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20–947 PDF 2016

S. HRG. 114–318

ASSESSING THE EFFECTS OF CONSUMER FINANCE

REGULATIONS

HEARING

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE

ONE HUNDRED FOURTEENTH CONGRESS

SECOND SESSION

ON

ASSESSING THE EFFECTS OF CONSUMER FINANCE REGULATIONS ON 

CONSUMERS AND EXPLORING WAYS TO IMPROVE REGULATION TO 

ENSURE THE CONSUMER FINANCE PROTECTION BUREAU ISSUES 

RULES THAT PROVIDE STAUNCH CONSUMER PROTECTION

APRIL 5, 2016

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

(

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


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

RICHARD C. SHELBY, Alabama, Chairman

MIKE CRAPO, Idaho 

BOB CORKER, Tennessee 

DAVID VITTER, Louisiana 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

DEAN HELLER, Nevada 

TIM SCOTT, South Carolina 

BEN SASSE, Nebraska 

TOM COTTON, Arkansas 

MIKE ROUNDS, South Dakota 

JERRY MORAN, Kansas 

SHERROD BROWN, Ohio 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

JON TESTER, Montana 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

ELIZABETH WARREN, Massachusetts 

HEIDI HEITKAMP, North Dakota 

JOE DONNELLY, Indiana

WILLIAM D. DUHNKE III, Staff Director and Counsel 

MARK POWDEN, Democratic Staff Director

DANA WADE, Deputy Staff Director 

JELENA MCWILLIAMS, Chief Counsel 

SHELBY BEGANY, Professional Staff Member

LAURA SWANSON, Democratic Deputy Staff Director 

GRAHAM STEELE, Democratic Chief Counsel 

JEANETTE QUICK, Democratic Senior Counsel 

PHIL RUDD, Democratic Legislative Assistant

DAWN RATLIFF, Chief Clerk 

TROY CORNELL, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor

(II)


BANKI-41578DSA with DISTILLER
(III)

CONTENTS

TUESDAY, APRIL 5, 2016

Page

Opening statement of Chairman Shelby ................................................................ 1

Opening statements, comments, or prepared statements of: 

Senator Brown .................................................................................................. 2

WITNESSES 

Leonard Chanin, Of Counsel, Morrison & Foerster LLP ..................................... 4

Prepared statement .......................................................................................... 34

Responses to written questions of: 

Chairman Shelby ....................................................................................... 93

David Hirschmann, President and CEO, Center for Capital Markets Competitiveness, U.S. Chamber of Commerce ................................................................ 6

Prepared statement .......................................................................................... 38

Responses to written questions of: 

Chairman Shelby ....................................................................................... 95

Senator Warren ......................................................................................... 103

Senator Cotton ........................................................................................... 105

Reverend Dr. Willie Gable, Jr., D. Min., Pastor, Progressive Baptist Church, 

New Orleans, Louisiana, and Chair, Housing and Economic Development 

Commission, National Baptist Convention USA, Inc. ....................................... 8

Prepared statement .......................................................................................... 65

Responses to written questions of: 

Chairman Shelby ....................................................................................... 107

Todd Zywicki, George Mason University Foundation Professor of Law, 

Antonin Scalia School of Law at George Mason University, Executive Director, Law and Economics Center, and Mercatus Center Senior Scholar .......... 9

Prepared statement .......................................................................................... 70

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD

Prepared statement of the Consumer Federation of America ............................. 110

Joint cover letter from the Americans for Financial Reform, Color Of Change, 

CREDO Action, National Council of LaRaza, National People’s Action, 

Other 98, and Public Citizen ............................................................................... 116

Prepared statement of Americans for Financial Reform (AFR) ........................... 118

Prepared statement, fact sheet, and report from Alliance for a Just Society ..... 129

Prepared statement of the Consumer Finance Center for American Progress .. 177

Prepared statement of the Center for Responsible Lending (CRL) ..................... 179

Article by Kimberly D. Krawiec, Kathrine Robinson Everett Professor of Law, 

Duke University ................................................................................................... 182

Prepared statement of the Food Marketing Institute ........................................... 233

Prepared statement of the National Association of Convenience Stores and 

the Society of Independent Gasoline Marketers of America ............................ 236

Letter from the Main Street Alliance .................................................................... 242

Prepared statement and attachments of the National Association of Consumer 

Advocates (NACA) ................................................................................................ 245

Prepared statement of the National Consumer Law Center (NCLC) ................. 256

Prepared statement of the National Community Reinvestment Coalition 

(NCRC) .................................................................................................................. 262

Prepared statement of the National Fair Housing Alliance (NFHA) .................. 264

Prepared statement of the National Retail Federation (NRF) ............................ 268

Prepared statement of the U.S. PIRG .................................................................... 274


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IV

Prepared statement of Public Citizen .................................................................... 280

Article, ‘‘He Who Makes the Rules,’’ in Washington Monthly, by Haley 

Sweetland Edwards ............................................................................................. 281


BANKI-41578DSA with DISTILLER
(1)

ASSESSING THE EFFECTS OF CONSUMER 

FINANCE REGULATIONS 

TUESDAY, APRIL 5, 2016

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 10:03 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Richard Shelby, Chairman of the Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN RICHARD C. SHELBY 

Chairman SHELBY. The Committee will come to order. 

Today the Committee will hear from private sector experts on 

consumer finance regulation. This Thursday, we will hear from Director Richard Cordray. 

Nearly 5 years ago, the Bureau of Consumer Financial Protection 

opened its doors. Because of the Bureau’s structure and the means 

by which it is financed, it remains one of least accountable agencies 

in the Federal Government. 

As a result, the very consumers that the CFPB was designed to 

help have been harmed by the Bureau because some of its rules 

make it more difficult for companies to lend and offer products in 

the marketplace. 

For example, certain rules will make it more difficult for a consumer to get a prepaid card or take out a short-term, small-dollar 

loan. Such regulations may restrict access to credit entirely for individuals, households, and businesses. 

I have long advocated for sensible consumer protections, but I do 

not believe they should be used as a substitute for an individual 

consumer’s independent—yes, independent—judgment. Also, socalled protections should not be implemented without regard to 

their costs or their effects on economic growth or the safety and 

soundness of any particular financial institution. 

The Bureau has enormous power over consumer financial matters. It has, however, no statutory mandate to write balanced regulations that protect the economy or promote institutional safety 

and soundness. As it continues to exercise its considerable regulatory powers, it does so without any meaningful statutory check 

by Congress. 

For example, its actions in the indirect auto lending space have 

pushed the envelope on its jurisdiction under Dodd-Frank. In order 

to circumvent Dodd-Frank’s explicit exemption for auto dealers, the 

Bureau has targeted auto lenders. 


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To do so, it has also circumvented the regular rulemaking process that has been in place for 70 years. This process ensures transparency and accountability in Federal regulations. 

Instead of setting clear rules, the Bureau is using enforcement 

actions to reshape the auto finance industry. As demonstrated by 

settlements with the Bureau, its goal has been to limit the interest 

rate that dealerships charge based on factors other than financial 

risk. 

What is more, these limits often differ leading to an uneven playing field not only among companies that have settled, but also between them and the rest of the market. I fear that this sets a dangerous precedent for the role of a regulator in our financial markets. 

In addition, the Bureau continues to base its fair lending enforcement on the controversial legal theory of disparate impact, under 

which a company can be held liable for policies that lead to different results, without any intent to discriminate. 

Further, as part of this process, the Bureau uses a methodology 

to identify ‘‘victims’’ that is known to produce inaccurate results. As 

a consequence, settlement funds may regularly go to individuals 

who have not been harmed in any way. 

Outcomes like this should cause the Bureau to seriously reevaluate its approach in this area. Instead, we have seen the Bureau 

and its Director double-down on the same faulty methodology. 

Equally troubling is the Bureau’s look at the use of arbitration 

clauses for financial products. Its 2015 study on this matter relies 

on a series of questionable assumptions and conclusions. 

I think it should surprise no one that the final study makes 

sweeping conclusions that arbitration agreements harm consumers 

and downplays or altogether ignores its potential benefits to individuals. One can only assume that any final rule on arbitration will 

incorporate many of these dubious findings. 

As the Bureau continues to reshape the consumer finance landscape, it is important that these and other issues be fully vetted 

before Congress and the American public. Today we will hear from 

our witnesses on how we can improve the regulation of consumer 

finance and ways to prevent the Bureau from overstepping its 

boundaries at the consumer’s expense. 

Senator Brown. 

STATEMENT OF SENATOR SHERROD BROWN 

Senator BROWN. Thank you, Chairman Shelby, for holding this 

important hearing on consumer finance regulation. 

Nine years ago this week, New Century Financial, once the second largest subprime mortgage originator in the country, filed for 

bankruptcy. This marked the beginning of the worst financial crisis 

this country has seen since the Great Depression, something many 

on this Committee seem to have forgotten. 

Over the next 3 years, the crisis ravaged the country. Nine million homes went into foreclosure between 2007 and 2010. Think of 

the family with young teenagers that paid their mortgage every 

month, lost their jobs, or were victimized by speculation and all the 

things that played into that crisis. Billions of dollars of household 


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wealth disappeared overnight. Think of the senior citizen in a 

401(k) or savings they had, much of which they lost. 

Estimates on the costs of this crisis in the American economy are at least $10 trillion—that is $10,000 billion. It could be as high as 

$25 trillion. 

We learned that large companies gambled with retirement savings and homes of everyday Americans, that millions of Americans 

were put into predatory mortgage products they could not afford. 

As that happened, regulators all too often were looking the other 

way. In response, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act, which created the Consumer 

Financial Protection Bureau. 

The crisis revealed that Americans needed a Federal watchdog 

that would put their interests first. The CFPB has been absolutely 

a success. The agency has taken strong actions in a number of consumer finance markets that previously had no Federal oversight: 

credit reporting, debt collection, payday loans, student loan servicing, and auto finance. 

The benefits of CFPB are clear. Its actions have resulted in more 

than $11 billion being returned to 25 million consumers. Over and 

over, CFPB has exposed unfair and abusive behavior by financial 

companies, companies adding on hidden fees to credit cards, companies attempting to collect on debt that has already been paid off, 

companies discriminating against minorities, companies deceptively 

marketing financial products. CFPB has made consumer financial 

products safer and better for consumers. 

Its work is not done. The Bureau is working on rules to rein in 

payday loans, prepaid cards, and debt collection. It is working to 

limit forced arbitration clauses in consumer finance products—

forced arbitration clauses, I would emphasize—clauses which deny 

consumers the right to litigate when they are harmed. 

It is critical that CFPB be allowed to finalize and implement 

these rules. It is also critical for the agency to be vigilant against 

new threats to consumers. Americans have a record $3.5 trillion in 

consumer debt, not even including mortgage debt. This number, including $1 trillion in student loan debt, $1 trillion in auto loan 

debt, is a full $1 trillion more than it was in 2010. 

Those who say that credit is not available to consumers today are 

not paying attention. Credit is available and it is growing month 

after month. We are seeing increasing levels of lending to subprime 

borrowers in mortgages and credit cards and auto loans. We are 

seeing nonbank lenders expanding their role in consumer lending 

from FinTech companies to nonbank mortgage originators. 

It is vital that CFPB exist. It is vital that they exist to watch 

these developments and take action when needed. It is our duty on 

the Banking Committee in both parties, it is our duty in Congress 

to resist the collective amnesia that is all too present in this hearing room and in this Congress, and to ensure that the same bad 

practices that led to the crisis that hurt so many Americans, that 

those practices are not repeated by a new set of players. It is why 

I continue to be troubled by Republican efforts to undermine and 

in some cases eliminate the CFPB. 

Three years ago, Director Cordray said he wants the Bureau to 

‘‘make sure we stay in touch with the people who need us most to 


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do our work.’’ That is why I am pleased that Reverend Willie Gable 

could be with us here today from New Orleans. I understand you 

are a graduate of Union Theological Seminary in Dayton, Ohio. 

Good move—for us and for you. Dr. Gable has seen firsthand the 

effects of too little financial regulation in communities. 

I know, Mr. Chairman, that Dr. Gable is the only witness on this 

panel representing consumers, representing everyday Americans. 

The other three witnesses, by and large, represent the views of the 

financial industry. I regret—as much as Dr. Gable, I know, can 

hold his own—I regret that this Committee’s panel today is not 

more balanced. Dr. Gable is by no means alone. I ask consent to 

enter 11 statements I have received from consumer advocacy organizations in the record. 

Chairman SHELBY. Without objection. 

Senator BROWN. Thank you, Mr. Chairman. I look forward to the 

testimony of all four of you. Thank you. 

Chairman SHELBY. I think as we start this hearing, we need to 

recognize that we are all consumers, every single one of us, you 

know, with some degree. 

First, we will today receive testimony from Mr. Leonard Chanin, 

Of Counsel at Morrison & Foerster. 

Next we will hear from Mr. David Hirschmann, President and 

CEO of the U.S. Chamber of Commerce Center for Capital Markets 

Competitiveness. 

Then we will hear from Reverend Willie Gable, Jr., Doctor of 

Ministry, Chairman of the Board, National Baptist Convention 

USA, Housing and Economic Development Commission, and Pastor, Progressive Baptist Church. 

Finally, we will receive testimony from Mr. Todd Zywicki, Foundation Professor of Law and Executive Director of the Law and Economics Center at the George Mason University School of Law. 

We welcome all of you. Your written testimony will be made part 

of the hearing record. We will start with you, Mr. Chanin. 

STATEMENT OF LEONARD CHANIN, OF COUNSEL,

MORRISON & FOERSTER LLP 

Mr. CHANIN. Good morning. Chairman Shelby, Ranking Member 

Brown, and Members of the Committee, my name is Leonard 

Chanin. I am Of Counsel in the financial services practice group 

of the law firm Morrison & Foerster here in Washington, DC, and 

have more than 30 years’ experience working as an attorney on 

consumer financial services issues. I spent 20 years at the Federal 

Reserve Board, including 6 years as Assistant Director and Deputy 

Director of the Division of Consumer Affairs, and 18 months as Assistant Director of Regulations at the Consumer Financial Protection Bureau. I have spent nearly 10 years in private practice advising financial institutions on Federal consumer financial services 

laws. I am pleased to be here today to discuss the effects of consumer finance regulations. 

The primary Federal agency entrusted with regulating consumer 

financial products is the CFPB. I would like to address two issues: 

the impact of regulations on the consumer financial services market; and, second, the use of enforcement orders to create policy. 


BANKI-41578DSA with DISTILLER
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If properly designed, regulations can better ensure a standardized approach is used to provide disclosures to consumers to allow 

them to compare products and choose the ones they prefer. However, there are many risks to regulating too much. Regulations 

need to be clear, but also provide flexibility to accommodate new 

products, new delivery channels, and new ways of doing business. 

Clear rules ensure that institutions know what is required to comply and manage risks, but detailed, proscriptive rules inhibit the 

availability of products and development of new products. 

While it is difficult to quantify the precise impact that CFPB 

rules have had on consumers and the market for financial products 

and services, it seems clear that such rules have had a significant 

adverse impact on the ability and willingness of institutions to offer 

those products and services. Anecdotal evidence clearly indicates 

because of the rules’ complexity, some institutions that previously 

offered mortgages have simply stopped doing so. Other institutions 

have reduced the mortgage products and services offered to consumers, and some institutions have been reluctant to offer new 

products and services. 

Despite the problems associated with regulations, they are vastly 

preferable to regulating by the use of enforcement orders to establish policy. It is quite clear that the CFPB uses enforcement orders 

to create new policies and rules. When enforcement orders are used 

to establish policies, there can be many drawbacks. 

First, most enforcement orders lack specificity about the practices involved, so it is difficult to discern how to apply any guidance 

in the orders to a variety of products availability. This creates inconsistencies in the marketplace. 

Second, unlike rules, enforcement orders are not published for 

public comment. This deprives the public of the opportunity to comment and deprives the agency of the ability to consider operational 

and other issues as well as potential negative or unforeseen consequences. 

Finally, enforcement orders that contain broad statements and 

allege unfair or deceptive acts and practices may result in financial 

institutions simply choosing not to offer products or develop new 

products due to lack of certainty about what is required and how 

to manage potential risks. 

The use of fair lending enforcement orders dealing with the pricing of indirect auto loans illustrates this problem, as it has created 

an unlevel playing field in the automobile loan market. There are 

hundreds of banks, credit unions, and finance companies that purchase auto loans. Institutions take a variety of approaches in how 

they deal with pricing and the purchase of loans made by auto 

dealers due to competition in the local markets and other factors. 

By using enforcement orders to create a policy that provides only 

three options for ways lenders can compensate dealers for their 

work in originating auto loans, the CFPB has failed to recognize 

that there are many other legitimate means institutions can use to 

compensate dealers and still comply with fair lending laws. By 

using enforcement orders to create new legal requirements, the 

CFPB has failed to provide critical guidance to lenders on what 

laws require or permit. 


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In conclusion, the CFPB is less than 5 years old, and the question remains as to how the agency will balance its mandated purpose of ensuring consumer access to financial products while ensuring fairness in these markets. 

Thank you for the opportunity to be here today. I would be happy 

to respond to any questions. 

Chairman SHELBY. Thank you. 

Mr. Hirschmann. 

STATEMENT OF DAVID HIRSCHMANN, PRESIDENT AND CEO, 

CENTER FOR CAPITAL MARKETS COMPETITIVENESS, U.S. 

CHAMBER OF COMMERCE 

Mr. HIRSCHMANN. Senator Shelby, Ranking Member Brown, 

Members of the Committee, thank you for the opportunity to testify 

today on behalf of the Chamber’s Center for Capital Markets Competitiveness. 

The Chamber shares the Committee’s goal of ensuring that consumers are both treated fairly and that they retain access to the 

financial products they need. After all, in today’s economy consumer products are critical sources of financing, not just for consumers but for small businesses as well. Fully 4 in 10 small businesses rely on personal credit cards and other forms of consumer 

credit to finance their business. So whether you are managing the 

finances of a small business or those of a family of four, everyone 

benefits from a system that deters fraud, creates clear rules of the 

road within an evenhanded enforcement across the board, ensures 

consumer products are clearly explained and disclosed, and creates 

a level playing field to spur competition and encourage innovation 

to serve diverse consumer needs. 

We have engaged with the CFPB from the day it first opened its 

doors nearly 5 years ago now to promote those basic principles. 

While we certainly do not expect to agree with the CFPB on every 

decision it makes, we have urged them to clarify the rules of the 

road by doing two things: creating a system to provide guidance 

and no-action relief to companies seeking to do the right thing, and 

avoiding regulating through one-off enforcement or supervision. 

Unfortunately, progress has been slow, and over time that means 

fewer choices, higher prices, and less credit available for consumers 

and small businesses. 

Today I would like to address two specific Bureau initiatives: the 

first is the CFPB’s forthcoming rule on arbitration, and the second 

is the CFPB’s continued efforts to regulate auto dealers through 

consent orders with loan underwriters. 

First, on arbitration. One way in which businesses compete in 

the consumer financial marketplace is by subsidizing dispute resolution programs like arbitration that provide a better customer experience than any court litigation. The Bureau’s 2015 study 

reaches four conclusions on arbitration. 

First, it points out that arbitration is faster and more convenient 

than litigation. Consumers can initiate arbitrations by filing claims 

online. They can submit documents by email and participate in 

hearings by telephone. 

Second, arbitration is cheaper for the consumer. Many companies 

actually pay for a consumer to file a complaint in arbitration. Some 


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even pay double legal fees and a bonus award to consumers who 

prevail. 

Third, consumers generally receive bigger awards in arbitration 

than they would in litigation. 

And, finally, arbitration is often presided over by a neutral arbitrator who has expertise in the specific area of the law, unlike a 

judge who is usually a generalist. 

Despite these benefits, the Bureau has indicated it is planning 

to propose a rule this spring that will have the practical effect of 

eliminating consumer arbitration. If that happens, consumers with 

small, individualized disputes will have a much harder time getting 

quick and effective resolutions to their claims. But the Bureau appears not to have considered the likelihood of that outcome. 

The Chamber’s CCMC, our Institute for Legal Reform, and, in 

fact, many Members of this Committee and throughout the Senate 

have expressed serious concerns about the arbitration study, including its omission of certain data and critical analysis that led 

to flawed conclusions. We hope, for example, that the Bureau has 

considered the impact of the loss of arbitration in drafting its rule. 

Turning to auto loan underwriting, in my remaining time I 

would like to briefly add a few thoughts on that topic. 

For over 2 years, the Chamber has urged the Bureau to abandon 

its effort to regulate auto dealers through regulation by enforcement campaign against auto loan underwriters. Intentional discrimination is both morally repugnant and has no place in the 21st 

century society or economy, period. But the Chamber rejects the argument that the Equal Credit Opportunity Act permits claims to 

be brought under the disparate impact theory of discrimination. 

The Bureau has, nonetheless, used this approach in enforcement 

actions against a handful of underwriters. 

If the Bureau believes that the auto loan market needs regulating, we would welcome an open public debate about how best to 

do it. The Bureau should pursue a transparent rulemaking, complete with notice and comment. In fact, if they had taken us up on 

our suggestion, it is highly possible they could have concluded a 

rulemaking by now. The Bureau has instead preferred to push for 

one-off settlements. I strongly believe the CFPB could have found 

a swifter, more effective path for both consumers and credit providers if they engaged with lenders, auto dealers, and the American public on a more sensible approach to regulatory policy. 

The Chamber will continue to encourage the Bureau to consider 

the significant negative impact of its indirect auto campaign on 

consumers and small businesses and urge it to develop a transparent and effective resolution on this issue. We encourage the 

Committee, Mr. Chairman, to continue its oversight over this program as well. 

Mr. Chairman, I am happy to answer any questions you or Members of the Committee may have. 

Chairman SHELBY. Reverend Gable. 


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STATEMENT OF REVEREND DR. WILLIE GABLE, JR., D. MIN., 

PASTOR, PROGRESSIVE BAPTIST CHURCH, NEW ORLEANS, 

LOUISIANA, AND CHAIR, HOUSING AND ECONOMIC DEVELOPMENT COMMISSION, NATIONAL BAPTIST CONVENTION 

USA, INC. 

