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THE SEMI-ANNUAL REPORT OF 

THE BUREAU OF CONSUMER 

FINANCIAL PROTECTION 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 29, 2015 

Printed for the use of the Committee on Financial Services 

Serial No. 114–52 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

September 29, 2015 .......................................................................................... 1 

Appendix: 

September 29, 2015 .......................................................................................... 73 

WITNESSES 

TUESDAY, SEPTEMBER 29, 2015 

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

(CFPB) ................................................................................................................... 5 

APPENDIX 

Prepared statements: 

Cordray, Hon. Richard ..................................................................................... 74 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Ellison, Hon. Keith: 

Chart entitled, ‘‘State Payday Loan Regulation and Usage Rates’’ ............. 77 

Hurt, Hon. Robert: 

Letter from Payne’s Check Cashing, with attachments, dated September 

28, 2015 .......................................................................................................... 78 

Cordray, Hon. Richard: 

Written responses to questions for the record submitted by Representatives Garrett, Hinojosa, Stivers, Murphy, and Williams ........................... 87 

(1) 

THE SEMI-ANNUAL REPORT OF 

THE BUREAU OF CONSUMER 

FINANCIAL PROTECTION 

Tuesday, September 29, 2015 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10:07 a.m., in room 

2128, Rayburn House Office Building, Hon. Jeb Hensarling [chairman of the committee] presiding. 

Members present: Representatives Hensarling, Royce, Lucas, 

Garrett, Neugebauer, Pearce, Posey, Fitzpatrick, Luetkemeyer, 

Huizenga, Duffy, Hurt, Fincher, Stutzman, Mulvaney, Hultgren, 

Ross, Pittenger, Wagner, Barr, Rothfus, Messer, Schweikert, 

Guinta, Tipton, Williams, Poliquin, Love, Hill, Emmer; Waters, 

Maloney, Velazquez, Sherman, Meeks, Capuano, Hinojosa, Clay, 

Scott, Green, Cleaver, Ellison, Perlmutter, Himes, Carney, Sewell, 

Foster, Kildee, Delaney, Sinema, Beatty, Heck, and Vargas. 

Chairman HENSARLING. The Committee on Financial Services 

will come to order. 

Without objection, the Chair is authorized to declare a recess of 

the committee at any time. 

Today’s hearing is entitled, ‘‘The Semi-Annual Report of the Bureau of Consumer Financial Protection.’’ 

I now recognize myself for 3 minutes to give an opening statement. 

Today, the committee holds a hearing again on the semi-annual 

report of the Consumer Financial Protection Bureau (CFPB), a creation of the Dodd-Frank Act. The committee recently concluded a 

series of hearings to examine the impact of the Dodd-Frank Act in 

the 5 years since it became law. The hearings clearly reveal how 

the law in numerous ways has indeed harmed consumers and lowincome Americans. 

Dodd-Frank and the CFPB are the prime reason that the big 

banks are now bigger and the small banks are now fewer. This has 

eliminated competition, stifled innovation, and given consumers 

fewer choices. 

Dodd-Frank and the CFPB help raise prices; eliminate free 

checking for millions; and are cutting off access to mortgages, bank 

accounts, and credit cards. This tragically makes it harder for lowincome Americans living paycheck to paycheck to improve their 

lives and achieve financial independence. 

2 

Regrettably, still more harmful consequences appear just over 

the horizon. Soon Director Cordray, one man neither elected nor accountable to either the President or Congress, will presume to decide for all low-income Americans whether he will allow them to 

take out short-term small-dollar loans. These are the very loans 

many need to keep their utilities from being cut off suddenly or to 

keep their car on the road so they can in turn keep their jobs. One 

man will decide whether he will permit Americans to resolve contract disputes more efficiently outside the courts or allow the regulatory capture of his Bureau by wealthy and litigious trial attorneys. And the Director, one man, violating the express provisions 

of the Dodd-Frank Act and using junk science, will continue forcing 

many consumers to pay more when they finance the purchase of an 

automobile. 

Why have so many zealous defenders of the Dodd-Frank Act suddenly turned silent? 

Now, my problem is not with this one man, but with the insidious belief among Washington elites that low-income Americans 

cannot be trusted with freedom, cannot be trusted to make good decisions for themselves, so Washington must do it for them. It is insulting. It is degrading and an affront to social justice. Every 

American, regardless of which side of the tracks they grew up on, 

regardless of who their parents are, regardless of how humble their 

circumstances may be, has the right to shape their own financial 

destiny. But today they find themselves at the mercy of an arrogant, overgrown, distant, and unaccountable Washington bureaucracy. Instead of the equal protection offered by the impartial rule 

of law, they are today dictated to by the arbitrary rule of regulators. And exhibit No. 1 is the CFPB Director. 

I was struck at our last hearing by the Democrat witness’ description of the CFPB as the Dodd-Frank Act’s crown jewel. Herein 

lies the problem: In America, we don’t want crowns, because we 

don’t want kings, including a king of consumer financial products. 

Freedom, opportunity, and choice allow consumers to pursue their 

dreams and achieve financial independence. If Congress is to protect the fundamental rights and opportunities of all Americans, including low-income Americans, then one essential step we must 

take is to reform the CFPB. 

I now yield 4 minutes to the ranking member for an opening 

statement. 

Ms. WATERS. Thank you, Mr. Chairman. 

And I am pleased to welcome you back to the committee, Director 

Cordray. We gather to discuss the Consumer Financial Protection 

Bureau’s semi-annual report, which reflects your diligent work to 

protect American consumers and establish clear rules of the road 

to improve our financial marketplace. 

Director Cordray, first and foremost, I want to take the time to 

commend your efforts to return hard-earned money to the families 

who rightly earned it, specifically with the $11 billion of ill-gotten 

gains you have returned to 25 million Americans. This is no small 

feat, and I applaud you for it. Likewise, I want to commend your 

agency’s work to end the sorts of unfair, deceptive, and abusive 

practices that nearly brought our economy to its knees 7 years ago 

and that continue to strip wealth from American families. This inVerDate Nov 24 2008 18:50 Feb 08, 2017 Jkt 099731 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 K:\DOCS\99731.TXT TERI
3 

cludes your work to implement payday rules free of debt traps; to 

establish debt-collection guidelines that promote honest settlements 

and block bad actors; and to ensure that borrowers have access to 

fair, responsible, and sustainable mortgage credit. 

I also want to commend you on your recent enforcement action 

against a bank for redlining. I know many people think these types 

of ugly policies are a thing of the past. But this recent enforcement 

action demonstrates how badly your agency is needed. 

As you state in your report, the CFPB has also taken steps to 

empower the American public, launching consumer resources specifically tailored for college students, older Americans, and people 

preparing for home ownership, not to mention the nearly half a 

million consumer complaints you have processed through your own 

online portal. 

It is unfortunate, however, that rather than working to encourage good behavior in our markets and support American consumers, opponents on this committee continue to promote measures to eliminate or weaken the Bureau. They have perpetuated 

false narratives of an agency that is unaccountable and lacks transparency, despite the record number of times you yourself have 

made yourself available to Congress, and the many checks and balances on the Bureau contained in Dodd-Frank. And they continue 

to support and amplify industry challenges to the CFPB’s constitutionality in court with little or no success. 

So what we are seeing now that the CFPB has celebrated its 

fourth birthday is that the dire predictions of the Republicans on 

this committee have not come true. For example, we have actually 

seen an increase in the share of mortgages made to African-American and Hispanic borrowers since your qualified mortgage rule 

was put in place in 2014. 

After several years of decline, data shows that access to consumer credit cards is expanding even for low FICO score borrowers. 

At the same time, the defaults on credit are declining. And one analyst has noted that for all the talk about the death of free checking, nothing could be further from the truth. These are all important facts that bear repeating. 

Finally, just last week we had the Holy Father Pope Francis 

come to a joint session of Congress and deliver an historic address. 

In his remarks, he encouraged us lawmakers to ‘‘keep in mind all 

of those people who are trapped in a cycle of poverty.’’ 

Director Cordray, I believe your work and the work of the Bureau lives up to the promise of a better economy, one that serves 

working people and fulfills the American promise of opportunity. I 

look forward to hearing your testimony today. 

And I will yield back the balance of my time. 

Chairman HENSARLING. The gentlelady yields back. 

The Chair now recognizes the gentleman from Texas, Mr. Neugebauer, chairman of our Financial Institutions Subcommittee, for 2 

minutes. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. Since its creation 

5 years ago, the CFPB has aggressively pursued a rulemaking and 

enforcement agenda which has really dramatically changed the 

consumer marketplace. While prudential banking regulators were 

widely criticized for falling down on the job in the runup of the fiVerDate Nov 24 2008 18:50 Feb 08, 2017 Jkt 099731 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\99731.TXT TERI
4 

nancial crisis, the CFPB has not only consolidated consumer protection laws into one agency but has dramatically expanded their 

scope. As a result, it is not only necessary but healthy to have serious policy discussions about the proper balance and calibration of 

these new and pending regulations. 

Today, I look forward to hearing from Director Cordray about 

two forthcoming rulemakings. First, the CFPB has announced 

plans to move forward with rulemaking that will completely alter 

an offering of short-term small-dollar products. The rule will entirely disrupt the robust State-based regulatory framework of this 

marketplace. In doing so, the Bureau has paid little attention to 

the existing authority and past legislative actions by States across 

the country. Additionally, the Bureau has failed to identify alternative products for the segment of customers or consumers who 

will lose access to credit. This is particularly disappointing given 

the demonstrated high demand and usage for these products. 

Second, it is widely expected that the Bureau will move forward 

to prohibit predispute mandatory arbitration clauses. These clauses 

are a form of alternative dispute resolution that produce a faster 

and more cost-effective legal avenue as compared to class action 

suits for many consumers. I am concerned that the Bureau will fail 

to give weight to the pro-consumer features of arbitration agreements which were outlined in the Bureau’s own study. For example, the study demonstrates consumer recovery under arbitration is 

166 times greater than under class actions. I look forward to learning more about how the Bureau plans to balance the identifiable 

benefits of these clauses with the theoretical costs associated with 

their use. 

While I know my colleagues and I disagree on certain policy positions and actions of the Bureau, I hope that today we can foster 

a forward-looking dialogue that truly examines how this agency 

balances consumer protection and access and cost. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Connecticut, Mr. 

Himes, for 1 minute. 

Mr. HIMES. Thank you, Mr. Chairman. 

And I thank you, Director, for joining us today. 

I find myself on either side of the regulatory debate from time 

to time because I believe that regulation should be there but that 

it should be finely and carefully balanced. I find myself puzzled by 

the incessant attacks on you and on your agency. Look, derivatives, 

securitization, margin rules, these things are complicated and difficult to fully understand. But the kinds of predatory and inappropriate behavior that the CFPB has countered over the years are 

not difficult to understand and not difficult to see. I thank you for 

the fact that the CFPB has returned $11 billion to 25 million consumers. 

Director, I thank you for making the obvious point, if you have 

studied any economics, that there is no such thing as free checking, 

that there are products that look free but that get paid for through 

less transparent and less visible mechanisms. And I thank you, 

frankly, for the work that your agency is doing in my district. In 

leafy Fairfield County, a bank of $35 billion in assets stands accused of redlining, something that I would have hoped we would 

5 

have seen the end of long, long ago. So know that you have supporters and friends here in the Congress, and I hope that your mission continues in keeping the American people safe. 

I yield back the balance of my time. 

Chairman HENSARLING. The time of the gentleman has expired. 

Today, we welcome the testimony of the Honorable Richard 

Cordray, Director of the CFPB. Director Cordray has previously 

testified before this committee, so I believe he needs no further introduction. 

Director Cordray, without objection, your full written statement 

will be made a part of the record. You are now recognized for 5 

minutes to give an oral presentation of your testimony. Thank you. 

Chairman HENSARLING. Your microphone— 

Mr. CORDRAY. Yes. It has been a little while since I have been 

in this room, but I should have remembered that. 

Chairman HENSARLING. We can arrange more appearances. 

STATEMENT OF THE HONORABLE RICHARD CORDRAY, 

DIRECTOR, CONSUMER FINANCIAL PROTECTION BUREAU 

Mr. CORDRAY. Thank you, Chairman Hensarling, Ranking Member Waters, and members of the committee. Thank you for the opportunity to testify today about the Consumer Financial Protection 

Bureau’s latest semi-annual report to Congress. To frame it as you 

did, Mr. Chairman, I am one person who will not be silent about 

the work and importance of what I believe the Consumer Bureau 

to be doing on behalf of the American public in promoting and improving the choices in life for American consumers. 

This July marks 5 years since the passage of the financial reform 

law. As you know, Congress created the Bureau in response to the 

financial crisis with the purpose and sole focus of protecting consumers in the financial marketplace. Through fair rules, consistent 

oversight, appropriate enforcement of the law, and broad-based 

consumer engagement, the Consumer Bureau is working to restore 

people’s trust and confidence in the markets they use for everyday 

financial products and services. 

As we continue our work, consumer financial markets are showing increasing signs of health. This is very important because, Mr. 

Chairman, you in your introduction and other speeches, and others 

have said that the Bureau is cutting off access to credit for the 

American public. The facts do not bear that out. For example, the 

latest HMDA data released by Federal agencies last week showed 

increasing numbers of consumers are taking out home purchase 

mortgages. In 2014, the first year of our new mortgage rules, mortgage originations for owner-occupied home purchases increased between 4 and 5 percent. The upward trend appears to have accelerated over the first half of this year. After adjusting for merger activity, the number of lenders that reported having originated mortgages showed an increase in 2014, including for community banks 

and credit unions. Those are the facts. 

Other consumer credit markets also show encouraging signs of 

expanding access to credit. In the first half of this year, over 14 

million consumers obtained new auto loans, up 8 percent over the 

prior year. For auto loans, this marks a 45-percent increase since 

2011, and a 9-year high since the Dodd-Frank Act took effect. SimiVerDate Nov 24 2008 18:50 Feb 08, 2017 Jkt 099731 PO 00000 Frm 00009 Fmt 6633 Sfmt 6633 K:\DOCS\99731.TXT TERI
6 

larly, 54 million new consumer credit card accounts were opened in 

the first half of 2015, which is 12 percent more than in the same 

period last year and 48 percent higher than the same period of 

2011, just after Dodd-Frank took effect. 

At the same time, the percent of loan balances that are seriously 

delinquent dropped below 4 percent last quarter for the first time 

since 2007 and down from 7 percent 4 years ago, just after DoddFrank took effect. 

Equally heartening is the strength being exhibited by community 

banks and credit unions. Last quarter, lending by community 

banks grew by 8.8 percent compared to the prior year, growing at 

almost twice the rate of noncommunity larger banks. 

Credit union lending grew at an even faster pace, and credit 

union membership over the past year grew at the fastest rate in 

over 20 years. 

These are all positive trends for the consumer financial marketplace, which are very much aligned with the Bureau’s mission. I 

hope, based on the facts, we can decide it is time that we could all 

be friends in this particular space. 

The Bureau helps consumer financial markets work by making 

rules more effective, by consistently enforcing those rules, and by 

empowering consumers to take more control over their economic 

lives. 

To date, our enforcement activity has resulted in more than $11 

billion in relief for over 25 million consumers who have been 

wronged by violations of the law. 

We have handled over 700,000 complaints from consumers addressing all manner of financial products and services. Many of 

these consumers are constituents from each of your States. 

As with the letters you receive from your constituents, the customer complaints submitted to the Bureau raise issues of serious 

concern. Along with our enforcement, supervisory rulemaking, and 

market monitoring activity, these complaints and the voices of consumers are important to the Bureau. Our work is focused on ensuring that the markets for all consumer financial products and services are marked by responsible practices that help rather than 

harm consumers. 

In the most recent semi-annual report, we describe our efforts to 

achieve our vital mission. We describe various enforcement actions 

taken by the Bureau. We worked with the Department of Education to obtain $480 million in debt relief to student loan borrowers who were wronged by Corinthian Colleges. We also issued 

a final rule to reduce burdens on industry by promoting more effective privacy disclosures from financial institutions to their customers. We issued a Notice of Proposed Rulemaking to provide 

strong new Federal consumer protections for prepaid accounts, 

which currently have none, and a proposal to clarify various provisions of our mortgage servicing rules. 

We are in the process of developing new rules governing payday, 

vehicle title, and certain installment loans, and we recently finalized changes to some of our mortgage rules to facilities even broader mortgage lending by small creditors, including community banks 

and credit unions, particularly in rural or underserved areas. 

7 

As a data-driven institution, we published several reports 

through the reporting period that highlight important topics in consumer finance such as medical debt, arbitration agreements, reverse mortgages, and consumer perspectives on credit scores and 

credit reports. 

In the year to come, we look forward to continuing to fulfill Congress’ vision of an agency that is dedicated to cultivating a consumer financial marketplace based on transparency, responsible 

practice, sound innovation, and excellent customer service, where 

consumers can be both more prosperous and more free to make 

choices that improve life for themselves and their families. 

Thank you for the opportunity to testify today. I look forward to 

your questions. 

[The prepared statement of Director Cordray can be found on 

page 74 of the appendix.] 

Chairman HENSARLING. The Chair now recognizes himself for 5 

minutes for questioning. 

Director Cordray, recently there has been an expose by the 

American Banker, 3 articles dealing with indirect auto lending over 

the last 2 weeks. Are you familiar with these articles, and have you 

reviewed them? 

Mr. CORDRAY. I am, yes. I have had a chance to read them at 

least— 

Chairman HENSARLING. The American Banker claims it has multiple internal CFPB documents showing that your disparate impact 

analysis overstates disparities, and in fact the title of their first article is, ‘‘CFPB Overestimates Potential Discrimination, Documents 

Show.’’ Do such internal documents exist, which indicate that the 

CFPB may be overestimating such racial disparities? 

Mr. CORDRAY. I don’t believe that is an accurate account of what 

the discussion and careful analysis of this issue has been. 

Chairman HENSARLING. Specifically, is there a document from 

Patrice Ficklin, Assistant Director of the Office of Fair Lending, 

dated April 2013, where she says, ‘‘There may be some risk of overestimating disparities?’’ Are you familiar with such a memo? 

Mr. CORDRAY. I will try to be persistent in answering your questions. I started to answer the last one and you cut me off, so I 

didn’t get a chance to finish. Shall I finish? 

Chairman HENSARLING. I don’t think you were actually—you answered the question. You do not agree with that assessment. So 

now I have moved on to a different question. Are you— 

Mr. CORDRAY. No, no, that is not what I said, and that is not my 

answer. So I will try to answer your questions, but if you are going 

to cut me off in the middle, it is difficult. What I will say is, there 

have been robust discussions within the Bureau as to how to approach these methodologies. There have also been robust discussions from outside the Bureau, including from this committee, in 

terms of checking— 

Chairman HENSARLING. Director Cordray, I have a limited 

amount of time here, so I am asking a different question now. Are 

you familiar with the memo that I just referenced from Patrice 

Ficklin? 

Mr. CORDRAY. I believe that I am roughly familiar with various 

memos that I have seen. Yes. 

8 

Chairman HENSARLING. Okay. Are there any memos that you are 

aware of at the CFPB which indicate that you are overestimating 

such racial disparities? 

Mr. CORDRAY. What I will say again is there have been various 

efforts and discussions to try to make sure that the estimation is 

as correct and accurate as possible. 

Chairman HENSARLING. Let’s be— 

Mr. CORDRAY. There are various methodologies that might cause 

it to be overestimated, and some that might cause it to be underestimated. 

Chairman HENSARLING. Director Cordray, I get to control the 

time here. 

So you employ a proxy known as BISG, correct? 

Mr. CORDRAY. I believe that is correct, sir. 

Chairman HENSARLING. Are you aware of any other proxy methods for estimating racial disparities that are more accurate than 

BISG? 

Mr. CORDRAY. I don’t believe that we are trying to find anything 

other than the most accurate method we can. There have been different approaches to this over the years— 

Chairman HENSARLING. So you are unaware of other more accurate proxies? 

Mr. CORDRAY. ‘‘Accurate’’ is in the eye of the beholder. We are 

trying to get it right. We are trying to understand what ‘‘accurate’’ 

means. But if some people— 

Chairman HENSARLING. Okay. So in your opinion— 

Mr. CORDRAY. They would say it is more— 

Chairman HENSARLING. —the CFPB is using the most accurate 

proxy method available? 

Mr. CORDRAY. We are certainly trying hard to do that, and I believe we are trying to do that, yes. 

Chairman HENSARLING. Has the Bureau ever evaluated how your 

proxy method estimates race by comparing it to data where race 

is actually known? For example, HMDA data, have you ever performed such an analysis? Are you aware of any such analysis? 

Mr. CORDRAY. That is something that has been a bone of contention from the beginning, both in our discussions and with external 

parties. There is a desire to compare auto lending to mortgage 

lending and say they are the same thing, but the pool of borrowers 

is quite different— 

Chairman HENSARLING. I understand that, but are you aware of 

any such analysis that has actual racial characteristics as opposed 

to purported? 

Mr. CORDRAY. Again, HMDA data can pinpoint all of these characteristics too. 

Chairman HENSARLING. I am just asking, Mr. Director, are you 

aware of such an analysis, yes or no? 

Mr. CORDRAY. I believe there have been multiple analyses by 

many different people of that comparison. 

Chairman HENSARLING. You consider it an invalid analysis, but 

isn’t it true that the CFPB has an analysis showing that its own 

proxy method has overestimated African Americans by almost 100 

percent? 

9 

Mr. CORDRAY. You are mixing apples and oranges. Mortgage borrowers are one set of the population. Auto borrowers are a very different set of— 

Chairman HENSARLING. They are either a member of a racial minority or they are not a member. We are comparing actual data to 

your purported data. 

Mr. CORDRAY. You are also comparing two distinct markets with 

different universes. 

Chairman HENSARLING. I know, but Mr. Director, you did the 

same thing when you compared auto lending to the general population, did you not? 

Mr. CORDRAY. That is correct. Both of us try to make that comparison and try to get it right. We may disagree about whether we 

are getting it right, but we are trying hard to do that. 

Chairman HENSARLING. Has the Bureau at least— 

Mr. CORDRAY. You hit the nub of the issue, though— 

Chairman HENSARLING. Has the Bureau at least controlled for 

other factors like creditworthiness? Do you control for credit scores? 

Mr. CORDRAY. We attempt to control for all of the variables that 

have nothing to do with prohibited characteristics, such as race— 

Chairman HENSARLING. Including credit scores. 

Mr. CORDRAY. Again, it depends on the analysis, and there are 

different approaches to this, and some people would say certain 

ones are more accurate than others. We have done our best to try 

to understand— 

Chairman HENSARLING. Isn’t it true that credit scores could account for some, if not all, of the disparities that you have observed 

under current law as deigned by the Supreme Court? Don’t we 

have to look at causation? 

Mr. CORDRAY. I don’t think that it is fair to say—again, I am not 

the biggest expert on this at the Bureau or in the social science 

field—I don’t think it is fair to say that credit scores can explain 

the disparities. 

However, that is a relevant point. Creditworthiness in other 

measures is a relevant point. But, again, the nub of the issue, 

which you have hit upon, Mr. Chairman, is whether it is fair to 

simply compare mortgage borrowers to auto borrowers and say that 

they are comparable. We think they are not. That has been a basic 

difference between us and the Charles River report, for example. 

Chairman HENSARLING. My time has expired. 

The Chair now recognizes the ranking member of the committee. 

