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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 

SECOND SESSION 

JANUARY 28, 2014 

Printed for the use of the Committee on Financial Services 

Serial No. 113–60 

( 

(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 

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: 

January 28, 2014 .............................................................................................. 1 

Appendix: 

January 28, 2014 .............................................................................................. 77 

WITNESSES 

TUESDAY, JANUARY 28, 2014 

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

(CFPB) ................................................................................................................... 9 

APPENDIX 

Prepared statements: 

Cordray, Hon. Richard ..................................................................................... 78 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Hensarling, Hon. Jeb: 

Written statement of the National Independent Automobile Dealers Association (NIADA) ............................................................................................ 81 

Ellison, Hon. Keith: 

Report entitled, ‘‘Toward a Sustainable and Responsible Expansion of 

Affordable Mortgages for Manufactured Homes,’’ by Howard Banker 

and Robin LeBaron, dated March 2013 ...................................................... 85 

Garrett, Hon. Scott: 

Letter to Dr. Thomas Stratmann, University Professor of Economics and 

Law, George Mason University, dated January 22, 2014 ......................... 137 

Response letter from Dr. Thomas Stratmann, University Professor of 

Economics and Law, George Mason University, dated January 23, 

2014 ................................................................................................................ 139 

Luetkemeyer, Hon. Blaine: 

Letter from Hon. Richard Cordray, Director, CFPB, dated October 31, 

2013 ................................................................................................................ 144 

Letter from Peter J. Kadzik, Principal Deputy Assistant Attorney General, U.S. Department of Justice, dated January 28, 2014 ....................... 146 

FDIC Financial Institution Letter, dated September 27, 2013 .................... 150 

Perlmutter, Hon. Ed: 

Letter to Financial Services Committee Chairman Jeb Hensarling, dated 

January 10, 2014 .......................................................................................... 152 

Royce, Hon. Ed: 

Letter to House Speaker John Boehner and Minority Leader Nancy Pelosi 

from NAFCU, dated January 22, 2014 ....................................................... 154 

Cordray, Hon. Richard: 

Written responses to questions submitted by Chairman Hensarling .......... 158 

Written responses to questions submitted by Representative Huizenga ..... 181 

Written responses to questions submitted by Representative Mulvaney .... 184 

Written responses to questions submitted by Representative Barr ............. 190 

Written responses to questions submitted by Representative Stivers ......... 194 

Written responses to questions submitted by Representative Luetkemeyer ............................................................................................................. 197 

Written responses to questions submitted by Representative Velazquez .... 201 

Written responses to questions submitted by Representative Ross ............. 203 

(1) 

THE SEMI-ANNUAL REPORT 

OF THE CONSUMER FINANCIAL 

PROTECTION BUREAU 

Tuesday, January 28, 2014 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10:04 a.m., in room 

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

Members present: Representatives Hensarling, Bachus, Royce, 

Capito, Garrett, Neugebauer, McHenry, Pearce, Posey, Fitzpatrick, 

Luetkemeyer, Huizenga, Duffy, Hurt, Grimm, Stivers, Fincher, 

Stutzman, Mulvaney, Hultgren, Ross, Pittenger, Wagner, Barr, 

Cotton, Rothfus; Waters, Maloney, Velazquez, Sherman, Meeks, 

Capuano, Clay, Lynch, Scott, Green, Cleaver, Ellison, Perlmutter, 

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

This hearing is for the purpose of receiving the testimony of the 

Director of the Consumer Financial Protection Bureau (CFPB) concerning the Bureau’s semi-annual report. 

I now recognize myself for 41⁄2 minutes to give an opening statement. 

This morning, we welcome back Mr. Richard Cordray, Director of 

the CFPB, for one of his two statutory semi-annual appearances 

before our committee. It is an important appearance because, by 

design, the CFPB is perhaps the single most powerful and least accountable Federal agency in all of Washington and demands rigorous oversight. 

First, let’s speak of its power. When it comes to credit card loans, 

auto loans, and mortgages of hardworking taxpayers, the CFPB 

has unbridled discretionary power not only to make them less 

available and more expensive, but to absolutely take them away. 

This is not the rule of law; it is the rule of rulers, and the rulers 

are unaccountable. 

The Bureau is fundamentally unaccountable to the President 

since the Director can only be removed for cause, fundamentally 

unaccountable to Congress because the Bureau’s funding is not 

subject to appropriations, and fundamentally unaccountable to the 

courts because the Dodd-Frank Act requires courts to grant the 

2 

CFPB deference regarding its interpretation of Federal consumer 

financial law. Thus, the Bureau regrettably, remains unaccountable 

to the American people. 

The American people deserve better. They now have witnessed a 

failed stimulus plan, trillions of dollars of unsustainable debt that 

we can witness on the monitors, revelations of NSA domestic data 

collection, and a broken promise of, ‘‘If you like your health insurance, you can keep it.’’ The American people rightfully demand accountability from this Administration. 

Therefore, our committee took common-sense steps in November 

to make the Bureau more accountable and transparent when we 

passed six bills that reform the CFPB’s flawed structure, such as 

replacing its single unaccountable Director with a bipartisan board; 

putting Bureau employees on the civil service pay scale; introducing a safety and soundness check on its regulations; and giving 

American citizens greater control over their personal financial data 

that the Bureau is collecting and maintaining on them at this time. 

Our committee took another modest step towards greater accountability for the CFPB when we announced that the committee’s 

Web site now offers an easy way for the American people to let us 

know how the Bureau’s works affect them, good or bad. And since 

many citizens today justifiably fear reprisals when it comes to 

speaking their mind about big government agencies, citizens’ stories and comments will be treated confidentially, upon request. 

We are already hearing a lot of feedback concerning the harmful 

impact on consumers of the Bureau’s Qualified Mortgage (QM) 

rule, which went into effect just days ago. 

Let me share a couple of those messages with you. One is from 

Doyle Cooper, a small-town banker in Royse City, Texas. He used 

our Web site and gave his permission to quote him: ‘‘The results 

of Dodd-Frank in the CFPB continue to be a burden on us each and 

every day. We have just this past week decided to suspend any and 

all mortgage products. We know our customers and their businesses. But yet, we are being asked to use a one-size-fits-all underwriting criteria to allow the loan to be a Qualified Mortgage. The 

customers in our community have come to rely on us to help their 

dreams happen, and now we are being forced to say, ‘No, we can 

no longer help you.’’’ 

Another small-town community banker wrote in to say this about 

the QM rule: ‘‘Our bank has had to exit this line of business’’— 

meaning mortgage lending. ‘‘The bank cannot find a way to generate these small-balance loans in a profitable manner under the 

existing regulatory environment. I can’t tell you the number of 

times we have had to tell our good, low- to moderate-income customers that we can no longer loan them money to purchase a home 

to live in.’’ 

I have one more story from a small-town community banker out 

West. The community bank, due to the QM rule, discontinued making owner-occupied home loans. The banker said, ‘‘A typical customer is one without a credit score but whom we have known all 

of his or her life and have made many personal loans to them over 

the years. Often, these are Hispanic customers—60 percent of our 

population. And many are more stable than so-called qualifying 

secondary market individuals who are simply overleveraged.’’ 

3 

The CFPB has a very important mission. Properly designed and 

led, it is capable of great good, but stories like these dramatically 

show the very real harm that the CFPB can inflict on low- and 

moderate-income Americans. We can all imagine a brighter day 

with abundant economic opportunity for all, competitive markets, 

and where consumers’ freedom to choose is respected—a day when 

these consumers are protected not only from deceptive practices 

and fraudulent claims that may come from Wall Street, but they 

are protected from the power grabs and excesses of Washington as 

well. Until that day comes, this committee will do everything in its 

power to hold the CFPB accountable to the American people. 

The Chair now recognizes the ranking member, Ms. Waters, for 

4 minutes. 

Ms. WATERS. Thank you, Mr. Chairman. 

Welcome, Director Cordray, on the Consumer Financial Protection Bureau’s 46th appearance before Congress since its inception 

in 2011. Despite the Bureau’s extensive engagement with this committee over the past few years, the CFPB has managed to do more 

than just testify before Congress. To the contrary, the CFPB has 

built an unprecedented record of success protecting our Nation’s 

customers and consumers and servicemembers who have been victimized by unscrupulous corporations and financial institutions. 

In fact, the Bureau’s enforcement actions have resulted in over 

$3 billion being directly refunded to nearly 10 million consumers 

and servicemembers. And the CFPB has earned the trust of the 

American public. It has received more than 269,000 consumer complaints, resolved tens of thousands of individual problems, and answered more than 1,000 questions posed through its online portal. 

Director Cordray, you are here today to discuss findings of your 

semi-annual report, which shows the Bureau’s continued success 

and effectiveness on behalf of consumers. In fact, the reports shows 

that in just 1 year—1 year’s period—the CFPB received approximately 122,000 consumer complaints on issues ranging from mortgages, credit cards, and banking services, to credit reporting and 

student loans. These issues matter to our Nation’s consumers and 

the CFPB is ensuring that when it comes to these industries, protecting consumers is the Bureau’s top priority. 

Moreover, we know that when consumers complain, companies 

listen. Recently, the CFPB has issued a number of important regulations that protect consumers from predatory financial practices. 

Most notable is the Qualified Mortgage rule, which protects consumers by requiring that lenders only make mortgage loans to 

those who can afford to repay them over the loan term. 

The semi-annual report also indicates the Bureau has continued 

this unprecedented success in enforcement actions against a wide 

range of institutions for unscrupulous actions. In Fiscal Year 2013, 

the CFPB was a party to 13 enforcement actions related to deceptive marketing, unlawful debt collection, discrimination, unlawful 

fees, and fraudulent mortgage relief schemes. 

I am truly proud of the CFPB’s outstanding success on behalf of 

our Nation’s active duty military, restoring more than $12.5 million 

to servicemembers. 

I was particularly pleased to see that in November of last year, 

the CFPB took its first enforcement action against a payday lender, 

4 

ordering Cash America to refund $14 million to consumers for overcharging our servicemembers and robo-signing court documents 

and debt collection lawsuits. These actions are important and must 

continue. 

In the midst of significant Republican scrutiny, and to potential 

data breaches at the CFPB and other agencies, the CFPB has actually helped consumers protect themselves from fraud and identity 

theft and actual breaches, such as the recent incidents at Target 

and other major retailers. 

So, Director Cordray, I would like to take this moment to commend you for the CFPB’s impressive track record in these short 

years. But despite all these successes, Republican attacks on the 

CFPB continue, unrelenting. Their campaign to undermine the Bureau is nothing more than a disservice to our Nation’s consumers 

and our men and women in uniform. 

So I look forward to the witnesses’ testimony, and I yield back 

the balance of my time. 

Chairman HENSARLING. The Chair now recognizes the gentlelady 

from West Virginia, the Chair of our Financial Institutions Subcommittee, Mrs. Capito, for a minute-and-a-half. 

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

thank Director Cordray for joining the committee this morning. 

For the last 9 months, my subcommittee has spent a significant 

amount of time learning about the Bureau’s new mortgage rules, 

and what impact they will have on consumers. Community bankers 

and credit unions are very concerned about their ability to offer 

targeted programs to help low- and moderate-income borrowers. 

Last June, the chairman of WesBanco, which is in Wheeling, 

West Virginia, raised concerns about the ability of his bank to continue administering a charitable trust that helps low-income borrowers to realize that dream of home ownership. 

Just 2 weeks ago, the executive from Orion Federal Credit Union 

in Memphis raised the same concerns that many of his members 

who benefited from the Orion Homerun Program, a tailored rentto-purchase program, will not fit the Qualified Mortgage standard. 

And during that same hearing, the CEO of Habitat for Humanity 

of Charlotte testified that, ‘‘As the regulations stand today, Habitat 

affiliates remain at risk of a debilitating liability.’’ 

In each of these cases, a local lender is losing their ability to 

serve their community. Lenders who previously assessed a borrower’s ability to repay will be handcuffed by arbitrary thresholds 

and a one-size-fits-all approach. 

I am very concerned that what we are going to end up doing with 

this QM rule is hurting those low- and moderate-income borrowers 

who so desperately need the flexibility and the ability to attain a 

mortgage. 

So I look forward to hearing your comments on that, and I want 

to make sure that these borrowers are not left out of the system. 

I yield back. 

Chairman HENSARLING. The Chair now recognizes the gentlelady 

from New York, Mrs. Maloney, for a minute-and-a-half. 

Mrs. MALONEY. I thank the ranking member and the chairman 

for calling this hearing. 

And I welcome Director Cordray. 

5 

In just 21⁄2 years, the CFPB has made huge strides on a number 

of important consumer protections, from mortgage disclosures to 

credit cards to remittance transfers to protecting our 

servicemembers. 

The CFPB has also established itself as a data-driven agency. Its 

rule-writing process has won praise from industry and consumer 

advocates, and both Democrats and Republicans. The Bipartisan 

Policy Center described the CFPB’s QM rule writing process as 

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

And there is still plenty of work left to do. The Bureau is working on some very important issues such as prepaid card regulation, 

payday lending, debt collection, and credit card overdraft policies. 

These are clearly issues that merit attention from the CFPB because they affect a large number of our constituents and consumers 

on a day-to-day basis. 

As one who helped author the requirement of the semi-annual report to Congress and other provisions in the CFPB law, I look forward to Director Cordray’s testimony today. 

Thank you for your hard work. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from New Mexico, Mr. Pearce, for 1 minute. 

Mr. PEARCE. Thank you, Mr. Chairman. 

And, again, Director Cordray, we appreciate your appearance 

here today. We have heard in previous hearings, and in this one, 

that your job is to protect the consumers, that you, in fact, yourself 

state that you are focused on making financial markets work better. My belief is that in rural States like New Mexico, you are making the market worse. 

I would quote from a banker in Otero County: ‘‘Hardworking people in rural New Mexico are being denied access to credit for purchasing a manufactured home because of CFPB policies. Their policies are hurting the small guys.’’ That is what I have maintained 

in every hearing that we have had with you so far. 

In your attempts to protect the small guy, you are actually limiting access to credit. Fifty percent of the homes in New Mexico are 

trailer houses, and now, almost all of our lenders are out of that 

market. 

Twenty-five percent have gotten out of loaning money for houses 

completely, so you are hurting—your war on the poor is hurting 

New Mexico, and we would like to express our position in this 

hearing. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Texas, Mr. Green, 

for a minute-and-a-half. 

Mr. GREEN. Mr. Chairman, I would like to yield 30 seconds initially to Mr. Capuano. 

Mr. CAPUANO. Thank you, Mr. Green. 

Mr. Cordray, I just wanted to say I think you are doing a great 

job. Keep it up. 

Mr. GREEN. Thank you. 

Thank you, Mr. Chairman. 

And I thank the Director for appearing. 

6 

I would like to also thank Mr. Dodd and Mr. Frank. And I would 

like to thank Mr. Dodd and Mr. Frank because I liken them to 

Benjamin Franklin, who was questioned after the Constitutional 

Convention of 1787. The question was whether we have a monarchy or we have a republic. And his response was, ‘‘We have a republic if you can keep it.’’ 

Today, we have a Consumer Financial Protection Bureau. And 

the question is, can we keep it? 

My hope is that what Mr. Dodd and Mr. Frank have done in requiring the semi-annual reports will give us enough empirical evidence so as to convince the public and Members of Congress that 

this agency is vital and important. 

With this agency having returned $3 billion to 9.7 million consumers, I think that speaks volumes. And I would also add, the 

question is whether or not we would have received this $3 billion 

placed back in the hands of consumers if we did not have the Consumer Financial Protection Bureau. My suspicion is probably not, 

but I will ask the Director to elaborate on that at a later time. 

We have it. The question is, can we keep it? 

I yield back. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Wisconsin, Mr. Duffy, for 1 minute. 

Mr. DUFFY. Thank you, Mr. Chairman. 

I am here with a hopeful heart that the Director is going to 

renew his commitment to providing us open and transparent testimony, consistent with his promise and the promise that has been 

made from the CFPB to the American people. 

I am specifically interested in hearing testimony in regard to the 

data collection program at the CFPB—specifically, the extent of the 

information that is being collected on the American people and the 

extent of the disclosure that the American people get when you collect and monitor information on their financial transactions. 

I am also interested in hearing about the civil penalties fund, 

how you find victims, designate victims, and decide to reimburse 

victims. We are aware that you have provided $14.6 million in victim compensation. 

I am also interested in hearing about the Consumer Education 

and Financial Literacy Program, where you have designated $13.4 

million for that education. But I also want to know about the $96 

million that has been unobligated and what the intent is for the 

use of those dollars. 

With that, I yield back. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Connecticut, Mr. Himes, for a minute-and-a-half. 

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

Cordray. I am glad you are here. 

I was very heartened by the lengthy discussion we had some 

time ago in which you were obviously committed to your mission 

and had an appreciation for the limits of your mission and the need 

you had, of course, to not overly regulate in ways that would be 

harmful for our economy. 

I am glad you are here. You will sense that is not a sentiment 

universally shared in this room. 

7 

As the chairman said, they offered up the opportunity to the 

American public to offer stories about the work you do. I have been 

reading this survey. Apparently, you can help—they helpfully point 

out that you are engaged in a massive data-collection effort, gathering confidential financial information on millions of Americans, 

adding piles of new burdensome regulations on job creators—it 

goes on and on. 

In my business, this is called ‘‘push-pulling.’’ It is certainly leading the witness. It is certainly fear mongering. And apart from the 

entertainment value of this white-hot partisanship, I got to thinking, what about the stories that can’t be told? 

How does one tell the story of a predatory loan that didn’t bankrupt an American family? How does one tell the story of a liar’s 

loan that didn’t get made and of a family who is not sitting on the 

curb, bewildered, surrounded by their meager belongings? This is, 

of course, where we were, where the Majority would put us back 

to, and I think it is worth remembering that. 

It is also worth pointing out that the Dallas Fed produced a report just recently putting a price tag on that tragedy. And the Dallas Fed said that the price tag per American household was 

$50,000 to $120,000 per household. 

Director Cordray, I thank you for the efforts you are going to 

make to make sure that never happens again. 

And I yield back the balance of my time. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Tennessee, Mr. Fincher, for 1 minute. 

Mr. FINCHER. Thank you, Mr. Chairman. 

And welcome, Mr. Cordray. I read in your bio that you are from 

Ohio, so you are somewhat familiar with rural America. I, too, live 

in a small county in Tennessee where we don’t have a red light in 

the entire county. I have spent my life farming and working in 

rural communities. 

You may not realize it, but manufactured housing plays a significant role in the lives of many folks who live in rural communities 

in my district and across my State. For many families, this may 

be the only home they can afford, and when they are just starting 

out, sometimes rental properties are not always abundant in rural 

areas. Starting this month, though, it will be a lot harder for those 

families to get a loan to buy manufactured housing homes. 

I am concerned the CFPB is cutting off access to credit for lowand moderate-income home buyers due to the Home Ownership 

and Equity Protection Act (HOEPA) Loan rules implemented this 

month. I have introduced legislation, H.R. 1779, the Preserving Access to Manufactured Housing Act, to correct this problem, and it 

has received bipartisan support with over 100 cosponsors and a 

companion bill in the Senate. 

Clearly, this is a problem for a lot of Members, and I am hopeful 

we can work this out before families across America are left without access to financing. 

Chairman HENSARLING. The Chair now recognizes the gentlelady 

from Arizona, Ms. Sinema, for a minute-and-a-half. 

Ms. SINEMA. Thank you, Mr. Chairman. 

And thank you, Ranking Member Waters. 

8 

Director Cordray, thank you for recognizing the difficulties faced 

by homeowners in my State, and specifically in Phoenix, and for 

choosing to hold a field hearing there to kick off the Consumer Financial Protection Bureau’s new mortgage rules. 

As you know, one in five Arizona homeowners with a mortgage 

still owes more than their home is even worth. And across the 

country, that number is roughly one in ten. 

As of December 31st, the CFPB has received almost 6,000 consumer complaints from Arizonians, including over 2,500 mortgagerelated complaints. 

And my constituent, Mary, was one of these homeowners. Mary 

lost her job. She was attempting to negotiate a short sale with her 

bank but the bank refused to accept the terms of the deal, delaying 

and unnecessarily preventing the sale of her property. The problems were endless, and Mary felt like she had no recourse. She was 

at the mercy of her bank until the CFPB stepped in and helped facilitate a favorable outcome, which allowed Mary to move on with 

her life. 

Arizona’s homeowners are still struggling, and we feel like we 

must do everything we can to help them. The CFPB’s new mortgage rules protect Arizonians like Mary at every stage of the process, from getting the right mortgage to paying back the loan, and 

they provide hardworking families reasonable safeguards against 

bad mortgage deals that ruin credit and cost families their homes 

and financial security. 

In addition to protecting homeowners, the Bureau has also vigorously enforced protections for active duty military families, restoring millions of dollars to servicemembers under the Military Lending Act. This is a huge issue in Arizona. 

Thank you. 

Chairman HENSARLING. The Chair now recognizes the gentlelady 

from Missouri, Mrs. Wagner, for 1 minute. 

Mrs. WAGNER. Thank you, Mr. Chairman. 

Welcome, Director Cordray. 

It is unfortunate, but by no means surprising, that some of the 

worst fears and predictions regarding the Bureau of Consumer Financial Protection have already come true. 

Earlier this month, our committee learned that organizations 

such as Habitat for Humanity, as Mrs. Capito referenced, are finding it more difficult to help low-income families attain homeownership. Many of us have heard from our community banks that are 

altogether leaving the mortgage business or are seeing their compliance costs absolutely skyrocket. 

Regrettably, news such as this has become all too common since 

the Bureau’s inception, whether it is the unfair way in which lowand moderate-income Americans are harmed under the Qualified 

Mortgage rule, the deceptive public database of unverified complaints maintained by the Bureau that only serves to mislead consumers, or the abusive manner in which the Bureau is spending 

money and irresponsibly gathering the sensitive financial information of American families. 

It is clear by now that this Federal bureaucracy is crying out for 

reform. And I hope that today’s hearing helps to shine further light 

on the Bureau. 

9 

I thank you, and I yield back. 

Chairman HENSARLING. That concludes our opening statements. 

Today, we welcome Richard Cordray, the Director of the CFPB. 

Director Cordray has appeared before this committee before, so I 

believe he needs no further introduction. 

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

a part of the record. 

Again, Director Cordray, welcome, and you are now recognized 

for your testimony. 

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

Mr. CORDRAY. Thank you, Chairman Hensarling, Ranking Member Waters, and members of the committee. Thank you for inviting 

me to testify about the fourth semi-annual report of the Consumer 

Financial Protection Bureau. Since we opened our doors just over 

2 years ago, the Bureau has been focused on making consumer financial markets work better for consumers and honest businesses. 

Representative Himes, you said you are not sure that everybody 

is glad to see me today. My sense is different. I think everybody 

here is glad to see me; they just may have different reasons. 

[laughter] 

The report we are discussing today describes the Bureau’s efforts 

to achieve this vital mission. Through fair rules, consistent oversight, appropriate enforcement of the law, and broad-based consumer engagement, the Bureau is helping to restore trust in consumer financial markets. 

Through our collaborative enforcement work with fellow regu- lators, we are putting approximately $3 billion back into the pockets of millions of consumers who fell victim to various violations of 

consumer financial protection laws. This includes a refund of more 

than $6 million to thousands of U.S. servicemembers based on failure to properly disclose costs associated with repaying auto loans 

through the military allotment system and expensive auto loan 

add-on products sold to active duty military. 

Because of our supervisory work, financial institutions are making changes to their compliance management systems that have 

prevented violations, reduced risk to consumers, and resulted in financial restitution to many thousands of additional consumers. 

That is good work by our supervision team, good business practice 

for the companies, and good for consumers, who deserve to be 

treated fairly under the law. 