Mr. GABLE. Chairman Shelby, Ranking Member Brown, and 

Members of the Committee, thank you for inviting me to testify 

today. I am Reverend Willie Gable, Pastor of the Progressive Baptist Church in New Orleans, Louisiana. Our congregation is a 

member of the National Baptist Convention USA, the Nation’s 

largest predominantly African American religious denomination. 

I am also Chair of the National Baptist Convention Housing and 

Economic Development Board, and over the past 20 years, the commission has developed over 1,000 affordable homes for seniors in 

14 different States. 

Home—I would ask you to think about that word for a minute, 

Senators, to think about that place. Perhaps you live with family 

there, with a spouse or a family or a child. Now imagine being 

kicked out of your home, your possessions scattered on the curb. 

Twelve million families lost their homes as a result of the financial 

crisis. Twelve million lives turned upside down. Life savings 

washed away, $2.2 million lost property value, trillions lost in property value. Over half of the communities that lost this were people 

of color. 

Predatory lending practices caused that financial crisis, and the 

lax oversight enabled predatory lending. The whole Nation suffered, many worse than others. Some will continue to suffer for the 

rest of their lives. 

The Consumer Financial Protection Bureau was formed in the 

wake of that crisis by this body, Congress. It was vested with the 

authority by this body to prevent financial practices. That is mandated, and it was handed down by this body. 

CFPB implemented mortgage rules that have made the mortgage 

market far safer, have required lenders to determine borrowers’ 

ability to repay, have offered some assurances that mortgage credit 

will grow the community rather than implode it. But other abuses 

continue to run rampant. Some may be more obscure than mortgage lending, but they are ever powerful and ever destructive. And 

if not controlled, they will relegate some communities to a state of 

perpetual poverty. 

Payday lending is an abomination in plain sight, a debt trap—

legalized loan sharking, I think. The CFPB is studying and proposing a rule in this area, and rightly so. Bank overdraft fees are 

the banks’ version of exploiting the most vulnerable among us, billions of dollars annually in fees derived mainly from a select few 

unlucky people. The CFPB is studying and considering rules in this 

area, and rightly so. 

In the auto lending industry, predatory discrimination practices 

have been evidenced for years. The CFPB is studying and proposing guidance and taking enforcement actions in this area, and, 

again, rightly so. 

Debt collectors routinely break the law. The CFPB has appropriately taken action against some, and again I say rightly so. 

Mandatory arbitration clauses stuck in fine print of so many


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predatory loan contracts is an affront, I think, to our constitutional 

rights. Congress mandated that the CFPB study this. It has, and 

it is considering rules to limit it to permit individuals to join together and pursue justice, and rightly so. 

And the list goes on: student loans, credit cards, protection 

against elder abuse. It is clear that a strong, well-funded, independent agency whose job is to wake up in the morning thinking 

about protecting the most vulnerable among us is necessary to ensure the financial service practices do not drain the hard-earned income and savings for many of my constituents and many Americans across this country. 

Please allow me to be clear. The notion that the struggling Americans need access to products like these the Bureau has been working on so hard to address is an insult to the basic dignity of every 

vulnerable person. The predatory practices the CFPB is addressing 

siphons off what little resources targeted persons have and leave 

them in worse-off situations. 

I thank you for the opportunity to share my experiences, and I 

look forward to your questions. 

Chairman SHELBY. Thank you. 

Professor. 

STATEMENT OF TODD ZYWICKI, GEORGE MASON UNIVERSITY 

FOUNDATION PROFESSOR OF LAW, ANTONIN SCALIA 

SCHOOL OF LAW, GEORGE MASON UNIVERSITY, EXECUTIVE 

DIRECTOR, LAW AND ECONOMICS CENTER, AND MERCATUS 

CENTER SENIOR SCHOLAR 

Mr. ZYWICKI. Thank you, Senator Shelby, Ranking Member 

Brown, and Members of the Committee. It is my pleasure to testify 

at this hearing this morning on this crucially important issue of access to consumer credit and consumer credit regulation. 

Let me make clear at the outset that as a scholar of consumer 

credit and the former Director of the Office of Policy Planning at 

the Federal Trade Commission, I was a strong supporter at the 

time of Dodd-Frank of creating a new, modernized, scientifically 

based consumer financial protection system. I think the old system 

did not work very well, and I agreed with the idea of centralizing 

this in one regulatory agency. 

Unfortunately, by creating a super regulator that lacks the democratic accountability and checks and balances of a traditional Government regulatory agency, we have created a monster that is 

passing regulations that are harming American consumers and 

American families. 

During the time since the financial crisis, Dodd-Frank, and the 

creation of the CFPB, we have seen Washington impose a series of 

laws and regulations that have reduced access to credit for consumers, stifled innovation, substituted the will of Washington’s bureaucrats for the good, sound judgment of American families of how 

to manage their finances, and driven millions of consumers out of 

the mainstream financial system, forcing increased reliance on

alternative products such as payday loans, auto title loans, and the 

like. 


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Most tragic, the cost of this regulatory onslaught has fallen most 

heavily on lower-income, younger, and the most vulnerable consumers in the American economy. 

I will start with the Durbin amendment, which was attached as 

a midnight amendment to Dodd-Frank. It imposed price controls on 

debit card interchange enrollees, not credit card but debit card 

interchange fees, which one thing we could say did not contribute 

to the financial crisis by consumers overusing their debit cards. 

Nevertheless, it was attached to Dodd-Frank and passed through. 

The results of these price controls have been disastrous for 

American consumers as the loss in revenues has been passed on to 

consumers in the form of higher bank accounts. We have seen——

Chairman SHELBY. Can you take a second to digress and explain 

its effects? 

Mr. ZYWICKI. Certainly, Senator, yes. Under the Durbin amendment, it reduced the interchange fees on debit cards, which are the 

fees that are paid when you swipe your debit card at, say, Target 

or the grocery store. Under the Durbin amendment, they basically 

cut in half what could be compensated for with respect to the recovery. That loss of several billion dollars of revenues by banks 

that are most affected by that has been passed on to consumers. 

It has been passed on in two ways, which is the loss of free checking. Before the Durbin amendment went into effect, 76 percent of 

bank accounts in America were eligible for free checking. Today 

that number has been reduced to 38 percent. 

It has been passed on a second way, which is that the bank fees 

that people pay on a monthly basis have doubled during that period. So we have seen a reduction of free checking and a doubling 

of bank fees. 

Chairman SHELBY. [off microphone] I don’t get to [inaudible] but 

can you explain what consumers lost on this from the—what they 

gained, if anything—in other words, the cost-benefit there? 

Mr. ZYWICKI. Certainly, yes. What consumers lost was that—access to debit cards had been a huge driver, the introduction of debit 

cards into the market at the beginning of 2000, had raised free 

checking from under 10 percent to 76 percent. Why? Because the 

44 cents or whatever that was generated on average from those 

payments were enough to cover the bank accounts for most consumers and especially low-income consumers who lack the ability 

to have the high minimum balances and that sort of thing that otherwise make them eligible——

Senator BROWN. Mr. Chairman, if we are going to begin the 

questioning, which apparently we are already, I would have to——

Chairman SHELBY. Observations. 

Senator BROWN. Well, and I will make observations, also, in—

just for fair play, the Durbin rule, maybe it was added in the middle of the night, as you claim, but it was a Senate vote, and it was 

a heavily lobbied Senate vote on both sides. 

Second, the millions of dollars that the Durbin amendment may 

have cost banks——

Mr. ZYWICKI. Billions. 

Senator BROWN. I am sorry, excuse me. I stand corrected. The 

billions of dollars it may have cost banks, to imply that that was 


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11

not passed on in large numbers to consumers is also a bit misleading. 

Mr. ZYWICKI. Actually——

Senator BROWN. I would add that you really—you make the 

statement that all of a sudden because of the Durbin rule, these 

banks cut down on the number of free checking accounts, the 

amount of free checking they were doing, that is a pretty tentative 

cause and effect that you really cannot prove. And you can prove 

in a timeline, but considering what banks have done in fees over 

the years, they are always looking for opportunities, and that is 

how they nicked Dr. Gable’s congregation and so many others. But 

that was just an observation also since we have begun the questioning, Mr. Chairman. 

Mr. ZYWICKI. Well, thanks for that. I will just elaborate and then 

move on. 

First, you mentioned in theory these costs could be passed on to 

consumers. According to a study by the Richmond Federal Reserve 

that was conducted this fall, there is zero evidence that anything 

has yet been passed on to consumers by retailers. And, in fact, because of the way the market has adjusted, small businesses look 

like, many of them, have actually paid higher interchange fees. 

Big-box retailers certainly have generated a huge multi-billion-dollar windfall to big-box retailers. Yet according to the study by the 

Richmond Federal Reserve this fall, there is no evidence that any 

of that has been passed on to consumers. 

With respect to whether it was the Durbin amendment, what we 

can say is that free checking has disappeared only at the banks 

that were affected by the Durbin amendment. Small banks have 

not so far scaled back—and community banks and credit unions 

have not scaled back on access to free checking. And so I think the 

evidence overwhelmingly supports that. 

The second thing I want to point to that has driven consumers—

and the impact of that for consumers has been tragic, maybe a million consumers, especially lower-income consumers, have lost access to bank accounts as a result of the higher fees and less access 

to free checking relative to the Durbin amendment. 

The Credit CARD Act, which was passed in the wake of the financial crisis, has had a similar effect. By interfering with the ability to price risk accurately, certainly it has helped some consumers, 

especially middle-class consumers who may be paying less fees 

than they did otherwise. Yet according to research by CFPB and 

other researchers, the impact of the Credit CARD Act—and it is 

hard to disentangle from the recession—275 million credit card accounts were closed, $1.7 billion of credit card lines disappeared, 

and, unfortunately and most tragically, many of those who lost 

their credit cards have had to turn to things like payday loans, 

auto title loans, and overdraft protection to make ends meet. 

With respect to mortgages, the qualified mortgages rule and 

other regulations have driven up the cost, the regulatory cost, and 

the risk of making loans substantially and imposed a one-size-fitsall system of mortgage underwriting that has stifled innovation 

and consumer choice in the consumer financial system. Since the 

qualified mortgages rule has gone into effect, mortgage originations 

have fallen and have not recovered. 


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A report this fall finds most strikingly by the National Association of Realtors that the share of mortgages going to first-time borrowers has fallen for the third straight year last year and now 

stands at the lowest rate since 1987, largely because of the inability of first-time home buyers to be able to get access to mortgages 

as a result of the regulations such as the qualified mortgages rule. 

At the same time, it has driven community banks out of the 

mortgage market. According to a study done by the Mercatus Center at George Mason University, 64 percent of community banks reported they changed their mortgage offerings, and 15 percent have 

left the market completely as a result of the regulatory cost and 

risk associated with the qualified mortgages rule and other regulations. 

Finally, the imposition of one-size-fits-all underwriting has deprived community banks of their competitive advantage in the market, which is the relationship lending that they have with their 

consumers. Now, basically because of the one-size-fits-all blanket of 

uniformity that has been thrown over the mortgage market, it has 

eliminated the ability of community banks to compete with the 

mega banks. And, unfortunately, as banks have exited this market 

because of the regulatory costs, as Senator Brown mentioned so 

well at the outset, nonbank lenders have stepped in to fill this 

voice; nonbank lenders have dramatically increased their market 

share as traditional banks and lenders have been driven out of the 

market by regulatory and liability risks. 

Unfortunately, as consumers have been driven out of the mainstream financial system, they have lost access to bank accounts, 

credit cards, mortgages, and the like, and they have turned increasingly to products like payday loans, overdraft protection, and 

auto title loans to try to make ends meet. 

Unfortunately, as we stand here today, the CFPB stands poised 

to shoot holes in the life rafts to which consumers are increasingly 

clinging to as they try to make ends meet to these alternative financial products. 

Now, these products serve an important function in the American 

system of providing a buffer between mainstream lenders and the 

black market. They serve an important role, but I think we—and 

we want to be careful about driving them out of the market and 

making vulnerable consumers even more desperate. 

In closing, let me reiterate I support, supported then and support 

now a modern consumer financial protection system in one centralized agency that has the ability to basically bring coherence and innovation and promote competition in our consumer credit market. 

Unfortunately, in the period since the financial crisis and the imposition of Dodd-Frank, we have seen exactly the opposite. We have 

seen a stifling of competition. We have seen consumers being driven out of mainstream financial products. We have seen small banks 

disappearing at twice the rate they were before Dodd-Frank was 

enacted. And we are seeing increase misery for American consumers in this market. 

I think it is important to reform the CFPB, to bring democratic 

checks and balances and democratic accountability to this process 

in order to help American consumers. 

Thank you for your time. 


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Chairman SHELBY. Thank you, Professor. 

I will start with you, Mr. Chanin. Your background, having been 

at the Fed how many years? A number of years? 

Mr. CHANIN. Twenty years, sir. 

Chairman SHELBY. And also you worked at the consumer agency 

for, what, a year and a half? 

Mr. CHANIN. Correct, a year and a half. 

Chairman SHELBY. You have a unique background here. And I 

will also direct this question to Mr. Hirschmann. As you both mentioned in your testimony, the CFPB, the consumer agency, has

habitually used enforcement actions against companies to try to—

companies and individuals, small companies—to set market standards rather than going through the formal rulemaking process to 

set clear rules of the road where people will have something definite, yes or no? Could you provide a little more detail—I will start 

with you, Mr. Chanin—to the Committee and the record here regarding the downsides of using such enforcement actions in lieu of 

a more formal rulemaking process? 

Mr. CHANIN. Sure, I would be happy to. So there are a number 

of drawbacks to using enforcement actions to create a policy or 

really create rules. 

First, the enforcement actions are solely between the parties involved, so usually a bank or other financial institution, and the 

CFPB. So they do not affect the thousands of other institutions out 

there. So other institutions can choose to abide by those, the principles in them, or not. And institutions differ. Some do choose to 

abide by them, and others take different approaches there. What 

that does is to lead to inconsistencies in the marketplace in terms 

of how lenders deal with fair lending issues. 

The other problem is they are not published for public comment, 

so no one has an opportunity to point to problems, unforeseen consequences, and those sort of things in terms of the orders. So you 

are dealing with a marketplace that has thousands of lenders. The 

CFPB in the case of fair lending and the enforcement orders has 

not obtained or provided the public with the opportunity to comment on those and point out some of the problems. 

Chairman SHELBY. Basically, it is narrow in scope. Is that right? 

Mr. CHANIN. The enforcement orders are quite narrow in scope. 

They also do not provide very many details about what the issues 

are. It is very narrowly drawn in terms of the facts and what the 

remedies are. 

Chairman SHELBY. Mr. Hirschmann, do you have any comments? 

Mr. HIRSCHMANN. First, I think we would agree with every Member of this Committee that strong, effective enforcement is important. The real issue is: Do you use enforcement to change the rules 

of the road, or do you write a new rule? Let me give you a couple 

specific examples. 

Recently, the Bureau did an enforcement action against a company that it felt exaggerated its cybersecurity claims. Now, it did 

not just tell the company adjust your—your claims are invalid, but 

it said here is a best practice of what we think cybersecurity should 

be. 

Now, nobody knows if the Bureau is now getting into regulating 

cybersecurity and joining all the other players in this space, if that 


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is the standard the CFPB wants, or if it is going to do a separate 

rulemaking. So it is very hard for those trying to comply to

understand how to read the tea leaves from one enforcement action 

and understand what the rules of the road are going to be. 

Now, in the case of indirect auto, it is particularly troublesome 

because that is such a diffuse market that even doing enforcement 

against one, two, three, five, or ten players only gets you a small 

fraction of the marketplace, and, therefore, it does not solve the 

problem more broadly. So in that case in particular, we thought 

that writing a rule would make much more sense than one-off enforcement. 

Chairman SHELBY. I will start with you, Professor. Last year, the 

consumer agency began publishing consumer narratives in its consumer complaint database. The Bureau admits that it does not 

verify the accuracy of complaints. Meanwhile, it uses this 

unverified data to inform its supervisory activities and for other 

purposes. 

Should a Government agency be publishing narratives about 

companies that are known to be inaccurate? And, second, is it appropriate for the consumer agency to use this unverified information as part of its supervision and regulation? Is this anecdotal 

versus real hard statistics? What is it? 

Mr. ZYWICKI. Thank you, Senator Shelby, for calling attention to 

that issue, and I know some of the other witnesses have spoken to 

this. 

Chairman SHELBY. I think Mr. Hirschmann has a view on this. 

Mr. ZYWICKI. Yes, and I am very concerned by that, really 

based—drawing on my experience at the Federal Trade Commission. The idea of just dumping unverified consumer narratives out 

on the public record, I cannot see how that furthers any coherent 

regulatory purpose. Certainly, it has always been the case, it has 

been an important part of consumer protection to collect complaint 

data and use complaint data in the aggregate as a way of marshalling resources for enforcement regulatory purposes and the like. 

But the idea of basically creating a Government-sponsored Yelp 

where people can just simply, you know, put their own unverified 

views out on the market and basically have the Government endorse it I think serves no coherent regulatory purpose that I can 

see, just these isolated, unverified, often inaccurate, one-sided complaints. 

Chairman SHELBY. Mr. Hirschmann, do you have any comments? 

This area you have worked in. 

Mr. HIRSCHMANN. Yes. Senator, nobody argues that gathering 

complaints is a good idea. We just take particular issue with the 

way the Bureau has done it. By gathering the unfiltered data, it 

is not providing consumers with——

Chairman SHELBY. Is it the methodology? 

Mr. HIRSCHMANN. It is the way they are doing it. So it is hard, 

particularly when you look at these monthly press releases they do, 

kind of the naming and shaming approach, it is hard for a consumer to know if a particular company is a bad actor they should 

avoid or is simply larger than the other players. So the unfiltered 

data, the raw data, without providing any way of verifying, creVerDate 0ct 09 2002 15:42 Dec 22, 2016 Jkt 000000 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 S:\DOCS\20947.TXT SHERYL

BANKI-41578DSA with DISTILLER
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ates—might actually make it harder for consumers to really understand what is going on. 

So what we have said is let us work together to find ways to improve and make the consumer data that is available verified and 

more useful for consumers rather than potentially misleading consumers. 

Chairman SHELBY. The consumer agency has also brought enforcement cases against indirect auto lenders for violating fair 

lending laws using the theory of disparate impact. In these instances the companies being accused of discrimination are by law 

not even allowed to know the race of the purported victims. In your 

opinion, is this an appropriate way to enforce fair lending laws? Because I think all of us believe that you should not discriminate 

against anybody, period; we should be fair in lending; we should do 

everything with it. But is this fair itself? 

Mr. HIRSCHMANN. Well, it has created a particular problem for 

companies who want to be compliant and want to avoid even an 

allegation that they might be dealing with consumers unfairly. Nobody wants to do that. So, you know, the approach of doing it 

through enforcement and using a proxy methodology that has been 

questioned by a number of places is not working toward solving the 

ultimate problem the Consumer Bureau sought to solve. It had a 

view, initially perhaps, that flat pricing was better. Now in some 

enforcement cases, it has put a cap. Why not have an open debate 

where everybody can participate? Let us agree on clear rules of the 

road, and then we can all follow them. 

Chairman SHELBY. Where you have some certainty? 

Mr. HIRSCHMANN. Exactly. 

Chairman SHELBY. Mr. Hirschmann, the consumer agency’s 

March 2015 study on arbitration has been criticized for its lack of 

transparency and for incorporating limited input from interested 

parties. Director Cordray has repeatedly defended the study and 

has said that it is, and I will quote, ‘‘the most comprehensive study 

ever done.’’ Nobody disputes that. 

Do you agree with this? And if not, why not? 

Mr. HIRSCHMANN. Well, we urged them, for example, to look at 

how consumers fare in arbitration and what would happen if you 

limit arbitration and whether consumers are better off in a world 

where arbitration goes away and class actions come in. The Bureau 

did look at a number of class actions before it existed, and even its 

own data found that 87 percent of consumers get absolutely nothing, nada, zilch out of those cases. 

So you cannot just look at class actions and say should we add 

this to the system. You have to look at what system will provide 

the best, cheapest way for consumers to get redress. Today they get 

redress by calling their credit providers, and in most cases companies want to do right. They also do complain to the CFPB. The 

CFPB is a new actor in this space and has brought enforcement actions in a number of areas. It would be smart to look at how all 

those things work together and then determine: Is arbitration a 

valuable tool, or should we replace it with something else? That is 

not what the Bureau did. 

Chairman SHELBY. That is what real analysis is about, is it not? 

Thank you. 


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Senator Brown. 

Senator BROWN. Thank you, Mr. Chairman. 

I do not even know where to start. I want to—I just am incredulous today at this testimony. I have been on this Committee for 

close to 10 years. I have never quite heard the unsubstantiated 

claims, and let me start with, first, the Richmond Fed study was 

not really a study. It was a survey. It did not find savings were 

passed through—it did not find savings were not passed through. 

It just found that merchants actually did not get savings. So, again, 

it was not an economic study. It was a survey. 

Number two, the Durbin amendment was not part of DoddFrank. It is not part of CFPB. It was debated with heavy, heavy, 

heavy lobbying and still was affirmed on the Senate floor. 

But the most troubling was when I hear three of you—or maybe 

not all three talked on this—talk about the one-sided, inaccurate—

you used another—unverifiable complaints from consumers—I 

mean, this is a town that specializes in one-sided, inaccurate, un—

I cannot even read my writing, I was so agitated—unverifiable 

complaints, I mean, this town—look after Dodd-Frank. Do you remember when Dodd-Frank passed? The day the President signed 

it, the chief financial service lobbyists in this town said, ‘‘Now it 

is half-time.’’ Well, what that meant is it was time for a cascading 

of one-sided, inaccurate, unverifiable complaints from industry that 

did not want these rules and regulations. 

Look at the ratio. We are trying to find specifics on this, but 2:1, 

3:1 ratio from industry—one being the consumer side—2:1, 3:1, 4:1 

ratio from industry on all of these—on so many of these issues. So 

to just say, well, these consumers, they have got one-sided, inaccurate, unverifiable complaints, but to never say that about industry—because you know the agencies, whether it is the Consumer 

Bureau, whether it is the Fed, whether it is any other agency, they 

do not have time to track the thousands of complaints, whether 

they are one-sided, whether they are inaccurate, whether they are 

unverifiable. So to put it on the CFPB is collecting and then releasing all these unverifiable complaints is disingenuous, and that is 

a rather kind description of that. 