Ms. WATERS. Thank you very much. Mr. Cordray, I want to 

thank you and commend you for the settlement that was announced with Hudson City Bank for structuring its businesses so 

as to avoid majority Black and Hispanic neighborhoods. This is a 

well-known practice to those of us who pay attention to minority 

access to credit. 

And I was very surprised, as Mr. Himes said, at the attempt to 

go back to redlining. This was a very important settlement that 

you were able to enforce. And, unfortunately, it appears that Hudson City didn’t consider any of these majority minority neighborhoods to be a part of their CRA assessment area. And I suppose 

we are going to have to be on the lookout for other institutions that 

are going to attempt to do this. 

10 

But really today should be a time of celebration. You have done 

some extraordinary things with this Bureau. And as I look at just 

a few of them—and you mentioned that you stopped an illegal kickback scheme for marketing services which resulted in $11.1 million 

in redress for wronged consumers. You also worked with the Department of Education to obtain $480 million in debt relief to student loan borrowers who were wronged by Corinthian Colleges, a 

for-profit chain of colleges that violated the law and has since declared bankruptcy. I want to give you an opportunity to just discuss some of this. Prior to the creation of the Consumer Financial 

Protection Bureau, consumers literally had little or no protection in 

this government. And you have moved in ways that have benefited 

our consumers in such a grand way. Tell us about this 11.1 or Corinthian or what you have done with student loans. Expand on that 

for us. 

Mr. CORDRAY. Okay. Thank you, Ranking Member Waters. 

On the Corinthian matter, I will say that I was impressed, surprised, and pleased at the work done by our team, which was some 

of the most diligent and creative work I have seen during my time 

at the Consumer Bureau, where they were pressing to get debt relief for students. We had sued Corinthian, and we were in court 

with them. They had sold a lot of debt out from under the lawsuit 

so it couldn’t necessarily be reached by the lawsuit itself, and it 

was a tremendous amount of work by our folks, who were ultimately able to secure $480 million in relief for current and former 

students. That was one of the most impressive things I have seen 

during my time at the Bureau. 

On the marketing service agreements that you mentioned, that 

matter, which was the $11 million matter, we have found over our 

experience over the last several years that marketing service agreements carry a great deal of legal risk for the participants that may 

not have been fully recognized by people in the industry. It is very 

difficult to have such agreements and have them be effectuated and 

monitor them carefully so that they are compliant with the law. 

That has been a source of concern for us. That was an enforcement 

action, a major enforcement action. We continue to look carefully 

at that problem, and it is something that really needs to be cleaned 

up. It is something we will continue to attend to. 

On the redlining matter that you just mentioned, I was surprised 

as well. There is such good and detailed Home Mortgage Disclosure 

Act (HMDA) data out there now that every bank and every lender 

should know that if they are redlining, it is going to be apparent 

from the data. And I would have thought that we would have 

stamped that out a long time ago. We apparently haven’t. The Justice Department, which works with us on these matters, has indicated that they have more matters open on the issue. So we will 

see where that goes. Obviously, nobody here, nobody on either side 

of the aisle, nobody in this room believes that people should be deprived of access to mortgages and other credit simply because they 

live in areas that have a high concentration of minority residents. 

That is un-American. It is not right. And we will continue, wherever we see that, to work that problem very hard. I know everybody in this room agrees on that. 

11 

Ms. WATERS. I want to thank you so much for that. I was in the 

State legislature when redlining was absolutely something that 

was being done all over this country. And I thought we had worked 

in ways that would wipe that out, but to see it coming back means 

that not only are we going to have to catch those who are doing 

it, what can we do to try and prevent it from happening? What can 

we do as public policymakers? 

Mr. CORDRAY. I think the deterrent effect of an action like this 

is very important. I like to think and hope it will prove to be an 

aberration, but the data is very good on this issue. And it is something we can monitor carefully, and we are very attentive to the 

problem, maybe more so than might have been true in the past, for 

all I know. 

Ms. WATERS. I want to thank you. 

And on Corinthian, we have been working to try and get rid of 

Corinthian for years. They have been ripping off our students, who 

were looking for just an opportunity to learn and to get a job. And 

we finally got them, and there are a lot more out there like them. 

And I thank you for your work. 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the gentleman from Texas, Mr. Neugebauer, chairman of our Financial Institutions Subcommittee. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

Director Cordray, Section 1028 of Dodd-Frank grants the CFPB 

authority to conduct a study of predispute arbitration. Depending 

on your findings of the study, the Bureau may prohibit or limit the 

use of arbitration’s rulemaking, or it may choose not to act. I think, 

in March, the Bureau finalized its study, and in testimony before 

the Senate Banking Committee in July, I think you stated the Bureau would move forward with the rulemaking process. I would like 

to get into kind of the nitty-gritty of this issue with you a little bit. 

The statute says that the findings of the report must lead to a 

conclusion that it would be in the public interest or protect consumers to move forward with a rule. But your report found that 

customers who prevailed in arbitration recovered an average of 

$5,300 compared to $32.35 obtained by the average class action 

member in class action settlements. Can you walk me through how 

prohibiting arbitration is better when you look at those kinds of 

numbers? 

Mr. CORDRAY. Yes. And I like to try to make eye contact when 

we are talking back and forth. 

On the arbitration issue, it is, as you said it, in our statute. What 

is notable is, first of all, in the Military Lending Act of 2007, Congress enacted a statute to protect servicemembers, which said that 

there should be no enforced predispute arbitration in any financial 

service contracts to military servicemembers, Active Duty. That 

was the first sort of walk-back in this area. 

In the Dodd-Frank Act itself, Congress outlawed predispute enforced arbitration agreements in mortgages. They further mandated, as you correctly and accurately framed it, that on all other 

consumer financial products and services, the Bureau would conduct a study, which we tried to do in a very careful, thorough way. 

It took us several years to gather the data, put it together, and its 

analysis that even its critics have said it is the most comprehensive 

12 

treatment of this issue they have ever seen and very complimentary about the approach to it, even though they may disagree with 

some of the conclusions. And I take it perhaps you do as well. Once 

we had finished the study, we were to report that to Congress, 

which we did earlier this year, and then we were to try to make 

judgments from that report about whether we should adopt regulations affecting those clauses in any way. That is something we are 

now moving forward with. 

Mr. NEUGEBAUER. But in Section 1028, there was not a mandate 

that you do that. It was Congress who gave you the authority to 

study and to come up with your own determination. 

Mr. CORDRAY. It was a mandate for us to diagnosis the problem 

and an authorization for us to act on that diagnosis. That is fair. 

Mr. NEUGEBAUER. Now, your study looked at 562 class action 

cases. In 92 percent of those class actions, arbitration was not even 

a factor, and this presented no barrier to moving into a class action 

suit. So can you explain how your study supports the position that 

arbitration is a barrier to class action suits? 

Mr. CORDRAY. I hate to try to boil down the conclusions of a pretty exhaustive study into just a couple of sentences. Essentially 

what we found was that the arbitrations were rarely pursued by 

individual consumers because the nature of consumer financial 

issues and concerns is that there is often very little money at stake 

for the individual, although in the aggregate for the financial institution there may be a great deal of profit to be had from a particular practice. We did a close comparison of class action suits 

such as exist in the area—many of which have been cut off because 

of these arbitration agreements, but some of them still exist—and 

arbitrations. And we found that in terms of preventing and cleaning up violations of law and getting redress to consumers, you 

could compare for yourself the numbers. You could draw your own 

conclusions. We are now trying to move forward and figure out 

what is the appropriate rulemaking answer to that. That is a process which will unfold. 

Mr. NEUGEBAUER. One of the things that the Bureau has committed to is a pretty aggressive educational process of educating 

consumers on the choices that they have. What kind of resources 

has the Bureau dedicated to educating consumers about arbitration 

and the pros and cons of arbitration? Have you done any education 

in that direction? 

Mr. CORDRAY. I would actually say that the first question is, 

what kind of education has industry done who have enforced these 

clauses over the years to encourage people to pursue individual arbitrations? I don’t know that there has been any educational effort 

by industry over decades. As to what we have done over the last 

several years, first of all, we wouldn’t have engaged in some aggressive education program during a period in which we were 

studying the problem and trying to diagnosis it. We obviously needed to try to understand it first. And, again, we took several years 

to gather data, put it together. Even the critics of the study have 

recognized this is the most comprehensive, fullest treatment they 

have seen, and it breaks new ground. 

Now having accomplished that, we will go through a rulemaking 

process where it will be open, notice and comment, lots of people 

13 

will have points of view. I am clear on that. We will have a chance 

to process all of that. That is how we will try to proceed. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentlelady from New York, Ms. 

Velazquez. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. 

Director Cordray, I would like to thank you for your response to 

our letter regarding implementation of Section 1071 of the DoddFrank Act. As you know, 1071 requires banks and lenders to collect 

and report credit application data on small businesses as well as 

minority- and women-owned businesses. Can you please elaborate 

on some of the groundwork you have done to prepare for the rulemaking on Section 1071? 

Mr. CORDRAY. Yes, I can. And I have appreciated—I have gotten 

quite a bit of input on this issue in particular over the last number 

of months from Members of Congress and also from community 

groups around the country. 

What we have always said here is this is an undertaking that 

under the Dodd-Frank Act was placed with the Consumer Bureau. 

It is a somewhat unusual undertaking because it involves smallbusiness lending, not consumer lending. And we don’t—we otherwise have very little authority over small-business lending. We do 

have an amount of—a little window of authority under the Equal 

Credit Opportunity Act, and we have indicated we are going to 

begin some examinations of institutions on their small-business 

lending within the next year. 

We also said we had another job that Congress gave us to do, a 

mandatory job, which is to first, overhaul the Home Mortgage Disclosure Act rules, and second, to take on another job of bringing 

over from the Federal Reserve the operational, technological aspects of gathering that data, collecting it, and being able to make 

it accessible to people, which will allow us to update the technology 

and make that information better, cleaner, and easier for everyone 

to use so that when the ranking member asked me about the redlining case, everyone will be able to see the data and diagnosis it 

for themselves. That is good transparency that will help make sure 

that we can enforce and monitor these types of things. As we are 

completing that rulemaking, which I expect to be completed before 

the end of the calendar year, we have then always said that we can 

move forward with 1071—that is a section of the Dodd-Frank Act— 

small-business lending project, which is intended—it requires us 

now—to adopt a rule and then figure out all the technical and 

operational details of gathering data on small-business lending 

akin to how we have done it for mortgage lending. 

Having done as much work as we have done on the HMDA 

project, both operationally and then rulemaking, we can now turn 

to the small-business lending and work on the rule. I think it will 

take some time. We have to—we are going to be reaching out to 

the Small Business Administration, people at the State level, any 

of you who are interested in trying to understand how we would 

do a new data collection for small-business lending, how to try to 

minimize the burdens of that and how to accomplish the benefits 

of it. 

14 

Ms. VELAZQUEZ. Thank you. As a follow up to my last question, 

we have heard critics of Section 1071 saying that the costs will outweigh any benefit the data collected will provide. In light of the recent enforcement action against Hudson City Bank for discriminatory redlining practices against Black and Hispanic neighborhoods, 

I would agree the benefits of Section 1071 to minority small-business borrowers will justify any monetary cost to a financial sector. 

Would you agree with that? 

Mr. CORDRAY. It is obviously something very hard to judge at the 

outside of a project, but I will say that I have heard from a number 

of groups who have spoken powerfully and eloquently to this issue. 

What they have said to me is for the average middle class and 

working class family—people trying to rise, and it is true of many 

communities of color—their wealth building happens to occur 

through home ownership, which was devastated by the financial 

crisis and through small-business creation. That is often a big engine of growth and economic development for new families in this 

country and for communities of color, who are otherwise maybe 

shut out of other traditional networks. For those reasons, the small 

business lending seems to me to go hand in hand with the mortgage lending data collection. And it seems to me to be a very powerful way for us to try to understand how we can create more economic opportunity in communities of color and for minorities 

around this country. That makes a great deal of sense to me. 

Ms. VELAZQUEZ. Thank you. And last I would like to mention to 

you or, yes, to make a comment regarding the fact that American 

citizens of Puerto Rico who invest in mutual funds are not covered 

by the Investment Company Act of 1940. This leaves them without 

the safeguards that those on the mainland have. Do you think this 

is fair? 

Mr. CORDRAY. I don’t know that I know enough to answer that 

question. I’m sorry. I would be glad to go back and have our folks 

look at it— 

Ms. VELAZQUEZ. I introduced legislation to close this loophole, 

H.R. 3670, and I would like for you to take a look into this issue 

that is really disrupting the lives of Puerto Ricans, American citizens. Thank you. 

Mr. CORDRAY. Okay. 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the gentleman from New Jersey, Mr. 

Garrett, chairman of our Capital Markets Subcommittee. 

Mr. GARRETT. I thank the chairman. And I thank the Director for 

being here. 

I might just take a little different tack on this. You talk about 

the mandate you had on the mortgages in that area. Okay. Good. 

You know, my dad always said to give credit where credit is due. 

You have talked a lot already here about what you are doing in the 

auto industry in the lending area. Those are the initial questions 

and some of your focus—and you are nodding your head. Some of 

the focus of what you are doing in some of the cases that are out 

there as far as what you have been able to recover for the claimed 

discrimination and that sort of thing that went on there. 

Why that is puzzling, though, to me is I was on the Dodd-Frank 

conference committee, and I was one who carried the amendment 

15 

that said that there would be an exclusion for activity within the 

jurisdiction of the CFPB dealing with the auto industry. And this 

is one that Chairman Frank accepted, and it was passed in a bipartisan manner, and it passed out of the House and the Senate and 

was signed into law to exclude that area of authority for you to do. 

Yet, you are nodding your head that you are proud of all the work 

you have done in that area. And that puzzles me. So, one of my 

questions is, it has been reported in that same article that the 

CFPB has been considering how to eliminate dealer reserves. So 

the first question along that line, is that something that you are 

doing, despite the fact that we have carved that exception there? 

Is that something you are doing? Yes or no? 

Mr. CORDRAY. I don’t really speak in terms of having pride in 

this or that. 

Mr. GARRETT. Okay. But I only have 31⁄2 minutes. Is that something you have done? Is that something you are doing, trying to 

eliminate dealer reserves? 

Mr. CORDRAY. I would start with what you said that the exception— 

Mr. GARRETT. Is that something that you are doing? Here is— 

Mr. CORDRAY. That is not the way it is worded. 

Mr. GARRETT. Director, I only have 3 minutes left. Let’s run 

down the questions. The question is: Are you working to eliminate 

dealer reserves? Yes or no? 

Mr. CORDRAY. We have been working to try to address a practice 

that we believe is discriminatory— 

Mr. GARRETT. So that is a yes. Is that a yes, please? Just answer 

the questions yes or no. 

Mr. CORDRAY. Not necessarily eliminate. We had an enforcement 

action yesterday in which it would limit dealer reserve but not 

eliminate it, and we think that may be a fair way to try to address 

the— 

Mr. GARRETT. So the answer is yes, you are doing that. And 

there was a memo back in May of 2013 which said the purpose of 

a meeting you had is to continue our discussion about a markettipping settlement that would resolve discriminatory disparities 

caused by auto dealers by markup by eliminating markup at major 

auto lenders. Is that something you are working on as well? 

Mr. CORDRAY. What we found is that it is a somewhat more complex problem than maybe we thought at first. It is, live and learn— 

Mr. GARRETT. So the answer to that question is ‘‘yes?’’ 

Mr. CORDRAY. No. The answer is, we started out thinking that 

the right answer to that concern— 

Mr. GARRETT. Is that in a general area that you are looking into? 

Is that a general area that you are looking into? That answer 

seems to be yes. 

Mr. CORDRAY. Yes. And I was trying to be more specific. 

Mr. GARRETT. I don’t have time for more specific. I am just—are 

you looking into it? 

Mr. CORDRAY. Yes. We are. 

Mr. GARRETT. What is the authority for you to do so? 

Mr. CORDRAY. We have authority in the statute. It doesn’t exempt the auto industry. It exempts auto dealers. It does not exVerDate Nov 24 2008 18:50 Feb 08, 2017 Jkt 099731 PO 00000 Frm 00019 Fmt 6633 Sfmt 6633 K:\DOCS\99731.TXT TERI
16 

empt auto lenders. We have a responsibility to address auto lenders— 

Mr. GARRETT. Whoa, whoa, whoa. What did you just say? It exempts the auto industry? 

Mr. CORDRAY. It does not. That is what you said in your opening. 

Mr. GARRETT. So it exempts the auto dealers? 

Mr. CORDRAY. It exempts auto dealers, but it gives us— 

Mr. GARRETT. So who are the ones— 

Mr. CORDRAY. —responsibility over auto lenders. 

Mr. GARRETT. —who are on the front line, who are actually making these loans? Isn’t it the auto dealers? 

Mr. CORDRAY. Look, Congress drew the statute. I didn’t draw it. 

I have to live with it. It exempts auto dealers but gives us responsibility over auto lenders. I am not sure that makes a lot of sense, 

but we are trying our best to observe the lines that Congress drew. 

Mr. GARRETT. But when you make these decisions, you are directly affecting the auto dealers. It is the auto dealer that I just 

went to in order to buy a car or not buy a car, right? And it is the 

auto dealer that people will be paying the interest rates that are 

affected by your actions, right? 

Mr. CORDRAY. The loan is made by an auto lender, and an auto 

lender controls their auto lending program. They decide whether 

they are going to deal through dealers or on their own or whatever 

they do. We have a responsibility over auto lenders. It is a funny 

provision in the statute. I am not sure it is very logical, but it is 

what we— 

Mr. GARRETT. Let’s see what the practical consequence are. And 

the studies have shown this to be true. By your actions, the interest rates that somebody who goes to an auto dealer, because that 

is where I go to buy a car, is an auto dealer, are actually going up 

because of the actions you are taking. Isn’t that correct? Isn’t that 

what some of the reports have shown? 

Mr. CORDRAY. Let’s make an analogy to the mortgage industry. 

Mr. GARRETT. No, no, no. We are on auto here. We are not talking about mortgage. The results of your actions are raising the cost 

of buying cars. It is making the interest rates go up. That is what 

the studies have shown. Correct? 

Mr. CORDRAY. What I would say is this, as we do our work, and 

we have a responsibility— 

Mr. GARRETT. I understand that. But is the result— 

Mr. CORDRAY. —to auto lenders. It does affect auto dealers. I 

would agree with you on that. That is why the logical provision is 

not— 

Mr. GARRETT. Sir, is the result of your action that it is costing 

more for people to buy cars now? Is that what the CFPB’s bottom 

line is? Because the results of one study— 

Mr. CORDRAY. There is disagreement about that. But if you are 

engaged in potential discrimination in a market and you cure that 

discrimination, and that discrimination has been cross-subsidized 

by the— 

Mr. GARRETT. At the end of the day, are the people who are most 

hurt by this the very same people that you claim to help, the people of that—the poor, and the middle class are the people who are 

actually paying the higher rate. Isn’t that true, sir? 

17 

Mr. CORDRAY. No. That is not true. 

Mr. GARRETT. That is what the studies seem to show. But I yield 

back. 

Mr. CORDRAY. No, that is not what it seems to show. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from California, Mr. 

Sherman. 

Mr. SHERMAN. Mr. Cordray, there is a lot of discussion as to 

whether your successor should be an individual or a commission. 

And, obviously, an individual is more efficient, makes decisions 

quicker, but when we have that efficiency, that means that your 

successor will be appointed by whomever the next President is, and 

then the next successor will be whomever, and we could swing very 

efficiently and extremely from the forces of light to the forces of 

darkness, and then back to the forces of light, which of course will 

make it pretty complex to transact business. 

Let’s imagine, God forbid, that your successor is your evil twin, 

just as capable as you but determined to undo every good thing 

that you have done or are about to do. How efficiently could that 

person, one person running your agency, replace all of the regulations that you will have in force by January of 2017 with new regulations that would be touted as good consumer protection but would 

in fact eliminate the lion’s share of the good that you plan to do 

in this your first term? How efficient could your evil twin be in 

undoing everything you have done or will do between now and January 2017? 

Mr. CORDRAY. It is theoretically possible, but it is not so easy to 

do. Once you have passed rules and regulations through a notice 

and comment process and they are protective of consumers and 

those start to become the lay of the land and institutions adjust to 

them, even though you might decide, I am going to undo all of 

those, it is a whole process to go through. You have to fight the opposition on that. You have to fight whatever evidence there is— 

Mr. SHERMAN. I would point out the opposition that you face is 

the industry. In this case the industry would be on the—that somebody moving the other direction would face less opposition than you 

have faced. 

Mr. CORDRAY. No, they might well face considerable opposition 

from the American public— 

Mr. SHERMAN. They might if the American public understood the 

details. As I said, I am positing that these replacement regulations 

would be billed as a major increase in consumer protection. But, 

obviously, it would be more efficient for your evil twin to do this 

if it was one person rather than a commission made up of both 

Democrats and Republicans, some of whom agreed with you, some 

of whom who didn’t. 

I want to move on to another— 

Mr. CORDRAY. Could I respond briefly to that? 

Mr. SHERMAN. No. Because I have to move on to the next question. 

Mr. CORDRAY. Okay. Fine. 

Mr. SHERMAN. You can respond for the record. 

TILA-RESPA, TRID, if you are building a new ship, you want 

some extra time to get the ship done, but no matter how long you 

18 

spend at the dock, you are really not done until you take it on a 

shakedown cruise. October 3rd begins the shakedown cruise, the 

chance to actually try out these regulations and see how they work. 

And it is going to be difficult. Now, you have given additional time 

for the ship to be built, but it still hasn’t been on a shakedown 

cruise, and in fact you have to—you can’t use the new regulations 

for September transactions, but we are closing in on October 3rd. 

Are you willing to announce a formal temporary 3-month hold 

harmless period for those who are making a good faith effort to 

comply with the 1,800 pages of regulations and are acting in good 

faith knowing that they have never used them before, although 

they have had enough time—they have had plenty of time at the 

dry dock? 

Mr. CORDRAY. Actually, all of this area was changed and overhauled in 2010 by the Department of Housing and Urban Development (HUD). Congress then legislated it be changed again by us. 

I am not sure that is the way you would have drawn it up if you 

had started from scratch, but they got through it in 2010. There 

is obviously lots of angst around it, and people are trying hard to 

make their systems work. We did give them more time, as you 

have said. You and I have had a chance to have back and forth on 

this a number of times. I have never quite fully understood your 

phrase ‘‘shakedown cruise,’’ but I think I have— 

Mr. SHERMAN. Well, a shakedown cruise is when you go out and 

you try to sail the ship the best you can, but you don’t get sued 

if the facilities don’t work. 

Mr. CORDRAY. So the nub of this, which I think is your biggest 

concern is, we have said and we are working now to provide written guidance on this, and we are working with the other agencies 

so that we all provide the same written guidance on this, that for 

a period—for some period of months, we are not going to be very 

specific about it. It might be longer. Right? There will be a diagnostic approach to this that is not—nobody believes that the market participants here are going to be trying to abuse consumers 

here. They are just going to be trying to change their systems and 

get it right. So it would be diagnostic and corrective, not punitive, 

and there will be time for them to work to get it right and not have 

to be perfect on the first day. 

Mr. SHERMAN. Will you be announcing something by October 

3rd? 

Mr. CORDRAY. I am pushing hard the see to it that it is out before October 3rd. I was hoping it was going to be out before today, 

but it is going to happen, and it is going to be along the lines of 

what you have asked for. I think it will be satisfactory. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Missouri, Mr. 

