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90–951 PDF 2015

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THE CONSUMER FINANCIAL PROTECTION

BUREAU’S SEMI-ANNUAL REPORT TO CONGRESS

HEARING

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED THIRTEENTH CONGRESS

SECOND SESSION

ON

THE CONSUMER FINANCIAL PROTECTION BUREAU’S SEMI-ANNUAL REPORT TO CONGRESS, DISCUSSING THE AGENCY’S BUDGET, REGULATORY, SUPERVISORY, AND ENFORCEMENT ACTIVITIES, AND INFORMATION ABOUT CONSUMER COMPLAINTS

JUNE 10, 2014

Printed for the use of the Committee on Banking, Housing, and Urban Affairs

(

Available at: http://www.fdsys.gov/


BANKI-41578DSA with DISTILLER
COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

TIM JOHNSON, South Dakota, Chairman

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

SHERROD BROWN, Ohio 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

KAY HAGAN, North Carolina 

JOE MANCHIN III, West Virginia 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

MIKE CRAPO, Idaho 

RICHARD C. SHELBY, Alabama 

BOB CORKER, Tennessee 

DAVID VITTER, Louisiana 

MIKE JOHANNS, Nebraska 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

JERRY MORAN, Kansas 

TOM COBURN, Oklahoma 

DEAN HELLER, Nevada

CHARLES YI, Staff Director 

GREGG RICHARD, Republican Staff Director

LAURA SWANSON, Deputy Staff Director 

GLEN SEARS, Deputy Policy Director 

BRIAN FILIPOWICH, Professional Staff Member 

JEANETTE QUICK, Counsel 

SABAHAT QAMAR, CFPB Detailee

GREG DEAN, Republican Chief Counsel 

JELENA MCWILLIAMS, Republican Senior Counsel 

JARED SAWYER, Republican Counsel

DAWN RATLIFF, Chief Clerk 

TAYLOR REED, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor

(II)


BANKI-41578DSA with DISTILLER
CONTENTS

TUESDAY, JUNE 10, 2014

Page

Opening statement of Chairman Johnson ............................................................. 1

Opening statements, comments, or prepared statements of: 

Senator Crapo ................................................................................................... 2

Senator Menendez ............................................................................................ 3

Senator Toomey ................................................................................................ 4

Senator Brown .................................................................................................. 4

WITNESSES 

Richard Cordray, Director, Consumer Financial Protection Bureau ................... 5

Prepared statement .......................................................................................... 28 

Responses to written questions of: 

Chairman Johnson .................................................................................... 31 

Senator Crapo ............................................................................................ 31 

Senator Reed .............................................................................................. 38

Senator Menendez ..................................................................................... 39

Senator Brown ........................................................................................... 40 

Senator Toomey ......................................................................................... 41 

Senator Moran ........................................................................................... 46 

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

The Semi-Annual Report of the Consumer Financial Protection Bureau ........... 50

(III)


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(1)

THE CONSUMER FINANCIAL PROTECTION BUREAU’S SEMI–ANNUAL REPORT TO CONGRESS 

TUESDAY, JUNE 10, 2014

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 10:35 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Tim Johnson, Chairman of the Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN TIM JOHNSON 

Chairman JOHNSON. I call this hearing to order. 

Director Cordray, welcome back to the Committee. Today, we 

continue our regular oversight of the CFPB. In the 3 years since 

the CFPB opened its doors, it has had a noticeable impact on nearly every aspect of the consumer’s experience with the financial system, from student loans to credit cards, mortgages, financial education, debt collection, prepaid cards, and credit reports. The Bureau has conducted extensive outreach to both industry and consumers and has proven itself to be a careful regulator, in many 

cases over industries that previously had no Federal supervision. 

Importantly, the CFPB has also proven itself up to the task Congress set out for it, which is to protect consumers. To date, the Bureau has obtained nearly $900 million of refunds and fielded over 

375,000 consumer complaints. 

During the crisis, we saw that mortgage lending, from underwriting to servicing, had serious problems. Fittingly, many of the 

CFPB’s most significant actions relate to mortgage lending. For example, the Bureau recently finalized its mortgage disclosure rules 

to improve closings and provide key loan terms and costs to consumers in clear, understandable forms. While the consumer experience at the mortgage table is an important aspect of mortgage 

lending, the ability of consumers to access affordable mortgage 

credit in the first place is critical. The CFPB’s rules to strengthen 

mortgage standards, including the QM and servicing rules, went 

into effect this past January. Director Cordray, I look forward to 

hearing how these rules impact mortgage lending, particularly by 

small lenders or lenders in rural areas such as South Dakota. 

While I support strong mortgage standards, it is also important to 

ensure that lenders can continue to lend in all communities. 

Since Director Cordray testified last November, the Bureau finalized its rule to supervise nonbank student loan servicers who servVerDate 0ct 09 2002 14:45 Mar 03, 2015 Jkt 000000 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 S:\DOCS\90951.TXT SHERYL

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ice over 49 million borrower accounts. For the first time, the Nation’s second largest consumer debt market will have Federal supervision. I am encouraged by this action, but remain concerned 

about the high level of student debt, which stands at $1.2 trillion. 

This issue is particularly important to me, as South Dakota has the 

highest proportion in the country of residents with student loan 

debt. I am interested to hear from Director Cordray about actions 

the Bureau plans to take to address this growing problem. 

According to Federal Reserve data released last Friday, consumer credit growth jumped to its fastest pace in 3 years, with 

credit card debt rising at a pace unseen since 2001. This serves as 

a reminder that, as memories of the last crisis fade, we need a diligent CFPB that guards against abusive practices and ensures consumers are able to make responsible financial decisions while having fair access to affordable credit. I applaud the CFPB’s work so 

far and look forward to your testimony. 

With that, I turn to Ranking Member Crapo. 

STATEMENT OF SENATOR MIKE CRAPO 

Senator CRAPO. Thank you, Mr. Chairman. Today we welcome 

back Director Cordray to discuss the most recent semi-annual report of the Consumer Financial Protection Bureau. 

In recent months, the CFPB has laid out a broad and ambitious 

rulemaking agenda that will considerably affect many consumer financial products and services. As the CFPB proceeds with rules 

targeting short-term and small-dollar credit, overdraft protection, 

auto financing, mortgage servicing, and settlement and arbitration, 

it must fully understand how these rules will affect the cost and 

availability of credit for consumers. 

The CFPB must also commit to take a balanced approach and to 

performing a thorough qualitative and quantitative cost-benefit 

analysis of each rule. 

I am concerned that many of the CFPB’s recent proposals and actions will continue to push mainstream financial products into unregulated areas, diminish consumer choice, and make certain products unaffordable. Those outcomes could come at a great cost to the 

consumer and should be prevented. 

As the Director is aware, another initiative that is of great concern to me is CFPB’s big data collection. In the past, I have asked 

simple questions regarding CFPB’s data collection, such as how 

many consumer accounts the CFPB is monitoring, and how it intends to use the personal information it collects. Unfortunately, my 

calls for transparency have been met with ramped-up efforts by the 

bureau. 

This April, I learned that the Federal Housing Finance Agency 

and CFPB will expand the jointly run national mortgage database 

to include a person’s religion, Social Security number, major life 

events, and link other lines of consumer credit together on potentially hundreds of millions of loans. This information is undoubtedly intrusive, unnecessary, and contrary to the CFPB’s public 

statements of not collecting and using personally identifiable information. Adding concern is the admission by FHFA’s project manager for the database that the information on it would be easy to 

reverse engineer. 


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Moreover, the FHFA and CFPB have already publicly indicated 

that borrowers do not have the opportunity or right to opt out of 

the database. Finally, the recent reports about employment discrimination at the CFPB are also deeply troubling. Two CFPB-commissioned independent external reports and testimony from a whistleblower highlight the CFPB’s failure of the employment rating 

and compensation system and unacceptable conduct of certain Bureau managers. 

Today we will need to discuss how this occurred, why it took 

months for CFPB to acknowledge and act upon these independent 

reports, and what additional steps the CFPB is taking to increase 

transparency and accountability. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Thank you, Senator Crapo. 

Are there any other Members who would like to give brief opening statements? 

Senator MENENDEZ. Sure. 

Chairman JOHNSON. Senator Menendez. 

STATEMENT OF SENATOR ROBERT MENENDEZ 

Senator MENENDEZ. Thank you, Mr. Chairman, and welcome Director Cordray. The CFPB earlier this year released a report on 

consumer protection issues involving student loans, and as I look 

at hard-working middle-class New Jerseyans trying to get ahead, 

I feel that they fall further behind. 

A new class of college graduates is preparing to enter the workforce, but the question is, at what cost to them and their families? 

And at what cost if something should happen to them before the 

loan is paid off? 

The experience of the family of Christopher Bryski in my State 

of New Jersey illustrates how challenging these issues can sometimes be. In 2004, Christopher was a student at Rutgers when he 

suffered a severe traumatic brain injury. It left him in a vegetative 

state for 2 years before he tragically passed away. 

During this time of hardship, Christopher’s parents were shocked 

to learn that his student loan debt continued, that not the injury 

nor Christopher’s death was enough to stop the debt from growing. 

While some private lenders make clear that they will discharge 

recent loans in the event of a borrower’s death or disability, others 

do not clearly communicate to co-signers what their obligations will 

be, leaving families like Christopher’s to find out that they are on 

the hook for the full cost of the loan, no matter what. We need to 

take a step back and think about how we approach the student 

loan process, especially in cases like Christopher’s. 

This month, new graduates will be starting their careers, and before they collect their first paycheck, they will already be burdened 

by massive student loan debt. Like Christopher, if something happens to them, the burden in many cases will fall to family members, many of whom are already struggling to make ends meet. 

According to the Federal Reserve Bank of New York, the share 

of 25-year-olds with student loan debt continued to rise last year, 

and the total outstanding balance now exceeds $1.1 trillion. That 

is nearly $30,000 for an average student loan borrower in New JerVerDate 0ct 09 2002 14:45 Mar 03, 2015 Jkt 000000 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 S:\DOCS\90951.TXT SHERYL

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sey. The burdens for families are real, and the need for consumer 

protection I believe is critical. 

That is why today, Mr. Chairman, with Senators Brown and 

Booker, I am introducing Christopher’s law, a simple and commonsense bill that will require student loan providers to clearly communicate to borrowers and their co-signers what their obligations 

will be in the instance of death or disability. By increasing transparency in this simple and small way, the bill can save families 

like Christopher’s years of potential hardship down the road. 

I also plan to introduce separate legislation in the coming weeks 

to address two other related issues. 

First, in the Bryski situation, when the lender ultimately forgave 

Christopher’s student loan debt, after 6 years, his parents were 

then hit with a large tax bill on what is deemed under the law to 

be ‘‘income.’’ The bill I will be introducing will end that practice 

which unnecessarily burdens families and the economy. 

Second, if something unfortunate happens to the co-signer of a 

student loan—death, disability, or bankruptcy—some borrowers 

have gone into default despite never missing a payment or doing 

anything wrong. That is simply unacceptable. 

So I will look forward to discussing this issue with you further 

today, Director Cordray, and I look forward to being able to make 

a change so that death and disability is not a continuing challenge 

to families. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Anybody else? 

Senator TOOMEY. Mr. Chairman? 

Chairman JOHNSON. Senator Toomey. 

STATEMENT OF SENATOR PATRICK J. TOOMEY 

Senator TOOMEY. Thank you, Mr. Chairman. I just want to say 

briefly I will not be able to stay until the time when I would be 

able to ask questions, but I am concerned about a process that is 

underway by which the CFPB is collecting a vast amount of information about credit card usage, you know, on the order of—well, 

there is a staggering amount of data about individual usage of 

credit cards. I have a series of questions. I will submit them for the 

record and look forward to an opportunity to have a follow-up discussion. 

Thank you, Mr. Chairman, and thank you, Mr. Cordray. 

Senator BROWN. Mr. Chairman? 

Chairman JOHNSON. Senator Brown. 

STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. I will be less than 30 seconds. I wanted to echo 

the words of Senator Menendez. I am a cosponsor of his legislation. 

I was on a call the other day speaking with the sister of Andrew 

Katbi, who is a law student in western Ohio who was killed right 

before he graduated from law school. His sister, Olivia, spoke of 

some of the same kinds of behavior that they experienced from 

their servicer similar to what Senator Menendez talked about. So 

I am hopeful, Director Cordray, that you can help us address those 

issues. 

Thanks, Mr. Chairman. 


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Chairman JOHNSON. Anybody else? 

[No response.] 

Chairman JOHNSON. I would like to remind my colleagues that 

the record will be open for the next 7 days for additional statements and other materials. 

Mr. Richard Cordray is the Director of the Consumer Financial 

Protection Bureau. Director Cordray, you may begin your testimony. 

STATEMENT OF RICHARD CORDRAY, DIRECTOR, CONSUMER 

FINANCIAL PROTECTION BUREAU 

Mr. CORDRAY. Thank you, Chairman Johnson, Ranking Member 

Crapo, and Members of the Committee, for inviting me to testify 

again today about the latest Semi-Annual Report of the Consumer 

Financial Protection Bureau. 

The Bureau, as you know, is the Nation’s first Federal agency 

with the sole focus of protecting consumers in the financial marketplace. Financial products like mortgages, credit cards, and student 

loans involve some of the most important financial transactions in 

people’s lives. In the Dodd-Frank Act, Congress created the Bureau 

to stand on the side of consumers and ensure they are treated fairly in the consumer financial marketplace. Those consumers are 

your constituents. Since we opened our doors, we have been focused 

on making consumer financial markets work better for the American people, the honest businesses that serve them well, and the 

economy as a whole. 

My testimony today focuses on the Bureau’s fifth Semi-Annual 

Report to Congress and the President, which describes the Bureau’s efforts to achieve this vital mission. Through fair rules, consistent oversight, appropriate enforcement of the law, and broadbased consumer engagement, the Bureau is helping to restore 

American families’ trust in consumer financial markets, protect 

American consumers from improper conduct, and ensure access to 

fair, competitive, and transparent markets. 

Through our enforcement actions to date, we have aided in efforts to refund more than $3.8 billion directly to consumers who fell 

victim to various violations of consumer financial protection laws. 

We have also fined wrongdoers more than $141 million, all of 

which has gone into our Civil Penalty Fund and can be used to 

compensate wronged consumers—victims—and to the extent compensating consumers is not practicable, to support consumer education and financial literacy programs that also will benefit the 

consumer public. 

In the fall of 2013, for the first time, we took action, in conjunction with multiple State Attorneys General, against an online loan 

servicer for illegally collecting money that consumers did not owe. 

We took action against a payday lender for overcharging 

servicemembers in violation of the Military Lending Act and robosigning court documents. We took action against an auto lender for 

discriminatory loan pricing. And we partnered with 49 States to 

bring an action against the Nation’s largest nonbank mortgage loan 

servicer for misconduct at every stage of the mortgage-servicing 

process. 


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CFPB supervisory work contributed to a recent enforcement ac- tion resulting in a refund of approximately $727 million to 1.9 million consumers for illegal practices related to credit card add-on 

products. In addition to this public enforcement action, recent nonpublic supervisory actions and self-reported violations—a great new 

development among many of these financial institutions—have resulted in more than $70 million being remediated to over 775,000 

consumers. 

In January, as the Chairman noted, mortgage rules that the Bureau issued to implement provisions of the Dodd-Frank Act took effect, establishing new protections for home buyers and homeowners. During the reporting period, we also issued another major 

mortgage rule mandated by the Dodd-Frank Act: a final rule to 

consolidate and improve Federal mortgage disclosures under the 

Truth in Lending Act and the Real Estate Settlement Procedures 

Act, to simplify this process for individuals and industry alike, 

which we call our ‘‘Know Before You Owe’’ project. We also issued 

an Advance Notice of Proposed Rulemaking on debt collection, asking the public in-depth questions about a range of issues relating 

to the debt collection market, which is the Bureau’s most frequent 

source of consumer complaints. 

