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THE SEMI-ANNUAL REPORT OF THE CONSUMER 

FINANCIAL PROTECTION BUREAU 

HEARING 

BEFORE THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

SEPTEMBER 20, 2012 

Printed for the use of the Committee on Financial Services 

Serial No. 112–159 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

SPENCER BACHUS, Alabama, Chairman 

JEB HENSARLING, Texas, Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

RON PAUL, Texas 

DONALD A. MANZULLO, Illinois 

WALTER B. JONES, North Carolina 

JUDY BIGGERT, Illinois 

GARY G. MILLER, California 

SHELLEY MOORE CAPITO, West Virginia 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

PATRICK T. MCHENRY, North Carolina 

JOHN CAMPBELL, California 

MICHELE BACHMANN, Minnesota 

KEVIN McCARTHY, California 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

NAN A. S. HAYWORTH, New York 

JAMES B. RENACCI, Ohio 

ROBERT HURT, Virginia 

ROBERT J. DOLD, Illinois 

DAVID SCHWEIKERT, Arizona 

MICHAEL G. GRIMM, New York 

FRANCISCO ‘‘QUICO’’ CANSECO, Texas 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

FRANK C. GUINTA, New Hampshire 

BARNEY FRANK, Massachusetts, Ranking 

Member 

MAXINE WATERS, California 

CAROLYN B. MALONEY, New York 

LUIS V. GUTIERREZ, Illinois 

NYDIA M. VELA ́ ZQUEZ, New York 

MELVIN L. WATT, North Carolina 

GARY L. ACKERMAN, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

CAROLYN MCCARTHY, New York 

JOE BACA, California 

STEPHEN F. LYNCH, Massachusetts 

BRAD MILLER, North Carolina 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JOE DONNELLY, Indiana 

ANDRE ́ CARSON, Indiana 

JAMES A. HIMES, Connecticut 

GARY C. PETERS, Michigan 

JOHN C. CARNEY, JR., Delaware 

JAMES H. CLINGER, Staff Director and Chief Counsel 

(III) 

C O N T E N T S 

Page 

Hearing held on: 

September 20, 2012 .......................................................................................... 1 

Appendix: 

September 20, 2012 .......................................................................................... 53 

WITNESSES 

THURSDAY, SEPTEMBER 20, 2012 

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

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

APPENDIX 

Prepared statements: 

Cordray, Hon. Richard ..................................................................................... 54 

ADDITIONAL MATERIAL SUBMITTED FOR THE RECORD

Frank, Hon. Barney: 

List of times CFPB officials have testified before Congress ......................... 56 

Luetkemeyer, Hon. Blaine: 

Letter to the CFPB from various organizations, dated September 10, 

2012 ................................................................................................................ 57 

Cordray, Hon. Richard: 

‘‘Semi-Annual Report of the Consumer Financial Protection Bureau, January 1–June 30, 2012,’’ dated July 2012 ..................................................... 59 

Written responses to questions for the record submitted by Chairman 

Bachus ........................................................................................................... 142 

Written responses to questions for the record submitted by Representative Luetkemeyer .......................................................................................... 148 

Written responses to questions for the record submitted by Representative Neugebauer ............................................................................................ 154 

(1) 

THE SEMI-ANNUAL REPORT OF 

THE CONSUMER FINANCIAL 

PROTECTION BUREAU 

Thursday, September 20, 2012 

U.S. HOUSE OF REPRESENTATIVES, 

COMMITTEE ON FINANCIAL SERVICES, 

Washington, D.C. 

The committee met, pursuant to notice, at 10 a.m., in room 2128, 

Rayburn House Office Building, Hon. Spencer Bachus [chairman of 

the committee] presiding. 

Members present: Representatives Bachus, Hensarling, Manzullo, Biggert, Capito, Garrett, Neugebauer, McHenry, Pearce, 

Posey, Luetkemeyer, Huizenga, Hayworth, Hurt, Dold, Schweikert, 

Grimm, Canseco, Stivers, Guinta; Frank, Maloney, Velazquez, 

Sherman, Meeks, Capuano, McCarthy of New York, Baca, Miller of 

North Carolina, Scott, Green, Cleaver, Perlmutter, Himes, and Carney. 

Chairman BACHUS. The hearing will come to order. As previously 

agreed with the ranking member, there will be 10 minutes on each 

side for the purpose of making opening statements, and without objection, all Members’ written statements will be made a part of the 

record. 

The Chair will now recognize himself for the purpose of delivering an opening statement. 

Today, we welcome back to the committee Richard Cordray, the 

Director of the Consumer Financial Protection Bureau (CFPB), to 

present the Bureau’s second semi-annual report, as required by 

Congress in the Dodd-Frank Act. These statutorily required hearings are one of the very limited forms of oversight that Congress 

can exert over the CFPB. 

Many of us have been frustrated by the lack of accountability in 

the CFPB’s leadership structure and the lack of transparency in 

the CFPB’s funding structure. The absence of adequate checks and 

balances is especially troubling given that neither Congress nor the 

Executive Branch can fully review the Bureau’s spending. The 

CFPB’s requests to draw millions of dollars from the Federal Reserve often take the form of nothing more than e-mails that lack 

any details as to how the money will be spent. 

Mr. Cordray, all of us on both sides of the aisle support consumer 

protection. Under your direction, the Bureau has attempted to 

tackle a number of issues it perceives to be problematic for consumers. Some may prove to be helpful; others may warrant reconsideration. 

2 

For instance, in the semi-annual report the CFPB discusses at 

length the consumer complaint data it has received. While I applaud the Bureau’s efforts to give Americans a forum for reporting 

potential abuses, many question its decision to release raw, 

unverified complaint data to the public. 

Rather than help consumers, publicly disclosing unverified information could instead mislead consumers. It is my hope that the 

CFPB will take the steps necessary to ensure the data it releases 

to the public is accurate. 

The CFPB’s efforts to rewrite the rules governing the mortgage 

market are also of particular interest to many Americans. These 

regulations are already very complex, and in carrying out its responsibilities the CFPB must avoid adding to that complexity. 

For example, the CFPB’s long-awaited proposed rule for consolidated mortgage disclosure forms is more than 1,000 pages long. 

The new disclosure forms required by the proposal add up to eight 

pages. It appears the dream of a one-page mortgage disclosure form 

is officially dead. 

As the CFPB goes forward in the mortgage rulemaking process, 

I encourage you and it to consider how the complexity of this and 

other mortgage-related rules might burden consumers and small 

businesses. 

Mr. Cordray, welcome back. I look forward—and I think we all 

look forward—to the civil discussion we will have today. And thank 

you for being here. 

At this time, I recognize the ranking member for the purpose of 

making an opening statement. 

Mr. FRANK. I am, frankly—I was about to say I am pleased to 

be here, but it is too late in my career to pretend. Here we go 

again. We will listen for a couple of hours to my Republican colleagues complain that they have no chance to have oversight during an oversight hearing. 

In fact, I ask unanimous consent to submit for the record a list 

of the 26 prior occasions on which either Mr. Cordray or other officials of the CFPB have testified before Congress. It has been very 

closely monitored. 

Chairman BACHUS. Without objection, it is so ordered. 

Mr. FRANK. Thank you. 

The objection to its structure and financing would be more persuasive to me as a genuine objection on those merits rather than 

a complaint about independent consumer protection if I had ever 

heard them before about the other Federal financial regulatory 

agencies, which are exactly similarly situated. The Comptroller of 

the Currency gets funding from fees, does not get appropriations, 

is independent of the Treasury, is appointed to a fixed term. As a 

matter of fact, we have a pattern of Comptrollers of the Currency 

lasting from one Administration to another across partisan lines in 

some cases. 

None of my Republican colleagues, in my hearing or in my reading, have ever objected, and it is, in fact, even more insulated than 

the CFPB. The Federal Reserve itself, yes, gets money from the 

Federal Reserve, which is self-funding and doesn’t get money from 

appropriations. And when we had a vote to subject CFPB to approVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00006 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
3 

priations I offered an amendment to subject the Federal Reserve to 

appropriations and the Members voted it down. 

When people give a reason and then don’t apply it logically—and 

I am not talking about taking it to an extreme; I am talking about 

simply applying it very logically to identically situated agencies— 

it means that is not the real reason. What we have is an objection 

to the fact that we have, for the first time, an independent consumer agency. It is not subject to brow-beating; it is not subject to 

having its funds cut. 

By the way, if it was subjected to the regular appropriations 

process, we know what would happen with this congressional alignment, because we have seen it with the Commodities Futures Trading Commission. One of the gravest problems we had in the first 

part of this century was largely unregulated derivatives trading. It 

led directly to the crisis at AIG and it caused problems elsewhere, 

led to unlimited speculation that hurt the prices for farmers. That 

is why our friends on the Agriculture Committee were strongly in 

favor of derivatives regulation. 

We conferred significant regulatory authority over derivatives on 

the Commodities Futures Trading Commission and the response of 

my Republican colleagues has been to deprive it of the funds it 

needs—to keep it so inadequately funded that derivatives cannot be 

adequately regulated. And that is clearly what they would want to 

do here. There is no example of these kinds of objections ever being 

made to the other Federal agencies to which it applies. 

So what we have here is, as I said, an objection to the CFPB 

being independent. 

The chairman said once he thought the regulators were there to 

serve the banks. He later said that wasn’t exactly what he meant. 

But what my Republican colleagues want to do is to put the other 

bank regulators, who have a historic record of not being very serious about consumer protection, and putting concern for the financial well-being of the banks well ahead of consumer protection. And 

obviously, there has to be a balance. They want to put them back 

in charge. 

I am also struck that there have been no substantive objections 

to the—Mr. Chairman, how much time did I consume? How much 

time have I consumed? 

Chairman BACHUS. Four minutes. 

Mr. FRANK. Four minutes. But I will take another minute. I will 

yield myself 1 minute. 

The lack of substantive objection is very important. There was an 

argument that there were too many pages. There were often a lot 

of pages because the entities being regulated come to the regulator 

and say, ‘‘Well, wait a minute. Provide for this exception. Provide 

for that exception.’’ 

I think the merger—one of the good things we did was to take 

two statutes dealing with real estate settlements, RESPA and 

TILA, that were given to different agencies and put them together. 

So I think Mr. Cordray can be proud of the fact that he has presided over an agency about which there are very few substantive 

objections. 

4 

And finally, I do note there was some complaint about the salaries. Once again, I haven’t read the complaint about the salaries 

of the Office of the Comptroller of the Currency, or the FDIC. 

There is on the part of the Republicans an understanding that 

the agency is popular, a failure to find specific things it did wrong, 

so they seized other issues on which to argue when they, in fact, 

ignore the possibility that those would be equally relevant criticisms of the other financial agencies. 

I yield the balance. 

Chairman BACHUS. I thank the gentleman. 

Let me take a point of personal privilege. I have been quoted by 

the press as saying that the regulators were there to serve the 

banks. What I said, in fact, was that I viewed the regulators as 

public servants. And the question was asked, did that include the 

banks, and I said yes. 

I went on to say—not later, but at the same time; quoted in the 

article that quote has been drawn from—that they were supposed 

to enforce the rules. And I am actually going to introduce into the 

record— 

Mr. FRANK. If the gentleman would yield, yes, I had read that 

quote somewhat differently than you said it, but if the gentleman 

will produce a quote to me, I will be glad to read it— 

Chairman BACHUS. And I am actually going to, hopefully before—and I would like to clear that up because I do believe that 

Members genuinely believe that was the quote in its entirety, 

which was what I—the statement was that they were public servants, and they should look on themselves as public servants not 

only to the people but to the banks. But I also went on and there 

were two other sentences there that they—and I know it has been 

widely quoted, and it is hard once something gets out on the Internet to clarify, but I am going to actually read the statement. 

Mr. FRANK. I appreciate that, Mr. Chairman. If you would yield, 

I had not previously heard that explanation. I will be glad to read 

it, and if that is—if you didn’t use those words, I will be glad to 

acknowledge that. 

Chairman BACHUS. The two things on the Internet—and I am 

sure all our Members have suffered from this—which claimed that 

I said there were 19 socialists in Congress, that was absolutely not 

said. Someone at a meeting asked, ‘‘Are there any socialists in Congress?’’ And I said, ‘‘I am sure there are some who profess the European view of socialism.’’ They asked, ‘‘How many?’’ And I said, ‘‘I 

don’t know.’’ They said, ‘‘100?’’ And I said, ‘‘No, not that many.’’ I 

actually said I didn’t know; I had no idea. The only one I knew of 

was Bernie Sanders. 

But, in today’s attempts really to make us all look like fools, 

sometimes that sort of thing is said, and it is very disappointing 

because there have been things that I—where I have misspoken, 

but those two things have been a source of—they just seem to have 

a life of their own. In fact, I specifically said I had no idea. And 

I have that in a recording, because that was a speech that was recorded. And they later retracted that, but the retraction never got 

out. 

Mr. Hensarling? 

Mr. HENSARLING. Thank you, Mr. Chairman. 

5 

Good morning, Mr. Cordray. As you know and we have discussed 

before, Section 1066 of Dodd-Frank requires you to be ‘‘confirmed 

by the Senate.’’ You haven’t been. Even if we choose to ignore the 

statute, which apparently the Administration chooses to do, you 

can’t be bootstrapped as a recess appointee because your appointment came at a time when the Senate was in pro forma session. 

So you came before us 6 months ago as an unlawful appointee 

and probably an unconstitutional one as well. Six months later, 

nothing has changed. 

The Dodd-Frank Act, Mr. Cordray, has made you a very powerful 

appointee, but it has not made you a legitimate appointee, and it 

has not made you an accountable appointee. And it is certainly not 

personal to you, but as long as this big gray legal cloud hangs over 

you and your agency, your credibility and the efficacy of both you 

and your agency are compromised. 

Mr. Chairman, we know that the creation of the CFPB was a 

major title under Dodd-Frank, and in the passage of the Act, the 

President predicted that Dodd-Frank ‘‘would lift our economy’’ and 

‘‘give certainty to everybody.’’ 

Two years later, we are mired in the worst economy in the postwar era. Millions suffer from unemployment and underemployment 

and Dodd-Frank’s rules are proving to be some of the most confusing, complex, voluminous, and harmful our capital markets have 

ever seen, including those of the CFPB. Regulations tend to fall in 

two categories: those that create uncertainty; and those that create 

certain economic harm. 

We know that small businesses are the job-engines of America. 

They are capitalized quite frequently and principally by our community financial institutions. The head of one of the community 

banks in my native Texas remarked, ‘‘My major risks are not credit 

risks, risk of theft, or risk of some robber coming in with a gun in 

my office. My number one risk is Federal regulatory risk.’’ 

I yield back. 

Chairman BACHUS. Mrs. Maloney for 3 minutes. Thank you. 

Mrs. MALONEY. First, I would like to welcome Director Cordray 

to the 27th hearing that he has attended, and often my Republican 

colleagues continue to use the CFPB as a political issue, citing it 

as an example of unprecedented power with no oversight. And I believe this list of hearings—27 of them—speaks to the oversight that 

they have gone through. 

In fact, you are here today to discuss the semi-annual report requested and put in Dodd-Frank—it actually happened to have been 

my amendment. If I had known there would be so much oversight, 

I never would have required it. I thought we wouldn’t be seeing 

much of you, but when you do come, we do hear what you are doing 

to help people, and I would say you have tremendous credibility, 

particularly with the college students that you are helping, the veterans, the seniors, ‘‘Know Before You Owe’’ issues that help people 

understand their finances. 

But the CFPB is already, I would say, one of the most accountable Federal agencies, and the numerous attempts to defang the 

CFPB with major pieces of legislation put forward by this committee are merely election-year efforts by those who never wanted 

6 

to create the agency in the first place. Those who put forward those 

amendments and bills didn’t vote for the creation of the CFPB. 

And there were many of us who offered and worked on DoddFrank who thought the consumers needed to have an office that 

was on their side. Too often, consumers were not thought about. It 

was a secondary thought, a third thought, or even not thought 

about at all. And I think it is very appropriate to have an agency 

looking out for a proper balance for industry, for consumers, and 

for the overall economy. 

Some of my colleagues on the other side of the aisle continue to 

say that there is not enough accountability, but I would say that 

the CFPB has extensive accountability and these were standards 

that were put in place under the Wall Street reform bill, and they 

are absolutely unprecedented in our government. I would say there 

is more accountability and oversight of the CFPB than any of the 

Federal regulators. 

And I would like to place in the record this analysis of the accountability and mention that—my time is running out—the President can remove the Director for cause. The Director must appear 

before Congress annually and report on their budget. The GAO is 

required to do an audit every year. 

It is the only banking regulator with a funding cap. They are 

capped in what they can spend. And the CFPB final rules are subject to judicial review. And it is also subject to the Regulatory 

Flexibility Act and the Congressional Review Act. The Inspector 

General monitors the CFPB, and all of their rules could be overruled by the other regulators. 

So there is extensive oversight of this important agency, which 

in my opinion has tremendous credibility, particularly to the consumers and Americans and hard-working people that they are trying to help understand their finances, bring transparency into their 

contracts with credit cards and other financial institutions. And I 

believe it is good for industry, good for our overall economy, and 

good for consumers. 

I look forward to your 27th report from the CFPB to this Congress. Thank you for your service. 

And I yield back. 

And may I place this in the record? A detailed explanation of the 

various oversight— 

Chairman BACHUS. Without objection, it is so ordered. 

Mrs. Capito for 2 minutes. 

Mrs. CAPITO. Thank you. Thank you, Mr. Chairman. 

And thank you, Director Cordray, for coming today. I don’t want 

to repeat a lot of the things that I have said in opening statements 

in the past. I think you know that I believe, and many of us believe 

on this committee, particularly on our side, that a commission or 

a five-person panel would probably serve this agency better because you would eliminate dramatic swings in ideology, and those 

kinds of things can happen to the political winds. 

I know you are aware of the fact that we believe the CFPB 

should have more accountability to Congress for the fiscal and the 

allocations that occur. A lot of people ask us, how can you control 

or weigh in on this agency, and one of the ways we weigh in on 

agencies all across this government is to work with their finances, 

7 

and I think that this is one of the arms-length things the law provided that I think is a detriment to the CFPB and really to consumer safety. 

But I am going to take a little bit different tack because what 

we heard in the August recess, and I know what you are hearing 

is, what is wrong with this economy? Why can’t we get it going? 

And it is the uncertainty that we have across-the-board, whether 

it is uncertainty on taxes, health care, regulatory uncertainty. And 

financial regulatory uncertainty is part of this. 

You have some extremely important issues before your Bureau 

right now, such as the Qualified Mortgage (QM), where if you don’t 

do it right, this economy is going to stay in a bleaker uncertain 

state. If you don’t get the ability to pay rule that we have been asking you to make a judgment on for those stay-at-home spouses to 

be able to get credit in their own names. 

And lastly, since I just have 12 seconds left, I have heard over 

the last several days that many of the financial institutions have 

a lot of uncertainty because you have the CFPB over here and the 

regulator over here who are still holding on to their consumer protection. Nobody is making the decision. It is creating more uncertainty for financial institutions, and it is resulting in a lack of lending, a lack of job creation, and further stagnating this economy. 

Thank you. 

Chairman BACHUS. Mr. Scott for 2 minutes. 

Mr. SCOTT. Thank you, Mr. Chairman. 

I think this is a great time for you, Mr. Cordray, because you 

hear a lot of complaints about the CFPB, to take an opportunity 

to explain exactly what you are doing to help protect the consumer. 

For example, sharing what are the violations that pose the greatest 

threat to consumers would be good for us to know. 

You are currently carrying out hundreds of investigations. It 

would be good for us to know what types are they, what is most 

prevalent? What poses the greatest threat? 

There are also areas of conflicts of jurisdiction, particularly in 

areas like with the FTC and your agency, particularly involving 

credit scores. That came up in our credit score hearing a few weeks 

ago. Where do you begin? Where do they begin? Where do you end? 

Where do they end? 

One very important issue to our consumers is home appraisals. 

We hear all of the time because of the economy where homeowners 

are caught in a bind where their mortgages have been allocated at 

a certain level, their homes have lost the value, you get your appraisals coming in. That would be good to know. 

Another is to describe just how the consumer complaints process 

works. What happens here? If a consumer disputes the response 

they get from a financial company, what are the options available 

to that consumer? 

And in your experience, are there additional changes that the 

Bureau could make, particularly to home appraisals to help protect 

the consumer more? 

So I am looking forward to your comments on these things but 

I think it presents you with an excellent opportunity to give a great 

response to some of the criticism that we have gotten to show exVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00011 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
8 

actly the good that you are doing and how it is being done to the 

benefit of protecting our consumers. 

Thank you, Mr. Chairman. 

Chairman BACHUS. Thank you. 

Mrs. Biggert for 1 minute. 

Mrs. BIGGERT. Director Cordray, as we all know, Congress has 

been examining complex settlement procedures and confusing 

mortgage disclosures for several decades. Mortgage disclosure has 

been of interest to me since my days as a real estate attorney. 

Today, alongside consumers and mortgage industry stakeholders, 

we are reviewing the 1,000 pages of the CFPB’s proposed RESPA/ 

TILA rule and mortgage disclosures. At first glance, I can say that 

I think that the proposal needs more work. 

Newly proposed mortgage disclosures must be streamlined and 

simplified, thoroughly tested and vetted, allow stakeholders ample 

time to provide input, and include a thorough regulatory impact 

analysis with a particular focus on small businesses. As the CFPB 

continues to work on mortgage disclosures, I encourage you to keep 

in mind that new disclosures can radically change the marketplace 

and be costly to businesses—particularly small businesses—and 

these changes and costs will be absorbed by consumers. We must 

get it right. 

I yield back. 

Chairman BACHUS. Mr. Neugebauer for 1 minute. 

Mr. NEUGEBAUER. Thank you, Mr. Chairman. 

I was trying to put this in perspective as we look at Dodd-Frank 

basically creating a new government agency, giving the Director a 

half a billion dollar slush fund to say, I am going to go create an 

agency. And I was trying to put that in perspective in my background in business, and it would be like a CEO calling an employee 

to his office and saying, ‘‘I hear we have a problem down in this 

certain area. I will tell you what, here is a half a billion dollars. 

You can draw that. Send me an e-mail if you need a little more, 

and don’t worry about sending us any reports or—I won’t ask you 

any questions, but you just go and see if you can take that money 

and fix that problem.’’ 

I think government is the only place where that would happen. 

And I think one of the things that, whether you agree or not that 

we created the CFPB, what you should agree is that at a time 

when we are having to borrow 40 cents for every dollar we spend 

of the American taxpayers’ money, transparency and accountability 

is very important. 

Mr. Cordray has promised that he would have an open and 

transparent agency, yet our continued requests for additional information on operational and financial plans basically have gone unanswered. And so I am hopeful today that we can get a clearer picture of where this agency is going. 

With that, I yield back. 

Chairman BACHUS. Let me indicate to the Members that Mr. 

Cordray has to leave at 1:30. 

And with that being said, without objection, Mr. Cordray, your 

written statement will be made a part of the record, and you are 

now recognized for a 5-minute summary of your testimony, but you 

can obviously go longer than 5 minutes. 

9 

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

(CFPB) 

Mr. CORDRAY. Thank you, Mr. Chairman. Let me clarify, I will 

stay as long as you like. 

Chairman Bachus, Ranking Member Frank, and members of the 

committee, thank you for inviting me to testify today about the 

Semi-Annual Report of the Consumer Financial Protection Bureau. 

A little over one year ago, the Consumer Bureau became the Nation’s first Federal agency focused solely on protecting consumers 

in the financial marketplace. The Semi-Annual Report we are discussing today covers our activities from January 1st through June 

30th of this year. 

As the report shows, we have been using all of the tools at our 

disposal to help protect consumers across this country. We pledge 

to continue our work to promote a fair, transparent, and competitive consumer financial marketplace. 

Through our regulatory tools, we have proposed rules that will 

help fix the broken mortgage market with common-sense solutions. 

We are writing rules that simplify mortgage disclosure forms, as 

referenced, and rules that make sure consumers do not receive 

mortgages they do not understand or cannot afford. Our rules will 

also bring greater transparency and accountability to mortgage 

servicing. And our careful process is that before we propose a rule, 

a team of attorneys, economists, and market experts evaluates its 

potential impacts, burdens, and benefits for consumers, providers, 

and the market. 

Our push for accountability extends beyond mortgage servicing. 

We are holding both banks and nonbanks accountable for following 

the law. Prior to my appointment, nonbanks had never been federally-supervised. The financial reform law specifically authorized us 

to supervise nonbanks in the markets of residential mortgages, 

payday loans, and private student lending. We also have the authority to supervise the ‘‘larger participants’’ among nonbanks in 

other consumer finance markets as defined by rule. So far, we have 

added credit reporting companies to this group. 

It is important for us to exercise sensible oversight of the consumer finance markets but it is also important that we empower 

consumers themselves to make responsible financial decisions. Our 

‘‘Know Before You Owe’’ campaign involves us working to make 

mortgages, credit cards, and student loans easier to understand. 

We also developed ‘‘AskCFPB,’’ an interactive online database with 

answers to consumers’ frequently asked questions. We also 

launched the first-ever database of individual complaints about financial products, starting with credit cards. Consumers can use the 

Web site to review and analyze information and draw their own 

conclusions about the customer service provided with these financial products. 

We also think it is important to engage directly with consumers 

so we know more about the struggles and frustrations they encounter in their daily lives. The Bureau has held numerous field hearing across the country—you will recall, Mr. Chairman, our first one 

was in Birmingham, Alabama, under my Director’s tenure—so we 

can talk face to face with consumers on a variety of topics. Our 

10 

Web site has a feature called ‘‘Tell Your Story,’’ which encourages 

consumers to share with us their personal stories to help inform 

our approach in addressing issues in the financial marketplace. 

And perhaps most significantly, we help to resolve consumer disputes with lenders by taking complaints on our Web site at 

consumerfinance.gov, as well as by mail, fax, phone, and by referral 

from other agencies. As of September 3rd, we have received 72,297 

consumer complaints about credit cards, mortgages, and other financial products and services and the pace of complaints has been 

increasing over the past year. 

All of these processes—rulemaking, supervision, enforcement, 

and consumer engagement—provide us with valuable information 

about consumer financial markets. We engage in extensive outreach to large and small institutions, including banks and 

nonbanks, to gather the best current information as we make policy decisions. We pride ourselves on being a 21st-Century agency 

whose work is evidence-based. So we also conduct our own in-depth 

studies on consumer financial products such as reverse mortgages 

and private student loans. We have issued public requests for information that seek input from consumers, industry, and other stakeholders on issues such as overdraft fees, prepaid cards, and the financial exploitation of seniors. 

The new Consumer Bureau has worked on all of these projects 

while being fully engaged in start-up activities to build a strong 

foundation for the future. The Bureau has worked to create an infrastructure that promotes transparency, accountability, fairness, 

and service to the public. Our first year has been busy and full and 

this report reflects considerable hard work done by people whom I 

greatly admire and respect. They are of the highest caliber and 

they are deeply dedicated to public service. We look forward to continuing to fulfill Congress’ vision of an agency that helps all Americans by improving the ways and means of their financial lives. 

Thank you. I will be glad to address all of your questions. 

[The prepared statement of Mr. Cordray can be found on page 54 

of the appendix.] 

Chairman BACHUS. Thank you, Mr. Cordray. And I appreciate 

you making, I think one of the—the first hearing was in Birmingham. That was your first public hearing, and Senator Shelby 

and I both appreciate you coming to Birmingham for that hearing. 

And I think it went quite well. 

As you know, the Federal Reserve issued a final rule earlier this 

year clarifying certain provisions of the Card Act in which they determined that a credit card issuer could no longer rely on the consumer’s household income to determine a consumer’s ability to pay. 

The CFPB has now inherited this rule from the Fed. 

I am deeply concerned about the impact this change will have on 

non-working spouses and military families. Some people call this 

the stay-at-home moms—or probably stay-at-home spouses might 

be more politically correct. But given the current economic environment, many consumers already face challenges getting access to 

credit, and this change would make the situation worse, especially 

for women and military families. 

In a June hearing with the Financial Institutions Subcommittee, 

Gail Hillebrand of the CFPB testified that the Bureau intended to 

11 

make a determination about how to proceed with the rule during 

the course of the summer. She went on to clarify that summer goes 

until mid- to late September, so we are within that definition. 

With that said, has the CFPB finished reviewing the submitted 

comments and made a determination about how to proceed? And 

if so, could you share with the committee any analysis that you 

have conducted on the impact this change may have on consumers? 

Mr. CORDRAY. Thank you, Mr. Chairman, for that question. I 

know it has been of concern to many Members. I have actually discussed the matter personally over the telephone with Representative Capito and Representative Maloney, and we have had communication with others. 

We have, over the course of the summer, made an effort to assess 

two things. The first is sort of the scope of the problem, and understanding whether it is something we should move forward and act 

on. The second is, if we do so, what means are available to us? 

What avenues can we pursue? 

Is it something that we could simply clarify without having to 

engage in rulemaking? Is it something that requires us to engage 

in rulemaking? Is it something where whatever we do by rulemaking really has to be fixed by the Congress in a statute, which, 

of course, is often most difficult? 

Over the course of the summer we did have a chance to gather 

information and some data from industry to assess the gravity of 

the problem. I think we have determined that it is a significant 

problem. There are tens and perhaps hundreds of thousands of individuals who perhaps have been denied access to credit as a result 

of the way the law was interpreted. 

We have also attempted to gauge whether we could simply offer 

some sort of clarification informally and that would do the trick, 

and I think we have determined that will not suffice, that we will 

need to engage in rulemaking. I think we have also determined 

that in order to address this problem, we can engage in rulemaking, and it is not necessary to come back and have Congress 

change the law. Of course, it is always within Congress’ purview 

if they want to change the law to do so. 

So we have made a determination to proceed. We are going to address this issue. 

Our proposal will be on the street in the very near future. Certainly, I would think, before you reconvene you will have an opportunity to look at that, then you may want to determine whether 

you want to proceed by legislation, whether you want to work with 

us on a rulemaking process, and we do intend to face this issue and 

resolve it. 

Chairman BACHUS. Thank you. I appreciate—that is a responsive 

answer, and we don’t always get those. 

Mr. CORDRAY. I do what I can. 

Chairman BACHUS. And I don’t mean from you personally, I 

mean just in the course of these hearings. 

As you know, lending standards on residential mortgages are as 

tight as they have ever been, and even prospective borrowers with 

strong credit histories are in some cases finding it difficult to obtain loans. Are you concerned about the rigid criteria for defining 

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12 

tionately affect populations that tend to take out smaller mortgages, such as low-income, first-time, rural, or minority borrowers? 

And how is that concern informing the CFPB’s deliberations on the 

critical question of how much protection from legal liability should 

be afforded to lenders that make Qualified Mortgages? 

Mr. CORDRAY. Mr. Chairman, we do have a concern, and I think 

Congress told us one of our statutory objectives is to be mindful of 

issues of access to credit, and I have come to understand that we 

can draw up the nicest-looking consumer protections you have ever 

seen, but if people are not willing to lend to consumers, those protections are worth very little, and if they interfere with lending to 

consumers, then they could actually be harmful to consumers. 

I would say two things about the mortgage market. The first is, 

the biggest thing that has constrained credit in the mortgage market in our lifetimes was the financial crisis credit freeze and meltdown and ensuing recession that has caused so many problems for 

smaller institutions, community banks, and small businesses and 

individuals getting access to credit. 

That remains the case today. Credit in the mortgage market is 

extremely tight. We are at very low levels of activity and it is part 

of what is essentially having to dig out of a financial crisis that 

would have been far better if we could have averted it in the first 

place. 

Secondly, with respect to the Qualified Mortgage Rule that you 

asked about, we have received a tremendous amount of input from 

industry, consumers, stakeholders of all kinds, participants in the 

real estate industry. I think over the course of that—of course, we 

inherited this proposal, as you mentioned, from the Fed; we did not 

originally propose it, but our job is to finalize—we have come to understand that it is very important for us to draw this rule in a way 

that encourages and facilitates access to credit in the mortgage 

market and we plan to do so. 

It would be unwise of our agency to write a rule that further constricts access to credit. The Qualified Mortgage Rule, which is due 

and will be finalized before January 21st of next year, is intended 

to create protections for consumers, and I think that in the end, 

people will be satisfied with what we do. 

Chairman BACHUS. Okay. Thank you very much. 

Mrs. Maloney? 

Mrs. MALONEY. Thank you, Mr. Chairman. 

And welcome again, Director Cordray. 

I read a story recently in Bloomberg—I believe it was last 

week—where you were quoted as saying that the Bureau had received far fewer complaints on credit cards than expected, and I 

was pleased to hear that, as I was the author of the Credit Card 

Bill of Rights in the House, and that you attributed that low number of complaints to the changes that we made in the passage of 

the Card Act. I would like to add that I, likewise, have not been 

getting complaints. It used to be I couldn’t walk down the street 

without someone stopping me with a credit card horror story. 

But I would like to know, to the extent you are receiving complaints about credit cards, what are they? What types of complaints 

are you receiving, if you are receiving any, and what is the Bureau 

doing to address it? 

13 

Mr. CORDRAY. Thank you for the question. And again, thank you 

for what I thought were really important strides for consumers 

made in the Card Act that Congress enacted in the last session. 

I did say and I do believe that for myself personally, coming to 

this, I have been surprised that we have received fewer complaints 

about credit cards than I certainly would have expected. My experience in that regard was at the time that the Federal Reserve was 

first considering broadening consumer protections in this area. I 

was the treasurer in the State of Ohio. I organized a Speak Out 

Ohio campaign to collect comments and reactions from the public 

on this. 

We submitted something like 30,000 comments to the Fed on it, 

and people were very upset about their credit card accounts and 

how those were being handled, and manipulation, as they perceived 

it, of late fees, and changes that they did not understand, or were 

not sufficiently explained—just a whole variety of things. 

In the wake of the Card Act, a number of those problems have 

been addressed. We held a conference on the implementation of the 

Card Act last year and I think we were encouraged already by 

what we saw, and as it has filtered through more and more it has 

been very positive. 

The complaints we have received on credit cards range across the 

spectrum. I am sure they are very similar to the types of things 

your office hears from constituents; a lot of issues, clearly, around 

billing—billing disputes—sometimes they are factual disputes, 

sometimes they are claims of error; sometimes there is unclarity 

around terms, although again, I think less so than was true before. 

And I think we have put up a graph on our Web site of different 

categories of complaints that we have received so that the public 

can scrutinize it and understand what we are seeing. 

The other thing I want to note is that we have found, through 

our complaint database, that the response from the financial companies—the credit card issuers—to the complaints has been at a 

pretty high rate. They seem to be paying increased attention to 

customer service. I have been to a couple of the customer service 

centers of credit card issuers where they have kind of overhauled 

the way in which they respond to their own complaints and to the 

ones that we work with them on, and there seems to be better attention. 

The J.D. Power survey recently indicated this as well. It showed 

that the overall level of public satisfaction with credit card companies has been increasing over each of the last several years. Again, 

I would attribute some of that to the Card Act, some of that to renewed focus by the companies themselves, and I think it is a good 

development. 

Mrs. MALONEY. I must say that one outcome of the Card Act 

with which I am not pleased is the interpretation of the Federal 

Reserve on the ability-to-pay standards in implementing the Card 

Act, and I join Chairwoman Capito and others on both sides of the 

aisle, and I know, since I wrote the bill, it was certainly not my 

intent for ability-to-pay to prevent stay-at-home spouses from obtaining credit in their own right. 

Chairwoman Capito held a hearing in May on the issue, and at 

that hearing, we received substantial testimony that this was a 

14 

huge effort for stay-at-home moms. I know you say you are working 

on it, but we certainly don’t want to legislate it. If we wanted to 

legislate it, we would have done it by now. 

We feel that we created the CFPB to handle these types of problems. We have made it a top priority of the subcommittee, the committee, and it is a priority on both sides of the aisle. And I also 

would say it is a women’s issue. 

So when are you going to have a draft? We have been waiting 

for almost 2 years now or a year. Can you give us a little more definite statement on when we will have something we can react to? 

Mr. CORDRAY. Yes. Thank you, Congresswoman. I thought it was 

fairly definite before, but I will repeat it. 

This issue came up where you and I, and Representative Capito 

and I had discussions about it, I believe in May, so that is a few 

months ago. We first had to determine whether we could proceed 

by rule or whether the statute itself had to be changed. This is 

clearly an unintended consequence— 

Mrs. MALONEY. Exactly. 

Mr. CORDRAY. —of the legislation and the regulatory process. 

It is not an uncomplicated issue. There are a number of issues 

here that have to be sorted through. But we have determined that 

we will proceed with rulemaking and we will have a proposal, as 

I said, on the street, I am fairly certain—quite certain, before you 

all return. 

Mrs. MALONEY. That is good. That is a definite date. I didn’t hear 

a definite date. 

My time has expired. And that is very good news that we will 

have something we can— 

Mr. CORDRAY. You will. 

Mrs. MALONEY. —start working on to help stay-at-home moms. 

Thank you. 

My time has expired. 

Mrs. CAPITO [presiding]. Thank you. 

Mr. Hensarling? 

