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THE SEMI-ANNUAL REPORT OF 

THE CONSUMER FINANCIAL 

PROTECTION BUREAU 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED THIRTEENTH CONGRESS 

FIRST SESSION 

SEPTEMBER 12, 2013 

Printed for the use of the Committee on Financial Services 

Serial No. 113–43 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

GARY G. MILLER, California, Vice Chairman 

SPENCER BACHUS, Alabama, Chairman 

Emeritus 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

MICHAEL G. GRIMM, New York 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

TOM COTTON, Arkansas 

KEITH J. ROTHFUS, Pennsylvania 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

September 12, 2013 .......................................................................................... 1 

Appendix: 

September 12, 2013 .......................................................................................... 73 

WITNESSES 

THURSDAY, SEPTEMBER 12, 2013 

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

(CFPB) ................................................................................................................... 7 

APPENDIX 

Prepared statements: 

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

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Hensarling, Hon. Jeb: 

Written statement of the Independent Community Bankers of America 

(ICBA) ............................................................................................................ 76 

Beatty, Hon. Joyce: 

Script from ‘‘40 Million Mistakes,’’ which aired on CBS on February 

10, 2013, and was rebroadcast on August 25, 2013 ................................... 132 

Cordray, Hon. Richard: 

Written responses to questions submitted by Representative Foster .......... 138 

Written responses to questions submitted by Representative Murphy ....... 140 

Written responses to questions submitted by Representative Sinema ........ 144 

Written responses to questions submitted by Representative Ross ............. 148 

Written responses to questions submitted by Representative Stivers ......... 151 

Written responses to questions submitted by Representative Pittenger ..... 152 

Written responses to questions submitted by Representative Luetkemeyer ............................................................................................................. 153 

Written responses to questions submitted by Representative Fincher ........ 158 

Written responses to questions submitted by Representative Garrett ........ 160 

Written responses to questions submitted by Representative Royce ........... 165 

Written responses to questions submitted by Representative Pearce .......... 166 

Written responses to questions submitted by Representative Bachus ........ 169 

Written responses to questions submitted by Representative Mulvaney .... 172 

(1) 

THE SEMI-ANNUAL REPORT OF 

THE CONSUMER FINANCIAL 

PROTECTION BUREAU 

Thursday, September 12, 2013 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 9 a.m., in room 2128, 

Rayburn House Office Building, Hon. Jeb Hensarling [chairman of 

the committee] presiding. 

Members present: Representatives Hensarling, Miller, Bachus, 

Royce, Capito, Garrett, Neugebauer, McHenry, Campbell, Pearce, 

Posey, Fitzpatrick, Luetkemeyer, Huizenga, Duffy, Hurt, Grimm, 

Stivers, Fincher, Stutzman, Mulvaney, Hultgren, Ross, Pittenger, 

Barr, Cotton, Rothfus; Waters, Maloney, Velazquez, Watt, Sherman, Meeks, Hinojosa, Clay, Lynch, Green, Ellison, Perlmutter, 

Himes, Peters, Carney, Sewell, Foster, Kildee, Murphy, Delaney, 

Sinema, Beatty, and Heck. 

Chairman HENSARLING. The committee will come to order. 

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

the committee at any time. 

For Members who are arriving and seeing our hearing room for 

the first time since our last hearing, yes, it did receive a coat of 

paint. For those of you who were wondering when Chairman 

Frank’s portrait would make its appearance, it is here now, and as 

I said to him at the unveiling ceremony of his portrait, as a conservative Republican, I have long since looked forward to the day 

when Barney could be seen but not heard. 

[laughter] 

That day has arrived. If I could say, it did seem to elicit a chuckle from our former chairman. I don’t know how Chairman Frank 

got to my right, I don’t know. That disturbs us both. 

Recognizing the time constraints this morning, we are expecting 

first votes sometime between 10:15 and 10:30. The ranking member and I have agreed to limit opening statements to 8 minutes per 

side. Without objection, it is so ordered. 

At this time, I will recognize myself for 5 minutes for an opening 

statement. 

This morning, we welcome Richard Cordray, the Director of the 

Consumer Financial Protection Bureau (CFPB) to deliver the Bureau’s latest Semi-Annual Report. Mr. Cordray, we recognize that 

the Bureau’s latest Semi-Annual Report may be a little bit dated 

due to the legal controversy that previously surrounded your apVerDate Nov 24 2008 18:17 Jul 02, 2014 Jkt 086678 PO 00000 Frm 00005 Fmt 6633 Sfmt 6633 K:\DOCS\86678.TXT TERRI
2 

pointment, and thus delayed your timely appearance. Nonetheless, 

we welcome you today and congratulate you on your recent Senate 

confirmation. 

The CFPB is arguably the single most powerful and least accountable Federal agency in the history of America. Thus, it is an 

agency that demands rigorous oversight and consequently will undoubtedly demand numerous congressional hearings and inquiries. 

So again, not only do we welcome the Director today, but we look 

forward to welcoming you to our hearing room for many further appearances before us. 

As all of us know, the CFPB was designed to operate outside the 

usual system of checks and balances that applies to almost every 

other government agency. 

Number one, the CFPB is effectively unaccountable to Congress; 

it is exempted from the congressional budgetary and appropriations 

process. Thus, unlike many other agencies, there is no check to ensure that the CFPB Director is spending the peoples’ money effectively to promote consumer protection, much less effectively in a 

time of runaway debt and deficits. 

Not even the agency from which the CFPB obtains its funding, 

the Federal Reserve, has oversight over the CFPB Director’s spending. 

The CFPB is unaccountable to the Executive Branch. Once appointed and confirmed, the Director can only be removed by the 

President for cause. Neither can the Nation’s Chief Executive enforce spending discipline on the Bureau because it is not subject to 

the Office of Management and Budget nor does the CFPB have its 

own Inspector General. 

I also find it fascinating, as Syria has dominated our national 

consciousness, that it merely takes a majority vote of Congress to 

launch military action or to go to war, but it takes a super majority 

vote to the Executive Branch Financial Stability Oversight Council 

to overturn a ruling of the CFPB, and then only if that ruling can 

be shown to threaten the safety and soundness of the entire U.S. 

financial system. 

Next, the CFPB is uniquely unaccountable to the courts, since 

Section 1022 of the Dodd-Frank Act provides that where the Bureau disagrees with any other agency on the meaning of a provision 

of Federal consumer financial law, the reviewing court must give 

deference to the Bureau’s view under the Chevron Doctrine. 

Finally, in many respects the CFPB is uniquely unaccountable 

even to itself since there is fundamentally no ‘‘it,’’ no ‘‘they,’’ only 

a ‘‘he.’’ There is no commission, only one omnipotent Director fundamentally accountable to no one. 

Combined with this breathtaking lack of accountability is a grant 

of power under Dodd-Frank to the CFPB Director that is unilateral, unbridled, and unparalleled. The Director can unilaterally declare virtually any financial product or service as unfair or abusive 

at which point Americans will be denied that product or service 

even if they need it, understand it, and want it. 

Be he our credit czar, national nanny, or benevolent financial 

product dictator, Mr. Richard Cordray is now empowered fundamentally to decide what types of credit cards Americans are alVerDate Nov 24 2008 18:17 Jul 02, 2014 Jkt 086678 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 K:\DOCS\86678.TXT TERRI
3 

lowed to have, what types of mortgages they may have, and whether or not they can access a payday lender. 

All of this does beg the question, who will protect consumers 

from the Consumer Financial Protection Bureau? True consumer 

protection requires access to competitive, transparent, and innovative markets vigorously policed for force, fraud, and deception. 

True consumer protection empowers consumers and respects 

their economic freedom to make informed choices free from government interference and FOIA. 

Consumer protection is not a zero sum game where for consumers to win, producers must lose, or where borrowers can only 

win when lenders lose. 

And consumer protection is not having powerful government 

agencies ‘‘nudge’’ consumers to make correct choices, since they believe that consumers are incapable of making rational decisions for 

themselves. 

When it comes to true consumer protection, and when it comes 

to the Consumer Financial Protection Bureau, this committee will 

do everything we can to demand the highest levels of accountability, transparency, and answers. 

I will now recognize the ranking member for 4 minutes. 

Ms. WATERS. Thank you very much, Mr. Chairman. 

Director Cordray, congratulations again on your confirmation. I 

am so pleased that you are here today. Your presence before this 

committee is long overdue, particularly after the nearly 6 months 

of Republican obstruction that has threatened consumer protection 

in order to score certain political points. 

As you know, the Wall Street reform law requires the Director 

of the Consumer Financial Protection Bureau to appear before this 

committee every 6 months to discuss the agency’s Semi-Annual Report. The report that you are here to discuss today was released 

back in March. Unfortunately, at that time we were denied the 

benefit of your perspective. 

The timing of this hearing turns out to be somewhat appropriate, 

however. This month, we must observe the 5-year anniversary of 

the Lehman bankruptcy rooted in the risky and irresponsible lending and financial practices that brought the economy to the brink 

of collapse, wiped out the life savings of many of our constituents, 

and set off a foreclosure epidemic that has left many States still 

struggling. 

The Consumer Financial Protection Bureau was born from that 

crisis as one of the cornerstones of the Dodd-Frank Act. The CFPB 

is now on the front lines of protecting consumers from bad actors 

in the financial system and ensuring nothing like what happened 

5 years ago ever happens again. 

Mr. Director, I would like to commend you on how well you have 

worked with a wide array of stakeholders during your tenure, for 

your careful leadership of this young agency. You have consistently 

earned praise from both consumer advocates and industry leaders. 

Those of us in Congress know that is not an easy task. Your 

leadership has resulted in achievements at the Bureau that cannot 

be understated. In just 2 short years, the CFPB’s enforcement actions have resulted in $432 million being directly refunded to over 

4 

6 million consumers victimized by unscrupulous actors in the financial system. 

Importantly, the CFPB has ensured for the first time that someone is monitoring a number of industries that have a history of 

problematic interactions with consumers. These include the hundreds of millions of consumers interacting with consumer reporting 

agencies, debt collectors, and payday lenders, just to name a few. 

In just the past few months, we have seen the agency investigate 

and raise concerns about the harmful impact of a number of practices on consumers including overdraft fees, private education 

loans, and the cycle of debt that payday and deposit advance loans 

can become. 

Mr. Director, your agency has also finalized several mortgage 

rules that help guard against the risky and irresponsible lending 

that brought the economy to its knees just 5 years ago. 

These rules aim to protect consumers from irresponsible mortgage lending, establish strong protections for homeowners facing 

foreclosure, and prevent lenders from steering homebuyers into 

risky mortgages at a time when numerous Dodd-Frank regulations—we have seen indefinite delays, and I am very pleased with 

your progress. 

But, Mr. Director, while your accomplishments are significant, 

issues such as data collection practices continue to need your attention. I believe all Federal agencies regulators—credit report bureaus, financial service providers, and others—must proceed with 

caution on this front, affording the highest respect to the protection 

of consumer privacy. The CFPB is a data-driven agency, as you 

know. 

The Dodd-Frank Act specifically prohibits the CFPB from gathering or analyzing any information that is personally identifiable. 

I trust you are carefully adhering to the letter of the law and carefully balancing your Bureau’s duty to monitor the market with 

your responsibility to protect consumer privacy. 

I strongly support the important work of the CFPB and Mr. Director, I want to congratulate you for the Bureau’s impressive 

record of accomplishments for our Nation’s consumers. 

I look forward to your testimony. 

And I yield back the balance of my time. 

Chairman HENSARLING. The Chair now recognizes the Chair of 

the Financial Institutions and Consumer Credit Subcommittee, the 

gentlelady from West Virginia, Mrs. Capito, for 3 minutes. 

Mrs. CAPITO. Thank you, Mr. Chairman, and I would like to 

thank the chairman for having this hearing. This marks the first 

appearance by Mr. Cordray as full Director, and congratulations to 

you. 

I also would like to thank you for including me in conversations. 

It is very important that we have a good relationship and communication, and you have certainly extended the hand of welcome to 

me. So, I appreciate that. 

I would also like to thank you for the CFPB’s reaction to the ability-to-repay rule for stay-at-home spouses that Mrs. Maloney and 

I worked on. I know you worked on that and reshaped the rule, so 

thank you so much for that. 

5 

Last month, I held a roundtable with lenders from across my district. We addressed numerous challenges, but one issue that everybody expressed great concern about is the mortgage rules that are 

expected to come into effect in January. 

Many of the lenders I talked to are extremely concerned about 

their ability to have their systems in place to be fully compliant 

with the rules. In fact, in the PATH Act we address these concerns 

by pushing back the implementation by 1 year. 

This extra time is especially important to community lenders, 

like those we have in West Virginia. It is unreasonable to expect 

the small community lender with one compliance officer to be able 

to absorb the challenges of 3,500 pages of new regulations proposed 

and the additional amendments that have been issued throughout 

the year. 

Community lenders need to ensure their systems are compliant 

in order to properly extend credit to their consumers. I noticed in 

a report that you had addressed this issue with the community 

bankers in North Carolina most recently, and you said that you are 

going to be releasing a second set of amendments to its ability-torepay rule any day now. 

I wonder what kind of adjustments—you did express some flexibility here—I would be interested, if we can dig down on that in 

the question portion. 

Another issue we learned about in a previous hearing is the inability of some institutions’ charitable programs to comply with the 

new mortgage rules. We heard testimony about a program that has 

served borrowers in one county in West Virginia for nearly 50 

years. 

This institution’s trustees work with borrowers to determine 

their ability to pay on a case by case basis with great success. However, the institution remains concerned that this program will not 

comply. These are folks who would never be able to secure a home 

without the help of the charitable program. 

I have deep concerns that the Qualified Mortgage rule will result 

in less availability of credit for low- and moderate-income borrowers. Yet, these are the consumers that supporters of these rules 

claim to help. Are they better off if we would extend credit, if credit 

becomes more difficult to obtain. 

I think the problem with the rules—and the chairman talked 

about it—really points to something that we have had discussions 

on in this committee, and that is the structure of the CFPB. 

We still continue to, and I still continue to, believe that creating 

rules and having a buy-in from a committee would actually better 

serve the consumer and the institutions that are set up to serve the 

consumer. 

So with that, I yield back. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Illinois, Mr. Foster, for 1 minute. 

Mr. FOSTER. Thank you, Mr. Chairman, and Ranking Member 

Waters. 

I would like to take a moment to congratulate Director Cordray 

for his long overdue confirmation, and welcome him before this 

committee. 

6 

Since its inception in 2011, the CFPB has been a very effective 

advocate for consumers and taxpayers. I would note that in just 2 

years, the CFPB’s enforcement actions have resulted in $432 million being directly refunded to more than 6 million consumers. 

And for the first time, consumers have an advocate at some of 

the highest levels of government to fight on their behalf, and to 

help level the regulatory playing field. 

Just 5 years ago, American families lost $16 trillion in wealth in 

less than 2 years. Our economy lost 8 million jobs and the unemployment rate jumped to over 10 percent. 

Measured as a decline in the percentage of household net worth, 

the 2008 crisis was actually worse than the Great Depression. This 

was no accident; it was the result of reckless deregulatory policies 

that allowed certain bad actors to prey on the most vulnerable 

members of our communities with little or no economy. 

I want to thank Mr. Cordray for the transparent and effective 

manner he has gone about engaging on these issues, and I look forward to his testimony. Thank you, and I yield back. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Michigan, Mr. Kildee, for 1 minute. 

Mr. KILDEE. Thank you, Mr. Chairman, and Ranking Member 

Waters. 

And welcome, Mr. Cordray, and congratulations to you. 

You and I have both served as county treasurers at the same 

time in our neighboring States, and I congratulate you on that, and 

I particularly congratulate you on choosing Michigan State University as your college, rather than the one in closer proximity to your 

home. 

I will tell you that I am really glad that you are in the position 

that you are in. For as long as I have known you, I have known 

you to be a careful and diligent steward of the public trust, and I 

am very confident that you will continue to do the great job that 

you have. 

I do ask that you address two issues as you move forward. The 

first is to carefully look at ways to provide additional protection 

from predatory lending for our Nation’s servicemembers. This is a 

significant issue that needs to be addressed, and I know you are 

aware of it. 

Second, to carefully review the proposed guidance being issued 

on fair-lending practices to indirect auto lenders, and I know you 

are examining that, ensuring that the proposed guidance provides 

consumers access to credit. 

And finally, we know now, in my State and in California, that 

we still do need to have significant regulation. What we have seen 

in energy trading is— 

Chairman HENSARLING. The time— 

Mr. KILDEE. I encourage you to continue— 

Chairman HENSARLING. —of the gentleman has long since expired. 

Mr. KILDEE. Thank you, Mr. Chairman. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Washington, Mr. Heck, for 1 minute. 

7 

Mr. HECK. Thank you, Mr. Chairman, and Ranking Member 

Waters. Director Cordray, thank you, in general, for what you do 

and for your presence today. 

And before we get into what I would euphemistically characterize 

as challenging questions, a couple of which I have of my own, I 

wanted to say something else: Thank you. 

I have the honor of representing the third largest military installation in America, with tens of thousands of servicemembers. I feel 

a strong sense of duty to them, as you might imagine. And I have 

no better ally in my efforts than your office. 

In particular, the Office of Servicemember Affairs, ably led by 

Holly Petraeus, has been instrumental in several efforts. They 

helped me successfully draft language to the Defense Authorization 

Act that will literally help people save their homes. 

On an individual casework basis, they have been not just responsive, but proactive, and I think the most important thing that we 

need to remember here is that this work makes a difference in people’s lives, and I thank you, sir, very much. 

Chairman HENSARLING. The Chair now recognizes the gentlelady 

from Ohio, Mrs. Beatty, for 1 minute. 

Mrs. BEATTY. Thank you, Mr. Chairman, and thank you, Ranking Member Waters. 

I want to extend a sincere thanks to Director Cordray for being 

here. I have never been prouder or more honored to serve here. I 

would certainly like to disclose that I have known Mr. Cordray for 

a number of years. 

I had the proud honor, when he was the Franklin County treasurer, as well as the State of Ohio—our hometown treasurer—that 

we had the opportunity to work across the breadth of that State, 

making a difference in lives, whether it was financial literacy, 

home mortgages, looking at credit and protecting folks—your being 

here makes a difference. 

Ditto to everything my other colleagues have said. Let me just 

say to this body here, he has a proven track record of integrity, 

transparency, and scholarship. 

I am pleased that you are here. I look forward to working with 

you, and I make a commitment to support your endeavors. Job 

well-earned. 

Chairman HENSARLING. Today, we welcome the testimony of 

Richard Cordray, who was confirmed by the Senate to serve as the 

CFPB’s first Director on July 16th of this year. Prior to his service 

at the CFPB, Director Cordray served the people of the State of 

Ohio as treasurer and solicitor general. 

Without objection, the Director’s written statement will be made 

a part of the record. Again, we welcome Director Cordray, and you 

are now recognized for your oral statement. 

STATEMENT OF THE HONORABLE RICHARD CORDRAY, DIRECTOR, THE CONSUMER FINANCIAL PROTECTION BUREAU 

(CFPB) 

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

Waters, and members of the committee for inviting me to testify 

today about the third Semi-Annual Report of the Consumer Financial Protection Bureau (CFPB). 

8 

Born out of the worst financial crisis since the Great Depression, 

the CFPB is the Nation’s first Federal agency whose sole focus is 

protecting consumers in the financial marketplace. We are dedicated to improving the lives of everyday Americans, and to restoring trust in consumer financial markets. 

The Semi-Annual Report we are discussing today embodies our 

work over the last 6 months of 2012. The Report illustrates the 

ways we are using the tools Congress has provided us to empower 

consumers—as you have said, Mr. Chairman, and I agree, it is so 

important to promote a fair, transparent, and competitive marketplace for consumer finance. 

We have taken steps to improve the workings of markets, particularly those in which consumers cannot choose their financial 

service providers. 

One such market is debt collection. Concerned about systemwide 

problems that pose risks to consumers, we gained authority at the 

beginning of the year to supervise debt collectors. 

The debt collectors covered by our supervisory authority account 

for over 60 percent of the industry’s annual receipts in that market. Bad actors in this market are a detriment to consumers, and 

to every debt collector that operates lawfully. 

We also expanded our supervision program to include the larger 

credit reporting companies. Credit reports have a profound impact 

on people’s lives, although people often do not realize it. Previously, 

these companies were not subject to any Federal supervision and 

consumers often struggled to get errors resolved. 

In addition to our new supervision program, we began handling 

consumer complaints about credit reporting issues, all of which will 

open a clear window into the actual operations of these companies. 

As a result, the Bureau can now evaluate whether Federal consumer laws are being followed throughout the process, from credit 

origination to debt collection. By identifying problems and rooting 

them out early, we are working to minimize consumer harm. 

Our report also encompasses the Bureau’s first enforcement actions, which were against credit card companies that deceived and 

misled consumers. In some cases, the companies targeted economically vulnerable consumers with low credit scores and low credit 

limits. 

We were able to secure $425 million in relief for 6 million consumers, and we also imposed penalties on the companies to deter 

such activity in the future. 

There is more to come in this area, and these actions will serve 

as a warning signal for anyone who seeks to profit by deceiving or 

misleading consumers. 

In the second half of 2012, we also tackled issues in the market 

for private student loan debt, with a total of about $150 billion in 

outstanding student loan debt. Our studies detailed the struggle 

students and recent graduates are experiencing in that market, 

which they tell us about every day. 

Together with Education Secretary Arne Duncan, we have made 

recommendations to policymakers and common-sense reforms to 

ensure that the risky underwriting practices of the past are not repeated. 

9 

The work I have discussed here today and will discuss is merely 

a snapshot of our efforts on behalf of consumers. We are also addressing consumer complaints on a growing number of financial 

products and services, totaling more than 130,000 as of the end of 

last year, and now exceeding 200,000. 

We have adopted comprehensive new mortgage regulations, banning irresponsible lending practices which helped bring about the 

recent financial crisis. Our ability-to-repay rule follows the simple 

principle that lenders should offer consumers mortgages which they 

can actually afford to pay back. 

