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88–544 PDF 2014

LEGISLATIVE PROPOSALS TO IMPROVE 

TRANSPARENCY AND ACCOUNTABILITY 

AT THE CFPB 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

SECOND SESSION 

MAY 21, 2014 

Printed for the use of the Committee on Financial Services 

Serial No. 113–82 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

GARY G. MILLER, California, Vice Chairman 

SPENCER BACHUS, Alabama, Chairman 

Emeritus 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

STEVEN HORSFORD, Nevada 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

SHELLEY MOORE CAPITO, West Virginia, Chairman 

SEAN P. DUFFY, Wisconsin, Vice Chairman 

SPENCER BACHUS, Alabama 

GARY G. MILLER, California 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

MARLIN A. STUTZMAN, Indiana 

ROBERT PITTENGER, North Carolina 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

KEITH J. ROTHFUS, Pennsylvania 

GREGORY W. MEEKS, New York, Ranking 

Member 

CAROLYN B. MALONEY, New York 

RUBE ́ N HINOJOSA, Texas 

CAROLYN MCCARTHY, New York 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

KEITH ELLISON, Minnesota 

NYDIA M. VELA ́ ZQUEZ, New York 

STEPHEN F. LYNCH, Massachusetts 

ED PERLMUTTER, Colorado 

MICHAEL E. CAPUANO, Massachusetts 

JOHN K. DELANEY, Maryland 

DENNY HECK, Washington 

KYRSTEN SINEMA, Arizona 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

May 21, 2014 ..................................................................................................... 1 

Appendix: 

May 21, 2014 ..................................................................................................... 41 

WITNESSES 

WEDNESDAY, MAY 21, 2014 

Chapman, Rob, President, the American Land Title Association (ALTA) .......... 10 

Mierzwinski, Edmund, Consumer Program Director, U.S. Public Interest Research Group (U.S. PIRG) ................................................................................... 11 

Peirce, Hester, Senior Research Fellow, Mercatus Center, George Mason University ................................................................................................................... 8 

Pincus, Andrew, Partner, Mayer Brown LLP, on behalf of the U.S. Chamber 

of Commerce ......................................................................................................... 6 

APPENDIX 

Prepared statements: 

Chapman, Rob .................................................................................................. 42 

Mierzwinski, Edmund ...................................................................................... 52 

Peirce, Hester .................................................................................................... 63 

Pincus, Andrew ................................................................................................. 68 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Capito, Hon. Shelley Moore: 

Written statement of the Credit Union National Association (CUNA) ........ 80 

Written statement of the National Association of Federal Credit Unions 

(NAFCU) ........................................................................................................ 83 

Ellison, Hon. Keith: 

‘‘Protect the Rule of Law: Support H.R. 1844, the Arbitration Fairness 

Act of 2013’’ ................................................................................................... 85 

Written statement of Fair Arbitration Now ................................................... 86 

Letter to Representative Shelley Moore Capito from Representative 

Henry C. ‘‘Hank’’ Johnson, Jr., and Representative John Conyers, Jr., 

dated May 21, 2014 ....................................................................................... 88 

MarketWatch article by Catey Hill entitled, ‘‘You won’t believe your 

bank’s newest fee. Suing your bank? Prepare to pay up,’’ dated April 

9, 2014 ............................................................................................................ 91 

Washington Times article by Paul Samakow entitled, ‘‘When Mandatory 

Arbitration Replaces Litigation, Consumers Lose,’’ dated June 16, 2013 93 

Written responses to questions submitted to Rob Chapman ........................ 95 

Written responses to questions submitted to Edmund Mierzwinski ............ 100 

Written responses to questions submitted to Andrew Pincus ...................... 114 

(1) 

LEGISLATIVE PROPOSALS TO IMPROVE 

TRANSPARENCY AND ACCOUNTABILITY 

AT THE CFPB 

Wednesday, May 21, 2014 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:03 p.m., in room 

2128, Rayburn House Office Building, Hon. Shelley Moore Capito 

[chairwoman of the subcommittee] presiding. 

Members present: Representatives Capito, Duffy, McHenry, 

Pearce, Posey, Fitzpatrick, Westmoreland, Luetkemeyer, Stutzman, 

Pittenger, Barr, Cotton, Rothfus; Meeks, Maloney, Hinojosa, Scott, 

Green, Ellison, Capuano, and Sinema. 

Also present: Representatives Stivers and Mulvaney. 

Chairwoman CAPITO. The subcommittee will come to order. Without objection, the Chair is authorized to declare a recess of the subcommittee at any time. And by way of warning, we are expected 

to be called for one vote here very, very shortly. So I am going to 

go ahead and start, maybe get our opening statements out of the 

way, and then we will recess for a short period, for just one vote. 

I now recognize myself for an opening statement. This afternoon’s hearing is a continuation of this committee’s efforts to make 

the Consumer Financial Protection Bureau (CFPB) a more transparent and accountable agency. I would like to thank the sponsors 

of the legislation before us for their hard work in crafting commonsense reforms to the Bureau. 

I would also like to highlight that some of the bills are the product of bipartisan efforts. 

One of the items that we will consider today is the legislation 

that I have drafted that puts the Bureau on a level playing field 

with the other banking regulators. Much like the other Federal 

banking regulators, the Bureau is provided with the power to assess fines on supervised entities that are in violation of Federal 

laws or regulations. These fines are an important tool to discourage 

other market participants from engaging in similar practices. 

Traditionally, these fines have been remitted to the United 

States Treasury, benefiting all taxpayers. However, unlike the 

other banking regulators, the Dodd-Frank Act requires the Bureau 

to retain these fines in a ‘‘civil penalty fund,’’ and allows the Bureau to use these funds for consumer education financial literacy 

2 

programs. To date, the Bureau has collected nearly $125 million in 

fines. 

Last year, we learned that the Bureau earmarked $1.6 million of 

these funds for administrative costs. My issue is not that the Bureau is collecting these fines. My issue is that the taxpayers would 

be better served if these fines were remitted to the Treasury to pay 

down the historic national debt. 

My legislation simply states that funds currently held in the 

Civil Penalty Fund should be remitted to the Treasury, and all future fines levied by the Bureau should be remitted directly to the 

Treasury. This approach maintains the ability of the Bureau to fine 

the bad actors while providing a direct benefit to the taxpayers. 

At this time, I would like to yield to the ranking member of the 

subcommittee, Mr. Meeks, for the purpose of making an opening 

statement. 

Mr. MEEKS. Thank you, Madam Chairwoman. 

And let me just say this first off. I just hope, as I review some 

of the bills, that we are not trying to, in certain ways, undermine 

or weaken or cripple the CFPB. I don’t think that is the way to go, 

because if we are trying to slow it down or undermine the Consumer Financial Protection Bureau or the rights of average Americans to be protected from fraud or predatory or discriminatory financial practices, we will find that we are back to where we were. 

I think that context does matter, and we need to learn from the 

past, from past matters. Just a few years ago, I can’t forget that 

we were in the middle of a great recession because the financial 

sector had remained one of the major sectors of our economy where 

consumer rights had been neglected and treated as a stepchild 

among other financial regulatory issues. You don’t have to go into 

how many foreclosures, et cetera, that we had. 

I am always willing to work together. And I think that the CFPB 

has done some things, for example, like the small and rural lenders 

have received significant relief, and the QM rules, and nonprofit 

and philanthropic organizations, such as Habitat for Humanity, received relief for their financial products. Those are ways that the 

CFPB has worked continually to try to help and work together. 

And with the internal process, there are ways that I am looking 

at. For example, I agree with the intent of H.R. 4262 from Representative Duffy and H.R. 4383 from Representative Pittenger to 

require the CFPB to establish a Small Business Advisory Board. 

So my caution is that I feel concerned that some of my colleagues 

are looking to just undercut the CFPB. I have confidence in Director Cordray. And I want to congratulate the CFPB, for example, for 

last week’s announcement with the Justice Department that it had 

reached a settlement against Sallie Mae for violating the legal 

rights of U.S. servicemembers in student loan servicing. And Sallie 

Mae was ordered to pay $96.6 million in restitution and penalties. 

This is just an example of how the CFPB works every day to protect vulnerable Americans and bring relief to them. 

Chairwoman CAPITO. Thank you. 

I now recognize Mr. Pittenger for 1 minute, please, for an opening statement. 

3 

Mr. PITTENGER. Thank you, Madam Chairwoman, for calling this 

hearing, and I appreciate the time to address this distinguished 

group. 

At this time, we are to discuss H.R. 4383, the Bureau of Consumer Financial Protection Small Business Advisory Board Act. As 

the Consumer Financial Protection Bureau works to promulgate 

and implement new regulations affecting the American economy, it 

is vital that small businesses within the financial services sector 

have a seat at the table to voice their opinion. 

That is why I have joined with Congressman Denny Heck to establish a Small Business Advisory Board within the CFPB. The 

mission of this Board will be to advise and consult with the CFPB 

on any new regulations coming forth and their effect on the small 

business community. The CFPB Small Business Advisory Board 

will consist of at least 12 members from the financial services community and will be appointed by the CFPB Director. In order to be 

selected to serve on the Board, members must represent a small 

business dealing with financial service products. 

This is a bipartisan, common-sense piece of legislation that all 

Members should support. And I thank Congressman Heck for his 

strong support. 

I yield back the balance of my time. 

Chairwoman CAPITO. Mr. Green is recognized for 2 minutes for 

an opening statement. 

Mr. GREEN. Thank you, Madam Chairwoman. And I thank the 

ranking member as well, and would associate myself with his comments. 

I, too, am concerned about the possibility of our going too far. I 

do believe that there is room for improvement. But I am very much 

concerned about overreach. I recall what duration of time it took 

for us to get a Director for the CFPB in place. And I am always 

concerned about consumers, and I want to make sure that as we 

do this, we strengthen the CFPB. Transparency is great, and I look 

forward to helping with this, but I want to make sure that we 

strengthen the entity, that we don’t eviscerate or emasculate it. 

And with that, I will yield back the balance of my time. 

Chairwoman CAPITO. I now recognize Mr. Stutzman for 1 minute 

for an opening statement. 

Mr. STUTZMAN. Thank you, Madam Chairwoman. 

I want to thank the Chair for holding this hearing to explore legislative proposals to improve transparency and accountability at 

the Consumer Financial Protection Bureau. 

I also want to thank each of the witnesses for taking the time 

to lend their expertise today. 

Today, we consider H.R. 4684, the Bureau Guidance Transparency Act, the bill that I have introduced to increase accountability when the CFPB issues guidance. 

While guidance is supposed to be merely a restatement of law or 

a further explanation of a rule, there have been recent examples 

where the CFPB has gone outside of this scope. This bill requires 

a notice-and-comment period prior to the issuance of guidance at 

the CFPB and also has the CFPB show its work by providing any 

data or other analysis on which they relied. These are fair and reaVerDate Nov 24 2008 16:52 Dec 09, 2014 Jkt 088544 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\88544.TXT TERRI
4 

sonable adjustments to avoid informal guidance substituting for 

formal rulemaking. 

I want to thank Mr. Chapman for his testimony on possible further action we can take to make feedback on bulletins or guidance 

public on CFPB’s Web site. I wholeheartedly support his idea, and 

I currently have draft language to do just that. 

So I look forward to working with all of my colleagues to make 

this possible. 

With that, Madam Chairwoman, I will yield back. 

Chairwoman CAPITO. Thank you. 

Mr. Ellison is recognized for 2 minutes. 

Mr. ELLISON. Let me thank the chairwoman and the ranking 

member. 

I am deeply proud of the creation of the Consumer Financial Protection Bureau. I believe Americans should have access to fair and 

appropriately priced financial products. And we know that information gaps between consumers and a financial product firm can be 

very large, and that can be to the disadvantage of consumers. 

Let’s also remember that the crash of 2008, that the root of it 

was a lack of consumer protection as relates to people in the mortgage market. And it is that problem that the Consumer Financial 

Protection Bureau was designed to solve, and many others. 

So as we move forward with all of these bills, I hope we don’t 

get the misimpression that the problem is the Consumer Financial 

Protection Bureau. The problem is the bad, irresponsible behavior 

that led to its creation. 

There is a particular bill that I am concerned about, and I would 

like to point out first that more than $3.8 billion has been refunded 

to the 12.6 million consumers as a result of CFPB enforcement actions. This $3.8 billion is compensation to consumers who have 

been subjected to illegal practices. 

Unfortunately, one of the bills—I think it is the Slush Fund 

Elimination Act—that we will consider today will prevent consumers from receiving financial redress and also stop providing 

funding for financial education. This would be very, very unfortunate. I would like to talk to my colleagues about this bill and others. But I certainly hope that at the end of the day, we don’t find 

ourselves dismantling what is helping literally millions and millions of Americans, some of whom are not sophisticated people in 

the financial markets, some of whom are workaday folks who are 

just trying to save a little bit of money and get by and not get 

ripped off by people with considerably more resources than they 

have. 

So I am looking forward also to having some dialogue about mandatory arbitration clauses. I would like to ask the members of the 

panel today about that. I yield back. Thank you. 

Chairwoman CAPITO. I now recognize Mr. Westmoreland for 1 

minute. 

