending list of republican fishing expeditions. director cordray, i'm thankful for the work that you are doing. i look forward to hearing your testimony on how the bureau continues to help consumers and improve our economy. thank you so much. and i yield back the balance of my time. >> the chair now recognizes the gentleman from texas, chairman of the financial institution subcommittee for two minutes. >> thank you, mr. chairman. today i want to use this opening statement to address an issue that director cordray actually raised himself in speaking before the consumer branchers association conference a couple of weeks ago. the director highlighted the virtues of bringing market changing enforcement actions instead of going through a transparent and formalized rule making process. so some call this practice regulation by enforcement. he critiqued his critics saying their concerns were misguided. after hearing the comments, i feel it necessary to respond. businesses of all sizes deserve certainty from the largest financial institution to the title lender, regulatory risk drives up cost and stunts economic growth. federal agencies that are authorized to enforce federal l law act appropriately when they take act to hold unlawful actors accountable. when a federal agency brings enforcement actions instead of undertaking rule making with the purpose of changing the market behavior, it begins to look like a deliberate evasion of public notice and comment. public notice and comment is crucial check on the regular tore require overreach and abuse of regulatory power. not only does it allow public to provide unique business insight into the marketplace, but it diversifies and balances the decision making. at the cfpb this point is all the more important given the agency's structure, a single unelected individual who can ut lateral laterally authorize agency action. this is most obvious and concerning in the auto industry market. in the midst of significant public and congressional pushback, the bureau's policies, it chose to strong arm lenders into changing practices through media driven enforcement headlines. it chose do this instead of allowing a transparent and process driven bin public comment. some say that the proposed -- purposely evaded public dialogue. unfortunately, this example highlights the problem with regulation by enforcement. it allows regulators to exert regulatory authority outside of transparent and structured process. it provides an opportunity for regulatory overreach and abuse. further, it inserts significant regulatory risk into the business of our main street job creators. the director told consumer bankers association, when you push back, we welcome your input. director should expect continued and aggressive congressional push back to continue his regulation by enforcement. >> time of the gentleman has expired. today we welcome the testimony of the of the honorable richard cordray. director cordray, your written statement will be made a part of the record. you are now recognized to give an oral presentation of your testimony. thank you. >> thank you, mr. chairman, ranking member waters, members of the committee for the opportunity to testify today about the consumer financial protection bureau's semiannual report to congress. i appreciate our continued dialogue as we work together to strength our financial system and ensure it serve s con assumers, businesses and the foundation of the american economy. as we continue to build this new agency, we make progress on our core responsibilities to exist supervisory oversight over the largest banks and non-bank financial companies. to enforce the consumer financial laws enacted by the congress. our analytical approach to risk-based supervision is leading to more consumer friendly changes at the financial institutions. we're making progress on leveling the playing field. during this reporting period, our supervisory actions resulted in financial institutions providing more than $95 million in relief to over 177,000 consumers. our enforcement actions are based on careful and thur raw investigations. most have identified deceptive practices by the parties involved. during this reporting period, the orders entered led to approximately $5.8 billion in relief for consume erdz victimized by violations of the law. these consumers are located in every one of your districts nationwide. we're also working to provide tools and information to develop practical skills and help people under the choices they will make to manage the ways and means of their lives. our ask resource provides guidance in response to inquiries across consumer finance. our major moment in time decision tools include paying for college, owning a home and planning for retirement. we have developed aid partnership with the financial services round table to work together on financial education in the schools, in the workplace and on behalf of older americans which is productive. listening and responding to consumers is central to our mission. we refine the capabilities of our office to receive, process and facilitate responses to consumer complaints. including those referred to us by your offices. we also continue to expand our public consumer complaint database which updates nightly and is populated by over half a million complaints from consumers about the broad range of consumer financial products and services. we marked a milestone for consumer empowerment when we began to public 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 hardful practices and ensure consumer financial markets operate in a fair and competitive manner. we focused our efforts on promoting functional markets such as the mortgage market in particular where consumer can shot for financial products and services and are not subject to unfair, deceptive or abusive acts or practices. during this reporting period, we issued several rules or request for information. to support industry compliance with our rules, we published plain language compliance guides and other resources to aid in the implementation. we're also seeking to streamline modernize and harmonize financial regulations that we have inherited from other agencies. over this reporting period, the bureau continued to expand efforts to support and protect consumers in the financial marketplace. recent data indicate that sound consumer protections in our major markets are strengthening them for consumers and providers alike. the mortgage market has been expanded briskly for two years now. since our major rules took affect. the credit card market is greatly improved with strong consumer protections, better industry performance and increasing consumer satisfaction. the auto lending market is supporting report sales of cars and trucks to meet consumer demand. the growing sense of consumers that the markets can actually work for them without fear of tricks and traps and other predatory conduct is stoking their confidence and restoring trust. these developments reflect well on the work being done by the consumer bureau and taken as a whole they are making contributions to the continued gradual recovery in the american economy. mr. chairman, ranking member waters and members of the committee, thank you again for the opportunity to testify today and to discuss all the work we're doing on behalf of consumers. we will continue to listen closely to all of our stakeholders 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. >> chair now recognizes himself for five minutes for questions. director cordray, as you are well aware in late 2013, the bu bureau entered into this. at the time, ally had an important yet unrelated application pending before the federal reserve to become a financial holding company. on february 21st of this year, michael carpenter, former ceo said the charges were trumped up, that your bureau brought against ally. he went on to say that ally had been quote unquote strongarmed and that the cfpb knew they had tremendous leverage over us, unquote. mr. cordray, isn't 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? >> i read the interview with mr. carpenter who is no longer -- >> just a simple yes or no question. were you aware, were you not aware of the pending application prior to the consent order? >> we had pursued this investigation against ally for well over a year before ally themselves -- >> mr. cordray, it's a simple question or no question. >> we had pursued this investigation for more than a year before ally brought that to our attention. >> so you were aware. that's the answer to the question. isn't it true that senior staff in the office of fair lending were in discussion in the federal reserve and fdic on how cfpb's determination of an ecoa violation could adversely impact their application? is that true? >> we had no decision making authority over the other matters. we were attempting to conclude our investigation and get -- >> the question is, were they in discussion? was senior staff of the fair lending division of the cfpb in discussion with both the federal reserve and the c -- and the fdic regarding this application? >> i believe there were some consultations about them wanting to know if we were completing this investigation. >> you say consultation. we saw discussion. can we pull up slide number six, please? i believe on october 7, 2013, a decision memorandum was prepared for you. i'm not sure you saw this. but it has the operative phrase, staff is in a dialogue with both the federal reserve board and the fdic. it begs the question, what does this have to do with a potential violation of eoca? i'm also led to believe -- did you receive this memo, mr. cordray, do you know? >> i do not know. >> go to the next slide, please. what is also interesting is is that the previous -- the last sentence of the previous menu -- of the previous slide was deleted. instead, we have somebody with the initials of paf, perhaps patrice if i cfickland saying l refrain from this and instead from the securities filing which seems to mean that either senior staff attempted to cover up these discussions or they tried to withhold this information from you. did senior staff try to withhold this information from you prior to the determination? >> no, i don't believe so. i think you have the entire matter exactly backwards, mr. chairman. >> okay. >> i will be glad to explain. >> 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. in it it says this could have a material adverse affect on ally's business, results of operations in financial position. seemingly, you initialled this. are you at least familiar with this report? >> again, i think you have this matter backwards. >> that's not the question, mr. cordray. the question is, did you initial this memorandum? if so, it would seem to indicate that you knew ahead of time that you had advantage over ally and you used it. >> again, i think you have this backwards. i would be glad to explain. >> mr. cordray, you will have ample opportunity within this hearing. but i wanted to know -- >> should we do it now? >> i have another question. in employing your -- in determines the racial characteristics of borrowers in auto lending context, you don't have the racial characteristics that you know for a fact. instead the bureau uses sur name -- >> we used same -- >> do you use it or not? >> we do the same approach that's used in employment diskrdi discrimination -- >> so it's coding. we have the names and salaries of the bureau's employees in our possession. our committee has used a public search tool to match home addresses and match names using your own coding. 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 impact analysis you apply to others be applied to you? if you don't believe our analysis, i would assume you actually know the racial characteristics of your employees. i invite you to do your own analysis. should impact analysis be applied to the cfpb? >> i have no idea what analysis you are referring to or how carefully it was done. it applies throughout these field of law. it was upheld bit u.y the u.s. supreme court last year. if you are going to that, you would need to correct for pay bands and different jobs. i have no idea whether you did that or not. >> i would invite you to do your own analysis. i must admit, the evidence is overwhelming. i'm not sure there was justice taking place. i fear what we are seeing are shakedowns for headlines. this has got to stop. the chair is way beyond his time. i recognize the ranking member. >> 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. there's nothing in their work or their history that shows they are. so you continue to do your work and make sure the work that you do on impact analysis is work that will benefit all of the people who are being harmed by it. so let's get on with the real issues. let's 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. before i do that, i have asked my staff to get me more information about where they are locating and how many are locating in what areas they are locating. we do know this. as it has been said by the federal reserve in st. louis, they there are more payday loan operations than there are mcdonald's stores. a number of states like florida and ohio have attempted to reform payday lending. even after so-called reforms, loopholes and other gaps remain. still leaving vulnerable borrowering susceptible to debt. even after reforms, floridians still take out an average of nine loans a year according to the center for responsible lending with an annual interest rate of about 312%. investigation into florida auto lenders who expanded dramatically after florida's so-called reforms, one florida consumer 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 times, she still owed $3,900. i can give more examples of this. what i'm giving examples of is how he 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 trapp eped borrowers i a cycle of debt. tell me why you are issuing guidance on payday loans. what have you discovered about them and how they work? >> so what we have discovered -- this is through careful and comprehensive research into the payday lending industry -- is that the description you just provided is substantially correct. and accurate. about half of payday loans in the united states today are made to borrowers who are trapped in a cycle of ten or more loans. that is about half of the loans being made nationwide. that's what we found in our research that looked into millions of such transactions. it's 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. that's perfectly great. and we are not attempting to cut off any such lending. but it's the debt trap being stuck in the debt cycle, living your life off of this -- these massive rates of interest and difficult collection practices and like that we have seen that creates a tremendous amount of consumer harm. >> according to the work that you have done, the research you have done, is this a profitable industry? are they making money? are they making large sums of money? what's keeping this them going? >> it's a difficult product economical economically. there's high costs involved in defaults and customer acquisition. there are not super normal profits being made in that area. what keeps them going, the heart of the business model is rolling the customers into loan after loan after loan so that eventually you have recovered more in fees than they borrowed in the first place. 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. that's a normal part of this business. >> this is why they are referred to as debt traps. >> yes. >> people get trapped. they can't get out. they keep rolling them over. is that what this is all about? >> yeah. industry has objected to that notion. but it's the best description i have seen of what actually happens in the marketplace. >> thank you. i yield back. >> chair now recognizes the gentlemen from texas, chairman of the financial institution subcommittee for five minutes. >> director cordray, this committee spent time studying the short-term small dollar marketplace. your deputy director testified at my subcommittee on this issue. i will say this. many of my colleagues did not walk away with much confidence in the direction you are headed in 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 in the federal preemption that will go forward. 