We have actively conducted outreach on various issues to older 

Americans, students, servicemembers, and others, and what we 

have heard from them has guided the direction of our work. 

Each day, we take another step in pursuit of our vision to create 

a consumer financial marketplace where customers can see crisis 

and risk up-front, and easily make product comparisons, in which 

no one can build a business model around unlawful practices, and 

that works well for individual consumers, for responsible businesses, and for the economy as a whole. 

We will continue to persist in this work, and we appreciate your 

oversight. It is very meaningful to me, and to the Bureau. As always, I will be glad to answer your questions and certainly to stay 

as long as you like. Thank you. 

[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. 

Thank you, Mr. Cordray, in particular for your last statement 

about your willingness to answer our questions, and my first question, or statement, frankly has to do with that. I know that the 

agency, and you yourself, take great pride in the commitment to 

transparency and accountability, and frequently speak about the 

number of appearances that you and your staff have had before our 

committee, but it is not really a question of quantity; it is a question of quality. 

And frequently we have found, Mr. Director, that members of 

your staff can be uniquely unresponsive to our inquiries, particularly on July 9th, your number two, I believe, Steven Antonakes, 

appeared before our committee, dealing with what the ranking 

members spoke of, this very sensitive issue of data collection regarding our citizens. And here is just a snippet of what we had to 

deal with if we could please roll the video. 

[Begin video.] 

‘‘Mr. ANTONAKES. I don’t have the exact number. I would be 

happy to follow up with you on what the number is. I can get back 

to you with precise numbers. 

‘‘Voice. Will you send those to us? 

‘‘Mr. ANTONAKES. We are happy to provide the contract information to you. 

‘‘Voice. Thank you. 

‘‘Mr. ANTONAKES. I would have to verify that, Congressman. I 

can verify that for you. I would have to get back with you. 

‘‘Voice. Could you get back with us on that? 

‘‘Mr. ANTONAKES. Yes. 

10 

‘‘Voice. We would be interested to know that. 

‘‘Mr. ANTONAKES. I would have to confirm that for you, Congressman. 

‘‘Voice. Okay. 

‘‘Mr. ANTONAKES. I would have to get back with a precise number. And we could provide that information to you. 

‘‘I would have to provide that information for you. I want to be 

accurate. 

‘‘I would have to get that information for you. 

‘‘I have to verify the contract to see exactly what type of information we are— 

‘‘We can seek to provide that information to you. We will do it 

in as timely a fashion as possible. 

‘‘Voice. Okay.’’ 

[End video.] 

Chairman HENSARLING. Now, Mr. Director, that appearance was 

on July 9th, which was over 2 months ago. Because your number 

two was unable or unwilling to answer so many questions, there 

have been roughly 100 follow-up questions from both sides of the 

aisle, and we have yet to hear any response, notwithstanding the 

fact that Mr. Antonakes said he would get right back to us, so the 

question is, do you have any knowledge of when your agency plans 

to respond to this committee? 

Mr. CORDRAY. Thank you, Mr. Chairman, and thank you for raising that set of issues. 

I have reviewed the transcript of that hearing, and whenever 

someone else comes to testify rather than myself—and as you 

know, I was not invited to testify during that period—I always 

make it a habit to review the transcript and follow up within the 

Bureau on things that are raised. 

My understanding of those exchanges that were edited and truncated there was that this committee is quite interested in, and I 

think quite appropriately concerned about the manner in which the 

Bureau collects information and what it is being used for. 

I do think that the statute and the law contemplates that an 

agency should be well-informed in its work, and that as we report 

to you, report to Congress, write regulations, you have required— 

Chairman HENSARLING. Mr. Cordray, you know our time is short. 

I am happy to get the background, but do you have the answers? 

The committee has been waiting for 2 months. Do you know when 

we can anticipate answers to these questions? 

Mr. CORDRAY. Yes. Let me be specific about that, then. That 

hearing occurred on July 9th, as you indicated. There were a few 

questions for the record provided to the Bureau in the days thereafter, but there was a huge slug of questions that actually totaled 

close to 200 that came to the Bureau on August 12th, so more than 

a month after the hearing. It took time, obviously to prepare those 

and to make sure we had comprehensively addressed the issues. 

We have been working in the ensuing now month to prepare responses to the questions for the record, and also to gather contract 

documents and other information. You will have that— 

Chairman HENSARLING. I understand that, Mr. Cordray. Right 

now, I have less than 1 minute of time. Is there an estimate? 

Mr. CORDRAY. You will have that any day now. 

11 

Chairman HENSARLING. Any day now. 

Mr. CORDRAY. You will. Yes. Certainly by—week. 

Chairman HENSARLING. Thank you. In the limited time that I 

have remaining—I know a number of other Members will be asking 

questions regarding QM. 

It is a standard that I fear may be simultaneously underinclusive 

and overinclusive, but I am somewhat curious, and perhaps in my 

limited time—you may have to answer in writing. But as I speak 

to a number of community financial institutions, they are very concerned about a line being drawn at 43 percent debt-to-income. 

It begs the question, what if somebody has 44 percent debt-to-income, but is willing to put 20 percent down, and has a 740 FICO 

score, which is a great credit score, but apparently they will be denied credit under this standard, versus somebody who has a 43 

percent DTI, has a 440 FICO, and puts 0 percent down. 

So on the one hand, you could be restricting credit to deserving 

creditworthy borrowers, and on the other hand, although I know 

you are not a safety and soundness agency, you could be helping 

put the government’s imprimatur on exactly the type of mortgages 

that helped bring about the crisis in the first place. 

My time has lapsed. The Chair now recognizes the ranking member for 5 minutes. 

Mr. CORDRAY. Did you want me to respond to that question, or 

not? 

Chairman HENSARLING. I would like you to, but I am going to attempt to set a good example for the rest of the Members. Perhaps 

you could submit that in writing, and I will go ahead and yield to 

the ranking member. 

Ms. WATERS. Mr. Chairman, would it be appropriate for me to 

yield at least a minute to Mr. Cordray so he can respond? 

Mr. CORDRAY. Thank you. And— 

Chairman HENSARLING. Without objection, by unanimous consent. 

Ms. WATERS. Thank you. 

Mr. CORDRAY. I appreciate the questions about the Qualified 

Mortgage rule, which I know is a focus of tremendous interest 

among Members here, and I was in North Carolina yesterday addressing the American Mortgage Conference, where there was tremendous interest as well. 

The point that we made, and I just want to address it because 

it is not entirely accurate to say that every mortgage has to have 

a 43 percent or less debt-to-income ratio. That is one of the categories, bright-line categories that get you to a Qualified Mortgage. 

There is a separate category, also a bright-line category, that the 

loan is eligible for purchase by any of the GSEs in conservatorship, 

Fannie Mae or Freddie Mac. That is a very significant band of 

things. It could be above a 43 DTI. 

A third category that we drew in response to some of the concerns that members of this committee and community bankers 

across the country brought to us is that if you are a smaller creditor of under $2 billion in assets, and you make mortgages that you 

keep in portfolio, those also are Qualified Mortgages, regardless of 

the 43 DTI, so it is not one-size-fits-all. It is not a procrustean bed 

fitting everybody into one metric. It is an attempt to respond to difVerDate Nov 24 2008 18:17 Jul 02, 2014 Jkt 086678 PO 00000 Frm 00015 Fmt 6633 Sfmt 6633 K:\DOCS\86678.TXT TERRI
12 

ferent considerations we have heard around the country. I am 

happy to address that in more detail as Members wish. 

Chairman HENSARLING. I think you will have that opportunity. 

The Chair now yields 5 minutes to the ranking member. 

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

know that as the chairman described the questions that were asked 

of your assistant, he said there were 170 from both sides of the 

aisle. 

This side of the aisle only had one question, so I guess it was 169 

from the other side, and I also would like to tell you that if you 

had not been blocked from coming to this committee, we would not 

have had to rely on other people. 

You are very well-qualified to answer any questions, and I am 

so glad that you are confirmed and you are here now, so I would 

like to continue with that line so that you can, as you had started 

to do, so expertly explain what has happened with QM. 

A lot of my friends on the opposite side of the aisle talk about 

wanting to help community banks, and I have been trying desperately to reach an agreement so that we could do more. I just 

want to know how, and perhaps you can give some assistance, 

some resources, to help our community banks get into compliance. 

So will you continue with that line of discussion on QMs? 

Mr. CORDRAY. Sure. And in background, I want to say that when 

the Dodd-Frank Act was passed in July of 2010, there were provisions in the statute that could have simply taken effect of their 

own momentum, and they would have taken effect in January of 

2013, governing the mortgage market. 

If this Congress had not created this agency and not authorized 

us to write rules, that is what would have been the timeframe. 

The rules that we wrote actually contoured the criteria of what 

was in the statute in ways that were very responsive, deliberately 

responsive, to the concerns that we heard from community banks, 

credit unions, and many others in the mortgage market who were 

very concerned that in this era, maybe was not true in 2006 and 

2007 about access to credit, and we are very concerned about it as 

a result of what we have heard. 

With respect to the community banks and credit unions and 

helping them to get into compliance, we have been working at that 

intentionally and purposefully, and alongside them every day of 

this year. We have developed plain language guides to the rules 

that translate them, frankly, into understandable English, because 

none of us, including myself, enjoys reading the Federal Register. 

We have made compliance videos, how-to guides, and we have 

also worked with the other agencies to make the examination procedures clear. They have been finished and published well in advance of the effective date, which I think is unprecedented in past 

recent experience. 

So we are working very hard. We are also taking questions every 

day and attempting to address issues. And when you mentioned 

some amendments to the rules, all of those amendments have been 

in response to industry questions and concerns about making it 

more operational, and making it easier for them to implement. 

13 

There has not been a single thing which has added burden. They 

have all been burden-relieving, and we continue to be devoted to 

that effort. 

It is very important for us to recognize that we can write rules, 

and we can say to industry, ‘‘Now, it is your problem.’’ That would 

not be an appropriate approach. It is a problem for all of us. We 

want the rules to be effective. We want them to be able to successfully implemented. 

We want the lenders to be lending in the mortgage market, and 

the housing recovery, which is well under way, to continue. And we 

are working to make sure that we understand those issues and I 

tend to be responsive, not only to the Members here, but to those 

across the country who have such a stake in that market, most of 

all, average Americans. 

Ms. WATERS. Thank you very much. On this side of the aisle, 

many of our Members are convening our meetings with community 

banks. We have been doing that all during our break, and we are 

very engaged with them to find out how we can perhaps get them 

out from under the yoke of regulations that should not apply to 

them. And, of course, we have been centered on QM as I have indicated. 

So, I would like to know if we could have someone from your 

shop attend one of our meetings where we have convened the community banks? Would you make someone available so that we can 

make sure that they have access to the information that can help 

them come into compliance that many of them may not know about 

or easily understand? 

Mr. CORDRAY. Gladly. And I make that offer to Members on both 

sides of the aisle, whether they are on the committee or not: Feel 

free to convey to your colleagues, I know there are a lot of questions and issues people are having. 

We have met just this week with at least five or six State community banking organizations. I have met with several myself personally. We have a number of people out and around who can attend those meetings. 

As you know, we have worked on meetings in your district before, and I am happy to do that with all the Members to make sure 

people understand and have their questions addressed. That is 

something we want to do and I appreciate any invitations we have 

on that score. 

Ms. WATERS. Let me thank you for the attention that you have 

given to the community banks. It is high on our list of priorities 

on this side of the aisle, and I appreciate your support and assistance. 

Chairman HENSARLING. The Chair now recognizes the Chair of 

the Financial Institutions and Consumer Credit Subcommittee, the 

gentlelady from West Virginia, Mrs. Capito, for 5 minutes. 

Mrs. CAPITO. Thank you, Mr. Chairman. 

Mr. Director, I would like to go back—I would like to stick with 

the QM discussion. I mentioned in my opening statement that in 

roundtables with institutions, this obviously has been number one, 

because of the pressure of the deadline coming in January. 

You mentioned being in North Carolina, and mentioned some adjustments that were going to be made. Do you have full assurance 

14 

that this is going to be ready for prime time, that community institutions are going to be able to have their back office and IT and 

everything ready to meet the challenges if you are still changing 

some of the rules and provisions? 

I would like to hear—we would be interested in pushing it back. 

Is there any thought in your mind that might be a good idea? 

Mr. CORDRAY. Yes, it is a very live topic at the moment. 

Let me say several things. The first thing I would say is we have 

been in close touch with both larger and smaller institutions and 

both lenders but also REALTORS® and home builders and appraisers and everybody else who has a stake in this market over 

the course of this year. Most of the institutions have told us that 

they will be in compliance, but they have had concerns about it. 

They have been nervous about it. 

They have been looking for questions to be answered and certain 

relief to be given on operational issues. I think that for the most 

part, they have said they will be in substantial compliance by January 10th. 

With the smaller institutions, we did include special provisions, 

and I alluded to them a moment ago, that sometimes the smaller 

banks and credit unions don’t seem to be yet aware of, and so it 

is incumbent on us and I am happy to work with all of you to get 

that message out. 

Some of them are worried about the QM rule. I had this come 

up in North Carolina yesterday. We had it come up with some 

Oklahoma bankers earlier in the week. If they are under $2 billion 

in assets, if they make fewer than 500 mortgages a year, it covers 

the vast majority of community banks and credit unions in this 

country. Then anything they make and keep in portfolio, which is 

what many of them do, which means they pay close attention to 

ability to repay is a Qualified Mortgage rule and has the Safe Harbor. 

Many of them don’t seem to fully appreciate that there actually 

was a further amendment and further work we did after January 

10th that took effect in May and we want to make sure we get that 

message out. 

Beyond that, there was another piece I wanted to say about that, 

and I can’t honestly remember what it was. So, if it comes back in 

my mind, I will pass that along. 

Mrs. CAPITO. Let me shift gears a little bit here. One of the provisions in Dodd-Frank was that you and others and the Secretary 

of the Treasury would be looking at old and outdated regulations. 

Because this is another complaint we hear. It is just a complete 

compounding on top of regulation upon regulation. 

Mr. CORDRAY. Yes. 

Mrs. CAPITO. And one of the charges of Dodd-Frank was to look 

at these old and outdated regulations. How much time do you really spend at the CFPB scraping out any old and outdated and irrelevant regulations, and can you name a few of those? 

Mr. CORDRAY. Yes, thank you for that question. It is a concern 

of mine and I think it is an appropriate concern for you all because 

I do think it is a question in the regulatory world. Each individual 

rule, people focus on it, they have a rationale, they have a justification and they think it is great and needed and what they often 

15 

don’t do is look at the totality of it. What is the overall burden? 

So, we are trying to be very accessible to institutions and invite 

them to raise those issues with us. 

We embarked on a streamlining initiative last year, put it out for 

notice and comment for people to tell us what kinds of things they 

would like to see us streamline. There is a certain amount of 

streamlining we have been doing all along as we write rules. We 

do try to find ways to weed things out. 

Mrs. CAPITO. But you could actually give me a listing of rules 

that have sort of been— 

Mr. CORDRAY. Yes, I— 

Mrs. CAPITO. —grandfathered out. 

Mr. CORDRAY. I think as we write each rule, we are finding 

things that we peel out of what was there previously, as well as 

updating. But in particular, we were working on the ATM sticker 

issue which in the end— 

Mrs. CAPITO. Right, we have— 

Mr. CORDRAY. —in the end— 

Mrs. CAPITO. —right. 

Mr. CORDRAY. —in the end Congress addressed it. 

Mrs. CAPITO. Right. 

Mr. CORDRAY. We are in the process of writing a rule. 

The next one that we are going to be taking on, which I think 

has been an issue some of you have raised, is the annual privacy 

notices in which we think the burden there may outweigh the benefits to consumers. We are going to be looking at that and that will 

be under way in the next few months. 

And if there are other things that you would like us to look at, 

please submit them to us, because I am interested in doing that. 

I think it would help build our credibility to be addressing those. 

Mrs. CAPITO. I think it would definitely help your credibility and 

I think it would help the institutions that are under your purview. 

If you could as a follow up, maybe we could get together and you 

could— 

Mr. CORDRAY. That would be fine. 

Mrs. CAPITO. —show me some of the proof that this is actually 

occurring because in the field, it doesn’t seem to be as such. 

I do want to register a concern because I am one of those who 

asked for certain data from the last hearing in July and we still 

don’t have a follow up and I would like to have that as well. 

The other question I have and I have only 8 seconds so you are 

not—the other issue I would like to raise maybe in another forum 

is when you are collecting fines, you are retaining some of the fine, 

you are not giving it all to the person who has been wronged, 

whether it is a credit card or mortgage or whatever. I would like 

to talk further about what you are doing with the remains of those 

dollars, but I am out of time. 

Mr. CORDRAY. Yes, I don’t think I would characterize it that way. 

We try to seek full compensation for victims. If there is overage in 

terms of fees, we can potentially offer that to uncompensated victims either in that matter or in other matters, that is something 

we are trying to focus on. 

Chairman HENSARLING. The— 

16 

Mrs. CAPITO. I think it is important to know that is adding up 

to tens of millions of dollars right now. 

Chairman HENSARLING. —time of the gentlelady has expired. 

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

Maloney, for 5 minutes. 

Mrs. MALONEY. Welcome, Director Cordray. 

The creation of the CFPB was one of the most important victories for consumers in a generation. It is extremely important that 

we have one regulator whose sole focus is protecting consumers so 

the consumer is not an afterthought or a secondary thought, a 

third thought, or not thought about at all as we saw they were 

treated when we moved towards the financial crisis. 

And in my opinion, the Bureau has done an excellent job so far 

in working with both consumers and the financial industry to write 

common-sense rules of the road. 

I want to give one specific example, which was a rule that came 

out in April at the request of Chairwoman Capito and myself as 

it concerned the Credit Card Bill of Rights, the Card Act. 

The interpretation from the Fed was that stay-at-home spouses 

could not have access to credit, and that was not Chairwoman 

Capito’s and my intent. When we wrote that law, we appealed to 

every single regulator and you finally took action and had a rule 

that allows credit card issuers to consider income that a stay-athome spouse applicant shares with a spouse. 

That is just common sense. And I think that this rule is a concrete example of the agency working with consumers and the financial industry to allow responsible access to credit and liquidity to 

American families. So I want to thank you for responding to the 

chairwoman’s and my request. You took too long, but you got it 

done. And so we are very grateful, and consumers across this country are, as well. 

I would like to go back to the chairman’s issue of focusing on 

data collection, and I would say that this is getting a tremendous 

amount of attention before Congress now throughout government, 

and under Dodd-Frank, we required the Bureau to collect data in 

order to improve your rule making, your understanding and supervisory functions. 

And Dodd-Frank also included numerous safeguards to protect 

consumers’ personal privacy and to prevent the misuse of confidential information. That was an important hearing, and after that 

hearing, Chairwoman Capito and I feel that it is not only important for you to give us this data, but that every financial regulator 

gives us this data. 

So, we have appealed to the GAO for a bipartisan report on what 

all the financial regulators are collecting so that we can see if there 

is any inefficiency. Is there any overlap? Is there sharing between 

the agencies? And what are the specific safeguards for the personal 

privacy of individuals? 

I would like to use my remaining time to hear from you, first of 

all, what data are you collecting? I know it is—it can’t be exact, 

but you will get that to the chairman. But off the top of your head, 

what are you collecting? And what are the safeguards that you 

have put in place to protect consumers’ personal information? This 

is very personal information and it is important to protect it. 

17 

Mr. CORDRAY. If I could, just a brief word on the credit card rule 

that you mentioned that both you and Congresswoman Capito 

pushed so hard on and effectively. When you raised that to me, I 

thought of my mother who passed away now 33 years ago and was 

a working mom and she would have felt exactly as both of you did, 

and that was important to me in thinking about addressing that 

issue. 

On data collection, we welcome the GAO examination of this 

issue, and we have worked closely with the GAO on a number of 

matters. They also do an annual audit of us, which is unusual 

among the Federal agencies. They will deal with this, I think appropriately, and help us. Potentially, they will have suggestions for 

improvement, which we welcome. 

Second, in terms of the data that we collect, it is information 

that has nothing to do with individual consumer behavior patterns; 

we are not interested in whether Richard Cordray went to this restaurant and spent X dollars on dinner last night. That is not what 

we do. That is what private financial institutions do in the private 

sector. They are all about that. Our issue is that we have to oversee the financial institution. We have to be able to understand the 

pattern of how they treat their customers in order to understand 

that financial consumer laws are being followed or being violated. 

So we collect data in, sort of, three main buckets. One is in our 

consumer complaint function, where people come to us voluntarily 

because they have a complaint they want us to resolve. They obviously need to give us information in order for that to happen, the 

same as with constituents who come to your offices. 

A second is the area of supervision, where our job is to supervise 

these financial institutions. Some of the biggest, most powerful financial institutions in the country and the world, and we have to 

be able to go in and gather enough information— 

Chairman HENSARLING. Mr. Cordray, if you could quickly summarize the rest of your answer. The time of the gentlelady has expired. 

Mr. CORDRAY. Okay. 

Chairman HENSARLING. Or did that summarize your answer? 

Mr. CORDRAY. There was a third bucket I could just do in 30 seconds. 

Chairman HENSARLING. If you could quickly, quickly. 

Mr. CORDRAY. The third is our market monitoring function, 

which I think is an appropriate subject of inquiry from this committee, where we are sampling data from different markets to assess. 

We have a CARD Act report due to this Congress by October 1st. 

It wouldn’t be a very good report if we didn’t have information to 

base it on. And so, that is a big part of our work as well, and I 

am happy to address that more as other Members— 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the gentleman from California, Mr. 

Miller, for 5 minutes. 

Mr. MILLER. Thank you, Mr. Chairman. Welcome, Mr. Cordray. 

I enjoyed your opening statement. You talked about empowering 

consumers, fair, transparent, and competitive marketplaces, and 

dealing with bad actors, which we saw plenty of before 2007. And 

18 

you expanded your supervisory program to include larger credit reporting companies. 

