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95–057 PDF 2015

EXAMINING REGULATORY BURDENS ON 

NON-DEPOSITORY FINANCIAL INSTITUTIONS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS 

AND CONSUMER CREDIT 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

FIRST SESSION 

APRIL 15, 2015 

Printed for the use of the Committee on Financial Services 

Serial No. 114–13 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

ROBERT DOLD, Illinois 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON FINANCIAL INSTITUTIONS AND CONSUMER CREDIT

RANDY NEUGEBAUER, Texas, Chairman 

STEVAN PEARCE, New Mexico, Vice 

Chairman 

FRANK D. LUCAS, Oklahoma 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

ROBERT PITTENGER, North Carolina 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

ROBERT DOLD, Illinois 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

MIA LOVE, Utah 

WM. LACY CLAY, Missouri, Ranking 

Member 

GREGORY W. MEEKS, New York 

RUBE ́ N HINOJOSA, Texas 

DAVID SCOTT, Georgia 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

STEPHEN F. LYNCH, Massachusetts 

MICHAEL E. CAPUANO, Massachusetts 

JOHN K. DELANEY, Maryland 

DENNY HECK, Washington 

KYRSTEN SINEMA, Arizona 

JUAN VARGAS, California 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

April 15, 2015 ................................................................................................... 1 

Appendix: 

April 15, 2015 ................................................................................................... 49 

WITNESSES 

WEDNESDAY, APRIL 15, 2015 

Evans, Diane, President, American Land Title Association (ALTA) ................... 9 

Friedman, Justin G., Director, Government Affairs, American Financial Services Association (AFSA) ....................................................................................... 7 

McGrath, Paulina Sepulveda, Chair, Community Mortgage Lenders of America (CMLA) ............................................................................................................ 6 

Shaul, W. Dennis, Chief Executive Officer, Community Financial Services 

Association of America (CFSA) ........................................................................... 11 

Wilson, Mitria, Vice President, Government Affairs, and Senior Counsel, Center for Responsible Lending (CRL) ..................................................................... 13 

APPENDIX 

Prepared statements: 

Hinojosa, Hon. Ruben ....................................................................................... 50 

Evans, Diane ..................................................................................................... 55 

Friedman, Justin G. ......................................................................................... 66 

McGrath, Paulina Sepulveda ........................................................................... 74 

Shaul, W. Dennis .............................................................................................. 81 

Wilson, Mitria ................................................................................................... 94 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Neugebauer, Hon. Randy: 

Written statement of the Community Home Lenders Association (CHLA) . 113 

Written statement of the Mortgage Bankers Association (MBA) ................. 117 

Written statement of the National Association of Mortgage Brokers 

(NAMB) .......................................................................................................... 130 

Sherman, Hon. Brad: 

Written statement of the African American Credit Union Coalition 

(AACUC) ........................................................................................................ 135 

Written statement of the Consumer Federation of America (CFA) ............. 142 

Written statement of the National Council of La Raza (NCLR) .................. 148 

(1) 

EXAMINING REGULATORY BURDENS 

ON NON-DEPOSITORY FINANCIAL 

INSTITUTIONS 

Wednesday, April 15, 2015 

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 1:01 p.m., in room 

2175, Rayburn House Office Building, Hon. Randy Neugebauer 

[chairman of the subcommittee] presiding. 

Members present: Representatives Neugebauer, Pearce, Lucas, 

Posey, Fitzpatrick, Luetkemeyer, Stutzman, Mulvaney, Pittenger, 

Barr, Rothfus, Dold, Guinta, Tipton, Williams, Love; Clay, Scott, 

Maloney, Sherman, Lynch, Delaney, Heck, Sinema, and Vargas. 

Ex officio present: Representative Waters. 

Chairman NEUGEBAUER. The Subcommittee on Financial Institutions and Consumer Credit will come to order. The Chair is authorized to declare a recess of the subcommittee at any time. 

Today’s hearing is entitled, ‘‘Examining Regulatory Burdens on 

Non-Depository Financial Institutions.’’ 

Before I begin, I would like to thank our witnesses for being here 

today, and for traveling all the way over here to room 2175. As you 

know, our regular committee room is under construction for a little 

remodeling, making sure that it is ADA-compliant, and upgrading 

the sound system so that when the Federal Reserve Chair is here, 

we don’t have to adjourn for 10 minutes while we try to get the 

sound back on. 

And so, we are very happy that you are here today. This is a 

very important hearing, and I look forward to hearing from our 

witnesses this afternoon. 

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

statement. 

Good afternoon. This month, we got some very bad economic 

news: The U.S. economy only created 126,000 jobs in the month of 

March, far below our expectations. The Government also revised 

the numbers downward for the first quarter. 

I see these numbers, and I continue to be concerned with the direction that our economy is headed. According to the Brookings Institute, last year, for the first time in 30 years, business deaths exceeded business births. 

2 

And on this day, tax day, we are reminded just how burdensome 

and complex our Tax Code is; according to the National Taxpayers 

Union Foundation, compliance with Federal income tax cost the 

economy $233 billion in productivity last year. This is only making 

it harder to get our economy back on track. 

This committee has already heard testimony on and explored the 

significant regulatory onslaught and resulting market consolidation 

facing our depository institutions, our Nation’s community banks 

and credit unions. 

Today, I am pleased to welcome our witnesses, who represent 

many small businesses and community-based financial institutions, 

to hear their perspective on ever-increasing regulatory burdens. 

As many of you know, the full Financial Services Committee and 

this subcommittee are undertaking a comprehensive examination 

of regulatory burdens facing our Main Street lenders and businesses. Today’s hearing provides the committee with an opportunity to hear about the impact that these regulatory burdens have 

on our non-depository financial institutions. 

Non-bank financial institutions are a diverse and important faction of our financial sector. Many of these institutions provide 

short-term, small-dollar lending. 

They enable families to purchase automobiles to take their kids 

to school. They provide the title insurance for those looking to purchase a home and move closer to the American dream. And they 

are often the lenders and service providers for basic consumer 

loans. 

Yet, they are very different from community banks and credit 

unions: They don’t use deposits to fund their operations. 

As a result of this unique structure, they face operational challenges with which many on this committee may not be familiar. 

Today, I hope to explore a few of the more pressing regulatory 

issues facing these institutions. 

First, the Consumer Financial Protection Bureau (CFPB) is in 

the process of integrating the Truth in Lending Act and the Real 

Estate Settlement Procedures Act into what will be known as 

TRID. This is a major endeavor that will significantly alter the 

mortgage closing processes for consumers, lenders, and title insurance companies. It is important for this committee to understand 

how the industry is working to comply with this August 1st effective date, and if there are issues the committee can help to address. 

Second, the CFPB is in the process of promulgating rules addressing the short-term, small-dollar credit market. This market is 

widely used by the American consumer and is highly regulated and 

enforced at the State level. It is important for this committee to examine the regulatory structure of these products and to understand 

how the Federal regulators impact credit access and product 

choices for our consumers. 

Third, the CFPB has taken significant regulatory action impacting the auto industry. While the Dodd-Frank Act exempted auto 

dealers from the CFPB’s jurisdiction, the Bureau has tried to bypass that exemption by regulating the indirect auto lenders. The 

CFPB’s actions have the ability to disrupt the automobile-buying 

3 

experience for consumers, and we have received bipartisan criticism that we will examine further. 

Finally, it is important for this committee to better understand 

what the impact of Federal regulation and supervision means for 

industries historically regulated at the State level. While we often 

talk about regulatory burdens in compliance terms, burdensome, 

duplicative, and unnecessary supervision and examination can also 

be a burden to community-based lenders. 

I am hopeful that the Members will leave this hearing with a 

better understanding of the current regulatory environment for 

non-depository institutions and areas of concern that the committee 

can address. We must push forward in our bipartisan efforts to provide regulatory relief for our Main Street financial institutions and 

protect the financial independence of the individuals and the families that they serve. 

Now, I will recognize the ranking member of the subcommittee, 

Mr. Clay from Missouri, for 2 minutes. 

Mr. CLAY. Thank you so much, Mr. Chairman. 

And I also thank the ranking member of the full Financial Services Committee, Ranking Member Waters, for being here. 

And to our witnesses, thank you for your participation today. 

While the title of today’s hearing sounds harmless enough, anyone who follows the work of our committee knows what this hearing is actually about: providing a venue to bolster the Majority’s 

narrative that the Consumer Financial Protection Bureau is actually harming consumers by limiting their choices and freedom. 

Prior to Dodd-Frank, consumers had ample freedom and choice. 

They had the freedom to choose risky mortgages with exotic products that eventually ravaged the economy. 

For many of my constituents in St. Louis, they had the choice to 

support payday lenders that charge rates in the neighborhood of 

455 percent. Or, as former Missouri Attorney General Nixon uncovered in Operation Taken for a Ride, thousands of Missourians were 

free to be misled into paying for extended service contracts on their 

vehicles that were deceptively marketed. 

As so many of my constituents have come to learn, this kind of 

freedom is costly and serves as a constant reminder that the marketplace for consumer financial services can be treacherous for lowand moderate-income consumers. 

This is particularly true in my home State of Missouri. With respect to payday lending, according to ProPublica, Missouri has 

about one payday or car title lender for every 4,100 residents, with 

short-term loans averaging 455 percent APR. 

Statewide, a broad-based coalition of consumers’ advocacy groups 

and community-based organizations tried to cap interest rates at 

36 percent, but their efforts failed. And similar efforts around the 

country to regulate unaffordable short-term lending and abusive 

collection practices have fallen short until now. 

I applaud the CFPB—is that 3 minutes or 5, Mr. Chairman? 

I yield to the ranking member. I was just getting started. 

Ms. WATERS. I will yield to the gentleman to complete his statement. 

Mr. CLAY. Oh, thank you. 

4 

Only in Washington could a requirement that seeks to ensure 

that borrowers can actually pay back the money they borrow be 

considered a burden or controversial instead of sound underwriting. 

I find it odd that so often this committee only considers the cost 

of the CFPB’s initiatives to industry without a fair and honest assessment of the benefits of the CFPB’s work to consumers and to 

the economy. 

Dollars not spent on unaffordable payday loans can often be 

spent on other goods and services that can spark economic activity, 

a consideration that rarely informs our discussion of the costs and 

benefits of Federal consumer protection laws. 

Part of our job is to ensure that we strike the appropriate balance between the interests of industry and those of consumers. And 

the fact that this hearing is solely about the burdens on businesses, 

and only one witness is here to provide the perspective of consumers, speaks volumes on the Majority’s imbalanced approach. 

My concerns about the intentions notwithstanding, I remain committed to doing the difficult work of developing a regulatory approach that is properly calibrated to a firm’s business model and 

risk profile. But this work of narrowly tailoring our regulatory approaches must be weighed against the very real risk that the business practices of non-banks pose to consumers. 

I look forward to hearing from each of the witnesses. 

Chairman NEUGEBAUER. And I thank the gentleman. 

The distinguished ranking member of the full Financial Services 

Committee, the gentlewoman from California, Ms. Waters, is recognized for 1 minute. 

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

And, Mr. Clay, I really appreciate the fact that we are having 

this hearing today. 

While I have a prepared statement, I am going to deviate from 

that statement and simply say I am so pleased that we are going 

to talk about payday lending today. I am so pleased that we are 

going to talk about it because it is discussed everywhere throughout our communities, Members of Congress are talking about it, 

and we all talk about it in the way that Mr. Clay just described 

it. 

We have constituents who, no fault of their own, don’t earn very 

much money, don’t have money for food or for their bills prior to 

their next payday, and they go to a payday lender and then they 

get hooked. They get hooked with 400-plus percent interest rates 

and, of course, they can’t pay off the loan and so they resign them 

up, and it goes on and on and on. Once they get into debt with payday lenders, it is very hard to get out. 

We have to change this. We have to do something about it. But 

I am very appreciative that the Consumer Financial Protection Bureau has finally announced its long-anticipated proposal to regulate 

the payday lending industry. 

So I look forward to this hearing, and I thank you very much. 

Chairman NEUGEBAUER. I thank the gentlewoman. 

And I am now going to introduce our panel. 

First, Ms. Paulina Sepulveda McGrath. Ms. McGrath is president 

and co-owner of Republic State Mortgage in Texas. She also serves 

5 

as the Chair of the Community Mortgage Lenders of America, 

which primarily advocates for non-bank mortgage lenders. 

Ms. McGrath has led Republic since 1999, and during that time, 

Republic has grown from 2 to 22 locations in 7 States. Notably, Republic is the past recipient of the Inc 500 Award from Inc. Magazine. She also serves on the board of the Texas Mortgage Bankers 

Association and is vice president of the board of trustees of the 

Women’s Fund, a nonprofit organization that provides Houston 

area women and girls with tools they need to—that can be advocates for their health. 

I would like to now turn to the gentleman from California, Mr. 

Sherman, to introduce our second witness, Mr. Friedman. 

Mr. SHERMAN. Yes. Justin Friedman is here from the American 

Financial Services Association. He served as my Legislative Advisor on the issues before this committee just a few years ago. When 

he left I told him, ‘‘You don’t stop working for me; I just stop paying you.’’ 

But Justin’s real genius was to give me advice on how to really 

make a witness squirm, how to make sure that their 5 minutes 

with me was one of the worst experiences of their life. And I hope 

that I have not lost those skills even though he has departed, and 

in a few minutes, we will find out. 

I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

Third, Ms. Diane Evans is vice president of Land Title Guarantee Company and serves as the president of the American Land 

Title Association, which advocates on behalf of the title insurance 

industry. Ms. Evans is active in the title industry both nationally 

as well as in her home State of Colorado. She has served on many 

State panels, including the State insurance title advisory panel; the 

State board of land commissioners, and in 2002 she was selected 

as Castle Rock, Colorado’s Chamber of Commerce businessperson 

of the year. 

Fourth, Mr. W. Dennis Shaul is CEO of the Community Financial Services Association, which is a national organization representing short-term, small-dollar lenders. Before joining CFSA, 

Mr. Shaul had a distinguished career on Capitol Hill as Senior Advisor to former Financial Services Committee Chairman Barney 

Frank. 

Additionally, Mr. Shaul has served as the State of Ohio’s chief 

financial regulator. Mr. Shaul earned his J.D. from Harvard Law 

School, and his Master’s from Oxford University. He is a graduate 

of the University of Notre Dame, and he is also a Rhodes Scholar. 

And fifth, Ms. Mitria Wilson is vice president of government affairs and senior counsel at the Center for Responsible Lending. 

Prior to joining the Center for Responsible Lending, she worked as 

the director of legislative and policy advocacy at the National Community Reinvestment Coalition. 

Ms. Wilson specializes in the analysis of financial services issues, 

which focus on housing finance, student loans, consumer lending, 

and employment issues. In 2014 she was named as Woman of Influence by HousingWire Magazine. 

6 

Each of you will be recognized for 5 minutes to make your oral 

presentation. And without objection, your written testimony will be 

made a part of the record. 

Ms. McGrath, you are recognized for 5 minutes. 