To promote informed financial decisionmaking, we have continued providing consumers with online resources, including the 

AskCFPB section of our Web site, which I encourage you to use on 

behalf of your constituents, where we have answers for over 1,000 

frequently asked questions. 

A premise at the heart of our mission is that consumers should 

be treated fairly in the financial marketplace, and they deserve a 

place that will facilitate the resolution of their complaints when 

that does not happen. To this end, the Bureau has strengthened its 

Office of Consumer Response. As of June 1, 2014, we have received 

nearly 375,000 consumer complaints on credit reporting, debt collection, money transfers, bank accounts and services, credit cards, 

mortgages, vehicle loans, payday loans, and student loans. 

The progress we have made has been possible thanks to the engagement of hundreds of thousands of Americans who have used 

our consumer education tools, submitted complaints, participated 

in rulemakings—actually, that should be millions—and told us 

their stories through our Web site and at numerous public meetings from coast to coast. We have also benefited from an ongoing 

dialog and constructive engagement with the institutions we supervise, as well as with community banks and credit unions, with 

whom we regularly meet. Our progress is also thanks to the extraordinary work of the Bureau’s own employees—dedicated public 

servants of the highest caliber who are committed to promoting a 

healthy and fair consumer financial marketplace. Each day, we 

work to accomplish the goals of renewing people’s trust in the marketplace and ensuring that markets for consumer financial products and services are fair, transparent, and competitive. 

In the years to come, we look forward to continuing to fulfill 

Congress’s vision of an agency dedicated to cultivating a consumer 

financial marketplace based on these principles. 

Thank you for the opportunity to appear before you again today. 

I appreciate the benefit of your active interest and oversight, and 


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I look forward to listening closely and responding to your questions 

today. 

Chairman JOHNSON. Thank you for your testimony. 

As we begin questions, I will ask the clerk to put 5 minutes on 

the clock for each Member. 

Director Cordray, the CFPB has now been up and running for almost 3 years. What do you consider to be the most significant accomplishment of the Bureau since 2011? And looking forward, what 

actions can we expect either the Bureau over the next few months? 

Mr. CORDRAY. Thank you, Mr. Chairman. That is a broad question, and I would say a number of things. 

First of all, the challenge of building a Federal agency from 

scratch has been significant. We have had some growing pains, and 

we have been working through those. But at the same time, we 

have gone from zero employees to now close to 1,400 employees, 

people who are very dedicated, as I said in my opening statement, 

to protecting consumers and seeing that they are treated fairly, 

and they are doing marvelous work to accomplish that. 

The mortgage rules that we put in place that Congress set such 

a high priority on, both mandating that we do so and putting it on 

a tight deadline, have been very significant. That is the single biggest consumer financial market. 

The enforcement activity that we have had to ensure that institutions understand that people need to be treated fairly and that 

money will go back to people’s pockets when they are treated unfairly have been important. 

Our attempts to supervise and put in place now a significant supervision program for nonbanks to put them on a level with the 

banks and allow that we can now supervise and oversee entire 

markets with an even hand and on an even playing field have been 

very significant. 

And I think increasingly not only our consumer response function, which addresses individual complaints but also reveals the 

pattern of complaints, but also our efforts to provide public information that all of you can see and share and that calls attention 

to various practices, some of which were described in legislative 

proposals noted here today and otherwise, I think do affect the 

market in meaningful ways. 

Chairman JOHNSON. The QM rule has been in effect since January. Would you discuss the rule’s impact on the mortgage market 

and on home buyers? 

Mr. CORDRAY. The Qualified Mortgage rule, or ability to repay 

rule, alternative names, has been one of the most significant protections for the mortgage market to date, and it is an important 

provision to recognize the need to prevent similar financial crises 

from growing out of the mortgage market in the future. And I 

think it has been widely acknowledged that it will help to do so. 

I think the effort now to potentially put the QRM rule on a level 

with the QM rule acknowledges that fact. I think it has been a balanced rulemaking, but it is something we are very attentive to and 

closely monitoring. If we see unexpected consequences for the mortgage market, we want to be ready to act, and we have been close 

to the National Association of Realtors, mortgage bankers, and othVerDate 0ct 09 2002 14:45 Mar 03, 2015 Jkt 000000 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 S:\DOCS\90951.TXT SHERYL

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ers who are bringing us regular data to let us see how this may 

be affecting the market. 

In the rural areas, that is an area where we tried to be very sensitive. We had an original proposal that was, I now believe, not 

calibrated properly in terms of gauging what is rural for purposes 

of this act. We backed that proposal off for 2 years while we can 

reconsider that further. We are taking a lot of input on it, receiving 

a lot of comment, and I think we will have a proposal that will be 

more satisfactory to people within that 2-year timeframe. 

Chairman JOHNSON. Director Cordray, the Bureau recently proposed changes to the QM rule, including a change to the points and 

fees limit to allow lenders an opportunity to cure a loan that inadvertently exceeded the limit. Can you describe why these changes 

were necessary and whether you think any additional changes to 

the points and fees limit or QM generally will be needed? 

Mr. CORDRAY. The points and fees provision stems from the 

Dodd-Frank Act and Congress’ action there. We have heard from 

a number of lenders about it, including the concern that was stated—I think it was mortgage bankers in particular, but a number 

of people have brought it to us—that although there is a points and 

fees cap under the rule and people should be able to go right up 

to the edge of that cap in making mortgages in the market and we 

expect them to do so, that there was some concern that if they got 

close to the cap, they would have to stay away and create a gray 

area because of concern that they might get it wrong. And a right 

to cure, at least on a certain limited basis, would be a way to ease 

that concern. 

We took that input to heart, and we have proposed a provision 

to take account of that, which we have now had comment on, and 

it is overwhelmingly supported by lenders. There are some differences of opinion about what timeframe it should cover and the 

like. Those are things we will work through. But I think it is a reflection of our willingness to listen to lenders about what is actually happening in the market, how we can ease access to credit 

without lessening consumer protections, and I think there may be 

a number of places where we may have opportunities to do that. 

Chairman JOHNSON. Senator Crapo. 

Senator CRAPO. Thank you, Mr. Chairman and Director Cordray. 

I want to start out with regard to the big data collection issue, 

Director Cordray, and there are so many questions to ask on that, 

I am just going to get into it briefly. 

Mr. CORDRAY. OK. 

Senator CRAPO. But I want to remind you that we need to get 

further answers from the agency with regard to literally the scope 

of and the content of the big data project that is underway to collect credit card information. 

I just want to clarify one fact in these questions, and that is, it 

is my understanding that the agency’s goal is to collect the credit 

card transaction information on 90 percent of the credit card accounts in the United States. Is that correct? 

Mr. CORDRAY. I believe that is correct, although I would not put 

it quite that way. We are not trying to collect information on individual credit card accounts. We are trying to collect information 

that would give us the pattern of credit card activity in the marketVerDate 0ct 09 2002 14:45 Mar 03, 2015 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6633 S:\DOCS\90951.TXT SHERYL

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place so that we can protect consumers against the kind of abuses 

that led to the CARD Act and have been reined in considerably 

under the CARD Act. We are also trying to collect information so 

that we can accomplish our task that the Congress set for us of reporting to you every year on the effects of the CARD Act, to help 

you understand how it is affecting the marketplace, do you want 

to consider further legislation to either go further or to reconsider 

what was done? We cannot do that analysis if we do not have information. This is——

Senator CRAPO. I understand that, but if my math is correct and 

understanding is correct, we are talking about approximately 900 

million accounts, and you are collecting data on the 900 million accounts. Although I understand the purpose, as you have stated the 

purpose, for your collection of this data, I have significant concerns 

about the potential abuse and misuse of that data and the loss of 

privacy that comes from it. 

But I want to move to the more recent development which we 

learned about in April, which is that the CFPB is joining with the 

FHFA with regard to the national mortgage database. What we 

learned then, just last April, is that the two agencies—the FHFA 

and the CFPB—are going to jointly work to expand the national 

mortgage database, and the information that came out in the Federal Register with regard to this proposed expansion is extremely 

alarming. And I am reading from the Federal Register right now: 

‘‘The records in the new expanded system may include, without 

limitation, borrower/co-borrower information, name, address, zip 

code, telephone numbers, date of birth, race, ethnicity, gender, language, religion, Social Security number, education records, military 

status and records, financial information, account information, including life events of the last few years.’’ And the list goes on and 

on and on. 

The question I have is: Does this mean that the assurances that 

you have given us recently and, as we have discussed, the big data 

projects that you will not collect personally identifiable information 

on Americans is being changed? Is the agency’s intent changing in 

terms of its data collection? 

Mr. CORDRAY. No, it is not, and I believe—without being certain, 

I believe what you are reading from was a SORN, which is a particular statement that is done for bureaucratic reasons under the 

law as to what could conceivably be the case. The national mortgage database, as it is conceived, will not include personally identifiable information such as name, address, Social Security number. 

I also want to make a point to assure you and your colleagues, 

because the question was raised, there are no plans to include and 

we will not be including religion in the national mortgage database. 

So what I do want to say is the need for this information is 

acute. Chairman Bernanke, when he testified here and when we 

spoke personally, said that one of the problems before the financial 

crisis was they did not know enough about the mortgage market; 

they did not see coming what happened in the mortgage market. 

And Chair Yellen has reiterated this since. 

We have to know more about the mortgage market to prevent 

this economy from cratering again on the same grounds it did before. 


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Senator CRAPO. Well, I understand, and this is a similar rationale to your explanation——

Mr. CORDRAY. It is. 

Senator CRAPO.——of the need for information about credit card 

transactions. 

Mr. CORDRAY. Absolutely. 

Senator CRAPO. And I understand the rationale. But, again, I 

have the concern that the Government collecting this phenomenal 

amount of data about private citizens could be used in an invasive 

way. And, frankly, my time is running out, but I hope we will have 

another opportunity for additional rounds, Mr. Chairman. I want 

to get into the questions about whether we can reverse engineer 

this information and whether abuses of the information could 

occur. 

Mr. CORDRAY. And I recognize that this operates in 5-minute segments. That is quite short. We are quite happy, as I have said to 

you before, to have our staff continue with your staff talk back and 

forth about your concerns about this. I share those concerns. The 

GAO is conducting the study and report that you asked for. It is 

extensive. It will get into all of these concerns. We have had backand-forth with them to considerable length. They are conducting a 

very responsible and comprehensive inquiry. And any way we can 

be helpful to you—it is so critical that this Bureau and other agencies have information to be able to oversee these markets and make 

sure that things are not happening that we do not comprehend, 

while at the same time recognizing the issues of security and privacy that you are raising. I want to be sensitive to those and recognize that as foundational for this agency as well. So I am happy 

to spend as much time with you as you like personally myself or 

through our staff on these issues. 

Senator CRAPO. Thank you. 

Chairman JOHNSON. Senator Menendez. 

Senator MENENDEZ. Thank you, Mr. Chairman. 

Director, in your mid-year update on student loan complaints, 

you highlight a particularly egregious practice where lenders automatically put a loan into default if the loan’s co-signer dies, becomes disabled, or declares bankruptcy, even if the borrower has 

never missed a payment. And that practice to me is unfair to borrowers who have been making their payments on time and whose 

loans are current and in good standing. And I am in the midst of 

drafting legislation to fix that problem, but my question is: What 

are some steps that can be taken under existing law to protect students from this practice, students who might otherwise be able to 

qualify for their existing loan either on their own or with a new 

co-signer? And does the Bureau have the authority to remedy this 

practice through rulemaking, or do you need additional legislative 

authority? 

Mr. CORDRAY. Thank you for raising that issue, Senator. It was 

shocking to me—and I want to kind of describe the practice so that 

people understand it, and tremendous work, I will say, done by the 

student loan ombudsman in the CFPB who has been just an outstanding advocate on behalf of the young people who bear student 

loan debt burdens across this country in significant measure. 


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The practice was that—nowadays many, many, the vast majority—I think 90 percent plus—of student loans that people take out 

have a co-signer on them, often a parent, maybe a grandparent. 

And what will happen is the student then attends school maybe for 

multiple years, ultimately graduates and begins to repay student 

loans. They may well have a spotless payment history, and yet suddenly something happens to the co-signer—at this point the parent 

or grandparent is aging—and eventually some of them pass away. 

At a time when that young person is now affected by the death 

of their parent or grandparent, we saw student loan servicers calling in the account because the co-signer is no longer available on 

it. Rather than considering this situation, working with the borrower, working out a payment plan, or recognizing that they have 

made spotless payments on time, that was the way they heaped 

trouble on these poor affected people. And it was not right. 

I think the issuance of the report itself has sent people scuttling 

throughout the industry to avoid a repeat of this. We heard from 

one of the major servicers just the other day——

Senator MENENDEZ. Short of—I do not mean to interrupt you because my time is limited, but short of the report and public shame, 

is there any regulatory ability to do anything about this, or do you 

need additional authority? 

Mr. CORDRAY. I would like to have our folks talk with your staff 

about what additional authority we need. 

Senator MENENDEZ. All right. They would do that. 

Mr. CORDRAY. But I do think that the shaming here is a great 

example. I think it——

Senator MENENDEZ. I am all for shaming, but I would like to 

have a guarantee. 

Many borrowers are having difficulty releasing co-signers even 

though this was an option prominently advertised to the borrower 

upon signing up. What is the feasibility of requiring an automatic 

co-signer release in a situation where the lender’s conditions are 

met? 

Mr. CORDRAY. I think that may be quite possible, and I am not 

clear in my mind as I sit here now whether we need legislation on 

that or not. Obviously, when things are written in legislation, they 

are more lasting and more secure. 

Senator MENENDEZ. OK. 

Mr. CORDRAY. But we would be happy to work with you on that. 

Senator MENENDEZ. Would you make that part of the agenda 

that we are going to follow up on? 

Mr. CORDRAY. OK. Sure. 

Senator MENENDEZ. OK. 

Mr. CORDRAY. Sure. 

Senator MENENDEZ. As you said, we are now at 90 percent—we 

used to have 67 percent of private student loans were co-signed in 

2008. By 2011, that number jumped to 90 percent. So this whole 

issue of co-signers, the whole issue of a young person passing away 

or having a disability and then having their parents now facing 

this debt, the whole issue of even if there is forgiveness at the end 

of the day, getting a big tax liability, these are issues that, you 

know, we would like to work with you on, because I have serious 

concerns about where we are at on those issues. 


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Mr. CORDRAY. I strongly agree with the issues you have raised 

and the concern you are sharing about them. At a minimum, even 

if something gets worked out, after 4 or 5 or 6 years of hassle and 

frustration and struggle, you know, it is not a good situation for 

people. 

Senator MENENDEZ. Yes. You would think that death in and of 

itself would have some finality. 

Mr. CORDRAY. You would think. 

Senator MENENDEZ. Let me ask you one other quick question. On 

prepaid cards, the last time you were here in November, we discussed your upcoming rulemaking on prepaid cards. This is something I have followed for some time. You can have products that 

largely remain unregulated. Consumers can fall victim to all types 

of hidden or abusive fees, being charged for customer service or 

just to check your balance; or sometimes, if you want to cancel the 

card because the fees are too high, you get charged more fees to 

close the account, and we have legislation dealing with that. Can 

you provide an update on the status of the Bureau’s work on prepaid cards? And what is your expected timeline for a proposed 

rule? 