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 short-term small dollar loans? >> what i would say is, states have authority in this area. the federal government has authority in this area as well. >> you didn't find anybody that didn't have the authority? the states have the authority to regulate that? is that your answer? >> as is true in many areas of the law. states have authority and the federal government also has authority. >> 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? >> what i can say is as you indicated as approximately 37 or so states nationwide 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 who take out ten or more loans in a row. >> which states then are allowing the debt trap? >> that would be all of the areas -- all of the states that were examined in the study. >> do you have a list of those state s states? >> where payday lending is authorized in this country. >> you looked at every state? >> we have looked at millions of transactions nationwide that occurred in all of the states. >> you talk about -- you mentioned that there's a floor. does a floor mean anything below that standard is void? >> first of all, we don't have a rule at this point. we have an initial framework. we're working toward a proposal. it's in process. this input is relevant to our process. as with our mortgage services rules which are final, we did not pre-empt 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 consumer protection not a ceiling. >> is it your position you do not think you are pre-empting state law? >> we are not pre-empting state law. typically the federal government when it's active could seek to occupy the field. we're not doing that. they could also seek to pre-empt state law in specific respects. we're not doing that. whatever we do will coexist with state law. there will continue to be state regulation of payday lending. there will now be federal regulation as well. that's true of many areas of law. telecommunication, energy law, environmental law. >> i understand that is your position. the attorney general disagrees with you. >> i'm sorry? >> the attorney general disagrees with you. >> i know the indiana attorney general. we served together. i was a bordering state attorney of his in ohio. we have both been interested in and concerned about issues of federal preemption in state government. >> so if one state has a five-day cooling off period and rule comes out you require 60-day cooling off period, haven't you pre-empted the state that says five days is appropriate cooling off period and you say 60 -- isn't that pre-empting that state? >> a common aspect of federalism in our system is that there may be federal regulation and there may be state regulation of individuals. they coexist. >> what is your definition of pre-emption then? >> the federal government overrides state law and invalidates state law. >> my state has a five-day cooling off period and you say that 60 is the new norm, then haven't you pre-empted my staid? >> could you say the same thing about security law. they protect people who are investing. the federal government has securities laws as well. they coexist. they don't necessarily jive in every particular. >> so i -- here is the question. these 37 states have gone out there. they have had hearings. they have had debates on the floor. they have had laws. what do you know that they don't know? >> could you say the same about any of the areas of law. telecommunication act congress passed. states regulated that for years. the federal government had authority. congress gave it authority. they acted. >> i have one -- i'm sorry, mr. chairman. one last -- if you brought those attorney generals of these states and the various groups from the states -- you have brought them in? >> i talk to them all the time. those are former colleagues. >> have you had a forum where they had an opportunity to comment. >> i have spoken to them. i speak to them individually. i have had a clahance to speak attorney general zoeller. we coordinate on many things, including enforcement actions. >> the time has expired. >> welcome, mr. cordray. welcome. my question concerns the credit card bill of rights which was the second bill that president obama signed into law. rahm emanuel told me it's one of the most popular things that he did because it touches so many consumers. in that card act we required you, the bureau, to conduct a review every two years of whether the act was having the effects that we intended. first of all, wasn't to know, what is the response to the card act when you get complaints, are you getting complaints about credit cards to the extent you were before the card act went into affect? what about the clear and transparent disclosures? has that worked? no more hidden fees or expected interest rate hikes that are hidden. the bill wanted to crack down on unfair and abusive tax -- tactics by card companies on consumers. your report found that the card act has improved the credit card market, making it fair, more transparent and even as the cost and availability have improved. i think it's useful to have this type of regular review of a major bill. my question is, are there lessons you have learned from your two card act reports that have been useful to the bureau in writing other rules? have you used those lessons going forward? also, two celebrated reviews. one said the card act saved consumers $10 billion a year. the nyu review with others said it was anywhere from 16 to $20 billion a year. have you conducted any reviews similar to what they have done to see whether it is as good a stimulus package -- it's 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 the various -- >> sure. as you say, we have had a chance to review the credit card market. we do that to report to congress. i would congratulate congress. they did an excellent piece of work in passing the card agent. it made an enormous difference for consumers. different assessments of amounts that consumers have been saved in terms of previously exploited fees range from $16 billion to whatever. but it's important to recognize this is going forward year by year. every year consumers are saving. that's important. the second piece is this shows -- by the way, my experience goes back to when i was in state government before the card act was passed. we would hear tremendous complaints and concerns about the credit card product at that time. i'm now in the federal government, since the card act was passed. we are doing a regular review of this and watching the jd power consumer surveys which show increasing customer satisfaction in this marketplace year in and year out. it's a tremendous success story. it shows what can be done with serious substantive even-handed regulation. butt better performance by the industry. i give them credit for that, on the customer service in the credit card industry. and better consumer performance. people are being more careful with cards coming out of the financial crisis. that's important. it shows that if we work together in a balanced and reasonable way, we can improve these markets so consumers can get more value from them and that's what we all should want. >> okay. also in your report, you highlighted the so-called deferred interest promotions. i quote, impose significant costs on many consumers, end quote. i think that's really important. my question is, what if anything should be done to address the risks the bureau has identified in deferred interest promotions? also, your comments on the overdraft. we have also a bill that i offered on overdraft on the credit card bill of rights. your comments on where we stand on that rule making. >> yes. so we did indicate we have significant concerns about deferred interest products. the reason is the core principal of the card act was back end pricing, which is never transparent up front by definition. it's confusing and harmful to consumers because they think they are making a deal and they are having certain terms and it turns out it will be different. it will change after the fact in a way that was not disclosed to them. deferred interest operates much in that same fashion. that's something we spotlighted in our most recent report. it's an issue that we're looking at very carefully and we're going to be taking actions as appropriate. i think that credit card issues would be -- should be mineful of thinking about the deferred interest products and the harm happening to a number of consumers who end up with back end pricing that's very different from what was represented to them up front. that's an ongoing concern. >> time of the gentle lady expired. the chair recognizes the gentleman. >> thank you. i appreciate it. director cordray, i'm a little surprised, a little stunned. you just have laid out a case where uriyou are trying to crea conflict between state law and federal law. a number of my colleagues over on the other side have been working on a slightly different issue that i'm sure you are familiar with. medical marijuana law, not lining up with federal law. how that has affected banking. usually there's an understanding that we're going to try and solve that problem, not create the conflict. i just couldn't let that pass as my colleague from texas was asking you about the lending -- >> do you want mre e to respond? >> briefly, sure. why would you want to create conflict? >> i spent years in state government as state attorney general, state treasurer. it was very common across many fields of law for us to administer and enforce state law in conjunction with federal law. it happens all the time. >> i did that as well. you don't -- but you don't have -- what we typically have, for example, in environmental law is you have pre-emptive state law that goes in. first it has to clear that hurdle. i served in the state legislature as well. that's not the direction i want to continue to ask. i want to pursue a little bit about arbitration agreements. i know that was brought up earlier. in march of 2015, the bureau released a report on the use of arbitration agreements in disputes between consumers and financial product providers. however, the report was criticized by academics for ignoring major pieces of data. on june 17 of 2015, over 80 members of congress, including me, signed a letter asking you that the bureau reopen the arbitration study citing issues with the methods on which it was conducted, including the processes that were not fair, transparent or comprehensive. i would like to submit the letter without objection. >> without objection. >> it noted historical press de dense -- i hear all the time, we're bogged down in court. arbitration was a tool introduced to streamline that. not to eliminate anybody's rights. not to eliminate a fair hearing. but purely to start a break the logjam. i'm very curious. do you really believe that this report reflects accurately how consumers use these tool ss? >> our report is the single most comprehensive and informative report on this ush done. had access to new data from the american arbitration association and others. it is an outstanding report. i have seen and we have tended closely to criticism. it has been mostly incidental. 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. we have -- >> okay. i have a question specifically. where does the study estimate the transaction cost associated with consumers pursuing a claim in federal court versus arbitration? >> what we looked at was how the judicial process compared to the arbitration process in terms of outcomes. what we found by the way was as a matter of history what you say is correct in terms of arbitration started off as a business to business dispute resolution mechanism. >> that's also -- >> it's in more recent type ti >> does it compare ability of consumers to pursue without a lawyer? >> the study addresses many aspects of the judicial process, of the arbitration process and compares outcomes. >> for those watching on c-span and the rest, the answer to both those questions is no. >> no. my answer is to describe what our study did. it's most comprehensive study done. nobody disputes that. >> there's a number of people involved in that space that believe that there was major flaws in the data and how it was used. it seems to me -- >> we looked at what they had to say. it's not particularly credible, frankly. >> so you would have no problem then asking or heeding the request that over 80 members of congress and the house and senate had of saying, okay, we would like to open this up and express some of our concerns in this? >> i'm simply going to continue to enforce the law. congress asked us to do a broad comprehensive study. we spent three years on it. we're moving ahead with congress's direction to engage in policy intervention. >> what i need to know is how you can make a meaningful comparison between class actions and arbitration. i don't see that. and many others in the space do not see that. that ultimately is the concern that i have is somebody receiving a check for 25 cents, being part of a class action suit, which often happens as these major class actions suits go on. trial lawyers and attorneys are paid up. they make the money. it's not the consumers. i would argue that arbitration actually benefits the consumer as much as it benefits anybody else. because it streamlines it. it sounds to me you are trying to protect -- >> that's not what our report showed. virtually no relief to consumers in the arbitration process. billions of dollars of relief to consumers in the judicial process. that's the comparison. >> time of the -- >> as long as the attorneys are paid. >> expi expired. >> thank you. 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? >> 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. that's why the card act becomes so important. it protects not just individuals but also many fledgeling small businesses. it's the case that home equity loans are used to get capital to start businesses or improve businesses or grow businesses. if i had my way, i don't 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 our statute authorizes but small businesses who operate with no greater clout than an individual household does. if the congress sees fit to give us that authority, we will aggressively pursue that. 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. >> mr. cordray, one area where i'm 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? >> so we are very interested in financial innovation. so-called fin-tech. we have had them in to talk with us. we have jurisdiction over them. the treasury convened a set of actors and is working on a white paper. it's something we're all interested in. it's a new source of capital for small businesses. needs to be subject to several oversight and protections as well. that's something we will continue to work on. i think we have -- i'm hearing from you a great deal of interest in this area. others have a great deal of interest. >> thank you for answering my letter. 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 working with bodies interviewing complaint ants and investigating the depth of the problem we are hearing about? >> i can't speak to specific enforcement activity being engaged in by the bureau. across the country, when there is consumers complaining about harm done to them or perceived mistreatment, that's the thing that gets identified to us through our consumer complaint line. those are things we prioritize for action. >> in may 2015, the cfpb issued a bulletin providing 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? >> i'm not sure if this is a 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 they're receiving public assistance income. that is good income. it is supposed to be part of the calculation. we've had several actions now where we found that lenders were not taking appropriate account of that kind of income and they've 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 that prohibited classes are not being discriminated against under that statute. >> thank you. >> the gentle lady yields back. the chair now recognizes the gentleman from new jersey mr. garrett, chairman of the capital markets subcommittee. >> thank you, mr. chairman. i'm just coming in. i'm over in budget right now. but 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 was a study was done. >> what law was that? >> the federal arbitration act. >> okay. of 1929 or so. >> yep. are you familiar with that law? >> i beg your pardon? >> are you familiar with it? >> i am. >> is that still the law of the land? >> it is still the law of the land. yes. >> you disparage it by saying 1920 -- >> no, i'm just saying in 2010 congress passed the dodd-frank act and made a number of changes in terms of how arbitration will -- including outlawing arbitration clauses in residential mortgage contracts. >> the federal arbitration act which allows for arbitration is still the law of the land. >> it's been modified by congress in several respects since then. yes. >> and is now your agency's decision to what? upend that law through a comprehensive action. >> so congress has now intervened and superseded the federal arbitration act. under the military lending act -- >> has congress ended the ability for arbitration? >> in the military -- >> that's a yes or no question. >> in several respects, yes. they have. >> they've ended -- i didn't say in several respects. >> yes. in several respects they have. >> have they ended the use of arbitration? >> under the military lending act they barred arbitration clauses and lending contracts to service members. under be dodd-frank they barred it in residential mortgage contracts for the most part. >> have they totally eliminated arbitration? >> no, but they -- >> okay. >> -- they gave us then authority, congress conferred on us, i'm not making it up -- >> is it your intention to eliminate arbitration? >> because congress specifically said and we merely carry out the will of congress. congress said we should issue a report, do a study, issue a report, and then act in terms of addressing arbitration in light of that study. >> your intention to 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? >> i pay close attention to what members of congress tell me. it's my job to enforce the law that congress has enacted. >> when 80 members of congress ask you a question, do you believe you have the responsibility to respond and answer those questions? >> i respond to individual members of congress but i enforce the laws that congress enacts. >> so the answer is no since you did not say -- >> no, that's not correct. the answer is yes. >> you do. well, we sent a letter back on june 17th of last year. we're still waiting for a complete answer. the bureau with regard to that so-called comprehensive study. the bureau ignored requests to disclose the topics that would be covered by the study. have you disclosed all topics that have been covered by the study? that's a yes or no. >> i'm not sure what all back and forth correspondence has been. i know we responded to that letter. if you think that response was insufficient we'd be happy to work with you. get you more information. >> you also failed to provide the general public with any meaningful opportunities to provide input for the topic because materials were kept behind closed doors. the final arbitration study included entire sections that were not included in the preliminary report that was provided to the topic. was there a reason why you decided that certain information would be held confidential and not disclosed to the public? >> some of the information depending on how we obtain it from the american arbitration association and others, businesses have deemed confidential. may have involved trade secret information and the like. those would be the obstacles. wouldn't be any desire on my part. >> are those the only sections that are precluded from being public, the trade secrets, or is it a broad swath of areas? >> i'd be glad to have my staff who are expert in this area deal with your staff and specifically specific pieces. >> since we're talking about a letter from june and here we are in march, we're still looking for complete answers. >> we have responded to the letter and if that response was deemed insufficient we'd be glad to work with you further to get you more information. >> it goes back to your initial answer to the question, as whether you