The one thing that is kind of glaring to me is you took title insurance and you tagged it as optional for the buyer. And that is a real 

concern for me because I— 

Mr. CORDRAY. I’m sorry. What— 

Mr. MILLER. Title insurance policies. 

Mr. CORDRAY. Yes. 

Mr. MILLER. You have tagged those as optional. Now, any time 

a buyer would look at something that says ‘‘optional’’ and it costs 

money, generally they don’t do it, because most people really don’t 

understand what ‘‘optional’’ means or they don’t know what title insurance really means, but your bank regulators and GSEs all require title insurance before they make a loan. 

But the issues they look at in title insurance are completely different than what a buyer would look at on a title insurance policy. 

Banks look at financial encumbrance. Does anyone know if they 

have free and clear titles? So, they really don’t get into the back 

pages on title policies. 

But I have been in real estate and buildings since I was in my 

early 20s, and often you find historic easements, right-of-way 

issues that will come up in the back pages of title policies that 

lenders really don’t—they are not concerned with, they don’t care 

about. 

And if we are concerned about empowering consumers, we really 

should be concerned about their safety. Why would you take something that I believe is very, very important which could arise in the 

future and put ‘‘optional’’ on it? 

Mr. CORDRAY. I am not sure I am following exactly what you are 

referring to in terms of— 

Mr. MILLER. A buyer does not have to get a title insurance policy. 

Mr. CORDRAY. No, I understand, but in what manner— 

Mr. MILLER. Generally, they will now. 

Mr. CORDRAY. Yes. In what manner have we addressed that 

issue in a way— 

Mr. MILLER. You put it as optional for a buyer. 

Mr. CORDRAY. In what? 

Mr. MILLER. To be able to be required— 

Mr. CORDRAY. No, in some document or some rule or what— 

Mr. MILLER. Yes, on your RESPA TILA proposal, you have in 

there that title insurance is optional. 

Mr. CORDRAY. Okay. 

Mr. MILLER. And if you are going to really protect consumers, 

that is something I would be very concerned about, because you 

could have historic utility easements. You could have right-of-way 

easements on property, and especially many seniors are downsizing 

and they are not necessarily getting a loan. 

They are taking and selling an expensive home and they are buying a smaller home because they just don’t need the big home any 

longer. So, they are not even involved with a lender. They are 

going in and buying a piece of property and it says ‘‘optional.’’ In 

many cases, they won’t pull a title policy. 

19 

Mr. CORDRAY. I’m sorry. I am now up-to-speed on what you are 

asking. So you are talking about the TILA RESPA proposed rule 

which has not yet been finalized but I hope will be finalized— 

Mr. MILLER. Yes. That is what I am trying to get you to consider. 

Mr. CORDRAY. —sometime this fall. First of all, I take your point. 

Your point is obviously meritorious. Title is often in question with 

properties in different parts of the county more so than others. 

Title insurance obviously is meant to address the risks of that. I 

will be happy to go back and take a look at the point you are raising about how we are characterizing it on that proposed— 

Mr. MILLER. I would encourage it because many times you will 

have a utility easement, but if there is no utility used at that point 

in time, but later the utility company comes in, and they can’t put 

in a pool. They can’t do things on their property that they would 

otherwise want to do. 

I think that is an issue we really—if we are dealing with consumer safety and empowering them, I think that is something we 

need to encourage them to do, if anything. 

But I know QM has been talked about. And I have some real 

concerns. You exempted Freddie and Fannie, which I think probably increased the number of loans that you would say would quality under QM with their exemption from—if you took it, CoreLogic 

showed 48 percent would not quality today that qualified in 2010. 

And if you are looking at liquidity and stability in the marketplace, a tremendous amount of lenders I am talking to are very 

concerned about this issue. And if you put Fannie and Freddie back 

into the equation, which—they put themselves in the equation. 

They said they will not be exempted. You are talking about almost 

half of the loans that were made in 2010, which are good-performing loans, that will not be made now. 

Now, don’t get me wrong. There are a lot of lenders that made 

predatory loans and they tagged them as subprime. They should be 

put in jail and they never were. But we are going to have guidelines that are so stringent based on a worst-case situation that 

would not be applicable today using good underwriting standards. 

Is that not a concern for you? 

Mr. CORDRAY. It is a concern for me. And I thank you for the 

question because there has been some confusion around the 

CoreLogic analysis. They at first indicated that the way we drew 

the rule, only half of the loans in the market would now be covered. 

They have since clarified that is not correct, that in fact, the vast 

majority of loans will be covered now. What we tried to do, frankly, 

was to leave room for Congress. We know you are looking at GSE 

reform. That is a matter for Congress to determine. 

We had to write a rule for the mortgage market that allowed 

some flexibility depending on what would happen with GSE reform. We tried to make sure that we were covering the market 

broadly as it is now, and I think everybody has recognized we are— 

Mr. MILLER. I am out of time, but please would you look at that? 

Because that is—I am not attacking you, but I am very concerned 

about liquidity. 

Mr. CORDRAY. We will continue to monitor this as we go. And as 

you all perhaps address GSE reform, we will respond and react to 

20 

that to make sure we don’t freeze the mortgage market or constrain it. 

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, 

medical debt reporting continues to be a source of consternation for 

many consumers. The Medical Debt Responsibility Act, which I cosponsor, will require paid or settled medical debt to be removed 

from credit reports within 45 days. That bill directly addressed the 

negative impact such information has on consumer’s credit score. 

With the CFPB now regulating credit bureaus, do you plan to address how medical debt is treated on credit reports? 

Mr. CORDRAY. I think that question and issue is one of many 

things I have run across at the Bureau that is fairly complicated 

and not necessarily very helpful to consumers, frankly. 

Many of us will go to the doctor’s office and will end up potentially with a bill that is covered by insurance, maybe it is all covered. Maybe there is a copay. Maybe we have to pay something. We 

may not know when we leave the office exactly how it is going to 

be handled. And sometimes, that can end up being reported as a 

debt. 

We may not even owe it. It may be just a battle among insurance 

companies, or it may be that we owe $10 or $20 but it wasn’t billed 

to us immediately. So, there are lots of things that end up showing 

up on peoples’ credit reports that they are unaware of, that probably are not necessarily correct, and that may or may not be justified. 

So, the issue of medical debt is a particularly difficult one. Many 

of those amounts are very small, but they can loom large in terms 

of qualifying for a mortgage or something. So, I do think it is a fair 

point that you raise that it may be a subject for legislative attention and or action. 

It is something we are looking at, at the Bureau. It is clear that 

medical debt is kind of a separate category that is tripping up a 

lot of Americans, and often in ways that they would not anticipate 

or understand and don’t necessarily seem to be appropriate. 

Ms. VELAZQUEZ. Thank you. Section 1071 of the Dodd-Frank Act 

requires banks and lenders to collect and report credit application 

data on small businesses, as well as minority- and women-owned 

businesses. Can you elaborate on how collecting this information 

will help enforce fair lending laws and enable lenders to identify 

opportunities for improvements in underserved communities? 

Mr. CORDRAY. Yes. There are a couple of different issues there. 

First of all, I think the logic of what Congress did in Dodd-Frank 

makes a great deal of sense. My understanding is that there were 

some efforts to collect this data maybe by the Fed at one time. 

They had a survey that was discontinued at some point. This Congress obviously expressed its will that that data, which is important, and can shed light on lending patterns, needs to be developed. 

It was determined to create a provision in the Act which puts 

some responsibility on us to take this up. We want to work with 

the Small Business Administration, which obviously is much more 

knowledgeable in that area than we are. There has also been some 

21 

talk and efforts among some other departments in terms of how to 

work on this. We are trying to first of all figure out what is the 

best way to proceed. 

The second thing I want to point out is we are going to be undertaking, and we have indicated now, the HMDA data, which has 

been very valuable but is in need of an update. Everybody pretty 

much agrees. 

Congress also addressed that, and we are going to be undertaking new rules to govern HMDA data. And out of that, we expect 

to learn a lot that relates to small business data collection, and 

there may be some overlap there operationally as well. So, we are 

under way. We are thinking about this. We understand the importance of it and why you are looking for it. 

It is not necessarily in our immediate comfort zone because we 

deal with consumers typically, and it is about the only area where 

we are given any responsibility in business. So, we want to work 

with others to make sure that can be done properly and appropriately. 

Ms. VELAZQUEZ. When can we expect the CFPB to publish rules 

implementing that section? 

Mr. CORDRAY. I can’t give you a date in terms of when we will 

publish rules. I can give you the assurance that as of this fall, we 

are under way. We are thinking about how to staff that, how to 

work with the other agencies, how it intersects with the HMDA update, which is extremely important and that we are under way 

with immediately. And there may be things there that can be jointly collected, which would obviously be efficient. So— 

Ms. VELAZQUEZ. Regarding the remittance transfer providers, 

last year the Bureau published a rule and critics took exception 

with a rule for potentially increasing the cost on small banks and 

credit unions. What changes did the CFPB make to the final rule, 

and when that is supposed to take effect next month? 

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

Ms. VELAZQUEZ. The one that will require remittance transfer 

providers to provide senders with certain disclosures. 

Chairman HENSARLING. I am afraid the time of the gentlelady 

has expired. 

Mr. CORDRAY. I would be happy to follow up or— 

Chairman HENSARLING. If the Director could add that to the list 

of answers to submit in writing, please. The Chair now recognizes 

the gentleman from Alabama, the chairman emeritus of the committee, Mr. Bachus, for 5 minutes. 

Mr. BACHUS. Thank you, Mr. Chairman. Director Cordray, I sent 

you a letter on indirect lending, and you responded to that letter. 

In fact, 35 of my fellow members on this committee joined that letter. Your response, in my opinion, was very general. 

So, I just wanted to alert you that I will be sending a follow-up 

letter. 

Mr. CORDRAY. Okay. 

Mr. BACHUS. And I would like the agency, as soon as possible, 

to give me a more detailed response. 

Mr. CORDRAY. I will look forward to that— 

Mr. BACHUS. Thank you. 

22 

Director, Section 1022 of Dodd-Frank says that, ‘‘The Bureau 

may not use its authorities under this paragraph,’’ and that is to 

obtain records from other agencies and other individuals, ‘‘for purposes of gathering or analyzing personally identifiable financial information of consumers.’’ You are aware of that section, are you 

not? 

Mr. CORDRAY. I am, yes. 

Mr. BACHUS. Is the agency collecting personally identifiable financial information of individual consumers? 

Mr. CORDRAY. Yes. I want to address this kind of carefully and 

comprehensively. There are different provisions in our statute 

about gathering information needed to do our work that Congress 

expects us to do and carry out our responsibilities, so if we have 

no information, we can’t carry out the responsibilities. That is pretty clear. Section 1022 is referring to efforts we might undertake to 

monitor markets in order to be able to understand patterns and— 

Mr. BACHUS. And getting information from other agencies that 

might have personal information in it. 

Mr. CORDRAY. So if we undertake to gather that information to 

monitor the market, we are required to proceed by either rule or 

order. We had not, until very recently, proceeded under Section 

1022 at all. We did just now send out an order to a number of companies to provide us with template consumer credit agreements as 

part of our efforts on the arbitration study, but there are other 

areas where we are permitted to collect information, and it is obviously necessary. The consumer complaint function, again, is one 

where we— 

Mr. BACHUS. All right, let me ask you this— 

Mr. CORDRAY. Yes. Personally identifiable information. 

Mr. BACHUS. You are aware that back on May 11th of last year, 

your agency approached the U.S. Trustees Program and asked 

them to make a request before the Federal District Court in 

Tampa, Florida, for 5 million bankruptcy files? 

Mr. CORDRAY. We don’t typically comment on the details of enforcement matters. I understand that other parties feel free to comment, and apparently do feel free to comment on those. We are 

working with a number of different agencies, including the Justice 

Department, to carry out our responsibilities, and we will try to do 

that in an appropriate— 

Mr. BACHUS. You may not want to comment, but those 5 million 

files have all sorts of personal information in them. Let me ask you 

this: If you did that, hypothetically, and you were to receive personal financial or private information on U.S. citizens from the 

U.S. Trustees Program, that came from the files of attorneys, 

would that not violate the Act? 

Mr. CORDRAY. First of all, no, and second, let me be— 

Mr. BACHUS. No, it would not? 

Mr. CORDRAY. Let me be straightforward about this, and let me 

give you a related example. We had enforcement actions against a 

number of credit card companies. 

Mr. BACHUS. Now, let us just use that example. 

Mr. CORDRAY. No, I am just saying we had to make restitution 

to millions of consumers— 

Mr. BACHUS. If you used that information—let me say, Director— 

23 

Mr. CORDRAY. In order to do that— 

Mr. BACHUS. If you requested that the U.S. Trustee’s Office file 

an action, or request the files of every bankruptcy file in this country, would that not violate the Act? 

Mr. CORDRAY. First of all, there is some garbling going on in the 

facts. Not on your part, but on those who are trying to report the 

facts. That was the subject of a— 

Mr. BACHUS. I am just asking, would it violate the charge of the 

specific limitation, and you are aware that you have been walled 

off from obtaining, from interfering with the practice of law, or intervening in the judicial process. Let me just say this: That is a 

data mining and data collecting process that you request the U.S. 

Trustees Department to do, without the knowledge or consent of 

citizens of the United States. Now, is that true, or not? You can 

answer yes or no, or you can say you can’t talk about it. 

Mr. CORDRAY. No, I think it is a general principle that when we 

have an enforcement action, and we are trying to figure out— 

Chairman HENSARLING. The gentleman can give a brief answer. 

Mr. CORDRAY. —to consumers, we need to understand individual 

consumer harm, and we will do that. We need to do that in order 

to be effective. 

Chairman HENSARLING. The time— 

Mr. CORDRAY. The number of people around the country who are 

purporting to be— 

Chairman HENSARLING. —of the gentleman has expired. 

The Chair now recognizes the gentleman from North Carolina, 

Mr. Watt, for 5 minutes. 

Mr. WATT. Thank you, Mr. Chairman, and welcome, Director 

Cordray. I just have two quick questions, and I will leave all the 

rest of the time for you to answer, and if that is not enough time, 

then maybe you can answer in writing. 

There seems to be a proliferation of online payday lending, which 

seems to be able to evade State laws governing payday lending, 

and I am interested in knowing, now that the CFPB has the ability 

to regulate payday lending, what options you are exploring in this 

arena and what is your timetable for doing so? 

Second, a couple of my constituents, bank constituents, have 

raised questions about a recent rule that requires them to issue 

separate statements for bank accounts and loan accounts on the 

theory that it requires them to duplicate mailing costs and drives 

up the cost of the regulation. 

I am wondering whether you have the ability to go back and take 

a look at that or provide information to me that justifies why that 

requirement is necessary? Particularly, small and community 

banks and credit unions are concerned that the extra cost of mailing, in much the same way as the cost of mailing privacy policies, 

is just an onerous cost. 

So if you could address those, in the 3 minutes that I have remaining. And if you need additional time, you can submit it in 

writing. Thank you. 

Mr. CORDRAY. Thank you, Representative Watt. A number of 

your friends in North Carolina said hello yesterday when I was 

down there and wanted me to pass that on to you. 

24 

On the second point, I don’t know that I am familiar with the 

question you are raising. It is not a concern that I recall hearing, 

that there is some sort of duplication in terms of bank accounts 

and loan accounts and extra costs of mailing, but I would be very 

interested to hear about it. We will follow up with you. If there 

are— 

Mr. WATT. They have indicated to me it is a recent rule, so 

maybe that is the question you will want to get back to me on, 

preferably after we do— 

Mr. CORDRAY. Maybe it is a proposal or something. We will get 

back to you. We certainly wouldn’t want that to be the result, and 

I would agree with you on that. 

On your first question, which is a very good question, and a very 

active topic right now, the issue of online payday lending, online 

payday lending is interesting because first of all, much brick-andmortar payday lending is migrating to the Internet now. It is estimated that the majority of payday lending will have gone to the 

Internet in the next several years. 

And what often happens is that can create problems in States 

where there is a usury cap, as you know, in North Carolina and, 

and in I think 13 States. So if the loan is being made into that 

State above the rate of interest that can be charged legally in that 

State, that is problematic. 

If the loan is being made into that State by someone from the 

Internet who is not licensed to provide a loan in that State, that 

also can be problematic. 

These are issues that obviously require us to coordinate and cooperate with different State authorities, both banking regulators 

and also attorneys general. I met with Attorney General Roy Cooper yesterday in North Carolina, and he is very concerned about 

this issue. 

It also requires us to coordinate with financial regulators, and as 

you have seen, there has been some activity now about trying to 

understand some of these online lenders, and what their relationship is with banking institutions. 

Typically, they can only operate if there is both a transmission 

mechanism and a collection mechanism with the financial entities, 

and that can be problematic. It is a subject of some considerable 

scrutiny right now, by us and by others. 

So I wouldn’t say more than that right now, but we are mindful 

of the fact. I would go back to my experience as attorney general 

in Ohio. Internet practices can be very difficult for law enforcement 

authorities at the State level because they are borderless; they go 

beyond jurisdictions. They go beyond the national jurisdiction as 

well. So— 

Mr. WATT. Do you anticipate the CFPB having some rules issued 

at some point in this area? 

Mr. CORDRAY. I think at the moment it is an issue that we see 

as a potential issue for enforcement and supervision. Perhaps 

rules, we are looking at the payday and small title lending industry. I think that is known. We have indicated that in our unified 

regulatory agenda. 

These are things that we are looking at, because they are hard 

problems. I have seen them at the State level. I know their frustraVerDate Nov 24 2008 18:17 Jul 02, 2014 Jkt 086678 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\86678.TXT TERRI
25 

tions. I work with the attorneys general constantly. We want to 

make sure that we all can be effective together. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the chairman of our Capital Markets 

Subcommittee, the gentleman from New Jersey, Mr. Garrett. 

Mr. GARRETT. Thank you, Mr. Chairman. Mr. Director, when a 

senior government official comes before a hearing of Congress and 

fails to answer questions in a timely manner, I believe, in the 

minds of the American public, there is an appearance of impropriety by that individual and by his agency as well. 

When that same agency is responsible for secretly looking into 

the private papers of an American public as well, I think that 

raises even to a higher level. Let me understand your testimony, 

then. 

Your testimony is that you were well aware of these questions 

that were asked of your second in command at your agency back 

on July 9th, and yet over a month went by, all the way to, according to your testimony, August 12th, and you still had not answered 

any of those questions, and the excuse that you give to Congress 

today is that more questions came in after that fact. 

Mr. CORDRAY. No. No, that is not my testimony. If you want me 

to restate it. 

Mr. GARRETT. Can you explain why you did not answer in the 

first 5 weeks after July 9th? 

Mr. CORDRAY. On July 9th, with the testimony, there were a few, 

just a few questions submitted. 

Mr. GARRETT. Correct. 

Mr. CORDRAY. And there were multiples of that then submitted 

on August 12th, so it took the committee— 

Mr. GARRETT. Can you explain why you did not answer in the 

first 5 weeks? 

Mr. CORDRAY. No. It took the committee a month to formulate 

the vast majority of the questions. It is a huge amount of information. 

Mr. GARRETT. Can you explain why you did not answer those 

basic questions in the first 5 weeks? 

Mr. CORDRAY. Okay. There were a few questions submitted to us. 

We would have had an easy time answering those. At the same 

time— 

Mr. GARRETT. Can you explain why you did not do what you just 

said is easy, then? 

Mr. CORDRAY. I would like to respond to your question, if you 

would like to give me a chance to respond. Would you like to give 

me a chance to respond? 

Mr. GARRETT. So far, you have not answered why you did not answer the first time— 

Mr. CORDRAY. There were a few questions submitted that we 

could have answered easily in a timeframe. As we were working on 

those, a vast number of almost 200 questions were further submitted— 

Mr. GARRETT. How many— 

Mr. CORDRAY. —that intersected with the other questions and 

they involved gathering contracts and other things. It took this 

26 

committee more than a month to formulate the questions. We have 

had less than a month now to respond to them, but we will— 

Mr. GARRETT. Let me just— 

Mr. CORDRAY. —have responses to you— 

Mr. GARRETT. Let me just— 

Mr. CORDRAY. —in a matter of days— 

Mr. GARRETT. You still have not answered the basic question. We 

gave you a number of questions. As you said, they were easy to answer, and yet, in 5 weeks, you could not answer those questions. 

Mr. CORDRAY. That is not— 

Mr. GARRETT. Here is, for example— 

Mr. CORDRAY. That is not my testimony. But if you want— 

Mr. GARRETT. Your testimony is— 

Mr. CORDRAY. [Off mike.] 

Mr. GARRETT. Your testimony, a moment ago, to quote you just 

now, was that ‘‘some of those questions would have been easy to 

answer’’— 

Mr. CORDRAY. Had they not been followed by a vast number of 

questions that intersect with them and affect the answers— 

Mr. GARRETT. Did you know— 

Mr. CORDRAY. —and need to be responded to. 

Mr. GARRETT. —in the week after July 9th, that there were subsequent questions coming? 

Mr. CORDRAY. I beg your pardon? 

Mr. GARRETT. Did you know on July 10th, 11th, and 12th that 

separate other questions were coming? 

Mr. CORDRAY. Our staff has had regular contact with your staff. 

We are very responsive to questions for the record. We always respond. 

I would add that I am supposed to be back here, as the chairman 

has indicated, to testify again next month. So, you will have plenty 

of opportunity with me on these. 

My understanding is that we have received over 200 questions 

for the record. We have taken less time to respond than the committee took to formulate the questions, and we will have the answers in days. 

Mr. GARRETT. Here is a question: ‘‘Will you commit to sending us 

all the contracts engaged with third party vendors?’’ ‘‘Yes, we are 

happy to provide that contract and information.’’ It is 2 months 

later. You haven’t provided that. 

Mr. CORDRAY. They are being provided in response— 

Mr. GARRETT. Another question: ‘‘Do you have agreements with 

any foreign countries?’’ ‘‘I can verify that for you, Congressman.’’ 

You haven’t provided that answer. 