Mr. HENSARLING. Thank you, Madam Chairwoman. 

Mr. Cordray, when you were here before the committee 6 months 

ago, we had a discussion about the term ‘‘abusive,’’ since your agency has the ability to outlaw abusive acts. It is a new legal term of 

art. 

At the time, I believe you said, ‘‘We will have more to say about 

this over time.’’ Section 1031(b) permits the Bureau to prescribe 

rules defining ‘‘abusive.’’ I think you were quoted in the American 

Banker, though, a few months ago stating that it was not your intention to write rules dealing with the term ‘‘abusive.’’ 

Is that correct, and is that still your intention? 

Mr. CORDRAY. That is currently our outlook on that issue, Representative. 

Mr. HENSARLING. Okay. It is a new legal term of art. There 

wasn’t much clarity 6 months ago. 

You also testified 6 months ago before this committee that there 

could be a practice that could be fair yet still be abusive. You didn’t 

give examples at the time. Can you give, 6 months later, now that 

your agency has had a chance to study this—can you give me examples of a practice or a product that would be both fair and abuVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00018 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
15 

sive, or at least give me the criteria that the agency is currently 

using to draw the differentiation? 

Mr. CORDRAY. Congressman, we are, as I think you would hope 

that we would do as a Federal law enforcement agency, applying 

the language that Congress itself enacted—that is, following the 

law. The definition of ‘‘abusive’’ that is contained within the financial reform law itself is specific as to prongs. It is different language than the Act uses in defining ‘‘unfair,’’ which is also a defined term in the Act. And therefore, there could be different application. 

I have also said that it is a bit of a puzzle to determine what 

kind of actions would not be unfair, not be deceptive, but would be 

abusive. And that is— 

Mr. HENSARLING. So is it at least fair to say that 6 months later, 

we still don’t have an answer to the question, is there a specific example of a product or service that would be both fair and abusive? 

Mr. CORDRAY. I wouldn’t put it that way, that we don’t have an 

answer to the question. We have had an answer from the beginning. The answer is, Congress defined what ‘‘abusive’’ means. It is 

the law of the land. We have to follow it. 

Mr. HENSARLING. If we have an answer, could you give me examples, Mr. Cordray? Can you then give me examples? 

Mr. CORDRAY. I don’t think that industry is eager to have us 

start spraying ‘‘abusive’’ citations around. We are trying to be careful about this and— 

Mr. HENSARLING. Wouldn’t they want to know what is lawful and 

what is unlawful? If an act is abusive, it would be unlawful. I 

would think they would want to follow the law, so I don’t quite understand your answer. 

Mr. CORDRAY. That is fine. As we go along, if we determine that 

there are abusive acts and practices, we will rely upon Congress’ 

definition of the term. There is no reason for us to go make up 

some different definition. For us to establish— 

Mr. HENSARLING. But you have the power to prescribe the rules 

that define it. 

Mr. CORDRAY. We could. I don’t get a sense that industry is 

dying for that either, Congressman. State attorneys general can enforce rules that we adopt under the Act, cannot enforce the statutory terms themselves against the banks. So if we were to define 

rules on— 

Mr. HENSARLING. I guess, Mr. Cordray, what is— 

Mr. CORDRAY. —enforcement channels— 

Mr. HENSARLING. —of concern here is whether or not the agency 

refuses to write a rule or is incapable. Is it a totally subjective term 

that will be determined by the agency on a case-by-case basis, in 

which case an incredible detriment to our consumer credit markets? I haven’t heard any clarity around it today, but in the limited 

time I have, I will move on. 

In the context of discussion of mortgage rules, I think you said 

it wouldn’t help homebuyers to promulgate rules that restricted access to mortgage credit. But then I look at what has happened with 

respect to remittances. Your own agency has estimated the first 

rule would require 7.7 million employee hours to implement and 

comply with the rule—the new rule. You also noted, ‘‘The cost of 

16 

compliance will ultimately be shared among the consumers and 

businesses involved in remittance transfers.’’ 

All I can tell you, Mr. Cordray, is I am hearing from a number 

of banks in my home State of Texas that due to the rules promulgated by your agency, they are just getting out of the business. 

They are getting out of the remittance business. 

I have lots of constituents, as do many other Members who represent States along our southern border. So, I am just curious, are 

you—I hope your agency is hearing the same thing. I don’t think 

these are outliers. How is this serving the consumer that they have 

fewer choices and their access is getting restricted by the rules? 

Mr. CORDRAY. Thank you, Congressman, for raising that issue. 

As you will recall, we didn’t just come up with this rule in a vacuum. Congress passed a statute. It is the law of the land now, unless Congress were to act otherwise, that there are brand new consumer protections being afforded to remittance transfers, and 

therefore, when people send money internationally, they now will 

have the same kinds of consumer protections in many respects that 

they have when they send money domestically. 

That is a public policy choice that Congress made. I happen to 

agree with it. 

Our job was to carry that out by implementing rules, which we 

have done. There are some providers for whom the notion that in 

doing these transactions, they have to offer consumer protections 

and disclosures, et cetera, may be too onerous, that they won’t do 

the transfers if they have to tell the consumer how much money 

is going to be received on the other end. 

There are provisions in the law meant to soften that. So, for example, if you are a smaller depository institution or credit union 

and you are not in a position to know what the exchange rate is 

that is going to be applied on the other end, you are permitted 

under the law to use a reasonable estimate. You don’t have to get 

it exactly right. 

If you don’t know, because of the nature of the transaction you 

are engaged in, what fees are going to be imposed on the other end, 

you are permitted to give a reasonable estimate. You don’t have to 

get that right. 

We do hear that there are some providers for whom this is going 

to be difficult and they may not be able to comply, and they may 

choose not to offer this product. We did propose and send out for 

comment and then finalize an exemption for any institution that 

does not do these transactions in the normal course of business. 

That exemption is now in place and will exempt many providers 

from having to comply with this rule if they simply want to do this 

as a convenience for existing customers, not very frequently. 

For anybody who is in the business of doing remittance transfers 

and that is their business model, there are new requirements, 

again, imposed by Congress by law. I happen to agree with them. 

I think they are necessary. I think the people who engage in these 

transactions are entitled to the same protections that we all get on 

our bank account transactions, and that is what we are doing. 

There is also— 

Mrs. CAPITO. I am going to step in here a minute, because we 

are about 2 minutes over his time. Hopefully, we can get into some 

17 

more on this topic, but if I don’t keep things moving, we are not 

going to get to our other questioners, so— 

Mr. CORDRAY. I know I can get a little— 

Mrs. CAPITO. No, you are—it is not you, really. 

Ms. Velazquez for 5 minutes. 

Ms. VELAZQUEZ. Thank you, Madam Chairwoman. 

Mr. Cordray, the Dodd-Frank Act created a Bureau-specific requirement to assess the possibility that new consumer protection 

regulations will increase the cost of capital for small businesses. 

What factors about access to capital did the CFPB analyze when 

drafting the new TILA/RESPA mortgage disclosure regulations? 

Mr. CORDRAY. Congresswoman, on that particular effort we have 

been at it for more than 2 years now with being as transparent as 

we can be around these forms, because the issue is, what do consumers understand and what exactly do financial providers need to 

tell them and how will it be framed so that it is understandable? 

We have been doing a great deal of qualitative testing around 

different forms, around different language to see how actual consumers react to that. We have conducted, as we are required to do 

by law on certain of our rulemakings, a Small Business Regulatory 

Enforcement Fairness Act (SBREFA) panel, which is a panel of 

small providers who came and gave us face-to-face their input into 

how different proposals might affect small providers like themselves, and we had broad representation from a lot of the real estate industry, not just lenders. 

That was very useful to us, and a number of aspects of their 

input went into the proposal that we now have out for notice and 

comment—which is now available, and we are getting much more 

comment now broadly, not only from small providers, but also more 

from them. We have tried to be very accessible to groups and 

stakeholders on all sides, to meet with us and tell us their concerns. 

This is a change. It is something Congress has wanted for more 

than 20 years to take these two distinct forms under two distinct 

statutes that overlapped each other in very confusing and redundant ways and put them together. It is not an easy thing to do. 

I think Mark Twain once said that if he had more time, he would 

write a shorter letter. It is the same for us as we are trying to boil 

things down but still make it understandable. It is actually quite 

a bit of work and we want to make sure that we test it with consumers to get it right. 

We will be doing quantitative testing as well in the winter and 

spring, as we have been urged to do by many of our colleagues who 

know this field very well. And we hope to get it right. We are doing 

everything we can— 

Ms. VELAZQUEZ. Great. Thank you. 

Mr. Cordray, under the Dodd-Frank Act the CFPB becomes only 

the third Federal agency required to convene advocacy review panels to examine how small entities will be affected by the agency’s 

new regulations. Can you talk to us about what type of feedback 

the small business community has provided to you as the CFPB begins implementing these type of regulations? 

Mr. CORDRAY. Yes. Thank you. 

18 

As you said, the Consumer Bureau is one of only three government agencies out of all the government agencies that write regulations that is required to follow the small business review process. 

The others are OSHA and the EPA. 

There was some concern among our staff at the outset of how onerous would this process be, how much would it encumber the rulemaking process? I think we have had a good experience with it so 

far. I would say that for myself, I am a fan of the SBREFA process. 

On all of the rulemakings where we have gone through the 

SBREFA process thus far, we have found that we have received 

input that has changed the content and our thinking about our proposals. It has, I think, succeeded in the aspiration, which is that 

hearing face to face from small providers in a setting where we are 

focused specifically on them and not being drowned out by some of 

the voices of the larger providers, we come to see things a little differently and we take that into account in our proposals. And I 

could show you for each of the rules different specific substantive 

changes that that has led to. And so it has been a good process. 

Ms. VELAZQUEZ. Okay. I guess by now you have heard a lot of 

people and critics saying that they express concern that the CFPB 

will stifle lending to small businesses. We know that even before 

the Act was passed, small businesses were having trouble accessing 

capital. 

Based on empirical data, can you talk to us if there has been any 

negative impact on small businesses accessing access to credit? 

Mr. CORDRAY. In terms of perspective on that, probably the 

Small Business Administration has a better perspective than we 

do, but it is something we are mindful of and trying to avoid, to 

the extent we can, in our regulatory process. I would echo what you 

said. The biggest single drying up of capital for small business in 

our lifetime was the financial crisis, the credit freeze, and it has 

been difficult for small businesses ever since. The things that we 

can do to prevent that from happening again are very meaningful 

to small businesses, and I hope that is also understood. 

Ms. VELAZQUEZ. Thank you. 

Mrs. CAPITO. Thank you. 

Mr. Cordray, I am going to recognize myself for 5 minutes for 

questioning. 

Quick question: How many employees do you have right now at 

the CFPB? 

Mr. CORDRAY. My understanding is that as of September 30th, 

it will be 983 employees. 

Mrs. CAPITO. And then, how many will you have at full— 

Mr. CORDRAY. I don’t know that we know that yet, Congresswoman, but somewhere probably in the 1,600 to 1,700 range. So I 

would say we are more than halfway there but still have a ways 

to go. 

Mrs. CAPITO. That is quite a large agency. 

You remember the FSOC, correct? 

Mr. CORDRAY. I am a member of the FSOC. 

Mrs. CAPITO. Yes. How many meetings have you been to and how 

many have there been? 

Mr. CORDRAY. I don’t have an exact count for you. I have been 

attending meetings since I became Director of the Bureau on JanuVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
19 

ary 4th. I could go back and get you an exact number. My guess 

is there have been approximately half a dozen meetings. 

Mrs. CAPITO. So once— 

Mr. CORDRAY. We are meeting regularly. 

Mrs. CAPITO. Less than once a month, if it is 6. 

Mr. CORDRAY. Certainly more than once every 2 months. It may 

be less than once a month, but it is probably— 

Mrs. CAPITO. What is the substance of those meetings at your 

level? 

Mr. CORDRAY. The substance of the meetings is implementing 

the provisions of the Dodd-Frank Act that the Financial Stability 

Oversight Council (FSOC) was given authority to oversee, which 

has to do with Systematically Important Financial Institutions 

(SIFIs) and other matters that are of grave import to the stability 

of the financial system. 

Mrs. CAPITO. Are you satisfied that is moving fast enough? 

Mr. CORDRAY. I don’t really have a context for making that judgment. We are moving forward. There are activities that are occurring and I think that they have become known publicly. There is 

other activity occurring that is in process and therefore isn’t necessarily public yet. 

I think everybody is looking to move these processes along, and 

I, as a member of the Council, am looking to do so as well. 

Mrs. CAPITO. Okay. Thank you. 

I mentioned in my—I want to get into two things, but I want to 

get into this uncertainty issue that I talked about in my opening 

statement. And we have heard this as recently as yesterday from 

institutions who fall, say, within the purview maybe of the CFPB 

and the FDIC, or the CFPB and the Federal Reserve. There is a 

distinct impression that—and I haven’t just heard it once, so it is 

not just a one-shot deal, and I believe this was brought to your attention—I believe you are aware of this, the feeling that the CFPB 

is there to make decisions on consumer protection yet the prudential regulator is still holding on or is still exerting that influence 

in that area and that there is some—when two people think they 

have authority in one area, instead of both people making decisions, sometimes nobody makes a decision or takes the lead. 

Where is the lead supposed to be? What are you going to do 

about this? Because this was one of the fears we had in creating 

the—when the Bureau was being created. We didn’t create the Bureau; we all know that. 

But when it was created, we said, ‘‘You are just going to pile on 

and pile on and it is going to create more uncertainty.’’ And this 

really concerns me, particularly at this juncture of our economy. So 

I would like for you to be as candid as you possibly can be in this 

area. 

Mr. CORDRAY. Okay. It is a fair concern because the statutory 

authority does overlap to some degree. If you have a consumer protection issue you, arguably, almost inevitably have a consumer 

compliance issue that could involve matters such as litigation risk, 

reputational risk, and the like, for the institution, which can, depending on the magnitude, go to safety and soundness. 

So this is and is going to be a collaboration, and I have come to 

see that more and better as the Director of this agency. It is very 

20 

important for us to have strong relationships with the FDIC, the 

OCC, the Fed, and frankly, with the National Credit Union Administration, as well. 

I have been really pleased at the progress we have all made at 

building those relationships and working together. It may be noted 

that the credit card add-on product enforcement action that was 

completed recently was a collaboration between our Bureau and 

the OCC. We worked together on that. 

It is important that we be on the same page so that the institutions don’t have to, as you say, deal with the possibility of different 

regulators taking different positions from one another. That is very 

confusing and unfortunate if that were to happen. 

It is our job to see that we get together. We have a number of 

matters that we are working on cooperatively with the OCC, and 

a number of matters we are working on cooperatively with the 

FDIC and with the Fed. 

We all collaborated earlier this summer on supervisory guidance 

involving military servicemembers and their families’ permanent 

change of station orders. That was a good collaboration. 

But, as you say, when you are starting to do these things for the 

first or second or third time, there are issues you work through 

that are new and different, and then over time it becomes easier. 

But I would say that the fact that the new Comptroller of the Currency has a strong background at the State and Federal level in 

both consumer protection issues and safety and soundness regulation has been a tremendous step forward for our relationship, and 

I would say that the fact that I serve on the FDIC Board and have 

had a chance, therefore, to get to know their leadership has helped 

tremendously with that cooperation. 

Mrs. CAPITO. Thank you. And my final statement, because I have 

run out of my time, would be, I think the institutions can follow 

a roadmap if they can see the roadmap, and they can follow the 

directions if they have the directions. They can follow the rules if 

they have the rules. 

But if nobody is going to make a decision or if there is going to 

be a political struggle between regulators, they are put into a twilight zone of decision-making, and what do they do? They don’t 

make a decision. 

Mr. Cleaver? 

Mr. CLEAVER. Thank you, Madam Chairwoman. 

Mr. Cordray, you have been on the job now for half a year, 

maybe slightly over, and I know there probably was this assumption that you were going to be a Wall Street attacker, which obviously didn’t materialize. But I am wondering how many—if you 

have a number thus far—people across the country have contacted 

the agency so far? Do you have an estimate or maybe even an accurate number? 

Mr. CORDRAY. I am sorry, Congressman. How many people have 

contacted the agency so far? 

Mr. CLEAVER. Yes. How many people have come to the agency filing complaints? 

Mr. CORDRAY. Okay. I see. 

The complaints have been steadily increasing. That is a function 

of probably several things. Number one, given that we didn’t know 

21 

at the outset what the volume would be, we did stage in complaints 

in different categories at a time starting with credit cards, then 

adding mortgages before proceeding to other products. 

By the way, that was only possible, notably, because other agencies cooperated with us to make that possible. The number of complaints as of September 3rd total 72,297. That is increasing. We are 

at an annualized rate this month of what would be 10,000 a month, 

or 120,000 a year. 

That is continuing to increase. We have no idea where it will 

level off. So it is a considerable piece of work for us. 

There are other people who have come to our ‘‘Tell Your Story’’ 

portal and told their stories. There have been thousands of those. 

I don’t have an exact number of those. 

There are many other people who communicate with us in various ways, ranging from meetings, to mail, to all the same sort of 

things they probably come to you by those different avenues, as 

well. 

Mr. CLEAVER. I don’t have as much personal pain involved in this 

as I did a couple of years ago before my youngest son graduated 

from school, but— 

Mr. CORDRAY. From college? 

Mr. CLEAVER. Yes, from college. And I would never have given 

him a credit card if I owned a credit card company. It doesn’t have 

anything to do with love; it is logic. 

But I am wondering what you have found so far, or whether you 

have found anything with regard to student debt, credit card use? 

Mr. CORDRAY. Yes. One of the things that the Card Act addressed which has been positive, among the many things it addressed, was the credit card marketing to minors, often to new college students on their own for the first time, about which there 

were various concerns. I remember in State government there 

being concerns about those abuses in different hearings in front of 

our legislature and then the Card Act was passed and it addresses 

that to a considerable degree. 

So that has been, I think, certainly helpful. In terms of student 

loan debt, we hear quite a bit. It is a big issue for people right now. 

We calculated and we had better sources of data than maybe had 

been available before earlier this year that the total amount of student loan debt in the United States had passed the $1 trillion 

mark—the biggest single source of debt—besides mortgages—bigger than credit cards, bigger than auto loans. There are many people over the years who accumulated debt and didn’t understand 

maybe the differences between private student loans and Federal 

loans, the different protections that are available in terms of if you 

have trouble making payments, the different avenues that you 

have. 

We have done a lot of work—it is part of our ‘‘Know Before You 

Owe’’ project—around clarifying and making much more accessible 

to people the choices they have on student loans when they are 

thinking about going on for further schooling. And we will be bringing out the results of all that as a college cost indicator that people 

can really get a sense of, when they get that offer—it is a little like 

buying a house. Sometimes, people fall in love with the house and 

22 

they forget to think much about the mortgage. Similarly, you can 

fall in love with the school and forget to think much about the bill. 

This will be much easier for them to compare what kind of offers 

they are getting from different places, what the cost will be, and 

we believe it will help people make more informed, better choices. 

We also are working a lot of complaints from people who, it is 

too late to inform them because they already went through—people 

not like your son necessarily, but people of the age and older who 

do have problems now repaying their loans about what their rights 

are, what their responsibilities are, what their options are. We are 

working very closely with the Department of Education on that. It 

has been a great partnership for us with Secretary Duncan and his 

staff. 

Mr. CLEAVER. Thank you. My time has expired. I would be interested if your staff could provide any information on that. I was one 

of the authors, the pushers for that inclusion in Dodd-Frank, and 

not just because of my son but because of the sons and daughters 

of other people I knew who were also— 

Mr. CORDRAY. I would be glad to come talk with you, sure. 

Mr. CLEAVER. Thank you. 

Thank you, Madam Chairwoman. 

Mrs. CAPITO. Thank you. 

Mr. Neugebauer? 

Mr. NEUGEBAUER. Thank you, Madam Chairwoman. 

Mr. Cordray, you testified before our subcommittee on February 

15th, and during your testimony you stated that the CFPB is committed to being accountable and using your resources wisely and 

carefully. You also repeatedly stated in correspondence that you 

are committed to promoting a culture of transparency and accountability. 

But quite honestly, to date the responses that we have been receiving from the CFPB haven’t really proved that out. And, one of 

the things that Dodd-Frank requires is that you provide a financial 

operating plan and forecast to OMB. I understand that you did not 

do that, that you gave them a budget justification form, which is 

different than a financial operating plan. 

Additionally, we have asked you to furnish us performance measures and an overall strategic plan for the agency. As of this date, 

we have not received that. 

We also asked you to give us a—you mentioned the word ‘‘detailed process’’ in determining the Bureau’s employment needs, and 

as the gentlewoman asked you today what was the size of the organization you felt like it would be at some point in time, you have 

still not furnished us with any kind of information on what the 

process is to determine what the employment needs of the agency 

are. 

I could go on. There are a number of things that we have asked 

you that should be an integral part of any agency or any business 

that is operating, especially one with a half a billion dollar budget. 

So here is the question: Is it just you don’t want to furnish that 

information, or it is just not a part of the process, you don’t have 

these documents? I am trying to get a handle on if it is just a lack 

of transparency or you just don’t have these documents. Can you 

elaborate on that? 

23 

Mr. CORDRAY. Sure. And thank you for the chance to address the 

issue, Congressman Neugebauer. I did read your piece in the Wall 

Street Journal. 

A number of things. Again, it is important to recognize that we 

did not exist as an agency until last year, so at the outset, we obviously weren’t going to have the same kind of full documentation as 

other agencies do that have existed in some cases for decades, in 

some cases for over a century. But we are on our way there and 

we are getting there. 

In terms of responsiveness to your requests, it is my understanding that we have at least 5 times responded to requests with 

more information that you have asked for, and especially as it has 

been clarified to us what information you want. 

As to specific issues you raise, our budgeting documents are 

growing larger and more fulsome each time in the process, and this 

is the first time through for me as Director; I only became Director, 

as you recall, in January. And I believe that we are well on our 

way to doing the kinds of things you want us to be doing around 

the budget process. 

As for performance plans, I know that we have been working and 

I have seen drafts and worked on drafts of our performance plan 

under the GPRA that will be coming out shortly. I think you are 

going to find that as we go, you will receive more information. Initially, you got very little information because we had 30 people at 

the Bureau at the time and we hadn’t built up the expertise yet. 

The next time, it was more. This next time, it will be more yet. 

But we are happy to work with you and are committed to working with you to try to make sure that you are satisfied that you 

are getting the kind of information you want. I understand as of 

today, you perhaps are not satisfied, but I think that you will be 

over time, and we are getting there. 

We did get a clean audit, I want to note for the record, from GAO 

our first time through. They are back to see us again and we have 

our Inspector General from the Federal Reserve, who is working 

over matters with us. And Congress has required us to obtain yet 

another outside audit, which also was clean. 

So we are trying to be careful about these processes. I take them 

seriously and I take them personally. But in terms of getting you 

the information that you need to be satisfied, we are working hard 

at it and we will have more as we go and we will be happy to continue to be in touch with your office about making sure that— 

Mr. NEUGEBAUER. I look forward to that. 

I have one last question. I want to follow up on my friend, Mr. 

Hensarling, on this term ‘‘abusive.’’ 

Here is the question: If your agency determines that a bank or 

a nonbank financial entity is engaging in what you deem as an 

abusive product or an abusive practice, what is the recourse for 

that bank or for that financial institution if they don’t like your decision? 

Mr. CORDRAY. Sure. This could come up, I guess, in two different 

contexts. One would be an examination of the institution. If we 

were to find something that we deemed to comply with Congress’ 

definition, which again, is the law of the land, on what abusive 

means, we would have a working back-and-forth with the instituVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00027 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
24 

tion. There might be disagreement about that. We would discuss it, 

try to clarify it. 

It is not our intention to try to ding institutions on things where 

it is not very clear what the law is or what the law says, in gray 

areas. That is not really worth our time or theirs. But, as I say, 

often things that you might consider to be abusive are also unfair 

or deceptive, which is much clearer under the law, and that may 

be where the discussion would center. 

It also could come up in the context of an enforcement action or 

an investigation, and if that is so the company would have every 

opportunity, or the individual, to raise their concerns. We have a— 

what we call a NORA process, that if we are considering taking an 

action they have an opportunity to come to us and explain why we 

should not or why we don’t necessarily understand the facts or law 

correctly. And then, we take account of that before deciding whether to proceed. 

And then, of course, if we were overreaching or if we were getting it wrong, courts might well tell us that and cut us back. We 

have not had any of those occasions thus far. We would hope that 

we would not, but we will see as we go. We are trying to be reasonable and yet firm in our understanding that we are there to enforce 

the law. 

Mrs. CAPITO. Thank you. Thank you, Mr. Neugebauer. 

Mrs. McCarthy? 

Mrs. MCCARTHY OF NEW YORK. Thank you. 

And thank you for your testimony. It has been very interesting, 

especially being that it is such a young agency and the amount of 

work that you have done in a short period of time. 

One of the things that we were interested in is that your agency 

so far has issued two notices for comments of proposed rules aiming at protecting mortgage borrowers. With regard to the servicing 

proposed rules you have included a provision that requires 

servicers to make good-faith efforts and contact the delinquent borrowers and inform them of their options to avoid foreclosure. 

And I was just wondering, how do you define ‘‘good-faith effort,’’ 

because I have to tell you that we—and I am sure many Members 

of Congress are going through this, where so many of our constituents are calling us because they get the foreclosure notice and they 

don’t know what to do. And they then call us back to basically say, 

‘‘We have been trying to work with the bank. We don’t understand 

what they are trying to tell us, or because there are different programs out there. Can you help us?’’ 

And we are very lucky. We have a good relationship with a number of our community bankers. One of the things that we found— 

probably the best solution is for the customer to really sit down 

with the loan person so there can be a face-to-face. And I was wondering if you ever considered—if the agency has ever considered a 

face-to-face as a means of contacting, once you make the contact 

with the borrower, to come in, let’s talk about this. Because over 

the phone sometimes it is very difficult, or even, to be very honest 

with you, with some of the papers that I have seen my constituents 

bring in and read—I am sorry. I sit on this committee. We have 

been working on this issue for a long time. You need to be a lawVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00028 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
25 

yer, and so you can understand where the confusion is coming 

from, so— 

And most of these people want to keep their homes. They want 

to do whatever they can, but obviously they are caught in the economical problems that this country has been facing. And I still believe very strongly that until we settle the housing issue across this 

Nation, that is one of the things that is dragging our economy 

down. And I was just wondering what your response would be to 

that? 

Mr. CORDRAY. My response, Congresswoman, to that would be, I 

agree with you. I think housing has been one of the single biggest 

obstacles to a faster economic recovery. I think that is well-documented now. I think that is undeniable and everyone is working toward more improvement, and no one more than the private sector, 

frankly. 

In terms of the questions you raised about mortgage servicing, I 

believe that the community bank and credit union model on this 

is exactly as you describe. It is very often a face-to-face process. 

Typically, a lot of those institutions do keep their loans in their 

own portfolios, so no one else is involved. There isn’t some subcontracted mortgage servicer who may not have an actual relationship 

with that customer and it is much easier to work through the problems in that setting. 

That is the traditional model and it is a good model and it works 

well. The lender and the borrower both have a stake. They talk it 

through. They find a way to go forward. 

What has happened in this industry is that there are a lot of 

high-volume providers, and in many cases servicing rights may 

have been bought and sold and go on to someone who never has 

had a relationship with that individual customer and it may be 

several years before they start having a problem making payments. 

That kind of communication has not occurred very well or very effectively. 

Frankly, there has been—just to be blunt about it—poor customer service by a lot of the mortgage servicers. There is just no 

other way to describe it. 

Our rules will help to improve this situation. They provide for 

continuity of contact, early intervention, and new record-keeping 

and document management procedures, all of which should improve this. None of this is a surprise or a mystery to people in the 

industry; it is just a question of whether they are willing to put in 

the time and effort to do it. 

And whether we should mandate face-to-face meetings in all instances, that feels a little like we would be micromanaging processes maybe too much. I would be happy to have our staff discuss 

with your staff thoughts along those lines, but we have tried to 

draw a balance in these rules. They are out for public notice and 

comment right now and we will be finalizing them by January. 

Mrs. MCCARTHY OF NEW YORK. My time is up. Thank you. 

Mr. NEUGEBAUER [presiding]. I thank the gentlewoman. 

And now the gentleman from North Carolina, Mr. McHenry, is 

recognized for 5 minutes. 

Mr. MCHENRY. Thank you, Mr. Chairman. 

26 

Mr. Cordray, thank you for returning to the Hill to testify. Structural issues remain regarding the CFPB, but I certainly appreciate 

your willingness to submit to congressional oversight. 

And I want to follow up on my colleague from Texas, Mr. 

Neugebauer’s, line of questioning, as well as Mr. Hensarling’s line 

of questioning about the term ‘‘abusive.’’ Now, the concern—and 

you answered this in Mr. Neugebauer’s question, but you outlined 

it that this term will largely be determined by enforcement action. 

That is the concern I hear from industry is that you are going 

to wait until you take an enforcement action in order to understand 

what the definition of ‘‘abusive’’ is. It would be proper for you to 

outline what those terms are before you take an enforcement action. 

That sort of concern by the industry adds to their level of uncertainty about your agency and about the Bureau as it currently 

stands. So I ask you to consider that. 

The question I have in hand is about simplified mortgage disclosures. My colleague, Mr. Green of Texas, and I wrote legislation 

trying to put in place a one-page mortgage disclosure form. 

I appreciate the fact you took this up first on your watch. Again, 

the concern I have, though, is the construct of it, as Chairman 

Bachus outlined—look, when you say you have a three-page loan 

estimate at the beginning and a five-page long disclosure form at 

the end it becomes overly cumbersome and simply adds to the 

stack that folks have at closing or at refinancing. 

We had Mr. Date—Raj Date—testify and he even conceded, like 

I have conceded, that I didn’t read the full stack. And so people are 

left with a lot of major questions even when they make this huge 

closing with all these enormous mandates. 

Can you get to a one-page mortgage disclosure and can you simplify the regs that you have put out? 

Mr. CORDRAY. Thank you, Congressman McHenry, and—for the 

discussions we have had around these issues. And I recalled that 

you had worked on legislation on this actually several years before 

it became in vogue. 

We are working, as I said, to simplify the two forms. Congress 

has asked us to do this. They had asked agencies to do this before. 

It was not easy. There were different statutes and they overlapped 

and we are well on our way to simplifying those forms. 

It is a hard piece of work and you maybe can appreciate it the 

most if you have tried to create the short form that speaks to the 

things that need to be spoken to without making it overly long. 

Our proposals to date are shorter than what existed before. It is 

not accurate to try to make something so simple when it isn’t so 

simple, but it is an ongoing project for us. 

In terms of the fact that there is still a huge stack of materials, 

we dug into that and looked carefully at what there is. Much of it 

is required by State law. Unless we are going to sort of preempt 

State law that says you have to have a deed and you have to have 

different titles— 

Mr. MCHENRY. We have had that since—some of these issues are 

as old as the Magna Carta. 

Mr. CORDRAY. Right. So— 

27 

Mr. MCHENRY. But the important thing is that people have the 

essential information. 

Mr. CORDRAY. That is correct. 

Mr. MCHENRY. What their payment is, what their interest rate 

is— 

Mr. CORDRAY. That is right. And that is what we are trying to 

do with our form. And frankly, we have had this all out for lots of 

public input, and are happy to get input from your office, and if you 

want to have us look again at what you had thought about— 

Mr. MCHENRY. So what specific elements of TILA and RESPA 

need to be reformed so that we can reduce that stack and make 

sure consumers have the proper information? 

Mr. CORDRAY. Yes. Although, my point is, as for the stack, a lot 

of it is State law. 

Mr. MCHENRY. I heard you. 

Mr. CORDRAY. It is not correctable by this Congress unless you 

are simply going to preempt all of State property law. A lot of it 

is imposed, we have found, by the lenders themselves out of a sort 

of defensive medicine-type approach to— 

Mr. MCHENRY. Right. My time is short, and that is why I am trying to ask about TILA and RESPA— 

Mr. CORDRAY. Yes. 

Mr. MCHENRY. —that are both Federal laws. I conceded with you 

that much is State law and much is as old as the Magna Carta. 

I am talking about the things that we can control. 

Mr. CORDRAY. Yes. What we are doing is trying to simplify that 

as much as possible, and that proposal is out for comment now. We 

will be finalizing it next year. And again, we are happy to hear 

from everybody on that project. 

Mr. MCHENRY. I will just follow up with you in written form because— 

Mr. CORDRAY. That would be fine. 

Mr. MCHENRY. —that is not much of an answer. I am trying to 

ask for specifics of what can be reformed. 

I yield back. 

Mr. CORDRAY. Okay. That is fine. 

Mr. NEUGEBAUER. I thank the gentleman. 

And now the gentleman from New York, Mr. Meeks, is recognized for 5 minutes. 

Mr. MEEKS. Thank you, Mr. Chairman. 

It is good to see you, Director Cordray, and we thank you for the 

work that you are doing. I have just a few questions on issues that 

have come before my office from a number of constituents, and I 

would just like to get some of your viewpoint. 

One of the first is, of course, dealing with many of our 

servicemembers. We have had a number who have come by the office and are in very difficult financial challenges and seem to be 

prime victims for predatory lenders. One had told me about individuals being outside of the military base itself and giving him 

what he thought was an offer that was too good to be true, and 

generally, when it is too good to be true, that is because it is. 

I know that Holly Petraeus is part of the new Office of 

Servicemember Affairs. So I was wondering what you can tell us 

in regards to how this office has been helping and what they can 

28 

do and how maybe I can direct some of my constituents to the services, or those individuals in the military. 

Mr. CORDRAY. Sure. Thank you, Congressman, for asking about 

that part of our office. It has been really a great success, our Office 

of Servicemember Affairs, and a lot of it is due to the fact that Assistant Director Petraeus is in charge of it. 

She has tremendous credibility throughout the military, across 

the country from both the rank and file and leadership. She goes 

out and brings back issues that she learns about from 

servicemembers and their families, and increasingly from veterans 

as well, and she gets a response from the Department of Defense, 

and the Department of Veterans Affairs, as wanting to solve those 

problems. 

The Permanent Change of Station Order guidance that we 

gave—and a number of you served in the military and can think 

back to when you were actively on duty and understand the challenges it can create economically for servicemembers and their families. People get a Permanent Change of Station Order and they 

have to move. They don’t have any choice. That is part of their 

Army duty, or Navy, or whichever branch of the service. 

But they may not be able to sell their home. They may have to 

decide between leaving their family there because they are not able 

to sell it, it is underwater, or taking a huge loss which they can’t 

afford, some hard choices that maybe civilians don’t typically face. 

And the guidance that we have provided now makes that a qualifying hardship for the HAMP program and some of the other government programs that help people get mortgages modified. That 

is an advance. Any number of those types of stories that I can tell. 

People can get in touch with our Office of Servicemember Affairs 

either through our Web site—consumerfinance.gov—or by calling 

our line and working through that. And we welcome that input. We 

have been very actively working on behalf of servicemembers and 

trying to address their special concerns. 

Mr. MEEKS. Thank you very much. And we will be in touch on 

that. 

In the time I have left, let me ask another question, because 

when we went through the financial crisis, and what caused it, a 

lot of the larger companies and the big companies were the major 

ones and we have our smaller institutions that still are very actively involved in the local communities, et cetera. And I know that 

when we put in—when Congress granted the CFPB the power to 

exempt various or certain financial institutions. 

So my question is, down the line do you foresee the CFPB creating, maybe, a rule that would exempt some of the smaller financial institutions—some of the community banks, or credit unions, 

or things of that nature? What is your vision there? What is your 

viewpoint there? 

Mr. CORDRAY. Congressman, that is something that I have promised we will think about with every single rule. In the first rule, 

we finalized on the remittance transfers, discussed earlier, we 

ended up putting in a threshold below which you do not have to 

comply with the rule and that will exempt a large number of community banks and credit unions. We have that in our proposal on 

29 

mortgage servicing and we are considering it in some of the other 

rules, as well. 

I firmly believe—as I have said before and I will say it again— 

that community banks and credit unions and the traditional customer service model that they bring to their work did not cause the 

financial crisis. We would have been far better off if their market 

share hadn’t been robbed before the crisis by some of their irresponsible competitors, and we will be better off eventually to the 

extent that they are restoring their place in the market. We want 

to encourage and promote that and we will look to do that as we 

write rules. 

Mr. MEEKS. Thank you, Mr. Director. 

I yield back. 

Mr. NEUGEBAUER. I thank the gentleman. 

Now, the distinguished gentlewoman from Illinois, the chairwoman of the Insurance and Housing Subcommittee, Mrs. Biggert, 

is recognized for 5 minutes. 

Mrs. BIGGERT. Thank you, Mr. Chairman. 

Director Cordray, I think that I want to continue a little bit on 

what was said before about RESPA and TILA. It seems that DoddFrank failed to provide the CFPB with the authority to merge the 

RESPA and TILA statutes, and I know that we worked to try and 

get them together as they were working on that so that it didn’t— 

they didn’t come up with a disparity in those statutes, but that 

happened. And there seems to be the conflict between the statutes 

and their application or policy goals. 

