U.S. GOVERNMENT PUBLISHING OFFICE

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CFPB’S ROLE IN 

EMPOWERING PREDATORY LENDERS: 

EXAMINING THE PROPOSED REPEAL OF THE 

PAYDAY LENDING RULE 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ECONOMIC AND CONSUMER 

POLICY 

OF THE

COMMITTEE ON OVERSIGHT 

AND REFORM 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED SIXTEENTH CONGRESS 

FIRST SESSION 

MAY 16, 2019 

Serial No. 116–25 

Printed for the use of the Committee on Oversight and Reform 

( 

Available on: http://www.govinfo.gov 

http://www.oversight.house.gov 

http://www.docs.house.gov 
(II) 

COMMITTEE ON OVERSIGHT AND REFORM 

ELIJAH E. CUMMINGS, Maryland, Chairman 

CAROLYN B. MALONEY, New York 

ELEANOR HOLMES NORTON, District of 

Columbia 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

JIM COOPER, Tennessee 

GERALD E. CONNOLLY, Virginia 

RAJA KRISHNAMOORTHI, Illinois 

JAMIE RASKIN, Maryland 

HARLEY ROUDA, California 

KATIE HILL, California 

DEBBIE WASSERMAN SCHULTZ, Florida 

JOHN P. SARBANES, Maryland 

PETER WELCH, Vermont 

JACKIE SPEIER, California 

ROBIN L. KELLY, Illinois 

MARK DESAULNIER, California 

BRENDA L. LAWRENCE, Michigan 

STACEY E. PLASKETT, Virgin Islands 

RO KHANNA, California 

JIMMY GOMEZ, California 

ALEXANDRIA OCASIO-CORTEZ, New York 

AYANNA PRESSLEY, Massachusetts 

RASHIDA TLAIB, Michigan 

JIM JORDAN, Ohio, Ranking Minority Member 

JUSTIN AMASH, Michigan 

PAUL A. GOSAR, Arizona 

VIRGINIA FOXX, North Carolina 

THOMAS MASSIE, Kentucky 

MARK MEADOWS, North Carolina 

JODY B. HICE, Georgia 

GLENN GROTHMAN, Wisconsin 

JAMES COMER, Kentucky 

MICHAEL CLOUD, Texas 

BOB GIBBS, Ohio 

RALPH NORMAN, South Carolina 

CLAY HIGGINS, Louisiana 

CHIP ROY, Texas 

CAROL D. MILLER, West Virginia 

MARK E. GREEN, Tennessee 

KELLY ARMSTRONG, North Dakota 

W. GREGORY STEUBE, Florida 

DAVID RAPALLO, Staff Director 

RICHARD TRUMKA, Subcommittee Staff Director 

WILLIAM CUNNINGHAM, Chief Counsel and Senior Policy Advisor 

JOSHUA ZUCKER, Assistant Clerk 

CHRISTOPHER HIXON, Minority Staff Director 

CONTACT NUMBER: 202-225-5051 

SUBCOMMITTEE ON ECONOMIC AND CONSUMER POLICY

RAJA KRISHNAMOORTHI, Illinois, Chairman 

MARK DESAULNIER, California, 

KATIE HILL, California 

RO KHANNA, California 

AYANNA PRESSLEY, Massachusetts 

RASHIDA TLAIB, Michigan 

GERALD E. CONNOLLY, Virginia 

MICHAEL CLOUD, Texas, Ranking Minority 

Member 

GLENN GROTHMAN, Wisconsin 

CHIP ROY, Texas 

CAROL D. MILLER, West Virginia 
(III) 

C O N T E N T S 

Page 

Hearing held on May 16, 2019 ............................................................................... 1 

WITNESS

Thomas Pahl, Policy Associate Director for Research, Markets and Regulations, Consumer Financial Protection Bureau 

Oral Statement ................................................................................................. 4 

* The prepared statement for Mr. Pahl is available at the U.S. House of 

Representatives Repository: https://docs.house.gov. 

INDEX OF DOCUMENTS 

The documents entered into the record during this hearing are listed below, 

and available at: https://docs.house.gov. 

* Emails Show Pro-Payday Loan Study Was Edited By The Payday Loan 

Industry, submitted by Rep. Krishnamoorthi 

* How a Payday Lending Industry Insider Tilted Academic Research in 

Its Favor, submitted by Rep. Krishnamoorthi 

* How Predatory Payday Lenders Plot to Right Government Regulation, 

submitted by Rep. Krishnamoorthi 

* Millions of People Post Comments on Federal Regulations. Many are 

Fake, submitted by Rep. Krishnamoorthi 

* Payday Lenders Drum Up Customer Support to Ease Regulations, submitted by Rep. Krishnamoorthi 

* Payday Lenders Get Thousands of Borrowers to Complain to Government 

About Rules Meant to Protect Them, submitted by Rep. Krishnamoorthi 

* Payday Loan Group Paid KSU for Favorable Research, Records Show, 

submitted by Rep. Krishnamoorthi 

(1) 

CFPB’S ROLE IN 

EMPOWERING PREDATORY LENDERS: 

EXAMINING THE PROPOSED REPEAL OF THE 

PAYDAY LENDING RULE 

Thursday, May 16, 2019 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ECONOMIC AND CONSUMER POLICY, 

COMMITTEE ON OVERSIGHT AND REFORM, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:07 p.m., in room 

2154, Rayburn House Office Building, Hon. Raja Krishnamoorthi 

(chairman of the subcommittee) presiding. 

Present: Representatives Krishnamoorthi, Pressley, Tlaib, Connolly, and Cloud. 

Mr. KRISHNAMOORTHI. Good afternoon. The Subcommittee on 

Economic and Consumer Policy will come to order. Without objection, the chair is authorized to declare a recess of the committee 

at any time. 

This hearing is being convened to examine CFPB’s role in empowering predatory lenders and examine the proposed repeal of the 

Payday Lending Rule. 

I now recognize myself to give an opening statement. 

In the wake of the financial crisis, the CFPB was established to 

stop predatory financial activity central to the collapse. For years, 

the CFPB has stood up to financial predators, holding companies 

accountable for wrongdoing and returning $12 billion of ill-gotten 

money to consumers. 

When the CFPB saw predatory payday and auto title lenders targeting the poorest Americans with high-interest debt traps, it 

began studying the issue. Five years of careful research uncovered 

an industry preying on desperation. Many lenders advertised shortterm loans, but they know the truth; their products lock in the average consumers for 11 months. In fact, most consumers pay more 

in fees than they borrowed in the first place. Furthermore, interest 

rates approach 400 percent. 

But you don’t have to take my word for how predatory these 

loans are. Please watch this video on the CFPB’s own website. 

[Video shown.] 

Mr. KRISHNAMOORTHI. Well, I think we’ll see it eventually after 

it ends the buffering here. Why don’t you pause the video, please. 

Most types of lenders make money when loans are repaid, but 

payday and auto title lenders succeed when their borrowers fail. 
2 

Ninety percent of fees come from people who take out seven or 

more loans just to repay the first. 

CFPB’s five years of research produced substantial evidence that 

action was needed. It issued the 2017 rule, also known as the Payday Lending Rule, to stop the debt traps, by simply requiring payday, title, and other high-cost installment lenders to determine up 

front whether people could afford to repay. 

Indeed, Americans overwhelmingly support this commonsense 

rule. Nationwide, 73 percent of Americans support requiring payday lenders to check a borrower’s ability to repay before lending 

money, including 74 percent of Democrats, 72 percent of Republicans, and 77 percent of Independents. 

Today, we are going to discuss the CFPB’s proposed repeal of 

this wildly popular rule. Why are we so focused on it? Listen to the 

plight of Billy A, one of the many borrowers central to the story. 

Billy A is from Springfield, Illinois. She is disabled and on a fixed 

income. She took out a title loan to help when her grandchild was 

born. After a year, she had paid $1,500 on a $1,000 payday loan, 

and still owed $800 on top of that. She couldn’t pay basic living expenses, turning to a food bank, and eventually living in her car. 