Let me move on. I have a question for Dr. Gable. You have done 

significant work on payday lending. I love how you started your 

testimony when you have seen—as an observer of this Committee, 

you have seen the amnesia, the collective amnesia, like there was 

not that big a problem 10 years ago, and certainly nobody in industry caused it, it was all those consumers and all those GSEs and 

all. But you have done significant work on payday lending and 

what it meant. I love how you started your testimony by talking 

about what foreclosure means to families. I know my colleagues on 

this Committee are tired of me saying this, but I live in Zip code 

44105, my wife and I, in Cleveland. My Zip code in the first half 

of 2007 had more foreclosures than any Zip code in America. I 

know some of those people. I know what happens to a teenaged kid 

who is told by his mom and dad you are losing your house. They 

have to sell their pets first, and then they give away their pets. 

They have to move their kids to another school district—all the 

things that happened to far to many of your parishioners in New 


BANKI-41578DSA with DISTILLER
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Orleans and happened to my constituents on Cleveland because of 

this. 

So talk narrowly, if you would, about your experience with payday lending, why it is important for CFPB to write a strong rule 

in the next few weeks . 

Mr. GABLE. It is very important that the rules be—that we have 

a strong rule. First of all, let me explain that I have had firsthand 

experience where we have had individuals, Senators, that have 

ended up in these debt traps. One of the most heart-wrenching 

ones was a young member of the congregation who came in and 

found out that her mother had nine payday loans. But to make it 

even more exasperating and incredulous is the fact that her mother 

was in pre-dementia, and there was no ability to pay that was investigated by these payday loans. 

Over and over, what has happened in our churches is this: 

Through our benevolent funds—and it is almost a shameful thing, 

but our benevolent funds, we have individuals come to the churches, and they ask for support for their utility bills. But we found out, 

once we started presenting and asking the questions about, you 

know, how did you get into this situation, because of shame they 

did not tell us that they had payday loans. 

So some of the things that we are hoping the rule will do is, in 

fact, have a strong rule that will allow for the ability to pay. And, 

second, not only a strong rule that will allow for the ability to pay 

before making the loan, we are asking that the rule also has some 

cap in terms of the number of loans, so that individuals cannot go 

from ‘‘Get Your Money Here’’ or ‘‘I Have Got Money for You Over 

There’’ and you have got 10. The industry establishes the fact that 

it takes—they make money off of those folks who have at least 10 

loans, continued loans, and that is just unnecessary. 

And I might just add this here, and let me add this: This Congress found that it was necessary and saw fit to pass a 36-percent 

cap for the military. I believe if it is good for the military, it ought 

to be good for America. And I know that you asked me about payday lending, and I know we have had some discussion, and my colleague here, Mr. Zywicki, talked about, you know, what was happening in arbitration on both sides and about the consumers putting in unverifiable claims because of the CFPB. I do not know of 

any consumer who would take time out of their schedule and just 

write an arbitrary complaint just to fill out a piece of paper. 

Senator BROWN. Well said. 

Mr. GABLE. It just does not happen. And when we come to the 

arbitration in terms of finding it, what the study did show after 

two decades, before it was looked into by auto dealers and the lending, is that those who were targeted were women; and to my dismay, preachers, pastors were the ones who were most vulnerable 

to these high increases. 

Senator BROWN. Thank you. And I think you—and a couple comments and one last question, Mr. Chairman. I think your comments 

about the 36-percent cap in the statute for military families is exactly right. I am very happy we did that. I am very happy that is 

the law. But why should it not apply to others? 

And you also made a couple other comments along those lines, 

that, you know, there are 12 or 13 States that do not allow payday 


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lending, and access to credit does not seem to be a particularly 

huge problem in States like—I know Senator Warren’s State is one 

of those. 

Mr. GABLE. New York. 

Senator BROWN. I wish my State—my State used to be one of 

those until 1994. But a couple of comments first. 

You know, if arbitration is better for consumers, one would expect groups representing consumers would oppose CFPB’s efforts, 

but they are not. And I think that is pretty interesting. 

Also, some comments about the CARD Act that were made, the 

CFPB published a report that the CARD Act reduced credit card 

fees by more than $16 billion. In 2014 alone, consumers opened 

more than 100 million credit card accounts, so it is not like credit 

card access has been particularly restricted. 

And I wanted to apologize. I did say that the Durbin amendment 

was not part of Dodd-Frank. I should have said it is not a CFPB 

rule. It was voted on the Senate floor. I apologize to Professor 

Zywicki that I did not say that quite precisely. 

My last question, Mr. Chanin, for you, if I could. You were—the 

Financial Crisis Inquiry Commission found that the Fed would not 

exert its authority over nonbank lenders nor others that came 

under its purview in 1994 with any real force until after the housing bubble burst; in other words, there was no CFPB, and the Fed, 

it appears, did not do what it should have. And that is really my 

two questions to you. Sitting in that position, which you were as 

the Deputy Director of the Division of Consumer and Community 

Affairs, do you think that what the Fed did to enforce consumer 

protection laws was sufficient? And, second, should the Fed have 

acted sooner to protect consumers from products that could have 

been updated by the HOPE Act if we had done that? So if you 

would answer those two questions for the remainder of my time. 

Thank you. 

Mr. CHANIN. Senator, the Fed has fundamentally two authorities. 

One is a rulemaking authority. Those rules in the consumer space 

apply to all financial institutions, banks and nonbanks, and the 

Fed exercised that authority particularly in the late 1990s as well 

as later 2006 and 2007, I believe it was, dealing with high-cost 

mortgages and the like. 

The Fed also has supervisory authority. That authority is limited; that is, it only applies to banks and certain other institutions. 

For example, it does not apply to national banks, credit unions, 

nondepository institutions. So the Fed has no authority to deal 

with those institutions in terms of supervisory or enforcement actions. 

In hindsight, it is easy to say that the Fed could have acted sooner in terms of high-cost mortgages, in terms of predatory lending 

practices. My experience at the time was the data was not there 

that showed the problem. It was only later—2008, 2009—that the 

data emerged that said there is a significant problem in terms of 

lender activities in this space. And the Fed took action at that 

point, not prior to that because it simply did not have any data 

that suggested there was systemic of fundamental issues in terms 

of those types of loans. 


BANKI-41578DSA with DISTILLER
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Senator BROWN. So were they not getting complaints as the only 

consumer—as kind of the consumer bureau, were they not getting 

complaints that—that is why you need an agency to anticipate 

those problems when consumers—or to respond to the number of 

them? 

Mr. CHANIN. The Fed, like all of the banking agencies, as well 

as the Federal Trade Commission, gets complaints on lots of 

things. The way the agencies operate those, if the complaint deals 

with an institution not under the jurisdiction of the Fed, such as 

a national bank, those complaints would go to the Comptroller of 

the Currency. If it dealt with a nonbank, they would go to the Federal Trade Commission or another entity. So the Fed did get complaints, but it had supervisory authority over a fairly small number 

of institutions. There was no dramatic increase, as I recall, in 

terms of the complaints over those entities that the Fed had jurisdiction over. 

Senator BROWN. Well, Mr. Chairman, I will close. Whether 

wittingly or unwittingly, I think Mr. Chanin just made a pretty 

good case for the Consumer Bureau, so thank you for that. 

Chairman SHELBY. Senator Heller. 

Senator HELLER. Mr. Chairman, thank you, and to the Ranking 

Member, for this discussion. There are very few topics that have 

both sides so far apart on a particular issue, and I want to thank 

our witnesses also for being here and for what you are bringing to 

this hearing. 

We can go on and on about who is right and who is wrong, but 

let us talk about the practical effect of what we are talking about 

today. 

During our last recess, I had an opportunity to talk to our lenders in the State of Nevada. I am going to guess that the comments 

that I got from these lenders in the State of Nevada are very similar to probably what the lenders would be saying in Ohio and probably what they would be saying in Alabama today, and let me give 

you some examples. 

One particular lender said that 75 percent of all their new employees were compliance officers because of the new regulations. 

Community lenders in Nevada have stopped originating mortgages—you brought that up, Professor—stopped originating mortgages because they are now too overregulated. I have them telling 

me that it takes just as much time and effort to service a deposit 

customer as a person with a loan, again, because of all the new 

regulations. And I will tell you in Nevada we have half as many 

credit unions and community banks in Nevada than we did 5 years 

ago. 

I think these are pretty stark messages, and like I said, I have 

no doubt that the same comments would be made in Ohio and the 

same comments would be made in Alabama. 

And thanks for your comments because they played very much 

into what is going on in my State. But to Mr. Chanin and also to 

Mr. Hirschmann, does the CFPB have the authority to exempt 

small community lenders from these regulations that were meant 

for big banks? 

Mr. CHANIN. Yes, the CFPB has a great many authorities in the 

Dodd-Frank Act, and those authorities are under the statute itself, 


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but also for each individual law that it implements, like the Truth 

in Lending Act, the Equal Credit Opportunity Act, et cetera. It has 

separate authorities to make exemptions. So it has a great deal of 

authority, if it wants to, to either exempt small institutions from 

some of the requirements or all of the requirements, assuming 

there is evidence that shows that institutions by complying would 

not make credit available to consumers or other things. So there 

is a test they have to use before they create an exemption, but I 

do think they have sufficient authority to make exemptions if the 

evidence supports that. 

Senator HELLER. Are you aware of them ever exempting a small 

community lender from these regulations? 

Mr. CHANIN. They have created some exceptions in some of their 

regulations from some of the requirements. For example, in the 

mortgage rules dealing with balloon payment provisions and those 

sort of things, they have created exemptions in some of their rules 

in Truth in Lending, for example, from some requirements, but not 

a blanket exemption that I am aware of. 

Senator HELLER. Mr. Hirschmann, do you support tailoring regulations based on the size of institutions? 

Mr. HIRSCHMANN. Absolutely. I think it is also important that 

the lenders in your State and other States, even if the rules do not 

directly apply to them, find that rules meant for larger institutions 

kind of roll downstream, and when it comes to their safety and 

soundness regulators, that they are asked to comply with some of 

the things that maybe were never intended for them. You know, 

certainly even smaller institutions want to be compliant. But our 

Nation benefits from having every size of financial institution, and 

we should continue to ensure that we do not force smaller institutions to merge just to have the scale to meet the compliance requirements. 

Senator HELLER. Mr. Zywicki, do you believe that America is better served having fewer banks and fewer credit unions? 

Mr. ZYWICKI. No, most certainly not. America’s consumers are 

better served when there is robust competition and an equal playing field where you do not have banks getting bigger and succeeding simply because they can more readily bear the regulatory 

costs than smaller banks. We have known this for decades: proportionally small businesses bear higher regulatory costs per unit, and 

not just consumers but also community banks make most of the 

small business loans in this country. And so what we have seen in 

several studies is, as small banks have been hammered by DoddFrank and driven out of business, access to credit for small businesses has disappeared as well. So it is not just consumers who 

lose, it is not just communities that lose when credit unions and 

community banks go under. It is also small business and the entrepreneurs and the dynamism that we see in the economy. And it is 

probably not just a coincidence that 2 years ago it was documented 

for the first time in measured memory more small businesses disappeared than were created. And part of that is because of the 

costs that Dodd-Frank is imposing on small banks and thereby reducing access for small businesses to credit. 

Senator HELLER. Professor, thank you. 


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Mr. Chairman, I am a big believer that big banks serve big businesses, small banks serve small businesses. 

Chairman SHELBY. Right. 

Senator HELLER. And that is why we are seeing the problems 

that the professor just expressed. So, anyway, thank you for the 

time. 

Chairman SHELBY. Thank you. 

Senator Merkley. 

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

Mr. Chanin, did mortgage lending increase or decrease over the 

last 3 years? 

Mr. CHANIN. So I do not know the answer to that, quite honestly. 

I do not have data in front of me. 

Senator MERKLEY. OK. Thank you. You do not know the answer. 

But it is relevant because all of this testimony about all this imposition on mortgage lending, in fact, it has increased between 2012 

and 2015 by $500 billion. You divide that by $250,000 for a family 

home, you are talking about 2 million more mortgages, or the 

equivalent of that, then than now. It just does not fit the argument 

you are making that mortgage lending is under oppression. 

And let me just add that a lot of those loans previously, before 

Dodd-Frank, that were predatory loans where after 2 years you 

had a prepayment penalty, you could not get out of the loan and 

the interest rate doubled after 2 years, they did not help families. 

They destroyed families. So not only do we have mortgages, but 

mortgages that are helping families build wealth, which is what we 

had before those predatory practices that helped tear down, losing 

trillions of dollars for working families in America. 

Mr. Hirschmann, has car lending gone up or down over the last 

3 years? 

Mr. HIRSCHMANN. Car lending has gone up. 

Senator MERKLEY. Thank you. You are right. It has gone up. It 

has gone up from $60 billion to $84 billion, and 2015 was a record 

number of sales. I mean, people are buying cars at unprecedented 

numbers. So, again, that is really a great contrast to the argument 

that something is seriously wrong in the car lending business or 

the car sale business. The system is working very well, and people 

are getting fair loans. 

Mr. Zywicki, consumers of payday loans in States that have put 

an interest rate cap can now borrow at 25 to 36 percent rather 

than at 500 percent. Do you think from a consumer’s point is it better to get a 25- or 36-percent loan or better to get a 500-percent 

loan? 

Mr. ZYWICKI. Well, actually, they do not borrow at 25 or 36 percent because the product—payday loans disappear from the market 

in places that have——

Senator MERKLEY. OK. Well, thank you, because—thank you for 

that answer. They disappear, because that was exactly the argument in State after State. In Oregon, we wrestled with this argument because the payday loan industry said: You know what? If 

you lower the interest rate to 36 percent, we are just going to disappear. So we looked at every State that had such a cap, and you 

know what? You are wrong. They did not disappear, and we went 

ahead and put a cap in Oregon, and you know what? They did not 


BANKI-41578DSA with DISTILLER
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disappear. You can still find payday loan storefronts throughout 

our metropolitan area, title loan fronts. But the consumer is getting a far better deal. 

So let me just point out that if you are going to make the argument, at least know the facts, that they do not disappear when you 

put a cap on the interest rate. 

Mr. ZYWICKI. The research I have seen on that by Jon Zinman, 

which is the study of the Oregon payday loan, indicates that there 

was a substantial drop in payday loans and an increase in use of 

overdraft protection and a slight increase in auto title loans. 

Senator MERKLEY. Well, you can come out to the State, and we 

can—I will take you—we can visit some payday loan places 

and——

Mr. ZYWICKI. You are saying the volume of payday loan was completely unaffected by the law? 

Senator MERKLEY. No, I am not saying that, but that was not the 

question. The question was: Can the consumer get a payday loan 

at a much lower interest rate now than before? And the answer is 

yes. And I can tell you, for example, I went to a food bank, and 

the head of the food bank said, ‘‘Senator, the biggest change is that 

we no longer have people bankrupted by this vortex of debt from 

payday loans. They are not coming to our food bank because of the 

500-percent interest rates. Thank you so much for putting a cap on 

the interest rate.’’

And then she proceeded to say, ‘‘Now, the economy as a result 

of the crash’’—of course, that goes back to the predatory mortgage 

loans. ‘‘Unfortunately, a lot of people have lost work, and they are 

coming to our food bank.’’ But the victims of payday loans disappeared. 

Now, let us just look at the model. This is the model that we are 

putting up the chart of. This is the model payday loan interest—

payday loan companies use. Their model is to trap people in debt. 

This happens to come from a training manual for a payday loan 

company. It is called ‘‘ACE,’’ and they say consumer applies, consumer exhausts—they get the loan, they exhaust the cash, and 

they do not have the ability to pay, because those are the folks they 

make money off of. And then the consumer cannot make the payment, the account enters collections, so we come along and we give 

them a new loan. And that is the cycle of debt, the vortex of debt. 

If you take $1,000 at 500 percent, you can do the math, I am sure, 

in your head. That is $25,000. Do you think any low-income family 

can pay off $25,000 debt when they started out with $1,000 2 years 

earlier? Of course the answer is no. They end up in bankruptcy. 

Their finances are destroyed. Their marriages are stressed. Their 

children are shortchanged. 

So my time is up, but I have never heard a hearing where the 

testimony from industry is so apart from the reality on the ground 

across America. Getting rid of predatory practices in the credit card 

industry, in the mortgage industry, in the lending industry in general allows middle-class families and families of modest means to 

be successful rather than to be victims of tricks and traps. And 

that is a plus for America. 

Chairman SHELBY. Senator Scott. 


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Senator SCOTT. Thank you, Mr. Chairman. Thank you to the witnesses for investing your time in trying to help us to understand 

and appreciate the actual impact of Dodd-Frank on our country 

and specifically on the most vulnerable. 

To me, as I listen to both sides have this conversation, I am disappointed in the tone. I am concerned that as viewers watch this 

at home, the reality of it is that they are missing the point. We are 

missing the point for the average person in the average place in 

this country who suffers on a daily basis because of financial 

stress. The facts are very simple. 

Mr. Zywicki, I would love to chat with you about the facts. As 

a kid growing up, just by circumstance I went to four different elementary schools because poverty has a transient nature. You move 

a lot. And so when I think about the impact of Dodd-Frank, I think 

about the impact on Dodd-Frank on the poor very specifically. And 

to me it is pretty clear, the facts are very clear, that Dodd-Frank 

makes it worse for people living in poverty and people living on the 

threshold of poverty. 

Question: If, in fact, Dodd-Frank stays as it is, there will be, in 

my opinion, more payday lending and not fewer loans. Is that accurate from your perspective? 

Mr. ZYWICKI. Yes, Senator. First, let me say I went to high school 

in Greenville, South Carolina, so I feel like you are my honorary 

Senator in some sense. 

Senator SCOTT. Thank you. Move back and vote, please. 

[Laughter.] 

Senator SCOTT. If you agree with me. If no, just stay where you 

are. 

[Laughter.] 

Mr. ZYWICKI. Well, I agree with you, yes, that that is who has 

borne the biggest impact of this, and basically what happens if we 

have known this for decades, which is, if you take mainstream 

products away from people, you drive people down the credit ladder 

from credit cards to payday loans and overdraft protection to pawnshops and so forth. And so that is what we are seeing, unfortunately. 

Senator SCOTT. I only have 5 minutes. I want to try to use my 

5 minutes as quickly as possible. But, in other words, there is a 

correlation. The higher the fee, the lower the access. 

Mr. ZYWICKI. Correct. 

Senator SCOTT. It is kind of a simple concept. 

Mr. ZYWICKI. Yes. 

Senator SCOTT. So in the end, then, if we have, according to some 

studies, 2009 through 2011, a million more unbanked consumers, 

that translates to more people finding access to credit outside of 

the banking system——

Mr. ZYWICKI. That is right. 

Senator SCOTT.——which means higher interest rates. 

Mr. ZYWICKI. Check casher, payday loans, pawnshops, and the 

like. Exactly right. They are forced to rely on those products instead. 

Senator SCOTT. This should be a simple concept for us to understand and digest here. 

Mr. ZYWICKI. It seems like it to me. 


BANKI-41578DSA with DISTILLER
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Senator SCOTT. I must be missing something. 

Third point: First-time home buyers fell for the third straight 

year. Now, according to the statistics, 74.1 percent, I think it is, of 

white folks own their homes. Around 45 percent of African

Americans own their homes. If first-time home buyers have fallen 

for the third consecutive year, logically the disproportionate impact 

is on people of color and folks living toward that threshold of poverty. Is that a fair conclusion based on deductive reasoning? 

Mr. ZYWICKI. Yes, that would follow. 

Senator SCOTT. And the data, frankly? 

Mr. ZYWICKI. Yes, as a percentage of home buyers, yes. 

Senator SCOTT. Another outstanding and stunning fact that is 

hard to argue with is that the African American unemployment 

rate is about 70 or 80 percent higher consistently than the white 

unemployment rate. The Dodd-Frank legislation makes it far more 

difficult for first-time business owners to find access to credit. 

In South Carolina, small business is the heartbeat of our economy. From my perspective, having been a small business owner for 

about 15 years, the reality of it is that you hire folks from your 

neighborhood, from the place where you do business, which means 

that if you have fewer businesses in minority areas, you are going 

to have a higher unemployment rate in those areas. 

Dodd-Frank has had—have we seen more small businesses or 

fewer small businesses? 

Mr. ZYWICKI. We have seen fewer small businesses. We have 

seen a loss of small banks. And, of course, as you know, women in 

particular disproportionately start small businesses as well as minorities, so that is particularly important to those communities and 

those folks. 

Senator SCOTT. And the final thought before I wrap this up on 

the Durbin amendment, which we have heard so much about, if billions of dollars were transferred from banks to big-box retailers, 

one of the ways that you can figure out whether or not there has 

been a passing on to the consumers, look at the prices. This is not 

a hard thing to discuss. Here is what you will hear as I depart and 

go to my next meeting. You will hear from both sides a conversation about how we need to do better for the consumer and how we 

need to protect the consumer, when the reality of it is that the goal 

of protecting the consumer has been lost in Dodd-Frank, and the 

CFPB is not making it easier for consumers to have access to credit, not making it easier for people to experience the American 

dream. They are not making it easier for any of us to see the goal 

of the most vulnerable in our society being protected. 

It may be well intended, maybe the intentions of the legislation, 

but the facts are inconsistent with the reality, no matter how we 

spin it up here. Thank you. 

Mr. GABLE. Mr. Chairman, may I just respond to that? 

Senator Scott, one of the statements you made was that the payday lenders, when they come in and they are driving individuals 

out of the banking business——

Senator SCOTT. Actually, I did not make that statement. My 

statement was simply this: that as a result of higher fees, you will 

have more people unbanked. And if you have a million people 


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unbanked, the question then is: Where do they go to get their access to credit? 

Mr. GABLE. Absolutely. 