STATEMENT OF PAULINA SEPULVEDA MCGRATH, CHAIR, 

COMMUNITY MORTGAGE LENDERS OF AMERICA (CMLA) 

Ms. MCGRATH. Chairman Neugebauer and Ranking Member 

Clay, I am Paulina Sepulveda McGrath, president of Republic State 

Mortgage Company, based in Houston, Texas. I am here today as 

a chairperson of the Community Mortgage Lenders of America, a 

trade group representing both small mortgage bankers and community banks with mortgage lending experience. 

CMLA supports the regulatory streamlining that Congress is 

moving ahead with for community banks. However, if the effort 

does not provide the same streamlining for all community-based 

mortgage lenders, including those that are not banks or bank affiliates, it will fail consumers and small businesses in every community in our country. 

These unaffiliated lenders originated approximately 40 percent of 

all conventional loans and roughly 50 percent of all loans insured 

by the Federal Housing Administration and the Department of Veterans Affairs in 2014. We are a key piece of the mortgage market, 

especially for the first-time homebuyer and for those borrowers 

looking for or needing more personalized service. 

Unfortunately, the current regulatory burden is driving consolidation among both community banks and small, unaffiliated mortgage lenders. If this consolidation continues, the resulting reduction in competition will lead to even higher costs and fewer choices 

for consumers. 

As a Nation, we need to find a way to serve, with careful and 

safe underwriting, more families in their homeownership needs, 

particularly first-time homebuyers. If we cannot, these families will 

continue to pay ever-increasing rents that are outstripping income 

gains. 

Remember, Dodd-Frank’s goal was certainly to make lending 

safer for consumers. However, as we were told in 2009, the law was 

intended to regulate most closely the largest lenders and the bad 

actors. 

Experience with this statute shows it lacks the flexibility to distinguish the level of regulation necessary for lenders of different 

sizes, business models, and performance records. Consequently, it 

levies the regulatory burden on everyone, including small lenders 

that operate in a prudent manner. Importantly, these small lenders 

simply cannot amortize large fixed costs onto a relatively modest 

volume of mortgage lending. 

The CMLA would like to introduce a concept that will spur more 

community-based lending while not diminishing consumer protections. Why not provide some targeted relief for small lenders which 

have no recent enforcement actions and which originate primarily 

loans that meet the Qualified Mortgage standard contained in the 

truth-in-lending statute? Why not streamline certain regulations 

for these lenders, which recognizes their unique role in the lending 

7 

market and benefits the borrowers whose home financing needs 

they serve? 

We propose that lenders receive specified regulatory relief so long 

as they remain: one, small; two, with most of their annual loan volume composed of QM loans; and three, only as long as they continue their excellent lending records. 

If Congress adopted a framework like this, it would spur more 

community lending while maintaining the consumer focus intended 

by policymakers. This is most crucial for our country’s underserved 

areas and communities, from the rural areas to the inner city. 

CMLA recommends to Congress five steps to streamline current 

regulations. The first four steps are also supported by the Community Home Lenders Association (CHLA) a group of small lenders, 

all of which are unaffiliated with banks, that are working closely 

with us on these issues. 

First: Eliminate the current 3-day waiting period between a revised disclosure and the closing of the loan if the revised disclosure 

has an APR for the consumer that is lower than the original disclosure. 

Second: Exempt small lenders from the vendor oversight requirements. 

Third: Direct the CFPB to concentrate their examinations on 

large lenders and those small lenders for which the CFPB has received a referral from another regulator, and exempt those small 

lenders that have no such referral. 

Fourth: Refine the definition of ‘‘small servicer’’ to include those 

small lenders that subcontract part or all of the servicing function 

to a subservicer. 

And fifth: Amend the SAFE Act to direct the issuance of a 180- 

day transitional license to registered bank-employed loan originators who were hired by an unaffiliated lender, which will permit 

these loan originators to continue to work while completing State 

licensing requirements. 

The rationale for each of these proposals is set out in my written 

testimony. And of course, I will be happy to answer any questions 

you may have. 

Thank you very much for this opportunity. 

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

74 of the appendix.] 

Chairman NEUGEBAUER. Thank you. 

Mr. Friedman, you are recognized for 5 minutes. 

STATEMENT OF JUSTIN G. FRIEDMAN, DIRECTOR, GOVERNMENT AFFAIRS, AMERICAN FINANCIAL SERVICES ASSOCIATION (AFSA) 

Mr. FRIEDMAN. Mr. Chairman, Ranking Member Clay, and members of the subcommittee, good afternoon. 

My name is Justin Friedman, and I am here on behalf of the 

American Financial Services Association. I am pleased to provide 

testimony as you examine regulatory relief for non-depository financial institutions and to discuss proposals to improve the structure of the Consumer Financial Protection Bureau. 

8 

I wish to thank the subcommittee for holding a hearing on this 

issue, which is of keen importance to the consumer credit industry 

and the households that we serve. 

Founded in 1916, AFSA is the national trade association for consumer credit. Our 390 members include consumer finance companies, commercial banks, industrial banks, and other financial services companies that make credit available to consumers and small 

businesses. 

AFSA members offer a broad array of financial products including personal installment loans, retail and commercial sales finance, 

credit and payment cards, residential mortgages, vehicle loans and 

leases, and floorplan finance for dealers. Our members provide approximately 80 percent of the Nation’s vehicle financing. In general, finance companies are responsible for one of every five dollars 

of consumer credit in America. 

While depository institutions play a vital role in the economy, 

Federal Reserve statistics show that a substantial share of consumer credit is provided by non-depository finance companies. In 

fact, for non-revolving lines of credit, finance companies and banks 

hold roughly equal shares of the pie—about one quarter each. Both 

are smaller than the share held by the Federal Government, which, 

of course, dominates the student loan market. 

Finance companies have a long history of meeting the needs of 

consumers, such as buying or maintaining a car to get to work, or 

paying for higher education. Finance companies are licensed by 

each and every State where they do business. The CFPB has added 

a complex new layer of Federal oversight to the existing regime. 

The principal types of credit offered by consumer finance companies are motor vehicle finance and traditional installment loans. 

Lately, much has been said about the abuses found in certain 

forms of short-term, small-dollar lending. Policymakers should recognize that traditional installment loans are a time-tested and beneficial form of credit for working Americans, and they are based 

upon sound underwriting. 

I am talking about fixed-rate, fully-amortizing personal loans, 

which are repaid in equal monthly installments of principal and interest. Traditional installment loans are the safest, most responsible form of small-dollar lending, and they have been for many 

decades. 

AFSA members also offer motor vehicle financing: directly, 

through branch-based lending; and indirectly, through dealerships. 

Eight out of 10 consumers who finance their purchase of an automobile choose to do so at the dealer. 

This financing is ultimately facilitated by the captive finance 

companies of the auto makers, independent finance companies, 

banks, and credit unions. Their provision of credit helps keep the 

auto market a strong, competitive, and integral part of the American economy. 

While our industry is focused on providing a positive experience 

for the consumer, it also ensures a reliable source of liquidity for 

auto dealers. Specialized auto lenders do not withdraw from the 

market during economic downturns, unlike banks, that have safety 

and soundness concerns which may compel them to curb auto lending during times of turbulence. 

9 

The trope that non-depository lenders are unregulated is simply 

untrue. The creation of the CFPB imposes new, often duplicative 

Federal burdens on these State-regulated entities. 

State regulators have a familiarity with local and regional circumstances. This knowledge, along with geographic proximity, 

means that a State regulator will often be the first to identify 

emerging issues, practices, or products that pose risks to consumers. 

On behalf of AFSA’s member companies, I wish to thank the 

committee for its help in enacting H.R. 5062, the Examination and 

Supervisory Privilege Parity Act last year. The Act clarified the law 

governing the sharing of information between Federal and State 

agencies that license, supervise, or examine non-banks offering consumer financial services. 

This legislation resolved a regulatory disparity between depository and non-depository institutions, recognizing the unique situation of non-depositories and their relationships with State regulators. We are pleased that the legislation was passed in a bipartisan fashion, becoming the very first amendment to the CFPB 

statute that was enacted into law. AFSA hopes that this effort can 

serve as a model for future reforms to Dodd-Frank. 

The CFPB’s current governance structure is flawed, and it should 

be replaced by a bipartisan, multimember commission, as is the 

norm for virtually all independent regulatory agencies of the Federal Government. Unlike most of these agencies, the CFPB is headed by a single political appointee. 

AFSA welcomes Chairman Neugebauer’s introduction of H.R. 

1266, the Financial Product Safety Commission Act, which alters 

the CFPB structure to be a five-member commission appointed by 

the President. While this is a step forward, the previous bills did 

not address State-licensed entities and the substantial portion of 

the consumer credit market that they serve. 

As I noted previously, State regulators possess important insight 

into the practices and products of the lenders that they license. 

State regulators are best positioned to investigate issues that may 

pose risks to local consumers. 

AFSA recommends that at least one member of the new board 

should have State bank or consumer credit supervisory experience. 

A similar approach has worked effectively at the FDIC, and it 

would be appropriate for the consumer regulator. Some fear that 

any structural reform would harm the mission of the CFPB, but 

AFSA believes an agency directed by a commission with staggered 

terms is better insulated from electoral politics and most likely to 

produce sustainable policy that will protect consumers while promoting access to credit. 

Thank you. 

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

66 of the appendix.] 

Chairman NEUGEBAUER. Ms. Evans, you are recognized for 5 

minutes. 

STATEMENT OF DIANE EVANS, PRESIDENT, AMERICAN LAND 

TITLE ASSOCIATION (ALTA) 

Ms. EVANS. Thank you, sir. 

10 

Chairman Neugebauer, Ranking Member Clay, and members of 

the subcommittee, thank you for inviting me here today. My name 

is Diane Evans and I am vice president of Land Title Guarantee 

Company in Denver, Colorado. Along with my day job, I serve as 

the president of the American Land Title Association. 

ALTA is a national trade association that represents the abstractors, settlement service providers, and title industry across this 

United States. ALTA has more than 5,500 member companies 

ranging from small, one-person operations to large, publicly traded 

companies. Our industry employs more than 108,000 professionals, 

and we have offices in every county in this United States. 

I am happy to be here today to discuss how overregulation is affecting our industry, our members, and our consumers. As you 

know, the Dodd-Frank Act required the CFPB to combine the disclosures required under the Truth in Lending Act (TILA) and the 

Real Estate Settlement Procedures Act (RESPA) into a single 

TILA–RESPA form, which we commonly call TRID. 

The Bureau started this process back in 2011, and we implement 

these new disclosures on August 1st, 107 days from today. We 

know that the ultimate purpose of TRID is to help consumers better understand their real estate transaction, and that is extremely 

important to our members, who are sitting across from homebuyers 

while we are sitting here today. 

We have three primary concerns. First, our experience in implementing regulation tells us that there will be unforeseen issues 

once we start using these forms in actual, real transactions. To assist with this process, ALTA requests that the CFPB publicly commit to a hold-harmless period of enforcement from August 1st 

through the end of the year. 

I thank Chairman Neugebauer and Congressman Luetkemeyer 

for their leadership in asking CFPB Director Cordray for that holdharmless period, and I request that the rest of the subcommittee 

follow that lead. A hold-harmless period in the first few months allows industry to adapt their business processes to comply with the 

regulation without fear of enforcement action or potential class action lawsuits. It allows us to focus on our business, our customer, 

and the consumer. 

Second, this new regulation prohibits the industry from disclosing the actual cost of a title insurance policy purchased by the 

consumer at the closing. Consumers will be confused because the 

government-mandated form will disclose different prices than the 

actual cost that consumer will pay at the closing table. They will 

be unable to shop using accurate cost analysis. 

The Bureau should resolve this issue by requiring us to disclose 

what the actual title insurance premium is on each transaction as 

required in each individual State. 

Finally, a 2012 service provider bulletin, which was issued by the 

CFPB, continues to cause uncertainty in the marketplace for our 

members. Unlike the CFPB, other Federal regulators have provided helpful guidance so that businesses understand how to manage the risks associated with third-party service providers. Lenders 

are left without this clear guidance on the appropriate risk management procedures that they need for their title and settlement 

service providers in this industry. 

11 

In 2012, due to the lack of that additional guidance, ALTA developed the title insurance and settlement company best practices. 

These were created to help our members highlight policies and procedures that our industry exercises to protect lenders and consumers while ensuring a positive and compliant real estate transaction. 

To improve the way the CFPB works with and provides information to businesses, I urge Congress to pass H.R. 1195, the Bureau 

of Consumer Financial Protection Advisory Boards Act, as soon as 

possible. Thank you to Congressmen Pittenger and Heck for their 

leadership in sponsoring this bipartisan legislation that establishes 

a small business advisory board at the CFPB. It provides those 

open and formal channels of communication from CFPB staff in 

this industry. 

I appreciate the opportunity to be here and I look forward to 

serving as a resource and answering questions for you all. Thank 

you. 

[The prepared statement of Ms. Evans can be found on page 55 

of the appendix.] 

Chairman NEUGEBAUER. Thank you. 

Mr. Shaul, you are recognized for 5 minutes. 

STATEMENT OF W. DENNIS SHAUL, CHIEF EXECUTIVE OFFICER, COMMUNITY FINANCIAL SERVICES ASSOCIATION OF 

AMERICA (CFSA) 

Mr. SHAUL. Chairman Neugebauer, Ranking Member Clay, 

thank you for inviting me to testify, and I look forward to questions 

that you may have. 

I am the chief executive officer of the Community Financial Services Association of America, an entity which represents non-depository financial institutions and includes more than half of the storefront payday loan entities across the country. 

We are particularly interested in CFPB’s recent proposals with 

regard to our industry and companion industries that are in the 

short-term, small-dollar market. I look forward to these with particular interest because, as was mentioned a while ago, I was here 

as a staff member during the drafting of Dodd-Frank and participated in that capacity and I have looked forward to working with 

the CFPB. 

That has not always been easy, and it is in part what draws me 

here today. 

It is important, I think, to note at the outset that the concept 

was, for me, one that was laudatory. The practices may not meet 

the measure that I had hoped, and I think others had hoped, they 

would meet. 

So it was with some real anxiety that we began to look at the 

paper that was propounded approximately 2 weeks ago by CFPB 

relative to our industry and companion industries. That raised several questions for us. 

In terms of the immediate future, that document goes to the 

Small Business Regulatory Enforcement Fairness Act (SBREFA). 

And it is important because the Bureau describes it as the entry 

point for regulation of large and small entities. 

12 

The reason I am discouraged is that as I read that paper, and 

by the admission of CFPB, it would put out of business approximately 60 percent of those in the small business area. Now, CFPB 

uses the language that so often accompanies the closing of plants 

and the displacement of jobs. They speak about it as—in the bloodless way of saying that there is going to be consolidation within the 

industry. 

Make no mistake. It isn’t consolidation we are talking about; it 

is job loss, and 50 percent of those jobs have medical benefits, et 

cetera. 

So we are concerned about that. And we are concerned whether 

this isn’t an entree to throw the baby out with the bath water. 

As we look at the statistics propounded by CFPB, we understand 

that they have a particular concern for people who are in the product payday too long, but it is not necessary to throw out the product itself to get at those who need consumer protection. And I think 

it is instructive to remember that two Federal banks—the New 

York Reserve and the Kansas City Reserve—have spoken about the 

indirect and unintended consequences of restricting payday lending. 