Mr. CORDRAY. I can, and you and I have discussed this a fair 

amount. This is a market where people do not realize it, but they 

are subject to no consumer protections currently. There are billions 

and billions of dollars being loaded onto these cards, and that is a 

growing market. We had anticipated that we would have a rulemaking proposal out in June, which is this month. It is now taking 

us a bit longer. It will be into the summer before that can happen. 

But it is a very high priority for us right now. It does not indicate 

any particular problems about the rulemaking, just that it is hard 

to work through some of these issues. We are getting there and we 

will have something fairly soon. 

Senator MENENDEZ. I will look forward to it. Thank you, Mr. 

Chairman. 

Chairman JOHNSON. Senator Johanns. 

Senator JOHANNS. Thank you, Mr. Chairman. 

Mr. Director, as you know, I am one of those Senators who has 

taken the position and argued for some time that there should be 

greater oversight over your budget process. 

Mr. CORDRAY. Yes. 

Senator JOHANNS. In fact, there is not much limitation under the 

law. You can request up to 12 percent of the Federal Reserve’s operating budget, and the expenses must be reasonably necessary to 

carry out your functions. So we do not get a lot of oversight here, 

as you know, and I think that is very problematic. 

I want to focus on just a small piece of what you have been doing 

with your spending. This relates to the building that you are in, 

a leased building. It is a building not even owned by your agency. 

Renovation costs started at 55; Washington Examiner thinks it is 

up to 95 now. Now I think your own acknowledgment is that it is 

probably $145 million. 

There are some documents from Skidmore Owings & Merrill. 

They are the architects, as you know, for this building. Here is 

some of the money you are—or some of the things you are spending 

money on. And I am quoting from the document:


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At the western terminus of the skim fountain, a raised water table spills 

over and down into a sunken garden below. The water cascade creates an 

atmosphere of white noise as visitors peer over the glass railings down into 

the sunken garden pools and plantings below.

At the western side of the plaza is a calmer, informal seating area under 

shady trees. Under the trees, the soft contrast of the stone dust floor further implies a removed space of rest and contemplation. Additional seating 

is provided along the building edge at a lightly elevated timber-paved 

porch, which is covered by a dark bronze color trellis, with a light bronze 

color adorned with vines.

The southern side of the raised water table over a water wall of naturally 

split granite. At this southern edge, a new water source creates a cascade 

of water that flows down the wall into the sunken garden, terminating in 

a raised splash pool. More slabs of granite rest in the bottom of the pool.

Then it talks about a four-story interior glass staircase:

An all glass and stainless stair placed in the interior vertical light wells 

connects levels 2 through 6 that allow increased circulation while allowing 

daylight into the interior.

It is nearly embarrassing, as I read through this stuff, and that 

is about the oversight we have with you, is to just raise these 

issues. 

Do you think that kind of spending is really reasonably necessary 

to carry out your functions on a building that is a leased building? 

Would you make the case to us today that that is reasonably necessary? 

Mr. CORDRAY. So, if I may, several things in your discussion I 

would like to address. 

First of all, this has been out there and taken as gospel in the 

public record for some time. It is a fiction of the Washington Examiner’s that this project started out at $55 million and now has 

ballooned to higher proportions. There was never any expectation 

that this project could be completed for $55 million. That is just—

that is false. 

Senator JOHANNS. How much will it cost? How much——

Mr. CORDRAY. What happened was, in the first budget where we put anything in as a partial payment on the ultimate project, $55 

million was listed in that year’s budget. That was never considered 

to be the total cost—the notion this has tripled in cost is just a fiction by the Washington Examiner. That is all it is. 

In fact, there was a review done of this building prior to the 

CFPB being created when it was the OTS building, which is what 

it was, in which they anticipated that even at that point in time, 

baseline needs of the building, such as the HVAC system, electrical 

problems, and other things, were going to require at least triple figures’ worth of construction work, and that did not include a lot of 

the contingencies that go along with a project like this. 

As to the description you described, I find it embarrassing. It is 

the kind of flowery statements that someone will make when they 

are trolling for a bid, trying to get the business and trying to make 

it sound as wonderful as they can. Much of the flowery words there 

do not reflect any particular cost. I would say that you could say 

the same thing about many of the staircases and outer areas 

around the Capitol here. There is nothing special about this in respect to other Government buildings, and it is not a very special 

Government building. It is actually a building that needs a great 

deal of work. I wish it did not. I would rather not spend a single 


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penny on that. As you say, we do not own the building. So the notion we are trying to create some palace that we do not even own 

does not even make any sense to me. But we worked out with the 

OCC——

Senator JOHANNS. We are out of time, and I do not want to impose upon the Chairman’s patience here. Would you be willing to 

give us a thorough accounting of what is being spent and on what 

in this building? 

Mr. CORDRAY. Absolutely. I would be happy to do that, yes. 

Senator JOHANNS. Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. And welcome back, 

Director, and thank you for the—I am always—‘‘amused’’ is probably not the right word, but when I hear a number of colleagues, 

especially in the House, question the accountability of your work 

and this Bureau, and I know that you have appeared in front of 

the House and Senate close to 50 times now, and thanks for being 

as accountable as you have been. 

The Semi-Annual Report states that the CFPB will soon take 

steps toward providing new protections for consumers in the smalldollar credit markets. I appreciate the Bureau’s continued interest 

in providing oversight to this high-cost market, but I am concerned 

that tailoring regulations to the traditional payday loan market 

may still leave some consumers vulnerable to harmful products. As 

we both saw with Ohio’s experience attempting in the legislature 

and the ballot to prohibit high-cost, small-dollar loans targeting 

only traditional payday loans allows lenders to move into other 

products that trap consumers in a cycle of debt. As we have seen 

in Ohio, lenders reorganized under the thrift lending law and have 

moved into auto title lending, as you know. 

As the Bureau considers new oversight for the high-cost loan 

market, how do you ensure that new rules will protect consumers 

through the whole range of products, including obviously traditional payday loans, but online payday loans, auto title loans, installment loans? 

Mr. CORDRAY. So the issue you raise is of extreme importance to 

the Bureau in addressing this market because, as you say, I have 

seen the experience in Ohio where rules that were meant to address concerns about debt traps and payday lending were circumvented through migrations in the market. And it is happening 

across the country in a number of States right now. 

We also have seen it, frankly, Senator, because the Military 

Lending Act gave rise to similar problems. The first set of rules 

that was adopted in the Military Lending Act about 7 or 8 years 

ago was narrow and allowed those rules to be circumvented by 

high-cost lenders, who continued to operate right outside of military bases or online with lots of patriotic-looking flags and other 

things, and they are peddling terrible products to our 

servicemembers. 

We have been working with the Department of Defense for the 

past year to revise those rules. Congress reopened that, and it is 

exactly the same type of problem we are going to be dealing with 

in the small-dollar lending market. 


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It is taking us somewhat longer as a result to address this, but 

I think it is well worth a little additional time in order to make 

sure that what we do will not be made a mockery of by people circumventing it through just transforming their products slightly. 

Senator BROWN. Thank you. I want to follow up and expand a 

little bit on Senator Menendez’s interesting questions about student loan servicing. I chaired a Subcommittee hearing a week or 

so ago about this issue. I am concerned that the problems that we 

saw in mortgage servicing are being repeated in student loan servicing, including flawed incentives, confusing loan transfers, and 

nondisclosure of those, violations of servicemembers’ rights and inadequate and inconsistent modifications and refinancing options. 

Three of our four witnesses agreed we need comprehensive, consistent standards for servicers, both Federal and private student 

loans. 

Will you move forward with comprehensive student loan servicer 

standards? And how can we better align servicers’ incentives with 

borrowers’ needs as you move forward on this? 

Mr. CORDRAY. I would agree that we see a lot of these same problems that just absolutely bedeviled mortgage servicing—and continues to do so, frankly—arising with student loan servicing as 

well. There are different markets. There are some different characteristics of the product. But poor customer service, problems with 

transfers, lack of information, harm to consumers, there is an eerie 

consistency there. 

What we have done is, in this past period, we finalized the rule 

that was necessary for us to be able to begin supervising student 

loan servicers, nonbank student loan servicers on the spot, and go 

in and actually see what they are doing to comply with the law. 

And that insight is leading us to things like recognizing the autodefault problem, which was not well known before we called attention to it. 

Whether that will lead to specific standards—and we do a lot of 

work with the Department of Education on these issues—I do not 

know yet, but we now have the ability to go in and actually correct 

problems on the spot, which we did not have before. And it is going 

to make a significant difference in this market, I believe. And 

where it will all lead is hard to say at this point, but happy to keep 

you posted as we go. 

Senator BROWN. Thank you, Director Cordray. 

Chairman JOHNSON. Senator Coburn. 

Senator COBURN. Thank you. Welcome. I have been watching on 

television. I wanted to follow up a little bit with the line of questioning that Senator Johanns had. 

When you were here last, I asked you about this building, and 

I believe the quote was the estimated cost to renovate was $95 million at that time. That is your testimony back then. And now the 

estimated total cost for the CFPB headquarters renovation is $185 

million. 

So, first thing, how many square feet? 

Mr. CORDRAY. I cannot give you exactly what the square footage 

is, but what I know is that the building is problematic. We are having to actually move out of it so it can be renovated. 


BANKI-41578DSA with DISTILLER
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Senator COBURN. I understand that, but you do not know how 

many square feet. So you do not know whether——

Mr. CORDRAY. I do not——

Senator COBURN.——$185 million is a good value for the American taxpayers or not based on a per-square-foot calculation of renovation costs. 

Mr. CORDRAY. I know that we have been through these numbers, 

and it is a—I believe it is an appropriate value. It is something 

that was taken account of in the lease that we negotiated with the 

OCC so that our lease payments were less over the 30 years to 

take account of the fact that we, not the landlord, would be making 

the improvements on the building. 

It is a building that would be a white elephant if this work is 

not done, and it is a Government asset owned by the Treasury and 

the OCC. It is also a building that, when we finish with it, will be 

populated more densely than it had been before, so we need to be 

efficient about that. 

Senator COBURN. I know, and that is a great sell job, Adminis- trator, but the point is we are $17 trillion in debt, and when you 

hear—regardless of the flowery nature of what Senator Johanns 

read to you, the fact is that this is going to be opulent. 

Mr. CORDRAY. It will not be opulent. 

Senator COBURN. Well, if you have any of those waterfalls, any 

of that stuff, that is the kind of stuff we cannot afford right now 

in this country, because we are running a $600 billion-a-year deficit, the very thing you are trying to help people with, in terms of 

fairness, in terms of the consumer being treated fairly. We are 

going to take back from them in terms of excess costs because we 

do not run things on a tight ship. 

So my point being to you is, you know, the structural renova- tions, $139 million; the temporary lease is $22 million. The securities, utilities, and other expense at the temporary space for 3 years 

is $13.6 million. The cost of architectural engineering and design 

contract was $9.2 million. That does not include the IT, the apparent shuttle service that is going to run back and forth. I mean, so 

there are a lot of costs in this. And I am not saying what you did 

was wrong. I am just saying we are buying top-dollar design and 

construction at a time that we do not have the money to pay for 

it. 

Now, you have an unlimited budget, and as Senator Johanns 

made the point, we do not get any chance at oversight. I mean, we 

do not get—and the fact is—who with you has the experience outside of Washington of doing a rehab on a building? Who works for 

you that actually has private-world experience in rehabbing buildings? 

Mr. CORDRAY. So, first of all, I would like to invite you and your 

staff to come take a tour of that building that we are now going 

to be out of for——

Senator COBURN. I am not saying that it is not——

Mr. CORDRAY. It is a dump. It is not opulent, and it will not be 

opulent when it is finished either. 

Senator COBURN. I am not saying that it does not need to be 

done. One of my statements was it probably does need to be done. 

The question is: Can it be done for less? Can it be done under the 


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realization that this country is in trouble financially? And are 

spending money that we have to spend, or could we spend less 

money? That is my only question. 

Mr. CORDRAY. That is fair enough, and I am responsible to you 

on that, and this is meaningful oversight that you have with me. 

We also now are briefing the Appropriations Subcommittee on 

these types of issues, both in the House and the Senate. That is 

something I agreed to as I was confirmed by the Senate, and I take 

this seriously. 

We also do not have an unlimited budget. We have a budget cap 

each year, and our spending has to come out of there. We have no 

capital budget, and so every dollar that we spend on something like 

this is a dollar taken away from other work that we are doing. And 

I am feeling that and wanting to spend as little as possible on this. 

So I will be happy to continue to keep you and your staff closely 

apprised. I know you care about these issues. We have talked about 

them. 

Senator COBURN. I just have a few seconds left. Who is the expert on your side, on your staff, that has the knowledge to make 

the decisions about a construction project like this? And what is 

their experience outside of doing it for the Government? 

Mr. CORDRAY. OK. So we have people in the agency that are 

working on this that are in charge of facilities, and we also have 

brought GSA in because they are the expert in the Federal Government on all of these types of projects. That is why we brought them 

in, so that I could feel comfortable——

Senator COBURN. But you do not have anybody on staff that has outside knowledge and outside experience to run a $180 million 

construction project? 

Mr. CORDRAY. I do not know that I would agree with that, but 

at the same time, that is part of why we brought GSA in. I 

have——

Senator COBURN. So will you——

Mr. CORDRAY.——the same concerns that you have. 

Senator COBURN.——answer for the record who on your staff and 

what their experience is in terms of making the decisions about 

this project? 

Mr. CORDRAY. I would be happy to have you or your staff meet 

with our facilities group and others and also meet with the folks 

from GSA who are working with us on this. We brought them in 

specifically because I share your concerns about this, and every dollar spent on this is a dollar away——

Senator COBURN. Well, I——

Mr. CORDRAY.——from other work that we——

Senator COBURN. I would just tell you, I am not real satisfied 

with the work GSA does on this. We are getting ready to build a 

190,000-square-foot VA facility in Muskogee that ultimately we 

could own for about a third of the cost that we are going to pay 

through rents, plus we have a 4-percent rider in the lease that we 

have negotiated—GSA negotiated a 4-percent rider on the lease, 

plus a $9 million or $8 million design and construction budget for 

a facility that now is going to be three times the size it was now, 

and we have a 5-percent increase in veterans expected over the 

next 20 years in Tulsa. 


BANKI-41578DSA with DISTILLER
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So the point is GSA is not really great at this either. 

Mr. CORDRAY. I do not really know about——

Senator COBURN. I know, but you are relying on experts——

Mr. CORDRAY. But I tell you, if you have other suggestions for 

us, I am all ears. I do not want to——

Senator COBURN. Well, it is a little late——

Mr. CORDRAY.——spend more money than we need to either. 

Senator COBURN.——right now. The deal is done, is it not? 

Mr. CORDRAY. If you have further suggestions——

Senator COBURN. Yes, I will give you this suggestion: Go to the 

outside of Washington, go into the middle of the country, and find 

people like Manhattan Construction that knows how to do this for 

a whole lot less money. They can design and build it, that is adequate and built well, and do it in a way that says we do not have 

an extra penny spend, now how can we get what we need for the 

least amount of money? And that does not happen at the GSA, and 

that does not happen in most Government agencies. And you ought 

to set the example given the position that you are in. 

Mr. CORDRAY. OK. Happy to talk with you further about that, 

and I know it is a concern for you. We have talked about it before. 

Senator COBURN. Thank you. 

Chairman JOHNSON. Senator Merkley. 

Senator MERKLEY. Thank you very much, Mr. Chair, and thank 

you, Director, for your testimony. 

I wanted to start and ask you to say a little bit about the resolution of the Castle & Cooke place issue. I believe this is where steering payments occurred to employees who were steering customers 

into higher-interest loans and then getting bonuses for it, these 

steering payments being banned under Dodd-Frank, and now 

under your supervision, you have taken action against their appearance. Can you just maybe summarize where this action ended 

up? 