Senator SCOTT. And they get their access to credit from, as you 

call it, predatory lenders or payday loans or some other access, 

whether it is pawnshops or something else that is close in proximity to where they live. And then so the question becomes: What 

is the interest rate because of the result of Dodd-Frank increasing 

the cost of doing business and running some folks out of banks, 

what is the cost to society and what is the cost to the poorest communities? The actual cost is a higher interest rate because of the 

result of Dodd-Frank. 

Mr. GABLE. What I wanted to point out, first of all, payday lenders were around—started out in 1985 before Dodd-Frank. Second, 

payday lenders require individuals to have bank accounts, so they 

have bank accounts. And they have first access to those bank accounts. And that is how they keep them in the cycle, and it has 

been consistent in poor communities in our country that poor individuals, the weakest and the most vulnerable individuals, have to 

pay more for everything. When they are purchase in their community, their prices are high. When they go to get credit, their prices 

are high. We use the statement, ‘‘They are at risk.’’ In fact, what 

we do is we develop a consistent area where people are in perpetual poverty. 

So my position on this, my view on this is that when we have 

these predatory lending practices, when we have—everybody in 

here has arbitration clauses that are bad in their contracts. Unless 

we have somebody, some watchdog group like the CFPB looking 

out for the most vulnerable, we are going to always have that small 

cadre of community in America who will have to pay the most and 

get the least out of what this country offers. 

Senator SCOTT. Well, let me just say this, Reverend. Thank you 

for your service to the country. Without any question, the National 

Baptist Association is a fantastic organization. I think your passion 

for people is right on spot. I would just disagree with our conclusions. 

My conclusion is a simple conclusion, that the way that we increase the costs to the most vulnerable in our society is to increase 

the costs in an area where the fees are lower, that the interest 

rates are lower. So if you increase the fees and you shrink that 

market, the unintended consequence is going to be higher unemployment in those very areas that we both want to help, higher 

costs at the grocery stores or whatever the food mart is in those 

areas, and a very difficult time to increase the employment opportunities and entrepreneurs in those communities because those 

communities are the communities where I have lived the vast majority of my life. 

So the goal of having a watchdog agency that provides the type 

of protection that we both hope for is not happening as we are 

watching it unfold today around this country. 

So I do not disagree with the fact that the goal of having an 

agency that provides greater protection is a wonderful goal. I am 

simply saying that the CFPB is not that agency, and the results 

of Dodd-Frank have not been—that goal has not been achieved. It 


BANKI-41578DSA with DISTILLER
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is not getting closer to being achieved. It is getting further away. 

The fact of the matter is that as we eliminate small banks in small 

communities, the reality of it is they do not go to bigger banks; 

they go to a different market for their access to credit. That is just 

the unfortunate reality of the facts, no matter our goals. I do not 

disagree with the goal. I would love to work with you on seeing 

that goal become a reality. If we study the CFPB, we will conclude 

that, unfortunately, with all the good intentions, the reality is the 

poor are still getting poorer and that is why the poverty rate in 

America is 15 percent and in the African American community it 

is 28 percent. 

So when we look at the facts, we find ourselves with a big question mark on why are these not changing. And I will submit this 

to you, I will suggest this to you: that as we watch this unfold for 

the next couple of years, let us just see what happens. And if we 

are both around in 24 months, I would love to have the conversation about what has happened because of our conversation and 

Dodd-Frank. 

Mr. GABLE. I certainly appreciate that. I just want to make one 

comment. 

Senator SCOTT. Yes, sir. 

Mr. GABLE. Maybe it is just in New Orleans, Chairman Shelby. 

Chairman SHELBY. Go ahead. 

Mr. GABLE. Or in Louisiana, and I have heard my colleague here, 

Mr. Zywicki, talk about the disappearance of small banks. We have 

to understand there are some variables in terms of their disappearance. Some disappeared because they were just bad banks. But 

many community banks purchased those small banks. So I deal 

with small banks. Most of our churches in the National Baptist 

Convention deal with community banks. But many of those communities banks are the ones that are providing access for us. 

Senator SCOTT. Yes, sir. 

Mr. GABLE. But they bought up other small banks. We have a 

plethora of small banks. They are not mega banks. But they are 

still community banks. What I am simply saying is that when it 

comes to payday loans, when we have some banks in some communities move out, then we have payday loan individuals move in. Individuals who are purchasing—who are going in for payday loans, 

it is not a matter of the fact that they do not have banking or they 

do not have a job. They have a crisis in their lives, and small-dollar 

loans are not available from some of our banks the way they should 

be. 

Our National Baptist Convention is in the process of establishing 

a structure with our 31,000 churches, and we hope to be able to 

provide small-dollar loans. But if we do not have some enforcement 

on the process, there is just no reason why someone has to pay who 

is at the bottom already, has to pay 400 or 500 percent when the 

interest rate that the Feds have been giving over the last 8 years 

has been 0.25 percent. 

Senator SCOTT. Yes, sir. 

Mr. GABLE. It is immoral, it is unbiblical, and it is a shame. 

Senator SCOTT. I do not disagree with you at all, sir, and I will 

say thank you to the Committee for your indulgence here. I am a 

fan of the Bible and a fan of the Proverbs about usury, usury fees. 


BANKI-41578DSA with DISTILLER
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So there is no doubt that I do not disagree with you at all. The only 

question I have is: Can we achieve the goal that you want us to 

achieve through the CFPB? And my answer is: I do not think we 

are getting closer. And we can measure this progress or the lack 

thereof over the next couple of years. We will hear a lot of

conversation, and some will—Senator Warren will tear up what I 

have said to pieces. I would love to have a chance to come back and 

respond to her as well. But the fact of the matter is that let us just 

watch and see what happens to the most vulnerable in our society 

as the good wishes and the good intentions of this Congress does 

not produce the results that we want. 

Mr. GABLE. Since you mandated the CFPB to do these things, let 

us work together with them so that we both reach that outcome. 

Senator SCOTT. I would love to replace them and work with you 

anyway. 

[Laughter.] 

Mr. GABLE. Well, that is the difference. Thank you, sir. 

Chairman SHELBY. Senator Warren, thank you for your indulgence. 

Senator WARREN. That is fine. Thank you, Mr. Chairman. 

Senate Republicans called this hearing today to talk about the 

costs of regulating consumer financial products like mortgages and 

payday loans and credit cards. I want to focus on the other side of 

the equation, and that is, the cost to American families of failing 

to regulate consumer financial products. 

Mr. Chanin, as Senator Brown mentioned, from 2005 to 2011, 

you held top positions in the Federal Reserve’s Division of Consumer and Community Affairs, and in those positions you had both 

the legal authority and the legal responsibility to regulate deceptive mortgages, including dangerous subprime lending that sparked 

the 2008 financial crisis. But you did not do it despite years of calls 

and even begging from consumer advocates and others asking you 

to act. Instead, you did essentially nothing. 

Now, your failure had devastating consequences. The bipartisan 

Financial Crisis Inquiry Commission identified, and I am quoting 

here, ‘‘the Federal Reserve’s pivotal failure to stem the flow of toxic 

mortgages’’ as the ‘‘prime example’’ of the kind of hands-off regulatory approach that allowed the 2008 crisis to happen. 

Now, according to the Dallas Fed, that crisis cost the American 

economy an estimated $14 trillion. It cost millions of families their 

homes, their jobs, their savings, devastated communities across 

America. 

So when you talk now about how certain regulations are too costly or too difficult to comply with, you sound a lot like you did before 

the 2008 crisis when you failed to act. So my question is: Given 

your track record at the Fed, why should anyone take you seriously 

now? 

Mr. CHANIN. So since you were responsible for creating the 

CFPB, you know and set forth the notion that they should be a 

data-driven organization. And we can debate whether they are or 

not, but I can assure you the Fed was and is a data-driven organization. There was simply no data provided to the Fed on a——

Senator WARREN. I——


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Mr. CHANIN. Let me finish, please, Senator.——on a statistical 

basis that suggested that there was a meltdown in the mortgage 

market in 2005 and 2006——

Senator WARREN. I am sorry. Are you saying there were no data 

in the lead-up to the financial crash that showed the increasing

default rates on subprime mortgages and what they were doing to 

communities across America? Did you have your eyes——

Mr. CHANIN. There was——

Senator WARREN.——stitched closed? 

Mr. CHANIN. There was anecdotal evidence to be sure——

Senator WARREN. I am not talking——

Mr. CHANIN.——but there was no hard data——

Senator WARREN.——anecdotal—are you telling me you never 

saw any data about the increases in mortgage foreclosure rates before the crash in 2008? Is that what you are saying here? 

Mr. CHANIN. No hard data was——

Senator WARREN. Oh, my——

Mr. CHANIN.——presented to the Fed until the crisis erupted——

Senator WARREN. Mr. Chanin, let us just be——

Mr. CHANIN.——in 2008. 

Senator WARREN. Let us just be clear. You want to defend your 

tenure. It is not just me or consumer advocates who are calling 

your Fed tenure a disaster. The bipartisan Financial Crisis Inquiry 

Commission spent years looking into the causes of the crisis and 

identifying the Fed’s failure to regulate subprime mortgages as one 

of the key drivers of the collapse of 2008. That was you. Even 

former Chair Greenspan admitted that the Fed made a mistake by 

failing to regulate subprime mortgages. That was you. 

If you are still defending your time at the Fed and saying you 

had no information about a problem that was emerging, then, 

frankly, that raises even more questions about your judgment. You 

know——

Mr. CHANIN. Senator, do you have a question? 

Senator WARREN. I do. 

Mr. CHANIN. OK. Thank you. 

Senator WARREN. And I will get there, but thank you for indulging me on this, Mr. Chanin. 

After the crisis, you joined the CFPB to oversee the agency’s 

rulemaking. Within a couple of years, though, you sailed through 

the revolving door to a big law firm where, according to the Web 

site for this law firm, your job is ‘‘to counsel financial institutions 

on consumer finance issues.’’

Now, after taking that job, working for banks you were quoted 

as saying that you ‘‘lost faith that the agency would become a truly 

independent entity and carefully balance consumer costs and access 

to credit with consumer protection.’’

So the question I have is: Does that mean that you want the 

CFPB to operate more like your Division of Consumer and Community Affairs at the Fed did before the 2008 crash? 

Mr. CHANIN. No. In my view, the CFPB does not appropriately 

balance consumers’ need for access to products and the fact that if 

costs are excessive, the institutions simply will not offer those products. 


BANKI-41578DSA with DISTILLER
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Senator WARREN. I am sorry, Mr. Chanin. If you would answer 

the question that I asked. The question is: Do you want it to operate more like your Division of Consumer and Community Affairs 

did at the Fed before the 2008 crash? 

Mr. CHANIN. The CFPB was created as an independent agency. 

I do not think it fulfills that role if it does not serve the two mandates set forth in the Dodd-Frank Act of access——

Senator WARREN. I am sorry, Mr. Chanin. I asked you a question. You wanted to hear a question. Could I have an answer to the 

question? Are you asking for the CFPB to operate more like the 

agency that you directed that the Financial Crisis Inquiry Commission said played the pivotal role in the crash of 2008? 

Mr. CHANIN. I do not think that is the goal of the CFPB. The 

goal is twin: access and fairness. And it has not satisfied that need 

for access, in my——

Senator WARREN. I will take it, then, that you do not want to answer this question. 

You know, Mr. Chanin, when I was setting up the CFPB, I was 

told that even though you played a key role in blowing up the economy, that I needed to hire you because you were one of the few people within the technical expertise needed to write the Dodd-Frank 

rules. Now, people said that you and your team made a terrible decision that helped crash the economy, but we needed to keep you 

all around because you were the only ones who really understood 

the mistakes that had been made. And when you wanted the job 

at the CFPB, you claimed that you had learned from your failure. 

But I see today that is obviously not the case. 

Of all the people who might be called on to advise Congress 

about how to weigh the costs and benefits of consumer regulations, 

I am surprised that my Republican colleagues would choose a witness who might have one of the worst track records in history on 

this issue. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Thank you, Senator Warren. 

Senator Cotton. 

Senator COTTON. Goodness. Mr. Chanin, if you think it is tough 

being questioned by Senator Warren, try to be on her first-year 

contract class panel one day. That is even tougher. 

I would like to turn my attention to the Credit Repair Organizations Act of 1996, also known as CROA. This is a law that was designed to root out the fraudulent practice of credit repair clinics 

promising consumers that they can remove negative but accurate 

information from consumers’ credit histories. The law’s strict obligations and penalties enforced through public and private cause of 

actions have been useful in preventing some forms of fraud peddled 

by credit clinics. But at the same time, over the past several years, 

the plaintiffs’ bar has pushed courts to expand CROA’s reach to 

cover important services never intended by lawmakers to be subject 

to CROA’s requirements and penalties, including credit monitoring 

and credit education services. 

One way that companies providing these services have been able 

to limit their exposure to CROA has been through arbitration 

clauses. Mr. Hirschmann, I would like to ask you: Does the CFPB’s 


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forthcoming arbitration rule expected next year make the need for 

CROA reform more urgent or less urgent? 

Mr. HIRSCHMANN. Senator, I honestly do not know the answer to 

your question, but I am happy to get back to you on that. We are 

expecting the CFPB to issue an arbitration rule literally within 

months, and I am happy to get back to you on that. 

Senator COTTON. OK. The FTC, which is charged with enforcing 

CROA, has been on the record in Senate testimony stating that it 

is very sympathetic about the need for reform to protect credit 

monitoring and similar services. Do you see any risks with the 

intersection of the CFPB’s potential arbitration rule and the FTC’s 

position? 

Mr. HIRSCHMANN. I am happy to get back to you on the question. 

Senator COTTON. OK. 

Senator COTTON. Are there any other unique issues with respect 

to the application of this potential arbitration rule as it applies to 

credit bureaus that the CFPB should have in mind as it goes forward with its arbitration rule? 

Mr. HIRSCHMANN. Well, arbitration is certainly a much more 

cost-effective and timely way for consumers to get redress, and, 

particularly when it is very expensive for individual claims that are 

not classable to get into the courts, it is unlikely that consumers 

will want to go to the expense to take those claims into the court 

if they are not classable. Even the class action—you know, even 

with the low percentage of consumer benefits that come from class 

action, they are unlikely to take those as well. So we have to look 

carefully to make sure that—and it is one of the things we have 

urged the CFPB to do, is to look carefully at what consumers would 

lose if they take away arbitration. 

Senator COTTON. Thank you. And if you can take those earlier 

questions for the record and respond, I appreciate very much the 

analysis that you have submitted to this Committee, and CROA reform is something on which I will continue to be engaged, particularly as we look forward to the new arbitration rulemaking, impacting not just Arkansas consumers but also many Arkansas jobs as 

well. So I would like to receive your insights in the future on the 

record, if you could get back to us. 

Thank you. 

Chairman SHELBY. Mr. Chanin, is it not true that the Fed actually did several rulemakings in 2007 and 2008 while you were 

there on mortgages under its UDAP and other authorities? 

Mr. CHANIN. That is correct, Mr. Chairman. The Federal Reserve 

Board both proposed and adopted a final rule that set forth an ability-to-repay requirement for basically high-cost mortgages that became part of Truth in Lending Regulation Z, and applied to all 

lenders who offered those mortgages. 

Chairman SHELBY. Let me direct this at you, Professor Zywicki. 

How important is it that the regulators do cost-benefit analysis on 

any regulations that they propose? 

Mr. ZYWICKI. It is really the single most important thing that a 

regulator can do. The regulation of consumer credit is a very complicated, challenging issue because of the tradeoffs involved, which 

is we know that, as I described earlier, as you choke off access to 


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certain products, it drives consumers to other products, and eventually may drive them out of all products. 

So, for example, in 1968, for example, there was a U.S. Senate 

report that found that the second largest revenue source of the 

Mafia was loan sharking. When ‘‘Fat Tony’’ Salerno was indicted, 

the head of the Genovese crime family was indicted in 1974 on 14 

counts of loan sharking, and, in fact, one count of having a victim’s 

legs broken for not paying their debts, he was running $80 million 

a day, which is $463 million a day in today’s dollars, in his territory in New York City. And what we saw was the regulatory structure at that period in the 1960s and 1970s led to everybody coming 

together and basically saying, look, we need to make sure that consumers have access to credit products in a competitive market, 

even if they are expensive. And that is what we have always wrestled with. 

And so cost-benefit analysis is the key issue to try to get at these 

questions of access, competition, price, and doing so in a way that 

promotes transparency, competition, and consumer choice, because 

if we do not do that, if the costs do exceed the benefits, it can be 

really tragic for consumers, I am afraid. 

Chairman SHELBY. But it is not just cost to the lender. It is the 

loss or cost to the consumer that is part of this study. Is that not 

right? 

Mr. ZYWICKI. Yeah, let me make clear, I do not care personally. 

I do not work for the banking industry, and I personally do not 

care about the cost to the lender, except to the extent that it affects 

the cost to the consumer. 

Chairman SHELBY. But we do care about the cost of regulation. 

Mr. ZYWICKI. Absolutely. We care about the cost——

Chairman SHELBY. Considering all of it together. 

Mr. ZYWICKI. Absolutely. I care about the cost to the lender to 

the extent that it impacts the consumer. And what we are seeing 

now is we are imposing costs that do not have offsetting benefits, 

I think, to the consumer, imposing costs, imposing especially high 

costs on small banks that are hurting consumers, and that is why 

I think it is so important. Yes, a good, robust, modernized, educated consumer protection policy can help consumers, can help the 

economy, can help competition, innovation, consumer choice. Innovation is so important. The biggest issue, I think, in this sector we 

have today is financial inclusion, and I think innovation is the goal 

to that. And to the extent we pass policies where the costs exceed 

the benefits, that stifle competition, innovation, and consumer 

choice, we are moving in the opposite direction. 

Chairman SHELBY. Senator Brown. 

Senator BROWN. Just a couple of comments, and I want to ask 

UC to insert a couple of things in the record, Mr. Chairman, but 

first a few comments. 

I am going back to the statement that hundreds of thousands of 

one-sided, inaccurate, unverifiable complaints have been filed with 

the Consumer Bureau. I want to put that in perspective, and I will 

quote from a law review article in the Arizona Law Review from 

Kimberly Krawiec and then quote from an article in the Washington Monthly by Haley Sweetland Edwards called ‘‘He Who 

Makes the Rules.’’ Again, I want to put in perspective the claims 


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that these hundreds of thousands of complaints filed by individual 

Americans—I cannot think that is not who they were—put that 

into perspective about what happened to them. 

First, financial institutions, financial industry trade groups, law 

firms representing such institutions, and trade groups collectively 

accounted for 93 percent of all Federal agency contacts on the 

Volcker rule during the time period studied. In contrast, public interest, labor advocacy research groups, and other persons and organizations accounted for only 7 percent. Again, think of that perspective. You claim hundreds of thousands of unverifiable, onesided, inaccurate complaints were filed by real live consumer people—individual consumers. 

A second point to make: According to public records, representatives from the financial industry have met with a dozen or so agencies that regulate them thousands of times in the past 2 1⁄2 years. 

According to the Sunlight Foundation, the top 20 banks and banking associates met with just three agencies—the Treasury, the Federal Reserve, and the CFTC—an average of 12.5 times per week for 

a total of 1,298 meetings over the 2-year period from July 2010 to 

July 2012. JPMorgan Chase and Goldman Sachs alone met with 

those agencies 356 times. That is 114 more times—a ratio of 

114:1—than the financial reform groups combined. 

Third point. Since the passage of Dodd-Frank, the industry has 

estimated—it has been estimated $1.5 billion in registered lobbyists alone, a number that most dismiss as comically low as it does 

not take into account the industry’s much more influential allies 

and proxies, including a battalion of groups like the U.S. Chamber 

of Commerce, the Business Roundtable, the American Bankers Association, also does not take into account the public relations firms 

and think tanks or the silos of campaign cash the industry has 

dumped into lawmakers’ reelection campaigns. 

Now, the reason for the agitation of many of us on this side, I 

am—it is a personal affront in many ways to talk about the hundreds of thousands of one-sided, inaccurate, unverifiable complaints. It is insulting to those consumers all over the country that 

have been wronged time and time again. It is another example of 

how this town sings with an upper-class accent on issue after issue 

after issue. 

I will close with this. In the last quarter of 2010, just a few 

months after Dodd-Frank passed, the financial industry raked in 

$58 billion in profits—$58 billion in profits. That was 30 percent 

of all U.S. corporate profits that year, $58 billion in profits. That 

was close to a third of all profits that corporations raked in that 

year. So there’s something amiss, and to lay it all on these ill-informed consumers that file these complaints that were not vetted 

when by a factor of whatever it is, the number of lobbying hits and 

discussions coming from a very well-organized, well-capitalized, 

well-funded group of interest groups is, frankly, insulting. 

Thank you, Mr. Chairman. 

Chairman SHELBY. Mr. Chanin, I would just like to take a moment to thank you for your dedication to consumer protection over 

the years and your decades of work in the Federal Government at 

the Federal Reserve and at the CFPB. I only regret that you are 

no longer at the consumer agency because I think your guidance 


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and your experience and wisdom would help guide its efforts toward sensible regulation that is open, transparent, accountable, 

and in the consumers’ and all of our best interests. You know, we 

all go to the basic premise that I said earlier. We are consumers. 

We want the market to work. 

Mr. CHANIN. Thank you, Mr. Chairman. 

Chairman SHELBY. Overregulation does not work. Cost-benefit 

analysis, I pushed it for years, and I am going to continue to push 

it. We will get there someday, because that would protect and 

weigh the benefits and the costs to the consumer, for the consumer, 

and the people who loan money both. I think we need both. 

Thank you very much, all of you. The hearing is adjourned. 

[Whereupon, at 11:47 a.m., the hearing was adjourned.] 

[Prepared statements, responses to written questions, and additional material supplied for the record follow:] 


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PREPARED STATEMENT OF LEONARD CHANIN

OF COUNSEL, MORRISON & FOERSTER LLP

APRIL 5, 2016

Chairman Shelby, Ranking Member Brown, and Members of the Committee, my 

name is Leonard Chanin. I am Of Counsel in the financial services practice group 

of the firm here in Washington, DC, and have more than 30 years’ experience working as an attorney on consumer financial services issues. I spent 20 years with the 

Federal Reserve Board, including 6 years as Assistant Director and Deputy Director 

of the Division of Consumer and Community Affairs. In addition, for 18 months I 

was Assistant Director of Regulations at the Consumer Financial Protection Bureau 

(‘‘CFPB’’). I have spent nearly 10 years in private practice advising banks and other 

financial institutions on a number of Federal consumer financial services laws. I am 

pleased to be here today to address the effects of consumer finance regulations. 