One month she took out a payday loan to cover her title loan to 

avoid repossession. 

The lender never asked about other debts or if she could repay, 

but it got her bank information so it could pull from her account 

every month. When there is no money, it charges her $25 more. 

Billy describes her situation as, quote: ‘‘being like a hamster on one 

of those wheels. I just keep running and running and never get 

anywhere. It’s scary to tell my story, but someone’s got to tell people what the payday lending industry is doing to us. They are profiting off the backs of poor people. It’s predatory, plain and simple, 

and it’s got to stop,’’ close quote. 

Billy is just one of 12 million Americans who use these types of 

loans each year, and her story is not unique. The CFPB’s 2017 Payday Lending Rule was developed over the course of a half a decade 

to protect people like Billy, but the CFPB’s current leadership has 

decided to abandon it, based on no new research. In this hearing 

we will ask the question why? 

Today, Mr. Pahl is here from the CFPB to discuss payday lending. We in this room may not be payday borrowers, but we need 

to stand up for them. If we do not, what protections will CFPB 

come for next? 

The chair now recognizes the ranking member, Mr. Cloud of 

Texas, for five minutes for an opening statement. 

Mr. CLOUD. Thank you, Chairman. 

We are here today to discuss the CFPB’s Payday Lending Rule, 

which if allowed to come into effect later this year, could do major 

disservice to the very people the CFPB is charged with serving. 

Since the passage of Dodd-Frank and other post-crisis financial 

regulatory legislation, it has become increasingly difficult for many 

Americans to access the financial system. 

It is too often the case that Congress can make snap knee-jerk 

reactions to problems and passes legislation that has far-reaching 

and unintended consequences. Before these laws were implemented, 76 percent of bank accounts qualified for free checking. 
3 

After Dodd-Frank, this number fell to just 39 percent. Congress 

has made it more expensive to participate in the financial system, 

and Americans who lack financial resources are the ones who paid 

the price most dearly and continue to struggle today. 

From 2009 to 2012, the average minimum balance required to have fees waived on a bank account rose from $186 to $723. Even 

at $15 an hour wage, that’s more than a full week’s salary for 

many people. If you’re someone getting established in life and living paycheck to paycheck, you can’t afford that, and Congress has 

shut you out of the financial system many Americans take for 

granted every day. 

Because of these regulatory burdens that Congress put in place, 

low-income and credit-impaired Americans were forced to look elsewhere for financial services. For up to 12 million Americans, that 

meant turning to payday loans. These Americans are generally considered to be unbanked or underbanked. They lack a credit history 

and so can’t obtain credit through traditional channels like credit 

cards or they have an adverse credit history that makes banks unwilling to lend to them. They tend to be younger, hourly wage 

workers toward the beginning of their career, with 56 percent of 

payday loan customers making between $25,000 and $75,000 per 

year. 

The CFPB could have tried to make payday loans safer for the 

people who use them through requirements like increased disclosure and more enforcement against lenders who take advantage of 

consumers or engage in fraud. Instead, the CFPB sought to kill the 

industry and remove one of the few remaining sources of credit for 

a significant number of Americans. 

The CFPB’s own analysis of the rule impacts project up to 80 

percent decline in the number of loans being issued to the rule. 

Payday lenders commissioned their own study of the rule and an 

impact, as estimated, could be 90 percent of a decline. 

The CFPB did this while ignoring the impact its rule will have 

on unbanked and underbanked consumers who use these loans. Research has shown that when access to small-dollar consumer credit, 

like payday loans is restricted, people turn to illegal and unregulated lenders like loan sharks to make ends meet. Studies also 

show that restricting access to small-dollar consumer credit results 

in consumers bouncing checks and filing for bankruptcy at much 

higher rates than when credit like payday loans is available. 

The CFPB also ignored the role that states were already playing 

in regulating these credit markets. All 50 states regulate small-dollar consumer credit like payday loans, and states have long been 

the primary regulators of consumer credit and lending. There is no 

unregulated Wild West crying out for Federal intervention, particularly when the Federal intervention ignored the evidence before 

them. 

Before regulating, the Bureau should have considered whether 

the proposed rule would harm consumers. They are required to do 

(this) under the law, and that did not adequately happen in this 

case. Professor Ronald Mann of Columbia Law School, whose work 

the CFPB used to build the foundation for the Payday Lending 

Rule, disputed how the Bureau used his own research. He even 

went so far to write a letter to the CFPB, calling his use of re-
4 

search on consumer credit, quote, ‘‘inaccurate and misleading,’’ unquote. 

Professor Mann further alleged that the CFPB was engaging in, 

quote, ‘‘a distortion of evidence to suit policies that the Bureau has 

preselected for implementation,’’ unquote. The Bureau finalized the 

rule anyway, saying simply that they disagreed with how Professor 

Mann was interpreting his own research. 

I am glad that under the CFPB’s new leadership, the agency appears to be serious about having rigorous, research-based regulatory process, and that the agency is willing to look back at its 

prior actions and identify any mistakes when necessary and consequently how to correct them. 

Thank you. I yield back. 

Mr. KRISHNAMOORTHI. Thank you, Mr. Cloud. 

Today we are joined by Thomas Pahl, the policy associate director for Research, Markets and Regulations at the Consumer Financial Protection Bureau, the CFPB. 

If the witness would please rise, I will begin by swearing you in. 

Do you swear or affirm that the testimony you are about to give 

is the truth, the whole truth, and nothing but the truth, so help 

you God? 

Thank you. 

Let the record show that the witness answered in the affirmative. Thank you, and please be seated. 

We will begin with questions. And before that, we will start with 

an opening statement. How is that? 

Mr. Pahl. 

STATEMENT OF THOMAS PAHL, POLICY ASSOCIATE DIRECTOR 

OF THE RESEARCH, MARKETS AND REGULATIONS DIVISION, 

CONSUMER FINANCIAL PROTECTION BUREAU 

Mr. PAHL. Thank you. 

Chairman Krishnamoorthi, Ranking Member Cloud, and distinguished members of the subcommittee, thank you for the opportunity to testify here today. I am Thomas Pahl. I am the policy associate director for the Division of Research, Markets and Regulations at the CFPB. I have worked at the FTC and CFPB for more 

than 25 years doing consumer protection work, primarily as a career staff attorney. 

I am pleased to discuss the Bureau’s activities concerning payday 

lenders and what the CFPB is doing to make a final determination 

whether there is a sufficient factual and legal basis for the 2017 

rule. 

Our goal is to protect borrowers from harm, while not unduly restricting the ability of borrowers to decide what credit is best for 

them. A large portion of American consumers live paycheck to paycheck, sometimes facing a financial shortfall due to an emergency 

expense or a pressing bill and a lack of liquid savings. These consumers are the primary potential customers for small-dollar lenders. 

Rulemaking is just one of the four tools the CFPB uses to prevent harm to these consumers. To get a complete picture of what 

the Bureau is doing to protect these consumers requires an understanding of the Bureau’s use of all of its tools. 
5 

First, the CFPB’s consumer education activities are focused on 

helping consumers help themselves, protect their own interests, 

choose the financial products and services that best fit their needs. 

This education is vital to preventing consumer harm and building 

a high level of financial well-being. 

The Bureau’s efforts include its new Start Small, Save Up initiative, which consumers are encouraged to build a basic savings 

cushion and develop a savings habit. Having such emergency savings is critical to helping people address the broader issues in their 

financial lives around attaining and retaining good credit, managing their debt, and saving habitually. The Bureau is firmly committed to doing the work needed to move the needle on emergency 

savings. 

Second, the CFPB’s supervision program examines lenders and 

other firms to ensure that they comply with a variety of existing 

Federal statutes and regulations. The Dodd-Frank Act provides the 

Bureau with express authority to engage in supervision of payday 

lenders. The Bureau uses supervision effectively and efficiently to 

increase compliance with the law and prevent consumer harm, including by keeping payday lenders on the straight and narrow. 