I am not at all sure that the research that the CFPB has done 

on this topic is meritorious in two senses. First, it may not have 

begun with the proper question, which I believe was, given a sample of people who use payday loans, how many of them benefit from 

them? How many are neutrally affected? And how many are worse 

off? 

And clearly, the task is to work with those who are worse off and 

make certain that they either do not acquire payday loans, or make 

certain that they are given ample consumer protection if they do. 

This is a complicated area, and you must recognize that every 

entity that we represent is State-licensed and must also undergo 

the test of our own better business—better practices. That means, 

in effect, something that was not taken into account by CFPB: 

There are distinguishing characteristics in this area between those 

online, between those in storefront, between those in title lending, 

between those who are large and those who are small, between 

what applies in Florida and what applies in California. 

The Federal system was once described by Justice Brandeis as 

providing a laboratory for experimentation. What the CFPB is 

about to do is close the laboratory and make a one-size-fits-all set 

of demands on all those who are participating as operators for this 

product and for the customers. 

I speak today as much for the customers as I do for our operators, and I would encourage any of you who have doubts about the 

efficacy of what we do to visit our stores and see how the customer 

comes out of our place. 

It seems to me that it is important to provide consumer protections. It seems to me also that regulating payday is not a path to 

annihilation, as it apparently is to the Bureau at this point. 

[The prepared statement of Mr. Shaul can be found on page 81 

of the appendix.] 

Chairman NEUGEBAUER. I thank the gentleman. 

And now, Ms. Wilson, you are recognized for 5 minutes. 

13 

STATEMENT OF MITRIA WILSON, VICE PRESIDENT, GOVERNMENT AFFAIRS, AND SENIOR COUNSEL, CENTER FOR RESPONSIBLE LENDING (CRL) 

Ms. WILSON. Good afternoon, and thank you, Chairman Neugebauer and Ranking Member Clay, for this opportunity to testify 

today. 

I have had the opportunity to benefit from hearing all of the 

other panelists who went before me, and one of the things that I 

thought was really striking about the invitation to testify today 

was that the request itself asked us to focus on community financial institutions. And there is something special about community 

financial institutions, and that is a fact that the Center for Responsible Lending patently recognizes. 

Community financial institutions are actually based on a business model that recognizes relationships and the importance of relationships with consumers. So it is with that being understood 

that I have to tell you that today I actually came to be a counterpoint to most of the assertions that are being made by the prior 

panelists. 

We value community financial institutions because we believe 

that they create choice, opportunity, and access, and they proliferate the ability to generate competition that drives down prices 

for consumers. 

I have to tell you that most of the proposals that are being advanced today have little to do with either of these objectives and 

principles, and for that reason they should be opposed. 

For example, one of the points that we have talked about today 

was the importance of auto lenders and indirect auto financing. 

And people suggest that this is a question of opportunity, that financiers should be able to actually charge an increased commission 

based on the interest rate without any consideration and that 

should be okay. 

But the reality is that evidence shows that the way in which 

auto financiers do that, dealers, lends itself to a result that actually shows discriminatory practices—that is that people of color, 

people of low- and moderate-income backgrounds, are those who 

are most likely to actually receive an interest rate markup. 

That kind of opportunity is not an opportunity at all. It is discrimination and it is illegal under the Equal Credit Opportunity 

Act. 

So to the extent that the Consumer Financial Protection Bureau’s bulletin actually recommended that auto financers and lenders who had an indirect relationship stray away from that kind of 

practice and policy, we believe that was actually a responsible recommendation by a Bureau that has been charged with enforcing 

the Equal Credit Opportunity Act. 

And now to choice. One of the most fascinating things about our 

conversation around expanding access to credit has been an argument that non-depository mortgage lenders are somehow in a position of being disadvantaged by the regulations that—created by the 

ability to repay rule. 

We think it is a simple concept that is basic to business that, in 

fact, if you are going to underwrite a loan you should make sure 

that the individual to whom you give that loan has the ability to 

14 

repay it. There is nothing novel about that; it is a common-sense 

approach. 

So then the question becomes, are there other ways that non-depositories or smaller financial institutions can satisfy that burden 

without having the same in costs? The reality is for non-depository 

financial institutions, they have adapted and accepted a business 

model that far more parallels larger financial institutions than 

what we think of as traditional community banks. 

I would suggest to you that a non-depository institution does not, 

in fact, have a long-term relationship with the consumer. Why? Because a mortgage lender who is a non-depository doesn’t have 

interactions with the consumer on multiple bases. They are making 

a one-time loan to that consumer. 

And interestingly enough, unlike what we think of as traditional 

community banks, non-depository mortgage lenders are not located 

in communities, by and large. A great example of that is Freedom 

Mortgage, which, although being located in 8 different States, actually offers mortgages in 50 States across the country. 

I think that most Americans listening to this conversation today 

would be hard-pressed to agree that an institution making a loan 

in the State of Texas that is based in New Jersey somehow understands community banking and relationship lending. 

Thank you for the opportunity to testify, and I am happy to answer any questions that you may have. 

[The prepared statement of Ms. Wilson can be found on page 94 

of the appendix.] 

Chairman NEUGEBAUER. I thank the gentlelady. 

And now, each Member will be recognized for 5 minutes for a 

question-and-answer period. 

I will begin by recognizing myself for 5 minutes. 

As has been mentioned, the CFPB finalized rules that combined 

the disclosures that consumers receive both at applying for and 

closing their residential loans, the Truth in Lending Act and the 

Real Estate Settlement Procedures Act. Now, I am quite honestly 

supportive of simplifying the forms. As a former—I have been in 

the real estate business for a long time and the forms have increased dramatically, and so somehow harmonizing that I think is 

a good process. 

But I have heard from the industry representatives that with the 

rules that came along with this new form—I think it was over 

1,000 pages, if I am not mistaken—there are a lot of other details 

that go with using that form together. 

Ms. Evans, can you kind of describe some of the challenges that 

you are facing as you approach this August 1st deadline for complying with the new rules, at the same time implementing the new 

form? 

Ms. EVANS. Thank you, Chairman Neugebauer. 

Yes. There is much more to this process than just forms; it is 

about a whole paradigm shift on how transactions are going to be 

closed. And we absolutely agree that a better-informed consumer is 

far more educated to make good, solid decisions about their financial obligations. 

The new forms are very costly to title insurance companies large 

and small. It requires a total new process. In fact, many of our 

15 

companies are having to upgrade and redesign their entire systems 

to accommodate the rule that was put forward, and to a very small 

operation across the Nation that we have, it could be a matter of 

whether they are going to make money or lose money this year. 

We are committed to making sure that consumers are able to 

close their loans, that real estate transactions go forward. But the 

one big issue still looming is the calculation or the miscalculation, 

as the rule requires, of the title insurance costs for consumers. 

Chairman NEUGEBAUER. Ms. McGrath, on your side of the process, how is this impacting you? 

Ms. MCGRATH. We completely agree that it has been a very confusing and challenging process for companies of all sizes, but in 

particular for smaller lenders. We are absolutely having to change 

all of our systems, and in many instances we are at the mercy of 

our loan origination system providers, who are having to put together this information and haven’t yet completed the process. 

So we absolutely agree that a non-enforcement period through 

the end of the year would be incredibly beneficial. We are doing everything we can to educate our employees and work together with 

our partners at the title companies and our REALTOR® partners 

to help to educate the consumer and prepare for what is coming, 

but at the end of the day, this is going to be a very challenging 

process and it is just going to hurt consumers who are trying to 

buy their homes. 

Chairman NEUGEBAUER. Yes, as I think was mentioned, Mr. 

Luetkemeyer and I sent a letter requesting that kind of a holdharmless period here beginning August 1st, and one of the reasons 

I agreed to do that was that from my days in the homebuilding 

business and the real estate business, August was a big month. In 

other words, families were trying to close their new home purchase 

so that they were changing school districts and so it was important 

to do that. 

What I began to worry about when we—because really the purpose of this hearing is to talk about how this is impacting the 

American families and consumers, and what I am worried about is 

that we come up to that August period of time and people are trying to work out the glitches in their system, and then a last-minute 

charge comes in and that closing may have to be delayed because 

now the title company, for example, or the lender is afraid to give 

authorization to close that loan until they have gone back and double checked. 

Is that a reality? 

Ms. WILSON. Chairman Neugebauer? 

Chairman NEUGEBAUER. Just a second. I was—Ms. Evans? 

Ms. EVANS. Thank you, sir. Yes. 

And one of the most challenging aspects with a hard start period 

or a hard stop, however you would like to couch it, is the fact that 

we are going to be faced with closing loans under the current process as well as those loans that will close under the new process, 

because the rule very specifically defines applications made on or 

before August 1st will close under the current process; applications 

made or closed after August 1st and thereafter will close under the 

other process. 

16 

And so both title entities and lenders are forced to maintain dual 

operating systems for who knows how long in order to make sure 

that consumer is well-served and those transactions can close during a most busy time of the year. 

Chairman NEUGEBAUER. My time has expired. 

The gentleman from Missouri, Mr. Clay, is recognized for 5 minutes. 

Mr. CLAY. Thank you, Mr. Chairman. 

Let me start with Ms. Wilson. In addition to serving as a consumer advocacy organization, the Center for Responsible Lending 

also provides alternatives to payday lending. 

In CRL’s experience, have your alternative products been profitable? 

Ms. WILSON. They have. One of the benefits of being an employee 

of the Center for Responsible Lending is that not only do we advocate or do research on financial services, but we are an affiliate of 

Self-Help, a credit union based in North Carolina, Illinois, and 

California. We actually provide products and services to consumers 

across the country, and so we understand the business model of 

community bank lending. 

The Center for Responsible Lending, through our relationship 

with Self-Help, has been able to determine that you don’t have to 

charge 300 percent or 400 percent interest rates to do business 

with working-class individuals across the country in order to do 

short-term loans. In reality— 

Mr. CLAY. And you can still be profitable. 

Ms. WILSON. Right, and be profitable. In reality, you can charge 

interest rates that are well below proposals like those existing in 

the Senate that suggest a 36 percent rate cap. In fact, for the Center for Responsible Lender’s affiliate, Self-Help, our interest rate on 

short-term loans is approximately 25 percent. 

Mr. CLAY. Thank you for that response. 

Mr. Shaul, Federal law establishes an ability-to-repay standard 

for credit cards and mortgages. Should payday lenders have to 

abide by a similar standard? 

Mr. SHAUL. They certainly should have to abide by an ability-torepay standard, no question. When we were present at the CFPB 

for interviews and discussions, I think the staff was generally 

amazed that there was in place already a lot of the standards necessary for ability to repay. 

This is an ongoing discussion of what would constitute exactly 

the criteria for ability to repay, but I think it is an unassailable 

proposition that everyone should be given criteria by which we 

would assess whether or not they can repay a loan. 

Mr. CLAY. So you think your industry will come up with a bright 

line that says, ‘‘Okay, these are the standards, this is what a person has the ability to repay us on a monthly or weekly basis,’’ and 

then it will be accepted universally by the industry? 

Mr. SHAUL. Congressman Clay, I have learned the hard way that 

this is a very diverse industry, and I would never attempt to speak 

for everyone within it. I would say that our members, who are, I 

think, committed to a higher standard and to reform, are completely willing to take up the issue of ability to repay, work with 

17 

the Bureau on it, and come to a conclusion that I think could be 

accepted by everyone within our membership. 

Mr. CLAY. Okay. That is a fair response. 

Let me ask you about—in light of CFPB’s enforcement actions 

and supervisory highlights of the payday lending industry, why do 

you still believe that State regulation provides adequate protection 

for consumers nationally? 

Mr. SHAUL. In part because when Director Cordray appeared before the Financial Services Committee and gave testimony, he was 

pressed on the question of which States had fallen down in providing adequate safeguards for consumers, and he did not really 

reply to that. It is hard to convey exactly all of the differences that 

exist State by State within the payday empire. 

There are some 15 States that do not have payday at all. There 

are States that have what they denominate as strict regulation. 

California really has a payday loan that amounts to $270, $273. 

Florida has a very different situation from that. 

The analysis that should be done and that we recommend to the 

Bureau is to take each of the States that have a payday component 

and determine what needs to be preempted by the Bureau because 

there is a specific weakness or specific problem within it. 

I am concerned about preemption because one of the models that 

is being put forward as an exhibit—a good exhibit—is Colorado, 

but there doesn’t seem to be an appreciation that you don’t get to 

the Colorado model unless you have the ability within the States 

to experiment, make determinations on their own, and out of the 

best of that we can come up with a comprehensive set of norms 

that I think would serve the industry well. 

Mr. CLAY. Thank you for that response. 

Okay, my time— 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from New Mexico, the co-chairman of 

the subcmmittee, Mr. Pearce, is recognized for 5 minutes. 

Mr. PEARCE. Thank you, Mr. Chairman. 

And thanks to each one of you for your presentations. 

Ms. McGrath, you may have heard Ms. Wilson. She said that the 

mortgage lenders basically don’t have relationships or, she leaned 

that way—she may not have said that exactly. Is that true? Mortgage lenders don’t have relationships with their customers? 

Ms. MCGRATH. I don’t believe that is true at all. As a matter of 

fact, our company is built on the relationships that we have built 

with REALTORS® and our customers. That is how we receive our 

loans. 

Mr. PEARCE. Your customers come back and finance— 

Ms. MCGRATH. Absolutely. We— 

Mr. PEARCE. —a different house—this is not one time out? 

Ms. MCGRATH. Yes, sir. We regularly see customers come back 

and then refer their friends to us. We actually spend very little relative to our overall expenses on advertising because we get referrals from our existing customers time and time again. 

Mr. PEARCE. Okay. If the coming regulations are going to put 

pressure on the industry, will that pressure be greater on the 

smaller, local institutions or greater on the large, international, national mortgage banks? 

18 

Ms. MCGRATH. Sir, at the end of the day, the regulations that 

are in place right now have had a tremendous impact in terms of 

fixed costs and per-loan costs. The larger banks— 

Mr. PEARCE. So it would be tougher on the smaller— 

Ms. MCGRATH. It is much tougher on the smaller— 

Mr. PEARCE. So what Ms. Wilson is recommending, that we go 

along with CFPB and just act like it is all good, actually will ensure that what she says is already happening would actually happen. It will force the small people out of the market and you will 

just be left with the big guys that can afford to come in with the 

cost. 

Ms. Wilson, have you all studied the payday lending—your center? 

Ms. WILSON. Definitely. The Center for Responsible Lending 

has— 

Mr. PEARCE. What would be a fair percentage rate—you said we 

don’t have to charge the high rates, and I understand the ranking 

member and Mr. Clay both have pointed out shortcomings of the 

system, and we would acknowledge that those shouldn’t exist, but 

what would be a fair percentage to charge? You said you studied 

it and you said you researched it, so— 

Ms. WILSON. Right. One of the things that I would point you to 

is actually— 

Mr. PEARCE. Ten percent? Twenty percent? 

Ms. WILSON. There is legislation, actually, in the Senate, introduced by Senators Durbin and Merkley that set the rate cap of 36 

percent. 