feel it's your responsibility to answer to 80 members of congress. when you were -- first came to this committee i asked you the seminal question. if the house of representatives said you shouldn't do something, are you accountable to them? and the response was no. and i said if the senate said that you should be doing something, should you respond to them and respond? your answer was no. i said the president asked whether or not you should be doing something. his answer was no. final answer was -- >> i certainly don't remember it in that way. >> that was my series of questions. the final question was are you accountable to anyone? and the answer to this letter and that question back then was no. >> it's not what i'm saying and it's not a legitimate, you know, characterization of this. >> actually, that's on the record. >> but i have a responsibility to enforce laws enacted by congress. not by individual members of congress. >> the law of 1929 has been enacted by congress. and it would appear -- >> and so has the law of 2010. >> time for the gentleman has expired. the chair now recognizes the gentleman from new york, mr. meeks. >> thank you mrshgs chairman. good morning, mr. cordray. director cordray. great to see you this morning. and 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 you've been doing to help the american consumer. for the work you have been doing to help our veterans, help our students, help our mortgagees. and especially for the work you do for low-income and minority communities that are always the most victimized. it's those that are on the bottom. and the work that you're doing to try to make sure that there is a level playing field. and 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 there's room that we can work collectively together. for example, what's important is that since the financial crises a number of financial services have closed. there's been over 5,000 branches of closures, especially most of them in low-income and communities of color, leaving behind banking deserts, which are neighborhoods with basically 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 short-term lenders. and i hear my colleagues talking about that. and prepaid card providers, et cetera. of which, you know, i just think about my parents. i was in poor -- lived in public housing. went to a bank. at that time some banks were not bankable but they needed to have options. so they used other options. back then, you know, some of the options are dark. we don't want folks to go to the dark. so it seemed to me your agency is a godsend to me, is not to wipe out all of those businesses but to try to make sure 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 they're not being denied access to financial products also as they would have. sometimes i knew my dad needed an extra few dollars to make it to the next month, till the next paycheck came. and we need that kind of but we don't want it where people are caught in that forever. and i think that would be good for both sides. nobody should want that. we don't want anybody taken advantage of. so if we have an agency like yours that can then put in some rules and some regulations so that 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 don't want to get rid of everybody. we want to get rid of the bad folks. that would seem to me to be the goal. i think that is the right approach that we should take. and i think that that's the approach that you're trying to take in this. not just eliminating an entire -- but eliminating the bad guys. and let's make sure that we uplift the good so that poor folks in low-income areas would have some opportunities to continue to bank. is that correct? >> i found myself sitting here thinking that you're saying a lot of things i try to say when i'm sitting in this seat testifying. and i think you may have just said it better. i would just agree with you. >> so now let me just give you -- in the little time i have left. what i was concerned, i saw about the bureau's latest enforcement and findings because i'm shocked, here we are in 2016 and there's still red-lining going on. and the red-lining especially in the mortgage lending, in the steering of consumers and high-cost loans. it amazes me that we're still finding institutions thriving from this egregious practice. can you please discuss with us in the little time i have left what is going on in those cases and what the bureau has done to address it? >> so we've seen a lot of things over the last few years, and frankly, again, 90% or more of our enforcement actions involve deceptive conduct by financial institutions, which is discouraging in some ways. but even -- we were somewhat surprised to see what we thought was very blatant redlining occurring. this is the enforcement action that we in the justice department jointly took involving hudson city savings bank and the patterns when they were mapped were very clear. so it's 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 they're doing and correct it if in fact they've gone down that road in any respect. >> i only have seven seconds, so i'll yield back. >> gentleman yields back. chairman now recognizes the gentleman from missouri, mr. luetkemeyer. chairman of the housing and insurance subcommittee. >> you and i have had a number of discussions with regard to trib. and i certainly appreciate your willingness to discuss it with us. as we've seen, you've delayed the implementation of the rule until october. and since then we've seen a lot of concern by the industry. they're struggling with this rule. some of the software programs that they've utilized have not been as good in implementing this as they would have liked to have seen and they're still struggling. so my question is what do you see from your position as the enforcer of this as well as are you -- have you had any enforcement actions taken against anyone at this point? >> yeah. so i think we see and hear much the same things that you're describing. i think the i.t. problems here have been much larger than maybe people would have expected in particular because a mortgage lender can't 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 1st of this year. what i had said, and i've worked with the other regulators to jointly say was we were going to be corrective and diagnostic, not punitive as we oversaw this implementation period. and it was open-ended. it remains open-ended. we're now march 6th -- midway through march today, and it remains open-ended. we have taken no enforcement actions. i don't expect us to take enforcement actions unless somebody's just 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, we're attempting to provide more clarification to them, which is something industry is asking us for. and also recognizing nobody is trying to exploit consumers here. this is just a matter of getting these forms right and getting them correct. and by the way, the whole purpose behind this was something congress wanted. and it's 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. and that's what we have done here. >> are you going to issue any additional guidance on this? or you feel that everybody's doing okay with what's going on? >> we have been monitoring this very closely. the last thing i want is for any of our rules to cause a jam-up in the market beyond anything that anybody would intend. i think we're 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. >> we will, trust me. >> okay. >> also along a different line the federal trade commission act grants the federal trade -- the ftc and banking regulators with the power to pursue enforcement actions based on unfair and deceptive acts or practices, udap. dodd-frank marked an unprecedented expansion of udap authorities for the cfpb including for the first time the term abusive. expanded powers for the cfpb has become a primary enforcement tool. i realize last week you spoke to the consumer banker association and rejected the notion that you're regulating by enforcement. i beg to differ, sir. and when it comes to cfpb udap authority you have issued little to no guidance preventing any financial institution from any sort of predictability. you use it on a case-by-case basis. isn't that the definition of regulation by enforcement? >> we're doing the very same thing the federal trade commission does and the state attorney generals do. it is difficult to know more than case by case when you're talking about cases of fraud or deceptive conduct. we're attempting to give guidance to the entire market by very specific orders that are issued in these cases so that everyone knows if they're doing this they should stop. if that's called regulation by enforcement, i think it's just strong deterrence. 's the important as a law and order mechanism for signaling to other actors. >> along that line 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 that's in force but a proposed rule. >> i'm sorry. what matter are we talking about? >> well, encore. >> okay. debt collection. >> debt collection. and this was based on not a rule that was in force but a proposed rule that you thought you may down the road have in force and said they have a formula that's non-compliant. is that not regulation by enforcement? >> i don't think that's what we did in the encore matter. we did a careful investigation, thorough investigation of the facts. we found that there were violations of the either federal debt collection practices act or the unfair and deceptive prong that we're given by congress and we enforced against that. the notion that because we may issue a rule in debt collection several years down the road or maybe next year whenever it may be, that in the meantime we can't stop people from engaging in unfair and deceptive conduct i don't think is the right approach for us. >> i think my time has expired. i yield back the balance of my time. >> the time of the gentleman has expired. the chair now recognizes the gentleman from texas, mr. hinojosa. >> thank you. thank you very much, chairman hensarling and ranking member waters for holding this important hearing on the cfpb's semi-annual 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 today's record. >> without objection. >> with that i'll be able to move right into my questions. director cordray, many argue that the bureau issues a payday lending rule in line with a released outline, that if you do that it will eliminate a crucial source of lending for many low-income 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? >> so again, we were given authority by congress to address this marketplace among many others. in fact, it was specifically called out in the consumer protection act of 2010. the dodd-frank act. we've done extensive research. we've 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 ten or more loans. that is, a debt trap. i don't know what else to call it. it creates tremendous harm for consumers. it's the exact point that was being made earlier. in the ranking member's example of someone taking out x dollars in loans. ending 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. >> thank you for your response. i strongly support your efforts to rein in those harmful payday loan practices. in my community we've seen some programs that cost 1/10 of what payday lenders charge but there just aren't enough of these programs. tell me about the 5% option included in the proposed rule and will it be included in the final rule? >> i can't speak to what may be in the final rule. we're just coming up on a proposal stage here. so again, we're going to continue to take input from many different stakeholders. and of course they have very dramatically conflicting input. and that's something we try to sort through. what i can say is that in approaching this rule we're attempting to both address significant and actual harms to consumers and we're also trying to make sure that there are ample avenues that remain for small dollar lending to be available to consumers. and you know, 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 don't want to squash innovation in this area. we do want to, as to the extent we can squash predatory products that are amassing enormous consumer harm. >> according to the fdic, nearly 50 million americans are either 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 that they can still purchase medicines and groceries and other necessities. how have the qm rules affected mortgage lending by community financial institutions? >> 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 dodd-frank was enacted. it is larger now. it is larger now than it was in the mid '90s. this has come at the expense of large banks in particular. this is exactly the point that i think mr. meeks -- congressman meeks just made, which is if you have evenhanded sensible regulation of a market the more responsible actors should be able to thrive because they're 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 share has increased and that's a good thing. >> my time -- >> time of the gentleman has expired. the chair now recognizes the chairman from wisconsin mr. duffy chairman of the oversight and investigation subcommittee. >> thank you, mr. chairman. welcome, mr. cordray. as you know, i've expressed some of my frustration with regard to the lack of compliance with the document request that this committee has made to the cfpb. that's with the backdrop of barack obama telling us this would be the most transparent and open administration ever. that's with elizabeth warren indicating that sunshine would flow into the cfpb. that's with regard to the backdrop you've 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 there's been a lack of compliance. as you know, there's been a recent subpoena three months ago that have compiled all of our document requests, and we get limited compliance from you. >> do you want me to speak to that? >> in a second. you'll have plenty of time. i want to direct your attention. you're aware a report came out from this committee in regard to indirect auto lending. and you would note that there were 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? >> i can't speak to individual documents. i don't know which one you're referring to. but what i can say -- >> the ones in the report. i'm referring to the -- >> over the course of the last several years in response to numerous requests -- >> i'd like you to answer my question. so i'm talking about the report that we did on indirect auto lending the one that came out on november 24th. i'm sure you read that because you made some calls to the hill. did you provide those documents to us? >> i can't out of context here place individual documents over the last several years. >> i'm talking about the documents -- >> we've been very responsive to your requests. we've gotten tens of thousands of pages of documents. and if there are particular ones you're looking for -- >> director cordray, i love -- you can send me tens of thousands. you can send me tens of millions of documents. if you don't send me the ones that i ask for, just like hillary clinton can send thousands of e-mails but if you don't send the ten that are relevant -- >> sure. >> if you want to talk about recordings in watergate, you can send hours of recordings, days of recordings but if you miss a few minutes it's those that are relevant. >> we continue to work with you on those responses. we'd be glad to continue to work with you -- >> i know you know what i'm talking about with regard to this report. and you know you didn't send us these documents. and even after this report came out we've again asked you for the documentation in this report and you've refused to comply again with our request. and that, sir, is incredibly frustrating. when again you've made commitments to being open and transparent. >> i continue to be glad to work with you on those, congressman duffy. >> mr. director, we've been trying to work together for years. >> i still am. i still am trying to work with you. and will continue to try to work with you. >> working is easy. give us the documents. send them to us. send us what we asked for. >> we'll be glad to sit down and talk further. i know our people are talking further. >> i want to just kind of highlight some of the -- well, before we go there in the allied settlement. let's talk specifically 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? >> so it depends on -- look, it depends on what you're talking about. there's different degrees of accuracy for different things. we work to provide a high degree of accuracy in terms of potential charges of disparate impact discrimination under the law as has been confirmed by the supreme court. >> disparate impact, what percentage of accuracy do you have? >> again, it depends on what we're talking about. we're talking about the auto market, the mortgage market -- >> we're talking about auto market. >> a high degree of accuracy. >> what is the percent? >> i can't give you specific percentages but if you want my staff to work with your staff on specifics there we can do that. >> it's fair to say that you are not 100% accurate, is that right? >> i don't know if anybody's ever 100% accurate. >> so is it fair -- >> we get as close as we can. >> are there some white borrowers who may be included in your analysis that will get checks from the ally settlement? >> i would say that if you're 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 -- >> so dispirited impact checks will go to white borrowers potentially. >> there's nothing unique in this area. >> great. in your analysis i'm sure you saw some african-americans who paid higher rates than the white average and some african-americans who paid less than the white average. is that right? >> what we saw was systematically african-americans and/or hispanic borrowers who -- >> is it your testimony nobody paid less than the white average? >> i beg your pardon? >> is it your testimony no one paid under the white average, less than the white average? >> i don't know that i would say that. >> my question for you -- >> what we're talking about -- >> is someone who paid less than the white average, are they also getting a disparate impact check? yes or no? >> i don't know what matter you're talking about or what data you're talking about. but what i would say is impact discrimination is something i know has been under attack in certain quarters. >> are you familiar -- >> time. the time of the gentleman has expired. pursuant to clause d-4 of committee rule 3 the chairman recognizes the gentleman from wisconsin for an additional five minutes. >> thank you, mr. chairman. we're talking about the ally settlement. you're well aware of that, right? and i'm talking about the numbers you used for that settlement. so i'm asking you simple questions. are white borrowers getting disparate impact money? you're stonewalling me here. you're not answering my question. and i think it's pretty -- this is a pretty simple line of questions. if you want to be open and transparent be it here. if you're not going to give me the documents answer my questions. >> sure. >> that was one you're trying to waffle on. the next question is -- >> i'm ready to do it. >> hold on. and the next question is you have individuals who probably, and i know this for a fact, paid less than the white average. do those african-american borrowers get disparate impact checks as well? or are you only sending checks to african-americans who paid more than the white average? >> if you want to specify someone to me we can look at it. what i know is that 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. >> so you haven't -- >> and it is getting redress to hundreds of thousands of consumers. >> director cordray, you haven't sent me the information on ally but we do have information with regard to toyota. this comes from a document dated november 19th, 2004. it was initialed by you. and on page i believe it's 15 is a chart that shows non-subvented african-americans. the total number affected at 116,500. if you want to -- do you have the document in front of you? >> no, i don't. >> look at the screen. you can see that right there. and the number of harm prohibited basis borrowers is 66,000. so it's my reading of this document that there are 56% of african-americans who paid more than the white average and 44% who paid less. fair enough? in the toyota study. >> i'm not easily able to analyze these numbers -- >> you signed off on the document. >> but go ahead with your question. >> if you want to go down to the subvented african-americans, the number that were affected were 7,559. but the number that had prohibited -- or were harmed was 2,668. so meaning on the subvented class of african-americans only 35% paid more than the white average. 