The primary Federal agency entrusted with regulating consumer financial products and services is the CFPB, a creation of the Dodd-Frank Wall Street Reform 

and Consumer Protection Act (‘‘Dodd-Frank Act’’). The Dodd-Frank Act sets out in 

broad terms the purpose of the CFPB. The Act states that the CFPB shall:

seek to implement and, where applicable, enforce Federal consumer financial law consistently for the purpose of ensuring that all consumers have 

access to markets for consumer financial products and services and that 

markets for consumer financial products and services are fair, transparent, 

and competitive.

This goal is challenging to achieve. ‘‘Fairness’’ to consumers depends on what one 

views as being ‘‘fair,’’ and it is open to a wide variety of perspectives. The overzealous pursuit of ‘‘fairness’’ adversely affects the ability and willingness of financial 

institutions to offer products to consumers and, thus, negatively affects the ability 

of consumers to obtain such products. In addition, access to financial products is affected—both directly and indirectly and both positively and negatively—by rules and 

other actions taken by Federal agencies that regulate consumer financial services 

products and services. 

While it is difficult to quantify the precise impact that CFPB rules, guidance, enforcement orders and other actions, as well as activities by other Federal banking 

agencies, have had on consumers and the broader market for financial products and 

services, it seems clear that such rules and other actions have had a significant adverse impact on the ability and willingness of institutions to offer those products 

and services. Anecdotal and other evidence clearly indicates that institutions have 

reduced the products and services offered to consumers and some institutions have 

been reluctant to offer new products and services. Recent CFPB rules on mortgages 

illustrate this result. In addition, the use of enforcement orders by the CFPB to establish policy has had adverse results; for example, enforcement orders dealing with 

the pricing of indirect auto loans and alleged discriminatory practices have created 

an unlevel playing field in the automobile loan market. 

THE IMPACT OF REGULATIONS 

Federal consumer financial regulations unquestionably have a significant impact 

on consumers, financial institutions and the broader economy. The effect rules have 

and whether they actually harm consumers, hinder competition, or reduce the products available to consumers, likely depends on the specific rule and which consumers are considered. 

There can be benefits to regulation. If properly designed, regulations can better 

ensure that standardized approaches are used to provide disclosures to consumers 

to enable them to compare products and choose the ones that best suit their needs. 

Regulations are most effective when they require all institutions that offer consumer 

financial products to ‘‘play by the same rules.’’ This better ensures a competitive 

marketplace, where all participants are subject to the same legal requirements. 

But, there are many risks and dangers to regulating ‘‘too much.’’ Regulations need 

to be clear, but at the same time provide flexibility to accommodate new products, 

new delivery channels and new ways of doing business. Clear rules are needed to 

ensure that institutions know what is required to comply and manage risks. However, detailed, proscriptive rules can inhibit the development of new products and 

new ways of doing business. In addition, rules that lack flexibility can discourage, 

and, in some cases, stifle the development of new products or services or new features of financial products or services. Furthermore, new rules can be very costly, 

particularly, for example, for smaller institutions that may make few loans. For 

those institutions, the overall costs to support a small loan program may be so great 

that they may simply exit the business. 


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So, what impact have the CFPB mortgage rules had on the market? Some institutions that previously offered mortgages have stopped doing so because the costs of 

complying with the new rules cannot be spread over a sufficient number of loans 

to enable them to effectively compete in the marketplace. In addition, a number of 

institutions have reduced the products offered to consumers. In fact, a recent American Bankers Association survey revealed that, due to the CFPB mortgage rules, 75 

percent of banks surveyed eliminated one or more mortgage product offerings, such 

as construction loans and loans with payout options. 

An examination of the CFPB rules that integrate mortgage disclosures under the 

Truth in Lending Act (Regulation Z) and the Real Estate Settlement Procedures Act 

(Regulation X) illustrates the adverse impact that regulations can have on consumers and the broader market. 

The CFPB’s integrated mortgage disclosure rules and explanatory information are 

hundreds of pages long. They contain dozens upon dozens of sub-rules and prohibitions dealing with how creditors must disclose information about mortgages to consumers. A small bank or credit union cannot hope to comply with the extraordinary 

level of detail required. And even the largest institutions face great difficulties in 

ensuring compliance and likely face litigation risks if they make a mistake. 

One example illustrates the extraordinary level of detail required under the integrated mortgage disclosure rules. There are several different rounding rules for the 

disclosure of dollar amounts and percentages (rates). One sub-rule states that the 

principal and interest payments must be disclosed using decimal places, even if the 

amount of cents is zero. (Thus, a disclosure of a payment of ‘‘$800’’ violates the rule, 

whereas a disclosure of ‘‘$800.00’’ complies.) This sub-rule is in contrast to the subrule for disclosing the loan amount, which actually prohibits the use of decimal 

places in disclosures. (Thus, a disclosure of a loan amount of ‘‘$240,000.00’’ violates 

the rule, whereas a disclosure of ‘‘$240,000’’ complies.) 

The adoption of such a proscriptive rule can only lead to errors and ultimately 

can result in litigation, even if a consumer did not rely on the information and was 

not harmed by the error. In addition to litigation risks, failure to comply with the 

integrated mortgage disclosure rules could lead investors who purchase loans to require lenders to buy back any loans where lenders make errors in providing disclosures. 

USE OF GUIDANCE AND ENFORCEMENT ORDERS TO ESTABLISH

POLICY 

In spite of the ‘‘dangers’’ and problems associated with regulations, they are vastly 

preferable to ‘‘regulating’’ by the issuance of guidance, or, even worse, use of enforcement orders to establish policy. 

Guidance 

Guidance can be helpful to institutions in understanding laws that apply to specific transactions or products. But any such guidance should be published for public 

comment. Failure to do so can lead to confusion as to the scope and meaning of the 

guidance and create operational and other compliance problems. In addition, agencies benefit by allowing the public to comment, as it results in clearer and better 

guidance. The CFPB has issued dozens of guidance documents, in the form of official 

CFPB bulletins, as well as by using blog posts and other ways of communicating 

its views on issues. These documents are not published for public comment. Failure 

to get public input creates significant problems. 

By way of an example, one of the most problematic documents deals with indirect 

auto lending and the application of the Equal Credit Opportunity Act (‘‘ECOA’’) and 

implementing Regulation B to institutions that purchase loans made by automobile 

dealers. The CFPB issued a bulletin interpreting Regulation B on this issue, rather 

than publishing a proposed revision to the Regulation for public comment. The bulletin addresses the obligation of indirect auto lenders (those who purchase loans 

made by auto dealers) to address potential discrimination in the pricing of loans by 

auto dealers. 

The failure of the CFPB to issue guidance for comment on issues such as this creates significant problems. Because the public was not afforded the opportunity to 

comment on the indirect auto lending bulletin, the guidance fails to address important issues. The bulletin does not state that use of discretionary pricing to compensate auto dealers is illegal, but states that lenders should monitor and address 

the effects of such policies to ensure that discrimination does not occur. However, 

aside from ‘‘conducting regular analyses’’ of dealer-specific and portfolio-wide loan 

pricing data, the guidance fails to inform lenders about what analysis would be satisfactory to avoid fair lending violations. For example, should analysis be done on 

a monthly, quarterly, or annual basis? What if a quarterly analysis shows potential 


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issues, but a semi-annual analysis shows no statistically significant disparities? 

What action should a lender take to address any risks in these circumstances?

Neither lenders nor consumers are helped when guidance issued is not clear. Such 

guidance frequently leads to inconsistencies in the marketplace, due to differing interpretations of such guidance. 

Enforcement Orders 

‘‘Regulating’’ institutions that offer consumer financial products and services by 

use of enforcement orders is a new trend. Although the prudential banking agencies 

and other agencies have long entered into public enforcement orders with institutions, this practice has increased exponentially by the CFPB. Moreover, it seems 

quite clear that the CFPB uses enforcement orders to establish policy. 

Public enforcement orders are not inherently inappropriate or a ‘‘bad’’ tool for 

agencies to use. But, when enforcement orders are used to establish policy, there 

can be many problems and drawbacks. First, enforcement orders do not apply to any 

company or person that is not a party to the order; thus, other companies can take 

a variety of approaches regarding their views of such orders. Oftentimes, some companies may ‘‘comply’’ in a certain way and others may take a different approach. 

This results in inconsistency—inconsistency for consumers and for institutions’ practices—which results in a marketplace that offers products and services not governed 

by the same standards. Second, most CFPB enforcement orders lack specificity 

about the practices involved and only give a brief statement of facts and issues. It 

is often difficult to discern how to ‘‘apply’’ any guidance in orders to the variety of 

products or practices that exist in the marketplace. This also creates inconsistency. 

Third, the failure to create rules that apply to all players in the marketplace can 

have the unintended effect of driving some parties to entities that ‘‘don’t comply.’’ 

Anecdotal information suggests that this is precisely what is happening with

so-called discretionary dealer pricing and auto loans, where the marketplace is highly diffuse and where some auto dealers may do business with those lenders who 

offer dealers greater compensation for loans the dealers originate. Fourth, unlike 

rules, enforcement orders are not published for comment. This deprives the public 

of the opportunity to comment on significant issues and also deprives an agency of 

the ability to consider operational and other issues as well as potential negative or 

unforeseen consequences. Fifth, enforcement orders that contain broad statements 

and allege unfair, deceptive or abusive acts or practices may result in financial institutions simply choosing not to offer new products, certain product options or new 

ways of delivering products due to lack of certainty about what is ‘‘required,’’ as well 

as uncertainty about how to effectively manage potential risks. 

For these reasons, use of enforcement orders to establish policy is both inappropriate and unsuccessful. The pricing of auto loans and use of fair lending enforcement orders illustrates this problem. The CFPB has entered into several enforcement orders with financial institutions asserting that institutions that purchased 

consumer car loans made by multiple auto dealers have violated the ECOA. While 

recognizing that it is appropriate for dealers to be compensated for work done on 

transactions, the CFPB orders conclude that financial institutions that purchase 

auto loans violate the ECOA because the CFPB determined that the pricing

approach used had a discriminatory impact on consumers on the basis of race or 

ethnicity. 

Leaving aside the significant issue of the validity of the CFPB’s methodology and 

analysis in the orders, the use of enforcement orders in this circumstance has resulted in an unlevel playing field and has raised numerous questions for which the 

orders provide no answers. For example, the most recent orders state that an institution must select one of three options. One option is for the institution to limit 

dealer discretion to no more than 1.25 percentage points above the buy rate for 

loans with a term of 60 months or less, and 1 percentage point for loans with a term 

longer than 60 months. For this option, the institution must ‘‘monitor for compliance’’ with the limits. 

But, what if institutions not subject to the orders want to retain a dealer discretion model of compensation to effectively compete in the marketplace? The orders 

only recognize two options. There are hundreds and perhaps thousands of banks, 

credit unions and finance companies that purchase auto loans. Anecdotal evidence 

indicates that institutions have taken a variety of approaches in how they deal with 

pricing and the purchase of loans made by auto dealers, due to competition in local 

markets and a variety of other factors. By using enforcement orders to create a policy addressing how lenders can compensate dealers for dealers’ work in originating 

auto loans, the CFPB has failed to recognize that there may be many other legitimate methods institutions can use to compensate dealers and still comply with the 

ECOA. By using enforcement orders to create new legal requirements, and doing so 


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without publishing proposed changes to Regulation B to address these issues, the 

CFPB has failed to provide critical guidance to lenders on what the law requires 

or permits. 

In this case, if the CFPB believes the way in which institutions interact with auto 

dealers regarding the pricing of car loans is contrary to the ECOA, the far better 

approach for consumers and financial institutions would be for the CFPB to formally 

propose changes to Regulation B. This would ensure that any policy applies consistently to all financial institutions. In addition, engaging in a rulemaking proceeding 

would allow the public to comment on the approach, ensuring that the CFPB has 

an opportunity to address any concerns or issues raised. Rulemaking, of course, 

takes more time than issuing ‘‘guidance’’ or entering into enforcement orders. But 

such an approach better ensures the creation of sound policy. Establishing a policy 

by regulation also enables a company or person who disagrees with a rule to challenge that policy and have a court independently review the agency action. 

CONCLUSION 

The CFPB is a new agency—less than 5 years old. It continues to develop expertise and a broader understanding of consumer financial services markets. The question remains as to how the CFPB will balance its mandated purposes of ensuring 

consumer access to financial products and services while ensuring fairness in these 

markets. 

Thank you for the opportunity to be here today. I would be happy to respond to 

any questions.


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1http://www.federalreserve.gov/pubs/bulletin/2015/pdf/2014lHMDA.pdf.

PREPARED STATEMENT OF REVEREND DR. WILLIE GABLE, JR.,

D. MIN.

PASTOR, PROGRESSIVE BAPTIST CHURCH, NEW ORLEANS, LOUISIANA, AND CHAIR, 

HOUSING AND ECONOMIC DEVELOPMENT COMMISSION, NATIONAL BAPTIST CONVENTION USA, INC.

APRIL 5, 2016

Chairman Shelby, Ranking Member Brown, and Members of the Committee, 

thank you for inviting me to testify today. 

I am the Reverend Willie Gable, Jr. I serve as Pastor of Progressive Baptist 

Church in New Orleans. My congregation is a member of the National Baptist Convention USA, Inc. the Nation’s largest predominantly African American religious denomination. 

I also serve as Chair of the Housing and Economic Development Commission of 

the National Baptist Convention USA, Inc. This Commission’s mission is to develop 

affordable housing for low- and moderate-income persons, particularly for senior citizens and the disabled, allowing them to live with pride in a place they can proudly 

call home. Over 20 years, the Commission has developed over a thousand homes at 

30 housing sites across 14 State. 

I appear before you today to bear witness to the utter devastation that predatory 

financial practices have wrought on my community and on communities across this 

Nation; to the safer mortgage market we have now thanks to newly implemented 

reasonable rules; and to a desperate need for further regulatory action to weed out 

the abhorrent financial abuses in other product areas that continue today. 

The financial crisis 

It is impossible to overstate the damage done to the families and communities 

most impacted by the worst financial crisis since the Great Depression. Over 12 million homes lost, representing families displaced, lives turned upside down, life savings washed away. Over $2.2 trillion in lost property value for communities surrounding foreclosed properties, with over half of that lost value sapped from communities of color. The wealth gap, already a chasm, made wider still. 

This crisis was caused by unrestrained predatory mortgage lending practices and 

a failure to stop them. These practices included steering borrowers with 30-year 

fixed-rate mortgages, and with significant equity in their homes, into toxic refinance 

products that would inevitably become unaffordable—exploding adjustable rate 

mortgages, balloon loans, loans that negatively amortized. There were no requirements to determine whether the borrower had the ability to repay the loan. Often, 

lenders paid brokers perverse kickbacks, or yield-spread premiums, to steer borrowers into riskier, more expensive loans when they could have qualified for a safer, 

more affordable one—a practice that disproportionately impacted borrowers of color. 

These predatory lending practices were permitted because the existing regulators, 

with whom consumer protection authority had been vested, failed to prohibit them. 

Congress gave the Federal Reserve Board rulemaking authority in 1994 to prohibit 

unfair and deceptive practices in the high-cost mortgage market. The Board failed 

to use this authority until 2008; by then, the damage had been done. The national 

bank and thrift regulators, the OCC and the OTS, had enforcement authority 

against unfair practices. But they treated their supervisee banks like clients, competing for their charters by being most willing to ignore the abusive practices that 

the agencies’ own supervisory guidance advised against. The existing Federal regulators failed, and the whole Nation suffered. Some suffered far more profoundly 

than others. Many continue to suffer. Full recovery will take decades. 

Mortgage market 

Today, we can be thankful for a safer mortgage market, one with reasonable rules 

in place to prevent predatory practices. Lenders must determine a borrower’s ability 

to repay a loan. Kickbacks for steering borrowers into more expensive or riskier 

loans are prohibited. 

Contrary to lender predictions, the implementation of ability-to-pay rules in 2014 

did not result in a constriction of the credit market, according to Home Mortgage 

Disclosure Act data 1 Recovery, to be sure, is slow. And there is much work to be 

done to increase the availability of home loans to people of color and low- and moderate-income families. But we can rest easier knowing that when a borrower

receives a loan, it is a reasonably designed, affordable loan where responsible

underwriting has been conducted, instead of a toxic one designed to fail; that


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2 Addo Koran, Lawmakers eyeing limits on payday loan industry, The Advocate, March 24, 

2014. 3Together Louisiana. (April 2014). The economic impact of payday lending in Louisiana, An 

analysis of the Office of Financial Institutions report ‘‘Deferred Presentment and Small Loans 

2013 Data’’ issued on April 1, 2013. Available at http://www.togetherbr.org/wp-content/

uploads/2010/09/Economic-impact-of-payday-lending-in-Louisianal4-5-14.pdf. 4 Id, applying methodology from Lohrentz, T. (March 2013). The New Economic Impact of Payday Lending in the U.S. Insight Center for Community Economic Development. 

mortgage credit will again serve to help stabilize, rather than shatter, our neighborhoods. 

The Consumer Financial Protection Bureau (CFPB or Bureau) has played a critical role in the implementation of these mortgage rules. The mortgage market is, 

of course, an absolutely vital one. Homeownership is the primary vehicle through 

which families build wealth and pass it on to future generations. Homeownership 

brings tangible benefits to neighborhoods, schools, and cities, and carries immense 

intangible value as well. This is particularly important for families of color, who still 

lag so far behind economically. The predatory practices in the market had catastrophic consequences, and ones that became evident to all. 

But other, often less conspicuous, predatory practices also wreak destruction. And 

in my experience working with people in need, families do not tend to experience 

a predatory practice in isolation. These predatory practices tend to be interconnected, raiding families’ resources and assaulting their dignity from every direction. 

Congress created the CFPB in the wake of the financial crisis precisely to protect 

consumers from abusive financial practices, be they mortgages or any other kind. 

The Bureau has begun good work in many areas, and there remains much more to 

be done. 

Payday and car title loans 

Payday loans and their close cousins, car title loans, are an abomination in plain 

sight. Consider the plight of one Louisiana mother who lost one of her two jobs 

when a rehabilitation center where she worked closed. Down one income stream and 

struggling to pay her bills, she took out a $300 payday loan. As lenders hope, she 

could not afford the repayment 2 weeks later, so a lender gave her another loan to 

repay the first, charging her new interest and fees. This happened five times, ultimately costing her $2,500 and, as payday loans often do, her bank account. She also 

lost her car and mementos from her children she pawned, all in an effort to escape 

the debt trap.2

She is not alone. Payday lenders make loans to 57,000 Louisianans each year. In 

my community, we often encounter elderly individuals who have taken out payday 

loans. Their younger family members often don’t learn of it until they are caught 

deep in the trap. It is not surprising these loans are kept secret. For many, payday 

loans carry a deep sense of shame. 

These lenders weave themselves into the fabric of our neighborhood and purport 

to lend a helping hand. But they are wolves in sheep’s clothing. They claim to be 

for a once-in-a-blue moon emergency, but three-fourths of their loan volume comes 

from borrowers with more than 10 loans a year. And they use this blood money to 

pad the pockets of legislators to prevent enactment of any reasonable restrictions. 

In Louisiana, this strategy has been sadly successful, despite widespread opposition 

from churches and other organizations who work directly with families these loans 

hurt. 

In Louisiana, there are more than four times as many payday loan storefronts as 

McDonald’s. They are concentrated in African American communities. I do not believe this is an indication that people ‘‘need’’ or ‘‘desire’’ payday loans. The most 

common reason people ‘‘need’’ a payday loan is because a previous payday loan was 

designed to be unaffordable. It’s a cycle, by design—so-called ‘‘demand’’ that generates and feeds itself. It is intentional exploitation of the desperate. 

My comments here have focused on short-term balloon-payment payday loans. But 

as we speak, many payday lenders are restructuring their payday loans to be highcost, longer-term installment loans, designed to work essentially the same way—by 

trapping the borrower in a cycle of high-cost debt. In Louisiana, payday lenders are 

currently pushing a bill that would authorize loans of up to $1,500 at 240 percent 

APR. This is immoral. 

In total, payday loans in Louisiana strip $146 million in fees and interest from 

working families, costing residents an average of over $800 for every $300 borrowed.3 The destructive business model caused a net loss of $42 million to the 

State’s economy in 2013, costing the State a net 614 jobs.4


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My community has helped to pay the payday loan debts of many individuals. Like 

so many churches across the country, we wish that they would have come to us 

sooner, before the first payday loan, so that more of our congregation’s funds could 

benefit people in need instead of paying off economic predators. Last year, a diverse 

group of faith organizations formally came together to establish Faith for Just Lending, a national coalition that shares the belief that Scripture speaks to the problem 

of predatory lending. Our coalition condemns usury and the exploitation of financial 

vulnerability. 

We will continue to fight in Louisiana, and in States across this Nation, for State 

legislators to limit the cost of credit to 36 percent annual interest or less. Absent 

Congressional action to do the same at the Federal level—which, to be clear, is warranted and overdue—the CFPB is exactly who must, by the Congressional mandate 

it was given, address abusive payday and car title loan practices. The Bureau lacks 

authority to limit interest rates, but it can and should require lenders to determine 

whether a borrower has the ability to repay a loan, without reborrowing or refinancing. This is a reasonable requirement—far from extreme—that should serve as 

a Federal floor for State and national regulation. Many States already go much further than this, prohibiting the loans altogether. Other States don’t, but they always 

can, and we will continue to press for just laws at the State level. 

Bank overdraft practices 

Overdraft fees are the banks’ version of preying on those with the least, of taking 

advantage of those in need and leaving them only worse off. Already, too many lowincome people are unbanked or underbanked, and this is particularly so for people 

of color. We should be seeking to bring these individuals into the banking mainstream, which can facilitate low-cost financial transactions and saving for economic 

emergencies. But overdraft fees, common on bank accounts, undermine this aspiration. 