Mr. CORDRAY. Sure, and, frankly, it is exactly as you just described it. You have had steering going on that we believed was in 

violation of the law. We were actually surprised that the company 

did not recognize that what it was doing was in violation of the 

law, because we thought it was—you know, there are many areas 

where you could say it is somewhat debatable, but this we thought 

was absolutely clear-cut. It took awhile for that to sink in. Ultimately the matter was resolved with significant payment and also 

penalty, and it is indicative of the need to oversee the actual enforcement of rules and laws, and not just to assume that once they 

are on the books everybody understands them and abides by them, 

particularly if there may be financial incentives not to do so. 

So, you know, it is a great example of why you need an agency 

to actually bulldog laws and rules and make sure that they are actually occurring in the marketplace as they should. 

Senator MERKLEY. I believe about $9 million was returned to approximately 9,000 individual mortgage holders. Did the mortgage 

holders also get, if you will, a permanent discount on their interest 

rates since they had been steered into higher-interest loans? 

Mr. CORDRAY. I do not recall offhand. I would be happy to fill you 

in further on that. I know that there was injunctive relief going forward to make sure that what we saw happening was not going to 


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happen again. I do think also this signals the market, as a public 

enforcement action does, that if other people happen to continue to 

be engaging in this and somehow thinking that it is appropriate or 

thinking that people will not pay attention, that we will. And I 

think it is quite important as a matter of principle. 

Senator MERKLEY. Thank you. You anticipated my next question, 

really the deterrence effect, because this type of steering in which 

a mortgage originator poses as a financial counselor and then 

steers people into high-interest loans when they qualify for low-interest loans is just a huge predatory practice, and I am delighted 

that you are patrolling against that predatory practice, and I hope 

and anticipate that there is a substantial deterrent effect from 

what you have done. 

Mr. CORDRAY. Again, what was surprising to me here was there 

has been so much visibility on this issue and it was so remarked 

upon and explicitly dealt with by the Congress and by us in the 

wake of the mortgage market meltdown that I was just very surprised to see a company engaged in these practices and, even upon 

engaging with them, did not seem to be aware that these practices 

were illegal. Eventually that got through. 

Senator MERKLEY. Well, millions of American homeowners, mortgage holders, will benefit from that action, so thank you. 

I want to turn to the issue of medical debt, and thank you for 

this report you have all put out, ‘‘Data Point: Medical Debt and 

Credit Scores.’’ This is something I have been very concerned about 

because essentially when you get a bill on health care activity, you 

normally get these papers that say this is not a bill, and then you 

get something from the laboratory and then you get something 

from the X-ray technician, and meanwhile your insurance sends 

you something and says this is what we think we are going to pay, 

but you are not sure they are going to pay. And it becomes this 

whole confusing matrix that often takes quite a while to sort out 

whether the appropriate payments have been made by the insurance company. 

Often in the course of that, medical debt is reported to a credit 

agency, putting a permanent scar on your credit record that really 

has nothing to do with your—it is just the fact that this type of 

debt takes a while to figure out. So I have felt when those medical 

debts are paid off, they should be cleared from the credit record because of the logic behind the fact that they probably bear a little 

resemblance to the role of other debts in anticipating whether or 

not you will make payments. And your report indicates about a 20-

point margin, and just in other words, it is the first solid evidence 

I have seen that this is, in fact, a miscalculation of the ability to 

pay. 

Do you want to comment on this at all? 

Mr. CORDRAY. I do. I would like to reinforce what you said. Medical debt is something I think we all can understand and appreciate. We have all been to the doctor’s office and then either not 

been billed or later we are billed and we are not sure whether the 

insurance company is paying for it or whether we are supposed to 

double-pay that bill. It is very confusing for people. It is often small 

amounts. And yet what we find is it gets reported on people’s credit 

reports, and it affects their credit. And it may keep them from getVerDate 0ct 09 2002 14:45 Mar 03, 2015 Jkt 000000 PO 00000 Frm 00023 Fmt 6633 Sfmt 6601 S:\DOCS\90951.TXT SHERYL

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ting a mortgage or a car loan, something significant, when it was 

20 or 50 bucks and they honestly thought it had been paid by the 

insurance company. 

This is a great example of—as you say, it is the first time we 

have actually been able to have enough data and information to 

really dig into this and point out to the credit reporting companies 

that they are not scoring medical debt in the credit scoring companies appropriately compared to other debt. And, you know, if we 

did not have that data or information, we could not do that analysis, and we could not show that. And I think we are already beginning to see the credit scoring companies are responding to this 

and recognizing that they need to up their game and think more—

think differently about medical debt from the rest of debt, for all 

the reasons I think you laid out so well. 

Senator MERKLEY. My time is running out, so I will just close by 

saying I appreciate the letter I received from the CFPB yesterday 

in regard to payday loan practices and the statement in that letter 

that if lenders are engaged in unfair, deceptive, or abusive acts or 

practices, the Bureau will hold these institutions accountable no 

matter how their products are structured. 

This certainly is a big concern to States like Oregon that have 

tried to comprehensively protect against predatory, triple-digit, 

500-percent-interest payday loans, and then lenders using online 

practices and remotely generated checks are basically pulling—violating the law in a straightforward way, but able to get away with 

it because they are at a distance and they can pull money out of 

checking accounts. A lot has to be done on this, and thank you for 

taking a look at this, and I will continue to work with you on it. 

Mr. CORDRAY. Thank you. 

Senator MERKLEY. Thank you. 

Chairman JOHNSON. Senator Heitkamp. 

Senator HEITKAMP. Thank you, Mr. Chairman. 

You and I share, Administrator, a common experience, and that 

is, running our own local consumer protection bureau when we 

were both Attorneys General. And so when I look at this, I kind 

of look at the broad scope of possibility for protection of consumers 

not just laying at your shoulders. 

And so one of the concerns that I have is the need to do coordination with what is happening on a State level, understand what is 

happening on a State level, understand what is happening on a 

local level, and then broadly understanding what is happening with 

all of your sister or brother agencies that also have overlapping jurisdiction. And one of the frustrations that I hear is, ‘‘Here it comes 

again, yet another agency to be talking to without any coordination.’’

So I would just ask, as you look at each one of these issues, that 

you look at coordinating with the State and understanding better 

what State agencies are doing. A good example was already today 

with prepaid cards. You said there is no regulation. There is in the 

State of North Dakota. I made sure there was regulation of these 

cards in the State of North Dakota. 

And so you cannot say with certainty that there is none when I 

know that there are a number of activities that are going on in 

States, and it is important for us to understand those. 


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With that said, I would also say that we have referred North Dakotans to your consumer complaint Web site and have gotten really 

very favorable reviews back. And so it is yet another avenue for 

people to raise concerns. 

With that said, I would also say one of the issues that I worked 

on when I was Attorney General was the issue of bank privacy, and 

I share Senator Crapo’s concern about the amount of data that is 

being collected, and I understand the need to have enough to do 

the analysis. But we need to be very, very mindful of the sensitivities of consumers today about their information. And I think there 

is a growing insecurity, and if they look at the Federal Government, we have not exactly given them reason to believe that we are 

going to be confidential with it or that we are going to be straightforward. And so, you know, I look forward to the GAO report. I look 

forward to other enhanced discussions. 

I want to just mention something on payday lending. I was probably one of the first foolish people to weigh into that area back in 

the day, and I will just tell you a quick little story. The payday 

lending that was going on was just as egregious as it is today. It 

has just taken different forms. But why I was unsuccessful in getting appropriate regulation is 900 consumers signed a petition telling me to mind my own business. And so we need to be aware that 

in that lane there is a desperate need that is not being fulfilled for 

short-term credit that, you know, whether it is to buy cars or diapers or whatever it is. And so we need to be mindful that, as we 

look at this, we do not close off the avenue for that kind of credit. 

I listened to those 900 consumers, and, you know, where I think 

that was done incorrectly, and I have a lot of concern about what 

is happening with payday lending. Until we have a country that 

has maybe more economic justice, we are going to need to give people access to that kind of credit. 

I want to just talk a little bit about student loans and ask you 

your opinion. The administration I think recently said that they 

are going to cap repayment at 10 percent. All that is really going 

to do for a lot of the consumers in my State, a lot of student borrowers in my State, is extend the time that they are going to have. 

So they are never going to be out of consumer debt. 

Senator Warren and I have a bill, along with a number of us, to 

restructure consumer debt. How do you see the restructuring of 

consumer debt actually benefiting long term the creditworthiness of 

Americans who currently have that level of debt? 

Mr. CORDRAY. It is obviously a complicated subject, and it depends a lot on the individual circumstances, the individual borrower. But it is certainly the case that what upsets someone’s credit most of all is ending up in default. And if the payment levels are 

unrealistic, particularly a lot of young people coming out of school 

today are not finding the jobs that they hoped to find, particularly 

in the wake of this financial crisis, and so the income-based repayment, as I understand it, was an attempt to maintain some sort of 

balance there. Whether it is the exact right balance, exactly what 

it should be, is hard to say, and I am not an expert on it. 

Senator HEITKAMP. If we did an analysis of student debt and we 

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ture it, could we be at the 10 percent and shorten the time period 

of repayment? 

Mr. CORDRAY. It may be. Obviously it depends on the level of 

rates, and I know that is one of the things your legislation would 

try to address. I would say if you compared a mortgage—and the 

comparison is not exact, but there are a lot of parallels. It has been 

loan restructuring—and sensible loan restructuring, not any old 

loan restructuring, because sometimes you can have loan modifications and end up with higher payments, which was not a formula 

for success—has been the winning and the most optimal way of addressing some of the mortgage problems that people are still 

digging out from, and it could be that in the student loans the 

same type of approach could be very beneficial to people. 

Senator HEITKAMP. Just one quick comment. We have obviously 

a State-owned bank in North Dakota. We are quite proud of the 

Bank of North Dakota. 

Mr. CORDRAY. Yes. You are the only one. 

Senator HEITKAMP. Yes. And we have recently announced a program at the bank for restructuring student debts, and in a month 

there has been over a thousand applications. So it tells you the absolute essential need for assisting people in restructuring this debt. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Warren. 

Senator WARREN. Thank you, Mr. Chairman, and thank you, Director Cordray, for being with us once again. 

When I taught contract law, I covered arbitration clauses near 

the end of the term, and students usually came in thinking arbitration sounded so friendly and so inexpensive. But after studying the 

law, they discovered that arbitration stacks the deck against customers in favor of large corporations. Arbitrators often have a financial interest in remaining in the good graces of the corporation 

that places lots of business with them. Corporations usually hold 

all the key evidence in the dispute but are under no obligation to 

turn it over. And an arbitrator’s ruling cannot be overturned even 

if it contains clear legal mistakes or factual errors. 

So the bottom line is that when a customer thinks he has been 

cheated or that a bill is wrong, an arbitration clause in his contract 

makes it nearly impossible for him to get any real help. So it is no 

surprise that many big banks and other big corporations force customers to agree to arbitration clauses to get credit cards or open 

checking accounts, knowing that this means that the customer will 

have no real remedy if things go wrong. 

So, Director Cordray, as you know, Dodd-Frank requires the Bureau to conduct a study on these forced arbitration clauses and authorizes the Bureau to prohibit or limit the use of such clauses 

based on that study. The Bureau released the preliminary reports 

last December, and they were damning. Forced arbitration clauses 

are everywhere, particularly in contracts with the largest banks, 

and these clauses dramatically restrict the legal options available 

to consumers. 

I know there are additional issues that the Bureau wants to examine in its final study. When do you think the Bureau will have 

that study? 


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Mr. CORDRAY. So I would say a number of things. You know, this 

is an interesting area where if you look at what industry says and 

then you look at what consumer groups say, sometimes there is 

some relation between the two. Here there seems to be almost 

none. And so as I understand it, Congress waded into this area in 

Dodd-Frank in a way that is more interventionist than Congress 

has been on arbitration in other areas, particularly in business situations, where the Federal Arbitration Act has been viewed by the 

courts as having a policy in favor of arbitration. 

Here, however, under Dodd-Frank, arbitration clauses have been 

barred from mortgage contracts flat out by the Congress. In terms 

of the other consumer finance contracts, as you noted, what the 

Congress has said very specifically and carefully to us at the Bureau is—you know, there seemed to be very different views of 

this—we are going to direct you, not suggest but mandate that you 

perform an appropriate study, a comprehensive study, and make 

your best judgments about the pros and cons of arbitration clauses, 

and based on the results of that study, consider what policy interventions may be appropriate. 

The Bureau has been trying to carefully adhere to that, and, 

frankly, if anything, we have erred on the side of a very thorough 

process. But I think that ultimately that is the right thing to do 

here. As you noted, we put out essentially an interim progress report where we covered certain subjects. We have more to come. I 

believe we have indicated that further work on that, it is ongoing. 

It is very active, and I believe it will be completed this year. And 

then we will be in a position to make policy judgments based on 

that. And I understand that some people think we should take forever on this, and other people think we should have finished it yesterday. I have my own views, but we are pushing along, and we 

are trying to do the work as Congress set it out in that framework, 

the two-step, just as they said. 

Senator WARREN. All right. But you anticipate it is going to be 

this year? 

Mr. CORDRAY. I do anticipate it is going to be this year. 

Senator WARREN. Good. I am very glad to hear that. 

I have a second question. Now, I am sure you would tell me that 

you will need to see the final study before deciding whether to 

issue rules restricting or prohibiting forced arbitration clauses. So 

let me ask the question this way: What kind of evidence would lead 

you to believe that the Bureau should issue rules on forced arbitration? 

Mr. CORDRAY. You know, this is—it feels very much to me sort 

of like a case that is under advisement in a court. Clearly I should 

not prejudge the issue of policy interventions before we have finished the study. We are well along, but we are not yet complete. 

Certainly in the end it is going to depend in part on things like: 

How does arbitration work? Does it provide a meaningful avenue 

for resolution for consumers? Does it not? Why does it? Why doesn’t 

it? Does it matter how an arbitration proceeding is procedurally set 

up? You know, there are a variety of things that we are considering. The other is: How does it compare to alternatives in court? 

I think we could all look at it and we would come to about the 

same conclusions about what kind of evidence we think matters, 


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but I would really like today here, if I can, to stay away from trying to prejudge that. 

Senator WARREN. All right. But I do want to be clear that if the 

evidence supports it, the Bureau is willing to issue rules regarding 

forced arbitration? 

Mr. CORDRAY. I think Congress gave us a very specific task here. 

They said look at this very carefully, study it, tell us your results, 

and based on those results, you have an obligation to engage in policymaking that appropriately reflects the conclusions you reach. 

Senator WARREN. Excellent. I just want to say I realize that arbitration can play a very important role in our legal system as long 

as parties choose arbitration freely after the dispute has arisen. 

But forcing customers into an arbitration system that banks control 

is just another way to tilt the playing field against consumers. The 

CFPB can help level the playing field, and I look forward to seeing 

the final report. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Crapo. 

Senator CRAPO. Thank you, Mr. Chairman. 

Director Cordray, before we go back to data issues, I had one 

question on Operation Choke Point. News reports tell us that the 

Department of Justice and several Federal banking regulators are 

pressuring banks to end relationships with legally operating payday lenders and with gun stores, retailers, and that this operation 

is known as Operation Choke Point. Are you familiar with it? 

Mr. CORDRAY. I have certainly read numerous press accounts of 

it, and, therefore, I would say I am familiar with it. 

Senator CRAPO. Is the CFPB participating in Operation Choke 

Point? 