Over the past year we have enacted a number of new rules to 

meet the mandates of the Dodd-Frank Act, including the Qualified 

Mortgage rule, which I understand we will be talking about today. 

This important rule requires mortgage lenders to make a goodfaith, reasonable determination that borrowers can actually afford 

to pay back their loans. It is a back-to-basics approach to mortgage 

lending. We also enacted the mortgage servicing rules, which are 

designed to clean up sloppy practices and ensure fair and more effective processes for troubled borrowers who may face the loss of 

their homes. And we adopted a remittance rule that provides transparency and consumer protections for international money transfers for the very first time. 

10 

During this period, the CFPB has also been closely focused on 

making sure that businesses—both small and large—have what 

they need from a practical and operational standpoint to understand and comply with the new mortgage rules. We have put up 

plain language versions of the rules, created and posted video guidance, and met with major market players and the full range of industry stakeholders, including vendors and smaller lenders. We 

have worked with our fellow regulators to publish interagency examination procedures well before the implementation date so that 

industry understands our expectations and has time to make necessary adjustments. We have also coordinated with other regulators to ensure we all have a shared understanding to promote 

consistent supervision of compliance with these rules. 

While we work on all of these important efforts, we also recognize that consumers bear their own share of responsibility for how 

they participate in the financial marketplace. We need to promote 

informed financial decision-making. So we are providing consumers 

with useful tools, including the ‘‘Ask CFPB’’ section of our Web site, 

where we have developed answers to more than 1,000 frequently 

asked consumer questions. I encourage you to encourage your constituents to use these resources. Send them to consumerfinance.gov 

to gain the benefit of this expertise, and unbiased, helpful financial 

information. 

The premise that lies at the very heart of our mission is that consumers deserve to have someone stand on their side and see that 

they are treated fairly. To this end, the Bureau strengthened its 

Office of Consumer Response, and we have now received over 

270,000 consumer complaints on mortgages, credit cards, student 

loans, auto loans, bank accounts, credit reporting, debt collection, 

and money transfers, I venture to say, from constituents in every 

one of your districts across the country. 

In the past year, in fact, we have received thousands of private 

student loan complaints and nearly 30,000 comments in response 

to our request for public information about how student debt is affecting individual consumers and the economy more generally. At 

a field hearing we held in Miami last May on student loan debt, 

it became clear that there are many troubling similarities to the 

mortgage market before the financial crisis. The burden of student 

debt is having a domino effect on our economy by jeopardizing the 

ability of young Americans to buy homes, start small businesses, 

and save for the future. We consider it a priority to continue to 

monitor this market closely as it develops over time. 

The progress we have made in the past 2 years has been possible 

thanks to the engagement of thousands of Americans who have 

used our consumer education tools, submitted complaints, participated in rulemakings, and told us their stories through our Web 

site and at numerous public meetings from coast to coast. Our 

progress also reflects the cooperation of those we regulate, and we 

attempt to remain considerate of the challenges they confront. 

Each day, we work to accomplish the goals of renewing consumers’ 

trust in the marketplace and ensuring that markets for consumer 

financial products and services are fair, transparent, and competitive. These goals not only support consumers as they climb the economic ladder of opportunity, but also help responsible businesses 

11 

compete on an evenhanded basis, and reinforce the stability of our 

economy as a whole. 

Mr. Chairman, I saw with interest yesterday the announcement 

that this committee would be accepting stories from the American 

people about the effects of the CFPB on their daily lives. That will 

provide good data on what our work has been and how it is affecting people across this country, and we hope and expect for transparency in understanding what stories you are receiving from people across the country. We have confidence in the stories they will 

tell. 

Thank you for the invitation to appear before you today. If we 

are quoting Ben Franklin, he said during the Revolution that, ‘‘We 

must all hang together or, most assuredly, we will hang separately.’’ As always, we welcome your oversight, and I am glad to 

have the opportunity to hear and address your concerns. 

Thank you very much. 

[The prepared statement of Director Cordray can be found on 

page 78 of the appendix.] 

Chairman HENSARLING. Thank you, Mr. Cordray. 

The Chair now recognizes himself for 5 minutes. 

Mr. Cordray, I have no doubt that you have figured out that the 

Majority of this committee feels that your agency is unaccountable 

by design, but we are increasingly concerned it may be unaccountable by practice, as well. 

As you can tell from the monitors, the Majority also is very focused on the unconscionable, unsustainable, and, frankly, immoral 

debt that is being left to our children. So how you expend the people’s funds is a very salient issue. 

You were last before the Senate Banking Committee on November 12th, where Senator Coburn asked you, ‘‘Can you tell me why 

you need a $95 million building?’’ I believe he was referring to your 

renovation budget. 

You answered, ‘‘By the way, we do not own it, and I would rather 

not spend a penny on it.’’ You went on to say, ‘‘The HVAC and electrical apparently has to be brought up to snuff.’’ And finally, ‘‘It is 

not like we are building some palace for the Bureau over the long 

term.’’ 

Mr. CORDRAY. That is correct. 

Chairman HENSARLING. I discovered on December 16th of last 

year, it says the Bureau released its financial report. Is it not true 

that on page 39 of the report, it says that the headquarter’s renovation costs have now jumped to $145.1 million? 

Mr. CORDRAY. I don’t believe that is correct in terms of construction costs. There are additional costs. We are using— 

Chairman HENSARLING. That is not part of the renovation costs 

on page 39 of the report? 

Mr. CORDRAY. I am just saying we are using GSA now to oversee 

this renovation because it has, as we understood, received scrutiny, 

and we want to make sure things are being done right, so— 

Chairman HENSARLING. Let me ask you about the GSA, then, because as I understand it, the GSA owns or leases 354 million 

square feet in 9,600 buildings across 2,000 communities, and that 

your $145 million renovation budget now is equivalent to over half 

of their entire annual budget nationwide. Were you aware of that? 

12 

Mr. CORDRAY. I don’t know much about GSA’s operations. That 

is not the agency I run. I know a lot about the CFPB’s operations. 

What I would say is they are the experts at dealing with these 

types of projects, so we got them involved. 

Chairman HENSARLING. Okay, so is the $145 million merely to 

update the HVAC and electrical? 

Mr. CORDRAY. No, and there have been different numbers here, 

and the most recent number that I have seen is $114 million for 

construction. What I am told is that about two-thirds of it is required in order to upgrade the basic structure—the building. We 

bought a tough building, apparently, and when I say ‘‘bought,’’ we 

have leased a tough building. It is— 

Chairman HENSARLING. So, it is not your building, and you are— 

Mr. CORDRAY. That is correct. 

Chairman HENSARLING. —renovating a building that you do not 

own—putting in almost as much as the entire value of the building. 

I have tried to get some comparable real estate costs. As you say, 

‘‘We are not building some palace for the Bureau over the long 

term.’’ 

Apparently, your renovation cost is now $483 per square foot, 

which is triple the typical Washington, D.C., luxury commercial 

class-A luxury renovation rate of $150 per square foot—3 times as 

much as the D.C. Metro area. 

You are spending more per square foot than the Trump World 

Tower, which came in at $334 per square foot. You are spending 

more than the Bellagio Hotel and Casino which, at the time it was 

completed, was the most expensive hotel ever built—$333 per 

square foot. 

And if I am pronouncing this correctly, you are more expensive 

than the Burj Khalifa, the tallest skyscraper in the world, located 

in Dubai, which came in at $450 per square foot, and which is 

known as a ‘‘world class destination,’’ a ‘‘ New York urban masterpiece, superlative in every respect,’’ designed by ‘‘the world’s most 

esteemed designers,’’ one of which was the architectural firm 

Skidmore, Owings & Merrill LLP, while the Bureau paid $7.5 million for architectural and engineering services at your headquarters. 

So, here is the deal—what on God’s green earth is going on here? 

Mr. CORDRAY. It is a— 

Chairman HENSARLING. Explain to me, Mr. Director, why I 

shouldn’t be outraged and why the American people shouldn’t be 

outraged. 

Mr. CORDRAY. Thank you for asking a question, Mr. Chairman, 

and let me restate. 

First of all, we do not own this building. It is an asset of the Federal Government. It is owned by the Comptroller of the Currency. 

We have leased the building. The renovations that are performed 

there will make the building serviceable for years to come, probably 

far outlasting the time of our lease. 

The notion that we would try to build some palace that we don’t 

even own or control doesn’t make much sense to me. 

I am told that in order to— 

Chairman HENSARLING. I don’t think it makes much sense to the 

taxpayers, but you are spending the money. 

13 

Mr. CORDRAY. If I might finish, I am told that we have to do certain things so that the building can be brought up to code and work 

properly. We are going to have to vacate the building while this is 

going on. None of this is convenient for myself and our employees; 

none of this is something that we would prefer to do. 

We worked with GSA to try to understand what space was available in Washington, D.C., and there is very limited space for an 

agency with over 1,000 employees, so— 

Chairman HENSARLING. My guess is cheaper space could have 

been found in Reston, and the American taxpayers would have appreciated— 

Mr. CORDRAY. We— 

Chairman HENSARLING. I am beyond— 

Mr. CORDRAY. We looked around at surrounding areas, as well. 

Chairman HENSARLING. I am beyond my time. 

The Chair now recognizes the ranking member for 5 minutes. 

Ms. WATERS. Thank you very much. 

Mr. Cordray, allow me to apologize for my chairman with his, ‘‘I 

got you’’ politics. You are here to give your semi-annual report and 

supposedly, as Members of Congress, we are here for oversight and 

to try and work out problems. 

I could ask and talk a lot about all the good work that you are 

doing with students, our men and women in uniform, predatory 

lending, payday lending. We have alluded to some of that in our 

opening statements. But I wish to talk about solving problems, not 

give political messages. 

I heard some of the Members on the opposite side of the aisle 

talk about manufactured housing. To tell you the truth, if the 

chairman and I are really interested in providing leadership, we 

would be working with you and the members to deal with an issue 

that keeps being brought to our attention. 

Would you please give me your take on what is happening with 

manufactured housing? What are the differences here? What can 

we do to solve this problem? 

Mr. CORDRAY. Thank you, Ranking Member Waters. 

I do think that the chairman’s questions are fair, and I want to 

have a chance to address them fully because as far as I am concerned, this is an unavoidable one-time expense that we simply 

want to put behind us. 

And again, it is not something I would choose to do if we could 

avoid it. 

In terms of manufactured housing, I appreciated the gentleman’s 

comments—the Representative from Tennessee. I have family who 

have lived and live in manufactured housing. I went to school with 

many of my friends and other children who grew up in manufactured housing in my area in Ohio. It is a useful, beneficial, and 

often important housing alternative for people, particularly in rural 

areas. 

My understanding is that some of the issues around manufactured home loans go back to the changes in the HOEPA rule and 

before, that there was a certain retreat from manufactured home 

lending at that time. We had executives from the American Bankers Association come in recently and say that many of the people 

who retreated at that time because they feared the ability-to-repay 

14 

regime under the HOEPA rules have now come back into the market, realizing that they overreacted. 

There is further concern now with the ability-to-pay regime and 

the Qualified Mortgage rule. I personally have met with leaders 

from the manufactured home community, both builders and lenders. 

We will continue to meet with them, and I want to understand 

their concerns and what we can do to address them. I do recognize 

that in parts of America this is the premiere alternative for putting 

a roof over peoples’ heads and giving them a chance, and we want 

to make sure that happens. To the extent that we can address their 

concerns and monitor the market to see what the actual effect is, 

as opposed to doomsday predictions that are easy to make in the 

early days of a rule in a room like this, we will. We want to know 

what is actually happening, and work with them to address those 

concerns. 

Ms. WATERS. I give you the rest of the time to address those concerns. And I want to work with you. 

If my chairman does not care enough about this issue to spend 

some time on it, we will work with you and see if we can’t convince 

him that his Members on his side of the aisle really do have some 

concerns about manufactured housing. 

If you would like to address some of those concerns you alluded 

to, please do that now. 

Mr. CORDRAY. There are special difficulties with the kinds of 

properties on which you would put a manufactured home, and then 

the loans around those. 

Almost inevitably, those are specialty properties. I refer to the 

Representative from West Virginia and Southeastern Ohio that I 

am familiar with in my area of Ohio. There are lots of places where 

you cannot necessarily build a home and dig down a foundation. A 

manufactured home provides an alternative to that. Some of them 

are pretty basic; some of them are more elaborate. 

But the bottom line is it is a useful piece of the housing market, 

and it is a necessary piece in certain areas. 

Many of those loans are lower dollar loans, so there are particular issues around the points and fees cap that Congress imposed, which does become larger as you get to a smaller dollar 

loan, and that is how we attempted to build it. 

To the extent that there is any modification or change that needs 

to be made to make sure that this market can work, we are all 

ears, and we will continue to be all ears, both to the Members of 

this committee and also to industry and consumers who are affected by the rule. 

Ms. WATERS. You have done such a great job on solving problems 

and providing leadership. 

I would like to meet with you on this issue because I think we 

need to demonstrate that we can solve difficult problems, no matter 

the chairman’s unwillingness to work on this issue and to resolve 

it, but rather to simply do the political messaging. I will meet with 

you on behalf of not only our constituents on this side of the aisle, 

but his constituents that he fails to pay attention to. 

Thank you very much. 

15 

Chairman HENSARLING. The Chair now recognizes the gentlelady 

from West Virginia, the Chair of our Financial Institutions Subcommittee, Mrs. Capito. 

Mrs. CAPITO. Thank you, Mr. Chairman. 

Mr. Director, let’s start with the Habitat for Humanity issue. I 

have expressed this to you in a private meeting and I am very concerned about the impact on folks who have the nonprofits that 

are—either a rent-to-own program or one like they have at 

WesBanco or Habitat for Humanity. 

They still don’t feel like they are on firm ground in terms of the 

rules to be able to move forward with their programs and give 

themselves a level of comfort that they can move forward in the 

way that they have conducted business in the past, which is working with families individually. 

They think they need more legislation in this issue. We are ready 

to do that. What is your response to that? 

Mr. CORDRAY. I actually share your concern about these issues, 

and let me go back and review. 

Last year when we were first finalizing the Qualified Mortgage 

rule, Habitat for Humanity came to us and they had several concerns about that rule. We told them that we shared those concerns 

if they had them. 

We worked with them. We sat down, we did a supplemental proposal that was proposed and then finalized in May or June of last 

year that provided a broad provision for coverage for 501(c)(3) charitable organizations such as Habitat. 

My understanding at the time was that addressed their concerns. 

Now we come to the end of last year, beginning of this year, and 

they have identified some additional concerns that they did not 

present to us at that time. These are new concerns; I understand 

circumstances change and new experiences can occur. 

We have been working to figure out how we can address those 

concerns through further activity. I had a conversation with Jonathan Reckford, the CEO of Habitat for Humanity, yesterday to 

walk through specifically three issues that they have. 

Mrs. CAPITO. If I could cut you off here, just quickly— 

Mr. CORDRAY. Yes. 

Mrs. CAPITO. Do you think these can be solved in your space or 

is it— 

Mr. CORDRAY. We do. 

Mrs. CAPITO. —legislation? 

Mr. CORDRAY. We do. And that— 

Mrs. CAPITO. How quickly can you respond to this? 

Mr. CORDRAY. We can respond during the course of this year. 

And I asked Jonathan that directly: what kind of timeframe are 

they looking at where this will start to pinch them? 

And by the way, the main one involves how you characterize first 

and second liens, which was an issue that— 

Mrs. CAPITO. Right. It seems to me if you have already identified 

the problem, we could go ahead and have the fix if we—if you already know what it is— 

Mr. CORDRAY. Yes. 

Mrs. CAPITO. —and you think you could fix it— 

Mr. CORDRAY. There are processes— 

16 

Mrs. CAPITO. I would encourage you to do it. 

Mr. CORDRAY. —that we have to work through, in terms of notice 

and comment, rulemaking, and the like. 

But there are only six of their affiliates of the thousands of affiliates nationwide that are affected by that. I will just say that. 

Mrs. CAPITO. —the large one— 

Mr. CORDRAY. And of those six, they all would be addressed by 

the discussion we had yesterday. So, we will— 

Mrs. CAPITO. I will— 

Mr. CORDRAY. —move forward to address those. 

Mrs. CAPITO. Okay, I— 

Mr. CORDRAY. I think we can, in fact, address these by regulatory means and we have made a commitment to work with them 

to do that— 

Mrs. CAPITO. I would heavily encourage you to do that, but there 

are other programs out there that don’t have the voice that Habitat 

had who are— 

Mr. CORDRAY. Yes. 

Mrs. CAPITO. —deeply affected by this. 

In your statement, you mentioned that the Qualified Mortgage 

rule requires mortgage lenders to ‘‘make a good-faith, reasonable 

determination that borrowers can afford to pay back their loans.’’ 

Now, if I was just reading that and didn’t know anything about 

this, I would think that you are giving the bankers or the lenders 

the flexibility to make those determinations and yourself, and really, that is not what the QM rule does. It says, ‘‘Here is a box. You 

write the mortgage within it and if it doesn’t fall within that, then 

you are going to’’—and this is not just me speaking. That is coming 

from testimony after testimony after testimony from credit unions 

and community banks who feel that they are not going to be able 

to have the flexibility to give the farmer, to give the med student, 

to give the single mother the ability to get the home because they 

are not going to fit into this QM box. 

So my question is, what is plan B here? How long do you think 

it is going to take before you see and we see what effect this is having and when are you going to be able to react to this or— 

Mr. CORDRAY. I could not disagree more with that characterization of our rule. I remember at the time we finalized the rule, we 

saw a press release from this committee before anybody had even 

read what we did saying it is one-size-fits-all. 

That has been a narrative from the beginning. It is not true. 

We had a special provision that we added for small creditors, 

community banks and credit unions, which covers thousands of 

them—exactly the people you are talking about—and says if they 

keep loans in portfolio they can do anything that they traditionally 

have done in terms of lending. They have carte blanche because we 

trust them on the lending that they do. 

Many of them, when we hear these complaints and I call them 

and I speak to them, they just haven’t understood that was added 

to the rule. And we will continue to try to get the message out to 

them. 

Mrs. CAPITO. So the question is— 

Mr. CORDRAY. For a small lender, with less than $2 billion in assets, who makes fewer than 500 mortgages a year, every mortgage 

17 

they make is covered by the Qualified Mortgage rule, either in its 

main provisions, or the small creditor provision. And this is just an 

unreasoned and irrational— 

Mrs. CAPITO. So the best thing for the two of us is to wait and 

see when the data comes out. How long will that be? 

Mr. CORDRAY. That is fine. Absolutely. 

Mrs. CAPITO. Two months, 30 days, 6 months, 1 year? These are 

families who are affected by this. 

Mr. CORDRAY. There is data that comes out every month on the 

mortgage market— 

Mrs. CAPITO. So, monthly. 

Mr. CORDRAY. —and the housing market. And as I have said, 

and I said to you when we met, we are very open to hearing what 

that data shows, and also stories. Frankly, we are interested in 

hearing stories— 

Mrs. CAPITO. But by your own comments, though, you have said 

publicly that we are going to have flexibility here. That signals to 

me that you know there are problems ahead. With that, my time— 

Mr. CORDRAY. No, that is not correct. From the beginning, we 

have made further changes in the rule. We made a number last 

year in response to what we heard from people. We are an openminded agency. We are listeners. As we hear more, we don’t want 

to have some sort of unexpected effect on this market. 

Chairman HENSARLING. The time of the gentlelady has expired. 

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

Velazquez. 

Ms. VELAZQUEZ. Thank you, Mr. Chairman. Director Cordray, 

since 2012 the CFPB has been supervising credit bureaus. As you 

know, the personal credit rating of small business owners can have 

a direct impact on their ability to obtain financing for their businesses. 

Can you provide an update on CFPB supervision of the consumer 

credit reporting market and whether it is having a positive impact 

on small business owners’ access to credit? 

Mr. CORDRAY. Thank you for the question. We have now undertaken, as the Bureau, for the first time, to provide Federal supervision of the major credit-reporting agencies. It is an adjustment 

for them because they are not used to this. 

We have had examination teams into each of the three largest 

credit-reporting agencies and there are various issues that we have 

been discussing with them, and areas of concern. 

As a result of our efforts, you may have seen that the credit-reporting agencies, for the first time, are forwarding the information 

that consumers send them about problems and potential errors in 

their credit reports to the furnishers to be evaluated. 

Before they were simply taking all that information, translating 

it into one number code, and not actually sending the information 

along, so there was no way for furnishers to actually evaluate 

whether you were right in saying there was an error in your credit 

report. 

That is a big change, and that change continues to evolve. But 

we are concerned about errors. We are concerned about error resolution. And we are concerned about the handling of data. 

18 

I think they know that we are—I know they know that we are 

concerned and that we are going to work hard with them to see 

that these things are fixed. 

For years, that industry was pointed away from consumers. It 

was a business-to-business industry with credit reporters dealing 

with furnishers and then providing information to lenders. 

It has a dramatic impact on consumers, many of whom now have 

their credit report checked when they go to apply for a job, and all 

of whom have their credit report checked when they go to apply for 

a loan. And it is an industry that needs to take very seriously its 

obligations to the American public. 

Ms. VELAZQUEZ. I am really concerned about access to capital for 

small businesses. And if there are errors and they don’t have any 

recourse, it is going to have a negative impact on their ability to 

access capital financing. 

Mr. Director, 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 

improvement in underserved communities? 

Mr. CORDRAY. We do understand that is the intent and purpose 

of that provision of the law. It is a difficult area for us, frankly, 

because the Bureau has no interaction with business lending, or 

commercial lending, or any kind of small business lending other 

than that single provision. 

What we have determined is that as we undertake the rulemaking that we are also required to do under the Act to update the 

Home Mortgage Disclosures Act rule, which is under way now, we 

will see how we can try to fold the small business lending element 

into that as we develop. We are going to be overhauling that whole 

database and working with the Fed on that, which we believe is 

the right approach. 

But we also very much want to work with the Small Business 

Administration, the people who are more expert in this area than 

we are. 

Ms. VELAZQUEZ. And when can we expect the CFPB to publish 

the rules implemented in this section? 

Mr. CORDRAY. The HMDA overhaul will be getting under way 

this year. It feels to me that the right spot for this, and we have 

talked to a number of folks both from industry and consumer side 

groups, is to make the HMDA overhaul part of the later stages of 

that. So, it is coming, but not immediately. 

Ms. VELAZQUEZ. Okay. As required by Section 1451 of the DoddFrank Act, HUD is currently developing information on materials 

to educate borrowers on the importance of home inspections. These 

inspections are a simple, cost-effective way for borrowers to identify 

problems with a property prior to purchase and reduce their future 

risk of foreclosure. 

Do you expect CFPB to adopt similar regulations to help educate 

and protect homeowners under your jurisdiction? 

Mr. CORDRAY. I am not entirely sure what our authority and 

what HUD’s authority would be and how they overlap, but I find 

it remarkable that you are asking that question, because when I 

19 

was in the Ohio legislature, now 23 years ago, one of my very first 

bills there was called the Residential Real Estate Disclosure Act, 

and it was exactly the problem you are describing. 

I am going to sell my property. I may know it has termites. But 

the buyer doesn’t know any of that. If I don’t say anything, they 

are going to get a raw deal. Or maybe there are problems in the 

plumbing or electrical that I have experienced but they wouldn’t 

know. 

And it was about making disclosure of those items required so 

that there would be fair information back and forth across the 

table. 

I find it remarkable that 20 years later, we are still talking about 

the same thing that was State legislation in Ohio, which we enacted at that time. That seems like the basic principle of fairness 

to me, and if we can work with HUD—I don’t know who should do 

what on that—that seems to me the right— 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the chairman emeritus of the committee, Mr. Bachus, from Alabama, for 5 minutes. 

Mr. BACHUS. Thank you. 