Third, the Bureau’s enforcement program targets bad actors. 

Over the past year, the Bureau has initiated five new enforcement 

actions involving payday lenders and obtained final judgments on 

two other previously filed payday lending cases. These cases are a 

testament to the agency’s commitment to use its enforcement tool 

to take decisive action to deter wrongdoers so that all lenders can 

compete with each other on a level playing field. In its supervisory 

activities and its law enforcement, the Bureau often cooperates and 

coordinates with other Federal and state agencies. 

Let me now turn to the small-dollar rulemaking. In November 

2017, the Bureau published a rule to regulate small-dollar lenders. 

That rule addressed two discrete topics. First, the rule contains 

mandatory underwriting provisions. Second, the rule contains provisions with respect to attempts to withdraw payments from consumers’ checking or other accounts. 

The Bureau has not proposed to rescind or delay the rule’s payment provisions. However, with respect to the mandatory underwriting provisions, the Bureau has doubts as to whether the appropriate standards for unfairness and abusiveness under the DoddFrank Act were applied. The Bureau also has doubts whether, despite the abundance of evidence in the record on many issues, the 

evidence was sufficiently robust and reliable to support the necessary factual findings to support the conclusion that a lack of 

mandatory underwriting was unfair and abusive. 

The Bureau, therefore, decided in February 2019 to issue a notice 

of proposed rulemaking to reconsider the mandatory underwriting 

provisions of the rule, especially important in light of the large and 

lasting effects that the mandatory underwriting provisions would 

have on the market and on consumers’ ability to choose small-dollar loans to address financial shortfalls. 

The Bureau also preliminarily concluded at the same time that 

delaying the compliance date for the mandatory underwriting provisions was necessary for an orderly rulemaking process to proceed. 
6 

The CFPB, therefore, also issued a notice of proposed rulemaking 

to delay the compliance date. 

The comment periods on both notices of proposed rulemakings 

have now closed. The Bureau received 145 comments on the delay 

proposal, and as of May 13, the agency had received more than 

150,000 comments, and counting, on the reconsideration proposal. 

Because the Bureau is in the midst of rulemaking proceedings, 

I’m sure you’ll understand that I can neither offer any final views 

nor comment on the Bureau’s internal deliberations. I can assure 

the subcommittee, however, that the Bureau will approach comments with an open mind and will carefully review them before 

reaching any conclusions. We also are committed to a fair and 

transparent rulemaking process. 

Thank you very much. I look forward to answering any questions 

that you may have. 

Mr. KRISHNAMOORTHI. Thank you, Mr. Pahl. 

It looks like the video is now working, so we’re going to play your 

own website video for one minute. 

Could you please roll the video? 

[Video shown.] 

Mr. KRISHNAMOORTHI. Well, that was a nice video from the 

CFPB. Thank you. 

I am going to recognize myself for five minutes for questions. 

Mr. Pahl, thank you so much for being here. I’d like your help 

in establishing the timeline behind the Payday Lending Rule. As 

you know, the final payday rule was issued on October 5, 2017, and 

then CFPB leadership changed on November 27, 2017. Within a 

few days, on December 4, less than a week later, Director 

Mulvaney told the press that the CFPB was considering repealing 

the payday rule. And just one month later, in January 2018, the 

CFPB formally announced that it was reconsidering the payday 

rule. 

Isn’t that your understanding as well, Mr. Pahl? 

Mr. PAHL. Thank you. I returned to the Bureau in April 2018, 

so those events preceded my return to the agency, but what you 

have described is consistent with what my understanding is of the 

course of events. 

Mr. KRISHNAMOORTHI. Very good. And two days after that announcement, that formal announcement, on January 18 of 2018, 

the CFPB voluntarily dismissed a lawsuit called CFPB v. Golden 

Valley Lending. This was a lawsuit against a payday lender that 

had charged 950 percent interest. Unfortunately, this was the beginning of a pattern in the litigation that the CFPB had previously 

initiated but now was beginning to dismiss. 

Four days later, on January 22, Business Wire reported that 

CFPB ended its investigation into payday lender World Acceptance 

Corporation. Are you aware of this particular decision to drop that 

investigation as well? 

Mr. PAHL. These events preceded my time returning to the Bureau. I have a general understanding that there were some payday 

lending investigations that were closed or matters that were closed, 

but, as I say, it predates my time. And also, I would note that I 

run the Division of Research, Markets and Regulations. All of the 
7 

law enforcement activity is handled by a different division at the 

agency. 

Mr. KRISHNAMOORTHI. I understand. 

Mr. PAHL. And so it was not part of my responsibility to be involved in those decisions—— 

Mr. KRISHNAMOORTHI. I understand. 

Mr. PAHL [continuing]. Even once I arrived. 

Mr. KRISHNAMOORTHI. And, without objection, I enter into the 

record a New York Times report stating that on April 5, 2018—so 

this is nearing or after the time that you joined the Bureau—the 

deputy director of the CFPB met with payday lender group Consumer Financial Services of America to discuss repealing the payday rule. 

Are you aware that four days later, on April 9, that same group 

of payday lenders sued CFPB to block the payday rule from going 

into effect? This was on April 9, 2018, Consumer Financial Services 

Association versus CFPB. 

Mr. PAHL. I actually started later that same month. These two 

events also preceded my return to the Bureau. I do know that the 

CFSA suit was filed on the date you mentioned, and it is my understanding that there was a meeting between Acting Deputy Director or actually now Deputy Director Brian Johnson and CFSA. 

Mr. KRISHNAMOORTHI. Very good. Interestingly, court records in 

that case show that instead of defending the lawsuit against it, 

CFPB joined with the payday lenders suing it and actually stopped 

the litigation and sued to stop the CFPB rule from going into effect. In fact, according to campaign finance records, the CFPB’s industry partner in that case, Consumer Financial Services Association, made significant campaign contributions to Director Mulvaney 

while he was still in Congress. 

Now, Mr. Pahl, are you aware that on February 1, 2019—so it’s 

this year—CFPB settled with payday lender NDG Financial? 

Mr. PAHL. Yes, I am aware of the settlement with NDG Financial. But, again, that was a matter handled by a different part of 

the agency than the part of the agency that I oversee. 

Mr. KRISHNAMOORTHI. I understand. And do you know how much 

they settled that case for? 

I’ll tell you. It was zero dollars and zero cents. CFPB settled it 

for zero dollars, despite the fact that NDG had been alleged to 

charge illegally high interest rates and tried to collect on debts not 

owed. 

So if you just stay with me, that’s the fourth piece of litigation 

now that the CFPB has either dropped or settled for zero dollars 

and zero cents. 

Will you commit to providing us, within two weeks, the names 

of the CFPB personnel that were involved in each of the four enforcement actions that I mentioned? 

Mr. PAHL. Yes, I think we can do that. And—yes. One thing I 

would note—I do want to offer one response to the CFSA litigation 

versus the Bureau. I mean, we and CFSA are adverse parties in 

that litigation and our positions in that litigation are set forth in 

the briefs. But I do want to avoid—— 

Mr. KRISHNAMOORTHI. I understand. 
8 

Mr. PAHL [continuing]. The misimpression that we are somehow 

in alliance with CFSA. We are adverse parties and we are pursuing 

our own interests in that litigation. 

Mr. KRISHNAMOORTHI. I understand. But both of you joined 

hands to stop the litigation and stop the rule from going into effect. 

I want to move on to my last question here. Without objection, 

I enter into the record a February 27 New York Post article from 

this year. And in it, it says: Payday industry representative Hilary 

Miller confirmed to the New York Post that he, and I quote, ‘‘represented individual lenders in discussions with CFPB last year in 

the months before the agency scrapped the 2017 rule.’’ That directly contradicts a statement from CFPB spokeswoman two days 

earlier on February 25 that, and I quote, ‘‘the Bureau did not discuss its proposal to rescind the rule with industry officials before 

making the announcement.’’ 

