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LEGISLATIVE PROPOSALS TO IMPROVE 

THE STRUCTURE OF THE CONSUMER 

FINANCIAL PROTECTION BUREAU 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

APRIL 6, 2011 

Printed for the use of the Committee on Financial Services 

Serial No. 112–24 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

THADDEUS G. McCOTTER, Michigan 

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 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, 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 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

LARRY C. LAVENDER, Chief of Staff 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

SHELLEY MOORE CAPITO, West Virginia, Chairman 

EDWARD R. ROYCE, California, Vice 

Chairman 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JEB HENSARLING, Texas 

PATRICK T. MCHENRY, North Carolina 

THADDEUS G. McCOTTER, Michigan 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

JAMES B. RENACCI, Ohio 

ROBERT J. DOLD, Illinois 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

CAROLYN B. MALONEY, New York, 

Ranking Member 

LUIS V. GUTIERREZ, Illinois 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

RUBE ́ N HINOJOSA, Texas 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

NYDIA M. VELA ́ ZQUEZ, New York 

GREGORY W. MEEKS, New York 

STEPHEN F. LYNCH, Massachusetts 

JOHN C. CARNEY, JR., Delaware 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

April 6, 2011 ..................................................................................................... 1 

Appendix: 

April 6, 2011 ..................................................................................................... 59 

WITNESSES 

WEDNESDAY, APRIL 6, 2011 

Andersen, Leslie R., President and Chief Executive Officer, Bank of 

Bennington, on behalf of the American Bankers Association (ABA) ............... 9 

Hunt, Richard, President, Consumer Bankers Association (CBA) ...................... 45 

Levitin, Adam J., Professor, Georgetown University Law Center ....................... 47 

Sharp, Jess, Executive Director, Center for Capital Markets Competitiveness, 

U.S. Chamber of Commerce ................................................................................ 12 

Shelton, Hilary O., Director, NAACP Washington Bureau, and Senior Vice 

President for Advocacy and Policy, NAACP ...................................................... 14 

Smith, Lynette W., President and Chief Executive Officer, Washington Gas 

Light Federal Credit Union, on behalf of the National Association of Federal Credit Unions (NAFCU) .............................................................................. 11 

Staatz, Rod, President and Chief Executive Officer, SECU of Maryland, on 

behalf of the Credit Union National Association (CUNA) ................................ 43 

Wilcox, Noah H., President and Chief Executive Officer, Grand Rapids State 

Bank, on behalf of the Independent Community Bankers of America 

(ICBA) ................................................................................................................... 42 

APPENDIX 

Prepared statements: 

Andersen, Leslie R. .......................................................................................... 60 

Hunt, Richard ................................................................................................... 71 

Levitin, Adam J. ............................................................................................... 79 

Sharp, Jess ........................................................................................................ 90 

Shelton, Hilary O. ............................................................................................. 101 

Smith, Lynette W. ............................................................................................ 106 

Staatz, Rod ........................................................................................................ 119 

Wilcox, Noah H. ................................................................................................ 130 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Capito, Hon. Shelley Moore: 

Written statement of the American Financial Services Association 

(AFSA) ........................................................................................................... 136 

Smith, Lynette: 

Additional information provided in response to questions from Representatives Maloney and Carney .......................................................................... 140 

(1) 

LEGISLATIVE PROPOSALS TO IMPROVE 

THE STRUCTURE OF THE CONSUMER 

FINANCIAL PROTECTION BUREAU 

Wednesday, April 6, 2011 

U.S. HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS

AND CONSUMER CREDIT, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The subcommittee met, pursuant to notice, at 10:25 a.m., in room 

2128, Rayburn House Office Building, Hon. Shelley Moore Capito 

[chairwoman of the subcommittee] presiding. 

Members present: Representatives Capito, Royce, Manzullo, 

McHenry, McCotter, Pearce, Westmoreland, Luetkemeyer, 

Huizenga, Duffy, Renacci, Dold, Canseco; Maloney, Hinojosa, 

McCarthy of New York, Miller of North Carolina, Scott, Velazquez, 

and Carney. 

Ex officio present: Representative Bachus. 

Also present: Representative Green. 

Chairwoman CAPITO. This hearing will come to order. This morning’s hearing marks the third hearing that the Financial Institutions and Consumer Credit Subcommittee has held on the oversight of the Consumer Financial Protection Bureau (CFPB). We 

have before us today two panels who will comment on legislation 

that members of this subcommittee have been working on for the 

last month to make structural reforms to the CFPB. 

The first measure is H.R. 1121, which changes the leadership of 

the CFPB from a single director to a five-person commission. In my 

view, this is a critical change to the structure of the Bureau, and 

I would like to thank Chairman Bachus for his lead on this legislation of which I am a cosponsor. 

This is not unprecedented for a regulatory agency. The Securities 

and Exchange Commission, the Commodities Future Trading Commission, and the Federal Trade Commission are examples of regulatory agencies led by a commission. Most notably, the Consumer 

Product Safety Commission, which regulates the safety of thousands of non-consumer products, is led by a five-member commission. The powers of the Bureau are simply too broad for a single 

director, and the move to put the commission in place I think puts 

an important check on power. 

I would like to commend Mr. Duffy for his leadership on the second bill we will be considering today, H.R. 1315. This legislation 

makes important improvements to the Financial Stability OverVerDate Nov 24 2008 14:46 Jul 15, 2011 Jkt 066862 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\66862.TXT TERRIE
2 

sight Council’s ability to overturn a CFPB regulation. Current law 

creates a situation in which the Financial Stability Oversight 

Council (FSOC) only has the authority to overturn a CFPB regulation if ‘‘the regulation or provision would put the safety and soundness of the United States banking system or the stability of the financial system of the United States at risk.’’ Wow, that is a pretty 

high standard there, I would say. 

Current law also requires a two-thirds majority vote to overturn 

a CFPB regulation. This simply sets the bar too high. Consumer 

protection and safety and soundness should go hand-in-hand. 

Mr. Duffy is to be commended for his legislation, which makes 

dramatic improvements by lowering the threshold for a vote by 

changing it to ‘‘regulation which is the subject of the petition is inconsistent with the safe and sound operations of United States financial institutions.’’ 

In addition to lowering this threshold, Mr. Duffy’s bill changes 

the FSOC vote from a two-thirds majority to a simple majority and 

excludes the director of the CFPB from voting on CFPB regulations. 

It is my intent for the two discussion drafts to serve as an opportunity to explore two other issues within the structure of the 

CFPB: the first delays the transfer of consumer protection functions until there is a confirmed director; and the second prevents 

the CFPB from sending personnel to accompany credentialed regulators on examinations. These are two critical discussions on the 

current structure of the CFPB before the designated transfer date, 

and I look forward to hearing from our witnesses. 

This is just the beginning of what will be an ongoing dialogue on 

how to better reform the CFPB. The current structure simply puts 

too much power into the hands of one individual and does not allow 

for sufficient oversight of the regulations put forth by this Bureau. 

There have been recent statements made about the Bureau being 

created as ‘‘the voice for American families’’ and the willingness of 

the Bureau to stand up and stick up for those families. The members of this subcommittee are elected by the American people. It is 

our responsibility to protect the freedoms and liberties of our constituents. We also have a responsibility to ensure that regulations 

are in place to properly protect consumers. 

Finally, we have a responsibility to ensure that their personal financial decisions are left up to them and not unduly influenced by 

unelected bureaucrats who seek to limit consumer choice. 

I would now like to recognize the ranking minority member, the 

gentlelady from New York, Mrs. Maloney, for the purpose of making an opening statement. 

Mrs. MALONEY. I would like to welcome the witnesses today, and 

thank you, Madam Chairwoman, for calling this important hearing. 

I appreciate the opportunity to consider these legislative proposals, but I take issue with the title of today’s hearing, ‘‘Legislative Proposals to Improve the Structure of the Consumer Financial 

Protection Bureau,’’ because I disagree that these proposals are 

meant to improve it. These proposals we are considering today 

come from some of the members who last year voted against the 

Dodd-Frank Financial Protection and Consumer Protection Act 

which created the CFPB. Taken together, these proposals will only 

3 

serve to delay and disrupt the CFPB from being able to fully do 

its job before it is even opened for business on July 21st. 

The Consumer Financial Protection Bureau was created in response to the worst financial crisis since the Great Depression. Any 

attempt to delay or weaken the CFPB could leave American families, their communities, and the economy as a whole exposed to 

many of the same risks that brought our financial system to the 

brink of collapse. 

According to the Majority, the four bills we are discussing today 

are to create and promote greater accountability and transparency 

at the CFPB, but that is precisely what the CFPB is doing. The 

CFPB is working on how to make credit and other financial products clearer and easier to understand so that consumers have the 

information they need to make informed decisions. 

These moves, in my opinion, are an attempt to return to the 

failed policies of the past: the same regulatory indifference; the 

same blindness to real-world consequences. It is reinstating the 

same mindset of deregulation that was firmly in place in the prior 

Administration as the economy headed towards disaster. It is as if 

all the loss, all the sorrow, all the misery of the ‘‘Great Recession’’ 

never happened. 

If you doubt the benefits of effective consumer protection, then 

please take a look at what the Center for Responsible Lending had 

to say about the effects of my Credit Card Bill of Rights that was 

passed with broad bipartisan support in the last Congress. The 

study shows that the Credit Card Act of 2009 has reversed much 

of the unclear pricing on credit cards without leading to higher 

rates or more difficulty in getting credit. Furthermore, the greater 

transparency about the real costs of credit makes it less likely that 

consumers will get in over their heads, something many believe 

was one of the contributing factors to the great credit crisis. This 

is all reflected in the fact that consumer complaints about credit 

card company practices have dropped dramatically since the implementation of my bill. 

With the Consumer Financial Protection Bureau, we can begin to 

do for all financial products what the credit card bill did for consumer credit cards—make the arena more competitive and the 

products more fair, less deceptive, and more transparent so that 

consumers can compare costs. These are all traits an efficient free 

market system needs in order to thrive. 

The Bureau is designed to be funded through the Federal Reserve, just as all bank supervisory agencies are independently 

funded, in order that it might be just that, independent. This is 

vital in order to avoid the kind of politicizing of its mission. 

The claim that the CFPB will not be subject to oversight is simply not based on reality. The CFPB director will testify twice a 

year to Congress. The Board will report annually to Congress on 

its budget and operating plan. It will submit quarterly financial reports to the Office of Management and Budget. The Government 

Accountability Office will do its own audit. The Financial Stability 

Oversight Council will review all CFPB regulations and can overturn them with a two-thirds vote, an unprecedented power. 

4 

The Administrative Procedures Act allows for Federal courts to 

review agency decisions. And Congress, as the majority party in 

the House is attempting to do right now, can overturn regulations. 

Elizabeth Warren has made it clear that she favors free market 

solutions, but like the vast majority of Americans she is opposed 

to the use of deceptive, predatory, or anticompetitive practices. I 

would like to end by quoting from her recent address to the Consumer Union: ‘‘We want to see innovation, lots of innovation, but 

innovations need to be around real product differences that consumers can see and understand, not around misleading advertising 

and new tricks buried in the fine print. Our goal is simple. We 

want the credit markets to work better for consumers, for responsible providers, and for the whole economy.’’ 

Thank you, and I reserve my time in the event that others have 

opening statements. 

Chairwoman CAPITO. Thank you. 

I would like to recognize the chairman of the full committee, Mr. 

Bachus, for 1 minute for an opening statement. 

Chairman BACHUS. Thank you. What you just heard from the 

gentlelady from New York is sort of what I think the press has also 

said. That is their message, and their message is that this is all 

about politics; we don’t like consumer protection. 

Nothing could be further from the truth. In fact, my bill is for 

a commission, which is what this House passed. This is what we 

passed in Dodd-Frank. It was changed in conference to allow one 

person to run the agency with total discretion. What we are advancing is not politics, it is the way government has always functioned, and that is not one person with unbridled authority. 

And let me say this: Professor Warren has done a great job of 

really fooling the national media into thinking, oh, this can easily 

be appealed. Nothing could be further from the truth. Sean Duffy 

has introduced a bill which is as important as the bill I am introducing, which tells you that you can’t even appeal a ruling unless 

the ruling would bring down the whole financial system of the 

United States. 

Now, how absurd is that? Someone has to file within 10 days of 

the Consumer Protection Bureau issuing something. Ten days. 

That is absurd. It is unheard of. And it is a supermajority, not even 

two-thirds. It is 70 percent. 

And I tell you what, no one has gone past this crazy story about 

how we are just attacking Ms. Warren or that we don’t want consumer protection. I think the American people and I know this 

Congress are too sophisticated to believe that, and if they are able 

to hoodwink the American people, they pulled a real sham here. 

I am advancing the same language that everyone in this House 

thought was the appropriate solution. It is what has been discussed 

for years about pulling everything into one agency and it being a 

commission. But someone in the dead of night decided they could 

just do whatever they wanted to, whenever they wanted to, and 

that the press would not tell the American people. This is not 

about Elizabeth Warren. This is about giving one person total unbridled authority and power. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Scott for 2 minutes. 

5 

Mr. SCOTT. Thank you very much, Madam Chairwoman, and welcome, panelists. This is indeed a very timely and a very important 

hearing. I think there are essentially 2 basic points that we have 

to explore today and make sure we get our hands on. 

One is, how do we adequately put forward the machinery that 

will effectively do two things: protect the American consumer; and 

make sure in the process of doing that, that consumer does not lose 

valuable access to credit. Those are the two things we have to do. 

And we have to explore, we have to really respond to some of the 

fears that are out there and make sure that we answer them before 

we move forward; that this effort does or does not clamp down unfairly on the financial services industry that has to both help consumers, while surely at the same time make sure that access to 

credit is there. So I want to get some answers to that. 

I want to get some answers to these concerns, because we can’t 

do it without the financial services industry and we have to make 

sure that they are not going to tighten up on credit if such prompt 

procedures are in place. 

And I think in so doing, we will do the American people a great 

service. 

Now, my friend, Chairman Bachus has an interesting bill. Can 

we do this by committee? Can we do it by commission? If so, what 

will be the political makeup of that commission? If it is three, and 

you have two political parties, somebody is not going to have a fairly good chair when the music stops in terms of balance. I think 

that we have to be very thoughtful as we move forward. 

And again, Madam Chairwoman, I know my time is about up, 

but the major point again I want to impress is what I am after 

here is making sure we indeed protect the consumer, educate the 

consumer against predatory practices, against abuses that have 

caused so much of the problem that we are in today, while, at the 

same time, ensuring that he does not lose that valuable access to 

credit. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Royce for an opening statement. 

Mr. ROYCE. Thank you, Madam Chairwoman. The July 21st 

deadline is quickly approaching here. And assuming a director is 

eventually appointed, we will soon be left with an agency unlike 

any other, given the way this was written. For the first time, there 

will be a director who serves a set term, has sole authority over 

the agency and its actions, and has access to hundreds of millions 

of dollars outside of the appropriations process. So it is a bad precedent. It would fundamentally weaken our regulatory structure by 

moving safety and soundness regulation to the back seat. 

What I had offered earlier during the markup when this bill became law was something that the prudential regulators wanted. 

They have seen what happened with the oversight over the GSEs. 

They thought it was a bad idea to move safety and soundness regulation to the back seat. And frankly, this bill takes a critical step 

by empowering the safety and soundness regulators to have a 

greater say in the CFPB by lowering the threshold for a rule to be 

struck down. 

And I would also add, Mr. Scott raised the concerns about access 

to credit, which I think is something we need to be worried about. 

6 

I think beyond that, this worry about tying the hands of the regulators on this is a road we have been down before, where Congress 

did this with respect to Fannie and Freddie, and we had a very bad 

consequence out of it. So let us give the prudential regulators a 

greater say in this process. Thank you, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Miller for 2 minutes for the purpose 

of an opening statement. 

Mr. MILLER OF NORTH CAROLINA. Thank you, Madam Chairwoman. Yes, the CFPB is an agency unlike any another. It probably has more checks on its authority, more accountability than 

any other agency of the government. It certainly is not unique in 

that it is not subject to the usual budget process. Every regulator 

of the financial industry is funded separately, rather than to have 

to come back to Congress, hat in hand, to be turned away by the 

influence of the financial industry to restrict their ability to do 

their job. In that way, they are certainly not at all different from 

anybody else, except that they have a cap on theirs that nobody 

else—none of the other regulators have. 

They are certainly not unique in that they have a single director. 

The OCC, for instance, has a single director, and that has made 

that a very powerful agency, which has worked greatly to the benefit of the banking interest and greatly to the disadvantage of consumers. So it is certainly not in that respect at all unusual. 

When the industry talks about safety and soundness, the need to 

keep safety and soundness together, Congress did limit the authority of the CFPB. The CFPB cannot require any bank to offer any 

product. They can only prohibit practices that they determine to be 

abusive of consumers. So when a bank says they want to consider 

safety and soundness, what they are saying is, in order to stay in 

business, they have to do things, they have to do things the CFPB 

has determined cheat consumers, or the language of the statute, I 

think, are unfair, deceptive or abusive. They say that they have to 

be unfair, deceptive, or abusive to stay in business. Maybe that 

bank needs to go out of business. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. McHenry for 1 minute for the purpose of an opening statement. 

Mr. MCHENRY. Thank you, Madam Chairwoman. This legislation 

today we are looking at, it will go a long way to providing the necessary oversight of the Consumer Financial Protection Bureau in 

order to ensure that consumer protection rules can be implemented 

without risking the safety and soundness of our Nation’s financial 

system. 

Last November, the voters sent a clear message to Washington. 

Massive new regulations are creating uncertainty and crippling job 

creation. With that in mind, I believe the legislation before us 

today is extremely necessary in order to protect consumers, while 

also making certain that small businesses and individuals aren’t 

limited from accessing the credit that they need. 

While our economy is still fragile, this legislation will remedy a 

flaw passed in the final Dodd-Frank piece of legislation. 

I would say to my colleagues on the other side of the aisle, this 

idea that they created a very limited regulator, while having 59 

7 

votes in the Senate and 60 percent of the House of Representatives 

and a Democrat President, is absolutely absurd. They were bragging about how powerful this regulator was until after the election. 

We are trying to fix this problem and go back to a more balanced 

approach at the CFPB. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Pearce for 1 minute for the purpose 

of an opening statement. 

Mr. PEARCE. Thank you, Madam Chairwoman. I just wanted to 

address some of the comments coming from our friends on the 

other side of the aisle that innovations need to be somehow controlled, those dangerous innovations. And I think back to growing 

up in a family where the innovations, those scary innovations in 

the phone industry, were stopped for decades, so we grew up with 

this one black phone, a big heavy thing. As soon as that was deregulated, those scary changes began to come on to the market, 

and they call them cell phones and now iPods, iPads, whatever. 

And so as I think about choking down the financial sector, it is 

going to do exactly what one of my other friends from the other 

side said. It is going to limit access to consumers. 