Director, first of all, I appreciate your remarks about manufactured housing, what is commonly referred to sometimes as mobile 

homes. 

In the South, they replaced tar-paper shacks, and often without 

indoor plumbing or electricity. So they are, many times, the only 

affordable alternative for people. 

Mr. CORDRAY. Yes. 

Mr. BACHUS. And I would like to continue to work with you as 

you refine your approach to lending. 

We have had many conversations, and I know you have also had 

conversations with Jerry Moran in the Senate, about automobile 

lenders—indirect automobile lenders who go through auto dealers 

to make loans on auto loans. 

You have issued a directive or a bulletin, and I think it is clear 

that you can compensate these dealers with a flat fee per transaction. And there is some move in the market to go to that. 

You have also indicated there are other nondiscriminatory practices to compensate automobile dealers other than the flat fee, and 

I know you have been asked before to be more specific about maybe 

what some of those are. 

You have said, because of—I think there was a legal action, 

which I think was resolved in December, you didn’t want to go into 

more detail, but could you give me some other examples of what 

indirect auto lenders can use, other than the flat fee system? 

Mr. CORDRAY. Yes. And in fact, I would say that is a good example of what I was trying to respond to Representative Capito, who 

was saying that if you think you are considering changes, it must 

mean that you think there are problems. 

It doesn’t mean that. It simply means that we don’t know it all. 

We were making our best judgment at the time, but if there is new 

information and it turns out that there is something that occurs to 

us and is brought to our attention that we didn’t understand or appreciate at the time, we are open to making changes. 

20 

Here, too, in our bulletin we made it clear that flat fees are one 

mechanism by which lenders could address this issue, but it is by 

no means necessarily the only mechanism. 

And my real answer to your question is, I don’t know that we 

know all the mechanisms yet that would be satisfactory, and we 

are open to auto lenders and others bringing those to our attention. 

But we did say flat fees are one possibility. A flat percentage of 

the loan might be a possibility. Some combination of that with different durations of the loan, different levels, and potentially other 

things that we haven’t thought of but others in the industry may 

think of and bring to our attention. So, we are open-minded on 

that. 

Mr. BACHUS. As you make determinations on some alternatives, 

can you make those public, too? 

Mr. CORDRAY. We will. As we know more and we become convinced of more and, frankly, some of the other alternatives I just 

described have come from further discussions with auto lenders 

who said, ‘‘Well, what about this? What about that?’’ And we are 

open to having those further discussions. 

We also have tried to be very careful in this space, because as 

you no doubt recall, in Dodd-Frank it was very clearly defined that 

we do not have jurisdiction over auto dealers. 

Mr. BACHUS. The separation— 

Mr. CORDRAY. We have jurisdiction over auto lenders. 

Mr. BACHUS. Sure. And I understand that is limited due to—but 

I appreciate that. I think they just want to be—they want to know 

there are some alternatives. 

Mr. CORDRAY. We are open to having discussions with them. We 

just wanted to be careful and not have people think that we were— 

Mr. BACHUS. And I think before we enforce some of this, it needs 

to get to the point of them knowing what they can do and what 

they can’t. 

Mr. CORDRAY. Yes. Fair enough. 

Mr. BACHUS. Many people—my constituents and others—get 

calls from card servicers, which are—it is a fraudulent enterprise, 

I think. And I know the FTC made a settlement in December with 

some of those people, but I can tell you that the calls have continued. 

I know you advise and work with the Federal Trade Commission 

(FTC), and I have talked to Chairwoman Ramirez. Are you aware 

of that problem? They are promoting a financial scheme which is 

absolutely fraudulent. 

Mr. CORDRAY. We are aware of it, and particularly when it comes 

to advertising these schemes, the Federal Trade Commission has 

more jurisdiction than we do. I would say, actually, they advise us 

more than we advise them. They have been around for 100 years; 

we have been around for 2 years. 

But we have a very good working relationship with them. We are 

trying to make sure that we don’t duplicate resources and that we 

think there are more problems out there than both of us can handle. It has been a very good working relationship so far, and I appreciate that very much. 

Mr. BACHUS. Let me end with this. Almost every day I get solicitations, as do most Americans, for financial products that appear 

21 

to be sponsored or promoted by the government or approved by the 

government. 

Mr. CORDRAY. Yes. 

Mr. BACHUS. I have one example that just came. This was actually yesterday. 

Mr. CORDRAY. That looks pretty good. 

Mr. BACHUS. And if you will keep an eye—I would like some discussions on that. It is just getting overblown. 

Mr. CORDRAY. Yes. 

Mr. BACHUS. Where the U.S. Government is inviting you to do 

this, and Congress is authorizing this at a certain price. 

Mr. CORDRAY. It is a terrible practice. I started seeing it when 

I was Attorney General in Ohio. People will mimic the government 

because it has a certain amount of credibility, although not everybody agrees. 

When we have the opportunity to enforce against those things we 

take them very seriously, because what it does is it pollutes the 

market for all of the legitimate programs that are being offered. 

And it undermines all of the honest, self-respecting businesses that 

are trying to do things right. 

Mr. BACHUS. I appreciate that— 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from California, Mr. Sherman, for 5 minutes. 

Mr. SHERMAN. A financial institution must hit an incredible low 

in its credibility if it thinks that cloaking itself in Congress is a 

step up. 

Mr. Cordray, on ability to repay, if somebody wants to mortgage 

their house to start a business—say, a risky business. Will your 

rules in effect imperil the bank which makes that loan, knowing 

that if the business doesn’t work out, it is going to be very difficult 

to repay the loan? 

Mr. CORDRAY. That would be the very same consideration that 

the bank or lending institution has always given, which is they try 

to assess your ability to repay. They make a reasonable determination— 

Mr. SHERMAN. What if there is a one in ten chance you are going 

to be a billionaire and buy the bank, and there is a 50 percent 

chance your business is going to go down and we are going to—and 

you are going to have to sell the house in order to pay this loan 

or you are going get foreclosed on. Is the bank, in effect, punished 

for making that loan? 

Mr. CORDRAY. No, I don’t see— 

Mr. SHERMAN. They have made a loan that, in all likelihood, the 

borrower cannot repay. 

Mr. CORDRAY. The bank has to make a reasonable determination 

in good faith whether that loan would be repaid, but that is their 

judgment to make. 

Mr. SHERMAN. Gotcha. 

Mr. CORDRAY. All they have to do under our rule is document 

that they did that. And if it is a reasonable, good-faith determination, then that is totally satisfactory. Banks have to make these 

judgments about the risks that they are taking with their capital— 

Mr. SHERMAN. Okay. 

22 

Mr. CORDRAY. —and it is up to— 

Mr. SHERMAN. And that is a different kind of loan, when you 

know that there is a good chance you are going to have to take the 

home or force the sale of the home, but— 

Mr. CORDRAY. At some point what you are describing may become an actual commercial loan as opposed to a residential loan. 

I am not entirely clear on what you are describing. 

Mr. SHERMAN. I want to pick up on Mrs. Capito’s questioning 

with regard to the affiliated title company versus unaffiliated. Are 

you formally studying this—the discrimination on the affiliated— 

as a consumer, I couldn’t care less whether my title company is affiliated or unaffiliated, I just want the best possible deal. So are 

you looking formally at how to fix that? 

Mr. CORDRAY. Congress did seem to care, and in Dodd-Frank— 

Mr. SHERMAN. Yes. 

Mr. CORDRAY. —they, in various places, wrote in concerns and 

protections about sometimes affiliated entities, where there would 

be steering and— 

Mr. SHERMAN. Yes. You certainly don’t want the steering. 

Mr. CORDRAY. On the other hand, affiliated entities can provide 

more efficient one-stop shopping as well, so that is something that 

we are aware of, as I have talked to a number of the people in the 

industry who are affected by different aspects of these rules. That 

is one where we have said very clearly, ‘‘We are very interested in 

what the data will show us in terms of what impact this has and 

how that intersects with the 3 percent point and fee cap,’’ and we 

are interested to have them come and show us what they are finding and what their experience is. 

Mr. SHERMAN. And I hope that if you see a need for a legislative 

fix, you will be back to us with a clear proposal. 

Mr. CORDRAY. Certainly. We will be receptive to thinking about 

that as well. 

Mr. SHERMAN. Okay. With regard to automobile dealers, there is 

a lot of controversy about whether to even cover anything that the 

automobile dealers did and do. Of course, the Equal Credit Opportunity Act is something for you to focus on. 

As it happens in our society, those with lower incomes and lower 

credit scores pay more for credit. It is more difficult to arrange the 

loan, it takes more time, and of course, there is a greater risk. 

In the work you are doing, do you believe that the CFPB has 

sought and considered adequate input from the stakeholders on the 

issue of fair lending in vehicle finance? 

Mr. CORDRAY. I think we are always interested in having more 

input from stakeholders. And frankly, I will say that we have had 

more in the last 6 months than we had in the 6 months before that. 

I think it has refined our thinking and it is helpful to us. 

It is, as you say, typically the way of the world that the tougher 

it is to make the loan, the more people have to pay. And that is 

a creditworthiness determination. That is fair enough. 

What we think is problematic is when a creditworthy determination has been made and there is a rate that is gauged, that somehow that rate will be pushed up because of financial incentives for 

people to push that up higher at the expense of the consumer. That 

23 

is the yield spread premium we saw in the mortgage market, which 

Congress acted to stamp out. 

It is not quite the same dynamic in the auto lending market, but 

there are some similar concerns. 

Mr. SHERMAN. I yield back. 

Chairman HENSARLING. The gentleman yields back. 

The Chair now recognizes the Chair of our Capital Markets Subcommittee, Mr. Garrett of New Jersey, for 5 minutes. 

Mr. GARRETT. Thank you, Mr. Chairman. 

Mr. Director, you started your comments out by saying that 

someone needs to stand beside the consumer. After hearing the 

chairman’s questioning on the flagrant spending by the CFPB, I 

guess we should also agree that someone needs to stand beside the 

American taxpayer, between them and you. 

I come here today because there are a number of questions that 

were put to you months ago and still have not been answered. And 

that is perhaps because your agency, as someone else from your 

agency once testified, is not accountable to Congress or to anyone 

else. 

One of the questions we sent to you back in September was, why 

is it necessary for the CFPB to collect consumer credit card information on so many—literally millions? 

According to the CFPB, the combined data collected from the 18 

card issuers represents 80 to 90 percent of credit card accounts. 

The Census Bureau projects there were approximately over a billion credit card accounts in the United States, held by over 100 

million card holders last year. 

It would appear that the CFPB is collecting account-level data on 

at least 991 million credit card accounts, which would account for 

literally 60 percent of the adult population here in the United 

States. 

So, I will ask the question from September: Why is it necessary 

to collect so many credit card accounts on so many Americans? 

Mr. CORDRAY. A couple of things, Congressman. First of all, I do 

strongly believe that the Bureau is needed and Congress passed 

the measures that created the Bureau to stand on the side of consumers and see that they are treated fairly. 

I also very much agree with you that the Bureau needs people 

looking over our shoulder to see that we are called to account for 

how we do what we do. And that is the role of this committee and 

others, and that is why I am here today, and I am here regularly, 

as you know. 

Mr. GARRETT. Right. So let— 

Mr. CORDRAY. Now on the credit card industry, as I said at the 

time, the purpose of information-gathering by any agency is to be 

able to make informed judgments about policy. 

Mr. GARRETT. Let me get into the— 

Mr. CORDRAY. You would not want us shooting darts at a board; 

you want us to be informed. 

Mr. GARRETT. Director, it is my time. 

Since you did not answer the question, and you still haven’t, I 

ask the chairman, by unanimous consent, to submit my letter to 

Dr. Thomas Stratmann, professor of economics and law at George 

Mason University, and his response, for the record. 

24 

Chairman HENSARLING. Without objection, it is so ordered. 

Mr. GARRETT. He is an expert in econometric analysis and he 

looked at what you have been doing. We asked him to review the 

CFPB credit card data collection efforts on over 900 million credit 

card accounts, which represents over 60 percent of the American 

public, and this is what he said about what you are doing. He said, 

‘‘The CFPB is collecting far more data than is necessary,’’ and that, 

‘‘It is both expensive and risky.’’ 

He concluded that if the CFPB limited its sampling to 1 percent 

of the population, like the Census Bureau does, the CFPB would 

achieve its monitoring goals as well as bring the CFPB more in line 

with the Census Bureau, which makes anonymized granular data 

available to researchers and only provides 1 to 5 percent samples 

for statistical analysis. 

Why is the CFPB overcollecting credit card data by over 70,000 

percent, more than what the Census Bureau does for their data? 

Mr. CORDRAY. With all due respect to Professor Stratmann, and 

I don’t mean to disparage him in any way, I have learned that 

there are economic experts on about 16 sides of every issue. 

But on this one, what we have found when we work with industry, and we are collecting information for them in the very same 

way that other agencies have done so, they often prefer to provide 

it wholesale rather than having to go in themselves and develop a 

sampling device, every piece of which costs them money. It is a little easier sometimes for them just to provide the information. That 

has been our experience with them, and that is why we have proceeded as we have. 

Mr. GARRETT. Do you tell the consumer that you are collecting 

this data on them. Do you inform them? I have never received a 

notice from you that you have collected data on me. 

Mr. CORDRAY. We have had this conversation a number of times, 

myself, with you and your colleagues. We are not collecting information about Mr. Garrett or Mr. Cordray. We are collecting aggregated information that is aggregated before it comes to us about 

what credit card issuers are doing to their customers and how they 

are treating their customers. That is our focus. 

Mr. GARRETT. Let me just clear the record on that. I dug into 

some of the contracts you have where you collect some of this data, 

not necessarily on the credit card data but other type of data. 

Some of the information that you are collecting, true, you don’t 

have my name and my address, but with regard to one of the contracts you do provide the zip code and the four digit zip code after 

it. And you also get the date of birth. 

So let me tell you, if you have my zip code and my last four digits, and you know what my date of birth is, well there is only one 

guy in my house who has that. 

If you go to my neighbor and you go to his house, you will know 

what his—and know what his daughter’s birth date is. 

Mr. CORDRAY. No. No. No. 

Mr. GARRETT. You are collecting that type of data, according to 

your contracts. 

Mr. CORDRAY. Look, you are not the only house in your zip code. 

There are thousands—tens of thousands of houses in your zip code. 

25 

Mr. GARRETT. No, you are also collecting a four-digit zip code 

afterwards. That goes right to my house. 

Mr. CORDRAY. Look, we don’t have information where we are trying to reverse-engineer anything. 

Mr. GARRETT. This is in your contract, Mr. Director. This is in 

your contract. 

Mr. CORDRAY. I am not sure what you are talking about at this 

point. You said this is no longer the credit card, it is some other 

data collection. 

Mr. GARRETT. Experian Information Solutions is the contract 

that you have. 

Mr. CORDRAY. Okay, so you are talking about credit reporting at 

that point. Yes. Again, we aggregate the data, and that is what we 

are doing. 

I have no interest in where you spend money and on what and 

why and how. I have no interest in what I do. 

The private industry does; that is exactly what they are about. 

They want to know exactly what you are doing so they can market 

to you. 

But we are about aggregate information so we can determine 

what is going on in these markets, so that we can bring law enforcement actions against people for violating the law. We can get 

money back to consumers. 

If you don’t want us to do that— 

Chairman HENSARLING. The time of the gentleman has expired. 

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

Meeks, for 5 minutes. 

Mr. MEEKS. Thank you, Director Cordray. And I appreciate you 

being here. I think our State is number three—we are keeping you 

busy—in complaints, especially in regards to mortgage complaints. 

So we know that we are keeping you busy, but we appreciate the 

work that you are doing. 

I want to also just briefly say that I look forward to continuing 

to work with you, and to work with you in the area of manufactured housing. I think that it is important that we have a voice and 

work together and try to fix and work collectively together. So I 

wanted to add my voice to the many that are looking forward to 

working collectively in resolving and working with you on manufactured housing. So I look forward to doing that. I think that it is 

important for us to work together to get that done. 

My issue is trying to help the unbanked. I come from an area 

up—since I come—I have lived the life myself from coming from my 

parents, who were struggling, and banks—they didn’t—weren’t 

qualified or did not have enough money, but still they needed certain credit to make ends meet. 

Working paycheck to paycheck is a common thing. And I find 

that I know many Americans are working paycheck to paycheck. 

And going to a bank is not available to them, and so therefore, they 

go to products that are nonbankable. 

I have been working very closely, trying to make sure that they 

still have access to some credit, to nonbank institutions. And I have 

been working with my colleagues on the other side there to try to 

get something done there. 

26 

But I want to make sure that the products are safe. I want to 

make sure, because there is a statement that it is extremely expensive to be poor. 

So I was wondering if you could tell us how the CFPB is making 

sure that underserved consumers will be able to access affordable 

and better-suited products from some of the regulated credits? 

Mr. CORDRAY. Thank you for the question, and also for the background. We have known for years that it is expensive to be poor, 

particularly where you don’t have good products and services being 

offered to you. 

We recognize that there is a real need and demand among the 

public for small-dollar credit and, as you say, particularly for people who don’t have direct access to the banking system, for a variety of reasons. 

We have been careful in trying to assess the actual dynamics of 

that marketplace. We put out a White Paper last year on payday 

lending and on the deposit advance product by banks that has been 

very similar to payday lending, and looked at the need for that 

credit, and how it is being met. One of the problems and concerns 

that we have is that the business model seems to depend on a significant lump of consumers who end up rolling loans over 6, 8, 10 

times. They end up living their lives off of 390 or 520 percent rate 

of interest, which is not benefiting or helping them. 

Now, there are others who use these products, and can get in 

and out of them responsibly. And it is not solely payday loans. It 

is car title loans; it is certain types of installment loans. There is 

pawn brokering. It is a somewhat complicated, dynamic market. 

We have indicated that we are going to move ahead with making 

some policy judgments and regulations in this area, and we will. 

But our concern is exactly yours. We want people to have access 

to the credit they need, but the kinds of products that are going 

to make things better for them, not worse. And there are many 

complicated dynamics around that. 

Mr. MEEKS. But that is important, because I can tell you some— 

you hear the word just get rid of these—all the products, but then 

those folks have no resource. And then they end up, as I have 

seen—some of my friends’ parents do when I was growing up— 

there is the old loan shark. That is the person I would want to 

make sure stays out of business, because not only—they come in, 

they do some bad things. 

Mr. CORDRAY. Yes. 

Mr. MEEKS. The American Banker reported last week that T-Mobile will be joining a growing list of companies which are enabling 

consumers to bank without going to banks also by offering the 

reloadable prepaid Visa cards. Can you tell me what—has the 

CFPB done any research on that? And any comments on those kind 

of products? 

Mr. CORDRAY. Yes, that is a great question. It is something we 

watch very closely. A concern of mine is, can we stay ahead of how 

fast moving some of these markets are? There are many innovators 

trying to make their way into the space of mobile banking and various products, and many of them of them may be offered by phone. 

There may be other mechanisms, as well, such as peer-to-peer lending. 

27 

We are trying to stay close to that. Some of it is happening more 

quickly, some of it less quickly. It is very difficult to predict how 

that is going to evolve. But you can look around the world and see 

that it is arriving in various ways in other countries and likely will 

arrive here, as well. And it poses challenges to a regulatory system 

that is built on a more physical notion of banks or phones. And the 

FCC does phones, and so forth and so on. 

So it is something that we are both trying to be very aware of, 

trying to stay on top of, and also recognize we are going to need 

to work with other regulators if we are going to be effective in this 

space. And probably we will need help from Congress addressing 

this. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Texas, Mr. Neugebauer, Chair of our Housing and Insurance Subcommittee, for 5 

minutes. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

Director Cordray, thank you for coming this morning. 

Several high-profile data breaches at major U.S. retailers, including the most recent breach at Target, have raised Americans’ anxiety levels about the security of their personal financial information. Yet, I think most Americans would be surprised to learn that 

one of the largest repositories of financial data in the country is 

maintained not by a retailer or a financial institution but by the 

CFPB. 

The Bureau is tracking, as my colleague from New Jersey mentioned, 991 million credit card accounts, at least 8.6 million individual credit reports, and now as many as 227 million mortgages. 

We know that the Bureau has already experienced three breaches 

at its consumer complaint portal, and the government’s less-thanstellar track record in this area suggests that there may be many 

more to come. 

So my question to you, Mr. Cordray, is, can you personally guarantee that consumers’ personal financial information is 100 percent 

secure? 

Mr. CORDRAY. First of all, there are a lot of comparisons made, 

some of them very casually, in relation to us to the stimulus bill, 

which we have nothing to do with, us to the NSA, which we have 

nothing to do with, us to health care, which we have nothing to do 

with. 

What we do have to do with is the work that we are doing on 

behalf of consumers and the issues we can control. And the issue 

you raise is an important one, and it is one that I take very seriously, just as you take it very seriously. And it would be pretty bad 

for our agency if we didn’t take it very seriously. 

What I can say is we attempt to safeguard any information we 

have about the American public in two ways. First of all, wherever 

possible, we are trying to gather aggregated information. I don’t 

really care or want to know anything about your personal spending 

habits. All that does is get in my way because there are provisions 

in the Federal law for that kind of personal information, and how 

carefully you have to safeguard it. 

Where we do gather that information necessarily, like through 

our consumer response function, where people have to give us their 

28 

details in order to have their complaint handled, we are complying 

with all of the security and privacy provisions that are pretty extensive in Federal law. We are trying to do that very carefully, and 

people are looking at us to see how we are doing that, including 

our Inspector General and the GAO. It is something that I personally am very mindful of and we will do our absolute best not to 

have a problem in this area, because I recognize that a problem 

would hurt this agency, hurt our mission, and not be what you or 

we want. 

Mr. NEUGEBAUER. So, you are collecting a lot of data. You are 

doing the best you can, obviously. 

I want to quote the President. He said recently, ‘‘All of us understand that the standards for government surveillance must be 

higher. Given the unique power of the State, it is not enough for 

leaders to say, ‘Trust us, we won’t abuse the data we collect.’ For 

history has too many examples of when that trust has been 

breached.’’ 

And so, you are saying you are not doing it, but the President 

is saying, we can’t always take that at face value. 

I think the question that I want to follow up with is something 

Mr. Garrett mentioned, can this data be reverse-engineered? 

Mr. CORDRAY. First of all, again, you are giving me quotes about 

the NSA, which is not us, and not what we are doing, and I don’t 

think there is any comparability there, so— 

Mr. NEUGEBAUER. But you are still collecting—almost as—I 

think you and the NSA are in a contest of who can collect the most 

information. And I think the jury is still out as— 

Mr. CORDRAY. I fundamentally reject that— 

Mr. NEUGEBAUER. —to who is going to win that contest. 

Mr. CORDRAY. —categorization. However, in terms of what we 

are doing, we are making every effort to be very careful, both in 

satisfying the Federal law in terms of security and privacy, and in 

terms of treating consumers properly. If we are careless with their 

information, that is not consistent with our mission, and we are 

not. 

Mr. NEUGEBAUER. And so the question is, can this data be reverse-engineered? That was the question. 

Mr. CORDRAY. The issue of whether data can be reverse-engineered is a complicated one. That is why we try to aggregate as 

much as we can at a very high level. There may be informationgatherings that the government has done across many sectors that 

at one time could not be reverse-engineered but may become more 

capable of having that happen. That is something we are very careful about and mindful of and thinking about. 

My point is, that is not an issue that you can answer at one time 

for all time. It is something that may change over time. 

Mr. NEUGEBAUER. So the fact that you are concerned about it— 

does that mean that you think it can be reverse-engineered? 

Mr. CORDRAY. I think we are concerned about making sure that 

could not happen as much as possible. Nobody at the Bureau, I can 

tell you, is reverse-engineering anything. Nobody has the time or 

interest to do that. It would only cause us trouble. 