Mr. PEARCE. No, I mean, what is your opinion? What is your 

group’s opinion that a fair rate is? Ten percent? 

Ms. WILSON. I think we support the 36 percent rate cap that 

Senators Durbin and Merkley— 

Mr. PEARCE. So, 36 percent. We will just call it 40 percent. Fair 

enough? 

Ms. WILSON. I think a 36 percent rate cap is— 

Mr. PEARCE. Okay. Call it 30 percent. We will go low then—30 

percent. 

So the average guy in the oil field whom I represent comes to me 

and asks me, ‘‘What business is it of yours, the government, if I 

want to borrow $100 today and pay back $120 at the end of the 

week? What business is it of yours?’’ 

But if we apply your standard of 30 percent, basically for that $100 the lender is going to get 36—yes, basically 30 cents. So you 

loan $100 for a week, you get 30 cents back. That is 10 percent is 

$10 over a year and then just divide by 52. That is not exactly scientific, it is not exactly perfect, but it is close enough for the discussion. 

So would you loan $100 for a week for 30 cents? 

Ms. WILSON. Well, Congressman— 

Mr. PEARCE. No, I am just asking a straight question. It is easy. 

It is either yes or no, and I don’t think you would. And I don’t 

think you could make any money at it. 

And so what you are going to do is you are going to force these 

people out of business by putting these caps on here, and at the 

end of the day the guy borrowing the money asks, ‘‘What business 

19 

is it of the government if I want to borrow $100 to get me through 

to the next payday?’’ But you would choke that opportunity off. 

And I am not trying to attack you, because it is not you. But it 

is people who declare what is and what isn’t and the whole circumstance of loaning money. 

So, Ms. Evans, I get complaints from the community banks a lot 

that this has made life very difficult for them—the CFPB, the QM 

rule, all that. Have you noticed any change in the offerings from 

community banks as far as the lending to real estate purchases? 

Ms. EVANS. What we have noticed is conversations about, I don’t 

know whether I am going to be able to offer mortgages in my small 

markets. What is the consequence going to be, and can I afford either the implementation or the risk of— 

Mr. PEARCE. And so if that is the case, if people choke that off, 

who are going to be the losers? Who cannot go find a different market? 

Ms. EVANS. The small community— 

Mr. PEARCE. The small communities, the poor people, the people 

who are at the bottom end of the economic spectrum will have no 

other choices. And so we are—we have people of good will—Ms. 

Wilson I consider to be of tremendously good will—but they are 

suggesting things which are going to choke off access to the poor, 

to the people who are not in large markets because no bank in New 

York is ever going to come into the 2nd District of New Mexico and 

loan for a $30,000 house. I will guarantee it. And so, you will choke 

off those people. 

So I appreciate your good heart in the deal, Ms. Wilson, but I 

really see a different side of the argument. 

Thank you very much. I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Georgia, Mr. Scott, is recognized 

for 5 minutes. 

Mr. SCOTT. Yes. I would like to direct my question to Mr. Friedman. 

There has been much discussion about the CFPB’s governance 

model, whether we should have a single director or a multi-commission for its governance. Can you explain to the committee what 

would be the shortcomings of the CFPB’s current governance that 

could be cured by replacing a single director with a multimember 

commission? 

Mr. FRIEDMAN. Thanks for that question, Congressman. 

Most Federal regulators, independent regulators, are headed by 

a bipartisan, multimember commission, and what we find is in 

those cases they are more deliberative about the policy they put 

forward. It is not just about approving rulemaking, but also which 

enforcement actions they take up. 

By having a multimember commission you set up a process by 

which staff at the agency has to put forward a proposal and the 

members consider it and often take a vote on whether to proceed. 

In the case of a single political appointee, it is really just a matter 

of a memo to the boss and he will sign off on whether to move forward or not, and there is no public record or transparency in how 

that decision is made. 

20 

Mr. SCOTT. So in your opinion, what would be the best method? 

Which way should we go—single director or multimember commission? 

Mr. FRIEDMAN. AFSA would recommend a multi-member, bipartisan commission with staggered terms, allowing a new President, 

as he came in, to appoint the chairman, and having that institutional memory holdover. It also provides an avenue for stakeholders like our industry and like consumer advocates and like 

Congress, to approach the various commissioners and bring their 

issues to the fore. 

Mr. SCOTT. And what benefits would this bring to our financial 

services industry? 

Mr. FRIEDMAN. Ultimately, I think that it would promote better 

policymaking that carefully weighs consumer protections against 

the need to ensure access to credit, particularly for financially underserved Americans, who are the ones who are more commonly 

served by non-banks. 

Mr. SCOTT. Let me ask you another question, if I may. Consumer 

finance companies differ from banks and from credit unions, which 

is why they have been regulated differently. Finance companies, for 

example, do not accept deposits, so they are not supervised for safety and soundness. 

So why is it important for a consumer regulator to concern himself or herself with this distinction? 

Mr. FRIEDMAN. Sir, safety and soundness concerns for banks and 

credit unions are very real. Consumers put deposits at those institutions and the government has a stake in ensuring that they are 

not lost if the institution fails. 

In the case of a consumer finance company, they are lending out 

of their own capital, and if the institution were to fail then the 

portfolio of loans would be bought up by some other institution 

which would continue to collect the payments. But no consumers 

would lose their nest egg. 

As a result, consumer finance companies are able to take risks 

that depository institutions are not, and that means that consumers who are lower down on the credit spectrum, perhaps have 

dings on their credit histories, are able to find loans from consumer 

finance companies that they might not get from a depository institution. 

Mr. SCOTT. Thank you. 

Ms. Wilson, you are with the neighborhood lending group, is that 

correct? Is that the group out of North Carolina? I’m sorry. 

Ms. WILSON. The Center for Responsible Lending? 

Mr. SCOTT. The Center for Responsible Lending. Is that the one 

out of North Carolina? Are you based out of North Carolina, or— 

Ms. WILSON. CRL is actually the national headquarters in Washington, D.C., but we are affiliated with Self-Help, which is, in fact, 

based in North Carolina. 

Mr. SCOTT. Okay. Tell me what your assessment is. You have followed our work here. We had a program on mortgage lending. It 

was called the Hardest Hit program. 

Are you familiar with that, where we put that into the Wall 

Street bailout—and I hate to use the word ‘‘bailout’’—program? But 

21 

it was able to go down and help struggling homeowners in the 

hardest-hit States with unemployment and mortgage foreclosures. 

And I wanted to just get your assessment on how you feel that 

program has helped in the lending area, particularly for those behind on their mortgages. 

Ms. WILSON. Certainly. The Hardest Hit Fund was actually intended for very good reasons, to direct capital to stem the challenges that were facing communities that were really burdened by 

the impact of the housing crisis and the market’s implosion. 

There have been challenges with the program, and there is no 

denying that. Mostly those challenges have actually related to the 

restrictions that exist on the ability to release those funds. So there 

are remaining funds that we hope that we can actually get released. 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

The gentleman from North Carolina, Mr. Pittenger, is recognized 

for 5 minutes. 

Mr. PITTENGER. Thank you, Mr. Chairman. 

Ms. Wilson, I think it is fair to say that you have a strong aversion against payday lending. You don’t like payday lending. You 

think it harms people. Is that right? 

Ms. WILSON. Let me say this: I think short-term lending can be 

a very beneficial product and a necessary product, but I do take exception to payday lending to the extent— 

Mr. PITTENGER. Payday lending, as it is today, harms people. 

Ms. WILSON. —that it has a 400 percent or 300 percent interest 

rate. 

Mr. PITTENGER. Reclaiming my time, yes or no: Payday lending, 

as you see it today, harms people, is that right? 

Ms. WILSON. Short-term lending can be very beneficial. 

Mr. PITTENGER. Payday lending harms people. Okay. I understand. 

Ms. WILSON. 400 percent interest rates harm people. I would 

agree with that. 

Mr. PITTENGER. I appreciate that. Now, you are moved by a personal concern, is that right? You care about people. And I value 

that. I respect that. 

Ms. Wilson, I would ask you, do you smoke? 

Ms. WILSON. I don’t. 

Mr. PITTENGER. There are people who smoke. 

Ms. WILSON. I know. 

Mr. PITTENGER. There are warning labels on smoking cigarettes 

that warn people they could die. Isn’t that right? We allow people 

freedom to make a choice. Is that correct? 

Ms. WILSON. That is correct. 

Mr. PITTENGER. Ms. Wilson, do you drink alcohol? 

Ms. WILSON. I do occasionally. 

Mr. PITTENGER. Okay. The ranking member mentioned that people get hooked on payday lending. Some people get hooked on alcohol, don’t they? Do we allow alcohol? 

Ms. WILSON. We do. 

Mr. PITTENGER. We do. 

Ms. Wilson, do you eat products with sugar? 

Ms. WILSON. That is a really personal question. 

22 

Mr. PITTENGER. I know. 

Ms. WILSON. I am going to tell you right now— 

Mr. PITTENGER. I know, and if a— 

Ms. WILSON. —that I do. 

Mr. PITTENGER. My doctor— 

Ms. WILSON. I will admit it today before you. 

Mr. PITTENGER. And we are hearing the stats all the time that 

diabetes is the number one health problem we have right behind 

heart problems. A lot of people get hooked on sugar. 

You know, Ms. Wilson, people marry who they want to marry. 

And sometimes, they marry bad people. I have met some of those, 

maybe you have, but they made that choice. People make choices. 

Do you believe in Big Brother? 

Ms. WILSON. Do I believe in— 

Mr. PITTENGER. Do you believe in Big Brother—should Big 

Brother determine what choices people can make? 

Ms. WILSON. Representative, what I would say to you is that 

when it comes to financial services, the Federal Government and 

State governments have recognized that usury is a problem— 

Mr. PITTENGER. And we recognize— 

Ms. WILSON. —and the question that we are asking about— 

Mr. PITTENGER. Reclaiming my time— 

Ms. WILSON. —payday lending is whether or not usurious rates 

should be something that is acceptable. And the law has a longstanding— 

Mr. PITTENGER. Ms. Wilson, with all due respect— 

Ms. WILSON. —of rejecting that. 

Mr. PITTENGER. —is smoking not a problem? Is alcohol not a 

problem? And for many people, sugar? Do people get hooked on 

these? 

Ms. WILSON. They do, but it is regulated by the Federal Government— 

Mr. PITTENGER. And they make choices. And we have given 

warnings. There are disclaimers. 

I think we have made our point, haven’t we? 

Ms. Evans, you made a wonderful statement about the legislation that my colleague, Mr. Heck, and I have introduced on a small 

business advisory board for CFPB, to ensure that small businesses 

who work with financial services products have a voice at the table. 

What would you say to your critics—maybe those with the Center 

for Responsible Lending here today—who claim H.R. 1195 is redundant and not needed? 

Do you feel like we need to have that voice? Is there pressure on 

small businesses that they need to be able to have that forum? 

Are there compliance problems that maybe the CFPB needs to 

know about? Give me some of your responses to that. 

Ms. EVANS. Sir, thank you for asking. Yes, absolutely. 

Small businesses, medium-sized businesses all need a voice with 

the CFPB and a way to communicate about the consequence of 

overregulation to the cost of business and their ability to engage 

with consumers in their local market. And H.R. 1195 gives that 

voice to small business. 

Mr. PITTENGER. Thank you. 

I reserve the balance of my time. 

23 

Chairman NEUGEBAUER. I thank the gentleman. 

The gentleman from Washington, Mr. Heck, is recognized for 5 

minutes. 

Mr. HECK. Thank you, Mr. Chairman. 

I worked long and hard with Mr. Pittenger on the non-bank advisory board. I had hoped it would pass. I worked long and hard with 

Mr. Posey on the advisory opinion board. 

But, as Mr. Pittenger knows full well—and I compliment him 

again for introducing the bill—an amendment was added yesterday 

that kills the bill. It is dead. 

It may pass the House, I don’t know, but it is dead. It is dead, 

of course, because the bill was used as a vehicle after it got out of 

committee for another purpose, and that is to harm the CFPB. 

I suppose my question for those of you who want to and seek increased collaboration between the regulated parties and the regulator would be, how can those of us who think that is appropriate 

work and proceed in order to have the same outcome? 

Because let me repeat—Ms. Evans, I think I would like to start 

with you—that bill is dead. And it is my bill, so please understand—along with Mr. Pittenger, the lead—I take absolutely no 

pleasure. In fact, it grieves me deeply that this has occurred. 

What do you want us to do when we are confronted with this? 

We are trying to be helpful and constructive. How can we do that? 

Ms. EVANS. My response would be that we all, as businesses, 

work together in order to make sure that consumers are able to obtain mortgage loans, they are able to buy homes for their families. 

And I would urge each and every one of you, irregardless of the 

side of the aisle that you are on, to work together to make sure 

that we as small businesses—my members, my company in Colorado, and each of us that employ citizens in our communities and 

help drive healthy and successful communities, you need to come 

together and find a solution. 

You need to help us out. We are the bedrock of this United 

States and we are depending on you to come up with a solution to 

keep us in business. 

Mr. HECK. Hear, hear, Ms. Evans. 

Please note the bill came out of committee 53 to 5, and after it 

got out of committee, without consultation across the aisle, the 

amendment was proposed. So we collaborated—for months we collaborated. And we are deeply frustrated. 

And if I am conveying the depth of my frustration to you—and 

all of you who wanted this bill to pass, including myself—please 

understand how deep my frustration is that after months of working on this, we were bushwhacked. 

Ms. Wilson, I have, admittedly, a lot of sympathy for the concerns that have been expressed about the difficulties in implementing the August 1st deadline and the integration of TILA and 

RESPA. I frankly think they are right, that it is a deadline that 

may be problematic. 

But I am interested in your response. Please know that we may 

have a little bit of a disagreement if you are going to come from 

where I think you are, but I do want to know what your point of 

view is. 

24 

Ms. WILSON. I am so glad that you asked me that question. I 

wanted to have the opportunity to speak to that, because I think 

this is actually a really fascinating issue for one particular reason. 

The integrated disclosure requirements were actually implemented by a final rulemaking by the CFPB in 2013. So the rules 

that were actually supposed to guide this process the industry has 

had notice of for almost 2 years. 

In the timeframe between that, the Consumer Financial Protection Bureau has done four webinars, has released seven different 

consumer guides, business guides, small business compliance 

guides. They have actually done eight forms specific to the different 

types of mortgage loans that could take place to show the disclosures. 

And at the end of the day, the rule itself is not a rule that actually assesses a different burden, but is intended to actually decrease the number of forms that the industry has to provide. 

Why am I saying this? I am saying this because just less than 

a year ago the very same industry associations that are coming to 

you today and asking you for an extension testified before this very 

same subcommittee that the very rulemaking that the CFPB engaged in with respect to the integrated disclosure should be hailed 

as a classic example of how the industry can work with the CFPB 

to get the rule and the process right. 

Mr. HECK. Okay. I see the yellow light is on so I don’t mean to 

rudely interrupt, but— 

Ms. WILSON. Yes. 

Mr. HECK. —frankly, you haven’t swayed me. But in my limited 

time left I would be interested in hearing a rebuttal from industry 

as to why, given that context, you think we just all didn’t—Mr. 