For the situations where someone does cheat or take money away 

from someone, there is a remedy. Stick them in jail. When people 

cheat somebody else, have an outcome. But we don’t need to choke 

down the entire financial services market in the name of safety. I 

yield back the balance of my time. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Huizenga for 1 minute for the purpose of an opening statement. 

Mr. HUIZENGA. Thank you, Madam Chairwoman. I appreciate 

you doing this today. 

We are here today to discuss legislative proposals that will create 

more transparency and accountability for what some have labeled 

an independent agency—some of us would maybe characterize it as 

a rogue agency—that Congress created last year. And under this, 

Dodd-Frank, the CFPB, the Consumer Financial Protection Bureau, will have extensive authority to issue all new Federal and financial regulations that affect businesses and individuals, but with 

very little accountability. To me, that is unacceptable. 

If I am doing a bad job, I have to answer to the constituents of 

the Second District in Michigan. If the President is not effective, 

he has to go answer to people in an election situation. 

Who does the head of the CFPB report to? No one. That is part 

of the problem. 

And as a newly elected Member of this 112th Congress, and a 

member of this important committee, I am here to work for that 

change. 

Madam Chairwoman, I again appreciate your willingness to hold 

this hearing on this important issue. So thank you. 

Chairwoman CAPITO. Thank you. 

I would like to recognize now Mr. Dold for 1 minute for the purpose of giving an opening statement. 

Mr. DOLD. Thank you, Madam Chairwoman. And I want to 

thank the witnesses for your time today. 

8 

Both before and after legislation is passed, Congress has an obligation to identify and correct unintended negative consequences 

that frequently arise from what many would say is well-intended 

legislation. 

What I would like is do is I would like to fast-forward, because 

what we do today is going to have implications for many years to 

come. So let us go forward 5 and 10 years. Let us say the Administration is vastly different. We are empowering one individual who 

has, I would say, an enormous amount of power. What the legislation does today broadens that out. Instead of one, we want to have 

five. This seems to me to be commonsense legislation. Instead of 

vesting the power so much in one individual, we are investing it 

in a board. 

And then when it talks about veto authority, it is going to be a 

simple majority, as opposed to two-thirds, which is a very high 

standard to jump over. 

So I look forward to your comments in terms of trying to convince me on how this is not a good idea, why we need to invest so 

much power in an individual. Given the consumer credit industry’s 

importance to our economic prosperity, the CFPB broad regulatory 

mandate should exist within a structural framework that improves 

transparency and accountability. 

I thank you, Madam Chairwoman, for giving me the time. 

Chairwoman CAPITO. Thank you. 

I would like to recognize Mr. Canseco for 1 minute for the purpose of giving an opening statement. 

Mr. CANSECO. Thank you, Madam Chairwoman. 

Out of all the provisions included in the 2,300-page Dodd-Frank 

bill, perhaps the biggest and most important question surrounds 

the creation of the Consumer Protection Bureau. For the first time, 

we have an agency whose primary mission is supposed to be consumer protection, although it is unclear exactly what the distinction is between consumer protection and safety and soundness. 

Aside from the agency’s puzzling mission, there is a great concern over its structure. Ignoring the precedents for financial regulatory agencies, the Bureau is structured so that it has a single director who will have great influence. This means that one person 

can essentially determine what types of mortgage products or credit cards Americans can have access to. 

In its current state, it is also extremely difficult to overturn a potentially damaging rule proposed by the Bureau. It is also worth 

noting that the funding of this agency has been carved completely 

out of the normal appropriations process. The powers given to this 

agency seem to go out against the traditions of accountability and 

openness, and it moves us towards creating an American credit 

czar. 

Thank you. 

Chairwoman CAPITO. Thank you. 

Finally, I would like to recognize Mr. Duffy for 1 minute for the 

purpose of giving an opening statement. 

Mr. DUFFY. Thank you, Madam Chairwoman. 

Quickly, I think all of us here on the panel and this committee 

agree that we want to protect consumers. I just think we have a 

disagreement that this bill is actually going to accomplish that 

9 

goal. We have an incredibly high standard to overturn a CFPB 

rule. Basically, what has to happen here is the CFPB has to create 

a rule that is going to bring down the whole financial system. And 

if that is the case, we need to go to FSOC and get three-quarters 

of the vote, three-quarters of 10 votes on FSOC to overturn it. 

The way the rule is written, or the law is written right now, the 

director of the CFPB sits on FSOC. This is a super, super, supermajority. It makes it incredibly difficult to overturn a rule that 

comes from the CFPB that is going to be damaging to the financial 

system. 

I think my bill addresses this. It puts some perspective back into 

oversight of the CFPB and brings some sanity to the legislation. 

Thank you, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. 

That concludes our opening statements. I would like to welcome 

our witnesses. We have your full written testimony, and you will 

be given 5 minutes to sort of summarize your testimony. And we 

have a lot of eager questioners here, so we would like to try to stick 

to the 5 minutes. 

First of all, I would like to welcome Ms. Leslie Andersen, president and chief executive officer of the Bank of Bennington, on behalf of the American Bankers Association, for 5 minutes. 

STATEMENT OF LESLIE R. ANDERSEN, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, BANK OF BENNINGTON, ON BEHALF 

OF THE AMERICAN BANKERS ASSOCIATION (ABA) 

Ms. ANDERSEN. Thank you, Chairwoman Capito, Ranking Member Maloney, and members of the subcommittee for the opportunity 

to testify today. ABA appreciates the chance to share ways to improve the accountability of the new Bureau of Consumer Financial 

Protection. 

The banking industry fully supports effective consumer protection. At the Bank of Bennington, we are proud of our 8 decades of 

service to our customers. No bank can be successful without a longterm perspective like ours and without treating customers fairly. 

The new Bureau will certainly impose new obligations on all 

banks, large and small, banks that had nothing to do with the financial crisis and already have a long history of serving consumers 

fairly in a competitive environment. 

There are several features of the Bureau that make improved accountability imperative. These include the problems brought about 

by the extensive new powers of the agency, the unfettered authority of the director to impose new rules, the separation of consumer 

protection from bank safety and soundness, the gaps in regulating 

non-banks, and the expanded and unaccountable enforcement authority of prudential regulators and State attorneys general. 

We believe the bills that are the subject of this hearing today are 

a start in the right direction, but certainly more needs to be done. 

We have detailed recommendations to improve the Bureau’s accountability in our written testimony, but let me highlight just a 

few. 

ABA supports H.R. 1121, which would create a commission responsible for the Bureau’s actions. A board or a commission structure is far better than giving the head of the Bureau sole authority 

10 

to make decisions that could fundamentally alter the financial 

choices available for customers. It also provides the needed balance 

and appropriate checks in the exercise of the Bureau’s significant 

authority. 

ABA recommends that the commission include members with 

consumer finance business experience and direct safety and soundness regulatory expertise. Such expertise would provide an important perspective as standards are set and enforcement activities 

undertaken. 

ABA also supports H.R. 1315, which would require a simple majority vote of the Financial Stability Oversight Council to set aside 

a Bureau rule. If a majority of the Nation’s top regulators believe 

a Bureau rule will have an adverse impact on the banking system, 

that rule should not go forward. 

Moreover, ABA also believes that a finding of systemic risk is too 

narrow. The review standards should be recalibrated to account for 

adverse consequences of Bureau actions that do not rise to the level 

of systemic risk. 

In addition to further accountability, we believe the Bureau 

should direct its resources to the most glaring gap in regulatory 

oversight: a failure to supervise and impose enforcement actions on 

non-bank lenders committing consumer protection violations. One 

simple suggestion is to mandate transparency on the Bureau’s nonbank expenditures. 

We also strongly urge the Congress to eliminate the term ‘‘abusive’’ from the Bureau’s prohibitions. This is the most effective 

method of keeping the Bureau focused on the task of reforming the 

authorities it has inherited from its predecessor regulators. Then, 

the Bureau can shape those more-than-adequate authorities into 

simpler, more effective, and less burdensome consumer protections. 

Finally, the Dodd-Frank Act gives license to pile on additional 

State law requirements. It gives additional authority to State attorneys general and prudential regulators to interpret and enforce Bureau statutory authorities and the rules as they see fit. If we are 

to hold the Bureau accountable, we must also hold accountable all 

those who derive authority from its existence. To do otherwise, by 

allowing new rules to be written or applying new interpretations 

each time a State border is crossed, would completely undermine 

the reliance of all citizens on the Bureau’s rules. 

Chairwoman Capito, banks across this country will continue to 

treat our customers right and do whatever we can to make sure 

that they understand the terms of the loans they are taking on and 

their obligations to us. Our task is made more difficult by the many 

new hurdles that we will have to jump over to serve our customers’ 

most basic financial needs. 

With only 22 employees, I worry about how my bank will handle 

all the new compliance obligations that will flow from the Bureau 

and from all other Dodd-Frank requirements. More importantly, I 

worry about the added cost, time, and hassle for my customers that 

these new rules will inevitably create. Thank you. 

[The prepared statement of Ms. Andersen can be found on page 

60 of the appendix.] 

Chairwoman CAPITO. Thank you very much. 

11 

I would like to welcome and introduce our second witness, Ms. 

Lynette W. Smith, president and chief executive officer of the 

Washington Gas Light Federal Credit Union, on behalf of the National Association of Federal Credit Unions. Welcome. 

STATEMENT OF LYNETTE W. SMITH, PRESIDENT AND CHIEF 

EXECUTIVE OFFICER, WASHINGTON GAS LIGHT FEDERAL 

CREDIT UNION, ON BEHALF OF THE NATIONAL ASSOCIATION OF FEDERAL CREDIT UNIONS (NAFCU) 

Ms. SMITH. Good morning, Chairwoman Capito, Ranking Member Maloney, and members of the subcommittee. My name is Lynette Smith and I am testifying this morning on behalf of NAFCU. 

I serve as the president and CEO of Washington Gas Light Federal 

Credit Union in Springfield, Virginia. Washington Gas has more than 6,800 members and over $80 million in assets. NAFCU is the only national organization exclusively 

representing the interests of our Nation’s Federal credit unions, 

and we appreciate the opportunity to participate in this hearing 

today concerning proposals to improve the structure of the Consumer Financial Protection Bureau. 

Credit unions were not the cause of this financial crisis, and yet 

we are still substantially affected by a number of provisions contained in the Dodd-Frank Act. For example, all credit unions are 

subject to the rulemaking authority of the new CFPB. The requirements in Dodd-Frank will create a number of new and unnecessary 

compliance burdens for small credit unions like mine. 

It is with that in mind that NAFCU has long opposed the CFPB’s 

authority over credit unions. We believe that CFPB’s singular focus 

should be on regulating the unregulated entities that contributed 

to the financial crisis. 

Indications are that some of the first areas that the CFPB may 

tackle include mortgage lending and credit card practices, areas 

where we have already seen a number of changes in the recent 

years. Although the debit interchange price cap remains NAFCU’s 

number one concern with the Dodd-Frank Act, I will focus my concerns on the new CFPB. 

First, NAFCU will urge the subcommittee to return authority for 

rulemaking, examination, and enforcement of all credit unions to 

the National Credit Union Administration. 

Second, while we were pleased to see the Financial Stability 

Oversight Council granted veto authority over some proposed 

CFPB rules, we believe the current veto authority does not go far 

enough. NAFCU supports legislation to modify the threshold needed to veto a proposed rule. 

Third, NAFCU supports H.R. 1121, legislation introduced by 

Chairman Bachus and others, which would create a five-person 

commission to govern the CFPB. We believe a Board has benefits 

over one single director. At a minimum, NAFCU believes that the 

CFPB must have a Senate-confirmed director before it becomes an 

official, stand-alone Federal agency. We would support legislation 

to delay the transfer date until a director is confirmed. 

Fourth, only three credit unions are above the current $10 billion 

threshold and would be subject to the examination and enforcement authority of the CFPB. We believe it is a waste of taxpayers’ 

12 

dollars for the CFPB to have credit union examination teams for 

only three institutions, when NCUA has been handling examining 

these institutions for decades. Congress should transfer that authority back to NCUA. 

Finally, there are a number of other areas where the CFPB could 

be improved, and I have outlined those in my written testimony. 

In conclusion, I remain at a loss as to why my credit union has 

been placed under a new regulatory regime. That being said, we 

welcome a dialogue with Congress on possible changes to the structure, governance, and authorities of the new CFPB. 

I thank you for my opportunity to appear before you today on behalf of NAFCU, and I would welcome any questions that you may 

have. 

[The prepared statement of Ms. Smith can be found on page 106 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our next witness is Mr. Jess Sharp, executive director of the 

Center for Capital Markets Competitiveness, the United States 

Chamber of Commerce. Welcome. 

STATEMENT OF JESS SHARP, EXECUTIVE DIRECTOR, CENTER 

FOR CAPITAL MARKETS COMPETITIVENESS, U.S. CHAMBER 

OF COMMERCE 

Mr. SHARP. Thank you. Good morning, Chairwoman Capito, 

Ranking Member Maloney, and distinguished members of the subcommittee. I am Jess Sharp, the executive director for what we call 

the CCMC—it is kind of a mouthful—at the Chamber of Commerce. Thank you for the opportunity to testify this morning on behalf of the millions of companies and businesses that the Chamber 

represents. 

The Chamber firmly supports sound consumer protection regulation that deters and punishes financial fraud and predation and ensures that consumers receive clear, concise, and accurate disclosures about financial products. 

However, the ability of a regulatory agency to carry out its mission successfully is influenced by, among other things, organizational structure, coordination with other agencies, and the ability 

to maintain over the long term a consistent, effective approach. The 

unprecedented structure and authority of the CFPB fails these 

longstanding commonsense tests. 

The proposals that the subcommitee is considering today provide 

an opportunity to address structural issues essential to the success 

of the Bureau’s mission. 

I will start with Chairman Bachus’ bill, H.R. 1121, which would 

restructure the CFPB so that it is governed by a five-member bipartisan commission rather than by a single director. 

For four reasons, we strongly support this reform. First, far from 

singling out the Bureau for special treatment, the Bachus bill 

would conform the Bureau to other independent Federal agencies, 

including those responsible for consumer protection, like the FTC, 

for example. Today, almost all independent agencies follow this 

model. Moreover, the decision to place a single director in charge 

of the Bureau, far from being essential to the original conception 

of this agency, as Chairman Bachus pointed out in his opening 

13 

statement, actually was made quite late in the legislative game. 

The President’s original draft bill proposing a Consumer Protection 

Agency included a commission, as did the bill that passed this 

House in 2009. 

Second, the Chamber believes that a commission will ensure better impartial decision-making. We believe that collaborative deliberation among a commission with diverse views, expertise, and 

backgrounds will lead to better policy outcomes. By contrast, leadership by an individual director is more likely to lead to extreme 

swings in approach over the years. 

The CFPB has a tough balancing act to perform as a substantive 

matter. More stringent rules and stricter enforcement will protect 

some credit users from fraud, as has been pointed out, and we certainly agree with that. As has also been pointed out, it could also 

lead to higher prices and reduced access to credit with potentially 

significant adverse implications for consumer well-being and economic growth. So smart, evidence-based decision-making in this 

complex area depends on full consideration of a diversity of inputs 

and views. 

The third point is that we believe that a commission approach 

would minimize the risk of regulatory capture. In the 2008 Law Review article entitled, ‘‘Making Credit Safer’’ that Professor Warren 

co-authored, she observed that a major challenge in establishing a 

unified Federal regulator of consumer credit products is the challenge of minimizing risk of capture. The Chamber agrees and believes, again, that a multi-member commission is the best way to 

address this risk. 

Fourth and finally, on H.R. 1121, we just think that a commission approach will ensure continuity and stability in a way that a 

single director would not. A multi-member commission, with staggered terms, ensures the continuous presence of a significant number of experienced members at all times and prevents any gaps in 

agency effectiveness. It would also prevent significant policy shifts 

based on the political wins. 

Moving quickly to Mr. Duffy’s bill, the Chamber supports H.R. 

1315 because it would enhance the FSOC’s ability to serve as the 

critical check on Bureau rulemaking that threatens the financial 

system. If every prudential regulator opposed the proposed CFPB 

regulation, then that regulation shouldn’t stand. And a majority requirement based on the vote of nine of FSOC’s members, because 

we are taking the Bureau out of the FSOC for purposes of this provision, would permit that result. 

I would like to just quickly also address the discussion drafts 

that are before the committee before concluding. The discussion 

drafts would do a couple of things, both in terms of delaying—the 

first would delay the transfer of consumer protection functions to 

the Bureau until a director has been confirmed, and would remove 

the current authorization for prudential regulators to include Bureau examiners in examinations of large financial institutions prior 

to the transfer date. 

With respect to the first proposal, the Chamber agrees that consumer protection functions should remain with their existing agency until the leadership of the Bureau has been confirmed. 

14 

As for the second proposal, we also agree that it raises concerns 

for the Bureau examiners to participate in examinations of large financial institutions prior to the transfer date and, accordingly, we 

would support legislation along those lines as well. 

So thank you again for the opportunity to testify. I am happy to 

answer any questions you may have. 

[The prepared statement of Mr. Sharp can be found on page 90 

of the appendix.] 

Chairwoman CAPITO. Thank you, Mr. Sharp. 

I would like to welcome Mr. Hilary Shelton as our final witness 

on this panel. He is the director of the NAACP, Washington Bureau, and senior vice president for advocacy and policy. Welcome. 

STATEMENT OF HILARY O. SHELTON, DIRECTOR, NAACP 

WASHINGTON BUREAU, AND SENIOR VICE PRESIDENT FOR 

ADVOCACY AND POLICY, NAACP 

Mr. SHELTON. Thank you very much. And good morning, Chairwoman Capito, Ranking Member Maloney, and so many of my good 

friends who are here on this subcommittee. 

It is a pleasure and an honor to be here to share in your discussion about improving the strength of the Consumer Financial Protection Bureau, the CFPB. We at the NAACP feel very strongly 

that this nascent agency needs as much support as possible so that 

it can reach its greatest potential to protect the American public 

in ways that it has never been protected before. 

The NAACP feels strongly that a robust CFPB is not only necessary for our Nation today; it is absolutely crucial. For too long, 

too many consumers, disproportionately racial and ethnic minority 

Americans, have been underserved and even targeted by unfair and 

downright unscrupulous predatory financial services. The result 

has dramatically diminished opportunities for an ability to build 

wealth or, in too many cases, to continue to own our homes, or even 

buy a car. 

More than 4 years ago, I testified before the Senate Banking 

Committee about predatory lending in the home mortgage and refinancing market and the racial disparities that existed. At that time 

I stated, ‘‘Predatory lending is unequivocally a major civil rights 

issue.’’ As study after study conclusively demonstrated, predatory 

lenders target African Americans, Latinos, Asians and Pacific Islanders, Native Americans, the elderly, and women at such a disproportionate rate that the effect is devastating to not only individuals and families, but whole communities as well. Predatory lending stymies families’ attempts at wealth-building and ruins people’s 

lives. 