Luetkemeyer, chairman of our Housing and Insurance Subcommittee. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. And I want to 

just follow up on the gentleman from California’s remarks there. 

Mr. Cordray, you and I have had some discussions with regards 

to TRID and my concerns about it. And I committed to you that 

I was going to send a letter to all the associations representing people or industry folks who made mortgages and to let us know 

19 

whenever there were some sort of punitive actions that were out 

of line that was taken by your agency. And I want to let you know 

that letter goes out Thursday. So just to put you on notice that we 

are going to be watching. 

Mr. CORDRAY. That is great. I am actually glad to have you monitor this because it is my intention—this is how we handled the 

first set of mortgage rules, and I haven’t heard of any problems, 

and we are now 21 months in, but I am glad to have you monitor 

it because I want what you want, to make sure this is what actually happens. So I appreciate that. 

Mr. LUETKEMEYER. If you live up to your end of the bargain, this 

will all go away and we will all live happily ever after. 

Mr. CORDRAY. Okay. Fair enough. 

Mr. LUETKEMEYER. Thank you. 

With regards to—I want to follow up just for a second with regards to the gentleman from New Jersey’s remarks with regards to 

the relationship between the auto dealer and the lender. I think 

you just mentioned a minute ago that you came out these last few 

days with a recommendation to have a 1.5-percent spread between 

what the lender and the dealer have in their relationship. Is that 

correct? 

Mr. CORDRAY. There is a consent order that was entered yesterday that would have a one and a quarter differential for certain 

loans, and 1 percent differential for other loans depending on timeframe. 

Mr. LUETKEMEYER. It is very concerning to me. Number one, 

where is the authority to do that? And number two, why are you 

getting in the middle of the general competitiveness of the marketplace? 

Mr. CORDRAY. Why am I getting in the middle of what? 

Mr. LUETKEMEYER. It looks like you are price fixing to me. Why 

are you getting in the middle of a discussion between two entities 

that determine the risk of the loan between the two? Interest rates 

should be reflective of risk. They always have been. I am old 

enough to remember when we had usury rates. And a few years 

ago, we took them off. And now with this action it looks like we 

are putting them back in place because you are limiting the 

amount that people can make based—and you are taking all the 

other risk factors out, which that is the definition of interest. 

Mr. CORDRAY. This is not just a general philosophical thing that 

we are deciding to do because we have some ideology on this. This 

is a result of an enforcement action, an investigation by us and the 

Justice Department. We are not solo on this. We are working with 

the Justice Department. They have much more lengthy experience 

in these matters than us on investigation of potential discrimination. There was a back and forth with that entity and various other 

entities—there has been a number of them—in which it was determined that this was a reasonable result to address the problem and 

yet to allow the entity to move forward and continue to lend aggressively to customers. 

And as I said in my outset, auto lending is at some of its highest 

levels ever right now. This is not interfering with that. 

20 

Mr. LUETKEMEYER. Director, that is because the economy has 

come back and people can finally afford to have an automobile in 

their garage. 

Let me move on. It seems to me along that same line here, a 

while ago you said that you are a data-driven institution. 

Mr. CORDRAY. We try to do that, yes. 

Mr. LUETKEMEYER. I know in talking with one of my bankers last 

night, I called him and said: Listen, tell me what is going on with 

you and this disparate impact situation. And he is very concerned 

because whenever he was examined, basically the examiners looked 

at three things: loan to value; debt to income; and FICO score. And 

he was cited by the examiner for inappropriate loans. He had an 

outside accounting firm come in, and they came up with two reasons that he had this problem: Number one, he loaned to people 

outside the State; and number two, he loaned to very small auto 

dealers. If you take those two things out, he would have been in 

perfect compliance. 

Yet if that happens, now we are going to restrict the amount of 

dollars that are available, and you are going to lessen the competition. And in talking with him—you made the comment a while ago 

that there is plenty of access to credit out there. I can tell you that 

there are a number of banks that have already quit doing this and 

are looking to quit doing this. And when that happens, there will 

be less bidding going on for those dealer loans. And that means the 

rates will go up. 

Mr. CORDRAY. Could you help me a little bit? Is that a big bank 

or a small bank? 

Mr. LUETKEMEYER. It is a mid-sized bank. 

Mr. CORDRAY. Over $10 billion in assets? 

Mr. LUETKEMEYER. Yes. 

Mr. CORDRAY. I would love to hear more. I would like to know 

more. 

Mr. LUETKEMEYER. I would be glad to fill you in. I have 46 seconds. It is concerning to me, and I think that you need to be willing 

to look at other factors when you are modeling this and take those 

into account because I don’t think that is happening, and I think 

that is where a lot of problems begin. 

Just one more quick comment. I also had an entity who was a 

debt buyer come into my office recently, and they were fined for a 

word in their settlement agreement that you are proposing a rule 

in the future for. That made no sense to me. 

Mr. CORDRAY. I have heard that, and it doesn’t make sense to 

me either. I don’t really understand how we fine somebody for a 

word. I would love to hear more and understand that problem. 

When we investigate it—again, I am not sure which one it is. We 

have taken several actions against debt buyers who have engaged 

in some pretty predatory practices. And when we get into the details of it, you wouldn’t find them very appetizing either. 

Mr. LUETKEMEYER. They were fined for a word that was going 

to be noncompliant in the future with one of your rulings, and as 

a result— 

Mr. CORDRAY. Give us a chance to talk with your staff and understand that problem and see if we can clear that up. I would love 

to do that. 

21 

Mr. LUETKEMEYER. I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from New York, Mr. 

Meeks. 

Mr. MEEKS. First, I want to thank you, Mr. Cordray, for your 

leadership at the CFPB because, clearly, over the last 4 years, recovering approximately $11 billion in relief for over 25 million 

American consumers, that is tremendous, and the CFPB clearly is 

changing some of the most egregious behaviors from bad actors in 

our financial markets and helping consumers every day. And your 

leadership has been to that very same effort. 

And I think that you have a difficult job. The job is difficult because at the same time you are helping consumers, you are trying 

to figure out that balance to make sure people still have access to 

credit and they are not left out. 

And so there has been this conversation that we have had going 

on for a long time, and I come from my experience, especially when 

you deal with the short-term loans or payday loans or whatever, 

how do you balance that? How do you make sure that people have 

access to credit but are not being ripped off? For example, I think 

you came out with a report that said we have to get rid of these 

rollovers for folks who can’t afford them. But at the same time, 

from my background, knowing what I have seen, I want to put the 

loan sharks out of business. In the neighborhood that I grew up in, 

when banks turned folks down, there was harm done to folks because they didn’t have any other choice but to go to some of these 

loan sharks. 

So the question of harm and how do you—because I don’t think 

that—to get rid of the bad individuals—I don’t want to throw the 

baby out with the bath water—but I want to make sure that we 

can keep—because I have found some to be good business folks but 

others to be bad. You indicated that you were going to be looking 

at some of the State regulations and how they handled it to get rid 

of the good and the bad, et cetera. I was wondering if you could 

give us the benefit of your knowledge and whether or not you think 

you have gotten enough information from looking at some of the 

States as to how to properly maybe we can regulate this, because 

I am for regulating this industry, not necessarily getting rid of it 

but having some firm regulation because folks are going to try to 

find a way to get some money. 

Mr. CORDRAY. I appreciate that what you have just done is to put 

yourself in our shoes and recognized in a very eloquent way, better 

than I would have done, what the two sides of the problem are. 

You want to have access to responsible credit for people that 

doesn’t get them into more trouble and sink them in these debt 

traps, but you also don’t want people to be in credit that is going 

to destroy their lives. And there are some really ugly kinds of credit out there that we have seen that are quite predatory. How you 

balance that is not easy. 

Now, you are from the State of New York. The State of New York 

bans payday lending because the usury cap is on in New York, and 

it doesn’t really exist. And yet, I take it your constituents are managing somehow or other, and that is true of 13 States across the 

country. 

22 

States handle this issue in very different ways. We have been 

very carefully going to school on what the States do and the different approaches and what seems to be working in some respects 

or not working in other respects, and we want to be respectful of 

that. At the same time, we have done two pretty comprehensive 

White Papers showing that in this industry, a significant number 

of consumers end up in a debt trap where they get a loan at a very 

high cost and they can’t repay it and they have to roll it and roll 

it and roll it. A large number of consumers end up in cycles of 8, 

10, 12 loans. That is very destructive to their economic well-being. 

Now, can we find some reasonable restrictions here that would 

allow access to credit and maybe a number of repeat loans but 

without people getting so far into it—I have an example from a 

court opinion in Missouri. The person took out a $100 loan. By the 

end of the whole thing, they had repaid several thousand dollars 

and they owed several thousand more. It was all being garnished 

from their paycheck. That is not helping their economic situation 

at all, for a $100 loan. 

These are some of the things that we are grappling with and trying to understand, but it is not an easy problem. The way you 

framed it is exactly right. We are trying to balance two things here, 

and it is not easy to strike the balance. We are working hard at 

it, and we are trying to get there. Not everybody will agree, I am 

sure. 

Mr. MEEKS. Thank you. And I would love to continue to work it 

as you look at some of the States, et cetera. For example, what 

happened in New York and I am finding some, there is a black 

market. 

Mr. CORDRAY. And the Internet too. 

Mr. MEEKS. They are getting money in that regard, and I would 

rather have something that was strongly regulated that they could 

go to. Then I would have more confidence that no one ends up with 

the broken arms or the black eyes that I see some folks ended up 

with. So I would appreciate your continuing to work on that. I 

thought I had more time. I didn’t realize, but I am going to give 

you the chance to be more specific about the auto loans that you 

didn’t have the opportunity to earlier. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Michigan, Mr. 

Huizenga, chairman of our Monetary Policy and Trade Subcommittee. 

Mr. HUIZENGA. Thank you, Mr. Chairman. I am going to try to 

be quick. The dealer reserves, I just want to revisit that a little bit 

and make sure to give you an opportunity to clarify briefly on this. 

So my colleague from New Jersey brought up his amendment, and 

it is my understanding that neither one of us were here when 

Dodd-Frank was created, but we are living with the echo effect of 

it here. 

Mr. CORDRAY. We are both blameless. 

Mr. HUIZENGA. The intent of the exemption was the entire transaction, is my understanding. Is that your understanding as well? 

Mr. CORDRAY. I don’t have that understanding. I don’t know one 

way or the other about that. What I know is, as I read the statute, 

23 

we have jurisdiction over auto lenders. We have a responsibility 

there. We don’t have jurisdiction over auto dealers. 

Mr. HUIZENGA. Got it. Will you support then expanding or clarifying the exemption to both dealers and lenders? 

Mr. CORDRAY. If you ask me what direction it would go—I try to 

be very careful of not stepping into the shoes of legislators. You 

have to make those judgments. I don’t have that authority. 

Mr. HUIZENGA. You suggest a lot of other things. 

Mr. CORDRAY. It has been suggested that you go in that direction. It has been suggested that you go the opposite direction. And 

there is a suggestion to leave it alone. 

Mr. HUIZENGA. Have you issued guidance on appropriate levels 

then of what a dealer reserve should be? 

Mr. CORDRAY. Guidance? 

Mr. HUIZENGA. Have you told people, here is what we think is 

the acceptable level? 

Mr. CORDRAY. We have had several enforcement actions. 

Mr. HUIZENGA. That is different than outlining. I know, I saw what happened with Ally. You have $80 million that you haven’t 

been able to distribute so far. Right? 

Mr. CORDRAY. That is one action, but we have had several enforcement actions involving other auto lenders as well where this 

has come into better focus, and it is gravitating toward what I said 

about yesterday’s action limiting caps. 

Mr. HUIZENGA. Why not get specific then on what that level is? 

Mr. CORDRAY. I think our enforcement—our consent orders now 

are quite specific, and they have signalled to the industry a possible way for us to resolve this on a global basis, and I think that 

would be a good thing. 

Mr. HUIZENGA. I want to quickly move on to another thing, marketing services agreements (MSAs). You and I had this conversation the last time you were here, and I will ask the same question: 

Have you issued specific guidance on MSAs? 

Mr. CORDRAY. We have gotten increasing input asking us to do 

that. 

Mr. HUIZENGA. Why have you not done it? 

Mr. CORDRAY. We are working on it. 

Mr. HUIZENGA. Why not just ban them or outlaw them? 

Mr. CORDRAY. What I have said is that what we have seen—and 

we have had several enforcement actions—there is huge risk involved in those agreements, and people don’t seem to have realized 

it. We are going to try to signal based on our experience what we 

have seen. And I think people will get the message. 

Mr. HUIZENGA. Let me ask a question just quickly going back on 

this Ally situation. You have $80 million. You have asked people 

to self-identify as to whether they are a minority and may even 

qualify. Will you give Ally a refund of the money that is not 

claimed? Because there are a lot of people who believe that you 

overextended. You are getting $18 million already in general, and 

this $80 million is supposed to be distributed. What happens to 

that money if it is not distributed? 

Mr. CORDRAY. I understand. We are in the process in this, but 

we are quite confident from what we have seen so far from the response rate that all of the money will be distributed. If it isn’t, it 

24 

will not go back to Ally. That would reward them for not getting 

money out. It would be disgorged to the Treasury. 

Mr. HUIZENGA. It is actually you not proving that there was discrimination or DOJ not proving that. 

Mr. CORDRAY. Not necessarily. 

Mr. HUIZENGA. On both—on dealer reserves and the MSAs and 

a number of other things, it seems to me that you are not willing 

to issue that guidance because you quite possibly don’t have the 

authority to do that. 

Mr. CORDRAY. No, no. We are working on it. I believe we will 

issue guidance shortly. People have asked us very much for that. 

Mr. HUIZENGA. The American Banker, in this story on September 

24th—well, I am going to read this opening paragraph: The consumer, the CFPB, the Bureau, has struggled internally on how to 

end potential discrimination auto lending—I would add MSAs and 

other things—including debating whether it should cite a large 

lender in the hope of effectively ending the ability of partnering 

dealers to mark up loans to all lenders. 

And what I am afraid of, Director, is—and the last time you were 

here, March 3rd, we were talking about the press release situation. 

And you had said that the ombudsman for the Bureau is looking 

into whether there have been differences in the language on the 

consent orders and the press releases on the actions given. And it 

seems to me that is still the case, and I am afraid that it seems 

your goal is to intimidate businesses big and small into actions or 

inaction that you think it needs to have because you don’t have the 

legal authority to execute those. 

Mr. CORDRAY. I understand you may think that. I don’t think 

that is true. That is certainly not how I intend to operate. The ombudsman did look at the issue of the press releases and consent decrees and found that there really weren’t any significant problems 

there, and on the MSA— 

Mr. HUIZENGA. Could you share that report with us? Could you 

share that report with me specifically because I would like to see 

that? 

Mr. CORDRAY. I am sure we can. It may even be posted on our 

website for all I know. The ombudsman has a fair amount of independence from me but did look at that. 

On both auto and MSAs, we have consent decrees in place that 

do give very specific guidance based on specific facts and situations. 

On MSAs, you and others have really pushed us to give more guidance on that. We are going to be doing that. We are working on 

it. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Massachusetts, 

Mr. Capuano. 

Mr. CAPUANO. Thank you, Mr. Chairman. 

Thank you, Mr. Cordray. I have been reading through your report. I don’t know. It doesn’t seem like you have been too busy to 

me. It strikes me as though you are not doing much. From what 

I see, you have done one proposed policy statement; one final policy 

statement; 4 requests for information; 13 proposed rules; 11 final 

rules; 5 bulletins; 2 guidances; 20 orders; 5 assessments of State 

attorney general actions, which of course is not yours, you are just 

25 

looking over what the State attorney general does. You have appeared before Congress 5 times yourself; your staff 2 more times. 

I know that is very easy. It takes no preparation, no time. I get 

that. You have done 37 public speeches in front of different groups 

that are interested in everything you do. Your staff has done four 

more speeches. You have had 14 executive actions taken against 

different companies, and you have issued 63 reports and financial 

reports during the last calendar year. It doesn’t strike me as 

though you have been too busy. It strikes me as you are probably 

just sitting around not protecting consumers and everything else. 

At least that is what it sounds like today. But then again this is 

the bulk of what you do is only part of it. Apparently, as I read 

this, you are allowed to spend up to $619 million, but you only 

spent $302 million. You only spent 48 percent of what you are allowed to spend. I don’t think there will be another agency in the 

entire Federal Government or any State government or any city 

government for that matter that would do that and have the results that you have had. And on top of that, you have collected $47 

million in fines against companies that have bilked consumers, and 

you distributed $113 million to different victims across this country. Sounds to me like maybe you are actually doing something to 

fulfill the title of the agency, Consumer Financial Protection. 

Mr. Cordray, I am here to say thank you. I am here to congratulate you and your team for doing a great job. It doesn’t mean I 

don’t want to nitpick certain things. Of course, we do. I know you 

do that internally. And to be perfectly honest, I think you have 

been pretty receptive to our comments and to our suggestions along 

the way on different rules and regulations. You have worked with 

us. It doesn’t mean I agree with everything you have done. It just 

means I think this country is a lot better off with the CFPB than 

without you, and I wanted to say thank you for that. 

I do want to ask you, do you think you have any ability or any 

regulatory authority to maybe take a look at the effect on consumers of different Federal agencies, most notably the FHA and 

maybe Fannie Mae and Freddie Mac? Do you think that might be 

within your purview or outside of your purview? 

Mr. CORDRAY. I don’t think it is within our purview to, for example, try to enforce the law against other agencies. I do think it is 

within our purview—and really would be irresponsible if we didn’t, 

to collaborate and coordinate and cooperate with the other agencies 

and try to work toward common policies, which we do try to do 

with each of the ones you mentioned and many more, so that is 

something that takes a fair amount of time and effort; and these 

agencies are pretty receptive. We try to be pretty receptive because 

the worst thing that could happen to an institution is to have different agencies coming at them with contradictory positions because then the institution, how do you treat that institution fairly? 

Mr. CAPUANO. Let me encourage you to work as cooperatively 

and forcefully as you can with both of them because both of them, 

in my opinion, are participating in what I consider to be the slow 

and steady destruction of various neighborhoods around this country by selling these bulk mortgages to companies that then make 

a profit—not just a profit, a massive profit. The largest one is the 

Lone Star Funds run by a gentleman who voluntarily gave up his 

26 

United States citizenship. I will repeat that. We have made a billionaire out of a person who voluntarily gave up his United States 

citizenship. This Congress spends an awful lot of time debating 

how we can allow more people to come to this country. I don’t know 

anybody who wants to leave, except for the person who is currently 

in charge of the largest fund slowly destroying various neighborhoods across this country because Fannie and Freddie and the FHA 

refuse to allow local communities to have a say on what to do with 

houses that have been lost because people couldn’t afford to keep 

them. And I would dare say—talk about consumer protection— 

what they have done, not directly but indirectly, by allowing these 

companies to do this, I think certainly should fall into your purview, and if not directly in your purview based on the job you have 

done to protect consumers, I would strongly suggest you get on the 

phone and talk to them, educate them, enlighten them as to how 

we help individuals, as opposed to the people who are not even 

United States citizens out of their own volition. 

With that, I yield back the rest of my time, because I don’t really 

have any questions; I just wanted to say thank you again. 

Chairman HENSARLING. The gentleman yields back. 

The Chair now recognizes the gentleman from New Mexico, Mr. 

Pearce. 

Mr. PEARCE. Thank you, Mr. Chairman. 

Thanks for being here, Mr. Cordray. The question that came 

from Mr. Huizenga about the money going back, and I understand 

not a penny has been given back to the people who are discriminated against? 

Mr. CORDRAY. Are we talking about the Ally matter specifically 

because we have had many discrimination matters, and there is a 

lot of money— 

Mr. PEARCE. The Ally. The money has not gone back or has gone 

back? It is a simple question. 

Mr. CORDRAY. There have been many matters where consumers 

have received money back. The Ally is a somewhat complicated 

process, but it is being worked through. 

Mr. PEARCE. But nobody has received money? 

Mr. CORDRAY. That is correct at the moment, but they will. They 

will receive all of it, I believe. 

Mr. PEARCE. Patrice Ficklin wrote on your website that—in December of 2013—we are starting to pay back some of those things 

already, and it just doesn’t seem very believable. And by the way, 

if you are not giving the money back, is that racist on your part 

that these consumers have been defrauded and you have the money 

and you have had it in your hand? Is your action not racist? 

Mr. CORDRAY. We are giving the money back. It is somewhat 

complicated, but it will get there. 

Mr. PEARCE. It is very complicated. It is not complicated to cheat 

them upfront, but it is complicated for you. 

Mr. CORDRAY. I could just throw money out there, but nobody 

would be happy about that. We are going through a careful process, 

and it will get there. 

Mr. PEARCE. And just to put this in perspective, the assertion in 

The Wall Street Journal is that consumers are being defrauded of 

27 

about $200 to $300 over the life of the loan. Is that more or less 

correct? 

Mr. CORDRAY. I’m sorry. What are we talking about? 

Mr. PEARCE. The Wall Street Journal says that the differences 

in interest could amount to $200 or $300 over the life of the loan. 

Mr. CORDRAY. Is it the Ally matter or generally or— 

Mr. PEARCE. Generally, in auto finance, you might have that. 

Mr. CORDRAY. That, depending on the facts, could be about right. 

Mr. PEARCE. Which ends up at 60 months, which Mr. Williams 

told me that is what the general financing is for is $5 a month, 16 

cents a day at the high end; at the low end is $3 a month. Now 

consider that compared to—and in my 11 years, I have never had 

one person come up and say: We are being cheated, discriminated 

against in auto loans. But I have had multitudes of people come 

up and say: In our student loans, they are charging us exorbitant 

interest rates—8.7 percent is the one that came up to our office 

most recently; $60,000, 8.5, 8.7 percent interest, which is a huge 

amount more, but you all, according to the memos, the internal 

memos, are redirecting your enforcement away from these highpriced educational problems into the auto industry. That was an internal memo that is circulated. 

Another memo says that we are not sure that we have the legal 

authority for doing what we are doing at all and that the rule could 

be perceived as an attempt to circumvent the law and our lack of 

authority. Now, you had told Mr. Garrett that you didn’t really 

agree with the law. Is that something that I heard or maybe I 

didn’t hear? 

Mr. CORDRAY. I didn’t agree with the law? 

Mr. PEARCE. The law that said you can’t go after the auto dealers, but you can go after the financial part of it. So you do agree 

with the law? 

Mr. CORDRAY. My job is to enforce the law, whether I agree or 

disagree with it. What I disagreed with was the characterization 

that the auto industry had been exempted from Dodd-Frank. That 

is not what the statute says, and that is not my understanding of 

the authority we are supposed to exercise. 

Mr. PEARCE. So auto dealers are not exempt or the auto industry, 

which? 

Mr. CORDRAY. Auto dealers are exempt under the statute. The 

auto industry is not exempt, and auto lenders in particular are 

within our responsibility, and we have a responsibility to them. 

Mr. PEARCE. So you are attempting to go after the dealer markup. Is that right? You are trying to assess that. That is the whole 

1 percent, 1 and a quarter percent; you are trying to determine 

that. 

Mr. CORDRAY. What I would say is we are assessing lender programs where they authorize discretionary dealer markup with financial incentives to mark up the rate, none of which is known to 

the consumer, which is part of the reason they don’t complain 

about it. Consumers don’t realize that the buy rate was 4 percent 

and they are being offered 5.5 percent. 