Mr. WESTMORELAND. Thank you, Madam Chairwoman. And 

thank you for including my bill, H.R. 4604, in the hearing today. 

Last week, it came to my attention that contrary to testimony 

from the committee, CFPB will be collecting personally identifiable 

information, including Social Security numbers, financial account 

5 

numbers, telephone numbers, race, gender, religion, and even the 

GPS coordinates of your home. 

My bill, H.R. 4604, the CFPB Data Collection Security Act, once 

again tries to stop some of CFPB’s massive data collection by allowing consumers to opt out of all CFPB data collection. The provision 

has been modeled after the successful National Do Not Call Registry. H.R. 4604 also requires the CFPB to purge data after 60 

days, and requires CFPB employees accessing personal data to obtain a confidential security clearance. 

I don’t know if the CFPB has intentionally misled this committee 

about the scope of their data collection, but I hope this committee 

will soon mark up H.R. 4604. 

And thank you again, to the chairwoman and the ranking member. 

Chairwoman CAPITO. For our next opening statement, we will go 

to Mr. Barr for 1 minute. 

Mr. BARR. I want to thank Chairwoman Capito for including my 

discussion draft, the Preventing Regulatory Abuse Act, in this important hearing. 

In talking with community bankers throughout Kentucky, one 

thing has been made clear to me, and that is the anxiety and frustration with the inconsistencies and uncertainties in bank examinations. I know the chairwoman is very familiar with this issue, 

having introduced the Financial Institutions Examination Fairness 

and Reform Act, and I appreciate her leadership on that important 

legislation. 

I hope that we would all agree that a foundation of effective examination and enforcement and ultimately protecting consumers 

from unscrupulous behavior and preserving access to affordable 

credit is making sure that standards for what is permissible and 

not permissible are clearly defined and understood. 

Unfortunately, Section 1031 of Dodd-Frank has added confusion 

to this area by broadening the longstanding UDAP standard to now 

include the ambiguous ‘‘abusive’’ term without providing clear guidance on its meaning. My proposed legislation is a good faith effort 

to try to provide constructive boundaries to this currently undefined ‘‘abusive’’ standard. And I would appreciate any thoughtful 

feedback on this discussion draft. 

Thank you. 

Chairwoman CAPITO. Thank you. 

I now recognize Mrs. Maloney for 2 minutes for an opening statement. 

Mrs. MALONEY. First of all, I would like to thank you, Madam 

Chairwoman, and the ranking member. 

In just 3 years, the CFPB has made huge strides on a number 

of important consumer protections, from mortgage disclosures to 

helping veterans, seniors, credit cards, to remittance transfers. In 

the process, the CFPB has established itself as a thoughtful and 

data-driven agency. Its rule-writing process has won praise from 

industry and consumer advocates, Republicans and Democrats. The 

Bipartisan Policy Center described the CFPB’s QM rule-writing 

process as ‘‘open, driven by data and research, and focused on practical application in the mortgage market.’’ 

6 

So I am concerned and a little surprised, given the Bureau’s 

record and their willingness to be open-minded, that some of the 

bills we are discussing today would hinder the Bureau’s ability to 

conduct the necessary analysis to inform its rules. I describe it as 

a death by a thousand cuts, cut here, cut there, but put it all together and it will hinder tremendously the ability of the CFPB to 

be effective. 

For instance, forcing the Bureau to define ‘‘an abusive financial 

practice’’ in just 15 days strikes me as almost reckless, that we all 

want them to be as careful and as thoughtful as possible in defining such an important term. 

Additionally, I am concerned about proposals that would prevent 

the CFPB from producing high-quality research, because these research papers have helped to inform both the Bureau’s own rules 

and our debates here in Congress. 

So I am interested in hearing more from our witnesses about 

these proposals. And I yield back. Thank you. 

Chairwoman CAPITO. Mr. Fitzpatrick is recognized for 1 minute. 

Mr. FITZPATRICK. Thank you, Chairwoman Capito. 

Any government agency that is purporting to be a data-driven organization should welcome the opportunity to operate in a more 

transparent manner. I have introduced the Bureau Research 

Transparency Act, which simply requires that research papers released by the CFPB include the studies, the data, and the analysis 

on which the paper was based. This is especially important in light 

of a pattern that has emerged in which the Bureau is engaging in 

rulemakings based on this research. 

If the research is sound, and the need for a regulation is evidence-based, then let the Bureau make available the supporting 

data and methodology so that the public and also interested parties 

have the opportunity to review the CFPB’s work. This legislation 

improves the CFPB’s rulemaking process by ensuring that its policy prescriptions are supported by objective and unbiased research. 

I look forward to the testimony. And I yield back. 

Chairwoman CAPITO. That concludes our opening statements. 

We have just been informed that votes are now pushed back another 5 or so minutes, so we are just going to soldier on here. And 

I appreciate your indulgence and your patience. 

Each of our witnesses will be recognized for 5 minutes to give an 

oral presentation of your testimony. And without objection, each of 

your written statements will be made a part of the record. 

Our first witness is Mr. Andrew Pincus, who is a partner at 

Mayer Brown LLP. Mr. Pincus? 

STATEMENT OF ANDREW PINCUS, PARTNER, MAYER BROWN 

LLP, ON BEHALF OF THE U.S. CHAMBER OF COMMERCE 

Mr. PINCUS. Thank you, Chairwoman Capito, Ranking Member 

Meeks, and members of the subcommittee. Thank you very much 

for the opportunity to appear before the subcommittee on behalf of 

the Chamber of Commerce’s Center on Capital Markets Competitiveness. 

Consumer protection is of course important for consumers, but it 

also is important for businesses. Legitimate companies are hurt 

when fraudsters lure away customers by using deceptive claims 

7 

and other marketing techniques that violate the law. And unfair 

practices can make consumers skeptical about all businesses and 

reluctant to participate in the market at all. 

The fundamental job of a consumer protection agency is of course 

to protect consumers, but to do so in a way that allows law-abiding 

companies to understand the rules and to comply with them. That 

is the only way to promote competitive, efficient, and innovative 

markets, which of course provide crucial benefits to consumers. 

Particularly important, given the state of our economy, is that is 

the only way to ensure the availability of credit that is essential 

for small businesses to create jobs, for consumers to buy a home 

or a car, and for them to send their children to college. 

I think everyone would agree that several years after the end of 

the recession, we continue to suffer from a lack of credit availability, particularly for small businesses. 

Congress recognized the reality of this dual goal in the DoddFrank Act itself, authorizing the CFPB to exercise its authorities 

for the purpose of protecting consumers against illegal practices, 

and also for the purpose, and I am quoting, ‘‘of ensuring that markets for consumer financial products and services operate transparently and efficiently to facilitate access and innovation.’’ 

Sadly, in its nearly 3 years of existence, the CFPB’s actions have 

not met this standard. First, for a number of critical legal standards, the Bureau simply refuses to provide clear rules of the road 

that would allow law-abiding companies to conform their conduct 

to the law. The subcommittee is very familiar with the Bureau’s secret legal standard for indirect auto lending and its refusal to provide any clue about what makes a business practice abusive or the 

extent of supervision needed to protect a company against vicarious 

liability for the acts of a service provider. And the Bureau has consistently refused to implement a process enabling companies to obtain advisory opinions or other forms of informal advice, even 

though other Federal agencies have long had that method available. 

Second, the Bureau frequently announces broadly applicable 

legal standards in guidance or in enforcement actions without first 

obtaining public comment to inform its decisions. The Bureau’s 

view appears to be: seek public comment only when absolutely required to do so. That inevitably leads to bad decision-making, as 

the Bipartisan Policy Center explained in its recent report criticizing the Bureau for this practice. 

Third, the Bureau seems to view statutory requirements as burdens to circumvent rather than restrictions that must be recognized. By using guidance rather than rulemakings, the Bureau can 

avoid the requirements of the Small Business Regulatory Enforcement Fairness Act that otherwise would apply, and require the Bureau to seek out and take into account the views of small businesses regarding the impact of its actions. And the Bureau has refused to employ the Small Business Regulatory Enforcement Fairness Act (SBREFA) process in guidance and other contexts, even 

though the impact of those actions on small business is significant. 

By targeting indirect auto lenders, the Bureau can try to alter 

the practices of auto dealers, notwithstanding Congress’ specific decision to expressly exclude auto dealers from the Bureau’s jurisdicVerDate Nov 24 2008 16:52 Dec 09, 2014 Jkt 088544 PO 00000 Frm 00013 Fmt 6633 Sfmt 6633 K:\DOCS\88544.TXT TERRI
8 

tion. By seeking data from 9 companies on credit cards rather than 

10, the Bureau can circumvent the notice and comment and other 

requirements of the Paperwork Reduction Act. 

Given this pattern of conduct, enactment of reasonable measures 

imposing clear rules designed to promote transparent, informed decision-making by the Bureau, such as the bills now before this committee, appear to be the only way to force the Bureau to follow the 

regulatory approach that Congress expressly specified in DoddFrank, and practices that are utilized as a matter of course by 

many, many other Federal regulatory agencies. 

Thank you. And I look forward to answering the subcommittee’s 

questions. 

[The prepared statement of Mr. Pincus can be found on page 68 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness is Ms. Hester Peirce, Senior Research Fellow 

at the Mercatus Center at George Mason University. 

Welcome. 

STATEMENT OF HESTER PEIRCE, SENIOR RESEARCH FELLOW, 

MERCATUS CENTER, GEORGE MASON UNIVERSITY 

Ms. PEIRCE. Thank you. Chairwoman Capito, Ranking Member 

Meeks, and members of the subcommittee, it is an honor to be here 

today to talk about the Bureau’s consumer financial protection. 

The Bureau’s logo is a spotlight. Unfortunately, the Bureau itself 

likes to operate in the dark. This penchant for darkness is in part 

a result of Dodd-Frank, which sought to make the Bureau independent of both Congress and the President. More fundamental 

changes, such as replacing the Director with a commission and putting the Bureau under congressional appropriations, would be necessary to address those problems fully. But incremental reforms 

can go a long way to help the Bureau do a better job of what its 

mission is, which is protecting consumers. And so, I would recommend holding the Bureau to standards of accountability and 

transparency and putting some constraints on their statutory discretion. 

One way to add some accountability would be to put an inspector 

general in place who is devoted solely to the Consumer Financial 

Protection Bureau instead of sharing the job with the Federal Reserve. The Fed got a lot of new powers under Dodd-Frank, and so 

taking care of the Fed itself is a big job, let alone also covering the 

Bureau. 

Another area in which the Bureau has been problematic is that 

its general approach is an enforcement-minded approach, and that 

is how it has approached its examinations as well. So, putting constraints on how the Bureau conducts its examinations, and reminding the Bureau that the purpose of an exam is not to find an enforcement action, the purpose is to work with well-intentioned companies to improve their compliance processes so that they work better and so that they protect consumers. 

In the area of transparency, it is very important for the Bureau 

to be clear about what its intentions are so that again, well-intentioned businesses know what is expected of them and know what 

to expect from the Bureau. And the public, too, should be able to 

9 

have an eye into the Bureau to see whether it is doing the job of 

protecting consumers with which it was charged. 

One thing that changed this week is that now the Bureau will 

be making public its Advisory Council meetings, which is a good 

change. In the past, they have been having these meetings behind 

closed doors. And that is very troubling, that other agencies all 

have to have these meetings in public, and they should do the same 

thing. 

Another area where I have noticed problems is small banks have 

mentioned that one of their really big concerns is the lack of transparency at the Bureau. They are never sure what to expect from 

the Bureau. The Mercatus Center did a survey of small banks, and 

that was one of the big complaints that we got in the survey. 

And another area in which transparency is necessary is the area 

of what data, what studies is the Bureau relying on in making its 

regulations. That is just good government, for an agency to let people know, here is what we looked at, here are the assumptions we 

made, here are the things we are uncertain about. And that leads 

to better public comment and leads ultimately to better rulemaking. 

Because the Bureau has such wide statutory discretion, putting 

some restraints on how they exercise that is very important, 

whether that would be making them define terms before they start 

enforcing them, or whether that would be telling them, no, you 

can’t set up a penalty fund that essentially is an extension of your 

budgetary authority. That is highly unusual, and it leads to very 

bad incentives for the agency. The agency’s incentives then become 

collecting penalties because they can enhance their budget that 

way rather than collecting penalties because they have figured out 

that is the right penalty amount to collect. 

And then another area in which constraints are necessary is the 

Bureau has been very aggressive in collecting data about individual 

consumers. And so, they are amassing huge amounts of data, very 

personal data, and data that is able to be tracked back to particular consumers. That practice should be reined in. 

In addition—and the Bureau is not alone in this—the Bureau 

has not developed a good track record so far in using non-APA rulemaking methods to make rules. And that practice should be 

stopped early in the Bureau’s existence. 

So I would just close with the idea that holding the Bureau to 

high standards of accountability and transparency doesn’t harm 

the Bureau’s mission; it will make the Bureau a more credible regulator. It will make it more possible for the Bureau to go out and 

hold the industry to those same high standards. Thank you. 