Sadly, since that time, my words have been reinforced by more 

studies and, more importantly and more tragically, there have been 

catastrophic consequences for families, neighborhoods, and whole 

communities as the foreclosure rate among racial and ethnic minorities has disproportionately skyrocketed. 

In almost every other facet of financial services like home mortgages, racial and ethnic minorities are targeted by exploitive and 

unscrupulous lenders, and we continue to be treated unfairly. My 

written testimony gives you two more examples of this, payday 

15 

lenders and credit scoring. But for the sake of brevity, I will not 

elaborate on them right here and now. 

Madam Chairwoman, distinguished members of the subcommittee, I could go on and on with examples and studies which 

demonstrate undeniably that racial and ethnic minority Americans 

are still treated disparately in a world of financial services. As a 

result, racial and ethnic minority Americans are faced with dramatically diminished opportunities to fulfill the American dream 

and build any sort of wealth for the future. It is because of this 

continuing disparity in treatment and the blatant targeting of racial and ethnic minority communities by exploitive financial services that the NAACP joined many other national civil rights organizations, among others, in applauding the creation of the CFPB 

under last year’s Dodd-Frank Act. As a matter of fact, many civil 

rights organizations, including the NAACP, testified before this 

very committee on the need for a single, robust, independent agency charged with protecting consumers and ensuring that all Americans have the same access to credit. 

Under the old system, at least five Federal agencies played a role 

in monitoring how financial institutions complied with consumer 

and civil rights laws, while three Federal agencies provided additional enforcement authority. There was not a single entity charged 

with investigating or charged with ensuring that all consumers 

were treated equally and fairly. 

Under the new and improved system, as mandated by DoddFrank for many financial institutions, consumers’ financial protection will now be the sole focus of a single agency, the CFPB. Once 

fully operational, the CFPB will have a broad authority to write 

rules, supervise a wide variety of financial institutions, and enforce 

Federal fair lending and consumer protection laws. 

Most important to the NAACP, fair lending is explicitly built in 

the CFPB’s mission, structure, and research mandates. DoddFrank clearly states that the CFPB is tasked with the responsibilities to ‘‘seek to implement and, where applicable, enforce Federal 

consumer financial protection law consistently for the purposes of 

ensuring that all consumers have access to markets where consumer financial products and services, and the markets that consumers financial products and services are fair, transparent, and 

competitive.’’ In short, a robust function of CFPB will work through 

rulemaking, enforcement, and research to ensure a more fair and 

equitable financial playing field. 

The NAACP is particularly pleased to note that the CFPB will 

be looking at almost every aspect of financial services, including 

mortgage lending, credit cards, overdraft fees, and payday loans. 

Madam Chairwoman, I recognize that the subject of this hearing 

is four particular pieces of legislation intended to, as the committee 

contends, strengthen the CFPB. I am very interested in hearing 

the analysis of these four bills because I would like to state unequivocally for the record that the NAACP staunchly opposes any 

rules which may make weaken or undermine the CFPB or otherwise impede it from reaching its full potential. 

Any proposals which would weaken the mission of the CFPB 

would mean fewer protections for American consumers in general, 

and racial and ethnic minorities in particular, as they attempt to 

16 

manage the often confusing world of finances, mortgages, and credit. Emasculating the CFPB, before it even gets off the ground, will 

result in a return to a system of inadequate financial supervision 

that failed taxpayers, depositors, investors, homeowners, and other 

consumers. Allowing continued predatory lending to consumers and 

the targeting of particular groups will once again allow greater risk 

to our financial system. Thank you so much. 

[The prepared statement of Mr. Shelton can be found on page 

101 of the appendix.] 

Chairwoman CAPITO. Thank you, Mr. Shelton. 

I would like to begin the questioning. I have a question for Ms. 

Smith. We have heard reports that CFPB personnel have already 

been accompanying prudential regulatory staff on examinations. 

The issue here for me is, as we know, the statutory date to begin 

the full implementation of the CFPB is not until July. And I think 

for institutions’ safety and soundness and protection of financial 

data of their clients and their customers, this could be problematic 

if you have somebody, personnel accompanying who don’t really 

have any kind of regulatory authority or any enforcement authority. Do you have a comment on that? And are you aware that this 

is occurring? 

Ms. SMITH. Yes, I am aware. And we call it the ride-along examination. So that would be detrimental, in my opinion, to any credit 

union, regardless of size. The resources of a credit union really 

need to be better served than doing double examinations. So, for 

that reason, I feel that it would be a problem. And I can speak for 

myself and what I experience when a NCUA examines our credit 

union once a year. It was 18 months. Now, it is once a year. 

And also, I have to have a year-end audit examination by a certified public accountant. Both take approximately 30 days to complete, and take a lot of resources away from my credit union, resources that I could use to better serve my members. That needs 

to be our focus. That has been the credit union’s focus all along. 

While smaller credit unions are supposed to be exempt from this 

bill, as it is written in the testimony, we just feel that this would 

be very problematic to the credit union industry as a whole. 

Chairwoman CAPITO. Yes. I think it presents a problem whether 

it is a ride-along or whether it begins issues of privacy issues with 

financial data and other issues of that magnitude. And I appreciate 

the statement that you made that when you get into the heavy regulatory burden, you are really undermining what Mr. Shelton addressed in his statement, which is how you get the consumer products and credits to the folks who most desperately need it and who 

have been shut out previously from greater access to credit. 

Ms. SMITH. And please keep in mind that in the last 2 or 3 years, 

I have been able to still continue to lend to members. When this 

financial crisis hit, my doors were open and we were lending every 

day. 

Chairwoman CAPITO. I appreciate that. 

I would like to ask Ms. Andersen, the carve-out for community 

banks, you have 22 employees, I can see from your statement, and 

it is of great concern to me as well that the carve-out really doesn’t 

exist for a banking institution of any size, whether you are in the 

17 

larger part that maybe fall under the CFPB. But still, the rules 

and regulations are going to influence your institution. 

You have already talked about the resources. Have you had to 

hire somebody? Do you anticipate that you are going to have to 

hire somebody to meet all of the demands that would then take, 

of course, resources from your bank that could be again more adequately placed in seeking credit and helping your communities? 

Could you address that issue? 

Ms. ANDERSEN. Yes. We have actually hired outside counsel who 

is helping us look at the issues coming at us to try to be prepared, 

so that has taken additional resources. We also don’t really have 

any one person in charge of compliance. Being a small institution, 

with 21 employees, everybody has to wear a compliance hat to 

serve our customers, and the more time and effort that is expended 

on new regulations—we already have a boatload—more regulations 

on top of what we have already takes time away from our consumers and our customers and also our ability to just be active in 

our communities. 

Chairwoman CAPITO. On the issue of a commission as opposed to 

an individual, to me, this just makes good common sense. Obviously, we passed it in the House. When it was passed in the 

House—and it was, as Mr. Sharp mentioned in his statement, it 

was a change made towards the end of the completion of the bill. 

And I think that we have seen now, with no statutory person in 

place, no Presidential appointment at this point who has to go 

through the confirmation procedure, I think it is just problematic 

if we have no director; what are we going to do, which is the point 

of one of my pieces of legislation. And so I think we could solve this 

a lot easier if we would, instead of having a singular person to 

head and have all the power concentrated in that one person, if we 

spread it out over a commission. 

But my time is up, and I am going to ask the ranking member 

if she would like to begin questioning. 

Mrs. MALONEY. I most certainly would. First of all, I would like 

to thank the panelists for your thoughtful presentations. And I 

would like to clarify for the record that the House-passed bill started with the director and only became a commission 2 years after 

the designated transfer date. The House conferees rejected an 

amendment that would have restructured the CFPB into a commission. 

And I would like to place in the record the debate that was very 

extensive around supporting the need for a strong consumer protection regulator. Without objection, I will place that in the record. 

This is the model that we have now in government for regulators. The Comptroller of the Currency, the head of the Fed, the 

CFTC, OTC, all of them have a single regulator, not commissions. 

I would like to respond really to Ms. Smith’s concern about the 

shadow banking system, and that is what we pulled into the CFPB 

to be reviewed. The commission would only lead to gridlock, and, 

in my opinion, inaction that would only make it more difficult to 

react to the regulatory disparity between banks, credit unions, and 

the less regulated competitors. And I agree, the regulated credit 

unions and the regulated banks did not cause the problem. It was 

these unregulated areas. 

18 

And I would like to say that my colleagues on the other side of 

the aisle say they want to reduce the size of government, yet they 

want to change a single-director Bureau into a five-member commission. President Obama is having difficulty finding a director 

that he can get confirmed by the Senate. One Senator can hold up 

a confirmation. If you had five, you would have more difficulty in 

moving forward. 

But my question, and I would like to begin with you, Mr. 

Shelton, you stated that predatory lending was, in your opinion, a 

civil rights issue. And it is believed by many that the old system 

reacted too slowly during the subprime mortgage boom, and that 

helped bring the economy to near collapse, which is why the CFPB 

was included in the overall Dodd-Frank financial reforms. 

Too often, consumer concerns were not thought about as a second 

thought, or a third thought, or they weren’t thought about at all. 

And it is believed by me and others that if we had an agency such 

as the CFPB, they would have reacted more quickly to the screams 

and cries for help that were coming in from the communities across 

America. 

So I would like to ask every member of the panel if you think 

that the subprime mortgage boom that helped bring the economy 

to near collapse, would the CFPB help to have prevented that? The 

old system did not work, and we need to move forward in a system 

that will prevent financial collapse in the future. 

So first, Mr. Shelton, and then Mr. Sharp, and all the way down 

to Ms. Andersen. Thank you. 

Mr. SHELTON. Thank you, Congresswoman. You are absolutely 

correct. I am deeply concerned about a lot of the argument being 

made here to withstall the implementation of the CFPB. Quite 

frankly, the NAACP has done reports and testified before this committee as well as the Senate Banking Committee on numerous occasions. We have sat down with the heads of the Comptroller of the 

Currency, the Fed, sat down with a number of government agencies responsible for this particular oversight. 

We did a report in 2007 to show you the slow movement of the 

existing system and why it is the literal definition of insanity to 

continue with the existing policy. Quite frankly, we spoke in 

2007—and I will leave the names of the very high-ranking officials 

out of this so as not to embarrass them in this particular case— 

we went to them and said we were predicting in 2007 that African 

Americans who received subprime loans in 2005 would go into foreclosure by the end of 2009. And needless to say, we were underestimating the devastation that was created by this lack of oversight and regulatory oversight of our financial services programs. 

Indeed, more than 52 percent of subprime borrowers who were African American went into foreclosure by the end of 2009. That is 

outrageous. We need a process and a system that actually provides 

the kind of protection that consumers need. 

What we got at every step of the way is, when we asked them 

what do you intend on doing, when we asked them to simply do 

things like a moratorium on foreclosures, we were told that, ‘‘We 

will allow the market to work it out. We have no plans whatsoever, 

even though we see the concerns you are having are 2 years down 

the line.’’ 

19 

We need a nimble, effective process to provide that kind of oversight and enforcement to protect the consumers first. If you are 

protecting consumers, then we are not going to have the kind of 

meltdown we are experiencing. 

Mrs. MALONEY. Madam Chairwoman, my time has expired, but 

I would like to request that everyone place in writing their response on whether or not the CFPB would have helped prevent and 

protect consumers during the subprime crisis, comparing that to 

what happened with the old system. Thank you very much, and I 

yield back. 

Chairwoman CAPITO. Thank you. I would like to say in terms of 

growing government, I would remind the committee that the CFPB 

will have over 1,000 employees. I would say that is a large growth 

in government, some of them coming from existing agencies, but 

many still remaining in their original agencies. And the FDIC has 

recently announced that they are going to be creating a new compliance division, there again growing government further. 

Mr. Royce for 5 minutes. 

Mr. ROYCE. Thank you. I think we have gotten it exactly backwards. The bifurcated regulation that we have here with the CFPB 

is exactly like the bifurcated regulation that we had with respect 

to the GSEs. So if we had Congress coming in and muscling the 

market and basically saying with the GSE Act that you could overleverage, and here you had the safety and soundness regulators, 

the prudential regulators who said no, no, that is a mistake; 100 

to one leverage. The goal is forcing people to buy junk like Countrywide and holding that on the books. You are going to do that 

just so that everybody can own a house, whether they can make 

a payment or not? You are going to put that kind of leverage into 

the system? You are going to muscle those kind of goals to create 

a market for junk like Countrywide out there? 

That is the insanity. That is the insanity of duplicating that kind 

of system and trumping the prudential regulator, yet again, who 

wanted to regulate the GSEs for systemic risk. So now here we 

have created, and I will ask this question of Mr. Sharp, we have 

created a situation where we have made it harder, even harder for 

the prudential regulator to have the kind of say over safety and 

soundness they should have had. And here what we have done 

under the FSOC, is they can only block the CFPB regulations if 

two-thirds of its membership, which includes the CFPB director, 

concludes that the regulation or provision would put the safety and 

soundness of the United States banking system or the stability of 

the financial system of the United States at risk. 

Mr. Sharp, do you think this standard is too broad and the number of required votes needed to overturn too high to effectively protect the financial system from onerous and overreaching activism 

by the CFPB? 

Mr. SHARP. Yes. The Chamber definitely believes the bar is set 

too high. I think the critical point here is it seems like Congress 

recognized that there was a potential for a problem here. That is 

why this provision is in the bill. But the way it was set up, it is 

a bar that it is not clear that any rule could ever clear. Even if you 

have all 5 prudential regulators, 5 of the 10 members of the FSOC 

make a decision that a rule could undermine safety and soundness, 

20 

that is not enough. You still have to convince everybody else. So 

if this is a safety and soundness question, it seems like if you have 

unanimity among the safety and soundness regulators, then that 

should control. 

Mr. ROYCE. And this is the aspect that concerns me, because I 

have talked to all the prudential regulators and heard their concerns, both during the markup of this bill and during the conference on this legislation. Let me just ask you, how would you improve upon this language, Mr. Sharp, if you might make some suggestions? 

Mr. SHARP. Sure. The language in the bill before us today? 

Mr. ROYCE. Yes. How would you address this issue; in the way 

Mr. Duffy addresses it with his bill, or how would you— 

Mr. SHARP. Yes, I think the Duffy bill is a very good solution. 

The only thing I would say, in addition to what is before us here 

in the legislation, is the authority to review and override CFPB actions, as I understand it, only applies to regulations. We have 

heard from Professor Warren that her inclination, at least at this 

point—and she is not obviously the director—but at this point, 

speaking on behalf of the Bureau, is not to regulate through regulations and to use enforcement actions to sort of push for compliance. 

Now, that is fine and that is one way of doing things, and it 

wouldn’t be the first time an agency did that. But if that is the 

case, if that is the primary means of pushing for compliance and 

for shaping the landscape, then those types of actions should be, 

at least some of those actions, could be broad and sweeping enough 

to have safety and soundness implications, and it is probably a 

good idea for FSOC to have the authority to review those as well. 

Mr. ROYCE. Thank you, Mr. Sharp. 

I am going to ask Mr. Wilcox, in your testimony you express support for Mr. Duffy’s bill to strengthen the review of CFPB rules, 

and you mentioned that the ICBA has proposed language to take 

his bill a step further by allowing the FSOC to veto a bill that 

would adversely impact a subset of the industry in a disproportionate way. I would just ask you if you would want to elaborate 

on your concerns there. 

Mr. Wilcox is not on this panel, so I will ask that question of Ms. 

Andersen. 

Ms. ANDERSEN. I cannot speak on behalf of the Independent 

Community Bankers, so I am not quite sure how to answer your 

question. 

Mr. ROYCE. In that case, my time has almost expired, and I will 

yield back. 

Chairwoman CAPITO. Thank you. I would like to recognize Mrs. 

McCarthy for 5 minutes for questioning. 

Mrs. MCCARTHY OF NEW YORK. Thank you. Thank you very 

much for having this hearing. And I find it very interesting. I keep 

seeing every week the numbers in foreclosures. I keep seeing the 

numbers of people losing their homes, many of them becoming 

homeless. And I know then when we had all these hearings, going 

back when we were working to see what we could do to protect the 

consumers in the future, and here is something that we have in 

place that hasn’t really gone into place yet. 

21 

And I know there were concerns with the credit unions and some 

of the banks, but we also know that Elizabeth Warren stated in her 

testimony in March, and a few other times before that, that the 

CFPB must consider the impact of proposed rules on community 

banks and smaller credit unions, as well as consult with Federal 

banking regulators, consider the written objections raised during 

the consulting process. 

We are forgetting why we are putting this together. Everybody 

forgot about the consumer. And everybody can blame everybody 

else, but nobody was there to protect the consumer. No one. 

So there are specific—and my question is to everybody. There are 

specific requirements that the CFPB must adhere to in carrying 

out their regulatory activities. Shouldn’t Congress allow the CFPB 

to become implemented before we start making changes? 

We have done this before. It is called technical changes as we go 

down the road. Basically, almost every bill that passes this House 

comes back for technical changes. 

And then if there was a commission structure in place, what 

would have happened if there wasn’t agreement on how to respond 

to a consumer threat or move forward on a proposed rule? Wouldn’t 

the consumer end up being disadvantaged from the gridlock? 

And that is what we were trying to prevent in the beginning, 

gridlock. Because around here, everybody knows it, Republican and 

Democrat, it takes forever to get something done. And in the case 

of what happened for consumers across this Nation, they are the 

ones who paid. They are the ones who paid. They paid by losing 

their homes. They paid by losing their jobs. 

And what are we doing for them? In my opinion, we did something for them, and we are doing nothing now. 

Mr. Shelton, why don’t you start? 

Mr. SHELTON. Thank you so much. And again, I am in full agreement that to delay the implementation of these long-needed protections of the American consumer is something that we have to remember throughout this process. 

The CFPB needs to have an opportunity to be fully implemented 

to become fully operational. We need to move very quickly. The 

NAACP sent a letter very recently to the President asking for a 

nominee to serve as director of the CFPB. We think that is extremely important. But slowing down this process again brinks on 

the terms of insanity. 

The revisionist history that we continue to hear, about why it 

was so important to put this program in place in the beginning, is 

something we must go back and look at. We testified before and it 

stands today that we had people being offered products they could 

not sustain. 

The issue for us is twofold: one, the sustainability of access to 

credit; and two, protecting consumers from the predatory nature of 

some of these financial services institutions. We need to move very 

quickly and decisively to make sure both of those particular provisions are in place. We see this as something that has been well debated, well discussed, it has been legislated. The President has 

signed it into law. Let us now implement this program and let the 

American people enjoy the protections that the Bureau offers. 

22 

Mrs. MCCARTHY OF NEW YORK. Thank you. Anyone else? Ms. 

Smith? 

Ms. SMITH. Thank you very much. We appreciate Elizabeth Warren’s statement, and would urge Congress to make sure the concerns of small institutions like credit unions are taken into account 

as the CFPB goes forward. Compliance burdens would still be inevitable. Credit unions have a board regulator, NCUA, and we are 

not the cause of the problem. So a board could work. 