Banks spin their overdraft programs as a courtesy, but they collect the large majority of overdraft fees from a select few who get hammered, some paying thousands 

of dollars annually. Overdraft fees fund the checking account business model, and 

they drive those struggling to make ends meet out of the banking system altogether. 

When accounts go too far negative, banks close them and report the account holder 

to a black list like Chexsystems, which prevents the individual from opening another checking account for years. In an environment where distrust of banks is very 

strong, overdraft practices only exacerbate economic disenfranchisement. 

The disturbing reality is that banks design their practices to maximize overdraft incidents. They charge $35 overdraft fees on small debit card transactions they 

could easily decline when the account lacks funds. Why are credit practices that 

would no longer be permitted on credit cards permitted on debit cards? This is the 

sort of inconsistency the CFPB can and should address. 

Overdraft is credit and should be extended only when, again, the individual can 

afford to repay it. With this overdraft fee cash cow, it is not surprising that banks 

do not more often offer reasonably priced credit to those living on the margins, or 

more safe bank accounts that do not carry these fees. The Bureau is rightly studying overdraft practices extensively and plans to issue rules. Curbing high cost overdraft fees would help move banks toward offering affordable products, without hidden penalty fees or gotcha fees, for people living paycheck to paycheck. 

Prepaid cards 

Driven out of the banking system by overdraft fees, or wary of the banking system 

generally, many low- and moderate-income families turn to prepaid cards. Well-designed prepaid cards can be a useful tool for many families. But they have lacked 

basic protections for far too long. High-cost credit on prepaid cards is especially concerning given that many families turn to prepaid cards precisely to avoid taking out 

credit, and given that prepaid cards are often sold by payday lenders. Overdraft fees 

on prepaid cards are a dangerous and deceptive notion, and they should be prohibited. The Bureau has taken a close look at prepaid cards and issued a proposal that 

would provide important protections in this area, including critical protections 

around credit on prepaid cards. 

Auto lending 

After one’s home, the largest purchase many will make is their car. Here, too, 

predatory practices abound. Car dealer interest rate mark-ups, much like yieldspread premiums in the mortgage market, make car loans more expensive for many 

consumers. This is also a practice with a long history of discriminatory impact on 

borrowers of color. However, this is not the only abusive practice in auto lending, 

and the Federal Trade Commission’s car lending roundtables 5 years ago brought 

many to the surface. Yo-yo scams force consumers into higher priced financing than 


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they agreed to—the dealer claims the original financing deal fell through after the 

borrower has left the lot with the new car. Consumers are faced with the loss of 

a down payment or trade-in if they don’t agree to more expensive financing. Expensive and sometimes worthless add-on products are financed into the loan. Evidence 

suggests these products are sold disproportionately to borrowers of color, who are 

more frequently told their loans require these products when they do not. And buyhere, pay-here operators churn high-cost used car loans through our communities, 

using, as the CFPB has found, high-pressure and sometimes illegal collections tactics to extract payments. 

Abuses that are in this industry have escaped attention until recently. But CFPB 

has taken important action in this area, including providing guidelines aimed at 

preventing discriminatory practices and taking much-needed enforcement actions. 

As a result, the Bureau has come under fire from Members of Congress. This fire 

is misplaced. Instead, the focus should be directed at why, for more than two decades, auto lenders’ and dealers’ practices have operated under a cloud of discrimination and abuse of low-income borrowers. Rather than defending a system that continues to fail many of our communities, Congress should push for a more transparent, fair system of auto finance. 

Debt collection 

Debt collectors commonly engage in harassment and threats; they commonly attempt to collect debts consumers never owed, or no longer owe. They induce dread, 

fear, embarrassment, panic in good, honest, hard-working individuals and in their 

family members, their children. Though existing laws are not as strong as they 

must be, debt collectors routinely break them. 

The CFPB has taken strong enforcement actions to address illegal debt collection 

practices. And it has indicated it will propose rules in this area in the coming 

months. These new rules will permit collection of debts while, we hope, requiring 

that this collection be done without employing abusive tactics. This is reasonable 

and necessary. This is not extreme. 

Forced arbitration 

There is no question that predatory practices are a violation of both biblical and 

social moral norms. Often, they also violate the law. But remedies are seldom available, as the financial industry has cloaked itself in a shield of impunity in the form 

of pre-dispute mandatory arbitration clauses. 

These clauses, often in the fine print of take-it-or-leave-it contracts for payday 

loans, bank accounts, auto financing, student loans, and other products, deprive ordinary Americans of their liberty and constitutional rights. They require that complaints be brought on an individual basis to a private arbitration system where the 

arbiter has every incentive to rule in favor of the private company that brings them 

repeat business. The fine print also often prohibits individuals—with little power 

standing alone—from joining together with others in class actions. The effect is to 

strip individuals of their ability to secure redress when they have been wronged by 

a clearly illegal practice. 

This is wrong. And we need the Bureau to exercise its authority to limit pre-dispute mandatory arbitration clauses and restore the right of individuals to join together to seek justice when they are cheated. 

Conclusion 

The Bureau has taken important action in other areas as well, like credit cards, 

student loans, and, an often-overlooked rampant problem, prevention of elder abuse. 

To date, CFPB has returned over $10 billion to consumers through enforcement actions against illegal practices. To be sure, this is to be commended. But relative to 

the funds predatory practices strip, this amount is quite modest; some individual 

predatory practices cost consumers more over the course of only a single year. This 

means that the Bureau has far more work to do. 

Other Federal regulators have an important role to play as well—the Department 

of Education with student lending; the Department of Defense with important new 

rules limiting costs on consumer loans made to our military service members; the 

prudential banking regulators, who have worked to prevent the payments system 

from being used to violate the law and reined in abusive payday lending directly 

by banks. 

But it is clear that a strong, well-funded, independent agency whose job it is to 

wake up in the morning thinking about protecting the most vulnerable among us 

is necessary—to ensure that financial services practices do not drain hard-earned 

income and savings from my constituents, and from the millions of other Americans 

who are affected by predatory lending every day. 


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Please let me be clear: the notion that struggling Americans need access to products like those the Bureau has been working so hard to address is, at best, an insult 

to the basic dignity of every vulnerable person. At worst, it is a thin veil for the 

influence corporate money and power hold in our Nation’s politics at every level. 

The predatory practices CFPB is addressing drain what little resources targeted 

persons have and leave them worse off. Not controlled, they will relegate some communities to a state of perpetual poverty. 

I implore you to let the CFPB be the consumer watchdog this body mandated that 

it be in the wake of the financial crisis. We have seen what happened when there 

was none. And we all deserve far better. 

Thank you for the opportunity to share my experiences with you. I look forward 

to your questions.


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RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN SHELBY 

FROM LEONARD CHANIN 

Q.1. On April 7th, CFPB Director Richard Cordray testified before 

the Committee and was questioned by numerous Members on the 

Bureau’s approach to indirect auto lending. Director Cordray stated:

[w]e join our fellow agencies and the Justice Department in believing disparate impact is the law of the land. That was then challenged up to the 

Supreme Court, and the Supreme Court reaffirmed that that’s the law of 

the land. And to me that’s pretty conclusive on this subject.

However, the Supreme Court decision in Texas Department of 

Housing and Community Affairs v. Inclusive Communities applied 

specifically to the use of disparate impact under the Fair Housing 

Act, and referenced features unique to that statute, while the 

CFPB has invoked disparate impact under the Equal Credit Opportunity Act as authority for its approach to indirect auto lending. 

Has the Supreme Court ruled on the application of disparate impact theory to the Equal Credit Opportunity Act?

A.1. The ‘‘Official Interpretations’’ of the CFPB’s Regulation B 

(which implements the Equal Credit Opportunity Act (ECOA)) 

state that the disparate impact doctrine applies under the ECOA 

and Regulation B. However, the U.S. Supreme Court has not 

issued a decision evaluating whether disparate impact is a valid 

basis for asserting discrimination under the ECOA and implementing Regulation B. The Supreme Court’s recent decision evaluating disparate impact under the Fair Housing Act and the Department of Housing and Urban Development’s implementing regulation does not deal with the question of whether disparate impact 

is ‘‘valid’’ under the ECOA and implementing Regulation B.

Q.2. During the hearing, you were questioned about the actions the 

Federal Reserve took to evaluate and address subprime mortgages 

before the crisis. Please explain what specific rulemakings and 

other actions regarding subprime mortgages you were involved in 

before the crisis while you served at the Division of Consumer and 

Community Affairs at the Federal Reserve.

A.2. I served in the Division of Consumer and Community Affairs 

at the Federal Reserve from 2005 to 2011. The Federal Reserve 

took several actions, including adopting rules, to address subprime 

mortgage issues prior to the financial crisis. 

In 2005, the Federal Reserve, along with the other Federal banking agencies, proposed guidance to address nontraditional mortgage 

loans and to address ‘‘risk layering’’ issues. Final guidance was 

issued in 2006, and addressed layering risks of nontraditional 

mortgages to subprime borrowers. In 2006, the Federal Reserve 

held four hearings in four cities to obtain information from consumer advocates, community development groups, researchers, 


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mortgage lenders, and others about nontraditional mortgage products and the effects on consumers of State predatory lending laws. 

In addition, in the fall of 2005, as well as on three occasions in 

2006, the Federal Reserve gathered information from its Consumer 

Advisory Council meetings dealing with subprime mortgages and 

nontraditional mortgage products. 

In March 2007, the Federal Reserve, along with the other Federal banking agencies, proposed guidance addressing heightened 

risks to consumers for certain adjustable rate mortgage loans. 

Final guidance issued in 2007 set out standards institutions should 

follow to ensure borrowers in the subprime market obtain loans 

they can afford to repay. 

In June 2007, the Federal Reserve held an additional hearing to 

explore how the Federal Reserve could use its authority to prevent 

abusive practices in the subprime market while at the same time 

preserving responsible subprime lending. In January 2008, the 

Federal Reserve proposed a rule that would protect consumers 

against unfairness and deception, while preserving responsible and 

sustainable home ownership. In July 2008, the Federal Reserve approved a final rule addressing these matters.

Q.3. Before the creation of the CFPB, the prudential banking regulators collected consumer complaints on a regular basis. How did 

that process differ from the CFPB’s current process for collecting 

and publishing consumer complaints?

A.3. Historically and currently, consumers can submit complaints 

to the Federal Reserve about various practices. The Federal Reserve investigates complaints against State member banks (and 

certain other entities) and forwards complaints against other banks 

and businesses to the appropriate enforcement agency. In its annual report, the Federal Reserve provides detailed statistical information about the complaints it receives. For example, the report 

lists the number of complaints received, including the number referred to other Federal/State agencies. However, the report and 

other information made available by the Federal Reserve do not 

provide information about specific banks or specific consumer complaints. 

The annual report also lists the number of complaints received 

against State member banks (and certain other entities) based on 

the specific law/rule the consumer alleged the bank violated. For 

example, in 2014, 25 complaints alleged that State member banks 

violated Regulation B, which implements the Equal Credit Opportunity Act. 

Importantly, the Federal Reserve investigates complaints it receives against State member banks (and certain other entities). 

The vast majority of investigated complaints reveal that institutions ‘‘correctly handled’’ the matter. For example, of complaints

received in 2014 against State member banks (and certain other 

entities), the Federal Reserve found that 86 percent were ‘‘correctly 

handled’’ by institutions. Of the remaining 14 percent, 4 percent 

were deemed violations of law, 4 percent were errors (corrected by 

the bank), and the remaining 6 percent were withdrawn, or involved litigation or other matters. The Federal Reserve does not 

publish information on individual complaints or information about 


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1 Elizabeth Hill, Due Process at Low Cost: An Empirical Study of Employment Arbitration 

Under the Auspices of the American Arbitration Association, 18 Ohio St. J. on Disp. Resol. 777, 

783 (2003); Recommendations of the Minnesota Supreme Court Civil Justice Reform Task Force 

10 (Nov. 23, 2011), http://www.mnbar.org/sections/outstate-practice/11-23-11%20Civil%20

Justice%-20Reform.pdf. 2 In California, for example, repeated budget cuts have forced 52 courthouses and 202 courtrooms to close, prompting the State judiciary to warn that funding for the State’s courts is no 

longer ‘‘enough to sustain a healthy [judicial system].’’ Judicial Council of Cal., InFocus: Judicial 

Branch Budget Crisis, available at http://www.courts.ca.gov/partners/courtsbudget.htm. Los 

Angeles County, the State’s largest, reported this year that its remaining courts are facing 

‘‘unmanageably high’’ workloads, which is producing ‘‘intolerable delay’’ in civil cases. Judicial 

Council of Cal., 2015 Budget Snapshot: County of Los Angeles (Feb. 2015), available at

http://www.courts.ca.gov/partners/-documents/CountylBudgetlSnapshotlCombined l2015.pdf.

specific State member banks. While it is unclear why such individualized data is not published, it may be that because the overwhelming majority of complaints were deemed ‘‘correctly handled’’ 

by the Federal Reserve, it could be viewed as misleading to publish 

data about complaints and the names of specific institutions suggesting either violations of laws or other problems. 

In the CFPB’s Consumer Response Report published in 2015 (for 

2014 complaints), the CFPB provides results of consumer complaints. Of the complaints addressed to companies within the 

CFPB’s authority, 70 percent of the companies closed the complaint 

with an ‘‘explanation’’ (without providing monetary or nonmonetary 

relief to the consumer). For 84 percent of those complaints, consumers were given the option to provide feedback to the company’s 

response. For those complaints, 66 percent of consumers did not 

dispute the response by the company, while 19 percent did dispute 

the company’s response (with 15 percent pending). Thus, the overwhelming majority of consumers did not dispute the company’s 

findings for complaints, which were closed without providing any 

monetary or nonmonetary relief to the consumer. 

RESPONSE TO WRITTEN QUESTION OF CHAIRMAN SHELBY 

FROM DAVID HIRSCHMANN 

Q.1. Several commenters have expressed concerns that upcoming 

CFPB rules on pre-dispute arbitration clauses may prohibit such 

clauses or make it impractical to include such clauses in consumer 

contracts. In your opinion, what would be the cost to consumers if 

such clauses were prohibited or made impractical?

A.1. The bottom line is that consumers will be harmed if arbitration ceases to be an available dispute resolution forum for them. 

Let me explain in more detail. Arbitration is a dispute resolution 

process that is faster, less expensive, more user-friendly, and altogether more efficient than in-court litigation. Consumers are more 

easily made whole in arbitration-certainly much more so than they 

are in class actions. Particularly in the consumer context, consumers can seek and obtain redress for the many claims for which 

a lawyer is too expensive or that lawyers are unwilling or unable 

to take on. Indeed, one study reported that a claim must be worth 

at least $60,000; in some markets, this threshold may be as high 

as $200,000.1 Plaintiffs who brave the court system find that a 

hearing on their claims is long delayed by overcrowded dockets in 

our underfunded courts.2


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3 Allied-Bruce Terminix Cos., Inc. v. Dobson, 513 U.S. 265, 281 (1995). Professor Peter Rutledge has observed that, without access to arbitration, consumers would be ‘‘far worse off, for 

they would find it far harder to obtain a lawyer, find the cost of dispute resolution far more 

expensive, wait far longer to obtain relief and may well never see a day in court.’’ Peter B. Rutledge, Who Can Be Against Fairness? The Case Against the Arbitration Fairness Act, 9 Cardozo 

J. Conflict Resolution 267, 267 (2008). 4 AAA, Costs of Arbitration, https://www.adr.org/aaa/ShowPDF?doc=ADRSTAGE2026862. 5 Christopher R. Drahozal & Samantha Zyontz, An Empirical Study of AAA Consumer Arbitrations, 25 Ohio St. J. on Disp. Resol. 843, 896–904 (2010). 6See, e.g., Theodore Eisenberg et al., Litigation Outcomes in State and Federal Courts: A Statistical Portrait, 19 Seattle U. L. Rev. 433, 437 (1996) (observing that in 1991–92, plaintiffs won 

51 percent of jury trials in State court and 56 percent of jury trials in Federal court, while in 

1979–1993 plaintiffs won 50 percent of jury trials).

Most injuries that consumers suffer are small and individualized-excess charges on a bill, a defective piece of

merchandise, and the like. These claims are too small to justify 

paying a lawyer to handle the matter; in any event, most consumers do not have the resources to do so. And because they are 

individualized, they cannot be asserted in class actions. As Justice 

Breyer has recognized—in a decision joined by Justices Stevens, 

Souter, and Ginsburg—‘‘the typical consumer who has only a small 

damages claim (who seeks, say, the value of only a defective refrigerator or television set)’’ would be left ‘‘without any remedy but a 

court remedy, the costs and delays of which could eat up the value 

of an eventual small recovery.’’3

Arbitration is inexpensive and easy for consumers to use. The 

American Arbitration Association (‘‘AAA’’), for example, requires 

the business to bear most arbitration costs; many companies pay 

even the consumer’s share, which the AAA caps at $200.4 The AAA 

offers hearings by telephone, and participants can file documents 

and otherwise communicate with the AAA and arbitrator through 

email. Consumers forced to go to court have to sit through lengthy 

proceedings and postponements—losing pay while seeking justice. 

That does not happen in arbitration. 

And arbitration works. Studies show that consumers and employees who use this efficient dispute-resolution system prevail in arbitration at least as frequently as—and often more 

frequently than—they do in court:

• A recent study by scholars Christopher Drahozal and 

Samantha Zyontz of claims filed with the AAA found that consumers win relief 53.3 percent of the time.5 By contrast, empirical studies that have sampled wide ranges of claims have 

similarly reported that plaintiffs win in State and Federal 

court approximately 50 percent of the time.6

• Drahozal and Zyontz found that ‘‘the consumer claimant[s] won 

some relief against the business more than half of the time,’’ 

and were generally awarded between 42 percent and 73 percent of the amount they claimed, depending on the size of the 

claim and how average recoveries were calculated (mean or 

median). The authors found little evidence for a purported ‘‘repeat player’’ effect. Consumers prevailed more than half the 

time against repeat and nonrepeat businesses alike; prevailing 

claimants were ‘‘awarded on average an almost identical percent of the amount claimed’’ (approximately 52 percent). The 

authors concluded that any discrepancy could be explained by 


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7Drahozal & Zyontz, 25 Ohio St. J. on Disp. Resol. at 898, 912–13.

8Michael Delikat & Morris M. Kleiner, An Empirical Study of Dispute Resolution Mechanisms: Where do Plaintiffs Better Vindicate Their Rights?, 58 Disp. Resol. J. 56, 58 (Nov. 2003—

Jan. 2004). 9 Elizabeth Hill, Due Process at Low Cost: An Empirical Study of Employment Arbitration 

Under the Auspices of the American Arbitration Association, 18 Ohio St. J. on Disp. Resol. 777, 

785–88 (2003) (summarizing results of past studies by Lisa Bingham that lacked empirical evidence proving the existence of an alleged ‘‘repeat player’’ and ‘‘repeat arbitrator’’ effect). 10See Theodore Eisenberg & Elizabeth Hill, Arbitration and Litigation of Employment Claims: 

An Empirical Comparison, 58 Disp. Resol. J. 44, 45, 47–50 (Nov. 2003–Jan. 2004). 11See Elizabeth Hill, AAA Employment Arbitration: A Fair Forum at Low Cost, 58 Disp. Resol. 

J. 9, 13 (May/July 2003) (reporting employee win rate in arbitration of 43 percent); see also

Eisenberg & Hill, 58 Disp. Resol. J. at 48 tbl. 1 (reporting employee win rate in Federal district 

court during the same time period was 36.4 percent).

businesses becoming better at screening cases ahead of time to 

‘‘settle meritorious claims and arbitrate only weaker claims.’’7

• A study of 186 claimants who pursued employment arbitration 

in the securities industry concluded that employees who arbitrate were more likely to win their disputes than employees 

who litigate in Federal court. The study found that 46 percent 

of those who arbitrated won, as compared to only 34 percent 

in litigation; the median monetary award in arbitration was 

higher; only 3.8 percent of the litigated cases studied ever 

reached a jury trial; and the arbitrations were resolved 33 percent faster than in court.8

• One study of 200 AAA employment awards concluded that lowincome employees brought 43.5 percent of arbitration claims, 

most of which were low-value enough that the employees 

would not have been able to find an attorney willing to bring 

litigation on their behalf. These employees were often able to 

pursue their arbitrations without an attorney, and won at the 

same rate as individuals with representation.9

• A later study of 261 AAA employment awards from the same 

period found that for higher-income employees, win rates in 

like cases in arbitration and litigation were essentially 

equal, as were median damages. The study attempted to compare ‘‘apples’’ to ‘‘apples’’ by considering separately cases that 

involved and those that did not involve discrimination claims. 

With respect to discrimination and nondiscrimination claims 

alike, the study found no statistically significant difference in 

the success rates of higher-income employees in arbitration 

and in litigation. For lower-income employees, the study did 

not attempt to draw comparisons between results in arbitration and in litigation, because lower-income employees appeared to lack meaningful access to the courts—and therefore 

could not bring a sufficient volume of court cases to provide a 

baseline for comparison.10

• Another study of arbitration of employment-discrimination 

claims concluded that arbitration is ‘‘substantially fair to employees, including those employees at the lower end of the income scale,’’ with employees enjoying a win rate comparable to 

the win rate for employees proceeding in Federal court.11

• In 2004, the National Workrights Institute compiled all available employment arbitration studies, and concluded that employees were almost 20 percent more likely to win in arbitration than in litigated employment cases. It also concluded that 


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12 National Workrights Institute, Employment Arbitration: What Does the Data Show? (2004), 

http://workrights.us. 13Public Citizen, The Arbitration Trap, Sept. 2007, http://www.citizen.org/documents/

ArbitrationTrap.pdf. 14Sarah Rudolph Cole & Theodore H. Frank, The Current State of Consumer Arbitration, 15 

Disp. Resol. Mag. 30, 31 (Fall 2008). 15 Christopher R. Drahozal & Samantha Zyontz, Creditor Claims in Arbitration and in Court,

7 Hastings Bus. L.J. 77, 91, 97, 111–16 (Winter 2011). 16Sherwyn et al., 57 Stan. L. Rev. at 1567 (emphasis added). 

in almost half of employment arbitrations, employees were 

seeking redress for claims too small to support cost-effective 

litigation. Median awards received by plaintiffs were the same 

as in court, although the distorting effect of occasional large 

jury awards resulted in higher average recoveries in litigation.12

• Critics of arbitration sometimes point to a now-discredited report from the advocacy group Public Citizen,13 as purported 

support for the assertion that arbitration is unfair. That report 

shows the folly of examining outcomes in arbitration without 

comparing them to analogous outcomes in court. 