We can go through—these are what you just said were the easy 

questions and you said you couldn’t answer them because you were 

waiting for the other ones. If you would like— 

Mr. CORDRAY. No, we don’t have any agreements with foreign 

countries. Mr. Antonakes testified to that at the hearing, and that 

is the answer. So, there is nothing— 

Mr. GARRETT. I’m sorry, no, he did not. You said you read the 

transcript— 

Mr. CORDRAY. He did, in fact— 

Mr. GARRETT. I will verify that for you. 

27 

Mr. CORDRAY. That is fine, but that is the answer. 

Mr. GARRETT. Okay. 

Mr. CORDRAY. But look, we are going to have the answers to you 

in days. It is an immense amount of information, you will see. Our 

staff has been working incredibly hard and they have been communicating back and forth with your staff on it. 

You will have a crack at me next month; I will be happy to answers your questions, at that point. 

Mr. GARRETT. So, I will— 

Mr. CORDRAY. I have no intention here to be unresponsive. I take 

the oversight responsibilities of this committee and of our Bureau 

very seriously, and I think that has been our track record, and we 

will continue to try to establish that track record. 

I want to satisfy you on this point. 

Mr. GARRETT. Obviously, you haven’t satisfied today— 

Mr. CORDRAY. I know I haven’t, yet. 

Mr. GARRETT. One of the other questions—I will submit my questions to you. Of course, I am not going to get into in 35—mine are 

basic questions, and I have your commitment, I can have some answers from you by the beginning of next week? 

Mr. CORDRAY. We will take all the questions for the record that 

are submitted. If there are a lot, it will take us a little while to 

respond to them. If there are a few, it will take us— 

Mr. GARRETT. How many U.S. consumer accounts is the CFPB 

monitoring in its data collection? Basic question. 

Mr. CORDRAY. Okay. There are several pieces to that answer. 

And I am sorry it is a complicated answer, but it is. We have our 

consumer response function, where there are over 200,000 consumers who have submitted information to us, and that is one basket. 

There is our supervision program, which deals with the 110 largest financial institutions in the country, who have an extensive customer base, across this country that we deal with all the time— 

Mr. GARRETT. When will it— 

Mr. CORDRAY. Third, is our market monitoring— 

Mr. GARRETT. When can we expect answers to these questions? 

Mr. CORDRAY. The QFRs that you all submitted, approximately 

200, and you will see that it is pages and pages of luminous answers and documentation— 

Chairman HENSARLING. The time— 

Mr. CORDRAY. —will be within days. 

Chairman HENSARLING. —of the gentleman has expired. 

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

Meeks. 

Mr. MEEKS. Thank you, Mr. Chairman. 

Director Cordray, let me first thank you for your cooperation in 

working with this committee, and getting us information and being 

willing to extend your staff to come to anything that we ask and 

we ask you to, as you, in response to Ranking Member Waters, 

when she asked to have staff available to ask questions dealing 

with the queue and anything else, you were more than willing to 

say that whatever you need, not only on this side of the aisle, but 

both sides of the aisle, and whether or not people are on the committee. 

28 

So, I just want to thank you for your cooperation with this—and 

being open and transparent about it. I think that is tremendously 

important, and something that we need to get done. 

And clearly, for the American people, I want to thank your agency again. Over 6 million consumers have received refunds since you 

have been in office; over 200,000 consumer complaints have been 

recorded, and there have been several rules and guidelines issued 

that affect millions of Americans and consumer protection rights, 

which we didn’t have. 

So, it is been a real service, I think, to the American people, and 

I want to thank you and your agency for what you are doing in 

that regard. 

In your answer, you talked and referred, in one of the questions, 

to your own personal life, with your mother, when you answered 

the question of the gentlelady from New York. 

I often do the same thing when I think about credit. I look at 

my family, who lived in public housing and didn’t have many resources, and therefore, had to try to get banking—institutional 

banking, sometimes they would deny it, and try to figure out other 

ways in which they could make a living without going to a loan 

shark— 

And so, to that end, again, I applaud you for showing leadership 

on the issue, which I think you had it released in June of final 

rules to establish procedures to cover—to bring and recover nonbanks, who are lending money under your supervisory authority, 

including those that may—payday loans, et cetera. 

So, I was wondering, first, could you comment on the study that 

the CFPB has been undertaking to bring clearer supervisions to 

the industry, and have you looked at what some of the borrowing 

or analyzed some of the borrowing activity by the consumers that 

Mr. Watt was talking about, who are using online payday loans? 

Because we are trying to figure out how they could have access 

to credit also, but not be abused, and how the CFPB could be involved there. 

And lastly, and then I will just be quiet and let you answer the 

questions, I also have been trying—I had a conversation with some 

banks yesterday, asking them, why won’t they compete in this market? 

And they said that they would like to, and they were complimentary of you, but they said that they thought that there was some 

conflict at times, between your rulings and some of the jurisdiction 

between either the FDIC or the OCC that seems to be conflicting, 

and so, they are not clear, but they would like to be under, clearly, 

the rulings that would—dealing with consumers, under the CFPB. 

So, could you give me some responses in that regard? 

Mr. CORDRAY. Okay. Actually, I am intrigued by your last point, 

because I would be glad to hear more about that. I do think that 

many financial institutions could make small dollar loans cheaply. 

They would have very little cost in doing so. A lot of credit 

unions have done this, and that would be helpful to provide more 

of that kind of credit to people who need it, and potentially could 

avoid some of the higher cost cycles of indebtedness that they get 

into. 

29 

I want to go back a couple of comments. First, the point you 

made about thinking about your own family and so forth. That is 

something that I try to preach at the Bureau all the time. 

In preparing for this hearing, I was looking at the backgrounds 

of the members of this committee; there are very sophisticated people here. A lot of people with real estate background, a lot of legal 

background, extensive legislative background, but none of us has to 

look very far in our lives to think about mothers and fathers, sisters and brothers, sons and daughters, who struggle with these 

issues. And those are the people that we are working for. I think 

it is important for us to keep that in mind. 

And as we work for them, one of the issues is, how do we protect 

them against some of the predatory practices that, frankly, do unfortunately exist, in a number of these markets? 

You mentioned our White Paper on payday and deposit advance 

lending earlier this year. There were a number of concerns we had 

identified in that report, and it is a great example of how, if we 

don’t have the data or information that we need to make those 

judgments, we are going to be very ill-informed in our policy judgments. We are going to be pretty wild in targeting what, exactly, 

are the major concerns. 

The better data and information we have about what is going on 

in these markets, the more precisely we can pinpoint what is an 

appropriate action and what is not, which is something you all, I 

think, should want and do want, and that is as to the importance 

of us gathering information on these issues. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the chairman of our Housing and Insurance Subcommittee, the gentleman from Texas, Mr. Neugebauer. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

Director Cordray, I have here in my hands a copy of the CFPB’s 

supervision and examination manual, which is referenced in your 

Semi-Annual Report. And I assume that this is intended to give 

your field people some direction on their examinations, is that correct? 

Mr. CORDRAY. It is that general problem—you are running an 

agency, you have intentions, but you need to make sure everybody 

in the field is doing what you intend and— 

Mr. NEUGEBAUER. But it is a guidance document, is that correct? 

Mr. CORDRAY. It is a guidance document, yes. 

Mr. NEUGEBAUER. So, it has three sections. It talks about unfair, 

deceptive, and abusive acts or practices. 

And when you look at the—has a statutory definition of ‘‘unfair,’’ 

and it has a number of examples to it—a fairly large number—and 

then it has deceptive acts, and it also has a statutory definition of 

what deceptive acts are, and then a number of examples so that, 

I guess, a person in the field could know what to look for there. 

And then, when we get over to abusive acts, it is a small paragraph here, and it just has a statutory definition, but it doesn’t 

have any examples. And so, I guess the first question I have is, 

who is telling the examiners what abusive is, and are the examiners just making that call as they are out in the field? 

30 

In the first two examples there, you are very detailed about what 

to look for, but when you get to abusive acts or practices, you just 

give a definition. And so, are you telling them what an abusive act 

is, and that is what they are looking for, or are they making that 

decision on their own? 

Mr. CORDRAY. I appreciate the question, Congressman. It has 

been an issue, as you know, that we have gone around the block 

on before a few times, both you and others. In fact, under our statute, ‘‘unfair’’ is a defined statutory term. 

‘‘Deceptive’’ is not a defined statutory term. Congress gave us no 

specific guidance on that, but there is a fair amount of case law we 

can work with in terms of what is deceiving someone, and that is 

a fairly straightforward concept, I suppose. ‘‘Abusive’’ is another 

term that Congress defined. 

So, in terms of what our examiners are looking for, they are looking for what meets the definition Congress itself laid down. We are 

not making anything up. Congress imposed this term, Congress defined the term. 

In terms of examples, they have been a little harder to come by. 

I will certainly agree with that, and we have talked about this before. 

We have not been actively oppressing people with some concept 

of what is abusive that is not unfair and deceptive, and one of the 

questions in this area is there is presumably a circle of what is unfair, and there is a circle of what is deceptive, and they overlap to 

some degree. And, there is a circle of what is abusive, and that also 

overlaps to some degree. 

The hard question for me is what is abusive that is not also unfair and deceptive. Many things would be both or all three at the 

same time. 

Mr. NEUGEBAUER. So here is the question, have you brought any 

enforcement action or determined that practices or products were 

abusive up until this point? 

Mr. CORDRAY. We have brought several and they have involved 

pretty egregious examples of outright defrauding of customers. 

Mr. NEUGEBAUER. Could you furnish examples? 

Mr. CORDRAY. Yes. 

Mr. NEUGEBAUER. If those are examples, then why wouldn’t they 

be in this document? 

Mr. CORDRAY. Yes, so some of that we are working through as 

we go, as we see new situations. Those instances were subsequent 

to that examination guidance. We will be updating that from time 

to time. I am happy to have our staff provide you with more information. 

Some of what we have done has been public, in terms of consent 

decrees, and other resolutions of cases. I’m happy to give you more. 

But I would say it is still a difficult issue for us and it is one 

that we have tried to tread carefully on and not be wild and overly 

aggressive in terms of making up things that can’t be easily defended. 

Mr. NEUGEBAUER. Yes, I think some more transparency here is 

certainly warranted. 

Mr. CORDRAY. Fair enough. 

31 

Mr. NEUGEBAUER. I have two other quick issues. I want to go 

back to the data collection issue. I think the American people are 

very concerned about data collection and one of the things that I 

hear from the people that your agency has been in to do examination is that you are requesting a huge amount of data, as a couple 

of things. One, it is very sensitive information; and two, it is very 

costly. 

The examination process is generally meant to be a sampling, 

going in and looking at a few records and confirming if there is a 

pattern or practice here. As I understand it, in many cases you are 

requesting almost the entirety of the records of those companies. I 

don’t think that was the intent of Congress. 

We have OFR, they are collecting data. We have the IRS collecting data and I think that one of the things we need to hear 

from you is who has access to that data and what you are doing 

to secure that data. 

Mr. CORDRAY. I— 

Chairman HENSARLING. Brief answer, please. 

Mr. CORDRAY. We typically do proceed by sampling and intend 

to do so. Sometimes, it is situational, for example, if we are into 

an enforcement situation, we may need to know all the consumers 

affected to make sure they are getting restitution as appropriate. 

I am happy to follow up with you further on that. I think I share 

your instinct, we should be sampling, not oppressing institutions, 

and that is what we are trying to do. 

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. 

I also want to thank Director Cordray for his testimony and his 

hard work on behalf of America’s consumers. 

Director Cordray, I would like to congratulate you on your bipartisan confirmation in the Senate. While I hear many of my friends 

across the aisle in this committee bemoaning the work of Director 

Cordray and his Bureau, let me remind everyone that 17 Senate 

Republicans voted for cloture and 12 Senate Republicans voted to 

confirm Mr. Cordray as the Director of the CFPB. 

It is possible that those Senate Republicans had heard of the impressive accomplishments of the young Bureau, including $432 million refunded to 6 million consumers because of the new Bureau’s 

enforcement actions. 

They probably also heard of the Bureau’s work on behalf of college students, of older Americans, and our servicemen and servicewomen and a full commission by the AARP, two-thirds of respondents agreed that this Bureau is a needed institution and I could not 

agree more. 

My first question to Director Cordray is as follows, can you provide highlights of the forthcoming financial literacy efforts of the 

Bureau including research results, pilot programs, and the recently 

announced financial coaching initiative? 

Mr. CORDRAY. Thank you, Congressman. That is actually a subject very near to my heart. I am putting a lot of emphasis at the 

Bureau on financial education with an eye to, as the chairman 

32 

noted at the outset, not trying to dictate the decisions that consumers make. 

They have to make their own decisions and make their own 

choices. We would like to feel confident that they are in a position 

to know more and to make more responsible choices, based on their 

judgment, that they can live with over the course of their lives and 

not regret. 

So, in the financial education area, we are trying to focus on how 

can we deliver more information to consumers in an effective manner. It is not an easy issue. People have been working at this for 

decades and we do a very poor job in this country at preparing 

young people to go out into the world and deal with some of the 

fairly complicated financial decisions they are going to be asked to 

make in an increasingly complex financial marketplace. 

We are trying to focus on schools, focus on workplaces, and focus 

on faith communities. I was in North Carolina to speak to the National Baptist Ministers Convention recently, and we are going to 

be doing more outreach of that kind. We want groups of people 

around this country to focus on the importance of having people be 

in a position to fend for themselves, to stand up for themselves, to 

stand up for their rights, and to see that they are making good decisions. And that is quite a bit of work that we are going to be 

doing on that score. 

We are working with the Financial Literacy Education Commission and other Federal agencies. We are reaching out to folks at 

the State level including governor’s offices to try to get more focus 

on this. Nobody seems to ever say that this is not important. They 

just don’t always manage to prioritize it. We need to prioritize it, 

it has been getting second shift to everything else in this country 

for way too long. 

Mr. HINOJOSA. I want to say that I worked very closely as cochair with Judy Biggert on the other side of the aisle to start a bipartisan caucus here in Congress 10 years ago, and that number 

is close to 100. I recommend that you see who those Congressmen 

are on both sides of the aisle because they are half and half, 50 

percent Republicans and 50 percent Democrats and— 

Mr. CORDRAY. It is an excellent— 

Mr. HINOJOSA. —engage them because together, we cover lots 

and lots of people and there are over 100 partners in the 

JumpStart umbrella that has many banks and the U.S. Treasury 

and the U.S. Federal Reserve so that together we need to move it 

up and do what you said that we are lacking communication out 

there to the institutions you mentioned. 

Mr. CORDRAY. Excellent suggestion. I have heard from Congressman Stivers on this point, and he is interested in working with us 

to figure out how we can better deliver good financial education 

that provides meaningful help to both young people and adults. It 

is something that I am very focused on and I intend for us to make 

headway over the next several years. 

Mr. HINOJOSA. I understand that you are appointed to the President’s forthcoming advisory council on financial capability for 

young Americans, and seeing that we have a debt of $1 trillion in 

college student loans, I wish you would address that and help us. 

Mr. CORDRAY. Okay, thank you. 

33 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair would like to announce that there are votes on the 

Floor. They just began, so it is the Chair’s intention to clear two 

more Members, the gentleman from North Carolina, Mr. McHenry, 

and the gentleman from Missouri, Mr. Clay. 

Other Members who wish to go to the Floor now, if they would 

leave quietly after clearing two more Members for questions, we 

will declare a recess and ask for the patience and indulgence of our 

witness. I am told that there are two votes on the Floor, so it 

shouldn’t take too terribly long, and then we will reconvene as soon 

as votes have concluded on the Floor. 

So at this time, I would like to recognize the Chair of the Oversight and Investigations Subcommittee, the gentleman from North 

Carolina, Mr. McHenry. 

Mr. MCHENRY. Mr. Cordray, thank you for being here. 

You authorized, did you not, the creation of the Academic Advisory Commission or Council? 

Mr. CORDRAY. I think it is called the Academic Research Council, 

but yes. 

Mr. MCHENRY. And you authorized it? 

Mr. CORDRAY. It was before I became Director, but it is something that has existed at the Bureau for some time. 

Mr. MCHENRY. Okay, now does that Council report to the Assistant Director of Research, who was until recently Sendhil 

Mullainathan? 

Mr. CORDRAY. Yes, I wouldn’t say ‘‘report to,’’ it is an advisory 

council that is meant to assist us in our work and give us broader 

perspective on many of these issues. 

Mr. MCHENRY. But in the organizational chart, where would 

they report to? 

Mr. CORDRAY. They are not with the Bureau. They are folks from 

outside who are willing to— 

Mr. MCHENRY. Sure, okay. 

Mr. CORDRAY. —spend some of their time helping us think about 

these issues. 

Mr. MCHENRY. Okay, but this is a group that you gather in and 

you decided this was a good idea to have this board. 

Mr. CORDRAY. Again, this existed since before I was the Director, 

but yes, it is a good idea. 

Mr. MCHENRY. Okay. 

So have you heard of the company called Ideas 42? 

Mr. CORDRAY. I believe I have heard that name. 

Mr. MCHENRY. Okay. 

What do you know about it? 

Mr. CORDRAY. Not much. 

Mr. MCHENRY. Okay. 

Are you aware that the CFPB awarded a research contract for 

$5 million to Ideas 42? 

Mr. CORDRAY. I believe I knew that, I am not familiar with all 

the details of that. 

Mr. MCHENRY. And was this a process that was a competitive 

bid process or was this more of a single source contract? 

Mr. CORDRAY. All of our procurements at the Bureau go through 

the regular Federal laws and contracting guidelines and we have 

34 

been audited on that. And I don’t know offhand whether that 

was— 

Mr. MCHENRY. Single source contracting— 

Mr. CORDRAY. —competitive or single source— 

Mr. MCHENRY. Yes. 

Mr. CORDRAY. —but it was done according to government procedures. 

Mr. MCHENRY. No, I understand, but single source contracting 

exists. Right? And that is permissible. 

Mr. CORDRAY. I believe so, yes. 

Mr. MCHENRY. Okay. 

So if you would let us know whether or not that was competitive 

bids, how many bids there were, and from what companies? 

Mr. CORDRAY. Okay. 

Mr. MCHENRY. And then furthermore, you know the full process 

for this. 

Mr. CORDRAY. Okay. 

Mr. MCHENRY. It is a $5 million contract and that is important. 

Are you aware that Sendhil Mullainathan was a co-founder of 

the company, Ideas 42? 

Mr. CORDRAY. I don’t know if I was familiar with that or not. I 

don’t believe so. 

Mr. MCHENRY. Okay. 

But he was the former head of research, right? Or assistant director for research? 

Mr. CORDRAY. That is correct, he was. He is no longer employed 

by the Bureau, but he is a well-regarded economist, a MacArthur 

grant winner and well-known in the field. 

Mr. MCHENRY. Yes, and the question I asked is about your policies and procedures. 

Mr. CORDRAY. Yes. 

Mr. MCHENRY. For a former staffer of yours to get a $5 million 

contract without any apparent bids, he is the co-founder of this 

company and—go ahead, please respond. 

Mr. CORDRAY. Yes, I don’t know that the details of that are all 

accurate. I don’t believe as far as I know that Sendhil is involved 

in the management of that company but— 

Mr. MCHENRY. No, he is the co-founder of that company. 

Mr. CORDRAY. At one time, yes. 

Mr. MCHENRY. And are you aware that four of your six members 

of the Academic Research Council have direct connections to Ideas 

42? 

Mr. CORDRAY. Again, I don’t know what you mean by ‘‘direct connections.’’ 

Mr. MCHENRY. One is a founder and board member of Ideas 42, 

one is an adviser, and two are affiliates of that firm. 

Mr. CORDRAY. I don’t know what you mean by adviser or affiliates. And when you say ‘‘founder,’’ are you talking about— 

Mr. MCHENRY. This is, yes. 

Mr. CORDRAY. Okay. I am happy to have our staff follow up with 

you. I am quite confident that everything done there, as has been 

true of all of our procurements, was done properly and in accordance with government procedures. 

35 

Mr. MCHENRY. So do these connections raise any questions about 

conflicts of interest? When you have an advisory board, and four 

of the six members have a connection to a company that gets a direct contract from the CFPB for $5 million? And furthermore, that 

you have a founder, who was formerly with your employ, and we 

are not sure of the circumstances of his leaving, but he has apparently departed in the ensuing amount of time between, in the last 

year, it appears. 

Mr. CORDRAY. Right. That is correct. 

Look, I am quite confident that everything was done properly, 

and that we have carefully vetted these kinds of conflicts of interest. I am happy to have my staff work with your staff to go through 

it in detail. 

Mr. MCHENRY. We would like to have some answers on this, because it appears to us— 

Mr. CORDRAY. And if there is, it will be a concern to me. So— 

Mr. MCHENRY. It appears to us an enormous conflict of interest. 

And it raises greater concerns that we have with the policies and 

procedures you have to avoid conflicts of interest with your staff 

and former members of your staff who have enormous connections 

both with policymaking, without much in the way of a cooling-off 

period of any sort before they come back to either receive a no-bid 

contract, or maybe even a competitive contract. We don’t know. So, 

I would like to have answers to these questions. 

Mr. CORDRAY. That would be fine. Thank you. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Missouri, Mr. 

Clay. 

Mr. CLAY. Thank you, Mr. Chairman, for conducting the hearing. 

And thank you, Mr. Cordray, for your leadership at the CFPB. 

My questions are related to mortgages. As you are aware, part 

of the issues concerning our economic meltdown going into 2007 

was shaky mortgages, and the whole process of steering people who 

normally would be qualified for conventional mortgages into 

subprime mortgages. 

I was wondering, what has been the CFPB’s record of preventing 

those kind of abuses, especially now, since it is a little more difficult to obtain a mortgage. I was wondering, what has been your 

experience there in the leadership of the CFPB and how have you 

addressed it? 

Mr. CORDRAY. Thank you for the question. That is one of the responsibilities Congress gave us, that they really highlighted as 

being very important to this country and gave us the responsibility 

to write the set of mortgage rules, and a very specific, firm deadline for doing that, both so that the mortgage market could be protected and safe, and also so that it could proceed forward and industry could have certainty. And we understood those various aspects of the problem. 