Chairman, I want to register my objection to the absence of clocks 

in our temporary hearing room, which did not enable me to calibrate my question. Thank you. 

Chairman NEUGEBAUER. The gentleman’s comment is noted. I 

can’t do anything about it, but it is noted. 

The Chair now recognizes the gentleman from Texas, Mr. Williams, for 5 minutes. 

Mr. WILLIAMS. Thank you, Mr. Chairman. 

And I thank the witnesses for being here today. 

In full disclosure, I must say the following: I am from Texas. I 

am a small business owner, 45 years—family 76 years. I have enjoyed this testimony. 

And I am a car dealer, new and used. And I think Dodd-Frank 

is just about the worst legislation we could ever have. 

Now, with that being said, I want to direct my first set of questions to Mr. Friedman. 

The first is almost the same question I asked Dr. Cordray a few 

weeks back when he testified before our committee, but hopefully— 

and I feel like I will—I will get a more detailed answer from you. 

Under the Dodd-Frank Act, does the CFPB have statutory authority to regulate auto dealers? 

Mr. FRIEDMAN. No, sir. 

Mr. WILLIAMS. Elizabeth Warren is out there today saying they 

do, so we will have some interesting debate. 

25 

Second, is it your opinion that CFPB is indirectly regulating auto 

dealers’ behavior by holding lenders accountable for dealers’ actions, something they cannot control? 

Mr. FRIEDMAN. Yes, sir. 

Mr. WILLIAMS. Okay. Now, Director Cordray has insinuated that 

auto dealers base financing rates on eyeballing a customer and that 

this practice was regrettable. Basically, he is saying that in my industry and in my business we charge different rates based on 

someone’s ethnicity, skin color, gender, and so forth. 

I know that AFSA commissioned a study that studied the methodology used by CFPB to determine disparate impact and it has 

significant error rates. So the question is, is the CFPB putting 

dealers in an impossible position here by saying that their lending 

policies may be discriminatory, yet not giving them any guidance 

on how to avoid potential liability? 

Mr. FRIEDMAN. Yes, I would agree with that, sir. And I would 

add that our industry has zero tolerance for discrimination, and we 

are eager to work with the CFPB and the Department of Justice 

and any other stakeholder who cares about fair lending. 

We simply disagree with their methodology and the approach 

they have taken, and we also disagree with the Bureau’s belief that 

it should use financial institutions as an arm of the law to regulate 

auto dealers. 

Mr. WILLIAMS. There is a thing called reputation that we all deal 

with. At the end of the day, that is all we go home with is our reputation with our customer, something the Federal Government 

does not understand. So thank you for your testimony. 

My next question is to Ms. McGrath. 

Last month you wrote an article for the American Banker that 

indicated that Congress might be inadvertently ignoring the regulation burden on small and mid-sized community-based non-depository mortgage lenders. Would you help me and others understand 

how and to what degree the non-CFPB regulators audit and oversee your business? 

Ms. MCGRATH. Yes. Thank you very much for the question. 

Every single one of the non-depositories that is a licensed mortgage lender is being regularly audited by every single State in 

which we conduct business. So in all of the seven States in which 

I operate, we have an audit. 

In addition to that, we are also audited by the FHA, the VA, and 

the USDA. My company has recently become Fannie Mae-approved, so soon we will also be audited by Fannie Mae. 

All of these States in addition to our warehouse providers. Bear 

in mind that as a non-depository we have to borrow money in order 

to lend it to consumers, and so our warehouse providers will also 

audit us as well and do all sorts of checks to make sure that we 

have the financial wherewithal and that our policies and procedures are in place. 

I would also like to add that in addition to that, just back to the 

non-depository point, is that all of us that are non-depositories, in 

order to conduct—in order to close these loans, we usually have to 

put our own personal guarantees on the line for these transactions. 

So the thought that we are trying to avoid the ability to repay because we want to do riskier loans is simply not true. I have no deVerDate Nov 24 2008 17:40 Aug 31, 2015 Jkt 095057 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 K:\DOCS\95057.TXT TERRI
26 

sire, and my business partner has no desire, to buy back a loan because we have not done a good check to make sure that the borrower has the ability to repay. 

Mr. WILLIAMS. Next question: How does this affect the types of 

products you might or will offer a customer? 

Ms. MCGRATH. At the end of the day, the products are the products that are out there that we are able to sell into the secondary 

market, so we applaud the ability to do those loans but we have 

to stay within the QM parameters because we have to be able to 

sell these loans in the secondary market. 

So the bulk of our loans are QM lending. Again, we are small 

non-depository lenders with good track records who are trying to 

provide consumers with the loans that they need. 

Chairman NEUGEBAUER. The gentleman’s time has expired. 

Mr. WILLIAMS. I yield back. Thank you. 

Chairman NEUGEBAUER. Based on the question from the gentleman from Washington, I just want to let you know that when 

the yellow light comes on, you have 1 minute remaining. You can 

look at the lights on the table there. 

The Chair now recognizes the gentleman from Massachusetts, 

Mr. Lynch, for 5 minutes. 

Mr. LYNCH. Thank you, Mr. Chairman. 

I want to thank all the witnesses. I think you have all been very, 

very helpful, each of you, in helping us grapple with this issue. 

But, Ms. Wilson, I wanted to focus on you. I know the comparison was made earlier to alcohol and smoking, I guess, regarding 

choices that could be made. 

And I know that we in the legislature have put limits on those 

who sell alcohol and we say, ‘‘Look, young people are not able to 

really make that choice so we are going to put a limit.’’ You have 

to be 18 to buy alcohol. 

We also put limits on people buying cigarettes because young 

people—I remember for years when I was younger during spring 

break the cigarette companies would be down there in Florida and 

elsewhere giving free samples of cigarettes out, and young people 

were unable to—well, I think they were exploited. There was an information asymmetry where they just didn’t have the wherewithal, 

and that circumstances weren’t good for them making a decision in 

that circumstance. So we did away with that pretty much. 

I have some areas in my district that are underbanked, including 

Brockton, Massachusetts. We were hit pretty hard by subprime 

lenders and there was an informational asymmetry, and also there 

was—the community is underbanked. 

We have convinced some credit unions to go in there and try to 

help people out, but mortgages were not available so the folks who 

were selling subprime had a field day down there. And then when 

the crisis hit, boy, it really hit Brockton very, very badly, and they 

are just recovering now. 

Unlike some of the—I also represent Boston. They are wellbanked and it is not a problem. 

But for the folks that we are talking about who are exploited by 

payday lenders, do they really have a choice? Do they really have— 

is it as simple as that—they can either go to the payday lender or 

27 

they have another institution that will lend to them at a better 

rate? 

Ms. WILSON. Representative Lynch, I actually thank you for 

making those points because I think you bring out an important 

perspective that takes us back to the title of this hearing and the 

initial question. 

One of the things that the Center for Responsible Lending has 

been very public and adamant about is the importance of actually 

making sure that community-based banking institutions have an 

opportunity to compete. And the reality is because most of the conversation has focused not on actually granting legitimate relief to 

community bank financial institutions, and instead addressing topics like payday lenders and those other institutions, we haven’t 

been able to do that. 

So the reality is that one of the things we would like to see is 

that this conversation should focus on how do we get credit unions 

and community banks to offer legitimate alternatives at lower interest rates for consumers in traditionally underserved areas? That 

is a conversation worth engaging in. That is a conversation that 

Congress can do great benefit to American consumers for addressing. 

But that is a very separate thing than saying that it should be 

acceptable to charge 300 percent or 400 percent interest rates. 

Mr. LYNCH. All right. 

I traveled a lot as an iron worker before I came to Congress and 

oftentimes I would only be in a place maybe 6 months, 8 months, 

and many times shorter times than that, and you would have to 

go to a payday lender to cash a check because you didn’t have— 

you are actually sort of a traveling worker, so you wouldn’t have 

a connection to that neighborhood or that city. And so without an 

established residence, you had to rely on payday lenders. And they 

typically take 2 percent of your check plus a fee—plus a fat fee. 

So, you see where people don’t have that—and many can’t go to 

a regular bank. You have to get an account, and you might be leaving there, so to set that all up was just not practical. 

So I have seen firsthand how some people can be taken advantage of if they don’t have all the advantages that other people 

might have. 

So anyway, I will yield back the balance of my time. 

And thank you all for your testimony. 

Chairman NEUGEBAUER. I thank the gentleman. 

And now the gentleman from Missouri, the chairman of our 

Housing and Insurance Subcommittee, Mr. Luetkemeyer, is recognized for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

I have a quick question for Ms. Wilson. 

Your testimony, apparently, with the RESPA–TILA situation, the 

TILA–RESPA integration situation, leads me to believe that you 

are not supportive of the 6-month hold-harmless period. Is that 

what I will read you— 

Ms. WILSON. You mean a delay by the Consumer Financial Protection Bureau— 

Mr. LUETKEMEYER. Right. 

Ms. WILSON. —in enforcement? 

28 

Mr. LUETKEMEYER. Right. 

Ms. WILSON. As a general matter, I made that testimony to— 

Mr. LUETKEMEYER. Either you are or you aren’t. Yes or no? 

Ms. WILSON. So what I would say is this: I think that it is perfectly consistent with what the CFPB has done before to allow 

some delayed enforcement. My point was to suggest that unlike 

other instances— 

Mr. LUETKEMEYER. My point, Ms. Wilson, is that CRL signed a 

letter 3/18, a trade letter that asked CFPB to consider a holdharmless period of 6 months. Do you change your position? 

Ms. WILSON. It is not a change in position. What I wanted to— 

Mr. LUETKEMEYER. Okay. So you agree with the chairman and 

I in our position, and agree with the industry to try and have a 

hold-harmless period here where we can sort of find a way to make 

this thing all work. You agree with that, then, I take it. Yes or no? 

Ms. WILSON. That is easy. Yes. 

Mr. LUETKEMEYER. Okay. Thank you very much. 

Ms. McGrath and Ms. Evans, along that same line, I am just 

kind of curious, before CFPB came out with their rules, were your 

industries, your associations working with CFPB at all to try and 

help form some rules and regulations that would actually be workable? Were you working with—were they working with you? 

Ms. MCGRATH. Excuse me. Thank you for the question. 

We have certainly reached out to them through our organization 

and tried to start a dialogue and tried to become involved in the 

process, but for the most part we were told that we just would have 

to wait until it came out. 

Mr. LUETKEMEYER. Okay. 

Ms. Evans? 

Ms. EVANS. Thank you for asking the question. Yes, most certainly, we were very actively engaged in the comment period when 

the proposed rules were put forward. And actually, the CFPB did 

consider many of our comments. 

But the remaining outstanding issues are critical to the—to actually the goal of the CFPB to make sure consumers are better informed. 

Mr. LUETKEMEYER. Ms. Evans, I think you were the one who 

made mention of the fact that you were—you had some—or maybe 

it was—I think it was you—made mention of the fact that you had 

an issuance of best practices. Did CFPB put any of those into place 

in their regulation? 

Ms. EVANS. No, sir. They did not. In fact, the best practices 

standards that we put forward were in response of the lack of direction that the CFPB has not done. 

Thank you 

Mr. LUETKEMEYER. Thank you. Thank you very much. 

Mr. Shaul, I am kind of curious—I am someone who is sort of 

very involved in the Operation Choke Point discussions and trying 

to push back the DOJ and the FDIC with their actions, and I know 

that payday lending is in the crosshairs of Operation Choke Point. 

So I am sure at this point all the different storefronts and individual businesses that have been affected by this, can you—there 

is bound to be some sort of access to credit problem that we have 

29 

gotten. Can you determine, give us an idea of just how much it has 

affected the access to credit by Choke Point actions? 

Mr. SHAUL. It has affected access to credit indirectly and directly. 

Some smaller entities have been forced out of business, notably in 

States like California. 

It is also true that entities across the country have borne increased costs because the issue here is not one that is commonly 

understood. It goes to the ability to bank proceeds on a daily basis 

in banks that are close to the institutions. So many members, for 

example, have had to hire armored trucks to take cash from point 

to point. 

The beauty of this, from our point of view—or the irony of it— 

is at the same time that this is occurring to our members and to 

others, the Justice Department has struggled to find a way to put 

marijuana proceeds in banks. It is curious that we are State-licensed, in business for more than 15 years, and constitute, in my 

judgment, little if any reputational risk to a bank, and yet our position is inferior to that of a marijuana— 

Mr. LUETKEMEYER. I have one quick question. I see the yellow 

light has come up on me. 

With regards to CFPB’s new rulings that have come out with regards to payday lending, how much did they study this? Are you 

aware of the length and breadth of the studies that they did before 

they issued these rules or did they do it at all? 

Mr. SHAUL. I am not fully aware—they say they have been at 

this for 3 years, but our judgment is that there are two problems: 

they have not asked the proper questions in regard to research; 

and their research is incomplete. 

For example, in SBREFA they have not done product-by-product 

research. They have not done research that is on small entities, 

even though SBREFA is meant to address small entities as a proposition. 

Mr. LUETKEMEYER. Thank you very much. 

Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

The gentlewoman from California, Ms. Waters, the ranking member of the full Financial Services Committee, is recognized for 5 

minutes. 

Ms. WATERS. Thank you very much. 

For full disclosure, I am very supportive of the Consumer Financial Protection Bureau. I think Mr. Cordray has done a wonderful 

job. I served on the conference committee for Dodd-Frank reform, 

and I made sure that I did everything that I could to make sure 

that the CFPB was—became a part of the reforms that we were 

doing. 

For further disclosure, Ms. Wilson was asked a lot of things. She 

was asked whether or not she liked the CFPB, I believe. She was 

asked about smoking. She was asked about liquor. She was asked 

about a lot of stuff. Let me be clear—I think she was asked about 

payday loans, not the CFPB. 

And you weren’t given a chance to answer many of the questions 

that were put to you because you have been interrupted by Mr. 

Luetkemeyer, Mr. Pearce, and Mr. Neugebauer here today. But let 

30 

me just say, even though you haven’t had a chance to say it, I don’t 

like payday loans. So I want everybody to be clear about that. 

Let me ask you, Ms. Wilson, you said some banks and credit 

unions make loans at rates much less than 28 percent. Are these 

charity loans or can short-term loans be profitable and affordable? 

Ms. WILSON. Congresswoman Waters, thank you for asking me 

that question, because the reality in the experience of Self-Help, 

CRL’s affiliate, is that they are profitable. And it is not charity; we 

are in business to make money. 

And our experience is that you can make short-term loans to consumers who are of low- and moderate-income backgrounds, or in 

minority neighborhoods, and they can be profitable and successful. 

The key is to actually make sure that they have an ability to repay 

that loan and that the loan is designed in a way where they can 

actually meet the terms. 

So no, they are profitable, and yes, we are in the business of 

making money. 

Ms. WATERS. Thank you. 

Let me ask our gentleman here today who is representing payday loans—I think it is Mr. Shaul—there has been a lot of criticism 

about the 400 percent interest, 455 I think Mr. Clay said. You have 

been criticized about the cost of your loans. 

Why do you charge 400 to 455 percent for your loans? Why do 

you do that? 