• Public Citizen examined data about claims brought by creditors against consumer debtors, and concluded from a high win 

rate for creditors that arbitration is biased. In those cases, 

however, the consumer often does not appear and does not contest the claim, and is therefore liable either because he has defaulted or ‘‘because he owes the debt.’’14

• A more rigorous empirical study showed that ‘‘consumers fare 

better’’ in debt-collection arbitrations than in court: ‘‘creditors 

won some relief before the AAA in 77.8 percent of individual 

AAA debt collection arbitrations and either 64.1 percent or 

85.2 percent of the AAA debt collection program arbitrations,’’ 

depending on how the research parameters were defined. By 

contrast, in contested court cases creditors won relief against 

consumers between 80 percent and 100 percent of the time, depending on the court.15

As one study published in the Stanford Law Review explained in 

surveying the empirical research, ‘‘[w]hat seems clear from the results of these studies is that the assertions of many arbitration 

critics were either overstated or simply wrong.’’16 There simply is no empirical support for the contention that arbitration leads 

to unfair or subpar outcomes when compared with litigation in our 

overcrowded court system. Rather, the overwhelming weight of the 

available evidence establishes reflects that arbitration allows consumers and employees to obtain redress faster, cheaper, and more 

effectively than they could in court. 

Arbitration also has built-in fairness guarantees. The rules of 

arbitration organizations along with existing law protect 

consumers and employees against unfair procedures and

biased arbitrators.

Thus, when courts find arbitration provisions unfair to consumers or employees under generally applicable principles, they do 

not hesitate to invalidate the agreements. Thus, courts have repeatedly invalidated provisions of arbitration agreements that purported to impose:


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17The Supreme Court has held that a party to an arbitration agreement may challenge enforcement of the agreement if the claimant would be required to pay excessive filing fees or arbitrator fees in order to arbitrate a claim. See Green Tree Fin. Corp.—Ala. v. Randolph, 531 U.S. 

79, 90–92 (2000). Since Randolph, courts have aggressively protected consumers and employees 

who show that they would be forced to bear excessive costs to access the arbitral forum. See, 

e.g., Chavarria v. Ralphs Grocery Co., 733 F.3d 916, 923–25 (9th Cir. 2013) (refusing to enforce 

an arbitration agreement that required the employee to pay an unrecoverable portion of the arbitrator’s fees ‘‘regardless of the merits of the claim’’); Am. Express Co. v. Italian Colors Rest.,

133 S. Ct. 2304, 2310–11 (2013) (reaffirming that a challenge to an arbitration agreement might 

be successful if ‘‘filing and administrative fees attached to arbitration . . . are so high as to 

make access to the forum impracticable’’ for a plaintiff). Courts also have reached the same conclusion under State unconscionability law. See, e.g., Brunke v. Ohio State Home Servs., Inc.,

2008 WL 4615578 (Ohio Ct. App. Oct. 20, 2008); Liebrand v. Brinker Rest. Corp., 2008 WL 

2445544 (Cal. Ct. App. June 18, 2008); Murphy v. Mid-West Nat’l Life Ins. Co. of Tenn., 78 P.3d 

766 (Idaho 2003). 18See, e.g., Venture Cotton Coop. v. Freeman, 395 S.W.3d 272 (Tex. Ct. App. 2013) (limit on 

damages and attorney’s fees under State consumer protection law); Mortg. Elec. Registration 

Sys., Inc. v. Abner, 260 S.W.3d 351, 352, 355 (Ky. Ct. App. 2008) (limited to ‘‘actual and direct’’ 

damages); see also Carll v. Terminix Int’l Co., 793 A.2d 921 (Pa. Super. Ct. 2002) (limit on damages for personal injury); Alexander v. Anthony Int’l, L.P., 341 F.3d 256 (3d Cir. 2003) (limit 

on punitive damages); Woebse v. Health Care & Retirement Corp. of Am., 977 So. 2d 630 (Fla. 

Dist. Ct. App. 2008) (limit on punitive damages); cf. Am. Express Co., 133 S. Ct. at 2310 (explaining that Federal law would require invalidating ‘‘a provision in an arbitration agreement 

forbidding the assertion of certain [Federal] statutory rights’’). 19See, e.g., Willis v. Nationwide Debt Settlement Grp., 878 F. Supp. 2d 1208 (D. Or. 2012) 

(travel from Oregon to California); College Park Pentecostal Holiness Church v. Gen. Steel Corp.,

847 F. Supp. 2d 807 (D. Md. 2012) (travel from Maryland to Colorado); Hollins v. Debt Relief 

of Am., 479 F. Supp. 2d 1099 (D. Neb. 2007) (travel from Nebraska to Texas); Philyaw v. Platinum Enters., Inc., 54 Va. Cir. 364 (Va. Cir. Ct. Spotsylvania Cnty. 2001) (travel from Virginia 

to Los Angeles); see also, e.g., Dominguez v. Finish Line, Inc., 439 F. Supp. 2d 688 (W.D. Tex. 

2006) (travel from Texas to Indiana); Swain v. Auto Servs., Inc., 128 S.W.3d 103, 108 (Mo. Ct. 

App. 2003) (travel from Missouri to Arkansas); Pinedo v. Premium Tobacco Stores, Inc., 102 Cal. 

Rptr. 2d 435 (Ct. App. 2000) (travel from Los Angeles to Oakland). 20See, e.g., Chavarria, 733 F.3d at 923–25 (holding that an arbitration agreement was unconscionable and unenforceable when it ‘‘would always produce an arbitrator proposed by [the company] in employee-initiated arbitration[s],’’ and barred selection of ‘‘institutional arbitration administrators’’); see also, e.g., Murray v. United Food & Commercial Workers Int’l Union, 289 F.3d 

297 (4th Cir. 2002) (striking down an arbitration agreement that gave the employer the sole 

right to create a list of arbitrators from whom the employee could then pick); Hooters of Am., 

Inc. v. Phillips, 173 F.3d 933 (4th Cir. 1999); Newton v. American Debt Services, Inc., 854 F. 

Supp. 2d 712, 726 (N.D. Cal. 2012) (refusing to enforce a provision that would have granted 

a company sole discretion to choose an ‘‘independent and qualified’’ arbitrator for its consumer 

disputes because, under the circumstances, there was no guarantee that the arbitrator would 

be neutral); Roberts v. Time Plus Payroll Servs., Inc., 2008 WL 376288 (E.D. Pa. Feb. 7, 2008) 

(refusing to enforce provision that would have given employer sole discretion to select arbitrator, 

and instead requiring parties to select arbitrator jointly); Missouri ex rel. Vincent v. Schneider,

194 S.W.3d 853 (Mo. 2006) (invalidating provision giving president of a local home-builder association sole discretion to pick arbitrator for disputes between local home builders and home buyers). 21See, e.g., Zaborowski v. MHN Gov’t Servs., Inc., 2013 WL 1363568 (N.D. Cal. Apr. 3, 2013); 

Adler v. Fred Lind Manor, 103 P.3d 773 (Wash. 2004) (180 days); see also Gandee v. LDL Freedom Enters., Inc., 293 P.3d 1197 (Wash. 2013) (refusing to enforce arbitration agreement in 

debt-collection contract that required debtor to present claim within 30 days after dispute 

arose); Alexander, 341 F.3d at 256 (same, for an employee); Stirlen, 60 Cal. Rptr. 2d at 138 (rejecting provision that imposed shortened 1-year statute of limitations).

• excessive costs and fees to the consumer or employee for accessing the arbitral forum;17

• limits on damages that can be awarded by an arbitrator when 

such damages would be available to an individual consumer or 

employee in court;18

• requirements that arbitration take place in inconvenient locations;19

• biased procedures for selecting the arbitrator;20

• unreasonably shortened statutes of limitations;21 and 


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22See Gandee, 293 P.3d at 1197; Alexander, 341 F.3d at 256; Sosa v. Paulos, 924 P.2d 357 

(Utah 1996). 23See, e.g., In re Checking Account Overdraft Litig., MDL No. 2036, 485 F. App’x 403 (11th 

Cir. 2012); see also Samaniego v. Empire Today LLC, 140 Cal. Rptr. 3d 492 (Cal. Ct. App. 2012) 

(attorneys’ fees). 24 Brief for the United States as Amicus Curiae Supporting Respondents at 28–29, American 

Express Co. v. Italian Colors Restaurant, 133 S. Ct. 2304 (2013) (No. 12–133), 2013 WL 367051 

(emphasis added).

• ‘‘loser pays’’ provisions under which a consumer or employee 

might have to pay the full costs of the arbitration,22 or must 

pay the drafting party’s costs regardless of who wins.23

Of course, the vast majority of arbitration agreements do not exhibit these sorts of defects; and the clear trend has been for companies to make arbitration provisions ever more favorable to their 

customers and employees. But when courts find that overreaching 

occurs, they have not hesitated to strike down the offending provision. 

In addition to the courts’ oversight of arbitration provisions, the 

leading arbitration forums provide additional fairness protections. The AAA and JAMS—the Nation’s leading arbitration 

service providers—recognize that independence, due process, and 

reasonable costs to consumers are vital elements of a fair and accessible arbitration system. They therefore adhere to standards 

that establish basic requirements of fairness that provide strong 

protections for consumers and employees—and refuse to administer 

arbitrations unless the operative clause is consistent with those 

standards. 

Furthermore, companies increasingly are adopting consumer-friendly arbitration agreements. In the wake of the Supreme Court’s decision in Concepcion, an increasing number of arbitration agreements include consumer- and employee-friendly provisions modeled on the elements of the arbitration agreement 

upheld in that case. That should not be surprising. As the Solicitor 

General of the United States explained in its briefing before the 

Supreme Court in American Express v. Italian Colors Restaurant,

‘‘many companies have modified their agreements to include 

streamlined procedures and premiums designed to encourage customers to bring claims.’’24 The Government recognized that consumer-friendly clauses ensure that instances where individuals 

cannot bring their claims ‘‘remain rare.’’ As the brief explained: 

AT&T Mobility modified its arbitration agreement during the course of the 

litigation to include cost- and fee-shifting provisions and premiums designed to ensure that customers could bring low-value claims on an 

individual basis. These modifications left consumers ‘better off under 

their arbitration agreement’ than they would have been in class litigation. And by obviating a potential objection to enforcement of the arbitration agreement, those modifications simultaneously served the company’s 

interest in avoiding litigation.

Consistent with these observations, arbitration agreements include a variety of consumer-friendly provisions:

• Many require businesses to shoulder all of the costs of arbitration, including filing fees and the arbitrator’s compensation.

• Some agreements, such as the one the Supreme Court considered in Concepcion, provide for ‘‘bounty payments’’ as an incentive for an individual to bring a claim in arbitration, and agree 


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25 Arbitration imposes significant additional transaction costs on companies—paying consumers’ filing fees and other costs of arbitration, for example. Thus, as one group of businesses 

has explained, ‘‘when there is no assurance that all claims will be arbitrated in lieu of litigation, 

and a [company] must shoulder the additional costs of class action litigation, subsidizing the 

costs of individual arbitration is no longer a rational business option’’; the only logical decision 

is to ‘‘disengage from arbitration altogether.’’ Brief for CTIA—the Wireless Association as Amicus Curiae at 21, AT&T Mobility LLC v. Concepcion.

not only to pay any attorney’s fees that would be authorized 

by the underlying law, but double the attorney’s fees if the arbitrator awards more than the company’s last pre-hearing settlement offer.

• In some very complex cases, it is possible that a consumer or 

employee might require an expert witness or even complex discovery in order to pursue a claim against a company. Many 

agreements contain provisions that allow for such costs to be 

shifted to the company if the claimant prevails—even when the 

underlying law does not provide for such cost-shifting, which 

thus would not be available in a lawsuit in court.

• Agreements often adopt informal procedures that make it easy 

for claimants to pursue their disputes. For example, these 

agreements enable consumers and employees to choose whether the dispute should be resolved on the basis of a written submission, a telephonic hearing, or in-person proceedings.

In addition to all these direct benefits, consumers and employees also benefit through the systematic reduction of litigationrelated transaction costs, which leads to lower prices for products and services and higher wages.

How does this work? Businesses face many costs in bringing 

products and services to market. On top of the ordinary costs of 

running a business, they must absorb costs of litigating businessrelated claims. The transaction costs of litigation are high; they include settlements, judgments resolving meritorious claims, and the 

costs of defending against all lawsuits. Because those transaction 

costs are lower in arbitration, businesses can reduce costs that otherwise inflate product and service prices and reduce the availability 

of margins that could pay for wage increases. 

The CFPB’s Effort To Ban Arbitration 

Given the clear benefits of arbitration, it is disappointing that 

the CFPB has now proposed a rule that will eliminate arbitration. 

Of course, the Bureau’s proposal does not say that; it is framed as 

a requirement that class procedures be permitted either in arbitration or in court. But the practical effect of that will be a ban on 

arbitration, and the Bureau knows it.25

The bottom line: consumers will lose the ability to vindicate 

most of the injuries they suffer—which cannot be addressed in 

class action because they are individualized—so that lawyers can 

continue to reap the benefits of class actions. 

The Bureau is basing its proposal on its ‘‘study’’ of arbitration. 

But that study is the result of a closed process that solicited public 

comment once at the outset and never again for the 3 years that 

the study was underway. The Bureau never informed the public of 

the topics it had decided to study and never sought public comment 

on them—even though a number of commenters suggested that the 


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26The Bureau staff would meet with interested parties and accept written submissions. But 

the staff refused to provide any information regarding the topics that the Bureau was studying 

or the timeline for its study process, and those oneway conversations therefore did not permit 

anything resembling meaningful input. 27http://www.cfpbmonitor.com/files/2015/06/McHenry-Scott-to-Cordray-Letter-re-Arbitration.pdf. 28 Jason Scott Johnston & Todd Zywicki, The Consumer Financial Protection Bureau’s Arbitration Study: A Summary and Critique 5 (Mercatus Ctr., George Mason Univ., Working Paper, 

Aug. 2015), available at http://www.law.gmu.edu/assets/files/publications/workinglpapers/

LS1507.pdf.

Bureau utilize that procedure. The Bureau never convened public 

roundtable discussions on key issues, as many other agencies routinely do. And the Bureau never sought public input on its

tentative findings.26

The product of this closed process is flawed in numerous respects. The Bureau’s study:

• ignores the practical benefits of arbitration as compared to the 

court system for vindicating the types of disputes that consumers most often have;

• fails to consider the benefits that arbitration provides to injured parties in a variety of contexts—benefits that plainly 

would accrue to consumers as well if they were not discouraged 

by plaintiffs’ lawyers and others from invoking arbitration;

• fails to consider the reduced transaction costs resulting from 

arbitration, which under basic economic theory produce lower 

prices to consumers;

• exaggerates the supposed benefits of class actions to consumers 

and ignores the grossly disproportionate gains reaped by selfinterested plaintiffs’ lawyers; and

• ignores the significant role of Government enforcement—particularly the CFPB’s own enforcement and supervision processes—in protecting consumers.

More than 80 Members of the House and Senate sent a letter to 

the Bureau stating that:

the process that led to the Bureau’s Arbitration Study has not been fair, 

transparent, or comprehensive. The Bureau ignored requests from senior 

Members of Congress for basic information about the study preparation 

process.

The Bureau also ignored requests to disclose the topics that would be covered by the study, and failed to provide the general public with any meaningful opportunities to provide input on the topics. Because the materials 

were kept behind closed doors, the final Arbitration Study included entire 

sections that were not included in the preliminary report that was provided 

to the public.

As a result, the flawed process produced a fatally flawed study. Rather than 

focusing on the critical question—whether regulating or prohibiting arbitration will benefit consumers—and devising a plan to address the issues relevant to resolving that question, the Bureau failed to provide even the most 

basic of comparisons needed to evaluate the use of arbitration agreements.’’27

Two prominent academics conducted an independent analysis of 

the CFPB’s study, concluding that it ‘‘provides no foundation for 

imposing new restrictions or prohibitions on mandatory arbitration 

clauses in consumer contracts.’’28 In particular, the study ‘‘fail[s] to 

support any conclusion that arbitration clauses in consumer credit 

contracts reduce consumer welfare or that encouraging more class 


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29 Id. at 6. 30Testimony of Martin H. Redish at 7, Class Actions Seven Years After the Class Action Fairness Act (June 1, 2012), available at http://judiciary.house.gov/hearings/Hearings%202012/-

Redish%2006012012.pdf. 31 Am. Express Co. v. Italian Colors Rest., 133 S. Ct. 2304, 2319 (2013) (Kagan, J., dissenting). 

action litigation would be beneficial to consumers and the economy.’’29

It is particularly remarkable that the Bureau’s proposal apparently will be justified by the asserted benefits of class actions when 

the plain reality is that consumer class actions deliver little to 

anyone other than lawyers. Thus, eliminating arbitration in 

order to preserve class actions sells out the interests of consumers in order to benefit plaintiffs’ lawyers.

A recent empirical study found that the overwhelming majority 

of putative class actions studied resulted in no recovery at all for 

members of the putative class. The idea that class actions consistently provide benefits to consumers is just plain wrong. 

The chief proponents—and the principal beneficiaries—of 

restrictions on arbitration are the plaintiffs’ lawyers. Because 

arbitration is quicker and more efficient than litigation, it is less 

expensive, which means that they cannot extract large settlements and attorneys’ fees for meritless claims in arbitration as 

easily as they could in class actions in court. As Professor Martin 

Redish has noted, this confirms that ‘‘[t]he real parties in interest 

in . . . [many] class actions are . . . the plaintiffs’ lawyers.’’30 Indeed, the CFPB’s own study found that plaintiffs’ lawyers average 

class action fee is $1 million per case; the average recovery by consumers: $32.35. 

Also, as Justice Kagan has recognized, ‘‘nonclass options abound’’ 

for effectively pursuing claims on an individual basis.31 Many arbitration agreements require businesses to pay all or most filing fees, 

authorize recovery of attorney’s fees and other costs, and provide 

other incentives for plaintiffs, making it easier for consumers to 

bring claims individually. Class actions are not needed to enable 

consumers to vindicate their rights—particularly when the cost of 

providing class actions will be the elimination of arbitration, which 

enables consumers to vindicate claims that as a practical matter 

cannot and are not asserted in court. 

Finally, to the extent there are practices that inflict harm on 

broad classes of consumers that might go unremedied, the Bureau’s 

enforcement and supervision authority provides strong protection 

that did not previously exist. There is no need to rely on self-interested class action lawyers given the obvious flaws of the class action system and the benefits to consumers from arbitration. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN 

FROM DAVID HIRSCHMANN 

Q.1. Since the 2008 financial crisis, the U.S. Chamber of Commerce 

has devoted enormous resources to lobbying against rules that 

would protect consumers, strengthen the financial markets, and 

hold the financial industry accountable when it breaks the law. 

You testified before the Banking Committee as a representative of 

the U.S. Chamber of Commerce. For members of Congress to

interpret the information and advice you are providing, it is


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critically important for us to have a better sense of who is behind 

that work.

• Please explain to the Committee how much funding the Chamber of Commerce has received from the six largest banks in the 

country—JPMorgan Chase, Bank of America, Citigroup, Wells 

Fargo, Goldman Sachs, and Morgan Stanley—in each of the 

following years.

i. 2016

ii. 2015

iii. 2014

iv. 2013

v. 2012

vi. 2011

vii. 2010

viii. 2009

ix. 2008

• Please explain to the Committee how much funding the Chamber of Commerce received from all other depository institutions 

in:

i. 2016

ii. 2015

iii. 2014

iv. 2013

v. 2012

vi. 2011

vii. 2010

viii. 2009

ix. 2008

• Please explain to the Committee how much funding the Chamber of Commerce received from nondepository financial institutions in:

i. 2016

ii. 2015

iii. 2014

iv. 2013

v. 2012

vi. 2011

vii. 2010

viii. 2009

ix. 2008

• Is there any reason that you would be unwilling to inform Congress which financial institutions are funding your work, including your testimony before the Senate Banking Committee? 

If so, please explain.

• If you will not disclose your funding, why should Congress give 

your testimony the same weight as the testimony of those who 


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appear before this Committee and are willing to make clear 

who funded their work?

A.1. The Chamber supports strong, clear, and predictable consumer 

financial protection policies that deter fraud and predation and 

contribute to well-functioning capital markets. 

As you know, the Chamber is under no obligation to disclose its 

membership or the manner in which it prepares testimony. It does, 

however, represent the interests of over 3 million businesses of 

every size, sector, and region of this country; over 95 percent of the 

Chamber’s members are small businesses.

Q.2. Did you share drafts of your testimony with any representatives of any financial institutions or employees of organizations 

representing financial institutions prior to this hearing? If so, who, 

and what kind of access did you provide them? 

Is there any reason that you would be unwilling to inform Congress which representatives of financial institutions participated in 

the drafting of your testimony or reviewed your testimony before 

it was submitted? If so, please explain.

A.2. The Chamber supports strong, clear, and predictable consumer 

financial protection policies that deter fraud and predation and 

contribute to well-functioning capital markets. 

As you know, the Chamber is under no obligation to disclose its 

membership or the manner in which it prepares testimony. It does, 

however, represent the interests of over 3 million businesses of 

every size, sector, and region of this country; over 95 percent of the 

Chamber’s members are small businesses. 

FOLLOW-UP RESPONSE TO HEARING QUESTION OF SENATOR 

COTTON FROM DAVID HIRSCHMANN 

Q.1. Does the CFPB’s forthcoming arbitration rule expected next 

year make the need for CROA reform more urgent or less urgent? 

(Page 29)

A.1. The U.S. Chamber of Commerce is the world’s largest business 

federation, representing the interests of more than 3 million businesses of all sizes, sectors, and regions. The Chamber created the 

Center for Capital Markets Competitiveness to promote a modern 

and effective regulatory structure for capital markets to function 

well in a 21st century economy. 