Mr. PEARCE. Consumers who do realize they have a problem in 

the student loan industry who complain a lot, they are okay. 

28 

Mr. CORDRAY. We are working hard on student loans. The whole 

Corinthian matter— 

Mr. PEARCE. You are saying the memo is incorrect, that you are 

not redirecting resources? 

Mr. CORDRAY. We are allocate resources all the time, but the notion that we are not addressing student loan harms— 

Mr. PEARCE. Seems like a complicated concept of billiards to 

avoid the law. We are going to hit this ball over here, and it is 

going to hit that bank, and it is going to come over here, and it 

is going to tap the auto dealers. And that is who we are really 

after. 

Mr. CORDRAY. We have been very careful to observe that line. As 

I said, it is not a particularly logical line, but we have been very 

careful. We didn’t even talk to dealers for 2 years until they started 

to want to talk to us. 

Mr. PEARCE. Maybe that is the reason some on our side have disagreements. 

I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Texas, Mr. Hinojosa. 

Mr. HINOJOSA. Thank you, Chairman Hensarling and Ranking 

Member Waters, for holding this important hearing; and thank 

you, Director Cordray, for your appearance here today and for your 

steadfast leadership at the Consumer Financial Protection Bureau. 

I am going to go directly to questions and skip the other points 

that I wanted to make. Our Nation faces a severe student loan crisis. Student loan debt now stands at $1.2 trillion and tops out credit card debt, auto loan debt, and home equity debt. Moreover, default rates on student loans keep rising every year. Can you tell 

us more about efforts at the CFPB to provide student loan relief? 

Mr. CORDRAY. Yes. And there have been a lot of different efforts. 

This is an area where we don’t really act alone. We try to work 

with others, including States, State attorneys general and others, 

the U.S. Department of Education. We have worked with the U.S. 

Department of the Treasury on these issues. There is a whole variety of things that we have tried to do. 

First, we have tried to make it clearer and easier for consumers 

themselves to make their own judgments about what is the right 

answer for them in a particular set of circumstances. That is our 

paying for college tool. This is one of the ways in which, as the 

chairman would put it, we are trying to help consumers become 

more free. If they can make more informed choices, they can make 

choices that are the best ones in their view for themselves and not 

have regrets later. We hear plenty of regrets from people who 

didn’t have that kind of transparency around student loans in the 

past. 

Second, student loan servicers, the people who are actually han- dling the debt that is already owed, and there is $1.2 trillion owed 

in this country, so it is a very significant concern for many Americans, millions of Americans. We feel that there are various practices in that industry that are subpar, very much like mortgage 

servicing practices have been very subpar for a long time. We are 

looking at figuring out how we can work to sort of clean that up 

29 

and bring that up to a standard so that people who already owe 

a fair amount of money to get an education—that is burden 

enough—aren’t further burdened with misappropriation of payments or payments that go to the lower interest and keep the higher interest and various ways in which this industry is not serving 

their interests well. 

Third, we have worked with the Department of Education, and 

the Department of the Treasury, to press for more refinancing options, particularly for people with private student loans, which 

have largely been unavailable to them in the past. There is a lot 

of movement on that, and there is progress on that. 

Fourth, one of the things we are trying to call attention to is a 

lot of this is a matter of public policy, and it is at either the Federal or State level or both, is that the amount of student loan debt 

in this country is itself becoming a negative drag on our economy. 

Younger people are forming households later. They are forming 

small businesses at lesser rates than in the past. They are making 

different choices because of the amount of debt that they have. Student loan debt is affecting the broader economy. We need to 

rethink public policy in this country. It goes well beyond my limited mandate, but it is something that we think needs to be aired 

and needs to be discussed and policymakers need to think more 

about it, so we are trying to be active on all fronts. 

Another issue is a lot of these student loan issues affect 

servicemembers who are trying to figure out what to do with their 

GI benefits and/or other student loans that are available to them 

and make sure that they don’t go to waste and that they benefit 

by them. And with Holly Petraeus, who heads the Servicemember 

Affairs Office, we have been working with the Department of Education and also the Departments of Defense and Veterans Affairs 

to make sure that servicemembers can really maximize their benefits in ways that will improve their lives as they come back into 

the civilian population. There are a lot of different fronts for us, 

very big problem, very big concern. It should be a big concern for 

anybody making policy in this country. 

Mr. HINOJOSA. I want to thank you for all those things that you 

are doing. I want to jump to another point that I want the record 

to show. A year ago, the Bureau announced an action against a 

former for-profit college chain, Corinthian Colleges, Inc., in response to a scheme that lured thousands of students into expensive 

loans and conducted abusive collection tactics that preyed on students. Moving forward, do you expect that the Corinthian experience will inform the Bureau’s work with respect to institutional 

student loan programs at those for-profit colleges? 

Mr. CORDRAY. Yes, and thank you. I meant to wind up with that 

work, which has been very aggressive on our part. We have been 

working with State attorneys general and other partners, Department of Education, Department of Justice, and others. We did 

bring the action against Corinthian. We thought that they had misled students in significant ways and engaged in various predatory 

practices. Obviously, others have felt the same, and they are now 

in a bankruptcy proceeding. We have sued ITT, which we think 

have engaged in many of the same practices. We continue to monVerDate Nov 24 2008 18:50 Feb 08, 2017 Jkt 099731 PO 00000 Frm 00033 Fmt 6633 Sfmt 6633 K:\DOCS\99731.TXT TERI
30 

itor that market. It has been a source of a lot of harm to people, 

and it needs to be thought about more carefully. 

Mr. HINOJOSA. Thank you for your good hard work on this issue. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Florida, Mr. 

Posey. 

Mr. POSEY. Thank you very much, Mr. Chairman. 

It’s good to see you again, Mr. Cordray. 

Mr. CORDRAY. Thank you. 

Mr. POSEY. I want to go back to something that one of my colleagues across the aisle, Mr. Meeks, mentioned just a little while 

ago. And that is a concern my colleagues in Florida have about our 

earlier experience in Florida with short-term lending. The legislature in Florida worked hard to balance the needs of the citizens of 

Florida for short-term credit with consumer protections. The Florida experience has been a positive for Floridians and shows the 

value of State legislatures who desire to meet the needs of their 

local communities. As the CFPB considers regulations of short-term 

lending, you have said that your rule will be just a ‘‘floor’’ over 

which the States can regulate. However, I have been told the proposal that the CFPB has released is, in fact, a floor that no existing 

State law meets, period. So it is effectively a preemption. And that 

is why I think you have seen so much concern within the Florida 

delegation and others, New York now. Do you intend to follow 

through with your rule that effectively throws out the hard work 

of the Florida legislature, and that of 31 other States for that matter, that have acted to regulate a responsible payday and other 

short-term lending? 

Mr. CORDRAY. One of the things I have found is there is a lot of 

people saying to us on payday lending, vehicle title, certain installment loans, they are saying to us, oh, you really shouldn’t do anything. You should just leave alone what the States are doing, and 

it is all fine. We did two extensive White Papers, the largest research that has ever been done on this issue, which showed that 

a large number of consumers under these existing regimes end up 

trapped in debt, getting 8, 10, 12 loans in a cycle, paying more in 

fees than they ever borrowed in the first place. Some of the stories 

are quite gross, and I can’t in good conscience just leave that alone. 

If we can make reasonable interventions to improve this market so 

that consumers are not victims of predatory lending, I think we 

have an obligation to do that. As to Florida in particular, you and 

I and your colleagues have had a number of discussions about it. 

One view of Florida is it is really fine. It is a model for the Nation. 

Another view that consumer groups in Florida have put forward— 

Consumers for Responsible Lending did a report, and other groups 

have written to the delegation more recently—they said it is actually still problematic in various ways. A lot of people end up rolling 

into these long sequences, and the percentage of people who re-borrow is just as high really in Florida as in the rest of the country. 

That is what our analysis has shown as well. Again, I was referring earlier to an example from Missouri. This is a judicial opinion. 

The judge was so offended they went to the evidence record there 

and indicated, for example, class member DW took out a $100 loan 

from this company—this is in the record. A judgment was entered 

31 

against them for $705.18. There was a garnishment of his wages. 

So far, $3,174.81 has been collected on a $100 loan, and a balance 

of $4,105.77 remains. That is the kind of thing we are seeing 

around this country. We can all talk about access to credit and all 

credit should be allowed, but some of this is quite predatory. It is 

quite problematic, and this is something that we need to address. 

And I feel strongly about it, and I don’t feel in good conscience I 

can just give it a pass and move on to other things. 

Mr. POSEY. I don’t know what they do in Missouri. I heard somebody from our Financial Services Office, in a meeting—you were in 

the meeting. 

Mr. CORDRAY. Yes. 

Mr. POSEY. I think you heard him say he had two complaints out 

of how many hundreds of thousands. That kind of shocked me, 

which indicated to me that Florida maybe and some States got 

some things right. But it seems if you come out with your floor, a 

standard that no State can meet, your effort to protect some people 

is going to have the unintended consequence of hurting people. 

I don’t think anybody chooses to go to a payday lender. I heard 

somebody from your agency say we would like to get these people 

more involved in going to credit unions and conventional banks. 

Yes, except they will not make the loans a payday lender makes. 

When somebody goes to a payday lender, they are usually pretty 

doggone desperate. And the next step is—I don’t even want to mention it. There are three ways people get through life if they are not 

independently wealthy: they work; they steal; or they are on welfare. So if you don’t have jobs for people, you really can’t complain 

when you have the bad two scenarios. It is a similar thought with 

payday lending. When you don’t have some conduit for these people 

to survive, you are asking for trouble. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Missouri, Mr. 

Clay, the ranking member of our Financial Institutions Subcommittee. 

Mr. CLAY. Thank you, Mr. Chairman. 

And thank you, Director Cordray, for being here today. We have 

heard a lot this morning about auto loans and credit related to 

auto loans. A February 2015 settlement announcement from the 

Department of Justice against two North Carolina-based buy-herepay-here auto dealers for violations of the Equal Credit Opportunity Act alleged reverse redlining, finding that the dealerships 

intentionally targeted African-American customers in extending 

high-cost auto loans when the borrowers otherwise qualified for 

more reasonable interest rates. 

Mr. Cordray, how concerned are you that the recent growth in 

subprime auto lending may also include the kind of reverse redlining that the Department of Justice uncovered just in February 

2015? 

Mr. CORDRAY. By the way, buy-here-pay-here auto dealers are a 

different part of the market. Again, when you say the CFPB isn’t 

sure of its legal authority—one of the things we try to do is be very 

careful about our legal authority. We discuss it a lot. We try to 

analyze it carefully. We try very hard to be on the right side of that 

rather than the wrong side. If we are on the wrong side, courts will 

32 

smack us down, and they may do that from time to time. We are 

trying to be careful about it. 

We have investigated buy-here-pay-here auto dealers because 

they pose a somewhat different and special risk, I think. What was 

your question? 

Mr. CLAY. How are you addressing it, the reverse redlining, 

elaborate on the buy-here-pay-here business model? And are there 

unique risks associated with the buy-here-pay-here business 

model? 

Mr. CORDRAY. Reverse redlining is not unique to auto. It is also 

in mortgage. We took an action against National City that got back 

to consumers $25 million in compensation because of reverse redlining in the mortgage market. 

In the auto market, the same types of concerns. Although I will 

say, I don’t think the right answer is to cut off auto lending to people who have less than perfect credit. People need to have transportation in most parts of the country, certainly my part of the country, in order to get to work and make something better for themselves. So I don’t think it is just because it is subprime that it is 

wrong or bad. 

It is the case that when you go into the subprime market, prices 

tend to be somewhat higher. Some of that is inevitable. It also creates risks because maybe you will try to exploit those consumers 

in ways that are not appropriate. That is something for us all to 

monitor very carefully. 

The Justice Department has indicated it is monitoring that carefully. We are trying to monitor it carefully. I don’t think the right 

answer is that people whose credit is under, say, a FICO score of 

680 should not be able to get auto loans. They need them. It is actually helpful to their situations. But if people are using that market as a means of engaging in predatory conduct—and we saw it 

in the mortgage market, so it is certainly a risk—that is something 

we should be very careful about. 

Mr. CLAY. So, in other words, my colleagues should not be naive 

about the fact that some in this industry are steering people for no 

other reason than because of the color of their skin into high-cost 

loans? 

Mr. CORDRAY. If somebody qualifies for a prime loan and they 

are being steered into subprime, that is the kind of abuse that we 

would want to take action against. If someone just has less good 

credit and, therefore, they are a subprime customer, the notion 

they shouldn’t get a loan for that reason is not a right answer, I 

don’t think, either. 

Mr. CLAY. Thank you for that response. 

Let’s shift over to diversity and inclusion. What role has the Office of Minority and Women Inclusion played in helping the CFPB 

recruit a diverse and qualified workforce? 

Mr. CORDRAY. They have been very instrumental for us. I have 

had a number of discussions with some of you and particularly 

with the ranking member on the importance of the Office of Minority and Women Inclusion, which was of course created in DoddFrank and applies to all of the financial agencies. I, in response to 

work that we have done and some issues that we have worked to 

address, elevated that role within the Bureau. The Office of MinorVerDate Nov 24 2008 18:50 Feb 08, 2017 Jkt 099731 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 K:\DOCS\99731.TXT TERI
33 

ity and Women Inclusion is at the highest levels. That office has 

been incredibly helpful to us both in understanding our own workforce, understanding our recruiting and hiring, understanding our 

retention, and also thinking about our contracting and trying to 

work as aggressively as we can with the other regulators in the industry to see the practices changed there as well. I would say it 

is one of the successes of the Dodd-Frank legislation. 

Mr. CLAY. Thank you, Mr. Director. 

Mr. Chairman, I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Virginia, Mr. 

Hurt. 

Mr. HURT. Director Cordray, thank you for appearing before our 

committee. I represent a rural district in southside, central Virginia. During August, we had the opportunity to travel across the 

district and met with a lot of folks who live on Main Street and 

are served by our local Main Street financial institutions. We heard 

a lot of concerns as we travelled across the district about the CFPB 

and the impact that it is having on these institutions’ ability to deliver access to capital. But the question that I wanted to focus on 

today relates to the truth in lending RESPA, integrated disclosure 

rules that are going into effect. 

I will recount for you one conversation that we had with one of 

those representatives from the compliance office with one of those 

institutions, and they said they were glad that there was an announced effort to try to streamline those complicated and complex 

rules that have to be undertaken when closing real estate transactions, but they were also concerned about the end product, and 

concerned about the process. So I guess I was wondering if you 

could talk a little bit about your analysis in terms of the actual 

costs to consumers. What will the costs be ultimately? Will this result in higher costs? And how much extra time will be required or 

if you could just talk about that briefly? 

Mr. CORDRAY. Sure. Again, it was Congress’ decision that these 

forms really needed to be streamlined. They have been out there 

for 40 years, 2 different statutes, 2 different— 

Mr. HURT. You all looked at the cost directly? 

Mr. CORDRAY. Yes, although it was a mandatory rule. We didn’t 

have discretion to say, we are not going to do this. We did our best 

to try to mitigate costs and make it feasible for industry. We spent 

a fair amount of time on it. The statute was enacted in 2010, and 

this rule isn’t taking effect until now, almost 5 years later. At the 

same time, we have been working with the industry extensively to 

try to help them comply, trying to provide a lot of guidance, trying 

to provide webinars. 

Mr. HURT. Are you able to talk specifically about the cost and the 

analysis that you all have done, about the specific costs that will 

be passed on to consumers or the time? 

Mr. CORDRAY. I am not convinced that there are going to be any 

significant costs passed on to consumers. It really is a change of 

forms. There is a lot of angst around the transition because they 

made a transition 5 years ago when HUD changed the form. It 

probably happened too fast in light of that, but Congress mandated 

it all. Industry did it 5 years ago. They will do it now. It will be 

34 

a better, cleaner process. Consumers will understand these forms 

better. That is what our testing has shown. The industry will benefit because consumers will be both clearer and happier about what 

they are doing, with less angst around the closing, and less surprises; unhappy surprises at the closing table are a big source of 

dissatisfaction. I think it will be better, but it is a matter of getting 

through it. 

Mr. HURT. And as you point out, the timeline has proven to be 

a burden to a lot of these institutions, especially smaller ones that 

have a hard time. There are lot of partners in these transactions, 

and trying to make sure everybody is on the same page is very important. So I guess my question to you is, I understand that the 

CFPB has rejected the request by industry to grant a grace period 

for the implementation of this for the next 6 months, let’s say, until 

February. It is my understanding that has been rejected. 

Mr. CORDRAY. That is not right. 

Mr. HURT. My question to you is, will the CFPB pledge not to 

bring enforcement actions against those institutions that are acting 

in good faith? Obviously, we don’t want people abusing that grace 

period, but will you pledge that you will do that? 

Mr. CORDRAY. It is wrong that we have rejected that. In fact, I 

saw just the other day an article that may not be legislation— 

Mr. HURT. So my question— 

Mr. CORDRAY. But CFPB has granted most of what industry 

wanted. We have done that. 

Mr. HURT. But you haven’t offered a blanket grace period for 

those who are acting in good faith in terms of not bringing an enforcement action. I would like to get you on the record as saying 

if that is your position. 

Mr. CORDRAY. What we have done is actually better for the industry. We have worked with the other agencies. And as I said, 

this is going to be in writing. I have said it verbally. I have made 

my commitment, but it is going to be in writing by all the agencies, 

that during the early period, and this may be less or more than 6 

months, we will be diagnostic and corrective, not punitive. That 

means we are not going to hammer people if they happen to get 

the forms somewhat wrong. We know industry is trying to get it 

right. We know there is no advantage to them in undermining consumers by changing the forms in some way. They are just trying 

to get it right, and I believe that. And so that is the way we are 

going to handle it, and that is the way I have talked to the other 

agencies about it. They agree. You are a former prosecutor. I know 

you know law enforcement and you have to sometimes be a little 

nuanced about it. We are trying to do that. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Georgia, Mr. 

Scott. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Over here, Mr. Cordray, in the corner. I served in the Georgia 

legislature. I was the chairman of the Senate Rules Committee, 

and there we passed and enacted into law a fairly restrictive State 

short-term lending law. But even so, online companies like Elevate 

offer a 59-percent rate product in Georgia that complies with our 

State law, and certainly gives our constituents there more access 

35 

to good short-term credit. But under the proposed small-dollar 

lending rule, Elevate wouldn’t be able to offer this 59 percent product in our State of Georgia. 

So my question to you is, how will my constituents who use the 

credit as intended and needed be better served by a rule that is 

overly prescriptive and does not complement our existing State law 

and that our State legislatures have concluded is in the best interests of our constituents in Georgia? 

Mr. CORDRAY. I will say this is something we are trying to listen 

very carefully to you and others who are bringing these different 

scenarios to us. I am very sympathetic and the point has been 

made on both sides of the aisle today that alternative means of satisfying small-dollar credit for people are very important, whether 

it is credit unions or maybe community banks, or as you say, companies that are now innovating around trying to find more consumer-friendly methods of supplying that credit that people need. 

I am sympathetic to that. We are trying to work with the rules we 

are trying to develop such that there will be room for that. If we 

are not getting that right, we will be interested in hearing from 

people about how they think we might adjust the proposals somewhat here or there, and the product you described seems to me 

much more user-friendly than some of the products I have seen out 

there. 

Mr. SCOTT. It is. It helps my constituency. I am going to be working on that, and I am glad to hear you say you will work with us 

so that my folks in Georgia will be happy. 

Now to another matter, Mr. Cordray. This business with the auto 

dealers. First of all, let me say that the CFPB have done some good 

things, but this business with the auto dealers is a bad thing. It 

is a bad deal. Now let me tell you why. There is racism everywhere. We know that. But in the ruling and the guidance that you 

put out, it was done unfairly. You offered a rule. You charged the 

dealers with the basis of it that they were racially discriminating. 

You based that on a report that was shamefully flawed. It was inaccurate. And to tell you the truth, it was downright insulting to 

African Americans because you just assumed their last name was 

Johnson or Williams or Robinson or maybe even Scott. But let me 

tell you, there are a lot of white people with the same names. How 

can you be accurate? 

And even you yourself, you as the CFPB, said that even this is 

about 25 percent inaccurate. But yet still you directed an extraordinary and deceitful approach that harmed some of the very people 

that you are trying to help. You have hundreds of auto dealers who 

are African Americans, but when you put this blanket indictment, 

you hurt them. And then, you went to the lenders. You pressured 

them to cut out their ability to discount their loans, the one little 

measure they have in there with which they can make a profit. 

Now, you did this without congressional approval. We said right 

here in Dodd-Frank and wrote—there has been some discussion 

about the law. Here is what we wrote. We said—and I wrote this 

with Barney Frank and many members on this committee. Section 

1029, says these words: ‘‘The Consumer Financial Protection Bureau may not exercise any rulemaking, supervisory, enforcement, 

or any other authority including any authority to order assessVerDate Nov 24 2008 18:50 Feb 08, 2017 Jkt 099731 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 K:\DOCS\99731.TXT TERI
36 

ments over a motor vehicle dealer that is predominantly engaged 

in the sale, the servicing of motor vehicles, the leasing and servicing of motor vehicles and both. 

Mr. CORDRAY. I strongly disagree with much of what you just 

said, but I— 

Mr. SCOTT. You can disagree. I read it from the law. 

Mr. CORDRAY. No, no. I don’t disagree with the reading of the 

law. Auto dealers are one thing. Auto lenders are another. I disagree with quite a bit of what you said about characterizing our efforts here— 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Illinois, Mr. 

Hultgren. 

Mr. HULTGREN. Thank you, Mr. Chairman. 

Director Cordray, thank you for being here today. Your testimony 

is an important opportunity certainly for us to hear about the Bureau’s policymaking, formal and informal, and for Congress to use 

the limited oversight provided to us by the Dodd-Frank Act. 

First of all, I was drawn to the part of your testimony that I 

think awkwardly tries to make the case that community banks and 

credit unions are faring well in the current regulatory and economic environment. I assume you read the American Banker, but 

just in case you don’t, I wanted to flag some stats from a story that 

was published on Friday. It said: ‘‘Today, there are 1,524 fewer 

banks with assets under $1 billion than there were when DoddFrank was signed into law.’’ It also said: ‘‘The number of banks 

with under $1 billion in assets fell by 5.6 percent in the second 

quarter.’’ This is the second largest percentage reduction since 

1984. The annual shrinkage rate in the number of banks under $1 

billion has accelerated every quarter but one since the third quarter of 2012. As I have observed the Bureau over the last few years, 

I have become increasingly concerned it is more interested in expanding its influence than in protecting consumers’ access to financial products and services. The revised QM rules for small creditors 

and those operating in a rural or underserved area was released 

by the Bureau last week. 

I appreciate many of the considerations you made for these lenders. However, the entire Illinois delegation—House, Senate, Republicans, Democrats—made a recommendation to the CFPB that economically challenged areas be included in the definition of underserved areas. Why did the CFPB avoid an opportunity to make this 

commonsense change that would have eased compliance for community lenders and improved access to credit? 

Mr. CORDRAY. There are two parts to your question. The first 

part is on community banks. I think you are just wrong on the 

facts. 

Mr. HULTGREN. My question was specific to this. You can comment on my statement, but my question is economically challenged—again this was Republicans, Democrats, House, Senate, all 

said: ‘‘This is important; please do this.’’ You just ignored it, and 

I wonder why you did and why you wouldn’t put the commonsense 

change in there, first question. 