And if I could just give you a personal testimony of what I have 

experienced. When the predatory lenders were out there doing 40- 

year mortgages, interest-only mortgages, my examiners—before the 

regulation got out on NCUA in black and white—were calling us 

on the phone and saying, ‘‘Don’t do it. Don’t do it.’’ 

I just had another example last week, and it doesn’t have to do 

with lending. But NCUA is a source for our members to complain. 

I had one member who complained about a $40 withdrawal from 

an ATM and she did not get the money. She wrote the letter to 

NCUA and we—before I got the letter from NCUA, I had already 

resolved it. But then I had to turn around and respond back to 

NCUA. And this was in less than a week’s time. So I think NCUA 

does a good job at really keeping us on the right track. 

Mrs. MCCARTHY OF NEW YORK. Let me just interject. I agree 

with the credit unions and I also agree with our community bankers. We tried to do whatever we could, many of us, as during the 

regulation part, to protect them because we know they did nothing 

wrong. But unfortunately, at times, everybody is pulled in, and 

that is why we want to try to make sure that we make it right for 

those who had nothing to do with the economical failure. 

Chairwoman CAPITO. Thank you. I would like to recognize Mr. 

Renacci for 5 minutes for questioning. 

Mr. RENACCI. Thank you, Madam Chairwoman. 

I thank all of you for your testimony today. One thing I heard 

consistent with all four of you was that you all support sound and 

effective consumer protection. You said it in different ways, but you 

all said that. 

My question comes down—and I am going to ask all four of you. 

The four pieces of legislation that we are talking about, would any 

of you tell me how that weakens the ability for the CFPB to have 

effective oversight on sound consumer protection? Because you all 

talked about how the four pieces of legislation were okay. 

I want to know if there is anyone who could tell me how any one 

of these four pieces of legislation weaken the ability. We can start 

with— 

Ms. ANDERSEN. I don’t think they do weaken consumer protection. Consumers and small businesses are the lifeblood of traditional banks. We take care of them. If we don’t take care of them, 

we don’t survive. What these changes will do will expand our ability to continue to take care of our customers. 

A commission is far better than having one single person have 

the authority over deciding what products I should be delivering to 

my customers in Bennington, Nebraska. I have a hard time believing that somebody in Washington, D.C., one person, one single person, understands the needs of my community. 

23 

Mr. RENACCI. And again, I understand your—you guys have all 

indicated your thoughts on how these help. I want to hear if any 

of you can tell me where it has weakened any one of these pieces 

of legislation. 

Mr. SHELTON. I would certainly argue that it slows the process. 

One of the things we also experienced were products that were 

being offered very quickly, and not being able to respond quickly 

enough to be able to address the damages that were created by 

many of the predatory lending packages we ended up fighting. 

If you end up, quite frankly, with the arguments to be made that 

having a commissioner, an oversight along those lines, and not allowing one person to actually provide the leadership in this particular case, also understand there are checks and balances for that 

one person that could very well slow the necessary oversight and 

enforcement that this agency must be responsible for. 

Quite frankly, when you look at these pieces of legislation, all I 

am seeing are things that will slow down the process and not add 

value to the process of oversight and protection. 

Mr. RENACCI. If it slows it down and it gets it right, we are still 

in the right place, as long as it protects. 

Mr. SHELTON. If you can establish it somehow did it right; but, 

quite frankly, what we have seen so far does not establish that. 

Mr. RENACCI. Ms. Smith, when it comes to credit unions, and I 

have had a number of credit unions come visit me in my district, 

credit unions do provide services to low- and moderate-income families and households, correct? 

Ms. SMITH. That is correct. 

Mr. RENACCI. Do you see a director—one of my concerns about 

having one director who maybe doesn’t like credit unions or maybe 

doesn’t like the way credit unions are going, that it may affect the 

ability to service low- and moderate-income families. 

Ms. SMITH. Absolutely. In answering your first question, we do 

think that it would strengthen, so we are in favor of it. But in answer to your second question—could you repeat it again, please? 

Mr. RENACCI. I said if you had a director, one of the problems 

with having a single director is they may say that credit unions 

don’t provide service. My biggest concern is that credit unions do 

provide service to low- and moderate-income families. The question 

was, if you saw a director who was taking this agency in a direction that would hurt your credit unions, would you be able to provide services to low- and moderate-income families? 

Ms. SMITH. No. It would really put a damper on the services that 

I could provide. So I am very concerned. I don’t feel that one person—I am in favor of five. I think you will have a broader array. 

I think there would be some confusion, too, to having an examination, a dual examination, so to speak. I think there would be confusion at my board of directors level, staff management. We wouldn’t 

know who we really ultimately reported to. 

Mr. RENACCI. And, Ms. Andersen, moving on, you had some interesting comments in your testimony about some of the other overreaching things that the States could provide. Could you go into a 

little more detail on that? You talked about statutory language prohibiting States from imposing additional consumer protection. 

I would just like to hear a little more about that. 

24 

Ms. ANDERSEN. I think it is imperative that we have common 

regulation. We can’t have different regulation in one State over another, because most all of us do business in more than one State. 

I am located in Nebraska, relatively close to Iowa. I have farmers 

that I do business with who own land in both States. We have customers who have vacation homes in Florida, and we need to have 

one common regulatory guide so we understand the rules of the 

road clear across the country. 

Mr. RENACCI. Thank you. I yield back. 

Chairwoman CAPITO. The gentleman’s time has expired. 

Mr. Miller for 5 minutes for questions. 

Mr. MILLER OF NORTH CAROLINA. Thank you. 

Critics of the OCC, including me, think that the OCC has been 

the most captured of the regulators, the most permissive of the regulators, and the OCC’s permissiveness to the banks that they regulated contributed greatly to the financial crisis of a few years ago, 

just 21⁄2 years ago. And a big part of that was their assertion of 

preemption; that banks that were subject to the OCC, regulated by 

the OCC, would not be subject to State laws. And there are a lot 

of States who saw what was going on right under their eyes. State 

legislators saw it, tried to pass laws prohibiting it, and the OCC 

kept them from applying their laws, particularly with respect to 

mortgages and predatory subprime mortgages. The failure of States 

to be able to act contributed greatly to the subprime crisis and the 

financial crisis. 

Mr. Sharp, should the OCC’s assertion of preemption be subject 

to review by the FSOC, and, if not, why not? 

Mr. SHARP. I am not here to testify today about the OCC. 

Mr. MILLER OF NORTH CAROLINA. It is obviously parallel. Why 

not the same rule? If it affects the safety and soundness of the system, why should that not be subject to review by the FSOC? 

Mr. SHARP. They are a safety and soundness regulator, whereas 

the CFPB is not. That is why the concern is greater in the CFPB 

context, because they exist outside safety and soundness. 

Mr. MILLER OF NORTH CAROLINA. How about just subject to the 

APA, the notice and comment periods for assertions of preemption? 

If CFPB is going to be subject to the APA, why should OCC not 

be subject to the APA? 

Mr. SHARP. I don’t have a good answer for you, but I would be 

happy to provide one in writing, if you prefer. 

Mr. MILLER OF NORTH CAROLINA. The Dodd-Frank Act, the 

CFPB statute as initially proposed by the Obama Administration, 

would have required plain vanilla products be offered side-by-side. 

There was an uproar in the financial sector. It was awful to think 

that they would be required to sell something they didn’t want to 

sell, and the truth was the consumer advocates didn’t love it all 

that much either, so it got dropped fairly quickly. 

To make the point clear, Republicans offered an amendment in 

committee, and Democrats accepted it, that said clearly the CFPB 

would not have the authority to require any financial institution to 

offer any given practice. They could not require, they could only 

forbid. They could forbid practices that were abusive to consumers 

or deceptive or unfair. They could not require them to do something 

that was good for consumers. And further, it is clear that the CFPB 

25 

does not have any authority to set interest rates, so you can price 

products however you want to. If they are a greater risk, you can 

price them accordingly. 

Can you give me an example, Ms. Andersen, of a consumer practice that you have to do, that you are afraid that the CFPB might 

forbid as abusive or deceptive or unfair, that you have to do to stay 

in business? 

Ms. ANDERSEN. To stay in business, I have to serve my community, and in serving my community, I can develop products for the 

consumers in my community that are helpful. One great example 

of this is we have a large Burmese refugee community in our area, 

and we worked with our regulator and developed a product for 

them that allows them to buy homes. They couldn’t qualify—generally speaking, they can’t qualify for a traditional secondary market loan because they haven’t lived in the United States for 2 

years, and don’t have 2 years of tax returns, so that kicks them out 

of traditional secondary market lending. 

We developed a program of financial education and a loan program for them to purchase a house, they have downpayment 

money, and move forward. 

Mr. MILLER OF NORTH CAROLINA. Leaving aside the unlikelihood 

that the CFPB would forbid that, because it sounds very wholesome, do you have to do that to stay in business? 

Ms. ANDERSEN. I have to serve my community to stay in business, and I need to serve the needs of my community. And I don’t 

believe that one person in Washington can understand the needs 

of my community and the services that I need to provide for them. 

Mr. MILLER OF NORTH CAROLINA. Mr. Sharp, can you give me an 

example of a consumer practice that you are afraid the CFPB 

might strike down as abusive and say you can’t do that, but a financial institution would have to do that to stay in business? 

Mr. SHARP. I can’t give you an instance of a particular product. 

Again, the uncertainty is what is so concerning. We don’t know 

what ‘‘abusive’’ means. We don’t know if unfair, deceptive, and abusive is sort of an escalation, if you can fully disclose the characteristics of a product and still be considered abusive. These are the 

things—it is a term without much definition, more than was given 

in the statute, and we don’t know what it means, so— 

Chairwoman CAPITO. The gentleman’s time has expired. Thank 

you. 

Mr. McHenry for 5 minutes. 

Mr. MCHENRY. Thank you, Madam Chairwoman. 

Now, to Ms. Andersen and Ms. Smith, with the passage of DoddFrank and with the CFPB, for instance, do these additional regulatory burdens add to the cost of compliance? 

Ms. SMITH. If I could speak first, 2 years ago, because of the unemployment rate, I was able to hire an attorney, a lawyer who just 

got out of law school, and I started her off at a salary of $40,000 

and I had her do policies. But, lo and behold, 2 years later, she is 

my compliance officer and it takes up a lot of her time; she spends 

90 percent of her time just doing compliance for the credit union. 

So what has happened now, and I could speak from the heart, 

is I don’t know how long I am going to keep her, because compliance is becoming larger—compliance is becoming such a big deal of 

26 

importance to the credit union industry and to financial institutions that I can’t compete with the larger credit unions in salary. 

So, yes, I do have financial costs that I have had to incur. 

In addition to that, because of the recent credit card changes and 

the real estate changes, I have had to spend over $10,000 in the 

last 2 years just to update forms to keep up. 

Mr. MCHENRY. How large is your credit union? 

Ms. SMITH. $80 million. 

Mr. MCHENRY. Ms. Andersen? 

Ms. ANDERSEN. We have had significant increased costs. We have 

had significant increased costs just over the past few years of 

changes in regulations totally separate from Dodd-Frank and from 

the CFPB. Those regulations aren’t in place yet, but we are getting 

ready for them. We see them coming. We know that the costs are 

going to be there and be a lot more expensive. We have to figure 

out a way to pay for them, and we are a $60 million bank, much 

smaller. 

Mr. MCHENRY. Do you think these regulations, to both of you, do 

you think that these regulations will affect smaller institutions at 

a greater, I guess, cost basis per dollar that you have in your institution, as opposed to the large institutions? 

Ms. SMITH. Yes, they will. When I came into the credit union industry over 20 years ago, there were over 12,000 credit unions. 

Now, there are roughly under 8,000. I think we will see that number go down. I am really concerned about the credit union industry 

and its survival, because we have always been the lender of last 

resort. I can speak to that personally on what I am doing at Washington Gas Light Federal Credit Union. 

Mr. MCHENRY. Ms. Andersen? 

Ms. ANDERSEN. Yes, I would agree completely. As I said, we don’t 

have one person in charge of compliance. We may be having to 

move that way, hire yet an additional person, or take more time 

away from my community, which I really don’t want to do. 

Mr. MCHENRY. How many employees do you have, Ms. Andersen? 

Ms. ANDERSEN. Twenty-two. 

Mr. MCHENRY. So you are talking about adding a full-time compliance person with what you see coming down the road? 

Ms. ANDERSEN. Yes. 

Ms. SMITH. I have 17, and that does include one compliance person. 

Mr. MCHENRY. Oh, Lord. So if I can just ask a general yes-oror-no question here—first Ms. Andersen and then you, Ms. Smith— 

did these regulations increase access to credit and reduce the cost 

of credit? Yes or no? 

Ms. ANDERSEN. No. 

Ms. SMITH. I would say no. 

Mr. MCHENRY. Mr. Sharp? 

Mr. SHARP. I would agree. No. 

Mr. MCHENRY. Mr. Shelton? 

Mr. SHELTON. I would say yes. 

Mr. MCHENRY. How so? We have two market participants who 

say no and then— 

27 

Mr. SHELTON. I am sorry, Congressman. What I am hearing is 

an argument over having to comply with these regulations, with 

having someone who is responsible for making sure the regulations 

provide the protection the American people need. And, quite frankly, what we saw under the lack of regulation was the American 

people were left hanging. 

Mr. MCHENRY. To reclaim my time, my time is about to expire, 

this idea that there is a lack of regulation is absolutely absurd. 

These financial institutions—Ms. Andersen, did you lack regulations 5 years ago? 

Ms. ANDERSEN. No, sir. 

Mr. MCHENRY. Ms. Smith? 

Ms. SMITH. No, sir. 

Mr. MCHENRY. Interesting. Because the argument here—if I may 

finish—the argument here is that somehow there were no regulations, right? 

Ms. Andersen, so did you cause the crisis that we just faced? 

Ms. ANDERSEN. No, sir, I did not. 

Mr. MCHENRY. Wow, that is interesting. You are a regulated entity. How many regulators do you have as a small financial institution? 

Ms. ANDERSEN. I am regulated by the State of Nebraska and the 

Federal Reserve. 

Mr. MCHENRY. In addition to what you see coming down the line 

in Washington, you will see further regulations. Okay. 

Ms. ANDERSEN. Yes. 

Mr. MCHENRY. Thank you for your testimony. I certainly appreciate your making the point that this drives up the cost of lending 

and reduces access to credit. Thank you. 

Chairwoman CAPITO. Mr. Scott for 5 minutes for questioning. 

Mr. SCOTT. Yes, thank you very much, Madam Chairwoman. 

Let me start with you, Ms. Andersen, and Ms. Smith. Can you 

give me some examples of how the Consumer Financial Protection 

Bureau and its function will dry up access to credit? This is a 

major concern that many of you in the financial services industry 

have raised, that if we do this, it will dry up credit. Could you tell 

us how? 

Ms. ANDERSEN. I believe that it will stifle innovation and it will 

make banks concerned about how they are going to deal with their 

consumers and go forward, and that it will dry up credit. 

Ms. SMITH. I will have to put more resources into compliance, 

and if you are 17 employees strong, lending could suffer as a result 

of that. 

Mr. SCOTT. But you would agree that there is some question here 

of a fear of the unknown. There is an uncertainty here. We do not 

know; is that a fair assumption? I think we really, really need to, 

in order to wade through this in a fair way, fair to the financial 

services industry, is to have concrete examples, if you could give 

them, on how putting forward these protection agents for consumer 

protection would dry up access for credit to the very people we are 

trying to protect. I think that is the real core of the issue. 

Ms. ANDERSEN. Speaking from experience, and, granted, we don’t 

know exactly what the new Bureau will do, but speaking from experience, I can give you an example. 

28 

The Federal Reserve has recently issued new rules on overdraft 

protection. Those rules require significant resources from a bank 

the size of mine. We had an overdraft protection program in place 

to serve our customers prior to the issuance of those new rules. We 

have discontinued that program, so our customers have suffered. 

But we have discontinued that program because we are too small 

to absorb the costs involved with the new rulemaking. 

Mr. SCOTT. Okay. 

Ms. ANDERSEN. And our customers now are paying overdraft 

fees, because we are bouncing more checks, and they are paying 

fees at the merchant because we bounced the check, and they are 

having their names posted behind the checkout stand saying, 

‘‘Don’t take a check from this person.’’ So our customers are suffering. 

Mr. SCOTT. Okay. Yes, Ms. Smith? 

Ms. SMITH. I cannot say that there is not an unknown. Of course 

there is an unknown. But the CFPB has said, ‘‘credit cards and 

mortgages,’’ and they are two areas where my credit union has had 

to dedicate significant resources in the past 2 years. And I guess 

my concern is, it is working. We have made revisions to the mortgages and to the credit cards in the last 2 years. To have it redone 

does not help. In my opinion, it is a waste of time. 

Mr. SCOTT. We gnawed on this for quite a bit of time last year 

when we were working on this bill. We went through this entire 

process and this issue. I think it is one that we will continue to 

move forward on, because that is the issue. 

But I would like to get a word in, Mr. Shelton. I, too, have some 

concerns about this commission, because as you know, I represent 

Atlanta and Georgia, and we have had a series of problems in 

terms of predatory lending. And I know my friend in the banking 

community said she doesn’t like to use the word ‘‘abusive’’ and 

would like to get that out. I can understand that. But in fact, these 

were very abusive practices of predatory lending, fleet finance, 

going all the way back to that. So I share that. 

My concern with the commission is that the very nature of the 

reason we got so deep into this problem in the downturn of the 

economy was what happened in the housing bubble falling was we 

could not act to move to correct these situations quickly enough. 

My fear is that a commission would only detour that. It would 

only add to the slowing down of the process. So I think we still 

have to work on this issue here some more. 

Thank you, Madam Chairwoman. 

Chairwoman CAPITO. I would like to recognize Mr. Pearce for 5 

minutes for questioning. 

Mr. PEARCE. Thank you, Madam Chairwoman. 

Ms. Andersen, in the previous questions, the question was: Do 

you know of anything that would dry up credit to real people? Now, 

I heard you talking about the Burmese. Don’t they qualify as ‘‘real 

people?’’ 

Ms. ANDERSEN. I certainly think so. 

Mr. PEARCE. And wouldn’t the rules dry up credit to those real 

people? 

Ms. ANDERSEN. They absolutely would. 

Mr. PEARCE. Okay. 

29 

Ms. Smith, do you all charge a different amount, different rates 

of interest to any of your consumers? Let us say you have 350 people who have 30-year mortgages for houses. And maybe you don’t 

lend money for houses, but let us say you did. Do you have different interest rates for any of your customers? 

Ms. SMITH. No, we do not. 

Mr. PEARCE. So everybody gets one interest rate? 

Ms. SMITH. Everybody gets one interest rate on a mortgage loan. 

We offer second mortgage loans. 

Mr. PEARCE. If they have not paid their bills in the past, you are 

going to try to lean out and give them a little credit; you don’t add 

just a little bit? 