I write to follow up with you and your colleagues on the Committee on Banking, Housing, and Urban Affairs regarding your 

questions from yesterday’s hearing concerning the impact of the 

forthcoming Consumer Financial Protection Bureau (CFPB) rule 

that, as a practical matter, will eliminate arbitration from the consumer financial services industry. In particular, you asked about 

its likely impact on the ability of credit bureaus to provide helpful 

credit monitoring and credit education services to consumers. 

Thank you for your question; my thoughts on this subject are set 

forth below. 

As you mentioned in your question to me, the Credit Repair Organizations Act of 1996 (CROA) was enacted to prohibit fraudulent 

representations by companies offering credit repair services about 

their ability to remove true but negative information from an


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1See generally Credit Repair Organizations Act of 1996, Pub. L. No. 104–208 § 2451 (Sept. 

30, 1996) (codified at 15 U.S.C. §§ 1679–1679j). 2 Id. § 1679g, 1679h. 3 Under CROA, the defined term ‘‘credit repair organization’’ (A) means any person who uses 

any instrumentality of interstate commerce or the mails to sell, provide, or perform (or represent 

that such person can or will sell, provide, or perform) any service, in return for the payment 

of money or other valuable consideration, for the express or implied purpose of (i) improving 

any consumer’s credit record, credit history, or credit rating; or (ii) providing advice or assistance to any consumer with regard to any activity or service described in clause (i)[.] It does not 

include a 501(c)(3) nonprofit organization, a creditor that is helping a person restructure debt, 

or a depository institution or credit union. 15 U.S.C. § 1679a(3). 4See generally Stout v. Freescore, LLC, 743 F.3d 680 (9th Cir. 2014). 5 Id.

6Oversight of Telemarketing Practices and the Credit Repair Organizations Act (CROA): Hearing Before the Senate Committee on Commerce, Science, and Transportation, 110th Cong. 8 

(2007) (written statement of Lydia B. Parnes, Dir., Bureau of Consumer Prot., Fed. Trade 

Comm’n). 

individual’s credit history.1 In addition to Government enforcement, CROA is enforced through a strict liability private right of 

action, including a statutorily authorized class action.2 This means 

that even the most insignificant, immaterial error by a credit repair organization is actionable. Needless to say, under this particular strict liability statute, the potential liability of any ‘‘credit 

repair organization’’ is immense.3

The question of who is a ‘‘credit repair organization’’ is more 

than a proverbial ‘‘million dollar question’’—the class action plaintiffs’ bar has recently turned it into a literal one. In February 2014, 

the Ninth Circuit Court of Appeals issued its opinion in Stout v. 

FreeScore, LLC, concerning whether the district court properly dismissed a putative class action case alleging that FreeScore, a company that provided consumers with credit scores, credit reports, 

and credit monitoring services, was strictly liable under CROA for 

various violations of the statute. To be sure, FreeScore did not at 

any time actually perform credit repair services—a point the Court 

did not dispute.4 Instead, the Court’s opinion focused on 

FreeScore’s advertising, which state that having access to credit reports and scores and using credit monitoring services could help 

consumers improve their overall credit. Incredibly, the Court took 

the view that stating the most basic principle of financial literacy—

that knowing more about your credit can help you improve your 

credit—was exactly the type of nefarious ‘‘representation’’ that 

CROA was enacted to root out.5 That holding is at odds with congressional testimony by the Federal Trade Commission, the agency 

tasked with enforcing CROA, in which the Commission said it ‘‘sees 

little basis on which to subject the sale of legitimate credit monitoring and similar educational products and services to CROA’s 

specific prohibitions and requirements, which were intended to address deceptive and abusive credit repair business practices.’’6

Class action lawsuits under CROA are existential threats to companies actually subject to its jurisdiction; more perniciously, in 

light of cases like Stout, they threaten the existence of companies 

not intended to be subject to CROA that provide credit monitoring 

and education services to millions of Americans worried about identity theft, hacking, and other cybersecurity threats. The Chamber 

is very concerned that Stout and cases like it, which we believe seriously misread CROA’s statutory text, defy congressional intent, 

and subject more companies to class action litigation, will harm 

consumers by reducing or eliminating their access to helpful


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7See Dodd-Frank Wall Street Reform and Consumer Protection Act, Pub. L. No. 111–203 § 

1013(d) (July 21, 2010) (creating the CFPB’s Office of Financial Education to ‘‘educate and empower consumers to make better informed financial decisions’’). 

products that help them take more control over their financial wellbeing. We therefore take this opportunity to encourage Congress to 

clarify that the provision of credit monitoring and credit education 

services is not covered by CROA. 

Moreover, as you foreshadowed in your question to me at yesterday’s hearing, the CFPB’s forthcoming arbitration rule will further 

jeopardize the availability of consumer credit monitoring and education services—a strange result for a Government agency charged 

with improving financial literacy.7 Like many financial services 

providers, many credit monitoring service providers use pre-dispute 

arbitration agreements to provide their customers a faster, cheaper, more efficient way of recovering a greater amount of money for 

claims they have against the company. That shouldn’t be surprising—after all, the CFPB’s own 2015 Arbitration Study and Report to Congress confirms these benefits of consumer arbitration; it 

also concludes that 87 percent of class action lawsuits result in absolutely no recovery for consumers. Despite this data, the CFPB’s 

arbitration rule is likely to prohibit consumer financial contracts 

from requiring that claims be filed in arbitration rather than class 

action litigation, which will likely have the practical effect of eliminating arbitration altogether. The impact of CFPB’s rule on the 

continued availability of consumer arbitration is a critically important question that should be answered before any such rule is proposed; regrettably, the CFPB did not even bother to study it. The 

Chamber has and will continue to encourage the CFPB to preserve 

consumer arbitration in financial services contracts. I hope that I 

have answered your questions. If not, please do not hesitate to

contact me. 

RESPONSE TO WRITTEN QUESTION OF CHAIRMAN SHELBY 

FROM REVEREND DR. WILLIE GABLE, JR., D. MIN 

Q.1. Dr. Gable, in addition to your many other roles, you are also 

the founder and Executive Director of a nonprofit that offers housing and rental assistance to low-income individuals. 

Can you talk about what you saw during and after the crisis in 

the housing market?

A.1. Foreclosure Impact in Louisiana

• Louisiana continued to suffer financial devastation due to Hurricane Katrina when the foreclosure crisis hit.

• The Center for Responsible Lending projected that 26,306 

homes in the State would be lost to foreclosure from 2008 

through 2009. As a result, it was estimated that an additional 

400,306 homes in close proximity to those foreclosed properties 

would see a decrease in home values and tax bases of $1 billion 

dollars. The average decrease in home value affected per unit 

totaled $2,578. (See http://www.responsiblelending.org/mortgage-lending/research-analysis/louisiana-state-info-with-fcstarts.pdf). A later 2012 report by CRL showed that Louisiana 

had 88,898 foreclosure starts affecting 1,042,210 households 


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with each household facing a home equity loss of 2.7 percent 

and $4,587. Families living in minority census tracts in the 

State loss 36.2 percent of their wealth to foreclosure. (See 

http://www.responsiblelending.org/sites/default/files/uploads

/3-mortgages.pdf.)

• In 2012, the Brookings Institute conducted a study titled, ‘‘The 

Ongoing Impact of Foreclosures on Children,’’ and found that 

2.3 million children who lived in single family homes during 

the crisis lost their homes. In Louisiana, 45,000 children were 

displaced due to completed foreclosures on home loans that 

were originated between 2004–2008. (See http://

www.brookings.edu/∼/media/research/files/papers/2012/4/

18-foreclosures-children-isaacs/0418lforeclosureslchildren

lisaacs.pdf.)

• According to RealtyTrac, as of April 2016 1 in every 1593 

homes in the State of Louisiana is facing a foreclosure action 

despite being 7 years post ‘‘Great Recession’’. (See ‘‘America’s 

foreclosure crisis isn’t over’’—http://www.cbsnews.com/news/

americas-foreclosure-crisis-isnt-over/.)

• Credit accessibility has become overly constrained as a result 

of the market over correction in response to the foreclosure crisis. Lower wealth families and people of color with a history 

of success with mortgages are now basically locked out of the 

housing finance system except for the Government-insured 

mortgages they received. In Louisiana, African Americans received only 10,655 mortgages and Latinos only 1,618 in 2014 

according to Home Mortgage Disclosure Act data. These low 

numbers are in comparison to the 60,177 whites in the State 

received. Home ownership is the primary way that most families build wealth and move into the middle class. Lower-wealth 

families have been sidelined by conventional mortgage lenders 

when interest rates are at historical lows and home prices are 

relatively affordable. (See http://www.consumerfinance.gov/

data-research/hmda/explore#filters.)

Q.2. Dr. Gable, in your testimony, you stated ‘‘in the auto lending 

industry, predatory discrimination practices have been evidenced 

for years’’? Can you describe those practices, including what you 

have observed in your community?

A.2. Auto Lending

• The issue of discrimination in auto lending has persisted for 

the past few decades.

• The first evidence of discrimination came as a result of a series 

of lawsuits filed in the mid-1990s against the largest finance 

companies in the country alleging discriminatory impact from 

the practice of dealer interest rate markups. Data from those 

lawsuits showed that borrowers of color were more likely to 

have their interest rates marked up by the dealer, and paid 

substantially more than white borrowers.

• To settle these cases, the lenders agreed to cap the amount 

dealers could add to the interest rate at 2–2.5 percent. These 

caps have all expired, and while most lenders have maintained 

those caps, they are voluntary and lenders could increase them 


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at any time. http://www.nclc.org/images/pdf/carlsales/ibauto-dealers-racialldisparites.pdf.

• In 2007, the Department of Justice settled cases with Pacifico 

Ford and Springfield Ford in Pennsylvania in which the DOJ 

found that African American borrowers were charged higher 

markups than white borrowers. Those dealers agreed to take 

steps to reduce or eliminate racial disparities, although there 

is no data available to show whether those steps actually

did reduce or eliminate that discrimination.

https://www.justice.gov/archive/opa/pr/2007/August/07l

crtl639.html.

• More recently, the CFPB and DOJ have entered into a series 

of settlements with lenders in which the CFPB said that data 

indicated continued discrimination. While the levels of discrimination were not the eye-popping levels found in the cases 

from the mid-1990s, CFPB’s data still shows unacceptable levels of discrimination.

• The Federal Trade Commission’s (FTC) 2011 Roundtables on 

auto lending also shone light on practices that those presenting 

said have been problematic for quite some time. Those include 

yo-yo scams, issues with add-on products, and other sales and 

financing abuses. The FTC has taken strong action on car dealer advertising issues, but we still await action on many of the 

other abuses identified.

• Specifically in Louisiana auto dealers seek to target minorities 

who are unaware the higher financing charges added to the vehicle they chose to purchase. I personally have been seduced 

into deals like these. However, I persist in showing my FICO 

score and then informed the dealer I have a rate from my bank 

which they can match if they desire my business. Many bi-vocational pastor/clergy in my community fall prey to this predatory practice.


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110

ADDITIONAL MATERIAL SUPPLIED FOR THE RECORD


BANKI-41578DSA with DISTILLER20947.001
111


BANKI-41578DSA with DISTILLER20947.002
112


BANKI-41578DSA with DISTILLER20947.003
113


BANKI-41578DSA with DISTILLER20947.004
114


BANKI-41578DSA with DISTILLER20947.005
115


BANKI-41578DSA with DISTILLER20947.006
116


BANKI-41578DSA with DISTILLER20947.007
117


BANKI-41578DSA with DISTILLER20947.008
118


BANKI-41578DSA with DISTILLER20947.009
119


BANKI-41578DSA with DISTILLER20947.010
120


BANKI-41578DSA with DISTILLER20947.011
121


BANKI-41578DSA with DISTILLER20947.012
122


BANKI-41578DSA with DISTILLER20947.013
123


BANKI-41578DSA with DISTILLER20947.014
124


BANKI-41578DSA with DISTILLER20947.015
125


BANKI-41578DSA with DISTILLER20947.016
126


BANKI-41578DSA with DISTILLER20947.017
127


BANKI-41578DSA with DISTILLER20947.018
128


BANKI-41578DSA with DISTILLER20947.019
129


BANKI-41578DSA with DISTILLER20947.020
130


BANKI-41578DSA with DISTILLER20947.021
131


BANKI-41578DSA with DISTILLER20947.022
132


BANKI-41578DSA with DISTILLER20947.023
133


BANKI-41578DSA with DISTILLER20947.024
134


BANKI-41578DSA with DISTILLER20947.025
135


BANKI-41578DSA with DISTILLER20947.026
136


BANKI-41578DSA with DISTILLER20947.027
137


BANKI-41578DSA with DISTILLER20947.028
138


BANKI-41578DSA with DISTILLER20947.029
139


BANKI-41578DSA with DISTILLER20947.030
140


BANKI-41578DSA with DISTILLER20947.031
141


BANKI-41578DSA with DISTILLER20947.032
142


BANKI-41578DSA with DISTILLER20947.033
143


BANKI-41578DSA with DISTILLER20947.034
144


BANKI-41578DSA with DISTILLER20947.035
145


BANKI-41578DSA with DISTILLER20947.036
146


BANKI-41578DSA with DISTILLER20947.037
147


BANKI-41578DSA with DISTILLER20947.038
148


BANKI-41578DSA with DISTILLER20947.039
149


BANKI-41578DSA with DISTILLER20947.040
150


BANKI-41578DSA with DISTILLER20947.041
151


BANKI-41578DSA with DISTILLER20947.042
152


BANKI-41578DSA with DISTILLER20947.043
153


BANKI-41578DSA with DISTILLER20947.044
154


BANKI-41578DSA with DISTILLER20947.045
155


BANKI-41578DSA with DISTILLER20947.046
156


BANKI-41578DSA with DISTILLER20947.047
157


BANKI-41578DSA with DISTILLER20947.048
158


BANKI-41578DSA with DISTILLER20947.049
159


BANKI-41578DSA with DISTILLER20947.050
160


BANKI-41578DSA with DISTILLER20947.051
161


BANKI-41578DSA with DISTILLER20947.052
162


BANKI-41578DSA with DISTILLER20947.053
163


BANKI-41578DSA with DISTILLER20947.054
164


BANKI-41578DSA with DISTILLER20947.055
165


BANKI-41578DSA with DISTILLER20947.056
166


BANKI-41578DSA with DISTILLER20947.057
167


BANKI-41578DSA with DISTILLER20947.058
168


BANKI-41578DSA with DISTILLER20947.059
169


BANKI-41578DSA with DISTILLER20947.060
170


BANKI-41578DSA with DISTILLER20947.061
171


BANKI-41578DSA with DISTILLER20947.062
172


BANKI-41578DSA with DISTILLER20947.063
173


BANKI-41578DSA with DISTILLER20947.064
174


BANKI-41578DSA with DISTILLER20947.065
175


BANKI-41578DSA with DISTILLER20947.066
176


BANKI-41578DSA with DISTILLER20947.067
177


BANKI-41578DSA with DISTILLER20947.068
178


BANKI-41578DSA with DISTILLER20947.069
179


BANKI-41578DSA with DISTILLER20947.070
180


BANKI-41578DSA with DISTILLER20947.071
181


BANKI-41578DSA with DISTILLER20947.072
182


BANKI-41578DSA with DISTILLER20947.073
183


BANKI-41578DSA with DISTILLER20947.074
184


BANKI-41578DSA with DISTILLER20947.075
185


BANKI-41578DSA with DISTILLER20947.076
186


BANKI-41578DSA with DISTILLER20947.077
187


BANKI-41578DSA with DISTILLER20947.078
188


BANKI-41578DSA with DISTILLER20947.079
189


BANKI-41578DSA with DISTILLER20947.080
190


BANKI-41578DSA with DISTILLER20947.081
191


BANKI-41578DSA with DISTILLER20947.082
192


BANKI-41578DSA with DISTILLER20947.083
193


BANKI-41578DSA with DISTILLER20947.084
194


BANKI-41578DSA with DISTILLER20947.085
195


BANKI-41578DSA with DISTILLER20947.086
196


BANKI-41578DSA with DISTILLER20947.087
197


BANKI-41578DSA with DISTILLER20947.088
198


BANKI-41578DSA with DISTILLER20947.089
199


BANKI-41578DSA with DISTILLER20947.090
200


BANKI-41578DSA with DISTILLER20947.091
201


BANKI-41578DSA with DISTILLER20947.092
202


BANKI-41578DSA with DISTILLER20947.093
203


BANKI-41578DSA with DISTILLER20947.094
204


BANKI-41578DSA with DISTILLER20947.095
205


BANKI-41578DSA with DISTILLER20947.096
206


BANKI-41578DSA with DISTILLER20947.097
207


BANKI-41578DSA with DISTILLER20947.098
208


BANKI-41578DSA with DISTILLER20947.099
209


BANKI-41578DSA with DISTILLER20947.100
210


BANKI-41578DSA with DISTILLER20947.101
211


BANKI-41578DSA with DISTILLER20947.102
212


BANKI-41578DSA with DISTILLER20947.103
213


BANKI-41578DSA with DISTILLER20947.104
214


BANKI-41578DSA with DISTILLER20947.105
215


BANKI-41578DSA with DISTILLER20947.106
216


BANKI-41578DSA with DISTILLER20947.107
217


BANKI-41578DSA with DISTILLER20947.108
218


BANKI-41578DSA with DISTILLER20947.109
219


BANKI-41578DSA with DISTILLER20947.110
220


BANKI-41578DSA with DISTILLER20947.111
221


BANKI-41578DSA with DISTILLER20947.112
222


BANKI-41578DSA with DISTILLER20947.113
223


BANKI-41578DSA with DISTILLER20947.114
224


BANKI-41578DSA with DISTILLER20947.115
225


BANKI-41578DSA with DISTILLER20947.116
226


BANKI-41578DSA with DISTILLER20947.117
227


BANKI-41578DSA with DISTILLER20947.118
228


BANKI-41578DSA with DISTILLER20947.119
229


BANKI-41578DSA with DISTILLER20947.120
230


BANKI-41578DSA with DISTILLER20947.121
231


BANKI-41578DSA with DISTILLER20947.122
232


BANKI-41578DSA with DISTILLER20947.123
233


BANKI-41578DSA with DISTILLER20947.124
234


BANKI-41578DSA with DISTILLER20947.125
235


BANKI-41578DSA with DISTILLER20947.126
236


BANKI-41578DSA with DISTILLER20947.127
237


BANKI-41578DSA with DISTILLER20947.128
238


BANKI-41578DSA with DISTILLER20947.129
239


BANKI-41578DSA with DISTILLER20947.130
240


BANKI-41578DSA with DISTILLER20947.131
241


BANKI-41578DSA with DISTILLER20947.132
242


BANKI-41578DSA with DISTILLER20947.133
243


BANKI-41578DSA with DISTILLER20947.134
244


BANKI-41578DSA with DISTILLER20947.135
245


BANKI-41578DSA with DISTILLER20947.141
246


BANKI-41578DSA with DISTILLER20947.142
247


BANKI-41578DSA with DISTILLER20947.143
248


BANKI-41578DSA with DISTILLER20947.144
249


BANKI-41578DSA with DISTILLER20947.145
250


BANKI-41578DSA with DISTILLER20947.146
251


BANKI-41578DSA with DISTILLER20947.136
252


BANKI-41578DSA with DISTILLER20947.137
253


BANKI-41578DSA with DISTILLER20947.138
254


BANKI-41578DSA with DISTILLER20947.139
255


BANKI-41578DSA with DISTILLER20947.140
256


BANKI-41578DSA with DISTILLER20947.153
257


BANKI-41578DSA with DISTILLER20947.154
258


BANKI-41578DSA with DISTILLER20947.155
259


BANKI-41578DSA with DISTILLER20947.156
260


BANKI-41578DSA with DISTILLER20947.157
261


BANKI-41578DSA with DISTILLER20947.158
262


BANKI-41578DSA with DISTILLER20947.159
263


BANKI-41578DSA with DISTILLER20947.160
264


BANKI-41578DSA with DISTILLER20947.161
265


BANKI-41578DSA with DISTILLER20947.162
266


BANKI-41578DSA with DISTILLER20947.163
267


BANKI-41578DSA with DISTILLER20947.164
268


BANKI-41578DSA with DISTILLER20947.165
269


BANKI-41578DSA with DISTILLER20947.166
270


BANKI-41578DSA with DISTILLER20947.167
271


BANKI-41578DSA with DISTILLER20947.168
272


BANKI-41578DSA with DISTILLER20947.169
273


BANKI-41578DSA with DISTILLER20947.170
274


BANKI-41578DSA with DISTILLER20947.171
275


BANKI-41578DSA with DISTILLER20947.172
276


BANKI-41578DSA with DISTILLER20947.173
277


BANKI-41578DSA with DISTILLER20947.174
278


BANKI-41578DSA with DISTILLER20947.175
279


BANKI-41578DSA with DISTILLER20947.176
280


BANKI-41578DSA with DISTILLER20947.177
281


BANKI-41578DSA with DISTILLER20947.178
282


BANKI-41578DSA with DISTILLER20947.179
283


BANKI-41578DSA with DISTILLER20947.180
284


BANKI-41578DSA with DISTILLER20947.181
285


BANKI-41578DSA with DISTILLER20947.182
286


BANKI-41578DSA with DISTILLER20947.183
287


BANKI-41578DSA with DISTILLER20947.184
288


BANKI-41578DSA with DISTILLER20947.185
289


BANKI-41578DSA with DISTILLER20947.186
290


BANKI-41578DSA with DISTILLER20947.187
291


BANKI-41578DSA with DISTILLER20947.188
292


BANKI-41578DSA with DISTILLER20947.189
293


BANKI-41578DSA with DISTILLER20947.190
294


BANKI-41578DSA with DISTILLER20947.191
295


BANKI-41578DSA with DISTILLER20947.192
296


BANKI-41578DSA with DISTILLER20947.193
297


BANKI-41578DSA with DISTILLER20947.194
298


BANKI-41578DSA with DISTILLER20947.195
299


BANKI-41578DSA with DISTILLER20947.196
300


BANKI-41578DSA with DISTILLER20947.197