Will you commit to me, Mr. Pahl, information about the personnel from CFPB who were involved in those particular meetings 

with industry representatives before the CFPB scrapped the rule? 

Mr. PAHL. Let me see how I can answer it this way. The CFPB 

spokeswoman’s statement was accurate. Between the time the final 

rule was issued and the time that the notice of proposed rulemaking went out, no one in the Division of Research, Markets and 

Regulations that worked on the rule discussed the proposal with 

anybody in industry or any trade association. So the meetings—my 

understanding of the meetings you’re defining, I don’t think they 

exist. 

Mr. KRISHNAMOORTHI. So you are saying that Hilary Miller is 

lying about what exactly happened? 

Mr. PAHL. Mr. Miller, my understanding, has revised his statement to clarify that the period of time that he was referring to was 

prior to the time that the rule was issued in 2017, not post the 

time the rule was issued in 2017. 

So what Hilary Miller has said with this modification and what 

the Bureau is saying are consistent. We did not talk to Hilary Miller from the time the final rule was issued until the proposal came 

out. 

Mr. KRISHNAMOORTHI. So you did not discuss with anybody in industry between the time the final rule was issued in October 2017 

and when the rescinding of the rule happened? 

Mr. PAHL. We have many contacts with stakeholders that occur 

while we are doing rule development, including deciding whether 

we want to reconsider a rule and on what grounds. As part of that, 

we would have spoken with members of industry, consumer advocates, academics, all sorts of other people. But we never took our 

proposal and went to a payday lender or a payday trade association 

and said, what do you think about this, or do you have different 

ideas for proposals? We did, however, receive information and have 

meetings. You anticipate—— 

Mr. KRISHNAMOORTHI. So on those meetings—I understand what 

you’re saying. You’ve met—you admit that the agency did meet 

with folks from the payday lending industry after October 5, 2017, 

with regard to this rule. 

Will you commit to providing us the details of every single meeting that the CFPB had with industry representatives or officials? 
9 

Mr. PAHL. I believe—I believe that actually we have—yes. Frankly, I think we—— 

Mr. KRISHNAMOORTHI. Very good. We will expect that in two 

weeks. So thank you so much for that vital information. Thank you 

so much. 

Okay. Mr. Cloud, I recognize you now for five minutes for questions. 

Mr. CLOUD. Thank you, Chairman. 

Thank you, Mr. Pahl, again, for being here. For me, the thing 

that I’m concerned with is good governance. You’ve mentioned that 

the prior rule was made on what was not well-researched information. And so a number of think tanks have criticized the Bureau’s 

research in this regard. The research also failed to take into account state-level regulation. Professor Mann, as was mentioned, 

even had questions about his own research and how it was used. 

Can you walk us through the role that this evidentiary concerns 

played into your decision or the Bureau’s decision to reconsider the 

2017 rule? 

Mr. PAHL. Sure. One of the factual findings that needs to be 

made in order to support either a finding of unfairness or some of 

the theories of abusiveness under the Dodd-Frank Act is essentially 

that consumers couldn’t reasonably avoid the harm from taking out 

loans that had not been underwritten. 

What Professor Mann’s study looked at is it really compared 

what consumers thought was going to happen in terms of how long 

they would be in a payday lending sequence versus what their actual experience had been. Professor Mann, looking at his own 

study, said that consumers made a realistic assessment of how long 

that they would be in those sequences and that they generally did 

a good job of predicting that they were likely to roll over and have 

more loans. The notion is that if consumers are aware of the risks 

of a product and they have reasonable opportunity to take steps to 

avoid those risks, then you don’t have a basis for unfairness or abusiveness under some theories. That’s what Professor Mann’s original conclusion was. 

What the Bureau did in the 2017 rule is took some of the data 

from Professor Mann’s study and did its own analysis of it; and the 

Bureau decided, based upon its own analysis of Professor Mann’s 

study, that it wasn’t predictive. Consumers did not have an expectation as to what their experience was going to be with a payday 

loan. And the Bureau based its 2017 final rule essentially on that 

one piece of research or relied very heavily on that one piece of research. 

One of the things that we have done in reconsidering the rule— 

and we are still—we just got tons of comments on this, of course, 

so it’s being analyzed. But we went back and took a look at really 

how strong a basis is the Bureau’s analysis of some data from the 

Mann study to support what the Bureau did, and decided that essentially it wasn’t—we have questions about whether it really was 

strong support for two main reasons. 

One is that it didn’t address vehicle title loan customers. So one 

of the main products that’s covered by the rule, the study didn’t 

even purport to address those products. 
10 

The other is, even within payday loans, the Mann study involved 

one lender in five states. Obviously, there are numerous payday 

lenders throughout the United states. Consumers have the ability 

to get payday loans in 33 states, and in each of those states, there 

are different disclosure regimes, requirements that could affect consumers’ experience. 

So, essentially, what we decided in going forward with reconsidering it is that because the Mann study, even if you took what the 

CFPB had concluded in 2017 as accurate, even if you took it as accurate, the limited scope of the study—that it didn’t deal with vehicle title loans, it only dealt with one payday lender, it only dealt 

with five states—that was a very thin basis on which to impose requirements which would have a draconian effect on the ability of 

vehicle title lenders and, to a lesser extent, payday lenders to operate. 

Mr. CLOUD. So as limited as Mr. Mann’s study is, your understanding is that his understanding of the data was that customers 

by and large knew what they were getting into and they were able 

to predict when they would have—when they would be able to pay 

back their loan, but somehow the Bureau flipped the equation on 

that? 

Mr. PAHL. The Bureau did its own—yes. The Bureau did its own 

analysis and reached a conclusion. Professor Mann had reached a 

different conclusion. And so really what you have is two sets of experts looking at one set of data reaching very different conclusions 

about it. And that is the primary piece of evidence on a key factual 

finding that needs to be found in order to justify a finding of unfairness or abusiveness. 

Mr. CLOUD. Do you have any insight into how that was reinterpreted? 

Mr. PAHL. How—— 

Mr. CLOUD. How the Bureau at that time—I realize this was before he was able to reinterpret that data—to come to a different 

conclusion. 

Mr. PAHL. Yes. I was either not at the Bureau or not working 

the project at that time. But my understanding is what the Bureau’s economist, the economic staff working that did, is they got 

data from Professor Mann about his study. They did their own 

analysis to see whether there was a correlation between consumers’ 

expectations and their actual experience. 

The results they got, they reached out to Professor Mann and 

said, hey, this is what we found. And they engaged with him on 

that. So, really, it is two sets of experts talking about data and trying to decide whether they really think that it shows or does not 

show that consumers anticipate what their experience is going to 

be with payday loans. 

And essentially, we have decided to reconsider the rule, in part, 

because the research that was done, you know, nothing wrong with 

it in and of itself, but it is not a very strong basis for addressing 

all vehicle title lenders nationwide, all payday lenders nationwide. 

And for that reason, we have questions about it, and that’s why we 

put it out for public comment, to see if there are other sources of 

information on this point before the Bureau makes final determinations. 
11 

Mr. CLOUD. Thank you. 

Mr. KRISHNAMOORTHI. Thank you, Mr. Pahl. 

I now recognize Congresswoman Pressley for five minutes. 

Ms. PRESSLEY. Mr. Pahl, thank you for joining us. I was fortunate enough to discuss this issue before the House Financial Services Committee just last month and to express my concerns regarding the perpetual debt trap that these products leave and create for 

some of our most vulnerable residents and consumers. 

I want to ask you about CFPB’s stated justifications for the proposed rule. They seem to share a similar focus. The proposed rule 

states, and I quote: ‘‘A more robust and reliable evidentiary record 

is needed to support a rule that would have such dramatic impacts 

on the viability of payday lenders.’’ 