What you mentioned goes directly to our ability-to-repay rules of 

the so-called Qualified Mortgage rule, which is intended to root out 

some of the practices that were inappropriate and improper. They 

weren’t necessarily illegal in the somewhat lacking regime that we 

had before the crisis. And many were being offered by lenders that 

were not being supervised or overseen by anyone. 

36 

The other issue was the steering, as you say, of people who actually would have qualified for a prime rate mortgage and didn’t 

know it. They assumed the person across the table was being 

straightforward with them, but people actually had financial incentives to steer them into a higher-cost mortgage and then they get 

a kickback on that. 

That is totally inappropriate and that is very exploitive of consumers. And it happened to millions of Americans. There is a loan 

originator compensation rule that, first of all, the Federal Reserve 

wrote, and then we have had a further round which is meant to 

prevent the use of yield spread premiums, which was the mechanism by which—that is a somewhat bureaucratic term—but that is 

how it actually worked. 

And the point is to make sure that can’t happen again. We have 

been working hard to see that is actually happening. We are focused very much on the issue you raise. 

Mr. CLAY. And have you taken any action if you have found players in the market who have steered people into these high-cost, 

high-risk mortgages? 

Mr. CORDRAY. We have. I typically am not in a position to talk 

about—first of all, the regulation is important because going forward, that is not going to be possible. We are supervising around 

that issue every day. Second, we recently filed an action against a 

lender that we found was still engaged in that process as a sort of 

routine business model, which is inappropriate and violates the 

law. And we will proceed whenever we see that. 

Mr. CLAY. Thank you for that response. 

Home mortgages and student loan debt are the two largest categories of outstanding consumer debt in America. We are still feeling the effects of the subprime mortgage crisis and are only beginning to understand the threat that excessive student debt possesses 

to the economy. 

What steps are being taken at the CFPB to promote transparency of student loans and other financial products? 

Mr. CORDRAY. It has been a big issue for us. We have a great 

ombudsman, a student ombudsman that was created by Congress 

in the law. It was an excellent insight and it is an important position for us. 

We have worked on a ‘‘know before you owe’’ effort around student loans, because for many people, it is new to them. They are 

engaging in it for the first time as their son or daughter is thinking 

of going off to college or getting any kind of further education, 

whether training school or vocational school or community college. 

We have also developed the financial aid shopping sheet so you 

can actually compare and contrast institutions, and created more 

uniformity in the disclosures there. And all of this has been folded 

into a suite of tools on our Web site that we want people to use 

and we are working to get out to guidance counselors, teachers, 

and parents called ‘‘paying for college.’’ 

It is an excellent, excellent Web site. I recommend to all Members that you should be promoting it to your constituents who are 

all going to potentially be in this position of having to deal with 

paying for school. And there is great advice and expert information 

that will benefit them. 

37 

Mr. CLAY. Thank you for your responses. 

Chairman HENSARLING. The time of the gentleman has expired. 

Pending the termination of votes on the Floor, the committee 

stands in recess. 

[recess] 

Chairman HENSARLING. The hearing will come to order. 

The Chair now recognizes the gentleman from California, the 

Chair of our Monetary Policy and Trade Subcommittee, Mr. Campbell, for 5 minutes. 

Mr. CAMPBELL. Thank you, Mr. Chairman, and good morning, 

and welcome back, Director Cordray. 

For a number of the things that the CFPB is looking into, like 

home mortgages and so forth, there are some pretty obvious reasons as to why you are doing that. They contributed substantially 

to the 2008 financial meltdown, or there is a significant number of 

consumer complaints, or whatever. 

Now, we may disagree on whether the solutions are helping or 

hurting the problem, but the need to wade into some of those areas 

and to look into some of those areas is pretty evident. 

The question I have for you is about car loans. This is an area 

of lending which clearly did not contribute to the financial crisis. 

No one makes any assertions to that regard. There has been, even 

through the 2008–2009 period, a relatively slow delinquency rate, 

certainly relative to other forms of lending. 

There are a lot of them, over 10 million a year, new and used 

car loans. It is extremely competitive. Virtually every financial 

service provider in the United States—bank, credit union, nonbank—makes car loans, most of them aggressively, with an extremely low number of consumer complaints. 

Like a point zero zero zero-type, very low number of consumer 

complaints. So, as the old adage goes, ‘‘If it ain’t broke, don’t fix 

it,’’ and it would seem to me that is an area that is not broke. 

But yet, the CFPB has waded in, in a couple of areas, one of 

which was recently—on a car loan application, there is no indication of race or ethnicity, so there is no way, even if a financial provider wants to discriminate that they can, because they don’t know 

to whom they are lending. But yet, you, at one point, the agency 

considered introducing race and ethnicity, I guess so you could discriminate on that basis into it. And I just want to ask you broadly, 

what are you doing in the area of car loans and why? 

Mr. CORDRAY. Thank you, Representative Campbell, for asking 

about this subject. And I would agree with much of what you said. 

First, I am from Ohio and we make cars in Ohio, and I would 

agree with you that for a number of years in the middle of the last 

decade, we were not selling enough cars in the United States as 

shown by the average life of the car on the road is now higher than 

ever, I think 11 years. That is even older than my car, which is 

already fairly old. Second— 

Mr. CAMPBELL. I believe it is 12 years. 

Mr. CORDRAY. I am appreciative to see the recovery in the auto 

market, and it has been pronounced and it has been significant, 

and it is actually one of the things very much contributing to economic recovery, and I think it will continue to do so. In terms of 

38 

what we are doing, we did release a bulletin for what you are referring to back in the spring. 

Congress was very specific about how they divided up jurisdiction 

in this market. Auto dealers are not subject to the jurisdiction of 

the CFPB, but auto lenders are subject to our jurisdiction. We both 

have to be careful not to exceed our jurisdiction with respect to 

auto dealers, and to exercise our jurisdiction appropriately with 

auto lenders. 

The purpose of the bulletin was to remind auto lenders that if 

you have a lending program, it is important for you to recognize 

that just because you are also working with third parties, whether 

they are dealers or someone else, you still are responsible for your 

program and how it is carried out. 

That was essentially the gist of that bulletin. There has been no 

indication in the wake of that—a number of months ago—that any 

of that has affected the auto sales market, which continues to be 

very robust. August was one of the best months we have had in 

some time. 

We are mindful of the need for access to credit. We are mindful 

of the number of different players in the market. We are concerned. 

There are a fair number of complaints that do occur about potential 

discrimination in this area, as was also true in mortgage lending. 

Nobody should have access to credit denied or put at a higher price 

because of their ethnic background. I think we all appreciate that 

and recognize that, and we are trying to do careful work to sort of 

gauge whether there are issues or concerns of that kind in this 

market. 

But I will be happy to continue to be in touch with you and your 

staff about— 

Mr. CAMPBELL. Okay, just in my last 6 seconds, the only thing 

I would say is if you don’t know—you can’t discriminate on the 

basis of something you don’t know, and so if we keep it that way, 

that is the best way to not discriminate. I believe my time has expired. 

Chairman HENSARLING. The time of the gentleman has indeed 

expired. 

The Chair recognizes the gentleman from California, Mr. Sherman. 

Mr. SHERMAN. I am happy to yield to a Democrat who would like 

5 minutes of time. 

Mr. CARNEY. I will be happy to go, Mr. Chairman. 

Chairman HENSARLING. Okay, apparently the gentleman from 

Delaware is recognized for 5 minutes. 

Mr. CARNEY. I would like to thank my colleagues on this side for 

allowing me to go, and I want to thank the gentleman from Delaware. I used to be down there when you first came in. I am up here 

now. 

Mr. CORDRAY. I wasn’t sure who was going to end up asking the 

question. 

Mr. CARNEY. I want to thank you for coming in and for your 

great work. I have a number of questions, some of which you and 

I have spoken about before. 

Mr. CORDRAY. Yes. 

39 

Mr. CARNEY. But I would like to talk just about a couple, and 

maybe follow up with your staff on the others. You and I have 

talked before you were confirmed about non-bank lending, and the 

focus there, particularly on payday lending, subprime lending, that 

kind of thing. Could you just highlight a couple of things that you 

think we need to continue to do that you are not satisfied with yet, 

with respect to those lenders—those non-bank lenders? 

Mr. CORDRAY. When you say ‘‘we,’’ do you mean what I think 

Congress needs to do? 

Mr. CARNEY. No, I mean you. 

Mr. CORDRAY. We need to continue— 

Mr. CARNEY. You at the CFPB. 

Mr. CORDRAY. Yes. So, I think there are, as there are throughout 

the mortgage market, and all the lending markets, competing considerations. One is, we need to make sure that some of the abuses 

that did occur, no question about it, and they were part of what 

helped to create problems, both for the mortgage market and the 

economy, occurred in the subprime market, that those don’t recur 

again. 

Our ability-to-repay rule is designed to root out some of those 

practices. The yield spread premium provision, and the mortgage 

loan originator rule that we discussed a little bit ago, are also designed to address those. It is important for us to monitor as we go, 

and hear from the market and make sure that we are actually addressing this problem appropriately. 

At the same time, there is an access to credit issue, and it is an 

access to credit issue for low and moderate-income Americans, 

much of which falls in the subprime market that we need to be 

mindful of as well. So, it is something of a delicate balance. 

We try to address that by being very accessible and hearing from 

lots of different points of view, and also having access to the kind 

of data we have talked about today, but it is critically important, 

if we are going to do— 

Mr. CARNEY. —and it would be more so as we try to reform our 

housing finance system and to keep credit available for folks who 

have difficulty getting it— 

Mr. CORDRAY. I agree. 

Mr. CARNEY. So I appreciate your attention to that. In a related 

issue, mortgage foreclosure prevention, there was a piece on public 

radio this morning that you may have heard, that talked about 

people who get themselves underwater, if you will, not getting access to the Federal programs to help them. Have you looked at that 

problem? I know it is something that has been on your radar. 

Mr. CORDRAY. Yes, definitely, the underwater mortgage issue, 

which of course is more of an issue in some parts of the country 

than others, and more pronounced in some parts of the country 

than others has been a major problem with economic recovery. 

First of all, the problem is easing a bit, month by month, as the 

housing market has recovered. There are millions of Americans 

who had been underwater, who have come out and gotten their 

heads back above water, but there are still millions who are not 

yet. 

Mr. CARNEY. What about this access to some of the Federal programs? The idea was that the servicers or the banks were foreVerDate Nov 24 2008 18:17 Jul 02, 2014 Jkt 086678 PO 00000 Frm 00043 Fmt 6633 Sfmt 6633 K:\DOCS\86678.TXT TERRI
40 

closing before they had an opportunity to avail themselves maybe 

of something that would help. 

Mr. CORDRAY. Yes, yes. There have been ongoing changes being 

made in both the HAMP program, and the HARP program, which 

we don’t have direct jurisdiction over, we have jurisdiction over the 

mortgage servicers, so there is an intersection there, changes being 

made in FHA programs and others to try to address the underwater mortgage problem. 

It is a difficult problem. There is no easy fix, by any means. But 

there is continuing attention to it. We are paying attention to it. 

I don’t really have more to say, other than that we are all working 

toward the day where we have addressed that problem sufficiently 

and the market has recovered to the point where it is more manageable, and it is not— 

Mr. CARNEY. One of the issues that I have been trying to work 

on, particularly over the last several months, is college affordability. And I notice that you have done some reports on student 

loans and private lenders in that regard. Is there something there 

that jumps to mind? 

One of your reports was more generic in terms of the effect that 

it is having on the ability of those young adults to purchase in the 

economy. What else in terms of the structure of the loans? 

I have heard from a lot of students and families, frankly, that 

they didn’t really know what they were getting into. I think part 

of it was maybe they weren’t paying attention to the fine print or 

what have you. What have you found there, if anything? 

Mr. CORDRAY. There are a variety of problems there. First of all, 

it is a more than $1 trillion issue in this country now. It is very 

significant. It is something we need to— 

Mr. CARNEY. It is killing our young people, just— 

Mr. CORDRAY. And it is killing them. It is driven in part by losing control over tuition costs, which is an issue that goes well beyond the CFPB. 

Mr. CARNEY. And the bigger problem, in my view, that is the bigger problem. But I just— 

Mr. CORDRAY. Yes. But in terms of us, we have been noting, and 

increasing numbers of Federal policymakers are noting, the domino 

effect of this, that the student loan albatross around young people’s 

necks is keeping them out of the housing market, and it is keeping 

them out of starting businesses or starting a family. 

Mr. CARNEY. My time is up, but this is something that hopefully 

I can follow up on with you and your staff. 

Mr. CORDRAY. Absolutely. 

Mr. CARNEY. I appreciate it. Thanks very much for your good 

work. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Missouri, Mr. 

Luetkemeyer, for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

And, Mr. Cordray, I appreciate your comments earlier, your testimony with regards to the ATM bill, which I was a lead sponsor on 

last year, that managed to get through. And now, we have the privacy bill that is sitting in the Senate. 

41 

So if you are anxious to help in that regard, we sure wouldn’t 

oppose a phone call or a letter or some sort of something to get the 

Senate on the ball there, to help us along with that. 

Mr. CORDRAY. Okay. And I will say, I do find the things we tend 

to focus on most immediately are also things that Congress is focused on most immediately. And if Congress addresses an issue, we 

are always happy to see that. If it needs to be us who addresses 

it, we are happy to do that and work with you, either way. 

Mr. LUETKEMEYER. Thank you very much. 

I would like to follow up on a couple of things that have been 

discussed a little bit with regards to online lenders. It is come to 

my attention, with the number of banks that have called, as well 

as a number of online lenders that have called our office, that the 

FDIC is really coming down on the banks who have online lenders 

who have accounts and clearing their third-party payments 

through them. 

In the Wall Street Journal the other day, there was a comment 

made by a Department of Justice spokesman who said, ‘‘they intend to choke online lenders off from the very air they need to survive.’’ 

Are you aware of this activity going on by the Department of 

Justice and the FDIC to choke online lenders off from the very air 

they need to breathe, to survive? 

Mr. CORDRAY. I don’t know about that characterization. I am 

aware, and there is work going on to try to understand the relationship between online lending, which, as I indicated before, is a 

very difficult law enforcement problem, because it tends to be borderless, and how that relates to the involvement and responsibilities of financial institutions. 

Mr. LUETKEMEYER. Mr. Cordray, your agency, if I am not mistaken, is primary over all these nonbank lenders. From the regulatory side? 

Mr. CORDRAY. I don’t know if we are primary. We have jurisdiction over non-bank lenders, yes. 

Mr. LUETKEMEYER. You are the primary regulator— 

Mr. CORDRAY. —also has some involvement. The State attorneys 

general have involvement. State banking regulators, and— 

Mr. LUETKEMEYER. But you are the primary Federal regulator. 

Mr. CORDRAY. Yes, with the FTC. 

Mr. LUETKEMEYER. Are the FDIC and the DOJ coordinating with 

you with regards to these efforts that they are undertaking to force 

online lenders out of banks? 

Mr. CORDRAY. We pretty much coordinate with the FDIC, the 

OCC, and the Fed on— 

Mr. LUETKEMEYER. So they are coordinating with you, then, on 

these efforts? 

Mr. CORDRAY. There is work going on, and we are trying to work 

with a broad range of partners, some of— 

Mr. LUETKEMEYER. So you are aware, and you are working with 

them to get the online lenders out of the banks. Is that correct? 

Mr. CORDRAY. Again, trying to characterize the objective is one 

thing. We are working to try to understand how the online lenders 

work— 

42 

Mr. LUETKEMEYER. It is pretty simple. They just have a business 

model, like every other business that is online, where they use the 

banks as a clearinghouse for their transactions. 

Mr. CORDRAY. That is right, but if they are making loans that 

are illegal, or if they are making loans where they are not licensed 

to make loans, then that is a business model that we don’t want 

to endorse. 

Mr. LUETKEMEYER. From the banks I have talked to and the online lenders I have talked to, that is not the problem. I am not here 

to support the bad actors. What we have is a problem where there 

is this blanket policy, as the DOJ spokesman has indicated, as the 

FDIC, with the way they are carrying out their activities, they are 

out there to just get rid of them, period. 

And to me, I guess my question would be, what is your stance 

on online lending? Are you here to get rid of all these online lenders as well? 

Mr. CORDRAY. My stance on online lending, as with all lending, 

is that it should be done legally; it should be done by folks who are 

licensed and qualified to do it. It should be done in compliance with 

Federal and State law. 

Mr. LUETKEMEYER. So your stance would be, then, if they are licensed and they are behaving according to the laws, then you 

should have no problem with them being in business. 

Mr. CORDRAY. Anybody who is behaving according to the law, is 

behaving according to the law. And our job is to make sure that 

is happening. 

Look, I know you get this. You were both a bank official and also 

a bank regulator. So, you have been on both sides of the table. 

That is our job, to make sure they are complying with the law. 

But we have to investigate and understand the— 

Mr. LUETKEMEYER. Mr. Cordray, I appreciate the fact you did 

your homework. The problem here is you also have a—also don’t 

need to be punitive in the way that you take action against these 

people if they are behaving in a business-like manner, according to 

the law, we don’t need to be punitive about this and drive them out 

of business. That is my concern. 

One of the things that we are discussing with these online lenders is a national charter that would give you the ability, and then 

whoever, wherever we land with this charter, the ability then to 

enforce it on a national basis. 

Would you support something like that? 

Mr. CORDRAY. You are talking about a national charter for— 

Mr. LUETKEMEYER. For online lenders. 

Mr. CORDRAY. For online lenders? 

Mr. LUETKEMEYER. Yes. That way, you don’t have to, that would 

alleviate the State-by-State-by-State situation, where you— 

Mr. CORDRAY. Yes. 

Mr. LUETKEMEYER. —making it, according to this law, that rule, 

this rate or whatever. 

Mr. CORDRAY. You know, I— 

Mr. LUETKEMEYER. —support something like that? 

Mr. CORDRAY. I don’t know what to say about that. The online 

problem, unfortunately, is a bigger problem, because some of the 

43 

online lending is coming now from outside the borders of the 

United States. 

Mr. LUETKEMEYER. The question, then—this is a way to solve the 

problem. I just asked a simple question, do you support it or do you 

not? 

Mr. CORDRAY. I would have to look at that and think about it. 

I don’t have a position for you today. 

Mr. LUETKEMEYER. Okay. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from California, Mr. 

Sherman. 

Mr. SHERMAN. Thank you, Mr. Chairman. 

I want to pick up on Mr. Luetkemeyer’s comments. And, again, 

he and I have carried this bill to eliminate unnecessary privacy notifications. 

Mr. Cordray, is there any way that you could, in effect, implement, that bill without legislation, through regulation, or do we 

have to rely upon the House of Lords—I mean, the United States 

Senate—to move on that? 

Mr. CORDRAY. We have been working on this issue and looking 

at it. And it has risen to the top of our list of streamlining things 

that we hear a lot about from community banks and others, and 

we tend to agree, as is often the case in the consumer space, there 

is often more disclosure than the consumer benefits from, but it is 

burdensome. 

So our sense is that there is quite a bit we could do by regulation. It may or may not be everything that Congress wants. Congress can always do whatever they want within the Constitution. 

I would be happy to have more conversations with you. But I 

think we think we could make considerable headway— 

Mr. SHERMAN. I will ask you to do all you can to deal with this 

through regulation, and do all you can to get the Senate to move 

on the bill. 

Mr. CORDRAY. Let me say two things— 

Mr. SHERMAN. We in the House have passed it through this committee and through the Floor 3 times. 

Mr. CORDRAY. Let me say two things. We would be happy to 

work with you and have you understand our thinking about what 

we can do by regulation, and see if that falls short of what you are 

trying to do by legislation. 

We are also happy to work with you if you are working on legislation to think about how to craft that and whether there are particular technical issues or so forth with which we could help you. 

Mr. SHERMAN. I know the gentleman from Missouri and I look 

forward to working with you on this. 

Mr. CORDRAY. Either way. Yes. 

Mr. SHERMAN. The next issue is that some credit rating agencies 

are tagging homeowners as if they went through a foreclosure simply because they did a short sale. 

Now, a short sale is not an A-plus, smiley face, financial institution thing on your record. But it is not a foreclosure. 

What can you do to make sure that the credit rating agencies say 

a foreclosure is a foreclosure, and just because you began the foreVerDate Nov 24 2008 18:17 Jul 02, 2014 Jkt 086678 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 K:\DOCS\86678.TXT TERRI
44 

closure process and went into a short sale does not mean that you 

have a foreclosure on your record? 

Mr. CORDRAY. Thank you for the question. As you know, we 

worked on this quite a bit this summer. It is a complicated issue. 

It involves lots of different actors. 

We could have walked away from it and said, ‘‘Well, we can’t 

solve it ourselves,’’ but we thought it was important to address it. 

It is wrong for people who are not foreclosed on—when we are actually encouraging short sales and public policy is encouraging 

short sales—to then be tagged with a foreclosure in their credit 

records. 

We worked very closely on this issue. It has been a success story 

for us with Fannie Mae, and with the credit reporting agencies, to 

get processes changed and fixed so that this will no longer be a 

problem. It was a very complicated undertaking, and I am happy 

to report that we were able to push and pressure for progress, 

working significantly with Senator Nelson and others. 

And I am pleased with the work our staff did, which was great 

work, hard work, and important work. 

Mr. SHERMAN. You are pleased that the hard workers—is this 

problem solved, or you are just moving in that direction? 

Mr. CORDRAY. No, the problem is being solved. It involves 

changes in the computer processes of Fannie Mae and one of the 

credit reporting agencies, and they are making those changes, and 

they have committed to making those changes. And we are monitoring to make sure the changes are made correctly. 

Mr. SHERMAN. My final issue is remittances, which are important 

in my district. A number of banks and credit unions have looked 

at the new regulations and decided to just get out of the remittance 

business. 

What can you do to keep a high level of competition and at the 

same time protect consumers? 