65% paid less. these are your documents, sir. >> so what i would say -- >> i want to be clear. if you're not going to give me the ally document we'll use toyota. >> what i will say is subvented auto loans can behave differently from normal auto loans and that is something we take account of in our analysis. >> that's why i gave them both to you. look at the chart. in this document you don't show great disparity between african-american rates and white rates. >> so i would disagree with your conclusions there. we did pursue a matter with toyota. we thoroughly analyzed the underlying facts. the automaker, lender had access to the same underlying facts -- >> i'm going to reclaim my time. in regard to the analysis that you've done i find it interesting when the chairman brought up, when they did their own statistical analysis on the cfpb and that would show based on that analysis that you pay african-americans $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 doesn't take into account pay bands. if doesn't take into -- >> i didn't have any analysis -- >> you want to make sure that we consider what information you might have that could account for that disparity. so in regard to indirect auto lending did you take into account credit scores, trade-ins and trade-in values, whether the car was new or used, the amount financed, length of the term financed? because this was all information that the auto lenders tried to get you to consider but you refused to do it. but when the role was reversed and mr. hensarling asked you those questions you wanted to make sure -- >> i wouldn't agree with that. i wouldn't agree with that characterization. but i'm happy to explain if you want me to. >> well, i'll just -- i won't have you explain it. maybe we'll do it in writing. maybe i'll get some documents from you. i want to pull up another exhibit -- actually, i'm not going to put it up. i'm going to hand you a document. this was provided to us in response to our subpoena number 20 and 22. this was the only document that is in compliance with our subpoena. and this is in regards to records memorializing the final remuneration plan with regard to ally. do you have that document in front of you? >> no, i do not. >> i believe you have it -- your staff has it. this is basically a computer printout. if you'd hand it to the director, please. this is a computer printout. this is the only document you've given us to show us what the remuneration plan is. could you read this document for the committee so we can understand what this document says? and your sunshine and compliance with the committee. >> what do you want me to do? you want me to just start down here and read it -- >> yeah, read it for me. >> for official use only? is that what you would like? confidential. not for distribution. >> compute space. cap equals 900 period, back slash, star money sign. dash term. what does this mean? this doesn't mean anything, director. >> all i know is if you ask for documents in an area we give you the responsive documents that we can. >> this is the one that you sent us. >> and it may be -- it may be that you aren't in a position to interpret this document. i don't know about that. >> are you? >> time. time of the gentleman has expired. the time of the gentleman has expired. pursuant to the committee's rules for extended questioning the ranking member is now recognized for an additional five-minute question period. >> thank you very much, mr. chairman. at the beginning of this hearing we started talking about the cfpb's work and racial discrimination in auto lending and specifically the cfpb's 98 million settlement with ally. and 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 don't think that you are 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? >> sure. and 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. >> did ally do this? >> they could have but they did not. >> they did not. did toyota do this? >> they could have but they did not. >> did honda do this? >> they could have but they did not. >> so 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? >> certainly. >> thank you very much. now, let's go further. the republicans are alleging that the cfpb used ally's desire to change its status to a bank holding company to leverage the settlement. isn't it true the cfpb was investigating racial discrimination at ally financial prior to any knowledge of ally's desire to change its status? >> so i'm 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 they'll see the transcript. we opened an investigation against ally into potential discrimination in auto lending more than a year, maybe year and a half before the matter was resolved. as often happens, parties that are being investigated, it moves slowly. they're 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. that was a decision they made and that was a choice they were making for their own reasons. i wasn't familiar with why those were. they then explained to me why they wished to proceed in that fashion. our purpose all along 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 a -- an appropriate resolution that the company agreed to and was willing to enter into and as you say 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 the matter. and we did so. that's all there is to it as far as i'm concerned. >> isn't it true that cfpb only consulted with the fdic and fed regarding ally's status after ally themselves informed the cfpb of their desire to change their status? >> i believe that is correct. >> isn't it also true that the cfpb had evidence that ally financial's policies surrounding discretionary dealer markup resulted in widespread racial discrimination? >> that is certainly correct. >> can you speak more about your investigation of ally and how you came to that settlement? i know you just did, but i want you to reiterate because you know, i think that my colleague on the opposite side of the aisle is -- has framed this in such a way that you have been unfair, that somehow you're not following the law, and that somehow you leveraged their desire to change their status. would you please go ahead and -- >> so i would say quite the opposite. the law of the land 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. it's a law that congress enacted. again, 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 can't, by litigation. and we work with the justice department on these matters. they're our active partner. and we work together on them. and we see eye to eye. >> the time of the gentle lady has expired. the chair now recognizes the gentleman from california, mr. royce, chairman of the house foreign affairs committee. >> thank you, mr. chairman. on the question of exemptive authority as it applies, mr. cordray, as it applies to your ability to exempt community banks and credit unions from rule makings, 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 broad-based policy matter. and director, as you know, section 1022 of the dodd-frank act gave the cfpb the authority to adopt regulations by allowing it to exempt any class of entity from its rule makings. just this week 329 members of this house wrote to you. it was mr. stiver's 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? does a letter from -- this would be over three quarters of congress. does such a letter change your view of congressional intent? >> so 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 lenders. we did that with our mortgage origination rule. we did that with our mortgage servicing rule. we did that 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 rule. and i respect it. i would also say that what i think i know here and i may not know as much as you all do certainly about the legislative process in the congress, and i wasn't around for the dodd-frank 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 dodd-frank 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 deferential treatment of banks and credit unions under 10 billion in assets as compared to those above. we have gone beyond that and at times provided special dispensations or special provisions for smaller creditors, often those of two 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 of what 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. >> 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 2016. and i would ask if that's still accurate. >> i think that is still roughly accurate. i would comment that the spring starts as i understand next week and will extend till the third week in june or so. >> in proposing its rule governing prepaid cards, was it the bureau's 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 bureau's position that they should still be denied the opportunity to choose such a feature? >> so 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 approached as used with credit cards, which is an accepted approach that's been in place for credit cards for many years. and that's 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. by the way i would say one thing that's happened since the last time i testified here on prepaid cards was we did have this significant fiasco with the rush card where many, thousands of consumers had prepaid money onto these cards and could not get access to the money. if anything, that shows me we need strong consumer protections for prepaid cards, for which none exist today. >> the time of the gentleman has expired. the chair now recognizes the gentleman from missouri, mr. clay, ranking member of the financial institution subcommittee. >> thank you, mr. chairman, and thank you, director cordray for attending today. just to expand on my friend's inquiry from california, what -- can you give us a sampling of what cfpb rules are expected to be finalized this year? >> this year? >> yeah. >> it's hard for me to hazard a guess on what exactly will be finalized when because the process, it's kind of like a judicial opinion, it's 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 rule makings and i just couldn't really hazard a productive guess as to when those would be completed. >> thank you for that. and switching subjects, it has recently come to my attention that some of my constituents are offered loans by lenders that are not licensed 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 chris coster 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% annual percentage rate, eventually paying $4,000 for a $1,000 loan. can you share insight on what -- >> look, i've heard some horrific stories from the state of missouri on lending that is occurring at interest rates effectively 1,950% annualized. and i 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 coster, with whom i served when i was attorney general of 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 vielgting the federal debt collection practices act and federal unfair and deceptive practices. we have open matters on that in the courts and i think that's all quite appropriate. >> so you have -- missouri has caught your attention as far as the abuses are concerned of consumers. >> very definitely. >> thank you for that. you know, as it relates to estimating the ratio or ethnic impact of auto discrimination, to your knowledge, do any statistical methodologies exist that eliminate all false positives and false negatives? >> i'm not a social scientist but it seems to me unlikely that in any field of social science or natural sciences, that that's easily possible. but i wouldn't claim to be an expert. >> okay. if republicans have concerns about using estimates for race or ethnicity, shouldn't congress just tell auto finance companies to start collecting this data as agmda does for mortgages? wouldn't that eliminate the need for estimation? >> actually, it would. yes. i believe so. >> okay. are proxy methodologies used in other civil rights enforcement contexts? >> have been for decades. >> and they have been for decades. >> yep. >> well, i appreciate your response. and mr. chairman, i yield back. >> the gentleman yields back. the chair recognizes the gentleman from new mexico, mr. pierce. >> thank you, mr. chairman. don't want to catch you out of balance, mr. cordray, but i would like to thank, over here, would like to thank you for the past couple years, your staff's been working with the coalition to save financing, basically streamlining the rules under title 14 of dodd-frank just as it pertains to the seller financing. that's something we discussed in one of our meetings. so i appreciate whatever's going on there. there's some sense that we'll come to resolution there. so 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? >> i don't know if there's 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 for -- >> i'm trying to get sort of -- >> for whom this is marketed as a short-term 14-day loan and in fact, more than half the loans growing to people who have rolled them ten or more times. seems like that crosses the line somewhere. >> that's not the direction i'm 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? >> talking about tribal payday loans in particular? >> payday loans. >> i wouldn't have a specific figure to put on that. >> is there a figure at which you identified people having payday loans that they're kind of in trouble? >> i think -- >> if they owe -- >> many people looked at that and have different points of view. i would say the overwhelming consensus of a lot of people who look at it is that rolling loans in long sequences where you end up paying more in fees than you borrowed in the first place and you still owe at the end more than you borrowed in the first place. >> with all respect, sir, you tell me that many people have many different ideas. you're the top regulator in the dad-gum country. i'm asking you, what is your opinion? and you can't give me an answer? >> well, you have a high opinion of my authority. we are working through these issues. we issued a -- >> you are going after an industry and trying to shut them down. we may disagree. there are people in my district who use them and say if it weren't for that, i wouldn't have been able to pay my rent this month. but forget that. is there -- let's go to exploitation. you talked about exploitation today. i write the notes down as you're talking. at what level are fees exploitative? >> let me correct the record. we are not seek to shut the industry down. >> you are doing a pretty good job of it. please, sir, i really am 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, would that be an exploitative fee? >> i don't have a comment on that. >> you made comments you are trying to stop exploitation so how do you determined if it's exploitation? >> well, again, i would say, i think 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 ten 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. >> we have already discussed that multiple times. i appreciate it. i was hoping to have a substantive conversation. i don't think that's probably going to happen, i'm sorry about that. so the 5% per month fee comes straight from the irs web page. you are going to pay 5% per month when you're late. and that to me i think crosses into the exploitation category. so you and i have discussed this before. i will just ask you once more for the record, do you ever deal with exploitation on the part of the u.s. government? >> we don't have authority to address -- >> okay. all right. fine. that's fine. that's fine. do you have any authority over student loans? because student loans charge 5% where the wall street bankers pay less than one half percent to get money in student loans. do you deal with student loans? >> i think there are various issues that might be looked at there and maybe they are for the congress. >> so there are various issues that you haven't looked at. you are looking at other issues. so if i would wrap the whole thing up in the direction i was going, you established a qm rule and the qm rule was supposed to protect consumers. but what it actually did was drive 95% of the loans into the gses which are exempt, according to the legislation that you tried to impact, so 95% are driven into the gses and you have no action that you're taking on gses. you are coming down here picking on the people who are making loans to people just trying to pay their rent on the end of the month but when you drive them inside a government, then your answer is here, we cannot do anything to back the government up, we don't deal with the irs, we don't deal with the government loans, and what you do is you're driving people into a market where you don't care if they're being exploited or not. so i just think that's -- >> the time of the gentleman has expired. the time of the gentleman has expired. the chair now recognizes the gentleman from georgia, mr. scott. >> thank you very much, mr. chairman. over here, mr. cordray. first of all, mr. cordray, it's very important for you, 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 you're 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. when you start talking about discrimination and you start talking about giving people checks because they have 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 robinson or smith or scott or whatever, who are getting checks and they're 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 african-american customer goes 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 african-american's budget, and yet your rule, your situation, would deny that dealer, would deny that african-american customer, who the bank won't deal with, many of whom don't even have a credit card. there are 60 million unbanked, underbanked people in this country and a huge percentage of them are african-americans. when you discriminate, that is discrimination against african-americans. 