However, we are trying to be mindful of, as we gather information, making sure that it wouldn’t be subject to reverse-engineering 

29 

by us or anyone, because I don’t need that kind of headache, frankly. 

Mr. NEUGEBAUER. I think it is one of the things that you evidently have some concern about, because in one of your contracts 

with CoreLogic, you say they must agree not to attempt or directly 

or indirectly reverse-engineer. So evidently that capability exists or 

you wouldn’t have that in your contract. 

Chairman HENSARLING. The time of the gentleman has expired. 

Mr. CORDRAY. Again, we try to make sure that will not happen. 

And that is a term in our contract and we are going to hold our 

contractors to that— 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Missouri, Mr. 

Clay, for 5 minutes. 

Mr. CLAY. Thank you, Mr. Chairman. 

And thank you, Director Cordray, for your testimony this morning. 

The ranking member and several members of the Majority have 

expressed interest in working with the CFPB to solve challenges 

like making sure that manufactured housing remains a viable alternative for the many families who benefit from this important 

product. 

As you know, many times when we attempt to address these 

types of issues, we unintentionally create loopholes that undermine 

consumer protections instead of fixing the problem. 

Can you commit to working with us to address the concerns of 

the manufactured housing industry while continuing to protect our 

constituents from the actual bad actors that the rules are meant 

to target? 

Mr. CORDRAY. I do commit to that. I believe I have committed to 

it today already, but I commit to it now. 

We have been open and accessible to representatives from both 

the building and lending industries. They have made a strong case 

for why this fits a particular need in the population. And it was 

a case that, as I said, I am familiar with from my own personal 

experience and where I grew up and my family, particularly in 

Eastern Ohio. 

So yes, we are very interested in those issues. 

Mr. CLAY. Thank you for that response. 

In the area of mortgage rules, what steps has the CFPB taken 

to educate and help lenders as well as consumers understand your 

new rules? 

Mr. CORDRAY. I am actually really proud of the work we have 

done in that area, because when we finalized our rules last January we could have easily said, and it would have been a classic response to industry, ‘‘Well, we are done, and it is your problem now, 

and we are moving on to other things.’’ 

But instead, we dug in alongside with them and made it clear 

that we had a whole project around regulatory implementation. We 

wanted to hear from them about what kind of practical problems 

they might be running into that we hadn’t foreseen, and they 

hadn’t foreseen, because they told us everything that they thought 

they had problems with before we finalized the rules. 

30 

And there have been a number of things, including the small 

creditors that I talked about with Representative Capito and the 

special provision we made that covers thousands of community 

banks and credit unions. That was in addition to the original rule 

and it was meant to address concerns we heard that we absolutely 

found to be valid and legitimate. 

The examination protocols were done 6 months in advance so 

people could get familiar with them. We continue to work with industry. In fact, by the fall, they said to us, ‘‘We appreciate that you 

have been so helpful. Please stop being so helpful until January 

10th because we now need to finalize.’’ But we have been taking 

further comments and issues, and we will address some of those 

this year as well. 

And again, there will be new circumstances people will run into 

that we didn’t quite anticipate, and they didn’t quite anticipate. We 

will listen to them and see what they have to tell us and see what 

the data shows about actual impacts on the market. 

We do not want to upset the housing or mortgage market. We 

are here to help— 

Mr. CLAY. Do we have any data yet on any decline in the 

issuance of mortgages or— 

Mr. CORDRAY. It is so soon that it is very hard to say anything. 

The rules took effect January 10th. It is now January 28th. 

I will say, I did see that mortgage lending was up for each of the 

first 2 weeks under our rule, but that is such a small slice that it 

is very hard to make anything of that over the week before we finalized our rule. 

Mr. CLAY. Thank you for that response. 

In the area of servicemembers, the Dodd-Frank Act created the 

Office of Servicemember Affairs to address the specific challenges 

faced by servicemembers, veterans, and their families. This office, 

which monitors complaints from servicemembers in conjunction 

with consumer response, received approximately 3,800 complaints 

between July 1, 2012, and June 30, 2013. 

What are some of the most common grievances expressed by 

servicemembers, and what has the Bureau done or can it do to address their concerns? 

Mr. CORDRAY. Congressman, I am lucky with the people I get to 

work with at the Bureau, and one of the best we have is Holly 

Petraeus, who runs that office, and has tremendous credibility 

across the country with servicemembers, their families, and veterans. And she has lived that life herself. 

We had a gentleman from Massachusetts tell us about his son 

whom he thought was treated unfairly on an auto lending program. 

We looked into it, and found a lot of complaints. We addressed that 

through an enforcement action and got $6.5 million back to thousands of servicemembers. 

We have addressed a lot of individual complaints. We have addressed problems like permanent change of station orders, which 

didn’t qualify people for the kinds of adjustments that other people 

were getting in the mortgage market. 

And the Department of Defense and Veterans Affairs, I will say, 

to their great credit, have been very responsive to the problems we 

identify to them that we hear from servicemembers and veterans 

31 

and they have solved a lot of problems. It is a great partnership 

that we have with them. 

Mr. CLAY. And thank you for your advocacy on behalf of consumers in this country. 

I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from North Carolina, 

Mr. McHenry, the Chair of our Oversight and Investigations Subcommittee. 

Mr. MCHENRY. Director Cordray, to follow the chairman’s opening line of questions about your building renovation, would you provide the committee with the occupancy agreement between the Bureau and the OCC? 

Mr. CORDRAY. I don’t know that there would be any reason why 

we could not provide that, and I would be surprised if we haven’t 

provided it, but I don’t know offhand if we have— 

Mr. MCHENRY. You haven’t. So if you would, that would be helpful for us to understand this. 

Mr. CORDRAY. Yes. That was an agreement signed after I became 

Director, but it is what we are going to be living under for the 

next— 

Mr. MCHENRY. Even easier then. 

Mr. CORDRAY. —30 years, so— 

Mr. MCHENRY. No, even easier— 

Mr. CORDRAY. Well— 

Mr. MCHENRY. —since it is a 20-year contract that you have disclosed in your report. The reason why we ask this is because you spent $12 million a 

year in rent. You disclosed that. And we appreciate the fact you 

disclosed that. 

We also know from a Treasury audit that the value of the build- ing that you are occupying is $153.7 million as of 2011. And yet, 

you are spending—first, we find out $55 million, based on your disclosures, then $95 million, then $150 million. So it looks very odd 

to us, and that is why we would like to know the details of this. 

Don’t you think that is reasonable? 

Mr. CORDRAY. I do think that is reasonable, yes. 

Mr. MCHENRY. Okay. Thank you. 

You said today that you will actually have to move out of this 

building that you are leasing—you don’t own it, you are leasing it. 

And you are going to have temporary space. 

Mr. CORDRAY. Yes, it is a very annoying problem for us, and it 

hasn’t made anybody happy, including me. 

Mr. MCHENRY. But, you think about the cost of it and seems a 

little insane that you are spending $150 million of taxpayer money 

and spending $12 million in rent and you are not even going to be 

in it. 

Mr. CORDRAY. Look, there is much that I am unhappy with about 

this situation. It is a building that is a deteriorated building. It is 

a classic white elephant. 

Mr. MCHENRY. How old is it? 

Mr. CORDRAY. It is going to cost a fair amount of money to bring 

it back up to standard. 

Mr. MCHENRY. How old is it? 

32 

Mr. CORDRAY. It is not that old. 

Mr. MCHENRY. No? 

Mr. CORDRAY. It must have been used pretty heavily. It was built 

in the 1970s— 

Mr. MCHENRY. Yes, this place looks pretty— 

Mr. CORDRAY. —or the 1960s, I think, but— 

Mr. MCHENRY. Yes. You know, Kennedy laid the cornerstone on 

this little building. 

Mr. CORDRAY. Yes. 

Mr. MCHENRY. It is a little heavily used here, too. So anyway— 

Mr. CORDRAY. If I were a consumer— 

Mr. MCHENRY. —I just want to find out— 

Mr. CORDRAY. —I would be complaining a lot about that building 

if I owned it. 

Mr. MCHENRY. —if you would provide us with the details of this 

arrangement for space, and what it is going to cost? Would you do 

that? 

Mr. CORDRAY. I think—as you have seen— 

Mr. MCHENRY. Not today, but— 

Mr. CORDRAY. As you have seen, our budget and spending has 

become more and more transparent as we build up this agency. 

Mr. MCHENRY. Sure. 

Mr. CORDRAY. All of that is available on our Web site each quarter. 

Mr. MCHENRY. Okay. And let me follow up on that. 

Mr. CORDRAY. Yes. 

Mr. MCHENRY. I wrote you a letter at the beginning of the 

month. I appreciate your responding in a timely manner. 

You provided back—and my question—and I know you receive 

letters—a few. And I understand that my letter request was about 

the details of your budget. You responded back with some links on 

your Web site, and I appreciate that. One was a newly-issued report on your financials for the year. 

What I asked for was the resource detail and operating levels detail within your budget. Now, the report you sent me a link to— 

I went to it, looked at it, and the level of detail there is fairly nonspecific. And I will give you an example. 

What I am asking for is a line item structure of this and you 

have a $166 million line item that has 3 lines of description in 

order to add up to $166 million. And it has a great name: ‘‘Prevent 

financial harm to consumers while promoting good practices that 

benefit them.’’ 

I don’t know that we oppose that idea, we would just like to 

know what it is. Now, your Bureau has also done something I 

think is proper. You disclose contracts. So, we are able to ask you 

about contracts. 

Mr. CORDRAY. Right. 

Mr. MCHENRY. Right? So I know that you spent $2.5 million to 

pay for Web ads to drive traffic to your Web site. I know that. And 

I know you contracted with well-known firms. Now, I also know 

whether it is a no-bid contract, a bid contract, right? And I appreciate that— 

Mr. CORDRAY. And you have seen that we have placed a real emphasis on competition in our contracts. 

33 

Mr. MCHENRY. Yes, and I appreciate that. I also saw the no-bid 

contracts, and we could have questions about that. 

Now, as a policymaker you are also spending a substantial 

amount in salaries and benefits. You disclose that, but not in the 

detailed level. In your budget estimates, we know you have 238 

people working on one area, but we don’t know anything more than 

that. 

So what is going to happen to you is you are going to come before 

Congress, and we are going to have a lot of questions about your 

contracts, even if you have enormous amounts of wasteful spending 

to the tune of $300 million, $400 million a year, and we don’t know 

the details of it. 

What I would ask you to submit to us is that budget line item 

that other agencies who have to go through the appropriation process submit on a regular basis. Would you submit that to our committee? 

Mr. CORDRAY. So what I would say is, as I said, the extent of detail of our budget has grown greater as we have been staffing the 

agency— 

Mr. MCHENRY. It is still insufficient, sir. 

Mr. CORDRAY. —and have the ability to do that. 

It is my understanding that the amount of information we provide about our budget is comparable to that of other agencies, and 

we are now providing it on our Web site on a quarterly basis, 

which other agencies do not do. If you have other views about how 

much detail we should be providing, I am— 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Georgia, Mr. 

Scott, for 5 minutes. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Over here, Mr. Cordray. How are you? 

Mr. CORDRAY. Good. 

Mr. SCOTT. Mr. Cordray, I want to ask you about the Bureau’s 

March 2013 fair lending guidance for our automobile dealers. This 

is very important to me. I represent a district that represents the 

six largest counties around Atlanta, which means the suburbs, 

which means transportation, which means auto dealers and auto 

consumers. 

Now, I am very concerned about this because I, along with 12 

other members of this committee, wrote you a letter expressing our 

concerns on May 28th, and asked you to respond, but we haven’t 

gotten a response as of yet. 

This is very, very critical. Number one, there was no study that 

was done on the impact of flat fees for consumers or how it would 

affect consumers and the availability of them getting credit. This 

is very serious. 

I am very concerned about the Bureau’s actions because they 

have had unintended consequences of: one, raising credit costs for 

consumers; and two, pushing the marginally creditworthy out of 

the market entirely. 

And if, for example—if you learn, as many of us here in Congress 

have learned, that the broad adoption of dealer compensation 

methods that do not permit consumers to negotiate lower prices 

would hurt marginally creditworthy consumers, including many 

34 

minorities, of which you are admirably trying to make sure have 

fairness—but if you knew this, would the Bureau review this guidance that it has used to finance sources that you issued last 

March? 

Mr. CORDRAY. I am trying to follow all of what you described. 

First of all, I believe we have responded to your May 28th letter, 

and we will get to the bottom of that and make sure that we are 

on the same page. I would be very surprised if we had let 7, 8 

months go by without responding— 

Mr. SCOTT. Just to correct you, I have checked with my staff in 

my office and you didn’t. But I understand. That is not the point 

here. I just mentioned that so you could see the urgency of moving 

forward. 

Mr. CORDRAY. Yes. 

Mr. SCOTT. We need to treat both our auto dealers and our consumers with fairness and the March 23rd guidance is not fair. 

Mr. CORDRAY. Let me say a couple of things about that. The 

problem that we are trying to address is one where people walk in 

to get a loan to buy a car, which, as you say, is a critical thing in 

suburban and rural areas in order to get around. And we find that 

they are treated differently. They are required to pay different 

amounts, higher amounts, based solely on the color of their skin or 

their ethnic background. 

That is not right. That is what we are trying to address. 

Now, in terms of how we are trying to address it, it becomes a 

more complicated issue. The bulletin we put out last March, there 

was nothing unfair about it. 

It was restating law that has been on the books and followed by 

all the other agencies, including the Department of Justice, for almost 20 years. We, as a new agency, laid out that we also felt that 

we were going to take the same approach. 

The auto industry has a lot of concern about this, but the auto 

lending industry is doing just fine. In fact, it had a banner year in 

2013 and I expect it will have a banner year in 2014. So the notion 

that we are somehow destroying lending or killing off the ability 

of people to compete in this market, we are not. 

We are going to continue to work with people to address concerns. You saw that we had an enforcement action that did bear 

fruit against Ally for $98 million— 

Mr. SCOTT. But, Mr. Cordray, please, my time is running out. 

Here is the point—and all your points are here—and I want you 

to do a great job. But if the people—if what you are doing is not 

great within the auto industry and the consumers between the people who are buying the cars and are not—and if they have input, 

which, in fact, they did not—considering how controversial this 

guidance was and has become, wouldn’t it have been more prudent 

for you to receive input from them, which you didn’t, to hear concerns from them, to hear their concerns directly who are directly 

impacted by this guidance before it was issued? 

This could have been avoided. 

Mr. CORDRAY. Look, the guidance itself is exactly a restatement 

of existing law. That is all it is. I don’t know what people are telling you, but if they are making more of it than that, they are 

wrong. 

35 

We have had lots of discussions with lenders over whom we have 

jurisdiction. We were careful about not trying to reach out to dealers over whom we don’t have jurisdiction and respecting the line 

that Congress drew. 

Mr. SCOTT. Allow me to say this, please—my time is up. 

But this is one Congressman who represents probably per capita—certainly my area, because I represent the suburbs where the 

action is—where they have to get fair treatment. If you could work 

with my office more closely to make sure my dealers and consumers are treated more fairly— 

Chairman HENSARLING. The time— 

Mr. CORDRAY. I am happy to do that. 

Chairman HENSARLING. —of the gentleman has expired. 

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

Pearce. 

Mr. PEARCE. Thank you, Mr. Chairman. 

And thanks again, Director, for being here. 

Just a follow up to Mr. Neugebauer’s questions—a Federal judge 

ruled the metadata collection by the NSA was unconstitutional, 

and my question is, will you submit a request for the Federal judge 

to look at your data collection and see if it is constitutional? Would 

you do that? 

Mr. CORDRAY. We will follow our statute, which is the law Congress gave us, and that is what we will do. 

Mr. PEARCE. That was not my question. 

Mr. CORDRAY. And by the way, I will say that we have an enforcement action in which— 

Mr. PEARCE. If I could reclaim my time, sir— 

Mr. CORDRAY. —the constitutionality of the Bureau was raised— 

Mr. PEARCE. I just asked you a simple question. I asked a simple 

question. 

Mr. CORDRAY. —in the Federal district court in California— 

Mr. PEARCE. Mr. Chairman, if I could reclaim my time? 

Chairman HENSARLING. The time belongs to the gentleman from 

New Mexico. 

Mr. PEARCE. I know that Mr. Snowden was not a planned asset 

of the agency, and I know that the IRS didn’t plan for things to 

be released, but I will say that the collection of data like you are 

collecting has tremendous value in political campaigns, and I worry 

that there might just be someone down the system who might release that information. And you are saying that, no, you are not 

going to ask a judge if it is constitutional. 

I found your testimony almost amusing where you described how 

many of your friends live in manufactured housing. That smacks 

of a condescension that was rejected two generations ago, and I 

wonder, have you personally talked to any people who deal with 

manufactured housing? 

On January 23rd, I got this unsolicited e-mail from a friend of 

mine. I didn’t tell him I was looking for information. 

‘‘Good morning, Steve. I just returned from an educational seminar that explained how we have to conduct our business as manufactured home retailers now that the new laws are in effect. I honestly can’t believe what I have to do to sell homes and how difficult 

it will be not to trip up. It just takes the wind out of my sail and 

36 

all others that are in my industry. It just keeps getting more and 

more difficult to operate a business and more and more easy to get 

sued for not dotting I’s or crossing a T.’’ 

That is the legacy which lives in the manufactured housing industry that you have given lip service to today and for the last 

year. 

But I will tell you that I found amusing your indignation that 

the one-size-fits-all characterization, before you even came here, 

was so offensive. And yet, you are doing the same thing today. 

You are declaring today that many times the mobile home, the 

manufactured housing—that a regular house can’t be built there. 

Now, my county is flat from one end to the other; 50 percent of the 

homes are manufactured homes. And to declare that one lot is not 

suitable for regular homes but is suitable for those that many of 

your friends live in, I found to be generalistic thinking—one-sizefits-all thinking. 

You characterized that even your initial rules were coming because you feared the ability to repay. Now, I wonder how many 

banks who lend to manufactured home buyers you actually talked 

to, because they tell me that they have the highest rate of repayment of any form of home. 

And you still have one-size-fits-all in the balloon payments, 

which then kicks us out—kicks a lender out of the Qualified Mortgage market without a secondary. When you do that in New Mexico—we have 70 days of capital to lend for houses in the entire 

State, and when you kick them out of the secondary mortgage market, you then say that you have to lend that money for that piece 

of property, and when it pays off 30 years from now you can lend 

for a new house. 

You are going to choke, then, the rural, small areas—the areas 

that don’t fit your definition of what is really right for people to live 

in and your idea that balloon mortgages aren’t somehow okay. 

None of your people from Wall Street are going to come to New 

Mexico and lend on a trailer house and give them a 30-year note 

because they can deteriorate or they can be held in good condition 

for 50 years. 

And so I find your indignation that we might have said or might 

even be saying still that one-size-fits-all is not working, it is a war 

on the poor that is being conducted by you and this Administration 

and it is one where low-income people suffer the most. They don’t 

have other options. 

So I find your testimony today to be diminishing, demeaning to 

the people who are suffering the most. I wish that you would 

change the rules instead of coming here and giving lip service. 

Thank you, Mr. Chairman. I yield back. 

Mr. CORDRAY. Mr. Chairman, point of personal privilege as the 

witness at this hearing for the 5-minute filibuster that resulted in 

no questions to me— 

Chairman HENSARLING. The gentleman— 

Mr. CORDRAY. That is some of the most offensive— 

Mr. PEARCE. I asked a question early on. 

Mr. CORDRAY. —some of the most offensive comments I have 

heard from this committee— 

Chairman HENSARLING. The committee will come to order. 

37 

It is the gentleman from New Mexico’s time. As a courtesy to the 

witness, if he would like a brief moment to respond, the Chair will 

yield him a brief moment. 

Mr. CORDRAY. I would. 

The completely unfounded suggestion that we are using data for 

political campaigns, which you have not a shred of evidence for, 

this is an independent agency and— 

Mr. PEARCE. I did not say that, Mr. Chairman. 

Mr. CORDRAY. —is not subject to be controlled like— 

Mr. PEARCE. I said the possibility— 

Mr. CORDRAY. That is what you said. 

Mr. PEARCE. —of Snowden, who would release that information 

without your consent— 

Mr. CORDRAY. And the notion that I am being condescending in 

talking about manufactured housing because, in fact, I have friends 

and family members who have lived and live in manufactured 

housing—I don’t begin to understand where you are coming from 

on that. 

You are being blunt with me— 

Chairman HENSARLING. Your brief moment— 

Mr. CORDRAY. —and I will be blunt with you. 

Chairman HENSARLING. —has expired. 

Mr. CORDRAY. And I expect courtesies from this committee— 

Chairman HENSARLING. The Chair— 

Mr. CORDRAY. —of reasonable discussion. 

Chairman HENSARLING. —now recognizes the gentlelady from 

New York, Mrs. Maloney, for 5 minutes. 

Mrs. MALONEY. I thank the Chair for yielding. 

And I thank Mr. Cordray for your hard work. 

I would like to yield him as much time as he would like to respond to the line of disrespectful questioning. 

Mr. CORDRAY. So the notion that we are being condescending in 

trying to take account of these issues and recognize that there are 

different guides of properties that have different needs in rural, 

suburban, and urban areas is—and that is somewhat amusing to 

you, it is not amusing to me. 

We are trying to take this seriously. We are trying to meet the 

needs of consumers across this country. 

That is the mandate of this Bureau, and we will do it as best we 

can. The notion that we are somehow going to take information 

and use it for political campaigns is deeply offensive. 

You haven’t a shred of evidence on which you are basing that. 

That is just a wild allegation, and it is not befitting of this committee, Mr. Chairman. 

Thank you. 

Mrs. MALONEY. Okay. 

Mr. Cordray, as you and my colleagues know, we created the 

CFPB to protect consumers. We saw in the financial crisis that consumers were often not thought about at all, or as an afterthought. 

And it is highly appropriate to have one agency whose prime focus 

is to make sure that abusive practices and unfair deceptive practices are not out on the market. 

I believe your record speaks for itself in really coming forward 

with well-thought-out, researched positions that help the economic 

38 

security of our country by being fair to people and giving notice to 

people about the products that they are purchasing. 

I would also like to ask specifically about an area that you are 

working on which is becoming an emerging important market, and 

that is prepaid cards. Prepaid cards hold a lot of potential, but they 

are not subject to uniform Federal protections or disclosure standards, and that makes it difficult for consumers to be able to do 

comparison shopping. 

I know that your office has been working on a proposed rule for 

prepaid cards for quite a while and I look forward to seeing what 

you come out with. 

So I have two basic questions in this area. First, when does the 

Bureau plan to release its prepaid card proposal? 

And second, based on your research into this market, how should 

we as policymakers think about the prepaid card policies? Should 

we focus primarily on clear, consistent disclosure of fees to consumers, or are there other limitations that need to be placed on 

prepaid cards? 

Mr. CORDRAY. Thank you, Representative Maloney. 

The issue you raise is a very important one, and an increasingly 

important one for many low- and moderate-income consumers for 

whom a general purpose, reloadable prepaid card may increasingly 

become some sort of alternative mechanism to a bank account or 

check cashing or other things that can be very costly at times for 

low- and moderate-income individuals. 

The state at which the prepaid card issue is at at the Bureau, 

is the proposed rule state. This means that we are on the verge of 

undertaking to write rules governing prepaid cards, which, as you 

know, and I know from your attention to this, is right now a hole 

in the fabric of consumer protection. 

Just as remittances had no consumer protections before we acted 

to adopt those rules, prepaid cards are the same. Most consumers 

don’t realize the differences when they reach in their wallet and 

pull out a credit card, a debit card, or a prepaid card. I think they 

think they have the same protections across all of those cards. It 

is not true. Prepaid cards are not protected at all. 