[The prepared statement of Ms. Peirce can be found on page 63 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness is Mr. Rob Chapman, president, American 

Land Title Association. 

Welcome. 

10 

STATEMENT OF ROB CHAPMAN, PRESIDENT, THE AMERICAN 

LAND TITLE ASSOCIATION (ALTA) 

Mr. CHAPMAN. Chairwoman Capito, Ranking Member Meeks, 

and members of the subcommittee, good afternoon. My name is Rob 

Chapman, and I am the president of the American Land Title Association, and executive vice president and chief information officer 

for Old Republic National Title Insurance Company. I joined the 

company 18 years ago. 

There is no doubt that the Dodd-Frank Act has increased the 

complexity of regulatory compliance. As we implement all of these 

rules and regulations, it has become clear that Congress needs to 

work in a bipartisan way to improve the regulatory process. The 

end result will be better compliance by businesses and stronger 

protections for consumers. 

We agree with the Bipartisan Policy Center’s report last year 

that when the Bureau operates in a transparent, open, and 

iterative manner, the results are generally positive. However, when 

the Bureau makes unilateral decisions, rolls out initiatives, rules, 

or processes in a more closed deliberation, the results are far more 

likely to be problematic. 

Our industry experienced this with CFPB Bulletin 2012–03. It 

restated longstanding Federal guidance that banks and nonbanks 

must oversee their vendors. But unlike other regulators, the Bureau offered no additional direction to help banks and nonbanks effectively oversee the action of their vendors and left many open, 

unanswered questions about how to demonstrate compliance. 

How this bulletin applies to our industry is also unclear because 

unlike a traditional bank vendor, consumers primarily choose their 

real estate settlement providers. To help our members fill this void, 

ALTA created a best practice framework for title and settlement 

companies. These are reasonable, prudent business practices. However, lots of uncertainty, varying practices and vetting procedures 

are predominant in lender-vendor management. We fear that some 

lenders will limit the number of vendors with whom they are willing to work, which will limit competition and hurt consumer choice. 

A better outcome would have been a process where CFPB consulted to reduce these unintended consequences. An example of a 

more open and transparent process that worked well is the Bureau’s rulemaking for integrated mortgage disclosure under Section 

1032 of the Dodd-Frank Act. This includes a nine-round iterative 

process and a one-time small business review panel to ensure that 

the regulation was not overly burdensome on small business. My 

written statement outlines six commonsense ways the Bureau can 

make small business review panels more effective. 

Other Bureau rulemakings did not use the small business review 

process, but probably would have been better off if they had, including the Qualified Mortgage rule. These panels encourage collaboration to produce better outcomes for consumers and business. 

Another good example of how a transparent and open process results in better outcomes for business and consumers is the Bureau’s recently released study entitled, ‘‘Mortgage Closings Today: 

A Preliminary Look at the Role of Technology in Improving the 

Closing Process for Consumers.’’ Released last month, this highly 

credible research identifies four key pain points for consumers and 

11 

industry and was the result of ample input, including interviews, 

an opportunity for public comment, and demonstrations with technology vendors. Open and transparent processes like this one led 

to a good outcome for consumers and our members. 

Based on these experiences, ALTA recommends that Congress 

work in a bipartisan way to improve outcomes for consumers and 

businesses in three ways. 

First, Congress should pass H.R. 4383. This bipartisan legislation by Representative Pittenger and Representative Heck would 

establish a Small Business Advisory Board at CFPB, similar to 

those already established for community banks and credit unions. 

They provide clear, formal, and open channels of communication 

between the Bureau and the industry. 

Second, direct the CFPB to issue advisory opinions. An advisory 

opinion provides greater certainty to those of us who comply with 

Federal consumer financial law in real-life situations. Consumers 

will see better outcomes if the Bureau spends more time advising 

people in industry how to best follow the law. 

Finally, encourage public feedback on draft policy statements, 

bulletins, and other guidance documents. Public comments ensure 

the final documents are useful and understandable to industry, 

provide a safety valve to reduce unintended consequences, and 

produce better policy outcomes for consumers and industry. 

Thank you for inviting me to testify. I am happy to answer any 

questions that you may have. 

[The prepared statement of Mr. Chapman can be found on page 

42 of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our final witness is Mr. Ed Mierzwinski, who is the consumer 

program director of the United States Public Interest Research 

Group. 

Welcome. 

STATEMENT OF EDMUND MIERZWINSKI, CONSUMER PROGRAM DIRECTOR, UNITED STATES PUBLIC INTEREST RESEARCH GROUP (U.S. PIRG) 

Mr. MIERZWINSKI. Thank you, Chairwoman Capito, Ranking 

Member Meeks, and members of the subcommittee. 

U.S. PIRG, by the way, is the witness today. But I want to point 

out that Americans for Financial Reform and six or seven other 

consumer groups recently sent up a letter that I would like entered 

into the record, if possible, that opposes all the bills on this docket 

today. 

U.S. PIRG opposes all 11 proposals before the committee. We do 

not think they are necessary to protect consumers. None provide 

any necessary oversight function. Some roll back important authorities of the CFPB, particularly the McHenry proposal, giving 

the CFPB the authority to ban or regulate forced arbitration. And 

finally, others will subject the Bureau to enormous regulatory burden and litigation risk and raise the cost of government. 

Also, most of the bills only—in fact, I think all of the bills only 

apply to the CFPB. None apply to the other regulators. And we 

don’t think that is a good idea. 

12 

Instead of enacting these bills, we would urge you to take a 

look—why don’t you have a hearing on the achievements of the 

CFPB? It would be a long hearing because they have done tremendous work. They have saved billions of dollars. They have helped 

military families. They have educated students. They have helped 

families wanting to send money overseas. They have done tremendous work. It is just a very successful agency, and I would encourage you to look at that side of the agency at some point. 

At the same time, the CFPB is a work in progress. It is a baby 

agency. It is a startup, and it is less than 3 years old, still growing. 

It has growing pains. In response to some legitimate oversight by 

this committee, it has announced new changes on staff evaluations; 

new changes, as noted by other witnesses, on its disclosure of information and the openness of its committee advisory board. So we 

don’t think the agency needs new legislation to continue to do the 

good work that it is doing. 

I am going to quickly do the lightning round on all of the bills. 

I want to spend a little bit of time on the Bureau Arbitration Fairness Act, which of course should not be confused with Representative Henry Johnson’s Arbitration Fairness Act. Consumer groups 

support that bill because it bans arbitration. 

We don’t oppose all arbitration. We only oppose forced arbitration. Let me make that clear. Consumer groups allow for the choice 

of arbitration after a dispute has already arisen. In the CFPB’s research on arbitration, research that contrary to the Chamber’s testimony has been open and transparent and many members of the 

Chamber, many members of industry have marched in and out of 

the CFPB as part of the research into that bill, the CFPB looked 

at some major class action lawsuits involving bank fraud, where 

banks were tricking consumers into paying extra overdraft fees. 

And the CFPB found that class action lawsuits on behalf of consumers had recovered hundreds of millions of dollars for consumers. 

The CFPB also looked and found that only two consumers—two 

consumers—had actually used the arbitration process individually 

to try to protect themselves. So arbitration on the one hand is a 

system that favors corporate wrongdoers, and the private rights of 

consumers to go to court buttress the work of the CFPB, the work 

of Federal laws, and the work of State attorneys general to make 

markets work. So we oppose that bill. 

Regarding your bill, Madam Chairwoman, I have to disagree. We 

oppose the CFPB Slush Fund Elimination Act. The purpose of the 

CFPB’s authority to take extra civil penalty money and use for it 

other purposes is twofold. First, when you have a financial 

fraudster who spends all the money that he stole, the CFPB can 

make his victims whole. And that is what it has done with the 

money. Second, if you have extra money left over, the CFPB has 

targeted the money to another important constituency that this 

Congress has given it: to protect military widows and widowers. 

That is financial literacy. That is what the CFPB wants to spend 

this extra money on. It doesn’t want to spend it on anything to aggrandize the purpose of the agency. 

13 

I think that they are a remedial agency, and they should have 

the authority to do remedial things. They are different than other 

agencies because they were set up to protect consumers. 

The rest of my testimony goes through all the other nine bills. 

I am happy to answer questions to talk about any of them. I respect the committee’s authority to conduct oversight. Again, your 

oversight has already resulted in the CFPB doing things to make 

changes as you have requested. 

And finally, I would just close by saying, to quote the late environmentalist Edward Abbey, I think the idea of the CFPB needs 

no defense, only more defenders. Thank you. 

[The prepared statement of Mr. Mierzwinski can be found on 

page 52 of the appendix.] 

Chairwoman CAPITO. Thank you. 

I want to thank you all for your testimony. And I will begin the 

questioning. But before I do, I will take the letters, Mr. 

Mierzwinski, and ask that they be entered into the record. Without 

objection, it is so ordered. 

And without objection, the following statements will be made a 

part of the record: the National Association of Federal Credit 

Unions; and the Credit Union National Association. Without objection, it is so ordered. 

I would like to talk about my bill, the Slush Fund Elimination 

Act. There is $96 million in that fund right now. 

And I would like to clarify for Mr. Ellison, we are kind of talking 

about two different things here. Not kind of. We are. And my bill 

would not eliminate at all any ability for the CFPB to remunerate 

or make restitutions to any victims. That is explicitly written into 

the bill. It is the rest of the money that I am concerned about. It 

is sort of sitting there, accounted for, yes, but with the only specific 

purpose to go to financial literacy. 

I am not opposed to financial literacy. We had a financial literacy 

hearing just, what, 2 weeks ago, and we found that there are financial literacy programs throughout the government that have no coordination, some accountability, but it is sort of diluted resources. 

And I think we can do a much better job in that in coordination 

with the private sector. There is lots going on the private sector in 

the arena of financial literacy, and I certainly agree there is much 

more that we can do. 

So I would like to see whatever is left in that civil penalty, rather than be in what I am calling a slush fund, because that is how 

I identify it, to go to help to eliminate the enormous debt that we 

have, after all of the victims have been paid, after a certain period 

of time, and all that is cleared out. 

So I would like to ask Mr. Pincus if you have an opinion on the 

Civil Penalty Fund and what it is used for and the transparency, 

because the Bipartisan Policy Center issued a report last fall that 

was critical of the transparency and suggested that it be used for 

other purposes. So do you have a comment on that? 

Mr. PINCUS. I do. Thank you, Madam Chairwoman. 

A couple of things. I think, first of all, it is important to point 

out how unique this is in an agency that is already unique. First 

of all, the CFPB’s budget is already quite unique because it gets 

a $600 million-plus check from the Federal Reserve without any 

14 

oversight or prior approval by the Congress or the President about 

how it is spent. The Director has sole discretion to decide how to 

spend all of that money, escalated for inflation. 

So the CFPB already has a lot of money that it decides for itself 

without prior approval by anybody how to spend. And what is happening here is yet another pot of, as you say, almost $100 million 

that is sitting around waiting for them to decide how to spend it. 

And I think it is just troubling that in an era of fiscal scarcity 

and deficits, as you said, there is this money that will be disposed 

of not to compensate victims, but for other purposes, without any 

review by the Congress, by the President, coordination with other 

programs, just as the CFPB decides. That is quite extraordinary. 

And I think it is also quite extraordinary, as one of my fellow 

witnesses said, when you think of the fact that civil penalty decisions, which have a lot of discretion in them, should be based on 

whether the punishment fits the crime. They shouldn’t be revenueraising devices. But if it is a fund that the Bureau has the ability 

to spend for all kinds of different purposes, that creates a very 

skewed incentive system that is dangerous. 

Chairwoman CAPITO. I would make note, too, that in the accounting from the CFPB, they have used this for administrative costs of 

$1.5 million. 

Mr. ELLISON. Would the chairwoman yield? I’m sorry, Madam 

Chairwoman. I seek recognition because you specifically mentioned 

me. 

Chairwoman CAPITO. Okay. 

Mr. ELLISON. I just wanted to note that in the bill, your bill, the 

slush fund bill, which I think is very unfortunately named, from 

that— 

Chairwoman CAPITO. Could you make it quick? Because I only 

have a minute. 

Mr. ELLISON. I will. From the fund that you want to eliminate 

in your bill, on November 29, 2013, in accordance with the Civil 

Penalty Fund rule, the Bureau allocated $499,000-plus to two eligible classes of victims from the American Debt Settlement Solutions, Inc., case, and $2 million-plus to eligible class victims from 

the National Legal Help Center case. 

Chairwoman CAPITO. Okay. 

Mr. ELLISON. I mention that because you seemed to imply that 

all this money is only for education purposes. 

Chairwoman CAPITO. I would like my time back. 

Mr. ELLISON. But the victims have been compensated from this 

fund. I yield back. 

Chairwoman CAPITO. If you were listening to me, I said specifically that the money goes to the victims and what is left after that, 

which is now $100 million— 

Mr. ELLISON. Well— 

Chairwoman CAPITO. I am going to claim my time here, because 

I don’t have much left. So, that is what I am getting at. 

Mr. ELLISON. You are incorrect, Madam Chairwoman. 

Chairwoman CAPITO. I have the accounting right here. 