Can you or your staff suggest legislative language that would resolve the differences and the conflicts between the two statutes, 

and should they be merged? 

Mr. CORDRAY. Yes. And Congresswoman, maybe this helped me 

understand what I didn’t—what was not clear in Congressman 

McHenry’s question before. 

What Congress did in the financial reform law was they said that 

the disclosures that apply to mortgage transactions at application 

and again at closing needed to be merged and consolidated and if 

possible streamlined because it was just too confusing for people to 

get two different things with somewhat different purposes but overlapping. And that is the project we are working on and we are resolving. 

Congress did not, though, push together the Truth in Lending 

Act and the Real Estate Settlement Procedures Act. They are very 

different statutes and have different objectives: the Truth in Lending Act has to do with the accuracy of disclosures and forthcoming 

nature of disclosures around different types of consumer financial 

lending and credit; and the Real Estate Settlement Procedures Act 

has to do with what were viewed as problematic issues and practices around real estate closings, and therefore, they are actually 

quite distinct. 

They do overlap in this area of mortgage disclosures and that is 

where Congress has asked us and really directed us to try to clean 

that up, and that is what we are trying to do. But beyond that, I 

don’t at this point have suggestions on ways in which you should 

change RESPA or change TILA, although I would be happy to work 

30 

with you and your staffs on those. I don’t regard the statutes themselves as a problem— 

Mrs. BIGGERT. Or that have to be—then you don’t think that 

they have to be merged to— 

Mr. CORDRAY. The two statutes, no. I don’t think that would be 

productive, although I am always open-minded on legislative matters. That is your purview, and if there is something you want to 

look at, we are happy to look at it as well. 

Mrs. BIGGERT. I would like to, and we can do that in the future. 

And thank you. 

Another question is that the RESPA/TILA rule I think creates 

uncertainty regarding who prepares and delivers the final disclosure to the consumer. The proposed rule, by permitting the lender 

to deliver the final disclosure, I think removes the independent 

third-party closing agent from the settlement process. And even in 

Illinois, there is a State law that requires that at any closing, there 

be a real estate attorney also. 

What was the intent of removing this independent check at the 

closing table? 

Mr. CORDRAY. Congresswoman, one of the issues kind of left unresolved, to the extent that the financial reform law directed us to 

merge the TILA and RESPA disclosures for mortgages, was who 

would provide certain pieces of that at the closing table, whether 

it be the settlement agent or the lender. And the lender had more 

responsibility for some of the things under the Truth in Lending 

Act, and the settlement agent under RESPA. 

We have not at this point decided that issue. We are not trying 

to—we are kind of wary about trying to impose a model on the 

market. We certainly feel the right answer is—clearly the right answer is that the two would work together because they tend to 

bring different sources of information to ultimately what needs to 

be done to get you your mortgage, and so that is all out for notice 

and comment now. We are hearing from people—hearing some of 

the same questions you are raising today. We are hearing what 

they think, thinking through that, and we will do that before we 

finalize. 

And any thoughts that you or your staff have about it that you 

want us to know, we are happy to hear them. 

Mrs. BIGGERT. Okay. When you are talking about this, is this 

from the testing that you are doing on the mortgage disclosure 

form for consumers and how they react to changes? 

Mr. CORDRAY. Yes. Although that testing is more around the effectiveness of the disclosures, whether consumers understand them 

or whether they are confused by them. The issue you are raising 

is more of a practical problem of who, on the industry side, the provider side, is responsible for which pieces of the closing. That has 

always been an issue that the settlement agents and lenders have 

tended to work out between the two of them and it is something 

they should continue to work out between the two of them. But we 

are hearing from people who have different points of view on this 

and we are going to try to— 

Mrs. BIGGERT. And that is why I would like to meet and discuss 

that further, because I am really concerned that the mortgage participants, especially small businesses, may be shut out of the mortVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00034 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
31 

gage origination process altogether. So I thank you for your answers. 

And I yield back the balance of my time. 

Mr. NEUGEBAUER. I thank the gentlewoman. 

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

for 5 minutes. 

Mr. SCOTT. Thank you very much, Mr. Chairman. 

Mr. Cordray, I would like to continue the line of questioning on 

the mortgage servicing end. Two significant events have happened 

lately to help struggling homeowners. I happen to think that there 

are just too many homeowners who are losing their homes unnecessarily. There is help out there, but they are not getting it. And I 

wanted to know what connection you had with these and how you 

are working with them. 

One has been the settlement of the multi-State with the banks, 

the large banks. There was a settlement—Bank of America, Wells 

Fargo, JPMorgan Chase, Citi, and Allied—these five banks, and individuals who held their mortgages with that would be entitled to 

very significant help. 

Have you all looked into this? What relationship would you have 

with it? How are you making sure those consumers are getting 

help? 

There has been some debate as to whether or not this money can 

be used to write down principal, for example, which is very much 

needed. What is the assessment of that situation right now? 

Mr. CORDRAY. Our involvement, Congressman, in this issue is, in 

particular, we now have authority over mortgage servicers. We 

have authority to write rules on mortgage servicing that apply 

across the industry to banks and nonbanks. We are in the process 

of doing that; those will be final by January. 

We have the ability to examine mortgage servicers, send in our 

examination teams. We have been doing that with different 

servicers. We are in the process of doing that across the industry. 

That has been insightful for us and it will lead to corrective action 

in a number of instances where they have not been up to snuff, 

likely. 

We have enforcement authority, which in appropriate cases will 

be utilized as needed to make sure people are following the law. 

In terms of the— 

Mr. SCOTT. Have there been any problem areas there? Any complaints? Is it moving smoothly? Are all five major banks cooperating? 

Mr. CORDRAY. I think our processes are moving relatively 

smoothly. Again, we are a new agency, so I am sure things will be 

smoother several years from now than they are at the outset, but 

relatively smoothly. 

In the mortgage servicing industry, things have not moved 

smoothly over the past 5 or 6 years. Consumers—I am sure your 

office hears from them as much as we do—have been very dissatisfied with the level of customer service, accessibility, even the ability to get somebody on the phone, when you get them the paperwork, whether there is continuity and they actually keep and don’t 

lose the paperwork, all the frustrations people have had. 

32 

So it is a troubled area, but it is not necessarily the case that 

every mortgage servicer is having deep problems with their process. Some of them have cleaner portfolios; some of them have been 

more attentive to— 

Mr. SCOTT. Let me ask you—my time is slipping away: One other 

program we put together here at this very committee was to get 

help where it really was needed for those people who are barely 

holding on to their homes, but have lost their jobs. And so, we put 

forward what we call the Hardest Hit Program. 

Mr. CORDRAY. Yes. 

Mr. SCOTT. And there have been a lot of problems with that, 

largely because some States have the 45 percent approval rate, and 

some have a 10 percent approval rate. And I am wondering, this 

is a program—and many people do not even know it exists—where 

an individual lost his job and this money is there to help them to 

pay up to 18 months of their mortgage, and they have not gotten 

that information. 

What are you doing to help some of these States move along to 

more aggressively market the program, target the severely unemployed and make sure that works? That is something that could directly keep people in their homes, particularly in the view of the 

fact that that money will run out in 4 years? 

Mr. CORDRAY. Yes. I recall, when I was Attorney General of Ohio 

and these funds were first made available, finding myself frustrated as time was passing and they were not being drawn down. 

I actually think in the State of Ohio, that is going better, but it 

is a challenge. 

We don’t actually administer the Hardest Hit funds so I am not 

an expert on that. But I do know it has been an issue and a problem around the country. Some States have drawn virtually none of 

their funds; others somewhat more. There has been resistance from 

various quarters. I don’t understand it well enough to opine helpfully to you on it. 

Mr. SCOTT. That might be somewhere where we need some extra 

help. You are absolutely right. Many of the States have been— 

But let me get to one other point on the regulatory front and the 

regulatory burden. We hear some complaints from your agency 

about the regulatory—the overworked paperwork, the outdated, unnecessary, unduly burdensome regulations. What are you doing to 

address this issue? 

Mr. CORDRAY. We have heard that too, and I have invited that 

kind of comment. We launched a streamlining initiative earlier this 

year to ask people broadly, including industry and other stakeholders who typically have this complaint, to identify for us some 

of the types of provisions that they think could be eliminated or 

modified or the burden of them reduced without hurting consumers 

or that they think are not really delivering their value. 

And we got a number of suggestions, some of which we are definitely following up on, but one of which was the credit card ‘‘ability 

to repay’’ effect on spouses who do not work outside the home, 

which is one, as I said earlier, we are going to be taking up imminently. There are others we will pursue. 

So I think that was fruitful for us. We did find that a lot of the 

burden people complain about has nothing to do with the ConVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00036 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
33 

sumer Bureau and the financial industry. It is the money laundering requirements and the Bank Secrecy Act, neither of which we 

administer. 

But there are things that did come within our purview that we 

will proceed on and I think that has been helpful and we will be 

able to show the people who complain about that, that we are willing to take up and work on some of the issues they raise, which 

I want to do. 

Mr. SCOTT. Thank you very much. 

Mr. NEUGEBAUER. The gentleman from Missouri, Mr. 

Luetkemeyer, is recognized for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. 

Mr. Cordray, on—I sent you a letter along with, I think, 30-some 

of my colleagues with regards to the wire remittance rule that you 

promulgated, and we received back this week your letter and we 

thank you for that. One of the questions that I have that, in the 

letter here it says that you understand that achieving full compliance by the effective date may present challenges for some institutions subject to the rule and have met with some providers to hear 

the concerns they may have. 

Are you considering any changes as a result of those meetings 

that you had with those providers? And if so, what changes to the 

rule are you anticipating? 

Mr. CORDRAY. There have sort of been three stages of this. The 

first is, as I said earlier, Congress passed the law. It is the law of 

the land. There are now new protections and new procedures for 

remittance transfers. If the Consumer Bureau didn’t exist, that 

would still be the law of the land. 

The Consumer Bureau was the agency designated to implement 

that law by adopting rules. Those were out for public notice and 

comment. We had many discussions with many parties about them 

before finalizing them. We finalized those in February. 

At the same time, we proposed a supplement to consider whether 

to exempt institutions below a certain threshold from having to 

comply with the rule because it was more burdensome than makes 

sense for them. We did adopt that threshold in August and there 

are many—I believe it is thousands of institutions exempt from the 

rule. But it still covers most of the consumer market— 

Mr. LUETKEMEYER. Through your discussions, though, have you 

found that in serving the entities that are going to be affected by 

this, have you found a large group of them that are just going to 

quit providing the service? 

Mr. CORDRAY. We hear different things about that and we are 

trying to understand it more. The third stage that I didn’t get to— 

Congress passed the law. That is settled. We did issue a rule that 

is now settled. There is some opportunity for us to perhaps clarify 

and provide guidance around some of the points that are being 

raised, but unless we are going to reopen notice and comment rulemaking and redo the process, we are a little more constrained now. 

We are having discussions with various providers who were expressing concerns to us about what we can do to try to address 

those concerns. We will do as much as we can. 

We also recognize we need to provide clearer and simpler guidance to a lot of the smaller institutions and we are going to be comVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00037 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
34 

ing out with a small business compliance guide to the rule, which 

will be much more accessible and in plain English than what is 

written in the Federal Register. That is coming out soon. And we 

are going to continue to work with institutions to try to give them 

guidance and ease the implementation process as much as possible. 

Mr. LUETKEMEYER. If you see that there is a constriction of services due to the number of folks who are going to be doing this, 

would you look at raising this number from 100 to 500 or 1,000? 

Mr. CORDRAY. We just went through a process on that. We can 

do and redo and redo processes forever and then people complain 

about regulatory uncertainty. We went through a process; we 

heard— 

Mr. LUETKEMEYER. Director Cordray, let me interrupt for just a 

second. The rule is there or the law is there to solve a problem? 

Mr. CORDRAY. Correct. 

Mr. LUETKEMEYER. And if the problem—if there is no problem at 

the lower end of institutions that have very few transactions then 

that is not—then that problem—then we need to eliminate that because we are creating a problem instead of solving a problem. 

Mr. CORDRAY. Correct. And that is what we did. That is what the 

supplement was—transactions that are exempt from this rule. You 

do not have to worry about it; you can throw it in the trash. 

Mr. LUETKEMEYER. If we find, though, that as a result of constricting services, people getting out of it, and there still is—and 

the folks who were—who are getting out of it are not our problem 

folks, would you not think that we need to reconsider that at least? 

Mr. CORDRAY. What the law requires is that for the first time 

now, consumers are entitled to certain protections in this area: if 

errors are made that there would be an error resolution process, 

they are entitled to know what money is going to be received on 

the other end and not just toss their money into a black hole and 

not know what is— 

Mr. LUETKEMEYER. Okay. I understand where you are going. I 

understand that. 

You mentioned the word ‘‘error.’’ Right now, the way the rule is 

written the error can be assigned to the individual providing—the 

provider who correctly delivers the funds but the sender gives them 

a wrong account number. Is that not correct? 

Mr. CORDRAY. I think that is one of the issues we are working 

through with different institutions that are raising the issue with 

us. I think it is somewhat overstated. 

Mr. LUETKEMEYER. How can you overstate that? 

Mr. CORDRAY. Because I think that— 

Mr. LUETKEMEYER. Either you count it as an error or you don’t. 

Mr. CORDRAY. Shall I explain? 

Mr. LUETKEMEYER. Sure. 

Mr. CORDRAY. Okay. So counting as an error then has to do with 

whose responsibility it is to sort out whether it is an error or not. 

That is the first issue. And, Congress provided, and it probably 

makes better sense that the institutions sort out how the error occurred than that the individual be given the burden of doing that. 

Once that is done, the fact that an error was made by the consumer is something that can be worked on back and forth between 

the institution and the consumer. There is some concern I have 

35 

heard expressed that there might be fraud here, the consumer 

makes an error deliberately and the institution is somehow on the 

hook for sorting through that error. Nothing in our rule prevents 

the institution from suing consumers who attempt to defraud them 

and to get relief. 

But look, these are more complicated issues, perhaps, in some 

ways, than can be discussed productively in 30- and 60-second 

bites. We would be happy to come and talk with your staff more 

about them. We are having the same kinds of discussions with 

some of the providers themselves and we are looking to see if there 

is any kind of clarification and guidance we can give around this 

to keep your— 

Mr. LUETKEMEYER. I see my time is up, but I think it is—it 

opens a huge liability situation for the providers of the service. And 

whenever you deem something an error, which is not anything that 

they have control over, I think we have a huge problem that needs 

to be at least looked at and worked with industry in some degree. 

Mr. CORDRAY. With respect, the notion that consumers who come 

in for a $400 transfer and then there is an error are going to sue 

you and find an attorney to bring a case based on that I think is 

vastly overstated, but we are worried—we do not want to foment 

litigation and we are having discussions to see what we can do to 

resolve and address some of these concerns, and we will continue 

to do that and we are happy to have them with you and your staff 

as we go. 

Mr. LUETKEMEYER. Thank you. 

Thank you, Mr. Chairman. 

Mr. NEUGEBAUER. I thank the gentleman. 

And now the gentleman from California, Mr. Sherman, is recognized for 5 minutes. 

Mr. SHERMAN. I thank the Chair. 

The Federal Government does an awful lot to try to support the 

home market, especially in these difficult economic times. We do so 

at considerable cost and considerable controversy. 

We have a home mortgage deduction and property tax deduction. 

We have taken over Fannie Mae and Freddie Mac. There is considerable controversy there, and some risk to the Federal Government. 

And now the Federal Reserve has its QE3 program, which is designed to support home prices and allow people who might otherwise not be able to buy a home to qualify for a home with a lower 

payment or lower interest rate. So everybody in the Federal Government is sacrificing their other goals in order to try to make sure 

that we can turn around the home prices and provide for homeownership. 

Your agency is now crafting rules defining Qualified Mortgages, 

which will govern how housing finance works in the future, and 

initial reports indicate that the rules you are considering are very 

conservative and could restrict the number of creditworthy borrowers that are able to obtain mortgage financing. 

How do you reconcile your agency taking an action which would 

depress home prices, reduce the number of people who could qualify for a loan and become homeowners while everybody else in the 

36 

Federal Government is paying the price, enduring the controversy, 

shouldering the cost to accomplish the exact opposite goal? 

Mr. CORDRAY. The short answer, sir, is that is not what we are 

doing. The— 

Mr. SHERMAN. That is a good answer. 

Mr. CORDRAY. —longer answer is that this is not a proposal—the 

only proposal publicly on the table is one that did not originate 

with us, it originated with the Fed and it is a difficult area and 

the proposal raised a number of questions that it did not yet seek 

to resolve but sought to get broad input and comment from people, 

which I think was sensible at that time. 

We have now received those comments. We have received further 

comments. We have received incessant comments on this because 

it is very important to people. 

And the question you raise is one that has been raised to us numerous times and I think it is fair to say we are getting the message that if we draw the QM circle too narrowly we could ourselves 

be responsible for causing further troubles in the mortgage market. 

We do not intend to do that. 

We recently reopened this proposal for more notice and comment 

because we got some new data that gives us a better handle on 

what is actually happening in the mortgage market in this period 

where it is, in this somewhat unnatural phase, and it is difficult 

to predict where it is going. 

I think that people will be satisfied in the end that we have 

taken account of that concern and we need to do so. Hearing you 

say it again today reminds me once again how important this is for 

people. 

Mr. SHERMAN. I thank you for your attention to that. 

One part of these rules goes back and forth between rebuttable 

presumption and safe harbor, and of course, the economy works 

best when the rules are clear and when the regulators are in touch 

with the markets enough to know when some new abuse occurs 

and then they can quickly change the rules. If you can’t draw clear 

rules, and you can’t modify those rules as necessary, then we are 

stuck with the litigation system. Vague rules and rules you can’t 

rely on, and then you have litigation liability and loss to consumers 

and the economy. 

Is your agency leaning toward the rebuttable presumption and do 

you think you can write a rule that provides a safe harbor so that 

businesses can be certain that if they comply, they will avoid the 

liability, and won’t need to pay for the liability insurance? 

Mr. CORDRAY. I found myself saying in my head, ‘‘Amen,’’ to your 

comments about this. As a former attorney general, now as the 

head of a Federal agency that has, among other responsibilities, 

law enforcement functions, gray areas of the law are not appreciated. They are difficult. They are difficult for people trying to 

comply. They are difficult for us. 

I think we understand here that if we write rules that are 

murky, that is going to essentially be an abdication of our responsibility because they will end up getting resolved in courts through 

litigation so it will take years and it will be very expensive, and 

the uncertainty will linger all during that process. So we underVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00040 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
37 

stand and I think we are making real efforts here to draw very 

bright lines about what qualifies you or doesn’t qualify you. 

The safe harbor versus rebuttable presumption comparison is a 

little bit of a mirage because even the safe harbor isn’t safe. You 

can always be sued for whether you meet the criteria or not to get 

into the safe harbor, so there was a bit of a marketing concept 

there. 

But I think the more important point is, are we drawing bright 

lines that will discourage and minimize the prospect of litigation. 

That— 

Mr. SHERMAN. Let me just tell you that all the sea captains I 

have talked to really want a safe harbor. 

Mr. CORDRAY. Yes. Look, if somebody said to me, safe harbor or 

anything else, I would go for a safe harbor. But I don’t think the 

safe harbor is truly safe and I think that oversimplifies the issue. 

The issue here is minimizing litigation cost and the risk of it which 

would lead people out of this market. We are definitely going to try 

to do that. 

Mr. SHERMAN. Thank you. I yield back. 

Mr. SCHWEIKERT [presiding]. And the groaning wasn’t at the 

joke. Yes, it actually was at the joke. 

Mr. Grimm? 

Mr. GRIMM. Thank you. 

Let me just pick up from there. And I very much appreciate your 

time today, Mr. Cordray. One of the frustrations I think some of 

the Members are having is that we hear there are 27 oversight 

meetings. It is great to have that much oversight, but a lot of the 

questions just don’t get answered. We are talking about the questions and talking about everything but the answers. 

I was told—and please correct the record if I am wrong—that you 

yourself had mentioned that the CFPB would absolutely not be 

adopting a safe harbor for QM. Is that accurate? 

Mr. CORDRAY. First of all, that rule is pending and not finalized, 

so— 

Mr. GRIMM. Hold on, sir. That is my point, though. It is a yesor-no question. Did you or did you not say that the CFPB would 

absolutely not be adopting safe harbor? Yes or no? 

Mr. CORDRAY. So it is a little like bringing a Justice to the Supreme Court in here last spring and saying, ‘‘Are you or are you 

not going to find the Affordable Health Care Act unconstitutional?’’ 

It is in process. It is not yet resolved. So for me to tell you what 

we are going to do or not— 

Mr. GRIMM. Sir, that is actually not true. I asked if you said that. 

My question was, did you say that in the past? That is something 

that happened or didn’t happen. See how simple that question is? 

It is yes or no. It is not what is it going to do in the future; it is 

did you say that in the past or not? 

Mr. CORDRAY. Okay. I have not taken a position because the Bureau has not taken a position on that. 

Mr. GRIMM. Thank you. 

Mr. CORDRAY. What I have said is I have discussed the issue in 

ways as I just discussed it with Congressman Sherman, which is 

explaining that some of the difference between safe harbor and rebuttable presumption is, in my view, quite overstated, and that we 

38 

are going to try to minimize litigation risk and draw bright and 

clear lines. That is what we are going to try to do, but we have 

not done it yet, so for me to tell you what we are going to do when 

it is not finalized would be, as I understand it, improper. 

Mr. GRIMM. Okay. And that is why when there is a lot of talk 

about the lack of oversight and the uncertainty out there, there 

have been 27 meetings, yes, but all of them ended with, ‘‘We are 

working on it; we will let you know when we are done.’’ 

Mr. CORDRAY. Sometimes, that is the accurate answer. 

Mr. GRIMM. And that is extremely frustrating. 

Mr. CORDRAY. Sometimes, that is the accurate answer. If we are 

working on it and it is not yet done, I could give you an answer, 

but it would not be accurate. That is the answer sometimes. Where 

I can answer the questions more definitively, I certainly try to do 

so. 

Mr. GRIMM. In your opinion, do you think that litigation risk associated with ability to repay standards will be—would be increased? If the CFPB goes that way, do you think that would increase litigation risk? 

Mr. CORDRAY. Goes which way? 

Mr. GRIMM. With an ability to repay standard as opposed to a 

safe harbor. 

Mr. CORDRAY. The rule is an ability to repay rule. The proposal 

that the Fed put out posits a choice between a so-called safe harbor 

and a so-called rebuttable presumption. 

Mr. GRIMM. I am sorry, rebuttable presumption. 

Mr. CORDRAY. I think that a rule that creates uncertainty and 

murky criteria will foster litigation and that would, in fact, restrict 

access to credit. I would agree with that, yes. 

Mr. GRIMM. Okay. 

Today, do you think there are a substantial number of borrowers 

who are qualifying for mortgage credit who should not be getting 

loans? 

Mr. CORDRAY. Today? 

Mr. GRIMM. Today. 

Mr. CORDRAY. I don’t think so. I think in 2005, 2006, and 2007, 

there were a lot of mortgages made for people who honestly should 

never have qualified—they didn’t check their income; they falsified 

income. There are legions of stories around this. 

But today, it is much more constrained—because we had a financial crunch. We had a credit freeze. We have had a fall and a deep 

recession. Right now, credit is tight, and it is because of what happened to the economy in 2007 and 2008. 

Mr. GRIMM. So let me ask, alternatively, do you think that there 

are qualified borrowers who are not receiving credit under today’s 

underwriting standards? 

Mr. CORDRAY. My sense is that there are in—the weasel word in 

that question is ‘‘qualified,’’ but my sense is that credit is very 

tight, yes. Maybe too tight. 

Mr. GRIMM. I will end with this: How do you anticipate whichever way the CFPB goes with the Qualified Mortgage rule, do you 

think it will expand or contract that availability? 

Mr. CORDRAY. I think we are trying to write a rule that confers 

the protections that are intended under the ability to repay proviVerDate Nov 24 2008 18:42 Apr 19, 2013 Jkt 076129 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 K:\DOCS\76129.TXT TERRI
39 

sions and we are trying not to have the unfortunate side effect of 

drying up credit in the mortgage market. This is not an easy issue. 

It is a hard issue and it is hard to gauge the future of the mortgage 

market right now. 

We ask everybody who comes in to meet with us, what is the future? What is going on? What kind of financing is coming back into 

this market? Nobody has very clear answers. 

But we are going to try to avoid doing that ourselves. And by the 

way, let me say that if we write a rule and then we find that it 

has unduly restricted access to credit, we will go back and look at 

redoing it, although again, regulatory uncertainty is what people 

are complaining about now. We will have these rules in place by 

January. Then things will be certain. We will remove that cloud. 

People then may complain about, now it is certain but I don’t like 

it. That is what we are trying to listen to them on now so that we 

can do our best to take account of their concerns. 

Mr. GRIMM. Thank you. 

My time has expired. 

Mr. SCHWEIKERT. Thank you, Mr. Grimm. 

Mrs. Maloney had a question to a point you made. 

Mrs. MALONEY. Mr. Grimm and I are from the same State and 

City and we are experiencing the same situation even though the 

economy is improving in New York and in the country overall. 

Credit is incredibly tight. Even if you have an A-plus, A-plus-plusplus rating for your finances, you can’t get a loan. Why is that and 

what do we need to do about it? 

Is it the backload in Fannie and Freddie? Some of the big banks 

say that they are pushing back properties—if they find anything 

wrong, Fannie and Freddie push it back on the bank’s books and 

they take a huge loss on it, and they feel they are getting so much 

of this that they can’t put any other capital out. That is one explanation I have gotten. 

But we have now had 30 months of job growth and financial indicators going up in many places— 

Mr. HUIZENGA. Mr. Chairman, point of order. I am curious. We 

are all in line for questions and I am just curious where this time 

is coming from. 

Mr. SCHWEIKERT. Sorry. This was supposed to be just a quick reference question. 

Mrs. MALONEY. Okay. Why do you think that credit is so tight? 

Mr. CORDRAY. I think there are a lot of reasons. I think people 

are digging into this and trying to analyze and understand it. 

The most obvious reason is because we went through a credit 

crunch and a credit freeze and a financial crisis and a recession. 

That hurt a lot of institutions and therefore it is taking time for 

them to be able to lend more aggressively. There are a lot of problems that occurred in the financial crisis, including put-backs of 

mortgages that were poorly drawn up to begin with, so that has 

created risk and concern for people active in this market. 

There are any number of different explanations, many of which 

have some validity. I don’t know how to quite rate the importance 

of them vis-a-vis one or the other. 

Mr. SCHWEIKERT. Okay. And forgive me, because it was meant 

to be just a question off of a point of personal privilege. 

40 

Mr. Green? 

Mr. GREEN. Mr. Chairman, I am amenable to yielding to the 

gentlelady such time as she may consume. 

Mrs. MALONEY. Thank you. Thank you, Mr. Green. 

I would just like to say that I think this credit crunch is really 

the biggest problem that we have in having a robust recovery. And 

I just would appreciate your getting back to us as soon as you can 

with what you think we could do to try to address that. 

One of the reasons housing is not beginning to move forward is 

people literally can’t get mortgages. They can’t. They come to my 

office and they are making $400,000 a year, they have an A-plus 

credit rating, but they can’t get a mortgage anywhere. There is 

something wrong with a system like that. 

I yield back to Mr. Green and I just wanted to jump in on it because I think it is one of the biggest problems we have. We have 

the head of the CFPB. I would like to pick his brain and see how 

he sees it, and I think that is something that all of us are concerned about and I am sure all of my colleagues are hearing it from 

their constituents. 

I yield back to Mr. Green. And thank you so much, and congratulations on your important bill that passed the Floor last night. 

Mr. GREEN. Thank you, Mrs Maloney. 

And I thank the Chair for this opportunity. 

Mr. Cordray, thank you very much for appearing today and for 

your many, many other appearances. I am sure you have lost track 

of the actual number— 

Mr. CORDRAY. I enjoy coming here. 

Mr. GREEN. —but we do see you quite regularly and we appreciate your testimony. 

I would like to visit with you for just a moment on the ‘‘Know 

Before You Owe’’ program, but from a different perspective. I would 

like to talk for just a moment about the notion that we are polyglot—a good many persons in our society are bilingual and speak 

multiple languages. In my district, we have the ballot printed in 

four languages: English; Spanish; Vietnamese; and Chinese. 

How does this tie into ‘‘Know Before You Owe?’’ In this sense: We 

are talking about understanding and making sure that people understand the documents that they negotiate. If we are doing this— 

and I know that you are making a concerted effort to get the job 

done—to what extent are we translating documents and providing 

documents in other languages such that other persons can know 

before they owe by virtue of reading a language that they understand? That is the first question, and then I will have a quick follow up, if you can answer that one rather briefly. 

Mr. CORDRAY. Okay, sure. The issue of accessing consumers in 

other languages is one where I am not satisfied with our progress 

yet to date. We need to do more and we will. 

Our complaint call line is accessible to people in well over 100 

languages, so we are good on that front. In terms of our Web site, 

we don’t have enough translation there yet, in my view, but we are 

working on it. 

In terms of how we write rules and do things like ‘‘Know Before 

You Owe’’ and testing and the like, that is something that we are 

taking into account. In the remittance rule that we finalized there 

41 

is a requirement in the rule that if you advertise to offer money 

transfers and you advertise in a foreign language, so therefore you 

are trying to get customers by using that language, the disclosures 

need to be provided in that language. It wouldn’t be fair to people 

to bring them in speaking Spanish to them and then give them disclosures in English that you are not sure they can understand. 

And there will be other rules as we go where this will be a legitimate concern—always will be a legitimate concern and we will 

work with that. 

Mr. GREEN. I thank the Chair. 

I just want to comment on that last statement, if I may, quickly. 

That is an important aspect of this inquiry because we do have persons who will bring—attract business in a certain language, but 

when they do business, they do it in a different language, meaning 

English when they do the business but when they are attracting 

the business they may use Spanish or some other language on various radio stations. So I appreciate your looking into it. 

Thank you. 

Mr. SCHWEIKERT. Thank you, Mr. Green. 

Mr. Huizenga? 

Mr. HUIZENGA. Thank you, Mr. Chairman. I appreciate that. 

And I agree with my colleague from New York about the credit 

issue. I will make a note, though, it is not an interest rate problem 

as to why people are not able to get loans right now, and as we 

are having this discussion about Quantitative Easing 3 happening 

I think that is important. 

I, too, am glad you are here, but I am concerned about the real 

lack of oversight, which means, in my mind, budget direction from 

this body. We can ask whatever questions we want, but precious 

little can actually be done unless we have that actual, direct budget 

direction or input. And my definition, which I think is the constitutional definition as well, that is what real true oversight is. 

And I know, Mr. Cordray, you are in a particularly tough spot 

to a degree and you have said a number of times—I have lost count 

of how many ‘‘Congress has directed’’ or ‘‘this bill has said,’’ and all 

those other things. Not all of us were here when that was passed. 

I am living with the echo effects as one of those freshmen, 12 on 

this side of the aisle, and I believe there are one or two over on 

the other side of the aisle. 

So I want to not talk or dwell about, necessarily, the specifics 

about your rule, but I want to know this: Why do you believe that 

so many entities that will be falling under the purview of the 

CFPB are nervous or, frankly, even afraid about what your agency 

and its rules are going to do to them? 

Mr. CORDRAY. Thank you, Congressman. I think that the reason 

that is so, as I understand—I have asked this question because I 

want to understand it because if we can alleviate some of that anxiety and concern we want to do so. 

A lot of it I think clearly stems from the fact that we are just 

new. People haven’t dealt with us before. They aren’t sure what to 

make of us; they are not sure what we are going to do. 

Obviously as a new agency, it takes some time to figure out what 

we are going to do, what our priorities are, how we are going to 

approach things. And we are trying to think that through carefully. 

42 

It gets easier for us to sort of signal what we intend to do as we 

go, and as we do our work people begin to see how we do our work. 

But— 

Mr. HUIZENGA. Could it be— 

Mr. CORDRAY. —at the outset, they don’t know what to expect, 

and I am sure that is the anxiety. 

Mr. HUIZENGA. I think that is part of it, but could you—could it 

be also because that they believe what is being imposed or discussed about, it certainly is not efficient or workable in their opinions? 

Mr. CORDRAY. Certainly. That could be the case. And I am sure 

in some instances that is part of the reaction. 

Mr. HUIZENGA. Do you believe that the big banks that you are 

dealing with now are acting in good faith? 

Mr. CORDRAY. I actually have found over the years that most citizens, most businessmen in particular, want to follow the law, they 

want to get it right. They are sometimes unsure what the right answer is. They would like to have clarity and guidance. 

However, there are some who are interested in taking advantage 

of every gray area they can. When I was Ohio Attorney General, 

I had to enforce the law against a number of those people— 

fraudsters and scammers. 

But in the banking industry, and I would say my guess is, as in 

the legal profession that I am more familiar with historically, people will tend to follow the rules if the rules are made clear to them. 

Mr. HUIZENGA. How about credit unions or community banks. 

You believe they are acting in good faith? 

Mr. CORDRAY. Community banks and credit unions, I have 

worked with them for years now, going back to my time in State 

and local government in Ohio. They have a sound business model. 

They are under a lot of economic challenges because of the changing nature of the marketplace. This has been true for 30 years with 

consolidations going on for a lot of reasons. 

Mr. HUIZENGA. But do you have confidence that they are actually 

doing that? Or insurance companies? Or financial advisors that you 

are dealing with? 

Mr. CORDRAY. My view is that the vast majority of people do deal 

in good faith. They sometimes can get into trouble for a variety of 

reasons but the ones who get into trouble typically are the ones 

who are looking for trouble or not caring about the consequences 

because they downplay the notion they will get caught and the law 

will be enforced against them. 

Mr. HUIZENGA. But do you believe it takes a massive government 

agency like this one to guarantee that somehow? 

Mr. CORDRAY. I don’t think that is our role. Our role is to focus 

on consumer protection and make sure that there are clear rules 

of the road to address some of the obvious problems that we saw, 

particularly in the mortgage market and other places in the run up 

to the financial crisis. 

Mr. HUIZENGA. But you don’t believe that market forces can dictate that; it has to be an agency like yours coming in and doing 

that? If these people are acting in good faith—and you believe that 

they are acting in good faith, which I seem to have heard that is 

what you have said from financial advisors, community bankers, 

43 

credit unions, insurance agents, all the way up to big banks—why 

do we need to be going through some of these things and why do 

we need to be causing that same anxiety? 

Mr. CORDRAY. I would say two things. First of all, we just saw 

how well that worked. In 2007, 2008, the economy of the United 

States melted down dramatically. Trillions of dollars in household 

wealth were lost because the markets didn’t work properly. So— 

Mr. HUIZENGA. So you don’t believe that is the answer. 

Mr. CORDRAY. Second, I served as Ohio Attorney General. Why 

do we need an attorney general? I had 1,500 people in my office. 

Because somebody has to enforce the law and— 

Mr. HUIZENGA. Trust me, I am a Calvinist. Man is depraved, sinful, fallen, and evil by its nature. But— 

Mr. CORDRAY. So we have— 

Mr. HUIZENGA. And, Mr. Chairman, I would respectfully ask— 

the other side had 5 additional minutes, and so I would like to kind 

of follow through on this. 

But, I understand that it is not the nature of an agency to leave 

things alone, whether they are good or whether they are bad, 

frankly. That is part of my concern and I think that is the anxiety 

that as I talk to those people who are involved in this that is the 

anxiety that is being created, because they feel like—whether they 

are acting in good faith or not, they feel like there is an anvil hanging over their head and that there is one person who decides 

whether that anvil falls on their head or not. 

And, I just reject the notion, I guess, that this is the only way 

to deal with these problems is to have this massive agency. 

So with that, Mr. Chairman, I appreciate your indulgence and I 

yield back. 

Mr. SCHWEIKERT. Thank you. Though, when you were explaining 

you are a Calvinist, I hope you weren’t pointing at me. 

Mr. Carney? 

Mr. CARNEY. Thank you, Mr. Chairman, finally. 

Mr. Cordray, it is good to see you again. When you get to me, 

you know it is almost over. 

You say in your opening statement that your push for accountability extends beyond mortgage servicing. We are holding both 

banks and nonbanks accountable for the following; law—and you 

add at the end of that paragraph, so far we have added credit reporting companies to this group. 

We had a hearing last week on credit bureaus, and in particular, 

two pieces of legislation. I don’t know if you are aware of those or 

not. Fact, one would address medical bills and the other was to add 

utility payments to the consideration of credit scores. 

The medical bills, tell me, what are you doing, if anything, this— 

the credit bureau question first, and then I want to ask specifically 

about these two bills on medical bills in particular. 

Mr. CORDRAY. Okay. So on the credit bureau in general, what we 

are doing with credit reporting companies? 

Mr. CARNEY. Yes. 

Mr. CORDRAY. Is that the question? Okay. 

Mr. CARNEY. I assume you are referring to consumer credit bureaus. 

44 

Mr. CORDRAY. We are. Transunion, Experian, Equifax, and then 

a number of others that are more specialty providers. 