Mr. Pahl, other than the industry just not liking it, by what 

measure are the five years of research and outreach leading up to 

this rule not robust or reliable evidentiary record? 

Mr. PAHL. Thank you. I think the best example is reflected in the 

exchange that I just had with the members. Essentially, on one key 

determination as a matter of law that needs to be established, 

there was one study in the record. There’s great debate/controversy 

as to the strength of that, as well as how limited in scope that 

study is. And it is looking, you know, not at overall the quantum 

of evidence that came in, but the evidence on some specific issues 

on which we need a factual predicate that was—our preliminary 

conclusion is that was weak, so we went out and asked the public, 

you know, is this all there is or is there other evidence on this specific point? 

You know, it’s not that we didn’t get a lot of comments. We got 

1.4 million comments last time. It’s not that there aren’t a number 

of studies that we considered as part of our analysis. But on the 

particular point that we have to establish as a matter of law to justify the provisions in the rule, the research on that particular point 

we thought was weak enough that it justified going out and seeking public comment on that particular issue. 

Ms. PRESSLEY. In the interest of time. So CFPB also says that 

the 2017 rule is welfare-decreasing for lenders, and, quote, ‘‘reversing the restriction should, therefore, be welfare-enhancing for lenders,’’ unquote. 

Mr. Pahl, what is the name of your agency? 

Mr. PAHL. The Consumer Financial Protection Bureau or the Bureau of Consumer Financial Protection. 

Ms. PRESSLEY. Consumer, right. So why should the Consumer Financial Protection Bureau care about enhancing the welfare of 

predatory lenders? Are these lenders new consumers? 

Mr. PAHL. Lenders are not consumers. I think, though, that the 

language that you’re quoting from or paraphrasing is incomplete. 

Immediately following those statements in the notice of proposed 

rulemaking, there is an indication by the agency that those estimates are based upon assuming that consumers don’t adequately 

understand what their risks are for taking out payday loans and 

being able to avoid them. 

So essentially what happens is that that conclusion as to the welfare effects also is contingent upon the state of the record with re-
12 

gard to whether consumers anticipate loans or not, anticipate their 

experience. 

Ms. PRESSLEY. Okay. But then let me just go on then. So then 

following the concern for lenders’ welfare, then the CFPB states 

that the primary impact of the proposed rule would be, and I quote, 

‘‘a substantial increase in the volume of loans and a corresponding 

increase than the revenue lenders realize from these loans,’’ unquote. 

Now, many would argue that the primary impact is to hurt consumers, but I guess you’re right, that the flip side of that is to line 

lenders’ pockets. So yes or no, is that an important consideration 

for the CFPB? 

Mr. PAHL. When we do rulemakings, we look at the costs and the 

benefits of the rules that we put into place. The effects on industry, 

the effects on consumers are both things that we consider as part 

of our 1022 analysis, which is required by the Dodd-Frank Act. 

Ms. PRESSLEY. I have to reclaim my time just in the interest of 

time. 

So the proposed rule does not leave this to speculation. However, 

Mr. Pahl, CFPB’s own cost-benefit analysis includes a projection of 

the additional amount that the predatory lenders will be able to extract from borrowers if the 2017 rule is repealed. So that additional 

revenue is around $8 billion per year. Is that correct? 

Mr. PAHL. That is correct, yes. 

Ms. PRESSLEY. Okay. So while borrowers are struggling to make 

ends meet, the agency tasked with their protection is busy gifting 

predatory lenders $8 billion a year. Is that correct? 

Mr. PAHL. I wouldn’t describe it as gifting. We are—— 

Ms. PRESSLEY. I’m sorry, in the interest of time. This confusion 

around the CFPB’s mission even extends to court filings. When the 

payday lenders sued CFPB to block the rule, your agency joined 

hands with the industry suing it and asked the court to stop 

CFPB’s rule from taking effect. 

In that joint motion, CFPB stated that, quote, ‘‘the balance of equities heavily favors a stay, particularly in light of the irreparable 

injury that the payday lenders face,’’ unquote. 

And I yield. 

Mr. KRISHNAMOORTHI. Thank you, Ms. Pressley. 

Now I recognize Congresswoman Tlaib for five minutes. 

Ms. TLAIB. Thank you, Chairman. 

CFPB did an incredibly thorough job in developing a Payday 

Lending Rule. It studied the markets for five years. It held multiple field hearings, conducted supervisory examinations and multiple enforcement investigations, reviewed over a million comments. It published five research reports and reviewed the loanlevel data of tens of millions of consumers, our residents. The 

mountain of evidence was gathered in support of the 2017 Payday 

Lending Rule, which now you seek to repeal. 

To justify repealing the rule backed by such evidence, I would 

have expected you to have done at least that much work. In gathering support for the repeal, you didn’t hold any field hearings or 

publish any research reports, did you? 

Mr. PAHL. That is correct. We did not do any new research. We 

evaluated the strength of the research. 
13 

Ms. TLAIB. You know, you can just say no. You didn’t do either 

of those things, correct? 

Mr. PAHL. That is correct. Yes, we did not do either of those 

things. 

Ms. TLAIB. It only took a few days in this tenure of Director 

Mulvaney—— 

Mr. PAHL. Mulvaney. 

Ms. TLAIB [continuing]. Mulvaney, sorry, to announce CFPB was 

considering repealing the rule without any evidence supporting this 

change. I thought maybe there would be new studies, but the proposed rule states that no new studies influence the CFPB’s views. 

The proposed rule points to no new facts and no new evidence. 

Is it true that CFPB based its analysis on reinterpretation of the 

same evidence that was available in 2017? 

Mr. PAHL. We reviewed the same evidence and found that there 

was a sufficient basis for believing it was lacking on fundamental 

legal prerequisites to having a rule. 

Ms. TLAIB. As an objective observer, it is hard to see any gaps 

in the evidence, but if you think there are gaps, how can you justify 

not conducting the research to fill them? 

Mr. PAHL. Well, in the short run, we asked for public comment. 

Public comment can provide that, can provide more studies, more 

information that could speak to the issue that—the issues that we 

think need more evidence. 

The other reason is that none of the sort of research that would 

be required had been started under the prior administration. And 

so were we to do such research, it would probably take—and I’m 

just making a rough guess here—a year and a half, two years to 

do it. Delaying the entire proceeding for that kind of substantial 

period of time, the agency expressed concerns about whether that 

was really in the interest of consumers, industry, everybody else. 

Ms. TLAIB. Yes. The CFPB is supposed to be research-driven. 

Mr. PAHL. We are research-driven, yes. 

Ms. TLAIB. Well, when was the initial decision made to reconsider the payday rule? 

Mr. PAHL. Acting Director Mulvaney in January 2018—— 

Ms. TLAIB. Who was involved in the initial decision to reconsider 

the rule? 

Mr. PAHL. That precedes my time at the Bureau. My understanding, it was the usual process, in which case people throughout 

the agency would have—— 

Ms. TLAIB. It was Mulvaney, I believe. But will you commit to 

providing us CFPB’s decision memo within two weeks? 

Mr. PAHL. No, I will not. That involves the deliberative process 

of the agency. 

Ms. TLAIB. You can’t give me the memo of how you all decided, 

how you made that decision? 

Mr. PAHL. I cannot give you the memo with our recommendations that were made to the Director that formed the basis of his 

decision because we need to have frank and candid conversations 

about the evidence and the law to make decisions. 

Ms. TLAIB. Prior to issuing the proposed rule, who did you meet 

or communicate with from the industry? 
14 

Mr. PAHL. I had one meeting with the board of FSCA in May 

2018. I also met between October 2018 and February 2019 with the 

American Bankers Association, the Consumer Bankers Association, 

and the Online Lenders Alliance, to hear some of their concerns 

about the issues that we were not—we had not suggested that we 

would reconsider. 

Ms. TLAIB. Will you commit to providing us with a calendar 

schedule, meeting notes, and communications regarding the proposed repeal within two weeks? 