Ms. SMITH. If it is an unsecured or an automobile loan, it is riskrated. 

Mr. PEARCE. So some people pay a little bit higher? 

Ms. SMITH. Yes, they do. 

Mr. PEARCE. Now, Mr. Shelton, in your testimony when you said 

you wanted the same access to credit, is this then what you are 

saying; people are going to have different amounts of mortgage 

payments, different amounts of interest rate? Does that qualify in 

your books as the same access to credit? 

Mr. SHELTON. Certainly. As we are talking about interest rates, 

we know that there are some aspects of the market that are high 

risk. I understand the importance of the prime market, quite frankly. 

Mr. PEARCE. But you basically don’t disagree with the idea that 

risk should be related; just that when they are picking out people 

out of the community and targeting them with fast talk and fancy 

products and stuff like that. But your objection is not to a market 

which differentiates between people who are bad risks? That is my 

question. 

Mr. SHELTON. Not bad risks, no, sir. 

Mr. PEARCE. You don’t mind them paying more interest. That is 

not in your objections, right? 

Mr. SHELTON. Certainly, risk assessments have to be made. Risk 

assessments have to be balanced and fair. 

Mr. PEARCE. That is fine. What I would like to really concentrate 

on was my friend from North Carolina began to change the concept 

about what the CFPB is going to do, and that is where the great 

alarm is. 

You noticed that most people in the testimony, in the hearing 

statements here, say that the idea of the CFPB is to protect the 

American people, to protect the consumer. And yet we suddenly 

eased the argument over: Do you have to do this to stay in business? 

Now, that is significantly different than protecting the consumer. 

Yet, I think Mr. Miller is giving us a heads-up as to where this 

thing is really going. Do you really need that to stay in business? 

And if you can’t answer it to the affirmative, I think you are going 

to be disavowed from creating those products that really do deal 

with your communities, like Ms. Andersen suggested, that we have 

a very unusual circumstance that is never going to come to the attention of a Federal regulator. There are 50 States. There are thousands and hundreds of thousands of communities, and the chance 

30 

of them looking at this one little deal are not great. It is this we 

are going to only consider what you have to do to stay in business, 

and you don’t have to do that and we are not going to approve it. 

We see that every day in the Federal Government. They don’t 

give approvals that are required. Right now, we are killing jobs off 

the coast of Florida, off the coast of Louisiana, by not giving permits that are required. There is no law that keeps them from doing 

it. We just didn’t give those permits, so about 100,000 people are 

now out of a job; 33 $5 billion platforms are beginning to steam 

away at 4 knots per hour, which means they have to really have 

a serious desire to move to Africa and South America. Those were 

simply not allowing them to proceed ahead. 

So as we visualize this protection of our consumers, I will tell 

you where the real access to credit is going to be denied, that my 

friend Mr. Scott was asking about. What is going to happen is that 

a product is not going to be approved because it maybe can’t differentiate between whether or not it is race-based. The product is 

simply going to be disallowed and the people who desperately need 

access to that credit are not going to have it. I can see that circumstance arising. 

Mr. Shelton, do you have a comment? Go ahead. 

Mr. SHELTON. I would just say that I think the real issue here 

is whether or not these would be abusive products. I know the term 

‘‘abusive’’ becomes problematic. However, when you look at some of 

the products that the Financial Protection Bureau was set up to 

address in the first place, we are talking about products like exploding ARMs. You are talking about trying to prevent people 

being charged an interest rate under another name at rates of 465 

percent and higher. Indeed, we are talking about an oversight to 

provide some protection of American consumers from the kind of 

predatory nature of many of these products that we are trying to 

prevent. 

Mr. PEARCE. I understand that. It is just that we do have regulator agencies that were supposed to be doing that, but they did not 

do it. 

Mr. SHELTON. But they didn’t. 

Mr. PEARCE. This next regulatory agency won’t—my time is gone. 

Chairwoman CAPITO. Mr. Carney for 5 minutes for questioning. 

Mr. CARNEY. Thank you, Madam Chairwoman. 

I would like to pick up on this discussion about the effect of putting together the Bureau here on your bank practices, and in particular the testimony which you gave earlier that the Dodd-Frank 

bill itself would impose new hurdles and difficult conditions in the 

operation of your facilities. I would like to know if you can be more 

specific about that. 

I am not as concerned about one director or a five-person board, 

all that kind of stuff, in setting up this regulatory agency. I am 

more concerned about some of the testimony that you gave about 

provisions that would—if you could be specific, everybody agrees 

that there ought to be consumer protections, it sounds like. At least 

that is what everybody prefaced their remarks with. They were 

very concerned about some of the predatory and abusive practices 

that we know occur in the marketplace. 

31 

So there are two things that really caught my attention. One was 

the specific reference to specific things in Dodd-Frank that are new 

requirements that would impact your businesses; and the second 

was gaps that exist for nonbank lenders. 

If you could, either Ms. Smith or Ms. Andersen, just detail those 

things for me, please? 

Ms. ANDERSEN. The legislation looks like we are going to have 

about 252 new regulations; roughly, by estimates, 5,000 new pages 

of regulations to deal with. Again, I have 22 employees. That is a 

lot of pages of regulation for us to understand, implement, and 

comply with. 

Specifics, I can—I am happy to get you that answer later. But 

I do have one specific thing. 

Mr. CARNEY. If there are specifics beyond just the fear of the unknown, which we have talked about, if there are some specifics, I 

would like to know those. Some of the specifics aren’t known because there is still rulemaking going on. 

Ms. ANDERSEN. Requiring the registration at the SEC of municipal advisers is one of those potential issues. I think the final rules 

aren’t written on that yet, but the way it looks at the moment, anybody who has any contact with municipalities, so it could be a teller. The town clerk comes into my bank and has money to deposit 

and the teller says, ‘‘You know, if you put it over in this account, 

you might earn a little more interest than if you put it in this account,’’ would qualify as a municipal adviser, and that person 

would then be required to register with the SEC and be regulated 

by the SEC. 

Anybody who serves on those boards, if they are not elected and 

they are providing advice, in small communities, the people who 

provide financial advice to the schools and to the foundations are 

very often the banker, and the banker would have to then be registered with the SEC. 

Mr. CARNEY. Anything else? 

Ms. ANDERSEN. That is the one that comes to mind right now. 

I can get others for you. And the second part of your question— 

Mr. CARNEY. That doesn’t sound very onerous. It just sounds 

kind of ridiculous. 

Ms. ANDERSEN. It is onerous to have another regulator involved. 

That means the SEC can then come into my bank and regulate me. 

The annual fees to register are excessive. It is just one more layer 

of regulation. 

Mr. CARNEY. Thank you. 

Ms. SMITH. One regulation that comes to mind is the interchange 

price fee cap. I think my credit union will definitely be devastated 

by the loss of the revenue from the Fed’s proposed debit interchange fee rule. Although we fall under the so-called exemptions, 

because we are a lot less than $10 billion, I believe that forces as 

a result of this provision will drive— 

Mr. CARNEY. If I can cut you off, because we have been running 

out of time, we have had a lengthy discussion about interchange. 

There are lots of things going on there. 

Ms. SMITH. Okay. But we can submit more information to you at 

a later date. 

32 

[The additional information referenced can be found on page 140 

of the appendix.] 

Mr. CARNEY. Mr. Shelton, is there anything else you would like 

to add to the discussion about some of the concerns? I appreciate 

the concerns that you have talked about and I share those concerns. I am just wondering, the balance here that we are trying to 

strike between appropriate regulation and addressing the abusive 

practices, the predatory lending that concerns you and your organization. 

Mr. SHELTON. Certainly, through the thorough investigation done 

by this committee, by the full committee, by the Senate Banking 

Committee, on the challenges and the problems of the lack of regulation, prompt us to make sure that these new regulations are put 

in place. Again, we are trying to avoid the insanity issue here. We 

need to do things differently because what we did before did not 

work. What we are seeing here are things where it is clear it will 

improve the process and add to the protection, and hopefully the 

access to capital where American people did not receive very much. 

Mr. CARNEY. Thank you. We are out of time. 

Chairwoman CAPITO. Mr. Westmoreland for 5 minutes. 

Mr. WESTMORELAND. Thank you, Madam Chairwoman. 

Mr. Shelton, in your testimony you quoted a spring of 2000 article that suggested that—I believe it says you asked the gentleman 

who wrote the article if credit scoring resulted in higher rejection 

rates for certain racial and ethnic minorities than for Whites, and 

his response was simply, ‘‘yes.’’ 

Are you saying that the credit bureaus are being unfair because 

of race and ethnicities, or are you saying that banks and credit 

unions have different scores for different categories of people? 

Mr. SHELTON. No. Actually what I was referring to was the companies that actually do this credit scoring process, the FICOs and 

other organizations along those lines, had pretty much what we 

call a ‘‘black box.’’ That black box is one that takes into consideration certain issues and concerns about the person who is applying 

for the credit and assigns a score accordingly. 

What we argued was that, however, there were some racial and 

actually ethnic disparities in how they actually come to those 

scorings, and they won’t tell us exactly what that is. In essence, 

you put it in the hands of so many Americans, a process which is 

considered proprietary. They argue that they don’t have to tell us 

exactly how they come to the score because that would otherwise 

affect their business. That is what we were talking about. 

Mr. WESTMORELAND. So you are not saying that Ms. Andersen or 

Ms. Smith or any of those are taking somebody who has a 650 

credit score and rejecting them based on their race or ethnicity 

rather than the credit score? 

Mr. SHELTON. What we saw was a different standard being applied for racial and ethnic minorities than for White Americans. 

Quite frankly, those who were in the same income class, at the 

same risk factors, those at the same level of property and so forth, 

and the same level of education, were actually being steered into 

subprime loans, if you were African American or otherwise a person of color, than were actually eligible for a prime loan. That is 

what we were talking about at that point. 

33 

Mr. WESTMORELAND. With the same credit score? 

Mr. SHELTON. In some cases, with the same credit score as well. 

Mr. WESTMORELAND. Ms. Smith, is that true? 

Ms. SMITH. That is not. At my credit union, that is not true. 

Mr. WESTMORELAND. Ms. Andersen, is that true? 

Ms. ANDERSEN. No, that is not true at my bank either. 

Mr. SHELTON. I would be delighted to offer for the record a copy 

of the report with a full analysis. I can’t say their particular 

small— 

Mr. WESTMORELAND. I don’t really want to see a 2000 report. 

This is 2011. 

Mr. SHELTON. We will give you an updated copy. 

Mr. WESTMORELAND. Do you think the CFPB is going to help get 

everybody equal credit scores? 

Mr. SHELTON. It will help make sure that everyone is scored fairly. And that is the issue here, making sure the same issues are 

taken into consideration and preventing the kind of misdirection of 

those who should have gotten a better interest rate, fees, and so 

forth. 

Mr. WESTMORELAND. Do you have some specifics of the accusations that you are making against some of the credit scoring folks? 

Mr. SHELTON. We do. 

Mr. WESTMORELAND. I would like to see that, too. 

Mr. SHELTON. We will send it to you. 

Mr. WESTMORELAND. The next thing you mention, in the next 

paragraph actually, is you are talking about how even after the 

Fair Housing Act, after the Equal Credit Opportunity Act, after the 

Mortgage Disclosure Act, after the Community Reinvestment Act, 

that racial and ethnic minorities are still treated disproportionately 

in the world of financial services. So you think the CFPB or DoddFrank is going to straighten that out? 

Mr. SHELTON. It is certainly our hope. 

Mr. WESTMORELAND. Okay. Could you give me an example of 

what it would take for them to do to straighten it out? 

Mr. SHELTON. It is clearly the increase of oversight. What we experienced before, again, we were convinced the chief regulatory 

agency— 

Mr. WESTMORELAND. What type of oversight? Are they going to 

be doing—because I know to get a certain loan now, you have to 

do consumer financing, education, how to buy a house. So I want 

a specific from you about how this is going to help. 

Mr. SHELTON. It should outlaw— 

Mr. WESTMORELAND. Other than oversight. 

Mr. SHELTON. It should outlaw exploding ARMs. We knew that 

there were Americans who were being sent into financial packages 

they couldn’t sustain. Anytime you have a product that would give 

you a mortgage that you couldn’t support in the first place, but at 

the introductory rate, what we had was people being given mortgages at 4 percent for the first 2 years, increasing that by 2 percent 

every year for the next 5 years, and then dropping the escrow so 

people couldn’t afford to sustain them. 

Mr. WESTMORELAND. I was in the construction business, but that 

was not because of somebody’s ethnicity or anything else. They 

made those stupid loans to a lot of people. 

34 

Mr. SHELTON. Yes, they did; but for some reason, they targeted— 

Mr. WESTMORELAND. And that was due, a lot of it, to the Community Reinvestment Act. 

Mr. SHELTON. I disagree with that. 

Mr. WESTMORELAND. I appreciate all of you being here. I yield 

back. 

Chairwoman CAPITO. Mr. Green for 5 minutes. 

Mr. GREEN. Thank you, Madam Chairwoman, and thank you for 

the unanimous consent that I might participate. 

I think that we should talk about legitimate concerns. I believe 

that the interchange fee is a legitimate concern. I think we have 

to do something about it. I think that flexibility with products is 

a legitimate concern. We will have to do something about it. I believe that personnel issues for small lenders, this is a legitimate 

concern. We have to do something about it. 

But there are also other legitimate concerns that we have to do 

something about—3/27s, 3 years of a teaser rate that you qualify 

for, the adjusted rate that you do not qualify for, or 27 years of a 

rate that might move up or down—2/28s, the same thing. A little 

bit more onerous. Yield spread premium. Qualify for a prime rate, 

given a rate higher than the prime rate, never told that you qualified for the prime rate. Pushed into the subprime market. We need 

to do something about it. Teaser rates that coincide with prepayment penalty. Legitimate issues. We need to do something about 

them. 

Naked shorts. I don’t mean to sound X-rated, but for those of you 

who understand these things, people playing the market and not 

having the ability to cover. 

Credit default swaps in an insidious way. There are some ways 

to have credit default swaps that are meaningful. But when you 

take it to the level of doing what we used to call participating in 

the numbers racket, where a number runner—many of you don’t 

know about this. I am a little bit older than most of you, but we 

used to have these guys come through the neighborhood. They 

would sell something called numbers. And the number runner, if 

he had a big hit on one number, meaning a lot of people bought 

that number, he would go to a fellow bookie and say, ‘‘Listen, I 

have a big run on number 7 this week. I will give you $10,000 and 

if number 7 hits, you split the loss with me. If it doesn’t hit, you 

keep the $10,000.’’ They literally found a way to legitimize that 

kind of behavior in an insidious way. 

We have to do something about it. So we have all of these issues 

that are legitimate and we have to do something about them. And 

because time is of the essence, I will ask but one question, perhaps 

a follow-up, but one question. 

Are any of you contending that we need to do away with the 

CFPB, the Consumer Protection Financial Bureau? Are any of you 

contending we need to end it? 

Mr. Shelton, are you contending that we need to do away with 

it? 

Mr. SHELTON. Absolutely not, sir. 

Mr. GREEN. Let the record reflect that he says ‘‘no.’’ 

Yes, sir? 

Mr. SHARP. No, sir, we are not. 

35 

Mr. GREEN. Ma’am? 

Ms. SMITH. No, sir. 

Ms. ANDERSEN. No, sir. 

Mr. GREEN. Since we are not going to end it, and I think most 

people in this room agree—and, by the the way, I plan to work 

with my friends on the other side. I think they will attest to the 

fact that even though sometimes it is difficult for them to do it, we 

still work together, we try as best as we can. I plan to work with 

them. I plan to work with people who are seated at the table and 

behind the table to try to get some of these things resolved. 

That is what this really is about: How can we mend it? Because 

as was indicated by the ranking member, I believe, all major legislation faces challenges. The only piece of major legislation that we 

will ever pass that will not face a challenge, that will be perfect, 

is the one that I will draft. 

So now, given that I am not drafting all of this legislation, it will 

all have to be mended. And that is the challenge. We have to find 

a way to mend it, rather than end it, so that all of these legitimate 

issues can be addressed. 

Madam Chairwoman, thank you for the time. I yield back and 

beg that I be excused because I am late for another meeting. 

Chairwoman CAPITO. Thank you. 

Mr. Luetkemeyer for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Madam Chairwoman. 

Mr. Sharp, in your testimony, your written testimony, you talk 

about some discussion that Professor Warren had in some of her 

documents and some of her writings with regards to her opinion of 

a commission versus a board. And I think that is what Chairman 

Bachus’ bill is all about, is we are looking at trying to go from a 

single person to a commission here. 

In your discussion, you talk about about a 2007 article, that Professor Warren believes that it probably clearly shows a Consumer 

Product Safety Agency is a cost-effective way to set up an agency. 

Another comment you made is in a 2008 Law Review article, that 

she indicates that a major challenge in establishing a Federal regulator, like what she is trying to do or they are trying to do, is minimizing the risk of capture, which means that only one person can 

have the total control over a thing and capture all of what is going 

on. 

Can you elaborate just a little bit on that, since that is really the 

focus of what this committee should be talking about today? 

Mr. SHARP. Certainly. For more than 100 years, there has been 

a strong preference for regulatory agencies, particularly independent regulatory agencies; that there be bipartisan representation; that there be multi-member leadership. In fact, I am glad actually that Mr. Green asked the question, is anybody on the panel 

here asking or proposing that the CFPB go away; and the answer 

unanimously was no, it is important. Also, there were a number of 

questions about what in particular are we concerned about in the 

credit markets. Unfortunately, the answer for the most part is, we 

don’t know. 

So what is the best way to prevent serious unintended consequences down the road as this new agency begins to put out regulations? In our view, the best way to mitigate that at the top, 

36 

early on here, before we begin to create problems, is to establish 

a structure, a framework, a way of doing business at this new 

agency that incorporates a diversity of views. Again, it appears 

that Ms. Warren in previous positions has agreed that structure is 

sound. 

Mr. LUETKEMEYER. I think that is important from the standpoint 

that she, quite frankly, is probably the leading candidate, and she 

agrees with what we are trying to do here today, and I think that 

is an important point to make. 

The second point I want to make is the the other day when she 

was here, I asked her about the cost/benefit of the regulations that 

are proposed by all the different groups, as well as something her 

testimony was suggesting we should take a look at, the cost/benefit 

of the regulations that she is overseeing. I asked her the question, 

I said, ‘‘Okay, give me an example of when the cost is too much 

for a regulation.’’ I never got an answer. 

We talked about cost quite a bit today with Ms. Andersen and 

Ms. Smith, and I think it is important to know—can you tell me 

right off the top of your head, or just a ballpark figure, what the 

cost of compliance is and how much it has increased in the last 

couple of years and what you anticipate with this new bill—just the 

percentage of your income? 

Ms. SMITH. If I can go first, I do have a full-time employee. So it probably is costing me about $80,000. 