So we will be writing rules to take account of the importance of 

providing protections in that area. 

And what I would say is you are asking about kind of the balance between: Do you simply proceed through improving disclosures or is there some substance to be provided here? 

My general impression is that in most of these markets, we need 

better disclosures and we need better substance in the rules. I don’t 

want to prejudge the rulemaking process. We will be putting out 

a proposal for comment and then finalizing it. 

But action here is very much needed and it is an emerging market that is now well over $100 billion being loaded onto these cards 

every year and people need protections in a balanced way. 

We will welcome the input of members of this committee, as well 

as consumers and industry, on getting those rules right. 

Mrs. MALONEY. And where do we stand on your rule on overdraft 

protections? I understand you were reviewing that. 

39 

Overdraft would not be part of a prepaid card. That would not 

be part of it. But the overdraft protection rule, where do you stand 

on working on that area? 

Mr. CORDRAY. In the Unified Agenda, which we publish, and we 

publish on our Web site, actually in response to a suggestion Representative McHenry made about a year ago, maybe a couple of 

years ago now, that is at the pre-rule stage. It is not as far along 

as prepaid cards but it is something that we are looking at and trying to figure out. We are doing analysis right now of the market 

to try to understand. 

There are many ways in which the overdraft product is good for 

consumers, like helping them avoid NSF fees. There are some practices that concern us in that area, so we are moving forward in trying to figure out how to approach those issues, but it is not as far 

along as prepaid cards. 

Mrs. MALONEY. My time has expired. Thank you. 

Chairman HENSARLING. The time of the gentlelady has expired. 

The Chair now recognizes the gentleman from California, Mr. 

Royce, the Chair of the House Foreign Affairs Committee. 

Mr. ROYCE. Thank you. Thank you very much, Mr. Chairman. 

And, Director, thank you. 

I wanted to raise some concerns, but maybe in the process lower 

the blood pressure a little bit over this issue on the question of the 

Bureau’s National Mortgage Database project with the FHFA. I 

think you understand that beyond this room there are others who 

have concerns with the privacy— 

Mr. CORDRAY. I do. 

Mr. ROYCE. —issue here, and at the end of the day you put together a database like that and it is going to include credit information on 50 million people here in the United States. That is just 

the project. 

Now, in your opinion, this information—the data collected from 

market monitoring—does not include personally identifiable information? 

Mr. CORDRAY. That is my understanding. Yes. 

Mr. ROYCE. Yes. And the real question here is, is it searchable? 

Can it be reverse-engineered? And I assume that you don’t believe 

that you can identify a single individual through that process. 

But if we look at the actual risk that consumers have, we saw 

the recent Target breach, which in theory should not, could not 

happen. We saw what happened with Michael’s. Even with the best 

of intentions, even with high security—in these cases you have 

companies with great reputational risk on the line. They had done 

everything they could do to make sure that a breach of personal 

information didn’t happen, and it happened. 

But now we are talking about the Federal Government. And 

breaches of information at the Federal Government level—according to the GAO, in 2012, there were 22,000 data breaches. Now, 

some of that is small in terms of breaches of personally identifiable 

information, but some of them were very large. 

It was a 42 percent increase from the year before. It was over 

a 100 percent increase from the year before that. 

40 

I would like to play a short video clip from a presentation given 

last year by Bob Avery. He is the FHFA’s Project Director for the 

National Mortgage Database—that is this database. 

So let’s go to that if we could, Mr. Chairman. 

[Video plays.] 

Mr. ROYCE. So Mr. Avery states, in fact, the information included 

in the database is, in his words, easily reverse-engineered. And 

even more troubling, it will be available to any Federal employee 

in the country and possibly others. 

Now, this is why from the perspective of privacy advocacy, there 

is this concern about consumer privacy in this case. And personally, I don’t believe that the project should move forward until 

these issues are adequately addressed. 

So I guess my question is, from your standpoint, you are weighing the assumed benefits of the database. Do you believe that outweighs the real privacy concerns here? 

Mr. CORDRAY. Ultimately, it is a judgment and a balance. But I 

would say two things in response to your line of questioning. 

The first is, in fact, the homeowner market is one where there 

is a tremendous amount of information freely available to the public. I don’t know quite how they do things in California, but in 

Ohio, the home that I own is on our county auditor’s Web site. 

There are pictures of it. There is a valuation of it. There is the 

amount of taxes I pay. At a time when I had a mortgage, there was 

the amount of the mortgage that I owed. 

All of that information was public information. 

I had a law school class that told me back in 1990 how much information there is out there. I wasn’t sure I understood. They 

brought in and they knew all about all of my homeowner transactions. It was available on the Internet. That was true 20 years 

ago. 

So nonetheless, it doesn’t lessen the privacy concerns. 

But let’s get the paradox here of how important this is. I am getting questions from you and your colleagues, in your case, so far, 

your colleagues, about what we should be doing in the mortgage 

market. Have we drawn too tightly the box around QM? Is manufactured housing being unfairly affected or undermined here? 

In order to make judgments about that, in order to respond to 

you, in order to get this right and for you to get it right and us 

to get it right, we have to have information about the market. 

What we found with the mortgage database was that we didn’t 

always have the kind of information we would have liked to have 

had about the mortgage market. This will help us provide it. 

Then we will be able to all have confidence as to whether we are 

getting this right or should adjust it. That is what your colleagues 

are crying for. It depends on information. 

Mr. ROYCE. And I am pointing out we had 20,000 breaches. 

Mr. Chairman, I would like to submit something else for the 

record, a recent letter from the National Association of Federal 

Credit Unions to House leadership on data security and protection, 

if I could? 

Chairman HENSARLING. Without objection, it is so ordered. 

Mr. ROYCE. Thank you. 

Chairman HENSARLING. The time of the gentleman has expired. 

41 

The Chair now recognizes the gentleman from Texas, Mr. Green, 

for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

And, Mr. Cordray, I thank you again for coming before us today. 

I look forward to your visits. I am up here, Mr. Cordray. 

Mr. CORDRAY. You moved on me. 

Mr. GREEN. I relocated temporarily. 

I am appreciative of the fact that you are willing to stand up for 

consumers. And when I say stand up, I mean you take a firm position. You really believe in what you do. And it comes through, and 

that is important to consumers. I want to visit with you about the $3 billion in refunds—$3 billion. That is a lot of money, impacting 9.7 million consumers. Can you give just a brief overview of this $3 billion that 9.7 million consumers have had an opportunity to receive? 

Mr. CORDRAY. Thank you, Congressman. This is essentially basic 

law enforcement work. On both sides of the aisle in this committee, 

I know one basic principle everybody agrees with is that people 

should have to comply with the law, and if they violate the law, 

they should be held accountable. 

And if they violate the law in a way that hurts people, harms 

people financially, those people should have a right, if possible, to 

get their money back. That is something we are trying to do. 

We have been engaged in addressing violations of the law with 

credit card add-on products, which has been a big source of redress 

for consumers. Hundreds of millions of dollars are going back into 

people’s pockets who were victims of fraudulent, deceptive, and 

misleading marketing of products. And that has been, I think, wellestablished. And it is not unique to the United States; they had 

similar problems in the United Kingdom. 

The large mortgage servicing settlement we reached recently 

with a large nonbank mortgage servicer, again, for violations of the 

law, and practices that were unfair and deceptive to consumers. 

These are things that in a marketplace that works, the good, 

honest businesses are also protected against those who violate the 

law and potentially get a competitive advantage by doing so. So, it 

is in everybody’s interest for us to do this work. 

It does depend, I will say, on having information, being able to 

analyze what is going on in the markets, not just shooting blindly 

at problems. And that is part of why we feel so strongly about having the information on which to base this. 

But we will continue to do that work. We will continue to be, I 

think, appropriately aggressive, while not unreasonable. Where 

people are violating the law, it is our job to make sure that they 

are held accountable. 

Mr. GREEN. You received 122,000 complaints between July 1st of 

2012 and June 30th of 2013, over half of which or thereabouts relate to mortgages; 3,800 of these complaints dealt with service people. 

I am sure that these complaints would have gone someplace if 

the CFPB did not exist. I am sure they would have gone someplace. 

Mr. CORDRAY. Maybe to you. 

Mr. GREEN. Probably. 

Mr. CORDRAY. And your colleagues. 

42 

Mr. GREEN. But I am not sure that they would have received the 

kind of attention that they have received by virtue of the CFPB 

being there. And I am curious about the types of complaints. I 

want to give you a chance to just talk about some of them, because 

we will always hear about things that don’t go well. We don’t hear 

enough about the things you do that benefit the consumer. 

So this is an opportunity for you to just take a moment, and tell 

us about some of these complaints that have been successful, where 

you have helped people, if you would? 

Mr. CORDRAY. Sure. And Congressman, I know you understand 

this. Stories that we hear from people when they file a complaint 

are very similar and in fact, in many cases, are exactly the same 

stories they are telling people in your offices and your staff get all 

the time: somebody struggling with their mortgage and they can’t 

get anybody to respond to them; they submitted the paperwork, it 

got lost again and again; people won’t answer the phone. Those are 

some of the things we hear and we help cut through that. 

We hear people who feel like they had an improper charge on 

their credit report. They can’t get the credit reporting agency to 

pay attention and take it off and get it corrected, but it is affecting 

them. They can’t now get a mortgage or a car loan because that 

blights their credit. And we get those things fixed and get them removed. 

People harassed by debt collectors. Debt collectors have every 

right to do their job and collect money that people owe and people 

should pay, but there are laws that say you can’t call after 9 p.m. 

You can’t harass people at their workplace if they ask you not 

to. You are not supposed to do that. It is a violation of the law. It 

is cheating and giving you an unfair advantage over some other 

debt collector who actually abides by the law. 

Those are the kinds of things that we are addressing and dealing 

with every day. And again, a number of these are being referred 

by your offices, people on both sides of the aisle here. And we are 

happy to address these issues for all consumers, all constituents, 

wherever the complaint comes from. And we regard it as part of 

our job. 

The other thing is, we learn from it. As we get hundreds of complaints about a particular issue, then we know it is a real big problem and we ought to address it more systematically. Maybe we 

should write a rule about it. Maybe we should bring an enforcement action to clean it up. Those are the kinds of things we are 

trying to do. 

Mr. GREEN. Thank you, Mr. Chairman. 

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. 

Mr. Cordray, let me change speeds here a little bit and talk to 

you a little bit about a different issue here. I sponsored an annual 

privacy notice bill and you were kind enough to—I wrote you a letter with regards to that in October of this past year. You sent a 

letter to me and agreed that it was something that we needed to 

do. 

43 

You supported it and I thank you for that. It was a timely letter. 

And we may need your help in trying to get it pushed through the 

Senate. They seem to be dropping the ball on the issue over there. 

But in your letter you also made the comment that you may be 

able to do this by some rulemaking authority that you have. Could 

you elaborate on that just for a moment? 

Mr. CORDRAY. Yes. And thank you for asking about that. I will 

say that sometimes processes move kind of slowly because of different provisions in our law, in terms of how we proceed. 

I do know that internally, we have been working on that issue, 

and I believe that there is a presentation going to be made to me 

fairly soon on it. 

I am hopeful we can move forward on that. One of the things I 

will find from the presentation is, do we think we can comprehensively address the issues you are trying to raise through your legislation? If so, you may not need the legislation. On the other hand, 

if you move the legislation and that resolves it and we don’t need 

to work further on it, that is fine too. 

I don’t care how we proceed, but I do think there are issues, you 

have identified some of them and I think we are identifying others, 

that need to be addressed and fixed. And there can be a reasonable 

balance struck here that doesn’t burden institutions unnecessarily 

in ways that don’t necessarily benefit consumers. 

Mr. LUETKEMEYER. Very good. I appreciate that. With unanimous 

consent, I would like to enter the letter into the record, Mr. Chairman. 

Chairman HENSARLING. Without objection, it is so ordered. 

Mr. LUETKEMEYER. Thank you. 

With regards to another subject, Director, we have—online lending is something that is very concerning to me. A lot of it is offshore, and we need to be regulating it to make sure that our consumers aren’t being taken advantage of. 

By the same token, there is a lot of discussion right now within 

the FDIC and the DOJ about payday lending, online lending, and 

those sorts of things. And we have actually found people within 

those agencies who, because of personal bias, have tried to basically shut down those industries. 

And they have admitted such to us, and we had them on record 

to that effect and have had lengthy discussions with the FDIC and 

the DOJ. And both of them have, as a result of those discussions 

and the investigations of the oversight committee—or I should say 

potential investigations—have given a letter to not only us but the 

industries, saying that they are going to allow these industries to 

continue. They believe that they are worthwhile. 

Any abuse that has taken place will stop. These are legitimate 

industries. As long as they behave within the confines of the law, 

they will be allowed to continue to do so. 

And I would like your opinion on that. And if we could perhaps 

get you to also do a letter similar to that, as what they have done, 

to say that as long as these lenders are behaving within the law, 

they have every legitimate reason to be in business and provide 

credit to a lot of folks who can’t get it. 

I know we had a lengthy discussion a minute ago with Mr. 

Meeks, who brought this issue up as well, at least on the periphVerDate Nov 24 2008 16:37 Sep 22, 2014 Jkt 088522 PO 00000 Frm 00047 Fmt 6633 Sfmt 6633 K:\DOCS\88522.TXT TERRI
44 

eral parts of it, and indicated this is a very necessary area of lending. Whether you like it or not, there are a lot of folks for whom 

this is the only way they can get lending. 

And I think as long as we regulate it properly, it doesn’t need 

to be here with things like Operation Choke Point, trying to choke 

it off. So could you respond? 

Mr. CORDRAY. Much economic activity is gravitating online. That 

is the way of the world, and it seems to be in our society. 

A lot of commerce is going online. My wife orders a lot of things 

now online, and I do, that before, we would have gone somewhere 

to get. It is natural that lending would gravitate there as well. 

There are, however, important law enforcement issues. And I 

struggled with them when I was attorney general of Ohio. And I 

hear from my colleagues, former colleagues, that they struggle with 

them now because online Internet activity doesn’t have clear jurisdiction, as there is nothing physical or tangible about it. 

It can be originating in a different State but not complying with 

State laws here. It can be originated in a different country and not 

complying with any American laws. 

I think law enforcement officials are grappling with a strategy 

for how to deal with that, because online lenders that are legitimate and valid deserve protection against online lenders that are 

undercutting them by violating the law and not complying with the 

same requirements with which they comply. 

So it is definitely a difficult subject and one that we have been 

trying to hash out and understand with the State attorneys general 

and others. We will continue to do that. 

I definitely agree that there is a lot of online lending that is perfectly proper and valid and may even cut some costs over physical, 

in-person lending. There are also risks there, and there is a risk 

of being able to evade law enforcement. 

Mr. LUETKEMEYER. Would you be willing to put that in writing? 

Mr. CORDRAY. I would be happy to. You mentioned a letter? I 

would be happy to take a look at it. I don’t obviously know— 

Mr. LUETKEMEYER. Okay. Without objection, I ask unanimous 

consent to place in the record a copy of the letter from DOJ indicating their concerns and their willingness to also allow these businesses to be lawfully there as long as they are behaving within the 

confines— 

Chairman HENSARLING. Without objection, it is so ordered. The 

time of the gentleman has expired. 

The Chair now recognizes one of the committee’s reputed, most 

rabid Seattle Seahawks fan, Mr. Perlmutter, from— 

Mr. PERLMUTTER. I thank the chairman, and I want to thank the 

gentleman from Missouri— 

Mr. LUETKEMEYER. A point of order, Mr. Chairman, for the 

choice of the color of his tie in support of the Denver Broncos. So 

with that, I will stop breaching the decorum of this committee and 

just, I want everybody to know I am united in orange against the 

Seattle Seahawks. 

Chairman HENSARLING. We see the gentleman’s cap. Now, he 

may remove it. 

Mr. PERLMUTTER. Mr. Cordray, thank you for your testimony 

today. And thank you again for your fairly even-keeled testimony. 

45 

I did appreciate your response to Mr. Pearce, because there is a lot 

of data out there, and in your position, whether it is gathering 

mortgage data, or anything else, there is just a lot of data out 

there. We don’t want it abused. We have seen politicians in the 

past abuse it, and at the top of the list would be Richard Nixon. 

So I do understand your response. I understand his fear that it 

can be abused because it has been in the past. But there is a lot 

of mega data out there. 

Mr. Royce brought up the Target Corporation. My wife and I are 

Target shoppers. And she has a saying, if Target doesn’t have it, 

she doesn’t need it. 

But I also used my Target card—or I used my debit card in Target in that period where their data was breached. So I am one of 

100 million people, apparently, or 100 million cardholders who was 

affected by this. And when I went to Wells Fargo and I said that 

I had used my card, they immediately took my card and switched 

it out for a new card. 

What is the CFPB’s role in something like this, where there has 

been a major data breach that affects millions of consumers? 

Mr. CORDRAY. We have been looking at that since this occurrence. Of course, this is not, as you know, the first occurrence of 

this kind. It is just one of the largest and most stunning ones, and 

the most recent one. 

In the past few days, we issued a bulletin to consumers: If you 

are one of the people who is or feels that you may have been victimized or affected by this, here are some steps you can take to protect yourself, the kinds of information you need to respond to this 

situation. 

There are broader issues here for the credit card industry and for 

retailers in terms of how they manage information. Frankly, a lot 

of the same concerns that people have raised appropriately, I think, 

with me about our agency today. 

Everybody who has information is going to need to jealously safeguard it in order to protect consumers. And there is real consumer 

harm that happens, whether somebody steals your identity or not. 

Even switching out your card, as you did, involves inconvenience 

and time and effort. You may have to change accounts and account 

information may cause you to miss a payment on something here 

or there. That can cause real harm to people as well. 

So, I think that the guidance we have provided to consumers is 

meant to be very helpful. It is drawing, again, on some of that expert, neutral information and advice I indicated is available to your 

constituents on our Web site at consumerfinance.gov, and we urge 

you to take advantage of it. That is intended to help people. 

Mr. PERLMUTTER. Thank you. 

And, Mr. Chairman, if I could, I would like to introduce for the 

record a letter that we—a number of Democrats—sent to you on 

January 10th concerning some kind of hearing on this breach of 

data. 

Chairman HENSARLING. Without objection, it is so ordered. 

Mr. PERLMUTTER. Mr. Cordray, I would like to also ask you a little bit about the QM situation. You have had a number of questions already, but because you and I have had this conversation on 

QM, the 43 percent debt-to-income ratio. Were there other ways 

46 

that a lender, if it didn’t fit into that 43 percent box—were there 

other ways a loan might be considered eligible under your rules? 

And if so, what are they? 

Mr. CORDRAY. Okay, so there are actually three main boxes, and 

sometimes it does get misstated and people either intentionally or 

unintentionally don’t quite get the purpose of the debt-to-income 

ratio of 43 percent or less, which is a pretty generous number by 

historic standards. We used to advise people not to spend more 

than a third of their income on housing, and then 36 percent was 

the number, and now people use 43 percent. It is meant to be 

broad—to provide a broad area for mortgage lending. That is one 

box. 

A second box—and this is very notable—any mortgage loan that 

would qualify to be purchased by any of the GSEs—Fannie Mae or 

Freddie Mac, if it qualifies as an FHA loan, if it qualifies under VA 

or Ginnie Mae—all of those are also Qualified Mortgages. That significantly extends and then covers a lot of loans that are above a 

43 percent debt-to-income ratio. That is second. 

As long as they are in conservatorship, that is a temporary measure. This Congress may act on housing finance reform at some 

point. We weren’t sure where that was going, so we had to sort of 

take account of that and draw that into our calculations. That is 

a second box. 

And it is very easy for a lender: 43 DTI or you just plug it in, 

and you get a yes or no. You don’t have to sell it to Fannie or 

Freddie, it is just if it is eligible for sale. 

The third box is the small creditor provision that I have mentioned before. It covers thousands of community banks and credit 

unions. Any mortgages they make, if they sell them in the secondary market to Fannie or Freddie, are covered by that second 

box. If they keep them in portfolio, they are covered by this third 

box. 

Mr. PERLMUTTER. Thank you sir, for your testimony. 

I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Michigan, Mr. 

Huizenga. 

Mr. HUIZENGA. Thank you, Mr. Chairman. I appreciate that. 

And, Director Cordray, I appreciate you being here. Obviously, 

you have heard a lot of concern, some of it a little more heated 

than others, but concern on both sides of the aisle, frankly, about 

everything from auto loans to the security of the data that is being 

collected. 

QM has really sort of dominated this Qualified Mortgage definition, and I would like to head a little in that direction, and point 

out that there had been an American Banker article entitled, 

‘‘Blacks and Hispanics Likely To Be Hurt by Qualified Mortgage 

Rule,’’ which reported on a Federal Reserve Board report that 

found that ‘‘roughly one-third of Black and Hispanic borrowers 

would not meet the requirements of a QM loan based solely on its 

debt-to-income requirement.’’ That is what we were just addressing. 

I am a former REALTOR® myself. I have dealt with those. 

Frankly, I come from an area where the median income and the 

47 

median mortgage and household transaction, home sale transaction, is far below any of those major markets like California or 

New York or other places that might be falling into a jumbo-loan 

trap. 

But frankly, whether it is jumbo or whether it is small loan borrowers, what we are anecdotally hearing, and it is only half-funny, 

is that QM is quickly becoming ‘‘quit mortgages,’’ and I am very 

concerned about that. For those people out there trying to lend, 

this—these assets, there is a real fear that there is too much of 

that constriction on there. 

Sort of the response, one of the things that was part of the original Dodd-Frank bill was the 3 percent cap on affiliated mortgages. 

I recognize that the CFPB has sought to limit the impact of the 3 

percent cap by providing more generous ‘‘points and fees allowance 

for loans under $100,000.’’ But frankly, it is not enough. 

That has brought me to introduce H.R. 1077, and H.R. 3211. My 

friend from New York, Mr. Meeks, is a cosponsor of that. It is a 

bipartisan bill. We also have been working with Senator Vitter and 

Senator Manchin. There is a Senate companion to that, S.949 and 

S.1577. 

Based on a survey conducted by the Real Estate Settlement Providers Council, the inclusion of title charges causes 60 percent—60 

percent of loans under $60,000 to fail as Qualified Mortgages. 

These loans actually become high-cost, as we were discussing earlier, these HOEPA loans, because of points and fees that exceed 5 

percent of the loan amount. The survey also found that 45 percent 

of affiliated loans between $60,000 and $125,000—so we are not 

talking massive jumbo-loans—failed to qualify as Qualified Mortgages. 

In fact, 97 percent of the loans that failed as QMs were under 

$200,000, simply due to the inclusion of title insurance on that. 

And if title insurance is excluded, only 3 percent of those same 

loans would fail as QMs. 

Now, the States by and large regulate most of this, and as I have 

been working with people in the industry, I have had some conversations with colleagues across the Capitol, some who may or 

may not, not to name names, have been very involved in creating 

your Bureau, who constantly bring up title insurance, apparently 

not understanding that this is regulated by the States, those 

amounts of what people are having to go in and pay for their title 

insurance. 

So introducing the Mortgage Choice Act is trying to seek relief 

for the major players, like the Quicken Loans and Flagstars of the 

bank, which are doing these across the Nation. Both are 

headquartered in Michigan but do business in virtually all 50 

States, to the small firms, like myself, which was a small real estate firm that put together its own title company, not because they 

were trying to be out gouging consumers, not because they were 

trying to charge more than what the other guy down the road was 

going to charge for their title insurance, but for the ease and convenience of the consumers. 

And I know that is one of your stated goals of the Bureau, but 

I am curious if you could comment on that. 

48 

And then I am—you had mentioned earlier about waiting for 

data. How long are we going to have to wait for that data to address this as well, that I believe is going to show that there has 

been a reduction in mortgages offered? 