And in any event, I would also note that—and I started on this— the administrative cost for this has already been $1.5 million. If 

the Bureau has $600 million to operate on, why do they need to 

15 

take out of the Civil Penalty Fund another $1.5 million for their 

administrative costs? 

With that, I yield back. 

Mr. Meeks is recognized for 5 minutes. 

Mr. MEEKS. Thank you. 

Let me first find out and ask Mr. Pincus, do you think there is 

a need for the CFPB? 

Mr. PINCUS. I think the purpose of consumer protection is important. I think Congress could have done it different ways. 

Mr. MEEKS. That is not my question. 

Mr. PINCUS. It established the CFPB. And I think the consumer 

protection role that it is performing is important. 

Mr. MEEKS. That is not my question. My question is a simple 

one, you can say yes or no. Do you think there is a need for the 

CFPB? Yes or no? 

Mr. PINCUS. Yes. 

Mr. MEEKS. Ms. Peirce? 

Ms. PEIRCE. No. Its functions could be done by other agencies. 

Mr. MEEKS. Mr. Chapman? 

Mr. CHAPMAN. Yes. 

Mr. MEEKS. Mr. Pincus, since you think that there is a need, are 

there any objections you have to any of the proposed bills, the nine 

bills that are before us, do you agree with all of them or disagree 

with any of them? 

Mr. PINCUS. I think there are some details on some of them that 

I think we would like to talk about. But if I could just expand on 

my yes-or-no answer to your prior question, I think there is a need 

for the CFPB. The unfortunate thing that happened when it was 

created, the original proposal of course was that there would be one 

Federal agency that would deal with consumer protection for all 

kinds of businesses that engaged in financial activities. We didn’t 

have that, as it turned out. The FTC kept all of its authority over 

this activity. 

Mr. MEEKS. Reclaiming my time, let me just say this. Because 

we have talked about all of the consumers who have been protected 

now, some reimbursed because of the bad practices. And we should 

have learned, because, you know what? Had there not been the 

fraud and the misleading that took place in the first place that 

caused us to have the financial crisis that we have had, we 

wouldn’t be talking about a CFPB now. We are talking about it because of what we learned. And that is the reason for it. That is 

why I am shocked Ms. Peirce has indicated there is no need for it 

when, in fact— 

Mr. PINCUS. If I could say, Congressman, I said there was a need 

for it. 

Mr. MEEKS. Well, Ms. Peirce said there is no need for it. 

Ms. PEIRCE. May I elaborate on that? 

Mr. MEEKS. In a second. Because when we look at what has 

taken place, if everything was fair then I would agree. But we have 

witnessed individuals where, in fact, people lost—there were over 

10 million foreclosures, 8 million jobs lost, trillions of dollars of 

wealth lost. And nobody was there to protect these individuals. 

That is why we have the CFPB. 

16 

And I am trying to find out, and if anybody says that they are 

for it, yet there is not one of these bills that is being proposed, 

which is clearly cuts that is intended to get rid of the CFPB, as 

Mrs. Maloney said, it gets into what the motivation is. Do we want 

to protect consumers? 

Mr. PINCUS. May I elaborate? I think I can answer your question. 

These bills basically impose on the CFPB practices that are routine 

for other Federal agencies. Every agency has their own IG, every 

agency except for the Federal Reserve and the CIA has to abide by 

FACA. Many other agencies have advisory opinion processes that 

are in place. The FTC and the SEC are role models of getting input 

before they issue guidance. The CFPB doesn’t do any of these 

things. 

Mr. MEEKS. I am running out of time. 

Mr. PINCUS. These are procedural changes that would bring it 

into line with those other agencies. 

Mr. MEEKS. I am running out of time. 

Because all of those agencies existed, yet still the consumers did 

not have a voice. They did not have a voice until we had the CFPB. 

Let me just ask really quick, Mr. Mierzwinski, I am just looking 

at H.R. 464, for example. How feasible would it be for the Bureau 

to comply with a requirement to not collect personally identifiable 

information about a consumer if the consumer chooses to opt out 

of being eligible for data collection? Doesn’t that go against the 

very nature of how the CFPB is supposed to work and collect data 

to protect the most vulnerable? Isn’t it the same information that 

most banks have? 

Mr. MIERZWINSKI. Absolutely. The banks already have that information. I am unaware of any of the studies that the other Representative pointed out that claim that the CFPB is collecting all 

this detailed information. In most cases, the CFPB does not collect 

personally identifiable information unless the consumer has opted 

in, for example, in a complaint. 

Mr. MEEKS. I see I am running out of time, and I heard the bells 

ring. We are going to have a vote. 

So let me just ask again: You talked about the Civil Penalty 

Fund. How would that impact consumers if they didn’t have the 

money to pay out to the consumers for their being defrauded? 

Mr. MIERZWINSKI. May I answer? 

Chairwoman CAPITO. Yes. Quickly, please. 

Mr. MIERZWINSKI. Very briefly, it is my understanding that Section D eliminates civil penalty funds and requires them all to be 

put into the general fund. That is my reading of the bill. And I 

would be happy to talk to your counsel about their reading of the 

bill, Madam Chairwoman. 

Chairwoman CAPITO. Okay. With that, this is what I am going 

to do, if we can work this out. I want the full attention of the membership. Since we only have one vote, what I would like to do is 

keep this rolling. So Mr. Duffy is going to come to the Chair. I will 

go vote and come back. Is that satisfactory to the rest of the committee? 

So we are going to go with Mr. McHenry. Do you want to question? 

17 

Mr. MCHENRY. Yes. Am I now recognized? I will take that as recognition. 

My bill is a very simple one. And I want to ask you, Mr. Pincus, 

a few questions about arbitration and the utilization of arbitration. 

We have a fairly long history in this country with arbitration being 

in statute, in Federal statute. So why is arbitration important? 

Mr. PINCUS. Arbitration is important because it is a quicker, 

cheaper, and more efficient way of resolving many kinds of disputes, especially, as members of the Supreme Court have said, the 

kind of small, individualized disputes that many consumers have. 

As you know, our courts, especially small claims courts, have incredible budget pressure, are overcrowded. They are just not a realistic option for real people who have real disputes and are trying 

to get someone to decide them. You have to go to court, you have 

to file papers. You almost always have to have a lawyer. Arbitration today you can do online or over the phone. It doesn’t have to 

be done in person. It is an informal process. And it is a way for 

people to get their disputes— 

Mr. MCHENRY. Is arbitration harmful to consumers? 

Mr. PINCUS. I think arbitration is beneficial to consumers because it gives them a way to get their disputes to a decision-maker 

and courts don’t. 

Mr. MCHENRY. Okay. So, is this a constitutional question? Is it 

a debatable constitutional or dubious under the Constitution for arbitration to exist? Or is this a policy debate? 

Mr. PINCUS. This is a policy debate. The current law is clear. The 

Federal Arbitration Act protects the enforceability of arbitration 

agreements. The reason we have this policy debate is that DoddFrank gave the Bureau the power to first investigate arbitration 

and then regulate it. But this is totally a policy question. 

Mr. MCHENRY. So is the Dodd-Frank Act a departure when it 

comes to arbitration? 

Mr. PINCUS. Yes, it is a significant departure in terms of creating 

the possibility that these claims will be placed off limits to arbitration as opposed to the Federal Arbitration Act’s rules which apply 

generally across-the-board. 

Mr. MCHENRY. So it is a departure of longstanding Federal policy? Is that correct? 

Mr. PINCUS. There have been a few other areas in Federal law 

where Congress has taken that step, but a very, very few. 

Mr. MCHENRY. Okay. Is there an incentive for the CFPB to release a study on arbitration that shows that consumers are harmed 

by arbitration? 

Mr. PINCUS. If the Bureau wants to eliminate arbitration, obviously the way to do it is to conduct a study that concludes that arbitration is bad for consumers. And what is troubling about the 

preliminary results that the Bureau released at the end of last year 

is that it seemed as if they were focused on a lot of the wrong questions and not on a lot of the right questions, which is, for a consumer, what is a realistic way of getting a dispute resolved, as opposed to what is good for lawyers, what is sort of the traditional 

way things have been done in the legal system? 

Mr. MCHENRY. Okay. So you undertook a study on arbitration. 

And what did that study find? 

18 

Mr. PINCUS. We undertook two studies. We undertook to gather 

as much of the outstanding information about arbitration that we 

could find. And what we found was the results, which seemed to 

be the most important thing, do consumers or people situated like 

them get as good results in arbitration as they do in court. And the 

answer from the studies was a resounding, yes, they do. 

Is arbitration supervised to make sure that a maliciously minded 

company couldn’t construct an unfair arbitration clause? And it is, 

under generally applicable contract unconscionability rules. Courts 

invalidate unfair arbitration clauses all the time. If the company 

general counsel is going to be the arbitrator, guess what? That arbitration clause isn’t going to be enforced. 

The other study we did, because a lot of the debate about arbitration comes down to class actions, frankly— 

Mr. MCHENRY. And the trial bar. 

Mr. PINCUS. And plaintiffs’ lawyers who embark on class actions. 

And so the question is, even if arbitration gives more justice for individualized claims, because arbitration is one by one, you are taking away class actions, and that outweighs the expanded justice for 

individual claimants. 

And so we looked at a neutrally selected group of class actions 

and found, of the ones that had decided, two-thirds gave nothing 

to the class. The one-third that were settled, and they were all settled, produced settlements that, frankly, you couldn’t trace because 

the big secret in class actions is there is a headline that says $250 

million settlement, but as we all know from getting those forms in 

the mail or seeing them in the paper, you have to file. And what 

is never revealed is how many people file and how much of that 

$250 million is distributed to real people, how much goes either 

back to the defendant or to some charity that the judge and the defendant and the plaintiff’s lawyer all pick together. And the sad 

fact is, of the ones we could find, a huge percentage, 99.9 percent 

in some cases, does not go to the consumers. 

Mr. MCHENRY. Thank you. 

Mr. DUFFY [presiding]. The gentleman yields back. 

The Chair recognizes Mr. Ellison from Minnesota for 5 minutes. 

Mr. ELLISON. I thank the Chair and the ranking member. 

Let me start by asking you this, Mr. Mierzwinski. Does the Civil 

Penalty Fund, which would be eliminated by Chairwoman Capito’s 

bill, does that bill help consumers when the business that has 

taken advantage of them and been found to be wrong doesn’t have 

the wherewithal to pay out? 

Mr. MIERZWINSKI. That is absolutely the purpose of the fund. 

And the way that it has worked so far is it has given, I think, 

about $13 million to customers of bankrupt financial fraudsters 

who otherwise would not receive any money. 

So in the examples of this big credit card add-on cases, the CFPB 

has sued five big credit card companies for misleading add-on identity theft and debt cancellation products. In the most recent Bank 

of America case just a month or so ago, they recovered $727 million 

for consumers directly. 

But there have been a number of other cases where they have imposed civil—and then they had about $100 million civil penalty 

on top of that. That civil penalty goes into the fund because there 

19 

are a number of small-time financial fraudsters who might have 

ripped off 10,000 or 50,000 consumers but don’t have the money 

like Bank of America has. That is the main purpose of the money. 

The secondary purpose is to help military widows and widowers 

and others at risk of being financially at risk, and so they are going 

to increase their financial literacy. 

And by the way, Mr. Ellison, it is not a unique fund. The Department of Justice has a similar fund. 

Mr. ELLISON. Now, if that fund were eliminated, as it would be 

with Representative Capito’s bill, what would happen to those consumers in the case where the people who defrauded them or the 

business that defrauded them doesn’t have the money to be paid 

out? What relief would they have? 

Mr. MIERZWINSKI. I respect the purpose of her bill to put money 

to help taxpayers. But it would hurt victims. 

I would urge, instead of her bill to help taxpayers, a better solution is something that my organization supports. And we have met 

with many agencies, including the CFPB. When an agency signs a 

settlement agreement, it should prohibit companies from taking a 

tax write-off on any settlement agreement with the government. 

Mr. ELLISON. We need to pursue that in any case. 

Now, if a business is able to take advantage of consumers and 

then just doesn’t have the money to pay them out, what message 

does that send to other people who might be looking to make a 

quick buck at the expense of consumers with fraud and deception? 

Mr. MIERZWINSKI. These are so-called last-dollar scammers. They 

even often go after people who are already in financial trouble. 

They don’t care, and they will be encouraged. 

Mr. ELLISON. Let me just say that I would like to introduce for 

the record an article entitled, ‘‘You won’t believe your bank’s newest fee. Suing your bank? Prepare to pay up. Thought ATM, overdraft and bounced-check fees were bad? Banks want to fine for you 

beating them in court.’’ 

Mr. Pincus, I would like to just ask you a general question before 

we run out of time. I mean, we are at bottom talking philosophy 

here. And I am a person who owned a business, and was very 

proud to be a business owner. And I just thought that if I did a 

good job for my consumers and I charged them a fair price, then 

that would be good. And the other businesses that are trying to get 

over on consumers and not do a good job, I don’t want them in the 

business. I want to get rid of these people. 

But you seem to be arguing for the bad guys. Why don’t you 

want to have a business community with people who want to give 

a good product at a fair price and get rid of all the other bad ones? 

Why don’t you want that? 