Mr. CORDRAY. We have done two or three rounds of rulemaking 

now on the meaning of ‘‘rural’’ and ‘‘underserved.’’ We have heard 

37 

a lot of comments on those, and we have done our best to digest 

those comments and reach conclusions. We have in all these cases 

expanded the coverage of that and so as to benefit community 

banks and credit unions and have considerably done so. 

Mr. HULTGREN. We are not feeling it, and the American Banker 

article clearly says so. I want to get to my second question quickly. 

Again, this is bipartisan, Republicans, Democrats, House, Senate, 

asking: Please, commonsense. This makes sense. Please do it. 

Please take another look. 

Second question, I want to talk a little bit about how your agency 

chooses to engage the media and the public. I have noticed your 

press office is much more aggressive and inflammatory than any 

other financial regulators. First of all, your agency is well-known 

for its use of midnight embargoes to create one-sided stories. Additionally, these press releases frequently use language that misrepresent the facts. In the Bureau’s semi-annual report, you cite 45 

public enforcement actions in the preceding calendar year ending 

March 31, 2015, and many of these standalone enforcement actions 

most commonly resulting in consent orders, the report and press 

releases describe the Bureau as finding or ordering companies to 

conform to a judgment determined by the Bureau. Do any of those 

standalone consent orders admit any facts or guilt? 

Mr. CORDRAY. Ordering is certainly accurate. When we say finding—we tend to be careful about this language—but usually this is 

the result of a prolonged investigation by us, sometimes in conjunction with other agencies, including the Justice Department at times 

or other financial agencies or States, who are all joining the investigation and reaching the same conclusion. So the notion that we 

are somehow off on our own doing crazy things when we are typically working with partners who are themselves law enforcement 

partners and reaching the same conclusions, I think speaks for 

itself. 

Mr. HULTGREN. But even with your statement, since liability has 

not been proven in a court of law, why does the Bureau issue overthe-top press releases that state facts that are not proven? Why 

does the Bureau try to insist a company has violated the law if it 

has not proven it did so? 

Mr. CORDRAY. I don’t think that is a fair characterization. 

Mr. HULTGREN. They did. If you look at the press releases— 

Mr. CORDRAY. I don’t think they are over-the-top press releases. 

We are calling attention to practices that usually are the result of 

a prolonged investigation. The facts are usually clear enough that 

the institution wants to resolve without further proceeding because 

they recognize the problems, and they are going to clean up the 

problems. 

Mr. HULTGREN. We can hear it. We have several regulatory agencies that come and report to us. We see the difference. It is such 

a glaring difference to us what the CFPB is doing. I am just asking 

you: Look at what the other Departments are doing. Your press releases are so far over the top. Who writes the press releases— 

Mr. CORDRAY. Often, we issue press releases in matters where 

State Attorneys General issue press releases as well. I don’t think 

there— 

Mr. HULTGREN. Who writes the press releases? 

38 

Mr. CORDRAY. I don’t think the Justice Department— 

Mr. HULTGREN. My time is almost up. Who writes your press releases? 

Mr. CORDRAY. Many people at the Bureau are involved in writing 

accurate, fair accounts of our matters. 

Mr. HULTGREN. It doesn’t look that way. My time has expired. 

I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentlelady from New York, Mrs. 

Maloney, ranking member of our Capital Markets Subcommittee. 

Mrs. MALONEY. Thank you, Mr. Chairman. 

I want to thank you for calling this hearing, as well as Ranking 

Member Waters, and I welcome you, Director Cordray. As you 

know, I am a big supporter of CFPB, under your leadership I might 

add, and I think you have done a fantastic job. I believe this report 

is absolutely excellent that you are issuing, and your statements, 

your press releases, and your actions have all been data-driven and 

factual, and I want to congratulate you. And the numbers speak for 

themselves. The Bureau has returned over $11 billion—$11 billion—to 25 million consumers who have been harmed by illegal 

consumer practices. The Bureau has also gone out of its way to 

help our men and women in the military through the Office of 

Servicemember Affairs, led by Holly Petraeus. And you have shown 

great flexibility and reacted to letters and inquiries from members 

of this panel and the public as well. 

And I want to give one example. The Bureau helped stay-athome spouses by clarifying that the credit card bill of rights, the 

CARD Act, did not prevent stay-at-home spouses from taking out 

credit in their own names. And this was a bipartisan request for 

clarification, and we want to thank you for that. 

Now, I would like to ask you about co-ops. As you know, co-ops 

are a big part of New York City, and many thousands of our residents, hundreds of thousands of our residents, literally live 

vertically not horizontally. And, unfortunately, there is a great deal 

of uncertainty about whether co-ops are included or excluded in the 

Bureau’s new integrated disclosure rule for mortgages. Co-ops have 

always been treated as real estate under both TILA and RESPA, 

and so lenders to co-ops have always provided the same disclosures 

as everyone. They have always had the same. 

But under the Bureau’s new integrated disclosure rule, the Bureau did not specify whether co-ops were still included, as they always have been under Federal law. Different lenders have come to 

different conclusions about whether co-ops are included in the rule. 

Some say they are included; some say they are excluded. Now this 

is a big problem because if you are not allowed to voluntarily comply, you are not allowed to voluntarily comply with the integrated 

disclosure rule, without violating the law. And this is a rare situation where the co-op industry thinks that you and your Bureau has 

done such a good job on the integrated disclosure rule that they actually want to be included in the rule. So I would like to ask you 

for the record, can you take this opportunity to clarify that co-ops 

are, in fact, intended to be covered by the new integrated disclosure 

rule? 

39 

Mr. CORDRAY. Thank you for the question. I don’t know that I 

can today on the spot at this moment. I know that our staff has 

been talking back and forth to your staff, as you brought this issue 

to our attention, and as we have been looking at it and trying to 

understand it, it feels that the issue can vary in different parts of 

the country depending on State law. Now, whether that is the right 

answer or whether that is just a current answer, whether we 

should be more specific somehow here is something I believe we 

have taken under consideration, and we are considering and will 

continue to talk back and forth both with your staff and any other 

Members who are interested in this issue. Maybe others from your 

State would be interested in it as well. 

I would like to get it right. I would like it to be satisfactory. As 

you say, I would like to—if people like our forms and want to be 

covered by them, I would like that to be the answer, but I can’t tell 

you today exactly how the legal issue comes out here as we are trying to work on it as we speak, I believe. 

Mrs. MALONEY. Okay. I would also like to ask you about overdraft fees. As you know, I have been focused on overdraft fees, 

which can be outrageously high and can eat into consumers’ hardearned savings. In fact, I will be reintroducing Mr. Ellison’s and 

my Overdraft Protection Act next week, and my bill would ensure 

that overdraft fees are reasonable and proportional to the amount 

of the overdraft, which would end the $35 cup of coffee. But I want 

to know, are you still working on this? When are you going to come 

out with it? And are you going to be looking at mainly disclosure 

on overdrafts, or are you considering some more substantive limitations on oversight fees? 

Mr. CORDRAY. Yes. We are well aware of your interest in this, 

and you have been proposing legislation on it. We are working on 

it right now. I think there may be some misunderstanding because 

we recently put out to start some customer testing around disclosure, but that does not signal that that is the only thing we are 

thinking about in this regard. I agree with you that there is a 

broad set of issues here—some substantive, some maybe handled 

by disclosure—for us to try to figure out. It is not a suggestion that 

we are narrowing our scope of our inquiry here. 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the gentleman from Florida, Mr. Ross. 

Mr. ROSS. Thank you, Mr. Chairman. 

Director Cordray, it is a pleasure to see you again. You and I 

have had multiple conversations with regard to the payday lending 

industry. I have explained in the past that I was active in the Florida legislature in initiating legislation that corrected a very bad 

market, a very terrible market for consumers in the payday lending 

industry. As a result, I think we have probably the best State-run 

payday lending institution anywhere. We protect our consumers. 

We limit what they can do, but we also make sure that the bad 

players are not in there. 

Now, the fact that we are here talking about payday lending 

doesn’t mean that I am here talking on behalf of payday lenders. 

No, I am here on behalf of payday consumers. The fact that they 

have a paycheck means that they have a job which means they are 

working hard to meet the needs of their family to better their life. 

40 

And yet when they have a need for capital, when they need a 

short-term loan, according to Commissioner Breakspear in Florida, 

your proposed regulations will absolutely eliminate this source. It 

will absolutely delete any opportunity for these hard-working taxpayers to have access to capital in a market where nobody else will 

fill that void. Have you had a chance to talk to any of these payday 

consumers? 

Mr. CORDRAY. Yes, I have. And I have also had a chance to talk, 

as you know, to talk extensively with Commissioner Breakspear 

and with folks about the Florida structure, both Members of Congress who are very interested in it I have seen, and people from 

Florida, providers and consumer groups. There are different points 

of view on that regime. Not everybody thinks it is the greatest 

thing since— 

Mr. ROSS. Eliminating the supply will not eliminate the demand, 

and these poor consumers who are trying to make ends meet will 

now be subjected to usurious lenders, mostly offshore. Maybe Cousin Guido or somebody who has interest rates that they can’t afford. 

We are not doing any benefit for the consumer, and yet that is your 

mission. 

Now, when you promulgate your regulations, I would assume it 

is done based on objective evidence. You would look at data that 

you may collect, and I would assume that you would look at how 

bad the industry is in terms of how many complaints have been 

registered in the payday lending industry. And according to the 

CFPB’s complaint database, since its inception by product only 

3,030 complaints have been filed against payday loan companies. 

That is less than one-tenth of 1 percent. At what point do we say 

that is egregious? 

Mr. CORDRAY. First of all, we staged products over time. Payday 

was one of the later products to come online. That is one piece. Another piece, what we find is that consumers may be characterizing 

a complaint in one way where it is actually another. A lot of our 

debt collection complaints actually turn out to be joint debt collection payday complaints— 

Mr. ROSS. Still. Only 3,000. Less than— 

Mr. CORDRAY. No, no, no. That is—which suggests that is not the 

right number. But it is a fair point. Again, for us, one of the things 

we are trying to figure out is we want there to be access to credit. 

We understand the needs people have, and we have heard a lot 

about it in the individual situations. But if it is credit that is going 

to roll them into sequences of 8, 10, 12 loans— 

Mr. ROSS. I agree with you, and that is what we have to— 

Mr. CORDRAY. And it still happens under Florida law. 

Mr. ROSS. But if I might point out under the Florida law, over 

the last year, there were nearly 8 million, 8 million, payday transactions. And according to the Florida Office of Financial Regulations, there were only 117 complaints. It sounds like something is 

working. And I think we need to take a look at that. I think if we 

are going to look at— 

Mr. CORDRAY. It is a relevant datum. 

Mr. ROSS. Relevant? It is compelling because where— 

Mr. CORDRAY. I don’t know that it is. 

41 

Mr. ROSS. —are these people going to go? Where are these people 

going to go when they can’t make ends meet, when it is 11 o’clock 

at night and they need to be able to get lunch money for their children, when they need to be able to pay the rent. Are they going 

to go to a bank that is not open? Are they going to go a non-bank 

lending institution that doesn’t want to touch these long-term 

loans? 

Mr. CORDRAY. This is why we are looking at the different regimes in all 50 States. There are 13 States where no payday lending is allowed. That doesn’t mean that is the answer we are going 

to come to. But in 13 States, it is not allowed. What do the people 

do in those States? They do something. 

Mr. ROSS. And I am here to tell you that there is a good guidance 

to follow, and that is the State of Florida. 

Now, I know that in a conversation you had some time ago, you 

indicated that Florida has—that consumers are charged up to almost 300 percent per year. I take issue with that, and I just wanted to know where you might have gotten that— 

Mr. CORDRAY. I’m sorry. What is this? 

Mr. ROSS. That they pay up to 300 percent per year APR on their 

payday loans. 

Mr. CORDRAY. In Florida? 

Mr. ROSS. Yes. 

Mr. CORDRAY. That is my understanding. And— 

Mr. ROSS. And I take issue with that— 

Mr. CORDRAY. And consumer groups—again, consumer groups 

don’t agree with you on that. 

Mr. ROSS. The one thing I would just please ask you to do: These 

are hard-working taxpayer dollars. They have a job, as evidenced 

by the fact that they have a paycheck. My concern is not for the 

payday lenders. My concern is for the payday consumers, and I ask 

and I plead with you to make sure that we keep this industry alive, 

and protect our consumers. 

And I yield back. 

Mr. CORDRAY. Okay. Thank you. 

Chairman HENSARLING. The gentleman yields back. 

The Chair now recognizes the gentleman from Texas, Mr. Green, 

ranking member of our Oversight and Investigations Subcommittee. 

Mr. GREEN. Thank you, Mr. Chairman. 

And I thank the ranking member as well. I thank the President 

of the United States of America, the Honorable Barack Obama, for 

appointing you, Mr. Cordray, to this position as the Director of the 

CFPB. And I thank him for doing so because he appointed someone 

with courage, someone with intestinal fortitude, someone who is 

willing to stand up for consumers. It is just not easy to do. You 

have been through the fire and the storms. Just getting positioned 

required an inordinate amount of effort, and I am grateful that you 

are in the position that you are in. 

Now, let me just say one more thing. This is not really a part 

of what I am called upon to talk about today. But I am proud to 

serve under the leadership of the Honorable Barack Obama. I am 

saying it because too often so much is said about him on the negative side, such that people assume that everybody in the room 

42 

thinks negatively of the President. I do not. He has been elected 

twice. It was no fluke. And I just don’t want the record to show 

that there were some of us who acquiesced when statements were 

made that we should have objected to. I am proud. 

Now, Mr. Cordray, you are not saying that all auto dealers engage in invidious discrimination, are you? I assume your answer is 

no, you are not. Is that correct? 

Mr. CORDRAY. That is correct. 

Mr. GREEN. And you are not saying that all—by the way, this is 

not under the purview of your bailiwick, but all investment advisers are engaging in invidious discrimination or all mortgage lenders, but— 

Mr. CORDRAY. I don’t think all anybody in any industry. 

Mr. GREEN. Absolutely, but those that do are the ones that we 

have to stop. 

Mr. CORDRAY. Yes. 

Mr. GREEN. Do you agree? 

Mr. CORDRAY. I very much agree. It is a law enforcement obligation and duty that we have. 

Mr. GREEN. I saw you anxiously desiring to respond to some commentary that was made earlier, and you did not get the opportunity because time was limited, but as it relates to the auto lenders. So would you take a moment please and give your response before I continue with my concerns? 

Mr. CORDRAY. We are not trying to make up problems to address, 

but when we see problems and they are brought to our attention, 

and again, in the auto lending, it is not unique to us. The Justice 

Department feels just as strongly and feels the same way as we do 

about the concerns here. And they have been at this a lot longer 

than we have. We feel that when people go to get an auto loan and 

lending programs have been established by lenders, even though 

they may be executed by dealers, that allow or—and that bless 

high risks of discrimination, based on race or national origin or 

other prohibited characteristics, that is an issue we need to investigate and we need to try to address. If we can find a way to address it that mitigates and roots out the risks of that but at the 

same time allows the industry to do what it does best, which is sell 

cars to people and give them the opportunity to have transportation to get to work, which is so important for people’s economic 

well-being, that is what we are trying to accomplish. And it is a 

balance, and it is—people can look at it and say we are getting the 

balance wrong, or they can say I disagree with this or I disagree 

with that, or the methodology here seems complicated and I think 

you don’t have it right. We always try to listen to that. And if we 

can adjust and take account of their concerns, we try to do it. The 

fact that we do have those discussions frequently— 

Mr. GREEN. With less than 50 seconds left, Mr. Cordray, let me 

go to something quickly. Let me do this quickly. People—there has 

been much said about how powerful you are. But isn’t it true that 

the Financial Stability Oversight Council (FSOC) has within its 

purview the authority to override decisions that you make in terms 

of rulemaking? 

Mr. CORDRAY. They do. 

Mr. GREEN. And— 

43 

Mr. CORDRAY. No other agency is subject to that. 

Mr. GREEN. Only agency subject to this. And isn’t it also true 

that your rules are subject to judicial review? 

Mr. CORDRAY. Absolutely. 

Mr. GREEN. And isn’t it true that while you are confirmed by the 

Senate, you have to be—that you can be removed by the President 

should the President find that you have not behaved properly while 

in office? 

Mr. CORDRAY. For cause, that is my understanding. 

Mr. GREEN. And isn’t it true that you are also subject to audits 

by the GAO? 

Mr. CORDRAY. Yes. Every year, in fact, more so than I think 

many agencies are. 

Mr. GREEN. So while you do have some authority to help consumers, you are still regulated yourself. Is this not true? 

Mr. CORDRAY. I think extensively, including coming here at least 

twice a year and to the Senate at least twice a year and hearing 

your oversight, which I take very seriously. I don’t feel that I can 

sit here, listen to concerns you raise, and then not pay attention 

to them. 

Mr. GREEN. Our time is up. But I want to close with, Mr. Chairman, there was some mention about African-American auto dealers. If an African-American auto dealer engages in invidious discrimination, that person ought to be stopped too. Doesn’t matter 

about your color. You ought not discriminate against people regardless of who they are. 

Mr. HUIZENGA [presiding]. The gentlemen’s time has expired. 

With that, the gentleman from North Carolina is recognized for 

5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Mr. Cordray, I have in my hand the annual employee survey, 

dated December of 2014, of your employees. And question 57 says: 

‘‘How satisfied are you with the policies and practices of your senior leadership?’’ 

Mr. Cordray, less than half of the people questioned were satisfied with the policies of your leadership. This must be very disturbing to you as you consider that these individuals have worked 

with you for the last 4 years and followed these policies. How do 

you account for this? What is happening within your Bureau, and 

why do you believe that you have been given such a vote of no confidence by your own employees? 

Mr. CORDRAY. First of all, I think I would agree with some of the 

employees at that point in time. I thought that there were reasons 

that I wasn’t satisfied— 

Mr. PITTENGER. Excuse me, sir. This is December 2014. 

Mr. CORDRAY. I understand. And what I am saying is— 

Mr. PITTENGER. This is just a few months ago. 

Mr. CORDRAY. What I am saying is, I wasn’t satisfied with our 

senior leadership, including myself, at that time either. We had 

had significant problems with our performance management system. That needed to be changed and fixed. We were in the process 

of doing that and that was a source of a lot of dissatisfaction for 

our employees, and— 

44 

Mr. PITTENGER. You had tremendous autonomy and authority to 

write rules and regulations. They apparently don’t like your policies. 

Mr. CORDRAY. No, no. No, no. Different things here. 

Mr. PITTENGER. Well, no, that is a real thing. 

Mr. CORDRAY. These are operational issues, but I will say we 

have just had the new Annual Employee Survey this year. There 

is a significant positive increase, which I have been pleased to 

see— 

Mr. PITTENGER. Let’s go on to my next question because this— 

I am sure you were disturbed by that. Let’s look at this. Your employees have come forward and said that they have been subjected 

to discrimination, retaliation, and other kinds of maltreatment. 

How do you account for the fact that not one single manager has 

been held accountable for what has been done? 

Mr. CORDRAY. Again, a lot of this stemmed from the performance 

management system, which was unsatisfactory. We have scrapped 

that system, and we are working with our union to overhaul it. But 

I just want to say, since you are raising the AES, the annual employee survey, the most recent numbers indicate that the diversity 

inclusion index from our own employee base is higher than it was 

last year, and higher than it is government-wide. 

Mr. PITTENGER. That is not necessarily a good correlation— 

Mr. CORDRAY. And I take each one seriously. The overall tenor 

at this CFPB is very positive. 

Mr. PITTENGER. Given what we have seen in the various departments and agencies of government, I don’t believe I would use that 

as a reference. 

Now, according to the Bureau, only 3.8 percent of all consumer 

complaints in the last 12 months have received any actual monetary relief. Does this mean that most of these complaints are without merit, or does it mean that you are remarkably deficient in obtaining financial relief for these consumers? 

Mr. CORDRAY. First of all, I would say that the consumer complaint system that we have set up is revolutionary among Federal 

agencies in the Federal Government. We are getting more relief for 

people— 

Mr. PITTENGER. Excuse me, sir. Excuse me, sir, 3.8 percent of all 

consumer complaints, only that number received in the last 12 

months any monetary relief. 

Mr. CORDRAY. A lot of them are—on a debt collection complaint, 

the issue may be stopping the harassing phone calls. On a credit 

reporting complaint, the issue might be cleaning up— 

Mr. PITTENGER. Answer the question. Does it mean that most of 

these complaints are without merit? 

Mr. CORDRAY. No. As I am saying, just listen for a moment. On 

a debt collection complaint, different kinds of relief that are not 

monetary are very important to people, and the same with credit 

reporting. There are a whole bunch of complaints where monetary 

relief is not the immediate issue, although it has monetary consequences. If I get my credit report cleaned up, now I can get a 

loan. That has a lot of consequences, but it wasn’t that money came 

to my pocket immediately. 

45 

Mr. PITTENGER. Let me ask you this, sir. The CFPB has promulgated rules that have impacted credit unions and community 

banks, enforced by the FDIC, the Fed, the OCC— 

Mr. CORDRAY. NCUA. Yes. 

Mr. PITTENGER. Do you see any relief that you have given to reduce the regulatory burden for these entities? I work with these entities on a constant basis. I was on a community bank board for 

a decade. 

Mr. CORDRAY. I know you were. 

Mr. PITTENGER. And yet I see here time and again how they are 

faced with such a burden in compliance that they are hiring more 

compliance officers than loan officers and development officers. 

How do you account for that? 

Mr. CORDRAY. Take our mortgage rules, for example. We had 

special provisions that we created in the rules to create special coverage for community banks and credit unions; 98.5 percent of the 

credit unions are covered by those special provisions. The credit 

unions’ share of the mortgage market is up since our rules. How 

do you explain that? This is positive in many respects for some of 

these smaller entities. 

Mr. PITTENGER. The housing market has come back. I wouldn’t 

credit that with— 

Mr. HUIZENGA. The gentleman’s time has expired. 

Mr. PITTENGER. And community banks have come out of—have 

left that business as well. 

Mr. HUIZENGA. The gentleman’s time has expired. 

Mr. CORDRAY. That is a myth that is not necessarily being borne 

out— 

Mr. HUIZENGA. The gentleman’s time has expired. 

With that, the Chair recognizes the gentleman from Missouri, 

Mr. Cleaver, for 5 minutes. 

Mr. CLEAVER. Thank you, Mr. Chairman. 

Thank you for being here, Mr. Cordray. 

Mr. Cordray, my first question—first, let me associate myself 

with the comments of my colleague, Mr. Green from Texas. I 

thought he spoke quite eloquently for many people in this country. 

My first question is, Director Cordray, can you tell me what the 

approval rating of Congress is? 

Mr. CORDRAY. I don’t know. 

Mr. CLEAVER. I do. It is 14 percent. 

Mr. CORDRAY. Fourteen percent? 

Mr. CLEAVER. Fourteen percent. 

Mr. CORDRAY. Okay. 

Mr. CLEAVER. Fourteen percent. It is up from 9 percent. 

Mr. CORDRAY. That is a 50 percent increase. 

Mr. CLEAVER. My point is, 50 percent of your employees say that 

they are dissatisfied, and 90 percent of the people say they are dissatisfied with us. 