First of all, we are very appreciative that Congress is taking an 

interest in this area. It is an issue that affects Americans dramatically and across-the-board; most of them are unaware of it because 

it isn’t something where they sign up for anything, it is that credit 

files are being kept on them, information is in those files, and that 

information often is used to dictate whether they can get a loan— 

Mr. CARNEY. And that information is often incorrect, and what 

we learned in the hearing last week that one-in-three of the information, the debts sent to collectors for medical debts is just wrong. 

And is there anything that you can do to address that question? 

Are you aware of the bill that is before this committee and this— 

Mr. CORDRAY. Yes. There is a lot that we are going to be able 

to do to address that question. First of all, we will now have the 

authority to examine these institutions, which means send in 

teams who are used to examining financial companies and understanding exactly how they operate. We will get a real— 

Mr. CARNEY. To the credit bureaus themselves? 

Mr. CORDRAY. Yes. We will get a real, neutral view of what the 

error rate is and what is being done about those errors. There have 

been wildly different estimates, and we will be able to really get 

a picture of what is actually going on, and what the problems are, 

and what may need to be done to clean those up. So— 

Mr. CARNEY. The medical bills in particular are a problem because of—I don’t know if you know much about the medical billing 

system, but it is incomprehensible. I will just speak from my own 

personal experience, to figure out what gets credit, how much you 

are due, or whatever, and it is not necessarily whether you get sick 

or have one of these occurrences. It could happen to any of us. And 

it is not so much a function of—it is really a function of your insurance coverage, your employment status, and all of that than it is 

a function of your ability to pay, and then to have a credit bureau 

using inaccurate information to affect your credit rating, it is just, 

I think, completely unacceptable. It is an area, I think, that you 

ought to really look hard at. We have this piece of legislation. 

Mr. CORDRAY. Fair enough. And a lot of those medical debts are 

small amounts and yet they can have a huge impact on your credit 

score or block bigger transactions like mortgages. It is an issue. We 

are interested in what you are going to be finding as you are looking at it. We are also looking at it closely and we are looking to 

take action as needed. 

Mr. CARNEY. Yes. I think the error rate problem is the biggest 

problem there because you are getting bad information into a system that has a dramatic impact on a person’s ability to get credit. 

Tell me briefly—you and I have had this conversation before 

about nonbank lending, payday lending, that kind of stuff. You 

have mentioned it briefly in your remarks. Are you moving the ball 

at all on that question, particularly the payday lending and the— 

Mr. CORDRAY. Yes. 

Mr. CARNEY. It is a tough issue, too, in terms of people who don’t 

have access to the banking system who are using these services. I 

know you have testified before you have learned that in your hearing that you had in Alabama. 

45 

Mr. CORDRAY. Yes. We had our first, under my direction, field 

hearing on this issue. We put out a request for information to gather broad input on the problem. We now have begun actual examinations of payday lenders, and similarly, of the similar products at 

times offered by banks, so we are getting a much deeper understanding of this and we will consider what steps need to be taken. 

We do not have—and I want to emphasize this—under our statutory authority the ability to impose an interest rate cap, which has 

been the approach taken at the State level at times to address this 

issue by raising or lowering it, but— 

Mr. CARNEY. Is it within your purview or your expectation that 

you will be doing some kind of report on what you find? That would 

be helpful to us, as legislators, and maybe even to State legislators, 

as well. 

Mr. CORDRAY. We haven’t determined that. We might be proceeding in any number of ways. As I said, we are already engaged 

in supervision of the payday lending industry. We, of course, have 

the enforcement authority. We have rule-writing authority. If we— 

Mr. CARNEY. I see my time has expired. I want to thank you 

again for coming today. You have been here many times, and I 

thank you for your good work. 

Mr. CORDRAY. I appreciate it. Thank you. 

Mr. SCHWEIKERT. Thank you, Mr. Carney. 

Mr. Stivers? 

Mr. STIVERS. Thanks, Mr. Chairman. 

I would like to welcome Director Cordray to the committee. He 

is one of my constituents. I have known him a long time. 

I appreciate your commitment to consumer protection and I 

thank you for what you are trying to do at the Consumer Financial 

Protection Bureau. 

I do have a few questions about the structure and budget of the 

committee, and then some issue questions if we could. The first is 

regarding the structure of the CFPB. I am personally bothered that 

there is no reference in the creation of the CFPB about safety and 

soundness of the financial institutions, because if your only charge 

is to protect consumers but you have no responsibility to the safety 

and soundness of the institutions, the easy thing to do is make people give products away at a loss. And that hurts the safety and 

soundness of our financial system. 

And I guess I am just curious what your thoughts are, briefly, 

on that issue, and if you have had a chance to reconcile that. 

Mr. CORDRAY. It is a new approach to have an agency that focuses specifically on consumer protection and decouple that from 

the chartering and safety and soundness. I would say this—we do 

not have authority to make companies offer products at a loss. If 

they are going to be losing money on products they will stop offering them and we have no authority to require them to do that. 

But second, the notion that we would pay no attention to safety 

and soundness or not cooperate closely with our fellow regulators 

who do have that concern would be quite misguided, because if institutions are not going to be safe and sound, they are not going 

to be good for consumers, and then we have a much bigger problem 

on our hands. 

46 

Mr. STIVERS. And I believe you would do that. I guess my question is, do you believe we need to make it clear in the law that the 

CFPB should look at safety and soundness as one piece of the 

things you look at? 

Mr. CORDRAY. At this point I would say, I think the law does 

that implicitly by making our regulations subject to being overruled 

by the Financial Stability Oversight Council, which includes the 

safety and soundless regulators. 

Mr. STIVERS. With only a supermajority vote, though, not a simple majority. It takes either two-thirds or three-quarters; I can’t remember the exact number for there to be a supermajority. 

Mr. CORDRAY. That is right. Look, if it weren’t a close call, I have 

no doubt that that could be the outcome. 

I don’t think there is a change in law needed. Of course, that is 

for Congress to determine. I think that if we show that we are not 

willing to cooperate with the other regulators and to work closely 

with them then maybe that should be reconsidered down the road. 

That is not the case now. We have— 

Mr. STIVERS. And I don’t have a concern with you at the helm, 

but the other concern I have about the agency is you are also one 

of the few agencies in Washington that does financial regulation 

that is not a board: the SEC is a board; the Federal Reserve is a 

board; the CFTC is a board; and the Federal Deposit Insurance 

Corporation is a board. You are one person and you run the agency 

the way you see fit, and I have total confidence in you knowing 

you, but who knows who will be in charge after you? That is why 

I think it is really important to look at the agency, so I appreciate 

that. 

The other quick question I have on structure is about your budget, and your budget comes—you could have up to 12 percent of the 

Federal Reserve’s budget, up to $598 million without an additional 

request, and an extra $200 million, the way I understand it, as a 

discretionary increase from Congress. I think you requested $440- 

some million for this year, in round numbers. I looked at your 

numbers earlier— 

Mr. CORDRAY. That is the estimate. We are going through the 

budget now, actually. We will have new numbers— 

Mr. STIVERS. I guess my question is, do you believe the CFPB 

should have less accountability than the FBI and the military, 

whose budgets are appropriated? 

Mr. CORDRAY. My understanding, and again, I wasn’t here when 

the Dodd-Frank Act was enacted, was that it was determined that 

we should have the same accountability as the other banking agencies and we should operate pretty much on equivalent terms with 

them. That is true of the manner in which we are funded and it 

is true to some extent of the structure. The OCC has a single 

Comptroller; the FHFA used to be appropriated and now is not and 

has an individual at its head. 

So I think it makes sense for us to be on a par with the other 

banking agencies since they are the peers that we need to work 

closely with in our work. That would be my sense of it. Of course, 

that is a policy choice for— 

Mr. STIVERS. And that is a choice we have to make, and I have 

some concerns there. 

47 

I do quickly want to talk, as I know Blaine Luetkemeyer did, 

about remittances. As you know, we have a big Somali community 

in Columbus, Ohio, second biggest to Minneapolis, and these remittances are truly lifelines for those folks and other folks who are immigrants and trying to help family back home. And I am curious, 

when I read your rules and I read the comments from those around 

it, it sounds like the closed networks like Western Union and 

MoneyGram will be able to comply with your February deadline 

but a lot of the wire services and ACH transfers might have real 

trouble with that. 

Have you been told that, and does that give you cause for concern? Because what it tells me is there is going to be less competition, more expensive cost to these remittances, and less access. So 

is this something you are aware of and are you willing to do something to give folks time to make sure that they can comply with 

your regulations? 

Mr. CORDRAY. We are aware of it. I was actually on the phone 

with the clearing house just the other day and we have offered to 

make ourselves available to try to work through the issues that 

they may be finding. This has been long telegraphed. The law was 

passed more than 2 years ago, and we allowed a 12-month implementation period on this, but it is a concern. 

I also think this is an area—and you can appreciate this; you 

have a background in the financial services industry yourself— 

where the technology and innovation are changing very fast: 

PayPal is now in this space; prepaid cards are now being used at 

times to send money overseas; phone transfers may now be starting 

to increase. So we don’t have a good sense of how this marketplace 

is changing. 

At the same time, I have no desire to have our rule or the law 

drive out depository institutions from this space, and they are 

treated a little more generously under the law. They can make reasonable estimates of exchange rates and fees in a lot of instances. 

But we are going to try to work through the other issues with 

them. 

Mr. STIVERS. I appreciate that. 

Can I ask one last follow up? I know you are—I appreciate your 

indulgence and—by the time when you get to me—Mr. Carney said 

when you get to him, you are almost done, but when you get to me, 

you really are done. Lunch is almost over by the time I get to ask 

questions, so—one other question I have is, when financial institutions deal with many regulators, especially the FDIC and the 

Comptroller, they get some confidentiality—they have privilege on 

the information that they provide but they do not receive that same 

benefit to the information they provide to the CFPB. Would you be 

amenable to Congress amending the Federal Deposit Insurance Act 

to add the Bureau as an agency for which privilege is preserved? 

Mr. CORDRAY. We are. We have really done our best to try to address this issue. We think the law is already clear. We issued a 

bulletin to that effect, and when it wasn’t clear that was satisfactory to the banking institutions raising the concern, we went 

through the rulemaking process to adopt a rule which has the force 

of law and would deserve deference from the courts. 

48 

We have also said there is legislation pending that we are supportive of making that even clearer than maybe people think it is 

now, and we think it is. So that is our position. 

Mr. STIVERS. Great. 

Can I do one more or do you need me to— 

Mr. SCHWEIKERT. Is it a really good one? 

Mr. STIVERS. I don’t know. You can tell me that later. 

Mr. SCHWEIKERT. All right. Go ahead. 

Mr. STIVERS. Thank you, Mr. Chairman. I appreciate again your 

indulgence. 

I also wanted to ask you quickly about the ability to repay and 

the Qualified Mortgage. I understand that you have worked on 

your rulemaking and your rulemaking on mortgage underwriting, 

ability to pay, and Qualified Mortgage requirements, and high-cost 

loan requirements. 

While larger lenders can really absorb some of these regulatory 

changes, it does affect some of the smaller institutions like community banks. I have a lot of community banks in my district and I 

am curious if you have sort of a game plan about how you will deal 

with these regulatory changes and make them manageable for 

small institutions like community banks, because they serve a lot 

of customers especially in the rural parts of my district in Union 

and Madison Counties and in a lot of the southern Ohio counties 

that I am familiar with as well? 

Mr. CORDRAY. So what do you think, Mr. Chairman? Is it a really 

good one? Should I answer it? 

[laughter]. 

Mr. SCHWEIKERT. If the answer is really short, it is a great one. 

Mr. CORDRAY. All right. 

We are mindful of that, Congressman, and one of the things we 

have begun to realize that we will need to put out when all these 

mortgage rules are finalized is what I am calling a slim mortgage 

booklet that will boil down the changes in the rules in plain 

English so that it can be followed—something like the guide we are 

doing on remittance rules for smaller providers. I think that is important for us to do. It is important for us to make it easy for people to understand what is going to be required of them and we will 

work to do that. 

There will also be an implementation period on those rules to 

give us a chance to work some of this through with people. So we 

will be happy to hear more from you as we go on about how we 

are doing. 

Mr. STIVERS. I appreciate your time. 

And I appreciate the Chair and the acting ranking member’s indulgence. 

Mrs. MALONEY. They were good questions. 

Mr. STIVERS. You think that one did okay? 

Mr. SCHWEIKERT. Yes. We agree that you were worth the extra 

time, Mr. Stivers. 

Mr. Cordray, this is the moment when you know you are near 

the end. Can I throw just a couple of questions at you? 

Mr. CORDRAY. Yes, sir. 

Mr. SCHWEIKERT. One of my great concerns is the differences different States operate under. I come from a deed of trust State. The 

49 

Member next to me comes from a mortgage State and uses a judicial foreclosure system. 

In the rule-writing, the one-size-fits-all is sort of the colloquialism, but I actually have a great concern. As you do that are 

you finding mechanics looking at those differences in different 

State laws? I come from a 91-day State foreclosure system. Where 

I come from, there are no lawyers at the closing, because many, 

many years ago, back in I think the 1950s they did a constitutional 

amendment in Arizona to try to do the things to make buying a 

piece of property as inexpensive at the closing mechanics as possible. 

Mr. CORDRAY. Yes. 

Mr. SCHWEIKERT. And so my great fear is any rules that come 

from the Federal Government that change a first-time homebuyer’s 

cost of doing that transaction. 

Mr. CORDRAY. It is a great question. My background again is in 

State government, and as a State attorney general I am very mindful and sensitive to differences in State law, which usually reflect 

different circumstances. Obviously, things are very different in Arizona than they would be in New York, and particularly the New 

York City area. 

So for the most part, our approach is we are going to be leery 

about preempting State law. Most of what we do will ride on top 

of State law and coexist with State law, and that actually was most 

of the premise of the Dodd-Frank Act, as I understand it. I was Attorney General at the time, and we were very concerned about 

those issues. 

It is the nature of things that we are going to be adopting rules 

that apply throughout the country so the difficulty of how that fits 

with local conditions is something that we are going to try to understand through the notice and comment process and hearing 

from people— 

Mr. SCHWEIKERT. And you have a number of those you have to 

deal with, both the types of instruments we use—deed of trust, 

mortgage state—the different closing procedures we use— 

Mr. CORDRAY. Yes. 

Mr. SCHWEIKERT. —the reporting, the regulations of, even down 

to the way title insurance is issued. You do have some dramatic regional differences. 

Mr. CORDRAY. Yes. That is right. And we have an Office of Intergovernmental Affairs that is going to help us try to be sensitive to 

those things. Of course, people can comment in on our rules as we 

go and we will take account of those things. 

If we are getting this balance wrong somehow, and unduly crimp 

State law and State processes people, I hope, will bring that to our 

attention and we can rethink it. But we are trying to be mindful 

of that. 

Mr. SCHWEIKERT. One scenario example: Let’s say Mrs. Maloney 

lived in Arizona and had a handful of properties that she owned 

that she wanted to sell, and she chose to carry the loans on them. 

So she was going to act as the bank on it—not a purchase money 

mortgage, but do the carry-back. And she does half a dozen of these 

in 1 year. Do you think that is someone who is going to fall into 

your purview? 

50 

Mr. CORDRAY. No. I am not entirely clear on whether we have 

anything to do with that sort of person-to-person lending for business or investing purposes. I don’t think that necessarily falls 

under the broader provision in consumer financial products and 

services but I would have to go back and look at that. I would certainly say, it wouldn’t be any kind of priority for us as we are trying to allocate limited agency resources. The things that are broader patterns and of potential consumer harm are obviously the kinds 

of things we should prioritize but I would have to go back and look 

at that— 

Mr. SCHWEIKERT. If you could and could let me know, because I 

have seen in Arizona where certain subdivisions have been subdivided where the old farmer or rancher who owned the land dices 

it up and sells it and carries back the loans for 10 years, those 

sorts of things. Would they start to be pulled into another regulatory scheme? 

One last thing I would like to go over with you: In a previous 

life I was the treasurer of Maricopa County. We spent—actually, 

one of our side projects was trying to reach out to we will say the 

‘‘unbankable’’ population—the population who would show up at 

our countertop twice a year with bundles of cash to pay their property tax—and try to find ways to get them so they could pay 

through ACH or pay—they had a checking account. 

And I do have this great fear, as we reach out to try to protect 

everyone, do we end up changing the cost structure that more of 

our population gets moved into the unbankable population because 

they are not going to fit in the box. And just, in many ways this 

be more of a statement, but I hope you are at least keeping that 

in mind of these—I don’t want to call them more marginal populations, but with their—they often don’t have a relationship with 

banking financial institutions, either through distrust or some 

other reasons—being very careful that we don’t build additional 

barriers for them to come join us. 

Mr. CORDRAY. I would say that, kind of ironically, you and I may 

be the only two people in this room who can speak the same language of having served as county treasurers. I used to be responsible for collecting the real estate taxes, current and delinquent— 

Mr. SCHWEIKERT. Did you have the same experience? 

Mr. CORDRAY. I had a lot of the same experiences. It was good 

for me. 

But what I would say is, we are very concerned about the 

unbanked and the underbanked, and I would say the underbanked 

in particular. I was at the FDIC; Chairman Gruenberg invited me 

over as they unveiled their latest report—they are doing now a 2- 

year study every other year with the Census Bureau on the 

unbanked, the underbanked, trying to understand that population, 

document how much and who that is. 

And the underbanked, in particular, are very interesting. They 

have a bank account. They are not unbanked. But they use a lot 

of alternative financial products and services. For whatever reasons, the banking system isn’t really meeting their needs the way 

it maybe meets a lot of people’s needs. We need to understand that 

better. 

51 

Mr. SCHWEIKERT. And we have—we did some studying in our 

Maricopa County Treasurer’s Office and we found it was more complicated. We had some folks who had the income, they had the resources; they came from either an ethnic background where they 

just didn’t trust institutions— 

Mr. CORDRAY. Yes. 

Mr. SCHWEIKERT. —and the fact of the matter is they should 

have every right to not trust institutions and have another alternative channel if that is their particular background. So this is sort 

of a tricky line— 

Mr. CORDRAY. It is. 

Mr. SCHWEIKERT. —because my fear is as we raise the cost structure so institutions end up having to limit sort of certain services, 

we start to drop parts of the population that is underbanked. 

Mr. CORDRAY. Yes. It is a tricky line. And actually, one of the 

things that we will now do, which has not been true before of the 

banking agencies is, we have the ability to protect consumers even 

if they are getting their services from nonbank firms, so whether 

it is a payday lender, a check-casher, whoever it may be. We are 

going to try to be thoughtful about how we use that authority, but 

we care deeply about these people and just because they are not 

in the banking system, or they choose not to be, or maybe they are 

out of it because of prior problems with the banking system, we 

care very much about how they are getting their ways and means 

of their lives managed and thinking about whether they are getting 

the same kind of protections they should be entitled to. And it is 

an interesting and difficult but very important set of problems. 

Mr. SCHWEIKERT. Director, it is one of those things my office has 

an interest in— 

Mr. CORDRAY. Okay. 

Mr. SCHWEIKERT. —so as you head there, on occasion think of us 

and send us things. 

And I think that is the end of this hearing. 

Mrs. MALONEY. I would just like to add— 

Mr. SCHWEIKERT. Mrs. Maloney? 

Mrs. MALONEY. —my appreciation. You have been incredibly generous with your time today, Director Cordray, and I am so proud 

of you and the work that your Bureau is doing. I think you are 

doing a sensational job. 

But I also have a goal, and that is the Federal Reserve interpretation of the ability to pay standard, so I am looking forward to 

that report sooner rather than later. Let’s get something done. 

Mr. CORDRAY. I hear you loud and clear. 

Mrs. MALONEY. It was certainly not the intent of the legislation, 

and I want to show the world that you can solve this problem. 

So anyway, thank you for all the problems you have solved and 

that you are working on to solve to help consumers. 

Thank you. I yield back. 

Mr. SCHWEIKERT. And the ones we worry about that we hope we 

are not creating. So, there are always both sides of the coin. 

Mrs. MALONEY. Preventing. 

Mr. SCHWEIKERT. The Chair notes that some Members may have 

additional questions for the Director, which they may wish to submit in writing. Without objection, the hearing record will remain 

52 

open for 30 days for Members to submit written questions to Director Cordray and to place his responses in the record. 

And with that, thank you for your time, thank you for your generosity, and this hearing is adjourned. 

[Whereupon, at 12:44 p.m., the hearing was adjourned.] 

(53) 

A P P E N D I X 

September 20, 2012 

54 


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Testimony of Richard Cordray 

Director 

Consumer Financial Protection Bureau 

United States House of Representatives 

Committee on Financial Services 

September 20, 2012 

Chainnan Bachus, Ranking Member Frank, and Members of the Committee, thank you for 

inviting me to testify today about the Semi-Annual Report of the Consumer Financial Protection 

Bureau. 

A little over one year ago, the Consumer Bureau became the nation's first federal agency focused 

solely on protecting consumers in the financial marketplace. The Semi-Annual Report we are 

discussing today covers our activities from January I through June 30 of this year. 

As the report shows, we have been using all of the tools at our disposal to help protect consumers 

across this country. We pledge to continue our work to promote a fair, transparent, and 

competitive consumer financial marketplace. 

Through our regulatory tools, we have proposed smarter rules that will help fix the broken 

mortgage market with common-sense solutions. We are writing rules that simplify mortgage 

disclosure fonns and rules that make sure consumers do not receive mortgages that they do not 

understand or cannot afford. Our rules will also bring greater transparency and accountability to 

mortgage servicing. And our careful process is that before we propose a rule, a team of 

attorneys, economists, and market experts evaluates its potential impacts, burdens, and benefits 

for consumers, providers, and the market. 

Our push for accountability extends beyond mortgage servicing. We are holding both banks and 

nonbanks accountable for following the law. Prior to my appointment, nonbanks had never been 

federally supervised. The financial refonn law specifically authorized us to supervise nonbanks 

in the markets of residential mortgages, payday loans, and private student loans. We also have 

the authority to supervise the "larger participants" among nonbanks in other consumer finance 

markets as defined by rule. So far, we have added credit reporting companies to this group. 

It is important for us to exercise sensible oversight of the consumer finance markets, but it is also 

important that we empower consumers themselves to make responsible financial decisions. Our 

"Know Before You Owe" campaign involves us working to make mortgages, credit cards, and 

student loans easier to understand. We also developed "AskCFPB," an interactive online 

database with answers to consumers' frequently asked questions. We also launched the first-ever 

database of individual complaints about financial products, starting with credit cards. 

Consumers can use the website to review and analyze infonnation and draw their own 

conclusions about the customer service provided with these financial products. 

We also think it is important to engage directly with consumers so we know more about the 

struggles and frustrations they encounter in their daily lives. The Bureau has held numerous 
55 


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field hearings across the country so we can talk face to face with consumers on a variety of 

topics. Our website has a feature called "Tell Your Story," which encourages consumers to 

share with us their personal stories to help inform our approach in addressing issues in the 

financial marketplace. And, perhaps most significantly, we help to resolve consumer disputes 

with lenders by taking complaints on our website at consumerfinance.gov, as well as by mail, 

fax, phone, and by referral from other agencies. As of September 3, we have received 72,297 

consumer complaints about credit cards, mortgages, and other financial products and services, 

and the pace of complaints has been increasing over the past year. 

All of these processes - rulemaking, supervision, enforcement, and consumer engagement -

provide us with valuable information about consumer financial markets. We engage in extensive 

outreach to large and small institutions, including banks and nonbanks, to gather the best current 

information as we make policy decisions. We pride ourselves on being a 21 st -century agency 

whose work is evidence-based. So we also conduct our own in-depth studies on consumer 

financial products, such as reverse mortgages and private student loans. We have issued public 

requests for information that seek input from consumers, industry, and other stakeholders on 

issues such as overdraft fees, prepaid cards, and the financial exploitation of seniors. 

The new Consumer Bureau has worked on all of these projects while being fully engaged in 

start-up activities to build a strong foundation for the future. The Bureau has worked to create an 

infrastructure that promotes transparency, accountability, fairness, and service to the public. Our 

first year has been busy and full, and this report reflects considerable hard work done by people 

whom I greatly admire and respect. They are of the highest caliber and they are deeply dedicated 

to public service. We look forward to continuing to fulfill Congress's vision of an agency that 

helps all Americans by improving the ways and means of their financial lives. 

Thank you. 
56 


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CFPB Officials Have Testified 27 Times before Congress as of Sept. 20, 2012 

1. February 9, 2011: Holly Petraeus before the House Committee on Veterans Affairs 

2. March 16,2011: Elizabeth Warren before the House Financial Services Subcommittee on Financial 

Institutions and Consumer Credit 

3. April 12, 2011: Holly Petraeus before the Senate Homeland Security and Governmental Affairs 

Subcommittee on Oversight of Government Management, the Federal Workforce, and the District 

of Columbia 

4. May 24, 2011: Elizabeth Warren before the I-louse Oversight and Government Reform Subcommittee on 

TARP, Financial Services, and Bailouts of Public and Private Programs 

5. July 7, 2011: Raj Date before the House Financial Services Subcommittees on Financial Institutions and 

Consumer Credit and Oversight and Investigations 

6. July 13,2011: Kelly Cochran before the House Financial Services Subcommittee on Insurance, Housing and 

Community Opportunity 

7. July 14, 2011: Elizabeth Warren before the House Oversight and Government Reform Committee 

8. July 28, 2011: Dan Sokolov before the House Small Business Subcommittee on Investigations, Oversight 

and Regulations 

9. September 6, 2011: Richard Cordray before the Senate Banking Committee 

1 O.November 2, 2011: Raj Date before the House Financial Services Subcommittee on Financial Institutions 

and Consumer Credit 

II.November 3, 2011: Holly Petraeus before the Senate Banking Committee 

I2.November 15, 2011: Skip Humphrey before the Senate Banking Subcommittee on Financial 

Institutions and Consumer Protection 

I3.January 24, 2012: Richard Cordray before the House Oversight and Government Reform 

Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs 

I4.Jannary 31, 2012: Richard Cordray before the Senate Banking Committee 

IS.February 15, 2012: Richard Cordray before the House Financial Services Subcommittee on 

Oversight and Investigations 

I6.Marcb 29,2012: Richard Cordray before the House Financial Services Committee 

17.April 26, 2012: Camille Busette before the Senate Homeland Security and Governmental Affairs 

Subcommittee on Oversight of Government Management, the Federal Workforce, and the District 

of Columbia. 

I8.Jnne 6, 2012: Richard Cordray before the Senate Banking Committee 

19.June 6, 2012: Gail Hillebrand before the House Financial Services Subcommittee on Financial 

Institutions and Consumer Credit 

20.Jnne 20, 2012: Raj Date before the House Financial Services Subcommittee on Insurance, 

Housing, and Community Opportunity 

21.June 26, 2012: Holly Petraeus before the Senate Banking Committee 

22.July 19,2012: Raj Date before the House Financial Services Subcommittee on Financial 

Institutions and Consumer Credit 

23.July 24, 2012: Richard Cordray before the House Oversight and Government Reform 

Subcommittee on TARP, Financial Services, and Bailouts of Public and Private Programs 

24.July 24, 2012: Rohit Chopra before the Senate Banking Committee 

2S.August 1, 2012: Richard Cordray before the House Small Business Committee 

26.September 13, 2012: Richard Cordray before the Senate Banking Committee 

27 .September 20, 2012: Richard -Cordray before the House Financial Services Committee 
57 


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September 10,2012 

Ms. Monica Jackson 

Office of the Executive Secretary 

The Consumer Financial Protection Bureau 

1700 G Street NW 

Washington, DC 20552 

Re: Docket No. CFPB-20J 2-0028 or RIN 3170-AA28 

Dear Ms. Jackson: 

The undersigned trade associations appreciate the opportunity to write to you on the 

proposed rule amending Regulation Z and Regulation X to implement provisions of the DoddFrank Wall Street Reform and Consumer Protection Act. This letter is in addition to the 

individual comments that our associations will submit on these rulemakings. 

At the outset, we thank you for your September 61h Federal Register announcement to 

extend the comment period for these important regulatory changes. Our associations believe that 

the current reform process poses a unique opportunity to modernize the mortgage lending 

regulations and achieve effective and lasting consumer protections. The new regulatory system 

requires proper balance, and must avoid confusion and uncertainty. We question, therefore, the 

wisdom and practicality of also injecting new requirements for the so-called "All In" annual 

percentage rate or APR into the rulemaking. On balance, we strongly believe that aspect of the 

proposal should be dropped. 

As the CFPB and other agencies have documented and industry can attest, the current 

APR is of little value to consumers. It neither enhances a borrower's understanding of the 

obligation they are undertaking, nor serves as an accurate shopping tool. The Bureau's own 

research indicates that consumers confuse the APR with the note rate; this confusion has nothing 

to do with what is in or out of the APR calculation. Simply adding additional fees to an 

unhelpful formulation that consumers do not use or understand will add significant costs and 

complications to the rulemaking effort, with no measurable benefit to the borrower. 

The APR is embedded in numerous other mortgage finance rules as a trigger for 

additional compliance requirements, many of which are associated with steep legal, compliance 

and reputational risks. However, it is entirely unclear how the reconfigured APR will impact or 

relate to these other rules, such as the yet to be finalized Ability to Repay/Qualified Mortgage 

rule and the HOEPA rule, to name two. The CFPB has suggested the possibility of a separate 

transaction coverage rate (TCR), but that approach will require yet another new calculation and 

additional burdens for industry and costs that are passed on to consumers. 
58 


76129.005

It is critical to note that Dodd-Frank itself does not require wholesale changes to the APR. 

To the contrary, the statute relies on this figure by using it as a measurement for a number of new 

provisions. The sheer magnitude of regulatory changes coming forth has the potential to impose 

enormous confusion and cost to both industry and consumers. For these reasons, we urge the 

CFPB to simplifY its approach to forthcoming RESP A and TILA rulemakings by focusing only 

on those elements that are truly needed to implement Dodd-Frank requirements and will have 

maximum impact on promoting consumer understanding. 

Finally, there are several outstanding proposed rules making changes to Regulation Z. 

These proposals cross-reference provisions in each other, making it difficult to tell what each 

references and what Regulation Z would look like if all of these proposals are finalized. In 

addition, there are conflicts among the proposals. For example, the proposed Ability to Repay 

rule would remove § 1026.35 because Dodd-Frank made it obsolete, but the proposed HOEPA 

rule would retain it. We respectfully request that the CFPB publish a single version of 

Regulation Z as it would be amended by all of the pending rulemakings as soon as possible. 

This would improve our ability to provide input that CFPB will need before the comment periods 

close. 

Thank you for this opportunity to comment. We stand ready to assist you as you endeavor 

to meet the charge provided to you by Dodd-Frank. 

Sincerely, 

American Bankers Association 

American Escrow Association 

American Land Title Association 

Community Mortgage Banking Project 

Consumer Mortgage Coalition 

Consumer Bankers Association 

Housing Policy Council 

Independent Community Bankers of America 

Mortgage Bankers Association of America 

National Association of Federal Credit Unions 

National Association of Home Builders 

National Association of Mortgage Brokers 

National Association of Realtors 

Real Estate Services Providers Council, Inc. (RESPRO®) 

Real Estate Valuation Advocacy Association 

The Realty Alliance 
59 


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60 


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Message from Richard 

Cordray 

DIRECTOR OF THE CFPB 

Just one year ago, the Consumer Financial Protection Bureau became the nation's first 

federal agency solely focused on protecting consumers in the financial marketplace. As 

this report shows, we have already made great strides and helped many thousands of 

consumers. 

The markets for consumer finance arc rooted in the financial and credtt needs we all 

encounter in our daily lives. These products and services have brought broad benefits to 

Americans as they manage the ways and means of their lives. But, as we have seen, if 

these products and services are misused, they can do real damage to consumers and to the 

broader economy. 

The Consumer Bureau is establishing evenhanded and reasonable oversight to the 

marketplace. We are working to root out unfair, deceptive, or abusive practices. 

Consumers deserve to be treated fairly, and to have someone stand on their side when 

they are not. Congress directed us to fix grave problems in the mortgage market> and we 

are well on our way to fulfilling that goal. 

To achieve these objectives, we are dedicated to building an agency that is evidence-based 

and data-driven. Field hearings, inquiries, bulletins, rulemakings - we take an '<all of the 

above" approach to guarantee that we have the best current information as we make 

policy decisions. 

Our Consumer Response team is handling complaints on issues ranging from mortgages 

to credit cards to bank products to student loans. Our "Know Before You Owe" projects 

aim to make the costs and risks of financial decisions clearer and more accessible for 

consumers. We launched our Consumer Complaint Database to bring more transparency 

and efficiency to the marketplace. 

We created a Financial Aid Shopping Sheet and a Financial Aid Comparison Shopper to 

help students and their families better understand the student loan process. We are 

SEMI-ANNUAL REPORT OF THE CFPB. JULY 2012 
61 


76129.008

seeking to educate older Americans about their financial options and help 

servicemembers make the best financial decisions for themselves and their families. 

The first year of the Consumer Bureau has been busy and full; it reflects the hard work 

done by people of the highest caliber and dedicated to public service. We look forward to 

continuing to fulfill Congress's vision of an agency that helps all Americans by improving 

their financial lives. 

Sincerely, 

Richard Cordray 

2 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
62 


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Table of Contents 

Message from Richard Cordray ....................................................................... 1 

Executive Summary ............................................................................................ 4 

Consumer Challenges in Obtaining Financial Products and Services ........ 8 

Delivering for American Consumers and Leveling the Playing Field ........ 31 

Building a Great Institution: Update .............................................................. 50 

Appendix A: More about the CFPB ............................................................... 64 

Appendix 8: Statutory Reporting Requirements ........................................ 66 

Appendix C: Significant Rules, Orders, and Initiatives ............................... 68 

Appendix D: Actions Taken Regarding Rules, Orders, And Supervisory 

Actions With Respect To Covered Persons Which Are Not Credit 

Unions Or Depository Institutions ......................................................... 71 

Appendix E: Reports ....................................................................................... 72 

Appendix F: Congressional Testimony ....................................................... 73 

Appendix G: Speeches .................................................................................. 75 

. Appendix H: Financial And Budget Reports ............................................... 78 

Appendix I: CFPB Organizational Chart ...................................................... 80 

Appendix J: Defined Terms ........................................................................... 81 

3 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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Executive Summary 

The Consumer Financial Protection Bureau (CFPB or Bureau) is the nation's first federal 

agency focused solely on consumer financial protection.1 The Dodd-Frank Wall Street 

Reform and Consumer Protection Act (Dodd-Frank Act) created the CFPB to protect 

consumers of financial products and services and to encourage the fair and competitive 

operation of consumer financial markets. The Bureau's mission is to make consumer 

financial markets work for American consumers, honest businesses, and the economy as a 

whole. 

In fulfillment of its statutory responsibility and its commitment to accountability, the 

CFPB is pleased to present its second Semi-Annual Report to the President and Congress. 

This report provides an update on the Bureau's activities and accomplishments since its 

inaugural report in January 2012 and additional information required by the Dodd-Frank 

Act.2 

The Dodd-Frank Act requires the CFPB to: 

• Ensure that consumers have timely and understandable information to make 

responsible decisions about financial transactions; 

• Protect consumers from unfair, deceptive, or abusive acts and practices, and 

from discrimination; 

• Identify and address outdated, unnecessary, or unduly burdensome regulations; 

1 Previously, seven different federal agencies were responsible for rulemaking, supervision, 

and enforcement relating to consumer financial protection. The agencies which previously 

administered statutes transferred to the Bureau are the Board of Governors of the Federal 

Reserve System (Federal Reserve, Federal Reserve Board, or Federal Reserve Board System), 

Department of Housing and Urban Development (HUD), Federal Deposit Insurance 

Corporation (FDIC), Federal Trade Commission (FTC), National Credit Union Administration 

(NCUA), Office of the Comptroller of the Currency (OCC), and Office ofThrift Supervision 

(OTS). 

2 Reports cover six-month increments beginning January 1 st and July 1 st. Appendix B 

provides a guide to the Bureau's response to the reporting requirements of Section 1016(c) 

of the Dodd-Frank Act. 

4 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
64 


76129.011

Promote fair competition by consistent enforcement of the consumer protection 

laws in the Bureau's jurisdiction; and 

Ensure markets for consumer financial products and services operate 

transparently and efficiently to facilitate access and innovation.3 

Since opening its doors on July 21, 2011, the CFPB has dedicated its efforts to listening 

and responding to consumers and industry while laying the foundation of a great 

institution. 

CONSUMER CHALLENGES IN OBTAINING FINANCIAL 

PRODUCTS AND SERVICES 

Consumers' input about their experiences with financial products and services is critical to 

understanding the challenges that consumers face in obtaining financial products and 

services in the current economic climate. It is also a driving force behind the CFPB's 

development of resources and programs to help build American consumers' financial 

capability and to level the playing field. 