Mr. CORDRAY. I think the CFPB has a job to do as a law enforcement agency to police illegal lending, whether it is online or in person, and much of what we are talking about here is online. There 

is now—the further issue that has been raised is what about illegal 

lending that operates by piggybacking on the existing banking payment system. That is not something the banks like. It is not something—not a risk they want to be exposed to. Some of this gets into 

areas of prudential regulation, safety and soundness, and sort of 

risk, operational risk, legal risk, reputational risk, that I am not 

an expert on. So I want to——

Senator CRAPO. But does this mean that you are participating 

with Operation Choke Point? 

Mr. CORDRAY. I am not sure what you mean by ‘‘participating.’’ 

I think that the agencies have all tried to discuss what is the appropriate approach to Know Your Customer. That is really, again, 

more of a prudential regulator term. But our concern at the Consumer Bureau is we are supposed to be policing nonbank lenders 

as well as the banks, and many of those nonbank lenders that are 

riding along the payment system, if they are acting illegally—and 

this is one of the enforcement actions I described in my opening remarks—need to be addressed. 

But what I would say is it is about whether the activity is legal 

or illegal. It should not be about whether it is disfavored or favored. 


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Senator CRAPO. The operation, what I understand from, again—

and we just get this in the news reports. But from what I understand about it, there is an conscious effort to force legally operating 

payday lenders and gun store retailers to stop their business. 

Mr. CORDRAY. I do not know if that is in the reports, and I do 

not know if that is accurate or not. I do not know if that is what 

anybody intends, and I do not know if that is what is, in fact, happening. The Bureau’s focus is on ferreting out illegal activity, and 

it is hard enough to do, frankly——

Senator CRAPO. Understood. But what advice have you given, if 

any, to the Department of Justice on this project? 

Mr. CORDRAY. I have not given advice to the Department of Justice on this. 

Senator CRAPO. All right. And, again, because of time, let me 

switch quickly back to the data issues. And, Mr. Chairman, I have 

got a lot of questions on this and others that I am going to have 

to just submit for the record. I would hope that we can do that. 

Senator CRAPO. I just want to talk quickly back again about this 

new project on the national mortgage database that you are engaged with, with the FHFA. When I read to you that long list of 

personal identifiers that the Federal record says are going to be 

collected, you indicated that that was just a list that was—I do not 

know what you called it. A SORN list? 

Mr. CORDRAY. It is a term of art that, frankly, is the kind of 

thing only bureaucrats can love, but, yes, it is called a ‘‘SORN’’—

S–O–R–N. I do not even know what the acronym is, but it is sort 

of statement of operational risk notice, something like that. 

Senator CRAPO. Well, accepted, but it is also a statement in the 

Federal record, Federal Register that says that this data will be 

collected. 

Mr. CORDRAY. But here is the difference. I believe that in order 

to access data, we have to secure it from somewhere—procure it, 

buy it, whatever. And it comes in whatever format it starts out in, 

and it is already being bought and sold out there by industry in 

that format. 

Senator CRAPO. Understood. 

Mr. CORDRAY. For us, in order to create the kind of database that 

I have pledged to you will meet the kind of criteria I have laid out, 

which is the identifying, the personally identifiable information, if 

it comes to us—comes to someone in a different form, then it needs 

to be de-identified before it can become part of the database. That 

is a careful process——

Senator CRAPO. So what I understand you to say is that you are 

actually collecting all this information——

Mr. CORDRAY. I do not know——

Senator CRAPO.——anonymizing it or de-identifying——

Mr. CORDRAY. I do not want to jump to that conclusion. They are 

collecting information, and I think they are identifying what may 

be in it, depending on the original data set, which is out there in 

the marketplace——

Senator CRAPO. Understood. 

Mr. CORDRAY.——being freely passed around. And for our purposes, if it contains that kind of information, then that would be 

de-identified before it comes into our database and cannot——


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Senator CRAPO. Well, then what the——

Mr. CORDRAY.——be used by any of my employees. 

Senator CRAPO. Then what the FHFA notice says is that it will 

include that information, and then they in this notice also say that 

they are going to de-identify it for some purposes. So the question 

then comes back to: Is this an unnecessary invasion of the privacy 

of citizens? When you look at that list of identifying information 

that is contained——

Mr. CORDRAY. That could be. 

Senator CRAPO.——it is scary. But here is the question: At a 

2013 Urban Institute conference, prior to the issuance of this notice 

in the Federal Register, the FHFA’s own project manager for the 

database said that the information in it would be ‘‘easy to reverse 

engineer.’’ And I have been told that by many, many other experts 

whom we have talked to. Is that not correct? 

Mr. CORDRAY. I would like to address that. My understanding is 

that quote that is being quoted is a truncated quote. It is a cutoff 

quote. There is more to the quote. And I believe that the individual 

went on to say that is the risk, it is very important that we handle 

this properly, that we de-identify information, et cetera, et cetera.

That quote was part of a longer passage, and the full passage 

needs to be quoted in order to put that in context. Taken out of 

context, it certainly sounds worse than I believe it actually was. 

Senator CRAPO. Well, I think folks can actually watch that quote 

on YouTube if they would like to, but the fact is——

Mr. CORDRAY. They can, yes. 

Senator CRAPO. The fact is, though, I mean, the core question 

here is: Isn’t it possible to reverse engineer—every expert I have 

talked to about this issue as we have started looking into it has 

said yes, that you can reverse engineer and obtain the de-identified 

data. 

Mr. CORDRAY. So this is——

Senator CRAPO. Are you telling me that that is not possible? 

Mr. CORDRAY. This is a fair question, and particularly in the real 

estate market with HMDA data that has been on the books for, you 

know, decades. There is a lot of information available in the real 

estate market and the mortgage market. I recall, when I taught at 

law school back in the 1990s, my students coming to me and saying, ‘‘Here is the kind of information that is out there’’—I was kind 

of pooh-poohing this at the time, and they said, ‘‘Here is the kind 

of information out there on you.’’ And they had my mortgage, they 

had my purchase price, they had all kinds of things about me. That 

is out there. That has nothing to do with whether the CFPB exists 

or does not exist. 

Senator CRAPO. I understand and my time——

Mr. CORDRAY. And it is a robust market, so——

Senator CRAPO. My time is up, and so let me just say I do understand that. In fact, it is quite concerning to me that this information is so broadly available in the private sector as well. 

Mr. CORDRAY. Yes. 

Senator CRAPO. And I do have grave concerns about that. But 

the concern I am expressing to you today is the concern that the 

Government is collecting it. 

Mr. CORDRAY. Yes. I understand. 


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Senator CRAPO. I think that is a different thing. And I think that 

the rationale for the Government to collect this information does 

not necessarily justify the level of potential invasion of privacy that 

is involved here. This is a much longer discussion, and——

Mr. CORDRAY. It is. 

Senator CRAPO.——the Chairman has already let me go a few 

minutes over. 

Mr. CORDRAY. And let me just again state my attitude toward 

this because I think it is important. I know you know it, but I will 

say it again. This is an area where—it is a classic area where congressional oversight is extremely important. You are very concerned about this. The public should be concerned about this. We 

are concerned about it. Your work is making us be on our toes to 

make sure that we are doing things as right as we can. The GAO 

inquiry has been significant and exhaustive, and it is going to result in a report, and we are working with them, and whatever findings they have or concerns they raise we will take to heart. 

I am happy to have our staff spend as much time with you and 

your staff as you like on this, because it is not just something you 

are interested in and I am just trying to fend you off. I am interested in it, too. And it is important to this agency to be getting it 

as right as we can. But we also have to have information in order 

to do our work other than just throwing darts against a wall, which 

neither you nor anybody else would like. And information about 

medical debt or information about the mortgage market or information about the credit card market is very critical for you to engage 

in good policymaking and for us to engage in good policymaking, 

and to even know whether we are getting it good or bad. You cannot even criticized us very well unless you have information as to 

whether what we have done is good or bad. 

Senator CRAPO. Well, we will have, I am sure, a lot more discussions about this. 

Mr. CORDRAY. OK. 

Senator CRAPO. We both look forward to the GAO report, and we 

will continue to engage on this until we get it right. 

Mr. CORDRAY. OK. Good. 

Senator CRAPO. Thank you. 

Mr. CORDRAY. Thank you. 

Chairman JOHNSON. Director Cordray, I thank you for your testimony today and your leadership of this important agency. 

This hearing is adjourned. 

[Whereupon, at 11:58 a.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:]


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PREPARED STATEMENT OF RICHARD CORDRAY

DIRECTOR, CONSUMER FINANCIAL PROTECTION BUREAU

JUNE 10, 2014

Chairman Johnson, Ranking Member Crapo, and Members of the Committee, 

thank you for inviting me to testify today about the Semi-Annual Report of the Consumer Financial Protection Bureau. 

The Consumer Financial Protection Bureau is the Nation’s first Federal agency 

with the sole focus of protecting consumers in the financial marketplace. Financial 

products like mortgages, credit cards, and student loans involve some of the most 

important financial transactions in people’s lives. In the Dodd-Frank Act, Congress 

created the Bureau to stand on the side of consumers and ensure they are treated 

fairly in the consumer financial marketplace. Since we opened our doors, we have 

been focused on making consumer financial markets work better for the American 

people, the honest businesses that serve them, and the economy as a whole. 

My testimony today focuses on the Bureau’s fifth Semi-Annual Report to Congress 

and the President, which describes the Bureau’s efforts to achieve this vital mission. 

Through fair rules, consistent oversight, appropriate enforcement of the law, and 

broad-based consumer engagement, the Bureau is helping to restore American families’ trust in consumer financial markets, to protect American consumers from improper conduct, and to ensure access to fair, competitive, and transparent markets. 

Through our enforcement actions to date, we have aided in efforts to refund more 

than $3.8 billion to consumers who fell victim to various violations of consumer financial protection laws. We have also fined wrongdoers more than $141 million, all 

of which has gone into our Civil Penalty Fund and can be used to compensate 

wronged consumers and, to the extent compensating consumers is not practicable, 

to pay for consumer education and financial literacy programs. 

In the fall of 2013, for the first time, we took action, in conjunction with multiple 

State Attorneys General, against an online loan servicer for illegally collecting 

money that consumers did not owe. We took action against a payday lender for overcharging servicemembers in violation of the Military Lending Act, and robo-signing 

court documents. We took action against an auto lender for discriminatory loan pricing. And we partnered with 49 States in bringing an action against the Nation’s 

largest nonbank mortgage loan servicer for misconduct at every stage of the mortgage servicing process. 

CFPB supervisory work contributed to a recent enforcement action resulting in a 

refund of approximately $727 million to 1.9 million consumers for illegal practices 

related to credit card add-on products. In addition to this public enforcement action, 

recent nonpublic supervisory actions and self-reported violations have resulted in 

more than $70 million in remediation for over 775,000 consumers. 

In January, mortgage rules that the Bureau issued to implement provisions of the 

Dodd-Frank Act took effect, establishing new protections for home buyers and homeowners. During the reporting period, we also issued another major mortgage rule 

mandated by the Dodd-Frank Act: a final rule to consolidate and improve Federal 

mortgage disclosures under the Truth in Lending Act and the Real Estate Settlement Procedures Act, which we have called ‘‘Know Before You Owe.’’ We also issued 

an Advance Notice of Proposed Rulemaking on debt collection, asking the public indepth questions about a range of issues relating to the debt collection market, which 

is the Bureau’s most frequent source of consumer complaints. 

To promote informed financial decisionmaking, we have continued providing consumers with online resources, including the AskCFPB section of our Web site, where 

we have answers for over 1,000 frequently asked questions. 

A premise at the heart of our mission is that consumers should be treated fairly 

in the financial marketplace, and that they deserve a place that will facilitate the 

resolution of their complaints when that does not happen. To this end, the Bureau 

has strengthened its Office of Consumer Response. As of June 1, 2014, we have received nearly 375,000 consumer complaints on credit reporting, debt collection, 

money transfers, bank accounts and services, credit cards, mortgages, vehicle loans, 

payday loans, and student loans. 

The progress we have made has been possible thanks to the engagement of hundreds of thousands of Americans who have used our consumer education tools, submitted complaints, participated in rulemakings, and told us their stories through 

our Web site and at numerous public meetings from coast to coast. We have also 

benefited from an ongoing dialog and constructive engagement with the institutions 

we supervise, as well as with community banks and credit unions, with whom we 

regularly meet. Our progress is also thanks to the extraordinary work of the Bureau’s employees—dedicated public servants of the highest caliber who are comVerDate 0ct 09 2002 14:45 Mar 03, 2015 Jkt 000000 PO 00000 Frm 00032 Fmt 6633 Sfmt 6621 S:\DOCS\90951.TXT SHERYL

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mitted to promoting a healthy and fair consumer financial marketplace. Each day, 

we work to accomplish the goals of renewing people’s trust in the marketplace and 

ensuring that markets for consumer financial products and services are fair, transparent, and competitive. These goals not only support consumers in all financial circumstances, but also help responsible businesses compete on a level playing field, 

and reinforce the stability of our economy as a whole. 

In the years to come, we look forward to continuing to fulfill Congress’s vision of 

an agency dedicated to cultivating a consumer financial marketplace based on transparency, responsible practices, sound innovation, and excellent customer service. 

Thank you for the opportunity to appear before you. I appreciate the benefit of 

your active interest and oversight. And I look forward to your questions today. 


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RESPONSE TO WRITTEN QUESTION OF CHAIRMAN JOHNSON 

FROM RICHARD CORDRAY 

Q.1. Many have raised concerns about the mortgage rules’ definitions of rural and underserved. Director Cordray, you have stated 

that you will revisit these definitions over the next 2 years. Can 

you provide an update on this process, including when you think 

your review may be complete and what information or existing 

definitions you may be reviewing or plan to review to determine 

how to define a rural area?

A.1. As you know, initially, the Consumer Financial Protection Bureau’s (Bureau) Ability-to-Repay rule provided a general definition 

of ‘‘rural’’ using the Department of Agriculture’s Urban Influence 

Codes. Those codes, in turn, are based on definitions developed by 

the Office of Management and Budget, in particular ‘‘metropolitan 

statistical area’’ and ‘‘micropolitan statistical area.’’

As we have subsequently discussed, the Bureau amended its rule 

to provide a 2-year transition period during which small creditors 

can originate balloon payment qualified mortgages even if they do 

not operate predominantly in rural or underserved areas. In addition to providing time for small creditors to further develop their 

capacity to offer adjustable rate mortgages, the Bureau expects to 

re-examine the definitions of rural or underserved during this time 

to determine, among other things, whether these definitions accurately identify communities in which there are limitations on access to credit and whether it is feasible to develop definitions that 

are more accurate or more precise. 

The Bureau is in the process of research and analysis to deepen 

our understanding of small creditors’ origination of both balloon 

and adjustable rate mortgages and the implications of the DoddFrank Wall Street Reform and Consumer Protection Act provisions 

on access to credit. The Bureau is taking a holistic approach to better understand the issues regarding consumer protection, State 

regulation, technical systems, compliance processes, credit risk 

management, and other considerations that prompt small creditors 

to offer balloon loan products, and the potential transition issues 

in converting to other loan offerings. These efforts are being undertaken for the purpose of ensuring access to markets for consumer 

financial products and services for all consumers, while seeking to 

minimize burdens on financial institutions. We will complete this 

process in time for providers to have the benefit of our work before 

the 2-year transition period expires. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR CRAPO 

FROM RICHARD CORDRAY 

Q.1. As I have raised on several occasions, many basic questions 

concerning the CFPB’s data collection activities remain unanVerDate 0ct 09 2002 14:45 Mar 03, 2015 Jkt 000000 PO 00000 Frm 00035 Fmt 6601 Sfmt 6601 S:\DOCS\90951.TXT SHERYL

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swered. Using its supervisory authority, how many credit card accounts does the Bureau collect data about on a monthly basis?