Mr. PINCUS. As I said in my opening statement, Congressman, 

I absolutely agree with you. And that is why I think consumer protection is important, that the CFPB’s purpose is important. But the 

problem is, if you are a legitimate company— 

Mr. ELLISON. Wouldn’t you agree that we are here today because 

we had a massive financial collapse in part due to people being 

taken advantage of in bad mortgaging, bad consumer practices? 

Would you agree with that, in part? 

20 

Mr. PINCUS. I think, in part, we could quarrel about that part. 

But if I could finish my other answer. I think what is critical here 

for legitimate businesses is what they want to know is what do I 

have to do to be law-abiding? I don’t want to engage in an abusive 

practice. What is abusive? So I can build a compliance system that 

doesn’t violate the rules. What can I do— 

Mr. ELLISON. Thank you, Mr. Pincus. I got my red light. I do 

need to try to get some things in for the record. I appreciate your 

answer, sir. 

There are three articles I would like to introduce into the record, 

without objection: a Washington Times article, ‘‘Mandatory Arbitration Replaces Litigation, Consumers Lose;’’ and ‘‘Protect the Rule 

of Law and Arbitration Now.’’ 

Mr. DUFFY. Without objection, it is so ordered. 

Mr. ELLISON. I think my time is up, so thank you, Mr. Chairman. 

Mr. DUFFY. The gentleman yields back. The Chair now recognizes himself for 5 minutes. 

I had one of the bills up today that provides access for the public 

to the Consumer Advisory Committee meetings. I tried to attend 

one of those meetings and was advised, per the staff of the CFPB, 

that Congressman requests would not be accommodated. 

We just found out yesterday that the CFPB has changed course 

and thought that transparency would be the best course and are 

now going to allow the public access to those meetings. They are 

diverting from the course of the CIA and the Federal Reserve. So 

I am sure you all know that, but I am pleased. 

But I guess, Ms. Peirce, to you, do you think we still need to go 

forward with legislation? I guess I would tell you, I have some concerns that it took us this much effort and this long to get the CFPB 

to agree to open up these meetings. Do you think we still need to 

go forward with legislation or do you think now they have seen the 

light and this issue is behind us? 

Ms. PEIRCE. Even before yesterday, they said that they complied 

with the FACA in spirit. And so, that seems to be a selective compliance. The problem with an agency that is run by a single director is that it runs on the whim of the director, so what they felt 

yesterday might not be what they feel next week. 

Mr. DUFFY. So you would agree that a legislative fix is still warranted? I don’t think it is necessary, but based on their interpretation. 

Ms. PEIRCE. If you put something in legislation, it is harder for 

them to ignore, although they might try. 

Mr. DUFFY. I would agree. 

I want to change course to Mr. Westmoreland’s bill. I have a real 

concern on data and the information that has come out in regard 

to the CFPB’s collection of data, but more recently, what has been 

told to us by the FHFA on the kind of information and data they 

are going to be collecting in conjunction with the CFPB. 

I guess, Mr. Mierzwinski—hopefully I didn’t slaughter your 

name—do you agree that if we want to empower consumers, we 

should give consumers an opt-out provision to make sure that government doesn’t have information on how they spend, when they 

spend, their race, their religion, their kids, that the government 

21 

should not have all this data without their permission or consent? 

Do you agree with that premise? 

Mr. MIERZWINSKI. Mr. Duffy, I don’t know any consumer or privacy organization that has endorsed the proposals to rein in the 

CFPB’s use of data. I think nobody is concerned about the government agency’s use of data. They are confident that it will protect 

it. 

Mr. DUFFY. Let me stop you there. 

Does anyone else on the panel have a concern about the data collection going on by the FHFA and the CFPB? 

Ms. PEIRCE. I am absolutely concerned, and I think, given the 

amount of information the Bureau already has, and the amount 

that the FHFA wants to add to that pile, they are going to have 

very specific, very personal information about a lot of Americans. 

And I think a lot of Americans would want to opt out of that. 

Mr. PINCUS. Yes, just last week the Chamber filed comments 

with the FHFA raising these issues. And I am surprised to hear, 

given everything that has happened with the NSA and data collection, that anybody wouldn’t be worried about a government agency 

collecting a lot of data, especially one where there have been concerns by the GAO and others about data security. 

Mr. DUFFY. And I have to tell you, what surprises me is usually 

we see liberal outrage. Traditional liberals see government and its 

expansion, especially into the privacy of others, that is an affront 

to liberal principles. And oftentimes we see liberals now coming 

forward and saying, no, this is actually a good thing, that the government should have this kind and this amount of information on 

Americans. 

I guess I would submit a question to the panel. Doesn’t it change 

the fundamental relationship that the citizenry has with the government when the government has this much information on them? 

Mr. Pincus? 

Mr. PINCUS. I think it is concerning, and I think it is very worrisome. Obviously, there are some targeted reasons that government 

needs targeted information. 

Mr. DUFFY. I agree. 

Mr. PINCUS. The construction of very large databases that are 

going to be permanent and accessible by a lot of people, I think, 

is very worrisome. 

Mr. DUFFY. I am going to rephrase my question as I have 45 seconds left. If we are here to protect consumers—and that is the objective of the Consumer Financial Protection Bureau—why 

wouldn’t you give the consumer an opt-out if that is who you are 

here to protect? 

Ms. Peirce? 

Ms. PEIRCE. I agree with that. I think the standards that the Bureau wants applied to itself are very different than the standards 

it wants applied to anyone else. 

Mr. DUFFY. Very good. 

And, Mr. Mierzwinski, why does the CFPB need to know a consumer’s religion? 

Mr. MIERZWINSKI. I wouldn’t venture to guess why the CFPB 

needs to know that except to say that the CFPB is not trying to 

22 

study individual consumers. The CFPB is trying to study markets, 

and it feels that information could help it. 

Mr. DUFFY. And what does religion have to do with markets? No 

good answer, right? You shrug your shoulders? 

Mr. MIERZWINSKI. As far as I know, Congressman, there are 

many faith-based organizations that are in the market and there 

are many companies that are faith-based, so it might matter. 

Mr. DUFFY. Very well. My time has expired. I don’t see that we 

have any Democrats. 

We will now go to the gentleman from North Carolina, Mr. 

Pittenger. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Mr. Chapman, you have been in business for 18 years, I believe 

I heard? 

Mr. CHAPMAN. Yes, sir. 

Mr. PITTENGER. Small business. You have seen a lot of transitions, I am sure, in the role of the Federal Government. Do you believe that the voice of small business is sufficiently represented at 

this time on the Bureau? 

Mr. CHAPMAN. I do not. 

Mr. PITTENGER. What would you recommend could be done to ensure that small business does have a voice? 

Mr. CHAPMAN. In the industry that I represent, the majority of 

those members of our association are small business people. And 

they need to have a voice in which they can communicate their concerns with the Bureau and be able to articulate the real world activities that are brought down. 

Mr. PITTENGER. What actions taken by the Bureau, Mr. Chapman, have impacted your business? 

Mr. CHAPMAN. As an example, when the first CFPB 2012–03 

came out, we didn’t know directly how it affected our business. So 

we are out here trying to slay dragons with no idea of what we are 

trying to thwart off. So from the title insurance settlement world, 

we are not directly regulated by the CFPB, but those that we serve, 

the lender community, have a great deal of regulatory environment 

that we need to be adherent to. So it was very, very hard for us 

to try to understand how we would keep our members relevant and 

continue to have them be applicable with the new regulations. 

Mr. PITTENGER. So do you feel, Mr. Chapman, that you and other 

members of ALTA are sufficiently represented, then, on the Bureau 

before they took these kind of actions? 

Mr. CHAPMAN. I think we have a great relationship with the Bureau, but I think there could be better representation if there was 

a small business panel. 

Mr. PITTENGER. Thank you. 

Ms. Peirce, it has been argued that small businesses have a voice 

into the CFPB’s decision-making processes through the SBREFA 

process. Are you aware of occasions that CFPB has ignored this requirement based upon a technicality? 

Ms. PEIRCE. I think it was on the QM rulemaking that they said 

they didn’t need to have a panel because the original proposal was 

done by the Fed as opposed to the Bureau. And to me, that indicates just a willingness to live and die based on technicalities rathVerDate Nov 24 2008 16:52 Dec 09, 2014 Jkt 088544 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\88544.TXT TERRI
23 

er than really seeking the input of small businesses, which should 

be what you would think the Bureau would want to have. 

Mr. PITTENGER. Did the CFPB agree to convene a SBREFA 

panel? 

Ms. PEIRCE. They did not for that rulemaking. They have for others. But, again, it is not something that they do willingly. 

Mr. PITTENGER. Ms. Peirce, if the CFPB has the power and the 

authority to ignore the law requiring that it listen to small businesses, should we provide small businesses with another avenue to 

ensure that their voices are heard at the Bureau? 

Ms. PEIRCE. I think that giving small businesses more avenues 

to speak to the Bureau will lead to their concerns being taken into 

account. 

Mr. PITTENGER. Thank you. 

Mr. Chapman, one more time. Are small businesses exempt from 

the CFPB’s supervision and examination? 

Mr. CHAPMAN. Yes, they are. 

Mr. PITTENGER. Then, how do the decisions of the CFPB that are 

intended for the largest companies end up affecting small business? 

Mr. CHAPMAN. Unintended consequences of not having representation. 

Mr. PITTENGER. So you would be in support of the bill that we 

have offered, H.R. 4383, the Bureau of Consumer Financial Protection Small Business Advisory Board Act? 

Mr. CHAPMAN. Yes. 

Mr. PITTENGER. Thank you, sir. 

Mr. Pincus, do you have any comments to offer on this? 

Mr. PINCUS. While the Chamber is also very supportive of increasing the voice of small business at the Bureau, as I said in my 

written statement and in my opening statement, there is a lot of 

concern that because the Bureau’s approach has been to only use 

rulemaking when it is absolutely required, and because SBREFA 

only applies to rulemaking, there are a lot of decisions that the Bureau is making in its so-called guidance and other areas where 

there is no voice of small business heard at all, and that is a terrible problem. 

Mr. PITTENGER. Thank you. 

Mr. Mierzwinski, I think you would have to agree, as well, that 

it surely doesn’t hurt to have the input from small business and 

concerns that they express. That makes sense, doesn’t it? 

Mr. MIERZWINSKI. Congressman, I think that through the existing panels, the SBREFA panels and the Consumer Advisory Board 

which small businesses are eligible to sit on, through the Office of 

Financial Institutions and Business Liaison—which by the way, 

was set up by the CFPB— 

Mr. PITTENGER. Sir, I am running out of time. What we are hearing from these small business— 

Mr. MIERZWINSKI. I just— 

Mr. PITTENGER. —they have not had that access. 

Mr. MIERZWINSKI. —I respect the purpose of your bill, but I don’t 

think your bill is necessary to provide the input. 

Mr. PITTENGER. According to the people who are in the real 

world, it is. 

I yield back my time. 

24 

Chairwoman CAPITO. The gentleman yields back. 

Mr. Fitzpatrick? 

Mr. FITZPATRICK. I thank the Chair. 

Ms. Peirce, on November 4th the Mercatus Center released a 

commentary entitled, ‘‘CFPB Study of the Overdraft Program.’’ And 

according to the commentary, the authority found several aspects 

of the White Paper that raise concerns, including the following: 

first, general statements that are not supported by rigorous analyses; second, selective quotations that do not provide context that 

would accurately portray the meaning as intended by the original 

source; third, leading statements in the body of the White Paper 

that are then modified in footnotes; fourth, lack of discussion of the 

economic welfare overdraft protection provides to a population with 

few other options; and finally, no discussion of the democratization 

of providing overdrafts to low- to moderate-income consumers. 

Who wrote that study at the Center? 

Ms. PEIRCE. That was by my colleague Todd Zywicki, and he 

wrote it with someone else, as well. 

Mr. FITZPATRICK. Do you agree with those findings? 

Ms. PEIRCE. I read the study, and I think it was a good study. 

Mr. FITZPATRICK. Do you believe that these flaws support the 

need for the Bureau to make the research that it relies upon public? 

Ms. PEIRCE. I think that is just good government, that you 

should make the data that you use, the assumptions that you 

make, the uncertainties that you have, you should make those all 

public. You are not trying to weaken your case, you are trying to 

draw in as much information from the outside as you can. And that 

leads to better rulemaking. This is not about the Bureau specifically. This is what all agencies are supposed to do. This is just good 

government. 

Mr. FITZPATRICK. Mr. Pincus, are you familiar with the CFPB 

study on the prevalence and use of payday loans and deposit advance products? 

Mr. PINCUS. Yes, somewhat. 

Mr. FITZPATRICK. Do you believe that the research that underlies 

the study should be made public? 

Mr. PINCUS. Absolutely. I agree with Ms. Peirce. There is no reason not to make the underlying data public of almost any study. 

Obviously, you don’t want to make public confidential information 

or personally identifiable information and whatever is released has 

to be scrubbed to take care of that. But the agency depicts itself 

as being data-driven, and any good researcher will tell you that the 

best way to be sure that you are drawing the right conclusions 

from data is to not only put out your conclusions, but make the 

data available. 