In the past year, the CFPB has heard from consumers about their positive and negative 

experiences with financial products and services, including through the "Tell Your Stoty" 

feature of the CFPB's website, roundtables, town halls, and field hearings. In addition, the 

Bureau has launched a first-rate infrastructure to receive, process, and facilitate responses 

to consumer complaints. The Bureau is also gathering data and evidence about consumers' 

behaviors and choices when they shop for financial products and the ways that market 

structures and sales practices may shape such conduct. 

DELIVERING FOR AMERICAN CONSUMERS AND LEVELING THE 

PLAYING FIELD 

The CFPB has taken significant steps in the past year toward making consumer financial 

markets work better for consumers and responsible companies. The Bureau has launched 

offices to provide vital resources for consumers. For example, the CFPB's Consumer 

Response team receives complaints and inquiries directly from consumers. The CFPB's 

Division of Consumer Education and Engagement develops and implements initiatives to 

educate and empower consumers to make better-informed financial decisions; its 

initiatives include programs directed toward particular populations, such as 

servicemembers, older Americans, students, and consumers who traditionally have been 

underserved by the financial markets. 

The Bureau has also: 

3 See Dodd-Frank Act, Pub. L. No. 111-203, Sec. 1021(b). 

5 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
65 


76129.012

• 

• 

• 

• 

• 

• 

Engaged in extensive outreach to consumers and industry throughout the 

counrry; 

Initiated and developed partnerships with federal agencies, state financial 

regulatory entities, and state attorneys general, and begun to establish advisory 

groups comprised of consumer organizations, community organizations, 

government officials, and industry representatives; 

Implemented statutory protections for consumers who use consumer financial 

products and services, and begun the process of streamlining regulations that the 

CFPB inherited from other agencies; 

Launched programs for supervising large banks and other companies that 

provide consumer financial products and services to ensure that they comply 

with federal consumer financial protection laws; 

Investigated potential violations of laws under the Bureau's jurisdiction; and 

U sed extensive outreach in its efforts to ensure fair, equitable, and 

nondiscriminatory access to credit for individuals and communities. 

BUILDING A GREAT INSTITUTION 

All of this has taken place while the Bureau has been engaged in start-up activities. As of 

June 30, 2012, the CFPB team now consists of 889 staff working to carry out the Bureau's 

mission. It has worked to build a human and physical infrastructure that promotes - and 

will continue to promote - transparency, accountability, fairness, and service to the public. 

That includes: 

• 

• 

• 

• 

6 

Demonstrating a strong commitment to openness and utilizing the Bureau's 

website to share information on the operations of the Bureau; 

Recruiting highly qualified personnel; 

Providing training and engagement oppotrunities for CFPB staff to improve 

skills and knowledge and maintain excellence; and 

Launching the Bureau's Office of Minority and Women Inclusion to promote 

diversity in the CFPB's workforce and among its contractors. 

SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
66 


76129.013

The CFPB is proud of the accomplishments that it has achieved in its first year. But this 

marks only the beginning of the Bureau's work on behalf of consumers and providers of 

financial products and services. Over the next six months, the CFPB's efforts to make 

consumer financial markets work better will continue to expand. We invite you to visit the 

CFPB's website, for updates on the CFPB's work over the 

coming months. 

7 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
67 


76129.014

Consumer Challenges In 

Obtaining Financial 

Products and Services 

The challenges that consumers face in obtaining financial products and services are a 

driving force behind the CFPB's efforts to make consumer financial markets work better. 

Listening and responding to consumers are integral to our mission, and the Bureau 

provides many means through which consumers can make their voices heard. 

Consumer Concerns 

Financial markets are rooted in the daily lives and the financial and credit needs of 

individual Americans. There is no doubt that consumer financial products and services, 

when understood and appropriately used, can bring broad benefits to consumers. Savings 

accounts are a first step to help people pursue their dreams and checking accounts 

facilitate everyday transactions. Mortgages help people buy homes and pay for them over 

time. Credit cards give people convenient access to money when needed. Srudent loans 

allow people who lack means but have talent and ambition to pursue their deepest 

aspirations. 

Over the past year, consumers have shared with the CFPB their experiences - positive 

and negative - with financial products and services. Consumers have the opporrunity to 

provide the CFPB with such feedback through a variety of forums, including, among 

others, the "Tell Your Story" feature of the CFPB's website, roundtables, town halls, and 

field hearings. This feedback is key to understanding the challenges consumers face in 

obtaining the financial products and services they need. 

8 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
68 


76129.015

The stories consumers have shared with the Bureau through the "Tell Your Story" feature 

of the CFPB's website cover a wide range of financial products and services, providing 

snapshots of consumers' day-to-day experiences in the marketplace. Consumers' stories 

are reviewed by CFPB staff and further the Bureau's understanding of current issues in 

the financial marketplace. 

Those consumers who have shared their experiences with the CFPB expressed some of 

their challenges and concerns with respect to obtaining a variety of financial products and 

services. They include: 

• 

• 

• 

• 

Inability to qualify for a mortgage loan modification, or if they qualify they are 

unable to obtain a viable modification that sufficiently lowers their payments; 

Inability to refinance their loans even though they report having high credit 

scores; 

Inability to refinance, consolidate, or pay their private student loans; 

Lack of clarity about credit scoring and the scores that creditors use versus the 

scores consumers are given by credit bureaus, making it difficult for consumers 

to understand this key measure of their creditworthiness; and 

Confusion about overdraft protection, including terms, fees, and the relationship 

between checking accounts and related savings accounts, lines of credit, and 

credit cards. 

In addition to "Tell Your Story," consumers have opportunities to voice concerns and 

share their experiences in person. Consumers have participated in large Bureau-sponsored 

public events, including town halls and field hearings focused on particular consumer 

finance issues, in Birmingham, Alabama; New York City; and Durham, North Carolina. 

Combined, these events have drawn hundreds of participants, many of whom have 

shared their experiences - positive and negative - with mortgages, student loans, credit 

cards, payday loans, checking accounts, prepaid cards, and other consumer financial 

products and services. 

In each of these cities and others, the CFPB's Office of Community Affairs has also 

hosted roundtable conversations with local leaders representing consumer, civil rights, 

community, housing, faith, student, and other organizations. The roundtables provided 

opportunities for stakeholders in the field to share their ground-level perspective on these 

issues with Director Richard Cordray and other key Bureau staff. 

The CFPB also has hosted dozens of roundtables and meetings at its offices in 

Washington, DC. The Office of Community Affairs and subject-marter teams have 

included hundreds of policy experts and advocates and community leaders in Directorlevel, roundtable, and other discussions on mortgage issues, credit cards, payday loans, 

student loans, cbecking accounts and overdraft fees, prepaid cards, credit reporting and 

scoring, debt collection, remirtances, the CFPB's Consumer Response system, the CFPB's 

9 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
69 


76129.016

definition of "larger participants" in nonbank markets, and the CFPB's approach to 

research, financial education, and new media. 

Collecting, investigating, and responding to consumer complaints4 are integral parts of the 

CFPB's work, as Congress set forth in the Dodd-Frank Act.s The Bureau's Consumer 

Response team hears direcdy from consumers about the challenges they face in the 

marketplace, brings their concerns to the attention of financial institutions, and assists in 

addressing their complaints. 

c 

HOM!! INSIDE THE CFl'!l PARTICIPATE SUBMIT A COM!'!AINT 

Submit a complaint nCB 

IIElmac 

Sank.-1It or V<thlde loan or ~1It loan 

Ht'Vke consumer tean 

www.consumerfinance.gov/complaint 

The CFPB began Consumer Response operations on July 21, 2011, accepting consumer 

complaints about credit cards. Consumer Response began handling mortgage complaints 

on December 1, 2011, and it began accepting complaints about bank accounts and 

services, private student loans, and consumer loans on March 1, 2012. Over the next year, 

the CFPB expects to handle consumer complaints on other products and services under 

its authority. As Consumer Response continues to expand its capacity, consumers may 

contact the CFPB about additional products and services. The Bureau answers these 

inquiries and refers consumers to other regulators or additional resources where 

appropriate. 

4 Consumer complaints are submissions that express dissatisfaction with, or communicate 

suspicion of wrongful conduct by, an identifiable entity related to a consumer's personal 

experience with a financial product or service. 

5 See Dodd-Frank Act, Pub. L. No. 111-203, Sec. 1021 (c){2). 

10 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
70 


76129.017

Consumer Complaint Database (beta] 

'l'his:oonb!.W¢.tlai'rmn the~~eBTdCQ~l'~bytbeQwumer Fimurial Protu:tion.8ufa.u. We do not 

\wltythe amuacyof these complaints, but __ do take step! t(l oortfirm a oommerciJll mationship between the eomumer and the 

klentlfWdmmt'llny. 

Datlt iiMn::shed daily, stltrtin&frcm JIIM at, Wt:z. 

Oowntoad.$UKb. & viwalize Example visualiution$. 

:!-!!!!!"!!-!!!!!!'!-!!!!!! 

. •••• __ . 

---- ~.~ 

~~~ZfF ... ll!)tt:U\rt -. 

www.consumerfinance.gov/complaintdatabase 

Information about consumer complaints is now available to the public, following the 

CFPB's launch of a public Consumer Complaint Database on June 19,2012.6 The 

database is populated by credit card complaints received by the CFPB on and after June 1, 

2012 arid contains certain individual complaint-level data collected by the CFPB, 

including the type of complaint, the date of submission, the consumer's zip code, and the 

company that the complaint concerns. The database also includes information about the 

actions taken on a complaint - whether the company's response was timely, how the 

company responded, and whether the consumer disputed the company's response. The 

database does not include confidential information about consumers' identities. Webbased and user-friendly features of the database include the ability to: filter data based on 

specific search criteria; aggregate data in various ways, such as by complaint type, issuer, 

location, date, or any combination of available variables; and download data. Over time, 

the CFPB may add complaints about other consumer financial products and services 

under its authority to the Consumer Complaint Database. 

In keeping with the CFPB's statutoty responsibility and its commitment to accountability, 

this report provides an overview of how Consumer Response handles complaints and 

presents an analysis of complaints received over the period from July 21, 2011 through 

June 30,2012. 

6 1n December 2011, the CFPB asked the public to comment on a proposed policy of making 

some credit card complaint data publicly available. After considering those comments, the 

CFPB finalized its policy for disclosing some of the data through its Consumer Complaint 

Database. See Disclosure of Certain Credit Card Complaint Data, 77 Fed. Reg. 37,558 (June 

22,2012). 

11 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.018

HOW THE CFPB HANDLES COMPLAINTS 

Consumer Response screens all complaints submitted by consumers based on several 

criteria. These criteria include whether the complaint falls within the CFPB's primary 

enforcement authority, whether the complaint is complete, and whether it is a duplicate of 

a prior submission by the same consumer. Screened complaints are sent via a secure web 

portal to the appropriate company. 7 The company reviews the information, 

communicates with the consumer as needed, and detertnines what action to take in 

response. The company reports back to the consumer and the CFPB via the secure 

"company portal." The Bureau then invites the consumer to review the response. 

Consumer Response prioritizes for review and investigation complaints in which the 

consumer disputes the response or where companies fail to provide a timely response.8 

Consumers who have ftled complaints with the Bureau can log onto the secure 

"consumer portal" available on the CFPB's website or call a toll-free number to receive 

sratus updates, provide additional information, and review responses provided to the 

consumer by the company. 

tilt J\.t~ • ~ Complaint 

Received and 

Review 

Route 

Company 

Response • Consumer Review Investigation 

Revlewand 

~ 

Throughout this process, Consumer Response is supported by CFPB colleagues who 

provide subject-matter expertise and help monitor complaints. For example, Consumer 

Response coordinates with the CFPB's Office of Servicemember Affairs on complaints 

filed by servicemembers or their spouses and dependents. 

7 If a particular complaint does not involve a product or market that is within the Bureau's 

jurisdiction or that is currently being handled by the Bureau, Consumer Response refers it to 

the appropriate regulator. 

8 The CFPB initially requested that companies respond to complaints within 10 calendar days, 

but increased the requested response time to 15 calendar days when Consumer Response 

began handling mortgage complaints on December 1, 2011. If a complaint cannot be closed 

within 15 calendar days, a company may indicate that its work on the complaint is "In 

progress" and provide a final response within 60 calendar days. 

12 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
72 


76129.019

COMPLAINTS RECEIVED BY THE CFPB 

Between July 21,2011 and June 30, 2012, the CFPB received approximately 55,300 

consumer complaints.9 

FIGURE 1: CONSUMER COMPLAINTS BY PRODUCT 

2% 

Other 2% I, Consumer loan 

----- 4% 

Student loan 

15% 

Bank account 

and service 

Approximately 44 percent of all complaints were submitted through the CFPB's website 

and 11 percent via telephone calls. Referrals accounted for 38 percent of all complaints 

received. The rest were submitted by mail, email, and fax. 

The tables and figures presented below show complaints by type, actions taken, company 

responses, and consumers' reviews of company responses.1o 

9 This analysis excludes multiple complaints submitted by a given consumer on the same 

issue and whistleblower tips. All data are current as of July 1,2012. 

10 Percentages may not sum to 100 percent due to rounding. 

13 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
73 


76129.020

Consumers' Credit Card Complaints 

Table 1 shows the most common types of credit catd complaints that the CFPB has 

received as reported by consumers. Sixty-seven percent of the approximately 18,800 

credit card complaints fell into these 10 categories. 

TABLE 1: MOST COMMON CREDIT CARD COMPLAINTS REPORTED 

BY CONSUMERS 

Billing disputes 

Annual Percentage Rate (APR) or interest rate 

Identity theft/Fraud/Embezzlement 

Other 

Closing/Cancelling account 

Credit reporting 

Collection practices 

Late fee 

Credit card protection/Debt protection 

Collection debt dispute 

CREDIT CARD COMPLAINTS IN TOP 10 TYPES 

As the table illustrates, billing disputes are the most common type of credit card 

complaint. Some consumers are confused and frustrated by the process and limits to 

challenging inaccuracies on their monthly credit card billing statements. For example, 

some consumers only realize after their claim has been denied that they needed to notify 

their credit card companies within 60 days of any billing errors. In other cases) consumers 

are not aware that companies typically do not stop a merchant charge once the cardholder 

has authorized it or do not override a merchant's "no-return policy." Other common 

types of credit card complaints relate to annual percentage rates or interest rates and 

identity theft, fraud, or embezzlement. 

The CFPB generally has relied on the consumer's characterization of his or her complaint 

to identify its nature for analytical purposes. However, the CFPB's experience to dare 

suggests that consumers may often have differing interpretations of what these categories 

mean. For example, one consumer might choose to categorize a problem as a billing 

dispute, while another might identify the same issue as a concern with a provider's setting 

% 

14% 

10% 

9% 

6% 

6% 

6% 

5% 

4% 

4% 

.3% 

67% 
74 


76129.021

or changing of an interest rate. To improve our reporting on the data we receive, the 

Bureau is evaluating the use of these categories by consumers to date and developing a 

simplified categotization scheme to promote more consistent categorization of 

complaints. 

Consumers' Mortgage Complaints 

Figure 2 shows the types of mortgage complaints as reported by consumers for the 

approximately 23,800 mortgage complaints received by the CFPB. 

FIGURE 2: TYPES OF MORTGAGE COMPLAINTS REPORTED BY 

CONSUMERS 

8% 7% 

Other Applying for the loan 

54% 

Problems when 

unable to pay 

Applying for the loan 

(Application, originator, mortgage broker) 

Receiving a. crerlit offer 

(Crerut·decision/Underwriting) 

Signing the agreement 

(Settlement process and costs) 

Making payments 

. (Loan.servidng, payments, escrow accounts) 

Problems when you are unable to pay 

(Loan morlification, collection, foreclosure) 

Othei' 

TOTAL MORTGAGE COMPLAINTS 

2% 

Receiving a credit offer 

4% 

Signing the agreement 

25% 

Making payments 

15 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 

% 

8% 

2% 

4% 

25% 

54% 

7% 

100% 
75 


76129.022

The most common type of mortgage complaint is about problems consumers have when 

they are unable to make payments, such as issues related to loan modifications, collection 

or foreclosure. Consumers who have fIled these complaints generally appear to be driven 

by a desire to seek agreement with their companies on foreclosure alternatives. The 

complaints indicate that consumer confusion persists around the process and 

requirements for obtaining loan modifications and refinancing, especially regarding 

document submission timeframes, payment trial periods, allocation of payments, 

treattnent of income in eligibility calculations, and credit bureau reporting during the 

evaluation period. The shelf life of documents provided as part of the loan modification 

process is of particular concern to consumers. Though consumers must provide 

documents within short time periods and income documentation generally remains valid 

for up to 60 days, lengthy evaluation periods can result in consumers having to resubmit 

documentation - sometimes more than once. This seems to contribute to consumer 

fatigue and frustration with these processes. 

Other common types of mortgage complaints address issues related to making payments, 

such as issues related to loan servicing, payments, or escrow accounts. For example, 

consumers express confusion about whether making timely trial petiod payments will 

guarantee placement into a permanent modification. Issues related to applying for the 

loan, such as the application, the originator, or the mortgage broker, are also among the 

most common types of mortgage complaints. 

16 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
76 


76129.023

Consumers' Bank Account and Service Complaints 

Figure 3 shows the types of bank account and service complaints, such as complaints 

about checking and savings accounts, as reported by consumers for the approximately 

8,100 complaints received by the CFPB. 

FIGURE 3: TYPES OF BANK ACCOUNT AND SERVICE COMPLAINTS 

REPORTED BY CONSUMERS 

15% 5% 

Problems caused by low funds Using a debit or ATM card 

9% 

Sending or __ 

receiving payments 

5% 

Other 

25% 

Deposits and withdrawals 

Account opening, closing, or management 

41% 

Account management 

(Confusing marketing, denial, disclosure, fees, closure, interest, statements, 

joint accounts) 

. Depositsand withdrawals . 

(Av~abillty~f depqsits, withdrawal problems.a1ld penalties, unauthodzed 

trafisa?tlons;cl1eCkcashirig, payroll deposit ptobletlls, lost or missing 

flli:J.ds,.ttllI1sac\ion holds) . 

Using a debit or ATM card 

(Disputed transaction, unauthodzed card use, ATM or debit card fees, 

ATM problems) 

~gorreceivirig payments, sending money to others 

(P~QolernswithpaYtl1ents by chec~ card, phone or online, unauthodzed or 

fraudulent transactions, money/wire transfers) 

Problems caused by my funds being low 

(Overdraft fees, late fees, bounced checks, credit reporting) 

Other 

TOTAL BANK ACCOUNT AND SERVICE COMPLAINTS 

17 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 

% 

41% 

25% 

5% 

9% 

15% 

5% 

100% 
77 


76129.024

As the table illustrates, the most common type of bank account and service complaint 

relates to opening, closing, or managing the account. These complaints address issues 

such as confusing marketing, denial, fees, statements, and joint accounts. Other common 

types of complaints relate to deposit and withdrawal issues, such as transaction holds and 

unauthorized transactions, and problems caused by the consumer's funds being low, such 

as bounced checks, overdraft and late fees, and credit reporting. Many consumers remain 

frustrated with overdraft fees and the wide discretion companies have to assess these and 

other fees so long as the fees are outlined in account agreements. Similarly, some 

consumers express frustration with the order in which companies process account 

withdrawals because the processing of larger transactions before smaller ones can lead to 

more overdraft-fee charges. 

18 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
78 


76129.025

Complaints 

4 shows the types of student loan cmnpJ.aints as consumers for the 

ap'prc)xirnal:ely 2,000 student loan cornpJ.am[s the CFPB, 

FIGURE 4: TYPES OF STUDENT LOAN COMPLAINTS REPORTED BY 

CONSUMERS 

28% 

Problems when 

unable to pay 

a loan 

(C()ntuSlng terms, rates, 

3% 

Other 

4% 

I I 

tactics or pressure, financial aid serVJ(:eK re!:ruit1tl!l:) 

Problems when 

ILlClau", debt coillec:tion, uall>J:UIJ1L~ 

TOTAL STUDENT LOAN COMPLAINTS 

a loan 

The most common type of student loan co:mp,lail:1t relates to 

65% 

Wt>"",,'\JInf"! the loan 

4% 

65% 

28% 

3% 

100% 

the loan, such as 

fees, deferment, forbearance, fraud, and credit Consumers with 

the limited payment defenment in their loan agreements, ""'t:ClaL!\ 

when have not found by the time they need to 

loans and because defenments often are limited to six months. Another common of 

co:mp,jalJrl! addresses consumers have when are unable to pay, such as 

issues related to default, debt collection, and hOt1krlml'rv 

19 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
79 


76129.026

Consumers' Consumer Loan Complaints 

Figure 5 shows rhe types of consumer loan complaints, such as complaints about 

installment loans, vehicle loans and leases, and personal lines of credit, as reported by 

consumers for the approximately 1,400 consumer loan complaints received by the CFPB. 

FIGURE 5: TYPES OF CONSUMER LOAN COMPLAINTS REPORTED 

BY CONSUMERS 

6% 

Other 

8% 

Shopping for the loan 

17% 21% 

Problems when 

unable to pay 

Taking out the loan 

48% 

Managing the loan 

Shopping for a loan, lease, or line of credit 

(Sales tactics or pressure, credit denial, confusing advertising or 

marketing) 

Taking out the loan or lease / Account terms and changes 

.(ferm changes (mid-deal changes, changes after closing, rates, fees, etc.), 

required add-on products, trade-in payoff, fraud) 

Managing the loan, lease, or line of credit 

(Billing, late fees, damage or loss, insurance (GAP, credit, etc.), credit 

reporting, privacy) 

Problems when you are unable to pay 

(Debt collection, repossession, set-off from bank account, deficiency, 

bankruptcy, default) 

Other 

TOTAL CONSUMER LOAN COMPLAINTS 

% 

8% 

17% 

48% 

21% 

6% 

100% 

The table illustrates that the most common type of consumer loan complaint is about 

managing the loan, lease, or line of credit. Another common type of complaint addresses 

problems consumers have when they are unable to pay, such as issues related to debt 

collection, bankruptcy, and default. 

20 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
80 


76129.027

HOW COMPANIES RESPOND TO CONSUMER 

COMPLAINTS 

Approximately 44,600 (or 81 percent) of all complaints received between July 21,2011 

and June 30, 2012 were sent by Consumer Response to companies for review and 

response.H Table 2 shows how companies responded to these complaints during this 

time period. 

Company responses include descriptions of steps taken or that will be taken, 

communications received from the consumer, any follow-up actions or planned follow-up 

actions, and categorization of the response. Based on industry comments received about 

disclosure of credit card complaint data, beginning June 1,2012, response category 

options included "closed with monetary relief," "closed with non-monetary relief," 

"closed with explanation," "closed," "in progress," and other administrative options.12 

Monetary relief is defined as objective, measurable, and verifiable monetary relief to the 

consumer as a direct result of the steps taken or that will be taken in response to the 

complaint. "Closed with non-monetary relief" indicates that the steps taken by the 

company in response to the complaint did not result in monetary relief to the consumer 

that is objective, measurable, and verifiable, but may have addressed some or all of the 

consumer's complaint involving non-monetary requests. Non-monetary relief is defined 

as other objective and verifiable relief to the consumer as a direct result of the steps taken 

or that will be taken in response to the complaint. "Closed with explanation" indicates 

that the steps taken by the company in response to the complaint included an explanation 

that was tailored to the individual consumer's complaint. For example, this category 

would be used if the explanation substantively meets the consumer's desired resolution or 

explains why no further action will be taken. "Closed" indicates that the company closed 

the complaint without relief - monetary or non-monetary - or explanation. Consumers 

are given the option to review and dispute all company closure responses. 

11 The remaining complaints have been referred to other regulatory agencies (8 percent), 

found to be incomplete (4 percent), or are pending with the consumer or the CFPB (1 percent 

and 6 percent, respectively). 

12 The CFPB initially asked companies to categorize their response as "full resolution 

provided," "partial resolution provided," "no resolution provided," or another administrative 

option. From December 1,2011 through May 31,2012, the CFPB piloted categories of 

"closed with relief" and "closed without relief" in addition to other administrative options. 
81 


76129.028

TABLE 2: HOW COMPANIES HAVE RESPONDED TO CONSUMER 

COMPLAINTS13 

Company 

reported dosed 

.\Vith monetary 

relief 

Company 

repotted .dosed 

with explanation 

All 

N::::44,600 

26% 

55% 

Credit 

card 

N::::15,600 

47% 

42% 

Bank 

account 

and Student 

Mortgage service loan 

N::::20,200 N::::6,400 N::::l,400 

9% 32% 6% 

66% 48% 60% 

Companies have responded to over 40,300 of the 44,600 complaints sent to them (90 

percent) and report having closed 85 percent of the complaints sent to them. Table 2 

shows how companies have responded. 

Beginning December 1, 2011, companies had the option to report an amount of 

monetary relief, where applicable. Since then companies have provided relief amounts in 

13 While companies' responses under previous categorizations were maintained, for 

operational and reporting purposes, responses categorized as "full resolution provided," 

"partial resolution provided," and "closed with relief" are considered a subset of "closed with 

monetary relief," and responses categorized as "no resolution provided" and "closed without 

relief" are categorized as "closed with explanation." "Closed with non-monetary relief" and 

"closed" reflect only those responses provided by companies after June 1, 2012. 

22 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 

Consumer 

loan 

N::::800 

19% 

57% 
82 


76129.029

response to more than 4,800 complaints. The median amount of relief reported by 

companies was $144; however, company reports of relief amounts and medians vary by 

product. For the approximately 2,500 credit card complaints where companies provided a 

relief amount, the median amount of relief reported was approximately $130. For the 

approximately 800 mortgage complaints where companies provided a relief amount, the 

median amount of relief reported was approximately $411. For the more than 1,400 bank 

account and service complaints where companies provided a relief amount, the median 

amount of relief reported was approximately $105. For the approximately 70 student loan 

complaints where companies provided a relief amount, the median amount of relief 

reported was approximately $1,597. For the approximately 80 consumer loan complaints 

where companies provided a. relief amount, the median amount of relief reported was 

approximately $136. 

Consumers' Reviews of Companies' Responses 

Once the company responds, the CFPB provides the company's response to the 

consumer for review. Where the company responds "closed with monetary relief," 

"closed with non-monetary relief," "closed with explanation," or "closed," consumers are 

given the option to dispute the response.14 Complaints with disputed company responses 

are among those prioritized for investigation. Table 3 shows how consumers responded 

to the approximately 36,600 complaints where they were given the option to dispute. 

Consumers are asked to notify the CFPB within 30 days if they want to dispute a 

company's response. Approximately 44 percent of such consumers did not dispute the 

responses provided. Nearly 17 percent of consumers have disputed the responses 

provided. The rest were pending with consumers at the end of this period. 

14 Consumers were initially given the option to dispute responses from companies that 

indicated a resolution had been provided. With the shift to closure categories, consumers are 

given the option to dispute company responses regardless of closure category. 

23 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
83 


76129.030

TABLE 3: CONSUMER REVIEW OF COMPANY RESPONSES 

Pending.consumer 

review {lfcompany's 

response 

~~~~~~~t ~j1!lot . . ~~~~t~;~ompany's .. !e~~~h~e> .. Consurnerdisputed 

company's response 

8g~~~ 

All 

40% 

17% 

<100% 

Credit 

card Mortgage 

40% 39% 

15% 19% 

lOW/o· .•. jl)Q% 

Consumer Response Investigations 

Bank 

Account 

and 

Service 

42% 

15% 

lOOo/lt" 

Student 

Loan 

39% 

14% 

·100% 

After requesting that companies respond to all complaints filed and giving consumers the 

opportunity to review and dispute company responses, Consumer Response primarily 

focuses its review and investigation efforts on those complaints where the consumer 

disputed the response or where companies failed to provide any response within 15 

calendar days. Consumer Response also petiodically investigates groups of complaints to 

survey product- and issue-specific trends. Consumer Response seeks to detennine why a 

company failed to provide a timely response (if applicable) and whether the consumer's 

dispute of the company's response (if applicable) justifies additional review of the 

company's minimum required actions under the consumer financial protection laws 

within the CFPB's authority. In the course of an investigation, Consumer Response may 

ask companies and consumers for additional information, and once the investigation is 

completed, Consumer Response sends the consumer a summary. In some cases, 

Consumer Response has referred complaints to colleagues in the CFPB's Division of 

Supervision, Enforcement, and Fair Lending & Equal Oppormnity for further action. 

listening and responding to consumer complaints is an integral part of the CFPB's work 

in understanding issues in the financial marketplace and helping the market work better 

for consumers. 

24 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 

Consumer 

Loan 

49% 

16% 

100.% 
84 


76129.031

Shopping Challenges 

The challenges that consumers face in the marketplace highlight the importance of a tenet 

which is central to the CFPB's mission - promoting markets in which consumers can 

shop effectively for financial products and services. When the costs, risks, and other key 

features of financial products are transparent and understandable, consumers are better 

able to compare products and choose the best one for them. This discussion presents 

preliminary observations about opportunities and challenges that consumers face when 

shopping for checking accounts.IS 

CHECKING ACCOUNTS 

Background 

Over 92 percent of American households hold some type of transaction account for their 

core cash management needs.I6 Most of those accounts are insured checking accounts at a 

bank, thrift, or credit union. According to one survey, households are switching their 

checking account providers at a rate of once every 11 years, and switching is on the rise.17 

Consumers shopping for banks in 2011, on average, looked at no more than two 

institutions. IS While historically consumers may have been most likely to shop for a new 

bank when moving to a new city or neighborhood, increasingly consumers may be 

shopping in response to an unpleasant experience, such as changes in fees or other terms 

and conditions.I9 

1S For a discussion of shopping challenges in markets for mortgages, credit cards, and 

student loans, please see Consumer Financial Protection Bureau, "Semi·Annual Report of the 

Consumer Financial Protection Bureau, July 21 - December 31,2011," January 30, 2012. 

16 Jesse Bricker, Brian Bucks, Arthur Kennickell, Traci Mach, and Kevin Moore, "Surveying the 

Aftermath of the Storm: Changes in Family Finances from 2007 to 2009," March 2011, at 27, 

http://www.federalreserve.gov/pubslfeds/2011 1201117 i201117pap.pdf(last viewed July 9, 

2012). 

17 J.D. Power and Associates, "Shopping and Switching Rates Increase among Retail Bank 

Customers as Competition in the Industry Intensifies," March 1,2011, 

http://businesscenter.jdpower.com/news/pressrelease.aspx?ID=2011 020 (last viewed July 9, 

2012). 

19 J.D. Power and Associates, "Bank Customer Switching Rates Rise Again, Fueled by Issues 

with Fees and Poor Service," Feb. 27, 2012, 

http://businesscenter.jdpower.com/news/pressrelease.aspx?ID~2012017 (last viewed July 9, 

2012). 

25 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
85 


76129.032

Banks may charge a wide range of fees to holders of checking accounts.20 Some fees, 

including monthly maintenance, are levied on a periodic basis. Others, such as fees for 

using the A TMs of other institutions or fees for in-person transactions with tellers, are 

incurred on a per-transaction basis. Depository institutions frequently also impose 

"penalty" fees for overdrafts, returned deposited checks, and other transactions that may 

impose additional risks or costs upon the institution. 

Shopping Channels 

While consumers have historically shopped - and continue to shop - for checking 

accounts at branch offices, a large portion of the population now relies upon the Internet. 

Use of the two primary shopping channels may not be mutually exclusive. A recent survey 

estimates that "76 percent of consumers view the bank branch as the primary place to 

open new accounts and 65 percent look there first when they b'!Y banking productS."21 

However, the survey also found that "70 percent of consumers first go online when 

researching banking products and services, up from 42 percent five years ago." 

The growth of online shopping promises increased access to information and 

development of tools with which consumers can make online comparisons. Consumers 

can obtain at least some information about checking account products at most financial 

institutions' websites. They can also compare checking products along a limited number 

of dimensions at a number of third-party sites.22 Still, a number of issues present 

challenges for consumer shoppers. 

Transparency 

DISCLOSURE OF TERMS AT BRANCH OFFICES 

Regulation DD, which implements the Truth in Savings Act, requires a depository 

institution to disclose to a consumer, among other things, the terms and fees (and 

conditions under which the fees will be imposed) associated with maintaining a checking 

account before it opens the account for or provides services to the consumer.23 The 

20 Banks' revenue from checking accounts comes through a combination of net interest 

margin (interest earned from lending or investing the consumers' deposits, minus any interest 

paid to consumers' account), interchange earned on consumers' debit card transactions, and 

fees charged to the consumers themselves. 

21 Sherief Meleis et aI., "Reconstructing the Retail Banking Business," Novantas Review, July 

2011, at 13, http://www.novantas.com/article.php?id~317 (last viewed July 9, 2012). 

22 Examples include Bankrate.com and Findabetterbank.com. 

23 See 12 C.F.R. § 1030.4. 

26 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
86 


76129.033

purpose of the regulation is to enable consumers to make informed decisions about 

accounts at depository institutions.24 

However, in 2008, the Government Accountability Office (GAO) found that consumers 

may not be able to obtain the required information from bank branches at all times.25 

GAO employees conducted "secret shopper" visits to a non-generalizable yet sizable 

sample: 185 branches of 154 banks, thrifts, and credit unions during 2007 and 2008. 

Visitors found they were "unable to obtain, upon request, a comprehensive list of all 

checking and savings account fees at 40 of the branches (22 percent)."26 Similarly, the 

"secret shoppers" were "unable to obtain the account terms and conditions, including 

information on when deposited funds became available and how overdrafts were handled, 

for checking and savings accounts at 61 of the branches (33 percent)."27These findings 

appear to be consistent with those published by the Unites States Public Interest Research 

Group (pIRG) in 2011.28 

DISCLOSURE OF TERMS ONLINE 

Currently, the regulation implementing the Truth in Savings Act, Regulation DD, also 

provides that if a consumer uses electronic means to open an account, such as through a 

website, the same disclosures required for opening an account in a bank branch must be 

provided to the consumer before the account is opened or a service is provided. However, 

because the regulation also provides that disclosures may be mailed to customers who 

request written account information when the customer is not "present," account terms 

may not be immediately available for customers shopping online.29 In addition, Regulation 

E, which implements the Electronic Fund Transfer Act, requires disclosures of fees for 

electronic fund transfers or the right to make such transfers at the time the consumer 

contracts for the electronic fund transfer service or before the first transfer is made 

involving the consumer's account.3o Examples of fees for electronic fund transfer services 

24 Seeid. § 1030.1(b). 

2S Government Accountability Office, "Bank Fees: Federal Banking Regulators Could Better 

Ensure That Consumers Have ReqUired Disclosure Documents Prior to Opening Checking or 

Savings Accounts," January 2008, http://www.gao.gov/assets!280!271686.pdf(lastviewed 

July 9,2012). 

26 Id. at 6. 

27 1d. 

28 U.S. Public Interest Research Groups, "Big Banks, Bigger Fees 2011: A National Survey of 

Bank Fees and Fee Disclosure Policies," April 2011, 

http://www .uspirg.org/sites/pirglfi les/reports/uspirgBIG BAN KSREPORTON L Y. pdf (last 

viewed July 9, 2012). 

29 See 12 C.F.R. § 1030.4. 

30 See id. § 1005.7. 

27 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
87 


76129.034

include fees for ATM withdrawals or purchases made using a debit card.31 However, 

these disclosures also may be provided too late to assist shoppers. 

In 2008, the GAO found that information on fees, terms, and conditions was not readily 

available on the websites of the institutions visited by its "secret shopper" employees. The 

GAO was "unable to obtain a comprehensive list of fees from 103 of the 202 [websitesJ 

(51 percent). In addition, [it was] unable to obtain the terms and conditions from 134 of 

the 202 (66 percent)."32 

ACCESSIBILITY AND PROMINENCE 

Facilitas, Inc., a market research firm that publishes the website FindABetterBank.com 

and monitors checking account pricing daily at 139 institutions across the nation 

(including the 65 largest) has conducted additional research on disclosure of terms and 

pricing by depositories. The company tracks and scores the difficulty of finding 

information related to 24 common fees at each of the institutions the firm monitors, 

noting what terms are prominently posted online, what is only contained in legal 

disclosures, what is not posted and requires assistance from a customer service 

representative, and what is ostensibly not available outside of a branch. As of February 

2012, the average accessibiliry score earned by banks and credit unions observed by 

Facilitas was 2.9 on a scale of 0 to 6, where a score of 3.0 indicates "persistent navigation" 

is required to find fee information online and a 2.0 suggests fee information is difficult to 

find or is not available on the bank's website.33 

Other studies indicate that institutions that post information online often do so within 

complex legal disclosures. In a 2011 study of the web sites of the ten largest depository 

institutions, the Pew Charitable Trusts was generally able to find fee information online 

for the institutions' checking products. However, for many of the institutions, the study 

found that the fee schedules were contained within lengthy documents containing all the 

terms and conditions for checking and savings products, with a median length of 111 

pages.34 

31 See id. §§ 1005.7, 1005.16. 

32 Government Accountability Office, "Bank Fees: Federal Banking Regulators Could Better 

Ensure That Consumers Have Required Disclosure Documents Prior to Opening Checking or 

Savings Accounts," at 38, January 2008, http://www.gao.gov/assets/280/271686.pdf(last 

viewed July 9, 2012). 