Mr. CORDRAY. And my point about that is if 50 percent are satisfied and 50 percent want us to do better, I want us to do better 

too, and we are working to do better. That is the only appropriate 

way for us to address these issues, and that is exactly what we are 

trying to do. 

46 

Mr. CLEAVER. I agree and I appreciate what the agency is doing, 

and also your flexibility. I said many times, I was in here, as were 

a few of us, when Treasury Secretary Hank Paulson came in, he 

was sent over from the White House, and Fed Chair Ben Bernanke 

and others came in this very room, and told us what was happening and that we only had a short time to respond, and we did 

what we thought was in the best interest of the country. 

I listened to Ben Bernanke this past Sunday on one of the shows, 

and he said he thought that the Great Recession was worse than 

the Depression because of the whiplash that is still being felt. And 

one of the things we did—we did a lot of things trying to bring the 

country out. Obviously, some of those things worked because we 

are a much healthier Nation economically now. We tried and failed, 

I will admit, to reduce the big banks. Too-big-to-fail was something 

we all were interested in but what happened was the red tape has 

become so costly that we have unintentionally pushed more and 

more consolidations and concentrations of the financial services 

world. We didn’t intend to do it. Now, that is not your fault. It is 

not the agency’s fault. 

I went into one of my banks in Marshall, Missouri. Well, there 

is only one bank there. And they put the regulations on a desk so 

I could see how high they were, and it was quite impressive. That 

is—the agency didn’t do that. Congress did that. We did that, albeit 

unintentionally. I looked at—one of my favorite Chairs of this committee was Mr. Oxley, a Republican on the other side. He was a 

fair and good and decent guy. I speak at one of his forums once 

a year. I think he is just—he is great. The Sarbanes-Oxley Act— 

I think it was in the early 2000s; I can’t remember today—but they 

had I think 16 rulemakings. And I guess your agency had hundreds and hundreds of rulemakings to do. 

Mr. CORDRAY. My agency? 

Mr. CLEAVER. Yes. 

Mr. CORDRAY. I don’t think it has been hundreds, no. 

Mr. CLEAVER. But you had more than 16. 

Mr. CORDRAY. Probably, including a lot of little ones, yes. Possibly. 

Mr. CLEAVER. So what has happened is that community banks, 

which no one intended to hurt—not Republicans, not Democrats, 

not anybody. I don’t think there is anybody in this room who intended for community banks to be in the condition that they are 

in, in terms of many of them struggling just to maintain their assets. And what I am hoping to finish my sentence, if everybody disagrees, it would seem to me that it is logical if we had men and 

women of good will sit down here and figure out a way to bring 

some legislation forth to provide relief to the community banks. 

Mr. HUIZENGA. The gentleman’s time has expired. 

With that, the Chair recognizes Mr. Rothfus of Pennsylvania for 

5 minutes. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

Director Cordray, welcome. 

In September 2014, the GAO published a report requested after 

industry participants and Members of Congress raised questions 

about the nature and scope of the Bureau’s data collection activities. The report found that the Bureau has undertaken 14 data colVerDate Nov 24 2008 18:50 Feb 08, 2017 Jkt 099731 PO 00000 Frm 00050 Fmt 6633 Sfmt 6633 K:\DOCS\99731.TXT TERI
47 

lection projects, including the monthly collection of data concerning 

up to 600 million credit card accounts and 127 million mortgages, 

as well as consumer credit reports. This can only be characterized 

as an unprecedented Big Government grab of individual financial 

records. In fact, George Mason University economist Thomas 

Stratmann has estimated that the number of credit card accounts 

for which the Bureau wants to collect consumer information is 

some 70,000 times greater than is necessary for the agency to execute its regulatory mission. 

Leaving aside the fact that Americans have a fundamental interest in not having their purchases tracked by the Federal Government, there is also the risk of data security breaches and the compromising of personal information. When testifying before the committee before, even you admitted that the Bureau’s data collection 

is not secure and could be hacked. 

Since then, of course, we have witnessed the Office of Personnel 

Management (OPM), another Federal Government agency, admit 

that it allowed more than 22 million Americans to have their personal information stolen. So why should Americans trust the Bureau with their personal information anymore than OPM? 

Mr. CORDRAY. First of all, I am always eager to hear from you 

on this issue because I know you have background and expertise 

in information management. What I would say is, first of all, we 

try hard and virtually all of our data collections are done on a sampling basis because we have heard and agree with the concern 

raised about why get more information than you really need to 

monitor the market, which is all we are trying to do. 

Second, I would be the last to say that any database is immune 

from being hacked: OPM, Target, Home Depot, big banks. Everybody is under fire these days. But I do think that we have are making sure that we comply with every reasonable standard that is in 

place across the Federal Government, which, again, is not the beall-and-end-all because OPM got hacked. But our data is less interesting to the hackers because it is anonymized. They can’t get credit card numbers. They can’t get names. They can’t get personal information. 

Mr. ROTHFUS. Are you familiar with the recent article in Science 

Magazine where they used only 3 months of anonymous credit card 

data and they were able to re-identify 90 percent of the individuals 

with some reverse engineering? 

Mr. CORDRAY. This was from what database? 

Mr. ROTHFUS. A recent Science article— 

Mr. CORDRAY. But what database were they talking about? 

Mr. ROTHFUS. I don’t have that— 

Mr. CORDRAY. They weren’t talking about the CFPB’s database, 

I don’t think. 

Mr. ROTHFUS. Going back to the CFPB database, you just mentioned data sampling. Collecting 600 million credit card accounts, 

that is data sampling? 

Mr. CORDRAY. No. The only place we haven’t done sampling is on 

the credit card data because we are simply getting the same data 

that other agencies have already gotten. The industry has told us 

it is more efficient for them to just give it rather than them having 

to create a representative sample. It is a cost issue for them. Now, 

48 

if you are telling me that regardless of the cost, we should do something different, but we are doing exactly what other agencies have 

done. It is the very same data. It is swimming around out there 

in the private sector all over the place, that is for sure, but in our 

case, it is anonymized. And, therefore, it is really not of that much 

interest to hackers I would think because— 

Mr. ROTHFUS. Except to the extent it can be reverse-engineered, 

but Director Cordray—I only have a minute-and-a-half left. 

The Bureau’s consumer complaint database has come under 

heavy criticism since its July 2015 rollout for publishing complaints 

and allegations of wrongdoing without the Bureau actually 

verifying that all of the underlying information is both accurate 

and complete. There have also been reports that the Bureau has 

failed to scrub personally identifying information from some of the 

CCD complaints that have been already been published, thereby 

putting individuals’ financial information at risk. And recent reports from the Office of the Inspector General have identified noticeable inaccuracies and other shortcomings related to the management and maintenance of the database. What does it say about 

the Bureau and the database that there have been so many problems associated with this database? 

Mr. CORDRAY. I think our data collection has been scrubbed pretty hard by the GAO, which did a yearlong review of this at the suggestion of Senator Crapo and others. GAO made a number of recommendations which we have implemented, and with which we 

agree. The Inspector General has looked at it and had further suggestions. 

Mr. ROTHFUS. What kind of processes have you put in place to 

identify complaints that are materially inaccurate or identifying 

complaints that were not submitted in good faith? 

Mr. CORDRAY. In terms of consumer complaints in particular, the 

process is that the complaints are submitted to the company. The 

company has an ability to decide whether that is actually a customer relationship or not. There are various screens on this process. But I want to go back. You know probably better than anyone 

in this room, better than I do, that in the issue of data collection 

and data integrity, it is an ongoing process, and it is a constant 

evolution where you think you have met the standards and then 

something new arises and you are kind of chasing the goal all the 

time. We are trying to do that. We are trying do it very carefully. 

We are trying to keep up with all of the latest standards and we 

have been meeting them. But it is a challenge. I would agree with 

you, it is— 

Mr. ROTHFUS. Going back to an earlier question on— 

Mr. HUIZENGA. The gentleman’s time has expired. 

Mr. ROTHFUS. —credit card accounts. 

Mr. CORDRAY. Yes, the credit card— 

Mr. HUIZENGA. The gentleman’s time has expired. 

Mr. CORDRAY. —for cost reasons. I would be happy to talk further with your staff. 

Mr. HUIZENGA. You can do that on the other time. But thank 

you. The gentleman’s time has expired. 

With that, the Chair recognizes Mr. Ellison for 5 minutes. 

49 

Mr. ELLISON. Allow me to thank the Chair and Ranking Member 

Waters. 

Mr. Cordray, thank you for all the great work you do. I don’t 

want to go into it. Other people have done it. It is somewhat surprising to me that you have to put up with all of this when you 

have done so much good for American consumers, but the reality 

is that American consumers are at work. They don’t have lobbyists. 

They don’t have people to pressure them to pressure you. 

So, anyway, I want to applaud your work on considering a rule 

to end payday lending traps. I hear from constituents, both borrowers and pastors and other leaders in the community, about the 

damage these short-term high-cost loans do. In fact, I had a meeting with a group called Isaiah on these—on payday lending and the 

work you are doing. And on the screen is a map of payday loan 

laws, which shows great gaps in consumer protections. And I want 

to urge you to move forward with a proposed rule, and I have discussed the agency’s March statement with my constituents at this 

meeting with a group called Isaiah in Minneapolis, and at this 

time, my constituents seem to be leaning toward option B, which 

is loans could require a borrower repay no more than 5 percent of 

the consumer’s gross monthly income. Could you give me an update 

on your payday lending rulemaking, and what are you considering 

doing moving forward? 

Mr. CORDRAY. The payday rulemaking is an ongoing rulemaking. 

And it is a difficult rulemaking. It is a surprisingly complicated 

rulemaking that we are trying to work through carefully. What I 

will say is we have put out a framework that is out there that people have been shooting at—and some people like it, and some people have suggestions about it—that we think it is very important 

to establish a principle that the lenders on these loans verify and 

assess the ability to repay of the borrower. If there are going to be 

exceptions to that principle, because maybe people think that is too 

onerous to do, although it is pretty normal in a lending-borrower 

relationship, that maybe we allow certain kinds of alternatives 

where they don’t even have to do that loan. But as long as lenders 

can’t catch consumers in debt traps and roll them over and over 

and over again. 

One of the things I will say that has been notable to me over the 

past year is we have had a lot of faith groups come to see us on 

this issue. They have been Protestant. They have been Catholic. 

They have been Jewish. They have been Muslim. They have been 

fundamentalists. They have been progressive. And they feel very 

strongly about this issue. They feel very strongly that reasonable 

steps need to be taken to address some of the harms they see in 

their congregations, in their synagogues, in their mosques, and 

that has had a powerful effect on me. I think that this is an issue 

that people in the communities who care about others and who see 

the problems coming to them—maybe they are not complaining to 

the financial banking regulator because they don’t realize that is 

who it should be—but they are complaining to their pastor or their 

minister or whomever it may be. We are seeing and hearing this, 

and it is a powerful dynamic, and I think that it matters in terms 

of thinking about how we try to address this problem. 

50 

Mr. ELLISON. I just want to say, I talked to one lady who had 

gotten in deep on some payday loans, and I asked her if she had 

made any complaints. She said no because she feels so stupid that 

she let herself get into this situation. But when I talked to her, she 

wasn’t stupid at all. She was just trying to make a dollar out of 

95 cents. It was just a tough situation. And she was being taken 

advantage of. And much of the money she had to re-borrow to pay 

back the money she borrowed in the first place was really high in 

terms of fees. 

I wonder if you would take my last minute to explain why it is 

that the alternative to good regulation in payday lending is not illegal loan sharking? You hear people say that all the time. 

Mr. CORDRAY. Yes, I do. 

Mr. ELLISON. Could you rebut that, if you please? 

Mr. CORDRAY. Yes. The notion that you are going to drive people 

to further illegal conduct, that is not where most families are going 

to go. There hasn’t been some uptick in loan sharking in the 13 

States that have effectively banned payday lending. It is an interesting experience to see what the real experience has been in those 

States over many years now. But I do think we are trying to make 

sure that there is room for responsible lending, room for community banks and credit unions in particular, but other installment 

lenders who are traditional and have responsible products. It is a 

tough balance. That is why it has been a difficult rulemaking. We 

have been at it quite some time, and we are still hard at it. But 

we are trying to—again, the voices in the room from the faith community have altered the dynamic in powerful ways. We encourage 

those voices. We want to hear more from them on this issue. 

Mr. ELLISON. Well, be quick to do that. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Arizona, Mr. 

Schweikert. 

Mr. SCHWEIKERT. Thank you, Mr. Chairman. 

Mr. Director, you had a bit of a discussion about data. What are 

the data sets? Because the news stories have been that they are 

pretty stunning in size and complication. Have you blinded them 

so you have removed the personal identifiers and made that data 

public so if I am a researcher, if I am a left-wing researcher, a 

right-wing, or just some—an academic, someone doing their postgrad, I have access to this publicly financed collection of data to understand trend lines. What is available to the public? 

Mr. CORDRAY. We typically have worked to anonymize or de-identify data before it comes to us because we don’t need—I don’t need 

to know that it is you or it is me. 

Mr. SCHWEIKERT. —directives from the White House how to do 

it— 

Mr. CORDRAY. —marketing against us all the time, but that is 

now what we are doing. We are trying to monitor the market, not 

the individuals. So that is important. 

But the second point to your question was what again? 

Mr. SCHWEIKERT. My great interest is, as you are creating public 

policy, ultimately what you are doing, and we are having these 

sorts of discussions, it would be neat to have a fact-based database 

discussion because you said something very early on—and I don’t 

51 

think you meant to—that sometimes the data is in the eye of the 

beholder. It is not. The data is the data is the data. It is— 

Mr. CORDRAY. Assessment of the data is what I mean. So, yes, 

good point. 

Mr. SCHWEIKERT. And I am sure that is not what you meant because you have gone out of your way to say you are a data-centric 

agency. Then we all deserve to touch the data and model it and 

stress it and match it against other data sets to see if it is saying 

the same things that you are saying. 

Mr. CORDRAY. Good. So wherever we can, it is our principle that 

if we can make the data more publicly available to everybody so 

they can see for themselves and judge for themselves and maybe 

they see things that we didn’t think of and maybe they see things 

that refute things that we thought we thought of— 

Mr. SCHWEIKERT. Or other paths for better policy. Sometimes, it 

is not a ‘‘gotcha.’’ Sometimes, it is: Hey, when we matched it 

against this, did you see this, this noise? 

Mr. CORDRAY. Yes, first of all, that reinforces, as you make the 

point, the importance of the data. And where we can make it public, for example, the Home Mortgage Disclosure Act (HMDA) data 

is public. We worked on better tools to make that more accessible. 

Mr. SCHWEIKERT. But you have some massive trendline data and 

regional data, and even some, my understanding, it is broken out 

demographically with ethnic tags. Please make that as— 

Mr. CORDRAY. Where we can. Some of it is proprietary data that 

we purchased. We don’t have the authority to make it public. Some 

of it is supervisory or enforcement data that is confidential. But 

wherever we can, our principle is to try to make it public so that 

everybody can make their own judgments about it. 

Mr. SCHWEIKERT. Just as one policymaker, I have great concerns 

about proprietary data making public policy because when the rest 

of us cannot sort of stress it and see it and match it and test it, 

there is something almost unseemly of: Well, we bought this data 

but we have a nondisclosure on it, but we are going to make rules 

that affect your lives. Just understand I think that is a bad direction. 

And this may be a future conversation. Your faith groups. Quick 

anecdote. It was 20-some years ago. We had a check-cashing 

issue—and I have already pitched you on this once before—where 

the fees were outrageous in my community. And guess what happened? A couple of my faith-based groups actually set up little windows at their church and this, and they were cashing checks for a 

minimal fee. And then some of our local regulators said: Hey, why 

don’t we give check-cashing charters to anyone that wants it, the 

Circle K, the 7-Eleven, the church? And the fees crashed. If your 

faith-based groups care about this issue, how do you promote them 

to also step up and participate in those low-dollar short-term loans? 

And that is the next step back to the data sets. Do you have data 

sets that say, hey, here is an incredibly competitive market where 

lots and lots of players of different groups are participating in these 

low-dollar, short-term loans? Look at their cost structure compared 

to areas where we have set up so many regulatory barriers that 

only a handful get to participate. 

52 

Mr. CORDRAY. Yes. I have a lot of the same instincts you do. 

Maybe it comes from having both been in public office as treasurers 

at the local level. I have always been puzzled as to why other lenders don’t compete down the high costs of these payday loans, the 

390-percent interest rates and the like. It doesn’t seem to happen, 

and that is a puzzle to me because it feels like that is at odds with 

the natural workings of the marketplace. 

Mr. SCHWEIKERT. Because we heard our member from New York 

allude to saying, hey—and you actually said the online, some of the 

dodgier access to these short-term, isn’t the ultimate solution here 

actually the market itself allowing many, many actors and players 

to participate in that line of business? 

Mr. CORDRAY. I might have thought so, but it has been 20 years, 

and it hasn’t been happening. 

Mr. SCHWEIKERT. Well, maybe it is time that you come up and 

promote a simplified charter. 

Mr. CORDRAY. I would be glad to. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentlelady from Ohio, Mrs. Beatty. 

Mrs. BEATTY. Thank you, Mr. Chairman. 

And thank you, Director Cordray, for being here today. 

Let me first say that I am proud to associate myself and my comments along with what Congressman Al Green stated about President Obama and his appointment of you. Today, I join my colleagues in congratulating you on many of the successes. As we talk 

about students and those entering college, I thank you for the actions against the Corinthian College chain. Also, I think it is worth 

repeating that $11 billion was recovered for some 20 million American consumers and, more recently, the actions that your office took 

against an Ohio bank for discriminating against African Americans 

with credit cards. 

But let me say this. I have asked every Director who sat in that 

chair a question about Section 342 of the Dodd-Frank Act, OMWI, 

the Office of Minority and Women Inclusion, and I do that for several reasons. For more than 2 decades, I traveled across the United 

States as a diversity consultant with private corporations and with 

government. But also, I think it is important for people who look 

like me to have someone who is standing there advocating for 

them. And my role is to protect the institutional consumer and the 

individual consumer, just as your role is. 

So the question that I have asked everybody is to address what 

attention and actions that they have taken as it relates to OMWI, 

and I think that is very important with you because we have heard 

about the data, the surveys. We have all read the American Bankers Report of 2014 and 2015. And you kind of have a mark against 

the culture of your operation as it relates to fairness in pay for 

women and African Americans. And then so I want you to answer 

what you have done. I noticed most recently you have appointed a 

Director to report directly to you. 

Mr. CORDRAY. Yes. 

Mrs. BEATTY. That is good news from where I sit, and I am going 

to thank you in advance for that. 

And the second thing I want you to answer is most recently, in 

the joint ruling where you can report your diversity either on a volVerDate Nov 24 2008 18:50 Feb 08, 2017 Jkt 099731 PO 00000 Frm 00056 Fmt 6633 Sfmt 6633 K:\DOCS\99731.TXT TERI
53 

untary basis or it could be mandatory, talk to me about the differences and if you think that people will fairly report and accurately report and what you think about it being available to the 

public? Because, clearly, we are gathered here in this hearing because we all have a concern. Those concerns might be a little different depending on what side of the aisle you sit on. But if you 

could address that for me? 

Mr. CORDRAY. Yes. And I have always valued, as you know, Representative, your insight into this because you have spent years as 

an expert in the field dealing with lots of different workplace settings and having a sense of how they—I remember when we 

worked together in financial education at the State level, you 

brought a perspective of how that affects different communities in 

a way that was very valuable for us. For us, in terms of the issues 

within the Bureau itself that have been very real for me and of 

great concern, there is both procedure, and there is substance. The 

procedure, in terms of things like elevating our OMWI, et cetera, 

and showing our concern, that is one thing. We have been doing 

that. And that is important. 

The other thing is substance. The performance management system was the root of a lot of this. We have thrown it out. We are 

working with the union to overhaul that in a way—and the number 

of complaints people have had have diminished significantly accordingly because they are not having that problem that many of 

them were reacting to. 

In terms of pay, there have been pay equity issues at the new 

Bureau, partly because we were in a hurry to start up and things 

didn’t always—you couldn’t always put them on a grid, and we 

found later that some of it maybe was not as it should have been. 

We have adjusted a lot of pay equity grievances and complaints as 

well. I don’t know that they correlated by race or gender. I don’t 

believe they did. But we have been working to correct those wherever they lie. And in terms of the OMWI in terms of the standards 

in the other agencies, we are trying to work hard with the agencies 

to bring the spirit of OMWI, which Ranking Member Waters has 

really impressed upon me, into our agency and to the other agencies. Also, to push on, and this is where, again, you have perspective, how can we push on the financial services industry to itself 

become more diverse and to recognize there is a huge opportunity 

here with their broad consumer base, which itself is becoming more 

diverse? If you don’t keep up with it, you are going to fall behind 

the times in terms of your business success. 

Mrs. BEATTY. I am going to stop you because my time is up, and 

I want to end with saying, thank you. One, we have hit you with 

some hard questions. 

Mr. CORDRAY. It is always fair. 

Mrs. BEATTY. But I want to say to you that I like your words 

that you said, ‘‘I want to do better.’’ And so, we will help you do 

better. 

Mr. CORDRAY. Thank you. 

Mrs. BEATTY. Thank you. 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the gentleman from Wisconsin, Mr. 

Duffy, chairman of our Oversight and Investigations Subcommittee. 

54 

Mr. DUFFY. Thank you, Mr. Chairman. 

And welcome, Director Cordray. Obviously, you are a very smart 

man, and you are working, I think diligently, on what you would 

argue is the protection of consumers. We might disagree on how far 

you have gone or what you have done, but I do think you are trying 

to do the best that you can. 

I have a couple of questions for you, and I know we are getting 

late in the day, and I would just ask you for—I think they are pretty simple questions, and they are yes-or-no questions. Or if you 

don’t know, you can tell me that too. 

Mr. CORDRAY. We will try it. It doesn’t always lend itself to that, 

but I will try. 

Mr. DUFFY. But I think this will. And hopefully, with our limited 

amount of time, you will just give me yes or noes. So, with that, 

have you ever been advised by senior CFPB staff or attorneys that 

eliminating dealer reserve either is or should be a goal of the 

CFPB? 

Mr. CORDRAY. I think that early on we thought that might be one 

of the solutions to the problem. We never said the only solution. 

I think we have moved in the direction of thinking that— 

Mr. DUFFY. My question really is— 

Mr. CORDRAY. —limiting the reserve might be a satisfactory solution. 

Mr. DUFFY. So you were advised by senior staff that you should 

look at eliminating dealer reserve? The answer to that is yes? 

Mr. CORDRAY. What I would say is, on an issue like that, we debate lots of different alternatives. 

Mr. DUFFY. So the answer is yes. 

Mr. CORDRAY. So I would say yes, at some point in that discussion, some people advocated that. Others advocated— 

Mr. DUFFY. So right. 

Mr. CORDRAY. —the policy of the Bureau. 

Mr. DUFFY. That wasn’t my question if there was a policy. You 

were advised in discussions about eliminating dealer reserve. So 

the answer is yes, you were. 

Mr. CORDRAY. Some people thought that was the right answer; 

others didn’t— 

Mr. DUFFY. Let’s not do this. I am not asking you whether some 

people thought it was good or bad— 

Mr. CORDRAY. I think I have answered your question. 

Mr. DUFFY. Okay. I think you have too. 

Have you ever met with senior CFPB staff or attorneys to discuss 

eliminating auto dealer reserve? The answer to that is yes, right? 

Mr. CORDRAY. That was one of the possible solutions to the problem, not the only solution. 