Mr. SHAUL. Ms. Waters, it actually stems from the fact that it 

is necessary as a proposition to stay in business to have a larger 

interest rate for a short-term loan, especially if it is in conjunction 

with a storefront—less from the standpoint of the number of defaults, more from the underlying cost of servicing those loans. 

Ms. WATERS. I understand that it—I believe you get capital from 

some of the larger banks. For example, you are able to obtain capital to run your businesses and to make loans, et cetera, from some 

of the larger banks. Is that right? 

Mr. SHAUL. I think that would be a minority point of view. I do 

not think that is— 

Ms. WATERS. You have not received capital from Chase Bank? 

Mr. SHAUL. I do not believe that Chase Bank is supplying lines 

of credit to anyone in our industry—in our— 

Ms. WATERS. What is the cost of your capital—the money that 

you get from wherever you get it from? 

Mr. SHAUL. I’m sorry, I missed the question. 

Ms. WATERS. The capital that you use to make loans with, to run 

your business with—I don’t know where you get it from, but what 

does it cost you? 

Mr. SHAUL. It would vary from institution to institution. Some is 

through private placements; some is through partnerships and so 

forth. So I could not give you a complete answer to that. 

What I could tell you is that our return on capital is less than 

banks’ return—large banks’ return. 

Ms. WATERS. Thank you. 

Let me just say something about the automobile industry here. 

There are a lot of people who are watching what is happening in 

the industry, and we find that we are afraid that what happened 

31 

in the housing market with subprime lending is now what is happening with automobile lending, and we are worried about that. 

We see people—and I know people, and I have constituents even 

who are walking into these automobile places and they are getting 

cars without their credit being vetted, but they are paying 40 percent interest on the loans that they are getting. What is going on 

and why is this happening? 

Mr. Friedman, I am speaking to you. 

Chairman NEUGEBAUER. The time of the gentlewoman has expired. 

Ms. WATERS. Would you allow Mr. Friedman to answer the question, Mr. Neugebauer? 

Chairman NEUGEBAUER. Briefly. 

Mr. FRIEDMAN. Ma’am, as far as the rates that you are talking 

about, I wonder if you are referring to buy-here-pay-here dealers, 

which is not the industry that I represent. We represent indirect 

auto lenders, captive finance companies, independent finance companies, and banks that offer credit that is transacted by dealers to 

purchasers of new and used automobiles. 

Ms. WATERS. I am talking about the industries you represent, 

yes. 

Chairman NEUGEBAUER. I hate to do this, but we are going to 

have to vote here in a little bit and I would like to get as many 

Members in as possible, so I am going to have to—if you want to 

get one of your staff members to reach out to the Member to answer that question. 

I am now going to recognize the gentleman from Pennsylvania, 

Mr. Fitzpatrick, for 5 minutes. 

Mr. FITZPATRICK. I thank the chairman for calling the hearing. 

This is a really important subject, and I have found the testimony 

of all the witnesses to be really helpful. 

I keep in close contact with my constituents back in Bucks County, Pennsylvania, those who represent consumers and represent 

buyers and sellers at the real estate settlement table—lenders, title 

agents. And, you know, while I think we all can agree that consolidation of all these procedures and all the forms, all of which were 

designed to help consumers and that is good, but the consolidation 

is a good thing. 

As was pointed out by Ms. Evans, we are 107 days away from 

implementation, and as hard as they are trying—buying software, 

trying to coordinate things—they are concerned about that hardand-fast deadline. And so I want to associate myself with the letter 

that Chairman Neugebauer and Chairman Luetkemeyer have written to the CFPB asking for a responsible, reasonable deferral so 

that everybody can sort of get things in order. 

I asked some of my constituents what their concerns were specifically, in preparing for the hearing today, and one particular constituent was talking about the Real Estate Settlement Procedures 

Act, I guess the HUD–1 settlement form. And he wrote that the 

new closing disclosure set to go into effect as of August 1, 2015, has 

to be delivered to purchasers 3 days prior to closing receipt. Receipt 

has to be confirmed via email or certified mail or hand delivery, 

and no changes can happen once received. 

32 

Is that an accurate recitation of what we are looking at as of August 1st? 

Ms. Evans or Ms. McGrath? 

Ms. MCGRATH. Yes, absolutely. That is very true and it is going 

to be incredibly cumbersome. 

And one of the concerns that we didn’t really talk about during 

this hearing is that when you think about the multiple transactions 

that can sometimes go back to back with different sales of homes, 

a delay in any one of those transactions in the chain will cause a 

delay in all of them. So it could be devastating. 

Mr. FITZPATRICK. Ms. Evans, I assume you have done thousands 

of real estate settlements? 

Ms. EVANS. Yes, you are exactly right. 

And the bigger issue is the rule is so specific that even email delivery isn’t acceptable; it has to be—meet an esign standard that 

for the most part most consumers aren’t familiar with, so it requires the extra burden of educating the consumer about what 

deems acceptance. 

Mr. FITZPATRICK. What happens if a consumer is not represented 

by a REALTOR® or just literally go into the settlement on their 

own? 

Ms. EVANS. They are subject to the same rules, same obligations— 

Mr. FITZPATRICK. Can I just, by show of hands, the panelists— 

the five panelists here—who have actually represented a buyer or 

a seller or a lender at the settlement table when these kinds of 

rules actually have to be implemented? Which of the five of you 

have represented people—have actually gone to real estate settlement other than for yourselves? 

Just the two of you? 

So what happens when, 3 days, 2 days before a settlement, there 

are adjustments? There is oil in the oil tank that needs to be reimbursed, maybe people, families are moving out of a home and 

maybe there is debris left that somebody needs to remove and pay 

for. 

In my experience, these things are minor adjustments at the settlement table that happen in just about every real estate transaction—they are small but they are important, especially to a 

buyer who is putting out a lot of money for a home. What happens 

to those minor adjustments under these new HUD–1 regulations? 

Ms. EVANS. Actually, those minor adjustments may cause a delay 

and a total reset of the transaction, which in most instances does 

nothing but cause harm to that consumer. 

When a consumer approaches closing, they are in—they are 

wanting to close on that home. They perhaps have the moving van 

sitting in our parking lot. They may have their children being entertained in our conference rooms. And they are wanting to close 

the loan, move into their new home so they can get on with their 

life. 

We may have a seller getting ready to take those proceeds and 

go on and purchase another home, and exactly as Ms. McGrath 

said, a delay in one transaction will cause tremendous consequence 

for the subsequent transactions following. 

33 

Ms. MCGRATH. And I would add to that, I just want to reiterate 

something I said in my verbal statement is that this is currently— 

some of this is in effect now already because of changes in the APR 

and what can happen, and in many instances, again, it is a change 

that can—not to the borrower’s—it is not going to negatively impact the borrower. It is actually in their benefit. 

But because it is a change in the APR we have to re-disclose and 

the clock has to start ticking again. 

Mr. FITZPATRICK. Right. And that causes, yes, other—in my experience of representing real families, including at the settlement 

table, August 1st is probably the most difficult time because everybody is trying to get the settlement done before the new school year 

starts. It seems January 1st, if you are going to enact these and 

put these changes into effect, is a better time. 

It is a responsible deferral, still putting the rules into effect, and 

I would hope that the Center for Responsible Lending would continue to advocate for that reasonable extension. 

Thank you, Mr. Chairman. 

Chairman NEUGEBAUER. I thank the gentleman. 

Another gentleman from Pennsylvania, Mr. Rothfus, is recognized for 5 minutes. 

Mr. ROTHFUS. Thank you, Mr. Chairman. 

Mr. Friedman, I wanted to ask you about the Charles River Associates report. 

During a hearing on March 4th, I questioned Director Cordray 

about the Charles River Associates study that examined the Bureau’s disparate impact methodology for indirect auto lending. I 

pointed out that the Bureau had yet to publicly acknowledge the 

study and I questioned the Director on whether he could commit 

to correcting any errors or bias in the methodology before pursuing 

any further disparate impact claims under the Equal Credit Opportunity Act. 

Unfortunately, the Director could only say that the Bureau had 

looked at the study. He didn’t agree with the conclusions and didn’t 

find any obligation to respond. He also stated that the Bureau was 

still thinking about the study and what it might mean. 

Personally, I think it is pretty troubling that the Bureau was attempting to further expand its unaccountable authority by attempting to regulate businesses that are specifically exempt from Bureau 

supervision under the Dodd-Frank Act, and I also think it is pretty 

troubling that Director Cordray couldn’t or wouldn’t commit to 

making necessary corrections to fix the methodology in order to improve the accuracy of the Bureau’s findings. 

I would like to give you the opportunity to respond as well. What 

do the results of the Charles River Associates study mean for your 

members? 

Mr. FRIEDMAN. Thank you for that question, sir. 

I will say that based on the findings of this independent report, 

when appropriately considering the relevant market complexities 

and adjusting for a proxy bias and error, the CFPB’s observed variations in dealer reserve based on race are largely explained by 

business factors. 

And so for the companies under the CFPB’s jurisdiction, they are 

struggling to get to the bottom of this. The CFPB has alleged disVerDate Nov 24 2008 17:40 Aug 31, 2015 Jkt 095057 PO 00000 Frm 00039 Fmt 6633 Sfmt 6633 K:\DOCS\95057.TXT TERRI
34 

parate impact, which means statistical unintentional discrimination based on neutral lending factors, and these companies want to 

work with the Bureau, but under the Equal Credit Opportunity Act 

we don’t collect or maintain demographic information on borrowers 

and proxying is necessary. Unfortunately, the methodology put forward by the Bureau gets it wrong two out of five times. 

Mr. ROTHFUS. Two out of five, that is 41 percent. 

Mr. FRIEDMAN. That is right, sir. 

Mr. ROTHFUS. How do you respond to the fact that the Bureau 

is attempting to hold vendors liable when their methodology is off 

by 41 percent? 

Mr. FRIEDMAN. I would say that if you are trying to market a 

product to a particular community then you might be satisfied with 

guessing their race or ethnicity by a 59 percent accuracy rate, but 

from a law enforcement perspective, I don’t think that is appropriate. 

Mr. ROTHFUS. This question is for everybody on the panel. In a 

hearing last month on regulatory burdens for depository institutions, I spent my time questioning—focusing on problems that 

come about when you have a one-size-fits-all, Washington-knowsbest approach to regulating community banking. 

I made the point that this mindset has a direct impact on the 

ability of financial institutions to serve their local communities, 

particularly those people in need, and the witnesses discussed the 

products and services that are no longer offered today, such as free 

checking. I would like to give you the same opportunity today. 

Are there any specific rules or proposals that you believe will 

have a significantly detrimental impact on access to credit for financially underserved Americans? 

Ms. McGrath, we can start with you and go down the line. 

Ms. MCGRATH. Thank you very much for the question. I think 

that the statistics have shown that the regulatory burden on lenders has caused a dramatic decrease in first-time homebuyers, and 

the numbers are out there and it is very obvious, and you can see 

it in the sales as well in specific areas. For example, in Houston 

the sales show that loans under $100,000 have decreased, whereas 

loans—or, excuse me, home sales under $100,000 have decreased 

whereas home sales above $500,000 and above have increased dramatically. 

So I think that it is important to note that one size does not fit 

all, because the regulatory burden is a fixed cost on many of these 

institutions, and the large banks can absolutely shoulder that burden, whereas the smaller lenders—the smaller depositories and 

non-depositories alike cannot. And that is what is leading to all of 

the consolidation and the lack of choice. 

Mr. ROTHFUS. Mr. Friedman? 

Mr. FRIEDMAN. I would just add that I represent consumer finance companies that make personal loans, traditional and installment loans to consumers. And in the past they often would make 

real estate loans, particularly home equity loans, to good customers, and they have all but exited that marketplace due to just 

sort of the sum total of the regulatory changes in the mortgage 

space. 

35 

It was an incremental part of their business, but it was an important part to their customers, and now they don’t do it anymore, 

and their consumers find fewer options in that space. 

Mr. ROTHFUS. Ms. Evans? 

Ms. EVANS. Thank you. The issue with our industry is the fact 

that the cost of meeting the standard set forth under the new regulation is cost-prohibitive for many of our small members and eliminates competition and choice in our small markets for those consumers who reside in those rural and smaller areas. 

Mr. ROTHFUS. I see my time has expired, Mr. Chairman. Thank 

you. 

Chairman NEUGEBAUER. The gentleman’s time has expired. 

The gentleman from South Carolina, Mr. Mulvaney, is recognized 

for 5 minutes. 

Mr. MULVANEY. Thank you, Mr. Chairman. 

I would like to start with Mr. Shaul and ask some general questions about your opening testimony, and then also follow up a little 

bit on what Mr. Luetkemeyer asked you about the SBREFA process. 

You said in your opening testimony that as well-intentioned as 

you thought Dodd-Frank was and the concept of the CFPB was, it 

has sort of gotten astray from its original intention. Why do you 

think that is? 

Mr. SHAUL. I think there is a natural tendency in Bureaucracies, 

whether they are governmental or not, to continue to expand their 

territory, and in this case I think we all would have been better 

served if there had been limited objectives for the CFPB and limited problems solved before they launched into areas that are dubious at best. Auto lending is one such area. 

I think that their look at our industry ought to be disturbing to 

everyone who envisions rules being made for them, because the research that they have done in our industry fails to take into account the Federal structure, and it also, I think, fails to take into 

account what Dodd-Frank really said. What Dodd-Frank really said 

was that we were to be regulated. 

The proposals in front of us don’t regulate us; they virtually 

drive us out of business. And in addition to that, they are saddling 

us with a set of comparabilities, in terms of other products to be 

regulated, that make it almost impossible to have a straight dialogue on payday lending. 

Mr. MULVANEY. Let me ask you, following up on Mr. 

Luetkemeyer’s comments regarding the outline of proposals under 

consideration, the alternatives to consider to the March 26th document you mentioned in your opening testimony that I think identifies on—I think it is page 45 specifically—says about 60 percent of 

the small lenders are going to go out of business, they are going 

to close. That is the CFPB’s own admission that is the impact here. 

Did I hear you say that is not the intent of—when you worked 

on drafting Dodd-Frank and CFPB, that was never the intent of 

what you worked on? 

Mr. SHAUL. No. I don’t think that the intent of Dodd-Frank was 

to annihilate businesses, and I also do not think that there is a full 

understanding of the consequences—the indirect consequences that 

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36 

cally, I mean that if you look at non-prejudiced research done by 

the Federal Bank in New York and done in Kansas City, you see 

consequences that are not readily seen at the moment the prohibition is made or the restriction is made. 

So I think the error here is the belief that a relatively inexperienced agency with very little as a track record has the stature to 

look forward for an industry as a whole and predict what the consequences of its rules will be. A measure of caution, humility, and 

a greater willingness to have a full discussion would serve the 

CFPB well. 

Mr. MULVANEY. And there is another aspect to it here that I am 

hearing from back home that we won’t have time to explore today, 

which is one of the ways the CFPB, it strikes me, could get that 

sort of insight and that fuller understanding of the impact, is to 

work closely with the industry that they are seeking to regulate or 

to oversee. But what I am hearing from back home is a perfectly 

reasonable question, which is, why should we work with somebody 

who has come out on public record and said they want to put 60 

percent of us out of business? 

