```

[Senate Hearing 118-449]
[From the U.S. Government Publishing Office]

                                                        S. Hrg. 118-449

                  THE CONSUMER FINANCIAL PROTECTION 
                 BUREAU'S SEMIANNUAL REPORT TO CONGRESS

=======================================================================

                                HEARING

                               BEFORE THE

                              COMMITTEE ON
                   BANKING,HOUSING,AND URBAN AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                                   ON

               THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL 
                             REPORT TO CONGRESS

                               __________

                             JUNE 13, 2023

                               __________

  Printed for the use of the Committee on Banking, Housing, and Urban 
                                Affairs
                                
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]                                

                Available at: https: //www.govinfo.gov /
                
                                __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
57-169 PDF                  WASHINGTON : 2024                    
          
-----------------------------------------------------------------------------------                 

            COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS

                       SHERROD BROWN, Ohio, Chair

JACK REED, Rhode Island              TIM SCOTT, South Carolina
ROBERT MENENDEZ, New Jersey          MIKE CRAPO, Idaho
JON TESTER, Montana                  MIKE ROUNDS, South Dakota
MARK R. WARNER, Virginia             THOM TILLIS, North Carolina
ELIZABETH WARREN, Massachusetts      JOHN KENNEDY, Louisiana
CHRIS VAN HOLLEN, Maryland           BILL HAGERTY, Tennessee
CATHERINE CORTEZ MASTO, Nevada       CYNTHIA M. LUMMIS, Wyoming
TINA SMITH, Minnesota                J.D. VANCE, Ohio
KYRSTEN SINEMA, Arizona              KATIE BOYD BRITT, Alabama
RAPHAEL G. WARNOCK, Georgia          KEVIN CRAMER, North Dakota
JOHN FETTERMAN, Pennsylvania         STEVE DAINES, Montana

                     Laura Swanson, Staff Director

               Lila Nieves-Lee, Republican Staff Director

                       Elisha Tuku, Chief Counsel

                  Amber Beck, Republican Chief Counsel

                      Cameron Ricker, Chief Clerk

                      Shelvin Simmons, IT Director

                       Pat Lally, Assistant Clerk

                                  (ii)

                            C O N T E N T S

                              ----------                              

                         TUESDAY, JUNE 13, 2023

                                                                   Page

Opening statement of Chair Brown.................................     1
        Prepared statement.......................................    36

Opening statements, comments, or prepared statements of:
    Senator Scott................................................     4
        Prepared statement.......................................    37

                                WITNESS

Rohit Chopra, Director, Consumer Financial Protection Bureau.....     6
    Prepared statement...........................................    39
    Responses to written questions of:
        Chair Brown..............................................    40
        Senator Scott............................................    41
        Senator Warnock..........................................    57
        Senator Fetterman........................................    60
        Senator Britt............................................    61

              Additional Material Supplied for the Record

Semi-Annual Report of the Consumer Financial Protection Bureau--
  Fall 2022......................................................    62
Statement submitted by UnidosUS..................................   148
Letter submitted by Asset Building Policy Network................   155

                                 (iii)

 
    THE CONSUMER FINANCIAL PROTECTION BUREAU'S SEMIANNUAL REPORT TO 
                                CONGRESS

                              ----------                              

                         TUESDAY, JUNE 13, 2023

                                       U.S. Senate,
          Committee on Banking, Housing, and Urban Affairs,
                                                    Washington, DC.
    The Committee met at 10 a.m., in room SD-538, Dirksen 
Senate Office Building, Hon. Sherrod Brown, Chair of the 
Committee, presiding.

            OPENING STATEMENT OF CHAIR SHERROD BROWN

    Chair Brown. The Banking, Housing, and Urban Affairs 
Committee will come to order. Welcome back, Director Chopra. 
Good to see you again. Thank you.
    We created the Consumer Financial Protection Bureau to 
fight for all the Americans who have no other way to stand up 
to powerful interest groups and powerful corporations. Look at 
all the actions CFPB has taken since Director Chopra last 
appeared before us.
    The CFPB is going after those that discriminate in home 
lending, provide shady financial products, and prey on the 
elderly and students and servicemembers.
    Since its creation, the CFPB has returned $17.4 billion to 
more than 200 million Americans; $17.4 billion that otherwise 
would be on corporate profit statements is now where it 
belongs, back in consumers' wallets.
    In just one action, the CFPB returned millions to 
servicemembers by going after a title lender that violated 
servicemembers' financial rights.
    They are protecting consumers from being forced to pay 
debts they do not owe to nursing homes.
    They are working to ensure homes are valued fairly, helping 
working families build generational wealth.
    They are going after junk fees.
    Of course, Wall Street does not like what the CFPB does, 
and never has. After all, corporate lobbyists are not paid to 
just sit around and let consumers win.
    So what do Wall Street, their Republican allies in 
Congress, and their army of lobbyists do? They go to war 
against the only agency created to protect consumers. They have 
tried every tactic to gut the CFPB. They tried to cut its 
funding. They tried to take away the effective single director 
structure. They tried to dismantle it from the inside under 
Mick Mulvaney and Kathy Kraninger.
    None of that worked, at least not permanently.
    Under Director Chopra's leadership, the CFPB is back to 
doing its job--standing up to bad actors, protecting people's 
paychecks and savings, helping working families--it is pretty 
simple--keep more of their money.
    But the corporate crowd never gives up. Now they have used 
Wall Street's favorite circuit court to try to get rid of the 
CFPB.
    Last year's Fifth Circuit ruling is far, far outside the 
mainstream. They are saying the CFPB's funding authority 
violates the Constitution's Appropriations Clause and the 
separation of powers.
    This is, frankly--I am not a lawyer, but I can see that is, 
frankly, insane.
    By establishing reliable and steady funding, we ensured 
that CFPB would be able to fully protect consumers.
    For more than two centuries, Congress has used--and the 
courts have recognized--a variety of different mechanisms to 
fund agencies and programs.
    When creating the CFPB, we intentionally chose to fund the 
Bureau in a way that guaranteed steady funding without 
political interference--and we know that there would be lots of 
political interference during this--just as other financial 
regulators, like the Federal Reserve, are independently funded. 
Not going after that with the same verve as they do the CFPB, 
of course.
    If the CFPB's independent funding structure is 
unconstitutional, there is going to be far-reaching collateral 
damage. The Fed would be in jeopardy. So would the FDIC. Does 
Wall Street really want that to happen?
    These are entities vital to our economy, and to how 
corporations operate. Yet Wall Street does not seem to care 
because they dislike the CFPB so much.
    This lawsuit is a half-baked, bad-faith, dangerous legal 
ploy to do through the courts what Wall Street and their 
congressional allies in Congress could not get done any other 
way: get the CFPB off their back.
    That is the end goal here, to allow corporations to pad 
their profits with working families' hard-earned money, with no 
one standing in their way.
    Just look at Wells Fargo. In the most recent of a long, 
long, long line of abuses, for years--this is just the most 
recent one--found that Wells Fargo mismanaged auto loans, 
mortgages, and bank accounts. The bank wrongfully foreclosed on 
homes and illegally repossessed vehicles. That is a traumatic 
event in a consumer's life. The CFPB uncovered this misconduct 
that affected 16 million consumer accounts--16 million consumer 
accounts.
    The agency ordered Wells Fargo to repay $2 billion--that is 
``billion'' with a B--to millions of customers. For many of 
these customers, they had no other way to get their money back. 
Some of them may not have even known they were wrongfully 
foreclosed on, if the CFPB had not stood up for them.
    That is this agency's job. The CFPB is helping Americans 
save money on their homes and their bank accounts and their 
medical bills.
    And then take mortgages, for example. Unlike in 2008, today 
the largest mortgage lenders are nonbanks that are not even 
overseen by the Federal banking regulators. The CFPB is charged 
with policing all lenders to make sure they are making 
mortgages on fair terms.
    Without the CFPB, consumers' biggest financial investment, 
their key--for many, many, many millions of middle-class and 
working families--their key to generational wealth would be at 
risk, and the mortgage market would be in chaos. The Director 
knows all that. I can tell from the look on his face.
    Or look at the progress the CFPB has made on reducing junk 
fees, like overdraft fees. The CFPB estimates that consumers 
will save $5.5 billion--again that is ``billion'' with a B--on 
overdraft fees, due to the recent overdraft reforms made by 
banks, after many of us and the CFPB put pressure on them. That 
is $5.5 billion that Americans can instead use to put food on 
the table or pay their utility bills or put gas in their cars, 
maybe save a little bit of money for their son or daughter to 
go to community college.
    Make no mistake. These overdraft reforms and the $5.5 
billion in savings would never have happened without the 
Consumer Financial Protection Bureau.
    The CFPB's work on medical debt will also have a real 
effect on tens of millions of Americans' finances. Together 
with the CFPB, we pushed the three major credit reporting 
agencies to remove medical debt under $500 from credit reports. 
This Committee, beginning this year, brought, for the first 
time, all three CEOs of the credit reporting agencies to the 
table that you are sitting at, because that is so important 
that we oversee them better than we have in the past. That is 
what CFPB has done. It is time this Committee does too.
    That is going to mean 22.8 million consumers will have at 
least one medical collection removed from their credit reports. 
Think of that. Those Americans' credit scores will increase by 
an average of 21 points. And we all know that a better credit 
score means lower interest rates, and lower costs for 
consumers.
    All of these accomplishments, all of this work that means 
more money in working people's pockets and less money for stock 
buybacks and executive bonuses, because that is what it is all 
about for them. It is exactly why Wall Street and its allies 
are intent on destroying--and that is not an overstatement--
destroying the CFPB. They always have been.
    The people pushing this case do not really care whether the 
CFPB's funding model is constitutional. The only reason that 
corporations and their enablers on Wall Street have singled out 
the CFPB is because the agency does not do their bidding.
    The CFPB does not help Wall Street executives when they 
fail. It does not extend them credit in favorable terms or 
offer them deposit insurance like the other regulators do.
    No other agency fights for consumers, or stands up to 
corporate power, like the Consumer Financial Protection Bureau.
    Most Americans do not have high-priced lawyers. Most 
American's do not have corporate lobbyists. But they have you. 
They have the CFPB. It is our job to make sure that it will be 
their voice for decades to come. Ranking Member Scott.

             OPENING STATEMENT OF SENATOR TIM SCOTT

    Senator Scott. Thank you, Chairman Brown.
    Back in March we had a few things going on that month, so 
we would not be remiss in forgetting that the President 
submitted his budget. But while this Committee was consumed, 
and rightly so, by the bank failures, President Biden charged 
ahead with a progressive wish list of reckless spending, higher 
taxes, and failed policies.
    Thankfully, our Government has a system of checks and 
balances, one of which includes congressional oversight and the 
power of the purse--appropriations. In these important and 
trusted roles, we analyze and scrutinize the Executive branch's 
actions on behalf of the American taxpayer, so that the voices 
of the country's citizens are heard and their viewpoints 
reflected.
    Unfortunately, the Consumer Financial Protection Bureau, or 
the CFPB, is a notable exception. It is not accountable to 
Congress or the American taxpayer through the appropriations 
process, and it routinely and brazenly acts outside of the 
scope of its authority.
    And Director Chopra has taken full advantage of that 
loophole. Under your leadership, the CFPB has implemented 
policies and practices that will ultimately reduce consumer 
options and curtail reasonable practices that promote financial 
responsibility, further eroding access to credit.
    Director Chopra has created uncertainty in the marketplace 
by attempting to regulate through speeches and issuing blog 
posts under the guise of ``clarifying guidance.'' The result of 
rulemaking and enforcement by blog post? Fewer consumers are 
actually protected, and fewer options of financial products 
will be made available.
    Instead of serving people, companies are forced to maintain 
the status quo or withdraw service offerings out of fear for 
retribution by nastygram. Whether it is reputational harm 
through a CFPB press release based on a unique and flawed 
interpretation of the law or an assessment of risk exposure, 
the result is the same: less credit access for those who need 
it most.
    The CFPB's website boasts of how the agency's enforcement 
actions through 2022 have yielded $16 billion in consumer 
relief for 192 million consumers. But in reality, this means 
that the average consumer under the CFPB's ``protection'' would 
receive a check for around $83.
    Of course, $83 is still $83, but we have to ask ourselves, 
what is the real cost of those enforcement activities? How many 
billions of dollars have your actions actually cost consumers 
in the form of higher prices, reduced access to credit, or in 
lost opportunities for new products?
    Further, since his last appearance in front of this 
committee, Director Chopra has continued his public pressure 
campaign, mislabeling legitimate payment incentives as ``junk 
fees'' or ``illegal fees.'' This sweeping initiative lumps 
legitimate, standard credit card late fees in with the White 
House's political efforts to bring down fees in other sectors.
    Let's be honest: no one likes paying late fees, but they do 
encourage financial discipline. When you pay your credit card 
on time, your credit score goes up. When you do not, it goes 
down. And when your credit score goes down, it makes it harder 
to get a car loan, a small business loan, or even a mortgage at 
a better rate. So I am concerned that the CFPB's crusade on 
``junk fees'' will do more harm than good, and actually end up 
restricting access to credit for low- and middle-income 
Americans with limited credit histories.
    To make matters worse, this proposal has major gaps and 
errors in the data used and the procedure applied. Just read 
the Small Business Administration's Office of Advocacy's 
comment letter, in which the SBA expresses concerns that the 
CFPB ``does not have the necessary data to develop an adequate 
or factual basis for its certification.'' In other words, 
members of the Executive branch, your colleagues, have serious 
concerns around this rule.
    If this rule were to be finalized, the end result would be 
increased cost of credit for all American consumers and less 
access to credit for those who need it most. I really just 
simply cannot understand how that would protect consumers or be 
beneficial for everyday Americans and Main Street businesses.
    To make matters worse, under your leadership, the CFPB 
learned of a major data breach in its own backyard, impacting 
more than a quarter-million consumers. At the same time, the 
CFPB was finalizing the rule that requires lenders to collect 
and report a vast swath of small business lending data on 
credit products, including personally identifiable information 
like race, sex, ethnicity to the CFPB.
    The irony here is just astounding. Why should we trust the 
CFPB to collect more data on millions of community banks, small 
businesses, and individuals when it has failed to maintain 
safekeeping of the data it already collects?
    These obvious and repeated failures raise an important 
question: How can we protect American consumers from the 
actions of the CFPB? I honestly cannot believe that is a 
question that needs to be asked, but it is indeed. But that is 
where we find ourselves today. I hope that during the question 
and answering time of this Committee, we will have an 
opportunity to engage in some of the important answers to the 
questions I am asking.
    Finally, I think it is important to note that I am a firm 
believer that the best way to provide economic opportunity and 
protect American consumers is to encourage competitive markets, 
innovative products, and set clear rules of the road. These 
principles have provided millions of Americans, like myself, 
the opportunity and ability to overcome poverty. It is 
absolutely necessary that we protect our principles.
    But what I find so disappointing is that the American 
public cannot trust this agency, this Administration, or this 
Director, and that is truly a shame.
    Chair Brown. Thank you, Senator Scott.
    As I am introducing our witness today I point out that the 
White House that nominated Mr. Chopra, this Administration, in 
its first 29 months, has created more jobs than any 4-year term 
Administration in our Nation's history. So I think that is 
important always to remember the work that Mr. Chopra does, and 
others in the Administration.
    The honorable Rohit Chopra is Director of the Consumer 
Financial Protection Bureau. He previously served as FTC 
Commissioner after passage of Dodd-Frank. Director Chopra 
joined the CFPB as Assistant Director and then was appointed 
CFPB Student Loan Ombudsman, lots of experience there fighting 
for consumers in all facets. He subsequently served as a 
Special Advisor at the Department of Education.
    Director, please proceed.

    STATEMENT OF ROHIT CHOPRA, DIRECTOR, CONSUMER FINANCIAL 
                       PROTECTION BUREAU

    Mr. Chopra. Chairman Brown, Ranking Member Scott, and 
Members of the Committee, thank you for holding this hearing on 
the CFPB's submission of its Semiannual Report to Congress.
    I am pleased to report that the CFPB continues to deliver 
tangible results for the public today, ensuring that consumers 
are protected, while also preparing for the future as Big Tech 
and artificial intelligence reshape the industry.
    I want to share a few observations about the state of the 
American consumer, as well as some highlights of CFPB's work.
    American families continue to benefit from a resilient 
labor market, and consumer spending continues to be quite 
robust, and borrowing has accelerated. Americans now owe $17 
trillion in household debt, including mortgages, student loans, 
auto loans, and credit cards. Inflation in key categories such 
as vehicles has contributed to rising levels of debt. Interest 
rates are substantially higher than they were a few years ago, 
and some families are paying much more on their credit cards 
and other loans.
    Overall, current indicators of distress on consumer credit 
remain muted, though there are modest signs of increased 
delinquency. We will continue monitoring the impact of changes 
in interest rates and home prices closely, as well as other 
changes that might impact large segments of the population.
    The CFPB continues to be on high alert for shocks to the 
system that might unsettle household financial stability. The 
failures of Silicon Valley Bank, Signature Bank, and First 
Republic Bank highlighted some vulnerabilities in the banking 
system, and regulators took a series of extraordinary actions 
that limited the fallout to the broader economy. But it is 
clear we will need to take steps to avoid the need for 
emergency measures in the future and for people to know their 
funds are safe.
    With respect to congressional directives, CFPB has made 
major progress to propose, finalize, or implement required 
rules on credit reporting for survivors of human trafficking, 
small business lending data collection, PACE lending, the 
transition from LIBOR, and so much more. We are reviewing old 
rules to find opportunities to simplify and future-proof them. 
We have built on the work of my predecessor to publish more 
guidance and advisory opinions that especially help small and 
nascent firms looking to develop innovative products and 
services.
    We are focusing more heavily on supervision of nonbank 
financial firms, which have not always been subjected to 
similar oversight as local banks and credit unions. We have 
activated unused authorities to minimize regulatory arbitrage 
by nonbank firms seeking to gain a competitive advantage.
    We have shifted the focus of our enforcement program away 
from targeting small businesses and putting more attention on 
repeat offenders. Since then, we have recovered $4.6 billion in 
refunds and penalties against violators of the law.
    We are handling an average of 10,000 consumer complaints 
each week and obtaining successful resolutions for individuals 
outside of formal legal proceedings.
    Equally important is our work to address how technology is 
transforming financial services. I think the U.S. has a choice: 
will we harness technology to maintain and enhance relationship 
banking, to drive competition, and protect privacy, or will we 
continue our lurch toward a system marked by surveillance that 
is more automated and controlled by just a few firms?
    The CFPB is working to ensure broad benefits for consumers 
and businesses alike when it comes to technological progress. 
One of our most important initiatives is to accelerate the 
shift in the United States to open banking, allowing consumers 
to more easily switch and gain access to new products while 
protecting their most sensitive personal financial data, and 
privacy will continue to be high on our mind.
    We are leading a number of efforts on artificial 
intelligence, and we are working to bring on more technical 
talent inside the agency. We are taking steps to guard against 
algorithmic bias across markets, and we are working to ensure 
that data brokers respect longstanding laws on the books. The 
work of the CFPB in today's digital economy is more relevant 
than ever.
    Thank you again. I have appeared before this Committee 
many, many times, and I look forward to hearing to your 
questions.
    Chair Brown. Thank you, and with your performance in that 
job it will be many more times because I think the American 
public likes hearing about the progress that CFPB has made. 
Thank you.
    In 2010, Congress charged the CFPB with enforcing our 
mortgage laws so that families would never again face the types 
of predatory loans and practices that devastated so many 
communities, destroyed so many people's financial lives in 
2018, and did immense damage to the economy as a whole. What 
would it mean for homeowners in the mortgage market if CFPB did 
not have a strong, independent structure, as Congress intended?
    Mr. Chopra. Well certainly, inasmuch that the Fifth 
Circuit's ruling is sustained, it will create major uncertainty 
in our mortgage markets. It will be difficult for lenders to 
know what the rules of the road are, and borrowers may not have 
the clear responsibilities and rights to safeguard them.
    We learned a hard lesson in the financial crisis when it 
came to predatory mortgage lending, and the reforms that we put 
into place have built a lot of resilience in the system.
    Chair Brown. Thank you. That is why, as you know, I led 35 
of my Senate colleagues in filing an amicus brief defending the 
CFPB's constitutionality, fighting so that CFPB can continue to 
create a fair, transparent, and competitive mortgage market, 
how important that is, protecting consumers' biggest financial 
asset and the key to intergenerational wealth.