A.1. The Dodd-Frank Wall Street Reform and Consumer Protection 

Act authorized the Consumer Financial Protection Bureau (Bureau) 

to gather information from a variety of sources in order to monitor 

for risks to consumers in the offering or provision of consumer financial products or services, including developments in markets for 

such products or services. In the exercise of its supervisory authority, the Bureau obtains data stripped of direct personal identifiers 

with respect to all credit card accounts maintained by a number of 

large card issuers. Through a Memorandum of Understanding, the 

Bureau is also able to access data that is collected by the Office of 

the Comptroller of the Currency from an additional set of credit 

card issuers. The combined data represent approximately 85–90 

percent of the outstanding card balances. The precise number of accounts varies on a monthly basis.

Q.2. In 2013, the U.S. Department of Justice (DOJ) announced a 

consumer protection initiative called ‘‘Operation Choke Point’’. Its 

stated mission is to stop fraudulently operating merchants from accessing the payments and banking system. DOJ is using the Financial Institutions, Reform, Recovery and Enforcement Act of 1989 

(FIRREA) as its principle tool to stop fraudulent activity. News reports suggest Federal banking regulators are making referrals to 

DOJ when a bank is believed to have violated FIRREA. Has the 

Bureau made any referrals to DOJ to enforce FIRREA? If so, how 

many referrals have been made?

A.2. The Consumer Financial Protection Bureau has not made any 

referrals to the Department of Justice to enforce the Financial Institutions Reform, Recovery and Enforcement Act of 1989.

Q.3. The CFPB has noted in several publications that it uses its 

Consumer Complaint Database to help identify concerning consumer financial products and services, which should be addressed 

through rulemaking. Rulemaking for payday loans is a high priority for the Bureau, but only accounts for 1 percent of total consumer complaints. Please explain how the CFPB reconciles low consumer complaints and high consumer demand for this product with 

the Bureau’s goal of taking regulatory action in this market.

A.3. The Consumer Financial Protection Bureau (Bureau) began 

accepting complaints for payday loans on November 6, 2013. As of 

June 1, 2014, the Bureau has received approximately 3,400 payday 

lending and deposit advance complaints. The Bureau used a 

phased approach to accepting complaints to ensure that our systems, processes, and people are prepared to handle this important 

role. This phased approach means we have been accepting complaints about other products for longer periods of time and partially 

explains why payday complaints represent a smaller percentage of 

cumulative complaints. 

Consumers also submit debt collection complaints related to payday loans and deposit advances. In addition to the 3,400 payday 

complaints handled since November 6, 2013, the Bureau has also 

handled 9,700 debt collection complaints related to payday loans or 

deposit advances. These payday-related debt collection complaints 


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1https://www.youtube.com/watch?v=xeHuSwb7bG8.

2http://www.urban.org/events/Lunchtime-Data-Talk-National-Mortgage-Database.cfm.

account for nearly 12 percent of all debt collection complaints handled by the Bureau. 

The most common type of payday loan or deposit advance complaint is about being charged unexpected fees or interest. Consumers also report a number of other issues including not receiving 

the money after applying for the loan, problems contacting the 

lender, and receiving loans for which they did not apply. As well, 

consumers report issues with payments, including confusion about 

loan repayment using automatic withdrawal features on a bank 

card or prepaid card, and issues disputing the lender when the consumer believes the loan has been repaid in full. Consumers raise 

concerns about the high cost of the loans, difficulty repaying the 

loan and having enough money to pay for basic household expenses, and the aggressive debt collection practices in the case of 

delinquency or default. 

In addition to the knowledge gained through consumer complaints received, the Bureau also continues to independently research and monitor the short-term lending market as we develop 

an appropriate regulatory response to address practices that may 

cause harm to consumers. We plan to seek feedback from a Small 

Business Advocacy Review panel as part of our rulemaking activities. We welcome stakeholders’ input and communication about 

how to most effectively protect consumers in this market.

Q.4. The CFPB uses the concept of ‘‘behavioral economics’’ to guide 

its market monitoring and rulemaking activities. At its core, this 

philosophy says policymakers should make certain choices for consumers because they can’t be expected to make rational decisions. 

That is concerning because it places decisionmaking in the hands 

of the Government and not every day citizens. Under behavioral economics theory, please explain how the CFPB balances its view 

that a consumer financial product or service is harmful to consumers with a product or service that has high consumer demand 

and low consumer complaints.

A.4. Behavioral economics involves studying how various factors affect economic decisionmaking. Understanding consumers’ decisionmaking process in the financial marketplace helps the Bureau assess the market and the possible impacts of market changes. As 

noted by the Government Accountability Office (GAO) in its June 

2011 report on financial literacy, behavioral economics and other 

interdisciplinary insights may also be useful in developing financial 

education strategies ‘‘to assist consumers in reaching goals without 

compromising their ability to choose approaches or products.’’ The 

Bureau’s focus is on ensuring that consumers have access to fair, 

competitive, and transparent markets and on helping consumers to 

achieve their own financial goals and improve their financial lives, 

not on placing decisionmaking in the hands of the Government.

Q.5. At a 2013 Urban Institute conference, the Federal Housing Finance Agency’s project manager for the National Mortgage Database, Bob Avery, stated the information contained in the Database 

would be ‘‘easy to reverse engineer’’.1 2 Does the CFPB share the 


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assessment of the FHFA? Additionally, what steps is the CFPB 

taking to assist the FHFA in preventing the reverse engineering of 

information in the National Mortgage Database? 

A.5. The Dodd-Frank Wall Street Reform and Consumer Protection 

Act (the Dodd-Frank Act) established the Consumer Financial Protection Bureau (Bureau) in response to the most severe financial 

crisis since the Great Depression. Widespread failures in consumer 

protection and rapid growth in irresponsible lending practices in 

the mortgage market were at the epicenter of the collapse, which 

cost our economy and American families trillions of dollars. Congress created the Bureau to protect consumers; ensure access to 

fair, competitive, and transparent consumer financial markets; and 

to help prevent future financial crises. 

The Bureau plans to use the National Mortgage Database 

(NMDB) in support of the market monitoring called for in the 

Dodd-Frank Act, which includes understanding how mortgage debt 

affects consumers and assessing risks to consumers and mortgage 

markets. This type of market monitoring is critical to staying 

ahead of trends like those that caused the financial crisis. The 

NMDB will also help the Bureau to fulfill various statutory mandates for reporting on these markets to Congress. When gathering 

information necessary to perform our regulatory functions, the Bureau seeks to limit to the greatest extent possible any burdens on 

market participants and take all necessary precautions to protect 

individuals’ privacy. 

The NMDB is currently in development and only limited staff 

within the Federal Housing Finance Agency (FHFA) and only two 

staff members at the Bureau have access to the data on a secure 

server. Before being granted access to the data, users must sign an 

agreement that prohibits them from attempting to identify any of 

the consumers in the sample. FHFA also prevents users from 

downloading any individual-level data from the server or from 

uploading any data containing direct identifiers that might be used 

to re-identify consumers. Access to the data is controlled by the 

FHFA, which can provide additional details regarding that process. 

With ever advancing technology, it is not possible to categorically 

determine that re-identification of certain information is impossible, which is why the Bureau is committed to strong controls as 

this project develops. The Bureau understands that with most 

mortgage datasets including commercially available sources of deidentified data on mortgage performance, having strong security 

measures and technical, physical, and administrative controls in 

place helps to reduce the risk that records could be re-identified. 

The Bureau is acutely aware of the importance of reducing this 

risk to the greatest extent possible in constructing the NMDB. We 

will continue to be sensitive to privacy concerns and committed to 

the security of these data, as the Bureau works with FHFA to construct this important market monitoring tool. Finally, the quote 

from Mr. Avery was truncated and does not reflect his fuller discussion of these same points.

Q.6. The April 2014 FHFA System of Records Notice (SORN) states 

the information in the National Mortgage Database may be sourced 

from ‘‘other Federal Government systems of records’’. Will the 


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3Office of Inspector General, Board of Governors of the Federal Reserve System, Consumer 

Financial Protection Bureau, CFPB Report: 2014–AE–C–005, ‘‘The CFPB Can Improve the Efficiency and Effectiveness of its Supervisory Activities,’’ March 27, 2014 available at: http://

www.federalreserve.gov/oig/files/CFPB-Supervisory-Activities-Mar2014.pdf.

CFPB populate the database with any information it obtained 

through its supervisory and/or examination authorities?

A.6. The Consumer Financial Protection Bureau does not plan to 

use data obtained through the Bureau’s supervisory or examination 

authorities to construct the National Mortgage Database.

Q.7. In March, the Federal Reserve/CFPB Inspector General issued 

a report concerning the effectiveness and efficiency of the CFPB’s 

supervision programs. Specifically, the report found the CFPB 

needs to improve its reporting timeliness and reduce the number 

of backlogged, open exams. The Inspector General made 12 recommendations to improve supervision. Please describe the progress 

the Bureau has made in implementing these recommendations and 

an estimated timeframe for full implementation of all 12 recommendations. Additionally, please include a current assessment of 

the average number of days to complete a CFPB examination.

A.7. On March 27, 2014, the Office of the Inspector General (OIG) 

issued a report 3 after conducting an initial evaluation of the Consumer Financial Protection Bureau’s (Bureau) Supervision program. Of note, the report relies on data as of July 31, 2013, and 

fieldwork the OIG completed in October 2013. Thus, the report did 

not reflect many of the Bureau’s efforts since those dates to enhance the Supervision program. The Bureau indicated this to the 

OIG, and the OIG noted in the report that assessing these efforts 

will be part of its follow-up activities. 

The OIG’s findings begin by acknowledging in the Executive 

Summary the Bureau’s ‘‘considerable efforts’’ and its ‘‘significant 

progress toward developing and implementing a comprehensive supervision program for depository and nondepository institutions.’’ 

In this regard, the Bureau has recruited hundreds of employees, 

launched examinations and investigations, and settled a number of 

actions that have brought significant monetary and other relief to 

millions of Americans. As well, the Bureau has continued to expand our nonbank supervision program, adding to the initial larger 

participant rules for the consumer reporting and debt collection 

markets with a rule in the student loan servicing market and a 

proposed rule in the remittances market. The Bureau has also continued to implement a risk-based prioritization framework that ensures we allocate our examination resources across charters and 

markets, focusing our resources on those business lines that pose 

the greatest risk to consumers. 

Since July 2013, the Bureau has substantially enhanced its existing processes and systems for tracking examiner time spent on specific examinations. We continue to develop and refine an associated 

policy, and we will evaluate the current processes for coordinating 

examination staff scheduling across regions, as recommended by 

the OIG. More generally, we have undertaken a large effort to 

build a custom electronic Supervision and Examination System 

(SES) tailored to the Bureau’s operations and information needs. 

As recommended by the OIG, we are in the process of revising the 


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June 2012, CFPB Process for Reviewing Supervisory Letters, Examination Reports, and Supervisory Actions, as necessary to reflect 

the earlier reorganization of the Bureau’s supervision offices as 

well as relevant changes underway to the Bureau’s internal processes for examination report review. 

The Bureau’s efforts to enhance the supervision program have resulted in steady progress on our supervisory goals, including the 

timeframe in which we issue exam reports. At the outset, the Bureau made a purposeful decision to have a strong quality control 

function to ensure consistency in our examinations findings across 

the country, and across banks and nonbanks. This is particularly 

important and challenging at the Bureau where, as the OIG recognized in its report, we must address a multitude of novel issues in 

our exams. We are integrating a work force drawn from a wide variety of backgrounds who are conducting examinations at many entities that have never before been subject to compliance supervision. Initially, we sacrificed some timeliness for the sake of careful deliberation and consistency. 

We have been focused for some time on the timeliness of our reports. This effort includes weekly meetings among Supervision 

management to identify and address potential sources of delay. We 

have conducted internal process reviews and retained a third party 

to support a longer-term project to comprehensively address the report review process. It is important to note that the Bureau does 

a wide range of examinations—from targeted reviews of a particular product line to larger reviews of multiple product lines. As 

a result, we have focused particular attention on ensuring that we 

draft and issue our reports as expeditiously as possible after completing our analysis of the information gathered by the examination teams. The median number of days onsite is 53. Half of our 

exams take between 44 and 81 days, and we have outliers on either 

side of that range. 

The Bureau has made several advancements in our examiner 

training. The Bureau is introducing a robust and unique examiner 

commissioning program, which will consist of on-the-job and classroom training, and ultimately a capstone course, so that within 5 

years of working at the Bureau, an examiner can be prepared to 

lead reviews of the complex entities we oversee. The comprehensive 

examination that will be required to become a commissioned examiner is undergoing multiple rounds of content validation and is 

scheduled to be finalized during the fall of 2014. The Bureau is also 

developing training that focuses on specific product areas so our examiners are well-prepared to conduct work in both banks and 

nonbanks. Also, as the OIG report notes, the Bureau has implemented an interim commissioning program. 

Our ongoing enhancement of the Supervision and Examination 

System (SES) used to track exams will increase the effectiveness 

of our supervisory work. Improved guidelines for its use will address two of the OIG’s findings. These efforts will establish standards for recording exam milestones, and ensure accurate documentation of communications with the prudential regulators, which 

have occurred as required. 

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proves the effectiveness of supervisory activity for all of the agencies, enhances protections for American consumers, and is consistent with the cooperative relationship between the agencies envisioned in the Dodd-Frank Wall Street Reform and Consumer Protection Act. As noted in the report, the Bureau has acted in this 

spirit of cooperation and complied with all of the requirements and 

arrangements outlined in the Interagency MOU on Supervisory Coordination dated May 16, 2012 (Interagency MOU)—an agreement 

that resulted from a multi-agency decisionmaking process including 

the Bureau, the Federal Reserve Board of Governors, the Federal 

Deposit Insurance Corporation, the National Credit Union Administration, and the Office of the Comptroller of the Currency. The 

Bureau has already begun discussions with the other agencies that 

are party to the Interagency MOU in order to explore potential opportunities to enhance information-sharing, and will pursue the 

specific discussions suggested in the report. We have also complemented the Federal coordination with a State Supervisory 

Framework to coordinate our efforts with State regulators. In 

short, the timeframe addressed in the report does not reflect the 

current realities of the Bureau’s supervision program.

Q.8. Last year, the National Automobile Dealers Association 

(NADA) developed a comprehensive fair credit compliance program 

for its members. The NADA Program is based on a fair credit compliance program that the Department of Justice (DOJ) developed to 

resolve disparate impact allegations against two dealers in 2007. 

More recently, DOJ has described the approach taken in the program as an effective way to manage the risk of a fair credit violation. Do you see the release of the NADA program as a positive development?

A.8. The Consumer Financial Protection Bureau (Bureau) welcomes proactive proposals that demonstrate a commitment to fair 

lending. However, lenders should be careful about assuming that 

individual dealer-level actions will fully address their own fair 

lending risks. As you note, in general, the National Automobile 

Dealer’s Association’s (NADA) Fair Credit Compliance Policy and 

Program is based on two Department of Justice cases from 2007, 

where that model was negotiated in settlements involving dealers, 

whereas the Bureau’s focus is on indirect auto lenders. We remain 

concerned about indirect lending programs built around discretion 

and financial incentives that create fair lending risks. Our March 

2013 bulletin, Indirect Auto Lending and Compliance with the 

Equal Credit Opportunity Act, was issued to provide clarity and 

guidance for institutions regarding the application of Equal Credit 

Opportunity Act and Regulation B, and our attendant supervisory 

and enforcement approach in this area. It provided examples of internal controls, program features, and compliance management 

systems that institutions might use to mitigate legal risk. It also 

indicated that lenders may choose to adopt nondiscretionary pricing policies as an alternative method of mitigating fair lending 

risks.