Mr. PAHL. I certainly can provide mine, yes. 

Ms. TLAIB. Okay. Will you commit to helping us get the same information for the Director’s and the Deputy Director? 

Mr. PAHL. I will have to take that back to the agency. A lot of 

those—those are decisions for them to make in consultation with 

our general counsel. 

Ms. TLAIB. Sir, how many people worked on the 2017 rule for the 

CFPB? 

Mr. PAHL. I don’t know. It was worked on over the course of 

roughly six years, so I don’t know how many people at various 

times or total. 

Ms. TLAIB. How many people worked on the proposed rule? 

Mr. PAHL. On the current proposals? 

Ms. TLAIB. Current, yes. 

Mr. PAHL. Within my shop, it would be, I’d say roughly 10. 

Ms. TLAIB. Okay. Will you commit to telling us within two weeks 

who worked on each rule? 

Mr. PAHL. Yes, we can do that. 

Ms. TLAIB. All right. Thank you. 

I yield the rest of my time. 

Mr. KRISHNAMOORTHI. Thank you, Congresswoman Tlaib. 

I now recognize—we’re going to a second round. Good news. 

I now recognize Ranking Member Cloud for five minutes. 

Mr. CLOUD. Thanks again, Mr. Chairman. 

We mentioned that it was determined that the data was inconclusive and that right now you’re in a listening session, so to speak, 

of public comment. Would it be fair to state the CFPB’s position is 

that there’s not enough evidence at this point to make a decision 

on this rule and that you’re investigating it? 

Mr. PAHL. That’s fair. I mean, we decided that there were weaknesses in the evidence on particular points. That’s why we went out 

for public comment. We will consider the comments, and then ultimately, the Director of the agency will make a decision as to 

whether she thinks that what we’ve got is sufficient or not. But at 

this point in time, we are looking for more information through the 

public comment process, which just concluded. 

Mr. CLOUD. Do you have a ballpark of how long that process will 

take? 

Mr. PAHL. We don’t. We’re moving as quickly as possible. You 

know, given that we have, at a minimum, 150,000 comments, it’s 

going to take a while to go through the comments, because we do, 

in fact, read them all so we can consider them. We’ll move as 

quickly as we can because we know that resolution of this matter 

and the outstanding issues, would be in everyone’s interest to pro-
15 

vide more certainty, and so we’re committed to moving as quickly 

as we can. 

Mr. CLOUD. Now, one of the issues with this study, as I understand, was that it didn’t really take into account what states are 

doing to regulate. Could you speak to how many states do regulate 

these types of loans? 

Mr. PAHL. Sure. It depends on which type of loan that you are 

talking about. With regard to payday loans, my understanding is 

that they are either prohibited or effectively prohibited in 17 states 

and 33 states allow them. With vehicle title loans, my understanding is that 17 states allow them. 

I would offer the disclaimer that those estimates may be like a 

year or two old, and so there may have been some changes at the 

state level. But that gives you a rough idea of how many states 

permit and prohibit these types of products. 

Mr. CLOUD. So all 50 states, I guess, at some level regulate or 

prohibit, depending on the state? 

Mr. PAHL. Many states do. I don’t know if it’s all 50, and it will 

depend upon which of the two products as well. 

Mr. CLOUD. Right. Okay. Could you speak to—I know they vary, 

but what would be a mean of the regulatory burden that already 

exists, I guess? 

Mr. PAHL. Sure. I mean, it depends. Since much of the regulation 

of payday lending, there’s some at the Federal level, traditionally 

it’s been a matter of state law. Some of the regulations find their 

forum in usury caps that are applied. Some states require various 

disclosures. Some states limit how many loans you can take out. 

Some states limit the amount of loans you can take out. Some of 

them limit how frequently you can roll them over. Still, other 

states say if you get to a certain point in paying loans back and 

have problems, essentially you get an opportunity to go off the repayment track, rehabilitate yourself before you try to repay. I believe there are 16 states who have those restrictions. And some 

states mix and match each of them. 

So what your costs are, what kind of state regulations you’re subject to is highly dependent upon state law and state legislators’ 

opinions/views on what their constituents need to protect themselves. 

Mr. CLOUD. Okay. And you mentioned you’re not the enforcement 

arm, but could you speak to what enforcement there is there for 

those who do fall predatory in their practices? 

Mr. PAHL. Sure. Yes. You know, there are a number of different 

provisions that we can use as part of our law enforcement activities 

with regard to payday lenders. The primary tool is the Dodd-Frank 

Act, which prohibits unfair, deceptive, and abusive acts or practices. We frequently use that if payday lenders are making misrepresentations about, let’s say, what the terms of the loan is; or 

if they’re engaged in certain actions in collecting on loans, we will 

take action for violations of the Dodd-Frank Act against payday 

lenders. 

Some payday lender activity is subject to the Truth in Lending 

Act and Regulation Z. We have brought cases against them for 

those violations. They are subject to the Gramm-Leach-Bliley Act 

in Regulation P. We have brought cases based upon that. They are 
16 

subject to EFTA, the Electronic Funds Transfer Act, in its implementing Regulation E. The Bureau has brought cases under that 

statute and regulation as well. 

So there are many different restrictions that apply both at the 

Federal and the state level to payday lenders and their activities. 

And also, what will be added to the mix if, as our proposal goes 

forward, is the payments provisions in the 2017 rule will also kick 

in. 

So payday lenders, you know, are not getting off scot-free. There 

are many, many restrictions on what they do at the Federal and 

state level. What we have simply concluded preliminarily is that 

the evidence in the record is not sufficient to justify one particular 

intervention, that is the imposition of mandatory underwriting requirements. 

Mr. CLOUD. Thank you. I yield back. 

Mr. KRISHNAMOORTHI. Thank you, Mr. Cloud. 

I now recognize my friend Congressman Connolly for five minutes. 

Mr. CONNOLLY. Thank you, Mr. Chairman. And welcome, Mr. 

Pahl. 

Mr. Pahl, how important do you think independent academic research is to rulemaking? 

Mr. PAHL. It’s very important. 

Mr. CONNOLLY. Why is that? 

Mr. PAHL. We try to figure out where consumers have problems 

that warrant regulatory responses and figure out what the proper 

responses to them are. Having the views of researchers of all types 

is incredibly important as we try to figure out the best possible decisions to make for consumers. 

Mr. CONNOLLY. And when you do that, you want it to be as objective and untainted by industry influence as possible. Would that be 

a fair statement? 

Mr. PAHL. When we look at research, our researchers, almost 

every piece of research we looked at is paid for by somebody. Industry pays for some. Consumer groups pay for some. Academic institutions pay for some. What we try to do is we look at all of the 

research, regardless of who funded it. We look at the underlying 

data to try to see how strong it is, how relevant it is to the issues 

that we have to decide. 

So we don’t go into looking at research from the perspective of 

we shouldn’t consider those that are research funded by industry 

or we shouldn’t consider it if it’s funded by consumer advocates. We 

consider all of it. 

Mr. CONNOLLY. Okay. But surely you rank them in terms of objectivity and consider the source. For example, The Washington 

Post and The Atlanta Journal talked about a story where the payday lending industry directly tried to influence the rulemaking 

process through the use of an academic research paper. Consumer 

Credit Research Foundation, a payday lending industry group led 

by Hilary Miller, paid a Kennesaw State University professor 

named Jennifer Priestley $30,000 to ghostwrite a, quote, ‘‘academic,’’ unquote, study clearly designed to influence policy. 

Emails show that Mr. Miller provided line edits and drafted the 

paper’s abstract. That is to say the industry lobbyist and advocate, 
17 

not the academic professor. He instructed the professor, however, 

not to use the term ‘‘cycle of debt.’’ 

In another, she responded, and I quote: I’m here to serve you, the 

special interest. I just want to make sure that what I’m doing analytically is reflecting your thinking, she said. 