    In 2008, we saw what happens to homeowners who have said 
that a number of times in the broader economy when we do not 
have a strong consumer protection agency. We cannot let that 
happen again, so thank you.
    Let me talk about medical debt for a moment, Director. 
Forty-one percent of U.S. adults have medical debt. It is clear 
that accidents and sickness can happen to anyone, young or old, 
at any time. Yet, medical debt can affect a person's ability to 
rent or buy a home. People with medical debt are hounded to pay 
and are often made to feel like a burden to society.
    To alleviate the burden of medical debt, Director, would 
CFPB consider rulemaking to remove all credit debt from credit 
reports and eliminate deferred interest on medical credit 
cards?
    Mr. Chopra. Well, let me just say that so many people in 
our country are pushed to pay medical bills that they may not 
even owe. Many of them have already paid it or are stuck in the 
loop between the insurance company and their provider, often 
getting duplicative or conflicting bills. And the concern that 
the CFPB has is that the credit report may be used as a tool to 
coerce people into paying something they do not owe. So, we are 
looking at all aspects of the Fair Credit Reporting Act to see 
whether it is appropriate for credit reports to be used in that 
way, and we are considering options to restrict some of the 
parking on credit reports that may be false or inaccurate, 
because the consequences for individuals are very real. They 
may fail a background check because of it, just because they 
were sick or they had an inaccurate report on their credit 
report.
    Chair Brown. OK. Thank you.
    In November I wrote to you about the growing number of 
homeowners suddenly facing threats of foreclosure for second 
mortgages the did not even know they had, that they owed. They 
called them ``zombie foreclosures.'' Many of these homeowners 
have not heard from their lender in years. Just last week we 
found out that some of the companies trying to collect on these 
debts are actually private equity that have targeted single-
family homes as a big moneymaker, buying up homes, jacking up 
rents. Now they are trying to foreclose on homes based on old 
mortgages.
    What are you doing to protect consumers from these 
predatory ``zombie foreclosures''?
    Mr. Chopra. Well, so many people got piggyback mortgages. 
These were 80/20 mortgages where there was a second. Many of 
them modified it and had not heard and believed that it was 
satisfied and received representations that they were 
satisfied. We are now seeing some of those old second mortgages 
come back, and people are getting across the country 
foreclosure threats, even though they had already satisfied 
that.
    We have issued some guidance to make clear about what the 
current law expects when it comes to time-barred debt or zombie 
debt, and we will look to take actions where there are 
violations of law.
    This is the type of thing that can really undermine 
mortgage markets, and we need to make sure it is fair and 
transparent across the board.
    Chair Brown. Thank you. Last question. The Sunday New York 
Times Magazine cover story published a lengthy article just 
last Sunday describing how consumers desperate to improve their 
credit scores end up spending billions of dollars on 
questionable credit repair services.
    What is the CFPB doing to protect consumers, some of these, 
from shady credit report outfits that charge consumers big 
bucks but fail to deliver lasting results?
    Mr. Chopra. Well, so much of people's lives are determined 
by that three-digit score, that credit score, and people will 
go to great lengths to fix it. We have taken a number of 
enforcement actions against outfits that have illegally taken 
fees and run off, but we need to look more holistically at the 
credit reporting system so people know how they can fix errors 
and not be subjected to scam artists.
    Chair Brown. Thank you. Senator Scott.
    Senator Scott. Thank you, Mr. Chairman. Thank you, Director 
Chopra.
    In my opening statement I talked a lot about my concerns 
that you and your agency continue to push enforcement 
regulations and policymaking through blog posts and speeches 
rather than through the appropriate Administrative Procedure 
Act, the process. I am still very concerned about that, and 
frankly, this approach not only circumvents Congress, but it 
takes the public's chance away to comment and provide feedback 
on the CFPB's proposals. This feedback is critical to ensuring 
the best policy or rule is put forward and that it works for 
everyday Americans and Main Street America.
    Will you commit to refocusing on the CFPB's legislated 
mission and follow proper APA rulemaking?
    Mr. Chopra. So, sir, let me just share that we absolutely 
do that, and one of the things we hear from small firms is they 
really want to know how existing law applies. We have so many 
changes in technology, and these small firms do not have the 
ability to hire so many lawyers.
    So, I have actually continued a practice of my predecessor, 
Director Kraninger, to issue these advisory opinions and other 
guidance documents. They do not create any new obligations. 
They simply restate what the existing laws are. We receive a 
lot of good feedback from it.
    When this policy was proposed, the Consumer Bankers 
Association and others really cheered it on because there is a 
need, especially with the complexity of some of these old rules 
that have been on the books, how do new business models apply? 
If we want to promote innovation, if we want to promote new 
entry, and as you said in your opening statement, if we want 
competition we cannot have small firms be blocked. And so that 
is part of why we do this.
    I understand your concern. If there are specific instances 
where you feel that was not the case I take that feedback 
seriously. And we have proposed and implemented through notice 
and comment rulemaking, so many congressional directives. But I 
appreciate what you are saying.
    Senator Scott. Yeah, I will say it this way. As a small 
business owner for several years, one thing I would want from 
my Government is certainty and predictability. I want to be 
able to go through a normal, typical process, identify my road 
forward, my path forward, and be able to live by what I think 
is the normal, typical way of communicating and providing 
information to the small businesses and consumers out there, as 
opposed to using a patchwork quilt of posts, speeches, in order 
to provide clarifying information to the public. To me, it 
makes sense that if a business has to rely on the Federal 
Government, the one thing we ought to do is, if there is a 
process in place to provide that information. I think it is 
critical that we do it in such a way that the average person 
can go to the website or through a normal process in order to 
understand and appreciate what it is that they have to do in 
order to be a rule follower, so to speak, as opposed to a 
different way of approaching it.
    Mr. Chopra. And we absolutely do that. We try and make our 
guides also in plain language so that people who are entering a 
market, they actually can look. And I will tell you, we hear 
from firms that this is actually saving them money on legal 
costs. And compared to our other counterparts, we have actually 
caught up in issuing more of this guidance, because I think 
people want simple ways to understand their obligations, rather 
than having to follow lots of litigation and deal with lots of 
uncertainty.
    So, I take what you are saying seriously. I will happily 
chat with you more about how we can improve that. We do try and 
put it in one place so that people know how they can make sure 
they are living up to consumer rights.
    Senator Scott. One of the other comments I made during my 
opening statement had to do with the credit card late fees and 
the importance of not just lumping them in with the junk fees 
the President proposes eliminating because he thinks that they 
are just unnecessary fees. The fact of the matter is that some 
fees are, as I said in the opening statement, it provides 
discipline, financial discipline so that when you want a loan 
for a car or business or a mortgage, that you get better rates 
because the financial discipline that is encouraged through 
late fees is there.
    And the question I would ask you is twofold. Number one, 
the approach of trying to eliminate the credit card fee sounds 
great because, as I said, no one wants to pay the fee. But the 
truth of the matter is that fee is going to be paid just in a 
different form. If it costs an institution $29 or $38 to 
collect the fee and you eliminate the fee, you still are going 
to figure out how to collect that fee, whether it is through 
increased interest rates or increased cost of products. It does 
not go away. This is this misnomer that somehow the Government 
can just snap its fingers and say the fee is no longer there, 
but it is embedded in the cost of everything else. So what 
ultimately happens to small businesses that are starting out, 
that the entry level, the fee for entry goes up because the 
Government figures how to squeeze the balloon, but it just 
creates more pressure somewhere else?
    So I hope you will take that into consideration. I do not 
have time for an answer, but I do think it is important that we 
understand that if you take out a loan, you pay it back. If you 
do not pay it back on time, there is an incentive to do so, or 
a disincentive not to do so the next time around. Those are 
really important considerations in a free market economy that 
we understand that there is no free lunch. You cannot just take 
away a fee and assume that it is gone. You have to understand 
that taking away the fee only means that you are going to paint 
it into the overall structure and cost associated with that 
institution, whatever it is.
    Thank you, Mr. Chairman.
    Mr. Chopra. Mr. Chairman, may I respond?
    Chair Brown. Of course.
    Mr. Chopra. So our proposal does not seek to eliminate 
fees.
    Senator Scott. Right. It just goes down from what it is 
down significantly.
    Mr. Chopra. No. They are fully allowed to capture their 
costs, and I worry that there has been some misinformation 
about this. The proposal allows recovery of costs. What it does 
is it revisits a provision in the rule that the Fed put in a 
while ago, and we are trying to make that more rigorous and 
make sure it reflects market realities. And one of the things 
that our issuers tell us is that they do not want to profit off 
of late fees. That is exactly the goal here because the law 
says those penalty fees are supposed to be reasonable and 
proportional. We are trying to make it more clear about the way 
we can do that while also making the market more competitive.
    Senator Scott. Just a final comment.
    Chair Brown. Of course.
    Senator Scott. Thank you, Chairman. A, I think you are one 
of the best witnesses that says a lot in a very effective way, 
but somehow we get off course. Because the truth is that if you 
study the actual cost of collecting on these late fees, if we 
just go with whatever that cost is of doing business, that 
would be great. But the proposals that I have seen reflects a 
significant drop in the fee that actually does not cover the 
cost of the collection. But we could do this all day, and I 
would rather not.
    Mr. Chopra. Yeah. That is not right.
    Senator Scott. I would rather us have a serious 
conversation.
    Chair Brown. Senator Menendez is recognized.
    Senator Menendez. Thank you, Mr. Chairman.
    Wells Fargo is an exemplary institution, that is that it 
has exemplified why we need the CFPB through flagrant and 
persistent issues impacting its consumers. From the fake 
account scandal in 2016 to the $3.7 billion penalty the Bureau 
assessed on Wells Fargo last December for, quote, ``widespread 
mismanagement of auto loans, mortgages, and deposit accounts,'' 
the CFPB has repeatedly stepped in and stepped up to protect 
consumers from harmful schemes at Wells Fargo and other 
institutions.
    So Director Chopra, if the CFPB were defunded, as many 
Republicans in Congress would like it to be, who would be 
responsible for protecting consumers from this type of abuse?
    Mr. Chopra. I do not believe there would be anyone if we 
were simply defunded.
    Senator Menendez. And that is the answer, nobody, which is 
why we created the CFPB in the first place and why I joined 36 
of my colleagues in an amicus brief defending the CFPB. A 
strong, independently funded CFPB is essential to protecting 
consumers from harmful practices like we have seen at Wells 
Fargo--$3.6 billion.
    Now I continue to hear stories from New Jerseyans who have 
fallen victim to scams and fraud on Zelle and other peer-to-
peer payment apps and have been unable to obtain relief from 
their banks. The last time you came before this Committee we 
spoke about this, and you indicated that you were hoping that 
the industry would set up frameworks to combat fraud and scams. 
I have not seen much progress. What progress, if any, have you 
seen from the industry in ensuring consumers are made whole 
when they are scammed on peer-to-peer payment platforms?
    Mr. Chopra. Well, the industry manages the ACH network. 
They vote through the NACHA process. They have been very slow 
to take action. They need to speed up with respect to services 
like Venmo, Zelle, others. They may have different processes. 
We are making very clear that we need to make sure that the law 
is being followed but also that they take responsibility for 
updating rules that they control. If not, we are going to 
continue to have more scams, and in this digital environment, 
with generative AI, voice cloning, it could get even worse.
    Senator Menendez. Well, from my perspective it has been 
over 6 months since it was reported that banks that own and 
operate Zelle were considering requirements to reimburse 
customers that fall victim to scams, but nothing has been 
finalized. And when consumers are being harmed and industry is 
unable, or unwilling, to address the problem, the CFPB needs to 
step up.
    So I hope that, at some point, we are just not going to 
keep giving time to the industry to do that, which I think they 
do not really want to do. I would like to believe they want to 
do it, but at this point they have the wherewithal. They have 
the capacity. They have the resources to figure out what are 
the tools necessary. And I hope the CFPB will use all the tools 
at its disposal, up to and including modernizing Regulation E 
to reflect the reality of growing use of apps like Zelle.
    I have some significant concerns about the potential impact 
that RESTART and student loan payments will have on student 
loan borrowers. Research from your entity shows that an 
increasing number of student loan borrowers are delinquent on 
other credit products. Borrowers will likely also be impacted 
by changes to the system since the pause began. In the past few 
years, several student loan services have exited the program, 
and as a result 17 million student loan accounts have been 
reassigned to other loan servicers or other servicing 
platforms.
    What is the CFPB doing to facilitate a smooth transition 
for borrowers back to repayment?
    Mr. Chopra. It will be very difficult. Many people may have 
moved. Many people are with a new servicer. In some 
circumstances they will need to reup their auto-debit. We are 
working hard with the Department of Education. They are facing 
serious budgetary constraints in making sure they can 
effectively communicate and collect. But, of course, we are 
working with the States and other Federal agencies as well to 
make sure that loan servicers and collectors are adhering to 
existing law. If we do not get this right we will have a surge 
of delinquency in our country, which could have long-term 
effects, and we are actively working to make sure we mitigate 
that harm.
    Senator Menendez. That is what I hope we are working to 
prevent.
    Finally, the CFPB's complaint system is critical to the 
operations of the Bureau, given its real-time reports into 
potentially deceptive or abusive financial practices. However, 
for consumers with limited English proficiency, the complaint 
system as it currently exists remains out of reach. While there 
is a Spanish language complaint system by phone, there is no 
CFPB online complaint system in Spanish, or for that fact, any 
other language.
    According to the 2017 American Community Survey, nearly 26 
million people, nearly 10 percent of the U.S. population, have 
limited English proficiency. Consumers who lack access to 
information are prime targets for predatory behavior.
    Why is there not currently a complaint system online in 
Spanish or any other language, and can you commit today to try 
to make the complaint system available in an additional 
language?
    Mr. Chopra. Mr. Chairman, may I answer? Mr. Chairman, may I 
answer?
    Chair Brown. Of course.
    Mr. Chopra. So one of the things we have to consider in 
that is we transfer the complaints to the financial 
institution, so we would need to think about would we translate 
that or do something different. I am looking into expanding 
language access across the board. We have actually done some 
specific research in recent months on speakers of six different 
languages. I am happy to figure out ways in which we can make 
sure more individuals who speak Spanish and other languages are 
able to access our system.
    Senator Menendez. I can just say to you, Director, there 
are some pretty sophisticated programs that can auto-translate 
in a way that would be sufficient for the institutions to 
understand what the challenges are.
    Chair Brown. Senator Britt, from Alabama, is recognized.
    Senator Britt. Thank you, Mr. Chairman. Mr. Director, thank 
you for being here today. I greatly appreciate it.
    I want to follow up on a line of questioning from my 
colleague, particularly given the rise in AI. As you mentioned, 
if we are not thinking about the way that tech and AI affects 
the banking industry in a number of ways we are not all doing 
our job.
    One of the things that I am really concerned about, and I 
think we can both agree, rewind, I think we can both agree or 
assume that obviously we need to go after bank robbers, and 
now, in this day and age, thankfully, you do not see as many of 
those things in actuality. But what we do see is fraud to 
consumers. So we are seeing it across our State. We had a 
number of people targeted through the use of AI, and 
unfortunate scams, so to speak.
    So when I look at your budgetary proposal and I look at 
your performance plan it shows that consumer education 
initiatives are decreasing at the CFPB. And I want you to help 
me understand why the CFPB's investment in consumer education 
is not projected to keep pace with the rise in fraud and scams 
that American consumers are experiencing. I think we have to 
make sure we are doing our part to make sure that Americans are 
protected.
    Mr. Chopra. I am in total agreement. I think we need to 
make sure this Committee, too, is on notice about generative 
AI, voice cloning, impersonation.
    Senator Britt. Yes.
    Mr. Chopra. One of the things I took a look at in our 
budget is I found that there were a lot of programs that were 
not effective. So I am very open to finding ways that have some 
empirical effectiveness. But in the age of AI, pamphlets will 
not be what solves it. We are looking at digital literacy 
tools, ways in which consumers can protect themselves, spot 
scams. We are also looking at how it could be focused on 
specific populations. Servicemembers are much more likely to be 
targets of these scams and identity theft. Older Americans face 
different issues.
    Senator Britt. Absolutely.
    Mr. Chopra. So I am open to all of it.
    Senator Britt. I think when I see the decrease in the 
budgetary items it concerns me because Alabamaians alone lost 
$55 million last year to scams. So we need to be making sure we 
are doing what we need to be doing to stay in front of that, to 
educating people about what you just said, AI and the use of 
voiceovers, and all of the things. So thank you. I look forward 
to working with you on that.
    I also think that our emphasis needs to be placed on places 
like that, where we are really protecting consumers instead of 
what we have seen this Administration talk about with regard to 
actual incentive fees for people to pay things on time.
    My question to you is how many comments did the Bureau 
receive on the proposed actions related to the, quote/unquote, 
as you put them, ``junk fees''?
    Mr. Chopra. I do not know the exact number. I want to say 
it is in the tens of thousands.
    Senator Britt. Yes. I believe it was 60,000, is my 
understanding. So, I mean, that is a significant number. And I 
just want to make sure that you are committed to taking time to 
really reviewing those and the implications of those from 
various people.
    Mr. Chopra. Oh, absolutely. And I just want to comment real 
quick. It is important that people have the appropriate 
incentives to repay. I think we want to make sure, what we 
learned--and I think Senator Scott mentioned in his opening--
consumers face a lot of consequences when they do not pay.
    Senator Britt. Absolutely.
    Mr. Chopra. Credit scores getting harmed. They might face 
higher prices. But we want to make sure it is fair and 
competitive, and I will commit to you we will carefully review 
all of the comments in the record.
    Senator Britt. And do you have a timeline for that yet, on 
how long you----
    Mr. Chopra. So the docket you mentioned, that did not have 
a specific proposal attached to it.
    Senator Britt. OK.
    Mr. Chopra. That was more inviting broader comment. But as 
it relates to specific rulemaking proposals, I do not know if 
you have a specific one in mind. We are trying to do it in a 
way that is rigorous but that does not take forever.
    Senator Britt. OK. And then I know I am running out of 
time, and I actually have two more things I want to touch on. 
But when we hear from some of my colleagues about the removal 
of medical debt completely, you know, I do not agree that 
excluding accurate information on ability-to-repay factors will 
affect a bank's decision. It could have a detrimental 
downstream effect if you were to remove an entire source of 
information from a bank.
    Mr. Chopra. Well, the word you said is ``accurate'' is 
important.
    Senator Britt. Right.
    Mr. Chopra. And some of the analyses we have seen from the 
industry is that it is not necessarily predictive of other----
    Senator Britt. Right, and I do appreciate what you said 
earlier about if someone is involved and being attacked from 
two different sides, and that we have got to figure that out. 
We want to make sure that we are putting people in the best 
position possible to succeed. But eliminating an entire group 
with regard to medical debt completely, you know, you then 
wonder, what would your opinion be on what would someone's 
incentive to pay that debt be if it was completely removed?
    Mr. Chopra. Yeah, and I take that very seriously, and I 
think the accuracy issue is what I think is really the 
lodestar. Again, the credit report, it is not supposed to be a 
place where you park rumors or where you put something in order 
to say make them pay even if they do not owe. That is really 
the sweet spot we are trying to hit.
    Senator Britt. And as I close I would just like to say, 
when we look at 1071, I hope that you really consider the 
effects on small, mainstream, Main Street banks, relationship-
building banking that we see. I mean, we have got a lot of 
people that are making our small communities thrive, and I 
think they need to be heard, and you have the ability to give 
the exemption, and I really hope that you take a look. We need 
our community banks and our financial institutions and our farm 
credit bureaus to thrive. They are doing a good job, and if 
they have a CRA rating of Outstanding or Satisfactory, I mean, 
these men and women are trying to make their communities as 
healthy as possible, and I hope you will consider giving them 
an exemption.
    Mr. Chopra. And those small banks performed 
disproportionately well during PPP.
    Senator Britt. Absolutely, they did.
    Mr. Chopra. And based on our adjustment to the rulemaking, 
there are a substantial number of banks, even in Alabama, who 
will be exempt now. But I take----
    Senator Britt. Well, I am----
    Chair Brown. Thank you, Director.
    Senator Tillis, of North Carolina, is recognized.
    Senator Tillis. Thank you, Mr. Chairman. Mr. Chopra, thank 
you for being here. Is CFPB a prudential regulator?
    Mr. Chopra. No. In the typical sense we do not do safety 
and soundness capital adequacy type work. Our focus is in 
Federal consumer financial law.
    Senator Tillis. Does the CFPB consult with prudential 
regulators when taking actions that may impact safety and 
soundness?
    Mr. Chopra. Yes. So we are in regular touch with them, 
particularly when it is entities that we jointly supervise. We 
have actually done more of those actions in concert with them 
with respect to any regulation. We closely consult them on all 
of that. Because the last thing we want to see is any threats 
to the system.