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 african-american the opportunity because he doesn't have that budget? and here's 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 you're strangling the poor dealer and you're denying the very customers that you're supposedly trying to put this in view of to try to help. and 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 wasn't 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, but 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. >> time. time of the gentleman has expired. the chair now recognizes the gentleman from florida, mr. posey. >> thank you, mr. chairman. director mr. chairman, director cadre, it's no secret that i'm still a little bit apprehensive about the cfpw. >> i-- cfpb. >> i'm trying to help you get through that. >> despite a great sounding name, consumer financial protection bureau, it sounds wonderful, but it's just going to be another government entity that will be used to punish political enemies and bully law-abiding citizens like lois learner and the irs, for example. i like to think that that's the last thing we need. that congress and other agencies like the irs already do enough of that. one of the many, many reasons that we don't time to go into today that make me feel that way is your opposition to my proposed legislation which would allow businesses and individual s to ask whether a particular transaction complies with your rules. otherwise they might be left playing with a guessing game as to how the cfpb might react or not react to what they are doing or not doing. do you think it's important for the bureau to communicate with the companies they regulate? >> we do all the time. all the time. >> is that a yes? >> yes. >> do you think it's important that businesses understand the regulations you enforce on them? >> we -- >> yes or no. >> we try very hard to make that happen, yes. >> okay. do you think the cfpb has a role in helping companies understand and comply with the regulations you implement? >> i think we've been by far the most active regulator ever in doing that, yes. >> thank you, do you think consumers fare better when more businesses understand how to comply with your regulations? >> yes, because if -- otherwise the rules don't get implemented then they aren't worth anything. >> i like to think that you feel the way you said, which is why i was so disappointed with the bureau's final no action letter policy. i mean, there's an -- here's an excellent opportunity to provide clarification to companies and individuals who are faced with a constant stream of new regulations. in my office i've kept the register for the last five years it's become a little bit of a tourist spot for people to come and have their pictures take within the regulations the administration, federal agency, not elected people but unelected people, have implemented in the last five years. i ask people how high the stack of new regulations is. and the highest number i've had anybody guess so far was seven feet. the reality is it's seven stacks over seven feet. yet it's my understanding that the bureau is still expecting merely one to three requests per year and that the policy you set up is the expectation that there's only going to be one to three requests per year, is that correct? >> this is a fair line of inquiry, i think. i intend for us to do more than that. we opined 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 greater demand. the purpose, as i had in mind, of having a no-action letter policy -- and it took time and effort to work through that -- was to capture some of the spirit of the bill that you're 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. >> reclaiming my time. i'm limited here. i understand that. have you had any inquiries yet? >> i think the policy has just taken effect and i don't even know whether the effective date has yet passed so i don't know the answer to that at the moment. we'd be glad to keep your staff informed if that's -- >> if recourses were taken off the table, if money wasn't an issue for the cfpb, which it's not, would you then have any objection to making the no letters policy more expansivexp >> actually, money is an issue for us. we have a hard budget cap set by congress that we have to comply with so we always have to think about how we're allocating resources to different things and that borrow against each other. we don't have an unlimited budget. >> see, the frustration i see all the sometime the only time we're concerned about money is when it truly benefits the public by communicating them and letting them know what to expect. >> that's not so. we're concerned about money all the time. >> we've had your assistant come in here and a member from the other side asked her how much money she made, she refused to tell us. money never seems to be a problem except when it's trying to help the public. >> that's not true. money is an issue for us all the time. >> the time of the gentleman has expired. the chair recognizes member from texas, mr. green, ranging member of the oversight investigation. >> thank you, mr. chairman, and i thank the witness for appearing as well and 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 emasculate now the cfpb and ultimately eviscerate the controver cease-ficfpb. there was even an allegation that i had some concerns with the cfpb to the extent that it was alleged in a sort of a sketchy way that i was supportive of emasculating the cf cfpb. not in those words. so that's what this is all about. there are people who would like to have a financial protection bureau not a consumer financial protection bureau. and 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 you're doing to hen in the area of auto lending. to help us with payday lending. i support these things. i wish we could do more, i don't believe that all dealerships are engaged in invidious discrimination. i don't think that all payday lenders are bad people. but those that are ought to be properly regulated and they ought to be penalize ward in they do. let's talk quickly about ally, it is true that ally settled that case for about $80 million, i believe, is that correct? >> and they've paid out more since to remediate further problems year by year. >> and it is true that ally was prepared in the sense that they had their litigation contingency ready to do battle in court, which is the american way, that's why we have an independent judiciary, but they were prepared, they were in court and they chose to settle the lawsuit, correct? >> i assume so. >> with them settling this lawsuit, i assume that they thought this was in their best interest to do so. but what i marvel at is how these major businesses can lose in court but come to congress to win. because that's really what this is all about. they want to now change the rules of the game is 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 pockets. 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, that's when none of the cools seem to work for them. using testing doesn't work for them, which is probably one of the best ways to determine whether invidious discrimination takes place because you can send people out and those that come back with empirical evidence can share that with you, show that they were discriminated against. then disparate impact. another tool, just doesn't seem to work for them. any tool that we design doesn't work for them. everybody wants to fight invidious discrimination until they have to fight it or find a way to do it. unless it's at the cfpb. if it's at the cfpb, then all sorts of specious allegations are made, attempts to do everything that they possibly can to besmirch the cfpb because they've already said -- and i admire them for being honest -- that if ever they get a president, they're going to do things to eviscerate -- they don't use that terminology, but that's what they mean -- to eviscerate the cfpb. it will be taken away from us. i'm 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. i'm not sure we're going to be able to keep it to be quite kwan did with you. i'm 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 vs. fec. the supreme court said that money talks. well, 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 big like the corporations and we have to do something about it and i thank god for what you're doing trchl. the chair recognizes the gentleman from ohio mr. stivers. >> thank you, mr. chairman, appreciate you being here. i'd like to welcome you before the committee, mr. cordray, most people don't know this but mr. cordray is my constituent. it's always good to have a cob stit -- constituent in the room. you answered the question from mr. royce, a let we are 329 members of congress who signed it, bipartisan, a massive majority of members of congress and mr. royce asked you about it but he left a bit out. did you read the letter by any chance. >> i don't think it's come to me yet. it came over yesterday and i have not seen it. >> i hope you read it soon. the bottom line is the general accounting office -- >> i read all the letters, i just haven't gotten this one. >> the general accounting office found a study and found the number of cases where small credit yuans and small banks 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 that they're applied to. so i would urge you to do that and i'm a very visual person so i have a visual display for you and jesse will hand you a t-shirt. can you hold up the t-shirt and take a look at it real quick. is it a nice t-shirt? is it well designed? >> i'm not an expert on t-shirts. >> it looks like a nice t-shirt. could you hold it up a second, please? >> excuse me -- >> i just want -- okay, so could you try to put it on? what size is it? >> i'm kind of dressed in miny normal uniform today and i'm reluctant to deviate. >> does it look like a big t-shirt or small? >> looks like a small t-shirt. >> it's a small t-shirt. that's a size 2t t-shirt compliments of sam stivers. >> two teen? >> 2t. compliments of my son. >> what does that mine? >> it means he's a toddler, it means you wouldn't fit in it. so the two ways -- >> nor would you? >> so you can go into on a massive died and restrict yourself which is what our community financial institutions are doing to make themselves smaller to serve their clients less or they could strain the t-shirt and break the t-shirt, the t-shirt being the regulation. that's the problem you're putting folks in. so i'd ask you to take a look -- >> could i have a moment? >> puck in a second. i'll give you time. take a look at your authority, you talked earlier about your authority, you took your authority seriously in another realm when you were talking to one of my colleagues and you said "we take our authority very seriously. take your authority under 1022 seriously, too. what are you going to do about that?" i'll give you 20 or 30 seconds to tell me what you're going to do to help these folks. and you admitted you haven't read it so you probably can't tell me what you'll do but i will ask you are you going to read it and take this seriously. can you answer that question? >> sure, but let me also talks about the facts here. for example cunha, they have economists on the staff that present facts in reports and they write certain opinion pieces that don't jibe with the facts. credit union membership last year in the wake of four years of the cfpb is at a new all-time high in the nation. that's good news, i think. but it's not consistent with this notion that we're killing credit unions. cred credit unions share of the mortgage market where our rules are supposedly driving them out of business is at the highest level than it has been for the last 20 years of keeping track. they're doing better in a marketplace that rewards responsible leddenders. all right? it's also the case that we have contoured our rules in ways that give advantages or give differential treatment to smaller lenders, whether communitybacks or credit unions because that's 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 have provided by specifically for that. we will continue to think about those things on a case-by-case basis but this argument that everybody's being driven out of business, they're stopping products, they can't fit into a 2t toddler t-shirt isn't consistent with the data that shows that numbers of mortgage lendsers were up last year. that credit union membership is at all-time highs and that credit union mortgage lending in particular has increased its share of the market at the expense of large banks. so let's deal with the facts. >> i'd like to reclaim my time and tell you the number of small credit unions is going down because your regulations are making it difficult for small credit unions. they're 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. we're seeing it all over this country. the same thing with small banks and the regulatory climate is speeding it up. it's not the only cause. >> congressman, it's been happening since the 1920s. nothing specific about dodd-frank is changing that. >> the time of the gentleman has expired. the chair recognizes the gentlelady from ohio ms. beatty. >> thank you, mr. chairman, and ranking member and thank you mr. cordray for being here told. there are some benefits in being last, you get to hear all of the information, good or bad -- >> i notice you sit through the entire hearing. >> i do. let me just say how proud i am that you are from ohio and certainly i associate myself with all of 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've 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 i've 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 disparate and discrimination and sometimes for me it has seemed very political that people are using it -- whether it's you, whether it's president obama, whether it's anybody that is helping those folks who look more like me. i've looked on web sites pages of some of my congressional folks here and it's all about destroying you, it's all about racism, but we only seem to do it when we're protecting those folks. here's what i think and i'm trying to look at both sides. so if we take one of the most controversial votes that, for me -- and i'm all with you, i'm supportive but here's my issue. i think we've wasted a lot of time in here. a lot of time arguing without resolve and i was 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 -- let's say they were majority but there was some minority supportive of it. but here's a wonderful document, we have it mr. chairman, i'd like to enter it into the records. >> without objection. >> it's about what you do and it talks about fair credit compliance. you can take the black folks, you can take the white folks, you can take the combination, they all signed off on this document. so then we get this legislation that we're in ta ti if about it. so here's the issue i'm going to allow you the last half of my time left to answer. when i think about those african-americans 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 that we all know about and unfortunately we've heard in this room. now on the other side, do i think somebody walks in a dealership that looks like me and is not discriminated against or they don't automatically get a higher rate? well, what's the difference? it might just be that i was more aware, had a better credit score, nobody's talking about the systemic issues h and the problems and it starts -- because we can't change the color that you go in but we need to make sure we put practices and things in place that's beyond names and zip codes. but here's the other thing, if we start together on financial literacy, you have done more than any single person on financial literacy in that state so my question is, we create dodd-frank and i'm all for dot frank, i wasn't here. there isn't a part of the dodd-frank legislation that talks about real financial literacy. we're not doing enough in this committee that's charged with looking at the banking industries, looking at the financial industries, looking at the credit union industries but we're not talking about a program. even from the minority dealers in their letter to me it said we're not dealing with the real issue of the transparency of the people's credit and not coming up with legislation so dodd-frank mandates that the cfpb office of financial information shall -- not think about it -- develop an implement and strategy to improve financial literacies of consumers. it doesn't say consumers who go into a candy store, that means a consumer that goes into an automotive dealership. they