Mr. CORDRAY. Yes. So again, as you say, we attempted to alleviate some of the concern about the 3 percent points and fees cap, 

which was a pretty blunt instrument in the statute, by providing 

for graduated, higher levels on loans of under $100,000. It is not 

clear to me exactly what we will all think a year from now, whether that should be somewhat higher, whether it should be $150,000 

or where that should be set. That is a question. 

I have had discussions with Bill Emerson from Quicken about 

their model, which they touted, and which is a very efficient onestop shopping model. And affiliate models can be that. He also was 

very frank in acknowledging there had been some affiliate abuses 

over the years, and we have all seen them. Congress drew a line 

on that, we thought, and we are trying to respect that line. 

I think the— 

Chairman HENSARLING. I’m sorry, the time of the gentleman has 

expired. 

Mr. HUIZENGA. Mr. Chairman, I know my time has expired, but 

I would—in writing, I would like to ask, how long are we going to 

be able to wait? We think we have evidence now, after 30 days, so 

do we need 30 days of evidence, 60 days of evidence, because the 

longer that we wait the more people are going to be impacted and 

hurt by that. 

Mr. CORDRAY. I haven’t seen any data yet, but within a few 

months I think we will get a sense of the impact. 

Chairman HENSARLING. Now, the time of the gentleman has really expired. 

Mr. CORDRAY. Sorry. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Massachusetts, Mr. Lynch. 

Mr. LYNCH. Thank you, Mr. Chairman. 

I want to thank the ranking member as well. 

And, Director Cordray, I appreciate your willingness to come 

here and help the committee with its work. 

Just as—at the outside, I would just like to say that I think you 

present—well, the CFPB presents far less risk to American security than, say, Target or some of these credit card companies that 

actually have the specific data on individual consumers as opposed 

to the aggregated, anonymous data that is presented to the CFPB. 

Now, I think we all understand, because of the housing crisis, 

the need to have Qualified Mortgage regulations and standards. 

That much being said, where the line is drawn, I guess, is open to 

interpretation, and I guess it is a bit subjective. 

I do share some of the concerns with my colleagues across the 

aisle, especially with respect to community banks and making sure 

that the creditworthy population has that opportunity to get a 

mortgage. 

And there is the danger, I guess, if we use this bright line, 43 

percent, that there may be people in some of our neighborhoods, especially communities of color, who might not meet that bright line 

49 

test but nevertheless, because of their individual circumstances, 

should get a mortgage. 

And I am just wondering, as my previous colleague just mentioned, is there some ability going forward to look at the data to 

see if we are boxing out some meritorious segment of the population who should be getting mortgages but are getting shut out, 

either because of demographics or urban versus suburban versus 

rural? Is there some opportunity here going forward to sort of 

tweak this in a way that we make sure that folks aren’t left out? 

Mr. CORDRAY. Thank you, Congressman, and I agree with you, 

and there will be and is opportunity to consider further those provisions and the effect they are having. And I will just point back to 

when we finalized this rule a year ago, we did not have a provision 

for small creditors. We added that on. 

That was the first very significant tweak of the rule and it was 

meant to address exactly what you say. There are people who won’t 

qualify on some sort of boxed-up metric analysis, but community 

banks and credit unions will work with people in their community 

that they know and they have the personal relationship to understand their situation, and will make that loan. 

The whole point of the small creditor exemption was to give 

thousands of community banks and credit unions the flexibility to 

continue doing the same kind of traditional lending they have always done, which works well, pays attention to the person’s ability 

to repay, and makes good judgments about it. They have that latitude under the rule. 

Now, whether we have drawn all the lines exactly in the right 

places or whether we could move them is something that we will 

continue to hear from people about and listen to people about. Over 

the course of the year, we will start to get a sense of how this is 

affecting the market, and if it is affecting the market in ways that 

you and I think were not what we are trying to accomplish, then 

we will be open to thinking further about it. 

We have said that many a time, and I am happy to say it again 

today. 

Mr. LYNCH. Are we hearing anything from our smaller credit 

unions, smaller community banks right now in terms of—what is 

the feedback so far? 

Mr. CORDRAY. I hear from them all the time. We heard from 

them before we adopted the rule last January and we heard from 

them after we adopted the rule. We solicited their input and comments on the small creditor provision and incorporated a lot of 

what they told us. 

They talk to us constantly. I have a Community Bank Advisory 

Council and a Credit Union Advisory Council I didn’t have to set 

up, but I did, because I wanted to have more feedback from them. 

I think we have our ear pretty close to the ground. I think a lot 

of what you hear we are also hearing. There is a fair amount of 

concern, some of which is justified and some of which is not. But 

as we go, if we need to make adjustments we are open to considering that, as we have already shown that we have been willing to 

do. 

Mr. LYNCH. Lastly, I know this is not necessarily in your wheel 

house, but I am hearing from my constituents. I represent a coastal 

50 

area. There is a lot of pressure on REALTORS® with respect to 

these new flood maps. Have you encountered any feedback in terms 

of what it is doing to the real estate market? 

I know it is—for folks on low income or fixed income, I know it 

has had a dramatic impact on them. I am just wondering if you are 

hearing anything on that end. 

Mr. CORDRAY. Contrary to those who think we are all-powerful, 

that is not in our wheel house. I don’t know much about it. We are 

probably hearing some things about it, but I don’t have a perspective on it at the moment. 

Mr. LYNCH. Thank you, Mr. Chairman. I yield back. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair recognizes the gentleman from Wisconsin, Mr. Duffy. 

Mr. DUFFY. Thank you, Mr. Chairman. 

I would just lend my voice and concern to the QM rule, especially 

its impact on low- and moderate-income families and the impact of 

the rule. And when you have banks—financial institutions that are 

holding these loans in portfolio, we have concern how that is working, especially across our districts. 

But I am not going to spend my time there. I do want to move 

to data and data collection. 

We are all aware that the Bureau is collecting and monitoring 

financial information on millions of Americans. That is clear. 

Earlier today, I forget who the exchange was with, but you indicated that you weren’t sure that the information that is collected 

from individuals or third-party contractors could be reverse-engineered, which concerns me because Mrs. Capito and I, on July 9th 

of last year, asked you if it is possible for the CFPB or any thirdparty vendor working on behalf of the CFPB to reverse-engineer 

raw data to identify individual consumers. That was the question. 

And part of the response was: ‘‘The Bureau purposely reduces 

the likelihood of data being re-identified by restricting access to 

data to those whose work requires it and providing privacy and security training to Bureau personnel on how to handle and protect 

data appropriately.’’ 

So your response over half a year ago indicates, yes, you do get 

information that can be reverse-engineered and identify individuals, and today you are not as clear about that in the question and 

answer. My— 

Mr. CORDRAY. Do you want me to respond and clarify that for 

you? 

Mr. DUFFY. Let me ask you a question. 

Mr. CORDRAY. Okay. 

Mr. DUFFY. I think today you also said that you work on behalf 

of consumers. You would agree with that, right? 

Mr. CORDRAY. That is how I view my job, yes. 

Mr. DUFFY. Would you object to getting permission from consumers, those people you work for, before you collect or monitor 

their information? 

Mr. CORDRAY. So, a couple of things. First of all, as to whether 

there is any inconsistency in my testimony today with that letter, 

I don’t believe there is. I don’t want to have you mix apples and 

oranges, peaches and plums here. You have had a big focus with 

51 

us on the credit card data and we are very careful about avoiding 

any prospect of reverse-engineering on that. 

The question to me earlier had to do with mortgage data, where 

there is zip code information. And what I have said is I think we 

are always concerned and want to be very careful about the prospect of reverse-engineering. It is something that is going to continue to evolve over time as more information is publicly available, 

that it can be matched against and so forth. So it is something we 

are going to be very mindful of and very careful about. 

As to your question of would we go to individual consumers and 

ask their permission before we seek, say, aggregate data about the 

credit card market, that is, I believe, intended to and certainly 

would have the purpose of completely making it impossible for the 

agency to have any kind of data to know what is going on in these 

markets. Because to ask many, many consumers for their permission before we could aggregate data about them would mean that 

I wouldn’t know anything about the mortgage market when you 

want me to get the QM rule right, I wouldn’t know anything about 

the credit card market when you want me to report to Congress on 

that, and how would that— 

Mr. DUFFY. I am going to reclaim my time. 

Mr. CORDRAY. —and how— 

Mr. DUFFY. —I reclaim my time. 

I don’t know if you have done any polling to see what the American consumer thinks about you monitoring and collecting information. So I am concerned that you may not be aware of where the 

American population is. 

I would bet if you asked them, they would love to have the opportunity to give you permission to access their information or deny 

you permission, or in the least, I don’t think you have an opt-out 

provision on your Web site. So if you say, ‘‘Listen, I am one who 

doesn’t want the group of people who claim to be working for me— 

I don’t want to give them my information,’’ you can’t even opt out, 

which would be very easy for consumers, and that concerns me. 

And there has been some comparison to the Bureau and the 

NSA, and I know that is a burr under your saddle and you don’t 

like it. The NSA does not ask Americans permission to collect their 

phone records and e-mails and texts. And the CFPB does not ask 

permission to collect information on the American financial consumer. 

I would love if you would differentiate yourself from the NSA and 

actually ask the people that you work for, for permission before you 

access information, or at least give America an opportunity to opt 

out. 

And I will ask you another question here. As you go to your Web 

site—I pulled it up and looked at the disclosure of what the information that you collect. It is horrible that you have this much data 

on the American consumer that can be reverse-engineered and they 

don’t have that information and that disclosure clearly and crisply 

delineated on the Web site is of concern. 

Mr. CORDRAY. Wait, what are you talking about there? Are you 

talking about our consumer response function or what? 

Mr. DUFFY. On the bottom of your Web site—consumer—when 

you talk about the data information on the Web site. If you want 

52 

a copy if you haven’t looked at it, I can provide it to you. Privacy 

policy and legal notices is what I am referring to. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Michigan, Mr. 

Peters, for 5 minutes. 

Mr. PETERS. Thank you, Mr. Chairman. 

And thank you, Director Cordray, for appearing before the committee today. Certainly, I appreciate all of your hard work in protecting American consumers in relation to these financial products. 

I know it is a difficult task and you are doing a wonderful job. 

To me, however, college affordability is probably one of the top 

priorities we need to be focused on. And I believe that the CFPB 

has done an excellent job of shining the light on some of the difficulties that so many of our students are facing now. 

A CFPB report from last summer cited stakeholder comments 

suggesting that it might be useful to allow for the rehabilitation of 

private student loans on which borrowers have defaulted. And as 

you know, there are currently more than 850,000 private student 

loans in default in the amount of about $8 billion. 

For many, student loans are a young person’s first experience 

with credit. And after graduation, many students struggle for 

months and sometimes even years to find their first good-paying 

job, especially as our economy continues to recover. 

This is why I have worked across the aisle, with my colleague 

Michael Grimm, to introduce the Federal Adjustment in Reporting 

Student Credit Act, which would allow seriously delinquent private 

student loan borrowers a one-time offer to remove a default from 

their credit report after making a series of on-time payments. 

This already exists for Federal student loans, which make up a 

significant majority of the student loan market. Our proposal basically allows private student loan furnishers to offer a rehabilitation 

program similar to what is already available for the public student 

loan borrowers, but doesn’t require them to do so. The bill creates 

no new regulations and actually gives private lenders another tool 

to help borrowers get back on track once they get that first job and 

are able to make those payments. 

I appreciate having the Financial Institutions Subcommittee 

Chair, Shelley Capito, as a cosponsor of the legislation and that 

both she and Chairman Hensarling have agreed to work with me 

on putting together a hearing on this issue. 

And I appreciate that, Mr. Chairman. 

But, Director Cordray, I realize that it is difficult for you to talk 

about a specific piece of legislation, particularly one that is not in 

front of us right now, but maybe if you could just generally discuss 

how harmonizing the public and private loan rehabilitation policy 

would help recent graduates get back on track? 

Mr. CORDRAY. And thank you for saying that, Congressman, because I do want to always be careful about just responding off the 

top of my head to legislative ideas when I haven’t seen the text. 

But in general, I think I have a positive reaction to what you have 

described. 

As we have found in the mortgage market, with mortgage 

servicers, the more tools that are available for them to give people 

opportunities to get back on track, first, they have the opportunity 

53 

to collect money where they otherwise were going to get none, and 

second, often people do need a second chance and circumstances 

change. Maybe now they are employed, whereas at the time they 

defaulted, they were not employed. That is obviously going to be a 

big difference for people. 

And the fact that it is analogous to what is being done with Federal student loans, actually we would like to see more of the practices that exist on Federal student loans, such as income-based repayment and other things, be taken up in the private sector on private student loans. 

So in general, we think that private student lenders could be 

doing more to provide options to their borrowers. We think they 

would benefit by doing so. They would probably collect more 

money. 

At the same time, there is a tremendous overhang in our economy right now. I described it as a domino effect earlier about the 

student loan millstone around the neck of some of our biggest 

achievers in society who have managed to get a higher education 

and training and just happened to graduate into a tough job market or didn’t have the means and therefore have to come out of college with tens of thousands of dollars in debt. 

We want those people to be able to succeed, and giving them 

some options to respond to their circumstances seems to me to be 

a good thing. 

Mr. PETERS. I appreciate those comments. In fact, I have heard 

from a number of private lenders who believe that if this bill 

passes, they can start offering loan rehabilitation shortly after enactment. This would be an incentive for folks to really step up and 

move forward and rehabilitate their credit and pay those loans 

down. 

Do you agree that this is a market-driven policy change that 

would help a significant number of borrowers, as far as you know, 

from at least hearing it on the surface of this item? 

Mr. CORDRAY. I would be happy to have our very strong office of 

students and our student ombudsmen work with your office— 

maybe they already are, for all I know—in terms of ironing out 

some of the details and seeing if something could be moved on this. 

It is a crying need in our society right now. The student loan 

problem is weighing down a generation of young people who should 

be our next generation of leaders. 

Mr. PETERS. I appreciate your support of this legislation. We will 

look forward to working closely with you. And hopefully, we can get 

it passed with the help of Chairman Hensarling. 

Thank you, Mr. Chairman. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Ohio, Mr. Stivers, 

for 5 minutes. 

Mr. STIVERS. Thank you, Mr. Chairman. 

And thank you, Director Cordray, for being here. I want to thank 

you for your service to our home State of Ohio, as well as your 

service to the Federal Government as the Director of the CFPB. 

I have three sort of big area questions around mostly organizational culture. 

54 

The first question I have for you involves a bipartisan bill that 

Representative Tim Walz and I have introduced which would create a standalone Inspector General for the CFPB. I am curious if 

you would oppose that bill or not. 

Mr. CORDRAY. So this— 

Mr. STIVERS. If you can be brief in these answers— 

Mr. CORDRAY. Yes. Yes, I will. You know I have that problem, 

Congressman. He is my Congressman, so he knows that I am not 

always brief. 

We have an Inspector General now. That Inspector General has 

a strong staff and is doing a very good job with us. We are subject 

to, I think, 10 open inquiries and supervision processes right now. 

I think they are doing an excellent job. 

Obviously, we will live by whatever Congress makes the law. 

And the law that we have right now has us with a strong Inspector 

General who is, I think, doing the kind of work that you want him 

and his staff to be doing. 

Mr. STIVERS. And I can say, our bill is not an indictment on the 

Fed’s Inspector General. This is about an organization that now 

has 1,300 people, is growing in size and scope. And we just believe 

you deserve your own Inspector General. 

The sort of second area I want to go through is the role of your 

agency. Can you tell me, if I was to poll your 1,300 employees, 

would you say they would tell me that you are an enforcement 

agency or a supervisory agency primarily? 

Mr. CORDRAY. I believe I know exactly what they would say—the 

same thing I would say: We are both. 

Mr. STIVERS. The problem that I have with your culture and the 

way I believe it is going—you are both, but I believe you need to 

make the rules of the road clear first and then enforce those rules 

of the road. 

I want to share with you a conversation I had with a bank in 

my area recently where they told me their interactions with the 

CFPB. The CFPB identified a problem area, and the compliance officer asked for guidance on how they could make it right, and the 

CFPB official said to them—and I will give you this quote: ‘‘You do 

what you think is right and we will tell you later if it was okay 

or not.’’ 

I have a problem with that. I believe you need to make it clear 

what the rules of the road are first, and then use your enforcement 

actions to focus on those and get that done. 

I also noticed in your written testimony that you said, ‘‘Through 

our enforcement and supervisory actions,’’ so you put enforcement 

first, too. And I just would ask you to think about that, when you 

are building an organizational climate and culture, about what 

comes first. 

I have a couple other questions. I want to follow up on a question 

that Representative Luetkemeyer had, and this is just a yes-or-no 

question. Will you put in writing the same thing the DOJ and the 

FDIC have done that makes it clear what your guidance is for 

small-dollar, short-term lenders? I would love it sooner rather than 

later, but I guess what I would like is a commitment that you will 

ultimately put something in writing that gives them guidance with 

55 

regard to whether they can do business with banks and processors 

and all that. 

Mr. CORDRAY. Again, I don’t have a yes-or-no answer. It is actually a fairly complicated issue. How they should do business is not 

just a simple matter of a one-page sheet. 

I would be happy to look at the letters you are talking about. 

Mr. STIVERS. That would be great. The DOJ and the FDIC have 

managed to do it, so I would hope you would try to do it. 

The next thing I—and this all goes to sort of organizational culture. I hope you will solicit input from the folks you are charged 

with regulating. In fact, the CFPB’s Section 1011 actually says you 

are supposed to solicit and get input. I know you are supposed to 

get representation from these covered groups. 

And I would just ask you to take a look whether some—you can 

have somebody from somewhere in these short-term loan marketplace—somebody who has knowledge in it on one of your existing 

groups that you have for input. So that is just me urging you. It 

is not really a question, but take a look at that again. You and I 

have had this conversation for— 

Mr. CORDRAY. Yes. 

Mr. STIVERS. —a year. 

Mr. CORDRAY. I think we are doing that, Congressman, and we 

will continue to. I have probably spoken to some of the same executives you are speaking to. 

Mr. STIVERS. Great. 

Mr. CORDRAY. In defense of my folks, if they said, ‘‘you do this, 

and then we will tell you afterwards,’’ that is not our attitude. 

Sometimes, things are more complicated. That is all. 

Mr. STIVERS. I have one more question I want to follow up on 

really quick. 

Mr. Scott actually brought up a really good point about the Bureau, and this goes to my bigger point of supervisory versus enforcement—and I would ask you to do what you can with regard 

to indirect auto lending to create a more formal rulemaking process, because what is happening is, as you do enforcement actions 

and not rulemaking, they don’t get input. And so, I would ask you 

to look at your overall organizational culture. 

I am going to submit a few other questions in writing. I apologize 

for going over my time. 

I yield back the balance of my nonexistent time. 

Mr. CORDRAY. Thank you. 

Chairman HENSARLING. The gentleman’s nonexistent time has 

expired. 

The Chair now recognizes the gentleman from Illinois, Mr. Foster. 

Mr. FOSTER. Thank you. 

And thank you, Director Cordray, for your service. 

I would like to return to this issue of the National Mortgage 

Database and databases more generally. I believe this will be, over 

time, a tremendously valuable feature of our government. During 

the collapse of the housing bubble, homeowners in America lost 

roughly $9 trillion, which is $30,000 for every man, woman, and 

child in the United States. 

56 

And one of the things that drove the housing bubble was simply 

that regulators did not have the information to know what was 

going on. Basic information like consolidated loan to value, including second liens and stuff, was not available to the Federal Reserve 

and others who, at the time, had the authority to control mortgage 

origination in this country. 

I would also like to point out that the PATH Act that passed out 

of this committee, with the unanimous support of the Republicans 

on the committee, in fact, had provisions to adjust the underwriting 

requirements for mortgages on a county-by-county basis in response to market conditions. That would have required exactly the 

sort of a database that you are talking about developing for the National Mortgage database. 

But there are questions about statistical sampling, I think, that 

were raised by Congressman Garrett, and I think that they are actually valuable. This business with personally identifiable data is 

a problem in the commercial world, and it is a problem in the— 

and it is a problem for any federally-held data set. 

I think it was an interesting question of why you have chosen 60 

percent sampling, roughly, for credit cards and the National Mortgage Database is a 5 percent sample, if I understand correctly. 

But I also understand that you have—a lot of the abuses you are 

trying to identify are micro-targeted with the same sort of microtargeting that you are seeing for legitimate marketing. You can 

easily imagine—and I am sure it has happened—that you find 

abuses practices targeting, for example, unmarried Asian women in 

manufactured housing. 

So you are trying to track down abuses in small statistical corners. You will have to slice and dice the data tremendously and you 

get into statistical problems when you look for these. 

And so how do you view that problem, and how do you intend 

to handle it managing these data sets? 

Mr. CORDRAY. First of all, it is a very fair concern, and the smaller the category gets, the less confidence you can have in trying to 

extrapolate patterns from it. So I think that is just a general challenge in the work that we are doing and, frankly, for the industry 

and everybody concerned about what is happening in these markets. 

I don’t have much to say. You aptly, and I think very eloquently, 

described the importance of having the information, that people 

missed what was happening in the mortgage market and caused all 

the harm that resulted from the financial crisis, is—continues to be 

a scar on this entire generation, and we are still trying to build 

back both household wealth, and people trying to get their jobs 

back, and so forth. 

If we can avoid that, by having information and knowing what 

is happening in real time, I think it is clear what the choice should 

be. We should make sure that we know what is going on, so we 

can try to respond to it and prevent it where we can. 

Mr. FOSTER. I also think that you are correct in making the distinction between you and the NSA. The NSA is interested in targeting individual terrorists. You are looking for patterns of abusive 

behavior in the market, and I think that is a fundamental difference. 

57 

Mr. CORDRAY. Again, said better than I said, so thank you. 

Mr. FOSTER. Listen, I want to change gears a little bit. Having 

to do with—many immigrant communities—this is a question of 

notarios and fraudulent advice being provided, specifically targeting immigrant communities. 

Many immigrant communities across the country fall victim to 

what are sometimes called notarios. As you know, in many Latin 

American countries a notario or a notario publico refers to Stateappointed lawyers whose qualifications are equal or may even exceed those of an attorney. But in the United States, a notary public, obviously, has only the authority to witness certain documents. 

But the linguistic discrepancy is being abused by a number of 

fraudulent or simply incompetent advisers. Much of this is on immigration issues, but a significant fraction overlaps financial services. And I was wondering what you are doing—what is on your 

radar screen in this area? 

Mr. CORDRAY. Yes, I actually appreciate your asking about that. 

I first ran into notario fraud when I was the county treasurer in 

Franklin County, which would have been about 2003, 2004. And we 

were working with our Latino community on foreclosure issues and 

starting to translate some of our stuff into Spanish, which seemed 

like not a normal thing in Central Ohio at that time. But it has 

become very much a part of dealing with these markets. 

The notario fraud is just as you described it. Many people—especially when it comes to things like land contracts, which is often 

common as a means of securing housing—have fallen victim to it. 

We continue to work with people like State attorneys general and 

the Federal Trade Commission, who often have more to say about 

advertising types of fraud that aren’t linked specifically, sometimes, to mortgages and other products that we oversee. 

We have some information that we have been developing on our 

Web site for consumers to be careful about this. 

It is, I think, a broadly enough known scam now that there is 

a lot of effort in the Latino community to make people aware of it, 

but it is a problem of language and it is one that people have exploited wrongly and hurt poor people as a result. 

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

I yield back. 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from Tennessee, Mr. Fincher. 

Mr. FINCHER. Thank you. Thank you, Mr. Chairman . 

And, Director Cordray, I appreciate you taking time for us again 

today. It has been almost 3 hours now. 

I learned a few minutes ago that you are a five-time ‘‘Jeopardy’’ 

champion. Is that— 

Mr. CORDRAY. That was a long time ago, sir. 