Mr. FITZPATRICK. So you are saying you can think of no reason 

not to make—there might be some even peripheral or any reason 

at all? 

Mr. PINCUS. I think you want to protect, as I said, personally 

identifiable information. There may be business confidential information that obviously would have to be protected from release, as 

that is under FOIA and other statutes. But if this is just statistical 

25 

data that isn’t being tied to anyone, that is being used to generate 

particular results, I think that is important. 

There is a lot of concern among many of the companies I talk to 

that, although the Bureau references data, a lot of what it does is 

often driven by anecdotes or sort of one-off information. And I 

think not only would releasing the data allow the Bureau’s conclusions to be tested, but it would rebut the argument and the concern 

that these are really being driven, these regulatory decisions are 

being driven by things other than data. And I think that would 

make the Bureau more credible. 

Mr. FITZPATRICK. In your experience, what do other agencies do? 

Mr. PINCUS. A lot of other agencies release data. I was struck by 

Ms. Peirce’s comment generally about openness. A lot of other 

agencies are just much more open than the CFPB. For example, I 

have some experience with the FTC. And when the FTC is thinking 

about a problem, a policy problem, what it will do is put out a notice for comment, ask for public comments, and have a day-long 

symposium where different people can debate it. All of that is 

webcast and open to the public. And then it will follow up by using 

all of that information to make its decision. 

And the Bureau has sort of taken the opposite conclusion. In the 

arbitration study, for example, that Mr. McHenry was referencing, 

it is true that the Bureau will meet with people, but it won’t tell 

anybody what it is studying. It never laid out the topics of the 

study and said, ‘‘Please submit any information you have, please 

conduct other empirical studies. If you get them in by date X, we 

will use them. Here are the studies that we are relying on.’’ 

It is a very one-way process. You can give information, but you 

don’t know if it is relevant at all to what the Bureau is doing, and 

you have no idea what the Bureau is using as its information base. 

Mr. FITZPATRICK. My time has expired. Thank you. 

Chairwoman CAPITO. Mr. Luetkemeyer? 

Mr. LUETKEMEYER. Thank you, Madam Chairwoman. 

Thank you all for being here today, too. It is extremely important. I know that we have a lot of issues here, a lot of bills that 

try and find ways to improve CFPB’s ability to do its job. Whether 

you agree with it or not, I think there is no perfect bill, there is 

no perfect agency, and to try and improve it is not something to 

be discounted. 

So I am kind of curious. All of you have, I assume, looked at the 

whole list of bills. Are there some in here that you think are fantastic or some that you think are a total waste of time? I would 

just be kind of curious about your feelings on them. I know we 

have read your statements and listened to your testimony. Give me 

a little heads-up. Give you one more shot, take a shot at the bill. 

How is that? 

Mr. PINCUS. I think the Chamber’s view is that all of these bills 

address areas that have to be addressed, that for the vast majority 

they deal with process issues in which the Bureau is following a 

path very different than other agencies, and I would just list off the 

IG. Every agency has an IG. 

As I was just saying, many other agencies before they issue guidance will have a process for getting public comment. Many other 

agencies have a process for getting advisory opinions or some kind 

26 

of informal advice. Other agencies, because of the appropriations 

process, if for no other reason, don’t have the ability to collect civil 

penalties and spend them on broad purposes. 

For example, the SEC has a procedure for depositing civil penalties that it collects into what is called a Fair Fund and distributing that to victims of securities fraud, but it doesn’t get to use 

that money for any other purpose. 

Mr. LUETKEMEYER. Okay. I don’t want to cut you off, but I would 

like to have Ms. Peirce get a chance here. 

Ms. PEIRCE. I can’t endorse specific bills, but I will say that Mr. 

Mierzwinski said something about how the Bureau is still young. 

And so I think that is the point: that the Bureau is a young agency 

and this is the time to fix the problems, because otherwise they develop into pathologies that are very difficult to correct. So anything 

you can do to kind of get them on the straight and narrow now will 

benefit consumers down the road. 

Mr. LUETKEMEYER. Mr. Chapman? 

Mr. CHAPMAN. It looks like the bill should be supported. I think 

the jury is out at this juncture, and we will still need some more 

time to answer that question specifically. 

Mr. LUETKEMEYER. Okay. 

Mr. Mierzwinski? 

Mr. MIERZWINSKI. Congressman, if you weren’t here, I opposed 

all the bills, as did Americans for Financial Reform. I think the 

most problematic is Mr. McHenry’s bill. The Chamber is losing in 

an open, fair transparent process on whether or not arbitration 

should be banned or regulated by the CFPB. That is why they support taking away the CFPB’s authority. 

I haven’t talked about a couple of the bills. Mandating advisory 

opinions by statute would be analysis paralysis, and subject the 

CFPB to numerous lawsuits. If one company’s product is determined to be good and another company’s is not so good, you are 

going to have a lot of litigation. You are going to have litigation 

over any statutory advisory opinion process. And defining the word 

‘‘abusive,’’ it is clarified in the statute, and there are several cases 

that the CFPB has brought using the abusiveness prong. 

Mr. LUETKEMEYER. Okay. Mr. Mierzwinski, I have a couple of 

questions for you, then. I have a situation where I had a local 

bank, a small bank, and the director called me and said, ‘‘Hey, we 

just got out of the CFPB meeting, we just got fined $107,000 because the entity, the small mortgage lending company that we purchased had taken out a lease that they believed, the CFPB believed 

was $300 per month above what the market is and over the course 

of 9 months overpaid $2,700.’’ They fined them $107,000. Do you 

think that is abusive? 

Mr. MIERZWINSKI. I don’t know about that case, Congressman. 

Mr. LUETKEMEYER. That is a true story, by the way. 

Mr. MIERZWINSKI. $300 and $1,700, I don’t know about that case. 

Mr. LUETKEMEYER. My question is, do you think that is abusive 

by the CFPB? 

Mr. MIERZWINSKI. I would have to look at the case. 

Mr. LUETKEMEYER. $300 above market. Their reasoning for 

fining the bank was it is going to have to raise the cost of doing 

27 

business on the rest of the clients, $2,700, make up the $2,700. Is 

that a rationale you can support? 

Mr. MIERZWINSKI. I would have to look at the case. 

Mr. LUETKEMEYER. Thank you. 

Another situation we are aware of is I had a group of bankers 

who went to the CFPB to talk to them about the QM rule. They 

were told by the CFPB folks that they were the 42nd group who 

had come there to talk about this, and yet they continued down 

this path to issue a rule that everybody in the whole industry told 

them will not work and is going to be abusive. 

I think it is time that they were reined in. I understand that 

they are new, but that is a good time also to make some changes 

to make sure they stay on the right path. 

With that, I yield back. Thank you, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

Mrs. Maloney for 5 minutes. 

Mrs. MALONEY. I want to thank all the panelists, and the chairwoman and ranking member for calling this important hearing. I 

was ranking with Mrs. Capito in other Congresses and it is an incredibly important committee. 

I agreed very much with Mr. Pincus’ opening statement that industry should support consumers because that helps industry, and 

if consumers don’t trust industry, then the investment in our products doesn’t happen. And I would venture to say that every member of industry would accept the Dodd-Frank reforms if they had 

known before and known that could have prevented what we lived 

through. 

We lost roughly $18 trillion of wealth in this country. I remember one weekend I went to bed, and by the time I woke up, there 

were about 10 companies that went under in the district that I 

have the privilege of representing. The amount of human suffering 

and corporate loss was unprecedented. 

And what is so staggering to me about that crisis is that it could 

have been prevented. Testimony after testimony before the Joint 

Economic Committee has been that it was the only financial crisis 

in our history that could have been prevented if we had regulated 

products better, mainly the subprime crisis that hurt so many 

homeowners and hurt so many people and hurt the financial industry of our country. 

So the Consumer Financial Protection Bureau, a lot of people 

have the responsibility to speak up for consumers as many on the 

panel pointed out, but oftentimes they don’t do it because they 

have other responsibilities, such as safety and soundness or the 

bottom line or whatever. They have other responsibilities that come 

before the consumer. 

So, I support the CFPB. I think it is good for the country and 

good for business to have an agency that focuses on protecting consumers, because when we are protecting consumers we are basically protecting businesses in our country. And when you take all 

of these items that are before us and you put them together, in my 

opinion, it is death by 1,000 cuts to the CFPB. And by all accounts, 

industry in my district has been complimentary to the CFPB in 

their openness to listen and their responsiveness to it. 

28 

Now, there is one that if I were industry, I would be objecting 

to. And that is the one calling upon the CFPB to issue a thoughtful 

and workable rule defining the term ‘‘abusive’’ in just 15 days, as 

one of these bills would require. And it appears to me that forcing 

the Bureau to rush to such an important definition, the definition 

of abusive financial practices, would open the final rule to litigation 

by industry, because if I didn’t like the rule, boy, I would be suing 

that it is capricious and not thoughtful to come forward with a rule 

within 15 days that would have a serious impact on my bottom line 

as an industry. 

So I just would start on this end and go down the line on whether you think 15 days to come out with such an important rule— 

does that make any common sense to you whatsoever? 

Mr. MIERZWINSKI. I think, Congresswoman, that bill is very poorly drafted in that regard. And it also—I raised the question that 

if the CFPB did that proposed rule, then held the notice and comment, then issued a final rule, does the bill allow it, if new abusive 

practices that aren’t defined by the rule occur later, does it allow 

them to have a second rulemaking? I don’t think it does. 

Mrs. MALONEY. But anyone else, do you think 15 days—let’s just 

go down the row, Mr. Chapman, Ms. Peirce, and then Mr. Pincus, 

is 15 days enough time to come back with a rule on abusive practices? It is a term that is used by the Fed all the time. But is 15 

days enough time? I would be objecting if I were a member of industry. I am just curious as to your response. 

Mr. Chapman? 

Mr. CHAPMAN. Specific to that, I am sorry, I can’t give you a factual comment. But I can say I think that the CFPB is doing a wonderful job. It just needs to look at some different transparency and 

different communications to those that it regulates. So by the nature of creating the Small Business Advisory Committee— 

Mrs. MALONEY. Actually, I support that. What is wrong with 

that? Everybody should have an advisory committee. Who cares, 

you know? There are other advisory committees all over the place. 

So I think that is a good recommendation, quite frankly. 

Mr. CHAPMAN. Thank you. 

Mrs. MALONEY. But to write a rule, a major rule in 15 days, I 

think is unreasonable. 

Ms. Peirce? 

Ms. PEIRCE. They are already using the term in their enforcement actions, so they already know what it means, and it shouldn’t 

be hard for them to write a rule. 

Mr. PINCUS. I think the particular timeline may be too short, but 

I think that the bill gets at a problem, which is, again, going back 

to the legitimate businesses that want to do the right thing, they 

don’t know how— 

Mrs. MALONEY. But Mr. Pincus, you are very knowledgeable. 

This is a term that has been used by all the regulators. Every rule 

I see coming out of the Fed uses ‘‘abusive practices,’’ so why have 

they not been called upon to define it? 

Mr. PINCUS. It has not been a term previously used in the consumer protection area, and I think that is the concern. And the 

greater concern is that what the Bureau has done, rather than create a process to at least get some input on what the consequences 

29 

might be of different interpretations, is it has used enforcement actions where it also has made claims under its ‘‘unfairness and deceptive’’ authority to put out very, very broad definitions of ‘‘abusive.’’ The cases are settled. They are never challenged. And companies don’t know what to do because what the— 

Mrs. MALONEY. The cases can be challenged. 

Chairwoman CAPITO. The gentlewoman’s time has expired. 

Mr. Barr? 

Mrs. MALONEY. They can be challenged and rules put out by the 

Fed have used the term ‘‘abusive.’’ 

Mr. BARR. Thank you, Madam Chairwoman. 

Since we are on the topic of the proposed legislation that I have 

offered relating to defining abusive practices, whether it is 15 days 

or 30 days or 60 days to develop the rule, it is important to note 

that there is a notice-and-comment period that would give regulated parties and other interested parties the opportunity to weigh 

in on the proposal, a very deliberative process. The problem is that 

the CFPB is not going through that process. There is no timetable 

now. 

And so the issue is, if we want some timetable, some deliberative 

process to give notice to regulated parties, what the rules actually 

are, let’s give them at least 15 days, maybe more, and then give 

them more time to have a notice-and-comment rulemaking process. 

I think it goes to the good testimony of Mr. Pincus and Ms. Peirce 

that the regulated parties here don’t know what the rules of the 

road are. 

And so to that point, let me go beyond the argument Ms. Peirce 

makes about, this is just good government and that we want to 

eliminate legal uncertainty. Is there legal authority for the CFPB 

to simply ignore the Administrative Procedure Act and just engage 

in ad hoc, after-the-fact rulemaking? It is almost as if you say there 

is a reasonable speed limit, we are not going to tell you what it is, 

but here are the keys, go out on the road, and the police officer who 

pulls you over is going to decide there on the spot whether or not 

you get a ticket. 

Is that a proper analogy here, Ms. Peirce? 