Professor Priestley offered Mr. Miller authorship credit, but he 

wisely declined, stating in an email, and I quote, ‘‘We want them 

to believe that the results are honest,’’ unquote. 

Now, is that the kind of research you’d look at just like any other 

academic research prior to rulemaking? 

Mr. PAHL. I think what we would do is we would take a look at 

what the data itself was. 

Mr. CONNOLLY. Let’s not talk theoretically. Are you familiar with 

this case? 

Mr. PAHL. With the—— 

Mr. CONNOLLY. The case I’m describing that was published and 

written up in The Washington Post and The Atlanta Journal. 

Mr. PAHL. I have read that article at some point in time, yes. 

Mr. CONNOLLY. Did it bother you? 

Mr. PAHL. It bothered me in the sense that I never like the idea 

that people are trying to spin information in a way to achieve a result that information on the merits may not warrant. But from the 

point of view—— 

Mr. CONNOLLY. Does it bother you at all that somebody flat out 

would make an assertion that’s not true? For example, the cover 

of Professor Priestley’s ostensibly independent report falsely stated 

that the payday industry, and I quote, ‘‘did not exercise any control 

over the study or over the editorial content of the paper.’’ 

We know from emails that’s flat out untrue. So she submitted a 

paper to your organization that was factually untrue and clearly 

misleading, at best. 

Mr. PAHL. If someone submits something to us that is factually 

untrue, certainly that troubles me. What I think we would do as 

part of our rulemaking, however, is try to look at the actual data 

and analysis itself to see whether there were reasons why it may 

be useful to us or not. It may not be useful to us on the merits. 

But certainly, the idea that someone is making misstatements, 

misrepresentations about the research they provide us would concern us. 

Mr. CONNOLLY. Well, I’m glad it concerns you. Maybe that’s your 

Minnesota nice coming out. But for me, I’m bothered by that answer, because when we know that the industry is paying for it, 

when we know the industry is directly interfering with content and 

editing it, when we know that the author of that report is not telling the truth in asserting industry had no influence over this paper 

when, in fact, we know from emails the contrary is true, I’d throw 

that paper out. I don’t care what data they’ve got. It’s so tainted 

and it’s so corrupt, you risk compromising public confidence in your 

rulemaking process even looking at something like that. 

Mr. PAHL. I’d like to offer one response just to be very specific 

and clear. Our reconsideration proposal that was put together on 

my watch does not in any way rely on that particular research. So 

whatever its merits or demerits, it is not part of our current proceeding and what we’re looking at. 
18 

Mr. CONNOLLY. Yes. Thank you. My time is up, but I’d feel better 

if you told me, when something comes to us that tainted, we put 

it aside. We don’t allow it to corrupt the rest of the process. And 

I do think, Mr. Pahl, you’ve got to take into account, you know, 

public confidence in the process. And that’s not—it may be intangible, but it’s not inconsequential. 

For all of government to work, we’ve got to make sure we’re 

doing what we can to reassure the public that the process is an 

open, objective, fair one. And when we know that industry is paying for a paper posing as an academic research paper directly to 

influence your rulemaking on their self-interest, that taints and 

corrupts the process. And I’d feel a lot better if you told me, we 

throw that in the trash bin when we get it. 

My time is up. Thank you, Mr. Chairman. 

Mr. KRISHNAMOORTHI. Thank you, Mr. Connolly. 

Without objection, I enter into the record a Washington Post report entitled, ‘‘How a payday lending industry insider tilted academic research in its favor’’; an Atlanta Journal-Constitution article entitled, ‘‘Payday loan group paid KSU for favorable research, 

records show’’; and third, a Huffington Post article entitled, 

‘‘Emails show pro-payday loan study was edited by the payday loan 

industry.’’ 

Mr. KRISHNAMOORTHI. With that, I now recognize Congresswoman Tlaib for five minutes. 

Ms. TLAIB. Thank you so much. 

I do want to followup on my good colleague, Congressman Connolly, about corruption in this process. The comment period for the 

proposed payday lending payday rule repeal ended yesterday. So I 

want to ask you about CFPB’s process for filtering the comments 

it has received. 

Reports show that CFPB received duplicates, fake comments opposing the original 2017 payday rule at alarming rate. Out of 1.4 

million comments, CFPB received it only deemed around about 

200,000 to be so-called unique. Even this, quote, unique batch was 

plagued with fake duplicative comments. 

According to a Wall Street Journal survey, 40 percent of the respondents it contacted claimed they had not submitted the comments made in their name. In one instance, a woman who took out 

$323 payday loan and ended up owing more than $8,000 had a 

fraudulent pro-payday—get this—comment submitted in her name 

which stated she said, quote, her only good option for borrowing 

money, so I hope these rules don’t happen. 

You would agree this seems a highly unlikely comment from 

someone who paid—who had a loan ballooned nearly 25 times over, 

correct? 

Mr. PAHL. Yes. Knowing only those facts about that hypothetical 

consumer, yes. 

Ms. TLAIB. Unfortunately, this story is not atypical. CFPB’s own 

research supports that 80 percent of the payday loan borrowers’ 

debts were rolled over or reborrowed within 30 days, ultimately 

costing borrowers much more than they anticipated. 

Even more troubling is that the industry may be playing a significant role in submitting fake and even coerced comments. Reports show that lenders may have been asking borrowers to submit 
19 

pro-industry comments while they are applying for their loans, Mr. 

Pahl. 

Mr. Pahl, would you agree that payday lenders asking for vulnerable borrowers to submit comments while applying for a loan is, at 

best, suggestive and, at worst, coercive? 

Mr. PAHL. I think it’s real hard for me to speak to why consumers send in the comments they do. As you noted, we got 1.4 

million comments last time. 1.4 million comments, there’s probably 

a story behind each of them. What we try to do is try to read as 

many of them as we can to understand what the public thinks, recognizing that the problems you’ve identified, I think, are a big challenge to our agency and other agencies. 

Ms. TLAIB. But, Mr. Pahl, I do hope you take this very seriously, 

because they’re asking our residents to submit comments while applying for a loan. 

So CFPB spokesperson, former Director—I want to get this right 

now—Mulvaney was, quote, concerned about any inauthentic data 

that comes to the Bureau and stated that, quote, we intend to look 

into this matter further. 

Mr. Pahl, would you agree that any role industry played in submitting fake or coerced comments is worthy of additional scrutiny 

that could justify excluding such comments from consideration? 

Mr. PAHL. One of the things I’ve seen this week is complaints 

from some groups that consumer advocates are sending problematic comments to us. I’ve also heard complaints that industry is 

sending problematic comments to us. I think we will do our best 

to try to figure out which are legitimate comments. 

Ms. TLAIB. So what has the CFPB done to protect the integrity 

of the rulemaking process so far? 

Mr. PAHL. Well, this particular rulemaking process, the comment 

period ended yesterday. So we are just starting to look at the comments. One of the things that we have done in the past is try to 

figure out which are, in fact, duplicates. 

But one thing, I think looking at numbers of comments in some 

ways misses the point. To go back to some of the earlier discussion, 

we’re really looking at the quality of information that goes to the 

most relevant issues in the record, and so it really isn’t about numbers. I know that that’s what many people view the public comment process as. 

Ms. TLAIB. I agree, it has to be both. Is it a Federal crime to intentionally make—it is a Federal crime to intentionally make false 

or fraudulent statements to a government agency. However, The 

Wall Street Journal reports that payday lending industry hired a 

firm called IssueHound to create websites to gather rule comments. 

An alarming number of fake comments can be traced back to the 

IssueHound platform used by payday groups. 

Mr. Pahl, our democracy and our voice of the American people 

are undermined when abuses of this nature go unchecked. Can you 

agree today to ensure fake comments are filtered and that when industry players abuses the comment process, they will be held accountable? 

Mr. PAHL. I think we will do our best not to consider comments 

that are inappropriate, and I think anyone who submits commits 
20 

that are problematic, we deserve—it warrants taking a look to see 

what remedies may be appropriate for that. 