33 Data from Facilitas, Inc., received February 28, 2012. Scores below 2.0 indicate that the 

consumer had to navigate through an automated phone system to get information, which at 

times was difficult. 

34 The Pew Health Group, "Hidden Risks: The Case for Safe and Transparent Checking 

Accounts," April 2011, at 6, 

http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Sa'fe_Checking_in_the_ 

Electronic_Age/Pew_Report_HiddenRisks.pdf (last viewed July 9,2012). In the 2012 follow-up 

to this study, Pew observed that the median length decreased to 69 pages; however the 

change was largely attributed to a change in methodology rather than an industry trend. The 

28 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
88 


76129.035

NOMENCLATURE AND COMPARABILITY 

Even when consumers are able to obtain complete pricing information on competing 

products, comparing those products can be challenging due to a lack of standardized 

descriptions for certain types of fees, especially with respect to overdraft transactions. For 

example, different depository institutions may use different terms for the fee charged to 

transfer money from a savings account or a line of credit to a checking account to cover 

an overdraft and for the fee charged if an overdraft is not repaid within a specified period 

of time. 

Product Complexity 

Subtle and sometimes significant variations in product pricing structures across 

institutions can make comparisons between products or providers cumbersome. For 

example, some accounts may charge monthly fees if the minimum daily balance 

requirements are not met for just one day or even for part of one day during a statement 

period, while other accounts have a fee trigger based upon the average monthly balance of 

the account. 

Some institution practices, frequently undisclosed, may make it particularly difficult to 

anticipate overdraft usage and costs. For example, some institutions may post check, 

automated clearing house (ACH), and debit transactions in order from the largest to the 

smallest amount, while others might employ a chronological or low-to-high posting order. 

These posting-order rules impact the size and number of items that generate overdraft or 

non-sufficient funds (NSF) fees. Because many payments do not settle on the day on 

which they were conducted or authorized, consumers are hard pressed to predict the 

precise order in which items will be processed on a given day. Importantly, many 

disclosures merely state that the institution reserves the right to determine the order in 

which to process items. 

Furthermore, many institutions' policies set risk-based limits based on an individual 

customer's credit standing, history with the institution, past overdraft usage, and other 

factors. Those account underwriting policies vary from institution to institution but 

cannot be used as a basis for comparing providers if undisclosed. 

Consumer Expectations 

Finally, as when shopping for other consumer financial products, consumers enrolling in 

new checking accounts may often underestimate the likelihood of negative outcomes, 

Pew Health Group, "Still Risky: An Update on the Safety and Transparency of Checking 

Accounts," June 2012, at 7, 

http://www.pewtrusts.org/uploadedFiles/wwwpewtrustsorg/Reports/Safe_Checking_in_the_ 

Electron<.Age/Pew_Safe_Checking_Still_Risky.pdf (last viewed July 9, 2012). 

29 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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such as overdrawing their accounts or incurring overdraft-related fees.35 Thus, consumers 

may pay less attention to these terms - even when they are well-disclosed - than to "front 

end" charges they will incur with more certainty, such as monthly maintenance fees, 

regardless of the fact that "back end" transaction fees may represent the majority of costs 

they are likely to incur. 

35 Michael S. Barr et al., "Behaviorally Informed Financial Services Regulation," October 2008, 

http://www.newamerica.net/files!naCbehavioraLv5.pdf Qast viewed July 9, 2012); ROGER 

BUEHLER ET AL., INSIDE THE PLANNING FALLACY: THE CAUSES AND CONSEQUENCES OF 

OPTIMlSTlC TIME PREDICTIONS (2002). Bar-Gill (2004) made similar observations with respect to 

the credit card markets. Oren Bar-Gill, "Seduction by Plastic," 2004, 

http://law.bepress.com/cgi/viewcontent.cgi?article= 1 0 13&context~alea Oast viewed July 9, 

2012). 

30 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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Delivering for American 

Consumers and Leveling 

the Playing Field 

The CFPB is authorized to exercise its authorities under federal consumer financial 

protection laws to administer, implement, and promote compliance with those laws. To 

this end, the Bureau has made efforts in the past year to improve the resources available 

to consumers and to build the infrastrucrure necessary for making consumer financial 

markets work better. 

Resources for Consumers 

The CFPB has launched a variety of offices to provide assistance and information to 

consumers. The Bureau strives to provide individualized help to consumers based on 

their specific issues with financial products and services, and it works to improve financial 

literacy and capability - amongst the public as a whole and consumers who traditionally 

faced particular challenges in the financial markets. 

CONSUMER RESPONSE 

The Bureau's Consumer Response team receives complaints and inquiries directly from 

consumers. The CFPB accepts complaints through its website and by telephone, mail, 

email, fax, and referral. Consumers file complaints on the Bureau's website using 

complaint forms tailored to specific products, and can also log on to a secure consumer 

portal to check the starus of a complaint and review a company's response. While on the 

website consumers can chat with a live agent to receive help completing a complaint form 

Consumers can also call the Bureau's toll-free number to ask questions, file a complaint, 

check the starus of a complaint, and more. The CFPB's U.S.-based contact centers handle 

calls with little-to-no wait times; they provide services to consumers in more than 180 

languages and to hearing- and speech-impaired consumers via a toll-free telephone 

31 SEMI·ANNUAL REPORT OFTHE CFPB, JULY 2012 
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number. Cutting-edge technology, including secure company and consumer portals, 

makes the process efficient and user-friendly for consumers and companies. For 

companies, the CFPB provides secure channels for communicating directly with 

dedicated staff about technical issues. 

As Consumer Response processes complaints and responds to inquiries, it continues to 

seek new ways to improve existing processes to make them as efficient, effective, and 

easy-to-use as possible. Based on feedback from consumers and compauies, as well as its 

own observations, the Consumer Response team identifies new opportunities to improve 

its processes and implement changes with each product launch. By applying the lessons 

learned through previous complaint function rollouts, the Consumer Response team has 

improved its intake process, enhanced commuuication with companies, and ensured the 

system's ease-of-use and effectiveness for consumers. The CFPB aims to provide services 

that are trusted by consumers and companies alike. 

CONSUMER EDUCATION AND ENGAGEMENT 

The CFPB's Division of Consumer Education and Engagement is responsible for 

developing and implementing initiatives to educate and empower consumers to make 

better-informed financial decisions. Improving fmancialliteracy and capability 

encompasses many short and longer-term effotts, including education and engagement 

with information and tools designed to provide clear and meaningful assistance to 

consumers at the moment they need it. 

Reaching out to consumers is essential to the work of this Division. Over the past year, 

the Division's Offices have engaged with different groups across the countty through 

more than 320 listening sessions, town halls and roundtables, visits to military installations, 

and other stakeholder events. These and other opportunities to hear directly from 

consumers about their fmanciaI needs, aspirations, and experiences help inform all of the 

Bureau's work. Through this outreach work, the CFPB has connected to more than 4,200 

stakeholder organizations that were involved in these events. 

As a 21 st-century agency, the Consumer Engagement office has focused on bringing 

financial decision-making tools and information to consumers through an accessible 

online format. Over the past year, a steadily increasing number of consumers took 

advantage of these offerings. The Bureau's website received more than 5 million unique 

views in the past year. The CFPB estimates that more than 3,750,000 of those were to 

areas of the site providing consumer tools, information, and assistance. 

32 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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www.consurnerfinance.gov/knowbeforeyouowe 

Know Before 

You Owe: 

Mortgages ) 

The Division supports one of the CFPB's signature campaigns, Know Before You Owe, 

which has begun to make the costs and risks of financial products and services easier to 

understand. Although consumers expect to be held responsible for their purchases and 

debts, they also deserve to be able to make informed choices based on long-term costs 

and risks of those products and services. Know Before You Owe encourages personal 

responsibility and smart decision-making through fair and effective representations of the 

key elements of the costs and risks of financial products and services. In 2011, the Bureau 

published prototype forms, tools, and contracts for mortgages, student loans, and credit 

cards that are designed to make important information easier to find. 

The Office of Consumer Engagement and Office for Students recently entered the 

second phase of its Know Before You Owe: Student Loans project by releasing a beta version 

of a financial aid comparison tool for public comment. This online tool is designed to 

help students and families make better-informed decisions about student loans. The beta 

version drew upon publicly available data provided by government statistical agencies, 

including information on more than 7,500 schools and institutions, including vocational 

schools and community, state, and private colleges. 

33 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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Paying for Collegeem 

University of the United States STlO('ER P@a:;c S2~ 966 fOR fmsT 'ffA£ 

t~~4'P~ 

$7,986 

ii&: ; : 

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-

$23,986 total 

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0. !..'!'1I~bs·6~~.:.'<!\.,c",,! 

SCHOOL INDICATORS 

www.consumerfinance.gov/payingforcollege 

The tool also included a "Military Benefits Calculator" that can estimate education 

benefits for servicemembers, veterans, and their families, The calculator includes military 

tuition assistance and Post-9/11 GI Bill benefits. The Bureau is currently evaluating the 

feedback from the public to inform the development of the final version of the tool. 

In addition, in February, the CFPB's Consumer Engagement and Technology & 

Innovation teams released a new design for ConsumerFinance.goy, which streamlined the 

site's information architecture. This new design has increased the abiliry of visitors to find 

information about the CFPB's regulations, requests for information, and guidance for 

supervised entities within one click of the homepage, 

:'aSk cfpb 

.. CredltCards 

_"'_.~Ai'i! 

--.-~""""'" ~~~~- -.... ~ 

ill Mortgages. 

""""",~ .. ~~ 

~ ~mt'i~'<m: 

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www.consumerfinance.gov/askcfpb 

Other categories 

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especially for 

34 SEMI·ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.041

In March, the Bureau released Ask CFPB, an interactive online tool that helps consumers 

find clear, unbiased answers to their financial questions. Ask CFPB currently contains 

more than 420 easy-to-read, plain-language entries written by the Bureau's subject-matter 

experts. Consumers can view entries organized by "most helpful," "most viewed," or 

"recently updated." The majority of the entries are focused on credit card and mortgage 

questions. In the coming months, the Bureau will expand the database to answer 

questions about a range of financial products and services, including student loans, 

vehicle loans, and checking and savings accounts. With this expansion, the Ask CFPB 

content will mirror the Consumer Response system, which is already answering consumer 

questions and taking complaints on these products and services. 

The Bureau also helped bring attention to Financial Capability Month in April with a 

series of events throughout the country. Through events on Capitol Hill; in Chicago, 

Illinois; New York City; and Amarillo, Texas, Director Cordray and Bureau leadership 

engaged financial educators and leaders in the field, rural and community groups, 

consumers, and bankers about how to improve consumers' financial literacy. In addition, 

the Assistant Director for the Office of Financial Education testified before Congress 

about financial capability. 

As Vice-Chair of the Financial Literacy and Education Commission (FLEC), Director 

Cordray helped bring attention to the issue by emphasizing how important it is for 

consumers to have the ability to understand and control their finances and that this ability 

creates a path to economic independence and mobility. 

The Bureau is committed to education that builds financial capability and that engages 

consumers at the right moment with information, tools, and skills to help them achieve 

their own financial goals. In keeping with that commitment, the Office of Financial 

Education helped educate people during tax time about opportunities to save a potrion of 

their tax refund by providing useful materials to Volunteer Income Tax Assistance 

(VITA) sites nationwide. The results of that initiative will help focus and inform future 

efforts to help consumers reach their savings goals. 

Servicemembers 

The CFPB's Office of Servicemember Affairs continues to reach out to servicemembers 

where they are, by visiting 27 military installations and National Guard units and 

participating in 18 town halls and 14 roundtables since October 2011. At these outreach 

events, Servicemember Affairs leadership and staff listened to servicemembers discuss the 

financial challenges they face, observed financial education training, and provided 

educational materials. In addition to the military units/installations visited, the Office 

participated in fifteen outreach events sponsored by external organizations seeking 

additional educational information about the Office and the CFPB. The Office used 

Military Saves Week in February as an opportunity to distribute a video message to all 

military units about the importance of saving for goals. Also in February, Assistant 

Director Holly Petraeus met with Pentagon officials, who asked the Office to assist in the 

creation of financial planning materials for all servicemembers leaving the military, an 

35 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.042

often difficult time of transition when such materials are particularly useful. The Office 

staff has delivered consumer financial education information to over 14,000 people since 

October 2011. 

Building on its prior work with the U.S. Department of the Treasury (Treasury) and 

others to address the particular challenges that servicemembers often face in the mortgage 

markets, the Office continued its efforts to address the unique challenges presented by 

Permanent Change of Station (PCS) orders. In April and May, the Office worked with 

Treasury to secure changes to the Home Affordable Modification Program (HAMP) that 

will provide more opportunities for mortgage assistance to military homeowners. Under 

the announced changes to HAMP, as of June 1, military homeowners and other families 

who are permanently displaced by a move due to PCS orders may still qualify as owneroccupants for a HAMP mortgage modification. In June, the Bureau, along with the 

prudential regulators - the Federal Deposit Insurance Corporation (FDIC), the Board of 

Governors of the Federal Reserve System (Federal Reserve, Federal Reserve Board, or 

Federal Reserve System), the Office of the Comptroller of the Currency (OCC), and the 

National Credit Union Administration (NCUA) - issued joint guidance to address 

mortgage servicer practices that may pose risks to homeowners who are serving in the 

military. The guidance is to ensure compliance with applicable consumer laws and 

regulations as they pertain to military homeowners who have received PCS orders. 

Older Americans 

The Division of Consumer Education and Engagement's Office for Older Americans has 

continued its outreach efforts around the country with its core constituency, key public 

officials, financial institutions, industry, advocates, and other stakeholders - including 81 

events with more than 2,700 participants since October 2011. The Office's outreach work 

is helping to raise awareness of growing consumer financial challenges faced by older 

Americans and to bring various interests together to develop solutions on the local, state, 

and national level. To assist with this work, the Office issued a Request for Information 

(RFI) about elder fmancial exploitation and other issues impacting seniors in June 2012. 

The Office also worked with the CFPB's Research, Markets and Regulations Division to 

issue a report and consumer guide about reverse mortgages, a loan product sold to 

homeowners aged 62 and older. 

Students 

Last fall, the Bureau launched its Know Before You Owe: Student Loans project to help 

students make informed decisions about the level of debt associated with choosing a 

college. The Bureau also continues to offer the Student Debt Repayment Assistant tool 

for graduates to help them better understand the existing programs to manage their 

student debt repayment options. 

36 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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How to pay for college 

Gr.mer from YOlK lcl!ool 

f~~PeJ! Grl;lMf 

,a...~p:*mmyqtll'$~ 

~)dIof~$1!y.>jj.f$'l~ 

How does yQur cost c.ompar-e? 

WW'vV. con s u rn e rfi n a l": ce, gov! stu d ents/k n o'vvb efo reyo u owe 

In cooperation with the U.S. Department of Education, the Bureau collected additional 

comment on a draft financial aid comparison tool. The final model format, to be 

prescribed by the Secretary of Education, will help students and families receive clear 

information on grants and loans when enrolling in an institution of higher education. In 

April, the President of the United States issued an Executive Order outlining principles 

that would require schools to provide the final version of the shopping sheet - to be 

prescribed by the Secretary of Education - to provide better information to recipients of 

military and veteran education benefits. 

In March, the Bureau began to accept complaints from the public on student loans. The 

CFPB's Student Loan Ombudsman works with Consumer Response, the U.S. 

Department of Education, and institutions of higher education, lenders, and others to 

assist borrowers with complaints on private education loans and to address challenges in 

the student lending marketplace. The Student Loan Ombudsman will submit a report to 

Congress later this year. In preparation for this report, the Bureau published a Notice and 

Request for Information in June to collect comments on the nature of private student 

loan complaints received by institutions of higher education, state agencies, industry, nonprofit organizations, and other interested parties. 

Financial Empowerment 

The Bureau launched its Office of Financial Empowerment in June 2012 to address the 

needs of consumers who traditionally have been underserved by the financial market. The 

Office began reaching out to community and asset building groups, cities and counties, 

and financial service providers. Since its inception, the Office has met with more than 25 

stakeholder groups. These meetings helped inform the Office's goal to develop and 

37 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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provide innovative approaches that will help respond to lower-income and economically 

vulnerable consumers' immediate needs for transaction accounts and credit, as well as 

their longer-term needs for emergency savings and wealth building. In addition, on June 

25, Director Cordray and Office leadership held a conference call to introduce the 

Office's work to more than 400 participants representing community organizations, banks 

and credit unions, academics and researchers, representatives from local and state 

government, coalitions, and others. 

Outreach 

In addition to the Bureau's work engaging and educating particular populations, the 

Bureau has hosted events all over the country to inform and receive input about its work 

on issues related to consumer financial products and services. More than 1,000 consumers 

have made their voices heard by participating in town halls and field hearings convened 

by the CFPB. The Bureau hosted two field hearings - on payday loans in Birmingham, 

Alabama and on prepaid cards in Durham, North Carolina - to actively solicit public 

input on key policy initiatives. In New York City, the CFPB convened a town hall 

meeting to learn from the public'S experiences with consumer financial products and 

services. While in Sioux Falls, South Dakota the Bureau unveiled its Financial Aid 

Comparison Shopper at a gathering of high school seniors embarking on the college 

selection process. 

In conjunction with field events, Director Cordray and Deputy Director Raj Date have 

held roundtables with community banks, credit unions, and other members of the 

38 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.045

financial services industry as part of our continuing commitment to engage with financial 

service providers. Since January 2012, Bureau representatives have met with hundreds of 

industry representatives and senior CFPB leadership has delivered several speeches at 

widely-artended indusrty conferences. The Bureau also has convened its first three small 

business panels in January, April, and May 2012. These panels, which are required 

whenever a rule that the CFPB is writing may have a significant economic impact on 

small businesses, provided vital insight from financial service providers as the Bureau 

strives to issue thoughtful, research-based rules. 

The Bureau has also actively solicited the perspective of consumer and civil rights groups. 

In conjunction with field events, Director Cordray and Deputy Director Date have held 

roundtables with community-based organizations across the country. Since January 2012, 

the CFPB's Office of Community Affairs has engaged over 3,500 community group 

representatives through more than 100 meetings, roundtables, and public appearances in 

Washington, DC and throughout the counrty. Since January 2012, senior CFPB 

leadership delivered speeches at four national nonprofit conferences. As with industry 

outteach, the Bureau has ensured that consumer groups' perspectives inform its internal 

deliberations on policy initiatives. 

Partnerships 

The Bureau has furthered many existing partnerships and formalized several new ones. 

The CFPB received over 700 completed applications to serve on its Consumer Advisory 

Board. This Board, mandated by Section 1014 of the Dodd-Frank Act, will comprise a 

varied group of consumers, community organizations, governmental officials, and 

industry representatives who will provide Director Cordray with advice and consultation 

on consumer financial issues. The CFPB will be establishing community bank and credit 

union advisory groups to help ensure that the agency's rules do not unduly harm entities 

that we do not supervise. 

To date, the Bureau has signed numerous memoranda of understanding (MODs) with 

intergovernmental partners, including federal agencies, state financial regulatory entities, 

and state attorneys general. The CFPB has conducted meetings with over 200 

intergovernmental stakeholders such as mayors, state legislators, and international officials 

to help ensure that consumer financial protection remains coordinated among these 

entities. 

39 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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Regulations and Guidance 

The Bureau is focusing intensively on implementing consumer protections required by 

the Dodd-Frank Act in anticipation of statutory deadlines in 2012 and 2013. In addition, 

the Bureau has issued a number of bulletins to provide guidance on regulatory matters 

and is analyzing public comments on potential projects to streamline regulations that it 

has inherited from other federal agencies. 

IMPLEMENTING STATUTORY PROTECTIONS 

As contemplated by the Dodd-Frank Act, the CFPB is in the process of issuing a 

comprehensive set of regulations to address deep flaws in the mortgage market that were 

revealed by the financial crisis. After months of preparation and outreach, including 

conducting several small business review panels, the Bureau expects over summer 2012 to 

issue proposed rules to address the following topics: 

• Streamlining and integrating federal mortgage disclosures to ensure that 

consumers who have applied for a mortgage loan understand the terms of the 

transaction and to facilitate compliance by lenders and other financial services 

providers. 

• Addressing widespread problems in the mortgage servicing industry hy 

implementing Dodd-Frank Act requirements regarding periodic statements, 

force-placed insurance, prompt crediting of payments, responses to requests for 

pay-off amounts, and error resolutions. In addition, the Bureau plans to propose 

basic requirements to ensure that servicers maintain reasonable information 

management systems and reach out early to work with borrowers who are having 

trouble paying their loans. 

Refining existing rules regarding the compensation and qualification of mortgage 

loan originators, including brokers and loan officers, as well as simplifying the 

structure of upfront points and fees on certain loans. 

• Implementing Dodd-Frank Act amendments to existing rules governing highcost mortgage loans to apply the requirements to a broader group of mortgages 

and to increase consumer protections. 

• Ensuring that consumers receive a copy of the appraisals conducted in 

connection with their mortgage loan applications. 

The Bureau is also working on an interagency basis to implement certain other DoddFrank Act requirements regarding appraisals. 

40 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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After the public comment periods end, the Bureau will work to finalize these proposals as 

well as two additional mortgage-related proposals that were issued by the Federal Reserve 

Board in 2011 to implement additional Dodd-Frank Act requirements regarding escrow 

accounts and lenders' obligations to assess borrowers' ability to repay mortgage loans, 

including certain protections from liability for "qualified mortgages." In May 2012, the 

Bureau reopened the comment period on the ability-to-repay rule to seek public feedback 

on certain information that the Bureau has received in connection with that rulemaking, 

as well as to request additional data. 

The Bureau expects to finalize most of the mortgage rules by January 21, 2013, in 

accordance with certain statutory deadlines. Due to additional consumer testing and other 

factors, final rules regarding the integration of federal mortgage disclosures are expected 

to be issued later in 2013. 

The Bureau is also working to implement other Dodd-Frank Act protections. In 2012, the 

Bureau issued new rules governing foreign money transfers (remittances), which 

previously have been largely excluded from federal consumer financial protection laws. 

Those rules, including new disclosures and error resolution procedures, will take effect in 

February 2013. The Bureau expects to issue a supplemental rule on remittances in 

summer 2012 to address certain issues on which it had sought additional public comment, 

in advance of the February 2013 implementation date. Additional rulemakings are 

contemplated concerning reporting of data regarding mortgage lending, lending to small 

businesses and women- and minority-owned businesses, and consumer access to their 

own transaction data. 

[n addition, the Bureau has begun to issue rules that relate to its supervisoty authority. 

41 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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It has proposed a rule that defines "larger participants" in the debt collection and 

consumer reporting markets, which will bring within the scope of the CFPB's supervisory 

authority debt collectors and consumer reporting agencies that meet certain annual receipt 

thresholds. This would be the CFPB's initial rule defining larger participants in nonbank 

markets and will be followed by a series of subsequent rulemakings to define larger 

participants in other markets. 

The Bureau has also proposed a rule to establish procedures by which the CFPB may 

make any nonbank entity that the CFPB has reasonable cause to determine is posing a 

risk to consumers subject to its supervisory authority. The proposed rule would establish 

a process for the CFPB to give notice to the nonbank entities of such determinations and 

would provide them with a reasonable opportunity to respond. The proposed rule would 

not impose new substantive consumer protection requirements on any nonbank entity. 

INTERPRETING AND STREAMLINING INHERITED 

REGULATIONS 

The Bureau is working with consumer and industry stakeholders on interpreting and 

streamlining regulations to implement existing federal consumer financial protection laws. 

These regulations were issued previously by other federal financial services regulators and 

transferred to the Bureau in July 2011. 

In 2012, the Bureau issued interpretive guidance on a variety of topics, including 

interpretation of regulations concerning mortgage loan originator compensation, licensing 

requirements for loan originators under the Secure and Fair Enforcement for Mortgage 

Licensing Act of 2008 (SAFE Act), and analysis of disparate impact under fair lending law. 

In addition, the Bureau has been exploring possible initiatives to update, modify, or 

eliminate inherited regulatory requirements that may be outdated, unduly burdensome, or 

unnecessaty. At the request of various stakeholders, the CFPB extended the comment 

period covering potential streamlining initiatives from March to June 2012. The Bureau is 

currently reviewing the comments received to plan follow-up action. 

Finally, the CFPB has begun issuing updated housekeeping rules that establish procedures 

for the public to obtain information from the Bureau under the Freedom of Information 

Act, the Privacy Act of 1974, and in legal proceedings, and that provide for the 

confidential treatment of information that the Bureau generates and obtains in connection 

with the exercise of its authorities. The CFPB also promulgated supplemental ethics 

regulations for Bureau employees establishing restrictions on outside employment and 

business activities; prohibitions on the ownership of certain financial interests; restrictions 

on seeking, obtaining or renegotiating credit and indebtedness; prohibitions on 

recommendations concerning debt and equity interests; disqualification requirements 

based on credit or indebtedness; prohibitions on purchasing certain assets; and 

restrictions on participating in particular matters involving outside entities. 

42 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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Su pervision 

The CFPB's supervision program seeks to ensure that large banks and other companies 

that provide financial products and services to consumers comply with federal consumer 

financial laws. The CFPB's supervision program has two parts. The large bank 

supervision program focuses on compliance with consumer protection laws and 

regulations by insured banks, thrifts, and credit unions with assets over $10 billion, their 

affiliates, and service providers. The npnbank supervision program focuses on 

compliance with the same laws and regulations by thousands of other "nonbank" 

companies, including mortgage lenders and brokers, credit bureaus, payday lenders, and 

their service providers. 

SUPERVISORY ACTIVITIES 

The CFPB has launched its nonbank supervision program, the first federal program to 

supervise nonbank providers of consumer financial products and services. The CFPB 

commenced examinations of mortgage lenders, brokers and servicers as well as shortterm, small dollar lenders, commonly referred to as payday lenders. These nonbank 

entities have cooperated in the examinations, which include information requests and onsite reviews. CFPB examiners continue to actively examine large banks in each of its four 

regions throughout the country. 

The CFPB will soon issue a policy that gives supervised entities an opportuniry to request 

review of a final, less than satisfactory, rating and the underlying supervisory 

determinations. The review would be conducted by CFPB officials from headquarters and 

from a CFPB region that was not involved in assigning the rating. This policy will support 

the goal of maintaining a supervisory program that is fair, data-driven and consistent. 

The Director of the CFPB is a member of the Federal Financial Institutions Examination 

Council (FFIEC), a formal interagency body empowered to prescribe uniform principles, 

standards, and report forms for the federal examination of insured depository institutions. 

Additionally, employees of the CFPB actively participate in nine FFIEC task forces, 

committees, and working groups. The CFPB currendy provides leadership for the 

FFIEC's Consumer Compliance Task Force. 

EXAMINATION MANUAL, PROCEDURES, AND 

OTHER SUPERVISORY GUIDANCE 

The CFPB originally issued its Supervision and Examination Manualon October 13, 2011. In 

January 2012, the CFPB issued two additions to the Manual. The Mortgage Origination 

Examination Procedures describe the types of information the Bureau's examiners will seek 

in order to review key mortgage originator activities, from initial advertisements and 

marketing practices to closing practices. The Short-Term, Small-Dollar Lending Examination 

43 SEMI-ANNUAL REPORT OF THE CFPB. JULY 2012 
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Procedures address the types of information necessary to review key payday lending 

activities, from initial advertisements and marketing to collection practices. 

The SAFE Act mandates a nationwide licensing and registration system for residential 

mortgage loan originators. On March 7, 2012, the CFPB issued interagency SAFE Act 

examination procedures for insured depository institutions. These procedures describe 

the types of information that the Bureau's examiners will gather to evaluate compliance 

by depository institutions with the SAFE Act's registration system requirements. 

The CFPB will soon issue the second version of its Sup~roision and Examination Manual 

Version 2.0 will replace outdated regulatory citations with the new CFPB citations, 

reflecting the fact that authoriry for federal consumer financial laws was transferred to the 

CFPB by the Dodd-Frank Act. 

In addition, the CFPB issued bulletins in the past six months that provide supervised 

entities with guidance on a variety of issues. These include: 

• 

• 

Confidentiality protections that are provided to entities during the examination 

process; 

The CFPB's expectation that supervised entities will oversee their business 

relationships with service providers in a manner that ensures compliance with 

federal consumer financial laws; and 

Clarification that under the SAFE Act a state may grant a transitional loan 

originator license to an individual who holds a valid loan originator license from 

another state, as discussed further below. 

INFRASTRUCTURE AND TECHNOLOGY 

The CFPB has fully implemented its Supervisory Examination System (SES) 1.0, which 

records, tracks, and provides current information and data about its supervision and 

examination activities. Because this system was originally designed for the Office of Thrift 

Supervision, it is not fully capable of addressing all aspects of the CFPB's consumer 

financial protection mandate. As a result, the CFPB is planning and moving forward with 

development of SES 2.0, a more technologically sophisticated program that will have 

enhanced capabilities that focus on the unique needs and functions of the CFPB's 

consumer compliance supervisory program. 

44 SEMI,ANNUAL REPORT OF THE CFPB, JULY 2012 
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THE SECURE AND FAIR ENFORCEMENT FOR 

MORTGAGE LICENSING ACT OF 2008 

Related to our Supervision mission is the CFPB's responsibility to administer the SAFE 

Act.36 Enacted on July 30, 2008, the SAFE Act mandates a nationwide licensing and 

registration system for residential mortgage loan originators (MLOs).37 The SAFE Act 

authorities transferred to the CFPB pursuant to the Dodd-Frank Act.38 

To accomplish the goal of national licensing and registration, the SAFE Act prohibits 

individuals from engaging in the business of MLOs without first obtaining and 

maintaining annually a particular type of registration. Individuals who are MLOs 

employed by depository, and certain subsidiary, institutions regulated by the federal 

banking agencies39 or the Farm Credit Administration (FCA) must federally register as a 

registered loan originator and obtain a unique identifier. All other individuals who are 

MLOs must be licensed by a state, register as a state-licensed loan originator, and obtain a 

unique identifier. The SAFE Act requires that federal registration and state licensing and 

registration be accomplished through the Nationwide Mortgage Licensing System and 

Registry (NMLSR), an online registration system. 

The federal agencies previously charged with SAFE Act responsibilities had issued 

regulations to implement the Act. 4O In light of the transfer to the CFPB of the SAFE Act 

rulemaking authority of the federal banking agencies, the FCA, the Office of Thrift 

Supervision (OTS), and the U.S. Department of Housing and Urban Development 

36 The SAFE Act requires an annual summary of the CFPB's activities under the Act. 12 U.S.c. 

§ 5115(a). This section of the CFPB's Semi-Annual Report constitutes the annual SAFE Act 

Report for 201 2. 

37 More specifically, the SAFE Act as enacted required the OCC, the FDIC, the OTS, and the 

NCUA, with the Farm Credit Administration (FCA), and through the FFIEC, to develop and 

maintain a federal system for registering MLOs employed by certain oftheir regulated 

institutions. In addition, the SAFE Act as enacted charged HUD with oversight of the states' 

compliance with systems for licensing and registering other MLOs in accordance with 

minimum standards established in the SAFE Act. 

38 With this transfer of authorities, the CFPB assumed: (1) responsibility for developing and 

maintaining the federal registration system (including rulemaking authority); (2) supervisory 

and enforcement authority for SAFE Act compliance for entities under the CFPB's jurisdiction; 

(3) oversight and related authority relating to states' compliance with 5AFE Act standards for 

MLO licensing systems; and (4) related rulemaking authority. 

39 Defined in the SAFE Act as the Federal Reserve Board, the OCC, the NCUA, and the FDIC, 

collectively. 

40 In 2010, the Federal banking agencies, the OTS (subsequently eliminated by the DoddFrank Act) and the FCA published a combined final rule establishing similar requirements for 

federal registration. 75 Fed. Reg. 44,656 (July 28,2010). In 2011, HUD published a final rule 

setting minimum standards for state licensing and registration. 76 Fed. Reg. 38,464 (June 30, 

2011). 

45 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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(HUD), the CFPB published an interim final rule establishing a new Regulation G (SAFE 

Mortgage Licensing Act-Federal Registration of Residential Mortgage Loan Originators) 

and a new Regulation H (SAFE Mortgage Licensing Act-State Compliance and Bureau 

Registration System).41 This interim final rule became effective on December 30, 2011, 

and does not impose any new substantive obligations on persons subject to the existing 

SAFE Act regulations. 

Since the transfer to the CFPB of the SAFE Act authorities, the Bureau has fielded 

questions regarding the validity of transitional licenses for MLOs subject to state-licensing 

requirements. The CFPB issued a bulletin on April 19, 2012, that clarified the questions 

of whether: (1) a transitional license would allow a MLO who is licensed in one state to 

act as a MLO in another state; and (2) a transitional license would allow a federally 

registered loan originator to act as a state-licensed MLO. As stated in that bulletin, the 

SAFE Act and Regulation H generally require that a state prohibit an individual subject to 

state MLO-licensing requirements from engaging in the business of a MLO in the state 

unless the individual first: (1) registers as a loan originator through and obtains a unique 

identifier from the NMLSR; and (2) meets certain minimum standards. The Bulletin 

clarifies that the SAFE Act and Regulation H allow a state, if it chooses, to provide a 

transitional MLO license to an individual who holds a valid MLO license from another 

state. This guidance, therefore, has the potential to increase employment mobility for 

state-licensed MLOs who move from one state to another. Because these MLOs are 

already licensed, issuance of such a transitional license is consistent with the protection 

provided to the public by the SAFE Act. However, states cannot permit a registered, but 

unlicensed, loan originator who is no longer employed by a federally regulated institution 

to act as a MLO while pursuing a state license. Recognizing that this may create 

impediments to job changes by MLOs, the Bureau will work with the states, industry, and 

the NMLSR to minimize these impediments going forward, consistent with the SAFE 

Act. 

41 76 Fed. Reg. 78,483 (Dec. 19, 2011). 

46 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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Enforcement 

The CFPB aims to enforce the consumer protection laws within the Bureau's jurisdiction 

consistently and to support consumer-protection efforts nationwide by investigating 

potential violations both independently and in conjunction with other state and federal 

law enforcement agencies. 

CONDUCTING INVESTIGATIONS 

Since the CFPB's launch, the Office of Enforcement has been conducting research and 

investigations of potential violations of federal consumer financial laws identified by 

CFPB staff, transferred to the Bureau by the prudential regulators and HUD, or referred 

to the Bureau by consumers and others. Enforcement has endeavored to focus its 

investigative resources on the violations of law that cause the greatest harm to consumers. 

The investigations currently underway span the full breadth of the Bureau's enforcement 

jurisdiction. Further detail about ongoing investigations will not generally be made public 

by the Bureau until a public enforcement action is flied. 

JOINT TASK FORCE ON FORECLOSURE SCAMS 

In December 2011, the CFPB; the Office of the Special Inspector General for the 

Troubled Asset Relief Program (SIGTARP), and the U.S. Department of the Treasury 

announced the creation of a joint task force to combat scams targeted at homeowners 

seeking to apply for the Home Affordable Modification Program, a foreclosureprevention program administered by Treasury. This joint task force aims to protect 

taxpayers by investigating and shutting down these scams and by providing education 

programs to vulnerable homeowners. 

RESIDENTIAL MORTGAGE-BACKED SECURITIES 

WORKING GROUP 

In January 2012, the CFPB joined the Residential Mortgage-Backed Securities (RMBS) 

Working Group, a group established by the Attorney General as a part of the Financial 

Fraud Enforcement Task Force (FFETF). The RMBS Working Group consists of a 

broad coalition of state and federal officials, including the U.S. Department of Justice, the 

U.S. Attorneys' Offices, the U.S. Securities and Exchange Commission, the New York 

State Attorney General's Office, HUD, HUD's Office ofInspector General, the Federal 

Bureau ofInvestigation, the Federal Housing Finance Agency's Office ofInspector 

General, and other State Artorneys General. The working group and its members are 

focused on investigating potential false or misleading statements, deception, or other 

misconduct by market participants in the creation, packaging, and sale of mortgage47 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.054

backed securities. The working group also collaborates on future and current 

investigations, pools resources, and streamlines processes to ensure that if fraud or 

misconduct has occurred justice is achieved for the victims. Within the working group, 

the CFPB is focusing its efforts on obtaining relief for consumers and promoting healthy 

consumer finance markets. 

WHISTLEBLOWER HOTLINE 

In December 2011, the CFPB announced several ways in which individuals can alert the 

Bureau about potential violations of federal consumer financial laws. Current or former 

employees, contractors and vendors, and competitor companies may submit information 

or tips. People who submit tips may request confidentiality or even remain anonymous to 

the extent permitted by law. 

Fair Lending 

The CFPB's Fair Lending and Equal Opportunity Office leads the Bureau's efforts to 

ensure fair, equitable, and nondiscriminatory access to credit for individuals and 

communities. The Bureau's inaugural Semi-Annual Report described the tools Fair 

Lending uses to work toward this goal. This discussion will focus on one of those tools: 

outreach to consumers, industry, and federal and state agencies. 42 

OUTREACH AND COLLABORATION 

The Fair Lending Office engaged in numerous outreach events from January to June 2012 

in locations throughout the country, reaching consumers, consumer advocates, and 

industry representatives who are interested in promoting fair lending compliance. 