Q.9. In February, the CFPB sent a letter to 18 card issuing banks 

‘‘strongly encouraging’’ them to adopt the practice of offering their 

consumer’s free credit scores with each statement. Unfortunately, 


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the CFPB did not solicit public input before the letter was sent. It 

did not perform any cost-benefit analysis. Finally, it did not provide 

guidance on how a company may legally adopt this practice. During 

examinations of these 18 card issuing banks, will the CFPB examine for adoption of this ‘‘best practice’’?

A.9. In addition to ensuring that financial service providers comply 

with consumer protection law, Congress gave the Consumer Financial Protection Bureau (Bureau) the mandate of fostering greater financial literacy and capability among consumers. We believe the 

initiative taken by a few issuers to share the scores they purchase 

with their cardholders has provided those cardholders with a significant benefit that will improve their awareness of their credit 

scores and the impact their credit histories might have on the cost 

and availability of credit to them. My February letter to the other 

issuers encouraging them to disclose the consumer scores they already purchase was intended to foster greater financial literacy 

and to enlist the issuers as stakeholders in our financial literacy 

efforts, which is likely to benefit the issuers as well by strengthening the creditworthiness of their customers and reducing defaults. Today, only one-fifth of consumers view their credit scores 

in a given year through a combination of purchases through 

AnnualCreditReport.com, paid credit monitoring subscriptions, or 

adverse action notices. 

Absent any rulemaking that would declare such regular score 

disclosures a requirement of issuers (something that is not under 

consideration), the Bureau views making these disclosures as voluntary. While the letter strongly encouraged the practice, the Bureau will not be examining issuers to determine whether or how 

they have adopted it. 

RESPONSE TO WRITTEN QUESTION OF SENATOR REED FROM 

RICHARD CORDRAY 

Q.1. Could you explain why it is so important for the Department 

of Defense to finalize its update of the Military Lending Act rules 

and how these updated rules would protect our servicemembers 

and their families?

A.1. Military families make enormous sacrifices for our Nation and 

deserve to be protected from those who would take advantage of 

them. Congress passed the Military Lending Act (MLA) to protect 

servicemembers from predatory lending. The MLA prohibits interest rates above 36 percent on consumer credit offered to active-duty 

servicemembers and their dependents. In its initial implementing 

regulations, the Department of Defense defined ‘‘consumer credit’’ 

to include three specific types of closed-end credit including: certain 

payday loans, certain vehicle title loans, and tax refund anticipation loans. 

However, the implementing regulations did not cover high-cost 

loans structured as open-end lines of credit, loans with longer durations (more than 91 days for payday loans or more than 181 days 

for vehicle title loans), or loans with larger balances (more than 

$2,000 for payday loans). Military advisors such as Judge Advocates General and Personal Financial Managers have shared with 

us examples that indicate that servicemembers are taking out loan 


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1 10 USC § 987(b), (i)(3)(b). 

products which fall outside the current parameters of ‘‘consumer 

credit’’ as defined in the MLA implementing regulations. For example, some creditors have offered open-end lines of credit with tripledigit interest rates to active duty servicemembers. Other creditors 

have extended triple-digit interest rate loans to servicemembers 

with durations longer than 91 or 181 days for unsecured credit. 

Moreover, in the MLA, Congress attempted to limit the extent to 

which creditors could use expensive ancillary credit products to impose costs exceeding 36 percent per annum on servicemembers.1

The Department of Defense recently submitted a proposal to the 

Office of Management and Budget to revise the MLA regulations. 

The MLA requires the Department of Defense to consult with the 

Consumer Financial Protection Bureau (Bureau) and other specified Federal agencies on implementation of the law and such consultation is underway. The Bureau will continue to use its supervision and enforcement, consumer education and engagement, and 

interagency consultation tools to provide servicemembers the protections Congress intended. Servicemembers deserve the full benefit of general consumer protections as well as the military-specific 

consumer protections provided to them by the law. The Bureau is 

fully committed to ensuring that servicemembers benefit from the 

protections of the MLA and all Federal consumer financial laws. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR MENENDEZ 

FROM RICHARD CORDRAY 

Improving access for unbanked and underbanked households:

Q.1. According to a 2011 report from the FDIC, about 1 in 12 

American households is ‘‘unbanked,’’ meaning they do not have a 

checking or savings account at an insured depository institution. 

One in 5 American households is considered ‘‘underbanked,’’ meaning they have access to a deposit account, but also rely on alternative financial services such as nonbank check cashing or lending. 

Together, these groups account for about 34 million households. 

I raised concerns at a hearing a few weeks ago on short-term 

consumer lending about the need for real, meaningful efforts to 

help these households who lack access to traditional banking services access credit when they need it and build credit histories. 

Can you please provide an update on what the CFPB plans to 

propose in terms of new regulations for short-term lending?

A.1. The Consumer Financial Protection Bureau (Bureau) has been 

studying the market for short-term lending and is now in the process of developing an appropriate regulatory response to address 

practices that may cause harm to consumers. In particular, we are 

concerned about products and practices that turn a demand for 

short-term credit into a long-term debt. We also want to ensure 

that consumers can access the credit they require without jeopardizing or undermining their finances. We welcome continued input 

and communication about how to most effectively protect consumers in this market. As we proceed with our pre-rule activities, 

the Bureau will seek feedback from a Small Business Advocacy ReVerDate 0ct 09 2002 14:45 Mar 03, 2015 Jkt 000000 PO 00000 Frm 00043 Fmt 6601 Sfmt 6601 S:\DOCS\90951.TXT SHERYL

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view panel. We also are proceeding toward a rulemaking on general purpose, reloadable prepaid cards.

Q.2. When families with lower incomes have credit needs, what are 

some of the solutions available to them that are most effective? 

What should we be looking to as successful models?

A.2. The Consumer Financial Protection Bureau’s Office of Financial Empowerment (OFE) focuses on the needs of traditionally underserved consumers, which includes those with limited or no access to credit. The OFE leads several initiatives designed to help 

lower income consumers know how to build their credit. For example, Your Money, Your Goals, is a toolkit for frontline caseworkers 

who work with consumers that have limited access to credit. The 

OFE is also planning to study a credit builder loan product designed for lower-income consumers. As well, the OFE is working to 

ensure that lower income consumers know how to access and understand their credit reports and scores, and learn strategies for 

managing money to build credit.

Q.3. In looking to develop credit products for lower-income consumers, can mission-driven lenders alone achieve sufficient scale to 

fully serve the market? Or do we also need profit-seeking capital 

for the market to be self-sustaining—and if so, how do we achieve 

that goal in a way that meets consumer demand with effective loan 

structures and consumer protections?

A.3. The Consumer Financial Protection Bureau recognizes the demand for credit by low-income and credit impaired consumers. In 

order to achieve scale to fully serve the market, many types of institutions, including those in the for-profit sector, are likely needed 

to develop appropriate products to meet the credit demand of 

lower-income and credit-impaired consumers with products that 

offer effective loan structures and consumer protections. Particular 

attention would need to be paid to consumers who, as a result of 

having little to no existing credit files or poor credit, are prevented 

from accessing lower cost credit options. The amount of capital 

available for lending to consumers from the for-profit sector is far 

greater than that available to nonprofit organizations, so safe lending products that are widely available to lower-income consumers 

will likely include involvement from banks or other for-profit businesses. While new technology and innovative credit products may 

help reach these goals, we recognize this is a complex area that we 

are continuing to research. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR BROWN 

FROM RICHARD CORDRAY 

Q.1. In January, the Consumer Financial Protection Bureau 

(CFPB) implemented new high-cost mortgage loan provisions of the 

Home Ownership and Equity Protection Act (HOEPA) that expand 

the types of loans covered by HOEPA and further defined the interest rate and ‘‘points and fees’’ triggers for HOEPA’s protections. 

I have heard concerns that this is having a particularly detrimental effect on the manufactured housing industry, where home 

prices are lower and fixed fees make up a larger percentage of the 

overall loan amount. 


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1 5 CFR 1320.3 (c).

What steps has CFPB taken to monitor the effects of new highcost mortgage loan provisions on the manufactured housing market?

A.1. The Consumer Financial Protection Bureau (Bureau) analyzed 

various datasets (Home Mortgage Disclosure Act, and population 

surveys such as the Survey of Consumer Finances) to deepen our 

understanding of the manufactured housing market. The Bureau 

also conducted phone calls and in-person conversations with creditors, manufacturers, dealers, consumer advocates, and other government entities operating in this space, including attending a 

manufactured housing industry conference. The Bureau will also 

publish a white paper on the manufactured housing market later 

this year.

Q.2. Have these new provisions restricted access to credit and, if 

so, what steps with the CFPB take to protect consumer access to 

affordable mortgage loans, including manufactured home loans?

A.2. The Consumer Financial Protection Bureau has not encountered evidence of systematic access to credit concerns, though we 

welcome input from all sources on market trends, will continue to 

carefully examine potential concerns, and will publish a white 

paper on the manufactured housing market later this year. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR TOOMEY 

FROM RICHARD CORDRAY 

Q.1. According to the RFP put out by the CFPB, the 9 issuers you 

intend to collect data from are different from the 9 issuers the OCC 

is collecting data from. My understanding is that gathering data 

from 10 issuers would trigger an OMB review and a period for public comment. With a data mining exercise of this size and scope, 

shouldn’t it be reviewed and shouldn’t the public have the opportunity to express their opinions on what is happening with their 

data?

A.1. The Dodd-Frank Wall Street Reform and Consumer Protection 

Act (the Dodd-Frank Act) authorized the Consumer Financial Protection Bureau (Bureau) to gather information from a variety of 

sources in order to monitor for risks to consumers in the offering 

or provision of consumer financial products or services, including 

developments in markets for such products or services. In the exercise of its supervisory authority, the Bureau obtains data on credit 

card accounts maintained by a number of credit card issuers. The 

data is stripped of direct personal identifiers and does not include 

information about individuals’ purchases. 

The Office of Management and Budget review and public comment period to which you refer is a requirement of the Paperwork 

Reduction Act (PRA). This requirement is triggered by:

Identical questions posed to, or identical reporting, recordkeeping, or disclosure requirements imposed on, ten or more persons . . . where ‘ten or more 

persons’ refers to the persons to whom a collection of information is addressed by the agency within any 12-month period.1


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The Office of the Comptroller of the Currency (OCC) initially requested information from nine credit card issuers in 2009. The Bureau sent similar information requests to nine different credit card 

issuers beginning in September 2012. The Bureau made the determination that the PRA does not apply to the Bureau’s credit card 

collections.

Q.2. Why does the Bureau think that it needs access to data on 

over 900 million credit card accounts?

a. If your goal is to study trends and usage behavior, why not 

just sample anonymously rather than collect information on 

every account?

b. Will the CFPB commit to dumping or deleting data that it 

doesn’t need to conduct a meaningful analysis?

A.2. The Dodd-Frank Wall Street Reform and Consumer Protection 

Act (the Dodd-Frank Act) authorized the Consumer Financial Protection Bureau (Bureau) to gather information from a variety of 

sources in order to monitor for risks to consumers in the offering 

or provision of consumer financial products or services, including 

developments in markets for such products or services. 

In our monitoring activity of the credit card market, a number 

of large credit card issuers provide a full list of accounts to the Bureau’s contractor. Credit card issuers provide a full list rather than 

a random sample because this is the same format in which issuers 

provide data to the same contractor for benchmarking services that 

they purchase from the contractor pursuant to private agreements. 

This reduces costs and burden for the issuers supplying the data 

as it avoids the need to draw a random sample, to provide data 

with respect to those accounts on an ongoing basis, and to add to 

the sample each time the data is provided to ensure that the sample remains representative of all accounts, including newly originated accounts. 

The Bureau will maintain and ultimately destroy records in accordance with the Federal Records Act and Bureau record schedules once they are approved by the National Archives and Records 

Administration (‘‘NARA’’). The Bureau is in the process of drafting 

a records schedule for this data that will be submitted to NARA for 

approval.

Q.3. Given the number of fields this database will have, what’s to 

stop a contractor or the Government itself from matching up supposedly ‘‘anonymized accounts’’ with individual consumers?

A.3. As previously stated, in the exercise of its supervisory authority, the Bureau obtains data on credit card accounts maintained by 

a number of credit card issuers. The data is stripped of direct personal identifiers. The data does not contain information that directly identifies individual consumers such as names, street addresses, social security numbers or account numbers. The Bureau 

also implements strong controls to protect the data security including requiring its vendors to use data only for proper Bureau purposes, prohibiting attempts at re-identification, restricting access to 

those whose work requires it, and providing privacy and security 

training to Bureau personnel on how to handle and protect data 

appropriately.


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Q.4. In an answer to one of my questions at your last appearance 

before this Committee, you stated that it was your understanding 

that ‘‘bulletins’’ are merely restatement of existing law. If you recall, we respectfully disagreed. In hearing from regulated entities, 

many do not believe they have sufficient clarity in knowing who 

these bulletins apply to, and what they must do to avoid an enforcement action.

a. Do you still maintain that these are not substantive in nature?

b. Have you received requests from regulated entities asking for 

additional clarity with regards to the application and substance of previously published bulletins?

A.4. The Administrative Procedure Act (APA) sets out the principles by which Federal agencies engage in regulatory activity and 

in applicable cases calls for comments from affected parties and the 

general public concerning an agency’s activity. The APA does not 

impose a notice and comment requirement for a general statement 

of policy, a nonbinding informational guideline, or interpretive 

memoranda. The bulletins to which you refer would fall into one 

of these categories. From time to time the Bureau does receive and 

respond to requests for clarification on various topics, including the 

rules we administer and guidance we publish in the form of bulletins.

Q.5. When the Bureau decides to publish a Bulletin, does it follow 

an established process?

a. What process (either established, or ad-hoc) does the CFPB go 

through when putting out a bulletin?

b. Does the CFPB solicit or otherwise receive input from stakeholders prior to publishing them?

A.5. As noted in our immediately preceding response, the Administrative Procedure Act (APA) sets out the principles by which Federal agencies engage in regulatory activity and in applicable cases 

calls for comments from affected parties and the general public concerning an agency’s activity. The APA does not impose a notice and 

comment requirement for a general statement of policy, a nonbinding informational guideline, or interpretive memoranda. We 

value public input in our formulation of policy, and the Bureau engages stakeholders using a variety of mechanisms, ranging from informal consultations between industry and market specialists in 

the Bureau to published notice with a specified comment period.

Q.6. A recent report issued by the Philadelphia Federal Reserve 

Bank under its ‘‘Working Paper Series’’ found that tighter regulation of third-party collectors is associated with creditors extending 

less credit to consumers and at higher interest rates. The report 

concluded that ‘‘financial regulation that institutes strong consumer protection must be balanced with creditor rights in order for 

the latter to extend consumer credit in the first place.’’

a. Given the research on the economic implications, why 

shouldn’t the CFPB consider addressing specific concerns 

rather than an expansive rule that may ultimately hamper a 

consumer’s access to credit?


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b. As the Bureau engages in its debt collection rulemaking, how 

will you ensure that there is balance between strong consumer protection and creditor rights?

A.6. The Consumer Financial Protection Bureau (Bureau) is considering additional requirements to protect consumers with respect to 

debt collection. At the same time, we recognize that the process of 

debt collection may benefit consumers through keeping down the 

cost of credit. As a result, we are considering the burdens that additional requirements may place on collectors, and our goal is to develop rules that protect consumers without imposing undue burdens on the collection industry. 