    Senator Tillis. I know the CFPB has campaigned against the 
so-called ``junk fees,'' which I believe is an expansive term 
covering fees associated with a variety of financial products. 
This includes overdraft fees. In 2008, after the 2008 financial 
crisis, some regulators under the Obama administration 
emphasized the reliability and countercyclical nature of 
overdraft revenue is an appropriate tool for ensuring the 
stability of the bank's balance sheets. I should go on to say 
some at the Federal Reserve went so far as to express desire to 
see overdraft revenue when grading banks on the well-known 
CAMELS rating system.
    So what specific instances of consultation has the CFPB 
engaged in on overdraft fees, given these fees have previously 
been used to justify critical safety and soundness ratings?
    Mr. Chopra. Well, as a general matter, non-interest income 
is something that a prudential regulator looks at to determine 
where might there be cyclicality, where might there be ways in 
which they can ensure adequate earnings. There is no question 
of that.
    Both the FDIC and the OCC have now published more and more 
guidance with respect to different fee streams, including 
overdraft fees. So certainly the place where----
    Senator Tillis. Can you give me some specifics on the 
consultations?
    Mr. Chopra. Well, they have issued guidance in many ways as 
a result of all of the work we have done together. We work with 
them on data. We work with them to see what might the impact be 
on the system? We work with them to see how might this affect 
banking access? There are all sorts of ways in which we 
dialogue with each other, and it has been very high on their 
list as well, to address potential overdraft fees where three 
are charged instead of one. And I think that is where a big 
change has occurred in the market.
    Senator Tillis. What analysis has the CFPB conducted in its 
efforts to discourage overdraft fee revenue and that 
interaction with safety and soundness and balance sheet 
stability?
    Mr. Chopra. Sorry. What analysis has the CFPB conducted?
    Senator Tillis. Yes, to discourage overdraft fees.
    Mr. Chopra. So again, it is not necessarily discouraging. 
It is making them appropriate and competitive. So what we are 
seeing in the marketplace right now actually a shift to more 
overdraft lines of credit. So in many ways this is giving 
people a new way for credit creation, a new way to capture 
revenue.
    The analysis that is specific to institutions on their 
safety and soundness or the system, that is really done by the 
prudential regulator supervisor for that institution in 
developing any rating.
    Senator Tillis. I am going to submit some questions for the 
record on this line of questioning, but in my limited time I am 
also concerned with the level of rigor that went into the $8 
late fee proposal. It looks like your data does not account for 
the actual costs incurred by banks to actually manage these 
accounts. So if banks are not able to cover their full costs, 
will that not lead to driving up prices for consumers who will 
continue to be banked?
    Mr. Chopra. So just to be clear, we have not proposed an $8 
cap. They are able to recover their costs. We actually put more 
rigor----
    Senator Tillis. I think the more fundamental question is 
that if these accounts cost more than the revenue stream to 
sustain them, how do they make it up? They make it up one of 
two ways, right? They do not bank with a given customer, or 
they find a way to get the revenue to cover the cost of 
basically a losing proposition.
    So it seems like we are still moving down a path where we 
are going to artificially cap what you may need to actually 
justify even having a business relationship. What am I missing?
    Mr. Chopra. Well, the law prohibits using penalties as a 
major profit center. That was in the law. We are reviewing the 
Fed's rule on this to make sure----
    Senator Tillis. But I am just talking about having a 
revenue stream to cover the underlying cost of a given account.
    Mr. Chopra. I understand. The law is clear, though, that it 
must be reasonable and proportional to the violation or 
omission. That is exactly what we are trying to make sure is 
held faithful.
    Senator Tillis. I will submit other questions for the 
record. Thank you, Mr. Chairman.
    Mr. Chopra. Thank you, sir.
    Chair Brown. Senator Warren, of Massachusetts, is 
recognized.
    Senator Warren. Thank you, Mr. Chairman.
    So each year credit card companies squeeze billions of 
dollars in fees out of American consumers, and chief among 
these are the late fees that you were just discussing, the 20 
bucks or 30 bucks or 40 bucks that credit card issuers charge 
customers whenever they are late on a payment.
    Now some banks demand these fees even if someone is late 
only by a few hours or even if the missed payment is actually 
less than the late fee itself. These fees cost families an 
estimated $12 billion a year, and earlier this year the CFPB 
proposed a rule to put a cap on unreasonable fees.
    No surprise, the bank lobby is unhappy about this, and in 
response to the CFPB's rule, the big banks and the credit card 
issuers have unleashed a massive public relations campaign 
claiming that ending $40 late fees would end credit cards as we 
know them. So I thought I would use my time today to talk just 
a little bit more about this proposed rule.
    Director Chopra, does the CFPB's proposed rule ban credit 
card companies from charging late fees?
    Mr. Chopra. No. Absolutely not.
    Senator Warren. OK. So it is not an end to late fees. The 
rule just lowers the maximum amount the credit card companies 
can charge while getting automatic immunity from enforcement 
actions, and that dollar figure right now is proposed at $8.
    So let me ask this. If a bank needs to charge more than $8 
to cover the actual cost of collecting missed payments, would 
the proposed rule permit that?
    Mr. Chopra. Yes. They will just have to calculate it.
    Senator Warren. OK. So they can charge more if that is what 
it costs to actually cover the services. Is that right?
    Mr. Chopra. That is right.
    Senator Warren. OK. That sounds pretty reasonable to me. So 
if the banks want to charge more than $8, just come and show 
your math about why you are charging more than $8, and there is 
not going to be any problem here.
    But it is clear that the big banks are not interested in 
being reasonable under these circumstances. They insist that 
this rule would force them to pass on costs to all the rest of 
their customers or stop issuing credit to lower-income 
families.
    So let me ask this. Director Chopra, do you know what 
percentage of revenue late fees represent for the largest 
credit card issuers?
    Mr. Chopra. I do not know but I do not believe it is very 
large.
    Senator Warren. OK. When I asked the biggest credit card 
issuers for this information their response was that it was 
less than 1 percent. It was only a fraction of 1 percent. So if 
there is an $8 cap on credit card late fees, unless the banks 
can show that their costs are higher, in which case they can 
charge more, all that will happen, as best I can tell, is that 
the banks will have slightly lower profit margins. Does that 
sound about right?
    Mr. Chopra. Well, the law specifies, actually, it is not 
really supposed to be a profit center.
    Senator Warren. So they do not get to make a profit, in 
that sense, on people who are late. They can certainly cover 
their costs, but it is not supposed to be a profit center, and 
that is not the decision of the CFPB. Say that again?
    Mr. Chopra. Yes. That is in the CARD Act. The CARD Act 
specifically prohibits fees that are not reasonable or 
proportional, and the fact that you can be charged a massive 
fee for being a few hours or a day late, by a few dollars, that 
does not appear to be proportional.
    Senator Warren. OK. And the CART Act, as I recall, was 
passed even before the CFPB came into existence here.
    Mr. Chopra. That is correct.
    Senator Warren. So look. The CFPB is helping root out junk 
fees, and because of that Americans are going to keep a little 
bit more money in their pockets. I think of it as like the $35 
insulin, like student loan debt cancellation. Getting rid of 
junk fees is one more example of putting Government on the side 
of the American people.
    You know, junk fees are just one reason why it is critical 
that we have a CFPB, and that is why I have joined my 
colleagues in signing the amicus brief supporting the CFPB 
against attacks that undermine the Bureau's ability to fight on 
behalf of families. I am grateful that you are there, waging 
this fight, and I hope that you keep it up.
    Thank you. Thank you, Mr. Chairman.
    Chair Brown. Senator Daines is recognized, from Montana.
    Senator Daines. Chairman, thank you. Director Chopra, 
thanks for being here today.
    In your testimony you highlighted the impact of increased 
interest rates, what effect they are having on families. I will 
tell you, I hear that as I travel around the State of Montana.
    I remember being in this very room, whether it was as a 
banking hearing discussion or as part of the Finance Committee 
in another room, when we had this fight about is it smart, is 
it the right thing to unleash another nearly $2 trillion into 
the economy, in terms of stimulus. We had a $1 trillion of 
unspent dollars at the end of 2020. And there was a word that 
kept coming up--no, inflation is transitory, transitory.
    I do not hear the word ``transitory'' coming from anybody 
anymore, from the Administration or from my colleagues across 
the aisle. We warned the American people. We warned our 
colleagues this was going to create inflationary fires, and lo 
and behold, it did. Injecting trillions of dollars of 
unnecessary stimulus in the economy was a signific driver of 
seeing now 40-year highs in inflation and requiring now the Fed 
to increase rates, and hardworking Montanans are paying a 
severe price for that.
    Director Chopra, CFPB's small business data collection rule 
is something I have raised with you previously. Now I have 
heard concerns from financial institutions across my State, 
smaller institutions, larger institutions, about how unworkable 
this rule is. The Bank of Bridger, a bank that has jurisdiction 
and branches around Montana and in Wyoming, its chief credit 
officer said this is the most intrusive rule he has seen in his 
entire career. And I can tell you, some of these smaller banks, 
their compliance department is not on the 22nd floor of Wall 
Street. These are small banks. He says it is the most intrusive 
rule he has seen in his career, and he is rightly concerned 
with what your agency is doing with this data.
    I have major concerns with the rule overall. I am 
particularly, though, concerned about this 18-month 
implementation deadline, given that in the past a complex rule 
like this has deadlines of more like 24 months or greater. 
Given that this is such a complex rule to implement in some 
cases new systems that are going to be created, will you 
consider extending that deadline beyond 18 months?
    Mr. Chopra. So I appreciate what you are saying here. This 
obviously a congressional mandate. We were under a court order 
to complete it by March 31st.
    With respect to the implementation timeline, it is not just 
18 months. Eighteen months is only for the very largest 
lenders. So we gave quite a bit of additional time for the 
smallest ones, and actually exempted a few thousand of them. 
But I hear you----
    Senator Daines. Do you remember where you drew that line at 
in terms of small? Do you recall what that is?
    Mr. Chopra. Yes. So we took a look at the overall contours, 
and the way it was built was roughly 2,500 loans, so a much 
smaller subset of local banks and credit unions.
    Senator Daines. And that deadline goes out how far them, 
for the smaller institutions?
    Mr. Chopra. Sorry?
    Senator Daines. And how far was that deadline extended?
    Mr. Chopra. I was an additional 15 months beyond that. I do 
not have the exact number, but it was beyond 24 months, I 
believe.
    Senator Daines. OK. We will follow up. Thank you.
    Mr. Chopra. OK.
    Senator Daines. On March 15th, your agency put out an RFI 
on the privacy and security risk of data brokers. Ironically, 
just 6 days later, on March 21st, the CFPB notified Congress of 
a major incident regarding a data release of over 250,000 
consumers' personal information. In a report that CFPB learned 
of the breach on February 14th--maybe you can confirm that for 
us--but it took you more than a month to notify Congress. Here 
the agency is trying to regulate the safety of consumer data 
and it cannot adhere to the controls you are trying to 
implement on others. I think that is unacceptable.
    Why did it take more than a month--if I have my facts 
correct, and correct me if I am wrong--for you to notify 
Congress of a major breach?
    Mr. Chopra. The insider threat issue is very, very serious, 
and we have been briefing your staffs on this. We identified an 
indicia that there was suspicious activity by a now former 
employee. It took us a few weeks to look and determine whether 
there was any impact of that. We did find a situation. While 
there was no account numbers or Social Security numbers, we 
followed all of the OMB guidance to make sure that Congress was 
aware, and we followed all protocols.
    You are right, though. We have to make sure that not just 
our systems are impenetrable, but that we make sure that 
insider threats are detected----
    Senator Daines. What happened to the insider that you 
detected? What happened to that person?
    Mr. Chopra. I am prohibited from commenting in detail, but 
I will share that they are a former employee now.
    Chair Brown. Senator Cortez Masto, from Nevada, is 
recognized.
    Senator Cortez Masto. Thank you, Mr. Chairman. Director, it 
is good to see you.
    We know that from our past work and our current work that 
individual consumers are quite often mismatched in fights with 
financial firms over unfair and deceptive practices. That is 
why the work of the Consumer Financial Protection Bureau is so 
important.
    I also think that your actions to fight junk fees, illegal 
overdraft fees, and discrimination is critical to all of our 
priorities, and it should be to help people keep more of their 
money at the end of the day. So to ensure that the Bureau is 
able to continue to protect people from unfair fees, that is 
why I joined the 35 of my Senate colleagues in an amicus brief 
defending the Bureau's funding structure as constitutional. I 
think it is so important.
    Let me talk to you a little bit about our small businesses, 
and particularly franchising. I so appreciate the work that you 
are doing to stop unfair and discriminatory lending practices 
to business owners, and I support your efforts to really track 
small business lending and protect entrepreneurs investing in 
franchise businesses.
    So can you explain how the Bureau is protecting those 
businesses from the unfair, deceptive, abusive, and sometimes 
discriminatory financial practices?
    Mr. Chopra. Well, franchisees are really one of the 
lifebloods of really starting business in America. You do not 
necessarily need a lot of connections or huge amounts of wealth 
to start it, and across the country, rural, urban, everything 
in between, it is big.
    We are trying to make sure that we are enforcing all the 
laws that protect those small business owners. We are working 
with the Federal Trade Commission and other regulators. I do 
not want to see a world where small businesses, and especially 
these franchisees who went through so much during the pandemic, 
are not able to access capital fairly or really protect 
themselves and their data. Many of them are now getting 
business credit reports, so we are working with those with the 
relevant authority to make sure they are safe and secure.
    Senator Cortez Masto. And thank you, and we will continue 
in my office to work, as well, with you, or to bring forward 
the concerns that we hear from some of our franchisees, these 
businesses. Not all of them, right. Some of them work really 
well. But there are some that are taken advantage of, so thank 
you for that work.
    Let me jump back to our servicemembers. In 2021, 
servicemembers and their families submitted more than 42,000 
complaints to the Consumer Bureau. The most common type of 
complain--more than, I want to say, 60 percent--were about 
credit reporting and debt collection, and servicemembers have 
complained to the Bureau about billing inaccuracies as well. 
They also say that some debt collectors use aggressive tactics 
to recover allegedly unpaid medical bills.
    How is the Bureau working to protect servicemembers and 
their families from unfair and really some of these expansive 
practices, and how does the Bureau ensure that these lenders 
are complying with the Servicemembers Civil Relief Act?
    Mr. Chopra. That is a great question. So we have taken, 
just over the past, I think, 15 months, several actions 
specifically related to servicemembers, their families, and 
veterans. We enforce the Military Lending Act aggressively. We 
make sure that the provisions are adhered to.
    But I will say that these credit reports are still a major 
pain point. Many military families, you know, they have to move 
due to PCS orders, frequently. This creates issues with their 
credit report, and when they have an inaccuracy it can even 
have implications for their own careers.
    We see firms needing to make sure that they are treating 
those individuals fairly. The Servicemembers Civil Relief Act, 
we did a report that looks at how Guard and Reserve, when they 
are activated, are they getting their SCRA benefits, and we are 
finding pretty low uptick on that. We are working with the 
Justice Department and others to make sure the SCRA, which 
prohibits foreclosures, auto repos without a court order, the 
Military Lending Act limits interest, we want to make sure 
everyone is following that faithfully.
    Senator Cortez Masto. Thank you. And whatever we can do to 
continue to support that work for our servicemembers is 
essential.
    You talked about credit reports, because I think the 
Bureau--and if you would talk a little bit about this--you are 
working to ensure that there is accurate credit reporting 
happening when it comes to medical debt for families. Is that 
correct?
    Mr. Chopra. Yes.
    Senator Cortez Masto. Because I am hearing from Nevadans as 
well that this is starting to clear up for them and help them 
to address what they are seeing with some of this medical debt 
in their credit reports.
    Mr. Chopra. Yes. So sometimes people will go for a lab 
test, they will get a bill from the facility, a bill from the 
provider. Sometimes they are faced with multiple deductibles 
for the same service. They are trying their best to get it 
resolved but often it gets put on the credit report and they 
feel almost threatened to repay, and actually many of them do, 
even though they do not owe it. We have to really fix this on 
credit reports.
    Senator Cortez Masto. And thank you for your work there. 
Thank you, Mr. Chairman.
    Chair Brown. Thank you, Senator Cortez Masto.
    Senator Kennedy, from Louisiana, is recognized.
    Senator Kennedy. Thank you, Mr. Chairman. Thank you, Mr. 
Chopra, for being here.
    You just had a data breach at your agency. Is that correct?
    Mr. Chopra. We have an insider threat that transferred on 
an unauthorized basis some emails to their personal email 
account.
    Senator Kennedy. And you were in charge when this happened?
    Mr. Chopra. Of course, yes.
    Senator Kennedy. OK. And this was not an attack from 
outside your agency. It came from inside of your agency. Is 
that correct?
    Mr. Chopra. That is right. Our systems were not penetrated. 
It was not a hack in that way, but we had an employee who 
worked for us, who sent those emails.
    Senator Kennedy. The data for 256,000 consumers was 
breached. Is that correct?
    Mr. Chopra. Yeah. We looked through the----
    Senator Kennedy. But is my number correct?
    Mr. Chopra. I believe that is right, yes, but it was not 
any Social Security number, birthdates, any of that.
    Senator Kennedy. It was their data, though, right?
    Mr. Chopra. The institution's data, but it had their name, 
so that is important, and it is a huge problem.
    Senator Kennedy. Yeah, it is. You did not tell the 
customers that this happened to, the consumers, for 2 months. 
Is that correct?
    Mr. Chopra. Well, we did not have the contact information 
for them, so we had to work with institutions to figure out who 
to contact. And we wanted to work in partnership with them.
    Senator Kennedy. But you did not tell them for 2 months?
    Mr. Chopra. Well----
    Senator Kennedy. Is that correct?
    Mr. Chopra. ----we started the notifications, I believe, 
last month, but again, we did not know the contact information 
for them.
    Senator Kennedy. Right.
    Mr. Chopra. All we had was certain data elements, and we 
followed the cybersecurity OMB guidance to make sure that----
    Senator Kennedy. Well, you can understand, can you not, why 
consumers might be a little concerned about you having their 
information. Is that correct?
    Mr. Chopra. Oh, of course. The issue of----
    Senator Kennedy. Let me ask you this.
    Mr. Chopra. ----protecting personal data----
    Senator Kennedy. Let me ask you about Section 1071, your 
rule on small business data collection. Under your proposed 
rule, when a bank loans money to a small businesswoman or a 
small businessman, you would require the bank to ask that 
customer first about the customer's race. Is that right?
    Mr. Chopra. So just to be clear, the proposal you 
reference, that has been changed and is now into the final. The 
congressional requirement--and we are under a court order----
    Senator Kennedy. Do not--do not----
    Mr. Chopra. ----requires race.
    Senator Kennedy. ----do not filibuster me, Mr. Chopra.
    Mr. Chopra. No, it does require race.
    Senator Kennedy. Just answer my question. Is your rule 
going to require banks to ask the customer about their race?
    Mr. Chopra. That is in the statute, and----
    Senator Kennedy. About their race? Is your rule going to 
require the bank to ask the customer about their ethnicity?
    Mr. Chopra. So just to be clear, in the sample form it 
allows the borrowers to self-identify or refuse.
    Senator Kennedy. Just answer my question.
    Mr. Chopra. You know, I am trying to be clear.
    Senator Kennedy. No, you are not. No, you are not. Your 
rule would require a bank to ask the question of a small 
businessperson, ``What is your race?'' ``What is your 
ethnicity?'' ``What is your sexual preference?'' ``Are you gay? 
``Are you a woman?'' Now you can bubble-wrap this all you want, 
but that is what your rule does.
    Now, the customer, particularly in a small town, is going 
to go, ``Whoa. What does my sexual preference have to do with a 
loan?'' And the customer can say, ``I do not want to answer.'' 
But then you are requiring the bank to tell you that they would 
not answer. And all of this data is going to go to your agency, 
and we do not have the slightest idea how you are going to use 
it, except you say you are going to publish it.
    Mr. Chopra. Well, we will not get any names at all.
    Senator Kennedy. Yeah, but you are going to have datasets 
so that it is possible--you cannot tell me it is not possible--
to have this information known. Why do you want all of this 
information?
    Mr. Chopra. I do not.
    Senator Kennedy. Why do you want to know what a small 
businesswoman's sexual preference is?
    Mr. Chopra. OK. That is a mischaracterization of it.
    Senator Kennedy. No, it is not.
    Mr. Chopra. It is.
    Senator Kennedy. No, it is not.
    Mr. Chopra. We have congressional objectives.
    Senator Kennedy. No, it is not.