Mr. DUFFY. So the answer is yes. 

Mr. CORDRAY. Yes, there were discussions of that. 

Mr. DUFFY. Okay. Great. Have you ever discussed with senior 

CFPB staff or attorneys any strategy for eliminating dealer reserve? Have you talked about the strategy on how you would do 

that? 

Mr. CORDRAY. I think that follows from your earlier questions. I 

believe that is so. 

Mr. DUFFY. You talked about the strategy. Okay. 

55 

Have you ever discussed with senior CFPB staff or attorneys 

ways to encourage indirect auto lenders to eliminate dealer reserve? 

Mr. CORDRAY. Auto lenders, yes. I would say yes. 

Mr. DUFFY. Have CFPB staff or attorneys ever advised you that 

they were considering rulemaking as a way of potentially banning 

dealer reserve? 

Mr. CORDRAY. That was one of the alternatives, yes. 

Mr. DUFFY. Okay. And, obviously, you did not go for that alternative, correct? 

Mr. CORDRAY. I beg your pardon? 

Mr. DUFFY. You didn’t go with the rulemaking; you went for enforcement, right? 

Mr. CORDRAY. I would say we haven’t ruled it out, but we haven’t 

done that yet, obviously. 

Mr. DUFFY. Okay. 

Have you ever have met with senior CFPB staff or attorneys to 

discuss the impact that a market tipping settlement or settlements 

would have on auto lenders? 

Mr. CORDRAY. I think we have considered that from time to time, 

yes. 

Mr. DUFFY. Have you ever met with senior CFPB— 

Mr. CORDRAY. —say we still think about that, yes. Quite a bit. 

Mr. DUFFY. Yes. Have you ever met with senior CFPB staff or 

attorneys to discuss the risks and benefits of publicizing the proxy 

methodology that the CFPB is using? 

Mr. CORDRAY. I have always been in favor of being as public as 

we can about our approaches to these issues. Again, our approaches are similar to those of other agencies and the Justice Department— 

Mr. DUFFY. Now, let’s try my question. Did you guys, you and 

the senior CFPB staff or attorneys, discuss the risks and benefits 

of publicizing the proxy methodology? 

Mr. CORDRAY. We did publicize the methodology, and therefore 

we would have assessed the risks before doing so. 

Mr. DUFFY. Okay. You approved the CFPB’s settlement with Ally 

Financial, correct? 

Mr. CORDRAY. I did. 

Mr. DUFFY. And isn’t it true that in the Ally matter, the statistical model used by the CFPB to determine whether there was appropriate—there was—I’m sorry about that. In the statistical model 

that you used to determine whether there was a disparate impact, 

you excluded creditworthiness as a variable. Correct? 

Mr. CORDRAY. I don’t recall exactly what the components of that 

were. That may be correct; that may not be correct. As I sit here, 

I don’t have a specific— 

Mr. DUFFY. So is it your testimony that it is possible that in the 

Ally settlement that you reviewed, that you did consider creditworthiness? 

Mr. CORDRAY. I think we have always tried to include the components that relate to creditworthiness in the— 

Mr. DUFFY. Director Cordray, so I am talking about—it is my 

time. In regard to the Ally settlement, did you consider creditworthiness? 

56 

Mr. CORDRAY. We typically have regarded that. What we tried to 

weed out is the prohibited characteristics and factors that would 

be— 

Mr. DUFFY. Mr. Cordray, we didn’t talk about what you do typically. I am asking you specifically with regard to the Ally settlement which you approved, did you consider creditworthiness as a 

variable? 

Mr. CORDRAY. I believe that our methodology attempts to take 

account of creditworthiness and other nondiscriminatory factors in 

order to then weed out the discriminatory factors. 

Mr. DUFFY. Mr. Chairman, I would note my time has expired, 

but I would ask to be recognized for an extended question period 

as permitted by the committee rules. 

Chairman HENSARLING. Pursuant to clause (d)(4) of Committee 

Rule III, the Chair recognizes the gentleman from Wisconsin for an 

additional 5 minutes. 

Mr. DUFFY. Thank you. 

I want to be clear. You did consider creditworthiness in the Ally 

settlement? 

Mr. CORDRAY. I don’t recall now a couple of years ago exactly 

what we were doing at the very moment at which we would have 

reached the resolution there, but our models typically are trying to 

take account of creditworthy types of issues for the customers and 

weed out— 

Mr. DUFFY. Is it your testimony that you don’t recall whether 

you—when you— 

Mr. CORDRAY. I would be happy to work with your staff to give 

you very— 

Mr. DUFFY. So you have no independent recollection right now 

whether that was taken— 

Mr. CORDRAY. I don’t have any specific recollection of—I am not 

sure when you say ‘‘creditworthiness’’ whether you mean there is 

something specific or whether there are a number of factors that 

bear on that, which is how I would regard it. 

Mr. DUFFY. Specific or broadly. We can go either way. 

Mr. CORDRAY. Yes. I am happy to follow up with you on that. 

Mr. DUFFY. Did you ever discuss with or receive inquiry from the 

CFPB staff or attorneys regarding the possibility of accepting any 

controls proposed by Ally, such as creditworthiness of borrowers, in 

your disparate impact analysis in an effort to settle the case? 

Mr. CORDRAY. I am sure that there were discussions of that back 

and forth. I don’t tend to myself be involved in the details of the 

settlement discussions. I leave it to the team that is negotiating 

that. But I am sure that would have been raised on both sides, and 

there would have been discussion of that. 

Mr. DUFFY. But in your internal discussions about the Ally case, 

isn’t it true that the CFPB staff advised you that there was a correlation between an applicant’s trustworthiness and his or her 

dealer reserve? You were advised of that. Weren’t you? 

Mr. CORDRAY. Say that again. 

Mr. DUFFY. You were advised by the CFPB staff that there was 

a correlation between an applicant’s creditworthiness and his or 

her dealer reserve. 

57 

Mr. CORDRAY. A moment ago you asked the question, you said 

‘‘trustworthiness.’’ I wasn’t sure what that— 

Mr. DUFFY. I’m sorry. Creditworthiness. 

Mr. CORDRAY. Creditworthiness and dealer reserve. There probably were a lot of discussions, and that may have been something 

that was raised. I can’t remember a specific conversation, but— 

Mr. DUFFY. Okay. So you are not aware of whether you were advised about the correlation between creditworthiness and dealer reserve. 

Mr. CORDRAY. Again, when this gets into negotiating some of the 

details of a resolution, the team will work with the institution on 

that and with the Justice Department who is a three-cornered 

party in those discussions. 

Mr. DUFFY. This goes to Mr. Scott’s point, though, doesn’t it? 

That you have a factor like creditworthiness which factors into disparate impact and the dealer reserve, and you are not considering 

it? 

Mr. CORDRAY. No, no. That is not what I have said. 

Mr. DUFFY. So I want to be clear on this point. 

Mr. CORDRAY. What I said is, when you say ‘‘creditworthiness,’’ 

you may think that that is like—that is like my size, which is 6, 

2, and it is a firm clear fact. I think it is a set of characteristics 

and a set of criteria that may vary depending on—Ally might have 

had a view of what goes into creditworthiness. We might have had 

a view— 

Mr. DUFFY. So for the CFPB’s analysis, did you look at creditworthiness? Do you have your own, not mine, no one else’s, but Director Cordray has a view of what creditworthiness is and you applied that to the Ally settlement? 

Mr. CORDRAY. Look, I think, generally, creditworthiness is a fair 

consideration when people are making a loan. I believe that we try 

to find ways to take appropriate account of that in our approach 

to these issues. 

Mr. DUFFY. And it can account for the differential in the dealer 

reserve, which your staff told you. Right? 

Mr. CORDRAY. That would be one of the points of contention that 

people would have. 

Mr. DUFFY. Did your staff not advise you of that? 

Mr. CORDRAY. No, no. Again, it wouldn’t be whether creditworthiness itself is on or off the table so much as what kind of factors 

bear on that and which ones are relevant and which ones are not. 

And, again, somebody like Ally and us and DOJ may have different 

views of that, and we try to work them through and talk them 

through. It is just not quite as easy as a simple on/off switch on 

creditworthiness. I don’t know how to—I would love to just do yes 

or no with you on this, but it is fairly complicated. 

Mr. DUFFY. I would love that too, but—and just my last 50 seconds. I think that it is important when your government makes 

rules, whether it is in this institution or in the CFPB, they are 

very clear. And so when you are advised that you can actually do 

a rulemaking in regard to this issue and you choose not to, but you 

try to make rules by way of enforcement, people don’t know what 

the rules are. So the heavy hand of the CFPB comes bearing down 

on an institution making claims of racism, and if you think this is 

58 

so important, why wouldn’t you do a rule? Why wouldn’t you let 

people offer comments? Why wouldn’t you give guidance? 

Mr. CORDRAY. It is a fair question. The tool-making choice for us 

is a difficult choice. Where we think a matter is going to involve 

more in terms of specific facts and circumstances, it is harder for 

us to— 

Mr. DUFFY. My time is up. 

Mr. CORDRAY. —write a rule at the outset. We want to get more 

experience with that. That is what we have done here. You may 

think, in retrospect, it wasn’t the right answer. Maybe years from 

now, I will look back and think it wasn’t the right answer, but that 

is how we have tried to proceed. 

Chairman HENSARLING. The time of the gentleman has expired. 

I ask unanimous consent that the gentleman from Texas, Mr. 

Green, be recognized for 5 minutes. 

Without objection, the gentleman is recognized. 

Mr. GREEN. Thank you, Mr. Chairman. 

Mr. Cordray, are you a lawyer? 

Mr. CORDRAY. Am I a lawyer? 

Mr. GREEN. Yes. 

Mr. CORDRAY. I am. I haven’t really been active in practice for 

a while. 

Mr. GREEN. And so, as a lawyer, do you understand that a settlement is an agreement? 

Mr. CORDRAY. Yes, it is. 

Mr. GREEN. And an agreement by definition means that parties 

have reached a conclusion that they find themselves amenable to; 

they can go forward with that conclusion. Is that a fair statement? 

Mr. CORDRAY. I think that is fair. It doesn’t mean they all agree 

with each other on all the subparts, but, yes, I think that is fair. 

Mr. GREEN. And is it true that in the Ally case, there was an 

agreement, a settlement, which means that the offending party— 

this is my terminology—agreed to certain penalties and certain 

payments such that this could be resolved and such that persons 

who had been harmed could be justly compensated? 

Mr. CORDRAY. And notably also certain changes in their practices 

going forward, which may be more valuable in the long run than 

the payments made. 

Mr. GREEN. But the gravamen of my contention and the gravamen of this discussion is agreement. This is not something that the 

party, who has now found itself in a position to make these payments, it is not something that the party refused to do, refused to 

sign, said: I won’t deal with you. Take me to court. I don’t want 

to cooperate with you. 

There was a certain amount of cooperation in this. Is this correct? 

Mr. CORDRAY. They could have done that, but they didn’t. 

Mr. GREEN. They did not. And here is what I find from my review of some intelligence, the CFPB and the DOJ determined that 

more than 235,000 minority borrowers paid higher interest rates 

for their auto loans between a certain period of time, April 2011 

and December 2013, because of Ally’s discriminatory pricing system. Now, this is not something that Ally had to acquiesce to. This 

is something Ally chose to do for whatever reasons it chose to do 

59 

this. And by the way, Ally is not without a battery of lawyers. Is 

that a fair statement? 

Mr. CORDRAY. That is a fair statement. 

Mr. GREEN. And their lawyers, I assume, are capable, competent, 

and qualified persons who could easily decide that this is better 

suited for litigation than for some sort of settlement resolution. 

Fair statement? 

Mr. CORDRAY. I think so. 

Mr. GREEN. So I see in this, the largest ever settlement in an 

auto loan discrimination case, an opportunity for us to send a message to others that if you discriminate, we are going to come after 

you. This is lawful. It is ethical. It is righteous. People who discriminate ought not be allowed to do so with impunity, and others 

ought to get the message that you if you do it, you too will have 

to pay a price. I find very little to complain about with this decision 

because the party paying agreed to make the payments, agreed to 

the settlement, which by the way is large. But when you do a great 

amount of harm, you should pay a great amount in penalties. I am 

showing here that $18 million in civil penalties were agreed to. 

So, Mr. Cordray, if you have a conversation about your options, 

is that in some way unethical if you talk about options in rulemaking? My assumption is that you will look at the entire range 

of options when discussing rulemaking. Is this true? 

Mr. CORDRAY. I don’t think we could act responsibly if we didn’t 

discuss all the options and then try to make our best decisions, 

which may or may not be the right decision. Somebody else might 

disagree, but, yes, we talked through the options. I don’t think 

there is anything wrong with that, and I think it is the right way 

to proceed. 

Mr. GREEN. And in talking through options, do you sometimes 

talk about options that the industry might not find favorable? 

Mr. CORDRAY. Sure. 

Mr. GREEN. Do you also sometimes discuss options that consumers might not find favorable? 

Mr. CORDRAY. I am sure that is the case. 

Mr. GREEN. But that is your duty. 

I yield back the balance of my time. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from South Carolina, Mr. Mulvaney. 

Mr. MULVANEY. Very quickly just to follow up, Mr. Cordray, you 

all had a little bit of leverage over Ally, though, didn’t you? It 

wasn’t exactly a typical negotiation. They needed Federal Reserve 

approval, didn’t they? They needed approval from the Fed that 

your deal would settle with them? That was leverage you had over 

them you wouldn’t have over other folks? 

Mr. CORDRAY. I don’t put it that way. What I would say is this. 

We pursued an auto discrimination matter— 

Mr. MULVANEY. That is not my line of questioning. I just want 

to follow up. They needed to have a deal with you in order to get 

Federal approval. In fact, they got their Fed approval 4 days after 

their deal with you. Right? Do you think that factored at all into 

the negotiations? 

Mr. CORDRAY. Here is what I would say. That is what they wanted. We had an open discrimination matter against them that they 

60 

were resistant to resolving, and then suddenly they decided they 

wanted to resolve it. That is their choice. That is not me. I didn’t 

create the leverage. I didn’t set that up. 

Mr. MULVANEY. You mentioned something before with Mr. Duffy 

about creditworthiness, that you have your measure and that DOJ 

has theirs, and Ally might even have theirs. 

Mr. CORDRAY. Yes. 

Mr. MULVANEY. I buy that. You all didn’t use anybody’s creditworthiness in your statistical model on Ally, did you? 

Mr. CORDRAY. I don’t believe that is the case. Again, it is not so 

easy to say creditworthiness like it is a specific packaged fact. 

Mr. MULVANEY. You all have a measure of creditworthiness. 

Right. Let’s use credit scores. Did you use credit scores in your statistical analysis of the Ally case? 

Mr. CORDRAY. I don’t believe we did. 

Mr. MULVANEY. Why not? 

Mr. CORDRAY. There are a lot of things we could do. 

Mr. MULVANEY. I recognize the fact that creditworthiness may 

have a lot of different pieces and parts to it, but it would strike me 

that everybody would agree that credit scores would be part of 

creditworthiness. Right? 

Mr. CORDRAY. There are a lot of financial institutions we have 

seen that don’t use credit scores as the bright indicator of creditworthiness. 

Mr. MULVANEY. Do you use it in your analysis? 

Mr. CORDRAY. No, I am saying, for example, the FICO score is 

the most well-known credit score. A lot of banks have moved away 

from that. They think it is too crude, and they have more nuanced 

approaches to creditworthiness that they think are more refined 

and better from their standpoint. So again, creditworthiness is a 

more elusive concept, and just to say credit scores equals it is not— 

Mr. MULVANEY. Using whatever definition of creditworthiness 

that you want to use, did you use a creditworthiness analysis as 

part of your statistical model in the Ally case? 

Mr. CORDRAY. I think we try to use criteria that we think will— 

Mr. MULVANEY. I didn’t ask you about that. I am asking what 

you actually did. 

Mr. CORDRAY. I am saying that is what we tried to do. 

Mr. MULVANEY. Mr. Cordray, listen, we can do this all day because I will get 5 minutes. I am not asking what you tried to do. 

I am simply asking you a straight question. Did you use creditworthiness, however you want to define that, in your statistical 

analysis of the Ally case? 

Mr. CORDRAY. I think we used factors that tried to reflect that 

aspect of the transaction, yes. Ally might disagree. You might disagree. 

Mr. MULVANEY. Listen, I am sure there are a lot of things we 

disagree on, but I am actually trying to find what we agree on. Did 

senior staff or your attorneys ever tell you that your disparate impact methodology will at times overstate disparate impact? 

Mr. CORDRAY. I think there is always a risk that any methodology might either overstate or understate. 

Mr. MULVANEY. I didn’t ask you that question. I asked you if 

your people told you that. 

61 

Mr. CORDRAY. One of the things you are trying to do is to get 

it as right as possible, and depending if you compare it to the mortgage universe, it might seem to overstate. 

Mr. MULVANEY. Wonderful. Does your methodology at times 

overestimate disparities? 

Mr. CORDRAY. We don’t intentionally overestimate anything. We 

try to get it right. 

Mr. MULVANEY. Okay. You try to get it right. Do you ever get 

it wrong? 

Mr. CORDRAY. I think we may. Sometimes over, sometimes 

under; I am not sure that it is systematic either way. 

Mr. MULVANEY. Did the senior staff or your attorneys ever advise 

you that the Bureau had evaluated an alternative methodology for 

estimating racial disparities, the disparate impact analysis, and 

that this alternative methodology reduced the disparities for several racial groups, including African Americans and Hispanics? 

Mr. CORDRAY. I think we have seen different methodologies that 

can lead to different results. 

Mr. MULVANEY. I will take that one as a yes. 

Mr. CORDRAY. So I will just say, some of them we think are illegitimate. Some of them we have decided there may be different 

reasonable approaches to this that may differ from one another. 

Mr. MULVANEY. Did your attorneys or staff ever tell you they 

thought you had serious litigation risk in the Ally case? 

Mr. CORDRAY. Say that again? 

Mr. MULVANEY. Did your senior staff or attorneys ever tell you 

they thought you had serious litigation risk in the Ally case and 

that they wanted you to seek prelitigation settlement? 

Mr. CORDRAY. I think we have litigation risks every time we pursue a matter. 

Mr. MULVANEY. Got you. I didn’t ask you that question either. 

Mr. CORDRAY. I would say we had that risk in Ally. We have it 

in every matter, and it is something that we have to take account 

of and think about. So does the institution, by the way. 

Mr. MULVANEY. In my last 30 seconds, I want to follow up with 

something Mr. Ellison said. Your own database, your complaint 

database, shows that payday loans are one of the least complainedabout financial products. It is the only product, I understand, 

which has an actual year-over-year decrease in the number of complaints from 2014 to 2015. So if people aren’t complaining, and you 

haven’t brought to us any peer-reviewed studies saying that it is 

actually a problem, why are you considering rules that will dramatically reduce short-term small-dollar credit to people who need 

it? 

Mr. CORDRAY. What I will tell you is in the last year, the voices 

of the faith community, who hear these complaints from their congregation members, have gotten louder, and I would love to have 

them come and visit you and tell you what they see and hear 

among their congregations and their parishes and in their synagogues and in their mosques because they are very concerned about 

this problem, and I have found their voices to be powerful. I would 

like you to hear those voices as you are assessing— 

Mr. MULVANEY. I will do that just as soon as the lady down the 

street, down the hallway today on Planned Parenthood will listen 

62 

to the faith community about funding Planned Parenthood and 

abortion. How about that? Is that a deal? 

Mr. CORDRAY. I don’t have anything to do with Planned Parenthood. 

Mr. MULVANEY. I can’t believe you just told us you are making 

decisions based upon meetings with a faith-based community on a 

selective basis, but we will leave that for another day. 

Mr. CORDRAY. Wait a minute. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Kentucky, Mr. 

Barr. 

Mr. BARR. Thank you, Mr. Chairman. 

Director Cordray, welcome back to the committee. And I would 

first just like to take a little issue with your testimony about the 

relative health of the mortgage market and the recovery that you 

cited, and you cited Federal agency data and in particular Home 

Mortgage Disclosure Act data. 

Mr. CORDRAY. Yes, everybody agrees that is the best data 

around. 

Mr. BARR. I understand, but the data is at least mixed because 

the National Association of REALTORS® reported that in the first 

quarter of 2015, which appears to be a pretty recent data, only 1.2 

percent of originated mortgages did not fit the definition of qualified mortgages, so there is at least a fear of liability in terms of 

originating non-QM mortgages which I hope the Bureau would recognize— 

Mr. CORDRAY. Can I make a point on that? 

Mr. BARR. I will let you. I want to just finish my point quickly, 

and I will be happy to let you respond. The other part of that data 

is that a third of the National Association of REALTORS® survey 

respondents reported being unable to close mortgages due to a requirement of the Qualified Mortgage rule, and what I would specifically like for you to respond to is maybe the explanation for the 

health in the data that you are citing is because of the GSE exemption. 

The problem with the financial crisis was the originate-to-distribute model. As you know, I am promoting a portfolio lending 

model which would encourage risk retention, which was a core policy of the Dodd-Frank Act. The GSE exemption, which is the reason for the relative health in the data that you are citing, is exactly 

why we got into the mortgage financial crisis to begin with, originate to distribute to Fannie and Freddie. That is why your data 

conflicts with the National Association of REALTORS®’ data. You 

can respond. 

Mr. CORDRAY. I don’t think it conflicts at all. What in fact, you 

are seeing is that mortgage lending is up for home purchase mortgages. What varies in the market, of course, are refinancings. 

Those go up and down with the interest rate, so you can’t really 

say much from that. In terms of the legal risk being so prominent 

from the Qualified Mortgage rule, I met with the Mortgage Bankers Association recently, the top CEOs of mortgage units, top 40 

companies, and I asked them specifically: ‘‘Have any of you had a 

single lawsuit on the Qualified Mortgage rule?’’ It has been 21 

months now—21 months—and not a single lawsuit. Not one. All 

63 

this foaming at the mouth about legal liability really did not pan 

out. It was an overreaction. 

Mr. BARR. I understand if you are in safe harbor, you are not at 

risk. The point is that access to mortgage credit is not available if 

you are going to portfolio a loan right now, but there is a safe harbor if you sell it to Fannie and Freddie, which is how we got into 

the problem in the first place. So the policy is counterproductive in 

my opinion, not only in terms of constraining access to responsible 

mortgage credit that is retained by the institution, but you are actually incenting with the GSE exemption, the kind of risky practices that caused the financial crisis. I do want to— 

Mr. CORDRAY. I see the point, but two things. First, while they 

are in conservatorship, which is a constraint, very significant. Second, we have just expanded the ability of smaller institutions, community banks and credit unions, to do more portfolio lending, 

which I agree with you; I think it is very positive, and I think they 

think it is very positive. 

Mr. BARR. But it doesn’t do what my bill would do, which would 

be to allow a petition process. Let me get to TRID quickly. As you 

may recall, Congresswoman Maloney and I and 252 of our colleagues sent you a letter on May 22nd requesting a grace period. 

We met. We asked if closing attorneys and REALTORS® and title 

insurers could count on a grace period. You said they would be 

happy, but what happened the next day was that you would engage 

in a policy of sensitive enforcement, which gave unfortunately no 

clarity or—and I am just telling you what my constituents were 

telling me. I am not opining. I am telling you— 

Mr. CORDRAY. I would like to clarify it today then. 