Mr. CORDRAY. Several things. First of all, there is a high level 

of competition in the remittance area. And it is an area where technology is changing it dramatically. Prepaid cards are now a method 

of remitting money. Phones may be a method of remitting money 

in some areas. Online and PayPal and other things are methods of 

remitting. So there is a lot of competition in this space, and it is 

hard to separate out all the cause and effect. 

We did go back after—we had finalized that rule at a time when 

we were reluctant to think of further changes. Industry came to us, 

and they said they had three significant problems. 

They had a problem of being responsible for errors when they 

didn’t do anything wrong. They had a problem with trying to understand what fees were being imposed in some other country that 

they didn’t control. And they had a problem with having to be able 

to understand and report taxes that might be imposed at several 

different levels in other countries and were not transparent to 

them. 

We went back and reopened the rule and made changes specifically to address all three of those concerns. And we have heard 

very little further anxiety around anything that we can do operationally to make the rules work. 

45 

I know there will be some unease since this is now an area that 

has consumer protections, and it didn’t before so, that imposes 

some costs and there will be some change in the market but we are 

open to hearing more from people if they have specific concerns. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Michigan, Mr. 

Huizenga. 

Mr. HUIZENGA. I appreciate that, Mr. Chairman. 

And Mr. Director, thank you for your time. 

I have a couple of things; I think I am going to save them for 

the end about college tuition and about the online loan situation 

that my friend Mr. Luetkemeyer was talking about. 

But I want to touch a little bit on QM rules. As you know, current QM rules have included affiliated title insurance and that 3 

percent points and fees trigger. Unaffiliated title insurance is not 

included in that, however, and since title insurance rates are filed 

by underwriters and approved at the State level, is there really any 

reason to differentiate between affiliated versus unaffiliated title 

insurance? 

Mr. CORDRAY. Thank you for the question. It has been raised to 

me by a number of folks and raised to our staff by a number of 

folks, including the folks at Quicken Loans who are affected by 

this. They have told us— 

Mr. HUIZENGA. If I can make the—I am from Michigan, by the 

way— 

Mr. CORDRAY. Yes. 

Mr. HUIZENGA. —we can get into a little debate about Michigan 

and Ohio, the auto building and cars, from your earlier answer, but 

yes, Michigan is home to Quicken, it is home to Flagstar, it is also 

home to my former real estate firm that I was affiliated with, 

Woodland-Schmidt, which has its own title insurance, Fivestar and 

Lighthouse Insurance, so it is big, but it is also small. And they 

are all being pinched by this. 

Mr. CORDRAY. Yes. 

So the 3 percent points and fees was imposed by Congress in the 

law. We had to try to figure out how to apply it, which we did. 

There is a— 

Mr. HUIZENGA. Would you support changing it? 

Mr. CORDRAY. —pretty strong statement in the law. There are 

two sides to this, right? There are affiliates where there was some 

abuse of steering people and potential payments being made and 

so forth and then there are other affiliates where it is very much 

an efficiency and a synergy that creates. 

So we did our best to sort of write the rule within an understanding of those polar opposite views of affiliates both of which 

have some validity. We are happy to think further about these 

things in response to that request. I have begun talking to our staff 

about whether title insurance is different because it is regulated. 

Mr. HUIZENGA. It certainly seems to me that it would be, and I 

fail to see the true benefit to the consumer if title insurance is purchased through an affiliated or unaffiliated, and my colleague from 

New York, Mr. Meeks, and I are sort of leading that charge with 

House Bill 1077 which was included within the Path Act as well. 

46 

Mr. CORDRAY. We would be happy to work with you to provide 

technical assistance if you are looking at— 

Mr. HUIZENGA. I would like your support, frankly. If this is something on which we need a determination, and we need to figure out 

why if something is regulated by the State and has a cost attached 

to it, we are actually penalizing people who can deliver it more efficiently, in my view. So, I appreciate your looking further at that. 

Mr. CORDRAY. I understand the question, yes, and the issue. 

Mr. HUIZENGA. Okay, I look forward to that. 

The other element that I had, and I was glad to hear you say— 

I think I wrote down this quote accurately—that in response to 

some of the discussion about student loans, losing control of tuition 

costs which is beyond the CFPB, so I am glad, Mr. Chairman, we 

have found an area that is beyond the control of the CFPB. 

Mr. CORDRAY. We are not as powerful as people seem to think. 

Mr. HUIZENGA. You are still pretty darn powerful, because I am 

concerned about that as well. We have to have parents and students, and as a father of a couple of high schoolers and with more 

following, I am keenly aware of that, and I just want to make sure 

that we are not going in and shooting the messenger. 

As parents are making decisions and the students are making 

decisions, they need to have their eyes wide open, there should not 

be anything hidden from them, but at the same time, the system 

shouldn’t be penalized for providing opportunities for them to go 

after college educations that they are looking for whether they really truly believe that they need to be going to the Ivy League versus 

maybe the community college, that is another thing. 

And then I do have lastly in my last little bit here, as Blaine 

Luetkemeyer was talking about, I am a bit concerned about an uneven playing field being created if 50 percent of all online lending 

occurs offshore and we are going to start putting in regulations 

that are really going to be hampering ours but I am curious specifically, do you count the Native American reservation-based companies that are doing this as well as ‘‘offshore?’’ 

Mr. CORDRAY. What do you mean, ‘‘count?’’ 

Mr. HUIZENGA. Would you categorize them as offshore or beyond 

your control? 

Mr. CORDRAY. No, they are not beyond our control. I think it is 

well-established in Federal law that the Federal Government can 

regulate tribal business activities affiliated with Tribes. 

There is some question whether States can do so and so it has 

been a somewhat difficult area. But that is different from outside 

of the United States which is a particular jurisdictional problem, 

which mirrors the one I described as Ohio attorney general when 

people would lend from other States and would not necessarily be 

licensed in our State, that is the problem. 

Chairman HENSARLING. The time of the gentleman has expired. 

Mr. HUIZENGA. Thank you, Mr. Chairman. 

Chairman HENSARLING. The Chair recognizes the gentleman 

from Texas, Mr. Green. 

Mr. GREEN. Thank you, Mr. Chairman. 

I thank the ranking member, as well. 

And I thank you, Mr. Cordray, for appearing today. 

47 

I want to compliment you on your fine job that you are doing, 

and I look forward to working with you. I do have a couple of concerns that I would like to call to your attention. As the ranking 

member indicated, over our district work period—and I do emphasize ‘‘work period,’’ not ‘‘break;’’ there seems to be a misunderstanding about that we do. Over the district work— 

Mr. CORDRAY. I don’t misunderstand it. I know how hard you 

work. 

Mr. GREEN. Thank you. 

Mr. CORDRAY. Yes. 

Mr. GREEN. Over the district work period, as she indicated, many 

of us decided that we would visit some of the community banks, 

smaller banks. I visited at least three of them, and upon visiting 

with them, I was amazed at some of the things that were presented 

to me. 

To be very honest with you, the term ‘‘paperwork’’ is a nebulous 

term until you have an opportunity to see what ‘‘paperwork’’ actually looks like from the point of view of a smaller bank, an institution which has one person, possibly multitasking, doing more than 

one thing within the bank, all proper of course. 

But after having this opportunity to visit with the smaller banks, 

many of whom keep loans on their portfolios, I am absolutely convinced, Mr. Cordray, that they need some help. And I am going to 

work with the ranking member to do all that I can to provide them 

some assistance. 

But I just want to add my voice to her voice in letting you know 

that I believe that there sincerely, really is a problem that needs 

our attention for the smaller community banks. So in the weeks 

and months to come, perhaps we will talk to you more about it. 

I did ask that they provide proposed solutions, so at some point 

I will start to get these proposed solutions in. I will visit with the 

ranking member before passing them on, but I hope that we will 

be able to help you at least with some thoughts as to how we might 

provide some degree of help for them. 

Now moving to several things that have been called to my attention, the second appraisal for the smaller lenders, loans that are 

maintained on portfolios under $250,000, how are you proposing to 

address this concern that has been raised? 

Mr. CORDRAY. First of all, Congressman, I very much hear your 

point of view about the smaller institutions, community banks and 

credit unions. I have said time and again, they really were not at 

all causes of the financial crisis and we should not be oppressive 

in our responses in how they may affect their operations. 

So we did draw special provisions, that I mentioned earlier to the 

chairman, for the Qualified Mortgage rule. Smaller creditors who 

make loans and keep them in portfolio, the kind you just described, 

are deemed to be Qualified Mortgages regardless of the other aspects of that rule and have a safe harbor from litigation which is 

designed to help them feel confident in continuing to make the 

kinds of loans they make that work very well and support our communities. So, that is essentially how we are trying to address that. 

I am always interested to hear more from the smaller institutions, that is why we have a Credit Union Advisory Council, and 

that is why we have a Community Bank Advisory Council, so that 

48 

we can know how we are affecting them, which otherwise we don’t 

know, because we don’t examine them directly. Anything you want 

to pass on to us or any way we can hear from you about what you 

are hearing, we are probably hearing it already, but just in case, 

we would like to have you share it— 

Mr. GREEN. Thank you. 

Let me move forward to sophisticated borrowers and the homeownership counseling. Many of these persons have net worths that 

are fairly substantial if you are a sophisticated borrower, has there 

been any thought given to how you will address these persons and 

their homeownership counseling requirements? 

Mr. CORDRAY. Are you talking about unsophisticated borrowers 

or— 

Mr. GREEN. I actually I am talking about those who happen to 

be high net worth. 

Mr. CORDRAY. Oh, I see. 

Mr. GREEN. Yes. 

Mr. CORDRAY. High net worth borrowers? 

Mr. GREEN. Yes, sir. 

Mr. CORDRAY. That doesn’t generally seem to me to be an area 

of great concern at the Bureau. What we saw recently is the jumbo 

loans being made to higher net worth borrowers are actually being 

offered now at an interest rate in the market surprisingly and historically below that for other borrowers. 

So high net worth borrowers generally take care of themselves 

very well and institutions serve them. We have no problem with 

any of that of which I am aware. 

Mr. GREEN. Is there a requirement of counseling for a high net 

worth borrower? 

Mr. CORDRAY. I am not familiar with that, but I would be happy 

to get back to you. 

Mr. GREEN. Thank you. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Wisconsin, Mr. 

Duffy. 

Mr. DUFFY. Thank you, Mr. Chairman. 

And Director Cordray, welcome to the committee room and the 

hearing. 

I want to focus on data. We have touched on that a little bit 

today. I want to go back to that conversation and give you an opportunity to tell the committee how many Americans you are collecting their financial debt on—how many Americans do we have 

that you collect on? 

Mr. CORDRAY. So again, and I have tried to give this answer several different times. 

Mr. DUFFY. I am looking for a number, how many Americans? 

Mr. CORDRAY. Okay. 

It is not the way the question can be answered. 

Mr. DUFFY. Let me— 

Mr. CORDRAY. Do you want me to try to answer it? 

Mr. DUFFY. Do you have a number? 

Mr. CORDRAY. Okay. 

Mr. DUFFY. Do you have a number? 

Mr. CORDRAY. Three different buckets of pieces— 

49 

Mr. DUFFY. All right. 

Mr. CORDRAY. —there is consumer complaint data, a couple hundred thousand— 

Mr. DUFFY. So some are bringing it directly to the supervisory 

capacity. How many Americans do you collect from here? 

Mr. CORDRAY. Okay, we don’t collect directly from any Americans 

in a supervisory capacity— 

Mr. DUFFY. So— 

Mr. CORDRAY. We go to institutions and we work with the institutions to understand how they are affecting their customers. 

Mr. DUFFY. How many institutions collect from Americans—how 

many Americans are collected for you through these third-parties? 

Mr. CORDRAY. Okay. 

So, we oversee approximately 110 large banks and a few credit 

unions with assets of $10 billion or more. They have significant 

customer base— 

Mr. DUFFY. Mr. Cordray, how many Americans? That is my question for you. Give me an answer. 

Mr. CORDRAY. That is not the way the work is done, sir. It is like 

asking me, what color is this song. That is just not quite the same 

thing. So— 

Mr. DUFFY. Let us go to credit cards. How many actual credit 

cards are you collecting on Americans—credit card data, credit card 

information? 

Mr. CORDRAY. So, three different ways. One would be they may 

come to us with a consumer complaint. That would— 

Mr. DUFFY. Mr Cordray, listen, I think America wants to know 

a number of how many you are collecting. And you are giving me 

a lot of explanation, but I want an answer of how many credit 

cards does the CFPB collect data on? 

Mr. CORDRAY. Okay. We don’t collect any data from individuals 

about their credit card accounts, other than those who come to our 

consumer response functions. What we do is we go to credit card 

issuers who we are required to oversee and make sure they are 

complying with the law. And we need to look at their institutions 

and their practices to see if they are complying with the law. 

And by the way, some of them have not—and we have gotten 

back— 

Mr. DUFFY. Do you monitor credit card accounts? Do you monitor 

credit cards through your agency or through any of your third 

party contractors any credit card accounts? 

Mr. CORDRAY. And that is the third bucket, okay? So, consumer 

complaint, supervision, and then market monitoring. On the market monitoring, as we have indicated before, and—has indicated to 

you, we are gathering sample data on the credit card market. 

Mr. DUFFY. I am going to reclaim my time for a second. Mr. 

Antonakes was asked these questions. You were asked these questions by the Senate Banking Committee. And you came today illprepared to give us numbers on the number of Americans who 

have their financial transactions and data collected by the CFPB. 

Mr. CORDRAY. So, what I am fully prepared to do is to give you 

explanations of how these programs work— 

Mr. DUFFY. And what I think America deserves is the transparency that you promised. 

50 

Mr. CORDRAY. Okay. So again— 

Mr. DUFFY. And you are not giving us that transparency. 

Mr. CORDRAY. Again, what we are delivering for consumers on 

credit cards is enforcement actions— 

Mr. DUFFY. I am asking the questions, so would you give me the 

names of the banks, the financial institutions for which you— 

Chairman HENSARLING. The time belongs to the gentleman from 

Wisconsin. 

Mr. DUFFY. You are not going to give me a direct number. I am 

fine with that. 

Mr. CORDRAY. Okay. 

Mr. DUFFY. Stonewall me. 

Let us talk about financial institutions. Will you give me the 

names of the financial institutions for which you collect financial 

data on Americans? Will you give me those names? 

Mr. CORDRAY. Okay. 

Mr. DUFFY. Yes or no? 

Mr. CORDRAY. What we are collecting is—your question, I just 

need to correct the premise of the question. 

Mr. DUFFY. Will you give me the information on— 

Mr. CORDRAY. We are collecting data on how those institutions 

comply with the law. And they haven’t always complied with the 

law. 

Mr. DUFFY. Would you give me the names of those banks? 

Mr. CORDRAY. All right. There are 110 large institutions— 

Mr. DUFFY. Reclaiming my time, do you want to answer my 

question? 

The claim for transparency, Mr. Director, isn’t being met. So let 

me say this, I am going to ask you this. The American people don’t 

know what the CFPB is doing. And if you look at another agency, 

it is called the NSA. And they collect information about Americans’ 

phone records. 

America has said, ‘‘My phone company has information about my 

phone records. But, man, am I outraged when the Federal Government takes that information from me.’’ 

You are here to protect consumers, and you are taking this financial data that they have said it is okay for the financial institution 

to have, and you are taking it and you are not giving them any 

transparency about the information you are taking, how much you 

are taking, or from whom you are taking it. 

And that is incredibly frustrating. Why don’t you just level with 

us? We have asked you these questions over and over again. And 

you come in and you stonewall. You try to explain. But never do 

we get answers. Never does America get answers. 

Mr. CORDRAY. Look, I understand that you want to make a 

speech and I appreciate that, but there is no comparison between 

the NSA and the CFPB. 

Mr. DUFFY. Oh, there is. 

Mr. CORDRAY. It is a false comparison. 

Mr. DUFFY. Oh, no— 

Mr. CORDRAY. We are doing work to protect the consumers— 

Mr. DUFFY. Do you have numbers for me? 

Mr. CORDRAY. Six million consumers have benefited— 

Mr. DUFFY. Do you have numbers for me? 

51 

Mr. CORDRAY. —and many more will benefit. 

Mr. DUFFY. Do you have names of banks or numbers of consumers who had their data collected—do you have those numbers 

or those names? 

Mr. CORDRAY. There are 110 banks, okay? I can name a number 

of them. We are looking at credit card matters at Morgan Chase. 

We are looking at credit card matters at Bank of America. We are 

looking at credit card matters at Capitol One. We are looking at 

credit card matters at Discover, American Express, all of the biggest— 

Mr. DUFFY. Now, America knows that those are the greatest— 

Mr. CORDRAY. And we are going to make sure that they are complying with the law— 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Minnesota, Mr. 

Ellison. 

Mr. ELLISON. Thank you, Director Cordray. And congratulations 

on your confirmation. 

Mr. CORDRAY. Thank you. 

Mr. ELLISON. And thank you also on behalf of so many Americans who have benefited from the good work of your agency. I believe there is a total of $432 million being directly refunded to more 

than 6 million consumers because of your work. 

You have had to endure criticism regarding data and I think 

questions that people want answered, but I think the 6 million people whom you helped get refunds are pretty happy about the work 

you are doing. So many proclamations made in the name of Americans, but those 6 million are Americans, too. 

For example, the members of the United States military who 

were refunded about $6. 5 million due to deceptive car loans. They 

are Americans and they are glad that they got their money back. 

I happen to have a very close relative who is an 18-year-old enlisted member of the Army. And every time he walks outside that 

base, he sees those low terms. I don’t want him to get financially 

caught up. And because of your work, he won’t be or is less likely 

to be. 

Also, Capital One paid about $210 million because they engaged 

in deceptive credit card practices. What is in your wallet? The 

CFPB has a little bit more left in Americans’ wallets than would 

have been if you guys hadn’t had acted. And also, the CFPB has 

fined 4 private mortgage insurance companies for more than $15 

million for alleged kickbacks. 

So, I don’t begrudge my colleagues at all for asking questions of 

concern to themselves or their colleagues. That is fine. That is 

what Congress is all about. But I just don’t want it to be lost that 

literally millions of Americans and millions of dollars have been refunded because of your good work. In fact, I don’t claim that the 

CFPB couldn’t work better. Maybe it could. But I do believe that 

you guys are off to an awesome start and you are operating as we 

contemplated. 

And I could tell you this, there is no such thing as a Republican 

or Democrat consumer fraud. They happen in everybody’s district, 

all over this country, all the time. And no matter how you voted 

in the last election and no matter how you plan to vote, if you are 

52 

getting full measure for your dollar, then the CFPB is well-justified. And I thank you for the work that you are doing. 

I just also want to note that there are issues that we want to inquire about. And before my time runs out, I do want to just get to 

one of them. One of the things that I am concerned about is the 

credit-invisible. These are folks who aren’t banked at all. 

But what we have learned, and what has come to my attention 

is that if cell phone records and utility bills were able to be counted, then maybe some of these people could get a score and might 

be credit-visible. 

And therefore, that could improve their lives, reduce the cost of 

purchases, and even employment, which might hinge upon a good 

credit score. People might be able to acquire that. Could you talk 

a little bit about how you see this issue? And if anything, what the 

CFPB is doing about it or might do about it? 

Mr. CORDRAY. Thank you, Congressman. It is an important area, 

an interesting area. There are a lot of people who make a lot of 

payments in their lives, and they don’t seem to get much credit for 

it when it comes to positives showing up in their credit report or 

boosting their credit score. 

It is an issue we are very interested in. We have been studying 

the impact of remittances, which is one of the kinds of payments 

some people make very steadily and very persistently, how that 

could affect credit scores. The same, as you say, with utility payments, rent payments, and the like. 

There are some interesting pilots and models out there to try to 

figure out how we can do this better. Because, frankly, up to now, 

the credit reports tend to reflect only certain kinds of credit that 

tend not to be as common among low- and moderate-income Americans. And so, it is something of a skewed picture of the market. 

So, it is a good line of inquiry and one that we are interested in 

and happy to work with your staff on. 

Mr. ELLISON. Yes, me and Democrats and Republicans, the bipartisan bill that we have, we would love to get your technical assistance on it, because we would like to help people improve their 

financial outlook. 

Mr. CORDRAY. Yes. 

Mr. ELLISON. And again, I do want to encourage you to go after 

that student loan thing. This is a big, big deal. You mentioned the 

overhang on individual students and families. What about the macroeconomy? We are expecting those kids to go out and buy refrigerators one day. 

Mr. CORDRAY. Yes. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Ohio, Mr. Stivers. 

Mr. STIVERS. Thank you, Mr. Chairman. 

Director Cordray, I want to congratulate you on your appointment. My questions are around three areas that are all around the 

theme of transparency. You were congratulated for your transparency, and I want to talk to you about three things on transparency. One is the Inspector General, and then some information 

on advisory panels, and then activities. 

53 

First, with regard to your Inspector General—and if you can give 

me brief answers to the first two questions. They are kind of yesor-no questions. 

Mr. CORDRAY. Sure. Okay. 

Mr. STIVERS. Is your Inspector General solely dedicated to the 

CFPB? Yes or no? 

Mr. CORDRAY. We share an Inspector General with the Federal 

Reserve. 

Mr. STIVERS. With the Federal Reserve. 

Mr. CORDRAY. We are within that system. 

Mr. STIVERS. And is your Inspector General Senate-confirmed? 

Mr. CORDRAY. I actually don’t know, offhand, the answer. 

Mr. STIVERS. The answer is no, and I didn’t mean to answer your 

question for you. But— 

Mr. CORDRAY. Okay. Fair enough— 

Mr. STIVERS. I guess given what Representative McHenry, the 

chairman of our Oversight Subcommittee, talked about earlier with 

regard to Ideas42, some stuff that has been in the paper with— 

data. I don’t want you to comment on either of those particular possible conflicts. But I believe an independent, Senate-confirmed Inspector General is important because of the challenges of accountability of this agency with regard to having a budget that is not 

part of the normal appropriations process, and then not having a 

board. Boards normally preserve the rights of the minority view 

and then give a voice for that. 