    Mr. Chopra. We had to implement it. People can self-
identify. There is no personal information----
    Senator Kennedy. Why do you want to know what a small 
businesswoman, let's say in a town of 20,000 people, going to a 
local bank to borrow money, why do you want to know what her 
sexual preference is? What business is that of yours?
    Mr. Chopra. We sought to implement what the congressional 
requirements are.
    Senator Kennedy. What business is that of yours, what a 
small businesswoman does in her bedroom? Who appointed you 
Pope?
    Mr. Chopra. Again, people are able to self-identify they 
wish to----
    Senator Kennedy. You are making them----
    Mr. Chopra. We are not making them.
    Senator Kennedy. Yes, you are.
    Mr. Chopra. No, we are not.
    Senator Kennedy. And if they do not answer, the bank has 
got to tell you, and we have no idea how you are going to use 
this information.
    Mr. Chopra. Well, I am happy to----
    Chair Brown. Director Chopra----
    Mr. Chopra. ----about it further----
    Chair Brown. Director Chopra----
    Mr. Chopra. I do not believe that is an accurate statement.
    Chair Brown. Director Chopra, please.
    Senator Kennedy. You cannot ensure us----
    Chair Brown. Senator Kennedy. Senator Kennedy. Director 
Chopra, answer one more time and then I turn it to Senator 
Warner.
    Mr. Chopra. Just like----
    Senator Kennedy. Am I over again?
    Chair Brown. Yeah, you are way over again, and I always let 
you, but I am not going to let you go 3 minutes over with the 
same question eight times, Senator. Director Chopra----
    Senator Kennedy. Well, if he would answer it----
    Chair Brown. Director Chopra.
    Mr. Chopra. Just like the Home Mortgage Disclosure Act, 
there are other ways where there are requirements from Congress 
to collect data. In this situation, we took a lot of feedback 
to try and make it less intrusive, specifically based on the 
concern that you are raising. There will not be individual 
consumer names sent. We can talk further about it, but we tried 
our best to implement the congressional directive faithfully 
and consider all of these issues.
    Chair Brown. Senator Warner, from Virginia, is recognized 
online.
    Senator Warner. Thank you, Mr. Chairman, and thank you for 
holding this hearing. I was around when we set up the CFPB. A 
lot of this was due to the fact of abuse of consumers, and 
frankly, a lot of it was sometimes in the case of making sure 
that our financial institutions did not discriminate against 
any group of Americans. And I think individuals' identities 
obviously need to be protected, but I think patterns of 
behavior, particularly if they lead to discrimination, I think 
are relevant.
    I would point out, you know, as somebody who signed on to 
the amicus brief, that some of our friends who are trying to 
defund the CFPB, I would point out that a group of business 
organizations that I have worked closely with over the years, 
the mortgage bankers, the homebuilders, the realtors, have 
actually said that if the court were to somehow invalidate all 
of the CFPB regulations--and they have not always loved 
everything the CFPB has done--but if the court were to take 
that action it would throw the whole housing market into chaos, 
to the detriment of all mortgage borrowers. So I hope that 
court case is not successful.
    Director Chopra, one of the things that I have been 
spending a lot of time on, as Chairman of the Intelligence 
Committee, and something I think we are all racing to 
understand, is artificial intelligence. We have had a half a 
dozen sessions already with different groups of Senators on 
this issue. I think Senator Britt raised the issue a little bit 
earlier. I do believe that we cannot repeat in AI what we did 
in social media and say, well, let's let this whole world 
evolve and then we will come in and try to fix it after the 
fact. Congress' track record on social media has been a 
complete zero, and I am glad to see there are concerns on a 
bipartisan basis. But our record of getting stuff done on these 
large platforms is pretty poor.
    I think Senator Britt, to my understanding, raised some of 
the issues about consumer abuse. I guess one of the things--and 
this, indirectly at least, goes back to some of the questions 
my friend, Senator Kennedy, was asking--we have already seen 
data into these large language models--everybody is talking 
about ChatGPT, but there is the ability to have these 
algorithms literally discriminate against consumers in the 
financial services sector.
    So can you talk a little more about your concerns about AI, 
specifically what the Bureau is doing about this potential 
discrimination that may be coming very deep into the algorithms 
that, frankly, we do not have much transparency on, out of 
these large language models? What might happen if suddenly a 
consumer was not only discriminated against but also then 
pointed to a product that might not be good for them?
    I know our time is running down so I will turn it over to 
you. And do you need more regulatory tools? Do you have the 
tools you need, because there are a lot of us trying to figure 
out where there needs to be these guardrails. But I think you 
have got some of the tools already in place.
    Mr. Chopra. So there is no question that as large tech 
firms, others, enter the financial space where they already are 
ingesting enormous amounts of data to feed some of these 
artificial intelligence models, combined with the fact that 
generative AI, including the creation of voices and content, I 
think it creates a situation where if we do not use the laws we 
have on the books today effectively we will see a faster uptick 
in fraud, we will see more exclusion or discrimination, and 
frankly, less accuracy in the system when it comes to home 
appraisals and so much more.
    So we have put into place, Senator, a set of guidance to 
make sure people know this is how, if you are using AI, how the 
existing law applies. If big tech firms continue to have a 
bigger footprint in payments, and they are using that payments 
data, our most sensitive data, to feed their AI, I think that 
also raises a whole slew of questions about personalized 
pricing and ways in which people may not have the advantages of 
the normal consumer protections.
    Senator, I am out of time. We will work with you to figure 
out what additional tools are needed. Certainly there are 
issues around identity verification and more. But there is no 
question, this Committee and the CFPB, we have to focus on how 
Big Tech and AI will transform banking.
    Senator Warner. Thank you, Mr. Chairman.
    Chair Brown. Thank you, Senator Warner.
    Senator Vance, from Ohio, is recognized.
    Senator Vance. Thank you, Mr. Chairman, and thanks, Mr. 
Chopra, for being here.
    I want to talk just a little bit about the SVB collapse, 
and particularly the way in which the San Francisco Fed failed 
to successfully address that situation. So I just want to ask, 
on the three major bank failures we have had this year, Mr. 
Chopra--First Republic, SVB, and Signature--who were the 
primary regulators of the three banks?
    Mr. Chopra. So the Federal Reserve of Silicon Valley Bank 
at the Federal level, the FDIC at Signature Bank and First 
Republic. Two were California State-chartered banks. One was 
New York.
    Senator Vance. Thank you. So one question is, do you know 
the last time that an OCC-regulated bank failed?
    Mr. Chopra. A large one, I believe, has not failed in some 
time.
    Senator Vance. Yeah. I think the last one was 2019. It was 
a pretty small bank and did not require some of the 
extraordinary measures that you guys took in response to the 
SVB and First Republic collapse.
    So here is, I guess, my basic question here. I have heard 
this from industry people, and you always have to be somewhat 
skeptical when you are talking to industry people. Obviously, 
they have their own self-interests. But on this issue I think 
they are clearly right, that the Fed is both an overburdensome 
regulator but also a very ineffective regulator, that they take 
up a lot of time and do not actually do a whole lot to make the 
banking system safe.
    I am wondering if you have a view on that. Is the OCC a 
better regulator than the Federal Reserve? Maybe I will just 
ask that question directly and sort of get your view there.
    Mr. Chopra. I think it depends. It is hard to say, overall. 
But I will tell you, I think if we were starting from scratch, 
we probably would not create this balkanized system of who is 
accountable for oversight. From my viewpoint, as having backup 
supervision on consumer for all types of banks, including large 
banks and others, as well as from the FDIC board, I do think 
inconsistency in supervisory approach does have costs.
    Senator Vance. Yeah. So I guess the question that I have 
is, given what you just said--and I agree with you--if we were 
to create this system fresh we probably would not design it in 
the way that it looks now. This is some combination of 
bureaucratic capture and the various ways in which we reformed 
the system over time.
    Could you speak to the potential efficacy of moving part or 
even all of the Fed's supervisory power over to the OCC?
    Mr. Chopra. So the last experiment we had with this was 
really the CFPB. The Fed's authorities were largely stripped on 
consumer, and I think we have actually created, maybe not 
everyone likes it, but a huge amount of consistency throughout 
the board.
    So I think if you wanted to create consistency there are 
many ways to do that. But I do not have deep insight onto the 
Fed's supervision on the prudential banking side. But 
inconsistency is not good.
    Senator Vance. Yeah. So we are going to look into 
potentially some legislative changes here that I think would 
make the banking system both more safe and lower risk for 
consumers and taxpayers, but also would actually be more 
efficient from the perspective of industry.
    I really worry here that we have somehow created a system 
that is both overly burdensome on the financial institutions, 
including and especially those that are doing the right thing, 
and simultaneously really, really ineffective at preventing 
systemic risk. We will certainly have more questions and more 
conversations in the weeks and months to come as we develop 
that policy.
    I want to close by just making an observation, and feel 
free to respond, though a recognize we are getting down on time 
here, Mr. Chopra. You said--and let me get the organization, I 
think it was the American Economic Liberties Project, in a 
speech on May 4th, that you were really concerned about 
concentration and bigness in the financial sector. Probably 
more than many of my colleagues I share that concern about 
bigness in the financial sector.
    But I do have some concerns that the actual policies of the 
last couple of years have heightened that problem, not lessened 
it. In particular, we, of course, as I understand it, there was 
a bidding process for First Republic. PNC, much smaller bank, 
still a large financial institution but a much smaller bank, 
and JPMorgan both submitted bids, and, of course, JPMorgan's 
bid was accepted.
    My understanding is that increased JPMorgan's depositor 
base by, if you combine everything that has happened in the 
last year, by close to $100 billion. That strikes me as a 
really bad deal for consumers, a really bad deal for the risk 
of our financial system, but a really good deal for JPMorgan.
    So as you guys go about your work over the next couple of 
years, and certainly as we go about ours, I would love for us 
to pursue policies that actually preserve and strengthen the 
three-tiered banking system, rather than make JPMorgan more and 
more powerful, which is what it seems that we are doing right 
now.
    Mr. Chopra. And certainly many banks personally raise 
concerns that it seems obvious that we have a lot of too-big-
to-fail banks, and guess what? They get a funding advantage 
from that, in terms of lower costs of capital, and that has the 
result of really threatening local banking.
    Senator Vance. Yeah, and I agree with that, Mr. Chopra. And 
Mr. Chairman, if I may, just one brief addition there. One of 
the things that I hear pretty consistently--and Ohio has three 
very, very significant banks but small compared to JPMorgan--
one of the things I consistently hear from folks back in Ohio 
is this fear that Federal regulators, in some ways, treat the 
regional banks the same way they treat the big banks, even 
though the big banks have an implied lower cost of capital, 
because everybody knows that JPMorgan is going to get bailed 
out, but is it true that Huntington is going to get that 
bailout? Maybe, but maybe not.
    And that problem is, I think, really, really bad for the 
banking system that we have. I will not rehash the ways in 
which the Huntingtons of the world will make loans to 
businesses and consumers that JPMorgan will not touch. So I 
want to work to preserve that system, and I will work with 
whoever is willing to work with me on that.
    Mr. Chairman, I yield. Thank you.
    Chair Brown. Thank you, Senator Vance.
    Senator Van Hollen, of Maryland, is recognized.
    Senator Van Hollen. Thank you, Mr. Chairman. Director 
Chopra, good to have you here. Thank you.
    Your team, for your leadership, the CFPB plays an essential 
role in defending American consumers against some powerful 
financial interests that want to take advantage of consumers, 
especially those that engage in practices that essentially 
separate consumers from their money without giving them any 
additional value.
    You, of course, the Bureau has become a target of those 
interests, and have filed a lawsuit to try to put you out of 
business, which, as you know, is pending before the courts. I 
am proud to have joined the Chairman of the Committee, Senator 
Brown, and others in filing the amicus brief in that case, to 
make sure that you can continue to protect American consumers.
    I have long been a supporter of the FedNow system, because 
I think that folks who are living paycheck to paycheck, wage-
earners should be able to get immediate, real-time access to 
their money, so they are less subject to payday lenders and 
less subject to overdraft fees, which you have worked to also 
cut down on.
    I also have introduced the Opt-In Act, which makes it 
harder for companies to convert free trial periods into paid 
subscriptions without consumers' consent. That particular bill 
is outside of your jurisdiction.
    But since we are facing this moment in the courts, could 
you just provide a high-level sort of estimate of, if you look 
at all the areas under your jurisdiction, where you are trying 
to crack down on various schemes that unfairly hurt consumers, 
do you have a sort of ballpark estimate, as you look across 
your jurisdiction, of what goal you are working to, to try to 
save consumers money, in dollar terms?
    Mr. Chopra. Well, it has been billions of dollars just in 
the past year alone. The CFPB, I believe, has collected over 
$17 billion just in a subset of its work.
    But let me share with you this. When we let bad actors 
violate the law it is not just consumers that get hurt. It is 
every firm that is trying to play by the rules, they get 
disadvantaged too. And I think we always need to remember, the 
people who get hurt are not just the homeowners, not just the 
borrowers, but it is the businesses that are following the law. 
And rule of law in our financial marketplace is imperative, and 
it is why we take our responsibilities so seriously, and why 
money in people's pockets, it was theirs to begin with.
    Senator Van Hollen. I appreciate that. As you say, there is 
that dual benefit. Seventeen billion dollars in just one 
sector, over 1 year, obviously illustrates how important your 
work is to defending consumers. And if you do not have a cop on 
the beat who is trying to make sure everybody plays by the 
rules, as you say, it actually creates an incentive to a race 
to the bottom, and we do not want to establish that kind of 
system.
    Let me ask you briefly about some of the rent-a-bank 
schemes. I have been concerned over time about online lenders 
who essentially engage in these schemes to, quote, ``rent a 
bank,'' and therefore escape some State laws that protect 
consumers against usurious interest rates.
    Senator Brown and I teamed up and we worked on a CRA that 
overturned the Trump administration's rent-a-bank law that we 
thought opened the floodgates even further to this kind of 
price gouging. But I know that you and your team continue to 
look at this, and this remains an area of concern.
    Can you talk about concerns about online lenders and the 
practices they are engaged in, again, trying to route 
transactions in a way that avoid State laws to protect 
consumers, like in Maryland we have interest rate caps. Can you 
talk briefly about that?
    Mr. Chopra. One of the most important parts of the CFPB was 
to cut down on the regulatory arbitrage that you see some firms 
try and play to get out of certain consumer laws, especially at 
the State level. So in some cases they might just piggyback 
themselves to some bank or some institution in order to get 
around it.
    We, though, have authority over the nonbank firms, and we 
have taken a number of actions against them. And we are also 
working to make sure that all of those activities are 
legitimate and in accordance with the law. We do see a big 
footprint of online lending, and that can be good in certain 
circumstances except if it is purely about arbitraging the law.
    Senator Van Hollen. No, I appreciate that. I mean, there 
are good actors in this space that are playing by the rules, 
but it is kind of the Wild West out there still, and I hope you 
will continue to make sure that folks are not breaking the law 
and make proposals for how we can better protect consumers in 
this space.
    Mr. Chopra. I appreciate that, and I just want to make sure 
that the $17 billion number, I will make sure I have the most 
updated estimate so that it is in the record appropriately in 
case I misspoke.
    Chair Brown. Thank you, Senator Van Hollen.
    Senator Smith, of Minnesota, is recognized.
    Senator Smith. Thank you, Chair Brown, and welcome, 
Director Chopra. It is great to have you with us today.
    I would like to use my time to talk with you about the 
proliferation of businesses and scams that are targeting 
homeowners. We know that home ownership is a primary driver of 
wealth in our country and that home equity represented more 
than a quarter of household wealth in 2020, and that following 
the surge in home prices during the pandemic, homeowners have 
added like $8 trillion in wealth. But unfortunately this seems 
like it is giving rise to what look to us like some pretty 
dodgy businesses and just outright scams.
    When you were here last I think that you and I have 
discussed the issue of exclusive real estate listing agreements 
and what that looks like, and now we are seeing this uptick in 
so-called zombie mortgages that are catching homeowners by 
surprise, some second mortgage that they thought was not there 
anymore and it is there, and now they are in a bind.
    Last month, ProPublica reported about a real estate 
flipping company that is targeting vulnerable homeowners and 
using deception, coercion to close sales, and these complex 
legal maneuvers--nobody really understands how they work--that 
is hurting victims and keeping them from getting out of these 
unfair contracts.
    So Director Chopra, this is what I want to have you talk 
about. When you were here in December, you noted that while the 
CFPB cannot predict everything, the agency does have a role to 
play in preventing such issues from going nationwide. So I am 
wondering, have you seen an uptick in these deceptive and 
exploitive products? What are you seeing, what are you doing to 
monitor and stay on top of this?
    Mr. Chopra. So Senator Smith, I appreciate that because 
there is actually something new that we are hearing too. I 
actually met with some Minnesota community leaders about 
contract for deed, targeting certain immigrant groups across 
the country.
    Senator Smith. Yes. Yes.
    Mr. Chopra. And I think what we want to make sure is even 
where we might not have jurisdiction to go after a scam, we 
want to tell the Justice Department, tell the State AG, and we 
do, and tell others as well. I worry that because of the 
housing shortage and housing affordability issues, a lot of 
people are looking at older homeowners who are sitting on a lot 
of equity, many of them may be widowed or limited English 
proficiency and targeting them.
    And you mentioned that ProPublica article. That obviously 
had some very troubling allegations. I do not want to comment 
on that in too much detail, but we obviously work by looking at 
the data, our complaints, but also by talking to people on the 
ground. One of the big mistakes in the lead-up to the financial 
crisis is Federal regulators ignored stories from the ground--
--
    Senator Smith. Exactly.
    Mr. Chopra. ----and that proved to be a pivotal mistake.
    Senator Smith. I completely agree with that, because 
people, what is happening to them in real time, and they could 
explain the trend in real time because it was their life and 
their home.
    Mr. Chopra. And they have the documents often that are the 
canary in the coal mine to show who is funding this and who is 
orchestrating these schemes, and that gives us clues about 
where we need to target.
    Senator Smith. Yeah. I really appreciate that, and I think 
this is so concerning, how these companies appear to be taking 
advantage of folks who are, you know, as you said, older 
Minnesotans and Americans who do not understand what they are 
getting into, and they are being taken advantage of.
    Related to this, you know well that Minnesota has a very 
large entrepreneurial and really important Somali community, 
and we are seeing in Minnesota that this community has been 
targeted by these predatory land contracts. So we have heard 
concerns from advocates and from consumers about what this 
means.
    So this is the specific thing I want to ask you about. We 
have heard some concerns from advocates and consumers that the 
CFPB complaint form is geared primarily for mortgages rather 
than land contracts or similar agreements, and so what happens 
is folks cannot figure out how to use it and it is difficult to 
report on. So some people, who have been victims, are just sort 
of dissuaded from participating.
    So would you be willing to work with our office on this so 
that we could find an alternate way to get some of this 
reported?
    Mr. Chopra. Absolutely, and we will make sure that they can 
even file with the Consumer Sentinel, so the AGs--we will work 
on that. We have actually tested, with various groups, with 
people of different backgrounds, about how they use the 
complaint system. We can brief you on that.
    Senator Smith. Great.
    Mr. Chopra. And some State legislators in St. Paul also 
shared some of these issues with me, and we have been looking 
at it further.
    Senator Smith. Well, we will follow up on that and work 
closely with those legislators, so I appreciate that.
    Thank you, Mr. Chair.
    Chair Brown. Thank you, Senator Smith.
    Senator Fetterman, of Pennsylvania, is recognized.
    Senator Fetterman. Good morning, sir.
    Mr. Chopra. Good morning.
    Senator Fetterman. I am going to just say this up front. I 
am a fan of you and your work and the agency. I think it really 
makes America better and more just and more secure for people. 
I am also showing my cards--that is kind of the brainchild--
Senator Warren, my colleague, and I am a fan of her as well 
too.
    And from Pennsylvania, I am a Senator from Pennsylvania. 
Just last year, in the Philadelphia area, Trident created a 
redlining majority/minority neighborhoods throughout the 
marketing the sales and hiring experts. Trident contributed 
$18.4 million to a loan subsidy program for majority white 
neighborhoods. So in other words, you have been protecting a 
lot of mortgage holders in Philadelphia.
    But given all the good things that I have done in my State, 
the good things you have done, can you explain, and have you 
thought about, why do there seem to be some kind of critics 
that really want to tear you down and take it out?
    Mr. Chopra. Well, I will just say that our work to combat 
and stamp out redlining in the Philadelphia area, we did it in 
partnership with three States, including Pennsylvania, New 
Jersey, and Delaware, the DOJ. We got real relief to people.