Mr. LUETKEMEYER. Okay, so 1 out of 17. So you are probably 

looking at, what, a 6 percent increase; 6 percent of your cost increase is a result of compliance, fair, roughly? 

Ms. SMITH. Approximately. 

Mr. LUETKEMEYER. Probably similar to Ms. Andersen? 

Ms. ANDERSEN. Very similar. I would estimate we have about 11⁄2

people committed to compliance. 

Mr. LUETKEMEYER. I think it is important to understand, Congressman McHenry a while ago made a great point with regard to 

small institutions like yourselves make it difficult when you have 

to spread that much cost over all of your income and all of the 

products you have, because you don’t have quite the portfolio that 

the large institutions do to spread those costs out. 

As a result, it makes it more difficult for you to be in business. 

And I think it is important to understand that by increasing these 

costs, it also increases the danger of—you need to continue to be 

viable, especially when you have to look at 5,000 new pages of regulations. You may have to hire an attorney to actually go through 

and make sure that you are complying with all of this. 

I think this is where this leads to, is this game of ‘‘gotcha’’ with 

the examination forces. They come in with all these new rules and 

regulations. And I think you, Ms. Andersen, made the comment 

about the small banks being endangered, or I think something like 

that with regard to these compliance costs. I think that this is— 

this goes back again to answering one of the other questions I 

think that somebody asked earlier with regards to access to credit. 

I think part of this is not only it hurts in several respects, number 

one, it is the fear of compliance. Because if you are going to get 

fined by not complying with something, I think you will hesitate to 

make those loans and provide those services. I think just the cost 

37 

of compliance increases in general hurt, overall, the access to credit. 

I am out of time. Thank you, Madam Chairwoman. 

Chairwoman CAPITO. Thank you. The gentleman’s time has expired. 

At this time, I would like to excuse Ms. Andersen from the panel. 

She has a flight, I believe, that she needs to catch. So we have a 

couple more questioners we are going to go through, but I wanted 

to thank you for your testimony. When you need to leave, just go 

ahead and make your exit. But I wanted to be sure and thank you. 

Ms. ANDERSEN. Thank you very much, Madam Chairwoman. 

Chairwoman CAPITO. Mr. Huizenga for 5 minutes for questions? 

Mr. HUIZENGA. Thank you, Madam Chairwoman. I actually don’t 

plan on taking that much time. 

I had been in real estate and developing back a number of years 

ago. My family is still involved in the construction industry, what 

little there is in Michigan these days, unfortunately. But one of the 

questions that I had was when I was in real estate, I was taught 

people are not black, they are not white, they are not red, they are 

not yellow; they are green. And they are green because, can they 

afford things? 

That really to me I think is the crux of this as we we are talking 

about this. We are talking about whether people can afford to purchase the homes that they have. We talk about what has happened 

in the market. I have watched it very, very closely, and no State 

has been hit harder than Michigan in this. 

Some of it may be generational. I am 42, and I think I am on 

my fourth house now. Mom and Dad are in their second house and 

they had half of their downpayment saved up when they bought it. 

Natalie and I weren’t quite that far along. 

You are all smiling, you are all nodding your heads, because I 

think it is a familiar story. 

In so many ways, we have just sort of overextended ourselves as 

we have been pursuing what we thought was the American dream. 

It is the American dream to own your little piece of America, and 

so often that is in a home. 

We have seen that destroyed in many ways, because, whether it 

is greed or what we thought was a necessity, I am very concerned 

about that. I am concerned about those stories. And I too want to 

hear those stories, whether we can point to specific instances of 

people being pushed into products that they should not have been. 

That is very concerning to me. 

But I think we are at a watershed here. How do we make sure 

that we get people products that they can use? Because I also know 

that it used to not work very well, because there were so many artificial limits on people’s ability to go own a home. We had thresholds that were very difficult to achieve in many ways. So I think 

we have both a cultural as well as a regulatory structural problem 

as we are trying to go forward on that. 

What I am curious about is whether you think the structure— 

you all have said you believe that the Consumer Financial Protection Bureau is something that shouldn’t go away. Maybe the followup question to that is the structure, because that is really what we 

are talking about here with Mr. Duffy and others’ proposals here. 

38 

You believe that the structure of that particular program or Bureau needs to be that one person. 

Now, we have had the leading contender, Mrs. Warren, Professor 

Warren, here. According to news reports this morning, coming out 

of Michigan, my former Governor, Governor Granholm, is also 

being apparently looked at for that position. Having worked with 

her for 6 years, she is a wonderful lady. Very smart. I want to 

make sure that we have a Bureau on that, whether it is her or 

whether it is Professor Warren or somebody else. 

But I am curious. Can you answer as to whether you believe that 

somehow the structure of this would be impacted, whether it be a 

three-person or a five-person board versus this one particular person? 

Ms. Andersen, I don’t know if you would care to answer that? 

Ms. ANDERSEN. I think that the structure, restructuring and having a board or a commission, makes a lot more sense. You are able 

to have a broader view, broader representation, especially assuming that board consists of people who have safety and soundness 

regulation experience as well as consumer advocacy experience. 

Mr. HUIZENGA. Thank you. 

Ms. Smith? 

Ms. SMITH. Yes, I agree. We do want to see a five-member board 

in place. I don’t feel that one person should run that organization. 

Mr. HUIZENGA. Thank you. 

Mr. Sharp? 

Mr. SHARP. We definitely agree. A commission is superior to just 

having a single director. 

Mr. HUIZENGA. Mr. Shelton, do you care to answer that? 

Mr. SHELTON. Yes, sir. What we see in this particular case is this 

person actually has the authority to convene smaller groups of advisors to address the concerns that are before them. We see no 

problem with having one director in this particular case with the 

authority to convene the kinds of groups to help provide support for 

the initiatives the agency is going to be responsible for implementing. 

Mr. HUIZENGA. Do you believe it is superior having that one person versus having a three-person commission? 

Mr. SHELTON. At this particular time, I think having one person 

gives you that dexterity, that flexibility to move very quickly. One 

of the things that has also been very clear to us is that many of 

these products end up popping up almost like a whack-a-mole, and 

we have to be prepared to knock them down as quickly as we can. 

And having one person at the head means there is one person 

being held accountable for the agency. 

Chairwoman CAPITO. The time of the gentleman is up. I think we 

are edging up towards a vote, so I want to make sure I get the 

panel and all the questioning. 

So, Mr. Duffy. 

Mr. DUFFY. Thank you. To kind of follow up on that, Mr. Shelton, 

then would you say that with the FDIC, that should also be just 

a one-person director; maybe the National Credit Union Administration, that should also be a one-person director? The SEC—one 

person—director? 

39 

Mr. SHELTON. Those particular agencies, quite frankly, have 

more than one person and have been ineffective. 

Mr. DUFFY. So you would advocate that we should have a oneperson director? 

Mr. SHELTON. I am advocating having someone who can actually 

carry out the responsibilities of protecting the American people. 

Mr. DUFFY. If we look outside of banking, we can look to the Federal Trade Commission and the U.S. Consumer Product Safety 

Commission, both consumer protection agencies that use commissions as well. Are they also ineffective? 

Mr. SHELTON. Let me just say that, very well, if you wanted to 

address those agencies, we would be happy to come back and and 

testify. 

Mr. DUFFY. But they are ineffective. So you think we should restructure the government so these agencies have one director? 

Mr. SHELTON. We believe it would be a major improvement over 

the system we have right now. 

Mr. DUFFY. Ms. Smith, was your credit union one of the contributing factors to the financial crisis? 

Ms. SMITH. No, we were not. 

Mr. DUFFY. You heard a lot about predatory lending today. Were 

you engaged in predatory lending? 

Ms. SMITH. No, I was not. 

Mr. DUFFY. I guess I was going to ask Ms. Andersen the same 

question. I assume her answer would have been the same. But as 

we have gone through these Dodd-Frank regulations, is it fair to 

say that the regulations on your credit union have increased dramatically? 

Ms. SMITH. Yes, they have. 

Mr. DUFFY. And with the new regulations that are going to come 

from the CFPB, they will also continue to increase with regulation, 

right? 

Ms. SMITH. Yes, they will. 

Mr. DUFFY. And you are not opposed to smart regulations in 

banking, are you? 

Ms. SMITH. No, I am not. I just feel the unregulated should be 

regulated. 

Mr. DUFFY. But overburdensome regulation increases costs, 

doesn’t it? 

Ms. SMITH. Correct. 

Mr. DUFFY. And if you look at economies of scale, it makes it 

more difficult for a small bank or a credit union to compete against 

the big banks, doesn’t it? 

Ms. SMITH. Yes, it does. 

Mr. DUFFY. You don’t have the economies of scale, right? 

Ms. SMITH. Right. 

Mr. DUFFY. And in the end it drives up costs for your consumers, 

right? And you didn’t have anything to do with the financial crisis 

or anything to do with predatory lending? 

Ms. SMITH. No, sir. 

Mr. DUFFY. But your consumers are paying the price for it? 

Ms. SMITH. Yes, they are. 

Mr. DUFFY. In regard to what we are talking about with regard 

to predatory lending, Mr. Shelton, I agree with you, it is atrocious 

40 

what happened in the marketplace. You and I are on the same 

page with that and it has to be addressed, and you will find no argument from me with regard to that. 

I want to talk about how the CFPB has been set up, however. 

I look at the review process. To have a situation where basically 

the only way FSOC can review a rule from the CFPB is if we have 

a systemic risk in the marketplace, in the financial system. The 

burden is incredibly high, isn’t it? Would you agree with that? 

Mr. SHELTON. I am still not seeing a problem. 

Mr. DUFFY. So you are okay with that, an incredibly high burden, where the only way to review it is with systemic risk to the 

system. 

Mr. SHELTON. I would love to hear the argument as to why that 

is problematic. 

Mr. DUFFY. I guess I would say, shouldn’t we say at some point 

if consumer protection is an affront to safety and soundness, 

shouldn’t we have the FSOC then review those situations as well, 

even though it doesn’t create a systemic risk in the whole financial 

industry? 

Mr. SHELTON. Perhaps. 

Mr. DUFFY. Okay, good. We are on the same page then. 

Mr. SHELTON. Perhaps. 

Mr. DUFFY. Okay. And if you look at the review process, the 

FSOC is a 10-person board. Ms. Warren or the director of the 

CFPB is one of the ten. Do you think the director of the Bureau 

should be one of the 10 who votes on the FSOC? 

Mr. SHELTON. I see no problem with that. The continuity, I 

think, would be extremely important to any deliberations by that 

body. 

Mr. DUFFY. Do you think they are going to be impartial? Do you 

think the director is going to be impartial on that board? 

Mr. SHELTON. I think more importantly they will be informed, 

and that is extremely important in a situation like this. 

Mr. DUFFY. You can be informed without having a vote, right? 

You can still present your case, but not be a voting member, right? 

Mr. SHELTON. But even this body doesn’t do an assessment of 

how a government agency is performing its responsibilities without 

bringing the heads of that agency before it. Quite frankly, you want 

that intervention, you want that involvement in making your deliberations. 

Mr. DUFFY. And you can do that without giving the director a 

vote. And this is my concern. 

Mr. SHELTON. But it is only one out of how many? 

Mr. DUFFY. Ten. 

Mr. SHELTON. One out of ten. 

Mr. DUFFY. One out of ten. And we need a two-thirds majority 

to pass it. And with that two-thirds majority, one of the voting 

members is the director of the Bureau. So this is a supermajority. 

Doesn’t it make sense to say if—and we are all on the same page, 

we want consumer protection. 

Mr. SHELTON. Yes, we do. 

Mr. DUFFY. And we also have a concern for safety and soundness. And if there is an affront to safety and soundness, why don’t 

41 

we go to FSOC, take the Bureau director out of play of FSOC, and 

have a 5–4 majority to overrule the ruling from the CFPB? 

Mr. SHELTON. That has been their overview, that has been their 

responsibility, and, quite frankly, they haven’t carried it out. 

Chairwoman CAPITO. Mr. Canseco for 5 minutes. 

Mr. CANSECO. Thank you, Madam Chairwoman. I am sorry that 

Ms. Andersen from the Bennington Bank is not here to answer 

some questions that I have. But I think that I can start out by saying that I feel that there is a strong impact that the CFPB regulatory authority could have on banks’ ability to assess and to adjust 

credit risk on an ongoing basis, because badly implemented consumer financial protection regulations could hinder a bank’s ability 

to maintain prudent credit underwriting standards. 

But with that said, Ms. Smith, in your industry do you feel that 

is true with regards to maintaining your credit risk and the balance on your credit? 

Ms. SMITH. Yes, I do. 

Mr. CANSECO. Mr. Sharp, in my district in San Antonio, Texas, 

we have an enormous number of start-up companies, whether it is 

biotech or tech or other technology firms, and a lot of them as 

start-up companies find that their sources of credit are sometimes 

a little bit diminished, so they go to their own personal credit to 

obtain that primary financing. I noticed that the U.S. Chamber of 

Commerce has estimated that 47 percent of small business owners 

use personal and not business lines of credit in order to grow their 

businesses and create jobs. 

Because the CFPB essentially extracts consumer protection 

guidelines from other agencies and makes consumer protection its 

primary objective, do you feel there is a risk that small businesses 

and small business owners who are looking to create jobs and to 

build their businesses will be viewed as overextended consumers 

and be denied that credit? 

Mr. SHARP. Yes, sir, we do have that concern. In fact, I believe 

that figure is even a Small Business Administration figure as well, 

not an internal Chamber number. I believe this is the number that 

comes from the government. 

But, yes, that is a very big concern of ours. It is not just individual access to credit that could be harmed through this process. 

Again, there is a very delicate balance that needs to be struck. But, 

as you point out, so many small businesses, particularly in their infancy, rely on consumer products to get their businesses off the 

ground. And if individual credit is harmed or constrained or limited, there is a knock-on effect on the small business world, and 

that is a concern for us. 

Mr. CANSECO. Do you feel there is a strong distinction to be 

made between consumer protection and safety and soundness? 

Mr. SHARP. Yes. You can’t have one without the other, for sure. 

Mr. CANSECO. Ms. Smith? 

Ms. SMITH. I do concur. 

Mr. CANSECO. Thank you. I yield back. 

Chairwoman CAPITO. All right, the gentleman yields back. 

I would like to thank the panel for their testimony and their response to questions. I appreciate your participation. I want to dismiss the first panel. 

42 

I am going to ask the second panel to assemble. We are going 

to run over and make our vote, but Mr. Renacci may come back 

and assume the chair so we can go ahead and move the testimony 

forward. 

Thank you all very much. 

[recess] 

Mr. RENACCI. [presiding] The hearing will resume. I would like 

to introduce our second panel of witnesses. 

First, we will hear from Mr. Noah Wilcox for 5 minutes. 

STATEMENT OF NOAH H. WILCOX, PRESIDENT AND CHIEF EXECUTIVE OFFICER, GRAND RAPIDS STATE BANK, ON BEHALF OF THE INDEPENDENT COMMUNITY BANKERS OF 

AMERICA (ICBA) 

Mr. WILCOX. Thank you. Chairwoman Capito, Ranking Member 

Maloney, and members of the subcommittee, my name is Noah 

Wilcox, and I am a fourth-generation banker. I am president and 

CEO of Grand Rapids State Bank and a member of the executive 

committee of the Independent Community Bankers of America. 

Grand Rapids State Bank is a State-chartered bank with $236 million in assets, located in Grand Rapids, Minnesota. I am pleased 

to represent community bankers and ICBA’s nearly 5,000 members 

at this important hearing today. 

Community bankers are deeply rooted in the communities they 

serve. Because we cannot compete with megabanks on margins or 

economies of scale, we focus instead on the individualized needs of 

our customers. We practice relationship banking, not one-off transactional banking. Our customers are our friends and neighbors, 

and any given loan or other service is part of a long-term relationship. Our reputations in our communities are paramount and are 

a condition of our success. 

Community bankers have an overriding incentive to treat each 

customer well and earn their trust. The Dodd-Frank Act exempts 

community banks with less than $10 million in assets from primary examination by the CFPB. Because we will be subject to 

CFPB rules and to examination on a sampling basis, we have a 

keen interest in improving the structure and the procedures of the 

Bureau and the quality of the rules that they issue. 

We support Chairman Bachus’ recently introduced bill, H.R. 

1121, which would restructure the CFPB so that it is governed by 

a five-member commission rather than a single director. Commission governance would allow for a variety of views and expertise 

on issues before the Bureau, and thus build in a system of checks 

and balances that a single director form of governance simply cannot match. The commission model, which has worked well for the 

FDIC, the SEC, and the FTC, would help ensure that the actions 

of the CFPB are measured, nonpartisan, and result in balanced 

high-quality rules and effective consumer protection. 

Consistent with our support for a commission structure, ICBA 

supports efforts to strengthen prudential regulatory review of 

CFPB rules, which is extremely limited under the Dodd-Frank Act. 

ICBA supports Congressman Duffy’s bill, H.R. 1315, which would 

change the voting requirement for an FSOC veto from a two-thirds 

vote to a simple majority, excluding the CFPB director. 

43 

The proposal would also change the standard to allow for a veto 

of a rule that is inconsistent with the safe and sound operations 

of the United States financial institutions. The current rule standard puts at risk the safety and soundness of the banking system 

or stability of the financial system as a whole. This is nearly impossible to meet, and would let stand rules that are extraordinarily 

harmful to banks and consumers. 

While this change would improve CFPB rulemaking, ICBA has 

proposed language that would further broaden the standard to 

allow FSOC to veto a rule that could adversely impact a subset of 

the industry in a disproportionate way. We believe this standard 

would give prudential regulators a more meaningful role in CFPB 

rule writing. 

The CFPB’s far-reaching impact over the financial sector, consumers, and the economy should be matched by the highest standard of accountability. Ultimately, accountability for the actions of 

the CFPB resides with its director, appointed by the President and 

confirmed by the Senate. This basic mechanism of good governance 

would be undermined if the CFPB were to be operative before its 

director is confirmed by the Senate. For this reason, ICBA supports 

Chairwoman Capito’s discussion draft that would postpone transfer 

of functions to the CFPB until its director is confirmed. 

The final discussion draft on which I will comment would prevent the CFPB from participating in the examination of large 

banks on a sampling basis before the transfer of functions to the 

CFPB. We appreciate your caution about CFPB exams. Though 

this legislation would not affect community banks such as mine, we 

agree that sampling exams are not an innocuous exercise, and have 

requested relief from sampling exams of banks with less than $10 

billion in assets after the transfer of functions. The so-called ‘‘ridealong’’ provision allows the CFPB, at their discretion, to have input 

into every aspect of a small bank exam. Eliminating this authority 

would allow the CFPB to focus its resources on the examination of 

entities that pose a greater risk to consumers. 

Thank you again for the opportunity to testify today. ICBA is 

fully committed to developing effective and practical consumer protection for our customers, for customers of our competitors, and for 

the safety and soundness of the financial system. Thank you. 

[The prepared statement of Mr. Wilcox can be found on page 130 

of the appendix.] 