Mr. FINCHER. Wow. Well. Phrase your answers in the form of a 

question. 

[laughter] 

Mr. FINCHER. On a lighter note. I’m sorry. 

So, Director Cordray, we talked a lot today about manufactured 

housing—and I am from Tennessee, a rural State—and how important it is that we try to fix this problem. 

58 

I appreciate the chairman allowing us to put this fix in the 

PATH Act. And so many of us were elected for solutions to problems, and that is what we have been working with the industry 

and with the CFPB to try to solve this problem. 

You would agree that the CFPB is a data-driven agency, correct? 

Mr. CORDRAY. That is what we strive to be, yes. 

Mr. FINCHER. So I guess our concern is we, along with the industry, have been actively engaged in providing you with many, many 

pages of data, trying to fix this issue so that an estimated 6 million 

people don’t—are not able to access credit to buy manufactured 

housing. 

I guess our problem is as we have been giving you the data, and 

you have responded to us from requests back in September, and 

this is the response from the CFPB: ‘‘The Bureau has met with the 

representatives from the manufactured housing industry and has 

requested additional data from a set of manufactured housing lenders to gain more complete understanding of this market and the 

potential effects of this and other rules on the market for manufacturing home loans.’’ 

What my question to you is—and we are willing, my staff, industry folks, me, to come down to the CFPB, to sit down, as the ranking member said a few minutes ago, whatever we can do to try to 

fix this issue—but why would you go on and let the rules go into 

effect not having all of the documentation or the data that you 

need to have complete clarification of this issue? Why could you not 

just delay the rule until we figured out or you figured out or the 

agency figured out exactly what to do? 

Mr. CORDRAY. Thank you, Congressman. And I believe it was 

your comments that kicked off this entire subject today, which has 

gained a lot of attention in this hearing. 

In terms of delaying the rules, there is a lot of pressure on us 

to delay various aspects of the rules and we could keep delaying, 

delaying, delaying, and go on forever. All that does is preserve a 

lot of uncertainty in the marketplace, and we thought it was very 

important to go forward with the rules on January 10th. 

But let me say this: You raised this issue in your opening remarks. It was seconded by—and I have made some stars here— 

Representative Pearce, Representative Waters, Representative 

Bachus, Representative Meeks, and Representative Clay. A number 

of you want to work with us on this issue. We will reach out to 

work with you on it. 

As I said, we have had a number of meetings with top representatives from the industry to try to understand how this affects parts 

of the country that don’t always have an easy voice— 

Mr. FINCHER. Right. 

Mr. CORDRAY. —in the halls of Washington. 

So we will work with you over the next several months to try to 

understand what we are seeing, what we are finding, again, what 

the concerns are, many of which I think we have heard and begun 

to think about, and see what may need to be done. 

Mr. FINCHER. Thank you. And again, we want everyone to understand that we are willing to come down, we are willing to sit down 

and do everything we can to resolve it. 

59 

And just wrapping up, when I go back home to my district almost every weekend and sit down with constituents who don’t understand the process and don’t understand what the CFPB is and 

all of these different things, and I try to explain to them why they 

are being harmed and the unintended consequences, I think that 

is what is critical. 

I don’t think your intention or the intention of the agency is to 

knock folks out of buying manufactured housing, but what happens, and whether it is Republican, Democrat, any government 

that is as big as the government that we are—we have turned into, 

there is a problem. The right hand doesn’t know what the left hand 

is doing. So that is why we are trying to keep this small, and hopefully work out these problems going forward. 

So, I appreciate that. We will be in touch. And— 

Mr. CORDRAY. I worry about what you described as well. Yes. 

Mr. FINCHER. Okay. Thanks. 

Chairman HENSARLING. The gentleman yields back his time. 

The Chair now recognizes the gentlelady from Alabama, Ms. Sewell, for 5 minutes. 

Ms. SEWELL. Thank you, Mr. Chairman. 

And thank you so much, Director Cordray. I know that it has 

been a long day for you. But I also wanted to echo the sentiment— 

Mr. CORDRAY. A lot of people work a lot more than 3 hours. 

Thanks, though. 

[laughter] 

Ms. SEWELL. I wanted to echo the sentiment of that litany of 

folks who are concerned about manufactured housing. I represent 

the State of Alabama, and in my State, just like Representative 

Fincher’s, sometimes manufactured housing is the only available 

option. And I appreciate that the Bureau is going to work with us. 

And you can add my office as one of the— 

Mr. CORDRAY. I will put a star next to your name, as well. 

Ms. SEWELL. Thank you so much, sir. 

Can you also talk to us a little bit about the steps that the Bureau is going to take to make sure that the voices of industries are 

heard as well as being an advocate for consumers, especially on 

this issue that seems to have taken up the topic of the day? 

Mr. CORDRAY. Okay. 

Ms. SEWELL. Can you sort of talk to us a little bit about any of 

the steps—I know you said meeting with industry members and 

with Members of Congress— 

Mr. CORDRAY. First of all, we have had several insightful and 

productive meetings with representatives of the manufactured 

housing community. 

I think number one was for them to lay out the narrative of who 

this is, how it affects them. Let’s face it, when you talk about the 

mortgage market, people typically think about a house. They don’t 

naturally, in many parts of the country, think about a motor home 

or a manufactured home. There are lots of places in the country 

where that is what they would immediately think about. And as I 

said, I am familiar with those areas from my own background and 

my own life. 

The fact that there are some special issues around many of the 

manufactured home loans, like a distinction between the dwelling 

60 

and the underlying property which may or may not be related to 

it, creates complexities, which is not, again, the normal real estate 

transaction, where you buy a home and the land it sits on. 

And the fact that many of these loans come at higher cost—many 

of them are for lower amounts, but at higher cost—for years has 

triggered the HOEPA rules. And that is something that the industry had been adjusting to, and I think it goes back at least 4 or 

5 years, maybe longer, and now these rules to deal with them as 

well. 

So, we will sit down. We will talk more back and forth. We will 

try to understand, as this is unfolding, exactly what the impact is 

on people, get a sense of whether that is what is intended and to 

what extent that is affecting consumers. That is going to be our 

major concern. 

But we do understand, and one of the things that we have come 

to appreciate is that there are a lot of ways in which the lending 

industry serves consumers. If consumers don’t have credit available, if they don’t have opportunities, then you don’t have anything 

to protect anyway. So, writing great protections is kind of beside 

the point. 

That is why when it comes to the mortgage rules, I think fairminded people will say that we worked hard to try to balance access to credit and consumer protections and try to provide both as 

much as we can. 

Sometimes, there is a tradeoff. In many cases, there is not necessarily a tradeoff between them. 

We may not always have gotten those lines right. We may need 

to redraw some of them as we go. We are open-minded to recognizing that. We don’t think that we know it all or that one-sizefits-all. 

And, as I have said, over the last year we have shown ourselves 

open to making practical changes that help these rules actually 

work. We continue to do that and we will continue to think about 

how this affects consumers, which is really our pole star on all 

issues. 

Ms. SEWELL. Yes. I just wanted to make sure that we say thank 

you for being open-minded. I think that in jurisdictions like mine, 

where we are mostly rural, sometimes manufactured housing is the 

only option. 

Mr. CORDRAY. Yes. 

Ms. SEWELL. And we want to make sure that we are protecting 

the consumer, and we are also providing access to credit or helping 

that process so that folks have the best shot of getting a home that 

they possibly can. 

So, I thank you for your willingness. Do add my office as one of 

the offices willing to help out. 

Thank you, sir. 

And I yield back the rest of my time. 

Mr. CORDRAY. Thank you, Congresswoman. 

Chairman HENSARLING. The gentlelady yields back. 

The Chair now recognizes the gentleman from Kentucky, Mr. 

Barr, for 5 minutes. 

Mr. BARR. Thank you, Mr. Chairman. 

61 

Mr. Cordray, first a couple of questions about the indirect auto 

lending bulletin, and then I want to ask you a couple of questions 

about the Qualified Mortgage rule. 

On the indirect auto lending bulletin, will failure to conform to 

that bulletin bring adverse consequences to noncompliant auto 

dealers? 

Mr. CORDRAY. So again, the bulletin on indirect auto lending governs lenders. It does not govern dealers. 

And again, this is the landscape that we have been given and we 

are trying to be very mindful of it. 

Mr. BARR. Can auto dealers disregard the bulletin? 

Mr. CORDRAY. The bulletin covers and is addressed to auto lenders. It is not addressed to auto dealers, over whom we do not have 

jurisdiction. 

Now, when you have a transaction in today’s market, the way it 

often works is you will have a lender and a dealer engaged in that 

transaction. But the Congress drew a line here and they said dealers are subject to the jurisdiction of others; lenders are subject to 

our jurisdiction, so— 

Mr. BARR. Right. This does impact— 

Mr. CORDRAY. So lenders have to worry about it and comply 

with— 

Mr. BARR. Sure. But it impacts the dealers’ markup practices, obviously. 

Mr. CORDRAY. It could, depending on exactly what actions are 

taken in response, yes. 

Mr. BARR. Is it the intent of the Bureau to make this legally 

binding on the auto lenders and, by extension, the auto dealers? 

Mr. CORDRAY. Again, we have a responsibility under our statute 

to govern fair lending practices by auto lenders. We have no ability 

to govern fair lending practices of auto dealers. 

Mr. BARR. I understand. 

Mr. CORDRAY. No ability. 

Mr. BARR. That is really not where I am going. Is it the intention 

of the Bureau to make this legally binding on auto lenders? 

Mr. CORDRAY. Auto lenders are already bound to comply with the 

law. This is a clarification of what the law is. We didn’t create that; 

we didn’t change it. It is what it has been. 

Mr. BARR. The point of my question, and I think you understand 

what I am getting at, is why are you not using notice-and-comment 

rulemaking here? If the intent is to make this legally binding, why 

don’t you give auto lenders and auto dealers the opportunity—and 

the American people the ability to comment on what it is that you 

are doing? 

Mr. CORDRAY. We use notice-and-comment rulemaking when we 

are actually changing the law. This is not a change in the law. It 

is a restatement of law that other agencies have followed for 20 

years. They had a guidance document in 1994 or 1995 that we were 

simply restating, so— 

Mr. BARR. So can auto lenders disregard it since it is not a restatement or a new law? 

Mr. CORDRAY. No. They always had to regard it. They had to regard it for 20 years. We are simply, again, reaffirming that they 

still have to regard it. 

62 

Mr. BARR. Let me talk about the details of the bulletin, and 

whether or not—and the question that really wasn’t answered in 

your response to the letter that we sent you, about the analytical 

controls that you believe are appropriate in implementing this. 

We asked what were the controls that you were going to use in 

applying the rule. Is the Bureau going to be using, for example, 

nondiscriminatory factors—taking into account nondiscriminatory 

factors, such as the creditworthiness of borrowers? 

Mr. CORDRAY. Creditworthiness of borrowers is always relevant 

to these considerations and very, very valid criteria. 

Mr. BARR. And the amount financed? 

Mr. CORDRAY. The amount financed would matter because the 

extent of harm to consumers is going to be potentially greater with 

the greater amount financed. 

Mr. BARR. And the length of time of the loan? 

Mr. CORDRAY. That is a relevant factor, sure. 

Mr. BARR. And what about the presence of a manufacturer’s subvention of a right? 

Mr. CORDRAY. I believe that could be relevant criteria. What you 

are laying out is that it is a somewhat nuanced analysis and not 

so easy to say one-size-fits-all. It depends a lot on circumstances. 

Mr. BARR. If I may, with the remaining time, let me just move 

quickly to the Qualified Mortgage rule. As you know, the rule provides greater flexibility for lenders in rural and underserved areas, 

particularly to originate balloon loans, for example. 

But we have heard from our constituents that there is a problem 

in certain rural areas which have been improperly designated as 

non-rural. My question to you would be whether or not the Bureau 

would be open to allowing a process whereby clearly wrongly designated rural areas could petition your agency for a proper designation of rural status. 

Mr. CORDRAY. So here is what we did: I was convinced that we 

got the rural designation wrong or that it merited reconsideration, 

so we took that off the table. None of these lenders have to worry 

about that for the next 2 years while we rethink it. 

So I think we have done exactly what they wanted, which is nobody is being affected by that designation now. We will rethink it, 

and potentially it will end up being a different designation when 

we are through working through this. And we are interested in 

hearing from them in the meantime. 

I heard a lot from them initially, and that is what caused us to 

pull back on it. 

Mr. BARR. Whether it is in the case of an auto lending bulletin 

or in the case of the QM rule, I would encourage the Bureau to 

allow more participation, whether it is notice-and-comment or 

whether it is a petition process where the American people can actually correct— 

Mr. CORDRAY. If you know of anybody who is having trouble getting a meeting with us, you let me know. We are pretty widely accessible. 

Mr. BARR. Thank you. 

Thank you. I yield— 

Chairman HENSARLING. The time of the gentleman has expired. 

63 

The Chair now recognizes the gentleman from Florida, Mr. Murphy, for 5 minutes. 

Mr. MURPHY. Thank you, Mr. Chairman. 

And thank you, Director Cordray, for your testimony. And thank 

you for what you and the Bureau do to protect consumers. 

Regarding Habitat for Humanity, as you know, it is a charitable 

organization, which represents part of what makes America great: 

neighbors all coming together with a simple idea that affordable 

homeownership strengthens communities and helps break the cycle 

of poverty. 

Habitat homeowners enjoy no-interest, charity mortgages, designed not to make a profit on the underlying loan, or affect the 

risk of the homeowner, but simply to build communities and promote affordable homeownership. 

I have been working closely with my good friend and fellow 

United Solutions Caucus Member Meadows, from North Carolina, 

and the gentlelady from West Virginia, Chairwoman Capito, on legislation to improve Wall Street reform by protecting Habitat for 

Humanity and other such charity organizations from a regulatory 

risk, which should be reserved for banks and credit unions. 

The process has benefited from the Bureau’s responsiveness and 

ongoing willingness to address legitimate concerns. One of those 

concerns is whether forgivable loans actually count as an extension 

of credit. If a borrower will not be expected to repay a loan, as in 

the case for many downpayment assistance loans, that borrower 

should not have that loan count against them for the purposes of 

determining ability to repay. 

Can you explain to the committee the Bureau’s position on 

whether forgivable loans are considered an extension of credit for 

the purposes of determining ability to repay debt-to-income ratio? 

Mr. CORDRAY. Yes. And to go back, when we first finalized the 

Qualified Mortgage rule in January of last year there was not yet 

any provision that took account of 501(c)(3)’s like Habitat. They 

spoke to us. They had several concerns. 

We went back and did an additional rulemaking process, which 

resulted in the small-creditor provision, which was very important 

to community banks and credit unions, and a provision that governed Habitat. The Bureau took care of their concerns, or so I 

thought. 

By the end of this year, as they worked through other problems, 

they found that they have identified three other concerns. This is 

the leading one, as I understand it. I had a discussion with the 

CEO, Jonathan Reckford, yesterday, and we talked back and forth. 

He had his lawyers in the room explaining the details of the issues 

and we pledged to work to see that we can resolve these issues 

through our rulemaking authority. 

Representative Capito, with whom you are working, knows full 

well that we can resolve these issues because we had this problem 

with stay-at-home moms under the credit card rules that we inherited, that she raised. I agreed that it was a very valid concern and 

we addressed that through rulemaking, it always takes a little 

longer than we would like, but I think we can do the same here. 

64 

Mr. MURPHY. Thank you for your responsiveness to these consumer concerns. When should we expect a formal, workable position from you all? 

Mr. CORDRAY. We are already working with Habitat to understand the granular details of their concerns, including this one. As 

you say, the big-picture issue on this one is very much: do second 

liens have to count in the very peculiar circumstances of Habitat, 

where they put a second lien on often as a safeguard to avoid the 

homeowner getting themselves into trouble on a second lien of their 

own. 

We are working with them already. I think over the course of 

this year, we will solve this problem, and if that is not fast enough, 

we can work with them further to try to organize the timeframe. 

But I know in my area, it is a former colleague of mine from the 

State legislature who runs the Habitat in our area. They do a very 

good job. It is something we want to encourage and they help a lot 

of people. So, we are mindful of protecting their model. 

Mr. MURPHY. Thank you. And as you examine how to best protect consumers in the short-term, small-dollar credit sphere, I 

would be remiss to avoid sharing the benefit of good regulation and 

great enforcement that we have in Florida, where they are pulled 

away from unlawful and short-term loans by real access to a functional market without castigating or endorsing the industry. 

The State of Florida has really demonstrated a workable way to 

protect access and consumers. I hope, as we move forward, that you 

recognize the States that are doing it right. 

And my question is how, in an extremely well-regulated market, 

do you protect consumers by keeping them from the black market? 

Mr. CORDRAY. We are looking at a number of States that have 

developed different provisions on short-term, small-dollar payday 

lending. Florida is one; Colorado is one; Washington is one. There 

are some interesting new approaches. 

I have been in direct contact with Drew Breakspear, who is your 

banking commissioner, and they actually, in the interest of the importance of data and information, when we did our White Paper on 

payday lending, they then applied the same analysis to their Florida data and were able to show us differences in consequences because of their provisions. 

Those are all things we are looking at as we are trying to formulate the right approach. 

Mr. MURPHY. You are considering it. 

Mr. CORDRAY. Yes. 

Mr. MURPHY. Thank you. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Florida, Mr. 

Posey, for 5 minutes. 

Mr. POSEY. Thank you, Mr. Chairman. 

Mr. Cordray, I wanted to ask you a few questions about the time 

periods the CFPB provides for certain requests. 

This is a set of regulations containing the rule relating to investigations—that is 12 CFR 1080. When the CFPB initiates a case, 

it serves a civil investigative demand requesting certain information, including answers to questions, documents, written reports, 

and testimony before an investigator. 

65 

Once they receive a civil investigative demand, do you know how 

many days that person has before they have to meet with a CFPB 

investigator? 

Mr. CORDRAY. So first of all, what I know is this is standard— 

Mr. POSEY. A one-or two-word answer, please. I only have 5 minutes. You don’t know. 

Mr. CORDRAY. No, no. It is more than that. Number one, it is a 

standard practice. All attorneys general use the same approach— 

Mr. POSEY. It is 10 days. It is my time. Ten days is what they 

have. 

Mr. CORDRAY. Secondly— 

Chairman HENSARLING. Sir, the time belongs to the gentleman 

from Florida. 

Mr. CORDRAY. He asked a question. Don’t I get a chance to answer? 

Chairman HENSARLING. The time belongs to the gentleman from 

Florida. 

Mr. POSEY. I asked you how many days. It doesn’t take a book 

to answer that. 

Mr. CORDRAY. We negotiate. 

Mr. POSEY. If a person wants to challenge the civil investigative 

demand or modify the scope of the investigation, do you know how 

many days they have to file an appeal with the CFPB? 

Mr. CORDRAY. There is a specified time in— 

Mr. POSEY. Twenty days is the answer. It could really be answered that simply. 

If a person wants more time to prepare a challenge to the CFPB 

investigative demand, do you know what the CFPB regulations say 

about the extension? 

Mr. CORDRAY. What I know is our practice has been to negotiate 

that timing with the party and to give them a reasonable amount 

of time. We have done it many times. 

Mr. POSEY. Your literature says they are ‘‘disfavored.’’ 

Do you know what the penalty is for failure to comply entirely 

or only in part with civil investigative demand? 

Mr. CORDRAY. What I know is we had an example of this recently. We investigated a payday lender. It resulted in our first enforcement action. They were actually destroying documents as they 

were under investigation. 

Mr. POSEY. Okay. The answer to my question is— 

Mr. CORDRAY. That was totally inappropriate. It resulted in a $5 

million penalty. 

Mr. POSEY. —the Federal district court. 

This is a set of regulations that governs the investigation of nonbank-covered persons. It is 12 CFR 1091. When the CFPB issues 

a notice of reasonable cause against a person who offers consumer 

financial products, how much time do they have to respond? 

Mr. CORDRAY. —in our rules. 

Mr. POSEY. Thirty days. If that person fails to respond to the notice of reasonable cause, do you know what happens to them then? 

Mr. CORDRAY. What I know is these are law enforcement activities. People need to take them seriously. 

Mr. POSEY. —right to respond and have a decision in order automatically entered against them. 

66 

Mr. CORDRAY. These are law enforcement activities and people 

need to comply with the law. 

Mr. POSEY. Do you know what happens to a person if they give 

vague or incomplete answers in their responses to a notice of reasonable cause? 

Mr. CORDRAY. That is something that we negotiate in terms of— 

Mr. POSEY. They lose the right to rely upon any legal argument, 

document, or other information that they could have used in their 

defense if they fail to include it in their response. 

This is a letter from me to you, dated December 21, 2012, containing 19 questions about the CFPB consumer data collection program. 

This is a CFPB response dated February 21st. This is a letter responding to my questions. As you can see, it is three paragraphs 

long. Nineteen questions I asked—the answer is three paragraphs 

long. Paragraph three is a two-sentence conclusion, actually. 

How many days do you think it took the CFPB to respond to me? 

Mr. CORDRAY. So let me say, at the time that you submitted— 

Mr. POSEY. Sixty-two days— 

Mr. CORDRAY. At the time that you submitted 19 questions, others submitted questions. There were well over 150 questions that 

we had to respond to— 

Mr. POSEY. Listen, the people that you regulate can have a lot 

of people asking them questions at the same time. 

Mr. CORDRAY. And nobody got favorable treatment. They all were 

responded to together. 

Mr. POSEY. Do you think a three-paragraph, one-page letter provided complete and satisfactory answers to my 19 questions? 

Mr. CORDRAY. I would like to see the letter, but many of them 

were incorporating by reference. Other questions— 

Mr. POSEY. The answer is clearly no. 

Mr. CORDRAY. Other questions were being answered at the same 

time. 

Mr. POSEY. This, for the record, as marked, is the 19 questions 

I resubmitted in December 2012. Would you like to guess when I 

got the answers to those questions? 

Mr. CORDRAY. Again, I recall at one period— 

Mr. POSEY. These were July 9, 2012, questions for the record, 

and the responses arrived on September 17, 2013. 

Do you know how many days it took to respond to my question 

from July? That is 70 days. 

Do you know how many days it took for me to finally get a response to the questions I originally sent you in December? That is 

270 days. 

It is a bad case of, I think, democracy here— 

Chairman HENSARLING. The time of the gentleman has expired. 

Mr. CORDRAY. What I understand is we have answered all your 

questions. If it takes longer than you like, we will look at that 

again. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentlelady from Ohio, Mrs. Beatty, 

for 5 minutes. 

Mrs. BEATTY. Thank you. Thank you, Chairman Hensarling and 

Ranking Member Waters. 

67 

And I apologize for my voice—I am losing it. But you can also 

imagine when you are at the end of a 3-hour-plus hearing, much 

has been said. 

But, Director Cordray, let me say how honored I am to have entered into the record that I can say something that people here 

can’t say—that I have had the opportunity to work with you for 

several decades and witnessed your leadership and administration. 

So, for the record, I could tell you that condescending is not a word 

that you would find with this Director. 

Let me also say—we have heard a lot about protecting consumers—how proud I am that in the capital city of my great State 

of Ohio, that you and our mayor, Mayor Coleman, have set up a 

311 constituency line, which I think is very rare—that you would 

have a Director and a mayor working together, that individuals in 

my district can actually dial 311 and be connected directly to the 

Bureau to talk about their concerns. 

I would also like to thank you for your attention to ending the 

broken system. And I was very pleased to read about how you are 

working with consumers to make sure that when they are getting 

a mortgage, they are not hit with surprises. 

You have also heard from a lot of my colleagues on manufacturing. I have had the opportunity to work with our colleague—a 

Republican colleague who we both serve within the House with 

Habitat for Humanity. 