And so, given those things, I think it is really important that you 

have a separate Inspector General who is focused on you, who is 

Senate-confirmed. And if you can give me brief comments on that. 

I don’t want to get you sideways with your current Inspector General or anything. 

Mr. CORDRAY. I would just say two things on the Inspector General. We have an Inspector General. We share with the Fed, but 

a very strong I.G., strong staff, and they have been working to improve our operations and are doing so in a number of respects. 

Whatever Congress provides is what we will carry out. And it is 

true of all of our oversight provisions, the numerous audits we’re 

subject to; the mandatory testimonies both here and in Senate 

Banking and FSOC veto and other things. 

Mr. STIVERS. Great. 

Mr. CORDRAY. You know— 

Mr. STIVERS. Thank you. 

So, the other thing I want to focus on is advisory panels. And you 

mentioned earlier that the CFPB doesn’t know a lot yet about payday lending, doesn’t completely understand it. You have done some 

White Papers on it. 

But you got a letter signed by 30-some members of the committee 

here. Then, I know you got a letter from at least one Democrat who 

is very prominent, and holds a position outside the Congress, saying you should consider having an advisory panel. 

And I know Section 1014 of the Dodd-Frank Act actually requires 

you to have this consumer advisory board or—and you have set up 

one for credit unions. You have set up one for community banks. 

That is great. 

54 

But because you are, essentially, the sole Federal regulator or 

the primary sole—Federal regulator for non-bank financial institutions, and because you can potentially regulate them out of business as was referred to earlier, it would be great if you would try 

to set up some type of advisory panel. And even if you set up one 

that had diverse interests—because I know you talk about— 

Mr. CORDRAY. Yes. 

Mr. STIVERS. When you and I talked, you talked about—you have 

credit bureaus. You have student loans. 

Mr. CORDRAY. Yes, that is right. 

Mr. STIVERS. You have other financing agencies. But if you set 

up one as a voice for non-bank financial institutions, even though 

there would be disparate interests at the table, it would be great 

for you to have that input and feedback. 

So I guess that is more of an urging than anything. I would ask 

you to consider that. If you want to make a brief statement, I have 

one more thing I want to talk about really quickly. 

Mr. CORDRAY. Yes, that is fine. Look, I have responded to the letter. It is a—we have the Credit Union and Community Bank Advisory Councils because they fill a hole. We don’t examine them. We 

don’t see them day to day. We are constantly dealing with the nonbank focus. 

We do have examination authority. So we are working with them 

day to day. That is what felt different to me. I am happy to talk 

with you further and— 

Mr. STIVERS. Maybe we can talk offline a little bit about it. The 

last thing is more of an activities warning. It has come from multiple sources. Mr. Campbell talked about it. Mr. Luetkemeyer 

talked about it. 

Sometimes, the activities you do target financial activities that 

you might not like, whether it is specific types of car loans or online lending, they can actually—if they are products that consumers demand, your activity can actually result in credit allocation that hurts borrowers. And I am really concerned about that. 

And I want to focus on one piece of it. Do you think it is appropriate to have non-written guidance that, basically, tries to force 

people, force businesses to not have a banking relationship without 

any due process? Because I think that is what is happening with 

online lending. 

Mr. CORDRAY. I am not understanding. Forcing— 

Mr. STIVERS. Okay, so— 

Mr. STIVERS. It is not you. It is the FDIC— 

Mr. CORDRAY. Yes. 

Mr. STIVERS. —that is twisting some banks’ arms saying, ‘‘Don’t 

bank these particular types of companies.’’ And if they are following State laws; should that happen? Shouldn’t we make sure 

that—and you stated it earlier— 

Chairman HENSARLING. Very brief answer, since the time of the 

gentleman has expired. 

Mr. CORDRAY. If people are following all the laws, then there is 

not a problem. If they are not following all the laws, I understand 

that is what people are looking into. And there may be, obviously, 

a distinction between the financial institutions following the law, 

whether the online lender is following the law, and what they know 

55 

about each other. Those are the complexities we are all trying to 

work through. 

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 Ranking Member 

Waters. 

Again, thank you, Mr. Cordray, for being here. And let me join 

others in congratulating you on your confirmation and also receiving the bipartisan accolades prior to your confirmation on your credentials and character. 

I have three questions also. Certainly, as you are aware, the Attorney General in Ohio has taken an extremely aggressive approach to scrutinizing the consumer credit reporting companies for 

failing to investigate and correct. And, certainly, we all know how 

important credit reports are. 

He went so as much to go on record and drew attention not only 

from national media, but ‘‘60 Minutes,’’ in saying he thought they 

were breaking the law. And there is an article, Mr. Chairman, I 

need to enter into the record. 

Chairman HENSARLING. Without objection, it is so ordered. 

Mrs. BEATTY. That happened in August, around the last week of 

August. Let me just say how much I appreciated your immediate 

response to that, coming out with your release in strong words of 

holding them accountable. So I wanted to thank you for that. 

I also, before I ask my two questions to allow you enough time 

to answer, wanted to say I really appreciate your deliberate detail 

in somewhat lessly, but historical answers. Because there are at 

least a dozen of us who were not here July 21st of 2011 when your 

agency went into effect from Dodd-Frank. 

And as we move forward, especially since a lot of my colleagues 

on the other side of the aisle have wanted us to move the needle, 

it is very much appreciated that you help educate us on where we 

were. 

Secondly, had you had the opportunity to be here before when we 

were going through some of those questions and issues, I think we 

would have been served. Unfortunately, you were not invited and 

not here. And I appreciate your bipartisan responses to some of the 

questions. 

Let me move forward. For many, financial literacy—as you know, 

we made many changes in Ohio through your leadership. I would 

like to go on record in bipartisan support to say that I would like 

to join Mr. Stivers in working with you on financial literacy. Because I think as we look at our young folks, they are the economic 

engines of the future for financial growth. 

My question that I would like an answer to from you is on the 

Office of Minority and Women Inclusion (OMWI). As you have 

heard repeatedly on this side of the aisle, our ranking member, 

Congresswoman Maxine Waters, defined break for us, i.e., work. 

So, we have had the opportunity to work through that break. 

Mr. CORDRAY. Yes. 

Mrs. BEATTY. And even most recently, had the opportunity to 

have a mini town hall meeting with those new Directors of OMWI. 

So having a big interest in what happens with small businesses as 

a small business owner, can you help us when we talk about 

56 

women and minorities and Federal contracts of how you propose to 

help us increase those numbers and make a difference? 

Mr. CORDRAY. Yes, so thank you for that question. Thank you for 

all your comments. 

On the Office of Minority and Women Inclusion (OMWI), which 

is what OMWI represents, first of all, I am very pleased and have 

developed a deep respect for the OMWI at the CFPB, whom you 

met the other day, maybe met before, former commissioner of the 

EEOC and really very thoughtful about the work that we are doing 

in this area. 

There are three areas of work. The first is hiring practices at the 

different Federal agencies. The second is contracting practices at 

the different Federal agencies. We have been very mindful of that, 

and we have made some changes in our own human capital and 

procurement processes to reflect some of that input. 

And the third is the issue of diversity in the financial services 

industry itself, which is a broader issue. There are not any compulsory tools that have been given to the agencies to effect that. And 

it feels to me that is going to be a cooperative effort back and forth 

between the agencies and the industry on that front. 

We are just working to—I think we are finalizing a memorandum of understanding with standards within the next month or 

two, maybe one month. And we will move forward from there. But 

we are very mindful of our obligations here. We take them seriously, and I think it is going to be interesting and important work. 

Mrs. BEATTY. Thank you. 

And, Mr. Chairman, I actually yield back my time. 

[laughter] 

Chairman HENSARLING. The gentlelady from Ohio is setting a 

fine standard for this committee. 

[laughter] 

The Chair now recognizes the gentleman from Pennsylvania, Mr. 

Rothfus. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

And congratulations, Director Cordray, on your confirmation. 

A recent survey from the Independent Community Bankers of 

America (ICBA) reveals that more than 10 percent of the community banks are indicating that they are going to get out of the mortgage lending business due to the QM rule. How does the fact that 

these banks will be exiting this market help increase access to 

credit? 

Mr. CORDRAY. First of all, I am not familiar with this survey, although I will now look for it. You say it is an ICBA survey? 

Mr. ROTHFUS. Yes. 

Mr. CORDRAY. Okay. It would be unfortunate, in my mind, if 

community bankers who had been making loans, typically, according to a very responsible underwriting model that is safe and sound 

and often performed extremely well, even during the worst economic crisis of our lifetimes, were to stop making mortgages because they have some anxiety around the rules that I think is not 

justified. 

The smaller banks, as I said, we have a special provision to cover 

them so that they make loans and keep them in portfolio. They are 

Qualified Mortgages with a safe harbor from litigation. It would be 

57 

a bad business decision if they were to leave that money on the 

table and not make those loans. 

Mr. ROTHFUS. Yes, I think it is important that you reach out to 

the— 

Mr. CORDRAY. I know. They need to know. Some of them don’t 

seem to know that yet. 

Mr. ROTHFUS. If I could just talk a little bit about some transparency issues. We are coming up on a very sad anniversary in this 

country in November— 

Mr. CORDRAY. Yes. 

Mr. ROTHFUS. —with the death of President Kennedy. And one 

of the things I have always heard about his Administration was the 

call to public service. Indeed, you look at some of his words, ‘‘Let 

the public service be a proud and lively career. And let every man 

and woman who works in any area of our national government in 

any branch at any level be able to say with pride and with honor 

in future years, ‘I served the U.S. Government in that hour of our 

Nation’s need.’’’ 

And, of course, we all remember, ‘‘Ask not what your country can 

do for you. Ask what you can do for your country.’’ President Kennedy also told the American people to ask of those in public service 

the same, to hold them to the same high standards of strength and 

sacrifice that we ask of the American people. 

There was an ad on the American Bankers Web site from the 

CFPB, advertising employment. ‘‘Not satisfied with your day to 

day? Why not give public service a try? Take your private sector 

skills and put them to good use at the CFPB. Make a difference 

without compromising premium salary and benefits. Now hiring: 

all levels of our supervisory team.’’ 

There are 741 staffers at the CFPB: 61 percent make a six-figure 

salary; 111 staffers make more than $179,000; 56 employees make 

more than $199,000; and 14 make more than $227,000, which is 

how much the Vice President of the United States gets paid. 

Does the CFPB pay bonuses in addition to these salaries? 

Mr. CORDRAY. So, first of all— 

Mr. ROTHFUS. Does the CFPB pay these people who are making 

the six-figure and higher salaries bonuses? Yes or no? 

Mr. CORDRAY. We have had limited supplemental pay adjustments— 

Mr. ROTHFUS. Okay, so would that be a bonus? 

Mr. CORDRAY. I don’t consider it a bonus. 

Mr. ROTHFUS. Okay, do you know what the top enforcement attorneys make at the Department of Justice? 

Mr. CORDRAY. I know that they are on a different pay schedule 

than the independent Federal agencies, but I don’t know what they 

make. 

Mr. ROTHFUS. And do you know that the people who have those 

top enforcement jobs at the Department of Justice could be making 

a lot more money on the outside? 

Mr. CORDRAY. And I believe many of our people could be making 

a lot more money on the outside as well. 

Mr. ROTHFUS. But they are making more than the attorneys at 

the Department of Justice, is that correct? 

58 

Mr. CORDRAY. Different people make different amounts at different levels that have— 

Mr. ROTHFUS. Do you know what the top salaries are for the people at the Consumer Product Safety Commission? 

Mr. CORDRAY. Again, the Federal banking agencies are on a different pay scale than the GS scale. One of the things that I want 

to note, it is very important here. Our statute requires us, it requires us, this is the law of the land that we are bound to follow 

that we are to have a pay scale comparable to that of the Federal 

Reserve. Last I checked on our statistics, we were 1 percent lower 

in average salary than the Federal Reserve, so we are complying 

with the law— 

Mr. ROTHFUS. But who sets your salary, Director? 

Mr. CORDRAY. I beg your pardon? 

Mr. ROTHFUS. Who sets your salary? 

Mr. CORDRAY. Congress. 

Mr. ROTHFUS. Congress sets the salary. 

Mr. CORDRAY. And it is lower than many of the people at the 

agency, but I am willing to do that to— 

Mr. ROTHFUS. Would you support legislation that sets guidelines 

for what salaries at the CFPB should be? 

Mr. CORDRAY. Congress has set those guidelines so they specifically provided in our statute, that, like the other Federal banking 

agencies, we would be on a pay scale, and that wouldn’t— 

Mr. ROTHFUS. Would you oppose legislation that would make the 

pay scale be comparable to the enforcement people at the Department of Justice? 

Mr. CORDRAY. Again, I don’t know what level you are talking 

about, apples-to-apples comparison. I am happy to have our staff 

talk to your staff about pay if that is an issue for you. But we are 

just following the law. We are trying carefully to follow the law. 

Mr. ROTHFUS. Thank you. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Washington, Mr. 

Heck. 

Mr. HECK. Thank you, Mr. Chairman, and Ranking Member 

Waters. Director Cordray, I want to pick up on the line of inquiries 

made by Congressman Green and others, namely the relative layer 

of regulatory burden on small institutions. I actually don’t think 

this is rocket science. I think it is axiomatic. Small institutions run 

on people. Big institutions run on processes. And fairly understandably, the CFPB’s regulatory approach is geared to processes. 

So given what you had said earlier about there being a lack of 

culpability on the part of smaller banks and credit unions to contribute to the economic crater we experienced, is there anything 

else that you can do that would ease that regulatory burden to enable them to continue to be a part of the rich fabric, the financial 

institutions that offer services to consumers? 

Indeed, is there anything you can even say that would help, I 

think virtually everyone on this committee, feel better that you 

really get this? Indeed, Director Cordray, if you want to take today 

to announce a new initiative in this regard and make news, please 

feel free. 

59 

Mr. CORDRAY. So thank you, Congressman, and I think there are 

things that I can say that are important. First of all, I have never 

worked at a big financial institution. That is not my background. 

It is of some, and it is an important experience that some bring to 

the Bureau and bring to this Congress. 

I am from a small town in Ohio. I grew up there. I commute from 

there now which gives me an appreciation for all of you who commute from all over the country and you go 3 time zones as I understand. That is above and beyond. And we did that because we want 

to serve this country, and we take pride in having a role in helping 

lead this country. 

In terms of the smaller banks, they are the backbone of the economy in many parts of America. We have a unique small banking 

system in this country that is not replicated in Europe. It is not 

replicated in most countries around the world. 

A banker told me recently that he had been in China and they 

were very curious about, ‘‘How could they set up a bank, a system 

of 7,000 or 10,000 small banks?’’ It is not easily done. It required 

decades and decades of work. 

It is important for us to preserve that system, because I know 

in many small towns, if the local bank or local credit union is not 

providing that credit, bigger banks aren’t going to come in and do 

it. I was taken by your initial comment, which I think is exactly 

right. Larger institutions tend to work on processes, and smaller 

institutions on persons, who often exercise a lot of discretion and 

judgment. 

The way they have exercised that discretion and judgment historically has been sound and responsible and deserves our respect 

and our admiration. It is a model that performed well through the 

worst financial crisis of our lifetimes, and continues to perform 

well. 

We are trying to figure out where we can make special exemptions and special provisions to recognize that model and encourage 

it and not oppress it with a slew of rules that they don’t necessarily 

need to meet because they were not part of the problem. 

We will continue to do that and I meet regularly with them, to 

hear from them, both the State institutions, State-to-State association level, individual institution-level, the ICBA, credit union 

groups, and also our advisory council. 

It is something that I mean for this agency to be able to point 

to as a success and not as a failure, and I appreciate your input 

to help us accomplish that. 

Mr. HECK. Please hear us, it is universal. 

Mr. CORDRAY. Yes. 

Mr. HECK. Maybe quickly, on the QM, I have the sense that you 

had gone back and done a retrospective analysis of how many loans 

made in the last few years would have been enabled or allowed 

under the QM. 

But I am actually more curious, especially given the decision on 

QRM as to whether or not you have gone back and done any analysis retrospectively on how many loans would not have been allowed in the years of a run up to the crater, and whether or not 

you think that it would have helped us, materially helped us avoid 

60 

bursting that bubble by having fewer people placed in loans for 

which they probably shouldn’t have been? 

Mr. CORDRAY. Yes, two points. First, your question is, how can 

we continue to monitor how the mortgage market may be affected 

by our rules, and make sure that we are not having undue effects 

of the kinds the chairman has referenced that we don’t want to 

have. 

We have to have data and information in order to do that. There 

is no substitute for it. If you cut us off from having information 

about the markets, we won’t do a very good job, and you will justly 

criticize us for that. In terms of this issue in particular, the QRM 

is a rule that we are not involved in writing. 

There seems to be a growing proposal by the other agencies now 

to conform that significantly to the Qualified Mortgage rule, which 

I assume is a complement to that rule. We will continue to work 

with the other agencies to help them get that right in their judgment. It is not our rule, it is their rule, but we are happy to continue to work with them on it. 

Chairman HENSARLING. The time of the gentleman has now expired. The Chair recognizes the gentleman from South Carolina, 

Mr. Mulvaney. 

Mr. MULVANEY. Thank you. Mr. Cordray, in looking over the reports, something jumped out at me, which was the section regarding the amount of money you had requested from the Federal Reserve for the first quarter of this year. 

It said that as of December 31st, you had requested—Federal Reserve filling $136.2 million to fund your operations. But later on in 

the same document, it says that you only spent $85.9 million. What 

did you do with the extra $50-odd-million? 

Mr. CORDRAY. We make quarterly requests to the Federal Reserve. 

Mr. MULVANEY. I know what you do, and again, I am not trying 

to cut you off. I really just want to have a conversation. 

Mr. CORDRAY. I know. 

Mr. MULVANEY. I am not going to give speeches. What did you 

do with the extra $50 million? 

Mr. CORDRAY. I know how it works. Yes, what I am saying is, 

you need to look at it over time. Some quarters we are asking for 

more because we spent more before. Some, we are asking for less 

because we spent less before. It is an ongoing thing, and it is a reasonable answer— 

Mr. MULVANEY. —and that is why I went back to look at 2011 

and 2012. 

Mr. CORDRAY. Yes. 

Mr. MULVANEY. In leading up to your question for 2013—in 2011, 

you asked for $161 million and spent $123 million. 

Mr. CORDRAY. Yes. 

Mr. MULVANEY. In fiscal 2012, you asked for $343 million and 

only spent $299 million before you asked for $136 million versus 

only spending $85 million in the first quarter of 2013. So by my 

calculations, going back to the beginning of your existence, you 

have asked for roughly $135 million more than you have spent. I 

want to know where the money is going? 

61 

Mr. CORDRAY. Let me say a couple of things. First of all, I hope 

you understand, there is a challenge to creating a new agency out 

of nothing. We had no agency, no personnel, no structures, anything in July of 2010. We are about 3 years old now. 

We have had something of a pattern in the early phases of the 

Bureau as we have been building up, of underspending. In part, because we had anticipated a hiring trajectory that has been slower 

than we intended— 

Mr. MULVANEY. How long do you expect it to be before your quarterly requests start to line up more closely with your quarterly expenditures? 

Mr. CORDRAY. I think they are beginning to line up more closely 

now. The other piece I want to mention is— 

Mr. MULVANEY. I don’t have the second or third quarter numbers 

in 2013, but how closely did they line up, say for your most recent 

request? 

Mr. CORDRAY. Okay. So the other piece that I wanted to get out 

on the table is, we are leasing a building that is apparently in need 

of substantial renovation— 

Mr. MULVANEY. I understand all that. 

Mr. CORDRAY. And we have had timing issues where we have requested funds for that, and then the renovation wasn’t able to proceed yet, so some of those numbers have looked larger than they 

have turned out to be. That is the other piece. 

Mr. MULVANEY. Your authority to ask the Federal Reserve for 

money seems to come from Section 1017 which gives you the right 

to, ‘‘an amount determined by the Director to be reasonably necessary to carry out the authorities, et cetera.’’ Okay, that is the 

statutory authority for your ability to go request money from the 

Federal Reserve. If anybody thought that your request was unreasonable, who could make that challenge? 

Mr. CORDRAY. I think we are subject to oversight by the Congress right here. You are the only— 

Mr. MULVANEY. No, the only oversight we have on your spending 

is the caps that are set every single year as a percentage of the expenses of the Federal Reserve, so I am asking you, has your Inspector General ever asked you about the relationship between the size 

of your requests and the size of your expenditures? 

Mr. CORDRAY. We are subject to a GAO audit every year. We are 

subject to an additional outside audit every year. This is all the law 

of the land. We are subject to Inspector General— 

Mr. MULVANEY. I don’t care about that. Has anybody ever asked 

you that question? 

Mr. CORDRAY. I think that question has been asked several 

times, actually in these hearings, it has been asked before, because 

people want to make sure, just as you are legitimately, and very 

validly, as far as I am concerned, asking now. How is our spending 

matching up with our budget— 

Mr. MULVANEY. And the reason I ask, Mr. Cordray, is because 

the money comes directly from the Fed, and because the Fed remits 

its extra earnings back to the Treasury, this is money that comes 

straight off of the bottom line. This is money that would go to reduce the deficit that you all are sitting on. Again, my calculations, 

roughly $135 million plus interest. 

62 

Mr. CORDRAY. Yes. Again, there has been some underspending 

issues around the hiring trajectory and also the timing of building 

renovations that will smooth over time. As for us, we are like every 

other banking agency, but we have a hard cap on our budget which 

the others do not have. 

Mr. MULVANEY. Are you operating under a specific plan to run 

up the amount in that account? 

Mr. MULVANEY. How large do you expect that amount to be? 

Mr. CORDRAY. I expect that as soon as the building renovations get under way, I am sorry to say, because I would rather spend $0 

on it, much of that will be— 

Mr. MULVANEY. Good, because that will happen some time. 

I want to follow up very briefly now on something that Mr. Green 

and Mr. Heck both asked about the smaller financial institutions. 

My understanding is that you have some primary authority over 

the larger, and then some secondary authority over some of the 

smaller institutions of less than $10 billion. 