Ms. TLAIB. Thank you. I do look forward to the Bureau making 

meaningful and swift action to ensure this process is not corrupted. 

Thank you so much, and I yield the rest of my time, Chairman. 

Mr. KRISHNAMOORTHI. Thank you, Congresswoman Tlaib. 

Without objection, I’d like to enter the following four documents 

into the record. First, a Wall Street Journal report entitled ‘‘Millions of People Post Comments on Federal Regulations. Many Are 

Fake’’; two, a Cleveland Plain Dealer article entitled ‘‘Payday lenders get thousands of borrowers to complain to government about 

rules meant to protect them’’; third, a Vice article entitled ‘‘How 

Predatory Lenders Plot to Fight Government Regulation’’; and 

fourth, a Wall Street Journal article entitled, ‘‘Payday Lenders Mobilize in Support of Rules Repeal.’’ 

Mr. KRISHNAMOORTHI. I now recognize myself for five minutes. 

Mr. Pahl, you were hired in April 2018, correct? 

Mr. PAHL. That is correct, yes. 

Mr. KRISHNAMOORTHI. And what did you do before this position? 

Mr. PAHL. Immediately prior to that, I was the acting director of 

the Bureau of Consumer Protection at the Federal Trade Commission. 

Mr. KRISHNAMOORTHI. Okay. And in your conversations leading 

up to your hire in April 2018 in this current position, did you talk 

to Director Mulvaney about the Payday Lending Rule? 

Mr. PAHL. No, I did not. 

Mr. KRISHNAMOORTHI. Did you talk to anybody else at the Consumer Financial Protection Bureau about this rule? 

Mr. PAHL. As part of the interviewing process, I was told that the 

Bureau was moving forward to reconsidering it. So I knew that 

from part of the interviewing process, but I was not asked for my— 

I was not—what—the conversation didn’t go beyond that. 

Mr. KRISHNAMOORTHI. And what did you say in response to their 

telling you that the Payday Lending Rule was being reconsidered? 

Mr. PAHL. I think I said that I have experience as both one who 

is engaged in the rulemaking process, someone who’s done litigation, and if that were part of the job, that I would have the ability 

to do that. 

Mr. KRISHNAMOORTHI. And have you written anything on this 

particular issue of payday loans or auto title loans in the past? 

Mr. PAHL. Not on either of those topics, no. 

Mr. KRISHNAMOORTHI. Have you written anything on the issue of 

high-cost installment loans? 

Mr. PAHL. Nothing that I can recall. 

Mr. KRISHNAMOORTHI. Did you talk to anybody at the White 

House before being hired in this current job about the Payday 

Lending Rule? 

Mr. PAHL. I have not, did not. 

Mr. KRISHNAMOORTHI. How many supervisor examinations have 

been conducted of payday or title loan lenders during the tenures 

of Directors Mulvaney and Kraninger? 

Mr. PAHL. I don’t know the answer to that because that’s not the 

shop at the Bureau that I’m responsible for. 
21 

Mr. KRISHNAMOORTHI. Okay. Could you commit to assist us in 

getting that type of information? 

Mr. PAHL. I can take that back to the agency and we can see 

what could be provided. 

Mr. KRISHNAMOORTHI. What is the current litigation pending 

against any payday or title loan lender? 

Mr. PAHL. Sorry, I don’t understand your question. 

Mr. KRISHNAMOORTHI. Okay. Let me back up. Is there any litigation currently pending against any auto title lender or payday lender? 

Mr. PAHL. I don’t know the answer to that. I would have to 

check, because again, that’s not the part of the organization that 

I’m responsible for. 

Mr. KRISHNAMOORTHI. Sure. Can you please provide that—or go 

back to the agency and provide that information to us? 

Mr. PAHL. If there are cases that we have filed or announced, we 

can give you that information, certainly. 

Mr. KRISHNAMOORTHI. Sure. Unfair, deceptive, and abusive practices are what Dodd-Frank covers. Is there any level of interest 

rate above which a payday loan would be considered unfair or abusive? 

Mr. PAHL. The Dodd-Frank Act explicitly prohibits the agency 

from imposing usury requirements, so basically doing any kind of 

regulation based upon the price of a loan. And so for that reason, 

the price of a loan is not something that we can use essentially as 

a basis for our actions. 

Mr. KRISHNAMOORTHI. Is there any interest rate above which you 

would think a payday loan is unconscionable? 

Mr. PAHL. I think unconscionability is a matter of state law traditionally. And so, to me, to figure out whether there is such a rate 

would depend upon what state you were and with the judgment of 

that state. 

Mr. KRISHNAMOORTHI. So you don’t believe that there’s any 

threshold that would necessarily apply across the board? So, for instance, would an interest rate of 500 percent be unconscionable to 

you? 

Mr. PAHL. It is not part of the Bureau’s work. And also, if it’s 

a 500 percent rate, I also would want to know what’s included and 

how it’s calculated. 

Mr. KRISHNAMOORTHI. Okay. Tell me how you could justify a 500 

percent rate on a payday loan. 

Mr. PAHL. It’s not whether I could or could not justify it. It’s just 

something that is not within the ambit of my agency’s responsibility or authority. And so therefore, you know, my personal opinions as to pulling a number, you know, as to what’s too high or too 

low for an interest rate alone is not part of my job, part of my position, part of my agency’s work. 

Mr. KRISHNAMOORTHI. So, Mr. Pahl, I have another question for 

you. Do you believe that the lion’s share of deregulation is likely 

to commence once President Trump’s appointees assume their leadership roles throughout the Federal Government, including the 

CFPB? 

Mr. PAHL. I’m sorry, could you repeat the question? 
22 

Mr. KRISHNAMOORTHI. Do you believe that the lion’s share of deregulation is likely to commence once President Trump’s appointees 

assume their leadership roles throughout the Federal Government, 

including the CFPB? 

Mr. PAHL. That’s a question that goes way beyond my expertise. 

Mr. KRISHNAMOORTHI. Well, that’s what you wrote back on—let’s 

see here. You wrote in The Hill, in an article, on February 2, 2017, 

an article titled, ‘‘The tortoise, not the hare, will win the deregulation race.’’ 

Mr. PAHL. Right. 

Mr. KRISHNAMOORTHI. So I think it’s within your expertise, if it 

was back then. 

Mr. PAHL. My point was simply that I was making a general 

statement in that article that it takes a long time to make regulatory changes, pro or con. I thought you were asking me whether—about other specific agencies and other specific regulatory regimes and who benefits from them. 

Mr. KRISHNAMOORTHI. And you’re one of those senior appointees 

at CFPB, correct? 

Mr. PAHL. I am, yes. 

Mr. KRISHNAMOORTHI. Thank you. Thank you. 

Well, I’d like to thank our witness for his testimony today. Without objection, all members will have five legislative days within 

which to submit additional written questions for the witness to the 

chair which will be forwarded to the witness for his response. I ask 

our witness to please respond as promptly as you are able, and we 

will followup as well on our request to you for the information that 

was posed in this hearing. 

Mr. PAHL. Chairman, there is one point I’d like to make, with 

your indulgence. You know, I received some requests for information from members of this panel. I want to clarify that I’m not authorized to provide documents on the agency’s behalf. 

Mr. KRISHNAMOORTHI. Are you asserting executive privilege over 

that too? 

Mr. PAHL. I would be asserting executive privilege as—depends 

on what the documents are as to—— 

Mr. KRISHNAMOORTHI. We’re going to followup with the request. 

You’ve already answered those questions during the hearing, and 

then you can put on paper what you—what objections you have. 

But I think you already answered on the record with regard to 

those documents. So if you want to go back and ask those questions 

of the agency as to what you’re going to be able to provide, I appreciate it. 

Thank you very much. This hearing is adjourned. 

[Whereupon, at 3:37 p.m., the subcommittee was adjourned.] 

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