Apri12012 was Fair Lending and Fair Housing Month, and the Bureau hosted several 

activities to focus attention on these issues. On April 18, 2012, Director Cordray 

announced at an outreach event held at the National Community Reinvestment Coalition 

annual conference that the Bureau is "giving fair notice on fair lending" by issuing CFPB 

Bulletin 2012-04 which provides guidance on compliance with the Equal Credit 

42 Separately, and pursuant to the Dodd-Frank Act's requirement in Section 1013(c)(2)(d)that 

the Bureau report to Congress annually on its efforts to fulfill its fair lending mission, the 

Office of Fair Lending will submit a· single report in fall 2012 in satisfaction of this requirement, 

and the Bureau's reporting requirements under 15 U.s.c. § 1691 f of the Equal Credit 

Opportunity Act and 12 U.s.C. § 2807 ofthe Home Mortgage Disclosure Act. 

48 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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Opportunity Act and Regulation B.43 The Fair Lending Office also issued a pamphlet 

aimed at educating consumers about credit discrimination and their rights. 44 

Fair Lending also has engaged in a variety of efforts to coordinate with other federal 

supervisory and enforcement agencies, and has begun outreach to state agencies. Those 

efforts include joining the U.S. Department of Justice, HUD, and the Federal Reserve as a 

co-chair of the Federal Financial Fraud Enforcement Task Force's Non-Discrimination 

Working Group. The Task Force brings together representatives from law enforcement 

agencies, regulatory authorities, inspectors general, state attorneys general, and local law 

enforcement in order to coordinate and increase effective enforcement in the lending 

discrimination and mortgage fraud areas. The Fair Lending Office also participates in the 

Federal Interagency Task Force on Fair Lending which brings together various federal 

regulatory agencies45 to discuss and coordinate fair lending activities. 

43 See 1 S U.s.c. § 1691(a)(1); 12 C.F.R. § 1002.4. The Bulletin is posted on the Bureau's 

website at 

http://fi les. Consu merF i na n ce. g ov If/2 0 1404_ cfp b _bu' leti n_: endin g_ d iscri min ation. pdf. 

44 The pamphlet is available on the Bureau's website at 

http://fi I es. Co n SU merF i na nee .gov If 1201204_ cfp b _ C red i t_Discrim i nalio n _Broc h u r e .p d f. 

45 The following agencies participate in the Federal Interagency Task Force on Fair Lending: 

HUD, the U.S. Department of Justice, the OCC, the Federal Reserve, the FDIC, the Federal 

Housing Finance Agency, the NCUA, and the FTC. 

49 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.056

Building a Great 

Institution: Update 

The CFPB strives to promote transparency, accountability, and fairness. Built on these 

values, the CFPB is better able to make consumer financial markets work for consumers, 

honest businesses, and the economy. 

Open Government 

A key mission of the CFPB is to make consumer financial products and services more 

transparent in the consumer marketplace. The CFPB believes it should demonstrate that 

same level of commitment to transparency in its own activities. To accomplish this, the 

Bureau utilizes its website as the primary vehicle to share information on the operations 

and decisions that the CFPB undertakes every day. 

Recent examples over the last few months that illustrate the Bureau's commitment to 

openness include: 

• Freedom of Information Act (FOIA) 

• 

50 

The FOIA is a fundamental transparency law that gives consumers the statutory 

right to request information owned by the CFPB. A FOIA and Privacy Act 

Request Guidebook was created to provide specific information about submitting 

requests, fees, appeals, and more. The CFPB has also created an Index of Major 

Information Systems. This list highlights specific "systems" that may contain 

information sought under the FOIA and Privacy Act, and thus makes it easier for 

requestors to understand what information CFPB maintains. 

Leadership Calendars 

The CFPB is committed to letting consumers know the daily schedules of its 

senior leadership. The monthly calendars of Director Richard Cordray, Deputy 

Director Raj Date, and the past Special Advisor to the Secretary of the Treasury 

SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.057

• 

• 

• 

51 

Elizabeth Warren have been posted to the Bureau's website. The Bureau 

provides the calendars in multiple formats on a monthly basis in order to 

enhance their usefulness. 

Budget Updates 

The CFPB publishes quarterly budget updates on its website at 

ConsumerF.indnce.guv !budge( to keep Congress and the public informed about 

how the Bureau's funds are being spent. In addition, the Bureau has also 

published on its website a Fiscal Year (FY) 2013 budget in brief and budget 

justification, in addition to the Bureau's funding requests. 

Procurement 

The CFPB posted the FY2011 Service Contract Inventory to its website. Website 

updates include a summary report of the CFPB's ten largest service contract 

obligations and special interest functions, as well as a worksheet that includes the 

inventory of awarded service contract transactions in excess of $25,000. 

General Reports 

The CFPB posts a variety of reports to illustrate the progress in specific areas of 

the Bureau's operations. Recent reports include the Bureau's compliance with the 

Plain Writing Act, a comprehensive update on Consumer Response from July 

through December 2011, and a summary of activities related to the 

administration of the Fair Debt Collection Practices Act. 

Guidance Updates 

From time to time, the CFPB will post letters and other materials that provide 

guidance to industry and members of the public. The Bureau has provided 

additional guidance on its website about mortgage origination examination 

procedures; short-term, small-dollar lending exaruination procedures; and an 

interagency SAFE Act examination procedure for federally regulated depository 

institutions. Bulletins on transitional licensing of mortgage loan originators under 

the SAFE Act, lending discriruination, service providers, and payment of 

compensation to loan originators were also posted to the website. 

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Budget 

The Bureau is committed to fulfilling its statutory responsibilities and delivering value to 

American consumers. This means being accountable and using our resources wisely and 

carefully. 

HOW THE CFPB IS FUNDED 

The CFPB is funded principally by transfers from the Federal Reserve System, up to 

limits set fotth in the Dodd-Frank Act. The Director of the CFPB requests transfers from 

the Federal Reserve System in amounts that are reasonably necessary to carry out the 

Bureau's mission. Annual funding from the Federal Reserve System is capped at a fixed 

percentage of the total 2009 operating expenses of the Federal Reserve System, equal to: 

10 percent of these Federal Reserve System expenses (or approximately $498 

million) in FY2011; 

• 11 percent of these expenses (or approximately $547.8 million) in FY2012; and 

• 12 percent of these expenses (or approximately $597.6 million) in FY2013 and 

each year thereafter, subject to annual inflation adjustments.46 

During FY2012, to date, the CFPB has requested transfers from the Federal Reserve 

totaling $257.7 million to fund Bureau operations and activities as described in this 

report.47 

These funds are held in an account for the Bureau at the Federal Reserve Bank of New 

York. Bureau funds that are not funding current needs of the CFPB are invested in 

Treasury securities. Earnings from those investments are also deposited into the Bureau's 

account.48 

If the authorized transfers from the Federal Reserve are not sufficient in FY2010-2014, 

the CFPB can ask Congress for up to $200 million, subject to the appropriations 

process.49 The CFPB did not request an appropriation in FY2011 and does not plan on 

doing so in FY2012 or FY2013. 

46 See Dodd-Frank Act, Pub. L. No. 111-203, Sec. 1017(a)(2). 

47 The Bureau posts all of its funding request letters on its website at 

ConsumerFinance.gov/budget. 

48 See Dodd.Frank Act, Pub. L. No. 111-203, Sec. 1017(b). 

49 See id. § 1017(e). 

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Pursuant to the Dodd-Frank Act, the CFPB is also authorized to collect and retain for 

specified purposes civil penalties collected against any person in any judicial or 

administrative action under federal consumer financiallaws.so The CFPB generally is 

authorized to use these funds for payment of restitution to victims, but may also use the 

funds for purposes of consumer education and financial literacy programs under certain 

circumstances. The CFPB maintains a separate account for these funds at the Federal 

Reserve Bank of New York. The CFPB did not collect any civil penalties during the first 

three quarters in FY2012. 

KEY CFPB EXPENDITURES IN FISCAL YEAR 2012 

Through June 30, 2012, the CFPB has spent $247 millions1 in FY2012, and has incurred 

$208.3 million in obligations, including $101.1 million in salary and benefits, $91.0 million 

in contract and support services, and $16.1 million in travel and other expenses. 52 

Approximately half of the Bureau's spending was related to employee compensation and 

benefits and travel for employees on board. Over 70 percent of the amounts obligated in 

contracts and support services were for the acquisition of general administrative and 

support services from other government agencies and for the development and 

maintenance of the Consumer Response and additional information technology systems. 

50 See id. § 1017(d). 

51 This amount includes commitments for new procurements expected to be awarded and 

obligated in subsequent FY2012 quarters. 

52 Budget and spending information is made available at COl1sumerFinance.gov/budget. 

53 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.060

FIGURE 6: FY2012 YEAR-TO-DATE SPENDING BY EXPENSE 

CATEGORY 

Grand Total (as of 6130/2012) 

$247,030,675 

$9,013,592 $125,144 

$1,743,755 

Supplies & Materials ~ 

Equipment Transportation of Things iJ 

I I '1------ ~!~?,& D;v;deod, 

$29,903,208 

8 ____ ~-~ L-~.",,"~'- 7 Travel 

51,638,990 Printing & Reproduction $1,125,593 Rents, Communications, 

Utilities, & Mise 

• Includes open commitments for procurements for which a vendor has not yet been determined and funds have not yet 

been obligated. 

53 "Other Contractual Services" includes the cost of operating the Bureau's Consumer 

Response call centers in Iowa and New Mexico. 

54 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.061

TABLE 4: 2012 YEAR-TO-DATE SPENDING BY DIVISION/PROGRAM 

AREA 

Division/Program Area 

Director 

FY2012 Spending to Date 

2,237,031 

Chief Operating Officer 54;536,696 

Consumer Education & Engagement 

Research, Markets & Reguiations 

Supervision, Enforcement, Fair Lending 

General Counsel 

12,365,155 

21,547,487 

62,839,444 

5,606,288 

External Affairs 2,453,989 

Centralized Services 85,4'\4,585 

Grand Total (as of6/30/12) $ 247,030,675 

The Bureau's significant FY2012 ohligations through June 2012 include: 

55 

$19.7 million to Treasury for various administrative support services, including 

infortnation technology and human resource support, temporary office space, 

and detailees; 

$11.8 million to Treasury's Office of the Comptroller of the Currency for office 

space; 

$7.6 million to Treasury's Bureau of the Public Debt for cross-servicing of 

various human resource and financial management services, such as core financial 

accounting, transaction processing and travel; 

$4.0 million to a contractor for the development and operations of the Consumer 

Response System; 

$3.7 million to a contractor for human resource support services; 

$3.7 million to an information technology contractor for project management 

support services; 

$3.1 million to a contractor for hosting, cloud infrastructure, and system 

administration services; and 

$2.9 million for collection and analysis of credit card data to assist the Bureau. 

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76129.062

KEY CFPB EXPENDITURES IN FISCAL YEAR 2011 

During FY2011, the majority of CFPB spending was related to essential, one-time costs 

related to standing up the Bureau, such as information technology and mission-specific 

and human capital support. The CFPB incurred $123.3 million in obligations, including 

$68.7 million in contract and support services, $48.4 million in salary and benefits, and 

$6.2 million in other expenses. 

Implementation Activities 

. The Bureau's significant start-up expenditures in FY2011 included: 

• $18.6 million to Treasury for various administrative support services, including 

information technology and human resource support, office space, and detailees; 

• $6.7 million to Treasury's Office of the Comptroller of the Currency for office 

space and support services for complaint processing; 

• 

• 

• 

$6 million to Treasury's Bureau of the Public Debt for cross-servicing of various 

human resource and financial management services, such as core financial 

accounting, transaction processing and travel; 

$4.4 million to a contractor for human capital policies and assistance in 

developing salary and benefits packages consistent with statutory requirements; 

$4.3 million to an information technology contractor for project management 

support services; and 

$4.3 million to a contractor for the development of Consumer Response. 

THE CFPB'S BUDGET PROCESS 

The Bureau's Chief Operating Officer (COO) is responsible for coordinating activities 

related to the development of the CFPB's annual budget. The Office of the Chief 

Financial Officer within the COO has responsibility for developing the budget, and works 

in close partnership with the Office of the Human Capital, the Office of Procurement, 

the Technology and Innovation team, and other program offices to develop budget and 

staffing estimates in consideration of statutory requirements, performance goals, and 

priorities of the Bureau. The CFPB Director ultimately approves the CFPB budget. A 

discussion of the Bureau's goals and priorities, an updated set of performance measures, 

spending and staffing (FTE) estimates for FY2013 and projections for FY2014 will be 

included in the next CFPB Budget Justification, which is expected to be published in 

February 2013, in conjunction with the FY2014 President's Budget. 

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76129.063

Diversity and Excellence 

RECRUITING AND HIRING 

Over the past year, the CFPB has endeavored to recruit and hire highly qualified 

individuals. These efforts have focused on filling vacancies at its headquarters in 

Washington, DC, and in its examiner workforce distributed across the country. The 

Bureau's examiners are organized by regions and anchored by key strategic satellite offices 

in three of the nation's financial hubs - Chicago, Illinois; New York City; and San 

Francisco, California. As of June 30, 2012, we have 889 staff on-board and working to 

carry out the CFPB's mission. These include approximately 230 highly qualified regulators, 

researchers, lawyers, and market practitioners who transferred from the consumer 

protection divisions of the prudential regulators and other federal agencies. 

To continue this momentum, the CFPB is implementing a strategic plan to develop a 

sustainable pipeline of diverse candidates for occupations across the Bureau. This strategy 

includes: 

• 

• 

• 

57 

Leveraging existing staff to be the CFPB's most vocal and effective recruiters; 

Using social media and web 2.0 technology to connect people and get the word 

out about employment opportunities at the Bureau; 

Conducting outreach events that feature our senior leadership and attract people 

to an agency that we hope they will view as a "best place to serve;" and 

Creating development programs for incoming staff such as the Presidential 

Management Fellow program and our Honors Analysts. 

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FIGURE 7: QUARTERLY GROWTH OF CFPB POSITIONS FILLED 

THROUGH JUNE 30, 2012 

lI1 

UJ 

UJ 

9 

c.. 

~ 

UJ 

FY11 

01 

FY11 

02 

FY11 

Q3 

FY1' 

04 

FY12 

01 

FISCAL YEARS 2011 - 2012 

FY12 

02 

889 

FY12 

03 

EDUCATION, TRAINING AND ENGAGEMENT 

Since its creation, the CFPB has focused on srrong engagement with existing and 

potential Bureau staff. It has accomplished this through education, rraining, and 

engagement programs. As the Bureau matures, the CFPB continues to build and offer: 

• Robust programs that aim to keep its employees current on the latest skills they 

need to conduct their work and be successful; 

• Vehicles for full participation in a vibrant culture that adheres to the Bureau's 

values of Serve, Lead, and Innovate, and that fosters the successful achievement 

of its mission; and 

• Programs and methods to ensure that the CFPB attracts the best, brightest, and 

most diverse group possible to carry out its mission. 

The CFPB is developing a learning environment tailored to meet the specific needs of the 

Bureau's divisions and the individuals within them. 

58 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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In addition, the Bureau's Office of Human Capital (OHC) is working to identify, culrivate, 

and sustain a diverse workforce and inclusive work environment to further the CFPB's 

success. The OHC is making efforts to develop a culture that encourages collaboration, 

flexibility, and fairness, and tbat leverages diversity tbroughout the organization so that all 

individuals are equipped to Serve, Lead, and Innovate. 

DIVERSITY 

Diversity has been a cornerstone of the Bureau's foundation, its strategic workforce 

planning programs, and its contracting since its establishment.54 In January 2012, tbe 

Bureau formally established an Office of Minority and Women Inclusion (OMWI) to 

ensure that inclusion continues to inform its work, and in April 2012 hired the first 

Director for tbis office. 

The OMWI focuses on developing and refining standards for: 

• 

• 

Equal employment opportunity, workforce diversity, and inclusion at all levels of 

tbe Bureau; 

Increased participation of minority-owned and women-owned businesses in tbe 

CFPB's programs and contracts; and 

Assessing tbe diversity policies and practices of companies that the CFPB 

supervises. 

54 This discussion presents an overview of the Bureau's effort to promote diversity across its 

workforce and contractor support community. A more complete analysis will be presented in 

the Bureau's required annual Human Capital report, which will be published later in 2012. In 

July 2011, the Bureau published a report on its goals for recruitment and retention, training 

and workforce development, and workforce flexibilities. That report is available on CFPB's 

website: ConsumerFinance.gov. 

59 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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The CFPB has met with representatives from the Financial Institutions Reform, Recovery, 

and Enforcement Act (FIRREA) agencies 55 and other stakeholders to assess how best to 

structure and staff the OMWI and to help identify best practices for workforce supplier 

diversity. 

5S These agencies include the OCC, the OTS, the FDIC, the NCUA, the Commodity Futures 

Trading Commission, the Securities and Exchange Commission, and the Federal Reserve 

Board. See 12 U.S.c. § 1833b; 15 U.S.c. § l8d. 

60 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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DIVERSITY IN THE CFPB'S WORKFORCE 

As of June 30 2012, the CFPB's workforce is 49 percent women and 51 percent men. The 

CFPB workforce is comprised of 33 percent minorities. 

FIGURE 8: BUREAU-WIDE GENDER AND MINORITY STATISTICS TO 

FIRREA COMPARISONS 

49% 

Female 

FIRREA Female Comparison 

FIR REA Minority Comparison 

Figures 8 compares CFPB's workforce to the FIRREA community with respect to 

diversity by gender, race, and national origin. 

OMWI'S ROLE AT THE CFPB 

The OMWI will help all parts of the Bureau bring diverse perspectives to bear on its work 

and promote inclusive hiring and contracting practices. 

Recruitment 

As the CFPB continues to grow, the OMWI will work with the federal OMWI 

community, local and national media, and varied stakeholders to broaden awareness of 

job opportunities at the Bureau in order to promote the opportunities for women and 

minorities in its workforce and to diversify its applicant pool. In addition to promoting 

diverse applicant pools for immediate openings, the OMWI will work with the OHC to 

develop long-term plans that focus on active participation at recruitment and outreach 

events for all levels of candidates. The aim is to continually support the capacity to artract 

diverse applicants and ensure that the CFPB has the benefit of a diverse and qualified 

pool of candidates for all job openings. 

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Regulatory Oversight 

Under the Dodd-Frank Act, the OMWI must assess and monitor the diversity policies 

and practices of the entities that the CFPB supervises. The OMWI will continue to 

support the Bureau's efforts to defme procedures for conducting this oversight, working 

with other regulatoty agencies and consulting with appropriate stakeholders. 

DIVERSIFYING PROCUREMENT PARTICIPANTS 

The CFPB continues to promote diversity among the companies that compete to receive 

its contracts. The Bureau's Procurement Office is measuring obligations for certain small 

business contracts awarded to minority-owned small disadvantaged businesses and 

women-owned small businesses against goals based on the percentage of total dollars 

spent or obligated on contract actions.56 As shown in Figure 9 for FY2012 through June 

30,2012,10.57 percent ofCFPB contract dollars went to small disadvantaged businesses. 

Of that amount, 80 percent or roughly $4.1 million was awarded to certified 8(a) firms. 

Additionally, 5.30 percent of contract dollars went to women-owned small businesses.57 

56 Obligations are meas~ured for contract awards valued above $3,000. 

57 Final FY2012 results will be validated in an annual data certification due to OMB in January 

2013. 

62 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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FIGURE 9: FY12 SOCIOECONOMIC OBLIGATIONS THROUGH JUNE 

30,2012 

Small disadvantaged business 

Women owned small business 

Service disabled veteran owned small business 

HubZone small business 

Other small business 

21.1% 

Small business 

78.9% 

Large business 

Obligated 

Dollars 

$5.1 M 

$2.6M 

$1.2M 

$O.9M 

$O.4M 

The CFPB Procurement Office will work along with the O.i\fWI to research and develop 

strategies to increase the levels at which minority and women-owned enterprises - both 

large and small- participate in the CFPB's contracting opportunities. The OM\VI will 

also develop procedures to promote opportunities for fair inclusion of women and 

minorities within the population of contractor staff and, as applicable, subcontractor staff 

in accordance with the Dodd-Frank Act. 

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APPENDIX A: 

More about the CFPB 

<D GENERAL INFORMATION: 

Email Address: info@consumerllnance.gov 

Phone Number: 202-435-7000 

Mailing Address: 

Consumer Financial Protection Bureau 

AnN: Employee Name, Division, and/or Office Number 

1700 G Street NW 

Washington, DC 20552 

\. CONSUMER RESPONSE/ COMPLAINTS: 

Hours of Operation: 8 am - 8 pm EST 

Toll Free #: 855-411-CFPB (2372) 

Espanol: 855-411-CFPB (2372) 

TIY/TDD: 855-729-CFPB (2372) 

Fax #: 855-237-2392 

114 Consumer Response/Complaint Mailing Address: 

Consumer Financial Protection Bureau 

PO Box 4503 

Iowa City, Iowa 52244 

~ WHISTLEBLOWERS: 

Email: whistleblower@consumerfinance.gov 

Toll Free #: 855-695-7974 

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d§-I PRESS & MEDIA REQUESTS: 

Emw:press@OconSUlnerfinance·w 

~ OFFICE OF LEGISLATIVE AFFAIRS: 

Legislative Affairs: 202-435-7960 

.I. CFPB OMBUDSMAN'S OFFICE: 

Emw: CFPBOmbuosmanra;cfpb.gov 

Webpage: 

Toll Free #: 855-830-7880 

Fax Number: 202-435-7888 

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APPENDIX B: 

Statutory Reporting 

Requirements 

This Appendix provides a guide to the Bureau's response to the reporting requirements of 

Section 1016(c) of the Dodd-Fr.nkAct, The sections of the report identified below 

respond to Section l016(c)'s requirements. 

Statutory 

Subsection Reporting Requirement 

A discussion of the significant problems faced by 

consumers in shopping for or obtaining consumer 

financial products or services 

~ j~tificiti()il 'of the ~urea~'s, ~u~t ,~eq~st for 

the previou~ year 

A list of significant rules and orders adopted by the 

Bureau, as well as other significant initiatives 

conducted by the Bureau. during the preceding 

year and the plan of the Bureau for rules, orders, 

or other initiatives to be undertaken during the 

upcoming period 

An '~al~is 'of ~~mpIaID~ ~u~ t~ns':1mef 

financial pro~l:lcts'~1: services ttt;1t the, Bft!~u l\as 

receive~ ~d ~oll~te~' in, ~~ ~~al, database on 

complaints'durj.ng the prec'eding yea!' 

A list, with a brief statement of the issues, of the 

public supervisory and enforcement actions to 

which the Bureau was a party during the preceding 

year 

Section 

Consumer Challenges in Obtaining 

Financial Products and Services -

Shopping Challenges 

BUilding" Great InstitUtion: Up&te ~ 

Budget; 

ArPen~H ~ Finan'cia! ;md Budget 

Reports 

Appendix C - Significant Rules, Orders, 

and Initiatives 

Consumer eliall~Dge,~ jnqlit'ai!>ing 

Finan'cia! Products andSeJ:Vlces - 'Consumer Concerns ' 

N/A" 

Page 

25-30 

68-70 

N/A 

6 

.10 •• ctiQ.ns 'taken' regarding rules, orders,and 

su:p~sorY' actio~s, ~th ~spect,to covered 

~r~orts'whi~ are not credit unions 'OJ; depo~itory 

institutions 

Apl""'dixD - Actions Taken Regitding 

RuI .. ;~"'is, 'and SupeJ:Vlso,y ACtions, 

,with R<cipect.to Co"""",\ Persons w,hiI:h 71;, 

,'Are Not Ctedit UJoons or Depositoty' 

Iristiiutibns ' 

58 The Bureau has been a party to no such actions during the preceding year. 

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76129.073

s 

An assessment of significant actions by State 

attorneys general or State regulators relating to 

Federal consumer financial law 

An analysis of the Bureau~s efforts to fulfill its fair 

lending mission 

An analysis of the Bureau's efforts to increase 

workforce and contracting diversity consistent with 

the procedures established by OJ\..fW'I 

N/A59 

Delivering for American Consumers 

and Leveling the Playing Field - Fair 

Lending 

Building a Great Institution: UpdateDiversity and Excellence 

59 The Bureau has not learned of any such actions that have been filed since July 21, 2011. 

67 SEMI-ANNUAL REPORT OF THE CFPB. JULY 2012 

N/A 

48-49 

59-63 
127 


76129.074

APPENDIX C: 

Significant Rules, Orders, 

and Initiatives 

Section 1016(c)(3) requires "a list of significant rules and orders adopted by the Bureau, as 

well as other significant initiatives conducted by the Bureau, during the preceding year 

and the plan of the Bureau for rules, orders or other initiatives to be undertaken during 

the upcoming period." 

In the past year, the Bureau adopted the following significant rules and orders and 

conducted the following significant initiatives: 

Targeted review of inherited regulations and restatement of inherited regulations 

via interim final rules; 

• Issuance of rules to implement Dodd-Frank Act protections concerning 

consumer remittance transfers to foreign countries; 

• Interim final rules defining procedures for investigations, rules of practice for 

adjudication proceedings, and procedures for disclosure of records and 

information; 

Proposed Rule regarding defining "larger participants" in certain markets; 

• Issued the Bureau's Supervision and Examination A-lanuaf, 

• Issued the Shott-Term, Small-Dollar Lending Examination Procedures; 

• Issued the Mortgage Origination Examination Procedures; 

Issued the Mortgage Servicing Examination Procedures; 

• Notice and Opportunity to Respond and Advise process; 

• Notice and Request for Information on checking account overdraft programs; 

• Formal solicitation for nominations for CFPB's Consumer Advisory Board; 

• Release and testing of a draft periodic mortgage statement; 

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• With the U.S. Department of Defense, the FTC, and the National Association of 

Attorneys General, the development of a database to combat consumer financial 

fraud directed at military members, veterans, and their families; 

With the FDIC, the Federal Reserve, the OCC, and the NCUA, issued joint 

guidance to address mortgage servicer practices that may pose risks to 

homeowners who are serving in the military; 

MOU with the FTC to protect consumers and avoid duplication of federal law 

enforcement and regulatory efforts; 

• Began to take complaints on credit cards, bank products and services, private 

srudent loans, and consumer loans, through the Consumer Response function; 

Launched Ask CFPB, an interactive online tool that helps consumers find clear, 

unbiased answers to their financial questions; 

Released a beta version of the Financial Aid COmp!lrison Shopper as part of Know 

Bifore You Owe: Student Loans, an interactive, online tool designed to help families 

plan for the costs of post-secondary education; 

• Released a bulletin on third-party service providers to supervised entities; 

Released a compliance bulletin regarding the enforcement of Equal Credit 

Opportunity Act, and recognizing the disparate impact doctrine; 

• Launched a public inquiry into how consumers and financial services companies 

are affected by arbitration and arbitration clauses; 

• MOU with the prudential regulators to ensure the coordination of important 

aspects of the supervision of insured depository instirutions with more than $10 

billion in assets and their affiliates; 

• 

• 

Released a report and consumer guide about reverse mortgages; 

Interim Final Rule providing for confidential treatment of information generated 

and obtained by the Bureau, and establishing procedures for obtaining 

information from the Bureau as permitted by law; 

• Final Rule regarding confidential treatment of privileged information; 

• Supplemental ethics regulations for CFPB employees; and 

• Interim Final Rule ensuring nondiscrimination on the basis of disability in 

programs and activities undertaken by the Bureau. 

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76129.076

In the next six months, the Bureau plans the following significant rules, orders, and other 

initiatives: 

• Final rules to implement Dodd-Frank Act requirements defining lenders' 

obligations to assess borrowers' ability to repay mortgage loans, including certain 

protections from liability for "qualified mortgages;" 

• 

• 

• 

• 

Final rules to implement Dodd-Frank Act escrow requirements; 

Additional rules to provide further guidance to remittance rtansfer providers; 

Proposed integrated disclosures and accompanying rules for mortgage loans that 

satisfY the requirements of both the Truth in Lending Act and the Real Estate 

Settlement Procedures Act; 

Proposed rules to implement Dodd-Frank Act protections for the mortgage 

market, includhlg provisions on loan originator compensation and qualification, 

restrictions on high-cost loans, servicing practices, provision of appraisal 

documentation to consumers, and (on an interagency basis) other appraisal 

practices; 

Participation in interagency processes to consider mortgage servicing standards; 

Propose rules to define the scope of the Bureau's nonbank supervision program; 

• Final regulations based on certain interim final rules issued since July 21, 2011 

including those that establish procedures for investigations and rules of practice 

for adjudication proceedings among others; 

• 

• 

• 

• 

• 

70 

Reports on private student loans and recommendations on best practices 

concerning financial advisors who work with older Americans, as contemplated 

in the Dodd-Frank Act; 

Continued expansion of the Bureau's capacity to handle consumer complaints 

with respect to all products and services within its authority; 

A pilot program to evaluate certain financial education programs in the field; 

Reports on various aspects of the Bureau's work and operations, including 

reports on Consumer Response, Financial Education, Fair Lending, and Human 

Capital among others, as contemplated in the Dodd-Frank Act; and 

First meeting of the Consumer Advisory Board. 

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APPENDIX D: 

Actions Taken 

Regarding Rules, Orders, 

And Supervisory Actions 

With Respect To 

Covered Persons Which 

Are Not Credit Unions 

Or Depository 

Institutions 

Section 1016(c)(6) requires a report on "the actions taken regarding rules, orders and 

supervisory actions with respect to covered persons which are not credit unions or 

depository institutions." In 2012, the Bureau has taken the following actions with respect 

to such companies: 

• Proposed Rule regarding defining "larger participants" in certain markets; and 

• Proposed Rule regarding procedures for supervising nonbanks that pose risks to 

consumers. 

In addition to these items, other Bureau rules apply to both depository institutions and 

non-depository institutions. 

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APPENDIX E: 

Reports 

The CFPB has published the following reports: 

• 

• 

• 

• 

• 

• 

72 

July 21, 2011: Developing Our Human Capital; 

November 30, 2011: Consumer Response interim report on CFPB's credit card 

complaint data; 

December 9,2011: Financial Report of the CFPB - Fiscal Year 2011; 

January 31, 2012: Semi-Annual Report of the CFPB; 

March 20, 2012: Fair Debt Collection Practices Act; 

March 31, 2012: Consumer Response Annual Report; 

Apri113, 2012: Plain Writing Compliance Report; and 

June 28, 2012: Reverse Mortgage Report. 

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APPENDIX F: 

Congressional Testimony 

Senior CFPB staff have testified before Congress on the following 21 occasions: 

• February 9, 2011: Holly Petraeus before the House Committee on Veterans 

Affairs; 

March 16, 2011: Elizabeth Warren before the House Financial Services 

Subcommittee on Financial Institutions and Consumer Credit; 

• April 12, 2011: Holly Petraeus before the Senate Homeland Security & 

Governmental Affairs Subcommittee on Oversight of Government Management, 

the Federal Workforce, and the District of Columbia; 

• 

• 

May 24, 2011: Elizabeth Warren before the House Oversight and Government 

Reform Subcommittee on TARP, Financial Services and Bailouts of Public and 

Private Programs; 

July 7, 2011: Raj Date before the House Financial Services Subcommittees on 

Financial Institutions and Consumer Credit and Oversight and Investigations; 

• July 13, 2011: Kelly Cochran before the House Financial Services Subcommittee 

on Insurance, Housing and Community Opportunity; 

• July 14, 2011: Elizabeth Warren before the House Oversight and Government 

Reform Committee; 

• July 28, 2011: Dan Sokolov before the House Small Business Subcommittee on 

Investigations, Oversight and Regulations; 

September 6, 2011: Richard Cordray Nomination Hearing before the Senate 

Banking Committee; 

• November 2, 2011: Raj Date before the House Financial Services Subcommittee 

on Financial Institutions and Consumer Credit;. 

• November 3, 2011: Holly Petraeus before the Senate Banking Committee; 

73 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.080

• 

• 

• 

• 

• 

• 

• 

• 

November 15, 2011: Skip Humphrey before the Senate Banking Subcommittee 

on Financial Institutions and Consumer Protection; 

January 24, 2012: Richard Cordray before the House Oversight and Government 

Reform Subcommittee on TARP, Financial Services and Bailouts of Public and 

Private Programs; 

January 31, 2012: Richard Cordray before the Senate Banking Committee; 

February 15, 2012: Richard Cordray before the House Financial Services 

Subcommittee on Oversight and Investigations; 

March 29, 2012: Richard Cordray before the House Financial Services 

Committee; 

April 26, 2012: Camille Busette before the Senate Homeland Security and 

Governmental Affairs Subcommittee on Oversight of Government Management, 

the Federal Workforce, and the District of Columbia; 

June 6, 2012: Richard Cordray before the Senate Banking Committee; 

June 6, 2012: Gail Hillebrand before the House Financial Services Subcommittee 

on Financial Institutions and Consumer Credit; 

June 20, 2012: Raj Date before the House Financial Services Subcommittee on 

Insurance, Housing, and Community Opportunity; and 

June 26, 2012: Holly Petraeus before the Senate Committee on Banking, 

Housing and Urban Affairs. 

Written testimony submitted in connection with these appearances can be found on 

ConsumcrPinancc.gov. 

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APPENDIX G: 

Speeches 

Director Richard Cordray and Deputy Director Raj Date spoke at the following public 

events: 

• 

• 

• 

• 

September 15, 2011: Remarks by Raj Date at National Constitution Center in 

Philadelphia, PA; 

September 20, 2011: Remarks by Raj Date at American Banker's Regulatory 

Symposium in Washington, DC; 

October 10, 2011: Remarks by Raj Date at the Mortgage Bankers Association's 

98th Annual Conference in Chicago, IL; 

October 26, 2011: Remarks by Raj Date in Minneapolis, MN; 

December 1, 2011: Remarks by Raj Date at Consumer Federation of America's 

Financial Services Conference in Washington, DC; 

December 7,2011: Remarks by Raj Date in Cleveland, OH; 

January 5, 2012: Remarks by Richard Cordray at The Brookings Institution in 

Washington, DC; 

• January 17, 2012: Remarks by Richard Cordray at FDIC Board of Directors in 

Washington, DC; 

January 18, 2012: Remarks by Richard Cordray at U.S. Conference of Mayors in 

Washington, DC; 

• January 19, 2012: Remarks by Richard Cordray at Payday Loan Field Hearing in 

Birmingham, AL; 

• February 15, 2012: Remarks by Richard Cordray at League of United Latin 

American Citizens Conference in Washington, DC; 

75 

February 22, 2012: Remarks by Richard Cordray at CFPB Roundtable on 

Overdraft Practices in New York, NY; 

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76129.082

March 6, 2012: Remarks by Richard Cordray at National Association of 

Attorneys General in Washington, DC; 

• March 14, 2012: Remarks by Richard Cordray at Independent Community 

Bankers of America National Convention in Nashville, TN; 

• March 16, 2012: Remarks by Richard Cordray at Society of American Business 

Editors and Writers in Indianapolis, IN; 

• March 19, 2012: Remarks by Richard Cordray at Credit Union National 

Association Governmental Affairs Conference in Washington, DC; 

• March 21, 2012: Remarks by Richard Cordray at Consumer Bankers Association 

in Austin, TX; 

• March 28, 2012: Remarks by Richard Cordray at U.S. Chamber of Commerce in 

Washington, DC; 

• 

• 

April 10, 2012: Remarks by Richard Cordray at Operation Hope in Washington, 

DC; 

April 11, 2012: Remarks by Richard Cordray on launch of the Financial Aid 

Comparison Shopper in Sioux Falls, SD; 

April 18, 2012: Remarks by Richard Cordray at the National Community 

Reinvestment Coalition in Washington, DC; 

April 18, 2012: Remarks by Richard Cordray at Jump$tart in Washington, DC; 

• April 20, 2012: Remarks by Raj Date at Greenlining Institute Conference in Los 

Angeles, CA; 

• May 3, 2012: Remarks by Richard Cordray at 2012 Simon New York City 

Conference in New York, NY; 

• 

• 

76 

May 7, 2012: Remarks by Raj Date at Mortgage Bankers Association National 

Secondary Market Conference in New York, NY; 

May 10, 2012: Remarks by Richard Cordray at White House Financial Summit in 

Washington, DC; 

May 11,2012: Remarks by Richard Cordray at Michigan State University College 

of Law Commencement in East Lansing, MI; 

SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.083

May 23, 2012: Remarks by Richard Cordray at CFPB Prepaid Cards Field 

Hearing in Durham, NC; 

June 5, 2012: Remarks by Richard Cordray at White House press briefing on 

student loan transparency in Washington, DC; 

June 11, 2012: Remarks by Raj Date at American Bankers Association 

Conference in Orlando, FL; 

• June 11, 2012: Remarks by Richard Cordray at World Elder Abuse Awareness 

Day Event in Washington, DC; 

• June 15, 2012: Remarks by Richard Cordray at American Constitution Society 

Conference in Washington, DC; 

• June 21, 2012: Remarks by Richard Cordray at press conference on Military 

Permanent Change of Station (PCS) Guidance for Mortgage Servicers in 

Washington, DC; and 

June 27, 2012: Remarks by Richard Cordray on Reverse Mortgages Study in 

Washington, DC. 