    I do think that often law-abiding businesses do not 
necessarily always have their voice heard, and we protect them 
too. All of the mortgage lenders who followed the law in the 
Philadelphia area, they were disadvantaged by Trident's 
redlining scheme, and I think that is a place where the more 
honest businesses can speak up to, it is not just consumers we 
help, we help all of those who do the right thing.
    Senator Fetterman. I honestly am unable to understand why 
an agency as yours, doing all those things, guarding against 
the individuals here, as I cannot really think of any reason 
why that is the case.
    Now following up with my time left, if there are any other 
important parts or any things you would like to discuss about 
things in my State of Pennsylvania?
    Mr. Chopra. Well, certainly we see, in Pennsylvania, which 
is not unique, is that whether it is rural, urban, or suburban, 
housing affordability is an issue in so many communities. And 
with higher mortgage interest rates, that is leading a lot of 
people being blocked from really borrowing for a home.
    So I want to make sure that, over time, we have ways that 
if people get into trouble on their mortgages they can modify 
them in a streamlined fashion, when the rate environment does 
go back down that people can refi easily. And certainly in 
Philadelphia, Pittsburgh, and others, we do see a lot of scams 
that target older homeowners, and it is really a difficult 
challenge for us to combat. But we work closely with the State 
AG and others to do that.
    Senator Fetterman. OK. And I am ceding the remaining time 
back to the Chair.
    Chair Brown. Thank you, Senator Fetterman.
    Senator Warnock, of Georgia, is recognized.
    Senator Warnock. Thank you, Chairman Brown. I support the 
CFPB, and I was proud to join my colleagues in an amicus brief 
to the Supreme Court protecting the Bureau from another 
partisan legal attack, and I will continue working with the 
Bureau to protect the most vulnerable people in Georgia 
communities.
    I have long been opposed to onerous and unnecessary junk 
fees, junk fees by banks and other financial institutions that 
do little more than extract wealth from hardworking families. 
These fees are put in place to bring in extra profit for 
wealthy corporative executives and shareholders. When the 
Nation's banks were before us last year, I pressed them to 
continue to end overdraft fees. For those that had, I 
encouraged to not look to other areas to charge consumers and 
make up for these fees.
    Director Chopra, since your work against junk fees began, 
have you seen financial institutions shift efforts elsewhere to 
extract money from customers, vulnerable customers, especially 
in the areas where it is harder for customers to track and 
understand?
    Mr. Chopra. Actually, our analysis of certain bank account 
fees is that we see there has been big shifts in the market, 
and we have not seen it being replaced with other fees yet. 
Part of it is because the more you make the fees up front, 
consumers are smart. They will switch to a different product if 
they see that there are higher upfront fees, when they can shop 
easily.
    But we will be on the lookout for new types of fees that 
may not be lawful or that may be imposed in a less than 
scrupulous way.
    Senator Warnock. Thank you for that response. We are 
seeing, in some of our savings accounts, very, very low 
payments. For example, Wells Fargo pays only 0.15 percent 
interest. This is less than half the national average and less 
than 3 percent of the Fed fund's rate. Other large banks offer 
only similarly low rates on savings accounts.
    Do you think it is possible that these large, very 
profitable banks are so slow to--why do you think they are so 
slow to raise interest rates?
    Mr. Chopra. Well, this is a problem across our banking 
system, and frankly, globally. When interest rates are hiked, 
often credit cards and others quickly go up, but savings 
account and checking account do not always go up so fast.
    Part of what the CFPB is doing is we are going to be 
putting into place rules that accelerate the shift to open 
banking, so this will allow faster switching, which ultimately 
will give consumers power without a lot of bureaucracy and red 
tape to get higher rates. That means banks will have to compete 
harder to keep them, and I think the benefits will be big for 
our whole country.
    Senator Warnock. So you would support creating more 
marketplace competition as a way of addressing this.
    Mr. Chopra. Well, and also to reduce the friction and all 
of the challenges and roadblocks to switch. Often you have to 
change your auto-debits, you have to change your direct 
deposit. We need to figure out how we can make that simpler and 
to the benefit of borrowers and savers.
    Senator Warnock. Thank you so much.
    Listen, I am concerned about the effects that Federal 
Reserve's interest rate increases have had on recent home 
buyers in Georgia. Georgia and the Nation are in the midst of a 
housing shortage. For those who are able to purchase a home 
this year, they may not be able to maintain the stability 
owning a home brings. According to Black Knight Mortgage 
Analytics company, nearly 10 percent of folks who bought a 
house with a mortgage in 2022 are now underwater, 10 percent. 
Nearly half own less than a 10 percent equity stake in their 
home.
    Director Chopra, are these trends concerning to you as they 
are to me, and what is the CFPB doing to protect homeowners and 
potential home buyers on the verge of having negative equity 
sometimes on homes they just purchased?
    Mr. Chopra. We are watching the housing market like a hawk. 
When problems occur in the housing and mortgage markets it can 
rebound into the entire economy. We do see that higher rates 
have led to dramatic reductions in refinancing volumes. Many 
people who need to move for work find them in a situation where 
if they sell their home and they have to buy a new one with a 
much higher rate it really affects their family finances.
    So I do think the housing shortage in Georgia and elsewhere 
is a place we need to keep in mind as we think through how to 
police the mortgage market effectively.
    Senator Warnock. I am also worried about homeowners who do 
have equity in their homes being pushed to refinancing now in 
this high interest rate environment, risking their home in the 
case of a default. What steps have you taken in the past year 
to protect these homeowners?
    Mr. Chopra. Well, we are looking at ways to make sure that 
borrowers who get in trouble do not fall prey to some of those 
who are seeking to strip their equity, and part of it is we are 
looking at how we can make sure that loan modifications and the 
servicing flexibilities that we saw in the pandemic, are there 
ways to simplify some of the rules and guidance to make sure 
people can get those loan modifications and stay in their home, 
and not fall prey to a scam.
    Senator Warnock. Thank you so much. There is no question 
that rising home prices, coupled with low mortgage rates, 
encourage thousands of folks to purchase homes or to refinance 
their existing mortgages, and now that interest rates are 
increasing, slowing or even home prices in some areas, 
Congress, it seems to me, and the CFPB must ensure that those 
just trying to achieve the dream of home ownership are not 
instead signing up for a nightmare.
    Thank you for your work on this.
    Chair Brown. Thank you, Senator Warnock.
    Senator Scott, would you like to deliver a closing 
statement?
    Senator Scott. Yeah. Let me just very quickly say that you 
and I had a conversation about the late fee and the structure 
of it, and one of the concerns I have is not whether or not 
people pay a late fee. I do not have that question. I think 
people pay the late fee. The only question is what do you call 
it? Do you call it a late fee or do you just embed it in the 
overall structure of something.
    You and Senator Warren had a serious conversation about 
that late fee that I said was $8, you said that is not quite 
right, but the truth of the matter is that I suggested that you 
are really good at verbal kobuchi, and you really are. But at 
the end of the day the question I have is when you do not 
consider the total cost of collecting something then that 
becomes embedded in the overall structure of the organization, 
which then hurts access to products. It likely will increase 
the interest rates.
    And as a kid who grew up in a single-parent household mired 
in poverty, the one thing I can tell you is that the people who 
pay the additional costs that you do not see are the folks at 
the bottom of the food chain economically. And I want to make 
sure that when we have that consideration that we are 
considering it holistically, not whether or not we are paying 
the late fee.
    I do not think that is part of the argument. The argument I 
had, sir, was about the importance of making sure that when you 
can see it, you can bill for it, and the costs that you 
associate with the late fee had to do with the pre-charge-off 
cost, is what that fee structure is based on. When, in fact, 
there is more to that, which simply, to me, means that the 
average person in the Nation that struggles with paying bills 
will have fewer products to choose from, which means that the 
alternative is you go to a different marketplace where there 
are no caps, and that is dangerous.
    Thank you, sir.
    Chair Brown. Thank you, Senator Scott. I think the 
discussion of late fees suggests that Wall Street is entitled 
to big profits, and to eliminate late fees does not mean that 
some other consumer is going to pay. It means maybe, maybe, 
maybe these voracious and very profitable large banks might 
just make a tiny little bit less profit.
    Director Chopra, thank you. The CFPB has shown that they 
are ready and willing to stand up to the biggest banks and most 
powerful corporations. The majority of this Committee 
appreciates what you do every day.
    We heard about a number of actions CFPB has taken to 
protect hardworking Americans, preventing their homes and cars 
from being repossessed unfairly. They are cracking down on junk 
fees to working to prevent excessive credit card fees. Those 
are just a few of the many actions that you are pursuing to 
continue this mission to protect consumers. That is why you 
exist as an agency. That is why you wanted to run that agency. 
That is what you are doing. Thank you again.
    For Senators who wish to submit questions the record, those 
questions are due 1 week from today, Tuesday, June 20th. 
Director, please submit your responses to the questions we send 
you for the record 45 days from the day you receive them.
    Thank you again. The hearing is adjourned.
    [Whereupon, at 11:51 a.m., the hearing was adjourned.]
    [Prepared statements, responses to written questions, and 
additional material supplied for the record follow:]
               PREPARED STATEMENT OF CHAIR SHERROD BROWN
    We created the Consumer Financial Protection Bureau to fight for 
all the Americans who have no other way to stand up to powerful 
corporations.
    Look at all the actions CFPB has taken since Director Chopra last 
appeared before us.
    The CFPB is going after those that discriminate in home lending, 
provide shady financial products, and prey on the elderly and students 
and servicemembers.
    Since its creation, the CFPB has returned $17.4 billion to more 
than 200 million Americans.
    $17.4 billion that otherwise would be on corporate profit 
statements is now where it belongs: back in consumers' wallets.
    In just one action, the CFPB returned millions to servicemembers by 
going after a title lender that violated servicemembers' financial 
rights.
    They're protecting consumers from being forced to pay debts they do 
not owe to nursing homes.
    They're working to ensure homes are valued fairly, helping working 
families build generational wealth.
    They're going after junk fees.
    Of course, Wall Street doesn't like what the CFPB does. After all, 
corporate lobbyists are not paid to just sit around and let consumers 
win.
    So what do Wall Street, their Republican allies in Congress, and 
their army of lobbyists do?
    They go to war against the only agency created to protect 
consumers.
    They've tried every tactic to gut the CFPB:

    They tried to cut its funding.

    They tried to take away the effective single director 
        structure.

    They tried to dismantle it from the inside under Mick 
        Mulvaney and Kathy Kraninger.

    None of that worked, at least not permanently.
    Under Director Chopra's leadership, the CFPB is back to doing its 
job--standing up to bad actors, protecting people's paychecks and 
savings, helping working families keep more of their money.
    But the corporate crowd never gives up. Now they've used Wall 
Street's favorite circuit court to try to get rid of the CFPB.
    Last year's Fifth Circuit ruling is far, far outside the 
mainstream--they're saying the CFPB's funding authority violates the 
Constitution's Appropriations Clause and the separation of powers.
    This is, frankly, insane.
    By establishing reliable and steady funding, we ensured that CFPB 
would be able to fully protect consumers.
    For more than two centuries, Congress has used--and the courts have 
recognized--a variety of different mechanisms to fund agencies and 
programs.
    When creating the CFPB, we intentionally chose to fund the Bureau 
in a way that guaranteed steady funding without political 
interference--just as other financial regulators, like the Federal 
Reserve, are independently funded.
    If the CFPB's independent funding structure is unconstitutional, 
there's going to be far-reaching collateral damage.
    The Fed would be in jeopardy. So would the FDIC.
    These are entities vital to our economy--and to how corporations 
operate. Yet Wall Street doesn't seem to care.
    This lawsuit is a half-baked, bad-faith, dangerous legal ploy to do 
through the courts what Wall Street and their Congressional allies 
couldn't get done any other way: get the CFPB off their back.
    That's the end goal here--to allow corporations to pad their 
profits with working families' hard-earned money, with no one standing 
in their way.
    Just look at Wells Fargo.
    In the most recent of a long, long, long line of abuses, the CFPB 
found that Wells Fargo mismanaged auto loans, mortgages, and bank 
accounts. The bank wrongfully foreclosed on homes and illegally 
repossessed vehicles.
    The CFPB uncovered this misconduct that affected 16 million 
consumer accounts--16 million. The agency ordered Wells Fargo to repay 
$2 billion--that's ``billion'' with a B--to millions of customers.
    For many of these customers, they had no other way to get their 
money back. Some of them may not have even known they were wrongfully 
foreclosed on, if the CFPB hadn't stood up for them.
    That's this agency's job. The CFPB is helping Americans save money 
on their homes and their bank accounts and their medical bills.
    And then take mortgages, for example.
    Unlike in 2008, today the largest mortgage lenders are nonbanks 
that aren't overseen by the Federal banking regulators.
    The CFPB is charged with policing all lenders to make sure they're 
making mortgages on fair terms.
    Without the CFPB, consumers' biggest financial investment--their 
key to generational wealth--would be at risk, and the mortgage market 
would be in chaos.
    Or look at the progress the CFPB has made on reducing junk fees, 
like overdraft fees.
    The CFPB estimates that consumers will save $5.5 billion--again 
that's billion with a B--on overdraft fees, due to the recent overdraft 
reforms made by banks, after many of us and the CFPB put pressure on 
them.
    That's $5.5 billion that Americans can instead use to put food on 
the table or pay their utility bills or put gas in their cars.
    Make no mistake, these overdraft reforms and the $5.5 billion in 
savings would not have happened without the CFPB.
    The CFPB's work on medical debt will also have a real effect on 
tens of millions of Americans' finances.
    Together with the CFPB, we pushed the three major credit reporting 
agencies to remove medical debt under $500 from credit reports.
    That's going to mean 22.8 million consumers will have at least one 
medical collection removed from their credit reports.
    Those Americans' credit scores will increase by an average of 21 
points. And we all know that a better credit score means lower interest 
rates--and lower bills.
    All of these accomplishments--all of this work that means more 
money in working people's pockets and less money for stock buybacks and 
executive bonuses--is exactly why Wall Street and its allies are intent 
on destroying the CFPB.
    They always have been.
    The people pushing this case don't really care whether the CFPB's 
funding model is constitutional.
    The only reason that corporations and their enablers have singled 
out the CFPB is because the agency doesn't do their bidding.
    The CFPB doesn't help Wall Street executives when they fail.
    It doesn't extend them credit in favorable terms or offer them 
deposit insurance like the other regulators do.
    No other agency fights for consumers--or stands up to corporate 
power--like the CFPB does.
    Most Americans don't have high-priced lawyers. They don't have 
corporate lobbyists. But they have the CFPB--and it's our job to make 
sure the CFPB will be their voice for decades to come.
                                 ______
                                 
                PREPARED STATEMENT OF SENATOR TIM SCOTT
    Back in March, we had a few things going on that month, so we would 
not be remiss in forgetting that the President submitted his budget. 
But while this Committee was consumed, and rightly so, by the bank 
failures, President Biden charged ahead with a progressive wish list of 
reckless spending, higher taxes, and failed policies.
    Thankfully, our Government has a system of checks and balances, one 
of which includes congressional oversight and the power of the purse-
appropriations. In these important and trusted roles, we analyze and 
scrutinize the Executive branch's actions on behalf of the American 
taxpayer, so that the voices of the country's citizens are heard and 
their viewpoints reflected.
    Unfortunately, the Consumer Financial Protection Bureau--or the 
CFPB--is a notable exception. It is not accountable to Congress or the 
American taxpayer through the appropriations process, and it routinely 
and brazenly acts outside of the scope of its authority.
    And Director Chopra has taken full advantage of that loophole. 
Under your leadership, the CFPB has implemented policies and practices 
that will ultimately reduce consumer options and curtail reasonable 
practices that promote financial responsibility--further eroding access 
to credit.
    Director Chopra has created uncertainty in the marketplace by 
attempting to regulate through speeches and issuing blog posts under 
the guise of ``clarifying guidance.'' The result of rulemaking and 
enforcement by blog post? Fewer consumers are actually protected and 
fewer options of financial products will be made available.
    Instead of serving people, companies are forced to maintain the 
status quo or withdraw service offerings out of fear for retribution by 
nastygram. Whether it is reputational harm through a CFPB press release 
based on a unique and flawed interpretation of the law or an assessment 
of risk exposure, the result is the same: less credit access for those 
who need it most.
    The CFPB's website boasts of how the agency's enforcement actions 
through 2022 have yielded $16 billion in consumer relief for 192 
million consumers. But in reality, this means that the average consumer 
under the CFPB's ``protection'' would receive a check for around $83.
    Of course, $83 is still $83, but we have to ask ourselves, what is 
the real cost of those enforcement activities? How many billions of 
dollars have your actions actually cost consumers in the form of higher 
prices, reduced access to credit, or in lost opportunities for new 
products?
    Further, since his last appearance in front of this committee, 
Director Chopra has continued his public pressure campaign, mislabeling 
legitimate payment incentives as ``junk fees'' or ``illegal fees.'' 
This sweeping initiative lumps legitimate, standard credit card late 
fees in with the White House's political efforts to bring down fees in 
other sectors.
    Let's be honest: no one likes paying late fees. But they do 
encourage financial discipline. When you pay your credit card on time, 
your credit score goes up. When you don't, it goes down. And when your 
credit score goes down, it makes it harder to get a car loan, a small 
business loan, or even a mortgage at a better rate. So, I am concerned 
that the CFPB's crusade on ``junk fees'' will do more harm than good, 
and actually end up restricting access to credit for low and middle-
income Americans with limited credit histories.
    To make matters worse, this proposal has major gaps and errors in 
the data used and the procedure applied. Just read the Small Business 
Administration's Office of Advocacy's comment letter, in which the SBA 
expresses concerns that the CFPB ``does not have the necessary data to 
develop an adequate or factual basis for its certification.'' In other 
words, members of the Executive branch, your colleagues, have serious 
concerns around this rule.
    If this rule were to be finalized, the end result would be 
increased cost of credit for all American consumers and less access to 
credit for those who need it most. I really just simply can't 
understand how that would protect consumers, or be beneficial for 
everyday Americans and Main Street businesses.
    To make matters worse, under your leadership, the CFPB learned of a 
major data breach, in its own backyard, impacting more than a quarter-
million consumers. At the same time, the CFPB was finalizing the rule 
that requires lenders to collect and report a vast swath of small 
business lending data on credit products, including personally 
identifiable information like race, sex, ethnicity to the CFPB.
    The irony here is just astounding. Why should we trust the CFPB to 
collect more data on millions of community banks, small businesses, and 
individuals when it has failed to maintain safekeeping of the data it 
already collects?
    These obvious and repeated failures raise an important question--
how can we protect American consumers from the actions of the CFPB? I 
honestly can't believe that's a question that needs to be asked, but it 
is indeed. But that is where we find ourselves today. I hope that 
during the question and answering time of this committee, we'll have an 
opportunity to engage in some of the important answers to the questions 
I'm asking.
    Finally, I think it is important to note that I am a firm believer 
that the best way to provide economic opportunity and protect American 
consumers is to encourage competitive markets, innovative products, and 
set clear rules of the road. These principles have provided millions of 
Americans-like myself-the opportunity and ability to overcome poverty. 
It is absolutely necessary that we protect our principles.
    But what I find so disappointing is that the American public cannot 
trust this agency, this Administration, or this Director, and that is 
truly a shame.
                                 ______
                                 
                   PREPARED STATEMENT OF ROHIT CHOPRA
             Director, Consumer Financial Protection Bureau
                             June 13, 2023
    Chairman Brown, Ranking Member Scott, and Members of the Committee, 
thank you for holding this hearing on the Consumer Financial Protection 
Bureau's (CFPB) submission of its Semiannual Report to Congress.
---------------------------------------------------------------------------
     Statement Required by 12 U.S.C. 5492--The views expressed herein 
are those of the Director and do not necessarily reflect the views of 
the Board of Governors of the Federal Reserve System or the President.
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    I am pleased to report that the CFPB continues to deliver tangible 
results for the public today, ensuring that consumers are protected, 
while also preparing for the future as tech giants and artificial 
intelligence reshape the industry. I will share a few observations 
about the state of the American consumer, as well as some highlights of 
CFPB's work.
    American families continue to benefit from a resilient labor 
market. Consumer spending continues to be robust, and borrowing has 
accelerated. Inflation in key categories, such as vehicles, has 
contributed to rising levels of household debt. Americans now owe $17 
trillion in household debt, including mortgages, student loans, auto 
loans, and credit cards. Interest rates are substantially higher than 
they were a few years ago, and some families are paying much more on 
their credit cards and other loans. Overall, current indicators of 
distress on consumer credit remain muted, though there are modest signs 
of increased delinquency. We will continue monitoring the impact of 
changes in interest rates and home prices closely, as well as other 
changes that might impact large segments of the population, such as 
upcoming resumption of Federal student loan payments.