Ms. PEIRCE. I think it is. In fact, that is what Director Cordray 

has said. He said, ‘‘Well, you will know it when I see it and when 

I tell you I have seen it. And that is just not an acceptable way 

for a regulator to work, and that, to your point, is the reason that 

we have the Administrative Procedure Act. It is so that we have 

rulemaking done in a very careful way with input and then people 

will know which standards they are subject to. 

Mr. BARR. Mr. Pincus, in defining the boundaries of what the 

abusive standard actually should be, obviously the draft legislation 

has a 60-day notice and comment period. Does providing that period give the public sufficient opportunity to provide input so that 

the rule and the definition of abusive can be the right standard? 

Mr. PINCUS. Yes, I think it does. 

Mr. BARR. And what would be the consequences of lack of public 

input? 

Mr. PINCUS. What happens when there is no public input is that 

regulatory standards get devised without the agency knowing what 

the consequence is and also get sort of elaborated on in a way that 

30 

companies that absolutely want to be law abiding don’t know what 

the rules are, can’t build compliance systems that screen out what 

has been determined to be bad behavior. 

And the other problem that we have here is that the Bureau 

seems to be going down a path of defining ‘‘abusive’’ in just the way 

Congress said—to do just what Congress said the Bureau couldn’t 

do, which is to impose suitability requirements for financial services and products. Because what it said in these few settlements 

where it is mentioned abusive is that what was abusive, it appears 

to be, it is very oblique, but what it appears to be is that the company could have known if it had put a bunch of information together that this product wasn’t right for this consumer, and because the product was offered to these consumers, that was abusive. And that obviously goes directly contrary to Congress’ intent 

in removing suitability authority when Dodd-Frank was being legislated. 

Mr. BARR. And does after-the-fact enforcement and ad hoc enforcement without a clear rulemaking that gives advance notice to 

regulated entities also increase the likelihood of inconsistent enforcement? 

Mr. PINCUS. It increases the likelihood of inconsistent enforcement, and what it does is chill companies from entering the market. If you don’t know what the rules of the road are, the only safe 

thing to do is don’t do anything new or different, don’t try and 

serve a market that is underserved, because you may get into trouble. 

Mr. BARR. Yes. And, Mr. Mierzwinski, Director Cordray said that 

we expect a marketplace where companies are honest and clear so 

that consumers know the key terms and conditions of financial 

products up front. Shouldn’t that same philosophy apply to the regulator, that the regulator should be honest and clear and provide 

what the rules are up front so that the American people know what 

the rules are before they are asked to comply with the rules? 

Mr. MIERZWINSKI. Congressman, I would simply say that if the 

companies that had lost the abusiveness cases thought they had a 

case, their learned counsel would be down at the D.C. Circuit Court 

appealing those decisions. 

Mr. BARR. One final question. You had mentioned in your testimony, sir, that this is a start-up agency going through growing 

pains. Should the CFPB apply a more relaxed scrutiny to start-up 

banks or financial institutions or lenders that are experiencing 

growing pains? 

Mr. MIERZWINSKI. I think it does. I think it does already. I think 

it is a very flexible agency, sometimes much more flexible than people on the Hill really know. And you should go down there. They 

will have you in for a visit. 

Mr. BARR. Thank you. I yield back. 

Chairwoman CAPITO. The gentleman’s time has expired. 

Mr. Green? 

Mr. GREEN. Thank you, Madam Chairwoman. 

I thank the witnesses for appearing. I am intrigued by the style 

of the hearing which deals with transparency and accountability, 

and I think it is appropriate to have transparency and accountability. But I am intrigued because H.R. 4662—and I am pleased 

31 

that the sponsor is present—would have a statement issued that is 

confidential. It deals with the advisory opinions. 

And I am willing to yield to my friend to have him give me—Mr. 

Duffy, if you would. Mr. Duffy? 

Chairwoman CAPITO. Mr. Duffy? 

Mr. GREEN. I’m sorry. I didn’t mean to interrupt you. I just wanted to ask you about your bill. Might you and I have a polite exchange? 

Mr. DUFFY. Oh, absolutely. 

Mr. GREEN. Because I do commend you and compliment you on 

a good many of your accomplishments, especially seven children. 

Mr. DUFFY. Thank you. 

Mr. MULVANEY. That is actually what we were talking about. 

Mr. GREEN. All girls? 

Mr. DUFFY. Five girls, two boys. He wanted to know if I know 

what caused that, and I said Catholicism. 

Mr. GREEN. Okay. But I am very serious and this is with the 

best of intentions that I ask: Why would we have a confidential 

opinion given as opposed to an opinion that all could benefit from, 

given that we are seeking transparency? And honestly, my question 

is with the best of intentions. And I would ask you to give me your 

response. 

Mr. DUFFY. Are you talking about my bill— 

Mr. GREEN. I think it is—H.R. 4662 is yours, isn’t it? 

Mr. DUFFY. The consumer advisory bill? 

Mr. GREEN. Right. Yes, sir. 

Mr. DUFFY. And I’m sorry, your question again is? 

Mr. GREEN. My question has to do with the confidentiality associated with the opinion that is requested, and I am asking why 

would it be confidential? We are talking about transparency. Why 

would you want an opinion that others can’t benefit from? 

Mr. DUFFY. I don’t know that I have a confidentiality portion of 

my bill. 

Mr. GREEN. Unless I have a bad copy, I am assuming this is H.R. 

4662. 

Mr. DUFFY. I am going to move down here, as we talk, to my materials. 

Mr. GREEN. Okay. Great. It is titled, ‘‘the Bureau Advisory Opinion Act.’’ Is that yours? 

Mr. DUFFY. That is Mr. Posey’s bill. 

Mr. GREEN. Mr. Posey’s. 

Mr. DUFFY. You were confusing me there for a moment. 

Mr. GREEN. All right. Sorry about that. He is not the guy with 

the kids. Okay. He is not here. 

I didn’t want to bring this up without the person who actually 

is the sponsor being here. And the bill does deal with confidentiality. 

So with that said, let me just ask the panel, why would we have 

a confidential opinion? And I am asking with the best of intentions. 

Why would we want to have opinions issued that are not available 

for others to benefit from given that we are placing transparency 

on a pedestal? Why would we do this? 

Mr. MIERZWINSKI. If you are starting at the left end, I would say, 

Congressman, I don’t know why we would do that bill because I 

32 

think that it puts the Bureau into very complicated, murky legal 

terrain. There would be challenges. 

And the other thing about it is that it is a tremendous resource 

drain. The Bureau has to write rules, the Bureau has to conduct 

enforcement, it has to study markets, it has to provide information 

to consumers, and now it has to deal with every single request 

from any company for an advisory opinion that is private. It doesn’t 

make sense to me. 

Mr. GREEN. Would someone else like to respond? 

Mr. CHAPMAN. I think the opinion should be open and available 

to the public, redacted where appropriate. 

Mr. GREEN. Yes. 

Mr. PINCUS. I think the practice of many agencies is that they 

are open. I think the question is, if a company has a business confidential, a new idea that it doesn’t want to share with the rest of 

the world but wants to get some advice, is there a way to redact 

the confidential information, which other agencies do, so that the 

advice is there but the idea remains—the company that is seeking 

to do the right thing keeps the ability to capitalize on its idea? 

Mr. GREEN. Have you read this bill? 

Mr. PINCUS. I have. 

Mr. GREEN. You have? Do you believe that is what is accomplished with this bill? 

Mr. PINCUS. I am not sure that this language does exactly that. 

I think there probably is a way to provide for opinions to be published or to be put up on the Web site, which is what people do 

now, but to provide that business confidential information as it is 

in other circumstances is redacted so that is protected. 

Mr. GREEN. Thank you, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

I now recognize Mr. Westmoreland. 

Mr. WESTMORELAND. Thank you, Madam Chairwoman. 

Mr. Mierzwinski, I want to follow up on an answer that you gave 

Mr. Duffy earlier. I’m sorry, I was not here. But you said that the 

CFPB should collect information about religion because the CFPB 

is monitoring markets and not individuals. Was that your statement? 

Mr. MIERZWINSKI. Generally, yes. 

Mr. WESTMORELAND. Okay. 

Mr. MIERZWINSKI. Could they collect the information, but I said 

it is not important to study the consumer. They want to study markets. And in follow-up, I said to the Congressman—he asked me 

why, and I said, well, I think there are a lot of companies that target people of different faiths and it might be something you want 

to study because of that. 

Mr. WESTMORELAND. Okay. Then, why would they need to collect 

Social Security numbers or GPS locations of somebody’s house if 

they were just doing market research? 

Mr. MIERZWINSKI. Market research today involves trying to figure out what companies are doing with information. What this has 

to do with is— 

Mr. WESTMORELAND. I know, but what would that have to do 

with an individual? 

33 

Mr. MIERZWINSKI. I’m sorry, they are trying to find out whether 

or not you, at your location, are being treated differently than me, 

at my location, all other things being equal, and how companies are 

marketing to people in three dimensions. 

Mr. WESTMORELAND. With a GPS system, not just a ZIP code? 

Don’t most people do it by ZIP code? 

Mr. MIERZWINSKI. Most companies, Congressman, are now tracking you on your mobile phone. They want to know where you are 

at any time of the day. 

Mr. WESTMORELAND. So you think that is appropriate, for the 

CFPB to track you on your mobile phone? 

Mr. MIERZWINSKI. The CFPB, I understand, is collecting data 

sets that include it. I don’t think they are tracking people in the 

way that the companies are tracking people. I think that if they 

are collecting, and I would have to look at this FHFA study, if they 

are collecting data, they are collecting data on what the companies 

are doing with GPS data. They are not tracking you. 

Mr. WESTMORELAND. Okay. You also, I think, said that consumers trust the CFPB? 

Mr. MIERZWINSKI. Oh, I think the consumers do. 

Mr. WESTMORELAND. Now, have you done a poll on that or what 

have you done to prove that? Just talk to people in your neighborhood? 

Mr. MIERZWINSKI. Congressman, Americans for Financial Reform 

has conducted surveys, legitimate statistical studies; Celinda 

Lake’s organization, Lake Research, has done them for us. I would 

be happy to enter them into the record. But I don’t know if we have 

a question, do we trust the CFPB’s use of privacy? But we absolutely have questions, do you trust the CFPB and do you see a 

need for an agency that has only one job, protecting consumers? 

Absolutely. 

Mr. WESTMORELAND. It is interesting that their one job is to protect consumers, yet they have more information than the NSA does 

or any other agency in the government on these consumers, and 

the people who have as a repository for this information do not 

have a security clearance other than just a background check. 

So do you think that gives the consumer any type of sense of protection, and do they understand when they answer one of these 

surveys that somebody sends out that they have all this information and that the people who hold it do not have any type of security clearance? 

Mr. MIERZWINSKI. I am unaware, and I would be interested in 

the committee’s background memos, because I don’t have them, 

and I was asked to testify just a few days ago. I haven’t found out 

whether any agency that collects personally identifiable information (PII) requires a security clearance of all the employees who 

have a chance to look at it. But I don’t think that the American 

public is concerned right now. The CFPB is responsive to OMB’s 

requirements on protection of data and they are doing it. 

Mr. WESTMORELAND. I don’t think there is a lot of faith in the 

IRS that they are keeping that data confidential either. And it is 

just amazing to me that this start-up agency has the access to all 

of somebody’s personal information. I just think that is of great 

concern to the American people that these folks have nothing but 

34 

a background check, no security clearance, no confidential clearance, nothing else, but yet to be a Consumer Financial Protection 

Board one breach, one thing from them, it could be—and identity 

theft is the worst crime that we can have for somebody’s credit 

right now. 

So with that, ma’am, I know my time is up, and I yield back. 

Chairwoman CAPITO. Mr. Scott? 

Mr. SCOTT. Thank you. I just got back from voting. 

I have a couple of questions. Ms. Peirce, I think it was you who 

said that you didn’t think there was any need for the CFPB. Is that 

correct? 

Ms. PEIRCE. It is correct that I said that. My thinking is that the 

functions that the Bureau performs could be performed by existing 

agencies. 

Mr. SCOTT. What existing agencies? 

Ms. PEIRCE. The banking regulators could have performed the 

functions that were given to the Bureau. And there are good arguments— 

Mr. SCOTT. You are very much aware that the banking regulators could not provide the function to prevent the Wall Street 

crash? 

Ms. PEIRCE. I agree with you that they did not do a good job, and 

so giving regulators more authority is not the answer that I would 

have written. 

Mr. SCOTT. That is very revealing what you said. The CFPB, 

without question, is needed, there is no question about that, to protect consumers. Adjustments, perhaps, in certain cases, yes. There 

is no law that is perfect. There is no approach that is perfect. But 

it just struck me as rather odd that you were the only one who said 

that and would refer to agencies when those agencies didn’t do the 

job, the main job, that caused the need for the CFPB in the first 

place. 

Ms. PEIRCE. I think that we are all here today to see that the 

Bureau that does have those authorities is doing the job right, and 

I think that is why additional protections are needed on how they 

do that. 

Mr. SCOTT. Yes, I agree with you, and I agree with you 100 percent on that statement. What I don’t agree with you on is that we 

didn’t need it. But I am glad to hear you say that what you want 

to do is make it work and make it apply. But let there be no question, we need this. And I work with the CFPB. There are areas 

there that I am working with them on where we can fashion and 

we make the industry. 