Remarks can be found on ConsllmerFinance.gov. 

77 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.084

APPENDIX H: 

Financial And Budget 

Reports 

The CFPB has published the following financial reports, which are all available at 

ConsumcrFin"ncc.go, !budget: 

August 3, 2011: CFO update for the third quarter of fiscal year 2011; 

• December 9, 2011: Financial Report of the CFPB Fiscal Year 2011; 

• December 30, 2011: CFO update for the fourth quarter of fiscal year 2011; 

• January 20,2012: CFO update for the first quarter of fiscal year 2012; and 

• May 11,2012: CFO update for the second quarter of fiscal year 2012.60 

The CFPB has published the following Budget Documents, which are all available at 

ConsurnerFinance.gov!budgcr: 

• Fiscal Year 2013 Budget Justification; 

• Fiscal Year 2013 Budget in Brief; 

• Fiscal Year 2012 Congressional Budget Justification; and 

Fiscal Year 2012 Budget in Brief. 

The CFPB has published the following funding requests to the Federal Reserve Board, 

which are all available at 

• September 28, 2011: Funding Request to the Federal Reserve Board; 

• October 21, 2011: Funding Acknowledgement from the Federal Reserve Board; 

60 In addition, the CFO update for the third quarter of fiscal year 2012 will be made available 

at ConsumerFinance.gov/budget. 

78 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.085

• December 23, 2011: Funding Request to the Federal Reserve Board; 

• January 6, 2012: Funding Acknowledgement from the Federal Reserve Board; 

• March 30, 2012 Funding Request to the Federal Reserve Board; and 

• AprilS, 2012: Funding Acknowledgement from the Federal Reserve Board.61 

61 Additional quarterly funding requests to the Federal Reserve Board and the corresponding 

funding acknowledgements from the Federal Reserve Board will be made available at 

ConsumerFinance.gov/budget. 

79 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.086

APPENDIX I: 

CFPB Organizational 

Chart 

Stb.t~A9ll:stinl 

- Aufstant Oiredof 

,~'fiM.ncia1 

Offl,,<,\(CfO) 

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financilll 

Education 

CIlffRosenthai 

AUislatltOiredor 

Rnitne1id Empowerment 

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OIda"AmericiM' 

HoffyP~U$ 

~t~1eCtO( 

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KentMQrIru:s 

Assistant~tectot 

EnlOrt~nt 

Patrk.'flFiddIn 

Ass!SUllItDirector 

FaIr lel'ldlng l'Ird 

E"",IOpportu""Y 

PauiSanford.tPeggy Twohtg Aui$l3l1tOite<:tor 

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Auo<;:latebir«:tof 

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lntefg()vert1.rrumtal 

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Associate _'*'''''''' Director 

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Robert.oG~ 

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responsib,jjM$ to the Oireetor 

SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.087

APPENDIX J: 

Defined Terms 

DEFINED TERM 

ACH 

APR 

BUREAU 

CFPB 

coo 

DODD-FRANK ACT 

FCA 

FDIC 

FEDERAL RESERVE 

FEDERAL RESERVE BOARD 

FEDERAL RESERVE SYSTEM 

FFETF 

FFIEC 

FIRREA 

FLEC 

FOIA 

FTC 

Automated clearing house 

Annual Percentage Rate 

The Consumer Financial Protection Bureau 

The Consumer Financial Protection Bureau 

Chief Operating Officer 

The Dodd-Frank Wan Street Reform and Consumer 

Protection Act 

Farm Credit Administration 

The Federal Deposit Insurance Corporation 

The Board of Governors of the Federal Reserve System 

The Board of Governors of the Federal Reserve System 

The Board of Governors of the Federal Reserve System 

Financial Fraud Enforcement Task Force 

Federal Financial Institutions Examination Council 

The Financial Institutions Reform, Recovery, and 

Enforcement Act 

Financial Literacy and Education Commission 

Freedom of Information Act 

The Federal Trade Commission 

81 SEMI-ANNUAL REPORT OF THE CFPB, JULY 2012 
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76129.088

FY 

GAO 

HAMP 

HUD 

MLO 

MOU 

NCUA 

NMLSR 

NSF 

OCC 

OHC 

OMWI 

OTS 

PCS 

PIRG 

RFI 

RMS 

SAFE ACT 

SES 

SIGTARP 

TREASURY 

VITA 

82 

Fiscal year 

Government Accountability Office 

Home Affordable Modification Program 

The U ,S, Department of Housing and Urban Development 

,Mortgage Loan Originators 

Memorandum of understanding 

The National Credit Union Administration 

Nationwide Mortgage Licensing System and Registry 

Non-sufficient funds 

The Office of the Comptroller of the Currency 

Office of Human Capital 

Office of Minority and Women Inclusion 

The Office of Thrift Supervision 

Permanent change of station 

United Srates Public Interest Research Group 

Request for Information 

Residential mortgage-backed securities 

The Secure and Fair Enforcement for Mortgage Licensing 

Act 

Supervisory Examination System 

Special Inspector General for the Troubled Asset Relief 

Program 

The Department of the Treasury 

Volunteer Income Tax Assistance 

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76129.089

Questions for the Record for Mr. Richardt;ordray,}CFPB 

Financial Services Committee He~/ 

"The Semi-Annual Report of the Consumer Financial Protection Bureau'; 

September 20, 2~ 

'" 1 

Chairman SpenJr Baclfs 

-,/ 

1. On other occasions when you have testified before Congress, you "have heard a great 

deal about the concerns small businesses have about the costs of complying with new 

CFPB rules. In a nod to those concerns, the remittance transfer rule recently issued by 

the CFPB contains an exemption for institutions that conduct 100 or fewer remittance 

transfers per year. In the CFPB's press release on the final rule, you commented that 

"[w]e recognize that in regulations, one size does not necessarily fit all." Will this 

recognition be reflected in future CFPB rulemaking through thresholds, exemptions or 

other approaches that will ease the burden on small businesses? 

The Bureau is currently exploring a variety of methods for reducing the burden on small 

businesses. In some cases, the Bureau is considering using regulatory thresholds and exemptions 

similar to those adopted in its remittances rulemaking. For example, in the proposed mortgage 

servicing rules, the Bureau proposed an exemption from the periodic mortgage statement 

requirements for small mortgage servicers that serviced 1,000 or fewer mortgage loans where the 

servicer services only those loans which it (or an affiliate) owns or originated. The Bureau has 

requested comment regarding whether that threshold should be increased and whether a small 

mortgage servicer exemption should apply to other aspects of the proposed mortgage servicing 

rules. Similarly, in the TILA-RESPA mortgage disclosure integration proposal, the Bureau 

solicited comment on an exemption for small creditors from the requirement to retain disclosure 

data in an electronic, machine-readable format. 

The Bureau is also seeking to reduce the burden on all affected businesses by providing clear and 

thorough guidance on how to comply with its rules, which will save time, energy, and costs for 

industry. For example, in response to requests from industry, the Bureau's TILA-RESPA 

proposal includes extensive guidance, including samples of completed forms for a variety of 

different types of mortgage loans. 

Finally, the Bureau is seeking to reduce burden by supporting compliance efforts after its rules 

are finalized. For example, Bureau staff recently presented a webinar on the new remittance 

requirements attended by over three thousand industry representatives. We have also released a 

small business compliance guide for the remittance rule, and our staff continues to answer 

guidance questions received from institutions across the country. We plan similar efforts for the 

Dodd-Frank Act mortgage rulemakings. 

2. At the same time that the CFPB announced the settlement of its enforcement action 

against Capital One, it also released a bulletin providing general guidance on marketing 

credit card add-on products. While focused on credit card add-on products, the 

bulletin is also intended to serve as guidance for the marketing of similar products 

offered in connection with other forms of credit or deposit services. While it is useful 
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for the CFPB to make its expectations known to the industry, some see the CFPB's 

issuance of the bulletin as de facto rulemaking. 

a. Does this bulletin portend a trend by the CFPB to use its enforcement authority 

as a method for imposing industry-wide standards? 

b. Shouldn't industry-wide standards instead be established throngh the 

rulemaking process required by Dodd-Frank and the Administrative Procedure 

Act? 

Any enforcement action is based on the facts and circumstances of the situation. However, 

complaints received by the Bureau indicate and the Bureau's supervisory experience 

confirms - that consumers have been misled by the marketing and sales practices associated 

with add-on products offered by various institutions. Such practices violate current law. 

Consequently, the Bureau issued a compliance bulletin as a means of alerting the industry to 

existing compliance requirements under existing laws and regulations and providing insight 

into Bureau expectations. Notably, the bulletin does not impose any new legal requirements. 

Going forward, the Bureau will continue to use the rulemaking process for adopting new 

requirements, while providing prompt guidance through bulletins and other methods 

regarding compliance with existing requirements. 

3. Many of the Title XIV rules are required to be final in January 2013, but are only just 

now just being proposed. Given that the CFPB will have to sort through the mass of 

comment letters sent by industry, is the January 2013 deadline too aggressive? Do you 

need more time to do the job right? 

The Bureau is currently in the process of reviewing the comments on the proposed rules and 

performing additional analysis in order to prepare the final rules. The Bureau is committed to 

meeting the deadlines established by Congress and plans to issue the required rules by January 

21,2013. 

4. The CFPB's new closing rule requires that lenders give consumers their closing 

documents at least three business days before the consumer closes on the loan. The last 

time this was tried, in the 1970s, it proved to be extremely disruptive to the very 

borrowers it was meant to help. Given that this provision could cause delays in closing 

a mortgage loan, it is not far-fetched to reason that it could ultimately prompt 

consumers to pay higher fees or lose their deposit and rate lock. 

a. Is the CFPB concerned that requiring three days between disclosure and 

settlement and possibly an additional three days if there are changes to the 

deal- could have disruptive results for consumers? 

b. Would the CFPB consider giving consumers the right to opt out of this 

requirement if the consumer would be financially hurt by waiting three 

additional business days? 

The Bureau has proposed to require that consumers receive the combined Closing Disclosure 

three business days before closing, subject to limited exceptions (as discussed below). As the 
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question notes, this is not a new idea. In a 1998 report to Congress, the Federal Reserve Board 

and HUD recommended that "three days prior to closing, creditors be required to redisclose 

significant changes in the APR or other material disclosures and provide an accurate copy of the 

RESP A settlement statement. Consumers would receive final cost disclosures prior to closing 

(rather than at closing, the current practice) and would then be able to study the disclosures in an 

unpressured environment." In 2008, Congress amended TILA to require that consumers 

generally receive revised statements of cost for certain mortgages no later than three business 

days before closing. In 2009, settlement industry representatives advocated amending RESPA to 

provide consumers with three business days to review loan documents "so that circumstances 

don't pressure [consumers] into agreeing to a bad loan or excessive closing costs."} In light of 

this history and advances in the mortgage settlement process, we believe that it is time to 

reexamine the ability of lenders and settlement agents to provide consumers with important loan 

information in advance of closing. 

The Bureau's proposed rule does, however, permit a consumer to waive the timing requirement 

in the event of a bona fide personal financial emergency. This exception serves an important 

purpose: consumers should be able to waive the protection afforded by the waiting period if the 

consumer faces a financial emergency. The Bureau specifically sought comment on the nature 

of waivers based on bona fide personal financial emergencies in the proposal. The Bureau will 

analyze the comments on this issue and determine whether modifications to this waiver are 

appropriate. 

5. The proposed TILA-RESPA rule provides that the new form may contain lines for both 

appraisal and management fees, thereby breaking out what has traditionally been one 

entry into two entries. 

a. Why did the Bureau decide to separate these lines? 

b. Will this proposed change benefit consumers? How? 

c. Will these lines be subject to quantitative testing? 

Section 1475 of the Dodd-Frank Act amended section 4(c) ofRESPA to permit the separation of 

the fees paid by the consumer to the appraisal management company and the fee received by the 

appraiser on the disclosures required by RESP A. Consistent with this amendment, the Bureau 

proposed to permit, but not require, creditors to disclose the cost of the appraisal on the 

integrated TILA-RESPA disclosures in this manner. The Bureau qualitatively tested prototype 

disclosures both with and without this optional disclosure. The Bureau has not yet determined 

whether to focus its quantitative testing on this issue. 

6. Recent news reports indicate that the CFPB has advertised to recruit investigators 

whose activities are intended to inform the CFPB's enforcement division about 

consumer experiences with different financial products and services. This has led some 

to speculate that the CFPB may be planning to use "mystery shoppers." Mystery 

1 See American Land Title Association, ALTA Supports Pro-Consumer Mortgage Bill, December 8, 2009 Press 

Release, available at http://www.altaorg/news/news.cfrn7newsID=9714. See also Borrowers' Right to Inspect 

Closing Documents Act of 2009, H.R. 4229, Illth Congo (Dec. 8, 2009). 
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shoppers have commonly been used in the past to identity weaknesses in fair lending 

compliance, particularly with regard to pre-application discrimination. 

a. Will the CFPB similarly use mystery shoppers to target fair lending or other 

specific compliance weaknesses? 

b. Will the CFPB use mystery shoppers in connection with its authority to prohibit 

"unfair, deceptive or abusive" acts or practices? 

c. If the CFPB is considering the use of "mystery shoppers," will it offer an 

opportunity for public comment on its plans? 

In its Office of Enforcement, the CFPB intends to hire investigators to further that office's 

mission, which is to ensure compliance with the federal consumer financial laws and address 

violations of those laws. We anticipate that these employees will use a variety of investigative 

techniques to inform our Enforcement Office about what consumers may experience with 

different financial products or services. The Bureau is considering "mystery shopping" as an 

investigative technique, and to perform research and collect information that may inform other 

areas of its work. 

Mystery shopping may be a useful investigative tool when looking at deceptive marketing and 

other practices not captured in company policies and procedures. CFPB's enforcement 

jurisdiction extends to entities such as online and offshore fraudsters, loan modification and debt 

settlement scammers, debt collectors, payday, auto and student lenders, and other entities where 

deceptive marketing is a critical concern. Tools like mystery shopping could be particularly 

important in investigations of entities over which we have enforcement jurisdiction, but no 

supervisory authority. Mystery shopping is often used by both government and private industry 

- including the banking industry - to monitor compliance with the law as well as consumer 

satisfaction. 

7. The CFPB has filed six amicus briefs over the past year, four that were in Truth in 

Lending Act cases and two that were in Fair Debt Collection Practices Act cases. A 

recent blog posting on the CFPB's website states that these amicus briefs "help ensure 

that consumer financial protection statutes and regulations are correctly and 

consistently interpreted by the courts." Critics have pointed out that the CFPB's 

approach to filing amicus briefs stands in stark contrast to the approach taken by the 

Fed when it implemented federal consumer financial protection statutes. When the Fed 

felt the courts were iucorrectly interpreting the statute in question, the Fed would 

generally address the issue by proposing revisions to the implementing regulation or 

official staff commentary rather than by submitting an amicus brief. 

a. Why is CFPB taking a different approach to submitting amicus briefs? 

b. Has the Bureau received requests from industry to submit briefs advocating 

against the position taken by a consumer? 

c. How does the CFPB decide when it is appropriate to submit a brief? 

The CFPB has a number of tools at its disposal to assist the courts, consumers, and 

regulated entities in the interpretation of Federal consumer financial laws and 
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regulations. These tools include, among other things, the ability to adopt and amend 

Bureau regulations, issue official staff commentary, release supervisory bulletins, and 

file amicus briefs. The Bureau plans to use each of these tools, and others, in 

appropriate circumstances. The Bureau uses amicus briefs to assist the courts in their 

interpretation of statutes and regulations under the Bureau's jurisdiction in the same 

way that other governmental agencies have done in private litigation involving 

questions of law under their jurisdiction. For example, the Board of Governors of the 

Federal Reserve has in the past filed amicus briefs in private litigation, see, e.g., 

Shaner v. Chase Bank U.S.A., No. 09-1157 (1st Cir.) (available at 2009 WL 

6841351); Aronson v. Peoples Nat'/ Gas Co., No. 99-3000 (3d Cir.) (available at 

1999 WL 33631856), as have other prudential regulators (see, e.g., list of amicus 

briefs of the Office of the Comptroller of the Currency at 

http://www.occ.gov/topics/laws-regulations/litigationlocc-briefs.html).Indeed.in 

some cases, the courts have specifically requested the Bureau (and other federal 

agencies) to file an amicus brief to assist the courts' review. 

In determining whether to file an amicus brief in a particular case, the Bureau 

considers, among other factors, whether the case requires the court to interpret a 

provision of Federal consumer financial law or an implementing regulation under the 

Bureau's jurisdiction; whether the question is actively being litigated in multiple 

courts; whether courts have divided over the issue being litigated; whether the court's 

decision will have substantial precedential impact; and whether, in the circumstances, 

the court would welcome an amicus brief from the Bureau as the best means for 

communicating the Bureau's views. The Bureau also regularly consults with both 

parties to litigation in which it is considering filing an amicus brief. 

In August 2012, the Bureau launched a web site (see 

www.consumerfinance.gov/amicus) to provide information and solicit public input on 

its amicus program. Among other outreach and transparency efforts, Bureau officials 

held a series of roundtables with industry associations, consumer groups, and 

representatives of state and local governments to discuss the program in October 

2012. As a result, the Bureau has received a number of requests for amicus 

involvement in litigation. The Bureau does not segregate requests based on whether 

the request is from a regulated entity, industry association, consumer, or 

governmental entity, but rather looks at the legal issues presented by each request 

independently to see whether an amicus brief is appropriate. The Bureau welcomes 

requests for amicus briefs from any interested party and is committed to reviewing 

each request on the merits. 

8. Between July and October, the CFPB brought separate enforcement actions against 

three major credit card issuers for illegal and deceptive practices. Collectively, the 

companies must pay $46.1 million in fines, which is required to be placed in the 

Victim's Relief Fund. Dodd-Frank stipulates that these funds are to be used for 

payments to victims of wrongful activity, but there is no requirement that the proceeds 

of a civil penalty must be paid to victims of the specific wrongful activity for which the 

penalty was imposed. How will the CFPB distribute these particular penalties? 
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In the Dodd-Frank Act, Congress authorized the Bureau to use civil penalties only for 

payments to victims, and, in certain circumstances, consumer education and financial 

literacy programs. In particular, § lOI7(d)(2) provides: 

Amounts in the Civil Penalty Fund shall be available to the Bureau, without jiscal 

year limitation, for payments to the victims of activities for which civil penalties 

have been imposed under the Federal consumer jinanciallaws. To the extent that 

such victims cannot be located or such payments are otherwise not practicable, 

the Bureau may use such funds for the purpose of consumer education and 

jinancialliteracy programs. 

The Bureau has made available on its website an overview of the Civil Penalty Fund: 

http://files.consumerfinance.gov/f/201207 cfpb civil penalty fund factsheet.pdf. 

As that document notes, the Bureau has created a Civil Penalty Fund Governance Board, 

which is responsible for ensuring that the Civil Penalty Fund is administered in a manner 

that is consistent with the Dodd-Frank Wall Street Reform and Consumer Protection Act. 

In addition, the Civil Penalty Fund Governance Board is responsible for developing 

policies and procedures, including appropriate internal controls, to ensure that money 

deposited in the Civil Penalty Fund is distributed in a manner that: 

• Supports the Bureau's mission, responsibilities, policies, and priorities; 

• Complies with the Dodd-Frank Act and all other applicable laws and 

regulations, as well as internal CFPB policies and procedures and legal opinions 

of the CFPB's Office of General Counsel; 

• Protects against waste, fraud, and abuse; 

• Provides appropriate transparency regarding the use of CPF monies, including 

the manner of distribution, any associated administrative expenses, and, where 

applicable, the mechanism for identifying individual victims; 

• Ensures appropriate and robust oversight of contractors; and 

• Enhances program efficiency through regular operational analyses and 

development of appropriate performance metrics. 

The Bureau has also posted the criteria it will use in making available Civil Penalty Fund 

monies for Consumer Education and Financial Literacy programs: 

http://files.consumerfinance.gov/f/201207 cfpb civil penalty fund criteria. pdf. The 

Bureau will use the federal procurement process for these programs. 
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Questions}.Or the Reco d from 

Rep. Blaine. Luetkeme); r (MO-9) 

Committee enEll1- lal Services 

U.S. House of Representatives 

Hearing held on September 20,2012, entitled 

"The Semi-Annual RepOl;' ~ Consumer Financial Protection Bureau" 

Witness: The Honorable RichardfordraYDirector, Consumer Financial Protection Bureau 

1. During your testimony befo~ Committee, you responded to a question I asked 

about a provider's liability wben a sender gives an incorrect account number that if 

it is determined that the sender gave incorrect information, a provider can "work 

this out" with the consumer. However, isn't it true that the rule requires a provider 

to refund or resend the entire principal amount in the event funds go to the wrong 

account due to sender error? Is this what you mean by "working things out"? Also, 

settiug aside the issue of whether you think this concern is overstated, do you think 

this approach is fair? 

Section 1005.33(c) of the rule requires a remittance transfer provider to refund or resend a 

transfer that was sent to the wrong account. As noted in the Bureau's recent industry compliance 

webinar, however, we agree with some of the concerns that have been expressed about this part 

of the rule when a consumer provides incorrect account or routing information. In those 

circumstances, though we think the provider should be responsible for trying to remedy the 

situation. If the money was properly transmitted in accordance with the sender's instructions and 

cannot be recovered, we share concerns about liability resting on the provider. We expect to take 

action shortly to address this issue. 

2. Dodd-Frank doesn't require that any foreign taxes be disclosed to people sending 

money overseas, but your remittance transfer rule makes this a requirement. You 

have charged that providers can estimate foreign taxes. The only estimates that are 

permitted are when a tax rate must be applied to a transfer amount that has been 

estimated. Is it correct that providers must still know all the applicable taxes in all 

the countries that they send transfer to as well as the exemptions and exclusions that 

apply to those taxes? In your discussions with the industry, has any entity said it 

will be able to comply with this requirement? Are you aware of any service or 

technology solutions available to institutions to help them make these disclosures? 

Section 919(a)(2)(A)(i) of the Electronic Fund Transfer Act requires a remittance transfer 

provider to disclose the amount to be received by the designated recipient. The Bureau believes 

that the plain language of the statute requires providers to disclose all fees and taxes specifically 

related to the remittance transfer, regardless of the entity that charges or collects them, as these 

elements have a direct impact on the amount received by the designated recipient. Taxes may 

be estimated when the tax is based on an estimated amount (such as a percentage of the amount 

of foreign currency). Generally speaking, the statute provided for limited scenarios in which the 

Bureau could permit providers to estimate amounts that are required to be disclosed. 
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While some providers have expressed confidence about their ability to comply with the rule 

when it takes effect, we realize compliance with this requirement may be difficult for some 

providers and in certain remittance corridors. To the extent that existing open networks will be 

able to accommodate this part of the rule, we understand that work is ongoing. Furthermore, we 

understand that many providers are working diligently with their business partners, or are 

exploring alternative business models, to come into compliance by the effective date. 

Separately, the Bureau is considering whether we can facilitate industry efforts to figure out the 

correct tax information. 

3. Section 1073 of Dodd-Frank specifically directed the Federal Reserve and 

Department of the Treasury "to expand the use of the automated clearinghouse 

system •. , for remittance transfers to foreign countries" and required biennial 

reports to Congress on the status of such efforts. How did you ensure that this 

regulation reflects the directive to expand the use of the ACH Network? Can you 

provide us with examples where the regulation provides for the flexibility necessary 

for the operation of an open network like the ACH Network? 

In drafting the remittance rule, the Bureau carefully considered the ACH system and its role in 

the remittance transfer markets. Section 1073(a) of the Dodd-Frank Act requires specific 

consumer disclosures and includes only limited circumstances where estimates may be provided. 

Section 1073(a) applies these requirements to open network transfers, such as those sent through 

the ACH system as required by Section 1073(a) .. Operating within those constraints, the Bureau 

adopted several provisions in the final rule that provide flexibility for, or are otherwise 

accommodating toward, ACH transfers. For example, in the final rule, the Bureau reduced the 

time period for cancelling a transfer from one business day, which was proposed by the Federal 

Reserve Board, to thirty minutes. In adopting the shorter period, the Bureau noted that ACH 

transfers generally cannot be cancelled once the payment order has been accepted by the sending 

institution; thus, a cancellation period of one business day could prevent a sender from sending a 

remittance transfer quickly. Relatedly, the final rule allows providers to use combined 

disclosures (rather than separate pre-payment disclosures and receipts) to facilitate compliance 

with the rule. In monitoring the implementation of the remittance rule, the Bureau will continue 

to consider the impact of the rule on the use of the ACH network. 

4. Does the CFPB have a view on peer-to-peer lending, crowdfunding and other new 

sources of capital for micro-businesses? 

The Bureau has not had occasion to evaluate these new forms of financing, but in general, the 

laws that the Bureau administers and enforces relate primarily to financial products and services 

offered to consumers and not to businesses .. 

5. The FDIC recently released a new study showing more than one in four U.S. 

households are unbanked or underbanked. Tens of millions of consumers have 

ongoing, often critical, needs for credit but they have limited credit options. Please 

tell us what specific actions you believe can be taken by Congress and by the CFPB 

to help solve this critical credit access problem? 
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The Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank Act) directs 

the Bureau to use its authority to ensure both that consumers have access to markets for 

consumer financial products and services and that these markets are fair, transparent, and 

competitive. The largest financial crisis since the Great Depression cut deeply into 

Americans' access to credit, but that is now improving in many markets. Credit card 

originations are growing at a modest pace. We are seeing growth in auto lending, and private 

student lending has stabilized after a rapid decline. But mortgage lending standards are still 

quite tight, and it appears that many creditworthy borrowers cannot buy homes. We are now 

working to put in place common-sense rules of the road to help set the stage for the return of 

a stable, fair, and transparent private mortgage market. 

Credit access is also a consideration in our ongoing efforts to streamline the body of 

regulations we inherited. We recently' proposed a rule to implement the ability-to-pay rule of 

the CARD Act to ensure that repayment ability is properly balanced with credit access for 

spouses who are not currently employed outside the home. In each of these rulemakings, we 

explicitly consider the potential effect of a rule on access to credit. The Dodd-Frank Act 

specifically requires us to do that. As we consider potential alternative approaches to 

exercising our authority, we consider the benefits and costs of these alternatives for 

consumers and providers, including what kinds of effects different alternatives would have 

on access to consumer financial products and services. 

6. The CFPB has broad authority to enforce the various federal consumer financial 

protection laws and regulations. Do you believe that these laws generally provide 

adequate protection for most consumers? 

Congress created the CFPB as part of the Dodd-Frank Wall Street Reform and Consumer 

Protection Act, in response to the worst financial crisis this country has experienced since the 

Great Depression. The consumer financial protection statutes and regulations entrusted to the 

Bureau by the Dodd-Frank Act provide vital protections to consumers who use financial 

products and services, and the Dodd-Frank Act itself contained important reforms to those 

statutes and regulations, particularly with regard to the mortgage market. Since opening our 

doors in July 2011, the Bureau has been committed to implementing those reforms effectively, 

and we are working diligently to implement the Act. As you know, the many rulemakings 

required by the Act raise a number of important and complex issues, and our work on many of 

the implementing rules is not yet complete. The Bureau is carefully monitoring the markets as 

they continue to change, and is committed to using the authorities granted by Congress to fulfill 

the mission Congress gave us. We have thus far been able to work to appropriately implement 

the Act without legislative adjustments. 

7. As types of credit options become more limited, many underserved consumers are 

being driven to borrow from costly off-shore Internet lenders who do not comply 

with our consumer protection laws. Does the CFPB have jurisdiction over or have 

the authority to stop these operators? 
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The Bureau has authority over payday lenders and is in the process of looking at a wide 

range of issues involving payday lending, including issues related to lenders originating 

and servicing loans off-shore. 

8. Do you believe that the CFPB has the responsibility to consider whether its 

enforcement actions are detrimental to underserved consumers' access to credit? If 

so, how does the CFPB assure that its actions intended to protect underserved 

consumers do not have a detrimental effect on access to credit for those same 

consumers? 

The CFPB has a responsibility to enforce the laws that Congress charged us with administering 

in order to protect consumers and honest businesses that play by the rules. We craft our 

enforcement actions to maximize both deterrence to wrongdoers and benefits to consumers, one 

of which may be consumers' access to credit. We do so using the Bureau's informed 

understanding of the industries we regulate when we take enforcement actions. 

9. The makeup of CFPB boards seems to lack expertise from various sections of the 

financial services industry. Please explain in detail the process for searching for, 

recruiting and selecting members of CFPB's advisory boards. 

On September 12,2012, the Bureau announced the appointment of25 consumer experts from 

outside the federal government to its newly-formed Consumer Advisory Board which will 

provide advice to CFPB leadership on a broad range of consumer financial issues and emerging 

market trends. Of the 25 advisory board members, six members were nominated by the Federal 

Reserve Board in accordance with Section 1014(b) of the Dodd-Frank Wall Street Reform and 

Consumer Protection Act; nine are representatives from the financial services industry, four are 

academics, and the remaining six are consumer advocates. Financial services industry 

representatives therefore make up a significant portion of the Consumer Advisory 

Board. Specifically, the current Consumer Advisory Board includes representatives from: 

Two credit unions 

Two banks 

• One credit card company 

• One Personal Finance Software company 

• Two Asset and Credit Building Loan companies 

• Real Estate Broker professional association 

Financial Services Compliance and Risk Advisors 

Credit Counseling and Debt Management 

Section 1014 (b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act provides 

that, "in appointing the members of the Consumer Advisory Board, the Director shall seek to 

assemble experts in consumer protection, financial services, community development, fair 

lending and civil rights, and consumer financial products or services and representatives of 

depository institutions that primarily serve underserved communities, and representatives of 

communities that have been significantly impacted by higher-priced mortgage loans, and seek 

representation of the interests of covered persons and consumers, without regard to party 

affiliation." Following the guidelines provided in the statute, the CFPB published in the Federal 
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Register a notice outlining the functions of the Board and soliciting nominations for members to 

serve on the Board. In response to this call for nominations, the Bureau received over 1100 

unique nominations for persons applying for membership to the advisory board. As a result, the 

Consumer Advisory Board is a multi-disciplinary external stakeholder board of experts on 

consumer protection, consumer financial products or services, community development, fair 

lending, civil rights, underserved communities, and communities that have been significantly 

impacted by higher priced mortgage loans. 

As outlined in Section 1014(a) of the Dodd-Frank Wall Street Reform and Consumer Protection 

Act, the CFPB's Consumer Advisory Board (the "Board") will "advise and consult with the 

Bureau in the exercise of its functions under the Federal consumer financial laws" and "provide 

information on emerging practices in the consumer financial products or services industry, 

including regional trends, concerns, and other relevant information." The first meeting of the 

Consumer Advisory Board took place Sept. 27 and 28, 2012 in St. Louis, MO. 

In addition, the Bureau created a Community Bank Advisory Council and a Credit Union 

Advisory Council consisting of representatives of those entities to provide information, analysis, 

and recommendations to the Bureau and inform the CFPB' s policy development, rulemaking, and 

engagement functions. 

lO.l'm afraid that the three day requiremeut to receive your closing forms in the 

CFPB's RESPAITILA rule could wind up causing delays in closing a mortgage loan 

that would put consumers in a situation of higher costs, higher fees, losing their 

deposits or earnest money, and losing their rate lock. In situations where the 

consumer is going to be hurt financially or otherwise harmed and where the listed 

exceptions would not apply, is there a way that the consumer may waive this 

requirement and protect his or her loan provisions, or does the consumer have to 

live with the adverse consequences? 

There is long-standing support for providing consumers with important loan information in 

advance of closing. The Bureau's proposed rule does, however, permit a consumer to waive the 

timing requirement in the event of a bona fide personal financial emergency. This exception 

serves an important purpose: consumers should be able to waive the protection afforded by the 

waiting period if faced with a financial emergency. The Bureau specifically sought comment on 

the nature of waivers based on bona fide personal financial emergencies in the proposal. The 

Bureau will analyze the comments on this issue and determine whether modifications to this 

waiver are appropriate. 

11. CFPB did extensive testing on the mortgage disclosure form. Can you explain that 

testing process? What did the testing tell the bureau about how the forms would 

help consumers to shop for mortgage loans and settlement services? The testing 

report that accompanied the proposed rule indicates on page 23 that 92 consumers 

were tested on these new forms. How many of those 92 consumers demonstrated a 

change in behavior? Will CFPB be willing to commit to conducting more 

quantitative testing before finalizing the rule so that we can be sure that consumers 

will see these benefits before businesses spend millions of dollars on 

implementation? 
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Before the proposal, the Bureau conducted qualitative usability testing over ten rounds in nine 

different sites across the country. This type of testing is widely used by both industry and 

government (including the Federal Reserve, the FTC, and HUD). In total, we tested with 92 

consumer participants and 22 industry representatives. We recruited participants to reflect the 

general population in terms of demographic measures, such as age, ethnic diversity, education, 

income, gender, and marital status. We also accounted for varying degrees of experience with 

the home buying and loan refinancing process, recruiting consumers who have bought or 

refinanced recently and consumers who have no such experience. The 22 industry 

representatives included lenders, mortgage brokers, and settlement agents, many of whom 

worked for or owned a small business. We wanted to ensure that the forms work for the 

businesses that will use them every day. 

The Bureau's qualitative testing indicated that the information currently provided on the separate 

TILA and RESP A disclosures can be combined and reorganized into forms that enable 

consumers to make meaningful comparisons of different loans and choose the loan that best fits 

their needs. In particular, qualitative testing indicated that the proposed forms helped consumer 

participants understand the trade offs between different loans, such as the choice between a loan 

with higher up/Tont costs and a loan with a higher monthly payment or an interest rate that can 

increase over time. In addition, industry participants consistently reported that our forms would 

be easier to use than the current forms. Before issuing a final rule, the Bureau plans to conduct 

limited additional qualitative and larger scale quantitative testing to validate its qualitative testing 

results. 
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Questions for the Record for Mr. Richard Cordray, CFPB 

Financial Services Committee He!iri!)g-" 

"The Semi-Annual Report of the Consumer Financial Protection Bureau" 

September~ 

Randy reugebauer 

i, ./ 

'. / 

1. The CFPB recently released a draft rulil-for'servicing reforms, including changes to 

force-placed insurance. Did the CFPB research the impact of the proposed rule on 

underwriting practices for homeowners insurauce? Are you aware that the risk profile 

for a home is substantially different once a homeowner goes into default or foreclosure? 

Did you do any cost benefit analysis of the proposed rule on the homeowners insurance 

market? 

Section 1463 of the Dodd-Frank Act amended Section 6 of the Real Estate Settlement 

Procedures Act to impose requirements before a lender can impose a charge for force-placed 

insurance on a borrower. Force-placed insurance is a different type of insurance than a standard 

homeowners insurance policy. Force-placed insurance is generally substantially more expensive 

than a homeowner insurance policy that a borrower could purchase. It also generally provides 

less protection against loss than insurance that a borrower could purchase. These differences 

exist because a force-placed insurance policy is not an underwritten insurance product and 

properties subject to force-placed insurance generally present different risks, including a higher 

likelihood that such properties may be in the foreclosure process or vacant. 

The Bureau undertook substantial research regarding property insurance, including with respect 

to force-placed insurance, homeowners insurance, and flood insurance, in connection with 

proposing rules to implement the protections in the Dodd-Frank Act with respect to force-placed 

insurance. As set forth in the proposal, and as required by the Dodd-Frank Act, servicers would 

not be permitted to charge a borrower for force-placed insurance coverage unless the servicer has 

a reasonable basis to believe the borrower has failed to maintain hazard insurance and has 

provided required notices. One notice to the borrower would be required at least 45 days before 

charging for forced-place insurance coverage, and a second notice would be required no earlier 

than 30 days after the first notice. The proposal contains model forms that servicers could use. 

If a borrower provides proof of hazard insurance coverage, then the servicer would be required to 

cancel any force-placed insurance policy and refund any premiums paid for periods in which the 

borrower's policy was in place. In addition, if a servicer makes payments for hazard insurance 

from a borrower's escrow account, a servicer would be required to continue those payments 

rather than force-placing a separate policy, even if there is insufficient money in the escrow 

account. The rule would also provide that charges related to force-placed insurance (other than 

those subject to State regulation as the business of insurance or authorized by Federal law for 

flood insurance) must relate to a service that was actually performed. Additionally, such charges 

would have to bear a reasonable relationship to the servicer's cost of providing the service. 

These protections are designed to notify borrowers about the risks and costs of force-placed 

insurance and are designed to ensure that borrowers have the opportunity to obtain a 

homeowners insurance policy before a charge is imposed for force-placed insurance. The 
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Bureau has no reason to believe that these protections with respect to force-placed insurance will 

impose costs on the homeowners insurance market, because force-placed insurance and 

homeowners insurance are different types of products. We have received public comments on 

the proposed rules, including with respect to the provisions relating to force-placed insurance, 

and are carefully considering those comments in connection with finalizing the force-placed 

insurance rules. 

o