That is a very difficult and adversarial relationship in which to 

build that type of understanding, but if—given that is the stated 

purpose, Ms. Wilson, of the CFPB, I will ask you to follow up, as 

well, on something you said during your opening statement: that 

consolidation was bad for the consumer, that choice was good for 

the consumer. Would you agree with me, ma’am, that driving 60 

percent of the small lenders in this country out of business is bad 

for the consumer? 

Mr. SHAUL. It is bad for consumers. The closing of cash advance 

at banks was bad for consumers, even though it is a competitor of 

ours. 

When I am asked questions about rates, the first thing I think 

people ought to understand is the rate is largely because it is a 

short-term loan. But the second part of that is it will only become 

lower as there is real competition—not subsidized competition, not 

competition that doesn’t tell the whole story. 

When we get into these questions of other comparables, add the 

fee, add the byproducts that are included in this and you will see 

that almost none of the experiments, including Sheila Bair’s experiments through the FDIC, to give a counter to payday lending 

works because they don’t turn a profit. 

Mr. MULVANEY. Ms. Wilson, let me close with this: Mr. Pearce 

asked you a question that I think he offered you in a rhetorical 

fashion, which is, what do you say to that person working in the 

oil fields in New Mexico who wants to borrow $100 today and pay 

it back on Friday at $120? 

You support, I think, based upon what we have heard today, getting rid of that particular industry. What do you say to that person? It is not a rhetorical question. 

What do you say to that person who calls you up on the phone 

and says, ‘‘What gives you the authority to take this choice away 

from me?’’ What is your answer? 

Chairman NEUGEBAUER. Briefly, please. 

Turn your microphone— 

Mr. MULVANEY. Brief, but not that quiet. 

37 

Ms. WILSON. I’m sorry about that. 

So briefly, my answer would be that the law has longstanding 

recognition of the fact that usurious rates are bad. And so it is not 

a question of actually taking away the option; it is a question of 

making sure that the option is actually a legitimate choice. 

Mr. MULVANEY. And I will put it to you, Mr. Chairman, that 

when the law has the effect of hurting individuals, maybe the law 

should change. 

Chairman NEUGEBAUER. I appreciate the gentleman’s comments. 

Now, Mr. Friedman, I just want you to know I am about to recognize your former boss for 5 minutes of questions, so you might 

want to fasten your seatbelt. 

Mr. FRIEDMAN. Uh-oh. 

Chairman NEUGEBAUER. I now recognize the gentleman from 

California, Mr. Sherman, for 5 minutes. 

Mr. SHERMAN. I would point out that there is a lot of usury that 

isn’t called usury. It is when you can’t get your car out of the shop 

and you have to go rent a car or use a bus because you can’t get 

a $400 loan. It is when your lights are turned off, and there is no 

usury there except it costs $100 to get them turned back on, not 

to mention what you pay for candles in between. 

But that doesn’t mean that every payday practice ought to be allowed. 

Ms. Wilson, you talk about ability to pay, and I hope that you 

will help us develop a more sophisticated phraseology of that because in every 100 borrowers there is somebody who isn’t going to 

pay, and I don’t want to go back and have a class action lawsuit 

against the lender. 

The only reason they are making the loan is because they know 

90 percent of the people are going to repay eventually. Every payday lender would be out of business if nobody—if 20, 30 percent 

didn’t pay him back. 

So it really comes down to whether a substantial majority of 

those borrowing are going to repay substantially according to the 

terms of the agreement. So the one problem—the character of payday lending is yes, people repay, but the original agreement is they 

are borrowing the money for 2 weeks and they end up paying back 

26 weeks later. 

So I hope we can work with a more sophisticated standard that 

would look in terms of does a substantial majority of the borrowers 

repay with only a few late fees or a few extensions? 

If we were to say that a substantial majority had to repay a loan 

without any deviation from the terms of the loan, I couldn’t get a 

mortgage. I had a late payment. Everybody I know had a late payment once. 

So I guess the point I am making is it can’t be ability to repay 

eventually, and it can’t be ability to repay exactly according to the 

terms with no late payments. It has to be a way of looking at the— 

what loans are being made and whether the majority can substantially comply with the loan agreement. 

I think this question has come up a bit, but the issue is whether 

we should have a commission rather than a single commissioner 

over at the consumer protection agency. When you have just one 

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38 

lieve in having one commissioner right until the end of 2016. But 

I don’t know who the President is going to be in 2017, and neither 

do the gentlemen over there, so this might be a good time to be bipartisan effective 2017, which has a 50 percent chance of being adverse to one of the other of us. 

Chairman NEUGEBAUER. Is that an offer? 

Mr. SHERMAN. That is an offer. 

Chairman NEUGEBAUER. We will talk— 

Mr. SHERMAN. I will start with Justin because I promised to torture him a little bit, but—and also anybody else—what are the advantages and disadvantages of going with a commission rather 

than a commissioner, knowing that a commissioner is a little 

cheaper—a tiny bit cheaper and a little bit faster? 

Justin? 

Mr. FRIEDMAN. As I discussed with Mr. Scott earlier, I think that 

a multimember commission provides a process by which issues are 

considered carefully and staff has to make a case to the commission 

before they go forward with a rule or an enforcement action, and 

it is a more deliberative process that produces better policy that 

offsets consumer protections against the need to ensure affordable 

access to credit. 

Mr. SHAUL. May I— 

Mr. SHERMAN. Yes. Go on— 

Mr. SHAUL. Let me give you an example. When the CFPB presented its paper on where they intended to go with short-term, 

small-dollar lending, essentially a payday story and a media event, 

it was entitled, ‘‘Debt Traps.’’ 

If you had a commission, I believe that there would have been 

a dissent, which would go along these lines: Before you say ‘‘debt 

trap,’’ prove it. Before you say, ‘‘debt trap,’’ remember that you are 

the arbiter and you are giving the sense that you are not partisan. 

Mr. SHERMAN. I get it. And I would like to propose that for this 

committee instead of having a chairman we have a commission decide, because I have seen titles of hearings such as, ‘‘Examining the 

Regulatory Burdens But Not Any Benefits to the Consumer on 

Non-Depository Financial Institutions.’’ So the title of the hearing 

can be very important, and the desirability of a commission to 

make all decisions is duly noted. 

Chairman NEUGEBAUER. Maybe we can discuss that in 2017, as 

well. 

I now recognize the gentleman from Colorado, Mr. Tipton, for 5 

minutes. 

Mr. TIPTON. Thank you, Mr. Chairman. 

And thank you, panel, for taking time to be here. I would like 

to start with Mr. Friedman. 

Your members include credit card issuers that make credit available to consumers, which is especially important to the 68 million 

underbanked consumers in the United States, including those in 

my district. The CFPB released an 870-page proposed rule to regulate those prepaid card products, and my constituents have reached 

out to both myself and the CFPB to let it be known that they are 

not in favor of this proposal. 

As comments from customers in Grand Junction to Montrose to 

Pueblo, in my district, my constituents want the opportunity to 

39 

have overdraft protection on their prepaid cards. How do you believe the CFPB’s proposal on prepaid cards will impact the ability 

of the underbanked to access these important features like overdraft protection? 

Mr. FRIEDMAN. Traditional installment lenders don’t generally 

offer stored value cards. That is something that they are looking 

at in the future as technology changes and consumers are demanding cards instead of cash or checks or deposits. They are popular 

among the underbanked community, and there is certainly a lot of 

very interesting innovation going on in issuing general use prepaid 

cards. 

As far as the CFPB’s proposal, we would just say that we hope 

that the government won’t stand in the way of lenders using stored 

value cards to make loans and to extend credit to consumers. 

Mr. TIPTON. Just for the point of clarity, overdraft—you opt in, 

you are not forced. Is that correct? 

Mr. FRIEDMAN. I am less familiar with this rule since our members generally don’t— 

Mr. TIPTON. I believe that is pretty accurate. It is something that 

you have the choice to be able to do. 

And I see Mr. Shaul nodding his head— 

Mr. SHAUL. That is right, I believe, yes. 

Mr. TIPTON. It is. It is in opt-in fashion, so if we keep the government out of the way we are going to be able to help underbanked 

people actually have access to credit. Thanks. 

I would like to follow up—and by the way, it is great to see a 

fellow Coloradan here in Ms. Evans. 

Several things in your written testimony did catch my eye, and 

it is basically to the title of this hearing, ‘‘Examining Regulatory 

Burdens on Non-Depository Financial Institutions.’’ 

You cited an example in your written testimony, and it was a 

Nancy McNealy, a small business owner, small real estate title 

company. Because of regulatory compliance under TRID, she is seeing a 5 percent increase in the cost of her business. No increased 

revenue coming in, but because of government regulation, an additional 5 percent in cost. 

Is this a common pattern that we are seeing as regulations continue to compound out of this Administration? 

Ms. EVANS. Absolutely. Our industry is a highly regulated industry at the State level, which is where real estate transactions take 

place, in local markets. And for a Federal regulator to create a onesize-fits-all burden on our businesses across the Nation, large or 

small, we are facing huge financial costs in order to implement 

those standards. 

Mr. TIPTON. Huge financial costs. You just described a tier of regulatory requirements at the State level, now a compounded tier of 

regulatory requirements—and they aren’t all still written yet, by 

the way; they are still to come—coming out of the Federal Government. 

I assume in your position and others on the panel, all of your 

businesses are so profitable that you can afford whatever costs that 

the government wants to pile onto you. Is that accurate? 

Ms. EVANS. No, sir. Not at all. 

40 

Mr. TIPTON. It is not. It is not accurate that you can continue— 

who is going to ultimately pay those costs? Do you have to pass 

those on? 

Ms. EVANS. Ultimately, if you were going to remain profitable, 

yes. That consumer— 

Mr. TIPTON. You are going to pass those on. 

In your written testimony, you cited a young family just getting 

started with a child on the way, Brianna and Emina were their 

names. Here were their comments: Throughout the process, because of regulatory requirements they had on their loan, the couple 

was frustrated because they continually had to resubmit, resign, 

and re-date every line. Every request was repetitive and lastminute. 

How is this helping the consumer? 

Ms. EVANS. It is not. 

Mr. TIPTON. It is not helping the consumer. So the Federal Government saying it is here to help has become a hindrance. 

Ms. EVANS. That is correct. 

Mr. TIPTON. That is correct. 

So are you challenged like I am—and maybe, Ms. McGrath, you 

have had some experience with this. When I think of a young family, Brian and Emina, with a child on the way, they are trying to 

get this structured so that they would be able to be in the home, 

as the chairman had noted in his first comments, trying to close 

before August, get that family set and to be able to move. 

Does this kind of break your heart like it does mine? That we 

are seeing the government saying, ‘‘You can afford to pay more. We 

will take more out of your pocket because we need another regulation,’’ when we apparently have a system that has worked pretty 

well? 

Ms. MCGRATH. No, absolutely. Thank you for the question. I 

think you are absolutely right. 

The ones who are being hurt the most are those who have less 

to work with, there is no doubt, and also those who perhaps don’t 

necessarily have the experience with home-buying, so the first-time 

homebuyer, in particular. 

They may not be technologically savvy in some instances. They 

may not have—how are we going to get these disclosures to them? 

Some of them don’t have email. 

How exactly are we going to tell them, ‘‘You have to take a day 

off work so that you can come in and physically sign this disclosure 

3 days in advance so that we have proof that you read it and 

signed it?’’ 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

And now the gentleman from Kentucky, Mr. Barr, is recognized 

for 5 minutes. 

Mr. BARR. Thank you, Mr. Chairman. 

Mr. Shaul, I was impressed with your testimony, given your 

background working on the Dodd-Frank Act and describing what 

was the original intent of the law, certainly not to annihilate businesses—maybe to regulate businesses, but not annihilate businesses such as the industry that you represent. 

I represent constituent businesses that are members of your organization, and I have one payday lending business that told me 

41 

if these rules go into effect—they are a small two-store outfit—they 

will, in fact, go out of business. And so that corroborates that anecdotal response, corroborates the estimates of a large portion of the 

industry just simply going away. 

So my question to you is this: What do you expect will happen 

to customers of those businesses who will no longer be able to access the payday lending option? What other options will they have 

and what will happen to those consumers? 

Mr. SHAUL. Thank you for the question. The first thing that research shows that happens is a rise in the number of bounced 

checks. It is a fee and it is, in fact, a kind of loan, and it is a way 

by which people can access credit, but it is a costly way to access 

credit. 

The second thing that happens is many people find themselves 

going online. If they go online to an established, reputable lender, 

they will not have a problem. 

But our hope with the CFPB, as business people, was that the 

CFPB would spend particular time on those entities offshore that 

are nonregulated, unlicensed, unscrupulous, and don’t meet a 

moral standard. That has not fully occurred. 

Mr. BARR. So, Mr. Shaul, that doesn’t sound like consumer protection to me. 

Let me ask you this question: Do you believe that most of the 

complaints about the payday lending industry—do they come from 

the customers of payday lenders or do they typically come from 

consumer advocates who feel that these borrowers are taking advantage of an—I would note in the back of your testimony some of 

the testimonials from customers—very satisfied customers—of payday loans. 

Mr. SHAUL. The customer complaint, whether it is through the 

portal at CFPB or through the States or through the FTC, is minimal on payday lending, far below that of other institutions. 

Now, part of the problem here, I truly believe—and I impugn nobody’s motives—is the sense that some class of individuals knows 

better what to do for another class of individuals than they themselves know. That being true, that being a suggestion that is put 

forward by many consumer advocates, I would submit that they 

really don’t know either the customer or the customer’s needs or 

patterns. 

This year we did a Harris Interactive Poll and we were amazed 

not just that there were very few complaints, but that the number 

of—women are 60 percent of our customer base—women who carefully planned out their budget for the month and, when necessary, 

chose payday lending as a lender—as a softener to their accounts 

going month by month as they might go up or down. 

A fact that is commonly misunderstood with payday lending is 

for 89 percent of our borrowers it is not new debt; it is a transference. The money that comes in goes to pay something that is already owed. So, so much of this criticism really is not well-founded. 

Are there portions of the critique that are right? Of course there 

are. Are there things that we could do better? Of course there are. 

But in the main, this is a question of choice. And frankly, I 

would not be honest with you if I didn’t say that what is really at 

issue here is the CFPB’s attempt to credit ration and their attempt 

42 

to decide who will be winners and losers in both the depository and 

non-depository institutions. 

Mr. BARR. Thank you. Thank you, sir. 

And I don’t have much time left so let me just—quickly to Mr. 

Friedman, has the Bureau presented, to your knowledge, any evidence whatsoever of any particular instances of deliberate discrimination by any auto dealer or any bank in the country? 

Mr. FRIEDMAN. No, sir. And I don’t expect they will because the 

CFPB, under statute, doesn’t have jurisdiction over auto dealers. 

Mr. BARR. I know about the Ally settlement and some others, but 

have they distributed a single dollar of those settlements to any alleged victim of indirect auto lending discrimination? 

Mr. FRIEDMAN. My understanding is that the Bureau collected 

$80 million in restitution from Ally in December 2013 and zero dollars of that have been distributed. 