have to have financial counseling and information to assist with the evaluation of a credit product. let's say that product is a car and the understanding of credit histories and scores. lastly, i had a member, an african-american 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 i'm sorry i don't have enough time for you to answer. >> time of the gentlelady has expired. >> i ask to enter into the record the letter from the national association of minority automobile dealers. >> without objection and members are reminded all are allowed. >> the national association of minority automobile dealers is not in support of hr 1737. >> the chair now recognizes the gentleman from south carolina, mr. mulvaney. >> thank you mr. cordray, i'm over here. i want to follow up on some of the discussions that the senator from texas had about the interplay between federal regulation and state regulation. i think he was asking you specifically about some of your proposed rules on short term -- what people call payday lending and how it interacts with state action in the same field. during your questioning -- and i seriously -- despite you what may think, in this particular circumstance i'm not trying to put words in your mouth but i think -- >> i always take your comments at face value and listen closely. >> he asked you which states failed to protect consumers and i think in a back and forth you said all 37 who have failed to -- i think do something, to -- all 37 that state still allow payday lending. so i'll ask the question again. in your research adds you prepare to produce these new rules on short-term lending which states have you determine have had failed to protect their own consumers. >> maybe i wasn't clear in t trying to respond to the question. that's not how we approach the issue. it's not my job to tell state officials what to do. >> great, let's stop right there. let's go down a different road. >> but it is my job to look at what kind of harm is occurring in the marketplace and potentially look at ways to intervene to address certain predatory practices of lenders. >> is it fair to assume then that if you promulgate a rule that is more protective of consumers than a state has made that you deem that state to not to be adequately protecting consumers? >> so we will not seek to occupy the field and exert preemption in that manner. if there is federal intervention, that will co-exist with state regulations and authority just as it does in the field -- >> you do intend -- let's be clear and honest, you do intend to preempt state law? in certain areas? >> no, i don't think we intend to preempt state law. i think what that what will happen -- >> i'm using your words, mr. cordray, february 11, 2016, your letter to my office. i asked you about this particular issue and you said "among the bureau's goals is to ensure consumers are offered certain minimum protections no matter where they are located or whether they receive their loans from store front or online lenders. state laws that afford consumers greater protection would not be preempted by a bureau regulation on small dollar lending." the obvious implication to anybody who speaks the english language is that states that offer consumers less pro sex will be preempted. >> i don't know, maybe you're drawing that conclusion. what i would say is as is true in securities law, as is true in antitrust law -- >> this is not securities law, the s.e.c. comes in here, the s.e.c. gets money from us, the s.e.c. has an entirely different oversight. y'all are different. you don't get appropriations from us, you don't are the same level of oversight, so you cannot compare yourself to the s.e.c. let me ask you this -- >> i wasn't comparing myself. >> your home state has acted in this area. your home state i think the last time they looked at short-term lending was in 2009. they've done it over the course of the last 10 or 15 years. they have not provided by a calling off period between transactions. your proposal requires 60 days. who knows better how to protect consumers in the state of ohio? the people of ohio or the cfpb? >> what i would say is policymakers as i was for the state of ohio do their best to protect the citizens of ohio. policymakers at the federal level -- >> have they failed in this circumstance? >> policymakers at the federal level given authority by congress, as the cfpb has been given authority by congress do their best to protect people nationwide. >> the last time ohio addressed this issue was in 2009, you were the a.g. in 2009. if you were the a.g. today in ohio and the cfpb made a rule that preempted ohio law would you defend the ohio law or acquiesce to the federal p preemptio inn? >> i have addressed those since 1993, and 1994. >> wonderful resume. what's the answer to my question? >> it would depend on what circumstances we were talking about. >> this one, ohio passes the law and says there's a two day wait period. the cfpb says there's 60 days. will you defend ohio law against federal regulation. >> that's entirely a hypothetical. >> can you actually say the words "the people of ohio know better how to protect consumers in ohio than the cfpb?" >> the people of ohio are also people of the united states. >> you can't say those words, can you? do you believe that statement? >> do i believe that what statement? >> the people of ohio are better suited to protect consumers in ohio than is the cfpb? do you believe that statement to be true? >> that's a very general statement and i don't know what that means exactly. >> fair enough, thank you. >> time of the gentleman is expired. chair recognizes the gentleman from california, mr. sherman. >> i think the gentleman from south carolina is misusing the word preempt. to preempt means to prevent the state law from being effective. to supplement means that you have to obey the state law and you have to obey the federal law. >> will the gentleman yield? >> i'm sorry, i only have five minutes. if the chair will yield me additional timely yield. >> chair will yield an additional 30 seconds. >> i will yield the gentleman 30 seconds. >> we had the discussion last time. my state has a law that has a two day waiting period. they are proposing 60 days and my question is doesn't thus the federal regulation preempt state law? you would agree it would. >> no, i would not. reclaiming my time. if the federal law requires me to wear a belt and the state law requires me to wear suspenders i will comply with both laws. if you take the position that the state legislators are in the position to provide consumer protection then you should repeal dodd-frank, as i'm sure or at least these provisions of dodd-frank as i'm sure has some support on your side of the aisle. when we passed the law establishing the cfpb, we decided that in addition to following state law, which might provide a two-day period, there could also -- there will also be an additional federal law. now you can say that a state that decides to have no regulations in a financial area has made a conscious decision that that is the best policy for that state. but we passed a federal law to say that there will be standards. preempt is when you tell a company they don't have to comply with state law, supplement is when you say you have to comply with the state law plus you must comply with federal law. mr. cordray, thank you for all you do. part of what you do is coming here to congress so that we can comment on what you do and perhaps help you do an even better job: i think i just learned from you a little bit so appreciate that. >> as to mr. stivers' letter, there's some who say that that letter signed by many of us and i want to say i signed the letter and i'm a step ahead of you, i've read the letter. it does cite code section 1022b-3 and quotes it accurately and some have said well therefore it's in favor of exempt iing smaller institution so toddlers wouldn't be wearing shirts at all. in fact, what it calls for is look at each regulation, determine whether you can have a one size fits all regulation, buy hats in one size fits all or shirts need to be tailored to the right size. and the only ask in the letter is to be sure that regulations don't have unintended consequences and the specific focus is that when you write a regulation and you would want a different regulation or a different approach from smaller institutions that you have the portion of the smaller regulation applicable to smaller institutions. >> that's sound advice and something we will continue to heed, yes. >> and there may be individual circumstances where we bring into your attention. >> and we'll be glad to take input on that, yes. >> a couple days ago you urged financial institutions to use text messages and thank you for saying you'll go to the fcc and make sure the fcc will allow financial institutions to use text. if i can guess a text message from my bank telling me i'm about to overdraft my account, i'll pay my phone company a nickel to get that information. i want to focus on trid. these are particularly complicated regulations for smaller financial institutions, i want to commend you for having the hold harmless period and institutions would like to get more written guidance as to how to apply the regulars and what remediation steps they should take when remediation is necessary, we've talked about the hold harmless period continuing and i think you should continue the hold harmless period at least not you can issue the interpretations necessary to provide written guidance. so -- >> that may go on forever, but we'll continue to be very attentive to the industry and we've encouraged them to bring us their prioritized items. >> at least as long as it takes to answer the questions that have emerged in the first four months, obviously some newer question could come up. finally as we've talked, the regulations require an inaccurate statement as to the cost of title insurance in those states like california where there's a buyers' policy and an owners' policy and you get a discount on the owners' policy when you get the lenders' policy. >> to correct the record, there's a lenders' policy and a buyers' policy. >> i was actually reminded i gave you an extra 30 seconds to you have 14 to -- >> oh. thank you. >> go to town. >> in any case, mr. cordray, you will be looking to make sure the regulations deal with the situation what where there's a stated price for the policy, the buyer of the home is going to pay for but there's an automatic discount that's what's disclosed is the net price. >> i know that's an issue that's been under active consideration during the rule-making process and i believe since. >> the time of the gentleman has now expired. the chair now recognizes the gentleman from georgia mr. westmoreland. >> thank you, chairman. director cordray what -- on data security what system do you use to determine if somebody is fulfilling their commitment on data security? . there's a number of procedures that have been developed and enhanced in the federal government over the last several years, you know the. from has had some problems in this area and the private sector has had many problems and i think it's something we're all very attentive to. nothing would more discredit -- what standards do you use if you're going to go out and ev evaluate a company and possibly fine them -- >> oh, i see, i thought you were talking about our own data security. we're using standards that we understand to be common in the industry, we're using the standards of best practices at different institutions. >> what standard that would be? >> we're taking guidance from the federal trade commission which is ahead of us on this issue. we had an enforcement action in this area. >> what did you use for that enforcement? what standard? >> wherever we engage in enforcement matters we open an investigation, took a look at their security protocols, whether they were being follows, that's the first thing whatever security level or threshold you're talking about, one is whether they're on paper but being followed. if it's not being followed, then you have a problem. that's one of the things -- >> but what standards do you use for the cfpb? >> again, we are looking at all of the standards in the industry and attempting to adapt. if you want me to have -- >> but you don't have a standard now? >> if you want me to have my staff pofollow up with you -- >> i want to know what standards you're using. >> i'm not an expert but we can follow up. >> you stated consumers entrust companies with significant amounts of sensitive personal information and it's crucial companies put systems in place that protect this information, i'm assuming you think it's just as critical for the cfpb to protect this information that in your statement you said consumers entrust with companies but the cfpb has a lot of information that the consumer wouldn't normally give to a credit agency, is that true? >> i'd say two things about that, number one i think it's fair to hold us accountable for the security of data that we have but number two the day that that we have typically is anonymized and it's deidentified and it can not identify either you or me so it's less risky than the kind of data you're talking about private companies having which tells all about you and all about me and it's very clear who's being identified, that's much more risky and if they get my credit card information or yours we can be defrauded. >> so you think private companies -- the information is much more risky than yours? >> it's more risky because it's personally identified there and that's typically using it to market to you and me. our data is not of that kind. >> who has tested your data security system? what company has tested it? >> so the folks in the federal government who deal with this across all agencies set standards and they've now enhanced the standards and improved the standards that we're all seeking to met and i think we're all trying to keep up with best practices. >> i know, but who tested your security of your data. >> again, our it group could come and give your office a briefing if you want to know the details. >> i just want to know who tested it. you mentioned all the information that's available to other people and that you don't v that much information. i just want to give you a little rundown -- >> no, i said we have a different kind of information. we don't have information that's identified by you or me. it's anonymized information for the most part. >> okay, i just know that in your system you have the borrowers information of the name, address, zip code, telephone numbers, date of birth, race, ethnicity, gender, language, religion, social security, education, military, employment records, financial account numbers, financial events and the last few years life events in the last few years, mortgage information, current balance, current monthly payment, delinquency grid, monthly payment, refinanced amount, bankruptcy information, credit card account numbers, credit amount, loan balances, past-due amount, minimum payment requirements, high balance amount, chargeoff amounts, second mortgages, household composition, single male, single female, presence of children, number of wage earners in household, household income, number of bedrooms, bathrooms, square footage, year built, age of structure, units in the structure, most recently asse assessed value. longitude, latitude, origination date -- >> i'm not sure what data you're talking about. what particular data are you talking about? >> this data is give on the you and is supposedly in your records, that's from the national mortgage -- >> are you talking about the mortgage it that correct what are you talking about? >> it's data that's in your system and i think we need to know how it has been protected -- >> the time -- >> i'll be glad to have my folks call up yours and give you more satisfaction on this one. >> the chair wishes to advise all members that votes are expected somewhere between 1:00 and 1:1 cln1:20. i expect to clear all members in the queue and we will adjourn once votes are roughly five minute out. we won't ask our witness to come back but instead we will adjourn at that time, chair recognizes the gentleman from illinois. >> thank you, mr. chairman. as you know, the committee has at length raised concerns with guidance, the bureau issued in 2013 which it dubiously claimed a simple interpretation of its authority. despite explicit language and intents in dodd-frank to remove automotive lending from the purview. we've taken question in the questionable methodology used by the cfpb to administer it. this is a major concern for my automobile dealers in my district and all across illinois. you've now relied on disparate impact theory under ecoa against businesses that underwrite auto loans. i suspect what you're doing is expending the supreme court's holding in the inclusive communities case but that case dealt with the fair housing act not ecoa and that decision rested primarily on the unique congressional history of fha, history that's plainly inapplicable to ecoa. i wonder if you could spell out the specific deal basis on which the cfpb is pursuing ecoa enforcement using disparate impact. >> i believe there was considerable hope among the industry that disparate impact would be disapproved by the supreme court and i understanding interesting news, we have a new supreme court nominee this morning. that was a challenge that was raised in the inclusive communities case you referenced and in fact the supreme court resoundingly upheld disparate -- >> that was an fha case, right? >> that is correct. >> this is an ecoa case, right? >> yes. >> very different, very -- >> no, i don't think so. >> it's very different. it's very specific -- i don't think so. >> requirements that we've got there. fair housing. i think you're extrapolating something we conditioned fient any rationale for it. >> the two laws have been applied hand in glove for decades. >> ecoa had kpeexemptions for t. >> you're pulling this out of nothing because there's an agenda. >> that's not true. we wouldn't be enforcing the law if that had been the truth. >> i want to talk to you specifically about privacy concerns, pri colleague from georgia mr. westmoreland raised issues about the data you have, specific data on individuals around all of us have concerns, the federal