So it is also important for me to express my support for efforts 

by the Bureau to address the manufacturing housing issues without diluting important consumer financial protection. 

And lastly, we have heard a lot about the automotive association. 

I have read your reports. The National Automotive Dealers Association yesterday came out with a report and suggests that its 

members set up a single markup rate for all loans and only reduced the rate for documented reasons such as a match or to beat 

a competitive rate. 

I wanted to know if you have seen that report, and if you think 

that it is something you will work with them on. 

Mr. CORDRAY. We have just seen it, and to me, it is encouraging 

that people are taking seriously and trying to explore ways to address these kind of fair lending concerns, and that the Auto Dealers Association, which I have come to know as a very respectable 

body that is interested in solving these kinds of problems, is trying 

to develop a solution for dealers as notable. 

The difficulty we have, again, is one that we oversee lenders; others oversee dealers. We do not oversee dealers. 

But we are happy to—if everybody understands that we are respecting that line—we are happy to try to work together to get to 

a broader solution of this issue and I think we have made that 

plain. 

Mrs. BEATTY. Okay, thank you. 

Mr. Chairman, I would like to yield the balance of my time to 

the Director if there are any comments about anything he would 

like to say, or to respond to any of the other questions. 

Mr. CORDRAY. I appreciate that offer. I will pass at this time. 

Thank you. Thank you very much, Congresswoman. 

Mrs. BEATTY. I yield back my time. 

68 

Chairman HENSARLING. The Chair now recognizes the gentleman 

from North Carolina, Mr. Pittenger, for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

And thank you, Director Cordray, for being here. We are near 

the end of this hearing, so it is time for Double Jeopardy. 

Mr. CORDRAY. Or Final Jeopardy. 

[laughter] 

Mr. PITTENGER. Or final—how about that? That is even better, 

isn’t it? 

Mr. Director, the Dodd-Frank Act established the Civil Penalty 

Fund and the purpose of this was, of course, for penalties that were 

levied to establish this fund. And unlike the Federal Reserve or the 

OCC or the FDIC, you are in a position to deposit these funds in 

your own account. 

And to that end, I would like to ask this: Based on the committee 

calculations that we have today, the unobligated balance of this 

fund currently stands at about $96 million, and roughly $124 million of that you have imposed in fines, which would be allocated 

about $15 million—so, that is about 11.7 percent. Of that, about 

$1.5 million has been spent on administrative costs. 

I would just like to ask, why are you not using more of these 

funds to compensate victims, as it was designed to be set up? And 

can you not identify these people? 

Mr. CORDRAY. Thank you, Congressman, for asking about that. 

It is a provision in our statute that we are trying to be very careful 

about and puzzled through. 

What you are referring to, I think, at the moment is simply a 

timing issue. In order to set up this fund and make sure that it 

is subject to appropriate oversight by our Inspector General and by 

the GAO, all of whom audit us, and that you would all have confidence in it, we actually put out, as suggested on many occasions 

for notice and comment, a rule on how we would administer the 

fund. 

That took some time setting it up. We now have made the first 

allocations. We are able to compensate some victims in matters 

where they did not get full compensation from the perpetrator, 

often because funds were not available or on their way out of business from scams and frauds. 

Second, we have allocated some money for the first financial education program, which is financial coaching for servicemembers as 

they transition into civilian life. That is something we will be working on with people on military bases across the country. 

I think that it is going to be an important initiative, and it is 

very much within the letter and spirit of this law. 

Mr. PITTENGER. All right. I just want to clarify, because I would 

like to move on— 

Mr. CORDRAY. Yes. 

Mr. PITTENGER. —that the purpose of the fund—designed that 

you have sole autonomy in—is to benefit these individuals and to 

have educational programs. So, we would just encourage you to use 

it for that. 

Let me go ahead and ask you— 

Mr. CORDRAY. Subject to oversight by you, the Inspector General, 

GAO, and others. 

69 

Mr. PITTENGER. Yes, right. Next question. 

Mr. CORDRAY. Right. 

Mr. PITTENGER. On September 12, 2013, the Bureau announced 

the creation of four advisory groups: the Consumer Advisory Group; 

the Community Bank Advisory Council; the Credit Union Advisory 

Council; and the Academic Research Council 

Director Cordray, I would like you to discuss with us these advisory boards and the councils. And why are the boards’ advisory 

group meetings held behind closed doors? 

I understand that portions of the Consumer Advisory Board 

meetings are public— 

Mr. CORDRAY. Right. 

Mr. PITTENGER. —but most all other portions are private and all 

other advisory groups meet in secret. Why deny the public the 

right to observe these meetings? 

Mr. CORDRAY. First of all, the only advisory council we are required to have by law is the Consumer Advisory Board that is set 

up by— 

Mr. PITTENGER. I am asking really more, as not by law but as 

a matter of policy. 

Mr. CORDRAY. No, I am trying to get there. 

Mr. PITTENGER. Okay. 

Mr. CORDRAY. That one is by statute. And as you say, we always 

make it a point with every meeting to have an open portion and 

then there is a closed portion where we can get their unvarnished 

advice and we can speak candidly about matters that the Bureau 

is working on, including enforcement actions and the like. 

Second, in terms of the other councils, I created a Community 

Bank Advisory Council and a Credit Union Advisory Council because we wanted to hear more from them. We don’t oversee them 

in the normal course of things—all of those under 10 billion, which 

is thousands of them. 

We are not covered by the Federal Advisory Committee Act— 

Mr. PITTENGER. I understand. 

Mr. CORDRAY. —which exempts the Federal Reserve— 

Mr. PITTENGER. Director, let me just insert—we only have a few 

minutes— 

Mr. CORDRAY. Yes. 

Mr. PITTENGER. —a few seconds left. 

In the spirit of transparency, will you commit yourself now to at 

least some portions of these meetings being held up to the public 

or permitting Congressional Representatives to be there? We, as 

members of the Financial Services Committee, have requested to 

be there in the past and those requests were denied. 

Will you commit yourself to more openness to allow for the public 

to review what takes place in these meetings? 

Mr. CORDRAY. These are advisory meetings to discuss matters 

that often are not yet public, so they cannot— 

Mr. PITTENGER. Just yes or no. 

Mr. CORDRAY. They cannot be made— 

Mr. PITTENGER. Sir— 

Mr. CORDRAY. —public easily. 

Mr. PITTENGER. So, your answer is no? 

70 

Mr. CORDRAY. We do release minutes on the meetings and members who come to speak to us from credit unions and community 

banks can, if they want, go back and talk about what we said— 

Mr. PITTENGER. Mr. Cordray, is your answer no? 

Mr. CORDRAY. So I don’t think it works for us to do that, sir. 

Mr. PITTENGER. Thank you. 

Mr. CORDRAY. And get their candid advice. 

Mr. PITTENGER. I yield back my time. 

Chairman HENSARLING. The time of the gentleman has expired. 

The Chair now recognizes the gentleman from Washington, Mr. 

Heck. 

Mr. HECK. Director Cordray, I would like to start out by apologizing on behalf of the committee. I think there are instances 

where individual behavior in this committee does not live up to the 

great heritage of this institution or this committee, and I think earlier, there was an egregious breach of protocol. 

Indeed, I think the gentleman from Colorado’s shameless promotion of his individual sports franchise was way over the line. 

And for my part, sir, I will simply allow the Seahawks’ performance to speak for itself. Let the record show that the lady whose 

husband once played for the Denver Broncos just turned my microphone off. 

Mr. Chairman, I noted that Mr. Perlmutter got to start his 5 

minutes over after his shameless self-promotion. 

Chairman HENSARLING. Reset the clock to 5 minutes. The Chair 

is feeling rather indulgent at the moment. 

Mr. HECK. I have been here for 3 hours. 

Director Cordray, when you were here before I complimented you 

and the agency, in particular the Office of Servicemember Affairs, 

for the good work that we had done with them on behalf of the men 

and women who wear a uniform. In particular, Holly Petraeus has 

been just outstanding, and her staff. I thank you again. 

One of the issues that we continue to get exposed to in my area 

is behavior on the part of high-interest-rate lenders. And as you 

know, in accordance with the NDAA of 2013, the Department of 

Defense was charged with updating the rules and regulations associated with the Military Lending Act. 

I recognize that you serve in an advisory capacity to that effort, 

but it was due at the end of the last calendar year. It is not here. 

I think it has recently been announced that it will now be out probably by the end of the first quarter, or so indicated. But as somebody who does indeed act in an advisory capacity, could you provide us with any insight about what the holdup is all about? People’s lives are being affected every day. 

Mr. CORDRAY. I think I can, yes. We have actually been actively 

engaged in writing new rules with the Department of Defense. 

They have been actively engaged in this, as well as our fellow 

agencies, including the Federal Reserve, the FDIC, the OCC, the 

Treasury Department, and the FTC. And we are well along in that 

process. 

But I will just say it is always difficult to get multiple agencies 

to work together. It is not so easy to do. It always takes longer 

than we think. 

71 

Everything that you in Congress can do to keep our feet to the 

fire and make it clear that you want to see that quickly. However, 

we are trying to balance speed against getting it right. We have 

made tremendous progress and I know the Department of Defense 

wants to proceed on this. If you all just keep attending to it and 

make sure that everybody knows that we are on a timeframe and 

we need to move on that timeframe, that is very helpful to all of 

us trying to get the work done, so— 

Mr. HECK. I think Mr. Perlmutter just reentered the room. I am 

just guessing. 

Chairman HENSARLING. The Chair is not going to reset the clock 

again, so if I was the gentleman, I would keep on trucking. 

Mr. HECK. I am a little nervous right now, Director Cordray. 

Mr. CORDRAY. Do you have a hat like he does? You might want 

to have a hat like he does. 

Mr. HECK. I want to follow up on the earlier exchange about mobile payments. I am pretty excited about mobile payments because 

from my perspective, it removes friction from the marketplace. And 

things that do that, if they are balanced against consumer protection, I believe are inherently good. I think it accelerates the velocity of a transaction; it benefits retailers; and it is an increased convenience to the consumer. 

But I note that we are in the embryonic stages and this is growing in dozens of different ways. There is different technology, different user interfaces, and different underlying payment systems. 

And it just seems to me that as the number one protector of consumers’ interests, it might be good on the front end of this if we 

had had some kind of an in-depth analysis, I think best conducted 

by your agency, about the pros and cons of developing more harmonious consumer protections across these different platforms. 

Could I persuade you to be interested in such a thing and get out 

ahead of the curve before—and I realize that you have been fairly 

busy the last couple of years, but this could explode on us. Let’s 

get ahead of it. 

Mr. CORDRAY. Yes. The trouble is that it is a hard area. Exactly 

where it is going and when, and which platforms are going to be 

the ones that get great take-up from the American people. People 

have been working at this for several years already and I still 

couldn’t predict to you which ones are going to be the dominant 

technologies of tomorrow and maybe even, as you say, tomorrow on 

the calendar, not just tomorrow metaphorically. 

So we are trying to be very attentive to this. We recognize prepaid cards have exploded very fast. It is just in the last few years 

that they have ramped— 

Mr. HECK. Sir, may I interrupt with a question in that regard? 

Mr. CORDRAY. I’m sorry, yes. 

Mr. HECK. I apologize. 

Mr. CORDRAY. No, that is fine. 

Mr. HECK. I understand you have jurisdiction over prepaid cards 

for banks. 

Mr. CORDRAY. Yes. 

Mr. HECK. But I kind of got lost— 

Mr. CORDRAY. Not always—not— 

72 

Mr. HECK. Do you have jurisdiction over prepaid cards for retailers? 

Mr. CORDRAY. Yes. 

Mr. HECK. If not, who does? 

Mr. CORDRAY. We have jurisdiction over the offering of financial 

products and services, and prepaid cards typically are, especially 

the general purpose reloadable cards. So yes, I think we do have 

jurisdiction over prepaid cards, and not just banks, but also 

nonbanks. 

Mr. HECK. Good. 

So I think I am about done, Mr. Chairman, but I wonder, do we 

have a sergeant at arms? I am not feeling particularly safe right 

now. 

Mr. CORDRAY. The generous Congresswoman who shared a 

microphone with you, she and I wish we could talk about the 

Browns, the Bengals, or the Buckeyes, but we will just have to say 

wait until next year, so— 

Chairman HENSARLING. The apparent last questioner will be the 

gentleman from Delaware, Mr. Carney, who is recognized for 5 

minutes. 

Mr. CARNEY. Thank you, Mr. Chairman. I was expecting somebody from the other side, but I appreciate the opportunity to be 

here. I apologize for having to leave and come back. 

And I want to thank you for your service and for your patience 

in this hearing. It has been trying, I am sure, and a little disappointing to me, just the tone of it. It just seems to me that consumer protection ought to be something that we all care about, 

right? 

And I know there are a lot of differences of opinion over the 

agency and how it was created. I was not here when that happened. It seems like now, though, we ought to be able to move beyond that. 

I did want to come back to ask you some questions about the 

mortgage lending standards in particular. Something that many of 

us on this side are working on is some of the unfinished business, 

we think, from the near financial collapse—the reform of Fannie 

Mae and Freddie Mac and the GSEs and so on. 

Of course, the committee has passed a bill that would address 

that, we feel like, by eliminating a government backstop, which we 

think will be the end of the 30-year fixed-rate mortgage and actually cause mortgage interest rates to go up and make affordability 

more difficult. 

I am curious. Obviously, the QM standards are important for any 

kind of securitizing platform, but I want to revisit some of the 

questions that were asked by Members on both sides about how the 

QM rule that you—we are operating under now and ability to pay. 

And you answered to I think Mrs. Capito’s question some time ago, 

a couple of hours ago, that you feel like it was in a box. 

Could you take a minute or 2 here at the end of the hearing to 

explain why you think that is a good rule and why you think it is 

something that we can work within as we attempt to reform our 

system to address the problems that, frankly, that got us into this 

financial mess the last time, and leading up to a reform of the 

GSEs? 

73 

Mr. CORDRAY. Sure. No matter what the explanation of all the 

background, and it differs among different people, I know, everybody recognizes it was the mortgage market that collapsed and 

caused the financial crisis and all the harm and misery we have 

seen in this country over the last 5 years. And reforming the mortgage market was, therefore, the highest priority Congress set for 

us with the Qualified Mortgage rule. 

There are several different ways that a loan can meet the Qualified Mortgage test. And by the way, nothing prevents banks and 

others from lending outside the Qualified Mortgage boxes— 

Mr. CARNEY. As long as they hold the— 

Mr. CORDRAY. —as long as they make a good-faith reasonable determination of the ability to repay. And many of them are going to 

be doing so and have said so. 

But the boxes— 

Mr. CARNEY. Have you gotten feedback if—sorry for interrupting, 

but have you gotten feedback from the banks, positive or negative, 

about that piece of it? Do they have enough flexibility to make that 

determination? We will hear from our community banks and we 

have heard some testimony earlier today that ‘‘the box is too tight’’ 

is the term being used. 

What kind of feedback do you get? 

Mr. CORDRAY. Yes. I think everybody always wants more flexibility. They want to do whatever they want to do. We had way too 

much before the crisis and there were a lot of loans made that 

should not have been made. 

Mr. CARNEY. Correct. 

Mr. CORDRAY. And Goldman Sachs did a report, not a big fan of 

government regulation, that said that 50 percent of the loans that 

defaulted in 2005, 2006, and 2007 would not have been made if the 

QM rule had been in place. It would have been a very different 

story in the economy of this country. 

But, we drew a box around a 43 percent debt-to-income ratio. 

That is very generous by historical standards, but that is one box. 

We drew a box around loans eligible for sale to the GSEs, which 

gives you all latitude to determine what you are going to do about 

GSE reform. This is while they remain in conservatorship over the 

next 5 to 7 years if nothing else happens. 

And when we went back and drew another box for small creditors, hearing from them and recognizing that their lending practices are very important in a lot of communities around this country. Thousands of community banks and credit unions are covered 

by those provisions and they have complete latitude, whether they 

sell on the secondary market or keep in portfolio, to lend in accordance with their traditional mode. And that was an important adjustment that we needed to make and we were convinced that we 

should make. 

Mr. CARNEY. So, one last thing. You have mentioned a couple of 

times that we will see. We will look at the data. 

Mr. CORDRAY. That is right. 

Mr. CARNEY. What will the benchmarks be? What do you think 

will tell us whether it is working or not? Do you have a sense of 

that or what you are going to be looking at in terms of benchmarks 

there? 

74 

Mr. CORDRAY. Data and information about what is happening in 

the mortgage and housing market will tell us how this is going. 

The thing we will have to be careful of is there are a lot of other 

factors here. 

If the Congress acts on GSE reform, that will be a dominating 

factor in terms of what goes on in the mortgage and housing markets. If interest rates go on a sustained period of rising which, you 

never know when or whether things happen in that regard, that 

will obviously dominate this market. There are other things that 

matter, clearly. 

But in terms of our rules, we are going to continue to listen closely, as we have all along, both to the consumer side and to the industry side, about whether we are getting the balance right. I 

think people have recognized that we have tried hard to draw a 

balance. Many people think we have done well at drawing the balance. To the extent we are not sure and they are not sure, we are 

interested in seeing and hearing more as we go. 

Mr. CARNEY. My time is up, but let me thank you again for your 

service, and I hope that we can have an ongoing conversation about 

these issues. Thanks. 

Chairman HENSARLING. The time of the gentleman has expired. 

The new apparent last questioner is the gentleman from Minnesota, Mr. Ellison, who is recognized for 5 minutes. 

Mr. ELLISON. Thank you, Mr. Chairman. 

And thank you to the ranking member. 

Mr. Cordray, as we wrap up, I just want to offer my thanks to 

the CFPB for the great work that you all do. I know this has been 

a tough hearing in many ways. Of course, we are in a pretty polarized political environment nowadays, and you are in the crossfire. 

But I just want to say to the millions of people that you have 

helped, I hope that you will continue to do the hard work that you 

are doing, and I just want to let you know that you have the support of many of us, including me. 

Let’s talk about manufactured housing, if we may. What is up on 

the board is my district and all the little dots are manufactured 

housing. In my congressional district we are very proud to represent Hilltop, which is a manufactured housing community. 

Let me ask you this about manufacturing—or make these points 

and then get your reflections. We have more than 68,000 manufactured homes in Minnesota, more than 3 percent of our housing 

stock. And we also have about 900 manufactured home communities. One of them, North Country Cooperative, is a resident cooperative. And I have asked this chart for manufactured homes to be 

posted on the screen just for your reference. 

I want to congratulate the CFPB for taking steps to improve the 

finance options for manufactured home owners. Manufactured 

homes offer attractive, safe, and affordable homes for millions of 

people. But pre-crisis, too many manufactured home buyers were 

only offered high-cost loans with completely inadequate consumer 

protections. 

Recently, I presented a question for the record to you asking 

what data the industry has shared to justify those high fees and 

high interest rates. And I know there are great manufactured home 

loan providers, such as New Hampshire Community Home Loan 

75 

Fund and ROC USA. We should ask them to come and testify before this committee. 

I have a bill that strengthens CDFIs, H.R. 3656, which invests 

in manufactured homes. And another of my bills, the Common 

Sense Housing Investment Act, also helps manufactured home buyers. I encourage my colleagues to cosponsor the bills. 

Will you work with us to improve housing finance options for 

manufactured home buyers? 

Mr. CORDRAY. I would be happy to do that. And as I count it, 

there are maybe half a dozen to a dozen Members today who have 

raised these specific issues and we have heard about them directly 

from both industry and consumers, and we are interested in knowing more about whether the rules we have written that mostly, 

again, have typical residential housing in mind, are fitting in appropriate ways to this particular method of housing. 

Mr. ELLISON. Good. I would like to introduce for the record this 

report entitled, ‘‘Toward a Sustainable and Responsible Expansion 

of Affordable Mortgages for Manufactured Homes.’’ This is a report 

I think would certainly elucidate and elaborate on the issues we 

have. 

Chairman HENSARLING. Without objection, it is so ordered. 

Mr. ELLISON. Finally, let me just ask you about title insurance. 

In the Qualified Mortgage rule, the CFPB includes title insurance 

costs paid to affiliates in the fee cap. Nonaffiliated title insurers 

are outside of the cap. What was the CFPB’s reasoning for making 

this distinction? 

Mr. CORDRAY. It is a distinction that is drawn several places in 

the statute. There were concerns, as I understand it—I wasn’t here 

for the debates on Dodd-Frank—about abuses where people were 

steered toward affiliated companies and people benefited financially from that. 

It is not unique to title insurance. It is true of various fees that 

are considered under the 3 percent points and fees cap. It has been 

singled out by some as wondering whether the same rationale 

should apply to title insurance as to other things. 

It is a fair question. It is something that we considered as we 

were writing the rules. It is something that we will continue to consider what the impact is as we look at how the rules are operating 

going forward. 

But it is the same general rationale as the other fees that are 

treated in the same manner under the statute and under the rule. 

Mr. ELLISON. I have had a number of constituents come to me, 

and I just want to commend your staff on the fines against the 

sham title agents. I am concerned about consumers, particularly 

when they are being overcharged for the service, and it is wrong, 

I think, for consumers to pay hidden commissions and kickbacks. 

So with that, I just want to say again, thank you. Your work is 

very much appreciated around here by some, and we look forward 

to your future success on behalf of American consumers. 

Mr. CORDRAY. Thanks. 

Chairman HENSARLING. I am assuming the gentleman is yielding 

back his 5 seconds. 

I would like to thank Director Cordray for his testimony today. 

76 

Before excusing you, Mr. Cordray, I would like to bring to your 

attention several questions that are still pending, including one 

from our Chairman Emeritus Bachus, dated June 21st, requesting 

all the studies, analysis, and information relied upon by the Bureau in its compliance bulletin for indirect auto lenders; one dating 

back to September 18th from myself requesting a list of senior 

managers who have utilized private e-mail accounts to conduct official business; one from myself and Chairman McHenry requesting 

all documents relating to the Bureau’s awarding a $5 million research contract to ideas42; and one dating back to October 22nd, 

where we have requested all data upon which the Bureau relied in 

preparing its April 2013 White Paper on payday lending and deposit advance products. 

I would note that, indeed, this committee has given the CFPB 

many, many questions. We have received a number of answers. 

I know you find this sometimes voluminous and bothersome but, 

Mr. Director, we consider it to be a critical check and balance. This 

committee would like to continue to work with you cooperatively 

and respectfully, and so I would respectfully request that no later 

than the end of February, we receive full answers. Otherwise, you 

will force us to rely upon our compulsory process, which I prefer 

not to do. 

Mr. CORDRAY. I will just say that sometimes the requests are voluminous. We don’t find them bothersome. It is part of the vigorous 

oversight that I have come to expect, and appreciate, and I would 

be disappointed if I didn’t get that from this committee. 

On each of the four or so matters that you have pinpointed, I 

know there have been multiple rounds of back and forth on most, 

if not all of those. We have a job to do to try to determine how best 

to manage this information. You have a job to do, I understand, to 

oversee us. 

We will try to make sure we can get as much as possible on the 

same page. Sometimes these are not easy things to work through, 

as you know. 

Chairman HENSARLING. If you could, Mr. Director, if you would 

pay personal attention to these matters, that would be greatly appreciated. 

Mr. CORDRAY. Okay. Thank you. 

Chairman HENSARLING. The Chair notes that some Members 

may have additional questions for this witness, which they may 

wish to submit in writing. Without objection, the hearing record 

will remain open for 5 legislative days for Members to submit written questions to this witness and to place his responses in the 

record. Also, without objection, Members will have 5 legislative 

days to submit extraneous materials to the Chair for inclusion in 

the record. 

This hearing stands adjourned. 

[Whereupon, at 1:42 p.m., the hearing was adjourned.] 

(77) 

A P P E N D I X 

January 28, 2014 

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