Mr. BARR. And that is because their methodology can’t identify 

any victims, is that right? 

Mr. FRIEDMAN. That is my understanding, yes, sir. 

Mr. BARR. Thank you. 

I yield back. 

Chairman NEUGEBAUER. I thank the gentleman. 

The gentleman from New Hampshire, Mr. Guinta, is recognized 

for 5 minutes. 

Mr. GUINTA. Thank you, Mr. Chairman. I want to follow up or 

continue this line of discussion. 

Back in March of 2013 the CFPB issued guidance that threatens 

to eliminate auto dealers’ flexibility to discount the interest rate 

that is offered to consumers to finance vehicle purchases. And the 

guidance offered attempts, I think, to alter the $905 billion loan 

market, and I think it restricts market competition. I would add 

the term ‘‘credit rationing’’ that you utilized. 

This guidance, in my view, attempts to pressure indirect auto 

lenders into changing the way that they compensate the dealers to 

a flat fee system where dealers would no longer be able to discount 

for their consumers. I see this as a significant problem. I think that 

this would directly affect the dealer’s ability to negotiate with the 

consumers to help beat a competitor’s financing rates, and I think 

it would also negatively impact the consumer’s ability to negotiate 

a reasonable and what they deem to be an appropriate deal. 

Last year the CFPB admitted that they did not study the impact 

of their guidance and what it had on consumers, so my question 

is along the same lines to Mr. Friedman. 

First—and I think it has been said before but I want to clarify 

it again for the record—has the CFPB offered a public comment period in regards to this guidance, to your knowledge? 

Mr. FRIEDMAN. No, they have not. 

Mr. GUINTA. So they have said that auto lending policies may be 

discriminatory, yet there have been 12 letters from Congress requesting information on this, the CFPB has refused to release any 

information that would, in my view, help them avoid potential liability by altering their lending—yes? 

Mr. FRIEDMAN. Sir, in response to some of those letters, the 

CFPB did actually issue a White Paper in September 2014 detailing their methodology for proxying for race, and what that paper 

43 

revealed is that the CFPB, by their own admission, gets it wrong 

21 percent of the time. The analysis that we have talked about earlier from Charles River Associates actually pegs that at a 41 percent error rate. 

Mr. GUINTA. Why is there a disparity between Charles River and 

what CFPB says in terms of the percentage? 

Mr. FRIEDMAN. In the Charles River analysis of all aspects of 

this issue, I think that they have taken a more robust statistical 

approach than the CFPB does and included other factors at play. 

The Charles River analysis measures the proxy method against 

HMDA data, so this is mortgage data where we actually do know 

the actual race of the borrower. And so what they have found is 

that the CFPB’s method guesses the borrower’s race wrong two out 

of five times. 

Mr. GUINTA. Okay. What do you think about the flat fee compensation arrangement preferred by the Bureau? Do you think it 

would lower interest rates? Do you think it would increase them? 

And what do you think the impact would be to the consumer? 

Mr. FRIEDMAN. Alternative compensation structures such as flats 

for nondiscretionary dealer compensation may lead to increased 

borrowing costs for many minority and non-minority customers, 

and in turn, may limit access to credit for some or all consumers, 

which is, I think, not a desirable outcome. 

Mr. GUINTA. So it is rationing. 

Mr. FRIEDMAN. I would say that it is unintentional rationing, but 

it—that is what we believe would be the result. 

Mr. GUINTA. I believe Senator Warren, either last night or this 

morning, came out with comments already opposing what we are 

trying to do here, which is again, in my view, to provide flexibility 

to the consumer and give the auto dealer the opportunity to be 

competitive, which, quite honestly, last I checked that is what our 

economic system is built upon is the competitiveness. 

Ms. Wilson, I was interested if you had any comments or 

thoughts about that access to credit, because I know you have 

talked a little bit about this over the course of the hearing. 

Ms. WILSON. Briefly, what I would say is that I understand that 

people have talked about this question of indirect auto lending as 

a question of providing discounts. What I would remind you is that 

discounts that are based on race, religion, or nationality are not 

discounts; they are discrimination, and it is illegal. 

And so the issue that we want to make sure we are talking about 

in this conversation is whether or not we are engaging in practices 

that have that correlation to those prohibited categories. And you 

don’t just need the CFPB’s analysis to justify that concern in this 

industry. There are a litany of cases that have been settled—not 

just Ally Bank, but Namco, Union Bank— 

Mr. GUINTA. So would a veteran applying—getting a $500 discount, would that be discriminatory? 

Ms. WILSON. What I am suggesting is that if I gave you a $500 

discount because you happen to be African-American, that is discriminatory under our law. If I gave it to you because you are 

White, that is discriminatory. The question is whether or not these 

practices actually lend themselves to that, and the evidence suggests that they have. 

44 

Chairman NEUGEBAUER. The time of the gentleman has expired. 

I now recognize the gentleman from— 

Mr. SHERMAN. Mr. Chairman? 

Chairman NEUGEBAUER. —California for a unanimous consent 

request. 

Mr. SHERMAN. Thank you. I ask unanimous consent to add to the 

record the statement of the African American Credit Union Coalition, the statement of the National Council of La Raza, and the 

statement of the Consumer Federation of America. 

Chairman NEUGEBAUER. Without objection, it is so ordered. 

I also, without objection, would like to submit the statement of 

the Community Home Lenders Association for the record. 

Without objection, it is so ordered. 

The Chair now recognizes the gentlewoman from Utah, Mrs. 

Love, for 5 minutes. 

Mrs. LOVE. Thank you. 

Thank you, all of you, for being here today. 

I just wanted to try and ask these as quickly as I possibly can. 

Mr. Shaul, in your testimony about the CFPB replacing State 

law with their upcoming payday regulation, I just want you to 

know that concerns me quite a bit because in the State of Utah we 

have passed a law that actually regulates the payday industry in 

a responsible manner. As a mayor, I have realized that the most 

efficient way of dealing with things, the best solutions are found at 

the most local level. 

There are some things that we need to handle on a Federal level, 

but our legislature crafted legislation that protects consumers but 

keeps alive this source of credit. 

Now, as I understand it, if the CFPB pushes ahead with the 

rulemaking it will wipe the common-sense law of Utah—it would 

wipe it out pretty much and replace it with Federal law. Is that 

correct? 

Mr. SHAUL. Yes, Congresswoman, it is correct. And I take particular pride in the fact that I was out there last year when the 

State legislature in Utah considered this, and I considered the law 

to be an example of the failure of the Bureau to critically examine 

what is already happening at the State level. Under the Utah law, 

which went into effect in January, if a person after three rollovers 

is—three times asking to continue the loan—does that very act, 

then at the fourth instance he or she must either pay the loan off 

in total or go into an extended pay plan, which ends his interest 

payment and allows him to pay the principal off on time. 

This structure we recommended to the Bureau as one they ought 

to look at if they were genuinely concerned about the issue of how 

long people were in loans. And so far as I know, it has not been 

looked at by— 

Mrs. LOVE. It is really interesting because as a mayor a lot of 

times we took a lot of the rules and learned from a lot of the mistakes of other cities and figured out what works. And what I like 

about that is other States can do certain things and we as a State 

can look at it and say, ‘‘Actually that works,’’ or, ‘‘That doesn’t 

work,’’ instead of taking one entity and suffering the consequences 

of some of those things. 

45 

Short-term small-dollar lending has historically been a State-regulated industry, and my understanding is that, in fact, some States 

have actually banned the practice. 

Mr. SHAUL. Correct. 

Mrs. LOVE. So do you—do we have any States that do not have 

the same authority to regulate the payday loan industry? Are there 

any States that do not have the authority to regulate the payday— 

Mr. SHAUL. No. No. Any State can do that. And I must remind 

you of a statement that was made in an academic forum a year ago 

in Philadelphia—about 18 months ago, actually, in Philadelphia, in 

which a panelist who had done research on payday lending said, 

‘‘Every State has payday lending, but some States fail to recognize 

that it is going on despite the fact that it is not authorized or registered in their district.’’ 

In other words, if you go on in New York State, which bans payday lending, and you look under the payday loans, you will find 

several ways to get a payday loan. The fact is that people—there 

is a demand for this product. 

Now, if it is brought in every State into daylight and competition 

ensures, the rates will fall. 

Mrs. LOVE. Okay. 

I have just a little bit of time and I want to—I really want to 

get a point across. This, frankly, is not about you or your business. 

It is not about the banking industry. It is about creating as many 

products out there. 

I remember—I am going to keep the last name out of it because 

I am trying to protect this person’s identity—a good friend of mine 

coming to me and talking to me about a story where she came 

home, Maria, I am going to leave her last name out of it, a single 

mother with three children, came home in the evening and realized 

that her babysitter said, ‘‘You know, I don’t have enough milk for 

the baby.’’ And she didn’t have any cash, didn’t have any way of 

getting cash at that time, so she went to her local place and hurried up and that is what she thought about, grabbed milk for her 

baby and went out and was able to do that. 

Had she planned ahead of time would she have done something 

differently? Maybe, if she had had that time to plan. But it was 

just another option for her. 

Now, this is not—again, it is not about you; it is about people. 

I want to say, Ms. Wilson, I appreciate your testimony here 

today. I want to congratulate you on your award, being named the 

Woman of Influence by HousingWire Magazine. I think it is absolutely commendable. 

But I just want to say, as you go on and you think about some 

of these things, we really want to get to the same place, which is 

giving as many people as many options as possible. And we can’t 

forget about the Marias, that if this option didn’t exist she wouldn’t 

have that option out there. We cannot pick winners and losers. 

And so I want to commend you for what you are trying to do, 

and I want you to keep that in mind, that we want to give as many 

options to people as possible. 

Thank you. 

Chairman NEUGEBAUER. The time of the gentlewoman has expired. 

46 

The gentleman from Oklahoma, Mr. Lucas, the vice chairman of 

the Science Committee, is recognized. 

Mr. LUCAS. Absolutely, Mr. Chairman. Thank you very much, sir. 

I sense that at least on this end of the aisle and maybe the whole 

process, I am sort of batting cleanup here. 

I would like to go back to the core issues, I think, here and address this to Ms. McGrath and Ms. Evans, because everything has 

a cost, and for all the discussions we can have about social policy 

or goals or intentions or a lack of intentions, nonetheless, it is what 

the real effect is. How many hours would you estimate that your 

institution has spent trying to comply with the new most recently 

issued regulations? 

Ms. MCGRATH. Oh, goodness. I don’t know that we have calculated the manhours, but I can tell you that our association has 

calculated the cost to its members, and we have seen a 200 percent 

increase in the cost of compliance from 2010 to 2014 in trying to 

deal with the regulatory burden. 

I can tell you that just in looking at the number of employees, 

the average company has gone from having two compliance personnel to having seven compliance personnel, so if you look at it 

in terms of personhours, in that regard, it is astronomical. 

Mr. LUCAS. Ms. Evans? 

Ms. EVANS. Thank you, Congressman Lucas. Actually, the exact 

same thing. 

I can’t tell you the dollar amount, but I can tell you that our organization has had to create an additional compliance division or 

group of individuals who are focusing totally on how does our IT 

system work? What new softwares do we need to put in place? 

What additional training do we need to put in place for our individual employees? And most importantly, how are we getting out 

there and educating our customers, making sure consumers understand the consequence of this rule, making sure that REALTORS® 

and lenders understand the consequence of the rule? 

It is an astronomical number, and I don’t know how to quantify 

it at this time. 

Mr. LUCAS. And I would assume in addition to the permanent 

personnel brought onboard, probably you have spent a little money 

on outside consultants trying to work through these issues. Is that 

a fair assessment, in your home offices and in your parts of the industry? 

Ms. MCGRATH. Yes, absolutely. We now hire at least two or three 

different firms to help us with compliance matters. 

And part of that has to do with not being able to get a straight 

answer out of the CFPB on some of the regulations that they 

have—that they are trying to regulate. I can’t get a straight answer. 

Ms. EVANS. And when I look at the consequences to many of our 

small title providers across the Nation, even in your home State of 

Oklahoma, and the cost to bring in an outside provider, even the 

ability to find one in their local market so that the cost is more appropriate and reasonable, it actually could cause significant harm 

and the inability for that provider to continue to offer services in 

their market. 

47 

Mr. LUCAS. Absolutely. So clearly there is a quantifiable amount 

there. Clearly, ultimately the consumer is the recipient, because 

that has to be passed down. That is just the nature of everything. 

Like so many things Congress does, whatever the good intent 

may have been, there is the absolute impact and effect, and ultimately the person we are trying to help pays the price, which is 

reminiscent many times of the comments in my town hall meetings: ‘‘Please stop helping us, Congressman.’’ 

With that, Mr. Chairman, I think we have observed how hard 

this process has helped the American consumer. Let’s try to stop 

helping them while they are still able to survive. 

Chairman NEUGEBAUER. I thank the gentleman. 

I am going to recognize the gentleman from Georgia, Mr. Scott, 

for a brief question. 

Mr. SCOTT. Very brief question to you, Mr. Friedman. I am a 

strong supporter of the CFPB, but we have been getting a few concerns. One concern is whether or not we believe that the CFPB understands the differences between banks and the consumer finance 

companies and the need for the typically unbanked consumer who 

is served by finance companies. 

How do you feel about that, very quickly? 

Mr. FRIEDMAN. I would observe that the CFPB’s personnel are 

drawn largely from the ranks of the Federal banking agencies. 

Generally, historically speaking, States licensed and regulated consumer finance companies, non-depository institutions, and the Federal Government, in conjunction with States, was responsible for 

depository institutions. 

So it just stands to reason that folks who have been dealing with 

banks and regulating banks for their careers and suddenly have jurisdiction over non-banks will find that it is new ground, and we 

believe the CFPB would benefit from drawing some expertise from 

State agencies that have had jurisdiction over non-bank consumer 

financial institutions for decades. 

Mr. SCOTT. So you believe there is some difficulty in the CFPB 

understanding that, is that correct? 

Mr. FRIEDMAN. I do, and I would add that non-banks are more 

likely to serve unbanked consumers by nature, and these consumers tend to have different needs than banked consumers, and 

they tend to be more inclined to go to storefront lenders like traditional installment lenders to take out $500, $1,000, or $5,000 and 

repay it in installments. 

Mr. SCOTT. Thank you very much. 

Chairman NEUGEBAUER. I thank the gentleman. 

Mr. SCOTT. Thank you, Mr. Chairman. I appreciate it. 

Chairman NEUGEBAUER. I want to thank the witnesses. 

Your testimony has been very informative, it has been articulate, 

and I think we have all benefited from the comments that have 

been made today. 

I want to thank the folks on my side of the aisle. I think we had 

all of our Republican Members except for one participate today. 

And I appreciate the participation from the Minority, as well. 

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 5 legisVerDate Nov 24 2008 17:40 Aug 31, 2015 Jkt 095057 PO 00000 Frm 00053 Fmt 6633 Sfmt 6633 K:\DOCS\95057.TXT TERRI
48 

lative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

And with that, this hearing is adjourned. 

[Whereupon, at 3:29 p.m., the hearing was adjourned.] 

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A P P E N D I X 

April 15, 2015 

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