    The CFPB continues to be on high alert for shocks to the system 
that might unsettle household financial stability. The failures of 
Silicon Valley Bank, Signature Bank, and First Republic Bank 
highlighted significant vulnerabilities in the banking system, and 
regulators took a series of extraordinary actions that limited the 
fallout to the broader economy. But it is clear policymakers will need 
to take steps to avoid the need for emergency measures in the future.
    With respect to the CFPB's mandated objectives, we have made major 
progress to propose, finalize, or implement required rules on credit 
reporting for survivors of human trafficking, small business lending 
data collection, PACE lending, the LIBOR transition, and more. We're 
reviewing old rules to find opportunities to simplify and future-proof 
them. We've built on the work of my predecessor to publish more 
guidance and advisory opinions that especially help small and nascent 
firms looking to develop new products and services.
    We are focusing more heavily on supervision of nonbank financial 
firms, which have not always been subjected to similar oversight as 
chartered banks and credit unions. We've activated unused authorities 
to limit regulatory arbitrage by nonbank firms.
    We have shifted the focus of our enforcement program away from 
targeting small businesses and putting more attention on repeat 
offenders. Since then, we've recovered $4.6 billion in refunds and 
penalties against violators.
    We are handling an average of 10,000 consumer complaints each week 
and obtaining successful resolutions for individuals outside of formal 
legal proceedings.
    Equally important is our work to address how technology is 
transforming financial services. The United States has a choice: will 
we harness technology to maintain relationship banking, drive 
competition, and protect privacy? Or will we continue our lurch toward 
a system marked by surveillance that is fully automated and controlled 
by a handful of firms?
    The CFPB is working to ensure broad benefits for consumers and 
businesses alike when it comes to technological advances. One of our 
most important initiatives is to accelerate the shift in the United 
States to open banking, allowing consumers to more easily switch and 
gain access to new products, while protecting personal financial data.
    The CFPB has been leading a number of efforts on artificial 
intelligence, and we're working to bring on more technical talent 
inside the agency. We're taking steps to guard against algorithmic bias 
across credit markets, and we're working to ensure that data brokers 
respect longstanding laws on the books. The work of the CFPB in today's 
digital economy is more relevant than ever.
    Thank you for the opportunity to appear before you. I look forward 
to responding to your questions.
         RESPONSES TO WRITTEN QUESTIONS OF CHAIR BROWN
                       FROM ROHIT CHOPRA

Q.1. Recently, Artificial intelligence (AI) has experienced 
rapid growth and adoption. As AI is developed and launched in 
financial services, it is vital that the CFPB protects 
consumers.
    AI is often used ``in the background'' in financial 
services, and consumers may not be aware of AI's use in 
determining a loan decision outcome or their credit score, for 
example. What is the CFPB doing to ensure that financial 
institutions are transparent with consumers about when AI is 
being used in a financial transaction?

A.1. I appreciate this question and share your concern about 
the use of artificial intelligence (AI) in financial 
transactions. There is no ``AI'' exemption in our laws. 
Financial institutions are required to comply with existing 
laws and regulations regardless of the technology being used.
    The Consumer Financial Protection Bureau (CFPB) has 
reiterated this point publicly through multiple communications, 
including in a Joint Statement on Enforcement Efforts Against 
Discrimination and Bias in Automated Systems, published in 
April, 2023, by the CFPB, Department of Justice Civil Rights 
Division, Equal Employment Opportunity Commission, and the 
Federal Trade Commission. \1\ The CFPB also released an issue 
spotlight on financial institutions' use of AI chatbots, 
published in June, 2023. \2\ In May 2022, the CFPB published a 
Consumer Financial Protection Circular stating that financial 
institutions are required by law to provide accurate and 
specific adverse action notices to consumers regardless of what 
technology they use. \3\
---------------------------------------------------------------------------
     \1\ https://s3.amazonaws.com/files.consumerfinance.gov/f/
documents/cfpb--joint-statement-enforcement-against-discrimination-
bias-automated-systems--2023-04.pdf
     \2\ https://www.consumerfinance.gov/data-research/research-
reports/chatbots-in-consumer-finance/chatbots-in-consumer-finance/
     \3\ https://www.consumerfinance.gov/compliance/circulars/circular-
2022-03-adverse-action-notification-requirements-in-connection-with-
credit-decisions-based-on-complex-algorithms/

Q.2. AI-driven scams and fraud are increasingly difficult for 
consumers to detect. What is the CFPB doing to ensure that 
financial institutions are appropriately prepared for this 
threat, as well as appropriately informing consumers of this 
---------------------------------------------------------------------------
threat?

A.2. The CFPB has taken a wide range of steps, including 
recruitment of technologists and others with relevant skill 
sets, engaged with industry, and working with other agencies.
    In addition, the CFPB is monitoring consumer financial 
markets and reviewing consumer complaints that have been 
submitted via the CFPB Consumer Complaint Database to determine 
the most effective strategies for informing consumers about 
various types of fraud that are driven by autonomous decision 
making and other emerging technologies. The CFPB's Office of 
Older Americans and the Office of Servicemember Affairs are 
also looking into this issue, specifically, as it relates to 
those populations, and will be collaborating with other teams 
across the CFPB to apply findings and recommendations that are 
relevant for all consumers.

Q.3. From January 2020 to September 2022, the CFPB received 
nearly 1.2 million complaints about Equifax, Experian, and 
TransUnion. And tens of millions of disputes were sent by 
consumers directly to these companies. What is the CFPB doing 
to ensure consumers' complaints are addressed and that consumer 
credit reports are accurate?

A.3. Accurate information on consumer credit reports is 
essential, as one wrong piece of information on a person's 
report can have serious consequences that follow them for 
years.
    TransUnion, Equifax, and Experian routinely top the list of 
complaints submitted by consumers, and the CFPB is taking a 
number of steps to ensure consumers' complaints are addressed 
and that credit reporting companies follow the law. First, we 
are monitoring complaints submitted about TransUnion, Equifax, 
and Experian to identify deficiencies in their responses. This 
past January, we published a report highlighting some of our 
findings and noted that we have seen some evidence of changes. 
\4\ For example, our analysis indicates that these companies' 
responsiveness to complaints increased over the past year, as 
did their reported rates of relief in response to complaints. 
Second, we are continuing to exercise our authorities to ensure 
consumer reporting companies comply with consumer financial 
protection laws. This includes exploring a new rulemaking, as 
well as our ongoing supervisory and enforcement work, which has 
remained a top priority. Third, last November, we released a 
circular to outline how Federal and State consumer protection 
enforcers, including regulators and attorneys general, can 
bring claims against companies that fail to investigate and 
resolve consumer report disputes. \5\
---------------------------------------------------------------------------
     \4\ https://files.consumerfinance.gov/f/documents/cfpb--fcra-611-
e--report--2023-01.pdf
     \5\ https://www.consumerfinance.gov/compliance/circulars/consumer-
financial-protection-circular-2022-07-reasonable-investigation-of-
consumer-reporting-disputes/
---------------------------------------------------------------------------
                                ------                                

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR SCOTT
                       FROM ROHIT CHOPRA

Q.1. The CFPB is required to consult with the prudential 
agencies prior to the issuance of any rule that could affect 
banking institutions to ensure that the rule would not have any 
unintended consequences on bank safety and soundness.
    Prior to the issuance of the credit card late fees rule, 
did you consult with the other prudential agencies?
    If no, can you explain why you felt you did not need to 
consult with the other agencies on this rule?
    If yes, please describe these discussions, including who 
you met with at the Federal Banking Agencies on this matter.

A.1. Yes. Consultations can occur at many levels of the agency, 
but are most frequently executed by relevant subject matter 
experts at the staff level.
    Consistent with the CARD Act and in accordance with section 
1022(b)(2)(B) of the Consumer Financial Protection Act of 2010 
(CFPA), Consumer Financial Protection Bureau (CFPB) officials 
consulted with officials from the following agencies on the 
potential proposed changes prior to the Notice of Proposed 
Rulemaking (NPRM) being issued: (1) the Office of the 
Comptroller of the Currency; (2) the Board of Directors of the 
Federal Deposit Insurance Corporation; (3) the National Credit 
Union Administration Board; (4) the Board of Governors of the 
Federal Reserve System (Board); (5) the Federal Trade 
Commission; (6) the Department of the Treasury; and (7)the 
Department of Housing and Urban Development.

Q.2. How does the CFPB reconcile its proposal with issuers' 
obligations to run a safe and sound credit card portfolio?

A.2. The CFPB implements and enforces Federal consumer 
financial law and ensures that markets for consumer financial 
products are fair, transparent, and competitive. Consistent 
with section 1022(b)(2)(B) of the CFPA, the CFPB consulted with 
the appropriate prudential regulators and other Federal 
agencies prior to issuing this proposal.

Q.3. Congress requires consultation with small business 
entities who could be impacted by a CFPB rulemaking. I am 
concerned that the CFPB did not follow this requirement 
regarding the credit card late fee proposal.
    The CFPB certified that the credit card late fee rule 
proposal did not substantially impact community banks and 
credit unions or other small business entities. The Small 
Business Administration (SBA) Office of Advocacy sent a comment 
letter calling this certification into question and requesting 
that the proposal be amended to address concerns raised by 
small business entities.
    Given that another office of the Federal Government raised 
concerns with the impact the proposal would have on small 
business entities, why did you certify that the credit card 
late fee proposal did not require the CFPB to consult with 
small business entities?

A.3. After analyzing whether the proposed rule would have a 
significant impact on a substantial number of small entities 
under the Regulatory Flexibility Act, we found that the credit 
card market is dominated by a small group of large players, 
with the top 20 controlling 93 percent of the market.
    I certified that the proposal, if adopted, would not have a 
significant economic impact on a substantial number of small 
entities for the reasons described in the proposal. \1\
---------------------------------------------------------------------------
     \1\ https://www.govinfo.gov/content/pkg/FR-2023-03-29/pdf/2023-
02393.pdf (88 FR 18906, 18940-41)

Q.4. Did the CFPB believe that the SBA Office of Advocacy's and 
---------------------------------------------------------------------------
stakeholders' comment letters were incorrect?

A.4. The rulemaking is ongoing and the CFPB is reviewing all 
comments submitted in response to the proposal.

Q.5. Does the CFPB have a plan to remedy the concerns raised by 
the SBA Office of Advocacy?

A.5. The rulemaking is ongoing and the CFPB is reviewing all 
comments submitted in response to the proposal.

Q.6. Have you consulted with the SBA on this issue?

A.6. Yes, CFPB staff have met with personnel from the Small 
Business Administration (SBA) as well as SBA's Office of 
Advocacy to discuss this topic.

Q.7. Did the CFPB communicate with any other Federal agencies 
or personnel in the Biden administration outside of the CFPB 
regarding the proposal?

A.7. Consistent with the CARD Act and in accordance with 
section 1022(b)(2)(B) of the CFPA, CFPB officials consulted 
with officials from the following agencies on the potential 
proposed changes prior to the NPRM being issued: (1) the Office 
of the Comptroller of the Currency; (2) the Board of Directors 
of the Federal Deposit Insurance Corporation; (3) the National 
Credit Union Administration Board; (4) the Board of Governors 
of the Federal Reserve System (Board); (5) the Federal Trade 
Commission; (6) the Department of the Treasury; and (7) the 
Department of Housing and Urban Development.

Q.8. The credit card late fee proposal seeks to help a small 
number of credit card customers at the expense of the majority 
of consumers who pay on time. According to the CFPB's own data, 
74 percent of American consumers with a credit card never pay 
late. The CFPB admits that the proposal could result in higher 
maintenance fees, lower rewards, or higher interest rates on 
credit cards. The proposal also ignores the deterrent effect of 
late fees and the CFPB admits that the proposal could result in 
more consumers paying late of implemented.
    How is the CFPB able to justify moving forward with a 
proposal that will likely result in more harm to most consumers 
than will benefit a much smaller percentage of consumers?

A.8. At this point, the CFPB has not made any final 
determinations about the proposed rule. The rulemaking is 
ongoing and the CFPB is reviewing all comments submitted in 
response to the proposal.

Q.9. How has the CFPB accounted for potential responses by 
credit card issuers to manage their margins and credit risk?

A.9. At this point, the CFPB has not made any final 
determinations about the proposed rule. The rulemaking is 
ongoing and the CFPB is reviewing all comments submitted in 
response to the proposal.

Q.10. In June of 2022, you penned an op-ed where you criticized 
the use of ``overly complicated and tailored rules'' in 
promulgating regulations. You stated your intent to ``more 
clearly communicate the agency's expectations in simple and 
straight-forward terms'' and highlighted two forthcoming rules 
on the 1071 small business lending rule and residential 
property assessed clean energy financing. Today, those rules 
have either been proposed or finalized and they are hundreds of 
pages long--888 and 177 pages respectively.
    Do these rules fit your goals of simple and straight-
forward?

A.10. The CFPB is seeking to move away from highly complicated 
rules that have long been a staple of consumer financial 
regulation and toward simpler and clearer rules. Unnecessarily 
complex rules impede consumer protection and increases 
compliance costs, which benefit larger market players and their 
high-priced lawyers. In addition, unnecessarily complex rules 
place new entrants and small firms at a disadvantage compared 
to their larger competitors. To avoid this, the CFPB aspires to 
more clearly communicate the agency's expectations in simple 
and straight-forward terms, which will produce more durable 
rules.
    The actual regulatory text of the small business lending 
rule is approximately 16 pages. We also included several 
appendices and official interpretations to provide greater 
guidance, which adds 78 pages. The remaining pages in the 
Federal Register are explanations and analyses we are required 
by law to produce. The vast majority of the total page count is 
not regulatory text--it principally contains summaries of the 
thousands of comments that the agency received from industry 
and other stakeholders and explains how we assessed and 
addressed those comments. It also contains assessments of the 
costs and benefits of the regulation as required by statute. 
This material does not create any obligations for regulated 
entities. It is also important to note that the sheer length of 
a Federal Register notice has little to do with the actual 
length and complexity of the regulations. Because section 1071 
requires reporting of small business lending data, the rule 
includes sufficient details so that financial institutions will 
know exactly how they can comply.
    The same is true of the notice of proposed rulemaking for 
PACE financing. Although the notice totaled 177 pages, there 
were fewer than 8 pages of regulatory text and 8 pages of 
appendices designed to help facilitate compliance. Fewer than 6 
pages constituted official staff commentary. The majority of 
the notice was comprised of background information, statutorily 
mandated analyses, and plain-language explanations of the 
proposed rules to help provide clarity for stakeholders. For 
the PACE rulemaking, the proposed rules would, in large part, 
rely on the regulatory framework already in place for closed-
end mortgage loans, which has been in place for years. Certain 
proposed adjustments, clarifications, and exemptions would 
account for the unique nature of PACE--they would help 
facilitate compliance and resolve longstanding ambiguity while 
protecting consumers. I also note that Congress specifically 
directed the CFPB to ``account for the unique nature of PACE'' 
in prescribing ability-to-repay and civil liability 
requirements for PACE financing.

Q.11. Section 1071 of the Dodd-Frank Act calls for the 
inclusion of 13 data points, yet the CFPB's new rule includes 
81 data points. Can you explain how your form is 6 times more 
voluminous than the statute and how you believe that it fits 
with your goal of ``streamlined'' and ``clear rulemaking''?

A.11. In Section 1071 of the CFPA, Congress directed the CFPB 
to collect a number of data points, including ``any that the 
CFPB determines would aid in fulfilling the purposes of this 
section.'' In line with the plain language of the statute, the 
CFPB made a number of determinations in that respect. As a 
result, all the data points included in the rule directly 
reflect the language of section 1071.
    I also want to clarify that the CFPB's small business 
lending rule, which implements section 1071, requires 
submission of 81 data fields, not 81 data points. The number of 
data fields exceeds the number of data points in the rule 
because in order to transmit the required information in a 
clear and usable format, institutions will in some cases use 
multiple data fields to report a single data point. For 
example, institutions will report the amount of credit applied 
for, which is a single data point, via 2 data fields: one 
indicating whether the applicant applied for a specific amount 
and a second reporting that amount. Similarly, section 1071 
requires institutions to compile information about the race, 
sex, and ethnicity of the principal owners of an applicant-
business. Institutions will have 36 data fields they can use 
(as needed) to transmit that information for up to four 
different principal owners. The use of multiple fields to 
ensure data integrity is a technical feature of the reporting 
system and does not itself increase the substantive burden on 
institutions to gather additional information. In fact, by 
diminishing any uncertainty about how to report data under the 
rule, the use of multiple data fields helps make compliance 
simpler for regulated entities.

Q.12. The recently finalized 1071 rule does not address what 
data the CFPB will publish and make available to the public. 
The CFPB is required to conduct a ``privacy balancing test.'' 
The CFPB's final rule state that will collect data for at least 
1 year to weigh against the privacy balancing test before 
issuing a policy statement regarding what information will be 
publicized.
    Will the CFPB follow notice and comment rulemaking for 
determining what information will be made publicly available?

A.12. Section 1071 of the CFPA provides that the CFPB may, ``at 
its discretion, delete or modify data collected under [section 
1071] which is or will be available to the public, if the CFPB 
determines that the deletion or modification of the data would 
advance a privacy interest.'' The CFPB discussed its 
preliminary approach to potential modifications and deletions 
in its proposed rule to implement section 1071 on all aspects 
of its privacy analysis, and considered the many comments it 
received when issuing the final rule.
    As you note, the CFPB does not anticipate that it can carry 
out the necessary analysis of prepublication modifications and 
deletions without at least one full year of application-level 
data. As explained in the final rule, the CFPB is not 
committing at this time to issue modification and deletion 
decisions through any particular vehicle. The CFPB intends to 
further engage with stakeholders on the issue of data 
publication before it resolves on a particular approach to 
protecting privacy interests through modifications and 
deletions.

Q.13. If not, why does the CFPB believe this information is any 
less sensitive and deserving of privacy protections than other 
data collected and made publicly available by the CFPB?

A.13. The CFPB is committed to protecting the privacy and 
information security of the data collected. Congress authorized 
the CFPB to delete or modify data before making it available to 
the public to protect privacy interests. To that end, the CFPB 
will undertake a thorough privacy risk assessment, once the 
small business lending data are collected, to determine any 
deletions or modifications to protect privacy and address re-
identification risk.
    Again, the CFPB plans to continue engaging with external 
stakeholders on how to appropriately protect privacy in 
connection with publishing data. The CFPB also follows all 
applicable Federal standards for data collection and storage, 
including encrypting data transfers and encrypting data stored 
in our systems.

Q.14. The CFPB is trying to apply outdated regulatory 
frameworks to how it regulates and supervises new innovative 
consumer lending products.
    What will the impacts be to consumers should the CFPB apply 
regulations that are not commensurate with the risk?

A.14. Respectfully, this is no longer true. The CFPB has sunset 
many of the ineffective approaches to oversight of new 
financial products.
    Consumers benefit from a competitive, transparent playing 
field where all companies providing the same service must play 
by the same rules. On an equal playing field, companies should 
be innovating to win consumers business. Regulation, when done 
right, should not stymie technological advancement to provide a 
better consumer product, but rather create appropriate 
guardrails to guide its development.

Q.15. Under your leadership, the CFPB has greatly increased the 
amount of guidance that it has published. This guidance takes 
many forms, including Policy Statements, Interpretive Rules, 
Compliance Bulletins, Advisory Opinions, and Consumer Financial 
Protection Circulars, but all express the CFPB's view regarding 
how Federal consumer financial law applies in different 
circumstances with the (often explicit) intention of 
encouraging market participants to come into compliance with 
that view.
    The CFPB has generally issued such guidance documents under 
an exception to the Administrative Procedure Act's (APA) 
procedural requirements for notice and comment, and it has only 
requested public comment in a few instances. In addition, 
notwithstanding the fact that many of these documents are 
``rules'' within the meaning of the APA and the Congressional 
Review Act, the CFPB generally has not considered ``the 
potential benefits and costs to consumers and covered persons, 
including the potential reduction of access by consumers to 
consumer financial products or services resulting from such 
rule'' as required by the Dodd-Frank Act (12 U.S.C. 
5512(b)(2)(A)).
    With few exceptions, the CFPB has also not made clear that 
its guidance operates prospectively only. While clarity 
regarding the CFPB's position on Federal consumer financial law 
is generally helpful to market participants, the CFPB's 
reliance on informal guidance does not abide by the APA's 
procedural requirements for legislative rules. A guidance 
document issued without observing the procedural requirements 
of notice and comment can be rescinded as easily as it is 
issued, as the CFPB has repeatedly demonstrated throughout its 
relatively short history.