Specifically, in November 2013, the Bureau took the first step toward considering consumer protection rules for the debt collection 

market with the publication of an Advanced Notice of Proposed 

Rulemaking (ANPR). To identify subjects that proposed rules may 

address, the Bureau is reviewing the more than 23,000 public comments received in response to the ANPR to evaluate the nature and 

extent of consumer protection problems as well as the advantages 

and disadvantages of various solutions to those problems. In addition to these comments, Cornell University also submitted a report 

based on nearly 1,000 responses received on RegulationRoom.org,

its Web site that provides the public with an interactive and intuitive way to participate in discussions about rulemaking proposals. 

As needed, the Bureau may meet with commenters to clarify the 

information and views expressed in their comments as well as to 

understand differences in information and views in comments. 

In addition to considering existing research and data on debt collection, the Bureau plans to conduct its own research as part of the 

rulemaking process. Drawing from a nationally representative sample of consumer credit records from one of the three nationwide 

credit reporting agencies, the Bureau plans to conduct a mail survey to learn about consumer experiences with debt and debt collection. The Bureau also is considering conducting consumer testing 

of any model disclosures it may develop. 

Also, pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act, Section 1022(b)(2) and in deference to Section 814(b) of the Fair Debt Collection Practices Act, the Bureau 

expects to consult with relevant Federal agencies regarding any 

proposed regulations it may issue, including the Federal Trade 

Commission, prudential regulators (Office of the Comptroller of the 

Currency, Federal Reserve Board, Federal Deposit Insurance Corporation, National Credit Union Association) and Federal Communications Commission. The Bureau also expects to consult with relevant State law enforcement and regulatory agencies. Additionally, 

prior to issuing any notice of proposed rule, the Bureau may convene a panel pursuant to the Small Business Regulatory Enforcement Fairness Act composed of the Bureau, Small Business Administration, and the Office of Management and Budget to get input 

from small businesses in the debt collection industry on the possible effects on them of any debt collection rule under consideration, and ideas for possible lower-cost alternatives that accomplish 

the objectives of applicable statutes. 

Throughout this process, the Bureau will carefully consider its 

approach to rulemaking. The volume of comments in response to 


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1See Dodd-Frank Act, Pub. L. No. 111–203, Sec. 1021(c)(2). 

the ANPR speaks to a high level of interest in regulations from 

consumers, industry, and other interested parties. We will continue 

to consider the appropriate approach to take in a rulemaking as we 

move through the steps in our process. We seek to develop rules 

that protect consumers without imposing undue burdens on the collection industry.

Q.7. In its report to Congress, the CFPB purports that it is using 

debt collection complaint data to shape its public policy direction. 

At the same time, the CFPB clearly states that complaints received 

are not reviewed or investigated to determine whether actual 

wrongdoing or illegal activity has occurred. If that’s the case, how 

is it that this inherently subjective data you are collecting can be 

credibly used to shape meaningful public policy decisions?

A.7. Collecting, investigating, and responding to consumer complaints are integral parts of the Consumer Financial Protection Bureau’s (Bureau) work, as Congress set forth in the Dodd-Frank 

Wall Street Reform and Consumer Protection Act.1 The report you 

reference states that the Bureau screens all complaints submitted 

by consumers and, when appropriate, forwards complaints via a secure web portal to companies for response. Once the company responds to the consumer and the Bureau, including verifying a commercial relationship with the consumer, the Bureau invites the 

consumer to provide feedback about the response. The Bureau reviews the complaint, including the feedback consumers provide, to 

help prioritize complaints for investigation into regulatory compliance. Some complaints are investigated, the results of which provide more information as to the nature of the complaints, as well 

as to suggest whether possible violations of law or regulation may 

have occurred. 

The report indicates that since the Bureau began handling debt 

collection complaints on July 10, 2013, we have received 55,200 

debt collection complaints from consumers. The report also references that debt collection issues generate more complaints to the 

Federal Government each year than any other financial services 

market. In terms of the Bureau’s direction with respect to the debt 

collection market, the report indicates that the Bureau issued an 

Advanced Noticed of Proposed Rulemaking in November 2013, to 

seek a wide array of feedback and guide next steps with respect to 

proposed rules.

Q.8. How would a provider of a consumer financial product or service go about determining whether a new product or the business 

process they use complies with Federal consumer financial law? 

Does the Bureau have a procedure to receive questions from regulated institutions and provide participants in the market with some 

certainty that they’re following the law?

A.8. The Consumer Financial Protection Bureau (Bureau) provides 

a variety of helpful resources and compliance aids to assist regulated entities with understanding and complying with consumer financial laws and regulations. For example, for the rules recently 

issued under Title XIV of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act, the Bureau developed implementation 


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aids such as compliance guides, guidance bulletins, reference 

charts, Webinar presentations and videos, and other materials. The 

Bureau also took feedback and questions regarding its rules from 

regulated entities by email and telephone as well as at in-person 

meetings, conferences, and other events. 

RESPONSE TO WRITTEN QUESTIONS OF SENATOR MORAN 

FROM RICHARD CORDRAY 

Q.1. The National Automobile Dealers Association (NADA) recently 

brought to my attention a comprehensive fair credit compliance 

program it developed for its members. The NADA Program is based 

on a fair credit compliance program that the Department of Justice 

(DOJ) developed to resolve disparate impact allegations against 

two auto dealers in 2007. It is my understanding that the DOJ has 

been complimentary of the program as an effective way to manage 

the risk of a fair credit violation. Do you see the release of the 

NADA program as a positive development?

A.1. The Consumer Financial Protection Bureau (Bureau) welcomes proactive proposals that demonstrate a commitment to fair 

lending. However, lenders should be careful about assuming that 

individual dealer-level actions will fully address their own fair 

lending risks. As you note, in general, the National Automobile 

Dealers Association’s (NADA) Fair Credit Compliance Policy and 

Program is based on two Department of Justice cases from 2007, 

where that model was negotiated in settlements involving dealers, 

whereas the Bureau’s focus is on indirect auto lenders. We remain 

concerned about indirect lending programs built around discretion 

and financial incentives that create fair lending risks. Our March 

2013 bulletin, Indirect Auto Lending and Compliance with the 

Equal Credit Opportunity Act, was issued to provide clarity and 

guidance for institutions regarding the application of Equal Credit 

Opportunity Act and Regulation B, and our attendant supervisory 

and enforcement approach in this area. It provided examples of internal controls, program features, and compliance management 

systems that institutions might use to mitigate legal risk. It also 

indicated that lenders may choose to adopt nondiscretionary pricing policies as an alternative method of mitigating fair lending 

risks.

Q.2. As I understand the issue, retailers typically set their retail 

margin based on cost and competition considerations in their local 

market. Retailers also serve different demographic populations. 

This means that the portfolio of an auto lender that buys credit 

contracts from dealers around the country could reflect a pricing 

difference between various groups of consumers for no other reason 

than the fact that different dealers set different retail margins and 

they each serve different groups of consumers. If dealers broadly 

and faithfully adopt an approach to managing the risk of fair credit 

violations at the retail level, what is the policy justification for 

holding lenders accountable for any pricing imbalances that exist 

solely at the portfolio level?

A.2. As explained in the Consumer Financial Protection Bureau’s 

(Bureau) Indirect Auto Lending and Compliance with Equal Credit 


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1For example, see Cohen, Mark A. (2012). ‘‘Imperfect Competition in Auto Lending: Subjective 

Markups, Racial Disparity, and Class Action Litigation.’’ Review of Law and Economics vol. 8, 

no. I (21–58). Working Paper available at http://papers.ssrn.com/sol3/papers.cfm?

abstractlid=951827. 2See, Coleman v. Gen. Motors Acceptance Corp., 196 F.R.D. 315 (M.D. Tenn. 2000), vacated 

and remanded on unrelated grounds, 296 F.3d 443 (6th Cir. 2002); Jones v. Ford Motor Credit 

Co., 2002 WL 88431 (S.D.N.Y. Jan. 22, 2002); Smith v. Chrysler Fin. Co., 2003 WL 3287 I 9 

(D.N.J. Jan. 15, 2003); Osborne v. Bank of America Nat’ I Ass’n, 234 F.Supp.2d 804 (M.D. Tenn. 

2002); Wise v. Union Acceptance Corp., 2002 WL 31730920 (S.D. Ind. Nov. 19, 2002). 

Opportunity Act, which cites existing provisions of the Equal Credit 

Opportunity Act (ECOA), Regulation B, and the Official Staff Commentary to Regulation B, the standard practices of indirect auto 

lenders likely make them ‘‘creditors’’ under ECOA, which fall within the Bureau’s jurisdiction. When an auto lender’s policies for 

dealer compensation and pricing result in disparities within the 

lender’s portfolio on a prohibited basis, such as race, national origin, or sex, a lender may be liable under ECOA if those policies are 

not supported by a legitimate business need that cannot reasonably 

be achieved as well by means that are less disparate in their impact. However, when lenders share the nature and results of their 

own analyses, in connection with a particular supervisory review or 

enforcement investigation, the Bureau is open to hearing specific 

explanations of the decisions the lender has made to include particular analytical controls or relevant factors that reflect a legitimate business need. As part of the Bureau’s overall analysis of 

auto lender pricing, we carefully consider the specifics of each individual case, including factors such as individual dealer retail margin and regional pricing differences, in addition to a number of 

other factors, such as consumers’ credit scores and debt to income 

ratios; characteristics of the collateral; and terms of the deal, such 

as the amount financed, down payments, the existence of a manufacturer discounted rate, and loan term.

Q.3. In previous responses to my questions on indirect auto lending, you have repeatedly mentioned that auto lenders may eliminate their fair credit risk by compensating dealers for originating 

the credit contract with a flat fee or a fee based on some other 

‘‘nondiscretionary’’ pricing formula. Even if every lender were to 

adopt such a compensation approach, is it the CFPB’s conclusion 

that this would ‘‘eliminate’’ dealer pricing discretion when multiple 

auto lenders would continue to compete for the dealer’s business by 

offering different payment amounts and the dealer would still select the lender to which it would sell the credit contract? And if getting auto lenders to adopt fixed payment formulas fails to eliminate 

the dealer’s pricing discretion, then how would the CFPB’s flat fee 

solution offer consumers any more protection from a fair credit violation than the present system of compensation for dealers?

A.3. The Consumer Financial Protection Bureau (Bureau) is not 

mandating that indirect auto lenders compensate dealers through 

any specific compensation structure. Historically, the failure to 

properly or consistently monitor discretionary policies and practices 

for compliance with anti-discrimination laws has been a contributing factor in discrimination in auto lending and in other product 

markets, like mortgages. This historical experience has been documented by scholars,1 and is reflected in relevant case law 2 and DeVerDate 0ct 09 2002 14:45 Mar 03, 2015 Jkt 000000 PO 00000 Frm 00051 Fmt 6601 Sfmt 6601 S:\DOCS\90951.TXT SHERYL

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3See, e.g., United States v. Springfield Ford, Inc., No. 2:07–cv–03469–PBT (E.D. Pa. Aug. 21, 

2007); United States v. Pacifico Ford, Inc., No. 2:07–cv–03470–PBT (E.D. Pa. Aug. 18, 2007); 

United States v. NARA Bank, et al., No. 2:09–cv–07124–RGK–JC (C.D. Cal. Nov. 18, 2009); see 

also United States v. Countrywide Fin. Corp. No. 2:11–cv–10540–PCG–AJW (C.D. Cal. Dec. 28, 

2011); United States v. AIG Fed. Sav. Bank, No. 1:99–mc–0999 (D. Del. Mar. 4, 2010); United 

States v. Ally Financial Inc., 2:13–cv–15180 (Dec. 23, 2013). 

partment of Justice and Bureau enforcement actions;3 we remain 

concerned about indirect lending programs built around discretion 

and financial incentives that create fair lending risks. Our March 

2013 bulletin, Indirect Auto Lending and Compliance with the 

Equal Credit Opportunity Act, was issued to provide clarity and 

guidance for institutions regarding the application of the Equal 

Credit Opportunity Act and Regulation B, and our attendant supervisory and enforcement approach in this area. It provided examples 

of internal controls, program features, and compliance management 

systems that institutions might use to mitigate legal risk. It also 

indicated that lenders may choose to adopt nondiscretionary pricing policies as an alternative method of mitigating fair lending 

risks. 

Lenders should determine the type of dealer compensation that 

will best suit their business needs and meet their legal obligations. 

Moreover, the use of nondiscretionary compensation structures significantly reduces, but does not eliminate, fair lending risk. It is 

also not possible to predict with certainty how market-wide adoption of a single nondiscretionary compensation program or multiple 

such programs would affect the market, nor is it possible to anticipate all the potential actions lenders may take to eliminate discrimination from their indirect auto lending programs. The specifics of any particular structure will be taken into account when 

we consider such proposals in light of lender-specific data and implementation.

Q.4. Auto lenders and dealers have been asking for additional information and clarification from the CFPB’s guidance issued last 

year. As you well know, I have been seeking additional information 

regarding the statistical accuracy of the data the CFPB used to arrive at the conclusion that this guidance was necessary. Do you intend to provide clarifications so that lenders (1) more clearly understand what is expected of them and (2) can more effectively comply?

A.4. The Consumer Financial Protection Bureau (Bureau) has provided detailed explanations to Congress on topics such as the Bureau’s proxy methodology, the methods we use to identify statistically significant disparities in lending outcomes, and how the Bureau analyzes neutral factors, such as credit scores and debt-to-income ratios. We have explained how, consistent with the approach 

of other regulators, the Bureau employs a case-specific analysis 

that considers appropriate controls based upon the particular lender’s policies, practices, and legitimate business needs. In an effort 

to be responsive to congressional requests, we have provided thorough responses to questions from Members of Congress while being 

mindful of the need to protect the confidential business information 

of third parties as well as confidential supervisory and investigative information. In addition, as I noted during my testimony, the 

Bureau is working on a white paper on the proxy methodology the 


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4 Consumer Financial Protection Bureau, Supervisory Highlights: Fall 2012 (Oct. 31, 2012), 

available at http://www.consumerfinance.gov/reports/supervisory-highlights-fall-2012. 5 Consumer Financial Protection Bureau, CFPB Bulletin 2013–06 (Jun. 25, 2013), available at 

http://files.consumerfinance.gov/f/201306lcfpblbulletinlresponsible-conduct.pdf.

Bureau uses in our statistical analyses in our supervisory and enforcement work in the indirect auto lending area. 

Lenders seeking additional information on compliance should 

consult the Bureau’s Fall 2012 edition of Supervisory Highlights 4

as well as the Bureau’s March 2013, Indirect Auto Lending and 

Compliance with Equal Credit Opportunity Act bulletin, which describes several steps lenders can take to ensure that they are operating in compliance with the Equal Credit Opportunity Act and 

Regulation B as applied to dealer markup and compensation policies. 

Finally, lenders also may review the Bureau’s Responsible Business Conduct: Self-Policing, Self-Reporting, Remediation, and Cooperation5 bulletin, which serves to inform market participants 

that they may proactively self-police for potential violations, 

promptly self-report to the Bureau when they identify potential violations, quickly and completely remediate the harm resulting from 

violations, and affirmatively cooperate with any Bureau investigation above and beyond what is required. If a party meaningfully 

engages in these activities, which this bulletin refers to collectively 

as ‘‘responsible conduct,’’ it may favorably affect the ultimate resolution of a Bureau enforcement investigation. 


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BANKI-41578DSA with DISTILLER90951.174
224


BANKI-41578DSA with DISTILLER90951.175
225


BANKI-41578DSA with DISTILLER90951.176
226


BANKI-41578DSA with DISTILLER90951.177
227


BANKI-41578DSA with DISTILLER90951.178