government i think is showing incredible weakness at being able to protect the privacy of our citizens, i hear it all the time from them. the recently finalized hum da rule is especially concerning to me because it looks like it's not enough. all the information that mr. westmoreland listed off, item after item after item and now it looks like cfpb is looking for more of private information that i question if it's safe. section 1094 of the dodd-frank act which made changes to hum da also required the bureau to develop regulations that "modify or require modification of itemized information for the purpose of protecting the privacy interests of the mortgage applications or mortgagors that is or will be available to the public." in a footnote to the final hum da rule in october, 2015 the bureau states "based on its analysis to date the bureau believes some of the proposed new data points may create privacy concerns sufficient to warrant some degree of misdemeanorfication including redaction before public disclosure." however the bureau is only ap y applying the opportunity to provide -- not the actual data. in a 2005 speech, former federal reserve board senior advisor glen cantor raised concerns about hum da privacy risks noting, and i quote again "approximately 95% of loan records are unique. meaning loan amounts and census tracks can be attributed to a single person. with a cross match to private lien transfer records one can identify these individuals in 95% of the cases." should at no time bureau proceed with extreme cautious before finalizing any policy that would direct ffiec to public consumer information even if steps are taken to anonymous it? >> thank you for the question and as you pointed out and you should be pleased, we are approaching this issue very sensitively and we have engaged in a further notice and comment -- >> i'm not pleased and my consumers are not, my banks are not because they've seen breach after breach after breach by the federal government. mr. westmoreland asked who's the company that's looking at it, you said there isn't one, basically, it's internal -- >> that's not what i said. i said i'd be happy to brief your staff. >> it's stated by people in the administration saying that this does identify people, that 905-% chance as you're looking through this we can know who it is even if it's anonymized. i don't think it's enough. my citizens are concerned and now you're adding more requirement of getting more private information of my citizens. i think it's wrong. you ought to -- all of us ought to proceed with extreme caution. the least you can say is yes we will proceed with extreme caution. >> we will proceed very carefully in this area, yes. >> the chair now recognizes the gentleman from colorado mr. perlmutter for five minutes. >> thanks, mr. chairman. mr. cordray thank you for being here, thanks for your service to the united states of america. thanks to the people that you lead in the agency and there, you know, as i've said to you many times, being a regulator, you're never anybody's best friend and that's not your job and that's not what you're supposed to be but you're supposed to be looking out for the best interests of the people within the jurisdiction of your agency. i thank you for doing that in so many different ways. you and i disagreed on auto lending issues and dealership issues from time to time but in a civilized, i think, and respectful way. i was very disappointed to learn the other day about the deposition taken of one of your staff, one of your lead staff, i don't think that was appropriate and i wanted to say that for the record. i mean that kind of thing can happen if in court if it needs to be. depositions under the oversight of a judge. okay, that's how our system works. i would and -- i'm just saying this, take it or leave it as you choose that i would hope that the agency keeps a dialogue open with the auto dealer industry in the hopes that there is some kind of common ground that can be reached without them to continue to pursue a legislative approach but that there be some kind of a -- something that is valuable for consumers, does our best to root out discrimination, respects due process. good luck, i'd just ask you to keep the line of communication open. >> appreciate that. of course we had difficulty initially because we tried hard not to be reaching out to auto dealers to be respectful of our jurisdictional lines. we came to learn they were interested in talking to us, they continue to be interested in talking to us on various issues and we therefore have been willing to respond to them in kind. >> and i thank you for that and i would like you -- i just ask keep the lines of communication open to see if there is some kind of resolution short of legislation or lawsuits all the time and i just want to thank you for all the other things that you've been working on, whether it's mortgages or credit cards or the like because we the congress in dodd-frank and i know many of my friends on the republican side they don't like a lot of the provisions in dodd-frank and okay fine but we had a lot of problems going into the 2008 collapse of the financial sector and a lot of it had to do with respect to consumer lending and consumer matters and that is the mission of the agency to deal with those things so i didn't have anything specific ain'ted to ask you if you have -- >> if i could respond. >> if there's anything you would like to talk about. >> there was a point made earlier that i think is inaccurate and misguided that somehow our rules have pushed the mortgage marketplace into the gses. the reality is that irresponsible lending that precipitated the crisis and blew up the mortgage market and blew up the economy pushed most lending to gses and eliminated, destroyed the secondary financing market which has not yet recovered, all of that preceded any of our rule which is didn't even take effect until five years after that so just to set the record straight. there were statements that were not consistent with the facts and i'll do my best to set the record straight where i can. >> and actually the record is more stark than you just stated. that in 2008, 2009, 2010, the only entities buying loans in the secondary market were fannie mae and freddie mac. there was no secondary market. so everybody can go into their rhetoric and their hyperbole -- >> it blew up. it destroyed itself through very irresponsible behavior. by the way, another comment i saw the other day was that the federal reserve kept interest rates too low leading into the housing crisis and as i looked back at it, the interest rates were between 4% and 5% during that period. i'm not sure how high people wanted them to be but the timing is not accurate to the facts. >> the last thing i'd say and just to remind everybody, you are an agency of the federal government. you have a lot of power and however you exercise that power, we all expect you to do it judiciously, i think you've done that but it's something that has to be in the forefront of the minds of you and your members and your agency. >> the time of the gentleman has expired. the chair recognizes the gentleman from pennsylvania mr. fitzpatrick, chairman of the finance task force. >> i thank the chairman. over here on the right. i want to follow up on the issue raised by mr. perlmutter on indirect auto lending. would you acknowledge that some borrowers, customers in the indirect auto lending area who have good credit have ended up paying higher interest rates and fees as a result of the approach of the cfpb and the enforcement actions you brought. is that possible that people with good credit who otherwise would have had a lower rate, lower cost, these costs have been increased? >> what i know our investigations found was that there were many people with good credit who belonged to different minority groups who were being charged more for their loans. >> but were some individuals of any racial or ethnic. did they pay higher rates or fees as a result of the enforcement action? >> i've heard different views about that ch. >> but it's possible? you would acknowledge it's possible? >> i've heard different views about that. it depends on what the response is -- >> based on what you've heard is it likely that that's happened? >> i wouldn't say that. >> you think it probably has not happened? >> i just wouldn't say whether it was likely or not. it depends very much on the individual responses of individual lenders. >> mr. director, i want to get into an area, i had some very small community banks that i visited with yesterday, they're from bucks county, pennsylvania and it has to do with the subject of overdraft fees: there are a lot of us that have concern that the rule making of your bureau is limiting the ability of small community banks to serve their customers and provide choices to those customers and those customers can be vi can be individual small business owners. these are customers who would seek out riskier non-bank alternative which is is what i think we would want to see them avoid. in regards to the overdraft fees and i'm told you're looking at a rule and a rule is being formulated in this issue at the bureau, is that correct? >> we're working on that, yes. >> when is that expected to be released? >> i think we have said that the proposed rule which will be subject to considerable comment in a public notice process will be released this spring. >> this spring. so this particular bank i met with yesterday wanted know posit to you, she suggested i ask the cfpb whether you have willingness to deidentify data which is something you were talking about to mr. westmoreland and release it to the public so banks and financial institution cans interpret the data for themselves and draw their own conclusions. is that something you'd be willing to do? >> what kind of data are we talking about? for what purpose? what do you mean? >> the data that you're using the formulate the rule on overdraft fees. >> i'm sorry, on small dollar loans or overdraft? >> any of it. >> i thought you were talking about small dollar loans when i said we'd release a proposal this spring. on overdraft we are not releasing a proposal this spring. >> would you be willing to release more of the underlying data that forms the basis of your conclusions? >> so we issues a couple different white papers on over draft if that's what you want me to address. yes? >> is the cfpb willing to release more information? i've introduced a bill called the bureau of research transparency act, hr-3131. are you familiar that? >> not particularly no. >> the bill would require the bureau when you make a report or recommendation or issue a rule that you release the underlying data which many times is not released so that as i said in my first question so banks can form their own conclusions. >> so let me speak to -- are you willing to release more of the data? >> let me speak to circumstances where underlying data is not released because our orientation and our inclination is to release as much data publicly as we can because we want people to draw their own clonclusions but some of the information is trade secret protected. although one institution might not want to know more, another institution might feel affected or grieved or disadvantaged? >> if it's deidentified and doesn't fall within one of your exceptions and i'd like to hear about those, are you willing to release the data? so that the reports are transparent so banks and financial institutions and public can draw their conclusions? >> it isn't just where it's deidentified. it could contain trade secret information. it may have been obtained in such a way maybe we had to buy it from some provider in which there were conditions we weren't able to negotiate away. maybes of obtained through controversial supervisory information to an institution -- >> mr. director, my time is expired. would you be willing to lay out the exceptions to transparency on the data you were going to give us today? can you give us that information in writing? >> i think i just verbally laid out much of it. >> those are all the exceptions? >> there may be others. >> there for others, please provide in the writing. >> if you're interested in this, i'd be happy to have our staff brief your staff. >> time of the gentleman has expired. chair recognizes the gentleman from minnesota mr. ellison? >> director cordray, your agency has been under attack since its first day. i have something that i want to post on the screen. powerful interests have opposed the agency's every move, many call for the abolition of your agency and i have a slide up there right now. on the screen is an ad run by a secret group called "protect america's consumers" and i have no idea who's running these ads on msnbc in d.c., i have no idea who's paying for them. we've seen addresses that lead us to conclude they might be powerful interests but we haven't seen the confirmation yet. i was angry at the deception in this ad and being quoted out of context by this front group that i made my own youtube video. not everyone is an opponent of the work of the cfpb. i want to congratulate the people in the green shirts standing with the cfpb today. you're standing up for consumer justice and that's excellent. so i don't know was i planning on running my thing? this is the video setting the record straight that i at all times support the cfpb quite contrary to what the deceptive protect consumers ad implied. and also you may have heard in a public speech given by our chairman yesterday on his financial markets. i'd like that ask you some questions about some ideas that were raised. for example, do controverfpb ru requiring documents be provided to home buyers count as regulatory waterboarding of community bankers? >> i wouldn't describe them that way, no. >> do you think that limiting forced orb trags and consumer and financial contracts is a monument to arrogance in the hubris of man? >> i understand us to be trying to implement authority and direction given us by congress. >> and when we limit interest rates on small dollar loans to 36% for service members or act to prohibit lenders for charging african-americans higher rates of interests for car loans, is that creating an incomprehensible complexity of government control? >> i think congress legislated that to protect service members against being exploited while they're trying to defend our country. but, ben, that was a congressional judgment. >> it's a strange place to be against service members. when the cfpb requires lenders to tell buyers of manufactured homes that the loans they're being offer are more expensive compared to other options in the market is that an example of an unaccountable arrogant bureaucracy dragging us toward the failed economy of a european style social democracy? you don't need to answer. >> well, i will, i think we're trying to put consumers in a position so they can make choices they won't regret later. and that empowers consumers and promotes personal liberty. >> it's fair to say that we don't all agree on the committee about the role of the cfpb but i will say this. $11 billion turned back into the economy in the hands of ordinary working people, pretty good. on the screen is a recent monthly report of consumer complaints about financial products made to your agency. many experts decried the financialization of the economy. they note that overcharges, hidden commissions, arbitration contracts and costs millions in wealth to ordinary americans and yet one of the quotes in the chairman's public speech was quoting a kanye west statement that the only true freedom is economic freedom. would you say that ensuring a fair financial marketplace actually furthers economic freedom for american people? do you -- do people have more wealth now than some of these costly schemes are stopped? what do you think? >> i think that enforcing the law fairly promotes economic freedom. it helps the free market work against a backdrop of law and order the free market work against the backdrop of law enforcement. and i think this bureau has proven itself to be not only pro consumer protection, but pro consumers and pro consumer opportunity. that's how i see things. >> and pro consumer being pro business. i'll tell you why. you're an honest business person giving a fair product at a fair price, you're competing against unscrupulous competitors and that hurts the marketplace. >> i agree. i've been in the mortgage -- >> the time of the gentleman has expired. the chair recognizes the gentleman from florida. >> i was in the florida legislature and have experience dealing with pay day loans. we had a terrible problem, addressed it back in the early 2000s, came out with a bill that has done a great deal of good to eliminate the predatory lenders and make sure that the transaction has a duration of 7 to 31 days, cannot be greater than $500 and processing fee of no more than $5, a cooling-off period of 24 hours. under our regulatory scheme, we've reduced the use of online loans, which we don't want to see our consumers go to. that would eliminate any regulatory control whatsoever. but we've been able to reduce it by 82% since then. would you not agree that florida by far is the gold standard when it comes to state regulation of pay day loans? >> no. >> why not? >> there's another state out there better. >> but is there a state out there better? there isn't. >> i'm sorry. do you want me to answer the question? >> is there another state with a -- >> there's an analysis done of the model and these loans are being made still above 300% and the loans are being rolled over -- >> and you arg go try to eliminate the supply thinking you're going to eliminate the demand. but let's take your statistics. we have your monthly report on pay day loans. my colleague before me had it up there. it shows since its inception, i believe pay day loans have complaints registered with your office of 1.5% since 2011. that's not a significant thing, but when you think that ten times that have been credit reporting agencies, you're not doing anything about that. why are we focusing on an industry that has a need in the market now? >> i appreciate the question. glad to lay out an answer for you. >> go right ahead. >> what we find, when we look at -- some of these complaints are misclassified. people think they're complaining