    Do you agree that it is important for the CFPB's guidance 
to be durable so that market participants can plan multiyear 
investments in compliant products with certainty that changes 
to the rules governing their conduct (and/or that of their 
competitors) will not make such investments obsolete and 
therefor stifle innovation to the detriment of consumers?

A.15. The CFPB's Spring 2023 regulatory agenda explained that 
it was engaged in 11 notice and comment rulemakings. \2\ 
However, as contemplated by the Administrative Procedure Act, 
not all forms of CFPB guidance are issued through the 
legislative rulemaking process. The CFPB has continued the 
program created by my predecessor, Director Kraninger, of 
issuing advisory opinions that provide timely guidance to help 
institutions understand the obligations of the laws that 
Congress enacts. The CFPB also issues consumer financial 
protection circulars, which promote consistency among Federal 
and State agencies that enforce Federal consumer financial 
laws. These forms of guidance provide greater certainty and 
predictability to the market.
---------------------------------------------------------------------------
     \2\ https://www.consumerfinance.gov/rules-policy/regulatory-
agenda/

Q.16. If so, will the CFPB follow notice and comment rulemaking 
for rules that attempt to shape market behavior, such as:
    The Dodd-Frank Act, in its Policy Statement on Abusive Acts 
or Practices?

A.16. The CFPB is governed by the notice and comment rulemaking 
requirements of the Administrative Procedure Act. It complies 
with--and will continue to comply with--those requirements. The 
Administrative Procedure Act exempts general statements of 
policy, such as the Policy Statement on Abusive Acts or 
Practices, from the Act's notice and comment requirements. 
Nevertheless, the CFPB voluntarily solicited public comments on 
the Policy Statement on Abusive Acts or Practices. The CFPB may 
make revisions to that policy statement as appropriate after 
reviewing the comments it has received.

Q.17. The Real Estate Settlement Procedures Act, in its 
Advisory Opinion on Mortgage Comparison Shopping Platforms?

A.17. As explained above, the CFPB is governed by the notice 
and comment rulemaking requirements of the Administrative 
Procedure Act. It complies with--and will continue to comply 
with--those requirements. The Administrative Procedure Act 
exempts interpretive rules, such as the Advisory Opinion on 
Digital Mortgage Comparison-Shopping Platforms, from the Act's 
notice and comment requirements.

Q.18. The Equal Credit Opportunity Act, in its Advisory Opinion 
on Special Purpose Credit Programs?

A.18. As explained above, the CFPB is governed by, and complies 
with, the notice and comment rulemaking requirements of the 
Administrative Procedure Act. The Administrative Procedure Act 
exempts interpretive rules, such as the Advisory Opinion on 
Special Purpose Credit Programs, from the Act's notice and 
comment requirements. The Advisory Opinion on Special Purpose 
Credit Programs interprets Regulation B; it clarifies the types 
of research and data that may be appropriate for creditors to 
consider in meeting their preexisting obligations under 
Regulation B when creditors choose to establish special purpose 
credit programs.

Q.19. In the latest UDAAP policy statement, the CFPB uses the 
term ``gaps in understanding'' as an example of a potentially 
abusive or deceptive practice.
    In many cases, wouldn't a shorthand descriptor, or what 
some may call ``layman's terms'' explanations of what the 
consumer needs to know, rather than disclosures that were 
created in a pre-internet era, help to limit those ``gaps in 
understanding?''

A.19. In general, the CFPB supports clear, conspicuous 
disclosures that comply with applicable legal requirements and 
use plain language comprehensible to consumers. The adequacy of 
any particular disclosure must be assessed in light of the 
facts and circumstances surrounding that disclosure.

Q.20. Has the bureau considered allowing for these types of 
alternate disclosures so long as consumers can still easily 
access the full legal disclosure to help increase consumer 
understanding, especially as it relates to home financing 
information?

A.20. Although the CFPB is not currently considering proposals 
like the one described in the question, the CFPB in general is 
interested in considering proposals for model disclosures that 
satisfy the requirements of 12 U.S.C. 5532(b)-i.e., at minimum, 
that proposed disclosures use plain language comprehensible to 
consumers; contain a clear format and design, such as an easily 
readable type font; and succinctly explain the information that 
must be communicated to the consumer.

Q.21. The CFPB has disbanded the Office of Innovation and 
offers very few collaborative avenues for companies to work 
with the CFPB to gain regulatory clarity on the myriad of 
announcements coming from the CFPB. Technological innovation 
can help reduce the time and costs involved in closing a 
mortgage. Reports from FHFA and others show that over the past 
10 years the average time to refinance a residential mortgage 
loan takes around 45-50 days and that the average cost to 
originate a residential mortgage loan has doubled from $5,138 
to $10,637 over the same time period.
    Can you provide any specific analysis on what the CFPB 
views as the principal sources of these costs and delays, as 
well as any policies the CFPB is actively considering to reduce 
regulatory frictions and give companies regulatory clarity 
while supporting private sector innovations aimed at reducing 
these costs and creating a more consumer-friendly closing 
experience?

A.21. Respectfully, it is incorrect that the Office of 
Innovation was disbanded. It was clear that the Office of 
Innovation's work was not meaningfully incubating innovation in 
the market. After a careful review, the CFPB decided to reboot 
and elevate the Office with a greater focus on new market 
entrants and the stumbling blocks they face.
    I agree that the mortgage closing process can be sped up 
and with reduced costs. This is particularly acute when it 
comes to refinancing. From appraisals to employment 
verification and beyond, there are pain points that borrowers 
and lenders experience in the process. While these pain points 
do not stem from rules administered by the CFPB, I regularly 
hear about ways the system can be improved from start to 
finish. I would welcome further discussion with you on this.

Q.22. Has the CFPB done any work to analyze the regulatory 
costs of origination and servicing of mortgage loans and their 
impact on the cost and availability of credit to consumers?

A.22. CFPB's changes to the Ability to Repay (ATR) and 
associated Qualified Mortgage (QM) rule recognized the 
important role that technology can play to reduce origination 
costs while still ensuring borrowers are given mortgages based 
on a reasonable determination that they can repay. Part of the 
changes that were put in place with the updates in 2020 that 
ultimately became effective in October 2022 was to eliminate 
the prescriptive requirements for verification of employment 
and income and replace such requirements with more flexible 
guidance that will allow advancements in technology to verify 
such information through independent parties. The use of these 
technologies had already begun in the mortgage industry with 
adoption by both Fannie Mae and Freddie Mac in their technology 
offerings that operated under the temporary QM category for the 
Government-Sponsored Enterprises (GSEs), known as the Patch, 
which was replaced by the new rules applicable to all 
participants.
    The CFPB conducted an analysis of regulatory costs of the 
rule affecting the origination or servicing of mortgage loans 
and their impact on the cost and availability of credit to 
consumers for each of the mortgage rules it has promulgated. 
The CFPB has also conducted an ex-post analysis of certain of 
its significant mortgage-related rules pursuant to section 
1022(d) of the CFPA. The CFPB published reports of its 
assessments of the 2013 RESPA Servicing Rule, the Ability to 
Repay and Qualified Mortgage Rule, and the Integrated Mortgage 
Disclosures Under the Real Estate Settlement Procedures Act 
(Regulation X) and the Truth in Lending Act (Regulation Z). \3\ 
The CFPB also conducted a voluntary review of the Home Mortgage 
Disclosure Act Rule. \4\
---------------------------------------------------------------------------
     \3\ https://www.consumerfinance.gov/about-us/newsroom/consumer-
financial-protection-bureau-publishes-assessments-ability-repay-and-
mortgage-servicing-rules/; https://www.consumer
finance.gov/data-research/research-reports/trid-rule-assessment/
     \4\ https://www.consumerfinance.gov/data-research/research-
reports/report-on-the-home-mortgage-disclosure-act-rule-voluntary-
review/

Q.23. Is the Bureau working on any initiatives to help 
---------------------------------------------------------------------------
alleviate these costs? If not, why not?

A.23. Yes. During the COVID-19 pandemic, we saw how the 
mortgage servicing rules worked when unemployment spiked. The 
CFPB observed that there were places where the rules could be 
revised to reduce unnecessary complexity. Last fall, we 
published a Request for Information asking the public for input 
on ways to reduce risks for borrowers who experience 
disruptions in their ability to make mortgage payments. We 
sought input on the features of pandemic-related forbearance 
programs and whether there are ways to automate and streamline 
long-term loss mitigation assistance. Many commenters noted 
that borrowers seeking help on their mortgages can face a 
paperwork treadmill that hurts both homeowners and mortgage 
servicers. According to commenters, the temporary pandemic-
related changes we made to the mortgage servicing rules helped 
alleviate this problem and get borrowers accommodations more 
quickly.
    On June 15, 2023, the CFPB stated that we intend to 
identify ways to simplify and streamline the existing mortgage 
servicing rules. \5\ When homeowners who struggle to make 
payments get the help they need without unnecessary delay or 
hurdles, it is better for borrowers, servicers, and the economy 
as a whole. We will propose streamlining only if it will 
promote greater agility on the part of mortgage servicers in 
responding to future economic shocks while continuing to ensure 
that servicers assist borrowers promptly and fairly.
---------------------------------------------------------------------------
     \5\ https://www.consumerfinance.gov/about-us/blog/the-cfpb-
intends-to-identify-ways-to-simplify-and-streamline-the-existing-
mortgage-servicing-rules/
---------------------------------------------------------------------------
    In the same Request for Information, we asked the public 
for input on ways to improve mortgage refinances for homeowners 
who would benefit from refinancing, especially for borrowers 
with smaller loan balances. In it, the CFPB noted that targeted 
and streamlined refinance programs have been used to improve 
refinancing, typically with lower transaction costs than 
traditional refinances. Refinance programs can lead to lower 
monthly payments and interest rates for homeowners who 
previously would have been unlikely or unable to refinance. New 
streamlined or automatic refinancing mortgage products and 
programs could make sure that those buying a home now, or 
refinancing to cover other needs, are able to benefit from the 
next interest rate drop. The CFPB will use the information and 
comments it received as it considers steps to support household 
financial stability and address refinance market gaps.

Q.24. What do you think the role of technology may be in 
helping to further reduce these costs?

A.24. Technology plays an important role in helping to reduce 
costs to consumers while simultaneously offering protection to 
consumers. However, we must be ever vigilant by continuing to 
monitor and assess technology development to ensure that 
consumers remain protected and not sacrifice such protection in 
the name of cost savings.

Q.25. How do you think technology can be leveraged to improve 
the home-shopping, mortgage-shopping, and homebuying experience 
more broadly?

A.25. Like most markets today, technology has become an 
integral part of the home buying and mortgage experience. From 
online property listings and virtual home tours to mortgage 
shopping sites, technology can play an important role to help 
consumers shop and make better choices. However, such 
technologies also have the potential to introduce new risks to 
such transactions. Shopping around in the digital world no 
longer guarantees that one consumer will see the same 
information as another. As such, while presenting data to 
consumers in an unbiased fashion can help a consumer to make an 
informed financial decision, the potential for entrenched bias 
to skew such decisions can be harmful.

Q.26. When you testified in front of this Committee, concerns 
were raised regarding the lack of transparency in your 
calendar. The CFPB has yet to publish any updates for your 
calendar in 2023.
    Why has your calendar not been updated with your activities 
and work this year?

A.26. The CFPB proactively publishes leadership calendars 
online, on a voluntary basis. The time it takes to process and 
post calendars may vary. Before publishing calendars, the 
agency must conduct a review to determine whether any 
confidential or deliberative information needs to be redacted 
to avoid disclosing nonpublic information about supervisory, 
enforcement, rulemaking, or other activities. As part of that 
process, the CFPB may also need to work with other agencies to 
ensure their confidential information is appropriately 
protected. Copies of leadership calendars through June 2023 are 
currently available on the CFPB's public website. \6\
---------------------------------------------------------------------------
     \6\ https://www.consumerfinance.gov/about-us/the-bureau/
leadership-calendar/

Q.27. The CFPB's fall 2022 unified agenda indicated that the 
CFPB is in the pre-rule stage of creating an overdraft rule 
that would consider amending Regulation Z. Specifically, a 
proposal would consider reclassifying common overdraft fees as 
finance charges. If these changes were implemented, overdraft 
fees would be required in annual percentage rate (APR) 
calculations and financial services providers may be forced to 
provide a Truth in Lending Act (TILA) disclosure every time a 
consumer attempts an overdraft.
    Does the CFPB believe overdraft programs that consumers are 
sometimes forced to rely on to put food on the table or gas in 
their cars should be eliminated?

A.27. No.

Q.28. The CFPB recently released data indicating a major 
reduction in overdraft fees over the last several years. 
According to the CFPB's data, overdraft fee revenue in the 
fourth quarter of 2022 was 48 percent lower than overdraft fee 
revenue in the fourth quarter of 2019.
    Does this data suggest more regulations on overdraft fees 
may be unnecessary?

A.28. Overdraft and NSF fees reported by banks over $1 billion 
in assets totaled around $7.7 billion in 2022. Of that amount, 
a substantial portion constituted overdraft fees. Stakeholders 
from industry and the public have suggested that the CFPB 
consider creating clear rules for market participants. We have 
not made any final determinations with respect to any 
rulemaking.

Q.29. An outstanding issue with the proposed Section 1033 
rulemaking is determining who is required to obtain 
authorization from the consumer to gain access to the 
consumer's data. Currently, the party that is in control of the 
consumer data is typically the party who obtains the consumer's 
consent. The CFPB's proposal suggests that the third party that 
seeks the consumer's data will be responsible for obtaining 
consumer consent, potentially leading to unauthorized access to 
consumer data by bad actors. Many of these third parties are 
not federally supervised or subject to the same data privacy 
and data security requirements as supervised financial 
institutions while forcing these supervised institutions to 
rely on the third-party claims that consumer consent was 
obtained.
    What is the CFPB doing to ensure that unsupervised third 
parties uphold privacy and security standards expected of 
supervised financial institutions?

A.29. I am glad you raised this issue, as it has been very high 
on my mind. As part of the rulemaking, the CFPB is considering 
more effective and protective privacy and security standards 
for third parties who obtain data under the rule. The CFPB is 
taking the prospect of fraudulent authorizations very seriously 
and is considering all options to eliminate that risk as part 
of this rulemaking.

Q.30. Is the CFPB reconsidering this potential requirement?

A.30. The rulemaking is in its early stages, and no decisions 
about the rule are final at this time. The CFPB will be 
considering all feedback, including comments received in 
response to the upcoming proposed rule.

Q.31. The CFPB recently published a report highlighting 
companies' responses to consumer complaints. In that report, 
the CFPB directed companies to provide documentation to support 
a debt being collected which may include personally 
identifiable information (PII).
    Given the data breach at the CFPB that was identified in 
February, does sharing this potentially sensitive PII which may 
be protected by other Federal privacy laws reduce consumer 
protections?

A.31. As discussed in the CFPB's 2022 Consumer Response Annual 
Report, the predominant complaint in the area of debt 
collection is that consumers report attempts to collect a debt 
that is not owed. The CFPB's Consumer Response process has 
helped thousands of consumers obtain relief from this and other 
debt collection issues where information such as the identity 
of the consumer is relevant. Consumers and companies may rely 
on documents to submit or respond to a complaint.
    The CFPB maintains a comprehensive cybersecurity program to 
safeguard its Consumer Response system and the data maintained 
on that system. The CFPB maintains information security 
standards as required by Federal Information Security 
Management Act and is currently rated at a maturity level 4, 
managed and measurable--as assessed by the CFPB's Office of 
Inspector General. U.S. Department of Homeland Security 
guidance notes that level 4 (managed and measurable) represents 
an effective level of security.
    Consumer Response staff, as well as all CFPB employees, are 
subject to CFPB-wide policies on the proper handling of 
sensitive information, including Confidential Complaint 
Information (CCI) and Personally Identifiable Information 
(PII). All CFPB employees, including Consumer Response staff, 
are required to complete annual training on the proper handling 
of CCI and PII. Access to the consumer complaint system is 
granted to users based on their assigned duties and their role.

Q.32. A key function of the CFPB is consumer education. The 
Bureau has nearly half a billion dollars of unused funds in the 
Civil Penalty Fund.
    Does the CFPB have any plans to use these funds to educate 
consumers about financial scams and fraud?

A.32. Based on input from a number of members of the Committee, 
we have prioritized disbursements of these funds for victim 
relief. The CFPB takes many law enforcement actions where 
illegally obtained funds are gone and difficult to obtain for 
redress. For example, the CFPB just announced one of its 
largest settlements against a credit-repair conglomerate for 
$2.7 billion in restitution. \7\ However, the firms have filed 
for bankruptcy protection, raising questions about whether 
their victims will be made whole.
---------------------------------------------------------------------------
     \7\ https://www.consumerfinance.gov/about-us/newsroom/cfpb-
reaches-multibillion-dollar-settlement-with-credit-repair-conglomerate/
---------------------------------------------------------------------------
    I want to specifically thank Senator Mike Rounds for his 
input on the best uses of these funds. At the same time, we 
remain open to various uses of the fund.
    It is worth noting that Congress specifically charged the 
CFPB with conducting financial education programs and ensuring 
that consumers receive timely and understandable information to 
make informed decisions about financial transactions. The CFPB 
has developed, and continuously maintains, financial education 
programs and products using our general fund that support the 
ability of consumers to spot risks and warning signs, as 
discussed in more detail in part b of this question.

Q.33. What work is the CFPB's Consumer Engagement and Education 
Division to help consumers be more aware of financial scams and 
how best to avoid them?

A.33. Financial education should never be used to shame people, 
or to shift responsibility from wrongdoers to individual 
consumers. Instead, financial education should help people spot 
risks and warning signs of scams and fraud, as well as empower 
them to assert their rights and seek help when something goes 
wrong.
    The CFPB has developed, and continuously maintains, 
financial education programs and products that support the 
ability of consumers to spot risks and warning signs. The CFPB 
works to integrate financial education into trusted and 
established community partners where people already go for 
other services, including workplaces, social service 
organizations, military recruiters, Army ROTC, colleges and 
universities, Government agencies, financial institutions, and 
financial educators. Some examples of financial education 
programs and products are as follows:

    Ask CFPB is an online educational tool that 
        provides answers to common questions about consumer 
        financial products and services. Since its launch in 
        2012, the Ask CFPB portal has provided answers to 
        almost 48 million unique visitors. For example, the 
        Fraud and scams portal includes key terms to know, 
        basic questions, common issues, and how-to guides. \8\
---------------------------------------------------------------------------
     \8\ https://www.consumerfinance.gov/consumer-tools/fraud/

    Consumer Advisories call important issues to the 
        attention of consumers, those who work with consumers, 
        the media, and industry. The CFPB publishes these 
        advisories as a warning light about fraudulent 
        practices and scams that are circulating. \9\
---------------------------------------------------------------------------
     \9\ https://www.consumerfinance.gov/about-us/newsroom/
?categories=consumer-advisories

    Webinars feature CFPB staff and guest speakers and 
        focus on a specific topic. Some examples include: 
        Identity theft, scams, and older adults \10\ and 
        Spotting and avoiding financial fraud. \11\
---------------------------------------------------------------------------
     \10\ https://www.consumerfinance.gov/about-us/events/archive-past-
events/cfpb-finex-webinar-identity-theft-scams-older-adults/
     \11\ https://www.youtube.com/watch?v=VSceDmt-Td0

    Limited English proficient (LEP) consumers often 
        encounter significant barriers to participating in the 
        consumer financial marketplace. This can make it 
        difficult to conduct everyday financial affairs and can 
        make LEP consumers more vulnerable to deceptive 
        products or predatory actors. The CFPB offers financial 
        education publications that help LEP consumers spot 
        warning signs and risks, as well as assert their rights 
        and get trusted help. \12\ This information is provided 
        in Arabic, Chinese, Haitian Creole, Korean, Russian, 
        Spanish, Tagalog, and Vietnamese translated content on 
        the CFPB website. \13\
---------------------------------------------------------------------------
     \12\ https://pueblo.gpo.gov/CFPBPubs/CFPBPubs.php
     \13\ https://www.consumerfinance.gov/language/cfpb-in-english/

    Free publications provide tools and resources, 
        including a publication on How to spot frauds and 
        scams, \14\ to consumers and other stakeholders. In FY 
        2022, the CFPB reached 45.7 million publications 
        delivered over the life of the program.