Mr. BARR. I am telling you what the closing attorneys are telling 

me back home in Kentucky. They are saying we are going to have 

to do two closings—one with a HUD settlement statement; and one 

that is TRID-compliant—which doesn’t decrease the amount of disclosures that are going to be required for the homeowners and 

home buyers to actually review. It is not a simplification. We are 

still trying to get this right. All we want from the Bureau is not 

just a promise of sensitive enforcement but a grace period, a transition period. And the question for you is, are the closing attorneys, 

the REALTORS®, the title carriers, can they count on you to not 

bring an enforcement action for a period of, say, 6 months while 

they are trying to sort through the complexity and trying to get up 

to speed? 

Mr. CORDRAY. Look, I don’t think it is appropriate for me to say 

I won’t enforce the law when my job is to enforce the law, but I 

think what I have said says to them that we are going to be diagnostic and corrective, not punitive, in that early period. I think if 

they read between the lines, they will understand that we are trying to allow them to have the latitude that they have asked for. 

And I think people should be able to take ‘‘yes’’ for an answer. 

Mr. BARR. With my remaining time, on short-dollar loans, one of 

my constituents testified, a small-business owner, that she was 

going out of business as a result of your proposed rulemaking here. 

Mr. CORDRAY. What kind of person? 

Mr. BARR. A small-dollar lender, a payday lender. The attorney 

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64 

cratic Governor, his financial institutions department and the 

Democratic General Assembly in Kentucky all reformed our payday 

lending and usury laws. Why don’t you trust the Kentucky Democrats who have put these rules into place? What do you know that 

they don’t know? 

Mr. CORDRAY. To me, this isn’t a Democrat or Republican issue. 

That is not the way I look at things. 

Mr. BARR. I understand. 

Mr. CORDRAY. There are different States that have different approaches, but if you look at it on a national basis, there are a ton 

of rollovers. There are a lot of consumers in a lot of trouble. By the 

way, the last time I was here, you asked me about Bath County 

in Kentucky. 

Mr. BARR. Thank you. 

Mr. CORDRAY. Under our new provision, it is all rural. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Colorado, Mr. Tipton. 

Mr. TIPTON. Thank you, Mr. Chairman. Director Cordray, according to Treasury’s website, over 5 million recipients have enrolled in 

the Direct Express Program, which is used by Federal and State 

Governments to disburse supplemental security income and Social 

Security benefits to those enrolled. According to the U.S. Treasury, 

it costs $1.03 to issue a paper check, and only 10.5 cents to be able 

to use electronic payments like Direct Express. Yet, the CFPB has 

proposed a prepaid account rule that would fundamentally change 

how government cards, including a statement at the top to require 

disclosure to all recipients that the recipient does not have to accept a government benefit card. I guess my question is, this has 

been popular. It seems to have worked. Is this new policy going to 

create some disharmony and actually disincentivize people from 

being in the program? 

Mr. CORDRAY. I have the same reaction you do. I think the fact 

that government programs at the Federal, State, and local level, 

county, city, have moved towards benefits on cards as opposed to 

issuing paper checks is beneficial to consumers in many ways. I 

don’t think our prepaid card rule is affecting those government programs, but if it is, I would be glad to have our folks follow up with 

your staff and make sure that we can give you assurances in that 

regard. If it is a problem, then we still have that rulemaking pending, and we could take account of that as we finalize it. I would 

be happy to have that discussion. 

Mr. TIPTON. Good. I would appreciate that. I think there is a 95- 

percent approval rating with those government cards that is going 

out. 

Mr. CORDRAY. It is more secure, better for the consumers. They 

don’t have to deal with cash or check cashing and other things. I 

agree with that. 

Mr. TIPTON. Yes. And, Director, the proposed rule for prepaid accounts has raised some serious concerns over the treatment of credit futures for prepaid products. Consumers are using these products obviously to be able to meet their everyday needs. In my own 

district in Colorado, we have Delores from Pueblo who wrote that 

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65 

ily or to be able to pay a utility bill. I am concerned that the lack 

of understanding of how this product is used by folks back home 

will lead to its elimination. What is the CFPB’s plan to be able to 

make sure that consumers, like Doris in Pueblo, continue to have 

access to overdraft protection? 

Mr. CORDRAY. So in terms of prepaid cards, the rulemaking that 

we have under way—and it is still pending, so it is not final—is 

intended to create consumer protections for those cards that have 

never existed. I think people reach into their wallet, and they get 

out a debit card or prepaid card or credit card, and they assume 

they have the same protections. They don’t. Prepaid cards have 

nothing. If you have errors, you can’t get them corrected. If you 

have disputes, you can’t get them resolved. You have no rights in 

that regard. So that has been the focus of our rulemaking. 

In terms of overdraft on the prepaid cards, what we proposed in 

our initial proposal that we are still working through and thinking 

about, was that those cards should be treated similar to credit 

cards in terms of whether they are credit or not if they involve 

overdraft. That was the proposal. We have gotten a lot of comment 

on that both ways, and we are working through that. 

Mr. TIPTON. And just making sure that is available, and I hope 

that you are taking into consideration the concern this creates in 

terms of the industry almost unanimously noted that they will stop 

offering overdraft features with some of the— 

Mr. CORDRAY. By the way, very few in the industry offer overdraft now. Almost unanimously they do not offer overdraft, so it is 

a very small portion of the industry that this would affect. But the 

proposal at least was to offer such people credit-card-like protections like in the CARD Act. We have seen both criticism and endorsement of that, and we will have to size that up. 

Mr. TIPTON. Director, I would like to go back a little bit to the 

conversation you were having with Mr. Rothfus and Mr. 

Schweikert in regards to some of the data that is coming out. The 

government has suffered obviously some very embarrassing security and privacy breaches recently and lost sensitive data for millions of Federal employees. And CFPB is about to issue a new 

Home Mortgage Disclosure Act rule, which will require lenders to 

be able to submit detailed private information on their customers. 

With that in mind, can you specify what steps that the Bureau is 

taking to be able to protect homeowners from data breaches? 

Mr. CORDRAY. Yes, that information for our National Mortgage 

Database, if that is what you are referring to, will be de-identified 

and anonymized before it comes to the Bureau. And that is exactly 

how we are trying to handle it. Therefore, I think it is of little interest to hackers because they would have to, as the Congressman 

was mentioning earlier, go through an arduous re-identification 

process, if they even could do it, as opposed to other databases that 

companies have where if they can hack into those, they can get 

right into personal information and the like. 

That is how we are trying to handle that. It has been looked at 

by the GAO and the Inspector General. I think it is a responsible 

approach. If people have further suggestions on it, I am glad to 

hear them. 

66 

Mr. TIPTON. Yes. The U.S. Chamber of Commerce put out a 

statement that the Bureau is putting consumer personal information at risk by collecting enormous volumes of identifiable information yet failing to be transparent or instill confidence that it has 

recognized and addressed cybersecurity risks posed by such a vast 

amount of data. 

Mr. CORDRAY. Yes. I don’t think that is really accurate to the details of what we are doing. I understand the statement for rhetorical purposes. I would be happy to talk to the Chamber about it. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Texas, Mr. Williams. 

Mr. WILLIAMS. Thank you, Mr. Chairman. 

And thank you, Director Cordray. I am a small business owner, 

have been for 44 years, and I am a car dealer. And like my colleague, Congressman Green, I stand up for customers every single 

day. You are not the only one who stands up for customers. I want 

to go back to Section 1029. We talked about it a little bit today, 

but let me read what it says: The Bureau may not exercise any 

rulemaking, supervisory enforcement or any authority, including 

any authority to order assessment over a motor vehicle dealer— 

that is me—and this predominantly engages in the sale and servicing of motor vehicles, the leasing and servicing of motor vehicles 

or both. I am kind of new to this committee, but I am not new to 

the automobile industry. My family has been selling cars for over 

70 years, and we have done a great job, and we have taken care 

of a lot of people. 

But I think you and just about everyone here knows that. Now, 

I know we talked about this issue a lot, so there is certainly a lot 

to talk about when it comes to this topic. We can talk about the 

flawed data we have talked about today used to claim disparate impact or the fact that we have established the auto dealers are exempt, they are exempt from the CFPB supervision, or the way in 

which you released your auto finance guidance in 2013, or even 

how your agency has paid out claims to discriminated customers 

with little oversight. 

But I wanted to take this time today instead to educate you a 

little bit on what it means to be in the retail industry, what it 

means to be a small-business owner in America today, what it 

means to be an auto dealer, and, quite frankly, what it means to 

be a small-business owner on Main Street in America. My family 

business employs about 150 people. Just like any retail business in 

America, the cost of owning a business is not cheap. We have to 

worry about paying our employees, our utility bills, our credit, our 

debt, and making sure we have plenty of inventory for our customers to choose from. 

Now if I sold every car at your price, at the wholesale price, 

which is what I think the Bureau would like me to sell it at, I 

would be out of business in no time. 

Mr. CORDRAY. I wouldn’t like that, by the way. 

Mr. WILLIAMS. You are not giving that opinion. But you know 

what, I have to make a living. Frankly, I have to be profitable. I 

have to provide for my family. I have to take care of my employees. 

No business in America should be told by the Federal Government 

67 

to sell their product at a given price. I think you know this. I think 

you really believe this. 

But the financing part of buying a car is just one piece of the 

equation. Other factors include what the borrower pays for the vehicle or what trade-in value they receive. Every deal is different. 

No two are the same. But because of the jurisdiction of the CFPB, 

you have focused this on the financing aspect of purchasing a car, 

and I think it is obvious why. I think what your agency is trying 

to get at is forcing auto lenders to offer a flat fee to dealers. Is that 

what you are trying to do? 

Mr. CORDRAY. We have said that is one alternative, but it is not 

the only one. 

Mr. WILLIAMS. Essentially, when you do that, you eliminate the 

dealer reserve. 

Mr. CORDRAY. No, I understand that. We are not saying that is 

the only alternative. 

Mr. WILLIAMS. If you do that, you eliminate the dealer reserve 

and ultimately telling me what I can sell my product for. So what 

we have seen with Ally Financial, Honda Financial, and just yesterday, Fifth Third Bank, is to force them to change their pricing 

and compensation models and in turn avoid stricter fines, but ultimately you will put these dealers at a competitive disadvantage by 

capping the rates and putting them out of business. In fact, some 

lenders have even told me personally that they are discontinuing 

indirect auto lending because of the CFPB’s campaign and increased compliance risk. They are scared to death. In other scenarios, some lenders, as is the case of Honda Financial, have responded by overhauling their loan pricing in ways that will likely 

mean higher costs for some borrowers. 

So, Director Cordray, who does this hurt? You think about it. It 

hurts the consumer. The very people you are trying to protect, you 

are turning back and hurting them. Really quickly, yes or no, we 

have covered a lot of questions—are you really trying to eliminate 

dealer reserve? 

Mr. CORDRAY. When we first came to this problem, when we said 

this, that is one alternative, but it is not the only one, as we have 

come to understand the problem better. So to say that we are simply trying to eliminate dealer reserve, that would be—no, that 

would not be accurate. That is one alternative, but limiting it 

would be an alternative. 

Mr. WILLIAMS. Do you have an idea what to replace it with, with 

the dealers? 

Mr. CORDRAY. What I would say is this, if you set up a lending 

program where you are going to allow people to mark up rates and 

be financially incentivized to do so, and the consumer is none the 

wiser, we believe it creates great risk of discrimination. All right? 

We want to try to minimize that and limit as much as possible. 

Having said that, if the preexisting regime allowed for a certain 

amount of discrimination, where some borrowers are charged more 

than others, and you eliminate that, some of the others may now 

be charged a little bit more— 

Mr. WILLIAMS. Do you talk to dealers like me on how to have a 

better idea? Nobody has talked to me. 

68 

Mr. CORDRAY. We were very careful about not going out and 

doing a lot of talking to dealers because we want to respect the line 

that Congress drew. Again, it is not a very logical line— 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair wishes to advise all Members that there are votes pending on the Floor. Regrettably, we anticipate clearing only two more 

Members before adjourning: Mr. Poliquin and Mrs. Love. 

Mr. Poliquin is now recognized for 5 minutes. 

Mr. POLIQUIN. Thank you, Mr. Chairman. 

Mr. Cordray, thank you very much for being here. I appreciate 

it. Your organization was created about 5 years ago by DoddFrank. You have about 1,400 employees, and in that short period 

of time, sir, you are one of the most powerful regulators in America. You regulate companies that provide automobile loans and 

home mortgages, credit cards, student loans, and you reach into almost every family in America. Now, we all know that these departments and agencies throughout Washington have their inspectors 

general. Now these are important functions to make sure at every 

organization there is no fraud or abuse or wasting of taxpayer dollars. 

I have a list right here, Mr. Cordray, of 76 departments and 

agencies in the Federal Government. Each one of them has their 

own inspector general, except the CFPB. You don’t. You share one 

with the Federal Reserve. The Federal Reserve, as we all know, is 

involved with monetary policy and regulating banks as institutions. 

Your agency, on the other hand, is involved in regulating financial 

products that are sold to consumers. So can’t we agree right now 

that your functions are so different that you deserve your own inspector general, sir? 

Mr. CORDRAY. So if I heard you right, you said 76 departments 

and agencies have their own inspector general, and we are the only 

one that doesn’t? 

Mr. POLIQUIN. That is correct. 

Mr. CORDRAY. I don’t believe that is correct. 

Mr. POLIQUIN. Here is the list right here, Mr. Cordray. 

Mr. CORDRAY. I don’t think that is correct. Many, many agencies 

share an inspector general— 

Mr. POLIQUIN. —that is your testimony. Okay. Well, fine. I will 

let you look it up just the way I did, and you will find you are the 

only one. My question to you is the following. 

Mr. CORDRAY. We will get back to you on that. I don’t think that 

is correct. 

Mr. POLIQUIN. Don’t you think it makes sense for you to have 

your own inspector general to look over your shoulder? So that the 

taxpayers know they are being fairly treated and that you are held 

accountable? 

Mr. CORDRAY. I haven’t dealt with inspectors general until I 

came to the Federal Government. In the State government, as you 

and I were, we had the State auditor who would look at us every 

year, and that was appropriate and helpful. 

Mr. POLIQUIN. It is my time not yours, sir. Amtrak, the Postal 

Service, the EPA, even the Peace Corps has their own Inspector 

General. You don’t. 

69 

Mr. CORDRAY. That may be. That is up to Congress. Congress decides that. 

Mr. POLIQUIN. Let’s talk about transparency. Let’s talk about 

transparency, sir. In your own semi-annual report on page 132, you 

make it very clear that it is important to be transparent in your 

operations, and I happen to agree with that. You told us 6 months 

ago when you came here that you were going to make sure you 

posted on your website all your vendor contracts. We went to your 

website, and guess what? We didn’t find contracts. If I am not mistaken, you have contracted about $60 million for the next 3 years 

on management consulting contracts with a number of different 

firms. Where are those contracts? 

Mr. CORDRAY. I believe that all of our contracts are posted on 

USA.gov, which is I believe what Federal law requires, except for 

contracts with other parts of the Federal Government. And in the 

start-up phase with Treasury, we had a lot of contracts with Treasury itself. 

Mr. POLIQUIN. Here is what I would like to do. We are going to 

get in touch with your office. I would like to see those contracts. 

Mr. CORDRAY. If there are any contracts that you think are not 

posted as they should be, I will be glad to try to take account of 

that— 

Mr. POLIQUIN. Let’s shift gears here. You sit on an organization, 

on a board called the Financial Stability Oversight Council (FSOC). 

You sit on there with Treasury Secretary Lew, the Chair of the 

Federal Reserve, and also the Chair of the SEC, along with other 

organizations. 

Mr. CORDRAY. That is what the law requires. 

Mr. POLIQUIN. Now, FSOC is responsible for determining which 

non-bank financial institutions are too-big-to-fail, meaning if they 

get in trouble, then the taxpayers are on the hook to bail them out. 

We have about $24 trillion in this country that is managed by pension fund managers and mutual fund companies, and asset managers. And you know if one of those mutual fund companies isn’t 

performing well, an investor can call up on an 800 number, replace 

that account with another asset manager, so there is no risk to the 

market if one of those asset managers gets in trouble. Now, here 

is what I worry about. I am sure you know a fellow by the name 

of Douglas Holtz-Eakin. He is the former Director of the CBO, 

which is a nonpartisan organization. And you have seen the study 

I am sure, from 2014, which says if asset managers that handle the 

retirement savings, $24 trillion of retirement savings in this country, if those asset managers, that pose no risk to the economy if 

they get in trouble, if they come under the guise of the Dodd-Frank 

regulations because you folks designate them as SIFIs, then the 

rate of return long term of those retirement savings will go down 

about 25 percent. 

Now, where is the compassion? We are supposed to help small 

investors. You know what I worry about, Mr. Cordray? I worry 

about a nurse in Gardiner, Maine, or I worry about an auto mechanic in Ellsworth, Maine. They are putting aside $100 a month 

to try to save for their retirement, and all of a sudden, you folks 

have an opportunity to ding them by 25 percent of their long-term 

rate of return in their nest egg. So I want to see if you and I can 

70 

agree on something today, sir. Can we agree that it is a bad idea 

for FSOC to designate pension fund managers, mutual funds, and 

other asset manage as SIFIs? 

Mr. CORDRAY. First of all, FSOC acts as a body. I think they 

have indicated that they are— 

Mr. POLIQUIN. Do you think it is a good idea or a bad idea to 

so designate them? 

Mr. CORDRAY. I don’t know enough to jump the gun on any decision-making— 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentlelady from Utah, Mrs. Love. 

Mrs. LOVE. Thank you, Mr. Cordray. Thank you for being here. 

Mr. CORDRAY. My pleasure. 

Mrs. LOVE. I just have a quick couple of questions that are concerning to me and to constituents in my district. In the CFPB’s 

most recent annual report, it stated, on page 131, that a critical 

part of making financial markets work is ensuring transparency in 

those markets. The CFPB believes that it should hold itself to that 

same standard and strive to be a leader by being transparent with 

respect to its own activities. So my question for you is, what has 

the Bureau done to make sure that the consumers know that you 

are tracking their credit card data? 

Mr. CORDRAY. We are trying hard to meet that aspiration of 

being a very transparent institution. 

Mrs. LOVE. So what have you done to make sure that the customers know that you are extracting credit card data? 

Mr. CORDRAY. First of all, I am not tracking your data or my 

data or anyone’s data. What we are doing is we are getting data 

that is anonymized and de-identified so that we can evaluate the 

market. How can I possibly fulfill my responsibility to Congress to 

give you a report on how— 

Mrs. LOVE. Wait a minute. We are going to get there. Do you 

think most Americans know that you are actually doing this, collecting data? 

Mr. CORDRAY. Doing what? 

Mrs. LOVE. Collecting credit card information. So when they are 

going and they are actually making those credit card—you are actually collecting data from their credit cards. 

Mr. CORDRAY. I am not collecting it the way a bank would be collecting it, where they are actually trying to assess what Congresswoman Love ate for dinner last night and where you are shopping 

and trying to market to you. I am just looking at the overall patterns in the market that have nothing to do with you or me or anyone else in particular. 

Mrs. LOVE. You are saying you actually do not collect data from 

individuals who are using their credit cards? You are not collecting 

that information? Is that what you are saying? 

Mr. CORDRAY. It is all de-identified. That is really important. 

Mrs. LOVE. Do you believe that consumers have the right to 

know you are actually collecting the data? It is really simple. I am 

not trying to have a fight with you here. I just want to know what 

is happening. 

71 

Mr. CORDRAY. I don’t know if this is the answer to your question, 

but it wouldn’t have your name on it. It wouldn’t have your credit 

card number. 

Mrs. LOVE. It doesn’t matter. Don’t you think that my information belongs to me? Don’t you think that consumers have a right 

to opt out at least? 

Mr. CORDRAY. Many other Federal agencies have had this for 

years. What is special about us? Why do you come after us? 

Mrs. LOVE. Okay. Do you think it gives the American people 

comfort to know that just because other agencies are collecting 

data, that it is okay for you to additionally collect data? I think it 

is actually quite absurd to hear that other agencies are collecting 

as much data also. 

Mr. CORDRAY. Answer me this. We are supposed to do a report 

to Congress every year on the credit card market and how it is 

faring. How would we do that if we didn’t have data? 

Mrs. LOVE. Let me ask you a question. Let me ask these questions. I am glad that you led us down this path. Can the Bureau 

receive complaints about credit card companies? 

Mr. CORDRAY. I beg your pardon? 

Mrs. LOVE. If there is a company that is out there that is a terrible actor in the market, can you receive complaints about credit 

card companies if they are taking advantage of consumers? 

Mr. CORDRAY. Can we the CFPB receive complaints about credit 

card companies? 

Mrs. LOVE. Yes. 

Mr. CORDRAY. We do. We do every day. 

Mrs. LOVE. Does the Bureau have the power to conduct direct examination of financial institutions? 

Mr. CORDRAY. We do. 

Mrs. LOVE. Does the Bureau have a whistleblower program for 

employees to blow whistles on misconduct of their companies? 

Mr. CORDRAY. We have a hotline where whistleblowers can give 

us information if they see fit. 

Mrs. LOVE. So you are still telling me that the powers that you 

have aren’t sufficient for you to uncover and investigate actual 

problems in the marketplace? Even with all of those tools, you still 

have to go in and not allow people to know you are collecting their 

data in order to make these assessments? 

Mr. CORDRAY. You are saying we could collect it through examinations and supervision. Instead, we have collected it in the same 

way other agencies have. How is that different? 

Mrs. LOVE. What I am saying is one way is somebody complaining to you that something is happening, and the other way is 

you actually extracting data without the consumer knowing that 

you are extracting data. What I asked at the beginning is what 

provisions that you have put in place to let Americans know when 

their data is actually being extracted, when it is being mined? 

Mr. CORDRAY. We are having a public hearing here that is wide 

open to the entire American people— 

Mrs. LOVE. Thank goodness for Congress that is looking out for 

the American people, not the CFPB. 

First of all, I want you to know that the CFPB—I have been 

very, very fair in looking at what you actually do. Let me say you 

72 

are always under the guise that you are protecting those who can’t 

protect themselves. You are always under the guise—you are trying to let people know that you are the compassionate institution. 

Let me just say that you can’t be a compassionate institution because everything you do is through force. And that is through jail 

time and fines. If people do not comply with you, it is through jail 

time and fines. And I want you to know that these businesses that 

you go after are the ones that gave my father a job when he came 

to this country with just $10 in his pocket. 

Mr. CORDRAY. How does that make us different from the Utah 

attorney general? How does that makes us different from the U.S. 

Attorney General? 

Mrs. LOVE. You are saying because everybody else does it, that 

we are going to do it also? 

Mr. CORDRAY. No, no. It is law enforcement. Do you not want the 

law to be enforced? Of course, you want the law to be enforced. 

Mrs. LOVE. This is why Washington is a problem. This is why 

you are the problem, sir. 

Mr. CORDRAY. Do you want people to not abide by the law? 

Chairman HENSARLING. The time of the gentlelady has expired. 

I would like to thank the witness for his testimony today. 

The Chair notes that some Members may have additional questions for this witness, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to this witness 

and to place his responses in the record. Also, without objection, 

Members will have 5 legislative days to submit extraneous materials to the Chair for inclusion in the record. 

This hearing stands adjourned. 

[Whereupon, at 1:38 p.m., the hearing was adjourned.] 

(73) 

A P P E N D I X 

September 29, 2015 

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