Mr. RENACCI. Thank you, Mr. Wilcox. 

Our next witness, Mr. Rod Staatz, president and chief executive 

officer, SECU of Maryland, on behalf of the Credit Union National 

Association, is recognized for the purpose of making a 5-minute 

opening statement. 

STATEMENT OF ROD STAATZ, PRESIDENT AND CHIEF EXECUTIVE OFFICER, SECU OF MARYLAND, ON BEHALF OF THE 

CREDIT UNION NATIONAL ASSOCIATION (CUNA) 

Mr. STAATZ. Thank you for the opportunity to testify today. I am 

Rod Staatz, president and CEO of SECU of Maryland, and a member of CUNA’s board of directors. 

Credit unions are the best way for consumers to conduct their financial services. However, credit unions are facing tremendous regVerDate Nov 24 2008 14:46 Jul 15, 2011 Jkt 066862 PO 00000 Frm 00049 Fmt 6633 Sfmt 6633 K:\DOCS\66862.TXT TERRIE
44 

ulatory burdens that will only get worse as Dodd-Frank is implemented. Relieving credit unions’ regulatory burdens so that they 

are able to serve their members in a safe and sound manner is our 

objective. 

CUNA has consistently stated that consumers of financial products, especially those provided by unregulated entities, need greater protections. We believe that a consumer financial protection 

agency could be an effective way to achieve that protection, provided the agency does not impose unnecessary regulatory burdens 

on credit unions and takes an active role in improving disclosures 

for customers. 

In order for such an agency to work, consumer protection legislation must be consolidated and streamlined. It should not add to the 

burdens of credit unions that have been regulated for decades and 

performed very well. 

The subcommittee has given consideration to several of our concerns regarding Dodd-Frank, specifically, debit interchange regulations. We appreciate the opportunity to testify today regarding the 

structure of the Consumer Financial Protection Bureau. We have 

had a number of conversations with the staff at Treasury, which 

is working to establish the Bureau. We are encouraged by the 

staff’s outreach, and especially by the establishment of the Office 

of Community Banks and Credit Unions. 

Still, credit unions remain concerned that regulatory change 

could work to the detriment of our members. We have been asked 

to present our views on H.R. 1121. This legislation would replace 

the director with a five-person commission. If Congress decides to 

pursue this legislation, we would encourage the size of the commission be expanded to include appropriate industry and regulator 

representation, including a seat specifically for a person with experience related to credit unions. This would enhance the quality of 

regulations promulgated by the Bureau by ensuring that both the 

consumer and industry perspectives are represented. 

CUNA supports the intent of H.R. 1315 to achieve rules that balance consumer protection with safety and soundness. More specifically, we support the provision that would reduce, from two-thirds 

to a majority, the threshold for the FSOC to take action to set 

aside a Bureau rule. 

H.R. 1315 also makes changes to the conditions under which the 

council can stay or set-aside Bureau regulations. What is missing 

from that statute is the ability of the financial regulators to review 

Bureau regulation in the context of overall regulatory burden. We 

could support legislation to allow a rule to be set aside if the council determines it would be unreasonably burdensome for financial 

institutions and that burden to financial institutions outweighs the 

benefit to consumers. 

We have been asked to present our views on two discussion 

drafts related to the Bureau’s authorities prior to the appointment 

of a director. We believe that much more important than details of 

how and when the Bureau ramps up is how it will function once 

fully operational. We believe the Bureau should conduct its consumer protection mission in a manner that minimizes regulatory 

burden on financial institutions. Credit unions have not been the 

subject of widespread consumer complaints, and credit unions have 

45 

prudential regulators at the State and Federal level that are in a 

position to enforce consumer protection laws. 

We ask that Congress permit and encourage the Bureau to assign the examination of larger institutions which have not had a 

history of consumer abuses to their prudential regulators. 

We would like to recommend improvements to other areas of 

Title 10. We ask Congress to index the examination threshold for 

inflation. Without indexing these thresholds, significant erosion of 

the exemptions will occur in a relatively short period of time. 

We ask Congress to require the Bureau to report to Congress annually on steps they have taken to reduce regulatory burden, and 

hold a hearing to review the report and consider whether further 

action is needed. 

We also urge the subcommittee to work with the Bureau to establish a meaningful exemption process for credit unions under 

Section 1022. 

Let me be clear. We are not advocating for the elimination of 

consumer protection regulation. Rather, we seek a regulatory approach in which consumer protection is maximized and regulatory 

burden is minimized. 

On behalf of America’s credit unions and 93 million members, 

thank you very much for the opportunity to testify. And I am 

pleased to answer any questions. 

[The prepared statement of Mr. Staatz can be found on page 119 

of the appendix.] 

Mr. RENACCI. Thank you, Mr. Staatz. 

The next witness, Mr. Richard Hunt, president of the Consumer 

Banker’s Association, is recognized for the purpose of making a 5- 

minute opening statement. 

STATEMENT OF RICHARD HUNT, PRESIDENT, CONSUMER 

BANKERS ASSOCIATION (CBA) 

Mr. HUNT. Hi, and a very good afternoon. Chairwoman Capito, 

Ranking Member Maloney, and members of the subcommittee. My 

name is Richard Hunt, and I am serving as president of the Consumer Bankers Association. 

CBA is the national trade association for retail banking, fulfilling 

the financial needs of American consumers and small businesses. 

Retail banking is where the CFPB will now focus its broad authorities. We have had a long history of supporting improved consumer 

protection. It is no secret we opposed the creation of the CFPB. We 

believe the benefits are outweighed by the problems that arise in 

separating the agency from prudential banking regulators. 

Nevertheless, CBA is focused on helping our members prepare 

for this new agency which will be their primary regulator, and we 

have met on numerous occasions with those setting up the Bureau. 

We also acknowledge the Bureau will provide some benefits, such 

as providing the first real opportunity to level the playing field and 

have comprehensive Federal oversight of tens of thousands of 

underregulated, nondepository financial providers. 

We also support the simplification of TILA and RESPA disclosures. If there is a theme to our comments, it is uncertainty. Uncertainty creates risk, limits innovation, and does not promote competition, which, in the end, hurts consumers and small businesses 

46 

alike. This current transition period, the absence of a confirmed director, and the power of this new Bureau has created a time of 

great uncertainty for retail banking. 

Though the Bureau is required to coordinate with other agencies 

to promote consistent regulatory treatment, this concept is ill-defined. If another agency objects to a rule for any reason, the Bureau is charged only with noting the objection and its final 

issuance. In short, there is nothing in Dodd-Frank requiring the director of the Bureau to defer to the views of the prudential regulator, and there is virtually nothing to stop rules from being enacted that might cause serious harm to banks or even small businesses or consumers. 

To minimize concern that a single powerful director might adapt 

rules with harmful and unintended consequences, we would support a commission-led model. A commission provides an opportunity for alternative prospectives to be discussed and has been effective at a number of Federal agencies, including the Federal Reserve, the FTC, the FDIC, and the SEC. 

I will point out, Madam Chairwoman, even the Consumer Product Safety Commission, which was the model for the CFPB, is 

headed by a commission. Now, some have said the Bureau is 

checked by the veto authority of the Financial Stability Oversight 

Council, FSOC. That is factually correct, but not realistic. 

There are two main concerns: first, the supermajority needed to 

overturn a rule; and second, the threshold for making such a decision. Currently, 7 out of the 10 FSOC members must vote for a 

stay or a veto. Since one of the 10 members is the actual director 

of the CFPB, which would certainly not vote against itself, 7 of the 

remaining 9 would have to vote for a stay in order to set aside a 

rule. That is nearly impossible. 

Also, would it be prudent for the CFTC, who has no expertise in 

consumer retail banking regulation, having to decide rules regarding deposit products? 

In all due respect, that would be like my telling someone how to 

comb their hair, both out of their league. 

As for the threshold, the so-called veto is really more of a catastrophic insurance policy to protect only against a rule that would 

threaten the safety and soundness of the U.S. banking industry or 

the stability of a financial system as a whole. 

While it is good to also have a backstop against draconian rules, 

it does not address routine safety and soundness risk for a financial institution. It would only come into play in the most extreme 

situations. This threshold should be broadened to include a substantial impact on individual financial institutions. 

We also believe the authority to supervise large financial institutions and to issue regulations should not be transferred to the Bureau until a director has been confirmed by the Senate. 

In closing, yes, we support a commission-led CFPB, but in the 

absence of any structural changes, and because the CFPB will not 

have any authority to regulate nondepository institutions until a 

director is in place, which, of course, leaves us with the current 

unlevel and unfair playing field, we would urge the appointment 

and confirmation of a director who possesses a strong, comprehenVerDate Nov 24 2008 14:46 Jul 15, 2011 Jkt 066862 PO 00000 Frm 00052 Fmt 6633 Sfmt 6633 K:\DOCS\66862.TXT TERRIE
47 

sive understanding of the banking industry and the management 

skills needed to lead a $500 million-plus agency. 

CBA will continue to work with Members of Congress and the 

Bureau on these issues, and I look forward to answering any questions you may have. Thank you for the opportunity. 

[The prepared statement of Mr. Hunt can be found on page 71 

of the appendix.] 

Chairwoman CAPITO. Thank you. 

Our final witness is Professor Adam J. Levitin, Georgetown University Law Center. And you are being recognized for 5 minutes. 

STATEMENT OF ADAM J. LEVITIN, PROFESSOR, GEORGETOWN 

UNIVERSITY LAW CENTER 

Mr. LEVITIN. Madam Chairwoman, Ranking Member Maloney, 

and members of the subcommittee, my name is Adam Levitin. I am 

a professor of law at Georgetown University. I am here today as 

an expert on consumer finance and as a scholar whose work is 

deeply concerned with the financial security of American families. 

The bills being considered at this hearing would appear to be legislative tweaks to the structure of the Consumer Financial Protection Bureau. But let us not mistake what this hearing is really 

about. 

The issue presented by this hearing is whether Congress cares 

more about increasing the profits of banks or protecting the financial security of American families. Which is more important? Banks 

or families? That is the question. 

The new CFPB has not yet had a chance to get up and running, 

yet already we are seeing attempts to strangle the new agency in 

its crib. If you want to understand what this hearing is about, look 

at who is here at this witness table. There are three bankers and 

me. On the previous panel, there were three bankers and Mr. 

Shelton from the NAACP. Ask yourself who here likes the CFPB 

and who does not. The banks are opposed to the CFPB and want 

to see it hobbled, if not eliminated. 

But it is families, Main Street, and the real economy who like 

the CFPB and want someone looking out for them, making sure 

that banks don’t run wild like they did in the run-up to the financial crisis, because the other bank regulators, the prudential regulators, failed us and we were stuck with the bill. 

Again, does the subcommittee care more about the interest of 

banks or about American families? Now, I am aware that members 

of the committee are concerned that the CFPB will exercise its authority capriciously. This concern is misplaced. 

Despite what you will hear from the banks in the Chamber, the 

CFPB is more accountable than any other agency in the Federal 

Government, period. No other Federal agency has as many limitations on its powers as the CFPB. The CFPB is subject to the Administrative Procedures Act, notice and comment rulemaking, and 

hearing adjudication provisions. The CFPB’s actions are subject to 

judicial review. The CFPB is one of only three Federal agencies 

that are subject to OIRA small business flexibility review, which 

would cover some of the concerns of small financial institutions. 

The CFPB has numerous statutory limitations on its rulemaking 

power and must make detailed findings if it wishes to exercise the 

48 

power to declare certain acts or practices unfair, deceptive, or abusive. The CFPB is prohibited from imposing usury caps or from 

regulating nonfinancial businesses. 

The CFPB is the only Federal bank regulator subject to a budgetary cap. Every other Federal bank regulator is not going through 

appropriations and does not have a cap. The CFPB has a cap. 

Now, the banks in the Chamber may think that this cap is too 

high because they will enable the CFPB to be too effective; but I 

have never heard them complain about the lack of budgetary controls on the Fed, on the OCC, on the OTS or the FDIC. They only 

seem concerned about budgetary independence when it involves an 

agency tasked with prioritizing American families, not banks. 

The CFPB is the only Federal bank regulator whose actions are 

subject to a veto by the Financial Stability Oversight Council, a 

veto that is frankly of dubious constitutionality. Curiously, I have 

not heard any calls to subject the Fed or the OCC to similar vetos. 

And perhaps most crucially, the CFPD is subject to oversight by 

Congress. As this subcommittee’s actions have already shown, that 

is no small matter. No matter how the banks spin it, there is no 

escaping the fact that no other Federal regulator is subject to comparable oversight and limitations on its action. 

Now, turning to the bills at hand, Representative Bachus’ bill 

would replace the single CFPB director with a five-person commission. Put differently, the Bachus bill proposes paying five people to 

do one person’s job, and then giving each of those five a staff, and 

paying for office space for all of them. This is classic big government bloat and waste. What is more, by having five people doing 

one person’s job, accountability, which seems to be the overriding 

concern about the CPFB, will be diminished and leadership will become less effective. There is no reason to adopt a five-person commission. If a single director is good enough for the OCC, it is good 

enough for the CFPB. 

Representative Duffy’s bill would lower the threshold for the Financial Stability Oversight Council to veto CFPB rulemaking. It is 

frankly astonishing that anyone would propose to strengthen the 

FCC or the FSOC’s veto. The bank regulators given the veto are 

the very ones who failed to ensure both bank safety and soundness 

and consumer protection. In the private sector, these regulators 

would be out of a job. They would not be rewarded with a veto. 

The Duffy bill would require a veto if the CPFB rulemaking were 

inconsistent with bank safety and soundness. Now, bank safety and 

soundness is a technical term. Let me explain it to the committee. 

It means profitability. At its core, it is nothing more than profitability, and it is axiomatic that a bank can only be safe and sound 

if it is profitable. 

But consumer protection is sometimes at loggerheads with bank 

profits. The only reason to engage in predatory lending, for example, is because it is profitable. Banks don’t do it out of spite. What 

this means is that any CFPB rulemaking that affected bank profitability would be inconsistent with safety and soundness and thus 

subject to a veto. Thus, under the Duffy bill, the Credit Card Act 

of 2009 and Title 14 of Dodd-Frank, which reforms the mortgage 

lending industry, could not be implemented because they would 

49 

both affect bank profitability and be inconsistent with safety and 

soundness. 

In conclusion, the bills before this committee today seek to improve the CFPB by destroying it, by rendering it ineffective and incapable of performing the mission which Congress tasked it with: 

protecting American families by ensuring they get the information 

necessary to make informed decisions about their finances, and 

that financial products help consumers rather than induce financial 

distress. I urge you not to delay or diminish the CFPB’s effectiveness. 

[The prepared statement of Professor Levitin can be found on 

page 79 of the appendix.] 

Chairwoman CAPITO. Thank you. 

I want to thank all the witnesses, and I would like to begin the 

questioning. I would like to pivot off of Professor Levitin’s initial— 

it kind of shocked me a little bit to say that the choices here are 

between banks and families. 

We heard Ms. Andersen in the first panel state unequivocally 

that her customers, service to her customers is the lifeblood of her 

institution, and she provides—and she gave us I think some very 

good examples of targeted help. She talked about the Burmese refugees and other folks that they have been been able to target in 

their own community. So I would dispute that the choice is between banks or families. 

But I would like to give Mr. Wilcox a chance to weigh in on that 

statement as a banker. 

Mr. WILCOX. Sure. Thank you, Chairwoman Capito. I appreciate 

that opportunity. 

I would like to start by suggesting that there is a difference be- tween banks and community banks. My bank is a $236 million 

community bank and, as I noted in my opening testimony, our success is dependent on the people that we take care of. You will not 

find community banks around this country that have taken advantage of the people that they see at the grocery store, go to church 

with, and otherwise see around town. That is simply not the case. 

Our success is dependent upon the success of the people that we 

serve, and the vibrancy of the community that we operate in. And 

so that stewardship of the community is paramount to the success 

of community bankers from coast to coast. 

Chairwoman CAPITO. Thank you. I would like to ask Mr. Hunt 

to respond. I will say this about you, Professor, you changed my 

whole line of questioning when you made your statement. 

I would like to ask, on this question, that profitability equals 

safety and soundness, what does safety and soundness mean to 

you? 

Mr. HUNT. Making sure that the bank is healthy to provide the 

needed financial services to their consumers. They are not exclusive. You must have safety and soundness and you must have consumer protection. We have never advocated less consumer protection whatsoever. I am from Louisiana and we have a saying in Louisiana, ‘‘If Mama’s not happy, nobody’s happy.’’ 

Chairwoman CAPITO. I like it. 

Mr. HUNT. Thank you. If the customer is not happy, the bank 

does not survive. Period. If we do not protect consumers getting 

50 

loans, then they are going to go to another bank. There are 7,100 

banks in the United States. It is pure competition out there. We 

know they can virtually go across the street, so it is imperative 

that we have an agency that is worried about safety and soundness 

and consumer protection. 

Chairwoman CAPITO. Mr. Staatz, do you have a comment on that 

in terms of the credit union in terms of the profitability equals 

safety and soundness or banks—I suppose that could be slash, 

credit unions, if the choice is banks, credit unions or families? Because credit unions are families. We know they are members. If 

you would like to make a statement. 

Mr. STAATZ. Absolutely. We exist for those members. They own 

us. We have to perform for them each and every day. At the end 

of the day, there has to be a little profit to make sure that we are 

safe and we are sound, but we examine for them. And just like our 

banker friends here, you have to perform for them. We are in the 

community and we are directly responsible to them. 

Chairwoman CAPITO. Thank you. I would like to also respond, 

one of the bills is expanding—and I am on this bill—expanding 

from one to five in a commission. And I think we have plenty of 

testimony that shows that works for other government agencies, 

and there are some instances where there is a singular director at 

the top at the helm. 

But to say that creating a commission contributes to bloated 

waste, when this bill creates 1,000 people in a new consumer financial protection agency—and as we are finding and I would like to 

dig deeper on this, the way Professor Warren has laid it out for us 

is that she has gone to all these different agencies and said, okay, 

all the consumer protection is now going to be under this same organization within the Fed; but what we are finding is yes, there 

is another thousand people there, some of them are coming from 

these agencies, but the agencies are still keeping parts of their consumer protection and consumer investigative parts within that 

agency, duplicative government, and then the FDIC is going to create their own oversight to make sure that Mr. Wilcox’s bank is, 

whatever rules and regulations the CFPB put forward, that they 

can answer for that. 

So I am not sure that the lines that were drawn, supposedly, in 

this bill are going to exist if the behavior of the regulators that are 

in place now—the consumer protection is in place in different agencies now, are still existing there, a new agency here, and then another new oversight within the FDIC or at least someone watching 

over there. So with that, I will let Mrs. Maloney begin her questioning. 

Mrs. MALONEY. I want to thank all of the panelists for being 

here. Professor Levitin, some of my colleagues have indicated their 

concern, if you heard the testimonies earlier, that the CFPB will 

be an agency with unprecedented authority and reach. And in your 

statement, you said that it has more limitations on its power than 

any other Federal agency. So can you expand on these limitations? 