There is no law we have on the books, there is no policy we have 

on the books that is foolproof. We are still working with things like 

Medicare, Social Security, whatever it is, you are constantly working with. But, again, I am glad I clarified that, and I certainly welcome your work with us to fix the ailments that may come up with 

the CFPB. 

I wanted to talk about something that hadn’t been talked about, 

though, and that is Mr. Stivers’ bill on inspector general reform. 

Now, that gives me some problems, too. 

And, Mr. Mierzwinski—I hope I didn’t murder your name, but 

Mierzwinski, I think, all right—what is going on here? It seems to 

35 

me the IG that we have in place is basically working. Why do you 

think we need a new one? Do you agree with this, that we need 

a new IG in there? 

Mr. MIERZWINSKI. I am always surprised when the majority 

party asks to make government bigger. It does surprise me. And 

I would point out in my testimony I have a letter, excerpts from 

a letter that the Inspector General for the Fed and the CFPB sent 

to the Bipartisan Policy Center, the group that organized and supported in their report this notion of an independent IG, and the Inspector General found mistakes in that BPC report, and he asked 

for them to be retracted. And he also said we absolutely have all 

the authorities, all the power, and all the resources we need to continue to do this job. So, again, I don’t see the need for the legislation. 

Mr. SCOTT. Do you or any of you on the committee, is there any 

evidence that even would suggest that the current IG has failed to 

conduct rigorous and adequate oversight of the CFPB? So no evidence, nothing— 

Ms. PEIRCE. I would argue that there certainly is more work that 

they could have done. And I think the other half of that problem 

is that the Federal Reserve got a lot of new powers under DoddFrank, and I think the Federal Reserve is woefully underinspected 

by their Inspector General. So I think that there is work to be done 

on both agencies that is not getting done. 

Mr. SCOTT. All right. But you don’t have any specific examples 

or evidence where— 

Mr. STIVERS. Would the gentleman yield? 

Mr. SCOTT. Sure. 

Mr. STIVERS. I don’t know if you are aware, and it is in the committee’s report, but in the 15 reports that the Fed’s IG was supposed to do on the CFPB, there were 35 delays. And if you find 

that acceptable, then maybe you are okay with the current situation, but I don’t find that acceptable. 

Mr. SCOTT. I also think if you would look at several other IGs 

in several other agencies, the Veterans Affairs IG comes to mind, 

you can come up with some examples of that. But I am talking 

about rigorous enforcement, a need to overhaul and replace them 

with a totally new IG, correct that malfunction, and move on. I 

don’t see where there is a need for the entire new IG. 

But anyway, Madam Chairwoman, thank you. 

Mr. STIVERS. Would the gentleman yield again? 

Chairwoman CAPITO. The gentleman’s time has expired. 

Mr. SCOTT. Yes, I already yielded. 

Mr. STIVERS. I will make my points during my time, then. 

Chairwoman CAPITO. Mr. Mulvaney? 

Mr. MULVANEY. Thank you, Madam Chairwoman. Thank you to 

both you and the ranking member for letting me participate in this 

subcommittee today. 

Mr. Pincus, when you started off, one of the very first things you 

said was that one of the difficulties that many of the companies 

that are regulated by the CFPB are facing is that they just don’t 

know what the rules are. They want to abide by the rules, but they 

just don’t know what the rules are because either they don’t exist 

or they are not clearly defined. 

36 

Mr. Mierzwinski, you did not get a chance to comment on my 

proposed legislation in the long list of ones that you talked about 

at the beginning, but let’s talk about that now if we get a chance. 

Because I understand that one of the complaints I hear is that it 

takes too long to get these rules put in place. The examinations 

take too long. It takes too long to get the final reports. I think that 

the CFPB actually has internal goals on its own, they are not statutory, for 65 days for supervisory letters, 110 days for depository 

institutions’ final reports. 

So one of the things my proposed bill does, the Bureau Examination Fairness Act, is to codify those deadlines and to give the CFPB 

60 days to do the initial investigation, and 120 days to actually 

come up with the final decision, which could be extended to 180 

days one time. 

What is wrong with that, Mr. Mierzwinski? 

Mr. MIERZWINSKI. Congressman, first of all, on your bill, I think 

that the Bureau has already accepted the basic premise of your 

bill. They are no longer doing ride-alongs for the enforcement staff 

in the examination process. So, examiners are not being accompanied by enforcement staff. 

But I think it should be made clear in your bill that if an examiner finds evidence of continuing mistakes or problems at a company, they ought to be able to call an expert enforcement official 

to discuss it with them, and it is unclear from your bill whether 

you can do that. 

But getting to the part you are talking about, I think Congress 

imposing deadlines like that on examiners and with so many of the 

terms undefined for the coordinated examinations and the overlapping examinations and that limit of $50,000—by the way, I think 

that would benefit the bigger banks at the expense of the smaller 

banks— 

Mr. MULVANEY. Let’s stay on the number of days first, because 

you have touched on a couple of things, and I want to try and touch 

on all of them in 2 minutes and 40 seconds. But let’s stay on just 

the number of days. If 60 and 120 days aren’t the right numbers, 

what are? 

Mr. MIERZWINSKI. Again, I don’t know that the other bank regulators—some bank regulators have permanent examiners at banks. 

Mr. MULVANEY. That is not my question. What is the number? 

Mr. MIERZWINSKI. When there is a permanent examiner at a 

bank, what is the number they are using? I don’t know. 

Mr. MULVANEY. Are 60 and 120 days the right number, Mr. 

Pincus? Ms. Peirce? Anybody? Do you have any thoughts on this? 

Mr. PINCUS. I think it is the number the Bureau itself came up 

with, so that sort of indicates that it is the right number. And I 

think, talking to a lot of companies, this is a huge difference between Bureau examinations and examinations by the safety and 

soundness regulators, is that the Bureau examinations never end. 

Even if safety and soundness regulators are on the premises, the 

examinations have a time period, there are lots of different ones, 

and you get a closing letter at the end that tells you how you did 

or what you have to fix. 

And the frustration for many, many, many banks and other institutions that are being examined is they never get the end. It is just 

37 

everything is held open forever. There is no closure. Again, people 

don’t know what the rules of the road are so that they can implement what other changes they have to implement. And meanwhile, 

some other examination on another topic has started and is overlapping and that is a huge consumption of resources. 

Mr. MULVANEY. Let’s come back to the enforcement agents, the 

ride-alongs, because you are exactly right, Mr. Mierzwinski, you 

mentioned that the CFPB has stopped doing that. What is wrong, 

then, with codifying that? Again, all I think I am doing with my 

60 and 120 days is codifying what the Bureau says is its best practice? And I would like to codify that for the enforcement agency, 

as well. Do you have a difficulty with that? 

Mr. MIERZWINSKI. Again, as I said, I am not sure that applies to 

other agencies as well, does it? Do the other agencies have a prohibition on ride-alongs in statute? 

Mr. MULVANEY. Some of them do, yes. 

Mr. MIERZWINSKI. Then, again, the question is could an enforcement agency take a phone call from an examiner under your bill? 

Mr. MULVANEY. I don’t know the answer to that question. But 

generally speaking, do you have difficulty with codifying these 

rules? Do you think that an agency should operate under defined 

rules from Congress, or do you think they should be able to make 

up their own rules on how they want to function? 

Mr. MIERZWINSKI. I have always felt that agencies are expert and 

Congress should provide overriding general statutes, but putting 

numbers into statutes is always problematic. 

Mr. MULVANEY. And I guess doing what you have just suggested 

then would be overly problematic because the oversight ability we 

have is extraordinarily limited. If they get to make up their own 

rules on how long they want to take—or not make up any rules— 

I don’t know what oversight is available to us. 

I had some other questions about the 50,000, but I am out of 

time. So I appreciate the opportunity. 

Chairwoman CAPITO. Thank you. 

Mr. Stivers? 

Mr. STIVERS. Thank you, Madam Chairwoman. I really appreciate the chance to have this hearing, and I appreciate the witnesses being here today. 

I want to talk a little bit about the bill that the gentleman from 

Georgia brought up earlier, my bill, that is a bipartisan bill to create an independent Inspector General for the CFPB. 

As everybody in the room knows, the CFPB has no budget that 

is approved by Congress. They are not a board. It is one individual 

who runs the organization, and they draw down their money from 

the Federal Reserve. And unlike the 50 other agencies that have 

independent Inspectors General—and when I say independent, I 

mean appointed by the President, confirmed by the Senate—the 

CFPB has an Inspector General who is appointed by the head of 

the Federal Reserve, but not confirmed by the Senate. It does not 

make sense. 

And so, I think they should be on the same plane as the SEC, 

the CFTC, the FHFA, the FDIC, and the Treasury. That is all we 

are asking for here. This is a bipartisan bill. It is a bipartisan solution. And one of the witnesses suggested that they don’t like it 

38 

when Republicans want to grow government. I just want to make 

government work better. There is nothing wrong with having 

transparency and accountability for everybody. 

Does anybody on the panel know of any reason why the CFPB 

should be created or treated any differently than the other 50 agencies that have an Inspector General who is appointed by the President of the United States and confirmed by the United States Senate? 

I will take that as a no. 

So is there anybody on the panel who believes that transparency 

is a bad thing, accountability is a bad thing? 

Is there anybody on the panel who believes that transparency is 

a good thing? 

Mr. PINCUS. Yes. 

Mr. STIVERS. I will note that every witness is shaking their head 

that transparency is a good thing. 

Now I will, Mr. Mierzwinski—is that how you pronounce your 

name, sir? 

Mr. MIERZWINSKI. Very good. 

Mr. STIVERS. Is that correct? 

Mr. MIERZWINSKI. Correct. 

Mr. STIVERS. You had a dialogue earlier with the gentleman from 

Georgia to which I interjected that the CFPB—the Fed Inspector 

General has had 15 reports relating to the CFPB, and they have 

had 35 delays on just 15 reports. Do you find that acceptable? 

Mr. MIERZWINSKI. I don’t find that necessarily acceptable, but I 

would have to compare it to other IGs. 

Mr. STIVERS. So you don’t want to compare it against any sort 

of regular standard that when they make their work plan they report their work plan to our oversight committee every quarter. You 

don’t think it should be that they get to make their own work and 

plan their work and they should generally meet the deadlines they 

set. Nobody set these deadlines for them; they missed their own 

deadline 35 times on 15 reports. 

So you could compare that and say, well, everybody else is really 

bad so it is okay for them to be really bad. But I think for accountability and transparency and for the taxpayers, we want them to 

meet their own deadlines. And you may or may not know that they 

have over twice as many people, the Fed Inspector General oversees double the number of employees as overseen at the Federal 

Trade Commission, the Consumer Product Safety Commission, the 

NCUA, or the CFTC. The problem is they oversee a lot of folks, and 

that is a problem. 

I guess the other question I would have for Ms. Peirce is, so the 

Fed Inspector General serves the Federal Reserve Board and the 

Consumer Financial Protection Bureau. Do the missions of these 

two agencies differ? 

Ms. PEIRCE. They differ significantly. 

Mr. STIVERS. Can you serve two masters in two missions easily? 

Mr. PEIRCE. That is my big concern, is the Inspector General 

should get to know the agency for which he or she is Inspector 

General. And having to know both the Fed and the CFPB is a very 

difficult task. 

Mr. STIVERS. And, Mr. Pincus—is that how you pronounce it? 

39 

Mr. PINCUS. Yes. 

Mr. STIVERS. Mr. Pincus, the CFPB is a start-up agency. It now 

has over 1,300 employees. In your experience, when is the time 

that you can make the most mistakes in an agency, is it when you 

are a mature agency or when you are a start-up agency? 

Mr. PINCUS. I think mistakes are possible all the time. But certainly when you are a start-up, the growing pains can often lead 

to problems. And it is also the time when bad practices can get institutionalized or—rooted out right at the beginning, which is obviously preferable. 

Mr. STIVERS. If the CFPB were to have their own Inspector General, Mr. Pincus, don’t you believe that they could root out those 

potential institutional policies? For example, the CFPB just, I believe—I don’t know if it is public—had an issue with discrimination. And they are only 21⁄2 years old. And they paid out millions 

of dollars related to that. Does that sound like it could have been 

something that could have been prevented if they had their own Inspector General? 

Mr. PINCUS. Absolutely. The Inspector General would have been 

looking at what was going on and giving independent advice. 

One of the problems for the CFPB, as Ms. Peirce mentioned earlier, is unlike all the other agencies you mentioned that have multimember commissions, it is just one Director. So the opportunity to 

have input from others who might have a different perspective just 

isn’t there. And an IG would supply that. 

Chairwoman CAPITO. The gentleman’s time has expired. 

Mr. STIVERS. Thank you, Madam Chairwoman. 

Chairwoman CAPITO. In conclusion, I would like to thank all of 

you. Thank you for your patience. I know we were a little in and 

out here. But I think we got a lot of good information, and I appreciate everybody’s opinion. 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

Without objection, this hearing is adjourned. 

[Whereupon, at 4:05 p.m., the hearing was adjourned.] 

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