---------------------------------------------------------------------------
     \14\ https://pueblo.gpo.gov/CFPBPubs/CFPBPubs.php?PubID=13129

    A key focus of the CFPB's Office for Older Americans is 
helping older adults protect themselves from fraud and scams. 
---------------------------------------------------------------------------
Some examples include:

    The Money Smart for Older Adults program is a fraud 
        prevention curriculum developed by the CFPB and the 
        Federal Deposit Insurance Corporation. The program 
        consists of an Instructor guide and slides for 
        volunteers to share the information with older adults 
        and a resource guide for participants to refer back to 
        after their lesson. The CFPB also offers plain language 
        handouts designed to share simple lessons about common 
        types of scams and fraud. \15\
---------------------------------------------------------------------------
     \15\ https://www.consumerfinance.gov/consumer-tools/educator-
tools/resources-for-older-adults/money-smart-for-older-adults/

    The Managing Someone Else's Money program includes 
        four guides for financial caregivers operating in a 
        formal lay fiduciary role. The guides for agents 
        appointed under power of attorney and as trustees, 
        conservators, and Government fiduciaries help older 
        adults and financial caregivers recognize and prevent 
        elder financial exploitation. \16\
---------------------------------------------------------------------------
     \16\ https://www.consumerfinance.gov/consumer-tools/managing-
someone-elses-money/

    Choosing a Trusted Contact includes a guide for 
        consumers on selecting a trusted contact for the 
        accounts they hold at a financial institution. \17\
---------------------------------------------------------------------------
     \17\ https://www.consumerfinance.gov/consumer-tools/educator-
tools/resources-for-older-adults/protecting-against-fraud/

    Preventing Elder Financial Abuse is a guide to 
        assist staff of long-term care communities prevent, 
        recognize, record, and report elder financial abuse. 
        \18\
---------------------------------------------------------------------------
     \18\ https://pueblo.gpo.gov/CFPBPubs/CFPBPubs.php?PubID=13102

    Elder Fraud Prevention and Response Network 
        Initiative (Initiative). The CFPB also has been 
        influential in helping key stakeholders in communities 
        across the country prevent, detect, and respond to 
        elder financial exploitation through this Initiative. 
        We conducted research to understand existing networks 
        and how they can enhance collaborative efforts to fight 
---------------------------------------------------------------------------
        elder financial exploitation.

    The lessons learned from these network convenings can help 
other communities develop or build capacity in existing 
networks, as well as improve coordination and collaboration 
among law enforcement, adult protective services, financial 
institutions, and aging service providers. \19\
---------------------------------------------------------------------------
     \19\ https://www.consumerfinance.gov/consumer-tools/educator-
tools/resources-for-older-adults/elder-protection-networks/

Q.34. During your testimony before the committee, you stated 
that the CFPB is looking ``holistically at the credit reporting 
system.''
    Please explain what you meant by that remark.

A.34. The credit reporting system includes a complex set of 
business arrangements and market participants. These include 
furnishers, consumer reporting companies, users, and consumers. 
Furnishers can consist of many different types of businesses, 
including property managers and lenders. Consumer reporting 
companies are not limited to Experian, Equifax, and TransUnion, 
but include a wide range of other background screeners and data 
brokers. The users of consumer reports include lenders, 
insurance companies, employers, and landlords.
    As more and more data is collected about consumers, we must 
look holistically at this entire ecosystem to understand how to 
best ensure that the Fair Credit Reporting Act (FCRA) is being 
followed.

Q.35. What specifically about the credit reporting system are 
you examining?

A.35. As described above, our work in the credit reporting 
space includes supervisory and enforcement activity at both 
consumer reporting companies and data furnishers. Many of our 
findings from FCRA examinations are reported in Supervisory 
Highlights.

Q.36. Please describe in detail what changes to the credit 
reporting system that the Bureau is considering via rulemaking 
or other official action.

A.36. With respect to changes to the credit reporting system 
that the CFPB is considering via rulemaking, see response to 
17(a) below.

Q.37. The CFPB's Fall 2022 unified agenda mentions a potential 
rulemaking to amend Regulation V regarding the Fair Credit 
Reporting Act (FCRA). You have not spoken much about the need 
to amend Regulation V and there has been limited suggestions 
from the CFPB about what changes are necessary.
    Do you believe Regulation V should be amended?

A.37. The FCRA is one of the few privacy laws at the Federal 
level. Given changes in technology and the marketplace, it is 
worth reviewing whether updates are warranted.
    We are looking at whether rules under the FCRA reflect 
current market realities with respect to data brokers, and 
whether people have the ability to exercise control over their 
most sensitive data. The CFPB also remains concerned that 
medical debt is less predictive of future repayment than other 
debts, that it is often inaccurate, and that furnishing of 
medical debts to credit reporting companies may be used to 
coerce people into paying bills they may not owe. We are 
looking at all aspects of the FCRA to evaluate the role of 
medical debts in the credit reporting ecosystem, including 
whether it is appropriate for credit reports to be used in that 
way.

Q.38. What would the CFPB seek to accomplish in such a 
rulemaking?

A.38. See response to 17(a) above.

Q.39. What is the status of a potential rulemaking?

A.39. The rule has not yet been proposed and we continue to 
carefully look at market dynamics to determine the best path 
forward.

Q.40. Does the FCRA allow for State preemption?

A.40. The FCRA provides that State laws that are not 
``inconsistent'' with FCRA are generally not preempted by that 
statute. The FCRA also expressly preempts certain categories of 
State laws.

Q.41. It is important that the CFPB exercise caution in terms 
of how its regulations restrict credit at a time when Americans 
are struggling to make ends meet. For example, according to the 
results from a recent Consumer Reports about Buy Now, Pay Later 
(BNPL), consumers stated overwhelmingly that BNPL interest-free 
loans allows them to ``feel more in control of their finances'' 
and eases ``their financial stress.'' In fact, those consumers 
``are overwhelmingly positive about BNPL'' as it ``fills a gap 
in financial need and supports their ability to maintain 
emergency savings.''
    At a time of high inflation and tightening credit 
availability, shouldn't the CFPB be promoting and prioritizing 
safe access to alternative forms of access to credit rather 
than making it more difficult for consumers?

A.41. The CFPB wants to see a vibrant, competitive market and 
one of the characteristics of that type of market is to see new 
companies entering the market with new ideas and ways of 
meeting the needs of consumers.
    As specified in the CFPA, the CFPB's mission is ``to 
exercise its authorities under Federal consumer financial law 
for the purposes of ensuring that markets for consumer 
financial products and services operate transparently and 
efficiently to facilitate access and innovation.'' However, it 
is imperative that innovation serves consumer interests.
    Specifically, as that goal relates to Buy Now, Pay Later 
(BNPL) products, the CFPB seeks to ensure that these markets 
are fair, transparent, and competitive. The CFPB has observed a 
notable increase in the use of BNPL products over the past few 
years, including a significant increase in the use of these 
products to fund essential goods and services. As interest 
rates on credit cards increase--and correspondingly, 
outstanding balances--a low- or no-interest BNPL product that 
spreads the cost of goods over four payments can be 
particularly appealing. In fact, the CFPB's September 2022 Buy 
Now, Pay Later: Market trends and consumer impacts report 
identified several competitive benefits of BNPL loans over 
legacy credit products. \20\ These benefits are both financial 
(i.e., no interest and sometimes no late fees) and operational 
(i.e., ubiquitous, easy to access, simple repayment structure).
---------------------------------------------------------------------------
     \20\ https://s3.amazonaws.com/files.consumerfinance.gov/f/
documents/cfpb-buy-now-pay-later-market-trends-consumer-impacts-report-
2022-09.pdf
---------------------------------------------------------------------------
    The September 2022 report also identifies three categories 
of potential consumer risks: discrete consumer harms (i.e., 
lack of standardized cost-of-credit disclosures, minimal 
dispute resolution rights, and a requirement to use autopay for 
all loan payments), data harvesting (i.e., lenders' use of 
consumer data to deploy models, product features, and marketing 
campaigns to increase the likelihood of incremental sales), and 
borrower overextension (borne out in discrete short- and long-
term risks). A recent Consumer Reports piece on BNPL apps also 
noted concerns about fee disclosures and data collection. \21\
---------------------------------------------------------------------------
     \21\ https://www.consumerreports.org/short-term-lending/buy-now-
pay-later-apps-are-popular-but-are-they-safe-a7441154279/
---------------------------------------------------------------------------
    The CFPB is working to ensure that BNPL lenders adhere to 
the same protocols and protections as other similar financial 
products to avoid regulatory arbitrage and to ensure a 
consistent level of consumer protection. I believe that BNPL 
can grow and serve consumers well if we can collectively 
address some of the gaps outlined above. If BNPL lenders 
incorporate the protections and protocols that we observe in 
other financial products, this would go a long way to ensure 
that there is healthy competition where consumers have a 
baseline level of protections.
                                ------                                

       RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARNOCK
                       FROM ROHIT CHOPRA

Q.1. Thousands of Georgians and millions of people across the 
country are now at greater risk of losing their Medicaid 
coverage due to the termination of continuous enrollment 
requirements for Medicaid programs during the COVID-19 public 
health emergency.
    Now that COVID-19 protections that prevented States from 
removing people from their Medicaid programs have expired, how 
will the Consumer Financial Protection Bureau (CFPB) protect 
low-income people at risk of losing their health coverage from 
predatory practices by lenders seeking to take advantage of 
families' increased need to cover unexpected medical costs?

A.1. Medical bills are a major financial pain point for 
American consumers. Over 100 million Americans have medical 
debt, and consumers report that errors in medical billing and 
insurance payment are common. Among those with medical debt, 
more than four in ten say they received an inaccurate bill, and 
nearly seven in ten say they were asked to pay a bill that 
should have been covered by insurance. With millions of 
Americans expected to lose Medicaid coverage due to the 
expiration of pandemic protections, medical billing and 
collection issues may become even more common.
    The Consumer Financial Protection Bureau (CFPB) is 
committed to protecting consumers from debt collection or 
credit reporting consequences of inaccurate or inflated medical 
bills and is part of an all-of-Government effort to address the 
burden of medical debt and lower healthcare costs for 
consumers. As part of its work on medical debt, the CFPB 
released a May 2023 research report on medical payment 
products--including specialty medical credit cards and 
installment loans--which found that promotion and use of these 
products is growing. \1\ CFPB research shows that these payment 
products typically have less favorable terms than other general 
credit products and can land patients with significant amounts 
of deferred interest. Indeed, over a 3-year period, patients 
paid approximately $1 billion in deferred interest on medical 
credit cards. Interest and fee charges for these products can 
also be high. The typical medical credit card has an interest 
rate of 27 percent--substantially higher than the 16 percent 
average for general purpose credit cards. Additionally, medical 
payment products are sometimes pushed on patients to avoid the 
insurance claims process and financial assistance programs. The 
promotion of these high-cost products instead of more 
affordable options drives up health care costs and medical debt 
for patients. It can also impede people's ability to negotiate 
bills with their medical providers, sort out insurance 
coverage, or apply for and receive required financial 
assistance.
---------------------------------------------------------------------------
     \1\ https://www.consumerfinance.gov/data-research/research-
reports/medical-credit-cards-and-financing-plans/
---------------------------------------------------------------------------
    The CFPB is taking action to understand the risks that 
medical payment products pose for consumers. On July 7, the 
CFPB announced a public inquiry on medical payment products in 
collaboration with the Department of the Treasury and the 
Department of Health and Human Services. \2\ This Request for 
Information, which was open for public comment through 
September 11, will help the CFPB better understand consumer 
harms and financial challenges raised by specialty medical 
payment products, including the credit origination, debt 
collection, and credit reporting practices of the financial 
companies that originate and service these products.
---------------------------------------------------------------------------
     \2\ https://www.consumerfinance.gov/about-us/newsroom/inquiry-
into-costly-credit-cards-and-loans-pushed-on-patients-for-health-care-
costs/
---------------------------------------------------------------------------
    On July 11, the CFPB conducted a public hearing on medical 
billing and collections issues in Washington, DC, and listened 
to comments and feedback from various stakeholders, including 
several consumer advocacy groups. \3\ Policy recommendations 
heard during this public hearing included: (1) eliminate 
deferred interest rates on medical debt credit cards, (2) 
prohibit credit reporting on all medical debts, (3) standardize 
across-the-Nation charity and financial assistance program 
eligibility policy, and (4) prohibit placing the debt on 
special purpose credit cards or in collections until after all 
the screening for charity care is completed.
---------------------------------------------------------------------------
     \3\ https://www.consumerfinance.gov/about-us/events/archive-past-
events/cfpb-hearing-on-medical-billing-and-collections/
---------------------------------------------------------------------------
    The CFPB will use the public input from this Request for 
Information as it considers next steps to address the harms 
caused by these specialty financial products. The CFPB will 
also continue using its enforcement, supervision, regulatory, 
and consumer education tools to protect patients from 
experiencing financial harm when they seek medical care.

Q.2. Will the CFPB provide a timely report to Congress on these 
protections against predatory lenders unlawfully engaged in 
unfair, deceptive, or abusive acts or practices aimed at 
families with medical bills?

A.2. The CFPB will continue to provide Congress and the public 
with information about unfair, deceptive, or abusive acts and 
practices aimed at families with medical bills by a range of 
market participants in consumer financial services and 
products, including lenders, debt collectors, credit reporting 
companies, and others. Over the last few years, the CFPB has 
published a range of reports and guidance documents on medical 
debt, including:

    Medical Billing and Collections Among Older 
        Americans issue spotlight, describing how medical 
        billing practices can lead to inaccurate bills and 
        attempts to collect amounts that are not owed from 
        people 65 and older, as well as the impact of 
        inaccurate medical bills, including coercive credit 
        reporting, on older adults; \4\
---------------------------------------------------------------------------
     \4\ https://www.consumerfinance.gov/data-research/research-
reports/issue-spotlight-medical-billing-and-collections-among-older-
americans/full-report/

    Office of Servicemember Affairs Annual Report, 
        highlighting how servicemembers' experiences with 
        medical billing practices are one of the main drivers 
        of complaints about consumer reporting and debt 
        collection, and steps that can be taken to address 
        contributing factors; \5\
---------------------------------------------------------------------------
     \5\ https://s3.amazonaws.com/files.consumerfinance.gov/f/
documents/cfpb--osa-annual-report-2021.pdf

    Nursing Home Debt Collection circular, Know your 
        Rights resource, and issue spotlight, detailing that 
        the practices of nursing homes and the debt collectors 
        they hire may violate Federal laws administered by the 
        CFPB and the Centers for Medicare & Medicaid Services 
        (CMS); \6\
---------------------------------------------------------------------------
     \6\ https://www.consumerfinance.gov/compliance/circulars/circular-
2022-05-debt-collection-and-consumer-reporting-practices-involving-
invalid-nursing-home-debts/; https://www.consumer
finance.gov/consumer-tools/educator-tools/resources-for-older-adults/
know-your-rights-caregivers-and-nursing-home-debt/; https://
www.consumerfinance.gov/data-research/research-reports/issue-spotlight-
nursing-home-debt-collection/full-report/

    No Surprises Act guidance, making clear to debt 
        collectors and others that they may not collect on 
        medical bills that violate the No Surprises Act or the 
        rules issued under the No Surprises Act by the 
        Department of Health and Human Services; \7\
---------------------------------------------------------------------------
     \7\ https://www.consumerfinance.gov/about-us/blog/no-surprises-
act-how-we-are-protecting-people-from-side-effects-surprise-medical-
bills/

    Medical Credit Cards and Financing Plans report, 
        highlighting some of the risks to consumers of using 
        financing products, such as medical credit cards and 
        installment loans, to pay for medical procedures and 
        services; \8\
---------------------------------------------------------------------------
     \8\ https://www.consumerfinance.gov/data-research/research-
reports/medical-credit-cards-and-financing-plans/

    Third-Party Debt Collections Tradelines Reporting 
        market snapshot, highlighting the consumer and patient 
        harms of inaccurate medical debt tradelines and common 
        practices used in medical debt collection; \9\ and
---------------------------------------------------------------------------
     \9\ https://www.consumerfinance.gov/data-research/research-
reports/market-snapshot-trends-in-third-party-debt-collections-
tradelines-reporting/

    Know Your Rights resource on medical bills and 
        collections, highlighting best consumer practices for 
        verifying the accuracy of bills and collections, 
        protections guaranteed by the No Surprises Act, 
        protections against debt collection and coercive credit 
        reporting, and how to submit a complaint to the CFPB or 
        CMS. \10\
---------------------------------------------------------------------------
     \10\ https://www.consumerfinance.gov/about-us/blog/know-your-
rights-and-protections-when-it-comes-to-medical-bills-and-collections/

    The CFPB will continue to highlight the risks and harms 
posed to consumers by unfair, deceptive, or abusive practices 
aimed at outstanding medical debt.
                                ------                                

               RESPONSES TO WRITTEN QUESTIONS OF
              SENATOR FETTERMAN FROM ROHIT CHOPRA

Q.1. One issue that's critical to so many Pennsylvanians is 
their ability to reliably receive earned benefits, like Social 
Security or unemployment. It's crucial that Pennsylvanians are 
receiving the benefits they've earned and that we make sure 
Federal funds aren't going to waste or padding corporate 
profits. Can you speak more to this issue and what actions the 
CFPB has taken already or will take to address this?

A.1. Thank you for this question and I appreciate your concern 
about this very important issue. In March 2023, the Consumer 
Financial Protection Bureau (CFPB) released a new issue 
spotlight examining how the financial products used to deliver 
public benefits, like Social Security and unemployment 
compensation, affect individuals' ability to fully access the 
assistance provided through those programs. \1\ The issue 
spotlight outlines how Governments often choose to deliver 
public benefits through financial products, particularly 
prepaid cards, that may subject recipients to high fees and cut 
into the amount of funds the consumer receives. When cash 
assistance programs are drained by unnecessary fees and poor 
customer service, it hurts individual recipients and taxpayers. 
The CFPB will continue to ensure that companies delivering 
public benefits comply with Federal consumer financial laws and 
continue to work with Federal and State officials to make 
public benefits delivery more effective.
---------------------------------------------------------------------------
     \1\ https://www.consumerfinance.gov/about-us/newsroom/new-cfpb-
issue-spotlight-examines-high-fees-that-chip-away-at-public-benefits/

Q.2. In my role on the Committee on Agriculture, I'm working 
hard to protect and expand SNAP in this year's Farm Bill. That 
includes beefing up cybersecurity to stop fraud, known as 
``skimming,'' by adding smart chips to EBT cards. With SNAP EBT 
and other Government benefits, what protections are in place 
for people who discover they've had their benefits stolen? And 
in your opinion, how would cardholders benefit from security 
---------------------------------------------------------------------------
improvements like chipped cards?

A.2. Security on cards that provide public benefits is a 
serious concern to the CFPB. EBT cards, in particular, seem to 
be more susceptible to certain types of fraud, such as 
skimming, in part, due to not having advanced technology, such 
as embedded chip or tap payment, present in most other credit 
and debit cards throughout the United States. The CFPB is 
monitoring the occurrence of skimming with respect to EBT cards 
and encourages consumers whose benefits are stolen to 
immediately reach out to their State agencies to take steps to 
protect themselves and seek reimbursement of stolen funds, as 
appropriate.
                                ------                                

        RESPONSES TO WRITTEN QUESTIONS OF SENATOR BRITT
                       FROM ROHIT CHOPRA

Q.1. With regard to the CFPB's late fee proposal, you proposed 
a 60-day period for industry to come into compliance. However, 
Dodd-Frank (15 U.S.C. 1604(d)) actually requires at least a 6-
month implementation period. You have stated that you disagree 
with that assessment and have indicated plans to move forward 
with the shortened implementation period. Can you explain what 
led to this decision, and what discussions you have had with 
card issuers, and more importantly, the third-party processors 
who would actually have to implement this change about how long 
it would take to implement your proposed late fee changes? I am 
told there is no scenario in which the significant changes that 
you are proposing could be programmed, tested, and rolled out 
to consumers in 60 days. Will you ensure that you give 
sufficient time for implementation--such as the 6-month minimum 
required by Dodd-Frank--to avoid incomplete adoption and 
consumer confusion?

A.1. I appreciate this question. Implementation periods are an 
important part of the rulemaking process. The Consumer 
Financial Protection Bureau (CFPB) discussed its preliminary 
analysis of the proposed effective date in the late fee 
proposal. \1\ The rulemaking is ongoing and the CFPB is 
reviewing all comments submitted in response to the proposal.
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     \1\ https://www.govinfo.gov/content/pkg/FR-2023-03-29/pdf/2023-
02393.pdf (88 FR 18906, 18931)
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