I listened to my colleagues all day long about how it has unprecedented reach. Yet, you say there are more limitations. Would you 

clarify for us, please? 

51 

Mr. LEVITIN. With pleasure. We can compare the CFPB both to 

Federal agencies in general and to other bank regulators in particular. We tend to structure bank regulators differently than other 

agencies. One thing we do with other bank regulators is we take 

their budgets and we take them out of the appropriations process. 

And the reason we are concerned about that is we don’t want political influence over safety and soundness issues. The thinking with 

the CFPB’s budget was, similarly, we don’t want political influence 

over consumer protection. It is too important to make it exposed to 

the political process within the election cycle. 

The CFPB, unlike any of the other Federal bank regulators, has 

a cap on its budget. The OCC, if the OCC wants to increase its 

budget, it just increases assessments that it charges on banks. The 

OCC doesn’t come to Congress for a budget. 

Similarly, the Federal Reserve, if it wants to increase its budget, 

just warms up the printing press. The CFPB, though, is capped at 

a percentage of the Federal Reserve’s operating budget and has no 

ability to set what that operating budget is. It sinks and swims 

with the Fed. And I think that is actually a very good structure because it says that we are going to make sure the consumer protection is at least going to be ‘‘X’’ percent of bank regulation. 

Now, compared with other Federal regulatory agencies, the 

CFPB is the only agency around where there is a veto over its authority. Congress tried to structure a similar thing with the Public 

Company Accounting Oversight Board, PCAOB, with giving the 

SEC a veto. And within the last year actually the Supreme Court 

said that the PCAOB structure was unconstitutional. That was 

really not specifically on the veto but on some other aspects of the 

structure, but it certainly raises questions about the constitutionality of the veto. 

There is no other agency that is subject to a veto. No one can 

veto the OCC’s actions. Actually, by statute, the Treasury Secretary is forbidden from telling the OCC to take action or not to 

take action. If you want to find the rogue regulator, it is the OCC; 

it is not going to be the CFPB. And on top of this, we have a whole 

range of regular safeguards on administrative agencies. And a lot 

of the complaints I am hearing from the committee are complaints 

about the administrative state in general, not about the CFPB. 

There are reasons to be uncomfortable about delegation of authority to unelected officials. But we do this all the time. And we 

have things like the Administrative Procedures Act, which has notice and comment rulemaking provisions so that everyone has a 

chance to be heard about rulemaking. And we have a judicial review making sure that agencies do not exceed the scope of their 

statutory authority. 

We have these features and they apply to the CFPB just like 

they apply to any other agency. So when you look at the sum picture there, the CFPB really is subject to more restrictions than any 

other Federal regulatory agency. 

Mrs. MALONEY. As you know, there are four bills under consideration today and under debate. What do you believe the aggregate 

effect of these proposals would be on the CFPB? 

52 

Mr. LEVITIN. If these bills were passed it would delay the implementation of the CFPB and render the CFPB significantly less effective and less accountable. 

Mrs. MALONEY. And Mr. Hunt, I was voting, so I didn’t hear his 

testimony, but I read it. And he, in his testimony, wrote that the 

FSOC veto system, as designed under current law, a veto would be 

nearly an impossible hurdle to meet. Do you agree? Mr. Levitin? 

Mr. HUNT. I do. 

Mr. LEVITIN. The current FSOC veto standard is a high threshold, without a doubt. But it is worth considering what the alternative that is being proposed is. And then also the further alternative being suggested I think, by—I can’t remember which of the 

community banking lobbies is proposing it, but there is a further 

extension of it that is being proposed. 

The current threshold is undoubtedly a high threshold to meet, 

and I think that is actually the right threshold; that we want to 

make sure that there is not, that we are not seeing regulations that 

cause systemic risk. But a threshold that simply says ‘‘safety’’ and 

‘‘affect safety and soundness’’ is such a low threshold that pretty 

much every CFPB rulemaking will be subject to challenge. 

Let me give you an example. In August 2008, the Comptroller of 

the Currency, John Dugan, wrote a letter to the Federal Reserve 

objecting to certain proposed Federal Reserve regulations that 

would have restricted credit card rate-jacking, a topic that I know 

was of particular concern to you. Among the complaints— 

Chairwoman CAPITO. If you could kind of make it quick— 

Mrs. MALONEY. I request a few extra seconds so he may complete 

his statement. 

Mr. LEVITIN. Among the concerns that Comptroller Dugan raised 

was that it would be inconsistent with safety and soundness. A 

couple of months later, Congress went ahead and passed the Credit 

Card Act of 2009 which took those Federal Reserve regulations and 

raised them a notch. So basically, the bank regulators are likely to 

call anything inconsistent with safety and soundness to the extent 

that it negatively impacts the profitability of banks by raising compliance costs, etc. 

I think that the current threshold is probably the right place, 

and we certainly should not think about extending it to where, 

what the community bank is arguing because, given the economies 

of scale in the banking industry, every regulation has a disproportionate impact on small banks. That is the nature of the business, 

to be big; and being big gives advantages. 

Chairwoman CAPITO. Thank you. 

Mr. Renacci. 

Mr. RENACCI. Thank you, Madam Chairwoman. 

Professor Levitin, you actually did change my direction of questioning, too. You talked about bank profitability and you said—I 

think one of your comments was that is what this is all about, 

bank profitability versus safety and soundness. Do you believe that 

a bank losing money is better off going forward and providing safety and soundness to its customers? 

Mr. LEVITIN. I apologize if you misunderstood my comments. 

What I said is bank safety and soundness means profitability; 

therefore, that a bank that is not profitable is not safe and sound. 

53 

But a bank that is less profitable, but still profitable, is safe and 

sound. If a bank is only earning $1 billion a year, not a billion and 

a half, it is still profitable and it is still safe and sound. I think 

it is important to make that distinction, that less profitable as opposed to unprofitable. The exact level of the bank profits I don’t 

think should be a concern at all of the government as long as 

banks are profitable. But the exact levels, they should not be a concern for any of us. That is the marketplace. 

Mr. RENACCI. You do agree, though, that some of the Dodd-Frank 

provisions will take away some of the profitability of the banks? 

Mr. LEVITIN. Without a doubt, to the extent that predatory lending practices have been very profitable for banks, and Dodd-Frank 

is going to curtail those, probably quite rightly. And you know to 

that extent, yes, it affects safety and soundness if you say that it 

is affecting profitability. But a bank that is not able to lend on a 

fair and on a nondeceptive basis shouldn’t be in business. 

And I don’t think any of the banks here at this table are doing 

that. And I want to emphasize that, that the issue really here is 

not about community banks and credit unions. There are some bad 

actors in both of those spaces, but generally they are the salt of the 

Earth. The problem is the large banks, and we don’t have any of 

the large banks on the panel today. And it worries me sometimes 

to see small banks toeing the line for the large banks. 

Mr. RENACCI. That is interesting. 

Mr. Wilcox, would you agree that some of these regulations will 

reduce your profitability and also reduce your ability to create jobs? 

Mr. WILCOX. I would say without any question it will. It has already. We are still feeling the fallout of the Gramm-Leach-Bliley 

Act. This Dodd-Frank thing is just getting started and we are seeing the first bits of that come out. And certainly to the extent that 

there is an exemption in the regulatory process, some of those 

things filter down and become interpreted and are used in the regulatory process, certainly will challenge earnings and very well 

could create an issue with how do you continue to grow jobs and 

operate in a safe and sound and profitable manner. 

Mr. RENACCI. Mr. Staatz, wouldn’t you agree that some of this 

profitability that you are losing will be also a reduction of potential 

jobs? 

Mr. STAATZ. Without question. 

Mr. RENACCI. Mr. Hunt? 

Mr. HUNT. Sure. Absolutely, it will. The cost of compliance will 

go up. It will be a tremendous burden. We are already heavily regulated to begin with. Going forward, if you don’t mind just going 

back to the veto question, the only way a veto can be sustained is 

if it threatens the safety and soundness of the banking system or 

the entire United States economy. 

Now, who is going to determine that threshold? What will determine the safety and soundness of a bank or the entire financial 

economy going forward? 

And I know I mentioned earlier in my testimony about the 

CFTC, but also the SEC, the CFTC, and the Federal Housing 

Agency has a seat at the table to determine retail banking. They 

have nothing to do with retail banking, no expertise whatsoever. 

54 

That is why we would like to see 5 out of 9, not 7 out of 10 when 

it comes to a veto. 

Mr. RENACCI. Thank you. 

Mr. Levitin, you said that you felt pretty strongly about a single 

director. Does it make sense, then, to consolidate all the Federal 

consumer financial protection powers at the Bureau on the designated transfer date if there is no director? 

Mr. LEVITIN. Actually, subtitle (f) of Title 11 of the Dodd-Frank 

Act, the Consumer Financial Protection Bureau Act, does say that 

if there is no director who has been appointed by the President on 

the designated transfer date, the powers go to the Treasury Secretary as director. So we would have a Treasury Secretary who has 

been confirmed by the Senate, exercising the powers, at least under 

subtitle (f). 

Mr. RENACCI. Madam Chairwoman, I yield back. 

Chairwoman CAPITO. Thank you. I would have to say that if that 

does in fact happen, and the responsibilities go to the Secretary of 

the Treasury, I would question, is that not postponing, delaying, 

throwing the whole thing into a more chaotic position? Which is 

why I believe we ought to, and part of my discussion draft, this is 

something that concerned me because of the length of time it takes 

to confirm anybody into one of these positions. 

Mr. Manzullo? 

Mr. MANZULLO. Thank you, Madam Chairwoman. 

Professor, since you have made the statement that none of the 

people at the table, the credit unions and the community bankers, 

are responsible for this meltdown and crisis we have in banking, 

I would take it then that you would agree that they should be exempt from the Consumer Financial Protection Bureau. 

Mr. LEVITIN. No, quite to the contrary. First, I was making a specific estimate about the members at this table. There are bad eggs 

in the community banker space and the credit union space. And we 

should also note that there have have a lot of community banks 

and credit unions that failed. And that is not— 

Mr. MANZULLO. I understand that. And I want to reclaim my 

time because it wasn’t until October 1, 2010, that the Federal Reserve published its final rule that said—are you ready for this, 

guys?—‘‘If you make a mortgage application, you must have written proof of your income.’’ To me, that is just so amazing, so elementary. 

Mr. Staatz, Mr. Hunt, Mr. Wilcox, you have always had that provision; isn’t that correct? Whenever you made a loan on anything? 

Mr. STAATZ. In practice, absolutely. 

Mr. MANZULLO. Absolutely. And so here we have the Fed, which 

has jurisdiction over most of the banks, by the time you figure out 

what they do, that had the authority all along, that could have 

stopped this stupid blunder in real estate. They had the authority 

to do that all along and they didn’t do it. Why should we trust yet 

another organization with 1,000 new employees, untested, untried, 

in theory? 

Mr. LEVITIN. Here is why. The CFPB has a single mission and 

it will be judged on whether it succeeds in protecting consumers. 

The Fed has multiple missions and they conflict. 

55 

Mr. MANZULLO. But the CFPB would never be judged by the people elected in this country, and those are the Members of Congress. 

And I find your statement to be absolutely astounding, especially 

in light of the fact that you were Special Counsel on the TARP, 

where you said that you find it offensive that this agency would be 

subjected to the appropriation process and therefore politicized. 

For goodness sakes, Article 1 of the Constitution gives the power 

of the purse to the United States Congress. We are directly elected 

by people who want to see oversight on behalf of these agencies, 

and yet you make the statement that, thank goodness we have the 

Consumer Financial Protection Bureau that is immune from this 

process. I am just shocked at that. But I want to go on. 

Mr. LEVITIN. If you are shocked, I would note that unfortunately 

there are—there is a vigorous lobbying process which is present in 

this room. 

Mr. MANZULLO. Oh, come on. You know what? These are little 

guys. 

Mr. LEVITIN. There are big guys, too, who are not in the room 

here. 

Mr. MANZULLO. I have been through a thousand real estate 

transactions and I practiced law just before RESPA came in. And 

I would charge sometimes $75 to $100 to close a real estate transaction, and I could close it in 20 minutes. Along came RESPA, and 

there are 7 full-time employees at HUD who continue to work on 

RESPA and screw it up. And now you go there, and you have disclosure like this—one agency on top of the other, and all one had 

to do to stop the meltdown was to say, you can’t give a loan unless 

you have written proof of your earnings. 

Government doesn’t work in these situations. RESPA hasn’t 

helped one individual, it hasn’t saved anything, because ultimately 

all people want to know is, how much does it cost me a month? And 

you are going to have more regulations, more rules, and you don’t 

look to the practitioners, people who have been through this thing 

from little bitty houses all the way through shopping centers, people who have worked in towns with credit unions and community 

bankers like these little guys here. And is there something wrong 

with the fact that they belong to an association, that they have a 

lobby? They are not entitled to be represented in Washington? 

Mr. LEVITIN. No one has made that argument. 

Mr. MANZULLO. Sir, that is what you were saying. 

Mr. LEVITIN. No, I beg your pardon, sir. That is not the argument I am making. The argument that I am making is that the 

democratic process does have, sometimes, influence by campaign 

contributions, and that we may want to be concerned about ensuring that consumer protection is insulated from financial interests. 

Mr. MANZULLO. Sir, there isn’t anything in this town that is insulated from anything. And the people who try to insulate themselves are the ones who isolate themselves and go beyond the reach 

of what Americans want to do. This whole argument, if I could finish— 

Chairwoman CAPITO. You can finish. 

Mr. MANZULLO. Because I have been waiting a long time. 

Chairwoman CAPITO. You have. 

56 

Mr. MANZULLO. This whole argument that somehow the Consumer Finance Protection Bureau is above and beyond, has this 

great halo that is better than all these organizations, these people 

here, seated to your right, on a daily basis, do several things. The 

first thing they do is they always check to make sure that the people with whom they have a financial transaction can afford it. They 

don’t need government to do that. They sit down and look at income tax returns. They look at what their earnings are and they 

give them advice on what to do. 

And somewhere out there you have some people who really took 

advantage of the system, who allowed people to buy homes when 

they couldn’t make the first downpayment, people who were allowed to—they even called them ‘‘cheater loans’’ where that practice went on, and the Fed winked at it. They could have stopped 

it. Where an existing government agency that was insulated from 

politics, and that is the Fed, had the authority to stop all of this, 

and they didn’t do anything, and you expect us to believe the Consumer Financial Protection Bureau is going to do anything better 

than what the Fed could have done. That is not going to happen. 

Mr. LEVITIN. I think in light of that, giving the Fed partial veto 

authority over the CFPB makes absolutely no sense. But I think 

it is important to note that the Fed, one of the reasons the Fed 

failed to act was it had conflicting missions. It was told to do safety 

and soundness and to do— 

Mr. MANZULLO. There was no conflicting mission. The mission 

there was was to keep the government from collapsing. And they 

failed, just as the CFPB will also fail. 

Chairwoman CAPITO. The gentleman’s time has expired. Mr. 

Canseco, do you have questions? 

Mr. CANSECO. Yes, ma’am. 

Mr. Hunt, in your testimony you noted that the requirement for 

the Bureau to promote consistent regulatory treatment is ill-defined. Could you explain why you feel this is ill-defined? 

Mr. HUNT. I think I was referring to the ‘‘UDAAP’’ provision, 

where they create the new ‘‘A’’ in ‘‘UDAP,’’ and that is abusive. We 

don’t know if abusive means when they charge a checking account 

now at a bank, or if that means the interchange fee. We think it 

is totally inconsistent. 

And yes, I will admit to you a lot of it is fear, and that is why 

we have all the little mouse prints that people have said, mouse 

traps, trips, and everything else, because we have fear of litigation 

and fear of being fined by our regulators. We do everything we can 

to promote products that are beneficial to the consumer, to the customer, but at the same time we have one eye looking at our regulator and at civil lawsuits going forward. So we have to make sure 

that the UDAAP provision is used correctly, since it is a new addition to the entire Dodd-Frank bill, an addition to unfair and deceptive. 

Mr. CANSECO. Are you concerned that your small banks and 

other financial institutions will eventually find themselves caught 

in a trap with one Federal agency trying to restrict their profits on 

certain products and another agency telling them to increase their 

capital base? 

57 

Mr. HUNT. Oh, absolutely. We have about three coming up here 

real soon. That is going to take effect in a couple of years. Quite 

frankly, sir, we are concerned about everything these days. For instance, look at overdraft. You had the FDIC come out with their 

guidelines. You had the Fed come out with their guidelines. And 

what is to prohibit the CFPB from coming out with their new 

guidelines as well? It is very important that we have the ability to 

continue to give consistent products to our customers without fear 

of retribution from the regulators. 

Mr. CANSECO. Thank you. And Mr. Staatz, in your testimony you 

advocate for replacing the CFPB director with a commission larger 

than what has been proposed. You envisioned this commission to 

have seats on the board that are designated for industry representatives, including a seat specifically for an individual with experience related to credit unions. Would you mind elaborating on your 

suggestion and underlying concerns? 

Mr. STAATZ. First of all, as I said in the oral testimony that I 

gave today as well, one of our bigger concerns is undue burdensome 

regulation. Earlier today, I heard about all the horrors that went 

on during the past few years. Obviously, we as credit unions are 

not part of that. We are involved in it, have to help clean it up, 

but weren’t part of that. And I would think that any of the structures that were talked about today, under any of these structures 

we could move very quickly to ban those sorts of products, those 

that were truly abusive. 

But I guess our problem is, when does it move from abusive into 

some bureaucrat’s idea of what may or may not be right for the 

consumer? And so we would like somebody with industry experience to kind of buffer, when it starts to cross the line from is it 

abusive to just somebody’s idea of a better way of doing business. 

And we think that is why somebody from the industry should be 

part of oversight in that manner. 

Mr. CANSECO. What criteria from the industry would you suggest 

that person or those individuals have? Should they be a bank president? Should they be a small bank president? Should they be credit 

union presidents? Should they be payday lender presidents? 

Mr. STAATZ. To the latter, absolutely not payday lenders. I would 

suggest that obviously from our viewpoint, we believe that credit 

unions should be represented. Why? Because of who we are and 

who we represent. As a matter of fact, maybe the CFPB could learn 

a few more things by spending more time with credit unions and 

figuring out how we serve members and maybe that could be the 

model. But again, that sort of expertise might help all of us. 

Mr. CANSECO. Thank you, sir. I yield back, Madam Chairwoman. 

Chairwoman CAPITO. The gentleman has yielded back. And that 

concludes the testimony from this panel. I thank you for your testimony and for your responses to our questions. 

The Chair notes that some members may have additional questions for this panel which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 30 days 

for members to submit written questions to those witnesses and to 

place their responses in the record. 

With that, the hearing is adjourned. 

[Whereupon, at 1:34 p.m., the hearing was adjourned.] 

(59) 

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