Tell me, sir, how you handle your rule-making, your oversight 

authority differently for the small institutions versus the large 

ones, and the specific example I am interested in, there is the prohibition on financing credit insurance premiums which I understand rules now apply the same for the large institutions versus 

the small. So tell me how you treat those two institutions differently in that particular circumstance. 

Mr. CORDRAY. The institutions are treated differently in part 

under the law because we don’t have any authority to examine any 

institutions with assets of $10 billion or less. So we have no examination teams that go in, we are just not part of that. It is a very 

significant difference and its one that I understand people lobbied 

hard for in the Dodd-Frank Act. 

In terms of how we write our rules, as I indicated in several respects, we have tried to take account very carefully of the smaller 

creditors and their particular needs and the fact that a few employees can’t bear the same compliance burden as a 200,000 employee 

institution, as some of the larger ones are or even larger. 

In terms of the things, it is something that we are trying to be 

careful about all the time and that is why we have Credit Union 

and Community Bank Advisory Councils to help with that. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Colorado, Mr. 

Perlmutter. 

Mr. PERLMUTTER. Thanks, Mr. Chairman. 

Mr. Cordray, equanimity and perseverance are the two words 

that come to mind watching you today. I appreciate the fact that 

you have been very mellow under certain cross-examination and 

also for being here as long as you have been. 

I have three points I want to make. 

The first involves the title insurance question that you received 

from Mr. Miller using the word ‘‘optional,’’ title insurance being optional. 

I just suggest that you remain—that the document be silent that 

we in the Federal Government are not mandating title insurance 

but in virtually every real estate transaction, if you have a lender 

and a borrower, title insurance is going to be required, and if you 

63 

are fortunate enough not to need a lender, you certainly don’t want 

some hazardous waste pipeline going across your property that you 

don’t know about. So, I would just suggest you get rid of the word 

optional. 

Mr. CORDRAY. Okay. 

Mr. PERLMUTTER. Secondly, on Qualified Mortgages, I think that 

the Bureau is in kind of a dilemma here with its 43 percent debt 

to income ratio and the potential that those loans remain either 

with the credit union or with the small bank or with the original 

mortgage lender because they cannot now be sold in the secondary 

market which will then really reduce their liquidity, and what I 

fear is that lower-income borrowers are going to be, in effect, redlined out of borrowing. 

And so, there is a potential for discrimination at the same time, 

trying to have legitimate underwriting criteria in place, and I 

would just ask that your Bureau really look at that closely because 

I have had a number of complaints now from small banks, credit 

unions, and other lenders that they feel like they are in an impossible position. 

Mr. CORDRAY. Yes. 

Look, I would just say that I think it is going to be very important to us, and we made a commitment to monitor the effects of 

these mortgage rules as we go and as the market continues to 

evolve. And if there is GSE reform or other significant changes in 

the market, we are all going to have to think about how those affect the application of some of these rules. 

That is again, I just want to stress this again, that is why having 

the information and data about what is actually going on in the 

mortgage market is so critical to us being able to do that successfully and making sure that things aren’t going off the rails. We are 

also going to be required to review these rules within 5 years, that 

is in the law and consider updating or changing them as appropriate once we have more experience with them. Again, we won’t 

be able to do that if we don’t have the information necessary to 

have a— 

Mr. PERLMUTTER. I, for one, want you to have the data, you need 

the data to be able to do this right. 

Mr. CORDRAY. Yes. 

Mr. PERLMUTTER. But I think this one, you better watch it closely from the get-go because— 

Mr. CORDRAY. Fair enough. 

Mr. PERLMUTTER. —I think it is going to be a problem. 

Mr. CORDRAY. Fair enough. 

Mr. PERLMUTTER. The third thing, and it is a subject that has 

not come up yet today, is marijuana and banking. And the reason 

I bring it up is that in your position at the CFPB, and then you 

also sit on the FDIC Board or one of the other financial boards, we 

now have two States that allow for adult use of marijuana, being 

Washington and Colorado, and 20 States that have medical marijuana, so 22 States out of the 50 where there is some use of marijuana and under the banking regulations whether it is credit 

unions, banks, the ability to provide financial services has been 

questioned by some. 

64 

And if that is a consequence, everything goes to cash. And when 

it is cash, you have public safety problems. I think you were Attorney General in your role, you could see that. People are going to 

be more subject to robbery, obviously fraud, you can’t follow the 

money. From a tax point of view or from any kind of audit trail 

kind of a point of view. 

So, this matter came up before the Senate Judiciary Committee 

a couple of days ago, the Attorney General and their office has 

said, look, we understand that there is a banking issue here. We 

have sent, Denny Heck and I have sent you a letter on this subject 

and we would like for you to really be on it because we think this 

is a public safety issue. We now have 22 States, something that has 

to be addressed. 

And with that, I yield the balance of my time to the ranking 

member. 

Mr. CORDRAY. Do you want me to make a brief statement on 

that, because when you first raised the issue of marijuana and 

banking, I was a little surprised, and then I recalled the letter 

which I did see, and that there are some legitimate law enforcement and financial issues here that we will be glad to take a look 

at. I am from Ohio, and we are not one of those States, so it is not 

as front and center in my mind as maybe it is elsewhere. 

Mr. PERLMUTTER. But the law enforcement piece would be. 

Mr. CORDRAY. Yes. 

Mr. PERLMUTTER. I now yield to the ranking member. 

Ms. WATERS. Thank you. 

I was hoping I would have a little bit more time because I think 

you have been so rudely interrupted on any number of issues that 

you really didn’t have time to respond. I don’t have any time to 

really give you so we will get with you to make sure that we get 

that information from you. 

Mr. CORDRAY. Look, I just wanted to say, I understand this is 

oversight. I take it very seriously. It is important to me. I understand Members feel strongly about certain issues and sometimes it 

is not easy for me to give a simple answer to a question about a 

complicated matter. 

I hope people can understand and respect that and I know that 

can be frustrating. That is not my intention, not my purpose, and 

I am happy to continue to work with you to see that you have the 

oversight that you want and need. 

Chairman HENSARLING. The time of the gentleman from Colorado has expired. 

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

Pearce. 

Mr. PEARCE. Thank you. Mr. Cordray, congratulations and condolences on your confirmation. 

I represent New Mexico, and 50 percent of the loans in New 

Mexico for housing are for trailer houses, so when your agency excluded balloon loans, it made it very difficult to loan money on 

houses that are—if they are misused, they actually deteriorate, fall 

down in 4 or 5 years, so the balloons were common practice and 

you have made that very difficult. Any prospects of changing that? 

Mr. CORDRAY. Thank you, Congressman, and this was an issue 

that we worked hard on to try to give more latitude in the rural 

65 

or underserved areas. I come from an area of Ohio that I consider 

rural. There is a farm across the road but I have come to understand that in western States, rural really means something quite 

different from my experience. 

Mr. PEARCE. That would bring up then the second point— 

Mr. CORDRAY. Yes and so— 

Mr. PEARCE. —I will show you a map. 

Mr. CORDRAY. That is right. 

Mr. PEARCE. Yes, so this is New Mexico. 

Mr. CORDRAY. That is right. 

Mr. PEARCE. We have 2 million people in the same size geographically as the northeast where 55 million people live in that 

same size area. Now if you look over here in this corner here, that 

is Luna County. It is about 2,500 square miles, which makes it 

larger than Rhode Island and Delaware, and it has 25,000 people, 

which means that we have 8 people per square mile. In New York, 

for instance, you have 27,000 people per square mile, and they are 

being treated the same here. 

There is one road north and south, one road east and west, and 

the one town sits right in the middle and they are being treated— 

so this definition of rural and underserved somehow doesn’t play 

out—Cibola County right here goes over to the Arizona border, it 

is 6 people per square mile and they are not declared rural in your 

definition. 

Mr. CORDRAY. Yes, let me just—because I think I can lance the 

boil on this. 

I have seen a similar map for Ohio, and as soon as I saw the 

map, I realized we didn’t get that right. What we did then was we 

put in a 2-year moratorium on that. We have given everybody comfort and security for 2 years that this will not be a problem for anybody in any of those counties for the next 2 years and it— 

Mr. PEARCE. How many home loans fall in the 2-year—0- to 2- 

year category, sir? 

Mr. CORDRAY. No, no, no for 2 years, this does not take effect. 

That is what we have done. We have pulled that back— 

Mr. PEARCE. So they could make 100,000 loans, and for 15 years 

and they wouldn’t have to reconsider those loans. Anything done 

here— 

Mr. CORDRAY. No, no, no, no. For 2 years, we have completely 

solved this problem. No lender has to worry about this for anything 

they are doing for the next— 

Mr. PEARCE. I am asking about the loans that are made during 

this 2-year period that extend beyond the 2-year period. 

Mr. CORDRAY. Oh that; any loans they make in the next 2 years, 

this is not a problem. 

Mr. PEARCE. That is— 

Mr. CORDRAY. We have pulled it back. 

Mr. PEARCE. —my question. 

Mr. CORDRAY. And during those 2 years, we are going to reconsider this and redo that definition in a way that is more aligned, 

and we are happy to talk to you and your staff as we go. That is 

back off the table and is going to be reconsidered. It is not a problem for people in part because of the input we got from people that 

you are talking about. 

66 

Mr. PEARCE. The general prevailing direction—we had Ms. 

Kelley here in this committee room on May 21st, and then she 

came in on July 10th to visit personally with us. We still haven’t 

heard any answers. I know you haven’t had quite enough time to 

answer some of the things that have come in August, but this is 

now dating back to May and July and still no answers on these 

things. 

Mr. CORDRAY. But— 

Mr. PEARCE. I understand that when you declare that banks are 

going to be okay, they don’t have to follow QM if they hold things 

in their portfolio, understand that the portfolio of the average bank 

in New Mexico is 70 days. 

That means we can lend money for trailer houses for 70 days, 

then we have to wait until those pay off. So when you treat these 

areas of the west the same way that you treat Wall Street, understand that you have a war on the poor that is going on. 

That is who suffers access to credit and access to being able to 

borrow money just to get into some used trailer house. And so, the 

one-size-fits-all has been disadvantageous to us there in the poor 

rural areas. 

Some of the counties in New Mexico got $14,000 per capita income. So as you make your rules, and again, it would have been 

nice to get answers from Ms. Cochran before now. We had a good 

dialogue on this very thing. 

You gave high praise to community banks, but understand it is 

the community banks who are telling me that they are probably 

just going to shut down and go out of business because of the 

CFPB. That is what I am hearing across the State. 

And so with your high praise for them, understand that your 

rules are the ones that are probably going to choke off the banks, 

and no one from Wall Street is ever going to come to New Mexico 

and lend money for a trailer house. 

Mr. CORDRAY. We will make it a point—I know we have spoken 

before—to reach out to New Mexico community bankers associations and get the word to them. I don’t think that smaller lenders 

should be making a decision to get out of this market. 

I think it is a bad business decision. But I want to make sure 

that they understand that some of these anxieties are not, in fact, 

accurate and that we are working to continue to address—like that 

rule thing was not done correctly by us. We pulled it back. We are 

going to rethink it. 

And we are avoiding creating that problem. If there are other 

things you bring to our attention, we will listen to those, as well. 

I do realize, as you say, the West is different in— 

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. 

And thank you, Director. I appreciate you being here. 

I had a question about—and I know it is a challenge in government to have good staff and to keep good staff. I read recently in— 

I guess it was a little while ago, back in June—the American Banker said though some turnover was expected, the sheer number of 

senior officials leaving worries bankers. They wonder who will fill 

67 

these vacancies and how the new management will treat the industry. 

I think there is a real concern about the number of people leaving your organization, the CFPB, but also real concern over who is 

taking these positions. The other thing that I am very concerned 

about is the expertise and uncertainty of people who are serving in 

these positions of not really knowing details of the industry and not 

having a background in the industry. 

I also know there was, back in 2012, a questionnaire that asked, 

‘‘How satisfied are you with the training you receive from your 

present job?’’ At the CFPB, only 38.8 percent of CFPB employees 

agreed that the training they received was sufficient. 

I have talked to my bankers. I have talked to some small or medium-sized banks around the country. And what I have heard is a 

frustration. They have been in this industry for their entire lifetime. They want predictable, understandable regulation and regulators who understand. 

One of the quotes I heard from one of the bankers was, ‘‘It is 

very frustrating when I have been in this business for decades, and 

someone who was playing Hacky Sack on the quad 2 years ago is 

now regulating my bank.’’ 

I have some questions. 

Mr. CORDRAY. Somebody who what? 

Mr. HULTGREN. ‘‘Was playing Hacky Sack on the quad 2 years 

ago now is a regulator over my bank.’’ That is a concern I have 

heard over and over again. So I wondered if you could respond to 

that, the exodus of senior management, and then also the apparent 

lack of training and having qualified people to serve in these important roles. 

Mr. CORDRAY. Sure. First of all, and there has just been some reporting on this that has been off-base. The notion that there is 

some massive exodus of senior officials at the CFPB is just wrong. 

We have turnover at the CFPB, as every organization does, but our 

retention level has been quite high. The turnover level is quite low. 

There are people who come and go from time to time. And when 

they go, they are replaced. And we are finding that the people we 

are replacing them with are of equal quality, as good or better. We 

get hundreds of resumes for every opening. And we have actually 

been able to recruit quite effectively. 

Mr. HULTGREN. Let me just jump in there. What I am hearing 

is that is not the case, at least that is not the perception of the people who are being regulated. Let me switch gears here because I 

have another question. I know you are working on one more major 

mortgage rulemaking, the merging of RESPA and TILA mortgage 

disclosures into one document. 

And the proposed rule was over 1,000 pages and will affect everyone involved in a home purchase: home-buyers; lenders; and 

REALTORS®. 

As I understand it, given how much technical work must go into 

getting every system updated and ready, I would like to think it 

would be impossible to have this rule implemented before January 

15th. Is that true? Why or why not? 

Mr. CORDRAY. It was a special mortgage rule in the sense that 

Congress required us to do it, but didn’t give us a deadline, which 

68 

told us that Congress wanted it done, but not quite on the same 

priority maybe as some of the other rules. 

We will now finalize that rule later this year. We will give an 

implementation period for that I think will be sufficient for industry. And we are talking and listening closely to what they have to 

say about that. We recognize that is going to require a fair amount 

of systems and process changes. And that will lag behind the 

changes that they are making for January— 

Mr. HULTGREN. So there will be a delay in implementation requirements— 

Mr. CORDRAY. It is not even finalized yet, that one, unlike all the 

others. And when it is finalized, there will be a period of time to 

recognize they need to finish implementing this rule and then have 

ample time to bring that into effect. 

Mr. HULTGREN. Getting very specific on this, I know one of the 

requirements the Bureau’s RESPA–TILA proposal is to require all 

disclosure forms to be in machine-readable record format. I wonder 

if you could tell me what that means, what is the purpose of machine-readable forms? While I understand and appreciate that this 

will help the Bureau in examination, convergence to these systems, 

as you can imagine, will be incredibly costly for small lenders, escrow agents, and title companies. 

I wonder what efforts you are taking to help minimize the cost 

burdens on this rule on small businesses? 

Mr. CORDRAY. Yes, thank you for the question. Just as you are 

hearing about that, we are also hearing about it. We are trying to 

think about exactly what purpose that serves and to what extent 

those benefits are worth the burdens. 

Obviously, the point I know is to create some uniformity so that 

there can be more comparison, more analysis, and more understanding of the market. Whether that is all appropriate or needs 

to be done now is something that we are looking at. 

Mr. HULTGREN. My time is just about done. I hope you will look 

at cost-benefit analysis. That doesn’t happen enough in this. And 

it absolutely is having an impact on small businesses. 

Thank you, Mr. Chairman. I yield back. 

Chairman HENSARLING. Okay, the time of the gentleman has expired. 

The Chair now recognizes the gentleman from Florida, Mr. Ross. 

Mr. ROSS. Thank you, Mr. Chairman. 

Director Cordray, I want to talk to you about payday loans or advanced products, deferred presentment providers. How do you feel 

about those particular products? 

Mr. CORDRAY. About payday loans? 

Mr. ROSS. Yes. 

Mr. CORDRAY. So, as with all small-dollar loans—and there are 

different ways of providing it: car title loans; pawn brokers; and 

others—they are a mechanism for credit that some people find absolutely necessary to meet particular situations. They are often a 

very high-cost loan. We did a White Paper that we published in the 

spring that analyzed this market pretty carefully. I think some— 

Mr. ROSS. Let me ask you about that White Paper, the April 

24th White Paper of this year. 

Mr. CORDRAY. Yes. 

69 

Mr. ROSS. The detail of the data that you utilized for that, have 

you released any of that yet? 

Mr. CORDRAY. We did publish the paper. 

Mr. ROSS. But the data upon which the paper relies, and the 

data that you collected to write the paper, have you released any 

of that? 

Mr. CORDRAY. I am not certain that we can. There is a certain 

amount of— 

Mr. ROSS. Why can’t you? There is not a privacy act out there 

to prevent you. What privilege would you assert— 

Mr. CORDRAY. What we are talking about is business information. There may be proprietary and trade secret issues there. There 

may be—it was provided to us in confidence on the understanding 

it wouldn’t be published, could affect the competitive position of the 

companies. There is just some concern— 

Mr. ROSS. But did it take into consideration just a one-time user 

of a payday loan as opposed to a frequent or repetitive user of a 

payday loan? 

Mr. CORDRAY. We did, in fact. 

Mr. ROSS. But did it take into consideration all States and their 

programs that they have here? 

Mr. CORDRAY. We did, in fact, yes. 

Mr. ROSS. The Web site that you have on payday loans has a 

particular graphic that says, ‘‘Would you pay—would you take a 

taxi across—cross-country trip?’’ And it discusses the median loan, 

payday loan of $350. The medium number of transactions per year 

is 10. The data—the conclusions here are based on the data from 

your White Paper? Is that— 

Mr. CORDRAY. I believe so, yes. 

Mr. ROSS. Don’t you think that the integrity of your report, the 

White Paper itself is going to be somewhat tarnished as a result 

of not disclosing the data? 

Mr. CORDRAY. Look, we can’t always disclose the data. What we 

can do is analyze it and provide the conclusions. 

Mr. ROSS. So is it my understanding that you are going to refuse 

to disclose the data? 

Mr. CORDRAY. Actually, I will have my staff get back to you on 

that. 

Mr. ROSS. Thank you. 

Mr. CORDRAY. But— 

Mr. ROSS. I appreciate that. 

Mr. CORDRAY. —there are proprietary trade secrets— 

Mr. ROSS. I understand that. 

Mr. CORDRAY. —issues, competitive issues— 

Mr. ROSS. That is being— 

Mr. CORDRAY. —be harmed by disclosing that data, you would 

not want that, I would not want that. 

Mr. ROSS. I agree with you. But you would also agree though 

that there is a market out there for payday loans that is not being 

met by traditional bank or lending institutions. 

Mr. CORDRAY. There is a market for payday loans— 

Mr. ROSS. And— 

Mr. CORDRAY. —it is a multibillion dollar market— 

Mr. ROSS. Yes. And if we— 

70 

Mr. CORDRAY. —there are other ways to meet that demand too. 

Mr. ROSS. —overregulate the good players to where they get out 

of the market, where is the demand going to go? Most likely, it will 

go offshore. Most likely, it will go on the Internet. You are not 

going to eliminate the demand just because you eliminate the supply. 

Mr. CORDRAY. There is actually data on that because there are 

13 States that basically bar payday loans because they don’t allow 

lending above a 36 percent rate of interest, which is a pretty 

healthy rate of interest. 

Mr. ROSS. Good point, and I want to talk to you about rate 

States— 

Mr. CORDRAY. Okay. 

Mr. ROSS. —that deals with payday loans because when I was in 

the legislature in Florida, we addressed this. We have by far the 

best regulatory scheme. We address every issue and I would ask 

you to please take a look at how we addressed Florida and if I 

might just share with you— 

Mr. CORDRAY. Actually, I could help you on that. Drew 

Breakspear is your current superintendent of banking and he provided us with their steps after we did our White Paper, they took 

the data and analyzed it for Florida in particular and provided us 

with that so we could see how those provisions you are talking 

about are unique in Florida. 

Mr. ROSS. And how did that turn out, do you recall? 

Mr. CORDRAY. It was similar results to what we had in our report, maybe slightly better numbers in some respects because of 

some of the rollover and other types of constraints in Florida, but 

it was an interesting analysis and it was a good example of how 

they could use our approach, analyze their own data, provide it to 

us and then we could have a comparison. It was very helpful. 

Mr. ROSS. For example, in your warning here that you say that 

the median fees paid for more than $457, repeat borrowing often 

results in a cycle of debt, typical APR on a $350 loan is over 300 

percent based on your report. Now if you look at Florida, Florida limits their borrowing to $500 

per loan. They may have only one outstanding at a time, the maximum fee, the interest rate is 10 percent plus a $5 verification fee. 

I wish that was as good on my credit cards. 

They even have to wait 24 hours after they pay off the loan before they can go get another loan. The minimum loan is 7 days, the 

maximum is 31 days. All I am suggesting to you is that there is 

a system that works. 

It works effectively, it meets the market demand, and I would 

only ask that you please take a look at that and use that as your 

model as you go into the payday loans. 

Mr. CORDRAY. I thank you, and actually the Florida data was 

very helpful in making a comparison and helping us make judgments about what may work or not work around the country, and 

I just want to emphasize this point again, that without the data, 

we can’t have any idea what to do about this product. We have to 

have that data and Florida provided it, we have our own, and it 

is very, very helpful to getting this right. 

Mr. ROSS. Thank you. 

71 

Mr. CORDRAY. Thank you. 

Chairman HENSARLING. All Members have been heard. 

I would like to thank Director Cordray 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. 

Mr. CORDRAY. And before those 5 days pass, we will have those 

QFRs everybody has been asking about from the last time— 

Chairman HENSARLING. The committee will be most appreciative. 

This hearing stands adjourned. 

[Whereupon, at 12:49 p.m., the hearing was adjourned.] 

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A P P E N D I X 

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