about debt collection -- >> you're misclassifying -- >> people are complaining about debt collection, what we find are the incidents of pay day loans debt collection is much higher than that for student loans or -- >> realize they had 8 million pay day loans in the state of florida. do you know how many complaints they had? >> let's look -- >> .002 of a percent, what relationship would be great if all you had was .002 of complaints. you're not using logic and reason to dictate a policy that's coming forward in spring. i anticipate there will be a report this spring. can you tell us what it's going to say about the pay day loan industry, how we'll eliminate the state regulatory environment, so self-help credit union is assisting you because they want to take over the market. >> i have no idea what you're talking about. >> let me ask you -- >> some suggestion that they're trying to take over this market is beyond -- >> are you -- >> beg your pardon. >> are you familiar with the -- >> yes. [ all speak at once ] >> many stakeholders have had impact. >> are you familiar with their subsidiary? >> i'm sorry? >> their subsidiary. >> what i'm not understanding is -- >> have you ever heard of self-help credit union, yes or no? >> i have, yes. >> and you know they're a subsidiary of the center for responsible lending. >> i'm not familiar with the corporate relationship. >> have you had any relationships, any discussions, any e-mails, any communications with self-help credit union? >> i have discussions with many stakeholders. >> with self-help? this is your opportunity -- [ all speak at once ] self-help credit union, anything with them whatsoever, yes or no? >> what i don't understand is this claim -- >> it's not a claim. it's a question. do you have any [ all speak at once ] >> you can't say that you have? would it surprise you that you have? >> i'm sorry? what are we -- what's the question? >> that you've had communications with self-help. >> what's the question? >> self-help credit union, have you had any communications with them in any way, shape or form? >> i don't know whether i have or haven't. what you're talking about exactly. >> okay, well, you don't know whether you've had communications with them is what i'm asking you. >> i'm sure i have. i've had communications with probably everybody who has an interest in our rules going back for five years. >> can you give me in 18 seconds or less a little anticipation of what we may see in the rule you'll promulgate this spring with regard to short-term loans? >> first of all, i haven't promulgated it yet. so nothing should be taken to the bank. i think you can take a lot from our white paper and the small business framework we provided which is that we are going to seek to eliminate predatory practices by lenders that embroil many consumers in a debt trap with consistent and prolonged rollover of -- >> time of the gentleman is expired. recognize the gentleman from north carolina, mr. pittenger. >> director cordray, you've touted the transparency of your agency, the consumer financial protection bureau, is that correct? >> say that again. >> you've touted the transparency of your agency, is that correct? >> that's correct. i'd love to see some more -- >> taking my time back, sir, let's be respectful. >> all right. >> mr. cordray, in that light you've also admitted that you and 12 of your directors have used private e-mails for official business, is that correct? >> i think that's been a very limited -- >> have you used them or not? >> very limited practice -- >> so you've used them. how does the american public have any confidence in the records, in the information that's captured and recorded if you're using private e-mail? >> okay, so first of all -- >> mr. cordray, do you approve of what secretary clinton did with her private e-mails? >> i'm not familiar with that situation. >> you're not familiar with that? that's very interesting. >> i haven't been part of that. >> do you believe that the public gets proper accountability when you're using private e-mails? do you feel like the public is getting all the information they deserve to have? >> i know that there are policies we have in place to make sure government work is being captured in government databases -- >> will you turn over to the committee all these private e-mails? >> i don't really know what you're talking about. i'd be glad to have our staff work with your staff to try to understand your concerns. >> we'd like to have the full understanding of what has been conveyed over private e-mails regarding official business. it's just that clear. >> well, i'd be glad to follow up with you. >> thank you, sir, we will. regarding your structure in the cfpb, you are the single director. do you believe that it would be more prudent and more acceptable to have perhaps a five-member bipartisan commission? >> i've seen different approaches to different organizations and state governments, quite common -- [ all speak at once ] >> i'm sorry? >> do you think that you can gain wisdom from individuals who have joined with you on such -- >> i do every day. i have a leadership group -- >> let's talk about your time in the general assembly? ohio. you said you served on the general assembly. imsure you served on committee, correct? do you feel like the public would be better served if that committee chair just issued his decision without the full support of those who are on the committee and aware of all those issues? he didn't act alone, did he, sir? >> some committee chairs did, and some committee chairs didn't. >> well, he had accountability? >> sure. and as an individual member, i could sponsor and introduce a bill if i wished to do so. >> but you're accountable to nobody? >> i'm accountable the same way you are, to the public, for the sub stannive actions that i take. >> you've stated that you don't act in full transparency -- >> i didn't say that. >> you can't be fired without some egregious abuse. >> my role in the federal government is a role that was established by congress. the conditions were set by congress. i didn't just get to write them up. >> i think that's our point. i think we'd like to hear that your wisdom and what you believe would be the best accountability for the american people. >> okay. >> do you think it would be in the best interest of the american people that we had a five-commission, bipartisan board? >> so one of the things i think, when i come here and testify in front of you, you can call me to account. there's nobody i can blame it on and say somebody else might think differently, i'm accountable directly to to you. >> these are difficult hours for you because you're actually having to be accountable. >> actually enjoy coming before the committee. when i was a single official in charge of the ohio attorney general's office or treasurer's office, i'm always accountable. i'm accountable in public service, to the public, to serve them well. i appreciate the oversight upon this body, that i come here not only when i'm required, but other times when i'm invited and i've never ducked or dodged and i've always been willing to stay as long as you want me to stay. >> i think ducking and dodging would be that you're responsive when we write you and ask for information. there's been delay after delay in getting information from you on so many occasions. >> i've always read, we've always answered your letters. if the response is not sufficient, we're happy to follow up, we'll done to do that. >> you're your own man, you run an agency, $600 million a year or more, accountable basically to nobody. you have no board -- >> there's accountability in our statute. congress set the terms. set the terms for special audits -- >> the time of the gentleman has expired. chair recognizes the gentle lady from missouri, mrs. wagner. >> thank you, mr. chairman. wow, never ducked or damaged. >> right. >> our committee sent you a subpoena asking for documents with a variety of issues such as discrimination, retaliation, auto lending and others. and despite you saying the cfpb is committed to transparency and compliance, always answer our letters, never duck or dodge, you all have failed. failed once again to respond adequately to this subpoena. the committee sent this letter, i'll smit fadmit submit for the of the order on how you are complying. will commit to providing this information to our committee here right now? >> we continue to work with the -- >> will you commit to providing information and complying to the request of this subpoena from your office? >> i'd be glad to know specifics from you. >> if so, when? >> i'd like to know specifics about how we have not complied. i know in response to that -- >> you have failed to comply. >> in what way? >> you haven't responded to the subpoena or the letter. >> of course we responded. we produced another 20,000 pages of documents. >> not in any adequate way, shape -- >> tell me how it's inadequate. >> will you absolutely right now commit to complying with our committee? if so, when? >> we have been working to comply all along. >> working to comply is what we call ducking and dodging. let me move on. director cordray, last year i asked a question about who gave the authorization to renovate the headquarters of your agency, and i haven't forgotten the response you gave to me, which was, and i quote, and why does it matter to you? well, director, it still matters to me, because that is government expenditure of $215 million of taxpayer money. last year, you said that treasury made the decision. however, the committee sent a letter to treasury asking about it, and they said that you all, you, the cfpb made the decision. clearly both of you can't be right, sir. it's been a year since the last time i've asked to look into this. who authorized the renovation, sir? >> okay, so first of all, this has been misstated and garbled. i never said that, why would you look into an expenditure of funds. you're entitled to look into an expenditure of funds. >> you said, why does it matter to you? and it matters to the taxpayers. >> the if -- >> it matters to the people they represent. >> the it was not expenditure of public funds. >> who authorized it? who? i have more questions, sir. who authorized it? >> as i've said to you and to the committee numerous times, i later reaffirmed that decision and i continue to stand behind the decision. so in terms of who originally -- >> you're clearly not answering the question again. elizabeth warren was working in the treasury and was understood to be responsible for setting up the bureau. she published a post announcing the headquarters would be located at 1700 g street. so was it elizabeth warren who absolutely ordered and authorized the renovation, sir? >> i don't know. seems like that's what you're trying to get me to say. >> i want the truth, sir. who ordered a $215 million expenditure of renovations, of using the taxpayers money? >> it's not $215 million. that's never been true. not accurate. we've corrected the record on that numerous times. second, i have reaffirmed that decision and i take responsibility and accountability for it. >> you're saying you gave the authorization for that? >> i was not in the position for the time -- >> reclaiming my time. it is unbelievable that you don't know who authorized it. >> no, look -- >> this is my time, especially since you don't even own it. you know the building has been satisfied at $150 million. it makes me question how the cfpb spends its money. last month it was questions whether the fed is even able to veto specific funding requests. the answer to both of those questions was no. >> congress set up -- >> i'm not finished, director cordray. how exactly does this work? do you simply send the federal reserve an invoice and as long as it doesn't hit the caps that were set by dodd-frank, then it's approved automatically? how does this happen? >> we're simply carrying out the law that congress enacted. you and your colleagues in the congress or those who preceded you enacted that law. we're carrying it out. >> the time of the gentle lady has expired. members are advised, there are votes on the floor. ten minutes left in the first vote. we anticipate clearing one more questioner. the gentleman from kentucky. mr. bar is recognized. >> thank you, mr. chairman and director cordray, i'll follow-up from my colleague, miss wagner on that question regarding the source of the cfpb's funding. in your semi- annual report, you say that the director of the cfpb requests transfers from the federal reserve system in amounts that he has determined are reasonably necessary to carry out the bureau's mission. what was the transfer requested in fy-2015? >> i'd have to look at my -- >> what do you anticipate it being in fy-'16? >> so our published puth for fy-2016 is for $606 million. >> okay. does the fed approve that budget? >> the budget has to be within the parameters set by congress. >> i understand. does the fed approve that budget? >> you mean particulars of the budget or the overall total of the budget? >> both. total, particulars, anything. >> i assume if we were seeking to obtain more than our cap, that that would not be -- >> but otherwise, the fed doesn't approve the budget? let me ask it this way -- >> that's correct. >> does the fed ever, has the fed ever or does the fed ever review the bureau's transfer request? >> i believe they do. we send transfer requests and they fulfill them. >> okay, and it's as simple as that. so to your knowledge, the fed has never asked any questions about that transfer? >> i don't deal with the details of the back and forth with the fed. >> to your knowledge they've never asked any questions about -- >> i wouldn't know what to say about that. >> has the fed, to your knowledge, ever denied a particular transfer request? >> all of our questions have been within the bounds of the law set by congress. >> in particular an allocation or expenditure made by -- >> that's the system established by congress and we're carrying it out. >> so the fed is not involved in any way in the implementation of the bureau's budget. that's the point. and to that point, that's our concern frankly. because the fact that the bureau's been able to move forward with the $215 million luxury renovation to its headquarters, $60 million on management consulting services and pays the average bureau employee more than members of congress, would support the conclusion that the fed is merely a rubber stamp to your expenditures, and we would hope since you're in the accountable to the congress, not subject to the appropriations process, a fundamental flaw in the dodd-frank law, we would hope you would be accountable up to the source of your funding. >> i think several things you described are inaccurate. -- >> let's talk about the arbitration, rule-making and the study that we asked about in that letter. your response to our letter did not answer our questions about the deficiencies in the data. did the study confirm that arbitration can be faster than a class action lawsuit? >> i think it would depend on the individual arbitration -- >> was there any data that supported that arbitration can result in a faster, more expedited resolution for the consumer? >> sometimes a lawsuit can go faster. sometimes an arbitration can go -- >> was there any data that arbitration can be less expensive for a consumer? >> again, depending on the matter. some cases that go to court would be less expensive, some cases in arbitration would be more. >> was that any data that it can be a more effective way for consumers to resolve disputes? >> i don't know what a -- >> the point s you've said that you have a duty to enforce the dodd-frank law, not the 1928 law. here's what dodd-frank says. it says the rule must be in the public interest for the protection of consumers and consistent with the study. my point is, your study shows that arbitration can sometimes and in many cases be in the best interest of the consumer, in terms of a faster resolution, a better result for the consumer, and so i would encourage the bureau to not move forward with a rule that is inconsistent with the benefits of arbitration. in preparing the study, did the bureau coordinate with the american association for justice? >> beg your pardon? >> did the bureau in preparing the study coordinate with the american association for justice? >> i don't know who that is. >> well, that's the trade association for class action lawyers. the reason i ask is, the bureau cites a study by professor sob urn that purports to analyze -- do you know how the professor's study was funded? >> i'm not familiar -- >> it was funded by the american association for justice. that's a conflict of interest that you have -- you're using data from a study that's funded by the class action plaintiffs -- >> we took input from all stakeholders. there were also studies funded by industry. i don't hear you complaining about the conflict of interest there, but -- >> time of the gentleman is expired. i recognize the ranking member -- >> will carry out the statutory -- >> i'd like to submit for the record a study from the center for responsible lending report. >> without objection. >> african americans and latinos. >> i want to thiank the witness for his testimony. five days for questions to be submitted which will be forwarded to the witness for his response. i would ask you, mr. director, to respond promptly. all members will have five days to submit materials for inclusion in the record. this hearing stands adjourned. >> on news makers, nan aron president of the alliance for justice talks about the debate over president obama's nomination of judge merrick garland to the supreme court. news makers af 10:00 a.m. and 6:00 p.m. eastern on c-span. book tv is in primetime on c-span 2 starting monday night at 8:30 eastern. each night will feature a series of programs on topics ranging from politics and education to medical care and national security. plus, encore presentations from recent book festivals. tune in for book tv in primetime, all next week on c-span 2. go to book tv.org for the complete schedule. now a discussion on the status of the investigation into the e-mails sent to and from hillary clinton's personal server during her tenure as secretary of state. from washington journal, this is

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